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Chapter President's Letter
By Blake Gibson, Managing Division Counsel and Vice President, Black Knight Financial Services

Dear ACC North Florida Members:

We have been busy this quarter!  We enjoyed many great events with great turnouts.  Our annual Jacksonville Suns game hosted by McGuire Woods was well attended and enjoyed by all.  Nelson Mullins also hosted an excellent event that brought together leading in-house counsel from outside of Jacksonville to discuss trends and best practices.  Littler put on an excellent event to update us on Labor & Employment law changes complete with making predictions on how the L&E legal landscape will change following the November election (it will be “huuuge”).  

We are also making some great progress on executing on the strategic plan we unveiled in January.  As you may recall, we were focusing this year on expanding the connections between our members through Roundtables, and expanding our connections with the community through our new Community Outreach Committee.  As your Board of Directors for the North Florida Chapter started executing on these strategic initiatives, it became clear that we need assistance.  (As I am now the second Board Member to have back surgery in as many months, I will resist making jokes about the work being back breaking….)  Many of the Board Members and Officers work daily on Chapter business and spend dozens of hours each month on the Chapter.  Each of us have day jobs that are quite time consuming, and we decided it was time to expand our Chapter Administrator role into an Executive Director role.  The expanded role will allow us to further execute on our strategic plan and to ease the time burden on Board Members.  In turn, this will free up additional time to focus on strategy and Chapter management.  The Executive Director role will support the Board of Directors, foster and maintain corporate and law-firm sponsors, foster member involvement and development, and plan and execute educational events in northern Florida to further the mission of the organization under the direction of the Board of Directors.

We started the recruiting process a few months ago and had many, many excellent candidates.  We are pleased to announce the hiring of Allison Rodrigues as our Executive Director.  She comes to us with a wealth of legal, event, and marketing experience and we are lucky to have her on board.  Allison can be reached at our new Chapter email address:  nfla@accglobal.com.  Please update your address book!  We will have a spotlight article on Allison in our next newsletter so you can get to know her better.  Please join me in welcoming and congratulating her.  We also want to thank our former Chapter Administrator, Christina, for her hard work and dedication over the past several years.  She will be missed!

In short: these are exciting times at the ACC North Florida Chapter.  We are expanding.  Our sponsors are phenomenal.  Our community is deepening and a positive impact on Jacksonville and North Florida is being achieved.  

We look forward to seeing you at another event in 2016!


Blake Gibson

President, ACC North Florida Chapter

Managing Division Counsel & Vice President

Black Knight Financial Services

Upcoming Events & Past Events Recap
By Rodolfo Rivera, ACC North Florida Board Member

Upcoming Events:

1) Save the date! CLE sponsored by Marks Gray, August 30, 2016. Location to be announced. More details to come! More info ...

2) Networking Social - Save the date! September 16, 2016. Sponsored by Marks Gray. More info ...

3) Annual Ethics CLE and ACC NFL Chapter Meeting, October 6, 2016. Sponsored by McGuire Woods. More info ...

4) The ACC Annual Meeting in 2016 will be held in San Francisco Oct 16-19. The call for programs is now open. 2016 ACC Annual Meeting Home Page

5) SAVE THE DATE: Holiday Party and CLE, December 6, 2016, sponsored by Jackson Lewis. More info ...

Please be sure to check our Chapter page for other upcoming events by clicking here.

Attorney Recruiting – A Career Alternative for Attorneys
By: Sharon A. McLaughlin, Esq. (Special Counsel)

It’s no secret that many attorneys are not entirely fulfilled or happy practicing law. Thousands of attorneys throughout the country have turned to attorney recruiting as a career alternative to practicing law. The reasons vary, but I have interviewed dozens of attorneys over the years who are considering recruiting as a career alternative and many of their reasons mirror my own.  

As a former practicing attorney, I can personally attest to the things that caused me to leave the practice of law. It wasn’t about the ever-evolving or challenging nature of law, intellectual aspects or fast-paced setting – I loved these things.  Rather, it was the contentious environment, being pressured with the burden of billing hours, grueling schedule, lack of a personal life or work-life balance, inability to spend much quality time with family or take real vacations. And, I have heard these same reasons in varying forms time and time again when speaking with attorneys over the course of my second career – attorney recruiting.

So, why attorney recruiting?  Well, as an outside recruiter working for various law firms and companies, the reasons are plentiful.  I enjoy (1) the entrepreneurial nature of the role; (2) the ability to continue working in the legal industry; (3) developing and implementing a new skill set and manner of strategic communication; (4) unlimited income potential; (5) nurturing  my competitive nature; and (6) work-life balance.  

