Beware Before You Flare: EPA Revamps Rulemaking to Pave the Way for Methane Emission Reductions

On November 15, 2022, the United States Environmental Protection Agency (US EPA) issued the pre-publication version of supplemental proposed rulemaking for reduction of methane emissions in the oil and natural gas sector. The original proposed rule, published on November 15, 2021, sought to strengthen methane standards for new sources (New Source Performance Standards or NSPS), establish nationwide emission guidelines (EG) for regulation of existing sources, and develop new standards for unregulated sources. US EPA ultimately received more than 470,000 public comments. The rules, once finalized, will be included in 40 CFR Part 60, Subpart OOOOb (NSPS) and Subpart OOOOc (EG).

The agency anticipated a need for additional review in the original proposed rule, in which US EPA stated it would issue supplemental proposed rulemaking under its authority in the Clean Air Act sections 111(b) and (d). While the original rule already had an ambitious target of reducing methane by 74%, the supplemental proposal would reduce methane from covered sources by 87% below 2005 levels. The rule generally governs production and processing (i.e., well sites, compressor stations, and natural gas processing plants) as well as natural gas transmission and storage.

Key changes in the supplemental proposed rule include the following:

  • Super-emitter Response Program: Establishment of a super-emitter response program intended to reduce the risk of such events. Owners or operators that receive certified notifications of emissions greater than 100 kg/hr of methane would be required to take action.
  • Well Closure Plans: EPA will now require owners of well sites to submit a well closure plan that includes steps to plug wells, requires financial assurance, and includes a schedule to complete the closure and perform a final survey.
  • Advanced Methane Detection: In response to comments supporting advanced methane detection technologies, EPA has proposed a matrix where owners and operators have the flexibility to use approved alternative screening approaches with development of a plan and notification to the agency. The agency will further update the proposed protocol for optical gas imaging (OGI) in Appendix K.
  • Leak Inspection: EPA will now require identification and correction of leaks, a source of fugitive emissions, at all well sites, including new and existing. While EPA removed exemptions, the type of leak monitoring will vary depending on site characteristics and equipment in four primary categories: (1) single wellhead-only and small well sites; (2) wellhead-only sites with two or more wellheads; (3) sites with major production and processing equipment; and (4) well sites on the Alaska North Slope.
  • Flares: EPA will require flare flames to be lit at all times. Additionally, in order to flare, owners of oil wells with associated gas will be required to either implement alternatives permitted by the rule (such as routing to a sales line) or certify that alternatives are not safe or technically feasible.
  • Additional Regulated Sources: EPA has added strengthened standards for pneumatic pumps (zero-emission standard), updated standards for wet seal centrifugal compressors, and developed new standards for dry seal centrifugal pumps (currently unregulated).

Given the agency’s significant focus on environmental justice and community outreach, US EPA also seeks to provide more opportunities for vulnerable communities and Tribal communities to participate in the development of state plans. In fact, the agency held a webinar specific to Tribal communities and environmental justice communities on November 17, 2022. During the webinar, US EPA explained how the revised rule requires states to conduct meaningful engagement with vulnerable communities through early outreach and request for input. States developing plans for EG will be required to participate in “timely engagement with pertinent stakeholder representation . . . [i]t must include the development of public participation strategies to overcome linguistic, cultural, institutional, geographic, and other barriers to participation to assure pertinent stakeholder representation.”

The agency is also seeking additional insight from the regulated industry on advanced technologies that can be utilized to reduce methane and utilize associated gas. The original proposed rule requested public comment on a potential standard for oil wells with associated gas that would require owners or operators to route associated gas to a sales line or, alternatively, use it for another beneficial use. During this round of comments, US EPA now seeks to understand emerging technologies “that provide uses for the associated gas in a beneficial manner other than routing to a sales line, using as a fuel, or reinjecting the gas.”

