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In A New Cybersecurity Regime and a New Regulation to Mandate Secure Information Systems for Government Contractors, Cybermy colleague Travis Mullaney and I discuss Congress’ recent enactment of a wave of legislation to address ongoing cybersecurity threats, the Executive Branch’s recent adoption of new cybersecurity regulations, and other Federal initiatives that are underway and that will bring additional promised change requiring enhanced cybersecurity protections. In our Advisory, we discuss what government contractors need to do to prepare for these changes.

Photo:  Intel Free Press, Computer Security, Taken Sep. 4, 2012 – Creative Commons

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On May 20, 2016, the U.S. Court of Appeals for the Eighth Circuit, in Ebert, et al., v. General Mills, Inc., reversed the federal district court’s decision to grant class certification in an environmental contamination lawsuit. The district court had found that the requisites of Federal Rule of Civil Procedure 23 had been satisfied with respect to the proposed class of “all persons and non-governmental entities that own residential property within the ‘Class Area.'” The proposed class members were expected to assert five legal claims: (1) violation of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); (2) common law negligence; (3) private nuisance; (4) willful and wanton misconduct; and (5) violation of the Resource Conservation and Recovery Act (RCRA). The Eight Circuit disagreed with the district courts findings, instead concluding that the proposed class lacks the requisite commonality and cohesiveness to satisfy Rule 23.

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In U.S. Department of Labor More Than Doubles Minimum Salary Levels for FLSA Overtime Exemptions, Pillsbury attorneys Julia Judish, Rebecca Carr Rizzo and John Scalia discuss the U.S. Department of Labor’s much-anticipated Final Rule amending the Fair Labor Standards Act regulations implementing the exemption from minimum wage and overtime pay for executive, administrative, and professional employees (EAP) and for highly compensated employees (HCE). A projected 4.2 million exempt employees may be impacted by the new rule. Employers have six months to come into compliance with the new rule.

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On May 17, 2016, the Supreme Judicial Court of Massachusetts, in Isabel Kain & Others v. Department of Environmental Protection, held that the various existing greenhouse gas rules and initiatives promulgated by the Commonwealth of Massachusetts Department of Environmental Protection (DEP) did not satisfy the strict requirements of the state’s Global Warming Solutions Act. The purpose of the Act “is to attain actual, measurable, and permanent emissions reductions in the Commonwealth.” According to the Court, the unambiguous language of Section 3 (d) of the Act “requires the department to promulgate regulations that establish volumetric limits on multiple greenhouse gas emissions sources, expressed in carbon dioxide equivalents, and that such limits must decline on an annual basis.” DEP’s duty under the law was described by DEP as being mostly aspirational, but the Court held this was insufficient.

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According to the Ninth Circuit Court of Appeals, in Ash Grove Cement Co. v. Liberty Mutual Ins. Co., an unpublished opinion applying Oregon law, an insurer’s duty to defend begins with a “104(e) letter” from the EPA and continues for the duration of the regulatory process. In A “Suit” by Any Other Name: Ninth Circuit Rules CERCLA 104(e) Letter Triggers Duty to Defend, Pillsbury attorney discusses the Ash Grove ruling.

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A recent U.S. Court of Appeals for the Second Circuit ruling is an important decision for corporations with foreign operations. In 2011, the U.S. Court of Appeals for the Second Circuit, in Kiobel v. Royal Dutch Petroleum Co., 642 F.3d 591 (2nd Cir. 2011), held that the Alien Tort Statute (ATS) does not regulate corporate conduct because customary international law does not recognize corporate liability, and therefore the litigation against the defendant could not proceed in the federal courts on the basis of the ATS.  The defendant was alleged to have violated environmental human rights in the Nigeria. That ruling was very controversial, and  an appeal was made to the U.S. Supreme Court, which upheld that ruling, but on different grounds. The Court held that the ATS is subject to a presumption against the extraterritorial application of domestic statutes, and that presumption had not been overcome by the plaintiffs. Other circuit have issued rulings which disagreed with the Second Circuit, but the original Kiobel decision is still the law of the circuit.

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This blog, although not brief, is a brief report on some of the significant environmental law and administrative cases decided in late December and the first quarter of 2016.

U.S. SUPREME COURT

FERC Final Rule re Demand Response Valid. On January 25, the Court, in FERC v. Electric Power Supply Assoc., reversed the D.C. Court of Appeals which had held that a final rule of FERC governing the “demand response” in which operators of wholesale electricity markets (regulated by FERC) pay electricity consumers (arguably subject only to state regulation) for commitments not to use electricity at certain times (such as those times when the demand for this power is greatest) was invalid. The Court held that the rule does not cross the lines setting the boundaries between the states and the federal government regarding the exercise of regulatory power over the sale of electricity.

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In Implications for the Power Sector of Recent Rulings by U.S. Supreme Court and FERC, Pillsbury attorney Michael Hindus, discusses an important issue the power industry is currently facing — the tension federal and state roles in power supply planning. Of note, is the U.S. Supreme Court’s April 19 decision in Hughes v. Talen Energy Marketing LLC et al. wherein the Court struck down on federal pre-emption grounds a Maryland program intended to support construction of a new 725 MW natural gas-fired generating plant in Maryland after concluding that the program invaded “FERC’s [exclusive] regulatory turf” over determination of wholesale rates for electricity. This was followed within days by FERC blocking the implementation of two Purchase Power Agreements approved by the Ohio Public Utilities Commission just days later. The tension likely will continue, and the sparring over this issue could intensify, given the states’ efforts to support continued operation of existing generating units and construction of new plants.

