Two New Procedural Wrinkles That May Disincentivize Challenges to New Federal Policies
The first weeks of the Trump Administration have been defined by executive orders and new policies that were immediately challenged on constitutional or statutory grounds.
Recently, the US Environmental Protection Agency indicated its intent to “launch” the “biggest deregulatory action in U.S. History” under which it will undertake 33 separate actions impacting regulations ranging from emissions limits for power plants to internal calculations for the “social cost of carbon.” Even preceding this effort, more than 100 legal challenges to other Trump Administration actions have been filed.
As these disputes move through the litigation process (including appeals and, for at least some cases, likely US Supreme Court review), district courts have issued numerous preliminary injunctions to pause or delay the effects of executive orders until litigation is complete. While some of the new efforts will be challenged in appellate courts due to venue provisions in statutes including the Clean Air Act or Clean Water Act, other challenges will proceed in district courts.
Litigating these challenges can be expensive for both sides, but two recent developments could make litigation costs — particularly in challenges lodged in district courts — higher for challengers. First, the Trump Administration issued a Memorandum titled “Ensuring the Enforcement of Federal Rule of Civil Procedure 65(c),” and subsequently a related Executive Order on the same subject, seeking to require challengers to post bond before seeking preliminary injunctions. Second, the Supreme Court recently decided Lackey v. Stinnie, which — separate and apart from the Memorandum — makes it harder for some challengers to recover attorneys’ fees after a preliminary injunction is granted.
Below, we discuss these developments and how they might apply in the litigation context.
How to Challenge Executive Branch Actions
We have outlined some of the Trump Administration’s initial actions: initial Executive Orders; initial environmental policies; initial efforts to pause government grants; and policies in the energy space. We have also addressed the new Administration’s trade policies here and here.
Individuals and entities generally initiate a challenge to the legal basis for an executive order or other action by filing a complaint in a federal district court. Depending on what is at stake and whether the facts of the case require rapid resolution, the court may use briefings, hearings, or a trial to evaluate whether the order or action should be upheld, struck down, or modified. Parties that lose in district courts may appeal, and some disputes make their way to the Supreme Court, which has the final say on most constitutional issues.
Often, challengers ask for injunctive relief, which is a legal remedy in the form of a court order compelling a party to do, or not do, a particular thing. Injunctive relief is warranted when an award of a money judgment would be insufficient to resolve the harm. Injunctive relief can be temporary — a “preliminary injunction” — or permanent, requiring a party in perpetuity not to do a particular thing.
Courts will often use preliminary injunctions to temporarily preserve the “status quo” while litigation is ongoing. This means that a challenger may win a preliminary injunction, but ultimately lose the case (or have the case mooted if the government changes course on its own before a final judgment).
The White House Memorandum on Fed. R. Civ. P. 65(c)
On March 6, after district courts had issued numerous restraining orders and preliminary injunctions temporarily delaying or reversing executive orders, the Trump Administration issued a new memorandum titled “Ensuring the Enforcement of Federal Rule of Civil Procedure 65(c),” seeking to require plaintiffs to post a bond before requesting preliminary relief. (The White House fact sheet on the Memorandum is here.)
The memo asserts that the slate of lawsuits and preliminary injunctions constitutes an “anti-democratic takeover … orchestrated by forum shopping organizations that repeatedly bring meritless suits … without any repercussions when they fail.” The memo argues that taxpayers are harmed when program cuts are enjoined and substantial government resources are spent “fighting frivolous suits instead of defending public safety.”
In response to the issues it identifies, the memo invokes Federal Rule of Civil Procedure 65(c), which requires parties seeking a preliminary injunction to post security in an amount the court determines is sufficient to cover the costs and damages of the enjoined party if the enjoined party ultimately wins the case on the merits. The memo directs all federal department and agency heads to formally request security under Rule 65(c) in every case where plaintiffs seek a preliminary injunction against the government. It requires that the requests remind the court that Rule 65(c) is mandatory, reiterate that the government’s requested bond amount is “based on a reasoned assessment,” and demand that any party failing to comply with Rule 65(c) should lead to the “denial or dissolution of the requested injunctive relief.”
But despite its strong language, the memo is largely just a reminder of an already existing procedural rule. Judges have discretion to determine the appropriate amount for any Rule 65(c) bond, and, in the context of challenges to executive actions, many courts have determined that amount is zero. Federal judges are presumably aware of Rule 65(c), and many of the judges enjoining the Trump Administration already determined that Rule 65(c) did not require a bond in those cases. Two weeks before the memo, a federal district judge in Maryland granted a college diversity officer’s request for a preliminary injunction against executive orders cancelling diversity, equity, and inclusion (DEI) grants and contracts, but set the Rule 65(c) bond at $0 because the plaintiff’s constitutional rights were at issue and “a bond of the size Defendants appear to seek would essentially forestall Plaintiffs’ access to judicial review.”
Going forward, Rule 65(c) bonds will likely become a more actively contested issue and challengers to any executive action will need to provide arguments why they should not be required to pay.
