Summer 2006

In This Issue

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Message from the General Counsel

Since the last issue of The Foreseeable Future hit the wire, we’ve had to say goodbye to an iconic lawyer in the UT family – Cril Payne – UTMB’s long-time General Counsel. Cril passed away unexpectedly on June 18, 2006. He will be missed by his co-workers and friends both for his dedication to UTMB and for his lively personality.

Cril had a rich life and rewarding career. Whether working as an undercover agent for the FBI in the 60’s or keeping lottery bidders in line at the Comptroller’s office, Cril always brought his unique perspective on the world to his work. One story from his Comptroller’s office years illustrates Cril’s creativity.

When Cril was at the Comptroller's office as General Counsel in 1992, he was in charge of overseeing all the procurement related to establishing the Texas Lottery. The Comptroller had decided to allow the vendors to propose financing and managing the entire lottery for the state. In return for the State not having to finance the start-up, the winner would get a percentage of the entire gross receipts.

There were only two vendors that were considered experienced enough to win the bid. However, one was financially weak. Yet there were rumors, together with some substance, that some Fort Worth high rollers were going to put together a private venture to win what could be a very lucrative contract.

Cril had heard that the stronger of the two known bidders was going to scout the parking lot to see if anyone other than its financially weak competitor bid. The stronger vendor planned to wait until the last minute to submit its proposal. If the weaker vendor turned out to be the only other bidder, it would submit a higher cost proposal.

Sure enough, on bid submission day a van with “operatives”--complete with sunglasses, binoculars and walkie-talkies--was parked in the corner watching the deliveries coming and going. At 3:00 p.m., the Comptroller received the proposal from the weaker of the two known bidders. At 4:00 p.m., a spiffy Mercedes Benz parked in the delivery zone, and a well-dressed fellow unloaded 4 large boxes marked “lottery proposals” onto a dolly and delivered them. Of course, the folks in the van went nuts. At 4:50 p.m., they delivered what turned out to be the winning proposal.

However, when the mystery proposal was unwrapped, it was four Dewar's scotch boxes filled with various magazines. Cril loved Dewar’s scotch and the magazines were addressed to Cril Payne. Cril’s ruse saved the state millions of dollars.

CRIL PAYNE 1943 - 2006

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New Attorneys at OGC

Please join me in welcoming these new attorneys to OGC:

  • Kyle ZumBerge, Business Law Section, Tax, Benefits & Gift Planning Practice Group
  • Steven Rosen, Business Law Section, Intellectual Property & Technology Transfer Practice Group

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Experiential Education Affiliation Agreements

by Barbara Holthaus (General Law)

Affiliations agreements permit UT System institutions to establish ongoing relationships with outside clinical and training sites that enable students to gain first hand experience in their future professions through “experiential education” programs. UT System institutions can ensure their affiliation agreements are legally compliant by using the OGC model Experiential Education Affiliation Agreement, OGC SC 1. OGC has made some recent changes in the model agreement that are necessary to address HIPAA and FERPA compliance. This article discusses these new clauses as well as advice on other issues that frequently arise in negotiating affiliation agreements.

HIPAA Compliance

Frequently, experiential education programs involve the provision of health care by supervised students to patients at a clinic or hospital (the host training site). This practice implicates the HIPAA Privacy and Security Rules (45 CFR § 164) that protect the security and confidentiality of patient health information held by “covered entities” including many of these clinics and hospitals. 45 CFR § 164.501(2) defines a covered entity’s health care operations to include “conducting training programs in which students, trainees or practitioners in areas of health care learn under supervision to practice or improve their skills as health care providers.” HIPAA “covered entities” are required to adopt privacy policies that ensure compliance with the HIPAA Privacy Rule. The Rule also requires covered entities to enter into a Business Associate Agreement (BAA) with any organization that performs services on its behalf. The BAA requires the organization to comply with the covered entity’s HIPAA privacy policies. Many hospital and clinics demand that the Experiential Education Experience Affiliation Agreements incorporate a HIPAA Business Associate Agreement under the mistaken belief that this requirement extends to university students providing supervised health care services through an educational experience program. This situation creates problems for UT System academic institutions that have no HIPAA policies because they are not covered entities, as well as for UT System institutions that are HIPAA covered entities but whose own HIPAA policies differ substantially from the policies adopted by the host training sites.

