Articles, Alerts & Perspectives Archive

FTC Finalizes Non-Compete Ban, Legal Challenges Promptly Follow

Employment and Labor Alert

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 becomes effective 120 days after its date of publication in the Federal Register, 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 following day, on April 24, 2024, the U.S. Chamber of Commerce along with three other business groups filed a lawsuit against the FTC in the U.S. District Court for the Eastern District of Texas seeking an injunction to stop the implementation of 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 more than 120 days away and such legal challenges are already under way, 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.

EPA Designates Two PFAS as CERCLA Hazardous Substances and Issues Related Enforcement Policy Focused on “Major PRPs”

Environmental Alert

(by Matt Wood and Jean Mosites)

On April 17, 2024, the U.S. Environmental Protection Agency (EPA) released a pre-publication version of its long-anticipated final rule designating perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), and their salts and structural isomers, as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The final rule will be effective 60 days after publication in the Federal Register. PFOA and PFOS are the two most prominent and studied compounds in a “family” of per- and polyfluoroalkyl substances (PFAS) consisting of thousands of manmade chemicals. PFAS have been widely used for decades in various applications, including manufacturing water-, stain-, and heat-resistant consumer products, e.g., waterproof clothing and food packaging, and as ingredients in aqueous film forming foams (AFFF) used to extinguish certain kinds of chemical fires. Research indicates that exposure to PFAS, which are prevalent and persistent in the environment, may cause various health-related impacts.

EPA’s designation of PFOA and PFOS as CERCLA hazardous substances is unprecedented and not uncontroversial because it is the first time the agency has made such designations using its authority under CERCLA Section 102, 42 U.S.C. § 9602. Until now, CERCLA has always defined hazardous substances by reference to other statutes (e.g., the Clean Water Act and the Resource Conservation and Recovery Act). To reach its conclusion that the designations were warranted, EPA says it evaluated available scientific and technical information about PFOA and PFOS to determine whether they “may present a substantial danger to public health welfare or the environment” as contemplated by CERCLA section 102(a). EPA also conducted a “totality of the circumstances” analysis considering multiple factors, including benefits versus costs. Ultimately, EPA determined that the advantages of designation outweighed the disadvantages.

Among other things, the final rule will require parties to report to federal, state, tribal, and local authorities, as applicable, unpermitted releases of PFOA and/or PFOS at or above the applicable “reportable quantity” (one pound or more within a 24-hour period). It also imposes certain obligations on federal agencies when selling and transferring federally owned real property, e.g., providing notice if PFOA/PFOS (or any other hazardous substance) was stored on-site for a year or more and/or was released or disposed of on-site and warranting that the United States has remediated the property prior to the transfer (and will conduct future remediation as necessary).

More broadly, the final rule provides the federal government additional authority under CERCLA to address PFOA/PFOS contamination in the environment. It will allow EPA and other agencies with delegated CERCLA authority to: (1) respond to PFOA/PFOS releases without making an imminent and substantial danger finding; (2) require potentially responsible parties (PRPs) to clean up PFOA/PFOS contamination; and (3) recover cleanup costs from PRPs. Private parties who conduct cleanups consistent with CERCLA’s National Contingency Plan will be able to seek to recover PFAS cleanup costs from other PRPs. The final rule could potentially affect closed sites with existing remedies, e.g., if the presence of PFOA and/or PFOS affects the protectiveness of the remedy. However, these sites will have to be addressed on a case-by-case basis according to site-specific facts.

In a related action, on April 19, 2024, EPA issued a policy memorandum, “PFAS Enforcement Discretion and Settlement Policy Under CERCLA” (“Policy”) summarizing the agency’s intent to use its discretion to not “pursue entities where equitable factors do not support seeking response actions or costs under CERCLA . . . .” These entities include community water systems and publicly owned treatment works, municipal separate storm sewer systems, publicly owned/operated municipal solid waste landfills, publicly owned airports and local fire departments, and farms where biosolids are applied to the land. EPA will also consider not seeking PFAS response actions or costs under CERCLA based on the totality of four factors:

Whether the entity is a state, local, or tribal government, or works on behalf of or conducts a service that otherwise would be performed by a state, local, or tribal government.
Whether the entity performs a public service role in:
1. Providing safe drinking water;
2. Handling of municipal solid waste;
3. Treating or managing stormwater or wastewater;
4. Disposing of, arranging for the disposal of, or reactivating pollution control residuals (e.g., municipal biosolids and activated carbon filters);
5. Ensuring beneficial application of products from the wastewater treatment process as a fertilizer substitute or soil conditioner; or
6. Performing emergency fire suppression services.
Whether the entity manufactured PFAS or used PFAS as part of an industrial process.
Whether, and to what degree, the entity is actively involved in the use, storage, treatment, transport, or disposal of PFAS.

