Articles, Alerts & Perspectives

Washington, DC and Pittsburgh, PA

PIOGA Press

(By Gina Falaschi Buchman, Justine Kasznica, and Susanna Bagdasarova)

On November 14, 2022, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published a proposed Federal Acquisition Regulation (FAR) rule that would require certain federal suppliers to annually disclose their greenhouse gas (GHG) emissions and climate-related financial risks, as well as set GHG emissions reduction targets, on an annual basis. 87 Fed. Reg. 68,312 (Nov. 14, 2022) (Proposed Rule). The Proposed Rule entitled the “Federal Supplier Climate Risks and Resilience Rule” implements President Biden’s Executive Order 14030, directing a number of federal agencies to take action to address climate-related risks and the Administration’s push toward net-zero emissions procurement by 2050.

The Proposed Rule would introduce a new FAR subpart 23.XX containing mandatory GHG emissions1 disclosure and reporting requirements for major federal suppliers, which are divided into “significant” and “major” contractors for purposes of the applicable requirements. “Significant contractors,” defined as federal contractors receiving at least $7.5 million but less than $50 million in federal contract obligations in the prior fiscal year, must conduct a GHG inventory of their annual Scope 12 and Scope 23 emissions and report the total annual emissions in the System for Award Management (SAM). “Major contractors,” defined as federal contractors receiving more than $50 million in federal contract obligations in the prior fiscal year, are subject to the same requirement with respect to Scope 1 and Scope 2 emissions and must also conduct and report the results of a GHG inventory of their annual Scope 34 emissions.

Major contractors are also required to use the Carbon Disclosure Project (CDP)5 Climate Change Questionnaire annually to complete a publicly available disclosure of their Scope 1, Scope 2, and Scope 3 emissions as well as their climate risk assessment process and any risks identified. …

Pittsburgh, PA

Eric M. Spada recently joined Babst Calland as senior counsel in the Litigation Group. Mr. Spada’s practice focuses primarily on commercial litigation. He has represented a diverse array of clients in a variety of cases in state and federal courts in Pennsylvania, Ohio, West Virginia, and Florida, and also in commercial and construction arbitrations. Mr. Spada has also practiced in front of real estate tax assessment and appeal boards and state and federal ALJs. His litigation experience includes matters relating to construction, real estate, energy and natural resources, tax assessments and tax exemptions, and financial services. He has also successfully litigated cases concerning closely-held business disputes, franchising, civil identity theft, and insurance fraud issues. Mr. Spada also has extensive experience in the e-Discovery space.

Prior to joining Babst Calland, Mr. Spada was an associate with Buchanan Ingersoll & Rooney PC. He is a 2008 graduate of George Washington University Law School.

Pittsburgh, PA

Legal Intelligencer

(By Jennifer Malik and Anna Hosack)

While municipalities continue to grapple with the repercussions of Slice of Life, proponents for another controversial residential use—community living or group homes—attempted to rely on Slice of Life to support a curative amendment to a zoning ordinance that would allow a community living use in a residential district.

In 2019, the Pennsylvania Supreme Court examined the zoning issues surrounding the increasingly popular use of single-family homes as short-term rentals in Slice of Life v. Hamilton Township Zoning Hearing Board, 207 A.3d 886 (Pa. 2019). In the nearly four years since Slice of Life was decided, many municipalities have relied on its holding to prohibit short-term rentals in residential zoning districts—reasoning that the purely transient use of short-term rentals is inconsistent with the common definition of “family” that is typically defined as a single household in local ordinances. While municipalities continue to grapple with the repercussions of Slice of Life, proponents for another controversial residential use—community living or group homes—attempted to rely on Slice of Life to support a curative amendment to a zoning ordinance that would allow a community living use in a residential district.

