Publications Archives

Eugene Scalia was quoted in Law360 discussing his high court debut and why it is important to him.

Read the full article on Law360 [PDF].

Eugene Scalia was featured in The National Law Journal discussing his upcoming first Supreme Court argument and the significance to him.

Read the full article on The National Law Journal [PDF].

Jonathan Phillips was interviewed by the Federal News Network discussing false-claims trends and recent settlements.

Listen to the full interview on the Federal News Network.

Ryan Murr was quoted in The Recorder discussing the increase in biotech companies doing reverse mergers to reach public markets.

Read the full article on The Recorder [PDF].

Gibson Dunn was featured in The Texas Lawbook for its growth in Texas, highlighting major hires, key matters, and significant transactions.

Read the full article on The Texas Lawbook (subscription required).

Monica Loseman was quoted in Law360 discussing the Supreme Court and how they will most likely weigh in on a derivative suit.

Read the full article on Law360 [PDF].

Theodore Boutrous Jr. spoke with The National Law Journal discussing if the Supreme Court will revisit The New York Times v. Sullivan, its landmark First Amendment ruling, and how we will continue to see the rise in cert. petitions.

Read the full article on The National Law Journal [PDF].

Cassandra Gaedt-Sheckter, Vivek Mohan, and Eric Vandevelde were featured in Law360 Pulse discussing how Gibson Dunn is at the forefront of AI by creating an Artificial Intelligence practice group and how they help their clients.

Read the full article on Law360 Pulse [PDF].

Abdul Kallon has a resume that plenty of his partners at Perkins Coie would love to have: He was a federal judge for a dozen years.

But since leaving the bench last year and rejoining private practice, Kallon has found that he needs his partners’ help to succeed at something he’s not done for over a decade: “business development.” Building a book of business takes time, even for a former federal judge.

Most of Kallon’s contacts from a previous stint in private practice are useless toward that end, he said, having either retired or moved into new roles. He didn’t do marketing as a federal judge. He was cloistered away from most of the legal profession, isolating himself to avoid the perception of bias.

Even if he brings a rare skillset to clients’ disputes—a personal understanding of how judges might view their case plus his own trial chops—he is, for now, largely reliant on his partners to bring him into cases or introduce him to clients.

“You essentially have to start from ground zero,” said Kallon, who was nominated to the bench by President Obama in 2009. “It takes a while for relationships to gel and foster to the point where people will call you routinely.”

Kallon, 54, is among a wave of former federal judges who resigned from the bench for Big Law over the past two years. The judges were all appointed at relatively young ages and are in their late 40s or mid-50s, meaning they still have long working lives ahead of them.

They’re different from retired judges, who often take part-time mediator jobs or serve as a sort of figurehead in law firms. They’re looking to build their own practices.

“We’re going at it as hard as any of the other partners,” said Gregg Costa, who joined Gibson Dunn & Crutcher in September 2022 after leaving the U.S. Circuit Court of Appeals for the Fifth Circuit.

These transitions are likely to become more common. Presidents have been appointing judges at younger ages, and those who take the bench before age 45 resign before reaching senior status at a disproportionately high rate, according to research from The Vetting Room, which tracks judicial nominations. During the Bush I, Clinton and Bush II administrations, roughly 11% of judges nominated at the age of 45 or younger resigned before reaching senior status, compared to about 2% for judges who were nominated at above 45.

Dating back to at least 2009, when a federal judge resigned citing a need to support his seven kids, many departing judges cite the discrepancy in pay between federal judges and law firm partners. US district judges will earn $243,000 this year. Partners at many firms earn 10 times that amount, and the gap is likely to grow as law firm profits surge.

For the law firms and their partners, putting a former federal judge in front of a client no doubt burnishes credibility. Former judges have a rare perspective that they say clients and colleagues often seek out.

But to maximize their earning potential, the judges will need to win business. Originating work is the coin of the realm in private practice, and it’s a skill these new partners haven’t practiced in a decade or more while they served on the bench.

“The work comes to you on the bench. People file lawsuits. It doesn’t work that way in a law firm,” said John Gleeson, a Debevoise & Plimpton partner who has a bit more perspective on the transition. He resigned from the Eastern District of New York in 2016, a position he held since being nominated by President Clinton in 1994.

“It’s a very competitive profession we’re in, and there are a lot of really good lawyers out there doing it. So you have to learn how to be more entrepreneurial. You don’t have a single entrepreneurial bone in your body when you’re on the bench.”

No Longer ‘Judge’

In interviews with four former judges who joined Big Law as partners in the past two years, the judges made clear the transition is about more than just trying to win work. And they all lauded their partners for helping to introduce them to clients and get work on cases early on.

They’re no longer called “judge.” Most insist the title should be retired upon resignation. They travel more, flying across the country to meet colleagues, clients, or attend conferences.

And they’ve been through the low stakes but nerve-wracking test of trying out old skills, like taking a deposition or addressing a judge, for the first time in a decade or more.

“I remember the first deposition I took on this side of things, and there was a certain nervous energy I had: ‘Boy, do I remember how to do this?’” said George Hazel, 48, who resigned from the US District Court for the District of Maryland to join Gibson Dunn a year ago. “And then at some point it did click in and it felt a little like riding a bike.”

For former judges, Gleeson said great expectations can make it difficult to appear back in a courtroom for the first time. Colleagues often set a high bar, expecting to be wowed by a former judge’s skills in a courtroom, he said.

“And then you have the experience that everybody else has, you get beat up a bit,” he said. “For me, that took some courage, because it’s humbling. Federal judges are not used to being humbled. Once you come off the bench, you better get used to it and it’s not easy.”

Finding Early Work

While most of the judges are just getting started on the sales and marketing aspect of a law firm partnership, they’ve all made appearances for major clients. Their first order of business in generating work is to build relationships with their new partners.

Gary Feinerman, who joined Latham & Watkins last year after resigning from the Northern District of Illinois, has appeared in cases on behalf of Meta Platforms Inc., online retailer Temu, and Instacart, according to court dockets.

He credited his partners for plugging him into cases, and said he’d also brought in some work of his own.

“It’s very important to be present and connect with people to remind them that I’m here and talk about the kinds of things that we can work on together,” said Feinerman, 58, who was nominated by Obama in 2010. “Fortunately, the culture’s so collaborative that colleagues were very generous in terms of plugging me into matters where I’d have something to add.”

Costa and Hazel are taking a unique marketing approach. The Gibson Dunn partners last month launched a podcast, “A View From the Bench,” that discusses their careers, their return to private practice, and the state of trials in America.

Costa, 51, has already argued two cases, including in bankruptcy court and an arbitration, he said. His earliest cases were the result of partners bringing him onto pitch teams, he said, though he’s had some success generating his own work.

Getting early trial work validated why he went back to private practice (to try cases), and it knocked off some rust, he said.

“And it’s nice to tell clients it’s something I’ve done recently,” said Costa, whose nomination to the bench by Obama was approved in 2012.

Mindset Shift

After resigning from the bench in Birmingham, Alabama, Kallon moved to Seattle, where his wife took a job. He chose Seattle-founded Perkins Coie in part because of its longstanding relationships to major clients in the area. He’s part of a team defending Google Inc. against claims brought by the Republican National Committee that the search giant throttled its email marketing messages.

The shift in mindset to promote himself and ask clients for work was “initially not as easy as I expected,” Kallon said.

“There are some very, very good lawyers out here in the private sector who’ve delivered extremely well for their clients,” he said. “So I need lawyers in my law firm introducing me to their clients and I need to convince these people they’re introducing me to that I’m equally as capable.”

One possible challenge for former judges is they haven’t developed a specialty in a particular area of law the way plenty of Big Law litigators have. They are generalists with trial expertise.

But they have the benefit of being seen as a unique resource for insights on how judges might treat a case.

Feinerman said clients or colleagues at Latham often ask him how a judge might respond to a certain case: “If you were the judge, how would these legal issues or these facts hit you? What would be the inflection point for you?”

And he’s been asked to oversee mock trials or moot courts from lawyers at other firms.

“I still get to play judge even if I’m not robing up to actually sit on the bench,” he said.

Costa said he teams up with specialists to make pitches to clients. His partners will advise clients on an area of law they’ve practiced in for 20 years, and he’ll provide the perspective of a potential judge or jury.