The agency extended the timeline for a final rulemaking to 2023 and has issued new opportunities for public comment and training. Written comments are due to the agency by February 13, 2023 and can be submitted to Docket No. EPA-HQ-OAR-2021-0317. There will also be a series of public hearings on January 10-11, 2023 that require advance registration. To assist in preparation, US EPA published a document highlighting areas where the agency continues to seek public input. We are prepared to assist clients in engaging with the agency by providing comment and preparing for the final rule to be implemented next year.

© Copyright 2022 Squire Patton Boggs (US) LLP

Accounting Cases Involving SPACs

The Accounting Class Action Filings and Settlements—2021 Review and Analysis report features a spotlight section on accounting-related SPAC cases.

Special purpose acquisition companies (SPACs) have become an increasingly popular way for private companies to become publicly traded. The process typically proceeds through four phases:

  1. The SPAC initial public offering (IPO), when the SPAC becomes public as a shell company;
  2.  the search for a merger target, which typically involves a definitive time period (e.g., two years);
  3. the merger closing, during which time the SPAC sponsor and target company announce the merger, file a proxy statement, and solicit shareholder approval; and
  4. the period when the equity of the combined company becomes publicly traded, often referred to as the “De-SPAC” period.

Commentators have cited various reasons for the popularity of SPACs, including the perception of market participants that a private company may have more certainty as to pricing and control over the deal terms through a SPAC as compared to a traditional IPO.1 During 2021, there were 613 SPAC IPOs—nearly twice the number of traditional IPOs—and the $144.5 billion of capital raised was record-setting.2

SPAC filings that include accounting allegations tripled in 2021 as compared to the prior year.

SEC Statements Regarding Financial Accounting and Reporting

The increased popularity of SPACs has led to certain concerns from regulators. For example, the U.S. Securities and Exchange Commission (SEC) issued an investor bulletin on SPACs highlighting that the increased number of SPACs seeking to acquire an operating business may result in fewer attractive initial acquisitions.As of December 31, 2021, 575 SPACs were still searching for a merger target.4

The SEC has also highlighted concerns related to financial accounting and reporting issues that SPACs may face. For example, the SEC’s Acting Chief Accountant, Paul Munter, issued a statement on March 31, 2021, that raised questions about whether private company targets have the people and processes in place and the time that is needed to successfully transition to public company reporting requirements. Mr. Munter highlighted examples of complex financial accounting and reporting issues, including accounting for complex financial instruments and the need to comply with public company requirements for reporting on internal controls.5

Shortly after his March 31 statement, Mr. Munter and John Coates, the Acting Director of the SEC’s Division of Corporation Finance, issued a statement on April 12, 2021, that addressed accounting and reporting considerations for warrants issued by SPACs.6 The statement resulted in almost 500 SPACs restating their accounting for warrants by June 22, nearly all of which identified a material weakness in internal controls.7

Recent Trends in SPACs Involving Accounting Issues

During 2019 and 2020, only a handful of federal securities class actions involving SPACs were filed, but in 2021, federal filings involving SPACs became the dominant filing trend.8 Consistent with that overall trend, SPAC filings that include accounting allegations tripled in 2021 as compared to the prior year.

There are several trends in SPAC cases involving accounting issues over the past three years:

  • Approximately one in three initial complaints involving SPACs from 2019 through 2021 included accounting issues.
  • Three law firms—The Rosen Law Firm, Glancy Prongay & Murray LLP, and Pomerantz LLP—were associated with almost 80% of accounting case filings involving SPACs from 2019 through 2021.
  • Short-seller reports were commonly cited in cases involving SPACs. However, those reports were cited over one and a half times more often in accounting cases as compared with non-accounting cases filed during 2019 through 2021.
  • The median filing lag after a De-SPAC transaction was much greater in 2019–2020 (450 days) than it was in 2021 (106 days) for accounting case filings from 2019 through 2021 involving SPACs.
  • Inappropriate revenue recognition and weaknesses in internal controls were the most common allegations in SPAC accounting cases, followed by allegedly omitted disclosures of related-party transactions.

