On May 17, Gov. Kate Brown signed into law House Bill 3427, imposing a gross receipts tax on most Oregon businesses.

The new tax, $250, plus 0.57 percent of taxable commercial activity over $1 million, will have a significant impact on low-margin businesses, such as general contractors. This tax is on the gross receipts of a business, regardless of profitability, less only an amount equal to 35 percent of “cost inputs” or “labor costs.” Also, the tax is imposed on each step of the construction process (i.e., manufacturer, subcontractor, general contractor), resulting in taxation on the same economic value multiple times. The tax will have a significant impact on the cost of all goods in Oregon, including housing and real property development.

There are just a few exclusions to the tax imposed on gross receipts exceeding $1 million, including:

• exclusion of the greater of 35 percent of “cost inputs” or “labor costs,” where “cost inputs” means the costs of materials incurred in the creation of a good or service and the cost of purchases of items held in the ordinary course of business for inventory, and “labor costs” means total compensation of all employees, not including compensation to any single employee in excess of $500,000 per year;
• a number of industry-specific exclusions (i.e., groceries, residential care facilities, motor vehicle fuels);
• interest and dividend income, as well as receipts from the sale of IRC Section 1221 and 1231 assets; and
• the exclusion of most interest to companies in the design and construction industry is the exclusion of receipts for transactions among members of a unitary group. Transactions among members of a group of businesses with common ownership, such as equipment leasing subsidiaries, separate construction entities for residential and commercial construction, etc., are excluded from the calculation of gross receipts. Under the Oregon law, the threshold to determine common ownership is at least 50 percent, either direct or indirect, common ownership. This is much lower than the 80 percent threshold for filing consolidated returns in Oregon.

A unitary group with revenues in excess of $750,000 must register with the Oregon Department of Revenue and pay the tax as a single taxpayer under the name of the entity with the greatest amount of commercial activity for the year. This may create unique challenges for allocating liability for the gross receipts tax among the members of the unitary group. This also may present reporting challenges if the member of the unitary group with the most commercial activity in Oregon changes from year to year. Will a new registration be required each year?

Gross receipts include the value of any property transferred into Oregon for use in the trade or business of the company. Accordingly, contractors with business operations in several states will need to be careful moving equipment and other assets among projects inside and outside of Oregon.

Every business with gross receipts in excess of $1 million must file an annual return. The tax itself must be paid quarterly on or before the last day of January, April, July and October for the previous calendar quarter. The new statute is silent on whether the $1 million gross receipts filing threshold is before or after exclusions for cost inputs or labor costs. A strict reading of the statutory language suggests the threshold requirement is before the exclusion of cost inputs or labor costs. Accordingly, reporting may be necessary, even if no tax liability is due. Expect regulatory guidance on this issue to be forthcoming.

The new Oregon law applies for tax years beginning on or after Jan. 1, 2020, and before Jan. 1, 2021, and to returns filed on or before April 15, 2021.

The new tax is scheduled to go into effect on Jan. 1, 2020. However, the consensus is that the new tax will end up in front of Oregon voters in a special election. That special election is likely to occur in early 2020. Given the public rejection of Measure 97, a similar gross receipts tax proposed in 2016, the outcome of such a special election is uncertain. However, with the new tax due to take effect before a special election can occur, appropriate planning is needed in 2019 to minimize the impact of the new tax.

Thomas B. Eriksen is an attorney in Jordan Ramis PC’s Business Law practice group. He represents business and corporate clients in all aspects of business operations. Contact him at 503-598-5590 or brad.eriksen@jordanramis.com.

Kathleen M. Bertero is an attorney in Jordan Ramis PC’s Business Law practice group. She focuses on real property sales and acquisitions, commercial leasing, business acquisitions, and corporate formation. Contact her at 503-598-5554 or kathleen.bertero@jordanramis.com.

This column is intended to provide general interest for readers. Consult professional counsel for legal advice regarding specific situations.

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Federal and state government agencies have been increasing enforcement efforts to address misclassification of workers as contractors rather than employees. The U.S. Department of Labor has added 250 investigators to aid with compliance efforts, and the IRS also has been transparent in its intent to step up audits and enforcement efforts to combat misclassification. Meanwhile, the state of Oregon created an Interagency Compliance Network to proactively educate businesses and coordinate enforcement activities between key state agencies.

Courts, too, are being asked to opine on worker classification more than ever, and some decisions totally contradict what had been traditional business models in certain industries. This includes a 2014 decision by the U.S. Court of Appeals for the Ninth Circuit, which held that under Oregon law, a class of 363 full-time FedEx delivery truck drivers were employees and thus entitled to additional wages and overtime.

So, why is misclassification such a big deal?