“It makes an effective pitch,” he said.

Hazel, nominated by Obama in 2013, said he wants to remain a generalist but he knows lawyers gain reputations and new business based on their previous success.

“Business is business,” he said. “You hope you’re successful in one type of case, and if that causes someone with a similar problem to come to you, that’s kind of how you build a business in this industry. I’ll go where the business takes me.”

Reproduced with permission. Copyright February 29, 2024, Bloomberg Industry Group 800-372-1033 https://www.bloombergindustry.com

Adam Smith was interviewed on NPR: WBUR ‘On Point’ discussing the Russia sanctions and the international community’s goal for the sanctions.

Listen to interview on NPR: WBUR.

Barbara Becker’s law firm was on an unrivaled growth streak when she took the reins of Gibson Dunn & Crutcher in early 2021. Becker quickly ushered in two major changes.

The 130-year-old firm revised its partner pay system to give more money to top rainmakers. Becker, its first woman chair, also installed a crop of relatively young, and more diverse, lawyers in key lieutenant posts.

Despite a quarter century of consecutive profit growth, the firm’s leaders were concerned how Gibson Dunn would fare in what’s become a hyper-competitive market for the world’s highest paid lawyers.

Under Becker, the firm bumped the spread between its highest-paid partners and their lowest-paid peers to about eight-to-one, up from about six-to-one. Top partners could now earn a reported $13 million a year.

The moves ruffled some feathers among longtime partners and Gibson Dunn has seen notable departures on Becker’s watch. The firm’s financial success has continued: Gibson Dunn reported another banner year of growth in 2022, with profits and revenue up by double digits.

“Last year was proof that our strategy is working,” Becker said in an interview. “The economic challenges are real for everybody and our peers are experiencing declining demand and profitability, yet we’re thriving.”

Gibson Dunn’s direction under Becker shows how even the most successful firms are responding to new competitive pressures, like some firms’ willingness to pay lawyers salaries that rival professional athletes.

‘The Glue’

Gibson Dunn is well known for a hard-nosed, “take no prisoners” approach that has made its litigators some of the most sought after in the industry, while drawing public criticism and occasional rebuke from judges.

The firm’s corporate department has made strides, securing work on deals from major private equity sponsors like KKR, Blackstone, and The Carlyle Group. Part of Becker’s strategy focuses on adding more dealmakers.

Becker, who starts her day at 5 a.m., often calls partners across the globe before riding her e-bike across Manhattan to the firm’s Park Avenue office. When making those calls from her home on the North Fork of Long Island, the goats Becker’s family tends can occasionally be heard in the background.

The M&A lawyer made her name at the firm representing major clients like Accenture, Kraft Heinz, and Merck. A mother of four, she also founded the firm’s diversity committee 20 years ago. She’s one of four women leading a Top 25 firm by revenue.

Ken Doran, the Los Angeles deals lawyer who ran Gibson Dunn for two decades, reached the end of his leadership stint in 2021. He had recently turned 65, the age at which the firm requires partners to step down from leadership roles.

Becker, now 59, landed among the finalists in a relatively informal succession process in which the field of candidates was whittled down and then voted on by a 20-member executive committee. The firm partnership voted Becker into the role after the executive committee’s recommendation.

Partners who backed Becker for the chair role often touted her efforts to support colleagues and mentor younger lawyers. Some firm leaders in interviews praised her for using a personal touch.

Kahlil Yearwood, a co-leader of the firm’s San Francisco office, said he wondered what he’d done wrong when Becker scheduled a monthly call with him shortly after she became chair.

“What I realized was she wanted to be the glue,” Yearwood said. “Barbara thinks her job is to help each person be the best version of themselves. Having a leader who connects the dots is incredibly helpful.”

Paying Legal Stars

Changes to the firm’s pay system were in the air at the firm even before Becker took the top role.

Under Doran, a group of partners convened in 2019 to study whether to revise its compensation system to adapt to the new, more stratified market for partner pay.

The law firm hadn’t fallen behind as much as others had raced into uncharted territory, paying star partners salaries that now stretch as high as $20 million a year.

“The bar continues to move up on compensating big contributors,” said Kent Zimmermann, a principal at law firm consultancy Zueghauser Group. “And that bar is being set by very large and very profitable firms.”

Gibson Dunn has the resources to play that game. Only three law firms boasted a larger profit pool than the nearly $1.6 billion Gibson Dunn generated in 2021, AmLaw data show.

The question was how those earnings should be divvied up among the firm’s roughly 350 equity partners. In an environment where outsize pay packages are increasingly common, could Gibson Dunn stick to paying partners relatively similar amounts?

Elite firms once viewed as immune to competition, like Wall Street’s Cravath Swaine & Moore and Davis Polk & Wardwell, have ditched their strict seniority-based pay systems to keep their stars and help recruit new ones.

New Policy

Before Becker was elected chair in March 2021, she and four others vying for the top position went before a large group of partners in a Zoom meeting. They were asked to describe what changes they would make, among other questions, according to two sources familiar with the meeting.

Becker told the group that compensation changes would not be major, the sources said. The system needed tweaks to remain competitive, Becker added, but the general structure should stay the same.

The new pay structure, rolled out in the Fall of 2021, remains largely similar to the previous system, according to the sources. Partners gain shares as they progress up the scale, and the firm kept in place the same cap at the highest end of 1,000 shares.

Through a one-time “share exchange,” partners were placed into a new pay tier structure that extended the highest and lowest ends of compensation.

Notably, “1,000-share partners” that have reached the highest threshold remain ineligible for bonuses, a stark departure from some firms that compensate high earners through large discretionary bonus pools.

‘Modest Change’

The changes—and the way they were made—have prompted whispers of unhappiness at Gibson Dunn.

One former partner who left after the compensation change said the firm adopted an “economic imperative” under Becker, even after she insisted early on that there would not be a “star system” at the firm. The person said most partners were not consulted in advance and the partnership as a whole was not asked to vote on the moves.

The approach clashed with the firm’s culture of “excellent” lawyering and collegiality, the former partner said.

Three rival law firm leaders said they’ve seen an influx of resumes from Gibson Dunn lawyers, litigators especially.

Big Law leaders are often loathe to acknowledge they’re driving big changes—perhaps it’s the lawyer’s urge to respect precedent, or that most firms have been financially successful over long periods of time.

Becker, in an interview, acknowledged some partners wanted more communication ahead of the changes, but said they were widely accepted—especially now that they’ve been in place for a full year.

“It really was a modest change, and it has served us well because it has allowed us to continue to attract and retain top talent,” she said.

The firm last year hired 29 lateral partners. The additions include former Texas federal appeals judge Gregg Costa, Apple Inc.’s former chief privacy officer Jane Horvath, and partners from rivals like Simpson Thacher & Bartlett, Kirkland & Ellis, Sidley Austin, and Cooley LLP.

Youth Movement

Becker also took on a delicate task for any law firm: elevating younger lawyers into leadership positions typically occupied by veteran rainmakers.

Naming new leaders for practices and offices was one of her first initiatives. The firm has nearly doubled the number of women or diverse lawyers on its top leadership committee, according to Gibson Dunn, and roughly tripled that figure for office or practice leaders.

“What Barbara has done is say to senior partners who’ve been business leaders for the past decade or more: ‘Your job is to enable and mentor the success of our younger talent,’” said Orin Snyder, a New York trial lawyer and member of the executive committee who plays a leading role in the firm’s litigation group.

“It’s a generational shift where the senior partner’s job is to accelerate the success of younger lawyers,” Snyder said. “It’s a paradigm shift.”

The biggest challenge to the transition came early in Becker’s tenure.

Star New York litigator Randy Mastro was approaching 65, the maximum age for executive committee members. Mastro, who’d represented New Jersey Republican Gov. Chris Christie in the Bridgegate controversy, was a vocal force on the committee.

He asked for an exemption to stay on, according to two sources familiar with the matter. Becker rejected the request.

Mastro left the firm for King & Spalding about a year and a half later. He declined to comment.

He said in news reports at the time that his exit was partly motivated by another looming age limit, the firm’s mandatory retirement for equity partners at 68.

Becker’s decision was emblematic of what leaders at the firm described generally as a willingness to make difficult choices with the firm’s long-term health in mind. In conversations about transitioning titles and clients to younger partners, she said she emphasizes the benefits to the firm.

