FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Matthew C. Wood)
On August 23, 2023, a coalition of environmental groups filed a petition for review in the Commonwealth Court of Pennsylvania in which they challenged the constitutionality of Act 96 of 2022, 58 Pa. Cons. Stat. Ann. §§ 2801–2826. See Verified Petition for Review, Clean Air Council v. Pennsylvania, No. 379 MD 2023 (Pa. Commw. Ct. Aug. 23, 2023). Act 96 amended Title 58 to provide for oil and gas well plugging oversight, bonding, and well plugging funds, and requires an operator to obtain a bond to cover the well and well site in the event the operator fails to remediate the site and plug the well.
Act 96 removed authority from the Environmental Quality Board (EQB) to adjust well bonding amounts for conventional wells for 10 years from the effective date (July 19, 2022) and reserved that authority to the Pennsylvania General Assembly. The Act set the bonding amount for a conventional well at $2,500 and allows operators to obtain blanket bond coverage for multiple wells for $25,000, which must be increased by $1,000 for each additional well drilled, with the total blanket bond not to exceed $100,000. The environmental groups—Clean Air Council, Earthworks, Citizens for Pennsylvania’s Future, Protect PT, and Sierra Club—allege that the statutory bond amounts are inadequate and do not cover the actual costs of remediation and plugging. As a result, they argue, operators are not incentivized to promptly clean up and remediate oil and gas wells, leaving the costs of addressing abandoned wells to the Pennsylvania taxpayers.
Among the claims for relief, the environmental groups are seeking declarations from the court that (1) unplugged abandoned wells pollute the environment and harm Pennsylvania’s natural resources, (2) the Commonwealth has a trustee obligation to ensure that conventional oil and gas wells permitted by the Commonwealth are promptly plugged and remediated upon abandonment, and (3) wells not plugged in accordance with statutory deadlines violate Pennsylvania citizens’ environmental right to a clean environment guaranteed by the Pennsylvania Constitution’s Environmental Rights Amendment.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Legal Intelligencer
(by Casey Coyle, Stefanie Mekilo and Austin Rogers)
1995 was a watershed year. Michael Jordan returned to the NBA after a two-year hiatus, Brad Pitt was named Sexiest Man Alive by People magazine, and the world met Buzz Lightyear for the first time. Today, Buzz remains a constant fixture in pop culture, thanks largely to his signature catchphrase: “To Infinity and . . . Beyond!” Indeed, Buzz himself may use that phrase to describe the Pennsylvania Supreme Court’s recent decision in Bert Co. v. Turk, 298 A.3d 44 (Pa. 2023), which calls into question the presumptive constitutional limit for punitive damages awards.
Background
In 2017, four employees with non-solicitation agreements left their employment with The Bert Company d/b/a Northwest Insurance Services and joined First National Insurance Agency, LLC. They moved as part of what is known in business parlance as a “lift-out,” a practice in which a group of employees from one company are hired by a competitor. Northwest filed suit and obtained a preliminary injunction enforcing the agreements. At the ensuing trial, the jury exonerated three employees from any liability and exonerated the corporate defendants on two claims. While they found the remaining employee and corporate defendants liable on other claims, the jury only awarded Northwest $250,000 of the roughly $4 million in compensatory damages sought; the award was joint and several. However, the jury awarded Northwest $2.8 million in punitive damages—representing an 11.2:1 ratio of punitive-to-compensatory damages on a per-judgment basis.
Appellants challenged the punitive damages award as unconstitutional. Under U.S. Supreme Court precedent, courts must consider three guideposts when determining if a punitive damages award comports with the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution: (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded and the civil penalties authorized or imposed in comparable cases. BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575 (1996); State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003). Appellants invoked all three guideposts, contending: (1) the degree of reprehensibility could not sustain the $2.8 million punitive damages award because, inter alia, Northwest only alleged economic harm and the challenged conduct “had [no] impact on the health or safety of others;” (2) a punitive-to-compensatory ratio over 10:1 “grossly exceeds the 4:1 guideline established by the Supreme Court;” and (3) the disparity between the jury’s punitive damages award and penalties imposed in other cases necessitated remittitur.
The trial court upheld the award. Quoting State Farm, the court acknowledged “[f]ew awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” The court nevertheless affirmed the award because, “[w]hile the individual ratios clearly fall within the single-digit ratio explained in State Farm, the global ratio only slightly exceeds this standard,” and “there is no explicit ratio that a punitive damages award may not surpass.” The court only briefly touched on the first Gore guidepost (though it confined its analysis to Appellants’ “malicious intent” without discussing the other reprehensibility factors the U.S. Supreme Court articulated in State Farm) and did not address the third Gore guidepost at all.
A divided Superior Court panel affirmed the punitive damages award on appeal. Bert Co. v. Turk, 257 A.3d 93 (Pa. Super. Ct. 2021). Preliminarily, the majority limited its entire analysis to the second Gore guidepost. The majority determined that, “‘[a]s a matter of law,’ the Supreme Court has expressly not established any bright-line ratio which a punitive damages award cannot exceed.” Treating the absence of a bright-line rule the same as there being no limitation at all, the majority held that a punitive damages award over 11 times greater than the compensatory damages award is not presumptively unconstitutional where, as there, the compensatory damages award is substantial. The majority cited just two cases to support this conclusion—both statutory bad-faith cases involving low compensatory damages awards and, thus, implicating one of the two exceptions to a single-digit multiplier.
