Legal Intelligencer
(by Casey Alan Coyle, Anna Jewart and Anna Hosack)
In December 2022, the Pennsylvania Supreme Court issued its opinion in Central Dauphin School District v. Hawkins, 286 A.3d 726 (Pa. 2022), the latest in a line of cases considering the intersection of the federal Family Educational Rights and Privacy Act, 20 U.S.C. §1232g (“FERPA”), and the Pennsylvania Right-to-Know Law, 65 P.S. §§67.101-67.3104 (“RTKL”). The majority held that, while the school bus surveillance video at issue constituted an “education record” under FERPA, the school district was nonetheless required to release the video under the RTKL, following redaction of students’ personally identifiable information (“PII”). Hawkins has clear implications regarding the treatment of school surveillance videos under FERPA and the RTKL. However, Hawkins raises several questions, including whether a non-public record can “become” public through redaction, and therefore, be subject to disclosure under the RTKL.
RTKL
The RTKL is the state open records law. It requires state and local government agencies, including public school districts, to provide access to “public records’ upon request, subject to certain exceptions. The statute broadly defines a “public record” as a record of a Commonwealth or local agency that is not exempt under one of 30 enumerated exemptions, not protected by a privilege, and “not exempt from being disclosed under any other Federal of State law or regulation or judicial order or decree.” A record in the possession of an agency is presumed to be a public record unless, inter alia, “the record is exempt from disclosure under any other Federal or State law or regulation or judicial order or decree.” The RKTL also contains a disclaimer: “Nothing in this act shall supersede or modify the public or nonpublic nature of a record or document established in Federal or State law, regulation or judicial order or decree.” Notably, the RTKL includes a provision mandating redaction of exempt information, Section 706. Critically, however, Section 706 does not apply to all records, but only those determined to be a “public record,” “legislative record,” or “financial record.”
FERPA
FERPA is a privacy statute for student education records. An “education record” is defined as those records files, documents, and other materials which: (1) contain information “[d]irectly related to a student;” and (2) are “[m]aintained by an educational agency or institution or by a person acting for such agency or institution.” FERPA serves the dual purpose of ensuring parents and students have access to education records, while protecting student and parent privacy by prohibiting disclosure of students records without consent. FERPA achieves these objectives by conditioning federal funding to public school districts and other educational agencies or institutions upon compliance with its regulations. FERPA makes education records exempt from disclosure, subject to limited exceptions. One such exception is parental consent. Another is where the educational agency or institution, in its discretion, elects to release a record after the removal of all PII, “provided that the educational agency or institution or other party has made a reasonable determination that a student’s identity is not personally identifiable.”
Hawkins
Hawkins involved a school bus video. The video shows an incident occurring primarily between a student and a parent of another student while surrounded by other students on a school bus located on school district property. After receiving reports of the incident, the district conducted an investigation that resulted in disciplinary action against both students and staff. No parental consent for the release of the video was ever provided.
A Commonwealth Court panel held the video did not constitute an “education record” under FERPA, and thus, was subject to disclosure under the RTKL. The Pennsylvania Supreme Court subsequently issued its opinion in Easton Area School District v. Miller, 232 A.3d 716 (Pa. 2020), holding that a school bus video—factually analogous to the one in Hawkins—qualified as an education record under FERPA. The plurality opinion in Easton Area also discussed the issue of redaction but did not reach a majority on the issue.
In the wake of that ruling, the Supreme Court vacated the order in Hawkins and remanded for additional proceedings consistent with Easton Area. On remand, a Commonwealth Court panel affirmed the trial court on different grounds: although the video constituted an “education record” under FERPA, it was still subject to disclosure under the RKTL because “redacting students’ images removes any argument that the video is a public record and exempt under Federal law or regulation, and thus removes any argument by the [s]chool [d]istrict that it is exempt under [the RTKL.]”
The Supreme Court affirmed on further review. The majority held education records in a school district’s possession are presumed public and the district has the burden to prove the record is exempt by a preponderance of the evidence. The majority also held that the video in question is an education record, but that education records are not categorically exempt from disclosure under the RTKL. Rather, only a students’ PII within an education record is exempt. The majority further held the district did not meet its burden of proving it lacked the capacity to redact the video. Finally, while acknowledging that FERPA’s regulations define PII to include “[i]nformation requested by a person who the educational agency or institution reasonably believes knows the identity of the student to whom the education record relates,” the majority held that it “lack[ed] sufficient context to reverse the fourth consecutive directive to disclose the video” in reliance on that provision.
Justice Mundy authored a concurring and dissenting opinion. While agreeing with various of the majority’s conclusions, including that the video is an education record under FERPA, Justice Mundy disagreed with the majority’s “creation of a presumption that school districts have the ability to redact students’ personal identifiable information from video, imposing the costs of such redaction on districts, and its apparent diminishment of students’ privacy interest in their educational records.”
Unanswered Questions
While likely intended to resolve the uncertainty created by the plurality opinion in Easton Area, Hawkins arguably has created more questions than answers for school solicitors and other RTKL practitioners. They include, but are not limited to, the following:
- Burden of proof: The majority opined in a footnote that, to satisfy its burden of providing records are exempt under the RTKL, the district “must do more than baldly state it lacks the ability to redact them.” However, the district had not only submitted an affidavit attesting that it lacked the technological capability to redact the video, but also offered testimony to the same and the requester offered no contrary evidence. If unrefuted testimony is not sufficient to satisfy an agency’s burden of proof, then what is? Is Justice Mundy correct that the majority “essentially creates a presumption that school districts will never be able to meet their burden to show they lack the ability to redact the video, or any other media, to remove identifiable student information?”
- In camera review: Along these same lines, the majority ordered redaction of the video in Hawkins even though neither the Office of Open Records, common pleas court, Commonwealth Court, nor the Supreme Court reviewed the video, in camera, to determine whether redaction could remove all PII from the recording. What role, if any, does in camera review play to assess the feasibility of redaction of a record following Hawkins?
- Discretion: The majority found that “it is clear Section 706 of the RTKL mandates agencies . . . to redact exempt information and does not give them discretion in this regard.” But FERPA’s regulations state the opposite. The regulations vest an educational agency or institution with the discretion to release an education record upon de-identification only following a “reasonable determination that a student’s identify is not personally identifiable.” The district in Hawkins never made such a determination. To the contrary, it asserted that de-identification was not feasible because, even in redacted from, the requester and the public would know exactly which student’s face has been redacted from the video. Is a “reasonable determination” from a district that “a student’s identity is not personally identifiable” a requirement for disclosure of an education record under the RTKL? Or does the RKTL supersede FERPA in this regard? And if the latter is true, how can that be reconciled with the disclaimer set forth in Section 306 of the RTKL?
- Loss-of-federal-funding exception: Easton Area involved the loss-of-funding exception to disclosure under the RTKL. The plurality determined that, to implicate this exception, an agency must establish that it has a “policy or practice” of “releasing,” “permitting the release of,” or “providing access to” protected education records or personally identifiable information, adding that such language “necessary denotes repeated or systematic violations of student privacy, as opposed to singular or exceptional instances.” By mandating the disclosure of education records in redacted form, did Hawkins establish a statewide policy or practice of providing access to education records to implicate this exception? If not, what more is required to trigger the same with respect to education records?
- Scope of holding: At minimum, education records are now subject to a right of access, via redaction, under the RTKL. Arguably, however, the rationale of Hawkins extends to all non-public, exempt records of a Commonwealth or local agency. How will future courts interpret Hawkins? Will they limit the holding to the context of education records? Or will courts follow Hawkins’ lead and determine that only certain information within a record—as opposed to the record itself—is non-public, thus triggering redaction under Section 706 to entire categories of records previously considered non-public?
Given these unanswered questions, school districts and other Commonwealth and local agencies should proceed cautiously when addressing RTKL requests until the subsidiary issues raised by Hawkins are resolved.
—————-
Casey Alan Coyle is a shareholder at Babst Calland Clements and Zomnir, P.C. and Co-Chair of the firm’s Appellate Practice Group. He is also a former law clerk to Chief Justice Emeritus Thomas G. Saylor of the Pennsylvania Supreme Court. He represented Central Dauphin School District in its appeal to the Pennsylvania Supreme Court in Hawkins. Contact him at 267-939-5832 or ccoyle@babstcalland.com.
Anna S. Jewart is an associate at the firm and focuses her practice on land use and general municipal law. Contact her at 412-253-8806 or ajewart@babstcalland.com.
Anna R. Hosack is an associate at the firm and focuses her practice primarily on municipal and land use law. Contact her at 412-394-5406 or ahosack@babstcalland.com.
To view the full article, click here.
