chemical controls - blank rome llp · • article 3: product prioritization process – ......

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Chemical Controls

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Chemical Controls:

Toxic Substances Control Act: Regulatory and Legislative Initiatives

Judah Prero, Assistant General CounselAmerican Chemistry Council

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Chemical Management Update

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Setting the Stage for 2010

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Congressional Actions: TSCA

The Safe Chemicals Act – S 3209

The Toxic Chemicals Safety Act – HR 5820

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New Safety

StandardSafety

determinations

Prioritization process

Minimum data sets

Hot SpotsConfidential

Business information

Safer Alternatives

Children’s Health

PIC and POPs

ratification

Animal Testing

PreemptionReporting

of Information

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Congressional Actions: Product or Chemical Specific

Consolidated Land Energy and Aquatic Resources Act of 2009 (CLEAR Act) – HR 3534

Mercury Pollution Reduction Act –S 1428, HR 2190

Formaldehyde Standards for Composite Wood Products Act –

S 1660, HR 4805

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Congressional Action: Effect Specific

Endocrine Disruptor Screening

Enhancement Act of 2010

HR 5210

Assistance, Quality and Affordability Act of 2010

(AQAA)HR 5320

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EPA Activities: The Game Plan

New Risk Management

Actions

Increased Public Access to Chemical Information

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EPA: Risk Management –Chemical Action Plans

Identify chemicals that pose a concern

Evaluate data to determine what actions to take to address risks

Initiate appropriate

actions

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EPA: Risk Management

• BPA CAP – 3/10• Benzidine Dyes CAP– 8/10• Hexabromocyclododecane CAP – 8/10• NP/NPE Mixtures CAP – 8/10• Diisocyanates CAP – TBD• Siloxanes CAP - TBD

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EPA: Information Submission

• Inventory Update Rule – next reporting 2011• EDSP – Stage 2: Drinking Water Chemicals• HPV Test Rules – in development• Nanoscale Materials – Test Rules and SNURs in

development

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EPA – Increased Access to Information

•Web access to the TSCA inventory•Chemical Identity CBI Claims policy

•CBI Declassification Initiatives

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Questions?

[email protected]

mailto:[email protected]�

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Chemical Controls:State Law Overview

Presented by:Heather L. Demirjian

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Federal Inaction = State Action

• States’ Principles On Reform Of The Toxic Substances Control Act‒ December 2, 2009‒ 13 States/8 Principles

• 8 Years - @ 18 States - @ 75 Laws

• Bi-Partisan Support*

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Regulatory Approaches

Targeted v. Broad

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Targeted Approach

BPA

Chemicals And Products – Children

Green Cleaning

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Broad Programmatic Approach

• California• Maine• Minnesota• Washington

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California’s Green Chemistry Initiative

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Green Chemistry

• Design Of Chemicals Or Chemical Processes To Reduce Or Eliminate Negative Environmental Impact

• 12 Principles‒ Waste Prevention‒ Design for Degradation‒ Minimize Accident Potential‒ Design Less Hazardous Chemical Synthesis

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California’s Green Chemistry Laws

• Enacted September 29, 2008‒ SB 509 – Toxic Information Clearinghouse

• AB 187 – Chemicals In Consumer Products‒Cal. Health & Saf. Code § 25251, et seq.

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California’s Green Chemistry Laws• Purpose – Reduce Or Eliminate Chemical Hazards In

Consumer Products And The Environment• Provides Mechanism For Review Of Approximately

80,000 Chemicals Sold, Used Or Distributed In California

• Model/Precedent For Treatment Of Chemicals In Commerce

• World Where Products Are Benign By Design• Sustainability – An Overall Goal Of CalEPA

‒ Life-Cycle Thinking• Green Chemistry Initiative

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California’s Green Chemistry Regulations

• Draft Conceptual Flow Chart – February 23, 2010• Why Flow Chart?

‒ To Meet January 1, 2011 Deadline To Implement Regulations

‒ First Of Three Steps Toward Development Of Regulations:

(1) Show Overall Conceptual Process In Flow Chart and

Receive Public Comment Before Moving Forward(2) Outline of Regulatory Language(3) Full Regulatory Language

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• September 13, 2010 – Draft Proposed Safer Consumer Product Alternatives Regulations

• Green Chemistry Alliance • “[R]egulatory Proposal That Is Completely

Unworkable And That Will Have Serious Detrimental Impacts On California’s Economy, Public Health And The Environment.”

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• November 16, 2010 – Revised Draft Proposed Regulations

• Applies To “All Consumer Products Placed Into The Stream of Commerce In California”

• Responsible Entity And Duty To Comply‒ Manufacturer‒ Retailer

• Failure To Comply List• Information Posted To Department’s Website

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• Chemical And Product Data And Information

• Chemical Identification And Description Information

• Information Describing Types, Categories And Classes Of Products Containing Chemicals Of Concern

• Identification Of Intentionally Added Chemicals/Chemical Ingredients And Quantities

• Market Presence Information• Description Of End Of Life

Management Program For Product

Department Can Request/Require That Responsible Entity Provide Information Pertinent To A Product Placed In The Stream Of Commerce Or To A Chemical Contained In That Product

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California’s Green Chemistry Regulations• Article 2: Chemical Prioritization Process

‒ “All Chemicals That Exhibit A Hazard Trait And Are Reasonably Expected To Be Contained In Products Placed Into The Stream Of Commerce In California”

‒ Chemicals Of Concern List (12/21/2011)• Relative Degree Of Threat• Exposure Potential• Reliable Information Substantiating Threat And

Exposure• Scope Of State And Federal Regulatory Programs Or

International Trade Agreements Regulating Chemical• Department Resources

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• Article 2: Chemical Prioritization Process –Continued

• Department Can Only Consider:‒ Carcinogens/Reproductive Toxins‒ Chemicals Identified As Category 1A Or 1B Mutagens

In Annex VI To Regulation (EC) No. 1272/2008 Of European Parliament And Council

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• Article 3: Product Prioritization Process‒ Applies To All Products That Contain A Chemical Of

Concern And Are Reasonably Expected To Be Placed Into The Stream of Commerce As A Consumer Product In California

‒ Children’s Products, Personal Care Products, Household Cleaning Products

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• Article 3: Product Prioritization Process –Continued‒ Priority Products List - Products Determined To Be Of

Highest Priority‒Degree Of Threat Due To Chemical Of Concern

To Public Health Or Environment• Volume Of Product In Stream Of Commerce And Product’s Estimated

Contribution To Volume Of Chemical In Stream Of Commerce

• Potential Exposure To Chemical Of Concern During Useful Life and End-Of-Life Disposal

• Type And Extent Of Consumer Use That Could Result In Public Exposure

• Product Uses Or Management/Disposal Practices That Could Result In The Release Of A Chemical Of Concern To The Environment Which Could Result In An Adverse Impact

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• Article 4: Petition For Inclusion Of Chemical Or Product In Prioritization Process‒ Any Person May Petition Department To Evaluate

Chemical Or Product‒ Must Submit Quality And Comprehensive Data And

Information In Support Of Petition

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California’s Green Chemistry Regulations• Article 5: Alternatives Assessment

‒ Responsible Entity Must Perform AA For Priority Product Or Component

‒ Must Be Reviewed And Verified By Third Party With No Economic Interest In Responsible Entity

‒ AA Work Plan Within 180 Days Of Priority Product Listing• Sufficient To Support Selection Of Alternative (Or Decision To

Retain Current Product In Lieu Of Alternative) And Selection Of Appropriate Regulatory Response

• Identify Goals Of AA And Summarize Types Of Alternatives Anticipated To Be Assessed

• Identify Which Life Cycle Segments Will Be Evaluated

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• Article 5: Alternatives Assessment – Continued• Alternatives Analysis

‒ Chemical Hazard Assessment‒ Exposure Potential Assessment‒ Multi-Media Lifecycle Evaluation‒ Product Function And Performance Analysis‒ Economic Impact Analysis

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California’s Green Chemistry Regulations• Article 5: Alternatives Assessment – Continued

‒ AA Report• Identify All Parties Involved In Funding, Directing And Overseeing AA• Supply Chain Information• Product Information • Supporting Information• Scope Of Life-Cycle Segments• Approach And Methodology• Assessment And Comparison Of Alternatives (Alternatives Cannot

Have Greater Significant Adverse Impacts On Public Health Or Environment Than Impacts Associated With Priority Product)

• Implementation Plan• Proposed Regulatory Responses

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• Article 6: Regulatory Responses‒ No Response Required‒ Product Information For Consumers‒ End-Of-Life Management‒ Product Sales Prohibition‒ Other‒ Exemption

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• Article 9: Confidentiality Of Information‒ At Time Of Submission Of Information

• Assert Claim Of Trade Secret By Identifying Portions Of Information Subject To Claim

• Assert Confidentiality Claim And Disclosure Exemption Under California Public Records Act

‒ Submit Complete Copy Of Document (Including Trade Secret/Confidential Information) And Redacted Copy

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Washington Children’s Safe Products Act

• Requires Dept. Of Ecology And Dept. Of Health To Develop List Of Chemicals Of High Concern To Children‒ Draft List – 66 Chemicals

• Manufacturers Of Children’s Products Must Notify DOE When CHCC IsPresent In Product Above Trigger Level

• Civil Penalty - $5,000/$10,000 Per Violation

• Draft CSPA Reporting Rule• Rev. Code Wash. (ARCW) §70.240.010, et seq.• www.ecy.wa.gov/programs/swfa/cspa/index.html

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Maine Toxic Chemicals In Children’s Products Law(P.L. 2007 Ch. 643)

• Reduce Exposure Of Children/Vulnerable Populations To Chemicals Of High Concern By Substituting Safer Alternatives Where Feasible

• Requires List Of Chemicals Of High Concern

• 2 COHC Must Be Designated As Priority Chemicals By January 1, 2011

• Manufacturer/Distributor Notification To MDEP Of Product Containing Priority Chemical

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Maine Toxic Chemicals In Children’s Products Law(P.L. 2007 Ch. 643)

• Prohibition Of Manufacture, Sale Or Distribution Of Children’s Product Containing Priority Chemical

• “Interstate Clearinghouse” With Other State/Governmental Agencies

• 38 M.R.S. § 1691 – 1699-B; CMR Chapter 880• www.maine.gov/dep/oc/safechem/index.htm

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Michigan Green Chemistry Program

• Executive Directive No. 2006-6

‒ Encourage Research/Development

‒ Scientifically Sound And Cost-Effective

‒ Design/Manufacture/Use That Requires Or Eliminates Use/Generation Of Hazardous Substances

‒ Safer/Less Toxic/Non-Toxic Alternatives

• Green Chemistry Action Plan(September 2008)

‒ 5 Years/3 Phases

• Build Awareness

• Build The Program

• Build The Future

• http://www.michigan.gov/deq/0,1607,7-135-3585_49005---,00.html

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State Chemical Regulation -Issues Spotlight

• Federal Preemption• Trade Secrets/Confidential Business Information• Information Exchange And Agency/Government

Cooperation• Implementation Costs• Clarity Of Standards To Identify Chemicals

Regulated• Voluntary Corporate Action• Importance Of Taking Active Role In Regulatory

Process

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Green Chemistry – Internet Resources

• University Of Massachusetts, Lowell Center For Sustainable Production, State Chemicals Policy Database:

‒ www.chemicalspolicy.org/chemicalspolicy.us.state.database.php

• U.S. Environmental Protection Agency:‒ www.epa.gov/greenchemistry

• California Department of Toxic Substances Control, Green Chemistry

‒ http://www.dtsc.ca.gov/PollutionPrevention/GreenChemistryInitiative/index.cfm

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Chemical Controls:

Doing Business in China:New Chemical Control Laws and Regulations

Presented by:Robert V. Percival

University of Maryland School of Law

Huang JingChina University of Political Science & Law

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Efforts to CoordinateNorth Asian Chemical

Control Policies

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China’s Implementation of the Globally Harmonized System for Classification and Labeling of Chemicals and Mixtures (GHS)

• Safety Data Sheet for Chemical Products Content and Order of Sections (China’s Material Safety Data Sheet Standard) – entered into force Feb. 1, 2009.

• General Rules for Preparation of Precautionary Labels for Chemicals (China’s Labeling Standard) –deadline for labeling May 1, 2010.

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China’s Implementation of the Globally Harmonized System for Classification and Labeling of Chemicals

and Mixtures (GHS) (continued)

• General Rule for Classification and Hazard Communication of Chemicals (China’s Chemical Classification Standard) – follows the GHS classification system with only minor variations

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May 2008: China’s Ministry of Environmental

Protection (MEP) Proposes to Adopt“Measures for the

Environmental Administration ofNew Chemical Substances”

October 15, 2010:New Regulations Take Effect

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Principal Features of Regulations

• Registration and notification is required for all new chemicals regardless of production volume.

• A minimum data set must be provided with its scope increasing with production volume.

• Re-notification is required when production volume increases significantly or the uses of a chemical change or expand.

• Risk assessments must be provided for all new chemicals produced or imported in quantities greater than one metric ton annually.

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Three Risk Categories for New Chemical Substances

• General Chemical Substances – substances not deemed hazardous

• Hazardous Chemical Substances – substances shown by testing to pose a physical, health or environmental hazard

• Substances of Environmental Concern –substances that are persistent, bioaccumulative, or a hazard to ecological or human physical health.

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NOTIFICATION PROCEDURES FOR NEW CHEMICALS

• Regular Notification: applies to substances for which more than 1,000 kg (1 metric ton) is manufactured or imported each year. Filing requirements are more restrictive the larger the quantity (four categories: 1-10 metric tons, 10-100 metric tons, 100-1000 metric tons & more than 1000 metric tons).

• Simplified Notification: applies to substances for which less than 1,000 kg is manufactured or imported annually.

