Gibson Dunn | Client Alert

Client Alert

April 13, 2021

New York State Legalizes Online Sports Wagering

Click for PDF The New York State Legislature, as part of its annual revenue bill, has authorized mobile sports wagering in New York, and the Governor is expected to sign that bill momentarily.  Through this landmark legislation, New Yorkers will soon be able to wager on sporting events online, just like millions of Americans who live in other states. Although New York has long delayed legalizing various forms of sports wagering due to provisions of its State Constitution, the new mobile sports wagering law should pass constitutional muster.  As Gibson Dunn attorneys argued in a New York Law Journal article last year,[1] the Legislature has the authority to authorize mobile sports betting, consistent with the State Constitution, so long as the servers that effectively place the bets are physically housed “at” the casinos duly authorized under the State Constitution.  Through the new sports wagering law, the Legislature adopted Gibson Dunn’s constitutional interpretation:  The new law “deem[s]” “[a]ll mobile sports wagering initiated in this state” as “tak[ing] place at the licensed gaming facility where the server . . . is located.”[2] I.  New York’s Online Sports Wagering Law Adopts Gibson Dunn’s Constitutional Interpretations and Will Likely Survive Constitutional Challenge In 2013, New York State voters approved a constitutional amendment to allow the Legislature to authorize “casino gambling” “at” up to seven casinos in the State.[3]  Prior to this constitutional amendment, legal gambling in New York was limited to state-run lotteries and betting on horse races, as well as gambling allowed on Native American tribal lands under federal law.  The same constitutional amendment also conferred on the Legislature broad authority to regulate wagering in the State. Pursuant to this constitutional authority, in 2019, the Legislature legalized “sports wagering” in New York State.[4]  The law then enacted provided that sports wagers may only be accepted “from persons physically present” “in a sports wagering lounge located at a casino.”[5]  In effect, the law prohibited online sports betting, since sports betters would only be permitted to make bets in person at an authorized casino. But as Gibson Dunn attorneys argued in a 2020 New York Law Journal op-ed,[6] the Legislature had the authority to go further under the 2013 constitutional amendment.  As our attorneys explained, the Legislature could enact legislation legalizing online sports wagering for two reasons.  First, sports betting fits within the Constitution’s language empowering the legislature to legalize “casino gambling.”  Specifically, when the constitutional amendment was passed and adopted, “casino gambling” would have been understood to include sports betting.  Second, online sports wagering can be conducted “at” an authorized casino.  As our attorneys explained, a wager is nothing more than a contract, and under well-established New York law, a contract is made where the contractual offer is accepted.  When a mobile sports bettor in Manhattan, for instance, asks to place a wager by entering her bet into an app or website, that request constitutes a contractual offer.  So long as the acceptance of the Manhattanite’s bet and ultimate placement of the wager occurs at a server located at a duly authorized casino, online sports betting can be deemed to have occurred “at” a casino. New York’s new online sports wagering law adopts Gibson Dunn’s constitutional reasoning.  The Legislature amended the 2019 law to state that “all sports wagers through electronic communication . . . are considered placed or otherwise made when and where received by the mobile sports wagering licensee on such mobile sports wagering licensee’s server . . . at a licensed gaming facility, regardless of the authorized sports bettor’s physical location within the state at the time the sports wager is placed.”[7]  The hypothetical sports bet requested by an app user in Manhattan, for example, therefore is deemed to occur “at” the casino that ultimately accepts and places the bet.  Additionally, the new law is based on a legislative declaration that “a sports wager that is made through virtual or electronic means from a location within New York state and is transmitted to and accepted by electronic equipment located at a licensed gaming facility . . . is a sports wager made at such licensed gaming facility.”[8]  Under well-established New York law, this legislative finding of fact will be considered presumptively valid, making it more likely that the law will survive a constitutional challenge.[9] With our attorneys’ reasoning codified into law, New Yorkers across the State will be able to access online sports wagering websites and apps, and the State will begin to reap the economic benefits (including tax revenue) of these lucrative transactions. II.  New York’s Detailed Regulatory Scheme for Mobile Sports Wagering The new law includes a number of provisions regulating mobile sports wagering.  It clarifies that online sports betting is legal as long as the bettor is “physically present” in New York at the time of the transaction.[10]  By requiring the casino, bettor, and servers all to be located in New York, the law limits mobile sports wagering to intrastate transactions.  This allows the mobile sports betting industry to avoid problems that may arise from conducting interstate transactions, which are subject to federal regulations, including the federal Wire Act’s prohibition on using wires to transmit “bets or wagers on any sporting event or contest” if the state where the bet initiates has banned sports betting.[11] The law‘s regulatory framework centers on the “platform providers” that will offer online sports betting services.  