Reprinted with permission from the April 20, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
Christina Manfredi McKinley, a shareholder in Babst Calland’s Litigation, Energy & Natural Resources, and Environmental groups, was selected by The Legal Intelligencer as a “2023 Lawyer on the Fast Track” in Pennsylvania.
A graduate of The Catholic University of America Columbus School of Law, Ms. McKinley continually strives to provide business-oriented solutions to her clients and routinely serves as a general advisor, counseling clients on day-to-day legal and business matters on any number of issues. Her business-focused, proactive approach to problem-solving allows her to provide solutions to clients in a variety of industries. Her experience spans a wide range of industries, including manufacturing, retail, energy, chemicals, and environmental.
As a litigator who focuses on complex commercial matters, Ms. McKinley’s trial practice encompasses all phases of litigation, from early alternative dispute resolution through post-trial motions. She has concentrated experience in complex purchase agreement and commercial contracts disputes, protection of competitive interests (e.g., Lanham Act, unfair competition, tortious interference, trade secret protection, restrictive covenants), technology disputes (e.g., software services and license agreements), and corporate governance.
The Legal Intelligencer asked the Pennsylvania legal community to submit nominations for the annual Lawyers on the Fast Track honors. After reviewing their results, a six-member judging panel composed of evaluators from all corners of the legal profession and the state selected 29 attorneys as the 2023 Lawyers on the Fast Track. This recognition is only given to attorneys under the age of 40 who have demonstrated excellence in four categories: development of the law; advocacy and community contributions; service to the bar; and peer and public recognition.
PIOGA Press
(By Ben Clapp and Gina Falaschi Buchman)
On March 22, 2023, Chubb, one of the world’s largest insurance companies, introduced new climate-focused underwriting standards intended to induce reductions of methane emissions from the oil and gas production sector.
Under the new standards, Chubb will continue to offer coverage only to clients that implement evidence-based plans to manage methane emissions including, at a minimum, a leak detection and repair (LDAR) program, elimination of non-emergency venting, and measures to reduce emissions from flaring. These criteria commence immediately, but customers will have time to develop an action plan based on their individual risk characteristics. Chubb has also committed to creating a customer resource center to support oil and gas insureds implementing these requirements.
Chubb also announced that it will immediately cease offering coverage for oil and gas projects in government-protected conservation areas designated by state, provincial or national governments. This will include conservation areas covered by International Union for the Conservation of Nature (IUCN) management categories I-V in the World Database on Protected Areas, which includes nature reserves, wilderness areas, national parks and monuments, habitat or species management areas, and protected landscapes and seascapes. A sixth IUCN category applies to protected areas that allow sustainable use, and Chubb plans to develop standards for projects in category VI areas and for oil and gas extraction projects in certain key zones not currently listed in the World Database on Protected Areas by the end of 2023.
It is unclear how Chubb’s new underwriting criteria will compare with existing and proposed federal and state rules like NSPS Part 60, Subparts OOOO and OOOOa, the proposed NSPS Part 60, Subparts OOOOb and OOOOc, and Pennsylvania’s 2022 Control of VOC Emissions from Unconventional and Conventional Oil and Natural Gas Sources Rules. Compliance with these state and federal standards may satisfy insurers like Chubb, but that is not certainly the case. For example, Chubb has announced that it will require, at minimum, a LDAR program, but it is unclear what the required monitoring frequency will be. Wells with emissions below certain thresholds not currently subject to frequent monitoring under federal or state rules may need additional monitoring to remain insured under Chubb’s criteria. It is also possible that other insurance companies will follow Chubb’s lead in the coming months. Producers should remain alert to notices from their insurance companies to ensure that facilities meet the requirements to remained insured.
This new underwriting policy is an extension of Chubb’s recent efforts to focus more on climate-related activities. The company has already limited coal-related underwriting and investment. Chubb has also launched a new climate business unit, Chubb Climate+, which will offer insurance products and related services to companies developing new technologies that support progress towards a low-carbon economy.
Chubb’s new standards exemplify the expanding and influential impact of Environmental, Social, and Governance (ESG) principles on companies operating in the energy sector. ESG generally refers to a set of factors used to measure the non-financial practices in areas such as sustainability, climate, and resource conservation, and non-environmental areas such as diversity, equity, and inclusion. Consumers, insurers, lenders and investors are placing an increased emphasis on ESG considerations when making business decisions, and regulatory agencies are beginning to take actions aimed at increasing the transparency of regulated companies’ ESG efforts through required disclosures.
For example, a number of proposed federal agency rules over the past year could make ESG reporting mandatory, including the Securities and Exchange Commission’s proposed Enhancement and Standardization of Climate-Related Disclosures for Investors, which could become the first mandatory ESG reporting requirement for publicly traded U.S. companies. In addition, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration have proposed a rule that would require certain federal suppliers to annually disclose their greenhouse gas (GHG) emissions and climate-related financial risks, as well as set GHG emissions reduction targets, on an annual basis. Whether through exposure to consumer, insurer, lender or investor initiatives, or to new ESG reporting requirements imposed by regulatory agencies, companies operating in the energy sector are likely to face increased scrutiny over ESG-related practices that may, as in the case of the new Chubb standards, require costly operational changes.
Babst Calland’s energy and environmental attorneys continue to track ESG related issues affecting the energy industry. For more information, please contact Ben Clapp at (202) 853-3488 or bclapp@babstcalland.com or Gina Buchman at (202) 853-3483 or gbuchman@babstcalland.com.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the April 2023 issue of The PIOGA Press. All rights reserved.
The Wildcatter
(By Nikolas Tysiak)
For this month’s edition of the Wildcatter, we have two cases from Ohio that are of interest.
In Tera, LLC v. Rice Drilling D, LLC (2023-Ohio-273; 7th Dist.), the Court of Appeals for Ohio’s 7th district was asked to overturn the significant award of monetary damages in favor of a landowner based on a trespass claim. The lease at issue expressly reserved all the oil and gas rights “in all formations below the base of the Utica Shale,” while production indicated that the wellbores had penetrated the Point Pleasant formation. The trial court found that such penetration violated the reservation language of the lease, resulting in the trespass. The Operators involved appealed on various grounds, conceding that the Point Pleasant formation is now considered a distinct rock formation, but was not considered separate from the Utica Shale at the time the leases at issue were executed in 2013 and 2014, and that the term “Utica Shale” held special meaning at that time in Ohio, allowing for the use of extrinsic evidence (evidence outside the lease document) to interpret the lease. The court of appeals agreed with the trial court that the term “Utica Shale” was entirely unambiguous and that no extrinsic evidence was warranted to interpret the same and upheld the trial court’s decision. The appeals court went on to indicate that some of the factors regarding the calculation of damages required further analysis at trial and remanded to the trial court with some instructions on damages calculations. The key takeaway being, at least at this time, in Belmont County, Ohio, leases covering the “Utica Shale” will not cover the Point Pleasant formation.
In Chartier v. Rice Drilling D, LLC (2023-Ohio-272, 7th Dist.), the Court was once again confronted with a Marketable Title Act issue involving oil and gas. The Court decided that the reservation language within the root-of-title period called for by the Marketable Title Act did not serve to preserve reserved oil and gas for two distinct reasons: first, the underlying reservation at issue arose from a corrective deed that reserved oil and gas from the land, when the same had not been reserved in the original deed subject to correction; and second, a determination that the reservation language was not “specific” under Blackstone v. Moore, and therefore was a “general” reservation not preserved under the Marketable Title Act. Because of these factors, the court of appeals found in favor of the surface owners against the holders of the severed mineral interest. Despite this finding, the decision appears to be of questionable authority. First, the case makes no mention of Erickson v. Morrison, which found that a reference to a reservation only needs to provide notice to a title examiner that a preexisting interest exists and is locatable by a standard title search. Second, the Court appears to ignore the fact that subsequent parties repeated the reservation language from the corrective deed, calling in to question what expectation subsequent grantees realistically had to receive oil and gas rights under the land. Additionally, as of March 9, the case has been accepted for judicial review by the Ohio Supreme Court (case # 2023-0343), so we will continue to track and watch this one.
As always, bring us your feedback and suggestions for any additional topics you want to see covered.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the MLBC April 2023 issue of The Wildcatter. All rights reserved.
