Richard Manfredi, Author at Gibson Dunn

Please join us for a comprehensive guide to preparing Private Equity sponsor-backed portfolio companies for an Initial Public Offering. We cover key considerations for IPO planning throughout the entire life cycle of a portfolio company, from the initial acquisition by the sponsor to the IPO process and life with a public portfolio company.

This presentation is ideal for private equity sponsors, in-house lawyers and executives involved in preparing sponsor-backed portfolio companies for the IPO process. We provide practical guidance on navigating the legal and other complexities of going public and ensuring long-term compliance and success in the public markets.

MCLE CREDIT INFORMATION:

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PANELISTS:

Michelle M. Gourley is a Partner in the Orange County office of Gibson, Dunn & Crutcher and is a member of the firm’s Mergers and Acquisitions and Private Equity Practice Groups.

Ms. Gourley is a corporate transactional lawyer whose experience includes advising both strategic companies and private equity clients (including their portfolio companies) in connection with public and private merger transactions, stock and asset sales, joint ventures, strategic partnerships, and other complex corporate transactions. Ms. Gourley works with clients across a wide range of industries, and has extensive experience working with life sciences companies (pharma and medical device) and media, technology and entertainment companies.

Julia Lapitskaya is a partner in the New York office of Gibson, Dunn & Crutcher. She is a member of the firm’s Securities Regulation and Corporate Governance and its ESG (Environmental, Social & Governance) practices. Ms. Lapitskaya’s practice focuses on SEC, NYSE/Nasdaq and Securities Exchange Act of 1934 compliance, securities and corporate governance disclosure issues, corporate governance best practices, state corporate laws, the Dodd-Frank Act of 2010, SEC regulations, shareholder activism matters, ESG and sustainability matters and executive compensation disclosure issues, including as part of initial public offerings and spin-off transactions.

Peter W. Wardle is a partner in the Los Angeles office of Gibson, Dunn & Crutcher. He is a member of the firm’s Corporate Transactions Department and co-chair of its Capital Markets Practice Group, and previously served as partner in charge of the Los Angeles office.

Peter’s practice includes representation of issuers and underwriters in equity and debt offerings, including IPOs and secondary public offerings, and representation of both public and private companies in mergers and acquisitions, including private equity, cross border, leveraged buy-out and going private transactions. He has led the execution of IPOs across industries on both the issuer side and underwriter side, including some of the largest transactions in the year they were completed. He also advises clients on a wide variety of general corporate and securities law matters, including corporate governance and disclosure issues.

Jonathan Whalen is a partner in the Dallas office of Gibson, Dunn & Crutcher LLP. He is a member of the firm’s Mergers and Acquisitions, Capital Markets, Energy and Infrastructure, and Securities Regulation and Corporate Governance practice groups. Mr. Whalen also serves on the Gibson Dunn Hiring Committee.

Mr. Whalen’s practice focuses on a wide range of corporate and securities transactions, including mergers and acquisitions, private equity investments, and public and private capital markets transactions. Chambers USA named Mr. Whalen an Up and Coming Corporate/M&A attorney in their 2022 publication. In 2018, D CEO magazine and the Association of Corporate Growth named Mr. Whalen a finalist for the 2018 Dallas Dealmaker of the Year.

Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.

On February 18, 2025, the U.S. District Court for the Eastern District of Texas entered a stay of its January 7, 2025 order that had paused the “Reporting Rule” implementing the Corporate Transparency Act (CTA). On February 19, 2025, the Financial Crimes Enforcement Network (FinCEN) issued guidance that extends the reporting deadline for all reporting companies until at least March 21, 2025. In its guidance, FinCEN also noted that it may further modify this deadline.

Entities that may be subject to the CTA and its associated Reporting Rule that have not filed Beneficial Ownership Information (BOI) reports should consult with their CTA advisors as necessary to understand their obligations now that the CTA and the Reporting Rule are enforceable again, and BOI reports for the vast majority of entities will now be due by March 21, 2025.

On December 3, Judge Mazzant of the U.S. District Court for the Eastern District of Texas ruled that the CTA was likely unconstitutional, issued a nationwide preliminary injunction against enforcement of the law, and postponed the effective date of the Reporting Rule that set filing deadlines for compliance, in Texas Top Cop Shop, Inc. et al. v. Garland et al. (“Texas Top Cop Shop”).[1] After substantial litigation, that order was ultimately stayed by the Supreme Court on January 23, 2025.[2] The Court’s decision was 8–1.

In a separate case decided in early January, but prior to the Supreme Court’s decision to stay the Texas Top Cop Shop order, Judge Kernodle of the U.S. District Court for the Eastern District of Texas also ruled that the CTA was likely unconstitutional, in Smith v. U.S. Department of the Treasury (“Smith”).[3] Judge Kernodle enjoined enforcement of the CTA with respect to the plaintiffs in that case and stayed the effective date of the Reporting Rule nationwide.[4]

On February 5, 2025, the Department of the Treasury asked Judge Kernodle to stay the order in Smith and filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit.[5] Additionally, on February 7, 2025, the Department of Justice filed appellate briefs defending the constitutionality of the CTA in separate cases pending in the Fourth and Fifth Circuits.[6]

On February 18, 2025, Judge Kernodle issued a stay of his January decision in Smith.[7]

On February 19, 2025, FinCEN issued guidance regarding the applicable deadlines now that no court orders bar enforcement of the CTA nationwide.[8] In its guidance, FinCEN extended the reporting deadline for reporting companies to March 21, 2025, except for reporting entities previously granted extensions even beyond March 21, 2025 (for example, because of natural disasters).[9] FinCEN added that during the period between February 19 and March 21, 2025, FinCEN “will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.”[10] FinCEN also stated it intends to revise the Reporting Rule to reduce the burden for lower-risk entities, including many U.S. small businesses.[11]

The government’s request for a stay in Smith, its merits briefs in the Fourth and Fifth Circuits, and FinCEN’s recent guidance, all indicate that the Trump Administration’s Departments of Justice and the Treasury will likely continue defending the constitutionality of the CTA and Reporting Rule going forward. At the same time, FinCEN has indicated openness to revising the Reporting Rule to reduce the burden for some businesses.

While the Reporting Rule is enforceable again now that no judicial stays remain in effect, litigation remains ongoing, and it is still theoretically possible that another court could enjoin enforcement of the law against particular plaintiffs or nationwide. Moreover, Congress could intervene by enacting new legislation: the House of Representatives recently passed a bill seeking to extend the deadline to file BOI reports until January 1, 2026.[12] The Senate has yet to act on the bill.

Entities that believe they may be subject to the CTA and its associated Reporting Rule should closely monitor this matter, and consult with their CTA advisors as necessary, to understand their obligations now that the CTA is enforceable again and BOI reports for most entities are due by March 21, 2025.

For additional background information, please refer to our Client Alerts issued on December 5, December 9, December 16, December 24, and December 27, 2024, and January 24, 2025.

[1] Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-CV-478, Dkt. 30 (E.D. Tex. Dec. 3, 2024).

[2] Order, McHenry v. Top Cop Shop, Inc., No. 24A653 (U.S. Supreme Court Jan. 23, 2025).

[3] Smith v. U.S. Dep’t of the Treasury, No. 6:24-cv-00336-JDK, Dkt. 30 at 33–34 (E.D. Tex. Jan. 7, 2025).

[4] Id.

[5] Smith v. U.S. Dep’t of the Treasury, No. 6:24-cv-00336-JDK, Dkts. 32, 33 (E.D. Tex. Feb. 5, 2025).

[6] See Community Assocs. Institute v. U.S. Dep’t of the Treasury, No. 24-2118, Dkt. 40 (4th Cir. Feb. 7, 2025); Texas Top Cop Shop, Inc. et al. v. Bondi et al., No. 24-40792, Dkt. 212 (5th Cir. Feb. 7, 2025). Additionally, we note that another district court has now held that the CTA is constitutional. Boyle v. Bessent, No. 2:23-cv-00081, Dkt. 51 (D. Me. Feb. 14, 2025).

[7] Smith v. U.S. Dep’t of the Treasury, No. 6:24-cv-00336-JDK, Dkt. 39 (E.D. Tex. Feb. 17, 2025).

[8] https://fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf. Additionally, nothing in FinCEN’s guidance disturbs the Reporting Rule’s requirements that companies created or registered in 2024 have 90 days to file their BOI reports and companies created or registered in 2025 have 30 days to file their BOI reports. Therefore, any entity created in 2024 whose reporting deadline had not yet passed should have until March 21, 2025 or 90 days after creation or registration to file their BOI reports, whichever is later. Companies created or registered on or after January 1, 2025 will have until March 21, 2025 or 30 days after creation or registration to file their BOI reports, whichever is later.

[9] Id.

[10] Id.

[11] Id.

[12] Protect Small Businesses from Excessive Paperwork Act, H.R. 736 (119th Cong. 2025).

The following Gibson Dunn lawyers assisted in preparing this update: Kevin Bettsteller, Stephanie Brooker, Matt Gregory, Justin Newman, Dave Ware, Shannon Errico, Sam Raymond, and Connor Mui.

Gibson Dunn has deep experience with issues relating to the Bank Secrecy Act, the Corporate Transparency Act, other AML and sanctions laws and regulations, and challenges to Congressional statutes and administrative regulations.

For assistance navigating white collar or regulatory enforcement issues, please contact the authors, the Gibson Dunn lawyer with whom you usually work, or any leader or member of the firm’s Anti-Money Laundering, Administrative Law & Regulatory, Investment Funds, Real Estate, or White Collar Defense & Investigations practice groups.

Please also feel free to contact any of the following practice group leaders and members and key CTA contacts:

Anti-Money Laundering:
Stephanie Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)
M. Kendall Day – Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)
David Ware – Washington, D.C. (+1 202.887.3652, dware@gibsondunn.com)
Ella Capone – Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)
Sam Raymond – New York (+1 212.351.2499, sraymond@gibsondunn.com)

Administrative Law and Regulatory:
Stuart F. Delery – Washington, D.C. (+1 202.955.8515, sdelery@gibsondunn.com)
Eugene Scalia – Washington, D.C. (+1 202.955.8673, dforrester@gibsondunn.com)
Helgi C. Walker – Washington, D.C. (+1 202.887.3599, hwalker@gibsondunn.com)
Matt Gregory – Washington, D.C. (+1 202.887.3635, mgregory@gibsondunn.com)

Investment Funds:
Kevin Bettsteller – Los Angeles (+1 310.552.8566, kbettsteller@gibsondunn.com)
Shannon Errico – New York (+1 212.351.2448, serrico@gibsondunn.com)
Greg Merz – Washington, D.C. (+1 202.887.3637, gmerz@gibsondunn.com)

Real Estate:
Eric M. Feuerstein – New York (+1 212.351.2323, efeuerstein@gibsondunn.com)
Jesse Sharf – Los Angeles (+1 310.552.8512, jsharf@gibsondunn.com)
Lesley V. Davis – Orange County (+1 949.451.3848, ldavis@gibsondunn.com)
Anna Korbakis – Orange County (+1 949.451.3808, akorbakis@gibsondunn.com)

White Collar Defense and Investigations:
Stephanie Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)
Winston Y. Chan – San Francisco (+1 415.393.8362, wchan@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
F. Joseph Warin – Washington, D.C. (+1 202.887.3609, fwarin@gibsondunn.com)

Gibson Dunn’s Workplace DEI Task Force aims to help our clients develop creative, practical, and lawful approaches to accomplish their DEI objectives following the Supreme Court’s decision in SFFA v. Harvard. Prior issues of our DEI Task Force Update can be found in our DEI Resource Center. Should you have questions about developments in this space or about your own DEI programs, please do not hesitate to reach out to any member of our DEI Task Force or the authors of this Update (listed below).

Key Developments:

On February 5, the United States Office of Personnel Management (OPM) issued a memo to the heads and acting heads of federal departments and agencies entitled “Further Guidance Regarding Ending DEIA Offices, Programs and Initiatives.” The memo provides guidance related to the federal government’s implementation of President Trump’s recent DEI-related executive orders (EO 14151, EO 14168, and EO 14173). The memo directs agencies to “terminate all illegal DEIA initiatives” and eliminate DEIA “offices, policies, programs, and practices” that unlawfully discriminate in any employment action, including “recruiting, interviewing, hiring, training or other professional development, internships, fellowships, promotion, retention, discipline, and separation.” It also prohibits employee resource groups to the extent that they “promote unlawful DEIA initiatives,” though agency heads “retain discretion” to allow affinity group, cultural, mentoring, and social activities and programs that are not limited in any way based on protected characteristics. The memo further provides that agencies should retain “personnel, offices, and procedures required by statute or regulation to counsel employees allegedly subjected to discrimination, receive discrimination complaints, collect demographic data, and process accommodation requests.” For a more detailed analysis of the memo, see our February 12 client alert.

On February 14, the Attorneys General of 16 states issued joint guidance reaffirming their position on the continued legality of certain DEI initiatives. The guidance states, “diversity, equity, inclusion, and accessibility best practices are not illegal, and the federal government does not have the legal authority to issue an executive order that prohibits otherwise lawful activities in the private sector or mandates the wholesale removal of these policies and practices within private organizations, including those that receive federal contracts and grants.” The guidance also warns that failure to implement adequate non-discrimination and fair employment policies, procedures, and trainings may be used by those states to establish violation of those states’ anti-discrimination laws. Finally, the guidance provides a list of DEI best practices, which, in the AGs’ views, include (among other things): (1) prioritizing widescale recruitment efforts to attract a larger pool of applicants from a variety of backgrounds, (2) setting standardized criteria for evaluating candidates, (3) monitoring the success of policies and practices in attracting and retaining qualified talent, (4) conducting training on topics such as unconscious bias, inclusive leadership, and disability awareness, and (5) creating clear protocols for reporting discrimination or harassment.

On February 13, 2025, the National Association of Diversity Officers in Higher Education, the American Association of University Professors, the Restaurant Opportunities Centers United and the mayor and city council of Baltimore, Maryland moved for a temporary restraining order and a preliminary injunction to prevent the Trump Administration from enforcing two executive orders, EO 14151 and EO 14173. The plaintiffs contend that the executive orders exceed presidential authority, violate the separation of powers and the First Amendment, and are unconstitutionally vague. The plaintiffs contend that they are suffering irreparable harm from the termination of “equity-related grants” and the suppression of speech relating to DEI. The plaintiffs argue that preventing “constitutional, existential, and reputational harm” is in the public’s interest. The government’s response is due February 18, and a hearing is set for February 19.

On February 11, the State of Missouri filed a lawsuit against Starbucks in the Eastern District of Missouri, alleging that Starbucks is violating state and federal anti-discrimination laws. Specifically, the complaint alleges that Starbucks unlawfully ties executive compensation to diversity-and-inclusion-related quotas and metrics; provides discriminatory advancement opportunities through race- and gender-based mentoring programs, training programs, and employee “networks”; and discriminates on the basis of race and sex with respect to its board membership. The complaint raises four claims under Title VII, including (1) unlawful hiring and firing practices, (2) unlawful training programs, (3) unlawful segregation or classification of employees, and (4) unlawful printing or circulation of discriminatory employment and training materials. The complaint also alleges discriminatory contract impairment under Section 1981 and related state-law claims. Missouri argues that it has standing to sue Starbucks in relation to these practices because Starbucks’s practices harm some Missouri residents by discriminating against them, and Missouri could otherwise address this harm through its sovereign lawmaking power. Missouri seeks a declaratory judgment, monetary damages, and injunctive relief, including an injunction prohibiting Starbucks from “unlawfully misrepresenting to job applicants and customers that it does not engage in unlawful discrimination on the bases of race, color, sex, national origin, or ancestry.”

In a February 14 article, CNN’s Nathaniel Meyerson quotes Gibson Dunn’s Jason Schwartz, who described the lawsuit as “one of the first broadside attacks against the full menu of corporate DEI programs.” Meyerson reports that although legal experts agree that “[p]rograms that are not open to all employees because of race or other criteria, any numerical goals or targets, and executive compensation tied to diversity targets” are vulnerable to legal challenge, the lawsuit goes beyond that. Schwartz described some of Missouri’s claims as a “stretch,” noting that the lawsuit “bites off more than it can chew.” Schwartz explained that the suit “paints with a broad brush, arguing that virtually every diversity program is illegal even if open to all.  This is not the law.”

On February 14, 2025, Craig Trainor, Acting Assistant Secretary for Civil Rights in the Department of Education, issued a “Dear Colleague” letter “to clarify and reaffirm the nondiscrimination obligations of schools and other entities that receive federal financial assistance from the United States Department of Education (Department).” The letter explains “the Department’s existing interpretation of federal law,” including that the SFFA decision “applies more broadly” than in the context of admissions decisions, and that federal law “prohibits covered entities from using race in decisions pertaining to admissions, hiring, promotion, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies, and all other aspects of student, academic, and campus life.” The letter states that the Department will take “appropriate measures to assess compliance” and advises “all educational institutions” to ensure compliance with existing law, to “cease all efforts to circumvent prohibitions on the use of race by relying on proxies or other indirect means to accomplish such ends,” and to cease reliance on third-party contractors, clearinghouses, or aggregators used to “circumvent prohibited uses of race.” The letter threatens a “potential loss of federal funding” for noncompliant entities.

Media Coverage and Commentary:

Below is a selection of recent media coverage and commentary on these issues:

The New York Times, “Fearing Trump, Wall Street Sounds a Retreat on Diversity Efforts” (February 11): Rob Copeland of The New York Times reports that Wall Street firms are retreating from their diversity initiatives. Copeland also discusses last month’s letter from 11 Republican state attorneys general to BlackRock, Goldman Sachs, JPMorgan Chase, Bank of America, Citi, and Morgan Stanley.
Wall Street Journal, “Big Banks Are Scrubbing Their Public Mentions of DEI Efforts” (February 17): WSJ’s AnnaMaria Andriotis and Gina Heeb report that U.S. banks are reducing their public support for DEI, following a trend among other large corporations scaling back their DEI efforts. Andriotis and Heep note that among certain major banks, concerns regarding DEI initiatives have intensified after President Trump’s executive order directing federal departments and agencies to investigate these programs. They report that programs exclusively serving or giving preferential treatment to certain racial groups have faced increased scrutiny and are being modified to include broader audiences. For example, the authors predict that college scholarship and recruiting programs, previously for groups historically underrepresented in the financial services industry, will likely be modified to be tied more closely to economic need and other non-demographic factors. The authors report that major banks were slower to scale back DEI initiatives compared to other industries because they have long been criticized for lack of diversity at the executive level.
Reuters, “FCC To Open Probe Into NBC-Parent Comcast Over Promotion of DEI Programs” (February 12): Reuters’ David Shepardson reports that Federal Communications Commission (FCC) chair Brendan Carr sent a letter to Comcast stating that the FCC is opening an investigation into the company’s promotion of diversity, equity, and inclusion programs. According to Shepardson, the FCC’s letter states that it will “shut[] down any programs that promote invidious forms of DEI discrimination.” The letter asserts that there is “substantial evidence” that Comcast is “engaging in the promotion of DEI” and says that the FCC is focusing on Comcast because it covers numerous sectors regulated by the FCC including cable, high-speed internet, broadcast TV stations and wireless offerings. Shepardson reports that Comcast confirmed it had received an FCC inquiry and will cooperate and answer questions. “For decades, our company has been built on a foundation of integrity and respect for all of our employees and customers,” the company said in a statement.
Bloomberg, “Steer Clear of ‘Illegal DEI’ With Leveling—Not Lifting—Programs” (February 10): Writing for Bloomberg, Kenji Yoshino and David Glasgow—professors at NYU School of Law—propose a way to distinguish between illegal and legal DEI under EO 14173. Highlighting that the administration has not defined “illegal DEI,” the professors propose that a line exists between “lifting” DEI and “leveling” DEI. They define the former as programs and policies that provide a “bump” or benefit based on group membership while defining the latter as programs that emphasize merit. To illustrate the difference between the two, the professors give the example of a symphony that wishes to increase the number of women musicians in its ranks: “lifting” efforts involved actively preferencing women in the audition process, while “leveling” efforts included requiring that all musicians audition behind a screen to prevent consideration of gender in the first place. Yoshino and Glasgow characterize “[h]iring set-asides, tiebreaker practices, and tying manager compensation to meeting diversity goals” as “lifting” programs, and say that companies engaged in these kinds of practices “risk being targeted by the new administration.”
The New York Times, “Alarmed, Employers Ask: ‘What is Illegal D.E.I.?’” (February 10): Emma Goldberg of The New York Times reports on how companies are responding to changes in DEI-related law and policy. Goldberg writes that, at least for private companies that are not federal contractors, the law on DEI has not fundamentally changed, but the “spirit of how it is interpreted” and “expected to be enforced” has. She reports that employers are trying to balance in a “grey area” requiring them to retain sufficient diversity efforts to avoid discrimination lawsuits while also avoiding investigation and litigation from opponents of DEI. In another New York Times article also published on February 10, Goldberg buckets companies’ responses to the “multilayered pressure campaign” against DEI as (a) retreating, (b) holding steady, or (c) fighting for DEI programs. She writes that for companies retreating from DEI, the “retreat began before Trump took office” but “ballooned” in the days around President Trump’s inauguration.
Law.com, “With DEI Top of Mind, Black Judges Discuss Growing Up During Segregation, Efforts to Diversify the Profession” (February 10): Ross Todd of Law.com reports on remarks by Ninth Circuit Judge Johnnie Rawlinson and U.S. District Judge Richard Jones at a Black History Month event sponsored by the Ninth Circuit Judicial Historical Society and Federal Bar Association. Judge Rawlinson relayed her experiences growing up in a segregated town and attending segregated schools until high school, when, despite graduating fourth in her class, she was offered jobs as a maid or a sweeper. Judge Rawlinson described how these experiences motivated her to attend college and law school. At the event, she said she wanted to make clear that “DEI does not mean lack of merit. That’s a false narrative.” Judge Rawlinson stated that “DEI has been mischaracterized because all it is is making sure that opportunities are available to all qualified people, and not stemming the pool.” Judge Jones, who grew up in Chicago but moved to Seattle after his father experienced hiring discrimination, was rejected from a large law firm because “the senior partners in the firm [were not] sure how [their] white clients [were] going to react to having a Black lawyer represent them.” At the event, Judge Jones encouraged lawyers to think about “pipeline opportunities” that encourage young people to “inspire and create a dream.”
NPR, “Exclusive: GM, Pepsi, Disney, Others Scrub Some DEI References from Investor Reports” (February 7): NPR’s Maria Aspan reports that a least a dozen large U.S. companies eliminated references to “diversity” and “inclusion” in their most recent annual investor reports.

Case Updates:

Below is a list of updates in new and pending cases:

1. Contracting claims under Section 1981, the U.S. Constitution, and other statutes:

Landscape Consultants of Texas, Inc. v. Harris County, Texas et al., No. 4:25-cv-00479 (S.D. Tex.): On February 5, 2025, Landscape Consultants of Texas, Inc. sued Harris County, Texas and the Harris County Commissioners Court, challenging Harris County’s Minority and Woman-Owned Business Enterprise (MWBE) Program. The plaintiff, a non-MWBE landscaping company, claims it “has been at a significant disadvantage when bidding on landscaping contracts” with the County, because a Harris County ordinance requires that the government grant a certain percentage of contracts to MWBEs. The plaintiff alleges that the MWBE Program is racially discriminatory in violation of Section 1981 and the Fourteenth Amendment because it treats companies bidding for public contracts differently based on the race of the company’s owners.
- Latest update: Defendants’ answer is due on February 27, 2025.
Mid-America Milling Company v. U.S. Department of Transportation, No. 3:23-cv-00072-GFVT (E.D. Ky. 2023): On October 26, 2023, two plaintiff construction companies sued the Department of Transportation (DOT), asking the court to enjoin the DOT’s Disadvantaged Business Enterprise Program, an affirmative action program that awards contracts to minority- and women-owned small businesses in DOT-funded construction projects, with the statutory aim of granting 10% of certain DOT-funded contracts to these businesses nationally. The plaintiffs alleged that the program constitutes unconstitutional race discrimination in violation of the Fifth Amendment. On September 23, 2024, the court granted the plaintiffs’ motion for a preliminary injunction, holding that the plaintiffs were likely to succeed on the merits because the program is not sufficiently tailored to the government’s purported interest and lacks a “logical end point.” The court also held that the plaintiffs have standing based on their allegations that they are “able and ready” to bid on a government contract in the near future. The court denied the defendants’ motion to dismiss pending the resolution of any interlocutory appeal of the injunction order.
- Latest update: The parties filed a joint motion to stay the proceedings on February 10, 2025, due to the change in the presidential administration.
American Alliance for Equal Rights v. American Airlines, No. 25-125 (N.D. Tex. 2025): On February 11, 2025, the American Alliance for Equal Rights (AAER) sued American Airlines, alleging that the company’s suppler diversity program violates Section 1981. AAER alleges that eligibility for American’s supplier diversity program unlawfully depends on race, requiring that businesses “be at least 51% owned, operated and controlled by” minorities, women, veterans, service-disabled veterans, disabled individuals, or members of the LGBTQ community. AAER claims that it has members who are ready and able to apply to the program, but do not meet the diversity eligibility requirements.
- Latest update: On February 12, 2025, American Airlines waived service of summons.

American Alliance for Equal Rights v. Southwest Airlines Co.,No. 24-cv-01209 (N.D. Tex. 2024): On May 20, 2024, American Alliance for Equal Rights (AAER) filed a complaint against Southwest Airlines, alleging that the company’s ¡Latanzé! Travel Award Program, which awards free flights to students who “identify direct or parental ties to a specific country” of Hispanic origin, unlawfully discriminates based on race. AAER seeks a declaratory judgment that the program violates Section 1981 and Title VI, a temporary restraining order barring Southwest from closing the next application period (set to open in March 2025), and a permanent injunction barring enforcement of the program’s ethnic eligibility criteria. On August 22, 2024, Southwest moved to dismiss, arguing that the case was moot because the company had signed a covenant with AAER that eliminated the challenged provisions from future program application cycles. On December 6, 2024, the court granted in part and denied in part Southwest’s motion to dismiss. The court concluded that Southwest’s covenant to eliminate the program rendered moot any claims for declaratory or injunctive relief. However, the court held that it had jurisdiction over the plaintiff’s claims for one cent in nominal damages and allowed those claims to proceed. The court rejected Southwest’s argument that Southwest mooted those claims through an “unsuccessful tender of one cent to [AAER].”
- Latest update: On February 7, 2025, Southwest Airlines answered the complaint, denying allegations of discrimination.

Californians for Equal Rights Foundation v. City of San Diego, No. 3:24-cv-00484 (S.D. Cal. 2024): On March 12, 2024, the Californians for Equal Rights Foundation filed a complaint on behalf of members who are “ready, willing and able” to purchase a home in San Diego, but are ineligible for grants or loans under the City’s Black, Indigenous and other People of Color First-Time Homebuyer Program. Plaintiffs allege that the program discriminates on the basis of race in violation of the Fourteenth Amendment. On June 18, 2024, the City of San Diego and the Housing Authority of the City of San Diego filed a motion for judgment on the pleadings, arguing that the complaint does not include any allegations against it, and instead alleges a “fictitious [agency] relationship” with the other defendants, the Housing Authority of the City of San Diego and the San Diego Housing Commission.
- Latest update: On February 6, 2025, the parties filed a joint stipulation of dismissal, stating that the city had removed the race-based condition from the First-Time Homebuyer Program. On February 7, 2025, the court dismissed the case with prejudice.
American Alliance for Equal Rights v. McDonald’s Corporation et al., No. 3:25-cv-00050 (M.D. Tenn. 2025): On January 12, 2025, the American Alliance for Equal Rights (AAER) filed a complaint against McDonald’s and International Scholarship & Tuition Services, Inc. (ISTS), alleging that defendants operate a college scholarship program that “discriminates against high-schoolers based on their ethnicity” in violation of Section 1981. AAER alleged that the HACER scholarship program, which ISTS administers on McDonald’s behalf, “is open only to Hispanics.” AAER claimed that the program “flatly” bars non-Hispanic students from applying “based on their ethnic heritage” and is therefore unlawful. AAER sought declaratory and injunctive relief barring consideration of race, ethnicity, ancestry, or nationality in consideration of scholarship applications, as well as a preliminary injunction to stop the program from closing the application window for current applicants on February 6, 2025. Gibson Dunn represented McDonald’s in this action.
- Latest update: On January 31, 2025, the parties submitted a joint stipulation of dismissal, stating that McDonald’s will no longer consider applicants’ race and will extend the application deadline until at least March 6, 2025. On February 3, 2025, the court dismissed AAER’s claim with prejudice.

2. Employment discrimination and related claims:

Diemert v. City of Seattle, No. 2:22-cv-1640 (W.D. Wash. 2022): On November 16, 2022, Joshua Diemert, a white man and former employee of the City of Seattle, sued the City, challenging its Race and Social Justice Initiative (RSJI) under the Fourteenth Amendment, Section 1983, and Title VII. He contended that trainings and programs under the RSJI created a hostile work environment with a “pervasive” focus on race. He alleged that he was discriminated against and denied opportunities for advancement as a white man. On August 16, 2024, Seattle moved for summary judgment, arguing that the plaintiff experienced no “negative personnel actions” and that RSJI programing is nondiscriminatory. Seattle also argued that it investigated concerns raised by the plaintiff.
- Latest update: On February 10, 2025, the district court granted Seattle’s motion for summary judgment, holding that a “reasonable juror could not find that the RSJI created an objectively hostile work environment.”

Missouri v. Int’l Bus. Machs. Corp., No. 24SL-CC02837 (Cir. Ct. of St. Louis Cty. 2024): On June 20, 2024, the State of Missouri filed a complaint against IBM in Missouri state court, alleging that the company violated the Missouri Human Rights Act by using race and gender quotas in its hiring and by basing employee compensation on participation in allegedly discriminatory DEI practices. The complaint cited a leaked video in which IBM’s Chief Executive Officer and Board Chairman, Arvind Krishna, allegedly stated that all executives must increase representation of ethnic minorities in their teams by 1% each year to receive a “plus” on their bonus. The complaint also alleged that employees at IBM have been fired or otherwise suffered adverse employment actions because they failed to meet or exceed these targets. The Missouri Attorney General sought to permanently enjoin IBM and its officers from utilizing quotas in hiring and compensation decisions. On September 13, 2024, IBM moved to dismiss the suit, arguing that the “plus” bonus is not a “rigid racial quota,” but a lawful means of encouraging “permissible diversity goals.” IBM also argued that Missouri failed to assert sufficient facts to show that the “plus” bonus influenced any employment decisions in the state. On November 8, 2024, the State of Missouri filed “Suggestions in Opposition” to IBM’s motion to dismiss. Missouri first argued that IBM’s arguments are merits questions that cannot yet be addressed at the motion to dismiss stage. Missouri then argued that if the court considers the merits questions, it should hold that IBM’s racial quotas are unlawful in light of the Missouri Human Rights Act and the Supreme Court decision in Students for Fair Admissions.
- Latest update: On February 10, 2025, the court granted IBM’s motion to dismiss in a one-sentence order without any explanation or reasoning. The court gave Missouri thirty days to amend its complaint.