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In EPA Charts Middle Path for Making “Stationary Source” and “Major Source” Determinations, Matt Morrison and Bryan Stockton discuss the EPA’s new final rule applicable to upstream and midstream emission sources in the oil and gas sector. In particular, they discuss the EPA’s new definition of “adjacent,” a definition that is a key factor in determining whether there is a single “stationary source” for purposes of the Prevention of Significant Deterioration and Nonattainment New Source Review programs or a “major source” for purposes of the Clean Air Act Title V operating permit program.

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Did you know that California’s Contractors’ State License Law, Bus. & Prof. Code §§ 7000 et seq., requires licensees to report various information to the Contractors State License Board (CSLB) “within 90 days” of the effective date or event? ninetyFailure to report required events or information could result in the automatic suspension of your license and, in some cases, revocation of your license for 1 to 5 years. Some of these triggers include:

Changes in Personnel (Bus. & Prof. Code § 7076)

California requires that certain persons be listed on the contractor’s license application and the licensee to otherwise keep the CSLB informed regarding certain persons affiliated with the license. Of course the qualifier for the license, i.e., the responsible managing officer (RMO) or responsible managing employee (RME) for each license classification must be identified. In addition, California corporations are required to provide the names of the president, secretary, and treasurer of the licensee. In contrast, foreign corporations are only required to provide the name of the president of the licensee. (Recall that officers that are identified will be required to be fingerprinted and undergo the background check.) When individuals listed on the license change, the CSLB requires the licensee to provide notice of such changes. The CSLB provides forms to change the following persons listed on a license:

New Qualifier

Each California contractor’s license classification requires a qualifier, i.e., an individual that can pass any required trade exam and has the requisite experience. If a licensee will be unable to replace an exiting RME or RMO within the requisite 90-day period, a 90-day extension can be requested. An extension request will only be considered under certain circumstances, including that an application for replacing the qualifier has been filed, and only if timely sought. The CSLB provides forms to dissociate the qualifier and to replace him/her:

Change of Business Name or Address

A licensee may change its name if the new name does not indicate a change in the business entity, that the licensee qualifies for a classification other than the one(s) in which it is  currently licensed, or a personnel change. Before changing its name with the CSLB, the licensee must change the name as registered with the Secretary of State’s Office; such a change may not be necessary if the licensee is adding a DBA to the existing corporate name. The CSLB provides a form to change your business name or address.

Changes to the Licensee Entity

Beware that a “change in business entity” likely will require a new contractor’s license (Bus. & Prof. Code § 7075.1). For example, if a general partner or qualifying partner leaves the partnership, the partnership license must be canceled, and if a corporation dissolves, merges, or surrenders the right to do business in California through the Secretary of State’s Office, the contractor license must be canceled. With regard to the latter, if the registration number assigned by the Secretary of State’s Office to a licensee changes, a new contractor license number will be required for the new corporation. The CSLB provides forms to cancel your license and to continue and reassign your license, if permitted:

Changes to Required Bond(s)/Worker’s Compensation Insurance

If required, failure to have the required bond(s) and worker’s compensation insurance likely will expose your license to suspension until cured. With regard to the former, the CSLB can accept a bond as of its effective date, even though it was not received within 90 days retroactive to the bond’s effective date if you file a Request for Bond Acceptance.

Proof of Payment of a Citation, Arbitration Award and Judgment

Failure to timely pay a “construction-related” small claims court judgment or civil court judgment, or CSLB citation or arbitration decision  and, more importantly, provide the CSLB with proof of payment will expose the licensee to immediate suspension of its license. With regard to payment of an arbitration award or judgment, care should be taken regarding the latter point. For CSLB arbitration awards, payment may be delivered to the CSLB for ultimate delivery to the consumer. For other payments, be sure to obtain some sort of proof of acceptance of the payment – a copy of a check, even a cashier’s check or money order is not proof that it was delivered to the payee.

Miscellaneous Requirements

Beware of other miscellaneous notice-related requirements, including the following:

Other Events With a Shorter Window for Resolution

Don’t assume that you will always have 90 days to report an event to the CSLB.  Typically communications from the CSLB will indicated when a response is required and you should take care to promptly comply with any such deadlines. If you are unsure, review the CSLB’s website for guidance or call to confirm what rule applies.  Events with shorter reporting deadlines include:

  • Payment of a Citation ~ Due within 15 days of issuance (barring appeal)
  • Payment of Amounts Due from a CSLB Arbitration Decision ~ Due within 30 days
  • Proof of Resolution of Outstanding Liability ~ Due within 60 days

California is not the only state that requires licensees to report events like those identified above. Licensees should be aware of these common triggers to reporting obligations and take care when their business operations are undergoing change, including, but not limited to, changes in business operations and key personnel, or undergoing turmoil, including, by way of example only, a troubled project.

Photo:  Steve Bowbrick, 90, Taken April 13, 2010 – Creative Commons