Legal Intelligencer
(by Matt Wood and Mackenzie Moyer)
On March 14, 2023, the U.S. Environmental Protection Agency (EPA) provided a pre-publication version of a proposed National Primary Drinking Water Regulation Rulemaking that would regulate six polyfluoroalkyl substances (PFAS) under the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq (PFAS Rule). The proposed PFAS Rule would establish Maximum Contaminant Level Goals (MCLGs) and Maximum Contaminant Levels (MCLs) for perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS), two of the most common PFAS – a group of thousands of manmade chemicals used in various consumer, commercial, and industrial manufacturing processes since the 1940s – as individual contaminants. It would also establish a Hazard Index MCL for mixtures containing one or more of perfluorononanoic acid (PFNA), hexafluoropropylene oxide dimer acid and its ammonium salt (HFPO-DA, commonly known as GenX chemicals), perfluorohexane sulfonic acid (PFHxS), and perfluorobutane sulfonic acid (PFBS). Years in the making, the final PFAS Rule will be the first federally enforceable drinking water rule governing PFAS. EPA intends to finalize the PFAS Rule by the end of 2023.
PFAS have been used to make products water-, stain-, and heat-resistant and have been a key ingredient in some aqueous film forming foams (AFFF) used to extinguish flammable liquid fires (e.g., those that might occur on airports or military bases). PFAS are known as “forever chemicals” because they do not break down naturally in the environment. Due to these properties and their ubiquitous nature, PFAS have been found in various environmental media, such as groundwater (including drinking water), plants, animals, and in humans. Toxicity studies suggest that PFAS exposure can lead to adverse health effects.
For PFOA and PFOS, the proposed PFAS Rule sets MCLGs – non-enforceable health-based goals that represent the maximum concentration of a contaminant in drinking water at which there is no known or anticipated negative effect on a person’s health – at 0 parts per trillion (ppt). It sets the enforceable MCLs for PFOA and PFOS, which represent the maximum concentrations allowed in drinking water that can be delivered to users of a public water system and are informed by other factors (e.g., available treatment technologies and cost), at 4 ppt each.
The proposed PFAS Rule takes a different approach for PFNA, HFPO-DA (GenX), PFHxS, and PFBS by proposing regulation of these compounds as a mixture, because of their likely co-occurrence in drinking water, using a hazard index formula. The Hazard Index is calculated by dividing the concentration of each of the four PFAS compounds by its Health-Based Water Concentration (HBWC; 10 ppt for PFNA, 10 ppt for HFPO-DA (GenX), 9 ppt for PFHxS, and 2000 ppt for PFBS) and then adding the results together. A total value greater than 1.0 is an exceedance of the proposed Hazard Index MCL. For a more detailed explanation of the Hazard Index calculation, see EPA’s FAQ for Drinking Water Primacy Agencies, available here.
Prior to EPA’s announcement of the proposed PFAS Rule, the only federal drinking water guidance for PFAS were EPA’s 2022 interim Health Advisories for PFOA (0.004 ppt) and PFOS (0.02 ppt) and final Health Advisories for GenX (10 ppt) and PFBS (2,000 ppt), which are unenforceable standards that identify the concentration of PFOA and PFOS in drinking water at or below which adverse health effects are not expected to occur over a lifetime of exposure.
If finalized, and after a specified implementation period, the proposed PFAS Rule will require public water systems, including those in Pennsylvania, to monitor for each of the six PFAS discussed herein, notify the public of exceedances of the MCLs and/or Hazard Index MCL, and take action to reduce any exceedances in drinking water. Because the Safe Drinking Water Act does not regulate private wells, the proposed PFAS Rule does not apply to private well owners. EPA’s proposed PFAS Rule follows Pennsylvania’s recent adoption of state MCLs for PFOA (14 ppt) and PFOS (18 ppt) in January 2023. If the proposed PFAS Rule is finalized as written, Pennsylvania will have to lower its current MCLs for PFOA and PFOS and adopt standards for PFNA, HFPO-DA (GenX), PFHxS, and PFBS to ensure these standards are as at least as strict as the federal MCLs.
The proposed PFAS Rule is the latest action under President Joe Biden’s plan to combat PFAS pollution (fact sheet available here) and EPA’s 2021 PFAS Strategic Roadmap (available here), under which EPA is taking a “whole-of-agency approach” to address PFAS throughout its lifecycle. Consistent with this approach, EPA engaged in consultations with the public and sought input from other stakeholders, including public webinars, correspondence with the Science Advisory Board, and meetings with state, local, and tribal officials, to develop the proposed PFAS Rule.
To assist financially with addressing PFAS, the Bipartisan Infrastructure Law provides $9 billion to invest in drinking water systems impacted by PFAS and other emerging contaminants. $4 billion is earmarked for investment in Drinking Water State Revolving Funds and $5 billion will be made available to communities as grants through EPA’s Emerging Contaminants in Small or Disadvantaged Communities (EC-SDC) Grant Program, which is intended to promote access to safe and clean water in small, rural, and disadvantaged communities. In February 2023, EPA announced the availability of the first $2 billion of the EC-SDC funding.
The proposed NPDWR rulemaking will be subject to a 60-day public comment period upon publication in the Federal Register. EPA is also holding a public hearing on May 4, 2023, which members of the public can attend and provide verbal comments. More information on the public hearing can be found here.
In addition to the proposed PFAS Rule, EPA is moving to regulate PFAS under other federal programs, including a September 2022 proposal to designate PFOA and PFOS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The proposed PFAS CERCLA Rule would implement certain reporting requirements for releases of PFOA or PFOS exceeding the applicable reportable quantity and would enhance EPA’s authority to address PFAS in the environment, including potentially reopening long-closed cleanup sites. The comment period for the PFAS CERCLA rule is closed and the rule could be finalized this summer.
In the months since the proposed PFAS CERCLA Rule, stakeholders have raised questions and concerns about how EPA intends to address enforcement for PFAS contamination under CERLCA. In March 2023, EPA held two listening sessions focused on these questions. The agency stated that it intends to focus its CERCLA enforcement on manufacturers, federal facilities, and other industrial parties that are significant sources of PFAS and does not intend to pursue water utilities and publicly owned treatment works, publicly owned and/or operated municipal solid waste landfills, farms that apply biosolids, and certain airports and fire departments. EPA said that it is considering summarizing its PFAS CERCLA enforcement discretion policy in a formal guidance document in the future. More information on the CERCLA enforcement listening sessions can be found here.
Babst Calland’s PFAS Work Group, including both environmental and litigation attorneys, continue to track PFAS technical and legal developments and are available to assist you with PFAS-related matters. For more information on this and other remediation matters, please contact Matthew C. Wood at (412) 394-6583 or mwood@babstcalland.com, Mackenzie M. Moyer at (412) 394-6578 or mmoyer@babstcalland.com, or any of our other attorneys in this practice.
Matthew C. Wood is Senior Counsel in Babst Calland’s Environmental Group. His practice encompasses a variety of legal matters arising under major federal and state environmental and regulatory programs, with a focus on issues involving government inquiries, environmental investigations, remediation, and related activities.
Mackenzie M. Moyer is an associate in Babst Calland’s Environmental Group. Her practice encompasses a broad range of environmental issues including state and federal permitting and regulatory compliance.
To view the full article, click here.
Reprinted with permission from the April 6, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
Smart Business
(By Adam Burroughs featuring Kevin Douglass)
Many business owners are blindsided when a co-owner files a lawsuit against them detailing a list of grievances. When owners form a new business or an owner is added to an existing ownership group, the stakeholders are typically optimistic about the future. Owners often do not discuss or consider the possibility of future differences and may not address them in their written agreements. Consequently, when a disagreement inevitably arises, business owners frequently choose to minimize or completely ignore the dispute until considerable damage is done to the owners’ relationship, which allows these matters to fester and eventually disrupt the business. But with the right preventive approach, these challenges can be identified and resolved quickly and cost effectively.
“Even companies with just one owner eventually must deal with succession questions, so no business owner is completely immune from dealing with co-owners or the prospect of future owners,” says Kevin Douglass, shareholder at Babst Calland.
Smart Business spoke with Douglass about conflict resolution among business owners.
What can trigger disagreements among owners?
One common trigger is finances. If the company is doing very well, owners may feel entitled to more compensation or at least more input into how additional profits will be invested. In contrast, if the business begins to struggle, owners’ compensation, distributions and benefits may need to be decreased, and tough decisions made about the company’s direction.
Other reasons for conflict can include a change in an owner’s level of commitment or job performance, an owner’s desire for more authority and input into company management, or conflicting business strategies. Changes in an owner’s personal life may also spark controversy, such as the involvement of a new family member or owner in the business, changes in an owner’s personal finances or simply the advancing age of the company’s primary manager(s).
What are the risks of ignoring owner disagreements?
Owner disagreements can spill over into a business’s operations and finances. Employees, lenders, customers, vendors and others can easily become aware of, and even embroiled in, the drama. They may be confused about which owner is in charge. If left unchecked, the reputation and health of the business may be threatened. Just as significantly, relationships on a professional, personal and family level may be permanently impacted, if not addressed thoughtfully and with sensitivity.
