Pittsburgh Business Times
(by Kevin Douglass, Carla Castello, Stephen Antonelli)
Today’s businesses are subject to increasing workplace scrutiny concerning possible misconduct of their owners, officers, management, and personnel. When faced with an allegation that can potentially expose the company to legal, financial and reputational harm, it is critical that the company promptly investigate the facts and assess the business risk in order to make an informed decision on the best course of action.
Is an Internal Company Investigation Warranted?
Employee complaints, or even allegations from third parties, concerning improper workplace conduct should always be taken seriously. Whether the claims involve an entry level employee, a manager, a corporate officer, or anyone in between, the company should assess whether the allegations, if true, would constitute violations of law or company policies, or otherwise materially impact the company’s finances, culture, reputation, or workforce.
Workplace investigations are often sensitive. Employees may be reluctant to step forward and become the center of an investigation. They may also fear backlash from the individual(s) being investigated, particularly if they carry significant clout within the company. The company can assuage those concerns by reminding employees involved in the investigation of the company’s obligation to comply with applicable anti-retaliation laws and company policies. The company should also explain that it will perform the investigation with impartiality and (as much as possible) confidentiality, and that it will comply with the organization’s policies and procedures while minimizing business disruption.
Planning for and Conducting the Investigation
At the outset, the company must define the scope and purpose of the investigation (i.e. identify the allegations and the reasons for undertaking the investigation), select an investigation team, and determine a timeline for the investigation. It is important to recognize that the scope may shift as the investigation progresses and information is gathered. The team needs to implement measures designed to protect the attorney-client privilege and the attorney work product doctrine, including defining the roles of both internal and/or external attorneys and determining whether counsel will lead the investigation. The company should also identify the employees who will serve as the points of contact with the investigation team and the frequency and manner in which they will be kept informed of the investigation’s progress.
Another critical consideration is the preservation, collection, and review of key documents, including e-mails and text messages. In that regard, the organization’s document retention policy must be reviewed, and a notice issued to ensure the preservation of relevant communications and other documents that could become evidence in potential subsequent litigation. The team should also evaluate whether to engage a third-party to collect documents in a forensically sound manner from company-issued electronic devices. It is helpful to compile at the outset a list of potential people to be interviewed, including current and former employees, consultants, and any other individuals with pertinent information, including the person(s) who is the target of the investigation. Typically, the target of the investigation will be interviewed near the conclusion of the other interviews.
When planning for interviews, the investigation must balance the need for a thorough investigation while maintaining confidentiality and meeting timelines. How many interviews should be conducted and which interviews are critical to the investigation? It is recommended that the investigation team explain during the interviews the importance of confidentiality and, if counsel is conducting the interview, also emphasize that counsel represents the company, not the individual being interviewed. It is critical to exercise care concerning the manner in which the records witness statements or facts in interview notes, as those notes may become discoverable in potential subsequent litigation. Moreover, attorneys’ impressions or communications of the interviews should be separately recorded and protected.
Concluding the Investigation
As the investigation proceeds, the company should determine whether to prepare a written or verbal report, or materials for a presentation. If issuing a written report, the company should take appropriate steps to ensure confidentiality and privilege where appropriate. The company must then decide whether the investigation team will simply report its findings or take the additional step of recommending a course of action, up to and including disciplinary measures. Ultimately, management, the board of directors, or other decision makers must act in the best interests of the organization and decide what, if any, action is necessary to address the allegations that led to the investigation. At the investigation’s conclusion, the company should inform the complaining employee(s) as well as the target(s) of the outcome while reminding them of the company’s interest in maintaining confidentiality.
Business Insights is presented by Babst Calland and the Pittsburgh Business Times.
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Pretrial Practice & Discovery
American Bar Association Litigation Section
(by Michael Libuser)
“Discovery sanctions serve the objectives of discovery by correcting for the adverse effects of discovery violations and deterring future discovery violations from occurring.” Taylor v. Illinois, 484 U.S. 400, 425 (1988) (Brennan, J., dissenting). Serving these objectives is important given the common refrain that “practitioners, judges, and academics . . . perceive discovery abuse . . . as a major, if not the major contributor to the growing cost and delay of litigation and to the dissatisfaction with our court systems in resolving civil disputes.” Earl C. Dudley, Jr., “Discovery Abuse Revisited: Some Specific Proposals to Amend the Federal Rules of Civil Procedure,” 26 U.S.F. L. Rev. 189, 190 (1992). Still, many litigators write off motions for sanctions as noncredible threats that rarely gain traction. See, e.g., William T. Gallagher, “IP Legal Ethics in the Everyday Practice of Law: An Empirical Perspective on Patent Litigators,” 10 J. Marshall Rev. Intell. Prop. L. 309, 341 (2011). And some judges have outspokenly decried them. A federal judge recently commented, “There are few things that I truly despise. The short list includes meatloaf, the Ohio State Buckeyes, and hangovers. It also includes motions for sanctions. It is no exaggeration to say that I hate, hate, hate motions for sanctions.” Boshears v. Polaris Eng’g, Inc., 2023 WL 2572204, at *1 (S.D. Tex. Mar. 20, 2023) (per Edison, J.). One form of discovery sanction—awards of expenses—is rarely imposed. Why that is so, and, more specifically, the extent to which state procedural rules authorize those awards, is the impetus for this practice point.Majority Rule
A majority of states follow Federal Rule of Civil Procedure 37(a)(5). Under that rule, a court that grants a motion to compel discovery must order the party whose conduct necessitated the motion (or the party’s attorney, or both) to pay the movant reasonable expenses. But there are three exceptions. Awards of expenses are not permitted if: (1) the moving party failed in good faith to obtain the discovery without involving the court; (2) the losing party was substantially justified in withholding the discovery; or (3) other circumstances make an award of expenses unjust. Conversely, a court that denies a motion to compel must order the moving party to pay expenses, subject to the second two exceptions. “The great operative principle of Rule 37(a)(5) is that the loser pays.” 8B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2288 (3d ed. June 2024 update). Thirty-nine states and the District of Columbia follow the federal model almost verbatim. Their procedural rules embrace a presumption in favor of awarding expenses—courts must award expenses to a party who prevails on a motion to compel, unless an exception applies. There are differences, to be sure. For instance, only 15 of these states authorize an award of expenses if the noncompliant party produces the sought-for discovery after a motion to compel is filed but before the court rules on it.
That most states have adopted the federal approach is notable when considered against the history of Rule 37(a)(5). Rule 37(a)(5) reflects the view that “expenses should ordinarily be awarded,” Fed. R. Civ. P. 37(a) advisory committee’s note to 1970 amendment, and the belief that “potential or actual imposition of expenses is virtually the sole formal sanction in the rules to deter a party from pressing to a court hearing frivolous requests for or objections to discovery,” Proposed Amendments to The Federal Rules of Civil Procedure Relating to Discovery, 48 F.R.D. 487, 540 (1970).
Minority Rule
A minority of states—Arizona, Colorado, Massachusetts, Michigan, Rhode Island, Oregon, and Utah—permit awards of expenses in provisions that largely track Rule 37(a)(5), but with one significant change. These states have permissive rather than presumptive rules. Their courts “may” award expenses to the prevailing party, subject to similar exceptions in the federal model.
Outlier States
Five states—California, Connecticut, New Hampshire, New York, and Pennsylvania—do not track Rule 37(a)(5) in the same way.
In Pennsylvania, courts may not award expenses upon granting a motion to compel discovery. Parties must file the motion to compel, obtain an order compelling compliance, and then, if the noncompliant party disobeys the order, seek sanctions in a subsequent motion. Pa. R. Civ. P. 4019(g). If the court grants the sanctions motion, it “may” require payment of reasonable expenses incurred in obtaining both “the order of compliance and the order for sanctions.” Id. But as with Rule 37(a)(5), Pennsylvania courts’ discretion to award expenses is subject to the substantial-justification and unjust-circumstances exceptions.
New York discovery rules do not authorize awards of expenses or monetary sanctions of any kind. N.Y. CPLR 3126. Its courts, however, enjoy broad discretion to impose monetary sanctions for “frivolous conduct.” N.Y. Rules of the Chief Administrator of the Courts § 130-1.1(a). And that authority has been applied in the discovery context, including to impose monetary sanctions on a party that “should have produced” discovery but failed to do so. Lis v. Lancaster, 225 A.D.3d 568, 569 (N.Y. Sup. Ct. App. Div. 1st Dep’t 2024).