Grande v. Hartford Board of Education et al., 3:24-cv-00010-JAM (D. Ct. 2024): On January 3, 2024, John Grande, a white male physical education teacher in the Hartford school district, filed suit against the Hartford School Board after allegedly being forced to attend mandatory DEI trainings. He claimed that he objected to the content of a mandatory professional development session focused on race and privilege, stating that he felt “white-shamed” after expressing his political disagreement with the training’s purposes and goals, and that he was thereafter subjected to a retaliatory investigation and was wrongfully threatened with termination. He claimed the school’s actions constitute retaliation and compelled speech in violation of the First Amendment.
- Latest update: On February 5, 2025, the defendants filed a motion for summary judgment, arguing that the plaintiff’s objections to the trainings were made in the course of his official duties as a District employee and therefore were not protected by the First Amendment. They further argued that the District’s interest in effectively administering its professional development sessions outweighed the plaintiff’s speech interests.
Steffens v. Walt Disney Co., No. 25NNCV00944 (Cal. Super. Ct. Los Angeles Cnty. 2025): On February 11, 2025, a white former executive for Marvel Entertainment sued Disney, alleging the company discriminated against him on the basis of race, sex, and age. He alleged he was denied a promotion because of his race and age, and that the Company failed to promote him as retaliation for his objection to “effort[s] to promote presidents to senior vice presidents based on their race and a memorandum that would have referred to employees with the racial signifier ‘BIPOC.’” He brought claims under California state antidiscrimination and unfair business practices laws.
- Latest update: On February 13, the court issued an order to show cause for failure to file proof of service.

3. Actions against educational institutions:

Students Against Racial Discrimination v. Regents of the University of California et al., No. 8:25-cv-00192 (C.D. Cal 2025): On February 3, 2025, Students Against Racial Discrimination (SARD) sued the Regents of the University of California, alleging that University of California schools discriminate against Asian American and white applicants by using “racial preferences” in admissions at all campuses in the UC system in violation of Title VI and the Fourteenth Amendment. SARD alleged it has student members who are ready and able to apply to UC schools but “unable to compete on an equal basis” because of their race.
- Latest update: The docket does not yet reflect that the defendant has been served.
Hooley v. Regents of the University of California et al., No. 3:25-cv-01399 (N.D. Cal. 2025): On February 11, 2025, the mother of a minor high school student sued the Regents of the University of California, alleging that UC San Francisco Benioff Children’s Hospital Oakland discriminates against white students by offering its Community Health and Adolescent Mentoring Program for Success (CHAMPS) internship only to “underrepresented minority students.” The plaintiff alleges that her daughter applied for CHAMPS and was rejected based on her race. The plaintiff challenges the CHAMPS program as violating the Fourteenth Amendment, Title VI, Section 1981, and the California Constitution.
- Latest update: The docket does not yet reflect that the defendant has been served.

4. Challenges to statutes, agency rules, executive orders, and regulatory decisions:

American Alliance for Equal Rights v. City of Chicago, et al., No. 1:25-cv-01017 (N.D. Ill. 2025): On January 29, 2025, AAER and two white male individuals filed a complaint against the City of Chicago and the City’s new casino, Bally’s Chicago, alleging that the City precluded them from investing in the new casino based on their race, in violation of Sections 1981, 1982, 1983, and 1985. Under the Illinois Gambling Act, an application for a casino owner’s license must contain “evidence the applicant used its best efforts to reach a goal of 25% ownership representation by minority persons and 5% ownership representation by women.” Plaintiffs alleged that the casino precluded them from participating in the casino’s initial public offering by limiting certain shares to members of specified racial minority groups.
- Latest update: The defendants waived service on February 3, 2025. An answer is due on March 31, 2025.
Do No Harm v. Gianforte, No. 6:24-cv-00024-BMM-KLD (D. Mont. 2024): On March 12, 2024, Do No Harm filed a complaint on behalf of “Member A,” a white female dermatologist in Montana, alleging that a Montana law requiring the governor to “take positive action to attain gender balance and proportional representation of minorities resident in Montana to the greatest extent possible” when making appointments to the twelve-member Medical Board violates the Fourteenth Amendment. Do No Harm alleged that since ten seats are currently held by six women and four men, Montana law requires that the remaining two seats be filled by men, which would preclude Member A from holding the seat. Following Governor Gianforte’s motion to dismiss, Magistrate Judge De Soto recommended that the case be dismissed for lack of subject matter jurisdiction. Magistrate Judge De Soto found Do No Harm lacked standing because it did not allege “facts demonstrating that at least one Member is both ‘able and ready’ to apply for a Board seat in the reasonably foreseeable future.” For the same reasons, the Magistrate Judge found the case unripe.
- Latest update: On February 5, 2025, the court adopted the Magistrate Judge’s findings and recommendations and dismissed the complaint without prejudice.
National Association of Diversity Officers in Higher Education, et al., v. Donald J. Trump, et al., 25-cv-333 (D. Md. 2025): On February 3, the Mayor and City Council of Baltimore, the National Association of Diversity Officers in Higher Education, the American Association of University Professors, and the Restaurant Opportunities Centers United filed a complaint in the District of Maryland challenging two recent anti-DEI executive orders. The complaint raises six constitutional claims, including claims alleging that the orders violate the First Amendment, Fourteenth Amendment, Spending Clause, and separation of powers. The complaint seeks a declaratory judgment that EO 14151 and EO 14173 are unconstitutional, as well as a preliminary injunction enjoining enforcement of these executive orders.
- Latest update: On February 13, plaintiffs filed a motion for a temporary restraining order (TRO) or, in the alternative, a preliminary injunction to prevent the administration from enforcing the two executive orders, as well as any other memoranda or policy implementing the executive orders. On February 18, the government filed its opposition, arguing: (1) plaintiffs lack standing to challenge the executive orders because they fail to identify any members of their organizations who have been injured and fail to allege a non-speculative injury, (2) plaintiffs’ claims are not ripe for review because they depend on a series of future Executive actions which may not occur as anticipated or at all, (3) plaintiffs are not likely to succeed on the merits of their claim because the executive orders do not violate separation of powers, the First Amendment, or the Fourteenth Amendment since courts have long recognized the President’s authority to regulate contracts and federal funds, and the challenged provisions are tied to federal antidiscrimination law, (4) plaintiffs failed to show irreparable injury attributable to the executive orders, and (5) the public interest weighs against granting plaintiffs’ relief because eradicating discrimination is in the interest of the public. On February 19, plaintiffs filed a reply brief, emphasizing that the President lacks authority to direct federal agencies to terminate grants and contracts simply because they are “equity-related” or to chill plaintiffs’ speech with threats of investigation.

The following Gibson Dunn attorneys assisted in preparing this client update: Jason Schwartz, Mylan Denerstein, Blaine Evanson, Zakiyyah Salim-Williams, Cynthia Chen McTernan, Zoë Klein, Cate McCaffrey, Jenna Voronov, Emma Eisendrath, Felicia Reyes, Allonna Nordhavn, Janice Jiang, Laura Wang, Maya Jeyendran, Kristen Durkan, Ashley Wilson, Lauren Meyer, Kameron Mitchell, Chelsea Clayton, Albert Le, Emma Wexler, Heather Skrabak, and Godard Solomon.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Labor and Employment practice group, or the following practice leaders and authors:

Jason C. Schwartz – Partner & Co-Chair, Labor & Employment Group
Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com)

Katherine V.A. Smith – Partner & Co-Chair, Labor & Employment Group
Los Angeles (+1 213-229-7107, ksmith@gibsondunn.com)

Mylan L. Denerstein – Partner & Co-Chair, Public Policy Group
New York (+1 212-351-3850, mdenerstein@gibsondunn.com)

Zakiyyah T. Salim-Williams – Partner & Chief Diversity Officer
Washington, D.C. (+1 202-955-8503, zswilliams@gibsondunn.com)

Molly T. Senger – Partner, Labor & Employment Group
Washington, D.C. (+1 202-955-8571, msenger@gibsondunn.com)

Blaine H. Evanson – Partner, Appellate & Constitutional Law Group
Orange County (+1 949-451-3805, bevanson@gibsondunn.com)

In today’s regulatory and digital environment, cybersecurity and data privacy are critical factors in the IPO and public company readiness process. Please join us for a presentation that provides a comprehensive overview of the key considerations for assessing cybersecurity and data privacy preparedness, with a focus on helping companies identify, assess, and mitigate risks. We explore how to effectively characterize these risks for disclosures and navigate the scrutiny that comes with the IPO process, including responding to diligence inquiries from regulators, investors, and other stakeholders.

This session will equip legal professionals with the tools to ensure that cybersecurity and data privacy are adequately addressed in IPO planning and execution, helping to mitigate potential liabilities and position companies for long-term compliance and success as a public company.

MCLE CREDIT INFORMATION:

Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact CLE@gibsondunn.com to request the MCLE form.

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.0 hour in the General Category.

California attorneys may claim “self-study” credit for viewing the archived version of this webcast. No certificate of attendance is required for California “self-study” credit.

PANELISTS:

Harrison Tucker is a partner in the Houston office of Gibson, Dunn & Crutcher, where he currently practices with the firm’s Capital Markets and Securities Regulation and Corporate Governance practice groups. He regularly represents public and private businesses in a broad range of corporate and securities matters and issuers and investment banking firms in both equity and debt offerings, including Rule 144A offerings. His practice also includes general corporate concerns, including Exchange Act reporting, stock exchange compliance, corporate governance and beneficial ownership reporting matters. In addition, he works closely with the Gibson Dunn bankruptcy and restructuring team, advising on applicable securities laws issues.

Stephenie Gosnell Handler is a partner in Gibson Dunn’s Washington, D.C. office, where she is a member of the International Trade and Privacy, Cybersecurity, and Data Innovation practices. She advises clients on complex legal, regulatory, and compliance issues relating to international trade, cybersecurity, and technology matters. Stephenie ’s legal advice is deeply informed by her operational cybersecurity and in-house legal experience at McKinsey & Company, and also by her active duty service in the U.S. Marine Corps.

Sarah Scharf is an associate in the Los Angeles office of Gibson, Dunn & Crutcher. She is a key member of the firm’s Technology Transactions and Privacy, Cybersecurity and Data Innovation practice groups, including as part of the firm’s State Privacy Law Task Force. Sarah has extensive experience advising companies on privacy, cybersecurity, artificial intelligence (AI), information technology (IT), and intellectual property (IP) issues, and focuses on complex transactional representations, strategic product counseling, regulatory compliance counseling, and privacy and AI program development. Sarah counsels clients across a range of industries, including technology, software, retail, luxury fashion, sports, media and entertainment, gig economy, real estate, finance, energy, and utility.

New Guidance Likely to Alter the Landscape for Shareholder Engagement

On February 11, 2025, the Staff in the Division of Corporation Finance (“Staff”) of the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) issued updated and new Compliance and Disclosure Interpretations (“C&DIs”)[1] that are likely to significantly impact how investors engage with public companies. These interpretations address beneficial ownership reporting on Schedule 13G vs. Schedule 13D (“13G” and “13D,” respectively), expand the nature and scope of activities the Staff views as “influencing control of the issuer” (which could deter otherwise passive investors who own more than 5% of a company’s voting securities from certain forms of engagement to avoid becoming ineligible to rely on 13G reporting), and could require groups of smaller social activist shareholders to become subject to 13D reporting. The Staff’s recent guidance underscores the agency’s increasing scrutiny of institutional investors’ corporate governance stewardship activities, particularly in the context of environmental, social, and governance (“ESG”) matters.

Key Changes to 13G Filing Eligibility Standards

Shareholders, including those acting as a group, that beneficially own more than 5% of a class of registered voting securities must report their ownership on either a 13G or a 13D. To maintain eligibility to report on 13G instead of 13D,[2] a shareholder must certify that the subject securities “were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer.” A 13D requires more detailed information on a shareholder’s beneficial ownership of and transactions in a subject company’s shares, as well as its plans and proposals with respect to the company and requires prompt amendments for any material changes in the reported information.

13G Filing Eligibility and Shareholder Engagement.

In revised C&DI 103.11, the Staff reaffirmed that a shareholder’s inability to rely on the Hart-Scott-Rodino Act’s exemption from notification and waiting period requirements for an acquisition made “solely for the purpose of investment” would not affect a shareholder’s ability to report on 13G. The Staff emphasized that a shareholder’s ability to report on 13G instead depends on whether its activities suggest an intent to influence control of the company. The guidance reminds investors that such determination necessarily entails a factual analysis of the shareholder’s actions and intentions in relation to “control” as defined under Exchange Act Rule 12b-2.[3] Notably, as shown by the redline that the Staff now provides when it revises its C&DIs, the Staff withdrew its prior guidance that engagement with a company on executive compensation, environmental, social, or other public interest issues, or on corporate governance topics unrelated to a specific change of control, without more, would generally not cause a loss of 13G eligibility.

Actions Constituting a “Purpose or Effect of Influencing Control”.

In new C&DI 103.12, the Staff addresses circumstances that in its view would preclude an investor from reporting on 13G because it held securities with a disqualifying “purpose or effect of changing or influencing control of the issuer.” The interpretation makes clear that a shareholder exerting “pressure” to adopt governance measures, particularly tied to ESG or political policy matters, may be viewed as an attempt to influence control over the company.

When Does Engagement with Management Cross the Line?

The new and revised C&DIs state that engaging with a company’s management on corporate governance or other policy matters could, depending on all the relevant facts and circumstances, result in a disqualification from reporting on 13G. This is particularly relevant for investors whose activities, though intended to push for governance changes or ESG-driven policies, may be interpreted as attempts to influence control. The Staff’s recent interpretation aligns with comments made by SEC Acting Chairman Mark Uyeda, who previously stated that asset managers’ voting policies on ESG matters may qualify as attempts to exert control over management.[4] According to the Staff, investors exerting pressure on management to implement specific measures or changes to a policy would be influencing control over the company. Such examples of exerting pressure over the company include the following:

Subject Matter Engagement: Shareholders engaging with management to specifically call for control-related actions – such as a sale of the company or a significant amount of assets, restructuring, or the election of director nominees other than the company’s nominees – would be disqualified from 13G eligibility solely due to the subject matter of the discussion or communications.
Context of Engagement: Under C&DI 103.12, a “shareholder who discusses with management its views on a particular topic and how its views may inform its voting decisions, without more, would not be disqualified from reporting on a Schedule 13G.” However, “pressuring” management to adopt specific measures or tying support for directors to the adoption of certain proposals (e.g., removal of staggered boards, changes to executive compensation practices, eliminating poison pill rights plans, undertaking specific actions relating to an environmental, social, or political policy, and stating or implying during any such discussions that it will not support one or more of the company’s director nominees at the next annual meeting as a means of “pressuring” a company to adopt a particular recommendation) may also risk the loss of 13G eligibility. “Pressure” can be direct or indirect, express or implied.

SEC Guidance on 13D Group Formation

The Staff’s guidance should be read in conjunction with the SEC’s October 2023 Release,[5] which described examples of activities and/or communications that would not give rise to formation of a Section 13(d) group. According to the Commission, the following scenarios would not give rise to group formation:

Discussions in private or public forums: Meetings between two parties or an independent, free exchange of ideas among shareholders at a conference, without the intent to engage in concerted actions or agreements related to securities acquisition, holding, or disposition, are not considered group activity.
Discussions with company management: Engaging with company management and other shareholders to jointly recommend board structure and composition, without discussing individual directors, expanding the board, or pressuring the board to take specific actions, does not form a group.
Non-binding shareholder proposals: Having conversations about or submitting a non-binding shareholder proposal jointly with others does not constitute group activity.
Conversations with activist investors: Conversations, emails, phone calls, or meetings between a shareholder and an activist investor seeking support for proposals, without further coordinated actions, are not considered group activity.
Announcement of voting intentions: Announcing an intention to vote in favor of an unaffiliated activist investor’s director nominees, without further coordinated activity, does not form a group.

In contrast, a substantial shareholder sharing information with the intent of inducing others to purchase the same stock, where those purchases directly result from the information shared, could raise the possibility of group formation.

These scenarios provided by the Commission offer useful guidance for investors that may communicate with a public company and its shareholders, but do not want to inadvertently become a member of a group.

Implications and Possible Impact of the Staff’s Interpretations

The Staff’s views expressed in the C&DIs foreshadow stricter scrutiny on passive investors’ 13G status and create new risks for investors (or groups of investors) when communicating with management and boards at public companies. The new C&DI introduces the concept of “pressure,” which will be difficult to administer in practice and is, ultimately, a subjective standard. Investors should be mindful of the risk that, if a company believes the investor has crossed the line to “pressure” the company, it may contact the Staff to question whether the investor should be filing on a 13D and provide more details on its beneficial ownership and related transactions, as well as its intentions, including any plans or proposals, with respect to the company. The only example of “pressure” that is provided in the C&DIs is conditioning support for the company’s director nominees at the next election of directors.

While these interpretations should rein in the minority of 13G filers who campaign on various ESG issues subject to a threat of voting against directors, they will likely influence the actions of large institutional investors who in recent years have sought to address ESG matters through their own “board accountability” voting policy standards (which those institutions have in recent years increasingly relied on in lieu of supporting shareholder proposals on such issues). The interpretations also raise the possibility that groups of investors that collectively own more than 5% of a company’s stock, including smaller social activist investors that individually hold less than 5% of a company’s stock, could be viewed as forming a 13D group if they coordinate to urge companies to adopt specific climate-change, diversity, equity and inclusion, or other ESG policies, particularly if backed by pressure through a “vote no” campaign.

The updated C&DIs should prompt investors who are reporting on 13G, as well as smaller activist investors who are not 13D or 13G filers but have signed on to various ESG letter-writing and other campaigns, to reassess their strategies. Passive investors who have traditionally filed on 13G despite pushing for governance or ESG-related changes should now assess whether their actions could be seen as attempts to exert “pressure” and may need to change their approach to protect their 13G eligibility. While it is theoretically possible for investors reporting on 13G to temporarily opt to report on 13D, many mutual funds and other investors face institutional or practical restrictions that make 13D reporting unrealistic. As a result, those investors may seek to avoid or minimize any communications that could be viewed as exerting “pressure” or attempts to exert control. Passive investors who chose to migrate from 13G to 13D in situations where communications relate to control-related issues or rise to the level of “pressure” may be able to revert back to 13G reporting once the shareholder engagement is completed and a vote taken on the matter at hand.

There are other notable collateral, and possibly unintended, consequences of the Staff’s revised interpretations. For example, companies engaged in a proxy contest may find it more difficult to engage with their largest institutional investors, as those investors may be concerned that expressing views on issues arising in the contest could be viewed as pressuring company management and, therefore, triggering 13D reporting. Ironically, if faced with less transparency from their large institutional shareholders, companies may become more reliant on engaging with and attempting to sway the major proxy advisory firms. Even outside of the context of an actual proxy contest, another unintended consequence may be a stifling of dialogue between large institutional investors and companies, a decrease in transparency on how these investors intend to vote, and possibly an increase in abstentions.

Practical Considerations for Investors and Companies

The Staff’s updated guidance on 13G eligibility risks chilling the type of routine engagement that many companies have sought to foster and believe better positions them with their investors to help ward off proxy contests and other forms of traditional activism. With respect to the upcoming proxy season, we understand that some investors have already begun canceling or delaying long-scheduled engagements with companies as they assess the implications of the Staff’s guidance. As a result, companies may need to consider enhancing their disclosures and considering alternative additional solicitation strategies to ensure they are effectively communicating their key messages to investors.

Nevertheless, while the determination of whether an investor is acting with a control purpose or intent will depend on all the relevant facts and circumstances, there are some guideposts that investors and companies should bear in mind:

The C&DI expressly states that a shareholder who discusses with management its views on a particular topic and how its views may inform its voting decisions, without more, generally would not be disqualified from reporting on a 13G.
Discussions around non-binding proposals, such as votes on management’s say-on-pay proposals and discussions with non-proponents regarding shareholder proposals, should present less risk of being viewed as applying pressure on management or attempting to influence control of the company.
Investor responses to company-initiated inquiries regarding the investor’s views on a particular issue, and investor references to other companies’ practices or disclosures that the investor views as favorable, without more, should present less risk of being viewed as applying pressure on management or attempting to influence control of the company. As a result, companies will need to be more proactive in requesting engagement with investors and asking questions about key topics during those engagements.
Companies and investors may explore additional steps to foster productive discussions that avoid creating a mis-impression that an investor is seeking to apply pressure when that is not the investor’s intent. For example, when applicable, some investors might seek to clarify with a company that voting decisions are made on a case-by-case basis, by a committee, or by individual portfolio managers, and therefore that the investor’s engagement team should not be viewed as representing how the investor will vote on a particular matter.
The C&DI notes the context in which an engagement occurs is highly relevant in determining whether a shareholder is holding securities with a disqualifying purpose or effect of “influencing” control of the company and, as such, off-season engagements may present less risk of losing 13G eligibility.

Ultimately, the latest C&DIs are likely to chill institutional investors’ willingness to engage with companies as candidly as in recent years and could lead to unexpected negative votes on director elections, say on pay, or other matters. As a result, companies and boards will need to stay highly attuned to investor sentiment as expressed through other means, such as voting policies and public statements, and seek to maintain open channels of communication year-round to avoid these risks and ensure alignment on key governance and ESG matters. Companies and boards are encouraged to review their shareholder engagement activities, and consult with outside counsel as needed, on specific situations considering the Staff’s new guidance.

Conclusion

The Staff’s latest guidance signals a more stringent approach to shareholder activism, with a new emphasis on engagement as a factor that may cause a shareholder to lose its 13G eligibility. Shareholders who have traditionally been viewed as passive should be more mindful of how their actions (overt or implicit) and communications with management and boards may be seen as constituting “pressure,” particularly with respect to governance, environmental, social, and political policy matters. In many instances, views as to what amounts to “pressure” may be in the eye of the beholder. As a result, we recommend training, clarifying ground rules between parties, and avoiding one-on-one communications between companies and shareholders.

[1] Specifically, the Staff revised Question 103.11 and issued a new Question 103.12 under “Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting.”

[2] Rule 13d-1(b) and Rule 13d-1(c) require the shareholder to certify that the securities were not acquired and are not held with a disqualifying purpose or effect. Any person who acquired beneficial ownership before a company’s voting securities were registered under the Exchange Act can report on 13G pursuant to Rule 13d-1(d) regardless of control over the company.

[3] Exchange Act Rule 12b-2 defines “control” (including the terms “controlling,” “controlled by” and “under common control with”) as “the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.”

[4] U.S. Securities & Exchange Comm., Nov. 17, 2022, https://www.sec.gov/news/speech/uyeda-remarks-cato-summit-financial-regulation-111722 (remarks of Comm. Uyeda at Cato Summit on Financial Regulation).

[5] See SEC Release Nos. 33-11253; 34-98704 (Oct. 10, 2023).

The following Gibson Dunn lawyers prepared this update: Ron Mueller, Jim Moloney, Aaron Briggs, Beth Ising, Tom Kim, Brian Lane, Lori Zyskowski, Mickal Haile, and Matt Staugaard.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work, or any of the following lawyers in the firm’s Securities Regulation and Corporate Governance, Capital Markets, Mergers and Acquisitions, or Private Equity practice groups:

Securities Regulation and Corporate Governance:
Aaron Briggs – San Francisco (+1 415.393.8297, abriggs@gibsondunn.com)
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Brian J. Lane – Washington, D.C. (+1 202.887.3646, blane@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Michael A. Titera – Orange County (+1 949.451.4365, mtitera@gibsondunn.com)
Geoffrey E. Walter – Washington, D.C. (+1 202.887.3749, gwalter@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

Capital Markets:
Andrew L. Fabens – New York (+1 212.351.4034, afabens@gibsondunn.com)
Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)
Stewart L. McDowell – San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)
Peter W. Wardle – Los Angeles (+1 213.229.7242, pwardle@gibsondunn.com)

Mergers and Acquisitions:
Robert B. Little – Dallas (+1 214.698.3260, rlittle@gibsondunn.com)
Saee Muzumdar – New York (+1 212.351.3966, smuzumdar@gibsondunn.com)
George Sampas – New York (+1 212.351.6300, gsampas@gibsondunn.com)

Private Equity:
Richard J. Birns – New York (+1 212.351.4032, rbirns@gibsondunn.com)
Ari Lanin – Los Angeles (+1 310.552.8581, alanin@gibsondunn.com)
Michael Piazza – Houston (+1 346.718.6670, mpiazza@gibsondunn.com)
John M. Pollack – New York (+1 212.351.3903, jpollack@gibsondunn.com)

The Court of Appeal judgment means that States can be prevented by the doctrine of issue estoppel from relitigating state immunity issues before the English courts if those issues have already been decided in another forum. As such, the judgment provides a potential shortcut through otherwise lengthy and expensive proceedings on questions of state immunity.

Executive Summary

On 12 February 2025, the UK’s Court of Appeal issued an important ruling in the area of judgment and arbitral award enforcement: Hulley Enterprises Ltd & Ors v The Russian Federation [2025] EWCA 108 (the CA Judgment).

The CA Judgment affirms the High Court’s earlier decision (the HC Judgment)[1] that the doctrine of issue estoppel can apply to arguments on state immunity. The decision is especially important in the field of judgment and award enforcement because, according to the CA Judgment, those seeking to enforce against a State can rely upon prior decisions—including those of foreign courts—in deciding issues that underpin a claim for state immunity. That is subject to establishing (i) the standard common law requirements for an issue estoppel,[2] and (ii) the requirements for recognition of a foreign judgment issued against a foreign State set out in s. 31 of the Civil Jurisdiction and Judgments Act 1982 (the CJJA).[3]

The CA Judgment means States will be prevented from relitigating certain state immunity issues before the English courts so that an English court can base its decision as to the existence of state immunity on an issue estoppel arising from the decision of a foreign court. As such, it provides a potential shortcut through otherwise lengthy and expensive proceedings on questions of state immunity.

Relevant Background

The claimants in the case (the Hulley Claimants) obtained three materially identical arbitral awards (the Awards) against Russia in 2014. The Awards ordered Russia to pay damages exceeding USD 50 billion (plus interest) for Russia’s violations of the Energy Charter Treaty stemming from Russia’s unlawful expropriation of Yukos Oil Company in which the Hulley Claimants were majority shareholders. Following the issuance of the Awards, a sprawling set of set-aside and enforcement proceedings has unfolded across multiple jurisdictions.

As to the set-aside proceedings: in 2014, Russia applied to set the Awards aside in the courts of the arbitral seat, the Netherlands. The Awards were set aside at first instance by the Hague District Court in 2016 on jurisdictional grounds because it found that there was no binding arbitration agreement between the Hulley Claimants and Russia.[4] However, the Hulley Claimants successfully appealed that decision, and the Awards were re-instated by the Hague Court of Appeal in 2020.[5] Russia then appealed that decision to the Dutch Supreme Court,[6] which, in 2021, upheld most of the Hague Court of Appeal’s findings but remitted one issue to the Amsterdam Court of Appeal for further consideration.[7] According to the CA Judgment, while the Amsterdam Court of Appeal has ruled in the Hulley Claimants’ favour on the outstanding issue, a further appeal to the Dutch Supreme Court remained pending as of the date of the CA Judgment.[8]

Meanwhile, in 2015, before the Hague District Court had set the Awards aside, the Hulley Claimants had applied for recognition and enforcement of the Awards in the UK. Those proceedings were then stayed by consent following the set-aside decision of the Hague District Court in 2016.[9] After the Dutch Supreme Court judgment was handed down in 2021, the stay was lifted partially and solely for the purpose of resolving Russia’s state immunity defence (emanating from jurisdictional issues). Directions were given by Mr Justice Butcher for determination of certain preliminary issues centred around whether Russia was precluded, by reason of an issue estoppel arising out of the Dutch courts’ judgments, from arguing that the arbitral tribunal did not have jurisdiction.

The core of the Dutch courts’ jurisdictional finding was that, contrary to Russia’s submissions, there was a binding arbitration agreement between the Hulley Claimants and Russia. Consequently, in the English proceedings considering these preliminary jurisdictional issues, the Hulley Claimants argued that the Dutch courts’ determination on jurisdiction also resolved the question of whether the arbitration exception under s. 9 of the UK State Immunity Act 1978 (the SIA)[10] applied; Russia counterargued that that question had to be the subject of further consideration de novo by the English courts.[11]

The High Court Judgment

The preliminary jurisdictional issues were the subject of a two-day hearing before Mrs Justice Cockerill DBE on 4–5 October 2023, and the HC Judgment was handed down on 1 November 2023.

Cockerill J ruled in favour of the Hulley Claimants in reliance of the Dutch courts’ jurisdictional determinations. She held that the SIA is subject to procedural and substantive common law rules, including issue estoppel, and there was no principle of law that issue estoppel could not arise in the context of public international law (such as in relation to the interpretation of an international treaty).[12] She also held that, in order for an issue estoppel to arise from a foreign judgment issued against a foreign State, the requirements for recognition of such judgments, contained in s. 31 of the CJJA, must also be satisfied.[13]

Applying those principles, Cockerill J found that the Dutch Supreme Court’s 2021 decision—dismissing Russia’s challenge to the Awards and finding a binding agreement to arbitrate—created an issue estoppel. Russia was therefore estopped from re-arguing before the English courts the question of whether it had agreed to submit the dispute to arbitration. Consequently, Cockerill J dismissed Russia’s challenge to the jurisdiction of the English courts on the grounds of state immunity.

The Court of Appeal Judgment

Russia appealed the HC Judgment to the Court of Appeal on five grounds,[14] which were distilled down to a single primary issue: when a foreign court has decided that a State has agreed in writing to submit a dispute to arbitration, and the usual conditions for the application of issue estoppel are satisfied, can: (a) the English court treat that decision as giving rise to an issue estoppel, or (b) must it determine the issue for itself (i.e., de novo) without regard to the decision of the foreign court?

