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PACER and PRESS Are Introduced in the Pennsylvania General Assembly

The Foundation Mineral and Energy Law Newsletter

Pennsylvania – Mining

(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman, Christina M. Puhnaty)

Pennsylvania Governor Josh Shapiro recently announced two pieces of legislation as part of his “commonsense energy plan” that would replace state efforts to join the Regional Greenhouse Gas Initiative (RGGI): (1) the Pennsylvania Climate Emissions Reduction Act (PACER) and (2) the Pennsylvania Reliable Energy Sustainability Standard (PRESS). Press Release, Gov’r Josh Shapiro, “Governor Josh Shapiro’s Energy Plan Builds on Pennsylvania’s Legacy of Energy Leadership by Protecting and Creating Energy Jobs and Lowering Electricity Costs for Consumers” (Mar. 13, 2024). According to the Shapiro administration, these Pennsylvania-specific programs are aimed at reducing greenhouse gas emissions, lowering utility bills for consumers, and creating and protecting jobs in the Commonwealth.

PACER was introduced as House Bill 2275 by Representative Aerion Abney and as Senate Bill 1191 by Senator Carolyn Comitta on May 8, 2024, along with many cosponsors. The legislation proposes to establish a Pennsylvania-run CO₂ Budget Trading Program with its own auction of CO₂ allowances. The bill directs the Pennsylvania Department of Environmental Protection (PADEP) to administer this program in accordance with parts of the regulation promulgated to implement the commonwealth’s participation in RGGI, 25 Pa. Code ch. 145, subch. E (CO₂ Budget Trading Program), with some changes. “Budget sources”—fossil fuel-fired electricity generators with a nameplate capacity of 25 MW or more—would be required to comply with the program under PACER and purchase allowances (authorization to emit one ton of VOCs) equal to the tons of CO₂ emitted annually.

The legislation also directs PADEP to review the base budget—the number of allowances available for auction set in the CO₂ Budget Trading Program regulation—and consider the impact of the budget on jobs, consumers, and the environment to determine whether revisions to the budget are necessary.

If PADEP determines that budget revisions are needed, it would recommend a revised budget to the Environmental Hearing Board. The Environmental Hearing Board is permitted under the legislation to promulgate a final-omitted regulation under the Regulatory Review Act, effectively bypassing the typical rulemaking process, to amend 25 Pa. Code § 145.341 and adopt the recommended PACER emissions budget.

The proceeds from the auction of allowances would remain in Pennsylvania. The legislation requires that 70% of the proceeds be given to Pennsylvania consumers through an electric bill rebate. The remaining 30% of the proceeds would support projects to reduce air pollution, further reduce electric bills for low-income households, and invest in clean energy projects like carbon capture and storage.

PRESS was also introduced on May 8, 2024, as House Bill 2277 by Representative Danielle Friel Otten and as Senate Bill 1190 by Senator Steve Santarsiero, along with many cosponsors. PRESS will significantly increase the amount of renewable energy that utilities in Pennsylvania use by modifying and expanding Pennsylvania’s Alternative Energy Portfolio Standards (AEPS) first implemented two decades ago. The bill would add nuclear power and next-generation technologies like fusion to AEPS, as well as incentivize lower emissions for gas-fired power plants.

PRESS also provides for the investment of $5.1 billion in advanced energy technologies by 2035, incentivizing new development in Pennsylvania, with a focus on specific forms of energy development—primary battery storage, natural gas, and nuclear power—to establish reliable base-load power. PRESS establishes a target of 35% Tier I energy generation by 2035, with 10% Tier II generation and 5% Tier III generation.

Tier I includes solar photovoltaic and solar thermal energy, wind power, low-impact hydropower, geothermal energy, and biologically derived fugitive emissions. Tier II, which is limited to in-state resources, includes Tier I reliable energy sources in Pennsylvania, non-solar distributed generation systems, combined heat and power, demand-side management, large-scale hydropower, natural gas or coal using clean hydrogen (80%) co-fired blend or equivalent carbon intensity reduction technologies, fuel cells, biomass energy, and 24-hour storage co-located with a Tier I resource. Tier III, which is also limited to in-state resources, includes natural gas or coal using clean hydrogen (20%) co-fired blend or equivalent carbon intensity reduction technologies, waste coal, municipal solid waste, integrated combined coal gasification technology, and generation of electricity utilizing by-products of the pulping process and wood manufacturing process.

The Governor’s office anticipates that PRESS and PACER will create nearly 15,000 energy jobs and save Pennsylvania ratepayers $252 million during the first five years after passage. This legislation is still pending in the Pennsylvania General Assembly.

PADEP Proposes Revised Coal-Mine Methane Enclosed Flares General Permit

On March 16, 2024, the Pennsylvania Department of Environmental Protection (PADEP) announced in the Pennsylvania Bulletin an opportunity to submit public comments on the proposed revised General Plan Approval and/or General Operating Permit BAQ-GPA/GP-21, Coal-Mine Methane Enclosed Flare (Revised GP-21). See 54 Pa. Bull. 1429 (Mar. 16, 2024). As reported in Vol. 40, No. 3 (2023) of this Newsletter, PADEP previously published a final version of the General Plan Approval and/or General Operating Permit BAQ-GPA/GP-21, Coal-Mine Methane Enclosed Flare (GP-21) on September 23, 2023, which industry groups appealed.

According to PADEP’s technical support document (TSD) for the Revised GP-21, PADEP “was presented additional source and site-specific information after September 23, 2023, and upon review, decided certain changes were warranted to address the new information and intended use of GP-21.” TSD for the Revised GP-21, at 2. Although the TSD references changes to address the appellants’ concerns, it does not provide specific details about the appeal.

In the Revised GP-21, PADEP proposes to raise the best available technology (BAT) compliance requirement to limit NOx emissions to less than or equal to 0.15 lb/MMBtu, up from 0.08 lb/MMBtu. As explained in the TSD, PADEP determined that the 0.08 lb/MMBtu limit finalized in September was “not appropriate at the variable site conditions and the concentration of methane present in Pennsylvania mines.” Id. at 3. The Revised GP-21 also allows operators to install and operate methane gas monitors to continuously measure and record the coal-mine gas methane concentration. This option permits operators to forgo the prior requirement under GP-21 that they conduct quarterly gas analysis at the inlet gas stream to the enclosed flare to monitor heat input to the flare. PADEP explains in the TSD that it made this change in response to cost concerns raised by appellants and that the continuous monitoring option meets the intent of PADEP’s quarterly analysis requirement. Comments on the Revised GP-21 were due to PADEP by April 29, 2024.

FTC Publishes Non-Compete Ban, Legal Challenges Promptly Follow

The Legal Intelligencer

(by Alex Farone)

On April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 to publish its proposed final rule banning most noncompetition agreements, or “non-competes.” The final rule was published on May 7, 2024, in the Federal Register and therefore becomes effective 120 days later, on September 4, 2024, but legal challenges to the FTC’s authority to issue this ban will likely result in a stay in enforcement of the ban until litigation is resolved.

As of the effective date, the final rule would ban new non-competes with employees, independent contractors, and volunteers nationwide, on the basis that non-competes are an unfair method of competition and therefore a violation of Section 5 of the FTC Act, with one exception. The ban will not apply to a non-compete that is entered into pursuant to the bona fide sale of a business, the persona’s ownership interest in a business entity, or all (or substantially all) of a business entity’s operating assets.

The final rule will also void pre-existing non-competes, with two exceptions. First, existing non-competes for senior executives will remain enforceable after the effective date of the final rule. A “senior executive” is defined as a worker earning more than $151,164 annually who is in a policy-making position, meaning a company president, chief executive officer or equivalent, or any other person who has final authority to make policy decisions that control significant aspects of a business entity. Second, the ban will not apply to an existing non-compete that has been breached and where a cause of action accrued prior to the effective date.

The final rule will also require employers to provide “clear and conspicuous notice” to all workers, other than senior executives, with existing non-competes by the effective date stating that the non-compete will not be, and cannot legally be, enforced.

This final rule originates from the notice of proposed rulemaking the FTC issued in January 2023, which was subject to a 90-day public comment period. The FTC received over 26,000 public comments prior to the April 23, 3024 vote. The same day it voted to publish the final rule, tax services and software company Ryan LLC filed a lawsuit in the U.S. District Court for the Northern District of Texas seeking an injunction to stop the implementation of the ban. The following day, the U.S. Chamber of Commerce and three other business groups filed a similar lawsuit in the Eastern District of Texas challenging the ban.

There is a reasonable likelihood that legal challenges to the ban will be successful. In West Virginia v. EPA, 597 U.S. 697 (2022), the U.S. Supreme Court recently demonstrated skepticism of sweeping rulemaking 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 of the final rule, it is likely that the Court would consider a national non-compete ban to be an extraordinary case of political and economic significance that would have to clear the major questions doctrine hurdle to survive.

Employers who use non-competes should certainly plan for the upcoming effective date and think strategically about implementing stronger non-disclosure and/or confidentiality agreements in the event that we reach the effective date of the final rule without pending litigation resulting in a stay of enforcement of the ban. As the effective date is not until September 4, 2024, employers should not jump to conclusions about the immediate or ultimate enforceability of the FTC’s non-compete ban.

Alexandra Farone is an associate in the Litigation and Employment and Labor groups of Babst Calland. Ms. Farone’s employment and labor practice involves representing corporate clients, municipalities, and individuals on all facets of employment law, including restrictive covenants, discrimination claims, human resources counseling, grievances, and labor contract negotiations. Please contact her at 412-394-6521 or afarone@babstcalland.com.

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FTC Finalizes Non-Compete Ban, Legal Challenges Promptly Follow

TEQ Hub

(by Alex Farone)

On April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 to publish its proposed final rule banning most noncompetition agreements, or “non-competes.” The final rule was published on May 7, 2024 in the Federal Register and becomes effective on September 4, 2024, but legal challenges to the FTC’s authority to issue this ban will likely result in a stay in enforcement of the ban until litigation is resolved.

As of the effective date, the final rule would ban new non-competes with employees, independent contractors, and volunteers nationwide, on the basis that non-competes are an unfair method of competition and therefore a violation of Section 5 of the FTC Act, with one exception. The ban will not apply to a non-compete that is entered into pursuant to a bona fide sale of a business entity, the persona’s ownership interest in a business entity, or all or substantially all of a business entity’s operating assets.

