The Interplay Between Shareholder Oppression Suits and Derivative Actions in Closely Held Corporations


by Hunter Schoen, Issue Editor


In any corporation, minority shareholders are vulnerable to the decisions of majority shareholders. Majority shareholders can deny minority shareholders participation or financial rights, such as refusal to pay them dividends. In addition to this vulnerability, closely held corporations pose unique risks to minority shareholders because of the lack of marketability of their shares.[1] Unlike a typical corporation, there is no readily available market where minority shareholders of a closely held corporation can sell their shares.[2] Because of this lack of marketability, traditionally, the only remedy provided to minority shareholders was judicial dissolution under the Louisiana Business Corporation Law (“LBCL”). The LBCL, however, provided only meager protection to minority shareholders because courts were reluctant to enforce the remedy.[3] The Louisiana Business Corporation Act changed this lack of protection for minority shareholders.

On January 1, 2015, the Louisiana Legislature replaced the LBCL with the Louisiana Business Corporation Act (“LBCA”).[4] Among the rights and remedies created by the LBCA, the new statutory regime provides an alternative to judicial dissolution for minority shareholders in a closely held corporation—shareholder oppression suits.[5] Due to the relative youth of the LBCA, an attorney may not appreciate the interplay between a shareholder oppression suit and a derivative action—an action filed by a shareholder to challenge the actions of a corporation—and the consequences of filing one before the other. To adequately represent the interests of a minority shareholder, an attorney should be acutely aware of the interplay between the two.


Shareholder Oppression Suits vs. Derivative Actions

In a shareholder oppression suit, the shareholder withdraws from the corporation and receives compensation for the value of his or her shares. The LBCA provides, “If a corporation engages in oppression of a shareholder, the shareholder may withdraw from the corporation and require the corporation to buy all of the shareholder’s shares at their fair value.”[6] Under the LBCA, “oppression” is defined as when a corporation fails “to deal fairly and in good faith with the shareholder.”[7] Often, an act or omission by a corporation that constitutes oppression—making it an appropriate basis for a shareholder oppression suit—may also be the basis of a derivative action.

A derivative action asserts a right on behalf of the corporation.[8] An example of a derivative action is a suit filed for breach of fiduciary duty, such as misappropriation of corporate funds for personal expenses.[9] Although closely related, an important distinction between a shareholder oppression suit and a derivative proceeding is that an oppression suit is brought on behalf of a withdrawing shareholder and a derivative proceeding is brought on behalf of the corporation.[10] This distinction has significant procedural implications, namely the issue of standing, as well as substantive effects.


The Effects of Filing One Before the Other

To have standing to bring a derivative action, a shareholder must be “a shareholder of the corporation at the time of the act or omission complained of” and must “fairly and adequately represent[] the interest of the corporation in enforcing the right of the corporation.”[11] In a successful shareholder oppression suit, however, a shareholder withdraws from the corporation and thus loses standing to bring a derivative action, as the shareholder no longer adequately represents the interest of the corporation.[12] Therefore, before filing a shareholder oppression suit, a shareholder should assert all potential derivative actions.

In addition to the procedural implication of standing, a shareholder should file a derivative action first because a derivative action can potentially increase the fair value of a corporation’s stock. The derivative action can increase stock value in two ways: first, a corporation may be compensated through the litigation, thus increasing the fair value of each share; and second, a stayed derivative action is valued as an asset of the corporation.[13] Although any pending derivative actions are stayed upon the filing of a shareholder oppression suit,[14] the judge will nonetheless have to address the issues presented in the derivative action as they relate to the fair value of the corporation’s shares.[15] Given these effects, ideally a shareholder should file a derivative action before the institution of a shareholder oppression suit and have the action recognized as an asset. As judges and attorneys interact with the novel portions of the LCBA, however, this scenario will not always be the case.

What happens in the event an attorney does not file an applicable derivative action before filing a shareholder oppression suit, or a previously filed derivative action is not recognized as an asset? In these instances, a shareholder is not entirely out of luck. In a shareholder oppression suit, the litigation is largely based upon the fair value of the shares, not the withdrawal itself.[16] Expert testimony from a certified valuation analyst or an accredited business valuator can be used to determine the fair value of the shares. When valuing the shares of a closely held corporation for a buyout, fair value is calculated through investment value.[17] In valuing the shares based upon investment value, industry standards require the valuator to adjust the corporation’s books to account for misappropriated funds.[18] This valuation will effectively litigate the issues that would have been brought in the derivative action. Nevertheless, a derivative action should be filed before a shareholder oppression suit because it could be valued as an asset or addressed in a different manner by the judge on a case-by-case basis.[19]



With little to no jurisprudence stemming from the LBCA regarding shareholder oppression suits, an attorney may not realize the value of filing a derivative action before a shareholder oppression suit. When a derivative action is not asserted first, the relevant issues sought to be remedied in the action may be determined when valuing the stock. If the expert testimony is unconvincing or a judge does not interpret the expert testimony in the shareholder’s favor, the fair value of the stock may be lower than if a corporation’s harmful conduct was first challenged in a derivative action. Asserting derivative actions before filing a shareholder oppression suit will require the judge to address the pending litigation and formally bring to light issues that will affect the value of the stock before the shareholder oppression suit commences.


[1] Douglas K. Moll, Shareholder Oppression and the New Louisiana Business Corporation Act, 60 Loy. L. Rev. 461, 467 (2014).

[2] Id.

[3] See, e.g., Glenn G. Morris & Wendell H. Holmes, Business Organizations § 40.11, in Louisiana Civil Law Treatise (4th ed. 2013 & Supp. 2016).

[4] La. Rev. Stat. § 12:1-101 through 1-1704 (2017).

[5] Id. § 12:1-1435. Before the LBCA, the only remedy for an oppressed shareholder was involuntary dissolution under the LBCL. This drastic measure was frowned-upon by the courts and was rarely granted. Effectively, minority shareholders had no remedy in instances of shareholder oppression. See Morris & Holmes, supra note 3, § 22.08.

