Regulatory Playbook

Trending Issues

Pentagon Unveils $984 Million Loan Program to Promote Critical Technologies
10.18.2024

On September 27, the Department of Defense (DoD) published a Notice of Funding Availability to accelerate the commercialization of technologies critical to U.S. national security and defense. DoD’s Office of Strategic Capital (OSC) will carry out this program in line with its mission to “attract and scale private capital” to critical technologies. The program will provide direct loans ranging from $10 million to $150 million for eligible entities investing in technologies that benefit DoD but are not limited to DoD operations.

Lenders Beware: The Ponzi Scheme Presumption Can Trap an Unwitting Lender
10.15.2024

The Ponzi scheme presumption applies when a bankruptcy trustee (or similarly situated plaintiff) establishes that a Ponzi scheme exists. As a matter of law, it allows the court to infer the Ponzi scheme perpetrator’s actual intent to hinder, delay or defraud creditors with respect to seemingly all payments made during the existence of the scheme. See, e.g., Johnson v. Neilson (In re Slatkin), 525 F.23 805, 814 (9th Cir. 2008). Even payments received from the perpetrator in good faith can be clawed back, though recipients should be entitled to retain payments applied to their principal or actual investment in the scheme.

The Challenge Organizations Face to Become DORA Compliant Is Not to Be Underestimated
10.15.2024

Financial entities within the EU are required to submit registers of information detailing their contractual arrangements with providers of information and communication technology (ICT) services (ICT Providers) to the European Supervisory Authorities (ESAs) prior to DORA’s compliance deadline. Financial entities should now be engaging with their existing ICT Providers to prepare such registers of information to enable the ESAs to designate “critical” ICT Providers (CTPPs).

The Beginning of the End for the USPTO’s After Final Consideration Pilot Program 2.0
10.14.2024

On October 1, 2024, the U.S. Patent and Trademark Office (USPTO) announced the termination of the After Final Consideration Pilot Program 2.0 (AFCP 2.0), a program widely used by patent applicants since 2013. As the program enters its final extension period, patent applicants should be aware of key deadlines and explore alternative strategies for responding to final office actions. Initially set to expire on September 30, 2024, the AFCP 2.0 has been extended to December 14, 2024, after which no further participation requests will be accepted. The decision to end the program follows public resistance to a proposed fee structure aimed at offsetting its high administrative costs.
 

District Court Finds Qui Tam Provisions of the False Claims Act Unconstitutional
10.14.2024

In a groundbreaking decision issued on September 30, 2024, Judge Kathryn Mizelle of the U.S. District Court for the Middle District of Florida broke with decades of precedent and held that the qui tam provisions of the False Claims Act (FCA) are unconstitutional. See U.S. ex rel. Zafirov v. Florida Medical Assocs., LLC, No. 8:19-CV-01236-KKM-SPF, (M.D. Fla. Sept. 30, 2024).

New UK Trade Sanctions Enforcement Body Goes Live October 10, 2024
10.10.2024

The Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 (the Regulations) were published on September 12, 2024, and are effective from October 10, 2024. They grant the Office of Trade Sanctions Implementation (OTSI) new civil enforcement powers in respect of most UK trade sanctions, and the Department for Transport (DfT) corresponding powers in relation to aircraft and shipping sanctions. Businesses operating in the UK should expect substantially heightened trade sanctions enforcement risk, particularly as penalties for breaches of trade sanctions will be imposed on a strict liability basis. Certain parties in the financial, legal, shipping and aviation sectors will also be impacted by new mandatory reporting obligations.

Corporate Transparency Act: Is Your Company Prepared to Meet the Deadline for Filing on January 1, 2025?
10.10.2024

The federal Corporate Transparency Act (CTA) became effective on January 1, 2024, and set a deadline of January 1, 2025, for entities existing on the effective date to file an initial report. As we enter the fourth quarter of 2024, that deadline is fast approaching. Many entities have waited to see if the statute would be invalidated, the rules further clarified, or the deadline postponed, or have decided to wait until the deadline is at hand. It now may be time for entities formed or qualified to do business in the United States to determine if they are required to file and, if so, to determine who are the “beneficial owners” whose name and personal information needs to be collected, and to begin to collect this information.

