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Sixth Circuit Stands Alone (For Now?) on Third-Party Harassment Liability

The Legal Intelligencer

When can an employee hold its employer liable for harassment by a third-party? For instance, can a concierge hold a hotel liable for the inappropriate conduct of a paying guest? The consensus in many circuit courts, heavily influenced by the Equal Employment Opportunity Commission’s (EEOCs) guidance and procedural regulations, is that negligence is enough to answer that question in the affirmative. If an employer knew or should have known of the third-party harassment and failed to take immediate action, the employer can be held liable. However, the Sixth Circuit recently strayed from the path of the negligence theory of liability, and in Bivens v. Zep, Inc., 147 F. 4^th 635 (Aug 8, 2025), held that Title VII “imposes liability for non-employee harassment only where the employer intends for the harassment to occur.”

To establish a sex-based hostile work environment claim under Title VII, a plaintiff must establish that (1) she is a member of a protected class (2) who faced unwelcome harassment, which (3) was based on her sex and (4) created a work environment that reasonably interfered with her work performance, for which (5) her employer is responsible. Employers can be held directly liable for the actions of their agents, whether those of a supervisor who can bind the company or those of a lower-level employee whose intentional acts are within the scope of employment can result in vicarious liability for the employer. Because sexual harassment does not serve any business purpose, most circuit courts have interpreted Title VII to require a showing that the harasser was either “aided in accomplishing the tort by the existence of the agency relationship” or that the employer was negligent in letting the employee commit the tort. When a third-party harasses an employee, most courts invoke the same negligence theory to hold the employer liable. That is, until the Sixth Circuit tackled the issue in August.

Facts of Bivens

In Bivens, the plaintiff worked as a territory sale representative for a manufacturer and distributor of cleaning products. As part of her job, Bivens made sales calls to retail and commercial clients to sell products and maintain client relationships. Not long after she was hired, Bivens called on a motel client. During their meeting, the motel’s manager asked to speak to Bivens in his office. While Bivens was in the motel manager’s office, the manager locked the office door behind her and twice asked Bivens out on a date. Bivens declined the awkward invitation and explained that she was married. She then asked the manager to unlock the office door and ended the meeting.

Bivens reported the incident to her supervisor, who reassigned the motel client to a different sales team, so that Bivens would not have to interact with the client again. Around this same time, in response to fluctuating business due to the COVID-19 pandemic, Bivens’ position with the company was eliminated as part of a reduction in force.

Bivens filed suit, alleging hostile work environment harassment, retaliation, and discrimination by claiming that she had been subjected to a hostile work environment and that she had been fired either because she complained about the client’s improper advances or because of her race. The District Court granted Zep’s motion for summary judgment on each of Bivens’ claims, prompting Bivens to appeal.

Sixth Circuit Says Liability for Third-Party Harassment Requires Employer Intent

In addressing the issue as to whether her employer could be liable for the motel manager’s actions, the Sixth Circuit examined the history and purpose of Title VII and the interpretations of Title VII by both its sister circuits and the EEOC. The Court noted that when Congress passed Title VII, it created a federal species of intentional tort, distinguishing Title VII from torts based on mere negligent action. “Consistent with that congressional design, the key ‘factual question’ in a Title VII disparate treatment claim is whether ‘the defendant intentionally discriminated against the plaintiff’.” The Court noted that Title VII’s definition of the term employer includes agents of the company. Because agency law presumes the company controls its agent, an agent’s wrongful intent may be imputed to an employer on whose behalf the agent acts. Thus, a company can be held liable for discriminatory conduct of its employee acting in the scope of their employment.

However, if the harasser is not an employee, there is no agency, no furthering of the employer’s business interests, and no imputed intent up the chain of command. As a result, the Court held that Zep was not liable for the motel manager’s actions because Zep did not intend for Bivens to be harassed. It reasoned that, to hold an employer liable for the acts of third parties, the employer must desire an unlawful consequence from its actions or is “’substantially certain’ that it will result.” It must be the “intentional decision of the employer to expose women to [discriminatory] working conditions.”

In its opinion, the Court also held that, while the EEOC is authorized to issue procedural regulations for pursuing Title VII, its substantive interpretive guidelines have no controlling effect. Thus, the EEOC’s negligence standard – i.e., that an employer knew or should have known of the third-party harassment – is not enough to impose liability because the EEOC’s interpretive guidelines have no controlling effect on the Sixth Circuit’s analysis of Title VII. Though many sister circuits similarly use the negligence standard to impose liability on the employer for non-employee harassment, the Sixth Circuit admitted that it does not “lose any sleep standing nearly alone” in its interpretation of Title VII, which is true to Congress’ design. In doing so, the Court acknowledged that other circuits applying the negligence standard would likely reach the same decision it reached in Bivens.

The Sixth Circuit may not go it alone for long in its adoption of the desired intent standard. In late October, the U.S. District Court for the Eastern District of Pennsylvania found the Bivens decision to be persuasive and commended its “careful review of agency law” in O’Neill v. Trustees of the University of Pennsylvania, 2025 WL 3047884 (Oct 31, 2025).

Facts of O’Neill

In O’Neill, the University of Pennsylvania (University) awarded Sophia O’Neill a master’s degree in Robotics and Autonomous Systems in 2022. Shortly thereafter, O’Neill began working for the University in two roles – as a full-time Lab Manager in the School of Design, and as a Teaching Assistant in the Robotics and Autonomous Systems program. In these roles, O’Neill was required to work in person in the lab and to help students with their assignments.

In the fall of 2022, eight students in the program made complaints about the aggressive conduct of a six foot four-inch, male student (“Student HR”) in the lab. On one occasion during the second semester, O’Neill experienced Student HR’s behavior when he blocked her from her desk in the lab and hovered over her desk, demanding answers to an assignment. On another occasion, Student HR waited outside the lab for O’Neill to arrive at work and then, later that day, he blocked her path when she was exiting a room, refusing to move until she asked him to do so.

Upon returning to her desk and opening her emails, O’Neill discovered that Student HR had sent her several messages, including a middle of the night call on the messaging platform Discord. The messages stated that Student HR was in the middle of a “depressive psychotic episode,” asked O’Neill to come stay with him, and told her “Love you so much babe” with heart and kissing face emojis. O’Neill immediately reported Student HR’s behavior to the University.

In response, the University developed a safety plan for O’Neill after speaking with her and with Student HR. As a result of this plan, Student HR would only be permitted to attend the lab when the male lab manager worked, and he was prohibited from contacting O’Neill outside of an academic setting. Student HR agreed to the plan, acknowledging that he would face disciplinary proceedings if he violated it. O’Neill, however, sought a guarantee that she would never interact with Student HR, including prohibiting Student HR from accessing the Robotics lab even when she was not present.

O’Neill did not return to work, though the University continued to pay her and provide her with benefits. The University gave O’Neill a deadline to either return to work or formally request a leave of absence. O’Neill confirmed that she would not return to work and filed a complaint against the University with the Philadelphia Commission on Human Relations for forcing her to interact with her accused harasser. O’Neill then sued the University in the Eastern District of Pennsylvania for “creating and fostering a sex-based hostile work environment, for constructive discharge, and for retaliation under both Title VII and the Philadelphia Fair Practices Act.

The District Court determined that O’Neill had not adduced evidence to show that the University or its employees knew Student HR had physically intimidated or confessed unreciprocated romantic feelings for her until she reported his behavior. In its opinion, the Court called the negligence standard and the Bivens standard “almost-identical” and indicated that both approaches would have reached the same conclusion. The Court predicted that the Third Circuit will align with the Sixth Circuit’s approach in Bivens.

Employers should be aware of the O’Neill case to determine which standard the Third Circuit applies in the event of an appeal. Will the Third Circuit adopt Bivens’ desired intent standard for imposing liability in the context of harassment by non-employees and prove the District Court in O’Neill prophetic? Stay tuned.

Janet Meub is senior counsel in the Litigation and Employment and Labor groups of Babst Calland. She routinely counsels corporate clients on employment matters including discrimination, accommodations, wage and hour, discipline and termination, severance agreements, non-compete/non-solicitation agreements, unemployment compensation, and employee handbook and corporate policy updates. Janet also conducts workplace investigations and performs corporate trainings on employment “hot topics.” She may be contacted at jmeub@babstcalland.com or 412-394-6506.

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Surprise Act: Pending Appeal Involving Last-Minute Amendment Could Presage the Revival of Trial by Ambush in Pa.

The Legal Intelligencer

(by Casey Alan Coyle and Ryan McCann)

Pleadings are the opening act of litigation—setting the stage, defining the cast, and signaling the story to come. But Bernavage v. Green Ridge Healthcare Group, LLC, et al., No. 1576 MDA 2023 (Pa. Super. Ct.), which is pending on appeal before the en banc Superior Court, presents a plot twist: what happens when a plaintiff introduces an entirely new theory just as the curtain is about to fall and the house lights begin to rise? Specifically, the appeal poses the question of whether a plaintiff is permitted to amend her complaint in the middle of trial to add allegations of the defendants’ recklessness and request an award of punitive damages.

Standard to Amend Pleadings

Rule 1033 of the Pennsylvania Rules of Civil Procedure governs amended complaints. It states, in relevant part, that a party may amend a pleading—whether to “change the form of action, add a person as a party, correct the name of a party, or otherwise amend the pleading”— “at any time” “either by filed consent of the adverse party or by leave of court.” Pa.R.Civ.P. 1033(a). On its face, Rule 1033 does not impose a time limit on when a pleading such as a complaint must be amended. Indeed, the Superior Court has held that a complaint may be amended “at the discretion of the trial court after pleadings are closed, while a motion for judgment on the pleadings is pending, at trial, after judgment, or after an award has been made and an appeal take therefrom.” Biglan v. Biglan, 479 A.2d 1021, 1025–1026 (Pa. Super. Ct. 1984); see, e.g., Wilson v. Howard Johnson Rest., 219 A.2d 676, 679 (Pa. 1966) (amendments to pleadings “should be liberally granted at any stage of the proceedings” (citation and quotation marks omitted)).

