Publications Archives

Seven County Infrastructure Coalition v. Eagle County, Colorado, No. 23-975 – Decided May 29, 2025

Today, the Supreme Court held that agencies have broad discretion under NEPA in determining the scope and contents of an Environmental Impact Statement, and that agencies need not consider the indirect environmental effects of a project or factors outside the agency’s regulatory jurisdiction.

“The EIS need not address the effects of separate projects. In conducting [their] review, courts should afford substantial deference to the agency as to the scope and contents of the EIS.”

Justice Kavanaugh, writing for the Court

Background:

The National Environmental Policy Act (NEPA) requires federal agencies to consider the “reasonably foreseeable” environmental effects of permits and regulations that they issue. 42 U.S.C. § 4332(2)(C). Although NEPA does not impose substantive limits on what an agency may approve, it requires the agency to publish its analysis in an Environmental Impact Statement (EIS) that is then incorporated into the agency’s order and subject to judicial review under the Administrative Procedure Act.

The Seven County Infrastructure Coalition sought approval from the Surface Transportation Board (STB) to build a rail line in a remote part of Utah that would be used primarily to transport locally produced oil to the national rail network. After completing a 3,600-page EIS, the STB approved an 88-mile rail line. Environmental groups and Eagle County, Colorado challenged the STB’s approval, arguing that the STB made unreasonable analytical mistakes by failing to properly consider the project’s indirect environmental effects such as the effect on national rail-network traffic, the development of new oil wells in Utah, and the overall volume of oil processing on the Gulf Coast that could lead to more pollution and greenhouse gas emissions.

The STB defended its environmental analysis on the merits, and the Coalition intervened to argue that any analytical shortcomings were not actionable under NEPA because any indirect effects were not “reasonably foreseeable” insofar as they were neither proximate to the project nor within the STB’s regulatory authority. The D.C. Circuit ruled for the challengers, vacated the STB’s approval, and remanded for further environmental review. The Coalition appealed.

Issue:

Whether NEPA requires an agency to study environmental impacts beyond the proximate effects of the action over which the agency has regulatory authority.

Court’s Holding:

No. NEPA does not require an agency to study environmental impacts beyond either the proximate effects of the action or the scope of the agency’s regulatory authority.

What It Means:

Today’s decision will streamline federal permitting by limiting what agencies must consider in an EIS and limiting the ability of opponents to delay or defeat development projects through judicial challenges. The Court specifically noted that “NEPA has transformed from a modest procedural requirement into a blunt and haphazard tool employed by project opponents (who may not always be entirely motivated by concern for the environment) to try to stop or at least slow down new infrastructure and construction projects,” and expressed its goal of reversing this trend.
As the Court explained, “NEPA is a procedural cross-check, not a substantive roadblock.” NEPA helps agencies be informed about the significant environmental effects of their actions by requiring the agencies to prepare a report identifying and discussing those effects. An EIS must evaluate the significant environmental effects of the project at hand that are within the agency’s regulatory jurisdiction, but the inclusion of other issues will generally be in the agency’s discretion.
The Court emphasized that courts should afford “substantial deference to the agency” in reviewing the scope and contents of an EIS. The Court also noted that even a defective EIS does not require a court to vacate an approval of a project absent a reason to believe the mistake would lead the agency to disapprove the project.

The Court’s opinion is available here.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the U.S. Supreme Court. Please feel free to contact the following practice group leaders:

Appellate and Constitutional Law

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com	Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com	Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com

Related Practice: Environmental Litigation and Mass Tort

Stacie B. Fletcher
+1 202.887.3627
sfletcher@gibsondunn.com

Daniel W. Nelson
+1 202.887.3687
dnelson@gibsondunn.com

Related Practice: Land Use and Development

Mary G. Murphy
+1 415.393.8257
mgmurphy@gibsondunn.com

Benjamin Saltsman
+1 213.229.7480
bsaltsman@gibsondunn.com

This alert was prepared by partner Samuel Eckman and associate Aaron Gyde.

Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.

Speaking to Law360, partner Quinton C. Farrar has shared insights into how rising geopolitical tensions and trade uncertainty are reshaping private equity dealmaking strategies. “Tariff policies and the corresponding threats to global trade have made companies with even modest tariff exposure difficult to price,” he explained.

Quinton added that the recent market turbulence has prompted a more cautious and technical approach. “Deals that are actually getting done are often taking longer and involve significant structure.”

Partner Matt Donnelly recently shared insights with Tax Notes about the changes to the foreign-entity-of-concern rules in relation to clean energy tax credits in the budget bill passed by the U.S. House of Representatives — and the potential challenges these changes may pose for companies with international operations.

Current changes in regulations are transforming the business landscape—are you prepared? Please join us for a presentation that focuses on the latest developments in the ever-evolving area of ESG. As regulatory landscapes and investor expectations continue to adjust, companies should ensure that they are equipped to respond to the opportunities and challenges.

This 60-minute webcast provides valuable insights for companies assessing sustainability commitments and trying to determine how to best maneuver during these challenging times. We attempt to provide a strategic understanding of how to navigate regulatory and litigation complexities, as well as market expectations.

Key topics include:

ESG Outlook: Reporting and Disclosure Considerations
Assessing Greenwashing and Litigation Risk from Altering Sustainability Commitments in the US Market
European ESG Regulation: Cutting back the green deal?
Greenwashing Risks in Europe: Recent Developments

MCLE CREDIT INFORMATION:

This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.0 hour.

Gibson, Dunn & Crutcher LLP is authorized by the Solicitors Regulation Authority to provide in-house CPD training. This program is approved for CPD credit in the amount of 1.0 hour. Regulated by the Solicitors Regulation Authority (Number 324652).

Neither the Connecticut Judicial Branch nor the Commission on Minimum Continuing Legal Education approve or accredit CLE providers or activities. It is the opinion of this provider that this activity qualifies for up to 1 hour toward your annual CLE requirement in Connecticut, including 0 hour(s) of ethics/professionalism.

Application for approval is pending with the Colorado, Illinois, Texas, Virginia, and Washington State Bars.

PANELISTS:

Ferdinand Fromholzer is a partner in the Munich office of Gibson Dunn and a member of the firm’s corporate group. Ferdinand’s practice focuses on corporate law, in particular advising strategic and private equity investors on public and private M&A transactions. He also advises public companies on a wide range of legal issues, including disclosure requirements under capital market law, annual shareholders’ meetings, corporate structure measures and ESG aspects. He is also experienced in counseling on the duties and obligations of directors and officers, including in the context of compliance investigations.

Julia Lapitskaya is a partner in the New York office of Gibson Dunn. She is a member of the firm’s Securities Regulation and Corporate Governance Practice Group and co-chair of the ESG: Risk, Litigation and Reporting Practice Group. Julia’s practice focuses on SEC, NYSE/Nasdaq and Securities Exchange Act of 1934 compliance, securities and corporate governance disclosure issues, board and committee matters, corporate governance best practices, state corporate laws, the Dodd-Frank Act of 2010, SEC regulations, investor engagement and shareholder activism matters, proxy and annual meeting matters, sustainability and corporate responsibility matters, and executive compensation disclosure issues, including as part of initial public offerings and spin-off transactions. Julia is a frequent author and speaker on securities law and ESG issues and is a member of the Society for Corporate Governance.

Michael Murphy is a partner in Gibson, Dunn & Crutcher’s Washington, D.C. office. He is a leader of the firm’s ESG: Risk, Litigation, and Reporting practice area, and is a member of the firm’s Environmental Litigation and Mass Tort Practice Groups. Michael counsels clients on environmental and ESG issues related to corporate transactions and compliance. Michael advises clients in a variety of corporate, private equity, finance and real estate transactions. He is experienced in identifying environmental risks and negotiating transactional documents for buyers, sellers and investors of manufacturing, service, technology, aerospace, petroleum, energy, and financial industry clients. His litigation experience enables him to approach each environmental transactional issue with a broad perspective that takes into account all of his clients’ concerns. He advises clients on ESG and sustainability matters, including corporate disclosures, policies, reporting and integration issues.

Markus Rieder is a partner in the Munich office of Gibson Dunn and co-chair of the firm’s Transnational Litigation practice. He is also a member of the firm’s Class Actions, Securities Litigation and International Arbitration Groups. Markus focuses his practice on complex commercial litigation, both domestic and cross-border, and national and international arbitration, as well as on compliance and white-collar defense. He has substantial experience in the automotive, industrial and manufacturing sectors. He also advises related to the increased risks of ESG litigation, encompassing a variety of issues including climate and environmental protection matters, human rights and the new German Supply Chain Due Dilligence Act, and represents clients in major cutting-edge issues such as climate protection lawsuits.

Partner Eric Sloan spoke to Tax Notes about a last-minute change in the tax bill passed recently by the U.S. House of Representatives, which clarifies whether partnership rules on disguised sales and disguised fees for services are self-executing. While unexpected, Eric noted that the change may have limited practical impact.

“The subchapter K crowd has essentially practiced as if the [section 707] rules were operative in the absence of regulations for a long time, largely because we have all believed that a court would use one of many routes to reach the same result, even if a court found the code provision not to be self-executing,” he told the publication.

Eric is a Co-Chair of our firm’s Tax Practice Group.

During the week of May 19, 2025, the Texas Legislature passed two sets of amendments to the Texas Business Organizations Code through SB 1057 and SB 2411. These amendments allow certain corporations to impose higher thresholds for shareholder proposals, expand exculpation to officers of the corporation and streamline the approval and administration of major business transactions. These changes will become effective on September 1, 2025.

Overview

During the week of May 19, 2025, two sets of amendments to the Texas Business Organizations Code (TBOC) passed the Texas Legislature. These amendments are in addition to the significant changes made by SB 29 that became effective on May 14, 2025. (See Gibson Dunn’s client alert summarizing SB 29 here.) On May 19, 2025, the Governor of Texas signed into law SB 1057, which allows certain publicly traded corporations to implement limitations on shareholder proposals. On May 27, 2025, the Governor of Texas signed into law SB 2411, which expands exculpation to include officers and streamlines the approval and administration of business transactions such as mergers and conversions.

SB 1057’s Key Changes to the TBOC

Limitations on Shareholder Proposals

SB 1057 allows certain corporations to implement significantly higher requirements for shareholder proposals. The amended provisions of the TBOC are available to any “nationally listed corporation,” which is defined as a corporation that has equity securities registered under Section 12(b) of the Securities Exchange Act of 1934; and that either

a. is admitted to listing on a national securities exchange and has its principal office in the State of Texas; or

b. is admitted to listing on a national securities exchange and is admitted to listing on a stock exchange that (i) has its principal office in the State of Texas and (b) has received certain approval from the Texas Securities Commissioner under a specified provision of the Government Code.

A corporation does not have to be incorporated in the State of Texas to take advantage of this new TBOC provision. Under Texas case law, the principal place of business of a corporation is the location where the corporation’s officers direct, control and coordinate the corporation’s activities.