Lackey v. Stinnie and Plaintiffs’ Attorney Fees
Separately but relatedly, the challengers who have successfully obtained preliminary injunctions blocking Trump Administration executive actions may have a harder time recovering their attorneys’ fees — after the recent Supreme Court decision in Lackey v. Stinnie, plaintiffs will need to see their cases through to final judgment before recovering legal fees.
42 U.S.C. § 1988 provides that civil rights plaintiffs may win reimbursement of their attorneys’ fees if they are the “prevailing party.” Historically, this fee-shifting mechanism has helped advocacy groups and law firms shoulder the substantial cost of civil rights lawsuits. For example the Lackey plaintiffs estimated that the federal appellate litigation in the case cost $800,000. In a procedurally similar case, the New York Civil Liberties Union was seeking $200,000 in attorneys’ fees against two upstate New York counties.
The Supreme Court has addressed when exactly a plaintiff becomes a “prevailing party” (and thus eligible for reimbursement) on several occasions. In Buckhannon Board and Care Home v. West Virginia Department of Health and Human Resources, the Court ruled that a party prevails only when it achieves a “judicially sanctioned changed in the legal relationship of the parties.” 532 U.S. 598, 601 (2001). If a plaintiff files a lawsuit and the defendant voluntarily does what the plaintiff asked for, the plaintiff does not “prevail” for purposes of attorneys’ fees. To prevail, the plaintiff must win a merits judgment from a court.
What if a plaintiff wins a preliminary injunction but loses a final merits judgment? That plaintiff also does not prevail, the Supreme Court has held, because the victory was only temporary, not enduring. Sole v. Wyner, 551 U.S. 74, 86 (2007). The Sole decision left open what happens when a plaintiff wins a preliminary injunction and then the defendant voluntarily provides the relief plaintiff was seeking.
That issue has now been resolved. Until last month, 11 federal appeals courts held that a plaintiff that wins a preliminary injunction can be a “prevailing party” under some circumstances. Not so, said the Supreme Court in Lackey. The Court held that a plaintiff “prevails” when it wins permanent, on-the-merits judicial relief that materially alters the legal relationship of the parties. A plaintiff that wins only a preliminary injunction, which would include several plaintiffs suing the Trump Administration at this juncture, is not yet entitled to reimbursement of its attorneys’ fees. As a result, it’s not yet clear whether plaintiffs challenging the Trump Administration’s policies will receive attorneys’ fees. It will depend on how they are ultimately resolved.
Utilities Petition FCC for Updates to TCPA Guidelines to Allow “Demand Response” Calls and Texts
Edison Electric Institute (EEI), an association that represents all U.S. investor-owned electric companies, petitioned the Federal Communications Commission (FCC) to permit calls and texts under the Telephone Consumer Protection Act (TCPA) without prior express consent for “demand response” communications. A prior FCC ruling clarified the FCC’s policies towards the types of calls and texts from utilities that require prior express consent; EEI now urges the FCC to provide additional guidance on allowable “demand response” calls and texts. “Demand response” refers to non-marketing communications related to “temporary, strategic adjustments to electricity usage during peak demand periods.” EEI has asked the FCC to “recognize how essential demand response programs are to ensuring customer safety and to managing increasing demand for electricity more effectively.” EEI seeks FCC clarification on whether such calls and texts are permissible without prior express consent from customers so that utilities can save customers money and prevent outages.
Violations of the TCPA could result in fines and lawsuits against utilities. Thus, in 2016, the FCC clarified that when a customer provides a telephone number to a utility, such provision constitutes prior express consent for certain communications “closely related” to the utility service. EEI is asking that the FCC’s ruling be expanded to include non-telemarketing, information demand response calls, and texts. EEI’s petition states, “Demand response programs target short-term, intentional modification of electricity usage by end-user customers during peak times or in response to market prices. They help keep the electricity grid stable and efficient and can save customers money.” EEI further states that customer survey data “indicates widespread satisfaction among participants in demand response programs utilizing calls or texts, demonstrating positive impacts on customer experience with low opt-out rates.” EEI hopes that the FCC can clarify the language regarding the applicability of the utility customer presumption of consent and allow utilities to engage customers in these essential demand and response programs.
Cuts, Closures, and Confusion: A Quick Update on U.S. EPA
It has been 50 days since the Trump administration took office, and there remains a tsunami of activity surrounding executive actions and announcements across the federal government. The Environmental Protection Agency (EPA) has not been spared from deep cuts, office and grant program closures, and a fair amount of confusion.
On March 11, 2025, EPA Administrator Lee Zeldin directed the agency to eliminate all offices focusing on environmental justice. The move comes in the wake of executive orders signed on inauguration day declaring the end to the “whole of government” approach and the “Justice40” initiative and directed all federal agencies to terminate all environmental justice offices and positions. The recent action ends over 30 years of environmental justice work at the EPA by closing the national environmental justice office, along with each of the ten regional environmental justice offices. For the foreseeable future, the environmental justice considerations in environmental permitting and regulations will be starkly absent at the federal level.