EPA says it will focus “on holding accountable those parties that have played a significant role in releasing or exacerbating the spread of PFAS into the environment, such as those who have manufactured PFAS or used PFAS in the manufacturing process, and other industrial parties,” called “major PRPs” under the Policy. In addition to its enforcement discretion, EPA says it can use its settlement authority in one of two ways to protect parties that satisfy the equitable factors. First, in a settlement with a major PRP, EPA could require the major PRP to waive its right to sue such non-settling parties. Second, EPA may enter into a settlement agreement with a party where factors do not support enforcement, whereby the settling party resolves its CERCLA liability and is not liable for third-party contribution claims for matters covered by the settlement.

EPA cautions that exercising its discretion under the Policy is contingent upon full cooperation by an applicable party, the Policy does not exempt parties from other CERCLA reporting requirements, e.g., PFAS releases, and the Policy does not apply to enforcement actions outside of CERCLA. EPA also notes that the Policy’s scope may evolve to reflect scientific and/or regulatory advances. More information about EPA’s designation of PFOA and PFOS as hazardous substances under CERCLA is available here, and more information about EPA’s broader PFAS regulatory goals are detailed in the agency’s “PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024,” with its annual progress reports, available here.

As the federal government continues to ramp up its statutory and regulatory efforts to address PFAS across multiple program areas, Babst Calland attorneys will track these developments and are available to assist you with these matters. For more information on this development or related matters, please contact Jean M. Mosites at (412) 394-6468 or jmosites@babstcalland.com, or Matthew C. Wood at (412) 394-6583 or mwood@babstcalland.com, or any of our other environmental attorneys. For additional resources and more information on other PFAS developments, please visit Babst Calland’s PFAS Perspectives page, here.

EPA Agrees to Impose Novel Water Quality Requirements for West Virginia Streams

Environmental Alert

(by Kip Power and Robert Stonestreet)

The federal Environmental Protection Agency (EPA) has agreed to impose novel water quality requirements for West Virginia streams to resolve a lawsuit filed by multiple environmental advocacy organizations. On March 18, 2024, the Sierra Club, the West Virginia Highlands Conservancy, and the West Virginia Rivers Coalition (Plaintiffs) filed a lawsuit against EPA in the U.S. District Court for the Southern District of West Virginia (at Huntington). The suit alleges that EPA has improperly failed to take action under the federal Clean Water Act with respect to certain “biologically impaired” streams located in the Lower Guyandotte River Watershed in West Virginia. Specifically, Plaintiffs assert that because the West Virginia Department of Environmental Protection (WVDEP) has failed to do so, EPA must step in and develop pollution reduction plans (known as “total maximum daily loads” or “TMDLs”) for those streams.

However, rather than seek to reduce levels of conventional pollutants (e.g., iron, aluminum, etc.), the lawsuit addresses the concentration of dissolved minerals in the water (often referred to as “total dissolved solids” or conductivity). According to the Plaintiffs, certain levels of conductivity lead to an adverse impact (known as “ionic toxicity”) on specific species of aquatic life. Neither West Virginia nor EPA has developed a specific water quality standard for total dissolved solids or conductivity. A wide range of activities can affect conductivity levels of a stream, including wastewater treatment and earth disturbances associated with construction activities or mining. Naturally occurring conductivity levels can also vary widely among different streams.

About 10 days after the suit was filed, Plaintiffs and EPA announced a settlement, in the form of a proposed Consent Decree (CD). 89 Federal Register 22140 (March 29, 2024). According to the Federal Register notice, the parties have been discussing the settlement for approximately one year (since Plaintiffs sent EPA notice of their intent to file suit, on March 21, 2023). Unless extended, written comments on the proposed CD will only be accepted by EPA until April 29, 2024.

