Articles Posted in Business & Corporate Law

The FCC recently adopted broadband privacy rules which will be implemented on a staggered schedule. The FCC did not provide calendar dates for implementing the rules and some of the dates are based on pending PRA approvals. The following is a summary of the new privacy rules and the dates they are scheduled to take effect.

On January 3, 2017, sections 64.2010 and 64.2011(a) became effective. Section 64.2010 pertains to the Business Customer Exemption for Provision of Telecommunications Services other than BIAS, and states that Telecommunication carriers can utilize other contractual privacy and data security regimes for services other than BIAS as long as the issues of transparency, choice, data security, and data breach are addressed. There must also be a mechanism for the customer to communicate concerns to the carrier. Section 64.2011(a) pertains to BIAS Offers Conditioned on Waiver of Privacy Rights and states that a BIAS provider cannot condition providing BIAS on a customer’s agreement to waive privacy rights, nor may a BIAS provider terminate or refuse to provide service based on a customer’s refusal to waive their privacy rights. Section 64.2011(b) is not effective until on or after December 4, 2017, as discussed below.

On March 2, 2017, new section 64.2005 replaced old sections 64.2009 (Safeguards required for use of customer proprietary network information) and 64.2010 (Safeguards on the disclosure of customer proprietary network information). Section 64.2005 covers data security, states a carrier must take reasonable measures to protect customers’ proprietary information, and lists four  factors for determining reasonableness—the nature and scope of the carrier’s activities, the sensitivity of the data, the size of the carrier, and technical feasibility.

Attorneys practicing in Indiana are well aware that Indiana courts and administrative agencies are moving to “mandatory” electronic filing.  The Indiana Supreme Court’s e-filing project is rolling along, with e-filing now mandatory (except upon a petition showing good cause) for the Supreme Court and Appellate Courts and over twenty counties.  More county courts are going “E” every month.  By 2018, e-filing will be mandatory in all circuit courts in Indiana.  The specific schedule is available at http://www.in.gov/judiciary/4273.htm.  In addition, some administrative agencies such as the Indiana Utility Regulatory Commission (“IURC”) are also moving to mandatory e-filing.  See IURC RM-15-02.

As an attorney practicing in a major metropolitan area with ample access to high-speed internet, I welcome this transition.  Many (probably most) attorneys have been exchanging documents and information electronically for many years.  The world is going digital, and the ability to e-file court and agency documents is, to be frank, rather 2001.  But would I welcome mandatory e-filing with such open arms if I practiced in a small town or rural area in Indiana, as many of our distinguished colleagues do?

Rural broadband access is a hot topic these days.  At the national level, the Federal Communications Commission (“FCC”) has made broadband access a priority.   The FCC’s 2016 Broadband Progress Report notes “there continues to be a significant disparity of access to advanced telecommunications capability across America with more than 39 percent of Americans living in rural areas lacking access to advanced telecommunications capability, as compared to 4 percent of Americans living in urban areas….”   2016 Broadband Progress Report at 3, GN Docket No. 15-191, Jan. 29, 2016.  I represent a number of rural electric cooperatives who serve much of the rural territory in Indiana.  The cooperatives and their members are acutely aware that significant portions of rural Indiana lack access to high-speed internet.  For attorneys that live or practice in these areas, “mandatory” e-filing could present a challenge.

On February 16, 2017, the Indiana Supreme Court issued an opinion regarding a sports participant’s duty owed to other participants in sports-injury tort cases. Megenity v. Dunn (No. 22D03-1309-CT-1354, decided Feb. 16, 2017). The Court affirmed the trial court’s ruling that a participant does not breach a duty owed to another participant by engaging in conduct ordinary in the sport, unless the participant intentionally or recklessly did so.

In Megenity, the plaintiff was a black belt in karate and attended classes at one particular studio for two years. At one session, she volunteered to hold a flying-kick bag while students practiced. The defendant was a green belt and accidentally executed a jump kick (both feet are off the ground) instead of a flying kick (one foot remains on the ground), which sent the plaintiff “flying and crashing to the floor”. The plaintiff suffered a knee injury, requiring surgery and months of physical therapy.