Meanwhile, as a result of the February 19, 2025, executive order, the EPA has until April 20, 2025, to review all of their regulations and identify regulations that, among other criteria, are unconstitutional, impose significant costs that outweigh public benefit, or harm the national interest. This comprehensive regulatory review will likely have broad implications for nearly all environmental regulatory programs. For example, just yesterday, Administrator Zeldin announced the EPA’s plan to eliminate 31 separate major environmental regulations. Among the regulations on the chopping block are the greenhouse gas emissions endangerment finding, the “Good Neighbor Plan,” and several other climate-related standards. As for enforcement priorities, the same executive order instructed all federal agencies to “preserve their limited enforcement resources by generally deprioritizing” enforcement where such enforcement is not based on the “best reading of a statute,” or it goes “beyond the powers vested in the Federal Government by the Constitution.”
As for staffing, in February, the EPA had to correct a comment from the President that the EPA would be cutting 65% of its workforce; instead, it clarified that the figure was referencing spending cuts. Undoubtedly, much of those cuts will come from reductions to, or wholesale terminations, of many of the EPA’s traditionally successful and highly lauded grant programs. Just earlier this week the EPA announced its fourth round of cuts, including the cancellation of over 400 grants across nine programs. Then, the next day, the EPA announced it was canceling $20 billion in grants for climate and clean energy programs that had already been frozen. These broad cuts, which came with little or no notice, have left loan and grant applicants and recipients confused and concerned. While not tallied yet, there are sure to be thousands of potential brownfield, resiliency, and energy projects put on hold or terminated. It is anticipated that these cuts will also significantly impact on state and local government funding. It is too early to know whether and how much those gaps will be filled on a state or local level.
There is no sign that the pace of change will be slowing down anytime soon. With these changes, regulatory uncertainty will continue. More so than ever, keeping abreast of these developments and how they may impact operations, projects, or transactions is vitally important to businesses.
A Big Day at EPA – Agency Announces Reconsideration of 31 Major Agency Actions
On February 29, 2025, President Trump issued an executive order requiring agencies to identify suspect regulations for regulatory roll back within 60 days. Today, the U.S. Environmental Protection Agency (EPA) announced it will reconsider 31 EPA actions, including the Agency’s 2009 Clean Air Act finding that greenhouse gas emissions endanger public health and welfare along with many of the Agency’s flagship Clean Air Act regulations. These efforts will have far-reaching impacts on American businesses.
Womble Bond Dickinson can help your business keep up with these changes in the days ahead and advocate for your interests as this process plays out. In the meantime, we address what’s happening right now and what it could mean for your business.
What’s happening?
In a flurry of activity, EPA issued twelve press releases yesterday, March 12, 2025. Among those releases is an announcement that EPA will reconsider the following major regulatory programs:
New Source Performance Standards (NSPS) OOOOb/c regulations for the oil and gas industry;
The 2009 greenhouse gas endangerment finding under the Clean Air Act and actions that rely on that finding;
Greenhouse Gas Reporting Program;
Various regulations on power plants, including Clean Power Plan 2.0 and Mercury and Air Toxics Standards (MATS)
Light-duty, medium-duty, and heavy-duty vehicle regulations;
Hydrofluorocarbon (HFC) regulations in the Technology Transition Rule under the American Innovation and Manufacturing Act;
National Ambient Air Quality Standards (NAAQS) for PM 2.5;
Various National Emission Standards for Hazardous Air Pollutants (NESHAP) including for integrated iron and steel manufacturing, rubber tire manufacturing, synthetic organic chemical manufacturing industry, commercial sterilizers for medical devices and spices, lime manufacturing, coke ovens, copper smelting, and taconite ore processing, although this list could grow;
Regional Haze Program; and
Good Neighbor Plan.
In addition to the actions listed above, EPA issued a separate press release announcing its intent to again revisit the definition of “waters of the United States” (WOTUS) under the Clean Water Act. This definition was revised in 2015, 2019, 2020, and 2023. That rulemaking history and intervening court decisions have left 24 states and the District of Columbia implementing the 2023 rule and the remaining 26 states applying the pre-2015 regulatory regime and the Supreme Court’s 2023 decision in Sackett v. EPA. This renewed effort is sure to add yet another layer of regulatory complexity to project development and permitting.
While the definition of WOTUS is under review, EPA Administrator Lee M. Zeldin, published today a six-page Memorandum to offer further clarification of how WOTUS should be applied under both regulatory regimes currently operative in the U.S.
What could it mean for your business?
This is an incredible amount of regulatory activity to keep track of. But it is important to note that these press releases are not themselves regulatory actions. Many (if not most) of these actions will require rulemaking notices from EPA. The press releases do not include a timeline for each action, but we can expect the Agency to move quickly if it wants to accomplish this long list in the next four years.
It’s important to note that EPA does not say in these various press releases that it is staying compliance deadlines and obligations under existing regulations pending reconsideration. That’s because, at least for the announced actions that have origins under the Clean Air Act, EPA cannot stay existing rules unless authorized under the Administrative Procedures Act or the Clean Air Act.
In litigation involving EPA’s attempt during the first President Trump administration to stay NSPS for methane from the oil and gas sector for two years while it reconsidered the rule, the D.C. Circuit ruled that such stays are only authorized in limited circumstances—when reconsideration is mandatory under the Clean Air Act because issues of central relevance were impracticable to raise during the public comment period. Even then, the length of the stay is limited to 90 days.
