News

2106, 2018

Supreme Court Clears Way for Local Governments to Tax Internet Sales

June 21st, 2018|

Written by:  Jack McKenna

Today the Supreme Court of the United States opened up a new and potentially significant revenue stream to municipalities in Alaska.

In South Dakota v. Wayfair Inc., the Court ruled that companies no longer need to have a physical presence in a state in order for that state to require the company to collect sales taxes.  The decision overruled the Court’s previous opinions in National Bellas Hess, Inc. v. Department of Revenue of Illinois and Quill Corp. v. North Dakota.  In those decisions, announced before the dot-com boom established the internet as the prime method for many consumers to purchase goods, the Court had held that a state could only require out-of-state retailers to collect sales taxes if the company had a physical presence in the state.  When Quill was decided, physical stores were by and large the main choice for consumers; mail order retailers of the day accounted for a smaller percentage of overall sales.  However, that has obviously changed since Quill established the “physical presence rule” in 1992.  By 2015, Amazon had eclipsed Wal-Mart as the world’s largest retailer.  And most holiday purchases are now made online.  This shift from shopping locally to on-line has dried up a significant portion of state and local governments’ revenue from sales taxes.  Estimates for the decrease in revenue to state and local governments range between $8 billion and $33 billion.

These changes in Americans’ shopping habits have extended to Alaska and impacted the budgets of local municipalities and boroughs.  While the State of Alaska does not collect sales taxes, many boroughs and municipalities rely upon sales taxes as a source of funding.  The decision announced today has the potential to revive those revenue streams.

However, some potential challenges remain.  The Court’s decision today did not address whether the particular law at issue in South Dakota complied with the United States Constitution’s Commerce Clause.  Per the Supreme Court’s rulings related to that clause, states may not discriminate against interstate commerce and, instead, must treat local and out-of-state retailers alike.  However, Justice Kennedy’s opinion did provide some guidance on how to comply with the Court’s caselaw in that area.

With the “physical presence rule” from Bellas Hess and Quill now consigned to history alongside the former prominence of Blockbuster and the Sears catalog, state and local governments will now be able to collect taxes on goods purchased online.  Municipalities and boroughs in Alaska should review their Codes in order to determine whether their sales taxes can now be constitutionally applied to sales made by out-of-state retailers to consumers in Alaska.

1306, 2018

BHBC Supports Alaska’s Run for Women – It’s a Win-Win!

June 13th, 2018|

Written by:  Jennifer C. Alexander

2018 Winning Port-a-Potty: Birch Horton Bittner & Cherot’s “Explore The Tetons”

As a healthcare lawyer, I regularly deal with issues on behalf of my clients which can be divisive or require a balance of competing interests, such as privacy concerns, patient rights, the rising costs of healthcare, ethical practices, and extensive compliance requirements on practitioners and facilities.  Political views often invade discussions with regard to healthcare whether about choice, access, religious freedoms, or public funding, and in our current political climate, civility and acceptance of others’ views can get lost.   Birch Horton Bittner & Cherot has found common ground, however, on at least one public health issue in supporting the annual Alaska Run for Women, which has raised millions of dollars for education about, and access to, diagnostic screening for breast cancer that can be life saving.

For the past five years, BHBC has sponsored a “port-a-potty” or “rent-a-can” to be used by the thousands of racers, volunteers, and fans at the race day event.  This decorating contest pits organizations and businesses against one another to put out a fun and creative message in support of breast cancer awareness and prevention (while also providing a functional necessity to the well-attended event).  BHBC’s team includes walkers and runners of all abilities, from ages 20s to 60s.  Some are lifelong Alaskans and others “transplants” to Alaska, with ideological views across the spectrum.   While our team members may have different views on how to approach the difficult issues in healthcare today, we can agree on supporting this positive event in our community that encourages individuals to be proactive about their own health.

As four-time winners of the “Port-A-Potty Decorating Contest,” including 2018, BHBC takes the message of this silly competition seriously – with serious fun!  Congratulations to Team BHBC on your MOUNTAINOUS victory – can’t wait to see what you come up with next year!

For more information about the Run for Women, to donate, or to join the competition for next year, please visit http://www.akrfw.org/.

 

3005, 2018

Deadlines are Looming: HUBZone and SBA 8(a) Regulations are Changing!

