Articles, Alerts & Perspectives

Data Privacy: A Friend or Foe of Artificial Intelligence

TEQ Hub

(by Kristen Petrina)

Artificial Intelligence (AI) is advancing at unprecedented speeds. AI relies on vast amounts of datasets for processing and model training, creating the challenge of balancing the benefits of AI, while protecting data privacy. As a result of improper data processing and usage, organizations are facing harsh penalties including AI usage prohibition, algorithm disgorgement, and multibillion dollar fines. When considering how to introduce AI into any organization, one of the first questions to consider is, “How can AI be utilized to drive innovation without violating privacy and misusing collected data?”

AI governance analysis should be under a privacy lens, as personal data is at the core of many opportunities that come with AI development. Privacy risks may result in societal and ethical impacts on individuals which speaks to the heart of responsible AI usage. Incorporating responsible AI practices is user specific to each organization and it is possible to protect privacy and drive innovation. In order to achieve both goals, organizations should consider data protection preventative measures before implementing AI into its processes.

• Data privacy should be addressed at the onset of AI implementation. Organizations should conduct risk assessments and consider data enablement through AI from the beginning before it becomes an issue. Generative AI in particular is self-learning, the more data fed into the model, the harder it will be to unwind or remove data if improperly used.
• AI and data privacy governance teams must work together from the beginning to address any risks that may arise. Organizations may consider forming an ethical AI committee engaging diversified team members to reduce potential bias in the development and design.
• Contemplate data inputs by asking questions such as what the existing and potential future data sources may be, what data will be collected, what are in the datasets, how to categorize the types of data, will the data modeling receive personal or sensitive data, should those things be included.
• Consider data outputs by asking questions such as what information will be displayed after processing, what is the impact of the processing, is there any potential for harm from the processing and results, what controls are needed at the data layer to mitigate the risks.
• Review regulatory and data privacy requirements that impact and influence AI to assess and address any privacy policy gaps as a result of the introduction of AI into the organization’s processes. Policies can include but are not limited to addressing transparency into training data origins, acceptable use policies, data quality, validation of algorithms to confirm the AI model meets the organization’s AI and data policies, and sharing or transfer of data with third parties.
• What consent did the data owner give, particularly what purpose did the owner agree to? When implementing AI, organizations can get ahead of consent issues by educating the data owner of the intended purpose and use of the data.
• Build privacy measures into the system’s architecture to guarantee alignment with purpose consent given by the data owner and careful treatment of the data.
• Is the value provided to the organization proportional to the data owners risk? If data is used, should it be minimized to strip identifying features, or is it essential to include information such as sensitive data to determine if the model is biased?
• Determine the permanence of the data, depending on how it is incorporated into the AI model, an enforcement action can result in the loss of years of data. Additionally, some states allow data owners to be forgotten. If data is not de-identified it is possible to remove it from the datasets, however, if the data is de-identified it will not be possible to determine how the data was used and for the data to be removed from the datasets, potentially requiring a retraining of the model.
• Implement data security and privacy controls for stored decommissioned AI systems and associated data.

Organizations must safeguard data and ensure privacy compliance within AI systems, however, that does not mean innovation cannot thrive. An organization that considers privacy from the onset of AI implementation can drive innovation while also protecting privacy and reducing the risk of future penalties.

To view the full article, click here.

Two Babst Calland Attorneys Named as 2025 Best Lawyers in America® “Lawyer of the Year”, 40 Selected for Inclusion in The Best Lawyers in America®, and 17 Named to Best Lawyers: Ones to Watch® in America

Babst Calland is pleased to announce that two lawyers were selected as 2025 Best Lawyers in America® “Lawyer of the Year” in Pittsburgh, Pa. and Charleston, W. Va. (by BL Rankings). Only a single lawyer in each practice area and designated metropolitan area is honored as the “Lawyer of the Year,” making this accolade particularly significant.

Receiving this designation reflects the high level of respect a lawyer has earned among other leading lawyers in the same communities and the same practice areas for their abilities, professionalism, and integrity. Those named to the 2025 Best Lawyers in America^® “Lawyer of the Year” include:

Blaine A. Lucas, Litigation – Land Use and Zoning “Lawyer of the Year” in Pittsburgh, Pa.

