Kean Miller is closely following the recent challenges to the Chevron Deference standard established by the Supreme Court in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). As applied by federal courts for the last four decades, the Chevron Deference standard first requires that a court determine whether a statute is ambiguous. If the statute is ambiguous, the federal court defers to the agency’s interpretation of the statute. If the statute is not ambiguous, the federal court applies the clear intent of Congress under the principles of statutory interpretation. In recent years, plaintiffs and public interest groups have increasingly called for the Supreme Court to overturn Chevron.

As previously reported, a group of plaintiffs, in the Loper Bright Enterprises v. Raimondo, directly challenged the Chevron Deference standard arising out of an agency’s interpretation of certain provisions in the Magnuson-Stevens Act. Within the last month, the Supreme Court granted writ to hear a second case, Relentless Inc. v. U.S. Department of Commerce, which challenges Chevron Deference on the same grounds as Loper. The Loper and Relentless cases both seek reversal of Chevron and abandonment of agency deference.

As background, the Loper and Relentless cases arise out of the National Marine Fisheries Service’s interpretation of the Magnuson-Stevens Act and the apparent statutory silence related to the funding of regulatory compliance monitors. The agency’s interpretation of a statutory rule would require fishermen to pay part of the costs for maintaining federal compliance monitors on their ships. The Plaintiffs have appealed (i) the agency decision and interpretation of the statute; and (ii) the deference given to the agency’s interpretation under Chevron. The Plaintiffs request the Court abandon Chevron and clarify the statutory rule at issue.

With Chevron Deference directly before the Supreme Court, multiple advocacy groups, including former state supreme court justices, Advancing American Freedom, Buckeye Institute, New England Fishermen, Southeastern Legal Foundation, and Ohio Chamber of Commerce, have filed amicus briefs arguing for the departure and/or overruling of Chevron Deference. Within these briefs, the groups strenuously argue for the reversal of Chevron in order to hand statutory interpretation back to the federal courts without any deference to agency decisions or interpretations of federal statutes.

The brief filed by former state supreme court justices argues for a more workable standard that would allow judges to interpret statutes based on general principals of law without giving unbridled deference to the agency. The judges further argue that Chevron Deference undermines the Constitution’s structure and scheme to preserve liberty and guard against federal abuse of power by improperly expanding agencies regulatory authority. The former state supreme court justices highlight that the type of deference Chevron provides ultimately leads to inconsistent findings among the federal judiciary.

The Advancing American Freedom, New England Fishermen, Buckeye Institute, and Southeast Legal Foundation groups echo the former state supreme court justices’ arguments claiming that Chevron Deference is unconstitutional and unworkable. Specifically, the New England Fishermen and Southeast Legal Foundation argue that Chevron requires lower courts to accept an agency’s determination and shrink the court’s duty to interpret statutory text.

Although Chevron has come under scrutiny in more recent years and is ripe for consideration, many of the criticisms fail to consider that Chevron has a failsafe to avoid the impacts of an agency’s unreasonable statutory interpretation. Even in the face of the deference given to agency interpretation of ambiguous statutory text, a reviewing court can still overturn an agency’s unreasonable interpretation.

Importantly, the Chevron standard recognized that agencies have specialized knowledge and experience regarding how to implement and interpret ambiguous policies, rules, and statutory text. Do agencies always get it right? No; however, an agency is in a better position to interpret and apply an ambiguous statute based on its expertise and specialized knowledge – expertise and specialization that courts may not possess. Chevron Deference considers an agency’s expertise and provides adequate deference to the agency’s decisions. Nonetheless, providing deference does not give an agency unbridled authority or allow a federal court to rubber stamp an agency’s interpretation that is completely unreasonable and unworkable.

Although many theorize the Court will overrule Chevron, it is equally possible the Court will sidestep the issue, as the Court has done in the past, and maintain Chevron Deference while finding the agency’s interpretation unreasonable. Kean Miller will continue to follow the Loper and Relentless cases which will be set for oral argument in January 2024.

In the wake of the COVID-19 pandemic, the rise of telehealth, and its subset, telemedicine, has been significant.  Medical practitioners need to pay attention to the shifting telehealth landscape on topics such as licensing, exceptions to in-person care, acceptable electronic communication technology, labeling of visits, prescription drug monitoring program queries, and record-keeping to maintain proper documentation and safeguard from potential prosecution.

In the federal regulatory space, on October 10, 2023, DEA, in concert with other federal regulators, issued a second temporary rule (88 Fed. Reg. 69879) extending COVID-19 telemedicine flexibilities for prescribing controlled substances until December 31, 2024.  Meanwhile, DEA and other federal regulators are evaluating thousands of public comments to determine implementation of a final set of telemedicine regulations under the Ryan Haight Online Pharmacy Consumer Protection Act of 2008.

At the state regulatory level, legislatures are updating telehealth laws.  In June of 2023, the Louisiana Legislature passed ACT 322 (2023 Reg. Sess. S.B. 66) which was signed into law by the Governor and will become effective on January 1, 2024.  Among other things, the new law requires relevant state agencies or professional/occupational licensing boards to promulgate rules for telehealth.

While federal regulators largely acknowledge the benefits of increased access for patients, they are wary of fraud and abuse, issuing a “Special Fraud Alert” in 2022 to medical providers entering into agreements with telehealth companies HHS-OIG Special Fraud Alert.  When deciding to embark on a telehealth investigation, federal agents will likely be looking at a practitioner’s telehealth referral pipeline, including how entities advertise and whether they only service federal health care beneficiaries, how much contact each patient has with a medical practitioner before medical necessity determinations, whether compensation is based on volume of items ordered, and if the telehealth company focuses only on providing one class of products.  In the enforcement crosshairs are diabetic supplies, durable medical equipment, genetic testing, urine screen testing, and prescription pain creams.