Is the Federal Circuit Breathing Life Back Into False Patent Marking Claims?
10.09.2024

On October 3, 2024, the Federal Circuit issued a decision in Crocs, Inc. v. Effervescent, Inc. holding that a cause of action arises under Section 43(a)(1)(B) of the Lanham Act “where a party falsely claims that it possesses a patent on a product feature and advertises that product feature in a manner that causes consumers to be misled about the nature, characteristics, or qualities of its product.”

Federal Court Issues Injunction to Prevent Presumptive Gender and Race Preferences for DOT Contracts Within Kentucky and Indiana
10.08.2024

On September 23, 2024, the U.S. District Court Eastern District of Kentucky granted a preliminary injunction, enjoining the U.S. Department of Transportation (DOT) from using the rebuttable presumption that businesses owned by women and persons of certain races and ethnicities are socially disadvantaged and therefore should be given preference when awarding federal contracts

DOJ Debuts Updates to Its Evaluation of Corporate Compliance Programs Aimed at the Responsible Use of Artificial Intelligence
10.08.2024

On September 23, 2024, the U.S. Department of Justice (DOJ) Criminal Division released an updated version of its Evaluation of Corporate Compliance Programs (ECCP) guidance. DOJ first published the ECCP in 2017 to provide clear guidance on which factors federal prosecutors will consider when evaluating the strength of a corporation’s compliance programs in the context of an investigation or enforcement action. The ECCP instructs prosecutors on how to evaluate a company’s risk assessment mechanisms, to ensure that the company’s policies and procedures are responsive to the risks that it has identified and communicate those risks, and the established risk mitigations, to the corporation’s stakeholders, such as employees and vendors. The ECCP is a critical resource that companies should consider when developing compliance programs to avoid penalties associated with DOJ enforcement action.

Bipartisan Legislation Presents Opportunity for Passing PFAS Laws
10.04.2024

With appropriations settled until December 20, Congress now has one other piece of “must-pass” legislation to address: the National Defense Authorization Act (NDAA). The NDAA authorizes the activities of the Department of Defense (DoD) for the following fiscal year and the legislation has passed on a bipartisan basis for over 60 consecutive years. Because of the nature of the bill and its legacy as a successful, bipartisan movement, the NDAA has become critical for Congress to pass each year. However, the NDAA, as with other must-pass pieces of legislation, has also become a vehicle for attaching policy items that would not otherwise pass on their own, either because they are too controversial or not popular enough. As a result, the passage of the NDAA has become more controversial in the past few years as social programs and partisan priorities have been added to the negotiation process. One area of attention in recent years addresses DoD handling of PFAS chemicals. As the House and Senate versions of the NDAA have differing provisions concerning PFAS, this will prove to be another topic that the NDAA conferees will need to negotiate in the coming weeks. Below is an overview of the PFAS provisions that may or may not be included in the final bill.

California Climate Disclosures Remain on Schedule
10.02.2024

California is set to launch its first-in-the-nation mandatory climate disclosure framework next year as provided in the 2023 Climate Accountability Package, Senate Bills SB 253 and SB 261. (For more information on the Climate Accountability Package, see Pillsbury’s prior reporting here and here.) But the bills have not come without some lingering controversy over the ability of businesses to meet the aggressive January 1, 2026, deadline to report their carbon footprints and submit climate risk assessments to the California Air Resources Board (CARB), as well as CARB’s ability to adopt implementing regulations by this coming January 1. A proposal by California Governor Gavin Newsom to provide relief through two-year extensions for compliance arrived back in the form of a bill from the Legislature—SB 219—for his signature, but it was stripped of those extensions and only granted an additional six months for CARB to adopt regulations. On September 27, Newsom acquiesced and signed SB 219 into law. The development confirms the need for businesses to continue preparing for mandated climate disclosures by January 1, 2026, and to consider participating in the CARB rulemaking to emphasize the implementation concerns recognized by Newsom.

