Last week, a shareholder of Danimer Scientific, Inc., filed a derivative suit against the company’s executives and board members, alleging that overstated sustainability claims led to millions of dollars in market capitalization losses.

Danimer manufactures polymers, resins, and plastic alternatives that are used in a number of plastic products. The complaint alleges that the company repeatedly touted the biodegradability of these products, as well as their ability to reduce plastic use and pollution. For one product in particular, Nodax, Danimer claimed that it was fully degradable within 12 to 18 weeks after being discarded. According to a Danimer press release, Nodax is a “100% biodegradable, renewable, and sustainable plastic . . . certified as marine degradable, the highest standard of biodegradability, which verifies the material will fully degrade in ocean water without leaving behind harmful microplastics.” The company made similar representations in an SEC Form S-1 registration statement.

Shortly after these statements went public, The Wall Street Journal published a detailed article refuting Danimer’s biodegradation claims. The article cited experts that were skeptical of whether Danimer’s products could really degrade as quickly as advertised under real-world conditions. The article noted that things like ocean temperature, microorganism variation, and plastic shape and size, will all impact biodegradability and may result in significantly longer timelines for degradation.

The next trading day, Danimer’s stock price dropped by almost 13 percent.

After The Wall Street Journal article was published, Spruce Point published additional reports further supporting the notion that Danimer’s biodegradability claims were too good to be true. The company’s stock price further dropped in the wake of these reports.

Plaintiff, a Danimer stockholder, filed the derivative suit against the company’s CEO and Chairman of the Board, CFO, and a number of the company’s directors. Plaintiff claims that these officers and directors breached their fiduciary duties to the company by intentionally or recklessly allowing these misstatements to occur, which resulted in significant losses. Plaintiff also sued the officers and directors for unjust enrichment, waste of corporate assets, and breaches of the Exchange Act.

While we have yet to see where this litigation will go, the suit itself is another example of how ESG principles are having real consequences on market capitalization—and are finding their way into America’s courtrooms.

The case is Perri v. Croskrey, et al., D. Del., Case No. 1:21-cv-01423.

This week’s post was co-authored by Robinson+Cole Labor and Employment Group lawyer Emily A. Zaklukiewicz.

Last month, President Biden issued an Executive Order which effectively imposes several COVID-19 safety standards and protocols, including mandatory vaccination, upon certain federal contractors and subcontractors. Specifically, the Executive Order directs federal agencies to incorporate a clause into all covered federal contracts which will require federal contractors or subcontractors to comply with guidance published by the White House’s Safer Federal Workforce Task Force (Guidance), and which was released on September 24, 2021.  Under the Executive Order and Guidance, certain manufacturers and other companies doing business with the federal government will soon be required to mandate vaccination for their workforces and ensure compliance with masking and social distancing requirements, among other requirements. Continue Reading Mandatory Vaccination and Safety Protocols for Federal Contractors

Below is an excerpt of an article authored by Robinson+Cole Immigration Group lawyer Jennifer L. Shanley published in Industry Week on September 15, 2021. 

With U.S. manufacturers facing more than 800,000 vacant jobs, companies are re-focusing their efforts on building their workforce. Foreign nationals can help fill the workforce gap.

Manufacturers can sponsor foreign nationals in a variety of different work-authorized status categories, each with its own requirements and limitations. Here is a rundown on the most common classifications. Read the article.

This week’s post was co-authored by Robinson+Cole Labor and Employment Group lawyer Emily A. Zaklukiewicz.

