The American Oil & Gas Reporter
(By Lisa Bruderly)
The U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers have issued a new definition of “waters of the United States” (WOTUS), which becomes effective on March 20. The regulated community is watching this new definition of WOTUS because it will determine federal jurisdiction under the Clean Water Act.
For example, projects involving oil or natural gas development or pipeline construction require federal permitting for impacts from crossing, or otherwise disturbing, WOTUS. Generally speaking, the more impacts to such federally regulated streams and wetlands, the more complicated, expensive and lengthy the Corps Section 404 permitting.
In addition to determining the scope of federal permitting for the dredging/filling of streams and wetlands, the WOTUS definition also determines the scope of several other federal regulations, including regulations associated with National Pollutant Discharge Elimination System permitting, Spill Prevention, Control and Countermeasure plans and federal spill reporting. Although WOTUS is not defined in the CWA, the WOTUS definition appears in 11 different federal regulations.
Overview And Background
The agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS. However, this definition does not appear to provide much-needed clarity. Rather, generally speaking, the new definition codifies the approach that the agencies already have been informally utilizing to determine WOTUS, for example, relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (such as the 2006 case, Rapanos v. United States). Challenges to the new definition are already underway.
The definition of WOTUS has been debated for nearly two decades, starting with several U. S. Supreme Court cases, which addressed the meaning of the 1980s WOTUS definition. This 1980s definition is very brief and is open to much interpretation because it does not include any defined terms. As discussed further below, rather than providing clarity, the U.S. Supreme Court decisions introduced additional uncertainty by offering more than one test for determining WOTUS.
Subsequently, Presidents Obama and Trump each introduced their own WOTUS definitions. President Barack Obama introduced the Clean Water Rule (CWR) in 2015, and President Donald Trump introduced the Navigable Waters Protection Rule (NWPR) in 2020.
Not surprisingly, the CWR entailed a broader interpretation of WOTUS, based heavily of Justice Anthony Kennedy’s significant nexus test in Rapanos, while the NWPR was based heavily on Justice Antonin Scalia’s “relatively permanent waters” test in Rapanos. Both the CWR and the NWPR were immediately and significantly challenged. Neither rule remains in effect.
Current Status
The Biden administration published its draft definition of WOTUS on Dec. 7. The final rule was published in the Federal Register on Jan. 18. The agencies’ approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Scalia issued the plurality opinion, which held that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (such as adjacent wetlands).
Justice Kennedy, however, advanced a broader WOTUS interpretation in his concurring opinion, which was based on the concept of a “significant nexus” (for instance, wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical and biological integrity of other covered water”). President Biden’s new definition directly quotes and codifies these tests as regulations that may be relied upon to support a WOTUS determination.
While this new WOTUS definition may not be, conceptually, a significant change to how the agencies regulate streams and wetlands, the new definition may expand the agencies’ interpretation of a wetland that is “adjacent” to a WOTUS, through its lengthy discussion of adjacent wetlands in the final rule’s preamble.
The new definition also may expand how the agencies determine whether a water body will “significantly affect” a WOTUS, by providing a definition of “significantly affect,” which enumerates five factors to assess and five functions to consider in evaluating whether a potentially unregulated water will have a “material influence” on a traditionally navigable water.
Factors include distance from the traditionally navigable water, hydrologic factors and climatological variables. Functions include contribution of flow and retention and attenuation of runoff. Both the factors and the functions are broad and open to interpretation, which may lead to the agencies asserting jurisdiction over more water bodies. The new definition also codifies that the effect of the potentially regulated water must be evaluated alone “or in combination with similarly situated waters in the region,” which likely will broaden how the agencies evaluate the potential regulation of ephemeral and isolated water bodies.
Supreme Court And Congress
Publication of this definition, at this time, is likely a preemptive move by the agencies in advance of the Supreme Court’s impending decision in Sackett v. EPA, a case in which the court will, again, weigh in on the definition of WOTUS.
In Sackett, landowners in Idaho have had a long-standing challenge to an administrative order issued against them for allegedly filling wetlands without a permit. The Sacketts assert that Justice Kennedy’s significant nexus test in Rapanos is not the appropriate test to delineate wetlands as WOTUS, and that, under the test identified by Justice Scalia, the wetlands on their property are not WOTUS.
In 2021, the U.S. Court of Appeals for the Ninth Circuit ruled against the Sacketts’ position and held that the “significant nexus” test in the Kennedy concurrence was the controlling opinion from Rapanos. The Sacketts petitioned the U.S. Supreme Court to consider whether Rapanos should be revisited to adopt the plurality’s test for wetland jurisdiction under the CWA. However, the Supreme Court instead will consider the narrow issue of whether the Ninth Circuit “set forth the proper test for determining whether wetlands are WOTUS.”
Some have speculated that the U.S. Supreme Court’s opinion may support a narrower interpretation of WOTUS than the agencies have been implementing. For example, if the court narrows or eliminates the “significant nexus” test, the decision will create even more uncertainty in identifying WOTUS and may invalidate the Biden administration’s definition. The Sackett opinion is expected by this summer.
In a letter dated Jan. 30, 25 Republican governors asked President Biden to delay implementation of the new WOTUS definition until the U.S. Supreme Court issued the Sackett decision. The governors oppose the new definition and claim that it is, among other things, ill-timed, burdensome and overbroad. The governors assert that delaying implementation of the new definition until after the issuance of the Sackett decision will minimize the number of changes to the definition in a short time. The governors stated that multiple revisions would “impose an unnecessary strain on farmers, builders and every other impacted sector of the American economy.”
Consistent with the sentiments of the Republican governors, in early February, Republican members of Congress, led by Senator Shelley Moore Capito, R-W.V., and representatives Sam Graves, R-Mo., and David Rouzer, R-N.C., announced that they intended to use the Congressional Review Act to formally challenge the new WOTUS definition through a joint resolution of disapproval. The hearing was held on Feb 8.
The CRA provides Congress a mechanism to vote to disapprove agency rules that go beyond the authority Congress granted to federal agencies and to send the resolution to the president, who can approve or veto the resolution. If passed, the joint resolution of disapproval could invalidate the rule and prohibit an agency from issuing a rule that is in substantially the same form without further congressional authorization. President Biden is expected to veto any such joint resolution of disapproval.
Consistent with Obama’s CWR and Trump’s NWPR, the new WOTUS definition already has been challenged in the U.S. District Court of the Southern District of Texas by Texas and 18 industry groups, including the American Petroleum Institute, claiming that the new definition is “unworkable” and in conflict with the CWA (see accompanying story, page 30). These challenges may result in the stay or vacatur of the new definition. If this occurs, the agencies may, again, revert back to the current WOTUS definition.
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Republished with permission from the February issue of The American Oil & Gas Reporter.
PIOGA Press
(By Gina Falaschi Buchman, Justine Kasznica, and Susanna Bagdasarova)
On November 14, 2022, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published a proposed Federal Acquisition Regulation (FAR) 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. 87 Fed. Reg. 68,312 (Nov. 14, 2022) (Proposed Rule). The Proposed Rule entitled the “Federal Supplier Climate Risks and Resilience Rule” implements President Biden’s Executive Order 14030, directing a number of federal agencies to take action to address climate-related risks and the Administration’s push toward net-zero emissions procurement by 2050.
The Proposed Rule would introduce a new FAR subpart 23.XX containing mandatory GHG emissions1 disclosure and reporting requirements for major federal suppliers, which are divided into “significant” and “major” contractors for purposes of the applicable requirements. “Significant contractors,” defined as federal contractors receiving at least $7.5 million but less than $50 million in federal contract obligations in the prior fiscal year, must conduct a GHG inventory of their annual Scope 12 and Scope 23 emissions and report the total annual emissions in the System for Award Management (SAM). “Major contractors,” defined as federal contractors receiving more than $50 million in federal contract obligations in the prior fiscal year, are subject to the same requirement with respect to Scope 1 and Scope 2 emissions and must also conduct and report the results of a GHG inventory of their annual Scope 34 emissions.
Major contractors are also required to use the Carbon Disclosure Project (CDP)5 Climate Change Questionnaire annually to complete a publicly available disclosure of their Scope 1, Scope 2, and Scope 3 emissions as well as their climate risk assessment process and any risks identified. In addition, major contractors must identify and publicly disclose science-based targets to reduce their GHG emissions.
Under the proposed regulatory framework, a federal supplier is presumed to be nonresponsible (and therefore ineligible for contract awards) until the relevant contracting officer confirms that the contractor has (itself or through its immediate owner or highest-level owner, as defined in the FAR), complied with the applicable requirements of the Proposed Rule.
Certain entities are exempted from the Proposed Rule’s reporting and disclosure requirements, including higher education institutions, nonprofit research entities, state or local governments and federal management and operating (M&O) contractors which derive at least 80 percent of their annual revenue from such M&O contracts. Additionally, if a major contractor qualifies as a “small business” or is a nonprofit organization, it is subject only to the reporting requirements of a significant contractor. The requirements may also be waived by the Senior Procurement Executive for emergencies, national security, or other mission essential purposes.
