Employers Beware: FTC Announces Final Rule Banning Worker Non-Competes

On April 23, 2024, the Federal Trade Commission (FTC) voted along party lines to issue its Final Rule prohibiting almost all non-competes with workers—both those entered into in the past and in the future. The Final Rule is set to become effective 120 days after it is published in the Federal Register (the Effective Date). The Rule rests on the FTC’s authority to interpret and enforce sections 5 and 6(g) of the Federal Trade Commission Act (FTC Act), which prohibits unfair methods of competition.

Biden Administration Publishes Final Version of Title IX Regulations

After months of anticipation, the Biden administration released its final amendments to the Title IX regulations on April 19, 2024 (the “New Rules”). The amendments are the latest change to the Title IX regulatory landscape, altering many of the regulations that were put into place in the 2020 rule. The New Rules broaden the scope of Title IX by expanding the definition of sex-based harassment and hostile environment harassment, as well as expanding the jurisdiction of the regulations to include off-campus conduct. The New Rules also give schools more flexibility and discretion in developing procedures for Title IX grievance proceedings. For example, they no longer require that there be a live hearing and cross-examination by the parties, and a single investigator model is now allowed. The New Rules also clarify the prohibition on retaliation and update reporting and response obligations. Finally, while the New Rules do address certain protected characteristics, including sexual orientation, gender identity, and sex characteristics, they do not address participation in athletics. The Department of Education promulgated a separate Notice of Proposed Rulemaking on Sex-Related Eligibility Criteria for Male and Female Athletic Teams, but no final rule has been published.

EPA Issues New Rules Requiring the Development and Submission of Response and Risk Management Plans

The Environmental Protection Agency (EPA) has completed its work on two significant rules that are likely to impose new burdens on the regulated community: the Accidental Chemical Release Prevention Requirements, authorized by Section 7412( r)(7) of the Clean Air Act, and the Clean Water Act Hazardous Substance Facility Response Plans, authorized by Section 1321G)(5)(D) of the Clean Water Act of 1972 as amended by the Oil Pollution Act of 1990. The Accidental Chemical Release Rules were published in the Federal Register on March 11, 2024, at 89 FR 17622. The effective date is May 10, 2024, but many facilities will face a compliance date of May 10, 2027. The new Clean Water Act facility response plan requirements were published in the Federal Register on March 28, 2024, at 89 FR 21924, and are effective on May 28, 2024. However, the deadline for submitting response plans to EPA will be June 1, 2017, for “initially-regulated facilities.”

Supreme Court Unanimously Rules “Pure Omissions” Not Actionable under SEC Rule 10b-5 Even If Disclosure Required by Item 303 of Regulation S-K

In Macquarie Infrastructure Corp. v. Moab Partners, L.P., 601 U.S. ___, 2024 WL 1588706 (Apr. 12, 2024), a unanimous Supreme Court held that “pure omissions” cannot be the basis for a private action of securities fraud under Securities and Exchange Commission (SEC) Rule 10b-5(b). Stockholders had argued, and the Second Circuit had agreed, that while many “pure omissions” are not actionable, the result should be different if the omitted information should have been disclosed under Item 303 of the SEC’s Regulation S-K, which requires public companies to disclose “material events and uncertainties” in the Management’s Discussions and Analysis (MD&A) section of annual and quarterly reports. Rejecting this argument, the Court decided that private parties can premise a Rule 10b-5(b) claim on an omission only if that omission renders something else the company has said misleading (a “half-truth”). The SEC, however, can bring actions of its own for violations of Item 303.

Revised Uniform Grants Guidance Reduces Burdens While Encouraging Accessibility and Transparency

On April 4, 2024, the White House released a pre-publication final rule substantially updating the Office of Management and Budget (OMB) Uniform Grants Guidance, which sets the foundational requirements for agencies in making grants and providing other forms of federal financial assistance and will now be known as the “Guidance for Federal Financial Assistance.” Federal financial assistance includes grants, cooperative agreements (but not cooperative research and development agreements), loans and loan guarantees, subsidies, insurance and certain other types of assistance. This pre-publication final rule will be published in the Federal Register and builds on the proposed rule published in the Federal Register on October 5, 2023. This final rule is the most significant revision to the Uniform Grants Guidance since its inception 10 years ago.