While employers in healthcare and education have mandated, or considered mandating, vaccination of employees during the COVID-19 pandemic, recently employers in many other industries are considering doing so. Manufacturers are now grappling with how best to evaluate the risks associated with such policies, implementation and administration of a mandatory vaccination policy, and the handling of requests for exemption, which may follow. Under federal and many state laws, employers requiring vaccination must provide employees (and applicants with job offers) with the opportunity to request an exemption from vaccination as a reasonable accommodation, based on a disability (or medical condition) or sincerely held religious belief. Employers are required to engage in an interactive process with employees to understand the request and determine whether to approve or deny it. Therefore, it is critical that employers maintain clear policies and procedures for evaluating such requests and understand their legal obligations in doing so. Of particular note, general vaccine hesitancies and personal philosophies are generally not protected by law and employers are not required to consider such exemption requests unless a state or local law provides otherwise. Continue Reading Navigating Requests for Exemption from Mandatory Workplace Vaccination Policies

This week’s post was co-authored by Robinson+Cole Insurance + Reinsurance Group lawyer Denis J. O’Malley.

When a domestic company starts a relationship with an international partner, choosing the jurisdiction in which any dispute must be litigated in the event of a contract breach may not be top of mind. But a recent decision by the Connecticut Supreme Court illustrates the vital importance of including a forum selection clause in any contract with a foreign company in order to avoid the risk of having to litigate overseas. Continue Reading Manufacturing Alert: New Court Decision Underscores Importance of Forum Selection Clauses in Contracts

It wouldn’t be a change in Presidential administration without a change to the all-important definition of “Waters of the United States” (“WOTUS”) under the Clean Water Act. Last year, we updated you on Clean Water Act developments, including the then-new Trump administration WOTUS rule. The WOTUS rule defines which waters are subject to Clean Water Act jurisdiction—and which are not—so it has a meaningful impact on the reach of the Act. The Trump administration WOTUS rule, enacted in 2020, limited the waters that are considered WOTUS to include only territorial seas, traditionally navigable waters, certain surface waters that contribute surface flow to traditionally navigable waters, and wetlands that physically touch other jurisdictional waters. On August 30, 2021, a federal court in Arizona struck down the Trump WOTUS rule, citing the serious errors in enacting the rule, as well as the serious environmental harm that it has caused.

According to the Court, between June 22, 2020 and April 15, 2021, 76 percent of the 40,211 jurisdictional determinations of aquatic resources or water features made by the Army Corps of Engineers under the Trump WOTUS rule found the waters to be non-jurisdictional. The reduction was particularly significant in arid states, with nearly every stream assessed under the Trump WOTUS rule in New Mexico and Arizona falling outside Clean Water Act jurisdiction. The Court also cited concerns that the Trump WOTUS rule “disregards established science . . . .” The Court directed the Army Corps and the Environmental Protection Agency, the two agencies responsible for the WOTUS rule, to reconsider the rule (something the Biden administration had already prioritized), but it also vacated the Trump WOTUS rule, so it is no longer in effect.

So what are we left with? The Obama administration had enacted its own WOTUS rule, which was broader than the Trump WOTUS rule. However, the Obama WOTUS rule was repealed by the Trump administration, so unless that repeal is challenged, the Obama WOTUS rule will remain a thing of the past. Instead, the current definition of WOTUS will revert to a 1986 rule, which has been interpreted and re-interpreted by the courts, most notably by the Supreme Court in Rapanos v. United States, 547 U.S. 715 (2009). What does that mean? We could write a book about that, much less a blog post, but, at least temporarily, we will return to a regulatory definition that has been refined over the years by court decisions that essentially fall into some combination of the Trump WOTUS rule and the Obama WOTUS rule. Murky waters, indeed.

“A supply chain crunch that was meant to be temporary now looks like it will last well into next year as the surging delta variant upends factory production in Asia and disrupts shipping, posing more shocks to the world economy.”

This is the opening paragraph from a recent Bloomberg article entitled “The World Economy’s Supply Chain Problem Keeps Getting Worse.”

Many of our manufacturing clients are facing shortages of all types along with the significant increase for raw materials. The Bloomberg article also reports the significant increases in cost just to ship products as the article notes that the cost of sending a container from Asia to Europe has increased 10 times since May 2020 and from Shanghai to Los Angeles has increased six-fold.