The law authorizes the State Gaming Commission to select two platform providers to become mobile sports wagering operators based on a competitive bidding process.[12]  The Commission may permit more than two mobile sports wagering operators if the Commission determines that doing so is “in the best interests of the state” and if the additional operators pay the same tax rate as the initial two licensees.[13]  Applicants must provide a range of information about their operations and predicted earnings.[14]  Additionally, all licensees must pay a one-time $25 million fee to the State, and the operator’s license will need to be renewed after ten years.[15] One primary factor in assessing licensing applications will likely be the amount of tax on revenues that mobile sports wagering operators are willing to pay.  The law sets the minimum revenue tax on mobile sports wagering operators at 12%—with casinos to pay a 10% revenue tax only on in-person sports wagering.[16]  But the bidding process appears designed to reach a higher rate of taxation, explicitly stating that the ultimate tax percentage platform providers will pay “shall be determined pursuant to a competitive bidding process.”[17]  This revenue tax will be paid at least “monthly.”[18] The new law requires any casino that offers mobile sports wagering, and each mobile sports wagering platform provider, to submit a detailed annual report to the Commission.  The report must include, among other information, the total amount of wagers placed and prizes awarded and the number of accounts established by sports bettors.[19]  New York law will also now empower the Commission to conduct financial audits of casinos and mobile sports wagering licensees and mandate that the Commission publish an annual report sharing the aggregate information that the Commission receives across all sports betting entities.[20] Mobile sports wagering operators must satisfy a number of compliance requirements as “condition[s] of licensure.”[21]  For instance, they must limit sports bettors to a single account, take steps to ensure “to a reasonable degree of certainty” that individuals are only placing bets from within New York State, prevent minors from participating in any sports wagering, and avoid running advertisements that mislead players about the odds of winning on a bet.[22] Conclusion New York’s mobile sports wagering law stands on solid constitutional ground.  By deeming online bets to take place at the location of the servers housed on casinos’ premises, the new law follows the proposal made by Gibson Dunn attorneys last year and is consistent with the New York State Constitution. ___________________    [1]   Mylan Denerstein, Akiva Shapiro & Lee R. Crain, The Constitutionality of Mobile Sports Betting in New York State, N.Y. L.J. (Jan. 31, 2020), https://www.law.com/newyorklawjournal/2020/01/31/ the-constitutionality-of-mobile-sports-wagering-in-new-york-state/.    [2]   N.Y. Rac. Pari-Mut. Wag. & Breed. Law (PML) § 1367–a(4)(i) (post-2021 amend.).    [3]   N.Y. Const. art. I, § 9.  These casinos authorized by the State Constitution do not include those that Native American tribes may operate pursuant to the Indian Gaming Regulatory Act, 18 U.S.C. §§ 1166–1168 and 25 U.S.C. §§ 2701 et seq.    [4]   See PML § 1367 (pre-2021 amend.).    [5]   Id. § 1367(3)(b), (d).    [6]   Denerstein, Shapiro & Crain, supra note 1.    [7]   PML § 1367–a(2)(d) (post-2021 amend.) (emphasis added).    [8]   S.B. S2509, 2021 Leg., 2021–2022 Sess., Part Y, § 2 (N.Y. 2021) (emphasis added).    [9]   See, e.g., All Am. Crane Serv. Inc. v. Omran, 58 A.D.3d 467, 467 (1st Dep’t 2009) (noting that laws are “presumed to be supported by facts known to the legislative body”).   [10]   PML § 1367(1)(b) (post-2021 amend.).   [11]   18 U.S.C. § 1084(a)–(b); cf. Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1483 (2018) (emphasizing that “federal policy” is to “respect the policy choices of the people of each State on the controversial issue of gambling”).   [12]   PML § 1367–a(7) (post-2021 amend.).   [13]   Id. § 1367–a(7)(d).   [14]   Id. § 1367–a(7)(b).   [15]   PML § 1367–a(2)(b), (3).   [16]   Id. § 1367(7).   [17]   Id.   [18]   Id. § 1367(7)–(8).   [19]   Id. § 1367(6).   [20]   Id. § 1367(6), (9).   [21]   Id. § 1367–a(4).   [22]   Id. The following Gibson Dunn lawyers prepared this client alert: Mylan Denerstein, Akiva Shapiro, Lee Crain, Michael Klurfeld, Grace Assaye* and Lavi Ben Dor*. Gibson, Dunn & Crutcher’s lawyers are available to assist with any questions you may have regarding these issues. Please feel free to contact the Gibson Dunn lawyer with whom you usually work, or the following authors in New York: Mylan L. Denerstein – Co-Chair, Public Policy Practice (+1 212-351-3850, mdenerstein@gibsondunn.com) Akiva Shapiro (+1 212-351-3830, ashapiro@gibsondunn.com) Lee R. Crain (+1 212-351-2454, lcrain@gibsondunn.com) Michael Klurfeld (+1 212-351-6370, mklurfeld@gibsondunn.com) *Ms. Assaye and Mr. Ben Dor are not yet admitted to practice law in New York and currently are practicing under the supervision of members of the New York Bar. © 2021 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
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April 9, 2021

Gibson Dunn | Europe | Data Protection – April 2021