The plaintiff sued, arguing that the defendant breached a duty to her because a jump kick is never done during a flying kick drill. The trial court granted summary judgment for the defendant, finding a jump kick was an ordinary behavior during a kick-the-bag drill. The Supreme Court agreed, finding that “ordinary conduct” should be determined looking at the sport generally, not in the specific activity within the sport. As jump kicks are ordinary in the general sport of karate and the defendant did not intentionally or recklessly execute a jump kick, the defendant did not breach a duty even though the jump kick was contrary to protocol.

On November 2, 2016, the Federal Communication Commission (FCC) released their broadband privacy protection order, which came almost 18 months after the FCC reclassified broadband internet service (BIAS) as a common carrier telecommunication service under Title II of the Communications Act (the Act). The order communicates three main goals to be accomplished via the expanded consumer privacy standards: transparency, choice, and security for customers.

The FCC explained that expanded privacy protections for consumers are necessary because ISP’s have “untethered” access to their customer’s internet information. The order broadened the definitions of “telecommunications carrier” to include all carriers providing telecommunications services subject to Title II and “customer” encompassing current, former, and applicant customers. Three types of customer propriety information (PI) are included within the scope of the new rules: customer proprietary network information (CPNI); personally identifiable information (PII), defined as “any information that is linkable to an individual or device”; and “content of communications”, defined as “any part of the substance, purport, or meaning of a communication or any other part of a communication that is highly suggestive of the substance, purpose, or meaning of a communication.” Any “de-identified” data is not subject to the new rule.

To accomplish transparency, the FCC adopts privacy policy notice requirements mandating that ISPs provide easy access to “clear and conspicuous, comprehensible, and not misleading information about what customer data the carriers collect, how they use the data, who it is shared with and for what purposes”, including the categories of entities to which the carrier discloses access to customer PI, and “how customers can exercise their choices regarding privacy options.” These notices must be provided at the point of sale prior to purchase and advanced notice of material changes must be provided to existing customers.

Section 253(c) of the Communications Act, as amended in 1996, prohibits any “state or local statute or regulation, or other state or local legal requirement” to “have the effect of prohibiting the ability of any entity to provide interstate or intrastate telecommunications” including wireless communications.   This is commonly referred to as local government having barriers to entry.  The FCC is asking for public input on ways in which the Commission promotes wireless infrastructure deployment through a declaratory ruling. Many wireless providers are deploying small cell and distributed antenna systems (DAS) to meet the needs for coverage and to increase capacity. The facilities used in these networks are smaller and less obtrusive than traditional cell towers and antennas, but must be deployed more densely to function effectively. This has led to substantial increases in volume of applications for deployment for local land-use authorities, and the number of applications will likely accelerate as mobile data traffic is expected to grow by five times by 2022.

Mobilitie, LLC petitioned the FCC to issue a declaratory ruling interpreting three phrases in §253(c) of the Communications Act of 1934 to speed the deployment of advanced wireless infrastructure.  Mobilitie recommends the FCC interpret “fair and reasonable compensation” to mean only charges that enable a locality to recoup its costs related to issuing permits and managing the rights of way and that additional charges are unlawful. That “competitively neutral and nondiscriminatory” be interpreted as charges that do not exceed those imposed by other providers for similar access. And that “publicly disclosed by such government” obligate localities to make available the charges they previously imposed on others to a provider seeking access to the rights-of-way. Mobilitie thinks interpretation is necessary because they have dealt with varying types of fees from localities across the nation that seem exorbitant.  Fees have included application fees ranging from $1,000 to $10,000; annual per-pole fees up to $30,000 for each pole; percentage-of-revenue fees which have exceeded what localities can charge cable providers under federal law; fiber fees which have ranged from $0.19 per foot per year to fees based on fair market value of adjacent private property; and third-party manager fees.

The FCC is interested in comment, including updated information to help the Commission evaluate whether further action is warranted. This includes which actions (or inactions) of local government have hindered introduction of new services, obstructed efforts to improve existing service, or deterred prospective providers from entering the markets. The Commission requests specific information and detailed explanations, with greater weight given to systematic data. Specifically, how much time elapses between filing an application and approval or denial? How often are applications approved or denied and on what basis?

Many nonprofit organizations in Indiana have either a duty or a policy of disclosing minutes of board meetings upon the request of certain stakeholders and allowing stakeholders to attend board meetings.  Often, this duty arises under state law, such as the general Non-Profit Corporation Act, if applicable, or the specific act under which the organization is organized, such as the Rural Electric Membership Corporation Act codified at Ind. Code ch. 8-1-13 (the “REMC Act”).  Transparency is generally a good thing.  It fosters open dialog among stakeholders and it leads to a more accountable board.  However, the organization must also protect its competitively sensitive information, as well as the privacy and dignity of its employees and stakeholders.