Significant and major contractors will be required to report Scope 1 and Scope 2 emissions one year following the publication of the final rule. Major contractor requirements to disclose Scope 3 emissions, climate-related risks, and science-based targets begin two years following the publication of the final rule.
If this Proposed Rule is finalized, many companies with government contracts, particularly small businesses, will be required to calculate and report GHG emissions and climate-related financial information for the first time. Preparations of such disclosures is costly and may require the hiring of new personnel or outside contractors to complete calculations and compile and organize information. In addition, companies without government contracts may be asked by customers or suppliers with government contracts to estimate or account for their GHG emissions as part of the supply chain. Finally, public disclosure of climate-related financial information could subject companies to litigation risk by shareholders, investors, or non-governmental organizations.
From a practical standpoint, many oil and gas companies may already calculate and report GHG emissions under other federal, state, or permit requirements, including companies required to report under the EPA’s Greenhouse Gas Reporting Program (GHGRP). EPA’s GHGRP regulations generally apply to (1) direct GHG emissions sources that emit at least 25,000 metric tons of CO2-equivalent (CO2e, the amount of CO2 emissions with the same global warming potential as the number of metric tons of another GHG) per year; (2) fuel and industrial gas suppliers; and (3) facilities with underground CO2 injection wells. Other companies voluntarily set GHG emission reduction targets as part of their sustainability initiatives. The annual calculating and reporting of GHG emissions to satisfy other obligations may lessen the burden of the Proposed Rule on certain companies affected both directly and indirectly by the proposal.
The DoD, GSA, and NASA will accept comments on the Proposed Rule until February 13, 2023 on the Federal e-rulemaking portal (www.regulations.gov).
If you have any questions about the Proposed Rule or submission of comments, please contact Gina Falaschi Buchman at (202) 853-3483 or gfalaschi@babstcalland.com, Justine M. Kasznica at (412) 394-6466, or jkasznica@babstcalland.com, or Susanna Bagdasarova at (412) 394-5434 or sbagdasarova@babstcalland.com.
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1 GHG is defined to include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride, and sulfur hexafluoride.
2 “Scope 1” emissions are GHG emissions from sources that are owned or controlled by the reporting company.
3 “Scope 2” emissions are GHG emissions associated with the genera-tion of electricity, heating and cooling, or steam, when these are pur-chased or acquired for the reporting company’s operations but occur at sources other than those owned or controlled by the entity.
4 “Scope 3” emissions are GHG emissions that are a consequence of the operations of the reporting entity but occur at sources other than those owned or controlled by the entity.
5 The CDP is a nonprofit organization that runs a disclosure system for companies, cities, states, and regions to manage environmental impact and scores these entities based on questionnaires submitted.
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Reprinted with permission from the February 2023 issue of The PIOGA Press. All rights reserved.
Eric M. Spada recently joined Babst Calland as senior counsel in the Litigation Group. Mr. Spada’s practice focuses primarily on commercial litigation. He has represented a diverse array of clients in a variety of cases in state and federal courts in Pennsylvania, Ohio, West Virginia, and Florida, and also in commercial and construction arbitrations. Mr. Spada has also practiced in front of real estate tax assessment and appeal boards and state and federal ALJs. His litigation experience includes matters relating to construction, real estate, energy and natural resources, tax assessments and tax exemptions, and financial services. He has also successfully litigated cases concerning closely-held business disputes, franchising, civil identity theft, and insurance fraud issues. Mr. Spada also has extensive experience in the e-Discovery space.
Prior to joining Babst Calland, Mr. Spada was an associate with Buchanan Ingersoll & Rooney PC. He is a 2008 graduate of George Washington University Law School.
Legal Intelligencer
(By Jennifer Malik and Anna Hosack)
While municipalities continue to grapple with the repercussions of Slice of Life, proponents for another controversial residential use—community living or group homes—attempted to rely on Slice of Life to support a curative amendment to a zoning ordinance that would allow a community living use in a residential district.
In 2019, the Pennsylvania Supreme Court examined the zoning issues surrounding the increasingly popular use of single-family homes as short-term rentals in Slice of Life v. Hamilton Township Zoning Hearing Board, 207 A.3d 886 (Pa. 2019). In the nearly four years since Slice of Life was decided, many municipalities have relied on its holding to prohibit short-term rentals in residential zoning districts—reasoning that the purely transient use of short-term rentals is inconsistent with the common definition of “family” that is typically defined as a single household in local ordinances. While municipalities continue to grapple with the repercussions of Slice of Life, proponents for another controversial residential use—community living or group homes—attempted to rely on Slice of Life to support a curative amendment to a zoning ordinance that would allow a community living use in a residential district.
On Nov. 7, 2022, the Pennsylvania Commonwealth Court rendered a decision in Hope House in Midland PA v. Borough of Midland, PA, No. 145-CD-2022 2022 WL 16727674 (Pa. Cmwlth. 2022), affirming the denial of a property owner’s curative amendment that would have permitted a group home in a single family residentially zoned district. Although the court’s decision was unreported, it may be cited for persuasive value in the future and is indicative of the court’s interpretation of the boundaries of the holding in Slice of Life.
In December 2020, Hope House, a nonprofit organization, purchased a six-bedroom home located in Midland Borough’s R-1 Single-Family Residential Zoning District—intending to use the property as a “community living facility” for approximately 17 women and children in need of shelter. Hope House would not limit how long a resident could stay on the property, but estimated residents would stay for an average of four to five months. Hope House sought a curative amendment to the borough’s zoning ordinance that would allow a “community living arrangement” as a use permitted by-right in the R-1 zoning district, on the theory that the borough’s zoning ordinance was exclusionary. During the public hearing on the proposed amendment, the borough’s code enforcement officer opined that Hope House’s proposed use qualified as a “group residence,” which is permitted as a conditional use in the R-3 zoning district under the existing zoning ordinance. The zoning ordinance defines “group residence” as “a dwelling facility operated for not more than 15 persons plus staff, living together as a single family or as a single housekeeping unit.” The borough denied the curative amendment, finding that the proposed amendment was not only overly broad, but also unnecessary because Hope House’s proposed use fit into the existing definition of a “group residence” under the zoning ordinance. Hope House appealed the borough council’s determination to the Court of Common Pleas of Beaver County who affirmed the denial.
On appeal to the Commonwealth Court, Hope House argued that pursuant to Slice of Life, its proposed use did not qualify as a “group residence” under the zoning ordinance because its residents would be transient, and therefore could not be considered to be living as a “single housekeeping unit.” As readers may recall, in Slice of Life, the Pennsylvania Supreme Court evaluated whether a local zoning ordinance prohibited the use of property as a short-term rental unit in a single-family residential zoning district. There, the local zoning ordinance defined a “family” as “one or more persons occupying a dwelling unit, related by blood, marriage, or adoption living together as a single housekeeping unit and using cooking facilities and certain rooms in common.” The Pennsylvania Supreme Court held that by defining “family” as requiring “a single housekeeping unit,” the ordinance clearly and unambiguously excluded purely transient uses of property in a single-family residential district.
The Commonwealth Court rejected Hope House’s argument, distinguishing Slice of Life, because in that case, the Pennsylvania Supreme Court was interpreting the phrase “single housekeeping unit” in the context of the zoning ordinance’s definition of a “family,” as opposed to as part of a definition of a “group residence,” within a multi-family zoning district. Consequently, the Commonwealth Court found that the “logic and reasoning used to interpret the meaning of ‘single housekeeping unit’ in the definition of ‘family’ could not be extended to interpret the meaning of ‘single housekeeping unit’ in the zoning ordinance’s definition of ‘group residence.’” The Commonwealth Court reasoned that group residences are unlike single-family households and do not have an inherent expectation of stability. Additionally, the plain language of the zoning ordinance at issue indicated that a “single housekeeping unit” was not intended to be synonymous with “family” and it is clear the borough did not intend to adopt the definition laid out in Slice of Life since the zoning ordinance was last revised in 1993. Lastly, the court reasoned that by using the disjunctive “or,” the zoning ordinance made “living together as a single housekeeping unit” distinct from “living together as a family.” Since Hope House’s residents will have common living and dining areas and will participate in similar programs and activities within the residence, the residents will be living together as a single housekeeping unit for purposes of qualifying as a “group residence.” Therefore, the court concluded that persons “living together… as a single housekeeping unit” under the zoning ordinance’s definition of “group residence” can include transient persons and rejected Hope House’s argument that the zoning ordinance was exclusionary.
The Pennsylvania Supreme Court’s holding in Slice of Life remains undisturbed by Hope House, and it remains clear that municipalities may prohibit short-term rentals and other purely transient residential uses in single family residential districts. However, the interpretation of “single housekeeping unit” by the Commonwealth Court in Hope House appears to represent a logical boundary to how Slice of Life may be applied going forward and indicates that the law has not fully settled on how zoning ordinances should account for transient uses such as short-term rentals. It remains imperative that municipalities that regulate short-term rentals or other transient residential uses expressly address such uses within their zoning ordinances. As the Hope House court noted, it is crucial for the municipality to have the ability to place conditions on transient uses to regulate the health and safety of those in the area surrounding the use. Therefore, once a municipality has planned for the use, the municipality should consider what conditions would be appropriate for the use and location. Relevant standards for transient uses could include those that regulate parking, noise, signage, smoke, electrical disturbance, odors or glare.