The United States Moves Toward a Comprehensive Privacy Law (One More Time)

On April 7, 2024, U.S. Sen. Maria Cantwell (D-WA), Chair of the Senate Committee on Commerce, Science and Transportation, and U.S. Rep. Cathy McMorris Rodgers (R-WA), Chair of the House Committee on Energy and Commerce, released a discussion draft of the American Privacy Rights Act (APRA). This bipartisan, bicameral draft legislation builds upon the previous draft U.S. comprehensive privacy bills and seeks to eliminate the existing patchwork of sectoral-based and state-specific data privacy laws in the United States. If passed, the APRA would rival the EU General Data Protection Regulation (GDPR) and become one of the leading global privacy standards. “Fired up” to get the comprehensive privacy legislation across the finish line is the message we heard from the members of the Energy and Commerce (E&C) subcommittee hearing on April 17. Each of the five expert witnesses also answered unanimously “yes” to the question of whether this bill was the best chance Congress had to pass a national privacy standard. This article looks at why this time may be different.

Clarity for M&A Practitioners: Proposed DGCL Amendments Bridge the Gap between Recent Delaware Chancery Court Decisions and Market Practice

On March 28, 2024, the Council of the Corporation Law Section of the Delaware State Bar Association proposed certain amendments (the “Amendments”) to the Delaware General Corporation Law (DGCL), which, if approved, would go into effect on August 1, 2024, and retroactively apply in the case of all agreements, subject to limited exceptions. The proposed Amendments would, among other things:

DOI Rule Endorses Seminole Tribe’s Model of Remote Wagering

On March 22, 2024, a new federal rule published by the U.S. Department of the Interior (Department or DOI) went into effect, governing the Department’s review and oversight of certain tribal gaming arrangements.

SCOTUS Relaxes Standards for Title VII Plaintiffs in Workplace Discrimination Claims

In Muldrow v. City of St. Louis, No. 22-193, 2024 WL 1642826 (U.S. Apr. 17, 2024), the U.S. Supreme Court ruled that an employee alleging that an involuntary lateral job transfer constituted workplace discrimination in violation of Title VII of the Civil Rights Act of 1964 need only show that the transfer resulted in “some harm,” rejecting as “extra-textual” any heightened threshold of harm required by certain lower courts. As Justice Elena Kagan held in the majority opinion, a Title VII plaintiff “does not have to show … that the harm incurred was significant. Or serious, or substantial, or any similar adjective.” This is because “Title VII’s text nowhere establishes that high bar.” Justice Kagan’s opinion was joined by Chief Justice Roberts and Justices Sotomayor, Gorsuch, Barrett and Jackson. Justices Thomas, Alito and Kavanaugh each filed concurring opinions.

Revving Up: Eight States in Gear with Low-Carbon Fuel Standard Legislation

State low-carbon fuels programs are powerful drivers for the adoption of various low-carbon fuels, particularly renewable natural gas (RNG), renewable diesel and sustainable aviation fuel (SAF). For well over a decade, California has implemented its Low-Carbon Fuel Standard (LCFS), which was wildly successful in incentivizing the use and production of RNG, renewable diesel and SAF. In recent years, Oregon and Washington followed suit, and while these programs have a much smaller net impact on the demand for low-carbon fuels due to the respective sizes of those states, they have provided additional outlets for low-carbon fuels.

New CISA Rule Would Require Widespread Cyber Incident Reporting, Updated Timelines and Penalties for Critical Infrastructure Sector

At the end of March 2024, the Department of Homeland Security’s (DHS) Cybersecurity and Infrastructure Security Agency (CISA) released the long-anticipated Notice of Proposed Rule Making (NPRM) detailing how companies will have to comply with the Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA). The draft CIRCIA Rule (the Proposed Rule) will require virtually every owner/operator entity within one of 16 identified Critical Infrastructure sectors to report a cybersecurity incident within 72 hours and/or report within 24 hours a ransomware payment. Public comments about the Proposed Rule are due by June 3, 2024, and CISA expects to publish the Final Rule no later than October 4, 2025.