Well, for taxing authorities, classifying a worker as a contractor rather than an employee results in lost tax revenue. For others, it means the worker will not receive the benefit of employment-related legal protections and benefits that the worker may otherwise be entitled to.

For businesses that incorrectly classify employees as independent contractors, scenarios can be “make or break.” That’s because getting it wrong can mean the business may be on the hook for a host of additional unplanned costs, including:

• Payment of back wages and benefits that were neither anticipated nor budgeted for;

• Employment-related taxes on all wages owed to the misclassified worker(s);

• Fines, interest, and/or other penalties, including attorney fees, if the mistake is uncovered by the regulatory agency, or in connection with a civil claim brought by the worker;

• Additional workers’ compensation insurance premiums and potential claims for workplace injuries; and

• Liability for employment-related claims by the misclassified worker, including anti-discrimination, anti-retaliation, wage and hour, workplace safety and health, and protected leave laws.

These amounts can be staggering for even a single misclassified worker. Where there are multiple workers, the figures grow exponentially. This can also occur where an otherwise properly classified contractor employed its own workers to perform services, but didn’t follow the requisite formalities.

Isn’t this as simple as looking at whether the business issued a 1099 or a W-2 at the end of the year?

Unfortunately, no. Instead, a patchwork of fact-specific tests need to be considered. There are no fewer than three multi-factored tests that could apply under federal law. In Oregon, four tests may apply. Just as Oregon has its own tests, so do other states. If a worker performs work in other jurisdictions, the business must also consider the tests applicable in those states.

What generally isn’t relevant to any of the tests is what the business or the worker intended or often even what the paperwork says. Instead, the best practice is to consider the applicable tests before commencing the work so that the relationship can be properly structured to comply with the applicable legal standards.

Given the inherent risks of misclassification, the complexities and fact-specific nature of the proper determination of each of those issues, and the increased enforcement efforts at every level, it’s easy to see how a mistaken misclassification has the potential for a huge negative impact on a business. For these and other reasons, I typically recommend that the proposed relationship be evaluated, with advice of qualified counsel, and structured so that all of the potentially applicable tests are met, and then memorialized in an appropriate written agreement, before any work commences. By properly and proactively applying the appropriate standards in advance, businesses can best avoid the foreseeable risks.

Hopefully, this brief summary has been useful. Of course, it is merely intended to highlight the issues and legal standards, and point out some common risks and pitfalls related to misclassification. This synopsis should not replace independent legal advice for any particular situation.

Amy Robinson is an attorney in Jordan Ramis PC’s labor and employment law practice group. She has experience with a full range of employment issues. Contact her at 888-598-7070 or amy.robinson@jordanramis.com. This article is intended to inform readers of general legal principles; they should consult with competent counsel when addressing specific situations.

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For those familiar with commercial real estate deals, it is well-known that buyers and lenders want to see a No Further Action Letter (NFA) when dealing with property that has suffered some sort of environmental contamination. An NFA is considered a panacea for all environmental ills on real property.

Lenders demand to see an NFA before they will loan money to any potential purchaser. Real estate brokers will tell you that attempting to sell contaminated property without an NFA will lead to far fewer potential buyers and a greatly reduced price. Many prospective buyers do not want anything to do with a contaminated property without an NFA.

What many banks and real estate brokers do not know, do not realize or choose to ignore is that an NFA may be only a temporary reprieve from additional remediation work at the discretion of Oregon’s Department of Environmental Quality (DEQ) or Washington’s Department of Ecology (DOE). Both may reopen an NFA.

The DEQ is charged with reviewing files every five years. The reasons given for reviews every five years include making sure that the situation is still stable, that there is no new technology that could otherwise detect the previously undetectable, and other similar reasons.

The DOE also has stringent standards. In one particular case an NFA was not granted by the DOE because, even though no further environmental hazards could be detected, it wanted to wait until better detection techniques were developed in the future.

While lenders and brokers may want an NFA, that’s not where the story ends. It is very much up to the buyer of a formerly contaminated property to make sure that future uses are disclosed and discussed, because real danger may exist in a change of use. NFA or not, the due diligence process is extremely important in saving a prospective purchaser from the many problems that lurk on a previously contaminated property.

If a property’s planned use is similar to its previous uses or even less intense in nature, then the purchaser should be just fine with the NFA. However, if the planned use is significantly different than the most recent use, the purchaser can inadvertently enter into a real quagmire if the due diligence process is glossed over.

A significant change of use will cause both state agencies to re-examine their previous NFA determination to see if further investigation may be needed. The two state agencies may also reopen or revoke an NFA if the NFA had conditions related to the anticipated uses and the proposed use is different altogether.