Timothy M. Miller, Litigation – Environmental “Lawyer of the Year” in Charleston, W. Va.

View the award recipients here.

In addition, 40 Babst Calland lawyers were selected for inclusion in the 2025 edition of The Best Lawyers in America^®, the most respected peer-reviewed publications in the legal profession:

• Chester R. Babst III – Environmental Law, Litigation – Environmental
• Donald C. Bluedorn II – Environmental Law, Litigation – Environmental, Water Law
• Lisa Bruderly – Environmental Law
• Joseph G. Bunn – Banking and Finance Law, Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law, Business Organizations (including LLCs and Partnerships), Commercial Transactions / UCC Law, Corporate Law, Mergers and Acquisitions Law, Mining Law
• Dean A. Calland – Environmental Law
• Matthew S. Casto – Commercial Litigation, Litigation – Environmental
• Frank J. Clements – Corporate Law
• Kathy K. Condo – Commercial Litigation, Energy Law
• James V. Corbelli – Commercial Litigation, Litigation – Environmental
• James Curry – Energy Law, Oil and Gas Law
• Mark K. Dausch – Commercial Litigation
• Julie R. Domike – Environmental Law, Litigation – Environmental
• Kevin K. Douglass – Natural Resources Law
• Christian A. Farmakis – Corporate Law and Real Estate Law
• Kevin J. Garber – Energy Law, Environmental Law, Litigation – Environmental, Natural Resources Law, and Water Law
• Steven M. Green – Energy Law
• Jennifer Hicks – Commercial Litigation and Energy Law
• Lindsay P. Howard – Environmental Law, Litigation – Environmental
• Robert Max Junker – Land Use and Zoning Law, Municipal Law
• Justine Kasznica – Corporate Law
• Stephen L. Korbel – Litigation – Labor and Employment
• Blaine A. Lucas – Energy Law, Land Use and Zoning Law, Litigation – Land Use and Zoning, and Municipal Law
• John A. McCreary Jr. – Labor Law – Management
• Sean M. McGovern – Environmental Law
• Christina Manfredi McKinley – Commercial Litigation
• Timothy M. Miller – Bet-the-Company Litigation, Commercial Litigation, Energy Law, Litigation – Environmental, Oil and Gas Law
• Matthew Moses – Mergers and Acquisitions Law
• Jean M. Mosites – Energy Law, Environmental Law
• Christopher B. Power – Arbitration, Commercial Litigation, Energy Law, Environmental Law, Litigation – Environmental, Litigation – Land Use and Zoning, Litigation – Municipal, Litigation – Regulatory Enforcement (SEC, Telecom, Energy), Mining Law, Natural Resources Law, Oil and Gas Law
• Joseph K. Reinhart – Energy Law, Environmental Law, Litigation – Environmental, Natural Resources Law
• Bruce F. Rudoy – Corporate Law
• Charles F.W. Saffer – Real Estate Law
• Mychal Sommer Schulz – Litigation – ERISA
• Mark D. Shepard – Bet-the-Company Litigation, Commercial Litigation, Litigation – Environmental, Mediation
• Steven B. Silverman – Commercial Litigation, Information Technology Law
• Laura Stone – Corporate Law
• Robert M. Stonestreet – Commercial Litigation, Energy Law, Environmental Law
• David E. White – Construction Law, Litigation – Construction
• Richard S. Wiedman – Energy Regulatory Law, Environmental Law
• Michael H. Winek – Environmental Law

View the award recipients here.