The final rule will also void pre-existing non-competes, with two exceptions. First, existing non-competes for senior executives will remain enforceable after the effective date of the final rule. A “senior executive” is defined as a worker earning more than $151,164 annually who is in a policy-making position, meaning a company president, chief executive officer or equivalent, or any other person who has final authority to make policy decisions that control significant aspects of a business entity. Second, the ban will not apply where an existing non-compete has been breached and a cause of action accrued prior to the effective date.

The final rule will additionally require employers to provide “clear and conspicuous notice” to all workers, other than senior executives, with existing non-competes by the effective date stating that the non-compete will not be, and cannot legally be, enforced.

This final rule originates from the notice of proposed rulemaking the FTC issued in January 2023, which was subject to a 90-day public comment period. The FTC received more than 26,000 public comments prior to the April 23, 3024 vote. The same day, tax services and software company Ryan LLC filed a lawsuit against the FTC in the U.S. District Court for the Northern District of Texas seeking an injunction to stop the implementation of the ban. The following day, the U.S. Chamber of Commerce along with three other business groups filed a similar lawsuit in the Eastern District of Texas challenging the ban.

As previously reported, there is a reasonable likelihood that legal challenges to the ban would be successful. In West Virginia v. EPA, 597 U.S. 697 (2022), the U.S. Supreme Court recently demonstrated skepticism of sweeping rulemaking 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 of the final rule and the unchanged makeup of the Supreme Court, it is 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 think strategically about implementing stronger non-disclosure and/or confidentiality agreements in the event that we reach the effective date of the final rule without pending litigation resulting in a stay of enforcement of the ban. As the effective date is not until September 4, 2024, employers should not jump to conclusions about the immediate or ultimate enforceability of the FTC’s non-compete ban.

If you have any questions about FTC’s non-compete ban and the impact on your business, please contact Alexandra G. Farone at (412) 394-6521 or afarone@babstcalland.com.

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‘Another tool on your belt’: Pittsburgh cops embrace jiu jitsu training

TRIBLive

(by Justin Vellucci)

For Tim Novosel, Brazilian jiu jitsu is more about control than contact.

The Pittsburgh police commander — who launched a jiu jitsu training program for city cops about two years ago — talked about the importance the martial art places on focus instead of force. Nearby, a dozen officers grappled nearby on an ocean of blue mats in Pittsburgh police’s North Side training academy.

The officers’ limbs — each cloaked in a navy-blue gi, a robe-style top that’s part of jiu-jitsu’s uniform — furled around each other trying to gain an upper hand. Trainers in black gi leaned in periodically to help officers with dominant positions or demonstrate how to master moves like the Triangle Choke.

“It’s like human chess, it’s such a thinking man’s sport,” said Novosel, 51, a North Side native who took over leadership in February of Pittsburgh’s Zone 2 station, which covers Downtown. “You’re always examining the body and seeing how you can fit.”

“I’m passionate about it because it you came and told me, ‘Patrol over there,’ I’d rather go out without my gun than without my jiu jitsu,” he added. “It’s another tool on your belt.”

A couple of generations ago — long before Novosel joined the Pittsburgh force in 2007 — cops trained by boxing, the commander told TribLive.

Today, he said, Pittsburgh police integrate Brazilian jiu jitsu into teaching recruits the bureau’s defensive tactics — and keeping more tenured officers fit and focused.

About 120 officers — three of them women — have taken part in the bureau’s voluntary jiu jitsu training, with 50 coming to sessions regularly.

The martial art, which originated in Japan and integrated elements of wrestling while being taught in Brazil in the 1970s, allows smaller individuals to challenge larger attackers, its proponents say.

Brazilian jiu jitsu, or BJJ, training is said to improve self-defense and physical fitness, teach cops to seek control and sharpen teamwork and officers’ well-being.

Some police departments cite data hat shows how the training decreases use of force and helps minimize arrest-related injuries and hospitalizations for cops and suspects.

Novosel said he uses his jiu jitsu training principles “every time I touch somebody.”

Teaching control

Certain incidents, though, stand out, he said.

One night, Novosel remembered being called to Tequila Cowboy, a North Shore bar, where a man — who was “6-foot-4 and 280 pounds of muscle,” said the commander with a smile — was screaming and causing a scene.

The man started to get physical. Novosel said he relied on his jiu jitsu training to safely stop the man’s attacks.

“Ten seconds — done,” Novosel said.

Last year, for the first time, a Pittsburgh police academy class of 24 recruits studied jiu jitsu as part of their formal training, police said. More than half of those officers have continued training since graduating March 6, Novosel said.

Since the covid-19 pandemic, a cadre of officers has joined Novosel twice a week to train at the bureau’s brick-lined North Lincoln Avenue academy — handfuls of them breaking sweats as a speaker nearby pumps out 90s-era alt-rock staples such as Nine Inch Nails’ “Head Like A Hole” or Red Hot Chili Peppers’ “Californication.”

Once every two weeks, a pair of private trainers from Steel City Martial Arts volunteers to guide the sessions.

There are no payments or bureau contracts between the parties, police said. The private trainers are working for free, and the cops taking part are doing so voluntarily.

“What jiu jitsu teaches you is control. It doesn’t teach you how to fight — and that’s why this translates well for the officers,” said one of those trainers, Santino Achille, 39, of Peters in Washington County, who owns Steel City Martial Arts. As he spoke last Tuesday, officers practiced grappling, or “rolling,” on mats in the nearby gym. “When you look out here, you won’t see a single punch, a single kick.”

“There’s a difference between the sport and the reality with policing,” added Don Bluedorn, a Downtown attorney by day who has trained with Steel City Martial Arts for 20 years. “But, being able to adapt in a critical situation, to control somebody, is essential. This training gives them confidence, so they don’t overcompensate with aggression.”

The newly formed North Allegheny Police Department, a school district police force, also sat through a Steel City Martial Arts presentation about starting jiu jitsu training for officers, Achille said.

North Allegheny police Chief Eric Harpster, a 36-year law enforcement vet who served as a task force officer for the Drug Enforcement Administration, said he participated in jiu jitsu training while working for Pittsburgh police.

Police in Pittsburgh said it’s too early to start parsing data to measure the impact of jiu jitsu training locally on use-of-force rates, injuries and hospitalizations, or other metrics.

Helping with use of force

The scope of the trend to train law enforcement in jiu jitsu remains unclear nationwide. But the discipline’s benefits appear to be echoing elsewhere in the U.S.

Gracie University, a California group that teaches jiu jitsu trainers, said on its website that it’s been advocating for jiu jitsu training for those in American law enforcement for nearly 30 years.

Gracie Survival Tactics, a “train the trainer” course the group has offered for at least 15 years, works to “help officers verbally and physically de-escalate while humanely prevailing resistant and/or aggressive subjects,” according to the company’s website.

To illustrate Brazilian jiu jitsu training benefits, Gracie University points to the Atlanta suburb of Marietta, Ga., where municipal police made the training mandatory for all new hires in April 2019. One year later, the program was extended, on a voluntary basis, to the whole department.

To date, 95 of Marietta’s 145 sworn officers have attended more than 2,600 jiu jitsu classes. The training has helped reduce Marietta officers’ use of force, with Taser deployments dropping 23%, Gracie University said. Officers who train in jiu jitsu there use force on suspects half as frequently as colleagues who haven’t taken the training.

Pittsburgh police Officer Sean M. Jozwiak thinks the training also benefits men and women who seek to protect and serve here in Pittsburgh. Jozwiak started teaching defensive tactics to recruits at the academy last summer; in-classroom training for the recent grads started July 24, 2023.

“This gives me a foundation, a base, on how the body works,” said Jozwiak, 37, who grew up in Pittsburgh’s Polish Hill neighborhood and has lived for seven years in Brookline. “That knowledge, that confidence helps me teach recruits.”

“No one should be purposely injuring anybody into submission — and all the things they learn here are crucial,” added Detective Jed Pollock, 43, of Moon, as he paused his jiu jitsu grappling this week and wiped sweat from his brow. “It’s better for us. It’s better for the public. I’m just really proud to be a part of it.”

For others, jiu jitsu dictates tone.

“As a cop, (jiu jitsu) gave me confidence to speak with someone in a stressful situation,” said Pittsburgh police Officer Kevin Hendry, 49, who worked for Swissvale police for two years before joining the Pittsburgh force in 2019.

Hendry earned his jiu jitsu black belt, also in 2019, from trainer Tommy Costa at High Ground Jiu Jitsu, a members-only club with locations in Monroeville and Greensburg.

“I maintain a calm and level head,” Hendry said. “All my training has helped me know how to de-escalate a situation, instead of escalating it.”

Novosel said he and others embrace jiu jitsu as they mature in their respective jobs.

Novosel knows he’s not the same man who in 2008, while still in his 30s, won a heavyweight title in the martial art known as muay thai. But taking part in jiu jitsu training multiple times a week has led him to other improvements in his life; his diet’s better and so are his sleep routines.

“As an officer, when you start to do this, you become better,” he told TribLive. “And you want to become a better cop.”

Standing Tuesday near the blue training mats, Novosel reflected on how jiu jitsu has helped to unify and break down walls between many officers on the Pittsburgh force. It’s teaching officers from different backgrounds and with different levels of experience to speak a kind of shared language, he said.

“Police-wise, everyone’s from a different place — there are recent academy graduates, 20-somethings, ‘rolling’ with department veterans,” Novosel said. “There are guys here from narcotics, guys from homicide. I think every zone’s represented.”

“Here,” he added, “you get a chance to be more than just guys on the same shift.”

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Blurred Lines: The Ongoing Battle Between iLottery and iGaming

April 30, 2024

The Legal Intelligencer

(by Casey Alan Coyle and Michael Libuser)

Online gaming is a booming industry. In fiscal year 2022–23, the Pennsylvania Lottery’s iLottery program generated $872.5 million in eInstant sales, while online gambling revenues topped $2 billion in Pennsylvania last year according to published reports. But behind the scenes, a dispute has arisen that pits the Pennsylvania Lottery against privately owned casinos. The fight is over legislation that prohibits the Pennsylvania Department of Revenue (the “Department”), the administrator of the Lottery, from offering products that “simulate casino-style lottery games” as part of the iLottery program. The Pennsylvania Supreme Court recently construed the meaning of that phrase in Greenwood Gaming & Entertainment, Inc. v. Department of Revenue, 306 A.3d 319 (Pa. 2023), and remanded the case to the Commonwealth Court with instructions to apply a corresponding standard. The question now is whether, and to what extent, the Commonwealth Court will be able to establish a boundary between iLottery games and the online products offered by casinos.