China Issues Rules to Clarify and Relax Cross-Border Data Transfer Controls

On March 22, 2024, the Cyberspace Administration of China (CAC) published the final version of the Provisions on Promoting and Regulating Cross-Border Data Transfers (Provisions), aiming to provide more clarity on the implementation of the Measures on Security Assessment for Data Export (Security Assessment Measures), effective beginning September 1, 2022, and the Measures on the Standard Contract for the Cross-border Transfer of Personal Information (SC Measures), effective on June 1, 2023, and other cross-border data transfer issues. As described in more detail below, the Provisions, among other things, set forth certain scenarios where the procedural regulatory requirements for data export are exempted, and clarify the identification of “important data” (Important Data) and thresholds for mandatory security assessment.

Recoupment Survives the Discharge Injunction Permitting Dollar-for-Dollar Recovery on a Prepetition Debt

From time to time, a debtor continues to have the right to receive benefits or payments from a non-debtor counterparty under the same contractual relationship or transaction after receiving a discharge of prepetition debt. The question then arises whether the discharge prevents the non-debtor counterparty from withholding a payment or benefit to satisfy that prepetition, now discharged, debt. A recent bankruptcy appellate panel ruling decided in the context of the recoupment of overpaid Social Security benefits suggests that under the appropriate facts, the answer is no.

SEC Adopts Long-Anticipated Rules for SPACs: Considerations for Market Participants and SEC Enforcement Objectives in the New Regulatory Environment

On January 24, 2024, the Securities and Exchange Commission (SEC) announced the adoption of final rules (the Final Rules) affecting the acquisition of private operating companies by publicly traded special purpose acquisition companies (SPACs) and related financing transactions (individually and collectively, de-SPAC transactions), largely aligning them with requirements of traditional initial public offerings (IPOs). The Final Rules, which go into effect on July 1, 2024, and the adopting release also provided new guidance from the SEC with respect to SPAC and de-SPAC transactions.

FCC Advances Its Space and Satellite Agenda

The Federal Communications Commission (FCC or Commission), in a flurry of 2024 activity, has sought to advance its space and satellite agenda by, among other things, adopting rules that allow satellite operators and terrestrial wireless providers to partner and deliver wireless coverage to areas difficult to reach with traditional ground-based wireless signals, proposing rules that would comprise the framework by which space stations are licensed to handle in-space servicing, assembly and manufacturing (ISAM), and clarifying orbital debris mitigation rules.

Non-U.S. Companies on Alert: U.S. Government Issues Tri-Seal Compliance Note on Global Enforcement

On March 6, 2024, the U.S. Department of Justice (DOJ), U.S. Department of Commerce, and U.S. Department of the Treasury issued a Tri-Seal Compliance Note (the “Tri-Seal Note”) emphasizing the obligations of non-U.S. persons to comply with U.S. sanctions and export control laws. The Tri-Seal Note does not issue any new rules or regulations, but rather reiterates existing U.S. trade compliance obligations for non-U.S. persons, highlights recent enforcement actions, and provides recommendations to help mitigate risks.

SEC’s Climate Disclosure Rules Likely to Collide with California’s Climate Disclosure Laws

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) finalized and adopted its controversial greenhouse gas (GHG) reporting and climate disclosure regulations after a review of over 24,000 public comments and two years of hot debate. These new SEC climate-related regulations will soon require publicly traded companies to disclose, among other things, financially “material” Scope 1 emissions (direct emissions from operations) and Scope 2 emissions (indirect emissions from energy use) in their annual reports and registration statements, and will also require registrants to provide information regarding a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, operations or financial condition. Pillsbury recently published an alert on the content and details of new SEC climate-related regulations, which can be found here.