Click for PDF Personal Data Watch Europe 03/30/2021 – European Commission | Republic of Korea’s adequacy The European Commission announced that it will proceed with launching a decision-making procedure with a view to having an adequacy decision adopted for the Republic of Korea as soon as possible in the coming months. This involves obtaining an opinion from the European Data Protection Board and the green light from a committee composed of representatives of the EU Member States. Once this procedure will be completed, the Commission will adopt the adequacy decision on the Republic of Korea. For further information: Press Release 03/25/2021 – European Parliament | Resolution | GDPR enforcement The European Parliament calls for improved implementation and enforcement of the GDPR. For further information: Press Release 03/22/2021 – European Union Agency for Cybersecurity | Technical Guideline The European Union Agency for Cybersecurity (ENISA) published a Technical Guidelines on Incident Reporting under the European Electronic Communications Code. For further information: ENISA website 03/19/2021 – European Union Agency for Cybersecurity | Report | Microsoft Exchange vulnerabilities The European Union Agency for Cybersecurity (ENISA) published a report relating to Microsoft Exchange vulnerabilities following active exploitation that has been observed on on-premises running Microsoft Exchange installations. For further information: Press Release; ENISA situational report 03/18/2021 – European Data Protection Supervisor | Formal Comments | European Health Union Package The European Data Protection Supervisor published its Formal Comments, dated 4 March 2021, on a package of three legislative proposals for a European Health Union. For further information: Press Release; EDPS Formal Comments 03/16/2021 – European Data Protection Board | Work Programme 2021/2022 The European Data Protection Board (EDPB) published its Work Programme for 2021/2022 in which it lists Guidelines and other documents it intends to adopt. The EDPB based its upcoming work on four pillars: (i) advancing harmonization and facilitating compliance; (ii) supporting effective enforcement and efficient cooperation between national supervisory authorities; (iii) a fundamental rights approach to new technologies; and (iv) the global dimension. For further information: EDPB Work Programme 2021/2022 03/11/2021 – European Data Protection Supervisor | Opinion | Proposal for a NIS 2.0 Directive The European Data Protection Supervisor (EDPS) published its Opinion 5/2021 on the Cybersecurity Strategy and the NIS 2.0 Directive. In its Opinion, the EDPS welcomes the “Proposal for a NIS 2.0 Directive” which aims to replace the existing Directive on security of network and information systems. For further information: Press Release; EDPS Opinion 5/2021 03/10/2021 – European Data Protection Board & European Data Protection Supervisor | Joint Opinion | Data Governance Act The European Data Protection Board and the European Data Protection Supervisor adopted a joint opinion on the proposal for a Data Governance Act (DGA). For further information: EDPB Press Release; EDPS Press Release; EDPB-EDPS Joint Opinion 03/2021 03/09/2021 – European Data Protection Board | Letter | Cloud services cybersecurity The European Data Protection Board sent a letter to the European Union Agency for Cybersecurity (ENISA) providing recommendations on the draft cloud services cybersecurity scheme. For further information: EDPB letter to ENISA 03/09/2021 – European Data Protection Board | Guidelines | Final versions After public consultation, the EDPB adopted the final versions of (i) Guidelines 01/2020 on processing personal data in the context of connected vehicles and mobility related applications and (ii) Guidelines 09/2020 on relevant and reasoned objection under GDPR. For further information: EDPB Guidelines 01/2020 adopted after public consultation; EDPB Guidelines 09/2020 adopted after public consultation 03/09/2021 – European Data Protection Board | Guidelines | Virtual Voice Assistants The EDPB adopted Guidelines on Virtual Voice Assistants which are opened for comments until 23 April 2021. For further information: EDPB Guidelines 02/2021 03/09/2021 – European Data Protection Board | Statement | ePrivacy Regulation The European Data Protection Board (EDPB) adopted a Statement on the ePrivacy Regulation. It welcomes the agreed negotiation mandate adopted by the Council on 10 February 2021, but noted that this Regulation should complement the GDPR and not de facto change it. For further information: EDPB Statement 03/2021 03/08/2021 – European Data Protection Supervisor | Opinion | Europol Regulation The European Data Protection Supervisor published its Opinion on the proposal for amendment of the Europol Regulation, which aims, in particular, to broaden the scope of Europol’s mandate. For further information: Press Release; EDPS Opinion 4/2021 Belgium 03/16/2021 – Belgian Supervisory Authority | Tools | Compliance The Belgian Supervisory Authority announced that it has released a set of new tools to help controllers, processors and Data Protection Officers with GDPR compliance. For further information: APD website (in French) Czech Republic 03/05/2021 – Czech Supervisory Authority | Statement | Covid-19 employees testing The Czech Supervisory Authority published a statement, updated on 26 March 2021, relating to the conditions under which employers can conduct data processing to comply with their obligation to test their employees with Covid-19. For further information: UOOU website (in Czech) France 03/22/2021 – French Supervisory Authority | Data breach notification Following the fire which took place in an OVH data center in Strasbourg, the French Supervisory Authority published a reminder on the obligations regarding data breach notifications. For further information: CNIL website (in French) 03/18/2021 – French Supervisory Authority | Q&A | Cookies The French Supervisory Authority published a Q&A with more than 30 questions addressing practical issues related to the implementation of its Guidelines and Recommendations on cookies. For further information: CNIL website (in French) 03/17/2021 – French Supervisory Authority | Investigation | Social network The French Supervisory Authority opened an investigation against an audio social network (Clubhouse). For further information: CNIL website (in French) 03/08/2021 – French Supervisory Authority | Evaluation program | Audience measurement tools The French Supervisory Authority (CNIL) is inviting any