Client Alert Archives

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 27, the Federal Communications Commission (FCC) opened an investigation into corporate diversity practices at Verizon. In a letter to Verizon’s CEO Hans Vestberg, FCC Chairman Brendan Carr wrote that he “expected” all companies regulated by the FCC “to end invidious forms of DEI discrimination,” and he was “concerned by the apparent lack of progress” at Verizon to end its DEI programs. In the letter, Carr cited to Verizon’s public facing materials that “show the company’s continued promotion of DEI,” including a company statement regarding its commitment to diversity. Carr also cited materials allegedly obtained by a whistleblower. In a similar letter to Comcast’s CEO, Brian Roberts, Carr wrote “[t]he FCC will be taking fresh action to ensure that every entity the FCC regulates complies with the civil rights protections enshrined in the Communications Act . . . including by shutting down any programs that promote invidious forms of DEI discrimination.”

On February 21, the United States District Court for the District of Maryland preliminarily enjoined enforcement of key aspects of EO 14151 (“Ending Radical and Wasteful Government DEI Programs and Preferencing”) and EO 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”). The case is Nat’l Ass’n of Diversity Officers in Higher Educ., et al., v. Donald J. Trump, et al., No. 1:25-cv-00333-ABA, Dkt. 44–45 (D. Md. 2025). Specifically, the court halted enforcement of EO 14173’s requirement that federal contractors and grant recipients certify they do not “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws” and “agree that [their] compliance in all respects with all applicable federal anti-discrimination laws is material” for purposes of the False Claims Act. The court also enjoined the government from freezing or terminating existing “equity-related” contracts and grants under EO 14151. And while the court did not enjoin the Attorney General from “engaging in investigation” of DEI programs, it enjoined the enforcement provision of EO 14173, including the requirement that the Attorney General take “appropriate measures to encourage the private sector to end illegal discrimination and preferences.”

The injunction only applies to the ten agencies identified as defendants in this complaint, as well as “other persons who are in active concert or participation with Defendants.” On February 27, the plaintiffs filed a motion for clarification as to whether “other persons who are in active concert or participation with Defendants” extends to other non-defendant agencies. The government filed a motion to stay the ruling on February 27, which the court rejected on March 3. The government has also filed a notice of appeal with the Court of Appeals for the Fourth Circuit, and on March 4 filed a motion for stay pending appeal. For more information on this case, please see our February 24, 2025 client alert.

On February 14, America First Legal (AFL) sent a letter to Acting Secretary of Labor Vince Micone and Acting Director of the OFCCP Michael Schloss to “encourage” the U.S. Department of Labor to “immediately exercise” authority to “enforce nondiscrimination provisions of federal regulations” in light of EO 14173, which rescinded prior Executive Order 11246 and takes the position that “race- and sex-based employment practices” including those “under the guise of” DEI, “can violate the civil-rights laws of this Nation.” AFL’s letter states that Acting Secretary Micone has already directed the Department to “[c]ease and desist all investigative and enforcement activity” under the rescinded order, but urges the Department to “go further,” and enforce the “equal opportunity clause” contained in all federal government contracts. AFL urged the Department to use these equal opportunity clauses to initiate enforcement actions against contractors AFL has “identified” as engaged in “prohibited discrimination” based largely on the “contractors’ own public statements.” In an appendix and exhibits attached to the letter, AFL identifies Lyft, Mars, PricewaterhouseCoopers LLP, Twilio Inc., CBS Broadcasting, Meta Platforms, and Northwestern University as entities purportedly engaged in “prohibited discrimination.”

On February 28, the Department of Education published guidance entitled “Frequently Asked Questions About Racial Preferences and Stereotypes Under Title VI of the Civil Rights Act.” The guidance includes fifteen questions and answers addressing a range of issues relating to DEI initiatives in educational institutions. Among other things, the guidance notes that “a school’s responsibility not to discriminate against students applies to the conduct of everyone over whom the school exercises some control,” including third party contractors. It explains that Title VI extends to school procurement policies, including hiring substitute teachers, special education providers, and cafeteria services. It states that application essay prompts that “require applicants to disclose their race” are illegal. And it sets forth a “non-exhaustive list” of evidence that may raise an inference of discriminatory intent, including “(1) whether members of a particular race were treated differently than similarly situated students of other races; (2) the historical background or administrative history of the policy or decision; (3) whether there was a departure from normal procedures in making the policy or decision; (4) whether there was a pattern regarding policies or decisions towards members of a particular race; (5) statistics demonstrating a pattern of the policy or decision having a greater impact on members of a particular race; and (6) whether the school was aware of or could foresee the effect of the policy or decision on members of a particular race.” In response to another frequently asked question on whether Title VI permits schools to teach about race or DEI, the document says that the Department “enforces federal civil rights law consistent with the First Amendment,” and that federal statutes independently “prohibit the Department from exercising control over the content of school curricula.” But the document adds that schools are still prohibited from creating a “racially hostile environment” through the materials they teach, which depends on “the facts and circumstances” of individual cases. The guidance describes materials that characterize students of a certain group as “oppressors” or “deliberately assign[s] them intrinsic guilt based on the actions of their presumed ancestors” as potentially creating a hostile environment if those materials were used at an elementary school, but would be “less likely to create a racially hostile environment” “in a class discussion at a university.” The guidance also described “more extreme practices at a university,” including “privilege walks,” segregated “presentations and discussions with guest speakers,” and “mandating courses, orientation programs, or trainings that are designed to emphasize and focus on racial stereotypes” as “forms of school-on-student harassment that could create a hostile environment under Title VI.”

Media Coverage and Commentary:

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

Wall Street Journal, “Supreme Court Signals Minority Groups Get No Edge in Bias Suits” (February 26): Wall Street Journal’s Erin Mulvaney and Jess Bravin report on the Supreme Court’s recent oral argument in Ames v. Ohio Department of Youth Services, a case that could make it easier for plaintiffs to bring reverse-discrimination lawsuits. In that case, plaintiff Marlean Ames claims she was denied a promotion and demoted at the Ohio Department of Youth Services because she is heterosexual, while gay employees were promoted to the positions she sought. A federal appeals court in Cincinnati dismissed her lawsuit, finding that she had failed to prove the existence of “background circumstances” suggesting that the employer was hostile towards heterosexual employees, a test not typically applied in cases filed by plaintiffs from underrepresented groups. Federal appeals courts are divided on the question of whether this additional “background circumstances” showing is required in reverse-discrimination cases, with five courts imposing the test and three courts rejecting it. This case is part of a broader debate over reverse discrimination, fueled by growing challenges to DEI programs. In their article, Bravin and Mulvaney cited to research by Gibson Dunn to note that “[l]awsuits alleging that DEI programs discriminate against white people and other members of majority groups are mushrooming.” The authors note that Gibson Dunn’s survey found that 40 such cases were filed between October 2019 and the Supreme Court’s decision in SFFA v. Harvard, but that nearly 100 lawsuits have been filed since, with 60 in 2024 alone. Bravin and Mulvaney further cite legal experts who predict that a ruling in favor of Ames could lead to a further surge in similar claims, intensifying the debate over DEI initiatives in the workplace.
Reuters, “JPMorgan CEO Jamie Dimon reaffirms DEI commitment despite industry shift, CNBC reports” (February 24): Reuters’ Niket Nishant reports that JPMorgan Chase CEO Jamie Dimon reaffirmed the bank’s commitment to DEI efforts, despite a growing trend of corporate retreat from such initiatives. Dimon confirmed that the bank will continue its outreach to Black, Hispanic, LGBT, veteran, and disabled communities. Nishant reports that, earlier this month, the bank said it expects “to be criticized by activists, politicians and other members of the public” concerning the positions it takes regarding DEI and other public policy issues.
CNN, “Target is getting hit from all sides on DEI” (February 21): CNN’s Nathaniel Meyersohn reports that Target faces a lawsuit filed by Florida Attorney General James Uthmeier and America First Legal, alleging that the company concealed the financial risks of its DEI initiatives, including its 2023 Pride Month merchandise collection. The lawsuit follows Target’s decision to scale back its DEI policies in response to conservative activist pressure and backlash against its Pride-themed products, particularly “tuck-friendly” swimsuits for transgender customers. Gibson Dunn partner Jason Schwartz commented on the “new and growing trend of using securities lawsuits to attack corporate DEI programs” by “challenging whether risk disclosures were adequate.” Although these lawsuits are difficult to prove, according to Schwartz, “[t]his kind of public-private partnership with state attorneys general will likely pave the way for others to follow.” Meanwhile, Meyersohn reports, Target also has been subjected to “fierce . . . blowback from DEI supporters” and has seen decreased foot traffic in its stores.

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:

Desai v. PayPal, No. 1:25-cv-00033-AT (S.D.N.Y. 2025): On January 2, 2025, Andav Capital and its founder Nisha Desai sued PayPal, alleging that PayPal unlawfully discriminates by administering its investment program for minority-owned businesses in a way that favors Black and Latino applicants. Desai, an Asian-American woman, alleges PayPal violated Section 1981, Title VI, and New York state anti-discrimination law by failing to fully consider her funding application and announcing first-round investments only in companies with “at least one general partner who was black or Latino.” She seeks a declaratory judgment that the investment program is unlawful, an injunction barring PayPal from “knowing or considering race or ethnicity” in administering the program, and damages.
- Latest update: On February 21, the court granted a motion to extend the time to file an answer. PayPal is represented by Gibson Dunn in this matter.
Kleinschmit v. University of Illinois Chicago, No. 1:25-cv-01400 (N.D. Ill. 2025): On February 10, 2025, a former professor at the University of Illinois Chicago sued the university, alleging that it unlawfully discriminated against white male faculty candidates and discriminated and retaliated against the plaintiff by firing him after he objected to the school’s “racial hiring programs.” The plaintiff raises claims under Sections 1981 and 1983.
- Latest update: The docket does not yet reflect that the defendants have been served.
Landscape Consultants of Texas, Inc. et al. v. City of Houston, Texas et al., No. 4:23-cv-03516-DH (S.D. Tex. 2023): White-owned landscaping companies challenged the City of Houston’s government contracting set-aside program for “minority business enterprises” under the Fourteenth Amendment and Section 1981. On November 29, 2024, plaintiffs and defendant Midtown Management District filed cross-motions for summary judgment. Midtown Management argued that the plaintiffs failed to show the unconstitutionality of the programs. The City of Houston filed its own motion for summary judgment on November 30, contending that the plaintiffs lack standing and that the programs satisfy the requirements of the Equal Protection Clause.
- Latest update: On February 11, 2025, the court denied all motions for summary judgment in a single page order. Trial is scheduled to commence April 21, 2025.
Strickland et al. v. United States Department of Agriculture et a.l, No. 2:24-cv-00060-Z (N.D. Tex. 2024): On March 3, 2024, plaintiff farm owners sued the USDA over the administration of financial relief programs that allegedly allocated funds based on race or sex. The plaintiffs alleged that only a limited class of socially disadvantaged farmers, including certain races and women, qualify for funds under these programs. On June 7, 2024, the court granted in part the plaintiff’s motion for a preliminary injunction. The court enjoined the defendants from making payment decisions based directly on race or sex. However, the court allowed defendants to continue to apply their method of appropriating money, if done without regard to the race or sex of the relief recipient.
- Latest update: On February 10, 2025, the parties requested a 30-day stay of proceedings to discuss a resolution following the USDA’s determination to “no longer employ the race- and sex-based ‘socially disadvantaged’ designation” in light of recent Executive Orders. The court granted the request on February 11, 2025.

2. Employment discrimination and related claims:

Diemert v. City of Seattle, et al., No. 2:22-cv-01640 (W.D. Wash. 2022): On November 16, 2022, the plaintiff, a white male, sued his former employer, the City of Seattle. The plaintiff alleged that the City’s diversity initiatives, which allegedly included mandatory diversity trainings involving critical race theory and encouraging participation in “race-based affinity groups, caucuses, and employee resource groups,” amounted to racial discrimination in violation of Title VII and the Fourteenth Amendment. The plaintiff also alleged that he had been subjected to a hostile work environment. On August 16, 2024, the City filed a motion for summary judgment, arguing that the plaintiff had “resigned voluntarily because he had already moved to Texas and did not wish to return to in-person work.” The City further argued that while it required employees to complete two diversity activities per year, it did not penalize employees who did not fulfill the requirement. On September 7, 2024, the plaintiff filed his opposition to the motion for summary judgment, arguing that he experienced discrimination that the City failed to remediate.
- Latest update: On February 10, 2025, the court granted the City’s motion for summary judgment, holding that a reasonable juror could not find the City’s diversity initiatives created a hostile work environment or that the plaintiff experienced discrimination or retaliation. On February 24, 2025, the plaintiff filed a notice of appeal to the Ninth Circuit.

EEOC v. Battleground Restaurants, No. 1:24-cv-00792 (M.D.N.C. 2024): On September 25, 2024, the U.S. Equal Employment Opportunity Commission (EEOC) filed a lawsuit against a sports bar chain, Battleground Restaurants, in federal district court in North Carolina. The lawsuit alleges that the chain refused to hire men for its front-of-house positions, such as server or bartender jobs, in violation of Title VII. On November 25, 2024, Battleground Restaurants moved to dismiss or strike an improperly named defendant. Battleground Restaurants argued that the EEOC’s pattern or practice claims are “insufficiently pled, conclusory, and not plausible on their face,” and that the EEOC failed to conduct a “reasonable investigation” or give “adequate notice” to Battleground Restaurants.
- Latest update: On February 24, 2025, the court denied the defendant’s motion to dismiss, finding the EEOC complied with notice requirements, plausibly alleged a pattern or practice of disparate sex discrimination, and can properly include Battleground Restaurants as a defendant.

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

Chicago Women in Trades v. President Donald J. Trump, et al., No. 1:25-cv-02005 (N.D. Ill. 2025): On February 26, 2025, Chicago Women in Trades (CWIT), a non-profit organization, sued President Trump, challenging Executive Order 14151, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” and Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” CWIT alleges that, because of the orders, its federal grant funding was frozen and although the funding was restored following a temporary restraining order issued in another proceeding, “CWIT’s grants remain under threat of termination.” CWIT claims that these executive orders violate principles of separation of powers, the First and Fifth Amendments, and the Spending Clause of the U.S. Constitution.
- Latest update: The docket does not yet reflect that the defendants have been served.

Do No Harm v. Edwards, No. 5:24-cv-16-JE-MLH (W.D. La. 2024): On January 4, 2024, Do No Harm sued then-Governor Edwards of Louisiana over a 2018 law requiring a certain number of “minority appointee[s]” to be appointed to the State Board of Medical Examiners. Do No Harm brought the challenge under the Equal Protection Clause and requested a permanent injunction. On February 28, 2024, Governor Edwards answered the complaint, denying all allegations including allegations related to Do No Harm’s standing. On December 20, 2024, Governor Jeff Landry—who replaced Governor Edwards—moved to dismiss for lack of subject matter jurisdiction. He contended that, because he signed a declaration indicating that he does not intend to enforce the challenged law, the plaintiff’s claims are moot. Governor Landry also argued that the suit is barred by sovereign immunity. On January 10, 2025, Do No Harm filed an opposition to the motion to dismiss, asserting that Governor Landry’s declaration did not moot the case because the statute remains on the books and a “future governor will be bound to enforce the racially discriminatory aspects of [the law] regardless of Governor Landry’s declaration.” On January 30, 2025, Do No Harm filed a motion for summary judgment, arguing: (1) Do No Harm has organizational standing, (2) the claim is not moot because all future governors are bound to enforce the law, and (3) the law does not satisfy strict scrutiny.
- Latest update: On February 20, 2025, Governor Landry filed an opposition to the motion for summary judgment, asserting again this his declaration mooted Do No Harm’s claims, and that the suit is barred by sovereign immunity because Governor Landry “lacks a sufficient enforcement connection by reason of his vow to withhold enforcement.”

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: On February 20, 2025, Cunningham answered the complaint, denying all allegations related to the violation of the plaintiff’s constitutional rights. She asserted five affirmative defenses: (1) the complaint fails to state a claim; (2) the plaintiff lacks standing; (3) the claims are unripe, (4) the plaintiff has suffered no harm or damages as a result of the Defendant, and (5) the claims are barred by sovereign immunity.

Doe 1 v. Office of the Director of Nat’l Intel., No. 1:25-cv-00300 (E.D. Va. 2025): On February 17, eleven unnamed employees of the Office of the Director of National Intelligence and the Central Intelligence Agency sued their employers after they were put on administrative leave from their DEI-related positions. They assert that the decision to put and leave them on administrative leave violates the Administrative Leave Act, the Administrative Procedure Act, and the First and Fifth Amendments of the U.S. Constitution. On February 17, plaintiffs moved for a temporary restraining order on February 17. The court then entered an administrative stay to allow additional briefing on the motion. On February 24, plaintiffs filed an amended complaint adding eight new unnamed plaintiffs to the case.
- Latest update: The court held a hearing on plaintiffs’ motion for a temporary restraining order on February 27. That same day, the court denied the motion in a single page order and lifted the administrative stay.

Nat’l Urban League et al., v. President Donald J. Trump, et al., No. 1:25-cv-00471 (D.D.C. 2025): On February 19, the National Urban League, the National Fair Housing Alliance, and the AIDS Foundation of Chicago filed a complaint against the Trump Administration, alleging that the President’s recent Executive Orders targeting DEI (EO 14151, EO 14168, and EO 14173) infringe on the organizations’ rights to free speech and due process by penalizing them for “expressing viewpoints in support of DEIA and transgender people.” The organizations allege that orders are “extraordinarily vague” because they “equate banned ‘DEIA’ with any equity-related work,” which could include work authorized by civil rights law. The plaintiffs allege that the Executive Orders attempt to “chill and censor their speech,” as well as “intimidate, threaten, and ultimately stop Plaintiffs from performing services central to their missions.” The complaint also alleges that the Executive Orders have a clear discriminatory purpose: “to malign the targeted communities,” including people of color, LGBTQ people, and people with disabilities. Plaintiffs seek declaratory relief and a permanent injunction barring enforcement and implementation, including a court order that all agency-wide directives implementing the Executive Orders be permanently rescinded. Plaintiffs filed a motion for a preliminary injunction on February 28.
- Latest update: Defendants’ opposition to the preliminary injunction order is due March 12.

San Francisco AIDS Foundation et al. v. Donald J. Trump et al., No. 3:25-cv-01824 (N.D. Cal. 2025): On February 20, several LGBTQ+ groups filed suit against President Trump, Attorney General Pam Bondi, and several other government agencies and actors, challenging the President’s recent Executive Orders targeting DEI (EO 14151, EO 14168, and EO 14173). The complaint alleges that these EOs are unconstitutional on several grounds, including the Equal Protection Clause of the Fifth Amendment, the Due Process Clause of the Fifth Amendment, and the Free Speech Clause of the First Amendment. It also argues the EOs are ultra vires and exceed the authority of the presidency. Plaintiffs seek preliminary and permanent injunctive relief.
- Latest update: On March 3, plaintiffs filed a motion for preliminary injunction.

4. Board of director or stockholder actions:

Craig v. Target Corp., No. 2:23-cv-00599-JLB-KCD (M.D. Fla. 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, asserting 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. On January 21, 2025, plaintiffs filed a Response to Target’s Status Update and a Motion to Lift the Stay. Plaintiffs asserted that Target “misrepresent[ed] the dialogue between the parties,” and 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.”
- Latest update: On February 11, 2025, the court denied the motion to lift the stay, stating that it “will entertain briefing on Plaintiffs’ request to amend their Complaint before ruling on whether to lift the stay.”
State Board of Administration of Florida v. Target, No. 2:25-cv-00135 (M.D. Fla. 2025): On February 20, 2025 the State Board of Administration of Florida sued Target and certain Target officers on behalf of a class of Target stockholders, claiming the Target board of directors 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 plaintiff alleges that Target’s statements violated Sections 10(b),14(a), and 20(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. This suit relates to, and arises out of the same operative facts as, Craig v. Target Corp., No. 2:23-cv-00599-JLB-KCD (M.D. Fla. 2023).
- Latest update: As of this update, the defendant has not yet been served.

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

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.

Class and collective actions are expanding globally. Our “International Class Action Update” highlights recent developments in the EU and UK.

In this edition we discuss new developments on the EU level which will incentivize future class actions. The new EU Product Liability Directive expands strict liability to software and AI products and will lend itself to private enforcement through class actions. A recent trend to allow lump-sum damages for data privacy violations will also attract class action plaintiffs.

Additionally, we update you on the status of collective redress in the UK and selected EU jurisdictions (Germany, France, Italy, Belgium, Spain).

I. New Class Action Incentives in EU Law

The EU’s Directive (EU) 2020/1828 on Representative Actions mandates collective redress in all member states. Even though not all states have implemented compliant regimes yet, the EU continues to expand the substantive basis for class actions. We also note a trend towards using lump-sum damages, facilitating class actions for plaintiffs.

A. New EU Product Liability Directive

The new Product Liability Directive (EU 2024/2853) incentivizes class actions by easing the burden of proof, reducing liability limits, and including software and AI under the strict liability regime. The Directive also introduces a discovery mechanism, allowing both parties to demand evidence from each other that is relevant to their case. Member States must implement the Directive by December 9, 2026.

B. Non-material Damages in Data Privacy Litigation

On January 8, 2025, the General Court of the European Union ruled that the EU Commission must compensate an individual EUR 400 for non-material damage after personal data was transferred to the US upon visiting an EU webpage (Case T-354/22). The court assessed the compensation solely based on equity.

This decision, which can still be appealed, will further encourage class actions in the data privacy sector. If plaintiffs do not need to demonstrate individual material damages, class actions for widespread breaches become more attractive to qualified entities and litigation funders. In Germany, the Federal Court of Justice recently issued a similar decision, setting the amount for non-material damages after a data breach at EUR 100 (see below).

II. Germany

A. New “Leading Case Procedure”

In late 2024, Germany introduced a “Leading Case Procedure” at the Federal Court of Justice to clarify legal issues in mass proceedings. The court can designate a case as a “Leading Case” and decide it even if parties settle or withdraw their appeal. This non-binding decision guides lower courts on similar legal questions.

Immediately after the new procedure was in effect, the Federal Court of Justice selected its first “Leading Case” out of a swath of consumer claims alleging illegal data scraping from a social media website. On November 18, 2024, the Federal Court of Justice ruled that the consumer was entitled to a lump sum of EUR 100 without having to show actual harm (the decision is published under docket number VI ZR 10/24).

Shortly after the Federal Court of Justice’s decision, Germany’s best known consumer protection agency filed a Representative Action against the social media website, inviting all potentially affected consumers to join. This showcases the future interplay between representative actions and the new “Leading Case Procedure”: When the Federal Court of Justice issues a Leading Case Decision in favor of consumers, qualified entities will be quick to file new Representative Actions, compelling companies to defend against both individual mass claims and the Representative Action simultaneously.

B. Status of Representative Actions

Implemented in 2023, the German Representative Action allows Qualified Entities to seek damages for consumers or small businesses (for an in-depth discussion see our previous alert). Since 2023, seven new Representative Actions have been filed, adding to the approximately 30 collective actions already pending under the previous procedural regime introduced in 2018. Almost all cases under the new regime concern unilateral customer price increases in video streaming, telecommunications, energy, and insurance contracts.

III. France

France is currently broadening its class action regime. On December 15, 2022, a bill (“Proposition de loi relative au régime juridique des actions de groupe”, no. 639) was submitted and subsequently amended several times. It was debated in public session on February 6, 2024. The latest version (Text no.°154, transmitted to the Assemblée Nationale on July 23, 2024) is currently undergoing its second reading in the Assemblée Nationale.

The bill, while complying with European law, aims to encourage class actions and unify applicable legal procedures:

Class actions may seek the cessation of a failure or compensation for damages in any matter, with exceptions for health and work.
While the current legislation provides for compensation for specific damages, the bill would allow for all damages to be compensated.
The bill introduces the possibility of cross-border class actions.

Meanwhile, several class actions are pending under the existing regime. Google, involved in a class action launched by UFC-Que-Choisir in June 2019, ultimately avoided a potential EUR 27 billion penalty due to the inadmissibility of the class action.

IV. Italy

Italy transposed the EU Collective Redress Directive through Decree No. 28 on March 23, 2023. This Decree complements Italy’s pre-existing class action system, resulting in a dual-track approach to collective redress.

The first mechanism, the “Azione di Classe”––which is governed by Law 31/2019––has been in force since 2021 and applies to claims based on homogeneous individual rights. The second, the Representative Action, was introduced by Decree as a direct transposition of the EU Directive. Notably, the new framework expands consumer protection beyond homogeneous individual rights, allowing for a broader range of claims. It also enables qualified entities from other Member States to initiate proceedings in Italy, strengthening cross-border collective redress.

The impact of this reform is already evident in recent legal actions. Consumer associations, such as Movimento Consumatori, have used the Representative Action to challenge abusive clauses in rental agreements. Cases against Goldcar, Sicily by Car, and Sixt targeted excessive penalties and unfair fees imposed on consumers. Italian courts ruled in favor of the claimants, ordering the removal of unlawful clauses and requiring companies to notify affected customers and publicize the rulings.

These cases highlight how Italy’s dual-track system provides distinct but complementary tools to challenge allegedly unfair business practices. The Class Action allows individuals with similar claims to seek collective redress, while the Representative Action broadens the scope by enabling consumer organizations to act on behalf of a wider range of affected parties.

V. Belgium

Belgium transposed the EU Directive on Representative Actions effective June 10, 2024. It expanded the scope of its pre-existing class action system to include all consumer protection provisions required under the Directive on Representative Actions.

Consumers now have to opt-in to participate in Representative Actions. Before implementing the EU Directive, Belgian judges had to decide between an opt-in or opt-out system on a case-by-case basis.

Eleven class action cases have been filed to date in Belgium, most led by Test-Achat/Test-Aankoop, the main consumer protection organization. These actions were brought in various sectors (e.g., transportation, telecom, culture, energy, electronic goods), usually against large Belgian or globally operating companies.

All these eleven cases were still filed under the pre-existing procedural regime.

VI. Spain

Spain has not yet transposed the EU Collective Redress Directive on representative actions into its national legal framework, despite the deadline expired in December 2022.

This delay has drawn criticism from consumer organizations. For example, in December 2024, the Financial Users Association, supported by European Consumer Organization, filed a complaint against Spain before the European authorities for failing to transpose the directive within the established timeframe. It remains to be seen how and when Spain will fully transpose the Directive.