Entrepreneurial Nature

As an outside attorney recruiter, you are running your own business often under the auspices of larger company (e.g., Special Counsel).  You create your own business by developing client relationships with law firms and companies and assist them by sourcing and recruiting talented attorneys (“candidates”) for roles within their firm or legal department, respectively.  You act as a consultant and valuable resource to clients and candidates, make introductions, bring interested parties together and assist clients and candidates form longstanding relationships. Part of running your own business also includes marketing yourself and your company by meeting candidates and clients, writing and publishing informational articles and blogs, using social media to bring awareness to your brand, attending networking events, participating in speaking engagements and much more. 

Legal Industry

As an attorney recruiter, one is able to continue working in the legal industry, just in a different capacity. As a former practicing attorney, an attorney recruiter is already familiar with the nomenclature, career tracks, areas of specialty, organizational structures and titles within law firms and in-house legal departments of companies. As such, a former practicing attorney is able to relate to and easily communicate with candidates about their law practices, personal and professional motivations and career goals.  This better positions an attorney recruiter to establish credibility and develop relationships and trust with candidates.  

Similarly, a former practicing attorney is able to more easily communicate with clients, ask relevant questions and understand what they’re looking for in terms of specific experience requirements, areas of practice, culture and personality.

Developing and implementing a new skill set and form of communication

As an attorney, you learn a form of strategic communication and ability to persuade others to interpret and see facts and concepts in the same way that you interpret and see them. With attorney recruiting, you are still able to do the same thing, but in a different way. You learn how to effectively communicate without all the legal ease and formality and communicate on a more personable and likeable level. You use your ability to strategically communicate and influence people in a positive manner, relate to other attorneys and read their verbal and non-verbal cues. You help attorneys, who can often be pessimistic and distrusting in nature, to let down their guard, engage with and trust you to assist them with their career goals.  This can be incredibly gratifying for those who enjoy developing relationships and helping others.

Unlimited Income Potential

There is generally no cap to income for outside recruiters. They run their own business and bear and enjoy the fruit of their labor. In this profession, there is a direct correlation to one’s hard work and production to their resulting income. In fact, many successful outside recruiters are making substantially more placing attorneys and groups of attorneys in law firms and in-house corporate legal departments than they ever did or would practicing law.  

Competitive Nature 

Many attorneys are competitive by nature and like challenges and problem solving. When a competitive person is faced with a challenging and difficult task, their competitive drive is often triggered. The industry of attorney search and placement is without a doubt challenging. For one, it’s highly competitive - there are a large number of recruiters in the legal market vying over the same business and candidates.  And, it’s an “eat what you kill” business. Thus, being successful requires one to be resilient, innovative, hard-working, confident and persistent. These are typically qualities that are innate for many attorneys.

Work-Life Balance

Attorneys work hard – some more than others depending on their professional setting (e.g., in-house, BigLaw, small or mid-size firms, etc.). The hours can be long and grueling and the pressure to perform can be overwhelming. I have interviewed many BigLaw attorneys who are on-call 24-7, cannot turn off their blackberries, frequently sleep and shower at the office, cannot plan vacations due to the unpredictability of their work and clients and cannot be home before their children’s bedtime. These are extreme examples, but nonetheless a large number of attorneys complain about lacking work-life balance due to the nature of the profession.

Attorney recruiting also requires one to work hard, but you’re working hard for yourself.  You directly reap the benefits of your hard work. You work a full-time schedule, but are able to take vacations, set your own hours, be home at a reasonable time, spend quality time with family, exercise, enjoy a hobby, etc. If you want to work 40, 50, 60 hours per week, you can – it’s totally up to you. Your schedule is predictable because you solely control it. You put into it as much as you want to get out of it.  

While there may be additional reasons or other recruiting settings (e.g., in-house recruiter for a corporation or law firm) that appeal to attorneys, attorney recruiting can be an excellent career alternative for many. It’s not a viable option for everyone, but I have known many attorneys over the years to be incredibly successful and fulfilled with recruiting as their next career.

____________________

Sharon A. McLaughlin, Esq. is a Regional Search Director Parker + Lynch Legal, the attorney search division of Special Counsel, in Houston, TX (www.parkerlynch.com).


Changes to the Fair Labor Standards Act’s White Collar Exemption: What You Need to Know
By Nick Andrews (Littler Mendelson P.C.)

The U.S. Department of Labor (“DOL”) recently published its final revisions to the Fair Labor Standards Act's (“FLSA”) “white collar” overtime exemptions. This comes a little over two years after President Obama first directed the Secretary of Labor to “modernize” the existing regulations. This article is meant to point out the most important changes affecting employers and to highlight pitfalls employers will want to avoid when dealing with these changes.   

Minimum Salary Level: 

Since 2004, the minimum salary level required to meet the exemption went unchanged at $455 per week or $23,600 annually. The new rule more than doubles the minimum salary requirement to $913 per week or $47,476 annually. 

