This blog is an update to “Legal Issues with Using AI to Create Content – Written with Help from AI” by Devin Ricci on April 28, 2023

On August 18th, the United States District Court for the District of Columbia issued an opinion stating that Artificial Intelligence (AI) generated artwork lacks “human authorship,” thus it cannot be the subject of a valid copyright claim. This decision raises many issues regarding copyright ownership that will require further court involvement and/or policy reform.

The primary challenge arising from AI-generated artwork pertains to copyright existence and ownership. Copyright law traditionally assigns authorship to individuals who create original works. However, in the case of AI, determining authorship becomes complex. Some argue that since AI systems are essentially tools programmed by humans, the programmers should retain authorship rights. Others believe that if AI can autonomously create something new without direct human intervention, it should be granted certain rights. This debate challenges the very essence of copyright law, which is built around the concept of human creativity.

Case Summary

The plaintiff, Stephen Thaler, used the “Creativity Machine,” a generative AI technology, to generate a piece of artwork. Thaler was unsuccessful with obtaining a copyright registration for the AI-generated artwork. In the copyright application, Thaler identified “Creativity Machine” as the author. The United States Copyright Office (“USCO”) denied the application because the work “lack[ed] the human authorship necessary to support a copyright claim.” Thereafter, Thaler filed a complaint in the D.C. District Court against the USCO and its director requesting the refusal be set aside and the AI-generated artwork be registered.

Thaler filed a motion for summary judgment arguing that AI-generated work is copyrightable because the Copyright Act provides protection to “original works of authorship.” This argument was premised on Thaler’s assertion that “author” is not explicitly defined in the Copyright Act and that the ordinary meaning of “author” encompasses generative AI. Ultimately, the D.C. District Court disagreed. The Court held the Copyright Act plainly requires human authorship. As explained by the Court, an “author” is “an originator with the capacity for intellectual, creative, or artistic labor,” which is necessarily a human being.

Implications and Considerations

This decision raises a host of questions and demonstrates that a more comprehensive legal framework is required as AI generated content becomes more sophisticated and prevalent. AI has revolutionized various industries, and the realm of creative expression is no exception. AI-generated artwork has gained significant attention in recent years, raising fascinating questions about the intersection of technology, creativity, and intellectual property rights. As AI systems create artwork independently, it becomes imperative to analyze the implications of this emerging trend on copyright, ownership, and the very definition of creativity. The legal framework is continually evolving and there are many issues that content creators, artists, and marketing companies need to be cognizant of as the legal framework develops.

If this ruling is upheld, a work created solely by AI theoretically is not susceptible to copyright protection at all. Because copyright law is preemptive, meaning it exclusively governs the subject matter of claims that fall within the purview of the Copyright Act, this could severely limit the ability to prevent infringement of an AI-generated work. In theory, because the work would not be protectable, there is no property right to infringe and may not be a legal basis to prevent third party use of the material. 

It is important to note that this recent decision may not stretch to underlying works created by a human, or to the extent a human could be considered a co-author of AI-generated content. In any event, it does implicate works where AI is fully creating the work with little to no human involvement. For example, if you use a program similar to the Creativity Machine and type into the program: “create a picture of Santa getting run over by a reindeer with cookies flying everywhere and a dog laughing,” the resulting image would not be protectable under this decision. In particular, advertising companies should be aware that AI-generated advertisements may not be subject to copyright protection.

However, there must be some middle ground between complete human authorship and complete AI-generated content. AI might be utilized in developing a work, but if there is enough human involvement it should be fair to say there is human authorship. Perhaps a photographer snaps a photograph and uses an AI editing tool to filter/edit the photo. Is the photographer’s involvement enough to make the edited photo a human-authored work? How much human involvement is required to constitute authorship? Courts will have to wrestle with the intersection of AI’s involvement in creative works to sort out these questions. Otherwise, it will be up to Congress to create a new framework for addressing AI generated or augmented works.

Conclusion

AI-generated artwork represents a groundbreaking fusion of technology and creativity that challenges established norms in the art and legal worlds. The complex questions it raises about copyright, authorship, and the essence of creativity underscore the need for collaborative efforts among legal experts, artists, programmers, and policymakers. Balancing the rights of human creators and the capabilities of AI will shape the future landscape of artistic expression and intellectual property rights.

On August 18, 2023, in Hamilton v. Dallas County,[1] the United States Fifth Circuit Court of Appeals, sitting en banc, handed down a significant Title VII ruling that has far-reaching implications for future employment discrimination cases in Louisiana, Mississippi, and Texas. Employees seeking to bring a discrimination claim no longer need to meet the high burden of proving they suffered an “ultimate employment decision.” Instead, the Fifth Circuit has aligned with its sister circuits, and plaintiffs need only show they suffered from a discriminatory act related to hiring, firing, compensation or the terms, conditions, or privileges of employment. Indeed, in Hamilton, the Fifth Circuit initially applied the ultimate employment decision standard before rehearing the case en banc and ultimately reversing 27 years of precedence.

For many years, the Fifth Circuit limited actionable Title VII cases to those cases involving ultimate employment decisions. An ultimate employment decision is a decision that affects hiring, granting leave, discharging, promoting, or compensation. Employment decisions that did not impact at least one of the five enumerated categories did not rise to a level to sustain a claim under Title VII. [2]  

Hamilton arose from a Dallas County Sheriff’s Department (“the County”) employment policy pursuant to which officers were allowed to select their off-day preference, but only men could select two consecutive weekend days.[3] Consequently, female officers were not allowed time off for a full weekend. On its face, the policy was gender-based and discriminatory, but the County attempted to justify the policy by asserting that “it would be safer for male officers to be off during the weekends as opposed to during the week.”[4]  

In its initial August 3, 2022 panel opinion, consistent with its prior holdings, the Fifth Circuit held the gender-based scheduling policy was not an ultimate employment decision and affirmed the district court’s summary judgment and dismissal in favor of the County. The policy did not involve an ultimate employment decision and was, therefore, not actionable. To be actionable, the conduct must have impacted one of the enumerated categories and risen to the level of an ultimate employment decision. In the panel opinion authored by Judge Carl Stewart, the Court acknowledged its holding was contrary to its sister circuits and the express language of Title VII. But, absent an amendment to Title VII, a decision by the Court en banc, or a Supreme Court decision, the Court was bound by existing Fifth Circuit precedent. In the panel opinion, Judge Stewart recognized that the allegation against the County was within the scope of the express language of Title VII but not within the narrower requirements of Fifth Circuit precedent. In some circuits, to survive summary judgment, employees need only show that they are members of a protected class and an employment decision impacted their compensation, terms, conditions, or privileges of employment. In those circuits, claims are not limited to ultimate employment decisions. In the panel opinion, Judge Stewart expressly stated that the Hamilton case was ideal for an en banc review by the Court and would give the Court an opportunity to align the Fifth Circuit with its sister circuits and achieve fidelity with Title VII.[5]