On Nov. 7, 2022, the Pennsylvania Commonwealth Court rendered a decision in Hope House in Midland PA v. Borough of Midland, PA, No. 145-CD-2022 2022 WL 16727674 (Pa. Cmwlth. 2022), affirming the denial of a property owner’s curative amendment that would have permitted a group home in a single family residentially zoned district. Although the court’s decision was unreported, it may be cited for persuasive value in the future and is indicative of the court’s interpretation of the boundaries of the holding in Slice of Life. …

Pittsburgh, PA

ACBA Young Lawyers’ Division newsletter Point of Law

(By Alexandra Farone)

On January 5, 2023, the Federal Trade Commission (FTC) proposed a national ban on noncompetition agreements. Noncompetition agreements, or “non-competes,” are contractual terms between employers and workers that prohibit the worker from working for a competing employer or starting a competing business, typically within a certain geographic area for a certain period of time. If a worker violates a non-compete clause, the employer can sue the worker for breach of contract and may be able to obtain a preliminary injunction enjoining the worker to stop the conduct that purportedly violates the non-compete clause. If successful in litigation, the employer may be able to obtain a permanent injunction and/or the payment of monetary damages. If the FTC’s proposed ban becomes final, this is all about to change.

As a basis for the proposed rule, the FTC made a preliminary finding that non-competes constitute an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act (the “Act”). Section 5 of the Act provides that “unfair methods of competition in or affecting commerce” are unlawful, and that the FTC is “empowered and directed” to prevent businesses from using unfair methods of competition.

Under the proposed rule, employers could not ask new employees, independent contractors, or even unpaid volunteers to sign non-competes. All existing non-competes would have to be rescinded, and employers would have to inform current and former workers on an individual basis that their noncompete is no longer in effect within 45 days of the rescission. The proposed rule would also prohibit employers from attempting to enter non-competes, or representing to a worker under certain circumstances that the worker is subject to an enforceable noncompete. …

Pittsburgh, PA

Smart Business

(By Sue Ostrowski featuring Susanna Bagdasarova)

A number of countries require businesses to identify individuals who have a beneficial ownership interest in a company, making it more difficult for illicit actors to hide behind a corporate entity and use it for potentially illegal purposes. Until now, the United States has not been one of them. That is changing thanks to the “Beneficial Ownership Information Reporting Requirements” final rule issued by the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The information, says Susanna Bagdasarova, an associate at Babst Calland, will be filed with FinCEN to create a national, non-public database for limited law enforcement and regulatory use.

“The intent is to curtail the deliberate misuse of business entities as shell companies for illegal purposes — to deter fraud, protect national security and prevent oligarchs or criminal actors from using entities to launder money or provide a cover for drug or human trafficking,” Bagdasarova says.

Smart Business spoke with Bagdasarova about which of the 32 million businesses estimated to be subject to the rule fall under that umbrella, when they need to file, and what it means for your business.

What does filing entail and who must do so?

‘Reporting companies’ (domestic and foreign business entities, including corporations, LLCs, and other entities formed or registered to do business in a state) will be required to file reports that identify themselves and provide identifying information regarding each beneficial owner and certain ‘company applicants.’ A ‘beneficial owner’ is an individual who directly or indirectly exercises substantial control over the reporting company, or holds at least 25 percent of the ownership interests of a reporting company. …

Harrisburg, PA

Legal Intelligencer

(by Casey Alan Coyle and Emily Davis)

Sometimes life imitates art.  The Disney animated film “Encanto” centers around a family, the Madrigals.  They live in a magical house that bestows upon each child in the family a unique gift, except the protagonist, Mirabel.  Mirabel soon discovers that the magic surrounding the house is in danger and seeks out the assistance of her ostracized uncle, Bruno.  The Madrigal family avoided mention of Bruno for ten years.  Mirabel knew the basics: he could predict the future.  But the contours of his powers, the details of his disappearance, the mere mention of his name—all forbidden topics of discussion.  The family even wrote a Grammy-nominated song about it, “We Don’t Talk About Bruno.”

Likewise, for nearly a decade, the Pennsylvania Supreme Court has declined to further discuss its holding in Bruno v. Erie Ins. Co., 106 A.3d 48 (Pa. 2014), despite numerous calls for clarification.  As a result, uncertainty remains regarding the “gist of the action” doctrine in Pennsylvania.  Therefore, just like the Madrigal family, there is one question permeating the legal community: is it finally time to talk about Bruno?