The majority then turned to how to calculate the constitutionally permissible ratio of compensatory-to-punitive damages in a multiple-defendant case. Absent U.S. Supreme Court guidance, the majority examined cases from other jurisdictions. Finding the combined reasoning of the Ninth Circuit and Texas Supreme Court persuasive, the majority held that computation of damages ratios in multi-defendant cases is on “a per-defendant basis, rather than by aggregating all … compensatory and punitive damages on a per-judgment basis.” Notably, neither the Ninth Circuit nor the Texas Supreme Court had reconciled their holdings with the problem of “double counting” (or more), under which the same compensatory damages are counted multiple times in calculating the constitutionally permissible ratio—even though it is logically impossible in joint-tortfeasor cases that each tortfeasor will pay the full amount of compensatories. Regardless, the majority held that, because Appellants used a per-judgment basis to derive their damages ratio, “that ratio is erroneous as a matter of law.”
The majority, though, seemed to question the propriety of its ratio calculation. Instead of concluding its opinion after calculating what it believed to be the constitutionally permissible ratio in multi-defendant cases (which resulted in a single digit ratio of punitives-to-compensatories for each Appellant), the majority took a belt-and-suspenders approach and considered the potential harm Northwest could have suffered by Appellants’ conduct. The majority found that the potential harm “far exceeded” the $250,000 in actual harm sustained since the potential harm included the company’s remaining value—which the majority calculated on a cold record to be $9.15 million—for a total of $9.4 million. The majority then held: “[g]iven the total disregard for the rule of law that these four tortfeasors displayed, the punitive damages that the jury awarded are light years away from the outer limits of the Due Process Clause.”
The Pennsylvania Supreme Court affirmed the punitive damages award on further review. Bert, 298 A.3d at 48. The Court held that a per-defendant calculation of the Gore ratio—dividing individualized punitive damages by total compensatory damages—was appropriate “under the circumstances,” adding it “generally endorse[s]” that approach as being “consistent with” due-process considerations. The Court then rejected as moot Appellants’ argument regarding a ratio in excess of a single digit since that ratio was based on a per-judgment calculation. Nonetheless, the Court addressed Appellants’ argument in dicta. The Court stated that double-digit ratios “may trigger judicial scrutiny” and “require[] a closer examination of the justification” for the award, but expressly rebuffed any presumption of unconstitutionality. The Court also held that, under the facts presented, “it was appropriate to consider the potential harm that was likely to occur from the concerted conduct of the defendants in determining whether the measure of punishment was both reasonable and proportionate.”
Impact
Much like Buzz Lightyear’s flightpath, Bert’s trajectory is uncertain. The majority of courts have held based on State Farm and its progeny that, absent extraordinary circumstances, there is a presumptive 9.99:1 cutoff for punitives-to-compensatories when the compensatory damages award is substantial. However, Pennsylvania courts may cite Bert for its proposition that a double-digit ratio is not presumptively unconstitutional, even though Bert’s language to that effect is dicta and inferior courts are bound by the U.S. Supreme Court’s interpretation of the U.S. Constitution. Such a change in the law would have significant consequences, particularly given the recent trend of nuclear verdicts across the Commonwealth.
Moreover, by endorsing a “general” (as opposed to categorical) approach to calculating the constitutionally permissible ratio of punitive-to-compensatory damages, Bert leaves open the possibility that a per-judgment approach may be appropriate under certain circumstances. Though it suggested a punitive damages award against a “single corporate entity” is one such instance, the Court provided no test or other guidance for selecting between the two approaches. Nor did the Court indicate what standard of review will be applied by a reviewing court—or, if allocatur is granted, the Pennsylvania Supreme Court—in evaluating that selection.
Further, by sanctioning the Superior Court’s consideration of potential harm in the absence of a jury finding regarding same and where the trial court had issued an injunction eliminating such harm, Bert appears to authorize a reviewing court to consider potential harm in every case involving the constitutionality of a punitive damages award. While the Supreme Court seems to rein in that possibility in Bert’s penultimate paragraph, suggesting consideration of potential harm is only appropriate when “the record includes evidence of the potential harm intended by the Defendants” and the jury is instructed it can consider potential harm, this remains an issue to watch.
Finally, Bert creates tension regarding the continued viability of the Gore guideposts in Pennsylvania. The Supreme Court affirmed the finding that the punitive damages award was constitutional without applying the first or third guidepost or the intermediate appellate court doing the same. Yet, all three guideposts remain the standard for assessing the constitutionality of a punitive damages award until the U.S. Supreme Court holds otherwise.
—————-
Casey Alan Coyle is a shareholder at Babst, Calland, Clements and Zomnir, P.C and Co-Chair of the firm’s Appellate Practice Group. He focuses his practice on appellate law and complex commercial litigation. Casey is also a former law clerk to Chief Justice Emeritus Thomas Saylor of the Pennsylvania Supreme Court. He represented the appellants in Bert during the allocatur and merits briefing stage. Contact him at 267-939-5832 or ccoyle@babstcalland.com
Stefanie Pitcavage Mekilo is a litigation associate at the firm. She focuses her practice on complex commercial disputes involving theft of trade secrets, breach of noncompete and nonsolicitation agreements and other restrictive covenants, and related business torts. She is a former law clerk to the Honorable Christopher C. Conner and the Honorable John E. Jones III of the U.S. District Court for the Middle District of Pennsylvania. Contact her at 570-590-8781 or smekilo@babstcalland.com.
Austin D. Rogers is a litigation associate at the firm. He practices in a variety of litigation practice areas, including commercial, employment and labor, environmental, and energy and natural resources. Contact him at 681-265-1368 or arogers@babstcalland.com.
To view the full article, click here.
Reprinted with permission from the November 2, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
Environmental Alert
(by Kevin Garber and Jessica Deyoe)
On November 1, 2023, the Commonwealth Court of Pennsylvania held that the Pennsylvania Department of Environmental Protection’s CO2 Budget Trading Program Regulation is an unconstitutional tax, declared the rule to be void, and enjoined DEP from enforcing it. See Bowfin KeyCon Holdings, LLC et al v. Pennsylvania Department of Environmental Protection and Pennsylvania Environmental Quality Board (No. 247 M.D. 2022). The Regulation would have linked Pennsylvania’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), which is the regional, market-based cap-and-trade program designed to reduce carbon dioxide emissions from fossil-fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10 percent of their annual gross generation to the electric grid.