Some owners resort to litigation to obtain the satisfaction they believe they are entitled to, but the expense, stress and distraction of litigation is rarely the best route to resolve differences.
How can owners resolve their underlying issues quickly?
Do not ignore the issue. Instead, take the necessary steps to resolve potential conflicts as efficiently as possible.
Take the time to understand your legal and strategic options. Consult with an independent attorney who can objectively assess the strength of your position, as well as your goals, risks and opportunities. The company attorney’s primary obligation is to act in the best interest of the business, and therefore, may not be in the best position to give an owner personal legal advice.
After fully vetting an owner’s situation, finding a solution may include answering difficult questions. Do the owners share the same vision for the company’s future? Does the ownership, compensation or governance structure need to be redefined? Are new leaders and investors needed? Do the owners want to continue in business together, or separate via a buyout? Should the business be sold? Should a strategic or succession plan be developed, and if so, what should it look like?
Any resolution of issues involving owner conflict should strive to satisfy, or at least account for, the concerns of all owners and interested parties — even if they involve the buyout of an owner. Although litigation can be an effective way to resolve a dispute as a last resort, owners should seriously explore more cost-effective options to address conflict and strive to develop workable solutions that ensure the protection and preservation of the business.
To view the PDF, click here.
To view the full article, click here.
The Legal Intelligencer
(by Alex Farone, Janet Meub and Steve Silverman)
The National Labor Relations Board (NLRB) recently announced the return of a wide-sweeping ban on severance agreements that contain provisions that effectively silence certain employees. On February 21, 2023, the NLRB issued its decision in McLaren Macomb, 372 NLRB No. 58, reinstituting its pre-2020 precedent that severance agreements cannot contain: (1) confidentiality agreements precluding the employee from discussing the terms of the severance; and (2) non-disparagement clauses.
In McLaren, a Michigan hospital laid off eleven employees early in the COVID-19 pandemic after federal regulations prohibited the hospital from performing outpatient procedures or allowing nonessential employees to work in the building. The hospital offered these eleven employees a severance agreement that included a non-disparagement clause and a provision not to disclose the terms of the severance agreement. However, the NLRB determined that the severance agreement violated the National Labor Relations Act (NLRA) due to the inclusion of these provisions.
The Board reasoned that offering severance agreements containing broad confidentiality or non-disparagement clauses has a reasonable tendency to interfere with, restrain, or coerce employees’ exercise of their Section 7 rights under the NLRA to engage in protected concerted activity, which constitutes an unfair labor practice in violation of Section 8(a)(1). Under the NLRA, employers are prohibited from interfering with, restraining, or coercing employees who exercise their rights to engage in protected concerted activities, such as discussing the terms and conditions of their employment for the purpose of mutual aid and protection. According to the Board, the confidentiality and non-disparagement clauses in McLaren had a potential chilling effect on the employees’ exercise of their rights, because employees must waive certain Section 7 rights in order to receive the benefits of the severance agreement.
This decision marks a return to long-standing Board precedent that was overturned in 2020. In Baylor University Medical Center, 369 NLRB No. 43 (2020), the Board shifted its focus from analyzing the text of a severance agreement to the circumstances under which an employer offered the agreement. The Baylor Board reversed years of precedent to hold that severance agreements containing broad confidentiality requirements did not violate the NLRA, as long as they were not mandatory or coercive, applied only to post-employment activities, and were free of allegations that the employer committed a separate unfair labor practice discriminating against the employee. Several months later, in IGT d/b/a International Gaming Technology, 370 NLRB No. 50 (2020), the Board applied the same reasoning to severance agreements containing non-disparagement clauses. The McLaren Board criticized the rulings in both Baylor and IGT for failing to articulate any policy considerations that would justify their “severely constricted view” of employees’ Section 7 rights, and squarely overruled them in favor of reinstating broader protections for employees.
The McLaren ruling applies to all private employers—with or without unionized workforces—covered by the NLRA, as it is based on both Sections 7 and 8 of the Act. It does not, however, apply to all employees. The NLRA only applies to “employees” as defined by the Act, which specifically excludes independent contractors and supervisors. Whether an employee is a “supervisor” involves a fact-specific analysis beyond review of the job title in question. The NLRA states that a “supervisor” is:
Any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.
NLRA, Section 2(11). Some of these terms have been subject to additional definitional analysis through Board decisions. The Supreme Court has further determined that employees who are even higher in the management structure but who may not meet the NLRA definition of “supervisor” are also excluded from coverage of the Act. These workers are considered “managerial employees”—executives who formulate and effectuate management policies by expressing and making operative decisions of the employer. See NLRB v. Bell Aerospace Co. Div. of Textron Inc., 416 U.S. 267 (1974). So, McLaren‘s limitations likely will not apply to severance agreements offered to any supervisory or managerial employee.
The McLaren ruling is effective immediately, but there was no discussion as to whether the decision retroactively invalidates existing severance agreements containing these confidentiality and non-disparagement clauses. This is unlikely, as such retroactive application could be challenged as a violation of the U.S. Constitution’s Article I provision protecting the freedom to contract. Further, the six-month statute of limitations for unfair labor practice charges should render any severance agreement executed more than six months before McLaren (i.e., severance agreements effective prior to August 21, 2022) presumptively valid.
So, what are the implications of the McLaren decision on employers?
- As many employers are more likely to offer severance agreements to employees whom they would consider supervisory or managerial, employers are encouraged to consult legal counsel prior to including non-disparagement or broad confidentiality provisions in severance agreements for these employees to analyze whether they would fit the definitional NLRA exemption.
- Risk-averse employers should cease offering severance agreements containing non-disclosure and non-disparagement clauses to nonsupervisory employees, at least for the time being. Per McLaren, the very act of offering severance agreements with these broadly worded prohibitions, even if the employer has no intention of legally enforcing them, is itself now a violation of the NLRA. The safest practice is to take this approach until further clarification and advisory memoranda from the Board’s General Counsel is made available.
- A more robust approach would be for an employer to augment the offending provisions of its standard severance agreement with a broad disclaimer stating that nothing in the agreement should be interpreted as waiving the employee’s Section 7 rights under the NLRA or prohibiting the employee from participating in protected concerted activity, participating in the Board’s investigative process, or filing an unfair labor practice. There is no guarantee that the Board would uphold a confidentiality or non-disparagement clause containing such a proviso, but this is a viable middle ground approach that arguably demonstrates recognition of and attempted compliance with the NLRA’s prohibition on interference with employees’ Section 7 rights.
- Along with providing a disclaimer, an employer could tailor their standard confidentiality and non-disparagement provisions to address the specific issues the Board identified in the agreement in McLaren. The Board took issue with the fact that the non-disparagement clause (1) was not limited to matters regarding past employment, (2) extended to statements made concerning the employer’s parents, affiliated entities, officers, directors, employees, agents, and representatives, and (3) had no temporal limitation. The Board criticized the confidentiality clause because it applied to disclosure of the terms of the agreement to any third person other than a spouse, legal counsel, tax advisor, or court/administrative agency when compelled, which prohibits discussion with former coworkers who could be faced with deciding whether to accept a similar severance agreement and with union representatives. Creating caveats in severance agreements that address the Board’s concerns of overbreadth could result in provisions that may pass scrutiny under McLaren.
- When determining risk tolerance and how to proceed, consider these factors: (1) the deterrent value of your existing confidentiality and non-disclosure provisions; (2) whether your industry or company is at particular risk of scrutiny from the NLRB; (3) the likelihood of whether McLaren will be upheld; and (4) the likelihood that your former employees would challenge their severance agreements by filing an unfair labor practice.
- Finally, employers should review their employee handbooks (preferably annually) to ensure that their policies do not violate the NLRA.
The McLaren decision is a return to the employee-friendly pre-Baylor days. While the effects are immediate, it remains for the courts to enforce. This decision may be appealed, but in the meantime, employers should consider changing their severance agreement practices if they wish to avoid an unfair labor practice charge. Contact a Babst Calland employment and labor attorney to assist in evaluating the legal risk inherent in your existing severance agreements and in carefully crafting disclaimers that address the McClaren reasoning.
Alexandra Farone is an associate in the Litigation and Employment and Labor groups of Babst Calland. Ms. Farone’s employment and labor practice involves representing corporate clients, municipalities, and individuals on all facets of employment law, including restrictive covenants, discrimination claims, human resources counseling, grievances, and labor contract negotiations. Please contact her at 412-394-6521 or afarone@babstcalland.com.
