Environmental justice (EJ) has been a central focus of the Biden Administration, which has encouraged a “whole-of-government” approach. Notably, this encouragement to address EJ issues, while backed by multiple executive orders (EOs), has lacked any federal law upon which agencies can enforce responsive action. Agencies, such as the Environmental Protection Agency (EPA) and Department of Justice (DOJ), have nevertheless sought creative avenues to enforce EJ problems. As EJ appears to be a continued focus of the Biden Administration, those that operate in the environmental space should be aware of recent developments and their impact on business operations and considerations.

The SMART Grant Program
The Bipartisan Infrastructure Law (BIL) established the Strengthening Mobility and Revolutionizing Transportation (SMART) Grants Program, a competitive funding program for demonstration projects that improve transportation efficiency and safety.

From August 27 to August 30, U.S. Secretary of Commerce Gina Raimondo visited China, marking the first trip to China by a U.S. commerce chief in five years. The trip, which came amid growing tensions between China and the United States, sought to open dialogue on crucial matters, including export controls, investment restrictions and national security. One reported success from Raimondo’s trip was the creation of a commercial working group which will meet twice a year at the vice minister level. While Raimondo stressed that this group will not “solve everything overnight,” it has been hailed as a welcome step towards transparency between either country.

In RS AIR, LLC v. NetJets Aviation, Inc. (In re RS AIR, LLC), 2023 Bankr. LEXIS 1453, 2023 WL 3774652 (9th Cir. BAP June 2, 2023), the Ninth Circuit Bankruptcy Appellate Panel (BAP) concluded that a discharge injunction is not violated by an alter ego claim against a non-debtor that alleges that the debtor and non-debtor defendant are one and the same. The BAP reasoned that a discharge only protects a debtor from personal liability, not any other person or entity (such as a co-obligor or guarantor) that is liable with a debtor, and affirmed an order denying the debtor’s motion for contempt for violations of the discharge injunction.

The federal government’s new fiscal year begins on October 1, 2023. Given the current political climate, Congress may not agree on a new budget by the September 30 deadline. This creates a significant risk that the government will soon shut down for days or even weeks. If this happens, all executive branch operations will cease except for those deemed “essential,” a result which will significantly impact government contractors.

On August 25, 2023, the Internal Revenue Service (IRS) published proposed regulations [REG-122793-19] in the Federal Register, clarifying requirements under the Infrastructure Investment and Jobs Act (IIJA). The IIJA was enacted almost two years ago in November 2021, and established digital asset transaction reporting requirements addressing who is specifically responsible for furnishing information to the IRS and cryptocurrency customers for digital asset transactions. The act included definitions for digital assets and “digital asset brokers,” the latter of which was concerningly broad in scope. Clarifying follow-up regulations have been arguably slow in coming.

On August 30, 2023, the Internal Revenue Service (IRS) published proposed regulations [REG-100908-23] in the Federal Register providing further guidance on compliance with the prevailing wage and apprenticeship requirements under the Inflation Reduction Act of 2022 (IRA), which taxpayers must comply with in order to receive the increased credit amounts (i.e., base credit amount multiplied by five) for new and continuing energy credit provisions. The proposed regulations expand upon prior guidance, IRS Notice 2022-61, which was issued on November 30, 2022, in order to start the 60-day clock on the start-of-construction exception from compliance with the prevailing wage and apprenticeship requirements. For Pillsbury’s analysis on IRS Notice 2022-61, use this link.

On August 30, 2023, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking (NPRM), proposing to update and revise regulations under section 13(a)(1) of the federal Fair Labor Standards Act (FLSA), which governs minimum salary thresholds for employees to be exempt from the FLSA’s minimum and overtime wage requirements.