The Court reaffirmed its earlier July 8, 2022 opinion in which it preliminarily enjoined the Regulation as an unconstitutional tax. In this November 1 decision on the merits, the Court held that the Regulation constitutes a tax imposed by DEP in violation of the Pennsylvania Constitution.
Undisputed facts of record established that only 6 percent of RGGI auction proceeds are necessary to cover the cost of administering the program and that the annual revenue anticipated from RGGI would be three times greater than the total amount allocated to DEP from the General Fund in a single year. The Court found that the money to be generated by Pennsylvania’s participation in RGGI would be “grossly disproportionate” to the costs of overseeing participation in the program and DEP’s annual needs. Relying on the Pennsylvania Supreme Court’s opinion in Flynn v. Horst, 51 A.2d 54, 60 (Pa. 1947), which found that
[n]o principle is more firmly established in the law of Pennsylvania than the principle that a revenue tax cannot be constitutionally imposed upon a business under the guise of a police regulation, and that if the amount of a ‘license fee’ is grossly disproportionate to the sum required to pay the cost of the due regulation of the business the ‘license fee’ act will be struck down,
the Commonwealth Court concluded that Pennsylvania’s participation in RGGI “may only be achieved through legislation duly enacted by the Pennsylvania General Assembly, and not merely through the Rulemaking promulgated by DEP and EQB.
For more information, please contact Kevin Garber at (412) 394-5404 or kgarber@babstcalland.com, Jessica Deyoe at (202) 853-3489 or jdeyoe@babstcalland.com, or any of our other environmental attorneys.
Click here for PDF.
Babst Calland has been recognized in the 2024 edition of Best Law Firms®, ranked by Best Lawyers®, nationally in 8 practice areas and regionally in 31 practice areas:
- National Tier 1
- Environmental Law
- Litigation – Environmental
- National Tier 2
- Land Use & Zoning Law
- Natural Resources Law
- Oil & Gas Law
- National Tier 3
- Energy Law
- Litigation – Construction
- Mining Law
- Regional Tier 1
- Pittsburgh
- Bet-the-Company Litigation
- Commercial Litigation
- Construction Law
- Corporate Law
- Energy Law
- Environmental Law
- Information Technology Law
- Land Use & Zoning Law
- Litigation – Construction
- Litigation – Environmental
- Litigation – Land Use & Zoning
- Municipal Law
- Natural Resources Law
- Water Law
- Charleston-WV
- Commercial Litigation
- Energy Law
- Environmental Law
- Litigation – Environmental
- Oil & Gas Law
- Regional Tier 2
- Pittsburgh
- Admiralty & Maritime Law
- Labor Law – Management
- Charleston-WV
- Mining Law
- Natural Resources Law
- Washington, D.C.
- Energy Law
- Environmental Law
- Litigation – Environmental
- Oil & Gas Law
- Regional Tier 3
- Pittsburgh
- Mergers & Acquisitions Law
- Charleston-WV
- Bet-the-Company Litigation
- Litigation – ERISA
- Real Estate Law
Firms included in the 2024 Best Law Firms® list are recognized for professional excellence with persistently impressive ratings from clients and peers. To be considered for this milestone achievement, at least one lawyer in the law firm must be recognized in the 2024 edition of The Best Lawyers in America®.
Achieving a tiered ranking in Best Law Firms® on a national and/or metropolitan scale signals a unique credibility within the industry. The transparent, collaborative research process employs qualitative and quantitative data from peer and client reviews that is supported by proprietary algorithmic technology to produce a tiered system of industry-led rankings of the top 4% of the industry.
Receiving a tier designation represents an elite status, integrity and reputation that law firms earn among other leading firms and lawyers. The 2024 edition of Best Law Firms® includes rankings in 75 national practice areas and 127 metropolitan-based practice areas. Additionally, one “Law Firm of the Year” was named in each nationally ranked practice area.
Click here to view Babst Calland’s profile.
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Christina M. Puhnaty)
On September 23, 2023, PADEP published in the Pennsylvania Bulletin notice that the agency finalized its General Plan Approval and/or General Operating Permit for Coal-Mine Methane Enclosed Flares (GP-21). See 53 Pa. Bull. 6005 (Sept. 23, 2023). New or modified coal-mine methane enclosed flares in Pennsylvania are now subject to GP-21. Coal-mine methane enclosed flares with actual emission rates less than the following are exempted from GP-21’s permitting requirements:
- 4 tons per year (tpy) of carbon monoxide (CO) from a single enclosed flare or 20 tpy of CO from multiple enclosed flares;
- 1 tpy of nitrogen oxides (NOx) from a single enclosed flare or 5 tpy of NOx from multiple enclosed flares;
- 1.6 tpy of the oxides of sulfur (Sox) from a single enclosed flare or tpy 8 of the SOx from multiple enclosed flares;
- 0.6 tpy of particulate matter with a diameter of 10 microns or less (PM10) from a single enclosed flare or 3 tpy of PM10 from multiple enclosed flares;
- 1 tpy of volatile organic compounds (VOCs) from a single enclosed flare or 5 tpy of VOCs from multiple enclosed flares; and
- 0.5 tpy of a single hazardous air pollutant (HAP) from a single enclosed flare or 1 tpy of multiple HAPs from multiple enclosed flares. The HAPs may not contain Polychlorinated Biphenyls (PCBs), Chromium (Cr), Mercury (Hg), Lead (Pb), Polycyclic Organic Matter (POM), Dioxins, or Furans.
