Recently, we’ve been warning employers that in order to have a legally compliant unpaid internship available, certain specific conditions had to be met.  If those conditions were not met, employers ran the risk of facing liability for unpaid wages for someone they classified as an unpaid intern.  The factors that have been in place until this month are as follows: The internship is similar to training that would be given in an educational environment. The internship is for the benefit of the intern. The intern does not replace regular employees, but works under close supervision of existing staff. The employer derives no immediate advantage from activities of the intern, and may even be impeded. The intern is not necessarily entitled to a job offer at the conclusion of work. The employer and intern understand that the intern is not entitled to wages. An employer/intern relationship had to meet all of those factors to be a legal unpaid internship.  Despite the previous DOL test, some federal courts considered instead who the “primary beneficiary” was to determine if an unpaid intern was actually an employee entitled to wages.  The test considers the economic reality between the employer and intern. Based on that test, the DOL has issued new factors to be used when determining if an intern can legally be an unpaid intern.  Unlike the pre-2018 test, the employer/intern relationship does not have to meet all of these factors to be a legal unpaid internship, and no single factor is determinative.  Rather, all of these factors will be considered and weighed based on the facts of any particular case.  The new seven-factor test is as follows: The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Leah Tarantino Cintineo and David M. Tang have been elected partners in the law firm of Underberg & Kessler LLP, effective January 1, 2018. Leah is a partner in the firm’s Litigation practice group.  She focuses her practice on matrimonial and family law, representing individual clients in litigated and collaborative divorce, child custody, child support, and family offense proceedings. She also drafts separation and prenuptial agreements, and qualified domestic relations orders. Leah earned a B.A. from State University of New York at Geneseo, and is a graduate of Albany Law School.  She is a member of the Board of Directors of Society for the Protection and Care of Children, and also a member of the Association of Collaborative Family Law Attorneys. Leah was named a 2016-2017 Upstate New York Super Lawyer “Rising Star”, a Daily Record 2015 Up & Coming Attorney, and a finalist for the Rochester Business Journal’s 2016 Athena Young Professional Award. David is a partner in the firm’s Litigation, Health Care and Creditor’s Rights practice groups. He represents business and individual clients in state and federal courts, and in arbitrations. He also represents health care entities, creditors and equity holders in a variety of litigated and administrative proceedings.  David holds a B.A. from Cornell University, and is a graduate of Syracuse University College of Law.  He is a member of the Board of Directors for the Center for Dispute Settlement and St. John’s Foundation, and a member of the Board of Trustees of WXXI Public Broadcasting and The Little Theatre.  David was named a 2015-2017 Upstate New York Super Lawyer “Rising Star”, and is a past recipient of the Rochester Business Journal’s Forty Under 40 award. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Justin P. Alexander has joined Underberg & Kessler as an associate in our Rochester, New York office. Justin will focus his practice in commercial real estate.  He earned his B.A. from the University of Pennsylvania, and his J.D. from Temple University Beasley School of Law. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Over the years the U.S. Environmental Protection Agency (EPA) has regularly settled litigation brought by environmental interest groups and stakeholders through consent decrees and settlement agreements that force EPA action or regulatory changes by court order rather than through normal regulatory procedures. This practice, termed “sue and settle,” presents a number of problems to routine and transparent enforcement of the country’s environmental statutes and regulations. On Oct. 16, EPA Administrator Scott Pruitt issued a directive ending the practice by EPA and implementing a number of procedural requirements for EPA litigation and settlement activities. In many instances, outside environmental groups commenced litigation to challenge or enforce various aspects of the EPA’s regulatory or statutory actions in an effort to compel the EPA to move in a specific direction. The sue and settle practice is aided by many U.S. environmental statutes, such as the Clean Air Act and Clean Water Act, which empower private interest group litigation against the EPA when statutory deadlines or requirements are not met, in exchange for awards of attorney’s fees to prevailing parties. This has been compounded by forum shopping across the country for favorable district courts, which often handed down nationwide rulings on environmental regulatory matters. Under the past several presidential administrations, EPA routinely negotiated settlements and consent decrees in litigation with the plaintiffs that would exclude key stakeholders and states, and then relinquished EPA control or discretion over environmental priorities and responsibilities to the litigants and the courts through the settlement or decree. The numbers varied, but the practice was used heavily by special interest environmental groups in the Clean Air Act area under the Clinton Administration (27), George W. Bush first term (38), second