provider of audience measurement tools to submit its tool to the CNIL’s evaluation of the consent exemption before 30 June 2021. A specific form, with proper documentation, should be submitted to the CNIL. If the tool is “validated” by the CNIL, the tool will be referred to on the CNIL’s website and the provider will be able to display on the tool’s page that it has participated to the evaluation program proposed by the CNIL and is therefore in capacity to offer a tool exempted from the consent requirement in accordance with the guidelines issued by the CNIL. For further information: CNIL website (in French) 03/02/2021 – French Supervisory Authority | Focus for 2021 The French Supervisory Authority (CNIL) published its priority topics for the investigations that it will conduct in 2021. In particular, the CNIL will focus on: (i) cybersecurity of websites; (ii) security of health data; and (iii) compliance with the principles applicable to cookies and other trackers. For further information: CNIL website (in French) Germany 03/26/2021 – German Data Protection Conference | Opinion | COVID-19 contact tracing technologies The German Data Protection Conference (DSK) published an opinion regarding the importance of compliance with data protection principles when developing COVID-19 contact tracing solutions. In particular, the DSK criticized that there are no uniform, national regulations for digital contact tracing and emphasized that the principle of data minimization should always be adhered to when developing contact tracing technologies. For further information: DSK website (in German) 03/25/2021 – German Federal Commissioner for Data Protection and Freedom of Information | Annual report The German Federal Commissioner for Data Protection and Freedom of Information (BfDI) published the annual activity report for data protection and freedom of information highlighting the 2020 activities of the BfDI. For further information: BfDI website (in German) 03/16/2021 – German Federal Office for Information Security | Standard | Video conferencing The Federal Office for Information Security (BSI) launched, on 16 March 2021, a public consultation on a draft of minimum standards for securing video conferencing services. For further information: BSI website (in German) 03/10/2021 – Baden-Württemberg Supervisory Authority | Sanction | Accountability The Baden-Württemberg Supervisory Authority imposed a fine of €300,000 against a German soccer club for a breach of the accountability principle provided by the GDPR. For further information: Press Release (in German) Ireland 03/17/2021 – Irish Supervisory Authority | Correspondence | Schrems II The Irish Supervisory Authority (DPC) published its correspondence with the Committee on Civil Liberties, Justice and Home Affairs of the European Parliament (LIBE) in relation to two draft resolutions regarding the Schrems II case proceeding. For further information: DPC website Italy 03/11/2021 – Italian Supervisory Authority | Sanction | Adequate technical and organization measures The Italian Supervisory Authority (Garante) issued a fine of €350,000 against the City of Rome and a fine of €60,000 against its processor, for failing to implement adequate technical and organizational measures when processing personal data of citizens and carrying out the processing without appropriate legal basis. For further information: Garante decision against the City of Rome (in Italian); Garante decision against the City of Rome's processor (in Italian) 03/11/2021 – Italian Supervisory Authority | Sanction | Unlawful disclosure and DPO designation The Italian Supervisory Authority issued a fine of €75,000 against the Ministry of Economic Development for not appointing a data protection officer and having unlawfully disclosed on its website the resumes of more than 5,000 individuals. For further information: Garante website (in Italian) 03/01/2021 – Italian Supervisory Authority | Statement | Covid-19 vaccination pass The Italian Supervisory Authority announced that, in the absence of a legislative framework, the use in any form, by public or private entities providing services to the public, of apps or passes intended to distinguish vaccinated citizens from unavaccinated citizens against Covid-19 is to be considered illegitimate. For further information: Garante website (in Italian) Netherlands 03/31/2021 – Dutch Supervisory Authority | Sanction | Data breach notification The Dutch Supervisory Authority published its decision, dated 10 December 2020, imposing a fine of €475,000 on a hotel booking website for late notification (delay of 22 days) of a data breach that affected more than 4,000 individuals. For further information: AP website (in Dutch); AP decision (in Dutch) Norway 03/08/2021 – Norwegian Supervisory Authority | Sanction | CCTV The Norwegian Supervisory Authority imposed a fine of NOK 150,000 (approx. €14,700) against an electricity provider for installing a camera on the top of its building and broadcasting the images live on Internet, without having a legal basis to do so. For further information: Datatilsynet website (in Norwegian); Datatilsynet decision (in Norwegian) Poland 03/04/2021 – Polish Supervisory Authority | Sanction | Data breach notification The Polish Supervisory Authority published a sanction, dated 11 January 2021, imposing a fine of PLN 136,000 (approx. €30,000) against a company for failure to report a data breach. For further information: UODO website (in Polish); UODO decision (in Polish) Spain 03/18/2021 – Spanish Supervisory Authority | Sanction | Data breach notification The Spanish Supervisory Authority (AEPD) issued a fine of €600,000 against an airline company, for late notification (delay of 41 days) of a data breach of 1,5 million data records. For further information: AEPD resolution (in Spanish) 03/11/2021 – Spanish Supervisory Authority | Sanction | Various GDPR non- compliances The Spanish Supervisory Authority (AEPD) pronounced a fine of €8.15 million against a telecommunications operator for various GDPR non-compliances (e.g., transfers outside the EU without sufficient safeguards; no cross-reference of the numbers registered on the national “Do-Not-Call” register). For further information: AEPD resolution (in Spanish) 03/09/2021 – Spanish Supervisory Authority | Appeal against a decision The Spanish Supervisory Authority issued a decision by which it upheld the appeal filled by a social network fined for breaching the rules on cookies.   