Janet Meub is senior counsel in the Litigation and Employment and Labor groups of Babst Calland. Ms. Meub has significant experience in the areas of employment and labor law, professional liability defense, insurance coverage and bad faith litigation, toxic tort litigation, nursing home negligence, and medical malpractice defense. She has a diversified practice that includes defending employers, healthcare providers, law enforcement and other professionals, and non-profits, at all levels of civil litigation through trial. Contact her at 412-394-6506 or jmeub@babstcalland.com.
Steve Silverman is a shareholder in the Litigation and Employment and Labor groups of Babst Calland. Mr. Silverman devotes a significant amount of his practice to the defense and prosecution of theft of trade secret and non-compete suits. Contact him at 412-253-8818 or ssilverman@babstcalland.com.
For the full article, click here.
Reprinted with permission from the March 30, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
The American College of Environmental Lawyers (ACOEL)
(By Donald C. Bluedorn II)
Unless you have been hibernating this winter, you know about ChatGPT, the artificial intelligence chatbot that rolled out late in 2022. Its developer, OpenAI, describes ChatGPT as follows:
We’ve trained a model called ChatGPT which interacts in a conversational way. The dialogue format makes it possible for ChatGPT to answer followup questions, admit its mistakes, challenge incorrect premises, and reject inappropriate requests.
Or, for those of us who remember watching Star Trek, ChatGPT functions a lot like the computer on the Starship Enterprise – you ask it to do something, and it does it. People have experimented with ChatGPT to write computer code, draft poems, write term papers, and create visual art, among many others.
Recently I experimented with ChatGPT, in an effort to not be that “senior” lawyer who in the early 1990’s said, “I don’t need to learn this new email thing . . . .” More specifically, I asked ChatGPT to do two things:
- Draft a short purchase and sale agreement for a 65-acre coal-fired power plant; and
- Prepare a five-page memorandum on the definition of “Waters of the US.”
The results were surprising but instructive.
First, ChatGPT’s purchase and sale agreement was so basic, and so vanilla, that it would be useless to a lawyer hoping to prepare the document in a real transaction. This surprised me because I had heard and read so many glowing reviews about ChatGPT that I anticipated a fulsome work product. It is quite possible, if not likely, that much of this is attributable to “user error.” If I spent more time describing the project and setting forth my anticipated parameters, I expect I would have received a better product. Nonetheless, I deemed my initial effort with ChatGPT a failure.
ChatGPT’s 5-page memorandum on the “Waters of the US” was surprisingly good. Now make no mistake about it – the draft would not pass muster as a writing assignment in even the most basic of environmental law courses, much less as an actual piece of legal work product.
Nevertheless, it provided a basic level of understanding of the issues and it provided a surprisingly sound foundation for such a memorandum. I could easily imagine checking the referenced statements and citations in the draft (unfortunately ChatGPT already has developed a fearsome reputation for confidently stating a “fact” when it is wrong), and then performing supplemental research and analysis to fill out the picture. If I were a new lawyer tasked with preparing such a memorandum and I did not already have a good starting place, the draft would have saved me a surprising amount of time at the outset. So, at least in that sense, I deemed my second effort with ChatGPT a conditional success.
OpenAI is quite open and transparent about many of the limitations in ChatGPT. Among other express limitations, it states on its website that “ChatGPT sometimes writes plausible-sounding but incorrect or nonsensical answers. Fixing this issue is challenging . . . .” And of course the entire field of artificial intelligence is growing at a tremendous rate, so we can expect to see significant improvements in ChatGPT and similar products in the foreseeable future. Nevertheless, even in its current iteration it would be a mistake to dismiss ChatGPT as a viable tool for the environmental lawyer, particularly in the correct circumstances and with appropriate controls.
And with that final note, “Beam me up, Scotty . . . .”
To view the full article, click here.
Reprinted with permission from the March 23, 2023 ACOEL Blog.
Pretrial Practice & Discovery
American Bar Association Litigation Section
(By Jessica Barnes)
A proposed antitrust class action was recently dismissed because of the plaintiffs’ serious failures to comply with the court’s orders regarding discovery.
Interpretations of the extent of a responding party’s obligations to certain discovery requests likely vary by lawyer. One thing that most if not all lawyers would agree with, however, is that a party producing more than 99 percent of its documents after the close of fact discovery is improper, which is what occurred this week in a case out of the U.S. District Court for the Western District of Tennessee.
In American Spirit and Cheer Essentials Inc, et al. v. Varsity Brands, LLC, et al., No. 2:20-cv- 02782-SHL-tmp (W.D. Tenn. Mar. 21, 2023), there were numerous discovery disputes among the parties. Between seeking documents excluded from discovery via protective order, producing documents in a form that was in violation of the mutually agreed upon electronically stored information (ESI) protocol, outright lack of production and responses, failing to maintain and provide lists of search terms used in collecting documents, attempts to serve hundreds of subpoenas, and producing documents either immediately before or after the deposition of a relevant witness, the court described the history of discovery in this matter as “long, complex, and tortured[.]”
The court faced a first round of motions to dismiss in this case, which were granted in part and denied in part. The most critical aspect in the court’s actions here is that it specifically warned the plaintiffs that “willful failure to cooperate in discovery could lead to dismissal of plaintiffs’ case under Rules 37(b) and 41(b).”
Then later came another round of motions to dismiss. The plaintiffs responded, not contesting the defendants’ factual allegations of discovery violations, but arguing that the alleged discovery failures did not meet the legal standard to justify dismissing the case. In evaluating the arguments, the court highlighted that under Federal Rule of Civil Procedure 37, the court may impose sanctions on a party who fails to obey a court order to provide discovery, and such sanctions may include dismissal of the action. In addition, Federal Rule of Civil Procedure 41 permits involuntary dismissal of a case if the plaintiff fails to comply with the federal rules or a court order.
Accordingly, the court went through the four factors to consider when a party moves to dismiss a case under these two rules. First, the court found that while the defendants did not show an intent to thwart judicial proceedings from the plaintiffs, they did show that the plaintiffs’ conduct did amount to reckless disregard. Second, the court found that the plaintiffs’ actions prejudiced the defendants, who expended significant time, money, and effort to obtain plaintiffs’ documents. Furthermore, the defendants conducted depositions that were largely unusable because they were unable to inquire into important topic sources from the documents. Third, the court found that its previous explicit warning, that their behavior in discovery could lead to dismissal of the plaintiffs’ case, weighed in favor of dismissal. Lastly, the court found that lesser sanctions were insufficient to protect the integrity of the judicial process. Thus, the court dismissed the plaintiffs’ claims with prejudice.
Overall, this case is an example of how discovery misconduct, if severe enough, can cost the client its entire case. While disputes over the burden and proportionality of specific discovery requests will continue across the board, let this case be a lesson that neglecting discovery obligations can result in a plaintiff’s worst-case scenario: dismissal.
Jessica Barnes is an associate at Babst, Calland, Clements & Zomnir P.C. in Pittsburgh, Pennsylvania.
To view the full article, click here.
To view the PDF, click here.
© 2023. No Reason to Cheer—Case Dismissed Due to Severe Discovery Violations, Pretrial Practice & Discovery, American Bar Association Litigation Section, March 22, 2023 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 Amanda Brosy and Sean McGovern)
This article provides an update on the recent developments in environmental justice (EJ) policy and funding at the federal level, as well as forthcoming updates to Pennsylvania’s own EJ Policy, which could have tangible impacts on Pennsylvania’s regulated community.
Federal Background
Executive Action
Since Day One of taking office, the Biden administration has made EJ a priority. For example, on January 20, 2021, President Biden signed Executive Order 13985 (Advancing Racial Equity and Support for Underserved Communities Through the Federal Government), which directs federal agencies, including EPA, to “assess whether underserved communities and their members face systemic barriers in accessing benefits and opportunities available pursuant to those policies and programs.” E.O. 13985 then directs agencies to develop plans to overcome these barriers. Two more executive orders on EJ followed in January 2021, including 14008 (Tackling the Climate Crisis at Home and Abroad), which required the integration of EJ considerations into federal agency processes. Notably, E.O. 14008 established the Justice40 initiative, which sets the goal that 40 percent of the overall benefits of certain federal investments flow to disadvantaged communities, and it established an EJ screening tool to highlight disadvantaged communities that are “marginalized, underserved, and overburdened by pollution.”
Last month, President Biden signed Executive Order 14091 (Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government), which builds upon the Administration’s prior “equity-related Executive Orders by extending and strengthening equity-advancing requirements for agencies, and [positioning] agencies to deliver better outcomes for the American people.” Among other things, E.O. 14091 addresses equity-focused leadership, embedding equity in government-wide processes, and the creation of economic opportunities in rural communities.