The appeal was heard on 15 January 2025 and the CA Judgment was handed down on 12 February 2025. Lord Males, Lord Lewison, and Lord Zacaroli unanimously dismissed Russia’s appeal, with Lord Males delivering the lead judgment.

The Court of Appeal noted that, while the SIA sets out comprehensively the exceptions to state immunity (in ss. 2 to 11 of the SIA), it does not prescribe how the English court should decide whether any of the exceptions applies in any given case.[15] That question must be decided by applying the ordinary principles of English law—both substantive and procedural—and those principles include the principle of issue estoppel.[16]

Thus, when Cockerill J had decided to give effect to an issue estoppel arising from the Dutch Supreme Court’s 2021 judgment, she had not (as Russia had maintained) declined to determine whether Russia had agreed to submit the underlying dispute to arbitration. Instead, the Judge had determined that Russia had so agreed, applying the substantive principle of issue estoppel. In short: the relevant question had been determined by the previous decision of a court of competent jurisdiction (i.e., the Dutch Supreme Court in 2021), which the Court of Appeal confirmed to be conclusive on the issue in question.[17]

The Court of Appeal also rejected Russia’s arguments that issues of state immunity and/or treaty interpretation constituted “special circumstances” militating against the application of issue estoppel in any event. In doing so, the Court of Appeal noted that to give effect to the issue estoppel arising from such a judgment would be in the interests of justice as it would: (i) avoid putting the Hulley Claimants to the trouble and expense of litigating the relevant issue again, and (ii) be in accordance with the important public policy that arbitral awards, even against sovereign States, “should be honoured without delay and without the kind of trench warfare seen in the present case”.[18]

Comment

The CA Judgment is significant. It confirms that determinations of foreign courts—in particular, of the courts of the arbitral seat—can give rise to an issue estoppel when English courts are deciding the same issues within the context of a sovereign immunity defence. In practice, it is often the case that the set-aside proceedings at the seat of the arbitration will settle the question of whether the tribunal in question had jurisdiction (i.e., effectively the very same question that arises under s. 9 of the SIA as to whether the arbitration exception applies). The CA Judgment, thus, paves the way for award creditors to rely upon such final determinations of foreign courts to cut short a State’s assertion of adjudicative immunity in enforcement proceedings before the English courts.

Accordingly, the CA Judgment means that: (i) the timeline for obtaining an enforceable recognition and enforcement order against a State (entitling the award creditor to start the execution process against the State’s assets) can be much shorter, and (ii) the additional costs and expenses of re-running complex and already-decided jurisdictional arguments before the English courts can be avoided.

On the whole, the CA Judgment is positive news for parties looking to enforce awards against foreign States in the UK and re-affirms the UK’s pro-enforcement stance in accordance with other recent decisions.[19]

We note that the CA Judgment may be subject to a further appeal to the UK Supreme Court.

[1] Hulley Enterprises Ltd & Ors v The Russian Federation [2023] EWHC 2704 (Comm).

[2] Being that (i) the judgment (which is alleged to form the basis of the issue estoppel) must have been given by a foreign court of competent jurisdiction; (ii) the judgment (which is alleged to form the basis of the issue estoppel) must be final and conclusive and on the merits; (iii) there must be identity of parties; (iv) there must be identity of subject matter (i.e., the issue decided by the foreign court must be the same as the one arising in the English proceedings); and (v) “special circumstances”, militating against the application of issue estoppel, must not exist (see CA Judgment, paras. 36, 41).

[3] Being that (i) the judgment (which is alleged to form the basis of the issue estoppel) would be recognised and enforced if it had not been given against a State; and (ii) that the foreign court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the UK in accordance with ss. 2–11 of the State Immunity Act 1978 (see CA Judgment, paras. 23, 72–76).

[4] CA Judgment, para. 8.

[5] CA Judgment, para. 9.

[6] Raising challenges as to the conduct of the arbitration alongside its jurisdictional objections.

[7] CA Judgment, para. 11. The one issue that had been remitted to the Amsterdam Court of Appeal was whether the Awards were vitiated by fraud as a result of the Hulley Claimants having (allegedly) effectively bribed a witness to give evidence in their favour and failed to disclose key documents.

[8] CA Judgment, para. 15.

[9] CA Judgment, paras. 7–8.

[10] Section 9(1) of the SIA provides that “[w]here a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration”.

[11] CA Judgment, para. 12.

[12] HC Judgment, paras. 19–40, 53–55.

[13] HC Judgment, paras. 41–48.

[14] The five grounds of appeal advanced by Russia were: (1) issue estoppel is not applicable in respect of a foreign judgment against a state, not least on an issue of state immunity; (2) there is no scope for issue estoppel to apply when determining whether state immunity is available under the SIA; (3) s. 31 of the CJJA is not available as an “overlay” for a common law issue estoppel determination; (4) special circumstances militate against the application of issue estoppel in any event because of (i) the extant fraud challenge wherein the Awards are liable to be set aside; (ii) the existence of a potential reference to, and determination by, the Court of Justice of the European Union that there was no jurisdictional basis for the Awards; and (iii) the primacy which ought to be given to the exceptional nature of state immunity; and (5) the requirement for an English court to identify the true and proper construction of a treaty itself militates against the application of issue estoppel on such a matter (see CA Judgment, para. 49).

[15] CA Judgment, paras. 3, 57.

[16] CA Judgment, paras. 3, 57.

[17] CA Judgment, para. 56.

[18] CA Judgment, paras. 77–84.

[19] See further our client alerts on the decisions in Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain and Border Timbers Ltd & Anor v Republic of Zimbabwe [2024] EWCA Civ 1257 (here); Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain [2023] EWHC 1226 (Comm) (here); and Micula & Ors v Romania [2020] UKSC 5 (here).

The following Gibson Dunn lawyers prepared this update: Piers Plumptre, Ceyda Knoebel, Theo Tyrrell, and Dimitar Arabov.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Arbitration, Judgment and Arbitral Award Enforcement, or Transnational Litigation practice groups, or the authors in London:

Piers Plumptre (+44 20 7071 4271, pplumptre@gibsondunn.com)
Ceyda Knoebel (+44 20 7071 4243, cknoebel@gibsondunn.com)
Theo Tyrrell (+44 20 7071 4016, ttyrrell@gibsondunn.com)
Dimitar Arabov ( +44 20 7071 4063, darabov@gibsondunn.com)

From the Derivatives Practice Group: The CFTC under the Trump administration is taking shape, and ESMA launched consultations on (i) revising the disclosure framework for private securitizations (ii) settlement discipline and (iii) the European Market Infrastructure Regulation.

New Developments

Trump Plans to Pick Brian Quintenz to Lead CFTC. On February 11, several mainstream news sources began to report that U.S. President Donald Trump plans to nominate Brian Quintenz, the head of policy at Andreessen Horowitz’s a16z crypto arm, as Chairman of the CFTC. Quintenz previously served as a commissioner for the CFTC during the first Trump administration. [NEW]
Acting Chairman Pham Announces Brian Young as Director of Enforcement. On February 14, the CFTC Acting Chairman Caroline D. Pham today announced Brian Young will serve as the agency’s Director of Enforcement. Young has been serving in an acting capacity since January 22, and previously was the Director of the Whistleblower Office. He is a distinguished federal prosecutor with nearly 20 years of service at the Department of Justice, including Acting Director of Litigation for the Antitrust Division and Chief of the Litigation Unit for the Fraud Section of the Criminal Division, and has successfully tried some of the most high-profile criminal fraud and manipulation cases in the CFTC’s markets. [NEW]
CFTC Announces Crypto CEO Forum to Launch Digital Asset Markets Pilot. On February 7, the CFTC announced that it will hold a CEO Forum of industry-leading firms to discuss the launch of the CFTC’s digital asset markets pilot program for tokenized non-cash collateral such as stablecoins. Participants will include Circle, Coinbase, Crypto.com, MoonPay and Ripple.
CFTC Statement on Allegations Targeting Acting Chairman. On February 6, the CFTC released a statement regarding allegations targeting Acting Chairman Pham.
David Gillers to Step Down as Chief of Staff. On February 6, the CFTC announced that David Gillers will step down as Chief of Staff to Commissioner Behnam on February 7.
CFTC Announces Prediction Markets Roundtable. On February 5, the CFTC announced that it will hold a public roundtable in approximately 45 days at the conclusion of its requests for information on certain sports-related event contracts. The CFTC said that the goal of the roundtable is to develop a robust administrative record with studies, data, expert reports, and public input from a wide variety of stakeholder groups to inform the Commission’s approach to regulation and oversight of prediction markets, including sports-related event contracts. According to the CFTC, the roundtable will include discussion of key obstacles to the balanced regulation of prediction markets, retail binary options fraud and customer protection, potential revisions to Part 38 and Part 40 of CFTC regulations to address prediction markets, and other improvements to the regulation of event contracts to facilitate innovation. The roundtable will be held at the CFTC’s headquarters in Washington, D.C.
CFTC Division of Enforcement to Refocus on Fraud and Helping Victims, Stop Regulation by Enforcement. On February 4, CFTC Acting Chairman Caroline D. Pham announced a reorganization of the Division of Enforcement’s task forces to combat fraud and help victims while ending the practice of regulation by enforcement. According to the CFTC, previous task forces will be simplified into two new Division of Enforcement task forces: the Complex Fraud Task Force and the Retail Fraud and General Enforcement Task Force. The Complex Fraud Task Force will be responsible for all preliminary inquiries, investigations, and litigations relating to complex fraud and manipulation across all asset classes. The Acting Chief will be Deputy Director Paul Hayeck. The Retail Fraud and General Enforcement Task Force will focus on retail fraud and handle general enforcement matters involving other violations of the Commodity Exchange Act. The Acting Chief will be Deputy Director Charles Marvine.
CFTC Staff Issues No-Action Letter to Korea Exchange Concerning the Offer or Sale of KOSPI and Mini KOSPI 200 Futures Contracts. On February 4, the CFTC’s Division of Market Oversight issued a no-action letter stating it will not recommend the CFTC take enforcement action against Korea Exchange (“KRX”) for the offer or sale of Korea Composite Stock Price Index (“KOSPI”) 200 Futures Contracts and Mini KOSPI 200 Futures Contracts to persons located within the United State while the Commission’s review of KRX’s forthcoming request for certification of the contracts under CFTC Regulation 30.13 is pending. DMO issued similar letters when the KOSPI 200 became a broad-based security index in 2021 and 2022. See CFTC Press Release Nos. 8464-21 and 8610-22. The KOSPI 200 became a narrow-based security index in February 2024. The KOSPI 200 is set to become a broad-based security index on February 6, 2025, and the no-action position in DMO’s letter will be effective on that date.
CFTC Staff Issues Supplemental Letter Regarding No-Action Position on Reporting, Recordkeeping Requirements. On January 31, the CFTC’s Division of Market Oversight and the Division of Clearing and Risk announced they have taken a no-action position regarding swap data reporting and recordkeeping regulations. The CFTC said this position is in response to a request from KalshiEX LLC, a designated contract market, and Kalshi Klear LLC, a derivatives clearing organization, to modify CFTC Letter No. 24-15 to remove the condition prohibiting third-party clearing by participants and to cover fully-collateralized variable payout contracts. The Divisions indicated that they will not recommend the CFTC initiate an enforcement action against KalshiEX LLC, Kalshi Klear LLC, or their participants for failure to comply with certain swap-related recordkeeping requirements and for failure to report to swap data repositories data associated with binary option transactions and variable payout contract transactions executed on or subject to the rules of KalshiEX LLC and cleared through Kalshi Klear LLC, subject to the terms of the no-action letter. The supplemental letter also removes the condition in CFTC Letter No. 24-15 that prohibits Kalshi participants from clearing contracts through a third-party clearing member.

New Developments Outside the U.S.

ESMA Launches a Common Supervisory Action with NCAs on Compliance and Internal Audit Functions. On February 14, ESMA launched a Common Supervisory Action (“CSA”) with National Competent Authorities (“NCAs”) on compliance and internal audit functions of undertaking for collective investment in transferable securities (“UCITS”) management companies and Alternative Investment Fund Managers (“AIFMs”) across the EU. The CSA will be conducted throughout 2025 and aims to assess to what extent UCITS management companies and AIFMs have established effective compliance and internal audit functions with the adequate staffing, authority, knowledge, and expertise to perform their duties under the AIFM and UCITS Directives. [NEW]
ESMA Consults on Amendments to Settlement Discipline. On February 13, ESMA launched a consultation on settlement discipline, with the objective of improving settlement efficiency across various areas. ESMA is consulting on a set of proposals to amend the technical standards on settlement discipline that include: reduced timeframes for allocations and confirmations, the use of electronic, machine-readable allocations and confirmations according to international standards, and the implementation of hold & release and partial settlement by all central securities depositories. [NEW]
ESMA Consults on Revised Disclosure Requirements for Private Securitizations. On February 13, ESMA launched a consultation on revising the disclosure framework for private securitizations under the Securitization Regulation (“SECR”). The consultation proposes a simplified disclosure template for private securitizations designed to improve proportionality in information-sharing processes while ensuring that supervisory authorities retain access to the essential data for effective oversight. The new template introduces aggregate-level reporting and streamlined requirements for transaction-specific data, reflecting the operational realities of private securitizations. [NEW]
Geopolitical and Macroeconomic Developments Driving Market Uncertainty. On February 13, ESMA published its first risk monitoring report of 2025, setting out the key risk drivers currently facing EU financial markets. ESMA finds that overall risks in EU securities markets are high, and market participants should be wary of potential market corrections. [NEW]
ESMA Appoints Birgit Puck as new Chair of the Markets Standing Committee. On February 11, ESMA appointed Birgit Puck, Finanzmarktaufsicht, as a new Chair of the Markets Standing Committee.
ESMA consults on CCP Authorizations, Extensions and Validations. On February 7, ESMA launched two public consultations following the review of the European Market Infrastructure Regulation (“EMIR 3”). ESMA is encouraging stakeholders to share their views on: (i) the conditions for extensions of authorization and the list of required documents and information for applications by central counterparties (“CCPs”) for initial authorizations and extensions, and (ii) the conditions for validations of changes to CCP’s models and parameters and the list of required documents and information for applications for validations of such changes. EMIR 3 introduces several measures to make EU clearing services and EU CCPs more efficient and competitive, notably by streamlining and shortening supervisory procedures for initial authorizations, extensions of authorization and validations of changes to models and parameters. [NEW]
DPE Regime for Post-Trade Transparency Becomes Operational. On February 3, the public register listing designated publishing entities (“DPEs”) that now bear the reporting obligation for post-trade transparency under MIFIR went live, bringing the DPE regime into full operational effect. The public register can be found here. The post-trade reporting obligation for systematic internalizers (“SIs”) has been replaced by an analogous obligation on investment firms that have chosen to register as DPEs. As a further consequence of the DPE regime launch, ESMA has decided to discontinue the voluntary publication of quarterly SI calculations data early, ahead of the scheduled removal of the obligation on ESMA to perform SI calculations from September 2025. As of February 1, the mandatory SI regime will no longer apply and investment firms will not need to perform the SI test. However, investment firms can continue to opt into the SI regime. ESMA’s press release on these measures can be found here.
ECB Publishes Guidance on Initial Margin Model Approval Under EMIR 3. On January 31, the European Central Bank (“ECB”) published guidance on the initial margin validation process for entities under its supervision under the European Market Infrastructure Regulation (EMIR 3). Following the European Banking Authority’s (“EBA”) no-action letter on December 17, the guidance addresses implementation issues such as what the ECB approach will be until the EBA’s relevant regulatory technical standards and guidelines are applicable, the initial application process and model changes.
Equivalence Extension for UK CCPs Published in EU Official Journal. On January 31, the European Commission’s (“EC’s”) implementing decision extending the equivalence decision for UK CCPs until June 30, 2028 was published in the Official Journal of the EU. ESMA will now need to formally extend the temporary recognition decisions and tiering determinations for UK CCPs.
ESMA Provides Guidance on MiCA Best Practices. On January 31, ESMA published a new supervisory briefing aiming to align practices across the EU member states. The briefing, developed in close cooperation with NCAs, promotes convergence and prevents regulatory arbitrage, providing concrete guidance about the expectations on applicant Crypto Asset Service Providers, and on NCAs when they are processing the authorization requests.

New Industry-Led Developments

ISDA and IIF Respond on Counterparty Credit Risk Hedging. On January 31, ISDA and the Institute of International Finance (“IIF”) submitted a joint response to the Basel Committee on Banking Supervision’s proposed technical amendment on counterparty credit risk (“CCR”) hedging exposures. In the response, the associations explain that they believe the proposed changes to the treatment of CCR hedges are unnecessary, as the current substitution method is already very conservative and the new calculation would be complex and burdensome. [NEW]

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, and Karin Thrasher.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Derivatives practice group, or the following practice leaders and authors:

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus – New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt , Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki , New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

Gibson Dunn is available to help clients understand what these and other expected regulatory reforms will mean for them and how to navigate the shifting regulatory environment.

Gibson Dunn previously highlighted the executive and congressional tools that President Trump may use to halt or reverse Biden administration policies and implement his own agenda. During his first four weeks in office, Trump has employed several of these tools to advance his agenda. Here, we discuss three of them: (1) a regulatory moratorium and postponement; (2) recission of Biden Administration executive orders; and (3) new procedures for regulatory and funding review.

For additional insights, please visit our resource center, Presidential Transition: Legal Perspectives and Industry Trends.

1. Regulatory Moratorium and Postponement

On January 20, 2025, consistent with the start of prior administrations,[1] Trump issued a memorandum directing executive branch agencies to (1) refrain from proposing, issuing, or publishing any rules, regulations, or guidance documents until a department or agency head appointed by Trump reviews and approves it; (2) immediately withdraw any rules that have been sent to the Office of the Federal Register but not yet published pending review and approval; and (3) consider postponing for 60 days from January 20 the effective date for rules that have been published in the Federal Register or rules that have been issued but not taken effect.

Similar to the directive Trump and other presidents previously issued at the beginning of their terms, this memorandum authorizes the director or acting director of the Office of Management and Budget (OMB) to oversee the implementation of the memorandum and to exempt any rules the director deems necessary to address “emergency situations or other urgent circumstances,” including statutory and judicial deadlines.

The memorandum does not expressly address whether independent agencies are expected to comply with the freeze pending Trump’s designation of a new chair or appointment of new members, but independent agencies generally appear to be complying thus far and in the past have complied with similar memoranda. The President’s recent decisions to fire agency officials at three independent agencies—the Equal Employment Opportunity Commission, National Labor Relations Board, and the Merit Systems Protection Board—and Acting Solicitor General Harris’s statements that the Department of Justice will not defend the constitutionality of for-cause removal protections at certain independent agencies, strongly suggest that the Trump administration is prepared to take aggressive action to bring independent agencies under White House control.

2. Initial Rescissions of Executive Orders

It is standard practice for new administrations to rapidly rescind a number of the prior administration’s executive orders. Consistent with prior administrations, on January 20, 2025, Trump issued an executive order titled Initial Rescissions of Harmful Executive Orders and Actions, which rescinded dozens of Biden administration executive orders and memoranda regarding a variety of topics.[2] On Biden’s first day in office, he similarly issued executive orders rescinding multiple of Trump’s first-term executive orders.[3] Trump’s initial rescissions cover a variety of topics such as climate, clean energy, and the environment; gender; diversity, equity, and inclusion (DEI); worker health and safety; immigration; and healthcare. A list of noteworthy rescissions by category is below:

Climate, Energy, and Environment
- Executive Order 13990 of January 20, 2021 (Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis)
- Executive Order 14008 of January 27, 2021 (Tackling the Climate Crisis at Home and Abroad)
- Executive Order 14030 of May 20, 2021 (Climate-Related Financial Risk)
- Executive Order 14037 of August 5, 2021 (Strengthening American Leadership in Clean Cars and Trucks)
- Executive Order 14057 of December 8, 2021 (Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability)
Gender
- Executive Order 13988 of January 20, 2021 (Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation)
- Executive Order 14020 of March 8, 2021 (Establishment of the White House Gender Policy Council)
- Executive Order 14021 of March 8, 2021 (Guaranteeing an Educational Environment Free From Discrimination on the Basis of Sex, Including Sexual Orientation or Gender Identity)
Diversity, Equity & Inclusion
- Executive Order 14035 of June 25, 2021 (Diversity, Equity, Inclusion, and Accessibility in the Federal Workforce)
- Executive Order 14091 of February 16, 2023 (Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government)
Federal Contracting
- Executive Order 14069 of March 15, 2022 (Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency)
Labor and Employment
- Executive Order 13999 of January 21, 2021 (Protecting Worker Health and Safety)

3. Regulatory Reviews and Funding Freezes

In addition to freezing new regulations and rescinding dozens of executive orders, Trump has taken steps to ensure that agencies follow his new policies.

A. Regulatory Reviews

Trump’s initial rescissions include a rescission of Biden’s Executive Order 14094, which modified the way agencies analyze regulatory actions. Under Executive Order 12866—which was not rescinded—administrations of both parties have sent significant regulatory actions to the Office of Information and Regulatory Affairs (OIRA), a division of OMB, for pre-issuance review and cost-benefit analysis. Executive Order 14094 required OIRA review for those rules with an economic impact of $200 million, adjusted for GDP. It appears that Trump’s revocation will revert the threshold for OIRA review to economic impacts of $100 million not pegged to GDP, which will result in greater centralization of regulatory review. Executive Order 14094 also imposed equity-related obligations on agencies, such as requiring agencies to affirmatively seek input from affected and underserved communities and to “recognize distributive impacts and equity” in all rulemakings. Now, agencies will be required only to engage in such practices to the extent required by law.

Trump also expanded a deregulatory executive order from his first administration. The new order imposes two key requirements. First, agencies must identify at least ten existing regulations to repeal for every new regulation they promulgate. Trump’s first administration required agencies to identify two existing regulations to repeal for every new regulation (although agencies ultimately eliminated over five regulations for every new one). The order counts “rules, regulations, or guidance documents” similarly, meaning that agencies might promulgate expansive rules while rescinding several smaller rules and guidance documents. Second, the total incremental cost of new regulations in fiscal year 2025 must “be significantly less than zero”—which is less than the net zero requirement during Trump’s first administration. The order also directs the OMB director to revoke a 2023 version of OMB Circular A-4 and associated regulations and reinstate the prior 2003 version. The 2023 version had lowered the discount rates for calculating the value of a regulation’s future benefit, making it easier to justify new regulations under cost-benefit analyses. The 2023 version also encouraged agencies to weigh regulations’ benefits to lower income individuals more heavily and sometimes consider effects on noncitizens living outside the United States. To satisfy a cost-benefit analysis under the 2003 guidance document, regulations must provide more near-term benefits across a narrower geographic scope and with less weighting for distributional benefits.

In addition, several of Trump’s executive orders require agency heads to review and rescind all regulations, guidelines, and policy documents that are inconsistent with new policies relating to energy, national security, immigration, gender identity, and other topics. Those executive orders require that:

The Directors of the Domestic Policy Council and National Economic Council “submit to the President an additional list of orders, memoranda, and proclamations issued by the prior administration that should be rescinded, as well as a list of replacement orders, memoranda, or proclamations, to increase American prosperity.” The National Security Advisor must also review National Security Memoranda issued during the Biden Administration “for harm to national security, domestic resilience, and American values.”
Agency heads identify and take steps toward rescinding any agency actions “that impose an undue burden on the identification, development, or use of domestic energy resources” or are inconsistent with Trump’s energy policies.
All agencies identify and rescind or revise actions inconsistent with an executive order to promote energy projects in Alaska.
The Attorney General “investigate the activities of the Federal Government over the last 4 years that are inconsistent with the purposes and policies” of an executive order regarding free speech.
Agencies update their documents to reflect an executive order on biological sex.
The Secretary of Homeland Security “[a]lign all policies and operations at the southern border of the United States to be consistent with” executive order policies of securing the border.
Agencies “identify all regulations, guidance documents, orders, or other items that affect the digital asset sector” and recommend whether they should be rescinded or modified.
The Assistant to the President for Science and Technology, the Special Advisor for AI and Crypto, and the Assistant to the President for National Security Affairs, and relevant agencies review any policies inconsistent with an executive order on artificial intelligence.

B. Freezing Federal Grants and Funds

President Trump also issued executive orders pausing various disbursements of funds and requiring reviews of federal grants and funds for foreign aid, certain sustainability-related infrastructure projects, and NGOs providing services to removable or illegal aliens, among others. Several days later, OMB issued, clarified, and two days later, rescinded, a memorandum that many had read as ordering a freeze on a broad swath or even all federal grants and funds.

In OMB’s memorandum regarding a potential freeze of federal funds, Acting OMB Director Matthew Vaeth instructed agencies to “complete a comprehensive analysis of all of their Federal financial assistance programs to identify programs, projects, and activities that may be implicated by any of the President’s executive orders.” The memorandum also provided that “to the extent permissible under applicable law, [f]ederal agencies must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.” The memorandum clarified that “[n]othing in this memo should be construed to impact Medicare or Social Security benefits.”

The memorandum quickly sparked responses from federal fund recipients and lawmakers who struggled to determine its breadth and to identify affected programs. Nonprofit groups sued to enjoin the measure in the U.S. District Court for the District of Columbia, arguing that it was arbitrary and capricious, violated the First Amendment, and exceeded OMB’s statutory authority. A group of 22 States and the District of Columbia also challenged the freeze in the U.S. District Court for the District of Rhode Island, arguing that it violated the Spending and Appropriations Clauses and other separation of powers principles. The administration clarified that the pause did not apply across the board, but only to the programs “implicated by the President’s Executive Orders, such as ending DEI, the green new deal, and funding nongovernmental organizations that undermine the national interest.”[4]

The District of Columbia district court temporarily stayed the freeze shortly before it went into effect. The next day, OMB withdrew the memorandum, but the White House reiterated Trump’s commitment to “end the egregious waste of federal funding” and the White House Press Secretary asserted that “[t]he President’s EO’s on federal funding remain in full force and effect, and will be rigorously implemented.” This appears to include the pauses required directly by the executive orders. Referencing “the Press Secretary’s unequivocal statement and the continued actions of Executive agencies,” the Rhode Island district court granted and later extended a temporary restraining order blocking the freeze. The order does not appear to apply to separate freezes that the General Services Administration and other agencies have imposed on federal contracting. The nonprofit groups also received a temporary restraining order on February 3. The District of Columbia district court further instructed OMB to notify affected agencies that “they may not take any steps to implement, give effect to, or reinstate under a different name the directives in OMB Memorandum M-25-13 with respect to the disbursement of Federal Funds under all open awards.”

On February 10, 2025, the Rhode Island district court granted the States’ emergency motion to enforce their temporary restraining order after they “presented evidence . . . that the Trump Administration continued to improperly freeze federal funds and refused to resume disbursement of appropriated federal funds.” Trump has appealed that decision and the prior order extending the temporary restraining order, but the First Circuit declined an immediate stay pending the district court’s further clarification of its orders.

The challenging States and the nonprofit groups have moved for preliminary injunctions in their respective lawsuits.

A handful of suits, motions, and orders are also being made on an agency-by-agency basis, such as a suit seeking broad relief for employees and contractors at the Consumer Financial Protection Bureau and a recent order requiring the resumption of payments to USAID contractors and grant recipients. Notably, the USAID order ruled that the administration’s “blanket suspension of foreign aid funding” is unlawful, but the court allowed the administration to “enforce the terms of particular contracts [or grants], including with respect to expirations, modifications, or terminations pursuant to contractual provisions.” For over a century, courts have read into government contracts an implicit provision allowing the government to cancel a contract for “convenience” when the government concludes it is no longer in the public’s best interest.[5] It is unclear whether the order allows for such terminations on a case-by-case basis.

4. Conclusion

Gibson Dunn is monitoring regulatory developments and executive orders closely. Our attorneys are available to assist clients as they navigate the challenges and opportunities posed by the current, evolving legal landscape.

[1] See, e.g., Memorandum from Ronald A. Klain to the Heads and Acting Heads of Executive Departments and Agencies, 86 Fed. Reg. 7424 (Jan. 20, 2021, published Jan. 28, 2021); Memorandum from Reince Preibus to the Heads and Acting Heads of Executive Departments and Agencies, 82 Fed. Reg. 8346 (Jan. 20, 2017, published Jan. 24, 2017).

[2] A number of President Trump’s other executive orders also revoked prior orders on a topic-by-topic basis. These revocations partially overlap with the revocations in the Initial Rescissions order. E.g., Executive Order 14154, 90 Fed. Reg. 8353 (Jan. 20, 2025) (entitled “Unleashing American Energy” and revoking 12 Biden-era Executive Orders related to climate change, air pollution, and environmental justice, 11 of which were also revoked by the Initial Rescissions order).

[3] E.g., Executive Order No. 13992, 86 Fed. Reg. 7049 (Jan. 25, 2021) (Revocation of Certain Executive Order Concerning Federal Regulation); Executive Order No. 13985, 86 Fed. Reg. 7009 (Jan. 20, 2021) (Advancing Racial Equity and Support for Underserved Communities Through the Federal Government); Executive Order No. 13990, 86 Fed. Reg. 7037 (Jan. 20, 2021) (Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis).

[4] Fact Sheet, OMB Q&A Regarding Memorandum M-25-13 (Jan. 28, 2025), available at https://www.presidency.ucsb.edu/documents/white-house-fact-sheet-omb-qa-regarding-memorandum-m-25-13.

[5] United States v. Corliss Steam Engine Co., 91 U.S. 321 (1876); White Buffalo Constr., Inc. v. United States, 2013 WL 5859688 (Fed. Cir. Nov. 1, 2023).