VIII. United Kingdom

The United Kingdom continues to see a huge growth in collective litigation even though it does not have a fully-fledged US-style class action regime. In particular and most akin to US-style class actions, there is currently a large number of (mostly) opt-out antitrust class actions at various stages before the UK’s specialist competition tribunal (the Competition Appeal Tribunal) across a wide range of sectors (particularly the technology sector) that are increasingly testing the boundaries of competition law. The actions have a combined alleged value of between £100 – £200 billion.

However, two recent developments suggest that these claims may face increased scrutiny going forward:

First, in December 2024, the Competition Appeal Tribunal dismissed the first antitrust class action to proceed to full trial in Le Patourel v BT Group (docket number 1381/7/7/21). The Class Representative had sought damages of over £1.1 billion arguing that BT’s prices for telephony services were excessive and unfair. The Competition Appeal Tribunal ruled that BT’s prices were not unfair and, in doing so, made it clear the difficulties class representatives may face in proving unfairness in these types of cases.

Second, in January 2025 in Christine Riefa Class Representative Limited v Apple Inc. & others (docket number 1602/7/7/23), the Competition Appeal Tribunal refused, for the first time, the certification of a class action, on the basis that the class representative was unsuitable. This was because the Competition Appeal Tribunal found that the class representative did not understand her own funding arrangements and there were questions about her ability to act independently and in the interests of the class members. The decision makes it clear that class representatives “cannot be, merely a figurehead for a set of proceedings being conducted by their legal representatives” and that future class representatives, and their funding arrangements, will face greater scrutiny going forward.

Whilst these two developments are not expected to dampen activity, 2025 will be a key year for the regime given that trials and judgments in a number of class actions are expected to provide further insight into the Competition Appeal Tribunal’s operation of its class action regime.

There is a growing body of examples of class settlements in connection with the Competition Appeal Tribunal’s antitrust class actions regime, most notably the approval by the Competition Appeal Tribunal on February 21, 2025 of a £200 million settlement of the largest class action claim to date, brought in respect of a class of 44 million UK consumers in relation to Mastercard’s interchange fees.

In addition, there are outstanding appeals in the Court of Appeal and Supreme Court relating to the certification test and enforceability of litigation funding that will be heard this year that are likely to further shape the regime.

Beyond class actions stricto sensu, the UK remains relatively fertile ground for collective actions generally, with an active slate of cases currently before the High Court under Group Litigation Orders, a case-management device allowing large numbers of similar claims to be heard together, in relation to matters involving financial sector wrongdoing, diesel emissions cases, product liability claims, environmental breaches (in the UK and overseas), industrial and transportation accidents, misfeasance by public officials, etc.

The following Gibson Dunn lawyers prepared this update: Alexander Horn, Eric Bouffard, Patrick Doris, Markus Rieder, Friedrich Wagner, Yannis Ioannidis, Dan Warner, Kahn Scolnick, and Chris Chorba.

Gibson Dunn attorneys 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 in the firm’s Class Actions, Litigation, or Appellate and Constitutional Law practice groups, or any of the following lawyers:

Frankfurt:
Alexander Horn (+49 69 247 411 537, ahorn@gibsondunn.com)

Munich:
Markus Rieder – Munich (+49 89 189 33-260, mrieder@gibsondunn.com)
Friedrich A. Wagner (+49 89 189 33-262, fwagner@gibsondunn.com)

Paris:
Eric Bouffard (+33 1 56 43 13 00), ebouffard@gibsondunn.com)

Brussels:
Yannis Ioannidis – (+32 2 554 72 08, yioannidis@gibsondunn.com)

London:
Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com)
Dan Warner (+44 20 7071 4213, dwarner@gibsondunn.com)

United States:
Theodore J. Boutrous, Jr. – Los Angeles (+1 213.229.7000, tboutrous@gibsondunn.com)

Christopher Chorba – Co-Chair, Class Actions Group, Los Angeles (+1 213.229.7396, cchorba@gibsondunn.com)

Theane Evangelis – Co-Chair, Litigation Group, Los Angeles (+1 213.229.7726, tevangelis@gibsondunn.com)

Lauren R. Goldman – Co-Chair, Technology Litigation Group, New York (+1 212.351.2375, lgoldman@gibsondunn.com)

Kahn A. Scolnick – Co-Chair, Class Actions Group, Los Angeles (+1 213.229.7656, kscolnick@gibsondunn.com)

Bradley J. Hamburger – Los Angeles (+1 213.229.7658, bhamburger@gibsondunn.com)

Michael Holecek – Los Angeles (+1 213.229.7018, mholecek@gibsondunn.com)

Lauren M. Blas – Los Angeles (+1 213.229.7503, lblas@gibsondunn.com)

We are pleased to provide you with the February edition of Gibson Dunn’s digital assets regular update. This update covers recent legal news regarding all types of digital assets, including cryptocurrencies, stablecoins, CBDCs, and NFTs, as well as other blockchain and Web3 technologies. Thank you for your interest.

ENFORCEMENT ACTIONS

UNITED STATES

SEC Dismisses Crypto Enforcement Actions
The SEC has agreed to dismiss several crypto enforcement actions, including those against Coinbase, Consensys, and Cumberland DRW. These requested pauses on crypto litigation under acting SEC Chairman Mark Uyeda signals a potential shift in enforcement priorities. Coinbase; Coindesk; The Block.
SEC Closes Investigations into OpenSea, Robinhood Crypto, Uniswap Labs, and Gemini
On February 21, OpenSea announced that the SEC officially closed its investigation into the non-fungible token marketplace without pursuing enforcement action. According to OpenSea, the SEC Staff had issued it a Wells notice in August 2024, in which the SEC Staff stated that the SEC was planning to pursue an enforcement action against the platform, alleging OpenSea may have been operating as an unregistered securities marketplace. On February 24 and February 26, Robinhood, Uniswap, and Gemini made similar announcements that the SEC had closed investigations into their platforms. X (OpenSea); Robinhood; Uniswap; X (Gemini).
HashFlare Operators Plead Guilty to Crypto Fraud
On February 12, two operators of HashFlare, a defunct cryptocurrency mining service, pleaded guilty to charges of conspiracy to commit wire fraud, in the U.S. District Court for the Western District of Washington, in connection with their operation of a crypto Ponzi scheme affecting hundreds of thousands of individuals globally. From 2015 to 2019, HashFlare allegedly sold more than $577 million in mining contracts despite not possessing the required computing capacity to perform the mining it purported to perform. The two operators agreed to forfeit assets worth more than $400 million. Sentencing is scheduled for May 8. DOJ; The Block.
Las Vegas Business Owner Indicted for Alleged Crypto Ponzi Scheme
On February 14, Brent Kovar, owner of Profit Connect, was arrested pursuant to an indictment charging him with wire fraud, mail fraud, and money laundering, between 2017 and 2021. Kovar allegedly misrepresented that Profit Connect used artificial intelligence powered by a supercomputer to mine cryptocurrency, paid a fixed rate of return, and provided a 100% money-back guarantee while, in reality, Kovar allegedly used investor funds for his personal benefit, to operate Profit Connect, and to repay other investors as if such proceeds came from crypto mining. DOJ; The Block.
Canadian Man Indicted for Alleged $65 Million Fraudulent Scheme
On February 3, a criminal indictment was unsealed in the U.S. District Court for the Eastern District of New York, charging Andean Madjedovic with, among other things, wire fraud and money laundering. Madjedovic allegedly exploited vulnerabilities in two decentralized finance protocols to obtain approximately $65 million in digital assets from investors in the protocols between 2021 and 2023. According to the indictment, Madjedovic borrowed hundreds of millions of dollars in tokens to engage in deceptive trading that he knew would cause the smart contracts underlying the protocols to falsely calculate key variables, which allowed Madjedovic to withdraw millions of dollars of investor funds at artificial prices. According to the government, Madjedovic is currently at large. DOJ; Indictment.
Market Maker CLS Global Agrees to Plead Guilty to Charges Relating to Cryptocurrency “Wash Trading”
On January 21, DOJ announced that CLS Global, a financial services firm that functioned as a market maker, agreed to resolve criminal charges in the U.S. District Court for the District of Massachusetts relating to its fraudulent manipulation of cryptocurrency trading volume. According to the terms of the plea, which was accepted by a judge on February 7, 2025, CLS Global will pay $428,059 to the government, and will be prohibited from participating in U.S. cryptocurrency markets. On January 21, CLS Global also agreed to resolve parallel claims brought by the SEC. DOJ.
U.S. Attorney’s Office for the District of Massachusetts Files Civil Forfeiture Action to Recover Proceeds of Cryptocurrency Fraud Scheme
On February 19, the U.S. Attorney’s Office for the District of Massachusetts filed a civil forfeiture action to recover various cryptocurrencies, with an estimated value of more than $1 million, which are alleged to be proceeds of an online investment fraud scheme, sometimes called a “pig-butchering” scheme. According to DOJ, the civil forfeiture action stems from an investigation into a social media group called “Financial Independence Forum,” that instructed victims to transfer funds to an allegedly fraudulent trading platform. DOJ; Complaint.

REGULATION AND LEGISLATION

UNITED STATES

Senate Votes to Repeal IRS DeFi Broker Rule
In a major bipartisan win for the crypto industry, the Senate voted 70-27 to pass a joint resolution under the Congressional Review Act that would repeal a Biden-era rule requiring DeFi platforms to report user transactions to the IRS. The resolution is expected to pass in the House and be signed by the President. Once enacted into law, the resolution will not only effectively repeal the DeFi broker rule but also will prohibit the IRS from issuing a new rule that is “substantially the same” as the repealed rule absent new legislation. The resolution will not repeal the IRS’s July 2024 broker rule applicable to custodial digital asset trading platforms. Coindesk.
Former CTFC Commissioner Brian Quintenz Nominated to Lead the CFTC
On February 12, Brian Quintenz was nominated as Chairman of the Commodity Futures Trading Commission (CFTC). Quintenz previously served as a CFTC Commissioner between 2017 and 2021 and most recently worked as head of policy for the cryptocurrency arm of venture-capital firm a16z. Known as a crypto advocate, Quintenz stated in his announcement on X that the CFTC is “well poised to ensure the USA leads the world in blockchain technology and innovation.” On February 25, the CFTC announced that Democratic Commissioner Christy Goldsmith Romero will step down upon Quintenz’s confirmation, after which the Commission will be comprised of three Republicans and one Democrat. X; CoinDesk; Cointelegraph; CFTC Press Release.
SEC Guidance Says Meme Coin Transactions Generally Do Not Implicate Federal Securities Laws
On February 27, the SEC’s Division of Corporation Finance published a staff statement stating its “view that transactions in the types of meme coins described in this statement, do not involve the offer and sale of securities under the federal securities laws.” The SEC defined meme coins as “a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading.” As defined in the guidance, meme coins “typically share certain characteristics,” including that they “typically are purchased for entertainment, social interaction, and cultural purposes,” and “typically have limited or no use or functionality.” “In this regard, meme coins are akin to collectibles.” Based on these characteristics, the guidance concludes that transactions in meme coins do not involve “investment contracts” under the Howey test. Among other reasons, the guidance says, “meme coin purchasers are not making an investment in an enterprise” because “their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise.” In addition, “any expectation of profits that meme coin purchasers have is not derived from the efforts of others,” but rather “from speculative trading and the collective sentiment of the market, like a collectible.” The guidance does “not extend to the offer and sale of meme coins that are inconsistent with the descriptions set forth above, or products that are labeled ‘meme coins’ in an effort to evade the application of the federal securities laws by disguising a product that otherwise would constitute a security.” SEC Guidance.
New Proposed Legislation Would Establish Stablecoin Regulatory Framework
On February 4, Chairman Tim Scott (R-S.C.) joined Senate Banking Committee members Senators Bill Hagerty (R-Tenn.) and Cynthia Lummis (R-Wyo.), as well as Senator Kirsten Gillibrand (D-N.Y.), in introducing the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. This legislation seeks to establish a clear regulatory framework for payment stablecoins by defining “payment stablecoins and set[ting] up the procedures for issuing them, including establishing the Federal Reserve as watchdog for the big bank issuers and the Officer of the Comptroller of the Currency as regulator for nonbank issuers of more than $10 billion.”“Passing clear and sensible regulations for stablecoins is critical to maintaining U.S. dollar dominance, promoting responsible innovation, and protecting consumers,” said Senator Gillibrand. Senate; CoinDesk.
Jonathan Gould, Former Bitfury Executive, Nominated to Lead the OCC
On February 11, President Trump nominated Jonathan Gould, former chief legal officer of Bitfury (a blockchain technology company), to head the Office of the Comptroller of the Currency (OCC), which regulates U.S. national banks and federal savings associations. If confirmed by the Senate, Gould would lead the OCC for a five-year term. The Block; Cointelegraph.
SEC Commissioner Peirce Sets Out Plans for New Crypto Task Force
On February 4, SEC Commissioner Hester Peirce, head of the SEC’s new Crypto Task Force, issued a release that sets out priorities and plans for the newly established Crypto Task Force. The Task Force will focus on registered offerings, custody solutions for investment advisers, security status, crypto lending and staking, crypto exchange-traded products, cross-border experimentation, clearing agencies and transfer agents, and special purpose broker dealers. Peirce also urged crypto companies to be patient as the SEC decides how to “disentangle” itself from the litigation initiated under former Chair Gary Gensler. SEC Release; Thomson Reuters; CoinDesk.
The SEC Announces Creation of the Cyber Fraud Unit
On February 20, the SEC announced the creation of the Cyber and Emerging Technologies Unit (CETU), which will focus on combatting cyber-related misconduct and fraud. The CETU will replace the Crypto Assets and Cyber Unit and will be led by Laura D’Allaird, who was the co-chief of the Crypto Assets and Cyber Unit. The CETU will consist of fraud specialists and attorneys who will focus on, among other things, fraud involving blockchain technology and digital assets. SEC Press Release; The Block.
State Legislatures Continue to Propose State-Level Strategic Crypto Reserve Bills
During the month of February, at least 14 states introduced bills to establish frameworks for investing in digital assets within their respective state treasuries. While no such bill has been enacted, it has been proposed to the state legislature in a total of at least 26 states. Many bills include the stipulations that the amount of crypto investments by the state may not exceed a certain percentage of the total size of public funds and that the state may invest only in digital assets with a minimum market cap ($500 billion in Utah, for example). Bills in some states (such as Ohio) aim to establish a strategic reserve for bitcoin specifically. The Block.

INTERNATIONAL

Czech Republic Attempting to Eliminate Long-Term Crypto Gains Taxes
On February 7, Czech President Petr Pavel signed a bill exempting crypto users from paying taxes on digital assets that are held for three years. Additionally, transactions up to CZK 100,000 ($4,136) do not need to be reported to Czech taxing authorities. This bill was not well received by the President of the European Central Bank, Christine Lagarde. Lagarde said that she is confident that bitcoin won’t be entering the reserves of any of the EU central banks. CoinDesk.
Hong Kong’s SFC Proposes Expanding Crypto Regulatory Staff
On February 3, Hong Kong’s Securities and Futures Commission (SFC) proposed hiring eight new staff members as part of its budget for the next fiscal year. These hires are to focus on crypto regulatory regimes, market surveillance, and enforcement investigations. Hong Kong has opened its doors to crypto firms, and it appears to be continuing its drive to become a crypto hub. The Block ; CoinDesk .
Hong Kong SFC Sets Out New Roadmap to Develop Hong Kong as a Global Virtual Assets Hub
On February 19, Hong Kong’s SFC published its five-pillar “ASPIREe” roadmap that outlines 12 major initiatives to enhance the security, innovation and growth of Hong Kong’s virtual asset market. The 12 initiatives include establishing licensing regimes for virtual asset OTC trading and virtual asset custody services, exploring changes to the custody requirements for licensed virtual asset trading platforms, exploring a regulatory framework for professional investor-exclusive token listings and virtual asset derivative trading, and considering allowing staking and borrowing/lending services, among many other initiatives. The roadmap represents a welcome, forward-looking commitment to addressing the virtual asset market’s most pressing challenges in Hong Kong, thus encouraging digital-asset firms to set up or expand in Hong Kong. SFC.
U.S., UK, and Australia Jointly Sanction Zservers
On February 11, the U.S. Department of Treasury’s Office of Foreign Assets Control, Australia’s Department of Foreign Affairs and Trade, and the UK’s Foreign Commonwealth and Development Office jointly sanctioned Zservers, a Russia-based bulletproof hosting (BPH) provider, for its involvement with ransomware attackers, including LockBit, which notably extracted $120 million in Bitcoin from victims. BPH providers are known to sell tools to mask locations, identities, and activities online. Department of Treasury Press Release ; Cointelegraph ; Decrypt.
Dubai Virtual Assets Regulatory Authority Warns of Meme Coin Risks and Market Manipulation
On February 13, Dubai’s Virtual Assets Regulatory Authority (VARA) issued a consumer alert on the risks of investing in meme coins, citing their speculative nature, volatility, and susceptibility to market manipulation. All virtual asset activities in Dubai must comply with VARA regulations, and unauthorized promotions may face enforcement action. VARA; Cointelegraph.
Dubai Financial Services Authority Adds USDC and EURC to List of Recognized Crypto Tokens
On February 17, the Dubai’s Financial Services Authority (DFSA) expanded its list of Recognized Crypto Tokens—which currently includes Bitcoin, Ethereum, Litecoin, Toncoin and Ripple—to include the stablecoins USDC and EURC. Recognized Crypto Tokens are digital assets which can be used or transacted in the Dubai International Financial Centre. DFSA.
The UAE’s Securities and Commodities Authority Seeks Feedback on Draft Regulations for Security and Commodity Tokens
On January 22, the UAE’s Securities and Commodities Authority (SCA) published a draft regulation on security tokens and commodity tokens, inviting industry stakeholders to provide feedback. This marks a milestone in the country’s capital markets, integrating securities and commodities with modern financial technologies. The draft, which includes 18 articles, outlines issuance, trading, settlement, and compliance obligations for these tokens. SCA.

CIVIL LITIGATION

UNITED STATES

The SEC Files a Motion to Voluntarily Dismiss Dealer Rule Appeal
On February 19, the SEC filed an unopposed motion to voluntarily dismiss its appeal in the Fifth Circuit in the “Dealer Rule” case. The SEC had appealed two rulings in related cases by Judge Reed O’Connor that vacated the SEC’s Dealer Rule on the ground that the rule improperly expanded the definition of “dealer” under the Exchange Act. One of the cases was brought by the Crypto Freedom Alliance of Texas and Blockchain Association; the other was brought by the National Association of Private Fund Managers, Alternative Investment Management Association, Ltd., and Managed Funds Association. Motion to Dismiss Appeal; Crypto Freedom Alliance District Court Opinion; National Association of Private Fund Managers District Court Opinion; CoinDesk.
The FDIC Releases Documents in Response to Coinbase FOIA Request Showing FDIC Debanking of Crypto
On February 5 and February 21, in response to a FOIA lawsuit directed by Coinbase, the FDIC released 183 documents spanning hundreds of pages revealing the agency’s systematic attempts during the prior Administration to pressure banks into debanking digital-asset firms. In a statement, Acting Chairman Travis Hill stated that the documents show that banks’ requests to engage in crypto-related activities “were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence…, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity.” Hill explained that “these and other actions [by the FDIC] sent the message to banks that it would be extraordinarily difficult—if not impossible—to move forward. As a result, the vast majority of banks simply stopped trying.” Hill additionally noted that the FDIC is actively reevaluating its supervisory approach to provide a pathway for institutions to engage in such activities while still adhering to safety principles. FDIC.
The Second Circuit Rules for Uniswap in Securities Class Action Appeal
On February 26, the Second Circuit affirmed the dismissal of federal securities law claims brought against Uniswap Labs, a decentralized cryptocurrency exchange, in an April 2022 class-action lawsuit. The Second Circuit affirmed the district court’s ruling that Uniswap was not a statutory seller under Section 5 of the Securities Act because it does “not hold title to the tokens placed in the liquidity pool by third party users of the platform.” In rejecting claims under Section 29(b) of the Exchange Act, the Second Circuit said that “it ‘defies logic’ that a drafter of a smart contract, a computer code, could be held liable under the Exchange Act for a third-party user’s misuse of the platform.” The Second Circuit also remanded for the district court to consider the plaintiffs’ state-law securities claims, which Uniswap did not contest. Summary Order.

INTERNATIONAL

Ex-CEO of Crypto Exchange Wins Wrongful Dismissal Claim Against Crypto Exchange Three Fins
On February 19, the General Division of the High Court of Singapore ruled in favor of Georg Höptner, the former CEO of crypto exchange Three Fins, in a wrongful-dismissal lawsuit. Höptner was awarded nearly $2.5 million after alleging his termination was orchestrated to avoid fulfilling contractual bonus obligations. His contract stipulated a significant bonus upon completing two years or a termination bonus if dismissed without cause before that period. In October 2022, he was summarily dismissed for alleged unauthorized relocations and fund misappropriation. Judge Chua Lee Ming determined the dismissal was unjustified, noting Höptner had informed relevant parties about his relocations without objections. The court concluded the termination aimed to evade substantial bonus payments and awarded Höptner damages covering unpaid salary, allowances, notice period compensation, and the termination bonus. ICLG; Court Judgment.
Singapore Court Recognizes Terraform Labs’ Chapter 11 Liquidation Plan
On February 21, the Singapore International Commercial Court (SICC) issued a written judgment granting Terraform Labs’ application for recognition of its U.S. Chapter 11 liquidation plan and a U.S. court order confirming the plan. In reaching its decision, the SICC held that the chapeau of Art 21(1) of the UNCITRAL Model Law on Cross-Border Insolvency as adopted in Singapore gives the court an expansive and open-ended discretion to grant appropriate relief and allows the court to be guided by principles of comity and a spirit of cooperation with foreign courts. Court Judgment.
Robinhood to Launch Crypto Offerings in Singapore
Robinhood Markets Inc. plans to introduce cryptocurrency trading services in Singapore later this year, following the anticipated completion of its $200 million acquisition of European digital-assets exchange Bitstamp Ltd. The acquisition is expected to conclude in the first half of 2025, with the rollout of crypto offerings commencing shortly thereafter. Bitstamp had previously secured in-principle approval (IPA) from the Monetary Authority of Singapore to provide digital asset-related services in the country. This strategic move aims to leverage Bitstamp’s IPA, allowing Robinhood to provide a regulated crypto offering in the country and facilitating Robinhood’s broader expansion into the Asian market. Blockhead; Coindesk.

SPEAKER’S CORNER

UNITED STATES

Federal Reserve Chair Confirms the Fed Will Not Issue a CBDC
At the February 11 Senate Banking Committee meeting, Federal Reserve Chair Jerome Powell confirmed that the Fed would not issue a Central Bank Digital Currency (CBDC) during his tenure, which is scheduled to end in May 2026. This follows opposition to a CBDC from President Trump and current lawmakers due to privacy and other concerns. Cointelegraph; Senate Banking Committee.

INTERNATIONAL

Bank of England Governor: Bitcoin and Stablecoins Require Different Regulatory Approaches and UK exploring CDCS
In a Q&A session following a speech delivered on February 11 at the University of Chicago Booth School of Business, the Governor of the Bank of England, Andrew Bailey, stated that Bitcoin and stablecoins require different approaches to regulation. According to Bailey, stablecoins in particular should be regulated more stringently because they are primarily used for payments and users expect them to function like money. Governor Bailey also confirmed a central bank digital currency was still also being considered by the UK. Bank of England.

OTHER NOTABLE NEWS

CFPB Directed to Suspend Supervision Activity and Declines Future Funding
On February 9, Russell Vought, the acting head of the Consumer Financial Protection Bureau (CFPB) announced that the bureau will not be taking its next draw of funding from the Federal Reserve, signaling a wind down of CFPB operations. The CFPB was directed by Vought to stop work on proposed rules, to suspend effective dates on any rules finalized but not yet effective, and to cease all supervision and examination activity. Cointelegraph; The Associated Press; NPR.
Hackers Steal $1.5 Billion in Digital Assets from Cryptocurrency Exchange Bybit
On February 21, hackers stole approximately $1.5 billion in digital assets from Bybit’s Ethereum “cold wallet,” an offline storage system. The attackers gained control of the cold wallet and transferred over 400,000 ETH and stETH to an unidentified address. Bybit assured users that all other cold wallets are secure, that withdrawals are functioning normally, and that Bybit has more than enough assets to cover the loss and will use a bridge loan to ensure availability of user funds, if necessary. It is suspected that the hackers are connected to North Korea’s Lazarus Group. Bybit.
Standard Chartered Bank, Animoca Brands and Hong Kong Telecom Establish Joint Venture to Issue Hong Kong Dollar-Backed Stablecoin
On February 17, Standard Chartered Bank announced that it, Animoca Brands and Hong Kong Telecom have agreed to establish a joint venture with the intention to apply for a license from the Hong Kong Monetary Authority to issue an Hong Kong Dollar-backed stablecoin after the passage of the Stablecoins Bill. The Stablecoins Bill was introduced by the Hong Kong government on December 6, 2024, and proposes to introduce a licensing regime applicable to persons who issue fiat-referenced stablecoins in Hong Kong, or who issue fiat-referenced stablecoins that purport to maintain a stable value with reference to Hong Kong Dollar, or who actively market their issuance of fiat-referenced stablecoins to the Hong Kong public. Standard Chartered; Hong Kong government.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Kendall Day, Jeff Steiner, Sara Weed, Sam Raymond, Nick Harper, Amanda Goetz, Nicholas Tok, Cody Wong, and Chad Kang.

FinTech and Digital Assets Group Leaders / Members:

Ashlie Beringer, Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (+1 202.955.8256, mbopp@gibsondunn.com

Stephanie L. Brooker, Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)

Jason J. Cabral, New York (+1 212.351.6267, jcabral@gibsondunn.com)

Ella Alves Capone, Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)

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

Sébastien Evrard, Hong Kong (+852 2214 3798, sevrard@gibsondunn.com)

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

Martin A. Hewett, Washington, D.C. (+1 202.955.8207, mhewett@gibsondunn.com)

Sameera Kimatrai, Dubai (+971 4 318 4616, skimatrai@gibsondunn.com)

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

Stewart McDowell, San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)

Hagen H. Rooke, Singapore (+65 6507 3620, hhrooke@gibsondunn.com)

Mark K. Schonfeld, New York (+1 212.351.2433, mschonfeld@gibsondunn.com)

Orin Snyder, New York (+1 212.351.2400, osnyder@gibsondunn.com)

Ro Spaziani, New York (+1 212.351.6255, rspaziani@gibsondunn.com)

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

Eric D. Vandevelde, Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)

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

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

This alert provides a high-level summary of the Advisory and related considerations for participants facing potential enforcement actions.