The CD is available at https://www.regulations.gov (Docket No. EPA-HQ-OGC-2024-0145), along with public comments and other documents in the public docket. Under the proposed CD, EPA must publish draft TMDLs for the subject streams for public comment by October 31, 2024 and finalize those TMDLs by January 15, 2025 unless WVDEP does so first (which EPA must approve). Plaintiffs agree not to pursue further litigation against EPA alleging the need for TMDLs to address “ionic toxicity” in other West Virginia watersheds until after January 15, 2025.

The proposed CD could well have implications for areas far beyond those streams specifically identified in it. By imposing limits on conductivity or total dissolved solids in order to limit ionic toxicity, the TMDL process completed under the CD will effectively create a new water quality standard that may come to be applied throughout the state in order to purportedly protect against violations of West Virginia’s “narrative” water quality standards (i.e., descriptions of certain prohibited conditions, such as distinctly visible foam, sludge deposits, foul odors, discoloration, or “materials in concentrations which are harmful, hazardous, or toxic to man, animal or aquatic life”). Typically, such water quality standard-setting takes place through federal and state legislative and rulemaking processes, and there are valid concerns that establishing regulatory standards through lawsuits is a poor substitute for those processes. That concern is heightened when addressing a measure such as conductivity, which may be affected by a wide range of activities and may have effects that vary greatly from one location to another. Treatment methods to reduce conductivity levels can be expensive and difficult to implement.

For questions about the proposed Consent Decree or other Clean Water Act issues, please contact Christopher B. (Kip) Power at (681) 265-1362 or cpower@babstcalland.com, or Robert M. Stonestreet at (681) 265-1364 or rstonestreet@babstcalland.com.

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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U.S. Environmental Protection Agency Finalizes National Primary Drinking Water Regulations for Certain PFAS Chemicals

Environmental Alert

(by Jean Mosites and Mackenzie Moyer)

On April 10, 2024, the U.S. Environmental Protection Agency (EPA) finalized the National Primary Drinking Water Regulation (NPDWR) Rule regulating six per- and polyfluoroalkyl substances (PFAS) under the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq. This final rule establishes the first-ever nationally enforceable drinking water standards for PFAS. The final rule establishes Maximum Contaminant Level Goals (MCLGs) and Maximum Contaminant Levels (MCLs) for perfluorooctanoic acid (PFOA), perfluorooctane sulfonic acid (PFOS), perfluorononanoic acid (PFNA), hexafluoropropylene oxide dimer acid and its ammonium salt (HFPO-DA, commonly known as GenX chemicals), and perfluorohexane sulfonic acid (PFHxS). The final rule also establishes a Hazard Index MCLG and MCL for mixtures containing two or more of PFNA, HFPO-DA, PFHxS, and perfluorobutane sulfonic acid (PFBS).

For PFOA and PFOS, the final rule sets MCLGs – non-enforceable health-based goals that represent the maximum concentration of a contaminant in drinking water at which there is no known or anticipated negative effect on a person’s health – at 0 parts per trillion (ppt). The MCLs, which are legally enforceable, are set at 4.0 ppt for PFOA and PFOS. The MCLs represent the maximum concentrations allowed in drinking water that can be delivered to users of a public water system and are informed by factors such as available treatment technologies and cost. As a change from the proposed rule, the final rule sets MCLGs and MCLs for PFNA, PFHxS, and HFPO-DA at 10 ppt.

For mixtures of two or more of PFNA, PFHxS, HFPO-DA, and PFBS, the final rule establishes a Hazard Index due to the chemicals’ likely co-occurrence. The Hazard Index is calculated by dividing the concentration of each of the four PFAS compounds by its Health-Based Water Concentration (HBWC; 10 ppt for PFNA, 10 ppt for HFPO-DA (GenX), 9 ppt for PFHxS, and 2000 ppt for PFBS) and then adding the results together. A total value greater than 1.0 is an exceedance of the proposed Hazard Index MCL. For a more detailed explanation of the Hazard Index calculation, see EPA’s Fact Sheet for Understanding the Hazard Index, available here.

