Bankruptcy and Restructuring Considerations for Distressed De-SPACed Companies

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.

DHS Implements New Security and Privacy Measures for Controlled Unclassified Information

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.

Upcoming EU Rules on Digital Operational Resilience

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.

Contracting Models for Global Capability Centers in India

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.

U.S. Education Department Proposes New Accountability and Transparency Rules for Postsecondary Institutions

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).

Understanding the EPA’s Final Renewable Fuel Standard Set Rule for 2023, 2024 and 2025

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.

Proposed Regulations for Transfer of Energy Credits under IRA

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.

EPA Clarifies Requirements for Management of End-of-Life Lithium-Ion Batteries under RCRA

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.

Data Privacy: What Nonprofits Need to Know in the United States, EU and UK, and China

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.

Coinbase Contests the SEC’s Regulatory Authority over Crypto Exchanges, Staking

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.

Contiguous Condominiums Are Not “SARE”

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.

SCOTUS Upholds Civil RICO Lawsuit for a Foreign Defendant’s Acts in the United States to Evade Enforcement of a Foreign Arbitral Award

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.

New York Legislature Passes LLC Transparency Act

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.

New York Legislature Votes to Ban Non-Competes, Will Become Law if Governor Signs

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.

Proposed Rule Increases Buy American Act Content Thresholds for DoD Contracts

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.

Treasury Department Announces Additional Guidance and Timetable to Allocate $4 Billion in Qualifying Advanced Energy Project Credits

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.

Bank-Fintech Partnerships and Fair Lending: Top Areas at Risk for Government Scrutiny

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.

DoD Announces Overhaul of FMS Process to Overcome Inefficiencies

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.

Will Generative AI Create a Break in the Impenetrable Wall That Is Section 230?

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.

U.S. Court of Appeals for the DC Circuit Allows Claims Based on Association CEO’s Comments About Employee Departure

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.

California Rolls Out Offshore Wind Permitting Roadmap

On Friday, June 2, the California Energy Commission (CEC) hosted a workshop on permitting offshore wind energy facilities off the coast of California. The workshop came days after the CEC adopted a report entitled “Assembly Bill 525 Offshore Wind Energy Permitting Roadmap,” created in response to Assembly Bill 525, which established a goal for California to deploy up to 5,000 megawatts of offshore wind by 2030 and 25,000 megawatts by 2045. California aims to power 25 million homes with offshore wind by 2050. The report is the latest effort to bolster the development of California’s Offshore Wind Strategic Plan, which will be submitted to the legislature in 2023.

Overview of the Impact of the 88th Legislative Session on the Oil, Gas and Renewables Industries in Texas

While Texas is the top crude-oil and natural-gas producing state in the United States, it also leads the nation in wind power generation and is second only to California on utility-scale solar (source: U.S. EIA). During the 88th Legislature’s regular session (which ended on May 29, 2023), the Texas Legislature considered numerous bills whose stated purpose was to make the Texas electric grid more reliable—stemming from continuous calls for industry reform following disastrous Winter Storm Uri, which saw over two-thirds of Texans lose power and over 200 deaths. During Winter Storm Uri, many types of power generation failed, including both natural gas- and renewables-powered generation. However, various state officials—including Governor Greg Abbott and Lt. Gov. Dan Patrick—focused their criticism in the aftermath of the storm on renewables generation. The large proportion of non-dispatchable generation (such as wind and solar powered electricity) is perceived by certain officials and observers as a threat to the overall reliability of the Texas grid, with some arguing that increased dispatchable generation (typically gas-fired electricity) is urgently required (source: Lt. Gov. Dan Patrick: Statement on the Passage of the Texas Senate’s Power Grid Reform Package).

The Corporate Transparency Act: Beneficial Ownership Information Reporting Checklist

Enacted as part of the Anti-Money Laundering Act of 2020 in the National Defense Authorization Act for Fiscal Year 2021, the Corporate Transparency Act (CTA) requires certain entities—basically smaller and otherwise unregulated companies—to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). This report identifies the entities’ beneficial owners, the persons who ultimately own or control the company, and provides similar identifying information about those individuals who formed the entity. The Act further authorizes FinCEN to disclose this information to certain government authorities and to financial institutions for select purposes.