[6] La. Rev. Stat. § 12:1-1435A.

[7] Id. § 12:1-1435B.

[8] See id. § 12:1-741.

[9] See Moll, supra note 1, at 502.

[10] Compare La. Rev. Stat. § 12:1-1435A, with La. Rev. Stat. § 12:1-741.

[11] La. Rev. Stat. § 12:1-741A.

[12] See Maison Orleans P’ship in Commendam v. Stewart, 167 So.3d 1 (La. Ct. App. 2014) (holding that under the LBCL, petitioner gave up all rights to assert any claims, including derivative ones, when petitioning for dissolution).

[13] See Steven G. Durio et al., Louisiana Business Corporation Act is A Game Changer: A Discussion of Remedies and the Valuation Standard, 63 La. B.J. 396, 398 (2016).

[14] La. Rev. Stat. § 12:1-1437.

[15] Moll, supra note 1, at 505.

[16] See La. Rev. Stat. § 12:1-1436A(1).

[17] See, e.g., Blake v. Blake Agency, Inc., 486 N.Y.S.2d 341, 347 (N.Y. App. Div. 1985) (defining investment value as the earnings of the corporation).

[18] See, e.g., Raskin v. Walter Karl, Inc., 514 N.Y.S.2d 120, 121 (N.Y. App. Div. 1987). The adjustment of the books means that the valuator will add back the value of the misappropriated funds.

[19] Durio et al., supra note 13, at 398 (“While the LBCA is largely silent on handling such pending litigation, foreign jurisprudence indicates that these determinations will continue to occur on a case-by-case basis; Louisiana will likely follow this trend.”).

When a Bright-Line Rule Crosses a Gray Area: The Problem with IQ in Louisiana’s First-Degree Rape Statute

By Jo Neuman, Issue Editor 


Louisiana defines “rape” as an act of sexual intercourse without the lawful consent of the other person.[1] Penalties increase based on specific criteria,[2] and a conviction for first-degree rape carries a life sentence without benefit of parole.[3] The statute also deems certain persons incapable of consenting, such as children under the age of 13.[4]


In 1997, the legislature added mentally infirm victims to those deemed unable to consent[5] and defined “mental infirmity” as “a person with an intelligence quotient of seventy or lower.”[6] Mentally disabled individuals are estimated to be four to ten times more likely to be victimized sexually than members of the general population.[7] Legislators likely considered this fact when they added protection for such victims to the first-degree rape statute.


The constitutionality of this definition was recently challenged, and the Louisiana Supreme Court remanded the case to the district court for consideration of the defendant’s claim that the statute is unconstitutional because it establishes a threshold intelligence quotient (“IQ”) score as the sole determinant of mental infirmity.[8] The problem is not trying to protect this class of particularly vulnerable individuals, but rather the specific definition of mental infirmity that appears to criminalize all sexual activity with a person whose IQ is 70 or lower.[9] In light of medical science and recent jurisprudence, the provision is probably unconstitutional. Regardless of the result in the pending case, the Louisiana legislature should revise the definition to align with medical science and recent jurisprudence.[10]


Medical Science and IQ Uncertainty

Medical science recognizes that intellectual disability involves more than an IQ score. To be intellectually disabled, the American Psychiatric Association says a person must have deficits in both general intellectual ability and adaptive functioning in one or more areas of daily life with onset occurring during the developmental period.[11] Two people with the same IQ may differ significantly in their abilities to function in society.[12]


Medical science also acknowledges that IQ scores are not exact and represent a range with a margin of error of five points.[13] Thus, the range for an IQ score of 70 would be between 65 and 75.[14] Medical experts also note an IQ score should not be considered in isolation and that “clinical judgment is needed” to interpret the results of an IQ test.[15] Further, IQ scores “are approximations of conceptual functioning but may be insufficient to assess reasoning in real-life situations . . . a person with an IQ score above 70 may have such severe adaptive behavior problems . . . that the person’s actual functioning is comparable to that of individuals with a lower IQ score.”[16] As a result, individuals with IQs above 70 could be less capable of consenting to sexual activity than persons with a lower IQ score,[17] yet the statute as written offers these individuals no protection.


Conversely, persons with IQs lower than 70 might be capable of consenting to sexual activity because of the level of their adaptive functioning, yet the plain language of the statute criminalizes such conduct. Advocates opine that intellectually disabled adults are “sexual beings”[18] and should not be categorically precluded from consenting to sexual activity.[19] They contend everyone “has the right to exercise choices regarding sexual expression and social relationships” and having an intellectual disability “regardless of severity, does not, in itself, justify loss of rights related to sexuality.”[20] In light of the inherent medical uncertainty in a given IQ score, evaluation of a person’s ability to consent should be individualized and not tied to a bright-line cutoff score.


Jurisprudential Findings on IQ

The United States Supreme Court has taken note of medical science in holding that IQ alone is insufficient to determine whether a defendant in a capital case is intellectually disabled.[21] The Florida Supreme Court had held defendants with IQs over 70 were categorically not intellectually disabled and therefore eligible for the death penalty.[22] The Court found it impermissible to rely on “an IQ score as final and conclusive evidence of a defendant’s intellectual capacity, when experts in the field would consider other evidence.”[23] The Court specifically referenced the definition from the DSM-5, which requires consideration of deficits in adaptive functioning in addition to sub-average intelligence.[24]


Even before the United States Supreme Court rendered its decision in Hall, the Louisiana Supreme Court declined to set a bright-line IQ cutoff score for evaluating whether a defendant was intellectually disabled for purposes of capital punishment.[25] The court considered medical science noting that a defendant must show “subaverage intellectual functioning existing concurrently with deficits in adaptive behavior.”[26] Further, the court acknowledged IQ scores are not exact and represent a range in which a person’s actual score falls.[27] In her concurrence, Justice Knoll stated that Louisiana does not apply a strict numerical cutoff to IQ scores when evaluating intellectual disability.[28] Despite this judicial recognition, the first-degree rape statute still employs a bright-line IQ cutoff score.[29]


Prior Legislative Recognition

The Louisiana legislature has not been silent on this issue. In 2003, it enacted a rule for determining when defendants in capital cases are intellectually disabled wherein it used a definition of  intellectual disability substantially similar to what is contained in the DSM-5 with no reference to an IQ cutoff score.[30] Additionally in 2011, the legislature explicitly declined to add an IQ cutoff score to proposed revisions to the sexual battery statutes.[31] Despite revising the first-degree rape statute several times, the legislature has not revised the definition of mental infirmity contained therein.