Contract v. Tort Distinction

The contract-tort distinction is fundamental to civil litigation.  While actions for breach of contract compensate the plaintiff for damages foreseeable at the time of a contract, tort claims remedy injuries resulting from the defendant’s conduct.  Nonetheless, the contract-tort distinction is often unclear.  Charles Miller, Contortions over Contorts: A Distinct Damages Requirement?, 28 Tex. Tech. L. Rev. 1257, 1257-58 (1997).  This blurred boundary is complicated by plaintiffs’ ability to recover additional forms of damages for actions sounding in tort that are not available for actions sounding in contract, like punitive damages.  …

Pittsburgh, PA

GO-WV

(By Lisa Bruderly)

U. S. EPA and the U. S. Army Corps of Engineers (the Agencies) have issued a new definition of “waters of the United States” (WOTUS), which becomes effective on March 20, 2023. The definition of WOTUS determines federal jurisdiction under the Clean Water Act (CWA). For example, projects involving oil or natural gas development or pipeline construction require Corps permitting for impacts from crossing, or otherwise disturbing, WOTUS. Typically, the more impacts to such federally regulated streams and wetlands, the more likely the permitting will cause project delays and increase expenses.

Although the Agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS, this definition does not appear to provide much-need-ed clarity. Rather, generally speaking, the new definition codifies the approach that the Agencies have already been informally utilizing to determine WOTUS, which entails relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (e.g., Rapanos v. United States, 547 U.S. 715 (2006)).

The Agencies’ current approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Antonin Scalia issued the plurality opinion, holding that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (i.e., adjacent wetlands). Justice Anthony Kennedy, however, advanced a broader interpretation of WOTUS in his concurring opinion, which was based on the concept of a “significant nexus,” meaning that wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered water.”

President Biden’s new definition directly quotes and codifies these tests as regulations that may be relied upon to support a WOTUS determination. …

Pittsburgh, PA and Washington, DC

The Foundation Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)

On December 10, 2022, the Pennsylvania Environmental Quality Board (EQB) published in the Pennsylvania Bulletin a final-omitted rulemaking (Conventional VOC Rule), 52 Pa. Bull. 7635, and a final-form rulemaking (Unconventional VOC Rule), 52 Pa. Bull. 7587, adopting reasonably available control technology (RACT) standards to control volatile organic compound (VOC) and methane emissions from existing and future conventional oil and gas operations and unconventional oil and gas operations. These regulations establish RACT requirements for conventional and unconventional oil and natural gas sources of VOC emissions. These sources include natural gas-driven continuous bleed pneumatic controllers, natural gas-driven diaphragm pumps, reciprocating compressors, centrifugal compressors, fugitive emissions components and storage vessels installed at unconventional well sites, gathering and boosting stations, and natural gas processing plants, as well as storage vessels in the natural gas transmission and storage segment.

The Conventional VOC Rule was effective on notice from the Pennsylvania Department of Environmental Protection (PADEP) on December 2, 2022. Members of the Pennsylvania House Environmental Resources and Energy (ERE) Committee had disapproved the final-omitted regulation, Regulation #7-579, in a November 14, 2022, letter to the Independent Regulatory Review Commission (IRRC). On November 17, 2022, the IRRC approved the final-omitted rulemaking, and the EQB subsequently adopted an emergency certified final-omitted regulation, Regulation #7-580, on November 30, 2022. See Press Release, PADEP, “EQB Adopts Emergency Air Quality Regulation for Existing Conventional Oil and Gas Sources” (Nov. 30, 2022). Regulation #7-580 is identical to Regulation #7-579 except that it received an emergency certification of need from then-Governor Tom Wolf. …

Pittsburgh, PA and Washington, DC

The Foundation Mineral and Energy Law Newsletter

Pennsylvania – Mining

(By Joseph Reinhart, Sean McGovern, Gina Falaschi & Christina Puhnaty)

As previously reported in Vol. 39, No. 2 (2022) of this Newsletter, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule, or RGGI Rule, which links the commonwealth’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), was published in the Pennsylvania Bulletin in April 2022. See 52 Pa. Bull. 2471 (Apr. 23, 2022). RGGI is the country’s first regional, market-based cap-and-trade program designed to reduce carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid.