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NOTIFICATION PROCEDURES FOR NEW CHEMICALS (continued)

• Record notification concerning new chemical substances used for scientific research with an annual volume of less than 0.1 tons and for samples of new chemical substances imported solely for testing.

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FOUR “SPECIAL CIRCUMSTANCES”

• New chemicals used as an intermediate or only for export with an annual volume of less than 1 ton

• New chemicals used for scientific research with an annual volume of more than 0.1 ton but less than 1 ton

• Polymers - new chemical substances with less than 2% monomer concentration or a low concern polymer

• New chemicals to be used for technological R&D require notification with annual volume of less than 10 tons in less than 2 years.

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Registration of New Chemicals

• A “general new chemical” can be listed on the national Inventory of Existing Chemical Substances Manufactured or Imported in China (IECSC) five years after approval of the substance.

• Only Chinese-registered companies can perform registration submissions. Non-Chinese companies must use local agents or affiliates to register.

• Organizations must register any new chemical substances being manufactured in or imported to “the bonded areas and export processing areas.”

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New Annual Reporting Requirements

• Registrants using simplified filings approved within the past year are required to report only the total amount of the chemical produced or imported.

• For hazardous substances the annual report must also include information about the use of risk control measures, release and exposure and physical and environmental risks.

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New Annual ReportingRequirements (continued)

• For hazardous substances subject to priority management the annual report must include information on production plans for the year and the use of risk control measures.

• Registration of new chemical substances is required as a condition for examining and approving the environmental impact documents of construction projects producing, processing, or using new chemical substances.

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September 16, 2010 MEP Implementing Documents

• Guideline for notification and registration of new chemical substances

• Supervision and inspection rules for new chemical substances

• The regular notification form and filing instructions for a new chemical substance

• The simplified notification form and filing instructions for a new chemical substance

• The scientific research record notification form and filing instructions for a new chemical substance

• The report and filing instructions on first activity of a new chemical substance

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Criticisms of New Regulations from the Chinese Chemical Industry

• Criticize EU’s REACH Program as forming a trade barrier to chemicals from chemical-producing countries that are not members of the EU.

• The Chinese chemical industry is feeling pressured by the REACH regulations.

• Chinese Ministry of Environmental Protection spokesman believes that REACH “provides an opportunity to improve our own management of chemical substances.”

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Enforcement and Penalties

• Companies are prohibited from manufacturing, processing, or importing a new chemical substance not covered by an applicable registration or scientific research filing.

• Fines range between 10,000 and 30,000 RMB ($1,500 to $4,500).

• The registration certificate can be canceled by the MEP if false or incomplete information is provided.

• Parties filing new chemical registrations must not have received administrative penalty in past 3 years.

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ENFORCEMENT PROBLEMS

• Even though more than 100,000 chemical substances are commercially used in China, only 45,000 are listed on the Inventory of Existing Chemical Substances in China (IECSC).

• In 2009 only about 4,500 of the tens of thousands of Chinese companies registered their chemicals.

• Most Chinese chemical companies do not know about the registration requirements due to insufficient publicity and poor enforcement.

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Comparison of China’s New Chemical Regulations with EU’s REACH Program

• China’s regulations focus solely on new chemical substances rather than requiring the review of already listed chemicals for possible restriction.

• China has no provisions on manufactured products that do not release chemical substances.

• China trails the EU in the issuance of guidelines for chemical safety assessments and reports.

• Chinese registrants are not required to share data with other registrants.

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Will China’s New Chemical Regulations Influence TSCA Reform in the U.S. Congress?• The U.S. chemical industry often argues that more

stringent U.S. regulation of chemicals under TSCA will drive chemical production away from the U.S. and toward China.

• U.S. environmentalists are now citing the new Chinese chemical regulations as including the very elements that should be included by the U.S. Congress in TSCA reform (see, e.g. EDF scientist Richard Denison’s Nov. 16, 2010 blog post).

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CONCLUSION:WILL “CHINA’S

REACH” EXCEEDITS GRASP?

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Chemical Controls:New Chemical Control Laws

in Emerging MarketsPresented by:

Rachel S. Wolfe

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INTERNATIONALCHEMICAL REGULATIONS

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SOUTH KOREA

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South Korea

• Relevant Law:‒ Toxic Chemical Control Act (“TCCA”)

• Government Agency:‒ Ministry of Environment (Environmental Health Policy

Division, Chemicals Safety Division, Hazardous Chemicals Division)

‒ National Institute of Environmental Research

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Background

• The TCCA has five chapters that discuss the following:

• Framework Plan for Hazardous Chemical Control• New Chemical Notification and Risk Assessment• Safe Control of Toxic Chemicals, Banned or

Restricted Chemicals, Responses to Chemical Accidents

• Supplementary Provisions• Penalty Provisions

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TCCA Definitions

• Toxic Chemicals‒ Harmful to human health or the environment

• Observational Chemicals‒ Likely to be harmful to human health or the

environment• Restricted or Banned Chemicals

‒ Severely harmful to human health or the environment• Accident Precaution Chemicals

‒ High acute toxicity, explosive hazard, etc., and therefore present a high risk during an accident

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Chemical Self-Confirmation• A manufacturer or importer of chemicals must submit a

chemical self-confirmation sheet to MOE prior to manufacturing or import.‒ Confirmation of new chemicals, toxic chemicals, observational

chemicals, or restricted chemicals

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Assessment of New and Existing Chemicals

• New chemicals: chemicals produced/introduced in South Korea for the first time (approximately 400 kinds per year)‒ New chemicals are assessed for acute oral toxicity,

genetic toxicity, biodegradability, fish acute toxicity, daphnia toxicity, and algae toxicity

• Existing chemicals: approximately 983 chemicals have been evaluated (as of 2006)‒ Risk assessment for hazardous chemicals‒ Chemical management plans based on survey of

toxicity, distribution, and emissions of chemicals

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Regulation of Chemicals• Toxic Chemicals

‒ Required to register‒ Regulation on importation‒ Regular/irregular facility inspection‒ Post-management for toxic chemical handlers (reporting annual

results, and record keeping requirements)• Restricted Chemicals

‒ Required to obtain business permission‒ MOE provides guidance for managing restricted chemicals during

storage, transportation, and distribution‒ Prior authorization for import is necessary

• Accident Precaution Chemicals‒ Emergency preparedness plan for facilities of a certain size‒ Accident reporting

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TAIWAN

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Background

• Relevant Law:‒ Toxic Chemical Substances Control Act (“TCSCA”)

• Government Agency:‒ Environmental Protection Agency (“EPA”)

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Toxic Chemical Substances Control Act• The TCSCA sees to the management of manufacture,

import, export, sale, use, storage, transport, and disposal of toxic chemicals.

• The TCSCA ensures toxic chemicals are only handled by authorized operators, and appropriately handled, transported and disposed of.

• The entire process is supervised from “cradle to grave.”

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List of Regulated Chemicals• Taiwan’s List of Regulated Chemicals Draws on the

toxic management laws of the United States, Europe, and Japan.

• In order to prevent environmental pollution and protect human health, methods of categorization, grading and positive list management were adopted in risk management, drawing on control methods used by other nations including the US Toxic Substances Control Act, the European List of Notified Chemical Substances (ELINCS), and Japan's Laws Regarding the Evaluation of Chemical Substances and Regulation of their Manufacture.

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Four Classes of Toxic Chemicals• Among the 259 toxic chemicals currently listed by the

EPA, 79 are Class I, 89 are Class II, 64 are Class III, and 77 are Class IV. A total of 45 of these substances are banned and 137 are restricted to use with a permit. As for chemicals not yet listed as regulated substances, the EPA continually collects, analyzes and assesses data according to the Principles for Screening and Identifying Toxic Chemical Substances.

• International trends are also referred to and each year more substances are reviewed and added to the list of regulated chemical substances.

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Bans and Restrictions• The Toxic Chemical Substances Control Act

implements bans and restrictions to promote reductions of toxic chemical substances and ensure safe consumption.

• To understand the environmental status of toxic chemicals, since 1999 the EPA has been carrying out investigation projects on the flow of toxic chemicals in the environment for ten consecutive years. This has resulted in the collection of 15,865 sets of data up to the year 2009.

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The Philippines

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The Philippines

• Relevant Law:‒ Toxic Substances and Hazardous and Nuclear Wastes

Control Act of 1990 (Republic Act 6969)

• Government Agency:‒ Department of Environment and Natural Resources –

Environmental Management Bureau

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Background• In 1990, the Philippine Congress enacted the Toxic

Substances, Hazardous and Nuclear Wastes Control Act, commonly known as Republic Act (RA) 6969, a law designed to respond to increasing problems associated with toxic chemicals and hazardous and nuclear wastes.

• RA 6969 mandates control and management of import, manufacture, process, distribution, use, transport, treatment, and disposal of toxic substances and hazardous and nuclear wastes in the country.

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Application for Import Clearance

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Philippine Inventory of Chemicals and Chemical Substances (“PICCS”)

• PICCS is a list of existing industrial chemicals and chemical substances used, sold, distributed, processed, manufactured, stored, exported, treated, or transported in the Philippines.

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Pre-Manufacture Pre-Import Notification Process (“PMPIN”)

• New chemical substances (those not listed on the PICCS) must undergo the PMPIN process.

• Companies must first notify DENR-EMB of their intent to manufacture, import, distribute, or use a new chemical substance.

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PMPIN Assessment• After receiving the PMPIN notification and appropriate form, the DENR-

EMB, through its Chemical Review Committee, subjects the new chemical to an assessment using the following criteria:

‒ Hazard identification‒ Exposure assessment‒ Dose response assessment‒ Risk characterization‒ Risk management

• After the PMPIN assessment, the DENR-EMB will take one of the following actions:

‒ Issue a PMPIN Compliance Certificate, which serves as a clearance to manufacture or import a new chemical;

‒ Include the new chemical in on a chemical priority list, if it poses unreasonable risks to public health and the environment; or

‒ Return the notification to the company, if the information submitted is incomplete or inaccurate.

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Philippine Priority Chemicals List (“PCL”)

• PCL is a short list of chemicals that have been determined to pose unreasonable risks to public health, workplace, and the environment.

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Chemical Control Order (“CCO”)

• CCO is a policy instrument used by the DENR to prohibit, limit or regulate the use, manufacture, import, export, transport, processing, storage, possession and wholesale of priority chemicals that are determined to be regulated, phased-out, or banned because of the serious risk posed to the environment.

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Japan

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Japan

• Relevant law:‒ Chemical Substances Control Law (“CSCL”)

• Government Agencies:‒ Ministry of Health, Labor and Welfare (“MHLW”)‒ Ministry of Economic Trade and Industry (“METI”)‒ Ministry of the Environment (“MOE”)

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Background

• The CSCL regulates the manufacture and import of persistent, bioaccumulative and toxic chemical substances, such as PCBs.

• New chemical substances cannot be manufactured or imported into Japan until the pre-manufacturing evaluation by METI, MHLW, and MOE has occurred.

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Pre-manufacturing evaluation

• Hazard-based assessment is conducted prior to the manufacture or import of new chemical substances.

• Four subject areas are evaluated by METI, MOE, and MHLW:‒ Biodegradation;‒ Bioaccumulation;‒ Long-term toxicity for human health;‒ Long-term toxicity for plants and animals.

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Monitoring and Regulation• Based on the pre-manufacturing evaluation, METI,

MOE and MHLW classify a substance in one of the following categories:‒ Class I Specified Chemical Substances‒ Class II Specified Chemical Substances‒ Type I Monitoring Chemical Substances ‒ Type II Monitoring Chemical Substances‒ Chemical substance not subject to regulations‒ Chemical substance for which the classification is unclear.

• If the results of the evaluation are unclear, then additional test results will be required.

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CSCL Amendments

• Important amendments:‒ In 2003, the CSCL was amended to provide reduced

notification requirements for low volume production of new chemical substances.

‒ In 2009, the CSCL was amended to strengthen the risk management of all chemical substances, including “existing chemical substances”.

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CANADA

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Canada

• Relevant Laws:‒ Canadian Environmental Protection Act (“CEPA”)‒ New Substances Notification Regulations (“NSNR”)

• Government Agencies:‒ Health Canada‒ Environmental Canada

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Background• CEPA provides for the assessment and/or

management of the environmental and human health impacts of new and existing substances. This includes products of biotechnology, marine pollution, disposal at sea, vehicle, engine and equipment emissions, fuels, hazardous wastes, environmental emergencies and other sources of pollution.

• Any person who intends to import or manufacture a new substance in Canada must submit a notification to the NSNR Program prior to importing or manufacturing the substance.

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New Substance

• Substances not present on the Domestic Substances List (“DSL”) are considered to be “new” and are subject to notification.

• Any company or individual who plans to import or manufacture a substance subject to notification under the Regulations must provide Environment Canada with a New Substances Notification (NSN) package containing all information prescribed in the Regulations prior to import or manufacture.

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The DSL

• The DSL is a compilation of substances that were in Canadian commerce between 1984 and 1986 or that were added to the DSL in accordance with the Canadian Environmental Protection Act, 1999 (CEPA 1999).

• The DSL undergoes regular revisions as new substances qualify for listing through the New Substances assessment process.

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New Substances Notification (“NSN”) Package

• When Environment Canada receives a NSN Package from a company or individual proposing to import or manufacture a new substance, a joint assessment process is carried out with Health Canada to determine whether there is a potential for adverse effects of the substance on the environment and human health.

• The assessment time limit is typically 60 days, but it varies from 5 to 120 days depending on the type of substances and quantities which the companies want to import or manufacture.