Those coal-mine methane enclosed flares that are not exempt from GP-21’s requirements will have to meet the best available technology (BAT) compliance requirements established in GP-21. These requirements include operating the enclosed flare to (1) limit NOx emissions to less than or equal to 0.08 lb/MMBtu, (2) limit CO emissions to less than or equal to 0.30 lb/MMBtu, and (3) limit visible emissions to periods not to exceed an aggregate total of 60 seconds during any 15-minute period. GP-21 also requires that permittees sample and conduct a fractional gas analysis at the “inlet gas stream to the enclosed flares” on a quarterly basis to determine VOC, methane, and ethane concentrations, and the heat content of the inlet gas stream.
The Pennsylvania Department of Environmental Protection (PADEP) issued GP-21 in accordance with section 6.1(f) of Pennsylvania’s Air Pollution Control Act, 35 Pa. Stat. § 4006.1(f), and 25 Pa. Code ch. 127, subch. H. Industry groups have appealed PADEP’s issuance of GP-21 to Pennsylvania’s Environmental Hearing Board.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Christina M. Puhnaty)
On November 1, 2023, the Commonwealth Court of Pennsylvania held that the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program Regulation (RGGI Rule) is an unconstitutional tax, declared the rule to be void, and enjoined PADEP from enforcing it. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 M.D. 2022, 2023 WL 7171547 (Pa. Commw. Ct. Nov. 1, 2023).
After a lengthy rulemaking process, the RGGI Rule was published in the Pennsylvania Bulletin. See 52 Pa. Bull. 2471 (Apr. 23, 2022). The RGGI Rule would have linked Pennsylvania’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), which is the regional, market-based cap-and-trade program designed to reduce carbon dioxide emissions from fossil-fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid.
Two days after the RGGI Rule was published, a group of stakeholders filed a petition for review of the rule and an application for preliminary injunction in the commonwealth court. The court held a hearing on the preliminary injunction on May 10 and 11, 2022, and in a July 8, 2022, opinion, the court preliminarily enjoined the regulation as an unconstitutional tax.
In its November 1 decision on the merits, the court reaffirmed its earlier July 8, 2022, opinion, holding that the RGGI Rule constitutes a tax imposed by PADEP in violation of the Pennsylvania Constitution. Undisputed facts of record established that only 6% of RGGI auction proceeds are necessary to cover the cost of administering the program and that the annual revenue anticipated from RGGI would be three times greater than the total amount allocated to PADEP from the General Fund in a single year. The court found that the money to be generated by Pennsylvania’s participation in RGGI would be “grossly disproportionate” to the costs of overseeing participation in the program and PADEP’s annual needs, and thus was an illegal tax. In coming to its ruling, the court relied on the Pennsylvania Supreme Court’s opinion in Flynn v. Horst, 51 A.2d 54, 60 (Pa. 1947), which found that it is a firmly established principle of Pennsylvania law that a revenue tax cannot be constitutionally imposed upon a business under the guise of a police regulation, and that if the amount of a “license fee” is grossly disproportionate to the sum required to pay the cost of the due regulation, it should be struck down. The commonwealth court concluded that Pennsylvania’s participation in RGGI may only be achieved through legislation duly enacted by the Pennsylvania General Assembly, and not merely through a rulemaking promulgated by PADEP and the Environmental Quality Board. The Commonwealth has not publicly stated whether it will appeal the decision, but would have until November 30, 2023, to do so.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Christina M. Puhnaty)
The Shapiro administration recently released its Interim Final Environmental Justice Policy (Interim Final Policy) and latest Environmental Justice Mapping and Screening Tool (PennEnviroScreen). The Policy took effect on September 16, 2023, when official notice of the interim final rulemaking was published in the Pennsylvania Bulletin. See 53 Pa. Bull. 5854 (Sept. 16, 2023).
The Commonwealth first adopted an environmental justice policy (EJ Policy) in 2004 to provide citizens in EJ communities enhanced public participation opportunities during certain Pennsylvania Department of Environmental Protection (PADEP) permit application processes. In 2018, PADEP circulated a draft revised policy for public comment, but ultimately withdrew the proposed revisions in 2020 following receipt of public comments. After conducting further outreach in 2021, PADEP proposed an updated policy that would refine and expand the scope of the withdrawn 2018 revisions. On March 12, 2022, PADEP released a draft of the EJ Policy for public comment, and subsequently received more than 1,200 comments during the comment period.
The Interim Final Policy is the latest version of the EJ Policy to have been released by PADEP since the comment period closed last spring. Although PADEP had previously indicated that it was working to prepare a Comment Response Document in tandem with the Interim Final Policy, it has yet to release such a document. The Interim Final Policy will likely have a tangible impact on permitting and enforcement processes for various industries going forward.
The Interim Final Policy requires use of the PennEnviroScreen tool, which will replace PADEP’s current EJ Areas Viewer tool. PennEnviroScreen is currently live and fully accessible to the public. PADEP began using the tool on September 16, 2023, to determine whether facilities are located in EJ areas based on 32 environmental, health, socioeconomic, and demographic indicators. Industry should be aware that PADEP plans to regularly update the criteria used to evaluate areas where the Interim Final Policy applies (EJ areas). To allow for a level of certainty, however, the Interim Final Policy states that “the EJ Areas in effect at the key decision point of the project will follow that project.” Interim Final Policy § III; see also id. at Appendix B, “Environmental Justice Area Criteria.”
PADEP regulated activities that are listed as “Trigger Projects” in Appendix C of the Interim Final Policy automatically require application of the Policy’s provisions. Examples include various mining permits (bituminous and anthracite underground and surface mines), waste permits (landfills, transfer stations, commercial incinerators), and air permits (new major source of hazardous pollutants or criteria pollutants). Id. at Appendix C, “Public Participation Trigger Projects.” While the 2022 Draft Policy had classified oil and gas unconventional well permits as Trigger Projects, the Interim Final Policy does not; however, various types of unconventional oil and gas projects are listed as “Opt-In Projects.” Other Opt-In Projects include resource recovery facilities, scrap metal facilities, and “other projects as identified by the community.” Id. After receiving a request from the community or a PADEP staff member to apply the Interim Final Policy to Opt-In Projects, PADEP may decide to do so using its “discretion and expertise.” Id. § V(A)(2).
