After EPA Rule Changes, Which ASTM Phase I ESA Standard Should You Use?

On November 1, 2021, ASTM International released its revised standard for Phase I Environmental Site Assessments. On March 14, 2022, the U.S. Environmental Protection Agency (the “EPA”) published a Direct Final Rule that confirmed the new ASTM standard, ASTM E1527-21, could be used to satisfy the EPA’s All Appropriate Inquiry (“AAI”) regulations. That, in turn, would mean that satisfying the ASTM E1527-21 standard could help a potential buyer of contaminated property satisfy some of the EPA’s requirements to qualify as a Bona Fide Prospective Purchaser, which may lead to being protected from liability under the federal Superfund statute.

However, on May 2, 2022, EPA withdrew the Final Rule it had published on March 14, 2022, and indicated it would address the comments it received concerning the previously Final Rule in a subsequent final action.

Why the change and, more importantly, which ASTM standard should a potential purchaser of contaminated property use when having a Phase I Site Assessment prepared?

EPA withdrew its Direct Final Rule in response to the negative comments it received concerning that rule. EPA had planned to allow both the November 2021 ASTM standard and its predecessor from 2013 (the ASTM E1527-13 standard) to be used to satisfy certain AAI requirements. Those commenting said that approach would lead to confusion in the marketplace, and would allow reports that did not meet the ASTM E1527-21 standard to be considered adequate, even though the 2021 ASTM standard represented what the real estate and environmental community had determined to be good commercial and customary practice. In other words, because the 2021 standard required a more rigorous approach to the relevant environmental due diligence work needed to prepare a Phase I Environmental Site Assessment, EPA’s approach would have meant that less thorough reports could have been deemed sufficient.  As noted in the comment letter submitted to the EPA by the Environmental Bankers Association, “ASTM E1527-21 includes important updates that will reduce the risk of Users [of the ESA report] failing to identify conditions indicative of hazardous substance releases, potentially jeopardizing landowner [and prospective purchaser] liability protections to [potential] CERCLA [liability].” All of that makes sense: the better the environmental due diligence, the less risk of unpleasant surprises later.

But, where does that leave potential purchasers of contaminated real estate? Should they have their consultants prepare their Phase I Site Assessment reports based on the 2021 ASTM standard, or its 2013 predecessor, or both?

Contaminated real estate buyers, and any other parties involved in the transaction, such as lenders and equity investors, should require their environmental consultants to prepare their Phase I Environmental Site Assessment in conformance with the ASTM E1527-13 standard, because that is the ASTM standard that is currently referenced in EPA’s AAI regulations. It is necessary to do so, at least for now, in order to be able to qualify for Bona Fide Prospective Purchaser protection from CERCLA liability.

Those parties should also consider having their environmental consultants prepare the same Phase I Environmental Site Assessment in conformance with the updated ATSM E1527-21 standard. While some additional cost may be involved, nonetheless it may be worthwhile in order to meet what ASTM sees as the current standard of practice regarding these reports.

Another important consideration in the preparation of these reports is whether additional issues that are not formally included in the scope of either the ASTM E1527-13 or the ASTM E1527-21 standard should be addressed. For example, as noted in an appendix to the E1527-21 standard, petroleum products are within the scope of the practice “because they are of concern with respect to commercial real estate, and current custom and usage is to include an inquiry into the [past or present] presence of petroleum products when doing an environmental site assessment of commercial real estate.” That is so even though petroleum products generally do not lead to liability under CERCLA.

The non-scope issues appendix to the ASTM E1527-21 standard also addresses “substances not defined as hazardous substances” and does a good job addressing why a user of an ASTM-compliant report should at least consider whether to include certain emerging contaminants such as per- and polyfluoroalkyl substances, also known as PFAS, within its scope. The point is to think about whether to evaluate potential environmental liability for PFAS on a case-by-case basis in light of state law considerations, even though PFAS compounds have not yet been designated “hazardous substances” under CERCLA.

EPA’s recent rule-making activities have not provided clear guidance for potential purchasers of contaminated property regarding which ASTM standard should be used in preparing environmental site assessment reports that comply with EPA’s AAI regulations. At the moment, what seems to make the most sense is to have these reports prepared so that they comply with the ASTM E1527-13 standard and to consider whether to comply with the E1527-21 standard in addition. The user should also carefully evaluate whether certain considerations, such as potential PFAS contamination, should be included within the scope of the report.