Courts in California, Connecticut, and New Hampshire can impose monetary sanctions for discovery abuses regardless of whether a motion to compel is filed or granted, although only California’s rules are presumptive in that its courts “shall impose” any authorized monetary sanction. Cal. Civ. Proc. Code § 2023.030(a); Conn. Practice Book Sec. 13-14(a)–(b); N.H. R. Dist. Ct. R. 3.21(d)(2)(A).
Takeaway
While rare, awards of expenses incurred in moving to compel discovery are sometimes granted, even if they are generally reserved for repeated abuses and violations of discovery orders. But attorneys—particularly multi-state practitioners—should be mindful of state-specific rules and practices, some of which are beyond the scope of this article. For instance, some state courts have alternate mechanisms for awarding expenses for discovery abuses, whether derived from an inherent power, or through additional rules like the provisions for “immediate sanctions” in Maryland’s rules. Md. Rules 2-432(a).
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© 2024. Discovery Disputes: Best Practices from the Bench, Pretrial Practice & Discovery, American Bar Association Litigation Section, July 24, 2024 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Pittsburgh Technology Council
Firm Announces Strategic Partnership with Former PIT General Counsel Jeff Immel
Law firm Babst Calland announced today its plan to expand the firm’s capabilities in its Aerospace, Aviation and Airports practice through a strategic partnership with Jeff Immel, former general counsel of the Allegheny County Airport Authority (ACAA), the operator of Pittsburgh International Airport and Allegheny County Airport, and experienced aviation and aerospace attorney.
Prior to joining ACAA, Immel served as the head of U.S. aviation regulatory and legal affairs for Zipline International Inc. where he provided legal counsel in obtaining and maintaining all federal approvals necessary to begin unmanned aircraft systems (UAS) commercial package delivery operations in the U.S. He also served as the primary legal and regulatory counsel to Amazon Prime Air and Amazon Air and was an associate attorney for Jenner & Block and Jones Day where he advised clients on various aspects of aviation regulation and emerging technologies law. Prior to attending to law school, Immel served in the United States Navy as a combat fighter pilot, where he achieved the rank of Lieutenant Commander.
Led by Justine Kasznica, Babst Calland currently actively supports the mission and vision of the growing space industry in the region, and currently serves as general counsel for various aerospace contractors and suppliers and non-profit space organizations. Babst Calland is also in partnership with the Department of Defense and U.S. Space Force’s AFWERX/SpaceWERX hub in Pittsburgh, and is a founding member of the Pittsburgh-based Keystone Space Collaborative and the Moonshot Museum,
“We look forward to partnering with Jeff on many new endeavors as we forge new pathways in the aerospace, aviation and airport industries and helping our existing clients in these sectors to grow and expand,” said Justine Kasznica, shareholder, and chair of Babst Calland’s Emerging Technologies practice.
With demonstrated experience as a naval aviator flying in combat, an in-house attorney, airport general counsel, and legal and business advisor to multiple clients in the aviation and technologies industries, Immel is affiliating with Babst Calland to broaden its capabilities to meet the evolving and dynamic legal and regulatory challenges facing these highly regulated fields.
“Aviation, airport, and aerospace law are complex and rapidly evolving disciplines and demand quick answers to difficult problems. Joining forces with Babst Calland’s multidisciplinary legal and regulatory team is a welcome opportunity to focus on the complex needs and expectations of companies with emerging technologies,” said Immel.
“Partnering with Jeff further represents Babst Calland’s commitment to continue to meet the legal and regulatory needs of our clients,” said Donald C. Bluedorn II, Managing Shareholder. “Jeff is well-known in the industry and has a great reputation among local, state and federal regulatory agencies. We’re very pleased to have him as part of our team.”
To view the full article, click here.
The Current (PA Chamber Business Blog)
(by Christina Manfredi McKinley)
On July 31, 2024, the Pennsylvania Chamber will offer a free webinar addressing the effect on the business community of three significant administrative law cases from the Supreme Court’s recently concluded term: Loper Bright, Corner Post, and Ohio v. EPA.
Moderated by the Chamber’s General Counsel and Vice President of Government Affairs Megan Martin, this experienced panel will discuss and debate some of the likely consequences for Pennsylvania’s business community in this new frontier of administrative law. Whether individually or collectively, the import of these cases on the existing administrative state cannot be understated. Particularly for businesses, which nearly always are subject to federal regulations in some capacity, these cases create both significant opportunities and corresponding risks.
The United States is, in part, governed federally by what has come to be known as “the administrative state.” That term refers to the network of administrative agencies—operating under the direction of the Executive Branch—that frequently write, interpret, and enforce their own rules, which, in turn, apply to the communities they regulate. The administrative state is expansive and includes agencies touching on nearly every facet of American life, from tax to immigration, the environment to government land, and labor to finance.
This past term, the United States Supreme Court (“SCOTUS”) handed down a number of decisions, which, individually and collectively, have the potential to reshape the administrative state as we know it:
- In Loper Bright v. Raimondo, SCOTUS overruled its 1984 decision in Chevron USA, Inc. v. Natural Resources Defense Council. That decision was the seminal case creating what had long been known as Chevron. It required courts interpreting claims brought under the Administrative Procedure Act to apply a two-step process: (1) did the statute at issue have an ambiguity?; and (2) if so, was the agency’s interpretation of that ambiguity reasonable? Under Loper Bright, a reviewing court now is directed to interpret statutory ambiguities itself, without deferring to the agency’s interpretation.
- In Corner Post Inc. v. Board of Governors, the Court held that agency rulemaking may be challenged long after a rule is finalized. Previously, most appellate courts that had addressed the issue (save one) had held that the six-year statute of limitations began to run from the publication of the rule. Corner Post holds instead that the statute of limitations for regulatory challenges does not start ticking until a plaintiff is injured by agency action.
- In Securities and Exchange Commission v. Jarkesy, SCOTUS held that under the Seventh Amendment, the Securities and Exchange Commission must bring civil-penalty actions for securities fraud in federal court—where the defendant is entitled to a jury. It can no longer bring those actions via an in-house administrative hearing.
- Finally, in Ohio v. Environmental Protection Agency, the Court temporarily halted the EPA’s “Good Neighbor” Rule, which applied EPA’s federal Clean Air Act implementation plan against the applicant states. Of importance to the Court’s holding was that commenters had raised concerns during the rulemaking process about what would happen if some states dropped out of the plan; however, in the Court’s view, EPA did not sufficiently address these concerns.
In terms of their ultimate effect on the business community, these cases create more questions than they answer, but it is safe to say that the ramifications might well be far-reaching. By way of example, businesses might feel emboldened to challenge agency rulemaking with renewed optimism for their chances of success in the wake of Chevron’s demise. Similarly, businesses that previously could not have challenged a rulemaking at the date of its publication (e.g., like Corner Post, which was not in existence at the time of the rulemaking), might be able to raise challenges years after a rule goes into effect.
Conversely, there is likely to be significantly more litigation, which leads to short-term uncertainty and more expense for the business community. So, too, longer rulemaking processes, with more interagency coordination and slower resolution timetables as rules wind their way through the courts system, likely will create added costs and short-term uncertainty for businesses.
These issues all cut both ways, however. For example, in years past, statutory interpretations frequently changed with different administrations. The new regime, in which courts will resolve many statutory ambiguities, is likely to create more long-term stability. Thus, the effect on business in the short-term, as these issues are resolved over years of litigation, is likely to be uncertainty and added cost. But in the long-term, compliance with agency mandates that are not subject to changing interpretations over different administrations ultimately is likely to save costs for businesses. The one certainty is that the discussion of these and other issues on July 31 at 10:30 a.m. is sure to be an interesting one. Please consider joining us.
To view the full article, click here.
Christina Manfredi McKinley is a shareholder with Babst Calland. She will be a panelist during the webinar, “What Every Business Needs to Know About Recent SCOTUS Rulings.”
The Legal Intelligencer
(by Jean Mosites, Sloane Wildman and Amanda Brosy)
Per- and poly-fluoralkyl substances (PFAS), known as “forever chemicals” due to their persistence in the environment, have been manufactured and used in a variety of industries for nearly 80 years. Following decades of concerns with human health effects and environmental contamination, the United States Environmental Protection Agency (EPA) laid out its PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024 (PFAS Roadmap) and emphasized the need to ensure science-based decision making. PFAS Strategic Roadmap: EPA’s Commitments to Action, 2021-2024, at 7 (October 2021) https://www.epa.gov/system/files/documents/2021-10/pfas-roadmap_final-508.pdf. As EPA notes: “Regulatory development, either at the state or federal level, would greatly benefit from a deeper scientific understanding of the exposure pathways, toxicities, and potential health impact of less-studied PFAS.” The most researched of the tens of thousands of PFAS are PFOA and PFOS, so EPA’s initial regulatory efforts focused on those two compounds. But, as described below, the regulations developed under EPA’s PFAS Roadmap go beyond PFOA and PFOS, inviting scrutiny by the public, regulated entities, and various stakeholders.