PADEP plans to form an Enforcement and Compliance Team to
prioritize inspection and monitoring at sites which have multiple authorizations, multiple on-record complaints, habitual violations sites with high volume generation or unique permit conditions, EJ communities, and sites of significant geographic location and to ensure timely and appropriate responses to violations, implement an efficient criminal referral protocol, and ensure effective collaboration.
Id. § VI(B)(1). The Interim Final Policy also indicates that PADEP interprets impacts to the environment or the public health and safety at an EJ area to be a relevant factor in the calculation of penalties for violations, and may include a dollar figure in the penalty amount for such a violation “provided there is adequate evidence to support a factual finding that the violation caused harm and the penalty amount fits within the statutory limits.” Id. § VI(B)(2).
The Interim Final Policy’s publication date was also the start of a formal public comment period that ran until November 30, 2023. Receipt and review of public comments on the Interim Final Policy will be yet another “critical benchmark towards the final EJ Policy,” which is due from PADEP in 2024.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Christina M. Puhnaty)
Prior to the Commonwealth Court of Pennsylvania’s ruling discussed above, on September 29, 2023, Governor Shapiro’s office released the RGGI Working Group Memorandum and a corresponding press release announcing that the RGGI Working Group had concluded its work. See Press Release, “RGGI Working Group Concludes Its Work, Co-Chairs Hail Collaborative Process That Brought Diverse Group Together & Reached Consensus on a Number of Key Issues” (Sept. 29, 2023). Governor Shapiro established the RGGI Working Group in April 2023 and tasked it with evaluating the merits of the commonwealth’s participation in Regional Greenhouse Gas Initiative (RGGI) in the context of a three-part test: (1) protect and create energy jobs, (2) take real action to address climate change, and (3) ensure long-term, reliable, affordable power to consumers.
The RGGI Working Group was chaired by Jackson Morris of the Natural Resources Defense Council and Mike Dunleavy of the International Brotherhood of Electrical Workers Local 5 in Pittsburgh. Other members included representatives from organized labor, the energy industry (including fuel production, electric utilities, and coal, natural gas, and nuclear generation), environmental groups, and consumer advocates.
The Working Group reached a consensus that (1) greenhouse gas (GHG) emissions reductions are both necessary and inevitable and (2) a revenue-generating cap-and-invest carbon regulation for the power sector supporting the commonwealth’s energy transition would meet Governor Shapiro’s emissions reduction goals. The memorandum did not include a recommendation as to the form that a cap-and-invest program should take.
The Working Group further reached a consensus on the following recommendations:
- Maximizing job creation and other benefits of federal funding from the Inflation Reduction Act and other appropriations;
- Initiating dialogue and cooperation with neighboring states and other PJM states;
- Legislative codification as the preferred method of implementing any initiatives;
- Creating new councils and collaboratives to guide policymaking;
- Utilizing the RGGI program to satisfy proposed federal Clean Air Act GHG emission reduction standards if the program is otherwise adopted;
- Convening a bipartisan process to evaluate the recommendations of the new collaboratives to develop a statewide energy and climate plan that addresses jobs, reliability, consumer protection, and tangible emissions reductions;
- Implementing this energy and climate plan and seeking a PJM-wide cap-and-invest program through legislation;
- Ensuring the preservation of existing nuclear generation and other clean energy resources in the commonwealth; and
- Protecting Pennsylvania energy jobs and ensuring that consumers do not unreasonably shoulder cost associated with the clean energy transition.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Babst Calland today announced the opening of its office in Harrisburg, Pa., and the addition of two experienced litigation attorneys, Michael Libuser and Stefanie Pitcavage Mekilo.
Led by Shareholder Casey Alan Coyle, who joined the firm in August 2022, the Harrisburg office provides legal counsel for local, regional, and national businesses, industry sectors, and trade associations with focused practices in litigation, energy and natural resources, environmental, and legislative and regulatory affairs, among others.
The Harrisburg team of attorneys offers deep litigation experience in matters pending before state and federal appellate courts, with a particular emphasis on appeals before the Pennsylvania Supreme Court. They also represent clients in disputes pending before the U.S. District Court for the Middle District of Pennsylvania and state trial courts throughout Central Pennsylvania and matters brought before the Pennsylvania Commonwealth Court as part of its original jurisdiction.
“It is an exciting time for Michael and Stefanie to join Babst Calland and open a new office in Harrisburg,” said Mr. Coyle. “The Harrisburg office is uniquely poised to offer its clients the best of both worlds—pairing the service and pricing of a litigation boutique with the deep-bench expertise and resources of a law firm with more than 35 years of experience serving clients ranging from Fortune 100 companies to small and mid-sized businesses nationwide.”
Mr. Libuser represents clients in state and federal trial and appellate courts, with a particular emphasis on cases before the United States District Court for the Middle District of Pennsylvania. He served as a law clerk to the Honorable Yvette Kane, Senior United States District Judge for the Middle District of Pennsylvania, where he drafted opinions for the Third and Ninth Circuit Courts of Appeals and handled a wide range of district court matters involving complex civil litigation, commercial contracts, administrative law, trade secrets, and various statutory claims. Before that, he served as a law clerk to the Honorable Karoline Mehalchick, Chief United States Magistrate Judge for the Middle District of Pennsylvania, and previously served as the Principal Law Clerk to the Honorable Jeanette Rodriguez-Morick, an Acting Supreme Court Justice and Judge of the New York State Court of Claims.