That is not to say that the timeliness of a request to amend a pleading is wholly irrelevant. While the denial of a request to amend a pleading is an abuse of discretion when based on nothing more than unreasonable delay, see, e.g., Gutierrez v. Pa. Gas & Water Co., 507 A.2d 1230, 1233 (Pa. Super. Ct. 1986), the timeliness of the request is a proper consideration “insofar as it presents a question of prejudice to the opposing party.” Capobianchi v. BIC Corp., 666 A.2d 344, 347 (Pa. Super. Ct. 1995). The Pennsylvania Supreme Court has addressed prejudice in this context, writing:

If the amendment contains allegations which would have been allowed inclusion in the original pleading (the usual case), then the question of prejudice is presented by the Time at which it is offered rather than by the substance of what is offered. The possible prejudice, in other words, must stem from the fact that the new allegations are offered late rather than in the original pleading, and not from the fact that the opponent may lose his case on the merits if the pleading is allowed[.]

Bata v. Central-Penn Nat’l Bank of Phila., 293 A.2d 343, 357 (Pa. 1972) (citation and quotation marks omitted).

Applying that standard, Pennsylvania courts traditionally have looked unfavorably upon the late introduction of new theories of recovery. See, e.g., W. Penn Power Co. v. Bethlehem Steel Corp., 384 A.2d 144 (Pa. Super. Ct. 1975); Newcomer v. Civil Serv. Comm’n of Fairchance Borough, 515 A.2d 108 (Pa. Commw. Ct. 1986); Smith v. Athens Twp. Auth., 685 A.2d 651 (Pa. Commw. Ct. 1996).

The Bernavage Decision

The Bernavage case arose from a fall sustained by an elderly woman while being transferred at a long-term care facility. The woman subsequently passed away from unrelated causes. Thereafter, her daughter filed a professional negligence claim against two healthcare providers on her mother’s behalf. Notably, the complaint did not include any allegations of recklessness or willful or wanton misconduct. The matter was eventually tried to verdict before two different juries. During the first trial, the daughter elicited testimony from two of the defendants’ employees that the defendants’ conduct was reckless. The daughter then moved for a directed verdict on the issues of negligence and recklessness based on the employees’ admissions. The daughter also made a request to file an amended complaint to conform with the evidence elicited at trial, specifically, to characterize the defendants’ mental state as reckless and to make a claim for punitive damages. The trial court denied the daughter’s request for a directed verdict but granted her request for leave to file an amended complaint. In doing so, the trial court severed the issues related to the factfinder’s consideration of whether punitive damages should be awarded.

The first jury was asked to consider whether the defendants’ conduct fell below the standard of care, and if so, whether their negligence was a factual cause of the mother’s harm. The jury answered both questions in the affirmative and awarded the daughter $300,000 in compensatory damages. The jury was also asked two verdict interrogatories as to whether the defendants acted with the requisite state of mind that would allow for the recovery of punitive damages. The jury answered those questions in the affirmative as well. Based on that verdict, the pleadings were reopened, and the parties proceeded to conduct punitive damages discovery. At the ensuing second trial, the trial court required the parties to proceed using transcripts of the trial testimony for all witnesses called in the first trial; the only new evidence introduced was the wealth of the defendants and their ability to pay a punitive damages award. The second jury ultimately awarded the daughter $2.7 million in punitive damages—nine times the compensatory damages award. The defendants moved for judgment notwithstanding the verdict on punitive damages and the jury’s finding of negligence. The defendants also moved for a new trial. The trial court denied both requests.

On appeal, a Superior Court panel affirmed the award of compensatory damages but vacated the award of punitive damages. With regard to the punitive damages award, the panel determined that this was not a case where a plaintiff simply sought an amendment to conform the complaint to the evidence adduced at trial. “Rather,” the panel continued, “it was an introduction of a new theory of recovery,” because the specific theory of recovery to support the daughter’s punitive damages claim was “substantively different from the theory she developed during discovery and alleged in her complaint.” Bernavage, slip op. at 20. The panel held that this amounted to unfair surprise because, among other reasons, the daughter “never introduced the concept of recklessness into the case” “[i]n the three years prior”; the daughter’s counsel “introduced the concept of recklessness at the latest possible time—during day one of presentation of liability evidence”; “[t]he witnesses used the word reckless at counsel’s prompting”; and the daughter’s counsel “asked questions at trial that he could have, but did not, ask two years prior at the witnesses’ depositions.” Id. at 19, 21. In the process, the panel established the rule that “unfair surprise exists . . . where a negligence plaintiff, without explanation, withholds the precise theory of recovery until the latest possible time.” Id. at 21. The panel concluded its opinion by writing: “And while we ascribe no motive to [the daughter], to reach a different conclusion than the one we reach would be to invite negligence plaintiffs to withhold their theory of recovery, be it negligence, gross negligence, or recklessness, until the last possible minute for the specific purpose of creating unfair surprise.” Id.

The daughter moved for reargument en banc, which the Superior Court granted—resulting in the panel’s opinion being vacated. Briefing is underway, and it is anticipated that oral argument will take place before the en banc Superior Court in the spring of 2026.

What’s Next?

Depending upon how the en banc Superior Court rules, the impact of Bernavage could be far-reaching. Affirming the trial court in its entirety would, in practice, reintroduce trial by ambush, which the Pennsylvania Rules of Civil Procedure “were intended to prevent.” Clark v. Hoerner, 525 A.2d 377, 384 (Pa. Super. Ct. 1987); see Gregury v. Greguras, 196 A.3d 619, 628 (Pa. Super. Ct. 2018) (en banc) (“One of the primary purposes of discovery is to prevent surprise and unfairness of a trial by ambush, in favor of a trial on the merits.”). Plaintiffs would be incentivized to withhold their theory of recovery (and withhold their intention to seek punitive damages or possibly other damages) until the last possible moment, as noted by the panel.

Such a regime undoubtedly would unleash a series of preemptive measures by defendants, including filing motions in limine as a matter of course to bar plaintiffs from introducing evidence or argument on undisclosed theories of recovery or damages at trial to guard against last-minute amendments—although query whether such measures would prove effective if a plaintiff is automatically allowed to amend her complaint, in the middle of trial, to seek damages based on a previously undisclosed theory. Regardless, affirming the trial court, in full, would appear to raise due process concerns for defendants, particularly when punitive damages are sought. Such damages already “pose an acute danger of arbitrary deprivation of property,” Honda Motor Co. v. Oberg, 512 U.S. 415, 432 (1994), and that danger seemingly would be exacerbated if punitive damages could be introduced for the first time at trial.

Accordingly, the en banc Superior Court must decide in Bernavage whether a last-minute amendment of this magnitude belongs in the final act—or whether it impermissibly rewrites the performance after the audience is already waiting for the final bow.

—————–

Casey Alan Coyle is a shareholder at Babst, Calland, Clements and Zomnir, P.C. He focuses his practice on appellate law and complex commercial litigation. Coyle is a former law clerk to Chief Justice Emeritus Thomas G. Saylor of the Pennsylvania Supreme Court. Contact him at 267-939-5832 or ccoyle@babstcalland.com.

Ryan McCann is a litigation associate at the firm. He focuses his practice on complex commercial litigation, environmental litigation, and construction disputes. Contact him at 412-773-8710 or rmcann@babstcalland.com.

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Practical and Legal Hurdles to Lithium: The Next Extraction Revolution?

GO-WV

(by Steve Silverman and Katerina Vassil)

There has been much talk within the oil and gas industry about the potential for lithium extraction from produced water, a waste byproduct produced during hydraulic fracturing and drilling. Is this only talk, or are we approaching another extraction revolution? The answer is that the revolution is knocking on the door, but there remain significant practical and legal hurdles to overcome. To become viable, lithium extraction must become both economically and environmentally sustainable. Thus far, these technologies have not proven to be economically scalable, nor could their environmental impacts be justified.

The legal hurdles involving lithium extraction can be summed up in one question: Who owns the lithium? Is it the surface owner, the mineral owner (where the two differ), or the operator? As seen below, the standard lawyer answer applies: it depends.

Incentives for overcoming these hurdles could not be higher. Whoever masters lithium extraction technology from produced water will be able to name their own price for licensing that technology. Just as importantly, the oil and gas industry will be a major contributor to solving the obstacles currently facing the U.S. in sourcing lithium. Current U.S. dependence on foreign suppliers of lithium, especially China, raises significant geo-political concerns that can be cured by sourcing lithium domestically. Current estimates are that 40% of the country’s lithium needs are contained within the Appalachian Basin alone.

Lithium in Context

A. Lithium as a Commodity

Produced water contains a variety of constituents – sediment, salts, hydrocarbons, minerals, and metals. Lithium is one of these constituents, and when extracted and processed, lithium has numerous uses and applications.

Lithium batteries are used to power the cell phone or computer that you’re reading this article on, the alarm system that keeps your home safe, and the electric vehicle that you drive. Lithium batteries power medical devices like pacemakers. If you’re a golfer, your golf cart is likely powered by lithium batteries. If you’re an avid photographer, that digital camera that you use to take photos is powered by lithium batteries. As technology develops and improves, lithium batteries will continue to become even more ubiquitous. In fact, lithium consumption is expected to more than quadruple in the next ten years alone.

B. Lithium: Then & Now

In the 1990’s, the United States was one of the largest producers of lithium. Today, less than 2% of the world’s lithium is produced here. In 2022, the U.S. government designated lithium as a critical mineral, recognizing lithium as essential to economic and national security. The U.S. government has directed that all lithium be produced domestically by 2030, an unrealistic goal. In reality, the U.S. cannot meet current domestic lithium needs and must rely heavily on top producing nations like China, Chile, and Australia.