A simple example of the types of issues that can arise with a change of use includes a commercial office space with a former gas station on the corner. Assuming that the gas tanks leaked and most of the contaminated soil was removed, a seller will likely get an NFA to continue with the commercial building project. But what if the buyer wants to change use from the commercial building into condominiums with an underground garage? Test results needed to get the NFA for the commercial building may not be sufficient for such a change in use. Acceptable levels of contaminants for one use will be different than for another.

It is important for the buyer to get a copy of the NFA file from the respective state agency in order to determine if the NFA will be sufficient for the intended use. The buyer also should employ an environmental consultant to help sort through the issues long before the closing date of any sale and perform an independent Phase I (and possible Phase II) assessment of the property in advance of closing.

Prospective buyers can save money, time and grief by closely examining all environmental concerns with a property, including scrutinizing any NFA – and they should be ready to walk away if they are not satisfied with what they find, instead of paying minimal attention to the potential environmental issues before them.

Scott Anders is an attorney and shareholder in Jordan Ramis PC. He has been practicing law for more than two decades, and now focuses on land use, real estate and business matters. Contact him at 360-567-3904 or scott.anders@jordanramis.com.

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The Pareto principle posits that 80 percent of the effects of something come from 20 percent of the causes. As applied to employers, and more particularly human resource professionals, 80 percent of personnel issues typically are caused by 20 percent of the workforce. Employing a few best practices when working with these individuals, as well as recognizing when it’s time to call your attorney, can prevent personnel issues from evolving into employment liability claims.

Best practices
Employers can minimize or avoid most employment liability claims by:

•  Implementing a well-written, concise employee handbook that clearly sets forth company policies and procedures;
•  Providing frequent supervisor and manager training on managing employee expectations and productivity;
•  Conducting prompt, timely, complete and impartial investigations of all employee complaints made in good faith;
•  Documenting employment-related communications and corrective action carefully and appropriately; and
•  Taking corrective action fairly, consistently and appropriately when necessary.

In most cases, following these best practices will minimize employment-related lawsuits; however, there will still be times when you should call your employment law attorney.

Why to call your attorney

First, you are expected to know the myriad of federal, state, and local laws that affect the employment relationship. An employer’s lack of knowledge is not a “get out of jail free card.”

Second, due to the unequal power differential between the employer and the employee, the employer is subject to greater scrutiny.

Third, when civil or administrative claims are filed against you, an experienced employment law attorney can advise you on the applicable law and associated court or administrative processes that must be followed to defend the claim.

Finally, calling your employment law attorney when personnel issues arise is a good business practice. Your employment law attorney knows the nuances of each applicable law and can help you strategize a strong defensive position from the beginning, taking into account all required obligations. In other words, you wouldn’t hire a butcher to do heart surgery just because he or she is good with a knife.

When to call your attorney

When should you call your employment law attorney? The following situations justify a call, but please keep in mind that this list is not exhaustive:

•  When there is any situation that could involve handcuffs – i.e., criminal acts. These could include immigration violations, misuse of computer networks and workplace violence;
•  When you are served with an administrative complaint from: the Bureau of Labor and Industries (BOLI), the Equal Employment Opportunity Commission (EEOC), the U.S. Department of Labor, the Occupational Safety and Health Administration (OSHA), the National Labor Relations Board (NLRB), or others;
•  When you are served with a lawsuit alleging employment-related claims;
•  When an employee complains of mistreatment in the workplace or complains of a “hostile work environment;”
•  When an employee complains that you are breaking federal, state or local laws;
•  When an employee complains about not being paid overtime;
•  When you want to use employment agreements, severance agreements, non-competition agreements, or confidentiality and non-solicitation agreements;
•  When there are incidences of serious workplace injuries, death or workplace violence; or
•  When you are considering terminating employment for performance failures or reduction of workforce.

There are other times when calling your employment law attorney makes good sense. For example, after the conclusion of a statewide legislative session, call your attorney to discuss changes in employment-related laws or new enactments that would affect the employment relationship. This will allow you sufficient time to evaluate the laws’ effect, modify employee policies and procedures accordingly, and train supervisors and managers.

Another situation would be when you learn of court holdings that you may feel change the law or affect your policies and procedures.
Finally, your employment law attorney is a great resource to provide training for supervisors, managers and executives. Such training should include an annual session on harassment and discrimination avoidance based on the established company policies. Other recommended training could include new supervisors and managers, documenting the employment relationship (discipline and corrective behavior processes), and lawful recruitment practices.

In implementing best employment practices employers minimize their exposure to large employment liability claims. This, in turn, reduces the overall cost of employment-related legal expenses.

In cases where claims are unavoidable, employment law attorneys can serve as critical management tools when used effectively. Develop a relationship with your employment law attorney that allows you to handle 80 percent of your organization’s employment personnel issues, so you’ll only need to call your employment law attorney for that other 20 percent.