Act 42

On March 15, 1972, the Pennsylvania Lottery sold its first ticket for a weekly drawing. The Lottery, then only a year into its existence, operated without competition and continued to do so for decades. Over the years, with the rising popularity of Lottery games, including now-ubiquitous “scratch-offs,” came a tide of competition and technology that shepherded in a new legislative era for Pennsylvania gambling rules. First came the Race Horse Development and Gaming Act (the “Gaming Act”), which authorized slot machines. Six years later, the Legislature expanded the Gaming Act to include table games. Then, in 2014, the General Assembly amended the State Lottery Law (the “Lottery Law”) to prohibit the Department from offering “[i]nternet instant game[s]” and “simulated casino-style lottery game[s]” through the Lottery, absent further legislative authorization.

But before long, the General Assembly charted a new course. In 2017, it amended the Lottery Law and the Gaming Act to permit both the Lottery and privately owned casinos to offer different forms of online gaming. The legislation that effected this change, known as Act 42, authorized the Department to offer “iLottery games,” defined as “[i]nternet instant games and other lottery products.” 4 Pa.C.S. § 502. At the same time, Act 42 authorized casinos to offer “interactive gaming,” which, broadly stated, encompasses paid-for gambling games “offered through the use of communications technology.” Id. § 1103. To keep iLottery and casinos in their respective lanes, the Legislature drafted Act 42 to give each an exclusive space in which to operate. The Department can offer iLottery games but cannot offer products that “simulate casino-style lottery games.” Id. § 502. Casinos can offer “interactive gaming” but not a “lottery game or [i]nternet instant game” as defined in the Lottery Law. Id. § 1103.

With Act 42 in place, the Department began work on its iLottery program. The Department modeled the program after the Michigan iLottery program. Unlike Pennsylvania, however, Michigan’s law does not prohibit its lottery from simulating casino-style games. The Department relied upon Scientific Games, a leading slots game designer, to develop the iLottery platform. The Department subsequently promulgated temporary regulations for the iLottery program. But the temporary regulations did not address the limits on the iLottery authorization and contained no guidance with respect to limiting iLottery games to those that do not represent or simulate casino-style games. On May 22, 2018, the Department launched “iLottery,” offering games played online and on mobile devices.

Greenwood Gaming

A group of casinos filed a Petition for Review against the Department four months later, alleging that its iLottery games simulate slot machines and other casino-style lottery games, in violation of Act 42. The casinos moved for a preliminary injunction, seeking to enjoin the Department from offering iLottery games that include features of interactive slot games, such as autoplay, reveal all, adjustable bet, and bonus games. The Department opposed the injunction principally on the contention that iLottery games have different “mechanics” (i.e., programming and features) than slot machines and other casino-style games. Despite finding that “the side-by-side video comparisons of the iLottery games with the online or land-based casino games . . . highlight[ed] striking similarities,” the Commonwealth Court denied the preliminary injunction.

At the ensuing bench trial, the Department largely abandoned its defense from the preliminary injunction hearing. Instead, it contended that the features offered in iLottery games are “rooted in traditional lottery products.” Following post-trial submissions, the Commonwealth Court denied the Petition and dismissed the claims. The Court noted that there are undefined terms in Act 42 and the Lottery Law, namely, “simulate” and “casino-style.” Resorting to their common and approved usage, the Commonwealth Court concluded that, as used in Act 42, “simulate” means “to give or assume the appearance or effect of often with the intent to deceive” or “to make a simulation of.” In applying that definition, however, the Court superimposed an exclusivity requirement not found in any law, regulation, or definition of any statutory term—i.e., whether a game uses features that are “particular” or “exclusive” to casino-style slot machines. The Court also held that, for purposes of Act 42, “casino-style lottery games” means “online games that create a likeness or assume the appearance of a game that is in the style, with reference to form, appearance or character, particular to a casino slot machine.” The Court further held that only “signature, iconic, or key features particular to” casino slot machines would meet this definition, and the only such features are spinning reels and pay lines, even though this construction conflicts with the definition of “slot machine” within the same statute.

The Commonwealth Court then turned to the challenged features, limiting its evaluation to reviewing the features in isolation instead of considering the simulation of the games as a whole. This is despite the fact that: (a) the Legislature prohibited the Department from offering casino-style games, not casino-style features, as part of the iLottery program; and (b) only one game traditionally combines all of the features used in iLottery games, and it is a slot machine. In any event, and notwithstanding its previous acknowledgement of the “striking similarities” between iLottery games and land-based and online casino games, the Court held that the iLottery games do not simulate casino-style slot machines.

The Pennsylvania Supreme Court reversed on appeal in a 5–1 decision. The Supreme Court determined that Act 42 prohibits the Department from offering iLottery games that “give the appearance or effect of casino games,” adding: “[t]he class of casino games that may not be simulated includes, but is not limited to, . . . slot machines.” The Supreme Court reasoned that the Commonwealth Court’s more narrow interpretation “threatens to dissolve” the legislatively created barrier between lottery games and casino games because: (a) it “reduces slot machines to spinning reels and pay lines,” when, “by definition, a slot machine in Pennsylvania need not employ spinning reels or pay lines”; and (b) “reads the term ‘simulate’ out of the statutes by limiting the prohibition to games that incorporate only particular features unique to a casino game.”

Applying a plain-language analysis, the Supreme Court held that Act 42 prohibits the Department from offering iLottery games that “mimic slot machines in operation.” According to the Supreme Court, “[t]his requires a subjective assessment of the appearance and play function of an iLottery game that cannot be reduced to an objective inquiry regarding the presence or absence of pay lines and spinning reels.” The Supreme Court ordered that, on remand, the Commonwealth Court must apply Act 42 as the Supreme Court interpreted it, “focus[ing] on the overall appearance and experience of play of an iLottery game, not the presence of any particular feature.”

Impact

In the wake of Greenwood Gaming, the Commonwealth Court issued an Order directing the parties to submit supplemental briefing addressing the standards set forth by the Supreme Court and the application of those standards to the record evidence. Supplemental briefing is set to conclude in June, and oral argument to take place in July. The Commonwealth Court’s forthcoming decision could have far-reaching consequences for the future of the iLottery program because, according to the casinos, every single one of the games approved by the Department as of October 31, 2019, “in some degree, assume[s] the character of slot machines by imitating the appearance, function, and player interface of slot machines.”

It also remains to be seen whether the Commonwealth Court will cabin its forthcoming decision to the 57 games at issue when the discovery phase concluded or will include subsequent games approved by the Department as well. Moreover, regardless of how the Commonwealth Court rules in this case, it seems highly probable that the fact-specific standard articulated by the Supreme Court will lead to future challenges by the casinos over the legality of particular iLottery games, as the Supreme Court eschewed a bright-line rule in favor of a “subjective assessment of the appearance and play function of an iLottery game.”

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Casey Alan Coyle is a shareholder at Babst, Calland, Clements and Zomnir, P.C. and Co-Chair of the firm’s Litigation Group. He focuses his practice on appellate law and complex commercial litigation. Coyle is also a former law clerk to Chief Justice Emeritus Thomas G. Saylor of the Pennsylvania Supreme Court. He represented the casinos at trial and during the merits briefing stage on appeal. Contact him at 267-939-5832 or ccoyle@babstcalland.com.

Michael Libuser is a litigation associate at Babst, Calland, Clements and Zomnir, P.C. He focuses his practice on appellate law and complex commercial litigation. Before entering private practice, Libuser served as a law clerk to the Honorable Yvette Kane, Senior United States District Judge for the Middle District of Pennsylvania, and the Honorable Karoline Mehalchick, United States District Judge for the Middle District of Pennsylvania (then United Magistrate Judge). Contact him at 717-868-8379 or mlibuser@babstcalland.com.

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Governor’s Proposed PACER and PRESS Legislation Seek to Lower GHG Emissions

PIOGA Press

(By Kevin Garber and Jessica Deyoe)

On March 13, 2024, Governor Shapiro’s office announced the Pennsylvania Climate Emissions Reduction Initiative (PACER) and the Pennsylvania Reliable Energy Sustainability Standard (PRESS) legislative proposals. Together, these two initiatives seek to lower greenhouse gas emissions and promote the use of alternative energy for the electric energy grid in Pennsylvania. We note that first, as of the date of this article, the language of the bills has not been made publicly available and second, these initiatives are not mutually exclusive, so it is possible the legislature may pass only one of them.

Pennsylvania Climate Emissions Reduction Initiative (PACER)

PACER is a Pennsylvania-specific-cap-and-invest program that, if passed, would set a declining cap on carbon emissions from Pennsylvania’s fossil fuel-fired power plants and require them to purchase credits from the Commonwealth to offset emissions. It would also remove Pennsylvania from the Regional Greenhouse Gas Initiative (RGGI). PACER Credits would be tradeable emission credits, similar to RGGI credits; however, non-profit entities will not be allowed to purchase PACER credits to remove them from the market. This program would direct DEP to conduct a Pennsylvania-run auction similar to the RGGI program. DEP could be allowed to delegate the implementation of the auction to an agent but retain enforcement authority. If passed, DEP will be required to review the Pennsylvania Base Budget established under the currently enjoined RGGI regulation within 120 days to determine whether a new Base Budge should be established. The new regulation, if needed, would be promulgated by the streamlined Final Omit regulatory process.

Revenue from the sale of CO₂ allowances under the PACER Program would fund the following recipients and programs: (1) consumers as an on-bill rebate by the Public Utility Commission; (2) a “Workforce Enhancement Account” for projects such as carbon capture and storage, new uses for legacy coal and natural gas sites such as modular reactor development and construction, geothermal deployment, battery storage facilities, retrofitting natural gas plants with carbon capture equipment, and advanced manufacturing and clean hydrogen development; (3) projects in the Commonwealth that reduce air pollution; and (4) a Low-Income Support Account used to reduce the energy bills of low-income consumers.