“My north star is always: What’s best for the firm?’” Becker said. “And you can’t really argue with the fact that we do need to have a transition in leadership and our senior partners are an important part of that transition.”

The firm’s committed to competing for the best hires, she said, even if Big Law’s free agent era makes that an increasingly expensive endeavor.

“Our pipeline of hires is stronger than ever,” Becker said. “We’re in growth mode.”

Reproduced with permission. Copyright February 27, 2023, Bloomberg Industry Group 800-372-1033 https://www.bloombergindustry.com

Gibson Dunn was recognized by The American Lawyer for its 27^th consecutive year of record revenue.

Read the full article on The American Lawyer [PDF].

The National Law Journal featured Jeff Liu discussing his first oral arguments which happened to be back-to-back adding a challenge.

Read the full article on The National Law Journal [PDF].

Maurice Suh was quoted in Law360 discussing the rise in sports law cases as the public spotlight grows on how teams and leagues are conducted.

Read the full article on Law360 [PDF].

The latest government guidance addressing artificial intelligence risks serves as a launch pad for compliance considerations and could signal regulatory and lawmaker action to come, attorneys say.

AI technology is being implemented across the business universe, for tasks such as resume screening and generating art, text, and computer code. With its rapid growth and adoption comes the potential for unintentional algorithmic discrimination and violations of intellectual property and other laws.

The AI Risk Management Framework, released Jan. 26 by the National Institute of Standards and Technology, offers the most comprehensive approach to date that companies can use to assess and manage the myriad risks associated with the implementation or development of AI, attorneys who advise clients on the technology said.

The NIST framework establishes a common language to understand and discuss AI issues for businesses and lawyers, and it offers insight into the government’s views on the fast-evolving technology that attorneys predict will drive an influx of regulation and legislation in coming years.

“It provides some plain-language guidance that I can hand over to a client to accompany the legal guidance that I might be giving them. It also, frankly, is a harbinger of things to come from the regulatory perspective,” said Kathleen McGee, a partner in Lowenstein Sandler LLP’s technology practice who previously headed the Bureau of Internet and Technology of the New York state Attorney General’s Office.

The framework, created by mandate in the fiscal year 2021 National Defense Authorization Act, outlines considerations that companies should take into account when measuring and assessing risks posed by AI. It also focuses on the structures a business can use to mitigate them.

However, the principles detailed in the framework—which the agency explicitly calls “non-sector specific and use-case agnostic”—may be viewed as too abstract by some, and it will take time to see how companies and practitioners adopt them in daily operations, attorneys said.

Risks, Benefits

Artificial intelligence, if left unchecked, has the potential to harm people, organizations, and even ecosystems, according to NIST’s framework.

AI can perpetuate systemic biases against individuals in certain demographic groups, enhance rising cybersecurity threats companies face, and disrupt the global financial system, the framework said.

The technology has already received regulatory, legal, and academic attention for concerns over employment discrimination, intellectual property violations, and cybersecurity threats.

NIST noted that many threatening manifestations of AI are yet to be discovered, underlining that its framework was designed with the flexibility to “address new risks as they emerge.”

Despite the risks associated with the technology, both the agency and attorneys emphasized that well-designed and well-governed AI can benefit companies and society by enhancing efficiency.

AI Compliance and Regulation

NIST was methodical in its approach to developing the AI framework, releasing two draft versions over the course of two years and seeking feedback from interested parties including industry, academia, and government voices. That resulted in the most comprehensive guidance on AI so far, one which serves as a useful tool to head off prescriptive laws and regulation in the future, attorneys said.

The framework is oriented around four basic principles: govern, map, measure, and manage.

“Govern” outlines basic considerations for building an internal structure of assigned responsibility and processes, the manage function establishes how resources should be allocated to mitigate the risks identified by mapping and measuring, according to the framework.

NIST’s focus on governance and management can help attorneys and clients understand how to put data they collect to use, and it underlines the need for identifying leaders who understand an AI technology enough to make appropriate decisions when a risk is identified internally, said Natasha Allen, Foley & Lardner LLP’s AI group co-chair.

The map function emphasizes the importance of documenting the segmented parts of an AI system to holistically understand how it operates, and “measure” encourages developers and implementers of AI to quantify the risks a technology could pose.

While the high-level ideas discussed in the framework may be too broad to easily apply to specific clients, the accompanying draft playbook includes more useful actionable suggestions, said Cassandra Gaedt-Sheckter, the co-chair of Gibson, Dunn & Crutcher LLP’s AI practice.

“It seems to be a helpful guide to navigating those four pillars or functions into actual practical design and development and deployment. I think, depending on the type of learner you are, it’s important to see examples and see practical applications of the framework,” Gaedt-Sheckter said.

The playbook will help Gaedt-Sheckter flesh out assessments of legal and societal risks that arise from AI technology, the results of which determine where companies prioritize their attention, she said.

A notable suggestion detailed in the framework’s playbook is to map out all of the third-party software and data an AI system relies on, Allen said. This allows companies to identify risks—such as biased data or insecure software—and how the third parties are mitigating them, she said.

Allen said she views the framework as a way for government figures to test the waters for developing laws by mandating NIST to develop a resource built on the insight of professionals who interact with complex AI technology every day.

Active regulators with the bandwidth and technical acumen are also going to start examining the impacts of AI, especially in the contexts of investor and consumer concerns, said McGee.

“I think you can expect them to turn to things like this NIST framework for action plans, really, on how to evaluate whether or not a particular entity becomes a target,” she said.

‘Balls and Strikes’

However, the framework doesn’t answer enough practical questions that clients are already raising as they intertwine AI technology into their operations, said Avi Gesser, co-chair of Debevoise & Plimpton LLP’s data security group.

Some companies, for example, are using AI to monitor the tone of customer service call complaints, which raises challenging questions about privacy and culture that NIST’s work doesn’t easily answer, Gesser said.

Gesser called the guidance a useful “issue-spotting document” that his firm may use to evaluate its existing AI compliance program.

“But for the practitioners, right, like if NIST after two years isn’t willing to make the tough choices about what is good or what is bad, how am I supposed to call balls and strikes here?” Gesser said.

Other AI attorneys also underlined the challenges presented by the lack of specific detail contained in the framework.

“It’ll take some time for all the practitioners and businesses to really dig in and digest it,” Gaedt-Sheckter of Gibson Dunn said.

The framework isn’t a checklist that companies developing or implementing AI can instantly adopt, and a lot is left to interpretation, said Brad Fisher, the CEO of AI company Lumenova.

That lack of specificity seems intentional on NIST’s part, with the framework noting that it provides “flexibility to organizations of all sizes and in all sectors.”

Another challenge presented by the framework is its voluntary nature, attorneys said.

Companies are aware that more laws and regulations governing AI are likely to come, so aligning their systems with a government-backed framework is a useful way to stay on top of what comes later, they said.

“The mistake, I think is to think that this is optional,” Gesser said.

Reproduced with permission. Copyright February 1, 2023, Bloomberg Industry Group 800-372-1033 https://www.bloombergindustry.com

Ronald Kirk was recently interviewed on Fox Business about the framework of the USMCA free trade agreement and its performance.

Watch the interview on Fox Business.

Collin Cox recently spoke with The AmLaw Litigation Daily about leading a team of associates, all gathering significant trial experience and winning the case.

Read the full article on The AmLaw Litigation Daily [PDF].

Gibson Dunn lawyers will closely monitor these rules as the rulemaking process proceeds, and we stand ready to advise clients through the rule making procedure and on how to comply with final rules should they come into effect.

On February 19, 2025, Gibson Dunn submitted a comment to the California Privacy Protection Agency regarding its proposed regulations on automated decisionmaking technology (ADMT), risk assessments, and cybersecurity audits. Along with others, including industry groups, companies, and legislators, Gibson Dunn highlighted some of the most troubling aspects of the proposed regulations, which, as drafted, would impede innovation and impose unprecedented burdens on businesses, all without commensurate benefits to the privacy or security of Californians. A copy of Gibson Dunn’s comment can be found here.

