State-Level Permitting Primacy May Boost Carbon Capture and Storage

Texas and Louisiana are stepping up efforts to assume regulatory authority for an emerging wave of Carbon Capture and Storage (CCS) projects.

DOE Requests Comments on the Price-Anderson Act

The U.S. Department of Energy has issued a notice of inquiry requesting comments concerning the need for continuation or modification of the provisions of the Price-Anderson Act as administered by DOE. The comments will assist DOE in the preparation of a report it plans to submit to Congress by the end of this year.

DoD Requires Data Reporting for Certain Service Contracts Exceeding $3 Million

The Department of Defense (DoD) issued a final rule on July 9, 2021, requiring contractors to report annually their total labor hours and invoiced amounts for certain service contracts.

Presidential Executive Order 14008: The Climate Crisis Order

Presidential Executive Order 14008, “Tackling the Climate Crisis,” a long and unusually detailed Executive Order published in the Federal Register on February 1, 2021 (see 86 FR 7619), has generated considerable discussion and commentary.

Bipartisan Senators Introduce the Cyber Incident Notification Act of 2021

On July 21, 2021, Senator Mark Warner (D-VA), chair of the Senate Intelligence Committee, and a bipartisan group of co-sponsors including Senator Marco Rubio (R-FL) and Senator Susan Collins (R-ME), formally introduced the Cyber Incident Notification Act of 2021. In light of high-profile cybersecurity incidents such as the Colonial Pipeline attack, the Act aims to require companies and federal agencies to quickly report cybersecurity intrusions to the Federal Government.

DoL Proposes Rule to Increase Minimum Wage to $15 for Many Federal Contractors

Through a proposed rule published on July 22, 2021, the Department of Labor is implementing Executive Order 14026. The new rule and Executive Order will require federal service, construction contractors and subcontractors to increase hourly wages to $15 per hour for a broad range of employees.

Recalculating the Cost of Lunch

The California Supreme Court unanimously determines that premium pay for missed meal and rest breaks must be based on the more inclusive “regular rate.”

FDA Regulatory Approvals as the U.S. Emerges from the Immediate COVID-19 Emergency

Emergency Use Authorizations will play a role as the pandemic eases, but a transition to ordinary course approvals is underway.

The Beginning of the SPAC Enforcement Wave: SEC Makes Example of SPAC for Spacing Out on Diligence

Chair Gensler’s enforcement agenda begins to take shape as SEC brings sprawling enforcement action against wide range of SPAC participants.

DOJ Continues Targeting of Corruption through AML Laws and Alternate Statutes – Lessons for Compliance and Due Diligence

As the Biden Administration commits to crack down on corruption, recent enforcement actions show the DOJ continues a longstanding trend of relying on AML laws and other alternate statutes to prosecute corruption cases, with lessons for internal compliance and due diligence.

Colorado’s Emergent Consumer Privacy Bill Introduces Chance to Opt Out of Data Processing

On June 8, 2021, the Colorado Senate passed SB 21-190, a comprehensive consumer privacy bill. Signed into law on July 7, 2021. the bill gives consumers the right to opt out of the processing of their personal data and to request that personal data be corrected or deleted.

New GSA Regulations Governing Foreign Ownership Disclosure

GSA issues new regulations requiring certification as to foreign ownership and foreign financing of high-security leased space.

A Warning to Contract Counterparties: A Debtor Can Sell Your Fully Performed Contract Without Curing Defaults and Paying Your Claim in Full

There was no “silver lining” for a producer of the 2012 critically acclaimed film Silver Linings Playbook and his $400,000 claim to a portion of the film’s profits in a dispute before the Third Circuit Court of Appeals. See Spyglass Media Grp., LLC v. Bruce Cohen Prods., 997 F.3d 497 (3d Cir. 2021). Notwithstanding the purchase of film and related production/distribution rights and contracts in a bankruptcy sale and the buyer’s commitment to cure all defaults on the executory contracts acquired, the Third Circuit held that the producer had only an unsecured claim against the Weinstein Company’s estate because the producer’s contract was not executory. The decision serves as a stark reminder that contract counterparties do not always receive full payment on their claim when their contract is sold in bankruptcy. 