The latest large tele-fraud scheme charges surfaced in Massachusetts in July of 2023.  In U.S. v. David Santana, federal prosecutors charged the owner and operator of two telemedicine companies with conspiracy to commit health care fraud (18 U.S.C. § 1349) in connection with $44 million in claims to Medicare.  Prosecutors allege the scheme involved several steps.  Prosecutors allege telemarketers called and obtained information from Medicare beneficiaries.  Beneficiary information was then entered into a physician order.  The physician order was made to appear as though the practitioner had personally examined and treated the beneficiary.  Working with a medical staffing company, practitioners were sent pre-populated orders to authorize medically unnecessary durable medical equipment or genetic testing despite the lack of a qualifying telemedicine consultation.  Prosecutors also allege that Defendant paid kickbacks for beneficiary information sufficient to create and obtain signed physician orders, and received kickbacks for durable medical equipment and genetic testing orders, presumably from equipment and testing providers.

In perhaps the largest dollar tele-fraud case of 2023 ($1.9 billion), in U.S. v. Brett Blackman, et al., Miami federal prosecutors indicted three executives allegedly associated with a web of data, healthcare compliance, equipment supply, and telemarketing companies.  Prosecutors allege that defendants identified and targeted federal health care beneficiaries using advertising campaigns for free or low-cost medical equipment and prescription creams, generated physician orders and prescriptions, sold the orders to equipment suppliers, pharmacies, and telemarketing companies in exchange for kickbacks, then executed sham contracts and invoices to conceal the sale of orders.  The healthcare compliance company was allegedly an internet-based platform which prosecutors state was programmed to generate fraudulent orders for practitioners paid by telemedicine companies to sign.  The Indictment also alleges that physicians signed the orders after a brief call or no interaction with the beneficiary at all, and without regard to medical necessity.  Trial is scheduled for August 12, 2024.

Closer to home, the Gulf Coast Strike Force, composed of DOJ prosecutors and agents from HHS-OIG, FBI, IRS-CI, and the various state Medicaid Fraud Control Units in Louisiana, Mississippi, and Texas, has been actively investigating and prosecuting alleged genetic testing schemes.  In U.S. v. Jamie McNamara, federal prosecutors in New Orleans indicted the owner of laboratory companies and other businesses. The sprawling 30-page Indictment outlines an alleged $176 million scheme involving un-named co-conspirators, concealment of ownership interest, call centers with pre-approved scripts, a Florida-based telemedicine company, and kickbacks to marketers, call centers, and telemedicine companies in exchange for referring beneficiaries and physician orders for genetic testing.  Trial is scheduled for June 2024.

In U.S. v. David Thigpen, the Gulf Coast Strike Force obtained a similar telemedicine-based Indictment against a Hammond man who owned and operated urine drug and genetic testing laboratories in Louisiana and Mississippi.  The defendant has pled guilty to one count of conspiracy to commit health care fraud (18 U.S.C. § 1349) and is scheduled for sentencing on January 9, 2024.

Although many of the latest healthcare fraud cases involve old themes, namely, allegations of kickbacks, questionable medical necessity determinations, and limited or no interaction between practitioners and patients, moving forward medical practitioners need to assess and understand DEA’s anticipated final telemedicine rule(s) in conjunction with state law and licensing board rules, including the limits on electronic visit prescribing authority, and ensure that any such visits are properly documented and designated as telehealth.

The Oil Pollution Act of 1990 (known as “OPA 90”) and the Comprehensive Environmental Response, Compensation, and Liability Act (known as “CERCLA”) are two federal environmental laws with significant effects on businesses and individuals across the nation. OPA 90 provides a remedial scheme that apportions the liability and costs of oil spills among responsible parties. CERCLA does the same but for spills of “hazardous substances,” a term of art that is defined in the statute.

But what if there is a spill that is a mix of oil and hazardous substances? Which law governs, OPA 90 or CERCLA? That is the question answered recently by the U.S. Fifth Circuit in the case of Munoz v. Intercontinental Terminals Co.[1] The court’s answer: CERCLA.

The case arose out of a fire that broke out at Intercontinental Terminals Company’s chemical-storage facility at Deer Park, Texas. There was an allegation that during the ensuing battle to control the fire, various tank products, fire water, and firefighting foam accumulated behind ITC’s containment wall. Later, damage to this wall caused it to collapse, allegedly releasing various contaminants into the Houston Ship Channel.

Crucially, subsequent testing by the Texas Commission on Environmental Quality revealed that the spill was oil mixed with hazardous substances. About a year later, various plaintiffs sued ITC under OPA 90, seeking to recover economic losses due to interruptions of their business caused by closures of the Houston Ship Channel.

OPA 90, unlike CERCLA, allows for recovery of purely economic losses. For that reason, the plaintiffs brought OPA 90 claims, arguing that OPA’s definition of “oil” includes mixtures of oil and hazardous substances. ITC disagreed and moved for summary judgment on the issue of OPA 90’s applicability.

The district court granted ITC’s motion, and the plaintiffs appealed, teeing up the issue for the Fifth Circuit. As with all legitimate statutory interpretation, the court started with the text of the law. CERCLA, which was passed before OPA 90, expressly excludes “petroleum, including crude oil” from its definition of “hazardous substance.” But it does not exclude mixtures of oil and hazardous substances. In fact, before OPA 90 was passed, courts interpreted CERCLA’s definition of “hazardous substance” to include such mixtures.

Because OPA 90 was passed against this backdrop, the court could reasonably assume that Congress was aware of the accepted interpretation of CERCLA when drafting OPA 90. And OPA 90’s definition of “oil” expressly excludes any “hazardous substance” under CERCLA. The statute provides:

“oil” means oil of any kind or in any form, including petroleum, fuel oil, sludge, oil refuse, and oil mixed with wastes other than dredged spoil, but does not include any substance which is specifically listed or designated as a hazardous substance under [CERCLA].

33 U.S.C. § 2701(23). The plaintiffs, however, argued that a mixture of oil and hazardous substances was not “specifically listed” under CERCLA, so OPA 90’s hazardous-substance exclusion did not include ITC’s mixed spill.