The following Gibson Dunn lawyers prepared this update: Michael Bopp, Stuart Delery, Matt Gregory, Andrew Kilberg, Tory Lauterbach, Amanda Neely, Noah Delwiche, Maya Jeyendran, and Aaron Gyde.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Public Policy, Administrative Law & Regulatory, Energy Regulation & Litigation, Labor & Employment, or Government Contracts practice groups, or the following in Washington, D.C.:

Michael D. Bopp – Co-Chair, Public Policy Practice Group,
(+1 202.955.8256, mbopp@gibsondunn.com)

Stuart F. Delery – Co-Chair, Administrative Law & Regulatory Practice Group,
(+1 202.955.8515, sdelery@gibsondunn.com)

Matt Gregory – Partner, Administrative Law & Regulatory Practice Group,
(+1 202.887.3635, mgregory@gibsondunn.com)

Andrew G.I. Kilberg – Partner, Administrative Law & Regulatory Practice Group,
(+1 202.887.3759, akilberg@gibsondunn.com)

Tory Lauterbach – Partner, Energy Regulation & Litigation Practice Group,
(+1 202.955.8519, tlauterbach@gibsondunn.com)

Amanda H. Neely – Of Counsel, Public Policy Practice Group,
Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)

New Guidance Rescinds SLB 14L

On February 12, 2025, the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) published Staff Legal Bulletin No. 14M (“SLB 14M”), which sets forth Staff guidance on shareholder proposals submitted to publicly traded companies under Exchange Act Rule 14a-8. SLB 14M rescinds Staff Legal Bulletin No. 14L (“SLB 14L”) (which was issued in November 2021) and addresses a number of interpretive issues in a manner that draws heavily from prior statements by the Commission interpreting Rule 14a-8.

SLB 14L was widely viewed as creating an “open season” for shareholder proposals.[1] During the 2022 proxy season following the issuance of SLB 14L, the number of shareholder proposals submitted to companies surged, with those addressing environmental topics up over 50% and proposals addressing social policy issues increasing by 20%. At the same time, the overall success rate for no-action requests plummeted to an all-time low of 38%, a drastic decline from success rates of 71% in 2021 and 70% in 2020. As a result, many institutional shareholders, who typically do not submit Rule 14a-8 proposals but must devote time and resources to review and vote on shareholder proposals submitted by others to companies in which they have invested, have commented that the quality and utility of shareholder proposals have declined.

SLB 14M heralds a return to a more traditional administration of the shareholder proposal rule, particularly as it relates to interpreting the “ordinary business” exception under Rule 14a-8(i)(7), reinvigorates the economic relevance exclusion under Rule 14a-8(i)(5), and reinstates in part interpretive positions discussed in Staff Legal Bulletins issued by the Staff during the tenure of Commission Chair Jay Clayton. SLB 14M states that companies may supplement previously filed no-action requests to exclude shareholder proposals, or submit new no-action requests, based on the standards set forth in SLB 14M, and that the Staff will apply the standards outlined in SLB 14M when responding to pending or subsequently filed no-action requests.

Summary of the New Staff Guidance

As discussed in greater detail below, SLB 14M:

Applies a company-specific approach to evaluating whether the subject matter of a proposal is “not otherwise significantly related to the company” under the economic relevance standard under Rule 14a-8(i)(5) and when determining the significance of a policy issue raised by a shareholder proposal for purposes of the ordinary business exclusion under Rule 14a-8(i)(7) (thereby moving away from SLB 14L’s approach of considering only whether a proposal raised significant social policy issues, and reinstating the “nexus” standard under the ordinary business standard);
Reinvigorates the economic relevance exclusion under Rule 14a-8(i)(5) by stating that the Staff will base its administration of the rule on the objectives announced by the Commission when it adopted the current rule’s language, thereby opening the possibility to exclude proposals that may relate to a company’s operations but that are not economically or otherwise significant to the company;
Reaffirms that the Staff will continue to apply the micromanagement standard of exclusion under Rule 14a-8(i)(7) in line with past Commission statements and prior Staff Legal Bulletins that SLB 14L had rescinded (specifically, the interpretive positions summarized in Staff Legal Bulletin No. 14I (Nov. 1, 2017) (“SLB 14I”), Staff Legal Bulletin No. 14J (Oct. 23, 2018), and Staff Legal Bulletin 14K No. (Oct. 16, 2019) (“SLB 14K”) (collectively, the “Prior SLBs”));
Advises that company no-action requests under Rules 14a-8(i)(5) and 14a-8(i)(7) need not include a discussion reflecting the board of directors’ analysis of whether and how the particular policy issue raised in a shareholder proposal is not significant to the company, although a company may submit a board analysis if it believes the analysis will be helpful.
Confirms that the Staff will apply its traditional interpretive standards for purposes of assessing no-action requests under Rules 14a-8(i)(10) (the “substantial implementation standard”), 14a-8(i)(11) (the “duplication standard”), and 14a-8(i)(12) (the “resubmission standard”) and not the standards in the rule amendments proposed by the Commission in 2022, which have not been adopted;
Eliminates the novel position set forth in SLB 14L under which companies were at times expected to provide a second deficiency letter to specifically identify proof of ownership defects that had already been addressed in an initial deficiency letter;
Restates prior Staff guidance on the use of email for submission of proposals, delivery of deficiency notices, and responses (encouraging a bilateral use of email confirmation receipts by companies and shareholder proponents alike); and
Advises that the interpretive positions set forth in SLB 14M will apply to pending no-action requests that are decided after SLB 14M’s issuance, and that companies may timely supplement previously filed no-action requests, and submit new no-action requests, based on the positions set forth in SLB 14M.

Key Takeaways from SLB 14M

In light of the guidance set forth in SLB 14M, we urge public companies to keep the following in mind.

Companies Should Re-evaluate Proposals Received for Possible Exclusion. Companies should review the Rule 14a-8 shareholder proposals they have received and consider whether any of the interpretive positions reaffirmed in SLB 14M provide a basis for excluding the proposals that should be asserted in a new or supplemental no-action request, particularly under the economic relevance exclusion in Rule 14a-8(i)(5). At the same time, as noted above, we do not believe that companies should feel compelled to supplement pending no-action requests that have already addressed exclusion under Rule 14a-8(i)(7), Rule 14a-8(i)(10), or one of the other provisions addressed in SLB 14M, or to merely to cite SLB 14M or some of the Commission statements it relies on. In this regard, as noted above, SLB 14M confirms that the Staff will apply SLB 14M when reviewing pending no-action requests.
Companies Should Consider Re-engaging with Shareholder Proponents. As we have previously noted, the number of shareholder proposals withdrawn has declined in recent years, representing 15% of all proposals submitted in 2024 and 16% in 2023, compared to over 29% in the 2021 proxy season. In light of the standards that will be applied under SLB 14M, shareholder proponents may be more willing to engage and agree on a basis to withdraw their proposals. Companies as well may find a negotiated withdrawal to be a more favorable approach than waiting for a no-action letter response that may not be issued until the time of, or after, their proxy print deadline.
Think Strategically under Rule 14a-8(i)(12). Rule 14a-8(i)(12) provides a basis for excluding a proposal if it addresses substantially the same subject matter as a proposal, or proposals, included in the company’s proxy materials within the preceding five calendar years and the most recent vote on the proposal was below a specified threshold. In recent years, companies have been concerned that the Staff would narrowly interpret whether a proposal “addresses substantially the same subject matter” as a prior proposal, due to the proposed amendments in 2022, which set forth a narrower and more restrictive analysis. SLB 14M confirms that the Staff will apply traditional standards in assessing whether proposals address substantially the same subject matter as a prior proposal. Accordingly, companies may determine not to seek to exclude a proposal that is expected to obtain a low vote, so that substantially similar proposals can be excluded in future years.
Focus on Legal Arguments Based on Past Commission Statements. Notwithstanding expressions by some that SLB 14M is politically motivated, SLB 14M reiterates that when a company believes that it is entitled to exclude a proposal, the company must make a legal argument that clearly lays out the basis for the exclusion, consistent with the text of the rule itself and language from Commission releases. The Staff has long been policy- and politically-neutral when administering the shareholder proposal rule, and SLB 14M suggests that approach will prevail this year. As now-Acting Chair Mark Uyeda said in 2023, “[s]hareholder meetings were not intended under state corporate laws to be political battlegrounds or debating societies.”[2] Put differently, SLB 14M makes clear that SLB 14L was the outlier.

Detailed Review of SLB 14M

Reinvigorating the Economic Relevance Exclusion in Rule 14a-8(i)(5).

Rule 14a-8(i)(5), the “economic relevance” exception, permits a company to exclude a proposal that “relates to operations which account for less than 5 percent of the company’s total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business.” SLB 14M reintroduces an approach to applying the “economic relevance” standard under Rule 14a-8(i)(5) that was described in SLB 14I, which should provide a strong basis to challenge shareholder proposals that raise significant social policy issues that are not economically relevant to a company.

The Commission stated in 1982 that it was adopting the economic tests that now appear in Rule 14-8(i)(5) because previously the Staff would not agree with the exclusion of a proposal “where the proposal has reflected social or ethical issues, rather than economic concerns, raised by the issuer’s business, and the issuer conducts any such business, no matter how small.”[3] However, after the Commission adopted the economic tests, a U.S. District Court interpreted the rule as continuing not to allow exclusion when a proposal reflected social or ethical issues raised by a company’s business, even when those issues related to an economically insignificant part of a company’s operations. The Staff subsequently followed the court’s interpretation and, as a result, Rule 14a-8(i)(5) rarely served as a basis for exclusion of a proposal, notwithstanding the Commission’s stated intention in adopting the 1982 amendment. In 2017, the Staff issued SLB 14I to align the Staff’s interpretation with the intention of the 1982 amendment, but in 2021, SLB 14L repealed SLB 14I.

SLB 14M largely repeats the interpretive position set forth in SLB 14I, realigning Rule 14a-8(i)(5) with the Commission’s statements when it adopted the rule. SLB 14M states that, under this framework, proposals that raise issues of social or ethical significance may be excludable, notwithstanding their importance in the abstract, based on the application and analysis of each of the economic factors of Rule 14a-8(i)(5) in determining the proposal’s relevance to the company’s business. While corporate governance proposals will be “otherwise significant” for most companies, the mere possibility of reputational or economic harm alone will not demonstrate that a proposal is “otherwise significantly related to the company’s business.” In addition, SLB 14M clarifies that whether a proposal is “otherwise significantly related” to a company’s business under Rule 14a-8(i)(5) will be a separate analysis from whether a proposal raises a significant social policy issue that transcends a company’s ordinary business under Rule 14a-8(i)(7), which means that proposals may be excluded under Rule 14a-8(i)(5) even when the ordinary business exclusion is not available.

Changes to the Application of the Ordinary Business Exclusion in Rule 14a-8(i)(7).

As SLB 14M notes, the Commission has repeatedly stated that the ordinary business exclusion in Rule 14a-8(i)(7) is based on the concept that “[c]ertain tasks are so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight . . . . However, proposals relating to such matters but focusing on sufficiently significant social policy issues . . . generally would not be considered to be excludable, because the proposals would transcend the day-to-day business matters and raise policy issues so significant that it would be appropriate for a shareholder vote.” SLB 14L disregarded the first part of the standard approved by the Commission in 1976, 1997, and 1998 (i.e., whether a proposal related to a company’s ordinary business), and stated that the Staff would decline to concur with the exclusion of proposals that “raise[] issues with a broad societal impact, such that they transcend the ordinary business,” without regard to whether a proposal was relevant to or implicated management’s ability to run the company on a day-to-day basis. SLB 14L singled out proposals “squarely raising human capital management issues with a broad societal impact” as an example of proposals that would not be excludable under its new interpretation. In doing so, SLB 14L rejected the company-specific approach to assessing ordinary business that had been developed through several decades of precedent and allowed the express language of Rule 14a-8(i)(7) to be supplanted by what had traditionally been a narrow interpretive exception to the ordinary business standard.

SLB 14M reverts to the company-specific approach of applying the ordinary business standard, “rather than focusing solely on whether a proposal raises a policy issue with broad societal impact or whether particular issues or categories of issues are universally ‘significant.’” As such, the Staff has indicated it will focus on the “nexus” between a proposal’s subject matter and the company’s business.[4] As a result, proposals addressing particular social policy issues may be excludable at some companies but not at others. For example, a proposal relating to firearm regulation might not be excludable at a company in the business of manufacturing firearms, but has been found to be excludable when submitted to a retail company that sells firearms.[5] Similarly, a proposal asking a company to report on a particular issue is excludable under the “nexus” standard if a company is facing litigation over the same or similar subject matter such that the proposal would interfere with the company’s litigation strategy, since in that context the proposal implicates the company’s day-to-day management of litigation strategy.[6]

Many companies have already submitted no-action requests for 2025 annual meetings in which they set forth an ordinary business argument under SLB 14L’s framework, addressing specifically why a proposal should not be viewed as transcending a company’s ordinary business. Based on SLB 14M’s transition guidance, as addressed below, we do not believe that companies need to supplement these no-action requests, as those arguments asserting that a proposal does not transcend the company’s ordinary business largely focus on how the proposal implicates ordinary business activities. To the extent those arguments are relevant at all under SLB 14M, they may now carry greater weight with the Staff.

Reaffirming Commission-Based Interpretations for Micromanagement Arguments under Rule 14a-8(i)(7).

A second central policy consideration underlying Rule 14a-8(i)(7) relates to the degree to which the proposal “micromanages” the company “by probing too deeply into matters of a complex nature.”[7] This prong of the Rule 14a-8(i)(7) analysis rests on an evaluation of the manner in which a proposal seeks to address the subject matter raised, rather than the subject matter itself, and therefore can support exclusion of a proposal regardless of whether the proposal focuses on a significant social policy.

SLB 14M reinstates interpretive guidance from the Prior SLBs addressing the micromanagement prong of Rule 14a-8(i)(7). SLB 14L took the position that proposals seeking detail or seeking to promote timeframes or methods do not necessarily constitute micromanagement, and in particular that proposals requesting that companies adopt timeframes or targets to address climate change would not be excludable on the basis of micromanagement if they address targets or timelines, so long as the proposals afford discretion to management as to how to achieve such goals. SLB 14M and the Prior SLBs apply a stricter approach in this context, taking the view that some such proposals effectively require the company to adopt a specific method for implementing a complex policy and are therefore excludable because of micromanagement. Importantly, SLB 14M also confirms that the micromanagement standard can apply to proposals addressing executive compensation or corporate governance topics.

Over the past 18 months, the Staff has already increasingly concurred with exclusion of proposals on the grounds of micromanagement, perhaps recognizing that (as many institutional investors have noted)[8] an increasing number of proposals have sought to intrude into or impose specific approaches for addressing complex operational issues. We expect these recent precedents to remain viable, as they align with past Commission statements that are relied on in SLB 14M and the Prior SLBs. As such, we expect pending no-action requests arguing that proposals are excludable due to micromanagement will in many, if not most, cases not need to be supplemented as a result of SLB 14M.

No Requirement for a “Board Analysis.”

The Prior SLBs had encouraged companies seeking to exclude proposals under Rule 14a-8(i)(5) or Rule 14a-8(i)(7) to include a discussion in their no-action requests setting forth an analysis by the company’s board of directors as to whether or not the particular issue raised by a shareholder proposal was significant to the company’s business. Many of these board analyses included in no-action requests took the form of a “gap” analysis, explaining why a proposal was not significant in light of actions the company had already taken. In practice, the board analyses did not contribute significantly to the no-action process; in 2019 (the first year of the board analysis guidance), 25 companies made a board analysis argument and only one succeeded; in 2020, 19 companies made a board analysis argument and only four succeeded; and in 2021, 16 companies made a board analysis argument (representing only 18% of all of the 14a-8(i)(7) and (i)(5) no-action requests submitted that year) of which only five succeeded.

SLB 14M acknowledges that board analyses did not generally have a dispositive effect and states that the Staff will not expect a company’s no-action request to include a discussion that reflects the board’s analysis of the particular policy issue raised by a shareholder and its significance to the company. While a company is permitted to submit such an analysis if it believes the analysis will help the Staff’s review of the no-action request, we do not expect companies to do so.

Reaffirming traditional interpretive standards for purposes of assessing no-action requests under Rules 14a-8(i)(10), 14a-8(i)(11) and 14a-8(i)(12).

In 2022, the Commission proposed amendments to revise the standards applicable pursuant to the substantive bases for exclusion of shareholder proposals provided under Rules 14a-8(i)(10) (the “substantial implementation standard”), 14a-8(i)(11) (the “duplication standard”), and 14a-8(i)(12) (the “resubmission standard”). However, even before these amendments were proposed, the Staff appeared to be applying a non-traditional approach under these rules, a point that now-Acting Chair Uyeda noted in 2023, stating, “[w]hile the amendments have not yet been adopted, some practitioners have noted that . . . Commission staff had already begun to reverse prior no-action positions and narrow the scope of these exclusions.”[9] For example, in the 2022 proxy season, the success rate for excluding proposals under the substantial implementation standard of Rule 14a-8(i)(10) dropped to 13%, compared with 55% in the 2021 proxy season.

In SLB 14M, the Staff confirms that pre-2022 precedents applying these rules remain applicable, noting that the Commission has not adopted the proposed rule amendments and that, accordingly, the Staff will consider no-action requests and supplemental correspondence in accordance with operative Commission rules and prior Staff guidance.

No Second Deficiency Letters under Rule 14a-8(b).

Rule 14a-8(b) provides that a shareholder must prove eligibility to submit a proposal by offering proof that it has satisfied one of the ownership eligibility criteria set forth in Rule 14a-8 (i.e., that the shareholder has “continuously held” a required amount of securities for a required amount of time).[10] If a shareholder fails to provide satisfactory proof of ownership, the company must notify the shareholder within 14 days, and the shareholder must correct the deficiency within 14 days of such notice (if the shareholder does not correct the deficiency, the company may exclude the proposal from its proxy statement). In SLB 14L, the Staff stated that companies should send a second deficiency notice identifying the specific defects in a proof of ownership if those defects had not already been identified in a prior deficiency notice.

Rule 14a-8 does not require a company to send a second deficiency letter, and the Staff’s position in SLB 14L proved problematic for administration of the shareholder proposal process within the timeframes set forth in the rule. Consistent with decades of precedents, SLB 14M affirms that the Staff no longer interprets Rule 14a-8 as requiring a company to send a second deficiency notice to a proponent if the company previously sent an adequate deficiency notice prior to receiving the proponent’s proof of ownership. At the same time, SLB 14M reminds companies that an overly technical reading of proof of ownership letters provided by a shareholder or its broker may not be persuasive.

Frequently Asked Questions on the Transition to SLB 14M.

Recognizing that SLB 14M has been issued during the peak of the shareholder proposal season, SLB 14M addresses a number of questions relevant to evaluating shareholder proposals in the current proxy season. Specifically, SLB 14M states:

The Staff will consider the guidance set forth under SLB 14M when evaluating pending no-action requests that were submitted before, but will be decided after, the issuance of SLB 14M. Previously submitted no-action requests do not need to be resubmitted.
If, after considering the views expressed in SLB 14M, a company believes that it is entitled to exclude a proposal on a basis that the company has not already addressed in a no-action request, it must submit a no-action request, or supplement any pending no-action request, making a legal argument that clearly lays out the basis for the exclusion.
If the deadline prescribed in Rule 14a-8(j) for a company to submit a no-action request has already passed, the company may nevertheless submit a no-action request or supplement an existing no-action request based on the guidance set forth in SLB 14M, and the Staff will consider the publication of SLB 14M to be “good cause” that excuses the Rule 14a-8(j) deadline. SLB 14M states that companies should endeavor to submit any new requests as soon as possible, with consideration for the opportunity for proponents to provide supplemental correspondence in response to the new request.

SLB 14M also acknowledges that the Staff may face a significant number of new or supplemental no-action requests and, therefore, may not be able to respond by a company’s proxy print deadline. Accordingly, SLB 14M encourages companies and proponents to work together to resolve submitted proposals prior to print deadlines.

Other Guidance.

SLB 14M restates guidance from SLB 14K and SLB 14L on the use of email for submission of proposals, delivery of deficiency notices, and responses. The Staff encourages both companies and shareholder proponents to acknowledge receipt of emails when requested, and for companies and proponents to reach out using another method of communication (or emailing another contact, if available) if a requested confirmation of receipt is not provided. Consistent with prior no-action interpretations, SLB 14M confirms that the Staff does not consider screenshots or photos of emails on the sender’s device to be proof of delivery to the recipient. Finally, SLB 14M repeats prior Staff interpretations regarding the use of graphics or images in shareholder proposal submissions.

Continued Divisions within the Commission over Shareholder Proposals.

When SLB 14L was issued, Chair Gary Gensler publicly endorsed the Staff’s new guidance,[11] while Republican Commissioners Hester M. Pierce and Elad L. Roisman released a joint statement expressing a number of concerns, including that SLB 14L created significantly less clarity for companies, would dramatically slow down the Rule 14a-8 no-action request process, and wasted taxpayer dollars on shareholder proposals that “involve issues that are, at best, only tangential to our securities laws.”[12] This time around, Democratic Commissioner Caroline A. Crenshaw issued a statement on SLB 14M,[13] referring to it as “political policy shifting” and lamenting the timing of its issuance. Commissioner Crenshaw also repeats the frequent refrain that shareholder proposals are “merely advisory,” a defense that is undermined by the significance ascribed to them by advocacy groups and by the voting policy of major proxy advisory firms, which penalize boards that are not responsive to “merely advisory” votes, in some cases even if the proposal is supported by less than a majority of the shares voting. Ironically, Commissioner Crenshaw claims that SLB 14M “forsake[s] all consistency” and acknowledges that the Rule 14a-8 no-action process “is fact-intensive, and exactly how a proposal is crafted is often determinative of its exclusion or inclusion”—two points that SLB 14L eschewed. As a result, companies and shareholders—including the relatively few who submit proposals and the many more institutional holders who must devote time and resources evaluating and voting on such proposals—can expect Rule 14a-8 to continue to be a focus of policymakers at the Commission and in Congress.

[1] See Gibson, Dunn & Crutcher LLP, Shareholder Proposal Developments During the 2022 Proxy Season (July 11, 2022), https://www.gibsondunn.com/wp-content/uploads/2022/07/shareholder-proposal-developments-during-the-2022-proxy-season.pdf.

[2] See Comm’r. Mark T. Uyeda, Remarks at the Society for Corporate Governance 2023 National Conference (June 21, 2023), https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-society-corporate-governance-conference-062123.

[3] Exchange Act Release No. 34-19135 (Oct. 14, 1982).

[4] The “nexus” standard was described by the Staff in Staff Legal Bulletin No. 14E (Oct. 27, 2009) (“[i]n those cases in which a proposal’s underlying subject matter transcends the day-to-day business matters of the company and raises policy issues so significant that it would be appropriate for a shareholder vote, the proposal generally will not be excludable under Rule 14a-8(i)(7) as long as a sufficient nexus exists between the nature of the proposal and the company”).

[5] See, e.g., Staff Legal Bulletin No. 14H (Oct. 22, 2015), in which the Staff’s view was that such a proposal was excludable under Rule 14a-8(i)(7) because it related to the company’s ordinary business operations and did not focus on a significant policy issue.

[6] See Chevron Corp. (Sisters of St. Francis of Philadelphia) (avail. Mar. 30, 2021), in which the company argued that the proposal related to the company’s litigation strategy and the conduct of ongoing litigation to which the company was a party.

[7] Exchange Act Release No. 34-40018 (May 21, 1998).

[8] See Blackrock’s Investment Stewardship Annual Report 2023 (April 30, 2024) at 2 (stating that Blackrock Investment Stewardship’s votes on shareholder proposals during the 2023 proxy season reflected that it “did not support shareholder proposals that were overly prescriptive or unduly constraining on management, that lacked economic merit, or made asks that the company already fulfills”), at https://www.blackrock.com/corporate/literature/publication/annual-stewardship-report-2023-summary.pdf; T. Rowe Price’s 2023 Stewardship Report, (last visited Feb. 13, 2024) at 159 (“we observed a marked increase in the level of prescriptive requests . . . . Our view on these prescriptive proposals is that they usurp management’s responsibility to make operational decisions and the board’s responsibility to guide and oversee such decisions”), at https://www.troweprice.com/content/dam/trowecorp/Pdfs/esg/stewardship-report.pdf.

[9] See Comm’r. Mark T. Uyeda, Remarks at the Society for Corporate Governance 2023 National Conference (June 21, 2023), https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-society-corporate-governance-conference-062123.

[10] Rule 14a-8(b) requires proponents to have continuously held at least $2,000, $15,000, or $25,000 in market value of the company’s securities entitled to vote on the proposal for at least three years, two years, or one year, respectively.

[11] See Chair Gary Gensler, Statement regarding Shareholder Proposals: Staff Legal Bulletin No. 14L (Nov. 3, 2021), https://www.sec.gov/newsroom/speeches-statements/gensler-statement-shareholder-proposals-14l?.

[12] See Statement on Shareholder Proposals: Staff Legal Bulletin No. 14L (Nov. 3, 2021), https://www.sec.gov/newsroom/speeches-statements/peirce-roisman-statement-shareholder-proposals-staff-legal-bulletin-14l?.

[13] Statement on Staff Legal Bulletin 14M (Feb. 12, 2025), https://www.sec.gov/newsroom/speeches-statements/crenshaw-statement-staff-legal-bulletin-14m-021225

The following Gibson Dunn lawyers prepared this update: Elizabeth Ising, Thomas Kim, Ronald Mueller, Geoffrey Walter, and Lori Zyskowski.

Aaron Briggs – San Francisco (+1 415.393.8297, abriggs@gibsondunn.com)
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Brian J. Lane – Washington, D.C. (+1 202.887.3646, blane@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Michael A. Titera – Orange County (+1 949.451.4365, mtitera@gibsondunn.com)
Geoffrey E. Walter – Washington, D.C. (+1 202.887.3749, gwalter@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

Activities at the Consumer Financial Protection Bureau are frozen amidst a leadership transition, while the agency’s future looks increasingly uncertain.

After a flurry of activity in December and January, the CFPB’s interim directors have halted staff’s work on rulemaking, investigations, enforcement, litigation, and supervision while the new administration evaluates its priorities for the agency. In this update, we recap the directives issued to agency staff over the past two weeks, assess the potential effects on the agency’s regulatory activity, and consider possible responses to any perceived enforcement or supervisory gaps from other regulators and enforcers.

New Directives

On January 31, President Trump removed Rohit Chopra as CFPB Director, kicking off two weeks of rapid change for agency staff. Treasury Secretary Scott Bessent was named the Acting Director on X,[1] who promptly ordered a halt to most agency activity. Specifically, CFPB staff were instructed that, unless expressly approved by the Acting Director, they were not to issue any proposed or final rules or guidance; commence, investigate, or settle enforcement actions; issue public communications; approve or enter material agreements; or make filings or appearances in litigation, other than to seek a stay.[2] Bessent also suspended the effective date of all final rules that had yet to take effect.[3]

The next week, on February 7, Russell Vought, the newly confirmed head of the Office of Management and Budget, succeeded Bessent as Acting Director.[4] Vought expanded the freeze to cover supervision and examination activities, closed the CFPB’s headquarters in Washington, D.C., and ordered all employees to work remotely and “stand down from performing any work task” without express approval.[5] Enforcement staff are restricted from communicating with current or prospective enforcement targets or their counsel without the express authorization of Mark Paoletta, general counsel at the Office of Management and Budget, who is anticipated to be serving as the new Chief Legal Officer at the CFPB.[6] Vought also cut the agency’s next funding request to the Federal Reserve, the source of the CFPB’s budget, to zero.[7] Vought’s orders came as staff with the Department of Government Efficiency (DOGE) were reported at the CFPB headquarters.[8]

On February 11, President Trump announced Jonathan McKernan, formerly a board member of the Federal Deposit Insurance Corporation, as his nominee for CFPB Director.[9] Industry players have hailed McKernan “as a sober, tried-and-tested pick[] in line with the mainstream financial regulators who staffed Trump’s first administration.”[10]

Potential Effects on Regulatory Activity

In the near term, regulated parties can expect radio silence from the CFPB. After Vought’s “stand-down” directive, few staff are working at all, some probationary employees have been laid off, and those staff who are working, with minimal exceptions, are not engaging in investigative, supervisory, or enforcement activities. Top supervision and enforcement officials have resigned, citing the Trump administration’s broad suspension of key financial industry oversight activities at the agency.[11] Litigation will be stayed, so long as courts accept the CFPB’s requests. And significant rules finalized in the waning days of Chopra’s directorship, such as the overdraft fee cap and the exclusion of medical debt from credit reports,[12] will remain on pause.

In the longer term, the agency’s future is uncertain. President Trump recently defended the stop-work order and confirmed his intention to “get rid of” the CFPB, which he called “a woke and weaponized agency against disfavored industries and individuals.”[13] Elon Musk, who is leading DOGE, has posted “Delete CFPB” and “CFPB RIP” on X.[14] And Republicans in the House and Senate have introduced legislation to defund the CFPB by cutting its statutory funding cap to zero.[15] However, Democrats, like Elizabeth Warren, have pledged to defend the CFPB.[16]

Courts might step in to limit an administrative shutdown of the agency. The National Treasury Employees Union, which represents unionized CFPB employees, has sued to block Vought’s “stand-down” directive, arguing that separation-of-powers principles prevent the administration from winding down a congressionally authorized agency.[17]

At a minimum, regulated parties can expect the new administration will critically examine each active initiative—likely withdrawing some rules, settling some litigation, and dropping some enforcement actions. For example, the CFPB recently told a federal court that it “could take action to withdraw or modify” the agency’s supervision order over Google Pay.[18] More rollbacks are very likely to follow.

Other Enforcers

If the CFPB substantially curtails its activities, other regulators could step up their regulatory activity in the same space.

The Federal Trade Commission in particular has concurrent enforcement authority over some statutes, such as the Fair Credit Reporting Act, 15 U.S.C. § 1681, and can police “unfair practices” under the FTC Act, 15 U.S.C. § 45. Since the FTC has insight into the CFPB’s investigations and enforcement under the agencies’ memorandum of understanding,[19] it could pick up some of the CFPB’s initiatives.

State Attorneys General also have broad authority to enforce state consumer protection laws[20] and, under 12 U.S.C. § 5552, may enforce the (federal) Consumer Financial Protection Act against defendants in their respective jurisdictions. State Attorneys General in some states are expected to become more active if federal enforcement wanes. In fact, prior to the leadership transition, the CFPB published a report with a compendium of guidance aimed at states that contained specific recommendations and could serve as the blueprint moving forward.[21] Further, state banking departments have independent supervisory authority over many of the non-bank financial institutions that have been historically subject to additional supervision by the CFPB. These state banking departments may enhance supervisory oversight over non-bank financial institutions in light of any perceived supervisory gap at the federal level.

[1] CFPB, Statement on Designation of Treasury Secretary Scott Bessent as Acting Director of the Consumer Financial Protection Bureau (Feb. 3, 2025), https://www.consumerfinance.gov/about-us/newsroom/statement-on-designation-of-treasury-secretary-scott-bessent-as-acting-director-of-the-consumer-financial-protection-bureau.