Navigating Uncertain ESG-Related Risks at the SEC

Although the SEC’s ESG-related agenda is in its early stages, market participants should pay close attention to the emerging regulatory framework, which often portends both enforcement actions and shareholder litigation. As previously noted here, these regulatory developments call for careful evaluation, particularly in light of widely held expectations that the SEC will move swiftly on climate-related disclosure rulemaking following the conclusion of a notice-and-comment period this summer, as well as on potential rulemaking requiring public companies to disclose workforce metrics, including in relation to diversity.

Southern California’s New Indirect Source Rule for Warehousing Operations Tests Jurisdictional Waters

Rule 2305, a first-of-its-kind air district rule, will impose new costs on warehouses and the Southern California supply chain, potentially testing legal boundaries of local authority to regulate “indirect sources” of emissions.

DOL Ups Its Game on Cybersecurity Program Oversight, Begins Audit Initiative

On April 14, 2021, the Employee Benefits Security Administration of the U.S. Department of Labor (DOL) issued cybersecurity guidance for the first time aimed at ERISA plans and fiduciaries. The DOL highlighted that, as of 2018, there are 34 million persons covered by private sector defined benefit pension plans and 106 million persons covered by defined contribution plans (e.g., 401(k) plans) covering estimated assets of $3.4 trillion. The DOL emphasized that sufficient protections are needed to protect participants and plan assets from internal and external cybersecurity threats.

FCC Revises Equipment Authorization Rules

On June 17, 2021 the FCC approved a Report and Order modifying its equipment authorization program for radiofrequency devices. The Order updates the Commission’s marketing and importation rules in order to minimize obstacles to the development and deployment of new products while continuing to ensure that radiofrequency equipment remains compliant with Commission requirements.

Cal/OSHA Finally Approves Revised COVID-19 Emergency Temporary Standards

To follow-up on our previous alert of June 15, 2021, California’s Occupational Safety and Health Standards Board (Board) has approved revisions to the COVID-19 Prevention Emergency Temporary Standards (ETS) that eliminate physical distancing requirements and update other requirements (e.g., face covering, testing, exclusion from work) for fully vaccinated employees. The new and improved ETS is expected to go into effect on or around June 28, 2021. Consistent with his earlier announcement, Governor Newsom signed an Executive Order on June 17 to make the ETS effective the day it is filed with the Office of Administrative Law.

ASBCA Rejects Government’s Motion to Dismiss Despite Suspicion of Fraud

As we have reported previously, in actions at the Court of Federal Claims the Department of Justice often attempts to use fraud counterclaims when justifying its denial of a contractor’s claim. We are also noticing that agency lawyers are using fraud as an affirmative defense more frequently at the Boards of Contract Appeals, which unlike the Court of Federal Claims lack jurisdiction over fraud claims. Contractors should be aware that when the government attempts to use alleged fraud to strip the boards of jurisdiction, a recent decision from the Armed Services Board of Contract Appeals (the Board) makes clear that the Board retains jurisdiction unless actual fraud is found by a competent government agency or established by a federal court.

Biden Administration Updates Framework for China-Related Investment Prohibitions and Expands the Scope of Restricted Chinese Companies

Summary of the E.O.

On June 3, 2021, President Biden signed E.O. 14032 that alters the framework for restrictions on the purchase or sale of publicly traded securities of Chinese companies designated for military affiliations, but ultimately re-affirms the previous restrictions under E.O. 13959. These restrictions will continue to be applied to 31 entities previously sanctioned as well as 28 newly added companies. On the same day, the Department of Defense (DOD) independently released its annual list of Chinese military companies pursuant to recently enacted legislation.

Cal/OSHA Eliminates Distancing, Mask Mandate for Vaccinated Workers

After receiving pressure from businesses and other regulators during lengthy public comment meetings in recent weeks, the California Occupational Safety and Health Administration (Cal/OSHA) has proposed another set of revisions to its COVID-19 Prevention Emergency Temporary Standards (ETS), to be considered by the Occupational Safety and Health Standards Board on June 17, 2021. If approved, the revised standards would take effect on June 28, 2021.