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AUSTRALIA

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Background

• Relevant Law:‒ Industrial Chemicals (Notification and Assessment) Act

of 1989

• Government Agency:‒ National Industrial Chemicals Notification and

Assessment Scheme (“NICNAS”) (administered by the National Occupational Health and Safety Commission)

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NICNAS• NICNAS’s activities include:

‒ Assessing industrial chemicals that are new to Australia for their health and environmental effects, before use or release into the environment;

‒ Assessing chemicals that are already in use in Australia (known as “existing chemicals”) in response to concerns about their safety on health and environmental grounds; and

‒ Making risk assessment and safety information on chemicals and their potential occupational health and safety, public health and environmental risks widely available to workers, the public, industry and other governmental agencies.

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Registration with NICNAS

• All importers and/or manufacturers of industrial chemicals for commercial purposes must register with NICNAS, regardless of the quantity of industrial chemicals imported and/or manufactured in that registration year.

• There are three tiers of registration. A company’s registration tier is determined by the total value of industrial chemicals imported and/or manufactured each year.

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Australian Inventory of Chemical Substances (“AICS”)

• AICS is the legal device that distinguishes new from existing chemicals.

• Any chemical not included in AICS is regarded as a new industrial chemical unless it is outside the scope of the Industrial Chemicals (Notification and Assessment) Act 1989 or is otherwise exempt from notification. New industrial chemicals must be notified and assessed before being manufactured or imported into Australia.

• Chemicals on the AICS can be imported or manufactured in Australia without first being notified to NICNAS as New Chemicals.

• AICS has confidential and non-confidential sections.

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Listing of New Chemicals on AICS• All certificate-assessed chemicals are included on

AICS five years of the certificate date. For the interim five years, chemicals are not listed on AICS.

• At the end of five years, the company, which is the holder of the certificate for the assessed chemical is given the opportunity to put the chemical on the confidential section of AICS.

• For a chemical to be listed on the confidential section, an application to NICNAS is required. There are some minimum data requirements for the application.

• An assessed chemical can be listed on the non-confidential section of AICS prior to the five year period.

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Existing Chemical Assessments

• Whereas each new industrial chemical undergoes an assessment before being imported or manufactured in Australia, most of the 38,000 already present in Australia (i.e. existing chemicals) have never had an independent assessment of their potential risks.

• Priority Existing Chemical (“PEC”)

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THANK YOU

1

Climate Change/Greenhouse Gas Emissions Controls

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Climate Change/Greenhouse Gas Emissions:

Overview of EPA'sRecent Regulatory Developments

Presented by:Margaret A. Hill

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EPA Greenhouse Gas Emissions Regulations

• Evolved from April 2, 2007 Supreme Court Case (Mass. v. EPA); Court held that GHGs including Carbon Dioxide, are pollutants covered by the CAA.

• Supreme Court held that EPA is required to determine if GHG emissions from new motor vehicles cause or contribute to air pollution which may endanger public health on welfare.

• On December 9, 2009, EPA signed two distinct findings regarding GHGs under Section 202(a) of the CAA:

‒ Endangerment Finding‒ Cause or Contribute Finding

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EPA Endangerment Finding• Issued on December 15, 2009.

• EPA Administrator determined that current and projected concentration of six GHGs in the atmosphere threaten the public health and welfare of current and future generations:

‒ Carbon Dioxide (CO2)‒ Methane (CH4)‒ Nitrous Oxide (N20)‒ Hydrofluorocarbons (HFCs)‒ Perfluorocarbons (PFCs)‒ Sulfur hexafluoride (SF6)

• EPA set stage for Final Endangerment Finding after releasing its proposed April 2009 finding that combined GHGs from new motor vehicles and engines “cause or contribute to” pollution which affects public health and welfare.

• 380,000 public comments received by EPA.

• EPA determined that major contributors of GHGs include: Electricity Generation (34%); Transportation (28%); and Industry (19%).

• EPA Administrator: EPA required to protect public health and welfare and is not required to wait until harm occurs.

5

Mandatory GHG Reporting Rule• Generally applies to facilities that emit

more than 25,000 TPY of GHGs although some source categories will be required to report even if GHG emissions do not exceed 25,000 ton threshold (sources include: landfills, oil refineries, chemical manufacturers, electricity generators, etc.).

• Rule originated from 2008 Consolidated Appropriations Act which directed EPA to issue a rule by 1/26/09.

• Reporting companies required to self-certify emissions reports.

• State mandatory reporting programs are not preempted; 17 States have developed or are developing such rules.

6

How Will Emissions Be Verified• Self Certification

- Designated representative certifies and submits report

- Rule allows one designated representative for eachfacility and supplier

• EPA verification

- Reports submitted through an electronic system

- Built-in calculation and completeness checks for reporters

- Additional EPA electronic QA and consistency checks

- Site-specific and on-site audits

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7

EPA Vehicle Rule

• Under Final Vehicle Rule (4/1/10), EPA will control GHGs through implementation of GHGs from Light Duty Vehicles.

• Vehicle Rule will take effect with 2012 model year vehicles beginning January 2, 2011 (earliest date 2012 model year vehicles can be sold in United States).

• New standards will apply to new passenger cars, Light Duty Trucks and Medium Duty Passenger Vehicles covering model years 2012-2016.

• Rule was issued in response to Supreme Court’s 2007 decision in Massachusetts v. EPA which held that GHGs are pollutants under the CAA.

8

GHG STANDARDS FOR MEDIUM AND HEAVY DUTY TRUCKS

• EPA and NHTSA also issued proposed standards to raise fuel-efficiency requirements and to reduce GHGs emissions.

• The heavy-duty vehicle sector accounts for six percent of all US GHG emissions and 20% of transportation GHG emissions in 2007.

• New proposed standards are targeted to three categories; combination tractors, heavy-duty pick-up trucks and vans and vocational vehicles.

• Engine and vehicle manufacturers have a number of options for compliance; reduction of idling, making aerodynamic improvements, reducing weight, using direct injection technology or advanced transmission designs.

• Credit options will also be available.

9

December 2000 EPA Johnson Memorandum

• Discussed when air pollutants become subject to regulation under CAA.

• EPA recently reaffirmed the Johnson Memorandum that a pollutant is not subject to regulation (triggering permit and BACT requirements) until a CAA provision or EPA rule requires actual control of pollutant.

• EPA concluded GHGs became subject to regulation for stationary sources with new vehicle rule.

10

EPA TAILORING RULE

• On 5/13/10, EPA issued a Final Rule Setting Thresholds For GHG Emissions that define when permits are required under the PSD and Title V Operating Program for new and existing industrial facilities.

• Rule is designed to “Tailor” CAA Permitting Programs to limit which facilities will be required to obtain PSD and Title V Operating Permits (will include Power Plants, Refineries, and Cement Production Facilities).

• Rule establishes a schedule to initially focus CAA Permitting Programs on the largest sources with the most CAA permitting experience; coverage will be expanded to include largest sources of GHGs that may not have been covered by the CAA for other pollutants.

• Rule is effective as of 1/2/11; EPA asked states if they must revise their regulations to implement the new GHG emissions threshold.s

11

State Programs & State Implementation Plans (SIPs)

• On September 12, 2010, EPA proposed two rules as a follow-up to the Tailoring Rule; one rule proposes a Federal Implementation Plan for states that will not have the authority to issue permits for sources of GHGs; the second rule sets forth EPA’s Findings that 13 states do not have the requisite authority and requires these states to revise their SIPs (Texas responded to EPA that it will not issue permits for GHGs.)

• EPA planned to finalize the Rules by 12/01/10 and request a SIP call.

12

State Programs & State Implementation Plans (SIPs)

• Significance of EPA’s position is that sources requiring a PSD Permit under the Tailoring Rule will be unable to obtain a required PSD Permit and will be unable to construct or modify a source after 1/2/11 if they are located in an area with a deficient SIP.

• Recent Seventh Circuit Decision: U.S. v. Cinergy Corp., may pose a problem for EPA since the Court held that the CAA does not authorize sanctions for conduct that complies with an EPA-approved SIP, even if the SIP is outdated since the SIP (and the Permit) shields the company from EPA enforcement.

• On 10/30/2009, EPA issued the GHG Reporting Rule applicable to approximately 10,000 facilities. Additional source categories added on 7/12/10.

13

EPA GUIDANCE ON EVALUATING GHG EMISSION REDUCTION TECHNOLOGY FOR INDUSTRIAL SOURCES

• EPA Guidance on evaluating GHG emission reduction technology for industrial sources.

• New and modified emission sources must use BACT to limit air pollutants (state agencies will be involved in permitting process).

• Series-specific white papers are available to evaluate control technologies.

• Greenhouse gas emission strategies database available; provides information on sector-specific strategies and technologies. http://ghg.ie.unc.edu:8080/GHGMDB/

http://ghg.ie.unc.edu:8080/GHGMDB/�

14

GUIDANCE CLARIFIES THAT TAILORING RULE DOES NOT CHANGE EXISTING PSD APPLICABILITY PROCESS

• Two-Part calculation to be used: Need to evaluate facility’s emissions from a “Global Warming” potential, and traditional mass basis.

• Emphasis on using energy efficiency technologies at a source.

15

Climate Change/Greenhouse Gas Emissions:

Overview of Regional and State Climate Change Actions

Presented by:Charles E. Wagner

16

Regional and State Climate Change Action – Why?

• U.S. States and Regions have acted to address climate change in the absence of federal legislation and regulation.

• Individual States are major sources of GHG emissions.• State authority over economic sectors – power generation

and agriculture.• States are both leaders and innovators of climate change

action.• Economic and environmental impact on States – rising sea

levels in coastal states; impact on agricultural productivity; and worsening droughts and wildfire risks.

• States have been able to muster bipartisan support to take action.

17

Regional Climate Change Action

• Regional Greenhouse Gas Initiative‒ Connecticut, Delaware, Maine, Maryland,

Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.

‒ Established December 2005.‒ First mandatory CO2 cap-and-trade program.‒ Caps power plant CO2 emissions and allows emissions

trading and auctions.‒ Goal 10% reduction form 2009 levels by 2019.

18


• Midwest Greenhouse Gas Reduction Accord‒ Members: Iowa, Illinois, Kansas, Manitoba, Michigan,

Minnesota, and Wisconsin; Observers: Indiana, Ohio, Ontario, and South Dakota.

‒ Established November 2007.‒ Goals: Establish regional GHG reduction targets

including long-range target between 60-80%; establish multi-sector cap-and-trade system.

19


• Western Climate Initiative‒ Members: Arizona, California, New Mexico, Oregon,

and Washington, Utah, Montana, British Columbia, Manitoba, Ontario, and Quebec; Observers: Alaska, Colorado, Idaho, Kansas, Nevada, and Wyoming, Nova Scotia Saskatchewan, Baja California, Chihuahua, Coahuila, Nuevo Leon, Sonora, and Tamaulipas.

‒ Established February 2007.‒ 15% reduction from 2005 levels by 2020.‒ Multi-sector cap-and-trade system.

20


• Energy Security and Climate Stewardship Platform for the Midwest‒ Iowa, Illinois, Indiana, Kansas, Manitoba, Michigan,

Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.

‒ Established November 2007.‒ Goals: carbon capture and storage development,

renewable electricity development, energy efficiency improvements, and increased availability of low-carbon transportation fuels.

21


• Transportation and Climate Initiative‒ Connecticut, Delaware, District of Columbia, Maine,

Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.

‒ Established June 2010.‒ Regional transportation approach to help states build

the clean energy economy of the future.‒ Expand safe and reliable transportation options,

attract federal investment, lower transportation costs, improve air quality and public health, and mitigate the transportation sector’s impact on climate change.

22

State Climate Change Action

• Climate Change Action Plans• Power Generation Emission Reductions• Transportation Emission Reductions• Agricultural Emission Reductions

23


• Climate Change Action Plans‒ Almost 40 states have comprehensive action plans and

several are in the process of revising their initial plans.‒ Establish GHG emissions inventories.‒ Establish boards, commissions and other advisory

groups to develop and implement plans.‒ Decision making tool for cost-effective GHG emission

reductions.‒ Tailored to each state’s economic and political

structure.

24


• Power Generation Emission Reductions‒ Renewable portfolio standards.‒ Green pricing.‒ Appliance efficiency standards (beyond federal

standards).‒ Energy efficiency resource standards for generation

and rate payers.‒ Mandatory GHG emission limits.‒ Carbon capture and storage

25


• Transportation Emission Reductions‒ Incentives for alternative fuels and alternative fueled

vehicles.‒ California light-duty vehicle GHG emissions standard.‒ Implement low-carbon fuel standards.‒ Convert state-owned fleets to alternative fuels.

26


• Agricultural Emission Reductions‒ Promote soil conservation to increase carbon stored in

soil.‒ Promote the use of biomass – crops and residual

materials and animal wastes.‒ Forest management.

27


• Enforceable GHG Emission Limits‒ California Global Warming Solutions Act – A.B. 32

2006.‒ Proposition 23 overwhelming defeated 61% t0 39%.‒ Cap-and-trade program for utilities and oil refiners.‒ Low-carbon fuel standard.‒ Vehicle GHG emission standards.‒ And more.

28

So Should You Care About Regional and State Climate Change Action?

YES!!!

29

Why?

Because It May Be The Only Game In Town And You May Have To Play --- Even If You

Don’t Want To!!!!

30

Questions?

31

Climate Change/Greenhouse Gas Emissions Controls:

Legislative Efforts in the111th Congress

and the 112th CongressPresented by:

Elizabeth BoehlertBlank Rome Government Relations

Ashley E. DavisBlank Rome Government Relations

3232

111th Congress Recap• Waxman/Markey – Economy-wide cap and trade system. Passed House

Summer 2009.

• Bingaman Energy bill – Federal RES (renewable energy standard) and energy efficiency provisions. No Cap and Trade. Passed Senate Energy and Natural Resources Committee Summer 2009.