The court rejected this clever argument. It reasoned that the Ninth Circuit, the Fifth Circuit, and the EPA had interpreted CERCLA’s definition of “hazardous substance” to include mixtures of oil and hazardous substances. Therefore, when Congress later excluded hazardous substances from OPA 90’s purview, it did so knowing that exemption included commingled spills. Further, OPA 90’s legislative history revealed that Congress intended for OPA 90 and CERCLA to be mutually exclusive.

The plaintiffs also argued that the court’s interpretation of OPA 90 incentivizes the intentional or reckless commingling of oil with hazardous substances so that the responsible party can avoid liability for economic losses under OPA 90. The Fifth Circuit explained that while this might amount to a questionable policy decision under the law, it is not so absurd as to overcome the plain language of OPA 90, interpreted in light of the backdrop of CERCLA and its accepted meaning.

The Munoz case does create a disparity in potential liabilities for different parties. A party responsible for an unmixed spill of oil may be liable for pure economic losses under OPA 90, while a party responsible for a mixed spill may be liable under CERCLA, which does not include pure economic losses.

[1] Munoz v. Intercontinental Terminals Co.

A Louisiana car dealership’s Cyber Liability policy does not cover contractual reimbursements owed to a lender by that dealership following a “touchless” online vehicle purchase utilizing identity theft. During the pandemic, the dealership created a “touchless” process whereby an online buyer would submit a credit application to a lender. If approved, the buyer and the dealer would complete the paperwork electronically or by mailing documents. Once all documents were executed, the lender would then tender the purchase price to the dealer, who would then assign the credit agreement to the lender. The buyer would then arrange transport of the newly purchased vehicle via a third party.

Eventually, after no payments were made on certain transactions, the lenders discovered that those transactions were made with fake or stolen identities and sought reimbursement from the dealer under the terms of their agreements. The dealership then sought coverage for these payments from two carriers under certain Cyber Liability policies who denied coverage. Ruling on a Rule 12(b)(6) Motion to Dismiss, Judge Cain of the United States District Court for the Western District of Louisiana agreed that there was no coverage under the Cyber Liability policy provisions as to third-party and first-party coverage.

Regarding the third-party coverage, the Cyber Policy stated that it provided coverage for “…claim expenses and damages that you become legally obligated to pay resulting from a claim against you…” Allegations that the dealership was contractually obligated to remit the purchase price to the lender were not “facts that can be construed as indicating there is a claim against it causing it to be legally obligated to pay.”

As to the first-party claims, the carriers argued that the policy did not provide coverage for what was essentially a vehicle theft and that the allegations did not meet the necessary coverage triggers for any of the numerous fact-specific coverage sections of the policy. In particular, the dealership argued that the loss could be considered a “Funds Transfer Loss” under the Cyber Policy’s coverage for “Funds Transfer Fraud.” That policy defined “Funds transfer loss” as “loss of money… directly resulting from funds transfer fraud…” “Fund transfer fraud” is defined as:

Funds transfer fraud means a fraudulent instruction transmitted by electronic means, including through social engineering, to you or your financial institution directing you, or the financial institution, to debit an account of the named insured or subsidiary and to transfer, pay, or deliver money or securities from such account, which instruction purports to have been transmitted by an insured and impersonates you or your vendors, business partners, or clients, but was transmitted by someone other than you, and without your knowledge or consent. The financial institution does not include any such entity, institution, or organization that is an insured.

The dealership’s position was that the contractual reimbursement owed by the dealer to the lender was a “Funds transfer loss” because the “loss” because it was a “loss” of money as to the dealership. The court read the language in the policy’s definition of “Funds transfer fraud,” as necessarily requiring a “fraudulent instruction” directing the insured to debit its account. As such, the court found that the claims did not fall within the first-party coverage provisions of the Cyber Policy and that there was no coverage for the loss.

The matter is entitled Benoit Ford LLC et al v. Lexington Insurance Co. et al., 22-CV-06024 and is pending in the United States District Court for the Western District of Louisiana, Lake Charles Division. The Memorandum Ruling was issued on October 2, 2023.

The Fifth Circuit has previously ruled that a substantially similar provision did not cover a loss stemming from a cybercrime whereby false information was provided to an insured changing vendor payee information and subsequent payments issued to the false vendor account were made with the insured’s knowledge and consent. Mississippi Silicon Holdings, LLC v. Axis Insurance Company, 843 Fed. Appx. 581 (5th Cir. 2021). But see, Medidata Solutions, Inc. v. Federal Insurance Co., 268 F.Supp. 3d 471, 480 (S.D.NY 2017) (finding coverage under a Fund Transfer Fraud provision for identity theft of a corporate executive: “The fact that the accounts payable employee willingly pressed the send button on the bank transfer does not transform the bank wire into a valid transaction. To the contrary, the validity of the wire transfer depended upon several high-level employees’ knowledge and consent which was only obtained by trick. As the parties are aware, larceny by trick is still larceny.”)

Most litigants in Louisiana know that the usual tort claim has a prescriptive period (i.e., statute of limitation) of one year. This one-year clock begins ticking from the day injury or damage is sustained.[1]

But when exactly someone sustains an injury can be a tricky question to answer. If I am unknowingly exposed to a harmful chemical, did I sustain damage then, even if I didn’t know it at the time? If so, what if I don’t find out until over a year later? Although the clock on my tort claim has reached zero, it seems harsh to foreclose my cause of action before I even knew it existed.

Enter the doctrine of contra non valentem. From the Latin phrase for “prescription does not run against one who is unable to act,” contra non valentem pauses that one-year clock under certain circumstances.

One such circumstance is when the cause of action is not known or reasonably knowable to the plaintiff, even though the plaintiff’s ignorance is not induced by the defendant. For example, in my hypothetical case of chemical exposure, because I had no idea of my cause of action at the time of exposure, contra non valentem would pause the clock on my prescriptive period for some time.

The pause created by contra non valentem lasts until the plaintiff gains actual or constructive knowledge of facts that would lead a reasonable person to realize they have been the victim of a tort. There is some difficulty in defining constructive knowledge, but essentially it is the knowledge that a reasonable victim of a tort would possess.