That means all of the listed regulations remain on the books, unless otherwise stayed through judicial processes, and businesses will need to continue complying. EPA also announced that it will immediately revise its National Enforcement and Compliance Initiatives to align with the Administration’s priorities. These revisions will dictate where EPA spends its time inspecting and enforcing regulated facilities and industries. Importantly, however, even if the regulations noted are not among the revised priorities, it is no guarantee that noncompliance will go ignored while the EPA revises regulations.
Looking to the future, regulatory rollbacks are sure to face litigation. And even if these regulatory programs are rolled back significantly, businesses still face state regulation.
Businesses would be wise to identify the actions announced today that will impact their work and pay close attention as these actions are implemented by the EPA. In particular, participation in notice and comment rulemaking is foundational to both building a record and preserving issues should litigation ensue.
EPA Reschedules SACC Meetings to Consider 1,3-Butadiene Draft Risk Evaluation, Will Issue Supplement
The U.S. Environmental Protection Agency (EPA) announced on March 11, 2025, the rescheduled meeting dates of the Science Advisory Committee on Chemicals (SACC) that had been previously scheduled for February 2025 to consider and review the draft risk evaluation for 1,3-butadiene. 90 Fed. Reg. 11737. The rescheduled preparatory meeting for the SACC to consider the scope and clarity of the revised draft charge questions for the peer review will now be held on March 25, 2025, and the rescheduled peer review meeting for the SACC to consider the draft documents and public comments will now be held on April 1 – 4, 2025. EPA will accept comment on the scope and clarity of the revised draft charge questions for the peer review and the draft risk evaluation and related documents, including a new supplement of preliminarily refined risk estimates for 1,3-butadiene released from facilities in advance of and during the peer review meeting. SACC will consider the comments during its discussions. To request time to present oral comments during the preparatory meeting, stakeholders must register by 12:00 p.m. (EDT) on March 21, 2025. For those not making oral comments, registration will remain open through the end of this preparatory meeting. Written comments, including written versions of oral comments, on the scope and clarity of the charge questions are due March 21, 2025. To request time to present oral comments during the peer review meeting, stakeholders must register by 12:00 p.m. (EDT) on March 28, 2025. For those not making oral comments, registration will remain open through the end of this peer review meeting. Written comments on the draft risk evaluation and related documents, including preliminarily refined risk estimates for 1,3-butadiene released from facilities, are due March 20, 2025. Written versions of oral comments are due March 28, 2025.
Defence – A Sustainable Investment? A View From The UK’s Financial Conduct Authority
On 11 March 2025, the Financial Conduct Authority (the “FCA”) published a statement clarifying that their rules, including with regards to sustainability, do not prevent investment in or financing of defence companies. The FCA confirmed that it is at the discretion of investors or lenders as to whether they provide capital to defence companies.
The UK’s Sustainability Disclosure Requirements (“SDR”) introduced in 2023 aim to ensure that information about investments claiming to be sustainable can be trusted and readily understood. The SDR has never explicitly addressed the defence sector in SDR.
However, asset managers commonly apply exclusionary screening of investments related to weapons, typically limited to “controversial weapons” whose production and use have been deemed unacceptable under international conventions and even illegal within certain jurisdictions. Examples of such weapons include cluster munitions, anti-personnel landmines and chemical weapons. The clarity on weaponry exclusions came into sharp focus following the Russian invasion of Ukraine, prompting many to tighten their exclusionary criteria on cluster munitions in particular.
The FCA announcement follows lobbying from several Members of Parliament seeking clarity on defence investments and FCA sustainability rules. It also follows on from the statement from the previous government that directly confirmed “investing in good, high-quality, well-run defence companies is compatible with ESG considerations as long-term sustainable investment is about helping all sectors and all companies in the economy succeed”. Whilst the current Prime Minister has committed to increase defence spending recently, so far there is no statement from him or the Chancellor, Rachel Reeves, on their perspective on whether defence investments could be sustainable investments.
We wait to see if other regulators will make similar pronouncements as defence spending, and increases in it, becomes more and more in relevant to countries around the world.
EPA Extends Comment Period on Draft TSCA Risk Evaluation for DCHP
The U.S. Environmental Protection Agency (EPA) announced on March 7, 2025, that it is extending the comment period on the draft risk evaluation for dicyclohexyl phthalate (DCHP) under the Toxic Substances Control Act (TSCA). EPA released the risk evaluation for DCHP on January 7, 2025, with a comment period that closed March 10, 2025. EPA states that it will soon publish a Federal Register notice extending the public comment period for an additional 60 days. Upon publication of the Federal Register notice, EPA will accept public comments until May 9, 2025.
According to EPA’s January 6, 2025, press release announcing the availability of the draft risk evaluation, DCHP is used primarily as a plasticizer or stabilizing agent in polyvinyl chloride (PVC) products and in adhesives, sealants, paints, coatings, rubbers, and other applications. EPA preliminarily determined that DCHP presents an unreasonable risk of injury to human health for workers. EPA states that nine conditions of use (COU) significantly contribute to the unreasonable risk to workers. The draft risk evaluation preliminarily shows that DCHP does not pose unreasonable risk to the environment, the general population, or consumers. EPA notes that there are other uses of DCHP that are generally excluded from TSCA’s definition of chemical substance, such as food contact materials, and EPA did not evaluate risk associated with these uses.