PFAS are a group of manmade chemicals identified by chains of extremely durable fluorine and carbon bonds that have been manufactured and used in the U.S. since the 1940s. While the PFAS family of chemicals includes the more commonly known and used PFOA, PFOS, and GenX, thousands of additional compounds are also classified as PFAS. Because of their useful properties, including their resistance to heat, water, oil, and stains, PFAS have been utilized in many different industries and incorporated into numerous consumer products over the years. Examples include firefighting foam (known as “AFFF”), roofing materials, coatings, stain-resistant carpets, water-resistant outdoor clothing and gear, food packaging, nonstick cookware, and personal care products, among others. Unfortunately, PFAS do not degrade via normal chemical, physical, or biological processes, and depending on the type, may build up in people, animals, and the environment over time. Decades of PFAS production and use on a vast scale have resulted in releases to the environment, and these chemicals can now be found in water, soil, air, and food as well as common materials found in homes and workplaces.
This spring, EPA finalized two of the most significant measures described in its PFAS Roadmap. On April 10, 2024, EPA finalized a National Primary Drinking Water Regulation for certain PFAS under the Safe Drinking Water Act (SDWA), 42 U.S.C. § 300f et seq. See PFAS National Primary Drinking Water Regulation, 89 Fed. Reg. 32,532 (Apr. 26, 2024) (codified at 40 CFR Parts 141 and 142). The final rule, which took effect on June 25, 2024, establishes the first-ever nationally enforceable drinking water standards (known as Maximum Contaminant Levels, or MCLs) for six PFAS compounds. The final rule also requires public water systems to test for these PFAS, notify the public of the results, and implement solutions if monitoring shows levels exceeding the MCLs.
Shortly thereafter, on April 19, 2024, EPA finalized a rule designating the two most studied PFAS, PFOA and PFOS, and their salts and structural isomers as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq. See Designation of Perfluorooctanoic Acid (PFOA) and Perfluorooctanesulfonic Acid (PFOS) as CERCLA Hazardous Substances, 89 Fed. Reg. 39,124 (May 8, 2024) (codified at 40 CFR Part 302). CERCLA provides EPA with the authority to address releases or potential releases of hazardous substances into the environment and holds polluting parties responsible for response costs incurred. Notably, EPA’s CERCLA rule, which took effect on July 8, 2024, is the first time EPA has made such designations using its authority to directly identify hazardous substances under CERCLA Section 102. Previously, all CERCLA hazardous substances had been designated by reference to other environmental statutes.
These significant rulemakings have spawned several judicial challenges against EPA and, in early June, three separate petitions for review of the SDWA rule were filed in the U.S. Court of Appeals for the District of Columbia Circuit by trade groups representing water utilities and chemical manufacturers, as well as The Chemours Company, a PFAS manufacturer.
The petition filed by the National Association of Manufacturers and American Chemistry Council on June 10, 2024, asserts that EPA has gone beyond its authority under the SDWA, that its action is arbitrary and capricious, and that the rule was promulgated without observing the required legal procedures. Petition for Review, Nat’l Association of Manufacturers, et al. v. U.S. EPA, et al., No. 24-1191 (D.C. Cir. Jun. 10, 2024).
The American Water Works Association and Association of Metropolitan Water Agencies’ petition, filed June 7, 2024, repeats these claims and notes the petitioners’ concern about “the impact of this rule on water affordability, particularly for households that struggle to pay for essential needs” because EPA has “significantly underestimated the costs of this rule and the adverse impact that it will have on individual water users.” Petition for Review, American Water Works Association, et al. v. U.S. EPA, et al., No. 24-1188 (D.C. Cir. Jun. 7, 2024).
The Chemours Company’s petition, filed June 10, 2024, focuses in particular on the scientific rationale underlying the MCL for GenX, another common PFAS compound. Among other things, Chemours argues that EPA based the MCL on the same toxicity assessment that supported a “fundamentally flawed” 2022 Drinking Water Health Advisory, which Chemours is currently challenging in the Third Circuit Court of Appeals. Petition for Review, The Chemours Company FC, LLC v. U.S. EPA, et al., No. 24-1192 (D.C. Cir. Jun. 10, 2024).
As of June 12, 2024, all the SWDA petitions were consolidated and now appear at docket No. 24-1188, and the parties recently filed individual non-binding statements of issues (SOI). A common theme in these SOIs is EPA’s choice to adopt MCLs for mixtures of PFAS, specifically using a novel “hazard index” approach, which the petitioners claim was procedurally improper and not based on the best available science. See, e.g., Petitioners’ Statement of Issues to Be Raised, Nat’l Association of Manufacturers, et al. v. U.S. EPA, et al., No. 24-1188 (D.C. Cir. Jul. 10, 2024). On June 28, 2024, two motions for leave to intervene in support of U.S. EPA were filed: one by a number of community groups and another by the Natural Resources Defense Council (NRDC).
Meanwhile, the Chamber of Commerce of the USA, Associated General Contractors of America, Inc., and National Waste & Recycling Association filed a petition on June 10, 2024, challenging the CERCLA hazardous substance listing. Their July 12, 2024, Non-Binding SOI indicates they will challenge whether EPA must consider costs prior to a CERCLA § 102(a) designation, whether the hazardous substance listing is based on EPA’s erroneous interpretation of CERCLA, and whether EPA violated the U.S. Constitution “by, for example, imposing retroactive liability through the Final Rule.” Non-Binding Statement of Issues, Chamber of Commerce of the USA, et al, v. U.S. EPA, et al., No. 24-1193 (D.C. Cir. Jul 12, 2024). On July 10, 2024, community groups and the NRDC filed an unopposed motion for leave to intervene in support of U.S. EPA. Because CERCLA allows 90 days from the date a regulation is promulgated to seek review, it is certainly possible that additional lawsuits will be filed before the deadline of August 6, 2024.
Despite this flurry of recent regulatory activity, some feel that EPA has not gone far enough to regulate PFAS. For example, on June 6, 2024, a group of farmers and ranchers based in Texas filed a citizen suit under the Clean Water Act (CWA) (33 U.S.C. § 1251 et seq.) in the U.S. District Court for the District of Columbia claiming that EPA violated its non-discretionary duty to regulate PFAS in biosolids. Complaint, Farmer, et al. v. U.S. EPA, et al., No. 24-cv-1654 (D.D.C. Jun. 6, 2024). According to their complaint, the plaintiffs’ “property, livelihoods, and health have been harmed by PFAS contamination in sewage sludge spread on a neighbor’s property.” The plaintiffs request that the court declare EPA’s actions to be in violation of the CWA and the Administrative Procedure Act (5 U.S.C. § 551 et seq.), order EPA to regulate eleven different PFAS compounds in biosolids by the earliest practicable date, and award them reasonable attorneys’ fees, among other things.
All of these cases are in their earliest stages, and as of this writing on July 15, 2024, upcoming filings in each will impact how they proceed through the judicial system. Further complicating the evolving regulatory and litigation landscape, the United States Supreme Court’s June 28, 2024 landmark decision Loper Bright Enterprises, et al. v Raimondo, Secretary of Commerce, et al., No. 22-451 (Jun. 28, 2024) (together with No. 22–1219, Relentless, Inc., et al. v. Department of Commerce, et al), struck down the legal standard known as “Chevron deference,” which for years provided that judges should defer to a federal agency’s interpretation of its statutory authority when the law is silent or ambiguous on the statutory question at issue. The Loper Bright decision means that lower courts evaluating challenges to EPA rulemakings, such as those described here, will no longer apply Chevron deference to EPA’s interpretation of the environmental statutes implicated in the litigation.
Challenges to new environmental rules, especially when those rules relate to emerging contaminants, are to be expected. As EPA and others are aware, only a handful of the thousands of compounds that have been identified as PFAS have been studied closely, and the science related to PFAS health effects is still developing. As the science proceeds and EPA implements the actions outlined in its PFAS Roadmap, the PFAS regulatory environment will remain uncertain, and additional litigation will follow.