• Kerry-Lieberman – GHG cap but different systems for different sectors of the economy (utilities, manufacturing, and transportation.)

• Various other proposals floated by Democratic leaders during summer 2010 but lack of time and lack of support of 60 senators prevented anything else from moving forward.

33

Legislative Delay for EPA Regs?

• Rockefeller (D-WV) two year delay language?

• Appropriations language to deny funds to the EPA?

• More supporters for delay in Congress next year so issue will remain.

34

112th Congress Outlook

• EPA Oversight

• The CLEAR Act

• Possible small energy bills related to “clean” energy standard, natural gas and electric vehicles, or green buildings

3535

Blank Rome Government Relations, LLC

Ashley Davis202.772.5893

[email protected]

Elizabeth Boehlert202.772.5842

[email protected]

Watergate600 New Hampshire Avenue, NW

Washington, DC 20037202.772.5800



36

Climate Change Litigation:

A Logical Extension of American Tort Lawor . . . Standardless Liability?

Presented by:Joseph F. Speelman and

Edward LowenbergExxonMobil, Ret.

37

The Law

• Traditional Products Liability Law — causation, product responsibility

• Environmental Activism — declaration 15 years ago to “legislate by litigation”

• EPA Endangerment finding regarding Greenhouse Gases – CO2

• Rise of Public Nuisance Theory of Liability

38

Public Nuisance Theory

• Restatement III on Product Liability• Lack of success with other legal theories

•Political motivation + contingency fee= climate litigation

• This has been coming for 20 years

39

“What Rough Beast . . .?”

• 2nd Circuit, 4th Circuit, 9th Circuit public nuisance based climate cases — US Supreme Court

• Columbia University Climate ChangeLitigation Center

• And for the defense?

40

What Is The Defense?

• The Defense Must Respond• The Response Must Be Principled• The Response Must Be Coordinated• Points:

‒ Rule of Law . . . not politics‒ Defend American jobs . . . and industry‒ Balance the legal . . . and political debate‒ Utilize Influence Model Designed

for Internet

41

The Defense• Legitimate Science

‒ ClimateGate remembered• Public Nuisance law Must be Kept in

Appropriate Legal Context‒ Professor Jim Henderson — Cornell University

• A Rational Legal Thought Process‒ China – Russia – India – Japan‒ Neil Cavuto — “Give me a break!”

• Finally‒ What is the impact on our economy?‒ What is the impact of one volcano erupting

anywhere in the World?‒ Why is Greenland called “Greenland”?

1

Alien Tort Statute and Foreign Corrupt Practices Act: Potential Liability from Operations Abroad:

Alien Tort Statute Liability UpdatePresented by:

Raymond G. Mullady, Jr.

2

Headlines

• “Second Circuit’s Kiobel decision may end ATS lawsuits against corporations; Supreme Court review likely”

• “Corporate officials may be new targets of ATS suits”

• “Sensitivity to corporate social responsibility remains heightened; transnational companies operating in developing countries advised to step up due diligence”

3

Kiobel

• Kiobel v. Royal Dutch Petroleum, 2010 WL 3611392 (2d Cir. Sept. 17, 2010)‒ Three-judge panel of 2d Circuit ruled that

corporations, in contrast to individuals, are not liable under ATS for violations of international law

‒ Kiobel may signal end to human rights lawsuits against multinational corporations in U.S. federal courts under the ATS

4

Kiobel

• The Kiobel Ruling‒ Suit brought against RDP and related Shell oil

companies in 2002 by Nigerian villagers alleging that Shell aided and abetted acts of murder, rape and looting by Nigerian government

‒ Second Circuit dismissed case, holding that “corporate liability is not a discernable – much less universally recognized – norm of international law that we may apply pursuant to the ATS”

5

Kiobel

• The Kiobel Ruling‒ “Looking to international law, we find . . . that

offenses against the law of nations (i.e., customary international law) for violations of human rights can be charged against States and against individual men and women but not against juridical persons such as corporations. As a result, although international law has sometimes extended the scope of liability for a violation of a given norm to individuals, it has neverextended the scope of liability to a corporation.” Slip op. at 9 (emphasis in original).

6

Kiobel

• The Kiobel Ruling‒ Concurring opinion – Judge Pierre Leval

• Concurred in dismissing case, but on 12(b)(6) (not jurisdictional) grounds

• Disagreed that international law does not allow a U.S. court to impose ATS liability on a corporation

• Lamented that “majority’s rule conflicts with two centuries of federal precedent on the ATS, and deals a blow to the efforts of international law to protect human rights”

7

Alien Tort Statute –28 U.S.C. § 1350 (2010)

“The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States. “

8

Background on ATS

• Enacted in 1789 as part of the first Judiciary Act; text has remained almost unchanged since that time

• ATS laid dormant for over 170 years‒ Judge Friendly called it a “legal Lohengrin” – “no one

seems to know whence it came.” IIT v. Vencap, Ltd., 519 F.2d 1001, 1015 (2d Cir. 1975)(Friendly, J.)

• Almost no legislative history‒ ATS apparently intended to allow federal courts to

hear violations of customary international law such as piracy and assaults on foreign ambassadors

9

Background on ATS

• ATS given new life in 1980, when 2d Cir. decided Filartiga v. Pena-Irala, 630 F.2d 876, 890 (2d Cir. 1980) ‒ Paraguayan sued former Paraguayan official under ATS

for acts of torture and murder in violation of international law

‒ Court held that ATS provides jurisdiction over (1) tort actions, (2) brought by aliens only, (3) for violations of the law of nations (also called “customary international law”) including war crimes and crimes against humanity

10

Background on ATS

• Filartiga – the first of more than 100 suits for human rights violations filed in U.S. district courts over last 30 years

• Two categories of ATS suits:• Against foreign government officials for alleged

human rights abuses committed while in government

• Against U.S. and foreign companies for “aiding and abetting” human rights violations by foreign governments in the countries in which the companies operated

11

Corporations Facing ATS Litigation Since Filartiga

Company CountryArcherDaniels Midland Ivory CoastCargill Ivory Coast Caterpillar Israel (Gaza)Coca-Cola ColumbiaDow Chemical VietnamEli Lilly Brazil ExxonMobil IndonesiaFirestone Liberia

12


Company CountryNestle Ivory CoastOccidental Columbia Pfizer NigeriaRio Tinto Papua New GuineaShell NigeriaTalisman SudanUnocal BurmaYahoo! China

13


• The good news . . . no ATS suit has resulted in a monetary judgment against a major multinational corporation‒ Although several large companies have reached

settlements (Unocal, Yahoo!, Shell)‒ And other cases have been mired in litigation for years

at enormous financial cost and burden to the companies

14

Defenses to ATS Claims

• Three major categories:‒ Jurisdiction and justiciability

• Personal & subject matter jurisdiction• Political question doctrine

‒ Immunity and other preliminary issues• FSIA• Forum non conveniens

‒ Liability of non-state actors• E.g., on theories of aiding and abetting and

accessorial liability, conspiracy, and joint criminal enterprise

15

Sosa v. Alvarez-Machain, 542 U.S. 692 (2004)

• U.S. Supreme Court directly addresses ATS for the first time

• Court dismisses ATS suit for arbitrary detention filed by Mexican national abducted at direction of U.S. government and brought back to U.S. for trial

• Decision reaffirms basic availability of the statute• But doesn’t address all ATS issues and opens up a

number of new questions

16

Sosa v. Alvarez-Machain, 542 U.S. 692 (2004)

• Key aspects of Sosa:‒ Justice Souter opinion‒ Concurred in by all 9 justices‒ Federal courts should use “great caution” in allowing

private plaintiffs to bring civil suits for violations of international law

‒ ATS suits should be limited to law of nations violations that existed in 1789 (piracy, assaults against ambassadors, violations of safe passage) and a “modest number” of other offenses on norms of international character accepted by the civilized world (e.g., torture)

17

Post-Sosa ATS Litigation

• Key cases:‒ Presbyterian Church of Sudan v. Talisman Energy, Inc.,

582 F.2d 244 (2d Cir. 2009), cert. denied, No. 09-1262 (2010)

‒ Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252 (11th Cir. 2009)

‒ Kiobel v. Royal Dutch Petroleum, 2010 WL 3611392 (2d Cir. Sept. 17, 2010)

18

Post-Sosa ATS Litigation

• Presbyterian Church – court held that Talisman had to have intended the human rights abuses alleged, not just had knowledge of them

• Sinaltrainal – court held that corporations may be liable under ATS, citing prior 11th Circuit decisions holding that the text of the statute provides no exception for corporations, e.g., Romero v. Drummond Co., Inc., 552 F.3d 1303 (11th Cir. 2008)

• Kiobel – no corporate liability under ATS

19

Environmental Claims Under the ATS

• “[P]laintiffs’ imaginative view of this Court’s power must face the reality that United States district courts are courts of limited jurisdiction. While their power within those limits is substantial, it does not include a general writ to right the world’s wrongs.” ‒ Judge Rakoff, Aguidna v. Texaco, Inc. (Aguinda II), 945

F. Supp. 625, 628 (S.D.N.Y. 1996)

20

Environmental Claims Under the ATS

• Courts have recognized the potential for ATS liability for environmental torts, but no ATS plaintiff alleging an environmental violation of the laws of nations has prevailed

• “[F]ederal courts . . . exercise extreme caution when adjudicating claims under [the ATS] to insure that the environmental policies of the [U.S.] do not displace the environmental policies of other governments.” Beanal v. Freeport-McMoran, Inc., 197 F.3d 161, 167 (5th Cir. 1999)

21

Chemical Tort Claims Under the ATS

• Chemical companies operating abroad are susceptible to ATS liability for the effects their products have on local populations or environments when those effects are severe enough to violate the laws of nations‒ E.g. Abdullahi v. Pfizer, Inc., 562 F.3d 163 2d Cir. 2009),

cert denied, 2010 U.S. Lexis 5541 (U.S. June 29, 2010); Arias v. Dyncorp, 517 F. Supp. 2d 221, 228 (D.D.C. 2007).

22

Kiobel – Supreme Court Bound?

• Plaintiffs have requested en banc review by 2nd

Circuit; if review granted, decision by the full court would come in 2011

• Circuit split on issue of corporate liability – 11th

(Sinaltrainal ) vs. 2nd (Kiobel) may prompt review • Jurisdictional issue also appealing – would guide

lower courts in deciding ATS cases at an early stage

23

Post-Kiobel Jurisprudence

• Viera v. Eli Lilly, 2010 WL 3893791 (S.D. Ind. Sept. 30, 2010)‒ Following Kiobel, held that ATS cannot provide federal

court jurisdiction over claims based on voluntary actions taken by a corporation; action against Eli Lilly for injuries allegedly caused by environmental pollution in Brazil dismissed

24

Post-Kiobel Jurisprudence

• Flomo v. Firestone, No. 1:06-cv-00627-JMS-TAB (S.D. Ind. Oct. 5, 2010)‒ Merits dismissal of ATS against Firestone for injuries to

Liberian children allegedly caused by forced child labor‒ By reaching the merits, Flomo is in line with Judge

Leval’s concurring opinion in Kiobel

25

ATS Liability – What’s Ahead?

• “We note only that nothing in this opinion limits or forecloses suits under the ATS against the individual perpetrators of violations of customary international law – including the employees, managers, officers, and directors of a corporation – as well as anyone who purposefully aids and abets a violation of customary international law.” ‒ Kiobel, slip op. at 11

26

ATS Liability – What’s Ahead?

• Thus, even if Kiobel is affirmed by Supreme Court, ATS suits likely will continue‒ Against foreign government officials (Samantar v.

Yousuf, 130 S.Ct. 2278 (2010) – foreign government officials not immune from ATS suits under Foreign Sovereign Immunities Act))

‒ Against individual corporate officials (officers, directors, managers) for aiding or abetting human rights abuses by foreign governments

27

ATS “Take-Aways”

• We live in an age of heightened sensitivity to corporate social responsibility

• Transnational companies must be sensitive to the impact of their products and activities on local populations‒ Detailed guidelines of good human rights practices for

corporations are being developed by international initiatives, e.g., ISO, OECD

28

ATS “Take-Aways”

• Due diligence is key!• Corporations should review activities in less-

developed countries, establish internal rules, and have systems in place to audit their activity

• Outside counsel experienced in compliance matters can and should assist

29

Thank You!Copies of the presentations

and supplemental material can be downloaded at www.BlankRome.com/ChemCLE

30

Foreign Corrupt Practices Act (“FCPA”) Overview

Presented by:Shawn M. Wright

Blank Rome Government Relations

32

Foreign Corrupt Practices Act• The Foreign Corrupt Practices Act (FCPA), was created in

1977 as a result of over 400 U.S. companies admitting to making questionable or illegal payments to foreign government officials, politicians and political parties. Congress enacted the FCPA in an attempt to stop bribery of foreign officials and restore the integrity of American businesses

• The FCPA’s scope was expanded in 1998. It was amended to mirror language included in the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

• Any “improper advantage” vs. “Business”• Expanded jurisdictional reach• Expanded definition of foreign official

33

What Constitutes a Violation of the FCPA?

• The FCPA is violated when:‒ An issuer or any of its officer, directors, employees,

agents, or shareholders, a domestic concern, or foreign national pays, offers, promises to pay, or authorizes/approves the payment of money or anything of value:

• To a foreign official, foreign political party, candidate for political office, or official of a public international organization

• In a corrupt attempt to obtain, retain or direct business to any person or obtain an improper advantage

34

Anti-Bribery Provisions

• Prohibits the paying or offering to pay “anything of value,” whether directly or indirectly;

• To a foreign official, political party, or candidate for political office, or to any person while “knowing” that all or part of the thing of value will be paid or offered to a foreign official, political party, or candidate;

• “Corruptly” for the purpose of influencing the official in some official act or decision;

• In order to obtain or retain business or to secure any improper advantage.