Jennifer Malik is a shareholder and Anna Hosack is an associate in the public sector services group of the Pittsburgh law firm of Babst, Calland, Clements and Zomnir, P.C. Malik focuses her practice on health care benefits, administration, insurance coverage and appellate law—with an emphasis on zoning and land use. Hosack focuses her practice on zoning, subdivision and land development, and municipal ordinance construction and enforcement. Contact them at jmalik@babstcalland.com and ahosack@babstcalland.com.
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Reprinted with permission from the February 9, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
ACBA Young Lawyers’ Division newsletter Point of Law
(By Alexandra Farone)
On January 5, 2023, the Federal Trade Commission (FTC) proposed a national ban on noncompetition agreements. Noncompetition agreements, or “non-competes,” are contractual terms between employers and workers that prohibit the worker from working for a competing employer or starting a competing business, typically within a certain geographic area for a certain period of time. If a worker violates a non-compete clause, the employer can sue the worker for breach of contract and may be able to obtain a preliminary injunction enjoining the worker to stop the conduct that purportedly violates the non-compete clause. If successful in litigation, the employer may be able to obtain a permanent injunction and/or the payment of monetary damages. If the FTC’s proposed ban becomes final, this is all about to change.
As a basis for the proposed rule, the FTC made a preliminary finding that non-competes constitute an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act (the “Act”). Section 5 of the Act provides that “unfair methods of competition in or affecting commerce” are unlawful, and that the FTC is “empowered and directed” to prevent businesses from using unfair methods of competition.
Under the proposed rule, employers could not ask new employees, independent contractors, or even unpaid volunteers to sign non-competes. All existing non-competes would have to be rescinded, and employers would have to inform current and former workers on an individual basis that their noncompete is no longer in effect within 45 days of the rescission. The proposed rule would also prohibit employers from attempting to enter non-competes, or representing to a worker under certain circumstances that the worker is subject to an enforceable noncompete.
The proposed rule is focused on non-competes, but other restrictive covenants could become subject to the rule if they are so broad that they effectively function as non-competes. For example, the FTC states that a contractual term that requires the worker to pay the employer or a third party for training costs if the worker’s employment terminates within a certain time period, where the payment is not reasonably related to the actual costs incurred for training, may be deemed a prohibited de facto non-compete clause. It is unclear whether non-solicitation agreements (agreements in which a worker agrees not to solicit the employer’s other employees or clients to end their relationship with that employer) would be barred by this proposed rule, as many non-solicitation agreements are drafted broadly to have the near-effect of a non-compete. Many commentators believe that the FTC will revise the proposed rule after the comment period to provide more clarity regarding non-solicitation agreements.
There is also a proposed exception where the ban will not apply to non-compete clauses entered into by someone (1) selling a business entity, (2) disposing all of the person’s ownership interest in the entity, or (3) selling substantially all of a business entity’s operating assets, when the person is a substantial owner, member, or partner in the business entity at the time the person enters into the non-compete. A “substantial” owner, member, or partner is one who holds at least a 25% ownership interest in a business entity. Additionally, entities that are exempted from coverage under the Act – certain banks, savings and loan entities, federal credit unions, common carriers, air carriers, persons subject to the Packers and Stockyards Act of 1921, and entities not organized to carry on business for its own profit or that of its members – may not be subject to the rule.
The FTC voted 3-to-1 to publish the Notice of Proposed Rulemaking (NPRM). The public has 60 days to comment on the proposed rule. In the NPRM, the FTC also describes and seeks comment on several topics related to the proposed rule, including whether non-competes with senior executives should be subject to a different standard than non-competes with other workers, whether low- and high-wage workers should be treated differently, whether franchisees should be covered by the rule, and whether “no-poach” agreements and wage-fixing agreements should be barred. After the comment period closes on March 10, 2023, the rule will either take effect or be struck down.
Compliance would be mandated 180 days after the adoption of the rule. If adopted, it is generally expected that there will be multiple challenges to the FTC’s authority to issue this non-compete ban, which may result in a stay in enforcement of the ban until any litigation is resolved.
This proposed rule has been expected for some time. More than one year ago, on July 9, 2021, President Joe Biden signed Executive Order 14036 encouraging the FTC to limit or ban noncompetition agreements. The FTC estimates that 18% of U.S. workers are currently covered by non-competes. The FTC further predicts that this ban may result in up to $300 billion in additional earned wages, save consumers up to $148 billion on health costs annually, and double the number of companies in the same industry founded by a former worker.
There is a reasonable likelihood that legal challenges to this ban would be successful. In West Virginia v. EPA, No. 20-1530, — U.S. — (June 30, 2022), the Court recently demonstrated skepticism of sweeping rule-making from regulatory agencies, due to potential violation of the separation of powers doctrine. The Court adopted the major questions doctrine, which holds that in extraordinary cases of political and economic significance, where an agency makes “unheralded” use of its authority, the agency must be able to identify a clear statement from Congress authorizing that particular action. Given the broad scope, it is very likely that a national non-compete ban would be considered an extraordinary case of political and economic significance, and would have to clear the major questions doctrine hurdle to survive.
Employers who use non-competes should consider submitting comments to the FTC on the proposed ban and should begin thinking strategically about implementing non-disclosures and confidentiality agreements in lieu of non-compete agreements should the ban become law.
Alexandra Farone is an employment and litigation associate at Babst, Calland, Clements and Zomnir P.C. and can be contacted at afarone@babstcalland.com.
To view the Point of Law Winter 2023 edition, click here.
Reprinted with permission from the Point of Law Winter 2023 edition by the Allegheny County Bar Association.
Smart Business
(By Sue Ostrowski featuring Susanna Bagdasarova)
A number of countries require businesses to identify individuals who have a beneficial ownership interest in a company, making it more difficult for illicit actors to hide behind a corporate entity and use it for potentially illegal purposes. Until now, the United States has not been one of them. That is changing thanks to the “Beneficial Ownership Information Reporting Requirements” final rule issued by the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The information, says Susanna Bagdasarova, an associate at Babst Calland, will be filed with FinCEN to create a national, non-public database for limited law enforcement and regulatory use.
“The intent is to curtail the deliberate misuse of business entities as shell companies for illegal purposes — to deter fraud, protect national security and prevent oligarchs or criminal actors from using entities to launder money or provide a cover for drug or human trafficking,” Bagdasarova says.
Smart Business spoke with Bagdasarova about which of the 32 million businesses estimated to be subject to the rule fall under that umbrella, when they need to file, and what it means for your business.
What does filing entail and who must do so?
‘Reporting companies’ (domestic and foreign business entities, including corporations, LLCs, and other entities formed or registered to do business in a state) will be required to file reports that identify themselves and provide identifying information regarding each beneficial owner and certain ‘company applicants.’ A ‘beneficial owner’ is an individual who directly or indirectly exercises substantial control over the reporting company, or holds at least 25 percent of the ownership interests of a reporting company. Both ‘substantial control’ and ‘ownership interests’ are defined broadly to prevent loopholes allowing corporate structures to obscure owners or decision-makers.
The filing must include the company’s full legal name and trade names, principal business address, jurisdiction of formation or initial registration, and taxpayer ID number. The company must also include detailed personal identifying information for each individual beneficial owner.
The rule requires an initial filing, then additional filings within 30 days of any change regarding any of the reported information. Businesses will need to monitor changes in ownership and management throughout the year for compliance purposes. Many companies will be subject to this requirement, although the rule provides for 23 exceptions, including banks, wholly-owned subsidiaries, SEC reporting companies, and ‘large operating companies.’
How will the RULE be enforced?
The reported information will be aggregated by FinCEN into a central database for national security, intelligence and law enforcement purposes. Information will be tightly controlled and will not be publicly available. There are potential civil and criminal consequences for failing to comply. Willful violations can result in civil penalties of up to $500 per day a violation has not been remedied and criminal penalties can reach $10,000 and/or up to two years in prison.
How can an attorney help businesses navigate through the requirements?
The first step is to determine whether your company is exempt from reporting requirements. If not, a company should review its management and ownership structure to understand its reporting obligations. Companies with very simple management and ownership structures may be able to navigate the filing on their own. However, if there is some complexity in a company’s management or ownership structure or uncertainty about determinations of beneficial ownership or substantial control, an attorney can help you avoid missteps.
The rule becomes effective Jan. 1, 2024, with a one-year filing grace period for existing companies.
Given the goal of transparency to combat financial crimes, the government is casting a rather wide net, so companies need to review their structures to determine which individuals have a sufficient ownership interest and substantial control to trigger reporting requirements.
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Legal Intelligencer
(by Casey Alan Coyle and Emily Davis)
Sometimes life imitates art. The Disney animated film “Encanto” centers around a family, the Madrigals. They live in a magical house that bestows upon each child in the family a unique gift, except the protagonist, Mirabel. Mirabel soon discovers that the magic surrounding the house is in danger and seeks out the assistance of her ostracized uncle, Bruno. The Madrigal family avoided mention of Bruno for ten years. Mirabel knew the basics: he could predict the future. But the contours of his powers, the details of his disappearance, the mere mention of his name—all forbidden topics of discussion. The family even wrote a Grammy-nominated song about it, “We Don’t Talk About Bruno.”