The final rule regulates community water systems (CWSs) and non-transient non-community water systems (NTNCWSs), collectively public water systems. A CWS is defined as “a public water system which serves at least fifteen service connections used by year-round residents or regularly serves at least twenty-five year-round residents” and a NTNCWS is “a public water system that is not a [CWS] and that regularly serves at least 25 of the same persons over 6 months per year.” 40 C.F.R. § 141.2.

Under the final rule, public water systems have three years (by 2027) to complete initial monitoring of each of the six PFAS, followed by ongoing compliance monitoring. The public must be provided with information on the levels of these PFAS in their drinking water beginning in 2027. Public water systems have five years (by 2029) to implement solutions to reduce PFAS if monitoring shows levels exceeding the MCLs. After those five years, public water systems that have PFAS in drinking water violating one of the MCLs must take action to reduce PFAS levels and provide notice to the public of the violation.

In the final rule, EPA identifies granular activated carbon, anion exchange resins, reverse osmosis, and nanofiltration as the best available technologies for PFAS removal in drinking water. According to EPA, PFAS tend to co-occur, and these four treatment technologies have been documented to co-remove other forms of PFAS, along with the six PFAS being regulated. More information on the final rule can be found on EPA’s webpage, available here.

The final rule supersedes any state-specific MCLs, if those MCLs are less stringent than EPA’s. For example, Pennsylvania adopted MCLs for PFOA (14 ppt) and PFOS (18 ppt) in January 2023. To retain primacy over the drinking water program, states must regulate PFAS no less stringently than EPA. Under the final rule, states with primacy will have up to two years after the date of rule promulgation to develop regulations that are at least as strict as the federal MCLs. Pennsylvania’s regulations already incorporate the federal drinking water standards by reference but given Pennsylvania’s earlier action to regulate PFAS in drinking water, it is likely there will be a regulatory amendment to remove Pennsylvania’s earlier standards. 25 Pa. Code § 109.202. The regulations incorporated by reference are effective on the date established by the federal regulations; therefore, regulated entities in Pennsylvania should assume that the federal standards are effective upon the dates listed in the final rule.

The final rule is the latest action under President Biden’s plan to combat PFAS pollution and EPA’s 2021 PFAS Strategic Roadmap (available here), under which EPA is taking a “whole-of-agency approach” to address PFAS throughout its lifecycle. The final rule is expected to be published in the Federal Register in the near future. Additional rulemaking proposals include the designation of certain PFAS as hazardous and information gathering obligations to be imposed on certain wastewater systems.

EPA also announced nearly $1 billion in newly available funding through the Infrastructure and Investment Jobs Act (IIJA) to help states and territories implement PFAS testing and treatment at public water systems and to help owners of private wells to address PFAS contamination. This funding is a part of the $9 billion included in the IIJA to invest in drinking water systems impacted by PFAS and other emerging contaminants.

Babst Calland’s PFAS Work Group, including environmental, public sector, and litigation attorneys, continue to track PFAS technical and legal developments and are available to assist you with PFAS-related matters. For more information on this and other remediation matters, please contact Jean M. Mosites at (412) 394-6468 or jmosites@babstcalland.com, Mackenzie M. Moyer at (412) 394-6578 or mmoyer@babstcalland.com, or any of our other attorneys in this practice.

To stay informed on timely legal and regulatory information on PFAS, view our PFAS Perspectives page, or subscribe to updates here.

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

New to Whom? The Fifth Circuit strikes down EPA’s attempt to regulate ongoing uses of PFAS under TSCA’s “significant new use” provision.

Environmental Alert

(By Joseph Schaeffer and Sloane Wildman)

On March 21, 2024, the U.S. Court of Appeals for the Fifth Circuit issued an opinion in Inhance Technologies, L.L.C. v. U.S. Environmental Protection Agency, No. 23-60620 (5th Cir. Mar. 21, 2024) that confirmed the obvious: a company that has a 40-year history of using perfluoroalkyl substances (PFAS) in its fluorination manufacturing process is not engaged in a “significant new use” under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601-2697. While not preventing the U.S. Environmental Protection Agency (EPA) from regulating existing uses of PFAS under other TSCA provisions, this common-sense conclusion provides industry with much-needed clarity and predictability.