[2] Jon Hill, “Treasury’s Bessent Takes CFPB Reins, Halts Agency Actions,” Law360 (Feb. 3, 2025), https://www.law360.com/consumerprotection/articles/2292253.

[3] Id.

[4] Jon Hill & Courtney Bublé, “‘Stand Down’: CFPB’s Acting Chief Pulls Employees Off Job,” Law360 (Feb. 10, 2025), https://www.law360.com/consumerprotection/articles/2295798.

[5] Id.

[6] Id.

[7] Id.

[8] Evan Weinberger, “Musk’s DOGE Descends on CFPB With Eyes on Shutting It Down,” Bloomberg Law (Feb. 7, 2025), https://news.bloomberglaw.com/banking-law/musks-doge-descends-on-consumer-financial-protection-bureau.

[9] Michael Stratford, Declan Harty, & Katy O’Donnell, “Trump steps up overhaul of bank oversight with key picks,” Politico (Feb. 11, 2025), https://www.politico.com/news/2025/02/11/trump-bank-wall-street-regulators-top-posts-00203745.

[10] Jon Hill, “Trump’s Picks For CFPB, OCC Chiefs Hailed By Industry,” Law360 (Feb. 12, 2025), https://www.law360.com/corporate/articles/2297154/trump-s-picks-for-cfpb-occ-chiefs-hailed-by-industry-.

[11] Jon Hill, “CFPB’s Top Supervisor, Enforcer Call It Quits Amid Closure,” Law360 (Feb. 11, 2025), https://www.law360.com/corporate/articles/2296518/cfpb-s-top-supervisor-enforcer-call-it-quits-amid-closure.

[12] See CFPB, Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information (Regulation V) (Jan. 7, 2025), https://www.consumerfinance.gov/rules-policy/final-rules/prohibition-on-creditors-and-consumer-reporting-agencies-concerning-medical-information-regulation-v; CFPB, Overdraft Lending: Very Large Financial Institutions Final Rule (Dec. 12, 2024), https://www.consumerfinance.gov/rules-policy/final-rules/overdraft-lending-very-large-financial-institutions-final-rule.

[13] “Trump confirms goal to shutter CFPB,” ABA Banking Journal (Feb. 11, 2025), https://bankingjournal.aba.com/2025/02/trump-confirms-goal-to-shutter-cfpb.

[14] Weinberger, supra.

[15] Press Release, “Congressman Keith Self Introduces Bill to Eliminate CFPB Funding” (Jan. 30, 2025), https://keithself.house.gov/media/press-releases/congressman-keith-self-introduces-bill-eliminate-cfpb-funding; Press Release, “Sen. Cruz Introduces Legislation to Defund the CFPB and Restore Congressional Oversight” (Jan. 29, 2025), https://www.cruz.senate.gov/newsroom/press-releases/sen-cruz-introduces-legislation-to-defund-the-cfpb-and-restore-congressional-oversight.

[16] Claire Williams, “Warren, Democrats promise to fight for CFPB at rally,” American Banker (Feb. 10, 2025), https://www.americanbanker.com/news/warren-democrats-promise-to-fight-for-cfpb-at-rally.

[17] National Treasury Employees Union v. Vought, No. 1:25-cv-00381 (D.D.C.).

[18] Jon Hill, “CFPB Will Mull Axing Google Payment Oversight Order,” Law360 (Feb. 7, 2025), https://www.law360.com/technology/articles/2294631.

[19] Memorandum of Understanding Between the Consumer Financial Protection Bureau and the Federal Trade Commission (Feb. 25, 2019), https://files.consumerfinance.gov/f/documents/cfpb_ftc_memo-of-understanding_2019-02.pdf.

[20] See Consumer Protection Laws: 50-State Survey, Justia, https://www.justia.com/consumer/consumer-protection-laws-50-state-survey; National Association of Attorneys General, Consumer Protection 101, https://www.naag.org/issues/consumer-protection/consumer-protection-101.

[21] Jon Hill, “CFPB Serves Up Consumer Protection Roadmap For States,” Law360 (Jan. 15, 2025), https://www.law360.com/articles/2284260/cfpb-serves-up-consumer-protection-roadmap-for-states.

The following Gibson Dunn lawyers prepared this update: Gus Eyler, Natalie Hausknecht, Sara Weed, Ashley Rogers, Karin Thrasher, and Sam Whipple.

Gibson Dunn lawyers are closely monitoring developments at the CFPB and are available to discuss these issues as applied to your particular business. If you have questions about CFPB regulation and how best to prepare, please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Consumer Protection or Fintech and Digital Assets practice groups, or the following:

Consumer Protection:

Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)

Natalie J. Hausknecht – Denver (+1 303.298.5783, nhausknecht@gibsondunn.com)

Ashley Rogers – Dallas (+1 214.698.3316, arogers@gibsondunn.com)

Fintech and Digital Assets:

M. Kendall Day – Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)

Jeffrey L. Steiner – Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)

Sara K. Weed – Washington, D.C. (+1 202.955.8507, sweed@gibsondunn.com)

Throughout 2024, regulatory and enforcement agencies emphasized the importance of anti-money laundering (AML) compliance and sanctions measures as a means to combat illicit financing and protect U.S. foreign policy and national security interests.

Please join us for this year’s annual Gibson webcast on the latest developments and trends across the U.S. AML and sanctions regimes. In particular, we discuss developments regarding BSA/AML and sanctions rulemaking, legislation, and enforcement actions that have defined the last year. We further delve into key areas of regulatory and enforcement focus such as digital assets and decentralized finance, Russian and Global Terror sanctions programs, and control of critical emerging technologies, among others. Finally, we offer our insights into compliance best practices and what to expect for BSA/AML and sanctions in 2025 and beyond.

MCLE CREDIT INFORMATION:

This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 2.0 credit hours, of which 2.0 credit hours may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.

Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact CLE@gibsondunn.com to request the MCLE form.

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 2.0 hours in the General Category.

California attorneys may claim “self-study” credit for viewing the archived version of this webcast. No certificate of attendance is required for California “self-study” credit.

PANELISTS:

Moderator:

Kendall Day is a nationally recognized white-collar partner in the Washington, D.C. office, where he is Co-Chair of Gibson Dunn’s Fintech and Digital Assets Practice Group, Co-Chair of the firm’s Financial Institutions Practice Group, co-leads the firm’s Anti-Money Laundering practice, and is a member of the White Collar Defense and Investigations and Crisis Management Practice Groups. Kendall represents financial institutions; fintech, digital asset, and multi-national companies; and individuals in connection with criminal, regulatory, and civil enforcement actions involving anti-money laundering (AML)/Bank Secrecy Act (BSA), sanctions, FCPA and other anti-corruption, securities, tax, wire and mail fraud, unlicensed money transmitter, false claims act, and sensitive employee matters. Kendall’s practice also includes BSA/AML compliance counseling and due diligence, and the defense of forfeiture matters. Kendall is licensed to practice in the Commonwealth of Virginia and the District of Columbia.

Presenters:

Stephanie L. Brooker, a partner in Washington D.C. office of Gibson, Dunn & Crutcher, is Co-Chair of the firm’s White Collar Defense and Investigations, Anti-Money Laundering, and Financial Institutions Practice Groups. Prior to joining the firm, Ms. Brooker served as a prosecutor at the U.S. Department of Justice. As a DOJ prosecutor, Ms. Brooker served as the Chief of the Asset Forfeiture and Money Laundering Section in the U.S. Attorney’s Office for the District of Columbia, investigated a broad range of white collar and other federal criminal matters, tried 32 criminal trials, and briefed and argued criminal appeals. Ms. Brooker also served as the Director of the Enforcement Division and Chief of Staff at the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), the lead U.S. anti-money regulator and enforcement agency. During her approximately 25 years in legal practice, Ms. Brooker has been consistently recognized as a leading practitioner in the areas of anti-money laundering compliance and enforcement defense and white collar criminal defense. Chambers USA has ranked her and described her as an “excellent attorney,” who clients rely on for “important and complex” matters, and noted that she provides “excellent service and terrific lawyering.” Ms. Brooker has also been named a National Law Journal White Collar Trailblazer, a Global Investigations Review Top 100 Women in Investigations, and an NLJ Awards Finalist for Professional Excellence—Crisis Management & Government Oversight.

David P. Burns is a litigation partner in the Washington, D.C. office. He is the co-chair of the firm’s National Security Practice Group, and a member of the White Collar and Investigations and Crisis Management practice groups. His practice focuses on white-collar criminal defense, internal investigations, national security, and regulatory enforcement matters. David represents corporations and executives in federal, state, and regulatory investigations involving securities and commodities fraud, sanctions and export controls, theft of trade secrets and economic espionage, the Foreign Agents Registration Act, accounting fraud, the Foreign Corrupt Practices Act, international and domestic cartel enforcement, health care fraud, government contracting fraud, and the False Claims Act. He is admitted to practice in the District of Columbia.

Adam Smith, a partner in the Washington, D.C. office, serves as Co-Chair of the firm’s International Trade Practice Group. He is an experienced international lawyer with a focus on international trade compliance and white collar investigations, including federal and state economic sanctions enforcement, CFIUS, the Foreign Corrupt Practices Act, embargoes, and export and import controls. Clients benefit from Adam’s experience in the Obama Administration, where he was Senior Advisor to the Director of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and Director for Multilateral Affairs on the National Security Council. At OFAC, he was instrumental in shaping and enforcing sanctions policies, briefing Congressional and private sector leaders, conducting extensive international outreach, and negotiating complex agreements. Adam is admitted to practice in the State of Maryland and the District of Columbia.

Ella Alves Capone is of counsel in the Washington, D.C. office, where she is a member of the White Collar Defense and Investigations, Financial Regulatory, FinTech and Digital Assets, and Anti-Money Laundering Practice Groups. Ella’s practice focuses on advising multinational corporations and financial institutions on Bank Secrecy Act/anti-money laundering (BSA/AML), anti-corruption, sanctions, payments, and consumer financial regulatory and enforcement matters, with a particular focus on regulatory matters impacting banks, casinos, social media and gaming platforms, marketplaces, fintech, payment service providers, and digital assets businesses. Ella is admitted to practice law in the District of Columbia and New York, as well as before the United States District Courts for the Eastern and Southern Districts of New York.

Sam Raymond is of counsel in the New York office and a member of the White Collar Defense and Investigations, Litigation, Anti-Money Laundering, Fintech and Digital Assets, and National Security Groups. As a former federal prosecutor, Sam has a broad-based government enforcement and investigations practice, with a specific focus on investigations and counseling related to anti-money laundering, the Bank Secrecy Act, and sanctions. Sam is an experienced investigator and trial lawyer. Prior to joining Gibson Dunn, Sam was an Assistant United States Attorney in the U.S. Attorney’s Office for the Southern District of New York from 2017 to 2024. In that role, Sam tried multiple cases to verdict and prosecuted a broad range of federal criminal violations. Sam is admitted to practice in the State of New York and before the U.S. District Courts for the Southern and Eastern Districts of New York and the U.S. Court of Appeals for the Second Circuit.

Gibson Dunn’s DEI Task Force is available to help clients understand what these and other expected policy changes will mean for them and how to comply with new requirements.

On February 5, 2025, the United States Office of Personnel Management (OPM) issued a memo to the heads and acting heads of federal departments and agencies entitled Further Guidance Regarding Ending DEIA Offices, Programs and Initiatives. The memo provides additional guidance on how federal agencies should implement President Trump’s executive orders, including Executive Order 14151 (“Ending Radical and Wasteful Government DEI Programs and Preferencing”), Executive Order 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”), and Executive Order 14148 (“Initial Rescissions of Harmful Executive Orders and Actions”). While the memo is directed at implementation of the executive orders within the federal government, it provides insight into how the administration is likely to view certain types of DEI programs and how it will interpret similar programs in the private sector.

In alignment with the President’s executive orders, the OPM memo directs agencies to “terminate all illegal DEIA initiatives,” including by eliminating any DEIA “offices, policies, programs, and practices” that unlawfully discriminate in any employment action, including “recruiting, interviewing, hiring, training or other professional development, internships, fellowships, promotion, retention, discipline, and separation.” According to OPM, unlawful discrimination includes “taking action motivated, in whole or in part” by protected characteristics. The memo specifically identifies “diverse slate” policies—which it describes as “unlawful diversity requirements for the composition of hiring panels, as well as for the composition of candidate pools”—as an example of “[u]nlawful discrimination related to DEI.”

OPM does not require elimination of “personnel, offices, and procedures” that receive complaints of discrimination, counsel employees who have allegedly been subject to discrimination, collect demographic data, or process employee accommodation requests. To the extent these functions were previously handled by DEIA personnel, the memo instructs agencies to redistribute these functions among remaining agency personnel and offices. However, the memo warns that agencies must ensure that these functions are “strictly limited to the duties within [the agency’s] statutory authority[.]”

The memo also addresses Employee Resource Groups (ERGs), instructing agencies to prohibit ERGs that “promote unlawful DEIA initiatives.” Although the memo expressly states that agency heads “retain discretion” to “host affinity group lunches, engage in mentorship programs, and otherwise gather for social and cultural events,” it directs that these activities or programs must be consistent with President Trump’s executive orders and the “broader goal of creating a federal workplace focused on individual merit.” Specifically, the memo emphasizes that no affinity group or cultural or social gathering may be restricted, either “explicitly or functionally,” on the basis of a protected characteristic, and that agency heads may not “draw distinctions” based on protected characteristics. For example, OPM says that an agency may not permit the formation of ERGs for certain racial groups but not for others and may not limit attendance to an affinity group event to only members of that ethnic group.

The memo also addresses disability accessibility and accommodations, stating that the Biden Administration “conflated” DEI initiatives with legal obligations related to disability and accessibility. While the memo says that President Trump’s executive orders “require the elimination of discriminatory practices” and calls on agencies to rescind policies that are “contrary” to the Civil Rights Act of 1964 and the Rehabilitation Act of 1973, it states that agencies should not “terminate or prohibit accessibility or disability-related accommodations, assistance, or other programs that are required by” law.

OPM also says that agencies should eliminate Special Emphasis Programs that “promote DEIA based on protected characteristics in any employment action or other term, condition, or privilege of employment, including but not limited to recruiting, interviewing, hiring, training or other professional development, internships, fellowships, promotion, retention, discipline, and separation.” Special Emphasis Programs are employment-related programs in federal agencies that focus special attention on certain groups that are underrepresented in specific occupational categories or grade levels within the agency’s workforce. In lieu of these programs, the memo directs agencies to work to “restore merit-based equal employment opportunity” and “reward[] individual excellence.”

Finally, OPM states the President’s authority to promulgate these policies comes from the Constitution and, therefore, agencies should “adhere to the President’s orders” to “eliminate all unlawful discrimination in the federal workforce,” rather than heeding “non-binding opinions and guidance promoting DEIA” and similar policy efforts. The President’s authority over the federal workforce differs from the legal authority the Administration has over private sector employers and other non-federal workplaces. As noted, however, the OPM Memo is indicative of programs and practices the Administration may view as violating Title VII and other laws that apply outside the federal sector.

The following Gibson Dunn lawyers assisted in preparing this update: Jason Schwartz, Katherine Smith, Stuart Delery, Mylan Denerstein, Zakiyyah Salim-Williams, Zoe Klein, Anna McKenzie, Cate McCaffrey, Claire Piepenburg, and Lauren Meyer.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s DEI Task Force, Labor and Employment practice groups, or the following authors and practice leaders:

Jason C. Schwartz – Partner & Co-Chair, Labor & Employment Group,
Washington, D.C. (+1 202.955.8242, jschwartz@gibsondunn.com)

Katherine V.A. Smith – Partner & Co-Chair, Labor & Employment Group,
Los Angeles (+1 213.229.7107, ksmith@gibsondunn.com)

Stuart F. Delery – Partner & Co-Chair, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.955.8515, sdelery@gibsondunn.com)

Mylan L. Denerstein – Partner & Co-Chair, Public Policy Group,
New York (+1 212.351.3850, mdenerstein@gibsondunn.com)

Zakiyyah T. Salim-Williams – Partner & Chief Diversity Officer,
Washington, D.C. (+1 202.955.8503, zswilliams@gibsondunn.com)

Molly T. Senger – Partner, Labor & Employment Group,
Washington, D.C. (+1 202.955.8571, msenger@gibsondunn.com)

I. Introduction

With Republicans controlling both chambers of Congress, the majority is planning to use a budget process called reconciliation to implement significant policy measures. Reconciliation allows Congress to pass certain legislation through expedited procedures, including by a simple majority vote in the House and Senate. As their majorities in both chambers are slim, Republicans see reconciliation as their best opportunity for advancing legislative priorities. That opportunity is not unlimited: an arcane Senate requirement known as the Byrd Rule creates a point of order against any “extraneous material” in reconciliation bills. Legislation passed through reconciliation must be budget-related and cannot include provisions without a fiscal impact or with a “merely incidental” fiscal impact. Additionally, committees are asked to adhere strictly to instructions provided by the Budget Committee.

Members of Congress and outside organizations hoping to include policy measures in the upcoming reconciliation bills must ensure that those measures comport with the Byrd Rule, which can be a challenge. If they do not, a senator opposing the provision can object to it on the Senate floor and the provision will be stricken absent a supermajority vote to waive the point of order. Senate Majority Leader John Thune has urged Republicans to retain the supermajority requirement because overturning it would have the same effect as overturning the Senate filibuster.[1]

Current priorities for the reconciliation bills include energy deregulation, border security, defense spending, federal funding cuts, and tax cuts. Congress can pass one reconciliation bill each fiscal year. Usually, this equates to one opportunity per calendar year, but the 118th Congress failed to adopt a budget resolution for fiscal year 2025. As a result, the 119th Congress could pass two reconciliation packages in 2025: one before the fiscal year ends in September, and another once the 2026 fiscal year begins in October. Republicans are currently divided on whether to pass a single reconciliation bill covering all their priorities or to pass one bill in early 2025 and a subsequent bill later in the year.

To date, Congressional Republicans have struggled to align on a single strategy for budget reconciliation. Senator Lindsay Graham (R-SC) has been pushing Congress to pass two reconciliation bills over the course of the year while House Speaker Mike Johnson (R-LA-4) has been a vocal advocate for a single bill.[2] The Senate released a budget reconciliation blueprint on February 7 that would instruct nine committees to make a $11.5 trillion net spending reduction over the next ten years,[3] and Chairman Graham has announced plans to mark up his resolution shortly.[4] The blueprint does not include an extension of the 2017 tax cuts, which will decrease the total savings.[5] House Republican leaders have privately signaled they are looking to cut federal spending by a smaller amount, $2 trillion to $2.5 trillion, though their single bill would include an extension of the tax cuts.[6]

Regardless of how many packages Congress ultimately passes, reconciliation presents clients an opportunity to propose and champion helpful legislation. In addition, reconciliation could change programs that affect clients, including major subsidies in the Inflation Reduction Act.

Below, we explain the reconciliation process and targeted areas for reconciliation in the 119th Congress.

II. Process

a. Statutory Reconciliation Process

Budget reconciliation is an optional procedural tool authorized by the Congressional Budget Act that supplements the annual budget process. To begin, the House and Senate Budget committees draft a concurrent budget resolution.[7] The committees then report the resolution to their respective chambers and provide reconciliation instructions that direct certain committees to develop legislation that will advance the required budgetary outcomes.

When the Budget committees consider the budget resolution, they each determine which committees in their chamber to instruct to develop legislations to meet the determined budgetary outcome. Not all committees receive instructions in each reconciliation package and which committees receive instructions depends on the legislative goals the majority wishes to advance in the reconciliation bill. Notably, the House and Senate do not have the same committees and similar committees do not always have the same jurisdiction, so the same provision may end up in different committees in each chamber. For example, the House Energy and Commerce Committee may have five provisions under its jurisdiction, but those provisions may be divided between the Senate Commerce Committee and Senate Energy and Natural Resources Committee.

The instructions frequently tell the committees how much money they are allowed to spend or how much they must save. The provisions assigned to each committee must comport with those limits. For example, the 117th Congress passed a reconciliation measure with the following instructions:

(a) Committee on Agriculture, Nutrition, and Forestry. — The Committee on Agriculture, Nutrition, and Forestry of the Senate shall report changes in laws within its jurisdiction that increase the deficit by not more than $135,000,000,000 for the period of fiscal years 2022 through 2031.[8]

In this example, the budget resolution instructed the Senate Committee on Agriculture, Nutrition, and Forestry to increase the deficit by not more than $135 billion. In other words, provisions under the committee’s jurisdiction cannot increase the deficit by more than $135 billion.

Armed with instructions, the committees draft legislative proposals and return them to the Budget committees by the deadline specified in the budget resolution. The Budget committees then incorporate those reports into an omnibus reconciliation bill.

The House and Senate consider the resulting reconciliation legislation under expedited procedures. In the House, the Rules Committee typically sets limits on debate and amendments for reconciliation procedures. In the Senate, debate on reconciliation legislation is limited to 20 hours, and any proposed amendments must be germane.[9] The Senate’s 20-hour limit on debate prevents members from filibustering and allows the Senate to pass reconciliation legislation with a simple majority rather than the usual 60 votes required to invoke cloture. Unsurprisingly, these limitations make reconciliation bills attractive vehicles for the majority to advance its legislative priorities.

In the 1980s, to address concerns that Congress had increasingly larded reconciliation bills with policies unrelated to the budget, the Senate implemented, and later codified, the Byrd Rule to focus reconciliation on its budgetary purpose.

b. The Byrd Rule

The Byrd Rule allows a senator to raise a point of order to strike “extraneous material” contained in a reconciliation bill or reconciliation resolution. When a reconciliation measure is considered, the Senate Budget Committee is required to submit for the record a list of potentially extraneous material included therein. The Byrd Rule is not self-executing, meaning a member must affirmatively raise the point of order. If the Senate chair sustains the point of order, the extraneous material is struck from the bill and may not be offered as an amendment. A vote of three-fifths of the Senate (typically 60 senators) is required to waive the rule or to overturn a ruling of the Chair. A provision is extraneous if it falls under one or more of the following six definitions:

it does not produce a change in outlays or revenues or a change in the terms and conditions under which outlays are made or revenues are collected;
it produces an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions;
it is outside of the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure;
it produces a change in outlays or revenues which is merely incidental to the non-budgetary components of the provision;
it would increase the deficit for a fiscal year beyond the “budget window” covered by the reconciliation measure; and
it recommends changes in Social Security.[10]

When interpreting the Byrd Rule, the Senate Parliamentarian refers to precedents established by prior decisions. Some precedents are located in the Congressional Record, but many are not publicly available. Although the Byrd Rule allows members to make formal points of order during debate, the Parliamentarian works with instructed committees’ staff prior to the floor debate to determine what provisions would be subject to the Byrd provisions—a process known as a “Byrd bath.” In that process, the minority staff typically scour the reconciliation legislation for potential Byrd Rule violations and raise them with the Senate Parliamentarian. Frequently, minority staff will submit memoranda arguing their points and majority staff will respond with their own memoranda. For more complicated questions, the Parliamentarian may ask the staff to present oral arguments making their case. These discussions happen behind closed doors, so there is no public record of the arguments or outcomes. As a result, it can be “difficult to divine the standard that the Parliamentarian applies to make determinations under the Byrd Rule, and in particular, the ‘merely incidental’ test.”[11]

Two interrelated provisions under the Byrd Rule that are subject to frequent debate are the requirements that reconciliation legislation (1) must “produce a change in outlays or revenues or a change in the terms and conditions under which outlays are made or revenues are collected” and (2) must not produce a budgetary change which is “merely incidental to the non-budgetary components.” These requirements are discussed in turn.

First, each provision of a reconciliation bill must produce a budgetary effect or change the terms of a law that makes outlays or collects revenues. Reconciliation measures often satisfy this requirement by changing eligibility definitions or formulas used to determine federal benefits.[12] A spending-related provision will survive a challenge under this provision if it allocates money for various programs and an amendment will withstand a challenge if it modifies funding allocations in the underlying legislation.[13]

Second, the Byrd Rule creates a point of order against any provision with a budgetary effect that is “merely incidental” to its non-budgetary components. This judgment requires a balancing analysis: whether the provision creates a policy change that would substantially outweigh its budgetary impact.[14] This element does not stand on its own and must be read in conjunction with the requirement that a provision must create a budgetary effect.

Whether a provision increases or decreases the deficit is not dispositive. “[A] Senator can find it easy to defend as budgetary a provision that does nothing but spend a great deal of money. On the other hand, a provision that actually reduces the deficit but does so through the device of an extensive policy change will receive strict scrutiny.”[15]

The outcome of this prong of the analysis can depend on the score a bill receives from the Congressional Budget Office (CBO). The greater the budgetary impact of a provision, the more difficult it will be for opponents to contend that its budgetary effects are “merely incidental.” Reputable tax economics firms can provide cost estimates for proposed legislation.

Although the size of the budgetary impact from a provision is relevant to the Byrd Rule analysis, it is not dispositive. During consideration of the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015, the Parliamentarian considered a provision to repeal the Affordable Care Act’s individual mandate.[16] She advised that “while the dollars associated with repeal are large (a net savings of approximately 147 billion dollars over 10 years if combined with the employer mandate repeal), they are dwarfed by the scope and impact of this mandate on the 270 million Americans who are covered by it.”[17] As the “law constitutes a massive, national policy change[,] the primary purpose of which is not budgetary” it was found to violate the Byrd Rule.[18]

This provision frequently gives rise to staff arguments to the Parliamentarian and Senate floor points of order. There is little public precedent defining the “merely incidental” test, which means it is often difficult to predict how the Parliamentarian will rule on a particular question. Hence, careful thought needs to be given as to whether a provision can pass the “merely incidental” test as well as how to present the provision to the Parliamentarian.

The four remaining Byrd Rule provisions are more straightforward:

Where a Senate Committee is directed to increase or decrease the deficit by a certain amount, it must comply with those instructions in its legislative recommendations to the Budget Committee. If a House-passed reconciliation bill does not align with a Senate Committee reconciliation instruction, the House may offer an amendment to address the disparity.
A committee may only make recommendations to the Budget Committee—in response to reconciliation directions—on matters under the committee’s jurisdiction. If a committee makes recommendations on matters outside of its jurisdiction, those may be stricken as extraneous.
A provision must not increase the deficit for a fiscal year beyond the “budget window” covered by the reconciliation measure. The budget window will be ten years. In some cases, Congress can save a provision that would run afoul of this rule by adding a sunset provision.
No provision may recommend changes in Social Security.

III. Targeted Areas for Reconciliation

As Republicans in Congress prepare to implement President Trump’s legislative agenda, priorities for reconciliation include energy deregulation, border security, defense spending, and tax cuts.[19] A top reconciliation priority is extending the tax cuts enacted through reconciliation during the first Trump administration in the 2017 Tax Cuts and Jobs Act.[20] Those tax cuts are set to expire in December 2025.[21] In order to meet their targeted deficit reduction goals while cutting extending tax cuts, Republicans are reportedly considering slashing Medicaid, which may prove politically challenging.[22]

Of the energy policies being considered for reconciliation, the most significant would be repealing parts of the Inflation Reduction Act (IRA),[23] which provides funding for clean energy.[24] The law includes an array of green subsidies—including consumer tax credits, grants, and loans—in exchange for using clean energy.[25] Republicans have not publicly announced specific IRA provisions they will target through reconciliation, although Speaker Johnson mentioned wanting to take a “scalpel” rather than a “sledgehammer” to the green subsidies.[26] Republicans are also reportedly considering using reconciliation to address energy permitting reform and opening the Artic Wildlife Refuge for drilling.[27]

Republicans are also expected to attempt to use reconciliation to increase border security, namely by providing funding for completion of a wall along the country’s southern border and increasing funding for Customs and Border Protection and Immigration and Customs Enforcement.[28] And they are expected to convert a portion of discretionary defense spending into mandatory spending.[29]

Beyond those priorities, members have mentioned using reconciliation to expand child tax credits,[30] require site neutrality for Medicare,[31] reform welfare, and provide for greater scrutiny of “mandatory” spending.[32] The bill also may address the debt ceiling.[33]

IV. Conclusion

Gibson Dunn is monitoring the reconciliation process closely. Our lawyers include former key Capitol Hill staff members, including those who worked on instructed committees during reconciliation processes in the Senate. These lawyers can help clients interested in understanding how reconciliation could help them or assess provisions for compliance with the Byrd Rule. Clients with policy interests related to these bills should be aware that the situation is evolving rapidly and should reach out to the firm with any questions.

[1] Andrew Desiderio, Thune to Senate GOP: Don’t Overrule Parliamentarian on Reconciliation, Punchbowl News (Jan. 6, 2025), https://punchbowl.news/article/senate/thune-tells-gop-not-to-overrule-parliamentarian/.

[2] Jake Sherman, John Bresnahan, The race for reconciliation, Punchbowl News (Feb. 10, 2025), https://punchbowl.news/article/house/republican-leaders-house-look-to-cut-federal-spending-big/.

[3] Paul Krawzak, Graham unveils budget blueprint ahead of markup next week, Roll Call (Feb. 7, 2023), https://rollcall.com/2025/02/07/graham-unveils-budget-blueprint-ahead-of-markup-next-week/.

[4] Melanie Zanona, John Bresnahan & Samantha Handler, AM: The reconciliation race: Can the House get its act together?, Punchbowl News (Feb. 10, 2025).

[5] Id.

[6] Jake Sherman, John Bresnahan, The race for reconciliation, Punchbowl News (Feb. 10, 2025), https://punchbowl.news/article/house/republican-leaders-house-look-to-cut-federal-spending-big/.

[7] Floyd M. Riddick & Alan S. Frumin, Riddick’s Senate Procedure 502 (1992) [hereinafter “Riddick’s”].

[8] S. Cong. Res 14, 117th Cong (2021) (adopted).

[9] See Congressional Budget Act of 1974 § 310(e)(2) (codified as amended at 2 U.S.C. § 641(e)(2)); Congressional Budget Act of 1974 § 305(b)(2) (codified as amended at 2 U.S.C. § 636(b)(2)); Congressional Budget Act of 1974 § 305(c)(4) (codified as amended at 2 U.S.C. § 636(c)(4)).

[10] Congressional Budget Act of 1974 § 313 (codified as amended at 2 U.S.C. § 644).

[11] Budget Process Law Annotated—2022 Edition, by William G. Dauster, 117th Cong., 2d sess., S. Prt. 117–23, December 2022, notes on pp. 622.