On June 14, 2023, the Department of the Treasury and the Internal Revenue Service (IRS) released guidance on Internal Revenue Code (IRC) Section 6418, added as part of the Inflation Reduction Act of 2022 (P.L. 117-169)(IRA), granting taxpayers a new way to monetize certain tax credits. The guidance included proposed regulations relating to the transferability of tax credits under IRC Section 6418 (Transferability Guidance), temporary regulations regarding information and registration requirements (Pre-Filing Registration Guidance) and a series of frequently asked questions. (For a more general summary of this guidance, refer to our prior alert.) Notably, despite the hopes of tax practitioners and industry groups to the contrary, the new proposed regulations apply the passive activity rules of IRC Section 469 to transferees of tax credits under IRC Section 6418, which impacts the ability of individuals (and estates, trusts and certain corporations) to benefit from the credits. Additionally, the proposed regulations provide that transferees will bear the risk of certain events that result in a recapture of previously claimed tax credits.

On August 22, 2023, the Federal Circuit reversed and remanded an Armed Services Board of Contract Appeals (ASBCA or Board) decision on appeal by ECC International Constructors, LLC (ECCI). The Federal Circuit held that the requirement to state a sum certain amount in a Contract Disputes Act (CDA) claim is mandatory but not jurisdictional.

On July 19, 2023, the U.S. District Court for the Eastern District of Tennessee issued an injunction that prevents the Small Business Administration (SBA) from utilizing a “rebuttable presumption” of social disadvantage for specific minority groups when evaluating applicants’ eligibility for its 8(a) program. The opinion in Ultima Servs. Corp. v. U.S. Department of Agriculture declared the SBA’s rebuttable presumption unconstitutional under the Fifth Amendment of the U.S. Constitution. This ruling departs from the SBA’s longstanding practice of using this presumption to address discriminatory practices and promote equal opportunities.

Effective August 29, 2023, the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations (SI 2023/779) (FSMA 2023) explicitly brings digital assets within the regulatory perimeter, creates a new designated activities regime (DAR), introduces regulations for stablecoins used as a means of payment (Payment Stablecoins), and creates a framework to establish financial market infrastructure sandboxes.

Background
A nondebtor release releases the claims of a nondebtor party against another nondebtor party related to a debtor, potentially for both pre-petition and post-petition conduct. A nondebtor exculpation is a limited release of claims against nondebtor parties who participated in a bankruptcy case, e.g., trustees and creditor committee members, and typically concerns post-petition conduct. A nondebtor release or exculpation is “nonconsensual” if imposed on a releasing party without its explicit or, in some cases, implicit consent.

The Federal Communications Commission (FCC or Commission) has issued a Notice of Proposed Rulemaking (NPRM) to create a labeling program for Internet of Things (IoT) devices with comments due September 25, 2023, and reply comments due October 10, 2023.

On Monday, August 14, the Department of Justice’s Civil Rights Division and the Department of Education’s Office for Civil Rights (together, the “Departments”) issued a letter (the “Letter”) to colleges and universities advising compliance with the Supreme Court’s June 29, 2023, decisions, Students for Fair Admissions v. Harvard and Students for Fair Admission v. University of North Carolina (together, SFFA). The guidance urges colleges and universities to “redoubl[e] efforts to recruit and retain talented students from underserved communities, including those with large numbers of students of color” and to adopt “a greater focus on fostering a sense of belonging.”

On August 14, the White House Office of Management and Budget (OMB) published its final guidance (Final Guidance) on the implementation of the Bipartisan Infrastructure Law (BIL), which includes domestic content requirements reflected in the Build America, Buy America Act (BABA). The pre-publication version is currently available here.

Sections 1281.97 through 1281.99 of the California Code of Civil Procedure set strict penalties for nonpayment of arbitration fees in employee and consumer arbitrations. Under those sections, the drafter of an employee or consumer arbitration agreement is in material breach of the agreement if it does not pay arbitration fees within 30 days. Following such a breach, employees and consumers may withdraw their claim from arbitration and proceed in court, and are also entitled to their attorneys’ fees and costs incurred both during the abandoned arbitration and in withdrawing from arbitration.

The Pregnant Workers Fairness Act (PWFA), which went into effect in June 2023, requires employers, absent undue hardship, to provide reasonable accommodations to a qualified employee or applicant for employment for any known limitations related to, affected by or arising out of pregnancy, childbirth or related medical conditions.