Use of Nondiscretionary Bonuses and Commissions:

Previously, payments made to employees in addition to fixed salaries could not be counted toward the minimum salary requirement.  The new rules allow employers to count an employee’s nondiscretionary bonuses, incentive payments, and commissions to satisfy up to 10% of the salary requirement.  How does this work?  The final rule requires that the base salary paid an employee be at least equal to 90% of the minimum salary level.  Using the new minimum salary requirements, this comes out to $821.70 per week or $42,728.40, annually. The final 10%—which comes out to $4,747.60 annually or $1,816.90 per quarter—can be in the form of nondiscretionary payments as described above. If an employer chooses to use a nondiscretionary payment toward a portion of the standard salary level test, the payment must be paid on a quarterly or more frequent basis, meaning that annual bonuses are disregarded.

What if the Salary and Nondiscretionary Payments Do Not Meet the Minimum?

The new rule also provides a mechanism by which an employer can make a shortfall payment if, at the end of the quarter, salary plus nondiscretionary payments are less than $913 per workweek. This onetime shortfall payment must be made by the first pay period after the end of the quarter, and must satisfy the preceding quarter spread over a 13-week period. If an employer fails to make the payment, the employer must compensate the employee for overtime for the preceding quarter.

Highly Compensated Employees—What’s the Difference?

The regulations previously contained a special rule for “highly compensated” workers who are paid total annual compensation of $100,000 or more, provided the employee is engaged primarily in office or non-manual work and regularly performs the duties of an exempt executive, administrative, or professional employee. The new rule increases this compensation requirement to $134,004 annually. 

What About Bonuses to Meet the Minimum Salary Level for Highly Compensated Employees?

The new rule makes no changes to how employers may use bonuses to meet the Highly Compensated Employee minimum requirement. Employers must still pay a weekly salary of at least $913, but the remainder of the employee’s total annual compensation may include commissions, nondiscretionary bonuses, and other nondiscretionary compensation. If the employer chooses to use the highly compensated employee exemption, it cannot use the shortfall payment method described above.

Minimum Salary Level Increases

According to the DOL, as a means to “ensure that [the minimum salary level] remains [a] meaningful test[] for distinguishing bona fide executive, administrative, professional and overtime-protected white collar workers,” the standard salary and Highly Compensated Employee annual compensation levels are to be automatically updated every three years.  The first of these automatic updates will take effect January 1, 2020. The DOL intends to maintain the standard salary level at the “40th percentile of weekly earnings for full-time salaried workers in the lowest wage Census Region,” which is currently the South.  As for the Highly Compensated Employee minimum salary level, it will be reset every three years at the 90th percentile of earnings of full-time salaried workers nationwide, based on data from the prior year’s second quarter published by the Bureau of Labor Statistics.

The new regulations will take effect December 1, 2016, which is also when employers must have the new minimum salary levels in place.  There is a small exception for “Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds.” For these employers, the DOL will not enforce these regulations until March 17, 2019. 

Things to Consider for Employers

Employers should note that no changes were made to the exemptions for outside salespeople, teachers, lawyers or doctors. Also, no changes were made to the duties portion of the exemption tests, so those requirements must still be met before applying the exemption.  No changes were made to the salary basis test under the FLSA. Employers must take care to continue compensating employees at a fixed, predetermined salary that is not subject to reduction due to variations in quality or quantity of work in a workweek. 

Some employers may be relieved after reviewing the new changes. While the salary level changes are certainly significant, many feared there would be sweeping changes to the qualitative duties standards for the white collar exemption—a fear that was never realized. Similarly, many expected the DOL to rework the concurrent duty standards, which would affect employers using managers to perform both exempt and non-exempt work. Employers can rest easy knowing that neither of the standards has changed.

Employers should keep in mind that the DOL did not specify whether employers must “true up” employees when terminated, or risk having to pay overtime for the preceding quarter.  Employers should also review their current compensation practices to ensure that the minimum salary requirements are met each quarter.

If you have any questions or concerns, please do not hesitate to contact labor and employment counsel at Littler Mendelson, PC.  

 


Nick Andrews is an associate in Littler’s Miami Office. He can be reached at nandrews@littler.com.

Derivative or Direct? Who sues Whom—And Who Pays for It—When Limited Liability Companies Bust Apart
By Jared M. Wilkerson, Esq. (Marks Gray, P.A.)

The limited liability company has become the go-to business structure for startups. It affords members a freedom of movement and protection from personal liability not easily obtained in other forms, and at an initial cost irresistible to those just getting their feet wet in the field of enterprise.  Such newcomers are often not so savvy in the procedural mandates of the Florida LLC, and due to the recent overhaul of Chapter 608 (now 605) of the Florida Statutes, that is a condition which their attorneys may unfortunately share.  Therefore, when perceived betrayals pop up, as they often do, the potential for internal litigation between members is extremely high, and the process, often messy. The following common scenario sets the stage for the considerations of attorneys who represent past or present members in these disputes.  

THE SCENARIO:

Tom and Larry are the only members of a limited liability company in Florida called Doomed Construction, LLC (“Doomed”).