Bush term (28), Obama first term (60), and Obama second term (77). Under the Obama Administration, the practice increased significantly and the nature of the cases was far-reaching for EPA. In just the CAA area, the Obama Administration entered into more settlements (137) than the prior administrations did during the course of three terms. Based on a sampling of cases reviewed by the U.S. Chamber of Commerce, the regulatory areas affected by sue and settle span the gamut of EPA environmental regulatory discretion. The settlements have significant regulatory cost impacts on the states and affected parties, such as the following: 2015 Clean Power Plan – between $5.1 and $8.4 billion annual costs 2013 Revisions to CAA PM 2.5 NAAQs – up to $350 million annual costs Chesapeake Bay Clean Water Rules – up to $6 billion annual costs 2011-2016 Regional Haze Rules – more than $5 billion additional costs In his Memorandum declaring the end of sue and settle, EPA Administrator Pruitt stated that the practice “undermines the fundamental principles of government that I outlined on my first day: (1) the importance of process, (2) adherence to the rule of law, and (3) the applicability of cooperative federalism.” Additionally, he wrote that “sue and settle has been adopted to resolve lawsuits through consent decrees in a way that bound the agency to judicially enforceable actions and timelines that curtailed careful agency consideration. This violates due process, the rule of law, and cooperative federalism.” The EPA’s Directive Promoting Transparency and Public Participation in Consent Decrees and Settlement Agreement requires a number of important actions by the agency to improve information and transparency. Significantly, the EPA will implement a number of procedures including: publishing an online notice of intent to sue list within 15 days of EPA’s receipt of the notice; publication online of a complaint or petition within 15 days of service on EPA; direct notice to any affected states or regulated entities of a complaint or petition, and appropriate steps by EPA to attain participation of them in the consent decree and settlement negotiation process; publication of a searchable, categorized, online list of consent decrees and settlement agreements governing agency action; and EPA no longer entering into consent decrees where the court lacks authority to order action outside of litigation or relinquishing EPA’s discretionary authority. In addition, the Directive includes two regulatory procedural safeguards for settlements. In the event that the consent decree or settlement requires a deadline for EPA to issue a final rule, it must provide adequate time to modify the rule after notice and comment, and EPA consideration of agency review and comments. Further, EPA will post online and provide a 30-day public comment period of any proposed consent decree or draft settlement agreement to resolve claims against the agency, as well as providing time for the agency to withdraw, modify or proceed with the settlement. In light of the significant regulatory costs and lack of transparency in sue and settle, a variety of business groups support the EPA’s new policy on settlements. Notably, the Chamber of Commerce’s prior studies and recommendations on changes to the practice were considered in the directive. Similarly, Heritage Foundation and Freedom Works have applauded the change and steps to improve transparency, state involvement and preventing regulation through settlement. The Heritage Foundation’s Darren Bakst, noted that “[i] t’s like these groups have an additional step in the process to influence policy.” Conversely, environmental groups that have used the practice are upset by the new policy and will likely challenge the EPA’s new directive. For example, the Sierra Club’s legal director, Pat Gallagher, said that “[t]here’s a general hostility to citizen’s enforcement of environmental laws, and it reflects the fact that Pruitt doesn’t want these laws enforced.” While the new policy is not likely to cut down on environmental interest group litigation to enforce or modify various environmental regulatory policy, the procedural safeguards have the potential to increase transparency and input on settlements and related regulatory changes. Given the significant regulatory costs associated with administering and complying with EPA’s multitude of environmental regulatory areas, advance notice and input from the states and regulated community seems to be a reasonable requirement prior to significant regulatory revisions. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

My practice is negotiating to be acquired by a hospital system. How can I ensure I do not suffer undue stress through this transaction? It is natural that you will feel some stress occasioned by the transaction process. Expect that there will be some disruption in the operation of the practice. You will be called upon to consider the business and legal terms of transaction documents that are not at all familiar to you. More importantly, you will have to consider all of the changes in your practice operations and employment terms in dealing with a hospital system. Finally, there is uncertainty in being an employee of a new employer. It may ease your mind to understand the process of an acquisition and what in entails. The practice should be using a law firm that is qualified and experienced in health care transactions. Draw upon the experience of the lead attorney to learn the anatomy of a transaction: negotiation of purchase price and high level terms in a letter of intent; due diligence investigation of the practice and it's finances; drafting and negotiating the definitive acquisition