US EPA Continues to Refine its EJ Agenda
In response to the directives in EO 13985, US EPA released its Equity Action Plan in April 2022, to “take decisive action to advance environmental justice and civil rights.” US EPA has released formal EJ planning documents since 2010, including its most recent EJ 2020 Action Agenda, and the Equity Action Plan builds on this past work. One of the Equity Action Plan’s priorities is the development of “a comprehensive framework for considering cumulative impacts in relevant US EPA decisions,” which would be applied across US EPA’s programs and activities. The Equity Action Plan describes the issue of cumulative impacts in the context of federal, state, and local permitting decisions:
For decades, EPA, state environmental regulators, and local zoning officials have made decisions that contributed to the disproportionate pollution burden on people of color and underserved communities across the country, such as decisions to site and permit new industrial facilities in ways that concentrate them within these communities. Communities overburdened by pollution often raise concerns about the cumulative impacts of these individual environmental management decisions on public health and quality of life.1
According to US EPA, addressing cumulative impacts is a priority because multiple sources have identified it as “critical to achieving equitable and just outcomes across US EPA programs.”2 In the short-term, US EPA plans to develop a framework for considering cumulative impacts in relevant US EPA decisions, and produce guidance that will operationalize this framework. US EPA intends to identify and promote uses of the cumulative impacts framework in multiple contexts, including permitting, compliance monitoring and enforcement, cleanups, and rulemaking. The cumulative impacts framework will likely factor into permit conditions, mitigation, and potential denial of permits.
The concept of “cumulative impacts” is not new. Various federal environmental statutes including the National Environmental Policy Act (NEPA), the Clean Water Act (CWA), and the Resource Conservation and Recovery Act (RCRA) and associated regulations already incorporate consideration of cumulative impacts in some form or another. What is new, however, is US EPA’s commitment to weaving a comprehensive analysis of cumulative impacts throughout its decision-making. Speaking of decision-making, in Fall 2020 New Jersey adopted its new EJ Law, which provides that various types of permits shall be denied when the Department of Environmental Protection determines that approval would “cause or contribute to adverse cumulative environmental or public health stressors.”3
Pennsylvania Developments
Over the past several years, Pennsylvania has reevaluated its own EJ policies and programs. In October 2021, Former Governor Wolf adopted Executive Order 2021-07 which formally established the Office of Environmental Justice (OEJ) within the Department of Environmental Protection (DEP). E.O. 2021-07 directed OEJ to revise the state’s EJ Policy (which was drafted in 2004 but had gone unchanged since then) to, among other things, develop statewide definitions of “Environmental Justice Area” and “cumulative environmental impacts.” DEP is in the home stretch of the revision process now, having released a draft of the revised Policy in Spring of 2022 for public comment. DEP received over 1,200 public comments on the draft and is currently compiling a comment response document, as well as an updated draft. It is anticipated that the updated draft will be released early this year, in conjunction with key announcements from the Shapiro administration. Notably, the current draft did propose to apply cumulative impacts analysis broadly to agency decisions going forward.
As the public awaits the finalized EJ Policy update, DEP continues to update and otherwise populate the Environmental Justice Areas Viewer 4 with data used to identify potential EJ areas. The Viewer includes data on health, educational levels, and waste generators, and a third party has been retained to provide additional data such as transportation, income, and employment rates. Certain data is updated “nightly from Monday – Friday.” Accordingly, it is possible that the Viewer will show you outside of an EJ Area one day and inside of one the next.
Federal Funding
Following clear and consistent directives from President Biden, EJ funding is more robust as a result of the 2022 Inflation Reduction Act (IRA). Through the IRA, Congress made about $3 billion in funding available for EJ grants. The Administration has developed the following EJ grant programs:
- On January 10, 2023, the Administration announced the availability of $100 million via EPA’s Environmental Justice Collaborative Problem-Solving (EJCPS) Cooperative Agreement Program and the Environmental Justice Government-to-Government (EJG2G) Program. The EJCPS program will provide an estimated $30 million in funding directly to com-munity-based nonprofit organizations (and partnerships of these organizations). The EJG2G program will provide $70 million in funding, $20 million of which will be for state governments to be used in conjunction with community-based organization partners.
- On February 23, 2023, the Administration announced the availability of $550 million via the EPA’s new Environmental Justice Thriving Communities Grantmaking Program (EJ TCGM). The program will fund 11 entities to serve as “grantmakers” to community-based projects that reduce pollution. The selected grantmakers will develop a process to allow organizations that historically have faced barriers to receiving funding more seamlessly apply for grants that address environmental harms and risks.
Most recently, the Biden administration’s proposed Budget would provide US EPA almost $1.8 billion across numerous programs in support of environmental justice efforts, in addition to $91 million for technical assistance for communities working to advance equity and justice. While passage of the Budget as proposed is far from guaranteed, it does further demonstrate the current Administration’s persistence in funding EJ efforts.
Takeaways
As both US EPA and states like Pennsylvania work to develop updates to their respective EJ policies and programs, it is difficult to say exactly how these changes will impact the regulated community with plans for activities in potential EJ areas. What is clear is that funding will continue to be dispersed by the federal government to both states and local community-based organizations to support EJ initiatives. This, coupled with further refinements to the scope and definition of EJ Areas and cumulative impacts by federal and state agencies, means that members of the regulated community who may be planning to conduct activities in possible EJ Areas should keep cognizant of this evolving landscape.
__________________
1 E.O. 13985 Equity Action Plan: U.S. Environmental Protection Agency (April 2022), at p. 4 (available at https://www.epa.gov/system/files/documents/2022-04/epa_equityactionplan_april2022_508.pdf).
2 Id. at 6
3 N.J.S.A. 13:1D-160.4(a)(3)(c).
4 Available at: PA Environmental Justice Areas.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the March 2023 issue of The PIOGA Press. All rights reserved.
(By Paul Gough)
Three advocates for Appalachian hydrogen and carbon capture buildouts said Pennsylvania and the tri-state region will need to focus on permitting and other legal hurdles ahead of the potential projects that are likely coming over the next several decades of the energy transition.
Jim Curry and Kevin Garber, attorneys at Babst Calland, and Michael Docherty, executive director of Appalachian Energy Future, spoke during a webinar on policy and regulatory issues surrounding hydrogen and carbon capture and storage, which the Biden administration is promoting as a solution to reducing the reliance on fossil fuels in energy, electricity production and heavy industry like metal and chemical manufacturing.
For the full article, click here.
Smart Business
(By Adam Burroughs featuring Dane Fennell)
Artificial Intelligence (AI) has made its way into the legal profession — though not in the way that some news headlines might suggest. Recently, a program called ChatGPT passed several law and business school exams. However, for anyone who has any thoughts that we are entering an age of AI legal representation, flesh and blood lawyers who engage in utilizing AI on a daily basis can confirm that those days are a long way off.
“While AI is being used as a tool in a number of different areas of the law, it’s not yet capable of taking over all human roles,” says Dane Fennell, Senior Counsel at Babst Calland. “It’s just an arrow in the quiver that professionals can use to help them be more efficient, saving them and their clients time and money.”
Smart Business spoke with Fennell about the state of AI technology in the legal profession — how it’s being used, and what it can and can’t do.
How would you characterize AI’s place in the legal world?
There are a number of ways that AI has found its way into the legal profession. For example, in M&A due diligence, AI can be used to review large volumes of documents to assist the legal team to home in on the key aspects of a deal with much more speed and efficiency than a manual review. This saves clients time and money, and actually enables the review team to expand the scope of a review to find the ‘needle in the haystack’ issues.
Consumer-based programs are helping those who find themselves with relatively minor legal issues, such as parking tickets and credit card fees. Rather than pay a lawyer, some people are plugging their information into apps such as DoNotPay A.I. (which is the company that created ChatGPT) and allowing technology to fight to get those fees back or beat a ticket.
The problem is that modern AI technology typically doesn’t work well with respect to issue-spotting or finding a resolution to open-ended problems. They still require significant human oversight to be effective.
Lawyers need to have a basic understanding of AI, know what tools their firm is using and what those tools can and can’t do, in order to provide the best services to clients.
What should business leaders know about AI’s use in legal work?
Some business leaders believe that they can just buy an AI program and use it themselves to sort out whatever legal issue they encounter. Unfortunately, AI isn’t something that can be bought off the shelf, unboxed and used in a meaningful way. These technologies are supported by dedicated companies that work with law firms to tailor the AI to simultaneously improve it in an organic way, while also allowing the firm to utilize the AI as best fits the firm’s needs. Based on the current technology available on the market, there are no programs or technologies that can handle all aspects of a legal issue without human oversight.