2022 Goulston & Storrs PC.

USCIS Again Extends Flexibility for Responding to Agency Requests, Permanently Extends Reproduced Signature Flexibility

On July 25, 2022, U.S. Citizenship and Immigration Services (USCIS) announced an extension of flexibility periods for responding to USCIS requests and for filing forms I-290B and N-336 through October 23, 2022.

Background

In response to the coronavirus pandemic, USCIS extended certain flexibilities to help applicants, petitioners, and requestors. In March 2022, USCIS announced that it was extending the flexibilities through July 25, 2022, and that this would likely be the final extension of these flexibilities. USCIS has now stated that it will consider a response received within sixty calendar days after the due date set forth in the following requests or notices before taking any action, if the issuance date on the request or notice is between March 1, 2020, and October 23, 2022, inclusive:

  • Requests for Evidence
  • Continuations to Request Evidence (N-14)
  • Notices of Intent to Deny
  • Notices of Intent to Revoke
  • Notices of Intent to Rescind
  • Notices of Intent to Terminate Regional Centers
  • Motions to Reopen an N-400 Pursuant to 8 CFR 335.5, Receipt of Derogatory Information After Grant

USCIS also “will consider a Form I-290B, Notice of Appeal or Motion, or a Form N-336, Request for a Hearing on a Decision in Naturalization Proceedings (Under Section 336 of the INA [Immigration and Nationality Act]),” if:

  • the form was filed up to ninety calendar days from the issuance of a USCIS decision; and
  • the agency made the decision between November 1, 2021, and October 23, 2022, inclusive.

Permanent Extension for Electronically Reproduced Original Signature Policy

In an unexpected move, USCIS also announced that it is permanently extending the electronically reproduced original signature policy announced in March 2020. According to the earlier announcement, under this policy, USCIS “will accept all benefit forms and documents with reproduced original signatures.” This means that “a document may be scanned, faxed, photocopied, or similarly reproduced[,] provided that the copy must be of an original document containing an original handwritten signature, unless otherwise specified.” USCIS stated that applicants, petitioners, and/or requestors submitting documents bearing reproduced original signatures “must also retain copies of the original documents containing the ‘wet’ signature [because] USCIS may, at any time, may request the original documents, which if not produced, could negatively impact the adjudication of the immigration benefit.”

© 2022, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

UK Prohibits Certain Investment in Russia

From 19 July 2022,1 it is a violation of UK financial sanctions for any person who knows or has reasonable cause to suspect that they are carrying out, directly or indirectly, certain investment activity in Russia. These prohibitions follow the UK Government’s 6 April 2022 announcement of its intention to introduce an outright ban on all new outward investment in Russia.

The prohibitions are subject to exceptions and do not impact acts undertaken to satisfy obligations under a contract concluded before 19 July 2022, or an ancillary contract necessary for the satisfaction of that contract, subject to notifying Her Majesty’s Treasury at least five working days before the day on which any related act is carried out. There is also the option to apply for a specific Treasury licence, such as to enable humanitarian assistance activity or if connected with the provision of medical goods or services.

Furthermore, General Licence INT/2022/2002560 has been granted, taking effect from 19 July 2022 and expiring on 26 July 2022, allowing a seven-day wind-down period in respect of the prohibited activities.

What Is Prohibited?

The Regulations prohibit:

  • Directly or indirectly establishing any joint venture with a person connected with Russia;
  • Opening representative offices or establishing branches or subsidiaries in Russia;
  • Directly or indirectly acquiring any ownership interest in Russian land and persons connected with Russia for the purpose of making funds or economic resources available directly or indirectly to, or for the benefit of, persons connected with Russia;
  • Directly or indirectly acquiring any ownership interest in or control over a relevant entity or persons (other than an individual) with a place of business in Russia for the purpose of making funds or economic resources available, directly or indirectly, to, or for the benefit of, persons connected with Russia; and
  • The provision of investment services directly related to all the activities summarised above.