For further information: AEPD resolution (in Spanish) 03/09/2021 – Spanish Supervisory Authority | Sanction | Scoring The Spanish Supervisory Authority imposed a fine of €50,000 against a credit scoring company for processing data related to individual’s assets solvency and credits, without informing them and with no legitimate purpose. For further information: AEPD resolution (in Spanish) United Kingdom 03/23/2021 – UK communications regulator & UK Supervisory Authority | Joint plan | Nuisance calls and messages The UK Office of Communications (Ofcom) published the updated 2021 joint action plan for nuisance and messages elaborated with the UK Supervisory Authority. For further information: Press Release; Ofcom and ICO 2021 Joint plan 03/05/2021 – UK Supervisory Authority | Sanctions | Nuisance messages The UK Supervisory Authority imposed fines totaling £330,000 (approx. €385,000) against two companies that sent nuisance text messages during the Covid-19 pandemic. For further information: ICO website 03/02/2021 – UK Supervisory Authority | Reminder | Children’s Code The UK Supervisory Authority published an article where it urges businesses to comply with the Children’s Code as it comes into force within 6 months. For further information: ICO website This newsletter has been prepared by the EU Privacy team of Gibson Dunn. For further information, you may contact us by email: Ahmed Baladi – Partner, Co-Chair, PCDA Practice, Paris (abaladi@gibsondunn.com) James A. Cox – Partner, London (jacox@gibsondunn.com) Patrick Doris - Partner, London (pdoris@gibsondunn.com) Penny Madden – Partner, London (pmadden@gibsondunn.com) Michael Walther – Partner, Munich (mwalther@gibsondunn.com) Kai Gesing – Partner, Munich (kgesing@gibsondunn.com) Alejandro Guerrero – Of counsel, Brussels (aguerrero@gibsondunn.com) Vera Lukic – Of counsel, Paris (vlukic@gibsondunn.com) Sarah Wazen – Of counsel, London (swazen@gibsondunn.com) Adélaïde Cassanet – Associate, Paris (acassanet@gibsondunn.com) Selina Grün – Associate, Munich (sgruen@gibsondunn.com) Clémence Pugnet – Associate, Paris (cpugnet@gibsondunn.com) © 2021 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.  
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April 8, 2021

New York Adopts LIBOR Legislation

Click for PDF On April 6, 2021, New York Governor Andrew Cuomo signed into law Senate Bill 297B/Assembly Bill 164B (the “New York LIBOR Legislation”), the long anticipated New York State legislation addressing the cessation of U.S. Dollar (“USD”) LIBOR.[1]  The New York LIBOR Legislation generally tracks the legislation proposed by the Alternative Reference Rates Committee (“ARRC”).[2] It provides a statutory remedy for so-called “tough legacy contracts,” i.e., contracts that reference USD LIBOR as a benchmark interest rate but do not include effective fallback provisions in the event USD LIBOR is no longer published or is no longer representative, and that will remain in existence beyond June 30, 2023 in the case of the overnight, 1 month, 3 month, 6 month and 12 month tenors, or beyond December 31, 2021 in the case of the 1 week and 2 month tenors.[3] Under the new law, if a contract governed by New York law (1) references USD LIBOR as a benchmark interest rate and (2) does not contain benchmark fallback provisions, or contains benchmark fallback provisions that would cause the benchmark rate to fall back to a rate that would continue to be based on USD LIBOR, then on the date USD LIBOR permanently ceases to be published, or is announced to no longer be representative, USD LIBOR will be deemed by operation of law to be replaced by the “recommended benchmark replacement.” The New York LIBOR Legislation provides that the “recommended benchmark replacement” shall be based on the Secured Overnight Financing Rate (“SOFR”) and shall have been selected or recommended by the Federal Reserve Board, the Federal Reserve Bank of New York or the ARRC for the applicable type of contract, security or instrument. The recommended benchmark replacement will include any applicable spread adjustment[4] and any conforming changes selected or recommended by the Federal Reserve Board, the Federal Reserve Bank of New York or the ARRC. The New York LIBOR Legislation also establishes a safe harbor from liability for the selection and use of a recommended benchmark replacement and further provides that a party to a contract shall be prohibited from declaring a breach or refusing to perform as a result of another party’s selection or use of a recommended benchmark replacement. It should be noted that the New York LIBOR Legislation does not affect contracts governed by jurisdictions other than New York, and that the parties to a contract governed by New York law remain free to agree to a fallback rate that is not based on USD LIBOR or SOFR; the new law does not override a fallback to a non-USD LIBOR based rate (e.g., the Prime rate) agreed to by the parties to a contract. Although this legislation provides crucial safeguards, it should not be viewed as a substitute for amending legacy USD LIBOR contracts where possible. Rather, it should be viewed as a backstop in the event that counterparties are unwilling or unable to agree to adequate fallback language prior to the cessation date or date of non-representativeness. The ARRC, the Federal Reserve Board and several industry associations and groups have expressed their strong support for the new law.