May 30th, 2018|

Written by Jon M. DeVore

The U.S. Small Business Administration (SBA) announced that it is holding three consultations to solicit input and suggestions from Native American Tribes (Tribes) and Alaska Native Corporations (ANCs) to eliminate burdensome regulations and procurement procedures in the HUBZone and the SBA’s Minority Business Development Program (8(a)) .

The first consultation took place in Anchorage, Alaska, on May 9, 2018.  The second and third consultations are scheduled for June 7, 2018, in Albuquerque, New Mexico, and June 8, 2018, in Oklahoma City, Oklahoma.  Pre-registration deadlines for the two remaining consultations are May 31, 2018 and June 1, 2018, respectively.  Testimony presented at the consultations will become part of the administrative record for the SBA when it considers changes in the regulations pertaining to these programs.  Information and guidelines regarding pre-registration, submission of comments, and meeting times and locations, have been published in the Federal Register.

Robb Wong, Associate Administrator, and John Klein, Associate General Counsel for Administrative Law, led the May 9, 2018, Anchorage consultation at which there were about 75 attendees.  During the meeting, John Klein announced that the SBA would accept written comments for the two-week period following the meeting.  (The comment period for attendees of the May 9th meeting has closed.)  During the meeting, some of the comments and concerns expressed by attendees were:

  • NAICS codes could be improved or better defined; two federal agencies could classify the same work with different NAICS codes; SBA’s unilateral ability to change a firm’s NAICS code.
  • Paperwork: constant monitoring of contracts of multiple firms.
  • Multiple subsidiaries with differing program dates require that the same information about the parent company and benefits must be repeated and recertified. Perhaps this could be done once a year based on the parent company’s fiscal year.
  • How to calculate the performance requirements based on contract values given the high cost of transportation and materials in many rural and overseas work sites.
  • The conflict between SBA regulations and statutes.  SBA regulations require the head of an 8(a) firm to devote 100% of their time to running the firm while the statute allows the head of an 8(a) firm to run two firms at the same time.
  • Designate every village as a HUBZone (much like reservations in the Lower 48).

John Klein and Robb Wong offered a number of insights into proposed changes:

  • New regulations will clarify the concept of a follow-on contract (similar to the recent opinion Klein issued on this subject).
  • Simplify the burdensome regulations that impact firms with minor changes of ownership. For example, an increase of the ANC’s overall share changes the corporate structure, such as company mergers or converting from a corporation to an LLC.
  • Ease the HUBZone’s 35% requirement if an employee moves out of the HUBZone so that it will not lose its status. Veterans – regardless of where they live – count towards the 35% requirement.
  • Congressional amendment to change the competitive threshold measure by eliminating option years.

There was no announcement regarding how long the changes to the HUBZone and the SBA 8(a) Program will take.  It appears that the HUBZone changes are closer to release than the 8(a) Program.

A representative from the Office of Senator Dan Sullivan (R-Alaska) spoke at the consultation and announced that the Senator had reached several accords with the Department of Defense related to Section 811.  These changes should enhance the ability of Tribes and ANCs to use the Justification & Approval process for contracts above the $22 million threshold.  The essence of the commitments obtained by Senator Sullivan are:

  1. The ‘head of agency’ threshold for Native 8(a) contracts from $22-93 million is no longer at the head of agency level; it is now at a lower level of approval (below head of agency).
  2. The aforementioned approval threshold should NOT be seen as a barrier to awarding these contracts.
  3. There should be an effort to streamline each service’s approval processes.

This is significant progress in streamlining Section 811.  These policy clarifications could be best used by the business development people of Tribes and ANCs when discussing contracts as the end of the fiscal year nears.

1105, 2018

BHBC Represents at Historic Anchorage Event – The Miners and Trappers Ball

May 11th, 2018|

BHBC’s “miners” (left to right), Holly Wells, Lori Brownlee, Sarah Badten, Katie Davies.

Written by:  Lori Brownlee

Late February and early March is a festive time in Anchorage, Alaska.  That’s when the locals celebrate Fur Rendezvous (known as “Fur Rondy”), a winter festival with the dual purpose of commemorating Anchorage’s Last Frontier history and keeping cabin fever at bay.  Fur Rondy started as a three-day winter festival in the 1930’s, and coincided with the annual arrival of the miners and trappers to sell or trade their furs, gold and other goods for money, supplies, and maybe even a bottle or two of whiskey.  It has become one of the largest winter festivals in North America, stretching over 10 days and attracting visitors from all over the world.