Sitting en banc, in an opinion by Judge Don Willett, the Fifth Circuit overturned its original August 3 panel decision. Judge James Ho concurred, and Judges Edith Jones, Jerry Smith, and Andrew Oldham concurred with the judgment only. In its en banc opinion, the Court detailed the history of the phrase “ultimate employment decision” and the impact the phrase had on its past ruling. Applying the language of Title VII, the Court determined that although the County’s actions did not rise to the level of an ultimate employment decision under the Court’s prior interpretation of Title VII and was not actionable (as reflected in the original panel opinion), the en banc Court determined that because the County’s actions were linked to the female officers’ terms, conditions, and privileges of employment, their claims were actionable under Title VII. The gender-based scheduling policy had an adverse impact on female officers, and there was enough to survive summary judgment. The en banc Court held that “employees need only show that they were discriminated against because of a protected characteristic with respect to hiring, firing, compensation, or the terms, conditions, or privileges of employment to state a claim under Title VII.”[6] The judges concurring with the judgment reasoned that the conduct in Hamilton was actionable under the current standard. The concurring judges opined that the majority decision left ambiguity for employees and employers to determine what is an actionable Title VII claim and ultimately disagreed with the majority’s interpretation of the express language of Title VII.  Instead of changing the standard, the concurring judges suggested that the Court should continue applying the ultimate employment decision standard until the Supreme Court resolved the circuit split in a similar case.

The Fifth Circuit’s en banc decision in Hamilton changed the standard for Title VII discrimination claims by eliminating the need for an ultimate employment decision to sustain a Title VII claim and focused on whether an adverse decision had impacted the terms, condition, and/or privileges of employment. Yet, as reflected in the concurring opinion, the Court did not provide guidance regarding the types of adverse decisions effecting terms, conditions, or privileges of employment that could constitute actionable claims. The door has been left open for the Court to refine the scope of an adverse employment decision. What is clear is that employees no longer must satisfy the higher burden of showing an adverse employment decision. Because the standard has been lowered, there may be more cases brought under Title VII and more Title VII cases may survive summary judgment (like the plaintiffs in Hamilton). However, more suits does not mean more wins by plaintiffs. Plaintiff employees still must prove their case.

[1] Hamilton v. Dallas County, 21-10133, 2023 WL 5316716 (5th Cir. Aug. 18, 2023).

[2] 42 U.S.C. § 2000e-2(a) (“It shall be an unlawful employment practice for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.”) 

[3] Hamilton v. Dallas County, 42 F.4th 550, 552 (5th Cir. 2022), reh’g en banc granted, opinion vacated, 50 F.4th 1216 (5th Cir. 2022), and on reh’g en banc, 21-10133, 2023 WL 5316716 (5th Cir. Aug. 18, 2023).

[4] Id.

[5] Id. at 557.

[6] Hamilton, 21-10133, 2023 WL 5316716 at *8 (emphasis added).

The 2023 Regular Legislative Session’s enactment of HB 196 brings robust changes to Louisiana’s summary judgment procedure, set forth in Louisiana Code of Civil Procedure Article 966. The newest amendment to Article 966 focuses primarily on summary judgment evidence, and these changes demand strict adherence to the newly amended summary judgment procedure.

Expansion of Documents Permissible for Summary Judgment

One of the most noteworthy changes to Article 966 lies in the expansion of documents that can be used to support or oppose a motion for summary judgment. Article 966(A)(4)(a) now states in pertinent part:

(A)(4)(a) The only documents that may be filed or referenced in support of or in opposition to the motion are pleadings, memoranda, affidavits, depositions, answers to interrogatories, certified medical records, certified copies of public documents or public records, certified copies of insurance policies, authentic acts, private acts duly acknowledged, promissory notes and assignments thereof, written stipulations, and admissions. (Underlined language is added by HB 196.)

These changes enhance the pool of records available for use in summary judgment proceedings, shifting away from previous reliance on affidavit testimony to validate similar evidence.

Reference to Previously Filed Evidence

Additionally, any evidence provided for in Article 966(A)(4)(a) that is already present in the record can be cited to by reference in summary judgment briefing under a newly enacted provision. Article 966(A)(4)(b) provides:

(A)(4)(b) Any document listed in Subsubparagraph (a) of this Subparagraph previously filed into the record of the cause may be specifically referenced and considered in support of or in opposition to a motion for summary judgment by listing with the motion or opposition the document by title and date of filing. The party shall concurrently with the filing of the motion or opposition furnish to the court and the opposing party a copy of the entire document with the pertinent part designated and the filing information. (Underlined language is added by HB 196.)

Failure to adhere to the specifications of Subsubparagraph (A)(4)(b) may now serve as grounds for objecting to the court’s consideration of the referenced document. While this modification doesn’t negate the option to attach full documents, it introduces a streamlined method for citing existing records.

While it is now permissible to cite to documentary evidence present in the record, practitioners must remember that appellate courts still require evidence to be submitted and entered into the summary judgment record—as opposed to simply a reference to those documents in briefing—to be considered when supervisory review of a motion for summary judgment is requested.

Mandatory Electronic Service of Documents

In a nod to the digital age, amendments to Article 966(B)(1), (2), and (3) now mandate electronic service of all motion-related documents in accordance with Louisiana Code of Civil Procedure Article 1313(A(4). As such, electronic service for motions for summary judgment, oppositions, reply memoranda, and any supporting documents is now mandatory.

Trial Courts are Precluded from Considering Untimely Filed Evidence

The newest amendments to Article 966(D)(2) precludes the trial court from considering any documents that are filed untimely in support of, or in opposition to, the motion for summary judgment. Article 966(D)(2) now reads:

(D)(2) The court [may] shall consider only those documents filed or referenced in support of or in opposition to the motion for summary judgment [and shall consider any documents to which no objection is made] but shall not consider any document that is excluded pursuant to a timely filed objection. Any objection to a document shall be raised in a timely filed opposition or reply memorandum. The court shall consider all objections prior to rendering judgment. The court shall specifically state on the record or in writing [which documents, if any, it held to be inadmissible or declined to consider] whether the court sustains or overrules the objections raised. (Underlined language is added by HB 196; bold underlined language in brackets is removed by HB 196.)

These changes to Subparagraph (D)(2) now clarify that trial courts essentially lack discretion to consider any document or objection that is untimely filed in summary judgment proceedings, including any evidence supporting summary judgment that is filed in a reply memorandum rather than the motion itself.