The California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA), narrowly directed the California Privacy Protection Agency (CPPA) to issue regulations “governing access and opt-out rights with respect to business’ use of automated decisionmaking technology” and requiring businesses to perform cybersecurity audits and risk assessments when the “processing of consumers’ personal information presents a significant risk to consumers’ privacy or security.” The proposed regulations, however, go far beyond this grant of authority and, if enacted as drafted, would require businesses to comply with a range of obligations that do not advance privacy or security. Key issues with the proposed regulations include:

An overbroad definition of ADMT. The proposed regulations define ADMT to include “any technology that processes personal information and uses computation to execute a decision, replace human decisionmaking, or substantially facilitate human decisionmaking.” As Gibson Dunn explains in our comment letter, this broad definition would sweep in technology that merely “executes” or “substantially facilitates” human decisionmaking, which significantly exceeds the plain language definition of “automated” This overbroad definition could potentially subject a tremendous range of ordinary business activities to these regulations, which is why we have urged the CPPA to narrow the scope of its definition.

Overbroad definition of“significant decisions” as the trigger for key obligations. The trigger for many of the obligations in the proposed regulations is the use of ADMT in connection with a “significant decision.” The draft rules define “significant decision” broadly and in a manner that is unrelated to the privacy and security considerations undergirding the CCPA. This conflicts with the animating purpose of the CCPA to protect privacy and security, and attempts to leverage the narrow mandate to regulate those risks in the context of ADMT to instead regulate socially important activities generally.

Limitations on first-party advertising. The proposed regulations would also upend the rules governing first-party advertising. In particular, the CPPA’s proposal would require businesses to give consumers opt-out rights when businesses use ADMT to profile consumers for “behavioral advertising” within the business’s own distinctly-branded websites, applications, or services, even though the CCPA specifically excluded such first-party advertising from those opt-out requirements. Our comment urges the CPPA to strike provisions related to “behavioral advertising” from the proposed regulations.

A “pre-use notice” for ADMT. The proposed regulations would require businesses to provide consumers with a burdensome, “prominent and conspicuous” “pre-use notice” for ADMT detailing information about the opt out right and any exceptions; how the ADMT works (including its “logic,” “key parameters,” and “intended output”); and the role of humans in the decision. Again, the CCPA does not actually authorize pre-use notices. Rather, it only provides for access and opt-out rights.

Detailed information in pre-use notices and access requests. Not only do the proposed regulations require the dense information outlined above for pre-use notice to be described in “plain language”, but the rules also require individualized responses that detail how ADMT has been used with respect to that consumer. This requirement fails to acknowledge the challenges of translating complex models into a form understandable by ordinary consumers, and creates a substantial risk of misleading disclosures, since these models are constantly changing and vary in their application to individuals.

Onerous risk assessments. The CPPA has also used its statutory authority to propose regulations requiring risk assessments for data processing that poses “risks to privacy” to construct a regime that requires businesses to opine on a range of issues unrelated to privacy. For example, the draft regulations require businesses to comment on the “completeness, representativeness, timeliness, validity, accuracy, consistency, and reliability” of their information sources and the “logic” of certain algorithms. The CPPA has not explained how these factors relate to privacy, which is the stated purpose of the risk assessments.

Rigid cybersecurity audits. The cybersecurity audits required by the proposed regulations are also problematic. The draft regulations contain a detailed checklist with dozens of requirements, and do not permit businesses to use audits conducted in compliance with other accepted standards. This approach would lead to substantial compliance costs for businesses without materially improving the safety or security of consumers.

Inconsistent rules on “physical or biological identification or profiling.” The proposed regulations require businesses that use “physical or biological identification or profiling” for a “significant decision” or “extensive profiling” to conduct evaluations and implement policies, procedures, and training to ensure accuracy and nondiscrimination. The CCPA, however, does not authorize regulation of “identification” and the proposed regulations also conflict with other statutory provisions. For example, the CCPA permits businesses to use sensitive personal information, including biometrics, to improve the services they offer without offering an opt-out right to consumers. The proposed regulations would create a contradictory right to opt-out of the use of biometric information to improve a business’s algorithm..

Gibson Dunn’s comment letter discusses these and other issues, urging the CPPA to revise the proposed regulations to focus on the privacy and security issues that animated the CCPA and CPRA. Gibson Dunn lawyers will closely monitor these rules as the rulemaking process proceeds, and we stand ready to advise clients through the rule making procedure and on how to comply with final rules should they come into effect.

Please click on the link below to view Gibson Dunn’s comment:

READ MORE

The following Gibson Dunn lawyers prepared this client alert: Ashlie Beringer, Keith Enright, Cassandra Gaedt-Sheckter, Jane Horvath, Natalie Hausknecht, Jacob Arber, Stanton Burke, Eric Brooks, and Emma Wexler.

Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s Artificial Intelligence or Privacy, Cybersecurity & Data Innovation practice groups:

United States:
Abbey A. Barrera – San Francisco (+1 415.393.8262, abarrera@gibsondunn.com)
Ashlie Beringer – Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)
Ryan T. Bergsieker – Denver (+1 303.298.5774, rbergsieker@gibsondunn.com)
Keith Enright – Palo Alto (+1 650.849.5386, kenright@gibsondunn.com)
Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650.849.5203, cgaedt-sheckter@gibsondunn.com)
Svetlana S. Gans – Washington, D.C. (+1 202.955.8657, sgans@gibsondunn.com)
Lauren R. Goldman – New York (+1 212.351.2375, lgoldman@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Natalie J. Hausknecht – Denver (+1 303.298.5783, nhausknecht@gibsondunn.com)
Jane C. Horvath – Washington, D.C. (+1 202.955.8505, jhorvath@gibsondunn.com)
Martie Kutscher Clark – Palo Alto (+1 650.849.5348, mkutscherclark@gibsondunn.com)
Kristin A. Linsley – San Francisco (+1 415.393.8395, klinsley@gibsondunn.com)
Timothy W. Loose – Los Angeles (+1 213.229.7746, tloose@gibsondunn.com)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)
Rosemarie T. Ring – San Francisco (+1 415.393.8247, rring@gibsondunn.com)
Ashley Rogers – Dallas (+1 214.698.3316, arogers@gibsondunn.com)
Sophie C. Rohnke – Dallas (+1 214.698.3344, srohnke@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)
Frances A. Waldmann – Los Angeles (+1 213.229.7914,fwaldmann@gibsondunn.com)
Debra Wong Yang – Los Angeles (+1 213.229.7472, dwongyang@gibsondunn.com)

Europe:
Ahmed Baladi – Paris (+33 1 56 43 13 00, abaladi@gibsondunn.com)
Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com)
Kai Gesing – Munich (+49 89 189 33-180, kgesing@gibsondunn.com)
Joel Harrison – London (+44 20 7071 4289, jharrison@gibsondunn.com)
Lore Leitner – London (+44 20 7071 4987, lleitner@gibsondunn.com)
Vera Lukic – Paris (+33 1 56 43 13 00, vlukic@gibsondunn.com)
Lars Petersen – Frankfurt/Riyadh (+49 69 247 411 525, lpetersen@gibsondunn.com)
Christian Riis-Madsen – Brussels (+32 2 554 72 05, criis@gibsondunn.com)
Robert Spano – London/Paris (+44 20 7071 4000, rspano@gibsondunn.com)

Asia:
Connell O’Neill – Hong Kong (+852 2214 3812, coneill@gibsondunn.com)
Jai S. Pathak – Singapore (+65 6507 3683, jpathak@gibsondunn.com)

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

The Gibson Dunn Data Centers and Digital Infrastructure Practice Group is closely monitoring legislative, regulatory, and political developments regarding the growth of data centers. We are prepared to assist clients regarding all aspects of data center development. Please contact one of the Gibson Dunn attorneys listed below or the attorney with whom you usually work if you have any questions.

With the growing use of generative AI and quantum computing technology, clients are increasingly interested in the opportunities and challenges presented by the accelerating demand for data centers and the electricity that powers them. While the federal government considers setting ground rules for power plants looking to co-locate with data centers as an end-run around long waits for transmission grid upgrades, state governments too are grappling with the growing demand for data centers—sometimes by providing tax incentives for their developments, but at other times by imposing regulations that typically apply only to public utilities. This client alert provides a snapshot of recent developments in key states for data center development on topics ranging from real estate to tax to energy to foreign investment. We first discuss what are seen as the most dominant states for data center development in 2025—longtime hegemon Virginia and emerging leaders Arizona, Georgia, Illinois and Texas—and round out our discussion with other states that are in the data center mix in their own way, including longtime players (California, Oregon, Washington), rising markets (Indiana, Kentucky, Mississippi, Nevada, Ohio, Pennsylvania), and smaller markets that are proving to be regulatory trendsetters (Minnesota, Utah).