Definitions

A “person connected with Russia” means:

  • any individual or group of individuals who are ordinarily resident or located in Russia, or an entity which is incorporated or constituted under Russian law or domiciled in Russia;2

and is not:

  • A Schedule 2 Entity, as detailed in the Regulations;3 or
  • An entity domiciled outside of Russia or a branch, or subsidiary, of such a non-Russian entity.4

A “branch”5 means, in relation to a person other than an individual, a place of business which forms a legally dependent part of that person and which carries out all or some of the transactions inherent in the business of that person.

A “relevant entity”6 means a person, other than an individual, which has a place of busines located in Russia, but is not a person connected with Russia.

A person directly or indirectly “acquiring any ownership interest in or control over a person or entity”7 means:

  • Acquiring any share in the person or entity;
  • Acquiring any voting rights in the person or entity;
  • Acquiring any right to appoint or remove a majority of the board of directors of the person or entity; or
  • Acquiring any means of ensuring that the affairs of the person or entity are conducted in accordance with the wishes of the person.

Exceptions

The exceptions8 introduced enables a person to deal directly or indirectly with:

  • A transferable security otherwise prohibited by Regulation 16;
  • A relevant security issued by a person connected with Russia; or
  • A relevant security issued by a relevant entity.

Full definitions of the terms above are included within Regulation 60ZZA.

From 19 July 2022,1 it is a violation of UK financial sanctions for any person who knows or has reasonable cause to suspect that they are carrying out, directly or indirectly, certain investment activity in Russia. These prohibitions follow the UK Government’s 6 April 2022 announcement of its intention to introduce an outright ban on all new outward investment in Russia.

The prohibitions are subject to exceptions and do not impact acts undertaken to satisfy obligations under a contract concluded before 19 July 2022, or an ancillary contract necessary for the satisfaction of that contract, subject to notifying Her Majesty’s Treasury at least five working days before the day on which any related act is carried out. There is also the option to apply for a specific Treasury licence, such as to enable humanitarian assistance activity or if connected with the provision of medical goods or services.

Furthermore, General Licence INT/2022/2002560 has been granted, taking effect from 19 July 2022 and expiring on 26 July 2022, allowing a seven-day wind-down period in respect of the prohibited activities.

What Is Prohibited?

The Regulations prohibit:

  • Directly or indirectly establishing any joint venture with a person connected with Russia;
  • Opening representative offices or establishing branches or subsidiaries in Russia;
  • Directly or indirectly acquiring any ownership interest in Russian land and persons connected with Russia for the purpose of making funds or economic resources available directly or indirectly to, or for the benefit of, persons connected with Russia;
  • Directly or indirectly acquiring any ownership interest in or control over a relevant entity or persons (other than an individual) with a place of business in Russia for the purpose of making funds or economic resources available, directly or indirectly, to, or for the benefit of, persons connected with Russia; and
  • The provision of investment services directly related to all the activities summarised above.

Definitions

A “person connected with Russia” means:

  • any individual or group of individuals who are ordinarily resident or located in Russia, or an entity which is incorporated or constituted under Russian law or domiciled in Russia;2

and is not:

  • A Schedule 2 Entity, as detailed in the Regulations;3 or
  • An entity domiciled outside of Russia or a branch, or subsidiary, of such a non-Russian entity.4

A “branch”5 means, in relation to a person other than an individual, a place of business which forms a legally dependent part of that person and which carries out all or some of the transactions inherent in the business of that person.

A “relevant entity”6 means a person, other than an individual, which has a place of busines located in Russia, but is not a person connected with Russia.

A person directly or indirectly “acquiring any ownership interest in or control over a person or entity”7 means:

  • Acquiring any share in the person or entity;
  • Acquiring any voting rights in the person or entity;
  • Acquiring any right to appoint or remove a majority of the board of directors of the person or entity; or
  • Acquiring any means of ensuring that the affairs of the person or entity are conducted in accordance with the wishes of the person.

Exceptions

The exceptions8 introduced enables a person to deal directly or indirectly with:

  • A transferable security otherwise prohibited by Regulation 16;
  • A relevant security issued by a person connected with Russia; or
  • A relevant security issued by a relevant entity.

Full definitions of the terms above are included within Regulation 60ZZA.