Pennsylvania Reliable Energy Sustainability Standard (PRESS)

PRESS aims to expand the Alternative Energy Portfolio Standards Act established in Pennsylvania 20 years ago, while adding nuclear power and next generation technologies such as fusion and clean forms of natural gas. To accomplish this, PRESS would promote energy build-out in Pennsylvania and create a broader mix of energy resources in Pennsylvania. PRESS emphasizes resilient forms of energy generation, including battery storage, natural gas, and nuclear power to promote reliability in the energy grid. It targets specific forms of energy development to build a more diverse, reliable grid. Reliability of the PJM grid will be a crucial challenge in the coming decades.

If passed, PRESS will raise the target for renewable energy in Tier I to 30% by 2035. Tier I includes biologically derived methane gas, solar photovoltaic and solar thermal energy, wind power, low-impact hydropower, geothermal energy, and biomass energy. Similarly, the target for renewable energy in Tier II will increase to 10% by 2035. Tier II includes Tier I reliable energy portfolio sources located within Pennsylvania, distributed generation systems, demand-side management, large-scale hydropower, fuel cells, coal mine methane, small modular reactors, and fusions technology. PRESS creates a new Tier III that includes waste coal, municipal solid waste, integrated combined coal gasification technology, generation of electricity utilizing by-products of the pulping process and wood manufacturing process, Tier I reliable energy portfolio sources located within Pennsylvania, and natural gas or coal using hydrogen (20%) co-fired blend or CCUS equivalent until 2033, requires CCUS or co-firing with 80% hydrogen blend by 2038. Tier III has a target of 10% by 2035.

For more information and insights on what PRESS and PACER may mean to the energy industry, tune in to Kevin Garber’s presentation at PIOGA’s Spring Meeting on April 18, 2024.

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Public Posting 2.0: High Court Creates Test for When Social Media Posts Are State Action

The Legal Intelligencer

(by Harley Stone, Anna Jewart and Alex Farone)

In August of 2023, we discussed the ongoing trend of recent cases to blur the line between public officials’ “public” and “private” digital communications and social media, focusing primarily on two 2023 Pennsylvania Commonwealth Court cases – Penncrest School District v. Cagle and Wyoming Borough v. Boyer. In these cases the courts were called upon to decide when a public official’s own social media posts are “public” and therefore subject to disclosure under the Pennsylvania Right-to-Know Law (RTKL). While release of messages or comments intended to be kept private can be embarrassing, on March 15, 2024, the U.S. Supreme Court weighed in on an issue that more directly impacts the legal interests of public officials: when does a public official’s social media activity on a personal account constitute state action under 42 U.S.C. §1983, subjecting the public official to liability?

Section 1983 provides a cause of action against “[e]very person who, under color of any statute, ordinance, regulation, custom, or usage of any State” deprives someone of a civil right granted under the U.S. constitutional or federal statute. It protects against acts attributable to a State (interpreted to include local government agencies), not those of a private person. When a person associated with a State or local government agency acts in a manner that allegedly deprives someone of a federal constitutional or statutory right, the question therefore arises as to whether that act rose to the level of “state action” that triggers potential §1983 liability or was merely the private conduct of that individual. The line between private conduct and state action can be hard to draw, and the age of social media has only made such distinctions more difficult. The U.S. Supreme Court recently weighed in on this specific, but prolific, issue in Lindke v. Freed, No. 22-611 (Mar. 15, 2024).

Lindke v. Freed involved a city manager who created a private, personal Facebook profile page in 2008. He later changed the settings on his page so that it would be “public” – meaning anyone could see and comment on his posts. In 2014 he updated his profile page to reflect that he had been appointed as city manager and thereafter continued to post on the profile page about his private life as well as information related to his job and issues of public concern. During the COVID-19 Pandemic, a member of the public commented on some of the manager’s posts and expressed displeasure with the city’s approach to the pandemic. The manager initially deleted these comments, then ultimately blocked the user. The Facebook user sued the manager under §1983, arguing that the manager had violated the user’s right to free speech under the First Amendment because the manager’s Facebook profile page was a public forum.

The U.S. District Court for Eastern District of Michigan granted summary judgment to the manager, finding that the Facebook profile page was populated with predominantly personal posts and that there was an absence of “government involvement” in the posts. On appeal from the district court’s decision, the Sixth Circuit inquired into whether the manager ran his profile page as part of his actual or apparent duties, or whether the social media activity “couldn’t happen in the same way without the authority of the office.” In addressing this issue, the Sixth Circuit considered the following nonexclusive factors: whether (1) state law requires the office holder to maintain a social media account; (2) state funds are used in running the account; (3) the account belongs to the state or office itself; and (4) operating the account requires the authority of the office, e.g. , the office holder instructs government staff to operate the account. These same factors were considered by the Pennsylvania Commonwealth Court in Penncrest to aid in establishing the factors applicable the “public” nature of social media posts under the Pennsylvania RTKL. The Sixth Circuit affirmed the District Court.

On appeal, the U.S. Supreme Court noted that the manager’s status as an employee of the State was not determinative, and the distinction between private conduct and state action turns on substance, not labels. According to the Court, while public officials can act on behalf of the State, they are also private citizens with their own constitutional rights. The “state action” requirement of §1983 excludes from liability the acts of officers in the ambit of their personal pursuits, and thereby protects a sphere of individual liberty for those who serve as public officials or employees. This case, as the Court discussed, illustrates this dynamic. The manager did not lose his own First Amendment rights when he became city manager, and he was permitted to speak as a private citizen even as to matters of public concern, or about information learned through his public employment. The Court noted, as the Pennsylvania Commonwealth Court had in Penncrest, that there was no consensus amongst the federal circuits as to when a public official was acting in an official capacity when engaging in social media activity. Therefore, the Supreme Court established a new two-part, fact-specific rule to analyze this issue: a public official’s social media activity constitutes state action under §1983 only if the official (1) possessed actual authority to speak on the State’s behalf, and (2) purported to exercise that authority when the official spoke on social media. The appearance and function of the social media account are relative to the second step, but they cannot make up for lack of state authority in the first step. Ultimately, the Court unanimously vacated and remanded for consideration of the Facebook user’s claim in light of its newly established test.

Lindke resolved the discrepancies between federal circuits regarding state action and social media under §1983. It should therefore be closely reviewed and considered by any public employee or official who desires to engage in social media activity. However, it also clouds the longevity of Pennsylvania cases, such as Penncrest and Boyer, which established factors for the related, but not identical, legal question of when private social media is a “public” record under the RTKL.

Additionally, municipalities should take this opportunity to revisit their internal policies concerning social media, using Lindke as a guidepost. Social media policies can be made applicable to both municipal employees and elected officials due to RTKL and §1983 concerns. These policies should caution against or prohibit the employees or elected officials from making public posts on social media concerning official matters unless the employee or elected official either (1) makes a disclaimer that they are speaking on their own personal behalf and not on behalf of the municipality or (2) specifically states that they are speaking with the authority of or on behalf of the municipality. These social media policies can also place limits on which municipal employees have the authority to speak on behalf of the municipality without prior approval of a supervisor or the elected officials, and the protocol for obtaining such approval.

Harlan S. Stone is a Shareholder in the Public Sector Services and Energy and Natural Resources groups of the Pittsburgh law firm of Babst, Calland, Clements & Zomnir, P.C. Anna S. Jewart is an associate in Babst Calland’s Public Sector Services group and focuses her practice on zoning, subdivision, land development, and general municipal matters. Alexandra G. Farone is an associate in Babst Calland’s Employment & Labor and Litigation groups, and her practice includes employment, labor, and human resources counseling to both public and private sector clients.

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Trends and Developments in New Transportation and Energy Technologies

Pittsburgh Business Times

(By James Chen)

The transportation industry is in “the midst of a revolution,” changing the paradigm of how we transport people and goods on the nation’s public roads, said James Chen. Chen, who heads the Transportation Technology and Energy practice at Babst Calland, speaks about trends and developments in new transportation and energy technologies.

“For the first time in 100 years, we’re shifting that technology completely to a whole new powertrain structure that uses stored energy in the form of electricity and motors to power vehicles,” Chen said.

Evolving from the dominant technology of internal combustion engines – gas and diesel-powered vehicles – the industry has seen incremental improvement, moving from leaded to unleaded gas, the use of catalytic converters and on-board diagnostic systems.

Now, the concept of a robust battery pack of stored energy that moves electric vehicles through harsh changes in weather, vibration and more is serving as a platform for new methods for stable, stationary environments outside the transportation realm, as in connectivity, data and data sharing.

The electric vehicle is also providing a platform in the area of autonomy – vehicles that almost drive themselves, recognizing lines on the road, pedestrians, other vehicles and roads signs.

“What you’re basically talking about is machine learning,” he said. “And machine learning, at the end of the day, is artificial intelligence.”

These new technologies are also relevant, Chen adds, because battery stored energy can help with demand across energy sectors as the focus moves from primarily fossil fuel burning to additional types of energy generation like wind, solar, hydro-power and nuclear. All are necessary to satisfy increasing demands for energy in the United States and abroad.

Established companies and start-ups alike in the transportation sector are investing in developing and advancing these new technologies, Chen said.

Market leader Tesla upended the electric vehicle concept in 2008 with its proof-of-concept Roadster that could be charged at home and have a 250-mile range.

“They also installed the supercharger network which allowed …. you to get about 80 percent charged in about 40 minutes,” Chen said.

And there are other companies, like:

Irvine, California-based Rivian, with its all-electric pickup trucks and sports utility vehicles.
Lucid Motors, out of Newark, California, with a “high-end sedan” that goes up to 500 miles in a single charge.
Lion Electric, from Canada, that is producing all-electric school buses.
Scout Motors, of Tysons, Virginia, which is backed by a several billion-dollar investment from Volkswagen.

Established transportation companies, including BMW, Volkswagen and Hyundai are also investing in new technologies. Hyundai is currently building a new electric vehicle plant in Georgia, Chen said.

Technology start-ups, including EVGo, ChargePoint and Electrify America, are also entering other transportation related realms, especially in the area of electric vehicle charging stations.

Additionally, in the area of autonomous driving, there is another group of start-ups that includes Aurora, Waymo – a division of Google – and Amazon acquired Zoox.