China currently dominates the lithium market, with vast reserves of lithium and a monopoly over both lithium processing and production of lithium batteries. The U.S government is determined to prioritize critical mineral resource initiatives and has dedicated billions of dollars towards processing lithium and other critical minerals for battery production, with the ultimate goal of reducing dependence on China and other nations. Additional funding has been allocated towards direct lithium extraction initiatives and lithium-ion battery plants.

C. Lithium in the U.S.

Despite the U.S. sourcing the vast majority of its lithium needs from foreign nations, there are numerous lithium sources in our own backyard. Yet, the Albermarle Silver Peak Mine in Nevada is the only active lithium producing mine in the U.S. This site utilizes direct lithium extraction and produces most of the less than 2% of the world’s lithium that comes from the U.S.

In 2024, scientists discovered a massive lithium deposit in wastewater from Marcellus Shale wells in Pennsylvania, with potential for even more in West Virginia and Ohio. As noted above, these untapped Marcellus Shale sources could contain enough lithium to meet up to 40% of current domestic needs.

Another recent discovery in the Smackover Formation in Southwestern Arkansas contains potentially 19 million tons of lithium. There currently is a new pilot lithium extraction site in Northeast Pennsylvania operated by Canadian company Avonlea Lithium. According to Avonlea, a pilot test conducted at this site in June 2025 yielded extremely promising results, producing lithium phosphate solids from produced water with a purity of 94.2% and a lithium recovery rate of 69.3%.

Additional lithium extraction methods currently being developed and refined include Solar Evaporation Brine Extraction, Direct Lithium Extraction, Solar Transpiration-Powered Lithium Extraction and Storage, and Redox-Couple Electrodialysis. However, seemingly successful processes like the “Closed Loop” process used at Eureka Resources’ site in Williamsport, Pennsylvania have faced significant challenges. This method was initially successful, extracting 97% pure lithium carbonate from oil and natural gas brine with an up to 90% success rate. But the plant was subsequently closed in 2024 and cited for numerous permit and OSHA violations, workplace safety issues, and environmental violations. This illustrates how some promising lithium extraction methods face significant scalability, economic, and environmental issues that may impede their viability.

D. Lithium Ownership: Title and Lease Rights

The starting point as to who owns the produced water’s lithium requires determining whether there has been a severance of the mineral rights. In other words, has a prior owner of those mineral rights somewhere in a chain of title reserved or retained ownership of those minerals in the course of transferring ownership of their surface rights. As with any title examination, the specific language in the severance deed determines exactly what the surface owner retained: minerals, oil, gas or some combination of the three.

If there has been a severance of the mineral rights, then it is unlikely that the current surface owners own the lithium under their property. More importantly, the current surface owners likely have no legal authority to lease the lithium to an operator. Thus, the operator must lease that lithium from its true “severed” owner instead.

But even if an operator has a lease with the lithium owner, they still may not have the right to extract it unless the lease’s granting clause arguably includes lithium. Granting clauses can contain a variety of terminology to identify what rights the lessor is being given. These include “oil,” “gas,” “their constituents,” “hydrocarbons” and even the generic “minerals.”

Note, however, that a “mineral” can have different legal definitions in different states. For instance, in Texas “mineral” includes oil, gas, uranium and sulphur. In both West Virginia and California, the definition is even broader and includes sand and gravel. Oklahoma defines only hydrocarbons as a mineral. Ohio excludes coal but includes oil and gas within its definition of a mineral, while Pennsylvania excludes both of those from its definition.

While no court has yet to explicitly rule on whether lithium is a mineral, that is the most likely conclusion, particularly since lithium is a metal and certainly not a hydrocarbon. Thus, unless a lease’s granting clause explicitly identifies lithium, it should at least include “minerals” if the lessor is to claim rights to the lessee’s lithium.

E. Rights to the Produced Water

So, is an operator who doesn’t own lease rights to lithium out of luck? The answer is maybe not because that operator may still be able to argue ownership of the produced water within which the lithium resides.

As of this writing, only one case has specifically addressed who owns the produced water. In June of this year, in Cactus Water Services, LLC v. COG Operating, LLC, the Texas Supreme Court held that produced water is a waste byproduct of the oil and gas drilling process “product stream” and therefore owned by the operator.

The facts of the case are somewhat involved, but can be simplified as follows: The operator, COG, had an oil and gas lease with the severed mineral owner. Cactus Water, however, entered into a “produced water lease” with the surface owner for the same acreage to pay royalties for monetizing that produced water. In contrast, COG’s lease made no mention of the produced water, yet it still claimed ownership of that water. The Texas Supreme Court agreed with COG. Yet it also noted that COG’s lessor could have expressly reserved ownership of the produced water in its lease.

The case’s unique facts, combined with the Court’s strained rationale behind its decision, raise doubts as to whether Cactus Water’s decision will be adopted in less oil and gas friendly states.

Takeaways

The economic and political upsides to lithium extraction are simply far too great to ignore. Investors are showing an increasing willingness to dedicate the necessary resources to overcome economic scalability and environmental sustainability challenges.

The legal impediments surrounding lithium should be easier to overcome. Operators must perform their title analysis with an eye specifically geared to determining lithium ownership rights. New leases must contain language explicitly granting rights to lithium. Where operators lack defensible positions that their existing leases grant such rights, they should consider lease amendments explicitly doing so. Where lithium remains owned by surface owners not subject to oil and gas leases, operators should enter into separate leases with those surface owners to monetize their produced water. Finally, all of these agreements and leases should plainly state that royalties paid for extracting lithium, as well as other possibly valuable constituents from produced water, must be paid on a net basis so an operator can deduct its extraction expenses.

Thus, there can be no doubt that the lithium extraction revolution is coming. The ability to successfully extract lithium from produced water is not a question of “if,” but rather of “when.”

Steven B. Silverman is a shareholder in the Litigation and Energy and Natural Resources groups of law firm Babst, Calland, Clements, and Zomnir, P.C. His practice focuses on commercial litigation, with an emphasis on natural gas title and lease disputes and other energy-related cases. Steve is licensed to practice law in Pennsylvania and Ohio. Contact him at 412-253-8818 or ssilverman@babstcalland.com.

Katerina P. Vassil is an associate in the Litigation Group of law firm Babst, Calland, Clements, and Zomnir, P.C. She represents clients in a variety of litigation practice areas, including commercial, energy and natural resources, environmental, and employment and labor. Katerina is licensed to practice law in Pennsylvania and Ohio. Contact her at 412-394-6428 or kvassil@babstcalland.com.

Click here, to view the article online in the December issue of GO-WV News.

Practical and Legal Hurdles to Lithium: The Next Extraction Revolution?

PIOGA Press

(by Steve Silverman and Katerina Vassil)

Lithium in Context

A. Lithium as a Commodity

B. Lithium: Then & Now

C. Lithium in the U.S.

D. Lithium Ownership: Title and Lease Rights

E. Rights to the Produced Water

Takeaways

Thus, there can be no doubt that the lithium extraction revolution is coming. The ability to successfully extract lithium from produced water is not a question of “if,” but rather of “when.”

To view the full article, click here.

The 7 Most Common Mistakes Employers Make as to Non-Competes

TEQ Hub

(by Steve Silverman)

Employers often cling to misconceptions about non-compete agreements that can prevent them from effectively using these powerful tools or render such agreements unenforceable. Here are the seven most common reasons why this happens.