State legislatures, governors, and utility regulators have squarely trained their focus on ensuring long-term sustainable pathways to data center development in their states. As discussed in more detail below, most jurisdictions that have found success in attracting more data centers are focusing now on continuing to incentivize data centers while formalizing their processes for adding these large loads to their electricity grids, and on ensuring that other customer classes, such as residential customers, do not bear undue costs of these load service expansions. Although state lawmakers and regulators appear to be mostly bullish on data centers, many states have nonetheless begun adopting more rigorous requirements for data centers sourcing power supply, largely in response to concerns that further load increases may mean rate increases for other customer classes or shortages in energy supply. And once data centers are up and running, local taxing authorities are knocking on the door and demanding big tax checks employing clever and novel approaches.

As discussed in more detail below, recent state actions on data centers have included:

The adoption of data center-specific utility tariffs, rate schedules, and procedures aimed at increasing financial requirements for data center developments to ensure grid infrastructure improvements being installed for data centers will be utilized and paid for by the data centers themselves, including specific provisions outlining requirements for load being co-located with behind-the meter generation;
Continued availability of tax incentives for data center development, notwithstanding pressure in some states to revisit these incentives, but also tax increases for data centers in some jurisdictions;
Increasing opportunities for data centers to source power supply from competitive suppliers, especially in Utah;
State and utility moves toward building new gas-fired generation to support data center load growth;
Proposed legislation in Arizona to allow siting small modular nuclear reactors at data center sites without obtaining a public utility commission certificate of environmental compatibility;
But also, in the case of Minnesota, regulatory action to treat large backup generators like other types of generation, notwithstanding their lack of grid connection, accompanied swiftly by proposed legislation by data center supporters to ensure that backup generation is not subject to increased regulatory burdens;
Enhanced (for some) or streamlined (for others) zoning and siting requirements for data centers; and
In Illinois and Indiana, proposed legislation to restrict foreign investment in data centers when the foreign investor hails from a country unfriendly to the United States, echoing similar actions and proposals at the federal level.

Dominant Jurisdictions: Virginia, Arizona, Georgia, Illinois, and Texas

Virginia

Data Center Regulatory Outlook: Addition of generation is encouraging but some counties are seeking revenue opportunities or zoning limitations, which could negatively impact some projects

Virginia historically supports data center expansion and Governor Youngkin continues to endorse their growth. In his January 2025 State of the Commonwealth speech, Youngkin highlighted the need for Virginia’s energy supply to grow as data centers, which contribute $9.1 billion to Virginia’s GDP, enter the state. He stated that “Richmond should not stop [Virginia communities] from capitalizing on these incredible economic opportunities.”
That said, the Virginia General Assembly and some local governments are working to limit or impose conditions on new data centers. Currently pending approval by the governor is H.B. 1601 (Del. Joshua E. Thomas-D), which would require site assessments before new data centers are approved. A handful of other bills to regulate data centers failed this legislative session, which adjourned in late February 2025.
In early March 2025, Dominion Energy, the largest electricity utility in the state, filed for a certificate of public convenience and necessity with the Virginia State Corporation Commission to construct the Chesterfield Energy Reliability Center, a 944 MW natural gas-fired power plant to be located in Chesterfield County adjacent to another operational power plant, the Chesterfield Power Station. The Chesterfield Energy Reliability Center has long been part of the discussion of the state’s strategy to accommodate load growth from data centers.
Loudon County is considering changes to the county’s comprehensive plan and zoning ordinance which would increase the regulatory hurdles applicable to data centers in the county. The comprehensive plan amendment would make data centers a “conditional use” in locations where they are now a core or complementary use, and a zoning ordinance amendment would make data centers a “Special Exception” use in areas whether they are currently permitted by right. If approved, these changes would require data centers to go through a public hearing process and meet certain conditions to be constructed. A February board vote moved the issue forward, and a second vote is expected in March 2025.
The city of Manassas is considering a 67% tax increase for “computer equipment and peripherals used in a data center.” The city will approve its final budget following a public hearing on April 28, 2025.
Henrico County is considering a 550% increase in tax on data center computers and related equipment. County supervisors are expected to review the budget during March 2025.
Fairfax County enacted a requirement in September 2024 that data centers be built at least 200 feet from abutting property and undergo a noise study.

Arizona

Data Center Regulatory Outlook: Pending legislation could mean significant opportunities for development of small modular nuclear reactors; zoning modifications could negatively impact some projects

Arizona has extended its data center tax breaks to data centers certified before December 31, 2033 for the “use, installation, assembly, repair or maintenance” of data center equipment, not just the sale of such equipment.
H.B. 2774 (Rep. Michael Carbone-R), which has been passed by the Arizona House and currently sits before the Senate, would reduce state regulation of data centers, allowing them to place a small modular nuclear reactor (SMR) at a data center without a certificate of environmental compatibility. Additionally, in counties with a population of 500,000 or less, a new SMR co-located with a large energy user would be exempted from the certificate of environmental compatibility process and county zoning restrictions.
During a December 2024 meeting in which Arizona’s largest utility obtained permission to build new transmission lines for a data center, an ACC commissioner asked the utility to confirm that the costs of the transmission line “would be borne by the data center,” which the utility confirmed.
In October 2024, the ACC endorsed the Integrated Resource Plans of three large utilities: Arizona Public Service, Tucson Electric Power, and UniSource Energy. To meet the growing energy demand posed by data centers in the state, these utilities plan to add thousands of megawatts of new capacity from solar, wind, battery storage, and natural gas sources.
In December 2024, the Phoenix City Council a pproved a series of data center regulations, including regulations on external design specifications and location, approving zoning changes that seek to locate future data centers away from employment centers. The regulations were motivated by concerns over land and power demand, and job creation.
In January 2023, the City of Chandler adopted a zoning code amendment that specifically addressed data centers, classifying them as a “primary use only permitted in planning area development . . . zoning designations,” and requiring a sound study, noise mitigation measures, and a detailed communications protocol to notify impacted residents about the construction process.

Georgia

Data Center Regulatory Outlook: Greater formalization of major utility interconnection procedures means additional process but also predictability

Georgia has a tax exemption for certain data center equipment, and although the Georgia legislature attempted to suspend new exemptions from July 2024 through June 2026 with H.B. 1192, the Governor vetoed that bill in May 2024.
In January 2025, Georgia state senator Chuck Hufstetler (R) proposed S.B. 34, which would require costs of data center-related utility infrastructure to be recovered in a way that is “designed to recover such costs solely from commercial data centers or are prorated based on electric demand.” Provisions like this respond to concerns that data center-related utility costs could be allocated to other types of customers.

In January 2025, the Georgia Public Service Commission unanimously approved new rules that allow Georgia Power Company, the largest utility in Georgia, to require additional terms and conditions of service for new customers with more than 100 MW of load, including data centers. The new rules specifically allow the utility to impose minimum billing requirements and longer contract terms for these large load customers. According to Georgia Power’s filing, these new rules are meant “to protect Georgia Power’s customers and ensure that the cost to serve new large load customers are appropriately born[e] by those customers.”

Georgia Power Company has also been enhancing and formalizing its ten-step interconnection process for large load, such as data centers, including by requiring that data center developers provide affidavits attesting to their level of site control and who will be the end user of their facilities, as well as increased vetting requirements for financial guarantors.