On February 25, 2025, the Commodity Futures Trading Commission’s (the “CFTC”) Division of Enforcement (the “Division”) issued an enforcement advisory (the “Advisory”) regarding the evaluation of a company’s or an individual’s (a “Person”) self-reporting, cooperation, and remediation when recommending enforcement actions to the CFTC and setting forth the factors the Division will consider in determining proposed penalty reductions in cases involving self-reporting, cooperation, and remediation.[1] The Advisory sets out a credit-based system that the Division will use to determine appropriate penalty reductions based on a Person’s self-reporting, cooperation, and remediation in enforcement actions and investigations.[2] The Advisory replaces prior policies, including the Division’s May 2020 Enforcement Manual, and is now the sole policy of the Division.

Overview

The Advisory provides a mechanism for achieving the Division’s goals of promoting compliance with the law and ensuring accountability for those who violate the law by attempting to incentivize self-reporting, cooperation, and remediation.

Regulatory Consistency. The Advisory indicates that it is consistent with the CFTC’s broader regulatory scheme. Thus, the Division will recognize self-reports made to the pre-existing operating division, such as the Division of Clearing and Risk, the Division of Market Oversight, and the Market Participants Division, as applicable (the “Operating Division”).
Transparency. The Advisory contains tiered scales to evaluate self-reporting and cooperation (including remediation) and provides examples and explanations of activities that would fall into each tier.
Clarity. The Advisory aims to provide those who might seek a reduced penalty based on their self-reporting, cooperation, and remediation (“Mitigation Credit”) a clear understanding of the potential benefits of such activities by providing a matrix outlining the credit that may be applied to reduce a civil monetary penalty and details factors that may contribute to the recommendation of a public declination.

Self–Reporting

The Advisory indicates that Mitigation Credit may be awarded when a Person self-reports a potential violation and that the Division will apply a three-tier scale in evaluating such reporting. The factors that underlie the tier system are discussed below.

Voluntariness. The self-report must be a voluntary disclosure, rather than made on account of an imminent threat of negative enforcement action or exposure. The Division will consider the likelihood that it could have learned of the violation independently of the self-report.
Made to the CFTC. The self-report must be made to an appropriate division of the CFTC. A division will be considered appropriate if it is the primary division that is responsible for the potentially violated regulation. The Division of Enforcement is considered an appropriate division for all reports. If a potential violation relates to multiple divisions, a report to a single appropriate division will suffice. The Advisory notes that “[t]he Division, together with the Operating Divisions, will be developing a future public enforcement advisory to set forth transparent and consistent criteria for enforcement referrals by an Operating Division to the Division of Enforcement.”

Timeliness. The self-report must be prompt, considering the facts and circumstances of the potential violation.
Completeness. The disclosure must include all material information known to the Person at the time the report is made. To encourage early disclosure, the Division will consider a report to be complete if the Person made best efforts to determine relevant facts before reporting, continued to investigate, and disclosed additional relevant facts as they were identified.
Safe Harbor for Good Faith. The Division will provide a safe harbor for good-faith self-reporting if a Person voluntarily self-reports, the report is later found to be inaccurate after further investigation by the Person, the report was made in good faith, and the inaccurate information is promptly supplemented and corrected.

The Advisory contained the following chart, setting forth the self-reporting tiers and a non-exhaustive description of the self-reporting that exemplifies each tier.

Tier	Self-Reporting
Tier 1: No Self-Report	No timely self-report Self-report was information already known from other sources Self-report that was not reasonably related to the potential violation or not reasonably designed to notify the CFTC of the potential violation
Tier 2: Satisfactory Self-Report	Self-report to an appropriate division Notified the CFTC of the potential violation Did not include all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report
Tier 3: Exemplary Self-Report	Self-report to an appropriate division Notified the CFTC of the potential violation Included all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report Included additional information that assisted the Division with conserving resources in the Division’s investigation

Cooperation

The Advisory indicates that Mitigation Credit may be awarded for cooperation in the Division’s investigation and that the Division will apply a four-tier scale in evaluating such cooperation. In determining which tier to apply, the Division noted that it will consider all relevant facts and circumstances, including whether the cooperation materially assisted the investigation, whether the cooperation conserved the Division’s resources, the timeliness of the cooperation, and the quality and extent of cooperation. Other factors that the Division said that it will consider include truthfulness, specificity, credibility, completeness, reliability, and voluntariness.

However, even if a Person has cooperated with the Division, uncooperative action may offset the Mitigation Credit awarded. The Division said that it will employ a standard of objective reasonableness in evaluating whether conduct is uncooperative. Examples of conduct that may be considered uncooperative include impeding the Division’s investigation in bad faith, untimely subpoena compliance, failure to preserve material information after its discovery, and bad faith attempts to shape the testimony of a Person’s agent. Failure to self-report a violation that involves willful misconduct or abuse of a party, harm to a client, counterparty, or customer, or significant financial losses will be deemed uncooperative. Significantly, the Division indicated that the discovery of a material violation without subsequent corrective action or a self-report, as appropriate, may suggest the absence of acceptance of responsibility and could be deemed uncooperative.

The Advisory contained the following chart, setting forth the cooperation tiers and a non-exhaustive description of the cooperation that exemplifies each tier.

Tier	Cooperation
Tier 1: No Cooperation	No substantial assistance beyond required legal obligations
Tier 2: Satisfactory Cooperation	Provided substantial assistance Voluntary production of documents and information Arranging for voluntary witness interviews Basic presentations on legal and factual issues
Tier 3: Excellent Cooperation	Meet the expectations for Satisfactory Cooperation Consistently provided substantial assistance Internal investigations or reviews Thorough analysis of potential violation, root cause, and corrective action for remediation Use of internal or external expert resources and consultants as appropriate
Tier 4: Exemplary Cooperation	Meet the expectations for Excellent Cooperation Consistently provided material assistance Proactive engagement and use of significant resources Significant completion of remediation Use of accountability measures, as appropriate

Remediation

The Division will only recommend Mitigation Credit where the Operating Division, in consultation with the Division, has concluded that the potential violation and its root cause have either been remediated or that there is a remediation plan in place that is appropriate given the facts and circumstances.

In evaluating remediation, the Division will consider whether a Person has engaged in substantial efforts to prevent a future violation. Actions that will positively impact this analysis include performing a gap analysis to identify similar violations in the future, implementing an appropriate remediation plan that prevents future violation through procedural changes, personnel accountability measures, and providing the Division with an explanation as to how the remediation plan is reasonably designed to prevent a future violation.

Mitigation Credit

If a matter is eligible for Mitigation Credit for self-reporting and/or cooperation, the Advisory indicates that the Division will presumptively recommend a discount from its initial civil monetary penalty calculation based on the following matrix:

	Tier 1: No Cooperation	Tier 2: Satisfactory Cooperation	Tier 3: Excellent Cooperation	Tier 4: Exemplary Cooperation
Tier 1: No Self- Report	0%	10%	20%	35%
Tier 2: Satisfactory Self-Report	10%	20%	30%	45%
Tier 3: Exemplary Self Report	20%	30%	40%	55%

Departure from Previous Policy.

The Advisory represents a significant shift in the Division’s approach to enforcement. Previous guidance, as articulated in the Division’s 2023 Advisory Regarding Penalties, Monitors and Consultants, and Admissions in CFTC Enforcement Actions (the “2023 Advisory”) emphasized imposing penalties that would serve as strong deterrents to future violations.[3] In the 2023 Advisory, the Division expressed the view that civil monetary penalties would be seen as the rational cost of doing business if not severe enough to outweigh the potential benefit of misconduct, providing guidance on determining whether such penalties are sufficient and emphasizing the importance of admissions of fault in deterring future violations.

The Advisory evinces a departure from the adversarial approach of the 2023 Advisory in favor of a collaborative process, a shift that some in the industry have characterized as a change from “stick to carrot.”[4]

CFTC Comments

Acting Chairman Caroline D. Pham praised the policy changes, stating that the clear expectations described in the Advisory will incentivize firms to self-report and resolve cases faster with reasonable penalties and emphasized that this approach will enable the CFTC to “do more with less.”[5] However, Commissioner Kristin N. Johnson released a statement announcing her lack of support for the Advisory, expressing trepidation with respect to the departure from prior guidance and emphasizing that such changes must be consistent with the CFTC’s mandates.[6]

Conclusion

The Advisory marks a significant shift in the CFTC’s enforcement policy and provides market participants with clear information on the potential benefits of proactive self-reporting, cooperation and remediation in CFTC investigations.

[1] CFTC Press Release, CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation (Feb. 25, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9054-25.

[2] The Advisory notes that it provides only internal guidance regarding the Division’s recommendations to the CFTC and does not bind the CFTC.

[3] CFTC Press Release, CFTC Releases Enforcement Advisory on Penalties, Monitors and Admissions (Oct. 17, 2023), available here.

[4] Jessica Corso, Trump CFTC Shifts Enforcement Stance From Stick to Carrot, Law360.com (Feb. 26, 2025, 90:08 PM) available here.

[5] CFTC Press Release, CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation (Feb. 25, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9054-25.

[6] Statement of Commissioner Kristin N. Johnson on the Enforcement Advisory on Self-Reporting, Cooperation and Remediation (Feb. 25, 2025), available here.

The following Gibson Dunn lawyers prepared this update: Jeffrey Steiner, David Burns, Amy Feagles, Adam Lapidus, Hayden McGovern, and Marie Baldwin.

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

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

David P. Burns, Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)

Amy Feagles, Washington, D.C. (+1 202.887.3699, afeagles@gibsondunn.com)

Adam Lapidus, New York (+1 212.351.3869, alapidus@gibsondunn.com)

Gibson Dunn is available to help Japanese 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

トランプ大統領による中国原産輸入品への関税賦課に関する大統領令：米国による執行が日本の製造業者および輸出業者に与える影響

ギブソン・ダン法律事務所は、この大統領令およびその他の可能性のある政策変更が日本のクライアントにどのような影響を与えるか、また、変化する規制環境をどのように乗り切るかについて、日本のクライアントの皆様をサポートいたします。

2025年2月1日、トランプ大統領は「中華人民共和国における合成オピオイドのサプライチェーンに対処するための関税賦課に関する大統領令」を発令しました。この大統領令は、今後連邦官報で発表される予定の「中華人民共和国の製品であるすべての物品」に対して、10%の従価税関税を課すものです。発表された関税は、国際緊急経済権限法（IEEPA）に基づき、トランプ大統領が裁量で判断する「国家緊急事態」が終息するまで継続されます。

関税は、2024年2月4日午前12時1分（東部時間）以降、「消費を目的として輸入された、または消費を目的として倉庫から出荷された」すべての物品に適用されます。また、この関税は、トランプ政権発足時に中国からの輸入品4つのカテゴリーリストに対して課された最大50%の関税を含む、既存のすべての関税に上乗せされます。これらの関税は現在も有効であり、バイデン政権下で延長および追加され、バッテリー部品、電気自動車、半導体、鉄鋼およびアルミニウム製品など、他の分野にも適用されています。

大統領令には、具体的に対象となる品目のリストは含まれていません。詳細は、政府が連邦官報に命令を掲載するか、またはその後の連邦官報通知を掲載する際に、技術的な付属文書に記載される可能性が高いと思われます。

大統領令では、中国が独自の報復関税を課した場合、トランプ大統領は「本命令に基づき課された関税を増額または範囲を拡大することができる」と規定されています。2025年2月2日、中国の商務省はWTOに提訴し、それに対応する「対抗措置」を実施すると発表しました。これを受けて、2025年2月4日、中国財務省は、2025年2月10日より、米国からの石炭および液化天然ガスの輸入品に15%、原油、農業用機器、および特定の車両に10%の追加関税を課すことを発表しました。

さらに、2025年2月27日、トランプ大統領は、中国からの輸入品すべてに10%の追加関税を課す意向を発表しました。追加関税は、カナダとメキシコからの輸入品に予定されている25%の関税とともに、3月4日火曜日に発効する予定です。これを受けて、ワシントンD.C.の中国大使館は、中国はトランプ大統領の懸念に対処するために米国と協力していると発表しました。

関税回避に対する米国の調査環境の強化—偽証罪法

新たな関税の直接的な影響として、中国で製造または組み立てを行っている企業、あるいは中国を拠点とするサプライチェーンを持つ企業に対する規制当局の監視が強化されることが挙げられます。また、このコスト増の環境下で関税回避の疑いがある企業に対しては、米国当局が偽証法（False Claims Act、FCA）を主な執行手段として用いることになります。FCAは、虚偽の情報を提示することによる米国政府に対する金銭的義務の回避を禁じています。

また、米国司法省（DOJ）は、今後も継続してFCAの厳格な執行が期待できることを示唆しています。DOJ民事部の商業訴訟部門の副次官補であるマイケル・グランストン氏は最近、「司法省は、新政権が掲げる政府の効率化と無駄、不正、乱用の根絶という方針に沿って、今後も引き続き積極的に偽請求取締法を執行していく方針であることを明確にしたい」と述べています。グランストン氏は特に、FCAは「違法な外国貿易慣行」に対抗する「強力なツール」であると指摘し、これにはトランプ政権が発表している拡大関税体制の違反も含まれると予想しています。さらに、、FCA違反の疑いを報告した個人（現従業員および元従業員を含む）には、「キー・タム」（ラテン語の法律用語）または内部告発者による訴訟を通じて、相当額の金銭的インセンティブが提供されます。

製造、調達、または組み立ての関係の一部が中国と結びついている企業にとって、法執行措置のリスクは特に深刻です。これは、問題となる原材料、部品、および製品の仕上げに応じて、製品の原産地を決定するルールが異なるためです。例えば、日本企業が日本で完成品とみなしている商品であっても、一部に中国から調達した部品が組み込まれている場合、米国当局は、新たな執行や規制の解釈、アプローチ、優先順位を考慮して、関税目的で中国原産と判断することがあります。第三国における「実質的変更」が商品の原産地を変える可能性があることは事実ですが、米国当局は、単なる「粉飾」を目的とした積み替えに対して、ますます疑いの目を向けるようになっています。

この分野における現在進行中の積極的な調査について、私たちは認識しています。また、中国のサプライチェーンの問題が関わる数百万ドル規模のFCA和解の最近の例としては、以下が挙げられます。
1. ニュージャージー州の化学品輸入業者と中国のサプライヤーの間で関税回避の共謀があったとされる事件について、2024年3月に米国司法省が調査を行い、310万ドルの和解が成立しました。
2. 2024年1月の米国司法省による調査と300万ドルの和解金支払い。中国製自動車部品メーカーが関税を故意に支払わないようにしていたという疑惑の解決。

カナダとメキシコへの関税を同時に課す大統領令

さらに、これまで多くの日本企業を含む一部の企業が、北米自由貿易協定（NAFTA）および2020年に発効する後継協定である米国・メキシコ・カナダ協定（USMCA）を活用し、米国での立ち上げコストと比較して両国でのコスト削減を最大限に図ることを目的として、カナダやメキシコでの製造業務を推進してきましたが、2月1日付の大統領令の一環として、トランプ大統領は同時にカナダおよびメキシコ原産の製品に25%の関税を課すことを発表しました。2月4日時点で、これらの関税は30日間保留されていますが、この地域的なコスト軽減戦略は結局は阻止されるか、あるいは執行当局により厳しく精査される可能性があります。

リスクの軽減

このような新たな貿易環境を踏まえ、日本企業は関税回避に対する米国の調査環境が厳しくなっていることに留意し、バリューチェーン全体における原産地関連のコンプライアンスや記録管理プロセスを監査するなど、適切な予防措置を講じる必要があります。

それでもなお、関税回避を理由にFCA違反の可能性があるとして米当局による強制調査の対象となった場合、あるいは内部告発者からそのような不正行為を告発された場合、企業はFCA違反弁護の経験を持つ米国弁護士の支援を求めることをお勧めします。

ギブソン・ダンのFalse Claims Act / Qui Tam Defense（偽請求防止法／クイ・タム弁護）およびSanctions and Export Enforcement（制裁および輸出執行）の各業務グループは、この分野の動向を常に注視しており、日本語でのサポートを含め、FCA（偽請求防止法）および貿易関連の調査および執行措置について、日本企業の皆様に理解していただき、対応していただくためのサポートを提供しています

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)

Eli M. Lazarus – Of Counsel, White Collar Defense and Investigations Practice Group, based in our San Francisco office
(+1 415.393.8340, elazarus@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)

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.

Additionally, on February 27, 2025, President Trump announced that he intended to add an additional 10% tariff on all Chinese imports—with the additional levy to go into effect on Tuesday, March 4, alongside scheduled 25% tariffs on imports from Canada and Mexico. The Chinese Embassy in Washington, D.C. announced in response that China was working with the United States to address President Trump’s concerns.

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.

And the U.S. Department of Justice (DOJ) has indicated that continued robust FCA enforcement can be expected in the years ahead. Michael Granston, Deputy Assistant Attorney General in the Commercial Litigation Branch of DOJ’s Civil Division, stated recently that “[t]he department wants to make clear—consistent with the new administration’s stated focus on achieving governmental efficiency and rooting out waste, fraud and abuse—that the department plans to continue to aggressively enforce the False Claims Act.” Granston noted in particular that the FCA is a “powerful tool” in combating “illegal foreign trade practices,” which can be expected to include violations of the expanded tariff regime announced by the Trump administration. Additionally, 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 Japanese company may consider as finished in Japan 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 Japanese 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, Japanese 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, Eli Lazarus, Justin Lin, and Gabriela Li.

With its market-leading False Claims Act / Qui Tam Defense and Sanctions and Export Enforcement Practice Groups, Gibson Dunn continues to monitor developments in this area and is available to help Japanese clients understand and navigate FCA and trade-related investigative and enforcement actions, including with support in Japanese language.

Eli M. Lazarus – Of Counsel, White Collar Defense and Investigations Practice Group, based in our San Francisco office
(+1 415.393.8340, elazarus@gibsondunn.com)

False Claims Act/Qui Tam Defense Practice Group:

Washington, D.C.
Jonathan M. Phillips – Co-Chair (+1 202.887.3546, jphillips@gibsondunn.com)
Stuart F. Delery (+1 202.955.8515,sdelery@gibsondunn.com)
F. Joseph Warin (+1 202.887.3609, fwarin@gibsondunn.com)
Jake M. Shields (+1 202.955.8201, jmshields@gibsondunn.com)
Gustav W. Eyler (+1 202.955.8610, geyler@gibsondunn.com)
Lindsay M. Paulin (+1 202.887.3701, lpaulin@gibsondunn.com)
Geoffrey M. Sigler (+1 202.887.3752, gsigler@gibsondunn.com)
Joseph D. West (+1 202.955.8658, jwest@gibsondunn.com)

San Francisco
Winston Y. Chan – Co-Chair (+1 415.393.8362, wchan@gibsondunn.com)
Charles J. Stevens (+1 415.393.8391, cstevens@gibsondunn.com)

New York
Reed Brodsky (+1 212.351.5334, rbrodsky@gibsondunn.com)
Mylan Denerstein (+1 212.351.3850, mdenerstein@gibsondunn.com)

Denver
John D.W. Partridge (+1 303.298.5931, jpartridge@gibsondunn.com)
Ryan T. Bergsieker (+1 303.298.5774, rbergsieker@gibsondunn.com)
Monica K. Loseman (+1 303.298.5784, mloseman@gibsondunn.com)

Dallas
Andrew LeGrand (+1 214.698.3405, alegrand@gibsondunn.com)

Los Angeles
James L. Zelenay Jr. (+1 213.229.7449, jzelenay@gibsondunn.com)
Nicola T. Hanna (+1 213.229.7269, nhanna@gibsondunn.com)
Jeremy S. Smith (+1 213.229.7973, jssmith@gibsondunn.com)
Deborah L. Stein (+1 213.229.7164, dstein@gibsondunn.com)
Dhananjay S. Manthripragada (+1 213.229.7366, dmanthripragada@gibsondunn.com)

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

Sanctions and Export Enforcement Practice Group:

United States:
Matthew S. Axelrod – Co-Chair, Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)

On March 2, 2025, the Department of the Treasury issued guidance announcing that it will not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners pursuant to the Corporate Transparency Act (CTA). This guidance also announces that when the Department of the Treasury issues a proposed rulemaking regarding the CTA in the future, the rulemaking “will narrow the scope of the rule to foreign reporting companies only.”[1]

Entities that may be subject to the CTA that have not filed BOI reports should consult with their CTA advisors as necessary, now that the Department of the Treasury has announced it will suspend enforcement of the penalty provisions of the CTA and will propose amendments to the reporting rule providing that it will apply only against “foreign reporting companies.”

During litigation that temporarily enjoined enforcement of the CTA from December 2024 until February 18, 2025, the Financial Crimes Enforcement Network (FinCEN) issued guidance extending the required deadlines for companies subject to the CTA to deadline to March 21, 2025 or later.[2] On February 27, 2025, FinCEN then suspended the March 21, 2025 deadline, instead stating its intention to issue an interim final rule before March 21, 2025 that will extend beneficial ownership information (BOI) reporting deadlines for those companies required to submit such information.[3] Under the 2022 Reporting Rule that instituted the CTA, “each reporting company” – both domestic and foreign – was required to file BOI information by certain deadlines.[4]

The Department of the Treasury’s latest statement on March 2 announces that the Department will propose revisions to the reporting rule “that will narrow the scope of the rule to foreign reporting companies only.”[5] As currently defined, a “foreign reporting company” is “any entity” that is “[f]ormed under the law of a foreign country”; and “[r]egistered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.”[6]

For additional background information, please refer to our Client Alerts issued on December 5, December 9, December 16, December 24, and December 27, 2024, January 24, 2025 February 19, and February 28, 2025.

[1] https://home.treasury.gov/news/press-releases/sb0038.

[2] https://fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf.

[3] https://www.fincen.gov/news/news-releases/fincen-not-issuing-fines-or-penalties-connection-beneficial-ownership.

[4] 31 C.F.R. § 1010.380(a).

[5] https://home.treasury.gov/news/press-releases/sb0038.

[6] 31 C.F.R. 1010.380(c)(ii); see also 31 U.S.C. 5336(a)(11)(A)(ii).

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 lawyers are available to assist in addressing any questions you may have about executive orders and their implications for institutions of higher education. Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this client alert for more information.

Introduction

New Trump administration policies require colleges and universities to take careful stock of a large swath of their operations ranging from diversity, equity, and inclusion (DEI) policies and activities, to programs for which they receive federal funding, to immigration policies, to government contracts, to how they are combatting antisemitism, to their involvement with China. Here we briefly summarize the executive actions likely to most significantly affect higher education. These issues will continue to develop as the President and executive agencies implement the articulated policy agendas, and we will provide updates as warranted.

You can find more information on recent administrative actions on our Presidential Transition Hub, here.

Diversity, Equity & Inclusion

In his inauguration address, President Trump vowed to “forge a society that is colorblind and merit based” and “end the government policy of trying to socially engineer race and gender into every aspect of public and private life.” His administration has taken numerous actions since then to curb government contractors’ and grantees’ DEI programs. Colleges and universities that receive federal grant funding or that serve as government contractors should review their programs to determine any risk exposure related to DEI programs in light of the executive orders described below. They also should consider coordinating closely with their contracting and grant officers to prevent any misunderstandings. Relevant executive actions include:

Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” rescinded several executive orders, including Executive Order 11246, which imposed affirmative action obligations on federal contractors in addition to non-discrimination requirements. In place of the prior affirmative action requirements, federal contracts and grants now will be required to include (1) a clause requiring the recipient to agree that compliance “with applicable Federal anti-discrimination laws” is a “material” term of the contract or grant, and (2) a certification that the contractor or grant recipient “does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” Failure to comply with these new obligations may trigger False Claims Act liability, which can come with substantial penalties. The order also requires the Office of Federal Contract Compliance Programs to “immediately cease” “[a]llowing or encouraging Federal contractors” to engage in “workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” Finally, the order directs the Attorney General to develop a report identifying up to nine civil compliance investigations of higher education endowments over $1 billion, among other entities, and to issue guidance to “all institutions of higher education that receive Federal grants or participate in the Federal student loan assistance program … regarding the measures and practices required to comply with Students for Fair Admissions, Inc. v. President and Fellows of Harvard College.”

Executive Order 14151, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” directs agencies to review federal grantees who received funding since January 20, 2021 to advance DEI or environmental justice programs. Colleges and universities should review any programs funded by government grants to determine if any of them may be perceived as advancing DEI or environmental justice goals, including research grants.

Note that a group of higher education officials, including university diversity officers, recently sued the Trump administration to challenge these executive orders, and the U.S. District Court for the District of Maryland has preliminarily enjoined the implementation of specific provisions within these executive orders.[1]

Federal agencies have begun taking steps to implement these directives.

The Attorney General issued a memorandum stating that “the Department of Justice’s Civil Rights Division will investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” It clarifies in a footnote that the memorandum addresses programs that “discriminate, exclude, or divide individuals based on race or sex.” On the other hand, it does not prohibit observances that “celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination,” citing Black History Month and International Holocaust Remembrance Day as examples.

The Department of Education published a letter clarifying the nondiscrimination obligations of schools and other entities that receive federal funding from the Department. It criticized admissions and financial aid policies based on race, as well as programming, such as race-based graduation ceremonies and facilities. The letter states that the SFFA v. Harvard, which related to admissions decisions, applies more broadly to “prohibit[] 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.” In particular, it cautions against using students’ personal essays and extracurriculars as a “means of determining or predicting a student’s race and favoring or disfavoring such students.” It encourages reporting of any use of race by educational institutions to the Department’s Office of Civil Rights. Colleges and universities have 14 days—until February 28, 2025—to comply with the Department’s understanding of the law as described in the letter.

For more information on these and other executive actions related to DEI issues, you can find analysis by Gibson Dunn’s DEI Task Force here.

Anti-Semitism on Campus

President Trump campaigned on a promise to address antisemitism on college campuses. His administration acted upon that promise beginning with an executive order signed on Day One and followed by a host of actions taken by the White House and various agencies. Relevant executive branch actions include:

Executive Order 14188, “Additional Measures to Combat Anti-Semitism,” directs executive branch agencies to identify all civil and criminal authorities under their jurisdiction to combat anti-Semitism and encourages the Attorney General to pursue cases through the Department’s civil-rights enforcement authorities. It also directs the secretaries of State, Education, and Homeland Security to recommend ways to familiarize higher education institutions with the grounds for inadmissibility so institutions can “monitor for and report activities by alien students and staff relevant to those grounds” so that those reports lead “to investigations, and, if warranted, actions to remove such aliens.”

To advance the executive order’s purposes, on February 5, the Department of Justice released a memorandum establishing a joint task force to combat “antisemitic acts of terrorism and civil rights violations in the homeland.” The memorandum notes that the task force’s priorities include “investigating and prosecuting acts of terrorism, antisemitic civil rights violations, and other federal crimes committed by Hamas supporters in the United States, including on college campuses.”