The revised model Experiential Education Affiliation Agreement contains a new clause that addresses this issue by clarifying, consistent with guidance provided by HHS, that students participating in an experiential education program are not providing services to the host training site on behalf of the sending institution. In instances where the educational experience provided by the host training site is not subject to HIPAA, the clause can be simply omitted from the Agreement. Rather, under the HIPAA Privacy Rule, the students are considered to be part of the host training site’s own work force. The clause tracks the HIPAA Privacy Rule, requiring the host site to train the participating student about its HIPAA policies, 45 CFR § 164.530(b)(1), and the participating students to comply with those policies while they are providing supervised services at the host site.

Equally important, the clause clarifies that UT System students should never bring a clinic or hospital’s HIPAA protected patient information that the student accesses as part of the experiential education program back to the UT System institution unless it has been de-identified in compliance with the Rule. This clarification is crucial to prevent the creation of a Business Associate relationship between the institution and the training site that would render the institution responsible for protecting the patient information in compliance with the training site’s HIPAA policies. Appropriately de-identified patient information is not subject to the HIPAA Privacy Rule and is sufficient to permit the UT System institution to evaluate the students’ work for instructional and grading purposes without exposing the institution to liability for compliance with the training site’s HIPAA privacy policies.

On rare occasions, a host site may totally refuse to negotiate an affiliation agreement with your institution unless it contains a Business Associate Agreement. An institution that simply signs an agreement may be opening itself up to a great deal of trouble down the road. In such cases, OGC attorneys can work with the institution to develop language that will satisfy the training site’s HIPAA compliance concerns without creating unnecessary liability on the part of the institution.

There is an excellent FAQ provided by the Association of American Medical Colleges that addresses this and other issues concerning the impact of HIPAA on institutional training programs.

FERPA Compliance

Host training sites must have access to information from UT System institutions about the students who are participating in their experiential education programs. The Family Educational Rights and Privacy Act (FERPA), 20 U.S.C. §1232g (FERPA) is a federal law that provides students with, among other things, the right to consent to disclosure of the student's education records by an institution of higher education to third parties. “Education records” are very broadly defined in FERPA regulations as all records, files, documents and other materials containing information directly related to a student; and maintained by the education agency or institution, or by a person acting for such agency or institution.” 34 CFR § 99.3. Obtaining and documenting the required individual consent for establishing FERPA compliance is an impractical and time consuming process.

FERPA does recognize certain exceptions to the consent requirements including “disclosures to school officials with a legitimate educational interest in an educational record.” 34 CFR § 99.31. To utilize this exception, the institution must specify criteria for determining who constitutes a “school official” and what constitutes a “legitimate educational interest.” 34 CFR § 99.7(a)(3)(iii). UT System’s model FERPA policy defines “a University official with a legitimate educational interest" to include a “person or company with whom the University has a contract or affiliation . . . such as [a] clinical facility.

The new FERPA clause in the revised model Agreement ensures that the UT System institution complies with FERPA by designating the host training site as a “school official with a legitimate educational interest in the educational records of the Students who participate in the [experiential education] Program to the extent that access to the records are required by the Facility to carry out the Program;” and requiring the training site to maintain the confidentiality of the educational records it accesses through the Agreement in accordance with FERPA. Because, as noted above, FERPA applies broadly to any student record, this clause should be included in every UT System institution Experiential Education Affiliation Agreement.

