Articles, Alerts & Perspectives

Legal Intelligencer

(By Blaine Lucas and Anna Jewart)

While property rights are often viewed as inherently private, both law and society recognize that there is also a public nature to the use of land.  To this end, the Pennsylvania Municipalities Planning Code (MPC)1 establishes requirements mandating public notice of and allowing for public participation in the land use decision-making process.  For example, where a landowner requests a variance or special exception from the zoning hearing board, or a conditional use from the governing body, those entities must publish notice of and hold a public hearing on the application.  At that hearing, impacted members of the public may comment on and/or object to the application.  However, land use decisions for what are called “uses by right” are not made by the governing body or the zoning hearing board, but instead are addressed at an administrative level by the municipal zoning officer.  Upon receipt of an application for a use by right, a zoning officer is not required to provide any public notice, public hearing, or public comment period.  As a result, members of the public may not learn of a zoning officer’s approval until the landowner actually commences construction, which could be long after any permit was issued.

The zoning hearing board has jurisdiction over appeals from the determinations of a zoning officer.  53 P.S. §10909.1(3).  An appeal from a determination adverse to the applicant must be filed with the board within 30 days after notice of the determination is issued to the applicant.  53 P.S. §10914.1(b).  In this situation, the appeals deadline is easy to calculate.  However, when an application is granted, individuals who may wish to oppose the application may not have any idea such a decision occurred.   …

Attorney Casey Alan Coyle recently joined Babst Calland as a shareholder and member of its Litigation Group. Mr. Coyle will be based in Harrisburg, Pa.

Mr. Coyle concentrates his practice on appellate law and complex commercial litigation.  He frequently represents clients in state and federal appellate courts, with a particular emphasis on appeals before the Pennsylvania Supreme Court.  Over his career, he has represented either a party or an amicus curiae in 15 appeals before the Pennsylvania Supreme Court.

Mr. Coyle has also successfully petitioned the Pennsylvania Supreme Court to grant review of an appeal—commonly known as “allocatur”—on six different occasions.  In addition, he has presented oral argument before the U.S. Court of Appeals for the Sixth Circuit, Pennsylvania Supreme Court, Pennsylvania Commonwealth Court, and Pennsylvania Superior Court.  Before entering private practice, Mr. Coyle served for over two years as a law clerk for the Honorable Thomas G. Saylor, Chief Justice Emeritus of the Pennsylvania Supreme Court.

“We’re very pleased to have Casey as part our Litigation team. He is a highly accomplished litigator representing clients in matters pending before state and federal appellate courts,” said Donald Bluedorn, Babst Calland’s Managing Shareholder. “Casey’s proven experience and track record in appeals before the Pennsylvania Supreme Court will be an invaluable contribution to our Firm, and most importantly for our clients.”

Mr. Coyle also regularly represents businesses in disputes pending before state and federal trial courts.  His practice has focused on cases involving theft of trade secrets, non-competition/non-solicitation agreements, shareholder litigation, emergency injunctions, breach of contract, and breach of fiduciary duties.  In addition, he has represented clients in matters brought before the Pennsylvania Commonwealth Court as part of its original jurisdiction.

“I look forward to serving the expanding needs of my clients and working with a well-respected legal team who shares my values, experience, and philosophy, and a proactive approach to business-focused problem-solving and client service,” said Coyle. …

Babst Calland is pleased to announce that three lawyers were selected as 2023 Best Lawyers “Lawyer of the Year” in Pittsburgh, Pa. and Charleston, W. Va. (by BL Rankings). Only a single lawyer in each practice area and designated metropolitan area is honored as the “Lawyer of the Year,” making this accolade particularly significant.

Receiving this designation reflects the high level of respect a lawyer has earned among other leading lawyers in the same communities and the same practice areas for their abilities, professionalism, and integrity. Those named to the 2023 Best Lawyers “Lawyer of the Year” include:

Blaine A. Lucas, Litigation – Land Use and Zoning “Lawyer of the Year” in Pittsburgh, Pa.

Timothy M. Miller, Oil and Gas Law “Lawyer of the Year” in Charleston, W. Va.

Mychal Sommer Schulz, Litigation – ERISA “Lawyer of the Year” in Charleston, W. Va.