To adopt these provisions, a nationally listed corporation must make an affirmative election by an amendment to one of the corporation’s governing documents. Under Texas law, governing documents include the certificate of formation and the bylaws. The corporation must provide notice to its shareholders of the proposed amendment to the governing documents in any proxy statement provided to shareholders in advance of adopting the amendment. The corporation must include in any proxy statement provided to shareholders specific information regarding how shareholders may submit a proposal on a matter requiring shareholder approval, including information about how the shareholders may contact one another for the purpose of satisfying the ownership requirements.

If a nationally listed corporation elects to adopt the new requirements, then, in order to submit a proposal requiring shareholder approval, a shareholder or a group of shareholders must hold a number of shares equal to at least $1 million in market value or 3% of the corporation’s voting shares. Voting shares of the corporation are defined as “shares that entitle the holders of the shares to vote on a proposal.” Ownership of the shares is determined as of the date the proposal is submitted, and the shareholders must hold such voting shares (i) for at least 6 months prior to the shareholder meeting and (ii) throughout the duration of the shareholder meeting. In addition, the shareholders must solicit holders of shares representing at least 67% of the voting power of shares entitled to vote on the proposal.

These provisions apply to any proposal on a matter to be submitted to shareholders for approval at a meeting of shareholders, other than director nominations and procedural resolutions that are “ancillary to the conduct of the meeting” (the scope of which is not defined). As such, the provisions apply not only to shareholder proposals under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (Rule 14a-8), but also to “floor” proposals submitted pursuant to a corporation’s advance notice provisions unless the proposal’s topic is “ancillary to the conduct of the meeting.”

Corporations evaluating adoption of SB 1057’s provisions should carefully evaluate views of their shareholders, enforceability under state corporate law for companies not incorporated in Texas, likely reactions by the proxy advisory firms, and how to implement the provisions, including whether to address procedural or interpretive aspects of the provisions.

Effective Date

These amendments will be effective on September 1, 2025.

SB 2411’s Key Changes to the TBOC

Expanded Exculpation of Officers

SB 2411 permits entities organized under the TBOC to limit or eliminate the liability of officers for monetary damages for an act or omission taken by the officer in his or her capacity as an officer of the entity, except that exculpation cannot be provided for breaches of loyalty, intentional misconduct, transactions in which the officer received an improper benefit, or statutory violations. SB 2411 provides exculpation to officers of the corporation to the same extent already permitted for directors. To adopt such exculpation provisions, an entity must make an affirmative election in their certificate of formation.

Streamlined Approval of Mergers, Major Transactions and Related Actions

SB 2411 expressly provides that the governing authority of an entity (e.g., board of directors of a corporation) may approve corporate documents such as plans, agreements and instruments in final or “substantially final form.” The amendments also provide that disclosure letters, schedules and other such similar documents to be delivered in connection with a plan of merger are not considered a part of the plan of merger unless expressly stated.

Under the amendments, a plan of merger may include provisions for appointing representatives to act on behalf of owners or members, with the sole exclusive authority to enforce or settle post-transaction rights. The appointment of such a representative may be made irrevocable and binding on the parties to such plan of merger upon approval of the plan.

In addition, the amendments provide that a plan of conversion can authorize any additional actions taken by the converted entity in connection with the plan of conversion without any approvals by the governing authority, owners or members of the converted entity other than approval of the plan of conversion itself.

Other

Among other things, SB 2411 also updates references in the TBOC to the new Texas Business Courts, includes certificate of formation content modernizations, and clarifies the use of ratifications and validations.

Effective Date

These amendments will be effective on September 1, 2025.

Conclusion

In summary, the recent amendments introduced by SB 1057 and SB 2411 represent the continual evolution of the TBOC. Collectively, these changes demonstrate the responsiveness and innovative approach Texas is taking to enhance the attractiveness of Texas as a jurisdiction for business formation and operation, while balancing the interests of boards of directors, managerial officials and shareholders. Gibson Dunn will continue to monitor and provide updates on any significant additional legal developments approved during the 89th Legislature’s regular session (which concludes on June 2, 2025) or that otherwise emerge.

Texas entities and publicly traded companies in Texas should review their board training presentations and organizational documents and any other applicable compliance policies against these changes and consider whether any updates may be appropriate. Gibson Dunn’s Texas lawyers are available to assist with any questions you may have regarding these developments.

The following Gibson Dunn lawyers prepared this update: Hillary Holmes, Gerry Spedale, Julia Lapitskaya, Ronald Mueller, and Jason Ferrari.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. To learn more, please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Securities Regulation & Corporate Governance practice group, or the authors:

Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)

Gerry Spedale – Houston (+1 346.718.6888, gspedale@gibsondunn.com)

Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)

Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)

Jason Ferrari – Houston (+1 346.718.6736, jferrari@gibsondunn.com)

The do-over followed the Court’s separate conclusion that the board’s decision to reduce its size while in the shadow of a proxy fight was a breach of fiduciary duty.

The Delaware Court of Chancery recently concluded that a board properly rejected activists’ non-compliant director nomination notice, but nevertheless permitted the activists a rare second attempt at complying with the company’s advance notice bylaw. Applying Unocal and Blasius in a post-trial memorandum opinion, the do-over followed the Court’s separate conclusion that the board’s decision to reduce its size while in the shadow of a proxy fight was a breach of fiduciary duty.

Background

On May 21, 2025, Vice Chancellor Bonnie W. David issued a decision in Vejseli v. Duffy, 2025 WL 1452842 (Del. Ch. May 21, 2025), invalidating a board resolution that reduced the size of the board and permitting activists a second attempt at complying with an advance notice bylaw in nominating two new directors. The Court in this decision reaffirmed the enforcement of advance notice bylaws but, using its discretion as a court of equity, nevertheless provided a second chance at complying with the advance notice bylaw here due to the board’s own actions, which were not taken on a “clear day” and thus were a breach of the board’s fiduciary duties.

The opinion describes the facts as follows. In January 2024, digital currency mining assets of a company in Chapter 11 proceedings were spun off to a newly formed entity, Ionic Digital, Inc. (the “Company”), and many creditors became stockholders of the Company. The Company experienced significant management and director turnover, and a subset of stockholders became frustrated with the Company’s failure to publicly list its shares and what they considered other management failures. These activists aligned themselves with non-stockholder third parties whom the Company had previously passed over for arguably lucrative business opportunities. Those activists and third-party entities attempted to initiate a proxy contest at the Company’s first annual meeting of stockholders and install two new directors.

The Company’s board consisted of six seats (four directors and two vacancies), divided into three even classes, each standing for election every three years. Class I, consisting of one director and one vacancy, was up for re-election at the upcoming annual meeting of stockholders. In advance of the annual meeting, however, the Company’s board reduced its size from six directors to five, and, as a result, eliminated one of the two seats (which was vacant up until this point) that otherwise was going to be up for election. Without disclosing the board size reduction, the board announced the annual meeting date, triggering a 10-day window for submissions of nominations or other proposals of business under the company’s advance notice bylaw. The activists submitted nominations for the two board seats they believed were still up for election. In their nomination notice, however, the activists failed to disclose all existing agreements between them and the third-party entities with which they had partnered. After the nomination deadline passed, the board disclosed the board reduction and rejected the nomination notice based on the activists’ failure to include these agreements. The activists filed suit, alleging, among other things, that the directors had breached their fiduciary duties by reducing the board size and rejecting the nomination notice. In the meantime, the company postponed its annual meeting of stockholders until thirty days after the Court ruled in this action.

The Board Reduction

The Court first concluded that the board’s decision to reduce the board size was a breach of the board’s fiduciary duties. In reaching its decision, the Court considered the board’s actions under the enhanced scrutiny standard of review under Unocal, with a focus on election interference under Blasius, which considers whether (1) the board faced a “real and not pretextual” threat “to an important corporate interest or to the achievement of a significant corporate benefit,” and (2) the board’s response to the threat was reasonable in relation to the threat posed and was not preclusive or coercive to the stockholder franchise. The Court applied enhanced scrutiny because the resolution “interfere[d] with the election of directors,” and because the resolution was not adopted “on a ‘clear day,’” but rather as a defensive measure against the impending proxy contest.

In doing so, the Court noted that the most credible explanation offered at trial for the board reduction was that the board sought to ensure that “the Board, rather than the stockholders, could later identify better candidates,” which was “not a legitimate corporate purpose.” The Court also found that (1) the resolution was not necessary to accomplish the objectives of “cost savings and avoiding deadlock” that the board asserted post hoc as the reasons for the resolution, and (2) the board reduction was preclusive, because by eliminating a seat, the board made it impossible for stockholders to elect directors to that position, and therefore imposed its own favored outcome on the stockholders.

The Advance Notice Bylaw

The Court also held that the board properly rejected the nomination notice. First, the Court found that the activists failed to comply with the advance notice bylaw provision requiring “copies of all written agreements, contracts, arrangements, understanding, plans or proposals relating to” “[a]ny change in the present board of directors or management . . . , including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board” by not attaching the agreements between the activists and third-party entities and, more importantly, not even disclosing the existence of some of those agreements. The agreements included, among others, a solicitation agreement—described by but not attached to the nomination notice—for “the purpose of (i) supporting the [n]ominating [s]tockholders in their efforts to achieve the election of the persons they have nominated (at the [n]ominating [s]tockholders’ sole discretion) to the Board . . . at the 2025 [A]nnual [M]eeting . . . of [the Company.]” The Court concluded there are legitimate reasons why a board would want to know whether a nomination was part of a broader scheme relating to the governance, management, or control of the Company and such information was important to stockholders in deciding which director candidates to support. While the Court cited precedent suggesting that information regarding terminated agreements could be important, the Court did not definitively resolve whether such agreements needed to be disclosed because some provisions in the activists’ arrangements survived termination.

Second, the Court concluded the directors did not breach their fiduciary duties by rejecting the nomination notice. The Court analyzed the fairness of their decision under the enhanced scrutiny standard of review. The Court determined that the board rejected the notice to advance the “important corporate interest[]” of “preserving an informed stockholder vote,” and that the board’s enforcement of the advance notice bylaw was both reasonable and not preclusive because “[e]nforcing the Advance Notice Bylaw is a reasonable means of ensuring that stockholders receive material information about director nominees” and “did not preclude [the activists] from submitting a compliant Nomination Notice.” The Court also rejected the activists’ argument that the board’s failure to provide an opportunity to supplement the nomination notice before the nomination window closed was inequitable and found that such action did not amount to “manipulative conduct,” given that the window closed only two days after the activists submitted the nomination notice, noting that “Plaintiffs could have complied with the Advance Notice Bylaw’s disclosure requirements, but they did not.”