White House Announces Plan to Boost AI Research and Deployment

One of the most advanced technologies of our time is the rise of generative artificial intelligence (AI), a field that currently operates with minimal regulation. U.S. government officials, however, are stepping up their interest in generative AI technology, including assessing the opportunities while cautioning about potential risks. Government agencies are also beginning to seek public comment on these issues, where we expect to see increased activity in the coming months.

For Protest Timeliness Purposes, Forwarding an Agency Email Outside of Business Hours Constitutes Actual Notice

The Government Accountability Office (GAO) is well-known for its strict rules for the timely submission of protests. Under these rules, a protest based on other than alleged improprieties in a solicitation must be filed no later than 10 calendar days after the protester knew, or should have known, of the basis for protest. The GAO has held that a protester is on constructive notice of information received via email during normal business hours, but is not on constructive notice when an email is received outside of normal business hours. However, where a protester has actual notice of information that is received outside of normal business hours, the timeliness period for filing a protest begins on the day the information was actually received. The GAO has previously held that opening an email constitutes actual notice, even if the opened email was not read. The GAO’s recent decision in Infotrend Inc. has identified an additional action that can constitute actual notice.

AI Users Beware: Federal, State and Local Legislators and Regulators to Crack Down on AI-Related Employment Discrimination

According to a 2022 survey from the Society for Human Resource Management, approximately one in four organizations use automation and/or AI to support employment-related activities, such as recruitment and hiring. AI tools used in employment decision-making include chatbots that guide applicants through the application process, algorithms that screen resumes and predict job performance, and even facial recognition tools used in interviews to evaluate a candidate’s attention span. For employers, these tools may offer an efficient and effective way to recruit promising talent, but federal, state and local governments are increasingly focused on the potential for discrimination.

EPA Proposes Aggressive Carbon Pollution Standards to Reduce Greenhouse Gas Emissions

On May 23, 2023, the Environmental Protection Agency (EPA) published greenhouse gas (GHG) emissions standards for fossil-fuel-fired power plants, both new and existing, in The Federal Register. Interested parties have 60 days to provide comments on the proposed rule language, which will be due on or before July 24, 2023.

A Hat Tip to the Manufacturing, R&D and Electric Power Industries: California Bill Would Provide Income Tax Credits for Sales and Use and District Taxes Paid on Certain “Qualified Tangible Personal Property”

On May 22, 2023, the California Assembly unanimously passed a bill that, if enacted, would provide a significant benefit to California businesses that make capital investments in manufacturing, research and development (R&D), and electric power machinery and equipment in California. The bill, Assembly Bill 52 (AB 52), would provide income tax credits in an amount equal to the sales and use and district taxes paid on qualified tangible personal property primarily used in manufacturing, R&D, and electric power generation or production, or storage and distribution. The credit would complement the existing partial sales and use tax exemption under California Revenue and Taxation Code (RTC) section 6377.1, effectively giving taxpayers with sufficient California income tax liability a full sales and use tax exemption on such qualified tangible personal property.

Congress Contemplates Creating a New Federal AI Regulatory Agency

In a hearing of the Senate Judiciary Subcommittee on Privacy, Technology and the Law on May 16, multiple U.S. senators—including Senators Richard Durbin (D-IL), Lindsey Graham (R-SC), Peter Welch (D-VT) and Cory Booker (D-NJ)—supported the idea of a federal artificial intelligence (AI) agency to regulate the transformative technology.

Mentor Protégé Joint Venture Experience: GAO Confirms Agency Must Consider Experience of Each Member

Earlier this year, GAO sustained the bid protest of AttainX, Inc., B-421216 et al. (Jan 23, 2023), where the protestor argued that the agency’s evaluation was inconsistent with Small Business Administration (SBA) regulations requiring agencies to consider the experience of the individual members of the JV if the JV itself does not demonstrate experience. The awardee was MiamiTSPi, LLC, an 8(a) small business joint venture, composed of an 8(a) small business as the managing member and protégé, and another small business as the minority member and the mentor. The awardee JV sought reconsideration of the GAO’s decision. In MiamiTSPi, LLC-Reconsideration, B-421216.3 (May 11, 2023), GAO recently denied the request and provided further clarification on its interpretation of the SBA regulations regarding proposal evaluation for mentor-protégé JVs.

Outlook on AI and Civil Rights Law and Policy

The Administration’s October 2022 launch of the AI Bill of Rights: A Vision for Protecting Our Civil Rights was the first step toward cementing equity and civil rights with respect to artificial intelligence (AI) as core values upon which the Administration has built a series of guidance documents and executive actions.