Since 1950, one of the signature events of Fur Rondy is the Miners and Trappers Ball. Once held in a drafty warehouse befitting its frontier beginnings, attendees now go to Anchorage’s civic center dressed in authentic costumes reflecting Alaska’s Gold Rush era.  Ball attendees can participate in various contests including a costume contest with categories that range from Gold Rush and Period Costumes to “Anything Goes.”  There’s also a beard and mustache contest for the coveted title of Mr. Fur Face.

In minus twenty degree weather in January, 1972, I arrived from Washington State as a nine-year old with my parents and three sisters. A month later, my parents dressed in moose costumes to attend a party.  It was the Miners and Trappers Ball.  Fast forward four-plus decades; I just attended my third Miners and Trappers Ball with three of my colleagues from Birch Horton; Holly Wells, Sarah Badten, and Katie Davies.  We spent the night dressed as lady miners and our regalia included Carhartt® overalls, fur hats, and XTRATUF® boots.  We mingled with people from all walks of life from Anchorage and beyond. We received many positive comments on our costumes and we were encouraged to enter the costume contest.  While we didn’t win, we had fun and enjoyed the great team-building experience.

I have fond memories of other Fur Rondy events over the years. As kids, my sisters and I would venture to the carnival rides and games downtown and we would stay outside all day, no matter how low the temperature dropped.  As a teenager, I marched in the Grand Parade with my high school band and I can’t count the number of times I’ve watched the world championship dogsled races and starts of the Iditarod race to Nome. For the past five years, I’ve run with the reindeer with my sister Jennifer by my side. I’ve watched the opening fireworks many times, as winter is the best time to see fireworks here.

Alaska is a special place and Fur Rondy is one of the many reasons I still live and work in Anchorage.  Winters can be very long and that’s why Fur Rondy is such an anticipated event for young and old alike. It gives us a chance to kick up our heels and celebrate all things Alaskan and helps us through the last days of winter. I’m proud to work with people who have deep roots in Alaska and I can’t imagine living anywhere else.

2404, 2018

The Intersection Between Free Speech and Defamation

April 24th, 2018|

Written by:  David Karl Gross

The widespread use of Facebook, Twitter, and other social media forums, has caused the amount of information being exchanged to hit unprecedented levels.  A culture has developed where it is noteworthy to share the minutia of everyday living, including what you had for dinner, where you are traveling, and who may have said what to whom.  Websites that publish “totally useless facts,” like the fact that a crocodile cannot stick out its tongue, are abundant.

This cultural perception that all information must be shared, no matter how mundane, has spawned a new phenomenon:  the blogger.  A blogger is a person who creates a website to share one’s own experiences, observations, and opinions.  Many of these blogs can be quite entertaining and helpful, discussing topics such as food, travel, movies, health and fitness, and sports, just to name a few.  Blogs can play a very positive role in society.  For example, Birch Horton’s blog was created to share stories about those who work at Birch Horton; to discuss changes in the law; and to comment on the ever-changing legal landscape.  Our goal is to provide the community with interesting stories and useful information.

However, there are some blogs that are not about exchanging information in an effort to help but are more designed to harm.  These blogs strive to portray themselves as legitimate sources of news; instead, they are used as platforms to harm, harass, and embarrass.  The information promulgated by these blogs is not for the purpose of educating the reader about a particular issue, but to spin the facts in a manner that will harm certain members of the community.  While it is unclear whether these blogs were created as a means to hurt those that the blogger dislikes or to seek revenge for some past harm, what is clear is that these mean-spirited bloggers work in the gray area between defamation and the protections afforded by the First Amendment.

Defamation is a cause of action that will allow a person to recover damages when it is demonstrated that a blogger has posted something that is untrue and has caused personal harm.  Defamation is an important legal remedy because it provides people with a significant recourse when the words of another have caused harm to their careers, reputations, or finances.  In some cases, defamatory statements have been so harmful that they have caused health issues.  Thus, the law has armed the victims of bloggers with a means to not only stop the blogger (injunctive relief), but to require the payment of damages to compensate the victim for the losses they have suffered.