For example, if I unreasonably choose to ignore the obvious signs of my latent injury, my actual knowledge may be very little, but I will be charged with the knowledge of someone acting reasonably in my shoes. The knowledge imputed to me would be my constructive knowledge.

Now imagine that before realizing I was exposed to a chemical but after feeling the effects, I am diagnosed by a doctor with an illness. Does that diagnosis signal the end of the effect of contra non valentem? That is the difficult question answered recently by the U.S. Fifth Circuit.[2]

The case involved plaintiff Ervin Jack, Jr., who for years lived with his wife near a petrochemical manufacturing facility in Reserve, Louisiana that allegedly emitted dangerous levels of a chemical called ethylene oxide, a colorless and odorless gas. Jack’s wife was diagnosed with breast cancer and passed away in 2000. Jack claimed that he was unaware of the ethylene emissions until 2020, when a law firm sent out mailers with information about the allegedly carcinogenic emissions and the nearby facility.

In 2021, Jack and other plaintiffs in similar positions sued the facility on behalf of their deceased family members. Lawyers on behalf of the facility moved to dismiss Jack’s claims as time barred. The facility argued that contra non valentem ceased when Jack’s wife was diagnosed with breast cancer, which was over 20 years before filing suit.

The trial court judge agreed, finding that “[s]tate and federal case law regarding prescription and contra non valentem strongly suggest that a medical diagnosis puts a plaintiff on constructive notice of her cause of action, and thereby starts the prescriptive period.”[3] However, other judges in the Eastern District of Louisiana reached the opposite conclusion: diagnosis is not necessarily constructive notice.[4]

The Fifth Circuit sided with the second group of judges, holding that the diagnosis alone did not put Jack on notice of the alleged tort. The court determined that the proper question was whether a reasonable person with Jack’s lack of education, medical training, and computer literacy would have suspected that he was the victim of a tort. The answer was no, at least at the time of diagnosis.

Significant to the court’s conclusion was the fact that breast cancer is a very common diagnosis, one that has any number of causes and does not necessarily indicate a tortious source, unlike asbestosis or multiple myeloma.

The court also noted that “a man who does not work for an allegedly tortious employer cannot be held, with nothing more, to be suspicious of invisible and unknown emissions of surrounding companies or to embark on an investigation of the inner workings of an otherwise ordinary plant.”

Notably, the court did not address the related question of whether a reasonable plaintiff always inquires into the cause of his diagnosis. Instead, the court simply held that in this case, at the time of diagnosis, the alleged underlying tort was not reasonably knowable. But it’s not hard to imagine a case where the tort was reasonably discoverable at diagnosis, but the plaintiff contends there were good reasons he failed to inquire further.

Nevertheless, this recent case is instructive. It saw the Fifth Circuit reject a one-size-fits-all approach to contra non valentem where diagnosis alone puts plaintiffs on notice of their potential tort.

This means the unique facts of each latent-injury case are key. Parties should focus on the plaintiff’s background, the opportunities for discovering the alleged cause of the injury, the nature of the illness at issue, and the landscape of the scientific literature and other sources linking the harmful agent to the symptoms experienced by the plaintiff. As in any prescription analysis, the timing of these various factors is key.

Finally, parties should keep in mind that contra non valentem is a creature of state law, meaning the Louisiana Supreme Court has the final say in how the doctrine ought to be applied.

[1] La. Civ. Code art. 3492.

[2] Jack v. Evonik Corporation, No. 22-30526, 2023 WL 5359086 (5th Cir. Aug. 22, 2023).

[3] Jack v. Evonik Corp., No. 22-1520, 2022 WL 3347811, at *4 (E.D. La. Aug. 12, 2022) (Barbier, J.); see also Joseph v. Evonik Corp., Civ. No. 22-1530, 2022 WL 16712888, at *4–7 (E.D. La. Nov. 4, 2022) (Vance, J.); Villa v. Evonik Corp., Civ. No. 22-1529, 2022 WL 3285111, at *2 (E.D. La. Aug. 11, 2022) (Ashe, J.).

[4]  Fortado v. Evonik Corp., Civ. No. 22-1518, 2022 WL 4448230, at *4–8 (E.D. La. Sept. 23, 2022) (Milazzo, J.); Jones v. Evonik Corp., 620 F. Supp. 3d 508, 516–19 (E.D. La. 2022) (Africk, J.).

The recent U.S. Supreme Court decision in Sackett v. EPA significantly narrows the definition of “waters of the United States” (“WOTUS”) as applicable to wetlands and other adjacent bodies of water under the Clean Water Act (“CWA”). By extension, Sackett has broad impacts to wetlands delineation and mitigation requirements for section 404 permits issued by the U.S. Army Corps of Engineers (“Corps”).[1] Sackett will affect whether section 404 dredge and fill or other CWA permits[2] are required for wetlands and the extent to which mitigation of wetland impacts is required.[3] Under Sackett, wetlands that do not have a “continuous surface connection” to a perennial traditional waterway will no longer be subject to CWA jurisdiction (and section 404 permitting).

On September 8, 2023, the EPA amended the WOTUS regulatory definition to conform with the Sackett decision.[4] However, the change is only in effect in states where the 2023 rule is not being challenged. In those states, including Louisiana and Texas, the pre-2015 rule is in effect in conformity with the Sackett decision. This presents many potential complications because the pre-2015 rule provides more jurisdiction over wetlands than the holding of Sackett allows. Additionally, without the certainty of the final rule change, the Corps, who makes determinations on wetland delineations, could be hesitant to make new jurisdictional determinations until pending litigation is resolved and the new rule can be applied.