After years of working together, Tom notices that profits are routinely below his expectations.  He reviews several files from past jobs and finds what he believes to be a pattern of theft by Larry. Tom confronts Larry with a snapshot of his findings, and Larry admits that he cannot explain the apparent discrepancies on the spot.  Rather than argue, Larry tells Tom that he has wanted to make a change for a while, and that it might be best if the two simply part ways. To avoid damage to either’s professional reputation with accusations of criminal conduct, Tom and Larry agree that Larry will sign an agreement of withdrawal from the company effective immediately. In exchange, Tom will oversee the completion of Doomed’s contracts, wind up the company, and distribute any remaining capital equally.

During the winding up, Tom forms New Day, LLC (“New Day”), which takes on new projects from the Doomed customer base to ensure a smooth transition after dissolution. Under Tom’s direction, Doomed hires New Day as a subcontractor to complete portions of the outstanding Doomed jobs and pays New Day accordingly. When the jobs are completed, some of the profit that would have been retained by Doomed has been paid to its subcontractor, New Day.  

Tom winds up and dissolves Doomed and distributes far less capital to Larry than he had anticipated. When Larry learns about New Day’s involvement, he threatens to sue Tom for self-dealing regarding the final distribution. Tom reminds Larry that he is lucky to have gotten anything considering the perceived theft.

Both parties run out and get lawyers.  Larry wants to know if he can sue Tom on behalf of himself or if the company must do it. Tom wants to know to what degree, if any, he is protected from personal liability under the applicable statutes and the operating agreement, and whether Larry’s withdrawal precludes him from complaining about Tom’s decisions in winding up the company or even bringing the suit in the first place.  

THE ANALYSIS:

First, it is worth noting that virtually every aspect of the litigation between Tom and Larry could have been avoided if either of them had sought legal counsel when Larry first agreed to withdraw.  If the operating agreement did not dictate a valuation method for Larry’s interest, Larry could have been advised to initiate appraisal rights under chapter 605 of the Florida Statutes (1). Unless prohibited by the operating agreement, Tom could then have purchased Larry’s interest, and any issues with payment would have been a simple creditor/debtor dispute not involving the company. Alternatively, Doomed could have issued a special distribution allowing the LLC to buy back Larry’s shares within ninety days (2) or Larry could have become a creditor to the LLC and received payment prior to Tom receiving a final distribution upon dissolution (3)(4).   In either event, the court likely would have issued an order determining whether the appraisal costs would be borne either by the LLC or one of the parties.(5) 

The problem, of course, is that small LLCs generally avoid hiring an attorney until the situation devolves into a full-blown lawsuit between members. By the time we meet Tom and Larry, the problem is frustratingly more complicated because the company no longer exists and any capital it might have used for an unanticipated suit has been distributed to its members.  The question of who then pays for the litigation centers on who is actually suing whom and under what authority.  

Even after dissolution, A LLC can still sue or be sued (6), and members may bring direct or derivative actions against other members.(7)  With small LLCs, this disproportionately empowers the member bringing the suit because he need not petition the LLC to bring the suit on its own behalf,(8) yet the LLC will likely ultimately have to foot the bill for the litigation to the benefit of the member initiating the suit at the detriment of his targeted co-member.(9)   

However, in order to have standing to bring a derivative action, the would-be derivative enforcer must have been a member at the time that the suit was commenced and must have been a member at the time that the conduct giving rise to the cause of action occurred.(10)   

In the case of Tom and Larry, this presents a problem for Larry’s pending claims to the extent that they are derivative in nature.  Arguably, Larry ceased to be a member when he voluntarily withdrew from the company, and all of Tom’s offending actions occurred after Larry left.(11)   

Therefore, Larry might be better off suing Tom directly. Divining the circumstances under which one LLC member may directly sue another has been the cause of great consternation for Florida courts for the better part of the last half-century. The current rule of law can be boiled down to the following synthesis:  A direct action can only be brought if the injury complained of is not one which naturally flows from a direct harm to the company and that injury is separate and distinct from those sustained by other members.(12)   In other words, if the perceived betrayal causes the company to lose money first, then the action to recover is derivative.(13)   

Here, an argument that New Day’s profits mean that Tom suffered no injury, and that Larry’s own injury must therefore be separate and distinct, is irrelevant. To have any cause of action, Larry must logically assert that Tom’s conduct lowered Doomed’s profit before it could be distributed to Larry, and thus Larry’s injury invariably flows from a direct harm to the company. Therefore, the two-prong test dictates that Larry initiate a derivative action, which again, Larry cannot do if he was not a member through to dissolution.