Supreme Court Overturns Fraud Convictions Further Limiting Prosecutorial Power in Political Corruption Cases

On May 11, 2023, the Supreme Court overturned two federal wire fraud convictions involving alleged corruption surrounding New York’s “Buffalo Billion” initiative. Louis Ciminelli (Ciminelli) and Joseph Percoco (Percoco) were both defendants in an underlying criminal fraud case prosecuted in the Southern District of New York.

Where Employment and Trade Compliance Intersect—Protecting Your Company in a World of Dueling Enforcement Risks for Export Controls and Anti-Discrimination

On April 18, 2023, the U.S. Department of Justice (DOJ) announced a settlement agreement with GM to resolve allegations that the company violated the Immigration and Nationality Act (INA). The DOJ found that the company’s employment eligibility verification process violated U.S. law in part due to overbroad attempts to comply with export control laws. Specifically, the DOJ found that:

During onboarding, GM required non-U.S. citizens who were lawful U.S. permanent residents, and who therefore are “U.S. persons” for export control purposes, to provide an unexpired foreign passport as a condition of employment, imposing a discriminatory barrier in the hiring process; and GM improperly combined its I-9 process to verify permission to work in the United States with its export compliance assessment, which required non-U.S. citizens to provide specific documents that were not strictly necessary to prove their permission to work.

IRS, Department of Treasury Release Guidance on Domestic Content Rules for Energy Projects

On Friday (May 12, 2023), the Department of Treasury and the Internal Revenue Service (IRS) released Guidance for taxpayers seeking to take advantage of domestic content bonus credits associated with energy projects under the Inflation Reduction Act (IRA). Specifically, the Guidance sets out the requirements for using domestic steel, iron and manufactured products in order for a project to be eligible for the domestic content bonus credit amount. Projects that meet the domestic content requirement will be eligible to receive a 10 percent bonus under the production tax credit and up to a 10 percent bonus under the investment tax credit, provided that other requirements are also met.

Supreme Court of Virginia Strikes Down County Zoning Overhaul Adopted via Electronic Meetings During COVID-19 Pandemic

The Supreme Court of Virginia voided Fairfax County’s modernized zoning ordinance, known as zMOD. The Supreme Court decision, Berry v. Board of Supervisors of Fairfax County, 884 S.E.2d 515 (Va. 2023), made the zMOD ordinance void ab initio.

China Amends the Counter-Espionage Law

On April 26, 2023, the Standing Committee of the National People’s Congress of the People’s Republic of China (PRC) passed an amended Counter-Espionage Law. These changes constitute the first amendments to the Counter-Espionage Law since its introduction in November 2014. The amended law will come into effect on July 1, 2023.

Florida Legislature Reins in Florida Telephone Solicitation Act

Like the Telephone Consumer Protection Act (TCPA), navigating the Florida Telephone Solicitation Act (FTSA) can be a minefield for businesses engaging in telemarketing and text marketing to Florida residents and those that conduct business in the state. The FTSA, commonly dubbed the mini-TCPA, prohibits using certain automated dialers to call (or text) consumers without their consent and enables consumers to recover $500 per call. The FTSA also provides for up to $1,500 in treble damages for willful or knowing violations, plus reasonable attorney’s fees and costs. In July of 2021, the Florida legislature enacted language that broadened the language in the statute, distinguishing it from its federal counterpart, which resulted in a floodgate of litigation. As a result, FTSA violations have the potential to be financially devastating, especially for businesses underinsured against exposure.

Florida’s Response to ESG Investing

As many financial institutions and investment managers move towards integrating environmental, social and governance (ESG) factors into their decision making, Governor DeSantis signed a new law that prohibits reliance on ESG when it comes to Florida’s funds.