Determining intellectual disability is a gray area that does not lend itself to relying solely on a bright-line IQ cutoff score. Both the United States Supreme Court and the Louisiana Supreme Court have recognized IQ scores are imprecise, and relying on an IQ score without taking into account other factors considered by medical experts is improper.[32] Removing this bright line and allowing for the possibility that an intellectually disabled individual can consent will help ensure a defendant is not automatically facing a potential life sentence based solely on the other person’s IQ. This change would likewise afford greater protection to a victim with an IQ over 70 who is found unable to consent because of deficits in adaptive functioning. Furthermore, by eliminating IQ from the definition of mental infirmity, the legislature will align the first-degree rape statute with medical science and jurisprudential findings and ensure consistency in Louisiana’s criminal statutes.

[1] La. Rev. Stat. § 14:41 (2016).

[2] Compare Id. § 14:42, and § 14:42.1, with § 14:43 (sentences range from “not more than twenty-five years” to mandatory life imprisonment).

[3] Id. § 14:42(D).

[4] Id. § 14:42(A)(4).

[5] 1997 La. Acts 757.

[6] La. Rev. Stat. § 14:42(C)(2).

[7] Deborah W. Denno, Sexuality, Rape, and Mental Retardation, 1997 U. Ill. L. Rev. 315, 320; Joan Petersilia, Invisible Victims: Violence Against Persons with Developmental Disabilities, 27 Hum. Rts. 9, 9 (2000).

[8] State v. Mosley, No. 2016-1350, 2016 WL 7448268, at *1 (La. Nov. 29, 2016).

[9] La. Rev. Stat. § 14:42(C)(2).

[10] The legislature should also revise other provisions in this statute, including updating the definition of physical infirmity and removing the capital punishment provisions in light of the holding in Kennedy v. Louisiana, 554 U.S. 407 (2008), but discussion of those provisions is beyond the scope of this comment.

[11] Am. Psychiatric Ass’n, Diagnostic and Stat. Manual of Mental Disorders: DSM-5, 33 (5th ed. 2013). General intellectual ability is assessed based on IQ testing. Individuals are considered intellectually disabled if their IQ scores are approximately two standard deviations below the mean. On a typical IQ test, the mean is 100, and the standard of deviation is 15, resulting in a score of approximately 70. Id. at 37.

[12] Id. at 37.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Claire Azzopardi-Lane & Anne-Marie Callus, Constructing Sexual Identities: People with Intellectual Disability Talking About Sexuality, 43 Brit. J. Learning Disabilities 32, 35 (2014).

[19] Sexuality: Joint Position Statement of AAIDD and The Arc, Am. Ass’n of Intell. & Dev. Disabilities, [] (last visited Feb. 8, 2017). See also Alexander A. Boni-Saenz, Sexuality and Incapacity, 76 Ohio St. L.J. 1201, 1205 (2015) (“[T]he right to sexual expression should not be withheld due to cognitive impairment alone.”).

[20] Sexuality: Joint Position Statement of AAIDD and The Arc, supra note 19.

[21] Hall v. Florida, 134 S. Ct. 1986, 2001 (2014).

[22] Id. at 1994.

[23] Id. at 1995.

[24] Id. at 1994.

[25] State v. Dunn, 41 So. 3d. 454 (La. 2010).

[26] Id. at 461.

[27] Id. at 470.

[28] Id. at 475 n.1.

[29] La. Rev. Stat. § 14:42 (2016).

[30] La. Code. Crim. Proc. art. 905.5.1 (2016) (characterizing intellectual disability as “[d]eficits in intellectual functions . . . confirmed by both clinical assessment and individualized, standardized intelligence testing . . . [and d]eficits in adaptive functioning”).

[31] H.B. 86, 2011 Leg., Reg. Sess. (La. 2011) (as originally introduced, this bill defined “mental infirmity” as “a person who has an intelligence quotient of seventy or lower,” but amendments adopted before its enactment removed all references to IQ).

[32] Hall v. Florida, 134 S. Ct. 1986, 2001 (2014); Dunn, 41 So. 3d at 470.

Incentive-Based Greening: A Primer for Promoting Sustainable Design Policies for Localities

By Cameron Miller, Issue Editor


Buildings are gluttonous consumers of natural resources: constructing buildings creates vast amounts of waste material and operating buildings contributes significantly to global pollution.[1] Most reports indicate that on a worldwide basis, nearly 40% of all primary energy[2] is used on buildings.[3] Particularly in the United States, buildings are responsible for approximately 62% of electricity consumption, over 36% of primary energy consumption, and 30% of greenhouse gas emissions.[4] Thus, it is critical that all actors involved in the development process—government officials, private developers, property owners, and the general public—understand what sustainable building and green policies are and why sustainability goals are so important in the development industry.

Sustainable, or “green,” building practices represent a critically important component of the broader environmental movement. Rather than tackle a full-scale review of the legal aspects surrounding the implementation of pro-sustainability development practices, this comment focuses on a subset of green building policy implementation: incentivizing green building practices at the local government level. The first sections provide a brief overview of what sustainable building practices are and why they are environmentally important. Next, the comment looks to how pro-sustainability policies are implemented; this section compares green building policies mandated by various levels of government, as well as green building standards promulgated by private groups. Finally, this comment presents a survey of policy measures that local governments can undertake to promote green building practices in their communities.


