Today, the UK Government announced its “Winter Economy Plan” – a series of employment and business support and tax measures intended to support the UK economy as the COVID-19 pandemic continues to impact economic output. These latest support measures mark a shift in focus to keeping the UK economy open whilst providing support to businesses as reduced demand continues to impact many businesses during the winter months and through to Q1 2021. It remains to be seen whether further support measures are announced as the UK grapples both with economic recession and the impact of COVID-19 on public health.
The Jobs Support Scheme
The UK Government has announced the Jobs Support Scheme (“JSS”) as the successor to the Coronavirus Job Retention Scheme (“CJRS”), starting 1 November 2020 for a period of 6 months. Unlike the CJRS, which was designed to support employees unable to work as a result of the requirement to stay at home, the aim of the JSS is to protect viable jobs by supporting the wages of those in work, providing employers with the option to retain employees on shorter hours rather than making them redundant. Whilst employers participate in the JSS, they are not able to issue redundancy notices to employees on the JSS scheme.
To be eligible for the JSS, employees must be working at least 33% of their usual hours and be paid for those hours by their employer as normal. For the remaining hours not worked, the employer and the UK Government will each pay one third of the employee’s wages, resulting in the employee receiving at least 77% of their total wages (the employer paying 55% and the UK Government paying 22%). The level of the grant will be calculated based on an employee’s usual salary, capped at £697.92 per month. The JSS is open to employers with a UK bank account and UK PAYE scheme and is not limited to those employers who made use of the CJRS; all small and medium sized businesses may apply and larger businesses may apply if their turnover has been reduced as a result of the pandemic. Employers may also claim for JSS in addition to claiming the job retention bonus announced earlier in the year. The UK Government has stated that it expects that large employers using the JSS will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the JSS. Further guidance on the JSS is expected to be issued in due course and we will update our clients once this has been announced.
Self-Employed Support
The UK Government has also announced the extension of the Self Employment Income Scheme Grant (“SEISS”). An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to the Coronavirus pandemic. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year, capped at £1,875. An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April 2021.
UK Government Funding Schemes
Bounce Back Loans – the UK Government announced the Pay As You Grow Scheme, which will allow businesses to pay back government Bounce Back Loans over a period of 10 years. This is an extension on the original 6-year term of these loans, together with the UK Government’s 100% guarantee of these loans. In addition, firms in financial difficulty will be permitted to suspend their repayments for up to 6 months and also elect to make interest only payments for the same period, without impacting a firm’s credit rating. The deadline for applications for Bounce Back Loans has also been extended to 31 December 2020.
Coronavirus Business Interruption Loan Scheme – the Coronavirus Business Interruption Loan Scheme will also be extended to 31 December 2020 for applications and the UK Government has announced its intention to provide lenders with the ability to extend the term of a loan from 6 years to 10 years. This also has the effect of extending the UK Government’s 80% guarantee of these loans.
Coronavirus Large Business Interruption Loan Scheme – the deadline for applications for Coronavirus Large Business Interruption Loans has been extended to 31 December 2020.
Future Fund – the deadline for applications for funding under the Future Fund scheme has been extended to 31 December 2020.
Tax Measures
The temporary cut in VAT from 20% to 5% for the tourism and hospitality sectors that was due to expire in January 2021 has been extended through to 31 March 2021.
In addition, businesses that deferred their VAT payments due in March to June 2020 will be given the option to pay their VAT in smaller instalments. Instead of paying a lump sum in full at the end March 2021, these businesses will be able to make 11 equal instalments over 2021-2022. It has been announced that businesses will need to opt into this VAT deferral mechanism and that HM Revenue & Customs will put in place an opt-in process in “early 2021”.
A further tax deferral has been introduced for self-assessment income tax payers (building on the deferral provided in July 2020): details are still be provided at the time of writing, but it has been announced that taxpayers with up to £30,000 of self-assessment income tax liabilities will be able to use the “Time to Pay” facility to secure a further 12 months to pay those liabilities due in January 2021, meaning that payments may now not need to be made until January 2022.
This client update was prepared by James Cox, Sandy Bhogal, Benjamin Fryer, Amar Madhani, and Georgia Derbyshire.
Gibson Dunn’s lawyers are available to assist with any questions you may have regarding developments related to the COVID-19 outbreak. For additional information, please contact your usual contacts or any member of the Firm’s Coronavirus (COVID-19) Response Team. In the UK, the contact details of the authors and other key practice group lawyers are as follows:
James A. Cox – London, Employment (+44 (0)20 7071 4250, jcox@gibsondunn.com)
Sandy Bhogal – London, Tax (+44 (0)20 7071 4266, sbhogal@gibsondunn.com)
Benjamin Fryer – London, Tax (+44 (0)20 7071 4232, bfryer@gibsondunn.com)
Amar Madhani – London, Private Equity and Real Estate (+44 (0)20 7071 4229, amadhani@gibsondunn.com)
Georgia Derbyshire – London, Employment (+44 (0)20 7071 4013, GDerbyshire@gibsondunn.com)
© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
With talk about a second Coronavirus wave gathering pace, the German Ministry of Justice and Consumer Protection (Bundesministerium der Justiz und für Verbraucherschutz) is proposing to extend the temporary COVID-19-related legislation of March 2020 significantly simplifying the passing of shareholders’ resolution, including, in particular, the possibility to hold virtual-only shareholders’ meetings. The extension is proposed in unchanged form for another year until the end of 2021. A respective draft regulation has been published at short notice on 18 September 2020 and stakeholders are invited to submit their comments until 25 September 2020.
While the legislation of March 2020 was well received in the rise of the COVID-19 crisis the reactions to an extension were mixed so far. Criticism focuses on the significant restrictions of shareholders’ rights by this legislation (e.g. no right to ask questions or to counter-motions in real time, wide discretion of the management with respect to answering submitted questions, only limited appeal right etc.). This was raised not only by shareholders’ activists but also by various parliament members including prominent experts of the ruling coalition.
In the reasons of the draft regulation, the ministry strongly emphasizes that companies should only hold virtual-only meetings if actually required in the individual circumstances due to the pandemic. In addition, the ministry encourages the corporations in question to handle the Q&A process as shareholder-friendly as technically possible, including allowing for questions in real- time, if they decide to hold a virtual meeting.
The time window to debate the proposal is extremely short. The new shareholders’ meeting season is already approaching quickly, starting as early as in January/February 2021 for companies with business years ending on 30 September 2020. While the Ministry of Justice and Consumer Protection is authorized to extend the period of application of the legislation for another year without any modifications, modifications in substance would require the involvement of parliament and are thus deemed rather unlikely. If the proposal is adopted, it would be up to the corporations themselves to take the ministry’s appeal seriously and to make use of the virtual format in a responsible and shareholder-friendly manner.
The following Gibson Dunn lawyers have prepared this client update: Ferdinand Fromholzer, Silke Beiter, Johanna Hauser.
Gibson Dunn’s lawyers in the two German offices in Munich and Frankfurt are available to assist you in addressing any questions you may have regarding the issues discussed in this update.
For further information, please feel free to contact the Gibson Dunn lawyer with whom you usually work, or the three authors:
Ferdinand Fromholzer (+49 89 189 33 170, ffromholzer@gibsondunn.com)
Silke Beiter (+49 89 189 33 170, sbeiter@gibsondunn.com)
Johanna Hauser (+49 89 189 33 170, jhauser@gibsondunn.com)
© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
One of the thornier areas of law for U.S.-regulated banks and their holding companies is that regarding confidential supervisory information (CSI). U.S. regulators treat bank examination reports and related correspondence and materials, which are often the most useful sources of information about a financial institution, as the regulators’ own property, with parties subject to severe penalties for disclosing such information without prior regulatory approval.[1] Receiving approval is often a time-consuming process that may frustrate corporate transaction and litigation deadlines. In addition, each of the federal regulators – the Board of Governors of the Federal Reserve System (Federal Reserve), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Consumer Financial Protection Bureau (CFPB) – and each state financial regulatory authority – such as the New York Department of Financial Services (NYDFS) – has its own rules on the subject.
There have been two recent meaningful developments in the law regarding CSI. First, the Federal Reserve recently finalized revisions to its CSI regulation (Fed Final Rule); those revisions become effective on October 15th. Second, on September 9th, the NYDFS reproposed a regulation (NYDFS Proposed Rule) that would liberalize its approach to CSI disclosure. This Client Alert discusses these two developments.
In addition, the Alert contains a summary of the principal provisions of the CSI regulations of the four federal banking regulators and NYDFS, on the assumption that the NYDFS regulation is finalized in the form that NYDFS proposed it.
I. Federal Reserve Final Rule
The Fed Final Rule is an improvement, albeit a modest one, in terms of providing Federal Reserve-supervised institutions – bank and thrift holding companies, including their nonbank subsidiaries, state member banks, and branches, agencies and representative offices of non-U.S. banks – flexibility in sharing CSI without the Federal Reserve’s prior approval. Enhancements to the Federal Reserve’ regulatory framework demonstrate an effort to streamline the approval process in certain areas.
A. Scope of CSI
The Fed Final Rule defines CSI as “information that is or was created or obtained in furtherance of the [Federal Reserve’s] supervisory, investigatory or enforcement activities,” and includes reports of examination, inspection and visitation; confidential operating and condition reports; supervisory assessments; investigative requests for documents or other information; and supervisory correspondence or other supervisory communications, as well as “any information derived from or related to such information.”[2] In a clarification, the Fed Final Rule states that CSI does not include documents that are prepared “for or by” a supervised financial institution for its own business purposes that are in its own possession and do not otherwise contain CSI, even though copies of such documents in the Federal Reserve’s possession do constitute CSI.[3] Therefore, turning over such non-CSI to the Federal Reserve does not make the information CSI in the hands of the supervised financial institution.
B. Disclosure to Affiliates
The Fed Final Rule states that a supervised institution may disclose CSI without prior Federal Reserve approval not only to its own directors, officers and employees, but also, when it is “necessary or appropriate for business purposes,” to directors, officers, employees of its affiliates.[4] This position liberalizes the regulation from prior practice and aligns the Federal Reserve’s position more closely with that of the CFPB, under which CSI may be disclosed to [directors, officers and employees of] affiliates to the extent that it “is relevant to the performance of such individuals’ assigned duties.”[5] As shown in the Appendix, neither the OCC nor the FDIC has adopted this position in their CSI rules; disclosure to a parent may be permitted without prior regulatory approval, but not to other affiliates.[6]
C. Disclosure to Legal Counsel, Auditors, and Service Providers
The Fed Final Rule also makes a change from the prior regulation in permitting supervised institutions to disclose CSI to external legal counsel and their auditors, without prior written approval, when “necessary or appropriate in connection with the provision of legal or auditing services to the supervised financial institution.”[7] This change aligns the Federal Reserve’s position with that of the OCC and the even more permissive CFPB; the FDIC, however, has not adopted this position with respect to external legal counsel, and therefore the default provision of specific prior approval obtains under its regulations.[8]
In addition, under the revised Federal Reserve framework, supervised institutions are also able to disclose CSI to service providers to the institution and service providers to the institution’s external counsel and auditors (such as consultants, contractors, and technology providers), without prior written approval, in instances where such disclosure is “necessary to the service provider’s provision of services.”[9] The Fed Final Rule requires that the service provider first enter into a written agreement with the supervised institution, external counsel or auditor in which the service provider agrees that (i) it will treat the CSI in accordance with applicable regulations and (ii) it will not use the CSI for any purpose other than as provided under its contract to provide services to the supervised institution.[10] The rule requires supervised institutions to maintain a written account of such service provider disclosures and provide the Federal Reserve a copy of the written account on request.[11]
The Fed Final Rule also liberalizes the manner of disclosure. Under prior practice, disclosure of CSI to external auditors and counsel was required to be limited to on-premises review; the Federal Reserve did not permit the information to be copied or shared off-site. The Fed Final Rule strikes this outdated requirement and allows for disclosure in any manner when “necessary or appropriate in connection with the provision of legal or auditing services to the supervised financial institution.”[12]
D. Disclosure to Other Regulators
The Fed Final Rule also somewhat modifies the manner in which CSI requests for disclosure to other regulators are handled. Historically, any disclosure by a supervised institution of Federal Reserve CSI to another regulatory body (e.g., other banking regulators, state and federal, or the Securities and Exchange Commission) required the prior written consent of the Federal Reserve’s General Counsel. With respect to CSI about a supervised institution “that is contained in documents prepared by or for the institution for its own business purposes,” such as internal minutes, the Fed Final Rule changes this practice and permits institutions to make requests to share such CSI with other bank regulators to the “central point of contact at the Reserve Bank, equivalent supervisory team leader, or other designated Reserve Bank employee.”[13] Disclosure will be permitted upon a determination by the Federal Reserve point of contact that [the other regulator] “has a legitimate supervisory or regulatory interest in the [requested internally prepared CSI].”[14] Disclosure of all other CSI to another regulator, however, still requires the consent of the Federal Reserve’s General Counsel.[15]
II. NYDFS Proposed Rule
Like the Fed Final Rule, the NYDFS Proposed Rule, which is a re-proposal of a November 2019 proposal, is a welcome development because it demonstrates a greater willingness to harmonize the NYDFS CSI regime with those of other regulators. If finalized, New York would, for the first time, have a CSI regulation in addition to a statutory provision, Section 36.10 of the Banking Law.
A. Scope of CSI
The NYDFS Proposed Rule defines CSI as “any information that is covered by Section 36.10 of the [New York] Banking Law.”[16] Section 36.10, in turn, refers to “reports of examinations and investigations [of any NYDFS-supervised institution and affiliates], correspondence and memoranda concerning or arising out of such examination and investigations, including any duly authenticated copy or copies thereof,” and includes any confidential materials shared by NYDFS with any governmental agency or unit.[17]
B. Disclosure to Affiliates
Under Section 36.10, the default standard for disclosure of any CSI is the prior written approval of NYDFS. The NYDFS Proposed Rule contains an exception for disclosure of CSI to affiliates and their directors, officers and employees when “necessary and appropriate for business purposes.”[18] We note that this standard is different from the Federal Reserve and OCC standard, which is “necessary or appropriate” for business purposes.[19]
C. Disclosure to Legal Counsel, Auditors and Other Service Providers
The NYDFS Proposed Rule would also ease current restrictions on NYDFS-supervised institutions’ disclosure of CSI to certain advisors. It would provide a “limited exception” for disclosure to “legal counsel or an independent auditor that has been retained or engaged by such [supervised institution] pursuant to an engagement letter or written agreement.”[20] The applicable engagement letter or written agreement would be required to contain certain acknowledgements by the legal counsel or independent auditor; inter alia, it would be required to state (i) that the information will be used solely to provide “legal representation or auditing services” and (ii) that the information will be disclosed solely to employees, directors, or officers only “to the extent necessary and appropriate for business purposes.[21]
Notably, unlike the Fed Final Rule, the NYDFS Proposed Rule does not contain an exception for third-party vendors to legal counsel and external auditors. In declining to permit what it characterized as “a broad exception,” NYDFS noted that the OCC’s regulations do not contain one.[22]
D. Disclosure to Other Regulators
With respect to the disclosure of NYDFS CSI to other regulators, including, for non-U.S banks, their home country supervisors, the NYDFS Proposed Rule would require the prior written consent of both the Senior Deputy Superintendent of NYDFS for Banking and the General Counsel of NYDFS, or their respective delegates, prior to disclosure.[23] There is no streamlined procedure, as in the Fed Final Rule, for internally generated CSI.
E. Duty to Notify NYDFS of Requests for CSI
The NYDFS Proposed Rule requires each supervised institution, affiliate of a supervised institution, legal counsel, and independent auditor that is served with a request, subpoena or order to provide CSI to notify the Office of the General Counsel of the request immediately so that NYDFS will be able to intervene in the action as appropriate.[24] But it does not – in a relaxation from NYDFS’s November 2019 position – require external counsel and independent auditors to agree contractually to assert legal privileges and protections as requested by NYDFS on the agency’s behalf.[25] The proposal instead would mandate that CSI holders only inform the requester and the relevant tribunal of the obligations set forth in the NYDFS Proposed Rule and the substance of Section 36.10 of the New York Banking Law.[26] Relatedly, the NYDFS Proposed Rule does not require that supervised institutions maintain a record of all disclosed CSI.[27]
Conclusion
The Fed Final Rule and the NYDFS Proposed Rule signal a growing awareness by regulators of the inefficiencies posed by the current CSI regulatory framework. One hopes that the Fed Final Rule will help establish a regulatory benchmark for the other federal banking regulators, and that NYDFS’s willingness to reexamine its own processes will perhaps inspire other state regulators to revisit their regulations. Nonetheless, the overriding traditional principle of CSI law and regulation – that the regulators consider CSI their property, to be disclosed only upon their specific consent – remains a key feature of all regulatory regimes.
Appendix: Comparison of CSI Requirements
|
Topic |
Federal Reserve |
OCC |
FDIC |
CFPB |
NYDFS Proposed Rule | |
|
Supervisory Jurisdiction |
Bank/thrift holding companies and their nonbank subsidiaries, financial holding companies, state member banks, branches, agencies and representative offices of non-U.S. banks, and systemically significant nonbank financial companies when designated. |
National banks, federally chartered savings associations, and federally licensed branches and agencies of non-U.S. banks. |
FDIC-insured state banks that are not members of the Federal Reserve System and FDIC-insured state savings associations. |
Depository institutions with more than $10 billion in assets and certain nonbank financial entities, including mortgage-related firms, lenders (e.g., student loans, payday), certain other large nonbank consumer financial entities (e.g., debt collection/relief and consumer finance firms, credit reporting agencies), and prepaid and credit card issuers. |
Any entity licensed, chartered, authorized, registered, or otherwise subject to supervision by NYDFS under the New York Banking Law. | |
|
Scope |
Information that is or was created or obtained in furtherance of the Board’s supervisory, investigatory, or enforcement activities.[28] Includes any portion of a document in the possession of any person, entity, agency or authority, including a supervised institution, that contains or would reveal confidential supervisory information is CSI. New 12 C.F.R. § 261.2(b)(1). Excludes internally prepared documents for business purposes that do not contain CSI (even if such information is in possession by the Board and such copies constitute CSI. New 12 C.F.R. § 261.2(b)(2). |
(a) Records created or obtained by the OCC in connection with its supervisory responsibilities; (b) Records compiled by the OCC in connection with its enforcement responsibilities; (c) Examination reports, supervisory correspondence, investigatory files complied, agency memoranda; (d) CSI obtained by a third party; (e) Testimonies and interviews with current or former agency employees, officers, or agents concerning information acquired in course of such person’s official duties or status; and (f) Information related to current and former supervised institutions and their subsidiaries and affiliates. 12 C.F.R. § 4.37(b)(1). |
(a) Records designated pursuant to an executive order; (b) Records relating solely to internal personnel rules and practices; (c) Records otherwise exempt from disclosure by statute; (d) Intra-agency memoranda or letters; (e) Certain records compiled for law enforcement purposes; and (f) Records related to examination, operation, or condition of the supervised institution, prepared by or on behalf of the FDIC or other regulatory body. 12 C.F.R. § 309.5(g). |
(a) Reports of examination, inspection and visitation, non-public operating, condition, and compliance reports, and any information contained in, derived from, or related to such reports; (b) Any document, including reports of examination, prepared by, on behalf of, or for the use of the CFPB or any other federal, state or foreign regulator supervising such financial institution, and any information derived from such documents; (c) Intra-agency communications; and (d) Information provided to the CFPB by the supervised institution regarding consumer risk in the offering or provision of consumer financial products or services, or to assess whether such supervised institution is a “covered person.” 12 C.F.R. § 1070.2(b)(1). |
All reports of examinations and investigations, correspondence and memoranda concerning or arising out of such examination and investigations, including any duly authenticated copy or copies thereof in the possession of any supervised institution or its affiliates, including any confidential materials shared by NYDFS with any governmental agency or unit. NY Banking Law § 36.10. | |
|
Default Disclosure Standard |
“[P]rior written permission of the General Counsel” New § 261.20(a). Supervised institution must demonstrate “a substantial need to . . . disclose such information that outweighs the need to maintain confidentiality.” New 12 C.F.R. § 261.23(a)(1). |
Prior written consent. 12 C.F.R. § 4.37(b)(1). |
Prior written consent. 12 C.F.R. § 309.6(b). Default Standard: “[G]ood cause for disclosure.” 12 C.F.R. § 309.6(b). |
Prior written consent. 12 C.F.R. §1070.2(b)(2)(ii). |
Prior written consent. NY Banking Law § 36.10. Default Standard: “[T]he ends of justice and the public advantage will be subserved by the publication thereof.” NY Banking Law § 36.10. | |
|
Certain Exceptions to Disclosure |
Parent Holding Company |
No consent or written request required, when “necessary or appropriate for business purposes.” New 12 C.F.R. § 261.21(b)(1). |
No consent or written request required, when “necessary or appropriate for business purposes.” 12 C.F.R. § 4.37(b)(2). |
For majority shareholders, supervised institution’s board must authorizes disclosure via board action. 12 C.F.R. § 309.6(b)(7)(iii). |
No consent or written request required for parent holding company personnel, to the extent that it “is relevant to the performance of such individuals’ assigned duties.” 12 C.F.R. § 1070.42(b)(1). |
No consent or written request required, when “necessary and appropriate for business purposes.” 3 NYCRR § 7.2(c) (proposed 2020). |
|
Affiliates |
No consent or written request required, when “necessary or appropriate for business purposes.” New § 261.21(b)(1). |
Non-parent holding company affiliates require prior written consent 12 C.F.R. § 4.37(b)(2). |
Non-parent holding company affiliates require prior written consent. 12 C.F.R. § 309.6(b)(7)(iii). |
No consent or written request required for affiliate personnel, to the extent that it “is relevant to the performance of such individuals’ assigned duties.” 12 C.F.R. § 1070.42(b)(1). |
No consent or written request required, when “necessary and appropriate for business purposes.” 3 NYCRR § 7.2(c) (proposed 2020). | |
|
Outside Counsel / Auditors |
No consent or written request required, when “necessary or appropriate in connection with the provision of legal or auditing services.” New 12 C.F.R. § 261.21(b)(3). |
No consent or written request required, when “necessary or appropriate for business purposes.” 12 C.F.R. § 4.37(b)(2). |
For outside counsel, prior written consent required, and a showing of “good cause.” 12 C.F.R. § 309.6(b)(7)(i) and (iv). For external auditors, no consent or written request required. See FDIC Financial Institutions Letter (FIL-57-92), dated July 24, 1992. |
No consent or written request required. 12 C.F.R. § 1070.42(b)(2)(i). |
No consent or written request required for disclosure “to legal counsel or an independent auditor [if]. . . retained or engaged by such regulated entity pursuant to an engagement letter or written agreement” where the legal counsel or independent auditor states, among other things, that CSI will be used solely to provide “legal representation or auditing services”; and that the information will be disclosed solely to employees, directors, or officers only “to the extent necessary and appropriate for business purposes.” 3 NYCRR § 7.2(b) (proposed 2020). | |
|
Other Service Providers: |
CSI may be shared with service providers of attorneys or auditors if the service provider is under a written agreement with the legal counsel or auditor pursuant to which it agrees to treat the CSI in accordance with 12 C.F.R. § 261.20(a) and use CSI only “as necessary to provide the services..” New 12 C.F.R. § 261.21(b)(3). Other Service Providers to Institution: Allowed when “necessary to the service provider’s provision of services” and such provider is bound by written agreement with the supervised institution, agreeing to treat CSI in accordance with 12 C.F.R. § 261.20(a) and use CSI only “as provided under its contract to provide services.” New 12 C.F.R. § 261.21(b)(4). |
CSI may be provided by the supervised institution to a consultant if the consultant enters into a written contract, agreeing to abide by OCC rules and use CSI only to provide services. 12 C.F.R. § 4.37(b)(2). |
Prior written consent, and a showing of “good cause.” 12 C.F.R. § 309.6(b)(7)(i) and (iv). |
No consent or written request required for disclosure to a contractor, consultant, or service provider. 12 C.F.R. § 1070.42(b)(2)(i). Other persons require prior written consent. 12 C.F.R. § 1070.42(b)(2)(ii). |
Prior written consent required. NY Banking Law § 36.10. | |
|
Other regulators |
Consent of “central point of contact at the Reserve Bank, equivalent supervisory team leader, or other designated Reserve Bank employee” to disclose internally prepared material containing CSI to the FDIC, OCC, CFPB, state regulators supervising such institution; prior written consent required to disclose all other CSI. New 12 C.F.R. § 261.21(b)(2). |
Prior written consent required. 12 C.F.R. § 4.37(b)(1). |
Prior written consent required, and a showing of “good cause.” 12 C.F.R. § 309.6(b)(7)(i) and (iv). |
Prior written consent required. 12 C.F.R. § 170.42(b)(2)(ii). |
Prior written consent of the Senior Deputy Superintendent of NYDFS for Banking and the General Counsel required. 3 NYCRR § 7.2(f) (proposed 2020). | |
____________________
[1] Federal bank examination reports, for example, cite 18 U.S.C. § 641, which makes it a felony to convert, knowingly, government property to one’s own use. Lesser sanctions for alleged CSI violations have included substantial fines and prohibitions on consulting arrangements with supervised institutions for a period of years.