Jean Mosites is a shareholder in Babst Calland’s Pittsburgh office, Co-Chair of the Environmental Group, and Chair of the firm’s PFAS Work Group. Ms. Mosites’ practice includes all facets of environmental law, including site remediation under state and federal programs, environmental compliance in the energy sector, and administrative appeals of agency actions. Please contact her at 412-394-6468 or jmosites@babstcalland.com.
Sloane Wildman is a shareholder in Babst Calland’s Washington, D.C. office, a member of the Environmental Group and the firm’s PFAS Work Group. Ms. Wildman’s practice spans a broad range of federal and state environmental programs, and includes regulatory compliance counseling and enforcement, with a particular focus on hazardous and solid waste issues, as well as site remediation. Please contact her at 202-853-3457 or swildman@babstcalland.com.
Amanda Brosy is an associate in Babst Calland’s Washington, D.C. office and a member of the Environmental Group and the firm’s PFAS Work Group. Ms. Brosy’s practice is primarily devoted to solid and hazardous waste issues, including counseling clients on permitting, enforcement, and government investigations, as well as administrative appeals and litigation in state and federal courts. Please contact her at 202-853-3465 or abrosy@babstcalland.com.
To view the full article, click here.
Reprinted with permission from the July 23, 2024 edition of The Legal Intelligencer© 2024 ALM Media Properties, LLC. All rights reserved.
Morgan M. Madden recently joined Babst Calland as an associate in the Energy and Natural Resources, Public Sector and Employment and Labor groups. Ms. Madden represents traditional and renewable energy industry clients in land use and other local regulatory matters. She also has served as a solicitor for several Pennsylvania municipalities and municipal authorities. Ms. Madden provides a wide range of services to clients in both the public and private sectors, with an emphasis on land use, zoning, planning, labor and employment advice, and litigation.
Prior to joining Babst Calland, Ms. Madden served as an associate with Eckert Seamans Cherin & Mellott, LLC. She is a 2017 graduate of Widener University Delaware Law School.
TEQ Hub
(by Chris Farmakis, Susanna Bagdasarova, Kate Cooper, and Dane Fennell)
By now, you have likely heard about the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information Reporting Rule (the “Rule”) from your accountant, attorney, or business colleagues. Promulgated under the Corporate Transparency Act (CTA), the Rule requires most business entities to disclose information to FinCEN about their “beneficial owners”: individuals who directly or indirectly own or control such entities.
Enacted as part of the Anti-Money Laundering Act in 2021, the CTA is intended to “prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity.” The Rule aims to enhance transparency and support the mission of the CTA by requiring domestic and U.S. registered foreign entities to report information about their beneficial owners to FinCEN. Most entities in the U.S. will likely be required to comply with the Rule, and FinCEN estimates approximately 32 million business will be required to make a filing. The Rule exempts 23 types of entities from reporting requirements, primarily large or regulated entities already subject to various reporting requirements, such as banks, SEC-reporting companies, insurance companies, and ‘large operating companies’, as well as wholly owned subsidiaries of the foregoing. Entities formed before January 1, 2024, have until 2025 to comply, while entities formed in 2024 have a 90-day compliance period.
Under the Rule, reporting companies must provide detailed personal identifying information for each individual beneficial owner, including name, date of birth, residential street address, and unique identifying number (such as a passport or driver’s license number). A ‘beneficial owner’ is a natural person who directly or indirectly owns or controls at least 25% of the ownership interests of a reporting company or who exercises ‘substantial control’ over the reporting company. Both ‘substantial control’ and ‘ownership interests’ are defined broadly to prevent loopholes allowing corporate structures to obscure owners or decision-makers. Companies formed after January 1, 2025, must also provide this information for ‘company applicants’, the individuals who make or direct the filing of a reporting company’s formation or foreign registration documents. The Rule also requires supplemental filings to be made within 30 days of any change to any of the reported information, for example, a change in residential address. Businesses will need to monitor changes in ownership and management throughout the year for compliance purposes.
FinCEN is authorized to disclose the reported information upon request under specific circumstances to federal agencies engaged in national security, intelligence or law enforcement activities and to state local and tribal law enforcement agencies, as well as certain other limited entities. Failure to comply with the requirements may result in potential civil and criminal consequences, including civil penalties of up to $500 per day a violation has not been remedied and criminal penalties of $10,000 and/or up to two years in prison for willful noncompliance.
The future of enforcement is uncertain as the Rule is currently being challenged in the courts on constitutional grounds. Reporting requirements have been paused for certain entities following an injunction issued by the Northern District of Alabama on March 1, 2024, which ruled the CTA unconstitutional because it exceeds Congress’s enumerated powers. With this and other cases challenging the validity of the Rule making their way through the courts, what should companies do in the meantime? Given the uncertainty about the constitutionality of the Rule and future enforcement, we recommend the following:
- New entities formed or registered on or after January 1, 2024, and before January 1, 2025, should comply with the applicable reporting requirements and make their filings within 90 calendar days after formation or registration.
- Existing entities formed or registered prior to January 1, 2024, should wait until the fall to begin their compliance efforts. This will allow time for further legal challenges or administrative guidance to develop without prematurely expending resources in the event the Rule is modified or suspended.
Every entity organized under U.S. law or registered to do business in the U.S. will need to determine (i) whether it is exempt from reporting requirements and (ii) if not, what information it must report. Companies with simple management and ownership structures may be able to navigate the filing on their own. However, where complex management or ownership structures or uncertainty about determinations of beneficial ownership or substantial control exist, an attorney can help you avoid missteps.
To read the full article, click here.
Law360
(by Joseph Schaeffer and Jessica Deyoe)
On June 28, 2024, the modern administrative state died with the United States Supreme Court’s overruling of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Born in obscurity as a six-justice plurality opinion on the meaning of “stationary source” under the Clean Air Act, its two-step framework for resolving ambiguities in agency-administered statutes soon catapulted Chevron into the most-cited opinion in the Supreme Court’s canon. That framework required courts reviewing agency’s statutory interpretations to ask, first, whether Congress had clearly spoken to the precise question at issue. If so, the Congressional intent controlled over any contrary agency interpretation. But, if not, the Court was to defer to the agency as long as it offered a permissible construction of the statute, even if that construction was not the one the Court would have reached on its own.
Chevron and its two-step framework enjoyed a charmed childhood as a perceived means to achieving uniformity in interpretation of agency-administered statutes. But as Chevron entered its teenage years, and particularly once it entered adulthood, its original luster began to tarnish. Members of the bench and bar began to question how the deference owed to agency interpretations under Chevron could be squared with Congress’s directive in the Administrative Procedure Act that “the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.”[1] And some members of Congress and the broader public bemoaned Chevron as transferring power away from the legislative to the executive branch, enabling each new administration to offer a new gloss on statutory enactments that the prior administration had thought settled.
By the time the most recent question of Chevron’s continued vitality reached the Supreme Court in the consolidated cases of Loper Bright Enterprises and Relentless, Inc.,[2] the decision was a zombie. Not having been applied at the Supreme Court since 2016 and questioned by several of the justices in separate opinions, its death was virtually assured. But lower courts, bound by precedent, for the most part continued to apply it. Justice Roberts’ opinion formally overruling Chevron was thus a formality, but a necessary one nonetheless to inform and direct lower court review of federal administrative agency actions.
Writing for the majority, Justice Roberts adopted the central legal criticism of Chevron as the foundation of the Court’s holding: by requiring courts to defer agency interpretation of ambiguous statutory enactments, Chevron ran counter to the Congressional commandment in the Administrative Procedure Act for courts to “decide all relevant questions of law”[3] and to Constitutional separation-of-powers principles, as well. And because Chevron had started on a shaky legal footing, proved unworkable in practice, and experienced a lengthy period of desuetude at the Supreme Court, not even stare decisis could save it from death.
Chevron, however, did not “go gentle into that good night.” Its two-step framework continued to be applied by lower courts up to the moment of its death. And Justice Kagan, writing for the three Justices in dissent, denied any contradiction with the Administrative Procedure Act, arguing that that statute does not compel the de novo statutory review required by Justice Robert’s majority opinion, while bemoaning the Supreme Court’s lack of respect for stare decisis and the practical consequences of having judges interpret ambiguous provisions in complex technical statutes. Justice Kagan also expressed concern for the application of the many post-Chevron statutory enactments that assumed application of an interpretative framework that is no longer. She further predicted uncertainty as agency interpretations, once thought settled, will be subject to challenge. In that sense, Justice Kagan authored an obituary preceding ours.