FOOTNOTES

1 Regulation 18B introduced via The Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022 [2022 No. 801], in force as of 19 July 2022.

2 Regulation 19A(2), The Russia (Sanctions) (EU Exit) Regulations 2019 [2019 No. 855] – as amended.

3 See pp. 123-124.

4 Regulation 16(4D), Ibid.

5 Regulation 18B(8), The Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022 [2022 No. 801].

6 Regulation 18B(8), Ibid.

7 Regulation 18B(8), Ibid.

8 Regulation 60ZZA, Ibid.

©2022 Greenberg Traurig, LLP. All rights reserved.

Crosshairs: Labor Board Targets Gig Economy, Noncompete Agreements, and More

Many employers in the “gig economy” – such as rideshare companies – rely heavily on independent contractors for various functions within their organizations. Because independent contractors are exempt from coverage under the National Labor Relations Act (NLRA), which includes the right to form or join unions, this appears to have garnered the attention of the National Labor Relations Board’s (NLRB) top lawyer. And it appears the NLRB may be seeking to disrupt those companies’ current staffing models.

According to a recent press release from the agency:

“National Labor Relations Board (NLRB) General Counsel Jennifer A. Abruzzo and Federal Trade Commission (FTC) Chair Lina M. Khan executed a Memorandum of Understanding (MOU) forming a partnership between the agencies that will promote fair competition and advance workers’ rights. The agreement enables the NLRB and FTC to closely collaborate by sharing information, conducting cross-training for staff at each agency, and partnering on investigative efforts within each agency’s authority.”

The statement then goes on to describe specifically how the agencies will be targeting the gig economy:

“The MOU identifies areas of mutual interest for the two agencies, including: labor market developments relating to the ‘gig economy’ such as misclassification of workers and algorithmic decision-making; the imposition of one-sided and restrictive contract provisions, such as noncompete and nondisclosure provisions; the extent and impact of labor market concentration; and the ability of workers to act collectively.”

What does this mean for employers? For one thing, it reinforces that the NLRB is going to be taking a much closer look at workers classified as independent contractors – and likely finding independent contractor status more often. For another, it means the NLRB may soon be looking at noncompete agreements and similar restrictive covenants and finding the maintenance of overbroad terms to be violations of labor law. And while the memorandum calls out the gig economy, it is not limited solely to companies operating in that space.

Employers – in the gig economy and otherwise – should take note of these agencies’ moves and be aware that these issues are likely to receive much scrutiny in the coming months and years.

© 2022 BARNES & THORNBURG LLP

Erasing the Stigma—Michael Kasdan [PODCAST]

Men often hide their mental health struggles deeming it not manly for them to acknowledge weakness. Michael Kasdan was there at one point in his career, but he’s long since learned better. Today, Michael is an active member of the Good Men Project, sharing his personal struggles with depression with others in the legal profession and beyond. Now, he shares his story and perspective on the state of men’s mental health with Mark Yacano in this episode of Erasing the Stigma.

Michael Kasdan is a partner in Wiggin & Dana’s Intellectual Property Group. He focuses on all areas of intellectual property law, providing his clients with full- service IP expertise that ranges from patent, trademark, copyright and trade secret litigation to IP-related transactions – including licensing and monetization – to helping companies to protect and reap maximum value from their own innovations and brands.

Michael was listed as one of the world’s-leading IP Strategists in the 2103 and 2017 – 2021 editions of IAM Strategy 300 – The World’s Leading IP Strategists and has regularly been listed in Super Lawyers. Clients describe him as creative, energetic, and easy to work with and seek his insight into the business, technology, and legal facets of their IP issues.

Michael writes and speaks extensively. His articles have appeared in Intellectual Asset Management (IAM) Magazine, LEXIS, Thomson/Reuters, Practical Law Company, IP Law360, Bloomberg/BNA, Managing IP Magazine, The National Law Review, and elsewhere. Michael is the sole author of Practical Law Company’s Practice Note on Patent Law and the Lexis Practice Advisor on Patent Licensing and is a co-author of Practical Law Company’s Practice Notes on Global Patent Litigation and Licensing and on Tracking and Privacy.