Despite concluding the board properly and fairly rejected the activists’ nomination notice, as a consequence of the board’s breach of fiduciary duty in reducing the board size, the Court issued an injunction “directing the Board to reopen the nomination window under the Advance Notice Bylaw to allow the Board, Plaintiffs, and any other the Company stockholder to submit director nominations.” In doing so, the Court stated that “[a] remedy that would permit the directors who breached their fiduciary duties to choose who will serve on the Board is no remedy at all.” The Court also noted that the “unusual facts of this case” necessitated this remedy because it was the board’s own wrongful conduct that required re-opening the nomination window, and the record did not support the board’s position that the activists intentionally concealed material information.

Takeaways

This decision reaffirms that the Delaware Court of Chancery applies enhanced scrutiny under Unocal with a focus on stockholder franchise concerns articulated in Blasius when evaluating claims that a board breached its fiduciary duties by taking defensive action that impacts the election of directors.
The Court reinforced that Delaware law permits a company to reject a non-complying nomination notice after the close of the nomination window where the activists’ submission did not provide the company sufficient time to do so before the deadline. If such rejection is challenged, however, a court may still examine a board’s motives in rejecting even a non-complying notice.
To avoid triggering enhanced scrutiny review, directors and advisors should ensure that any adjustment to board size is done on a clear day and for legitimate corporate interests, as documented by the record. This supports the notion that any board size decrease should (ideally) be done in connection with any director departure and that leaving a vacancy open for a period of time could lead to scrutiny if circumstances change in the future.
This case is a reminder that the Delaware Court of Chancery, as a court of equity, has broad discretion to fashion a remedy for breach of fiduciary duty. That principle is difficult to predict and plan around. It manifested here when, despite achieving practically complete victory with respect to the advance notice bylaw, the Company was compelled to give the activists another chance.
While the Court seemed to suggest that disclosure of recently terminated agreements would be appropriate, it also expressly acknowledged that it remains an open question whether an activists’ failure to disclose such agreements is sufficient to establish a violation of the advance notice bylaw at issue in this case. At minimum, disclosure is required where a material provision of such an agreement expressly survives termination.

The following Gibson Dunn lawyers prepared this update: Andrew Kaplan, Mark Mixon, and Justine Drohan.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following Securities Litigation, Mergers and Acquisitions, Private Equity, or Securities Regulation and Corporate Governance practice group leaders and members:

Securities Litigation:
Monica K. Loseman – Denver (+1 303.298.5784, mloseman@gibsondunn.com)
Brian M. Lutz – San Francisco (+1 415.393.8379, blutz@gibsondunn.com)
Jason J. Mendro – Washington, D.C. (+1 202.887.3726, jmendro@gibsondunn.com)
Mark H. Mixon, Jr. – New York (+1 212.351.2394, mmixon@gibsondunn.com)
Craig Varnen – Los Angeles (+1 213.229.7922, cvarnen@gibsondunn.com)

Mergers and Acquisitions:
Andrew Kaplan – New York (+1 212.351.4064, akaplan@gibsondunn.com)
Robert B. Little – Dallas (+1 214.698.3260, rlittle@gibsondunn.com)
Saee Muzumdar – New York (+1 212.351.3966, smuzumdar@gibsondunn.com)
George Sampas – New York (+1 212.351.6300, gsampas@gibsondunn.com)

Private Equity:
Richard J. Birns – New York (+1 212.351.4032, rbirns@gibsondunn.com)
Ari Lanin – Los Angeles (+1 310.552.8581, alanin@gibsondunn.com)
Michael Piazza – Houston (+1 346.718.6670, mpiazza@gibsondunn.com)
John M. Pollack – New York (+1 212.351.3903, jpollack@gibsondunn.com)

Securities Regulation and Corporate Governance:
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

Partners Stephanie Brooker and M. Kendall Day are contributing editors to the International Comparative Legal Guide – Anti-Money Laundering 2025 and co-authors of the expert analysis chapter “Anti-Money Laundering Laws and Regulations: Top Developments in Anti-Money Laundering Enforcement in 2024” with of counsel Ella Alves Capone and Sam Raymond. All four also co-authored the jurisdiction chapter “USA: Anti-Money Laundering 2025.”

The Guide includes four expert analysis chapters and 15 jurisdictions, and covers issues including criminal enforcement, regulatory and administrative enforcement, and requirements for financial institutions and other designated businesses.

Access the Guide
View the chapter “Anti-Money Laundering Laws and Regulations: Top Developments in Anti-Money Laundering Enforcement in 2024”
View the chapter “USA: Anti-Money Laundering 2025”
Read our Client Alert

Gibson Dunn’s Anti-Money Laundering (AML) practice is renowned for its expertise in advising financial institutions and businesses on compliance with AML and economic sanctions laws and regulations, and defending those same clients from AML and sanctions enforcement investigations.

From the Derivatives Practice Group: This week, both the CFTC and SEC were very active in issuing guidance and advisories and Commissioner Kristin N. Johnson announced that she intends to step down from the CFTC.

New Developments

CFTC Staff Issues Advisory on Market Volatility Controls. On May 22, the CFTC issued a staff advisory reminding designated contract markets and derivatives clearing organizations of certain core principles and regulatory obligations under the Commodity Exchange Act and CFTC regulations related to controls designed to address market volatility. [NEW]
Commissioner Kristin N. Johnson Makes Statement on Departure from CFTC. On May 21, Commissioner Kristin N. Johnson announced that she intends to step down from the Commission later this year. [NEW]
CFTC Staff Issues Interpretation Regarding Certain Cross-Border Definitions. On May 21, the CFTC issued an interpretative letter confirming the application of certain cross-border definitions. The letter pertains to SCB Limited, an offshore crypto proprietary trading entity affiliated with Susquehanna, and confirms that SCB is not and will not qualify as a US person for the purposes of CFTC regulations concerning FCMs, FBOTs, and SEFs even if it were to (1) rely on US-located persons for trading/algorithm development, (2) license technology from a US-based affiliate, and (3) use US servers for its trading. Specifically, the interpretative letter confirms that SCB Limited is not a “person located in the United States” for purposes of the “foreign futures or foreign options customer” definition in Commission regulation 30.1(c); is not a “participant located in the United States” for purposes of Commission regulation 48.2(c); is a “foreign located person” for purposes of Commission regulation 3.10(c)(1)(ii); and is not a “U.S. person” as defined by Commission regulation 23.23(a) and the Commission’s 2013 Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations. [NEW]
CFTC Releases Procedures on Registered Non-U.S. Swap Entities Using Substituted Compliance. On May 20, the CFTC released procedures regarding CFTC-registered non-U.S. swap dealers or major swap participants relying on substituted compliance. The procedures establish how CFTC Divisions will address potential non-compliance with foreign law that has been found by the CFTC to be comparable in outcome to the Commodity Exchange Act or CFTC regulations pursuant to a substituted compliance order. [NEW]
SEC Names Katherine Reilly as Acting Inspector General. On May 19, the SEC announced the appointment of Katherine Reilly as the agency’s Acting Inspector General. Ms. Reilly is currently serving as a Deputy Inspector General at the SEC. She replaces Deborah Jeffrey, who has served as the SEC’s Inspector General since 2023 and is retiring. [NEW]
SEC’s Division of Trading and Markets Releases FAQ Relating to Crypto Asset Activities and Distributed Ledger Technology. On May 15, the SEC prepared responses to frequently asked questions relating to crypto asset activities and distributed ledger technology. The responses cover topics relating to broker-dealer financial responsibility and transfer agents. These responses represent the views of the staff of the Division of Trading and Markets. They are not a rule, regulation, or statement of the SEC. [NEW]
Commissioner Christy Goldsmith Romero Makes Statement on Departure from CFTC. On May 16, Commissioner Christy Goldsmith Romero announced that she intends to step down from the Commission and retire from federal service. Her final day at the Commission will be May 31.
Commissioner Summer K. Mersinger Makes Statement on Departure from CFTC. On May 14, Commissioner Mersinger announced that she intends to step down from her position as Commissioner at the CFTC at the end of the month, to pursue new opportunities.
CFTC Warns Public of Imposter Scam Targeting Fraud Victims. On May 14, the CFTC warned the public about a growing imposter scam involving individuals falsely claiming to represent the agency. According to the CFTC, scammers are contacting members of the public and claiming to represent the CFTC Office of Inspector General and promise to help financial fraud victims recover lost funds from foreign bank accounts. The CFTC Office of Inspector General stated that it will never contact individuals with offers to recover money lost to investment scams.
Acting Chairman Pham Makes Statement on Court Sanctions Against CFTC. On May 13, CFTC Acting Chairman Caroline D. Pham made a statement regarding the Federal District Court report and recommendations for sanctions against the CFTC for misconduct in CFTC v. Traders Global Group Inc, highlighting proactive efforts to overhaul the CFTC’s Division of Enforcement and reform culture and conduct, develop staff, and leverage expertise and reduce siloing.
CFTC Staff on Leave Pending Investigation. On May 5, pursuant to the President’s executive orders on lawful governance and accountability, the CFTC placed certain staff on administrative leave for potential violations of laws, government ethics requirements and professional rules of conduct. The CFTC stated it is committed to holding employees to the highest standards, as expected by American taxpayers. Investigations are currently ongoing into these matters and the CFTC has committed to provide updates as appropriate.

New Developments Outside the U.S.

ESMA Asks for Input on the Retail Investor Journey as Part of Simplification and Burden Reduction Efforts. On May 21, ESMA launched a Call for Evidence (“CfE”) on the retail investor journey under the Markets in Financial Instruments Directive 2014. The purpose of this CfE is to gather feedback from stakeholders to better understand how retail investors engage with investment services, and whether regulatory or non-regulatory barriers may be discouraging participation in capital markets. [NEW]
ESMA Delivers Technical Advice on Market Abuse and SME Growth Markets as Part of the Listing Act. On May 7, ESMA published its advice to the European Commission to support the Listing Act’s goals to simplify listing requirements, enhance access to public capital markets for EU companies, and improve market integrity. In relation to Market Abuse Regulation (“MAR”), the advice covers: protracted processes, identifying key moments for public disclosure; delayed public disclosure, listing situations where delays are not allowed; and Cross-Market Order Book Mechanism, indicating the methodology for the identification of trading venues with significant cross-border activity.
ESMA Consults on Rules for ESG Rating Providers. On May 2, ESMA published a Consultation Paper on draft Regulatory Technical Standards (“RTS”) under the Environmental, Social, and Governance (“ESG”) Rating Regulation. The draft RTS cover the following aspects that apply to ESG rating providers: the information that should be provided in the applications for authorization and recognition; the measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings; the information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings.