Mr. Libuser earned his J.D. from Benjamin N. Cardozo School of Law in 2012. He graduated with honors from Stony Brook University in 2006.
Ms. Mekilo is a civil litigator who concentrates her practice in state and federal trial courts, with particular emphasis on cases before the U.S. District Court for the Middle District of Pennsylvania. Ms. Mekilo draws on more than a decade of trial-court experience in the federal judiciary to guide clients through all aspects of the litigation process. She focuses her practice on complex commercial disputes involving theft of trade secrets; breach of noncompete and nonsolicitation agreements and other restrictive covenants; breach of fiduciary duties, tortious interference, and related business tort claims; labor and employment; and emergency injunction litigation. Ms. Mekilo also has experience in antitrust, environmental, securities, trademark infringement, product liability, class action, and multidistrict litigation. Prior to joining Babst Calland, Ms. Mekilo served as a judicial law clerk in the United States District Court for the Middle District of Pennsylvania for 12 years—first as a term law clerk to Judge John E. Jones III, then as the managing law clerk to Judge Christopher C. Conner.
Ms. Mekilo received her J.D. from Widener University Commonwealth Law School in 2011, graduating summa cum laude at the top of her class. She earned her B.A. in Business Administration from Bloomsburg University of Pennsylvania in 2008. Ms. Mekilo is an active member of the greater Harrisburg community. She currently serves as Secretary of the Middle District Chapter of the Federal Bar Association, as well as Vice President and President-Elect of the Junior Board of the YWCA of Greater Harrisburg.
Commenting on these moves and the opening of the Harrisburg office, Managing Shareholder Donald C. Bluedorn II said, “We are very pleased to welcome this fine team of attorneys to Babst Calland and are thrilled to open a new office in Harrisburg to work collaboratively across our other offices to serve the needs of existing and new clients in the region.”
Pretrial Practice & Discovery
American Bar Association Litigation Section
(by Joseph Schaeffer)
Whether attorneys have encountered an inadvertently produced privileged document in their own practice, it is a common enough occurrence that the procedure is well established: Suspend further review, sequester the document, and notify opposing counsel. What is not well-established is what attorneys should do when they encounter inadvertently produced non-privileged documents. A New York trial court recently dealt with this situation in a case of first impression.
In Pursuit Credit Special Opportunity Fund, L.P. v. Krunchcash, LLC et al., No. 615070/2022 (N.Y. Sup. Ct. Oct. 4, 2023), the plaintiff’s financial consultant had responded to a subpoena from the defendants by producing multiple emails with a Dropbox link in the message body. As the defendants discovered early in their review, the Dropbox link not only was “live,” it provided access to a bevy of the plaintiff’s sensitive internal files—including folders named “Legal,” “Tax,” and “Financial.” Rather than immediately notify plaintiff’s counsel, though, the defendants reviewed the Dropbox (with the exception of the “Legal” folder) and sent the plaintiff a letter about a week later that referenced the internal documents as part of a demand for voluntary dismissal of the litigation. The plaintiff responded by moving the trial court to order the defendants to show cause why they should not be sanctioned for accessing the Dropbox files.
The trial court granted the plaintiff’s motion and entered a sanction against the defendants of nearly $156,000, representing the plaintiff’s costs in bringing the motion. Though acknowledging the absence of directly applicable authority, the trial court found guidance in Rule 4.4 of the New York Rules of Professional Conduct. That rule imposes a notification obligation on New York attorneys who receive documents, writings, or electronically stored information that they reasonably should know to have been inadvertently produced—notably without providing for any limitation to privileged documents. The trial court found that the defendants should reasonably have known that the plaintiff could not have intended to provide access to its internal file system through a Dropbox link contained in email messages found by a third party. From there, the trial court concluded fairly easily that the defendants had failed to properly notify the plaintiff of the inadvertent production and, in fact, exacerbated matters by leveraging the inadvertent production as the basis for demanding voluntary dismissal of the litigation.
There are several lessons to be drawn from this case. One lesson is that the entire matter could have been avoided had the plaintiff implemented stronger security measures from the outset. Indeed, the plaintiff’s maintenance of internal files on an “open” Dropbox, which it then shared with third parties using non-expiring links, seems nothing short of negligent. But another lesson is that attorneys have a duty to notify opposing parties of documents that reasonably appear to have been inadvertently produced—no matter how negligent the inadvertent production. The parties’ failure to follow those respective lessons here led to an expensive (and embarrassing) series of events that they now surely wish to have avoided.
Joseph Schaeffer is a shareholder at Babst Calland in Pittsburgh, Pennsylvania.
To view the article published online by the American Bar Association Litigation Section, click here.
© 2023. A Quick Lesson on Responding to (and Avoiding) Inadvertent Document Productions, Pretrial Practice & Discovery, American Bar Association Litigation Section, October 31, 2023 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Pretrial Practice & Discovery
American Bar Association Litigation Section
(by Andy DeGory)
The process of researching and identifying an expert witness can be a daunting task in a complex commercial litigation setting. However, securing the appropriate expert tailored to your needs can be a critical component of a successful litigation strategy. While there is no exact formula for expert witness selection, the following pointers can help lead your team towards the right witness and a favorable outcome:
- Utilize your colleagues and network. When starting your search for an expert witness, polling your colleagues and other connections in the legal field can instantly provide you with multiple favorable candidates. Furthermore, your network may be able to significantly narrow your search down to a few options that will fit the needs of your case. This option is also particularly helpful for lesser-experienced attorneys who might be starting an expert search for the very first time.
- Google is your friend. Litigation attorneys may joke about relying on Google for legal research, however, an expert-witness search is actually an appropriate opportunity to fire up the search engine. Google (or another search engine) allows you to cast a wide net to build your list of expert candidates prior to a more formal vetting of your options.