Other Significant Issues

Many training sites request that UT System institutions sign the training site’s own affiliation agreement. Handle such requests with extreme caution, as they may require the institution to make promises that can’t or shouldn’t keep. For example, clinics frequently require the sending institution to provide malpractice insurance on each participating student for specific amounts. The cost to the institution to obtain a policy providing coverage for one specific experiential education program may be cost prohibitive. In some cases, OGC may be able to work with the training site to provide adequate coverage under our existing Medical Liability Plan. Unless you are sure that your institution already has a policy in place that will cover these students, don’t promise to sign an agreement that your institution will obtain one. Instead, OGC can help you negotiate a clause that requires each participating student to obtain their own coverage.

Another clause that is beginning to appear frequently requires the sending institution to agree that it will conduct a background check that guarantees that students have been screened for specific attributes, including prior criminal background. A UT System institution should never commit to conducting background checks unless it already has a policy and process for conducting them. There is a model policy on student background checks on the OGC website. Even if your institution does routinely conduct its own background check on all of its students, the information covered by that check may differ from the information requested by the host training site. Rather than signing the training sites clause, the best strategy is to work with OGC to negotiate a clause to require each participating student to obtain their own background check at the student’s expense and to submit it directly to the training site. Make sure that participating students are aware of the information that the background check they are responsible for obtaining must include.

Indemnification clauses should always raise a red flag. The standard affiliation agreement contains an optional indemnification clause if an institution wishes to include one. Never agree to utilize a non-standard indemnification clause that has not been approved by OGC as you run the risk of waiving the immunity from suit provided to UT System by Texas state law and agreeing to provisions that violate the Texas Constitution.

The Bottom Line:  OGC has added an optional HIPAA and a mandatory FERPA compliance clause to its model Experiential Education Affiliation Agreement. The worst time to discover a problem with an affiliation agreement is after you have signed it. The best way to protect your department and the institution is to use the OGC model agreement. If that isn’t possible, ask OGC to advise you before you commit to a non-standard affiliation agreement.

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Talking Copyright

by Georgia Harper (Retired, Intellectual Property)

Until about 15 years ago, copyright law only concerned commercial entities in the publishing, entertainment and software industries. Even though academics participated in these industries as content creators, they routinely assigned away their copyrights to become published, so the effect of the law on everyday life at universities was slight. But beginning in the early 90's, the Internet dramatically expanded the reach of this backwater area of law. Now copyright affects what you, your colleagues, your parents, your children and your friends do every single day of your lives. As a result, most of us need to know a little bit about this body of law. In response to your concerns, OGC has provided guidance on such matters as the ownership of materials created on our campuses, the use of others' works in the classroom and in the library, and institutional liability for the infringements of faculty, staff, and students.

I have enjoyed riding the wave of interest in what turned out to be a fast-moving area of law. It's challenging and energizing. I have been privileged to practice in this area at a time when few other university attorneys were able to devote sufficient time to it to get to know it really well. This concentration enabled me to be of service not only to UT System campuses, but also through the National Association of College and University Attorneys, to serve as a resource to many university attorneys around the country. However, I am now retiring to begin a third career as an advisor on scholarly communication and digital access issues for The University of Texas at Austin's library, while I get my third UT degree, this one in Information Science.

I won't be "wrapping up" copyright for UT System -- there are many very interesting projects that will carry over into the months to come.

