Thursday, August 29, 2013

The Virtual Law Office


Law is the next big thing to go wireless, as a new trend of virtual law offices moves lawyers out of traditional offices and enables them to practice at home or in satellite offices. As technology continues to evolve at an extremely fast pace, the State Bar of Arizona, in addition to many other state bars across the country, will be forced to take a deeper look at how these new practices will be managed and regulated.

Essentially, the idea behind virtual law offices is to make lawyers more accessible to clients, while also removing some of the geographical boundaries that may limit a lawyer’s scope of practice. For example, a lawyer licensed in one state may set up a home office and provide legal services, via the Internet and cloud computing, to clients all over the world. However, some states are not entirely ready to allow this type of practice to occur. A Podcast by the Jennings Strouss managing attorney, J. Scott Rhodes, addresses the issues presented by virtual law offices by stating that if a lawyer, not licensed in Arizona, spends more than six months a year in Arizona, and provides services for a client in a different state, he or she may be engaging in the unauthorized practice of law in Arizona. Inevitably, many discussions have ensued regarding this traditional regulatory stance and how, or if, it should be reconsidered to keep pace with the evolution of technologically savvy business practices.

Today’s culture and society is becoming increasingly mobile. Individuals do not necessarily live, or conduct all of their business and personal matters, in one state. The idea of a virtual law office seems beneficial to both lawyers and clients should either party move to a different state, because they would be able to maintain their already established attorney-client relationship. Additionally, virtual law offices provide an opportunity for solo and small firms to expand their client base and generate more business despite geographic boundaries. The client-driven market for online legal services is forcing lawyers and firms to become more creative and accessible; however, the lag in pliability of some current regulations can make adoption and expansion of virtual law offices difficult.

Maintaining compliance with current regulations regarding technology use in a law practice can be a tall order. An example of this is a rule that has been adopted by the American Bar Association permitting a lawyer to provide “temporary” legal services, to be handled by lawyers outside of their jurisdiction. The issue is the gray area that exists surrounding the word “temporary.”  The difference between temporary and permanent can be the difference between authorized and unauthorized practice of law. Should a lawyer be found to have engaged in the unauthorized practice of law, he or she could be disqualified from becoming a member of the state bar. While there are many benefits of a virtual law office, the risks involved are a deterrent to some lawyers considering engaging in this type of practice.

From a consumer standpoint, the increasing availability of law services via the internet provides alternative, more convenient, and lower cost ways to have their legal needs met. There are, however, two major issues that hinder this movement to virtual law offices privacy and security. Similar to the accommodations made by banks to secure client information when banking transitioned online, lawyers must establish tight security measures to ensure their clients’ information remains confidential and safe.  All states now permit the use of email communication with clients, but any form of unencrypted email runs the risk of access by a third party. Several have issued ethics opinions related to technology use and requirements for protecting client information. The State Bar of Arizona has, in fact, addressed this issue in an ethics opinion, which states that an attorney using electronic files has the responsibility to take competent and reasonable steps to assure that the client’s information is not disclosed to third parties. Nationwide, regulators of the legal profession have not yet uniformly determined a specific sets of standards of acceptable security precautions for the use of technology in law practices.

The advancement of virtual law offices is hindered by current regulations and differing ethics opinions. To its credit, the law of regulating lawyers is trying to keep up with all the new technologies, but isn’t there yet. In the meantime, it appears that the technology and the creativity of lawyers will be ahead of regulation on this issue. If regulation and enforcement of these rules become more standardized, the progression of virtual law practices will take off, potentially providing increased client access to justice, and business growth opportunities for lawyers.

Tuesday, August 27, 2013

Jennings, Strouss & Salmon Adds Three New Attorneys

Phoenix (August 21, 2013) – Jennings, Strouss & Salmon, PLC, a leading Phoenix-based law firm, is pleased to announce that Gary J. Newell is the firm’s newest member of the energy practice in Washington, D.C. and Shelley Tolman and Jeffrey D. Gardner have joined the firm’s Phoenix litigation group.
“We are excited to add three attorneys with such diverse experiences to the firm,” stated J. Scott Rhodes, Managing Attorney at Jennings, Strouss & Salmon. “Gary Newell’s knowledge and experience in energy, Jeff Gardner’s extensive litigation skills, and Shelley Tolman’s ability to effectively navigate construction litigation will provide great value to our clients.”