The law of defamation, however, is not without limits and often intersects with laws that protect free speech.  The First Amendment to the United States Constitution provides that the government shall make no law that abridges the freedom of speech or the freedom of the press.  This fundamental legal principle was included in our Constitution to ensure that people may speak freely without fear of reprisal.  This creates a delicate balance between a person’s right to speak freely and a person’s right to be free of harmful comments.

Determining whether a blog is constitutionally protected speech or defamation, requires a close and careful look at the statements made.  If a blogger can demonstrate that the statements at issue are true, the speech is protected.  No one can be punished for speaking the truth, no matter how ugly, or harmful, it may be.  Opinions, however, are murkier territory.  The United States Supreme Court declined to create a blanket protection for all opinions.  Instead, the Court held that if a statement of opinion could be proven false, a defamation claim would be proper.  For example, in Milkovich v. Lorain Journal Co., 497 U.S. 1 (1990), the Court determined that a news article expressing the opinion that a wrestling coach lied under oath was not protected speech and could therefore be the basis for a defamation claim.

Public figures are put in a separate category and will have a harder time bringing a defamation claim.  This is true, in part, because the public figure is able to use their access to the media as a means to refute the statements or to clear their name, whereas a private figure does not have a platform to address the false statements.  In this regard, it is possible for a public figure to transform back into a private figure when this access is lost.  The United State Supreme Court in New York Times v. Sullivan, 376 U.S. 254 (1964), held that for a public figure to prevail in a defamation action, they must prove actual malice, meaning that the blogger either knew the statement was false or acted with reckless disregard for the truth.  The line between public and private figure is often blurred.  Clearly, a politician or celebrity would be considered a public figure, while an everyday person would not.  The United States Supreme Court has handed down a number of opinions seeking to create a formula for determining if a person is a public figure or a private individual, but oftentimes these decisions have created more confusion.

When a blogger is publishing stories about a person, especially a story about a private individual, there is a real threat that they could be held liable for defamation.  With this, bloggers would be well advised to make sure that the statements they are making, including opinions, are factually correct.  If the statements can be proven false, it is possible a private figure can file an action for defamation.  Because the intersection between defamation and the First Amendment can be confusing, it is always best to consult an experienced attorney prior to setting up a blog and prior to posting controversial stories.

Leaving the legality of blogging aside, it is also important that prior to posting a story, bloggers ask themselves what is the point of the story.  Are they trying to report helpful information or cause harm to another?  If it is the latter, there is a real possibility that the blogger is stepping over a moral and legal line, such that the victim could have a successful defamation claim.  At the end of the day, the need to exchange information is important, but there must also be a limit and bloggers must try to have some measure of journalistic integrity.  Not everything is a “must read.”  Some things are best left unsaid.

1404, 2018

The Legal Maze of Small-Time Gold Dredging in Alaska

April 14th, 2018|

WRITTEN BY:  Adam Cook

Nome has been the epicenter of gold mining in Alaska since the Alaska Gold Rush blasted off in 1898.  Prospectors and miners have been finding gold deposits in the hills and creek beds around Nome for over a century.  They have also been finding placer gold (i.e., unrefined gold) in the seabed of Norton Sound, an inlet of the Bering Sea.

Several waterways drain into Norton Sound off the Seward Peninsula, depositing fine quantities of gold into the shallow waters near the coast.  For decades people have been dredging up sediment from the seabed, sluicing it, and collecting gold and other minerals.  They dredge frantically during the four months of the year that low ice levels permit such work.  This relatively obscure method of mineral extraction was pushed into the spotlight in 2012, when the Discovery Channel began airing the reality TV show Bering Sea Gold.  The show follows various groups of colorful characters dredging the waters near Nome.

Suction dredging is tricky business.  The placer gold does not appear in veins on the seabed, the way it does in rock formations on dry land.  Some sediments are rich with “paydirt,” but it is difficult to map profitable areas, and tidal forces or other geological activity might alter a rich location.  The work itself is also very dangerous.  Suction dredging often requires the work of a suited diver, who operates an airlift on the seabed, sucking sediment up to a boat and into a mechanical sluice.  In the meantime, the waters of the Norton Sound are icy cold, and visibility underwater near the seabed is almost nil.  And there are no guarantees.  For unlucky dredgers, weeks of dredging might result in barely any gold at all.