And energy companies – like ExxonMobil and British Petroleum – are also pursuing alternatives to petroleum-dependent energy systems.

Among the challenges that all of these companies face is working toward an infrastructure that supports and promotes their new technology platform. The starting point, Chen said, is through policy, “the precursor to laws and regulations.”

“The current laws and regulations were originally drafted with the incumbent technology in mind, with gasoline powered vehicles and gasoline powered technology in mind,” he said. “This is where the new players really have to start paying attention to what happens; how do we improve that?”

The answer is to inform policy makers of the current roadblocks companies face in terms of safety, emissions and efficiency improvements.

“For companies that are new in the space, it’s sometimes really easy to say, ‘We’ll worry about the policy later, we’ll worry about talking to policy makers and legislators and regulators later; let’s get the product out there,’” Chen said.

But, prior to approaching policy-makers, administrative officials and legislators, companies need to pitch their new products along the way by:

Keeping policy makers aware of their developments and why they are good.
Providing the reasons for efficiently improving energy.
Letting them know how improvements are creating a better and safer consumer experience.

The perfect example of how changes to policy, legislation and laws can directly affect the consumer is by incentivizing, from a policy perspective, new building codes to have electric vehicle charging access, Chen said. For many, the issue of local commutes is solved with an overnight 250- to 300-mile charge at home. For others, a convenient access to a power source can be geographically challenging — think homes with a plug that is from a parking spot or multi-dwelling condominium units.

“How do we find and build out that infrastructure so where electric vehicles seem to be most popular, urban and suburban areas, we’re providing that charging option,” he said. “That’s something companies need to play into.”

Business Insights is presented by Babst Calland and the Pittsburgh Business Times.

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Trends and Developments in New Transportation and Energy Technologies

Washington Business Journal

(By James Chen)

The electric vehicle is also providing a platform in the area of autonomy – vehicles that almost drive themselves, recognizing lines on the road, pedestrians, other vehicles and roads signs.

“What you’re basically talking about is machine learning,” he said. “And machine learning, at the end of the day, is artificial intelligence.”

Established companies and start-ups alike in the transportation sector are investing in developing and advancing these new technologies, Chen said.

Market leader Tesla upended the electric vehicle concept in 2008 with its proof-of-concept Roadster that could be charged at home and have a 250-mile range.

“They also installed the supercharger network which allowed …. you to get about 80 percent charged in about 40 minutes,” Chen said.

And there are other companies, like:

Irvine, California-based Rivian, with its all-electric pickup trucks and sports utility vehicles.
Lucid Motors, out of Newark, California, with a “high-end sedan” that goes up to 500 miles in a single charge.
Lion Electric, from Canada, that is producing all-electric school buses.
Scout Motors, of Tysons, Virginia, which is backed by a several billion-dollar investment from Volkswagen.

Established transportation companies, including BMW, Volkswagen and Hyundai are also investing in new technologies. Hyundai is currently building a new electric vehicle plant in Georgia, Chen said.

Technology start-ups, including EVGo, ChargePoint and Electrify America, are also entering other transportation related realms, especially in the area of electric vehicle charging stations.

Additionally, in the area of autonomous driving, there is another group of start-ups that includes Aurora, Waymo – a division of Google – and Amazon acquired Zoox.

And energy companies – like ExxonMobil and British Petroleum – are also pursuing alternatives to petroleum-dependent energy systems.

The answer is to inform policy makers of the current roadblocks companies face in terms of safety, emissions and efficiency improvements.

But, prior to approaching policy-makers, administrative officials and legislators, companies need to pitch their new products along the way by:

Keeping policy makers aware of their developments and why they are good.
Providing the reasons for efficiently improving energy.
Letting them know how improvements are creating a better and safer consumer experience.

To view the PDF, click here.

To view the full article and video, click here.

Appellate Lineup: Looking Back at Recent Pennsylvania Cases of Note and Forward to Those on Deck

Litigation Legal Perspective

(by Joseph Schaeffer and Michael Libuser)

Major League Baseball’s Opening Day is symbolic: for a short while, every one of the 30 teams has a chance at the World Series and every one of the 26 players on those teams’ active rosters has a chance at emerging as a superstar. Over 162 games and thousands of at-bats, however, the winning teams and superstars separate themselves from the rest of the pack. Most of those games and at-bats will be remembered only by the participants, but a special few will live on in memory.

Litigation is not much different. Of the thousands of decisions issued each year by Pennsylvania’s appellate courts, most are relevant only to the parties to the dispute. A handful, though, have far broader consequences—whether by announcing a new legal principle or applying an existing legal principle in a novel manner. In this Legal Perspective, we highlight several recent decisions and a few that appear on the horizon.

Balls or Strikes? Reviewing the Pennsylvania Appellate Courts’ Recent Decisions

Sullivan v. Werner Co., 306 A.3d 846 (Pa. 2023)

Sullivan left undisturbed the longstanding prohibition on the admission of industry or government standards evidence in strict products liability cases. The defendant, a scaffold manufacturer, attempted to avoid liability in a design defect claim, in part by showing its compliance with OSHA and other standards. In a split decision, three of the six Pennsylvania Supreme Court Justices who presided over the appeal rejected that defense. Sullivan was unexpected. The Court adopted the prohibition on compliance evidence in the 1980s, in Lewis v. Coffing Hoist, based on an even earlier decision, Azzarello v. Black Bros. Co., in which the Court barred consideration of negligence concepts in the strict liability context. But because the Court overruled Azzarello in 2014, in Tincher v. Omega Flex, Inc., courts and commentators expected the Court to overrule Lewis. The Court did the opposite but, given the lack of a majority opinion, could revisit the issue.

KEM Resources, LP v. Deer Park Lumber, Inc., No. 10 MAP 2023, — A.3d —- (Pa. 2024)

In February, the Pennsylvania Supreme Court held that accounting claims under 68 P.S. § 101, governing the rights of a co-tenant not in possession to its share of rents, are subject to a six-year statute of limitations. Deer Park’s predecessor-in-interest leased out thousands of acres of land for oil and gas development, receiving $12.6 million up front. After KEM’s own predecessors-in-interest established a 50 percent stake in the same oil and gas interests, KEM sought an accounting from Deer Park of its share of monies received under the lease. The appeal resulted in two important holdings. First, the Pennsylvania Supreme Court reaffirmed that a party need not plead a statute if the allegations bring the case within the statutory scope. Second, the Court held that, absent a specific statute of limitations for a statutory accounting claim, Pennsylvania’s catch-all, six-year statute of limitations applies. Though providing welcome certainty, this decision provides co-tenants additional time to seek an accounting while also expanding the potential scope of liability.

Batter Up! Cases of Note before the Pennsylvania Supreme Court

Santiago v. Philly Trampoline Park, LLC, 291 A.3d 1213 (Pa. Super. 2023), appeal granted, No. 29 EAL 2023, 2023 WL 5947576 (Pa. 2023)

Parents routinely sign agreements waiving liability for injuries to their children. But those agreements may have limited force, it turns out. This case involved children injured at Sky Zone trampoline parks. Before entering the parks, one parent of each of the injured children waived the parks’ liability and agreed to arbitrate any disputes outside of court. Although the agreements stated they were binding on the parents’ spouses and children, the Pennsylvania Superior Court held that the parents who signed the agreements bound neither their spouses nor their children. An affirmance in this case would solidify a sea change for potential liability of companies that provide risk-inherent services, particularly in the digital age of waivers. If the spouses and children can sue for injuries in court, the waivers are arguably meaningless.

Halpern v. Ricoh U.S.A., Inc., 299 A.3d 1023 (Pa. Super. 2023), appeal granted, No. 263 EAL 2023, 2024 WL 804876 (Pa. Feb. 27, 2024)

The Pennsylvania Supreme Court is poised to consider whether manufacturers who fail to disclose latent defects in their products violate the prohibition on “fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding” in the Unfair Trade Practices and Consumer Protection Law (UTPCPL). The Pennsylvania Superior Court has long held that the prohibition on “fraudulent or deceptive conduct” does not impose an affirmative obligation on manufacturers to disclose latent defects, going back to the 2001 decision in Romeo v. Pittsburgh Associates. The Superior Court reaffirmed Romeo in Halpern, concluding that there is no UTPCPL failure-to-disclose liability absent some underlying duty. If the Pennsylvania Supreme Court disagrees, manufacturers will face a much broader scope of liability. Caught up in this issue is whether public advisories of defects, such as recalls, would be enough, or if manufacturers will need to provide proof of actual notice to each consumer.

Ungarean v. CNA, 286 A.3d 353 (Pa. Super. 2022), appeal granted, 2023 WL 4530116 (Pa. 2023), and MacMiles, LLC v. Erie Ins. Exchange, 286 A.3d 331 (Pa. Super. 2022), appeal granted, 2023 WL 4528617 (Pa. 2023)

These related appeals ask the Pennsylvania Supreme Court to decide whether business interruption insurance policies extend to losses incurred due to governmental closure orders and limits on business activities during the COVID-19 pandemic. The policies covered “direct physical loss of or damage to property,” which the Pennsylvania Superior Court interpreted, somewhat inconsistently, to apply (1) only where there is tangible property damage or injury (MacMiles) and (2) even without any tangible property damage or injury (Ungarean). These cases are difficult to reconcile—particularly because they were decided by the same judges on the same day. How the Pennsylvania Supreme Court resolves this matter likely will determine whether the Commonwealth is an outlier jurisdiction recognizing coverage for COVID-19 business interruption claims or joins the majority in finding that such coverage is unavailable.

Freilich v. SEPTA, No. 327 CD 2022, 2023 WL 4370703, 302 A.3d 1261 (Table) (Pa. Commw. July 6, 2023), appeal granted, No. 245 EAL 2023, 2024 WL 1044586 (Pa. 2024)

This appeal involves a challenge to the statutory cap on damages recoverable against the Commonwealth. Freilich was injured when a Southeastern Pennsylvania Transportation Authority (SEPTA) bus ran over her foot, and SEPTA conceded liability. But while the parties stipulated to a $7 million jury verdict, the cap reduced Freilich’s nominal recovery to $250,000. After deductions, including for attorneys’ fees, the net award fell to zero. Freilich argued the cap violated her state constitutional rights to a jury trial and a remedy. The Commonwealth Court disagreed, but one judge urged the Pennsylvania Supreme Court to revisit the issue and suspend the cap until the General Assembly increases it. Notably, the parties will address the issue whether, if the cap is unconstitutional, the entire statute under which the Commonwealth partially waived its sovereign immunity is also unconstitutional. This appeal could expand governmental liability and reflects the Pennsylvania Supreme Court’s trend of considering requests to overrule relatively recent precedents.