Likewise, for nearly a decade, the Pennsylvania Supreme Court has declined to further discuss its holding in Bruno v. Erie Ins. Co., 106 A.3d 48 (Pa. 2014), despite numerous calls for clarification. As a result, uncertainty remains regarding the “gist of the action” doctrine in Pennsylvania. Therefore, just like the Madrigal family, there is one question permeating the legal community: is it finally time to talk about Bruno?
Contract v. Tort Distinction
The contract-tort distinction is fundamental to civil litigation. While actions for breach of contract compensate the plaintiff for damages foreseeable at the time of a contract, tort claims remedy injuries resulting from the defendant’s conduct. Nonetheless, the contract-tort distinction is often unclear. Charles Miller, Contortions over Contorts: A Distinct Damages Requirement?, 28 Tex. Tech. L. Rev. 1257, 1257-58 (1997). This blurred boundary is complicated by plaintiffs’ ability to recover additional forms of damages for actions sounding in tort that are not available for actions sounding in contract, like punitive damages. Danielle Sawaya, Not Just For Products Liability: Applying The Economic Loss Rule Beyond Its Origins, 83 Fordham L. Rev. 1073, 1083 (2014). These additional remedies provide a strong incentive for plaintiffs to disguise breach of contract claims as tort claims to recover a greater damages award. Lisa T. Munyon, et al., Tort and Contract Actions: Strange Bedfellows No More In The Wake Of Tiara Condominium, 87 Fla. B.J. (2013).
The Bruno Decision
Courts have attempted to devise rules to maintain the conceptual distinction between tort and contract claims, and one of those is the “gist of the action” doctrine. The doctrine bars a plaintiff from suing in tort when the “gist” or gravamen of the plaintiff’s claim is contractual in nature. eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10, 15 (Pa. Super. 2002). The purpose of the doctrine is to preclude a plaintiff from “re-casting ordinary breach of contract claims into tort claims.” Hart v. Arnold, 884 A.2d 316, 339 (Pa. Super. 2005). As recently explained by one federal court: “Pennsylvania courts have employed this doctrine to deal with Trojan Horse torts—that is, instances when plaintiffs have clothed a breach of contract claim in negligence terms so they can recover noneconomic damages (like pain and suffering) that they could not recover under contract law.” Humphries v. Pa. State. Univ., No. 4:20-CV-00064, 2021 WL 435532, at *7 (M.D. Pa. Sept. 24, 2021).
While the gist of the action doctrine has been a longstanding fixture of Pennsylvania law, the Pennsylvania Supreme Court did not formally adopt it until Bruno. In doing so, the Court articulated the test to determine when a claim is barred by the doctrine. The Court held that, “[i]f the facts of a particular claim establish that the duty breached is one created by the parties by the terms of their contract—i.e., a specific promise to do something that a party would not ordinarily have been obligated to do but for the existence of the contract—then the claim is to be viewed as one for breach of contract.” Bruno, 106 A.3d at 68. In contrast, “[i]f. . . the facts establish that the claim involves the defendant’s violation of a broader social duty owed to all individuals, which is imposed by the law of torts and, hence, exists regardless of the contract, then it must be regarded as a tort.” Id. The Supreme Court added that the “nature of the duty alleged to have been breached” is the “critical determinative factor in determining whether the claim is truly one in tort, or for breach of contract.” Id.
Justice Eakin authored a concurring opinion, in which he cautioned against what he deemed “troublesome language” in the majority opinion. Bruno, 106 A.3d at 124. He opined: “To the extent the majority is perceived to ‘paint with a broad brush,’ suggesting any negligence claim based on a contracting party’s manner of performance does not arise from the underlying contract, I must disagree. In some cases, such as here, that may be the case. However, synthesizing case law to stand for such a broad pronouncement does not comport with the ‘gist of the action’ doctrine—an inherently circumstantial analysis.” Id.
The Fallout
Although intended to end the uncertainty surrounding the gist of the action doctrine, Bruno left several questions unanswered. Chief among them is how to determine whether a claim concerns a “broader social duty” or a duty imposed by contract. Malone v. Weiss, No. 17-1694, 2018 WL 827433, at *4 (E.D. Pa. Feb. 12, 2018). As one federal court put it, “the Bruno court did not explain how to separate claims that implicate ‘broader social dut[ies]’ (and do not trigger the gist of the action doctrine) from contract duties (that do trigger gist of the action).” Ohama v. Markowitz, 434 F.Supp.3d 303, 319 (E.D. Pa. 2020). This lack of guidance has proven “particularly problematic in the context of a claim for fraudulent inducement because such claims inherently involve both a ‘social duty’ to refrain from fraud as well as duties imposed by contract.” Sheridan v. Roberts Law Firm, No. 2:19-CV-00467, 2019 WL 6726469, at *4 (E.D. Pa. Dec. 11, 2019) (citation and quotation marks omitted).
Pennsylvania state and federal courts have reached “different conclusions” about whether the gist of the action doctrine applies to fraudulent inducement claims. Downs v. Andrews, 639 Fed. Appx. 816, 820 (3d Cir. 2016). In Malone, for instance, the federal district court found that “[p]ermitting a fraudulent inducement claim . . . would essentially negate the entire doctrine of gist of the action because a Plaintiff would have only to allege that Defendants never intended to abide by a provision in their contract to escape dismissal.” Malone, 2018 WL 827433, at *4. On the other hand, in KMB Shamrock, Inc. v. LNR Transportation, Inc., 50 Pa. D. & C. 5th 259 (Lackawanna Cnty. Ct. Com. Pl.), the state court determined that fraudulent inducement claims should “remain unaffected by the gist of the action doctrine following . . . Bruno.”
The lack of clarity surrounding the doctrine is not confined to the tort of fraudulent inducement. Consider, for example, the tort of breach of fiduciary duty, which is often raised alongside a breach of contract claim where an employee solicits customers for a competitor during his/her employment in violation of a non-solicitation agreement. In that scenario, the act underlying the tort is identical to the act constituting the breach of the contract. Therefore, allowing both claims to proceed effectively allows the plaintiff to obtain double recovery for the same harm. Yet, under Bruno, is not clear whether the gist of the action doctrine precludes such a result.
In sum, and as noted by one commentator, “[w]hile the court’s decision to invoke a duty-based standard was an attempt to establish a uniform interpretation of the doctrine under Pennsylvania law, its broad holding allows for continued ambiguity surrounding the application of the doctrine and may increase the number of tort claims brought by plaintiffs who can rely on the opinion’s broad language.” Lauren Anthony, Home Is Where The Confusion Is: Pennsylvania Formally Adopts The “Gist Of The Action” Doctrine And Builds A House For Ambiguity In Bruno V. Erie Insurance Co., 61 Vill. L. Rev. 235, 246 (2016).
Conclusion
Almost ten years after Bruno, the uncertainty surrounding the gist of the action doctrine persists. Therefore, if given the opportunity through the proper vehicle, the Pennsylvania Supreme Court likely will further expound on its decision in Bruno. After all, there’s a lot to say about Bruno.
Casey Alan Coyle is a shareholder at Babst Calland. and focuses his practice on appellate law and complex commercial litigation. He is also a former law clerk to Chief Justice Emeritus Thomas Saylor of the Pennsylvania Supreme Court. Contact him at 267-939-5832 or ccoyle@babstcalland.com.
Emily A. Davis is an associate at Babst Calland and focuses her practice on appellate law and complex commercial litigation. She is also a former law clerk to Chief Justice Baer of the Pennsylvania Supreme Court. Contact her at 724-672-7445 or edavis@babstcalland.com.
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Reprinted with permission from the February 2, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
GO-WV
(By Lisa Bruderly)
U. S. EPA and the U. S. Army Corps of Engineers (the Agencies) have issued a new definition of “waters of the United States” (WOTUS), which becomes effective on March 20, 2023. The definition of WOTUS determines federal jurisdiction under the Clean Water Act (CWA). For example, projects involving oil or natural gas development or pipeline construction require Corps permitting for impacts from crossing, or otherwise disturbing, WOTUS. Typically, the more impacts to such federally regulated streams and wetlands, the more likely the permitting will cause project delays and increase expenses.
Although the Agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS, this definition does not appear to provide much-need-ed clarity. Rather, generally speaking, the new definition codifies the approach that the Agencies have already been informally utilizing to determine WOTUS, which entails relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (e.g., Rapanos v. United States, 547 U.S. 715 (2006)).
The Agencies’ current approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Antonin Scalia issued the plurality opinion, holding that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (i.e., adjacent wetlands). Justice Anthony Kennedy, however, advanced a broader interpretation of WOTUS in his concurring opinion, which was based on the concept of a “significant nexus,” meaning that wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered water.”
President Biden’s new definition directly quotes and codifies these tests as regulations that may be relied upon to support a WOTUS determination. Publication of this definition, at this time, is likely a preemptive move by the Agencies in advance of the Supreme Court’s impending decision in Sackett v. EPA, a case in which the Court is considering “the proper test for determining whether wetlands are ‘waters of the United States.’” Some have speculated that the U. S. Supreme Court’s opinion may support a more narrow interpretation of WOTUS than is currently being implemented by the Agencies. If true, this inconsistency would create even more uncertainty in identifying WOTUS.