Because filings of SPAC cases have largely occurred very recently, based on our research only one of these cases had reached settlement as of the end of 2021, and this case included accounting allegations. As more of these cases progress, SPAC cases may play a role in future accounting case settlement trends.


1     “What You Need to Know About SPACs – Updated Investor Bulletin,” U.S. Securities and Exchange Commission, May 25, 2021, https://www.sec.gov/oiea/investor-alerts-and-bulletins/what-you-need-know-about-spacs-investor-bulletin.

2     Jay R. Ritter, “Initial Public Offerings: Updated Statistics,” Warrington College of Business, University of Florida, p. 48, https://site.warrington.ufl.edu/ritter/files/IPO-Statistics.pdf, accessed April 8, 2022.

3   “What You Need to Know About SPACs – Updated Investor Bulletin,” U.S. Securities and Exchange Commission, May 25, 2021, https://www.sec.gov/oiea/investor-alerts-and-bulletins/what-you-need-know-about-spacs-investor-bulletin.

4   SPACs still searching for a target are those that have completed their IPO but not yet announced a De-SPAC transaction target. See SPAC Insider.

5  Paul Munter, Acting Chief Accountant, “Financial Reporting and Auditing Considerations of Companies Merging with SPACs,” U.S. Securities and Exchange Commission, March 31, 2021, https://www.sec.gov/news/public-statement/munter-spac-20200331.

6  John Coates, Acting Director, Division of Corporation Finance, and Paul Munter, Acting Chief Accountant, “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (‘SPACs’),” U.S. Securities and Exchange Commission, April 12, 2021, https://www.sec.gov/news/public-statement/accounting-reporting-warrants-issued-spacs.

7   See Will SPAC Restatement Wave Trigger Shareholder Litigation?, Cornerstone Research (2021), for further discussion.

8   See Securities Class Action Filings2021 Year in Review, Cornerstone Research (2022), for further discussion.

Copyright ©2022 Cornerstone Research

President Trump Orders Expanded Use of Emergency Powers to Streamline Infrastructure

On Thursday, June 4, 2020, President Trump signed an Executive Order (EO) on “Accelerating the Nation’s Economic Recovery from the COVID-19 Emergency by Expediting Infrastructure Investments and Other Activities.” Relying on the COVID-19 declared national emergency, the EO directs federal agencies to invoke their existing emergency authorities under the National Environmental Policy Act (NEPA), Endangered Species Act (ESA), Clean Water Act (CWA), and other laws to expedite economic recovery, including taking “all reasonable measures” to speed infrastructure and public works projects. While consistent with prior administrative directives to expedite project permitting, this latest EO likely will have little practical effect on individual projects and generate increased litigation for projects that rely on it.

The EO aspires to expedite a variety of projects that fall under the jurisdiction of several specific federal agencies:

  • All authorized and appropriated highway and other infrastructure projects within the authority of the U.S. Department of Transportation;
  • All authorized and appropriated civil works projects under the purview of the U.S. Army Corps of Engineers; and
  • All authorized and appropriated infrastructure, energy, environmental, and natural resources projects on federal lands managed by the Department of Defense, the Department of the Interior, and the Department of Agriculture.

The EO’s main action item is periodic reporting by affected federal agencies to the White House. Agency heads must provide a summary report listing all projects expedited under their emergency authorities no later than July 4th (30 days after the EO’s issuance date), and provide status reports every 30 days thereafter. The EO specifies no end date for the national emergency or use of emergency authorities.