A member of the firm’s Inclusion, Diversity and Equity Committee, Michael has been the keynote speaker at conferences addressing topics such as diversity and mentorship. He is also a passionate advocate for mental health and wellness in the legal profession and the world at large and serves on the Communications Committee of The Institute for Well-Being in Law.

Michael serves as on the Board and as Director of Communications and Development of the nonprofit MyChild’sCancer and on the Board of the SouthNextFestival. He was formerly Chairman of the Board of the nonprofit CityScience, which focuses on improving STEM education in cities. He is also the Director of Special Projects and Sr. Sports Editor for The Good Men Project.

Michael received his J.D. magna cum laude from New York University School of Law. He was a member of the NYU Law Review and the Order of the Coif, was Fish & Neave Fellow for the Engelberg Center on Innovation Law and Policy, and served as President of the Intellectual Property and Entertainment Law Society. After law school, he clerked for the Honorable Judge Roderick R. McKelvie in the U.S. District Court for the District of Delaware. Michael received a B.S.E. in electrical engineering magna cum laude from the University of Pennsylvania, with a minor in mathematics. He was a member of Eta Kappa Nu, Tau Beta Pi, and the Penn Parliamentary Debate Team.

©2022 Major, Lindsey & Africa, an Allegis Group

Government Brings First Cryptocurrency Insider Trading Charges

In a series of parallel actions announced on July 21, 2022, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) initiated criminal and civil charges against three defendants in the first cryptocurrency insider trading case.

According to the criminal indictment, DOJ alleges that a former employee of a prominent cryptocurrency exchange used his position at the exchange to obtain confidential information about at least 25 future cryptocurrency listings, then tipped his brother and a friend who traded the digital assets in advance of the listing announcements, realizing gains of approximately $1.5 million. The indictment further alleges that the trio used various means to conceal their trading, and that one defendant attempted to flee the United States when their trading was discovered. The Government charged the three with wire fraud and wire fraud conspiracy. Notably, and like the Government’s recently announced case involving insider trading in nonfungible tokens, criminal prosecutors did not charge the defendants with securities or commodities fraud.

In its press release announcing the charges, US Attorney for the Southern District of New York Damian Williams said: “Today’s charges are a further reminder that Web3 is not a law-free zone. Just last month, I announced the first ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street. And the Southern District of New York will continue to be relentless in bringing fraudsters to justice, wherever we may find them.”

Based on these facts, the SEC also announced charges against the three men in a civil complaint alleging securities fraud. In order to assert jurisdiction over the matter, the SEC alleges that at least nine of the cryptocurrencies involved in the alleged insider trading were securities, and the compliant traces through the Howey analysis for each. The SEC has not announced charges against the exchange itself, though in the past it has charged at least one cryptocurrency exchange that listed securities tokens for failure to register as a securities exchange. Perhaps coincidentally, on July 21 the exchange involved in the latest DOJ and SEC cases filed a rulemaking petition with the SEC urging it to “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities.”

In an unusual move, Commissioner Caroline Pham of the Commodity Futures Trading Commission (CFTC) released a public statement criticizing the charges. Citing the Federalist Papers, Commissioner Pham described the cases as “a striking example of ‘regulation by enforcement.’” She noted that “the SEC’s allegations could have broad implications beyond this single case, underscoring how critical and urgent it is that regulators work together.” Commissioner Pham continued, “Major questions are best addressed through a transparent process that engages the public to develop appropriate policy with expert input—through notice-and-comment rulemaking pursuant to the Administrative Procedure Act.” She concluded by stating that, “Regulatory clarity comes from being out in the open, not in the dark.” The CFTC is not directly involved in either case, and it is atypical for a regulator to chide a sister agency on an enforcement matter in this fashion. On the same day, another CFTC Commissioner, Kristin Johnson, issued her own carefully-worded statement that seemed to support the Government’s actions.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

How to Market Your Firm When You Don’t Need an In-House Hire

Law firms of any size need some level of marketing for long-term growth and sustainability. To be successful, every law firm must focus on its marketing. In an ideal world, lawyers would have the time to do what they do best and also market their business so it can grow. However, lawyers are inherently busy individuals, and it often doesn’t make sense to try to do it all themselves. Trying to do it all alone is overwhelming, and your time is best spent helping clients.