17 Babst Calland lawyers were also named to the 2025 Best Lawyers: Ones to Watch® in America which recognizes associates and other lawyers who are earlier in their careers for their outstanding professional excellence in private practice in the United States:

• Susanna Bagdasarova – Corporate Law
• Mary H. Binker – Corporate Law, Energy Law, Real Estate Law
• Gina Falaschi Buchman – Environmental Law
• Carla M. Castello – Commercial Litigation, Litigation – Labor and Employment, and Mass Tort Litigation / Class Actions – Defendants
• Andrew C. DeGory – Commercial Litigation
• Alexandra G. Farone – Commercial Litigation, Litigation – Labor and Employment
• Marc J. Felezzola – Commercial Litigation, Litigation – Construction
• Michael E. Fink – Corporate Governance and Compliance Law, Corporate Law, Mergers and Acquisitions Law
• Alyssa Golfieri – Land Use and Zoning Law, Municipal Law
• Sean R. Keegan – Commercial Litigation, Litigation – Labor and Employment
• Jennifer L. Malik – Land Use and Zoning Law, Municipal Law
• James D. Mazzocco – Construction Law, Litigation – Environmental, Transportation Law
• Daniel R. Richey – Corporate Governance and Compliance Law, Corporate Law, Mergers and Acquisitions Law, Securities / Capital Markets Law
• Joseph V. Schaeffer – Commercial Litigation
• Varun Shekhar – Environmental Law
• Joshua S. Snyder – Commercial Litigation, Energy Law
• Eric Spada – Commercial Litigation

View the award recipients here.

Best Lawyers undergoes an authentication process, and inclusion in The Best Lawyers in America® is based solely on peer review and is divided by geographic region and practice areas. The list has published for more than three decades, earning the respect of the profession, the media, and the public as the most reliable, unbiased source of legal referrals. Its first international list was published in 2006 and since then has grown to provide lists in over 65 countries.

Pennsylvania’s Carbon Capture and Sequestration Act of 2024

PIOGA Press

(by Kevin Garber, Gina Falaschi Buchman, and Sean McGovern)

On July 17, 2024, Governor Josh Shapiro signed the Carbon Capture and Sequestration Act into law, effective immediately.  This comprehensive new statute positions Pennsylvania to join a growing list of states, including North Dakota, Wyoming, Indiana, and West Virginia, that promote underground storage of carbon dioxide.

The Act authorizes the underground injection and sequestration of CO₂; confirms that the surface owner of real property owns the subsurface pore space; gives the Pennsylvania Department of Environmental Protection statutory authority to obtain primacy to issue injection permits; transfers title to stored carbon dioxide to the Commonwealth fifty years after injection ends; and establishes the Carbon Dioxide Storage Facility Fund to defray the Commonwealth’s long-term monitoring and management costs.

The Act has three key aspects – pore space ownership, permitting and operating an injection and storage facility, and liability and long-term responsibility for sequestered CO₂.

Pore Space Ownership.  The Act provides that the owner of the surface property interest owns the pore space beneath surface lands and waters of Pennsylvania.  “Pore space” means subsurface strata, formations, cavities, or voids, whether natural or artificially created, that can be used to store CO₂.  Conveying surface ownership also conveys the pore space unless it is (or has been) excepted and reserved, similar to the conveyancing of oil, gas, and minerals.  The Act does not change Pennsylvania law regarding dominance of the mineral estate.  A notice regarding pore space, like the coal notice, is now required in property deeds.

If, through negotiations with pore space owners, a prospective operator obtains at least 75% of the ownership interest in pore space for a storage facility, the Environmental Hearing Board may include the remaining 25% in the proposed facility by issuing a “collective storage order” if the EHB finds that the operator satisfied the notice and other provisions of the Act.  Other state statutes have different thresholds for pooling; for example, the threshold is 60% in North Dakota, 70% in Indiana, and 75% in West Virginia.  Unless the landowner or manager agrees, the EHB may not approve a collective storage order for land owned by a governmental entity or by a charitable organization that is used to protect natural or scenic values or wildlife, or to preserve historical and cultural resources.

Permitting.  The new law directs the Environmental Quality Board to promulgate permitting criteria and regulations. Although DEP is not specifically directed to apply to EPA for primacy to issue Class VI Underground Injection Control permits, the Act does provide authority for DEP to do so if it chooses, and DEP recently announced its intent to apply for primacy.  Until primacy is obtained, EPA will issue UIC injection permits in Pennsylvania.

The EQB’s regulations must address several specific subjects for permitting injection wells and operating storage facilities, including community and cumulative impacts, environmental justice, and seismicity monitoring.  A storage facility must be designed to isolate CO₂ from coal, oil, gas, and other commercially valuable minerals.  DEP may condition or deny a permit based on these considerations.  We can expect the EQB to publish proposed regulations soon to implement the Act.