A number of legal challenges were filed in response to the publication of the final rule. On April 25, 2022, owners of coal-fired power plants and other stakeholders filed a petition for review and an application for special relief in the form of a temporary injunction. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). Briefing has been filed and the court heard 30 minutes of oral argument in the case on November 16, 2022. The parties await the court’s ruling.

Additionally, on July 13, 2022, natural gas companies Calpine Corp., Tenaska Westmoreland Management LLC, and Fairless Energy LLC filed a third legal challenge to the rule with arguments similar to those brought in the other two cases. See Calpine Corp. v. PADEP, No. 357 MD 2022 (Pa. …

Pittsburgh, PA

Pretrial Practice & Discovery

American Bar Association Litigation Section

(By Jessica Barnes)

The application and scope of the attorney-client privilege for communications containing both legal and nonlegal advice is a critical consideration to protect the privilege.

A “bedrock doctrine of the legal profession,” “hallmark of Anglo-American jurisprudence,” and “cornerstone of the American legal system”—these are just a few ways that the attorney-client privilege was described in briefing in a matter before the Supreme Court of the United States (SCOTUS) that has attracted attention from legal scholars across the country.

This closely watched SCOTUS case is In Re Grand Jury, No. 21-1397, which involves a dispute over the withholding of documents in the form of communications containing both legal and non-legal advice (dual-purpose communications) in response to grand-jury subpoenas on the basis of privilege. Specifically, the petitioner-law firm provided legal advice to a client regarding the tax consequences of the client’s anticipated expatriation (i.e., renouncing citizenship). Thus, some of the communications from the law firm to the client were made for the dual purpose of providing legal advice about tax consequences and to facilitate preparation of the client’s tax returns.

For example, some of the documents that the law firm withheld on a privileged basis included communications related to unsettled statutory requirements, strategies for filing amended income-tax returns for purposes of expatriation, and the drafting of a submission to the IRS advocating for the abatement of a penalty assessment. The law firm withheld these dual-purpose communications on the ground that while relating to the client’s tax returns, they were sufficiently motivated by the additional purpose of obtaining or providing legal advice regarding the client’s taxes. …

Pittsburgh, PA

Pittsburgh Trib

(By Stephanie Ritenbaugh)

An Oakland business incubator closed its initial investment — over $300,000 — in one of its first cohort of companies through its ‘angel investment’ program.

Idea Foundry’s program, IF Ventures, said the company that received the infusion was one of five presented to a group of investors in September.

Idea Foundry and its partner, law firm Babst Calland, declined to name the company because of confidentiality agreements. However, President and CEO Mike Matesic was able to say that it’s a company that develops software to help retailers and distributors.

The company is generating revenue, Matesic said.

“Part of our investment will be used for the company to expand into additional geographic models,” said Chris Farmakis, shareholder and board chairman of Pittsburgh-based Babst Calland.

Additional investments are still being considered for the group, Matesic said.

IF Ventures is an investment group managed by Idea Foundry Inc., a non-profit economic development organization. The goal of the program is to attract investors and funding for companies to boost economic development through entrepreneurship and business growth.

“The investor interest and attraction of new investors exceeded our expectations at this early stage,” Matesic said.

“One of the most promising actions that occurred was that our initial group of investors encouraged their peers to join and ultimately became part of this initial investment,” he said.

To view the full article, click here.

Pittsburgh, PA

PIOGA Press

(By Lisa Bruderly)

Projects involving oil or natural gas development or pipeline construction require U.S. Army Corps of Engineers (Corps) permitting for impacts from crossing, or otherwise disturbing, federally regulated streams and wetlands. The extent of required federal permitting is dependent on the definition of “waters of the United States” (WOTUS), which determines federal jurisdiction under the Clean Water Act (CWA).  Typically, the more impacts to federally regulated streams and wetlands, the more likely the permitting will cause project delays and increase expenses.