Sackett v. EPA Decision

Prior to the Sackett decision, the WOTUS definition and Corps rules were based on the decision in Rapanos v. U.S.[5] In that case, the Court could not reach a majority on its holding, and a total of five opinions were entered in the case. Thus, the definition of WOTUS was based on Justice Anthony Kennedy’s concurring opinion. The Kennedy concurrence provided two standards: a wetland could be considered a “water of the United States” if it had either a “continuous surface connection” to a traditional navigable water or if it had a “significant nexus” to “waters of the United States.” Wetlands could be subject to CWA jurisdiction even when there was no indication of surface water present, no high-water table, and no saturated soil. Jurisdictional determinations could be based on the presence of certain soil characteristics and vegetation (factors that were widely used in the “significant nexus” test).

In Sackett, the Court eliminated the use of the “significant nexus” test, but retained the continuous surface connection standard. The Sackett Court also established a two-step analysis to determine whether wetlands or other adjacent waters are subject to CWA requirements:

  1. Does the adjacent body of water constitute “waters of the United States” (a relatively permanent body of water connected to traditional interstate navigable waters) within the meaning of the CWA?
  2.  If so, does the wetland or secondary water at issue have a “continuous surface connection” with that traditional water?[6]

Effects on CWA Approved Jurisdictional Determinations

The Sackett decision’s two step “continuous surface connection” test will necessarily affect jurisdictional determinations for pending permits primarily in the following four key ways:

  1. “Perennial” bodies of water, such as the Mississippi River or other rivers and lakes in Louisiana, will be classified as a traditional navigable body of water, passing “step 1” of the Sackett test.[7]
  2. Wetlands and other water bodies, such as drainage canals, that have a direct connection to perennial waters will pass “step 2” of the Sackett test. These wetlands and waterbodies will still be subject to CWA jurisdiction.
  3. Wetlands and water bodies where the surface connection to a traditional perennial waterway is interrupted by land or another barrier, such as a levee or road,[8] may no longer be classified as jurisdictional wetlands based on Sackett, but will require the two-step analysis to make that determination.
  4. Wetlands and areas that have a continuous surface connection that is interrupted periodically due to factors such as low tides, seasonal changes, or drought conditions, but that exists for at least some time during a year, may still be under CWA jurisdiction.[9]

September 2023 Conforming Rule

After the Sackett decision was released by the Court, the Corps halted all approved jurisdictional determinations (“AJDs”)[10] until the U.S. Environmental Protection Agency (“EPA”) could amend the WOTUS rule in conformity with the Court’s decision (“the Conforming Rule”). On August 29, 2023, the EPA released a revision to the January 2023 rule to conform with the Sackett decision, which became effective on September 8.[11] The new rule revised the 2023 rule in conformity with the Sackett decision. Namely, the new rule made the following changes:

  • Removed the phrase “including interstate wetlands” from 40 CFR 120.2(a)(1)(iii) and 33 CFR 328.3(a)(1)(iii).
  • Removed the significant nexus standard from the tributaries provisions in 40 CFR 120.2(a)(3) and 33 CFR 328.3(a)(3).
  • Removed the significant nexus standard from the adjacent wetlands provisions in 40 CFR 120.2(a)(4) and 33 CFR 328.3(a)(4).
  • Removed the significant nexus standard and streams and wetlands from the provision for intrastate lakes and ponds, streams, or wetlands not otherwise identified in the definition contained in 40 CFR 120.2(a)(5) and 33 CFR 328.3(a)(5).
  • Removed the term “significantly affect” and its definition in its entirety from 40 CFR 120.2(c)(6) and 33 CFR 328.3(c)(6).
  • Revised the definition of “adjacent” under 40 CFR 120.2(c)(2) and 33 CFR 328.3(c)(2).[12]

Dueling Regulatory Standards

Importantly, the Conforming Rule only applies in states where the January 2023 definition was enjoined, or became final (see map below). In the remaining 27 states, including Louisiana and Texas, the January 2023 rule was challenged in court and is subject to injunction. For these states, the EPA has stated that the pre-2015 WOTUS definition will apply along with the holding of the Sackett decision “until further notice.”[13]

The EPA has not clarified how this “modified” pre-2015 definition differs from the conforming rule, which is especially concerning since the purpose of the Conforming Rule was to implement the Sackett decision. While there is no question that Sackett necessarily affects jurisdictional determinations rendered by the Corps, the EPA has not specified exactly how it will modify the pre-2015 standard. Specifically, the pre-2015 standard provided for CWA jurisdiction over all interstate wetlands.[14] Perhaps the best illustration of this point is that the case giving rise to the Sackett decision itself involved a jurisdictional determination made in 2007 using the pre-2015 rule.

Figure 1: Map Created by the U.S. Environmental Protection Agency (epa.gov)

Post-Sackett WOTUS Outlook

While Sackett significantly clarifies the process for wetland delineation, the decision still contains gray areas. For one, the Court stopped short of defining a “continuous surface connection.” Instead, it characterized it as a connection “making it difficult to determine where the water ends and the wetland begins.”[15] Second, the majority opinion noted that there could be exceptions where the connection does not exist for a portion of the year, but the connection would still be viewed as continuous. (“We also acknowledge that temporary interruptions in surface connection may sometimes occur because of phenomena like low tides or dry spells.”[16]) So, if a wetland is connected only seasonally or intermittently to relatively permanent waters, AJDs will still require a case-by-case determination.

The Conforming Rule incorporates the key holdings of Sackett, but stops short of discussing “gray areas” where the decision lacks specificity. Notably, the EPA did not allow an opportunity for comment on the final rule, using the “good cause” provision of the Administrative Procedure Act (“APA”) to justify the move because the Conforming Rule “does not impose any burdens on the regulated community.”[17] And the Biden Administration stated in its initial response to the decision that it intends to use other legal authorities to fill the alleged regulatory gap.[18] Without clarity in the Conforming Rule on areas such as the degree of surface connection, the EPA and Corps could use other regulatory devices, such as guidance documents, to add requirements where the Sackett decision is silent.