Cal/OSHA to Vote on Revising COVID-19 Emergency Standards on June 3

As previously alerted, the California Occupational Safety and Health Administration (Cal/OSHA) recently proposed revisions to its COVID-19 Prevention Emergency Temporary Standards (ETS), which were to be considered by the Occupational Safety and Health Standards Board (Board) on May 20, 2021. However, on the eve of the meeting, Cal/OSHA issued a memorandum to the Board, requesting the Board not vote on the proposed revisions and allow Cal/OSHA to present a new proposal at a future meeting. On May 28, 2021, Cal/OSHA published an updated version of the proposed revisions, which will be the subject of public comment, Board discussion, and a Board vote on June 3, 2021.

Boom in the Medical Spa Industry Amid Regulatory Uncertainty Creates Perfect Storm

The medical spa (medspa) industry in the United States is booming. In 2010, there were about 1,600 medspas operating in the United States generating about $1.1 billion in revenue (about $700,000 per medspa on average). By 2018, these numbers increased to over 5,000 medspas generating about $7 billion-$8 billion in revenue (about $1.4 million per medspa on average). The number is expected to grow to over 10,000 medspas by 2023 with about $18 billion-$20.7 billion in revenue. Since 2010, year over year revenue growth has consistently been in the double digits, with 2011 registering nearly 40 percent growth and 2017 registering nearly 50 percent growth. The 2018 profit margin for medspas was 29 percent.

Congressional SPACtivity Continues: Draft Legislation Proposes to Eliminate Safe Harbor Protection for Projections in SPAC Transactions

As previously noted in Pillsbury’s earlier article, one factor that has contributed to the rise in SPACtivity has been the availability to SPACs of certain features unavailable to companies going public through traditional IPOs, most notably the Private Securities Litigation Reform Act (PSLRA) safe harbor for forward-looking statements. On May 21, 2021, the U.S. House Committee on Financial Services released draft legislation to amend the Securities Act of 1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act) to exclude all SPACs from the safe harbor. Section 27A of the Securities Act and Section 21E of the Exchange Act currently exclude from the safe harbor forward-looking statements made “… in connection with an offering of securities by a blank check company…” Rule 419 under the Securities Act defines a “blank check company” as “…a development stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person… ” and is “ … issuing penny stock ...” As the vast majority of SPACs do not issue penny stock or are structured to avoid treatment as a “blank check company” as defined in Rule 419, de-SPAC transactions have generally been viewed as eligible for the PSLRA safe harbor. The draft legislation proposes to delete the term “blank check company,” replacing it with the phrase “… a development stage company that … has indicated that its business plan is to acquire or merge with an unidentified company, entity, or person…” without reference to whether or not the company issues penny stock. As a SPAC is formed for the purpose of acquiring or merging with an unidentified entity, the proposed amendments would likely make the PSLRA safe harbor unavailable for forward-looking statements, such as projections, included in documents soliciting stockholder approval of de-SPAC transactions.

DoD Issues Proposed Rule on Enhanced Debriefing Procedures

The Department of Defense (DoD) recently issued a proposed rule to implement Section 818 of the FY18 NDAA. Under Section 818, Congress required the DoD to issue new regulations in the Defense Acquisition Regulation Supplement (DFARS) on the procedures for enhanced debriefing rules within six months. 

NRC Seeking Input to Update NEPA Process for Categorical Exclusions

In an important step furthering recent commitments to modernize its environmental review process, the NRC has requested input on its plan to update and expand the field of categorical exclusions in its regulations implementing the National Environmental Policy Act of 1969.

Congress Moves to Repeal OCC’s “True Lender” Rule

On May 11, 2021, the Senate voted to repeal a Trump Administration regulation that defines which party is the “true lender” in partnerships between banks and non-banks, including financial technology and other non-bank lending companies. The Senate resolution now heads to the House of Representatives, which is expected to pass the resolution. President Biden has signaled his support for the repeal and will likely enact the repeal following a vote in the House. The repeal of this rule could create regulatory uncertainty for fintechs and other non-bank lenders that were relying on the rule.

China Publishes New Draft Regulations on Data Security Management of Automobile Operators to Protect Privacy

On May 12, 2021, the Cyberspace Administration of China (CAC) published the Several Regulations on the Management of Automobile Data Security (Draft for Comment) (Draft Regulations). The Draft Regulations are open for public comment until June 11, 2021.  According to the CAC’s statement, due to growing concerns over personal data security and privacy protection in the People’s Republic of China (PRC), the Draft Regulations aim to strengthen protection of personal information and important data in automobile-related activities, as well as safeguard national security and the public interest. Below is our summary of the highlights of the Draft Regulations.