New Industry-Led Developments

ISDA Publishes ISDA SIMM® Methodology, Version 2.7+2412. On May 22, ISDA published updates to its Standard Initial Margin Model (“SIMM”) methodology that are based on the full recalibration of the model and marked the first SIMM version publication of the new semiannual calibration cycle in 2025. The effective date of July 12, 2025 means that ISDA SIMM users should use SIMM version 2.7+2412 to calculate the initial margin for close of business on Friday July 11, 2025 onwards. This means that the first day for exchange of initial margin calculated using SIMM version 2.7+2412 would be on Monday July 14, 2025. [NEW]
ISDA/SIFMA/SIFMA AMG Publish Joint Response to CFTC Request for Comment on 24-7 Trading. On May 21, ISDA, the Securities Industry and Financial Markets Association (“SIFMA”), and the SIFMA Asset Management Group (“SIFMA AMG”) jointly filed a comment letter in response to the CFTC’s request for comment on 24/7 trading and clearing. ISDA, SIFMA, and SIFMA AMG believe that the feasibility of both 24/7 trading and clearing needs to be evaluated holistically with an understanding of the interdependencies between market participants, trading venues, middleware and software providers, clearing systems, margining frameworks, payments systems, default mechanisms and adjacent markets. [NEW]
IOSCO Makes Statement on Combatting Online Harm and the Role of Platform Providers. On May 21, IOSCO reiterated its concern about risks associated with investment fraud orchestrated through online paid-for advertisements and user-generated content. IOSCO stated that regulators and platforms providers are strategically positioned to mitigate the potential investor harm arising from these risks and asks platform providers to enhance efforts, consistent with local law, aimed at reducing risk of pecuniary harm to investors, which also threatens public trust in the services provided by platform providers. [NEW]
IOSCO Releases Sustainable Bonds Report. On May 21, IOSCO published its Sustainable Bonds Report which identifies the key characteristics and trends tied to the sustainable bond market. IOSCO’s Report includes five key considerations which are designed to address market challenges, including enhancing investor protection, ensuring sustainable bond markets are operating in a fair and efficient way, and improving accessibility. [NEW]
IOSCO Publishes Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices. On May 19, IOSCO published the Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices, as part of the third wave of its Roadmap for Retail Investor Online Safety. The Finfluencers Final Report explores the evolving landscape of finfluencers, the associated potential benefits and risks, and the current regulatory responses across jurisdictions. [NEW]
IOSCO Concludes its 50th Annual Meeting. On May 15, IOSCO concluded its 50th Annual Meeting, which was hosted by the Qatar Financial Markets Authority (“QFMA”) in Doha. IOSCO welcomed near 500 participants over the course of three days, followed by the QFMA public conference. The IOSCO Annual Meeting brings all 130 member jurisdictions together to discuss the most relevant issues and risks with regard to global financial markets, and how to assist regulators in implementing standards through capacity building.
ISDA Publishes Paper Exploring Use of Generative AI to Extract and Digitize CSA Clauses. On May 15, ISDA published a whitepaper that shows generative artificial intelligence can be used to accurately and reliably extract, interpret and digitize key legal clauses from ISDA’s credit support annexes, showing how this technology could increase efficiency, cut costs and reduce risks in derivatives processes that have traditionally been highly manual and resource intensive.
ISDA Margin Survey Shows Leading Derivatives Firms Collected $1.5 Trillion of Margin at Year-end 2024. On May 14, ISDA published its latest annual margin survey, which shows that initial margin (“IM”) and variation margin collected by leading derivatives market participants for their non-cleared derivatives exposures increased by 6.4% to $1.5 trillion at the end of 2024. The 32 responding firms included all 20 phase-one entities (the largest derivatives dealers subject to regulatory IM requirements in the first implementation phase), five of the six phase-two firms and seven of the eight phase-three entities.
ISDA Extends Digital Regulatory Reporting to Support Revised Canadian Reporting Rules. On May 13, ISDA extended its Digital Regulatory Reporting solution to cover new reporting rules in Canada and has made it compatible with a trade reporting messaging format used for North America reporting to maximize the benefit of adoption by those firms subject to the rules. The revisions are being implemented by the Canadian Securities Administrators and are scheduled for implementation on July 25, 2025.
ISDA Publishes Governance Committee Proposal for CDS Determinations Committees. On May 8, ISDA published a proposal for a new governance committee for the CDS Determinations Committees (“DCs”), the first in a series of amendments to improve the structure of the DCs and maintain their integrity in changing economic and market conditions. The governance committee would be responsible for taking market feedback and adopting rule changes affecting the structure and operations of the DCs to ensure their long-term viability and meet market expectations for efficiency and transparency in credit event determinations.
ISDA Presents Proposed Charter for the Credit Derivatives Governance Committee. On May 8, ISDA presented the proposed Charter for the Credit Derivatives Governance Committee and accompanying DC Rule changes to implement. Pursuant to the announcement made in 2024, an ISDA working group formed from ISDA’s Credit Steering Committee has worked on producing the Governance Committee solution. ISDA views the Governance Committee as the first step in implementing the other recommended changes from the Linklaters’ report as part of an independent review on the composition, functioning, governance and membership of the DCs.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, Karin Thrasher, and Alice Wang.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Derivatives practice group, or the following practice leaders and authors:

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus, New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki, New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

This edition of Gibson Dunn’s Federal Circuit Update for April summarizes the current status of petitions pending before the Supreme Court and recent Federal Circuit decisions concerning provisional rights under 35 U.S.C. § 154(d), the Board’s findings regarding knowledge of a person of ordinary skill in the art, patent ineligibility under 35 U.S.C. § 101, and means-plus-function terms under 35 U.S.C. § 112 ¶ 6.

Federal Circuit News

Noteworthy Petitions for a Writ of Certiorari:

There were a few potentially impactful petitions filed before the Supreme Court in April 2025:

NexStep, Inc. v. Comcast Cable Communications, LLC (US No. 24-1137): The question presented is “Whether a patentee must in every case present ‘particularized testimony and linking argument’ to establish infringement under the doctrine of equivalents.” The response is due June 5, 2025.
Purdue Pharma L.P. v. Accord Healthcare, Inc. (US No. 24-1132): The question presented is “Whether, as this Court has held, the objective indicia of non-obviousness should be analyzed flexibly to combat hindsight bias or instead subject to the Federal Circuit’s rigid rules restricting the inquiry.” The response is due June 2, 2025.

We provide an update below of the petitions pending before the Supreme Court, which were summarized in our March 2025 update:

The Court will consider the petition in Converter Manufacturing, LLC v. Tekni-Plex, Inc. (US No. 24-866) at its May 22, 2025 conference.
The Court denied the petitions in Brumfield v. IBG LLC, et al. (US No. 24-764) and Celanese International Corp. v. International Trade Commission (US No. 24-635).

Upcoming Oral Argument Calendar

The list of upcoming arguments at the Federal Circuit is available on the court’s website.

Key Case Summaries (April 2025)

In re Forest, No. 23-1178 (Fed. Cir. April 3, 2025): Mr. Forest submitted a patent application titled “Apparatus for Selecting from a Touch Screen” on December 27, 2016. The application was rejected by the examiner in part under obviousness and nonstatutory double patenting grounds and affirmed by the Patent Trial and Appeal Board (Board), which Mr. Forest now appeals. The application claims priority to another application filed on March 27, 1995, meaning that if the 2016 application were to issue as a patent, it would have an expiration date in 2015. The United States Patent and Trademark Office (PTO) therefore contends that Mr. Forest has no personal stake in the appeal because he cannot be granted any enforceable rights by a patent grant with zero term. Mr. Forest argues that he would acquire “provisional rights” under 35 U.S.C. § 154(d) if the PTO issues him an expired patent.

The Federal Circuit (Chen, J., joined by Taranto and Schall, JJ.) dismissed the appeal. The Federal Circuit held that provisional rights, which are “provisional,” means they are “temporary” and must be replaced by the statutory exclusionary rights, which runs from the date of issuance to 20 years after the priority date. Thus, a patent is only granted exclusionary rights if it issues before its expiration date. Based on this, the Court reasoned that provisional rights must therefore precede exclusionary rights, which means that provisional rights can only be granted to a patent that issues with exclusionary rights. As a result, even if Mr. Forest were granted a patent on the 2016 application, it would not lead to a conferral of provisional rights, because the patent would have expired before it issued, meaning Mr. Forest would receive no exclusionary rights.

Sage Products, LLC v. Stewart, No. 23-1603, 23-1604 (Fed. Cir. Apr. 15, 2025): Sage owns two patents directed to a sterilized chlorhexidine product in a package, such as an applicator filled with an antiseptic composition for disinfecting skin. Becton, Dickinson and Co. (BD) petitioned for inter partes review (IPR) of certain claims of Sage’s patents and the Board concluded that the challenged claims were unpatentable in part because a person of skilled in the art would have found the prior art’s disclosure of “sterile applicators” taught the “sterilized chlorhexidine product” claimed.

The Federal Circuit (Stark, J., joined by Reyna, J. and Cunningham, J.) affirmed. The Court held that the Board’s finding that a person of skill in the art would have understood the term “sterile” as used in the prior art (a publication from the United Kingdom’s (UK) health agency) to meet the claim term “sterilized” under the Board’s construction was supported by substantial evidence. The Court found no reversible error in the Board’s finding that a skilled artisan would know about the differing regulatory requirements in the United States and the UK, including recognizing that satisfying the UK regulatory standards for “sterile” would satisfy the challenged claims’ requirements for “sterilized” items.

Recentive Analytics, Inc. v. Fox Corp., No. 23-2437 (Fed. Cir. April 18, 2025): Recentive owns several patents directed to methods for generating optimized television broadcast schedules and network maps using machine learning. Specifically, the patents aimed to improve television scheduling for live events and to allocate network content across different geographic areas. The claims described the use of machine learning to dynamically predict optimal scheduling and map allocation, allegedly proposing an innovative use of artificial intelligence (AI) in the broadcasting industry. Fox moved to dismiss on the grounds that the patent claims were ineligible under 35 U.S.C. §101, and the district court granted the motion. The court held that the claims were directed to abstract ideas of producing network maps and event schedules using generic mathematical techniques, and the claims lacked an inventive concept because they involved only routine applications of machine learning technology using generic and conventional computing devices.

The Federal Circuit (Dyk, J., joined by Prost and Goldberg (district judge sitting by designation), JJ.) affirmed. At Alice Step One, the Court held that the claims were directed to abstract ideas—specifically, the use of machine learning to television broadcast scheduling and network map allocation. At Alice Step Two, the Court held that the claims merely applied generic machine learning techniques to a new field, and that the use of conventional technology did not somehow transform the claimed abstract idea into a patent-eligible invention. The Court also noted that although machine learning is a rapidly advancing field, simply applying machine learning to specific tasks, without further innovation, does not satisfy the statutory requirements for patent eligibility.

Fintiv, Inc. v. PayPal Holdings, Inc., No. 23-2312 (Fed. Cir. Apr. 30, 2025): Fintiv sued PayPal for infringement of patents related to a cloud-based transaction system. During claim construction proceedings before the district court, PayPal argued that the term “payment handler” is a means-plus-function term subject to 35 U.S.C. § 112 ¶ 6 and was indefinite for failing to disclose adequate corresponding structure.