[12] Id. at 669.

[13] Id. at 671.

[14] Id. at 690.

[15] Id. at 693.

[16] Id. at 703.

[17] Id. at 704.

[18] Id.

[19] Sahil Kapur, Republicans eye tax breaks, border funds and clean energy cuts when Trump returns, NBC (Dec. 1, 2024), https://www.nbcnews.com/politics/congress/republicans-eye-tax-breaks-border-funds-clean-energy-cuts-trump-return-rcna181927.

[20] Pub. L. 115–97, 131 Stat. 2054.

[21] See Pub. L. 115–97, § 11001(a), 131 Stat. 2054, 2054 (codified at 26 U.S.C. § 1).

[22] Jake Sherman, John Bresnahan, The race for reconciliation, Punchbowl News (Feb. 10, 2025), https://punchbowl.news/article/house/republican-leaders-house-look-to-cut-federal-spending-big/.

[23] Pub. L. 117–169, 136 Stat. 1818 (2022).

[24] Emma Dumain et al., Republicans plot energy-focused reconciliation package, Politico (Dec. 4, 2024), https://www.eenews.net/articles/republicans-plot-energy-focused-reconciliation-package/.

[25] See Sahil Kapur, Republicans eye tax breaks, border funds and clean energy cuts when Trump returns, NBC (Dec. 1, 2024), https://www.nbcnews.com/politics/congress/republicans-eye-tax-breaks-border-funds-clean-energy-cuts-trump-return-rcna181927.

[26] See Emma Dumain et al., Republicans plot energy-focused reconciliation package, Politico (Dec. 4, 2024), https://www.eenews.net/articles/republicans-plot-energy-focused-reconciliation-package/.

[27] Id.; Kelsey Brugger, Republicans cooking up 2025 permitting plan if lame-duck push fails, PoliticoPro (Nov. 20, 2024), https://subscriber.politicopro.com/article/eenews/2024/11/20/republicans-cooking-up-2025-permitting-plan-if-lame-duck-push-fails-00190527.

[28] Alexander Bolton, Thune lays out plan for separate border and tax reconciliation bills, Hill (Dec. 3, 2024), https://thehill.com/homenews/senate/5020333-senate-republicans-reconciliation-tax-cuts-border-security/.

[29] Id.

[30] Sahil Kapur, Republicans eye tax breaks, border funds and clean energy cuts when Trump returns, NBC (Dec. 1, 2024), https://www.nbcnews.com/politics/congress/republicans-eye-tax-breaks-border-funds-clean-energy-cuts-trump-return-rcna181927.

[31] Ben Leonard & Robert King, Cassidy: ‘Premature’ to say if site-neutral is a reconciliation target, PoliticoPro (Dec. 11, 2024), https://subscriber.politicopro.com/article/2024/12/cassidy-premature-to-say-if-site-neutral-is-a-reconciliation-target-00193735?site=pro&prod=alert&prodname=alertmail&linktype=headline&source=email.

[32] Sahil Kapur, Republicans eye tax breaks, border funds and clean energy cuts when Trump returns, NBC (Dec. 1, 2024), https://www.nbcnews.com/politics/congress/republicans-eye-tax-breaks-border-funds-clean-energy-cuts-trump-return-rcna181927.

[33] Gregory Svirnovskiy, Johnson wants budget reconciliation bill on Trump’s desk by end of April, Politico (Jan. 5, 2015), https://www.politico.com/news/2025/01/05/johnson-budget-reconciliation-trump-april-00196504.

The following Gibson Dunn lawyers assisted in preparing this update: Michael Bopp, Amanda Neely, and Alexandria Murphy.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Congressional Investigations or Public Policy practice groups, or the following authors:

Michael D. Bopp – Chair, Congressional Investigations Practice Group,
Washington, D.C. (+1 202.955.8256, mbopp@gibsondunn.com)

Barry H. Berke – Co-Chair, Litigation Practice Group,
New York (+1 212.351.3860, bberke@gibsondunn.com)

Stuart F. Delery – Co-Chair, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.955.8515, sdelery@gibsondunn.com)

Thomas G. Hungar – Partner, Appellate & Constitutional Law Practice Group,
Washington, D.C. (+1 202-887-3784, thungar@gibsondunn.com)

Amanda H. Neely – Of Counsel, Public Policy Practice Group,
Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)

The executive order is among the most significant political developments related to the FCPA in years. Gibson Dunn will continue monitoring these developments and reporting to our trusted friends and clients in the days, weeks, and months ahead.

Yesterday evening, President Trump signed an executive order titled Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security (Feb. 10, 2025), directing the Department of Justice (DOJ) to pause new investigations and enforcement actions under the Foreign Corrupt Practices Act of 1977 (FCPA), conduct a review, and issue revised enforcement guidelines for the statute. In its opening lines, the order asserts that the FCPA has been “systematically, and to a steadily increasing degree, stretched beyond proper bounds and abused” such that its “overexpansive and unpredictable” enforcement “against American citizens and businesses . . . for routine practices in other nations” now impedes U.S. foreign policy objectives. The order requires that the newly appointed Attorney General Pamela Bondi, during a 180-day period that may be extended another 180 days at her discretion, cease initiation of new FCPA investigations or enforcement actions, unless she grants an individual exception.

The order mandates that any FCPA investigations or enforcement actions initiated or allowed to continue afterward must be governed by the revised guidelines and be “specifically authorized by the Attorney General.” Finally, the order directs the Attorney General to “determine whether additional actions, including remedial measures with respect to inappropriate past FCPA investigations and enforcement actions” should be taken by DOJ or, if Presidential action is required, recommended to the President.

This development comes on the heels of last week’s memorandum by Attorney General Bondi—discussed further in our recent analysis—instructing DOJ’s FCPA Unit to prioritize cases that relate to cartels and transnational criminal organizations (TCOs) and shift focus away from cases that lack such a connection, to facilitate aggressive prosecutions in service of the total elimination of cartels and TCOs. In keeping with President Trump’s stated priority of “keeping America safe,” that memorandum and others reflected a clear shift in the Administration’s enforcement priorities to human trafficking and smuggling; TCOs, cartels, and gangs; and protecting law enforcement.

Impetus and Context

The executive order and an accompanying “fact sheet” state that “FCPA overenforcement” has “harmed” U.S. companies doing business in international markets by prohibiting them from engaging in practices that are “common among international competitors,” putting them at a disadvantage against their international peers. The order cites “excessive, unpredictable FCPA enforcement” as impeding the President’s constitutional authority to conduct foreign affairs, which is “inextricably linked with the global economic competitiveness of American companies.” By stopping “overenforcement,” President Trump seeks to “level [the] playing field” and provide U.S. companies with “the tools to succeed globally.” This line of rhetoric resonates with comments President Trump made in a 2012 interview with CNBC, wherein he called the FCPA a “horrible law and it should be changed” because it puts U.S. businesses at a “huge disadvantage.”

Yet, as discussed in our 2020 Year-End FCPA Update, despite predictions to the contrary, sweeping changes did not come to pass during President Trump’s first term. Rather, FCPA enforcement actions increased, with 164 total enforcement actions (including non-prosecution agreements and “declinations with disgorgement”) announced by the DOJ or Securities and Exchange Commission (SEC) during President Trump’s first term (2017-2020)—compared to only 126 during President Obama’s second term (2012-2016) and 96 under President Biden (2021-2024). The current Trump administration’s pronouncements resurrect earlier predictions of the FCPA’s demise—and questions around what an appropriate level of FCPA enforcement should be.

Prior administrations used similar rhetoric around ensuring a level playing field and promoting the rule of law in the fight against TCOs and terrorism as rationales for continued or increased FCPA enforcement. Indeed, corruption has been a continuous focal point in national security strategies of administrations since the 1998 amendments to the statute, if not earlier. The George W. Bush administration pronounced in 2002 that “corruption can make weak states vulnerable to terrorist networks and drug cartels within their borders.” In 2010, the Obama administration similarly recognized corruption as a “severe impediment to development and global security” and as one of the primary vehicles through which TCOs and terrorist organizations had been able to accumulate wealth and power. The first Trump administration’s national security strategy noted in 2017 that “[t]errorists and criminals thrive where governments are weak, corruption is rampant, and faith in government institutions is low” and established a priority action to counter foreign corruption by “[u]sing our economic and diplomatic tools . . . to target corrupt foreign officials and work with countries to improve their ability to fight corruption so U.S. companies can compete fairly in transparent business climates.” And in 2022, the Biden administration referred to the fight against corruption as a “core national security interest.”

Metrics relating to FCPA enforcement do not suggest that U.S. companies are being disproportionately punished, although “overenforcement” is a subjective concept. The “fact sheet” cites only limited statistics in support of its premise that U.S. companies are disadvantaged, including that DOJ and SEC filed “26 FCPA-related enforcement actions” last year with 31 companies under investigation and that an average of 36 FCPA-related enforcement actions per year over the last decade “drain[ed] resources from both American businesses and law enforcement.” Although the totals of FCPA-related enforcement actions, as we have tracked them, are actually greater (40 announced in calendar year 2024 and 46 annually on average over the last decade, as discussed in our 2024 Year-End FCPA Update), focusing on those discrepancies misses the forest for the trees.

Beyond the policy point discussed above, it is important to note that the majority of defendants in FCPA enforcement actions over the past decade have been non-U.S. companies and individuals. Specifically, between 2015 and 2024, according to our data, 50% of all corporate defendants and 62% of all individual defendants in FCPA enforcement actions by DOJ or SEC were foreign. And of the top ten largest monetary recoveries by U.S. authorities resulting from corporate FCPA enforcement actions, foreign companies account for eight, with monetary recoveries amounting to $6.1 billion of the $8.3 billion aggregate total from the “FCPA Top 10” enforcement actions.

Finally, in terms of tying up law enforcement resources, DOJ’s 24 corporate FCPA enforcement actions over the past three years (2022-2024) represented less than 10% of DOJ’s at least 244 negotiated corporate criminal resolutions (i.e., guilty pleas, deferred prosecution agreements, non-prosecution agreements, and declinations with disgorgement) during that period. (And that small fraction has not appeared to require a disproportionate outlay of DOJ resources, insofar as FCPA cases have historically—by design—involved a greater degree of cooperation, voluntary disclosure, and non-trial resolutions than other types of criminal prosecution.) FCPA enforcement actions compose an even smaller fraction of overall enforcement when considering the full range of DOJ criminal investigations and prosecutions against individuals. Although the data do not correspond neatly to our other statistics, to provide a sense of magnitude, during President Trump’s first administration between government fiscal years 2017 and 2020, U.S. Attorneys’ Offices investigated a total of 678,949 suspects, and DOJ charged 326,726 defendants in federal courts according to DOJ’s Bureau of Justice Statistics.

The “fact sheet” and the executive order’s call to enhance national security (citing specifically the need for strategic advantages in critical minerals, deepwater ports, and other key infrastructure or assets around the world) is also not novel. We note that the FCPA provides a limited statutory exemption for matters implicating national security. Specifically, the FCPA exempts issuers from liability under the accounting provisions in matters related to national security when acting under the directive of the “the head of any Federal department or agency . . . pursuant to Presidential authority,” who must report such matters on an annual basis to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate. 15 U.S.C. § 78m(b)(3). The executive order does not address this exemption; whether the omission was intentional, perhaps signaling a desire to circumvent or reduce congressional oversight of such executive directives, or an effort to expand the exemption in practice to the antibribery provisions, remains an open question.

Open Questions

While the executive order gives a clear statement of President Trump’s priorities with respect to the FCPA, its impact remains to be seen. It is possible that the executive order could herald only a brief pause in new FCPA actions while DOJ brings its enforcement efforts in line with the Administration’s priorities and the directives Attorney General Bondi has already issued. For example, the Attorney General’s February 5, 2025 memorandum authorizing U.S. Attorneys’ Offices to initiate FCPA cases connected to cartels or TCOs without approval by DOJ’s Criminal Division requires some reconciliation with the executive order’s mandate that FCPA actions henceforth be specifically authorized by the Attorney General. Alternatively, the order could mark a material shift in FCPA enforcement, significantly impacting the United States’s historical global leadership in anti-corruption efforts.

Operationally, some immediate questions include the following:

How, if at all, does the executive order apply to the FCPA’s other enforcer, the SEC? The SEC shares joint authority with DOJ for enforcing the FCPA against issuers, and while the fact sheet references combined DOJ and SEC statistics, the executive order is addressed solely to the Attorney General and gives no direction to the SEC regarding FCPA enforcement. (Nor does the order address the CFTC, which issued an advisory during the first Trump administration announcing its own foreign corruption-related enforcement program.) It is possible that the FCPA may continue to be enforced civilly by the SEC, even as criminal enforcement declines, though this would seem to be at odds with the executive order’s premise that FCPA enforcement interferes with U.S. companies’ ability to do business abroad.
How will non-U.S. companies fare under the new FCPA enforcement regime? The rhetoric behind the executive order and fact sheet is uniquely protectionist as to U.S. companies. Although FCPA practitioners have long questioned the wisdom of and legal basis for pursuing foreign companies for bribing foreign officials on foreign soil, if the Trump Administration wishes to wield U.S. law as a tool to advantage U.S. companies, one way to do so could be to enhance aggressive prosecutions against foreign companies. This could then lead to serious “selective prosecution” challenges in the U.S. courts, as befell the “China Initiative” in Trump I.
Four Years, or Forever? Even under the broadest projection of deprioritizing FCPA enforcement, Americans will choose a new leader in just under four years. White collar criminal enforcement has long been a stated priority of Democratic regimes and other Republican regimes alike, and if there is an overcorrection to “FCPA overenforcement” under Trump, there very possibly could be an overcorrection in the opposite direction in the next administration. The challenges of rebuilding a dismantled enforcement apparatus would be real and take time, but the statute of limitations for FCPA cases is five years and can be paused for up to an additional three years as DOJ seeks foreign-located evidence—among other scenarios that toll the limitations period. Whether DOJ will continue to pursue tolling orders and tolling agreements during the enforcement review period remains to be seen.
Remedial Measures for Past FCPA Enforcement Actions? If the overall executive order is curious, more curious still is a suggestion that part of DOJ’s review will include the pursuit of “remedial measures” associated with past FCPA enforcement actions that may have crossed the FCPA’s “proper bounds” or were somehow abusive. What this will mean in practice remains to be seen, but one prime target could be ongoing compliance obligations associated with recent resolutions, including monitorships and self-reporting. For resolutions announced in coordination with foreign enforcement authorities, revisiting a U.S. resolution may have collateral effects vis-à-vis parallel resolutions announced by foreign enforcement authorities, such as if monetary penalties or forfeiture to U.S. authorities that were originally credited by foreign authorities are reduced.
How Does this Relate to FCPA-Related Cases? As we frequently note in our enforcement updates, a significant portion of foreign anti-corruption enforcement is actually brought under a myriad of adjacent criminal laws, including money laundering, wire fraud, securities fraud, and other statutes. These actions are not literally covered by the executive order, which is limited to the FCPA, and whether the pause will extend more broadly to “FCPA-related” enforcement remains to be seen. Indeed, one possibility is that international corruption cases initially investigated by DOJ’s FCPA Unit could be redirected to U.S. Attorney’s Offices to charge materially the same conduct under different statutes.
What About Already-Indicted Cases? DOJ has unilateral authority to “pause” ongoing FCPA investigations that have not yet been charged, but cases that already have been indicted and before the courts will involve an Article III decision-maker. Whether DOJ intends to move to dismiss or stay ongoing cases in the courts remains to be seen. We are aware of one case with an upcoming trial where a judge already has ordered DOJ to state its position in response to the executive order.

Whatever the answers to these questions, the perspective reflected in the order represents a shift from the long-held view that international anti-corruption efforts benefit U.S. businesses by creating a level playing field and strengthening the rule of law—including in countries with a strong presence of TCOs and cartels. One of the original purposes of the statute was to address bribery by U.S. companies that undermined American foreign policy in the 1970s and restore public confidence in the integrity of American businesses following evidence of substantial corruption and international bribery uncovered during investigations following the Watergate Scandal under President Nixon. President Clinton’s signing statement to the 1998 amendments to the FCPA also underscored an intent to level the playing field for U.S. companies that were losing international business opportunities to foreign competitors paying bribes and then deducting them from their taxes in their home countries.

As noted above, the order also marks a fundamental break with a longstanding bipartisan consensus on the role of the United States in combatting international corruption. That consensus was not only domestic but international, with the United States advancing multilateral efforts to bring other countries into the fold as partners in anti-corruption efforts. Indeed, in still-available public online materials, the U.S. Mission to the Organization for Economic Cooperation & Development (OECD) declared that “the United States has led the fight against international bribery” and credits the United States in creating a global “race to the top” by encouraging adoption of the 1997 OECD Anti-Bribery Convention, to which the U.S. also acceded in 1999. It is not yet clear whether the Administration’s executive order and stance on FCPA enforcement will be in line with U.S. obligations under the OECD Anti-Bribery Convention and other international treaties such as the United Nations Convention Against Corruption.

Whatever its ultimate implementation, the executive order is among the most significant political developments related to the FCPA in years. We will continue monitoring these developments and reporting to our trusted friends and clients in the days, weeks, and months ahead.

The following Gibson Dunn lawyers prepared this update: F. Joseph Warin, Patrick Stokes, Benno Schwarz, Stephanie Brooker, John Chesley, Michael Diamant, Melissa Farrar, Oleh Vretsona, David Ware, Bryan Parr, Kio Bell, Michael Jaskiw, and Ellie Schwietering.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. We have more than 110 attorneys with FCPA experience, including a number of former federal prosecutors and SEC officials, spread throughout the firm’s domestic and international offices. Please contact the Gibson Dunn attorney with whom you work, or any of the following leaders and members of the firm’s Anti-Corruption & FCPA practice group:

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Jordan Estes (+1 212.351.3906, jestes@gibsondunn.com)
Dani James (+1 212.351.3880, djames@gibsondunn.com)
Darren LaVerne (+1 212.351.3936, dlaverne@gibsondunn.com)
Michael Martinez (+1 212.351.4076, mmartinez2@gibsondunn.com)
Karin Portlock (+1 212.351.2666, kportlock@gibsondunn.com)
Jaclyn Neely (+1 212.351.2692, jneely@gibsondunn.com)
M. Jonathan Seibald (+1 212.351.6216, mseibald@gibsondunn.com)

Denver
Ryan T. Bergsieker (+1 303.298.5774, rbergsieker@gibsondunn.com)
Robert C. Blume (+1 303.298.5758, rblume@gibsondunn.com)
John D.W. Partridge (+1 303.298.5931, jpartridge@gibsondunn.com)
Laura M. Sturges (+1 303.298.5929, lsturges@gibsondunn.com)

Los Angeles
Michael M. Farhang (+1 213.229.7005, mfarhang@gibsondunn.com)
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Nicola T. Hanna (+1 213.229.7269, nhanna@gibsondunn.com)
Poonam G. Kumar (+1 213.229.7554, pkumar@gibsondunn.com)
Marcellus McRae (+1 213.229.7675, mmcrae@gibsondunn.com)
Debra Wong Yang (+1 213.229.7472, dwongyang@gibsondunn.com)
Rommy Flores (+1 213.229.7966, rflores@gibsondunn.com)

San Francisco
Winston Y. Chan (+1 415.393.8362, wchan@gibsondunn.com)
Thad A. Davis (+1 415.393.8251, tadavis@gibsondunn.com)
Charles J. Stevens (+1 415.393.8391, cstevens@gibsondunn.com)
Zachariah J. Lloyd (+1 415.393.8319, zlloyd@gibsondunn.com)

Palo Alto
Benjamin Wagner (+1 650.849.5395, bwagner@gibsondunn.com)

London
Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com)
Charlie Falconer (+44 20 7071 4270, cfalconer@gibsondunn.com)
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Michelle Kirschner (+44 20 7071 4212, mkirschner@gibsondunn.com)
Allan Neil (+44 20 7071 4296, aneil@gibsondunn.com)
Philip Rocher (+44 20 7071 4202, procher@gibsondunn.com)

Paris
Benoît Fleury (+33 1 56 43 13 00, bfleury@gibsondunn.com)
Bernard Grinspan (+33 1 56 43 13 00, bgrinspan@gibsondunn.com

Munich
Katharina Humphrey (+49 89 189 33 155, khumphrey@gibsondunn.com)
Benno Schwarz (+49 89 189 33 110, bschwarz@gibsondunn.com)
Mariam Pathan (+49 89 189 33 228, mpathan@gibsondunn.com)

Hong Kong
Oliver D. Welch (+852 2214 3716, owelch@gibsondunn.com)
Becky Chung (+ +852 2214 3837, bchung@gibsondunn.com)
Ning Ning (+852 2214 3763, nning@gibsondunn.com)

Singapore
Oliver D. Welch (+852 2214 3716, owelch@gibsondunn.com)
Karthik Ashwin Thiagarajan (+65 6507 3636, kthiagarajan@gibsondunn.com)

Gibson Dunn is available to help Taiwanese clients understand what this and other possible policy changes will mean for them and how to navigate the shifting regulatory environment.

Navigate to the English version here

美國總統川普簽署行政令對中國商品加徵關稅－台灣跨境企業面臨加劇執法風險

吉布森律師事務所可以幫助台灣跨境企業評估政策變化帶來的合規風險，以因應變化莫測的監管環境。

政策背景

2025 年 2 月 1 日，美國總統川普發布總統行政令，對中華人民共和國的合成鴉片類藥物供應鏈增收從價關稅。該行政令涵蓋“中華人民共和國生產的所有物品 ”，其具體定義將公佈在即將發行的《聯邦公報》中。在川普總統依據《國際緊急經濟權力法》決定「國家緊急狀態」結束前，該關稅將持續有效。

該行政令規定，美東時間2024年2月4日上午零點後所有原產於中國內地並“已入庫準備消費或從倉庫提出用於消費”的商品都須額外支付10%關稅。這項關稅將累加於現行關稅之上，包括川普首次執政期間對四篇清單中國進口商品增收高達50%的關稅。拜登政府隨後延續了川普時期的對華關稅政策，同時對包括電池零件、電動車、半導體及鋼鐵和鋁產品加徵額外關稅。

值得注意的是，行政令未提及適用的具體貨物範圍。相關規定可能會在隨後發行的《聯邦公報》或《聯邦公報》發行通知中頒布。

該新政同時規定，若中國徵收報復性關稅，川普總統「可提高或擴大依本命令徵收關稅的範圍」。中國商務部於2 月 2 日宣布將針對此關稅向世貿組織提出申訴並實施相應的反制措施。 2025 年 2 月 4 日，中國財政部宣布自 2025 年 2 月 10 日起，對美國進口的煤炭和液化天然氣徵收 15%的額外關稅，並對原油、農業設備和部分車輛徵收 10%的關稅。

美國將透過《虛假申報法》進一步打擊避稅行為

隨著新關稅政策的頒布，在中國生產、組裝產品或擁有中國供應鏈的公司或將面臨更嚴格的監管審查。《虛假申報法》是美國當局打擊涉嫌在目前高成本環境下公司避稅行為的主要執法工具。《虛假申報法》禁止行為人透過提供虛假資訊來逃避對美國政府的金錢義務，並對相應行為進行罰款。儘管法律要求美國政府承擔舉證責任，包括員工在內的個人和非政府組織卻可以透過Qui Tam機製作為原告提起訴訟。該法同時提供大量金錢獎勵以激勵舉報行為。

現行政策下，在中國進行部分產品生產、採購或組裝的非中國企業將面臨特別嚴重的執法風險。美國對於進口產品原產地的認定規則多種多樣，同一件產品可能隨著產品原料、零件和加工地的不同而適用不同規則。根據最新執法和監管解釋，一件台灣公司認為生產於台灣的產品可能因為使用了中國零件，而被美國當局認定為原產於中國，從而被徵收關稅。短期來看，企業仍可暫時將商品轉運至第三國，透過「實質改造」改變美國海關對商品原產地的認定。但這種行為早已成為美國執法機關的眼中釘，在可預見的高壓政策下能否長期持續仍尚未可知。

據我們吉布森了解，美國政府正在積極進行違反《虛假申報法》的執法調查。例如，近期就有兩家企業因為中國供應鏈相關的稅務問題與美國司法部簽署數百萬美元的和解協議：

2024 年 3 月，美國司法部對一家新澤西州化學品進口商與中國供應商之間涉嫌合謀逃避關稅的案件進行了調查，並簽署 310 萬美元的和解協議。
2024 年 1 月，美國司法部對一家汽車零件製造商故意不支付中國製造產品關稅的指控進行調查，並簽署 300 萬美元的和解協議。

新行政令同時對加拿大和墨西哥加徵關稅

包括台灣企業在內的許多涉中企業先前曾透過在加拿大和墨西哥開展生產業務來節省成本。在墨加辦廠一方面節省了美國本土高昂的成本。另一方面，《北美自由貿易協定》及後續的《美墨加協定》則給予了兩地出口商品極大的稅務優惠。但在 2 月 1 日的行政令中，川普總統宣布對原產於加拿大和墨西哥的商品徵收 25% 的關稅。美國同意將此計劃暫緩至3月4日實施。無論政策最終落實與否，這個涉中企業的避稅通道終將面臨更嚴厲的監管審查。

企業應及時應對並合理規避風險

在新的貿易環境下，台灣企業應警惕美國對逃避關稅行為的執法調查，並採取適當的預防措施，例如在供應鏈中對原產地進行嚴格的合規審查並保存相應記錄。

如果企業因可能違反《虛假申報法》而被美國當局以逃避關稅為由進行執法調查，或被所謂的舉報人指控有此類不當行為，建議企業尋求具有《虛假申報法》辯護經驗的美國律師的協助。

吉布森律師事務所市場領先的《虛假申報法》辯護業務團隊持續監控著這空間的演化，隨時支援協助台灣客戶應對調查和執法行動。此外，以下吉布森律師可使用國語進行溝通：

Winston Y. Chan (詹耀文) – Global Co-Chair, False Claims Act / Qui Tam Defense and White Collar Defense and Investigations Practice Groups, based in our San Francisco office
(+1 415.393.8362, wchan@gibsondunn.com)

Justin Lin (林昕弘) – Associate Attorney, False Claims Act / Qui Tam Defense and White Collar Defense and Investigations Practice Group, based in our San Francisco office
(+1 415.393.4653, jolin@gibsondunn.com)

Gabriela Li (黎哲媛) – Associate Attorney, False Claims Act / Qui Tam Defense and Securities Regulation and Corporate Governance Practice Groups, based in our San Francisco office
(+1 415.393.4602, gli@gibsondunn.com)

English:

On February 1, 2025, President Trump issued an Executive Order Imposing Duties to Address the Synthetic Opioid Supply Chain in the People’s Republic of China. The Executive Order imposes a 10% ad valorem tariff on “all articles that are products of the PRC,” to be defined in a forthcoming Federal Register notice. The announced tariff is to stay in place until President Trump determines the “national emergency,” as assessed in his discretion under the International Emergency Economic Powers Act (IEEPA), is over.

The tariff applies to all “goods entered for consumption, or withdrawn from warehouse for consumption,” on or after 12:01 a.m. Eastern Time on February 4, 2024. And the tariff is cumulative to all existing tariffs, including the up to 50% tariffs imposed during the first Trump administration on four category lists of Chinese imports. Those tariffs remain in effect and were extended and supplemented under the Biden administration, including (among other sectors) to battery parts, electric vehicles, semiconductors, and steel and aluminum products.

The Executive Order does not include a list of specifically covered goods. The full details are likely to be included in a technical annex when the government publishes the order to the Federal Register or publishes a follow-up Federal Register notice.

The Executive Order states that if China imposes its own retaliatory tariffs, President Trump “may increase or expand in scope the duties imposed under this order.” On February 2, 2025, China’s Ministry of Commerce announced it would file a complaint to the WTO and implement corresponding “countermeasures.” Accordingly, on February 4, 2025, China’s Ministry of Finance announced, starting February 10, 2025, the imposition of additional tariffs of 15% on coal and liquified natural gas imports from the United States and a 10% tariff on crude oil, agricultural equipment, and certain vehicles.

Heightened U.S. Investigatory Environment for Tariffs Evasion—False Claims Act

One direct consequence of the new tariffs will be increased regulatory scrutiny of companies with manufacturing or assembly operations in China, or who have a China-based supply chain. And for those companies suspected of evading tariffs in this higher-cost environment, the False Claims Act (FCA) is a primary enforcement tool wielded by U.S. authorities. The FCA prohibits the avoidance of monetary obligations to the U.S. government by the presentation of false information. At the same time, the FCA provides substantial monetary incentives to private individuals—including current and former employees—who report suspected FCA violations, through “qui tam” or whistleblower lawsuits.

The risk of enforcement action is particularly acute for companies with some but not all of their manufacturing, sourcing, or assembly relationships tied to China. This is because different rules for determining product origin apply depending on the raw materials, components, and product finishing in question. For example, goods that a Taiwanese company may consider as finished in Taiwan but that partially incorporate China-sourced components may be determined by U.S. authorities to have Chinese-origin for tariff purposes in light of new enforcement and regulatory interpretations, approaches, and priorities. And while it is true that “substantial transformation” in a third country can alter the origin of products, U.S. authorities have grown increasingly suspicious of transshipment undertaken merely as “window dressing.”

We are aware of ongoing active investigations in this area, and examples of recent multi-million-dollar FCA settlements involving Chinese supply chain issues include:

A March 2024 U.S. Department of Justice investigation and settlement of $3.1 million for an alleged conspiracy to avoid customs duties between a New Jersey chemicals importer and Chinese suppliers.

A January 2024 U.S. Department of Justice investigation and settlement of $3 million to resolve allegations that an automobile parts manufacturer intentionally failed to pay tariffs on Chinese-manufactured products.

Simultaneous Executive Orders Imposing Canada and Mexico Tariffs

In addition, whereas some companies—including many Taiwanese companies—had previously pursued manufacturing operations in Canada and Mexico, in part to leverage the North American Free Trade Agreement (NAFTA) and its 2020 successor, the United States-Mexico-Canada Agreement (USMCA), and to maximize cost savings in both countries relative to startup costs in the United States, as part of the February 1 Executive Order, President Trump simultaneously announced 25% tariffs on Canada- and Mexico-origin goods. Although these tariffs have been paused for 30 days as of February 4, this regional cost-mitigation strategy may end up being foreclosed, or otherwise highly scrutinized by enforcement authorities.