Joseph Schaeffer is a Shareholder in the Litigation Group of Babst Calland, in Pittsburgh, Pennsylvania, and Co-Chair of the firm’s Appellate Group. He focuses his practice on commercial and environmental litigation and regularly advises clients in the energy, manufacturing, and related industries. Contact him at 412-394-5499 or jschaeffer@babstcalland.com.

Michael Libuser is an Associate in the Litigation Group of Babst Calland, in Harrisburg, Pennsylvania. He focuses his practice on commercial litigation and appeals. Michael is a former law clerk to U.S. District Judge Yvette Kane, U.S. District Judge Karoline Mehalchick, and New York State Acting Supreme Court Justice Jeanette Rodriguez-Morick. Contact him at 717-868-8379 or mlibuser@babstcalland.com.

Legislative & Regulatory Update

The Wildcatter

(By Nikolas Tysiak)

A dose of new case law has arisen in Appalachia this winter. Enjoy!

West Virginia

For those paying attention, there has been some litigation regarding the West Virginia statutory pooling laws passed in 2022. In Sonda v. West Virginia Oil and Gas Conservation Commission, two landowners sued the West Virginia Conservation Commission, challenging the new pooling laws (W. Va. Code §22C-9-1, et seq.) in federal court, alleging an unlawful taking without due process of law under the U. S. Constitution. Instead of proceeding on the merits, the U.S. district court for the Northern District of West Virginia unilaterally decided to abstain from hearing the case, stating that the parties needed to litigate in West Virginia state court first, without identifying the issues that needed to be resolved in state court. The U.S. Fourth Circuit Court of Appeals found that the U.S. District Court had “abused its discretion” in abstaining from the action, as there were clear questions of federal law presented for adjudication and no clear statement of state law issues to be decided. In order to abstain as attempted by the District Court, there must be an unclear issue of state law which may render the need to go to federal court moot. The Court of Appeals therefore reversed the District Court Order of Abstention and remanded to that court for further proceedings.

Ohio

The U.S. District Court for the Southern District of Ohio, Eastern Division, confronted a question of whether the Point Pleasant formation constituted part of the Utica Shale, or a deeper formation. In Honey Crest Acres LLC v. Rice Drilling D LLC (2024 WL 1155970 (March 18, 2024 S. D. Ohio, ED)), the district court was asked to analyze the language of an oil and gas lease; while the language of the lease expressly limited the leasehold rights, retaining to the lessor “all formations below the base of the Utica Shale” it raised the question of whether development of the Point Pleasant formation violated the terms of the lease or not. Specifically, the question is whether the Utica Shale and Point Pleasant formations should be considered separate geological formations or not. However, the opinion is only addressing the parties’ motions for summary judgment. As such, the court is not necessarily deciding on the merits; instead, it is deciding if the pleadings support continuing. As to the issue of whether a trespass against the lands of Honey Crest Acres LLC and a conversion of its property occurred, the court found that there were sufficient pleadings to support a trial. This means that a trial can, and likely will, proceed on the merits of these claims, so it is a case to watch out for in the future.

In a case NOT dealing with the DMA or MTA coming out of Ohio (for once), the Seventh District Court of Appeals was tasked with adjudication a purportedly ambiguous “Term Royalty Assignment” in Bounty Minerals LLC v. LL&B Headwater II, LP, 2024-Ohio-944. In this case, landowners leased their oil and gas to Mason Dixon Energy Inc. in 2007, with a 5-year primary term, a 5-year extension term, and a standard secondary term. In 2011, the landowners executed a Term Royalty Conveyance to Principle Energy, LLC, granting all their 1/8 royalty interest for as long as the lease stayed in effect, but would also apply to new leases granted within three years if the existing lease were terminated, canceled, surrendered, etc. LL&B was one of several successors to Principle, and the lease became vested in Ascent Resources-Utica LLC. Through a series of conveyances, Bounty Minerals acquired a 35% interest in the oil and gas rights. The lease was never produced throughout the primary or extended terms, expiring on September 13, 2017. Instead, the landowners and the predecessors to Bounty signed a new lease about a week later. The Trial Court found that, despite claims by Principle, LL&B and others, the Term Royalty Conveyance expired following the expiration of the 2007 lease. On appeal, the Seventh District noted that the anti-washout term (that the Term Royalty Conveyance could apply to new leases) was only applicable if the termination, surrender, cancellation, etc. of the 2007 lease occurred before the expiration of the primary, extension, or secondary terms. In other words, the Conveyance only applied to new leases if the 2007 lease ended prematurely. The appellate court agreed with the trial court, finding that the Term Royalty Conveyance did, indeed, expire. The court further analyzed a series of related claims for appeal, but found them all to be without merit, finding in favor of Bounty and the landowners and affirmed the trial court’s final judgment.

Pennsylvania

In Plum Borough v. Zoning Hearn Board of Plum, —A.3d—, 2024 WL 314667 (Pa. Comm. Ct., January 29, 2024), the Pennsylvania Commonwealth Court was tasked with determining whether the Plum Zoning Hearing Board had properly adhered to its own ordinances regarding the expansion of a UIC brine disposal well located in Plum Township. After lengthy discussion, the Commonwealth Court determined that the ZHB failed to properly apply its ordinances in dealing with the proposed expansion of the well operator, noting in several places that the ZHB expressed the sentiment that it was powerless to stop the actions of the operator, regardless of their determinations. The court emphasized that the ZHB was not powerless and had several tools at its disposal to prevent expansion of the well’s operations. The court remanded to the ZHB, with instructions on how to conduct further hearings on the issue.

In the Pennsylvania Supreme Court, there was a decision involving a claim of accounting between two co-tenants to oil and gas rights in Wyoming County. In KEM Resources, LP v. Deer Park Lumber, Inc., —A.3d —, 2024 WL 696763 (Pa. Supreme Court, February 21, 2024) the predecessor to Deer Park executed a lease covering its own interest and purporting to cover all the interest of its co-tenant, the predecessor to KEM. The factual background of the case is very convoluted, with quiet title actions, striking down the judgments in those actions, and a lot of procedural and technical arguments regarding the nature of accounting claims, but there appears to be only one issue that was up for appeal to the Supreme Court – did the accounting claim filed by KEM occur within the applicable statute of limitations time period? KEM claimed a six-year limitations period, while Dee Park claimed the applicable statute of limitations was only four years. After lengthy discussion of the background to the case, the arguments of the parties, and the law regarding accounting between co-tenants, the Supreme Court concluded that the appropriate claim in this instance was, indeed, one for accounting between co-tenants. The court went on to state that there was no specific statute of limitations for such an accounting claim, so the general statute of limitations for six years applied, thereby affirming the prior decisions of the trial court and the Superior Court on the issue.

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Safe, Secure, and Trustworthy: White House Executive Order on Artificial Intelligence

Pennsylvania Business Central

(By Mary Binker and Susanna Bagdasarova)

On October 30, 2023, President Biden issued Executive Order 14110 on “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence,”[1] taking a significant step toward shaping the future of AI[2] and its regulation. The Order, which reflects growing calls for federal guidance on AI from public and private stakeholders, focuses on establishing a framework for safe, secure, and trustworthy AI development, focusing on ethical innovation, national security, and global cooperation. The Order builds on the White House’s October 2022 “Blueprint for an AI Bill of Rights”[3] and the National Institute of Standards & Technology’s (NIST) January 2023 “Artificial Intelligence Risk Management Framework.”[4]

The Order is broad in scope, covering a spectrum of industries and issues, including the establishment of new standards for AI safety and security; protection of privacy; advancement of equity and civil rights; support of consumers, patients, and employees; and promotion of innovation and competition.

Although the Order is primarily applicable to federal agencies, it reflects a vision and roadmap for AI regulation intended to guide both industry standards and future federal legislation.

The Order sets out eight principles and priorities to guide policymaking on AI systems:

AI must be safe and secure, requiring robust, reliable, repeatable, and standardized evaluations of AI systems, as well as mechanisms to test, understand, and mitigate risks.
The U.S. should promote responsible innovation, competition, and collaboration through investments in AI-related education, training, development, research, and capacity as well as by opposing monopolies and unlawful collusion with respect to key assets.
The responsible development and use of AI require a commitment to supporting American workers through job training and education, both to prevent AI systems from being deployed in ways that negatively impact employee rights and to use AI in ways that increase human productivity.
AI policies must be consistent with the Biden administration’s policy of advancing equity and civil rights and be structured to prevent deepening inequities, new types of harmful discrimination, and online and physical harms.
The federal government must enforce existing consumer protection policies and enact appropriate safeguards against fraud, bias, discrimination, and privacy infringement to protect Americans who are increasingly using AI and AI-enabled products, particularly in critical fields such as healthcare, financial services, education, housing, law, and transportation.
Policies and tools must be developed to protect Americans’ privacy and civil liberties to ensure that personal data collection, use, and retention is done in a lawful and secure manner that mitigates privacy and confidentiality risks.
The risks arising from the federal government’s own use of AI must be mitigated, and it must increase its ability to internally regulate, govern, and support responsible use of AI including, but not limited to, the recruitment of AI professionals.
The U.S. should be a global leader for societal, economic, and technological progress, and responsibly deploy technology through engagement with its international allies and partners to develop an AI governance framework and ensure that AI benefits the world rather than increasing or exacerbating existing harms and inequities.