The Federal Circuit (Prost, J., joined by Taranto and Stark, JJ.) affirmed. The Court first determined that while the payment-handler terms did not use the word “means,” PayPal overcame the presumption that § 112 ¶ 6 does not apply because the payment-handler terms recite function without reciting sufficient structure for performing that function. The Court also agreed with the district court that “handler” alone did not provide sufficient structure. The Court then looked to whether there was corresponding structure disclosed in the specification or an algorithm to achieve the functionalities performed and concluded that there was not. The Court thus concluded the term was indefinite.

The following Gibson Dunn lawyers assisted in preparing this update: Blaine Evanson, Jaysen Chung, Audrey Yang, Al Suarez, and Michelle Zhu.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups, or the following authors:

Blaine H. Evanson – Orange County (+1 949.451.3805, bevanson@gibsondunn.com)
Audrey Yang – Dallas (+1 214.698.3215, ayang@gibsondunn.com)

Appellate and Constitutional Law:
Thomas H. Dupree Jr. – Washington, D.C. (+1 202.955.8547, tdupree@gibsondunn.com)
Allyson N. Ho – Dallas (+1 214.698.3233, aho@gibsondunn.com)
Julian W. Poon – Los Angeles (+ 213.229.7758, jpoon@gibsondunn.com)

Intellectual Property:
Kate Dominguez – New York (+1 212.351.2338, kdominguez@gibsondunn.com)
Josh Krevitt – New York (+1 212.351.4000, jkrevitt@gibsondunn.com)
Jane M. Love, Ph.D. – New York (+1 212.351.3922, jlove@gibsondunn.com)

Gibson Dunn announces release of the International Comparative Legal Guide – Anti- Money Laundering 2025

Gibson Dunn is pleased to announce with Global Legal Group the release of the International Comparative Legal Guide – Anti-Money Laundering 2025. Gibson Dunn partners Stephanie L. Brooker and M. Kendall Day are the Contributing Editors of the publication, which covers issues including criminal enforcement, regulatory and administrative enforcement, and requirements for financial institutions and other designated businesses. The Guide, comprised of 4 expert analysis chapters and 15 jurisdictions, is live and FREE to access HERE.

Ms. Brooker, Mr. Day, and of counsel Ella Capone and Sam Raymond jointly authored “Anti-Money Laundering Laws and Regulations Top Developments in Anti-Money Laundering Enforcement in 2024.”

In addition, Ms. Brooker, Mr. Day, Ms. Capone, and Mr. Raymond co-authored the jurisdiction chapter on “USA: Anti-Money Laundering 2025.”

You can view these informative and comprehensive chapters via the links below:

CLICK HERE to view Anti-Money Laundering Laws and Regulations Top Developments in Anti-Money Laundering Enforcement in 2024

CLICK HERE to view Anti-Money Laundering Laws and Regulations USA 2025

The following Gibson Dunn lawyers contributed to this publication: Stephanie Brooker, M. Kendall Day, Ella Capone, and Sam Raymond.

Gibson Dunn has deep experience with enforcement defense and compliance issues regarding the Bank Secrecy Act, AML laws, and sanctions laws and regulations.

About the Authors:

Stephanie Brooker, a partner in the Washington, D.C. office of Gibson Dunn, is Co-Chair of the firm’s Global White Collar Defense and Investigations, Anti-Money Laundering, and Financial Institutions Practice Groups. Stephanie served as a prosecutor at DOJ, including serving as Chief of the Asset Forfeiture and Money Laundering Section, investigating a broad range of white-collar and other federal criminal matters, and trying 32 criminal trials. She also served as the Director of the Enforcement Division and Chief of Staff at FinCEN, the lead U.S. anti-money laundering regulator and enforcement agency. Stephanie has been consistently recognized by Chambers USA for enforcement defense and BSA/AML compliance as an “excellent attorney,” who clients rely on for “important and complex” matters, and for providing “excellent service and terrific lawyering.” She has also been named a National Law Journal White Collar Trailblazer and a Global Investigations Review Top 100 Women in Investigations.

Kendall Day is a nationally recognized white-collar partner in the Washington, D.C. office of Gibson Dunn, where he is Co-Chair of Gibson Dunn’s Global Fintech and Digital Assets Practice Group, Co-Chair of the firm’s Financial Institutions Practice Group, co-leads the firm’s Anti-Money Laundering practice, and is a member of the White Collar Defense and Investigations and Crisis Management Practice Groups. Kendall is recognized as a leading White Collar Attorney in the District of Columbia by Chambers USA – America’s Leading Business Lawyers. Most recently, Kendall was recognized in Best Lawyers 2024 for white-collar criminal defense. Prior to joining Gibson Dunn, Kendall had a distinguished 15-year career as a white-collar prosecutor with DOJ, rising to the highest career position in DOJ’s Criminal Division as an Acting Deputy Assistant Attorney General (“DAAG”). As a DAAG, Kendall had responsibility for approximately 200 prosecutors and other professionals. Kendall also previously served as Chief and Principal Deputy Chief of the Money Laundering and Asset Recovery Section. In these various leadership positions, from 2013 until 2018, Kendall supervised investigations and prosecutions of many of the country’s most significant and high-profile cases involving allegations of corporate and financial misconduct. He also exercised nationwide supervisory authority over DOJ’s money laundering program, particularly any BSA and money-laundering charges, DPAs and non-prosecution agreements involving financial institutions.

Ella Alves Capone is Of Counsel in the Washington, D.C. office of Gibson Dunn, where she is a member of the White Collar Defense and Investigations, Fintech and Digital Assets, Financial Regulatory, International Trade Advisory and Enforcement, and Anti-Money Laundering practice groups. Her practice focuses on representing and advising multinational corporations and financial institutions in government and internal investigations and regulatory compliance matters involving Bank Secrecy Act, money laundering, sanctions, consumer protection, anti-corruption, fraud, and payments issues. She also regularly advises clients on the development and implementation of compliance programs and internal controls. Ella has been featured as a fintech “Rising Star” by Law360 and recognized for her White Collar Litigation and Investigations work in Lawdragon’s 500 X – The Next Generation publications. She has also been recognized by Super Lawyers as a White Collar Defense “Rising Star.”

Sam Raymond is Of Counsel in the New York office of Gibson Dunn and a member of the White Collar Defense and Investigations, Litigation, Anti-Money Laundering, Fintech and Digital Assets, and National Security Groups. As a former federal prosecutor, Sam has a broad-based government enforcement and investigations practice, with a specific focus on investigations and counseling related to anti-money laundering, the Bank Secrecy Act, and sanctions. Sam is an experienced investigator and trial lawyer. He served as an Assistant United States Attorney in the U.S. Attorney’s Office for the Southern District of New York from 2017 to 2024. In that role, he tried multiple cases to verdict and prosecuted a broad range of federal criminal violations, including as a lead prosecutor in one of the first cases ever charging individuals with violations of the Bank Secrecy Act.

Contact Information:

For assistance navigating these issues, please contact the the Gibson Dunn lawyer with whom you usually work, the leaders or members of the firm’s Anti-Money Laundering practice group, or the authors:

Stephanie Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)
M. Kendall Day – Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)
Ella Alves Capone – Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)
Sam Raymond – New York (+1 212.351.2499, sraymond@gibsondunn.com)

Partners Sanford Stark, Saul Mezei, and Terrell Ussing and associate Nicole Butze are the authors of the USA chapter of Lexology Panoramic’s Tax Controversy 2025 guide, which addresses key tax enforcement and controversy issues as well as recent developments and trends.

Partners Andrew Lance and James Hallowell shared their insights with Law360 on the complexities of religious real estate transactions in New York City. Drawing on their deep experience, they explained such deals must not only pass an extensive regulatory review but also demand an understanding of the missions and governance structures of the faith-based organizations involved.

Speaking to Thomson Reuters Regulatory Intelligence, partner Michelle Kirschner has supported the U.K. government’s plans to regulate the “Buy Now, Pay Later” (BNPL) sector and shift oversight to the Financial Conduct Authority (FCA). She noted that the 50-year-old Consumer Credit Act regime is long overdue for reform, particularly given evolving consumer behavior and technological change.

As the FCA prepares to consult on proposed rules, Michelle expects a more tailored approach. “Overall, it is likely that the new regime will feel familiar … but will be tailored to the specificities of the BNPL sector and should greatly increase the protections available to oftentimes the more vulnerable consumers.”

Michelle is Co-Chair of our Financial Regulatory Practice Group.

Frame-Wilson v. Amazon.com, Inc., No. 2:20-cv-00424 (W.D. Wa.) – Decided April 29, 2025

A court in the Western District of Washington has held that human error in coding a privileged document as non-privileged does not qualify as inadvertent production of privileged documents under Federal Rule of Evidence 502(b).

Background

Amazon.com, Inc. is the defendant in three putative antitrust class actions. Amazon has produced almost 14 million documents, with the help of some 160 document reviewers. After a dispute arose over Amazon’s privilege log, Amazon conducted a privilege re-review of over 100,000 documents. During the course of that review, a reviewer designated three documents as not privileged or neglected to redact privileged information.

The plaintiffs then moved for class certification. In their motion, they cited the three documents that had been marked not privileged or had been inadequately redacted. Amazon quickly sought to claw back the documents, asking the plaintiffs to destroy them and to refile the class-certification motion without citing them. The plaintiffs refused, arguing that Amazon had waived any claim of privilege by virtue of producing the documents.

Issue Presented

Is a waiver of privilege “intentional” under Federal Rule of Evidence 502 when a reviewer mistakenly codes a privileged document as not privileged?

Court’s Holding

Yes. Absent extenuating circumstances, such as a technical glitch, the production of a privileged document is necessarily deliberate, and privilege is therefore waived, whenever a document was reviewed and designated “not privileged,” even if the document was initially designated privileged and was downgraded by mistake. The Court reached this conclusion after determining that the parties’ standard discovery agreements were inadequate to trigger the benefits of Federal Rule of Evidence 502(d), which permit no-fault clawbacks and limit the scope of any waivers to one particular lawsuit.

What It Means

In complex cases, litigants often accidentally produce a handful of privileged documents and seek to claw them back. Because cases routinely involve millions of documents, mistakes are inevitable, and litigants generally rely on the protections afforded by discovery agreements based on Rule 502. But the court here rejected the possibility of human error, holding that the production of a document marked as non-privileged must mean that the party producing it intentionally waived any claim of privilege.
The district court’s rule would leave very little that would satisfy the “inadvertence” standard for avoiding a privilege waiver under Federal Rule of Evidence 502(b). The court limited the standard to cover little more than technical glitches and freak accidents, rather than simple human error.
Other courts might conclude that a litigant’s reaction to the use of privileged information has some bearing on whether the disclosure of that information was inadvertent. Here, Amazon immediately took steps to claw back its documents and has continued to pursue the issue even after the district court’s decision. On May 14, Amazon challenged that decision by filing a petition for a writ of mandamus from the Ninth Circuit, and on May 19, the U.S. Chamber of Commerce filed an amicus brief in support of Amazon’s position.
If the Ninth Circuit declines to review the district court’s decision, litigants would be well advised to devote even more resources to ensuring that no privileged documents are produced. It may not be enough, as it was not in this case, to rely on standard language invoking the protections of Federal Rule of Evidence 502(d), or on Federal Rule of Evidence 502(b)’s default protections against inadvertent disclosure.