Ronald Guerra is an attorney in Jordan Ramis PC’s labor and employment law practice group. He is an employment litigator who handles the full range of disputes that arise out of employment relationships. Contact him at 503-598-5540 or at ron.guerra@jordanramis.com.

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In spring 2014, the Environmental Protection Agency published its draft “Waters of the U.S.” rule for public comment. The rule would redefine which waters are subject to federal regulation – commonly known as jurisdictional waters – and greatly increase the areas subject to federal jurisdiction and permits.

Despite significant controversy and an extension of the initial comment deadline to Oct. 20, 2014, the EPA has pushed forward with the proposed rule. This issue is of interest to a broad community of stakeholders because the jurisdictional waters definition determines who must apply for Clean Water Act permits, including Section 404 permits governing activities in jurisdictional wetlands. If adopted, the rule would require many government agencies and real estate developers to obtain those permits for the first time, substantially increasing the time and expense required for project approvals.

Since the Supreme Court in 2001 and 2006 issued rulings that limited the EPA’s authority to regulate isolated waters – those that do not fall within the clear boundaries of federal jurisdiction – the EPA and the regulated community have wrestled over which isolated “other waters” are jurisdictional. The EPA now proposes to expand on language from a Supreme Court opinion written by Justice Anthony Kennedy – an opinion not signed by any other justice – to redefine jurisdictional waters.

Critics argue, however, that the EPA, with its rule, is taking liberties to secure federal jurisdiction well beyond what Justice Kennedy ever intended. According to the EPA and the Army Corps of Engineers, under proposed changes, 17 percent of “other waters” would be classified as jurisdictional.

The EPA insists that it is not proposing to expand its regulatory reach, but rather clarify uncertainties that followed the court decisions. At the same time, the EPA acknowledges the rule would increase the percentage of all waters definitely subject to regulation by 3 percent, which includes about 17 percent of the “other waters” with previous uncertain status. It would do this by expressly regulating waters “adjacent” to a jurisdictional water, and by then defining “adjacent” to include “neighboring.”

It also would extend the EPA’s regulatory reach by expanding the definition of “other waters.” The new definition includes waters that, “in combination with other similarly situated waters, including wetlands, located in the same region, have a significant nexus to” a regulated water. A “region” includes “the watershed that drains to” a jurisdictional water, and the “significant nexus” includes any other waters that “can be evaluated as a single landscape unit with regard to their effect” on jurisdictional waters.

When strung together, these definitions can include any waters within a watershed that are not expressly exempted from the Clean Water Act, because all waters “in combination with other” waters not only have a nexus to, but become, the large rivers that are regulated, once the water percolates or runs downhill. The exemptions are focused on agricultural uses, but many stakeholders in the agricultural sector fear that existing agricultural exemptions to the Clean Water Act will be lost or altered by the proposed rule. For other sectors, the new definitions would expand what is regulated, leading to significant new regulatory challenges.

Many stakeholders and members of Congress have asked the EPA and the Army Corps of Engineers to provide standards, such as measurable flow rates or specific ecological functions for “other waters,” to qualify as having a significant nexus to jurisdictional waters, but the agency has declined to do so in the proposed rule.

If the rule is adopted, most of the additional regulatory costs will fall on state and local government infrastructure projects, landowners who do not qualify for an agricultural exemption, real estate developers (and their tenants and buyers), and resource extraction industries. Some of these people are accustomed to Clean Water Act regulation of their projects, especially projects along or in the water. But those who typically work far away from larger bodies of water are likely to discover that minor or isolated hydrologic features, such as a ditch that is wet only in wintertime, is now of concern to the federal government.

On Sept. 9, in response to stakeholders’ concerns, the U.S. House of Representatives passed H.R. 5078 to prevent the EPA from implementing the proposed rule. In a pre-emptive move, on Sept. 8, the White House issued a Statement of Administration Policy stating that the president’s administration strongly opposes H.R. 5078 and will recommend a presidential veto if the Senate passes it. This stance suggests that despite considerable opposition, the administration continues to support the proposed rule – and that rule is likely to be adopted sometime in 2015.

Steve Shropshire is an attorney and the managing shareholder at Jordan Ramis PC. He also is a member of the firm’s Dirt Law practice group. He regularly advises clients on natural resources, environmental, and water law matters. Contact him at 503-598-7070 or at steve.shropshire@jordanramis.com.

Joseph Schaefer is a land use planner and a paralegal with Jordan Ramis PC. He assists the firm’s attorneys with various land use, real estate and environmental development matters. Contact him at 503-598-7070 or at joseph.schaefer@jordanramis.com.