What is Green Building?

“Green building” can be defined as the practice of increasing the efficiency with which buildings and their sites use energy, water, and materials and reducing the (potentially negative) impacts buildings have on human health and the environment through better siting, design, construction, operation, maintenance, and removal.[5] Sustainable buildings seek to limit resource consumption and environmental impacts over the life of buildings—from initial resource extraction to waste disposal—while simultaneously providing building occupants an optimized environment.[6] To accomplish this, sustainable buildings have many design features that are either newly developed technology or otherwise not standard in most construction projects.[7]

Why Build Green?

Building construction, operation, maintenance, repair, and demolition have an enormous impact on the environment.[8] Buildings are a primary factor contributing to greenhouse gas emissions, water and air pollution, excessive energy consumption, solid waste generation, and other critical problems.[9] In the United States alone, there are over 300 billion square feet of building space, which includes over 111 million housing units and almost 5 million commercial buildings.[10] Buildings also account for staggering quantities of storm water runoff, and the indoor air quality of buildings is often substantially more polluted than outdoor air.[11]

With the substantial external effects of buildings in mind, proponents of green building strategies cite a variety of benefits associated with constructing sustainable buildings. Chief among these is a considerable decrease in energy costs over the life of the building, typically achieved through the lower cost of utilities.[12] Proponents of green buildings often point to these cost reductions over the life of green buildings as a justification of building green in the first place.[13] Pro-sustainable building advocates also point to increased indoor air quality and improved overall comfort within green buildings, which could lead to increased productivity in such buildings.[14] Taken together, these positive aspects of green buildings on the micro level have significant environmental effects at the macro level in terms of reducing carbon emissions from buildings, decreasing buildings’ contributions to urban heat islands, and reducing the materials expended in constructing and maintaining buildings.

Governmental v. Private Action?

In the United States, the federal government has not adopted any sweeping mandates for sustainable building. Some federal agencies have, however, established green building mandates for any construction that takes place within its respective department or agency.[15] In this absence of federal regulation, many states have passed legislation either mandating or encouraging entities to incorporate Leadership in Energy and Environmental Design (“LEED”) standards in new construction.[16] While state mandates typically only apply to public projects, many states have passed regulations seeking to incentivize private developers to build green.[17]

By far the most common practice, however, is for cities and local governments to implement regulations relating to sustainable building practices.[18] Unlike state legislation regarding green building policies, some localities have actually mandated sustainable building practices in the private sector, as well as the public sector.[19] Still, the most common practice is for local governments to promote green building practices in the private sector through legislation implementing incentives for sustainable building.[20] Promoting these practices is usually accomplished by tying the receipt of any incentives to developers and builders meeting certain levels of certification under a privately promulgated green building rating system, generally the LEED rating system of the United States Green Building Council (“USGBC”) discussed below.[21]

Currently, there is no universal regulatory system to promote and standardize sustainable building practices in either the public or private sector.[22] Instead, a handful of green building standards have served as guidelines for green building both for governmental and private actors.[23] The most prominent of these such guidelines is the USGBC’s LEED Green Building Rating System, which was created to “bring uniformity to the American green building movement by establishing a common standard of measurement for green building elements, promoting integrated, whole-building design practices, recognizing environmental leadership in the building industry, stimulating green competition, raising consumer awareness of green building benefits, and transforming the building market.”[24]

The LEED Rating System operates as a checklist, with projects seeking certification under the program incorporating various green building components into their designs in an effort to receive credits towards LEED certification.[25] For projects seeking LEED certification, points are awarded in seven categories of human and environmental health, as well as one regional priority category that varies by state or locality.[26] Within each of these categories, there are a given number of “credits.”[27] A certain number of points are available within each credit; thus, it is up to the developer to determine what mix of credits—and the number of points under each credit—he or she wants to satisfy to add up to a certain number of points required for a given level of certification.[28] There are currently four levels of LEED certification: Certified, Silver, Gold, and Platinum.[29] Each successive level of higher certification is achieved by scoring more points on LEED’s rating checklist.


Incentive Strategies for Promoting Sustainable Development

This section reviews five programs commonly used by municipalities to promote green building practices in their private development sectors. The strategies outlined here are green building tax incentives, density bonuses and green TDRs, expedited permitting for green projects, pro-sustainability grant programs, and green design assistance programs. These policies and programs are not an exhaustive list; rather, they represent some of the most frequently adopted strategies for incentivizing green development. Other viable strategies certainly exist, and it is critical that a community hoping to stimulate greater use of green building practices tailor any pro-sustainable building program to the specific objectives and needs of that community.

  1. Tax Policies and Incentives

Tax abatements and incentives are often the most flexible programs because states and municipalities have the ability to approve a multitude of sustainable performance standards and allocate those abatements or incentives to any taxing jurisdiction.[30] It is critical to note that developers and property owners have different priorities depending on whether they are small- or large-scale developers, short- or long-term owners or investors, developers looking to maintain equity investments in multiple properties, or corporate or residential building tenants.[31] Given the diversity of these parties and their differing interests and needs, tax incentives should be used to entice each group.[32]

While the additional cost of designing and constructing sustainable buildings are borne by the developer up front, the benefits gained from reduced energy costs accrue over the life of the building.[33] As such, a short-term investor or developer may never obtain any tangible benefits from building a green building, thus reducing the incentive to build green. Additionally, building owners who lease their properties may never realize these utilities savings and might prefer to spread those benefits over multiple years.[34] Transferable tax credits can encourage developers to build green, and tax abatements can be used to help defray the additional expenses often incurred by a sustainable design.[35]