As one of their last actions for 2022, U. S. EPA and the Corps (the Agencies) released a prepublication notice of a new definition of WOTUS on December 30, 2022. The new definition will become final 60 days after publication in the Federal Register.

Although the Agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS, this definition does not appear to provide much-needed clarity. Rather, generally speaking, the new definition codifies the approach that the Agencies have already been informally utilizing to determine WOTUS, which entails relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (e.g., Rapanos v. United States, 547 U.S. 715 (2006)). The Agencies reverted back to this definition in August of 2021, when the U.S. District Court for the District of Arizona vacated the definition of WOTUS promulgated by President Trump’s administration, referred to as the Navigable Waters Protection Rule (NWPR).

The Agencies’ current approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Antonin Scalia issued the plurality opinion, holding that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (i.e., adjacent wetlands). …

Pittsburgh, PA

Pittsburgh Business Times- Pittsburgh INNO

(By Nate Doughty)

A new Pittsburgh-based investment program backed by local angel investors has marked the close of its first capital infusion into a startup company.

IF Ventures, a joint program from Pittsburgh-based nonprofit economic development organization Idea Foundry made in partnership with Pittsburgh-based law firm Babst Calland, announced it invested over $300,000 into one of the program’s inaugural cohort of companies.

Chris Farmakis, a shareholder and board chair at Babst Calland, declined to disclose the name of the startup that received the investment citing confidentiality agreements made between the parties but noted that this is just the first of several deals the program is looking to make in the coming months.

Farmakis said the program isn’t to be likened to a fund like those raised by venture capital firms. Instead, IF Ventures serves as the vetter of hundreds of companies looking to take on investment and only selects a few firms to be presented to its cadre of angel investors who are open to deploying capital in budding enterprises.

There is no requirement that individuals in this program invest in every company, Farmakis said, though periodic investments must be made if investors wish to remain participants in the program.

“This is more about taking successful entrepreneurs, successful business people and people that have the ability to invest in these companies, aggregate them together and give them access in a painless way to make discernible investment decisions,” Farmakis said. “And that’s what we’re doing with this program.”

IF Ventures is expecting to close on its second investment soon and a second cohort of companies will be brought before the investors in its program next month.

Pittsburgh, PA

Breaking Ground

(By Max Junker and Anna Hosack)

Since the 1999 enactment of the Pennsylvania Construction Code Act (“PCCA”), Pennsylvania has sought to establish uniformity for construction standards throughout the Commonwealth.  In pursuit of uniformity the PCCA embraced the adoption of standards drafted by the International Code Council (“ICC”), a private non-profit entity, and directed the Department of Labor & Industry (“Department”) to promulgate certain ICC standards under the Uniform Construction Code (“UCC”).  The directive to adopt standards originating from a non-governmental entity such as the ICC implicates a legal concept known as the non-delegation doctrine.  The Commonwealth Court recently invoked the non-delegation doctrine to enjoin the enforcement of the 2021 accessibility regulations promulgated by the Department in Pennsylvania Builders Association v. Department of Labor & Industry, No. 479 M.D. 2021, 2022 WL 14668728 (Pa. Cmwlth. Oct. 26, 2022).

The non-delegation doctrine is embodied in Article II, Section 1 of the Pennsylvania Constitution where it states: “The legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives.”  Together with Article III, Section 1 of the Pennsylvania Constitution addressing the passage of laws, the non-delegation doctrine constrains the General Assembly so that it cannot delegate its lawmaking power to any other branch of government, another body, or some other authority.  Christ the King Manor v. Dep’t of Pub. Welfare, 911 A.2d 624 (Pa. Cmwlth. 2006), aff’d 951 A.2d 255 (Pa. 2008).

The Commonwealth Court’s recent decision in Pennsylvania Builders Association is the culmination of litigation filed by the Pennsylvania Builders Association (“PBA”) against the Department alleging that the ICC accessibility provisions adopted pursuant to Section 304(a)(3) of the PCCA (“Accessibility Regulations”) constituted an unconstitutional delegation of legislative authority. …