Cybersecurity Executive Order Will Impact Government Contractors

President Biden’s new Executive Order to improve cybersecurity involves a particular focus on federal government and contractor systems.

OSHA and Cal/OSHA Guidance for Fully Vaccinated Employees

As COVID-19 cases appear to be on the decline and more people are opting to become vaccinated, public health departments and workplace safety agencies are concurrently updating recommendations and guidance to reflect changes in the course of the pandemic. Although such recommendations and guidance are often in flux, below is a summary of where federal and California workplace safety agencies currently stand on the issue of fully vaccinated employees.

China’s MOFCOM Issues Internal Export Control Program Guidelines

On April 28, 2021, China’s Ministry of Commerce (MOFCOM) published The Guiding Opinions on the Establishment of an Internal Compliance Program for Export Control by Exporters of Dual-use Items (Opinions) along with a 35-page Guidelines for Internal Compliance of Export Control of Dual-use Items (Guidelines). The Opinions and Guidelines replace MOFCOM’s previous Opinions published in 2007 and are the latest steps taken by MOFCOM for the implementation of China’s Export Control Law effective on December 1, 2020 (see Pillsbury alert).

China Cancels Export Tax Rebate on Steel Products

On April 28, 2021, China’s Ministry of Finance (MoF) and the State Administration of Taxation (SAT) issued a short notice (Notice No. 16) on their official websites to cancel VAT rebates on the exports of certain steel products starting May 1, 2021.

Time’s Up!: The Court Rejects the Government’s Request for a Longer Limitations Period Applicable to Fraud Counterclaims

Contractors often face the dilemma of whether they should appeal an adverse contracting officer final decision (COFD) issued under the Contract Disputes Act (CDA) to the cognizant Board of Contract Appeals or the Court of Federal Claims. One factor favoring the Boards is that the Court has jurisdiction over fraud counterclaims and the Boards do not. The Department of Justice (DOJ) (which represents the government at the Court) has asserted such fraud counterclaims with more regularity in recent years.  Contractors should know that when the government asserts a fraud counterclaim, the Court’s decision in Lodge Constr., Inc. v. United States, No. 13-499, 2021 WL 1418847 (Fed. Cl. Apr. 14, 2021), makes clear that the government must adhere to a hard deadline--perhaps with no exceptions.

ASBCA Confirms the “Goldilocks Principle” in Government Contract Appeals

Contractors must ensure that they do not appeal a contracting officer’s decision too early or too late lest they find that the courts and board have no jurisdiction. Yet, the government continues to issue directions that provide no certainty on the issue and, indeed, serve only to muddle the question of what constitutes an appealable final decision. Last month, the Armed Services Board of Contract Appeals (ASBCA or Board) issued a decision in the appeal of Northrop Grumman Corporation, ASBCA No. 62189, dismissing the appeal for lack of jurisdiction and highlighted what these authors will refer to as “the Goldilocks Principle” for when contractors can appeal a contracting officer’s decision that certain costs are not allowable. Frustratingly, the Government often issues unclear decisions that can leave contractors wondering whether the timing for appeal is too early, too late or just right.

Data Privacy Fines and Damages “Double Jeopardy”: UK Supreme Court Hears Google “Class Action”

This week sees a key hearing before the UK Supreme Court in the case of Lloyd v Google, an event long awaited by those familiar with data protection law proceedings in Europe.

President Biden Issues an Executive Order Increasing the Minimum Wage for Many Employees of Federal Contractors to $15.00

On April 27, 2021, President Biden signed an Executive Order raising the minimum wage paid by Federal contractors and subcontractors to $15.00 per hour, beginning on January 30, 2022. The Federal minimum wage currently is $10.95 per hour for all workers on Federal construction and service contracts, based on President Obama’s 2014 Executive Order 13658, which had raised that minimum wage to $10.10 per hour and provided for adjustment for inflation. These Executive Orders do not change the current minimum wage of $7.25 under the Fair Labor Standards Act (FLSA) applicable to non-exempt employees who do not work for government contractors, and to employees of government contractors who do not work on or in connection with Federal construction and service contracts.