[5] __________________    [1]   See https://www.nysenate.gov/legislation/bills/2021/S297.    [2]   See https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2021/libor-legislation-with-technical-amendments.    [3]   We note that certain contracts, such as derivatives entered into under International Swaps and Derivatives Association (ISDA) standard documentation, provide for linear interpolation of the 1 week and 2 month USD LIBOR tenors until USD LIBOR ceases to exist for all tenors on June 30, 2023. The New York LIBOR Legislation provides that if the first fallback in a contract is linear interpolation, then, for the 1 week or 2 month tenor USD LIBOR contracts, the parties to the contract would continue to use linear interpolation for the period between December 31, 2021 and June 30, 2023. See the definition of “LIBOR Discontinuance Event” and “LIBOR Replacement Date” in the New York LIBOR Legislation.    [4]   Note that the ICE Benchmark Administration Limited and the UK Financial Conduct Authority formally announced LIBOR cessation and non-representative dates for USD LIBOR on March 5, 2021. These announcements fixed the spread adjustment contemplated under certain industry-standard documents. See Gibson Dunn’s Client Alert: The End Is Near: LIBOR Cessation Dates Formally Announced, available at https://www.gibsondunn.com/the-end-is-near-libor-cessation-dates-formally-announced/.    [5]   See “ARRC Welcomes Passage of LIBOR Legislation by the New York State Legislature,” ARRC (March 24, 2021, available at https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2021/20210324-arrc-press-release-passage-of-libor-legislation; see also, Randall Quarles, Keynote Address at the “The SOFR Symposium: The Final Year,” an event hosted by the Alternative Reference Rates Committee, New York, New York (March 22, 2021), available at https://www.federalreserve.gov/newsevents/speech/quarles20210322a.htm. Gibson Dunn's lawyers are available to answer questions about the LIBOR transition in general and these developments in particular. Please contact any member of the Gibson Dunn team, the Gibson Dunn lawyer with whom you usually work in the firm’s Capital Markets, Derivatives, Financial Institutions, Global Finance or Tax practice groups, or the following authors of this client alert: Andrew L. Fabens – New York (+1 212-351-4034, afabens@gibsondunn.com) Arthur S. Long – New York (+1 212-351-2426, along@gibsondunn.com) Jeffrey L. Steiner – Washington, D.C. (+1 202-887-3632, jsteiner@gibsondunn.com) John J. McDonnell – New York (+1 212-351-4004, jmcdonnell@gibsondunn.com) Please also feel free to contact the following practice leaders and members: Capital Markets Group: Andrew L. Fabens – New York (+1 212-351-4034, afabens@gibsondunn.com) Hillary H. Holmes – Houston (+1 346-718-6602, hholmes@gibsondunn.com) Stewart L. McDowell – San Francisco (+1 415-393-8322, smcdowell@gibsondunn.com) Peter W. Wardle – Los Angeles (+1 213-229-7242, pwardle@gibsondunn.com) Derivatives Group: Michael D. Bopp – Washington, D.C. (+1 202-955-8256, mbopp@gibsondunn.com) Jeffrey L. Steiner – Washington, D.C. (+1 202-887-3632, jsteiner@gibsondunn.com) Darius Mehraban – New York (+1 212-351-2428, dmehraban@gibsondunn.com) Erica N. Cushing – Denver (+1 303-298-5711, ecushing@gibsondunn.com) Financial Institutions Group: Matthew L. Biben – New York (+1 212-351-6300, mbiben@gibsondunn.com) 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) Arthur S. Long – New York (+1 212-351-2426, along@gibsondunn.com) Michelle M. Kirschner – London (+44 (0) 20 7071 4212, mkirschner@gibsondunn.com) Global Finance Group: Aaron F. Adams – New York (+1 212 351 2494, afadams@gibsondunn.com) Linda L. Curtis – Los Angeles (+1 213 229 7582, lcurtis@gibsondunn.com) Ben Myers – London (+44 (0) 20 7071 4277, bmyers@gibsondunn.com) Michael Nicklin – Hong Kong (+852 2214 3809, mnicklin@gibsondunn.com) Jamie Thomas – Singapore (+65 6507 3609, jthomas@gibsondunn.com) Tax Group: Sandy Bhogal – London (+44 (0) 20 7071 4266, sbhogal@gibsondunn.com) Benjamin Fryer – London (+44 (0) 20 7071 4232, bfryer@gibsondunn.com) Jeffrey M. Trinklein – London/New York (+44 (0) 20 7071 4224/+1 212-351-2344), jtrinklein@gibsondunn.com) Bridget English – London (+44 (0) 20 7071 4228, benglish@gibsondunn.com) Alex Marcellesi - New York (+1 212-351-6222, amarcellesi@gibsondunn.com) © 2021 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
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April 7, 2021

SEC Staff Issues Cautionary Guidance Related to Business Combinations with SPACs

There were more initial public offerings (“IPOs”) of special purpose acquisition companies (“SPACs”) in 2020 alone than in the entire period from 2009 until 2019 combined, and in the first three months of 2021, there have been more SPAC IPOs than there were in all of 2020. All of these newly public SPACs are looking for business combinations and many private companies are or will be considering a combination with a SPAC as a way to go public. After an IPO, a SPAC has a limited amount of time to acquire a target company. Many of these business combinations move quickly and a private company becomes a public reporting company in a relatively short period of time. It is important for sponsors, target companies and investors to be aware of some of the special attributes of SPACs and the post-business combination public company. On March 31, 2021, the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “SEC”) issued a statement addressing certain accounting, financial reporting and governance issues related to SPACs and the combined company following a SPAC business combination. Read More The following Gibson Dunn attorneys assisted in preparing this update: Hillary Holmes, Peter Wardle, Gerald Spedale and Rodrigo Surcan.