Pursuant to the executive order, the Department of Education already has launched investigations into five universities for tolerating “widespread anti-Semitic harassment” in violation of Title XI.

In addition to these executive branch actions, Gibson Dunn expects the House Committee on Education and Workforce’s new chairman, Tim Walberg (R-MI-5), to continue to focus on college and university responses to the antisemitism on campus. On February 13, Chairman Walberg sent a letter to Columbia University requesting disciplinary records for antisemitic incidents on campus, writing, “Columbia’s continued failure to address the pervasive antisemitism that persists on campus is untenable, particularly given that the university receives billions in federal funding.”

Gender-Related Issues & Title IX

President Trump has issued several executive orders regarding gender, some of which will affect how colleges and universities are evaluated for compliance with civil rights law, including Title IX. Relevant executive actions include:

Executive Order 14168, “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” defines “sex” as “an individual’s immutable biological classification as either male or female.” The order has two main effects: (1) it directs federal agencies to enforce “the freedom to express the binary nature of sex and the right to single-sex spaces in workplaces and federally funded entities” which may lead to enforcement actions against entities that do not provide “single-sex spaces” such as bathrooms or if they take disciplinary action against employees for “express[ing] the binary nature of sex”; and (2) it directs federal agencies to ensure that funds awarded via federal grants do not promote “gender ideology.”

Executive Order 14201, “Keeping Men Out of Women’s Sports,” which directs the Secretary of Education to “prioritize Title IX enforcement actions against educational institutions [] that deny female students an equal opportunity to participate in sports and athletic events by requiring them, in the women’s category, to compete with or against or to appear unclothed before males.” The Department of Education is expected to provide guidance on how schools must alter their sports programs.

Federal Grants and Contracts

Institutions of higher education that receive federal funding should monitor Trump administration actions that may delay the release of those funds. Government delays in fulfilling funding obligations may impede institutions’ ability to operate programs that rely on federal funding.

In late January, the Office of Management and Budget issued a memorandum (before rescinding it) that some interpreted as freezing funding for all “financial assistance programs and supporting activities,” but OMB then clarified that the freeze applied only to discretionary payments for specific programs involving immigration, foreign aid, DEI programs, and gender issues that were already ordered paused via executive orders. Days after the memorandum was rescinded, a federal district judge in Washington, DC granted a temporary restraining order on behalf of the plaintiffs and ordered that the White House is “enjoined from implementing, giving effect to, or reinstating under a different name the directives in [the memorandum] with respect to the disbursement of Federal funds under all open awards” and that the White House “must provide written notice of the court’s temporary restraining order to all agencies to which [the memorandum] was addressed.”[2]

Institutions also may find that competition process for new contracts also is on hold, which may affect institutions that provide services to the federal government. The General Services Administration, the Department of Energy, and likely other executive branch agencies have halted all new contracting awards with certain exceptions.

Immigration

Recent executive orders regarding immigration policy may affect institutions of higher learning. There has been concern that such orders may lead to immigration enforcement on campuses and legal action against institutions with undocumented students or staff. The orders may also affect the ability of students and staff to enter or remain in the United States. Relevant executive actions include:

Executive Order 14159, “Protecting the American People Against Invasion,” directs the Attorney General and Secretary of Homeland Security to set immigration enforcement priorities based on public safety. The order also authorizes state and local law enforcement to perform immigration functions and to take lawful actions to ensure “sanctuary” jurisdictions do not receive federal funds.

Acting Secretary of DHS Bejamine Huffman issued a directive advancing this EO, rescinding the Biden Administration’s guidelines for immigration enforcement actions near “sensitive” areas, including schools. It is possible that immigration enforcement actions will take place on college campuses.

Executive Order 14161, “Protecting the United States from Foreign Terrorists and Other National Security and Public Safety Threats,” directs the Secretary of State to ensure that all aliens seeking admission to, or already present in, the United States are “vetted and screened to the maximum degree possible” to ensure they “do not bear hostile attitudes towards [the U.S.’s] citizens, culture, government, institution, or founding principles” or “advocate for, aid, or support designated foreign terrorists or other threats to our national security.”

For more information on these and other Executive Orders related to immigration, you can find analysis by Gibson Dunn’s Immigration Task Force here.

Vaccines

Executive Order 14214

Conclusion

The issues discussed in this client alert are rapidly evolving. Gibson Dunn’s Executive Order Tracker analyzes executive orders in real time as they are announced. Gibson Dunn lawyers are available to assist in addressing any questions you may have about executive orders and their implications for institutions of higher education. Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this client alert for more information.

[1] National Association of Diversity Officers in Higher Education v. Trump, Case 1:25-cv-00333-ABA (D. Md. Feb. 3, 2025).

[2] See National Council of Nonprofits v. Office of Management and Budget, No. 1:25-cv-00239 (D. D.C. Feb. 5, 2022).

The following Gibson Dunn lawyers prepared this update: Michael Bopp, Amanda Neely, Allonna Nordhavn, and Samantha Yi.

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

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

Eugene Scalia – Co-Chair, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.955.8673, dforrester@gibsondunn.com)

Helgi C. Walker – Co-Chair, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.887.3599, hwalker@gibsondunn.com)

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

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

Tory Lauterbach – Partner, Energy Regulation & Litigation Practice Group,
Washington, D.C. (+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)

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

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

Mylan L. Denerstein – 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)

Gibson Dunn is a leader in royalty finance, including royalty monetizations and synthetic royalty financing transactions. With an interdisciplinary team bringing together expertise in M&A, licensing, finance, intellectual property, FDA regulatory matters and tax matters, Gibson Dunn has extensive experience representing buyers and sellers of royalty entitlements, including academic institutions, biotechnology and pharmaceutical companies and royalty acquisition funds. This breadth of experience provides valuable insight and commercial perspective that can be critical to an efficient and successful royalty financing transaction.

The Gibson Dunn team has represented clients in royalty finance transactions with a total aggregate value of approximately $8 Billion. Since 2020, Gibson Dunn has completed (representing either company/seller or fund/buyer) nearly 30% of the royalty finance transactions entered into by the most active funds in the space.

As a leading firm in the royalty finance space, we are using our resources and market knowledge to compile and curate all royalty finance transactions that have occurred since January 1, 2020. If you are aware of a transaction that is not appropriately reflected below, please email GibsonDunnRoyaltyTracker@gibsondunn.com with the applicable details.

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/2/2024	Pulmokine Inc.	XOMA Royalty	Seralutinib	$20,000,000	$20,000,000
11/4/2024	KalVista Pharmaceuticals	DRI Capital	Sebetralstat	$179,000,000	$100,000,000
11/4/2024	Syndax Pharmaceuticals, Inc.	Royalty Pharma	Niktimvo (axatilimab-csfr)	$350,000,000	$350,000,000
11/1/2024	Geron Corporation	Royalty Pharma	RYTELO (imetelstat)	$125,000,000	$125,000,000
10/21/2024	Twist Bioscience Corporation	XOMA Royalty	Various early-stage programs (60+) across Twist’s Biopharma Solutions business unit	$15,000,000	$15,000,000
10/3/2024	Editas Medicine, Inc.	DRI Capital	CASGEVY	$57,000,000	$57,000,000
9/20/2024	BRAIN Biotech AG	Royalty Pharma	Deucrictibant	$140,000,000	$20,000,000
9/3/2024	Ascendis Pharma Bone Diseases A/S	Royalty Pharma	Yorvipath (palopegteriparatide)	$150,000,000	$150,000,000
7/22/2024	Valinor Pharma	Grunenthal	Movantik	$250,000,000	$250,000,000
7/17/2024	OPKO Health	HCRx	NGENLA	$250,000,000	$250,000,000
7/16/2024	Aclaris Therapeutics	OMERS	OLUMIANT (baricitinib)	$31,500,000	$26,500,000
6/28/2024	HLS Therapeutics Inc.	DRI Capital	Xenpozyme (olipudase alfa)	$45,750,000	$13,250,000
6/27/2024	Esperion Therapeutics, Inc.	OMERS	Bempedoic Acid Products, including Nilemdo® (bempedoic acid) and Nustendi® (bempedoic acid and ezetimibe)	$304,656,180	$304,656,180
5/24/2024	Agios Pharmaceuticals	Royalty Pharma	Vorasidenib	$905,000,000	$905,000,000
5/22/2024	Cytokinetics	Royalty Pharma	Omecamtiv mecarbil; CK-586	$400,000,000	$150,000,000
5/9/2024	Verona Pharma	OMERS	ensifentrine	$250,000,000	$100,000,000
5/9/2024	ImmuNext, Inc.	Royalty Pharma	Frexalimab	$525,000,000	$525,000,000
5/8/2024	Karyopharm Therapeutics Inc.	HCRx	XPOVIO (selinexor) and other future products	$49,494,864	$49,494,864
4/29/2024	Dare Bioscience	XOMA Royalty	XACIATO Ovaprene; Sildenafil	$33,000,000	$22,000,000
3/27/2024	Moderna	Blackstone	Moderna influenza Flu Products	$750,000,000	Undisclosed
3/4/2024	Heidelberg Pharma	HCRx	Zircaix (TLX250-CDx)	$115,000,000	$25,000,000
2/1/2024	Omeros	DRI Capital	Omidria	$170,000,000	$115,000,000
1/17/2024	BridgeBio Pharma	CPPIB	Acoramidis	$200,000,000	$200,000,000
1/12/2024	Talphera	XOMA Royalty	DSUVIA	$8,000,000	$8,000,000

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/29/2023	ImmunityBio	Oberland Capital	Anktiva (N-803)	$300,000,000	$200,000,000
12/15/2023	XOMA Royalty	Blue Owl Capital Corporation	Vabysmo (faricimab)	$140,000,000	$130,000,000
11/9/2023	Teva Pharmaceuticals International GmbH	Royalty Pharma	Olanzapine (including TEV-447479)	$125,000,000	$100,000,000
11/3/2023	Xencor	OMERS	Ultomiris (ravulizumab-cwvz) Monjuvi (tafasitamab-cxix)	$227,000,000	$215,000,000
10/19/2023	PTC Therapuetics	Royalty Pharma	Evrysdi	$1,500,000,000	$1,000,000,000
9/5/2023	Ascendis Pharma A/S	Royalty Pharma	Skytrofa	$150,000,000	$150,000,000
8/24/2023	Ferring Pharmaceuticals	Royalty Pharma	Adstiladrin (nadofaragene firadenovec-vncg)	$500,000,000	$300,000,000
8/22/2023	TheracosBio	HCRx	veterinary product (Bexacat™ (bexagliflozin tablets))	Undisclosed	Undisclosed
8/14/2023	Radius Pharmaceuticals, Inc.	DRI Capital	Orserdu (elacestrant)	$140,000,000	$130,000,000
8/2/2023	Lantheus Holdings, Inc.	HCRx	RELISTOR (methylnaltrexone bromide)	$103,000,000	$98,000,000
7/7/2023	S*Bio Pte Ltd	DRI Capital	VONJO (Pacritinib)	$66,000,000	$66,000,000
6/30/2023	Eisai Co., Ltd.	DRI Capital	Orserdu (elacestrant)	$85,000,000	$85,000,000
6/21/2023	LadRx Corporation	XOMA Royalty	aldoxorubicin, arimoclomol	$11,000,000	$5,000,000
6/21/2023	Sutro Biopharma, Inc.	Blackstone	Vaxcyte Inc.’s products, including VAX-24 and VAX-31	$390,000,000	$140,000,000
6/5/2023	UCLA	Royalty Pharma	Erleada	$59,000,000	$59,000,000
5/12/2023	Humacyte, Inc.	Oberland Capital	Humacyte’s Human Acellular Vessel (HAV)	$150,000,000	$40,000,000
5/12/2023	uniQure N.V.	HCRx	HEMGENIX	$400,000,000	$375,000,000
4/27/2023	DRI Capital	Sanofi	TZIELD (teplizumab-mzwv)	$310,000,000	$210,000,000
4/25/2023	Enanta Pharmaceuticals, Inc.	OMERS	MAVYRET (glecaprevir/pibrentasvir)/MAVIRET (glecaprevir/pibrentasvir)	$200,000,000	$200,000,000
3/30/2023	Aptevo Therapeutics Inc.	XOMA Royalty	IXINITY (coagulation factor IX (recombinant))	$9,650,000	$9,600,000
3/22/2023	PureTech	Royalty Pharma	KarXT	$500,000,000	$100,000,000
3/8/2023	MacroGenics, Inc.	DRI Capital	TZIELD (teplizumab-mzwv)	$200,000,000	$100,000,000
1/9/2023	Liquidia Technologies, Inc.	HCRx	YUTREPIA™ (treprostinil) other products marketed by Liquidia	$100,000,000	$32,500,000
1/9/2023	Ionis Pharmaceuticals, Inc.	Royalty Pharma	SPINRAZA® BIIB-115 Pelacarsen	$1,125,000,000	$500,000,000

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/20/2022	Atara Biotherapeutics	HCRx	Ebvallo (tabelecleucel)	$31,000,000	$31,000,000
11/28/2022	Sanofi S.A.	DRI Capital	Xenpozyme (olipudase alfa)	$56,500,000	$30,000,000
11/9/2022	Arrowhead Pharmaceuticals	Royalty Pharma	Olpasiran	$410,000,000	$250,000,000
9/30/2022	Omeros Corporation	DRI Capital	Omidria	$125,000,000	$125,000,000
9/9/2022	AnaptysBio, Inc.	DRI Capital	Zejula	$45,000,000	$35,000,000
8/8/2022	Clearside Biomedical, Inc.	HCRx	XIPERE (approved), SCS Microinjector	$65,000,000	$32,500,000
7/21/2022	Undisclosed	DRI Capital	Pegcetacoplan including EMPAVELI® /ASPAVELI®)	$24,500,000	$24,500,000
7/14/2022	Ultragenyx Pharmaceutical	OMERS	Crysvita	$500,000,000	$500,000,000
7/13/2022	Theravance Biopharma, Inc. Innoviva, Inc.	Royalty Pharma	TRELEGY ELLIPTA (Trelegy) ampreloxetine	$1,610,000,000	$1,310,000,000
6/30/2022	Blueprint Medicines	Royalty Pharma	Gavreto (pralsetinib)	$340,000,000	$175,000,000
6/29/2022	Ardelyx, Inc.	HCRx	tenapanor	$20,000,000	$10,000,000
6/16/2022	Rhythm Pharmaceuticals	HCRx	IMCIVREE® (setmelanotide)	$100,000,000	$37,500,000
5/10/2022	Zealand Pharma	Oberland Capital	Glepaglutid; and any other products of Zealand (e.g., dasiglucagon, and BI 456906)	15,000,000	(60,000,000)
3/15/2022	Eye Therapies, LLC	HCRx	Lumify	$71,000,000	Undisclosed
3/15/2022	Sanofi	Blackstone	Sarclisa (isatuximab) (subcutaneous formulation and delivery)	$300,000,000	N/A
1/7/2022	Cytokinetics Inc.	Royalty Pharma	aficamten (royalties)	$150,000,000	$50,000,000

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/31/2021	Tafamidis Holdings, LLC (a Blackstone Life Science’s portfolio company)	CPPIB	Vyndaqel and Vyndamax (Tafamidis)	$221,000,000	Undisclosed
12/13/2021	Zealand Pharma	Oberland Capital	Glepaglutid; and any other products of Zealand (e.g., dasiglucagon, and BI 456906)	$200,000,000	$100,000,000
11/19/2021	BioCryst Pharmaceuticals, Inc.	Royalty Pharma	ORLADEYO™ (berotralstat) BCX9930	$150,000,000	$150,000,000
11/19/2021	BioCryst Pharmaceuticals, Inc.	OMERS	ORLADEYO	$150,000,000	$150,000,000
9/30/2021	Galderma Laboratories, Inc.	DRI Capital	Oracea (doxycycline) Two additional undisclosed products	$46,400,000	$46,400,000
9/29/2021	Spero Therapeutics	HCRx	Tebipenem HBr (Tebi); and SPR720, SPR206 and any other products marketed by Spero	$125,000,000	$50,000,000
8/25/2021	CTI BioPharma Corp.	DRI Capital	VONJO (Pacritinib)	$85,000,000	$60,000,000
8/25/2021	ADC Therapeutics SA	HCRx	Zynlonta (loncastuximab tesirine), Cami (camidanlumab tesirine)	$325,000,000	$225,000,000
7/15/2021	Kuros Biosciences	XOMA Royalty	vidutolimod (CMP-001) (Fast Track and Orphan Drug)	$149,500,000	$7,000,000
6/23/2021	Karyopharm Therapeutics Inc.	HCRx	XPOVIO (selinexor) other Karyopharm programs, including eltanexor	$25,000,000	$60,000,000
6/15/2021	Inventor of Botox	HCRx	Botox	$40,000,000	$40,000,000
6/2/2021	MorphoSys	Royalty Pharma	Tremfya, Gantenerumab, Otilimab (Phase 3), Pelabresib, CPI-0209	$1,575,000,000	$1,425,000,000
4/8/2021	Dicerna Pharmaceuticals, Inc.	Royalty Pharma	OXLUMO (lumasiran)	$240,000,000	$180,000,000
4/1/2021	GlaxoSmithKline (GSK)	Royalty Pharma	Cabometyx, Cometriq	$392,000,000	$342,000,000
3/30/2021	Aptevo Therapeutics Inc.	HCRx	Ruxience	$67,500,000	$35,000,000
3/23/2021	Viracta Therapeutics	XOMA Royalty	DAY101 (pan-RAF kinase inhibitor) vosaroxin (topoisomerase II inhibitor)	$33,500,000	$13,500,000
2/25/2021	Akebia Therapeutics	HCRx	Vafseo (vadadustat)	$60,000,000	$45,000,000
2/15/2021	Co-Inventor of Krystexxa	HCRx	Krystexxa (pegloticase injection)	Undisclosed	Undisclosed
1/15/2021	Minerva Neurosciences, Inc.	Royalty Pharma	Seltorexant	$155,000,000	$60,000,000

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/22/2020	REGENXBIO Inc.	HCRx	Zolgensma	$200,000,000	$200,000,000
12/16/2020	Nektar Therapeutics	HCRx	ADYNOVATE, MOVANTIK, Rebinyn, and certain licensed products	$150,000,000	$150,000,000
12/8/2020	Mirum Pharmaceuticals, Inc.	Oberland Capital	Maralixibat	$200,000,000	$50,000,000
12/7/2020	BioCryst Pharmaceuticals, Inc.	Royalty Pharma	ORLADEYO™ (berotralstat), BCX9930	$125,000,000	$125,000,000
11/2/2020	Cystic Fibrosis Foundation Therapeutics	Royalty Pharma	Cystic fibrosis franchise (a collection of drugs) including Kalydeco (ivacaftor), Orkambi (lumacaftor and ivacaftor), Symdeko/Symkevi (tezacaftor and ivacaftor) and Trikafta/Kaftrio (elexacaftor, tezacaftor and ivacaftor)	$650,000,000	$575,000,000
11/2/2020	Bioasis Technologies Inc.	XOMA Royalty	four lysosomal storage disorder enzymes	$1,200,000	$1,200,000
8/15/2020	An inventor of VIMPAT	HCRx	Vimpat (lacosamide)	$308,000,000	$308,000,000
8/7/2020	Biohaven Pharmaceutical Holding Company Ltd.	Royalty Pharma	zavegepant (formerly known as vazegepant; Nurtec ODT	$250,000,000	$150,000,000
7/17/2020	PTC Therapeutics, Inc.	Royalty Pharma	Risdiplam	$650,000,000	$650,000,000
6/30/2020	Axogen, Inc.	Oberland Capital	Any products, e.g., Axogen Nerve Graft	$75,000,000	$35,000,000
6/12/2020	Medtronic plc	Blackstone	Various Insulin Delivery and Sensory Medical Devices (four undisclosed type 1 diabetes programs)	$337,000,000	N/A
6/11/2020	Agios Pharmaceuticals, Inc.	Royalty Pharma	IDHIFA (enasidenib)	$255,000,000	$255,000,000
6/10/2020	Reata Pharamaceuticals, Inc.	Blackstone	bardoxolone methyl (bardoxolone)	$300,000,000	$300,000,000
6/9/2020	AiCuris Anti-infective Cures GmbH	Royalty Pharma	Prevymis (letermovir)	$220,000,000	$220,000,000
4/10/2020	Alnylam Pharmaceuticals	Blackstone	Inclisiran	$1,000,000,000	$500,000,000
4/7/2020	Chiasma, Inc.	HCRx	Mycapssa (octreotide) and any other future products	$75,000,000	$25,000,000
3/5/2020	Massachusetts General Hospital	Royalty Pharma	Entyvio (vedolizumab)	$94,000,000	$94,000,000
2/23/2020	RedHill Biopharma	HCRx	Products (any current or future products)– e.g., Talicia, Aemcolo	$115,000,000	$30,000,000
2/21/2020	Theravance Biopharma, Inc.	HCRx	Trelegy Ellipta	$200,000,000	$200,000,000

We are pleased to provide you with the February edition of Gibson Dunn’s monthly U.S. bank regulatory update. Please feel free to reach out to us to discuss any of the below topics further.

KEY TAKEAWAYS

On February 18, 2025, President Trump signed Executive Order 14215 titled, “Ensuring Accountability for All Agencies,” in an effort to subject independent agencies, including the federal financial services regulatory agencies, to significant political control across activities including rulemaking, legal interpretations, enforcement priorities and expenditures. See our Client Alert on the Executive Order here.
Acting Chairman Hill announced that the FDIC is “actively reevaluating [its] supervisory approach to crypto-related activities,” including replacing Financial Institution Letter (FIL) 16-2022 requiring FDIC-supervised institutions to notify the FDIC prior to engaging in any crypto-related activities and “providing a pathway for institutions to engage in crypto- and blockchain-related activities.”
The federal financial services regulatory agencies’ leadership, agendas and regulatory priorities under the new administration remain in flux as leadership teams continue to take shape.
- Russell Vought, the Director of the Office of Management and Budget, was named Acting Director of the Consumer Financial Protection Bureau (CFPB) pending the confirmation of former director of the Federal Deposit Insurance Corporation (FDIC) Board, Jonathan McKernan. Almost immediately, Acting Director Vought directed CFPB staff to “stand-down.”
- Treasury Secretary Scott Bessent designated Rodney Hood, former Chairman of the National Credit Union Administration Board, as the Acting Comptroller of the Currency, pending the confirmation of Jonathan Gould. Gould was previously the Senior Deputy Comptroller and Chief Counsel of the Office of the Comptroller of the Currency (OCC).
- Acting Comptroller Hood and Acting Director Vought join Acting Chairman Travis Hill as directors of the FDIC Board, which has reached its statutory limit of three directors from the same political party. The two remaining FDIC Board seats remain vacant. Matthew Reed was promoted to Acting General Counsel of the FDIC.
- President Trump announced Brian Quintenz as his nominee for Chairman of the Commodity Futures Trading Commission (CFTC). Quintenz is a former CFTC Commissioner during the first Trump administration. Quintenz was also nominated to take the seat of Commissioner Christy Goldsmith Romero, who announced she would step down from the CFTC upon Quintenz’s confirmation, leaving Commissioner Kristin Johnson as the only Democrat on the CFTC’s five-person Commission.
- The administration has not yet announced an intent to designate anyone to the role of Vice Chair for Supervision of the Federal Reserve Board following the Federal Reserve Board’s January 6, 2025 announcement that Vice Chair for Supervision Michael Barr will step down from the position effective February 28, 2025. Recall the Federal Reserve Board’s announcement indicated that it did “not intend to take up any major rulemakings until a vice chair for supervision successor is confirmed.”

DEEPER DIVES

Russell Vought Directs CFPB Employees to “stand-down.” Russell Vought assumed the role as Acting Director of the CFPB only days after President Trump fired former CFPB Director Rohit Chopra and designated Treasury Secretary Bessent as Acting Director. As Acting Director, Bessent directed staff to halt most work and suspended the effective date of all final rules that had not taken effect, consistent with President Trump’s January 20, 2025 executive memorandum ordering “all executive departments and agencies” to implement a regulatory freeze. Upon assuming the Acting Director role, Vought expanded the freeze to cover supervision and examination activities and cut the CFPB’s next funding request to zero. In a court filing on February 24, 2025, the Justice Department stated that Vought had “made no ‘decision to eliminate the CFPB.’” On February 11, 2025, President Trump announced Jonathan McKernan as his nominee for CFPB Director.

Insights. Among the federal financial services regulatory agencies, it seems that the CFPB has been an epicenter of change during President Trump’s first month—with three different agency heads in as many weeks and two separate stop-work orders—reflecting a shift in the CFPB’s priorities. In his February 27, 2025 nomination hearing before the Senate Banking Committee, McKernan was critical of the CFPB, stating that the agency “suffers from a crisis of legitimacy” that “must be corrected.” McKernan committed to taking “all steps necessary to implement and enforce the federal consumer financial laws” by centering the CFPB’s “regulation on real risks to consumers and by focusing its enforcement on bad actors.” McKernan’s nomination as CFPB Director also clears a path for his return to the FDIC Board, where he had served as a director since January 5, 2023—McKernan would have been unable to continue to serve as a member of the FDIC Board if a member of the same political party were confirmed as CFPB Director.

President Trump Seeks to Expand Oversight of Independent Financial Regulatory Agencies. On February 18, 2025, President Trump signed Executive Order 14215 titled, “Ensuring Accountability for All Agencies.” The Executive Order (EO) requires independent regulatory agencies to “submit for review all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President before publication in the Federal Register,” as traditional executive branch agencies have done for decades. The EO also directs the Office of Management and Budget (OMB) to review agencies’ obligations for alignment with presidential priorities and “adjust such agencies’ apportionments,” requires agencies to establish a White House Liaison and regularly consult and coordinate with the White House, and provides that the President and Attorney General will provide authoritative legal interpretations for the entire executive branch. Although the EO exempts the Board of Governors of the Federal Reserve System’s (Federal Reserve) “conduct of monetary policy,” it expressly applies to the Federal Reserve’s “conduct and authorities directly related to its supervision and regulation of financial institutions.” The EO also applies to other federal financial services regulatory agencies by reference to 44 U.S.C. § 3502(5), which includes the Federal Reserve, CFTC, FDIC, the Federal Housing Finance Agency, the Securities and Exchange Commission, CFPB and the OCC. (For up-to-date information on executive orders and other significant announcements made by the new administration, please visit our Executive Order Tracker. For additional insights, please visit our resource center, Presidential Transition: Legal Perspectives and Industry Trends.)