The following Gibson Dunn lawyers prepared this update: Samuel Liversidge, Julian W. Poon, Daniel R. Adler, Matthew C. Parrott, and Brian W. Anderson.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Litigation practice group, or the following authors:

Samuel Liversidge – Los Angeles (+1 213.229.7420, sliversidge@gibsondunn.com)

Julian W. Poon – Los Angeles (+1 213.229.7758, jpoon@gibsondunn.com)

Interviewed by Law.com about the uncertainty surrounding transgender rights in the workplace now that portions of the Equal Employment Opportunity Commission’s anti-harassment guidance have been struck down by a Texas judge, Washington, D.C. partner Jason Schwartz noted that the real difficulty for employers is that “there is no clear statement of what the law is. I don’t think there will be until these issues percolate all the way up to the Supreme Court.”

Jason is Co-Chair of our Labor & Employment Practice Group.

Read the full article, “‘Pronoun Police’: New Uncertainty After EEOC Workplace Rules Struck Down,” in Law.com (subscription required).

The Bureau of Industry and Security has initiated the rescission of the AI Diffusion Framework and announced additional guidance, policies, and plans to introduce a replacement set of rules regulating AI models and advanced computing technologies, with a continued focus on China.

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) ofﬁcially announced last week that it is rescinding the AI Diffusion Framework (the Framework) issued in the closing days of the Biden administration,[1] and will be replacing the rule with a “stronger but simpler” framework in the future.[2]

At the same time, BIS released a trio of guidance and policy statements which significantly expand the risks for companies using products made with advanced chips made by companies physically present in, headquartered in, or that are a subsidiary of a parent located in, China (including Hong Kong and Macau), with a specific notice regarding certain advanced chips produced by Huawei. The releases also heighten diligence expectations for any company exporting, reexporting or transferring U.S. controlled advanced integrated circuits (ICs), including to or by Infrastructure as a Service (IaaS) providers, particularly to parties headquartered in countries subject to U.S. arms embargoes such as China (including Hong Kong and Macau).

Rescission of the Framework

As discussed in a prior client alert, the Framework, through a multi-part control structure, would have created additional rules to restrict “countries of concern” (i.e., countries listed in BIS Country Group D:5 as subject to a U.S. arms embargo, which include, among many others, Russian, Iran, Venezuela, and China (including Hong Kong and Macau)) from obtaining advanced U.S. and allied closed-weight AI models by broadly:

Expanding licensing requirements for the export of advanced ICs;
Imposing controls on frontier AI models; and
Closing a loophole that previously allowed persons in countries of concern rent access to computing power outside their countries.

A key aspect of the Framework was to create a three-tiered licensing policy with a more permissive structure allowing exports to and among countries whose export controls are aligned with the U.S., imposing an effective embargo against countries the U.S. perceives as threats, and detailing a conditional policy for all other countries yet to adopt certain safeguards against exports supporting the unchecked development of frontier AI models.

The rescission of the Framework now means that, until a new regulation is issued, there are no express controls on general purpose AI models, whether proprietary, published, or otherwise. Questions remain, however, as to whether AI models that are specially trained to provide users with design, development, or other kinds of controlled technology are subject to export controls (and if so, how export controls apply to their development, deployment, and use).

AI Diffusion Replacement Rule

In its press release announcing the rescission of the Framework, BIS stated that it “will issue a replacement rule in the future.” Among other potential changes, the Trump administration has signaled an interest in reworking the tiered system of access to U.S. AI chips. Potential options include replacing the tiered system with bilateral agreements reached with counterparts on a country-by-country basis.[3]

While the Trump administration has explained that it is going back to the drawing board to replace the Framework, the national security drivers for the Framework controls remain, and we assess that any new regulations would retain some version of the following Framework elements:

License exceptions to support use and production by countries who adopt parallel export controls on AI chips and AI models to certain end uses and end users;
A validated end user (VEU) authorization system for data centers to facilitate the supply of advanced ICs to end users in destinations that do not raise national security or foreign policy concerns. (While the Universal VEU / National VEU categories no longer apply, the data-center focused VEU regulation from October 2024 remains intact);[4]
Enhanced customer diligence and reporting requirements for recipients of large quantities of AI chips; and
Controls on at least some proprietary AI models.

As such, we advise companies to prepare for such features when designing compliance systems and entering into new contract arrangements for counterparties that will entail the use of AI chips and AI-optimized data centers for the support of AI model training and inference.

Guidance and Policy Statements

BIS’s publication of three advisories on the same day it rescinded the Framework indicate that the Trump administration will continue an aggressive approach towards China-related export controls.

Heightened Risk of Export Control Violations from use of Advanced-Computing Integrated Circuits Designed or Made by Chinese Companies

In its Guidance on Application of General Prohibition 10 to People’s Republic of China Advanced-Computing Integrated Circuits (the IC Guidance), BIS substantially increases its compliance expectations for industry actors that use China-linked advanced-computing ICs meeting the parameters for control under Export Control Classification Number (ECCN) 3A090 by creating a presumption that such dealings violate U.S. export controls. While the warning extends to cover chips that have been developed or produced by companies located in, headquartered in, or whose ultimate parent company is headquartered in any country included in BIS Country Group D:5, BIS focuses its guidance primarily on China and specifically calls out specific Huawei-made chips, namely the Huawei Ascend 910B, Huawei Ascend 910C, and Huawei Ascend 910D.

BIS explains that its reference to Huawei chips is only illustrative, however, and states that there is a high probability that all chips meeting the parameters of 3A090 were likely designed or produced with U.S. software, technology, or equipment, and that a license therefore would have been required for various activities connected to companies in China or specifically restricted on the Entity List. Because BIS has not granted such licenses, BIS notes that there is a high probability that any such chips designed or produced by companies located in, headquartered in, or with an ultimate parent company headquartered in China were manufactured in violation of the EAR, and puts companies on notice that it will presume that General Prohibition 10 liability will extend to any further activity involving these chips.

General Prohibition 10 is a broad and temporally and geographically unbounded regulation that prohibits dealings on an item subject to the EAR “with knowledge [including a reason to know] that a violation of the EAR has occurred, is about to occur, or is intended to occur in connection with the item.” For example, in 2022, BIS listed 73 aircraft that had flown into Russia in violation of the EAR and noted that “any subsequent actions taken with regard to any of the listed aircraft, including, but not limited to, refueling, maintenance, repair, or the provision of spare parts or services,” are subject to General Prohibition 10.[5] In its press release, BIS then emphasized that any form of service to the listed aircraft likely constitutes a violation of U.S. export controls, and the potential for General Prohibition 10 liability created waves that hit not only direct service providers of aircraft – including aftermarket part manufacturers and distributors, maintenance organizations, airport operators, and refuelers – but also aircraft finance sector players such as insurers, lenders, and underwriters.

BIS’s IC Guidance goes a step beyond this precedent by creating a presumption that General Prohibition 10 restrictions apply to all China-linked ICs, and stating that the mere use of these chips could make one subject to enforcement actions. BIS stops short, at least for now, of stating that the use of AI models that were trained by China-linked companies using such ICs could be a General Prohibition 10 issue.

Heightened Risk of Export Control Violations from AI Chips and AI Models

BIS also used the occasion of its recission of the AI Framework recission to remind data center operators and IaaS service providers, among others that there are certain “catch-all” prohibitions on the use of AI chips for certain end uses and by certain end users. In its Policy Statement on Controls that May Apply to Advanced Computing Integrated Circuits and Other Commodities Used to Train AI Models (the Policy Statement), BIS warns of the heightened risk of prohibited transactions arising from dealings that involve WMD or military-intelligence end users and advanced ICs and related commodities (e.g., those classified under ECCNs 3A090.a, 4A090.a, as well as .z items in Categories 3, 4, and 5).

Specifically, (i) exports, re-exports, or transfers (in-country) of advanced computing ICs and commodities or (ii) providing “support” (as defined in 15 C.F.R. § 744.6(b)(6)) or performing any contract, service, or employment to assist the training of AI models may trigger a license requirement if the exporter, re-exporter, transferer, or service provider:

Has “knowledge” or a “reason to know” that the advanced computing ICs and commodities, support, or services will be used to conduct or assist the training of AI models for or on behalf of parties headquartered in D:5 countries (including China) or Macau, and
Has “knowledge” or a “reason to know” that the AI model will be used for WMD or military-intelligence use/user.

When read together with its Red Flag Guidance, discussed below, the BIS Policy Statement notifies exporters of its heightened end use and end user diligence expectations, both for companies supplying the IaaS providers with controlled ICs and for the IaaS providers themselves.

Red Flags and Diligence Actions

Finally, in its Industry Guidance to Prevent Diversion of Advanced Computing Integrated Circuits (the Red Flag Guidance), BIS provides exporters with transactional and behavioral red flags and suggested due diligence actions that are specific to exporters of advanced computing ICs.[6] The IC-related red flags focus on various suspicious behaviors concerning the customer’s address or business activities that are not consistent with the need for advanced computing ICs.

Notable, however, is BIS’s focus on IaaS providers and the diligence required to both supply IaaS providers with controlled ICs and for IaaS providers to use controlled ICs. To that end, the Red Flags Guidance provided:

Data Center /IaaS Red Flags:
- The data center to which the advanced ICs and/or commodities containing such ICs are being exported does not or cannot affirm it has the infrastructure (e.g., power/energy, cooling capacity, or physical space needed to run servers containing advanced ICs) to operate the advanced computing ICs and/or commodities that contain such ICs.
- The customer providing IaaS does not or cannot affirm that users of its services are not headquartered in the PRC, whether or not such customer is located inside or outside of China and Macau.
Data Center / IaaS Diligence Actions:
- The data center to which the advanced ICs and/or commodities containing such ICs are being exported does not or cannot affirm it has the infrastructure (e.g., power/energy, cooling capacity, or physical space needed to run servers containing advanced ICs) to operate the advanced computing ICs and/or commodities that contain such ICs.
- The customer providing IaaS does not or cannot affirm that users of its services are not headquartered in the PRC, whether or not such customer is located inside or outside of China and Macau.