DoD Contractor Requirement to Disclose Greenhouse Gas Emissions Has Been Halted

On December 6, 2022, and January 4, 2023, we published two client alerts outlining the proposed greenhouse gas (GHG) emissions disclosure requirements and explaining the differences between the Scope 1, 2 and 3 GHG emission categories. As we previously described, FAR 23.001 defines GHG as carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride and sulfur hexafluoride. Under the proposed Federal Acquisition Regulation (FAR) regulation, virtually all federal contractors will be required to identify and report an inventory of their Scope 1 and Scope 2 GHG emissions, starting one year after a final FAR rule is issued. With limited exceptions, this requirement will apply to all government contractors who received $7.5 million or more in federal contract obligations in the prior fiscal year. Government contractors who do not qualify as small business concerns and who received more than $50 million in federal contract obligations in the prior fiscal year will also be required to report an annual inventory of their Scope 3 GHG emissions. To date, the final FAR rule has not been issued.

Commercial Real Estate Partnership Cancellation of Debt Income

With $1 trillion in commercial real estate financing expected to mature in 2024, much of it with uncertain prospect of repayment, more real estate borrowers will be faced with the prospect of taxable cancellation of debt income (CODI). Cancelled debt generally results in CODI but, if the debt is cancelled in bankruptcy or the taxpayer is insolvent, an exception to CODI may apply. The bankruptcy and insolvency exceptions are tested at the individual partner level, not at the partnership level. CODI exceptions reduce other valuable tax attributes, such as property basis and loss or credit carryovers, which are especially complex in bankruptcy.

President Biden and Senators Support the Ramp Up in IRS Audits on Corporate Aircraft

During President Biden’s State of the Union address on March 7, 2024, President Biden announced that he will eliminate tax breaks for corporate aircraft. A White House statement released the same day explains this agenda and states that President Biden will be “cracking down on corporate jet loopholes” in an effort to make high-net-worth individuals and large corporations “pay their fair share.”

FCC Announces Consumer IoT Cybersecurity Labeling Program

Reflecting the growing concern with cybersecurity threats associated with Internet of Things (IoT) products, the Federal Communications Commission (FCC) adopted rules at its March 2024 meeting to implement a new Voluntary Cybersecurity Labeling Program. The new label— “U.S. Cyber Trust Mark”—will be affixed on wireless consumer IoT products that go through the voluntary review program to ensure that the products comply with baseline cybersecurity criteria established in the September 2022 NIST Report 8425.

Congress Sets Its Sights on Limiting Access to Chinese Biotech Companies

The BIOSECURE Act would prohibit federal agencies from contracting with, extending loans to, or awarding grants to, any company with existing or pending agreements with identified biotechnology companies. This limits funding to both the procurement of biotechnology companies and funding flowing to any entity using these technologies.

Treasury Department and IRS Issue Final Regulations and Other Guidance on the Direct Pay Election under Section 6417 of the Internal Revenue Code

Under Section 6417 of the Internal Revenue Code (IRC), “applicable entities” and certain electing taxpayers can elect to treat various renewable energy tax credits as payments against tax, essentially making those credits refundable as direct payments from Treasury (the “direct pay election”). Proposed and temporary regulations relating to the direct pay election were issued by Treasury and the Internal Revenue Service (IRS) on June 14, 2023, and were published in the Federal Register on June 21, 2023 (the “Prior Regulations”). After considering numerous comments submitted by interested parties with respect to the proposed regulations, Treasury and the IRS issued final regulations on the direct pay election on March 5, 2024, which were published in the Federal Register on March 11, 2024 (the “Final Regulations”).

FinCEN’s Proposed Rule to Regulate Investment Advisers: The Questions Industry Should Be Following

On February 15, 2024, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking to regulate specified investment advisers as “financial institutions” under the Bank Secrecy Act (BSA) (the “Proposed Rule”). Investment advisers have presented a target for anti-money laundering (AML) regulation for a decade, with an earlier 2015 rulemaking effort failing to advance. The 2021 U.S. Strategy on Countering Corruption again highlighted the investment adviser sector, and the Treasury Department’s 2024 Investment Adviser Risk Assessment helped inform the Proposed Rule.