Regulatory Control

Gold dredging in Alaska is also legally complicated.  Like any other form of mining, dredging is heavily regulated by the Alaska Department of Natural Resources (“DNR”) and the U.S. Department of Interior.  Norton Sound is a protected salmon fishery.  Starting in 1993, the U.S. Army Corps of Engineers and the Environmental Protection Agency implemented regulations on suction dredging in order to preserve the seabed habitat.  A person with the daring and determination to plunge into the icy waters in search of gold must first plunge into an array of restrictions on dredging dates and permissible equipment and practices.

Also, unlike fishing, gold dredging is not a simple matter of heading out in a boat and then choosing a location that feels right.  DNR does allow some “recreational mining” in public areas off the Nome beach.  But these areas are limited to small-scale operations, in seabeds with limited gold deposits.  Dredgers who actually wish to make their fortune with suction dredging have to dredge in one of a limited number of claims, either “staked” by other dredgers, secured by patent, or leased out by the State of Alaska.  Dredgers fortunate enough to hold an offshore claim or lease can sublease it to another party, or grant another dredger permission to dredge the claim, in exchange for royalties.

Suction dredging is thus a risky, legally complex, and very competitive way of making money.  But it has only gotten worse in the last ten years.  Since 2000, the price of gold has skyrocketed, from $273 per ounce to about $1,325 per ounce today (placer gold is worth slightly less than pure gold).  These price movements sent droves of profit-seekers into previously-unpopular dredging locations.  The runaway success of Bering Sea Gold (now in its 9th season) added fuel to the fire.  In 2015, the Nome Harbormaster reported more than 100 gold dredges operating out of the Harbor.

Status of Operators

Once dredging near Nome started to take off, the State of Alaska moved to take advantage of the demand.  In September 2011, DNR held its first offshore mineral lease auction in almost 12 years.  DNR successfully auctioned 84 leases, constituting more than 24,000 acres off the coast of Nome.  The State of Alaska made about $9.3 million from the auction.

The outcry auction drew strong interest from bidders because there are a limited number of available parcels offshore for dredging — and the majority of them are currently held by large commercial operators.  Anyone who does not hold a claim or mineral lease must purchase “operator authorization” from a claimholder in order to perform commercial operations.  This situation has created its own miniature industry, as lessees and claimholders sign deals with small operators allowing them on the claims.

Around the same time that Bering Sea Gold peaked in popularity, two developments sent shockwaves through the dredging community.  The first development was a decision by DNR to update its antiquated recordkeeping and approvals process.  Prior to 2014, claimholders could grant operator authorization to anyone with a boat, with little government oversight.  But at the start of the 2014 dredging season the DNR modified the mandatory Application for Permit to Mine in Alaska (“APMA”) to include specific information about third-party operators.  The APMA Operator Authorization Supplement required detailed information about the plan of operations, with the plan now a part of accessible public records.

The era of “Wild West” operators was over.  The claimholders and lessees giving operator authorization were now assuring the various regulatory bodies that the dredging operations would be legal, safe, and environmentally responsible.  Many claimholders and lessees started insisting on bonding or insurance to provide protection in the event of an accident or violation of the law.  The crude, simple watercraft used in the past — sometimes consisting of just an air pump on pontoons — were under enhanced scrutiny.

The second development was the death of a diver working a dredge operation near Nome on August 12, 2014.  The death prompted the U.S. Coast Guard to classify gold dredges as “commercial vessels,” rather than recreational watercraft.  The dredges now must maintain various safety gear, undergo dockside inspection, and get credentialed before sailing.  The new regulations meant additional expenses for dredge operators.

The Future

Today, gold dredging off Nome is more popular than ever.  But the industry is marked by three ongoing trends:  (1) consolidation of leases and claims into the hands of a few large commercial operators; (2) the increasing price of gold; and (3) increasing government oversight.  These trends work to make dredging spots more rare, the payoff for success more lucrative, and the cost of compliance more burdensome.  All of this works in the favor of very large operators, such as South African mining company AngloGold Ashanti, which holds more than half of the offshore leases issued by the State of Alaska in 2011.

Meanwhile, the smaller operators are feeling the squeeze.  Large corporations can pay the cost of insurance and legal headaches with much greater ease than a two?man operation.  Legal battles can and do erupt over the right to dredge, and large corporations have an easier time shouldering the cost of these legal battles.  Alaskans have always grumbled that increasing regulation has yanked away the livelihoods of the “little guys,” whether the activity is hunting, fishing, or mineral extraction.  It remains to be seen if Nome’s small operators can weather the trend.