Gary J. Newell has decades of experience in Energy Law, focused in the areas of electric utility, natural gas and nuclear power. Well known in the energy sector, Mr. Newell has represented municipalities, municipal joint action agencies and cooperative utility companies in proceedings related to the supply and transmission of electric power and natural gas. He has also been instrumental in negotiations leading to the conception of Regional Transmission Organizations (RTOs) in several U.S. areas, as well as in administrative proceedings involving terms for natural gas transportation services and nuclear generation stations.
“I was attracted to Jennings, Strouss & Salmon’s decades-long involvement with public power, and by the singular focus of the Washington, D.C. office on providing public power entities a strong and effective voice before FERC and other regulatory agencies,” stated Newell. “I’ve known several of the firm’s energy attorneys for years, and have the greatest respect for their knowledge and experience, and for the skillfulness with which they advocate for their clients. I am excited by the opportunity to practice with them as colleagues and delighted to be a part of the firm.”

Jeffrey D. Gardner focuses his litigation practice on securities, class action, employment, real estate and intellectual property matters. His experience also includes commercial and public finance law, as well as broker-dealer and registered investment advisor regulation and compliance. Mr. Gardner has extensive experience representing businesses and individuals in investigations and enforcement actions brought by the United States Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and numerous other regulatory agencies throughout the United States.
“I was drawn to Jennings, Strouss & Salmon because of the firm’s stellar reputation and excellent lawyers,” said Gardner. “Jennings Strouss offers clients terrific value, thoughtful solutions and exceptional legal advice, I am thrilled to be a part of the firm.”

An Arizona native, Shelley Tolman concentrates her practice in the areas of construction law, surety law, government contracts and complex commercial litigation. Her broad range of experience, resolving issues relating to the False Claims Act, the Miller Act, construction contract claims, bid protests, lien actions, and surety issues, expands the firm’s construction litigation services.
“I was drawn to Jennings, Strouss & Salmon because of the firm’s history of obtaining outstanding litigation results, and its reputation for integrity,” commented Tolman. “I’m proud to join a great group of attorneys with extensive experience in construction and surety law.”

About Jennings, Strouss & Salmon
Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in Phoenix, Peoria, and Yuma, Arizona; and Washington, D.C. The firm's primary areas of practice include agribusiness; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate, land use and zoning; surety and fidelity; tax; and trust and estates. For additional information please visit www.jsslaw.com and follow us on LinkedIn, Facebook and Twitter.
~JSS~
Contact:  Dawn O. Anderson  |  danderson@jsslaw.com|  602.495.2806
- See more at: http://www.jsslaw.com/news_detail.aspx?id=267#sthash.6bmpXBmw.dpuf

Jennings Strouss Attorney Named 2014 Phoenix Corporate Governance “Lawyer of the Year” by Best Lawyers in America®

 
 
Richard Lieberman Recognized for Corporate Governance Law
 
Phoenix, Ariz. (August 27, 2013) Jennings, Strouss & Salmon, P.L.C., a leading Phoenix-based law firm, is pleased to announce that Richard Lieberman has been selected as the Best Lawyers’ 2014 Phoenix Corporate Governance Law “Lawyer of the Year.” (Copyright 2013 by Woodward/White, Inc., of Aiken, SC).

Best Lawyers in America® began designating “Lawyers of the Year” in the United States in high-profile legal practice areas in 2009. Only a single lawyer in each practice area and designated metropolitan area is honored as the “Lawyer of the Year,” making this accolade particularly significant. Mr. Lieberman is the only attorney in Arizona recognized by Best Lawyers in America® 2014 as “Lawyer of the Year” in the field of Corporate Governance Law.

Lawyers being honored as “Lawyer of the Year” are selected based on results of the exhaustive peer-review assessments that are conducted with thousands of leading lawyers each year. Receiving this designation reflects the high level of respect a lawyer has earned among other leading lawyers in the same communities and the same practice areas for their abilities, their professionalism, and their integrity.

“I am honored to receive this recognition and to help serve clients with their corporate governance issues, from structuring those arrangements when forming an entity, to dealing with the rights and duties of owners and managers in transactional and litigated situations,” states Lieberman. “With increased scrutiny of governance arrangements by regulators, equity owners and the courts, this area of the law requires careful attention by executives, independent directors and equity owners.”

Richard Lieberman is Chair of the firm's Corporate, Securities and Finance Department and serves on the firm's Management Committee. He has extensive experience in a broad range of business law issues, including mergers and acquisitions, securities, corporate governance, finance and banking, employment, executive compensation, bankruptcy and corporate restructuring, dispute resolution and legislation.

He has served as in-house General Counsel and outside counsel to a variety of companies, ranging in size from start-ups to Fortune 500 companies. Mr. Lieberman has counseled boards and senior management on issues pertinent to growing companies as well as those experiencing crisis situations. This diverse experience enables him to counsel clients on corporate governance issues in a wide variety of situations.

In addition to his law degree, Mr. Lieberman is a Certified Insolvency and Restructuring Advisor, awarded by the Association of Insolvency and Restructuring Advisors. He can be reached at rlieberman@jsslaw.com or 602.262.5935.

About Best Lawyers
Best Lawyers is based on an exhaustive peer-review survey in which almost 50,000 leading attorneys cast nearly five million votes on the legal abilities of other lawyers in their practice areas, and because lawyers are not required or allowed to pay a fee to be listed, inclusion in Best Lawyers is considered a singular honor.

About Jennings, Strouss & Salmon
Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in Phoenix, Peoria, and Yuma, Arizona; and Washington, D.C. The firm's primary areas of practice include agribusiness; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate, land use and zoning; surety and fidelity; tax; and trust and estates. For additional information please visit www.jsslaw.com and follow us on LinkedIn, Facebook and Twitter.

~JSS~
 
Contact:  Dawn O. Anderson  |  danderson@jsslaw.com|  602.495.2806

Friday, August 23, 2013

FERC Confirms That Non-Jurisdictional Contract Rates Are Not Pass-Through Rates Subject To FERC’s Jurisdiction


    

By Alan I. Robbins & Andrea I. Sarmentero Garzón

On July 26, 2013 the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued three orders (“July 2013 Orders”)[1] in the context of East Kentucky Power Cooperative’s (“EKPC”) integration into PJM Interconnection, LLC (“PJM”) (Docket Nos. ER13-1177-000 et.al, ER13-1570-000 and EL13-68-000).

The July 2013 Orders, the Commission reaffirmed that the concept of pass-through rates under the Commission’s Orders and Opinions in City of Vernon (“Vernon”) does not apply to rates charged by a non-jurisdictional entity pursuant to a bi-lateral contract. See FERC Opinions 479 and 479-A.[2]

Pass Through Rates under the City of Vernon Decision

Vernon filed a petition for declaratory order with FERC in year 2000 requesting the Commission to determine that its Transmission Revenue Requirement (“TRR”) was acceptable for the purpose of becoming a Participating Transmission Owner in the California Independent System Operator (“CAISO”). FERC subsequently approved Vernon’s TRR. Pacific Gas and Electric Company appealed the Commission’s ruling to the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”). On October 15, 2002, the D.C. Circuit remanded to FERC the question of whether the standard of review conducted by the Commission of a non-jurisdictional entity’s TRRs (Vernon), which is a part of the rate of a jurisdictional independent system operator (CAISO), was sufficient to ensure that a pass through of Vernon’s costs by the CAISO would be just and reasonable under section 205 of the Federal Power Act (“FPA”).[3] The D.C. Circuit held that “FERC may analyze and consider the rates of non-jurisdictional utilities to the extent that those rates affect jurisdictional transactions.”[4]

In Opinions 479 and 479-A, FERC ruled that it was within its statutory jurisdiction to review Vernon’s TRR pursuant to FPA Section 205. FERC asserted that the TRR of participating transmission owners are part of the transmission rate charged by the CAISO, which is subject to FERC’s jurisdiction. FERC reasoned that Vernon voluntarily submitted the TRR as a component of a jurisdictional rate and therefore a full section 205 review was necessary to ensure that CAISO rates remained just and reasonable. The D.C. Circuit upheld the Commission’s decision to apply a section 205 standard of review to Vernon’s TRR in Transmission Agency of Northern California v. FERC.[5] The Commission has since then consistently applied Opinions 479 and 479-A to “pass through” rates voluntarily filed by non-jurisdictional entities.

The July 2013 Orders

In the context of EKPC’s integration with PJM, FERC further addressed the limits of its standard of review of rates voluntarily submitted by non-jurisdictional entities under Vernon. Louisville Gas and Electric Company and Kentucky Utilities Company (“LG&E/KU”) argued that the ancillary service rates to be charged to LG&E/KU by EKPC under a bi-lateral contract were FERC-jurisdictional rates subject to review by the Commission under section 205 of the FPA. LG&E/KU attempted to characterize the ancillary service rates as “pass-through” rates in an effort to invoke FERC’s jurisdiction pursuant to Vernon. EKPC responded by explaining that: (i) the ancillary service rates to be paid by LG&E/KU after EKPC’s integration into PJM were not pass-through rates; (ii) LG&E/KU had agreed to enter into a bilateral contract with EKPC for the provision of ancillary services by EKPC; (iii) EKPC, not PJM, was to charge those rates to LG&E/KU; and (iv) rates charged by a non-jurisdictional entity under a bi-lateral contract are not subject to the Commission’s jurisdiction.

In the July 2013 Orders, the Commission recognized that EKPC, like Vernon, is a non-jurisdictional utility that has voluntarily chosen to integrate into PJM and transfer functional control over its transmission facilities.[6] The Commission held, however, that the ancillary service rates to be paid by LG&E/KU were not pass-through rates as discussed in Vernon because the ancillary service rates at issue were specifically exempted from charges by PJM under the non-conforming Network Integration Transmission Service Agreement between LG&E/KU and PJM and are instead supplied and billed for by EKPC under a bi-lateral agreement between EKPC and LG&E/KU.[7] Citing a prior decision in Louisville Gas & Electric Company and Kentucky Utilities Company v. East Kentucky Power Cooperative, Inc., the Commission reiterated that it has no jurisdiction to review the contractual rates charged by FPA section 201(f) non-jurisdictional entities, such as EKPC, to their customers.

Jennings Strouss lawyers Alan I. Robbins, Debra D. Roby and Andrea I. Sarmentero Garzón represented EKPC in this matter.



[1] Order on Clarification or ,in the Alternative, Rehearing, 144 FERC ¶ 61,067 (July 26, 2013); Order Accepting Cancellation, 144 FERC ¶ 61,063 (July 26, 2013); and Order Accepting Proposed Revenue Requirements and Establishing Hearings and Settlement Judge Procedures, 144 FERC ¶ 61,066 (July 26, 2013).
 
[2] See City of Vernon, California and California Independent Sys. Operator, Inc., Opinion No. 479, 111 FERC ¶ 61,092 (2005) at P 44, order on reh’g, Opinion No. 479-A, 112 FERC ¶ 61,207 (2005) at P 26, reh’g denied, Opinion No. 479-B, 115 FERC ¶ 61,297 (2006).
 
[3] Pacific Gas & Elec. Co. v. FERC, 306 F.3d at 1112, 116 and 1117 (D.C. Cir. 2002).
 
[4] Id. at 1114.
 
[5] Transmission Agency of Northern California v. FERC, 495 F.3d 663, 672 (D.C. Cir. 2007).
 
[6] See Order Accepting Cancellation, 144 FERC ¶ 61,063 (July 26, 2013) at P 22.
 
[7] Id. at P 21 and P 23.

What Duties Does Your HOA Owe You?

To many homeowners, it may seem as though your homeowners’ association (HOA) governs your community essentially without any rules. While it is true many HOA’s have a lot of discretionary authority, their authority is not without checks and balances. The HOA’s powers are limited in four primary ways: the Arizona statutes; the governing documents (i.e. the bylaws and the Covenants, Conditions and Restrictions (“CC&Rs”); Arizona common law; and your ability to vote those in control out of office.
 
The Arizona statutory sections governing HOAs are primarily found in A.R.S. §§ 33-1801 -1814. Those provisions regulate such subjects as what a homeowner can be fined for late payments; requirements for responding to challenges for alleged violations of the community documents; the need for certain HOA meetings to be open to the community and requirements for providing notice of when those meetings will take place; the availability of the associations financial records for inspection; and when an association lien on your property can be foreclosed upon. The statutes also address subjects as a homeowners’ right to display flags and political signs, as well as when parking on the street cannot be restricted by the HOA. Finally, the statutes address such subjects as voting rights and when a board member can be removed. If you have a disagreement with the HOA, your first step should be to familiarize yourself with these statutory provisions.  
 
While the statutes often trump the bylaws and CC&Rs, there are many subjects and details that the statutes do not address. Thus, in determining the scope of the HOA’s authority, as well as the obligations of you as a homeowner, it is important to also review those documents. The bylaws and CC&Rs should have been provided to you upon your purchase of your home, and are often posted on HOA websites.
 
The Arizona Courts have indicated that, in addition to the duties imposed by statute and the governing documents, the association has the following duties to the members of the common-interest community:
  • use ordinary care and prudence in managing the property and financial affairs of the community that are subject to its control;
  • treat members fairly;
  • act reasonably in the exercise of its discretionary powers, including rulemaking, enforcement, and design-control powers; and
  • provide members reasonable access to information about the association, the common property, and the financial affairs of the association.  
However, if you, as a homeowner, contend an action of the association has violated one of the foregoing duties, the burden of proving such a breach of duty falls on you. It will also be your burden to prove that the HOA’s actions have caused, or threatened to cause, you or the interest of the community some harm.
 
Finally, as with any governing body, if you do not like the way the HOA is operating, you have the power to cast your vote at the next election to put someone else on the board.
 
*Garrett Olexa is a Member with the law firm of Jennings, Strouss & Salmon, PLC and works in its real estate and commercial litigation practice group. He can be contacted at golexa@jsslaw.com or 623.878.2222.http://www.jsslaw.com/professional_bios/Garrett_J_Olexa

Wednesday, August 21, 2013

CFTC Reporting Obligations Begin for End-Users Engaging in Energy Commodity Swaps


dswancredit

There are three basic types of transactional reporting requirements imposed by the Commodity Futures Trading Commission (“CFTC”) in regulations implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), including reporting of: (1) historical swaps; (2) new swaps; and (3) commodity trade options. Following the issuance of temporary no-action relief by the CFTC Staff, reporting obligations applicable to end-users are beginning to take effect for energy commodity swaps.

The CFTC defined historical swaps to include both pre-enactment swaps and transition swaps. A “pre-enactment swap” is a swap entered into prior to the date of enactment of the Dodd-Frank Act (i.e., July 21, 2010), the terms of which had not expired as of the date of enactment. A “transition swap” is a swap entered into on or after the enactment of the Dodd-Frank Act and prior to the applicable compliance date for reporting historical swaps data pursuant to Part 46 of CFTC’s regulations. For natural gas and electric utilities which are end-users of swaps and do not fall into the category of either a Swap Dealer (“SD”), Major Swap Participant (“MSP”), or financial entity, the applicable compliance date was April 10, 2013. CFTC Staff granted no-action relief, however, for the reporting of these historical swaps. Pursuant to the latest no-action letter issued by the CFTC Staff, historical energy commodity swaps entered into by such end-users prior to April 10, 2013 must be reported no later than 12:01 a.m. eastern time on October 31, 2013.

With respect to other new energy commodity swaps entered into by end-users on or after April 10, 2013, CFTC Staff granted no action relief until 12:01 a.m. eastern time on August 19, 2013, on the condition that, by 12:01 a.m. eastern time on September 19, 2013, a swap counterparty, which is not an SD, MSP, or financial entity, backload and report to a Swap Data Repository (“SDR”) all transaction data, for the period from April 10, 2013, to August 19, 2013, that such counterparty would have been required to report pursuant to Part 45 in the absence of the no-action relief.

An analysis of an end-user’s contracts and transactions, including the type of counterparty with whom the end-user entered into such contracts and transactions, is necessary to determine whether the end-user is the party which would have been required to report a transaction to an SDR. Often, the reporting obligation will not fall on the end-user because the CFTC established the following reporting hierarchy:
(a) If only one counterparty is an SD, the SD shall be the reporting party.

(b) If neither counterparty is an SD, and only one counterparty is an MSP, the MSP shall be the reporting party.

(c) If both counterparties are non-SD/MSP counterparties, and only one counterparty is a financial entity as defined in section 2(h)(7)(C) of the Commodity Exchange Act (“CEA”), the counterparty that is a financial entity shall be the reporting party.

(d) If both counterparties are SDs, or both counterparties are MSPs, or both counterparties are non-SD/MSP counterparties that are financial entities, or both counterparties are non-SD/MSP counterparties and neither counterparty is a financial entity, the counterparties must reach an agreement on which counterparty will be the reporting party and, for all off-facility swaps (i.e., those not executed on a Swap Execution Facility or Designated Contract Market), the agreement on which counterparty will be the reporting party must actually be included as “a term of the swap transaction.”
Thus, typically an end-user, which is not an SD, MSP or financial entity, will only have to report a swap transaction when its counterparty also is not an SD, MSP or financial entity. There is a significant exception to this reporting hierarchy, however, when a swap transaction is conducted with a foreign entity. Notwithstanding the provisions of paragraphs (a) through (d) above, if both counterparties to a swap are non-SD/MSP counterparties and only one counterparty is a U.S. person, the CFTC’s regulations require that the U.S. person be the reporting party. If your natural gas or electric utility engages in bilateral swap transactions with companies in, for example, Canada or Mexico that are non-MSPs/SDs, it is important to be cognizant of the fact that your utility will bear the burden of reporting a swap.

Moreover, it cannot be assumed that simply because your counterparty engaged in a large number of energy commodity swaps previously that it currently is an MSP or SD which will report the swap transaction. Very few companies are ever expected to register as MSPs and several large companies that trade energy commodity swaps have not yet registered to be SDs because the volume of their swap dealing activity has not yet exceeded thresholds established by the CFTC. Below are links to lists of SDs and MSPs on the CFTC’s website:

SDs: http://www.cftc.gov/LawRegulation/DoddFrankAct/registerswapdealer

MSPs: http://www.cftc.gov/LawRegulation/DoddFrankAct/registermajorswappart

It also is important to be aware that when Congress passed the Dodd-Frank Act, it broadly defined the term “swap” to include options. But, the CFTC issued interpretative guidance, exemptive orders or regulations excluding or exempting certain types of transactions, including some options, from reporting as swaps. For example, the CFTC ruled that when a contract requires delivery of a non-nominal, fixed volume of a non-financial commodity, it may be excluded as a forward contract, notwithstanding the fact that it also contains embedded volumetric options, so long as the contract passes a seven-prong test established by the CFTC. The CFTC cited, as an example, a forward contract requiring the delivery of 10,000 bushels of wheat that includes an option for an additional 5,000 bushels of wheat. The seven prongs that must be met include:
1. The embedded optionality does not undermine the overall nature of the
agreement, contract, or transaction as a forward contract;

2. The predominant feature of the agreement, contract, or transaction is actual delivery;

3. The embedded optionality cannot be severed and marketed separately from the overall agreement, contract, or transaction in which it is embedded;

4. The seller of a nonfinancial commodity underlying the agreement, contract, or transaction with embedded volumetric optionality intends, at the time it enters into the agreement, contract, or transaction to deliver the underlying nonfinancial commodity if the optionality is exercised;

5. The buyer of a nonfinancial commodity underlying the agreement, contract or transaction with embedded volumetric optionality intends, at the time it enters into the agreement, contract, or transaction, to take delivery of the underlying nonfinancial commodity if it exercises the embedded volumetric optionality;

6. Both parties are commercial parties; and

7. The exercise or non-exercise of the embedded volumetric optionality is based primarily on physical factors, or regulatory requirements, that are outside the control of the parties and are influencing demand for, or supply of, the nonfinancial commodity.
Typically, the seventh prong is most difficult to meet because many options are exercised, or not exercised, in a party’s economic discretion based primarily on the price of the option as compared to other alternatives.

If this seven-prong test is not met, it remains possible that the counterparties and transactions might still qualify for exemptive relief that excuses them from reporting a transaction as a swap if they meet all of the criteria in exemptive orders issued by the CFTC pertaining to: (1) certain transactions exclusively between governmental utilities, electric cooperatives, and tribal utilities; or (2) certain transactions by qualified participants in organized markets operated by Regional Transmission Organizations (“RTOs”) or Independent System Operators (“ISOs”) which are subject to regulation by the Federal Energy Regulatory Commission. An analysis of the counterparties and transactions as compared to the specific criteria in the CFTC’s exemptive orders is necessary to make this determination.

Alternatively, the counterparties and transactions potentially could qualify for a physical commodity trade option exemption. This exemption can be invoked if the following criteria are met:
(1) the offeror is an eligible contract participant or a producer, processor, commercial user, or merchant of the commodity that is the subject of the transaction and is entering into the transaction solely for purposes related to its business as such a producer, processor, commercial user, or merchant of the commodity;

(2) the offeree is a producer, processor, commercial user or merchant of the commodity that is the subject of the transaction and is entering into the transaction solely for purposes related to its business as such a producer, processor, commercial user, or merchant of the commodity; and

(3) the trade option is intended by both parties to be physically settled, so that if exercised, the option will result in the sale of an exempt energy commodity for immediate (spot) or deferred (forward) shipment or delivery.
Originally, the CFTC established two alternative methods for reporting these commodity trade option transactions. One method required such transactions to be reported immediately to an SDR just like all other new swap transactions must be reported pursuant to Part 45 of the CFTC’s regulations. Another less onerous method allowed such transactions to be reported only once a year to the CFTC pursuant to Part 32 of the CFTC’s regulations.