- Vet your candidates with Westlaw or Lexis. Once you have narrowed your search down to your favorite expert candidates, Westlaw and Lexis provide excellent tools for vetting your candidates’ background and history serving as an expert witness. In particular, these legal databases allow you to examine past cases in which the candidate has provided expert testimony, prior expert reports submitted in those cases, deposition transcripts (if available), and any motions in limine/to exclude the candidate’s testimony.
- Interview your top choices. An in-person or web-conference interview is the last critical step in selecting your top choice to serve as an expert witness. The interview provides you with an opportunity to explain the case in deeper detail, as well as ask the candidate key questions to evaluate their understanding of the subject matter and ability to handle the particular issue for which expert testimony is required. Additionally, the interview allows you to evaluate the witness’s presentation skills, speaking style, and poise when answering questions. Ultimately, you will want your candidate to excel in each of these categories if you need to call them to the stand to testify at trial.
Sometimes an expert witness search may begin with only a handful of candidates, and other times you may need to narrow the list down from several dozen options. The foregoing tools should provide practitioners with a good template for conducting a thorough and effective expert witness search when preparing for success in their next big case.
Andy DeGory is an associate at Babst Calland in Pittsburgh, Pennsylvania.
To view the full article, click here.
To view the PDF, click here.
© 2023. Quick Tips for Selecting an Expert Witness, Pretrial Practice & Discovery, American Bar Association Litigation Section, October 31, 2023 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Litigation Alert
(By Kip Power and Joseph Schaeffer)
Recently, the Court of Appeals of North Carolina confirmed that limited liability companies (LLCs) formed in other states must obtain a certificate of authority to transact business in North Carolina to prosecute lawsuits in the state’s Superior Court. JDG Environmental, LLC v. BJ & Associates, Inc., et al., Appeal No. COA21-692 (N.C. App. Oct. 17, 2023) (click here for the opinion). As addressed in an Alert released earlier this year, the issue raised in JDG Environmental involves yet another gloss on the question of how state business registration may be mandated and the implications for foreign LLCs and other foreign entities of registering to conduct business in other states. (See “Where Can a Corporation Be Sued for, Well, Anything? (An Evolving Test),” August 2023 Litigation Alert, click here.)
The Court of Appeals decision addressed a civil action filed in North Carolina Superior Court by JDG Environmental, LLC (JDG), an Oklahoma LLC, against BJ & Associates, Inc. (BJ), a general contractor that engaged JDG to perform cleanup work in a residential community in Newport, North Carolina, damaged by Hurricane Florence. During oral arguments on JDG’s motion for summary judgment, counsel for BJ made a cross-motion for summary judgment against JDG on the grounds that it had failed to comply with N.C. Gen. Stat.§ 57D-7-02. That statute provides that “no foreign LLC transacting business in this State without permission obtained through a certificate of authority may maintain any proceeding in any court of this State unless the foreign LLC has obtained a certificate of authority prior to trial.” (A similar statute (N.C. Gen. Stat.§ 57D-15-02(a)) applies to foreign corporations.) Since JDG had not obtained a certificate of authority from the North Carolina Secretary of State, the Superior Court orally granted BJ’s motion and later entered judgment against JDG.
The Court of Appeals reversed the Superior Court’s ruling on two grounds.
First, the statute at issue requires only that a foreign LLC obtain a certificate of authority “prior to trial.” Applying the plain meaning of this phrase that is not otherwise defined in the law, the Court held that JDG could have obtained a certificate and complied with this requirement any time prior to the empanelment of a jury in the case (i.e., prior to the time a jury trial is generally considered to have “commenced”). JDG Environmental, at 5-6. By granting judgment against JDG at the summary judgment stage, the Superior Court improperly cut short its opportunity to comply with the statute.
Second, the Court addressed the last sentence in N.C. Gen. Stat.§ 57D-7-02, which states that “[A]n issue arising under this subsection must be raised by motion and determined by the trial judge prior to trial.” Observing that motions for summary judgment in North Carolina courts are commonly heard by a judge who will not be the judge presiding over the trial of the case, the Court of Appeals also held that BJ had raised its motion with the wrong judge. Again, taking the statutory language at face value, such a motion must be heard and determined by the “trial judge,” not the judge hearing pre-trial motions.
As a result of the Court of Appeals’ decision, JDG will have its day in court (it had obtained its certificate of authority even before the Superior Court issued its written opinion in the case). But the time and expense associated with litigating this issue could have been avoided had JDG complied with the certificate requirement before filing suit. That decision, though, is not always without its own consequences. In the August 2023 Litigation Alert referenced above, we discussed how the United States Supreme Court upheld a Pennsylvania statute that requires foreign corporations registering in the Commonwealth to consent to the jurisdiction of its courts over any dispute, not just those involving in-state activities.[1] The North Carolina statute at issue in this case does not attach such onerous conditions, but registration can trigger other obligations—ranging in significance from annual reporting and fees to other regulatory burdens. It may therefore be prudent to seek legal counsel before registering to do business in a new jurisdiction, even if it is just to prosecute a single lawsuit.
For questions about the North Carolina law related to this decision, please contact Christopher B. (Kip) Power (licensed to practice in North Carolina, West Virginia and Kentucky) at (681) 265-1362 or cpower@babstcalland.com. For questions concerning the federal and state constitutional and procedural aspects of corporate registration and jurisdiction to sue or be sued, please contact Joseph V. Schaeffer (licensed to practice in Pennsylvania, District of Columbia, Virginia and West Virginia) at (412) 394-5499 or jschaeffer@babstcalland.com.
____________
[1] The Supreme Court limited its consideration to a constitutional due process challenge and remanded the case to the Supreme Court of Pennsylvania to consider challenges under the dormant commerce clause. Meanwhile, other challenges to the Commonwealth’s business registration statute are working their way through Pennsylvania courts.