Failing To Understand What Non-Competes Are
In the common vernacular, a non-compete is an umbrella term for contractually prohibiting an employee (or independent contractor, buyer of a business, or even a vendor) from working for a competitor or otherwise restricting that employee’s subsequent employment. However, a non-compete is one of several tools available to impose restrictions on an employee leaving their employer called “restrictive covenants.” A non-compete, which is just one type of restrictive covenant, limits a former employee or independent contractor from working for a competitor for a particular time period in a specific geographic area. A non-solicit agreement is another type of restrictive covenant, which allows an ex-employee to work for any employer they want without any geographic restriction but prohibits them from seeking business from their former employer’s customers for a period of time. Another variation of a non-solicit prohibits that ex-employee from hiring away or encouraging their former colleagues to leave their employment with their former employer. These are sometimes known as anti-piracy provisions. The distinctions between these various types of restrictive covenants are important. For instance, courts are generally more willing to enforce non-solicitation provisions than non-competes. Employers have to decide which, if not all, of these restrictive covenants work best for their business.
Assuming That Non-Competes Are Unenforceable
A significant number of employers, as well as employees, incorrectly believe that restrictive covenants such as non-competes are categorically unenforceable. While this can be true for certain classes of employees (as discussed below), this misconception cannot be further from the truth. This mistaken belief is often fueled by employees who see their employer’s refusal or unwillingness to enforce them when their colleagues subject to these agreements depart without consequence. Additionally, restrictive covenants over the last two years received a lot of publicity with the Federal Trade Commission’s efforts during the last administration to effectively outlaw them, but that effort has been abandoned. As a result, unless a state has passed a law prohibiting or significantly restricting the use of non-compete agreements, courts in most states continue to enforce non-competes and other restrictive covenants every day – provided that they are properly drafted and effectively prosecuted.
Not Understanding the Need for A Well-Drafted Non-Compete Agreement
A restrictive covenant agreement must be drafted to meet the unique needs of each employer. Such an agreement must be the product of a collaborative effort with an experienced attorney who understands the employer’s business. There is no downloadable form from the internet that meets every employer’s requirements. For instance, if the employer has employees working in multiple states, multiple versions of the agreements may be needed to address each state’s unique restrictive covenant laws. As explained below, different agreements may be needed for new employees versus existing employees whom the employer seeks to restrict. An employer’s agreements must also be periodically updated to address developments in the law.
Not Supporting Restrictive Covenants With Adequate Consideration
An enforceable restrictive covenant agreement must be supported by “adequate consideration.” Consideration is an exchange of value between two parties necessary to make a contract binding. It is the “price” each party pays in exchange for the other party’s promise. What constitutes “adequate” consideration for non-competes can vary by state. For instance, nearly all states recognize that new employment is sufficient consideration to support such agreements. In other words, the employee’s “price” for getting a new job is agreeing to the restrictive covenants. However, states take different views as to whether continued employment is adequate consideration. For instance, Ohio deems that an already existing employee signing a non-compete has been given sufficient consideration because that employee gets to keep their job. But Pennsylvania says that for an existing employee to sign an enforceable non-compete, mere continuation of employment is not sufficient consideration. Instead, that Pennsylvania employee must be given some type of additional consideration – like a one-time bonus or additional benefits they would not otherwise be entitled to, or even a promotion. That is why Pennsylvania employers may have to use two versions of their non-compete agreements – one for new hires and another for existing employees. To navigate this issue, employers should always consult with counsel.
Not Understanding What Protectible Interests Are
For a restrictive covenant agreement to be enforceable, an employer must have legitimate protectible interests. Essentially, this means that the law recognizes that certain employer property, both tangible and intangible, can be protected by restrictive covenants to prevent those interests from ending up in the hands of a competitor. This includes the company’s proprietary information, trade secrets and customer goodwill. However, the law says that only those employees who have access to those trade secrets or who are responsible for cultivating and maintaining that goodwill (such as sales people) can be subject to such agreements. That is why these agreements are not typically enforceable against receptionists, secretaries, mail clerks, or janitors. So, employers must be selective as to whom they require such agreements from and be able to justify how their protectible interests will be harmed by those employees failing to honor those agreements. This also requires employers to justify why their non-compete agreements need to extend for a particular length of time and geographic region without being overbroad, which courts dislike. Again, these are issues that employers must hash out with their counsel who draft these agreements.
Failing to Incorporate Non-Competes into Employee On-Boarding and Off-Boarding
Employers must create a culture where their employees understand not only what their restrictive covenants are, but also that they must comply with them. Educating an employee about their post-employment obligations should start before that employee begins work. Employers should issue offer letters that clearly state that employment is contingent upon agreeing to the restrictive covenants. A copy of the non-compete agreement should be provided for the employee to sign prior to their first day of employment so that the employee cannot later argue that they did not know the type of post-employment restrictions they were agreeing to when they accepted their position. Simply put, no employee should start work before signing their agreement. Similarly, employees must be reminded of their post-employment obligations during their exit interviews upon giving notice and should be given a hard copy of the agreement at that time. Employers should also ask their departing employees point blank (a) who their new employer is; (b) what their duties will be; and (c) whether they have given their new employer a copy of the agreement. An employee refusing an exit interview or refusing to answer any of these questions should set off an alarm resulting in a consultation with counsel. If no exit interview is held, employers should still make clear in writing that they expect the employee to honor their agreement and also make sure to provide that employee with a copy, whether by mail, hand delivery, or email to a personal email address.
Failing to Enforce A Non-Compete Through Litigation
While filing suit to enforce a non-compete can be both expensive and time consuming, failing to do so can be even worse in the long run. Those employers who do not enforce restrictive covenant agreements lose credibility among their employees and any deterrent effect that strong, enforceable agreements typically create. An employer who avoids the missteps above and places themselves in the best possible position to enforce these agreements protects their most valuable business interests. Likewise, an employer willing to enforce these agreements sends an unmistakable message to remaining employees that the employer expects them to honor their restrictive covenants and that they will pay a high price for not doing so. This often requires employers to make it abundantly clear that they are willing to do what is necessary to enforce their agreements. That message is often enough to dissuade the next departing employee from violating their post-employment obligations.

Dispelling these misconceptions is the first step in adopting and enforcing effective restrictive covenants to protect an employer’s most valuable assets.

For more than 30 years, Steve Silverman has built a career around this area of law—successfully enforcing non-compete agreements on behalf of his clients against former employees, while also defeating enforcement efforts on behalf of departing employees and their new employers.

If you have questions about the use of non-competes under existing state law or how to properly enforce them, please contact Steve at 412-253-8818 or ssilverman@babstcalland.com.

To view the full article, click here.

EPA Proposes to Scale Back PFAS Reporting Requirements Under TSCA

Environmental Alert

(by Sloane Wildman and Ethan Johnson)

On November 10, 2025, EPA announced a proposed revision to regulations issued under Toxic Substances Control Act (TSCA) Section 8(a)(7), which would reduce certain per and polyfluoroalkyl substance (PFAS) reporting requirements for manufacturers and importers. The regulation was promulgated in October 2023 under the prior Administration and requires manufacturers and importers of PFAS in any year between 2011–2022 to report data on exposure and detrimental effects to EPA. In proposing this revision, EPA noted its reliance on Executive Order 14219, entitled “Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency’ Deregulatory Initiative,” which directs each agency to review and rescind existing rules based on consistency with the agency’s best reading of the governing statute, Administration policy, and cost-benefit balancing principles. EPA Administrator Lee Zeldin estimated the existing rule would have cost American businesses $1 billion in total to comply.

Specifically, EPA’s proposed revision would exempt reporting on PFAS manufactured (including imported) in mixtures or products at concentrations of 0.1% or lower. It would also exempt imported articles, certain byproducts, impurities, research and development chemicals, and non-isolated intermediates from reporting. The revision also includes technical corrections that would clarify what must be reported in certain data fields and adjust the data submission period. Notably, however, the revision will not change the 2011–2022 reporting timeframe. The proposed rule has not yet been published in the Federal Register, but once published EPA will accept comments on the proposed changes for 45 days after publication.

Babst Calland’s Environmental Practice Group is closely tracking EPA’s PFAS actions, and our attorneys are available to provide strategic advice on how developing PFAS regulations may affect your business. For more information or answers to questions, please contact Sloane Wildman at (202) 853-3457 or swildman@babstcalland.com, Ethan Johnson at (202) 853-3465 or ejohnson@babstcalland.com, or your client service attorney at Babst Calland.

Babst Calland Ranked in 2026 Best Law Firms®

Babst Calland has been recognized in the 2026 edition of Best Law Firms^®, ranked by Best Lawyers^®, nationally in 8 practice areas and regionally in 41 practice areas:

National Tier 2
- Energy Law
- Environmental Law
- Land Use and Zoning Law
- Litigation – Construction
- Litigation – Environmental
- Mining Law
National Tier 3
- Natural Resources Law
- Oil and Gas Law
Regional Tier 1
- Pittsburgh
  - Bet-the-Company Litigation
  - Commercial Litigation
  - Construction Law
  - Corporate Law
  - Energy Law
  - Energy Regulatory Law
  - Environmental Law
  - Land Use and Zoning Law
  - Litigation – Construction
  - Litigation – Environmental
  - Litigation – Land Use and Zoning
  - Mediation
  - Municipal Law
  - Natural Resources Law
  - Water Law
- Charleston-WV
  - Business Organizations (including LLCs and Partnerships)
  - Commercial Litigation
  - Energy Law
  - Environmental Law
  - Litigation – Environmental
  - Oil and Gas Law
Regional Tier 2
- Pittsburgh
  - Information Technology Law
  - Real Estate Law
- Charleston-WV
  - Arbitration
  - Banking and Finance Law
  - Commercial Transactions / UCC Law
  - Corporate Law
  - Mining Law
  - Natural Resources Law
- Washington, D.C.
  - Energy Law
  - Environmental Law
  - Litigation – Environmental
Regional Tier 3
- Pittsburgh
  - Labor Law – Management
  - Litigation – Labor and Employment
  - Mergers and Acquisitions Law
- Charleston-WV
  - Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law
  - Bet-the-Company Litigation
  - Litigation – ERISA
  - Mergers and Acquisitions Law
  - Real Estate Law
- Washington, D.C.
  - Oil and Gas Law

Firms included in the 2026 Best Law Firms^® list are recognized for professional excellence with persistently impressive ratings from clients and peers. To be considered for this milestone achievement, at least one lawyer in the law firm must be recognized in the 2026 edition of The Best Lawyers in America^®.

Achieving a tiered ranking in Best Law Firms^® on a national and/or metropolitan scale signals a unique credibility within the industry. The transparent, collaborative research process employs qualitative and quantitative data from peer and client reviews that is supported by proprietary algorithmic technology to produce a tiered system of industry-led rankings of the top 4% of the industry.

Receiving a tier designation represents an elite status, integrity and reputation that law firms earn among other leading firms and lawyers. The 2026 edition of  Best Law Firms^® includes rankings in 75 national practice areas and 127 metropolitan-based practice areas. Additionally, one “Law Firm of the Year” was named in each nationally ranked practice area.

Click here to view Babst Calland’s profile.

Expedited Reviews of Permit Applications Under SPEED Program

FNREL Water Law Newsletter

(by Lisa Bruderly, Mackenzie Moyer and Ethan Johnson)

On August 21, 2025, the Pennsylvania Department of Environmental Protection (DEP) announced that companies may now request expedited permit application reviews under the Streamlining Permits for Economic Expansion and Development (SPEED) program. DEP likened the new program to an amusement park “fast pass.” Eligible permit types for the SPEED program include:

Air Quality plan approvals (state only) (Chapter 127)
Earth Disturbance permits (Chapter 102)
- Individual NPDES Permit
- General NPDES Permit for Discharges of Stormwater Associated with Small Construction Activities (PAG-01)
- General NPDES Permit for Discharges of Stormwater Associated with Construction Activities (PAG-02)
- Erosion and Sediment Control Permit
- Erosion and Sediment Control General Permit for Earth Disturbance Associated with Oil and Gas Exploration, Production, Processing or Treatment Operations or Transmission Lines (ESCGP-4)
Individual Water Obstruction and Encroachment permits for project impacts eligible for coverage under the federal/state programmatic permit (PASPGP-6 or its successor) (Chapter 105)
Dam Safety Permits (Chapter 105)

After submitting a SPEED intake form, the appropriate office will schedule and hold an intake meeting with the applicant within two to three business days.