Workers may be exposed to DCHP when making products or otherwise using DCHP in the workplace. According to EPA, when it is manufactured or used to make products, DCHP can be released into the water where most of it will end up in the sediment at the bottom of lakes and rivers. EPA states that if released into the air, DCHP will attach to dust particles and be deposited on land or into water. Indoors, DCHP has the potential over time to come out of products and adhere to dust particles that could be inhaled or digested.
No Harm, No Foul: Greenwashing Lawsuit Dismissed for Lack of Article III Standing
It is well-settled that under Article III of the Constitution, United States federal courts are limited to trying “cases and controversies.” Moreover, a case or controversy exists only if a plaintiff has standing to file the suit, requiring the plaintiff to demonstrate injury in fact, causation, and redressability. On February 19, 2025, the United States District Court for the Southern District of Florida issued a noteworthy decision and dismissed a putative class action lawsuit filed against lululemon athletica inc., and lululemon usa inc. (“Lululemon”) without leave to amend for lack of Article III standing.
A group of consumers filed the lawsuit alleging that Lululemon made “false, deceptive, and misleading representations” regarding the company’s products and actions as they relate to environmental initiatives in accordance with the company’s “Be Planet” campaign. Gyani v. Lululemon USA Inc., et al., 2025 WL 548405, *1 (S.D. Fla.). For example, the plaintiffs alleged that Lululemon’s website stated that it is “committed to making products that are better in every way-for…the planet.” Id. at *2. In fact, according to the plaintiffs, “Lululemon is responsible for significant GHG gas emissions, landfill waste, and release of microplastics into the environment.” Id. The plaintiffs claimed that they relied on various misrepresentations from the “Be Planet” campaign in deciding to purchase Lululemon products. Id.
The court dismissed plaintiffs’ claims, which were premised on alleged violations of various states’ consumer protection statutes. First, the court found the plaintiffs failed to adequately plead an injury in fact to support claims for monetary damages. The court highlighted that “mere allegations of having paid a price premium are insufficient — a plaintiff must tie the value of the product to any purported misrepresentations.” Id. at 4. On this point, the court found Valiente v. Publix Super Mkts., Inc., 2023 WL 3620538 (S.D. Fla. May 24, 2023) instructive. In Valiente, a plaintiff allegedly purchased cough drops due to the “phrase ‘honey lemon,’ the ‘pictures of these ingredients,’ and the statement that the product ‘soothes sore throats.’” The court dismissed the plaintiff’s claim for lack of injury because the plaintiff failed to allege that the cough drops were in any way “defective” or “worthless.” Id. at *5. The court in Gyani found the facts before it similar in that the plaintiffs’ complaint failed to allege Lululemon’s products were defective or worthless. 2025 WL 548405, *4. Moreover, the plaintiffs failed to allege deceptive or unfair acts as to the products themselves, failing to connect the allegedly problematic “Be Planet” statements to the price premium the plaintiffs alleged that they paid for Lululemon’s products. Id. at *5.
Next, the court held that the plaintiffs failed to plead an injury in fact to support a claim for injunctive relief. The court relied on Williams v. Reckitt Benckiser LLC, 65 F.4th 1243 (11th Cir. 2023) and Piescik v. CVS Pharmacy, Inc., 576 F. Supp. 3d 1125 (S.D. Fla. 2021), where the plaintiffs alleged that they “would like” to purchase the company’s products in the future “if” the defendant improved the products at issue. In Gyani, the complaint similarly alleged that the plaintiffs “would like” to purchase Lululemon’s products, however, “only if” the plaintiffs “can rely on Lululemon ‘to be truthful in their marketing statements regarding the sustainability and environmental impact of Lululemon’s products and actions.’” 2025 WL 548405, *5. The court held that such allegations failed to demonstrate harm that was actual or imminent.
Finally, the court refused to grant leave to amend. Id. at *6. The court held that the plaintiffs’ request was procedurally improper in that the plaintiffs embedded the request in their opposition brief rather than making the request via motion. Id.
Retailers and manufacturers concerned with risk associated with a growing number of environmental or “green” marketing claims will certainly welcome the Gyani decision. The ruling emphasizes that plaintiffs must demonstrate concrete economic injury linked to the at-issue marketing claims to pursue monetary relief as well as a real and immediate threat of future harm to seek injunctive relief; general allegations relating to a price premium and an equivocal desire to make future purchases are not enough. However, the decision certainly will not put an end to putative class actions asserting greenwashing claims. If faced with a similar lawsuit, retailers and manufacturers should consider whether to seek dismissal at the pleading stage when the complaint does not tie the alleged misrepresentations to the value of the product and/or does not adequately allege any real threat of future harm.
Supreme Court Limits Clean Water Act Permit Requirements in San Francisco v. EPA
On March 4, 2025, the U.S. Supreme Court in City and County of San Francisco v. Environmental Protection Agency held that “end-result” permit requirements are not allowed under the Clean Water Act (“CWA”). The Supreme Court characterized end-result requirements as “permit provisions that do not spell out what a permittee must do or refrain from doing,” but instead make a permit holder responsible for receiving water quality. Many individual and general National Pollutant Discharge Elimination System (“NPDES”) permits contain such “end-result” requirements—and the Supreme Court’s ruling is expected to have significant impacts on NPDES permitting going forward.