3535

FCPA Accounting Provisions• Books and records

‒ Issuers are required to make and keep detailed books, records, and accounts that fairly and accurately reflect transactions and dispositions of assets

‒ Internal accounting controls• Issuers must devise and maintain internal accounting

controls to ensure that: ‒ financial records and accounts are accurate for external

reporting,‒ access to assets is permitted only in accordance with

management instructions, and‒ the books are audited at reasonable intervals

3636

Responsibility for Subsidiaries• Controlled Subsidiaries

‒ Greater than fifty percent share‒ Issuer is strictly responsible for subsidiary’s compliance with

internal controls and books and records requirements –even when violation occurred without knowledge or participation of anyone at parent company –if financial results are consolidated

• Non-Controlled Subsidiaries‒ Fifty percent share or less‒ Issuer must proceed in good faith to use its influence to the

extent reasonable to cause the subsidiary to maintain sufficient controls. Take into account the “laws and practices governing business operations” in country where the subsidiary is located.

• Government will look at actual control; not rely on record ownership – also applies to joint-venture relationships

37

Permissible Payments – Facilitating Payments

• What are Facilitating Payments?• The FCPA permits small facilitating payments to a

foreign official in order “to expedite or secure the performance of a routine governmental action by a government official,” e.g., non-discretionary acts

• This exception is very narrow‒ The payment may only be given to encourage an

action to which the company is legally entitled (not an illegal or improper action).

‒ The payment must be properly recorded to reflect the amount, purpose and recipient of the payment

38

Adverse Consequences of Violations

• Substantial criminal and civil penalties for companies and individuals

• Potential disclosure to the SEC (and the DOJ) in compliance with the Sarbanes-Oxley Act

• Adverse publicity/Customer impact• Protracted, costly investigation• Diversion of management resources• Impediment to raising money• Debarment from government contracts, loss of

critical licenses

39

Trends in the Enforcement of the U.S. FCPA• Aggressive enforcement, larger penalties and focus on individual responsibility

‒ In a recent Senate Judiciary Committee hearing regarding the FCPA, Senator Arlen Spector questioned DOJ’s handling of foreign bribery cases. He stated that multimillion dollar corporate fines don’t mean a whole lot without prison sentences for corporate officials who commit the crimes.

‒ Control Person Theory of Liability Expanded – See Nature’s Sunshine Products, Inc.

• Aggressive extension of jurisdiction, particularly over non-U.S. companies• Expand responsibility of corporations beyond traditional scope of FCPA,

including money laundering and fraud• U.S. government encouraging companies to disclose possible misconduct and

to cooperate with law enforcement agencies• Greater cooperation among law enforcement agencies both in the United

States and overseas• Use of independent monitors to oversee compliance• Foreign State Owned Entities suing US companies• Third Party Agents – Due Diligence

40

Multinational Companies Targeted by U.S. Authorities

• U.S. authorities have targeted multinational companies with U.S. connections believing them to be “low hanging fruit” when it comes to corrupt practices: Statoil, Daimler, Siemens, BAE and Panalpina

• 30 years of history in prosecuting cases under the FCPA has given U.S. enforcement agencies a broad range of tools in prosecuting these cases under both the anti-bribery and accounting provisions of the FCPA

41

SPECIFIC AREAS OF CONCERN FORTHE CHEMICAL INDUSTRY

42

Areas of Concern

• Special Areas of Concern for Oil and Gas Companies‒ Mergers and acquisitions – acquiring companies may

assume successor liability for FCPA violations if they fail to conduct appropriate due diligence

• “willful blindness” – prosecution can be brought against a party that had no knowledge of corrupt payments if company aware of potential “warning signs” and consciously failed to conduct adequate due diligence

43

Areas of Concern

‒ Third party agents (especially agents in foreign countries)

• Specifically custom brokers and freight forwarders• Need careful procedures to screen relationships

with third parties (i.e., consultants, joint venture and teaming partners, distributors and sub-contractors)

• Important to monitor activities of agents and employees who interact with government officials

44

RECENT SETTLEMENTS INVOLVING OIL AND GAS COMPANIES

45

November 2010: Panalpina

• 7 companies linked to the Panalpina Group, a Swiss logistics company and all in the oil industry, entered into deferred prosecution agreements with the DOJ totaling $236.5 million for FCPA violations‒ The companies also agreed to pay a total of

$165,565,000 in criminal penalties. SEC settlements with the companies totaled approximately $80 million.

46

Panalpina Cont’d

• Panalpina entered into a three year deferred prosecution agreement with the DOJ and also agreed plead guilty to criminal charges for conspiracy to violate the books and records provision and for abetting the books and records provision‒ Together, the agreements imposed a $70,560,000

criminal penalty‒ Panalpina also agreed to disgorge $11,329,369 of illicit

profit

47

Panalpina Cont’d

• Panalpina admitted to paying $27 million in bribes to foreign officials in several countries to expedite services for its customers, including Royal Dutch Shell and Transocean Inc. ‒ Bribes were made to circumvent local customs

processes with respect to the importation of materials and equipment

‒ “Culture of corruption” - many Panalpina employees were involved, including those within senior management

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Panalpina Cont’d

• First time SEC charged a company that is not a US issuer with FCPA violations (DOJ previously had charged non-US issuers with FCPA violations)

• SEC asserted jurisdiction over Panalpina by alleging that Panalpina acted as an agent and aided and abetted violations by its customers who are US issuers‒ Case demonstrates how the SEC can bring non-US

companies under its jurisdiction

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November 2010: Royal Dutch Shell

• Royal Dutch Shell and its subsidiary, Shell Nigeria Exploration and Production Company Ltd. (SNEPCO), entered into a deferred prosecution agreement and a payment of a $30 million penalty by SNEPCO‒ In a related proceeding, Royal Dutch Shell and one of

its U.S. subsidiaries, Shell International Exploration and Production, Inc., agreed to pay $14,153,536 is disgorgement and $3,995,923 in prejudgment interest to the SEC

‒ Total of $48,149,459 in criminal and civil sanctions

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Royal Dutch Shell Cont’d

• SNEPCO’s subcontractors, through Panalpina, allegedly bribed Nigerian customs officials to circumvent Nigerian clearance process and expedite the importation of certain materials and equipment on behalf of SNEPCO

• Between March 2004 and November 2006, SNEPCO allegedly reimbursed its subcontractors more than $2 million worth of Panalpina charges, knowing and intending that all or a portion of the $2 million was reimbursement for the bribes Panalpina had paid

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COMPLIANCE!COMPLIANCE!COMPLIANCE!

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USSG: ELEMENTS OF AN EFFECTIVE COMPLIANCE PROGRAM

Effective Compliance

Program

Board Oversight (Leadership) Communications &

Training

Auditing & Monitoring

Reporting Concerns

Standards & Procedures

Responding to Allegations

Incentives & Discipline

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ANTI-CORRUPTION COMPLIANCE PROGRAM

Anti-Corruption Compliance

Program

Board Reporting

Senior Management Oversight (GC, CFO, COO, CECO)

Web-based & In-person (Third Parties and T&E)

Global communications on emerging topics (UK bill)

Internal audits

Statistics

•# of client events

•Legal/Compliance pre-approval

Helplines

Compliance mailbox

Open door policy

Anti-Corruption Policy

Entertainment P&P

Third Party P&P

Whistleblower P&P

Investigations procedure

Inside/outside counsel (under privilege)

Reward good behavior (Compliance Champions)

Punish bad behavior (termination, name/shame)

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COMPARISON CHART –UK BRIBERY ACT, OECD GUIDELINES, USSG

UK Bribery Act(Adequate Procedures)

OECD(Anti-Bribery Guide)

USSG(Elements of Program)

-Codes of Conduct-Policies for gifts/hospitality, due diligence of 3Ps

-A clearly articulated and visible corporate policy prohibiting foreign bribery-guidance of gifts/ent., donations, diligence of 3Ps

-Standards & Procedures

§8B2.1(b)(1)

-Support for AC Program @ highest levels-Dedicated compliance function in large companies

-Oversight of program is duty of senior corporate officers

-Board Oversight-Senior Leadership w/day-to-day oversight§8B2.1(b)(2)(A)(B)(C)

Employment Procedures – vetting of new staff

Proper due diligence on new employees§8B2.1(b)(3)

Training for all relevant staff Periodic communications & documented training for all levels of company

Training and communications

§8B2.1(b)(4)(A)(B)

Regular auditing of AC program Periodic review of program Auditing and monitoring

§8B2.1(b)(5)(A)(B)

Whistleblower hotline Internal & confidential reporting of breaches of law Reporting concerns & Responding to allegations§8B2.1(b)(5)(C), (b)(7)

Encourage support for compliance, & appropriate discipline procedures

Incentives & Discipline

§8B2.1(b)(6)

Tailored corruption risk mgmt procedures for higher risk jurisdictions & transactions

Periodic reviews of program taking into account relevant developments & evolving int’l / industry standards

Periodic risk assessments

§8B2.1(c)

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How to Approach Third Party Due Diligence• A risk assessment that measures the likelihood and

severity of possible violations, and directs compliance resources based on that assessment

• A systematic and consistent due diligence effort to vet third parties tiered at levels of inquiry based on a thorough business inventory and risk assessment

• Consistent warranties and representations that support the company’s ethics program and require compliance of all business partnerships abroad, including any agent acting for the company on any level

• Automated renewal to maintain and reinforce commitment to compliance among all third-party intermediaries

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Some Important Questions to Ask• Has the subject cooperated in completing a due diligence questionnaire

and other relevant disclosures/declarations?• Who are the subject’s social and business associates?• Have any recommendations to use this third party originated among

government officials?• What is the service being requested? Is compensation commensurate

with market rates or disproportionate to the job being done? If there’s a payment involved, where is it going? Offshore account?

• Is the payment to be made in the name of the corporation or some other individual or relative of the individual?

• Is the payment to be in cash or cash equivalent• Have any unusual payment patterns or financial arrangements

emerged?• What is known about their past social relationships and to what extent

are they connected with government officials?

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A company should consider…• Issuing clear company policies on what constitutes unacceptable

behavior and enforcing the prescribed consequences• Thoroughly and regularly training employees to address the

enforcement of international anticorruption standards• Routinely conducting due diligence on third parties, such as

agents, sales consultants, distributors, vendors, brokers and freight forwarders

• Performing due diligence on business partners, personnel, and contracts

• Performing frequent field tests to determine whether employees understand company policies and testing the adequacy of existing programs and controls

• Streamlining payment systems to easily see where, why and how much money is being spent and where it is going

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Other important questions…• Who “owns” the FCPA compliance programs and to

whom does that person report to?• Do we have special policies and procedures dedicate

to FCPA/anti-corruption?• Are we doing FCPA compliance assessments? How

often? In which countries?• Do internal audits include FCPA specific audits? If not,

why not?• Are we training the appropriate people? Is it web-

based or in-person?• How are we handling whistleblower complaints? Has

that change since the Dodd-Frank Act?

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ADDITONAL INFORMATION

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U.K. BRIBERY ACT

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U.K. Bribery Act: Main Offense

• Directly or indirectly, offering, promising or giving a financial or other advantage, to another person, intending the advantage to induce or reward someone for performing a function improperly‒ Relevant functions‒ Activities connected with a business‒ Activities performed during course of employment‒ Activities performed on behalf of corporations‒ Functions of a public nature

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U.K. Bribery Act: Bribery of Foreign Public Officials

• Directly or indirectly, offering, promising or giving a financial or other advantage, to an FPO in his/her capacity as an FPO, intending toobtain or retain business or a business advantage

• Unless FPO is explicitly permitted or required to be paid

• FPO covers individuals who:‒ Hold legislative, administrative or judicial positions; or‒ Exercise a public function for a foreign country or

territory or for a foreign public agency or public enterprise

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Consequences and Individual Liability

• Hospitality and foreign public officials – no specific word, left to prosecutorial discretion

• Although considered, facilitation payments not permitted

• “Senior officers” liable if they consent or connive‒ “Senior officer” includes partners, directors,

managers, company secretaries and other similar officers

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U.K. Law: Responsibility for Third Parties

• Failure of commercial organizations to prevent bribery:‒ Offense can be committed by a “relevant commercial

organization” where a person associated with the RCO bribes another person intending:

• To obtain or retain business for the RCO; or• To obtain or retain a business advantage in the conduct of

business for RCO‒ Associated person is someone who performs services for or on

behalf of RCO‒ RCO includes UK corporations and partnerships AND any other

corporation or partnership carrying on business in the UK• Defense for RCO to prove that it had adequate procedures

designed to prevent associated persons from engaging in bribery

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FCPA AND U.K. BRIBERY ACT COMPARISON

Is it an offense? FCPA U.K. Bribery ActBribery of Foreign Officials

Yes Yes

Private Sector Bribery No YesFacilitation Payments No YesFailure to keep accurate records/internal controls

Yes No

Liability for acts of third parties

Yes Yes

Compliance Program Yes, for mitigation under USSG

Yes, for adequate procedures defense

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FCPA IMPLICATIONS FROM THE DODD-FRANK ACT

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Background on Dodd -Frank

• Amendment protects and rewards whistleblowers that voluntarily provide “original information” to the SEC relating to the violation of a securities law (including the FCPA), which results in a fine/penalty for the violator of more than $1 million‒ “Original information” means information derived

from independent knowledge or analysis, not otherwise known to the SEC

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Background Cont’d

• Minimal work for whistleblower‒ Unlike whistleblowers under other statutes, like the

False Claim Act, a whistleblower under the Dodd –Frank Act is not required to file a complaint

‒ Whistleblower only required to bring violation to the attention of the government