[2] New 12 C.F.R. § 261.2(b)(1).
[5] 12 C.F.R. § 1070.42(b)(1).
[8] See Appendix. The FDIC does not require prior approval for a bank’s independent auditor.
[9] New 12 § 261.21(b)(3)-(4).
[16] 3 N.Y.C.R.R. § 7.1(a) (proposed 2020).
[17] New York Banking Law, Section 36.10.
[18] 3 N.Y.C.R.R. § 7.2(c) (proposed 2020).
[20] 3 N.Y.C.R.R. § 7.2(b) (proposed 2020).
[22] NYS Register, page 12 (Sept. 9, 2020), available at
https://www.dos.ny.gov/info/register/2020/090920.pdf.
[23] 3 N.Y.C.R.R. § 7.2(f) (proposed 2020).
[24] Id. § 7.2(d) (proposed 2020).
[25] See 3 N.Y.C.R.R. § 7.2(c) (proposed 2019) (institution “agrees to notify the Department, promptly and in writing, of any demand or request for the supervisory confidential information, and agrees to assert on behalf of the Department all such legal privileges and protections as the Department may request”).
[26] 3 N.Y.C.R.R. § 7.2(d) (proposed 2020).
[27] This too is a change from the 2019 position. See 3 N.Y.C.R.R. § 7.2(f) (proposed 2019) (“Regulated entities must keep a written record of all confidential supervisory information disclosed pursuant to the provisions of this Part and a copy of each party’s written agreement mentioned in subdivision (b) of this section for inspection and review by the Department”).
[28] Includes “reports of examination, inspection, and visitation; confidential operating and condition reports; supervisory assessments; investigative requests for documents or other information; and supervisory correspondence or other supervisory communications.” New 12 C.F.R. § 261.2(b)(1).
Excludes “[d]ocuments prepared by or for a supervised financial institution for its own business purposes that are in its own possession and that do not include confidential supervisory information as defined in paragraph (b)(1) of this section, even though copies of such documents in the Board’s or Reserve Bank’s possession constitute confidential supervisory information.” Id.
The following Gibson Dunn lawyers assisted in preparing this client update: Arthur Long, James Springer and Samantha Ostrom.
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 in the firm’s Financial Institutions practice group, or the following:
Financial Institutions Group:
Arthur S. Long – New York (+1 212-351-2426, along@gibsondunn.com)
Matthew L. Biben – New York (+1 212-351-6300, mbiben@gibsondunn.com)
Michael D. Bopp – Washington, D.C. (+1 202-955-8256, mbopp@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)
Mylan L. Denerstein (+1 212-351- 3850, mdenerstein@gibsondunn.com)
Jeffrey L. Steiner – Washington, D.C. (+1 202-887-3632, jsteiner@gibsondunn.com)
James O. Springer – New York (+1 202-887-3516, jspringer@gibsondunn.com)
Samantha J. Ostrom – Washington, D.C. (+1 202-955-8249, sostrom@gibsondunn.com)
© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
U.S. and EU Enforcers to Renew Focus on “Below the Radar” Transactions
On September 3, 2020, the Antitrust Division of the U.S. Department of Justice (the “Division”) released a new Merger Remedies Manual (the “Manual”). The Division traditionally reviews mergers involving airlines, health insurance, finance, publishing, media, beer, telecommunications, and other industries. In 2018, Assistant Attorney General Makan Delrahim formally withdrew the 2011 Policy Guide to Merger Remedies (“2011 Guide”), relying instead on the Policy Guide to Merger Remedies published in 2004 (“2004 Guide”), while the Division reconsidered its remedy policies.[1] This new Manual is the culmination of that process.
The Manual, which only governs DOJ procedures and not those of the Federal Trade Commission,[2] expresses a strong preference for structural relief—including for vertical transactions (i.e., transactions involving parties that operate at different levels of a supply chain, such as a merger between a manufacturer and a distributor). The Manual also addresses new topics such as structuring remedies in the context of consummated mergers and coordination with global enforcers and regulatory agencies. Lastly, the Manual describes certain provisions the Division will require in consent decrees to ensure effective enforcement.
In addition, FTC Chairman Simons and European Commissioner Vestager recently made comments signaling increased scrutiny of deals that do not meet the HSR or EU thresholds. These comments indicate that both the FTC and the EC will be more aggressive in using their existing authority to investigate smaller acquisitions that might involve future competitors.
New DOJ Merger Remedy Manual Issued
The Division’s new Manual includes a number of important revisions, although some reflect existing practice as opposed to new policy.
Strong Preference for Structural Relief for Horizontal and Vertical Concerns. Signaling a clear break from the DOJ’s 2011 Guide[3] and the FTC’s merger remedies policy,[4] which allow for non-structural “conduct” or “behavioral” remedies in vertical merger cases, the Manual expresses a “strong[] prefer[ence]” for structural remedies in both horizontal and vertical merger cases: “[a]lmost all merger remedies are structural,” and that conduct remedies are only appropriate in “limited circumstances.”[5] The Manual acknowledges that short-term conduct remedies may be needed to facilitate structural relief,[6] but states that a stand-alone conduct remedy is only appropriate where: “(1) the transaction generates significant efficiencies that cannot be achieved without the merger; (2) a structural remedy is not possible; (3) the conduct remedy will completely cure the anticompetitive harm; and (4) the remedy can be enforced effectively.”[7]
Characteristics of Potentially Ineffective Divestitures. The Manual outlines characteristics of divestitures that may be ineffective in preserving competition, including where the divestiture is of less than an existing standalone business; where it combines previously independent capital; where the merged firm retains rights to critical intangible assets; where ongoing entanglements remain between the firms; and where there are substantial regulatory or logistical hurdles.[8] However, while the 2004 Guide “strongly disfavored” so-called “crown jewel provisions” that require certain valuable assets be included in the divestiture package if the parties are unable to sell the initially agreed-upon assets within a certain time.[9] The new Manual does not comment on such provisions. The FTC merger remedies policy, in contrast, expressly allows for the use of “crown jewel” provisions and the FTC has a record of approving such provisions.[10]
Under existing policy, the Division will appoint a “divestiture trustee” in the event the parties are unable to find a buyer and sell the divested assets by the agreed-upon deadline, which is in most cases 90 days after the entry of a hold separate order. With this change in the Division’s policy, Division might be more willing to consider crown jewel provisions as an alternative to divestiture trustees. While a crown jewel might place additional risk on the merging parties because it requires them to sell valuable assets, in some cases a crown jewel enables the Division to accept a divestiture remedy that it would otherwise be unwilling to agree to—giving merging parties another option for settling merger cases without litigation. Crown jewel provisions might be an attractive alternative resolution for the Division and the merging parties in cases where there is heightened risk that the parties will be unable to find an acceptable buyer for the divested assets within an acceptable timeframe.
Private Equity Firms as Divestiture Buyers. The Division has as long-standing preference for identifying an upfront divestiture buyer, and the Manual notes that “identification of an upfront buyer is particularly important in cases where the Division determines that there are likely to be few acceptable and interested buyers.”[11] In the past, however, the Division has not indicated a preference for any particular type of otherwise qualified buyer for the to-be-divested assets. In a departure from this practice, the Division’s Manual remarks that, in some cases, a private equity purchaser “may be preferred,” recognizing that private equity purchasers may have “flexibility in investment strategy,” be “committed to the divestiture,” and be “willing to invest more when necessary.”[12] The Division cites an FTC study in support of its favorable view of private equity purchasers, although the FTC has not expressed a similar preference in its remedies guide.
Consummated Mergers. For the first time, the Manual explicitly addresses remedies for transactions challenged post-consummation.[13] The Manual recognizes that consummated mergers “may pose unique issues,” as the parties often have already integrated their assets, making it difficult to craft an effective divestiture that would eliminate anticompetitive effects. But the Manual reiterates that structural relief may be necessary in some circumstances to eliminate anticompetitive effects. For example, it may be necessary to unwind a merger and divest more or less than the acquired assets to effectively restore competition. The Division has advocated a similar point in prior proceedings, so this change does not mark a significant departure from existing Division practice.[14]
Global Enforcement and Regulatory Collaboration. As antitrust merger enforcement and merger control has proliferated around the world, and is now a staple of antitrust enforcement in 120 countries and in state AG offices, mergers are commonly subject to multiple investigations by authorities in and outside the United States. The Manual includes new sections outlining the Division’s practice of collaborating with foreign and state antitrust enforcers to minimize unnecessary jurisdictional conflict structure remedies that are effective across jurisdictions.[15] The Division will also work with regulatory agencies to avoid inconsistent requirements. While the Division will consider the impact of regulations on competitive dynamics, the Manual notes that the “existence of regulation typically does not eliminate the need for an antitrust remedy to preserve competition effectively.”[16]
Consent Decree Terms. The Manual also provides greater detail on consent decree terms that the Division likely will require in future settlements.[17] For example, the Manual recommends consent decrees explicitly provide for Division appointment of a selling trustee,[18] and that, in certain circumstances, a decree may require the merged firm to report otherwise non-reportable deals.[19] And the Manual details certain “standard provisions” that must be included in consent decrees to allow for effective enforcement, including (1) reducing DOJ’s burden to establish violation of a consent decree from clear and convincing to preponderance of the evidence; (2) allowing the Division to apply for a one-time extension of the consent decree terms upon a court finding a violation; (3) allowing the Division to terminate the decree upon notice to the court and the parties; (4) allowing courts to enforce provisions that are stated specifically and in reasonable detail; and (5) requiring parties to provide reimbursement to the Division for costs incurred in connection with a successful enforcement effort.[20] While the Division has increasingly been including these provisions in their Final Judgments over the last couple of years, the Manual memorializes these requirements. As a whole, these new provisions will strengthen the Division’s ability to police and seek fines for alleged consent decree violations.
New Compliance Unit. Lastly, the Manual outlines the responsibilities of the newly created Office of Decree Enforcement and Compliance.[21] This Office is charged with ensuring rigorous enforcement of merger remedies, and it will evaluate and provide oversight over all remedies. While on its face this new office appears to mimic the FTC Bureau of Competition’s Compliance Section, it will only monitor post-decree compliance, whereas the FTC’s Compliance Section is an active participant in remedy negotiations. Whether this has a practical impact on DOJ merger remedies remains an open question.
FTC Chair and EC Competition Commissioner Signal Increased Scrutiny of “Below the Radar” Transactions
Also noteworthy are recent statements by FTC Chairman Joseph Simons and EU Commissioner for Competition Margrethe Vestager[22] promising stepped-up review and scrutiny of “non-reportable transactions”—that is, deals that fall below applicable merger reporting statutory thresholds.
Referring to so-called “killer acquisitions” in which transactions by established incumbents that take out a nascent or potentially disruptive competitor, Commissioner Vestager observed that “there are a handful of mergers each year that could seriously affect competition, but which we don’t see because the companies’ turnover doesn’t meet thresholds” that would trigger a mandatory filing and review by the European Commission.[23] Commissioner Vestager promised to use an existing provision, Article 22 of the EU Merger Regulation, which allows the European Commission to review transactions that affect “trade between member States and [threaten] to significantly affect competition within the territory of the member State or States making the request.” Originally designed as a catch-all referral mechanism for EU member states lacking a home-based merger control authority, Article 22 contains no minimum filing thresholds, giving the Commission a tool to immediately implement Commissioner Vestager’s policy announcement.
Likewise, the FTC has recently directed several large technology companies to provide information about acquisitions that were not reportable under the HSR Act to “better understand” some of these non-reported transactions, in particular, those of nascent or potential competitors.[24] Chairman Simons noted that “[o]ne potential outcome of this study is that we may decide to issue an additional special order requiring premerger filings for acquisitions by these companies at levels well below the normal statutory thresholds” and that the FTC would have “the option” to take an enforcement action “where warranted.”[25] Following this statement, the FTC also announced that it has revamped its Bureau of Economics’ Merger Retrospective Program to expand the Bureau’s retrospective research efforts analyzing the effects of consummated mergers over the last 35 years.[26]
These actions followed Chairman Simons’ February 2020 announcement of the FTC’s investigation of the large technology companies.[27] A statement by Commissioners Christine Wilson and Rohit Chopra from February 2020 echoed Simons’ sentiments, stating that the “Commission will benefit from a deeper understanding of the kinds of transactions – and the nature of their competitive impact – that were not reportable under the HSR requirements.”[28]
Chairman Simons’ and Commissioner Vestager’s statements continue a recent pattern of enforcers signaling increased scrutiny of transactions that fall below applicable reporting thresholds—scrutiny that is designed to target acquisitions of potential or nascent rivals to the acquiring company. Transactions in the tech and pharma sectors where startups often generate little or no revenue, but might potentially pose a competitive threat in the future, could be subject to investigations under this new policy.
In the United States, parties may consummate a transaction only to later discover that the FTC has opened an antitrust investigation that casts doubt on the deal’s ultimate prospects. In Europe, there will be an increased chance that a relatively small transaction may nevertheless be subjected to a more involved and burdensome EU-level review (as opposed to review at the member state level). This increased uncertainty will have a knock-on effect for transaction planning and documentation, which must account for expected regulatory filings and clearance timelines.
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[1] U.S. Dep’t. of Justice, Justice Department Issues Modernized Merger Remedies Manual (Sept. 3, 2020), available at https://www.justice.gov/atr/merger-enforcement.
[2] The Federal Trade Commission adopted its own guide to negotiating merger remedies in 2012 that remains in effect. Federal Trade Comm’n, Negotiating Merger Remedies (Jan. 2012), available at https://www.ftc.gov/system/files/attachments/negotiating-merger-remedies/merger-remediesstmt.pdf.
[3] U.S. Dep’t. of Justice, Antitrust Division Policy Guide to Merger Remedies – June 2011, https://www.justice.gov/atr/page/file/1098656/download.
[4] Federal Trade Comm’n, Negotiating Merger Remedies (Jan. 2012), available at https://www.ftc.gov/system/files/attachments/negotiating-merger-remedies/merger-remediesstmt.pdf.
[5] U.S. Dep’t. of Justice, Merger Remedies Manual (Sept. 2020), available at https://www.justice.gov/atr/page/file/1312691/download at 12 (“Manual”); see also id. at Part III.B (“Structural Relief Is the Appropriate Remedy for Both Horizontal and Vertical Mergers”).
[6] Id. at Part III.B.1 (“Conduct Relief to Facilitate Structural Relief”).
[7] Id. at Part III.B.2. (“Stand-Alone Conduct Relief”).
[8] Id. at Part III.F (“Characteristics that Increase the Risk a Remedy Will Not Preserve Competition”).
[9] 2004 Guide at Part IV.H (“Crown Jewel Provisions Are Strongly Disfavored”).
[10] For example, the FTC’s consent decree in connection with Pinnacle Entertainment’s 2013 acquisition of Ameristar Casinos contained a “crown jewel” clause providing for a potential forced divestiture of Ameristar’s St. Charles casino—a centerpiece of the transaction—if Pinnacle did not divest the Lumiere casino identified by the FTC as the source of competitive concern. See Federal Register Notice: Analysis of Agreement Containing Consent Orders to Aid Public Comment; Proposed Consent Agreement, August 19, 2013, https://www.ftc.gov/sites/default/files/documents/cases/2013/08/130819pinnaclefrn.pdf.
[11] Manual at Part IV.A (“Identifying a Buyer”).
[12] Id. at Part IV.B (“The Division Must Approve the Proposed Purchaser”).
[13] Id. at Part III.D (“Remedies for Transactions Challenged Post-Consummation”).
[14] See Brief for the U.S. as Amicus Curiae in Support of Appellee Steves and Sons, Inc., Steves and Sons, Inc. v. Jeld-Wen, Inc., No. 19-1397 (4th Cir. Aug. 23, 2019) (arguing that laches should not bar all private-party divestiture suits even after a merger has been consummated, as a party may be injured by a merger after it has been consummated, or the threat of antitrust injury may not materialize until post-closing).
[15] Manual at Part III.E (“Collaboration When Structuring a Remedy”).
[17] Id. at Part VI (“Decree Terms”).
[18] Id. at Part VI.C (“Selling Trustee Provisions Must Be Included in Consent Decrees”).
[19] Id. at Part VI.F (“Prior Notice Provisions May Be Appropriate”).
[20] Id. at Part VI.I (“Consent Decrees Must Include Standard Provisions Allowing Effective Enforcement”).
[21] Id. at Part VII.A (“The Office of the Chief Legal Advisor Oversees Compliance and Enforcement”).
[22] “The Future of EU Merger Control,” International Bar Association Annual Conference (Sept. 11, 2020).
[24] Prepared Remarks of Chairman Joseph Simons, ICN 2020: Digital Showcase Introductory Remarks (Sept. 14, 2020), here.
[26] Press Release, Overview of the Merger Retrospective Program in the Bureau of Economics, FTC (Sept. 17, 2020), here.
[27] Press Release, FTC to Examine Past Acquisitions by Large Technology Companies (Feb. 11, 2020), https://www.ftc.gov/news-events/press-releases/2020/02/ftc-examine-past-acquisitions-large-technology-companies.
[28] Statement of Commissioner Christine S. Wilson, Joined by Commissioner Rohit Chopra, Concerning Non-Reportable Hart-Scott-Rodino Act Filing 6(b) Orders (Feb. 11, 2020), here.
The following Gibson Dunn lawyers prepared this client alert: Adam Di Vincenzo, Kristen Limarzi, Chris Wilson, Kaitlin Zumwalt and JeanAnn Tabbaa.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please feel free to contact the Gibson Dunn attorney with whom you usually work, the authors, or any member of the firm’s Antitrust and Competition Practice Group:
Antitrust and Competition Group:
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When the COVID 19 pandemic first hit European shores in early spring 2020, the German legislator was quick to introduce wide-reaching legislative reforms to protect the German business world from unwanted consequences of an economy struggling with unprecedented upheaval, the lock-down and the ensuing social strain.[1] One key element of the overall legal reform in March 2020 was the temporary derogation from the regular mandatory German-law requirement to file for insolvency immediately whenever a company is either illiquid (Zahlungsunfähigkeit) or over-indebted (Überschuldung). This derogation has now been extended in time for over-indebted companies, but restricted in scope for illiquid companies.
I. The Temporary Insolvency Law Reform in March 2020
At the time the German Act on the Temporary Suspension of the Insolvency Filing Obligation and Liability Limitation of Corporate Body in cases of Insolvency caused by the COVID-19 Pandemic (“Gesetz zur vorübergehenden Aussetzung der Insolvenzantragspflicht und zur Begrenzung der Organhaftung bei einer durch die COVID-19-Pandemie bedingten Insolvenz” – COVInsAG)[2] was introduced in March 2020, it was felt that the strict insolvency filing requirement that obliges management to file for insolvency without undue delay, but in any event no later than three weeks after such insolvency reason first occurs, would (i) place undue time pressures on companies to file for insolvency in situations where this short time period did not even allow management to canvass its financial or restructuring options or access to newly introduced state funding or other financing sources, (ii) result in a wave of insolvencies of otherwise healthy entities based purely on the traumatic impact of the pandemic and (iii) result in unwanted distortions of the market by failing to differentiate appropriately between businesses facing merely temporary cash-flow problems and genuinely moribund companies with long-standing challenges or issues.
In a nutshell and without going into all details, the interim reform of the German Insolvency Code (Insolvenzordnung, InsO) via the COVInsAG introduced a temporary suspension of the mandatory insolvency filing requirement until September 30, 2020 for both the insolvency reasons of illiquidity (Zahlungsunfähigkeit) and of over-indebtedness (Überschuldung) by way of a strong legal assumption that any such insolvency was caused by the pandemic if (i) the company in question was not yet illiquid on December 31, 2019 and (ii) could show that it would (still or again) be in a position to pay all of its liabilities when due on and after September 30, 2020.
This temporary exemption from having to file for insolvency was flanked by a number of other legislative tweaks to the Insolvency Code that privileged and protected a company’s continued trading during such time window against management liability risks and/or later contestation rights of the insolvency administrator in case the temporary crisis in the spring and summer of 2020 would ultimately result in a later insolvency, after all. Access to new financing was similarly privileged in this time window when the company could show that it traded under the protection of the COVID 19 exemption from the regular insolvency filing requirement.
Finally, the COVInsAG also contained a clause that allowed an extension of this protective time window beyond September 30, 2020 up to the maximum point of March 31, 2021 by way of separate legislative act.
II. The Modified Extension Adopted on September 17, 2020
While an extension of the temporary suspension of the filing requirement was consistently deemed likely by insolvency experts and in political cycles, Germany has since moved beyond the initial lock-down and has mostly opened up the country for trading again. It has also become apparent that, in particular, a continued blanket derogation from the mandatory filing requirement for companies facing severe cash-flow problems to the point of illiquidity (i) would often only delay the inevitable and (ii) create an unwanted cluster of many insolvency proceedings which are ultimately all filed for at the same time when the suspension comes to an end, rather than a steady and progressive cleansing of the market by gradually removing companies that have failed to recover from the pandemic in a reasonably short period of time.
As a consequence, Germany has chosen not simply to extend the current provisions in unchanged form, but rather has significantly modified the wording of the COVInsAG to address the above concerns.
- Over-Indebtedness
In particular, as of October 1, 2020 and until December 31, 2020, a continued derogation from the immediate obligation to file for insolvency henceforth only applies to companies which otherwise would only file for insolvency due to over-indebtedness (Überschuldung) but which are not also illiquid. Such companies remain protected from having to file for insolvency based on the above-described rules until December 31, 2020, if (i) they were not already illiquid by December 31, 2019 and will not be illiquid after September 30, 2020 and thereafter.
Unlike illiquid companies, it was felt that companies which are over-indebted, i.e. (i) whose assets based on specific insolvency-driven valuation rules are not sufficient to cover their liabilities and (ii) which do not currently have a positive continuation prognosis (positive Fortführungsprognose), deserve a further grace period during which they may address their underlying structural issues, provided they do not enter illiquidity during this time window.
This extension until year end for over-indebted companies also addresses the often-voiced concerns that the uncertain future effects of the pandemic on a company’s medium-term prospects currently do not allow for a meaningful continuation prognosis which by general consensus has to cover the liquidity situation over the next 12 to 24 months.
- Illiquidity
This new restriction of the interim derogation from the filing requirement to over-indebtedness only, in turn, means that companies that cannot pay their liabilities when they fall due on September 30, 2020 (and beyond) and, therefore, are illiquid under German insolvency law terms, may no longer justify such financial distress by claiming it is caused by the pandemic. Instead, they will now be obliged to file for insolvency based on illiquidity once the initial protection accorded to them by the March 2020 rules runs out at the end of September 30, 2020.
With it being mid-September 2020 already, this will give the management of any entity facing serious current cash-flow problems only another two weeks to either remedy such cash flow problems and restore full solvency or file for insolvency on or shortly after October 1, 2020 due to their illiquidity at that point in time.
- Consequential Issues
The new, changed wording of the COVInsAG consequently restricts the other privileges connected with the temporary exemption from the filing requirement, i.e. that companies are permitted to keep trading during the extended time-window with certain protections against subsequent insolvency contestation rights, personal liability derogations or privileges and simplified access to new external or internal restructuring financing or loans, only to over-indebted companies. For them, these additional rules, which they may have already become accustomed to in the period between March 2020 and September 30, 2020, are simply extended until December 31, 2020.
III. Immediate Outlook
This law reform is of utmost importance for the management and the shareholders of any German entities that are currently in significant financial distress. The ongoing, periodic monitoring of their own financial position will need to determine in an extremely short time-frame whether or not the respective company is either illiquid or over-indebted as of September 30, 2020. If necessary such analysis should be firmed up by involving external advice or restructuring experts.
If the company is found to be over-indebted but not illiquid, the focus of any future turn-around must be December 31, 2020, i.e. the continued applicability of the COVInsAG rules may continue to provide some respite until then. If the company is found to be illiquid, the remaining time until September 30, 2020 must be used productively to either restore future liquidity via external or internal funding in the shortness of the available time or the filing for insolvency in early October 2020 becomes inevitable and should be prepared.
Managing directors of illiquid companies that do not file for insolvency without undue delay, but continue trading regardless of the insolvency reason, will again face the twin risks of personal civil and criminal liability based on a delayed or omitted filing. They and their trading partners and creditors, furthermore, face the full power of the far-reaching array of insolvency contestation rights (Insolvenzanfechtungsrechte) for a subsequent insolvency administrator of any measures now taken outside of the protective force of the COVInsAG interim rules.
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[1] In this context, see our earlier general COVID 19 alerts under: https://www.gibsondunn.com/whatever-it-takes-german-parliament-passes-far-reaching-legal-measures-in-response-to-the-covid-19-pandemic/ as well as under: https://www.gibsondunn.com/european-and-german-programs-counteracting-liquidity-shortfalls-and-relaxations-in-german-insolvency-law/.