  1. Bonus Density and TDRs

Some jurisdictions have implemented floor/area ratio (“FAR”) bonuses, height bonuses, reduced landscaping requirements, and counting green roof space as landscaping and open space in return for including sustainable design components or achieving certain green building ratings.[36] Other jurisdictions sanction transfers of development rights (“TDRs”), whereby property owners sever the ability to develop their typically more rural property and sell those rights to developers seeking to increase densities on prospective projects in more urban locales. Programs like this have the benefit of protecting rural lands from developments by placing conservation easements on rural properties that have transferred their development rights, as well as promoting growth in urban centers. When municipalities have capacity shortfalls, these bonus density programs can be particularly enticing to both developers and building owners. These types of programs also help alleviate the timing problem highlighted above regarding who in the development and occupancy process ultimately obtains the benefits of green building incentives.[37]

Bonus density and TDR programs help developers and building owners realize increased profits by allowing developers to increase floor space on prospective projects, which can enhance a project’s overall viability.[38] It is important, however, that this incentive remain exclusive. That is, as green building becomes more common, more prospective projects might attempt to utilize this incentive.[39] Thus, it is critical that municipalities maintain comprehensive sustainability metrics as prerequisites for obtaining these incentives and reexamine the stringency of those requirements as green building develops.[40]

  1. Expedited Review and Permitting

Streamlining the permitting and approval process for building, plan, and site permits can save green developers considerable time and money.[41] This strategy can be difficult to implement, as it typically involves reorganization of a community’s planning staff. However, over time, it can lead to substantial cost savings, both for the municipality, as well as for developers and architects.[42] Thus, one of the major benefits of expedited review and permitting process incentives is that once the structural changes in planning departments take place, these programs require little to no additional financial investment—they simply require a shift in permitting priority.[43]

Expediting the permitting and review processes affords a municipality the ability to increase tax revenues while also providing the development community with a valuable incentive.[44] However, to successfully implement these programs, local planning staffs must include planners or inspectors with particular expertise in sustainable design and building; namely, it is critical that staffs include personnel who are well versed in LEED or any other green rating system the community uses.[45] As cities improve in this area, they will also experience increased revenues, as projects that move more quickly to completion provide increased tax revenues earlier for the community.[46]

  1. Grant Programs and Fee Subsidization

Municipalities should also consider direct grant programs to help offset some of the additional costs sustainable design and building projects present.[47] These types of incentives are generally awarded as a single monetary contribution. They also offer municipalities the opportunity and flexibility to promote the use of specific features like photovoltaic systems, HVAC systems, or water systems in green projects that are of particular import to that community. Additionally, should the community choose to promote LEED certification, these types of grants can be utilized by municipalities to defray those costs, as certification with the USGBC can be quite expensive.[48]

  1. Technical Design Assistance Programs

Even as demand for sustainable design and building increases, there are still questions regarding what sustainable design and building techniques are most effective.[49] Communities must provide technical expertise to those looking to implement sustainable design components in future developments. As the development community continues to embrace the growing trend of green building, it is important for local governments to keep up by providing quality services from training planners and building inspectors. By keeping accredited officials on planning staffs, communities have the ability to develop better master plans and provide better oversight of proposed green projects. By promoting a culture of sustainability, local planning commissions can also further educate the community on the benefits that sustainable design and building provide.[50]


The impact that buildings have on people cannot be overstated. We spend the majority of our time inside of them, they provide us shelter, and they represent the idea of home for so many people throughout the world. However, the impact that our buildings have on the earth is also of great magnitude. Thus, it is critical that humans create ways to build responsibly to protect our future on this planet, and incorporating sustainable design features in our environment represents just one small part in the broader environmentalism movement. While this comment reviews but a sliver of how that goal might be reached, it hopefully serves as a starting point for how local communities across the country might endeavor to solve this global issue.



[1] Carl J. Circo, Using Mandates and Incentives to Promote Sustainable Construction and Green Building Projects in the Private Sector: A Call for More State Land Use Policy Initiatives, 112 Penn. St. L. Rev. 731, 733 (2008).

[2] Primary energy is an “energy found in nature that has not been subjected to any conversion or transformation process. It is energy contained in raw fuels as well as other forms of energy received as input to a system.” Primary Energy, Real Return Environment, content&view= article&id=49&Itemid=110 [] (last visited Feb. 21, 2017).

[3] Id.

[4] Stephen T. Del Percio, Comment, The Skyscraper, Green Design, & the LEED Green Building Rating System: The Creation of Uniform Sustainable Standards for the 21st Century or the Perpetuation of an Architectural Fiction?, 28 Environs Envtl. L. & Pol’y J. 117, 125 (2004).

[5] White Paper on Sustainability: A Report on the Green Building Movement, Bldg. Design & Constr. Nov. 2013, at 4, [] [hereinafter White Paper] (quoting Office of Fed. Envtl. Exec., The Federal Commitment to Green Building: Experiences and Expectations (2013)).

[6] Benjamin S. Kingsley, Note, Making It Easy To Be Green: Using Impact Fees To Encourage Green Building, 83 N.Y.U. L. Rev. 532, 534 (2008).

[7] Id.

[8] Trip Pollard, Building Greener Communities: Smarter Growth and Green Building, 27 Va. Envtl. L.J. 125, 126 (2009).

[9] Id. at 125.

[10] Id. at 126.

[11] Circo, supra note 1, at 733.

[12] Id. at 737.

[13] Id.

[14] Id.

[15] A. Paige Reber, Note, Taking the “LEED”: Determining the Appropriate Amount of Government Regulation in Green Building Projects, 98 Ky. L.J. 573, 577 (2009).

[16] Id.

[17] Id. at 577–78.

[18] Id. at 579.

[19] Id.

[20] Id.

[21] Sarah B. Schindler, Following Industry’s LEED®: Municipal Adoption of Private Green Building Standards, 62 Fla. L. Rev. 285, 291 (2010).