Click here for PDF.
Smart Business
(By Adam Burroughs featuring Michael Fink)
A company’s capitalization table, simply put, details who has what ownership within a company. That’s straightforward when the company has a single owner. But as other equityholders are introduced, it can become much more complicated.
While an accurate cap table is crucial for determining who gets paid what when a company is sold, it’s also important every day of the company’s life.
“Companies should start dealing with their cap table from day one and will need to stay on top of it throughout the entire life of the enterprise,” says Michael E. Fink, a shareholder at Babst Calland. “An orderly, up-to-date cap table is central to well-informed business decisions.”
Smart Business spoke with Fink about the role of the cap table and how failing to accurately maintain it can be costly.
How are cap tables used?
Cap tables are critical when a company seeks new investment, such as via a private placement of preferred stock. That’s because every investor — both new ones as well as current investors, who typically need to approve new investment — needs to know its position on the cap table post-investment and what impact a contemplated investment would have on its position.
As companies get new funding and prior owners see their positions diluted, a cap table tracks who has how much equity and what type. Introducing multiple equity series often imposes multiple voting thresholds, so the cap table allows management and stakeholders to see what sort of voting blocs serve to approve any corporate action. Such actions can range from mundane to fundamental, such as approving a merger or replacing somebody on the board of directors.
What issues arise with cap tables?
One of the biggest challenges regarding the cap table is simply maintaining it. Any action impacting the company’s capitalization needs to be memorialized correctly. The cap table is supposed to be a factual reflection on the state of affairs; without an accurate record of the facts, it can’t be used to make informed decisions. It also makes policy discussions and other issues regarding the direction of the company — taking on more debt, issuing more shares, or bringing new investors into the fold — difficult. Unfortunately, poorly maintained cap tables are more common than many would expect.
Frequently, issues discovered in a cap table are used as leverage when negotiating — by a dissatisfied investor, for example, or by a potential acquirer who may, if the problems are significant, walk away from a deal. Occasionally, actual legal disputes can arise from missteps with a cap table. For instance, an investor may believe that it did not receive the return on investment from the company that it should have, and press for a legal resolution.
How might companies address these issues?
Often the problem of a poorly maintained cap table stems from having either too many people making changes, or no one at all. Especially with startups, management may not be aware of the level of diligence needed to maintain their cap table. It’s of utmost importance that companies take steps to prevent errors from creeping in and compounding in the cap table.
Every company should appoint someone to be the ultimate authority on its cap table — one person with the final authority for maintaining and signing off. Ideally, they’d have a business or legal background. If that expertise doesn’t exist within an organization, it could work with an external partner who stays in communication with the company, ensuring that timely and correct updates are made. In any case, the executive officers need to understand who has that authority and when they need to inform that person of any changes.
Cap tables must be maintained accurately and in a timely manner. Those who aren’t familiar with cap tables shouldn’t try to wing it. A half-hour phone call with a knowledgeable attorney can save weeks of aggravation down the road.
To view the PDF, click here.
To view the full article, click here.
Environmental Alert
(By Jean Mosites and Ben Clapp)
Pennsylvania Department of Environmental Protection (PA DEP) Secretary Rich Negrin submitted his resignation on October 26. Negrin’s resignation is effective December 9, 2023, and he will be taking a medical leave of absence until his resignation becomes effective. Former Executive Deputy Secretary Jessica Shirley will serve as Interim Active Secretary, effective immediately. Prior to serving as Executive Deputy Secretary, Shirly held the position of PA DEP Policy Director.
Babst Calland will continue to track these developments and provide further updates as additional information becomes available. If you have any questions regarding this change of leadership at PA DEP, please contact Jean Mosites at (412) 394-6468 or jmosites@babstcalland.com, or Ben Clapp at (202) 853-3488 or bclapp@babstcalland.com.
Click here for PDF.
FNREL Water Law Newsletter
(Lisa M. Bruderly, Mackenzie M. Moyer and Jessica Deyoe)
On January 28, 2023, the Pennsylvania Department of Environmental Protection (PADEP) released an updated draft of the Pennsylvania Post-Construction Stormwater Management Manual (Manual or PCSM Manual). This Manual is intended to establish guidance standards for the management of stormwater through the implementation of stormwater control measures (SCMs) and other measures to comply with the regulatory requirements under 25 Pa. Code ch. 102.
This Manual was developed to update and replace the Pennsylvania Stormwater Best Management Practices Manual that PADEP published in December 2006 in order to reflect and incorporate the advancements in stormwater processes since that time. The Manual now extends beyond the avoidance and minimization of historic stormwater problems to include mitigation through the regulation of municipal separate storm sewer systems and combined sewer systems. It also includes an increased focus on the resilience and maintenance of SCMs.
In the Manual, SCMs are synonymous with “best management practices” (BMPs) as defined in 25 Pa. Code § 102.1. This term is intended to reflect the improved understanding of stormwater management. The use of the term SCM is also intended to clarify the functions of stormwater BMPs, consistent with a national trend to do so.
Ultimately, the objective of the PCSM Manual remains the same as the 2006 Stormwater BMP Manual: “to protect, maintain, reclaim and restore water quality and the existing and designated uses of the waters of the Commonwealth.” Similar to other guidance documents, this Manual serves as a supplement to federal and state regulations, providing numerous examples of SCMs that can be employed to meet regulatory requirements. It is intended to be used as a technical reference for planning concepts and design standards that will satisfy Pennsylvania’s regulatory requirements and stormwater management policies. Alternative SCMs not listed in the Manual may also be used to satisfy regulatory requirements if they provide the same or a greater level of protection. Permittees whose activities and PCSM plans were authorized under Chapter 102 prior to the effective date of the Manual are not required to modify their PCSM plan to conform to the procedures and standards in the Manual.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado