Law Firm News

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Proskauer & Rose, LLP

Federal Trade Commission Challenges Consummated Transaction -- Orders Divestiture
The Federal Trade Commission has served up a powerful reminder of the scope of its enforcement powers related to mergers and acquisitions. Earlier this month the FTC announced that Hologic, Inc. has agreed to divest assets it acquired last year in a transaction that was not subject to the Hart-Scott- Rodino Act ("HSR Act"). In the transaction, valued at $32 million, Hologic acquired Fischer Imaging Corporation's mammography businesses and products, including Fischer's MammoTest stereotactic breast biopsy system.

07-24-2006

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Proskauer & Rose, LLP

IRS Issues Guidance on Calculating Penalty for Failure to Timely Pay Elective Deferrals to a Qualified Plan
The IRS has issued guidance in Revenue Ruling 2006- 38 (the "Revenue Ruling") on the manner in which the excise tax under Section 4975 of the Internal Revenue Code (the "Code") should be calculated if an employer does not timely pay participant contributions or deferrals to a qualified plan.

07-24-2006

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Proskauer & Rose, LLP

IRS Issues New Proposed Regulations On Dependent Care Expenses
On May 24, 2006 the Internal Revenue Service issued proposed regulations regarding the Internal Revenue Code Section 21 credit for expenses for household and dependent care services necessary for gainful employment.

07-24-2006

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Proskauer & Rose, LLP

The Stock Option Controversy -- The Scrutiny Escalates
The number of public companies subject to governmental scrutiny regarding their stock option granting practices increases every day. Even more companies are examining their practices at the urging of management, the board of directors, outside counsel or outside auditors. As the issue becomes dominant in companies across America, it is becoming clear that all companies should review and examine their stock option granting and pricing practices from the past and assure the legality and appropriateness of them prospectively.

07-24-2006

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Perkins Coie LLP

Top 10 Issues To Consider When You Are Sued: Issue #4: Preparing a Litigation Risk Assessment
Well over 95% of civil litigation cases settle. Many settle after expensive discovery, frequently on the eve of trial, but often the parties know or could have readily learned most of the key facts relevant to the dispute without incurring much of this expense. Litigants typically can achieve better case resolutions earlier, and reduce litigation expenses dramatically, through disciplined case management and rigorous early case evaluation. Use of a structured approach for evaluating cases – litigation risk assessment – is the key to this process.

WHAT IS A LITIGATION RISK ASSESSMENT?
A litigation risk assessment is a case analysis prepared for management that is considering instituting, or is faced with defending, litigation. The assessment gives management an early, concise evaluation of the risks and costs associated with the litigation. It is essentially a business plan for litigation, presented in a format that business-trained clients understand.

WHAT ARE THE ELEMENTS OF A LITIGATION RISK ASSESSMENT?
A litigation risk assessment can be customized to suit particular cases and clients but generally includes the following components:

Introduction and Recommendation – A brief summary of the nature and scope of the litigation and a clear recommendation of the strategy for resolution.

Summary of Facts – A synthesis of the key facts, focusing on those facts expected to affect the outcome of the dispute.

Case Status – A short description of the current status of the proceedings, anticipated motions and discovery, and settlement discussions or their absence. This component also can address issues such as the existence of an arbitration agreement and insurance coverage.

Legal Analysis – A discussion of the legal principles that control the dispute and how those principles are likely to apply to the relevant facts. This discussion may also note the benefits and risks of obtaining a binding judicial precedent that might control in future litigation.

Strengths and Weaknesses – A succinct outline of the strengths and weaknesses of the client's factual and legal position, including such factors as the substance and impact of the evidence, the availability and quality of witnesses, the presence or absence of sympathy for the adversary, the friendliness or hostility of the tribunal, and the competence and experience of opposing counsel. This outline is best presented in the form of two lists – one list of strengths and a second list of weaknesses.

Budget – The anticipated legal budget at each phase of the litigation (e.g., discovery, motion practice, trial).