Effects on Section 404 Permitting

The Corps has stated and that it is willing to reconsider prior AJDs based on the new standards in the Sackett decision[19] and that it will resume issuing AJDs now that the new Conforming Rule has been issued.[20] But the dueling regulatory standards between states could result in continued delays for AJDs in states where the Conforming Rule isn’t in effect. At least one effected Corps district has placed all AJDs on indefinite hold.[21] And, even in states where the Conforming Rule is in effect, there is currently no regulatory test or guidance on how the factors such as what degree of continuity in a surface connection will be sufficient for CWA jurisdiction under the Conforming Rule.  As a result, permit applicants may continue to experience delays on wetland AJDs for permit applications until litigation on the January 2023 rule can be resolved.

[1] CWA Section 404 requires permits for the discharge of dredged or fill material into waters of the United States, including wetlands. Activities regulated under this program include fill for development, water resource projects (such as dams and levees), infrastructure development (such as highways and airports), and mining projects. A permit from the Corps is required before dredged or fill material may be discharged into a water of the United States, unless the activity is exempt from Section 404 (such as certain farming and forestry activities). U.S. Env’t Prot. Agency, “Permit Program under CWA Section 404” (March 31, 2023), available at https://www.epa.gov/cwa-404/permit-program-under-cwa-section-404.

[2] The WOTUS rule also affects permitting under the following CWA sections and programs: Section 303(c), Water Quality Standards; Section 303(d), Impaired Waters and Total Maximum Daily Loads (TMDLs); Section 311, Oil Spill Prevention and Preparedness; Section 401 Certification; and Section 402, National Pollutant Discharge Elimination System (NPDES).

[3] Sackett v. Envtl. Prot. Agency, 598 U.S. 651, 143 S. Ct. 1322 (May 25, 2023).

[4] 88 Fed. Reg. 61964 (September 8, 2023).

[5] Rapanos v. U.S., 547 U.S. 715 (2006).

[6] 143 S. Ct. at 1341.

[7] See Envtl. Prot. Agency, National Hydrography Dataset: Streams and Waterbodies in Louisiana (January 19, 2021), available at https://19january2021snapshot.epa.gov/sites/static/files/2014-09/documents/louisiana.pdf.

[8] Sackett, 143 S. Ct. at 1368 (J. Kavanaugh, concurring): “For example, the Mississippi River features an extensive levee system to prevent flooding. Under the Court’s ‘continuous surface connection’ test, the presence of those levees (the equivalent of a dike) would seemingly preclude Clean Water Act coverage of adjacent wetlands on the other side of the levees, even though the adjacent wetlands are often an important part of the flood-control project.”

[9] Id. at 1341 (“[w]e also acknowledge that temporary interruptions in surface connection may sometimes occur because of phenomena like low tides or dry spells”).

[10] AJDs are determinations made by the Corps on whether a reviewed area is subject to CWA jurisdiction. 33 C.F.R. 331.2.

[11] 88 Fed. Reg. 61964 (September 8, 2023).

[12] Id. See also “Regulatory Text Changes to the Definition of Waters of the United States at 33 CFR 328.3 and 40 CFR 120.2” (Aug. 14, 2023), available at https://www.epa.gov/system/files/documents/2023-08/Regulatory Text Changes to the Definition of Waters of the United States at 33 CFR 328.3 and 40 CFR 120.2.pdf.

[13] Envtl. Prot. Agency, Pre-2015 Regulatory Regime, available at https://www.epa.gov/wotus/pre-2015-regulatory-regime.

[14] 40 C.F.R. § 230.3(s)(2) (2015).

[15] Sackett, 143 S. Ct. at 1341.

[16] Id.

[17] 88 Fed. Reg. 61965 (September 8, 2023), citing 5 U.S.C. § 553(d)(3).

[18] The White House, Press Release, Statement from President Joe Biden on Supreme Court Decision in Sackett v. EPA, (May 25, 2023), available at https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/25/statement-from-president-joe-biden-on-supreme-court-decision-in-sackett-v-epa/.

[19] Lewis v. United States Army Corps of Engineers, No. CV 21-937, 2023 WL 3949124, at *1 (E.D. La. June 12, 2023).

[20] U.S. Army Corps of Eng’rs Headquarters, Press Release, EPA and the Army Issue Final Rule to Amend 2023 Rule (September 8, 2023), available at https://www.usace.army.mil/Media/Announcements/Article/3520843/8-september-2023-epa-and-the-army-issue-final-rule-to-amend-2023-rule/.

[21] U.S. Army Corps of Eng’rs, Chicago District, Approved Jurisdictional Determinations, available at https://www.lrc.usace.army.mil/Missions/Regulatory/Jurisdictional-Determinations/ (last visited September 22, 2023).

The digitization of our economy has streamlined company operations but has brought with it persistent, ongoing cyberattacks. Successful attacks disrupt business operations, are costly to remediate, and can compromise confidential and personal information—including client and employee information. These compromises can significantly impact revenue and trust in the company and often result in stock prices dropping. While publicly traded companies typically report incidents to investors, reporting is not always consistent or is buried in quarterly reports made well after the fact.[1]

Effective as of September 5, 2023, the Securities and Exchange Commission (SEC) has finalized its proposed rule requiring publicly traded companies to promptly report “material” cybersecurity incidents and report annually on cybersecurity risk management and governance. This Rule addresses the need for disclosure of data incidents and preparedness to better inform investors with timely and reliable information.

I. Form 8-K Item 1.05: Cybersecurity Incident Reporting

The Final Rule is for the benefit of investors and focuses on streamlining and standardizing disclosures regarding data incidents and cybersecurity risk management, strategy, and governance.[2] New Form 8-K Item 1.05 requires companies to determine whether a cybersecurity incident is material without unreasonable delay after discovery of the incident. So long as a company does not intentionally delay a materiality determination to avoid timely disclosure, it will not likely be found to be in violation of the Rule.  Once a company determines that the incident is material, it has 4 days within which it must disclose the incident, including a description of the nature, scope, and timing of the incident and material impact or reasonably likely impact of the incident.[3] Registrants are not required to disclose the remediation status of the incident, technical information about planned responses, or whether data was compromised. To evaluate materiality, registrants should consider qualitative factors such as harm to company’s reputation, customer or vendor relationships, competitiveness, and potential for litigation or regulatory investigations. Cybersecurity incidents comprise “unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through a registrant’s information systems that jeopardizes the confidentiality, integrity, or availability of a registrant’s information systems or any information residing therein.”