Illinois

Data Center Regulatory Outlook: Notable incentives for large projects indicate a state welcoming of data centers

Since Illinois’s 2019 enactment of exemptions from certain sales, use, and occupation taxes, and an additional 2021 exemption from certain construction employment taxes, data centers have grown rapidly in the state. In addition to those tax incentives, proximity to a major population center and fiberoptic networks, aggressive redevelopment plans for retired corporate campuses in greater Chicagoland, and access to flexible power purchase options through Illinois’s retail electric competition program have made Illinois an attractive alternative to the established Northern Virginia data center hub.
In December 2024, Governor Pritzker, alongside key industry stakeholders, announced a collaboration to establish the new National Quantum Algorithm Center in the Illinois Quantum and Microelectronics Park in Chicago. “Quantum computers have the potential to solve the complex problems and grand challenges that companies and society face,” said Governor Pritzker, noting that deployment of this advanced “quantum system in Illinois will help spur additional commercialization opportunities for entrepreneurs—making the State an even more desirable destination for leading global technology companies spurring job creation and private investment.”
In January, state senator Sue Rezin (R) introduced S.B. 0094, which would establish that no foreign company may construct or cause to be constructed a data center in the state unless the Illinois Commerce Commission, the Illinois Power Agency, and the Department of Commerce and Economic Opportunity conduct a joint study of the energy consumption of the prospective data center and certify to the governor and the General Assembly that the energy used by the new data center is a new self-generated load and does not affect the load supply of PJM Interconnection or the Midcontinent Independent System Operator. The bill defines a “foreign company” as an entity that (i) is at least 51% owned by a foreign adversary or (ii) is headquartered in a country with a government that is a foreign adversary.

Texas

Data Center Regulatory Outlook: Proposed legislation could lead to greater formalization of interconnection procedures for large generator co-location; passage could mean additional process but also predictability

In addition to Texas’s state sales tax exemption on certain equipment for qualifying data centers, individual counties also provide property tax abatements to data center developers.
S.B. 6 (Sens. Phil King-R & Charles Schwertner-R), introduced in February 2025, would prepare the grid for increased power demand and address certain challenges posed by large loads by requiring (i) the Public Utility Commission of Texas (PUCT) to implement a new transmission charge to be paid by all retail customers served by generation located behind-the-meter (e.g., data centers that have entered into co-location arrangements to avoid transmission costs) to ensure that all users of the Electric Reliability Council of Texas (ERCOT) transmission system contribute to transmission cost recovery; (ii) PUCT to establish standards for interconnecting large (i.e., over 75 MW, as may be lowered by PUCT as necessary) load customers at ERCOT transmission voltage; (iii) co-located power generation companies, municipally-owned utilities and electric cooperatives to notify, and seek approval of, PUCT and ERCOT before implementing a new net metering arrangement between an existing registered generation resource and an unaffiliated retail customer if such customer’s demand exceeds 10% of the generation facility’s nameplate capacity and the facility owner has not proposed to construct an equal amount of replacement capacity in the same area; (iv) large loads to install equipment that would allow the load to be disconnected remotely during firm load shed; and (v) ERCOT to develop a reliability service to competitively procure demand reductions from large loads in advance of a projected energy emergency alert event.

Rising Markets: Indiana, Kentucky, Mississippi, Nevada, Ohio, Pennsylvania

Indiana

Data Center Regulatory Outlook: Greater formalization of some utility interconnection procedures means additional process but also predictability; proposed legislation could provide incentives for small modular nuclear reactors

Since 2019, Indiana has offered tax incentives for data centers providing property, sales, and use tax exemptions for data centers for a term of up to 50 years.
The Indiana General Assembly is currently considering two proposed bills that would affect data centers. H.B. 1007 (Rep. Edmond Soliday-R) would provide additional tax credits for small modular nuclear reactors in Indiana that could be combined with the tax incentives for data centers. The bill passed the Indiana House of Representatives in February 2025 and is now before the Senate.
S.B. 431 (Sen. Eric Koch-R) would ban construction of data centers in Indiana by or for foreign companies without a study showing that the data center would use self-generated electricity and would not affect the load supply of Indiana’s regional transmission organizations. Like a similar bill in Illinois, the bill defines a “foreign company” as an entity that (i) is at least 51% owned by a foreign adversary or (ii) is headquartered in a country with a government that is a foreign adversary. The bill passed the Indiana Senate in February 2025 and is now before the House.

In February 2025, the Indiana Utility Regulatory Commission issued an order approving a settlement between Indiana Michigan Power Company, the Indiana Office of Utility Consumer Counselor, and other intervenors including data center developers, that governs how large loads, including data centers, connect to the grid in Indiana. The settlement agreement approved in the order imposes minimum contract terms on these large load customers as well as exit fees if a large-load customer reduces its capacity more than 20% or terminates its contract, but did not address cost allocation.

Kentucky

Data Center Regulatory Outlook: Planned additions of generation and new incentives indicate a state welcoming of data centers

Data center investment and siting is expected to boom in Kentucky as the state offers generous tax incentives, water access, and aligned stakeholders (state government, local utilities, and public service commission) in a friendly business environment.
In April 2024, Kentucky lawmakers passed H.B. 8, which created a fifty-year sales and use tax exemption for “qualified data center projects.” Qualified data center projects are defined as entities that provide qualified data center infrastructure, are located within a consolidated local government with a population greater than 500,000, and, in the case of owners, operators, or colocation tenants, invest at least $450 million within five years.
In February 2025, in expectation of significant load growth through 2032 and 1,750 MW of “high load factor, energy intensive data centers,” the Kentucky Utilities Company and Louisville Gas and Electric Company applied to the Kentucky Public Service Commission for permission to construct two 645 MW natural gas plants, one 400-MW/1,600-MWh battery storage project, and one selective catalytic reduction facility for an existing coal plant. The Kentucky Public Service Commission is expected to rule on the request by November.

Mississippi

Data Center Regulatory Outlook: New incentives and a supportive utility regulator indicate a state welcoming of data centers

Data center investment in Mississippi has rapidly increased since Mississippi’s legislature enacted tax incentives. As discussed in more detail below, the legislature is now considering exempting data centers from certain sales and use taxes. The state is well-situated for growth as it offers a robust network of fiber connectivity and is situated at the crossroads of two major fiber cables stretching across the southeast United States from Atlanta to Dallas and into the Midwest from New Orleans to Chicago.

In February 2025, the Mississippi Senate unanimously passed S.B. 3168, a bill aimed at attracting data center investment through tax incentives. The proposed bill is now pending in the Mississippi House of Representatives. The bill would allow eligible “business enterprises” to apply for exemption from certain sales and use taxes related to the purchase, lease, or expansion of data centers. “Business enterprises” are defined as certain for-profit businesses that are the owner, operator, tenant or affiliate of a data center with a minimum capital investment of (i) $250 million in the case of newly constructed data centers that will create thirty five full time jobs with a minimum average annual salary of 125% the average annual state wage or (ii) $100 million in the case of an addition or expansion of a data center that meets the same criteria. The bill also provides for two automatic ten-year extensions of the tax exemptions for such business enterprises.
In January 2025, a data center developer announced a $10 billion data center investment in Lauderdale County, Mississippi. In February 2025, the Mississippi Public Service Commission approved a special contract between that developer and Mississippi Power Company (MPC), a local utility company that serves approximately 192,000 customers, with MPC agreeing to provide electric service. In its order approving the special contract, the Mississippi Public Service Commission found the special contract to be in the best interest of the MPC and its customers.
In January 2024, both houses of the Mississippi legislature nearly unanimously passed tax incentives in S.B. 2001 as well as two bills appropriating money, in anticipation of significant data center development. Thereafter, Governor Tate Reeves announced the single largest capital investment in Mississippi history to build two data centers in Madison County.

Nevada

Data Center Regulatory Outlook: Proposed new incentives and a supportive utility regulator indicate a state welcoming of data centers

In March 2025, the Public Utilities Commission of Nevada approved a stipulation agreement that would allow a developer to power its data center in Nevada with only clean energy under a new clean transition tariff with its interconnecting utility, NV Energy. This new model could offer data centers greater choice in where they receive power from in Nevada.
Nevada allows for a partial abatement of certain taxes for new or expanded data centers in Nevada, but these abatements are subject to eligibility requirements, including requirements to invest a certain amount of capital investment in the data center and employ a certain number of Nevada citizens at the data center depending on the length of the requested abatement period.
Introduced by Assemblymember Erica Mosca (D) in February 2025, A.B. 226 would require all businesses seeking tax abatements, including data centers, to develop and implement a community benefits plan, would allow the Nevada Office of Economic Development to investigate whether a business is following its community benefits plan, and would require a business to repay any abatements with interest if the business is found not to substantially have complied with the terms of its community benefits plans.
Pending S.B. 69 would require companies with tax abatements for certain projects with capital investments of $1 billion or more to enter into agreements with the city’s or county’s governing body and fire protection district to defray the cost of local governmental services and infrastructure that will service the project.