However, Florida courts recognize an exception to the rule. If the plaintiff member can establish a cause of action based upon the other member’s breach of a contractual or statutory duty owed directly to the plaintiff member, he may then bring the suit on his own behalf directly against the offending member without involving the LLC.(14) Florida Statutes section 605.04091 outlines the fiduciary duties and obligations of loyalty, care, and good faith and fair dealing that members and managing members owe not only to the company, but also to each other.(15)   Although these duties may be limited to some extent by the company’s operating agreement, they cannot be done away with altogether.(16) Therefore, Larry’s best approach is to frame his causes of action such that all of Tom’s alleged misconduct falls under a breach of these duties. This also works to Larry’s advantage because a breach of fiduciary duty may afford him access to punitive damages.  

Once again, Larry’s status as a member at the time of the alleged breach will be a determining factor in Larry’s standing to bring the suit.  If he was no longer a member, then Tom owed him no such duties. Larry’s chief argument will be that his membership did not terminate until he was effectively compensated for his interest in the company upon the final distribution.(17) Tom will have to argue that regardless of the timing of payment, upon Larry’s withdrawal, Larry’s interest was no longer that of a member, but merely that of a transferee, and therefore no duties of loyalty or care applied during the winding up period.(18)   The wording of the operating agreement regarding withdrawal procedures may be determinative here.

The above distinctions are critically important to both parties and their respective attorneys because the nature in which a claim is brought between members of a defunct LLC dictates who may be forced to pay the initial costs of maintaining or defending the suit.  It also has strategic impact on how awards for claims and counterclaims may be offset against the other in a final judgment.  For example, if you defend Tom for all claims brought against him directly, you may be tempted to bring a counterclaim against Larry for embezzlement or conversion in the name of the LLC in order to rope Tom’s expenses under the LLC’s litigation costs, which may or may not be covered by the LLC or even its insurer.(19) This could be a costly mistake down the road because any award that the LLC would receive would not offset any award that Larry might receive in his direct suit against Tom. Tom would have to pay that award in full(20), then hope that the LLC could collect against Larry, who may or may not have squirrelled that money away somewhere in an attempt to make himself judgment proof(21). The same analysis applies to Larry’s decision to bring a derivative claim on behalf of the LLC if Tom decides to counter with a personal suit claiming a direct injury from Larry’s possible thievery.  

Ultimately, a sort of chess game ensues where the best option is often to base one’s strategy not on a preconceived plan of moves, but rather on a measured reaction to the opponent’s actions, keeping the client’s end goals in mind.  However the opposing party files, it is generally cheaper for the client to respond in kind, through amendments or otherwise, and rely upon the rules to limit what damage the other party can do.

 ____________________                 

 (1) § 605.1006, Fla. Stat.; §§ 605.1066 – 605.1072, Fla. Stat.

 (2) Assuming that would not constitute an improper distribution under § 605.0405, Fla. Stat.

 (3) § 605.1067; § 605.0710(1), (2)(a), Fla. Stat.

(4)  § 605.1071, Fla. Stat.

(5)  § 605.1070, Fla. Stat.

(6)  § 605.0717(1)(b), Fla. Stat.

(7)  § 605.0802, Fla. Stat.

(8)  § 605.0802(2), Fla. Stat. (allowing a member to maintain a derivative action on his own by claiming that issuing a demand to other members to bring the suit in the name of the LLC would be futile or would cause irreparable injury to the company).

(9)  § 605.0805(2), Fla. Stat. (LLC may be directed to pay plaintiff’s expenses in suit, even if only partly successful).

(10)  § 605.0803, Fla. Stat.

(11)  Keep in mind that Larry may challenge the efficacy of his purported withdrawal by arguing that he was never compensated for his interest, so the withdrawal was not effectuated until his final distribution, which occurred after Tom’s offending management decisions. § 605.1067, Fla. Stat. (member’s interest ceases upon payment of agreed value).

(12)  E.g., Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3d DCA 2014).

(13)  See id. at 736, 740.

(14)  Id. at 740.

(15)  § 605.04091(1)-(4), Fla. Stat. 

(16)  § 605.0105(3)(e)-(f), Fla. Stat.

(17)  See Froonjian v. Ultimate Combatant, LLC, 169 So. 3d 151, 156 (Fla. 4th DCA 2015)

(18)  § 605.0603(1)(c), Fla. Stat.

(19)  Note that the LLC could also pay Tom’s costs if Tom wins against any or all of Larry’s direct claims.  § 605.0304(1), Fla. Stat.

(20)  Tom might be entitled to have his litigation expenses paid or awards indemnified by the LLC under § 605.0408(2)-(3), Fla. Stat., provided, for example, that his conduct was merely negligent as opposed to willful.

(21)  In any event, the parties’ respective judgments will likely be limited to the amount of the final distribution the non-prevailing party received upon dissolution of the company. § 605.0712(3)(b), Fla. Stat.

_______________                                                                                                                               

Jared Wilkerson is a graduate of Florida Coastal School of Law now specializing in business litigation and contractual disputes in the northeast and central Florida regions. 