II. Regulation S-K Item 106: Annual Reporting on Cybersecurity Risk Management, Strategy, and Governance

Registrants much also now disclose in their annual reporting their risk management practices, strategy, and governance. New S-K Item 106 requires companies to describe their processes, if any, for dealing with material risks from cybersecurity threats in enough detail that a reasonable investor would be able to understand it. Ideally, these disclosures will provide investors with material information to better inform their investment decisions, while avoiding the potential issue of a company’s being forced to disclose sensitive information that might further compromise the company’s security.[4] Item 106 reports must also include a description of the company’s governance structure and policies pertaining to cybersecurity and data protection, including which management positions are responsible for assessing and managing the risks, the expertise of the people in those positions, how those persons monitor security and compliance, and whether the risks are reported to the board of directors. The SEC also amended Form 20-F and Form 6-K to require similar disclosures in foreign private issuers’ annual reports.

A. Risk Management Disclosures

Proper compliance with the risk management practices disclosures entails disclosing information that would be material to the investment decisions of potential investors. These disclosures do not need to be so detailed that they would compromise the security of the company providing the disclosures. Indeed, in direct response to commenters’ concerns about the security risk presented from these disclosures, the SEC amended the Final Rule to appropriately account for the potential security vulnerability created by a detailed description of risk management practices or strategy by only requiring disclosure of “processes” instead of “policies and procedures”. Other deletions from the Rule as proposed include removal of the list of risk types (e.g., intellectual property theft, fraud, etc.) and removal of certain disclosure items, include the entity’s activities undertaken to prevent, detect, and minimize the effects of cybersecurity incidents and the business continuity and recovery plans in the event of a data incident.

B. Governance Disclosures

In compliance with S-K Item 106, registrants must also disclose governance of their cybersecurity policies, ideally identifying the management positions or committee responsible for managing cybersecurity risks and detailing the extent and nature of their expertise. Expertise can include prior work experience in cybersecurity, any relevant degrees or certifications, or any knowledge, skills, or other background in cybersecurity. The disclosure should further detail how the manager or committee is informed about cybersecurity threats or incidents and how they prevent, detect, mitigate, and remediate these incidents. Lastly, the company should disclose whether reports by either management or a committee are submitted to the board of directors or a subcommittee of the board. Having dedicated employees in management positions or having a committee whose primary responsibility is cybersecurity will become increasingly important to investors, who will likely exercise increasing scrutiny of such measures.

C. Compliance Considerations

Regulation S-K Item 106 and Form 20-F disclosures begin with annual reports for fiscal years ending on or after December 15, 2023. Form 8-K Item 1.05 cybersecurity incident disclosures must be compliant by the later of ninety (90) days after the date of publication in the Federal Register or December 18, 2023. Smaller reporting companies have an additional 180 days and must begin complying with Form 8-K 1.05 by the later of 270 days from the effective date of the rules or June 15, 2024. While each company will have its own individual considerations, here are some general recommendations to prepare for compliance and additional reporting:

  • Review and update the cyber incident response plan. Every company should have a cyber incident response plan that lays out how the company will respond to a suspected or confirmed data incident, the persons responsible for the incident response, and associated documentation procedures. Companies should update their plans to incorporate the new Form 8-K reporting requirements, including establishing a framework for evaluating materiality to ensure prompt reporting.  Considering that very limited circumstances allow for notification delay, companies should presume they will not be granted an extension unless they regularly interact with agencies of the U.S. government responsible for national security.  Once the policies and procedures are updated, companies should promptly train the appropriate employees on the new process.
  • Review and, if needed, update third party contract terms to include incident disclosure requirements. Cyber incidents often originate from a company’s vendor that has access to the company networks or the company’s data. The Rule requires disclosure of cyber incidents, regardless of where they originate. Companies should ensure that vendors with access to their data or networks are bound by clear, prompt incident notification requirements.
  • Assess possible updates to board assignments and committee responsibility. The SEC rules make clear that management of cybersecurity considerations just be a specifically designated job, and not an afterthought. Public companies should clearly assign cybersecurity oversight responsibilities, which may require updating committee assignments and charters.
  • Prepare the new disclosures for the company’s annual report. In addition to preparing to report on the company’s cybersecurity risk management, governance, and strategy, now is an excellent time to evaluate the effectiveness of the company’s overall cybersecurity posture and whether any gaps exist. The Rule clearly identifies that the person responsible for the cybersecurity oversight should be qualified with appropriate training or experience. If the company presently does not have someone with the appropriate qualifications, the company should consider hiring additional support or supporting a current employee’s training or certification.

While this Final Rule from the SEC will create new challenges for companies, it is worth emphasizing that the disclosure of this information to investors is not only imperative in the present moment but will become increasingly significant in the future. Cybercrime is proliferating, with professional groups organizing attacks on high level business at an ever-increasing rate. How well a company is equipped to deal with cybersecurity threats, and how well it addresses incidents that occur, is something investors will consider more and more as our reliance on technology to function grows. The Final Rule ensures that investors will become more effective in their ability to understand how prepared a company is for these events in the present and future.

[1] Special thanks to Christopher Malon, South Texas College of Law Class of 2025, for his assistance in researching and drafting this article.

[2] Securities and Exchange Commission, “Final Rule: Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure” (available at https://www.sec.gov/files/rules/final/2023/33-11216.pdf).

[3] Securities and Exchange Commission, “FACT SHEET: Public Company Cybersecurity Disclosures; Final Rules”, (available at https://www.sec.gov/files/33-11216-fact-sheet.pdf). In situations where disclosure would pose a substantial risk to national security or public safety, the SEC allows delaying disclosure if the Attorney General determines that the disclosure would indeed pose such a risk. This delay may be extended by the Attorney General so long as the risk to national security or public safety remains.