New Procedure for Challenging Expert Evidence in Summary Judgment

Another new provision to Article 966 provides for a procedural barrier to summary judgment when objections are made to an expert’s qualifications or methodologies by filing a Daubert motion in accordance with Louisiana Code of Civil Procedure article 1425(F). A timely filed Daubert motion challenging expert evidence in support of or opposition to summary judgment now dictates that the Daubert proceedings be completed prior to the summary judgment hearing, as Article 966(D)(3) provides:

(D)(3) If a timely objection is made to an expert’s qualifications or methodologies in support of or in opposition to a motion for summary judgment, any motion in accordance with Article 1425(F) to determine whether the expert is qualified or the expert’s methodologies are reliable shall be filed, heard, and decided prior to the hearing on the motion for summary judgment. (Underlined language is added by HB 196.)

Legal Holidays Now Count Towards Delays for Reply Memoranda

Lastly, Subparagraph (B)(3) now clarifies that legal holidays are “counted” towards the five-day filing requirement for reply memoranda. Article 966(B)(3) now reads:

(B)(3) Any reply memorandum shall be filed and served in accordance with Article 1313(A)(4) not less than five days inclusive of legal holidays notwithstanding Article 5059(B)(3) prior to the hearing on the motion. No additional documents may be filed with the reply memorandum. (Underlined language is added by HB 196.)

It is important to note that this change merely affects the time calculation and does not require filing and service on a legal holiday, as clarified by the drafters’ comments to the 2023 amendment of Article 996:

(d)  Subparagraph (B)(3) clarifies that legal holidays are included in the calculation of time within which the mover shall file the reply memorandum. Subparagraph (B)(4) continues to apply in this situation. For example, if the hearing on the motion for summary judgment is set on Friday, the fifth day to file the reply memorandum falls on the preceding Sunday. Accordingly, under Subparagraph (B)(4), the mover would have the entirety of the preceding Monday to file the reply memorandum. The court should be aware of this requirement when setting hearings on motions for summary judgment.

Thus, Subparagraph (B)(4) still applies, giving parties the next business day to file if the fifth day deadline falls on a legal holiday.

The property tax “open rolls” period is here for Louisiana taxpayers. While this annual inspection period is important in any year, legislation which took effect in 2022 has altered the process of appealing a parish assessor’s valuation determination. Therefore, it is critical for taxpayers to take early and appropriate action.

The “open rolls” period in any Louisiana parish is the annual opportunity for taxpayers to check property tax assessments and determine whether they are correct. More importantly, it is a time to act quickly or lose your rights to contest property tax valuations. The property tax rolls are scheduled to be “open” for public inspection in selected Louisiana parishes as follows:

PARISHOPEN ROLLS DATES
Caddo08/17-08/31/2023
Calcasieu08/15-08/29/2023
East Baton Rouge08/24-09/08/2023
Jefferson08/22-9/6/2023
Lafayette08/17-09/01/2023
Lafourche08/31-9/15/2023
Livingston08/15-08/29/2023
Orleans07/15-08/15/2023
Plaquemines08/16-09/01/2023
St Bernard08/15-9/2/2023
St Charles08/15-08/29/2023
St Mary08/15-08/29/2023
St Tammany08/15-08/29/2023
Terrebonne08/21-9/5/2023
Washington08/15-9/8/2023

Open rolls dates for other parishes can be found on the Louisiana Tax Commission website. The current property tax year for Orleans Parish is 2024. For all other Louisiana parishes, the current property tax year is 2023.

In evaluating a property tax assessment during “open rolls,” information for prior tax years can be useful in determining whether there has been a change, and this information may be included on a parish assessor’s website. However, note that some parishes may not have current or accurate information online, and in those cases, it will be necessary to contact or meet with the assessor’s office for updated information. The compressed “open rolls” time window requires diligence and quick work. In addition, the property tax assessments in some parishes can be viewed through the Louisiana Tax Commission website. The website for Orleans Parish is: www.nolaassessor.com.

It is important to know that if you or your client wishes to challenge the correctness (i.e., dispute the value) of a property tax assessment and preserve rights to challenge it, the “open rolls” period is your only chance to do so. During this time (if not earlier), it’s important to review the assessor’s data and conclusions, discuss the assessor’s stance on valuation, and provide all available information to the assessor that supports the correct value. Under recent statutory changes (La. Acts 2021, No. 343, eff. January 1, 2022), a taxpayer must furnish the assessor with all information that supports the taxpayer’s valuation prior to the deadline for filing an appeal with the local Board of Review. Although the deadline date varies by parish, it is typically just a few days after the “open rolls” period closes. Beware of this very short time frame! Under the new law, which governs property tax appeals filed on or after January 1, 2022, the Tax Commission may allow additional evidence that was not provided to the assessor to be presented at the property tax hearing before the Commission. However, the recommended course is to provide the assessor all available evidence to support the correct value during, or prior to, the open rolls inspection period.

In short, August brings a different kind of heat to Louisiana property taxpayers. If you or your clients have questions or need assistance with these and other property tax matters, contact Kean Miller’s State and Local Taxation group.

On May 25, 2023, the United States Supreme Court ruled in favor of landowners seeking to build a modest home on “wetlands” in Sackett v. EPA. This ruling represents not only a clarification of a major law relevant to companies seeking to develop land near water bodies, but also a significant limitation on the EPA’s and Army Corps of Engineer’s power to regulate wetlands. The Supreme Court’s clarification of the Clean Water Act’s jurisdictional reach significantly benefits landowners from the standpoint of concerns over federal regulation of their property. However, the landowners must still comply with state and local requirements.

In 2004, the Sacketts purchased a plot of land near Priest Lake in Idaho. In preparation for building their home, they began backfilling their property with dirt and rocks. A short while later, the EPA sent the Sacketts a compliance order informing them their backfilling violated the CWA because their property contained protected wetlands. The EPA demanded the Sacketts to immediately restore the site and threatened the Sacketts with penalties of over $40,000 per day if they did not comply, despite their lot being worth only $23,000.[1]

The Sacketts filed suit alleging that the EPA lacked jurisdiction because any wetlands on their property were not “waters of the United States.” The District Court entered summary judgment for the EPA and the Ninth Circuit affirmed, holding that the CWA covers adjacent wetlands with a significant nexus to traditional navigable waters and that the Sacketts’ lot satisfied that standard. The United States Supreme Court granted certiorari to decide the proper test for determining whether wetlands are “waters of the United States.”

The Supreme Court recognized the need for clarification of the definition of “wetlands” under the CWA, due to the Act’s severe consequences even for justifiably ignorant violations. Property owners who unknowingly violate the CWA can face criminal penalties, including imprisonment, or fines of over $60,000 per day.  