In addition, 31 Babst Calland lawyers were selected for inclusion in the 2023 edition of The Best Lawyers in America (by BL Rankings), the most respected peer-review publication in the legal profession:

• Chester R. Babst – Environmental Law, Litigation – Environmental
• Donald C. Bluedorn II – Environmental Law, Water Law, Litigation – Environmental
• Dean A. Calland – Environmental Law
• Matthew S. Casto – Commercial Litigation
• Frank J. Clements – Corporate Law
• Kathy K. Condo – Commercial Litigation
• James Curry – Energy Law and Oil and Gas Law
• Julie R. Domike – Environmental Law, Litigation – Environmental
• Kevin K.

…

Legal Intelligencer

(By Stephen A. Antonelli)

Is the country heading toward a recession?  Are we already there?  If so, for how long will it last?  Or, will we narrowly avoid a recession and instead see a mere economic slowdown as we (hopefully) put the global pandemic in our collective rearview mirror?

The answers to these questions are unclear.  Inflation and interest rates are rising, yet the economy added 528,000 new jobs in July and unemployment is at a pre-pandemic level of 3.5 percent.  Moreover, by the time you read this, the Inflation Reduction Act may have been signed into law.  As a result, the opinions of actual economists and other experts in the field differ as to the likelihood, timing, and duration of a recession.  I will therefore certainly not attempt to offer a prediction of my own.  I will, however, note that employers of all sizes must be mindful of the law if and when they are forced to make the difficult decision of reducing their workforce.

The Worker Adjustment and Retraining Notification (WARN) Act is one such law.  The WARN Act was enacted in 1988 in an effort to ensure advance notice to employees in cases of qualified plant closings and mass layoffs, thereby providing employees with sufficient time to prepare for the transition into a new job.  It requires larger private employers to give advanced notice of plant closings or mass layoffs to their employees (or their unions, if applicable) as well as to state agencies that assist impacted workers and the local government of the impacted area.  Specifically, the Act requires employers with 100 or more full-time employees (or 100 or more full- and part-time employees who work a combined 4,000 hours per week) to provide written notice 60 days in advance of a facility or plant closure or a mass layoff. …

Pittsburgh Business Times

(By Ethan Lott)

Jean Mosites is one of Pittsburgh’s most well-known experts in energy and environmental law and a shareholder in Babst Calland’s Environmental, Energy and Natural Resources Group. Her legal expertise and advice has been instrumental for Babst Calland’s clients in energy who are navigating the complexities of the Marcellus Shale development and the myriad regulations in Pennsylvania that surround it.

What do you see as the biggest opportunities for the energy industry right now?

One current opportunity is for oil and gas producers to enhance our country’s energy security and independence by building and maintaining a steady supply of fuel. Production, however, is only one part of the necessary steps in getting products to market. Support is needed to ensure that transmission and refining capabilities are available for long-term reliability of supplies.

What’s your biggest concern for the energy industry right now?

The difficulty of getting product to market as permits and approvals for transmission are challenged, blocked or overturned. This situation affects not only consumers in the region and in the United States, but in the world. Blocking natural gas production in the region reduces energy options for the poorest at home and abroad.

What are some of the major legal issues involving natural gas producers in Pennsylvania?

As environmental law evolves, a major legal issue for natural gas producers is keeping track of new laws, regulations, policies and procedures. The changing nature of the law presents a challenge for businesses that need certainty for long-term planning. New permit requirements related to air emissions or new listings of endangered species, for example, affect operational, regulatory and financial decisions regarding the development of natural gas assets in Pennsylvania. …

Pretrial Practice & Discovery

American Bar Association Litigation Section by the American Bar Association

(By Janet Meub)

Is the fear of contracting COVID-19 a legitimate excuse to avoid a deposition? Two recent cases highlight the issue.

In March 2020, the world shut down to prevent the spread of the novel coronavirus. Courts closed for all but emergency matters. Touching gas pumps, elevator buttons, and doorknobs could be the kiss of death! Others feared handling mail after it was delivered! When the deposition notice arrives, a witness’s fear of contracting COVID-19 is no excuse to avoid a deposition.

In Stowe v. Alford, No. 2:19-cv-01652 KJM AC, 2021 U.S. Dist. LEXIS 98021 (E.D. Cal, May 24, 2021), the parties were unable to agree, among other issues, as to whether the plaintiff should be required to appear without a mask at his remote Zoom deposition. The first deposition was abruptly discontinued when the plaintiff refused to remove his mask. The defendant filed a motion to compel the plaintiff’s second deposition, and the plaintiff argued that the first deposition was discontinued on meritless grounds.