The applicant will then have the opportunity to select a DEP-approved qualified professional to conduct the expedited review of the application. Among other qualifications, the professional must have at least five years of relevant permitting experience in Pennsylvania. The applicant must pay the qualified professional the review fee up front. The qualified professional must complete the initial review within 20% of the total review timeframe in the project work order, or another agreed upon timeframe.

DEP will conduct a final review of the permit based on the recommendations of the qualified professional and issue a permit decision. More information, including a flow chart of the full process under the SPEED program, is available on DEP’s website here.

DEP Seeking Comments on Proposed Conditional State Water Quality Certification Under Draft PASPGP-7

FNREL Water Law Newsletter

(by Lisa Bruderly, Mackenzie Moyer and Ethan Johnson)

On September 6, 2025, the Pennsylvania Department of Environmental Protection (DEP) published the Proposed Conditional State Water Quality Certification for the PASPGP-7 (SWQC), 55 Pa. Bull. 6477 (Sept. 6, 2025). The proposed conditional SWQC is for applicants seeking coverage under PASPGP-7 (the U.S. Army Corps of Engineers (Corps) Pennsylvania State Programmatic General Permit) for projects that do not require a federal license or permit other than a section 404 permit under the Clean Water Act (CWA). Comments on the SWQC were due by October 6, 2025.

DEP offered four main conditions, summarized below, that, if fulfilled, would demonstrate that a proposed activity under PASPGP-7 would comply with state water quality standards and certain provisions of the CWA:

Prior to beginning any activity authorized by the Corps under PASPGP-7, the applicant must obtain all necessary environmental permits or approvals and submit all required environmental assessments and other information necessary to obtain the permits and approvals.
The applicant must comply with required environmental assessments and other regulatory requirements.
Fill material may not contain any type of waste as defined in 35 Pa. Stat. § 6018.103 of the Solid Waste Management Act.
Applicants and projects eligible for the PASPGP-7 must obtain all state permits or approvals, or both, necessary to ensure that the project meets the state’s applicable water quality standards, including a project-specific SWQC, if needed.

As background, PASPGP-7 allows applicants to obtain both Corps section 404 permits and coverage under DEP permits or other authorizations for water obstructions and encroachments submitted to the DEP and for projects requiring permits or authorizations in this Commonwealth. Section 401(a) of the CWA requires an applicant seeking coverage under PASPGP-7 to provide the Corps with certification from DEP that its discharge will comply with the applicable provisions of the CWA. This proposed conditional SWQC applies to activities that qualify for PASPGP-7 within the jurisdiction of section 404 and also structures or work in or affecting navigable waters of the United States under section 10 of the Federal Rivers and Harbors Appropriation Act of 1899.

The current PASPGP-6 expires on June 30, 2026, and, at present, the draft PASPGP-7 stands to take its place, with possible revisions from the proposed draft. The proposed changes in PASPGP-7 include the following:

Adds 0.03-acre area of permanent stream impact measurement in addition to the 250-linear-feet of permanent stream impact, whichever is less, for reporting (Corps review) threshold. A permanent loss of 0.03-acre area of stream may then require compensatory mitigation on a case-by-case basis.
Adds a reporting threshold of 1,000-linear-feet of permanent stream impacts for PASPGP-7 applications for DEP General Permit-1 (GP-1) (Fish Habitat Enhancement Structures).
Removes the table of waterways potentially occupied by federally listed, proposed, or candidate species of mussels or fishes from reporting activities, as they are to be included in the Pennsylvania Natural Diversity Inventory Environmental Review.
Adds that all regulated work within the Delaware Canal is a reporting activity to ensure compliance with the Wild and Scenic Rivers Act.
Adds the ability for the Corps to waive the eligibility threshold for emergency activities, as defined in PASPGP-7, on a case-by-case basis. The reporting threshold of 0.50-acre of permanent impact remains unchanged.
Adds a general or project-specific section 401 Water Quality Certificate as a type of state authorization to General Condition 29 (State Authorization).
Extends the General Condition 33 (Anadromous Fish Waters) time of year work restriction, from March 15–June 30 to March 1–June 30.

When a Facebook Post Becomes a Public Record Subject to the Right-to-Know Law

The Legal Intelligencer

(by Steve Korbel, Anna Hosack and Peter Zittel)

Social media has become the modern town square for many public officials. Whether it’s sharing a recap of a school board meeting, celebrating a community event, or commenting on local issues, platforms like Facebook and Instagram are now a routine part of how leaders connect with their constituents. But what happens when those online conversations intersect with Pennsylvania’s Right-to-Know Law, 65 P.S. § 67.101, et seq. (the “RTKL”)? The Pennsylvania Supreme Court considered this question recently in Penncrest School District v. Cagle, 341 A.3d 720 (Pa. 2025), a case that sheds new light on how personal social media use by public officials can blur into the purview of the RTKL.

In May 2021, controversy arose in the Penncrest School District (“Penncrest”) after a high school library display included several books addressing LGBTQ+ issues. A third-party contractor photographed the display and posted it to Facebook, where a school board member shared the image on his personal account, adding comments denouncing the display as “evil” and suggesting he would raise the issue at a future school board meeting. Another board member also shared the post without commentary. The incident drew local media coverage, and a resident, Thomas Cagle, filed a request under the RTKL seeking school board members’ emails and social media posts related to the incident. While Penncrest released some district emails, it denied the request for board members’ social media posts, arguing that such content came from personal accounts. Cagle appealed to the Pennsylvania Office of Open Records, which granted his request, reasoning that the board members’ posts directly related to district business, citing prior cases that emphasized substance over account ownership.

Penncrest petitioned for judicial review, arguing that personal Facebook posts fell outside the RTKL’s definition of “records.” The trial court disagreed, holding that posts by elected officials about school activities, even on personal accounts, could constitute public records because they involved district business. The trial court found that the board member’s comments about the library display were made in his official capacity and, therefore, subject to disclosure. Penncrest appealed, and in 2023, the Commonwealth Court, sitting en banc, vacated the trial court’s decision. While acknowledging that, under the RTKL, the analysis regarding the disclosure of social media posts as public records lacked clear precedent, the Commonwealth Court crafted a framework that considers factors such as whether the account bore the “trappings” of an official page and whether the posts evidenced agency activity. Concluding that the trial court’s analysis was too narrow, the Commonwealth Court remanded the case for further factual development. The Pennsylvania Supreme Court later granted review to decide whether the RTKL requires disclosure of school board members’ social media posts on private accounts about official school matters.

Writing for the majority, Justice Mundy reaffirmed that the RTKL provides a single, uniform definition of a “record” and established that courts must apply the statute’s two-part test to all forms of communication, including social media posts. Under Section 102 of the RTKL, a record is information that (i) “documents a transaction or activity of an agency” and (ii) is “created, received or retained pursuant to law or in connection with a transaction, business or activity of the agency.” The Court emphasized that the statute’s plain language is unambiguous: “[t]hese provisions, unambiguous on their face, provide for a two-part inquiry that applies equally to all forms of communication, including Facebook posts.” The central question in this case was whether Facebook posts made by Penncrest school board members about a controversial LGBTQ+ book display in a school library were records “of the agency” and thus subject to disclosure. While the trial court had found that they were, the Commonwealth Court remanded the case, holding that the trial court’s analysis was incomplete. The Supreme Court ultimately agreed that additional fact-finding was necessary.

Notably, the Court clarified that it was not adopting a new, social-media-specific test but rather requiring courts to apply the established RTKL framework in a context-sensitive manner. As the Court explained, whether something is “of an agency” is a “fact-specific inquiry” and must consider the substance and circumstances of the communication rather than its platform or location. Quoting earlier precedent, Grine v. County of Centre, 138 A.3d 88 (Pa. Cmwlth. 2016), the Court noted: “The location of the record or an agency’s possession does not guarantee that a record is accessible to the public; rather, the character of the record controls.” To make this determination, courts may consider several relevant factors, including whether the official was acting in an “official capacity,” whether the account had the “trappings” of an official agency account, whether the posts were created, received, or retained in connection with agency business, and whether the content “prove[s], support[s], or evidence[s]” agency activity.

The Court also invoked a vivid analogy from the U.S. Supreme Court’s decision in Lindke v. Freed, 601 U.S. 187 (2024): was the official speaking “at the meeting” or “at the backyard barbecue”? That framing highlights the key distinction between a personal viewpoint and agency business. In practice, when an official uses their account to recap votes, announce decisions, or provide role-related updates, they cross into the realm of public records subject to disclosure.

The Court stressed the importance of analyzing the context of social media posts, given that “many use social media for personal communication, official communication, or both—and the line between the two is often blurred.” Ultimately, the Court held that the Commonwealth Court properly remanded the case for further proceedings under the traditional two-part test, concluding: “Today, we reaffirm that this two-part inquiry is the only test to be utilized when determining whether disclosure of information, regardless of its form, is required under the statute.”

The Penncrest decision carries significant implications for transparency, governance, and the conduct of public officials in Pennsylvania. First, it confirms that the RTKL is flexible enough to adapt to evolving technologies without the need for judicial invention of new tests. The statute’s definition of “record” applies across all media, ensuring that public access does not depend on the platform used. Second, the opinion underscores the importance of context. Public officials can no longer assume that personal accounts are immune from disclosure simply because they are labeled “private.” If those accounts are used to announce, explain, or document agency action, their contents may be subject to public access under the RTKL. At the same time, purely personal posts, such as family photos, vacation updates, or unrelated commentary, remain outside the statute’s scope. Third, the case highlights the ongoing tension between transparency and privacy in the digital age. The Court’s refusal to create bright-line rules reflects an appreciation for that complexity. Instead, the decision leaves lower courts with discretion to make case-specific judgments, guided by the statutory test and informed by contextual factors. This approach ensures flexibility but may also generate continued litigation as courts and agencies apply the standard in varied circumstances. Finally, the decision places responsibility on public officials to exercise caution in their use of social media. The line between personal and official capacity can be blurred, and posts made casually can later become the subject of public records requests. Agencies may wish to adopt clearer policies for officials’ use of social media, both to protect transparency and to provide guidance to employees navigating these boundaries.