From a legal perspective, many of our clients are scrutinizing their contracts of all types, including their force majeure clauses. The force majeure discussion has changed over time.

In 2020, there was a lot of discussion about companies claiming force majeure due to the decrease in OEM and/or customer business. In 2021, there has been significant discussion about whether suppliers can fulfill orders due to the inability to obtain materials that have never posed a challenge in the past. There is no sign that these supply chain issues are going to subside anytime soon.

This week’s post was co-authored by Robinson+Cole Labor and Employment Group lawyer Emily A. Zaklukiewicz.

Earlier this year, we covered the topic of drug testing in the workplace. Since then, several states have passed legislation legalizing recreational use of cannabis, including Connecticut; this new law not only legalizes the recreational use of cannabis in the state, but also imposes various obligations and restrictions on employers, which are effective July 1, 2022. While certain employers in the manufacturing industry may be exempt from these employment-related restrictions in the new law, manufacturers may still be impacted. Continue Reading Connecticut’s Recreational Marijuana Law And Its Impact on the Workplace

In the past, we have provided some guidance about how to manage supply chain and other business to business disputes.

2020-2021 has been the year of supply chain disruptions and customer disputes. Not all disputes lead to a courtroom – many of them are resolved. However, there are certain practices when it comes to sending internal emails that are worthwhile to consider. Some of these are obvious.

  1. A lot of times when we talk about email practices, we look at it defensively, i.e., if there is a dispute. Some of my partners call email “God’s gift to trial lawyers.” I think the point they are making is that email can be misconstrued because typically “tone” is read in and also because it often is written quickly. So, as an initial rule, I encourage people to apply the 24 hour rule if the email is dispute oriented at all. Sometimes you can’t wait to respond, but if you can, it is always better to send a placeholder email.
  2. Avoid sarcasm or jokes because again, it often is not delivered the right way.
  3. Mind your cc’s. Ccs are often used as a weapon and when dealing with a customer/supplier/vendor, it can look like you are taking someone to the “principal’s office.” Also, there may be a strategic reason to keep executive management out of it until the right time.
  4. For smaller companies, you should encourage people to relay significant concerns in person or over the phone. On the quality side, I know a lot of folks want to email the world, but oftentimes I have seen engineers, etc. speculate about issues and then change their minds. But, that initial email is there forever. So, make sure folks adequately investigate something before putting it in writing.
  5. When we train quality/sales, etc. we always tell people that emailing people is fine. Often, when you give people rules, they say they will never email anyone again. It is more about helping them identify the risks themselves as opposed to telling them what to do.

Last month, Maine signed the nation’s first packaging-based extended producer responsibility program into law, signaling a possible sea change in the way we handle recycling in the United States.

Maine’s extended producer responsibility for packaging law, LD 1541, will shift the costs of dealing with product packaging, whether it is recyclable or not, from municipalities and consumers to producers. The law will require packaging producers to report on the types and quantity of packaging materials sold into the state. A to-be-formed Stewardship Organization will then charge these producers an annual fee intended to account for the disposal and recycling costs associated with those packaging materials. The fees collected will be passed along to municipalities that have traditionally borne the cost of recycling or disposing of all of this packaging. Unless they are otherwise exempt, producers will not be allowed to sell or distribute products in Maine without complying with the law.

Extended producer responsibility laws aim to provide incentives for producers to reduce the packaging materials they use and focus on packaging recyclability. Producers in Maine will soon be required to realize the impact of their packaging from cradle to grave (or reincarnation). The hope is that this realization will lead producers, who have control over the packaging they use, to choose more sustainable options. Similar laws in other jurisdictions have been shown to increase recycling rates and reduce packaging waste overall.

The Maine law will not go into effect for a couple of years, but a number of other states are considering similar laws. This growing popularity of these laws appears to be a direct result of increased consumer and investor awareness of the challenges associated with recycling and the true economic impact of unsustainable business practices. They could signal a larger shift towards a reallocation of how we deal with the full life cycle of the products we create and consume.