[2] In this context, again see: https://www.gibsondunn.com/whatever-it-takes-german-parliament-passes-far-reaching-legal-measures-in-response-to-the-covid-19-pandemic/, under section II.2, as well as with further analysis in this regard https://www.gibsondunn.com/european-and-german-programs-counteracting-liquidity-shortfalls-and-relaxations-in-german-insolvency-law/.
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The following Gibson Dunn lawyers have prepared this client update: Lutz Englisch, Birgit Friedl, Marcus Geiss.
Gibson Dunn’s lawyers in the two German offices in Munich and Frankfurt are available to assist you in addressing any questions you may have regarding the issues discussed in this update.
For further information, please feel free to contact the Gibson Dunn lawyer with whom you usually work, or the three authors:
Lutz Englisch (+49 89 189 33 150, lenglisch@gibsondunn.com)
Birgit Friedl (+49 89 189 33 122, bfriedl@gibsondunn.com)
Marcus Geiss (+49 89 189 33 115, mgeiss@gibsondunn.com)
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London partners Susy Bullock and Allan Neil and associate Stephanie Collins are the authors of “National Contact Points: A Unique Grievance Mechanism for Resolving Responsible Business Conduct Disputes,” [PDF] published by Corporate Disputes Magazine in its October-December 2020 issue.
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The past several months have seen record volumes of debt issuance at historically low interest rates. At the same time, the COVID-19 pandemic has led to unforeseen challenges and novel practices for issuers, underwriters and their advisors working on these transactions. This webcast will discuss key legal, financial and logistical issues that are affecting debt offerings, as well as best practices for raising capital in the current environment. Please join our panel as they discuss recent developments in investment-grade and high-yield debt offerings, including market trends and disclosure considerations, as well as our expectations for the months ahead.
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PANELISTS:
Boris Dolgonos is a partner in the New York office of Gibson, Dunn & Crutcher and a member of the Capital Markets and Securities Regulation & Corporate Governance Practice Groups. Mr. Dolgonos has more than 20 years of experience advising issuers and underwriters in a wide range of equity and debt financing transactions, including initial public offerings, high-yield and investment-grade debt offerings, leveraged buyouts, cross-border securities offerings, and private placements. Mr. Dolgonos has represented public and private companies, investment banks and other financial institutions and sovereign entities in transactions across North and South America, Europe, Asia and Africa. He has experience in many industries, including metals and mining, biotechnology, industrials, aviation, hospitality, media and telecommunications, financial services, technology, and retail.
Doug Rayburn is a partner in the Dallas and Houston offices of Gibson, Dunn & Crutcher and a member of the firm’s Capital Markets, Energy & Infrastructure, Mergers & Acquisitions, Global Finance, Private Equity and Securities Regulation & Corporate Governance Practice Groups. His principal areas of concentration are securities offerings, mergers and acquisitions and general corporate matters. He has represented issuers and underwriters in over 200 public offerings and private placements, including initial public offerings, high-yield offerings, investment-grade and convertible note offerings, offerings by MLPs, and offerings of preferred and hybrid securities. Additionally, Mr. Rayburn represents purchasers and sellers in connection with mergers and acquisitions involving both public and private companies, including private equity investments and joint ventures. His practice also encompasses corporate governance and other general corporate concerns.
Robyn E. Zolman is a partner in the Denver office of Gibson, Dunn & Crutcher and a member of the firm’s Capital Markets, Securities Regulation & Corporate Governance and Energy Practice Groups. Her practice is concentrated in securities regulation and capital markets transactions. Ms. Zolman represents clients in connection with public and private offerings of equity and debt securities, tender offers, exchange offers, consent solicitations and corporate restructurings. She also advises clients regarding securities regulation and disclosure issues and corporate governance matters, including Securities and Exchange Commission reporting requirements, stock exchange listing standards, director independence, board practices and operations, and insider trading compliance. She provides disclosure counsel to clients in a number of industries, including energy, telecommunications, homebuilding, consumer products, life sciences and biotechnology.
Brussels partner Attila Borsos is the author of “The EU is set to control foreign subsidies,” [PDF] published by Financier Worldwide in its September 2020 issue.
San Francisco partner Ethan Dettmer and Washington, D.C. associate Suria Bahadue are the authors of “The future of DACA is far from clear,” [PDF] published by the Daily Journal on August 27, 2020.
Century City partner Scott Edelman and San Francisco associates Vivek Gopalan and Zach Tan are the authors of “Ruling in gun case puts every Californian at risk,” [PDF] published by the Daily Journal on August 27, 2020.
On August 26, 2020, as part of its continued effort to update and modernize public company disclosure requirements, the U.S. Securities and Exchange Commission (the “Commission”) adopted amendments to Item 101 (“Description of Business”), Item 103 (“Legal Proceedings”) and Item 105 (“Risk Factors”) of Regulation S-K at an open meeting of the Commission.[1] These amendments, which mark the first time that these disclosure requirements have been substantially updated in over 30 years, were designed to result in improved disclosure, tailored to reflect a registrant’s particular circumstances, and reduce disclosure costs and burdens. Many of the amendments reflect the Commission’s “long-standing commitment to a principles-based, registrant-specific approach to disclosure,” which Commission Chairman Jay Clayton referred to at the open meeting as the “envy of the world.”
As discussed in greater detail below, the key changes are:
- Revisions to the rules for the Description of Business to more broadly embrace a principles-based standard identifying a non-exclusive list of topics that may be addressed when material.
- Revisions to the rules for disclosure of Legal Proceedings to confirm the ability to incorporate by reference from other disclosures in the same document and to raise the dollar threshold for disclosing legal proceedings involving environmental protection laws in which the government is a party.
- Revisions to the Risk Factors standards to encourage more concise and company-specific discussions of material factors that make investment in a company or its securities speculative or risky.
In developing the proposed amendments, the Commission stated that it considered input from comment letters received in response to its disclosure modernization efforts, the SEC staff’s experience with Regulation S-K arising from the Division of Corporation Finance’s disclosure review program, and changes in the regulatory and business landscape since the adoption of Regulation S-K. As a recent example, in response to the COVID-19 pandemic, the Division of Corporation Finance closely monitored registrants’ disclosures about how COVID-19 affected their financial condition and results of operations. Division staff observed that the current principles-based disclosure requirements generally elicited detailed discussions of the impact of COVID-19 on registrants’ liquidity position, operational constraints, funding sources, supply chain and distribution challenges, the health and safety of workers and customers, and other registrant- and sector-specific matters. Chairman Clayton stated that “[t]he effectiveness of this framework in providing the public with the information necessary to make informed investment decisions has proven its merit time and time again as markets have evolved when we have faced unanticipated events.”[2] However, this view was not shared by all of the Commissioners, as evidenced by the amendments’ adoption by a 3-2 vote, with the two Democratic Commissioners dissenting.
This client alert begins with a general overview of the amendments adopted by the Commission and their practical impact on existing public company disclosure requirements, as well as the arguments raised by the dissent. A table providing a more detailed review of and observations on the amendments is provided at the end of this alert. For a comparison of the Regulation S-K language from before and after the amendments, please refer to the attached Annex A.
_____________________
[1] See Modernization of Regulation S-K Items 101, 103, and 105, Exchange Act Release No. 33-10825 (August 26, 2020), available at https://www.sec.gov/rules/final/2020/33-10825.pdf.
[2] Modernizing the Framework for Business, Legal Proceedings and Risk Factor Disclosures, available at https://www.sec.gov/news/public-statement/clayton-regulation-s-k-2020-08-26.
Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. For additional information, please contact the Gibson Dunn lawyer with whom you usually work, any lawyer in the firm’s Securities Regulation and Corporate Governance and Capital Markets practice groups, or the authors:
Andrew L. Fabens – New York (+1 212-351-4034, afabens@gibsondunn.com)
Hillary H. Holmes – Houston (+1 346-718-6602, hholmes@gibsondunn.com)
Elizabeth Ising – Washington, D.C. (+1 202-955-8287, eising@gibsondunn.com)
Brian J. Lane – Washington, D.C. (+1 202-887-3646, blane@gibsondunn.com)
Stewart L. McDowell – San Francisco (+1 415-393-8322, smcdowell@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)
Michael A. Titera – Orange County (+1 949-451-4365, mtitera@gibsondunn.com)
Peter W. Wardle – Los Angeles (+1 213-229-7242, pwardle@gibsondunn.com)
Lori Zyskowski – New York (+1 212-351-2309, lzyskowski@gibsondunn.com)
William Bald – Houston (+1 346-718-6617, wbald@gibsondunn.com)
Rodrigo Surcan – New York (+1 212-351-5329, rsurcan@gibsondunn.com)
© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
New York partner Avi Weitzman and of counsel Tina Samanta are the authors of “Liu v. SEC: Supreme Court Cabins SEC Disgorgement Remedy,” [PDF] published in the Wall Street Lawyer in its July 2020 issue.
Please join members of Gibson Dunn’s Capital Markets and Mergers and Acquisitions Practice Groups as they provide both practical advice and information about the latest legal developments regarding SPACs. Specifically, the panelists will discuss:
- IPO Market Overview
- IPO Considerations and Trends
- Business Combinations –
- Target Perspective
- SPAC Perspective
- London Listed SPACs
View Slides (PDF)
PANELISTS:
Evan M. D’Amico is a corporate partner in the Washington, D.C. office of Gibson, Dunn & Crutcher, where his practice focuses primarily on mergers and acquisitions. Mr. D’Amico advises companies, private equity firms, boards of directors and special committees in connection with a wide variety of complex corporate matters, including mergers and acquisitions, asset sales, leveraged buyouts, spin-offs and joint ventures. He also has experience advising issuers, borrowers, underwriters and lenders in connection with financing transactions and public and private offerings of debt and equity securities.
Matthew B. Dubeck is a partner in the Los Angeles office of Gibson, Dunn & Crutcher, where he practices in the firm’s Private Equity, Mergers and Acquisitions and Securities Regulation and Corporate Governance Practice Groups. He advises private equity firms, companies and investment banks across a wide range of industries, focusing on public and private merger transactions, stock and asset sales and joint ventures and strategic partnerships. Mr. Dubeck has particular expertise and experience in the use of transactional liability insurance, such as representation and warranty, tax and litigation risk insurance, to reallocate risk and to consummate transactions more efficiently on superior terms, particularly in the private equity and real estate industries.
Christopher Haynes is an English qualified corporate partner in the London office of Gibson, Dunn and Crutcher. Chris has extensive experience in equity capital markets transactions and mergers and acquisitions including advising corporates, investment banks and selling shareholders on initial public offerings (including dual track processes), rights issues and other equity offerings as well as on public takeovers, private company M&A and joint ventures. He also advises on corporate and securities law and regulation.
Stewart McDowell is a partner in the San Francisco office of Gibson, Dunn & Crutcher. She is a member of the firm’s Corporate Transactions Practice Group, Co-Chair of the Capital Markets Practice Group. Ms. McDowell’s practice involves the representation of business organizations as to capital markets transactions, mergers and acquisitions, SEC reporting, corporate governance and general corporate matters. She has significant experience representing both underwriters and issuers in a broad range of both debt and equity securities offerings. She also represents both buyers and sellers in connection with U.S. and cross-border mergers, acquisitions and strategic investments.
Gerry Spedale is a partner in the Houston office of Gibson, Dunn & Crutcher. He has a broad corporate practice, advising on mergers and acquisitions, joint ventures, capital markets transactions and corporate governance. He has extensive experience advising public companies, private companies, investment banks and private equity groups actively engaging or investing in the energy industry. His over 20 years of experience covers a broad range of the energy industry, including upstream, midstream, downstream, oilfield services and utilities.
MCLE 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.
Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact CLE@gibsondunn.com to request the MCLE form.
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California attorneys may claim “self-study” credit for viewing the archived version of this webcast. No certificate of attendance is required for California “self-study” credit.
1. Introduction
On December 28, 2019, China’s Standing Committee of the National People’s Congress (“NPC”) published the draft Export Control Law of the People’s Republic of China (“2019 Draft”), a revised version of an earlier draft first published by the Chinese Ministry of Commerce (“MOFCOM”) on June 16, 2017 (“2017 Draft”).[1] On July 3, 2020, the NPC published a further revised draft Export Control Law of the People’s Republic of China (“2020 Draft”) (the 2019 Draft and the 2020 Draft collectively the “Draft Laws”). The resultant set of draft legislation is China’s first step towards a comprehensive and unified export control regime.
Against this backdrop, we take this opportunity to (i) summarize the current status quo of China’s export control regime; (ii) discuss in depth the key features of both Draft Laws; and (iii) analyze their potential impact on our clients around the globe.
2. Status Quo of China’s Export Control Regime
2.1 Overview
Currently, China’s export control regime is scattered across multiple laws, administrative regulations, and other guidelines, including but not limited to: (i) the Foreign Trade Law (rev. 2016); (ii) the Customs Law (2017); (iii) the Administrative Regulations on Import and Export of Goods (2001); (iv) the Administrative Regulations on Import and Export of Technologies (2019); (v) the Regulations on Control of Arms Export (2002); (vi) the Regulations on Control of Nuclear Export (2006); (vii) the Administrative Regulations on Monitored Chemicals (2011); (viii) the Regulations on Control of Nuclear Dual-Use Items and Related Technologies Export (2007); (ix) the Regulations on Control of Missiles and Missile-related Items and Technologies Export (2002); and (x) the Regulations on Control of Biological Dual-Use Items and Related Equipment and Technologies Export (2002). Apart from the foregoing, the Criminal Law (as amended) and the Customs Law (2017) as well as the Implementation Regulations on Customs Administrative Penalties (2004) prescribe criminal liability and administrative penalties for violations of Chinese export control regulations.[2]
2.2 Scope
2.2.1 General
Through the various regulations described above, China’s export control laws and regulations cover items ranging from finished goods (such as products and equipment), components, and raw materials, to intellectual property (such as technologies and software). Generally speaking, China’s current export control regime regulates a wide range of activities such as “the export for trade purpose […], gifting, exhibition, scientific and technological cooperation, assistance, services and […] transfers by other means.”[3]
To date, China’s export control regulations have been focused on equipment, technologies, and services relating to sensitive items, including but not limited to missiles, arms, nuclear, certain chemicals, biological dual-use items, and explosives. In addition, MOFCOM, sometimes together with other authorities, has announced interim export control measures from time to time on items not specifically covered by the existing regulations upon approval of the Chinese State Council and other competent authorities. For example, in 2015, MOFCOM, China’s General Administration for Customs (the “China Customs”), the former State Administration for Science, Technology and Industry for National Defense (“SASTIND”), and the People’s Liberation Army General Armaments Department (“PLA Armaments”) jointly announced restrictions on the export of certain military and civil dual-use unmanned aerial vehicles.[4]
2.2.2 Extraterritoriality
Unlike some components of the U.S. export control regime and U.S. secondary sanctions, China’s export control regime currently generally does not purport to extend to re-exports by foreign persons that are not subject to Chinese jurisdiction.
However, as more fully described in Section 2.5 below, the end user and end-use requirements with respect to certain items effectively already have some (limited) extraterritorial effect. In addition, for clarification purposes, transit, transshipment and through shipment of dual-use items and technologies and export of the same via special customs supervision areas or bonded supervision areas are also subject to current Chinese export control law.[5]
2.3 Registration of Exporters
Article 9 of the Foreign Trade Law requires all exporters (whether or not the relevant products are subject to export control measures) to file and register with the “department of the State Council in charge of foreign trade” (currently MOFCOM), or any authorities entrusted by it, unless such filings and registrations are otherwise exempted. Failure to submit the necessary filings or be duly registered will be an impediment to obtaining clearance or relevant declarations from China Customs. This is especially the case for exporters of items subject to export control, and is a requirement that is duplicated in other export control regulations. For example, the Regulations on Control of Missiles and Missile-related Items and Technologies Export require relevant exporters to register with the “department of the State Council in charge of foreign economy and trade” (currently MOFCOM). Likewise, the Regulations on Control of Nuclear Dual-Use Items and Related Technologies Export also require relevant exporters to register with MOFCOM.
2.4 Quota Restrictions and Export Licenses
Pursuant to Article 19 of the Foreign Trade Law, quota restrictions and export licenses are the most powerful and widely used tools in China for exerting export control over controlled items and technologies.
Where a quota restriction applies to the export of any item, applications are required to be made to governmental authorities in charge of export quota administration, currently MOFCOM (including its local counterparts) in early November each year to apply for such quota for next year. Successful applicants will each receive a quota certification and then may be able to apply for an export quota license again at MOFCOM.
For controlled items that are not subject to a quota (e.g., nuclear, arms, explosives), export licenses are required. Typically, exporters are required to apply to MOFCOM or other competent authorities. For proposed exports that may have a material influence on national security, public interests or likewise, the application may even be subject to approval by the State Council.[6]
To export restricted technologies, exporters are required to apply for export licenses through a two-step process. First, an exporter shall apply to the department of State Council in charge of foreign economy and trade, currently MOFCOM, which will examine the technologies to be exported along with certain agencies in charge of science and technology. With MOFCOM’s approval, as evidenced by issuing a letter of intent for a technology export license, the exporter may then negotiate the terms of and enter into a technology export agreement with the counterparty. Then, following the execution of the technology export agreement, such exporter will again have to apply to MOFCOM for a formal export license.
2.5 End User and End-Use Certification
For export of missile, nuclear, certain chemical and biological dual-use related products and technologies, exporters are generally required to submit end user and end-use certifications and other application documents to competent governmental authorities. Recipients of such products or technologies shall also undertake that the exported products and technologies will not be (i) used for any purpose other than the declared end-use, or (ii) transferred to any third party other than the declared end user, unless otherwise approved by the Chinese government. In case of violation of such end user and end-use certification, any export licenses already issued may be suspended or cancelled.
2.6 Lists of Items and Technologies Restricted from Free Export
China has maintained controlled items lists setting forth details on the items and technologies that are subject to export restrictions, such as: (i) the Missiles and Missile-related Items and Technologies Export Control List; (ii) Arms Export Control List and Nuclear Export Control List; (iii) Certain Chemicals and Related Equipment and Technologies Export Control List; and (iv) Biological Dual-Use Items and Related Equipment and Technologies Export Control List.
Upon approval of the State Council, MOFCOM and other competent authorities may jointly announce interim export control measures against items and technologies that are not already included in these lists.
2.7 Liabilities for Violations under the Current Export Control Regime
Violations of China’s current export control laws and regulations may be subject to administrative penalties and criminal liability.
Pursuant to the customs-related laws and regulations, as well as the abovementioned export control regulations, administrative penalties range from a warning, confiscation of products to be exported and/or illegal income (if any), and/or a fine up to five times the illegal income, to cancellation of export licenses. In addition, local counterparts of China Customs may take temporary measures to detain suspected perpetrators as well as products to be exported and vehicles used for transportation. Criminal liabilities include a monetary penalty, confiscation of all assets and even imprisonment for severe violations that constitute crimes relating to smuggling, illegal business operations, and license forgery.
3. Reform of China’s Export Control Regime
3.1 Overview
The introduction of the new comprehensive Draft Laws comes on the heels of the U.S.-China trade war, which seemed to have culminated in both countries signing the “Phase One” trade deal on January 15, 2020.[7] Much ink has been spilled over the trade war, which featured the U.S. Bureau of Industry and Security’s (“BIS”) inclusion of Huawei onto the Entity List, the U.S. House of Representatives passing legislation in December 2019 in response to the Uighur conflict in Xinjiang, a move which could impose export controls on U.S.-made items used by the Chinese government for certain surveillance and repressive activities (as elaborated here[8]), recent designations of Chinese entities, and new export controls rules on military end uses and end users in China. In response, China has threatened to publish an “Unreliable Entity List” that could lead to trade sanctions against U.S. companies[9] and also recently imposed sanctions on four U.S. politicians, one congressional committee and one U.S. company.[10] The implementation of the 2020 Draft could arguably provide China with ammunition to counter U.S. export control measures targeting China, and spell wider implications for the international business community in dealing with Chinese goods. This includes potential further complications for European companies that may be caught in the middle of the U.S.-China trade war.
According to Minister of Commerce Zhong Shan at the 15th Session of the 13th National People’s Congress Standing Committee on December 24, 2019, the 2019 Draft drew inspiration from a “common international practice” to regulate trade, and therefore enhances China’s obligations to fulfill its international commitments as well as to safeguard national security interests. This sentiment is also echoed in Article 1 of both Draft Laws.[11]
Broadly speaking, the 2019 Draft addressed key matters such as: (i) the formal establishment of an export control system; (ii) the requirement for exporters to establish an internal compliance review system to monitor export controls; (iii) end user and end-use certifications; and (iv) enhanced penalties for violations of the 2019 Draft.
The 2020 Draft largely resembles the 2019 Draft but is also different in a few ways. For example, (i) the 2020 Draft explicitly applies to foreign entities and individuals who violate such law; (ii) it is no longer a mandatory obligation for exporters to establish an internal compliance review system; and (iii) it is now unclear how long it would take to apply for an export license, among others.
3.2 Scope
3.2.1 General
(a) The 2019 Draft
The 2019 Draft comprised 48 articles that are set out over six chapters. This represents a considerable streamlining of the 2017 Draft that contained 70 provisions.[12] We detail the areas we consider most relevant below. The 2019 Draft provided for the establishment of a unified export control system with extraterritorial reach and several additional new features.
The 2019 Draft specifically targeted China’s nuclear, military, and dual-use items,[13] as well as other goods, technology, and services that could have an impact on China’s international obligations and national security.[14] The State Council and the Central Military Commission are the primary enforcers of the legislation, though responsibility for regulating and licensing the various controlled items will be shared between different state agencies.[15]
(b) The 2020 Draft
The 2020 Draft also has 48 articles that are set out in only five chapters – the second chapter (control policy and list) and the third chapter (control measures) in the 2019 Draft have been consolidated to one chapter in the 2020 Draft, namely, control policy, list and measures. There is no material change to the general scope and coverage of the 2019 Draft, except as described below.
3.2.2 Extraterritoriality
(a) Re-exports, Deemed Exports and Likewise
The 2017 Draft defined “re-export” as the transfer of an item from a jurisdiction outside of China to a third country, and provided that the export control provisions would apply to certain Chinese-origin controlled items or foreign-made items that contain Chinese-origin controlled items that are determined with reference to a “percentage test.”[16]
The above definition of “re-export” has been removed in both Draft Laws, although the reasons for doing so are unclear.[17] As stands, the relevant Article 45 of both Draft Laws states: “The transit, transshipment, through shipment, or re-export of a controlled item, or the export of a controlled item to overseas from special customs supervision areas such as bonded areas and export processing zones, as well as bonded supervision places such as export supervision warehouses and bonded logistics centers shall be governed by the relevant provisions of this Law.”
Yet, while the definition of “re-export” and the de minimis rule were removed in the Draft Laws, a reference to “re-export” remained.
Accordingly, it remains to be seen whether Article 45 of the Draft Laws will include extraterritorial reach and expand to all re-exports of controlled items, such as a U.S. company re-exporting a controlled item that originates from China to Mexico.
Under Article 2 of both Draft Laws, “deemed exports” refers to the provision of regulated goods and technologies to non-Chinese citizens, legal persons, and organizations.[18] Ostensibly, this provision was included to regulate the trade activities of foreign entities based in China with access to controlled equipment or sensitive technical data. Although unlike the 2017 Draft, neither the 2019 Draft nor the 2020 Draft includes the language that it also applies to exports to Taiwan, Hong Kong and Macau, we believe it may still capture exports to such regions based on China’s geopolitical understanding and prior export control practice.
Other trade activities that are captured under the Draft Laws include transit, transshipment and through shipment of controlled items and export via special customs supervision areas and bonded supervision areas and the above noted re-exports.[19]
We expect China to address these questions, specifically whether “re-exports” will include re-exports from a non-Chinese country to a third country, either in a revised draft or in implementing regulations that provide more details and guidance after the 2020 Draft is enacted.
(b) Legal Liabilities of Foreign Perpetrators
The 2020 Draft, however, has brought clarity to legal liabilities of foreign entities and individuals engaged in China, by introducing Article 44, which reads: “An organization or individual outside the territory of the PRC which violates the provisions (…) of the Export Control Law, hinders the performance of non-proliferation and other international obligations (…), or endangers China’s national security and interests, shall be (…) held legally liable.”
3.3 Registration of Exporters
While the requirement of exporters’ filing and registration obligations remains unchanged, the first new feature of the export control system under both Draft Laws is the introduction of a licensing regime for exporters who wish to export controlled items, as well as any other items that exporters know or should know : (i) may threaten national security; (ii) are used in the design or development of weapons of mass destruction or their delivery vehicles; or (iii) are used for terrorism purposes.[20] According to the Draft Laws, the following eight factors will be taken into consideration in assessing a license application: (i) international obligations and commitments; (ii) national security; (iii) type of export; (iv) sensitivity of items; (v) countries or regions the items are destined for; (vi) end user and end-use; (vii) credit history of the exporters; and (viii) any other circumstances as prescribed by laws and regulations.[21]
3.4 Controlled Items List
Another novel feature of the Draft Laws is the creation of a controlled items list. To that end, Article 9 of the 2019 Draft states that three separate lists will be generated for dual-use items, military items, and nuclear items respectively.[22] However, according to Article 9 of the 2020 Draft, it appears only one list is contemplated to include all covered items.