Before the Court’s recent opinion, agency guidance instructed officials to assert jurisdiction over wetlands “adjacent” to non-navigable tributaries when those wetlands had “a significant nexus to a traditional navigable water.” In looking for evidence of a “significant nexus,” field agents were told to consider a wide range of open-ended hydrological and ecological factors.[2]  The significant nexus test and other obscure rules promulgated by the agencies over the years resulted in decades of uncertainty for permit applicants. Without a uniform rule established by the Court, the EPA and the Corps were free to implement a system of vague rules granting themselves broad jurisdictional reach. These interpretations led to rulings such as United States v. Deaton, where the Court held that a property owner violated the CWA by piling soil near a ditch 32 miles from navigable waters.[3]

In Sackett, the Court rejected the “significant nexus” test (from earlier decisions) in favor of a more objective rule. A five-Justice majority held that “the CWA extends to only those wetlands that are as a practical matter indistinguishable from waters of the United States. This requires the party asserting jurisdiction over adjacent wetlands to establish “first, that the adjacent [body of water constitutes] . . . ‘water[s] of the United States,’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.”[4] Note that a wetland must be affirmatively connected to, not just close to, a navigable waterway in order to qualify. The Court acknowledged that a surface connection could be interrupted by “low tides or dry spells” without precluding an area from qualifying as a wetland, but the text of the opinion makes clear that, in the Court’s view, a continuous surface connection to a navigable waterbody must be maintained the majority of the time in order for an area to so qualify.

The EPA attempted to argue that “wetlands are “adjacent” when they are “neighboring” to [CWA] covered waters, even if they are separated from those waters by dry land.” The Court rejected this interpretation as “inconsistent with the text and structure of the CWA,” and also stated that such a broad scope of authority would “give[] rise to serious vagueness concerns in light of the CWA’s criminal penalties.”

The Supreme Court’s new interpretation of wetlands covered under the CWA will effectively limit the geographical reach of the EPA’s jurisdiction. Obviously, the Sackett decision does not impact state and local wetlands regulations. We encourage the reader to carefully evaluate all of the applicable requirements when dealing with wetlands issues.

[1] Sackett v. EPA Case Story | Pacific Legal Foundation

[2] Rapanos v. United States, 547 U.S. 715 (2006).

[3] United States v. Deaton, 332 F.3d 698, 702 (C.A.4 2003).

[4] Sackett, 143 S. Ct. at 1324 (quoting Rapanos, 547 U.S., at 755, 742, 126 S.Ct. 2208. Pp. 1338–41).

The 2023 Regular Session of the Louisiana Legislature wrapped on June 8, 2023. During this session, the Louisiana Legislature enacted a number of bills in the energy and environmental sector of the law. Below is a brief summary of all new relevant adopted provisions:

Energy

Act 150 (SB 103) changes the name of the Department of Natural Resources to the “Department of Energy and Natural Resources.”[1] Act 150 has an effective date of January 1, 2024. Act 455 (SB 154) establishes a new statutory framework for “renewable energy leases” and regulates leases for wind, solar, and hydroelectric energy production. The Act outlines the rights and obligations of the parties involved in said leases. Act 455 enacts new statutory provisions, R.S. 30:1161-1179,[2] and has an effective date of June 28, 2023.

DEFINITION OF RENEWABLE ENERGY LEASE

Per Act 455, a “renewable energy lease” is a defined term described as:

A lease of immovable property that is entered for the primary purpose of the lessee’s engaging in the production of wind, solar, or hydroelectric energy using the leased immovable, and any other lease pursuant to which the lessee’s primary activity on the leased immovable is the production of wind, solar, or hydroelectric energy.[3]

Act 455 further provides that the lessee’s rights in a renewable energy lease are susceptible of mortgage, as well as his rights in the buildings, improvements, and other constructions.[4] The provisions of the Act explicitly state that a renewable energy lease is not a mineral lease; however, it is evident that many provisions are similar in nature to those found in the Mineral Code.[5]

RIGHTS AND OBLIGATIONS OF PARTIES INVOLVED

Reasonable regard is required to be exercised between the owner of land burdened by a renewable energy lease and the lessee of a renewable energy lease, and the lessee of a renewable energy lease shall not unreasonably interfere with the rights of others lawfully exercising their rights in the land, subject to the laws of registry.[6] The language of the new law also establishes an obligation for the lessee to act as a reasonably prudent operator.[7]

TERMINATION AND REMEDIES FOR VIOLATION

Act 455 establishes that a renewable energy lease terminates at the expiration of the agreed term or upon the occurrence of an express resolutory condition, and if the lease is violated, the aggrieved party has a right to relief for violation.[8] The law further adopts substantially similar written notice requirements and remedies to the provisions found in the Mineral Code which govern the violation of a mineral lease. As such, the lessor is required to provide written notice of the asserted breach of performance and allow a reasonable time for performance prior to a judicial demand for damages or dissolution of the lease.[9] The lessee thereafter has 30 days after the receipt of notice to pay the rent or respond in writing stating a reasonable cause for non-payment.[10]

Moreover, dissolution is unavailable when the lessee pays the rent or royalties due within 30 days of receiving notice unless it is found that the original failure to pay was fraudulent.[11] The court has discretion to award additional damages in an amount not to exceed the amount of rent or royalties that were not timely or properly paid, interest on that sum from the date due, and reasonable attorney fees if the lessee pays the rent or royalties due within thirty days of receiving the required notice but the original failure to pay rent or royalties was either fraudulent or willful and without reasonable grounds.[12] In all other cases, damages shall be limited to interest on the rent or royalties computed from the date due, and reasonable attorney fees if such interest is not paid within thirty days of the written demand.[13] The court may dissolve the lease if the lessee fails to pay rent or royalties due and fails to inform the lessor of a reasonable cause for failure to pay, and, additionally, the court may award as damages the amount of rent or royalties due, interest on that sum from the date due, and reasonable attorney fees regardless of the cause for the original failure to pay.[14]

LESSOR’S PRIVELGE

The lessor of a renewable energy lease has a privilege on all equipment, machinery, and other property of the lessee on or attached to the property leased for the payment of his rent and other obligations of the lease.[15] This right also extends to equipment, machinery, and other property of a sublessee on or attached to the property leased, but only to the extent that the sublessee is indebted to his sublessor at the time the lessor exercises his right.[16] The lessor may also seize the property subject to his privilege before the lessee removes it from the released premises, or within 15 days after it has been removed by the lessee without consent, if: (1) it continues to be the property of the lessee and (2) it can be identified.[17]

Act 378 (HB 571) requires revenue sharing for carbon capture sequestration projects on state lands or water bottoms as follows: 30% to parishes, 30% to the Mineral and Energy Board, and 40% to the state general fund. It also increases funding for the Carbon Dioxide Geologic Storage Trust Fund.[18] Act 378 requires proper notice to parishes when the Mineral and Energy Board, the Department of Natural Resources, or Department of Wildlife and Fisheries receive an application for a permit related to carbon capture and sequestration.[19] An environmental analysis must be submitted as part of the application for a Class VI injection well permit.[20] Lastly, the enacted law also increases reporting requirements and further aligns liability provisions with current Department of Natural Resources practices and Environmental Protection Agency standards.[21]

SR 123 requests the U.S. Environmental Protection Agency to take actions necessary to timely review and grant the state of Louisiana’s application for primacy in the administration of Class VI injection well permitting.[22]

Coastal Protection and Restoration Authority (CPRA)

SCR 17 approves the comprehensive master plan for integrated coastal protection. Importantly, the “coastal master plan” must include a list of projects and programs required for the protection, conservation, enhancement, and restoration of the coastal area.[23] It must also include the action required of each agency to implement said project or program and a schedule and estimated cost for the implementation of each included in the plan.[24] In addition, the state’s “coastal master plan” must be updated every six years and outlines the strategy to combat coastal land loss and storm surge flood risk.[25] The 2023 state master plan projects include: 65 restoration; 12 structural risk reduction; $11 billion for nonstructural risk reduction; and $19 billion for dredging.[26] Lastly, SCR 6 approves the annual integrated coastal protection plan for Fiscal Year of 2024.