[22] Reber, supra note 15, at 575.

[23] Id.

[24] Id. at 575–76 (citing Del Percio, supra note 4, at 121).

[25] For an in-depth discussion on how the LEED certification process operates see About LEED, U.S. Green Building Council (Jul. 1, 2015), [].

[26] See Checklist: LEED v4 for Building Design and Construction, U.S. Green Building Council (Apr. 5, 2016), []

[27] Id.

[28] Id.

[29] See About LEED, supra note 25.

[30] Am. Inst. of Architects, Local Leaders in Sustainability: State and Local Green Building Incentives 7 (2011), [].

[31] Id.

[32] Id.

[33] Id.

[34] Id.

[35] Id.

[36] Id. at 8.

[37] Id.

[38] Id.

[39] Id.

[40] Id.

[41] Id. at 9.

[42] Id. at 10.

[43] Green Building Incentive Strategies, U.S. Green Building Council, [] (last visited Feb. 7, 2017).

[44] Id.

[45] Am. Inst. of Architects, supra note 30, at 10.

[46] Id.

[47] Id. at 12.

[48] Id.

[49] Id. at 14.

[50] Id.

Pork Barrel Legislating: The Separation of Powers Restoration Act

By Ian Simrod, Senior Associate

Again, Congress has proposed a piece of legislation titled the “Separation of Powers Restoration Act” (“SOPRA”), which is Title II of the larger Regulatory Accountability Act.[1] SOPRA sets out to repeal the landmark Supreme Court decision Chevron U.S.A. v. NRDC by amending Section 706 of the Administrative Procedure Act.[2] In Chevron, the Court held that reviewing courts should defer to agencies’ interpretations of an ambiguous statute.[3] The main provision of SOPRA details that a reviewing court shall “decide de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions, and rules made by agencies.”[4] When a court hears a case de novo, it decides the issues without a reference to assumptions and legal conclusions made by any previous court that heard the case.[5]

The Clean Air Act tasked the Environmental Protection Agency (“EPA”) with regulating “stationary sources.”[6] The issue before the Supreme Court in Chevron centered on how to interpret the term “stationary sources.”[7] Under the “bubble theory,” multiple smokestacks at one site were treated as one stationary source.[8] The opposing theory treated each smokestack as a separate stationary source, meaning that one single plant would have multiple stationary sources being regulated.[9] The energy industry wanted the EPA to utilize the bubble theory, as it would give the industry flexibility to compensate for high polluting smokestacks in its bubbles.[10] The EPA permitted the bubble approach insofar as allowing the states to define a stationary source as an entire plant for purposes of developing a state implementation plan to decrease air pollution.[11]

Justice Stevens, using the Chevron framework and writing for the Court, held that the EPA’s interpretation was reasonable.[12] When a court reviews an agency’s construction of a statute, it needs to address two questions.[13] Chevron first directs a court to determine whether Congress has spoken directly to the precise question at issue.[14] If the congressional intent is clear, there is no issue for the court to decide, and the congressional intent must be followed.[15] Essentially, the court determines whether the statute is ambiguous. If it is not ambiguous, the judicial analysis ends.[16] To determine if there is ambiguity, the Court states that the finder of law should use “traditional tools of statutory construction.”[17] If a court finds that there is ambiguity within the statute, the second step of the framework requires the court to determine whether the agency’s action under the statute is based on a permissible construction of the statute.[18] To determine what is permissible, the Court states, “The court need not conclude that the agency construction was the only one it permissibly could have adopted to uphold the construction, or even the reading the court would have reached if the question initially had arisen in a judicial proceeding.”[19] Broadly speaking, the first step of the framework asks whether the statute creates a zone of ambiguity, and the second step asks whether the agency’s interpretation is within this zone.[20]

Advocates for the repeal of Chevron believe its prescribed deference circumvents principles of separation of powers by giving the judiciary the option to avoid its role of reviewing the legality of various regulations and rules promulgated by administrative agencies and to avoid striking down arbitrary agency actions.[21] Furthermore, these advocates believe that judicial deference creates a lack of incentive for Congress to draft clear statutes.[22]

In contrast, supporters of Chevron believe agencies are more expert and more politically accountable than courts and are therefore better suited for the task of administrative statutory interpretation.[23] Chevron deference also helps reduce judicial overload and produce judicial efficiency.[24]

While Congress looks to remedy what it perceives as a problem, it has overlooked the judicial remedy that already exists. This remedy is the doctrine known as the “major question exception,” which was introduced in Food & Drug Administration v. Brown & Williamson Tobacco Corporation.[25] The doctrine essentially states that Chevron deference does not apply when major economic and political repercussions would result from statutory interpretation.[26]

In Brown & Williamson, the Food and Drug Administration (“FDA”) interpreted a statute giving it authority to regulate drugs—defined as “articles (other than food) intended to affect the structure or any function of the body”—as encompassing the authority to control nicotine as a drug through the regulation of tobacco products.[27] Justice O’Connor, writing for the Court, held that Congress did not authorize this assertion of authority over the regulation of tobacco.[28] She first noted that, with the FDA’s support, Congress had enacted six statutes regarding tobacco, premised on the view that the FDA lacked jurisdiction.[29] Justice O’Connor wrote, “Under these circumstances, it is clear that Congress’ tobacco-specific legislation has effectively ratified the FDA’s previous position that it lacks jurisdiction to regulate tobacco.”[30] She then stated that allowing the FDA to assert jurisdiction over a large part of the American economy would be a major transition.[31] Finally, she stated, “As in MCI,[32] we are confident that Congress could not have intended to delegate a decision of such economic and political significance to an agency in so cryptic a fashion.”[33] The Court essentially stated that when addressing major questions of economic and political significance, it is not enough to say that Congress could step in to correct the issue; the burden, instead, should be on Congress to issue a clear statement.[34] Fifteen years after its introduction, the major question exception was addressed and confirmed in King v. Burwell.[35]