Article 10 of the 2019 Draft contains a further catchall provision that provides that goods, technology, or services that are not otherwise on a controlled items list may nevertheless be placed on a temporary restriction list for up to two years.[23] The 2020 Draft has also prescribed the same[24] but has introduced a new assessment regime prior to the expiration of the two-year temporary restriction period.[25] Items that are subject to a temporary restriction will not be automatically exempted from such restraint. Instead, such temporary restriction may be cancelled, extended or turned into a permanent restriction by including such items into the controlled items list, depending on the result of the assessment.
Neither the 2019 Draft nor the 2020 Draft contains an initial list of controlled and/or restricted items. Although the controlled items list(s) referenced in both Draft Laws is expected to include largely the same items on the existing lists subject to the current export control regime,[26] this could still prove worrying for businesses based in China due to the uncertainty of goods that will eventually make it onto the controlled items lists or the temporary restriction list.
While both Draft Laws primarily cover dual-use items, military items, and nuclear items, we do not expect the 2020 Draft, once enacted, to affect China’s current export quota administration primarily regulating the export of certain plants and livestock.
3.5 End User and End-Use Certifications
Unlike the 2017 Draft that gave regulatory authorities the power to request exporters or importers to provide end user and end-use certifications, Article 17 of the 2019 Draft and Article 15 of the 2020 Draft now make it mandatory for exporters to submit end user and end-use certifications to the national export control authorities.[27] In effect, this appears to be a uniform requirement regardless of the sensitivity of the controlled items exported, which is a significant departure from Article 25 of the 2017 Draft that limited the requirement for certification “based on the degree of sensitivity of controlled items and end users.”[28] The end-use and/or end user certificates may be issued by either end users themselves, or the governments in countries or regions where such end users are located.
Furthermore, to add on an additional layer of compliance requirements, exporters who are aware of changes to the end user or end-use of controlled items must immediately report the changes to the national export control authorities.[29] However, both Draft Laws are unclear on what the consequences are of violating these disclosure obligations.
In addition, importers and end users who violated either end user or end-use certifications may be placed on a controlled list. National export control authorities may impose bans or restrictions on transactions with entities on the list, among other sanctions.[30]
3.6 Entity Lists
3.6.1 Proposed “Unreliable Entity List”
In the midst of the China-U.S. trade war, MOFCOM announced on May 31, 2019 that China will introduce an “unreliable entity list” with an aim to “safeguard the international economy and trade rules and multilateral trading regime” and “object to unilateralism and trade protectionism.”[31] This announcement has been seen as a reaction to BIS’s inclusion of Huawei Technologies Co., Ltd. and its 70 affiliates (collectively, “Huawei”) to its Entity List on May 15, 2019 (as described here[32]). Over the course of several press conferences convened by MOFCOM and the Ministry of Foreign Affairs (“MFA”) in late 2019, spokesmen for the respective agencies repeatedly responded that such a list will be published soon.[33] However, there has not been any further development to date.
Nonetheless, we compare China’s proposed “unreliable entity list” against BIS’s Entity List in the table below.
| China’s Proposed “Unreliable Entity List” | BIS’s Entity List | |
|
Background and Purpose |
“Certain foreign entities have cut off the supplies or taken other discriminating measures, impairing Chinese companies’ legitimate interests, endangering China’s national security and interests, posing a threat to global industry chain and supply chain, as well as negatively affecting the global economy.”[34] The “unreliable entity list” will be introduced to “safeguard the international economy and trade rules and multilateral trading regime, in objection to unilateralism and trade protectionism, safeguard China’s national security, public interests and companies’ legitimate rights and interests.”[35] |
BIS first published the Entity List in February 1997 as part of its efforts to inform the public of entities that have engaged in activities that could result in an increased risk of the diversion of exported, re-exported, or transferred (in-country) items to weapons of mass destruction (WMD) programs. Since its initial publication, grounds for inclusion on the Entity List have expanded to activities sanctioned by the State Department and activities contrary to U.S. national security and/or foreign policy interests.[36] |
|
Grounds for Inclusion |
When weighing which entities might be included, the following factors will be taken into consideration: (i) whether such entities have implemented a blockade, cutoff of supplies, or other discriminating measures targeting Chinese entities; (ii) whether such entities’ conducts are based on non-commercial purpose and violate market rules and the spirit of contract; (iii) whether such entities’ conducts have caused substantial damage to Chinese companies or relevant industries; and (iv) whether such entities’ conducts pose a threat or potential threat to national security.[37] |
Pursuant to Section 744.11(b) of the Export Administration Regulations (the “EAR”), the Entity List identifies persons or organizations reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States.[38] |
|
Legal Basis |
Foreign Trade Law; Anti-Monopoly Law; and National Security Law. |
Export Control Reform Act of 2019; International Emergency Economic Powers Act; the EAR. |
|
Effect after Inclusion |
It is unclear what effect inclusion to such list will have. We expect China to at least impose restrictions on import from and export to the included entities, and such restrictions may even extend to their respective affiliates. |
The Entity List imposes specific license requirements for the export, re-export, or transfer (in-country) of specified items to the persons named on it. The persons on the Entity List are subject to individual licensing requirements and policies supplemental to those found elsewhere in the EAR. BIS considers that transactions of any nature with listed entities carry a “red flag” and recommends that U.S. companies proceed with caution with respect to such transactions.[39] |
|
Relief |
Listed entities will be entitled to object. After corrective measures are taken, relevant authorities may consider adjusting the “unreliable entity list.”[40] |
Listed parties may seek removal from such list. |
3.6.2 Introduction of Embargo, “Blacklist,” and National/Regional Risk Assessment
The 2017 Draft, the 2019 Draft and the 2020 Draft formally introduce trade concepts such as embargoes, “blacklists,” and national/regional risk assessments into China’s export control regime. Article 8 of both Draft Laws allows national export control authorities to conduct an assessment of countries and regions where controlled items are exported, identify the level of risks, and take corresponding control measures. Article 10 of both Draft Laws now makes it possible for national export control authorities to ban the export of certain items or to certain countries or regions or to certain persons (both individuals and entities), in order to “fulfill … international obligations and safeguard national security.” Article 18 of the 2020 Draft and Article 20 of the 2019 Draft also introduce a controlled list of importers and end users which (i) violate end user or end-use certifications as stated above, (ii) may impair national security, or (iii) use controlled items for terrorism purposes. Pursuant to the 2020 Draft, transactions with those on the controlled list will be restricted, banned or suspended.[41] These additions arguably will provide a legal framework and broad discretion for China to impose export control measures on an ad hoc basis.
3.7 Liabilities for Violations under the Draft Laws
3.7.1 Enhanced Penalties in Both Draft Laws
Finally, both Draft Laws significantly ratchet up the penalties for violations in contrast to the 2017 Draft by providing for stiffer fines. Examples of violations under the Draft Laws include, but are not limited to: (i) unauthorized export of controlled items; (ii) obtaining an export license for the export of controlled items through bribery or other improper means; (iii) falsifying or trading an export license; or (iv) conducting business with controlled importers or end users in violation of the Draft Laws.[42] Article 30 of the 2019 Draft and Article 28 of the 2020 Draft provide Chinese authorities with enforcement powers if they suspect violations of the new export control laws. Penalties for violations include confiscation of illegal income (if any) and a fine up to a multiple of the amount of illegal income if such amount is greater than a certain threshold or, if lower, a cap, in each case depending on the specific type of violation. Other administrative penalties include but are not limited to suspension of business for rectification as well as cancellation of export licenses.[43]
The enforcement powers given to Chinese authorities under the 2019 Draft, which now largely remain the same in the 2020 Draft, have been criticized by international organizations. For example, the Federation of German Industries (“BDI”) believes the missing independent judicial oversight is a key problem of the new export control regime.[44] It views the Chinese authorities’ enforcement powers available upon suspicion of a violation as highly problematic. The BDI also suggests publishing decisions about further export controls and measures in order to increase transparency.[45]
3.7.2 China’s Export Control Enforcement Actions
China’s export control enforcement actions result in liabilities ranging from administrative penalties imposed by China Customs to criminal fines and imprisonment.
Existing regulations[46] relating to export control do not specifically authorize China Customs to impose administrative fines. Instead, China Customs usually does so under Articles 14 and 15 of Implementation Regulations of Customs on Administrative Penalties (2004) when parties are seeking to export controlled items without export licenses[47] or when violations would compromise “the accuracy of China Customs’ statistics,” “China Customs’ supervision and administration,” or “China’s administration of licenses.”[48] Pursuant to these articles, a fine would range from RMB1,000 to RMB30,000 (approximately US$ 140 to US$ 4,200) or no more than 30% of the value of exported goods.[49] The value of goods sought to be illegally exported without the required export license, in most administrative cases we were able to find from publicly available information, was under RMB 0.5 million (approximately US$ 70k), with a few at around RMB 2 million (approximately US$ 280k), and one at around RMB 4 million (approximately US$ 560k). Fines imposed by China Customs ranged from a few thousand RMB (approximately a few hundred US dollars) to RMB 284k (approximately US$ 40k), representing 1% – 18% of the value of goods at issue.
Exporters, export agencies and their agents may be held criminally liable in severe violations, for example, when large amounts of valuable controlled items are illegally exported. Fines imposed on exporters may be as high as RMB 14 million (approximately US$ 2 million), and individuals in charge of such exporters or export agencies facilitating the illegal export are typically sentenced to less than five years in prison and fined for a few hundred thousand RMB. The most severe penalty against individuals we were able to find in the public domain was a fine of around RMB 1 million (approximately US$ 156k)[50] and imprisonment of 13 years.[51]
3.7.3 Potential Impact of the Draft Laws on Future Enforcement Actions
As discussed above, the existing export control laws and regulations do not themselves authorize China Customs to impose administrative penalties. Accordingly, China Customs has to resort to other regulations where the prescribed penalties are generally inconsequential. Once the 2020 Draft is enacted, China Customs will be authorized to impose significantly higher fines. In the case of exporting controlled items without an export license, the fine will range from five to 10 times the illegal income with a minimum of RMB 500k (approximately US$ 70,625 at the prevailing exchange rate) even if there is no illegal income,[52] almost twice the administrative fine imposed by China Customs in the most serious violation noted above. If exporters transact with those on the “blacklist” described in Section 4.5 below, the fine can be as high as 10 to 20 times the illegal income with a minimum of RMB 500k.[53]
Most severe export control violations will continue to be subject to criminal liabilities under China’s criminal law.
3.8 Internal Compliance Review System
3.8.1 2019 Draft
More significantly, the 2019 Draft made it mandatory for all exporters to establish an internal compliance review system to monitor their export control obligations. An internal compliance review system is required in order to be eligible for certain licenses – this is in contrast to the 2017 Draft which simply “encouraged” the establishment of an internal compliance program.[54] It is worth noting that under the current export control laws and regulations, only exporters of nuclear dual-use items and technologies are required to establish an internal control system. However, the 2019 Draft did not specify how regulators should evaluate this internal compliance review system and what constitutes a significant violation of this obligation.
3.8.2 2020 Draft
In contrast to the 2019 Draft, establishing an internal compliance system is no longer a mandatory obligation under the 2020 Draft. Article 14 of the 2020 Draft encourages, instead of mandating, exporters to establish such system by granting simplified export measures to those that have established such internal compliance review system that works well.
4. Impact of the Draft Laws on International Trade Relations
The reference to extraterritoriality of the Draft Laws means that China’s new export control regime, if and when the extraterritoriality is enacted, will impact businesses within and outside China that deal with Chinese controlled items.[55] That said, the vagueness of several of the Draft Laws’ provisions creates a layer of uncertainty within the international business community, specifically regarding its extraterritorial application and as to which activities specifically will be affected. This could be a deliberate move on China’s part in order to create sufficient room to augment the scope and reach of this export control regime through the issuance of supplementary regulations.[56]
For example, even with the abolishment of the definition of “re-exports” (but not the concept itself) and references to a de minimis rule, it is unclear if the 2020 Draft will apply to the re-export of foreign-made items that contain Chinese-origin controlled items to a jurisdiction outside of China. Following a public consultation, various trade associations from the U.S., Europe, and Japan have made calls for the 2019 Draft to clarify the scope of the affected re-export activities,[57] while the 2020 Draft remains unchanged in this regard.
Furthermore, the requirements to determine end-use and end-users for exporters may also give rise to increased compliance costs for businesses in China as they now have to undertake more stringent third-party due diligence into their trade counterparties, in order to avoid a potential violation of any controlled items list or restricted list that is published pursuant to the 2020 Draft.
Notwithstanding the above, both Draft Laws appear to be a more conciliatory version of the 2017 Draft in a move that is arguably designed to ease U.S.-China trade tensions. Of note is the removal of a clause that referred to retaliatory measures that China could take in response to “discriminatory export control measures” taken by other countries against it.[58] It therefore remains to be seen if Beijing will ever follow through with publishing an “Unreliable Entity List” in retaliation against U.S. trade sanctions.
4.1 U.S.-China Trade Relationship
For U.S. companies, what may prove most worrying about China’s new export control regime may be the highly publicized “unreliable entity list” and the “blacklist” to be formulated pursuant to the Draft Laws, in China’s apparent attempt to counter the U.S. sanctions, as well as the risk of leaks of trade secrets and other intellectual property in the case of investigations by China’s national export control authorities.
Based on the principle of reciprocity, a term frequently used by both countries’ governments as justification for its hostile actions against one another, if the U.S. government continues to target Chinese technology companies using its “Entity List” or similar tools, it is conceivable that China will follow through its original announcement for the establishment of the “unreliable entity list” and following the enactment of the 2020 Draft, the “blacklist,” and use these legal measures to counter U.S. export control measures targeting China.
The Draft Laws specify what measures China’s national export control authorities may take in order to investigate a suspected violation, and therefore raising concerns for potential leaks of trade secrets and other intellectual property.[59] Perhaps anticipating such concerns, both Draft Laws also require the authorities and their staff to maintain confidentiality of trade secrets obtained during such investigations.[60]
4.2 EU-China Trade Relationship
The 2020 Draft will likely have an impact on EU-China trade relationships and European companies in particular.
In the past, EU companies had to deal with the extraterritoriality of U.S. sanctions and political pressure from both the U.S. and China, as exemplified by the inclusion of the Chinese telecommunications company Huawei and its named affiliates on the U.S. Entity List in May 2019.[61]
In the future, EU companies will have to deal with the extraterritoriality of U.S. and Chinese sanctions and political pressure from both the West and East.
On the legal front, any Sanctions and Export Compliance Management System of an EU company will have to cover not only national law and EU law, but also be mindful of the extraterritorial reach of both the U.S. and the Chinese Sanctions and Export Controls.
If an entity were to be blacklisted or greylisted by the U.S., but not by China, or vice versa, EU companies would have to decide with whom to do business. As many companies might not have the resources to continuously monitor both the U.S. and the Chinese regime, they might choose to reorganize their supply chain in a way to only source U.S. or Chinese products to limit their legal exposure.
When it comes to export controls in the EU, power usually rests with the various national governments to implement their own laws.[62] Despite the lack of ability to implement EU-wide export controls, EU governments could, on a national level, align with U.S. export controls to ensure a common approach towards China.[63] Otherwise, there is an increasing risk for European companies to be subject to U.S. sanctions. One suggested approach for the EU would thus be to work together with the U.S. to restrict China’s ability of gaining access to advanced technologies.[64]
However, if China uses export controls to counter U.S. sanctions, and if, at the same time, the U.S. imposes further tariffs on EU goods, this could drive European companies closer to China.[65]
On the political front, European manufacturers could also find themselves sidelined by the U.S.-China Phase One deal as elaborated above. A study by the American Chamber of Commerce, for example, predicted that German and French manufacturing sectors may be the most adversely affected by China’s commitment to buy $200 billion more in goods from the U.S. in the Phase One deal.[66]
Finally, this conflict could also lead to European companies diversifying their portfolios by using goods from other third countries.
Overall, after the 2020 Draft is enacted, European companies could find themselves in the difficult position of having to choose between imports from the U.S. or China and evaluating where the larger legal risks and economic and political benefits are.
5. Conclusion
Both the 2019 Draft and the 2020 Draft change the 2017 Draft in many ways and provide for a comprehensive Chinese export control regime. Besides a few clear requirements, the 2020 Draft remains opaque as to its exact scope & specifically regarding its contemplated extraterritorial reach, and has the potential of making it challenging for companies to navigate through China’s new export control regime.
It is expected that, as is common with the introduction of a new law in China, the Chinese authorities will, in time, issue implementing regulations that provide more details and interpretation of this law, specifically relating to the concept and application of extraterritoriality.
Companies should monitor the current developments, prepare their Sanctions and Export Compliance mechanisms to be able to cope with a comprehensive Chinese Export Control regime and pay special attention to further supplementary Chinese regulations.
________________________
[1] Export Control Law of the People’s Republic of China (Draft), available at https://www.cistec.or.jp/service/china_law/202001_pubcom2_souan.pdf.
[2] See Xiaoming Liu, Royal United Services Institute, Upgrading to a New, Rigorous System – Recent Developments in China’s Export Controls (Mar. 2016), https://rusi.org/sites/default/files/201603_op_upgrading_to_a_new_rigorous_system_en.pdf.
[3] See Article 2 of the Regulations on Control of Missiles and Missile-related Items and Technologies Export (2002), Article 2 of the Regulations on Control of Nuclear Dual-Use Items and Related Technologies Export (2007), and Article 2 of the Regulations on Control of Biological Dual-Use Items and Related Equipment and Technologies Export (2002) for example.
[4] See Announcement on Imposing Interim Export Control Measures on Military and Civil Dual-Use Unmanned Aerial Vehicles issued on June 25, 2015 with effect from July 1, 2015.
[5] See Article 28 of the Regulations on Control of Nuclear Dual-Use Items and Related Technologies Export (2007).
[6] See Article 11 of the Regulations on Control of Nuclear Export (2006), Article 16 of the Regulations on Control of Arms Export (2002), and Article 11 of the Regulations on Control of Missiles and Missile-related Items and Technologies Export (2002) for example.
[7] See China Briefing, The US-China Trade War: A Timeline (Feb. 26, 2020), https://www.china-briefing.com/news/the-us-china-trade-war-a-timeline/.
[8] See Gibson, Dunn & Crutcher LLP, 2019 Year-End Sanctions Update (Jan. 23, 2020), https://www.gibsondunn.com/2019-year-end-sanctions-update/.
[9] Jeff Black/Daniel Flatley, Bloomberg News, China Hints U.S. Blacklist Imminent in Threat to Trade Talks (Dec. 3, 2019), https://www.bloomberg.com/news/articles/2019-12-03/china-hints-u-s-blacklist-imminent-in-threat-to-trade-talks.
[10] Michael O’Kane, EU Sanctions, China Designates 4 US Politicians & Congressional Commission (July 13, 2020), https://www.europeansanctions.com/2020/07/china-designates-4-us-politicians-congressional-commission/; and Michael O’Kane, EU Sanctions, China Designates Lockheed Martin for Taiwan Arms Deal (July 14, 2020), https://www.europeansanctions.com/2020/07/china-designates-lockheed-martin-for-taiwan-arms-deal/.
[11] Xiaolei Pu, Legal Daily, Proposed Inclusion of Military Items and Nuclear into Covered Items (Dec. 24, 2019), http://www.npc.gov.cn/npc/ckgzlf003/201912/03bf295574ad4d5caba56c2fd7a9af24.shtml.
[12] Leian Kae Naduma, Business Times, China Releases Draft Export Control Law, The Country’s First (Jan. 17, 2020), https://www.btimesonline.com/articles/125133/20200117/china-releases-draft-export-control-law-countrys-first.htm.
[13] This refers to “goods, technologies and services that have civil uses, and also have military use or enhanced military potential, particularly those which could be used for the design, development, production, or use of weapons of mass destruction.” See Article 2 of the 2019 Draft.
[14] http://www.npc.gov.cn/npc/ckgzlf003/201912/1c9cab8e27874d51ae79196802b1d894.shtml; see also Article 2 of the 2019 Draft.
[15] Article 5 of the 2019 Draft.
[16] Article 64 of the 2017 Draft.
[17] Pursuant to the 2017 Draft, “re-export” is defined as “the export of controlled items or foreign products containing controlled items whose value reaches a certain percentage from overseas to other countries (regions).”
[18] Article 2 of the 2019 Draft and Article 2 of the 2020 Draft.
[19] Article 45 of the 2019 Draft, which states the provisions of law also apply to these trade activities. As such, we expect national export control authorities (or jointly with China Customs) to still regulate these trade activities. Article 45 of the 2020 Draft is also similar to this.
[20] Articles 13 and 15 of the 2019 Draft and Article 12 of the 2020 Draft.
[21] Article 13 of the 2019 Draft and Article 13 of the 2020 Draft.
[22] Article 9 of the 2019 Draft.
[23] Article 10 of the 2019 Draft.
[24] Article 9 of the 2020 Draft.
[26] See Catalog of Import and Export Licenses Administration of Dual-use Items and Technologies promulgated by MOFCOM and China Customs on December 31, 2005 and last amended on December 31, 2019; Arms Export Administration List promulgated by former SASTIND and PLA Armaments on November 1, 2002; and Nuclear Export Administration List promulgated by former SASTIND on June 28, 2001 and amended by China Atomic Energy Authority, MOFCOM, MFA and China Customs on June 27, 2018.
[27] See Article 25 of the 2017 Draft, Article 17 of the 2019 Draft and Article 15 of the 2020 Draft.
[28] See Joint Comments by 11 Industrial Associations of U.S. and Japan (Jan. 26, 2010), available at: cistec.or.jp/english/export/china_law/200210-english.pdf.
[29] See Article 18 of the 2019 Draft and Article 16 of the 2020 Draft.
[30] See Article 29 of the 2017 Draft, Article 20 of the 2019 Draft and Article 18 of the 2020 Draft.
[31] See MOFCOM, MOFCOM: China to Establish the “Unreliable Entity List” Regime (May 31, 2019), http://www.mofcom.gov.cn/article/i/jyjl/e/201905/20190502868927.shtml.
[32] See Gibson, Dunn & Crutcher LLP, Citing a National Emergency, the Trump Administration Moves to Secure U.S. Information and Communications Technology and Service Infrastructure (May 20, 2019), https://www.gibsondunn.com/citing-national-emergency-trump-administration-moves-to-secure-us-information-and-communications-technology-service-infrastructure/. On August 21, 2019, the Trump Administration increased its Entity List designation of Huawei affiliates to over 100 entities.
[33] On a press conference of MOFCOM on August 22, 2019, a MOFCOM spokesman responded that the “unreliable entity list” was “going through internal procedures and would be released recently.” A spokesman from MFA repeated the same on October 8, 2019, following the U.S.’s blacklisting an additional 28 Chinese entities on October 7, 2019.
[34] See MOFCOM, MOFCOM: China to Establish the “Unreliable Entity List” Regime (May 31, 2019), http://www.mofcom.gov.cn/article/i/jyjl/e/201905/20190502868927.shtml.
[36] See FAQs – Entity List FAQs, available at https://www.bis.doc.gov/index.php/2011-09-12-20-18-59/export-and-reexport-faqs/cat/33-entity-list-faqs#faq_105.
[37] See Reasons to Introduce the “Unreliable Entities List” Regime? MOFCOM’s Response (June 4, 2019), http://coi.mofcom.gov.cn/article/y/gnxw/201906/20190602869699.shtml.
[38] See Addition of Certain Entities to the Entity List (Oct. 9, 2019), https://www.federalregister.gov/documents/2019/10/09/2019-22210/addition-of-certain-entities-to-the-entity-list.
[39] See FAQs – Entity List FAQs, available at https://www.bis.doc.gov/index.php/2011-09-12-20-18-59/export-and-reexport-faqs/cat/33-entity-list-faqs#faq_104 and https://www.bis.doc.gov/index.php/2011-09-12-20-18-59/export-and-reexport-faqs/cat/33-entity-list-faqs#faq_118.
[40] See Sina Finance, Authorities: MOFCOM’s Interpretation of China’s “Unreliable Entity List” Regime (June 2, 2019), https://cj.sina.com.cn/articles/view/1704819467/659d7b0b01900ux8q.
[41] It is also noteworthy that pursuant to Article 20 of the 2019 Draft, simplified export measures (if previously granted to the exporter) will no longer be applicable to transactions with those on the controlled list. This is no longer the case in the 2020 Draft.
[42] See Chapter 5 of the 2019 Draft and Chapter 4 of the 2020 Draft.
[44] Nikolas Kessels, BDI, China’s Export Control, Statement regarding the Second Draft of China’s National Export Control (Jan. 23, 2020), https://bdi.eu/artikel/news/peking-legt-neuen-vorschlag-fuer-exportkontrollgesetz-vor/ (in German).