Specifically, the CFTC’s regulations required a commodity trade option transaction to be reported immediately to an SDR when at least one counterparty (whether as offeror or offeree) already has become obligated to comply with the Part 45 reporting requirements as a reporting party for any other type of swap during the twelve month period preceding the date on which the commodity trade option was entered into by the counterparties. In other words, if any one of the two counterparties was already reporting a swap, other than a commodity trade option, the commodity trade option transaction was required to be reported to an SDR too. The CFTC reasoned that if a counterparty is already reporting another swap transaction to an SDR, it should be capable of reporting a commodity trade option transaction too without an undue burden. For the non-SD/MSP, which is designated as the reporting party pursuant to the hierarchy described above, this reporting obligation originally was scheduled to begin on April 10, 2013, but, as explained below, the CFTC Staff granted no action relief.

To the extent the counterparties instead qualified for lighter-handed annual reporting, the CFTC regulations required that both counterparties (not just one of them) submit the annual form providing notice of their respective commodity trade option transactions. This form, entitled “Annual Notice Filing for Counterparties to Unreported Trade Options,” is set forth in Appendix A to Part 32 of the CFTC’s regulations. The first such annual form is due to the CFTC on March 1, 2014.

Shortly before the April 10, 2013 compliance date for reporting of swaps pursuant to Part 45 of the CFTC’s regulations, CFTC Staff issued a no-action letter providing relief to end-users, which are not SDs or MSPs, from the obligation to report a commodity trade option immediately to an SDR. Essentially, the CFTC Staff stated, among other things, that CFTC Staff will not recommend that the Commission commence an enforcement action against a non-SD/MSP reporting party if the non-SD/MSP does not report a commodity trade option to an SDR pursuant to the swap reporting regulations in Part 45, so long as the non-SD/MSP: (1) annually reports the commodity trade option transaction on Form TO pursuant to Part 32; and (2) the non-SD/MSP notifies the CFTC Division of Market Oversight, by email, no later than 30 days after entering into trade options having an aggregate notional value in excess of $1 billion during any calendar year.

Tuesday, August 20, 2013

29 Jennings Strouss Attorneys Recognized in 2014 edition of Best Lawyers in America®


PHOENIX, Ariz. (August 20, 2013) – Jennings, Strouss & Salmon, a leading Phoenix-based law firm, is pleased to announce that 29 of the firm's attorneys have been selected for inclusion in the Best Lawyers in America® 2014 (Copyright 2013 by Woodward/White, Inc., of Aiken, SC):

Gerald W. Alston – Arbitration; Commercial Litigation; International Arbitration – Commercial; International Trade and Finance Law; Litigation – Construction; Mediation

Timothy W. Barton – Litigation – Real Estate

David Brnilovich – Real Estate Law

John R. Christian – Tax Law; Trusts and Estates

Frederick M. Cummings – Medical Malpractice Law - Defendants; Personal Injury Litigation – Defendants; Professional Malpractice Law – Defendants

Richard K. Delo – Legal Malpractice Law – Defendants; Medical Malpractice Law – Defendants

John J. Egbert – Commercial Litigation; Employment Law – Management; Labor Law – Management

Lee E. Esch – Real Estate Law

Jay A. Fradkin – Health Care Law; Medical Malpractice Law – Defendants; Personal Injury Litigation - Defendants

Joel L. Greene – Energy Law

Rodney Q. Jarvis – Land Use and Zoning Law; Litigation – Land Use and Zoning

Carolyn J. Johnsen – Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law; Litigation – Bankruptcy

Gary G. Keltner – Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law; Litigation – Bankruptcy; Real Estate Law

Richard L. Lassen – Trusts and Estates

Richard Lieberman – Corporate Governance Law; Mergers and Acquisitions; Securities / Capital Markets Law

Jay M. Mann – Construction Law; Litigation – Construction

Bruce B. May – Real Estate Law

John C. Norling – Real Estate Law

Robert J. Novak – Banking and Finance Law; Real Estate Law

Michael R. Palumbo – Commercial Litigation

Russell R. Rea – Eminent Domain and Condemnation Law

J. Scott Rhodes – Administrative / Regulatory Law; Ethics and Professional Responsibility Law; Legal Malpractice Law – Defendants

Alan I. Robbins – Energy law

Jack N. Rudel – Corporate Law

John G. Sestak, Jr. – Administrative / Regulatory Law; Commercial Litigation; Corporate Law; Litigation – Banking and Finance; Litigation – Construction; Litigation – Labor and Employment; Litigation – Real Estate