Chevron was preceded in death by Securities and Exchange Commission v. Jarkesy.[4] Another Justice Roberts opinion from just a day earlier, Jarkesy applied the Seventh Amendment to invalidate the SEC’s use of in-house administrative law judges to seek civil penalties under antifraud provisions in agency-administered statutes. Those claims must henceforth be prosecuted in federal court where defendants may be tried by a jury of their peers. Similar provisions in approximately 200 other federal statutes are likely to soon face similar challenges, if not to fall soon. Chevron and Jarkesy thus mark the end of the modern administrative state, where agencies could offer their own interpretations of ambiguous statutory provisions and then enforce their interpretations in in-house administrative forums with less formal procedural rules.
Though its modern iteration died with Loper Bright and Jarkesy, the administrative state lives on. Chevron is survived by the cases decided under its two-part framework, with the majority noting that “mere reliance” on Chevron is not enough by itself to qualify as a “special justification” for overruling a decision. Chevron also is survived by Skidmore,[5] under which agency interpretations and opinions, even on legal questions, are entitled to respect consistent with “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” And Chevron further is survived by Auer,[6] under which judicial deference is required of agencies’ interpretations of their own regulations. Neither decision, however, is a substitute for the scope and significance of deference that agencies were previously afforded under Chevron.
Though much about the post-Chevron landscape remains to be determined, the courts now have a much larger role in saying what the law is—not only at the interpretative stage under Loper Bright but also at the enforcement stage under Jarkesy.
Joseph V. Schaeffer is a shareholder and co-chair of the appellate practice group at Babst Calland Clements and Zomnir PC.
Jessica L. Deyoe is an associate at the firm.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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Reproduced with permission. The article was first published on Law360, July 8, 2024.
[1] 5 U.S.C. § 706.
[2] Loper Bright Enterprises Inc. v. Raimondo, No. 22-451, 603 U.S. — (2024).
[3] 5 U.S.C. § 706.
[4] U.S. Securities and Exchange Commission v. Jarkesy, No. 22-859, 603 U.S. — (2024).
[5] Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).
[6] Auer v. Robbins, 519 U.S. 452 (1997).
Pretrial Practice & Discovery
American Bar Association Litigation Section
(by Lucy Wiesner)
Under the Federal Rules of Civil Procedure, parties may obtain discovery regarding any nonprivileged matter that is relevant to either party’s claim or defense and proportionate to the needs of the case. While irrelevant information falls outside the scope of the express language of the rule, courts are generally reluctant to allow parties to redact irrelevant information contained within an otherwise responsive document.
A recent decision from the Southern District of New York provides helpful guidance on when relevancy redactions may be appropriate and how parties can avoid motions practice to resolve disputes over their scope.
The case Kaiser Aluminum Warrick, LLC v. U.S. Magnesium, LLC, No. 22-cv-3105 (JGK) (KHP) (S.D.N.Y. Feb. 27, 2023) concerned the defendant’s failure to fulfill its contract to supply magnesium to the plaintiff. The defendant relied on a force majeure defense, citing unexpected equipment failures. During discovery, the defendant produced several otherwise responsive documents with relevance redactions, to which the plaintiff objected. The plaintiff moved the court to require the defendant to produce the challenged documents in full “arguing that redactions for relevance are disfavored when there is a protective order in place, as one is here.” Id. at *1. The defendant responded that the redacted information was “irrelevant and competitively sensitive, and therefore, it should not be required to be produced in unredacted form.” Id.
The court held that where relevancy redactions “are consistent with Rule 1 and Rule 26 and do not deprive the other party of context, they may be appropriate” but advised that “a party should request permission to make such redactions in advance of production.” Id. at *2. Even where there is a stipulated protective order in place, “a party should not necessarily be denied the opportunity to redact if redacting would not otherwise prejudice the other side or delay the case.” Id. The court acknowledged that a particular concern with relevancy redactions “is that they can lead to motion practice . . . which often creates additional expense and delay” and suggested that such a risk could be minimized “if a producing party discusses its desire to make such redactions with its adversary in advance of its production and seeks advance permission from the Court to make them.” Id.
Following in camera review, the court found that the challenged documents “consist[ed] of monthly reports containing detailed financial information, results of research on competitors in the market, and reports on segments of the business unrelated to magnesium operations (such as information about its lithium plant and production). They also contain[ed] information about magnesium production.” Id. at *1. While the defendant had not sought permission to make relevancy redactions, the court had “already resolved discovery disputes in [defendant’s] favor concerning production of information about its Lithium plant and finances, holding this information to be irrelevant to the force majeure defense and not proportional to the needs of the case.” Id. at *2. Therefore, preventing the defendant from redacting such information would “run[] contrary to” the court’s prior discovery rulings. Id.
However, the court challenged the extent of defendant’s redactions, advising that “[h]ad [the defendant] sought permission before redacting, the court would have advised it to redact in a different manner than it did.” Id. While the court upheld the majority of the relevancy redactions, it ordered the defendant to unredact certain relevant information regarding the company’s magnesium operations and all column/row descriptors and graph titles contained within the reports so that the plaintiff would have the context necessary to determine the type of information that was redacted.
Overall, there are two main lessons to take away from this opinion. First, relevancy redactions should be applied conservatively in a way that preserves necessary context for the opposing party. Second, while some discovery disputes are inevitable, the need for motions practice can be significantly minimized if the parties discuss how they are going to handle relevancy redactions with each other and with the court in advance of production.
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© 2024. Discovery Disputes: Best Practices from the Bench, Pretrial Practice & Discovery, American Bar Association Litigation Section, June 28, 2024 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
PIOGA Press
(by Jean Mosites and Gina Buchman)
On May 30, 2024, Vermont Governor Philip Scott allowed S.259, An act relating to climate change cost recovery, to become law without his signature. S. 259, entitled the Climate Superfund Act, will require the development of claims to shift the cost of alleged climate-related impacts in Vermont onto the companies that produced fossil fuels responsible for greenhouse gas (GHG) emissions.
This bill is the first of its kind to become law in the United States, and similar legislation is pending in Massachusetts, New York, and Maryland. Borrowing some concepts from the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), or Superfund, which imposes strict liability for cleanup of contaminated sites on potentially responsible parties, this Act seeks to assign financial liability for climate-related impacts on the companies that extracted and refined petroleum products and other fossil fuels. Like CERCLA, the Act imposes retroactive liability on entities having conducted lawful business activities in the past.
Vermont’s Act establishes a Climate Superfund Cost Recovery Program to be administered by the Climate Action Office of the Agency of Natural Resources. The Vermont Treasurer will be required to assess the cost of GHG emissions to the state and its residents during the period January 1, 1995 through December 31, 2024. The Agency of Natural Resources will apportion liability and make cost recovery demands to “Responsible Parties,” those entities engaged in the trade or business of extracting fossil fuel or refining crude oil responsible for more than one billion metric tons of covered greenhouse gas emissions during the covered period.
Funds received from these companies will be deposited in the Climate Superfund Cost Recovery Program Fund and used for climate change adaptation projects. A Responsible Party’s first payment would be due six months after the cost recovery demand is made and should be at least 20% of the total demand. Subsequent payments of not less than 10% of the total demand would be due annually thereafter until the entire demand is received.
The Act also requires the Agency of Natural Resources to submit a report to the General Assembly on or before January 15, 2025 regarding the feasibility of and progress towards implementing the requirements of the Act. The Agency will also be required to adopt rules implementing the Act. Rules regarding methodologies to identify Responsible Parties and determine their share of covered GHG emissions and requirements for registering entities that are responsible parties must be finalized by January 1, 2027. A rule for the adoption of a Resilience Implementation Strategy to identify and prioritize climate change adaptation projects and disperse funds must be finalized by January 1, 2026.
Instead of signing or vetoing the bill, the Governor allowed the bill to become law after five days and sent a letter to the Vermont General Assembly. This letter expressed his concerns that the $600,000 appropriated by the legislature to cover implementation of the Act would be inadequate to complete the required cost analysis, which he expects to meet significant scrutiny and legal challenges.
Legal challenges to both the law and any regulations promulgated pursuant to it are certainly expected. Challengers are likely to target the methodologies used to determine Responsible Parties, the limited scope of definition of Responsible Parties and the decision to hold what may be just a few companies liable for the entire impact of GHG emissions, and the lack of connection between the adaptation projects and the actions of the Responsible Parties.