The simple answer to this time crunch dilemma is to hire someone in-house to take over the marketing efforts. But for many firms, that has a laundry list of drawbacks, such as additional time and expense. Perhaps you don’t have the marketing needs or budget to hire someone to market your law firm on a full- or even part-time basis. Hiring someone in-house means you need to have enough work and room in your budget to keep them busy. So, what are your other options?

Do it Yourself

Continuing to market your law firm yourself is one option. But let’s be realistic; you cannot do it all. With your busy schedule, you might only have one to three hours per week to dedicate to your marketing efforts. If this is the case, pick one or two marketing elements to be consistent with. For example, focus on your blogs or social media posts. If you need more help, as this tiny sliver of weekly time is not likely to move the needle or be sustainable, it’s time to outsource.

Hire an Agency or Freelancer

One viable option could be hiring an agency or freelancer to take over all or most of your marketing tasks. Outsourcing can help take some of this pressure off. Leaving your marketing in the hands of an experienced and knowledgeable agency or freelancer gives you peace of mind that it’s being done optimally. It also lets you focus on your clients and practicing law—which is what you went to school for, after all.

Identify Your Marketing Goals

If you decide to go this route, determine what your primary marketing goals are and go from there:

  • Do you want more leads?

  • Do you want to see more conversions?

  • Do you need to get more referrals?

  • Do you need a better ROI for your marketing dollars?

By listing your marketing goals and dreams and what you’re already doing, you can visualize your marketing gap and identify when it’s time to work with a professional. The more significant this gap, the more likely you need to hire a professional as soon as possible. In the meantime, you could be missing out on signing new clients.

Get an Outside Opinion

When you work with a freelancer or marketing agency, you will have a professional on your side who can also audit your marketing plan and tell you what your marketing is missing. Having another person, especially a marketing expert, lay eyes on what you’ve done to market your law firm and your future plans can help you identify your weaknesses and course correct to the right path. Marketing professionals can take what you have already started and turn it into something bigger and more successful.

Benefits of Working with a Marketing Agency or Freelancer

Working with a marketing agency or freelancer can provide your law firm with the following benefits:

  • Increased brand awareness

  • Greater ability to be found on the internet

  • More website traffic

  • Building trust and credibility with your audience

  • Improved online presence and engagement

  • Conversion rate optimization

  • Cost efficiency

  • Tracking and interpreting marketing efforts

  • Strategy and creativity – for example, creating targeted campaigns for niche clients

Last but not least, they allow you to focus on obtaining optimal outcomes for your clients instead of trying to market your law firm.

© 2022 Denver Legal Marketing LLC

Supreme Court Signals Move Away from Judicial Deference to Administrative Agencies

KEY TAKEAWAYS

In a unanimous decision on June 15, 2022, the Court in American Hospital Association v. Becerra[2] examined a Medicare reimbursement formula reduction that affected certain hospitals. While rejecting the DHHS agency interpretation of the reimbursement statute, the Court made no mention of Chevron deference even though the parties extensively briefed this doctrine. Instead, the Court focused solely on the relevant language of the statute. In particular, the Court held that the “text and structure” of the statute demonstrated that the Medicare reimbursement cut was not consistent with the statute.

In a 5-4 decision a few weeks later, the Court in Becerra v. Empire Health Foundation[3] again made no mention of Chevron deference even though the majority noted that the underlying statute’s “ordinary meaning … [did] not exactly leap off the page.” Despite its initial conclusion that the ordinary meaning of the statutory language was unclear, the Court continued its recent pattern of (a) choosing to not apply Chevron deference directly and (b) instead performing textural and structural analysis of its own. Based on this statutory analysis, the Court in Empire Health concluded that the statute was “surprisingly clear” if read as technical provisions for specialists and that the language of the statute supported the agency’s implementing regulation.

Finally, in West Virginia v. EPA,[4] the Supreme Court in a 6-3 decision again refused to give any deference to the EPA’s interpretation of a Clean Air Act provision which the EPA claimed as the statutory basis to regulate greenhouse gas emissions by power plants. The Court concluded that the EPA had violated the “Major Questions” Doctrine when the EPA used this provision to regulate carbon emissions. Under the “Major Questions” Doctrine, an agency cannot make decisions of vast economic and political significance without Congress expressly giving the agency the power to do so. Since the EPA’s effort to regulate greenhouse gases by making industry-wide changes was a decision of “vast economic and political significance,” the Court concluded that the EPA lacked the authority to do so in light of the overall nature and structure of the statute. Thus, even though there was some textual support for the EPA’s position, the Court again refused to defer to the agency and its interpretation of a statute.