Florida’s New Healthcare Transparency Law: Providing More Sunshine in the Sunshine State
By: Mike Anway (Holland & Knight LLP)

On May 15, 2015, Governor Rick Scott through Executive Order 15-99 created the Commission on Healthcare and Hospital Funding to examine healthcare price transparency and the role of taxpayer funding for hospitals, insurers, and healthcare providers in the aftermath of a bruising Medicaid expansion fight that had dominated Florida’s legislative sessions for the past two years.(1)  15 commission meetings were held and thousands of pages of healthcare data were submitted by providers and analyzed by the commission.(2)   The end result of the year long process was a proposed piece of legislation by Governor Scott which would establish enhanced reporting requirements of financial and quality information by hospitals, insurance providers, and healthcare practitioners, that would be made publicly available to the consumer in an attempt to provide greater cost and pricing transparency and assist prospective patients in making more informed healthcare decisions.(3) 

On March 11, 2016, the Florida legislature passed HB 1175 – “Relating to Transparency in Health Care,” which was signed by the Governor and became law on April 14, 2016. While the legislation differs from the Governor’s original proposal, the core principles of that proposed bill were preserved and incorporated into the passed legislation:

Agency for Health Care Administration (AHCA) is required to competitively procure a vendor to provide an internet-based platform that provides consumer-friendly information on costs of health care services and procedures to allow for price comparisons.(4) While the legislation expressly prohibits the agency from establishing an all-payer claims database, it does require the submission of data to the vendor by insurers participating in the Statewide Medicaid Managed Care program or the State Group Insurance plan. 

Hospitals and Ambulatory Surgical Centers are required to make available on their website and to patients an estimated average payment received and the estimated range of payments from all non-governmental, commercial payers for its bundled services, a personalized cost estimate upon request and all financial assistance policies and charitable programs available at the facility.

Hospitals and Ambulatory Surgical Centers are required to make available on their website the insurance provider networks for which the facility is a member, as well as information on healthcare practitioners or practice groups providing services within the facility who may participate in different insurance networks from the facility or none at all. 

Hospitals and Ambulatory Surgical Centers are required to provide after discharge or upon request an itemized bill within 7 days that is written in plain language, clearly identify any facility fee, identify each item as "paid", "pending third-party payment", or "pending payment by the patient," Each bill must notify the patient of any health care practitioners who will bill the patient separately. Facilities must also make available electronically, all records necessary for verifying the accuracy of the bill.

Not included in the legislation that eventually became law were two controversial pieces: 1) criminal penalties for hospitals who bill patients at “unconscionable prices” and 2) mandated patient safety culture surveys to be conducted annually at Hospitals and ASC’s licensed under Chapter 395 of Florida Statutes.

Contained within the Governor’s proposed bill was language that would have authorized the State Attorney General to prosecute facilities for billing a patient more than 115% of the average amount accepted by the facility for the same diagnosis related group (inpatient) or the same ambulatory patient group (outpatient). For its part, the original Senate language attempted to address this issue by directing the state Medicaid  agency to impose administrative fines, rather than Attorney General investigations, based on the findings of the Division of Financial Services’ consumer advocate’s investigation of billing complaints pursuant to s. 627.0613(6). The administrative fines for noncompliance with s. 395.301 would have been the greater of $2,500 per violation or double the amount of the original charges that exceed “fair charges.”

As noted, neither attempt made its way into the final bill as House bill sponsor Chris Sprowls, R-Palm Harbor, commented that there was “very little appetite in the Legislature to be creating new crimes.”(5)

The second controversial issue that was left out after final consideration by the legislature was the House originated language that would have mandated staff safety culture surveys be administered to all staff annually by each hospital and ambulatory surgical center licensed under chapter 395. According to the original House bill language, the survey would be designed to measure staff perspectives on all aspects of a facilities safety culture, including  frequency of adverse events, quality of handoffs and  transitions, comfort in reporting a potential problem or error, the level of teamwork within hospital units and the facility as a whole, staff compliance with patient safety regulations and guidelines, staff perception of facility support for patient safety, and staff opinions on whether they would undergo a health care service or procedure at the facility. 

Conversely on this piece, the House bill sponsor commented: “I think it’s a great policy giving the consumer a snapshot of what kind of quality they can expect in a facility . . . I think that’s something you will see return as a policy matter in the coming sessions.”(6)  While criminal penalties for unconscionable pricing appear not to be a policy that we will see in the future, the debate surrounding state mandated staff culture surveys may have a longer life expectancy.  

With greater transparency comes greater responsibility for healthcare stakeholders impacted by this legislation. Providers must  not only be hyper-vigilant in responding to cost estimate and billing statement requests from consumers, but also thoughtful in their calculation and presentation of the average payments received by a facility, personal cost estimates for bundled procedures, available financial assistance programs, billing statements and consumer education of which insurance networks the entity participates. Even with expanded coverage under the federal Affordable Care Act, provider networks have narrowed and back-end cost-sharing requirements have grown as insurers attempt to respond to public pressure to hold down premiums—adding to the timeliness of Florida’s most recent efforts to ensure a transparent healthcare market. With the median deductible for a Healthcare.gov plan reaching as high as $5,000 in a city like Miami,(7)   in addition to increasing co-pays, an unprecedented opportunity exists for health care providers to compete for what the drafters of this legislation hoped to create . . . an educated and discerning healthcare consumer.