Building on this foundation, Sections 4 through 11 of the Order each correspond to one of the eight guiding principles, setting out a host of practical policy goals, tasks, and guidance for federal agencies to implement in the next year. The lengthy Order contains directives for nearly all 15 executive departments to use their regulatory powers to monitor and mitigate risks, develop uses for AI technology, and implement such technologies safely. Certain directives are highlighted below:

The Order tasks NIST with establishing a series of guidelines for AI use and development, including (i) best practices to promote industry standards for safe, secure and trustworthy AI systems, (ii) a companion to the AI Risk Management Framework for generative AI, (iii) a companion to the Secure Software Development Framework for generative AI and dual-use foundation models,[5] (iv) AI auditing and evaluation guidelines with a focus on cybersecurity and biosecurity, and (v) procedures and processes for AI developers to conduct red-team testing[6] of dual-use foundation models.
The Order imposes recordkeeping and reporting requirements on developers of dual-use foundation models, including reporting of red-team safety test results and other critical information on model training and physical and cybersecurity measures. Developers will also be required to report the acquisition, development, or possession of large-scale computing clusters, including their location and the total amount of computing power available in each. Infrastructure as a Service (IaaS) products tested or sold by foreign persons will also be subject to recordkeeping and reporting requirements.
Various agencies with regulatory authority over critical industries are directed to assess and develop mitigation strategies for AI-related critical infrastructure vulnerabilities, including critical failures, physical attacks and cyberattacks.
The Department of Commerce is tasked with creating guidance for content authentication and watermarking of AI-generated content in government communications, in order to increase transparency and public trust and encourage adoption of such standards by the private sector.
The Department of Labor is instructed to create best practices for employers to mitigate AI risks and maximize AI benefits in the workforce, paying careful attention to the intersection of AI and worker protections.
The State Department and Department of Commerce must establish international frameworks for AI regulation, and the White House plans to collaborate with international partners and organizations for global and consistent AI regulation. The initial results of such collaboration are evident in the international agreement recently entered into by the U.S., as discussed below.
In addition to providing AI policy priorities and principles to federal agencies and departments, the Order calls on Congress to enact federal data privacy legislation and establishes a White House Artificial Intelligence Council to coordinate the implementation of AI-related policies by executive agencies.

Sweeping in its scope, the Order seeks to be comprehensive and consistent in addressing topics and sectors most keenly affected by the development and use of AI systems. Such directives will inevitably impact federal procurement policy and requirements for government contractors, a historically powerful tool to develop industry standards, even without legislative action.

In the months since its issuance, the White House has announced that federal agencies have both met “all of the 90-day actions” set out in the Order and “advanced other vital directives that the Order tasked over a longer timeframe”.[7] Notable actions include the following:

Invoking the Defense Production Act, the Department of Commerce is able to compel AI systems developers to report certain vital information, including training and safety testing results.
The Department of Commerce published a proposed rule[8] on January 29, 2024, requiring U.S.-based cloud service providers (commonly “Infrastructure as a Service”) providers and their foreign resellers to identify, assess, and track foreign customers of their products. Public comments on such proposed rule will remain open until April 29, 2024.
In early February, the Department of Commerce announced the creation of the Artificial Intelligence Safety Institute, established at NIST, to support federal efforts in developing the guidelines, rules, and regulations outlined in the Order. In further support of these efforts, NIST established the AI Safety Institute Consortium, comprised of more than 200 companies and organizations across private industry, academic institutions, unions, nonprofits, and other organizations to “develop science-based and empirically backed guidelines and standards for AI measurement and policy.”[9] Consortium members include Amazon, Apple, Google, OpenAI, Carnegie Mellon University, Massachusetts Institute of Technology, and AFL-CIO Technology Institute.
The U.S. Patent and Trademark Office (USPTO) published guidance[10] in the Federal Register on the patentability of AI-assisted inventions on February 13, 2024. Public comments are open until May 13, 2024.
On March 18, 2024, the Department of Homeland Security released an “Artificial Intelligence Roadmap”[11] detailing its AI strategy, including three AI-enabled pilot programs to be undertaken by U.S. Citizenship and Immigration Services, Homeland Security Investigations, and the Federal Emergency Management Agency.
The Departments of Defense, Transportation, and Treasury, as well as six other agencies with regulatory authority, submitted risk assessments on the use of AI in critical national infrastructure.
Through the AI and Tech Talent Task Force, the federal government launched “AI Talent Surge” to accelerate hiring AI professionals across the federal government.

The next significant deadline is set for April 27, 2024, with 30 actions across the federal government to be completed. The White House and federal agencies have shown significant commitment to implementing the directives under the Order, and a variety of guidance, initiatives, and recommendations are expected from government agencies in the coming months.

Attorneys Mary Binker and Susanna Bagdasarova practice in Babst Calland’s Corporate and Commercial and Emerging Technologies groups and focus primarily on corporate and commercial law, including addressing the complex legal and business issues surrounding the development, deployment, commercialization, and use of emerging technologies in a variety of industries.

To view the full article, click here.

Published in the Pennsylvania Business Central on March 29, 2024.

[1] Full text available at Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence.

[2] The definition of “artificial intelligence,” or “AI,” is as set forth in 15 U.S.C. 9401(3): “a machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations or decisions influencing real or virtual environments.” The Order is therefore broad in scope, applying to any machine-based system that makes predictions, recommendations or decisions, not only generative AI.

[3] Full text available at Blueprint for an AI Bill of Rights.

[4] Full text available at Artificial Intelligence Risk Management Framework.

[5] Defined as “an AI model that is trained on broad data; generally uses self-supervision; contains at least tens of billions of parameters; is applicable across a wide range of contexts; and that exhibits, or could be easily modified to exhibit, high levels of performance at tasks that pose a serious risk to security, national economic security, national public health or safety, or any combination of those matters…”

[6] Defined as “a structured testing effort to find flaws and vulnerabilities in an AI system, often in a controlled environment and in collaboration with developers of AI…[it] is most often performed by dedicated “red teams” that adopt adversarial methods to identify flaws and vulnerabilities, such as harmful or discriminatory outputs from an AI system, unforeseen or undesirable system behaviors, limitations, or potential risks associated with the misuse of the system.”

[7] See Fact Sheet: Biden-⁠Harris Administration Announces Key AI Actions Following President Biden’s Landmark Executive Order

[8] See Taking Additional Steps To Address the National Emergency With Respect to Significant Malicious Cyber-Enabled Activities

[9]See U.S. Commerce Secretary Gina Raimondo Announces Key Executive Leadership at U.S. AI Safety Institute

[10] See Inventorship Guidance for AI-Assisted Inventions

[11]See Department of Homeland Security, Artificial Intelligence Roadmap 2024

Discovery Disputes: Best Practices from the Bench

Pretrial Practice & Discovery

American Bar Association Litigation Section

(by Michael Libuser)

For judges and their law clerks, one of the most frustrating aspects of pretrial practice is managing discovery disputes. Some advocates view them as hiccups—trivial quarrels that demand little of the court’s time—but discovery disputes often present the first meaningful opportunity for parties to interface with the court. (Case-management conferences, brief as they are, and narrowly focused on scheduling and housekeeping matters, rarely present the same opportunity.) And discovery disputes can, in fact, win and lose cases, color pretrial proceedings by sowing antagonism between the parties, and bring a case to a halt. This article cobbles together the views of numerous federal and state judges, as well as former and current law clerks, regarding best practices for addressing discovery disputes to the court. Some of these best practices are obvious, but litigants routinely fail to heed the obvious, according to the judges and law clerks who generously shared their views on this topic.

Know the Rules

Judges are unanimous: Review local and judge-specific rules. Ignoring this obvious but often-neglected advice can chip away at a lawyer’s credibility, clutter the record, and create unnecessary work for all involved. Numerous judges, for example, require parties to informally notify chambers of discovery disputes before filing formal discovery motions. This requirement advances the goals of efficiency and helps keep costs down, and some judges will deny or strike a formal discovery motion filed in violation of it.

Vet Your Position

“My first piece of advice when a litigator arrives at an impasse with opposing counsel regarding a discovery issue is to carefully review the [procedural rules] on point and research caselaw to ensure that the position you are taking is sound.” One judge estimates that 70 percent of discovery disputes can be resolved under a straightforward application of black-letter rules and law. And it is “far better to back down from a position during negotiations if the law does not support your position than when you are before a judge.” Failure to back down can result in sanctions, one judge reminds.

Confer

“If you haven’t conferred before contacting the court, you are doing it wrong!” Confer and confer early, but also make it meaningful—don’t just go through the motions. Adequate conferral may resolve the dispute, removing the court from the equation altogether. Even if opposing counsel refuses to engage in good-faith conferral efforts, attorneys should create a record of their attempts to confer to present to the court if necessary.

Don’t Dawdle

“Don’t—do not—wait until the day before the close of discovery to present a discovery dispute to the court.” Inform the court of a discovery impasse at the soonest possible time and, if necessary, seek an extension of any relevant deadlines.

Be Clear and Know the Ask

When addressing a discovery dispute to the court, clearly articulate your arguments and know what relief you are seeking. “Describing the dispute in general terms and not specifying the precise relief you want is going to decrease your odds of success substantially.” Limit your arguments to the principles that support your position, e.g., relevance or privilege, says one clerk. Be specific about the relief you seek, says another, but also be prepared to offer alternative forms of relief.

Some Context Matters

“Contextualize the dispute by explaining where the parties are in discovery and why the requested information is important to moving discovery forward.” Your case may be but one of hundreds on a judge’s docket. Providing some context for a discovery dispute orients the court and can provide a helpful framework for wading into the key issues. But judges warn that too much context can be counterproductive. Rehashing every micro-dispute needlessly overcomplicates matters.

Less Is More

Don’t inundate the court with irrelevant materials. Attorneys often overlook this advice, and a great many present discovery disputes atop a mountain of attorney emails and correspondence that “usually just show personal hostility or bickering and are not helpful to the discovery dispute.” The better practice? “Any discovery materials provided to the court should be narrowly tailored to the dispute at hand and their importance should be clearly explained to the court.”

Civility

Finally, judges advise to handle discovery disputes with civility and in full compliance with rules of professional conduct. One judge recommends that counsel revisit those rules, citing the common practice of weaponizing discovery to gain a tactical advantage, rather than invoking the rules of discovery to advance a good-faith position.

To view the full article, click here.