Background
The CWA prohibits anyone from discharging “pollutants” through a “point source” into a “water of the United States” without a NPDES permit. “Pollutants” and “point source” are broadly defined in the CWA. The Supreme Court recently addressed what constitutes a “waters of the United States,” which we discussed here.
NPDES permits authorizing discharges of pollutants are issued by authorized states, tribes, and/or the EPA, depending on which agency has jurisdiction over the discharge area. NPDES permits contain conditions to protect water quality, such as “effluent limits” that restrict the quantities, rates, and concentrations of pollutants that can be discharged by the permittee. They also include monitoring, reporting, and “best management practice” requirements.
San Francisco v. EPA Decision
In 2019, EPA and the California Regional Water Quality Control Board issued a renewed NPDES permit for a San Francisco wastewater treatment facility that discharged treated wastewater into the Pacific Ocean. The renewed permit contained two new “end-result” provisions that:
“prohibit[ed] that facility from making any discharge that ‘contributes to a violation of any applicable water quality standard’ for receiving waters” and
“provide[d] that the city cannot perform any treatment or make any discharge that ‘creates pollution, contamination, or nuisance as defined by California Water Code section 13050.’”
On appeal, the Ninth Circuit Court of Appeals upheld these end-result provisions. The Court reasoned that such open-ended conditions were authorized by CWA Section 1311(b)(1)(C), which states that EPA may impose “any” limitation necessary to meet applicable water quality standards.
In a 5-4 decision, the Supreme Court reversed the Ninth Circuit and held that the CWA does not authorize the inclusion of “end-result” provisions in NPDES permits. Rather, the agency issuing the permit is responsible for determining and spelling out specifically “what steps a permittee must take to ensure that water quality standards are met.”
To support its interpretation, the Court focused on the text of Section 1311(b)(1)(C) and the broader statutory scheme. The Court pointed to the CWA’s so-called “permit shield” provision, which deems a permit holder to be in compliance with the CWA if it follows all permit terms. Noting the importance of the permit shield given the CWA’s imposition of strict liability and harsh penalties for violations, the Court held that the permit shield’s benefit be “eviscerated” by a decision to allow end-result requirements.
The Court also emphasized differences between the CWA and the “Water Pollution Control Act” (“WPCA”), the CWA’s predecessor statute. The WPCA which included a provision expressly allowing end-result requirements, an approach the Court called “backward-looking” and “impractical” –especially in situations where multiple permittees discharge pollutants into a single water body, requiring regulators to “unscramble the polluted eggs after the fact.”
In issuing its decision, the majority heavily relied on the amicus briefs of regulated entities. The dissent believed end-result provisions benefit regulated entities by providing a regulatory tool that can avoid permit delays or denials, but the majority disagreed, stating that the “long list of municipalities and other permittees” supporting San Francisco’s position are “sophisticated entities” who are “better positioned than the dissent to judge what is good for them.”
Impact of San Francisco v. EPA
The Supreme Court’s decision puts an end to “end-result” requirements, which have been used routinely in NPDES permits issued by states and the EPA. The Supreme Court’s ruling means agencies issuing NPDES permits must translate water quality standards into specific, measurable discharge limitations, rather than simply prohibiting contributions to water quality violations.
The Supreme Court’s decision, which applies equally to federal and state NPDES permits, will likely prompt more specific permit requirements. The decision could benefit some permittees by easing permit compliance, providing more certainty as to potential CWA liability, and reducing the number and scope of enforcement actions. However, the decision is also likely to cause delays in permit issuance, while states and the EPA work to implement the new standard announced by the Court.
EPA Extends Comment Period on Draft Scope Document for Vinyl Chloride TSCA Risk Evaluation
On March 5, 2025, the U.S. Environmental Protection Agency (EPA) extended the comment period on the draft scope of the risk evaluation to be conducted under the Toxic Substances Control Act (TSCA) for vinyl chloride. 90 Fed. Reg. 11315. As reported in our January 28, 2025, memorandum, under TSCA, the scope documents must include the conditions of use (COU), hazards, exposures, and the potentially exposed or susceptible subpopulations (PESS) that EPA expects to consider in conducting its risk evaluation. The purpose of risk evaluations is to determine whether a chemical substance presents an unreasonable risk of injury to health or the environment under the COUs, including unreasonable risk to PESS identified as relevant to the risk evaluation by EPA, and without consideration of costs or non-risk factors. Comments on the draft scope of the risk evaluation for vinyl chloride are due April 2, 2025.
EU Omnibus Package: Proposed Changes to Reduce ESG Compliance Burdens for Businesses
On 26 February 2025, the European Commission (Commission) published the so-called “EU Omnibus Package” (Proposal). The Proposal aims to reduce the administrative burden for businesses operating in the EU by easing compliance requirements under several key EU environmental, social, and governance (ESG) laws, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). The Proposal must be read against the background of the “Draghi report” on European competitiveness published last year, which urged to reduce the administrative and regulatory burden within the EU, and the Commission’s target to reduce such burden by 25% overall and by at least 35% for SMEs. This GT Alert provides an overview of the most important proposed changes to these regulations.