Possible Results and Probabilities – An assessment of damages, including possible results, probabilities and discounted values, and budgeted litigation expenses. This type of probability assessment is understood by business executives, who customarily base business decisions on similar analyses. The case value assessment includes percentage estimates based on various potential outcomes. Although percentages are not precise estimates, they convey information more clearly than imprecise adjectives frequently used in describing litigation risk. For example, does ""likely"" mean 51% or 80%? Is a ""strong defense"" one that will prevail 60% of the time or 25% of the time? A business person is entitled to know as clearly as possible what his or her attorney has in mind. Where possible results fall on a customary probability curve, the damage assessment assigns high, median, and low results and probabilities of 25%, 50%, and 25%, respectively, to these results.

Conclusion and Recommendation – The assessment concludes with recommendations that may run the gamut, from early efforts to settle or mediate the dispute, through targeted discovery with an eye toward settlement, to full-bore litigation.

HOW LENGTHY SHOULD A LITIGATION RISK ASSESSMENT BE?
A litigation risk assessment should be as concise as possible. Even a relatively complicated dispute can normally be summarized in fewer than ten pages. If the assessment runs more than 15 pages, it should be prefaced by a one- or two-page executive summary.

WHEN SHOULD AN INITIAL LITIGATION RISK ASSESSMENT BE PREPARED?
Every effort should be made to prepare the initial litigation risk assessment early – generally, no later than 30 days after notice of the claim or litigation has been received in defense cases and prior to commencement in plaintiff litigation. Although information will be incomplete at the time of an initial litigation risk assessment, even a defendant facing an unanticipated lawsuit can ordinarily identify many of the key facts relatively quickly by reviewing documents, interviewing employees, reviewing publicly available information, or simply asking the other side. Much commercial litigation occurs between companies with a business relationship. As a result, each party typically can get a good picture of the litigation from its own files, without bearing the costs of full-blown discovery.

SHOULD THE INITIAL LITIGATION RISK ASSESSMENT BE REVISED?
An initial litigation risk assessment becomes the business plan for the litigation. This assessment should be reviewed and, if necessary, revised as the litigation progresses and more facts become available. The current discounted value of the case provides a metric against which settlement opportunities and the costs of further litigation can be evaluated.

WHAT IS THE VALUE OF LITIGATION RISK ASSESSMENTS?
We have worked with many clients to implement disciplined case management and rigorous early case evaluation. They report:
Significant reductions in the number of pending cases. Dockets may be reduced by half or more when cases are aggressively evaluated early in the process.

Significant reductions in the overall expense of litigation, including both payouts and attorneys' fees and expenses. Again, reductions of 50% or more are not uncommon.

Reduced discovery expenses. By placing the need for discovery in the full context of the case, litigants can better prioritize or even eliminate some of the most expensive discovery, such as depositions.

Improved ability of business units to make informed settle-or-litigate decisions.

Improved ability to settle disputes creatively, such as through an exchange of goods or services.

Increased ability to retain a business or professional relationship with the adversary because disputes are settled earlier, before positions get hardened and feelings rise.

Improved ability to evaluate the performance of both inside and outside counsel.

Increased ability to identify the causes of litigation and to take countermeasures to avoid similar claims.

07-24-2006

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Manatt, Phelps & Phillips, LLP

CMS Announces New Demonstration Program to Encourage Consumer-Directed Health Plans Under Medicare Advantage
On July 10 the Center for Medicare and Medicaid Services (CMS) announced a major new undertaking to provide Medicare beneficiaries with access to coverage through consumer-directed health plans in the Medicare Advantage (MA) program beginning on January 1, 2007. Under the demonstration, Medicare beneficiaries will have access to new medical savings account (MSA) coverage that will be similar to commercially available health savings accounts (HSAs) and High Deductible Health Plan (HDHP) coverage. MA MSA plan sponsors would also be required to provide information to enrollees on the cost and quality of individual providers.