CO₂ Ownership, Liability and Long-Term Responsibility.  The storage operator is presumed to own the CO₂ injected into a storage facility.  The Act protects pore space owners from liability for the effects of injecting CO₂ for sequestration based solely on their interest in the pore space and it protects storage operators from claims for damage or migration unless a claimant proves the injection or migration was performed without reasonable care and caused injury.  DEP may issue a certificate of project completion 50 years after injection ends if the operator demonstrates that the injected CO₂ will remain within its pore space boundary and does not threaten drinking water, human health, safety, or the environment.  Thereafter, title to and responsibility for the injected CO₂ passes to the Commonwealth and the storage operator is released from regulatory requirements regarding the facility.  The Carbon Dioxide Storage Facility Fund will subsidize the Commonwealth’s cost to monitor and manage the closed storage facility.  Other states (for example, North Dakota and West Virginia) have agreed to accept long-term responsibility for sequestered CO₂.

Carbon capture and sequestration has been touted as a solution to reduce carbon emissions from fossil fuel-fired power plants^[1] and a mechanism to generate valuable emission reduction credits for sale or trading.  Pennsylvania did not have the statutory framework in place to compete with other states in this area until it adopted the Carbon Capture and Sequestration Act.  Determining whether Pennsylvania has sufficient deep geology to make capture and sequestration economically attractive and developing the regulations to govern the industry are the next steps in this energy evolution.

For more information on the Carbon Capture and Sequestration Act, please contact Kevin J. Garber at (412) 394-5404 or kgarber@babstcalland.com, Gina Falaschi Buchman at (202) 853-3483 or gbuchman@babstcalland.com, or Sean M. McGovern at (412) 394-539 or smcgovern@babstcalland.com,  or any of our other environmental attorneys.

To view the full article, click here.

Reprinted with permission from the August 2024 issue of The PIOGA Press. All rights reserved.

^[1]  EPA’s latest iteration of regulations setting greenhouse gas emissions standards for power plants, which was published in May 2024, names CCS as best system of emission reduction for the longest-running existing coal units and most heavily utilized new gas turbines.  The Carbon Capture and Sequestration Act could help power generators comply with the federal regulations regarding their carbon emissions.  While the regulation is currently in litigation in the U.S. Court of Appeals for the District of Columbia Circuit, the court has declined to stay the rule while litigation is pending. 

Legislative & Regulatory Update

The Wildcatter

(by Nikolas Tysiak)

July 2024 Legislative and Regulatory Article for MLBC

There are not a lot of relevant cases to report this period. Here are what the courts have been up to this month:

The West Virginia Intermediate Court of Appeals handled another important case regarding tax sales of oil and gas interests recently. In Northeast Natural Energy, LLC v. LT Realty Unlimited, LLC (— S.E.2d —; 2024 WL 338948 (July 12, 2024). The case arises from competing claims of title to oil and gas rights under approximately 119 acres of land in Clay District, Monongalia County. George Tennant owned interests in the Surface, Sewickley Coal, and the oil and gas associated with the 119 acres when he died in 1938. Two assessments were entered from 1938 through 1941 – the first covering 3/8 of the surface oil and gas under the land, and the second covering the Sewickley Coal interests under the land. In 1940, the lands of George Tennant were partitioned, as part of which all oil and gas and coal rights were reserved to the estate. The assessments for the surface dropped the oil and gas label, and only described “SUR” or surface as being the interest being assessed, entered in the name of the surface purchaser. George Tennant and his heirs continued to be assessed for the Sewickley Coal interests.

The Sewickley Coal rights and Oil and Gas rights descended to various heirs of George Tennant, but only the Sewickley Coal rights were separately assessed. Eventually, the successors to George Tennant executed deeds and leases with Northeast Natural Energy LLC and other parties, in 2015. However, in 1992, Shuman Inc. acquired a tax deed for the Sewickley Coal assessment for non-payment of taxes. The same “Sewickley Coal” assessed interest eventually became vested in LT Realty Unlimited LLC, which successfully argued at trial that the oil and gas rights associated with the land were included with the Sewickley Coal assessment, thereby resulting in LT Realty owning such oil and gas rights, and NOT Northeast.