Conclusion

In conclusion, the legislature has enacted several additions to Louisiana’s energy and environmental laws — including adopting a new framework for “renewable energy leases.” These new laws affect the rights and obligations of owners, lessors, lessees, and operators in these developing areas of the law. Kean Miller will continue to monitor these developments. For questions or to discuss any of the foregoing, please contact Kean Miller’s Energy/Environmental Litigation Team.

[1] (Emphasis added).

[2] Although Act 455 enacts the new statutory provisions comprised of R.S. 30:1161-1179, the final statutory numbers may be redesignated by the Louisiana State Law Institute as necessary.

[3] Section 1161. Renewable energy lease.

[4] Id.

[5] Id. (Emphasis added).

[6] Section 1162. Preservation of rights.

[7] Section 1163. Lessee’s obligation to act as a reasonably prudent operator.

[8] Section 1167. Termination of renewable energy lease; Section 1168. Right to relief for violation.

[9] Section 1170. Written notice; requirements and effect on claims for damages or dissolution of lease.

[10] Section 1172. Required response of lessee to notice; effect of response.

[11] Section 1172(A). Required response of lessee to notice; effect of response.

[12] Section 1172(B). Required response of lessee to notice; effect of response.

[13] Id.

[14] Section 1172(C). Required response of lessee to notice; effect of response.

[15] Section 1176. Lessor’s privilege.

[16] Id.

[17] Section 1177. Right to seize property on premises or within fifteen days of removal.

[18] Title 30, Section 1109(A)(4). Cessation of storage operations; limited liability release.

[19] HB 571.

[20] Title 30, Section 1104.1. Environmental analysis.

[21] Title 30, Section 1107.1. Reporting; record keeping.

[22] Senate Resolution No. 123.

[23] Senate Concurrent Resolution No. 17.

[24] Id.

[25] Id.

[26]https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwi8uJmDyoeAAxVFlWoFHd_pBDUQFnoECB4QAQ&url=https%3A%2F%2Fhouse.louisiana.gov%2FAgendas_2023%2FSession%2520Wrap%2520-%25202023%2520RS.pdf&usg=AOvVaw1gAmGUkgPMd-GvadHIjE4r&opi=89978449.

On June 8, 2023, the U.S. Supreme Court narrowed the reach of the aggravated identity theft statute, 18 U.S.C. § 1028A(a)(1). Criminal defense attorneys and federal prosecutors alike were anxiously awaiting the result in Dubin v. United States, 599 U.S. ____ (2023). The stakes were high. Commonly charged in mail, wire, bank, and healthcare fraud prosecutions, the aggravated identity theft offense revolves around the illegal use of a means of identification of another person. With its mandatory two years of imprisonment, an aggravated identity theft count tends to attract the attention of white-collar defendants.

Dubin is important for criminal practitioners because it narrows the “use” and “in relation to” elements of the aggravated identity theft offense in the context of fraud or deceit crimes involving healthcare billing. After Dubin, the government will need to prove the means of identification specifically was used in a manner that was fraudulent or deceptive, such as misrepresenting who received a service. Moreover, to meet the “in relation to” the predicate offense element, the government will need to show the misuse of the means of identification was at the crux of what made the conduct criminal.

In Dubin, Petitioner David Fox Dubin (“Dubin”) was the managing partner of a psychological clinic (the “Clinic”) in Austin, Texas. The Clinic often received referrals from an emergency shelter for children and sometimes billed Medicaid for treatment of certain patients.

Following an investigation and prosecution by the FBI, Texas Attorney General’s Medicaid Fraud Control Unit, and Department of Justice, a jury convicted Dubin of conspiracy to commit healthcare fraud, one count of substantive healthcare fraud, and one count of aggravated identity theft.

The evidence showed Dubin overbilled in four respects: (1) he billed at the licensed psychologist rate when, in fact, a clinician without that credential saw the patient; (2) he instructed employees to bill the maximum number of hours permitted by Medicaid even if they actually spent less time with the patient; (3) he billed for a full evaluation when only a partial was completed; and (4) he falsified the date that the services were provided.

The aggravated identity theft count involved a specific patient, a minor referred to as “Patient L,” who had undergone psychological testing at the Clinic. For purposes of the aggravated identity theft count, the allegedly misused “means of identification” was Patient L’s name and Medicaid identification number.

Among other grounds, Dubin appealed the aggravated identify theft conviction to the U.S. Fifth Circuit, arguing that he did not “use” Patient L’s identity within the meaning of the statute. Dubin lost his initial appeal but requested a rehearing, which was granted. In an Opinion on March 3, 2022, an en banc (and sharply divided) Fifth Circuit affirmed the conviction. The U.S. Supreme Court granted certiorari.

In a 9-0 Opinion authored by Justice Sotomayor (concurrence by Justice Gorsuch), the Supreme Court vacated Dubin’s aggravated identity theft conviction.

Mindful that it could not construe a criminal statute on the basis that the government would act with restraint, the Court rejected what it called a “sweeping” and “boundless” interpretation of the statute, one that covers “defendants who fraudulently inflate the price of a service or good they actually provided.” Justice Sotomayor used examples of a lawyer who rounds up their hours and a waiter who serves flank steak but charges for filet mignon. The Court was particularly concerned with the reach of the aggravated identity theft statute. “If [the aggravated identity theft statute] applies virtually automatically to a swath of predicate offenses, the prosecutor can hold the threat of charging an additional two-year mandatory prison sentence over the head of any defendant who is considering going to trial.”

In Dubin’s case, the Court found that his use of Patient L’s name and Medicaid number was not at the crux of what made the underlying healthcare overbilling fraudulent. The crux was Dubin’s misrepresentation about the “qualifications of [an] employee.” Patient L’s name was “an ancillary feature of the billing method employed.” Borrowing a formulation from the Sixth Circuit, Justice Sotomayor found that “[Dubin’s] fraud was in misrepresenting how and when services were provided to a patient, not who received the services.”

Moving forward, Dubin may provide criminal defense attorneys fertile ground for a targeted bill of particulars, non-pattern jury instructions, and Rule 29 arguments in cases involving alleged aggravated identity theft.