______________________

(1) Harris Meyer. “Blog:New price-transparency law puts Florida in the consumer vanguard.” Modern Healthcare. (April 19, 2016). Available online at: <http://www.modernhealthcare.com/article/20160419/BLOG/160419918>.

(2)  <http://www.healthandhospitalcommission.com/>.

(3)  <http://www.healthandhospitalcommission.com/docs/HealthcareTransparencyProposal.pdf>.

(4)  <http://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?FileName=h1175z1.SCAHA.DOCX&DocumentType=Analysis&BillNumber=1175&Session=2016>.

(5)  Christine Sexton. “Legislature Oks Scott’s health bill, but no criminal penalties.” Politico. (March 11, 2016). Available online at: <capitalnewyork.0511yh.com/.../legislature-oks-scotts-health-bill-no-criminal-penalties>.

(6)  Ibid.

(7)  Robert Pear. “Many Say High Deductibles Make Their Health Law Insurance All but Useless.” The New York Time. (November 14, 2015). Available online at: <http://www.nytimes.com/2015/11/15/us/politics/many-say-high-deductibles-make-their-health-law-insurance-all-but-useless.html?_r=0>.

 
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Mike Anway is a senior policy advisor with the Public Policy & Regulation Group in Holland & Knight's Tallahassee office. Mr. Anway counsels clients in the areas of government affairs and public policy, with an emphasis on healthcare policy, Medicaid and the appropriations process.
Five Pragmatic Tips-Conducting Effective Internal Investigations
By Susan E. Mack (Adams and Reese LLP)

While most General Counsel would prefer to provide legal advice for business activities which augment an enterprise’s growth, with increasing frequency, these men and women are confronted with allegations of wrongdoing on the part of management and staff.  This article is designed as a primer for the General Counsel approaching his or her first internal investigation.

An internal investigation can best be defined as a company’s efforts to collect and evaluate information responsive to accusations of improper actions or inactions.  Internal investigations are proliferating, because so, too, are allegations of corporate misconduct. It is axiomatic that these allegations are prompted by rich incentives for reporting purported wrongdoing to certain authorities. Enforcement agencies with skin in the game include the Securities and Exchange Commission (SEC), Internal Revenue Service (IRS), and Department of Justice (DOJ). 

In particular, statistics for 2014 bear out these assertions.  In 2014, the SEC pursued 755 enforcement actions, which resulted in $4.16 billion in penalties.  Of that amount, $35 million was distributed to whistleblowers.(1)   Under the Dodd-Frank Act, a whistleblower is entitled to between 10% and 30% of monetary sanctions collected in SEC actions.(2)  A whistleblower hits this big payday if he or she provides original information; namely, that which (a) derives from independent knowledge and analysis, (b) is not known to the SEC from any other source, unless the whistleblower is the original informant and (c) is not exclusively derived from public information, unless the whistleblower is one of the sources of such information.(3) 

Similarly, under the Tax Relief and Health Care Act of 2006, a whistleblower can secure between 10% and 30% of amounts actually collected by the IRS in instances of fraudulent underpayment of tax liability exceeding $2 million per taxpayer.(4)   Under the False Claims Act, whistleblowers can be awarded between 15% and 25% of amounts recovered.(5) 

The trigger for internal investigations can be a subpoena received from one of these governmental agencies based on a whistleblower’s information. Alternatively, complaints of misconduct may be lodged by employees or other individuals. Additional channels of information include external/internal audits and targeted examinations conducted by state regulatory authorities.  Whatever the source, five pragmatic tips lead to effective resolution of internal investigations. 

1. TIP ONE: AVOID THE APPEARANCE OF IMPROPRIETY BY RELYING ON INDEPENDENT OUTSIDE COUNSEL

While a General Counsel may well have substantial expertise in conducting investigations, only in rare circumstances should even a very seasoned corporate lawyer attempt to conduct a high-level investigation without retaining qualified outside counsel.  If the target of the internal investigation is a director or the Chief Executive Officer to whom the General Counsel reports, the General Counsel may well be accused of protecting his or her self-interest.  If the target of the internal investigation is one of the General Counsel’s peers, the General Counsel may be tarred with playing politics to disadvantage a competing executive. The General Counsel should consider using an investigator from inside the enterprise only if the subject of the investigation is a staff member outside corporate executive ranks.