Federal Rule of Civil Procedure 26(b)(1) governs discovery in federal cases. Remote depositions are permissible under Fed. R. Civ. P. 30(b)(4), especially in light of the COVID-19 pandemic. It is in the court’s discretion to determine whether a second deposition is warranted under the circumstances. Rule 26(b)(2)(C). However, what about the mask issue?

The U.S. District Court for the Eastern District of California ordered that the plaintiff appear on Zoom wearing either no protective face covering or a covering, such as a clear face shield, that allows his face to be seen. …

Environmental Alert

(By Christopher (Kip) Power and Marley Kimelman)

On July 21, 2022, the U.S. Department of the Interior’s Office of Surface Mining Reclamation and Enforcement (OSM) released its long-awaited “Guidance on the Bipartisan Infrastructure Law Abandoned Mine Land Grant Implementation” for use by participating states in applying for the first $725 million in funding available for projects involving the reclamation of abandoned mine lands (AML) under the Bipartisan Infrastructure Law (BIL). Overall, the BIL provides a total of $11.3 billion in AML grant funding over 15 years to eligible states to help communities eliminate dangerous environmental hazards and pollution caused by coal mining that took place prior to the August 3, 1977, effective date of the federal Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. 1201, et seq. (SMCRA).

The AML reclamation program, funded by per-ton fees on coal production, was created under Title IV of SMCRA; the BIL provisions (modifying the “AML Economic Revitalization (AMLER) Program”) greatly increase the funding for the program and provide additional factors to be considered in awarding projects under it. Generally, the AMLER Program has provided annual grants to the six Appalachian States with the highest number of unfunded Priority 1 and Priority 2 AML problems based on OSM’s AML inventory data: Ohio, Pennsylvania, West Virginia, Alabama, Kentucky, and Virginia.

As an example of the magnitude of the increased funding from the BIL, since the program was created in 2016, West Virginia (through its Department of Environmental Protection or “WVDEP”) has received approximately $25-$30 million each year to use in awarding contracts for AMLER projects. Under the BIL, the WVDEP anticipates receiving some $140 million each year for the next 15 years to support projects under the program. …

PIOGA Press

(By Kevin J. Garber)

On July 8, the Commonwealth Court enjoined the Department of Environmental Protection and the Environmental Quality Board from implementing the Regional Greenhouse Gas Regulations, which means the regulations are not effective as of the date of this article (August 5, 2022). DEP and EQB immediately appealed that decision to the Supreme Court where we await further developments from the high court.

As background, under the final RGGI regulations that EQB adopted in July 2021, regulated sources must acquire 50 percent of the necessary CO₂ allowances for 2022 emissions by March 1, 2023 and acquire 100 percent of their allowances for the compliance period by March 1, 2024. DEP set a partial-year emissions cap of approximately 40.7 million tons of CO₂ for the remainder of 2022 and approximately 75.5 million tons for 2023, which will gradually decline to approximately 58 million tons in 2030. The modeled allowance price was in the $3-4/ton range when DEP developed the regulations but has increased substantially to $13.90/ton at the last auction on June 1, 2022. The potential financial impact on businesses and consumers is now much greater than originally predicted. At auction prices of $13-14/ton, implementation of the RGGI program in Pennsylvania is expected to cost $700-800 million per year, or nearly $4 billion over five years at current auction prices.

A group of labor and industry petitioners and a group of elected officials (including the chairs of the House and Senate Environmental Resources and Energy committees) are challenging the regulations in Commonwealth Court. They contend the regulations are an unconstitutional tax and that the Air Pollution Control Act does not provide authority for DEP and EQB to promulgate them. …

Legal Intelligencer

(By Gary Steinbauer and Christina Puhnaty)

In June 2022, the U.S. Environmental Protection Agency proposed revisions to its greenhouse gas reporting program rule (GHGRP rule or rule). See 87 Fed. Reg. 36,920 (June 21, 2022). Established in 2009 following a Congressional mandate in the 2008 Consolidated Appropriations Act, the GHGRP rule requires large direct sources of greenhouse gas (GHG) emissions (e.g., with certain exceptions, sources emitting at least 25,000 metric tons of carbon dioxide equivalent), fuel and industrial gas suppliers, and carbon dioxide injection sites to report total annual GHG emissions and other information using specific calculation methodologies. See generally 40 C.F.R. Part 98. The rule requires reporting for over 40 different source categories, with more than 8,000 facilities reporting annually. According to EPA, the reported data cover covers 85% to 90% of the GHG emissions in the United States, and data collected under the program shows that Pennsylvania ranks among the top five states with the highest reported GHG emissions.