Key Takeaways

Together with BIS’s intent to replace the AI Diffusion Framework with a “stronger but simpler” version, the three advisories make clear that despite the shift in political winds in D.C., the U.S. Government continues to remain concerned about the diversion of advanced ICs to Chinese end users and to certain kinds of end users and end uses. While BIS’s rescission of the Framework may appear at first to provide temporary relief for AI chip suppliers, distributors, and customers, BIS’s precedent-setting guidance on the use of Chinese AI Chips, and its heightened and elaborated due diligence expectations, especially for IaaS and associated service providers, are regulatory in effect and lay the groundwork for aggressive BIS enforcement premised on General Prohibition 10 theories of liability.

Our team works daily with clients to develop the kinds of due diligence frameworks, contractual protections, and other compliance system tools to reflect BIS’s rapidly evolving guidance on AI chip exports, AI model development, and AI model use, and to advise on the kinds of safeguards investors, data center developers, and others should be looking to put place while the Trump administration works to replace the Framework with its own.

[1] U.S. Dep’t of Commerce, Press Release, Department of Commerce Announces Recission of Biden-Era Artificial Intelligence Diffusion Rule, Strengthens Chip-Related Export Controls (May 13, 2025), https://media.bis.gov/press-release/department-commerce-rescinds-biden-era-artificial-intelligence-diffusion-rule-strengthens-chip-related.

[2] Karen Freifeld, Trump Officials Eye Changes to Biden’s AI Chip Export Rule, Sources Say, Reuters (Apr. 29, 2025), https://www.reuters.com/world/china/trump-officials-eye-changes-bidens-ai-chip-export-rule-sources-say-2025-04-29.

[3] For example, the recent announcement of a “US-UAE AI Acceleration Partnership” framework and agreements to expand the UAE’s access to U.S. AI chips may reflect President Trump’s preference for bilateral agreements in the AI sector. See Gram Slattery, et. al., Trump Announces $200 Billion in Deals During UAE Visit, AI Agreement Signed, Reuters (May 15, 2025), https://www.reuters.com/world/middle-east/trump-heads-uae-it-hopes-advance-ai-ambitions-2025-05-15.

[4] BIS, Expansion of Validated End User Authorization: Data Center Validated End User Authorization, 89 Fed. Reg. 80080 (Oct. 2, 2024) (to be codified at 15 C.F.R. pt. 748), https://www.govinfo.gov/content/pkg/FR-2024-10-02/pdf/2024-22587.pdf.

[5] BIS, Commerce Department Updates List of Aircraft Exported to Russia in Apparent Violation of U.S. Export Controls (Mar. 30, 2022), https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/2942-2022-03-30-bis-list-of-aircraft-violating-the-ear-press-release-final/file.

[6] See also Supplement No. 3 to Part 732, Title 15 (providing sector non-specific red flags).

The following Gibson Dunn lawyers prepared this update: David Wolber, Christopher T. Timura, Matthew S. Axelrod, Dharak Bhavsar, Mason Gauch, and Zach Kosbie.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Sanctions & Export Enforcement, International Trade Advisory & Enforcement, and National Security practice groups:

United States:
Matthew S. Axelrod – Co-Chair, Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
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David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
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Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)
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Mason Gauch – Houston (+1 346.718.6723, mgauch@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
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Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)

Asia:
Kelly Austin – Denver/Hong Kong (+1 303.298.5980, kaustin@gibsondunn.com)
David A. Wolber – Hong Kong (+852 2214 3764, dwolber@gibsondunn.com)
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Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)

Europe:
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Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
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Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)

Writing in The M&A Lawyer (May 2025), Gibson Dunn partners Michael K. Murphy and Rachel Levick and associates Taylor C. Amato and Phil Washburn note that EH&S considerations can pose material issues and risks in M&A transactions, and that early identification of these issues can assist buyers in evaluating problems and structuring solutions. “It is therefore important to engage environmental subject matter experts early in the deal process,” they say, “so they can effectively evaluate compliance with applicable EH&S laws and assess liability risks.”

Read “Top Environmental, Health and Safety Issues to Think About in M&A Deals” in The M&A Lawyer [PDF].

We are pleased to provide you with Gibson Dunn’s ESG update covering the following key developments during April 2025. Please click on the links below for further details.

I. GLOBAL

International Maritime Organization (IMO) announces deal to decarbonize global shipping

On April 11, 2025, the IMO, the United Nations agency responsible for developing global shipping standards, announced its approval of draft regulations setting a global fuel standard to reduce annual greenhouse gas (GHG) emissions and establishing a pricing system for above-threshold emitters. Sixty-three nations approved the framework, including EU member states, China, and the United Kingdom, while 16 nations opposed, 25 nations abstained, and the United States leaving negotiations prior to the vote. The United States subsequently warned of “reciprocal measures” to compensate for fees charged to U.S. ships and “other economic harm” resulting from the new regulations. The regulations are expected to be formally adopted in October 2025 and effective in 2027 and will apply to large ocean-going ships over 5,000 gross tonnage.

Institutional Shareholders Services (ISS) launches new sustainability bond rating

On April 3, 2025, ISS ESG launched a new sustainability bond rating to provide investors with a sustainability impact and risk assessment for bonds issued labeled as green, social, sustainability, or sustainability-linked. These new ratings will assess bonds in three categories: how they align with international standards and guidelines, an environmental and social impact assessment, and the issuer’s sustainable strategy.

Other highlights:

On April 28, 2025, the International Sustainability Standards Board (ISSB) published draft amendments to the IFRS S2 Climate-related Disclosures standard that would ease certain requirements related to the reporting of GHG emissions.
The Net Zero Banking Alliance provided new guidance to align all sector financing with a goal to limit global warming to well below 2°C above pre-industrial levels, up from the prior target of 1.5°C.
T. Rowe Price and T. Rowe Price Investment Management have both issued updated proxy voting guidelines for 2025 that soften their approach to director votes, disclosure of GHG emissions, dual-class stock, and shareholder proposals on political spending and lobbying.

II. UNITED KINGDOM

Prudential Regulatory Authority (PRA) publishes consultation on managing climate-related risk

On April 30, 2025, the PRA issued Consultation Paper CP10/25, proposing to replace Supervisory Statement 3/19 with an updated and more granular statement on managing climate-related financial risk. The draft statement would apply to UK banks, building societies, PRA-designated investment firms and insurers (but not branches). The draft statement sets outcome-focused expectations structured around five themes: (i) governance – boards will be expected to set firm-wide risk appetite for each material climate exposure, translating it into quantitative limits for every business line, and periodically reassessing it in light of evolving regulatory, technological, or scientific standards; (ii) risk management – firms should conduct periodic materiality assessments, develop quantitative metrics and integrate climate considerations into operational resilience frameworks; (iii) climate scenario analysis – models must cover all material risks, inform capital planning and be refreshed; (iv) data – firms should have strategic plans to close data gaps, deploy conservative proxies where needed and oversee external providers while building in-house capability; and (v) disclosure – alignment will shift from Taskforce for Climate-related Financial Disclosures to forthcoming UK Sustainability Reporting Standards. The expectations remain guidance, not rules, but supervisors will test implementation six months after finalisation. The consultation closes on July 30, 2025.

UK Government launches consultation into voluntary carbon and nature markets (VCNMs)

On April 17, 2025, the Department for Energy Security and Net Zero published a consultation paper seeking views on the implementation of its principles to ensure integrity within VCNMs, launched at COP 29 in November 2024. VCNMs allow entities and/or individuals to acquire credits that represent avoided or removed greenhouse gas emissions or measurable environmental improvement. The acquiring entity/individual can then utilize the credits to offset unavoidable emissions and/or reach its environmental targets. The six principles announced at COP 29 include: (i) the use of credits in addition to ambitious actions within value chains; (ii) the use of high integrity credits; (iii) the disclosure of credits in ESG-related reporting; (iv) the role of credits in the transition plan; (v) the accuracy of green claims; and (vi) domestic and international co-operation. The consultation closes on July 10, 2025.

UK Advertising Standards Authority (ASA) publishes guidance on biodegradable and compostable products

On April 30, 2025, the ASA issued guidance on products that claim to be biodegradable and/or compostable to reflect relevant changes introduced by the Digital Markets, Competition and Consumers Act 2024 and included the following: (i) ensure claims are genuine; (ii) do not exaggerate the biodegradable content of the product; (iii) do not omit information material to a product’s ability to biodegrade or compost; and (iv) ensure absolute environmental claims apply to the product’s full lifecycle. In the event of an investigation, marketers should ensure that they hold sufficient evidence to substantiate claims about the extent to which their products are biodegradable and/or compostable.

Other highlights:

On April 24, 2025, His Majesty’s Revenue and Customs published the draft primary legislation for the carbon border adjustment mechanism for technical consultation.
On April 2, 2025, the Financial Conduct Authority shared feedback it received on its discussion paper on sustainability-related governance, incentives, and competence for regulated firms (DP23/1), confirming that it is not currently considering introducing new rules on the themes discussed in the discussion paper.
On April 11, 2025, the Lending Standards Board (LSB) announced its forthcoming Access to Financial Services for Ethnic Minority-led Businesses Code, committing participating firms to reduce barriers, enhance cultural understanding, apply evidence-based improvements, and share best practice, while the LSB monitors and reports progress.
On April 16, 2025, the International Association of Insurance Supervisors issued its final application paper on the supervision of climate-related risk, explaining how existing Insurance Core Principles should be applied to ensure insurers and supervisors adequately address the mounting consumer and commercial impacts of climate-driven events.

III. EUROPE

Discussions about Omnibus Simplifications in substance ongoing

On April 25, 2025, the rapporteur for the EU’s Omnibus Simplification Package in the European Parliament, Swedish MEP Jörgen Warborn, outlined his initial suggestions for amendments to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) during discussions in the European Parliament. Among other things, Warborn proposes to further raise the employee threshold for CSRD reporting requirements uniformly above the currently proposed 1,000 employees and backed the Commission’s proposal to remove the CSDDD’s civil liability (we have previously reported on the Commission’s proposal here). The proposal has sparked strong political divisions in the European Parliament, with some factions pushing to eliminate or delay reporting and due diligence obligations, while others seek to preserve the core objectives of the regulations. The rapporteur is expected to present his final proposal in early June of 2025.

In parallel, the EU’s Sustainability Reporting Board (SRB) has approved a work plan to simplify the European Sustainability Reporting Standards (ESRS). Among the currently envisaged revisions are the removal of less relevant data points for general purpose sustainability reporting (such as detailed biodiversity transition plans and certain non-employee-related disclosures), the downgrading of currently mandatory data points to voluntary reporting and of voluntary data points to guidance, prioritizing quantitative over narrative disclosures, and further alignment with global standards like ISSB. According to the work plan, the process will be continued with a shortened public consultation period this summer and is set to be finalized by October 31, 2025.