The underlying issue in King v. Burwell was whether an Internal Revenue Service (“IRS”) regulation that extended tax credits to federal exchanges, authorized by the Affordable Care Act (“ACA”), exceeded the agency’s statutory authority.[36] The ACA required each state to establish an “exchange” so that people could purchase health insurance coverage, and if the state refused to establish an exchange, the federal government would establish one.[37] The ACA also required people to obtain minimum essential coverage, unless a person fell within a low-income exemption, or else the person would have to pay a penalty.[38] To limit the number of people falling under the exemption, the ACA provided tax credits.[39] Critically, the language of the ACA pertaining to these tax credits only referred to “state-based” exchanges.[40] Although only the state-based exchanges were mentioned, the IRS created a regulation that made the tax credits available to those enrolled in the federal exchanges.[41]

The Court held that Congress did not delegate authority to the IRS to determine whether the tax credits should be available to those enrolled in both the state and federal exchanges.[42] The language of the statute unambiguously provides that Congress intended for the tax credits to be available through both exchanges.[43] The Court refused to apply the Chevron deference framework and officially confirmed the major question exception by stating that, when there are major consequences to the interpretation of statutory language, Chevron deference does not apply.[44] Although the major question exception became official in this case, there is still ambiguity concerning what specific consequences would qualify as “major” to be an exception.

Overall, the Supreme Court has found a balance and solution to the issues of Chevron deference with the major question exception, which allows for judicial efficiency while respecting the principles of separation of powers. Judicial efficiency will remain because courts can defer to agencies on more trivial and less far-reaching policies while tackling regulations that have major political significance and economic impact. This doctrine also remedies the lack of incentive for Congress to draft clear statutes concerning major regulations because courts are now empowered to scrutinize these regulations. SOPRA is pork barrel legislating, insofar as the legislation is wasteful, because the Supreme Court has already foreseen the issues with Chevron deference and provided a solution for the doctrine’s inconsistencies.


[1] Separation of Powers Restoration Act of 2017, H.R. 76, 115th Cong. (2017).

[2] Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

[3] See id.

[4] H.R. 76.

[5] De Novo, LII: Wex Legal Dictionary, [] (last visited Feb. 9, 2017).

[6] See Chevron, 467 U.S. 837.

[7] Id. at 842.

[8] Id.

[9] Id.

[10] See id.

[11] William Fox, Understanding Administrative Law 19 (6th ed. 2012).

[12] Chevron, 467 U.S. at 845.

[13] Id. at 842.

[14] Id.

[15] Id. at 842–43.

[16] See id. at 843.

[17] Id. at 843 n.9.

[18] Id. at 843.

[19] Id. at 843 n.11.

[20] See id. at 843.

[21] Jordan Rodriguez, Chevron Deference and the Proposed “Separation of Powers Restoration Act of 2017, JDSupra (Feb. 2, 2017), [].

[22] Id.

[23] Id.

[24] Id.

[25] 529 U.S. 120 (2000).

[26] See King v. Burwell, 135 S. Ct. 2480 (2015).

[27] 529 U.S. 120, 126 (2000) (citing 21 U.S.C. § 321(g)(1)(C)).

[28] See id. at 161.

[29] Id. at 122.

[30] Id. at 156.

[31] See id. at 159–60.

[32] MCI Telecomm. Corp. v. Am. Tel. & Tel. Co., 512 U.S. 218 (1994).

[33] 529 U.S. at 160.

[34] See id.

[35] King v. Burwell, 135 S. Ct. 2480 (2015).

[36] See id.

[37] King v. Burwell, Oyez, [] (last visited Feb. 9, 2017).

[38] Id.

[39] Id.

[40] Id.

[41] Id.

[42] See King v. Burwell, 135 S. Ct. 2480 (2015).

[43] Id. at 2492.

[44] Id. at 2488–89.

Mail Order Mineral Rights Legislation: Is It Too Onerous?

By Steven Cheatham, Senior Associate 


The 2016 Louisiana legislative session will long be remembered for the budget crisis that faced the state and its newly elected governor. While most of the activity in Baton Rouge during the spring of 2016 related to debates on how to resolve those budget woes, non-budget related bills were also passed. Among those was Act 179.  Act 179 (“the Act”) provides for sweeping regulation of the sale of mineral rights through mail solicitation.[1]  This regulation provides safeguards for the seller of mineral rights by mail that are far more robust than other consumer protection laws found in the Civil Code or Revised Statutes. This comment will discuss the effects of the Act, highlighting the extraordinary protections provided in several areas of the Act that are not typically provided for in Louisiana law.

Revised Statutes 9:2991.1 et seq.

The Act was enacted as Louisiana Revised Statutes 9:2991.1 through 9:2991.11.  These statutes provide a definition of the sale of mineral rights by mail solicitation, which serves as a limitation on the scope of the legislation.[2] These statutes only apply to transfers of mineral rights that are contracted “pursuant to an offer that is received by the transferor through the mail or by common carrier and is accompanied by any form of payment.”[3] Mail solicitations that occur after prior personal contact or meaningful exchanges of the parties are excluded from the application of the statute.[4] Sales of mineral rights procured through mail solicitation must be in the form of an authentic act or act under private signature, and must be signed by the transferor.[5] The statutes require each mail solicitation to contain a disclaimer in large font that explains clearly the consequences of the execution of the document.[6]  Furthermore, the solicitation must include a form notice of cancellation, which can be executed by the transferor within 60 days of the transfer of the mineral rights.[7]  If the mail solicitation does not include a notice of cancellation, the seller has a three-year peremptive period to rescind the agreement.[8] The statutes also define the form requirements of the rescission of a sale, its effects on third persons, and the effects of rescission on the parties.[9] Finally, the statutes provide several prohibited terms that cannot be included in a mail solicitation or the contract becomes absolutely null.  Among these are forum selection clauses that move the jurisdiction out of the state of Louisiana, indemnification clauses, the waiver of rights created by these statutes, and the prohibition of any “provision [that] authorizes the transferee to act as a mandatary of the transferor.”[10]


