Articles, Alerts & Perspectives

The Wildcatter

(By Nikolas Tysiak)

Hello MLBC friends, family and colleagues! This time around, you get a DOUBLE dose of statutes, regulations and cases because your friendly, neighborhood Legislative and Regulatory Committee Chair was too busy to get an article finalized for the last issue of the Wildcatter. Luckily for us, there has not been a lot of activity to report on, so hopefully this article will fill in the gap in your life with fascinating legal and legislative developments.

PENNSYLVANIA
In Pennsylvania Environmental Defense Foundation v. Commonwealth (255 A.3d 289 (Pa. 2021)), the Pennsylvania Supreme Court was asked to determine if allocations of bonuses, yearly rentals and interest penalties for late payments under oil and gas leases on state forest and game lands were improperly allocated to the Commonwealth General Fund under the Environmental Rights Amendment (“ERA”) to the Pennsylvania Constitution (Art. I, Sec. 27). In a prior decision, the Supreme Court had determined that the ERA created a public trust subject to private trust principles, and that royalty revenue streams generated by the sale of gas extracted from Commonwealth lands represented the sale of trust assets that had to be returned to trust fund principal.

In that prior decision, it was determined that not enough information existed in the record to determine whether the bonuses, rentals and interest penalties were also improperly allocated. The issue regarding the non-royalty payments had been remanded to the Commonwealth Court, which decided these non-royalty revenue streams did not constitute the sale of trust assets and were instead “income” and were not required to be returned to the trust fund principal. The Supreme Court relied on contract principles to determine that the non-royalty payments were not compensation for trust assets (oil and gas in the ground), and therefore did not have to be returned to the trust fund principal in kind. …

PIOGA Press

(By Keith Coyle, Ashleigh Krick and Chris Kuhman)

On November 15, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released a final rule (tinyurl.com/phmsa-gathering-rule) for onshore gas gathering lines. The final rule, which represents the culmination of a decade-long rule-making process, amends 49 C.F.R. Parts 191 and 192 by establishing new safety standards and reporting requirements for previously unregulated onshore gas gathering lines. Building on PHMSA’s existing two-tiered, risk-based regime for regulated onshore gas gathering lines (Type A and Type B), the final rule creates:

• A new category of onshore gas gathering lines that are only subject to incident and annual reporting requirements (Type R); and
• Another new category of regulated onshore gas gathering lines in rural, Class 1 locations that are subject to certain Part 191 reporting and registration requirements and Part 192 safety standards (Type C).

The final rule largely retains PHMSA’s existing definitions for onshore gas gathering lines but imposes a 10-mile limitation on the use of the incidental gathering provision. The final rule also creates a process for authorizing the use of composite materials in Type C lines and prescribes compliance deadlines for Type R and Type C lines. Additional information about these requirements is provided below.

Type R lines
The final rule creates a new category of reporting-only regulated gathering lines. These gathering lines, known as Type R lines, include any onshore gas gathering lines in Class 1 or Class 2 locations that do not meet the definition of a Type A, Type B, or Type C line. Operators of Type R lines must comply with the certain incident and annual reporting requirements in Part 191. …

Field Guide

(By Jenn Malik and Robert (Max) Junker)

HIGHLIGHTS

1. Covered service providers must disclose, in writing, any and all direct and indirect compensation in excess of $1,000.00 they receive for providing services to the plan.
2. Covered service providers include brokers and consultants which provide services ranging from third party administration, pharmacy benefits management, plan design, to recordkeeping services.
3. Responsible plan fiduciaries must review Section 202 disclosures for reasonableness.
4. Section 202 disclosures are applicable to all contracts, renewals, and/or extensions with covered service providers entered into on or after December 27, 2021.

Introduction

If you sponsor a group health plan, do you know how your broker will be compensated if you follow their recommendation for a new program for your members? Although these types of disclosures are commonplace for pension and retirement plans, these questions were largely unanswerable in the healthcare benefits industry until this year.

The Consolidated Appropriations Act, 2021 (CAA), enacted by Congress in December 2020, defines a compendium of transparency, disclosure, and reporting requirements that group health plans and plan sponsors must navigate to fulfill their fiduciary responsibilities to plan beneficiaries. Prior to the enactment of the CAA, group health plans were often limited by healthcare industry practices preventing the disclosure of claims and pricing data necessary to effectively design and administer health plans. Congress’s enactment of the CAA seeks to improve the market by placing the onus on group health plans and plan sponsors to avoid contracting with entities and health benefits issuers whose business practices prevent plan sponsors from making prudent decisions in the administration of health plans. …

The Legal Intelligencer and Martindale-Hubbell®, the company that has long set the standard for lawyer ratings, have announced the Pennsylvania Top Rated Lawyers®.  To view the list of Babst Calland lawyers who have achieved an AV® Preeminent™ Peer Review Rating, click here.