Key Proposed Changes
Amendments to CSRD
Scope of application for EU companies: The CSRD’s scope of application would be limited to undertakings that have more than at least 1,000 employees and either a net turnover of at least EUR 50 million or a balance sheet total of at least EUR 25 million. In addition, publicly listed small and medium sized undertakings (SMEs) that do not meet these thresholds shall be completely removed from the scope of the CSRD. The Commission estimates that these changes would remove approximately 80% of the current in-scope companies from the scope of the CSRD. Currently, the CSRD still captures all “large” undertakings, being companies which meet two of the three following criteria: (i) average number of employees: 250; (ii) balance sheet total: EUR 25 million; and (iii) net turnover: EUR 50 million, as well as listed SMEs (regardless of their number of employees).
Scope of application for non-EU companies: The Proposal suggests to significantly increase the threshold for non-EU companies to be subject to reporting requirements under the CSRD. The reporting obligation for non-EU companies shall now only be triggered if the ultimate non-EU parent company has a total turnover in the EU of at least EUR 450 million at group level (now: EUR 150 million) and either a “large” EU-based subsidiary (meeting two out of three criteria referred to above) or a branch in the EU with a turnover of at least EUR 50 million (now: EUR 40 million). The employee threshold was not raised to 1,000 for EU subsidiaries of non-EU parent companies, which may have been an oversight.
Scope of reporting requirements: The scope of the reporting requirements set out in the European Sustainability Reporting Standards (ESRS) shall be simplified through a reduction of the number of data points to be reported in the CSRD report. The Proposal also removes the obligation for the European Commission to adopt delegated acts to supplement CSRD in order to, where appropriate, provide for reasonable assurance standards. This would mean that CSRD would, also in the future, only require an audit opinion about the compliance of the sustainability reporting based on limited assurance standards.
Timing of reporting: The Proposal suggests postponing the CSRD reporting requirements by two years for all so-called “wave 2” and “wave 3″ companies, i.e. companies which are currently required to report under the CSRD in 2026 (over the financial year 2025) or 2027 (over the financial year 2026). If the Proposal is adopted, these companies would only have to provide their first CSRD report in 2028 and 2029, respectively. On the contrary, the Proposal does not change the timing of the reporting for so-called “wave 1” companies (i.e. publicly listed EU companies, insurances and banks with an average number of employees during the financial year of at least 500) which are already required to do CSRD reporting in 2025 (for the financial year 2024). The Commission intends to fast-track this part of the Proposal to provide legal certainty for companies with looming reporting obligations in 2026, and to “win time” for adoption of the envisaged substantive changes (in particular the introduction of the 1,000-employee threshold). Should the substantive changes be adopted and become effective as they currently stand, the “wave 1” companies that do not meet the new scoping criteria (because they have more than 500 but less than 1,000 employees) would no longer be subject to the CSRD.
Amendments to CS3D
Timing of due diligence obligations: The Proposal leaves the thresholds for the applicability of the CS3D unchanged but proposes to postpone the deadline for Member States to transpose the CS3D into national law by one year to 26 July 2027. Consequently, the first phase of application of the new due diligence obligations (i.e. for large companies) would begin on 26 July 2028.
General limitation of due diligence obligations to direct business partners: The Proposal generally limits the due diligence obligations of in-scope companies to direct business partners. An exception (i.e. an obligation to conduct an in-depth assessment of adverse impacts at the level of indirect business partners) shall only apply in limited circumstances where the company has plausible information suggesting that adverse impacts have arisen or may arise at the level of the respective indirect business partner. Hence, it would no longer be required to monitor and assess the entire supply chain.
Greater intervals for monitoring: As another significant relief for in-scope companies, the Proposal suggests requiring companies to assess the adequacy of their supply chain due diligence measures only every five years instead of every 12 months.
Termination of business relationships: Under the Proposal, in-scope companies would no longer be required to terminate their entire business relationship with business partners towards which preventive or corrective measures have failed to address their adverse impacts on human rights or environmental objectives. Instead, they would only be required to terminate business relationships with respect to the activities concerned.
Other Proposals
The Proposal also includes:
measures to reduce the regulatory burden and scope of the Taxonomy Regulation, including by introducing materiality thresholds and reducing reporting templates by around 70%;
changes to the Carbon Border Adjustment Mechanism (CBAM), including by exempting small importers from CBAM obligations; and
an amendment to the InvestEU Regulation, involving reduced reporting requirements.
Outlook
It remains to be seen whether the Proposal will become law in its current form. It is still subject to approval by the European Parliament and the Council of the EU Member States. Generally, EU legislative procedures can last up to 18 months – which is why the Commission has asked to fast-track the changes, in particular regarding the postponement of CSRD deadlines.
Whilst some EU politicians have raised concerns that the Proposal would lead to a setback for the EU’s sustainability objectives, the Proposal would significantly reduce the compliance burden for companies and limit the CSRD’s scope of application. For this reason, the Proposal has found support in some key EU Member States (e.g. Germany). Further intense discussions can be expected as the legislative procedure moves along.