SEC Adopts Long-Anticipated Final Rules on Climate-Related Disclosure Requirements

On March 6, 2024, the Securities and Exchange Commission (SEC) adopted final rules imposing new climate-related disclosure requirements on domestic and foreign registrants with respect to their annual reports and registration statements ( “Final Rules”). The Final Rules scaled back many of the proposals from 2022, including the elimination of certain aspects of the greenhouse gas (GHG) emission disclosure mandates, modification of the financial statement disclosure requirements, removal of some of the more granular disclosure requirements, extension of certain phase-in periods, and elimination of Scope 3 GHG emissions disclosure requirements.

U.S. Courts of Appeals Block Two Legal Efforts to Curb DEI Initiatives

The first week of March 2024 saw two U.S. Courts of Appeals separately block efforts to restrict initiatives designed to promote diversity, equity, and inclusion (DEI). Although each court decision was grounded in provisions of the U.S. Constitution, one ruling rested on the First Amendment in affirming a preliminary injunction against an anti-DEI statute, while the other applied Article III standing principles to affirm dismissal of an advocacy group’s challenge to a corporate initiative designed to increase its pipeline of diverse employees.

Congress Continues to Address AI in Bipartisan Fashion, Launching House AI Task Force as Latest Step

On February 20, Speaker Mike Johnson (R-LA-4) and Democratic Leader Hakeem Jeffries (D-NY-8) revealed the creation of a bipartisan Task Force on Artificial Intelligence, to be chaired by Congressman Jay Obernolte (R-CA-23) and Congressman Ted Lieu (D-CA-36).

Conflicting Court Rulings on Subchapter V Eligibility Leave Small Businesses in Limbo

In 2019, Congress passed the Small Business Reorganization Act (SBRA), which created subchapter V to chapter 11 of the Bankruptcy Code. Subchapter V is designed to create a streamlined, efficient and cost-effective way for smaller businesses to reorganize in a way that increases the likelihood of investors retaining their ownership. For example, subchapter V eliminates the absolute priority rule and instead allows the debtor to confirm, over the objection of creditors, a plan whereby equity retains ownership so long as it does not unfairly discriminate and is fair and equitable.

Sweden’s NATO Membership Is Official! Significant Business Opportunities Now Available to Swedish Companies

On March 7, 2024, Sweden officially joined the North Atlantic Treaty Organization (NATO) after Hungary’s parliament cleared the last hurdle to Sweden’s membership. Sweden and Finland began pursuing NATO membership following Russia’s invasion of Ukraine in 2022. Finland joined NATO in April 2023. Sweden’s accession, however, was met with significant opposition from Hungary and Turkey based on geopolitical concerns. NATO is an alliance of over 30 countries committed to working together to guarantee the freedom and security of its members through various political and military means. The admission of Finland and Sweden into NATO is monumental because it represents the most significant expansion of the alliance since the addition of eastern European countries after the Soviet Union collapsed in 1991.

The Ayes Have It: Dartmouth Men’s Basketball Team Is the First Student-Athletes to Unionize

On March 5, 2024, the Dartmouth Men’s Basketball Team voted 13-2 in favor of being represented by SEIU Local 560 (the “Union”). This vote follows the decision issued by Region 1 of the National Labor Relations Board (NLRB) that student-athletes are “employees” within the meaning of the National Labor Relations Act, as discussed in detail in our prior alert.

Delaware Court of Chancery Invalidates Certain Board Control Rights Commonly Found in Stockholder Agreements

Last month, the Delaware Court of Chancery issued a strong reminder that (1) when prevalent market practice is pitted against statutory law, it is the statute that will prevail in Delaware courts, and (2) the bedrock of Delaware law is that the board of directors manages the business and affairs of a corporation, not the stockholders.

Four New State Consumer Privacy Laws Are Slated to Take Effect in 2024

Despite growing momentum, the United States remains one of the largest nations without a comprehensive federal privacy law. This has led to a significant uptick in state-level privacy legislation since the 2018 enactment of the California Consumer Privacy Act. In 2023, alone, four consumer privacy laws went into effect in Colorado, Connecticut, Virginia and Utah and eight new states enacted similar laws.

