June 2010 Client Bulletins

July 12, 2010

Authored by: Jeannie Osborne

Regulations Issued on Preexisting Condition Exclusions, Annual and Lifetime Limits, Rescissions and Patient Protections under Health Care Reform

On June 22, 2010, the Departments of Labor, Treasury and Health & Human Services issued regulatory guidance under the Patient Protection and Affordable Care Act regarding prohibitions on preexisting condition exclusions, annual and lifetime limits and rescissions, as well as guidance regarding certain patient protections.  These rules are generally effective for plan years beginning on or after September 23, 2010 (January 1, 2011 for calendar year plans).  For more information on the rules, please see the Bulletin published by the Employee Benefits & Executive Compensation Client Service Group on June 30, 2010.

Grandfathered Plan Regulations Provide Vital Compliance Information for Employer-Sponsored Health Plans

On June 14, 2010, the Departments of Labor, Treasury and Health &  Human Services issued much-anticipated guidance on how a group health plan maintains or loses its status as a grandfathered plan under the Patient Protection and Affordable Care Act.  A grandfathered plan is generally one that was in effect on March 23, 2010.  Because grandfathered plans are exempt from many of the Act’s requirements, maintaining a plan’s grandfathered status has important plan design and cost implications.  Please read the Employee Benefits & Executive Compensation Group’s Bulletin published June 16, 2010, for more information on the interim final regulations.

Supreme Court Expands Time Period for Filing Title VII Disparate Impact Charges

In Lewis v. City of Chicago, the US Supreme Court ruled that the period in which to file an EEOC charge alleging that an employment practice has a disparate impact commences anew whenever that practice is applied, not when that practice was first adopted.  The Lewis decision sharpens the dilemma created by last summer’s Ricci v. DeStefano decision, which held that an employer’s changing an employment practice based on its fear of possible disparate impact claims could be a basis for disparate treatment claims.  For more information on the decision, please see the Labor & Employment Group’s client Alert published June 1, 2010.

Step Transaction Doctrine Not Applicable to Multi-Step Bargain Sales to Charity

In Klauer v. Commissioner, the Tax Court refused to apply the step transaction doctrine to disallow a corporation’s charitable contribution deduction for property transferred in a series of bargain sales to a charitable organization to which the corporation has granted options to purchase the property.  The taxpayers were shareholders of Klauer Manufacturing Co., a family-owned subchapter S corporation.  For a review of this decision and other tax news and developments, please see the Tax Advice and Controversy practice group’s June 2010 Bulletin.

Supreme Court Restricts “Honest Services” Fraud to Cases Involving Bribery or Kickbacks

In a recent decision involving a former Enron CEO’s criminal conviction, the U.S. Supreme Court limited, but did not altogether cut off, the government’s ability to prosecute corporate crime under the federal statute that bars theft of “honest services.”  The case had been closely followed because of the widespread use of the statute to prosecute fraudulent corporate schemes.  To read more about the decision, please see the Client Alert published by the White Collar Defense and Investigations Client Service Group on June 30, 2010.

Supreme Court Rules Against Ban on GM Alfalfa

On June 21, 2010, the Supreme Court issued its first-ever decision on genetically modified crops by overturning a court order that prohibited the planting of Monsanto’s pesticide resistant alfalfa seeds until an EPA environmental impact study was complete.  The Court’s decision was 7 to 1 in Monsanto v. Geertson Seed Farms that the lower court had abused its discretion in issuing the injunction.  For more information on this and other matters, please see the Food, Dietary Supplement and Cosmetic Regulatory and Policy Bulletin published by the Food and Drug Administration Practice on June 28, 2010.

Health and Human Services Inspector General Release Report on Foreign Clinical Trials

The Inspector General of the Department of Health and Human Services is slated to release a report detailing the number of drugs for which trials take place outside of the U.S.  The report found that ten drugs received U.S. approval in 2008 without testing being conducted in the U.S. and without any U.S. test patients.  For more information on this and other matters, please see the Pharmaceuticals, Medical Devices and Biologics Regulatory and Policy Bulletin published by Food and Drug Administration practice on June 22, 2010. 

In re Bilski:  No Bright-Line Rule for Determining Whether Processes are Patent-Eligible Subject Matter

The United States Supreme Court has issued the long-awaited Bilski “business methods” decision, addressing whether a “process” must be tied to a particular machine or apparatus, or must transform a particular article into a different state or thing (also known as the “machine-or-transformation” test) to be patentable.  Importantly, the Court did not eliminate business methods from the realm of patentable subject matter, or even severely curtail their availability.  For more information on the Bilski decision, please see the Bulletin published by the Intellectual Property Client Service Group on June 29, 2010.

Pequignot v. Solo Cup Company — The Federal Circuit puts the lid on false patent marking

The patent marking statute creates a cause of action against a company or manufacturer who, for the purpose of deceiving the public, falsely marks unpatented products as patented.  Damages can be awared in the amount of $500 per falsely marked article and any person may sue to collect the damages, with half of the proceeds going to the Federal Government.  For more information, please see the Bulletin published by the Intellectual Property Client Service Group on June 11, 2010. 

Institute of Medicine and National Research Council Report Question FDA’s Ability to Keep Food Safe

The Institute of Medicine and the National Research Council recently issued a report at the request of Congress finding that FDA “should adopt a risk-based approach to food safety and take steps to prevent foodborne illness more effectively.”  For more information on this and related news, please see the Food, Dietary Supplement and Cosmetic Regulatory and Policy Bulletin published by the Food and Drug Administration Practice on June 14, 2010. 