[45] Id. See also Art. 1 (5) 1. Council Decision (CFSP) 2019/1560 of September 16, 2019 amending Common Position 2008/944/CFSP defining common rules governing control of exports of military technology and equipment. Based on this decision by the European Council, EU member states need to submit information on their exports of military technology and equipment for transparency purposes.
[46] For example, the Regulations on Control of Arms Export (2002), the Regulations on Control of Nuclear Export (2006), the Administrative Regulations on Monitored Chemicals (2011), the Regulations on Control of Nuclear Dual-Use Items and Related Technologies Export (2007), the Regulations on Control of Missiles and Missile-related Items and Technologies Export (2002), and the Regulations on Control of Biological Dual-Use Items and Related Equipment and Technologies Export (2002).
[47] See Article 14 of the Implementation Regulations of Customs on Administrative Penalties (2004).
[48] See Article 15 of the Implementation Regulations of Customs on Administrative Penalties (2004).
[49] Paragraphs (4) and (5) of Article 15 of the Implementation Regulations of Customs on Administrative Penalties (2004) also provide for fines to be imposed where violations would compromise “China’s tax collection” or “foreign exchange or export tax rebate administration.” Such fines might be higher than those set forth above but these paragraphs are rarely cited by China Customs in administrative penalty cases relating to export control of dual-use items, arms, nuclear, monitored chemicals or likewise.
[50] See the Case of Yuhong Peng’s Smuggling General Goods available here, (2009) Xia Xing Chu Zi No. 25, where Yuhong Peng assisted a few clients in exporting 1,631,031 kilograms of flour without a valid export license by intentionally and falsely declaring flour as non-controlled goods. Flour was subject to China’s export quota restrictions. Yuhong Peng was found guilty for smuggling general goods and was sentenced to an imprisonment of 10.5 years and fined RMB 1,112,443.77 (approximately US$ 156,980.71 at the prevailing exchange rate).
[51] See First Trial Criminal Judgement of Huizhou Haihang Industrial Co., Ltd. and Huizhou Jiangfeng Industrial Development Co., Ltd. available here, (2016) Yue 13 Xing Chu No. 11, where Huizhou Haihang Industrial Co., Ltd., Huizhou Jiangfeng Industrial Development Co., Ltd., their respective key persons in charge and a few other individuals exported 689.086 tons of rare earth metals without a valid export license by intentionally and falsely declaring rare earth as non-controlled goods. Huanyong Xu, the manager of Huizhou Haihang Industrial Co., Ltd. was sentenced to an imprisonment of 13 years.
[52] See Article 34 of the 2020 Draft.
[53] See Article 37 of the 2020 Draft.
[54] Article 36 of the 2017 Draft; see also Article 14 of the 2019 Draft.
[55] See Leian Kae Naduma, Business Times, China Releases Draft Export Control Law, The Country’s First (Jan. 17, 2020), https://www.btimesonline.com/articles/125133/20200117/china-releases-draft-export-control-law-countrys-first.htm.
[56] Finbarr Bermingham, South China Morning Post, Trade war clues sought in China’s ‘ambiguous’ new export control law (Dec. 31, 2019), https://www.scmp.com/economy/china-economy/article/3044112/trade-war-clues-sought-chinas-ambiguous-new-export-control.
[57] See Statement by 11 U.S. and Japanese industrial associations, Joint Comments by Industrial Associations of the United States and Japan on China’s Revised Draft Export Control Law (Jan. 26, 2020), https://www.cistec.or.jp/english/export/china_law/200210-english.pdf and Statement by 14 European and Japanese industrial associations, Joint Comments by Industrial Associations of Europe and Japan on China’s Revised Draft Export Control Law (Jan. 21, 2020), https://www.cistec.or.jp/service/china_law/20200123-english.pdf.
[58] Article 9 of the 2017 Draft.
[59] See Article 30 of the 2019 Draft and Article 28 of the 2020 Draft. Such measures include “entering into the place of business … for inspection,” “viewing and copying … relevant agreements, accounting books, business correspondence …” and “seizing and detaining relevant items.”
[60] See Article 31 of the 2019 Draft and Article 29 of the 2020 Draft.
[61] See Benjamin Wilhelm, World Politics Review, Why America’s Global Campaign Against Huawei Is Failing (Jan. 29, 2020), https://www.worldpoliticsreview.com/trend-lines/28503/why-europe-is-resisting-trump-s-campaign-against-huawei-china.
[62] Limited exceptions apply in terms of military and dual-use goods.
[64] See Carisa Nietsche/Sam Dorshimer, The Hill, America and Europe will lose to China in transatlantic trade war (Jan. 31, 2020), https://thehill.com/opinion/international/480942-america-and-europe-will-lose-to-china-in-transatlantic-trade-war.
[66] See Greg Knowler, Journal of Commerce, Europe faces $11 billion hit from US-China ‘phase one’ deal: study (Mar. 27, 2020), https://www.joc.com/regulation-policy/europe-faces-11-billion-hit-us-china-%E2%80%98phase-one%E2%80%99-deal-study_20200327.html.
The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam Smith, Chris Timura, Fang Xue, Qi Yue, Xuechun Wen, Joerg Bartz and Richard Roeder.
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The California Supreme Court Round-Up previews upcoming cases and summarizes select opinions issued by the Court. This edition includes opinions handed down from December 2019 through August 2020, organized by subject. Each entry contains a description of the case, as well as a substantive analysis of the Court’s decision.
Updates From the Court
Justice Ming Chin will be retiring at the end of August 2020, after 24 years of service on the Court. At the June oral argument, his colleagues presented a virtual tribute, and Justice Chin remarked that the current pandemic could provide an opportunity to improve the judicial system. “The future of law and the future of the courts will be virtual and remote,” Justice Chin said. Governor Gavin Newsom is expected to announce Justice Chin’s successor before the end of the year.
No update would be complete without recognizing the unprecedented COVID-19 pandemic and the decisive actions of the Chief Justice, Supreme Court, and Judicial Council to preserve the health and safety of the courts, judges and staff, and litigants. Since March 2020, the Chief Justice has issued numerous orders announcing emergency measures and implementing emergency Rules of Court approved by the Judicial Council, which suspended court operations and jury trials, tolled civil and criminal case deadlines, and suspended almost all unlawful detainer actions statewide through September 1. The Chief Justice also approved dozens of superior court and Court of Appeal emergency orders, which permitted those courts to implement their own emergency measures and rules. The Court will continue its recent practice of hearing oral argument virtually through at least the end of 2020, and if it does resume in-person hearings in 2021 they will take place only in San Francisco. Finally, the Supreme Court ordered the postponement of the July 2020 Bar examination to October 2020, and ordered the State Bar to make every effort to administer the examination online.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the California Supreme Court, or in state or federal appellate courts in California. Please feel free to contact the following lawyers in California, or any member of the Appellate and Constitutional Law Practice Group.
Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)
Daniel M. Kolkey – San Francisco (+1 415-393-8420, dkolkey@gibsondunn.com)
Julian W. Poon – Los Angeles (+1 213-229-7758, jpoon@gibsondunn.com)
Michael Holecek – Los Angeles (+1 213-229-7018, mholecek@gibsondunn.com)
Victoria L. Weatherford – San Francisco (+1 415-393-8265, vweatherford@gibsondunn.com)
© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
Washington, D.C. partner Helgi Walker, New York partner Barry Goldsmith, New York associate Jonathan Seibald and Washington D.C. associate Brian Richman are the authors of “Aggressive SEC Enforcement Actions Could Limit Small Business Recovery Resources,” [PDF] published by The National Law Journal on August 20, 2020.
Washington, D.C. partner Jason Mendro and associate Jeffrey Rosenberg are the authors of “An Oversight Claim By Any Other Name Is Reviewed Under ‘Caremark,’ Says GoPro,” [PDF] published by Delaware Business Court Insider on August 12, 2020.
CCPA Regulations Are Now Effective
On Friday, August 14, 2020, California Attorney General Xavier Becerra announced that the state’s Office of Administrative Law (“OAL”) approved the final California Consumer Privacy Act (“CCPA”) regulations. As detailed in our alert on June 12, 2020, the Attorney General submitted final proposed regulations to the OAL on June 1, 2020, and OAL approval was required before the regulations could take effect. The approved regulations—which took effect immediately on August 14, 2020—largely track the final regulations proposed by the Attorney General. The OAL withdrew four provisions,[1] however, and the Attorney General made a number of non-substantive changes for accuracy, consistency, and clarity (the non-substantive changes are detailed by the Office of the Attorney General here). The OAL withdrew the following provisions, though certain of the revisions do not indicate any substantive reversal, as noted below:
- Explicit Consent for Use of Personal Information for Different Purpose (formerly § 999.305(a)(5)): The OAG removed the requirement that notice and explicit consent is required to use a consumer’s personal information for a materially different purpose from the purpose disclosed at or before the collection of personal information. This provision was heavily debated during the public comment period, and while it would remove a significant burden on businesses seeking to make such a change with respect to explicit consent, the statute (Cal. Civ. Code § 1798.100(b)) still dictates that a “business shall not collect additional categories of personal information or use personal information collected for additional purposes without providing the consumer with notice consistent with” the CCPA.
- Offline Notice of Opt-Out (formerly § 999.306(b)(2)): The OAL removed the requirement that businesses substantially interacting with consumers offline must provide an offline notice of a consumer’s ability to opt out of the sale of personal information, such as by providing a consumer with notice on a printed form or posting signage directing consumers to a notice.
- Ease of Requesting to Opt-Out (formerly § 999.315(c)): The OAL removed the language requiring that the methods businesses use for submitting requests to opt-out “be easy for consumers to execute,” and “require minimal steps to allow the consumer to opt-out.” The withdrawn provision had also clarified that a “business shall not utilize a method that is designed with the purpose or has the substantial effect of subverting or impairing a consumer’s decision to opt-out.” Although this particular provision was removed, another provision, § 999.315(b), still encourages businesses to consider the “ease of use by the consumer when determining which methods consumers may use to submit requests to opt-out.”
- Denying Requests by Unauthorized Agents (formerly § 999.326(c)): Although this subsection allowing businesses to deny a request from an agent that failed to submit proof of authorization to act on the consumer’s behalf was removed, a different provision, § 999.315(f), provides that “[a] business may deny a request from an authorized agent if the agent cannot provide to the business the consumer’s signed permission demonstrating that they have been authorized by the consumer to act on the consumer’s behalf.”
At least the first two provisions above were particularly scrutinized during the public comment period, and their exclusion from the final regulations makes requirements for businesses less onerous (for example, businesses required to provide an opt-out-of-sale mechanism may have struggled with a practical offline procedure for opting out of the sale of data). The OAL has offered little insight into its reasoning for withdrawing these provisions, however, and the Attorney General may resubmit these sections after further review and potential revision.
Regardless of the withdrawal of these particular provisions, in light of the official approval of the remainder of the regulations, and the Attorney General’s authorization to enforce them starting immediately, businesses would be well advised to familiarize themselves with the approved regulations. We remain available to advise accordingly.
Bill Extending Key CCPA Exemptions Moves Forward at the Legislature
Separately, on August 13, 2020, the California Senate Judiciary Committee agreed—with a unanimous 9-0 vote—to extend until January 2022 exemptions from certain CCPA requirements for personal information arising from business-to-business (“B2B”) transactions and employment, which are currently set to expire January 1, 2021.[2] The relevant bill, AB 1281, was significantly revamped from a prior bill on June 25, 2020, and now its sole proposal is to extend the foregoing exemptions until January 2022, unless the California Privacy Rights Act (“CPRA”) passes. The CPRA is an initiative that is set for a vote on the November 3, 2020 state ballot, as we discuss in more detail here, and would extend the same exemptions until January 1, 2023. AB 1281 now sits with the Senate Appropriations Committee and was scheduled for a vote on August 19, 2020, but the legislature adjourned its session without a vote on the bill. The next session is scheduled for Monday, August 24. As of now, it appears likely to pass, which means the CCPA would not start applying to employment and B2B-related personal information when the current exemption expires on January 1, 2021.
_____________________
[1] Cal. Code Regs. Tit. 11, Div. 1, Chap. 20 §§ 999.305 (a)(5); 999.306(b)(2); 999.315(c);999.326(c).
[2] See California Senate Committee Roll Calls, available at https://sjud.senate.ca.gov/sites/sjud.senate.ca.gov/files/roll_call_reports_all_bills.pdf.
The following Gibson Dunn lawyers assisted in the preparation of this client update: Alexander Southwell, Benjamin Wagner, Ryan Bergsieker, Cassandra Gaedt-Sheckter, Abbey Barrera, Julie Hamilton, and Tony Bedel.
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, or any member of the firm’s California Consumer Privacy Act Task Force or its Privacy, Cybersecurity and Consumer Protection practice group:
California Consumer Privacy Act Task Force:
Benjamin B. Wagner – Palo Alto (+1 650-849-5395, bwagner@gibsondunn.com)
Ryan T. Bergsieker – Denver (+1 303-298-5774, rbergsieker@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650-849-5203, cgaedt-sheckter@gibsondunn.com)
Joshua A. Jessen – Orange County/Palo Alto (+1 949-451-4114/+1 650-849-5375, jjessen@gibsondunn.com)
H. Mark Lyon – Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com)
Alexander H. Southwell – New York (+1 212-351-3981, asouthwell@gibsondunn.com)
Deborah L. Stein (+1 213-229-7164, dstein@gibsondunn.com)
Eric D. Vandevelde – Los Angeles (+1 213-229-7186, evandevelde@gibsondunn.com)
Please also feel free to contact any member of the Privacy, Cybersecurity and Consumer Protection practice group:
United States
Alexander H. Southwell – Co-Chair, PCCP Practice, New York (+1 212-351-3981, asouthwell@gibsondunn.com)
Debra Wong Yang – Los Angeles (+1 213-229-7472, dwongyang@gibsondunn.com)
Matthew Benjamin – New York (+1 212-351-4079, mbenjamin@gibsondunn.com)
Ryan T. Bergsieker – Denver (+1 303-298-5774, rbergsieker@gibsondunn.com)
Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com)
Joshua A. Jessen – Orange County/Palo Alto (+1 949-451-4114/+1 650-849-5375, jjessen@gibsondunn.com)
Kristin A. Linsley – San Francisco (+1 415-393-8395, klinsley@gibsondunn.com)
H. Mark Lyon – Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com)
Karl G. Nelson – Dallas (+1 214-698-3203, knelson@gibsondunn.com)
Deborah L. Stein (+1 213-229-7164, dstein@gibsondunn.com)
Eric D. Vandevelde – Los Angeles (+1 213-229-7186, evandevelde@gibsondunn.com)
Benjamin B. Wagner – Palo Alto (+1 650-849-5395, bwagner@gibsondunn.com)
Michael Li-Ming Wong – San Francisco/Palo Alto (+1 415-393-8333/+1 650-849-5393, mwong@gibsondunn.com)
Europe
Ahmed Baladi – Co-Chair, PCCP Practice, Paris (+33 (0)1 56 43 13 00, abaladi@gibsondunn.com)
James A. Cox – London (+44 (0)20 7071 4250, jacox@gibsondunn.com)
Patrick Doris – London (+44 (0)20 7071 4276, pdoris@gibsondunn.com)
Bernard Grinspan – Paris (+33 (0)1 56 43 13 00, bgrinspan@gibsondunn.com)
Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com)
Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com)
Kai Gesing – Munich (+49 89 189 33-180, kgesing@gibsondunn.com)
Alejandro Guerrero – Brussels (+32 2 554 7218, aguerrero@gibsondunn.com)
Vera Lukic – Paris (+33 (0)1 56 43 13 00, vlukic@gibsondunn.com)
Sarah Wazen – London (+44 (0)20 7071 4203, swazen@gibsondunn.com)
Asia
Kelly Austin – Hong Kong (+852 2214 3788, kaustin@gibsondunn.com)
Jai S. Pathak – Singapore (+65 6507 3683, jpathak@gibsondunn.com)
© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
The New York Attorney General (“AG” or the “Office”) has a broad range of powers to launch investigations and bring actions on behalf of the State or its consumers in a wide variety of areas. The AG’s prerogatives can have a profound impact on corporations, nonprofits, individuals, and investors. This 18-month round-up is a summary of major cases and initiatives that have occurred under the leadership of New York State’s 67th Attorney General, Letitia James.
In January 2019, AG James was sworn into office. She promised a rigorous defense of New Yorkers’ interests, particularly in the face of a federal administration that, in her view, may not share New York’s regulatory and enforcement priorities. True to her word, and foreshadowed by her inaugural speech, in 2019 AG James and her team challenged the federal government in numerous sectors, and launched or joined matters in the consumer, investor, environmental protection, and immigration areas, among others. AG James has kept her teams of over 600 lawyers busy, and they have worked on a number of ambitious and challenging cases, including, for example, the T-Mobile/Sprint antitrust case and the Exxon/Mobile securities fraud case. Both of these cases proceeded to trial. And in both, the Office did not prevail. That said, the Office continues to bring complex and high-profile cases. Most recently on August 6, 2020, AG James filed a lawsuit seeking to dissolve the National Rifle Association (“NRA”) based on the organization’s alleged diversion of millions of dollars away from the charitable mission of the organization for the personal benefit of its top executives[1]—a similar theory to the Office’s lawsuit against the Trump Foundation that resulted in the dissolution of the organization and an award of damages.[2] The lawsuit against the NRA is expected to be extensively litigated, as the NRA quickly filed its own countersuit claiming that the AG’s lawsuit is a “political vendetta.”[3] Nevertheless, AG James has promised that the “lawsuit will continue undeterred.”[4] As AG James continues to resolve the majority of cases through settlement agreements, she is also willing to use the bully pulpit to bring about results more favorable to her office.
In this round-up, we provide insight into some of AG James’s key cases and initiatives in her first 18 months in office. First, we provide background on AG James and her team. Second, we describe the Office’s aggressive approach vis-à-vis the federal government. Third, we discuss some of the Office’s key antitrust and competition cases, including the T-Mobile/Sprint trial loss. Fourth, we describe the Office’s activity in the data privacy and cybersecurity space. Fifth, we describe the Office’s efforts to protect investors. Sixth, we discuss significant cases the Office has brought in the health care area. Seventh, we review the Office’s actions in the environmental protection area, including the Office’s ExxonMobil trial loss. Eighth, we look at some of the actions the Office is taking in the employment space. Finally, we provide some thoughts regarding the Office’s approach going forward.
I. AG James and Her Team
A. About AG James
AG James is the first woman of color to hold statewide office in New York, and the first woman ever elected as the State’s AG. AG James’s background consists of public service, including serving as head of the Brooklyn Regional Office of the New York AG’s Office in 1999. In 2003, AG James was elected to New York City Council, representing the 35th Council District in Brooklyn for a decade. In 2013, she became the first woman of color to hold citywide office as Public Advocate of New York City. Some of her prominent initiatives in these past roles have included assisting in the investigation of the New York Police Department’s stop-and-frisk policy, passing legislation requiring landlords to improve tenant living conditions, and expanding public access to recycling.
B. AG James’s Team
The Office is divided into five major divisions: Economic Justice, State Counsel, Social Justice, Criminal Justice, and Appeals and Opinions. Soon after her election as Attorney General, AG James quickly assembled a diverse team:
- Jennifer Levy, First Deputy Attorney General: Prior to joining the Office, Levy was the Supervising Attorney for the Civil Law Reform Unit at the Legal Aid Society, which oversees class action and affirmative litigation in matters of housing, government benefits, immigration, and homeless rights. Before that, she served as the General Counsel in Charge of Litigation for the Public Advocate for New York City, also alongside James.
- Ibrahim Kahn, Chief of Staff: Khan previously served as First Deputy Public Advocate of New York, working alongside AG James. Before his service in the Public Advocate’s office, Khan was a top advisor on AG James’s Public Advocate campaign.
- Christopher D’Angelo, Chief Deputy Attorney General for Economic Justice: D’Angelo is a former Associate Director of the U.S. Consumer Financial Protection Bureau’s Supervision, Enforcement and Fair Lending division. In his current position in the Office, he oversees New York’s antitrust, investor protection, and taxpayer protection bureaus, among others.
- Meghan Faux, Chief Deputy Attorney General for Social Justice: Faux was previously the Managing Director of Brooklyn Legal Services, an organization which represents Brooklyn residents, who otherwise could not afford legal services, on a broad range of issues including accessing affordable housing and essential public benefits. In her current position at the Office, she oversees a range of the Office’s bureaus—namely, the charities, civil rights, environmental protection, health care, labor, and real estate finance bureaus.
- José Maldonado, Chief Deputy Attorney General for Criminal Justice: Maldonado previously served as a Special Advisor to the New York City Civil Service Commission, providing legal advice on personnel decisions made by city agency commissioners. He also served as Counsel and Senior Policy Advisor to the New York City Fire Department Commissioner, and as that Department’s first compliance officer, leading efforts to revamp its hiring and recruitment practices. Maldonado further served as Chief Assistant District Attorney in the Office of the Special Narcotics Prosecutor for the City of New York. In his current position in the Office, he oversees the Criminal Enforcement and Financial Crimes Bureau, the Conviction Review Bureau, and the Public Integrity Bureau, among others.
- Orelia Merchant, Chief Deputy Attorney General, State Counsel: From 2002 to 2019, Merchant served in the U.S. Attorney’s Office for the Eastern District of New York, most recently as an Executive Assistant U.S. Attorney directly overseeing the Office’s Civil and Administrative decisions. Merchant leads the Division of State Counsel, which manages litigation involving the State, including its agencies and officials.
- Barbara Underwood, Solicitor General: Underwood previously served as the Solicitor General of New York beginning in 2007 through early 2018, when the New York State Legislature selected Underwood to complete the remainder of former Attorney General Eric T. Schneiderman’s term. Before joining the Office, Underwood served in the U.S. Attorney’s Office for the Eastern District of New York. As Solicitor General, Underwood directs the Division of Appeals and Opinions, which is responsible for handling civil and criminal appeals in both state and federal courts.
II. Taking on the Feds
AG James’s first 18 months have been, in many ways, defined by the Office’s positioning vis-à-vis the federal government as an enforcer. Where she has viewed the federal government as stepping back—relaxing regulations or pulling away from enforcement or even acting unlawfully—AG James has aimed to fill the void. She has made clear that when she views newly enacted federal policy as harmful to her constituents (“discriminatory, regressive, and dangerous,” in her words), she will take action.[5] She has vowed to “work in a legal system where even the most powerful federal official in the country cannot use a loophole to evade justice” and to protect “anyone targeted by the wrath of bigotry.”[6] Since taking office, AG James has filed over 30 lawsuits and numerous amicus briefs against the Trump Administration over such policies, including those related to immigration controls,[7] restricted access to health care,[8] and a rollback of environmental regulations.[9] She prevailed in the U.S. Supreme Court in a lawsuit to block the Trump Administration from adding a citizenship question to the 2020 census[10]; she fought the implementation of a federal agency rule that would expand the ability of employers to refuse health care coverage to employees based on “religious beliefs or moral convictions”[11]; and she filed a lawsuit to halt the enforcement of a federal agency rule that would jeopardize the ability of immigrants to obtain legal permanent resident status and citizenship if they use certain publicly funded health benefits — a Motion to Stay Injunction Pending Appeal is currently pending.[12] AG James has also created a Federal Initiatives Unit within her office “to ensure that the rights of all New Yorkers are not compromised by the federal government.”[13]
“Attorney General Letitia James is focused on enforcing the rule of law. In any case we pursue, we will follow the facts wherever they may lead. We wish the President would share our respect for the law.” – New York Attorney General’s Office, April 29, 2019 |
Immigration has been at the forefront of the broad set of federal issues that AG James has addressed in her first year. For example, she supported the challenge to the federal government’s “fundamentally flawed” logic in eliminating Deferred Action for Childhood Arrivals (“DACA”),[14] standing alongside Gibson Dunn and others in support of multiple plaintiffs (including Gibson Dunn’s six Dreamer clients) who challenged the decision to end DACA as arbitrary and capricious under the Administrative Procedure Act and on other grounds. Gibson Dunn partner Ted Olson argued on behalf of Dreamers in the Supreme Court in November 2019.[15] On June 18, 2020, in a 5-4 ruling, the U.S. Supreme Court struck down the Trump Administration’s plan to end DACA, finding that it did not comply with the procedural requirement that it provide a reasoned explanation for its action.[16]
AG James has also launched recent challenges to the Trump Administration’s handling of the COVID-19 pandemic. In May 2020, AG James filed a legal challenge against an Environmental Protection Agency (“EPA”) non-enforcement policy that has effectively waived industry compliance with pollution monitoring and reporting—a non-enforcement policy the Trump Administration claimed was justified by the pandemic that AG James has described as “literally a matter of life and death.”[17] AG James’s motion for a preliminary injunction and the EPA’s motion to dismiss are still being briefed. AG James has also challenged U.S. Department of Labor regulations that restrict workers’ rights to paid sick leave and emergency family leave during the pandemic; a move AG James argues contravenes the Families First Coronavirus Response Act.[18] AG James’s motion for summary judgment was granted in part on August 3, 2020. AG James also led a coalition of 26 attorneys general in calling for the U.S. Department of Housing and Urban Development to ensure that senior citizens with reverse mortgages do not lose their homes because of the pandemic.[19]
Across a broad spectrum, AG James has repeatedly challenged the Trump Administration’s policies, regulations, and actions.[20]
III. Antitrust/Competition
A. T-Mobile & Sprint
On June 11, 2019, AG James and nine other attorneys general filed a lawsuit in the Southern District of New York to block T-Mobile’s proposed acquisition of Sprint under the Clayton Antitrust Act of 1914. The lawsuit claimed that the merger would harm competition in the mobile wireless telecommunications market by reducing the number of major mobile network operators to three, thereby raising prices for consumers. The AGs also expressed concern that the merger would result in the loss of retail jobs and harm mobile wireless independent dealers.