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April 7, 2021

New York State Legalizes Recreational Marijuana, Places Limits on Employers’ Ability to Take Drug Use Into Account When Making Employment Decisions

Click for PDF On March 31st, 2021, New York became the 16th state to legalize marijuana for recreational use with the enactment of Senate Bill S854A.  Under the new law, it is legal for individuals 21 and older to possess and purchase up to three ounces of marijuana.  At their place of residence, individuals are also permitted to possess up to five pounds of the drug.  While the law takes effect immediately, it is expected to take the state as long as two years to fully implement it, including setting up a system to license marijuana retailers.  The law also modifies the state’s existing medical marijuana program, in place since 2014, by expanding the types of medical conditions for which marijuana can be prescribed. Restrictions on Employers’ Hiring and Disciplinary Policies Of particular importance to employers, the law creates new restrictions on an employer’s ability to discipline or terminate employees for using marijuana, as well as limits on employers’ ability to refuse to hire a prospective employee for consuming the drug.  Specifically, it is now unlawful for employers to refuse to hire, employ or license, or to discharge from employment or otherwise discriminate against an individual in compensation, promotion, or terms, conditions or privileges of employment because that individual uses cannabis as permitted under state law.  N.Y. Lab. Law § 201-d(2).  However, the law allows employers to take action based on an employee’s or a prospective employee’s use of marijuana where required by federal or state law, or when an employee is impaired while on the job.  N.Y. Lab. Law § 201-d(4-a). These restrictions build on existing provisions of New York’s medical marijuana law, which treats a person’s status as a certified user of medical marijuana as a disability that employers must accommodate where reasonably possible.  See N.Y. Pub. Health Law § 3369.  They also come on the heels of a law that took effect in New York City in May 2020, prohibiting employers from testing job applicants for marijuana usage.  See N.Y.C. Admin. Code § 8-107(31)(a).  New York City’s law exempts employers in certain cases, such as where the applicant is being considered for a safety-sensitive position.  N.Y.C. Admin. Code § 8-107(31)(b). Trend in State and Local Laws With the enactment of S854A, New York becomes the third state in 2021 to liberalize its laws governing marijuana use.  In February 2021, New Jersey also legalized recreational marijuana, and starting in July 2021 residents of South Dakota will be permitted to use marijuana for certain medical reasons.  Both New Jersey’s and South Dakota’s laws also place restrictions on when employers can take action based on an employee’s or job applicant’s marijuana use.  See N.J. Stat. § 24:6I-52(a); S.D. Codified Laws § 34-20G-22. In total, 19 states and the District of Columbia now have laws restricting employers’ ability to take marijuana usage into account when making employment decisions.  These laws vary widely both in how extensively they limit employers’ actions, as well as in the number and types of exceptions they allow, creating a patchwork of different legal obligations across the country that employers must navigate.  New York’s new restrictions are among the most extensive in the nation, and will require many employers to make significant changes to longstanding drug testing and employment policies. Takeaways for Employers Employers in New York State should review their policies governing drug use among employees and job applicants to ensure they are in compliance with the new restrictions on basing employment decisions on a person’s consumption of marijuana. Employers with operations in multiple states should closely examine applicable state and local laws to ensure they are in compliance with the unique limitations on how marijuana use is treated in the workplace in different jurisdictions. A uniform, one-size-fits-all policy on drug use is, in many cases, no longer feasible for employers with nationwide operations. Employers should closely monitor developments in this area as states and cities adopt new laws. The rules governing how marijuana use is treated when making employment decisions are changing rapidly across the country, and employers may find that longstanding employment practices need to be adjusted as this trend continues. Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Labor and Employment practice group, or the following: Gabrielle Levin – New York (+1 212-351-3901, glevin@gibsondunn.com) Blake Lanning* – Washington, D.C. (+1 202-887-3794, blanning@gibsondunn.com) Please also feel free to contact any of the following practice leaders: Labor and Employment Group: Catherine A. Conway – Los Angeles (+1 213-229-7822, cconway@gibsondunn.com) Jason C. Schwartz – Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) *Mr. Lanning is admitted only in Indiana, and is currently practicing under the supervision of members of the District of Columbia Bar. © 2021 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
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April 5, 2021

Supreme Court Holds That Google’s Use Of Oracle’s Java Software Interface Is Fair Use