While this new WOTUS definition may not, conceptually, be a significant change to how the Agencies regulate streams and wetlands, the new definition could expand how the Agencies evaluate whether a wetland is “adjacent” to a WOTUS and whether a waterbody will “significantly affect” a WOTUS, both of which would support federal jurisdiction of the stream/wetland. The preamble to the new definition includes lengthy discussion regarding adjacent wetlands. In addition, the new definition of “significantly affect” enumerates five factors to be assessed and five functions to be considered in evaluating whether a potentially unregulated water will have a “material influence” on a traditionally navigable water. Factors include distance from the traditionally navigable water, hydrologic factors and climatological variables. Functions include contribution of flow and retention and attenuation of runoff. Both the factors and the functions are broad and open to interpretation, which could lead to the Agencies asserting jurisdiction over more waterbodies.
The new definition also codifies that the effect of the potentially regulated water must be evaluated “alone or in combination with similarly situated waters in the region,” which will likely broaden how the Agencies evaluate the potential regulation of ephemeral and isolated waterbodies.
Consistent with President Obama’s Clean Water Rule and President Trump’s Navigable Waters Protection Rule, the new WOTUS definition has already been challenged in the U.S. District Court of the Southern District of Texas by Texas and 18 industry groups, including the American Petroleum Institute, claiming that the new definition is “unworkable” and in conflict with the CWA. These challenges may result in the stay or vacatur of the new definition. If this occurs, the Agencies may, again, revert back to the current definition of WOTUS.
Babst Calland will continue to follow these and other Clean Water Act developments. If you have any questions about these developments, contact Lisa Bruderly at 412-394-6495 or lbruderly@babstcalland.com.
Click here, to view the article online in the February issue of Go-WV News.
The Foundation Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On December 10, 2022, the Pennsylvania Environmental Quality Board (EQB) published in the Pennsylvania Bulletin a final-omitted rulemaking (Conventional VOC Rule), 52 Pa. Bull. 7635, and a final-form rulemaking (Unconventional VOC Rule), 52 Pa. Bull. 7587, adopting reasonably available control technology (RACT) standards to control volatile organic compound (VOC) and methane emissions from existing and future conventional oil and gas operations and unconventional oil and gas operations. These regulations establish RACT requirements for conventional and unconventional oil and natural gas sources of VOC emissions. These sources include natural gas-driven continuous bleed pneumatic controllers, natural gas-driven diaphragm pumps, reciprocating compressors, centrifugal compressors, fugitive emissions components and storage vessels installed at unconventional well sites, gathering and boosting stations, and natural gas processing plants, as well as storage vessels in the natural gas transmission and storage segment.
The Conventional VOC Rule was effective on notice from the Pennsylvania Department of Environmental Protection (PADEP) on December 2, 2022. Members of the Pennsylvania House Environmental Resources and Energy (ERE) Committee had disapproved the final-omitted regulation, Regulation #7-579, in a November 14, 2022, letter to the Independent Regulatory Review Commission (IRRC). On November 17, 2022, the IRRC approved the final-omitted rulemaking, and the EQB subsequently adopted an emergency certified final-omitted regulation, Regulation #7-580, on November 30, 2022. See Press Release, PADEP, “EQB Adopts Emergency Air Quality Regulation for Existing Conventional Oil and Gas Sources” (Nov. 30, 2022). Regulation #7-580 is identical to Regulation #7-579 except that it received an emergency certification of need from then-Governor Tom Wolf. PADEP said that the final-omitted regulation was appropriate under the Commonwealth Documents Law because notice and comment from the public was unnecessary, impractical, and contrary to the public interest. PADEP recommended that EQB adopt the regulation as a final-omitted regulation as part of the process to meet the U.S. Environmental Protection Agency’s (EPA) December 16, 2022, deadline for the state to adopt methane emission controls for oil and gas operations. See Executive Summary, “Control of VOC Emissions from Conventional Oil and Natural Gas Sources—25 Pa. Code Chapter 129” (Oct. 12, 2022); see also Vol. 39, No. 4 (2022) of this Newsletter. Failure of the state to adopt the required regulations reportedly could have resulted in the loss of over $500 million in federal highway assistance. On December 5, 2022, the Pennsylvania Independent Oil & Gas Association, Pennsylvania Independent Petroleum Producers, and Pennsylvania Grade Crude Oil Coalition filed a lawsuit challenging the legality of the Conventional VOC Rule. See Petition for Review in the Nature of a Complaint for Declaratory Relief, Pa. Indep. Oil & Gas Ass’n v. Commonwealth, No. 574 MD 2022 (Pa. Commw. Ct. filed Dec. 5, 2022).
The Unconventional VOC Rule, which became effective upon publication in the Pennsylvania Bulletin, was adopted by the EQB at its June 14, 2022, meeting. The House ERE Committee met on July 11, 2022, and approved a letter to the IRRC announcing its opposition to the final EQB regulation on a number of grounds, including that the revised regulation had not gone through public notice and comment. During its July 21, 2022, meeting, the IRRC unanimously voted to approve the regulation. The House ERE Committee met on August 2, 2022, to vote on a concurrent resolution disapproving of the rule, and the resolution was voted out of committee. The House and Senate each had 30 calendar days, or 10 legislative voting days (whichever is later), to adopt the concurrent resolution. Neither took further action and the regulation was published in the Pennsylvania Bulletin.
A rule substantially similar to those published on December 10 was approved by the EQB in March 2022, but it did not distinguish between conventional and unconventional emission sources. That rulemaking had advanced to the Pennsylvania House and Senate ERE Committees and the IRRC for consideration, but the House ERE Committee issued a disapproval letter for the rulemaking on April 26, 2022. Three trade associations also filed a petition for review of the rulemaking in the Commonwealth Court of Pennsylvania. The petition and the House ERE Committee’s disapproval letter alleged that PADEP failed to comply with Act 52 of 2016, which requires that any rulemaking concerning conventional oil and gas wells be undertaken separately and independently from those concerning unconventional oil and gas wells or other subjects. As a result, PADEP withdrew the regulation from IRRC consideration on May 4, 2022. See Vol. 39, No. 2 (2022) of this Newsletter.
PADEP submitted both the Unconventional VOC and Conventional VOC Rules to EPA as a revision to Pennsylvania’s state implementation plan (SIP). On December 14, 2022, EPA issued a completeness determination for PADEP’s revision to Pennsylvania’s SIP, which avoided the imposition of federal highway funding sanctions that were set to take effect on December 16, 2022. EPA is now evaluating whether it will approve the SIP revision.
Governor Enacts Law Amending Oil and Gas Lease Act to Provide Additional Royalty Payment Transparency
On November 3, 2022, then-Pennsylvania Governor Tom Wolf signed Senate Bill 806 into law as Act 153 of 2022. The Act, effective March 3, 2023, amends the Oil and Gas Lease Act to clarify the minimum amount of information that a conventional or unconventional oil and gas operator is required to provide to a royalty owner on a royalty payment check stub or in an attachment to other forms of payment. The Act requires that an operator/payor furnish the following items (the complete details of which are available in the Act’s text):
- identifying information for the lease, property, unit, or wells for which payment is being made;
- the month and year of oil, gas, or natural gas liquids production for which the payment is being made;
- the total volume of oil, gas, or natural gas liquids produced and sold per well;
- the price received per unit of oil, natural gas, or natural gas liquids sold;
- the aggregate amounts for each category of deductions for each well incurred that reduces the royalty owner’s payment, including all severance and other production taxes;
- net and gross value of the payor’s total sales from each well less any deductions;
- the royalty owner’s legal and contractual interest in the payor’s share, expressed as a decimal or fraction;
- the royalty owner’s share of the gross value of the payor’s total sales before any deductions;
- the royalty owner’s share of the sales value less the royalty owner’s share of taxes and any deductions; and
- the payor’s contact information, including an address and telephone number.
See 58 Pa. Stat. §§ 35.2, .3(a).
The Act allows an unconventional operator and royalty owner to agree that the operator may provide this information in a summary format, so long as the operator provides the complete information upon the royalty owner’s request by certified mail. Id. § 35.3(b). If an unconventional operator fails to provide complete payment information without good reason within 60 days of a royalty owner’s request, the amendments authorize a royalty owner to bring a civil action against the operator to obtain the information and recover any incurred associated attorney’s fees and court costs in doing so. Id. § 35.3(c). The Act also sets deadlines for payment for unconventional operators (within 120 days from the date of first sale; thereafter, within 60 days after the end of the month when the production is sold), subject to certain exceptions, and imposes interest penalties for late payments. Id. § 35.3(e).