This article discusses the latest developments of legislations on Generative AI in the United States (U.S.), Europe (EU), the United Kingdom (UK) and the People’s Republic of China (China or the PRC).

The CHIPS and Science Act (CHIPS Act), enacted in August of 2022, appropriated $52 billion to grow the semiconductor market—of which $11 billion will accelerate the next generation of semiconductor design and secure the domestic supply chain through the CHIPS Research and Development Office.

On July 26, 2023, the U.S. Justice Department (DOJ), the Department of Commerce's Bureau of Industry and Security (BIS) and the Department of the Treasury's Office of Foreign Assets Control (OFAC) issued their second-ever joint compliance note. This second "Tri-Seal" note followed a March 2, 2023, note on the use of third-party intermediaries or transshipment points to evade Russian- and Belarussian-related sanctions and export controls.

Following years of unprecedented disruption resulting from the COVID-19 pandemic, the aviation industry is experiencing a doubling down of efforts to bring next-generation transportation technologies to market. The world’s sense of climate urgency is also pushing the industry to demonstrate leadership in greening the world’s transportation networks. For many, Advanced Air Mobility (AAM) represents an exciting new frontier and sustainable path forward for the aviation industry, which still has its fair share of challenges ahead.

With an estimated four billion robocalls per month, it’s not surprising that unwanted and illegal robocalls are the Federal Communications Commission’s (FCC) top consumer-protection priority, generating about 119,000 complaints in 2022 alone. Unwanted and illegal text messages—estimated at 225 billion in 2022—are increasingly prevalent and uniquely harmful to consumers by including legitimate-looking links designed to fool the recipient into providing personal and financial information. All of us experience on a daily basis the awkwardness of receiving a phone call or text message from an unknown telephone number and deciding whether to answer or reply. Unfortunately, some of these calls and texts are from bad actors and will result in fraud costing consumers billions of dollars.

On July 21, 2023, the White House announced the voluntary commitment of seven companies to high-level principles concerning safety, security and public trust with respect to their generative artificial intelligence (AI) technologies. These voluntary principles will serve as a guidepost for the industry until Congress develops and passes legislation for AI development.

Federal immigration law requires that, within three days after an employee’s first day of employment, an employer must confirm an employee’s identity and work authorization by physically examining the employee’s proof of identity and employment authorization documents. Employers must then complete Section 2, “Employer Review and Verification,” of Form I-9. Since March 2020, due to the COVID-19 pandemic, the Department of Homeland Security (DHS) and the U.S. Citizenship and Immigration Services (USCIS) had temporarily authorized employers to conduct virtual inspections of the documentation required to complete new employees’ Forms I-9. In May 2023, however, the DHS announced that the virtual inspection option would end on July 31, 2023, and in-person, physical examination requirements would resume on August 1, 2023. In addition, employers would be required to re-inspect any remotely inspected I-9 documents by August 30, 2023.

On July 26, the U.S. Securities and Exchange Commission (SEC) adopted Final Rules that require public companies (registrants) and foreign private issuers to disclose material cybersecurity incidents promptly and to make periodic disclosures of their cybersecurity risk management, strategy and governance in annual reports. As we previously noted, the Final Rules add powerful arrows in the quivers of SEC Chair Gary Gensler and the SEC’s Enforcement Division to regulate cybersecurity as part of its mission of maintaining orderly markets. With their adoption, the Final Rules further bolster the SEC’s attempts to serve as the “cyber cop” on the Wall Street beat.

On July 13, 2023, the Cyberspace Administration of China (CAC), China’s main regulator for cybersecurity and data privacy, issued its final version of the Interim Administrative Measures for Generative Artificial Intelligence Service (Generative AI Measures), which will come into effect on August 15, 2023. Compared to the draft regulations (Draft Regulations) published by the CAC in April for public comments, the Generative AI Measures have relaxed several requirements on the providers offering generative AI services and placed more emphasis on encouraging technological development and innovation.