[4] See id. at 61 (noting that the revised formulation from the proposed amendment helps avoid levels of detail that would go beyond what was relevant to investors and addresses commenters concerns about details that would make companies vulnerable to cyberattacks).

For decades, the Louisiana Supreme Court has grappled with the “open and obvious” liability defense, making several attempts to determine its proper use within Louisiana’s duty-risk negligence analysis. The latest of these cases is Farrell v. Circle K Stores, Inc. and the City of Pineville, in which the Court changed course from multiple of its prior decisions and clarified that the open and obvious determination is not a matter of duty for the court to decide, but a matter of breach for the fact finder. This note explains the open and obvious defense, Louisiana Supreme Court precedent pre-Farrell, the Farrell case, and the implications of the Court’s recent decision.

The open and obvious defense often arises in premises liability cases, where individuals sustain injuries as a result of hazardous or dangerous conditions on the property of another. These individuals have a cause of action against the owner or legal custodian of the property under Louisiana Civil Code article 2317, which provides generally that “[w]e are responsible, not only for the damage occasioned by our own act, but for that which is caused by the act of persons for whom we are answerable, or of the things which we have in our custody.” The following Code article, 2317.1, specifies the scope of premises liability for ruin, vices, or defects in property: “[t]he owner or custodian of a thing is answerable for damage occasioned by its ruin, vice, or defect, only upon a showing that he knew or, in the exercise of reasonable care, should have known of the ruin, vice, or defect which caused the damage, that the damage could have been prevented by the exercise of reasonable care, and that he failed to exercise such reasonable care.”

Under these Code articles, landowners have a legal duty to discover dangerous conditions on their property and to either correct the condition or warn patrons of its existence. There is no doubt that landowners who fail to mitigate or warn the public of unreasonably dangerous conditions are liable for resulting injuries to patrons on the property. But landowners asserting the open and obvious defense argue that hazardous conditions that are “open and obvious to all” are not unreasonably dangerous, so liability should not follow.

In several pre-Farrell decisions dating back to the 1990s, the Louisiana Supreme Court inconsistently applied the open and obvious analysis. The problematic question was whether the hazardous condition at issue was “unreasonably dangerous.” In Pitre v. Louisiana Tech University, 95-1466 (La. 5/10/96), 673 So.2d 585, the considered this inquiry as part of the “duty” analysis. By tethering the open and obvious determination to the duty element, the Court effectively rendered it a question of law to be decided by the court, not the fact finder. The Court granted summary judgment for the defendant, holding that the hazardous condition at issue was open and obvious, and thus that the defendant owed no duty to the plaintiff.

But in Broussard v. State, 2012-1238 (La. 4/15/13), 113 So.3d 175, the Court parted ways with its Pitre analysis. The Court criticized its prior open and obvious decisions for improperly classifying the open and obvious determination as a legal issue of duty—thus “confus[ing] the role of the judge and jury in the unreasonable risk of harm inquiry and arguably transferr[ing] the jury’s power to determine breach to the court to determine duty or no duty.” Instead, the Court suggested that the question of whether a hazard presents an unreasonable risk of harm is a pure question of fact reserved for the fact finder.

The following year, in the Court granted certiorari in the case of Bufkin v. Felipe’s Louisiana, LLC, 14-288 (La. 10/15/14), 171 So. 3d 851, and changed its open and obvious analysis yet again—seemingly abandoning the breach-based approach from Broussard and re-adopting the duty-based approach from Pitre. The Bufkin Court reversed the district court’s decision and granted summary judgment in favor of the defendant based on its determination that the hazardous condition at issue was not unreasonably dangerous, thus the defendant owed no duty to the plaintiff.

The Pitre, Broussard, and Bufkin line of cases blurred the line between the duty and breach elements of Louisiana’s negligence analysis, causing uncertainty among courts and litigants. Even more concerning was the effect: the Pitre/Bufkin duty-based approach and the Broussard breach-based approach could yield drastically different outcomes in otherwise similar cases, especially in the summary judgment context. Issues of fact as to the risks posed by the injury-causing condition that could preclude summary judgment under the breach-based approach were left up to the court under the duty-based approach, arguably making summary judgment more likely under the latter than the former. Pitre and Bufkin are perfect examples.

Farrell involved a plaintiff who decided to walk her dog in a grassy area near a gas station. In order to reach the grassy area, the plaintiff attempted to step over a pool of water and fell. The plaintiff filed suit against the owner of the gas station and the City of Pineville, Louisiana. The Defendants then filed a Motion for Summary Judgment arguing that the pool of water was open and obvious to the plaintiff.

The Farrell Court scrutinized its prior open-and-obvious decisions one-by-one and openly acknowledged the resulting confusion. Writing for the majority, Justice Genovese explained that the Court undertook review of Farrell to “rectify” the open and obvious defense. The remainder of the opinion clearly explains the role of the open and obvious inquiry within the broader negligence framework and explains its implications in the summary judgment context.

First, Justice Genovese explained that the open and obvious inquiry has no bearing on the question of duty. Instead, the question must be considered as part of the breach inquiry—specifically, the second factor of the risk/utility balancing test—which considers the likelihood and magnitude of the harm using a reasonable person standard. The court advised that the condition, size and location of the hazard are factors for consideration,
but the plaintiff’s subjective awareness of the condition has no bearing on the analysis.

Finally, Justice Genovese clarified that the breach-based approach is not an outright bar to summary judgment, which remains the appropriate remedy in open and obvious cases where the defendant makes a showing that reasonable minds could only agree that the injury-causing condition was not unreasonably dangerous. Proving this point, the Farrell court concluded that the gas station-defendant met this burden and granted its summary judgment motion, reversing the trial court’s decision.

Farrell seems to clarify years of inconsistent caselaw concerning the open and obvious defense. While renewed breach-based approach may yield fewer summary judgments for defendant-property owners, the Farrell decision exemplifies that it does not preclude summary judgment altogether.

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).