Governor Enacts Law Creating Orphan Well Plugging Grant Program
On November 3, 2022, then-Pennsylvania Governor Tom Wolf signed House Bill 2528 into law as Act 136 of 2022. The Act, effective January 3, 2023, amended Pennsylvania law to create the Orphan Oil and Gas Well Plugging Grant Program and bring the program into compliance with the requirements for the use of federal funding for well plugging. Among the significant amendments, the Act requires that no less than 20% of the funds allocated from the federal Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021), be made available for plugging conventional oil and gas wells (unless funds remain uncommitted six months prior to any deadline for recapture of the funds by the federal government, in which case they may be used for other purposes). 58 Pa. Cons. Stat. Ann. § 2811(a). The Act also increases the maximum grant amounts from $10,000 to $40,000 (or the actual cost, whichever is less) for wells up to 3,000 feet deep and from $20,000 to $70,000 (or the actual cost, whichever is less) for wells deeper than 3,000 feet. Id. § 2822(b).
The Act includes additional criteria an applicant must submit to the Pennsylvania Department of Environmental Protection (PADEP) to be considered a qualified well plugger (e.g., a demonstration that the applicant has access to the necessary equipment, materials, resources, and services required to plug wells). Id. § 2824(a). A qualified well plugger must also attest that (1) it will provide necessary documentation to allow PADEP to demonstrate it is complying with funding allocation requirements, and (2) each well plugged by the qualified well plugger will be plugged in accordance with applicable requirements. Id. § 2825(b).
The Act also requires that PADEP allow Pennsylvania companies of any size to bid on well plugging contracts. Id. § 3271.1. To qualify, any such company must be headquartered or have its main offices in Pennsylvania and conduct at least 50% of its business activities in the commonwealth. Id. Alternatively, other companies may qualify as “Pennsylvania companies” if they subcontract the work to subcontractors selected through a competitive bidding process that gives priority to subcontractors, when possible, that satisfy the location and business activity thresholds described above. Id. These requirements do not prohibit PADEP from accepting bids from or awarding contracts to companies that are not “Pennsylvania companies” if taking such action is not otherwise prohibited. Id.
PADEP Considering Revising Applicable Regulations After Release Event at Natural Gas Storage Facility
On December 9, 2022, the Pennsylvania Department of Environmental Protection (PADEP) announced that it had issued an administrative order and two compliance orders related to a natural gas storage facility release event that occurred in Jackson Township, Cambria County, Pennsylvania, in November 2022. See Press Release, PADEP, “DEP Issues Three Orders to Equitrans in Wake of Rager Mountain Storage Reservoir Natural Gas Release” (Dec. 9, 2022) (at which the three orders are available). In the press release, PADEP said its investigations into the event are ongoing.
At the December 1, 2022, Oil and Gas Technical Advisory Board (TAB) meeting, Kurt Klapkowski, Acting Deputy Secretary for PADEP’s Office of Oil and Gas Management, referenced the release event and indicated that it will inform PADEP actions in 2023. After praising Pennsylvania’s current regulations, which were adopted in 1994, as “very good” in terms of the requirements they place on the gas storage industry, Klapkowski said that in response to the release event, stakeholders can probably expect “significant development of potential proposed rule-makings, potential proposed statutory changes, [and] potential proposed administrative and implementation changes.” TAB Meeting at 29:10, 30:50 (Dec. 1, 2022). To achieve these goals, Klapkowski said that he expected significant interaction between PADEP and operators, as well as coordination with TAB and the Crude Development Advisory Council (CDAC). Id. at 32:13. CDAC, which reports to TAB, will be involved in any proposed rulemakings, guidance, or other administrative changes because storage wells are defined as conventional wells governed by 25 Pa. Code ch. 78.
Although Klapkowski did not provide specific details about PADEP’s potential actions and the form of the process, he said the changes may be proposed to chapter 78 and “[e]verything is on the table for consideration in terms of making sure that this industry is regulated appropriately and the public gets protected and the environment is protected from potential incidents like this happening again in the future.” Id. at 34:53. Prior to answering questions from attendees, Klapkowski said that PADEP is going to be spending significant effort on this in the coming weeks and months. Id. at 35:22. PADEP further addressed the release event and its response applicable to Pennsylvania gas storage operations, now under the new Shapiro administration, at CDAC’s February 16, 2023, meeting.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
The Foundation Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi & Christina Puhnaty)
As previously reported in Vol. 39, No. 2 (2022) of this Newsletter, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule, or RGGI Rule, which links the commonwealth’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), was published in the Pennsylvania Bulletin in April 2022. See 52 Pa. Bull. 2471 (Apr. 23, 2022). RGGI is the country’s first regional, market-based cap-and-trade program designed to reduce carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid.
A number of legal challenges were filed in response to the publication of the final rule. On April 25, 2022, owners of coal-fired power plants and other stakeholders filed a petition for review and an application for special relief in the form of a temporary injunction. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). Briefing has been filed and the court heard 30 minutes of oral argument in the case on November 16, 2022. The parties await the court’s ruling.
Additionally, on July 13, 2022, natural gas companies Calpine Corp., Tenaska Westmoreland Management LLC, and Fairless Energy LLC filed a third legal challenge to the rule with arguments similar to those brought in the other two cases. See Calpine Corp. v. PADEP, No. 357 MD 2022 (Pa. Commw. Ct. filed July 12, 2022). Constellation Energy Corporation and Constellation Energy Generation LLC petitioned to intervene in the case, but later filed a joint motion to stay intervention proceedings on October 31, 2022, which the court granted. The stay on the application for intervention remains in place. Briefing in this case has been filed and oral argument is set for February 8, 2023.
In a third suit filed by the acting Secretary of PADEP against the Pennsylvania Legislative Reference Bureau in February 2022, PADEP filed suit in the Pennsylvania Commonwealth Court seeking to compel the Pennsylvania Legislative Reference Bureau to publish the Pennsylvania Environmental Quality Board’s final-form rulemaking for the CO2 Budget Trading Program in the Pennsylvania Bulletin. See McDonnell v. Pa. Legis. Reference Bureau, No. 41 MD 2022 (Pa. Commw. Ct. filed Feb. 3, 2022). By law, the House and Senate each have 30 calendar days or 10 legislative days—whichever is longer—to vote on a disapproval resolution to stop a new rule from taking effect. PADEP argued that the periods should have run simultaneously for the House and Senate, rather than one after the other, and the Pennsylvania Legislative Reference Bureau’s improper interpretation delayed issuance of the rule. On January 19, 2023, the commonwealth court dismissed the case as moot, as the rule was published in April 2022, without ruling on the merits.
On an interlocutory appeal in PADEP’s action, the Supreme Court of Pennsylvania upheld a preliminary injunction of the RGGI Rule granted by the commonwealth court. On July 8, 2022, the commonwealth court granted a preliminary injunction preventing the state from participating in RGGI pending resolution of the case. See Vol. 39, No. 3 (2022) of this Newsletter. Governor Wolf appealed the injunction to the Supreme Court of Pennsylvania. On August 31, 2022, the supreme court denied the state’s emergency request to reinstate the automatic supersedeas, thereby maintaining the preliminary injunction while litigation on the merits proceeds before the commonwealth court. See Ziadeh v. Pa. Legis. Reference Bureau, No. 79 MAP 2022 (Pa. Aug. 31, 2022); Vol. 39, No. 4 (2022) of this Newsletter. The regulation remains stayed.
On January 18, 2023, every member of the Pennsylvania Senate Republican Caucus signed a letter to the newly inaugurated Governor Josh Shapiro that urged him to repeal the final RGGI regulation. See Letter from the Senate Republican Caucus to Gov. Shapiro (Jan. 18, 2023). The letter highlighted the economic burden that would be placed on Pennsylvania electric generating units and subsequently passed on to businesses and consumers. The letter also referenced Governor Shapiro’s previous statements that implied doubt as to whether participation in RGGI was the best approach for the commonwealth.
Further information regarding the rule and the history of the rulemaking can be found on PADEP’s RGGI webpage at https://www.dep.pa.gov/Citizens/climate/Pages/RGGI.aspx.
EQB Withdraws Proposed Water Quality Standard for Manganese
On November 18, 2022, the Pennsylvania Environmental Quality Board (EQB) notified Pennsylvania’s Independent Regulatory Review Commission (IRRC) that it was formally withdrawing its widely-opposed proposed rulemaking to change the water quality criterion for manganese in the commonwealth. See Letter from Laura Griffin, Regulatory Coordinator, EQB, to David Summer, Exec. Dir., IRRC (Nov. 18, 2022); see also Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). The manganese rule would have added a numeric water quality criterion for manganese of 0.3 mg/L to Table 5 at 25 Pa. Code § 93.8c and deleted the existing water quality criterion of 1.0 mg/L from 25 Pa. Code § 93.7. See Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). In its rule proposal, the EQB and the Pennsylvania Department of Environmental Protection identified the parties affected by the manganese rule to be “[a]ll persons, groups, or entities with proposed or existing point source discharges of manganese into surface waters of the Commonwealth,” but specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expected that mining operators would need to perform additional treatment to meet this criterion. Id. at 3.
The EQB’s withdrawal of the rule follows the November 2022 disapproval of the rulemaking by the IRRC and the Pennsylvania House and Senate Environmental Resources and Energy standing committees. See Vol. 39, No. 4 (2022) of this Newsletter.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Pretrial Practice & Discovery
American Bar Association Litigation Section
(By Jessica Barnes)
The application and scope of the attorney-client privilege for communications containing both legal and nonlegal advice is a critical consideration to protect the privilege.