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Dodd-Frank Impact on FCPA

• Based on increasing fines imposed for FCPA violations, whistleblowers have an incentive to report alleged actions of foreign corruption to the SEC‒ Qualified whistleblowers receive up to 30 percent of

the monetary penalty collected (at the discretion of the SEC)

‒ Increased penalties for FCPA violations over the last few years increases incentives for whistleblowers

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Dodd-Frank Impact Cont’d

• Act requires issuers in the oil, gas, and mineral extraction industries to include in their corporate annual reports info concerning royalty, licenses and other payments made to the US and foreign governments in connection with the issuers’ resource extraction activities‒ Affected issuers required to report type and amount of

such payments on a project-by-project basis. No confidentiality protection and info will be made available to the public

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Dodd-Frank Impact Cont’d

• Amendment adds new element to the compliance challenge‒ companies now have to consider possibility of

whistleblower claims from financially self-interested employees

‒ Changes analysis concerning “self disclosing” potential FCPA violations

‒ timing becomes more complicated and riskier because unknown whether whistleblower in contact with the government

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Alien Tort Statute and Foreign Corrupt Practices Act: Potential Liability from Operations Abroad:

Views from In-House Counsel –Self Audit Programs and Preventative Measures

Presented by:Joseph F. Speelman

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Dodd-FrankCorporate Governance

2

The Dodd-Frank Wall Street Reformand Consumer Protection Act:

Executive Compensation and Corporate Governance Reforms, SEC Disclosure and Proxy Access

Implications for Corporate Counsel

Presented by:Frederick D. Lipman

Jane K. Storero

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Highlights of the Dodd-Frank ActCorporate Governance Provisions

• The Dodd-Frank Act (the “Act”) contains (with exceptions) mandates new requirements, executive compensation, corporate governance and disclosure for all listed public companies, such as:‒ “Say-on-pay”, say on golden parachutes, and say “when” on pay‒ Compensation committee independence and use of consultants‒ Enhanced executive compensation disclosures, including pay vs.

performance, CEO median pay ratio and hedging‒ Clawbacks‒ Disclosures concerning dual CEO/Chair roles‒ Discretionary broker voting and proxy access‒ Whistleblower benefits

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4

Application of the Corporate Governance Provisions of the Act

• Applies generally to issuers with an equity security listed on a national securities exchange or a national securities association.

• Also applies, in certain cases, to unlisted companies which are subject to the SEC proxy rules contained in Section 14 of the Securities Exchange Act of 1934.

• The term “listed companies”, in this presentation, generally refers to both categories.

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5

Today’s Discussion

• Dodd-Frank Act Corporate Governance Reforms‒ Say on Pay Proposals‒ Elimination of Discretionary Voting by Brokers and

Proxy Access Update‒ Additional Executive Compensation Disclosures‒ Claw Back Provisions ‒ Enhanced Whistle Blower Provisions

• Action Items for Public Companies

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“Say-on-Pay” and Say “When” on Pay Proposals(Title IX, Subtitle E, Section 951)

• A proxy or consent or authorization for an annual or other meeting of the shareholders for which compensation disclosure is required by the SEC’s proxy rules must include a separate, non-binding shareholder vote on executive compensation.

• The resolution must be included in a proxy or consent or authorization at least once every 3 years.

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“Say-on-Pay” and Say “When” on Pay Proposals(Title IX, Subtitle E, Section 951)

• At least once every 6 years, companies must provide shareholders with a say on pay “frequency” vote on how often they want to vote on executive compensation:‒ to determine whether vote on executive compensation

required will occur every 1, 2 or 3 years

Effective Date: Applies to votes that take place 6 months after July 21, will be in effect for most public companies for 2011; for the first year, there will be both a say on pay and frequency vote

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“Say-on-Pay” and Say “When” on Pay Proposals (Title IX, Subtitle E, Section 951)

• Say on Pay Requirements• Required shareholder votes are not intended to be

binding on the issuer or the issuer’s board of directors• Shareholder votes are not to be construed to:

‒ overrule the issuer or board‒ create or imply a change to board fiduciary duties‒ create or imply any additional fiduciary duties‒ restrict or limit shareholder ability to make proposals

related to executive compensation• Institutional investment managers must annually

disclose to their shareholders how they voted on these proposals

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“Say-on” Golden Parachutes(Title IX, Subtitle E, Section 951)

• Say on golden parachute pay applies to any proxy or consent solicitation at which shareholders are asked to approve‒ an acquisition, merger, consolidation or proposed sale‒ other disposition of all or substantially all of the assets of an

issuer • The person making the solicitation shall disclose

‒ any agreements or understandings that such person has with any named executive officer concerning any type of compensation that is based on or relates to the subject transaction

‒ the aggregate total of all compensation that may (and the conditions upon which it may) be paid or payable to or on behalf of such executive officer

‒ the conditions upon which such compensation is payable

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“Say-on” Golden Parachutes(Title IX, Subtitle E, Section 951)

• Exception – if previously approved in say on pay vote

• Companies incorporating the golden parachute vote in the say on pay vote may still be required to hold a separate vote where:‒ Material details previously disclosed and voted on

have changed, or‒ The golden parachute compensation is to be paid to

NEOs of buyer

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Say on Pay – Action Items• Address any lingering concerns about the executive

compensation program‒ Have investors or Board of Directors identified any

problematic pay practice?• Examine trends in incumbent CEO’s year-over-year

pay when 1- and 3-year total shareholder returns are less than peer group median‒ Is long-term CEO being rewarded despite lagging

shareholder returns?‒ Is compensation sufficiently performance based?‒ Many ways to evaluate performance –Total Shareholder

Return as a key indicator

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Say on Pay – Action Items• Avoid excessive (non-performance based) and risk-

incentivizing pay practices‒ Excessive tax gross ups (including excise tax gross up)‒ Guaranteed bonuses‒ Single performance metric for incentive program

• Also consider longer-term alignment between pay and shareholder returns

• Review current executive compensation disclosure to see whether it can be improved‒ Consider simplifying the Compensation Discussion and Analysis‒ The more transparency the better ‒ Presentation and content are critical

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Say on Pay – Action Items (Continued)• Become familiar with executive compensation policies of

key shareholders and proxy advisory firms to identify “red flags” that may influence a “no” vote‒ Determine whether to “reach out” to these shareholders to

address their possible concerns or make changes to program to avoid a negative vote recommendation from ISS

• Analyze shareholder base to determine whether the absence of broker voting will have any impact on vote‒ If so, determine how to ensure an adequate vote‒ Consider a proxy solicitor

• In formulating a Say When on Pay recommendation, consider the relationship with shareholders and future shareholder votes on compensation-related matters

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Say on Golden Parachutes – Action Items• While vote is situational, companies should consider the

following items when preparing for the “Say on Pay” vote for their overall executive compensation program‒ Make sure all change-in-control arrangements are identified –

the definition of what’s covered as set forth in the Act is fairly broad

‒ Consider enhancing disclosure of existing change-in-control arrangements in the proxy statement for the annual shareholders meeting (including a clear explanation of the rationale for the arrangement) so that there is no question that they are covered by the exception to the vote

‒ Consider whether to expand disclosure in the annual proxy statement to cover all executive officers – the disclosure and advisory vote only cover named executive officers, but it’s unclear whether NEOs is based on last year’s or the current year’s determinations

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Elimination of Discretionary Voting by Brokers(Title IX, Subtitle E, Section 957)

• National securities exchanges must prohibit brokers from voting any security for which they do not receive instructions from the beneficial owner in connection with:‒ the election of directors ‒ executive compensation (i.e., “say on pay” votes)‒ “other significant matters” as determined by SEC Rule

• Exchanges may prohibit discretionary broker votes on other items not otherwise designated in the Act

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Elimination of Discretionary Voting By Brokers – Action Items

• Review quorum requirements for shareholders’ meeting

• Determine vote required for specific proposals• Allow extra time between meeting and mail dates,

if possible• Consider the retention of a proxy solicitor• Be familiar with the company’s shareholder base

and voting policies

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Proxy Access(Title IX, Subtitle G, Section 971)

• The Dodd-Frank Act authorizes the SEC to require by rule that:‒ a solicitation of proxy, consent or authorization is to include a nominee

submitted by a shareholder‒ an issuer follow a certain procedure with respect to solicitations

• New Access Requirements:‒ 3% ownership threshold‒ 3 year continuous holding period‒ 1 or 25% of the board‒ Shareholder with the greatest ownership gets to include nominees

• Effective Date: NOT Applicable for 2011 proxy season. . . Final SEC Rules adopted August 25, 2010 delayed due to legal challenge

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Compensation Committee Independence(Title IX, Subtitle E, Section 952)

• Requires new stock exchange listing standards that require each member of a compensation committee to be independent

• SEC rules will require, in determining “independence”, consideration of the source of compensation of board members, including consulting, advisory, or other compensatory fees, and whether the board member is an affiliate.

• NYSE and NASDAQ currently have independence rules for the compensation committee, but new requirement is likely to be stricter‒ similar to the requirements currently in place for audit committee

members pursuant to Sarbanes-Oxley• Effective Date: Proposed Rules – December 2010; Final Rules –

April – July 2011

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Compensation Committee Independence –Action Items

• While a comprehensive review will have to wait until the SEC and the exchanges complete their rulemaking, companies should consider the following items now:‒ Re-examine your compensation committee member

relationships in light of the new standards‒ One item that could present problems for venture capital-

backed companies is the prohibition on affiliates being independent

‒ If you expect that you may not have enough independent committee members, consider increasing the size of the board of directors and recruiting new members

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Independence of Compensation Committee Consultants(Title IX, Subtitle E, Section 952)

• The independent Compensation Committee of a company may only select a compensation consultant, legal counsel, or other compensation advisor after taking into consideration factors identified by the SEC, such as:‒ The provision of other services to the company by the person that

employs the advisor.‒ The amount of fees received from the company by the person that

employs the advisor and the percentage of such fees to his or her total revenue.

‒ The policies and procedures of the person that employs the advisor that are designed to prevent conflict of interests.

‒ Any business or personal relationship of the advisor with a member of the compensation committee.

‒ Any stock of the company owned by the advisor.• Effective Date: Proposed Rules – December 2010; Final Rules –

April – July 2011

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Independence of Compensation Committee Consultants(Title IX, Subtitle E, Section 952)

Hiring Consultants• Compensation committees

‒ have sole discretion to retain or obtain the advice of a compensation consultant

‒ are directly responsible for the appointment, compensation, and oversight of the work of a compensation consultant

• Compensation committees are not required to implement or act on the advice or recommendations of the compensation consultant

• Hiring a consultant does not affect ability or obligation of the committee to exercise its own judgment in the fulfillment of its duties

• The company must provide funding so the committee can pay reasonable compensation to a compensation consultant, independent legal counsel or any other advisor

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Executive Compensation Disclosures –Pay vs. Performance

(Title IX, Subtitle E, Section 953)• SEC to issue rules requiring a clear description of any

compensation required to be disclosed under the proxy rules, including relationship between:‒ Compensation actually paid; and‒ The financial performance of the issuer (total shareholder

return).‒ Must take into account change in value of stock and dividends

• Definition of compensation appears to be different than in the Summary Compensation Table

• May include a graph• Effective Date: No deadline specified for SEC rule;

Proposed Rules - April – July 2011

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Executive Compensation Disclosures –Pay vs. Performance Action Items

• Several interpretive issues must be addressed:‒ How “compensation actually paid” is to be determined‒ How corporate financial performance is to be measured‒ Period for comparison

• Review past disclosures of incentive compensation arrangements and consider providing greater disclosure about compensation policies and alignment to financial performance

• Add an executive summary to Compensation Discussion and Analysis that addresses this relationship

• In the absence of SEC rules, consider presenting graphic disclosure showing the relationship between aggregate named executive officer compensation and corporate financial performance (for example, TSR) over an extended period of time (for example, five years)

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Executive Compensation Disclosures – Median Pay(Title IX, Subtitle E, Section 953)

• SEC to require disclosure regarding:• The median of the annual total compensation of all employees,

except the CEO, of the company.• The annual total compensation of the CEO of the company.• The ratio of the median of the annual total compensation of all

employees of the company to the annual total compensation of the CEO of the company.

• Total compensation is determined as in the Summary Compensation Table

• Requires clarification by the SEC in implementing regulations:‒ Several interpretive issues must be addressed‒ Issuers have many questions about how to determine median

employee pay• Effective Date: No deadline specified for SEC rule; Proposed Rules

– April – July 2011

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Executive Compensation Disclosures –Median Pay

• Several interpretive issues must be addressed:‒ Specific filings to include this disclosure‒ How median employee total compensation is to be

determined‒ Rule for determining total compensation

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Disclosures Regarding Chairman and CEO Structures(Title IX, Subtitle G, Section 972)

• The SEC shall issue rules that require a company to disclose in the annual proxy statement sent to investors the reasons why the company has chosen:‒ The same person to serve as chairman of the board of

directors and CEO; or‒ Different individuals to serve as chairman of the board

of directors and CEO.