IRS Ramps Up Audits on Corporate Aircraft Use for High-Net-Worth Individuals and Affiliated Entities

The Internal Revenue Service (IRS) is continuing to increase scrutiny on high-net-worth individuals, large corporations and complex partnerships. On February 21, 2024, the IRS announced that it plans to begin dozens of audits on corporate aircraft and specifically focus on the issue of whether the use of the aircraft is being properly allocated between business and personal. As part of the announcement, IRS Commissioner Danny Werfel stated that “personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin. With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”

Reviewing Key CHIPS Act Implementation Milestones to Deliver Opportunities for the Semiconductor Supply Chain

The CHIPS and Science Act, enacted in August of 2022, appropriated $52 billion to expand the U.S. semiconductor market—accounting for research, development and ultimately domestic manufacturing of current and next-generation semiconductor technology. To carry out this mission, the Department of Commerce established the CHIPS Program Office, to administer the funding opportunities for manufacturing under the Act, and the CHIPS R&D Office, to carry out the research and development activities under the Act. In addition to the CHIPS Office, other agencies have been authorized to carry out CHIPS Act programming—including the Department of Defense (DoD), which is administering the Microelectronic Commons, a lab-to-fab pathway for microelectronic products to overcome the “valley of death” and reach commercialization. The CHIPS Offices, as well as the DoD, met several milestones in 2023 and the early months of 2024.

New York District Court Holds Teaming Agreements May Be Enforced

The U.S. District Court for the Southern District of New York (Crotty, J.) partially denied a motion to dismiss several claims brought by BAE Systems asserting a breach of contract by L3 Harris challenging, among other things, the enforceability of the parties’ teaming agreement. The contract relates to a Department of the Navy prime contract won by L3 Harris. BAE Systems Information and Electronics System Integration Inc. v. L3 Harris Cincinnati Electronics Corporation, S.D.N.Y. 23-cv-01860 (Feb. 9, 2024).

Cal/OSHA Approves Stricter Standards for Occupational Exposure to Lead

On February 15, 2024, the California Occupational Safety & Health Standards Board approved revisions to regulations for occupational exposure to lead. (Employers in the construction industry are governed by 8 C.C.R. section 1532.1, and employers in general industry are governed by 8 C.C.R. section 5198.) The revisions are now with the Office of Administrative Law and are expected to go into effect on January 1, 2025.

Confronting Regulatory Fluidity in the Post-Maui and Post-Sackett World of Water Regulation

The year 2023 will go down as a landmark year for water regulation—not because certainty was achieved with the ever-elusive, indefinable “waters of the U.S.” (WOTUS), but rather because of the regulatory whiplash that occurred within that 12-month period. In its wake, 2024 promises to be a year of dealing with the fallout—continued legal challenges, uncertain and inconsistent application of regulations, testing the limits of Supreme Court decisions—which have created a “regulatory fluidity” in whether and to what degree waters may be treated as jurisdictional under the Clean Water Act (CWA) and what regulations may apply.

China Passes Significant Amendments to Company Law

On December 29, 2023, the Standing Committee of the National People’s Congress of the People’s Republic of China (PRC) passed the final version of the long-awaited new Company Law (2024 Company Law) after deliberating on four versions of draft amendments. The new law will come into effect on July 1, 2024. The 2024 Company Law deletes 16 provisions in the latest version of the Company Law, which was amended in 2018, and makes substantial amendments to over 110 provisions. This is the sixth round of amendments and includes the most amendments to the Company Law since its initial introduction in 1993.

Federal Circuit Reverses COFC Protest Decision on Standing

In REV, LLC v. United States, a veteran-owned small business appealed a Court of Federal Claims (COFC) decision that the protester lacked standing to challenge the evaluation of multiple awardees, after being excluded from the competition after Phase 1 of a two-phase qualifying process under the Department of Veteran Affairs (VA) Twenty-One Total Technology-Next Generation (T4NG) multi-award Indefinite Delivery, Indefinite Quantity (IDIQ) on-ramp procurement. On January 29, 2024, the Federal Circuit reversed the COFC decision.