EPA Continues the Beat with an Advanced Notice of Proposed Rulemaking for Additional CERCLA Hazardous Substance Designations for PFAS

On April 13, 2023, the Environmental Protection Agency (EPA) issued an Advanced Notice of Proposed Rulemaking (ANPRM) requesting input on seven potential future hazardous substance designations of per- and polyfluoroalkyl substances (PFAS) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). (See Addressing PFAS in the Environment, 88 Fed. Reg. 22399, Apr. 13, 2023.) The seven PFAS identified are:

• Perfluorobutanesulfonic acid (PFBS), CASRN 375–73–5;

• Perfluorohexanesulfonic acid (PFHxS), CASRN 355–46–4;

• Perfluorononanoic acid (PFNA), CASRN 375–95–1;

• Hexafluoropropylene oxide dimer acid (HFPO–DA), CASRN 13252–13–6 (sometimes called GenX);

• Perfluorobutanoic acid (PFBA), CASRN 375–22–4;

• Perfluorohexanoic acid (PFHxA), CASRN 307–24–4; and

• Perfluorodecanoic acid (PFDA), CASRN 335–76–2.

Joint Statement by Federal Agencies Marks Heightened Enforcement Attention on Potential Bias in AI Systems

On April 25, 2023, the Consumer Financial Protection Bureau (CFPB), Department of Justice (DOJ) Civil Rights Division, the Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) issued a joint statement affirming that they will be working collaboratively to enforce existing laws and regulations as applied to potential discrimination and bias in artificial intelligence (AI) systems. Companies that use AI and other automated systems should prepare for greater scrutiny from these agencies.

Congressional Action on AI Takes Major Step Forward

Congressional leaders are intensifying efforts to legislate and regulate artificial intelligence (AI) technology. On April 13, Senate Majority Leader Chuck Schumer (D-NY) publicly announced a framework on artificial intelligence (AI) regulation. The announcement came in response to the Chinese Communist Party’s release of their own AI regulatory framework. Schumer revealed his framework as part of the United States’ duty to “lead and shape the rules governing such a transformative technology” rather than allow China to “write the rules of the road.”

U.S. Patent Trial and Appeal Board (PTAB) Considers Sweeping Reform to Address Discretionary Denials and Petitions Filed by Certain For-Profit Entities

On April 21, 2023, the U.S. Patent and Trademarks Office (USPTO) published an advance notice of proposed rulemaking seeking comments on the proposed changes addressing the U.S. Patent Trial and Appeal Board’s (PTAB) authority under 35 U.S.C. §§ 314(a) and 325(d) to exercise its discretion in denying petitions for inter partes review (IPR) and post-grant review (PGR). The USPTO is specifically seeking public input on a number of changes under consideration for future rule changes. Those who regularly make use of the IPR and post-grant proceedings before the PTAB will want to carefully review the changes under consideration and provide comments by June 20, 2023, if they want to affect the USPTO’s final rule changes.

No Cutting the (Priority) Line!: Incidental Beneficiaries to Assumed Contracts and Leases Cannot Assert Cure Claims Against Debtors

The Second Circuit held that a creditor seeking to assert a cure claim must have a contractual right to payment under the assumed contract or lease, and accordingly, a creditor with only a tangential or incidental interest in a contract or lease cannot assert a cure claim. (See In re George Washington Bridge Bus Station Development Venture LLC, No. 21-2050-bk, 2023 WL 2847175, 2d Cir. Apr. 10, 2023.) To allow otherwise would subvert Congress’s intent in creating a priority scheme for bankruptcy cases and contradict the language of section 365 of the U.S. Bankruptcy Code, because parties with no legal rights would get paid before creditors with legal rights to payment. The Second Circuit left unanswered whether intended beneficiaries can assert cure claims, but hinted that intended beneficiaries should be entitled to the protections afforded to counterparties to assumed contracts because they have a right to performance.

FCC Adopts International Section 214 Authorization Order and Notice of Proposed Rulemaking to Address National Security Concerns Posed by Foreign Ownership

The Federal Communications Commission (FCC), on April 25, 2023, released an Order and Notice of Proposed Rulemaking (NPRM) relating to international Section 214 authorizations, in response to recent concerns regarding national security, law enforcement and foreign ownership of telecommunications services. International Section 214 authorizations are issued to telecommunications providers that seek to offer international services originating or terminating in the United States.

Los Angeles Initiative Seeks to Impose $450,000 Cap on Annual Compensation of Executives in Health Care Facilities

An initiative submitted by the Service Employees International Union United Healthcare Workers West (SEIU-UHW) seeks to limit the annual compensation of health care executives in the city of Los Angeles to $450,000 per year. Entitled the “Limit Excessive Healthcare Executive Compensation Ordinance,” the initiative argues that health care executives should not receive higher compensation than the U.S. President, whose compensation is set by federal statute in 3 U.S.C. § 102 (Compensation of the President). Employing a similar legislative strategy, the initiative proposes a cap on the compensation of health care administrative professionals with executive, managerial or administrative duties, i.e., CEOs, CFOs, executive vice presidents and similar administrators, at privately owned health care facilities located in the city of Los Angeles. Covered health care facilities would include licensed general acute care hospitals, acute psychiatric hospitals, skilled nursing facilities and even residential care facilities for the elderly. Notably, medical professionals that provide medical services, research, patient care or other non-administrative services are excluded from the compensation cap.