How does one select qualified retained counsel in this instance?  Given the importance of perspective, the General Counsel should look beyond those attorneys who routinely provide advice to the enterprise and perhaps play golf with its executives. How to proceed?  Draft a short list of other qualified candidates. Conduct in-person interviews of a select few to confirm suitability for the specific assignment.  Candidates should be limited to those who have either conducted significant corporate investigations themselves or have previously supervised such investigations while in-house.  In this author’s opinion, there is no better match with a company’s independent investigator needs than retained counsel who has significant prior in-house corporate compliance experience in another enterprise. Such lawyers tend to understand departmental accountabilities and inter-relationships.

Who should be the recipient of the independent counsel’s findings?  High level investigations of a director or executive should report up to the Board Audit Committee. This serves three major purposes. First, charged with overseeing the enterprise’s controls, this Board Committee is in the best position to implement any recommended action steps. Second, oversight by this Board Committee appropriately gives the impression that no member of management is steering the investigation. Third, if the company will be reporting its findings and conclusions to the SEC or similar agency, such agency will be assured by the fact that accountability was maintained at the very highest levels of the enterprise.

2. TIP TWO: WITH THE END GAME IN MIND, CRAFT A WORK PLAN WITH CONTAINED SCOPE

The ultimate end-game of the investigation is to thoroughly and fairly conduct an examination of critical facts, producing concrete findings and actionable conclusions. A secondary but important purpose is to achieve these goals without unduly disturbing ongoing business operations and by appropriately constraining expense. The General Counsel should craft a work plan just broad enough to answer key questions identified in concert with retained counsel. Key witnesses must be identified and documents located. A document hold should be issued to avoid possible destruction of relevant materials. But ongoing care should be taken that there is no scope creep, as that will impede the timely resolution of the investigation.

3. TIP THREE: SET APPROPRIATE EXPECTATIONS FOR INVESTIGATION SUBJECTS

The witnesses to be interviewed may be used to viewing lawyers as friendly advisors in a business context. Of course, witnesses should be cautioned that all information exchanged in an interview is to be kept confidential. But to set appropriate expectations in the different context of an internal investigation, witnesses must be warned that the lawyers are representing the corporation, rather than the interviewee. The interviewing lawyers should also refrain from opining whether the subject of the interview should seek legal counsel.

4. TIP FOUR: TRAVEL IN TWO’S AS AN INVESTIGATIVE TEAM

Optimally, two retained counsel should conduct the witness interviews. One should conduct the questioning while the other should take notes. This team approach will result in the most accurate rendition of the witness’ version of events.

5. TIP FIVE: PROTECT THE ATTORNEY-CLIENT PRIVILEGE

The seminal case of Upjohn Company vs. United States 449 U.S. 383 (1981) established that the attorney-client privilege extends to the transmission of information by anyone in the corporation to the lawyer for the primary goal of providing legal advice to the corporation. So long as providing legal advice is one of the primary goals, the privilege is not destroyed if there exists other business-related goals such as compliance. In Re Kellogg Brown & Root, Inc. 756 F. 3rd 754 (D.C. Cir. 2014). Further, the investigating lawyer’s mental impressions are protected by virtue of the attorney work product privilege Upjohn at p.399.  To maintain the attorney-client privilege, the interview summaries must be framed in terms of the lawyer’s mental impressions, rather than as a verbatim transcript.

 
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(1)  The author acknowledges relying on the presentation “Regulatory Inquiries and Corporate Investigations” for these SEC statistics.  This presentation was delivered on May 17, 2016 by Julie Broderick, the Prudential’s head of investigations, and her colleagues at the Association of Life Insurance Annual Meeting.
(2)  See 15 U.S.C. Section78u-6(b)1
(3)  See 15 U. S.C. Section 78u-6 (a)3
(4)  See 26 U.S.C. Section 7623
(5)  See 31 U.S.C.  Section 
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Susan E. Mack serves as Special Counsel with the Jacksonville office of law firm of Adams and Reese LLP, following her 25 year career as General Counsel and Chief Compliance Officer of both insurance companies and reinsurers in the life/health and property/casualty sectors of the insurance industry. Adams and Reese LLP, an AmJur 200 law firm, has 280 lawyers in seven Southern states and the District of Columbia.

While working as Senior Vice President and General Counsel of The Main Street America Group, Ms. Mack was one of the co-founders of the ACC North Florida Chapter. From 2010-2011, she had the privilege of serving as the ACC North Florida Chapter’s President.  During her tenure, the chapter secured the “Best Small Chapter of the Year” award from the ACC national organization.

Ms. Mack is also a founding director of ARIAS (US), the premier organization for educating and certifying reinsurance and insurance arbitrators. She was the first woman to ever be on the ARIAS (US) Board. Currently, she holds ARIAS (US) designations as an umpire and arbitrator, and is also a qualified mediator.  In addition to her insurance, insurance regulatory and compliance practice, Ms. Mack accepts assignments as an arbitrator, mediator and expert witness.

Ms. Mack is admitted to practice in the states of Florida, California, Connecticut, North Carolina, and South Carolina. She is admitted to the bars of the Northern, Middle and Southern Districts of Florida.