  • The campuses need additional support to commercialize copyrightable works. Many of our campus commercialization centers do not have experience with these markets, and the materials available for marketing do not routinely come to light the way scientific inventions do. Fortunately, UT System's capacity to facilitate this genre of commercialization is growing and might provide more tangible support than we could have provided in the past. In connection with this expanding activity, our relationship with the Texas Education Agency (TEA), the source of considerable funding for the creation of marketable copyrightable materials, will need continued attention. We began to work closely with TEA about 4 or 5 years ago but many people who worked on both sides to establish that partnership have moved on. New people are in place, and all must strive to maintain a good working relationship with TEA.
  • The development and marketing of copyrightable materials created pursuant to TEA funding has brought to light some significant differences in the legal environment in which we procure product development services generally, for example, software development, and the legal environment in which we attract licensees to further develop and commercialize our own products. These two disparate paths are converging to some degree, and the two very different "cultures" of procurement and licensing will have to be reconciled.
  • Our campuses need support to implement processes to deliver digital materials to students (supplemental course materials, for example), to facilitate the digitization of our unique archival collections, and to create institutional digital repositories for faculty and student-authored works as open-access publishing becomes more common, all in ways that comply with copyright law. There is no shortage of fantastic opportunities presented by the digital networked environment, but there is a shortage of knowledge about how to achieve our goals without violating the rights of copyright owners.
  • We must be vigilant in monitoring federal legislation that could purposely or even inadvertently require a waiver of sovereign immunity in copyright and patent contexts. For example, a recently drafted bill that would have enabled our libraries to make creative use of works whose copyright owners cannot be located or contacted included language that might have caused state universities to waive their Eleventh Amendment sovereign immunity if they took advantage of certain of the bill's provisions. It took a combination of attorneys knowledgeable about Eleventh Amendment sovereign immunity and attorneys knowledgeable about copyright law to negotiate language that preserved the copyright-related benefits of this bill without effecting a waiver of sovereign immunity.
  • Congress will continue to respond to the needs of the content industries (publishers, Hollywood, the music industry, software industry) as their business models evolve, or fail to evolve, as the case may be, by considering legislation drafted by these industries. OGC should monitor copyright legislation and contribute to the national understanding of its effects on academe.
  • OGC will continue to be asked for guidance on substantive copyright issues involving infringement allegations, the scope of fair use and other more technical exemptions, resolving ownership disputes, drafting and updating copyright policies and procedures, and providing workshops or lectures on substantive copyright issues for faculty, staff, students, and professional personnel at our libraries, archives and museums. Important new cases will create opportunities and problems and will need to be analyzed and explained to those affected. For example, the "Google" case about which I wrote a few months ago promises to shake up our understanding of fair use in the Internet environment, one way or the other.

The Bottom Line:  In September, I'll be on UT Austin's campus with a new focus, but I will look forward to helping out on copyright issues from time to time if the need arises. Happy trails...

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Criminal Background Checks: Reporting Convictions on Applications

by Esther Hajdar (General Law)

Reviewing criminal background checks on applicants for employment or admission into an educational program is a daunting and sometimes confusing task. When information provided in an application is not consistent with information provided in a criminal background report, applicants often explain away inconsistencies based on their understanding of what occurred in the criminal proceeding. These misunderstandings (or sometimes creative interpretations) are often based on what their attorney or court personnel told them or on the plain language of a court order.

This situation often arises when a person successfully completes probation or community supervision. Often times a judge will issue an order finding that the probation/community supervision was successfully completed, the finding of guilt is “set aside,” and the complaint or information is “dismissed.” (Under the law, the terms "probation" and "community supervision" are considered synonymous.)

A court's statutory authority to place a person on community supervision is found at Art. 42.12, Texas Code of Criminal Procedure. A court may order community supervision whether an individual is sentenced to a county jail or a state jail facility. There are different types of "community supervision":

  • Regular - A court enters a finding that the person is guilty of a criminal offense, enters a sentence but then suspends the imposition of the sentence and instead orders the person to probation/community supervision.
  • Deferred Adjudication - A person enters a plea of guilty or nolo contendre, the court hears evidence to determine if there is enough evidence to support the evidence, but then defers any further action on the matter pending the person's successful completion of probation/community supervision.
  • Shock - A court enters a finding that the person is guilty of a criminal offense, enters a sentence, the person serves a certain amount of time in jail and then the remainder of the sentence is suspended, and the person then does probation/community supervision.

Once a person successfully completes community supervision, state law provides that a person must be "discharged" from community supervision.  If the person is "discharged," any underlying finding of guilt by the court is undisturbed. Unless a statute defines it otherwise, a "conviction" is a judicial finding of guilt.  Under this definition, deferred adjudication is not considered a conviction; however, regular and shock community supervision are considered convictions. Therefore, an individual who is only “discharged” must report the regular or shock community supervision as a conviction.