The EO principally relies on the government-wide NEPA regulation for emergency situations.  40 C.F.R. § 1506.11. It also invokes the ESA implementing regulation on Section 7 consultations in emergencies (50 C.F.R. § 402.05 2) and the CWA Section 404 regulations and nationwide permits addressing emergency circumstances. Lastly, the EO directs agencies to review “other authorities” potentially applicable to emergencies, including “all statutes, regulations, and guidance documents that may provide for emergency or expedited treatment (including waivers, exemptions, or other streamlining).”  Overall, the EO intends to allow critical infrastructure and public works projects to move forward more quickly, by abbreviating or waiving legally required environmental reviews, interagency consultation, and public comment.

While the goals of reducing time and paperwork are laudable, the EO will likely be less impactful than other recent efforts (such as One Federal Decision). The emergency exemptions available under NEPA, the ESA, the CWA, and other laws are quite limited pursuant to regulations and case law. They are meant for very narrow or discrete circumstances, not for indefinite national conditions. Moreover, they do not entirely or permanently waive environmental requirements, but rather allow for deferred or alternative procedures that achieve statutory aims. For example, the NEPA emergency regulation provides that when emergency circumstances make it necessary to take actions with significant environmental impacts without observing the typical NEPA process, agencies may consult with the Council on Environmental Quality to make “alternative arrangements” to take such actions. The effort and resources required to develop such “alternative arrangements” may not save time in the overall NEPA review. Nor can an EO legally displace regulations or case law.

Predictably, environmental organizations have already indicated a likely forthcoming challenge to the EO. Though a direct challenge may face jurisdictional obstacles, individual project approvals relying on the EO may be more vulnerable to lawsuits. And given the EO’s focus on timing, preliminary injunction motions at the commencement of lawsuits likely would be a centerpiece of those lawsuits, which likely would offset any advantage that may have been gained from relying on the EO.


© 2020 Beveridge & Diamond PC

U.S., Mexican, and Canadian Officials Conclude First Round of NAFTA Modernization Talks

On August 20, trade officials from the United States, Mexico, and Canada concluded the first round of negotiations to modernize the North American Free Trade Agreement (NAFTA). In a joint statement released following five days of talks, trade officials reiterated their commitment to updating the deal, continuing domestic consultations, and working on draft text. They also pledged their commitment to a comprehensive and accelerated negotiation process to set 21st Century standards and to benefit the citizens of North America.

Their agenda covered a wide range of existing and new NAFTA chapters, including: updating the Rules of Origin, adding and amending trade remedies provisions, addressing transparency, combatting corruption, increasing intellectual property protections, and addressing issues facing financial services and investment. The U.S. reportedly tabled roughly 10 proposals updating existing chapters or proposing new ones. Officials expect the modernized NAFTA deal will include a total of 30 chapters (the current agreement is comprised of 22 chapters and seven annexes).

The NAFTA negotiating teams are being led by Assistant U.S. Trade Representative for the Western Hemisphere John Melle, veteran Canadian trade expert Steve Verheul, and Director of the Embassy of Mexico’s Trade and NAFTA Office Kenneth Smith Ramos. In addition to negotiators, a number of Canadian and Mexican stakeholders – including eight members of the Mexican Senate and 150 representatives of Mexico’s private sector – were present on the margins of the talks. However, U.S. negotiators have acknowledged that their accelerated schedule leaves little time for formal business stakeholders to be included in events like those organized during the Trans-Pacific Partnership talks.

Negotiators are expected to head to Mexico City for the second round of talks from September 1 to 5, and to Canada for their third round in late September (reportedly September 23-27). Negotiators will continue at this rapid pace, moving back to United States in October and planning additional rounds through the end of the year. The NAFTA parties hope to finish talks by the end of 2017 or early 2018, ahead of Mexico’s July 2018 presidential elections.

This post was written by Mayte Gutierrez and Ludmilla L. Savelieff of Squire Patton Boggs (US) LLP © Copyright 2017
For more legal analysis go to The National Law Review

Supreme Court: DOL Can Flip-flop on its Interpretation of Its Own Regulations

Godfrey & Kahn S.C. Law firm

In 2010, the United States Department of Labor (DOL) issued an “Administrator’s Interpretation” stating that DOL would no longer consider employees who perform duties typical of mortgage loan officers to be exempt from the Fair Labor Standards Act’s overtime pay requirements.  This particular ruling revolved around the FLSA’s exemption for administrative employees.