© 2024. Discovery Disputes: Best Practices from the Bench, Pretrial Practice & Discovery, American Bar Association Litigation Section, March 27, 2024 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

You’re Going to Need a Bigger Boat: Intentional Interference Claims Now Hold Water in Context of At-Will Employment Relationships

The Legal Intelligencer

(by Steve Antonelli)

When talking about the practice of law with other lawyers—whether long time practitioners, first year associates, or any stage in between—I have been known to advocate for my chosen practice area by pointing out that employment lawyers never get bored with the fact patterns we encounter. I am of course willing to acknowledge that other commercial litigators surely come across an exciting case occasionally, but employment lawyers routinely deal with allegations that at the very least are interesting and sometimes include personality conflicts that are akin to a soap opera. In late February, the Pennsylvania Supreme Court issued a decision in Salsberg v. Mann, — A.3d —- (2024), that could help to ensure that employment litigation will continue to have the “best” fact patterns for years to come, when it ruled that plaintiffs can maintain a cause of action for intentional interference with an at-will employment relationship against third-parties, including coworkers who act outside the scope of their authority to the point they are rendered a “stranger” to the plaintiff’s at-will employment relationship with their employer.

Drexel University employed Cara Salsberg as its Tax Manager; an at-will position within the University’s Tax Department. Salsberg reported to Donna Mann, whose supervisory responsibilities included determining Salsberg’s schedule and assignments, evaluating Salsberg’s performance, and making recommendations to the University related to Salsberg’s employment. During a staff meeting in anticipation of the 2017 tax season, Mann told Salsberg and another Tax Department employee that they would soon need to work a yet-to-be-determined amount of overtime during the upcoming “busy season.” Salsberg expressed her disagreement to Mann, who in turn blamed her own supervisor, David Rusenko, for the increased workload. Salsberg then decided to meet with Rusenko directly. During her meeting with Rusenko, Salsberg addressed the mandatory overtime issue but also raised additional alleged “concerning” behaviors about Mann. She claimed that Mann “did nothing all day” and was “crazy.” She also told Rusenko that Mann would regularly “pick her head until it bled,” and “run through the office,” bump into walls, and slam her office door. Rusenko declined to intervene and instead recommended that Salsberg address these matters with Mann directly. Shortly after Salsberg did so, Mann issued Salsberg a Performance Improvement Plan. In early June 2017, Drexel terminated Salsberg’s employment for poor performance.

Following her discharge, Salsberg commenced litigation against both Drexel and Mann, alleging, among other claims, that Mann interfered with Salsberg’s contractual relationship with Drexel. The Court of Common Pleas of Philadelphia County granted summary judgment in favor of the defendants, and Salsberg appealed. The Superior Court issued a divided, en banc opinion in favor of Mann, in which the majority relied upon Hennessy v. Santiago, 708 A.2d 1269 (Pa. Super. 1998), a twenty-five-year-old case which held that claims for intentional interference with contractual relationships are only cognizable in Pennsylvania in the employment context relative to prospective at-will employment relationships but not to current at-will employment relationships. The Superior Court held that, like the plaintiff in Hennessy, a current at-will employee, Salsberg did not have any reasonable expectation of continued employment guaranteed by a contract, and therefore any such expectation is nothing more than a “mere hope.” In its opinion, the Superior Court noted that Hennessy made this “critical” distinction between prospective and current at-will employment relationships “without much explanation.”

The Pennsylvania Supreme Court disagreed with the distinction drawn by the Superior Court in Hennessy because it “ignores the expectation interest that a party to the at-will employment relationship has in continued employment absent unlawful interference by a third party….” The Court therefore overruled Hennessy and its progeny and held that “Pennsylvania does not categorically bar claims for intentional interference with an at-will employment contract or relationship by a third-party.” In doing so, the Court acknowledged that even though at-will employment “does not confer a contractual ‘right’ to continued employment as between the parties to the employment relationship, it does not follow that an employee has no protectable interest whatsoever in the continuance of that employment relationship vis-à-vis third parties:

The fact that the employment is at the will of the parties … does not make it one at the will of others. The employee has manifest interest in the freedom of the employer to exercise his judgment without illegal interference or compulsion and, by the weight of authority, the unjustified interference of third persons is actionable although the employment is at will.”

Stated differently, at-will employees in Pennsylvania should be free from third-party interference with their employment.

To assert a claim for intentional interference against a coworker, “at a minimum” the coworker must have been “acting outside the scope of her employment pursuant to Section 228 of the Restatement (Second) of Agency such that she qualifies as a true third party, or stranger, to the contractual relationship.” Such conduct is within the scope of employment if it: (a) is the kind she is employed to perform; (b) occurs substantially within the authorized time and space limits; (c) is actuated, at least in part, by a purpose to serve the employer; and (d) if force is intentionally used, it is not unexpectable force.

Salsberg claimed that Mann’s conduct interfered with the at-will relationship between Salsberg and Drexel. She argued that Mann’s conduct was intentional, improper, without privilege, and outside the scope of her authority to the point she was rendered a third-party, or “true stranger” to the at-will relationship between Salsberg and Drexel. Mann argued, among other things, that she always acted within the scope of her authority and that, as Salsberg’s supervisor, she had the privilege to cause Drexel to terminate Salsberg’s employment. Mann also argued that there was no record evidence that she acted solely with actual malice or against Drexel’s interests when evaluating Salsberg’s performance.

On this matter, the Court agreed with Mann because it found that there was no genuine issue of material fact as to whether Mann actually acted outside the scope of her authority to the extent that she should be considered a third party that could intentionally interfere with the employment at-will relationship between Salsberg and Drexel. In other words, Mann’s conduct fell within authorized time and space limits, did not involve the use of force, and was clearly the kind of conduct that she was employed to perform as Salsberg’s supervisor. Moreover, the Court determined that Mann’s actions were taken, “at least in part,” with the purpose to serve Drexel. Salsberg admitted that she disagreed with Mann on the workload issue, circumvented Mann by raising the issue with Rusenko even though she knew this would anger Mann, and then told Rusenko that she believed Mann to have mental health issues. Salsberg also did not dispute the fact that Mann was not pleased with the number of hours Salsberg had been working, her attitude at work, and her substantive work performance (which included admitted errors). Relying upon its well-settled precedent in Geary v. U.S. Steel Corp., 456 Pa. 171, 319 A.2d 174 (1974), a wrongful termination case with “similar circumstances,” the Court reinforced the notion that employers have a legitimate interest in “preserving administrative order” in their own houses. In short, the Court deemed Salsberg’s case to be an attempt to circumvent the employment at-will doctrine and therefore rejected it.

Although the Court recognized the potential for parties to use the Salsberg opinion as a means to attempt to “maneuver around” the employment at-will doctrine, the fact remains that the door has been opened for cognizable suits by an employee against a coworker for intentional interference in at-will employment relationships if the coworker had a hand or influence in the employee’s termination. Employers should be cautioned, as an uptick in these types of claims may encourage employers to take up the coworker’s defense. In many instances, it would benefit the employer to argue that the coworker acted in the employer’s interest and within their scope of authority when influencing the employee’s termination. In these instances, drafting an air-tight joint defense agreement with the defendant coworker will be imperative. The agreement should include a caveat that representation can and will be withdrawn if the employer determines a conflict or adverse interest between the employer and the defendant coworker. For example, if discovery reveals that the coworker acted with discriminatory animus in their influencing of the employee’s termination, the employer could be at risk of a later finding of vicarious liability for discrimination. Therefore, it is critical for employers to fully investigate allegations of intentional interference between an employee and a coworker prior to agreeing to defend the coworker, and to draft joint defense agreements in a manner that provides an escape route should the facts pan out in a manner that supports an intentional interference claim on the basis of discriminatory animus, as discriminatory acts do not fall within an employee’s scope of duties or authority.

Stephen A. Antonelli is a shareholder in the Employment and Labor and Litigation groups of Babst Calland. His practice includes representing employers in all phases of labor and employment law, from complex class and collective actions and fast-paced cases involving the interpretation of restrictive covenants, to single-plaintiff discrimination claims and day-to-day human resources counseling. Contact him at 412-394-5668 or santonelli@babstcalland.com.

To view the full article, click here.

What’s in a Name? Key Disclosure Considerations for Pseudonymous Plaintiffs

Pretrial Practice & Discovery

American Bar Association Litigation Section

(By Joseph Schaeffer)

Cases with anonymous plaintiffs are rare but not unheard of when disclosure of the plaintiff’s real identity might lead to reprisal. Indeed, one of the most famous cases in American history—Roe v. Wade—was prosecuted on behalf of the pseudonymous Jane Roe all the way to the U.S. Supreme Court. A recent decision from the U.S. Court of Appeals for the Second Circuit, however, sounds a cautionary note for plaintiffs attempting to litigate their claims anonymously.

In Do No Harm v. Pfizer Inc., No. 23-15, 2024 WL 949506, — F.4th — (2d Cir. Mar. 6, 2024), Do No Harm, an advocacy group opposing racial discrimination in healthcare, appealed the dismissal without prejudice of its challenge to a Pfizer fellowship program for persons of African American/Black, Latino/Hispanic, and Native American descent. The trial court had considered Do No Harm’s standing in connection with a motion for preliminary injunctive relief filed concurrently with the complaint, and it found wanting the affidavits of anonymous members that Do No Harm had submitted to support. At issue on appeal was whether the trial court applied the correct legal standard to its standing inquiry—particularly with respect to its conclusion that Do No Harm needed to identify the members supporting its associational standing by name.The Second Circuit affirmed the trial court on appeal. First, the court held that the trial court properly required Do No Harm to meet the same burden of proof on standing at the preliminary-injunction stage that is required at the summary-judgment stage. And second, a majority of the court held that Supreme Court precedent requires a plaintiff (or a member supporting associational standing) to be identified at least to the court to support standing at the preliminary-injunction or summary-judgment stage. The majority reasoned that a name is relevant to showing a concrete and particularized injury, especially because Do No Harm’s members would have been required to identify their name to Pfizer in connection with any application. A partial dissent, however, argued that the majority had elevated procedural rules governing anonymity to constitutional requirements.

What does this ruling mean for practitioners and their clients? To start, it does not affect the practice of employing pseudonyms at the pleadings stage. It also does not address cases where evidence necessary to support standing is uniquely in the defendant’s possession. And it does not require plaintiffs to disclose their identities or their members to the public. At bottom, what this ruling does is require plaintiffs to disclose their identities or their members to the court by no later than the preliminary-injunction or summary-judgment stage to support standing. This narrow requirement should be easily surmounted—but only if counsel is aware of its existence.

To view the full article, click here.

© 2024. Diversity Jurisdiction and the Unintended Consequences of Remote Employees, Pretrial Practice & Discovery, American Bar Association Litigation Section, March 18, 2024 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

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