agreement; drafting and negotiating the employment agreements, medical records transfer agreement and other ancillary transaction documents; and transaction closing. A well planned and executed transaction requires a team - utilize to the best of their abilities your business manager and outside accountant to work together with the attorney to structure the deal and negotiate favorable terms. Make sure that any and all legal questions you have are posed to the practice attorney and are answered to your satisfaction. To deal with all of these questions, consider the advice you would give to a patient to maintain their health and wellness: Follow healthy lifestyle habits in eating and exercising Maintain control over your work schedule and the additional time required to pursue the transaction Rely on your practice partners, practice business resources, and your team of professional advisors to each carry their full share of the load Maintain a work-life balance and ensure you spend sufficient time with your loved ones and on you own leisure time activities As you are aware from your question, you need to ensure that your personal wellness is not compromised, so that you can continue to deliver safe and effective medical care to your patients while the transaction plays out. Download the Reprint from The Nov/Dec 2017 Edition of 'The Bulletin' by MCMS As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Under new legislation effective July 20, 2017, New York State has taken steps to protect children under age 18 from being subjected to child marriage against their will. Under Federal Law, the U. S. State Department defines child marriage as “a formal marriage or informal union where one or both of the parties is under the age of 18.” Based upon statistics from the New York State Department of Health, approximately 3,853 minors were married in New York State between the years 2000 and 2010, with more than 84% of them being minor girls wed to adult men. Studies have shown that child marriage undermines children’s health, access to education, and economic opportunities. Child marriage also increases the child’s likelihood of experiencing domestic violence. Prior to July 20, 2017, New York State Domestic Relations Law permitted minors who were 16 and 17 years old to marry with parental consent as the only requirement. Notably, there were no provisions in the law that allowed the 16 or 17-year-old minor to voice his/her consent or lack of consent to being married. As long as his/her parent consented, the town or city clerk processing the application for a marriage license was able to issue the marriage license, even if the minor applicant appeared forced, coerced, or visibly upset when applying for the marriage license. Also prior to the new legislation, New York State law allowed children as young as 14 and 15 years old to marry as long as their parents consented and a Judge approved of the marriage license application. While judicial approval was required for these young children to marry, the previous law failed to provide guidelines for the courts to consider when determining whether or not to approve an application. Under the previous law, if a child married before the age of 18, they lacked the rights of a married person over the age of 18 and were unable to apply for divorce or an order of protection on their own. This was a major oversight in the law. While they had the ability to marry, they had no rights to protect themselves thereafter. The new law passed in July 2017 prohibits any child under the age of 17 from being married in New York State. (Domestic Relations Law §15-a) (2017). Pursuant to Domestic Relations Law Section 15, if a child is 17 years old and applies for a marriage license from a town or city clerk, written parental consent, and the written approval of a Supreme Court or Family Court justice or judge is required for them to be married. (Domestic Relations Law §15) (2017). The new law sets forth specific requirements for the Court to follow before approving the application of a 17-year-old to marry. First, the Court is required to appoint an attorney for the child for each minor party immediately upon application for marriage. The attorney for the child must have specific training in domestic violence and forced marriage in order to be appointed. Second, the Court must provide the minor parties notification of his/her rights, including but not limited to, rights in relation to termination of the marriage, child and spousal support, domestic violence services, and how to access public benefits and other services. There is a newly created form that specifically lists the minor’s rights in language that they can understand. Both the Court and the attorney for the child are required to give this form to the minor. Third, the Court is required to do background checks on the parties applying to be married. This includes a review of Family Court Article 10 decisions involving child abuse and neglect for all parties, a review of all warrants issued under the Family Court Act for the parties, a review of whether any orders of protection exist involving the parties, and a check for all parties’ names under the Sex Offender Registry. This ensures that the Court has important background information about the parties prior to approving the marriage of the minor. Fourth, prior to approving the minor’s application, the Court is required to have an in-camera interview separately with each minor party to discuss the application to marry. Finally, after meeting with the minor(s) and before they can approve an application to marry, the Court is required to make written affirmative findings that (1) it is the minor’s own will that the minor