Congress and the FCC Seek to Protect Americans from Robocalls and Robotexts Using AI-Generated Content

The federal government in recent weeks has taken steps to protect Americans from robocalls and robotexts that use artificial intelligence (AI)-generated content. Bad actors are increasingly using AI to fool consumers into thinking that the caller or texter is a real person, and certain AI technologies have become sophisticated enough to hold a conversation with the caller. To this end, the Federal Communications Commission (FCC) issued a Notice of Inquiry in an effort to better understand how AI technologies are currently being used in robocalling and robotexting and how they might be used in the future. In the most recent high-profile example of using AI-generated content in a robocall, New Hampshire residents received a call purportedly from President Joe Biden telling them to stay home and not vote in the state’s primary election. The call was not authorized by President Biden or his campaign, nor did it include a legitimate message from the president but instead was a so-called deepfake using the president’s voice. The FCC acted swiftly in the wake of the New Hampshire incident by issuing a cease-and desist letter to the company that it suspected of originating the illegal calls and by adopting a Declaratory Ruling to clarify the applicability of certain of its rules to robocalls and robotexts that use AI-generated content. U.S. Rep. Frank Pallone, Jr. (D-NJ), ranking member of the U.S. House Committee on Energy and Commerce, which has jurisdiction over the FCC and telecommunications issues, introduced legislation that seeks to require a disclosure for any robocall that uses AI to emulate a human.

DoD Publishes Final Rule Implementing Executive Order 14005

On February 15, 2024, the Department of Defense (DoD) issued a final rule that amends the Defense Federal Acquisition Regulation Supplement (DFARS) and imposes higher U.S. and qualifying country content requirements for certain DoD procurements. As we discussed at the time of the proposed rule, this represents the U.S. government’s overall push to ensure that products and services it acquires are manufactured domestically. The final rule implements President Biden’s January 28, 2021 Executive Order, “Ensuring the Future Is Made in All of America by All of America’s Workers,” and follows a similar rule amending the applicable Federal Acquisition Regulation (FAR) clauses published on March 7, 2022. The DoD’s final rule is effective as of February 15, 2024—the date of its publication.

Unplugging the Green Light on California’s New Climate Disclosure Laws

On January 30, 2024, a coalition of business organizations—including the U.S. Chamber of Commerce, American Farm Bureau Federation, Los Angeles County Business Federation, Central Valley Business Federation and the Western Growers Association—sued the State of California to prevent the California Air Resources Board (CARB) from enforcing California’s recently enacted climate disclosure laws—Senate Bills 253 and 261. The lawsuit, filed in the Central District of California, mounts the first legal challenge to these new, controversial laws and argues, among other things, that the laws’ requirements unconstitutionally compel speech by business entities in violation of the First Amendment and are otherwise precluded by federal law.

Proposed FAR Clause Prohibits the Use of Compensation History in Hiring and Requires That Federal Contractors and Subcontractors Post Salary Ranges in Job Postings

On January 30, 2024, the Department of Defense (DoD), General Services Administration (GSA), National Aeronautics and Space Administration (NASA) and Office of Federal Procurement Policy proposed a new rule to implement a new government-wide policy regarding the hiring of employees by federal contractors and subcontractors. The proposed rule seeks to implement President Biden’s Executive Order 14069. The new policy will apply to recruitment and hiring for any position to perform work “on or in connection” with any federal prime contract or subcontract.

FTC Announces HSR Threshold and Filing Fee Increases for 2024 Transactions

As a result of the increase in the U.S. Gross National Product (GNP) for 2023, the Federal Trade Commission (FTC) has announced an increase in the jurisdictional filing thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). The minimum size of transaction threshold will increase by more than $8 million, a 7.3% increase, to $119.5 million. The thresholds determine whether parties involved in proposed mergers, consolidations, or other acquisitions of voting securities, assets, or unincorporated interests must notify the FTC and the Antitrust Division of the Department of Justice (DOJ) of a proposed transaction and comply with a mandatory waiting period before the transaction may be consummated. The revised thresholds will take effect 30 days after they are published in the Federal Register, with the effective date expected to be in early March 2024. Until then, the current $111.4 million threshold is still in effect.