For Pennsylvania’s local municipalities, authorities, counties, and its elected and appointed officials, employees, and citizens, the message is clear: the principles of open government remain constant even as technology changes the way communication occurs with the public. In Justice Mundy’s words, “[t]hese statutory requirements are the touchstone,” and they will guide courts in ensuring that the public continues to have meaningful access to government records in the digital era.

Stephen L. Korbel is a shareholder in the Public Sector Services and Employment and Labor groups of Babst Calland Clements & Zomnir. Contact him at 412-394-5627 or skorbel@babstcalland.com.

Anna R. Hosack is an associate at the firm, focusing her practice primarily on real estate, municipal, and land use law. Contact her at 412-394-5406 or ahosack@babstcalland.com.

Peter D. Zittel is an associate at the firm, focusing his practice primarily on municipal and land use law. Contact him at 412-773-8711 or pzittel@babstcalland.com.

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EU-U.S. Data Privacy Framework: Current State and Possible Future Legal Challenges

TEQ Hub

(by Kristen Petrina)

Due to the lack of a United States national data privacy law, the EU-U.S. have attempted to create a legal framework that permits a streamlined, regulated, and sufficient data transfer framework. Since 2015, three different data transfer agreements between the European Union and the United States were introduced. All three have faced challenges due to concerns the data transfer agreements did not provide adequate protections for EU citizens’ data from U.S. government surveillance.

The first data transfer agreement implemented but was found to be inadequate and invalidated in 2015 by the EU’s Court of Justice was the EU-U.S. Safe Harbor framework, which was deemed insufficient for protecting EU citizens’ personal data and fundamental rights, particularly in light of revelations about U.S. surveillance programs. The second data transfer agreement implemented but ultimately found to be inadequate and invalidated in 2020 by the EU’s Court of Justice was the EU-U.S. Privacy Shield framework, which was deemed to not offer the same level of protection as the GDPR. In particular, the framework did not adequately protect EU citizens’ data from U.S. government surveillance. The EU-U.S. Safe Harbor and EU-U.S. Privacy Shield frameworks were challenged by Maximiliam “Max” Schrems and his data privacy rights organization NOYB – European Center for Digital Rights (NOYB). The challenges are referenced as Schrems I and Schrems II cases, respectively.

The third data transfer agreement implemented was the Data Privacy Framework (DPF). The EU-U.S. DPF was challenged by Latombe citing, among other claims, the U.S. Data Protection Review Court lacked true independence and impartiality, established as a key redress pillar under the DPF, and the sufficiency of safeguards governing bulk data collection by U.S. surveillance and intelligence agencies without prior authorization from EU citizens and lacked adequate oversight. The concerns were consistent with those raised in the Schrems I and Schrems II cases. Nevertheless, the European General Court dismissed Latombe’s actions in its entirety, upholding the European Commission’s adequacy decision.

The Latombe judicial challenge against the EU-U.S. Data Privacy Framework has been stopped by the European General Court. The ruling on September 3, 2025, conflicted with previously attempted EU-U.S. data transfer frameworks. The court dismissed the challenge brought by Philippe Latombe, Member of French Parliament (Latombe) to annul the DPF and reinforced the DPF’s validity of the European Commission’s adequacy determination for the U.S.

Data Privacy Framework

The most recent data transfer agreement between the EU-U.S. is the Data Privacy Framework (DPF). The DPF includes three different frameworks: (i) EU-U.S. Data Privacy Framework (EU-U.S. DPF), (ii) the UK Extension to the EU-U.S. Data Privacy Framework (UK Extension to the EU-U.S. DPF), and (iii) the Swiss-U.S. Data Privacy Framework (Swiss-U.S. DPF). The DPF was developed to alleviate challenges faced by transatlantic commerce of U.S organizations. The DPF provides U.S. organizations with reliable mechanism that are consistent with EU, UK, and Swiss law for personal data transfers to the U.S. from the European EU (EU) and European Economic Area (EEA), the United Kingdom and Switzerland.

U.S. organizations participating in the EU-U.S. DPF may receive personal data from the EU/EEA in reliance on the EU-U.S. DPF after the European Commission issued the U.S. adequacy decision on July 10, 2023 ((EU) 2023/1795). The adequacy decision enables the transfer of EU personal data to participating organizations consistent with EU law. U.S. organizations participating in the UK Extension to the EU-U.S. DPF may receive personal data from the United Kingdom and Gibraltar in reliance on the UK Extension to the EU-U.S. DPF. The data bridge for the UK Extension to the EU-U.S. DPF enables the transfer of UK and Gibraltar personal data to participating organizations consistent with UK law. Lastly, U.S. organizations participating in the Swiss-U.S. DPF may receive personal data from Switzerland in reliance on the Swiss-U.S. DPF, due to Switzerland’s recognition of adequacy for the Swiss-U.S. DPF. The recognition of adequacy enables the transfer of Swiss personal data to participating organizations consistent with Swiss law.

U.S. organizations must self-certify to the International Trade Administration (ITA) within the U.S. Department of Commerce their compliance to each DPF framework. Organizations that only wish to self-certify and participate in the EU-U.S. DPF and/or the Swiss-U.S. DPF may do so; however, organizations that wish to participate in the UK Extension to the EU-U.S. DPF must participate in the EU-U.S. DPF. Once such an organization self-certifies to the ITA, the organization declares its commitment to the DPF Principles, that commitment is enforceable under U.S. law. Organizations participating in the DPF must annually re-certify. A U.S. organization’s failure to re-certify, voluntarily withdrawal or determination by the ITA failure to comply with DPF requirements will result in removal from the DPF and must immediately cease claim of DPF participation. Nevertheless, upon removal from the DPF, U.S. organization’s compliance with all DPF principles must continue for all personal information received while participating in the DPF for as long as it retains such information.

European General Court’s DPF Legal Reasoning

Independence of the DPRC

Latombe’s primary argument and the cornerstone of the case was the structural dependence of the Data Protection Review Court (DPRC). The General Court reviewed the structure and function of the DPRC in detail, noting the appointment process for DPRC judges has multiple steps and layers, term limitations, and dismissal only for cause. Citing those findings, the General Court determined the judges were insulated from improper influence.

The General Court further discussed the statutory obligations on both the Attorney General and intelligence agencies, explicitly prohibiting their interference with the DPRC’s work. Separately, the European Commission is required to continue to monitor the application of the DPF, and if necessary, suspect, amend or repeal the adequacy decision should changes in U.S. law or practice lessen the safeguards. These factors led the court to find that the DPRC met the EU standard of independent and impartial redress.

Bulk Collection and Proportionality

The General Court reiterated that Schrems II did not demand ex ante judicial authorization, instead, it requires any bulk collection be subject to the meaningful, ex post judicial oversight. Separately, the General Court found that under U.S. law, collection of personal data by U.S. intelligence agencies is restricted to what is “necessary and proportionate” for clearly defined national-security purposes.

Further, such activities as bulk collection is subject to review DPRC, which has the authority to order remedial measures in cases where violations are identified. With this continued oversight, the General Court determined that the safeguards in the U.S. satisfy the “essential equivalence” test established by the Court of Justice of the European Union (CJEU).

Future of the DPF and Potential Additional Challenges

While this decision creates immediate stability for the DPF and participating U.S. organizations, the stability is not final.

Latombe has not indicated whether to expect an appeal, but he has until November 3, 2025 to decide whether to appeal the General Court decision to the CJEU. Separately, Max Schrems and NOYB issued a statement immediately upon the Latombe decision. NOYB argues that “the lower court here massively departs from the case law of the CJEU…It may be that the General Court did not have sufficient evidence before it – or it wants to make a point to depart from the CJEU. We will have to analyse the ruling in more detail the next days.” NOYB is monitoring the Trump Administration Executive Orders, removal of ‘independent’ heads of organizations, indicating that the Latombe challenge as too narrow and a more expansive challenge may come. Therefore, it is unclear whether further judicial challenges will be raised, leaving the long term stability of the DPF in question.

Separately, beyond a Latombe appeal or an NOYB challenge, the European Commission is required to continuously monitor the U.S. for any significant changes, whether legislative or U.S. agency changes. Any changes that could be found to significantly vary from the current framework, could result in a partial or complete suspension of the adequacy decision.

Conclusion

While the Latombe decision provides clarity and current certainty for U.S. organizations that require EU-U.S. data transfers, it is crucial that U.S. companies continue to monitor the annual European Commission reports, possible Latombe appeal and other legal challenges that may be brough before the General Court of the CJEU. The landscape of data transfers, domestically and internationally continues to be dynamic, requiring ongoing monitoring and U.S. companies should remain cautious and vigilant to every occurring changes. Additionally, while the Latombe judgement was a win for the DPF, it does not eliminate the need for transfer impact assessments when using alternative transfer mechanisms, such as Standard Contractual Clauses, especially for U.S. data recipients who have not self-certified under the DPF.

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EPA Will Retain PFOA and PFOS CERCLA Hazardous Substance Designation

PIOGA Press

(by Sloane Wildman and Alex Graf)

On September 17, 2025, EPA announced that it will retain the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) hazardous substance designation for PFOA and PFOS, two PFAS compounds. The final rule designating PFOA and PFOS (and their salts and structural isomers) as hazardous substances under CERCLA became effective on July 8, 2024. Substances designated as hazardous under CERCLA are subject to release reporting requirements, specific spill rules, release tracking requirements, and additional reporting mandates under other environmental statutes. Further, EPA may require potentially responsible parties – PRPs – to clean up or pay for the cleanup of hazardous substances. In conjunction with EPA’s announcement, the U.S. Department of Justice submitted a filing in Chamber of Commerce of the United States of America v. EPA, No. 24-1193 (D.C. Cir.) (ongoing litigation, currently in abeyance, challenging the CERCLA designation of PFOA and PFOS), asking the court to lift the abeyance and propose an amended briefing schedule.