Because it was a fiscal session, the Louisiana Legislature enacted a number of key tax changes in the 2023 Regular Session that concluded on June 8, 2023. Below you will find the important substantive tax updates and their implications for taxpayers, which are addressed by tax type. A number of these changes represent welcome relief for taxpayers and improvements to the climate for business in this state. Highlights of the legislative session are discussed below.

Corporation Franchise Tax

L. 2023, SB1, SB3 (Act 435) and SB6 – Diminishing Returns: Repeal of the Corporation Franchise Tax (Vetoed by the Governor)

Although the Louisiana corporation franchise tax (“CFT”) was roundly disliked by the courts, the Department of Revenue and the business community[1] as a result of its significant complexity and potential to discourage capital investment in the state, the tax nonetheless proved difficult to kill and, has in fact, survived the most recent attempt to rid the State of this tax. In what appears to have been a bipartisan effort in this most recent legislative session, the franchise tax was slated for eventual repeal.[2] The CFT was to be phased out at the cost of certain reductions to incentive programs, discussed below. The phase-out would have begun in the 2025 CFT year (which is the 2024 income tax year) and would have been reduced by 25% for each year in which overall corporate tax collections (from the CFT and the Corporation Income Tax) exceed $600 million. The reduction was to take effect in the year following such excess. The first 25% reduction was expected to occur within the next two years and would have resulted in significant savings for corporations currently subject to the tax, with a potential for complete elimination of the tax by the 2029 CFT year. While these amendments passed both the House and Senate, on June 27, 2023, the Governor vetoed SB1 and returned it to the Senate.[3] However, if the Legislature goes back into session, it can override the veto if House and Senate each vote by a two-thirds majority to approve SB1. In that case, SB1 will become law without the Governor’s approval. While this would be a welcome development, there is not yet any firm indication that there will be such a special session.

As noted above, if the CFT repeal had gone into effect, a portion of the cost of the phase-out would have been offset by a reduction of the sales/use tax rebate and the project facility expense rebate under the Quality Jobs program, to the extent of 50% of the CFT reduction for that year. This reduction would have only affected projects for which advance notifications under the Quality Jobs program are filed after December 31, 2023, which would have been an important planning point for projects intending to apply. While these amendments, set out in SB6, passed both the House and Senate, their provisions were rendered moot by the Governor’s veto of the CFT repeal legislation, and on June 28, 2023, the Governor also vetoed SB6.[4]

SB3 was introduced with SB1 and SB6 to change the month for the annual determination of automatic rate reductions for corporation income and franchise tax from April to January. This amendment has been signed into law and applies from January 1, 2024 onwards.

Corporation Income Tax

L. 2023 HB631 (Act 430) – The “Throwout Rule” Has Been Thrown Out

The sourcing rules used to determine the sales factor for Louisiana corporation income tax apportionment have been amended to repeal the “throwout rule,” which previously excluded certain sales of intangible property from both the numerator and denominator of the sales factor. Also, sales that are now classified as generating allocable income (rental/lease/license of immovable and tangible personal property, lease/license of intangible property) have been removed from the apportionment-related sourcing provisions. The amendments have been signed into law and apply to tax years beginning on or after January 1, 2024.

Individual Income Tax

L. 2023 SB89 (Act 242) – The LDR Must Promulgate Regulations Related to the Net Capital Gain Deduction for Sale of a Louisiana Business

Act 242 requires the Louisiana Department of Revenue (“LDR”) to promulgate regulations related to the individual income tax exclusion of net capital gains arising from the sale or exchange of an equity interest or substantially all of the assets of a non-publicly traded corporation, partnership, limited liability company, or other business organization commercially domiciled in Louisiana. In addition to reducing the administrative requirements for claiming the deduction, the regulations are also expected to restrict eligibility for the deduction where a majority of the physical assets of the business organization are located outside Louisiana or where the transactions are between related parties. These amendments have been signed into law and apply for taxable periods on or after January 1, 2023.

L. 2023 HB618 (Act 413) – Still No Taking All the Credit for Taxes Paid to Other States

Restrictions on the availability of a credit for net income taxes paid in another state have been extended – (i) the credit is limited to the amount of Louisiana income tax that would have been imposed if the income earned in the other state had been earned in Louisiana, (ii) the credit is not allowed for tax paid on income that is not subject to tax in Louisiana, and (iii) the credit is not allowed for income taxes paid to a state that allows a nonresident a credit for taxes paid or payable to the state of residence. Act 413 also provides that any deductions claimed by an individual partner/shareholder/member for another state’s entity level tax are in lieu of the credit and not in addition to it, i.e., no double benefit will be allowed.

In addition, the requirement of reciprocity in order to take a credit for taxes paid to another state (i.e., that the other state must grant a similar credit against Louisiana individual income tax) is eliminated. These amendments have been signed into law and will apply to taxable years beginning on or after January 1, 2023.

Pass-Through Entity Tax

L. 2023 HB428 (Act 450) – Expanded Access to the Pass-Through Entity Exclusion for Partnerships, Estates and Trusts

The pass-through entity exclusion (the “SALT cap workaround”) has been extended to partnerships, estates, and trusts, which will enable such entities to exclude net income or losses received from a related entity in which the partnership, estate or trust is a shareholder, partner, or member, provided that payor entity properly filed an entity-level Louisiana tax return that included the net income or loss in question. The exclusion will not apply to any amount attributable to income that does not bear the entity-level tax for any reason. Previously, this exclusion was only available to individuals.[5] These amendments have been signed into law and will apply to taxable years beginning on or after January 1, 2023.

Sales and Use Tax

L. 2023 HB171 (Act 15) – Thresholds Modified for Remote Sellers and Marketplace Facilitators

Previously, the Louisiana threshold for a remote seller or marketplace facilitator to register, report and remit use tax (both state and local) was gross revenue for sales delivered into Louisiana in excess of $100,000, or more than 200 transactions. Act 15 repeals the 200-transaction threshold. This development comes on the heels of South Dakota repealing the same transaction threshold earlier this year – that threshold was acknowledged in Wayfair[6] as one of the benchmarks to determine if a remote seller availed itself of the substantial privilege of carrying on business in a state so as to justify an obligation to remit the tax.

Act 15 also provides that only remote retail sales (and not excluded transactions such as resales) would be counted towards the $100,000 threshold for marketplace facilitators. These amendments have been signed into law and take effect from August 1, 2023.

Interestingly, Halstead Bead Inc., a small out-of-state retailer that challenged Louisiana’s decentralized local sales and use tax administration in federal court[7], informed the U.S. Court of Appeals for the Fifth Circuit that this amendment rendered its pending appeal moot because it does not expect to cross the higher $100,000 threshold and will therefore not be liable to report and remit tax in Louisiana. But the parishes in the matter counter-argued that the challenge was only mooted to the extent of the 200-transaction threshold but not the $100,000 threshold, and also that the new law would not take effect until August 1, 2023, ostensibly in a bid to persuade the court not to dismiss the matter and to issue a decision that Louisiana’s decentralized system is constitutional. The Fifth Circuit ultimately issued a decision on July 7, 2023 that Halstead Bead Inc.’s challenge to the Louisiana tax system was barred by the Tax Injunction Act.