However, the law also provides that in addition to discharging a person from regular or shock community service, a court may also set aside a verdict, permit withdrawal of a guilty plea and dismiss the complaint and information. If this "set aside/dismissal" occurs, the law further provides that the person is "released from all penalties and disabilities resulting from the offense or crime of which he has been convicted or to which he has pleaded guilty." In interpreting the effects of the "set aside/dismissal," courts have held that this is akin to a "judicial clemency," that the person is "unconvicted" and is no longer a convicted felon, and that certain civil rights are restored (i.e. the person can vote, serve on a jury, possess a firearm, but is not eligible to obtain a concealed handgun permit.) Based on this law, individuals often believe that they are not required to disclose the probation/community service.

However, in 2001 the Attorney General issued an opinion holding that the statutory language releasing a person from all penalties and disabilities does not relieve a person of reporting the original conviction in an employment application. See, Texas Attorney General Opinion JC-0396, (July 10, 2001), page 5. The only appropriate time that a person may report that they have not been convicted is if they have obtained an order sealing or expunging criminal records dated before the submission of the application.

Given the complexity of the legal consequence of a "set aside/ dismissal" from regular community supervision, it is certainly understandable that there would be some confusion as to whether the conviction still exists or not. However, the Attorney General opinion provides a sound legal basis upon which institutions can insist that "dismissals" from regular community supervision/probation must be reported as a conviction on job applications.

The Bottom Line:   Aside from deferred adjudications, applicants for admission or employment must disclose any successful completion of probation or community supervision as a conviction unless the applicant has an order expunging or sealing the criminal records that predates the application.

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Eminent Domain

by Mark Bentley (Business Law)

As a state agency, UT System has the power of eminent domain. This power allows a state entity to take property by condemnation when the property is necessary to the function of the agency and the owner of the property is unwilling to sell. The power is inherent in governments, and specifically addressed in the U.S. and our state Constitution.

The United States Constitution doesn’t specifically authorize condemnation, but it presumes that power. The power was not even mentioned in the original Constitution, but appears in the Fifth Amendment. What it requires is that “just compensation” be paid for private property taken for public use.

The State of Texas takes a similar approach, addressing the issue in the Bill of Rights. Article 1, Section 19, states: “No citizen of this State shall be deprived of life, liberty, property, privileges or immunities, or in any manner disfranchised, except by the due course of the law of the land.”

Last year brought a frenzy of public concern over the exercise of eminent domain by state governments and political subdivisions. Bills were introduced by state legislators nationally in reaction to the U.S. Supreme Court decision in Kelo v. City of New London, Connecticut, et al., 545 U.S. 469, 125 S.Ct. 2655 (U.S. Conn.), decided June 23, 2005. That case held that a city’s exercise of eminent domain power in furtherance of an economic development plan satisfied the constitutional “public use” requirement.

The Texas Legislature, in response to the possibility that The University of Texas at Austin might exercise eminent domain power to acquire a tract of land adjacent to the Executive Education and Conference Center on the UT Austin campus, included a provision in Senate Bill 7 (2d Special Session, 2005) so that a governing board of an institution of higher education may not use the power of eminent domain to acquire land to be used for a lodging facility or for parking or a parking structure intended to be used in connection with the use of a lodging facility. The term “lodging facility” does not include a dormitory or other student housing facility.

The reaction to the case revealed how little understood the concept of eminent domain is, particularly by the general public. Many people were shocked by the idea that the government could take someone’s property when that person did not want to sell it. Yet this concept is ancient and has been a part of the traditional powers of government since before the beginning of the American government. The very name of the concept reflects that the prime ownership of land is in the sovereign (originally the King) and that what we perceive as unrestricted ownership is subordinate to the sovereign’s right. In the United States, the sovereignty is vested in the people, as manifested by their representatives in the Congress and the legislatures.