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When purchasing real estate, buyers are always concerned with minimizing potential liability for environmental issues. When clients approach me with a prospective business acquisition, most prefer to structure it as an asset deal to avoid liabilities associated with a stock purchase. I rarely hear that a client is merely upgrading some equipment or purchasing a few assets.

However, even an asset purchase is not immune from successor liability issues. The Oregon Supreme Court clarified in a recent case that new owners who acquire any business assets, regardless of the acquisition method, face potential successor liability for wage claims by employees who were not paid by the former employers.

In Blachana LLC v. Bureau of Labor and Industries, a bar closed its doors without paying some of its employees. Those employees sought and received payment from the Oregon Bureau of Labor and Industries’ Wage Security Fund. The former bar’s landlord then acquired its assets by repossession and reopened the bar a month later. BOLI then sued the new bar for reimbursement of wages paid out of the Wage Security Fund, alleging that the new bar was an “employer” under the wage claim statute.

The wage claim statute includes in its definition of “employer” two classes of individuals or entities: (i) a successor to the business of the employer; or (ii) a lessee or purchaser of any of the employer’s business assets, which assets are used in the continuance of the employer’s same business.

The central issue in Blachana was defining a “successor to the business of employer” as contemplated under the definition of “employer” in the wage claim statute. Because the new bar did not lease or purchase the former bar’s business assets, the only way it could be deemed an “employer” under the statute, and therefore liable to BOLI for reimbursement of wages paid, was if it was a “successor to the business of employer.”

The Supreme Court rejected the new bar’s argument that it was not a successor to the former bar because it was a separate and distinct entity with no ties to the former bar. Additionally, the Supreme Court disagreed with the lower courts’ conclusion that an entity was liable as a successor to the business of an employer only when that entity would be liable for the employer’s unpaid wages under some law other than the wage claim statute.

In holding that the new bar was a successor to the former bar as contemplated by the statute, the court accepted the test offered by BOLI: an employer was a successor for purposes of wage claims if it “conducts essentially the same business as conducted by the predecessor.” The court considered a number of factors introduced in a previous BOLI case to determine if this test was met: (i) the name or identity of the business; (ii) the business location; (iii) the amount of time between the operation of the predecessor’s business and the new business; (iv) the continuity between the predecessor’s workforce and the new business’ workforce; (v) the products or services offered by the predecessor compared to the products or services offered by the new business; and (vi) whether the same equipment or production methods were used by the predecessor and the new business. In analyzing whether the new bar was a successor to the business of the former bar, the court noted that not all of the six factors must be met.

There are some ways businesses can attempt to protect themselves from the wage claim successor liability in Blachana:

1. Perform significant due diligence. In addition to evaluating the condition and history of the assets you are acquiring, carefully examine the business’s financial and payroll records.  When performing the due diligence, inquire into the solvency of the seller.

2. Ensure strong representations, warranties and indemnification are in the purchase agreement. The buyer’s attorney should draft strong representations regarding the payment of wages and adequate indemnification provisions. The representations and indemnification provisions are only as strong as the seller or guarantor standing behind them. If there is any question as to the seller’s solvency, require a guarantor to be jointly and severally liable for the indemnification obligations.

3. Allocate the purchase price to payment of wages. Part of the purchase price could be allocated and a process established for the payment of any unpaid wages, vacation or other employee compensation at closing.

4. Establish a holdback. Another protective device is a holdback agreement that withholds a portion of the purchase price for one to two years and provides the acquirer with security not only for unpaid wages, but also for any other indemnification claims.

The Blachana case emphasizes the potential exposure that any acquirer of a business or any business asset faces and reconfirms the importance of performing thorough due diligence in any acquisition.

The potential successor liability for employers in this context applies to all subsequent owners – no matter how the acquisition is structured. It also potentially applies to a business (or individual) that acquired only a few assets from another business and then used those assets in a similar business. While a buyer of stock expects significant liabilities to follow, a buyer of assets does not. Any type of business asset purchase, large or small, opens the door to potential successor liability.

Krista Evans is an attorney at Jordan Ramis PC who regularly advises clients on a variety of business issues. She also has experience in real estate matters. Contact her at 503-598-5575 or krista.evans@jordanramis.com.

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This past winter, in WaterWatch of Oregon v. Water Resources Department, the Oregon Court of Appeals reversed and remanded an Oregon Water Resources Department (OWRD) order granting a municipal water permit extension to the city of Cottage Grove, and issued instructions to vacate the related water right certificate.

In April, the Oregon Supreme Court granted review of the Court of Appeals’ decision. If upheld, the decision could significantly affect the ability of municipalities to perfect their municipal water rights to the full extent authorized in their existing permits.