Insights. The EO indicates that the White House intends to play an increased role in shaping financial regulatory policy by subjecting the federal financial services regulatory agencies to significant political control across activities including rulemaking, legal interpretations, enforcement priorities and expenditures. The EO’s requirement that the Attorney General interpret the law for the executive branch implies that independent agencies may need to consult with the Justice Department before issuing regulations or guidance, and potentially before taking enforcement action, which may slow the pace of agency action in both the regulatory and enforcement space. Additionally, the OMB Director’s (Russell Vought) authority to shape independent agency expenditures could allow him to order nonenforcement of regulations or defunding programs that are inconsistent with the President’s policy preferences, and shift the focus of financial regulators toward the administration’s political priorities.

Federal Bank Regulatory Agencies Revisit Crypto-Related Activities. On February 5, 2025, in conjunction with the FDIC’s announcement that it was making additional disclosure of FDIC correspondence with banks and noting “that requests from … banks [to pursue crypto- or blockchain-related activities] were [previously] almost universally met with resistance,” Acting Chairman Hill made clear that the FDIC is “actively reevaluating [its] supervisory approach to crypto-related activities,” including replacing Financial Institution Letter (FIL) 16-2022 and “providing a pathway for institutions to engage in crypto- and blockchain-related activities.” On February 12, 2025, Federal Reserve Board Governor Waller gave a speech illustrating an openness to increased bank participation in the crypto industry. In his speech, Governor Waller called for a “regulatory and supervisory framework that addresses stablecoin risks directly, fully, and narrowly” so that banks and non-banks alike can issue regulated stablecoins. He also addressed the impact of fragmentation—from a technical perspective, in use cases, and in regulatory approach—on the potential growth of stablecoins.

Insights. The federal banking agencies, with the support of Congress, have been very clearly signaling they will revisit their approach to crypto-related activities, potentially starting with addressing the permissibility of at least some of the five crypto-asset activities highlighted in the interagency policy sprint, in particular crypto custody activities; activities involving payments, including stablecoins; and the facilitation of customer purchases and sales of crypto-assets (perhaps using finder authority). The federal banking agencies also seem poised to continue to support tokenization of traditional financial assets. Increased acceptance of more forms of digital assets, blockchain-related activities and tokenization into the banking system should be met with the requisite evolution of BSA/AML programs. In addition, the historic web of U.S. federal and state (as well as non-U.S.) regulatory requirements will necessitate careful consideration to minimize friction. In that regard, this is an area where global coordination will be critical for industry participants.

OTHER NOTABLE ITEMS

Speech by Governor Bowman on Changes to Federal Reserve Supervision. On February 17, 2025, Federal Reserve Board Governor Bowman gave remarks before the ABA’s Conference for Community Bankers. In her remarks, Governor Bowman reiterated consistent themes of greater accountability and transparency in bank supervision; increased focus on safety and soundness, as opposed to operational risk; streamlined de novo banking applications; and a comprehensive review and modernization of banking laws. Specifically, she noted that “non-core and non-financial risks” like information technology, operational risk, internal controls and governance have been “over-emphasized” and, while important, “should not drive the overall assessment of a firm’s condition,” particularly “at the expense of more material financial risks.” According to Governor Bowman, where those non-core non-financial risks are over-emphasized, it creates an “odd mismatch between financial condition and overall supervisory condition.”

Speech by Vice Chair for Supervision Barr on Risks and Challenges for Bank Regulation and Supervision. On February 20, 2025, Vice Chair for Supervision Barr gave a speech titled “Risks and Challenges for Bank Regulation and Supervision.” In somewhat contrasting remarks to those of Governor Bowman, Vice Chair for Supervision Barr outlined seven specific risks that he foresees ahead: “(1) maintaining and finishing post-financial crisis reforms; (2) maintaining the credibility of the stress test; (3) maintaining credible, consistent supervision; (4) encouraging responsible innovation; (5) addressing cyber and third-party risk; (6) risks in the nonbank sector; and (7) climate risk.”

Federal Reserve and OCC Release 2025 Stress Test Scenarios. On February 5, 2025, the Federal Reserve released its 2025 stress test scenarios. Consistent with its December 23, 2024 announcement and the December 24, 2024 suit challenging the legality of the current the stress testing framework, the Federal Reserve indicated in its announcement that it plans intends to “take steps soon to reduce the volatility of stress test results and begin to improve model transparency in the 2025 stress test” and “begin the public comment process on its comprehensive changes to the stress test this year.” The Federal Reserve also released two hypothetical elements to explore “how banks would react to credit and liquidity shocks in the non-bank financial institution sector during a severe global recession.” On February 13, 2025, the OCC announced the release of economic and financial market scenarios for use in the upcoming stress tests for covered institutions. This year’s baseline scenario features moderate economic growth; the severely adverse scenario considers the impact of an increase in “the U.S. unemployment rate [of] nearly 5.9 percentage points, to a peak of 10 percent,” accompanied by severe market volatility and a collapse in asset prices, including a 33% decline in home prices and a 30% decline in commercial real estate prices.

FDIC Abandons Defense of Administrative Law Judges. On February 24, 2025, the FDIC filed a notice in the United States District Court for the District of Kansas stating that the FDIC will not continue to defend the use of administrative law judges under 5 U.S.C. § 7521 in that case. CBW Bank (CBW) had sought declaratory and injunctive relief from the FDIC on the basis that the FDIC’s administrative proceeding against CBW was unlawful. In its notice, the FDIC stated that the decision was based on the Acting Solicitor General’s decision that “the multiple layers of removal restrictions for administrative law judges in 5 U.S.C. § 7521 do not comport with the separation of powers and Article II.” The FDIC is still seeking dismissal of the case on other grounds. The case is CBW Bank v. FDIC, 2:24-cv-02535.

FDIC Seeks to Modernize Customer Identification Program (CIP) Requirements. On February 7, 2025, Acting Chairman Hill sent a letter to FinCEN urging FinCEN to “align” CIP requirements “with modern financial services practices.” Acting Chairman Hill’s letter notes that fintechs often collect only the last four digits of a customer’s social security or tax identification number from the customer while requesting the rest of the identifiers from a trusted third party, and proposes that banks should be able to onboard customers in a similar fashion.

Chair Powell Addresses Basel III During Semiannual Monetary Policy Report. On February 11, 2025, Chair Powell testified before the Senate Banking Committee. Responding to questions from the Committee, Chair Powell reiterated the Federal Reserve’s commitment to working with new FDIC and OCC leadership towards “completing Basel III Endgame” “fairly quickly,” noting that he expects that the final rule’s top-line number will be “somewhere in [the] area” of capital neutral because “Basel III was not supposed to be an exercise in raising capital in U.S. banks.” In his testimony, Chair Powell revealed that the Federal Reserve is removing the concept of “reputational risk” as a factor in the manual utilized by the Federal Reserve for account access for master accounts.

Speeches by Governor Bowman on Bank Regulation and Supervision. On February 5, 2025 and February 11, 2025, Federal Reserve Board Governor Bowman gave a speech titled “Bank Regulation in 2025 and Beyond.” In her speech, Governor Bowman outlined her views of bank regulation and supervision in 2025. She emphasized the importance of (1) tailoring both a regulatory and supervisory approach based on a firm’s size, business model, risk profile and complexity, (2) a “problem-focused approach” to regulation and (3) innovation in the bank system. As examples of “problems” warranting regulatory changes, Bowman cited the erosion of U.S. Treasury market liquidity, the lack of transparency in stress testing and an increase in check fraud.

Speech by Vice Chair for Supervision Barr on Crisis Management. On February 25, 2025, Vice Chair for Supervision Barr gave a speech titled “Managing Financial Crises.” In his speech, Barr reflected on strategies employed in the spring of 2023 when SVB and Signature Bank failed and outlined five key principles for managing a financial crisis: (1) the response must be forceful enough to convince the market and public of the will to overcome the crisis; (2) a response must be proportionate so that it does not suggest conditions are worse than perceived; (3) leaders need to made decisions despite high levels of uncertainty; (4) the response must be clearly communicated, both internally and to the public; and (5) crisis responders must remain accountable for their decisions.

Speech by Governor Bowman on Community Banking. On February 27, 2025, Federal Reserve Board Governor Bowman gave a speech titled “Community Banking.” In her speech, Governor Bowman touched on familiar themes affecting community banks, among others that “overregulation and unnecessary rules and guidance imposed on smaller and community banks create disproportionate burdens on these banks, eventually eroding the viability of the community banking model.”

Speech by Governor Barr on Artificial Intelligence. On February 18, 2025, Vice Chair for Supervision Barr gave a speech titled “Artificial Intelligence: Hypothetical Scenarios for the Future.” In his speech, Vice Chair for Supervision Barr addressed how banks and bank regulators can best harness the benefits of AI while minimizing the risks and highlighted the importance of (1) institutions and regulators understanding AI, (2) remaining agile and flexible, (3) monitoring any concentration in economic and political power that results from the development of AI, (4) deliberately setting up AI governance, (5) monitoring the risk introduced in finance, and (6) monitoring how AI, and its adoption at nonbanks and banks, alters the banking landscape.

Congress Continues to Investigate Debanking. On February 5 and 6, 2025, the Senate Banking Committee and House Financial Services Subcommittee on Oversight and Investigations held further hearings on debanking.

FDIC Updates Public Report of PPE Notices. On February 19, 2025, the FDIC updated the public list of companies that have submitted notices for a primary purpose exception under the FDIC’s brokered deposit rule. Although the FDIC had originally committed to updating the public list, it had done so only rarely since it was created in 2022.

OCC Announces Withdrawal from Global Regulatory Climate Change Group. On February 11, 2025, the OCC announced its withdrawal from the Network of Central Banks and Supervisors for Greening the Financial System, stating that its participation “extends well beyond the OCC’s statutory responsibilities and does not align with [its] regulatory mandate.” The OCC announcement follows similar announcements by the Federal Reserve on January 17, 2025 and the FDIC on January 21, 2025.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Ro Spaziani, and Rachel Jackson.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work or any of the member of the Financial Institutions practice group:

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

Ro Spaziani, New York (212.351.6255, rspaziani@gibsondunn.com)

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

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

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

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

Ella Capone, Washington, D.C. (202.887.3511, ecapone@gibsondunn.com)

Sam Raymond, New York (212.351.2499, sraymond@gibsondunn.com)

Rachel Jackson, New York (212.351.6260, rjackson@gibsondunn.com)

Zack Silvers, Washington, D.C. (202.887.3774, zsilvers@gibsondunn.com)

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

Nathan Marak, Washington, D.C. (202.777.9428, nmarak@gibsondunn.com)

From the Derivatives Practice Group: The CFTC Division of Enforcement has issued an advisory opinion that explains how the Division will evaluate a company’s or individual’s self-reporting, cooperation, and remediation when recommending enforcement actions to the Commission.

New Developments

CFTC Commissioner Christy Goldsmith Romero to Step Down from the Commission and Retire from Federal Service. On February 26, Commissioner Christy Goldsmith Romero announced she is stepping down from the Commission and will retire from federal service. Commissioner Romero extended gratitude towards President Biden for her nomination, the U.S. senate for its unanimous confirmation, and her current and former staff and CFTC for their public service. [NEW]
CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation. On February 25, the CFTC’s Division of Enforcement issued an Advisory on how the Division will evaluate a company’s or individual’s self-reporting, cooperation, and remediation when recommending enforcement actions to the Commission and establishes the factors the Division will consider. This marks the first time the Division will use a matrix to determine the appropriate mitigation credit to apply. Commissioner Kristin N. Johnson released a statement that “any effort to adopt new reporting processes, particularly processes that require inter-division guidelines and infrastructure, must be consistent with the mandates of [the CFTC]” and consequently, that she does not support the Advisory. [NEW]
SEC Announces Cyber and Emerging Technologies Unit to Protect Retail Investors. On February 20, the SEC announced the creation of the Cyber and Emerging Technologies Unit (“CETU”). According to the SEC, CETU will focus on combatting cyber-related misconduct and is intended to protect retail investors from bad actors in the emerging technologies space. CETU, led by Laura D’Allaird, replaces the Crypto Assets and Cyber Unit and is comprised of approximately 30 fraud specialists and attorneys across multiple SEC offices. The SEC noted that CETU will utilize the staff’s substantial fintech and cyber-related experience to combat misconduct as it relates to securities transactions in the following priority areas: fraud committed using emerging technologies, such as artificial intelligence and machine learning; use of social media, the dark web, or false websites to perpetrate fraud; hacking to obtain material nonpublic information; takeovers of retail brokerage accounts; fraud involving blockchain technology and crypto assets; regulated entities’ compliance with cybersecurity rules and regulations; and public issuer fraudulent disclosure relating to cybersecurity.
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.
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 Developments Outside the U.S.

IOSCO concludes Thematic Review on Technological Challenges to Effective Market Surveillance. On February 19, IOSCO published a Thematic Review on the status of implementation of its recommendations on Technological Challenges to Effective Market Surveillance issued in 2013. The IOSCO Assessment Committee conducted the review and assessed the consistency of outcomes arising from the implementation of its recommendations by market authorities in 34 IOSCO member jurisdictions. According to IOSCO, the review found that most market authorities have implemented the recommendations and have made significant progress in addressing technological challenges to market surveillance, particularly in more complex markets. However, IOSCO noted the following concerns: some regulators lack the necessary organizational and technical capabilities to conduct effective surveillance of their markets in the midst of rapid technological developments; the absence of regular review of the surveillance capabilities of market authorities; difficulties with regard to the collection and comparison of data across venues in markets with multiple trading venues; and the inability of many regulators to map their cross-border surveillance capabilities.
ESMA Proposes Guidelines on Product Supplements. On February 18, ESMA published a Consultation Paper (“CP”)asking for input on Guidelines on supplements that introduce new types of securities to a base prospectus. The aim of the guidelines is to harmonize the supervision of so-called ‘product supplements’ across national competent authorities as approaches to supervision in this area have diverged in the past. [NEW]
The ESAs Provide a Roadmap Towards the Designation of CTPPs under DORA. On February 18, the European Supervisory Authorities (“ESAs”) announced advancements of the implementation of the pan-European oversight framework of critical Information and Communication Technology (“ICT”) third-party service providers (“CTPPs”) with the objective to designate the CTPPs and to start the oversight engagement this year. The competent authorities are required to submit Registers of Information on ICT third-party arrangements they received from financial entities by April 30, 2025. [NEW]
ESMA Consults on the Criteria for the Assessment of Knowledge and Competence Under MiCA. On February 17, ESMA launched a consultation on the criteria for the assessment of knowledge and competence of crypto-asset service providers’ (“CASPs”) staff giving information or advice on crypto-assets or crypto-asset services. ESMA is seeking stakeholder inputs about, notably: the minimum requirements regarding knowledge and competence of staff providing information or advice on crypto-assets or crypto-asset services; and organizational requirements of CASPs for the assessment, maintenance and updating of knowledge and competence of the staff providing information or advice. ESMA said that the guidelines aim to ensure staff giving information or advising on crypto-assets or crypto-asset services have a minimum level of knowledge and competence, enhancing investor protection and trust in the crypto-asset markets.  ESMA indicated that it will consider all comments received by April 22, 2025.
ASIC Updates Technical Guidance on OTC Derivative Transaction Reporting. The Australian Securities and Investments Commission (“ASIC”) has updated its technical guidance on OTC derivatives reporting under ASIC Derivative Transaction Rules (Reporting) 2024. The guidance includes ASIC’s observations on, and the industry’s experience with, reporting under the 2024 rules since their commencement on October 21, 2024. It also responds to the industry’s requests for additional clarifications. The key updates include: emphasizing reporting entities’ responsibilities to create unique product identifier codes for accurate reporting; recognizing circumstances when ‘effective date’ and ‘event timestamp’ are reported on a back-dated basis; and clarifying certain aspects of ‘block trade’ reporting. The updated technical guidance is available on ASIC’s derivative transaction reporting webpage.
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.
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.
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.
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.
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.

New Industry-Led Developments

ISDA and FIA Response to IOSCO on Pre-Hedging Consultation. On February 21, ISDA and FIA responded to the International Organization of Securities Commissions (“IOSCO”)’s consultation report on pre-hedging. In the response, the associations highlight that an appropriate, consistent and well-understood framework for pre-hedging is important for safe and efficient markets. The associations also noted the importance of not cutting across existing industry codes, including the FX global code, the precious metal code and the Financial Markets Standards Board’s standard for large trades, as market participants already have policies, procedures and institutional frameworks in place to comply with them. [NEW]
ISDA and AFME Response to FCA on Transparency of Enforcement Decisions. On February 17, ISDA and the Association for Financial Markets in Europe (“AFME”) responded to the UK Financial Conduct Authority’s (“FCA”) consultation on greater transparency of enforcement decisions. The FCA’s proposal, which gives it the ability to publicly name firms at the start of an investigation, continues to cause trepidation across the industry. In the response, ISDA and AFME highlight concerns that the current proposals are harmful to UK competitiveness and growth and suggest a broader interpretation of the existing exceptional circumstances test could be used to meet the FCA’s objectives. [NEW]
ISDA Responds to FCA on Improving the UK Transaction Reporting Regime. On February 14, ISDA submitted a response to the FCA’s discussion paper (DP) 24/2 on improving the UK transaction reporting regime. In the response, ISDA indicated its support for the use of the unique product identifier in place of the international securities identification numbering system. ISDA also highlighted its opinion on the importance of aligning to global standards and similar reporting regimes, reducing duplicative reporting and using existing technology and data standards, such as the Common Domain Model and ISDA’s Digital Regulatory Reporting initiative.

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

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)

The First Omnibus Package proposes to scale back sustainability reporting obligations under the CSRD as well as due diligence obligations under the CSDDD. According to the European Commission, it aims to prevent regulatory uncertainty, avoid unnecessary compliance costs, and provide companies with a clear, realistic and manageable path towards transition, which meets their sustainability obligations.

Since the announcement by the President of the European Commission, Ursula von der Leyen, on November 8, 2024, of a “drasti[c] reduc[tion] [of] administrative, regulatory and reporting burdens” in the EU, there has existed persistent speculation about a potential reform. In particular, there have been questions as to what proposals the European Commission might make to amend two of the European Union’s flagship Sustainability Directives: the Corporate Sustainability Reporting Directive (CSRD)[1] and the Corporate Sustainability Due Diligence Directive (CSDDD)[2], both of which we have previously reported on here and here, as well as here. This week, on February 26, 2025, the European Commission presented its proposal in the form of the “First Omnibus Package”.[3]

In this client alert, we set out our initial analysis of the proposed amendments in the First Omnibus Package and the implications for in-scope businesses. We consider proposed amendments to (i) CSRD Reporting; and (ii) to the CSDDD obligations and enforcement regime.

As the legislative process unfolds, we will continue to monitor and report on any new developments.

1. Executive Summary

The First Omnibus Package is split into two separate proposals: (i) a Postponement Directive[4] to delay certain reporting obligations and due diligence obligations, and (ii) an Amendment Directive[5] to revise key elements of the EU’s sustainability reporting and due diligence frameworks.

The European Commission’s proposals must still be submitted to the European Parliament and the Council as part of the ordinary legislative process (Level 1 legislation).

It is expected that the Postponement Directive is less controversial and, therefore, likely to be adopted faster to ensure that companies are not required to implement reporting or due diligence obligations that may potentially soon be revised or lifted. This is highlighted in Article 3 of the Postponement Directive which requires the Member States to adopt laws implementing the Directive into force by December 31, 2025.

The Amendment Directive, in contrast, will most likely cause lengthy negotiations. It seeks to adjust the CSRD’s scope, reporting requirements, and assurance obligations and narrows the due diligence measures required under the CSDDD to reduce complexity and improve consistency with other EU legislation.

Overall, the most significant changes proposed by the First Omnibus Package, compared with the original texts, are as follows:

CSRD Reporting

For the CSRD, entry into application is generally postponed by two years (except for public interest entities to which it already applies for financial year 2024), i.e. applying first to reporting on financial years 2027 (in 2028) onwards. Furthermore, an additional requirement of 1,000 employees is supposed to reduce the in-scope undertakings by approx. 80 %. The threshold for reporting on non-EU parent companies is increased to a net turnover of EUR 450 million of these non-EU companies in the EU.
It is further proposed to significantly reduce the data points under the EU Sustainability Reporting Standards (ESRS). Also, no additional sector-specific reporting standards shall be adopted.
Taxonomy reporting is limited to undertakings with an EU net turnover exceeding EUR 450 million and more than 1,000 employees, also expected to result in a reduction of in-scope undertakings by approximately 80 %. Also, the reporting templates shall be drastically simplified, leading to a reduction of data points by almost 70 %.

CSDDD

For the CSDDD, entry into application will be postponed by one year, i.e. it shall apply to the first group of companies mid-2028. The in-scope companies remain unchanged.
With explicit reference to the German Supply Chain Due Diligence Act (SCDDA) as an example, due diligence obligations are significantly reduced. In particular, they will generally be limited to companies’ own operations and direct business partners, unless there is “plausible information” suggesting adverse impacts by indirect business partners.
There is no longer a (harmonized) requirement that a company can be held liable for damages in case of non-compliance with the CSDDD, but the various national civil liability regimes shall apply.
Also, the original obligation for EU Member States regarding representative actions by trade unions or NGOs is revoked.
Obligations regarding Climate Transition Plans will be limited to an adoption; to “put into effect” is no longer required.

The proposed amendments in the First Omnibus Package first and foremost will most probably give enterprises more time to prepare for CSRD reporting and CSDDD compliance. It is, however, too early to rely on the proposed amendments in substance. Generally, it can be expected that CSRD and taxonomy reporting requirements will be substantially reduced. While it will make sense to monitor the new definition of in-scope entities, the substantive reporting requirements are still subject of further discussion. Regarding CSDDD, companies should not overlook the fact that the remaining obligations will still involve considerable effort and require thorough preparation until the implementation of the CSDDD. Companies subject to already existing supply chain laws in countries such as Germany and France, can attest to the extensive demands these obligations impose.

2. CSRD Reporting

The proposed amendments in the First Omnibus Package will significantly change when and to what extent companies need to disclose information in the context of the CSRD, including which companies will be required to report. In the following, we (a) will discuss changes in the area of sustainability reporting; (b) changes regarding taxonomy disclosures; and (c) will address the implications of conflicts between the suggested amendments and already transposed legislation in the EU Member States.

(a) Proposed Amendments relating to Sustainability Reporting

The First Omnibus Package proposes amendments to the CSRD, the Directive on the Annual Financial Statements, Consolidated Financial Statements and Related Reports of Certain Types of Undertakings (Accounting Directive)[6], and the Directive on Statutory Audits of Annual Accounts and Consolidated Accounts (Audit Directive)[7]. These amendments will significantly change the requirements for sustainability reporting companies have to adhere to.

Two-Year Delay for Companies to Start Reporting, No Retroactive Effect for PIEs Reporting in 2025

The Commission’s Postponement Directive proposes a two-year delay for companies that are not yet obliged to report under the CSRD.

This affects large undertakings and parent undertakings of a large group not classified as public interest entities (PIEs) which would have reported for the first time in 2026 for the financial year 2025. Under the Postponement Directive, their reporting obligation will not start until 2028 for financial years beginning on or after January 1, 2027 (“second wave entities”).
It also applies to listed small and medium-sized enterprises (SMEs), originally set to report for the financial year 2026, whose reporting will be deferred to financial years starting in 2028 (“third wave entities”).
Notably, however, this delay does not affect companies already subject to CSRD reporting obligations, such as public interest entities reporting for the first time this year for financial years starting in 2024 (“first wave entities”).
Furthermore, the European Commission has not proposed delaying reporting obligations regarding non-EU ultimate parent undertakings under Article 40a Accounting Directive.

Significant Reduction of Scope of Application

As part of its Amendment Directive, the Commission proposes to significantly narrow the scope of the CSRD. The reporting obligation is now limited to large companies or the parent company of a large group with more than 1,000 employees and either a net turnover of more than EUR 50 million or a balance sheet total of more than EUR 25 million. As a result, around 80 % of companies previously expected to be in scope will no longer be subject to mandatory sustainability reporting. This major shift excludes large undertakings with up to 1,000 employees (including PIEs from the first wave and large companies from the second wave) as well as all listed SMEs (previously part of the third wave). By eliminating the distinction between listed and non-listed undertakings, the proposal aligns with the Capital Markets Union’s goal of enhancing the attractiveness of EU-regulated markets as a financing source. Notably, the exclusion of large PIEs is part of the Amendment Directive and not the Postponement Directive, thus unlikely creating a retroactive effect for companies already reporting this year (namely large undertaking public interest entities with more than 500 employees).

With regard to reporting on non-EU ultimate parent companies, the new Article 40a of the Accounting Directive raises the net turnover threshold for non-EU undertakings from EUR 150 million to EUR 450 million, increases the EU branch threshold from EUR 40 million to EUR 50 million, and limits the requirement to report on their ultimate non-EU parent to large subsidiary undertakings as defined in the Amendment Directive.

The previously leaked proposal to raise the net turnover threshold for EU undertakings to EUR 450 million was scrapped in the official draft. Instead, the revised scope locks in the existing thresholds, while adding a 1,000-employee requirement. As the Commission states, “this revised threshold would align the CSRD more closely with the CSDDD“, signaling a decisive move toward streamlining EU sustainability regulations and drastically narrowing the number of affected companies.

Voluntary Reporting Standards and Strengthened Value-Chain Cap

As part of its Amendment Directive, the Commission introduces a new voluntary reporting standard for companies no longer subject to mandatory CSRD reporting. Based on the voluntary sustainability reporting standard for non-listed micro, small and medium enterprises (VSME) by EFRAG, these new standards will be adopted as a delegated act, with a Commission recommendation to follow soon.

The Commission also envisioned the new standards to act as a shield for companies no longer in scope of the CSRD (e.g. companies with up to 1,000 employees) that are part of the value chain of a reporting entity. When reporting on their value chain, companies may not request information beyond that described in the new voluntary reporting standards. This way, the European Commission hopes to substantially reduce the trickle-down effect.

It should be noted, however, that the Delegated Act to provide for these standards will not be adopted until after the Amendment Directive enters into force. Drafting the VSME, for example, took about two years due to public consultation. Therefore, while a delegated act as a non-legislative level 2 instrument is not as time-consuming as a Level 1 legislative act, there is a possibility that the new standards will not enter into force until 2028. By then, large in-scope companies are already required to publish their sustainability statements.