The Intermediate court disagreed with the trial court, finding that there was a presumption that the oil and gas rights, while severed in title, remained assessed with the surface estate under West Virginia law. As such, the burden of proof lied with LT Realty to overcome the legal presumption. Factually, there was evidence from 1938-1941 that the surface and oil and gas were assessed together under the name of George Tennant, and only after the partition deed from his estate did the subsequent surface assessment drop the “oil and gas” description words. Additionally, the valuation of land from the 1940 assessment to the 1941 assessment (where the assessment changed from “surface, oil and gas” to “surface” remained the same, indicating that the value of the oil and gas rights were never deducted from the “surface” assessment, and therefore remained assessed with the surface. Based on these factors, the court concluded that LT Realty had not provided sufficient factual evidence to overcome the presumption and reversed the lower court’s holding.

The Seventh Circuit Court of Appeals has made several Marketable Title Act/Dormant Mineral Act decisions in the past couple of months:

• Cardinal Minerals, LLC v. Miller, 2024-Ohio-2133 (7th Dist.). This is a case where Cardinal Minerals LLC brought suit claiming that a severed mineral interest had been preserved in contradiction to a Dormant Mineral Act claim by the surface owners, the Millers. Cardinal Minerals purchased the severed mineral interests from the Pfalzgrafs, heirs of the original severing parties, and claimed that the DMA action of the surface owners was improper for failing to serve notice on the Pfalzgraf heirs. The Court of Appeals sidestepped the claim of Cardinal Minerals that the notice requirement under the Dormant Mineral Act was not properly adhered to, instead determining that Cardinal Minerals unlawfully “purchased a lawsuit” under the Doctrine of Champerty (Champerty being defined as “assistance to a litigant by a nonparty, where the nonparty undertakes to further a party’s interest in a suit in exchange for a part of the litigated matter if a favorable result ensues . . .”). The court further stated that the assignment of rights to a lawsuit is void as champerty. For these reasons, Cardinal Minerals’ claims were denied; the Court of Appeals effectively ignored the question of whether the surface owners followed the Dormant Mineral Act requirements by providing notice to the known successors to a reserving title interest holder pursuant to wills and intestate succession. This seems like a possible case for further appeal to the Ohio Supreme Court, as reconsideration of the suit was denied on July 2.
• Wolfe v. Bounty Minerals LLC, 2024-Ohio-2460 (7th Dist.). A claim of ownership by the surface owners against a reserved interest by the Holms heirs under the Marketable Title Act. The key question being whether the Holmes’ interest was preserved in connection with the Marketable Title Act. The District Court of appeals found that the preservation documents of the Holmes’ heirs was sufficient to preserve their interests.

To view the full article, click here.

To view the PDF, click here.

Reprinted with permission from the MLBC August 2024 issue of The Wildcatter. All rights reserved.

Best Practice for Conducting an Effective Internal Company Investigation

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.

To view the PDF, click here.

To view the full article, click here.

Don’t Bank on It: Recovering Expenses for Motions to Compel Discovery

Pretrial Practice & Discovery

American Bar Association Litigation Section

(by Michael Libuser)

Babst Calland Expands Aerospace, Aviation and Airports Practice

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.

Legal Experts to Lay Out Recent SCOTUS Decisions’ Impact on Business

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.”

Judicial Challenges to U.S. EPA’s PFAS Regulations: Are EPA’s Regulations Too Much, Too Little, or Just Right?

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.

Attorney Morgan Madden Joins Babst Calland

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.

MindShare: Navigate the Current Uncertainty on FinCEN Matters

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.

In Memoriam: The Modern Administrative State (1984-2024)

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.

For the full article, click here.

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).

Uncovering Relevancy Redactions

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.

To view the full article, click here.

© 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.

Vermont Governor Allows Nation’s First Climate Change Cost Recovery Bill to Become Law Without Signature

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.

To read the full article, click here.

Reprinted with permission from the June 2024 issue of The PIOGA Press. All rights reserved.

The Devil is in the Details (and the Deemed Approval Deadlines)

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.