enter into the marriage; (2) that the minor is not being compelled by force, threat, persuasion, fraud, coercion or duress; and (3) that the marriage will not endanger the mental, emotional, or physical safety of the minor. If these findings are not made, the Court will deny the application. The new statute provides specific factors for the Court to consider when making these findings. These factors include the age difference between the parties intending to marry, whether there is a power imbalance between the parties intending to be married, whether the parties are incapable of consenting to marriage for want of understanding, whether there is a history of domestic violence between the parties, and whether there is a history of domestic violence between a party and either parties’ or legal guardians’ family members. The law specifies that just because the parents of the minor wish for the minor to be married, that shall not be the sole basis for the Court’s approval of the application. This is significant, because many times it is the minor’s own family that is pressuring the minor to marry due to pregnancy or for religious or cultural reasons. Another important aspect of the new marriage law is that once the Court approves the application of the 17-year-old to get married, the 17-year-old is conferred some of the rights of an adult, including the right to enter into a contract and the right to divorce. It is important to note that this provision does not confer all adult rights on the minor: they are not granted exemptions to specific constitutional and statutory age requirements, such as the right to vote, the use of alcoholic beverages, and other health or safety statutes relative to the minor. For the first time the law provides minors who are married with rights to terminate the marriage if desired. Overall, the new law provides judicial oversight that will protect minors from being forced into marriage against their will. It allows for minors to give full consent to marry and to be informed of the law and their rights. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Employment laws might get tougher for employers in businesses that call workers in at the last minute. Around the holidays, it is especially difficult for certain types of employers, like retail establishments, to predict how much traffic they will get on any given day. Many have traditionally had employees “at the ready” to report to work if needed. Last week, the NYDOL proposed regulations that would require employees who report to work for a shift not scheduled at least 14 days in advance to be paid an extra two hours of call in pay.  Moreover, employees whose shifts are cancelled within 72 hours of the scheduled start time must be paid at least four hours of call in pay.  Likewise, those who are required to be available to report to work or who must contact the employer to confirm whether to report must be paid four hours of call in pay. While these regulations are not set in stone yet, employers must be ready as this is a change that has been a long time coming.  The new regulations do come with some exceptions and will not apply to restaurant or hotel workers.  We will keep you up to date on these proposals. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Josh Beisker has been named the Estates & Trusts practice group chair at Underberg & Kessler LLP. Josh focuses his practice in the areas of complex estate planning, estate and trust administration, business succession planning, and tax law.  He assists clients in developing effective estate planning strategies to be both tax efficient and to protect clients’ assets. He also counsels clients on business law matters, including succession and tax planning. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Underberg & Kessler LLP has been named a 2018 Rochester Tier 1 “Best Law Firm” by U.S. News - Best Lawyers®. The firm’s corporate, municipal law and real estate practices were included in the top tier rankings of Rochester law firms.  The “Best Law Firms” are recognized for professional excellence with persistently impressive ratings from clients and peers. Achieving a ranking signals a unique combination of quality law practice and breadth of legal expertise. The U.S. News – Best Lawyers® “Best Law Firms” rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

A recent decision by the Southern District of New York reminds practitioners of the importance of a well-crafted and detailed engagement letter. On September 12, 2017, Judge William H. Pauley III denied Seward & Kissel, LLP’s Motion to Dismiss the $10 million malpractice claim brought by Mitchell Barack, the founder and sole owner of ESCO Energy Services Company Inc. (“ESCO”). See Barack v. Seward & Kissel, LLP, 16-cv-09664 (S.D.N.Y. Sept. 12, 2017). Barack’s claims arise from Seward & Kissel’s representation of ESCO in its $7.5 million sale to ForceField Energy, Inc. (“ForceField”). The engagement letter entered into by Barack, ESCO and Seward & Kissel describes the scope of the engagement as follows: Representation of the Client as lead transaction counsel in connection with the proposed sale of Client’s common stock to ForceField Energy, Inc. and related agreements, documents and transactions. While Seward & Kissel performed due diligence on ESCO, it did none for ForceField, nor did it discuss whether due diligence should be prepared on ForceField with its client—even after the purchaser showed signs of financial distress. According to the terms of the sale, ESCO was to receive a $2.5 million cash payment at closing, $2.5 million in a deferred payment note collateralized by ForceField’s restricted common stock, and $2.5 million in ForceField’s