A “bedrock doctrine of the legal profession,” “hallmark of Anglo-American jurisprudence,” and “cornerstone of the American legal system”—these are just a few ways that the attorney-client privilege was described in briefing in a matter before the Supreme Court of the United States (SCOTUS) that has attracted attention from legal scholars across the country.
This closely watched SCOTUS case is In Re Grand Jury, No. 21-1397, which involves a dispute over the withholding of documents in the form of communications containing both legal and non-legal advice (dual-purpose communications) in response to grand-jury subpoenas on the basis of privilege. Specifically, the petitioner-law firm provided legal advice to a client regarding the tax consequences of the client’s anticipated expatriation (i.e., renouncing citizenship). Thus, some of the communications from the law firm to the client were made for the dual purpose of providing legal advice about tax consequences and to facilitate preparation of the client’s tax returns.
For example, some of the documents that the law firm withheld on a privileged basis included communications related to unsettled statutory requirements, strategies for filing amended income-tax returns for purposes of expatriation, and the drafting of a submission to the IRS advocating for the abatement of a penalty assessment. The law firm withheld these dual-purpose communications on the ground that while relating to the client’s tax returns, they were sufficiently motivated by the additional purpose of obtaining or providing legal advice regarding the client’s taxes.
The District Court for the Central District of California used the “primary purpose test” and permitted petitioner-law firm to withhold in full a set of documents related to the preparation of the client’s tax return because the “primary purpose” of those documents was obtaining legal advice and not solely tax-return preparation. Additionally, the district court ordered disclosure of the portions of communications where the primary or predominant purpose concerned the procedural aspects of the preparation of the client’s tax return.
Where it found that a portion of a tax-preparation communication contained tax-related legal advice, the district court instructed petitioner-law firm to redact the communication before disclosing the rest of the document. The Ninth Circuit affirmed, upholding the primary-purpose test’s application to dual-purpose communications.
Notably, there is a circuit split as to when the attorney-client privilege applies in dual-purpose communications:
- The D.C. Circuit uses the “significant purpose test” and directs courts to look to the legal purpose behind a communication and evaluate whether it is significant.
- The Ninth Circuit, on the other hand, uses the primary-purpose test and directs courts to determine the primary purpose of a communication, and find that the communication is privileged only when that one primary purpose is legal advice.
- The Seventh Circuit has taken a different approach, at least in the context of tax law, concluding that a dual-purpose tax-related document—a document prepared for use in preparing tax returns and for use in litigation—is not privileged.
Various amici filed briefs arguing against the stricter standard for asserting attorney client privilege, including:
- Association of Professional Responsibility Lawyers: While ultimately not supporting either side, the association emphasized the critical importance of the privilege and urged the court to adopt a rule that provides certainty and clarity as to the scope of the privilege at the moment that communications between lawyers and their clients occur.
- Federation of Defense & Corporate Counsel: Writing in support of petitioner-law firm, the group argued that the need for certainty is heightened further by the new realities of corporate life, in which legal advice is often sought for combined legal and business reasons by digital means, leading to even more dual-purpose legal communications. Ultimately, this group concluded that the significant-purpose test strikes the right balance.
- American Bar Association: Filing a brief in support of petitioner-law firm, the ABA argued that the primary-purpose test would narrow the privilege far beyond already well-established exceptions and limitations (e.g., crime-fraud exception, waiver by publication to third parties, and inapplicability when not seeking legal advice at all), without justification.
Overall, it is important for attorneys to be mindful of the state of the law in the jurisdictions in which they practice, especially until SCOTUS opines on the breadth of the sacred attorney-client privilege in the realm of dual-purpose communications.
Jessica Barnes is an associate at Babst, Calland, Clements & Zomnir P.C. in Pittsburgh, Pennsylvania.
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© 2023. SCOTUS to Weigh in on Privilege Standard for Dual-Purpose Communications, Pretrial Practice & Discovery, American Bar Association Litigation Section, January 18, 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.
Pittsburgh Trib
(By Stephanie Ritenbaugh)
An Oakland business incubator closed its initial investment — over $300,000 — in one of its first cohort of companies through its ‘angel investment’ program.
Idea Foundry’s program, IF Ventures, said the company that received the infusion was one of five presented to a group of investors in September.
Idea Foundry and its partner, law firm Babst Calland, declined to name the company because of confidentiality agreements. However, President and CEO Mike Matesic was able to say that it’s a company that develops software to help retailers and distributors.
The company is generating revenue, Matesic said.
“Part of our investment will be used for the company to expand into additional geographic models,” said Chris Farmakis, shareholder and board chairman of Pittsburgh-based Babst Calland.
Additional investments are still being considered for the group, Matesic said.
IF Ventures is an investment group managed by Idea Foundry Inc., a non-profit economic development organization. The goal of the program is to attract investors and funding for companies to boost economic development through entrepreneurship and business growth.
“The investor interest and attraction of new investors exceeded our expectations at this early stage,” Matesic said.
“One of the most promising actions that occurred was that our initial group of investors encouraged their peers to join and ultimately became part of this initial investment,” he said.
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PIOGA Press
(By Lisa Bruderly)
Projects involving oil or natural gas development or pipeline construction require U.S. Army Corps of Engineers (Corps) permitting for impacts from crossing, or otherwise disturbing, federally regulated streams and wetlands. The extent of required federal permitting is dependent on the definition of “waters of the United States” (WOTUS), which determines federal jurisdiction under the Clean Water Act (CWA). Typically, the more impacts to federally regulated streams and wetlands, the more likely the permitting will cause project delays and increase expenses.
As one of their last actions for 2022, U. S. EPA and the Corps (the Agencies) released a prepublication notice of a new definition of WOTUS on December 30, 2022. The new definition will become final 60 days after publication in the Federal Register.
Although the Agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS, this definition does not appear to provide much-needed clarity. Rather, generally speaking, the new definition codifies the approach that the Agencies have already been informally utilizing to determine WOTUS, which entails relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (e.g., Rapanos v. United States, 547 U.S. 715 (2006)). The Agencies reverted back to this definition in August of 2021, when the U.S. District Court for the District of Arizona vacated the definition of WOTUS promulgated by President Trump’s administration, referred to as the Navigable Waters Protection Rule (NWPR).
The Agencies’ current approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Antonin Scalia issued the plurality opinion, holding that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (i.e., adjacent wetlands). Justice Anthony Kennedy, however, advanced a broader interpretation of WOTUS in his concurring opinion, which was based on the concept of a “significant nexus,” meaning that wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered water.”
President Biden’s new definition directly quotes and codifies these tests as regulations that may be relied upon to support a WOTUS determination. Publication of this definition, at this time, is likely a preemptive move by the Agencies in advance of the Supreme Court’s impending decision in Sackett v. EPA, a case in which the Court is considering whether the Ninth Circuit “set forth the proper test for determining whether wetlands are ‘waters of the United States.’” Some have speculated that the U. S. Supreme Court’s opinion may support a more narrow interpretation of WOTUS than is currently being implemented by the Agencies. If true, this inconsistency would create even more uncertainty in identifying WOTUS.
While this new WOTUS definition may not, conceptually, be a significant change to how the Agencies approach regulating streams and wetlands, the new definition could expand how the Agencies evaluate whether a wetland is “adjacent” to a WOTUS and whether a waterbody will “significantly affect” a WOTUS, both of which would support federal jurisdiction of the stream/wetland. The preamble to the new definition includes lengthy discussion regarding adjacent wetlands. In addition, the new definition of “significantly affect” enumerates five factors to be assessed and five functions to be considered in evaluating whether a potentially unregulated water will have a “material influence” on a traditionally navigable water. Factors include distance from the traditionally navigable water, hydrologic factors (e.g., frequency, duration, magnitude of hydrologic connection) and climatological variables (e.g., temperature and rainfall). Functions include contribution of flow, retention and attenuation of runoff and provision of habitat and food resources for aquatic species in traditionally navigable waters. Both the factors and the functions are broad and open to interpretation, which could lead to the Agencies asserting jurisdiction over more waterbodies.
The new definition also codifies that the effect of the potentially regulated water must be evaluated “alone or in combination with similarly situated waters in the region,” which will likely broaden how the Agencies evaluate the potential regulation of ephemeral and isolated waterbodies.
If the fate of the new WOTUS definition follows the same path as President Obama’s Clean Water Rule and President Trump’s Navigable Waters Protection Rule, the new definition will be challenged quickly after it becomes effective. These challenges may result in the stay or vacatur of the new definition. If this occurs, the Agencies may, again, revert back to the current definition of WOTUS.
Babst Calland will continue to follow these and other Clean Water Act developments. If you have any questions about these developments, contact Lisa Bruderly at 412-394-6495 or lbruderly@babstcalland.com.
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Reprinted with permission from the January 2023 issue of The PIOGA Press. All rights reserved.
Pittsburgh Business Times- Pittsburgh INNO
(By Nate Doughty)
A new Pittsburgh-based investment program backed by local angel investors has marked the close of its first capital infusion into a startup company.