AI and the “G” in ESG

We recently waved goodbye to 2023, and we remember many things from last year (besides Taylor Swift), including two important letters—A.I. These two letters arguably received more attention than any others, ranging from companies developing and implementing breakthrough AI technology, to government regulators expressing caution and high school students becoming best friends with ChatGPT. As AI expands into virtually every industry—whether cutting edge technology and financial companies or “old school” industries, such as construction and transportation—another letter merits our attention: the letter G.

FAA Issues Licensing Guidance for Launch and Reentry of Space Nuclear Systems

On October 20, 2023, the U.S. Federal Aviation Administration (FAA) issued advisory circular (AC), AC 450.45-1: “Launch and Reentry of Space Nuclear Systems.” AC 450.45-1 provides guidance on the licensing process for the launch into space and reentry of nuclear technologies and radionuclides (referred to in the guidance and this alert as “space nuclear systems” or SNS). The AC addresses the safety review requirements and payload determinations of the FAA regulations and offers guidance and regulatory compliance methods to those seeking to launch or reenter SNS.

U.S.-Based Statutory Foundations: the Best of a Trust and a Non-Trust?

Under the U.S. system, based on the common law, a trust is a useful and common planning tool for estate, and sometimes income, tax planning. But a trust structure can be problematic in certain civil law jurisdictions, such as those in many European countries. A Liechtenstein Stiftung is a planning option used by many in civil law jurisdictions to create a trust-like structure (and is typically taxed as a trust in the U.S.) for planning purposes.

Not So Fast: An Option to Purchase Real Estate May Not Always Be Rejected by the Debtor in Bankruptcy

Speaking at an annual national bankruptcy conference decades ago, a prominent bankruptcy judge stated that “if you think about whether a contract is executory or not for more than a few minutes, then you have spent too much time thinking about it.” By this, the judge seemed to imply that (subject to the express exceptions contained in the Bankruptcy Code) a debtor should be relieved from financially burdensome obligations (or be able to take advantage of a better opportunity) through the mechanism of contract rejection, thus (1) avoiding specific performance under applicable non-bankruptcy law, and (2) leaving the counterparty with only a prepetition general unsecured creditor for its breach-of-contract damages. The bankruptcy court’s recent decision in In re Le Yang, Case No. 23-00075 (Bankr. S. D. IN October 23, 2023) may call into question such approaches, policy and results, and reinforce the minority of decisions that do not allow the rejection of real estate purchase options.

Employers Face Greater Misclassification Risk Under Resurrected Federal Independent Contractor Rule, Opening Door to Substantial Liability

The Fair Labor Standards Act (FLSA) requires employers to provide minimum wage and overtime pay to qualified employees—but not to independent contractors. Many employees, especially full-time employees, are also entitled to various statutory benefits, such as state law paid sick leave entitlements, workers’ compensation benefits, unemployment benefits, and to benefits under an employer’s ERISA-governed benefit plans, such as group health insurance policies and 401(k) plans. Failure to properly classify workers as employees can therefore result in substantial damages and penalties, even if the misclassification is unintentional, as described in more detail below. Correctly classifying workers is therefore of significant importance.

Department of Defense Delivers Highly Anticipated CMMC Proposed Rule

On December 26, 2023, the Department of Defense (DoD) issued the long-awaited Cybersecurity Maturity Model Certification (CMMC) proposed rule and related guidance. As we have previously reported, CMMC is a program developed by the DoD to protect the Defense Industrial Base from cyber threats. Under this program, nearly all DoD contractors and subcontractors would be required to achieve certain levels of cybersecurity maturity. The DoD first announced the CMMC program in 2019, then issued an initial version of the program (CMMC 1.0) in November 2020. In November 2021, the DoD announced that it would be overhauling the CMMC Program and replacing it with CMMC 2.0. The purpose of CMMC 2.0 was to restructure the CMMC Program and to reduce the cost and administrative burden of achieving cybersecurity compliance. The newly released proposed rule implements many aspects of CMMC 2.0 and introduces additional requirements. Below is a summary of some of the key aspects of the new rule. If implemented, the proposed rule would represent the DoD’s first implementation of the much-debated CMMC Program. Comments on the proposed rule are due on February 26, 2024.