It is also worth noting that the Climate Superfund Act is not the state’s only active initiative to hold energy companies liable for their activities within the state. The state also filed a consumer protection lawsuit in Vermont state court in 2021 against a dozen oil companies, alleging deception and unfair business practices related to the sale of their products. Vermont v. Exxon Mobil Corp. (Vt. Super. Ct.). The defendant oil companies removed the case to federal district court in Vermont, but, like other similar lawsuits, it was ultimately remanded back to state court in February 2024. Vermont v. Exxon Mobil Corp., 2:21-cv-00260 (D. Vt.). In this litigation, Vermont seeks the defendants to “disgorge all funds acquired and/or retained as a result of any acts or practices found to be unlawful,” among other relief sought.
Babst Calland continues to track climate change legislation and litigation, as well as federal and state regulatory developments. For more information on this and other climate change-related matters, please contact Jean M. Mosites at (412) 394-6468 or jmosites@babstcalland.com, Gina F. Buchman at (202) 853-3483 or gbuchman@babstcalland.com.
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Reprinted with permission from the June 2024 issue of The PIOGA Press. All rights reserved.
The Legal Intelligencer
(by Max Junker and Anna Jewart)
Noted wordsmith Justice Michael Musmanno articulated the rationale for the “deemed approval” concept in Pennsylvania land use law noting: “Without this kind of coercive determination, a Board could effectively prevent the erection of needed structures through the simple process of luxurious lolling while spiders of inattention spin webs of indifference over pending public problems.” To avoid luxurious lolling by local governments, the Legislature included mandatory deadlines in the Pennsylvania Municipalities Planning Code, 53 P.S. § 10101 et seq. (“MPC”), which governs municipal regulation of zoning, subdivision and land development within the Commonwealth. The MPC sets forth strict requirements for when and how municipalities make decisions on land use applications, in addition to how they communicate those decisions to the applicant. A failure to comply with these requirements may result in a deemed approval of the underlying application.
Within days of each other, the Commonwealth Court issued two reported opinions which affirmed the deemed approvals of land use applications. CRG Services Management, LLC v. Lowhill Township, No. 1091 C.D. 2023 (Pa. Cmwlth. June 3, 2024) (deemed approval of a land development plan for a warehouse because the township’s denial letter was inadequate) and Folk v. Mifflin Township Zoning Hearing Board, 969 C.D. 2023 (Pa. Cmwlth. June 5, 2024) (deemed approval for a variance to operate a wedding venue on a farm because the zoning hearing board did not commence the public hearing within 60 days of application’s submission). In light of these cases, this article provides a brief overview of key MPC provisions which could result in a deemed approval of a land use application.
Timing Requirements: One way an application can be deemed approved is by a failure to meet the statutory deadlines to consider and render a decision on an application. Most deadlines contained in the MPC are mandatory unless waived or extended by the applicant in writing or on the record.
- Zoning: the deadline for a decision on a zoning application depends on what type of application it is, and requires a review of both the MPC and local ordinances.
- Zoning Permit Applications/ Uses Allowed by Right: The MPC provides no statutory timeline in which a zoning officer must render a decision on a zoning permit application. Instead, §909.1, allows an applicant to appeal to the zoning hearing board (ZHB) on the “failure to act on the application.” However, the local zoning ordinance may establish a timeline for review. A deemed approval of the application may occur if the zoning officer fails to act within the deadline set by the ordinance. If no such deadline is set, the only remedy available to the applicant is to appeal to the ZHB.
- Variances and Special Exception Applications: Variances and Special Exception applications are handled through a quasi-judicial public hearing process before the ZHB. Section 908 of the MPC governs how public hearings are conducted before the ZHB. Section 908(1.2) in relevant part requires that the first hearing before the board be commenced within 60 days from the date of receipt of the applicant’s application, unless an extension of time has been granted. Each subsequent hearing must be held within 45 days of the prior hearing, absent agreement otherwise. Under §908(9) the ZHB must render a written decision on the application within 45 days after the last hearing. A failure to commence, conduct, or complete the hearing as required by §908(1.2) or a failure to render a timely decision under §908(9) can result in a deemed approval of the application. The Court in Folk found the applicant’s variance application was deemed approved by the ZHB’s failure to commence a hearing on the application within 60 days of receipt of the application as required by §908(1.2).In addition, under §908(10) a copy of the final decision, or as discussed further below, the findings, must be delivered to the applicant personally or mailed to him or her not later than the day following its date. However, the courts have determined that, where appropriate findings of fact and conclusions of law are ultimately provided, a failure to provide notice of the decision as set forth in §908(10) alone does not result in a deemed approval.
- Conditional Use Applications: Conditional use applications are also handled through a quasi-judicial public hearing process, this time before the governing body of the municipality. Section 913.2 of the MPC regulates how governing bodies handle conditional use hearings. Although §913.2 does not establish a timeline to hold a first hearing on the application, it states that where the governing body fails to commence, conduct, or complete the required hearing as provided in §908(1.2) of the MPC, the decision shall be deemed to have been rendered in favor of the applicant. Consequently, the timing requirements in §908(1.2) are applicable to adjudication of a conditional use application (60 days to hold a first hearing). The governing body must make a written decision on the application within 45 days after the last hearing per §913.2(b)(1).
- Subdivision and Land Development: the MPC also governs how municipalities handle applications for subdivisions and land developments. These applications take many forms (lot consolidation, minor and major subdivision, , land development, etc.) and often involve a two-part approval process (preliminary and final). They may be handled either by the governing body of the municipality, or the planning agency / commission. However, in each case the applicant is required to submit a “Plat,” defined as a map or plan of a subdivision or land development. Section 508 of the MPC, governs a municipality’s process for rendering a decision on any Plat. The local subdivision and land development ordinance can establish shorter time limits for the review of Plats, but §508 requires that a decision must be made and communicated to the applicant no later than 90 days following the date of the regular meeting of the governing body or the planning agency (whichever first reviews the application) next following the date the application was filed. If the next regular meeting is more than 30 days following the date of the application, the 90-day period is measured from the 30ᵗʰ day following the date the application is filed. The decision needs to be communicated, in writing, to the applicant personally or mailed to the applicant’s last known address no later than 15 days following the date of the decision. A failure to render a decision and communicate it within the time allowed may result in a deemed approval of the application.
Form and Content Requirements: The second most common way that a deemed approval can occur is where a decision on the application is timely made, but not communicated to the applicant in the form or manner required by the MPC. Therefore, it is important to closely review how a decision needs to be communicated, and what it must contain.
- Zoning: Regardless of the type of zoning application, a decision on the application needs to be communicated to the applicant in writing. For conditional uses (§913.2(b)(1)), variances, or special exceptions, (§908(9)) where the application was contested or denied, the written decision is to be accompanied by findings of fact and conclusions of law together with the reasons for the decision. Any conclusions based on the MPC or any other rule or regulation needs to contain a reference to that provision and the reasons why the conclusion was deemed appropriate in light of the facts found. The purpose of these findings and conclusions is to aid appellate review if an appeal is filed.
- Subdivision and Land Development: Any decision on a “Plat” must be in writing. If the application is not approved as filed, the decision must specify the defects found in the application, and describe and cite to the specific provisions of the statute or ordinance which have not been met. In CRG Services, the municipality voted to deny a revised application for land development due to “[r]ecommendations from [the township] Planning Commission and Engineer.” However, it failed to specify the defects found in the application or describe the requirements which had not been met as required by §508 of the MPC by either specifying them in the denial letter or making an express incorporation of the Engineer’s letter. As a result, the Commonwealth Court determined that the application was deemed approved.
The Commonwealth Court’s affirmation of two deemed approvals in one week is a healthy reminder that although in general the law disfavors deemed approvals, where there is statutory authority for the same, municipalities must proceed with caution in how they handle applications. The provisions cited above are not exhaustive and municipalities are urged to contact their solicitor to discuss the relevant requirements for any application. There is an entire process for perfecting a deemed approval through a mandamus action or public notice, but that is an article for another day because our deadline has expired.
Robert Max Junker is a shareholder in the public sector, energy and natural resources, and employment and labor groups of Babst Calland. Anna S. Jewart is an associate in Babst Calland’s Public Sector Services group and focuses her practice on zoning, subdivision, land development, and general municipal matters,
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Reprinted with permission from the June 20, 2024 edition of The Legal Intelligencer© 2024 ALM Media Properties, LLC. All rights reserved.
Pittsburgh Business Times
(by Jenn Malik featuring Joel Bibby)
There’s no magic pill for weight loss – but many think we’re getting closer to having one with the widespread use of diabetes medications, also known as GLP-1s (glucagon-like peptide analogs). And employers with sponsored health plans are seeing a significant impact on their plan budgets from the increased use of these drugs.