Before a firm even considers implementing some form of AI, the client needs to have the final right to approve, particularly when any of the client’s data is sent to third-party companies or if saved on a non-firm server. It is a lawyer’s duty to explain exactly what the programs do — such as organizing, categorizing and inventorying documents and information — and what they don’t do — such as making decisions without human interaction or oversight. AI amplifies a firm’s capabilities, and if used correctly, AI can be an invaluable resource that saves clients time and money.
For the foreseeable future, the human component within the legal profession is not going anywhere. AI technology has made leaps in the last decade, but at the end of the day it is a tool alone. It’s a powerful, though oftentimes expensive, tool that can make a good business or firm great if it’s correctly applied.
To view the PDF, click here.
To view the full article, click here.
The Foundation Water Law Newsletter
(By Lisa Bruderly & Mackenzie Moyer)
On January 27, 2023, the Pennsylvania Department of Environmental Protection (PADEP) released the final 2022 Pennsylvania State Water Plan (Plan). The Plan is intended to inform decision making and educate the commonwealth on sustainable use of the commonwealth’s aquatic resources. It identifies regional and statewide water resource priorities and recommends over 100 statewide and legislative actions to address those priorities.
Background
The Water Resources Planning Act of 2002, 2002 Pa. Legis. Serv. Act 2002-220, requires PADEP to collaborate with statewide and regional committees to update the Plan every five years. However, the last State Water Plan was published in 2009.
PADEP identified five main goals for the Plan update:
- A reviewed and updated State Water Plan having the input, guidance, and advice from a repopulated and reinstated statewide committee, six regional committees, and the public.
- Approved and updated critical area resource plans (CARPs) within the Potomac and the Ohio planning areas left unfinished from the 2009 Plan Update.
- Enhanced web-based applications and tools to deliver improved access to water resource information, data, and statistics for educational and water planning purposes.
- Plan provisions to implement applicable water resource-related strategies outlined in the 2018 Pennsylvania Climate Action Plan.
- An updated 2009 State Water Plan Atlas using a web-based GIS application.
The Plan is meant to be a source of water resource data, the latest information, and policy recommendations. It will assist PADEP and other state agencies with developing and implementing policies, programs, and projects that correspond with Pennsylvania’s current and future water needs.
Plan Recommendations
The updated Plan recommends over 100 actions in areas such as flood control, stormwater management, water withdrawal, legacy coal mining impacts, legacy oil and gas wells, drinking water and wastewater treatment, contaminants of emerging concern, and agricultural nonpoint source pollution.
Regarding stormwater, the Plan’s recommendations include: providing a streamlined and more efficient stormwater management program for the regulated community, establishing legislation that allows local authorities, utilities, and management districts to collect “reasonable fees” and “generate sustainable revenues” dedicated to planning, maintaining, improving, and repairing stormwater management infrastructure, and continuing to create opportunities for delegated county conservation districts to implement chapter 102 (Erosion and Sediment Control) and chapter 105 (Dam Safety and Water Way Management) permitting.
Other recommendations in the Plan include establishing an emerging contaminants program, considering regionalization and consolidation of treatment systems to address acid mine drainage from abandoned coal mines, and providing additional funding to identify and address inactive, abandoned, and orphaned wells.
Jumping off the work completed for the 2009 State Water Plan, the 2022 Plan identifies four watersheds as critical water planning areas (CWPAs). CWPAs are areas where existing or future water demands threaten to exceed water availability. These four watersheds are the Marsh and Rock Creek watersheds in Adams County; the Back Creek watershed in Fayette County; and the Laurel Hill Creek watershed in Somerset and Fayette Counties. After a watershed is identified as a CWPA, a CARP is developed. The CARP will identify CWPA-specific recommendations to better manage water-use in the CWPA and ensure future use.
Environmental justice (EJ) and climate change have been top priorities for PADEP, and the Plan complements these priorities. On climate change, the Plan includes and incorporates recommendations found in the 2018 and 2021 Pennsylvania Climate Action Plans. For example, the 2018 Climate Action Plan highlighted opportunities to use stormwater best management practices and water conservation to meet climate change goals. These goals tie nicely with the goals of the State Water Plan and have been incorporated into the Plan. For EJ, the Plan aims at providing educational opportunities and soliciting participation from EJ areas in state water planning processes. PADEP hopes to bring public awareness to the State Water Plan and include vulnerable communities in water-use planning to ensure availability of water resources for all communities into the future.
According to PADEP, the next step is for PADEP and committee members “to reach out to legislative, government, advocacy, and business leaders statewide with information on how they may implement the strategies and actions to benefit all members of their communities.” PADEP, “Pennsylvania State Water Plan,” https://www.dep.pa.gov/Business/Water/PlanningConservation/StateWaterPlan/Pages/default.aspx.
PADEP Rescinds 2022 Guidance on Evaluating Aquatic Resource Compensatory Mitigation
In early 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a technical guidance document entitled “Pennsylvania Function-Based Aquatic Resource Compensation Protocol,” PADEP Doc. No. 310-2137-001 (effective Mar. 1, 2022) (Mitigation Guidance). See Vol. 55, No. 1 (2022) of this Newsletter. On January 7, 2023, PADEP published a notice in the Pennsylvania Bulletin rescinding the Mitigation Guidance for re-evaluation. 53 Pa. Bull. 107 (Jan. 7, 2023).
The Pennsylvania Dam Safety and Encroachments Act, 32 Pa. Stat. §§ 693.1–.27, and its implementing regulations, 25 Pa. Code ch. 105, require a person to obtain a permit from PADEP to construct, operate, maintain, modify, enlarge, or abandon a dam, water obstruction, or encroachment that alters the course, current, or cross section of a body of water. Mitigation Guidance at 1. A mitigation plan is typically required with the permit application, including, as applicable, a plan to compensate for the impact to regulated waters as a result of the project. Id. at 2.
The Mitigation Guidance was meant to provide a standardized system for evaluating functional compensation offsets associated with proposed aquatic resource impacts, determining compensatory mitigation requirements, assisting in identifying measures to minimize proposed project impacts, reducing subsequent compensation requirements, and evaluating compensation proposals. Id. Prior to the Mitigation Guidance, Pennsylvania’s method for determining compensation for losses to aquatic resources was based on acreage and linear feet.
Due to pushback from affected entities, including mitigation banks and permittees, PADEP formed a stakeholder working group to review the Mitigation Guidance. PADEP officially rescinded the Mitigation Guidance “to reevaluate its effectiveness and review potential revisions through stakeholder outreach.” 53 Pa. Bull. at 107. Until new guidance is developed, the previous acre-and-feet method will be used to identify and calculate mitigation needs and requirements.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
The Wildcatter
(By Nikolas Tysiak)
Welcome back, I hope everyone had an excellent holiday season. As always, the period covering December and January is usually the slowest time of year regarding judicial and legislative activity, and this year is no exception. Just one case of interest from Ohio, and some minor administrative code revisions in Pennsylvania.
Ohio Public Works Commission v. Barnesville, 2022-Ohio-4603. The village of Barnesville, OH, purchased about 104 acres of land as an “open space” project in connection with the Clean Ohio Conservation Fund, which is administered by the Ohio Public Works Commission (“OPWC”) in 2002. As part of the deal, OPWC required that Barnesville take deeds for the lands with certain covenants and restrictions, including a limitation on the use of the purchased lands, restricting the use of the property for the stated purposes, and empowering the OPWC to enforce the covenants and restrictions with various penalties attached. Barnesville subsequently leased the oil and gas under the lands at issue to Antero Resources in 2012, without the consent of OPWC. The Ohio Supreme Court found that the actions of Barnesville in regard to the oil and gas rights violated the transferability restriction imposed by the OPWC, overruling the 7th District Court of Appeals. However, the Supreme Court also determined that the lease to Antero violated the use restriction imposed by OPWC as part of the overall transaction and affirmed the appropriateness of injunctive relief in enforcing such restrictions, including an injunction deeming the oil and gas lease unenforceable. Consequently, the Supreme Court affirmed the decision of the 7th District Court of Appeals’, remanding the case for further consideration, accordingly.
Pennsylvania has amended several administrative code sections regarding VOC emissions control requirements arising custody transfer from the wellhead to transmission or storage. See 25 Pa. ADC § 129.121 – 129.140. Additionally, there were revisions to the permits required in the disturbance of waterways and watersheds. See 58 Pa. ADC § 51.61.
There is nothing else to report this time. Until next time, we are always interested in hearing from the membership, so please do not hesitate to reach out to us.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the MLBC February 2023 issue of The Wildcatter. All rights reserved.