Updates and proposed amendments on European Deforestation Regulation (EUDR) published

On April 15, 2025, the European Commission published updates regarding the EUDR, including proposed amendments to Annex I of the EUDR as well as updated guidance and FAQs. The proposed amendments to Annex I include clarifications on in-scope commodities, such as cattle, cocoa, coffee, oil palm, rubber, soya, and wood. According to the proposal, the following products shall be excluded: products made from bamboo, rattan and waste materials. The updated guidelines and FAQs clarify certain topics, including regarding re-imported products, local law requirements in Art. 2 (40), trading and packaging of pallets, and qualifications as trader or operator.

CSRD / Omnibus “Stop-the-clock” directive transposition update

The focus currently is on postponing entry into force of the CSRD reporting requirements by transposing the EU’s Stop-the-clock Directive in member states that already completed the transposition process. While France already published its national “Stop-the-clock” law in the Journal officiel on May 2, 2025, Lithuania has published a proposal for a respective bill to delay reporting by two years. Bulgaria passed a law to delay implementation by one year, which came into effect two days after the Omnibus Simplification Package was officially disclosed.

An overview of the current transposition status of CSRD into national laws and the “Stop-the-clock” process under the Omnibus Simplification Package can be found here.

Other highlights:

The European Securities and Market Authority published a consultation paper on its new Regulatory Technical Standards under the EU’S ESG Rating Regulation.

IV. NORTH AMERICA

Business Roundtable (BRT) and U.S. Congress address proxy process reforms

On April 23, 2025, BRT published a report recommending reforms to the proxy process. The report argues that the lack of proxy process regulation has “allowed a small but vocal group of activist investors to exploit the proxy system for political purposes,” and includes recommendations aimed at depoliticizing the proxy process and refocusing it “on supporting shareholder interests and long-term value creation.” The report includes recommendations to (i) reform the Rule 14a-8 shareholder proposal process and (ii) create accountability for proxy advisory firms.

With regard to the Rule 14a-8 shareholder proposal process, BRT recommends Congress enact legislation that would preclude the inclusion of environmental, social and political shareholder proposals in companies’ proxy statements. If legislation is not enacted, BRT recommends the Securities and Exchange Commission (SEC) amend Rule 14a-8 to exclude environmental, social and political shareholder proposals, (ii) raise submission and resubmission thresholds, (iii) prevent Rule 14a-8 workarounds, including the use of voluntary exempt solicitation filings and universal proxy rules, (iv) restrict co-filers and representatives from being directly or indirectly involved in more than one proposal per company, and (v) amend the SEC review process to include an appeals process for no-action letter decisions and changing the timeline for no-action request responses.

Regarding proxy advisory firms, BRT recommends that Congress and the SEC (i) confirm the SEC’s authority to regulate proxy advisory firms and deem the activities of proxy advisory firms “solicitations” subject to SEC oversight, (ii) prohibit robovoting, (iii) require an economic analysis for proxy advisor recommendations that are contrary to a majority-independent board’s decision, (iv) prohibit conflicts of interests, and (v) limit the ability of proxy advisory firms to impose subjective preferences, including related to executive compensation decisions and prior shareholder support levels.

On May 6, 2025, the Interfaith Center on Corporate Responsibility (ICCR) and the Shareholder Rights Group (SRG) sent a letter to BRT, copying the Chairman of the SEC. The letter offered ICCR’s and SRG’s view that BRT’s recommendations would “insulate corporate management and boards, exposing companies and investors to increased risk during a highly volatile economic moment” and requested a dialogue with BRT to discuss the proxy process.

On April 29, 2025, the House Subcommittee on Capital Markets held a hearing to “examine the role and influence of proxy advisory firms . . . in shaping corporate governance and shareholder voting outcomes.” The memorandum related to the hearing included draft legislation proposing, among other things, required proxy advisory firm registration, prohibitions on robovoting for certain votes, and a requirement that the SEC study certain issues related to the shareholder proposal and proxy process.

Canadian regulator halts mandatory climate reporting requirements

On April 23, 2025, the Canadian Securities Administrators (CSA) announced a pause of its work developing new mandatory climate-related disclosure requirements and diversity-related disclosure rule amendments. The CSA explained the pauses were driven by the desire to support Canadian markets as they adapt to recent U.S. and global developments and resulting uncertainty and competitiveness concerns. The CSA emphasized, though, that Canadian securities laws already require disclosure of any material climate-related risks under existing regulations and that companies are encouraged to voluntarily report under the Canadian Sustainability Standards Board standards that were issued in December 2024.

Eighth Circuit issues abeyance in SEC climate litigation

After the SEC withdrew from its defense of the climate disclosure rules, 18 states filed a motion to hold the case in abeyance until the SEC takes action to amend or rescind the rules, as discussed in our March 2025 alert. On April 24, 2025, the Eighth Circuit granted the states’ motion and directed the SEC to file a report within 90 days advising whether the SEC intends to review or reconsider the rules.

President Trump issues executive order focused on state laws and regulations addressing climate and ESG

On April 8, 2025, President Donald Trump issued an executive order, “Protecting American Energy from State Overreach,” directing the U.S. Attorney General (AG) to investigate and identify all state and local laws and regulations that burden the “identification, development, siting, production, or use of domestic energy resources” that may be unconstitutional or preempted by federal law and to take “all appropriate action” to stop the enforcement of such laws. Under the order, the AG is required to prioritize laws that address climate change, environmental justice, carbon or GHG emissions, carbon penalties or taxes, and ESG initiatives. Within 60 days of the order, the AG is required to submit a report to the President detailing the actions taken and recommending additional presidential or legislative actions as necessary. The executive order highlights laws in New York and Vermont seeking retroactive payments for GHG emissions and California’s cap and trade framework as examples of laws that may be beyond states’ constitutional or statutory authorities.

Class-action plaintiffs attack sustainability claims by paper-goods companies

Two class-action lawsuits were filed recently in federal court against Amazon and Proctor & Gamble, alleging “greenwashing” claims based on each company’s statements about their paper products such as toilet paper. See Ramos et al. v. Amazon.com, Inc. (W.D. Wash. Case No. 2:25-cv-00465); Melissa Lowry, et al. v. Proctor & Gamble Company (W.D. Wash. 2:25-cv-00108). The complaints allege that, notwithstanding these companies’ advertised partnerships with groups like Forest Stewardship Council, production of their products leads to deforestation, and thus violates the FTC’s Green Guides and various state consumer-protection laws.

Both cases remain in their early stages. But they represent a new front in the ongoing trend of false-advertising litigation based on sustainability advertising claims, in which class action plaintiffs have already targeted multiple companies based on sustainability claims relating to plastics, emissions reductions, and supply-chain initiatives.

Other highlights:

On April 21, 2025, the Chamber of Commerce sent a letter asking the Trump Administration to urge the EU to exempt U.S. companies from the Corporate Sustainability Due Diligence Directive, which the letter asserts is overly prescriptive and in conflict with U.S. federal and state law.
As discussed in our recent client alert, on April 21, 2025, Paul Atkins was sworn into office as the 34th Chairman of the SEC.
On April 11, 2025, the SEC approved the launch of the Green Impact Exchange (GIX), a sustainability-focused stock market in the United States.
On April 4, 2025, the U.S. Department of Justice (DOJ) announced that it had terminated a settlement between the DOJ, the U.S. Department of Health and Human Services, and the Alabama Department of Public Health regarding sanitation risks in an Alabama county arising from inadequate water infrastructure, citing the termination as “another step . . . to eradicate illegal DEI preferences and environmental justice across the government and in the private sector.”

In case you missed it…

The Gibson Dunn DEI Task Force has published its updates for April summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion.

A collection of our analyses of the legal and industry impacts from the presidential transition is available here.

V. APAC

South Korea Financial Services Commission (FSC) delays ESG mandatory reporting

On April 23, 2025, the FSC announced after the fifth meeting of the ESG Finance Promotion Task Force that its original plan to begin disclosures in 2025 for large companies listed on the Korea Composite Stock Price Index will be postponed to post-2026, with possible further delays. The FSC explained that the delay to the ESG disclosure roadmap is in response to the evolving global regulatory landscape and increasing pressure for harmonization and highlighted recent moves by global regulators to ease ESG requirements. The Task Force also reviewed other key aspects of the reporting framework, including disclosures on consolidated financial statements, excluding non-material subsidiaries and a proposal to defer Scope 3 emissions reporting due to its complexity and costs involved in tracking the emissions.

Securities and Exchange Board of India (SEBI) issues new guidelines for ESG ratings

On April 22, 2025, the SEBI issued new guidelines that provided flexibility in ESG rating withdrawals, streamlined disclosure requirements, and offered relief to newer ESG ratings providers. Under these new guidelines, ESG ratings providers may withdraw a rating on a company if their business responsibility or sustainability reports are not available. Additionally, a ratings provider may also withdraw the rating if there are no subscribers for the rating. These new guidelines follow a statement made earlier this month by SEBI’s new chief, Tuhin Kanta Pandey, arguing that the ESG disclosures were too onerous.

China issues its first sovereign green bond

On April 2, 2025, China’s Ministry of Finance (MOF) issued a sovereign green bond on the London Stock Exchange, making this China’s first green bond and the first bond to be listed on an international market. The MOF originally announced its intention to enter the green bond market in January 2025. The bond has raised $824 million USD ($6 billion RMB). Proceeds from the bonds will be used to support projects and initiatives aimed at achieving environmental objectives. These include climate change mitigation, adapting to utilizing natural resources, and biodiversity conservation.

Other highlights:

The Taipei Exchange will launch a green securities certification system in 2026 to encourage enterprises to engage in green and sustainable economic activities.
The Philippine Department of Finance announced its intention to expand the role of the Inter-Agency Technical Working Group on Sustainable Finance.

The following Gibson Dunn lawyers prepared this update: Lauren Assaf-Holmes, Carla Baum, Susy Bullock, Mitasha Chandok, Martin Coombes, Mellissa Duru, Sam Fernandez*, Ferdinand Fromholzer, Saad Khan*, Michelle Kirschner, Julia Lapitskaya, Vanessa Ludwig, Babette Milz, Johannes Reul, Annie Saunders, and Meghan Sherley.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s ESG: Risk, Litigation, and Reporting practice group:

ESG: Risk, Litigation, and Reporting Leaders and Members:
Susy Bullock – London (+44 20 7071 4283, sbullock@gibsondunn.com)
Perlette M. Jura – Los Angeles (+1 213.229.7121, pjura@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
Michael K. Murphy – Washington, D.C. (+1 202.955.8238, mmurphy@gibsondunn.com)
Robert Spano – London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)

*Sam Fernandez and Saad Khan are trainee solicitors in London and not admitted to practice law.

In an article for Practical Law Oil & Gas, associate Graham Valenta examines gun-jumping violations in oil and gas acquisitions under the Hart-Scott-Rodino Act. He explains what constitutes a gun-jumping violation, analyzes the interim operating covenants in purchase and sale agreements that may raise issues, and outlines the strategies parties can use to minimize risk.