Under the General Data Protection Regulation (GDPR), personal data can only be transferred to a “third country” outside of the European Economic Area (EEA) (e.g., the United States) if: (i) there has been an “adequacy decision” issued by the European Commission (Commission) in respect of that country; (ii) “appropriate safeguards” are in place (such as standard contractual clauses (SCCs) or binding corporate rules (BCRs)); or (iii) a derogation applies. Similar rules apply in relation to transfers of personal data from the UK or Switzerland.

In Adolph v. Uber Technologies, Inc., the California Supreme Court ruled that plaintiffs who have been compelled to arbitrate their own individual Labor Code violations under the Private Attorneys General Act of 2004 (PAGA), Lab. Code, § 2698 et seq., continue to have standing to pursue other employees’ PAGA claims as their representative.

On June 21, 2023, the Ninth Circuit decided in a class action suit, Vargas, et al., v. Facebook, Inc., that Section 230 of the Communications Decency Act (Section 230) did not immunize Facebook from claims arising from allegedly discriminatory conduct by housing advertisers using the defendant’s Ad Platform. Ad Platform provides advertising users with the ability to select from among thousands of user attributes, including protected characteristics like sex, disability and familial status (e.g., whether a person has children), to target ads to advertisers’ preferred audiences on Facebook. Facebook is not alleged either to have contributed actual content to the housing ads or to have directed, induced or required advertisers to select particular audience attributes, whether or not protected under federal housing law. Nevertheless, the Ninth Circuit denied Facebook’s motion to dismiss, holding that Section 230 immunity did not apply.

Although special purpose acquisition companies (SPACs) have been around for decades, they took off during the COVID-19 trading boom. During 2020 and 2021, more than 850 SPACs raised roughly $245 billion to fund business combinations. But, as a more pessimistic view of future prospects emerged, a number of companies were left with far less cash than originally contemplated as investors exercised their redemption rights at the closing of a business combination (a “de-SPAC”) consistent with a SPAC’s structure.

Global Capability Centers (GCCs) located in India continue to evolve from labor arbitrage and cost savings initiatives to innovation centers for digital transformation, supporting cloud, mobile, data security, data analytics, AI, automation and other emerging technologies. Companies looking to establish a GCC in India (Companies) often engage a local or international service provider with in-country expertise, experience and professional connections (Facilitators) to facilitate setting up and operating the GCC.

The new DORA seeks to strengthen the resilience of financial entities against cyber threats posed by information and communication technologies (ICT). DORA’s scope is broad, applying to “financial entities,” such as credit, payment and e-money institutions, account information and crypto-asset service providers, investment firms, central securities depositories, managers of alternative investment funds, management companies, insurance and reinsurance undertakings, and credit rating agencies. Non-EU entities should assess their activities to identify whether they undertake covered activities within the EU and are in scope of DORA.

On June 21, 2023, the Department of Homeland Security (DHS or Department) issued a final rule amending the Homeland Security Acquisition Regulation (HSAR) to add requirements for DHS contractors to protect Controlled Unclassified Information (CUI) and to report cyber incidents. The final rule follows a 2017 proposed rule and builds on existing DHS security policy by updating an existing HSAR clause and creating two new HSAR clauses. The final rule imposes significant new obligations on DHS contractors that extend beyond the obligations imposed by the Department of Defense (DOD) and other agencies. In addition, the clause requires DHS contractors to protect CUI using different security controls than those required by the DOD.

Amidst the focus on President Biden’s student loan forgiveness plan, many postsecondary institutions may have missed the Department of Education’s (ED) notice of proposed rulemaking aimed at increasing accountability for career training programs and transparency into the costs and financial outcomes of nearly all postsecondary programs. Specifically, the proposed regulations cover five topics: (i) financial value transparency and gainful employment, (ii) financial responsibility, (iii) administrative capability, (iv) certification procedures, and (v) the ability to benefit (rules for students without high school diplomas).