Mitigating Risk

Given this new trade environment, Taiwanese companies should be attuned to the heightened U.S. investigatory environment for tariff evasion and take appropriate precautions, such as auditing origin-related compliance and recordkeeping processes throughout their value chains.

In the event that companies nevertheless become the subject of enforcement investigations by U.S. authorities for tariff evasion-based potential violations of the FCA or are accused of such misconduct by a purported whistleblower, companies are advised to seek the assistance of U.S. counsel with FCA defense experience.

The following Gibson Dunn lawyers prepared this update: Winston Chan, Justin Lin, and Gabriela Li.

With its market-leading False Claims Act / Qui Tam Defense Practice Group, Gibson Dunn continues to monitor developments in this area and is available to help Taiwanese clients understand and navigate FCA investigative and enforcement actions. In addition, the following practice group members have Mandarin Chinese language abilities:

Winston Y. Chan – Global Co-Chair, False Claims Act / Qui Tam Defense and White Collar Defense and Investigations Practice Groups, based in our San Francisco office
(+1 415.393.8362, wchan@gibsondunn.com)

Justin Lin – Associate Attorney, False Claims Act / Qui Tam Defense and White Collar Defense and Investigations Practice Group, based in our San Francisco office
(+1 415.393.4653, jolin@gibsondunn.com)

Gabriela Li – Associate Attorney, False Claims Act / Qui Tam Defense and Securities Regulation and Corporate Governance Practice Groups, based in our San Francisco office
(+1 415.393.4602, gli@gibsondunn.com)

Europe

01/20/2025

European Data Protection Board | Case Digest & Report | Right of Access

The European Data Protection Board (“EDPB”) has published a “One-Stop-Shop case digest on right of access” and a report on the “Implementation of the right of access by controllers”.

On January 16, 2025, the EDPB published a case digest providing examples on the exercise of the right of access in different contexts and analyzes, in this respect, national Supervisory Authorities’ (SAs) decisions under the one-stop-shop mechanism. In addition, on January 20, 2025, the EDPB released a report on the “Implementation of the right of access by controllers”. The report aggregates the findings of the SAs on the level of compliance of organizations regarding Article 15 of the GDPR, following a survey they conducted among 1,185 controllers from different sectors.

For more information: EDPB Website (Case Digest), EDPB Website (Report)

01/17/2025

European Data Protection Board | Guidelines | Pseudonymization

The European Data Protection Board (“EDPB”) has published new guidelines on pseudonymization.

The guidelines aim to clarify in particular the definition of pseudonymization, its objectives and benefits. They also provide guidance on the technical and organizational measures to be implemented to ensure its effectiveness, as well as examples of how pseudonymization is applied in real-world scenarios. The guidelines are under public consultation until February 28, 2025.

For more information: EDPB Website

01/17/2025

European Data Protection Board | Position Paper | Competition law

The European Data Protection Board (“EDPB”) has published a position paper regarding the interplay between data protection and competition law.

The EDPB recognizes that data protection and competition law have different legal frameworks but carry nonetheless many commonalities, such as the protection of individuals and their decision making. It stresses the importance of the cooperation between the data protection and competition authorities, and of a better understanding of related concepts in both areas, in order to improve consistency and efficiency.

For more information: EDPB Website

01/17/2025

European Commission | Regulation | Digital Operational Resilience Act

The Digital Operational Resilience Act (“DORA”) is applicable as of January 17, 2025.

As a reminder, the DORA lays down new requirements for the security of network and information systems in the financial sector.

For more information: Official Journal of the EU

01/15/2025

European Data Protection Supervisor | Concept Note | Digital Clearinghouse

The European Data Protection Supervisor (“EDPS”) published a concept note proposing the creation of the Digital Clearinghouse (“DCH”) 2.0.

The DCH was conceived by the EDPS as a voluntary network to promote a coherent enforcement of the EU legislation in the digital sector. With the DCH 2.0, the EDPS suggest turning this initiative into a forum with a permanent secretariat in order to identify cross-regulatory areas and allow interested authorities to exchange and coordinate their efforts.

For more information: EDPS website

01/09/2025

Court of Justice of the European Union | Judgment | Concepts of a ‘Request’ and ‘Excessive Requests’

On January 9, 2025, the Court of Justice of the European Union (“CJEU”) provides clarifications on the concepts of a ‘request’ and ‘excessive requests’ as part of a preliminary question referred by the Austrian Supervisory Authority.

The CJEU held that (i) the notion of “request” under Article 57(4) of the GDPR should be understood as including complaints lodged; (ii) the concept of “excessiveness” must be interpreted restrictively and the authority must demonstrate that the excessiveness of the requests stems from the applicant’s abusive intent, and (iii) when faced with excessive requests, the authorities may choose between charging reasonable fees and refusing to act on the requests.

For more information: Curia

01/09/2025

Court of Justice of the European Union | Judgment | Title and Gender Identity

On January 9, 2025, the CJEU published its judgment in Case C‑394/23 ruling that a customer’s gender identity was not necessary for the purchase of a rail transport ticket.

The CJEU clarified that the processing of personal data is only lawful if necessary for fulfilling a contract or for legitimate interest purposes. It ruled that personalizing commercial communications based on presumed gender identity, determined by a customer’s civil title, is not necessary, as it is not essential for a rail transport contract and could risk discrimination based on gender identity.

For more information: Curia

France

01/31/2025

French Supervisory Authority | Guidelines | Transfer Impact Assessment

The French Supervisory Authority (“CNIL”) published the final version of its guidelines on Transfer Impact Assessments (“TIA”) to help organizations comply with the GDPR when transferring data to third countries.

The CNIL’s guidelines outlines a methodology for evaluating the adequacy of protection in third countries, assessing potential legal and practical risks, and implementing supplementary measures where necessary.

For more information: CNIL Website

01/28/2025

French Supervisory Authority | Guidelines | Data Breach

The French Supervisory Authority (“CNIL”) published guidelines on personal data security.

In 2024, the CNIL saw a 20% increase in data breaches compared to the previous year. It has issued guidelines to help organizations prevent and manage data breaches, with cybersecurity being one of its priorities for 2025-2028.

For more information: CNIL Website [FR]

01/23/2025

French Supervisory Authority | GDPR | Publicly Available Databases

On January 23, 2025, the French Supervisory Authority (CNIL) published an article on its website outlining the necessary checks for controllers when using publicly available or third-party databases.

Data controllers must ensure that the database complies with the GDPR and other relevant regulations, such as information system security and intellectual property rights. Key considerations include whether the data was processed with the consent of the individuals and if the processing is based on legitimate legal grounds, especially for sensitive data or data related to criminal offenses. Additionally, the CNIL recommends formalizing the relationship with the data provider through a contract.

For further information: CNIL Website [FR]

01/16/2025

French Supervisory Authority | Action Plan | Children, AI, cybersecurity and digital

The French Supervisory Authority (“CNIL”) published its strategic action plan for 2025 to 2028.

The CNIL will focus on four main priorities: AI, children’s online privacy, cybersecurity, and daily digital use (mobile applications and digital identity). The CNIL plans to diversify its support for organizations and strengthen its dialogue with stakeholders in these areas.

For more information: CNIL Website [FR]

Germany

01/15/2025

Higher Regional Court of Karlsruhe | Judgement | Right of Erasure

On January 15, 2025, the Higher Regional Court of Karlsruhe (OLG Karlsruhe) ruled on the right to erasure and the possibility to retain personal data for the use in future legal disputes.

The OLG Karlsruhe ruled that companies cannot indefinitely store personal data for potential future claims if the underlying incident has already been subject to legal proceedings. The court held that once data is no longer necessary for the purpose it was collected, it must be deleted. Even if future claims are possible, there must be more than just a theoretical possibility that these claims are pursued to justify continued data storage under Article 17(3)(e) GDPR and to deny the right to erasure. The decision emphasized that the mere abstract possibility of future claims is not sufficient for data retention.

For more information: Official Court Website [DE]

Italy

01/31/2025

Italian Supervisory Authority | Temporary Ban | Chatbot

The Italian Supervisory Authority (“Garante”) imposed a temporary ban on an AI-powered chatbot service.

This follows a request for information addressed by the Garante to the companies providing the chatbot service. According to the Garante, the responses communicated by the companies were not satisfactory. In addition to the limitation order on the processing of Italian users’ data, the Garante opened an investigation.

For more information: Garante Website

Spain

01/14/2025

Spanish Council of Ministers | Transposition | NIS 2 Directive

The Spanish Council of Ministers approved the Draft Law on Coordination and Governance of Cybersecurity, transposing the NIS 2 Directive.

The Draft Law specifies the public and private entities that fall under the scope of the NIS 2 Directive as well as their obligations in terms of cybersecurity (such as incident notification). It also designates several national supervisory authorities for enforcement purposes, and creates the National Cybersecurity Centre, which will be the sole point of contact with the European Union and be in charge of intersectoral and cross-border cooperation.

For more information: Ministry of Interior Website [ES]

United Kingdom

01/23/2025

UK Supervisory Authority | Online Tracking | 2025 Strategy

The UK Supervisory Authority (“ICO”) has introduced its 2025 online tracking strategy.

The strategy aims to ensure that individuals have control over tracking within the context of online advertising. The ICO’s plan of action includes publishing guidelines on different subjects such as ‘consent or pay’ models or Internet of Things, engaging with different actors to promote and ensure compliance with the law (website publishers, consent management platforms, app developers, connected TV manufacturers). The ICO will also investigate data management platforms connecting advertisers and publishers.

For more information: ICO Website

The following Gibson Dunn lawyers prepared this update: Partners: Ahmed Baladi, Vera Lukic, and Kai Gesing; Associates: Thomas Baculard, Billur Cinar, Hermine Hubert, and Christoph Jacob.

Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Privacy, Cybersecurity & Data Innovation practice groups:

Privacy, Cybersecurity, and Data Innovation:

United States:
Ashlie Beringer – Co-Chair, Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)
Ryan T. Bergsieker – Denver (+1 303.298.5774, rbergsieker@gibsondunn.com)
Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650.849.5203, cgaedt-sheckter@gibsondunn.com)
Svetlana S. Gans – Washington, D.C. (+1 202.955.8657, sgans@gibsondunn.com)
Lauren R. Goldman – New York (+1 212.351.2375, lgoldman@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Natalie J. Hausknecht – Denver (+1 303.298.5783, nhausknecht@gibsondunn.com)
Jane C. Horvath – Co-Chair, Washington, D.C. (+1 202.955.8505, jhorvath@gibsondunn.com)
Martie Kutscher Clark – Palo Alto (+1 650.849.5348, mkutscherclark@gibsondunn.com)
Kristin A. Linsley – San Francisco (+1 415.393.8395, klinsley@gibsondunn.com)
Timothy W. Loose – Los Angeles (+1 213.229.7746, tloose@gibsondunn.com)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)
Rosemarie T. Ring – Co-Chair, San Francisco (+1 415.393.8247, rring@gibsondunn.com)
Ashley Rogers – Dallas (+1 214.698.3316, arogers@gibsondunn.com)
Sophie C. Rohnke – Dallas (+1 214.698.3344, srohnke@gibsondunn.com)
Eric D. Vandevelde – Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)
Benjamin B. Wagner – Palo Alto (+1 650.849.5395, bwagner@gibsondunn.com)
Debra Wong Yang – Los Angeles (+1 213.229.7472, dwongyang@gibsondunn.com)

Europe:
Ahmed Baladi – Co-Chair, Paris (+33 (0) 1 56 43 13 00, abaladi@gibsondunn.com)
Kai Gesing – Munich (+49 89 189 33-180, kgesing@gibsondunn.com)
Joel Harrison – Co-Chair, London (+44 20 7071 4289, jharrison@gibsondunn.com)
Lore Leitner – London (+44 20 7071 4987, lleitner@gibsondunn.com)
Vera Lukic – Paris (+33 (0) 1 56 43 13 00, vlukic@gibsondunn.com)
Lars Petersen – Frankfurt/Riyadh (+49 69 247 411 525, lpetersen@gibsondunn.com)
Robert Spano – London/Paris (+44 20 7071 4000, rspano@gibsondunn.com)

Asia:
Connell O’Neill – Hong Kong (+852 2214 3812, coneill@gibsondunn.com)
Jai S. Pathak – Singapore (+65 6507 3683, jpathak@gibsondunn.com)

Today marks the effective implementation of sweeping changes to the Hart-Scott-Rodino (HSR) Act Premerger Notification and Report Form (HSR form) and associated instructions, following unanimous approval by the Federal Trade Commission (FTC) on October 11, 2024, with concurrence of the Department of Justice (DOJ), and subsequent publication in the Federal Register on November 12, 2024. While markedly narrower than the FTC’s initial proposal on June 27, 2023, the new HSR rules represent a pivotal and comprehensive overhaul of premerger notification requirements for all HSR-reportable transactions.

Recap of Key HSR Changes

Additional Deal and Competition (formerly “Item 4”) Documents: Expanded to include (i) transaction specific documents created by or for the acquiring party’s “supervisory deal team lead,” in addition to its directors or officers and, (ii) where the filing parties have or anticipate having overlapping products or services, certain ordinary course documents created within one year of filing that discuss competitive or market information for the overlapping areas that were shared with the CEO or Board.

Narrative Responses on Transaction Details, Competitive Overlaps: Filings will now require narrative responses addressing (i) each party’s transaction rationale; (ii) the acquiring party’s operating businesses and products and services (current and planned), including whether any compete with those of the other filing party; (iii) the acquiring party’s pre-existing diagrams on deal structure; (iv) direct supply relationships between the parties, if any; and, critically, (v) for transactions where the parties have or anticipate having overlapping products or services, additional narrative and geographic data regarding the same.

Expanded Company Disclosures: Filings now call for additional disclosures relating to (i) the acquiring party’s ownership structure, directors and officers, and minority holdings and holders; (ii) both parties’ foreign subsidies and defense or intelligence contracts; and (iii) the acquired person’s prior acquisitions (in addition to just the acquirer’s) meeting certain requirements.

With these and other changes now in effect, deal teams should reassess transaction timelines and recalibrate internal processes to keep pace with the heightened filing demands. Below are five practical steps filing parties can take to stay on track.

Practical Steps to Optimize Filings Under the New HSR Regime

Build in More Lead Time for HSR Compliance. The new HSR form will require significantly more time to complete and additional company resources due to expanded narrative requests and data and document requirements. What was once a relatively quick process may now take weeks.
- Practice Tip: Build HSR compliance into the deal timeline and begin identifying appropriate stakeholders to support with filing at early stages. Internal templates for recurring disclosures—such as prior acquisitions and minority holdings—can help streamline current and future filings.
Promptly Engage Antitrust Counsel to Form Strategy, Avoid Pitfalls. In addition to significantly expanding the scope of document requirements, the new HSR form requires that filing parties prepare detailed narrative responses that substantively address market dynamics for deals involving competitive overlaps, extending beyond former data-based reporting. The competitive overlap section of the new form also determines the scope of other required disclosures, including documents. These narratives not only demand significant business input but also expose filings to heightened regulatory scrutiny. Ensuring thoughtful coordination across narratives, document collections, and parallel global filings will be crucial to mitigate risk of filing delays or prolonged reviews.
- Practice Tip: Engage antitrust counsel early. Counsel can help ensure narratives are accurate and consistent with documents to be submitted with the HSR filing. Counsel can also synchronize filings of different regulatory regimes to reduce risk and support a cohesive, defensible submission strategy.
Standardize Coordination Across Business Units. The expanded disclosures will require input from multiple business teams, including finance and supply chain, and potentially decentralized data sources. Early coordination is critical to avoid bottlenecks and filing delays.
- Practice Tip: Deal teams should adopt a clear division of labor, including designated liaison roles for relevant business units or data sources, and establish a centralized process for streamlining inter-departmental coordination. Securing executive-level support from corporate leadership and department heads will also help underscore the importance of timely cooperation across business units.
Expect Accelerated, Heightened Agency Review. The expanded requirements will give the FTC and DOJ earlier and deeper insight into potential competitive issues, possibly leading to heightened agency scrutiny much earlier in the process.
- Practice Tip: Prepare by identifying key deal documents early—such as strategic presentations and board materials—and ensure consistency with the information provided in the HSR filing. Discrepancies between internal documents and the filing could raise red flags with regulators, leading to further inquiry or delays.
Manage Party Expectations Upfront. Acquisition targets, particularly smaller companies unfamiliar with HSR filings, may face challenges meeting the expanded data and document requirements, which can cause compliance delays.
- Practice Tip: Ensure the acquired party understands filing expectations early. Incorporate HSR form preparation into deal negotiations and due diligence to avoid surprises and ensure timely collection of necessary information.

Looking Ahead

While the HSR updates introduce new complexities, they also offer dealmakers a clearer roadmap for regulatory review. With proper strategic planning—such as updating internal deal processes, closely coordinating with business teams, and proactively addressing competition concerns that may be raised by antitrust regulators—dealmakers can effectively navigate this new terrain with confidence.

The FTC’s Premerger Notification Office (PNO) has issued guidance in a series of Q&As clarifying expectations on key aspects of the new HSR form, including how to approach the expanded narrative requirements and scope of the required document submissions. Filing parties are encouraged to work with counsel to closely monitor future updates from the PNO, as additional clarifications will be critical for maintaining compliance and minimizing delays.

Looking ahead, the expanded disclosures may even streamline certain aspects of agency review, giving the FTC and DOJ a fuller picture of transactions early on and, in some cases, accelerating approval for straightforward deals through the recently reinstated early termination process. How these changes will ultimately reshape the merger landscape remains to be seen, but those who prepare early will be best positioned for smoother HSR filings and more predictable deal outcomes.

Gibson Dunn attorneys are closely monitoring these developments and are available to discuss these issues as applied to your particular business. Please reach out to your Gibson Dunn contacts in the Antitrust and Competition group if you have questions about how the updated rules may affect your M&A plans and how best to prepare. If you are interested in challenging the final rule as Gibson Dunn successfully accomplished against the FTC’s non-compete rule in Ryan, LLC v. FTC, please reach out to your Gibson Dunn contacts in the Administrative Law and Regulatory Practice group.

For further details on these developments, see our previous Client Alerts and related HSR resources:

The following Gibson Dunn lawyers prepared this update: Jamie France, Sophia Hansell, Kristen Limarzi, Josh Lipton, Michael Perry, Andrew Cline, and Jenna Raspanti.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the new HSR size of transaction thresholds, or HSR and antitrust/competition regulations and rulemaking more generally. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Antitrust and Competition, Mergers and Acquisitions, or Private Equity practice groups:

Antitrust and Competition:
Rachel S. Brass – San Francisco (+1 415.393.8293, rbrass@gibsondunn.com)
Jamie E. France – Washington, D.C. (+1 202.955.8218, jfrance@gibsondunn.com)
Sophia A. Hansell – Washington, D.C. (+1 202.887.3625, shansell@gibsondunn.com)
Kristen C. Limarzi – Washington, D.C. (+1 202.887.3518, klimarzi@gibsondunn.com)
Joshua Lipton – Washington, D.C. (+1 202.955.8226, jlipton@gibsondunn.com)
Michael J. Perry – Washinton, D.C. (+1 202.887.3558, mjperry@gibsondunn.com)
Cynthia Richman – Washington, D.C. (+1 202.955.8234, crichman@gibsondunn.com)
Stephen Weissman – Washington, D.C. (+1 202.955.8678, sweissman@gibsondunn.com)

This edition of Gibson Dunn’s Federal Circuit Update for January 2025 summarizes the current status of petitions pending before the Supreme Court and recent Federal Circuit decisions concerning inventorship, reverse doctrine of equivalents, and personal jurisdiction.

Federal Circuit News

Noteworthy Petitions for a Writ of Certiorari:

There were a few potentially impactful petitions filed before the Supreme Court in January 2025:

Brumfield v. IBG LLC, et al. (US No. 24-764): The questions presented are: (1) “Whether the lower courts abused their discretion by denying the meritorious Rule 60(b)(3) motion, and whether Rule 60(b)(3) requires a showing that a moving party was diligent in uncovering fraud, misrepresentation, or misconduct to obtain relief from a judgment?”; (2) “Whether this Court’s three categorical judicial exceptions to patent eligibility that are further defined by the two-step Alice/Mayo test impose limitations on patent eligibility that are inconsistent with the text of 35 U.S.C. § 101 of the Patent Act of 1952?”; and (3) “Whether this Court’s supervisory authority is needed to correct the Federal Circuit’s improper (1) application of Rule 56 to patent cases and (2) practice of deciding issues that were never argued or briefed on appeal?” A response is due March 20, 2025.

DISH Network L.L.C. v. Dragon Intellectual Property, LLC, et al. (US No. 24-726): The questions presented are “1. Whether the Patent Act’s fee-shifting statute allows a district court discretion to impose joint and several liability for the fee award on a party’s attorney whose actions substantially contribute to the exceptionality of the case. 2. Whether the same fee-shifting statute allows a district court discretion to award attorney’s fees incurred by a prevailing accused infringer in a parallel administrative proceeding to invalidate a patent.” The respondents waived their right to respond, and one amicus curiae brief has been filed. The Court will consider this petition during its February 21, 2025 conference.

Provisur Technologies, Inc. v. Weber, Inc. (US No. 24-723): The questions presented are “I. Whether the Federal Circuit applied an incorrect standard of review for appeals of a Judgment as a Matter of Law (JMOL) and, as a result, improperly assumed the role of factfinder in overturning a jury verdict of willful patent infringement? Whether the Seventh Amendment permits the Federal Circuit to reexamine a jury’s factual findings and credibility determinations in reaching a verdict of willful patent infringement?” Weber waived its right to respond. The Court will consider this petition during its February 21, 2025 conference.

We provide an update below of the petitions pending before the Supreme Court, which were summarized in our November-December 2024 update:

In Celanese International Corp. v. International Trade Commission (US No. 24-635), one amicus curiae brief has been filed. The response is due March 24, 2025.

In Lighting Defense Group LLC v. SnapRays, LLC (US No. 24-524), after SnapRays waived its right to respond, the Court requested a response. The response is due February 10, 2025.

In Parker Vision, Inc. v. TCL Industries Holdings Co., et al. (US No. 24-518), after the respondents waived their right to respond, the Court requested a response, which is due February 14, 2025. Nine amicus curiae briefs have now been filed.

The Court denied the petition in Edwards Lifesciences Corporation, et al., v. Meril Life Sciences Pvt. Ltd., et al. (US No. 24-428).

Other Federal Circuit News:

Release of Materials in Judicial Investigation. The Federal Circuit released additional materials in connection with the proceeding under the Judicial Conduct and Disability Act and the implementing Rules involving Judge Pauline Newman. The materials may be accessed here: https://www.cafc.uscourts.gov/release-of-materials-in-judicial-investigation-5/.

Upcoming Oral Argument Calendar

The list of upcoming arguments at the Federal Circuit is available on the court’s website.

Key Case Summaries (January 2025)

BearBox LLC v. Lancium LLC, No. 23-1922 (Fed. Cir. Jan. 13, 2025): Mr. Storms (founder and sole employee of BearBox) and Mr. McNamara (co-founder of Lancium) met at a Bitcoin mining conference in 2019 where they discussed BearBox’s system, after which Mr. Storms sent Mr. McNamara an email with four attachments describing BearBox’s technology. Months later, Lancium filed a patent application that issued as the patent-at-issue, listing Mc. McNamara and a Dr. Cline (the other co-founder of Lancium) as inventors, claiming methods and systems for dynamic power delivery. BearBox sued Lancium asserting claims of sole or joint inventorship of Lancium’s patent, claiming that Mr. Storms had conceived of and shared with Mr. McNamara the claimed subject matter of Lancium’s patent. The district court held that BearBox had not met its burden to prove its inventorship claims by clear and convincing evidence based on testimony from Lancium’s witnesses about Lancium’s software and the development activities prior to the 2019 conference.

The Federal Circuit (Stoll, J., joined by Chen and Bryson, JJ.) affirmed. The Court upheld the district court’s denial of the correction to the inventorship claim, reiterating that “an alleged co-inventor must supply evidence to corroborate his testimony.” The Court reasoned that the email with the four attachments on which BearBox’s case rested was not sufficient to establish that Mr. Storms conceived of the claimed invention, or that he had communicated the information to Lancium prior to Lancium’s independent conception of the claimed matter.

Steuben Foods, Inc. v. Shibuya Hoppmann Corp., et al., No. 23-1790 (Fed. Cir. Jan. 24, 2025): Steuben sued Shibuya for infringement of patents directed to aseptic packaging of food products. Shibuya argued for a finding of noninfringement under the reverse doctrine of equivalents (RDOE), which allows an accused infringer to rebut infringement by showing the accused product is so far changed in principle from the asserted claims that it performs the same or similar function in a substantially different way. After the jury returned its verdict finding the asserted patents were infringed and not invalid, the district court granted Shibuya’s renewed motion for judgment as a matter of law (JMOL) of noninfringement under RDOE.

The Federal Circuit (Moore, C.J., joined by Hughes and Cunningham, JJ.) affirmed-in-part, reversed-in-part, vacated-in-part, and remanded. The Court held that the district court erred in granting JMOL of noninfringement under RDOE, determining that there was substantial evidence upon which a reasonable jury could have found that the accused products and claims were not so far changed as to support a theory of noninfringement under RDOE.

Regeneron Pharmaceuticals, Inc. v. Mylan Pharmaceuticals Inc., et al., Nos. 24-1965, 24-1966, 24-2082, 24-2083 (Fed. Cir. Jan. 29, 2025): Regeneron owns patents directed to the formulation of EYLEA®, a therapeutic product that stimulates blood vessel growth. Samsung Bioepis (SB) is a biosimilar products company headquartered in Incheon, South Korea. In 2019, SB signed an agreement with a U.S. company, Biogen, to provide it exclusive rights to commercialize SB’s FDA-approved EYLEA® biosimilar called SB15. SB filed an abbreviated Biologics License Application (aBLA) under the BPCIA seeking FDA approval to market SB15. Regeneron sued SB in West Virginia where a similar suit was pending against Mylan, and SB moved to dismiss for lack of personal jurisdiction. The district court determined the minimum contacts standard was met based on SB’s aBLA filing and evidence of distribution channels that SB had established for national marketing of its biosimilar, with no carve-out for West Virginia.

The Federal Circuit (Taranto, J., joined by Moore, C.J., and Renya, J.) affirmed. The Court determined that SB’s conduct satisfied the minimum contacts requirement for personal jurisdiction in West Virginia. For instance, the Court explained that SB had filed an application for aBLA with the FDA and served Regeneron with a notice in which it expressly communicated its intent to market SB15 upon FDA approval. The Court also pointed to the fact that SB had entered into an elaborate distribution agreement with Biogen to commercialize SB15 in the United States. The Court further explained that it and other courts have determined that “purposeful shipment or plans to do so through an established distribution channel,” such as the one SB had created, can establish personal jurisdiction.

The following Gibson Dunn lawyers assisted in preparing this update: Blaine Evanson, Jaysen Chung, Audrey Yang, Al Suarez, Vivian Lu, and Evan Kratzer.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups, or the following authors:

Blaine H. Evanson – Orange County (+1 949.451.3805, bevanson@gibsondunn.com)
Audrey Yang – Dallas (+1 214.698.3215, ayang@gibsondunn.com)

Appellate and Constitutional Law:
Thomas H. Dupree Jr. – Washington, D.C. (+1 202.955.8547, tdupree@gibsondunn.com)
Allyson N. Ho – Dallas (+1 214.698.3233, aho@gibsondunn.com)
Julian W. Poon – Los Angeles (+ 213.229.7758, jpoon@gibsondunn.com)

Intellectual Property:
Kate Dominguez – New York (+1 212.351.2338, kdominguez@gibsondunn.com)
Y. Ernest Hsin – San Francisco (+1 415.393.8224, ehsin@gibsondunn.com)
Josh Krevitt – New York (+1 212.351.4000, jkrevitt@gibsondunn.com)
Jane M. Love, Ph.D. – New York (+1 212.351.3922, jlove@gibsondunn.com)

From the Derivatives Practice Group: This week, the CFTC announced plans to restructure the Division of Enforcement to refocus on fraud and stop regulation by enforcement.