Following the filing, on July 26, 2019, the Federal Trade Commission and U.S. Department of Justice joined the Federal Communications Commission in approving the deal, on the condition that T-Mobile sell its prepaid business and certain wireless spectrum to DISH Network to help enable the creation of a fourth wireless operator.[21] Eight additional AGs later joined the AG James’s lawsuit, although four ultimately withdrew.[22] The trial commenced in December 2019 with 14 state AG plaintiffs and concluded in January 2020.[23] On February 11, 2020, Judge Victor Marrero denied the AGs’ request to enjoin the merger.[24] The court found that the States failed to show that T-Mobile would pursue anticompetitive behavior following the merger, and rejected the argument that DISH would be unable to enter the wireless services market as a viable competitor.[25] On February 16, 2020, AG James announced that she would not pursue an appeal.[26] This high-profile loss demonstrates that even though the Office may be more aggressively pursuing interests traditionally handled by the federal government, like antitrust enforcement, such cases do not easily result in success for the AGs.
B. Google
On September 9, 2019, AG James made an announcement confirming the Office’s ongoing investigation into Google for antitrust issues, alleging that the company’s stature as a telecommunications and search engine giant was potentially harmful to consumers and the economy.[27] In announcing the investigation, which currently involves 50 attorneys general, the AGs pointed to alleged “evidence” that “we have seen” that Google may have reduced consumer choice, slowed innovation, and violated consumer privacy.[28]
Like the federal administration and many regulators around the country, AG James is looking for ways to address the perceived dominance of “big tech” in an era of ever-growing concern about how consumer data is used, and will likely test the applicability of century-old antitrust laws to the tech industry, which, unlike other industries, often offers consumers its products free of charge.[29]
IV. Data Privacy, Cybersecurity, and Data Breaches
A. Equifax & Capital One
On July 22, 2019, AG James announced that she and 49 other attorneys general reached a $600 million settlement with Equifax following their investigation into a 2017 data breach of the company.[30] Equifax, one of the three large consumer reporting agencies, had announced on September 7, 2017, a data breach that affected more than 147 million consumers, 8 million of which were purportedly New York residents.[31] According to press reports, the breach allegedly implicated personal information including social security numbers, names, dates of birth, addresses, credit card numbers and driver’s license numbers.[32]
The settlement comprised a $425 million Consumer Restitution Fund and $175 million payment in fines to the states, approximately $9 million of which would be allocated to New York. In addition to the monetary payment, Equifax agreed to provide free credit monitoring for up to 10 years to consumers affected by the data breach; assist consumers with identity theft issues, such as by helping to dispute inaccurate information in credit reports; and strengthen the company’s security.[33] On December 19, 2019, Judge Thomas W. Thrash Jr. of the Northern District of Georgia granted final approval of the settlement.[34]
On July 30, 2019, AG James announced an investigation into Capital One, which experienced a data breach in which an outside individual gained unauthorized access and obtained certain types of personal information about Capital One credit card customers.[35] While the outcome of that probe is yet to be determined, the investigation demonstrates the Office’s ongoing commitment to aggressively investigating potential breaches of consumer data.
B. Zoom
On March 20, 2020—in the midst of the COVID-19 pandemic and associated increase in work-from-home and academic videoconferencing—AG James sent Zoom a public letter asking the company to address reports of various privacy and security issues with the videoconferencing application.
On May 7, 2020, in lieu of pursuing litigation, AG James announced an agreement with Zoom whereby the company agreed to take various additional security and privacy measures.[36] AG James opted for this route “[i]n recognition of the fact that Zoom has acted [] quickly to address the issues identified above, has worked cooperatively with the AG’s investigation, and has provided valuable services to schools, local governments and health care institutions to help address the unique circumstances” posed by the COVID-19 pandemic.[37] Under the agreement, Zoom will maintain a comprehensive data security program that will involve regular security risk assessments, report those assessments to the Office, and enhance encryption protocols. Zoom also agreed to stop sharing user data with social media companies, and give hosts more control over outside access to video conferences.[38]
V. Investor Protection
Since her inauguration, AG James has consistently reiterated a commitment to protecting investors, enhancing corporate accountability, and maintaining integrity in New York’s financial markets; she views her work in this area as part of her obligation to all New Yorkers (as she often has said, “[W]hat happens on Wall Street impacts families on Main Street”).[39]
On October 2, 2019, AG James announced a new whistleblower submission system that facilitates secure and anonymous contact with the Office.[40] The system, which utilizes a web portal allowing users to submit their complaint and relevant documentation, is intended to permit witnesses of unlawful or otherwise improper workplace conduct to express their concerns without revealing their identities.[41] While the Office encourages users to disclose their identities,[42] it recognizes that “many people have legitimate concerns about their anonymity” and hopes that the new system will “attract, engage, and protect whistleblowers,” especially at a time when those attempting to call out corruption are facing intimidation.[43]
The new whistleblower portal represents just one of the latest efforts undertaken by AG James in 2019 with the goal of enhancing corporate accountability. Just weeks earlier, on August 26, 2019, AG James announced the signing of a bill that restores the six-year statute of limitations for claims under the Martin Act,[44] reversing a 2018 ruling by the New York Court of Appeals[45] that confined the limitations period to three years.[46] The Martin Act, considered one of the nation’s most powerful “blue sky” laws, grants the AG broad powers to investigate financial fraud and to bring both civil and criminal claims against any publicly traded company suspected of wrongdoing.[47] By extending the statute of limitations period, the new law thereby enhances “one of the state’s most powerful tools to prosecute financial fraud,” which AG James cites as particularly important during a period in which she believes that the federal government has worked to roll back consumer financial protections.[48] Critics of the Martin Act, however, have always maintained the law is too expansive, both because it permits the AG to investigate, issue subpoenas, and demand production of corporate documents without probable cause or a grand jury ruling, and because a civil fraud violation under the Martin Act does not require the AG to demonstrate scienter.[49]
Last year, the Office investigated several institutions suspected of violating the Martin Act.[50] For example, in October, AG James announced the resolution of a three-year investigation into two related New York-based brokerage firms—BGC Financial LP (“BGC”) and GFI Securities LLC (“GFI”)—accused of using fraudulent practices to solicit trades of foreign exchange currency options.[51] AG James’s investigation allegedly uncovered that, over a two-year period, BGC and GFI posted false bids and trades in an effort to encourage others to buy and sell options at the level at which the brokers had reported the false trade.[52] As part of the settlement, the two entities admitted wrongdoing—specifically, posting fake bids to create a false appearance of greater liquidity in the market, and fraudulently announcing fake trades to deceptively entice traders to buy and sell options. They agreed to pay fines totaling $12.5 million to the Office, among other penalties.[53] The U.S. Commodity Futures Trading Commission (“CFTC”) also imposed a $25 million dollar civil penalty against BGC and GFI for the same conduct, but did not require the brokerage firms to admit wrongdoing.[54] Both the Office and the CFTC required the appointment of independent monitors, who will work in parallel for at least 12 months.
AG James has also sought to hold individuals in the C-suite responsible for Martin Act violations. For example, in December 2019, the Office filed a civil action against a private equity fund manager for violations of the Martin Act, alleging that this individual and the companies he controlled defrauded investors and misappropriated more than $13 million dollars in funds.[55] In February 2020, a New York judge granted a preliminary injunction enjoining this individual from accessing funds associated with the alleged fraud, pending the upcoming trial.[56] Reiterating her commitment to protect investors, AG James declared that “[t]here is no safe haven for white collar fraudsters in New York….”[57] And in June 2020, the Office obtained a judgment against the founder and CEO of a wind turbine company who marketed unregistered securities and diverted investor funds to pay personal expenses in violation of the Martin Act.[58]
Not all Martin Act lawsuits pursued by AG James have been successful. As further discussed below, following a three-week trial in November 2019, the New York Supreme Court found that the Office failed to establish that ExxonMobil violated the Martin Act, holding that the Office did not prove that a “reasonable investor” would have been misled by ExxonMobil’s representations concerning climate change risks.[59]
In September 2019, AG James led a coalition of eight attorneys general from around the country in filing a federal lawsuit challenging “Regulation Best Interest,” a June 2019 U.S. Securities and Exchange Commission (“SEC”) regulation that, according to the lawsuit, fails to comply with the requirements articulated in the Dodd-Frank Act.[60] The regulation, known as “Reg BI,” outlines the obligations of broker-dealers who provide advice to investors, requiring covered broker-dealers to act in the best interests of their clients—but does not impose a fiduciary duty on them.[61] According to the lawsuit,[62] the SEC’s adoption of Reg BI was contrary to Congress’s delegation of authority as outlined in the Dodd-Frank Act. At the end of September 2019, the Southern District of New York dismissed the action for lack of subject-matter jurisdiction, finding that the law governing review of the SEC’s decisions mandated that the U.S. Court of Appeals for the Second Circuit was the proper forum for the litigation, rather than the district court.[63] The Office continued to pursue this action in the Second Circuit. On June 26, 2020, just four days before Reg BI was set to take effect, the Second Circuit upheld Reg BI, finding that “the SEC lawfully promulgated Regulation Best Interest pursuant to Congress’s permissive grant of rulemaking authority” under the Dodd-Frank Act and that Reg BI was not arbitrary, capricious, or an abuse of the SEC’s discretion.[64] As another setback to AG James and potential challenges to federal regulations in the future, the court also found that the states did not have standing to challenge this federal regulation because the states did not demonstrate that the regulation caused a “direct injury” to state revenues, as required for states that challenge federal regulations.[65]
VI. Health Care
AG James’s actions in the health care space—from partnering with other states to preserve the Affordable Care Act, to lawsuits against the pharmaceutical industry—represented a clear prioritization of those areas in 2019. The Office made headlines for bringing large-scale suits in areas that dominated the news in 2019, including e-cigarette use among youth, the opioid crisis, and access to health care. AG James frequently characterized these actions as protecting not only New Yorkers but the American people,[66] and her office did not hesitate to directly oppose the Trump Administration where she deemed appropriate.
A. Federal Actions – ACA
2019 was a year of significant pushback from AG James and other states’ attorneys general against the Trump Administration’s efforts to limit protections of the Affordable Care Act (“ACA”). In early January 2019, AG James set the tone for the Office’s actions for the rest of the year when she joined with 16 other attorneys general to appeal a Texas district court decision holding the ACA unconstitutional.[67] In announcing that suit, AG James said that New York would “continue . . . to safeguard access to healthcare for all Americans.” The U.S. Supreme Court granted certiorari in March 2020.
AG James made good on that statement a few months later when, in May, she led a group of states and cities in filing a suit opposing the Trump Administration’s “refusal-of-care” rule,[68] which was intended to give health-care providers, insurers, and employers greater leeway to refuse to provide medical care and services on the basis of their own religious or moral beliefs. The rule—also called the “conscience rule” by its supporters—had been enacted by the U.S. Department of Health and Human Services (“HHS”) over opposition from the same group and others.
In November 2019, Judge Paul Engelmayer of the Southern District of New York found in favor of the states and struck down the rule. In a lengthy decision noting that the refusal-of-care rule was “shot through with legal defects,” Judge Engelmayer agreed with the Office that the rule as adopted was unconstitutional because its central justification—that there was a “significant increase” in conscience-related violations—was “flatly untrue,” rendering the HHS “decision to promulgate the rule arbitrary and capricious,” in violation of the Administrative Procedure Act (“APA”).[69] On January 3, 2020, HHS appealed the decision to the Second Circuit.[70]
The refusal-of-care case was just one of several actions in which AG James joined other state AGs to oppose ACA-related rulemakings by the Trump Administration. In July 2019, AG James led a twelve-state coalition in filing the appellees’ brief in the Court of Appeals for the D.C. Circuit, defending a district court decision that struck down the Association Health Plan (“AHP”) rule promulgated by the U.S. Department of Labor which, according to the lawsuit, violated both the ACA and Employee Retirement Income Security Act (“ERISA”) through an unlawful reversal of key ERISA terms for the purpose of undermining the ACA, without adequate justification. The rule attempted to undo federal consumer protections relating to fraud and consumer harm, and expand the use of AHPs, which offer health insurance to groups of small businesses with a common interest.[71] The U.S. Department of Labor had appealed the decision, which found that the rule, which President Trump stated was aimed at dismantling Obamacare, was enacted in violation of the APA and was “clearly an end-run around the ACA.”[72] The appeal remains pending following oral argument in November. And in August 2019, AG James again joined with 21 state AGs to oppose another new HHS rule aimed at undermining anti-discrimination provisions in the ACA.[73]
B. Consumer Health – Drug Pricing
AG James has frequently participated in multi-state lawsuits challenging allegedly anticompetitive drug pricing.
In May 2019, 44 states including New York sued Teva Pharmaceuticals and 19 generic drug manufacturers for allegedly working together to artificially manipulate prices and restrain trade on more than 100 drugs, purportedly leading to inflated prices for consumers.[74] According to the Office, the lawsuit represented the culmination of a five-year investigation by the states into efforts by the companies and individual executives to coordinate and elevate pricing.[75] The suit is still at the pleadings stage.
In January 2020, AG James announced a lawsuit against Vyera Pharmaceuticals and two of its former CEOs, including the previously convicted Martin Shkreli, for anticompetitive behavior, including for an alleged 4,000% increase in the price of Daraprim—the only FDA-approved drug for the treatment of toxoplasmosis—in August 2015.[76] Six other states have since joined the suit, which is in the discovery phase.[77]
In June 2020, AG James joined a coalition of 51 attorneys general nationwide in filing a related antitrust complaint against 26 generic drug manufacturers and 10 executives of these companies, alleging “broad, coordinated, and systematic antitrust violations, price-fixing, market allocating, and the rigging of bids for more than 80 different topical, generic drugs.”[78] The suit is still in the pleadings phase.
Drug pricing was a focus of AG James’s work closer to home, too: in June 2019, the Office concluded an investigation of New York State pharmacies for failing to adhere to a law requiring them to post drug costs for consumers.[79] The investigation led to cease-and-desist letters to 44 pharmacies that were found to be in violation of the rule, which mandates that pharmacies maintain and notify customers of a list of prices for the 150 most commonly prescribed drugs.
C. Consumer Health – E-Cigarettes, Opioids
AG James’s actions over the last year have mirrored the nationwide concern over opioid and e-cigarette use. Like many other states, in 2018 New York launched an investigation into JUUL Labs, Inc., the largest e-cigarette company in the United States; on November 19, 2019, more than a year later, the Office filed a lawsuit. The suit, filed only a few days after New York changed the law to make it illegal to sell e-cigarette products to those under 21, alleges that the company engaged in deceptive marketing of its e-cigarettes and contributed to the “ongoing youth vaping epidemic.”[80] The case is currently in the discovery stage. It is part of a concerted push by the Office to spur further regulation of e-cigarette companies, as evidenced by her leading a coalition of seven attorneys general in filing comments with the Food and Drug Administration that urged enforcement actions related to flavored e-cigarettes and online sales.[81]
AG James has also sued pharmaceutical companies in connection with the opioid crisis. In March 2019, she filed a lawsuit against six opioid manufactures, four distributors, and the Sackler family (who owned Purdue Pharma), alleging that they ignored their duties to prevent unlawful diversion of opioids and thus contributed to the opioid epidemic.[82] Trial for all defendants except for Purdue Pharma and the Sackler family (whose case is moving separately through the U.S. Bankruptcy Court) was set to begin in March 2020, but has been delayed due to the COVID-19 pandemic.
AG James also pursued physicians for alleged over-prescribing and attendant Medicaid fraud, and joined a bipartisan multistate coalition of 38 states in an effort to push Congress to remove federal barriers to opioid addiction treatment,[83] calling it an effort to take “action from every angle” against the opioid crisis, and once again highlighting her willingness to get involved at the federal level.[84]
D. Consumer Health – COVID-19
AG James focused on protecting the public health, particularly during the COVID-19 pandemic. She has acted to “ensure the health of New Yorkers [is] not further at risk during these trying times.”[85] For example, in April 2020, citing the importance of protecting reproductive health and limiting trips to pharmacies, AG James demanded that several health insurance companies comply with the Comprehensive Contraception Coverage Act, requiring health insurers to provide a 12-month supply of contraception at one time.[86] The Office has also launched repeated efforts to protect New Yorkers from Coronavirus health scams, including issuing guidance to New Yorkers[87] and scrubbing websites of scams that are “stoking fear in the hearts and minds of Americans,”[88] and pursuing price gouging.[89]
VII. Environmental Protection
“While Washington is asleep at the wheel, New York continues to lead the way in protecting our planet. . . . I am proud to work with NYS Attorney General Letitia James to defend our precious environment from actions taken by this administration.” – New York Senator Todd Kaminsky (D)
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AG James proclaimed in her 2019 Year in Review that she is committed to “fight[ing] policies that hurt New Yorkers, our natural resources, and our planet.” AG James is stepping in to fill what she views as a gap in environmental protection enforcement by the Trump Administration. Many state AGs, including AG James, have taken over 300 actions on climate change, air, water, and toxic chemicals during Donald Trump’s Presidency.[90] A report by the State Energy and Environmental Impact Center at the NYU School of Law found that, as of the beginning of 2020, the Office has brought more environmental actions against the Trump Administration than any other state,[91] bringing 129 of those actions in 2019.[92]
AG James’s environmental activism takes aim at both the federal government’s policies and large corporations when she states that she believes that the federal government has not done enough to hold them accountable. The Office’s activism—frequently coordinated with AGs across the country—could have significant impacts on companies.
A. Taking on the Trump Administration’s Environmental Stance
AG James has challenged several of the Trump Administration’s new environmental rules, including the following:
(1) EPA’s COVID-19 Policy. On March 26, 2020, the EPA issued a temporary policy regarding EPA enforcement of environmental legal obligations in response to the novel coronavirus outbreak.[93] The policy applies retroactively to March 13 and has no end date. The policy allows the EPA not to take enforcement action against companies that violate existing requirements if they draw a nexus between COVID-19 and their noncompliance.[94] On April 15, 2020, AG James and 13 other states submitted a letter requesting that the EPA rescind the policy, contending that the “policy turns a blind eye to the impacts on our communities of more pollution and lesser accountability.”[95] There has been no response to the letter to date. AG James and attorneys general from several other states filed a complaint against the EPA on May 13, 2020 to challenge this policy, alleging that the EPA had not responded to the letter “or taken any of the actions requested by the Attorney[] General.”[96] This litigation remains pending in the Southern District of New York.[97]
(2) The Cross-State Air Pollution “Close-Out” Rule. This 2018 Trump administration rule loosens requirements that upwind states reduce their contribution of ozone precursors to downwind states, impacting the downwind states’ ability to attain ozone pollution standards by certain statutory deadlines. AG James has challenged the Trump Administration’s EPA rulemaking surrounding the Close-Out Rule multiple times.
On October 1, 2019, the U.S. Court of Appeals for the D.C. Circuit sustained New York’s challenge and vacated the Close-Out Rule. The court explained that the Close-Out Rule’s failure to require upwind states to reduce their emissions would “contribute significantly to downwind nonattainment in 2021.”[98] On October 29, 2019, AG James brought another lawsuit against the EPA for failure to “abide by its legal responsibility under the Clean Air Act [(“CAA”)] to ensure upwind sources of pollution do not continue to create unhealthy ground-level ozone pollution [] in New York.”[99] The lawsuit followed the EPA’s denial of a March 2018 petition filed by New York. The petition requested the EPA to make a finding that nine upwind states were guilty of emissions violations and that the EPA ensure that the states reduced their emissions.[100] On July 14, 2020 the court vacated the EPA’s denial of New York’s petition and remanded the case for further proceedings. On February 19, 2020, AG James joined a federal lawsuit against the EPA for its failure to control air pollution from upwind states, thus preventing New York from achieving compliance with the CAA.[101] On July 28, 2020, the court ruled in favor of the coalition of state attorneys general, granting their motion for summary judgment, finding that the EPA had not performed its obligations under the law and granting injunctive relief.
“The Trump Administration’s attempt to weaken the Clean Air Act will cause lasting damage to the economy, environment, and health of the American people.” – AG James, September 2019
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(3) Energy Standards. In August 2019, AG James led a coalition of 22 states and seven localities in filing a lawsuit challenging the EPA’s Affordable Clean Energy (“ACE”) rule, a regulation that purported to replace the Clean Power Plan (“CPP”), which had placed strict limits on fossil-fuel power plant emissions.[102] The lawsuit alleged that the EPA had no legal standing to weaken the CPP, that the replacement ignored an EPA mandate to set limits on greenhouse gases, and that the new rule would reverse progress made in addressing climate change and prolong the U.S.’s dependence on fossil fuels. EPA officials have argued that, unlike the CPP, the ACE rule adheres to the CAA and is just as effective.[103] Oral argument in the case has been scheduled for October 8, 2020.[104] In April 2020, AG James, together with 14 other states and New York City, filed a lawsuit in the Ninth Circuit challenging the U.S. Department of Energy’s (“DOE”) revisions to its Process Rule.[105] The Process Rule describes the procedures, interpretations, and policies that guide DOE in establishing new or revised energy-efficiency standards for consumer products.[106] The Office argued that the revisions impose an “unreasonably high threshold for energy efficiency savings” that “threaten” the economic and environmental progress made by DOE’s long-standing energy efficiency program.[107] The case is pending in the Ninth Circuit.
(4) Changes to Vehicle and Greenhouse Gas Emissions Standards. In July 2019, the U.S. Department of Transportation’s National Highway Traffic Safety Administration (“NHTSA”) repealed an Obama-era rule and announced a new rule that limited the civil penalty rate for automobile manufacturers that fail to meet certain emissions standards. AG James led a coalition of 13 state attorneys general in challenging the agency decision in the U.S. Court of Appeals for the Second Circuit, alleging that the new rule was “unlawful and rewards automakers that fail to manufacture fuel-efficient vehicles” and that it “violated federal law, which mandates that public agencies update their civil penalties to account for inflation using a clear timetable and formula for adjustment.”[108] The case was heard on June 1, 2020.[109] On March 31, 2020, the Trump Administration announced its final rule rolling back the Clean Car Standards.[110] On May 27, 2020, AG James joined a multistate lawsuit against the EPA, U.S. Department of Transportation, and the NHTSA.[111] The pending lawsuit, joined by 23 other attorneys general and several other local governments, argues that the rollback will halt the progress made “in saving consumers at the pump and reducing harmful greenhouse gas emissions, hurting the economy and public health at a time when the country can least afford it.”[112]
(5) Changes to Methane Emissions Standards. In November 2019, AG James joined a coalition of 21 state and local governments in filing comments opposing a proposed EPA rule that would rescind emissions standards for methane.[113] The coalition argued that the proposal was unlawful because the EPA had failed to justify its decision to abandon methane regulation, disregarded its own previous conclusions about the “substantial adverse impacts of methane emissions from the oil and gas industry,” and “arbitrarily eliminate[d] pollution controls from the transmission and storage segment of the oil and natural gas sector.”[114]
(6) Approval of Seismic Air Gun Survey Testing. In March 2019, AG James and eight other AGs joined a group of non-governmental organizations’ motion to preliminarily enjoin the Trump Administration’s authorization of seismic air gun survey testing in the Atlantic Ocean. Seismic testing is considered to a precursor to offshore drilling because it involves the use of high-powered air guns to release loud pressurized blasts through the Atlantic Ocean to the seafloor to map offshore oil and gas reserves. The AGs argued that the authorizations violated the Marine Mammal Protection Act, Endangered Species Act, National Environmental Policy Act, and the APA.[115] The case is currently pending in the U.S. District Court for the District of South Carolina (Charleston).[116]
B. Actions against Corporations
When it comes to the environment, AG James has also participated in actions against fossil fuel and automobile companies.