Smart Business

(by Sue Ostrowski featuring Dane Fennell and Chris Farmakis)

Artificial intelligence is revolutionizing the way attorneys approach due diligence, saving clients money, speeding up the review process and creating budget certainty.

“For a long time, AI was an alternative method to the usual approach of manually reviewing documents during an M&A transaction,” says W. Dane Fennell, an associate in the Corporate & Commercial Group at Babst Calland. “But now, clients expect ever-more efficient, accurate and speedy diligence results. To deliver, AI has become a critical tool in the due diligence process for deals of all sizes.”

Smart Business spoke with Fennell and Christian A. Farmakis, shareholder and chairman of the board at Babst Calland, about how AI is transforming due diligence in the legal marketplace.

What are some benefits of implementing AI in due diligence?

The amount of available data is growing at an exponential rate, creating pressure on those leading the M&A team. Just a few years ago, attorneys had months to work on a due diligence project, combing through what could be thousands of documents to gather and analyze data. The review timeframe has been drastically condensed as buyers and sellers both push to close deals faster.

Several years ago, we assisted with an acquisition that required three months of pre-closing diligence, and 18 months of post-closing confirmatory diligence. With a similar project earlier this year, we did the same work and reviewed the same number of documents in three weeks. Our AI tools allowed us to provide more cost-effective, accurate results in weeks instead of months, and oftentimes at a fraction of the price of a manual review. …

Pretrial Practice & Discovery

American Bar Association Litigation Section by the American Bar Association

(By Jessica L. Altobelli)

A reminder to attorneys to take their discovery obligations seriously and not let things get out of hand.

While I haven’t polled all ABA members, I think it’s safe to assume that obtaining default judgment during discovery isn’t a regular case-winning strategy of most litigators. And while Rule 37 of the Federal Rules of Civil Procedure does include default as a potential remedy for a party’s failure to cooperate during discovery, it is undoubtedly an extreme measure. Where a party is engaged in extreme or egregious discovery misconduct, however, default judgment may be a court’s last-resort remedy.

In spring 2021, for example, a Tennessee court entered a default judgment against the pharmaceutical company Endo after determining that Endo and its counsel engaged in a “coordinated strategy” to interfere with the administration of justice. Staubus v. Purdue Pharma L.P., No. C-41916 (Tenn. Cir. Ct. Apr. 6, 2021). As detailed in the court’s April 6, 2021, order granting the default judgment, counsel for Endo made numerous false statements during court proceedings throughout the pendency of the matter, and improperly withheld thousands of documents during discovery. Documents that were provided by Endo, in some cases, contradicted testimony of Endo’s own executives. Upon entry of the default, the judge acknowledged the harshness of the penalty, but stated that anything less than default in the circumstances at hand “would make a mockery of the attorneys who play by the rules and the legal system.”

A recent opinion out of the Southern District of Alabama reveals that courts may take the dramatic step of entering a default judgment for discovery misconduct in any variety of matters.  …

Pittsburgh Business Times

(By Sean M. McGovern)

Babst Calland Shareholder Sean McGovern takes a closer look at Pennsylvania Governor Tom Wolf’s executive order to develop a stronger environmental justice policy and what local business and industry can expect.

Pennsylvania businesses can expect 2022 to become the year of environmental justice, thanks largely to Executive Order 2021-7 issued by Pennsylvania Governor Tom Wolf on October 28.

So said Sean McGovern, a shareholder with Pittsburgh law firm Babst Calland’s environmental practice, who suggested the executive order will, indeed, change Pennsylvania’s approach to environmental justice significantly ahead.

“Certainly, this is a very current development,” McGovern said. “There’s no statute or explicit regulation here in the state. We already have an environmental justice policy, but this new environmental justice order, as well as the Executive Order 14008 from President Biden earlier this year, will further establish the rights and duties under the Environmental Rights Amendment to protect all people in Pennsylvania.”

McGovern shared his insights on environmental justice in Pennsylvania recently with the Pittsburgh Business Times as part of the law firm’s ongoing Business Insights series. Babst Calland is one of the Pittsburgh region’s largest law firms. McGovern is considered one of Babst Calland’s environmental counselors on issues surrounding environmental justice and other matters of environmental law.

Environmental justice defined

So, what is it? The U.S. Environmental Protection Agency defines environmental justice as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.”