No Comity Tonight
10.02.2024

Upon recognition of a foreign insolvency proceeding under chapter 15 of the U.S. Bankruptcy Code, the foreign debtor may request additional assistance from the U.S. Bankruptcy Court under section 1507 or additional relief under section 1521. Such additional relief often includes requests to recognize and enforce in the United States specific orders entered by the foreign court. While such requests are freely granted, there are limits to the relief a foreign debtor may receive. For example, in In re Nexgenesis Holdings Ltda., No. 22-14043-BKC-LMI, 2024 WL 3616732 (Bankr. S.D. Fla. July 31, 2024) (In re Nexgenesis), the bankruptcy court denied the foreign representatives’ request for recognition of an asset freeze order because, among other reasons, it would be manifestly contrary to U.S. public policy to recognize the order, even though the Brazilian insolvency proceeding had been recognized as a foreign main proceeding under Chapter 15.

From AI Doomers to E/Accs: How SB 1047 and the 38 AI Laws in California Are Shaping Future AI Law
09.26.2024

The California legislature sent 38 AI bills to the Governor’s office as the 2024 legislation session came to a close, eight of which have already been signed, regulating everything from deepfake nudes and AI-generated celebrity clones to election tampering. Governor Newsom has until September 30 to sign the rest, including California Senate Bill 1047, known as the Safe and Secure Innovation for Frontier Artificial Intelligence Models Act. SB 1047 is one of the first significant regulations of artificial intelligence in the United States that, if signed, would place liability on the developers of AI models.

California Employers Required to Have a Workplace Violence Prevention Plan
09.25.2024

According to the Occupational Safety and Health Administration (OSHA), workplace violence affects nearly two million American workers annually. In 2021, 57 people died from acts of workplace violence in California.

Venture Capital Fund Manager Considerations for Accepting SSBCI-Related Capital Commitments
09.25.2024

In 2021, the U.S. Congress appropriated $10 billion in funding for “SSBCI 2.0”—a second phase of the State Small Business Credit Initiative originally introduced in 2010. The initial SSBCI program leveraged approximately $1.4 billion into well over $8 billion of private small business loans and investments. As part of SSBCI 2.0, the U.S. Treasury Department permits states to invest a portion of their allocated funding to venture capital funds for investment in small businesses within their state (“SSBCI capital”), which opens up significant opportunities for venture capital fund managers to attract commitments from states that are leveraging SSBCI Capital.

Department of Justice Settles with Las Vegas Casino for $130 Million
09.20.2024

The Department of Justice (DOJ), through the U.S. Attorney’s Office (USAO) for the Southern District of California, recently announced a non-prosecution agreement with a Las Vegas casino, which forfeited over $130 million under the agreement. The agreement settled criminal allegations that the casino conspired with unlicensed money transmitting businesses (MTBs) worldwide to transfer funds for its financial benefit. This announcement is the latest example of the DOJ’s expanding focus on alleged money-laundering activities involving MTBs and international transfers of funds, particularly transfers connected with mainland China and mainland Chinese-related criminal activity.

SBA Proposed Rule to Change How Recertification Affects Small Business IDIQs and Bring More Uniformity Across Various SBA Programs
09.19.2024

On August 23, 2024, Small Business Administration (SBA) published a proposed rule making certain changes to the Historically Underutilized Business Zone (HUBZone) program, as well as other programs, to promote consistency in SBA’s rules across the various socioeconomic government contracting programs. While the proposed rule makes numerous changes to the SBA programs, small businesses will be particularly interested in the proposed changes to SBA’s recertification rule.