restricted common stock. A week before closing, ForceField informed Seward & Kissel that it could not pay the $2.5 million cash payment at closing and sought to delay payment of $1.5 million until several months after consummation of the transaction. Seward & Kissel advised Barack to proceed with the closing and that ForceField’s lack of cash was “routine” and “not unusual”. Approximately six months after the closing, the Executive Chairman of ForceField’s Board of Directors was arrested for securities fraud and conspiracy, and a securities fraud class-action was filed against ForceField. The price of ForceField’s stock plummeted and the SEC suspended public trading of ForceField’s shares. ForceField ultimately delisted itself from public trading. Barack’s restricted stock and deferred payment notes were rendered worthless, and he ultimately repurchased ESCO from ForceField for $900,000 and resold it to another buyer for $1 million—much less than the original $7.5 million purchase price. In denying Seward & Kissel’s Motion to Dismiss, the Court notes that the Engagement Letter is “facially broad” and does not “explicitly carve out specific due diligence responsibilities” or “shed light on the scope of Seward & Kissel’s responsibilities.” Essentially, Seward & Kissel’s failure to clarify whether due diligence on ForceField was included in its representation, and subsequent failure to even discuss whether due diligence on the purchaser was appropriate in light of ForceField’s apparent lack of cash, precluded the court from dismissing the malpractice action. This matter serves as a stark reminder of how important it is for the practitioner, whether a solo or a partner of a large New York City firm, to narrowly and specifically define the terms of his or her representation. Rule 1.2 of New York’s Rules of Professional Conduct governs the “Scope of Representation and Allocation of Authority Between Client and Lawyer”. Subsection (c) states: “A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances, the client gives informed consent and where necessary notice is provided to the tribunal and/or opposing counsel.” While it is natural to want to craft an engagement letter with broad language in the hopes of generating additional legal work, defining the scope of the engagement broadly exposes an attorney to malpractice claims. Clearly identifying the client is also essential for avoiding risk in a well-crafted engagement letter. One of the fastest growing areas of malpractice litigation against attorneys is third-party claims made by individuals or entities with no direct representation relationship to the attorney. Clearly defining the client and that the lawyer‘s duties are only to the client will also help to reduce the exposure from third-party suits. When an attorney, for whatever reason, does not intend to establish a client relationship—a non-engagement letter can be just as important as an engagement letter. An attorney can stumble into an attorney-client relationship by receiving confidential information or promising to look into a legal issue. We’ve all had a potential client call, listened to that potential client give their version of events and then declined to take on representation. If the attorney does not make clear to the potential client that representation is declined, the potential client may think an attorney-client relationship has been established by virtue of the initial consultation. Essential to declining a potential client is the non-engagement letter, especially after an initial consultation has taken place. The non-engagement letter should clearly state that no attorney-client relationship has been established and that you are not representing the potential client with regards to the issue discussed. No assessment of the potential client’s claims or defenses should be given. Do include any applicable statute of limitations and a list of local resources that the potential client can use to seek alternate representation. The Monroe County Bar Association’s Lawyer Referral Service is an excellent resource to recommend. When in doubt, narrowly define the scope of your representation—it can always be broadened by an addendum to the engagement letter—and be sure to clearly advise those potential clients whom you cannot represent that no attorney-client relationship has been established. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Eight attorneys from the law firm of Underberg & Kessler LLP have been named 2017 Upstate New York “Super Lawyers”, and four have been named 2017 Upstate New York “Rising Stars”. Jim Coniglio, Ron Hull, Kate Karl, Paul Keneally, Tom Knab, Anna Lynch, Paul Nunes and Margaret Somerset were included in the 2017 “Super Lawyers” group under the following areas of law.  This group represents the top 5% of attorneys in Upstate New York, and is awarded to those attorneys who have attained a high degree of peer recognition and professional achievement. Jim Coniglio – Government Finance Ron Hull – Environmental Kate Karl – Real Estate Paul Keneally – Employment & Labor Tom Knab – Business Litigation Anna Lynch -- Health Care Paul Nunes – Business Litigation Margaret Somerset – Personal Injury Medical Malpractice: Defense Josh Beisker, Leah Cintineo, Colin Ramsey and David Tang were included in the 2017 group of Upstate New York “Rising Stars” under the following areas of law.  This group represents the top 2.5% of lawyers who are under 40 years old or who have been practicing for 10 years or less. Josh Beisker - Estate Planning Leah Tarantino Cintineo – Family Law Colin Ramsey – Construction Litigation David Tang – Creditor Debtor Rights The “Super Lawyer” list is produced annually, through a rigorous selection process of statewide nominations, peer review within the local legal community, and independent research of candidates. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