Read together, these three decisions show an increased skepticism by the Court of agency interpretations of statutes and signal that going forward, the federal courts will more closely scrutinize administrative agency decisions in general. Businesses that have, to date, relied on an administrative agency interpretation may need to reassess their reliance if the interpretation relies on a broad or strained reading of a statute. Conversely, businesses currently restrained by agency interpretations which were shown deference by courts may now have an opening to challenge those interpretations.


FOOTNOTES

[1] Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

[2] Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896 (2022).

[3] Becerra v. Empire Health Found., for Valley Hosp. Med. Ctr., 142 S. Ct. 2354 (2022).

[4] W. Virginia v. Env’t Prot. Agency, 142 S. Ct. 2587 (2022).

© 2022 Miller, Canfield, Paddock and Stone PLC

The FTC Seemingly Thumbs Its Nose at the Supreme Court

Despite the Supreme Court’s recent 6-3 ruling in West Virginia v. EPA that regulatory agencies must have “clear congressional authorization” to make rules pertaining to “major questions” that are of “great political significance” and would affect “a significant portion of the American economy,” and the import of that ruling to the area of noncompete regulation, the Federal Trade Commission (FTC) and National Labor Relations Board (NLRB) announced yesterday that they are teaming up to address certain issues affecting the labor market, including the regulation of noncompetes.

In a Memorandum of Understanding (MOU) issued on July 19, 2022, the FTC and NRLB shared their shared view that:

continued and enhanced coordination and cooperation concerning issues of common regulatory interest will help to protect workers against unfair methods of competition, unfair or deceptive acts or practices, and unfair labor practices. Issues of common regulatory interest include labor market developments relating to the “gig economy” and other alternative work arrangements; claims and disclosures about earnings and costs associated with gig and other work; the imposition of one-sided and restrictive contract provisions, such as noncompete and nondisclosure provisions; the extent and impact of labor market concentration; the impact of algorithmic decision making on workers; the ability of workers to act collectively; and the classification and treatment of workers. (Emphasis added.)

Accordingly, the purpose of the MOU is “to facilitate (a) information sharing and cross-agency consultations on an ad hoc basis for official law enforcement purposes, in a manner consistent with and permitted by the laws and regulations that govern the [FTC and NLRB], (b) cross-agency training to educate each [agency] about the laws and regulations enforced by the other [agency], and (c) coordinated outreach and education as appropriate.”

This follows the Biden Administration’s July 9, 2021 Executive Order in which it “encourage[d]” the FTC to “consider” exercising its statutory rulemaking authority under the FTC Act “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” Nothing concrete has yet come of that Executive Order, although the MOU perhaps represents the next stage of the FTC’s “consider[ation]” of the issue. As we previously reported, FTC Chairwoman Lina Khan recently told the Wall Street Journal that regulating noncompetes “falls squarely in [the FTC’s] wheelhouse,” and she has never been shy about sharing her view that noncompetes should be banned nationwide and that the FTC has the authority to do so. This view does not appear to have changed despite the Supreme Court’s decision in West Virginia v. EPA.

Only time will tell what, if any, action the FTC takes with respect to regulating noncompetes, but if it does take steps to ban or otherwise limit noncompetes nationwide under Section 5 of the FTC Act, there will no doubt be litigation challenging those regulations. And you can bet that the Supreme Court’s decision in West Virginia v. EPA will be front and center in any such challenge. Indeed, according to Law360, U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley said that the MOU shows Chairwoman Khan’s vision for the FTC “goes well beyond what is provided in law and what was envisioned by Congress.” Chairwoman Khan does not seem too perturbed by the prospect of challenges to the FTC’s authority in this regard, however, and seems intent on moving forward despite the Supreme Court’s admonition.

©2022 Epstein Becker & Green, P.C. All rights reserved.