L. 2023 HB558 (Act 375) – Centralized Remittance and Reporting of Local Sales and Use Tax

The Uniform Local Sales Tax Board (“ULSTB”) has been tasked with setting up a uniform return and remittance system where a taxpayer can file returns and deposit all local sales/use taxes electronically within a single portal. This responsibility previously lay with the LDR but the ULSTB already has experience with setting up similar uniform programs for multi-parish audits, refunds and voluntary disclosure in a bid to simplify local tax administration.[8] The new uniform return and remittance system must be available for use no later than January 1, 2026, and once implemented, should ease compliance with Louisiana local sales/use tax although its exact features remain to be seen. The new system will also include information on the applicable tax rates and exemptions, which is to be provided to the ULSTB by the parish collectors, and any rate changes[9] are to be notified in advance. A taxpayer’s reliance on the rates and exemptions in the new system will be an absolute defense against any claim for a taxing authority’s sales and use tax. These appear to be “hold harmless” clauses designed to protect taxpayers and parish collectors when parish sub-jurisdictions delay reporting boundary changes or rate changes. These amendments have been signed into law and will take effect on January 1, 2024.

L. 2023 HB629 (Act 382) – Sales and Use Tax Exemption for Certain Topical Drugs

The exemption from local sales and use tax for prescription drugs administered exclusively to a patient in a medical clinic (as defined) has been extended to cover those administered by topical system. In addition, drugs for neuropathic pain have also been included under the exemption. These amendments have been signed into law and will take effect on July 1, 2023.

L. 2023 HB161 (Act 62) – Sales and Use Tax Exemptions Benefitting the Seafood Industry

The exemption for various materials and supplies to commercial fisherman[10] as well as related seafood processing facilities has been made mandatory for local sales and use tax. Previously, each parish could determine whether and to what extent to adopt the exemption. The amendment effects uniform treatment for such transactions at a state and local level. The scope of the exemption is fairly wide – covering materials and supplies necessary for repairs to the vessel or facility that become a component part of the vessel or facility, materials and supplies that are loaded upon the vessel or delivered to the facility for use or consumption in the maintenance and operation, and repair services performed upon the vessel or facility – and may therefore be relevant to a number of industries. This amendment has been signed into law and will take effect on August 1, 2023.

L. 2023, SB8 (Act 249) – No Interest When Local Sales/Use Taxes Paid Under Protest

In a welcome move, interest is no longer payable where a collector prevails against an unsuccessful taxpayer in a suit in which the taxpayer has paid the taxes under protest. This amendment repeals the interest liability that was introduced just last year as part of the 2022 Regular Session and was roundly criticized as double-dipping by collectors who could invest the disputed funds while the matter was pending resolution. It should also be noted that there is no interest liability when it comes to state sales/use tax[11] and the amendment reintroduces parity on that count.

On the downside, where interest is payable on a refund of tax paid under protest (i.e., when a taxpayer prevails), the interest rate has been reduced from 12% per annum to the judicial interest rate (currently, 6.5% per annum). These amendments have been signed into law and will take effect on August 1, 2023. Based on a 2015 change to the law, where a parish collector has deposited the monies into an interest-bearing escrow account, the taxpayer will be paid only the interest actually earned and received by the collector.

Ad Valorem Tax

L. 2023, SB5 (Act 284) – New Alternatives to Payment Under Protest When Challenging Property Tax Assessments

Taxpayers are no longer forced to pay ad valorem property taxes under protest in order to contest legality or correctness before the Board of Tax Appeals or a district court. Instead, a taxpayer may timely[12] file a rule for bond or other security (which includes a pledge, collateral assignment, lien, mortgage, factoring of accounts receivable, or other encumbrance of assets). The Board of Tax Appeals or district court may permit the posting of a bond or other security for all or part of the taxes at its discretion. No collection action will be taken in relation to the assessment of tax and interest unless the taxpayer fails to furnish such bond or security. Note that if a bond or other security is posted and the taxpayer is ultimately unsuccessful, interest will run until the date the taxes are paid (because there was no payment under protest to stop the interest clock).

The amendments also clarify that a taxpayer challenging the correctness of an assessment before the Louisiana Tax Commission (“LTC”) does not need to pay the tax or post security, including during an appeal against the LTC’s determination by any other party. If the taxpayer appeals against the LTC’s determination, the amount of the payment under protest or alternate security will be based upon the LTC’s determination. These amendments have been signed into law and will take effect on August 1, 2023.

L. 2023 HB279 (Act 161) – Modification to Rules on Confidentiality of Assessment Information Provided to the LTC

The provisions relating to confidentiality of information submitted to the LTC have been modified. Any current-year assessment information submitted to the LTC on or after January 1, 2024, may be provided to any individual or other entity for use in a business unless it is deemed or designated confidential by an assessor, or relates to public service properties. For assessment information submitted to the LTC prior to January 1, 2024, historical information held by the LTC and viewable from the LTC’s website that is at least one year old may be provided to a taxpayer in electronic form. The one-year requirement will not apply to assessment information submitted to the LTC on or after January 1, 2024. This amendment has been signed into law and will take effect on January 1, 2024.

Common Administrative Provisions for State Taxes

L. 2023, SB75 (Act 289) – Deadline for Payment under Protest of Self-Assessed State Taxes

In recent case Barron, Heinberg & Brocato, LLC vs. Louisiana Department of Revenue, State of Louisiana, the Board of Tax Appeals recently held that a taxpayer can choose to pay under protest any state tax self-assessed on a return, finding that there was no clear deadline in the applicable statute.[13] Act 289 substantively changes the law in relation to the Barron decision and requires a taxpayer to pay self-assessed taxes under protest within 60 calendar days of the date of a notice of tax due going forward.[14] The notice must be sent by certified mail where the amount due exceeds $1,000. The provisions of Act 289 apply to assessments and notices mailed on or after October 1, 2023.

Conclusion

This year’s regular session was particularly contentious, but the Legislature nonetheless came together to address a number of important tax matters including the eventual elimination of the franchise tax and the imposition of interest on taxes paid under protest at the local level in certain circumstances. Unfortunately, the governor vetoed the franchise tax repeal but other changes became law. The list above is not exclusive. It’s important to keep an eye on developments as they occur. For questions or to discuss any of the foregoing, please contact Kean Miller’s tax team: Jaye Calhoun at (504) 293-5936, Willie Kolarik at (225) 382-3441, Phyllis Sims at (225) 389-3717, or Divya Jeswant at (504) 293-5766.