Further Simplifications and Cost Reductions

The Amendment Directive introduces several additional measures to ease reporting burdens under the current legal regimes. One important measure is the planned revision of the European Reporting Standards (ESRS) to substantially reduce the number of required data points and improve consistency across EU legislation, at the latest six months after the entry into force of the Amendment Directive. While a revision is likely less time-consuming than a new draft, it can be expected that the European Commission will need at least 1.5 years to finalize the legislative process for the respective delegated act. Nevertheless, we expect the revision to significantly limit the reporting burden on companies.

Additionally, the Amendment Directive eliminates the Commission’s empowerment to adopt sector-specific reporting standards, preventing an increase in prescribed data points for reporting undertakings and ending a state of uncertainty as these standards were meanwhile delayed.

Another significant simplification with a crucial impact on reporting costs is the removal of the reasonable assurance standard whose adoption was initially envisaged for 2028. In addition, instead of a binding obligation to adopt sustainability assurance standards by 2026, the European Commission will issue targeted assurance guidelines, allowing for a more flexible response to emerging issues and avoiding unnecessary compliance burdens.

(b) Proposed Amendments to Taxonomy Reporting

While the proposed directives do not provide for explicit changes to the EU Taxonomy Directive, the Omnibus proposal does provide for changes to the Accounting Directive and the Taxonomy Delegated Regulations which will affect the EU Taxonomy reporting requirements.

Mandatory Taxonomy Reporting Thresholds

The proposal introduces a new threshold for mandatory taxonomy reporting. Only large undertakings with an EU net turnover exceeding EUR 450 million and more than 1,000 employees will be required to report their alignment with the EU Taxonomy. This change is expected to result in approximately 80 % of companies no longer being required to report their alignment against the EU Taxonomy. The significant reduction in the number of companies subject to mandatory reporting aims to alleviate the compliance burden on smaller and mid-sized enterprises.

Simplification of the Reporting Templates

The European Commission plans to amend the Taxonomy Disclosures Delegated Act and the Taxonomy Climate and Environmental Delegated Acts to drastically simplify the reporting templates. This simplification will lead to a reduction of data points by almost 70 %, significantly easing the reporting burden for companies. Furthermore, companies will be exempt from assessing the taxonomy-eligibility and alignment of their economic activities that are not financially material for their business, such as those not exceeding 10 % of their total EU turnover, capital expenditure, or total assets. This targeted materiality approach – similar to the reporting approach under the ESRS – ensures that companies focus their reporting efforts on the most relevant and impactful areas of their business.

Voluntary Taxonomy Reporting for large Companies below Threshold

For large companies that have more than 1,000 employees but an EU net turnover below EUR 450 million, the proposal prescribes voluntary taxonomy reporting. These companies will not be obligated to report their alignment with the EU Taxonomy but may choose to do so if they find it beneficial. This voluntary approach allows companies to communicate their sustainability efforts without the pressure of mandatory disclosures, potentially attracting investments by showcasing their progress towards sustainability goals.

Partial Taxonomy-Alignment Reporting

The proposal also introduces the option for companies that have made progress towards sustainability targets but only meet certain EU Taxonomy requirements to voluntarily report on their partial taxonomy-alignment. This flexibility is designed to encourage companies to disclose their sustainability efforts even if they do not fully meet all the criteria of the EU Taxonomy. The Omnibus proposal mandates the European Commission to develop delegated acts to ensure standardization in terms of the content and presentation of this partial alignment reporting, providing clear guidelines for companies to follow.

Simplification of the “Do No Significant Harm” Criteria

Lastly, the Commission seeks to simplify the most complex “Do No Significant Harm” (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals. These criteria apply horizontally to all economic sectors under the EU Taxonomy. The proposed simplifications aim to make it easier for companies to comply with the DNSH requirements without compromising environmental standards. The public consultation invites stakeholders to provide feedback on two alternative options for simplifying these criteria, ensuring that the final amendments reflect the needs and concerns of the business community.

(c) Conflict with Already Transposed Member States Legislation

Certain EU Member States (Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Sweden) have already transposed the current version of the CSRD, thereby implementing the “old” thresholds, reporting requirements and timelines. We provide regular updates on the status of transposition of the CSRD in our monthly ESG Updates. This raises the question whether companies in these jurisdictions have to comply with the current version of CSRD legislation. Technically, these laws apply, and Member States are, in principle, not prevented from introducing stricter requirements than those provided for by an EU Directive.

However, we would expect that, as a first step, the reporting obligations for all entities other than public interest entities will be suspended before they come into effect under the Postponement Directive. As stated above, we expect that the Postponement Directive will be adopted rather quickly. Article 3 of that Directive requires Member States to implement laws necessary to comply with the two-year delay before December 31, 2025, i.e., before the reporting obligations for any undertakings and groups other than public interest entities apply. Even if national legislators fail to transpose the Postponement Directive in time, we would expect that national authorities will refrain from enforcing the requirements under the current CSRD laws against such entities with a view to the discussion on the Omnibus proposal.

Regarding the scope of sustainability reporting for already in-scope public interest entities, the assessment is less straight forward. The proposed changes to the scope of application, the reporting requirements and other substantial issues are covered in the Amendment Directive which is expected to take more time until it enters into force. There is no clear answer as to how EU Member States will handle this issue. While they could decide to refrain from enforcing reporting obligations until the Amendment Directive has been approved, it is also possible for them to insist on compliance with their national laws until that date.

In this context, it should also be noted that some EU Member States already have imposed more strict reporting requirements, opting for so-called “gold-plating” in the area of sustainability reporting. Therefore, it is possible that after the Amendment Directive enters into force, some EU Member States will require more detailed reporting than stipulated at EU level. However, we consider this risk to be low in light of the strong resistance from EU Member States, e.g. Germany, France and others who have warned of too much bureaucracy and an unreasonable reporting burden on companies and explicitly supported the European Commission’s plan to simplify sustainability reporting.

3. The CSDDD

While there are many proposed changes with respect to the CSDDD, as outlined below, the companies defined as “in scope” have remained the same, i.e. there have been no changes to the thresholds. We note, however, that it is proposed to delete the review clause on inclusion of financial services in the scope of the CSDDD.

CSDDD’s extraterritorial reach to U.S. based companies has recently been challenged in a letter signed by several members of the U.S. House of Representatives to the U.S. Treasury Secretary and Director of the National Economic Council and may become a negotiating topic in U.S.-EU trade negotiations.

(a) Proposed Amendments to the CSDDD

Postponement of Application for One Year

According to the proposed Postponement Directive the deadline for EU Member States to transpose the CSDDD into national law will be postponed by one year to July 26, 2027. Consequently, the first entry into application of the CSDDD obligations will also start one year later, on July 26, 2028. In other words, there will no longer be a separate timeline for entry into application for the largest EU and non-EU companies as originally foreseen:

Narrowing the Scope in Companies’ Supply Chains

Explicitly inspired by the German SCDDA, obligations in the supply chain will be narrowed, to companies’ own operations and direct business partners. Companies will only be required to assess adverse impacts of indirect business partners if there is “plausible information” suggesting that adverse impacts have arisen or may arise there. Without such knowledge, an in-scope company will not be obliged to proactively review the supply chain further downstream. The European Commission explains that this change “[r]eliev[es] companies from the obligation to systematically conduct in-depth assessments of adverse impacts that occur or may occur in often complex value chains at the level of indirect business partners …”.[8]

In connection with limited obligations in the supply chain, the Amendment Directive also proposes to limit the information that in-scope companies may request from their SME and small midcap business partners (i.e. companies with less than 500 employees) to the information specified in the CSRD voluntary sustainability reporting standards.

Further, the reduction of obligations within the supply chain is also reflected in the proposed amendments to stakeholder engagement. Companies will be able to limit their engagement to “relevant” stakeholders in certain areas of the due diligence process, i.e. with workers, their representatives and individuals and communities whose rights or interests are or could be directly affected by the products, services and operations of the company, its subsidiaries and its business partners, and that have a link to the specific stage of the due diligence process being carried out.

Companies shall ensure compliance with due diligence standards focusing on human rights and the environment further down supply chains through their codes of conduct (“contractual cascading”).

Private and Public Enforcement

In terms of private and public enforcement, the Amendment Directive provides for three notable proposed changes:

Firstly, in terms of private enforcement, it is significant that the requirement for harmonized EU-wide civil liability regime for damages will be abolished. Thus, private enforcement is deferred to the civil liability regime of each EU Member State, which need to ensure that, if companies are held liable in case of non-compliance with the due diligence requirements under the CSDDD, the injured parties will have a right to full compensation. Further, national law is left to define whether its civil liability provisions override otherwise applicable rules of the third country where any harm occurs.

Secondly, it is also highly notable that the obligations for EU Member States regarding representative actions by trade unions or NGOs are revoked. National law will be able to support both actions brought directly by injured parties or representative actions to reflect different rules and traditions in EU Member States.

Lastly, regarding public enforcement, penalties for violations, which could be imposed by national “Supervisory Authorities” in EU Member States, will no longer be linked to 5 % of the in-scope company’s global net turnover.

Climate Transition Plans aligned with CSRD

Concerning the much-discussed requirement under the existing CSDDD to “put into effect” a Paris Agreement-aligned Climate Transition Plan, this obligation has been softened so that requirements for climate mitigation are now aligned with the CSRD. Whilst the “put into effect” part is dropped, the adoption of a Climate Transition Plan would still be required.

Remedial Measures and Periodic Assessments

The Omnibus Package also proposes to remove the obligation to be imposed on a company to terminate the business relationship as a last resort measure. Additionally, the interval between periodic assessments will be prolonged, extending the period from one year to five years.

(b) Key CSDDD Implications for In-Scope Companies

In summary, the proposed amendments in the First Omnibus Package are helpful for companies in terms of deregulating obligations and reducing complexity in their supply chains.

Nevertheless, companies should not overlook the fact that the remaining obligations will still involve considerable effort and require thorough preparation until the actual implementation of the CSDDD. Companies subject to already existing supply chain laws in countries such as Germany and France, can attest to the extensive demands these obligations impose.

Considering the strong alignment and similarity in many parts with the German SCDDA, especially after removing the main differences in scope and civil liability regime, two years of experience with the German law should and can be utilized by companies to leverage valuable insights gained from the enforcement of the German SCDDA.

To assist in-scope companies with preparations, the European Commission has committed to providing guidelines a year earlier, in July 2026, which provides more valuable time for companies to get aligned with the CSDDD.

[1] Directive (EU) 2022/2464.

[2] Directive (EU) 2024/1760.

[3] See EU Commission Press Release of February 26, 2025, available at https://ec.europa.eu/commission/presscorner/detail/en/ip_25_614, last accessed on February 28, 2025.

[4] COM(2025) 80 final, 2024/0044 (COD) – Directive of the European Parliament and of the Council amending Directives (EU)2022/2462 and (EU) 2024/1760 as regards the dates from which the Member States are to apply certain corporate sustainability reporting and due diligence requirements.

[5] COM(2025) 81 final, 2024/0045 (COD) – Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2462 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements.

[6] Directive (EU) 2013/34.

[7] Directive (EU) 2006/43.

[8] See EC link here.

The following Gibson Dunn lawyers prepared this update: Ferdinand Fromholzer, Robert Spano, Susy Bullock, Stephanie Collins, Vanessa Ludwig, Carla Baum, Johannes Reul, and Babette Milz.

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 leader or member of the firm’s ESG: Risk, Litigation, and Reporting, Transnational Litigation, or International Arbitration practice groups, or the authors:

Ferdinand Fromholzer – Partner, ESG Group,
Munich (+49 89 189 33-270, ffromholzer@gibsondunn.com)

Robert Spano – Co-Chair, ESG Group,
London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)

Susy Bullock – Co-Chair, ESG Group,
London (+44 20 7071 4283, sbullock@gibsondunn.com)

Stephanie Collins – London (+44 20 7071 4216, scollins@gibsondunn.com)

Carla Baum – Munich (+49 89 189 33-263, cbaum@gibsondunn.com)

Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)

Johannes Reul – Munich (+49 89 189 33-272, jreul@gibsondunn.com)

Babette Milz – Munich (+49 89 189 33-283, bmilz@gibsondunn.com)

On February 27, 2025, the Financial Crimes Enforcement Network (FinCEN) issued guidance announcing that it will not issue fines or penalties to, or take any enforcement action against, entities that fail to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act (CTA) by the current deadline, which for most reporting entities is March 21, 2025.[1] FinCEN also announced that it intends to issue an interim final rule by March 21, 2025 to formally extend the reporting deadline. “[L]ater this year,” FinCEN plans to issue a notice of proposed rulemaking and solicit public comment on a new rule permanently revising the existing BOI reporting requirements.

Entities that may be subject to the CTA and its associated Reporting Rule that have not filed BOI reports should consult with their CTA advisors as necessary, now that FinCEN has suspended enforcement of the filing deadlines.

Prior to yesterday’s announcement, and after litigation that temporarily enjoined enforcement of the CTA from December 2024 until February 18, 2025, FinCEN had issued guidance extending the reporting deadline to March 21, 2025 or later.[2] In that same guidance, FinCEN previewed that it intended to take further steps to modify deadlines. On February 27, 2025, FinCEN issued the additional guidance described above, which has the effect of suspending the March 21, 2025 deadline.[3] Instead, FinCEN intends to issue an interim final rule before March 21, 2025, extending BOI reporting deadlines.[4]

FinCEN also announced it will issue a notice of proposed rulemaking, anticipated to be issued later this year, to adopt permanent changes to the reporting requirements to minimize the burden on small businesses while ensuring that BOI is highly useful to important national security, intelligence, and law enforcement activities.[5] As part of that rulemaking, FinCEN may also further modify applicable deadlines, and the agency intends to solicit public comment on potential revisions to existing reporting requirements.[6] The public comment period will be an important opportunity for companies to provide input to FinCEN and build a record supporting changes to the existing reporting requirements, including the burden the requirements impose on businesses, and will allow companies to preserve and highlight for FinCEN any potential legal challenges to the new proposed reporting requirements.

[1] https://www.fincen.gov/news/news-releases/fincen-not-issuing-fines-or-penalties-connection-beneficial-ownership.

[2] https://fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf.

[3] https://www.fincen.gov/news/news-releases/fincen-not-issuing-fines-or-penalties-connection-beneficial-ownership.

[4] Id.

[5] Id.

[6] Id.

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)

The new Rules come into effect from 3 April 2025.

Background:

On 21 February 2025, the Minister of Commerce officially decreed and published into law the Ultimate Beneficial Ownership Rules (UBO Rules). In line with steps taken by other financial centers and leading jurisdictions around the world, the UBO Rules require all companies in KSA, other than companies publicly listed in KSA, to disclose and maintain accurate information about their ultimate beneficial owners. The UBO Rules come into effect from 3 April 2025.

How does the UBO Rules define an Ultimate Beneficial Owner?

The UBO Rules define an “ultimate beneficial owner” as any natural person who meets the following criteria:
1. owns at least 25% of the company’s share capital whether directly or indirectly;
2. controls at least 25% o the voting shares in the company, whether directly or indirectly;
3. is entitled to appoint or remove a majority of the company’s board of directors, its manager or president, whether directly or indirectly;
4. ability to influence decision-making or the business of the company whether directly or indirectly; or
5. is a representative of any legal person to which any of above criteria applies.
The UBO Rules clarify that if an ultimate beneficial owner cannot be identified by applying the foregoing criteria, then the company’s manager or members of its board of directors or its president will be regarded as its ultimate beneficial owner.

Key obligations under the UBO Rules:

Some of the key obligations under the UBO Rules include the following:

Incorporation: The Ministry of Commerce will now require applicants to disclose information on their ultimate beneficial owners as part of the application process for incorporation of companies in KSA.

Annual Filings: In relation to those companies already established at the time the UBO Rules come into effect, such companies will be required to make annual filings disclosing their ultimate beneficial owners. Such filings are due on the anniversary of the date on which companies were registered with the Ministry’s commercial register.
Maintenance & Updates: All existing companies will be required to maintain an ultimate beneficial owner register and notify the Ministry of any changes in the identity of an ultimate beneficial owner.
Required Information: It remains unclear what information will be requested by the Ministry to validate the identity of an ultimate beneficial owner in a relevant KSA company. Unsurprisingly, the UBO Rules grant the Ministry with broad authority to require disclosure. The UBO Rules state that the Ministry will publish guidelines with respect to its procedures and requirements for the identification of ultimate beneficial owners.

Exemption from UBO Rules:

The following entities are exempted from the application of the UBO Rules:

Companies wholly owned by the state or any state-owned authorities whether directly or indirectly; and
Companies undergoing insolvency proceedings in accordance with the Bankruptcy Law.

Additionally, the Minister of Commerce may issue exemptions on a case-by-case basis. All companies exempted from the UBO Rules are nevertheless required to prove to the Ministry that they enjoy such an exempted status.

Penalties for Non-Compliance:

A person that is required to comply with the UBO Rules but fails to do so, including its obligations to disclose/update information to the Ministry with respect to ultimate beneficial ownership, may face a fine of SAR 500,000.

Investors with complex shareholding structures in KSA should be wary of these UBO Rules as indirect changes in their shareholding structures could trigger disclosure obligations with the Ministry in KSA. All investors in KSA must start thinking about introducing appropriate internal protocols to ensure full compliance with the UBO Rules.

The following Gibson Dunn lawyers prepared this update: Mohamed A. Hasan and Lojain AlMouallimi.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. To learn more, please contact the Gibson Dunn lawyer with whom you usually work, or the authors in Riyadh:

Mohamed A. Hasan (+966 55 867 5974, malhasan@gibsondunn.com)

Lojain AlMouallimi (+966 11 827 4046, lalmouallimi@gibsondunn.com)

We are pleased to provide you with Gibson Dunn’s ESG update covering the following key developments during January 2025. Please click on the links below for further details.

I. GLOBAL

The International Financial Reporting Standards (IFRS) Foundation publishes guide for reporting only climate-related information using International Sustainability Standards Board (ISSB) Standards

On January 30, 2025, the IFRS Foundation published a new guide to help companies prepare abbreviated disclosures using the transition relief provided under ISSB Standards IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information to report only climate-related information under IFRS S2, Climate-related Disclosures, in the first reporting year. For those filing voluntary under the ISSB standards, this relief would apply to disclosure for the fiscal year beginning on or after January 1, 2024.

The International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) jointly launch a new international framework to support the implementation of their sustainability standards

On January 27, 2025, the IAASB and IESBA jointly launched new and revised standards intended to enhance the trust and transparency of sustainability reporting and assurance. The standards are IAASB’s International Standard on Sustainability Assurance 5000 (ISSA 5000), which provides a framework for the assurance of sustainability information, and IESBA’s International Ethics Standards for Sustainability Assurance (IESSA), which provide ethical principles for sustainability reporting and assurance. ISSA 5000 and IESSA will become effective for periods starting on or after December 15, 2026, in the jurisdictions that choose to adopt them.

Net Zero Asset Managers (NZAM) and Glasgow Financial Alliance for Net Zero (GFANZ) respond to departures

Following the public withdrawals of several large financial institutions from NZAM, on January 13, 2025, NZAM announced it was launching a review of the initiative following “[r]ecent developments in the U.S. and different regulatory and client expectations in investors’ respective jurisdictions.” While the review is in process, NZAM will suspend its activities tracking signatory implementation and reporting and will remove from its website the commitment statement and list of NZAM signatories, as well as their targets and related case studies.

Citing recent departures from its Net Zero Banking Alliance, GFANZ announced a restructuring plan to focus its efforts on mobilizing capital in support of the transition to net zero. In particular, the group seeks to close “the investment gap” in support of technology and public policy and to pursue public-private partnerships.

II. UNITED KINGDOM

Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) publish Climate Change Adaptation Reports 2025

On January 30, 2025, the PRA published its report on climate change adaptation reporting. The report notes that the current goal of the Bank of England’s policy work on climate change and the transition to net zero is to play a leading role in enhancing the resilience of the UK financial system and in understanding the financial, operational, and economic impacts on the macroeconomy. The PRA expects to publish in 2025 a consultation paper seeking views on an update to Supervisory Statement 3/19 on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change.

On January 28, 2025, the FCA published its report identifying three major issues that affect climate change adaptation in the financial services industry: (i) data and modelling for quantification and management of climate risks; (ii) barriers and enablers to insurance underwriting for climate risks and in consequence lending and investment; and (iii) barriers and enablers to financial services in allocating capital to adaptation.

UK confirms 2035 Nationally Determined Contribution (NDC) emissions reduction target under the Paris Agreement

On January 30, 2025, the UK submitted its NDC target to the United Nations Framework Convention on Climate Change (UNFCCC). First announced by the Prime Minister at COP29 in November 2024, the UK has now committed to reduce all greenhouse gas emissions (GHGs) by at least 81% by 2035 compared to 1990 levels, excluding international aviation and shipping emissions. The commitment aligns with the recommendations of the U.K. government’s climate advisory body, which has verified the target as a credible contribution towards limiting global warming to 1.5 °C.

UK Government votes to end debate and adjourn the Climate and Nature Bill

On January 24, 2025, the House of Commons debate resulted in a majority decision to adjourn the Climate and Nature Bill during its second reading, thereby preventing a vote on the proposed legislation. The bill proposes to impose a duty on the Secretary of State to ensure the UK implements its obligations and commitments under the Paris Agreement and the Global Biodiversity Framework, as well as a strategy to implement certain climate and nature targets. Debate on the bill will continue in July 2025.

The Equality and Human Rights Commission (EHRC) publishes parliamentary briefing on the UK Employment Rights Bill

On January 14, 2025, the EHRC published its parliamentary briefing on the proposed UK Employment Rights Bill. The briefing notes the potential of many measures set out in the bill to improve working conditions and reduce inequalities in the workplace but also raises concerns about the level of detail intended to be left to secondary legislation. The EHRC highlights that this approach could limit the ability of parliamentarians and stakeholders to assess the legislation’s unintended impacts on certain protected groups. The briefing calls for the UK Government to consider and avoid such impacts. The EHRC also warned of the current lack of clarity around the UK Government’s intentions for enforcing the bill.

III. EUROPE

EU Commission releases proposal of “First Omnibus Package” scaling back Sustainability Reporting and Due Diligence Obligations under CSRD, Taxonomy and CSDDD

Please see Gibson Dunn’s February 28, 2025 alert, Omnibus Simplification Package Proposed by the EU Commission: Scaling Back Sustainability Reporting and Due Diligence Obligations.

EU Platform on Sustainable Finance publishes draft reports suggesting revisions and simplifications of the EU Taxonomy Regulation and Climate Delegated Act

On January 8, 2025, the EU Platform on Sustainable Finance, tasked by the EU Commission with reviewing and recommending revisions to the Climate Delegated Act as well as with simplifying the EU Taxonomy Regulation, published a draft report. The report recommends simplifying the application of Do No Significant Harm criteria and expanding the scope of activities covered by the EU Taxonomy. This includes reducing complexity, improving the clarity and consistency of technical screening criteria, and providing more detailed guidance for reporting to ease the compliance process for companies and financial institutions.

On February 5, 2025, the EU Platform on Sustainable Finance published a second report in which it outlines “specific proposals to revise the Taxonomy Disclosures Delegated Act, leading to a reduction of over a third in the reporting burden for non-financial companies and a significant simplification for financial institutions.” Key recommendations include introducing a materiality threshold for corporate KPIs, making the OpEx KPI mandatory only for R&D costs, and simplifying the Green Asset Ratio by allowing estimates and proxies for non-EU and retail exposures.

Switzerland sets new Climate Goals for 2035

On January 29, 2025, the Swiss government approved a new climate target, aiming for a 65% reduction in GHGs by 2035 compared to 1990 levels, to be implemented as an emission budget covering 2031-2035. This goal will be part of Switzerland’s second NDC under the Paris Agreement. The new target aligns with Switzerland’s Climate and Innovation Act, which mandates net zero emissions by 2050 and includes various measures to reduce energy consumption and transition away from fossil fuels. The government also plans to achieve an average 59% GHG reduction between 2031 and 2035, primarily through domestic measures, while retaining the option to use international emissions reductions.

CSRD Transposition

No countries transposed the CSRD in January; however, the Dutch government submitted a CSRD implementation bill (Wet implementatie richtlijn duurzaamheidsrapportering) to the House of Representatives for consideration. An overview of the transposition of CSRD into national laws can be found here.

IV. NORTH AMERICA

The California Air Resources Board (CARB) extends comment period deadline for California Senate Bills 253 and 261

As described in our recent blog post, on December 16, 2024, CARB issued a request for public feedback and information regarding certain implementing regulations for Senate Bill (SB) 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate Related Financial Risk Act). CARB has extended the comment deadline to March 21, 2025, due to the Southern California wildfires.

Attorneys general issue request for information to financial institutions on ESG activities

On January 27, 2025, a coalition of 11 state attorney generals, led by Texas Attorney General Ken Paxton, sent a letter to several large financial institutions expressing concern that the companies had breached their fiduciary duty to maximize shareholder returns by making investment decisions based on diversity and climate considerations.

United States Climate Alliance (U.S. Climate Alliance) reaffirms commitment to Paris Agreement climate goals amid U.S. withdrawal

On January 20, 2025, the U.S. Climate Alliance, a bipartisan coalition of 24 state governors, delivered a letter to the Executive Secretary of the UNFCCC stating that the U.S. Climate Alliance, remains committed to the Paris Agreement, is “on track to meet [its] near-term climate target by reducing collective net greenhouse gas (GHG) emissions 26 percent below 2005 levels by 2025,” and noted that the states have “broad authority” to pursue climate initiatives despite President Trump’s announcement that he will withdraw from the Paris Agreement. .

Tennessee drops ESG lawsuit against BlackRock following settlement agreement

As described in our Winter 2023 ESG update, Tennessee filed a consumer protection lawsuit in Tennessee state court against BlackRock alleging the company had misled or made false representations to the state’s consumers regarding the incorporation of ESG into its investment strategy. On January 17, 2025, Tennessee announced a settlement with BlackRock. As part of the settlement agreement, BlackRock agreed to increase disclosure and compliance around its use of ESG factors and to disclose on its website membership in climate-focused organizations. For funds that do not have investment objectives beyond financial performance or screens based on non-financial criteria, BlackRock agreed to cast votes “solely to further the financial interests of investors,” remove ESG ratings from main product pages, provide quarterly as opposed to annual disclosures regarding its proxy voting, and provide the rationale behind any proxy voting that is contrary to management’s recommendations.

Federal Acquisition Regulatory Council (FARC) withdraws proposed climate-related disclosure rule

On January 13, 2025, FARC withdrew a proposed rule titled “Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk.” The rule, originally proposed on November 14, 2022, would have required certain government contractors to publicly disclose GHG emissions and major contractors (those that received over $50 million in federal contract obligations) to disclose climate-related financial risks and set emissions reduction targets in order to qualify for future federal contracts.