TSCA Background

TSCA was enacted in 1976 to regulate chemicals that “present an unreasonable risk of injury to health or the environment.” 15 U.S.C. § 2601. EPA may do so in one of two ways. Under TSCA § 5, EPA may regulate the use of “new chemical substance[s]” and any “significant new use” of chemical substances. 15 U.S.C. § 2604. To determine whether use of a chemical substance is a significant new use, EPA considers four factors:

(1) the projected volume of manufacturing and processing of a chemical substance; (2) the extent to which a use changes the type or form of exposure of human beings or the environment to a chemical substance; (3) the extent to which a use increases the magnitude and duration of exposure of human beings or the environment to a chemical substance; and (4) the reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of a chemical substance.

15 U.S.C. § 2604(a)(2). If the use is a significant new use, EPA issues a Significant New Use Rule (SNUR) for public notice and comment. Id. Industry wishing to engage in the significant new use then must submit a Significant New Use Notice (SNUN) at least 90 days in advance of manufacture or processing. Id. at § 2604(a)(1)(B)(i). EPA must review that SNUN and make one of three findings: “[1] the relevant chemical substance or significant new use presents an unreasonable risk of injury to health or the environment … [2] the information available …is insufficient to permit a reasoned evaluation of the health and environmental effects of the relevant chemical substance or significant new use … or [3] the relevant chemical substance or significant new use is not likely to present an unreasonable risk of injury to health or the environment.” Id. at § 2604(a)(3). If EPA finds that there is an unreasonable risk or insufficient information to evaluate the risk, then it must issue an order prohibiting or limiting the chemical substance’s manufacture. Id. at § 2604(e), (f).

Alternatively, under TSCA § 6, EPA may regulate any chemical substance—not just new chemical substances or significant new uses. Id. at § 2605. The broader authority conferred under TSCA § 6, however, is balanced by a more rigorous rulemaking process that requires EPA to perform, among other things, a cost-benefit analysis supporting the new regulation. Id. at § 2605(c)(2)(A)-(C).

In 2020, EPA invoked its authority under TSCA § 5 to finalize a SNUR designating as a significant new use any manufacture or processing of certain PFAS that would not be ongoing after December 31, 2015 or for which there currently was no ongoing use (the “PFAS SNUR”). Inhance Tech., No. 23-60620, at *5-6. EPA stated in the proposed PFAS SNUR that it would not designate ongoing uses as significant new uses, but it required companies seeking protection under this safe harbor to submit their prior manufacture and use of PFAS for approval. Id. at *11. EPA then excluded only the submitted ongoing uses from coverage under the final SNUR. Id. Notably, in the proposed PFAS SNUR, EPA included a non-exhaustive list of industries as potentially affected by the proposed rule, but did not include the fluorination industry on this list.

EPA orders Inhance to cease manufacturing or process PFAS

Inhance fluorinates plastic containers to create a barrier that prevents the containers’ contents from leaching out and outside substances from permeating in. Id. at *2. Neither Inhance nor EPA was aware during the rulemaking process for the PFAS SNUR that fluorination involved the manufacture or processing of PFAS. Id. at *11. Because EPA had not identified the fluorination industry as one of the industries potentially subject to the PFAS SNUR Inhance did not submit a SNUN during the rulemaking process to invoke the safe harbor for ongoing uses. Id.

Two years after finalizing the PFAS SNUR, EPA learned that Inhance’s fluorination process resulted in the creation of PFAS. Id. at *2. Relying on the PFAS SNUR, EPA issued Inhance a notice of violation ordering Inhance to either change its fluorination process to stop creating PFAS or temporarily cease fluorination resulting in the creation of PFAS. Id. Rather than complying with the notice of violation, however, Inhance submitted SNUNs for its fluorination process to EPA for review. Id.at *2-3. EPA completed its review by issuing orders prohibiting Inhance from manufacturing or processing PFAS through its fluorination process, and Inhance petitioned the Fifth Circuit for review. Id. at *3.