The reason for the power in today’s world is to prevent an individual from extorting an unreasonable amount of money from a governmental agency that needs to acquire the land for a new project. For example, if it would be prohibitively expensive to re-route a highway around a piece of property, the owner of the property might ask an unreasonably large price for the property, knowing that the highway could only be built if his terms were met. Many of the institutions in UT System are land-locked, and the only way that these institutions can expand is by buying surrounding property.

UT System always attempts to negotiate for the purchase of land. Any time that the owners will agree on a purchase price that is acceptable to UT System, the property is acquired on that basis. Constitutionally, UT System cannot pay more than the fair market value for property that it acquires. Fair market value is defined legally as the price a willing seller would ask and a willing purchaser would pay, neither being under a compulsion to make the deal. When a seller is unwilling to sell, the asking price may not be reflective of fair market value. In such cases, appraisers look to comparable properties to determine the fair market value.

When a state agency like UT System is unable to make a deal for a piece of property that it deems necessary to fulfill its mission, it can resort to eminent domain to acquire the property and essentially force the owner to sell to the agency at fair market value. By filing a condemnation action and paying into court the appraised value of the property, the agency can take title to the property. The owners (now sellers) can contest the value in the court action, and if the value is contested, the court will conduct a trial to determine the value to be paid for the property. This assures that the state can take the property it needs for public uses and the owners of that property will receive just compensation for their property, as required by the Constitution.

As stated above, the Board of Regents of UT System has the power, conveyed by §65.33, Texas Education Code, to acquire property by eminent domain as necessary for the carrying out of its purposes. The many purposes of The University set out in the Constitution and in the Texas Education Code do not include economic development, and The University does not exercise its powers of eminent domain for economic development. In fact, UT System has rarely needed to exercise eminent domain for any purpose.

Nevertheless, the use of eminent domain is viewed by many in the general public as a heavy-handed exercise of government power, making this an unpopular exercise. The Board of Regents’ policy concerning eminent domain recognizes that perception and the Board will authorize use of eminent domain only as a last resort when acquisition of the property is essential to the educational mission of an institution and all efforts at a negotiated purchase for fair market value have been unsuccessful.

The Bottom Line:   Eminent domain remains an important tool for the acquisition of property needed to fulfill the mission of UT System and UT System institutions, but it will be used sparingly and only as a last resort.

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Use of Outside Collection Agencies

by Traci Cotton (Claims & Bankruptcy)

Business Procedures Memoranda 30-12-01 and 36-10-86 both speak to the use of collection agencies as a part of the accounts receivable management process at UT System health institutions. The Interim Report to the 79th Legislature, drafted by the Senate Government Organization Committee, as well as state audits in this area, have both recommended the increased use of such agencies statewide. Good business practice also requires UT System institutions to consider how outside agencies can be appropriately used to maximize the recovery of debts owed to the institutions.

Prior to beginning the selection process, the institution should contact the OGC Claims & Bankruptcy Section to obtain the most recent standard contract for use with the agency. Because the information transmitted to an agency can be confidential and/or sensitive, there are various provisions regarding the agency’s obligation to safeguard this information, which must be included in the contract. As services offered and fees charged by each agency can vary, depending on the type of debt and other factors, it is wise to use a competitive bid process when determining which agency to use.

Once an agency has been chosen, the institution and the agency should sign four originals of the contract, sending all originals to the OGC Claims & Bankruptcy Section. OGC will approve and obtain the Attorney General’s approval as well, as required under §59.2(c)(3), Texas Administrative Code.

Institutional departments charged with the task of managing receivables of any sort should document their collection process, indicating how in-house resources, third party collection agencies, and OGC are used.

Failure to follow these procedures in procurement of outside collection services may result in a void contract.

The Bottom Line:   As stewards of state resources, UT System institutions must be diligent in protecting and preserving those resources. The use of outside collection agencies is one tool that should be considered when fulfilling this responsibility.

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Resources from this e-Newsletter

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Office of General Counsel
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