Prior to appropriating water to meet its water service obligations to residential, commercial, industrial and other users, a municipality must obtain a water permit from OWRD. Once the municipality receives a permit, it has 20 years to complete construction of required water works and other facilities necessary to appropriate and then apply the water to authorized uses. Once the municipality submits evidence showing the water has been used in compliance with permit conditions, OWRD issues a water right certificate and the municipality then has a vested water right.

Given a variety of factors beyond their control (e.g., funding capabilities, unanticipated levels of water demand, changes in applicable government regulations, etc.), municipalities can struggle to complete construction of water works within 20 years. For this reason, a municipality often seeks an extension of time to satisfy its water permit. Any such approval, however, may be subject to conditions.

ORS 537.230(2)(a) – (c) allows OWRD to grant an extension of time to a municipal use permit holder to complete construction or to perfect its water right: (a) for good cause, provided that (b) “the holder may divert water beyond the maximum rate diverted for beneficial use before the extension only upon approval by OWRD of a water management and conservation plan.” Under subsection (c), the statute also provides that “for the first extension issued after June 29, 2005 for a permit for municipal use issued before Nov. 2, 1998, OWRD must find that the undeveloped portion of the permit is conditioned to maintain the persistence of (protected) fish species.” These statutory provisions are the central issue in the case.

In November 1977, the city of Cottage Grove obtained a water permit authorizing the diversion of 6.2 cubic feet per second (cfs) of water from the Row River for municipal use. The permit required all water works to be constructed by Oct. 1, 1979 and the water applied to beneficial use on or before Oct. 1, 1980. Thereafter, the city obtained permit extensions necessary to complete construction, the last of which expired in October 1999. However, due to prolonged rule-making involving extensions, OWRD did not require the city to obtain an additional extension until after the new rules became effective in late 2005.

In December 2007, after having substantially completed construction, the city submitted its application for extension of time. In May 2008, the city modified its diversion structure to allow diversion of the full 6.2 cfs authorized under its permit. In early 2008, OWRD granted the city’s request to place its extension application on administrative hold and approximately six months later the city diverted 6.2 cfs of water into its water works to apply its full amount of water to beneficial use. On Aug. 4, 2008, the city requested the administrative hold be lifted, and 15 days later OWRD issued a proposed final order granting an extension of time to Oct. 1, 2013 for completion of the water works and to apply the water to beneficial use consistent with the permit.

WaterWatch challenged the proposed order and, following a hearing in late 2009, an administrative law judge affirmed the extension. The ALJ concluded that because the full 6.2 cfs of water was applied to beneficial use, no portion of the permit remained to be perfected and therefore no basis existed under ORS 537.230(2)(b) and (c) requiring the preparation of a Water Management and Conservation Plan or conditioning the extension to maintain the persistence of fish species. In September 2010, OWRD issued a final order adopting the ALJ’s decision. Approximately one month later, OWRD issued a water right certificate confirming the city’s perfection of its water right to the full extent authorized under its permit.

Although it did not challenge the issuance of the certificate, in November 2010 WaterWatch petitioned the Court of Appeals for judicial review of OWRD’s final order.

On appeal, petitioners argued that, under ORS 537.230(2)(b) and (c), any portion of water not applied to beneficial use prior to expiration of the city’s permit or any extension thereof, may not be later perfected until a permit holder receives an extension that includes conditions requiring: (a) Department approval of a Water Management and Conservation Plan; and (b) because the original permit was issued before Nov. 2, 1998, a condition to maintain the persistence of fish species. OWRD and the city alleged that water may be applied to beneficial use following the expiration of a permit so long as an extension amending that deadline is approved prior to the permittee’s submittal of final proof confirming the perfection of its water right.

The Court of Appeals agreed with the petitioner’s interpretation of ORS 537.230(2)(b) and (c), stating that OWRD’s interpretation would allow “municipalities to circumvent the requirements for fish protection and approval of a water management and conservation plan simply by completing construction and applying the full amount of water allowed under the permit to the use before applying for an extension of the permit.” The court reversed the final order granting the permit extension and sent the case back to OWRD ordering it to cancel the water right certificate and reconsider the city’s extension application consistent with the court’s interpretation of ORS 537.230(2)(b) and (c).

Absent a substantive reversal of the Court of Appeals’ decision or a legislative fix, any extension granted to the city will include conditions for the persistence of listed fish species. As the city considers the potential of having to assume such a burden, other similarly situated municipalities would be wise to consider the potential impacts of this case and their ability to appropriate water in time, place and manner to the full extent provided under their existing water permits.

Peter Mohr is an attorney at Jordan Ramis PC and a member of its Dirt Law practice group. He regularly advises clients on natural resources, environmental, energy, and water law. Contact him at 503-598-5529 or peter.mohr@jordanramis.com.