Supreme court DOL FLSA

The DOL’s 2010 stance represented a change of course, as DOL had previously issued an “Opinion Letter” in 2006 stating that mortgage loan officers were generally exempt from the FLSA’s overtime pay requirements under the administrative exemption.  Litigation ensued following the 2010 Administrator’s Interpretation.  The focus of that litigation was a rather technical issue:  Should DOL have followed the formal rulemaking process before it could flip-flop on its interpretation of its own regulations?  You can read more about the details of the litigation here.

On Monday, March 9, 2015, the United States Supreme Court ruled that DOL was not required to follow the formal rulemaking process whenever it took a position that was contrary to previous guidance issued by DOL.

Why does this ruling matter to employers of mortgage loan officers?  Those businesses should classify those employees as non-exempt and evaluate their compensation structures immediately to comply with DOL’s interpretation of the administrative exemption.  Otherwise, these employers run the risk of DOL enforcement actions and private litigation.  Of course, these employers can disregard the DOL’s interpretation and rely on individual merits of their classifications, but they would do so at their peril.

Why does this ruling matter to employers generally?  Based on the Court’s ruling, DOL can arguably change its tune about any interpretation of its own interpretive regulations without any warning to employers.  An emboldened DOL could revisit regulatory interpretations that currently favor employers and flip those interpretations on their head, without warning.  More importantly, the Court’s ruling was not limited to the DOL, which means that other federal administrative agencies (e.g., OSHA) could follow suit, leaving employers with little recourse to challenge such changes of heart.

ARTICLE BY

OF

January 2014 New Jersey Regulatory Developments

Giordano Logo

The following are the most recent health care related regulatory developments as published in the New Jersey Register on January 6, 2014:

  • On January 6, 2014 at 46 N.J.R. 12, the Department of Banking and Insurance published notice of its proposal of amendments to its rules and the proposal of a new rule governing the Small Employer Health Benefits Program.  The amendments were proposed in order to comply with the requirements of the federal Affordable Care Act.
  • On January 6, 2014 at 46 N.J.R. 76, the Department of Human Services published notice of its readoption of its rules governing outpatient mental health service standards.
  • On January 6, 2014 at 46 N.J.R. 77, the Department of Human Services published notice of its adoption of amendments to its rules governing managed health care services for Medicaid and New Jersey FamilyCare beneficiaries.
  • On January 6, 2014 at 46 N.J.R. 77, the Department of Human Services published notice of its readoption of its rules governing independent clinical laboratory services under Medicaid.
  • On January 6, 2014 at 46 N.J.R. 93, the Department of Human Services published notice of its adoption of amendments to its rules governing the scope of practice of athletic trainers outside of schools and professional teams.

Article by:

Beth Christian

Of:

Giordano, Halleran & Ciesla, P.C.

December New Jersey 2013 Health Care Regulatory Developments

Here are the most recent health care related regulatory developments as published in the New Jersey Register in December 2013:

  • On December 2, 2013 at 45 N.J.R. 2478, the Board of Medical Examiners published notice of its adoption of new rules which create the Genetic Counseling Advisory Committee and will require licensure of genetic counselors in the State of New Jersey.
  • On December 2, 2013 at 45 N.J.R. 2465, the Department of Health published notice of its cancellation of certificate of need calls for the following services:  (1) pediatric long-term care; (2) specialized long-term care; and (3) pediatric intensive care beds and services.  In addition, the Department of Health published notice that it was also postponing its certificate of need call for applicants for maternal and child health consortia changes in membership and intermediate and intensive bassinettes.
  • On December 16, 2013 at 45 N.J.R. 2602, the Department of Human Services published notice of its readoption of its rules governing community mental health services.
  • On December 16, 2013 at 45 N.J.R. 2602, the Department of Human Services published notice of its readoption of its rules governing payment for dental services under Medicaid.
  • On December 16, 2013 at 45 N.J.R. 2607, the Board of Physical Therapy Examiners published notice of its readoption of its rules governing the licensure and regulation of physical therapists and physical therapist assistants.
  • On December 16, 2013 at 45 N.J.R. 2618, the State Board of Dentistry published notice of its action on a petition for rulemaking filed by the New Jersey Dental Association requesting that the Board adopt a rule to establish regulatory guidance with respect to the corporate and/or unlicensed practice of dentistry in New Jersey.  This petition was filed following the issuance of a joint staff report on the corporate practice of dentistry by the U.S. Senate Committee on the Judiciary which found that corporations not owned by dentists operated dental clinics under the guise of providing administrative and/or financial management support to licensed dentists.  The Board referred the matter to its Rules and Regulations Committee for further deliberation.

Article by:

Beth Christian

Of:

Giordano, Halleran & Ciesla, P.C.

Varying Maternity Leave Policies Within the Same Company

McBrayer NEW logo 1-10-13

Is it permissible for a company to have separate maternity policies for a corporate office from that of a store location? The concern is of course that a claim of discrimination would be made if different policies were used, and it was right for the question to be asked.  However, what may be surprising is that there is no requirement that employees at different company locations all be offered the same benefits. In fact, it is common for employees in a corporate office to receive different employment packages than those at other locations, such as the company’s retail store or restaurant. In fact, an employer does not have to have the same policies for all employees in the same location in many instances. The key is that a policy not have an adverse impact on any protected groups or result in unintentional discrimination.

Maternity leave can involve a combination of sick leave, personal days, vacation days, short-term disability, and unpaid leave time. Thus, exactly how a maternity leave will be structured for any one employee will likely vary.  It is important to note that if your policy allows women to take paid leave beyond what’s considered medically necessary after childbirth (for instances, to arrange for childcare or bond with the child), then you should also allow male employees to take paternity leave for similar purposes. Not allowing a male to take leave under the same terms and conditions as females, if the leave is not related a pregnancy-related disability, can be considered sex discrimination.  So, realize that in some cases your maternity leave may also require a mirroring paternity leave.

The Family and Medical Leave Act (“FMLA”) should also always be considered. If FMLA eligible, a new parent (including foster and adoptive) may be eligible for 12 weeks of leave (unpaid or paid if the employee has earned or accrued it) that may be used for care of a new child.

Article by:
 of

10 DOs and DON’Ts for Employer Social Media Policies

Odin-Feldman-Pittleman-logo

In recent years, the National Labor Relations Board has actively applied the National Labor Relations Act to social media policies. The Act exists to protect employees’ right to act together to address their terms and conditions of employment. What many employers fail to realize is that the Act applies to union and non-unionized employers. With the Board’s increased scrutiny of social media policies, including review of non-unionized employers’ policies, the following list of dos and don’ts is meant to assist employers in drafting or reviewing their social media policies.

1. DON’T have a policy prohibiting an employee from releasing confidential information. The Board has found that such an overbroad provision would be construed by employees as prohibiting them from discussing information that could relate to their terms and conditions of employment, such as wages.

2. DO have a policy that advises employees to maintain the confidentiality of the employer’s trade secrets and private or confidential information. The Board advises employers to define and provide examples of trade secrets or confidential information. However, the Board cautions employers to consider whether their definition of trade secrets or confidential information would include information related to employees’ terms and conditions of employment.

3. DON’T have a policy prohibiting employees from commenting on any legal matters, including pending litigation. The Board found that such a policy would unlawfully prohibit discussion about potential legal claims against an employer.

4. DO have a policy prohibiting employees from posting attorney-client privileged information. The Board recognizes an employer’s interest in protecting privileged information.