The Fifth Circuit considers what qualifies as a significant new use

At the heart of Inhance’s petition for review was whether the creation of PFAS through its fluorination process was an ongoing use, which EPA could regulate only under TSCA § 6, or a significant new use, which EPA could regulate under TSCA § 5. TSCA does not define “significant new use” or “new,” and the parties proposed very different definitions. EPA argued that a significant new use is any use “not previously known to EPA,” id. at *9, whereas Inhance argued that a significant new use is a use “having recently come into existence” or “not previously existing,” id. at *8. Inhance’s fluorination process would qualify as a significant new use under EPA’s definition, since its creation of PFAS was not known to EPA until 2022, but would not so qualify under Inhance’s definition, since the process had been in place for decades.

The Fifth Circuit found Inhance’s definition to be more persuasive for two reasons.

First, Inhance’s definition better aligned with the TSCA’s text, structure, and purpose. TSCA § 5 creates forward-looking requirements—requiring notice before manufacture and processing and requiring EPA to consider projected volumes and reasonably anticipated manners and methods of manufacturing. Id. at *9. The cost-benefit analysis required under TSCA § 6 also indicates that Congress intended a more careful balancing for processes that had previously existed. Id. at *10. And, at bottom, the idea that an existing use becomes “new” when discovered by EPA runs counter to common sense. Id.

Second, Inhance’s definition avoids constitutional issues that would arise under EPA’s definition. Because Inhance did not know that its fluorination process created PFAS during the PFAS SNUR rulemaking, it had no reason to know that it would be subject to the regulation or that it would need to submit a SNUN to take advantage of the regulation’s safe harbor. EPA’s definition thus would require Inhance—and companies in a similar position—to be clairvoyant in identifying their regulatory obligations. Id. at *11-12.

What it all means

The Fifth Circuit was careful to note in conclusion that its decision only prohibits EPA from invoking its TSCA § 5 authority to regulate ongoing uses of PFAS. EPA may continue to invoke its TSCA § 6 authority. As the Fifth Circuit acknowledged, though, the regulatory process under TSCA § 6 is more rigorous and requires a cost-benefit analysis that is absent from the TSCA § 5 process. Given the difficulties some industries have faced in finding effective PFAS replacements, it is thus possible that ongoing uses that would have been prohibited or limited under TSCA § 5 will survive due to the cost-benefit analysis required under TSCA § 6. Though time will tell, this might prove to be the most significant consequence of the Fifth Circuit’s decision.

As the federal and state governments continue to take action to address PFAS across many program areas, Babst Calland attorneys continue to track these developments and are available to assist you with PFAS-related matters. For more information on this development and other remediation matters, please contact Joseph V. Schaeffer at (412) 394-5499 or jschaeffer@babstcalland.com, Sloane Anders Wildman at (202) 853-3457 or swildman@babstcalland.com, or any of our other environmental attorneys.

Federal Court Dismisses Challenge to WV Pooling Statute

Energy Alert

(by Robert Stonestreet and Austin Rogers)

A federal court has dismissed a challenge to the validity of a West Virginia law authorizing pooling and unitization of oil and gas formations associated with Marcellus and Utica shale wells. The court concluded that the mineral owners who filed the suit lacked standing to bring their claims because they failed to allege an actual injury from the challenged law.

As reported in an Alert published on February 1, 2024, the Fourth Circuit Court of Appeals directed the lower court, Judge John Preston Bailey of the District Court for the Northern District of West Virginia, to resolve a pending lawsuit challenging the law, known as Senate Bill 694, enacted by the West Virginia Legislature in 2022. This includes a determination of whether the mineral owners established legal standing to challenge the law. The District Court had previously abstained from addressing the merits of the claims or the legal standing of the mineral owners.

Judge Bailey ruled that the mineral owners lacked legal standing for at least two reasons. First, the Court observed that the mineral owners did not allege that their mineral interests had been adversely affected by the challenged law, that they were subject to unitization under the law, or that their royalties were diminished in any way by the law. Second, the Court found no causal connection between the mineral owners’ alleged injury and the enactment of the law. The Court noted that the mineral owners did not explain how the agency they sued, the West Virginia Oil and Gas Conservation Commission, was affecting their mineral interest “in any way” or that future enforcement of the law against them was “imminent.”

If you have questions about this lawsuit or West Virginia law governing pooling and unitization, please contact either of the following attorneys to learn more: Robert Stonestreet at rstonestreet@babstcalland.com or 681.265.1364 or Austin Rogers at arogers@babstcalland.com or 681.265.1368.

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.

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