Ohio

Data Center Regulatory Outlook: Legislative changes support data centers while outcome of important regulatory proceeding is unknown

Ohio offers a tax exemption for the sale, storage, use, or other consumption of equipment for data centers. In January 2025, some legislators expressed support for eliminating that the sales tax exemption, but that proposal has not yet materialized as a bill in either house of the legislature.

In January 2025, Ohio lawmakers proposed H.B. 15 (Rep. Roy Klopfenstein-R) and S.B. 2 (Sen. Bill Reineke-R). Both bills propose changes to Ohio’s energy regulatory regime that are meant to support data center growth while protecting other ratepayers. Among other things, both proposals would repeal legislation that currently allows electric utilities to increase certain components of electricity rates without specific Public Utilities Commission of Ohio (PUCO) review under programs known as electric security plans, a move expected to help moderate rate changes applicable to large loads like data centers. In addition, S.B. 2 proposes to codify the right of electric utilities to provide behind-the-meter generation service (i.e., co-location with load) subject to proposed safeguards to ensure that behind-the-meter service costs are not allocated to customers not receiving that service.

In 2024, AEP Ohio, Ohio’s largest electric utility, proposed a special data center tariff that would, among other things, set increased customer requirements for data center and cryptocurrency loads, such as minimum contract terms, exit fees, and minimum demand charges. In late October 2024, AEP Ohio filed a settlement proposal at the PUCO; hyperscalers and generators filed a competing proposal in the same docket. Key differences between the proposals include the size of load that will be subject to the new tariff and the minimum rates a data center could be required to pay under the new tariff. This proceeding is ongoing.

Pennsylvania

Data Center Regulatory Outlook: Incentives and permitting reform initiative indicate a state welcoming of data centers

In 2021, Pennsylvania created the Computer Data Center Equipment Exemption Program, which exempts computer data center equipment from sales and use tax when sold to, used, or consumed in a data center.
In January 2025, Pennsylvania Governor Josh Shapiro announced his “Lightning Plan” focused on meeting energy and infrastructure needs within the state. The plan includes a proposal to establish a Pennsylvania Reliable Energy Siting and Electric Transition Board (RESET Board) to streamline permitting and support for new energy projects and offer tax breaks for projects providing electricity to the grid. The announcement emphasized that Pennsylvania is one of only 12 states without a state entity that administers major energy project siting decisions. Creation of the RESET Board would require legislation, which Shapiro’s office in mid-March announced would soon be introduced for consideration in both houses.

Longtime Leaders: California, Oregon, Washington

California

Data Center Regulatory Outlook: Greater formalization of utility interconnection procedures and tariffs means additional process but also predictability, while pending legislation would increase incentives while also increasing reporting requirements and regulatory requirements, which could increase costs to data centers

S.B. 57 (Sen. Steve Padilla-D), currently before the California Senate, proposes the “Ratepayer and Technological Innovation Protection Act,” which would require (i) the California Public Utilities Commission (CPUC) to establish a special electrical corporation tariff for transmission and distribution services to data centers to, among other things, (a) provide protections for residential, agricultural, and small business ratepayers and prevent cost shifting to those ratepayers, (b) meet certain sustainability requirements, and (c) ensure that electrical grid investments to serve data centers are fully recovered from the data centers through the use of a services contract to repay an electrical corporation’s investment costs to serve the data center; and (ii) 100% of electricity delivered to data centers is provided by zero-carbon resources by 2030.
S.B. 58 (Sen. Steve Padilla-D), currently before the California Senate, would provide a partial exemption from certain taxes on data center equipment with respect to data centers that meet certain sustainability requirements, including, but not limited to, creating at least 20 qualifying jobs and investing at least $200 million, using a skilled and trained workforce for constructing the data center facility, utilizing at least 70% carbon-free energy for the first year of the data center’s operations and a specified percentage of carbon-free energy determined for each subsequent year thereafter, sourcing at least 50% of their energy supply from behind-the-meter sources, avoiding diesel fuel, using water-efficient cooling systems, and employing an onsite battery storage.
A.B. 222 (Assemblymember Rebecca Bauer-Kahan-D), currently before the California State Assembly, would introduce reporting and disclosure requirements with respect to energy use by data center operators that provide computing resources to AI developers. It would authorize CPUC to require data center operators to annually report energy consumption and performance data and to adopt energy efficiency performance standards for data centers.
Pacific Gas & Electric (PG&E), the largest utility company in California and in the U.S., has proposed Electric Rule 30, which aims to create a streamlined approach for interconnecting new transmission-level electric retail customers, including data centers, into PG&E’s existing transmission system. Electric Rule 30 includes provisions that would address design and construction specifications, ownership of facilities, the location of facilities, land rights, contracts required to receive electric retail service, the installation of facilities to provide service to new transmission-level customers, and customer’s responsibilities for PG&E facilities.

Oregon

Data Center Regulatory Outlook: Legislation and utility rules setting data center-specific requirements mean additional process but also predictability; if legislation passes, it could increase costs to data centers

Oregon lawmakers introduced the POWER Act, H.B. 3546 (Rep. Pam Marsh-D) on February 11, 2025, to regulate data centers. The bill aims to protect consumers from rising energy costs and reduce greenhouse gas emissions. Among other things, the bill would place data centers and cryptocurrency miners into a new class of utility customers. It also would authorize energy regulators to make rules to ensure that homes and small businesses in the state will not shoulder the energy costs of data centers.
H.B. 3546 only applies to data centers served by investor-owned utilities, like Portland General Electric and PacifiCorp. Electric cooperatives that serve data centers in eastern Oregon already have similar authority. The bill would require large energy users to sign a 10-year contract to pay for a minimum amount of energy used and the cost of new transmission. Some legislators, like Representative Virgle Osborne (R) voiced concerns with the bill while Bob Jenks, executive director of the Citizens Utility Board, testified at a recent legislative hearing in support of the bill.
In December 2024, the Oregon Public Utility Commission ruled in favor of a PacifiCorp proposal that would penalize large-load customers, such as data centers, whose energy use at new facilities is not in line with forecasted needs. The new rules, which PacifiCorp argues will incentivize more accurate load forecasts and help avoid unnecessary or premature spending, will take effect in February 2025.

Washington

Data Center Regulatory Outlook: New workgroup shows attention to data centers; outcome of workgroup not yet known

Washington law provides an exemption from taxes imposed on certain retail sales to qualifying businesses and to qualifying tenants of certain equipment in eligible data centers.

In February 2025, Washington Governor Bob Ferguson issued E.O. 25-05 directing the Washington Department of Revenue to establish a data center workgroup aimed at evaluating the impacts of data centers on Washington’s tax revenue, economy, environment, and energy use. The workgroup is tasked with balancing “industry growth, tax revenue needs, energy constraints, and sustainability” and must submit its findings and policy recommendations to the governor by December 1, 2025.

Regulatory Trendsetters: Minnesota and Utah

Minnesota

Data Center Regulatory Outlook: Agency decision adds to regulatory burden for data centers, but pending legislation could reverse the agency; other pending legislation, if passed, would provide helpful new incentives and but also new zoning requirements that could negatively impact some data center developments

Minnesota’s Public Utilities Commission voted in February not to exempt a data center development from permitting rules for generators at a proposed data center facility. Under Minnesota law, a “large energy facility”—that is, a generating plant or combination of plants at a single site with a combined capacity 50 [MW] or more” must obtain a certificate of need from the Public Utilities Commission. Although the data center developer stated that its diesel generators would be a backup power source and not connected to the grid, the Public Utilities Commission ruled that the project must obtain a certificate of need.
The Minnesota Senate, during the 2025 legislative session, will consider F. 1393 (Sen. Andrew Mathews-R), a bill clarifying that large data centers would not require a certificate of need for emergency backup generators not connected to the grid. When a data center in Maryland faced a comparable certificate requirement in 2023, the Maryland government passed a similar law in May 2024 to provide an exemption from backup generators that do not connect to the grid.
H.F. 1277 (Rep. Greg Davids-R), before the Minnesota House this legislative session, would allow large-scale data centers to be eligible for a tax exemption for purchases of equipment, software, and electricity.
S.F. 608 (Sen. Bill Lieske-R), before the Minnesota Senate this legislative session, would restrict the placement of data centers in municipal zoning districts.