Follow the Money: AI Winners in President Biden’s FY 2024 Budget Request

The artificial intelligence (AI) revolution is rapidly transforming industries and reshaping our world as we know it. With advances in machine learning, natural language processing and computer vision, AI has moved beyond the realm of science fiction and become a driving force of innovation and productivity. This disruptive technology is creating new opportunities, challenges and implications for society at large. The Biden Administration is taking notice—here is a look at new AI programs and funding proposed in President Biden’s fiscal year 2024 budget proposal released on March 9, 2023.

“If You Don’t Make It There, You Can’t Make It Anywhere:” New York’s Zero Manufacturing Rate Requires New York Property

A New York State Division of Tax Appeals (DTA) administrative law judge (ALJ) determined that Raytheon Company and affiliates (Raytheon) did not qualify for New York’s zero percent tax rate for manufacturers or the reduced tax rate for qualified emerging technology companies (QETCs). Raytheon’s primary contention in the litigation is that the zero percent manufacturing rate unconstitutionally discriminates against manufacturing activity outside New York. Specifically, Raytheon argued that the law as applied to its facts violated the U.S. Constitution, but the ALJ determined that Raytheon’s argument constituted a facial challenge to the statute that falls outside the DTA’s jurisdiction. Because the New York legislature included a poison pill in the session law that enacted the zero percent rate, the constitutional challenge could eliminate the zero percent manufacturing rate for all taxpayers.

Human Rights Due Diligence—ESG Impact on M&A Transactions

Over the past several years, environmental, social and governance (ESG) considerations have gained global importance in the context of mergers and acquisitions (M&A). Corporations, customers, regulators and investors are increasingly demanding the integration of ESG factors into the decision-making processes of businesses with regards to M&A in an effort to enhance business opportunities, protect reputations and mitigate risks. In today’s globalized economy, many companies rely on a complex web of supply chains that span multiple countries. Beginning with the exposure of China’s crimes against Uyghurs and other Muslim ethnic groups in Xinjiang and compounded by Russia’s recent invasion of Ukraine, there has been a renewed push for global brands to take their ESG efforts more seriously. As a result, companies and potential buyers are more sensitive to the risk of doing business in countries like China where labor costs are much lower than in other developed countries but where there is simultaneously a lack of respect for human rights and humane labor conditions.

Concerns Over PFAS Contribute to New Federal Legislation Expanding FDA’s Authority Over Cosmetics

On December 29, 2022, President Biden signed the Modernization of Cosmetics Regulation Act of 2022 (MoCRA) into law. (See Consolidated Appropriations Act, 2023, Pub. L. No: 117-328, § 3501-06.) MoCRA substantially expands the authority of the Food and Drug Administration (FDA) to promulgate new regulations over cosmetics and initiate enforcement against manufacturers and distributors of cosmetic products that present health risks. Most MoCRA provisions, including those dealing with facility registration and product listing, take effect on December 29, 2023, and existing facilities will have to register and comply with its product listing requirements as of this date.

Maine and Massachusetts Consider PFAS Legislation

Maine Regulators Propose Rules Providing Guidance on Newly Enacted Ban on PFAS-Containing Products
The Maine Department of Environmental Protection has proposed a new rule intended to establish, in greater detail, the procedures necessary for compliance with Public Law c. 477, entitled “An Act To Stop Perfluoroalkyl and Polyfluoroalkyl Substances Pollution.” As discussed in a previous post, this law, which went into effect January 1, 2023, imposes reporting requirements for consumer products with intentionally added per- and polyfluoroalkyl substances (PFAS) and phases out products containing PFAS beginning with carpets, rugs and fabric treatments. The proposed regulation largely echoes the language of the statute itself but does provide new definitions material to the statute’s “currently unavailable use” exemption and elaborates on the required content of the statutorily prescribed notices regarding PFAS-containing products.