Click for PDF Decided April 5, 2021 Google LLC v. Oracle America, Inc., No. 18-956 Today, the Supreme Court held 6-2 that Google’s use of the Java interface in the Android platform falls within the fair use doctrine.  Background: Sun Microsystems launched the Java platform in the 1990s to allow software developers to write and run applications in the Java programming language. The Java platform includes pre-written code to perform a number of common functions (e.g., calculating an arithmetic mean), which software developers can incorporate directly into their own applications through the use of the Java software interface. By using Java’s software interface in their applications, developers avoid having to compose the underlying, functional code themselves. Google launched its Android operating system in 2008. Like Java, Android includes pre-written code to perform certain common functions, making it easier for developers to create applications for Android. Although the code used by Android to perform these functions is entirely original, Android used portions of Java’s software interface. By doing so, Google allowed developers to create applications for Android using the same interface that they use to create applications for Java. In all, Android uses 11,330 lines (or 0.4 percent) of Java’s software interface. After acquiring Java from Sun Microsystems, Oracle sued Google for copyright infringement based on Android’s use of the Java software interface. The district court concluded that copyright protection did not extend to the Java software interface, but the Federal Circuit reversed, concluding that Java’s software interface is protectable under copyright law and that the merger doctrine, which bars copyright protection when there are only a few ways to express a function, was inapplicable. On remand, a jury found that Google’s use of the Java software interface was protected under the fair use doctrine, but the Federal Circuit again reversed. Issue: Does the Copyright Act protect a software interface and, if so, does Android’s use of the Java software interface constitute fair use? Court's Holding: The Court assumed, “purely for argument’s sake,” that the Java interface is protected by copyright, and held that Google’s use of that interface in the Android platform falls within the fair use doctrine. “We reach the conclusion that in this case, where Google reimplemented a user interface, taking only what was needed to allow users to put their accrued talents to work in a new and transformative program, Google’s copying of the Sun Java API was a fair use of that material as a matter of law.” Justice Breyer, writing for the Court What It Means: The Court clarified that “fair use” is a mixed question of law and fact. Reviewing courts should appropriately defer to the jury’s findings of underlying facts, but the ultimate question whether those facts show a fair use is a legal question for judges to decide de novo. The Court explained that the fair use doctrine is particularly important when applying copyright law to computer programs because they almost always serve functional purposes and are bound up with uncopyrightable material. “[F]air use can play an important role in determining the lawful scope of a computer program copyright” because it provides a context-based check that can help to keep a copyright monopoly within its lawful bound. The application of fair use in this case does not undermine the general copyright protection Congress provided for computer programs because the declaring code at issue, “if copyrightable at all,” is further than most computer programs are from “the core of copyright.”  This is because, as part of a user interface, the declaring code’s use “is inherently bound together with uncopyrightable ideas (general task division and organization) and new creative expression (Android’s implementing code).”  Moreover, its value (1) derives from the value that computer programmers invest of their own time and effort to learn the API’s system and (2) lies in its efforts to encourage programmers to learn and to use that system so that they will use Sun-related implementing programs. Despite Google having copied portions of the Java interface “precisely,” the Court held that its use was nonetheless “transformative” because Google used the code to “create a new platform that could be readily used by programmers.” Google’s use was therefore “consistent with that creative ‘progress’ that is the basic constitutional objective of copyright itself.” Commercial use does not necessarily tip the scales against fair use. The Court explained that, even though Google’s use was a commercial endeavor, that is not dispositive of the “purpose and character of use” factor, particularly because Google’s use was transformative. The Court’s fair use ruling will make it easier for platform developers to reuse software interfaces when creating new platforms. This may lead to the development of less-expensive competing versions of applications, but may also disincentivize research and development of new software platforms or languages. The question whether the Copyright Act protects software interfaces remains unanswered. “Given the rapidly changing technological, economic, and business-related circumstances,” the Court explained, “[the Court] should not answer more than is necessary to resolve the parties’ dispute.” The Court therefore assumed, “purely for argument’s sake,” that the Java interface is protected by copyright. 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 Supreme Court. Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Blaine H. Evanson +1 949-451-3805 bevanson@gibsondunn.com Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com Related Practice: Intellectual Property Wayne Barsky +1 310.552.8500 wbarsky@gibsondunn.com Josh Krevitt +1 212.351.4000, jkrevitt@gibsondunn.com Mark Reiter +1 214.698.3100 ,mreiter@gibsondunn.com Howard S. Hogan +1 202.887.3640 hhogan@gibsondunn.com
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