Developments in Association Law 2022 – 2024
09.13.2024

The following is a review of notable cases and regulatory developments for nonprofit organizations at the federal and state levels during the last two years.                                                         

ANTITRUST

Federal Court in Arizona Limits FTC Jurisdiction on Nonprofits FTC v. Grand Canyon Education, Inc., No. 2:23-cv-02711-DWL (D. Ariz. Aug. 15, 2024) A federal court in Arizona dismissed claims in a Federal Trade Commission (FTC) lawsuit against Grand Canyon University. The case has potential ramifications for other kinds of nonprofits, especially those without voting members. The court held that the FTC Act did not authorize the FTC to bring claims against GCU, formed as a nonprofit corporation with federal income tax exemption under Internal Revenue Code Section 501(c)(3), because GCU was not “organized to carry on business for its own profit or that of its members,” which is an element of the definition of a “corporation” under Section 4 of the FTC Act necessary for the FTC to assert jurisdiction. The FTC asserted in its complaint that GCU was “organized ... to advance [Grand Canyon Education, Inc.’s] for-profit business and advance Defendant Mueller’s interests as officer, chairman, director, stockholder and promoter of investment in GCE.” (Mueller was both GCU’s president and GCE’s CEO.) But neither GCE nor Mueller were members of GCU.

District Court Ruling Bars Federal Trade Commission Non-Compete Rule for the Near Term
09.10.2024

The Federal Trade Commission (FTC) and the Non-Compete Clause Rule (Rule)
Under Section 5 of the FTC Act, “[t]he Commission is [] empowered and directed to prevent persons, partnerships, or corporations … from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.” 15 U.S.C. § 45(a)(2). As such, Section 6 of the FTC Act, grants the FTC the power to “[f]rom time to time classify corporations and … to make rules and regulations for the purpose of carrying out the provisions” of the FTC Act.

FinCEN Finalizes Rule to Compel Reporting of Individuals and Beneficial Ownership of Entities Involved in Specified Transfers of Residential Real Estate
09.09.2024

On August 28, 2024, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule (RRE Rule) creating a reporting regime for transfers of residential real estate. This RRE Rule, proposed in preliminary form on February 16, 2024, supplements FinCEN’s current General Targeting Order (GTO) program for reporting of such transactions but is quite different in approach and scope. Unlike the GTO, it applies on a nationwide basis and without a floor amount of consideration.

U.S. Government Intervenes in Georgia Tech Cybersecurity False Claims Case
09.06.2024

On August 22, 2024, the U.S. Department of Justice (DOJ) filed a complaint as intervenor in a False Claims Act (FCA) lawsuit filed against Georgia Tech Research Corporation and the Board of Regents of the University System of Georgia (Georgia Tech). The case was originally filed against Georgia Tech under seal in July 2022 by two whistle-blowers, its former associate director of cybersecurity and a former principal information security engineer.

IRS Issues Proposed Regulations Regarding Updates to the Qualified Domestic Trust Regulations
09.06.2024

The United States taxes a U.S. resident on their assets above a certain amount at death and non-residents on their U.S. assets. So, if someone dies owning assets worth more than their remaining lifetime exemption, a U.S. estate tax is typically due. Payment of this tax can often be delayed with the use of a Qualified Terminable Interest Property (QTIP) trust for the benefit of a surviving (U.S.) spouse. Additionally, spouses can transfer property to the other free of any transfer taxes, as transfers of property between spouses qualify for the unlimited marital deduction. Although transfers of property to a noncitizen spouse would not qualify for the marital deduction under Internal Revenue Code (IRC) Section 2056(d)(1), IRC Section 2056(d)(2)(A) provides an exception to the general rule. If the qualified domestic trust (QDOT) requirements under IRC Section 2056A are met, property that passes from a U.S. person to a noncitizen spouse in a QDOT qualifies for the marital deduction. An executor of the estate must elect QDOT treatment.

Important Delaware General Corporation Law Amendments Are Signed into Law amid Recent Delaware Chancery Court Decisions
09.03.2024

Significant amendments to the Delaware General Corporation Law (DGCL) were signed into law by Governor John Carney on July 17, 2024 (SB 313). These amendments were initially introduced in March 2024 in response to three controversial Delaware Court of Chancery rulings, Moelis, Activision and Crispo, which called into question the validity of several well-established and commonly used market practices. SB 313 went into effect on August 1, 2024, and applies retroactively to all contracts and agreements made by a corporation (including merger and consolidation agreements) and all agreements, instruments or documents approved by a board of directors. However, SB 313 will not apply to or affect any civil action or proceeding completed or pending on or before August 1, 2024.