5. DON’T have a policy prohibiting employees from making disparaging remarks about the employer. The Board held that such a policy would have a chilling effect on employees in the exercise of their rights to discuss their terms and conditions of employment.

6. DO have policy that prohibits employees from making defamatory statements on social media about the employer, customers, and vendors, and generally remind employees to be honest and accurate.

7. DON’T have a policy advising employees to check with the company to see if the post is acceptable, if the employee has any doubt about whether it is prohibited. The Board held that any rule that requires permission from the employer as a precondition is an unlawful restriction of the employee’s rights under the Act.

8. DO have a policy that prohibits employees from representing any opinion or statement as the policy or view of the employer without prior authorization. Advise employees to include a disclaimer such as “The postings on this site are my own and do not necessarily reflect the views of the [Employer].”

9. DON’T have a policy prohibiting negative conversations about co-workers or supervisors. The Board held that without further clarification or examples, such a policy would have a chilling effect on employees.

10. DO advise employees to avoid posts that reasonably could be viewed as malicious, obscene, threatening or intimidating, or might constitute harassment or bullying. Provide examples of such conduct such as offensive posts intentionally mean to harm someone’s reputation or posts that could contribute to a hostile work environment on the basis of a race, sex, disability, religion or any other status protected by applicable state or federal law.

Read more: http://ecommercelaw.typepad.com/ecommerce_law/2013/10/ten-dos-and-donts-of-employer-social-media-policies.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+E-commerceLaw+%28E-Commerce+Law%29#ixzz2ir3v2KvK

Article By:

 of

Federal Court Narrows Claims Surrounding “HAPPY BIRTHDAY TO YOU” Copyright Suit

MintzLogo2010_Black

Following up on a previous post regarding the lawsuit winding its way through federal court seeking clarity on whether the music publisher Warner Chappell owns or has the exclusive right to license the copyright in the ubiquitous “Happy Birthday to You” song, U.S. District Judge George H. King (Central District of California) has ordered that certain tangential claims be stayed until further notice, while the case will move forward on the central claim, essentially whether Warner’s copyright in the song is valid and enforceable or not.

Judge King’s order confirms the parties’ agreement at an October 7th hearing to bifurcate (separate) the central claim from the remaining claims (seeking an injunction against Warner, and a variety of related claims such as unfair competition, false advertising, and breach of contract) at least through the summary judgment phase of the central claim.  The central claim alone will proceed for the time being allowing the parties and the Court to focus on what is truly the dominating question in this case.

In his order Judge King also declined to apply a four-year statute of limitations to the central claim instead of the traditional copyright infringement three-year period.  Plaintiffs claimed that unlike a traditional copyright infringement action where a plaintiff alleges a defendant infringed its copyright, this is a “declaratory judgment” action involving a copyright, that is to say one where plaintiffs are preemptively bringing suit so the Court can decide whether Warner even has rights it can assert.  Basically instead of asserting its purported rights, Warner is being forced into a suit to defend its rights.  Despite the procedural change however, the analysis and issues are very similar to a traditional copyright infringement action.  The question Judge King has to resolve was, since the Declaratory Judgment Act (which permits this type of suit) does not contain its own statute of limitations, plaintiffs argued that the Court should instead use the four-year period applicable to California’s unfair competition claims (one of those ancillary claims Judge King stayed in this same order).  Judge King declined, holding that because the Declaratory Judgment Act is merely a procedural vehicle and the substantive rights being challenged are copyright-based under the Copyright Act, the best statute of limitations period is not California’s four-year period, but rather the Copyright Act’s three-year period.  He therefore dismissed two plaintiffs whose claims were time-barred by the new shorter period and gave them three weeks to re-file if they can/chose to.

Judge King’s order is clearly going to focus the parties and the court on the central issue, whether Warner has a valid enforceable copyright in the “Happy Birthday to You” song.  We will continue to closely watch this one as it proceeds.

Article By:

 of