Under the new MSA demonstration, Medicare will contract with MA Organizations to provide health coverage with a high deductible (at least $2000) and separate out-of-pocket expenditure limits for beneficiaries who enroll. The plans will also make yearly deposits into enrollees’ MSAs. The MSA account deposits and any earnings on the funds would be tax-free for the beneficiary as long as they are used to purchase allowable health care.

CMS released numerous documents relating to this new demonstration project, including a press release, an announcement letter to MA Organizations and other interested parties, an MSA demonstration plan proposal, an application, a question-and-answer document, and a draft Federal Register notice.1

The MSA demonstration is significant because it underscores this Administration’s commitment to promoting consumer-driven HDHPs for all sectors of the health care market, including in public programs. Previously MSAs were authorized both as an MA plan option and as a demonstration program. However, neither MA Organizations nor beneficiaries have demonstrated interest in these options to date. In announcing this new demonstration, CMS has taken several steps to make the new MA MSA plan arrangements more flexible. Set forth below is a brief description of some of the key new features of the MSA demonstration.

Timing

The demonstration is on a fast track. Applications to participate for 2007 are due by July 21 and bids are due by August 10. CMS also is requesting nonbinding notices of intent for 2008.

Eligibility for Award

The only entities that are eligible for the MSA demonstration are state-licensed risk-bearing entities that qualify as MA Organizations and are approved by CMS.

Beneficiary Eligibility and Enrollment

Any Medicare beneficiary entitled to Part A and enrolled in Part B is eligible, except those enrolled in both Medicare and Medicaid (i.e., “dual eligible” individuals); beneficiaries with End Stage Renal Disease; beneficiaries who have elected Medicare hospice coverage; individuals covered under the Federal Employees Health Benefit Plan, VA, or military plans; and the working aged. Beneficiaries who enroll in the new MA MSAs will generally be ""locked in"" to the plan for the entire calendar year.

Key Differences Between New MSA Demonstration and Currently Authorized Medicare MSAs

Under the new demonstration only, MA MSAs may have differential cost-sharing for in-network versus out-of-network services (e.g., the demonstration MSA could recognize only the in-network level of cost-sharing for services received out-of-network in counting costs towards the deductible).
Under the new demonstration, CMS will allow the deposits into beneficiary accounts to be risk-adjusted (i.e., deposits could be greater for beneficiaries with higher expected health care costs).
Under the new demonstration, an MA organization could offer an MSA option only to the employer group market, and not to the individual market. Under the regular MA programs, the employer group plan could be offered only where the MA MSA plan was offered to the individuals in the service area as well.
Transparency

In line with what CMS describes as the “best practices” of commercial HSA/HDHP plans, demonstration projects would be required to provide information to enrollees on the cost and quality of individual practitioners and providers. They would also be required to establish programs to assist enrollees in the use of such information.

Impact on Providers

While the most direct effect of the demonstration is the authorization of a new product option for MA organizations and beneficiaries, the demonstration could also have significant consequences for Medicare providers.

The “transparency” requirement described above may hasten the mandatory reporting of cost and quality information to consumers. Providers will have to monitor, understand, and address the many new issues that increased reporting and transparency will raise.
Providers contracting with MA organizations that develop the new MSA demonstration products will have to rethink a number of contract provisions to address new risks (e.g., how to ensure that providers are paid timely and accurately out of MSA account deposits).
1 Most of the documents are available here: http://www.cms.hhs.gov/MedicareAdvantageApps/02_Final%202007%20applications.asp

07-24-2006

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Hunton & Williams, LLP

Michigan Court Of Appeals Bars Coverage For Mold Finding That Defective Workmanship Does Not Constitute An "Accident"
The Michigan Court of Appeals, in reversing a grant of summary disposition in favor of the policyholder, found that a policyholder's defective workmanship does not constitute an "accident", as defined in a general liability contract.

07-24-2006

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