On July 12, 2023, the U.S. Environmental Protection Agency (EPA) published the final rule, Renewable Fuel Standard (RFS) Program: Standards for 2023-2025 and Other Changes, which sets the final volume requirements and percentage standards for the use of cellulosic biofuel, biomass-based diesel, advanced biofuel and total renewable fuel used as transportation fuel, heating oil and jet fuel. In addition, the rule finalizes a supplemental standard to compensate for 500 million gallons of renewable fuel that the EPA wrongfully waived from the 2016 volume requirement. The volume requirements also reflect the EPA’s position that it will not be granting small refinery exemptions in the foreseeable future because empirical data has consistently shown that all refineries pass through their Renewable Fuel Standard (RFS) compliance costs to customers by increasing prices for gasoline and diesel fuel. Lastly, although the proposed rule included a mechanism for the creation of credits from qualifying renewable electricity, this credit scheme was not finalized.

On June 14, 2023, the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released a Notice of Proposed Rulemaking setting forth Proposed Regulations §§ 1.6418-1 through 1.6418-5 (Proposed Regulations) governing the implementation of the new tax law allowing electing taxpayers to sell a variety of eligible clean energy tax credits to unrelated parties pursuant to section 6418 of the Internal Revenue Code (Code). It is anticipated that these new transferability provisions will enhance and simplify the ability of taxpayers to monetize clean energy tax credits, thereby providing such taxpayers with additional funding for their clean energy projects. The Proposed Regulations include a temporary but mandatory pre-filing information and registration process designed to prevent fraud, duplication and excessive or improper payments that may result from such transfers.

As the demand for lithium-ion batteries in industrial equipment, electric vehicles (EVs), household appliances and other battery-powered products continues to grow, battery recycling and reuse programs are becoming increasingly critical. Businesses ranging from industrial operations to auto dealers to reverse-logistics providers are increasingly grappling with how to properly manage, dispose of, store and recycle lithium-ion batteries and battery-containing products.

Laws are evolving worldwide as data privacy and cybersecurity issues move to the forefront of policy-making discussions. The United States continues to work within a layered regulatory system that utilizes laws at both state and federal levels, while the EU and UK are largely guided by overarching legislation that bears strong consequences if breached. In China, regulations are a bit more complex. Nonprofit organizations doing business in these regions will want to take note of the latest privacy-related developments, along with regulations that have existed for a long time, all outlined ahead.

Background – The SEC Complaint
On June 6, 2023, the Securities and Exchange Commission (SEC) charged Coinbase, Inc. and Coinbase Global, Inc. (Coinbase) with violations of the Securities Exchange Act of 1934 and the Securities Act of 1933. The SEC’s 101-page complaint, filed in the U.S. District Court for the Southern District of New York, alleges that Coinbase operates as an unregistered national securities exchange, broker, and clearing agency. The SEC further alleges that Coinbase failed to register the offer and sale of its crypto asset staking-as-a-service program under Section 5 of the Securities Act, and that the Coinbase Wallet and Coinbase Prime constitute broker services under the federal securities laws.

On June 22, 2023, in a 6-3 opinion, the U.S. Supreme Court held in Ashot Yegiazaryan v. Vitaly Ivanovich Smagin and CMB Monaco v. Vitaly Ivanovich Smagin that a civil Racketeer Influenced and Corrupt Organizations (RICO) lawsuit may be based on a defendant’s acts to prevent a plaintiff, a prevailing party in a foreign arbitration, from collecting on the award. In doing so, the Court resolved a Circuit split and rejected the proposition that a foreign plaintiff’s economic loss necessarily occurs at the plaintiff’s foreign residence. The opinion suggests an additional tool for foreign plaintiffs seeking the enforcement of overseas awards and judgments to obtain enforcement in the United States.

To be classified as a single asset real estate case, the U.S. Bankruptcy Court for the Southern District of New York recently held that properties must share a common scheme or plan to constitute a “single property or project.” See In re Nuovo Ciao-Di LLC, Case No. 23-10068 (JPM), 2023 Bankr. LEXIS 1331 (Bankr. S.D.N.Y. May 19, 2023). In reaching its decision, the Bankruptcy Court clarified the multifactor test to be used to determine whether property is single asset real estate and emphasized the high burden creditors (particularly secured creditors who obtain substantial benefits from the designation) face when trying to prove a debtor is a single asset real estate debtor.