Environmental Justice Legislation Update

Environmental Justice, as an urgent priority of the Federal Government, dates back to 1994, and President Clinton’s issuance of Executive Order 12898. This order directed federal agencies to identify and address, as appropriate, the disproportionately high and adverse human health and environment effects of its many programs, policies and procedures on minority populations and low-income populations. The primary legal basis for this order was Title VI of the Civil Rights Act of 1964, in particular, Sections 601 and 602, which prohibit discrimination in programs and activities receiving federal financial aid and assistance. Over the years, the Supreme Court has reviewed the scope and importance of Title VI. In Alexander v. Sandoval, decided in 2001, the Court concluded that while private parties could sue to enforce Section 601 or its implementing regulations, as written, Section 601 only prohibits intentional discrimination. Noting that disproportionate impact is not the sole touchstone of invidious racial discrimination. Moreover, the Court also ruled in Sandoval that private parties cannot sue to enforce regulations implementing Section 602. Perhaps as an acknowledgement of these shortcomings, the Environmental Protection Agency (EPA) has established an administrative system to process environmental justice complaints at 40 CFR Part 7. Without strengthening the statutory base of environmental justice, the program may continue to be the subject of countless symposiums and seminars. However, this may change soon.

Court Finds Pandemic Does Not Satisfy Lease’s Casualty Clause

This is another in a series of alerts on insolvency topics affecting real estate. In this alert, we discuss a new case from the Southern District of New York that extends the trend of courts enforcing leases against tenants forced to close due to the impact of the COVID-19 pandemic.

COVID-19 Stimulus Package Includes $170 Billion for Education

The American Rescue Plan Act of 2021 (ARP)—the latest coronavirus-related stimulus legislation signed into law by President Biden on March 11, 2021—appropriates more than $122 billion for elementary and secondary education and almost $40 billion for institutions of higher education (IHEs). These funds are in addition to the relief funding allocated under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as described here and here, as well as under the Consolidated Appropriations Act, 2021 (CAA), as described here. Funds appropriated under the ARP will remain available through September 30, 2023.  

$1.9 Trillion COVID-19 Relief Law Includes Funding for Several Broadband-Related Measures

The American Rescue Plan Act of 2021, the latest COVID-19 relief package signed into law on March 11, 2021, includes several provisions that target funding for broadband connectivity and infrastructure projects. Specifically, the law provides $7.1 billion to support connectivity and the purchase of eligible devices for schools and libraries, and establishes additional sources of funding for broadband through support to state and local governments, as well as payment assistance to individuals facing financial hardships associated with the coronavirus pandemic.

Congress Appropriates New Funds, Extends Eligibility for Shuttered Venue Operator Grants

The American Rescue Plan Act, signed into law on March 11, 2021 and summarized here, includes a brief but important section that will permit the recipients of Paycheck Protection Program (PPP) loans issued after December 27, 2020 to remain eligible for grants under the “Grants for Shuttered Venue Operators” (Grants) program, which the Small Business Administration (SBA) has yet to launch.

Preparing Your Personal and Business Insurance Claims

The world is witnessing yet another dramatic weather event, this time in the southern states, especially Texas. The severe winter conditions in Texas have caused unprecedented hardship for Texans and devasting damage for nearly every industry sector. The extended and episodic power outages, cell phone and internet service disruption, water crisis, frozen roads, disruption of transportation and supply chains, shuttered industrial facilities and damage to public and private infrastructure will have a lasting impact on the region. While the current focus rightfully is on restoring critical systems and services to ensure the safety and well-being of Texans, as the crisis subsides there will be wide ranging legal and commercial considerations that require immediate and informed decision making.

New York State Assembly Reintroduces Legislation Imposing Recording Tax on Mezzanine Debt and Certain Preferred Equity Investments

On January 22, 2021, members of the New York State Assembly introduced legislation that would require the recording of UCC financing statements in connection with the origination of mezzanine debt and certain types of equity investments in real estate assets when there exists mortgage debt with respect to same, underlying real property asset(s). It also would allow municipalities to collect recording taxes in connection with the creation of such indebtedness or investments. This bill is the most recent iteration of a previous proposed bill that was introduced last year in the New York State Senate.