CareDx v. Natera – The Broad Road to Patent Ineligibility

In CareDx v Natera, Appeal No. 2022-1027, (Fed. Cir., July 18, 2022), a three judge panel of Judges Lourie, Bryson and Hughes, affirmed the district court’s finding that the claims of U. S. patent nos. 8703652, 9845497 and 10329607 are invalid for failing to survive the Alice/Mayo test for patent eligibility. I subtitled this post using Mathew 7:13-14: “Enter through the narrow gate. For wide is the gate and broad is the road, that leads to destruction.” The appeal to the Federal Circuit, which I wrote about on October 15, 2021, never got on the narrow road that leads to viable diagnostic claims. It may not have been possible to overcome the obstacles that blocked the road, but CareDx managed to hit them all, and ended up with three invalid patents on natural phenomena.

The claims were directed to a method for detecting transplant rejection or organ failure by isolating and genotyping a sample from the subject who received the donation, quantifying the cfDNA, and diagnosing the transplant status for an increase in donor cfDNA over time. An increase indicates possible transplant failure.

Judge Lourie summarized the claims, some of which are more than a page long, this way:

“Here, as in Ariosa, the claims boil down to collecting a bodily sample, analyzing the cfDNA  using conventional techniques, including PCR, identifying naturally occurring DNA from the donor organ, and then using the natural correlation between heightened cfDNA levels and transplant health, to identify a potential rejection, none of which was inventive. The claims here are equally as ineligible as those in Ariosa.”

Let’s take a quick look at how CareDx got onto the broad road. CareRx hoped to avoid Ariosa by arguing that it was doing more than just measuring a biomarker correlated to an existing phenomenon. Problem 1 is that CareDx did not discover the correlation; it just improved on it (or did it?). Louie writes:

“CareDx argues that the patents’ claims are directed not to natural phenomena, but to improved laboratory techniques. CareDx contends that the ‘claimed advance’ is an ‘improved, human-designed method for measuring increases in donor cfDNA in a recipient’s body to identify organ rejection.’ … In particular, CareDx identifies the use of digital PCR, NGS, and selective amplification to more accurately measure the donor SNPs of cfDNA transplant recipients. However, CareDx does not actually claim any improvements in laboratory techniques … Furthermore the specification admits that the laboratory techniques disclosed in the claims require only conventional techniques and off-the-shelf technology.”

In fact, CareDx had at least one claim in the ‘497 patent that recites that the assay detects the donor-specific circulating cfDNA from the organ transplant when the donor-specific circulating cfDNA [makes] up at least 0.3% of the total circulating cfDNA in the biological sample. I presume that this claim limitation was put into the claim so that “improvement”  could be argued, but the limitation is not mentioned in the opinion.

Let’s look at a few other things CareDx encountered on its broad road to legal destruction. The panel looked at every step of the method in isolation. In other words, once CareDx argued “improvement” it was forced to admit that the specification disclosed that all those analytical techniques, such as PCR, NGS and “selective amplification”, would be considered as conventional in the art. CareDx might have relied on some of the decisions finding patent eligibility where physical equipment was necessarily involved, such as XL LLC v. Trans Ova Genetics or Illumina v Ariosa.

The finding of conventionality of individual steps permitted the court and the panel to effectively rule that the method was directed to a natural product, since the devices used to carry it out were given no weight. Therefore, the patents failed to pass Step 1 of Mayo/Alice. Could it have been argued, if that was the case, that the equipment used to carry out the method was arranged in a novel sequence? (Also, is someone going to argue that PCR involves replicating small amounts of DNA to afford useful amounts? – This is accomplished by the hand of man.)

These are minor thoughts, CareDX should left the word “diagnostic” out of the claims and the specification. This is certainly no more of a diagnostic test than the Mayo range-finding step was. It is presently clear that in the life sciences, recognition of the utility of a naturally occurring correlation is not enough to avoid patent ineligibility. Of course, and this is cold comfort to CareDx, would it have helped to get this method into the safe harbor of methods of medical treatment? In other words, the first step could recite the actual transplantation step and/or the final step of the process could recite some sort of medical intervention. Narrower claims might have returned CareDx to the narrow path of patent life.

Article By Warren Woessner of Schwegman, Lundberg & Woessner, P.A.

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