Wayne A. Smith – Real Estate Law

George C. Spilsbury – Corporate Law; Public Finance Law

Bradley J. Stevens - Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law

Kenneth C. Sundlof, Jr. – Energy Law

About Best Lawyers
Since it was first published in 1983, Best Lawyers® has become universally regarded as the definitive guide to legal excellence. Because Best Lawyers is based on an exhaustive peer-review survey in which almost 50,000 leading attorneys cast nearly five million votes on the legal abilities of other lawyers in their practice areas, and because lawyers are not required or allowed to pay a fee to be listed, inclusion in Best Lawyers is considered a singular honor.

About Jennings, Strouss & Salmon
Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in Phoenix, Peoria, and Yuma, Arizona; and Washington, D.C. The firm's primary areas of practice include agribusiness; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate, land use and zoning; surety and fidelity; tax; and trust and estates. For additional information please visit www.jsslaw.com and follow us on LinkedIn, Facebook and Twitter.
 
~JSS~
 
Contact:  Dawn O. Anderson  |  danderson@jsslaw.com|  602.495.2806

Monday, August 19, 2013

Increased Energy Market Coordination: FERC Encourages Stakeholder Efforts Before Weighing Regulatory Changes

arukin-credit copy
Jennings, Strouss & Salmon Attorney, Alan J. Rukin, authors Increased Energy Market Coordination: FERC Encourages Stakeholder Efforts Before Weighing Regulatory Changes, published in IDEA District Energy Magazine’s “From a Legal Perspective” section.

Increased Energy Market Coordination FERC Encourages Stakeholder Efforts Before Weighing Regulatory ChangesThe development of new sources of natural gas and the corresponding price decline have some electricity and heat energy suppliers, including IDEA members, considering natural gas as their fuel of choice. Responding to this ongoing fuel switch, the Federal Energy Regulatory Commission (FERC) has undertaken an effort to learn about the feasibility of greater coordination between the electricity and natural gas markets – two of the major energy markets it regulates. The development of new sources of natural gas and the corresponding price decline have some electricity and heat energy suppliers, including IDEA members, considering natural gas as their fuel of choice. Responding to this ongoing fuel switch, the Federal Energy Regulatory Commission (FERC) has undertaken an effort to learn about the feasibility of greater coordination between the electricity and natural gas markets – two of the major energy markets it regulates.

This column summarizes FERC’s recent energy market coordination efforts so that IDEA members can be aware of the ongoing issues and potential market changes. Read the complete article

Tuesday, August 13, 2013

Arizona Supreme Court Declines to Expand Economic Loss Doctrine



The economic loss rule limits a contracting party to contractual remedies for the recovery of economic losses that are unaccompanied by physical injury to persons or other property. The Arizona Supreme Court recently issued the latest decision on the economic loss rule in Sullivan v. Pulte Home Corp. 2013 WL 3929151      P.3d      (July 31, 2013), declining to expand the application of the rule. 

In Sullivan, the Court was faced with the question of whether the economic loss rule would bar tort claims asserted against the home builder by the second owner of the home because the second homeowner could have sued the builder for breach of implied warranty. The Supreme Court rejected an attempt to expand the economic loss rule to non-contracting parties. In doing so, the Court in Sullivan re-affirmed its “express limited holding” in Flagstaff Affordable Housing Ltd. Pship v. Design Alliance, Inc., 223 Ariz. 320, 223 P.3d 664 (2010) that “a contracting party is limited to its contractual remedies for purely economic loss from construction defects.” 

The Sullivan decision suggests that the Arizona Supreme Court intends to hold the economic loss rule in-check and prevent it from being further expanded. Additionally, in citing with approval language from a secondary source indicating that the economic loss rule should only “ . . . relegate[e] a plaintiff to contract remedies in cases where there is an agreement between the parties allocating economic risks,” the Court hinted that it might also refuse to find that a tort claim is barred by the economic loss rule where (i) a tort duty exists independently of the contract and (ii) the parties’ agreement neither expressly nor implicitly addresses the scope of the duty nor the relief being sought.

*Garrett Olexa is a Member with the law firm of Jennings, Strouss & Salmon, PLC and works in its commercial litigation practice group.  He can be contacted at golexa@jsslaw.com or 623.878.2222.http://www.jsslaw.com/professional_bios/Garrett_J_Olexa