On June 20, 2023, the New York State Assembly passed the LLC Transparency Act, a bill that would require the disclosure of the beneficial owners of a limited liability company (LLC) upon formation or qualification to do business in New York (A03484A). LLCs formed under the laws of New York prior to the effective date of the bill, and foreign LLCs qualified to do business in New York prior to the effective date of the bill would also be required to disclose their beneficial owners. The bill would also establish a searchable public database containing the names of beneficial owners of LLCs. The New York State Senate passed the companion bill (S00995B) earlier this month. If signed by Governor Hochul, the bill will take effect one year thereafter.

On June 20,2023, the New York State Assembly passed a bill banning employee non-competes (A01278) in New York. The New York State Senate had already passed the companion bill (S3100A) earlier this month. If signed by Governor Hochul, the bill will take effect 30 days thereafter.

Once again, the U.S. government continues its push to ensure that the products and services it acquires are manufactured domestically. The latest domestic content development pertains specifically to acquisitions by the Department of Defense (DoD). By way of a refresher, we previously wrote about the Federal Acquisition Regulatory Council’s issuance of a final rule on March 7, 2022, imposing significant increases to U.S. content requirements for federal procurements subject to the Buy American Act (BAA). However, the BAA requirements specifically appliable to the DoD, which existed prior to Executive Order 14005, remained at their existing levels of 55 percent, until now.

On May 31, 2023, the U.S. Department of Treasury (Treasury) and the Internal Revenue Service (IRS) issued Notice 2023-44 (May 31 Notice) providing additional details for applicants seeking Qualifying Advanced Energy Project Credits (Advanced Energy Project Credits or Credits) under section 48C of the Internal Revenue Code (Code). In 2022, the Inflation Reduction Act (IRA) amended section 48C of the Code to establish the Qualifying Advanced Energy Project Program (Program) and provided $10 billion in Credits for qualifying advanced energy projects. The Program is meant to incentivize investment in clean-energy manufacturing and recycling projects, greenhouse gas (GHG) emission reduction projects and critical materials projects.

Banking regulators have recently imposed restrictive consent orders on leading banking-as-a-service (BaaS) providers, the most significant of which alleged a series of fair lending violations. These actions should serve as a warning that all banks and fintechs must be prepared for heightened fair lending scrutiny.

After many years of frustration, on June 13, 2023, the Department of Defense (DoD) announced its decision to optimize the Foreign Military Sales (FMS) program. This announcement incorporates recommendations proposed by an internal DoD task force and follows the release of a 10-point plan to improve the FMS program by the Department of State. Together, these changes aim to alleviate some of the bureaucratic hurdles of the key stakeholders involved in the FMS program.

As people increasingly experiment with ChatGPT, Google Bard, and other generative AI systems, even using these tools in the course of their daily lives and work, the legal hot topic of the day concerns liability for the content produced by generative AI. For the last 25 years, cases addressing, arguing and deciding the application of Section 230 of the Communications Decency Act (“Section 230”) have provided clear signposts offering reliable legal guidance about responsibility for most content we see on the Internet. But when applying these precedents to generative AI products, we are in unchartered territory.

On May 23, 2023, the U.S. Court of Appeals for the District of Columbia issued a decision in the matter Wright v. Eugene & Agnes E. Meyer Foundation, et al., No. 22-7004 (May 23, 2023, D.C.Cir.), reversing a district court’s dismissal of a former employee’s breach of contract, 42 U.S.C. § 1981 (“Section 1981”), and defamation claims, in relation to an employer’s alleged violation of a severance agreement’s mutual non-disparagement clause. The Wright decision serves as a reminder that employers must carefully craft the scope of non-disparagement clauses and ensure that post-separation statements by officers and employees regarding any former employee are neutral and circumscribed. Executives and board members who try to explain away rumors or criticisms by making unfavorable comments about departed employees also expose themselves to potential personal liability for such remarks. The Court’s decision yields important lessons for how employers and associations can minimize the risk of finding themselves in similar legal jeopardy.