Therefore, the board of any nonprofit organization should understand how to effectively use Executive Session to balance the policy of transparency with need to protect sensitive information.  The board must also understand how to appropriately document and maintain a record of the discussions that do occur in Executive Session.

The board should use Executive Sessions for robust discussion of matters that should not be discussed in a public forum.  So what matters should not be discussed in a public forum?

The Indiana Court of Appeals recently revisited the “blue-pencil” doctrine in Clark’s Sales and Services, Inc., vs. John D. Smith and Ferguson Enterprises, Inc., 4 N.E.3d 772 (Ind. Ct. App. 2014), which concerned an employment agreement containing a restrictive covenant/noncompetition provision. Based on the employee’s (“Smith”) fourteen-year career with the former employer and Smith’s access to confidential information, the court found a protectable interest before moving onto the reasonableness of such restrictions.

The court found these particular clauses were unreasonable in both the scope of activities covered and geographic area. The clauses prohibited Smith from “providing services competitive to those offered by [employer], or those provided by Smith on behalf of [employer] to anyone who was a customer of [employer] during the term of Smith’s employment.” This clause was unreasonable because it applied to all customers regardless of whether Smith had any contact with them; applied to Smith’s entire term of employment with the employer; and the prohibited activities were unrelated to what Smith actually performed.
Continue reading

On March 3, 2014 the Indiana Court of Appeals clarified that shareholders cannot be held personally liable for attorney fees in a wrongful stop payment of a check under Indiana Code section 26–2–7–5 unless the corporate veil can be pierced. CBR Event Decorators, Inc. v. Gates, 4 N.E.3d 1210 (Ind. Ct. App. 2014). In CBR I, the court held that the corporate veil could not be pierced in this case, but created some confusion in dicta about whether the shareholders were still liable for attorney fees. 962 N.E.2d 1276 (Ind. Ct. App. 2012). The court clarified in CBR II that the shareholders are not personally liable absent successful piercing of the veil, or in cases where the shareholders have otherwise been found personally liable for the wrongful stop payment.

Jeremy Fetty is a partner in the law firm of Parr Richey Obremskey Frandsen & Patterson with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.

The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.

An Indiana appellate court recently affirmed a trial court’s decision to dismiss a limestone manufacturer’s complaint seeking indemnity from a trucking company after a complaint by the trucking company subcontractor’s employee was brought against it.

In Carmeuse Lime & Stone v. Illini State Trucking, Inc., 986 N.E.2d 271 (Ind. Ct. App. 2013), an employee of a subcontractor of Illini State Trucking (“Illini”) was injured on Carmeuse Lime & Stone’s (“Carmeuse”) premises after he drove a truck into a ditch to avoid equipment on the opposite side of the road. When he got out of the truck his legs got burnt from lime and other chemicals. He then filed a complaint against Carmeuse alleging premises liability. In response to the employee’s complaint, Carmeuse filed a third party complaint against Illini alleging that at the time of the accident there was a valid contract between Illini and Carmeuse that indemnified Carmeuse from any potential employee injuries resulting from their own negligent acts.
Continue reading

An Indiana appellate court reversed the judgment of a trial court which had ruled in favor of a conveyor contractor. While it was an electrical subcontractor that initially brought an action against a conveyor contractor, the contractor filed multiple cross-claims against the subcontractor which resulted in trial court granting the contractor more than a $1.4 million judgment for lost profits and attorney’s fees.

In L.H. Controls, Inc. v. Custom Conveyor, Inc., 974 N.E.2d 1031 (Ind. Ct. App. 2012), Honda contracted with Custom Conveyor, Incorporated (“CCI”) to install conveyor systems for a new factory Honda constructed. Subsequently, CCI subcontracted some of the project to L.H. Controls, Inc. (“LH”), including computer programming and electrical control boxes for some conveyor lines. Soon after, problems and delays arose, which lead to LH falling behind its schedule in completion. This caused Honda to withhold progress payments to CCI. While it took three months longer to install the conveyor system, this did not cause a delay in the ultimate opening of the Honda factory.
Continue reading