The proposed rule does not limit covered sources’ GHG emissions or require sources to take any steps to reduce their GHG emissions. It is strictly a reporting rule, creating a massive dataset that the EPA uses to assess trends and make other policy decisions. The EPA publishes summaries of annual GHG emissions data, including summaries of GHG emissions by sector and facility, geographic information on reported GHG emissions, and environmental justice-related information for each sector.

This GHG emissions data are taking on greater significance as more companies focus on environmental, social and governance (ESG) issues and roll out net zero target dates. In addition, the Securities and Exchange Commission’s recently proposed climate disclosure rule provides that registrants reporting under the SEC reporting regime would be able to rely on data reported under the EPA’s GHGRP rule to partially fulfill their SEC climate-related reporting obligations. …

The Foundation Mineral and Energy Law Newsletter

Pennsylvania – Mining

(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi & Christina Puhnaty)

Preliminary Injunction Granted for RGGI Rule 

On July 8, 2022, the Commonwealth Court of Pennsylvania granted a preliminary injunction preventing the State from participating in the Regional Greenhouse Gas Initiative (RGGI) pending resolution of a case. 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, which links the commonwealth’s cap-and-trade program to 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.

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, and a group of state lawmakers filed a challenge as well. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). The commonwealth court held a hearing on May 10 and 11, 2022, on the application for special relief.

Because the commonwealth court had not granted the application for preliminary injunction by July 1, 2022, the date on which compliance was to begin under the rule, sources were obligated to begin tracking CO2 emissions for compliance purposes and planned to participate in the upcoming RGGI CO2 allowance action in September 2022. …

West Virginia Attorney Joseph Bunn has joined Babst Calland’s Charleston office as a shareholder and member of its Corporate and Commercial practice group.

Mr. Bunn focuses his practice in financial transactions, mergers, acquisitions, and divestitures. He also counsels clients in other strategic areas such as corporate governance issues and miscellaneous contracts. Over the course of his practice, Joe has negotiated and drafted numerous transactions for buyers and sellers ranging in size from approximately $10 million to $325 million.

“Joe Bunn is well-known in industry in West Virginia and across the country. We’re very pleased to have him as part our team,” said Don Bluedorn, Babst Calland’s Managing Shareholder. “His proven experience in working with clients in the energy industry is a great fit for our Firm, and most importantly for our clients.”

“I am excited to be joining a well-respected legal team in West Virginia representing such a wide range of clients in West Virginia and throughout the country,” said Bunn.

Mr. Bunn earned his J.D. from West Virginia University, and received his undergraduate degree from William & Mary. He is a member of the American Bar Association, and is the Chairman of the Coal Subcommittee of the West Virginia State Bar.

Prior to obtaining his law degree, he worked for a Fortune 500 company and a middle market company where he served numerous roles involving strategic planning, capital raises, and acquisitions and divestitures.

Smart Business

(By Sue Ostrowski featuring Michael Fink)

While a company can structure a financing round in many ways, there’s been increasing concern that convertible securities can result in out-of-line liquidity preferences for some investors.

“This concern, however, can be addressed via conversion to a shadow series of preferred stock, an increasingly common option,” says Michael Fink, shareholder at Babst Calland.

Smart Business spoke with Mr. Fink about how a shadow series works, when to use it, and the pros and cons of doing so.

How does a shadow series work?

It’s quite common for companies to fundraise using convertible notes (or other convertible securities) for early or bridge rounds, providing for interest and a discount on share price as a reward for the extra risks inherent in these investments. Noteholders, therefore, receive more shares on conversion than their investment would otherwise provide. For example, a 20 percent discount on conversion price implies a 25 percent increase in shares issued for the same purchase price.

Those additional shares are beneficial in terms of enhanced voting power, more dividends and potentially more participation rights. In this example, it also provides for an additional 25 percent liquidation preference over the amount invested. Is this too much of a good thing?

Noteholders took more risk by investing earlier, but over the past decade or so, founders and later investors have started questioning whether this ‘liquidation windfall’ is more of a benefit than that extra risk justifies.

A shadow series is a compromise approach to address this windfall — the notes convert to a ‘shadow series’ of the preferred stock purchased by later equity investors, identical in all ways but with a lower liquidation preference. …