The new statutes regulating the sale of mineral rights by mail solicitation are sweeping and provide rights and safeguards that are not typically found in the Civil Code or Revised Statutes. The question arises as to why there is a need for expansive regulation of such a particularized segment of the economy. No epidemic of deceptive mail solicitation in the state has been found.  There is  only anecdotal evidence of situations when sellers have been abused by these practices.[11] Furthermore, the bulk of these practices has been isolated to two specific companies.[12] In an environment where mineral rights purchasers are often required to locate and contract with numerous parties to secure the mineral rights on a particular piece of property, mail solicitation appears to be an economical method to procure those rights.[13]

Even if there was a substantial need for specific regulation of mail order solicitation, two particular provisions of the statutes are contrary to long-standing Louisiana law. First is the requirement that the transferor must sign the act of sale for it to be valid.  Second is the right of rescission that is created as a matter of law. It is unclear why these particular provisions are required to make this new statutory scheme effective.

Why do I have to sign it?

It is a long held principle of Louisiana contract law that an act under private signature does not require the signature of both parties. Comment (b) to Louisiana Civil Code article 1837 cites six cases that stand for the proposition that only one party must sign an act under private signature.[14]  Historically, a single signature validates an act when the party that does not sign has availed himself to the contract.[15] However, new Louisiana Revised Statute 9:2991.4 requires that the transferor of mineral rights by mail solicitation sign the contract for it to be valid.[16] This statute is written to combat a practice of mail solicitors who include checks with a solicitation.[17] Unknowing or confused transferors will sometimes validate a mail solicitation by cashing the check without ever having read the solicitation.  This is particularly a problem for holders of numerous mineral rights over multiple tracks of land with several different owners who may unwittingly cash a check believed to be a royalty payment from a preexisting lease.[18] A strict reading of Louisiana Civil Code article 1837 could hold that the cashing of a check is availing oneself to a contract, thereby validating a contract that had never been read or signed. This new legislation prevents this possibility.

I Changed My Mind and the Law Said I Could

In situations where the transferor signs the solicitation and mails it back to the solicitor, the transferor is always afforded an opportunity to rescind the contract. There is a 60-day rescission period if the solicitation contains a notice of cancellation, and a three-year period within which to rescind if the notice of cancellation is not included.[19] The right of rescission, or as the comments to Revised Statute 9:2991.6 call it, a “cooling off period,” is not something normally granted as a matter of law in Louisiana.[20] Typically, a rescission period is only granted when reserved by the parties to the contract. There is specialized legislation in Louisiana, such as the Louisiana Unfair Trade Practices Act (“LUTPA”), which sometimes provides similar safeguards.

There are, however, substantive differences between LUTPA and a similar application to mineral rights that are hard to reconcile. First, the new mineral rights law explicitly protects sellers. Courts have historically held that LUTPA claims are limited to plaintiffs that are consumers, business competitors, and potential business competitors—not sellers.[22] In this case, the mail solicitation is made to the party that is the eventual seller of the item. It is debatable whether LUTPA, when applied to a similar non-mineral circumstance, would protect a similarly situated seller. Second, LUPTA has historically only applied to movables.[23] Mineral rights are defined by the Mineral Code as incorporeal immovables.[24] It appears as though the legislature has tried to protect a class of persons and goods not historically protected by Louisiana consumer protection laws.

So why do we need this law?

As the Louisiana general law of contracts and specific consumer protection laws do not provide similar safeguards to other sellers of immovables, the need for this particular legislation is curious. The potential to create a three-year peremptive period of rescission on a technicality seems onerous when instituted for protection against a theoretical or “anecdotal” problem. Since there are practical applications of mail solicitation of mineral rights, the legislature may have created overly aggressive regulation with this legislation.


[1] 2016 La. Acts 179.

[2] La. Rev. Stat. § 9:2991.2 (2016).

[3] Id.

[4] Id. § 9:2991.3.

[5] Id. § 9:2991.4.

[6] Id. § 9:2991.5.

[7] Id.

[8] Id. § 9:2991.6.

[9] Id. § 9:2991.7, § 9:2991.9.

[10] Id. § 9:2991.10.

[11] Melissa Lonegrass, La. State Law Inst., Notes from the Reporter: Mineral Law-Unsolicited Offers Committee 4 (2013).

[12] Id. at 7.

[13] Id. at 5.

[14] La. Civ. Code art. 1837 cmt. b (2016).

[15] Id.

[16] La. Rev. Stat. § 9:2991.4 (2016).

[17] Lonegrass, supra note 11, at 3–4.

[18] Id. at 4.

[19] La. Rev. Stat. § 9:2991.6.

[20] La. Civ. Code art. 1919 reserves the right to plead rescission to a person without the legal capacity to make a contract. La. Rev. Stat. § 9:2043 allows for the rescission of an onerous disposition in trust.

[21] La. Rev. Stat. §51:1401–26.

[22] See Reporter’s Memorandum from the Mineral Law – Unsolicited Offers Comm. 7 (Jul. 11, 2014) (on file with the Louisiana Law Review) (citing Quality Environmental Processes, Inc. v. I.P. Petroleum Co., 2014 WL 1800081 (La. May 7, 2014) (quoting Cheramie Servs., Inc. v. Shell Deepwater Prod., 35 So. 3d 1053, 1059 (La. 2010))); see also Alexander M. McIntyre, Jr. et al., Standing Under the LUTPA—The Circuit Split Widens, 54 La. B.J. 362 (2007) (discussing the discrepancy among the Louisiana courts of appeal as to who may bring a private cause of action under LUTPA).

[23] Id. at 6.

[24] La. Rev. Stat. § 31:18.