Fossil Fuel Companies. Former AG Eric T. Schneiderman initiated an investigation against ExxonMobil in November 2015 to determine whether the company had fraudulently misled investors and the public about the risks of climate change and how such risks might hurt the oil business.[117] In 2018, following the nearly three-year investigation, then-AG Barbara Underwood brought a securities fraud case under the Martin Act against ExxonMobil based on an alleged accounting discrepancy, alleging that the oil company caused investors to lose up to $1.6 billion by falsely telling them it had properly evaluated the impact of future climate regulations on its business.[118] In late November 2019, the case went to trial. In December, after three weeks of trial, New York State Supreme Court Justice Barry Ostrager dismissed the case with prejudice, finding that “[t]he office of the Attorney General failed to prove, by a preponderance of evidence, that ExxonMobil made any material misstatements or omissions about its practices and procedures that misled any reasonable investor.”[119] The court further noted, “ExxonMobil does not dispute either that its operations produce greenhouse gases or that greenhouse gases contribute to climate change. But ExxonMobil is in the business of producing energy, and this is a securities fraud case, not a climate change case.”[120]
Following the defeat, the Office has continued to insert itself in climate change litigation brought against oil companies around the country, notably in Baltimore and the Bay Area, joining multistate coalitions in filing amici briefs in pending environmental litigation.[121] Supporting local government plaintiffs in these cases, the state AGs have argued that fossil fuel companies should be held accountable under state law, including state tort law, for actions purportedly contributing to climate change and resulting harms.[122] The oil companies have argued that the issues are fundamentally about emissions, which are regulated at the federal level. Many of the cases have been dismissed, although some remain pending.
Automobile Industry. In January 2019, AG James, a coalition of state and federal agencies, as well as private class action plaintiffs reached a $171 million settlement with Fiat Chrysler Automobiles (“Fiat”) and others. The deal—which did not involve any admission of guilt, and included civil penalties and compensation for eligible customers—settled purported claims that Fiat had allegedly falsely advertised that its “EcoDiesel” vehicles were environmentally friendly (in violation of state environmental and consumer protection laws and the federal Clean Air Act), among other allegations. Following the deal, Fiat announced “rigorous new validation procedures and updated . . . . .training programs.”[123]
VIII. Employee Rights
AG James has also been active in areas relating to labor and employment, especially post COVID-19. Since January 2019, she has actively opposed multiple rule change proposals related to federal labor laws, like the Fair Labor Standards Act (“FLSA”), from the Trump Administration, leading coalitions of state attorneys general, because she believes the proposals weaken vital protections for workers and make it harder for states to enforce workplace laws. AG James’s many comment letters in opposition to the Trump Administration’s proposals suggest that AG James and other attorneys general have already teed up future litigation on numerous issues.[124] We can expect her to file suit on many of these issues.
A. Challenging Federal Policy Changes
For example, in May 2019, AG James led a coalition of states in opposing a then-proposed, now-final, rule regarding the “white collar” exemption to the overtime pay requirements under the FLSA.[125] The exemption generally applies to salaried employees with executive, administrative or professional duties that earn above a threshold amount. The AG coalition favored a higher, more “meaningful” salary threshold in part because they argued it would have, in practice, created a “bright-line” rule that clearly delineated exempt from non-exempt workers in more cases, particularly where states have a higher-than-national minimum wage. However, the salary threshold that the U.S. Department of Labor (“DOL”) ultimately adopted was far below that advocated for by AG James (and the other state attorneys general), and roughly tracks to wages that are or soon will be the minimumwage in states like New York.[126] According to the AGs’ comment letter, this lower salary requirement will likely lead to a higher incidence of worker misclassification, as more classification decisions turn on a “multifactorial duties test” that assesses the extent to which an employee’s duties are administrative, executive, or professional. Despite AG James’s efforts, the overtime rule went into effect on January 1, 2020.[127]
AG James, along with Attorney General Josh Shapiro of Pennsylvania, also led an opposition to the Trump Administration’s efforts to revise the definition of “joint employer” as it is used to determine liability in both the FLSA and the National Labor Relations Act. AG James and AG Shapiro, joined by other states and the District of Columbia, have filed suit to challenge the DOL’s Final Rule[128] under the APA.[129] Cross motions for summary judgment are pending.
With the onset of COVID-19, AG James has redoubled her opposition to certain federal wage and hour policies—new and old—particularly where she believes wage workers will be disproportionately impacted. For example, AGs James and Shapiro again led a coalition of states in urging the Trump Administration to cease implementing the joint employer rule on the basis that the changes “put[] those most at risk of suffering financially as a result of the COVID-19 pandemic in even greater economic jeopardy.”[130] According to the coalition, the new rule limits employees’ ability to collect back wages from bankrupt employers.[131]
Similarly, AG James filed suit in federal court to block implementation of a rule issued by the DOL under the Families First Coronavirus Response Act, claiming that the portions of the rule violate the APA because they are not in accordance with law and exceed the DOL’s statutory authority.[132] AG James seeks to sever and vacate portions of the rule[133] that “make[] it harder for New Yorkers and Americans throughout the country to claim [paid sick leave and emergency family leave] benefits, which unnecessarily puts more workers at risk of exposure to COVID-19.”[134] On August 3, 2020, the court agreed with AG James, invalidating parts of the DOL rule that AG James argued unfairly restricted access to the program.[135]
AG James has also gone beyond wage and hour issues.[136] In a comment letter to the Federal Trade Commission, she joined other state AGs in advocating for increased scrutiny of anticompetitive policies in the labor market, singling out non-compete and no-poach agreements as examples.[137] Joining with other state attorneys general, she filed an amicus brief before the U.S. Supreme Court, joining in support of preservation of anti-discrimination protections, and highlighting the state’s “critical role in enforcing anti-discrimination [laws].”[138] She also co-led the filing of an amicus brief before the U.S. Supreme Court arguing that Title VII prohibits employment discrimination based on an individual’s sexual orientation and stereotyping of that individual’s gender identity.[139] This brief argued that discrimination against LGBT workers undermines the states’ ability to create inclusive communities, and that a contrary interpretation of Title VII would limit the extent to which states can rely on and utilize federal law to combat that discrimination. The U.S. Supreme Court ruled adversely to her position in the first case,[140] but, in the second, issued a landmark ruling protecting the rights of LGBT workers—finding that “[a]n employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex” is in violation of Title VII.[141]
B. Employee Protection Efforts and Enforcement in New York
AG James has been active in prosecuting employers and publicly supporting the passage of various laws and initiatives to protect the rights of workers, including that:
- AG James lauded state-wide passage of the Salary History Bill, finding that the practice of inquiring into past salaries during the hiring process “unfairly perpetuates discrimination towards women and women of color, and … deprives them of the equal pay and recognition that they rightfully deserve.”[142]
- AG James applauded an amendment to the Equal Pay Act, which bans employers from paying different wages based on gender, remarking that she is “proud to see NY lead the way on ensuring equity in the workplace” by requiring that employees be paid equally for “substantially similar work.”[143] She also joined a letter by a coalition of state attorneys general supporting a lawsuit seeking to compel “complete and final adoption” of the Equal Rights Amendment, after Virginia became the 38th state to ratify the Amendment, and urged Congress to remove any deadline for ratification.[144]
- AG James also successfully pushed for passage of a state law that penalizes discrimination and retaliation against immigrant employees, stating that “it is incumbent on us to help vulnerable workers be able to stand up for their rights without fear of punishment.”[145] This law went into effect in October 2019.[146] While the law essentially codifies federal case law interpreting anti-retaliation provisions, AG James advocated for the law to combat the “culture of fear” that has resulted from “increasingly heated rhetoric” regarding immigration nationwide.[147]
- AG James also heralded a decision by the New York State Court of Appeals reinstating a determination by the state’s Unemployment Insurance Appeal Board that a delivery driver was entitled to unemployment benefits.[148] AG James heralded the decision that “delivery drivers are employees [and not independent contractors] and are entitled to the same unemployment benefits other employees can obtain” particularly “[a]s the nation battles the spread of the coronavirus and more and more employees are laid off.”[149]
AG James has signaled she will consider “all legal options” to protect employees in the wake of COVID-19.[150] For instance, she has demanded that fast food restaurants provide employees with personal protective equipment,[151] and at least twice called on employees to report perceived violations of both preexisting labor laws and the recently issued executive orders.[152] We expect she will continue to advance the rights of and protections for workers in the turbulence of the COVID-19 pandemic.
AG James also secured several settlements on behalf of employees:
- AG James reached a $450,000 settlement with a home health care company following the passage of the new law barring discrimination against immigrant employees based on allegations that more than 100 home health aides were not paid their earned wages, and were instead allegedly threatened with deportation if they reported or complained of the wage theft.[153]
- In a settlement regarding the company’s prior sick leave policies and practices, a coffeehouse chain recently agreed to pay $150,000 to a restitution fund, reform its sick leave policy, educate its workers on the new sick leave policy, and submit a compliance report detailing its progress within six months.[154]
- AG James has secured a $530,000 settlement for 150 car wash workers for wage theft.[155]
- With the New York City Comptroller’s Office, AG James required a developer to pay over $400,000 in restitution and interest to workers, as well as $2.5 million to New York City and the State, to settle its inquiry into whether the developers willfully violated wage requirements under Section 421-a of the New York Real Property Tax Law, which provides tax breaks on certain multifamily buildings.[156]
- AG James reached a settlement awarding $240,000 and a 10-year profit sharing arrangement for 11 former employees of a New York City restaurant and requiring implementation of new policies after an investigation found that the restaurant failed to systematically address or take adequate action to address the sexual harassment of the female staff.[157]
IX. The Future
While we expect the next 18 months to look directionally like the last 18 months, the upcoming Presidential election will have important implications for AG James’s priorities. Civil rights including voter protection, the impact of the ongoing pandemic on consumers, borrowers, and workers will undoubtedly continue to draw her focus. The Office’s aggressive enforcement positions require that companies pay careful attention to AG James’s actions and next steps. AG James will continue to look for and seize upon opportunities in a broad range of areas building on her successes to date.
[1] State of New York v. Nat’l Rifle Ass’n of Am., Inc., et al., No. 451625/2020 (N.Y. Sup. Ct. Aug. 6, 2020); Press Release, N.Y.S. Attorney General, Attorney General James Files Lawsuit to Dissolve NRA (Aug. 6, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-files-lawsuit-dissolve-nra.
[2] Brett Samuels, Trump pays court-ordered $2 million in charity case, NY AG says, The Hill (Dec. 10, 2019), https://thehill.com/homenews/administration/473934-trump-pays-court-ordered-2-million-in-charity-case-ny-ag-says;Press Release, N.Y.S. Attorney General, AG James Secures Court Order Against Donald J. Trump, Trump Children, And Trump Foundation (Nov. 7, 2019), https://ag.ny.gov/press-release/2019/ag-james-secures-court-order-against-donald-j-trump-trump-children-and-trump.
[3] Nat’l Rifle Ass’n of America v. Letitia James, No. 5:000-at-99999 (N.D.N.Y. Aug. 6, 2020).
[4] Press Release, N.Y.S. Attorney General, Attorney General James Refuses to Back Down in Fight Against NRA (Aug. 7, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-refuses-back-down-fight-against-nra.
[5] Press Release, N.Y.S. Attorney General, Attorney General Letitia James Delivers Remarks At Inauguration Ceremony On Ellis Island (Jan. 2, 2019), https://ag.ny.gov/press-release/2019/attorney-general-letitia-james-delivers-remarks-inauguration-ceremony-ellis.
[7] Press Release, N.Y.S. Attorney General, Attorney General James Joins Multistate Amicus Brief Challenging Trump Administration “Turnback Policy” (Feb. 22, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-joins-multistate-amicus-brief-challenging-trump-0.
[8] Press Release, N.Y.S. Attorney General, AG James Backs Lawsuit Challenging Trump Administration’s Use Of Healthcare Coverage To Ban Immigration (Nov. 13, 2019), https://ag.ny.gov/press-release/2019/ag-james-backs-lawsuit-challenging-trump-administrations-use-healthcare-coverage.
[9] Press Release, N.Y.S. Attorney General, Attorney General James Seeks to Halt Trump Administration’s Reckless “Dirty Water Rule” (May 19, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-seeks-halt-trump-administrations-reckless-dirty-water-rule; Press Release, N.Y.S. Attorney General, Independent Study Finds NY State AG Tops Nation In Environmental Protection (Dec. 9, 2019), https://ag.ny.gov/press-release/2019/independent-study-finds-ny-state-ag-tops-nation-environmental-protection.
[10] Press Release, N.Y.S. Attorney General, Attorney General James And Coalition Files Brief In Census Case Challenging Trump Administration’s Attempt To Add Citizenship Question To The 2020 Census (April 1, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-and-coalition-files-brief-census-case-challenging-trump.
[11] Press Release, N.Y.S. Attorney General, Attorney General James Seeks Preliminary Injunction Against The Trump Administration To Stop Health Care Discrimination (June 14, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-seeks-preliminary-injunction-against-trump-administration.
[12] Press Release, N.Y.S. Attorney General, Attorney General James Continues Fight to Stop Public Charge Rule (Apr. 29, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-continues-fight-stop-public-charge-rule; Press Release, N.Y.S. Attorney General, Attorney General James Announces Lawsuit Against Trump Administration Over Public Charge Rule (Aug. 20, 2019), https://ag.ny.gov/press-release/attorney-general-james-announces-lawsuit-against-trump-administration-over-public.
[14] Press Release, N.Y.S. Attorney General, Attorney General James Remarks on DACA Following Supreme Court Argument (Nov. 12, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-remarks-daca-following-supreme-court-argument.
[15] See Gibson Dunn Dec. 2019 Newsletter: Defending the Dreamers, https://www.gibsondunn.com/wp-content/uploads/2019/12/ProBonoNewsletter-1219.html. A decision is expected in June 2020.
[16] See Department Of Homeland Security et al. v. Regents Of The University Of California, et al., Slip. Op. 18-587 (Supreme Court June 18, 2020).
[17] Press Release, N.Y.S. Attorney General, Attorney General James Urges Court to Halt Trump EPA’s Non-Enforcement of Federal Environmental and Public Health Laws (June 9, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-urges-court-halt-trump-epas-non-enforcement-federal; Press Release, N.Y.S. Attorney General, AG James Sues Trump Administration for Limiting Enforcement of Federal Environmental and Public Health Laws (May 13, 2020), https://ag.ny.gov/press-release/2020/ag-james-sues-trump-administration-limiting-enforcement-federal-environmental-and.
[18] Press Release, N.Y.S. Attorney General, AG James Sues Trump Administration Over Unlawful Regulations Restricting Coronavirus-Based Paid Sick Leave (Apr. 14, 2020), https://ag.ny.gov/press-release/2020/ag-james-sues-trump-administration-over-unlawful-regulations-restricting.
[19] Press Release, N.Y.S. Attorney General, Attorney General James Leads Bipartisan Multistate Coalition Calling on Federal Government to Protect Seniors’ Homes During Coronavirus Pandemic (May 1, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-leads-bipartisan-multistate-coalition-calling-federal.
[20] See, e.g.,Press Release, N.Y.S. Attorney General, Statement On President Trump’s Comments Regarding The New York State Attorney General Office (Apr. 29, 2019), https://ag.ny.gov/press-release/2019/statement-president-trumps-comments-regarding-new-york-state-attorney-general.
[21] Press Release, Dep’t of Justice, Justice Department Settles with T-Mobile and Sprint in Their Proposed Merger by Requiring a Package of Divestitures to Dish (July 26, 2019), https://www.justice.gov/opa/pr/justice-department-settles-t-mobile-and-sprint-their-proposed-merger-requiring-package.
[22] Lauren Hirsch, Texas and Nevada are the latest states to defect from the lawsuit against Sprint/T-Mobile deal, CNBC (Nov. 25, 2019), https://www.cnbc.com/2019/11/25/texas-is-latest-to-defect-from-lawsuit-against-sprintt-mobile-deal.html.
[23] Brendan Pierson, Testimony ends in T-Mobile-Sprint merger trial in New York, Reuters (Dec. 20, 2019), https://www.reuters.com/article/us-sprint-corp-m-a-t-mobile-us/testimony-ends-in-t-mobile-sprint-merger-trial-in-new-york-idUSKBN1YO2CV.
[24] Decision and Order, State of New York v. Deutsche Telekom AG, No. 19 Civ. 5434 (Feb. 11, 2020) (ECF No. 409).
[26] Press Release, N.Y.S. Attorney General, Attorney General James’ Statement On T-Mobile/Sprint Appeal (Feb. 16, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-statement-t-mobilesprint-appeal.
[27] Press Release, N.Y.S. Attorney General, Attorney General James Announces Antitrust Investigation Into Google (Sept. 9, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-announces-antitrust-investigation-google.
[28] Steve Lohr, Google Antitrust Investigation Outlined by State Attorneys General, N.Y. Times (Sept. 9, 2019), https://www.nytimes.com/2019/09/09/technology/google-antitrust-investigation.html.
[29] Emily Birnbaum, State probes of Google, Facebook to test century-old antitrust laws, The Hill (Sept. 14, 2019), https://thehill.com/policy/technology/461385-state-probes-of-google-facebook-to-test-century-old-antitrust-laws.
[30] Press Release, N.Y.S. Attorney General, Attorney General James Holds Equifax Accountable By Securing $600 Million Payment In Largest Data Breach Settlement In History (July 22, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-holds-equifax-accountable-securing-600-million-payment.
[32] Megan Leonhardt, Equifax to pay $700 million for massive data breach, CNBC (July 22, 2019), https://www.cnbc.com/2019/07/22/what-you-need-to-know-equifax-data-breach-700-million-settlement.html.
[33] Press Release, N.Y.S. Attorney General, Attorney General James Holds Equifax Accountable By Securing $600 Million Payment In Largest Data Breach Settlement In History (July 22, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-holds-equifax-accountable-securing-600-million-payment.
[34] Robin McDonald, Judge OKs $77.5M in Legal Fees, Approves Equifax Data Breach Settlement, Law.com (Dec. 19, 2019), https://www.law.com/dailyreportonline/2019/12/19/judge-oks-77-5-million-in-legals-fees-approves-equifax-data-breach-settlement/.
[35] Press Release, N.Y.S. Attorney General, Attorney General James’ Statement On Capital One Security Breach (July 30, 2019), https://ag.ny.gov/press-release/attorney-general-james-statement-capital-one-security-breach.
[36] Press Release, N.Y.S. Attorney General, Attorney General James Secures New Protections, Security Safeguards for All Zoom Users (May 7, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-secures-new-protections-security-safeguards-all-zoom-users.
[37] Letter from the N.Y.S. Attorney General to Cooley LLP, Letter Agreement between Zoom and the NYAG, p. 3 (May 7, 2020), https://ag.ny.gov/sites/default/files/nyag_zoom_letter_agreement_final_counter-signed.pdf.
[38] Press Release, N.Y.S. Attorney General, Attorney General James Secures New Protections, Security Safeguards for All Zoom Users (May 7, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-secures-new-protections-security-safeguards-all-zoom-users.
[39] Press Release, N.Y.S. Attorney General, AG James Files Lawsuit Against Private Equity Fund Manager Who Used Investor Funds as Private Piggy Bank (Dec. 5, 2019), https://ag.ny.gov/press-release/2019/ag-james-files-lawsuit-against-private-equity-fund-manager-who-used-investor.
[40] Press Release, N.Y.S. Attorney General, Attorney General James Announces New Whistleblower Submissions (Oct. 2, 2019), https://ag.ny.gov/press-release/2019/whistleblowers-welcome-attorney-general-james-announces-new-whistleblower.
[42] Patrick Connelly, Secure Whistleblower Submission System Debuted by New York AG, (Oct. 3, 2019), Buffalo L. J, Buffalo Bus. First, https://www.bizjournals.com/buffalo/news/2019/10/03/whistleblower-submission-system-debuted-by-ny-ag.html.
[43] Press Release, N.Y.S. Attorney General, Attorney General James Announces New Whistleblower Submissions (Oct. 2, 2019), https://ag.ny.gov/press-release/2019/whistleblowers-welcome-attorney-general-james-announces-new-whistleblower.
[46] Eric M. Kogan & Leslie J. Levinson, New York Reinstates Six-Year Statute of Limitations Under Martin Act, Nat’l L. Rev. (Sept. 5, 2019), https://www.natlawreview.com/article/new-york-reinstates-six-year-statute-limitations-under-martin-act.
[47] N.Y. Gen. Bus. Law 23-A, §§ 352–53; David Voreacos, The Martin Act, Bloomberg (Nov. 10, 2015), https://www.bloomberg.com/quicktake/martin-act.
[48] N.Y. Gen. Bus. Law 23-A §§, 352–53; Press Release, N.Y.S. Attorney General, New Law Strengthens AG James’ Authority To Take On Corporate Misconduct (Aug. 26, 2019), https://ag.ny.gov/press-release/2019/new-law-strengthens-ag-james-authority-take-corporate-misconduct.
[49] The Martin Act: New York State’s Most Notorious Business Law, Energy in Depth (Oct. 18, 2019), https://eidclimate.org/the-martin-act-explained/.
[50] Press Release, N.Y.S. Attorney General, AG James Imposes $12.5 Million Penalty on Brokerage Firms for Martin Act Violations (Oct. 2, 2019), https://ag.ny.gov/press-release/ag-james-imposes-125-million-penalty-brokerage-firms-martin-act-violations; see also Press Release, New York Attorney General’s Office, Attorney General James Announces Court Order Against “Crypto” Currency Company Under Investigation for Fraud (Apr. 25, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-announces-court-order-against-crypto-currency-company.
[51] Press Release, N.Y.S. Attorney General, AG James Imposes $12.5 Million Penalty on Brokerage Firms for Martin Act Violations (Oct. 2, 2019), https://ag.ny.gov/press-release/ag-james-imposes-125-million-penalty-brokerage-firms-martin-act-violations.
[52] Lizeth Beltran, Wall Street Brokerages Fined More Than $ 35M for Fraud, Crains New York (Oct. 2, 2019), https://www.crainsnewyork.com/finance/wall-street-brokerages-fined-more-35m-fraud.
[53] Jonathan Stempel, Regulators Fine New York’s BGC Partners $25 Million for Forex Options Fraud, Reuters (Oct. 2, 2019), https://www.reuters.com/article/us-cftc-new-york-brokerages/regulators-fine-new-yorks-bgc-partners-25-million-for-forex-options-fraud-idUSKBN1WH23U. BGC and GFI agreed to pay additional penalties to the U.S. Commodity Futures Trading Commission, totaling $25 million. Id.
[54] See Press Release, Commodity Futures Trading Commission, CFTC Orders Interdealer Brokers to Pay $25 million for Fraud in FX Options Markets (Oct. 2, 2019), https://www.cftc.gov/PressRoom/PressReleases/8035-19; Dave Michaels, Foreign-Exchange Brokers, BGC, GFI Settle Probes Over Phony Trades, Wall St. J. (Oct. 2, 2019), https://www.wsj.com/articles/foreign-exchange-brokers-bcg-gfi-settle-probes-over-phony-trades-11570039909.
[55] Press Release, N.Y.S. Attorney General, AG James Files Lawsuit Against Private Equity Fund Manager Who Used Investor Funds as Private Piggy Bank (Dec. 5, 2019), https://ag.ny.gov/press-release/2019/ag-james-files-lawsuit-against-private-equity-fund-manager-who-used-investor.
[56] Press Release, N.Y.S. Attorney General, AG James Obtains Injunction Against “Self-Dealing” Private Equity Fund Manager Who Committed “Outright Fraud,” According To Court (Feb. 7, 2020), https://ag.ny.gov/press-release/2020/ag-james-obtains-injunction-against-self-dealing-private-equity-fund-manager-who.
[57] Press Release, N.Y.S. Attorney General, AG James Files Lawsuit Against Private Equity Fund Manager Who Used Investor Funds as Private Piggy Bank (Dec. 5, 2019), https://ag.ny.gov/press-release/2019/ag-james-files-lawsuit-against-private-equity-fund-manager-who-used-investor.
[58] Press Release, N.Y.S. Attorney General, Attorney General James locks Fraudster ‘Green’ Inventor from Using Investor Funds as Personal Piggy Bank During Coronavirus Pandemic (Apr. 27, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-blocks-fraudster-green-inventor-using-investor-funds; Press Release, N.Y.S. Attorney General, Attorney General James Holds ‘Green’ Inventor Accountable, Ends Use of Investor Funds for Personal Expenses (June 5, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-holds-green-inventor-accountable-ends-use-investor-funds.
[59] People by James v. Exxon Mobil Corp., 65 Misc. 3d 1233(A) (N.Y. Sup. Ct. 2019).
[60] Press Release, N.Y.S. Attorney General, AG James Leads Coalition Suing SEC for Putting Brokers Ahead of Investors (Sept. 10, 2019), https://ag.ny.gov/press-release/2019/ag-james-leads-coalition-suing-sec-putting-brokers-ahead-investors.
[61] Regulation Best Interest: The Broker-Dealer Standard of Conduct, 84 Fed. Reg. 33,318 (July 12, 2019), https://www.sec.gov/rules/final/2019/34-86031.pdf (“Regulation Best Interest”).
[62] The attorneys general of California, Connecticut, Delaware, Maine, New Mexico, Oregon, and the District of Columbia have joined in the lawsuit.