In case you missed it…

The Gibson Dunn Securities Regulation and Corporate Governance Practice Group has published updates regarding the Securities and Exchange Commission’s issuance of Staff Legal Bulletin 14M, which is relevant for the 2025 shareholder proposal season; its potential strategy shift in the climate disclosure rule litigation; and its new interpretive guidance on Schedule 13G eligibility for large stockholders engaging with companies on ESG.

The Gibson Dunn Workplace DEI Task Force has published several updates for January and February summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion, including dedicated alerts describing:

a recent executive order revoking affirmative action requirements for government contractors and directing agencies to identify nine large targets for investigations of private sector DEI practices;
the impacts of recent executive orders regarding race and gender on corporate DEI programs; and
potential insights an Office of Personnel Management memorandum may give into future enforcement of the DEI directives.

Gibson Dunn also published two alerts regarding energy-related executive orders:

key takeaways from the executive order “Unleashing American Energy” and its potential impact on various energy initiatives as well as the M&A and capital markets outlook for energy companies; and
ten regulatory and policy issues energy industry experts will be monitoring in the early days of President Trump’s second administration.

More information on executive orders and other announcements from the White House is available in our White House Executive Order Tracker. A collection of our analyses of the legal and industry impacts from the presidential transition is available here.

V. APAC

Securities Commission Malaysia and the Central Bank of Malaysia releases 2025 climate change priorities

On January 22, 2025, Securities Commission Malaysia and Bank Negara Malaysia, co-chairs of Joint Committee on Climate Change (JC3), held its 14th meeting and released a joint statement outlining their priorities and action plans for addressing climate change in 2025. JC3 will focus on building climate resilience in the financial sector in three key areas: addressing data challenges, facilitating small and medium enterprises’ transition, and designing climate finance solutions.

Securities Commission Malaysia releases guidance to aid company directors in driving sustainability reporting

On January 20, 2025, the Securities Commission Malaysia released a guide titled “Navigating the Transition: A Guide for Boards” to provide actionable steps for directors to adopt the National Sustainability Reporting Framework (NSRF). The NSRF addresses the use of the sustainability disclosure standards issued by the ISSB. Large-listed issuers on the Bursa Malaysia’s Main Market with market capitalization of RM2 billion and above will start NSFR implementation this year, while other listed issuers and non-listed large companies will be expected to comply with the reporting requirements by 2027 under a phased approach.

Bank of China joins the Taskforce on Nature-related Financial Disclosures

On January 13, 2025, the Taskforce on Nature-related Financial Disclosures (TNFD) welcomed the Bank of China (BOC) as the first Chinese institution to join the TNFD.

Lauren Assaf-Holmes, Mellissa Campbell Duru, Mitasha Chandok, Becky Chung, Georgia Derbyshire, Ferdinand Fromholzer, Muriel Hague, Michelle Kirschner, Vanessa Ludwig, Babette Milz, Kiernan Panish, Johannes Reul, Annie Saunders, and Helena Silewicz*

Gibson Dunn 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, the authors, or any leader or member of the firm’s ESG: Risk, Litigation, and Reporting practice group:

ESG: Risk, Litigation, and Reporting Leaders and Members:
Susy Bullock – London (+44 20 7071 4283, sbullock@gibsondunn.com)
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Perlette M. Jura – Los Angeles (+1 213.229.7121, pjura@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Michael K. Murphy – Washington, D.C. (+1 202.955.8238, mmurphy@gibsondunn.com)
Robert Spano – London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)

*Helena Silewicz is a trainee solicitor in London and is not admitted to practice law.

This update provides an overview of the major developments in federal and state securities litigation since our 2024 Mid-Year Securities Litigation Update.

Introduction

In this update:

We report on orders from the Supreme Court that dismissed two securities-related cases from the Court’s merits docket, leaving unresolved questions about pleading standards and the nature of misstatements under the PSLRA. We also examine one potential circuit conflict involving federal courts’ jurisdiction to hear securities-related cases under the Class Action Fairness Act.
We cover recent developments in Delaware, including the latest opinion in Tornetta v. Musk, a recent Delaware Supreme Court opinion addressing aiding and abetting liability, and two new opinions addressing litigation over commercially reasonable efforts clauses.
Lawsuits challenging public companies’ environmental, social and governance (ESG) disclosures and policies continue to be filed, as do cases challenging ESG policies implemented by states, asset managers, and trading platforms. We survey notable developments in securities cases involving ESG allegations.
The cryptocurrency space has seen considerable activity since our last Update. Below, we discuss noteworthy new case filings and rulings in various lawsuits, as well as other developments that could impact cryptocurrencies going forward.
We discuss recent cases addressing price impact issues in the wake Goldman Sachs Group., Inc. v. Arkansas Teacher Retirement System. We also highlight recent opinions addressing market efficiency and preview cases on appeal implicating various reliance-related issues.
Finally, we address several other notable developments, including a recent opinion from the Second Circuit addressing materiality, a recent opinion from the Ninth Circuit involving a Special Purpose Acquisition Company or “SPAC,” a Tenth Circuit decision pertaining to short-selling, and recent securities lawsuits implicating Artificial Intelligence.

TABLE OF CONTENTS

I. Filing And Settlement Trends

II. What To Watch for In The Supreme Court

III. Delaware Developments

IV. ESG Civil Litigation

V. Cryptocurrency Litigation

VI. Market Efficiency And “Price Impact”

VII. Other Notable Developments

I. Filing And Settlement Trends

A recent NERA Economic Consulting (NERA) study provides an overview of federal securities litigation filings in 2024. This section highlights several notable trends.

A. Filing Trends

Figure 1 below reflects the federal filing rates from 1996 through 2024. In 2024, 229 federal cases were filed, matching the number of federal filings in 2023. That figure is considerably lower than in the peak years of 2017-2019, but is consistent with the number of filings from 2021 onwards. Note, however, that this figure does not include class action suits filed in state court or state court derivative suits, including those in the Delaware Court of Chancery.

Figure 1:

B. Mix Of Cases Filed In 2023

1. Filings By Industry Sector

As shown in Figure 2 below, the distribution of non-merger objections and non-crypto unregistered securities filings in 2024, varied somewhat from 2023. Notably, after a dip in 2023, the “Health and Technology Services” sector percentage returned to the percentages seen in 2021 and 2022. Similarly, the percentage of “Electronic Technology and Technology Services” filings increased in 2024, returning to levels last seen in 2021. Together, “Health and Technology Services” and “Electronic Technology and Technology Services” filings once again comprised over 50% of filings after dipping to 41% in 2023. Meanwhile, “Finance” sector filings decreased from 18% to 10%.

Figure 2:

2. Filings By Type

As shown in Figure 3 below, Rule 10b-5 filings make up the vast majority of federal filings this year. In fact, filings of other types are as low as they have been in years.

Figure 3:

3. Filings By Circuit

Figure 4 provides insight into the distribution of federal filings by Circuit. Most filings occur in the Second and Ninth Circuits. After trending down from 2021 to 2023, the number of filings in the Second Circuit increased this year. By contrast, the number of filings in the Ninth Circuit has remained steady or increased each year since 2021.

Figure 4:

4. Event-Driven And Other Special Cases

Figure 5 illustrates trends in the number of event-driven and other special case filings since 2020. The number of Artificial Intelligence-related filings in 2024, was more than double the number of such filings in 2023 and 2022. By contrast, SPAC and Cybersecurity and Customer Privacy Breach filings have decreased steadily since 2021.

Figure 5:

C. Settlement Trends

As reflected in Figure 6 below, the average settlement value in 2024 was $43 million. That is the highest number since 2016, and a significant increase from the mid-year average ($26 million). (Note that the average settlement value excludes merger-objection cases, crypto unregistered securities cases, and cases settling for more than $1 billion or $0 to the class.)

Figure 6:

As for median settlement value, it equaled the values from 2022 and 2023. At $14 million, the median settlement value also increased significantly from the mid-year median ($9 million). (Note that median settlement value excludes settlements over $1 billion, merger objection cases, crypto unregistered securities cases, and zero-dollar settlements.)

Figure 7:

II. What To Watch For In The Supreme Court

A. Supreme Court Update: Both Securities Cases Heard in November 2024 Dismissed As Improvidently Granted

As our 2024 Mid-Year Update discussed, by the beginning of its 2024 Term, the Supreme Court had granted review in two securities cases: Facebook, Inc. v. Amalgamated Bank, No. 23-980, and NVIDIA Corp. v. E. Ohman J:or Fonder AB, No. 23-970. Each case presented questions about pleading standards in securities class actions, and each petition identified circuit splits on those issues. See Petition for Writ of Certiorari at 16-17, Facebook, Inc., No. 23-980 (Mar. 4, 2024) (“Facebook Pet.”); Petition for Writ of Certiorari at 3-5, NVIDIA Corp., No. 23-970 (Mar. 4, 2024) (“NVIDIA Pet.”). However, after hearing oral argument in November 2024, in each of these cases, the Court issued a per curiam order dismissing each writ as “improvidently granted,” a disposition that sends a case back to the court below without a resolution on the merits. NVIDIA Corp. v. E. Ohman J:or Fonder AB, 2024 WL 5058572 (U.S. Dec. 11, 2024); Facebook, Inc. v. Amalgamated Bank, 604 U.S. 4 (2024); see also Garrett v. McCotter, 807 F.2d 482, 484 n.5 (5th Cir. 1987). These dismissals mean that, for now, lower courts across the country will continue to apply their own circuits’ precedents to these questions.

In Facebook, shareholders alleged that Facebook made misstatements in securities filings, where it had purportedly characterized as “hypothetical” the risk that third parties might misuse Facebook user data when that risk has already allegedly materialized. Facebook Pet. at 10. The Supreme Court granted Facebook’s petition for certiorari to resolve the question of whether risk disclosures are “false or misleading when they do not disclose that a risk has materialized in the past, even if that past event presents no known risk of ongoing or future business harm.” See id. at i; see also Facebook, Inc. v. Amalgamated Bank, 144 S. Ct. 2629 (2024) (granting certiorari in part). Gibson Dunn represents the petitioners in Facebook.

The question of whether such risk disclosures are misstatements unless they also disclose any and all materializations of the disclosed risk, no matter how inconsequential, remains subject to a circuit split. The Supreme Court’s dismissal in Facebook leaves intact the Ninth Circuit’s rule, which holds that a risk disclosure is materially misleading when it fails to disclose a past instance of the risk having materialized, even if the past event poses no known risk of harm. In re Facebook, Inc. Sec. Litig., 87 F.4th 934, 949-50 (9th Cir. 2023). As Facebook argued in its petition for certiorari, this puts the Ninth Circuit at odds with the Sixth Circuit, which treats risk disclosures as prospective only; and with the First, Second, Third, Fifth, Tenth, and D.C. Circuits, which have held that a risk’s materialization in the past must be disclosed only when the company knows or believes that the past event will harm the business. Facebook Pet. at 19-22 (citations omitted).

In NVIDIA, a group of investors brought a securities-fraud class action against NVIDIA, a company that produces graphics processing units (GPUs). E. Ohman J:or Fonder AB v. NVIDIA Corp., 81 F.4th 918, 924-25 (9th Cir. 2023). They alleged that NVIDIA’s CEO and two other defendants (whose dismissal was affirmed by the Ninth Circuit) had misled investors about the extent to which NVIDIA’s revenue growth was linked to demand from cryptocurrency miners. Id. at 924-27. In support of allegations about the falsity of NVIDIA’s statements and its knowledge, the investors’ amended complaint relied on statements from former NVIDIA employees about internal company documents, as well as on the independent analysis of an expert consulting firm. Id. at 929-30, 937-39.

The Supreme Court granted NVIDIA’s petition for certiorari to decide (1) whether, under the heightened pleading standards of the Private Securities Litigation Reform Act (PSLRA), plaintiffs making allegations of scienter based on company-internal documents must “plead with particularity the contents of those documents,” and (2) whether, under the PSLRA, allegations of falsity based on expert opinions—rather than “particularized allegations of fact”—suffice to survive a motion to dismiss. See NVIDIA Pet. at i; see also NVIDIA Corp. v. E. Ohman J:or Fonder AB, 144 S. Ct. 2655 (2024) (granting certiorari). Now, with certiorari dismissed in NVIDIA, both of these questions remain subject to the circuit splits identified in the NVIDIA petition. As to the standard for pleading scienter based on internal documents, the First and Ninth Circuits permit more general allegations, whereas the Second, Third, Fifth, Seventh, and Tenth Circuits require particularized allegations of the documents’ contents. NVIDIA Pet. at 4 (citations omitted). And as to the role of expert opinions in alleging falsity, the Ninth Circuit alone has held that expert opinions suffice; the Second and Fifth Circuits have held that expert opinions can “bolster” factual allegations of falsity but will be insufficient on their own to survive a motion to dismiss. See id. at 5 (citations omitted).

B. Lower Court Development: Circuit Split Recognized On Federal Court Jurisdiction Under The Class Action Fairness Act

After the Court’s dismissals in November and December, there are no securities cases currently pending before the Supreme Court. We highlight one securities-related development from the lower courts, which may reach the Supreme Court for resolution in a future Term.

On September 4, 2024, in Kim v. Cedar Realty Trust, Inc., 116 F.4th 252 (4th Cir. 2024), the Fourth Circuit acknowledged a circuit split on the extent of federal court jurisdiction under the Class Action Fairness Act (CAFA). Although the Second Circuit had determined CAFA did not confer federal subject-matter jurisdiction in a “nearly identical action,” the Kim court found that it was bound by Fourth Circuit precedent to reach a different conclusion. Id. at 260-61.

In Kim, an action brought by a class of preferred stockholders in Cedar Realty, the district court asserted subject-matter jurisdiction under CAFA’s exception to the usual jurisdictional requirement of complete diversity of citizenship between the parties. Id. at 260 (citing 28 U.S.C. §§ 1331, 1332(d)). On appeal, the Fourth Circuit raised the question of its own jurisdiction, noting that CAFA also incorporates carveouts under which there is not federal jurisdiction in cases without complete diversity. Id. Specifically, the court considered whether the Kim action “solely involve[d] a claim” relating to either state-law issues about a business entity’s internal affairs or the “rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.” Id. at 260 (quoting 28 U.S.C. § 1332(d)(9)(B)-(C)).

The claims in Kim were for breaches of contract and fiduciary duty by Cedar Realty, based on rights and obligations arising from the preferred shares; and for interference with contract and aiding and abetting breaches of fiduciary duty, by Wheeler, which merged with Cedar Realty while the plaintiffs held their preferred stock. Id. at 258-59. The court acknowledged that a panel of the Second Circuit had found that it lacked jurisdiction under CAFA in a “nearly identical action,” Krasner v. Cedar Realty Trust, Inc., 86 F.4th 522 (2d Cir. 2023). Kim, 116 F.4th at 260-61. But the Kim court was bound by prior Fourth Circuit precedent, in which the court held that aiding-and-abetting claims against corporate outsiders do not “relate[] to” either internal corporate governance or rights and duties conferred by a security. Id. at 261 (citing Dominion Energy, Inc. v. City of Warren Police & Fire Ret. Sys., 928 F.3d 325, 335-43 (4th Cir. 2019)). Under that precedent, the Cedar Realty stockholders’ claims against Wheeler were not carved out from CAFA and the court retained federal jurisdiction over the appeal. Id.

For now, under the apparent circuit split identified in Kim, shareholder class actions like these, involving aiding-and-abetting claims against corporate outsiders, may face different treatment in different circuits. In the Fourth Circuit and any others that follow the rule stated in Kim, these cases can remain in federal court, while in the Second Circuit and any other circuits following the Krasner rule, the same claims will be remanded to state court for lack of federal jurisdiction.

III. Delaware Developments

A. Ratification In Tornetta v. Musk

On December 2, 2024, the Delaware Chancery Court issued a much-anticipated opinion in Tornetta v. Musk, 326 A.3d 1203 (Del. Ch. 2024). This latest installment in Tornetta addresses the effect on the Court’s post-trial opinion of a subsequent stockholder vote in favor of the compensation award the post-trial opinion ordered rescinded. In short, the Court concluded the subsequent vote had no effect.

Tornetta centers on Elon Musk’s 2018 compensation package. The compensation award was approved at a special meeting of the Tesla Board on January 21, 2018, and then approved by a majority of Tesla’s stockholders in March 2018. Tornetta v. Musk, 310 A.3d 430, 485-86, 490 (2024). The compensation award carried a grant date fair value of $2.6 billion and a maximum value to Musk of $55.8 billion. Id. at 445. That maximum value represented “the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude.” Id.

On January 30, 2024, the Court issued a post-trial opinion that ordered Elon Musk’s 2018 compensation award rescinded after finding (1) Musk was a conflicted controller with respect to the compensation award, (2) the entire fairness standard applied to the transaction as a result, (3) the defendants failed to prove the March 2018 stockholder vote on the award was “fully informed,” and (4) the defendants failed to prove the transaction was entirely fair. Id. at 501, 520-21, 526-27, 544 (2024). Roughly three months after the Court’s post-trial opinion, Tesla filed a proxy statement in which it recommended that stockholders “ratify” the compensation award that the post-trial opinion ordered rescinded. Tornetta, 326 A.3d at 1218. On June 13, 2024, Tesla stockholders voted in favor of the proposal. Id. at 1219.

On June 28, 2024, certain Tornetta defendants, citing the stockholder vote, filed a Motion to Revise the Tornetta post-trial opinion, which this latest December 2, 2024 opinion denies. Id. at 1219, 1264.

The Court provided four independent bases for doing so, one of which is addressed here—ratification. The Court rejected Tesla’s ratification arguments on the merits. It began by framing the defendants’ arguments as being incorrectly built on agency principles that treat a corporation’s directors as agents of stockholders, with stockholders, as principals, able to “do whatever they want in all contexts.” Id. at 1230. According to the Court, the defendants’ view is contrary to Delaware law, which regards directors as more “analogous to trustees for stockholders.” Id. (citations omitted). Thus, agency principles apply “only by analogy.” Id.

Next, the Court opined that Delaware recognizes two forms of stockholder ratification, one of which was applicable in its view. The Court designated the applicable form of ratification “fiduciary ratification.” Id. Per the Court, fiduciary ratification “allows stockholders to express, through an affirmative vote,” that “a corporate act is ‘consistent with shareholder interests.’” Id. (quoting Vogelstein, 699 A.2d at 335). According to the opinion, the effect of fiduciary ratification varies depending on context, ranging from “act[ing] as a complete defense,” to “hav[ing] no effect.” Id. (quoting Vogelstein, 699 A.2d at 334). “Just as the standard of review increases as conflicts become more direct and serious, the effect of fiduciary ratification diminishes.” Id. (footnote omitted).

Here, the Court explained that the fiduciary ratification was occurring in the context of a conflicted controller transaction. That context, the Court noted, presents “multiple risks to minority stockholders.” Id. Considering those risks and the presumptive application of entire fairness, the Court held that the “maximum effect of stockholder ratification . . . [would be] to shift the burden of proving entire fairness.” Id. at 1232. A standard of review shift, the Court explained, depended instead on the company committing from the outset of the transaction to the requirements set forth in MFW. Id. Tesla did not do so, however, and it could not “‘MFW’ a vote”—i.e., obtain the benefits of MFW by “implementing the MFW protections before” the stockholder ratification vote. Id. at 1233. The Court therefore rejected the ratification argument.

The Court’s post-trial opinion prompted discussion about re-domestication and the relative merits of incorporating in Delaware as compared to states like Texas and Nevada. A detailed discussion of those topics is beyond the scope of this Update, though we note that systemic movement does not appear be occurring—at least not yet. See generally Stephen M. Bainbridge, DExit Drivers: Is Delaware’s Dominance Threatened (UCLA Sch. L. Rsch. Paper No. 24-04), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4909689. This latest opinion, and its recent appeal to the Delaware Supreme Court, suggest those discussions are likely to persist, and we will continue to monitor this case and these issues as developments unfold.

B. The Delaware Supreme Court Reiterates The High Bar for Bringing Aiding And Abetting Claims Against Third-Party Buyers

In its recent decision in In re Mindbody, Inc., Stockholder Litigation, the Delaware Supreme Court reversed a controversial holding that an arms-length buyer’s “passive failure to act rather than active participation or ‘substantial assistance’ can give rise to liability.” 2024 WL 4926910, No. 484, 2023 at *30 (Del. Ch. Dec. 2, 2024). The Court also addressed the several novel issues, “including . . . whether contractual undertakings in merger agreements can create fiduciary duties for third parties to the target’s stockholders.” Id.

As discussed in our April 10, 2023 Client Alert, the Court of Chancery ruled that Mindbody’s founder and CEO, Richard Stollmeyer, breached his Revlon duties. Id. at *22. The Court of Chancery also found that (1) Stollmeyer was liable for breaching his duty of disclosure, (2) Vista Equity Partners Management, LLC (Vista)—Mindbody’s acquirer—was liable for aiding and abetting Stollmeyer’s disclosure breach, and (3) the defendants had waived the issue of settlement credit. Id. at *22. Apart from the Court of Chancery’s aiding and abetting ruling, the Delaware Supreme Court affirmed.

To be liable for aiding and abetting a breach of fiduciary duty, plaintiffs must plead and prove that the third party was a “knowing participa[nt]” in the underlying breach. Id. at *31. For its part, the Court of Chancery “held that Vista’s ‘contractual obligation’ in the [Vista-Mindbody] merger agreement to review Mindbody’s proxy statements and ‘correct’ any misstatements or omissions, and Vista’s subsequent failure to correct omissions, amounted to ‘knowing participation’ in Stollmeyer’s breach of his duty of disclosure.” Id. at *30.

The Delaware Supreme Court disagreed. In reversing the Court of Chancery’s aiding and abetting determination, the Delaware Supreme Court provided an overview of the “knowing participation” element of an aiding and abetting claim. See id. at *31-35. It explained that the “knowing” factor comprises two types of knowledge—i.e., knowledge by the alleged aider and abettor that (1) “the primary party’s conduct constitutes a breach,” and (2) its own conduct was legally improper. Id. at *32 (citation and emphasis omitted). Participation, in turn, generally requires “substantial assistance.” Id. at *33. At least in the corporate governance context, the Supreme Court explained, substantial assistance has generally been limited to “overt participation,” as opposed to a “failure to act” or “passive awareness.” Id. It also cited Section 876 of the Restatement (Second) of Torts approvingly and structured its analysis around the Restatement factors. See id. at *34-36.

Considering these various factors and elements, along with the record, the Supreme Court held that the “the ‘participation’ requirement ha[d] not been established,” and that “aspects of the scienter requirement, namely, Vista’s knowledge of the wrongfulness of its own conduct regarding the disclosure breach, also f[e]ll short.” Id. at *31. Although it described the opinion as “narrow,” the Supreme Court’s analysis in this respect nonetheless included notable commentary. For example, it held that, “in the case before [it],” “a contractual obligation between a target corporation and a third-party buyer to notify the other of potential disclosure violations” did not “create[] an independent duty of disclosure between the third-party buyer and the target’s stockholders that [could] form the basis for secondary aiding and abetting liability,” id. at *38; there are “compelling public policy reasons not to read contractual disclosure-based obligation between a third-party buyer and a target company as implying independent fiduciary duties between the third-party buyer and the target’s stockholders,” id. at *43; taking “no action to facilitate or assist [the primary violator] in his breach,” and instead merely “passively st[anding] by” did not amount to “substantial assistance,” id. at *41; and “when an aiding and abetting claim is brought against a third-party acquirer negotiating at arms’-length, participation should be the most difficult to prove,” id.

As the Court acknowledged, In re Mindbody is unlikely to be the last word on aiding and abetting liability. See id. at *39 n.117 (noting another case on appeal “addresses similar issues with different facts”). Accordingly, we will continue monitoring these issues and provide updates on future cases implicating them.

C. Delaware Supreme Court Affirms Delaware Court Of Chancery’s Dismissal Of Breach Of Fiduciary Claims Against Directors Involved In A SPAC Merger

The Delaware Supreme Court recently affirmed the dismissal of a lawsuit alleging that the sponsor of a special purpose acquisition company (SPAC) and its directors breached their fiduciary duties “by touting an outdated business model that the target had decided to scrap.” In re Hennessy Cap. Acquisition Corp. IV S’holder Litig., 318 A.3d 306, 310 (Del. Ch. 2024), aff’d, No. 245, 2024, 2024 WL 5114140 (Del. Dec. 16, 2024). In doing so, the Supreme Court adopted the reasoning of the Court of Chancery, which provided guidance clarifying that the MultiPlan standard is not as lenient as some had thought. Id.

In 2018, Hennessy Capital Acquisition Corp. IV (Hennessy) was formed as a SPAC. Id. at 311. Hennessy then merged with an entity named Canoo in late 2020. Id. at 314-15. In advance of the merger, Hennessy and Legacy Canoo issued a press release, and Hennessy subsequently issued a proxy, that outlined Canoo’s “three projected revenue streams.” Id. at 313-15. After the merger, Canoo’s board and management changed appreciably, and Canoo’s new leadership publicly announced a shift in Canoo’s business model, resulting in some volatility and an eventual fall in Canoo’s stock price. See id. at 315-17. In June 2022, the plaintiff, a Canoo stockholder, filed a putative class action alleging fiduciary duty breaches, among other claims. Id. at 317-18.

After outlining the “narrow[ness]” of a MultiPlan claim and rejecting the plaintiff’s contention that “the pleading standard is ‘relaxed’ in the context of SPAC claims,” the Court of Chancery dismissed the plaintiff’s breach of fiduciary duty claim. Id. at 319-21. The Court explained that “[t]o state a viable MultiPlan claim, a plaintiff is required to plead facts making it reasonably conceivable that conflicted fiduciaries deprived public stockholders of a fair chance to exercise their redemption rights.” Id. at 320. And in the case of disclosures, the pleaded facts “must provide grounds to infer that the defendants made a material misstatement or omission—one affecting the total mix of information available to public stockholders deciding whether to redeem.” Id. But—notwithstanding the success of prior SPAC-related suits—”[p]oor performance is not . . . indicative of a breach of fiduciary duty,” “[c]onflicts are not a cause of action,” “[a]nd pleading requirements exist even where entire fairness applies.” Id. at 310. “Entire fairness is not . . . a free pass to trial.” Id. at 319. And here, the plaintiff’s allegations were deficient under those standards.