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Battling NIMBY (Not in My Back Yard) and the agents of CAVE (Citizens Against Virtually Everything) can appear a daunting task more suited to comic book heroes than developers. But taking on these forces ahead of a project can reap rewards for those who know how to present their development well.

How does one work with NIMBY or an agent of CAVE? It depends on the proposed project. If you propose to build a new airport, prison or nuclear power plant, there’s probably not much you can do, except brace for the onslaught and gather the favorable evidence for your project. But if your project is a bit more routine, approaching opposing parties early on in the process will often reap rewards for all involved.

Let’s say, for example, that a new neighborhood is your goal and that it is near already-existing neighborhoods. Then approaching the potential neighbors may prove to be beneficial. In exchange for working with the neighbors to mitigate certain impacts or present a buffer that exceeds the bare minimum required by code, the developer may be pleasantly surprised to find less resistance than anticipated. Working with the neighbors may ultimately save a developer legal fees and time in navigating the approval process.

Take a look at what your proposed development might have to offer to those impacted by the development. Can your project offer additions to the existing neighborhoods that residents will see as positive benefits? Do you plan to add parks or common areas that the existing neighbors can use? Will there be improved access to thoroughfares or services?

If the project is commercial in nature, then you might want to focus on mitigation measures that reduce noise, light and litter. Other factors to consider are the traffic impacts, circulation and power and sewer improvements that may be beneficial to the area.

No matter how proactive a developer may be, almost all projects will have relentless NIMBYs and CAVEs who will not quit, regardless of whether their basis for the resistance is rational. Significantly reducing the number of detractors is the goal.

In one such effort to work with NIMBYs and CAVEs, a developer approached the surrounding business neighbors before a development application was submitted to the government. A first meeting brought substantial interest and input from those concerned over any additional development. Once the developer explained that it was trying to be a good neighbor, had a right to develop the property, and wanted to make a good project for all parties, most of the neighbors in attendance engaged in helpful discussion.

The developer was able to point out some things that might work and the reasons that other things would not work. By the time the development came up for a hearing only three neighbors spoke against the project, while other neighbors testified that the developer had worked with them to develop a good project.

Approaching NIMBYs and CAVEs early enough in a project for them to feel that they have had an opportunity for significant input may be the best avenue. Opposing parties may not ultimately agree with the project, but if their useful input is incorporated into the development, the developer may very well find an easier path to success when it comes time for the hearing, with far fewer NIMBY and CAVE agents protesting.

Scott A. Anders is an attorney and shareholder in Jordan Ramis PC.  He focuses his practice on real estate, land use, and business matters. Contact him at 360-567-3904 or scott.anders@jordanramis.com.

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The economy’s emerging recovery is causing many businesses to increase the pace of their transactions. In the race to show good faith and serious intent to proceed with deals (including, but not limited to, the sale or lease of real estate or business assets), parties are moving quickly through the process of memorializing the terms of their proposed business arrangements – the negotiation of a “letter of intent,” “memorandum of understanding,” or similar agreement.

A letter of intent generally takes less time to negotiate than does a final purchase agreement and related transaction documents. It also enables the parties to memorialize their agreement on the critical business terms prior to spending material amounts of money and time on due diligence. However, with business picking up and parties rushing to move before their competitors act, the market rises, interest rates climb, or some combination of all three, counsel often is not sought at this early stage. Instead, there is a race to finalize the letter of intent, sometimes with dire consequences.

Generally, the parties to a letter of intent prefer that these preliminary “agreements” be nonbinding. But they often include limited provisions, like those related to confidentiality and exclusive negotiation/non-solicitation, intended to be binding. Parties should take special care to clearly define what is intended to be binding and what is not by creating separate sections within the letter of intent for each type of provision.

In light of recent cases in this area, extra care must be used to ensure that the other provisions of the letter of intent are not deemed to be binding, in whole or in part, on the parties. For example, careful attention must be paid to make sure that what was intended as a period of exclusive negotiation (or some other provision) does not become an additional, binding obligation broader than what the parties intended.

The key factor that courts use to determine whether a letter of intent (or a specific provision thereof) is binding has been the intent of the parties. However, the course of conduct after the execution of the letter can provide further evidence of the parties’ intent. Juries have determined that public actions of one party have the power to revise the interpretation of the terms of otherwise very clearly drafted language in a “nonbinding” letter of intent.

Once a clearly “nonbinding” letter of intent has been executed, parties need to be concerned about potential legal liability and obligations that exist prior to execution of the formal binding purchase agreement. Regardless of “intent,” the parties to a contract are bound by an unwritten or implied covenant of good faith and fair dealing. This is also true during the period of time between the execution of a letter of intent and a formal contract, when the parties are bound by a lesser standard – the duty to negotiate in good faith.