[63] New York v. United States Sec. & Exch. Comm’n, 2019 WL 5203751, at *1 (S.D.N.Y. Sept. 27, 2019) (citing 15 U.S.C. § 78y(b)(1)) (“A person adversely affected by a rule of the Commission . . . may obtain review of this rule in the United States Court of Appeals for the circuit in which he resides or has his principal place of business.”).
[64] XY Planning Network, LLC v. United States Sec. & Exch. Comm’n, 963 F.3d 244, 255–57 (2d Cir. 2020).
[65] Id. at 252–53. The Second Circuit held that an additional petitioner—Investment Advisor Ford Financial Solutions, LLC—had standing to challenge this regulation and, accordingly, allowed the case to proceed on the merits.
[66] Press Release, N.Y.S. Attorney General, Attorney General James’ Statement on Purdue Pharma Bankruptcy Filing (Sept. 16, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-statement-purdue-pharma-bankruptcy-filing.
[67] Press Release, N.Y.S. Attorney General, Attorney General Letitia James Joins Multistate Coalition to Appeal ACA Ruling (Jan. 3, 2019), https://ag.ny.gov/press-release/2019/attorney-general-letitia-james-joins-multistate-coalition-appeal-aca-ruling.
[68] Press Release, N.Y.S. Attorney General, Attorney General James Leads Coalition of 23 Cities and States Suing Trump Administration to Stop Health Care Discrimination (May 21, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-leads-coalition-23-cities-and-states-suing-trump.
[69] Yasmeen Abutaleb, Trump’s ‘conscience rule’ for health providers blocked by federal judge, Wash. Post (Nov. 6, 2019), https://www.washingtonpost.com/health/trumps-conscience-rule-for-health-providers-voided-by-federal-judge/2019/11/06/39aa9b74-00b1-11ea-9518-1e76abc088b6_story.html; Michael Riccardi, US District Judge Junks Trump Administration’s Health Care ‘Conscience Rule,’ N.Y. Law J. (Nov. 6, 2019), https://www.law.com/newyorklawjournal/2019/11/06/read-the-opinion-us-district-judge-junks-trump-administrations-health-care-conscience-rule/.
[70] State of New York v. United States Dep’t of Health & Human Servs., Case No. 20-41 (2d Cir. filed Jan. 3, 2020).
[71] Press Release, N.Y.S. Attorney General, Attorney General James Leads Effort to Defend Affordable Care Act from Trump Administration (July 16, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-leads-effort-defend-affordable-care-act-trump.
[72] Press Release, N.Y.S. Attorney General, Attorney General James Announces Major Win Over Trump Administration’s Attempt to Dismantle Affordable Care Act (Mar. 28, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-announces-major-win-over-trump-administrations-attempt; Timothy Bella, ‘Clearly an end-run’: Federal judge rejects Trump’s health-care plan to go around Obamacare, Wash. Post (Mar. 29, 2019), https://www.washingtonpost.com/nation/2019/03/29/clearly-an-end-run-federal-judge-strikes-down-trump-administrations-health-plan-go-around-obamacare/.
[73] Press Release, N.Y.S. Attorney General, Attorney General James Condemns New HHS Rule for Sabotaging the ACA (Aug. 15, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-condemns-new-hhs-rule-sabotaging-aca.
[74] Press Release, N.Y.S. Attorney General, New York and 43 Other States Sue 20 Generic Drug Manufacturers Alleging Conspiracy to Fix Prices and Allocate Markets for More Than 100 Generic Drugs (May 13, 2019), https://ag.ny.gov/press-release/new-york-and-43-other-states-sue-20-generic-drug-manufacturers-alleging-conspiracy-fix.
[75] Anne Cullen, Teva a ‘Consistent Participant’ in Drug Price-Fixing, AGs Say, Law360 (May 13, 2019), https://www.law360.com/articles/1158935/teva-a-consistent-participant-in-drug-price-fixing-ags-say.
[76] Press Release, N.Y.S. Attorney General, Attorney General James Sues ‘Pharma Bro’ Martin Shkreli and Vyera Pharmaceuticals for Illegally Monopolizing Life-Saving Drug (Jan. 27, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-sues-pharma-bro-martin-shkreli-and-vyera-pharmaceuticals.
[77] Press Release, N.Y.S. Attorney General, Attorney General James Adds States to Suit Against Convicted Criminal Martin Shkreli and Vyera Pharmaceuticals (Apr. 14, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-adds-states-suit-against-convicted-criminal-martin-0.
[78] Press Release, N.Y.S. Attorney General, Attorney General James Challenges Anticompetitive Conduct in the Generic Drug Industry (June 10, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-challenges-anticompetitive-conduct-generic-drug-industry.
[79] Press Release, N.Y.S. Attorney General, Attorney General James Cracks Down on Pharmacies Failing to Comply with Drug Pricing Transparency Law (June 13, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-cracks-down-pharmacies-failing-comply-drug-pricing.
[80] Press Release, N.Y.S. Attorney General, Attorney General James Sues JUUL Labs (Nov. 19, 2019), https://ag.ny.gov/press-release/attorney-general-james-sues-juul-labs.
[81] Press Release, N.Y.S. Attorney General, Attorney General James Leads Coalition of 7 States to Urge FDA to Strengthen E-Cigarette Guidance (Apr. 30, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-leads-coalition-7-states-urge-fda-strengthen-e-cigarette.
[82] Press Release, N.Y.S. Attorney General, Attorney General James Files Nation’s Most Comprehensive Suit Against Opioid Distributors and Manufacturers (Mar. 28, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-files-nations-most-comprehensive-suit-against-opioid.
[83] Press Release, N.Y.S. Attorney General, Attorney General James Announces Arrest of Two Physicians on Charges of Health Care Fraud at Opioid Mill (May 6, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-announces-arrest-two-physicians-charges-health-care-fraud; Press Release, N.Y.S. Attorney General, Operation Central City: Attorney General James Takes Down Two Drug Rings Responsible for Trafficking Heroin, Fentanyl, and Cocaine Throughout Central and Upstate New York (Apr. 25, 2019), https://ag.ny.gov/press-release/2019/operation-central-city-attorney-general-james-takes-down-two-drug-rings.
[84] Press Release, N.Y.S. Attorney General, Attorney General James Joins 38 State Coalition Urging Congress to Remove Federal barriers to Treat Opioid Use Disorder (Aug. 5, 2019), https://ag.ny.gov/press-release/attorney-general-james-joins-38-state-coalition-urging-congress-remove-federal.
[85] Press Release, N.Y.S. Attorney General, Attorney General James Makes Government Services More Accessible in Response to Coronavirus Pandemic (Mar. 17, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-makes-government-services-more-accessible-response.
[86] Press Release, N.Y.S. Attorney General, Attorney General James Demands Health Insurance Providers Obey the Law, Protect Women’s Access to Birth Control (Apr. 19, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-demands-health-insurance-providers-obey-law-protect-womens.
[87] Press Release, N.Y.S. Attorney General, Attorney General James Takes Action Against Coronavirus Health Scams, Issues Guidance To New Yorkers (Mar. 5, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-takes-action-against-coronavirus-health-scams-issues.
[88] Press Release, N.Y.S. Attorney General, Attorney General James Cleanses Internet of Coronavirus-Related Scams (Apr. 17, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-cleanses-internet-coronavirus-related-scams; Press Release, N.Y.S. Attorney General, Attorney General James Orders Craigslist to Remove Posts Selling Fake Coronavirus Treatments and Exorbitantly-Priced Items (Mar. 20, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-orders-craigslist-remove-posts-selling-fake-coronavirus.
[89] Press Release, N.Y.S. Attorney General, AG James: Price Gouging Will Not Be Tolerated (Mar. 10, 2020), https://ag.ny.gov/press-release/2020/ag-james-price-gouging-will-not-be-tolerated.
[90] 300 and Counting: State Attorneys General Lead the Fight for Health and the Environment (Dec. 2019), https://www.law.nyu.edu/sites/default/files/300%20and%20Counting%20-%20State%20Impact%20Center.pdf.
[92] Office of the N.Y.S. Attorney General Letitia James, 2019 Year in Review, https://ag.ny.gov/2019-year-in-review.
[93] News Release, U.S. Environmental Protection Agency, EPA Announces Enforcement Discretion Policy for COVID-19 Pandemic (Mar. 26, 2020), https://www.epa.gov/newsreleases/epa-announces-enforcement-discretion-policy-covid-19-pandemic#:~:text=EPA’s%20temporary%20enforcement%20discretion%20policy,during%20the%20COVID%2D19%20outbreak.&text=The%20temporary%20policy%20makes%20it,compliance%20as%20quickly%20as%20possible.
[94] Id.
[95] Press Release, N.Y.S. Attorney General, State Attorneys General Call on EPA to Rescind Policy Limiting Enforcement of Federal Civil Environmental and Public Health Laws (Apr. 15, 2020), https://ag.ny.gov/press-release/2020/state-attorneys-general-call-epa-rescind-policy-limiting-enforcement-federal.
[96] State of New York et al. v. Envtl. Prot. Agency et al., No. 20-cv-03714 (S.D.N.Y. May 13, 2020).
[97] Id.
[98] State of New York et al. v. Envtl. Prot. Agency et al., No. 19-1019 (D.C. Cir. Oct. 1, 2019).
[99] Press Release, N.Y.S. Attorney General, Attorney General James Sues Trump Administration For Failing To Address Interstate Smog Pollution (Oct. 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-sues-trump-administration-failing-address-interstate-smog.
[101] Press Release, N.Y.S. Attorney General, Attorney General Letitia James Joins Lawsuit Against EPA Over Failure To Act On Ozone Pollution From Upwind States (Feb. 19, 2020), https://ag.ny.gov/press-release/2020/attorney-general-letitia-james-joins-lawsuit-against-epa-over-failure-act-ozone.
[102] Press Release, N.Y.S. Attorney General, Independent Study Finds NY State AG Tops Nation In Environmental Protection (Dec. 9, 2019), https://ag.ny.gov/press-release/2019/independent-study-finds-ny-state-ag-tops-nation-environmental-protection.
[103] News Release, U.S. Environmental Protection Agency, EPA Finalizes Affordable Clean Energy Rule, Ensuring Reliable, Diversified Energy Resources while Protecting our Environment (June 19, 2019), https://www.epa.gov/newsreleases/epa-finalizes-affordable-clean-energy-rule-ensuring-reliable-diversified-energy.
[104] State of New York v. EPA, No. 19-1165 (D.C. Cir.), https://www.courtlistener.com/docket/20472/parties/state-of-new-york-v-epa/.
[105] Press Release, N.Y.S. Attorney General, Attorney General James Files Lawsuit Challenging the Trump Administration over Irrational New Obstacles for the Issuance of Energy Efficiency Standards (Apr. 15, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-files-lawsuit-challenging-trump-administration-over.
[106] 10 C.F.R. § 430 Subpt. C, App. A.
[107] Supra note 102.
[108] Press Release, N.Y.S. Attorney General, Attorney General James Leads Lawsuit Challenging Trump Administration’s Efforts To Undercut Fuel Efficiency Standards (Aug. 2, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-leads-lawsuit-challenging-trump-administrations-efforts.
[109] State of New York v. National Highway Traffic, Docket No. 19-02395 (2d Cir. Aug 2, 2019); see also Petition for Review of a Final Rule of the National Highway Traffic Safety Administration, State of New York et al. v. NHTSA (Aug. 2, 2019), https://oag.ca.gov/system/files/attachments/press-docs/CAFE%20penalty%20petition%20w.%20exhibit.pdf.
[110] News Release, U.S. Environmental Protection Agency, U.S. DOT and EPA Put Safety and American Families First with Final Rule on Fuel Economy Standards (Mar. 31, 2020), https://www.epa.gov/newsreleases/us-dot-and-epa-put-safety-and-american-families-first-final-rule-fuel-economy-standards.
[111] Press Release, N.Y.S. Attorney General, Attorney General James Fights to Protect Clean Air (May 27, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-fights-protect-clean-air.
[112] Id.
[113] Press Release, N.Y.S. Attorney General, Attorney General James Joins Coalition Opposing EPA Proposal To Gut Methane Emission Standards (Nov. 2019), https://ag.ny.gov/press-release/attorney-general-james-joins-coalition-opposing-epa-proposal-gut-methane-emission.
[114] Letter from the State of California et al. to the EPA (Nov. 22, 2019), https://ag.ny.gov/sites/default/files/comments_of_states_and_cities_11.22.19.pdf.
[115] Press Release, N.Y.S. Attorney General, Attorney General James Joins States’ Efforts To Halt Seismic Testing Off Atlantic Coast (Mar. 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-joins-states-efforts-halt-seismic-testing-atlantic-coast.
[116] South Carolina Coastal Conservation League et al. v. Wilbur Ross et al., No. 2:18-cv-03326 (D.S.C. Jan. 18, 2019).
[117] Justin Gillis & Clifford Krauss, Exxon Mobil Investigated for Possible Climate Change Lies by New York Attorney General, N.Y. Times (Nov. 5, 2015), https://www.nytimes.com/2015/11/06/science/exxon-mobil-under-investigation-in-new-york-over-climate-statements.html.
[118] Brendan Pierson, Exxon Mobil scores win in New York climate change lawsuit, Reuters (Dec. 10, 2019), https://www.reuters.com/article/us-exxon-mobil-lawsuit/exxon-mobil-scores-win-in-new-york-climate-change-lawsuit-idUSKBN1YE1ZU; Daniel Fisher, There’s second major trial starting this week – New York v. Exxon, Legal Newsline (Oct. 21, 2019), https://legalnewsline.com/stories/515106301-there-s-second-major-trial-starting-this-week-new-york-v-exxon.
[121] Press Release, N.Y.S. Attorney General, AG James Fights To Hold Big Polluters Accountable To State And Local Laws (Sept. 2019), https://ag.ny.gov/press-release/2019/ag-james-fights-hold-big-polluters-accountable-state-and-local-laws.
[123] Press Release, N.Y.S. Attorney General, Attorney General James Announces Landmark Multistate Settlements With Fiat Chrysler And Bosch Totaling $171 Million For Alleged Violations Of State Environmental And Consumer Protection Laws (Jan. 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-announces-landmark-multistate-settlements-fiat-chrysler.
[124] See, e.g.,Salary Comment Letter, supra note 124(white collar exemption); State Attorneys General, Comment Letter on Proposed Rulemaking (RIN: 3142-AA32) The Standard for Determining Joint-Employer Status (Jan. 28, 2019), https://ag.ny.gov/sites/default/files/nlrb-comment-letter.pdf (joint employer under NLRA); Joint-Employer Status Comment Letter, supra note 129 (joint employer under FLSA); State Attorneys General, Comment Letter on Proposed Rulemaking (RIN: 1235-AA21) Tip Regulations Under the Fair Labor Standards Act (FLSA) (Dec. 9, 2019), https://ncdoj.gov/wp-content/uploads/2019/12/Comment-of-19-State-Attorneys-General-re-RIN-1235-AA21.pdf (tip credit).
[125] State Attorneys General, Comment Letter on Proposed Rulemaking (RIN: 1235-AA20) Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees (May 21, 2019), [hereinafter Salary Comment Letter] https://ag.ny.gov/sites/default/files/usdol_overtime_multistate_comment_-_5-21-19.pdf.
[126] See Final Rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 84 Fed. Reg. 51230 (Sept. 27, 2019). The DOL adopted a salary requirement of $684/week, effective January 1, 2020, that is far below that advocated for by AG James and the other state attorneys general who joined in opposing the rule. See also Salary Comment Letter, supra note 124.
[127] See id.
[128] Final Rule, Joint Employer Status Under the Fair Labor Standards Act, 85 Fed. Reg. 2820 (Jan, 16, 2020).
[129] See Complaint, State of New York, at al v. Scalia, No. 20-cv-1689 (S.D.N.Y. Feb. 26, 2020), available at https://ag.ny.gov/sites/default/files/20-cv-1689.usdol_joint_employer_multi-state_complaint.as_filed.pdf; Press Release, N.Y.S. Attorney General, AG James Files Suit To Stop Trump Administration From Stripping Workers Of Key Labor Protections (Feb. 26, 2020), https://ag.ny.gov/press-release/2020/ag-james-files-suit-stop-trump-administration-stripping-workers-key-labor.
[130] Press Release, AG James: Trump Administration Must Suspend Implementation of Joint Employer Rule Amid Coronavirus Pandemic (Mar. 30, 2020),https://ag.ny.gov/press-release/2020/ag-james-trump-administration-must-suspend-implementation-joint-employer-rule.
[131] Id.; see also Letter to Secretary Scalia (March 30, 2020), https://ag.ny.gov/sites/default/files/2020.03.30_ag_letter_to_sec_scalia_0.pdf.
[132] Complaint, State of New York v. United States Department of Labor, No. 20-cv-3020 (S.D.N.Y. April 14, 2020), https://ag.ny.gov/sites/default/files/ny_v_us_dol_complaint.pdf.
[133] See Motion for Summary Judgment, State of New York v. United States Department of Labor, No. 20-cv-3020 (S.D.N.Y. April 14, 2020), https://ag.ny.gov/sites/default/files/ny_v_us_dol_motion_for_summary_judgment.pdf.
[134] Press Release, N.Y.S. Attorney General, AG James Sues Trump Administration Over Unlawful Regulations Restricting Coronavirus-Based Paid Sick Leave (April 14, 2020), https://ag.ny.gov/press-release/2020/ag-james-sues-trump-administration-over-unlawful-regulations-restricting.
[135] Press Release, N.Y.S. Attorney General, AG James Secures Court Win Against Trump Admin for Unlawful Regulations Restricting Coronavirus-Based Paid Sick Leave (Aug. 3, 2020), https://ag.ny.gov/press-release/2020/ag-james-secures-court-win-against-trump-admin-unlawful-regulations-restricting.
[136] AG James also joined coalitions of state attorneys general in opposing proposed rules regarding the calculation of overtime and distribution of “tips” under the FLSA. Press Release, N.Y.S. Attorney General, Attorney General James Urges U.S. Department Of Labor To Withdraw Proposal That Would Decrease Employee Earnings (Dec. 6, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-urges-us-department-labor-withdraw-proposal-would-decrease; State Attorneys General, Comment Letter on Proposed Rulemaking (RIN: 1235-AA21) Tip Regulations Under the Fair Labor Standards Act (FLSA) (Dec. 9, 2019), https://ncdoj.gov/wp-content/uploads/2019/12/Comment-of-19-State-Attorneys-General-re-RIN-1235-AA21.pdf; Joanna Fantozzi, Proposed Elimination of the 80/20 Tip Credit Rule is Likely Illegal, Attorneys General Say, Nation’s Rest. News (Dec. 12, 2019), https://www.nrn.com/operations/proposed-elimination-8020-tip-credit-rule-likely-illegal-attorneys-general-say.
[137] Press Release, N.Y.S. Attorney General, Attorney General James Urges Regulators To Protect Workers From Harmful, Anticompetitive Labor Practices (July 16, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-urges-regulators-protect-workers-harmful-anticompetitive.
[138] Press Release, N.Y.S. Attorney General, Attorney General James Fights To Protect Employees From Discrimination (Mar. 11, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-fights-protect-employees-discrimination.
[139] Press Release, N.Y.S. Attorney General, Attorney General James Files Supreme Court Brief To Protect LGBTQ+ Employees From Discrimination (July 3, 2019), https://ag.ny.gov/press-release/attorney-general-james-files-supreme-court-brief-protect-lgbtq-employees; Brief for States of Illinois, et al. as Amici Curiae in Support of the Employees, Bostock v. Clayton County, Georgia, No. 17-1618 (US July 3, 2019), https://www.supremecourt.gov/DocketPDF/18/18-107/107183/20190703180657540_Bostock-Zarda-Harris%20Amicus%20Br%20for%20States%20of%20IL-NY-et%20al.pdf.
[140] See Our Lady of Guadalupe Sch. v. Morrissey-Berru;, No. 19-267, 590 U.S. ___, ___ S. Ct. ___ (July 8, 2020) (slip op.) (holding that the Religion Clause in the First Amendment forecloses courts from adjudicating the discrimination claims brought by elementary school teachers who “performed vital religious duties”).
[141] See Bostock v. Clayton Cty., Georgia, 590 U.S. ___, 140 S. Ct. 1731 (2020) (holding that “[a]n employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex” is in violation of Title VII); see also Press Release, Attorney General James Lauds Supreme Court Decision Protecting LGBTQ+ Employees from Discrimination (June 15, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-lauds-supreme-court-decision-protecting-lgbtq-employees.
[142] Press Release, N.Y.S. Attorney General, Attorney General James On Passage Of Salary History Bill (June 20, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-passage-salary-history-bill; NY AG James (@NewYorkStateAG), Twitter (Jan. 6, 2020), https://twitter.com/NewYorkStateAG/status/1214289147604750338.
[143] NY AG James (@NewYorkStateAG), Twitter (Oct. 8, 2019), https://twitter.com/NewYorkStateAG/status/1181628966270066688.
[144] Press Release, N.Y.S. Attorney General, Attorney General James Calls On Congress To Take Steps Towards Ratification Of Equal Rights Amendment (Feb. 11, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-calls-congress-take-steps-towards-ratification-equal;Press Release, N.Y.S. Attorney General, Attorney General James’ Statement On Equal Rights Amendment Lawsuit (Jan. 31, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-statement-equal-rights-amendment-lawsuit.
[145] Press Release, N.Y.S. Attorney General, AG James: Bill Protecting Immigrant Workers From Workplace Harassment Signed Into Law (July 29, 2019), available at https://ag.ny.gov/press-release/2019/ag-james-bill-protecting-immigrant-workers-workplace-harassment-signed-law.
[146] N.Y. Lab. Law § 215.
[147] Press Release, N.Y.S. Attorney General, Attorney General James Applauds Passage Of Bill Protecting Immigrants In The Workplace (June 17, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-applauds-passage-bill-protecting-immigrants-workplace.
[148] Press Release, Attorney General James Scores Major Win for ‘Gig’ Workers with Victory in Postmates Case (Mar. 26, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-scores-major-win-gig-workers-victory-postmates-case.
[149] Id.
[150] Press Release, AG James’ Statement on Firing of Amazon Worker Who Organized Walkout (Mar. 30, 2020), https://ag.ny.gov/press-release/2020/ag-james-statement-firing-amazon-worker-who-organized-walkout[hereinafter Organized Walkout].
[151] Press Release, Attorney General James Demands Fast Food Restaurants Protect Workers (Apr. 25, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-demands-fast-food-restaurants-protect-workers [hereinafter Fast Food].
[152] Press Release, Attorney General James Urges Employees to File Complaints Against Employers Ignoring NYS Executive Orders (Mar. 21, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-urges-employees-file-complaints-against-employers-ignoring. See also Organized Walkout, supra note 152; Fast Food, supra note 154.
[153] Press Release, N.Y.S. Attorney General, Attorney General James Secures $450,000 For 100 Home Health Aides Threatened With Deportation (Sept. 13, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-secures-450000-100-home-health-aides-threatened.
[154] Press Release, City Hall of New York City, Mayor de Blasio and New York State Attorney General James Announce Settlement with Starbucks for Violations of City’s Paid Safe and Sick Leave Law (Dec. 19, 2019), https://www1.nyc.gov/office-of-the-mayor/news/631-19/mayor-de-blasio-new-york-state-attorney-general-james-settlement-starbucks-for; Jonathan Stempel, Starbucks settles New York probe into illegal sick leave policy, Reuters (Dec. 19, 2019), https://www.reuters.com/article/us-starbucks-new-york-settlement/starbucks-settles-new-york-probe-into-illegal-sick-leave-policy-idUSKBN1YN2H5; NY AG James (@NewYorkStateAG), Twitter (Dec. 21, 2019), https://twitter.com/NewYorkStateAG/status/1208448002760818696.
[155] Press Release, N.Y.S. Attorney General, Attorney General James Secures Over $500,000 For Over 150 Car Wash Workers (Sept. 13, 2019), https://ag.ny.gov/press-release/2019/attorney-general-james-secures-over-500000-over-150-car-wash-workers.
[156] Press Release, N.Y.S. Attorney General, AG James, Comptroller Stringer, and 32BJ President Bragg Return More Than $400,000 in Recovered Wages to Building Service Workers (Dec. 17, 2019), https://ag.ny.gov/press-release/2019/ag-james-comptroller-stringer-and-32bj-president-bragg-return-more-400000; Press Release, N.Y.S. Attorney General, AG James And Comptroller Stringer Secure Nearly $3 Million From Landlords For Underpaying Workers And Fraudulently Obtaining Tax Breaks (Nov. 8, 2019), https://ag.ny.gov/press-release/2019/ag-james-and-comptroller-stringer-secure-nearly-3-million-landlords-underpaying.
[157] Press Release, N.Y.S. Attorney General, Attorney General James Secures Settlement For Victims Of Sexual Harassment And Discrimination At Spotted Pig Restaurant (Dec. 17, 2019), https://ag.ny.gov/press-release/2020/attorney-general-james-secures-settlement-victims-sexual-harassment-and.
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