• Current SEC rule addressing this disclosure requirement

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Chairman and CEO Structure –Action Items

• Review structure currently utilized• Re-evaluate combination of roles or provide

additional support for continuing the combination of these two critical positions

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Clawbacks(Title IX, Subtitle E, Section 954)

• Listed companies will be required to develop and implement a policy regarding clawbacks of incentive-based compensation paid based on inaccurate financial statements ‒ When: Triggered by an accounting restatement due to the

material noncompliance of the issuer with any financial reporting requirement under the securities laws

‒ What: Applies to incentive-based compensation (including stock options) in “excess” of the amount that would have been received under the accounting restatement

‒ Who: All current and former executive officers ‒ How Long: For compensation paid during the three year

period preceding the date the company is required to prepare the accounting restatement

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Clawbacks(Title IX, Subtitle E, Section 954)

• Much broader than Sarbanes requirements: ‒ three-year look back vs. one-year look back‒ accounting restatement vs. proof of misconduct‒ all current and former executive offices vs. CEO and

CFO

• Effective Date: No deadline specified for SEC rule; Proposed Rules – April – July 2011

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Clawback Policies – Action Items• While many of the details about this policy will require SEC

rulemaking, companies should consider the following items now:‒ If a company does not currently have a compensation recovery policy,

it should decide whether the scope of the mandated policy is sufficient – for example, the triggering events may be too narrow – this may involve going beyond the scope of the new provision

‒ If a company already has a compensation recovery policy, it needs to compare its policy against the specifics of the mandated policy to see if any changes or modifications will be necessary

‒ Also, should review current outstanding compensation arrangements, including incentive compensation plans, model agreements and employment agreements to determine whether any modifications are needed

‒ Consider enhancing disclosure of compensation recovery policy, both in the Compensation Discussion and Analysis and in connection with the advisory vote on executive compensation – shareholders are likely to want to know how your policy stacks up against the mandated policy

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Benefits for Whistleblowers(Title IX, Subtitle B, Section 922)

• SEC authority to pay whistleblowers who:‒ Provide “original” information; and‒ Such information leads to enforcement action where

sanctions recovered exceed $1.0 million.

• The SEC has discretion to pay whistleblower 10-30% of monetary sanctions collected.

• Effective Date: Proposed Rules – November 2010

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Whistleblower – Action Items

• Revise policy to include employees of the public company’s subsidiaries and affiliates whose financial information is included in the company’s consolidated financial statements.

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Preparing for the 2011 Proxy Season

• Flurry of SEC rule makings in the works.‒ New Say on Pay Proposals‒ No proxy access‒ New disclosure requirements

• Action items for public companies discussed.

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1

Intellectual Property:

Patent Damages and Social Networking Issues

Presented by:Alfred W. Zaher

2

Patent Damages and Injunctive Relief

• Injunctions post eBay Inc. v. MercExchange• Lost Profits Damages• Reasonable Royalty Damages• Recent Damages Case law – Cornell, Lucent, Lansa,

IP Innovation• Patent Reform Bill

3

Injunctions post eBay• eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)

‒ Court unanimously determined that injunctions should not be granted automatically in patent cases, but injunctions should not be denied on the basis that the plaintiff does not practice the patented invention.

‒ Requires application of the traditional four-factor test• Irreparable injury• No adequate remedy at law• Balance of hardships favors patent holder• Harm to public interest

• District Courts applying eBay‒ Prior to eBay, the rate was 84% granted‒ Since eBay, 75% of requested permanent injunctions in patent cases

have been granted to winning patent holder (119 granted, 39 denied)Source: Patstats, University of Houston Law Center, http://www.patstats.org/Patstats3.html; Cases through October 17, 2010 represented above.

http://www.patstats.org/Patstats2.html�

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Lost Profits Damages

• Lost profits on sales that did not occur‒ Lost sales of competing products‒ Lost sales of convoyed products (collateral sales)

• Lost profits on sales that did occur‒ Lower prices

5

Reasonable Royalty Damages

• Hypothetical arms-length negotiation, between willing licensor and willing licensee, at the point of first infringement‒ Market Approach: comparable transactions‒ Income Approach: costs/benefits of license‒ Cost Approach: cost of avoiding use of IP

• Georgia-Pacific factors (next slide)

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Georgia-Pacific Factors1. Royalties patentee receives for licensing the patent in suit

2. Rates licensee pays for use of other comparable to the patent in suit

3. Nature and scope of license in terms of exclusivity and territory / customer restrictions

4. Licensor’s established policy and marketing program to maintain patent monopoly by not licensing others to use the invention

5. Commercial relationship between licensor and licensee, such as whether they are competitors or inventor and promoter

6. Effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales

7. Duration of patent and term of license

(continued next slide)

Source: Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1119-20(S.D.N.Y. 1970), modified and aff'd, 446 F.2d 295 (2d Cir.); Unisplay, S.A. v. American Electronic Sign Co., Inc., 69 F.3d 512, 517 n.7 (Fed. Cir. 1995).

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Georgia-Pacific Factors(continued from previous slide)

8. Established profitability of the products made under the patent, its commercial success and its current popularity

9. Utility and advantages of patent property over old modes and devices10. The nature of the patented invention; the character of the commercial embodiment of it as

owned and produced by the licensor; and the benefit of those who have used the invention

11. The extent to which the infringer has made use of the invention and the value of such use12. The portion of profit or selling price customarily allowed for the use of the invention13. The portion of realizable profit attributable to the invention as distinguished from

nonpatented elements, significant features / improvements added by the infringer, the manufacturing process or business risks

14. Opinion testimony of qualified experts15. Outcome from hypothetical arm’s length negotiation at the time of infringement began

Source: Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1119-20(S.D.N.Y. 1970), modified and aff'd, 446 F.2d 295 (2d Cir.); Unisplay, S.A. v. American Electronic Sign Co., Inc., 69 F.3d 512, 517 n.7 (Fed. Cir. 1995).

8

Industry Royalty Rates

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Variation in Industry Royalty Rates

10

Recent Patent Damages Cases• Trend is that federal courts are closely scrutinizing the

evidentiary and economic bases of the reasonable royalty-based patent damages awards‒ Setting appropriate royalty base‒ Proper application of entire market value rule‒ Calculation of appropriate royalty rate

• Recent cases in which the damages awards were vacated or significantly reduced:‒ Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279 (N.D.N.Y

2009) (Federal Circuit J. Rader sitting by designation)‒ Lucent Techs. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009)‒ ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010)‒ IP Innovation L.L.C. v. Red Hat, Inc., 705 F. Supp. 2d 687 (E.D. Tex.

2010) (Federal Circuit J. Rader sitting by designation)

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Patent Damages: 2010 Patent Reform Bill

• More defendant friendly• Requires the courts to narrow damage bases to

specific methodologies and factors• Codifies willfulness case law: mere knowledge of a

patent will not support a willfulness finding• Willfulness to be pled with particularity, and any

“close case” by default not willful

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Social Media Issues• Employees

‒ Creating and communicating a clear policy can avoid problems• Authorized channels for work-related social networking• Identify whether off-hours posts and personal activities may be

monitored• Avoid a “Wikileaks” scenario: limit employee access to proprietary

information• Reaching Customers

‒ FTC requires that bloggers, reviewers, and commentors disclose if they are writing about a product received for free or if they were paid for the review or post

• Policing Trademark and Copyright Infringement‒ Use of online complaint forms provided by service providers such as

Facebook often leads to quickest resolution, and broader protection than that afforded by DMCA

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Intellectual Property:

Declaratory Judgment Jurisdiction and IP Agreement Provisions

Presented by:Jay P. Lessler

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Declaratory Judgment - MedImmune

• Pre-2007‒ Actual case or controversy (Article III)‒ Reasonable apprehension of infringement suit

+ Commencement of allegedly infringing act (Fed. Cir.)

• Sea change in 2007 (MedImmune)‒ Supreme Court held that patent licensee can challenge

the validity of the licensed patent without repudiating the license

‒ Don’t have to bet the farm (breach and risk suit)

MedImmune, Inc. v. Genentech, Inc., 549 US 118 (2007)

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Declaratory Judgment - MedImmune

• Standard: Substantial controversy between parties having adverse legal interests of sufficient immediacy and reality to warrant issuance of DJ

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Declaratory JudgmentSanDisk v. STMicroelectonics

• At meeting, ST provided SanDisk‒ 14 ST patents‒ Reverse engineering reports for certain SanDisk

products (flash memory)‒ Diagrams showing how elements of ST’s patent claims

cover SanDisk products

• ST told Sandisk that “ST has absolutely no plan whatsoever to sue SanDisk”

SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. 2007)

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Declaratory JudgmentSanDisk v. STMicroelectonics

• DJ jurisdiction found‒ “[W]here a patentee asserts rights under a patent

based on certain identified ongoing or planned activity of another party, and where the party contends that it has rights to engage in the accused activity without license”, a case or controversy will arise

• Concurrence points out that this confers DJ jurisdiction to any party who receives an invitation to take a patent license but disputes a need for it

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Declaratory JudgmentHewlett-Packard v. Acceleron

• Acceleron wrote to “call [HP’s] attention” to an Acceleron patent covering a server blade

• HP responded that it “would be willing to agree not to file” DJ for 120 days

• Acceleron wrote back that no DJ jurisdiction exists• HP filed DJ rather than negotiate• Acceleron is solely a licensing entity• Without enforcement Acceleron receives no

benefit from its patents -> DJ jurisdiction existsHewlett-Packard Co. v. Acceleron LLC, 587 F. 3d 1358 (Fed. Cir. 2009)

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Declaratory Judgment – None FoundInnovation Therapies v. Kinetic Concepts• IT started by former KC employees• IT designed negative-pressure wound product• IT filed DJ that KC patents were invalid• KC had never seen or evaluated IT’s new product

Innovation Therapies, Inc. v. Kinetic. Concepts, Inc., 599 F.3d 1377 (Fed. Cir. 2010)

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Declaratory Judgment – None FoundInnovation Therapies v. Kinetic Concepts• IT argued DJ jurisdiction exists since

‒ IT obtained FDA approval based on “same technological characteristics” as KC product

‒ KC employees stated over phone that KC would react aggressively to competitive entry

‒ KC has history of enforcing patent rights

• FDA representations were not tied to patents• Telephone conversations not by decision makers• Enforcement history alone not sufficient for DJ

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Research & Development Agreements

• Contractor hired to develop efficient process for complicated product (60-100 step synthesis)‒ Included terms for future supply agreement

• IP Ownership‒ Allocate who owns what / consider reversionary rights‒ Consider research other party may perform using

knowledge from project but which is otherwise outside scope of collaboration

• Enforcement Control and Costs• Prosecution / Maintenace Control and Costs

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Research & Development Agreements

• Future supply agreement terms may be binding‒ Depends if it includes all material and essential terms

(Delaware law)‒ Minimum quantity, pricing, and exclusivity

• Termination provisions‒ Should be clear

• Unclear? Purchaser can terminate agreement by determining “insufficient market potential” at particular price

• Is negotiating a lower price with contractor an admission of insufficient market potential?

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Presumption of Patent Validity

• Supreme Court recently granted certiorari inMicrosoft Corp. v. i4i Ltd.

• I4i awarded $200+ million by jury (E.D. Texas)• Law currently requires clear and convincing

evidence of invalidity in order to invalidate patent• Question: Is this the correct standard?• Rationale: Patent Office examined patent• Study: 74% of cases (appealed to Fed Cir) may

have different result with a lower burden of proofi4i L.P. v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010) (cert. granted)

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Litigation Panel

2

Litigation Panel:

The Litigation Hazards Old Manufacturing Facilities

RepresentPresented by:

Raymond G. Mullady, Jr.

Silvio J. DeCarliDuPont

5

Litigation Panel:

The Threats Posedby a Disconnect Between MSDSs

and Product LabelsPresented by:

Mary Ann Mullaney

Thomas A. WarnockDuPont

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LITIGATION RISKS POSED BY DISCONNECTS BETWEEN MSDSs AND LABELS

• Occupational Safety and Health Administration (OSHA) has authority over MSDSs.

• Resource regarding the requirements for MSDSs: www.osha.gov. This website provides useful information regarding OSHA’s requirements, and, in sum, advises, with respect to the labeling of chemicals.

7

OSHA – Chemical Labeling

• “Chemical manufacturers and importers must convey the hazard information they learn . . . to downstream employers by means of labels on containers and material safety data sheets (MSDSs).

Also, chemical manufacturers, importers, and distributors must be sure that containers of hazardous chemicals leaving the workplace are labeled, tagged, or marked with the identity of the chemical, appropriate hazard warnings, and the name and address of the manufacturer or other responsible party.”

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OSHA – Chemical Labeling (cont.)

• “In the workplace, each container must be labeled, tagged, or marked with the identity of hazardous chemicals contained therein, and must show hazard warnings appropriate for employee protection. The hazard warning can be any type of message, words, pictures, or symbols that provide at least general information regarding the hazards of the chemical(s) in the container and the targeted organs affected, if applicable. Labels must be legible, in English (plus other languages, if desired), and prominently displayed.”

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OSHA - MSDSs• “The MSDS is a detailed information bulletin prepared by the

manufacturer or importer of a chemical that describes the physical and chemical properties, physical and health hazards, routes of exposure, precautions for safe handling and use, emergency and first-aid procedures, and control measures.

Chemical manufacturers and importers must develop an MSDS for each hazardous chemical they produce or import, and must provide the MSDS automatically at the time of the initial shipment of a hazardous chemical to a downstream distributor or user. Distributors also must ensure that downstream employers are similarly provided an MSDS.”

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OSHA – MSDSs (cont.)• “Each MSDS must be in English and include information

regarding the specific chemical identity of the hazardous chemical(s) involved and the common names. In addition, information must be provided on the physical and chemical characteristics of the hazardous chemical; known acute and chronic health effects and related health information; exposure limits; whether the chemical is considered to be a carcinogen by NTP, IARC, or OSHA; precautionary measures; emergency and first-aid procedures; and the identification (name, address, and telephone number) of the organization responsible for preparing the sheet.”

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OSHA – MSDSs (cont.)• “Copies of the MSDS for hazardous chemicals in a given

worksite are to be readily accessible to employees in that area. As a source of detailed information on hazards, they must be readily available to workers during each workshift.MSDSs have no prescribed format. ANSI standard no. Z400.1 --Material Safety Data Sheet Preparation -- may be used. The non-mandatory MSDS form (OSHA 174) also may be used as a guide and a copy can be obtained from OSHA field offices.