“It used to be that the majority of (a company’s) prescription spend on their health benefits was really in specialty drugs,” said Jenn Malik, an attorney in the employment and labor and public sector groups at the law firm Babst Calland. “But now you’re seeing a shift to these GLP-1s that are really topping the charts.”
Primarily injected, the drug compounds, better known as Ozempic and Mounjaro approved for treating type 2 diabetes, and their approved-for-weight-loss lifestyle counterparts, such as brands commonly known as Wegovy and Zepbound, are made of the same active ingredient as the diabetes version, explained Joel Bibby, a licensed pharmacist and managing director of clinical services for Integrity Pharmaceutical Advisors. They work by affecting an enzyme in your gut that can help you feel full and help your body process blood sugars. In addition to treating diabetes, they can help with issues associated with diabetes, like being overweight, which affect many different body systems.
“Indications for use of these drugs are expanding. In March, they were approved to reduce the risk of certain cardiovascular events, like heart attack and stroke. There are also rumors of Wegovy’s pending approval for help with other conditions,” Malik said.
“The broadening use of GLP-1 medications is also driving employers to rethink their plan designs.
Consider these statistics: one in eight adults say they’ve taken a GLP-1 at some point in their lives and about six percent of adults say they’re currently taking the drug.* Applying these statistics to an employer plan with 1,500 covered lives that has six percent of its members using one of these medications, they could pay anywhere from about$900 to $1,500 per month for each member with a prescription. At $12,000 a year per utilizer – using six percent of a population of 1,500 – that can be more than $1.5 million per year that an employer spends for one drug,” Malik said.
To cover or not to cover
One consideration for employers when deciding to cover GLP-1s – along with the high cost and expanding indications – is determining eligibility for the medications. Some practical and legal ways for managing this while keeping an eye on spending and ensuring the members who need these drugs are getting them include:
- Requiring a diabetes diagnosis before someone is prescribed one of the medications.
- Instituting another type of intervention, like prohibiting a 90-day fill on the initial prescription. “The drugs have a lot of side effects; many people discontinue them,” Bibby said. “If you fill a 90-day prescription for $3,000, someone might go two weeks into taking the medication and have to stop and throw it away.”
- Including prior authorization criteria, like a certain body mass index (BMI), participation in exercise and diet programs or permitting only certain providers to prescribe these medications.
Employers with self-funded plans will likely have more options available to them to help control GLP-1 spend as opposed to fully-insured plans in terms of both controlling costs and determining the impact of GLP-1s on costs. “Prescription drug claims will come through pretty quickly,” Malik said. “So you can see spikes in utilization as they’re starting on almost a monthly basis for self-funded plans and the impact to your budget versus your fully-insured plans where utilization data is reviewed less frequently and health care renewals occur on a yearly basis,” Malik said.
Employers should also track their data – examining their current members’ use of these diabetes medications and the type of population requiring them, especially when it comes to achieving the long-term benefits of covering drugs that may result in reduced weight, less musculoskeletal injuries and improved cardiovascular conditions.
“But if your population is really transient, or you have a lot of turnover, it may not make sense for an employer – at least the weight loss drug component of it –because employers won’t really get the benefit of the cost savings in the form of reduced medical claims down the line,” Malik said.
Also, employers should keep in mind that currently, data doesn’t fully support temporary use of GLP-1 medications. In most cases, use must be continual to achieve ongoing benefits.
“The widespread utilization of GLP-1s cannot be understated,” said Malik.
To help navigate the increased use of GLP-1s, Malik and Bibby encourage employers to review the current utilization in their health care plan and use the resources available to help find the right solutions for their employees.
*According to the Keiser Family Foundation Health Tracking Poll
Business Insights is presented by Babst Calland and the Pittsburgh Business Times.
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The Authority
(by Michael Korns and Amanda Brosy)
Municipal authorities and other public entities in Pennsylvania have long been familiar with the weight and burden of DEP and EPA mandates and regulations. Whether it involves issues with stormwater infiltration, erosion and sediment control, or any number of issues related to water treatment, all too often authorities must correct issues that they did not cause. Given that history, authorities should brace themselves, because new regulations will put them in the crosshairs again.
PFAS – A pollutant that means forever.
The new issue facing authorities relates to a large group of man-made chemicals known as per- and polyfluoroalkyl substances, or “PFAS” for short. PFAS are resistant to heat, oils, stains, and water, and for that reason, PFAS have been incorporated into a wide variety of consumer products and industrial processes since the 1940s. They are ubiquitous in the environment and are known as “forever chemicals” because they do not readily break down in nature. Ongoing research shows a variety of potential health risks related to PFAS exposures.
Pennsylvania has adopted PFAS standards related to drinking water and environmental cleanup, and EPA, which is working to address PFAS pollution on multiple regulatory fronts, recently finalized the first-ever national drinking water standard related to PFAS. In December 2023, DEP also updated its NPDES Individual Industrial Wastewater permit application to include PFAS sampling. Applications going forward are required to include sampling for four PFAS: PFOA, PFOS, PFBS, and HFPO-DA (commonly referred to as GenX) as part of Pollutant Group 1 sampling. Because sampling is required under Pollutant Group 1, all industrial categories are subject to the sampling requirements.
The heart of the issue for authorities is this: the elimination of PFAS in drinking water is a regulatory priority for both EPA and DEP. This is an important goal, and with appropriate grant funding, authorities could be an important partner in removing these chemicals from both the natural environment and our own drinking water, as they have done with the elimination of lead water lines. Unfortunately, many of the existing and proposed regulations tend to take a less cooperative approach, requiring regulated entities to ensure that PFAS are eliminated from the material in their possession, regardless of whether that entity created or used the PFAS at issue.
As is immediately obvious to anyone reading this, PFAS regulation presents a massive challenge to municipal water and wastewater authorities. Because PFAS have been used in so many different products and industries, it is very likely that wastewater treatment plants are receiving water that already contains levels of PFAS that would be in violation of the upcoming DEP and EPA standards. Water treatment facilities may also find PFAS in water sources, whether surface or groundwater. Given the ubiquity of PFAS, even water treatment plants fed entirely from natural sources may find PFAS present at unacceptable levels.
Potential Impacts
The list of potential ways in which new PFAS regulations are likely to impact authorities is numerous, but a non-exclusive list includes the following.[1]
National Primary Drinking Water Regulation (NPDWR)
On April 10, 2024, EPA released a final NPDWR that sets legally enforceable limits (maximum contaminant levels, or MCLs) in drinking water for six different PFAS. The federal standard becomes immediately effective in Pennsylvania, replacing the prior Pennsylvania standards. Notably, the rule sets an MCL of 4 parts per trillion (PPT) for PFOA and PFOS. The NPDWR requires public water systems to complete their initial monitoring for the chemicals within three years and notify the public what levels are detected. Where PFAS are found at levels that exceed the new standards, systems must take steps to reduce those levels within five years. To help states implement testing and treatment at public water systems, $1 billion has been made available through the Infrastructure Investment and Jobs Act. With this new rule in place, water utilities and municipalities should begin evaluating the technical and cost implications of conducting testing and installing treatment systems to meet the NPDWR standards.
Pretreatment
The EPA is developing, or plans to develop, effluent limitation guidelines that address PFAS for multiple industries, including landfills and metal finishers. Many authorities accept wastewater from some of these industries. These guidelines are expected to include pretreatment standards that will need to be incorporated into pretreatment programs and reflected in the local limits with which all industrial users must comply.
Biosolids
Some authorities dispose of biosolids at landfills. As part of its PFAS Strategic Roadmap, EPA is currently conducting a biosolids risks assessment for PFOA and PFOS, two of the most studied PFAS. Risk assessments are used to characterize the nature and magnitude of potential harm to human health and the environment as a result of exposure to a chemical. EPA intends to finalize the risk assessment by December 2024. These risk assessments may result in additional testing requirements and/or restrictions for disposal or land application of biosolids.
Superfund Hazardous Substances Designation
On September 6, 2022, EPA published a Proposed Rule to designate PFOA and PFOS as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, aka Superfund). In the Proposed Rule, EPA identifies waste management and wastewater treatment facilities as potentially affected entities. However, EPA has said it will focus its enforcement efforts on manufacturers and other entities that have released PFOA and PFOS into the environment. To that end, EPA is also working on an enforcement discretion and settlement policy that will outline its priorities. The final rule and accompanying policy are expected to be issued sometime this spring. Meanwhile, EPA has also requested public input on whether to designate other types of PFAS, besides PFOA and PFOS, as CERCLA hazardous substances. In light of the Biden administration’s commitment to addressing PFAS issues on multiple fronts, we expect EPA to finalize the Proposed Rule and take steps to develop other rules to address PFAS releases to the environment under CERCLA and other federal environmental statutes.