While the issue has been around for decades, it took center stage earlier this year when President Biden signed an executive order prioritizing for the federal government “environmental justice on a fairly systemic federal level,” McGovern said. …

PIOGA Press

(By Gary Steinbauer)

On November 2, the U.S. Environmental Protection Agency (EPA) released its highly anticipated proposal to expand existing and create new regulations related to greenhouse gas (in the form of methane) and volatile organic compound (VOC) emissions from the oil and gas sector. The proposed rule is entitled Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review. The proposal, if finalized, will lead to more stringent Clean Air Act (CAA) emission limitations and other work practice requirements related to emissions of methane and VOCs from new and existing sources within the crude oil and natural gas production sector, including producers in Pennsylvania.

Brief overview of the methane proposal

The methane proposal is comprised of three distinct actions proposed under sections 111(b) and (d) of the CAA: (1) proposed amendments to the existing methane and VOC requirements in Subpart OOOOa of the New Source Performance Standards (NSPS) in 40 CFR Part 60; (2) a proposed new NSPS to be included in new Subpart OOOOb, regulating emissions of methane and VOCs from new, modified and reconstructed sources within the oil and gas sector; and (3) nationwide methane emission guidelines (EGs) for existing sources within the oil and gas sector in new Subpart OOOOc.

EPA’s proposed amendments to the current requirements in Subpart OOOOa are primarily in response to Congress’ June 2021 revocation of regulatory amendments made by the EPA during the Trump administration. The new proposed NSPS to be included in Subpart OOOOb would expand the existing requirements in Subpart OOOOa and regulate additional sources of methane and VOC emissions within the oil and gas sector, establishing the “best system of emission reduction” for affected sources that are new, modified, and recon-structed after the effective date. …

The Legal Intelligencer

(By Stephen Antonelli)

On September 9, 2021, President Biden announced his administration’s Path out of the Pandemic action plan, a six-pronged national strategy aimed to combat COVID-19 while keeping schools and workplaces open and safe.  One prong of the plan involves vaccinating those who are not yet vaccinated.  To achieve this goal, the president took actions that have since been on the minds of most employers and human resources professionals: he issued an Executive Order requiring contractors who do business with the federal government to mandate vaccinations for their employees; he directed the Occupational Safety and Health Administration (OSHA) to develop a rule requiring employers with 100 or more employees to ensure that their employees are either fully vaccinated or tested weekly; and he ordered the Centers for Medicare & Medicaid Services (CMS) to require vaccinations for most healthcare workers.

As of this writing in early November, the Safer Federal Workforce Task Force has released detailed guidance related to the federal contractor order, but OSHA has not yet released an Emergency Temporary Standard (ETS) to implement the mandate for large employers, and CMS has not yet issued an interim final rule related to healthcare workers.  As a result, employers across the country are waiting for important guidance and details about how vaccine mandates will impact their employees.  Complicating matters further, at least 12 states have commenced litigation against the Biden administration in at least three different federal district courts (Arizona, Missouri, and Florida) over the federal contractor rule, and several states (Texas, Florida, Arizona, and Alabama) have issued executive orders of their own opposing vaccine mandates.

In short, employers could use some clarity on the topic of implementing vaccine mandates. …

Charleston Gazette-Mail

(By Moore Capito)

Small-business owners have many roles to fill–from managing payrolls and marketing to customer service. But one area many small-business owners fail to plan for is their company’s cybersecurity.

According to a recent Small Business Administration survey, 88% of small-business owners feel their business was vulnerable to a cyberattack. Experts warn that small businesses, including those in West Virginia, are under constant attack by cybercriminals, be it from local, national or global actors.

We don’t have to dig deep for a local example of this threat. In 2017 Princeton Community Hospital, in Mercer County, was a victim of the Petya attack, costing the health system $27 million.

Yet, many businesses can’t afford professional IT solutions, have limited time to devote to cybersecurity or simply don’t know where to begin.

As a delegate, I am focused on supporting West Virginia small businesses through state and federal grants and providing critical resources and training to entrepreneurs across the state. Small businesses are the backbone of our economy and provide the greatest opportunity for job growth in our state. We need to do everything we can to encourage and support them. West Virginians are hard-working, dedicated people–they just need the right tools to succeed.

This is where programs like the one hosted by the National Cybersecurity Center come in. The National Cybersecurity Center is a nonprofit organization established to promote cyber innovation and awareness, and offers training for the public and private sector alike. I have the privilege of taking part in a key public education effort, Cybersecurity for State Leaders, which is training leaders in all 50 states on best practices in cybersecurity.

Best practices for maintaining good cyber hygiene apply equally to the government and to business across West Virginia. …