Legal Intelligencer
(by Ben Clapp and Gina Falaschi Buchman)
On January 12, 2023, U.S. Environmental Protection Agency (EPA) published a notice of public comment period in the Federal Register requesting “Public Comment on EPA’s National Enforcement and Compliance Initiatives for Fiscal Years 2024-2027.”[1] Though EPA is charged with the enforcement of many environmental statutes, like any agency with limited resources, it must prioritize enforcement efforts. Every four years, EPA reviews its priorities and sets new enforcement and compliance initiatives for which it establishes specific goals and a comprehensive strategy.[2]
Over the years, EPA has used various names for these initiatives. The program started as the National Priorities. In 2010, the program was changed to the National Enforcement Initiatives in response to stakeholder feedback that the term “National Priorities” implied that EPA’s many other enforcement activities were of lesser significance programmatically or environmentally. From 2010 to 2018, the program was known as the “National Enforcement Initiatives,” but EPA decided to “evolve the National Enforcement Initiatives program into a National Compliance Initiatives (NCIs) program by providing states and tribes with additional opportunities for meaningful engagement, by developing and applying a broader set of compliance assurance tools, and by aligning the NCIs with the Agency Strategic Plan measures and priorities.”[3]
On December 20, 2022, EPA released a memorandum entitled “Updated Policy for EPA’s Enforcement and Compliance Initiatives” which explains that “[w]hile criminal enforcement and civil enforcement (judicial and administrative) remain the key tools to address serious noncompliance, hold polluters accountable and create general deterrence, EPA also uses informal enforcement and compliance tools to advance the national initiatives. To reflect this comprehensive approach, the national initiatives will now be known as National Enforcement and Compliance Initiatives (NECIs).”[4]
The December 2022 memorandum also sets forth three criteria to be used to evaluate initiatives to be included in the Fiscal Years 2024-2027 NECIs: (1) EPA will consider whether there is a serious need to address the issue and whether it is a widespread environmental violation. EPA will aim to address noncompliance that has a significant adverse impact on the environment and public health, particularly in environmental justice communities. (2) EPA will consider whether federal enforcement can make a difference, that is, will it be effective in holding polluters accountable and leveling the playing field. (3) EPA will consider whether the NECI aligns with the EPA’s FY2022-2026 Strategic Plan to concentrate enforcement resources to contribute towards the broader goals of the agency.[5] Two of the agency’s goals – Goal 1: Tackle the Climate Crisis and Goal 2: Take Decisive Action to Advance Environmental Justice – apply to all program areas. Strategic Plan Goal 3: Enforce Environmental Laws and Ensure Compliance reemphasizes the role of the NECIs. The memorandum also states that NECIs should be evaluated as to whether they can support media-specific goals in the Agency’s Strategic Plan such as Goal 4.1 – Improve Air Quality and Reduce Localized Pollution and Health Impacts.
While the EPA is preparing for the next four-year cycle, it is still enforcing under the current set of National Compliance Initiatives for Fiscal Years 2020-2023. The agency is currently focused on six NCIs where the enforcement program has the lead for the agency and a seventh priority area, where the enforcement program is contributing to the EPA’s goal of reducing childhood lead exposure. The six current NCIs are:
- Creating Cleaner Air for Communities by Reducing Excess Emissions of Harmful Pollutants from Stationary Sources;
- Reducing Hazardous Air Emissions from Hazardous Waste Facilities;
- Stopping Aftermarket Defeat Devices for Vehicles and Engines;
- Reducing Significant Noncompliance with National Pollutant Discharge Elimination System Permits;
- Reducing Noncompliance with Drinking Water Standards at Community Water Systems; and
- Reducing Risks of Accidental Releases at Industrial and Chemical Facilities.
EPA’s list of proposed NECIs for Fiscal Years 2024-2027 were selected using the three criteria explained above. EPA is soliciting comment on whether to continue, modify, or conclude the six initiatives from the FY 2020-2023 cycle. EPA notes that it is planning to continue the following four existing initiatives into the FY 2024-2027 cycle: (1) Creating Cleaner Air for Communities by Reducing Excess Emissions of Harmful Pollutants. EPA plans to continue this initiative with a focus on processes for which widespread noncompliance continues to be identified: flares, storage tanks, wastewater treatment, and incineration/combustion. (2) Reducing Risks of Accidental Releases at Industrial and Chemical Facilities. EPA plans to continue this initiative because EPA has found that many regulated facilities are not adequately managing risks they pose to surrounding communities. (3) Reducing Significant Non-Compliance in the National Pollutant Discharge Elimination System (NPDES) Program. EPA will continue and expand this initiative to include municipal permittees that are covered under a general permit, as unlawful discharges from such facilities can cause significant adverse impacts to overburdened communities. (4) Reducing Non-Compliance with Drinking Water Standards at Community Water Systems. EPA proposes to continue this initiative because, while progress has been made working with States in improving Safe Drinking Water Act compliance, further improvement is needed. EPA has also proposed to return the following two initiatives to the standard “core” enforcement program: (1) Reducing Toxic Air Emissions from Hazardous Waste Facilities and (2) Stopping Aftermarket Defeat Devices for Vehicles and Engines as significant improvement has been made and there is increased awareness of the issues.
EPA also specifically solicited comment on two potential new NECIs: (1) Mitigating Climate Change. This initiative would seek to combat climate change through a focus on reducing non-compliance with the illegal import, production, use, and sale of hydrofluorocarbons pursuant to the American Innovation and Manufacturing Act of 2020, excess emissions from sources within certain industrial sectors, and non-compliance with other requirements such as mobile source, fuels, and methane regulations. (2) Addressing PFAS Contamination. This initiative would focus on implementing the commitments under the EPA’s 2021–2024 Per-and Poly-fluoroalkyl substances (PFAS) Strategic Roadmap.[6] EPA also sought comment on two additional areas being considered for possible development as NECIs: (1) Reducing Exposure to Lead and (2) Addressing Coal Combustion Residuals (CCR). EPA noted that while both topics are significant enforcement priorities, resource constraints limit the number of NECIs that can be pursued.
Maintaining an awareness of the NECIs as they are developed and implemented can help the regulated community understand where EPA has identified significant nationwide noncompliance. With this knowledge, companies can identify aspects of their operations that fall within the ambit of the NECIs and evaluate internal compliance programs as appropriate. Additionally, companies should be aware that EPA will sometimes prepare updated guidance documents related to components of the NECIs in an effort to assist the regulated community in complying with the underlying environmental laws and regulations. EPA will accept comments on the proposed NECIs until March 13, 2023 on the Federal e-rulemaking portal (www.regulations.gov).
________________
[1] Public Comment on EPA’s National Enforcement and Compliance Initiatives for Fiscal Years 2024-2027, 88 Fed. Reg. 2093 (Jan. 12, 2023), available at https://www.govinfo.gov/content/pkg/FR-2023-01-12/pdf/2023-00500.pdf.
[2] Memorandum from Susan Parker Bodine to Regional Administrators, FY 2020-FY2023 National Compliance Initiatives, (June 7, 2019), available at https://www.epa.gov/sites/default/files/2019-06/documents/2020-2023ncimemo.pdf.
[3] Memorandum from Susan Parker Bodine to Regional Administrators, Transition from National Enforcement Initiatives to National Compliance Initiatives (Aug. 21, 2018), available at https://www.epa.gov/sites/default/files/2018-08/documents/transitionfromneitonci082118.pdf.
[4] Memorandum from Lawrence E. Starfield to Regional Administrators, “Updated Policy for EPA’s Enforcement and Compliance Initiatives” (Dec. 20, 2022), available at https://www.epa.gov/system/files/documents/2022-12/necimemo.pdf.
[5] EPA, FY2022-2026 Strategic Plan, (March 2022) available at FY 2022-2026 EPA Strategic Plan.
[6] EPA, PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024, available at https://www.epa.gov/system/files/documents/2021-10/pfas-roadmap_final-508.pdf.
Ben Clapp is a shareholder of Babst Calland. Mr. Clapp’s transactional work, which straddles the Firm’s Environmental and Corporate practice areas, consists of advising clients on the environmental components of complex deals, including identifying and analyzing significant environmental liability and compliance issues arising in connection with mergers and acquisitions, asset sales, project financings, and corporate restructurings, and working to resolve, manage, allocate or mitigate these environmental risks in the client’s best interest. Contact him at 202-853-3488 or bclapp@babstcalland.com.
Gina Falaschi Buchman is an associate in the Environmental Group of Babst Calland. Ms. Falaschi provides advice to clients in the energy, transportation, and technology sectors regarding compliance with state and federal environmental regulations. She has assisted companies with disclosure of regulatory violations to state and federal agencies and has counseled clients in negotiations with the U.S. Department of Justice, U.S. EPA, and California Air Resources Board. Contact her at 202-853-3483 or gbuchman@babstcalland.com.
To view the full article, click here.
Reprinted with permission from the February 16, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.