EPA Information Collection Request
The EPA is working to develop a study of influent to publicly owned treatment works across the nation. The goals of the study are to identify categories of industrial users discharging PFAS; collect data on PFAS in domestic wastewater influent to treatment works; characterize PFAS from industrial users and domestic sources; collect data on adsorbable organic fluorine concentrations in wastewater; and better understand PFAS pass through in treatment works to biosolids and effluent.
What Now?
It is clear that authorities will be impacted by the evolving PFAS regulatory environment in a variety of ways. If finalized, the proposed regulations could require authorities to develop and implement pretreatment protocols for industrial waste and then hold authorities responsible for the PFAS that happen to enter their systems. While the EPA claims that it does not intend to make utilities a target of initial CERCLA enforcement, its proposed “hazardous substances” rule does not absolve utilities from responsibility for the PFAS in their systems that they did not create or use. This is particularly concerning because it may not be possible in all cases to identify the origin of PFAS in the system.
Authorities in Pennsylvania should not wait for potential enforcement to assess threats to their systems. If you are able to identify sources of PFAS, consider review of applicable pretreatment requirements on industrial customers. If there are PFAS in your system that you cannot identify the source for, then your Solicitor should be closely monitoring final approvals of the upcoming regulations to best understand what will be required of your authority in the months and years to come.
As the federal and state governments continue to take action to address PFAS across many program areas, Babst Calland attorneys continue to track these developments and are available to assist you with PFAS-related matters. For more information on how municipal authorities and other public entities can navigate the uncertainties and better understand the new rules and regulations, please contact Michael Korns at (412) 394-6440 or mkorns@babstcalland.com or Amanda Brosy at (202) 853-3465 or abrosy@babstcalland.com.
[1] This article was submitted for publication on April 12, 2024 and thus does not include any developments after that date.
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The Wildcatter
(by Nikolas Tysiak)
A few cases to report on this month.
Griffin v. Toland, 2024 WL 2269941 (W. Va. S. Ct. May 20, 2024). In a memorandum decision (i.e. – without oral arguments), the West Virginia Supreme Court sought to interpret intentions of the parties to a 1976 deed containing oil and gas reservation language. Hazel L. White acquired all the surface and ½ the oil and gas under a tract of 82 acres during her lifetime, one-half the oil and gas having been properly and effectively reserved by a predecessor in title pursuant to a 1943 deed. By deed dated June 29, 1976, Hazel White conveyed the 82 acres to Timmie and Vickie McMillan, with an exception of ½ the oil and gas. The exception language in the June 29, 1976 was reportedly identical to the reservation language used by Hazel White’s predecessor in title to retain the “other” ½ of the oil and gas via the 1943 deed. The 82 acres was purportedly conveyed multiple times following the June 29, 1976 deed, all containing language nearly identical to both the 1943 deed and the June 29, 1976 deed. Griffin, as successor to Hazel White, filed a declaratory judgment action claiming rightful ownership of the ½ oil and gas interest purportedly reserved under the June 29, 1976 deed, as against the current surface owners (Toland). The trial court found in favor of Toland, stating that the June 29, 1976 deed was ambiguous as to Hazel White’s intent – the language does not indicate whether Hazel indicated to retain the “remaining” one half of the oil and gas associated with the 82 acres, ½ of the ½ interest, or none of the oil and gas. After allowing parol evidence, the trial court found that none of the parol evidence regarding Hazel White’s intent at the time of the June 29, 1976 deed was enough to overcome the legal holding that ambiguity in a deed must be construed most strongly against the grantor. The Supreme Court agreed that the June 29, 1976 was ambiguous but further held that the ambiguity presented a material issue of fact, so sustaining a motion for summary judgment regarding the situation was inappropriate. The case was remanded to the trial court for further proceedings.
Callen v. Foertsch, 2024 WL 2176673 (Pa. Super. Ct. May 15, 2024). Also in a memorandum decision (non-precedential), the court was confronted with a question of whether a joint tenant with right of survivorship effectively broke the joint tenancy and created a tenancy in common before her death. Dan Callen and Elaine Callen-Foertsch inherited a tract of land as joint tenants with the right of survivorship in 1990. They jointly leased the land in 2009, each receiving ½ the royalties. After Elaine’s death in November 2021, her daughter, Mae Foertsch, recorded a “Pennsylvania Gift Deed” whereby Elaine purports to convey all her interest in land in Butler County (including the land at issue) to Mae. Dan maintained that, as the surviving joint tenant, all title to the land, and therefore the oil and gas royalties, passed to him by operation of law. Rather than deciding on the facts, the Superior Court issued an order based on the most technical of technicalities, holding that the appeal from the trial court was not appropriate because the appeal occurred before the trial court issued a true final order. The trial court had only quieted title in favor of Dan Callen, but failed to dispose of a counter claim for monetary damages by Mae Foertsch. Consequently, the case was remanded back to the trial court for further proceedings.
In Tera, L.L.C. v. Rice Drilling D, L.L.C. (2024-Ohio-1945), the Ohio Supreme Court faced a “bad-faith” trespass claim by the landowners (Tera) against Rice, claiming that operations in the Point Pleasant formation was a violation of the terms of the executed leases, which only specified the Utica and Marcellus formations as being affected. Both the trial court and intermediate appeals court (Ohio 7th district) agreed with this reasoning, granting and affirming a motion for summary judgment on the issue of trespass, respectively – stating that there was no triable issue of fact based on the language of the leases. The Supreme Court of Ohio disagreed on procedural grounds, finding that a triable issue of fact did exist, as the meaning of the phrase “the formation commonly known as the Utica Shale” could be, and clearly has been, construed to include more than the literal Utica Shale formations. In a great win for the oil and gas industry in Ohio, the motions for summary judgment arising from the bad faith trespass claims were reversed and remanded back to trial to determine what that phrase actually means in Ohio.
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Reprinted with permission from the MLBC June 2024 issue of The Wildcatter. All rights reserved.
FNREL Water Law Newsletter
(by Lisa M. Bruderly, Mackenzie M. Moyer and Jessica Deyoe)
On March 9, 2024, the Pennsylvania Department of Environmental Protection (PADEP) announced the availability of its draft National Pollutant Discharge Elimination System (NPDES) General Permit for Discharges of Stormwater Associated with Construction Activities (draft 2024 General Permit), which would apply to eligible projects proposing earth disturbance greater than or equal to one acre. See 54 Pa. Bull. 1263 (Mar. 9, 2024). PADEP accepted comments on the draft through April 8, 2024. PADEP’s draft 2024 General Permit includes significant changes compared to the PAG-02 General Permit currently in effect, set to expire on December 7, 2024 (2019 General Permit). To supplement these changes, PADEP is expected to update the Erosion and Sediment Module 1 and Post-Construction Stormwater Management (PCSM) Module 2 to be consistent with the draft 2024 General Permit upon reissuance.
The 2019 General Permit requires that proof of the recording of an instrument for post-construction stormwater management (PCSM) best management practices (BMPs), now referred to as stormwater control measures (SCMs), be submitted to PADEP or the County Conservation District (CCD) with the Notice of Termination (NOT) or a Transfer Application. The draft 2024 General Permit would require submission of the full recording and proof of the recording to PADEP before a pre-construction meeting is scheduled, as well as upon the submission of the NOT to ensure compliance. The draft 2024 General Permit would also require the use of a standard form to document the completion of each structural PCSM SCM, which must be signed by a licensed professional and submitted to PADEP or CCD within 30 days of completion of each SCM.
The draft 2024 General Permit would require site inspections to be conducted by qualified personnel only, with PADEP providing three options to demonstrate that a person is qualified. Existing permittees would have one year from the effective date of the 2024 General Permit, December 8, 2024, to implement this provision. PADEP’s draft 2024 General Permit would also require the submission of an annual report by December 7 of each year. This report would require information on the status of the project. For existing permittees, the draft 2024 General Permit would require a renewed NOI to be submitted by December 7, 2024, to remain covered under the reissued PAG-02 General Permit.
Additionally, the draft 2024 General Permit identified specific types of non-stormwater discharges that would be authorized during earth disturbance activities to be consistent with other PADEP General Permits for stormwater discharges. The U.S. Environmental Protection Agency’s (EPA) technology-based standards at 40 C.F.R. pt. 450 are incorporated into the effluent limitation requirements, in addition to two new requirements for construction dewatering water. Discharges would be required to be treated by an approved series of at least two BMPs.
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