Employers must prepare a list of all hazardous chemicals in the workplace. When the list is complete, it should be checked against the collected MSDSs that the employer has been sent.”

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FHSA – Warning Labels for Hazardous Substances Intended for Household Use• The Federal Hazardous Substances Act, 15 U.S.C. §§

1261−1278, requires that certain hazardous household products bear cautionary labeling to alert consumers to the potential hazards that those products present and to inform them of the measures they need to protect themselves from those hazards. Any product that is toxic, corrosive, flammable or combustible, an irritant, a strong sensitizer, or that generates pressure through decomposition, heat, or other means requires labeling, if the product may cause substantial personal injury or substantial illness during or as a proximate result of any customary or reasonable foreseeable handling or use, including reasonable foreseeable ingestion by children.

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Case Worthy of Attention

• Zeigler v. CloWhite Co., 507 S.E.2d 182 (Ga. App. 1999): strict liability, failure to warn and punitive damages claims against manufacturer of lemon-scented bleach.

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Zeigler

• Lemon-scent additive’s MSDS “warns that the scent is incompatible with strong oxidizing agents.”

• CloWhite’s bleach label “describes the bleach as a ‘strong oxidizer.’”

• CloWhite’s MSDS “warned against inhalation [of the product’s fumes] but such warning was never placed on the product label.”

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Zeigler

• “CloWhite’s decision not to include on its label a warning against inhaling the fumes of the product was made despite warnings of this danger contained in their MSDS.”

• Trial court’s summary judgment to manufacturer on the product liability, failure to warn, and punitive damages claims reversed.

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The Ways in Which This Issue Can Arise

• Change in Formulation

• Purchase of an Asset

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What Can You Do?

• Keep in Close Communication with Product Labeling Experts

• Utilize the Right Software So the Process Is Automated

• Audit Regularly

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Full Prescribing Information: FLULAVAL

• FLULAVAL (Influenza Virus Vaccine)‒ Thimerosal, a mercury derivative, is added as a

preservative.‒ Each dose contains 25 mcg mercury.

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• Section 2 - Composition / Information on Ingredients‒ Ingredient: Thimerosal[, which] contains 49.6% w/w organically-bound

mercury.• Section 3 - Hazards Identification

Effects of Overexposure: Topical allergic dermatitis has been reported. Thimerosal contains mercury. Mercury poisoning may occur and topical hypersensitivity reactions may be seen. Early signs of mercury poisoning in adults are nervous system effects, including narrowing of the visual field and numbness in the extremities. Exposure to mercury in utero and in children may cause mild to severe mental retardation and mild to severe motor coordination impairment. Based on animal data, may be irritating to the eyes.

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relevant toMarcellus Shalenatural gas production

Developments inRadiation Litigation

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Expert witnesses play a dominant role in radiation litigation. Their testimony is relied upon to establish:

• the proper standard of care;• the radiation exposure pathways;• the type of radiation exposure;• the radiation dose; • the risk of health effects; and•general/specific causation.

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Several potential expert witnesses have discussed the radiation hazards associated with Marcellus Shale development. I have selected three as representative:

•Dr. Tracy Bank (geologist)•Dr. Marvin Resnikoff (physicist)•Dr. Peter Davies (plant biologist)

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This presentation will show how the developments in radiation litigation can be used to respond to the statements of these potential witnesses regarding the hazards of radioactivity in the Marcellus Shale.

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1. Dr. Tracy Bank:• is an assistant professor of

geology at the University at Buffalo (SUNY) with extensive uranium experience at Oak Ridge National Laboratory.

•Her research has involved simulating the effect of fracturing fluid on uranium in the shale.

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Dr. Bank’s research indicates that:

• there are slightly elevated levels of uranium in Marcellus shale; and

•under laboratory conditions, up to 35% of the uranium in the shale is solubilized by exposure to simulated fracturing fluid (HCl).

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Dr. Bank has acknowledged that:

• the uranium levels in the shale are so low that she takes no special precautions in her laboratory; and

•she does not consider the uranium levels in the shale to constitute a radioactive risk; but …

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Dr. Bank has claimed that:

•“uranium is still a toxic, deadly metal” (10/25/10 press release); and

•uranium causes kidney damage (11/19/10 Univ. of Pitt. presentation).

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We recently obtained the dismissal of a depleted uranium case in which we worked with three scientists who served on National Academy of Science committees that studied the newest epidemiologic information regarding the health effects of uranium exposure.

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The National Academy’s Institute of Medicine committee “concluded that there is inadequate/insufficient evidence to determine whether an association [exists] between exposure to uranium and:

•kidney disease;•various cancers; and•cardiovascular, genotoxic,

hemotologic, immunologic, and skeletal effects.

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Further, comprehensive studies of the military personnel who were exposed to depleted uranium have been followed for 15 years at the University of Maryland. These studies indicate that “no clinically significant uranium-related health effects have been observed in the cohort, including those with retained depleted uranium fragments.”

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2. Dr. Marvin Resnikoff:• is an (uncertified) health

physicist in New York City;•has been an expert witness or

consultant in many types of radiation cases; and

•has written on the presence of radium in Marcellus Shale flowback fluid and production water.

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Dr. Resnikoff claims that:•when radium-226 is ingested,

it can cause leukemia; and• residents whose homes are

constructed on landfills where Marcellus Shale drill cuttings have been disposed will ingest significant amounts of radium-226.

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We obtained the dismissal of several cases in which the leukemia deaths of a number of children were attributed to exposure to radium waste from a nearby uranium mill.

Mill

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In the childhood leukemia cases and others, we have worked with a number of scientists who have researched the leukemia incidence in the radium dial painters.

35

The newest edition of the authoritative Casarett & Doull’s toxicology text concludes:

“It is significant that no study has identified a statistically significant excess of leukemia after even massive doses of radium.”

36

Dr. Resnikoff’s Marcellus Shale dose calculations are based on the Argonne National Laboratory RESRAD program.

Dr. Resnikoff exaggerated the dose by using the default factors in the program (assumed the presence of fields, orchards, gardens, seafood ponds, etc., all on an uncovered landfill).

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We recently obtained dismissal of a case where two childhood cancer cases were attributed to emissions from a nuclear power plant. The court found that Dr. Resnikoff had relied upon false assumptions in using the RESRAD code and that his testimony was therefore unreliable.

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3. Dr. Peter Davies:• is a Professor of plant biology at

Cornell University;•states that he has a low-level

radioactivity license from the university; and

•has “been doing work with low-level radioactive materials for 50 years;” but,

•his comments pertain to “high-level radioactivity.”

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Dr. Davies assumes that the radium level in “flowback water” is the maximum level reported by the EPA for produced water in this table:

40

Threshold of1.2 billion picocuries(oral intake)

41

Based upon the radium dial research, even if the flowback fluid contains the EPA maximum 9,000 picocuries of radium-226 per liter, a person could drink a quart of flowback fluid (or produced water) every day for 369 years and not exceed the threshold for radium-induced cancer.

42

Dr. Davies recommends that the public dose limit be reduced from 100 to 10 millirem per year.

• Recommends a public dose limit of 10 millirem per year based on his misinter-pretation of the IAEA/CRCPD exempt or “trivial dose” as a public dose limit.

• 10 millirem is the dose a person receives from a single chest x-ray.

• 10 millirem is about 4% of the dose we receive annually from natural sources.

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Conclusion:

The proposed testimony of expert witnesses must be carefully scrutinized and excluded by Daubertmotions where appropriate. This is particularly so where experts attempt to testify in subject areas where they do not have sufficient expertise.

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Litigation Panel:

The Commingled Product Theoryof Market Share Liability

Presented by:Jeffrey S. Moller

Michael W. SilbermanFMC BioPolymer

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Commingled Product Theory of Market Share Liability

• Created by Judge Shira A. Scheindlin• United States District Court, SDNY• In re MTBE Product Liability Litigation (MDL 1358)

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• “[F]rom time to time courts have fashioned new approaches in order to permit plaintiffs to pursue a recovery when the facts and circumstances of their actions raised unforeseen barriers to relief.”

S. Scheindlin, U.S.D.J.

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• “When a plaintiff can prove that certain gaseous or liquid products of many suppliers were present in a completely commingled or blended state at the time and place that the risk occurred, and the commingled product caused a single indivisible injury, then each of the products should be deemed to have caused the harm.”

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Plaintiff’s Elements for Burden of Proof for a Viable Commingled Product Theory of Liability Claim:“So long as plaintiffs allege that (1) defendants marketed and sold MTBE-containing gasoline, (2) in the relevant zone of injury and (3) defendants product were in a completely commingled state, [then] defendants potentially contributed to plaintiffs’ indivisible injury.”

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• Court’s example:‒ 10 producers supplied 10% of the contents of a leaking

underground storage tank

• Actual application:‒ 20+ refiners placed gasoline (via

pipeline shipment, vessel or local refinery production) into the New York Harbor Market

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Threshold Requirements for Plaintiff’s Due Diligence for Pleading under Commingled Product Theory• Lack of “make whole” defendants with direct

connection to harm• Plaintiffs must identify those defendants who actually

contributed to the commingled product that caused their injury

• In identifying commingled defendants, Plaintiffs:‒ Cannot simply name every producer of the product in the

market‒ Must conduct some investigation to identify the

defendants whose products were actually present‒ Need not identify every actual producer of the commingled

substance

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• What “unforeseen Barriers to Relief”?1. Identifying LUSTs2. Mom and Pop Retailers3. Fungibility of gasoline makes ID of actual

manufacturer difficult4. Pure Market Share does not allow punitive damages

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Defendant’s Opportunity to Avoid Suit or Mitigate Damages – Burden Shifting

• Once Plaintiff affirmatively pleads against a Defendant under the commingled product theory of market share liability, Defendant has the burden to exculpate itself

• Can do so by proving (preponderance) that its product could not be part of the commingled product because its product was not present:

‒ at the relevant time; or‒ in the relevant place

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Defendant’s Responsibility for Damages: Market Share?

Liability is several, only• Apportionment of damages by proof

(preponderance) of defendant’s share of the market at the time a risk of harm was created to a class of potential victims.

• Despite clear linkage to Market Share Liability, Punitive Damages are available.

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Judge Scheindlin’s claimed precedent – various states’ adoption of:• Concurrent Wrong Doing • Concert of Action Liability• Alternative Liability• Enterprises Liability• Other Market Share Liability Variations

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Concurrent Wrong Doing –Joint and Several Liability

• Based on concurrent liability which is traditionally defined as two causes (not necessarily simultaneously enacted) combining to cause an indivisible injury

• Generally involves a small amount of tortfeasors (according to the Restatement Third – typically 2 to 3) so that imposition of joint and several liability is not deemed unfair

• Often applied where actions of defendants rise to the level of recklessness or an intentional act such that imposition of joint and several liability is not deemed unfair

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Concert of Action Liability –Conspiracy based-tort

• One party can be responsible for the actions of another party if it

‒ helps commit a tortious act together with another with a common design; or

‒ knows that the other’s conduct constitutes a breach of duty and gives assistance or encouragement

‒ gives substantial assistance and its own conduct is separately considered to be tortuous

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Alternative Liability

• Shifts burden of identification to two defendants where one committed the tort and plaintiff is unable to identify which one

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Enterprise Liability

• Claim was permitted to go forward when all producers of a product were sued and plaintiff plead that all producers had knowingly conformed to an industry standard that the producers contributed to establishing despite having knowledge of significant risk created by design of product.

• Court stated that theory was only appropriate for industries composed of small number of actors and not appropriate for decentralized industries with mass producers.

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Market Share Liability• Designed for DES (diethylstilbestrol) cases re: Miscarriage

Prevention Drug• 200 producers • Over 24 years of production• Plaintiffs only sued 11 manufacturers• Court rules plaintiff can proceed by establishing all

elements of claim accept for identification of actual tortfeasor and proportionality.

• Damages to be determined by market share of producer. • Burden then shifts to Defendants to disprove that it

contributed to the harm and/or refute proportionality of damages.

• Five states adopted Market Share for DES cases.

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Other Precedent: Statutory Commingled Product LiabilityCERCLA and RCRA• Joint and Several Liability for any “contributor” to

a contaminated site or source regardless of indivisibility of harm from numerous and “commingled” pollutants but

• Statutes provide affirmative defense for contributor to avoid joint and several liability by proving the divisibility of its contaminant.

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Contrary Precedent

• Case Law• Restatement of Torts

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Case law on “commingled” pollutants• In instances of “commingled pollutants,” re:

numerous producers of fungible products that are commingled and could not be differentiated for a common harm, 11 courts, including 7 state supreme courts) have ruled or stated that plaintiffs cannot obtain monetary damages through joint and several liability and instead must establish damages by proving culpability for apportionment of the harm created. Instead, plaintiffs can only obtain injunctive relief against contributors of commingled pollutants. Most cases date back to traditional common law principles of nuisance.

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Restatement’s view on Market Share Liability

Restatement of Torts Third on Product Liability states Market Share Theory Liability has “an exceedingly limited reach”• It also notes that courts that consider imposing market share liability consider 6

factors:• The generic nature of the product• The long latency period of the harm• The inability of plaintiffs to discover which defendant’s product cause plaintiff’s

harm even after exhaustive discovery• the clarity of the casual connection between the defective product and the

harm suffered by plaintiffs• The absence of other medical or environmental factors that could have caused

or materially contributed to the harm• The availability of sufficient market share data to support a reasonable

apportionment of liabilityJudge Scheindlin candidly concedes that only three of the six factors are present in MTBE: 1,3 and 4.

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• Courts that have Adopted Judge Scheindlin’s Commingled Product Theory of Market Share Liability….

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APPEAL

• City of New York v. Exxon – numerous MDL rulings, including “commingled product,” will be brought to Second Circuit for review.