Prior to its 2024 PFOA and PFOS designation, EPA’s CERCLA hazardous substance list was comprised solely of substances designated under other environmental statutes (e.g., Clean Water Act, Clean Air Act, Resource Conservation and Recovery Act, and the Toxic Substances Control Act). EPA’s 2024 designation of PFOA and PFOS represented the first time the Agency used its authority under CERCLA Section 102(a) to list specific hazardous substances that were not designated under another environmental statute. In this week’s announcement, EPA stated its intention to initiate a rulemaking to “establish a uniform framework governing designation of hazardous substances under section 102(a) of CERCLA moving forward.” Such a “Framework Rule” would establish a uniform approach to guide future CERCLA hazardous substance designation, including EPA’s method for considering the costs of proposed designation.

EPA further stated that it will prioritize holding polluters accountable while still providing certainty for passive receivers (such as water utilities) that did not manufacture or generate PFOA or PFOS, and that it believes new statutory language will be necessary to fully address concerns regarding passive receiver liability. This statement is aligned with EPA’s PFAS strategy, issued on April 28, 2025, which expressly acknowledged the Agency’s intention to protect passive receivers of PFAS. EPA noted at the time that it intended to work with Congress and industry to establish a liability framework that operates on a “polluter pays” principle to provide greater certainty to passive receivers.

Babst Calland’s Environmental Practice Group is closely tracking EPA’s PFAS actions, and our attorneys are available to provide strategic advice on how developing PFAS regulations may affect your business. For more information or answers to questions, please contact Sloane Wildman at (202) 853-3457 or swildman@babstcalland.com or Alexandra Graf at (412) 394-6438 or agraf@babstcalland.com.

To view the full article, click here.

FTC Withdraws Non-Compete Appeal, Previews a More Focused Approach

The Legal Intelligencer

(by Steve Antonelli and Alex Farone)

Recent activity from the Federal Trade Commission (FTC or Commission) indicates yet another shift in the Commission’s view on non-compete agreements, the latest in a turbulent 16-month period for this topic that began with the FTC’s May 2024 publication of a final rule banning most non-competes throughout the country.

The rule was set to take effect 120 days later, on September 4, 2024, and it would have banned the vast majority of new non-competes with employees, independent contractors, and volunteers nationwide, with the exception of those entered into pursuant to certain business sales. The ban was published based on the view of the Commission, which was controlled by a Democratic majority at the time, that non-competes are an unfair method of competition and therefore a violation of Section 5 of the FTC Act. In addition to the ban, the rule would have required employers to notify impacted workers of their agreements’ unenforceability.

Two weeks before its effective date, on August 20, 2024, the U.S. District Court for the Northern District of Texas invalidated the ban with its opinion in Ryan LLC, et al. v. Federal Trade Commission. The court ruled that the ban exceeded the FTC’s statutory authority. In doing so, it held that the creation of substantive rules stretched beyond the FTC’s power, and that the ban was unreasonably overbroad. The FTC appealed the court’s ruling to the U.S. Court of Appeals for the Fifth Circuit. The FTC filed its appellate brief in January 2025 but then sought a stay of the appeal in March 2025.

On September 5, 2025, one year and one day after the ban was originally set to take effect, the FTC formally withdrew its appeal of the Ryan decision as well as a similar appeal pending in the 11th Circuit. By withdrawing the appeal, the Commission (which is now entirely comprised of Republican appointees) essentially accepted the position of the Texas federal court in Ryan, which limits the FTC’s authority to creating rules of agency procedure rather than substantive rules regarding unfair methods of competition.

Although the FTC’s appeal withdrawal appears to be the final nail in the coffin of the non-compete ban, the day before it withdrew the appeal, the FTC issued a press release announcing an enforcement action to protect American workers from “harmful labor practices” by ordering Gateway Services, Inc., the nation’s largest pet cremation business, to stop enforcing restrictive covenants against nearly all of its workers. The FTC claimed that Gateway required almost every one of its 1,800 employees, regardless of their position or responsibilities (and regardless of the existence of a protectable interest), to sign a non-compete agreement that prohibited employees from working in the pet cremation service industry for one year after the end of their employment with Gateway. The FTC claimed that these agreements, which were even entered into with hourly employees and laborers, “unfairly alter the bargaining power” between Gateway and its employees, and they suppress competition by impeding the entry or expansion of similar businesses.

To resolve the matter, the FTC accepted a consent agreement containing a proposed consent order that, if finalized after a 30-day public comment period, would:

Prohibit Gateway from entering into, maintaining, or enforcing non-competes except in the context of the sale of a business by a person with pre-existing equity, or a non-compete of a director, officer, or senior employee signed in exchange for some kind of equity award;
Require Gateway to notify its employees that they are no longer subject to their non-compete; and
Prohibit Gateway from preventing employees from soliciting customers, except for those customers with whom the employee had direct contact during the last 12 months of their employment.

Though a final decision and order in this case would only be legally binding on Gateway, the case provides guidance on what circumstances might make a particular non-compete practice unlawful under Section 5 of the FTC Act in the Commission’s current view. It also raises the question of whether the FTC remains interested in challenging non-competes generally, or only in circumstances involving egregious violations like the case it alleged against Gateway. Either way, employers should continue to monitor the latest developments involving non-compete agreements.

If you have any questions about non-compete agreements or any developments concerning the FTC’s position on non-compete agreements, please contact Stephen A. Antonelli at 412-394-5668 or santonelli@babstcalland.com or Alexandra G. Farone at (412) 394-6521 or afarone@babstcalland.com.

Stephen A. Antonelli is a shareholder in the Employment and Labor and Litigation groups of Babst Calland. His practice includes representing employers of all sizes, from Fortune 500 companies and large healthcare organizations to non-profit organizations and family-owned businesses. He represents clients, in all phases of employment and labor law, from complex class and collective actions and fast-paced cases involving the interpretation of restrictive covenants, to single-plaintiff discrimination claims and day-to-day human resources counseling.

Alexandra G. Farone is an associate in the Employment and Labor and Litigation groups of Babst Calland. Ms. Farone’s employment and labor practice involves representing Fortune 500 companies, startups, public sector organizations, family-owned businesses, health care providers, and the financial services industry on all facets of employment law, including comprehensive human resources counseling concerning restrictive covenants, discrimination and harassment, disability accommodation, grievances, personnel best practices, contract negotiations, wage and hour issues, and collective bargaining.

To view the full article, click here.

EPA Extends Certain Compliance Deadlines for Oil and Natural Gas Clean Air Act Requirements

PIOGA Press

(by Gary Steinbauer, Gina Buchman, and Christina Puhnaty)

On July 31, 2025, EPA published in the Federal Register its highly anticipated Interim Final Rule to extend several deadlines in 40 C.F.R. Part 60, Subparts OOOO, OOOOa, OOOOb and OOOOc that were promulgated in EPA’s 2024 Methane Rule. 90 Fed. Reg. 35966 (July 31, 2025). That same day, environmental groups filed a lawsuit challenging the Interim Final Rule. Envtl. Defense Fund v. U.S. EPA, Case #25-1164 (D.C. Cir.). Absent a stay by the court, which the environmental groups are currently not seeking, the Interim Final Rule and the various extended deadlines are effective.

Summary of Deadline Extensions

The Interim Final Rule extends numerous compliance deadlines for oil and gas air emission sources subject to the New Source Performance Standards in 40 C.F.R. Part 60 Subparts OOOO, OOOOa, OOOOb and OOOOc. The previous compliance deadlines were published in a March 2024 final rule. 89 Fed. Reg. 16820 (March 8, 2024). The Interim Final Rule, which became effective upon publication, extends many deadlines in OOOOb, the date that the requirements of the Super-Emitter Program apply with respect to OOOO, OOOOa, and OOOOb, and the date by which states must submit plans to EPA pursuant to the OOOOc emissions guidelines.

EPA extended the following OOOOb compliance deadlines to at least January 22, 2027:

Process Controllers: The date by which process controller affected facilities are required to be zero-bleed devices. 40 CFR §§ 60.5370b(a)(5)(i), 60.5390b(a), 60.5415b(h)(1).

Storage Vessels:
- The date by which receiving additional crude oil, condensate, intermediate hydrocarbons, or produced water throughput at tank batteries triggers a modification. 40 CFR § 60.5365b(e)(3)(ii)(C) and (D).
- The date by which a legally and practicably enforceable limit used to determine the potential VOC and methane emissions from a storage vessel must include the elements provided in paragraphs 40 CFR § 60.5365b(e)(2)(i)(A) through (F). 40 CFR § 60.5365b(e)(2)(i).
- The date by which the potential for VOC and methane emissions from storage vessels must be calculated using a generally accepted model or calculation methodology that accounts for flashing, working, and breathing losses, based on the maximum average daily throughput to the tank battery determined for a 30-day period of production. 40 CFR § 60.5365b(e)(2)(ii).

Covers and Closed Vent Systems: The date by which a required closed vent system or cover must be designed and operated with no identifiable emissions and corresponding inspections must be performed. This new compliance deadline is 18 months after the date the Interim Final Rule is published in the Federal Register or upon startup, whichever is later. 40 CFR §§ 60.5411b(a)(3), § 60.5411b(b)(4), 60.5416b(a)–(b).