While seeking to memorialize key business points in a letter of intent, it is essential for the parties to ensure that the only binding provisions in a letter of intent are those that were intended to be binding. During the period of time leading up to execution of a formal contract, the parties should continue to act in a manner consistent with the legal obligations and implied covenants that come with operating under such an agreement. Without due care, parties could find themselves bound by provisions they thought were nonbinding.

Robert Koury is an attorney with Jordan Ramis PC, and the leader of its Dirt Law practice group. He concentrates his practice on real estate law. Contact him at 503-598-5591 or robert.koury@jordanramis.com.

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Large retail developments demand signalized access because it provides full turning movements into and out of the site. Land use approvals often require construction of signalized intersections for such developments. This occurred in Sherwood about 20 years ago, with the Sherwood Market Center and the Sherwood Cinema Center – on opposite sides of Tualatin Sherwood Road where it intersects with Oregon Route 99W. Neither property has access to 99W, so both rely on the signalized intersection – which they built and paid for.

Recently, Washington County decided to remove the signal, in an effort to improve traffic flow, and the owners of the two properties appealed. The Land Use Board of Appeals ruled that the county decision contained several flaws and issued a mulligan.

The county asserted exclusive authority to make improvements within existing right-of-way and that the decision is not subject to LUBA’s review. However, the exemption of transportation projects from LUBA jurisdiction applies only to projects that are “consistent with the comprehensive plan and land use regulations.”

LUBA reviewed the project against both county and Sherwood city land use regulations, especially their respective Transportation System Plans (TSPs), which are part of the comprehensive plans. The provisions of the city and county TSPs conflicted, and the project design was inconsistent with both. For example, the county TSP designated the road as five lanes; whereas, the project would increase it to six. The city TSP allows a maximum block length of 530 feet; however, the project would create a 1,200-foot block.

LUBA also discovered that governance of the road was not well documented, nor was there an intergovernmental agreement on the topic. LUBA questioned whether the county maintained exclusive planning and permitting authority over the road, absent city consent, based on the statute that governs the transition of county lands to cities. LUBA emphasized that the planning and permitting relationship for a county road within the city was not clearly explained by the decision or in the briefing.

The property owners argued that the project conflicts with the conditions of approval that required them to build the signalized intersection and the city code provision that compels compliance with the conditions. The county skirted that argument, and LUBA instructed the parties to provide more information and analysis on the issue.

Perhaps most importantly, the property owners asserted that the change would leave them without reasonable access. In 2011, the Legislature passed a new law prohibiting counties from using their authority over county roads to deny abutting properties access sufficient to serve the traffic from allowed uses. The county did not respond to this argument, and LUBA ruled that it must.

Given that the original land use decisions mandated construction of the signalized intersection to serve the retail uses, and that the properties have no access to the side street (99W), it will be difficult for the county to wiggle out of this one. But it is trying by appealing the decision to the Court of Appeals.

This case is a long way from over, yet there are several steps that local governments and property owners can take to reduce risks.

First, recognize that in Oregon that the right of abutting properties to reasonable access to county roads is now written into the law. If an access must be restricted or closed, counties are compelled to provide a reasonable alternate access or pay for the damages.

Second, the TSP matters. It is the primary governing document for local transportation facilities and contrary decisions that can be successfully challenged. The TSP includes access spacing standards for the minimum and maximum distances between driveways and intersections; however, those standards vary with street classifications, and in growing areas the classifications change over time.

Proactive engagement with the TSP is the best insurance against amendments that could limit access. Do the homework and ensure consistency among all levels of government that may have overlapping responsibility for managing a road. It is not always necessary to roll over when somebody says the access is changing.

Third, transportation agencies are constantly striving to increase traffic flows on busy commercial streets by restricting or closing access. Anything that provides convenient alternative access is worth exploring. Corner properties without access on one side, such as these two Sherwood properties that lack access to 99W, obviously are at greater risk.

Washington County has been working for years to improve east-west travel around Wilsonville, Sherwood and Tualatin. Efforts to create a new, high-volume right-of-way between I-5 and 99W have not come to fruition. In this instance, the county is attempting to redesign a portion of Tualatin Sherwood Road to handle more traffic, which inevitably conflicts with convenient access to abutting properties. Regardless of whether this one signal stays or goes, the tension between the mutually exclusive goals of improved traffic flow and good property access will surely increase as the remaining vacant properties in this corridor fill in.

Joseph Schaefer is a land use planner and a paralegal with Jordan Ramis PC. He assists the firm’s attorneys with various land use, real estate and environmental development matters. Contact him at 360-567-3919 or at joseph.schaefer@jordanramis.com.

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