DC Council Passes COVID-19 Pandemic Emergency Workplace Safety Statute

On February 1, 2021, DC Mayor Bowser signed emergency legislation passed by the DC Council, requiring DC employers to “adopt and implement social distancing and worker protection policies to prevent transmission of COVID-19 in the workplace” and that adhere to all applicable Mayor’s Orders related to the COVID-19 public health emergency. Titled the “Protecting Businesses and Workers from COVID-19 Congressional Review Emergency Amendment Act of 2021,” the Act was published in the DC Register on February 12, 2021 but took effect as of the Mayor’s signature and will remain in effect for up to 90 days. A companion bill (B24-0058), the “Workplace Safety During the COVID-19 Pandemic Emergency Amendment Act of 2021,” was passed by the Council and was transmitted to the Mayor on February 11, 2021; it has similar provisions and would replace—and have the effect of extending—the Congressional Review Emergency Amendment Act’s provisions.

COVID-19 Business Interruption Losses: Time is of the Essence to Pursue Coverage

The United States declared a national emergency in response to COVID-19 on March 13, 2020, and states quickly followed with stay-at-home orders that impacted businesses and institutions nationwide. More than 10 months have passed since the COVID-19 pandemic emerged in the United States and the prevalence of the virus has had significant impacts, not only with respect to the number of people infected and lives lost, but also to the widespread physical damages and economic losses suffered by businesses.

No Clear Answer to Address New Executive Order’s Effect on Recently Issued Buy American Regulations

Two recent developments make clear that government contractors will have their hands full complying with U.S. domestic preference rules in the coming years. On January 19, 2021, the Federal Acquisition Regulatory Council (FAR Council) issued a final rule implementing former President Trump’s Executive Order 13881 (Maximizing Use of American-Made Goods, Products, and Materials). The final rule makes significant changes to the domestic content requirements set forth in the Buy American regulations. Less than one week after the final rule became effective, President Biden signed Executive Order 14005 (Ensuring the Future Is Made in All of America by All of America's Workers) (the Order). The Order directs the FAR Council to further amend the domestic content requirements in the Buy American regulations. As we discuss below, the interplay and overlap between the Order and the final rule are almost certain to cause confusion until the Biden Administration or the FAR Council provide clarifying guidance. Suffice it to say, domestic preference compliance will become more complex in 2021. 

Federal Support for Defense Uses of Advanced Nuclear

Summary of the EO

On January 12, 2021, former President Trump issued an EO on Promoting Small Modular Reactors for National Defense and Space Exploration. The EO directs the Department of Energy (DOE), Department of Defense (DOD), and NASA to take actions to coordinate their nuclear-related activities, move forward with certain ongoing nuclear projects and promote advanced reactor and small modular reactor (SMR) technologies. The purpose of the EO is to take steps to revitalize the U.S. nuclear sector, reinvigorate the U.S. space exploration program, develop diverse energy options for national defense needs and advance U.S. technological supremacy and leadership.

The Consolidated Appropriations Act, 2021 Extends and Expands Eligibility for Employee Retention Tax Credit

The Consolidated Appropriations Act, 2021 (the Act), signed into law in December 2020, extends and expands the employee retention tax credit originally enacted in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Affirming Dismissal of AirAsia Lawsuit, D.C. Circuit Court Overrules Prior Decisions Allowing Personal Jurisdiction Based on Internet Presence Alone

The United States Court of Appeals for the D.C. Circuit has affirmed the dismissal of a personal injury lawsuit brought against the Malaysian-based airline AirAsia by a passenger and her husband. Erwin-Simpson v. AirAsia, No. 19-7034 (D.C. Cir. Jan. 19, 2021). This recent decision sets a new standard for establishing personal jurisdiction in the Circuit.

Congressional and Government Investigations in 2021: What to Expect from the Biden-Harris Administration and How to Prepare

Government investigations pose many risk management challenges. They are unpredictable, political and often public. If handled incorrectly, they can last for many years, spiral into multiple Congressional, criminal, and/or regulatory investigations at the state and federal levels, and generate serious reputational harm. Potential targets can take proactive steps to mitigate their risks.