Control Devices: The date by which you must install and operate a continuous burning pilot or combustion flame, as applicable, and the date by which an alert must be sent to the nearest control room whenever the pilot or combustion flame is unlit. 40 CFR §§ 60.5412b(a)(1)(viii) and (3)(viii), 60.5413b(e)(2), 60.5415b(f)(1)(vii)(A)(1), 60.5417b(d)(8)(i), 60.5417b(i)(6)(v).

EPA also gave regulated facilities until November 28, 2025, or 180 days after startup, whichever is later, to comply with continuous monitoring system requirements for enclosed combustors or flares. 40 CFR §§ 60.5370b(a)(9)(i) and (iii).

Regarding OOOOc, the EPA emission guidelines that States are required to use when regulating existing sources (i.e., regulated emission sources that commenced construction, modification, or reconstruction on or before December 6, 2022), EPA extended the deadline for States to submit their OOOOc plans to January 22, 2027. 40 CFR § 60.5362c(c). As indicated in our recent Alert, the Pennsylvania Department of Environmental Protection (“PADEP”) has issued public notice and provided an opportunity for comment for its proposed OOOOc plan. The comment period on PADEP’s proposed OOOOc plan closed on July 30, 2025. Several commenters urged PADEP to delay implementation of the OOOOc plan until EPA finalizes its reconsideration of OOOOc, and others raised concerns about PADEP’s analysis, or lack thereof, related to considering the “remaining useful life and other factors” when devising the proposed OOOOc plan requirements. PADEP’s proposed OOOOc plan noted the original March 2026 deadline for submission to EPA. It remains to be seen whether PADEP will continue moving forward with its plan given that it now has an additional 10 months to finalize and submit Pennsylvania’s OOOOc plan to EPA for approval.

EPA also extended deadlines in OOOOa and OOOOb associated with the so-called “super emitter program” created under the March 2024 Methane Rule. In the preamble for the Interim Final Rule, EPA notes that in implementing the “super emitter program,” which would allow EPA-approved third parties (using EPA-approved technologies) to provide EPA with data on super-emission events, “EPA has experienced unanticipated difficulties and concerns that require additional time for effective and lawful administration of various program procedures.” 90 Fed. Reg. at 35976. EPA is delaying implementation of the super-emitter program until after January 22, 2027, during which time EPA will not act on applications seeking approval for remote-detection technologies for use under the program. See 40 CFR §§ 60.5371a and 60.5371b.

The Interim Final Rule indicates that EPA may make additional, substantive revisions to the 2024 Methane Rule in a separate reconsideration action. EPA invites comments on the revisions in the Interim Final Rule by September 2, 2025, even though the rule became effective on July 31, 2025.

Environmental Groups’ Challenge

Ten environmental groups promptly filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit, challenging the Interim Final Rule. The Court has set initial filing deadlines, including a deadline to file any dispositive motions by September 18, 2025. A briefing schedule has not been established.

Press releases by the environmental groups suggest that they may attack the Interim Final Rule on both procedural and substantive groups. Procedurally, the grounds contend that EPA violated the law by offering no opportunity for public input. Substantively, the groups indicate that they plan to defend the 2024 Methane Rule requirements, including the original deadlines and requirements of that rule.

Babst Calland’s Environmental Practice Group is closely tracking these regulatory developments, and our attorneys are available to provide strategic advice on how these actions may affect your business. For more information or answers to questions, please contact Gary Steinbauer at (412) 494-6590 or gsteinbauer@babstcalland.com, Gina Buchman at (202) 853-3483 or gbuchman@babstcalland.com, Christina Puhnaty at (412) 394-6514 or cpuhnaty@babstcalland.com, or your Babst Calland relationship attorney.

To view the full article, click here.

White House Releases Sweeping AI Action Plan

TEQ Hub

(by Susanna Bagdasarova and Justine Kasznica)

On July 23, 2025, the White House released “Winning the Race: America’s AI Action Plan”,[1] a sweeping federal initiative setting forth the administration’s strategy to secure U.S. global leadership in artificial intelligence. Issued pursuant to Executive Order 14179, “Removing Barriers to American Leadership in Artificial Intelligence”,[2] the Action Plan outlines more than 90 federal policy actions across three strategic pillars: accelerating innovation, building American AI infrastructure, and leading in international diplomacy and security. The administration describes the effort as a path to “a new golden age of human flourishing, economic competitiveness, and national security,” goals that the Action Plan aims to realize through regulatory reform, infrastructure expansion and investment, and significant geopolitical engagement.

Guiding Principles

Three central principles[3] shape the Action Plan’s policy directives across all strategic pillars:

The American worker must benefit from the AI revolution. The expansion of AI infrastructure encouraged by the Action Plan aims to generate high-paying jobs, and AI-driven advancements in sectors like medicine and manufacturing are expected to raise the overall standard of living. Rather than displacing workers, AI is intended to enhance and support their roles.
Neutrality and objectivity must be foundational components of AI technologies. AI systems must be “free from ideological bias” and be “designed to pursue objective truth rather than social engineering agendas”.
National security depends on protecting AI systems. In a rapidly technologically advancing world, security initiatives must focus on preventing theft and misuse of U.S. AI technologies, as well as risk management and monitoring for emerging threats.

Key Policy Initiatives

Among the numerous directives and recommendations in the Action Plan, the administration identified four key policy initiatives:

Exporting American AI: To bolster U.S. influence and strengthen strategic alliances, the Departments of Commerce and State, in partnership with industry, will deliver “secure, full-stack AI export packages – including hardware, models, software, applications, and standards – to America’s friends and allies around the world.” In doing so, the U.S. can set global AI standards and simultaneously prevent countries in “America’s AI alliance” from becoming dependent on AI technologies developed by its foreign adversaries.
Promoting Rapid Buildout of Data Centers: To meet rising AI demand, the Action Plan proposes reducing regulatory burdens on infrastructure buildout to streamline permitting for data centers and semiconductor manufacturing facilities. This initiative is supplemented by directives to upgrade the U.S. electric grid and revitalize American semiconductor manufacturing, all of which is to be made possible by investments in the American workforce.
Enabling Innovation and Adoption: The Action Plan emphasizes the need for deregulation at the federal level to encourage acceleration of AI development and deployment and signals future collaboration with private industry partners in determining which rules should make the cut. It further seeks to discourage state and local regulatory barriers, proposing that “the Federal government should not allow AI-related Federal funding to be directed toward states with burdensome AI regulations that waste these funds.”
Upholding Free Speech in Frontier Models: The Action Plan directs federal agencies to update procurement guidelines to contract for AI systems and services with developers “who ensure that their systems are objective and fee from top-down ideological bias.”

Strategic Takeaways

The Action Plan highlights the administration’s intent to make artificial intelligence a central pillar of national policy. It marks a significant change in the federal government’s approach to AI. In contrast to the Biden administration’s more cautious stance focusing on risk management, the Action Plan emphasizes innovation and acceleration through deregulation, rapid development, and establishing U.S. global influence in AI. For businesses, the framework provides new opportunities, incentives, and challenges, including:

Export Control Compliance: Companies participating in “full-stack” AI export programs will need to closely navigate ITAR, EAR, and other export frameworks for compliance.
Federal Procurement Standards: AI developers should anticipate additional requirements and certifications for objectivity, transparency, and model governance to qualify for government contracts.
Infrastructure Incentives and Approvals: The expedited permitting process for data centers and semiconductor facilities may provide new opportunities for developers and investors in critical infrastructure.
Regulatory Rollback Participation: Stakeholders, particularly private industry participants, will be able to provide feedback on which regulations obstruct innovation, offering a potential avenue to shape the future legal landscape of AI.

The Action Plan introduces significant regulatory, contractual, and operational changes across the AI value chain. Companies should evaluate their existing and planned AI-related activities in light of these developments, especially those touching federal contracting, export markets, and data infrastructure. They should also keep a close eye on state and local AI regulations in the wake of the Action Plan. Although it stops short of imposing the moratorium on state and local AI regulation that was stripped from the final version of President Trump’s budget reconciliation bill (H.R.1.), dubbed the One Big Beautiful Bill Act, the Action Plan encourages the Federal Communications Commission to “evaluate whether state AI regulations interfere with the agency’s ability to carry out its obligations and authorities under the Communications Act of 1934,” and tasks federal agencies to consider a state’s AI regulations when awarding federal funds.

As federal agencies enact the recommended policy actions, the administration has signaled that it is heavily focused on achieving U.S. global AI dominance. “Winning the AI Race is non-negotiable. America must continue to be the dominant force in artificial intelligence to promote prosperity and protect our economic and national security… These clear-cut policy goals set expectations for the Federal Government to ensure America sets the technological gold standard worldwide, and that the world continues to run on American technology,” said Secretary of State and Acting National Security Advisor Marco Rubio.

President Trump also highlighted his administration’s AI strategy during his first major speech on AI at a White House AI summit on the same day the Action Plan was released afternoon and signed three AI-related executive orders which correlate with various Action Plan directives: Promoting The Export of the American AI Technology Stack[4], Accelerating Federal Permitting of Data Center Infrastructure,[5] and Preventing Woke AI in the Federal Government.[6]

Babst Calland attorneys are tracking the most pressing issues related to data center development – including AI usage and privacy policies, related risks and regulatory requirements, as well as data center development financing, project siting, land use, zoning and regulatory compliance – and addressing pathways forward for successful projects. For questions or more information, please contact Susanna Bagdasarova at sbagdasarova@babstcalland.com or 412.394.5434 or Justine M. Kasznica at jkasznica@babstcalland.com or 412.394.6466.

______________________

[1] Full text available at Winning the Race: America’s AI Action Plan.

[2] Full text available at Removing Barriers to American Leadership in Artificial Intelligence.

[3] See White House Unveils America’s AI Action Plan.

[4] Full text available at Promoting The Export of the American AI Technology Stack.

[5] Full text available at Accelerating Federal Permitting of Data Center Infrastructure.

[6] Full text available at Preventing Woke AI in the Federal Government.

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