IF Ventures, a joint program from Pittsburgh-based nonprofit economic development organization Idea Foundry made in partnership with Pittsburgh-based law firm Babst Calland, announced it invested over $300,000 into one of the program’s inaugural cohort of companies.
Chris Farmakis, a shareholder and board chair at Babst Calland, declined to disclose the name of the startup that received the investment citing confidentiality agreements made between the parties but noted that this is just the first of several deals the program is looking to make in the coming months.
Farmakis said the program isn’t to be likened to a fund like those raised by venture capital firms. Instead, IF Ventures serves as the vetter of hundreds of companies looking to take on investment and only selects a few firms to be presented to its cadre of angel investors who are open to deploying capital in budding enterprises.
There is no requirement that individuals in this program invest in every company, Farmakis said, though periodic investments must be made if investors wish to remain participants in the program.
“This is more about taking successful entrepreneurs, successful business people and people that have the ability to invest in these companies, aggregate them together and give them access in a painless way to make discernible investment decisions,” Farmakis said. “And that’s what we’re doing with this program.”
IF Ventures is expecting to close on its second investment soon and a second cohort of companies will be brought before the investors in its program next month.
Breaking Ground
(By Max Junker and Anna Hosack)
Since the 1999 enactment of the Pennsylvania Construction Code Act (“PCCA”), Pennsylvania has sought to establish uniformity for construction standards throughout the Commonwealth. In pursuit of uniformity the PCCA embraced the adoption of standards drafted by the International Code Council (“ICC”), a private non-profit entity, and directed the Department of Labor & Industry (“Department”) to promulgate certain ICC standards under the Uniform Construction Code (“UCC”). The directive to adopt standards originating from a non-governmental entity such as the ICC implicates a legal concept known as the non-delegation doctrine. The Commonwealth Court recently invoked the non-delegation doctrine to enjoin the enforcement of the 2021 accessibility regulations promulgated by the Department in Pennsylvania Builders Association v. Department of Labor & Industry, No. 479 M.D. 2021, 2022 WL 14668728 (Pa. Cmwlth. Oct. 26, 2022).
The non-delegation doctrine is embodied in Article II, Section 1 of the Pennsylvania Constitution where it states: “The legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives.” Together with Article III, Section 1 of the Pennsylvania Constitution addressing the passage of laws, the non-delegation doctrine constrains the General Assembly so that it cannot delegate its lawmaking power to any other branch of government, another body, or some other authority. Christ the King Manor v. Dep’t of Pub. Welfare, 911 A.2d 624 (Pa. Cmwlth. 2006), aff’d 951 A.2d 255 (Pa. 2008).
The Commonwealth Court’s recent decision in Pennsylvania Builders Association is the culmination of litigation filed by the Pennsylvania Builders Association (“PBA”) against the Department alleging that the ICC accessibility provisions adopted pursuant to Section 304(a)(3) of the PCCA (“Accessibility Regulations”) constituted an unconstitutional delegation of legislative authority.
On December 25, 2021, pursuant to Section 304(a)(3) of the PCCA, the Department amended Sections 403.21, 403.26, and 403.28 of the Department’s regulations and certain definitions in Section 401.1 to expressly adopt the ICC’s 2021 amendments to accessibility provisions of the International Building Code, International Existing Building Code, and International Swimming Pool and Spa Code. On December 29, 2021, PBA filed a complaint in the Commonwealth Court’s original jurisdiction alleging that the General Assembly delegated unfettered legislative authority to a private entity, the ICC, to establish accessibility standards, and that PBA and its members were aggrieved as a result. PBA claimed that the association and its members were denied the opportunity to provide meaningful comment during the promulgation process in addition to suffering future adverse economic impacts, delays, as well as foreseeable interpretive and enforcement difficulties. Section 304(a)(3) of the PCCA directs: “The Department shall promulgate regulations updating accessibility standards under Chapter 3 [Uniform Commercial Construction Code] by adopting by December 31 of the year of issuance of the accessibility provisions of the most recently published edition of the ICC codes and any other accessibility requirements which shall be specified in the regulations or contained in or referenced by the [UCC] relating to persons with disabilities.” 35 P.S. § 7210.304(a)(3). PBA argued that Section 304(a)(3) is a directive that in its essence requires the Department to rubber-stamp into law whatever accessibility standards the ICC publishes, without a process to consider any alterations to those standards. Furthermore, that the General Assembly failed to provide any mechanism for the Department to question, modify, reject, or even independently review and concur with the accessibility standards the ICC creates.
This is not the first time that PBA has accused the Department of violating the non-delegation doctrine. The General Assembly’s previous solution to complying with the non-delegation doctrine while still upholding the purpose of the PCCA was to establish the UCC Review and Advisory Council (“RAC”). Established in 2008, RAC is charged with making recommendations to the Governor, the General Assembly, and the Department regarding proposed changes to the PCCA. Additionally, RAC is responsible for reviewing the most recent building code updates published by the ICC. RAC is authorized to make determinations as to whether any new or amended provisions of ICC’s codes are not consistent with the PCCA, or are inappropriate for inclusion in Pennsylvania’s UCC, and RAC is to notify the Department of the same by May 1 of the issuing year. When that happens, the Department must exclude the challenged provisions when adopting the UCC, thereby leaving the corresponding provisions of the prior UCC version in effect. In late 2010, PBA filed a petition for review seeking a declaration that the 2009 UCC and other related codes are null and void as violative of the non-delegation doctrine. However, the Commonwealth Court held that the 2009 UCC amendments were valid because the inclusion of RAC in the Department’s process to adopt the Pennsylvania UCC afforded oversight and input by industry members and meant that the Department could no longer adopt ICC’s codes “sight unseen.” Pennsylvania Builders Ass’n v. Dept. of Labor & Indus., 4 A.3d 215, 222 (Pa. Cmwlth. 2010).
As noted by the Commonwealth Court, the distinguishing factor in the current case challenging the Accessibility Regulations was that RAC was uninvolved in the process. Section 106(b) of the PCCA specifies that “the Accessibility Advisory Board shall review all proposed regulations under [the PCCA] and shall offer comment and advice to the [Department’s] secretary on all issues relating to accessibility by persons with physical disabilities, including those which relate to the enforcement of the accessibility requirements.” 35 P.S. § 7210.106(b) (emphasis added). On July 15, 2021, the Department sought input from the Accessibility Advisory Board which “expressed no concern with the proposed changes.” However, the Department must only consider the Accessibility Advisory Board’s comments and advice in contrast with the binding determinations that are issued by RAC. The General Assembly has not expressly authorized the Department to alter ICC’s accessibility standards based on input from the Accessibility Advisory Board. Therefore, the Court found that due to the General Assembly’s statutory mandate that the Department must adopt the ICC’s accessibility codes without modification, the Accessibility Advisory Board’s review process does not in any way guide or restrain the ICC’s control over Pennsylvania’s UCC and the Department’s regulations.
Judge Covey, writing for the majority, stated: “The non-delegation doctrine prohibits the General Assembly from incorporating sight unseen, subsequent modifications to such standards without also providing adequate criteria to guide and restrain the exercise of the delegated authority.” Without the oversight of RAC in the promulgation process, the Accessibility Regulations were being adopted sight unseen and without any subsequent modification by the legislature. Therefore, the Commonwealth Court determined that Section 304(a)(3) of the PCCA contains valid provisions inseparable from invalid provisions, struck Section 304(a)(3) in its entirety from the PCCA, and permanently enjoined the Department from its enforcement.
After the Commonwealth Court’s ruling, it is likely that review of the ICC accessibility provisions will be referred to RAC and therefore avoid non-delegation doctrine issues in the future. Although it might seem like a short-lived win for PBA because the PCCA could utilize RAC to avoid the non-delegation doctrine, there is a crucial argument to be made following the recent decision. Because Section 304(a)(3) of the PCCA was declared unconstitutional, there is a strong argument that the Commonwealth Court also rendered invalid all accessibility regulations previously promulgated pursuant to that provision; not just the 2021 Accessibility Regulations at issue in the case. Although some accessibility provisions have been promulgated under Section 301 of the PCCA, a great deal of the accessibility provisions were promulgated by adopting a successor or revised code under the authority granted by Section 304(a)(3). Furthermore, if Section 304(a)(3) is unconstitutional, as ruled by the Commonwealth Court, by necessary implication those previous accessibility provisions adopted as regulations should be invalid as well.
The Department did not file an appeal with the Supreme Court so the Commonwealth Court’s decision stands. We will continue to follow developments in this area of the law and its intersection with the design, construction, and inspection activities of the Master Builders’ Association of Western Pennsylvania’s members.
Act of November 10, 1999, P.L. 491, as amended, 35 P.S. §§ 7210.101-7210.1103; See Commonwealth v. Null, 186 A.3d 424, 427 (Pa. Super. 2018) (quoting Flanders v. Ford City Borough, 986 A.2d 964, 969 (Pa. Cmwlth. 2009)).
Max Junker is a shareholder at Babst Calland. He can be reached at rjunker@babstcalland.com. Anna Hosack is an attorney at Babst Calland. She can be reached at ahosack@babstcalland.com.
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Reprinted from the January/February 2023 edition of Breaking Ground magazine with permission from the publisher Tall Timber Group. All rights reserved.