[1] Our colleague, William J. Kolarik, II, wants you to know that he is not celebrating the Governor’s veto as a public policy matter. While we had mentioned earlier that he is in the minority in that he would have missed the franchise tax, having figured it all out at this point, as we have spent a significant part of our careers assisting clients with franchise tax issues, he nonetheless understands that its unwieldy structure and anti-economic development policy was not good for the State.

[2] Interestingly, a 25% reduction based on current collections would arguably never have resulted in complete repeal in that simply reducing the tax by 25% each time the condition is met results in a continuously diminishing fraction which, while producing almost negligible tax liability, would nonetheless never reach zero.

[3] https://gov.louisiana.gov/assets/SB1Veto.pdf.

[4] https://gov.louisiana.gov/assets/2023Vetoes/SB6.pdf.

[5] La. R.S. 47:297.14.

[6] South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).

[7] Halstead Bead, Inc. v. Richard, 5th Cir., No. 22-30373.

[8] https://www.salestaxportal.com/.

[9] A rate change includes a new tax, a change in the rate of tax, a change in the boundary of a parish sub-jurisdiction, the introduction/repeal/modification of an exemption etc.

[10] Who own, lease or exclusively contract a vessel operated primarily for the conduct of commercial fishing as a trade or business.

[11] La. R.S. 47:1576.

[12] Within the usual appeal deadline in the case of a correctness challenge, and before the taxes are due in the case of a legality challenge.

[13] No. 12963C c/w 12984C, (La. Bd. Tax App. July 13, 2022).

[14] La. R.S. 47:1568. Note that the initial proposal was for a thirty-day deadline but was amended to ensure that a taxpayer had sufficient time to make payment after receiving the notice of tax due.

United States District Court Judge P. Kevin Castel issued an opinion on June 22, 2023, imposing sanctions and other penalties on the attorneys who relied on the artificial intelligence application, ChatGPT, in citing to fake cases in pleadings submitted to the court earlier this year.

Judge Castel’s thirty-four page opinion details the missteps of the lawyers, including filing the submission citing the fake cases, failing to withdraw the submission after opposing counsel identified the fake cases, doubling down on the existence of such cases when their validity was called into question, offering false information to the court in order to obtain an extension to a court ordered deadline, and providing “shifting and contradictory explanations” as to how and why the bogus case citations were submitted to the court.

The opinion makes clear that the real issue was the fact that the lawyers continued to mislead the court. Judge Castel wrote that, had the lawyers come clean about their actions shortly after they received the opposing parties’ brief questioning the existence of the cases, the outcome may have been different. While “poor and sloppy research” would amount to mere “objectively unreasonable” actions, the court found that the lawyers acted with subjective bad faith in violation of Federal Rule of Civil Procedure 11 based on all the subsequent failures to disclose.

Luckily for the offending attorneys, the court found that their submission of the fake opinions did not constitute a violation of 18 U.S.C. § 505. The statute states that it is a crime to knowingly forge the signature of a United States Judge or the seal of a federal court. Because the fake opinions did not include a signature or seal, the statute was not violated. But the court noted that the submission of fake opinions raises concerns with protecting the integrity of federal judicial proceedings and is an abuse of the adversary system.

Ultimately, the implicated lawyers were required to pay a penalty of $5,000 and to send letters to each individual judge falsely identified as the author of the fake opinions. Judge Castel’s opinion is a reminder that while a court may be forgiving of a lawyer’s choice to cut corners, lying to the court is still sanctionable.

Cite: Mata v. Avianca, Inc., No. 22-cv-1461, slip op. (S.D. NY. June 22, 2023).

On Tuesday, May 16, 2023, the D.C. Circuit denied in part and dismissed in part a petition for review filed by environmental groups, the Center for Biological Diversity, and the Sierra Club (collectively, “Petitioners”). Ctr. for Biological Diversity v. FERC, D.C. Cir., No. 20-01379, 5/26/2023. The petition sought a review of the Federal Energy Regulatory Commission’s (“FERC”) approval of a controversial $39 billion liquefied natural gas (“LNG”) project in Alaska.

This Alaska LNG project would build liquefaction facilities on the Kenai Peninsula to uptake gas and ready it for transportation through an 807-mile pipeline. A pipeline that can transport up to 3.9 billion cubic feet of gas daily to the plant.

According to the Petitioners, FERC’s approval of the project and its associated environmental impact statement violated the National Environmental Policy Act (“NEPA”), which requires agencies to “take a hard look at the environmental consequences before taking a major action.” Petitioners raised two central challenges to FERC’s decision: (1) the ruling erroneously failed to comply with NEPA, and (2) FERC’s substantive decision to authorize the LNG project was arbitrary and failed to satisfy the Natural Gas Act (“NGA”).

Concerning their first challenge, Petitioners asserted five arguments in support: (1) FERC failed to comply with NEPA because it inadequately considered alternatives to the LNG project; (2) FERC acted arbitrarily and contrary to law by refusing to employ the “social cost of carbon” metric to estimate the significance of the project’s direct emissions of greenhouse gases; (3) FERC failed to consider the project’s indirect greenhouse gas emissions; (4) FERC failed to adequately consider the impact of the project on the endangered Cook Inlet beluga whales; and (5) FERC’s evaluation of the project’s impacts on the wetlands was arbitrary and capricious.

The three-judge panel rejected all of the Petitioners’ arguments. First, the Court ruled it lacked jurisdiction to consider the Petitioners’ challenge regarding the “social cost of carbon” because the groups’ rehearing petition did not raise that issue. While the Petitioners discussed the social cost of carbon in their petition, they did not root their argument in the proper regulation, 40 C.F.R. § 1502.22. The panel noted the Petitioners only cited the regulation one time, in a “see, e.g.,” citation, which was not sufficient to put FERC on notice of the applicability of 40 C.F.R. § 1502.22, nor was it enough to properly raise the argument before the Circuit.

Next, the panel ruled FERC adequately considered reasonable alternatives but rejected them because they wouldn’t have furthered the project’s purpose or reduced environmental impacts. The Court also determined Petitioners’ remaining arguments failed because FERC’s decision not to consider the indirect effects of Alaska-bound gas was lawful, FERC adequately considered how noises and ship traffic might harm the endangered beluga whales, and how the construction of the liquefaction facilities could impact wetlands.

What’s more, the Court reasoned that under FERC’s delegated authority, it “‘shall issue’ authorization for LNG facilities ‘unless’ it determines doing so ‘will not be consistent with the public interest.’” Thus, FERC’s approval of the LNG project comported with the NGA because the agency concluded the project was in the public interest due to its substantial economic and commercial benefits, which outweighed any projected environmental impacts. The Circuit concluded its opinion by noting, “[i]n approving the Alaska Liquid Natural Gas Project, the Commission complied with the NGA, NEPA and the APA.” In sum, while the Petitioners “may disagree with the [FERC]’s policy choice to approve the Project, … the Commission comported with its regulatory obligations.”