Missouri Court of Appeals Requires Evidence of “Unequivocal Acceptance” by Employee in Order to Enforce Arbitration Agreement

The Missouri Court of Appeals recently issued an opinion that will affect the enforceability of some arbitration agreements between Missouri employers and their employees.  Kunzie v. Jack-in-the-Box, Inc., ED92974 (Mo. App. E.D. Mar. 9, 2010), held that an at-will employee’s continued employment, without more, does not establish acceptance of an arbitration agreement.  Please see the Client Alert published by the Labor &  Employment Client Service Group on June 2, 2010 for a review of the opinion.   

California Proposition 65 — Shoes, Purses, What’s Next?

What is Prop 65?  California Proposition 65, passed by voters in 1986, has given rise to hundreds of lawsuits against retailers and manufacturers of products that contain “hazardous substances,”  including lead, phthalates, cadmium, and acrilymides.  The first products targeted were food-related — ceramicware, decorated glassware, and cookware.  Food products themselves were targeted next, including wine, balsamic vinegar, chocolate, potato chips and, most recently, coffee products.  For more information, please see the Client Alert published by the Retail group on June 29, 2010. 

Consumer Product Safety Commission Begins Issuing Import Detention Notices

On June 14, 2010, the Consumer Product Safety Commission began issuing its own detention notices to importers, with copies to the broker and Customs and Border Protection Agency, on imported products that violate or are suspected of violating consumer safety laws.  For more information on the new detention notice, please see the International Regulatory Bulletin No. 470 published by International Trade Group on June 18, 2010.

Foreign Corrupt Practices Act Enforcement

FCPA enforcement activity is growing.  For more information, please see the International Regulatory Bulletin No. 468 published by the International Trade Group on June 7, 2010. 

Dietary Guidelines Advisory Committee Report Says New Guidelines Should Focus on Fighting Obesity; USDA and HHS Solicit Comments

One June 15, 2010, USDA and HHS announced that the Report of the Dietary Guidelines Advisory Committee on the Dietary Guidelines for Americans, 2010 is now available.  More than ever before, the guidelines address issues specific to obesity.  For more information on this and other news, please see the Food, Dietary Supplement and Cosmetic Regulatory and Policy Bulletin published by the Food and Drug Administration Practice on June 14, 2010. 

FDA Device Chief Jeffrey Shuren Introduces New Guidelines for Device Trials

FDA Device Chief Shuren has introduced new guidelines for FDA device reviewers to use in conducting evaluations of clinical trial designs.  Under the new guidelines, reviewers will not approve device studies for “pivotal” product assessments if the experiment’s protocols are not likely to produce clear conclusions to guide the approvals.  For more information and other news, please see the Pharmaceuticals, Medical Devices and Biologics Regulatory and Policy Bulletin published by the Food and Drug Administration Practice on June 2, 2010.

Dietary Supplements Get Senate Attention

On May 25, 2010, Senators Tom Harkin (D-IA) and Orrin Hatch (R-UT) introduced the Dietary Supplement Full Implementation and Enforcement Act of 2010, legislation that “will help the Food and Drug Administration protect consumers from unsafe dietary supplements and boost FDA accountability.”  For more information on this and other news, please see the Food, Dietary Supplement and Cosmetic Regulatory and Policy Bulletin published by the Food and Drug Administration Practice on June 7, 2010.

FDA:  Genetic Testing Kits are Medical Devices

The FDA has sent letters to five manufacturers of genetic testing kits stating that the agency is considering the kits to be medical devices.  As such, the agency has said that they need to receive approval from the agency before they can be marketed.  For more information on this and other news, please see the Pharmaceuticals, Medical Devices and Biologics Regulatory and Policy Bulletin published by the Food and Drug Administration Practice on June 15, 2010.

U.S. House and Senate Agree on Iran Sanctions Bill

U.S. House and Senate conferees announced that they had reached agreement on the Iran sanctions legislation passed earlier this year by each chamber.  For more information on the newly agreed  bill, please read the June 23, 2010 International Regulatory Bulletin published by the International Trade Group.

New UN Sanctions Further Target Iran’s Military and Nuclear Activities

On June 9, 2010, the United Nations Security Council passed a fourth round of sanctions against Iran over its nuclear program.  UNSCR 1929, which passed by a vote of 12 to 2 (with one abstention), reaffirms previous resolutions issued against Iran.  For more information on the sanctions, please see the June 16, 2010 International Regulatory Bulletin published by the International Trade Group.

Export Control Developments – BIS Seeks to Harmonize Definitions under Multiple Export Control Regulations in U.S.

In April 2010, Defense Secretary Robert Gates announced that the Obama Administration plans to reform the U.S. export system with four key principals:  Single Export Control List, Single Licensing Agency, Single Enforcement Coordination Agency, and Single IT System.  For more details, please see the Asia Trade Alert published June 18, 2010 by Bryan Cave International Trade LLC.

CHINA – Direct &  Indirect Tax Authorities Focus on Automotive Industry

The State Administration of Taxation (“SAT”) has, in recent years, taken a more industry-focused approach towards transfer price audits.  To achieve this the SAT has provided its audit teams with specialized and industry focused training.  For more information, please read the Asia Trade Alert published June 28, 2010 by Bryan Cave International Trade LLC.

Update on Trade Agreements – Thailand Ratifies ATIGA

The Ministry of Finance issued the Notification dated April 26, 2010 implementing the tariff reduction and exemption privileges under the ASEAN Trade in Goods Agreement (“ATIGA”), prior to the date of entry into force of the ATIGA.   For more information, please read the May-June 2010 Asia Trade Bulletin published by Bryan Cave International Trade LLC.