The Obama Administration adopted a Climate Action Plan in 2013, which addressed climate change issues. Pursuant to the Climate Action Plan, the past administration indicated that “the [EPA] will use its authority through the Significant New Alternatives Policy Program of Section 612 to reduce HFC emissions.” Asserting authority under the Clean Air Act (CAA) in 2015, the United States Environmental Protection Agency (EPA) issued regulations that required manufacturers of hydrofluorocarbons (HFC) used in aerosol spray cans, auto air conditioners, refrigerators and foams, to replace them with non-ozone depleting substances. Under its 2015 rule, EPA moved some HFCs from the list of safe substitutes to the list of prohibited substitutes. EPA cited its authority under Section 612 of the CAA to require continuous replacement of HFCs even after manufacturers replaced ozone depleting substances with non-ozone depleting substances. In Mexichem Fluor Inc. v. EPA, (D.C. Circuit 8/8/17), two manufacturers of HFC 134-a challenged EPA’s rule. The challenge asserted that: EPA’s 2015 rule exceeded its statutory authority under the CAA because the statute did not require replacement of non-ozone depleting HFCs with other substances, and EPA’s 2015 decision to remove HFCs from the list of safe alternatives was arbitrary and capricious. The D.C. Circuit granted the petitions and vacated the 2015 rule to the extent that it required manufacturers to replace HFCs with alternate substances, and remanded the rule to EPA for further proceedings consistent with the opinion. The court wrote that since HFCs are not ozone-depleting substances, Section 612 does not grant EPA authority to regulate replacement of HFCs. Notably, prior to the 2015 rule, EPA acknowledged that Section 612 of the CAA did not grant EPA authority to require replacement of non-ozone depleting substances like HFCs. Thus, the 2015 rule was a major departure from Section 612 and the first time since it was enacted that EPA required replacement of previously acceptable non-ozone depleting substances. The D.C. Circuit’s two to one majority decision was rather direct in concluding that EPA lacked the authority to regulate HFCs. Initially, the Court determined that the agency’s authority to regulate ozone-depleting substances under Section 612 does not grant EPA power to order the replacement of substances that are not ozone depleting, but that contribute to climate change. The court wrote that “Congress has not enacted general climate change legislation” and “[a]though we understand and respect EPA’s overarching effort to fill that legislative void and regulate HFCs, EPA may act only as authorized by Congress.” Further, “EPA has tried to jam a square peg (regulating non-ozone depleting substances that may contribute to climate change) into a round hole (the existing statutory landscape).” Additionally, the court rejected EPA’s position that replacement is an ongoing process. The court determined that once manufacturers replace a non-ozone depleting substance when they change to an alternate substance, the replacement has been made and the “manufacturer no longer makes a product that uses an ozone-depleting substance.” While apparently sympathetic to EPA’s desire to try to regulate climate change, the court noted that recent climate change decisions from the U.S. Supreme Court reflected two key limitations on agency action. First, that however laudable EPA’s policy might be in the area, it does not on its own authorize EPA to act. Utility Air Regulatory Group v. EPA, (U.S. S.Ct. 2014). Rather, “the agency must have statutory authority for the regulations it wants to issue.” Second, congressional inaction on general climate change legislation does not authorize EPA action. Based on recent Supreme Court decisions, the court noted that “[u]nder the Constitution, congressional inaction does not license an agency to take matters into its own hands, even to solve a pressing policy issue such as climate change.” The court’s decision did leave open a sliver of hope for EPA if it pursues an alternative theory of retroactive disapproval of substances. While referenced in its appellate brief in passing, EPA did not fully develop the theory that an agency may use its authority to revise prior administrative decisions based on new developments or considerations. However, the court made clear that EPA would have to satisfactorily prove that: 1) it had statutory or inherent authority to do so; 2) there was a basis for the position and changed interpretation of Section 612; and 3) it has satisfied due process requirements by giving manufacturers fair warning of prohibited substances or conduct. Hence, unless EPA satisfies these three requirements on remand, the court found that the agency may not apply the 2015 rule to require replacement of non-ozone depleting substances with another substance that was approved at the time of the replacement. The D.C. Circuit decision, while focused on repealing a single key aspect of the past administration’s Climate Action Plan, is notable for the limits it recognized on agency action. Despite broad statutory authority under the CAA, the court determined that agency regulations must have a specific statutory mandate. Based on the new Trump administration and leadership at EPA, it will require a bit of time to determine whether the agency scales back its attempt to regulate HFCs or instead asserts the ability to retroactively regulate substances on remand. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.