Utah

Data Center Regulatory Outlook: Innovative program will allow new options for data centers to secure competitive access to power purchases, which could mean cost savings

Although Utah has a vertically-regulated electricity regime—meaning that the electric utility is generally the only seller from which a customer can buy power—Utah recently adopted an innovative statute that would allow large energy users, like data centers, to purchase electricity directly from large-scale power generators when the utility and large load customer fail to agree to terms of service within 90 days of the utility completing its evaluation of the service request. In early March 2025, the Utah Senate passed S.B. 132 (Sen. Scott D. Sandall-R), which “establishes alternative processes for providing electric service to customers with large electrical loads.”
In addition to allowing the state’s large power generators to individually contract with new, large-load customers, the law contains provisions meant to ensure that the incremental costs associated with the large load energy requirements are paid by the large-load customer, rather than being offloaded to existing customers.

The following Gibson Dunn lawyers prepared this update: Eric Feuerstein, Joseph Warin, Tory Lauterbach, Matt Donnelly, Emily Naughton, Sara Ghalandari, Amanda H. Neely, Jess Rollinson, Simon Moskovitz, Vlad Zinovyev, Teddy C. Okechukwu, Sally Gamboa, Laura Marcus, and Jason Zhang*.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Artificial Intelligence, Data Centers & Digital Infrastructure, Energy Regulation & Litigation, Land Use & Development, Mergers & Acquisitions, National Security, Power & Renewables, Public Policy, Real Estate, Tax, Tax Controversy & Litigation, or White Collar Defense & Investigations practice groups, or the following authors:

William R. Hollaway, Ph.D. – Chair, Energy Regulation & Litigation Practice Group,
Washington, D.C. (+1 202.955.8592, whollaway@gibsondunn.com)

Tory Lauterbach – Partner, Energy Regulation & Litigation Practice Group,
Washington, D.C. (+1 202.955.8519, tlauterbach@gibsondunn.com)

Vivek Mohan – Co-Chair, Artificial Intelligence Practice Group,
Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)

Sara Ghalandari – Partner, Land Use & Development Practice Group,
San Francisco (+1 415.393.8250, sghalandari@gibsondunn.com)

Evan M. D’Amico – Partner, Mergers & Acquisitions Practice Group,
Washington, D.C. (+1 202.887.3613, edamico@gibsondunn.com)

Stephenie Gosnell Handler – Partner, National Security Practice Group,
Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)

Peter Hanlon – Co-Chair, Power & Renewables Practice Group,
New York (+1 212.351.2425, phanlon@gibsondunn.com)

Nick Politan – Co-Chair, Power & Renewables Practice Group,
New York (+1 212.351.2616, npolitan@gibsondunn.com)

Michael D. Bopp – Co-Chair, Public Policy Practice Group,
Washington, D.C. (+1 202.955.8256, mbopp@gibsondunn.com)

Amanda H. Neely – Of Counsel, Public Policy Practice Group,
Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)

Eric M. Feuerstein – Co-Chair, Real Estate Practice Group,
New York (+1 212.351.2323, efeuerstein@gibsondunn.com)

Emily Naughton – Partner, Real Estate Practice Group,
Washington, D.C. (+1 202.955.8509, enaughton@gibsondunn.com)

Matt Donnelly – Partner, Tax Practice Group,
Washington, D.C. (+1 202.887.3567, mjdonnelly@gibsondunn.com)

Sanford W. Stark – Co-Chair, Tax Controversy & Litigation Practice Group,
Washington, D.C. (+1 202.887.3567, mjdonnelly@gibsondunn.com)

F. Joseph Warin – Co-Chair, White Collar Defense & Investigations Practice Group,
Washington, D.C. (+1 202.887.3609, fwarin@gibsondunn.com)

*Jason Zhang, a recent law graduate in the New York office, is not yet admitted to practice law.

Kelley v. Homminga, No. 25-9013 & Devon Energy Production Co. v. Oliver,
No. 25-9014 – Decided March 14, 2025

The Texas Supreme Court unanimously held that the Fifteenth Court of Appeals’ jurisdiction is limited to cases within its exclusive appellate jurisdiction and those transferred to it under the Texas Supreme Court’s power to equalize dockets.

“We conclude S.B. 1045 is susceptible of only one reasonable construction: the Legislature did not intend the Fifteenth Court to hear every civil appeal within its statewide jurisdiction.”

Background:

In 2023, the Texas Legislature passed S.B. 1045, creating the Fifteenth Court of Appeals, a new intermediate appellate court with exclusive, statewide appellate jurisdiction over appeals involving the State and appeals from Texas’s recently created business court. Shortly after the Fifteenth Court began hearing cases in September 2024, a question about the scope of its jurisdiction arose: Does it have general, statewide appellate jurisdiction in addition to its exclusive intermediate appellate jurisdiction?

Two cases presented the issue: Kelley v. Homminga and Devon Energy Production Co. v. Oliver. In both cases, the defendants appealed directly to the Fifteenth Court, even though neither appeal was within the Fifteenth Court’s exclusive jurisdiction. Both sets of defendants argued that the Fifteenth Court could hear their appeals because it had general appellate jurisdiction. Each set of plaintiffs moved to transfer the appeal to the regional court of appeals that would ordinarily hear the case—in Kelley, the First or Fourteenth Court, and in Devon, the Thirteenth Court.

The Fifteenth Court denied both transfer motions over dissents by Chief Justice Brister. The majority held that because the Government Code grants the Fifteenth Court general appellate jurisdiction over civil cases statewide, the Fifteenth Court could hear the cases. But in Chief Justice Brister’s view, this would increase the number of appeals in the Fifteenth Court and divert judicial resources to cases outside the court’s exclusive jurisdiction. He further expressed concern that construing the court’s jurisdiction so broadly would incentivize forum-shopping and lead to gamesmanship. The First Court agreed with the Fifteenth Court majority, while the Thirteenth and Fourteenth Courts disagreed. In accordance with Texas Rule of Appellate Procedure 27a, the Fifteenth Court promptly notified the Texas Supreme Court of the courts’ disagreement so that it could resolve the dispute.

Issue:

Does the Fifteenth Court of Appeals’ jurisdiction extend beyond (1) the cases over which it has exclusive intermediate appellate jurisdiction and (2) cases transferred to it by the Supreme Court for docket equalization purposes?

Court’s Holding:

No. S.B. 1045’s text and structure indicate that the Fifteenth Court’s jurisdiction is limited to cases that are (1) within its exclusive jurisdiction or (2) transferred to it by the Supreme Court for docket equalization purposes.

What It Means:

In a unanimous per curiam opinion, the Supreme Court held that the Fifteenth Court’s jurisdiction extends only to those cases involving the State or from the business court.
The Supreme Court’s decision ensures that the Fifteenth Court will remain focused on quickly and efficiently resolving the categories of cases the Legislature placed within its exclusive jurisdiction. Indeed, instead of being “[b]urdened with thousands of civil cases of every stripe,” today’s decision ensures that the Fifteenth Court will be able “to give special attention to those cases the Legislature has defined as critical to the State’s interests.” Op. at 10.
The prompt decisions by the Fifteenth Court, regional courts of appeals, and Supreme Court underscore their commitment to providing timely and predictable answers to disputes that arise as the Fifteenth Court of Appeals proceeds with its work.
Any appeals filed in the Fifteenth Court that fall outside its exclusive jurisdiction are subject to transfer.

The Court’s order and opinion for Kelley v. Homminga, No. 25-9013, are available here.

The Court’s order and opinion for Devon Energy Production Co. v. Oliver, No. 25-9014, are available here.

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

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com

Related Practice: Texas General Litigation

Trey Cox +1 214.698.3256 tcox@gibsondunn.com	Collin Cox +1 346.718.6604 ccox@gibsondunn.com	Gregg Costa +1 346.718.6649 gcosta@gibsondunn.com
John Adams +1 214.698.3335 jsadams@gibsondunn.com	David Woodcock +1 214.698.3211 dwoodcock@gibsondunn.com

This alert was prepared by Texas of counsels Ben Wilson and Kathryn Cherry and associates Elizabeth Kiernan, Stephen Hammer, and Jaime Barrios.