New Developments

CFTC Announces Crypto CEO Forum to Launch Digital Asset Markets Pilot. On February 7, the CFTC announced that it will hold a CEO Forum of industry-leading firms to discuss the launch of the CFTC’s digital asset markets pilot program for tokenized non-cash collateral such as stablecoins. Participants will include Circle, Coinbase, Crypto.com, MoonPay and Ripple. [NEW]
CFTC Statement on Allegations Targeting Acting Chairman. On February 6, the CFTC released a statement regarding allegations targeting Acting Chairman Pham. [NEW]
David Gillers to Step Down as Chief of Staff. On February 6, the CFTC announced that David Gillers will step down as Chief of Staff to Commissioner Behnam on February 7. [NEW]
CFTC Announces Prediction Markets Roundtable. On February 5, the CFTC announced that it will hold a public roundtable in approximately 45 days at the conclusion of its requests for information on certain sports-related event contracts. The CFTC said that the goal of the roundtable is to develop a robust administrative record with studies, data, expert reports, and public input from a wide variety of stakeholder groups to inform the Commission’s approach to regulation and oversight of prediction markets, including sports-related event contracts. According to the CFTC, the roundtable will include discussion of key obstacles to the balanced regulation of prediction markets, retail binary options fraud and customer protection, potential revisions to Part 38 and Part 40 of CFTC regulations to address prediction markets, and other improvements to the regulation of event contracts to facilitate innovation. The roundtable will be held at the CFTC’s headquarters in Washington, D.C. [NEW]
CFTC Division of Enforcement to Refocus on Fraud and Helping Victims, Stop Regulation by Enforcement. On February 4, CFTC Acting Chairman Caroline D. Pham announced a reorganization of the Division of Enforcement’s task forces to combat fraud and help victims while ending the practice of regulation by enforcement. According to the CFTC, previous task forces will be simplified into two new Division of Enforcement task forces: the Complex Fraud Task Force and the Retail Fraud and General Enforcement Task Force. The Complex Fraud Task Force will be responsible for all preliminary inquiries, investigations, and litigations relating to complex fraud and manipulation across all asset classes. The Acting Chief will be Deputy Director Paul Hayeck. The Retail Fraud and General Enforcement Task Force will focus on retail fraud and handle general enforcement matters involving other violations of the Commodity Exchange Act. The Acting Chief will be Deputy Director Charles Marvine. [NEW]
CFTC Staff Issues No-Action Letter to Korea Exchange Concerning the Offer or Sale of KOSPI and Mini KOSPI 200 Futures Contracts. On February 4, the CFTC’s Division of Market Oversight issued a no-action letter stating it will not recommend the CFTC take enforcement action against Korea Exchange (“KRX”) for the offer or sale of Korea Composite Stock Price Index (“KOSPI”) 200 Futures Contracts and Mini KOSPI 200 Futures Contracts to persons located within the United State while the Commission’s review of KRX’s forthcoming request for certification of the contracts under CFTC Regulation 30.13 is pending. DMO issued similar letters when the KOSPI 200 became a broad-based security index in 2021 and 2022. See CFTC Press Release Nos. 8464-21 and 8610-22. The KOSPI 200 became a narrow-based security index in February 2024. The KOSPI 200 is set to become a broad-based security index on February 6, 2025, and the no-action position in DMO’s letter will be effective on that date. [NEW]
CFTC Staff Issues Supplemental Letter Regarding No-Action Position on Reporting, Recordkeeping Requirements. On January 31, the CFTC’s Division of Market Oversight and the Division of Clearing and Risk announced they have taken a no-action position regarding swap data reporting and recordkeeping regulations. The CFTC said this position is in response to a request from KalshiEX LLC, a designated contract market, and Kalshi Klear LLC, a derivatives clearing organization, to modify CFTC Letter No. 24-15 to remove the condition prohibiting third-party clearing by participants and to cover fully-collateralized variable payout contracts. The Divisions indicated that they will not recommend the CFTC initiate an enforcement action against KalshiEX LLC, Kalshi Klear LLC, or their participants for failure to comply with certain swap-related recordkeeping requirements and for failure to report to swap data repositories data associated with binary option transactions and variable payout contract transactions executed on or subject to the rules of KalshiEX LLC and cleared through Kalshi Klear LLC, subject to the terms of the no-action letter. The supplemental letter also removes the condition in CFTC Letter No. 24-15 that prohibits Kalshi participants from clearing contracts through a third-party clearing member. [NEW]
CFTC and SEC Extend Form PF Amendments Compliance Date. The CFTC, together with the SEC, extended the compliance date for the amendments to Form PF that were adopted Feb. 8, 2024. The compliance date for these amendments, which was originally March 12, 2025, has been extended to June 12, 2025. Form PF is the confidential reporting form for certain SEC-registered investment advisers to private funds, including those that also are registered with the CFTC as commodity pool operators or commodity trading advisers. This extension will mitigate certain administrative and technological burdens and costs associated with the prior compliance date. This extension will also provide more time for filers to program and test for compliance with these amendments.
Acting Chairman Pham Launches Public Roundtables on Innovation and Market Structure. On January 27, Acting Chairman Pham announced the launch of a series of public roundtables on evolving trends and innovation in market structure, including issues such as affiliated entities and conflicts of interest, prediction markets, and digital assets. Pham renewed calls for open public engagement and increased transparency by the CFTC on its policy approach to changes in derivatives markets last year.
Acting Chairman Pham Announces CFTC Leadership Changes. On January 22, Acting Chairman Pham announced the following CFTC leadership changes: Acting Chief of Staff: Harry Jung; Acting General Counsel: Meghan Tente; Acting Director of the Office of Public Affairs: Taylor Foy; Acting Director of the Office of Legislative and Intergovernmental Affairs: Nicholas Elliot; Acting Director of the Division of Market Oversight: Amanda Olear; Acting Director of the Division of Clearing and Risk: Richard Haynes; Acting Director of the Market Participants Division: Tom Smith; Acting Director of the Division of Enforcement: Brian Young; Acting Director of the Office of International Affairs: Mauricio Melara.
SEC Acting Chairman Uyeda Announces Formation of New Crypto Task Force. On January 21, SEC Acting Chairman Uyeda launched a crypto task force that, according to the SEC, is dedicated to developing a comprehensive and clear regulatory framework for crypto assets. Commissioner Hester Peirce will lead the task force. Richard Gabbert, Senior Advisor to the Acting Chairman, and Taylor Asher, Senior Policy Advisor to the Acting Chairman, will serve as the task force’s Chief of Staff and Chief Policy Advisor, respectively. The SEC said that the task force will collaborate with SEC staff and the public to set the SEC on a sensible regulatory path that respects the bounds of the law and that the task force’s focus will be to help the SEC draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously. The Sec indicated that the task force will operate within the statutory framework provided by Congress, coordinate the provision of technical assistance to Congress as it makes changes to that framework, and coordinate with federal departments and agencies, including the CFTC, and state and international counterparts.

New Developments Outside the U.S.

DPE Regime for Post-Trade Transparency Becomes Operational. On February 3, the public register listing designated publishing entities (“DPEs”) that now bear the reporting obligation for post-trade transparency under MIFIR went live, bringing the DPE regime into full operational effect. The public register can be found here. The post-trade reporting obligation for systematic internalizers (“SIs”) has been replaced by an analogous obligation on investment firms that have chosen to register as DPEs. As a further consequence of the DPE regime launch, ESMA has decided to discontinue the voluntary publication of quarterly SI calculations data early, ahead of the scheduled removal of the obligation on ESMA to perform SI calculations from September 2025. As of February 1, the mandatory SI regime will no longer apply and investment firms will not need to perform the SI test. However, investment firms can continue to opt into the SI regime. ESMA’s press release on these measures can be found here. [NEW]
ECB Publishes Guidance on Initial Margin Model Approval Under EMIR 3. On January 31, the European Central Bank (“ECB”) published guidance on the initial margin validation process for entities under its supervision under the European Market Infrastructure Regulation (EMIR 3). Following the European Banking Authority’s (“EBA”) no-action letter on December 17, the guidance addresses implementation issues such as what the ECB approach will be until the EBA’s relevant regulatory technical standards and guidelines are applicable, the initial application process and model changes. [NEW]
Equivalence Extension for UK CCPs Published in EU Official Journal. On January 31, the European Commission’s (“EC’s”) implementing decision extending the equivalence decision for UK central counterparties (“CCPs”) until June 30, 2028 was published in the Official Journal of the EU. ESMA will now need to formally extend the temporary recognition decisions and tiering determinations for UK CCPs. [NEW]
ESMA Provides Guidance on MiCA Best Practices. On January 31, ESMA published a new supervisory briefing aiming to align practices across the EU member states. The briefing, developed in close cooperation with National Competent Authorities (“NCAs”), promotes convergence and prevents regulatory arbitrage, providing concrete guidance about the expectations on applicant Crypto Asset Service Providers, and on NCAs when they are processing the authorization requests.
ESMA Publishes Data for Quarterly Bond Liquidity Assessment. On January 31, ESMA published the new quarterly liquidity assessment of bonds. ESMA’s liquidity assessment for bonds is based on a quarterly assessment of quantitative liquidity criteria, which includes the daily average trading activity (trades and notional amount) and the percentage of days traded per quarter.
Equivalence of UK CCPs Extended to June 30, 2028. On January 30, the European Commission determined that the regulatory framework applicable to central counterparties (“CCPs”) in the United Kingdom of Great Britian and Northern Ireland is equivalent, in accordance with Regulation No 648/2012 of the European Parliament and of the Council.
Euribor Panel to include Finland’s OP Corporate Bank and the National Bank of Greece. OP Corporate Bank and the National Bank of Greece join the group of credit institutions that contribute to Euribor under its revised methodology, which is a substitute for the panel banks’ expert judgement. The methodology was adopted in a phased approach by all members across the Euribor panel between May and October 2024.
EC Adopts Delegated Act On OTC Derivatives Identifier for MIFIR Transparency. On January 24, the EC adopted the delegated act on OTC derivatives identifying reference data for transparency under the Markets in Financial Instruments Regulation (MIFIR). The delegated act mandates the inclusion of the unique product identifier in identifying reference data for OTC interest rate swaps and credit default swaps. The selection of the provider of a consolidated tape for OTC derivatives cannot begin until the delegated act has entered into force. In an effort to ensure the selection process can begin on-time, the delegated act will apply from the date of its entry into force – 20 days after publication in the Official Journal of the EU – but, according to the EC, to allow sufficient time to adapt to the new requirements, the identifying reference data specified within the delegated act should only be used to identify interest rate swaps and credit default swaps from September 1, 2026. [NEW]
New Governance Structure for Transition to T+1 Settlement Cycle Kicks Off. On January 22, ESMA, the European Commission (“EC”) and the European Central bank (“ECB”) launched a new governance structure to support the transition to the T+1 settlement cycle in the European Union. Following ESMA’s report with recommendations on the shortening of the settlement cycle, the new governance structure has been designed to oversee and manage the operational, regulatory and technological aspects of this transition. Given the high level of interconnectedness within the EU capital market, a coordinated approach across the EU, involving authorities, market participants, financial market infrastructures and investors, is desirable. ESMA said that the key elements of the new governance model include an Industry Committee, composed of senior leaders and representatives from market players, several technical workstreams, operating under the Industry Committee, focusing on the technological operational adaptations needed in the areas concerned by the transition to T+1 (i.e. trading, matching, clearing, settlement, securities financing, funding and FX, asset management, corporate events, settlement efficiency), and two more general workstreams that will review the scope and the legal and regulatory aspects of these adaptations, and a Coordination Committee, chaired by ESMA and with representation from the EC, the ECB, ESMA and the chair of the Industry Committee, intended to ensure coordination between the authorities and the industry, advising on challenges that may arise during the transition. Additionally, ESMA said that the Commission is currently considering the merits of a legislative change mandating a potential transition to a shorter settlement cycle.

New Industry-Led Developments

ISDA Publishes Joint Trade Association letter to SEC on US Treasury Clearing. On January 24, ISDA, the Alternative Investment Management Association, the Futures Industry Association (“FIA”), the FIA Principal Traders Group, the Institute of International Bankers, the Managed Funds Association and the Securities Industry and Financial Markets Association and its asset management group sent a letter to Mark Uyeda, acting chair at the US Securities and Exchange Commission (SEC) requesting an extension to the implementation dates for the Treasury clearing mandate by a minimum of 12 months. The associations believe this would give the SEC time to consider and address several critical issues and for the industry to implement clearing. In the letter, the associations highlight their concern that, without an extension, the success of the transition to central clearing will be compromised and may lead to disruptions in the cash Treasury securities and repo markets.
ISDA and AFME Publish Joint Response to ECB Consultation on Options and Discretions under EU Law. On January 24, ISDA and the Association for Financial Markets in Europe (“AFME”) responded to the European Central Bank’s (“ECB”) consultation on its approach to options and discretions under EU law. In the response, the associations highlight the efforts of the ECB to establish consistent options and discretions that would harmonize rules and foster a level playing field in the euro area. The response also mentions that further actions are necessary, specifically on trading book boundary classifications and exemptions.
ISDA Publishes Equity Definitions VE, Version 2.0. On January 21, ISDA published version 2.0 of the ISDA Equity Derivatives Definitions (Versionable Edition) on the MyLibrary platform. This publication includes, among other updates, provisions that can be used for documenting transactions with time-weighted average price or volume-weighted average price features, futures price valuation in respect of share transactions and benchmark provisions in respect of an index.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, and Karin Thrasher.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Derivatives practice group, or the following practice leaders and authors:

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus – New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt , Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki , New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

Key Developments:

On February 3, the Mayor and City Council of Baltimore, the National Association of Diversity Officers in Higher Education, the American Association of University Professors, and the Restaurant Opportunities Centers United filed a lawsuit in the District of Maryland challenging two recent anti-DEI executive orders. The complaint raises six constitutional claims, including claims alleging that the orders violate the First Amendment, Due Process Clause, Spending Clause, and separation of powers. The complaint asks for a declaratory judgment that Executive Order 14151 and Executive Order 14173 are unconstitutional, as well as a preliminary injunction enjoining enforcement of these executive orders. The case has been assigned to Judge Adam Abelson.

On January 28, the Acting Chair of the Equal Employment Opportunity Commission (EEOC), Andrea Lucas, announced through an EEOC press release that the “agency is returning to its mission of protecting women from sexual harassment and sex-based discrimination in the workplace by rolling back the Biden administration’s gender identity agenda.” The press release described the actions Lucas has taken to effectuate President Trump’s Executive Order 14168, including removing EEOC employees’ ability to display their pronouns on software applications, ending the use of the “X” gender marker in the EEOC intake process, and removing “materials promoting gender ideology” from the EEOC’s internal and external websites. Lucas also initiated a review of the Commission’s “Know Your Rights” poster, which covered employers must post in their workplaces. The EEOC has not yet rescinded its Enforcement Guidance on Harassment in the Workplace, because a majority vote of the EEOC Commissioners is required to rescind guidance documents. On the same day that these changes were announced, the White House terminated two of the three Democratic Commissioners—former EEOC chair Charlotte Burrows and former EEOC vice chair Jocelyn Samuels. Karla Gilbride, the general counsel for the EEOC, was also terminated. On February 4, President Trump named Andrew Rogers as the acting general counsel for the EEOC. Rogers was previously Chief Counsel and Chief of Staff to acting EEOC Chair Andrea Lucas. Prior to that, Rogers worked in the US Department of Labor’s Wage and Hour Division and in private practice.

On January 28, state financial officials from eighteen states sent a letter to Mark Uyeda, the Acting Chair of the Securities and Exchange Commission, and Vince Micone, the Acting Secretary of Labor, requesting that the Commission and Department of Labor develop rules and guidance prohibiting investment decisions based on ESG or DEI objectives as “inconsistent with fiduciary duties.” The letter discussed “an indisputable trend, among large asset managers, to prioritize political and social agendas over the financial security of hardworking Americans,” and advocated that “[r]etirement security should not be jeopardized in order to facilitate corporate virtue signaling and activist-driven initiatives.”

On January 27, nineteen state Attorneys General, led by Iowa Attorney General Brenna Bird, sent a letter to Costco CEO Ron Vachris, urging Costco to repeal its DEI policies. In the letter, the attorneys general identified recent changes in the DEI policies of other major corporations and noted that companies that have not rolled back their programs have been sued or investigated over their DEI initiatives. The letter instructed Costco to respond within 30 days, “either notify[ing]” the group “that Costco has repealed its DEI policies or explain[ing] why Costco has failed to do so.”

In a January 21 memorandum, the U.S. Office of Personnel Management (OPM) provided guidance to all federal agencies regarding implementation of President Trump’s executive orders including Executive Order 14151 and Executive Order 14148. The memorandum required each agency to send agency-wide notices to all employees informing them that the agencies’ DEI offices would be closed, and “asking employees if they know of any efforts to disguise these programs by using coded or imprecise language.” The memorandum, signed by Acting OPM Director Charles Ezell, stated that failing to report on disguised DEI programs could result in “adverse consequences.” Ezell also ordered all agencies to place their DEI staff on paid leave by 5:00 p.m. on January 22, to take down any outward facing media relating to federal DEI offices, to cancel all DEI-related training, and to terminate relationships with all DEI-related contractors. The memorandum also instructed each agency, by close of business on January 31, to submit a “written plan for executing a reduction-in-force action regarding the employees who work in a DEIA office” and a “list of all contract descriptions or personnel position descriptions that were changed since November 5, 2024 to obscure their connection to DEIA programs.”

On January 20, Reverend Al Sharpton called for a boycott on companies eliminating their DEI programs. During a Washington, D.C.-based ceremony celebrating Martin Luther King, Jr. Day, Sharpton, speaking on behalf of his National Action Network, announced the convening of a council that will “engage in a 90-day study of what companies have given up on DEI and what their margins of profit are” before selecting two companies to “specifically be targeted in the boycott.” Sharpton stated that he will be supporting companies that have “doubled down” on DEI, including leading a “buy-cott” rally at a New Jersey Costco location to show support for companies that are maintaining DEI programs.

Media Coverage and Commentary:

Below is a selection of recent media coverage and commentary on these issues:

Bloomberg, “Costco Defended Its DEI Policies Now It Should Talk About Them” (February 3): Bloomberg Editorial’s Beth Kowitt reports on the response of Republican attorneys general to Costco’s shareholders rejecting a shareholder proposal that would have compelled reversal of the company’s DEI policies. Kowitt writes that Costco “did a powerful job of making a business case for why its DEI programs are important to the company,” but has failed to articulate what its DEI programs specifically entail, noting the lack of publicly available information on these programs. Kowitt recommends companies be more forthcoming about the details of their DEI initiatives, encouraging companies to “get granular” about what their DEI policies entail. She posits that companies that “vaguely allude to ‘doing DEI’” are much more likely to end up in the crosshairs of the Trump administration than those that make clear their policies comply with federal law. The article also quotes Jason Schwartz, co-chair of the Labor & Employment group at Gibson, Dunn & Crutcher LLP, who argues that, as a general matter, corporate America has not done “a good job at explaining itself and its programs,” and this failure has allowed opponents of DEI to “own[] the public dialogue about [DEI] without any nuance.”
ModernRetail, “How the Trump Presidency Upended Retailers’ DEI Policy Playbooks” (January 30): Writing for ModernRetail, Mitchell Parton and Allison Smith discuss the rapid shift in corporate DEI initiatives in recent months. They report that in 2020, companies “quickly committed to [DEI] measures,” but that many large companies have rolled back those commitments. Parton and Smith say that many other companies are adjusting the language they use to describe their DEI programs to avoid scrutiny. The authors note that “executives are scrambling to gauge their exposure to legal risks tied to diversity policies.” The article quotes Jason Schwartz of Gibson Dunn, who says phones are “ringing off the hook” with companies who “want to take a fresh look” at their programs in light of President Trump’s recent actions.
Law360, “Companies Risk White House Wrath By Keeping DEI Programs” (January 24): Law360’s Sarah Jarvis reports on President Trump’s executive orders in his first week in office targeting DEI programs. She notes that while “[m]any companies have retreated from their DEI commitments amid the pointed political landscape,” some major U.S. companies, including Costco, Apple, and Pinterest, “are staying the course with their existing DEI programs and policies.” The article quotes Jason Schwartz of Gibson Dunn, who says companies can take a range of approaches as they determine how to support a “robust pipeline of diverse talent,” but notes that the executive order involving federal contractors, in particular, creates a “massive expansion of potential liability.” Schwartz says that it is difficult to find the line between pursuing legally sound programs and avoiding unnecessary risk “because the law is in flux right now.”
Bloomberg, “Trump Redefining ‘Sex’ Sets Up Clash Over High Court Protections” (January 23): Bloomberg’s Rebecca Klar and Khorri Atkinson report that President Trump’s day-one executive order requiring the federal government to recognize only two sexes will likely face legal challenges. In the executive order, President Trump called on the Attorney General to “immediately issue guidance to agencies to correct the misapplication of the Supreme Court’s decision in Bostock v. Clayton County,” in which the Supreme Court held that sex discrimination under Title VII included discrimination based on sexual orientation and gender identity. Klar and Atkinson report that “Bostock was the foundation for agency actions like the EEOC’s harassment guidance addressing gender identity protections.” David Lopez, a Rutgers Law School professor and former EEOC general counsel under President Obama, said appellate courts have consistently ruled “with the EEOC position” and that the new executive order is an attempt “to achieve through executive action” what the administration could not previously “achieve in court.” However, at least one federal court has concluded that Bostock does not apply to “workplace policies on bathrooms, dress codes, and locker rooms.” Klar and Atkinson write that they expect litigation over Bostock’s reach and whether it prevents the rollback of gender identity protections the executive order mandates.
Litigation Daily, “With DEI Rollbacks, Employment Lawyers See Potential for Targeting Corporate Commitment to Equality” (January 23): Writing for Litigation Daily, Charles Toutant discusses how companies’ changes to DEI initiatives may be used against them in court. He reports that the National Institute for Workers’ Rights circulated a memorandum in October 2024 stating that a company’s choice to roll back DEI initiatives could be used against it in a discrimination case. Jason Solomon, director of the National Institute for Workers’ Rights, said that an employee bringing a discrimination lawsuit could use these roll backs as evidence that their employer failed to “use reasonable care” to prevent discrimination. Toutant reports that plaintiff-side employment lawyers believe that discovery into a company’s decisions about DEI programs would be “fair game” in a discrimination lawsuit. Conversely, Jason Schwartz of Gibson Dunn described the concern as “overblown.” Schwartz said that it was a “real stretch” to argue that a revision to DEI policies was evidence of animus or discriminatory intent, noting that he has “no doubt that plaintiffs’ lawyers will make that argument,” but that the argument is not “very compelling.” Schwartz concluded, “[t]here are lots of legitimate concerns that people are raising about the rollback of programs, and obviously they think it needs to be done in a thoughtful way. But the fact that it could evidence discrimination—I’m pretty skeptical [of that].”

Case Updates:

Below is a list of updates in new and pending cases:

1. Employment discrimination and related claims:

Paul Fowler v. Emory University, No. 1:24-cv-05353 (N.D. Ga. 2024): On November 21, 2024, a former Emory University employee sued the university, alleging that the Vice Provost for Career and Professional Development discriminated against white employees in investigations, discipline, hiring, and promotions. The plaintiff asserts employment discrimination claims arising from “unlawful race, gender, and age discrimination and retaliation” in violation of Title VII, the Age Discrimination in Employment Act, and Section 1981.
- Latest update: On January 21, 2025, Emory University answered the complaint, denying allegations that it engaged in employment discrimination.

2. Board of director or stockholder actions:

City of Riviera Beach Police Pension Fund v. Target, Corp., et al., No. 2:25-cv-00085 (M.D. Fla.): Institutional investor City of Riviera Beach Police Pension Fund sued Target and certain Target officers on behalf of a class of stockholders, alleging that defendants have defrauded investors by issuing false and misleading statements concerning conduct undertaken to further Target’s ESG and DEI initiatives, causing the company’s stock price to be artificially inflated. The lawsuit brings claims under Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934
- Latest update: The docket does not indicate that Target has been served yet.

Craig v. Target Corp., No. 2:23-cv-00599-JLB-KCD (M.D. Fl. 2023): America First Legal sued Target and certain Target officers on behalf of a shareholder, claiming the board falsely represented that it monitored social and political risk, when instead it allegedly focused only on risks associated with not achieving ESG and DEI goals. The plaintiffs allege that Target’s statements violated Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 and that Target’s May 2023 Pride Month campaign triggered customer backlash and a boycott that depressed Target’s stock price. On December 4, 2024, the district court denied defendant’s motion to dismiss, concluding that the plaintiffs sufficiently pleaded both their Section 10(b) and Section 14(b) claims. On January 6, 2025, the court entered a stay pending mediation between the parties. On January 17, 2025, Target filed a status update regarding the parties’ proposed mediation, in which it asserted that plaintiffs “would only provide dates of availability to mediate if [Target] agreed to do so on a class-wide basis.” In its filing, Target argued that the case is not a class action, the Private Securities Litigation Reform Act prohibits plaintiffs from “purporting to act on behalf of a hypothetical class,” and the law requires “shareholders who file a class action complaint to provide notice to other shareholders” which plaintiffs have not done. Target asked the court to “direct Plaintiffs to provide their availability to mediate” on an individual basis.
- Latest update: On January 21, 2025, plaintiffs filed a Response to Target’s Status Update and a Motion to Lift the Stay. Plaintiffs assert that Target “misrepresent[ed] the dialogue between the parties,” and they moved to lift the stay to “enable Plaintiffs to pursue, among other things, (1) amending the complaint to add class allegations; and (2) determining the lead plaintiff under 15 U.S.C. § 78u-4(a)(3).” Plaintiffs asked the court to reopen the action, lift the stay, and cancel the mediation conference. On January 31, 2025, Target filed an Opposition to plaintiffs’ motion to lift the stay, asserting that plaintiffs failed to “satisfy the applicable good cause standard for canceling a court-ordered mediation.”

3. Actions against educational institutions:

Chu, et al. v. Rosa, No. 1:24-cv-75 (N.D.N.Y. 2024): On January 17, 2024, a coalition of education groups sued Betty Rosa, Commissioner of Education for the State of New York, alleging that the state’s free summer program discriminates based on race and ethnicity in violation of the Equal Protection Clause of the Fourteenth Amendment. The Science and Technology Entry Program (STEP) permits students who are Black, Hispanic, Native American, and Alaskan Native to apply regardless of their family income level, but all other students, including Asian and white students, must demonstrate “economically disadvantaged status.” On April 19, 2024, Rosa moved to dismiss the amended complaint for lack of subject-matter jurisdiction, arguing that neither the organizational plaintiffs (groups of parents) nor the named plaintiff, also a parent, have suffered any personal or individual injury, and that the plaintiffs cannot sue for alleged violations of members’ rights as prospective STEP applicants. Plaintiffs opposed the motion, arguing that the plaintiffs do not need to apply for the STEP program as a prerequisite for standing because their “injury is the inability to compete on an equal footing,” not whether they can secure a spot in the STEP program. On April 5, 2024, Plaintiffs filed an amended complaint, adding further details regarding organization members and their interests and including that certain students “meet[] the residency and academic requirements” for the program and are “ready and willing to apply.” Rosa moved to dismiss the amended complaint, but the court denied the motion on November 22, 2024. The court ordered Rosa to answer the complaint no later than December 6, 2024, later extending this deadline to January 21, 2025.
- Latest update: On January 21, 2025, Rosa answered the amended complaint, denying allegations of discrimination. She asserted that the plaintiffs lack standing and that the amended complaint failed to state a claim.

4. Challenges to statutes, agency rules, and regulatory decisions:

Do No Harm v. Gianforte, No. 6:24-cv-00024-BMM-KLD (D. Mont. 2024): On March 12, 2024, Do No Harm filed a complaint on behalf of “Member A,” a white female dermatologist in Montana, alleging that a Montana law requiring the governor to “take positive action to attain gender balance and proportional representation of minorities resident in Montana to the greatest extent possible” when making appointments to the twelve-member Medical Board violates the Equal Protection Clause. Do No Harm alleged that since ten seats are currently held by six women and four men, Montana law requires that the remaining two seats be filled by men, which would preclude Member A from holding the seat. Following Governor Gianforte’s motion to dismiss Magistrate Judge De Soto recommended that the case be dismissed for lack of subject matter jurisdiction. Magistrate Judge De Soto found Do No Harm lacked standing because it did not allege “facts demonstrating that at least one Member is both ‘able and ready’ to apply for a Board seat in the reasonably foreseeable future.” For the same reasons, the Magistrate Judge found the case unripe.
- Latest update: On January 24, 2025, Do No Harm objected to the Magistrate Judge’s findings and recommendations. Do No Harm argues that it has associational standing and that the case is ripe because the organization adequately pleaded “concrete factual allegations regarding the ability and readiness of its members” to apply for board membership, and that its injuries are definite and concrete.
Do No Harm v. Cunningham, No. 25-cv-00287 (D. Minn. 2025): On January 24, 2025, Do No Harm sued Brooke Cunningham, Commissioner of the Minnesota Department of Health, challenging a state law that requires the Commissioner to consider race in appointing members to the Minnesota Health Equity Advisory and Leadership Council. Do No Harm alleges that state law requiring that the board include representatives from either “African American and African heritage communities,” “Asian American and Pacific Islander communities,” “Latina/o/x communities,” and “American Indian communities and Tribal governments and nations,” violates the Fourteenth Amendment. Plaintiffs seek a permanent injunction and declaratory relief.
- Latest update: Do No Harm served defendants on January 30, 2025. Their answer is due February 20, 2025.
American Alliance for Equal Rights v. Walz, No. 24-cv-1748-PJS-JFD (D. Minn. 2024): On May 15, 2024, AAER filed a complaint against Minnesota Governor Tim Walz, challenging a state law that requires Governor Walz to ensure that five members of the Minnesota Board of Social Work are from a “community of color” or “an underrepresented community.” The fifteen-member Board, comprised of ten professionally licensed social workers and five public member positions, has three currently open seats and will have an additional six open seats in January 2025. AAER claimed that two of its white female members are “qualified, ready, willing and able to be appointed to the board,” but that they will not be given equal consideration. AAER seeks a permanent injunction and a declaration that the law violates the Equal Protection Clause of the Fourteenth Amendment. On January 3, 2025, AAER filed an amended complaint to reflect the fact that they no longer rely on one of their original white female members.
- Latest update: On January 17, 2025, Governor Walz answered the amended complaint, denying the allegations of unlawful discrimination and asserting that the plaintiffs lack standing and failed to state a claim upon which relief can be granted.
American Alliance For Equal Rights v. Bennett, No. 1:25-cv-00669 (N.D. Ill. 2025): On January 21, 2025, AAER sued the Attorney General of Illinois, the Director of the Illinois Department of Human Rights, and the Secretary of State of Illinois. AAER alleges that an Illinois law requiring “qualifying nonprofits to gather and publicize” certain demographic data online compels organizations to engage in unlawful discrimination. They assert that “[b]y forcing charities to publicize the demographics of their senior leadership, the law pushes them to hire candidates based on race.” AAER also alleges the law violates the First Amendment by compelling organizations “to speak about a host of controversial demographic issues.” AAER seeks a permanent injunction and declaratory relief.
- Latest update: AAER served defendants on January 24, 2025. Their answer is due February 14, 2025.

The following Gibson Dunn attorneys assisted in preparing this client update: Jason Schwartz, Mylan Denerstein, Blaine Evanson, Molly Senger, Zakiyyah Salim-Williams, Zoë Klein, Cate McCaffrey, Jenna Voronov, Emma Eisendrath, Felicia Reyes, Allonna Nordhavn, Janice Jiang, Laura Wang, Maya Jeyendran, Kristen Durkan, Ashley Wilson, Lauren Meyer, Kameron Mitchell, Chelsea Clayton, Albert Le, Emma Wexler, Heather Skrabak, and Godard Solomon.

Jason C. Schwartz – Partner & Co-Chair, Labor & Employment Group
Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com)

Katherine V.A. Smith – Partner & Co-Chair, Labor & Employment Group
Los Angeles (+1 213-229-7107, ksmith@gibsondunn.com)

Mylan L. Denerstein – Partner & Co-Chair, Public Policy Group
New York (+1 212-351-3850, mdenerstein@gibsondunn.com)

Zakiyyah T. Salim-Williams – Partner & Chief Diversity Officer
Washington, D.C. (+1 202-955-8503, zswilliams@gibsondunn.com)

Molly T. Senger – Partner, Labor & Employment Group
Washington, D.C. (+1 202-955-8571, msenger@gibsondunn.com)

Blaine H. Evanson – Partner, Appellate & Constitutional Law Group
Orange County (+1 949-451-3805, bevanson@gibsondunn.com)