Considerations for Companies
Until the Proposal becomes final and is adopted, the existing ESG rules (including CSRD) will continue to apply. What steps should companies consider taking before then? In particular for the CSRD, the answer depends on the circumstances for each company:
Companies that are already required to report under CSRD (“wave 1” entities) in 2025 should continue to comply. Companies with more than 500 but less than 1,000 employees may no longer be required to comply after adoption of final rules, but whether those rules will indeed become effective in their current form remains to be seen.
For companies that are currently due to report under CSRD in 2026 and 2027 (“wave 2” and “wave 3” entities), the prudent approach is to continue preparing for CSRD on the basis of the existing rules.
Non-EU parent companies of EU subsidiaries or branches should reconsider applicability of the scope to determine whether they will be required to report in 2029.
All companies are advised to monitor the development of upcoming rules.
A New Alice Plot Twist – Can a Composition of Matter Be an Abstract Idea?
Federal Circuit Holds that “Polycrystalline Diamond Compact” Claims Are Not Directed to an Abstract Idea
The patent world tends to think that the Supreme Court’s framework in Alice1 is a template for determining the eligibility of software and business method inventions2. Under 35 U.S.C. § 101, abstract ideas are not eligible for patent protection.3 Ineligible abstract ideas have included claims directed to mathematical equations, certain business methods, and mental processes.4 Interestingly, the Federal Circuit recently evaluated claims directed to a diamond compact and determined that they were not directed to an ineligible abstract idea under § 101. While these composition of matter claims survived, we see implications for patent practitioners in the chemical and materials arts.
On February 13, 2025, the Federal Circuit reversed a ruling from the ITC holding claims directed to a polycrystalline diamond compact (PDC) from U.S. Patent No. 10,508,502 invalid as directed to an abstract idea.5 The PDC claims comprise “a polycrystalline diamond table . . . including: a plurality of diamond grains . . . and a catalyst including cobalt;” and “a substrate bonded to the polycrystalline table.” The claims also recite certain magnetic property ranges. The specification of the patent explains that these magnetic properties correlate to low levels of cobalt in the PDC, and low levels of cobalt are associated with stronger PDCs.6
At the ITC, the presiding ALJ applied the two-step framework of Alice7 to the claims at issue. The ALJ found that the claims recited some structural features (grain size and a catalyst), and the magnetic properties were “side effects.” The ALJ further reasoned that “[t]here may be some causal connection” between the recited magnetic properties and structures, but it “is so loose and generalized” that the “claimed limitations appear to be little more than side effects.”8 The ITC largely agreed and determined that the magnetic properties were merely the “the result of sintering conditions and input materials that went into manufacturing the PDC.”9
The Federal Circuit held that the “claims are directed to a specific, non-abstract composition of matter—a PDC—that is defined by its constituent elements . . ., particular dimensional information . . ., and quantified material properties . . . .”10 The court disagreed with the ITC’s reliance on the patent specification’s use of “may” to support its position that the correlation between the magnetic properties and structural features is “too weak and equivocal.” Rather, the paragraphs employing “may” also have sentences that unequivocally use “indicates” to establish the correlation.11 Further, the patent includes several working PDC table examples illustrating that the claimed magnetic properties are indicative of low levels of cobalt in comparison to prior art PDC tables.12 Ultimately, “no perfect proxy” is required to tie the recited properties to the recited structure.13
US Synthetic offers takeaways for patent practitioners who draft composition of matter claims. There is at least some risk that a recited property in a composition of matter claim could be held an ineligible abstract idea under § 101. One can substantially reduce this risk by working with inventors to draft patent applications that: (a) identify actual examples and comparative examples that illustrate a relationship between the recited properties and structure; (b) include specification passages that discuss proven or believed relationships between each of the claimed properties and structure; (c) avoid the use of the term “may” in the patent specification when correlating properties to structure; and (d) avoid equivocation when supporting claimed elements in the specification. At the same time, patent drafters should avoid couching these property/structure connections as the invention or as being critical to the invention because these constructions might be construed by a court as limitations in claims that do not expressly recite these properties and/or structures.
If you have any questions about the impact of US Synthetic or patent issues more generally, please contact your Miller Canfield attorney or the authors of this alert.
Footnotes
1 Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014).
2 See generally U.S.P.T.O. Manual of Patent Examining Procedure (MPEP) § 2106.04(a).
3 E.g., Diamond v. Diehr, 450 U.S. 175, 185 (1981).
4 See MPEP § 2106.04(a).
5 US Synthetic Corp. v. Int’l Trade Comm’n, __ 4th__, 2025 WL 478762, No. 2023-1217 (Fed. Cir. Feb. 13, 2025).
6 Id. at *1-4.
7 In the first step, the court must assess the claims in their entirety to determine “whether their character as a whole is directed to excluded subject matter.” Alice, 573 U.S. at 218. If the claims are directed to an abstract idea, step two requires the court to assess “the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application.” Id. at 217.
8 US Synthetic, 2025 WL 478762, at *4.
9 Id. at *5.
10 Id. at *6.
11 Id. at *7.
12 Id. at *8.
13 Id. at *7.