D. Court Of Chancery Issues Opinions Providing Guidance On Commercially Reasonable Efforts Requirements Related To Earnout Provisions

The Court of Chancery issued two cases in the second half of the year finding that buyers failed to use commercially reasonable efforts to achieve agreed-upon milestones in acquisition agreements. See Fortis Advisors LLC v. Johnson & Johnson, 2024 WL 4048060 (Del. Ch. Sept. 4, 2024); S’holder Representative Servs. LLC v. Alexion Pharma., Inc., 2024 WL 4052343 (Del. Ch. Sept. 5, 2024). The opinions address two different types of common commercially reasonable efforts requirements—”inward-facing” and “outward-facing” ones—and provide helpful insight into how courts approach them.

Commercially reasonable efforts requirements are often found in earnout provisions. Earnout provision are a “common risk allocation tool[] in merger agreements” that require a buyer to “pay[] an upfront sum and an additional amount if the seller’s business achieves specific targets by a deadline,” or milestone. Fortis, 2024 WL 4048060, at *1. To lessen the risk for the seller, buyers often provide a contractual assurance that they will “devote commercially reasonable efforts” to reach the milestones. Id.

Fortis Advisors arose out of an acquisition by Johnson & Johnson (J&J) of Auris Health, Inc. (Auris), a venture-backed startup developing surgical robots. Id. As part of the acquisition, J&J agreed to pay $3.4 billion up front and another $2.35 billion upon the achievement of several commercial and regulatory milestones for two of Auris’s products. Id. The merger agreement included an “inward-facing efforts provision,” which required J&J to make “commercially reasonable efforts” to meet these milestones that were to be measured by J&J’s own standards and “usual practice” for such products. Id. at *14. Rather than make efforts to achieve those milestones, however, J&J, the Court found, instituted a series of tests designed to rank one of Auris’s products against another J&J product to determine which product to pursue and which to abandon. Id. at 2.

Among other things, the Court concluded that J&J breached its contractual obligation to use commercially reasonable efforts to reach the agreed-upon milestones for one of Auris’s products. Id. at *24-26. In doing so, the Court noted that J&J agreed to make Auris’s product a “priority medical device,” and that “commercially reasonable efforts” clauses require a party “to take all reasonable steps toward an end.” Id. at 24 (quotation omitted). The Court found that instead, J&J took steps that were “reasonably certain to have caused [the product] to miss its regulatory milestones.” Id. at *26.

Alexion arose out of Alexion Pharmaceuticals, Inc.’s (Alexion) acquisition of Syntimmune, Inc. As part of the acquisition, Alexion agreed to pay $400 million up front and an additional $800 million in installments upon the completion of several development milestones. 2024 WL 4052343, at *1, *14. The merger agreement provided that Alexion would use commercially reasonable efforts to achieve each milestone, and defined the efforts with an “outward-facing metric” of “what a similarly situated company would do” with a similar product. Id. at *1, 14. Alexion eventually terminated the acquired program altogether after its acquisition by AstraZeneca. Id. at *2, *20.

The Court concluded that Alexion breached its obligation to use commercially reasonable efforts to achieve several of the milestones. Id. at *36. In doing so, the Court noted that the merger agreement’s definition of commercially reasonable efforts did not permit Alexion to “consider its own efforts and cost required for the undertaking,” but rather only allowed for the consideration of “anticipated profitability, but only insofar as typical companies might typically consider it.” Id. at *37. As a result, the Court found that Alexion could not “consider[] its self-interest in determining what is commercially reasonable,” but rather could consider “its self-interest only in drawing the upper bound of its commercially reasonable efforts,” namely to ensure that its efforts were not “contrary to prudent business judgment.” Id.

E. The Limits Of Integration Clauses And Benefits Of Anti-Reliance Provisions

Two recent Court of Chancery decisions reinforce the limits of integrations clauses while underscoring the importance of anti-reliance provisions in precluding fraud claims. In Trifecta Multimedia Holdings Inc. v. WCG Clinical Services LLC, the plaintiff alleged that the defendant—in addition to breaching the parties’ purchase agreement—”fraudulently induced it to enter into [the] purchase agreement by claiming that the [defendant] portfolio company would be the best partner for growth, would allow the [plaintiff] healthcare company to continue operating autonomously, would support the [plaintiff] healthcare company’s sales and marketing efforts, and would generally help the [plaintiff] healthcare company secure new contracts and sell its flagship product.” 318 A.3d 450, 454 (Del. Ch. 2024). The Court, after dismissing a handful of statements as puffery, denied the defendant’s motion to dismiss in the main. Id. at 454-55. Among other things, the Court rejected the defendant’s argument that the parties’ purchase agreement precluded reliance, noting that “an integration clause, standing alone, is not sufficient to bar a fraud claim; the agreement must also contain explicit anti-reliance language,” which the parties’ agreement lacked. Id. at 465; see id. at 467.

Cytotheryx Inc. v. Castle Creek Biosciences, Inc. is similar. 2024 WL 4503220, at *3-4 (Del. Ch. Oct. 16, 2024). There, the plaintiff likewise argued that the integration clause in the parties’ agreement “prohibit[ed] any reliance on extra-contractual statements.” Id. at *3. Once again, the Court rejected the plaintiff’s argument, noting not only that the integration clause at issue did not bar the plaintiff’s particular claims but also that the parties’ agreement specifically “preserve[d] [the plaintiff’s] right to bring an action for fraud.” Id. at *5. Together Trifecta and Cytotheryx show that Delaware courts will sustain adequately pleaded fraud claims in the face of integration clauses where explicit anti-reliance provisions are absent.

F. Stockholder Agreements And Moelis

As discussed in our 2024 Mid-Year Update, the Delaware General Assembly passed S.B. 313 in July 2024, which contained what is now Section 122(18) of the Delaware General Corporation Law, in response to West Palm Beach Firefighters’ Pension Fund v. Moelis & Company, 311 A.3d 809 (Del. Ch. 2024). As a reminder, Section 122(18) “specifically authorizes a corporation to enter into contracts with one or more of its stockholders or beneficial owners of its stock, for such minimum consideration as approved by its board of directors, and provides a non-exclusive list of contract provisions by which a corporation may agree to.” Section 122(18), however, “does not apply to or affect any civil action or proceeding completed or pending on or before” August 1, 2024—meaning it has no effect on the Moelis decision. S.B. 313 § 6. Accordingly, on August 16, 2024, Moelis filed a notice of appeal. See Moelis & Co. v. W. Palm Beach Firefighters’ Pension Fund, 340-2024, Doc. No. 74077020 (Del. Supr. Aug. 16, 2024). Briefing is now complete, and we will continue to monitor the case as it proceeds.

IV. ESG Civil Litigation

A. Environmental Litigation

Swanson v. Danimer Sci., Inc., 2024 WL 4315109 (2d Cir. Sept. 27, 2024): In May 2021, investors filed a putative class action lawsuit against Danimer Scientific, Inc., a bioplastics manufacturer, and certain executives. In re Danimer Sci. Sec. Litig., Case No. 21-cv-02708, ECF No. 1 (E.D.N.Y.). The plaintiffs alleged that the defendants made misleading public statements regarding the biodegradability of Danimer’s products. Id. ¶ 5. They further alleged that when an article published in The Wall Street Journal claimed that the timing in which the company’s product would biodegrade was more variable than suggested, the company’s stock price allegedly dropped. Id. ¶ 6. The United States District Court for the Eastern District of New York dismissed the lawsuit, concluding that the plaintiffs failed to adequately plead that the defendants knowingly made false or misleading statements about the biodegradability of the Danimer’s products. In re Danimer Sci. Sec. Litig., 2023 WL 6385642, at *16 (E.D.N.Y. Sept. 30, 2023). On appeal, the United States Court of Appeals for the Second Circuit affirmed the district court’s dismissal. Swanson, 2024 WL 4315109, at *3. The Second Circuit noted that the plaintiffs’ allegations, even when considered collectively, did not raise a strong inference that the defendants acted with the requisite intent to deceive or defraud investors. Gibson Dunn represented the defendants in this case. Id.

Lyall v. Elsevier Inc., et al., No. 24-cv-12022 (D. Mass.): The plaintiff, a former employee of a subsidiary of RELX PLC, filed a class action complaint against RELX PLC and its subsidiaries (RELX) for violations of federal securities laws on August 6, 2024. ECF No. 1. The plaintiff alleged RELX mislead both consumers and investors by greenwashing, i.e., representing to the public that it was doing more to protect the environment than it was actually doing. Id. ¶ 7. On October 16, 2024, the defendants filed a motion to dismiss the complaint, arguing that the plaintiff failed to comply with the requirements of the Private Securities Litigation Reform Act. ECF No. 12 at 1. Before the Court ruled on that motion, the plaintiff filed an amended complaint. ECF No. 25. The amended complaint continues to assert federal securities claims, alleging that RELX mislead investors by engaging in greenwashing. ECF No. 25. On February 7, 2025, the defendants moved to dismiss. ECF Nos. 28-29.

Texas et al. v. BlackRock Inc., et al., No. 24-cv-00437 (E.D. Tex.): In November 2024, Texas and 10 other states filed a lawsuit against major asset managers—BlackRock, State Street, and Vanguard—alleging their climate-focused investment strategies violated antitrust laws. ECF No. 1. The states claimed that these firms’ ESG initiatives reduced coal production, leading to higher energy prices. Id. ¶¶ 5-6. As of the date of this publication, the defendants have not yet filed an answer or a motion to dismiss the complaint. Gibson Dunn represents BlackRock in this matter.

B. Diversity And Inclusion

Alliance for Fair Board Recruitment v. SEC, No. 21-60626 (5th Cir. 2021): The petitioners in this case sued the SEC, alleging that Nasdaq’s Board Diversity Rules were unconstitutional and contrary to federal statutes. ECF No. 1-2. The Board Diversity Rules, which the SEC approved, required companies that list shares on Nasdaq’s exchange to (1) disclose aggregated information about board members’ diversity characteristics (including race, gender, and sexual orientation) and (2) provide an explanation if less than two board members are diverse. Id. at 3-4. On December 11, 2024, an en banc panel of the Fifth Circuit issued an opinion vacating the SEC’s order approving Nasdaq’s Board Diversity Rules. ECF. No. 532-1. Gibson Dunn represents Nasdaq in this action, which intervened as an interested party.

Kanaly v. McDonald et al., No. 24-cv-08839 (S.D.N.Y): On November 20, 2024, a shareholder filed a derivative complaint against Canadian athletic apparel brand Lululemon. In that lawsuit, the plaintiff, in part, alleged that the defendants made false and/or misleading statements and omissions related to IDEA, Lululemon’s diversity program. ECF No. 1 ¶ 44. Lululemon announced the IDEA program in October 2020, saying the company would aim to reflect “the diversity of the communities the Company serves and operates in around the world by 2025.” Id. ¶ 3. The plaintiff alleges that, in reality, the IDEA program was not structured to combat purported discrimination within Lululemon in any meaningful way. Id. ¶ 4. The plaintiff also alleges that the company’s 11-person board never had more than two racially diverse members during the relevant period, and that the company’s financial statements were silent on racial diversity goals. Id. ¶¶ 58, 77, 162. The defendants have not yet filed a response to the complaint.

McCollum v. Target Corp. et al., No. 25-cv-00021 (M.D. Fla.): On January 9, 2025, the plaintiff filed a shareholder derivative action on behalf of Target Corporation against officers and members of the Board alleging the Target’s Diversity, Equity, and Inclusion (DEI) initiatives and its 2023 LGBTQ Campaign harmed company investors. ECF No. 1. The plaintiff alleges that Target’s DEI initiatives and 2023 LGBTQ Campaign resulted in significant financial harm to investors by alienating a portion of the company’s customer base and leading to a decline in sales and stock value. Id. ¶ 7. The complaint asserts that the company’s directors and officers breached their fiduciary duties by deciding to pursue these initiatives. Id. ¶ 13. The defendants have not yet filed a response to the complaint.

Securities Industry & Financial Markets Association v. Ashcroft et al., No. 23-cv-04154 (W.D. Mo.): We first reported on this case in our Securities Litigation 2023 Year-End Update. In June 2023, the Missouri Securities Division adopted new rules requiring investment professionals to obtain client signatures before providing advice that “incorporates a social objective or other nonfinancial objective.” ECF No. 24 ¶¶ 69, 78. In August 2023, the Securities Industry and Financial Markets Association (SIFMA), filed a lawsuit against Missouri Secretary of State John Ashcroft and Missouri Securities Commissioner Douglas Jacoby, challenging these rules. ECF No. 1 at 41. On August 14, 2024, the U.S. District Court for the Western District of Missouri granted SIFMA’s motion for a permanent injunction, holding that the rules were preempted by federal law, violated the First Amendment, and were unconstitutionally vague. ECF. No. 115; ECF. No. 117 (as amended on August 28, 2024). This decision prevents Missouri from enforcing the contested rules.

V. Cryptocurrency Litigation

A. Class Actions

Naeem Azad v. Caitlyn Jenner, Sophia Hutchins, No. 24-cv-09768 (C.D. Cal.): On November 13, 2024, the plaintiffs filed a class action complaint in the Central District of California against Caitlyn Jenner and Sophia Hutchins, alleging violations of federal and California state securities laws. Specifically, they alleged a “scheme . . . [to] offer[] and s[ell] unregistered securities,” namely, “the cryptocurrency, $JENNER,” and “fraudulently solicit[] financially unsophisticated investors throughout the United States and abroad to purchase the unregistered securities.” ECF No. 1, ¶ 1. The plaintiffs described this cryptocurrency as a “memecoin,” i.e., a “blockchain-based digital asset that draws its inspiration from memes, characters, trends or, as in this case, the social media accounts and online presence of celebrities.” Id. ¶ 2. The value of memecoins, the plaintiffs alleged, is mainly derived from the ability of the “issuer or promoter to attract and sustain community engagement.” Id. ¶ 3. The plaintiffs—purportedly unsophisticated retail investors—accused the defendants of using social media accounts to promote the cryptocurrency without filing registration statements with the SEC or otherwise complying with all federal and state securities laws. Id. ¶¶ 4, 7. They further alleged that the defendants withheld or omitted material information from investors, such as “personal holdings” of the currency, “public wallet addresses she uses to hold or trade” the currency, and other facts. Id. ¶¶ 89-92. The case is in its early stages, and the defendants have not responded to the complaint at the time of this publication.

Hawes v. Argo Blockchain plc, 2024 WL 4451967 (S.D.N.Y. Oct. 9, 2024): On October 9, 2024, the District Court for the Southern District of New York granted defendant Argo Blockchain plc’s (Argo) motion to dismiss a securities fraud class action brought on behalf of investors who bought “American Depositary Receipts” in Argo’s U.S. IPO and in the aftermarket. Id. at *1. The plaintiffs filed their original class action complaint on January 26, 2023, ECF No. 1, and filed their amended complaint on September 26, 2023, ECF No. 45. Argo is a global cryptocurrency mining business, with facilities in Canada and Texas. ECF No. 45, ¶¶ 3-4. “Like many investors in the cryptocurrency arena, [the plaintiffs] lost money – specifically when, in mid-2022, Argo announced that unexpected increases in energy prices and a fall in the price of Bitcoin led to a decline in the price of Argo’s shares and ADRs.” Hawes, 2024 WL 4451967, at *1. The plaintiffs, accordingly, brought claims under the Securities Act and the Securities and Exchange Act, alleging that the defendants made “misleading statements deal[ing] principally with Argo’s capitalization and its ability to withstand adverse market conditions.” Id. The Court dismissed the plaintiffs’ complaint, noting that the “fact that an adverse event occurred following the making of a statement to the market . . . is an insufficient basis from which to infer that the statement was false when made,” and rejected the plaintiffs’ “[h]indsight pleading,” which is “too frequently seen in securities fraud cases.” Id. at *3. The Court also took pains to evaluate, and then reject, every allegedly misleading statement in the plaintiffs’ complaint. As of the date of this publication, no notice of appeal has been filed.

B. Regulatory Lawsuits

SEC v. Payward, Inc., 2024 WL 4819259 (N.D. Cal. Nov. 18, 2024): On November 18, 2024, the United States District Court for the Northern District of California denied a motion by Payward, Inc. (also known as “Kraken”) to certify for interlocutory appeal the Court’s August 23, 2024 order denying Kraken’s motion to dismiss. Id. at *1. The Court ruled that only discovery would establish whether the third-party cryptocurrency assets that are sold, exchanged, and traded on Kraken form the basis of investment contracts such that transactions involving those assets are subject to the securities laws. Id. at *2. On November 19, 2024, the parties filed a joint statement about a discovery dispute concerning the SEC’s objections to Kraken’s requests for three categories of documents concerning (1) Bitcoin and Ether, (2) the SEC’s public statements and testimony regarding digital assets, and (3) the SEC’s internal trading policies on digital assets. ECF No. 108 at 1. The case was referred to a magistrate judge for discovery, ECF No. 109, and the Court denied Kraken’s request to compel the production of these documents on December 16, 2024, ECF No. 113. On December 26, 2024, the Court granted the parties’ stipulated agreement to stay Kraken’s deadline to file objections to the Court’s order until March 31, 2025, so as to allow Kraken time to narrow its document requests. ECF No. 116. On January 24, 2025, the Court granted in part the SEC’s motion for judgment on the pleadings. ECF No. 126.

SEC v. Balina, 2024 WL 4607048 (W.D. Tex. Aug. 16, 2024): On August 16, 2024, the United States District Court for the Western District of Texas granted Ian Balina’s motion to certify its May 22, 2024 order for interlocutory appeal to allow the Fifth Circuit to consider whether Balina’s purported sales, offers to sell, and promotion of Sparkster or “SPRK” was domestic or extraterritorial conduct. Id. at *3. Balina did not seek to appeal the Court’s decision that tokens are securities as a matter of law. As discussed in a previous update, the SEC alleges that Balina, a cryptocurrency investor, sold and promoted SPRK tokens without disclosing his compensation, and the SEC maintains that U.S. securities laws apply because Balina targeted U.S. investors on U.S. social media platforms. ECF No. 1, ¶¶ 1-5. Balina contends that because his transactions occurred outside the United States, they are outside the purview of Section 5(a), 5(c), and 17(b) of the Securities Act. ECF No. 7 at 35. Trial, which had been set for January 13, 2025, is suspended pending resolution of the interlocutory appeal.

SEC v. Cumberland DRW LLC, No. 24-cv-09842 (N.D. Ill.): On October 10, 2024, the SEC charged Chicago-based Cumberland DRW LLC with operating as an unregistered dealer in more than $2 billion of crypto assets. ECF No. 1. On December 31, 2024, the defendant filed an unopposed motion to extend the briefing schedule regarding its motion to dismiss, pointing to news articles asserting that the upcoming change in Presidential administrations could impact crypto-related cases as the Trump administration would likely pull back on crypto-related enforcement. ECF No. 22. The Court denied the request, finding that neither the possibility of withdrawal of the lawsuit due to a change of administration nor the other reasons cited warranted an extension. ECF No. 24. Cumberland’s motion to dismiss, ECF No. 28, filed on January 15, 2025, remains pending.

C. Other Developments

Coinbase, Inc. v. SEC, 2025 WL 78330 (3d. Cir. Jan. 13, 2025): In July 2022—almost a year before the SEC publicly filed an enforcement case against Coinbase in federal court in the Southern District of New York for allegedly operating as an unregistered broker, exchange, and clearing agency—Coinbase petitioned the SEC to create clear rules on how federal securities laws apply to digital assets. The SEC denied Coinbase’s petition in a single paragraph, and Coinbase subsequently sought judicial review of that denial under the Administrative Procedure Act, asking the Third Circuit to order the SEC to institute a notice-and-comment rulemaking proceeding. The Court heard oral argument on September 24, 2024. Coinbase, represented by Gibson Dunn, asserted that (1) the SEC acted arbitrarily and capriciously by bringing enforcement actions seeking to apply the securities laws to digital assets without engaging in rulemaking, (2) digital assets are largely incompatible with existing securities regulations for several reasons, and these workability concerns are fundamental changes in the factual predicates underlying the existing securities-law framework, and (3) the SEC’s order was insufficiently reasoned. The Third Circuit issued its opinion on January 13, 2025, in which it declined to require the SEC to engage in formal notice-and-comment rulemaking regarding the application of securities laws to digital assets, but did require the SEC to provide a more complete explanation for its refusal to engage in such rulemaking. Id. at *1.

Crypto Freedom All. of Texas v. SEC, 2024 WL 4858590 (N.D. Tex. Nov. 21, 2024): As reported in our 2024 Mid-Year Update, CFAT and the Blockchain Association filed an action challenging the SEC’s Dealer Rule on April 23, 2024. Crypto Freedom Alliance of Texas v. SEC, No. 24-cv-361, ECF No. 1, ¶¶ 4, 7 (N.D. Tex. filed Apr. 23, 2024). The plaintiffs sought summary judgment on May 17, 2024. ECF No. 28. The SEC filed a cross-motion for summary judgment on June 26, 2024. ECF No. 38. The Court ruled in favor of the plaintiffs, finding that “Defendants engaged in unlawful agency action taken in excess of their authority.” Crypto Freedom All. of Texas, 2024 WL 4858590 at *1. The Court explained that “the Dealer Rule departs from . . . commonly recognized and historical interpretations by broadly defining a dealer as someone who ‘engage[s] in a regular pattern of buying and selling securities that has the effect of providing liquidity to other market participants.’” Id. at *4 (quoting Further Definition of “As a Part of a Regular Business,” 89 Fed. Reg. at 14944). “The Rule as it currently stands de facto removes the distinction between ‘trader’ and ‘dealer’ as they have commonly been defined for nearly 100 years.” Id. at *5. Accordingly, the Court vacated the Dealer Rule. Id. at *5. On January 17, 2025, the SEC filed a notice of appeal for the Fifth Circuit to review the district court’s decision. ECF No. 53. The SEC subsequently moved to dismiss the appeal, and dismissal was granted.

VI. Market Efficiency And “Price Impact” Cases

A. Price Impact

Because reliance is an essential element of securities fraud, plaintiffs seeking to bring securities claims as class actions must show that reliance can be presumed, rather than proven for each individual class member. To do this, plaintiffs typically invoke the decades-old precedent from Basic Inc. v. Levinson, 485 U.S. 224 (1988), which allows a rebuttable presumption of reliance if certain threshold requirements are met. Basic reasoned that material misrepresentations about a stock that trades in an efficient market would be reflected in the stock’s market price, and that any investor who decided to purchase based on the market price indirectly relied on all public information. See Basic, 485 U.S. at 247. Since the Supreme Court’s 2014 decision in Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258 (2014), defendants have focused on rebutting that presumption of reliance with evidence that the statements at issue did not actually impact the stock price and, therefore, class members trading on the open market did not rely on them.

As we covered in our 2024 Mid-Year Update and our 2023 Year-End Update, in 2021, the Supreme Court in Goldman Sachs Group., Inc. v. Arkansas Teacher Retirement System (“Goldman”) held that courts analyzing whether to certify a class must consider all evidence of price impact, even if the evidence overlaps with materiality and other merits questions. 594 U.S. 113, 121-22 (2021). If a plaintiff’s price impact theory is “inflation-maintenance”—where the price impact of a challenged statement is shown indirectly by a drop in the company’s stock price following a corrective disclosure, instead of by an increase in price when the statement is made—a court must consider whether there is a “mismatch” between the alleged corrective disclosure and challenged statement. Id. at 123. In 2023, the Second Circuit elaborated on the Goldman “mismatch framework,” and held that when plaintiffs rely on the inflation-maintenance theory they cannot simply “identify a specific back-end, price-dropping event” and match it to “a front-end disclosure bearing on the same subject” unless “the front-end disclosure is sufficiently detailed in the first place.” Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc., 77 F.4th 74, 81, 102 (2d Cir. 2023) (“ATRS”).

This year, the Ninth Circuit will opine for the first time on the application of Goldman. A district judge recently held that a series of negative disclosures related to the “Zillow Offers” group need not “precisely mirror” the alleged misrepresentation to support a finding of price impact, and any mismatch was not sufficient to rebut the presumption of reliance. Jaeger v. Zillow Grp., Inc., ___ F. Supp. 3d ____, 2024 WL 3924557, at *6 (W.D. Wash. Aug. 23, 2024). On January 8, Zillow filed its opening brief with the Ninth Circuit, arguing that the lower court erred, in part by disregarding the Company’s evidence from its expert that “no analyst referred to the allegedly concealed information,” and the “stock price declines were attributable to factors unrelated to the alleged misstatements.” Opening Brief of Defendant-Appellants at 53, Jeager v. Zillow Group, Inc., Case No. 24-6605 (9th Cir. Jan. 8, 2025), ECF No. 10-1.

Lower courts also continue to examine price impact arguments, with a focus on what “mismatch” between the alleged corrective disclosures and the challenged statements is sufficient to defeat the presumption. See, e.g., See, e.g., Pardi v. Tricida, Inc., 2024 WL 4336627, at *7 (N.D. Cal. Sept. 27, 2024).

B. Affiliate Ute Presumption

In 2025, we expect the Sixth Circuit will decide whether the Supreme Court’s decision in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972)—which presumes class wide reliance on “omissions” without requiring plaintiffs to prove the Basic prerequisites—applies to cases that have a “mix” of both omissions and misrepresentations. Opening Brief of Defendants at 8-9, In re: FirstEnergy Corp. Sec. Litig., Case No. 23-0303 (6th Cir. Apr. 14, 2023). FirstEnergy has argued that the district court inappropriately extended Affiliated Ute to allegations of incomplete statements or “half-truths,” and has asked the Sixth Circuit to vacate the district court’s decision to certify. Id. at 9. In reaching a decision, the Sixth Circuit will have to consider whether Affiliated Ute can be reconciled with Macquarie Infrastructure Corp. v. Moab Partners, L. P., in which the Supreme Court recently held that “pure omissions” are not actionable under Rule 10b-5 of the Exchange Act, 601 U.S. 257, 260 (2024), as well as decisions from other circuits holding that Affiliated Ute only allows the reliance element to be presumed in cases involving primarily omissions. See, e.g., Binder v. Gillespie, 184 F.3d 1059, 1063-64 (9th Cir. 1999); Waggoner v. Barclays PLC, 875 F.3d 79, 93-96 (2d Cir. 2017); Joseph v. Wiles, 223 F.3d 1155, 1162-63 (10th Cir. 2000), abrogated on other grounds by Cal. Pub. Emps. Ret. Sys. v. ANZ Sec., Inc., 582 U.S. 497 (2017).

C. Basic Presumption

In a fairly recent development, the “meme stock” phenomenon has made it more challenging for investors to invoke the Basic presumption in the first place. The “meme stock” phenomenon began online during the COVID-19 pandemic, when investors began using social media to coordinate “short squeezes,” causing large impacts in the market for the target security.

In Bratya SPRL v. Bed Bath & Beyond Corp., 2024 WL 4332616, at *9-19 (D.D.C. Sept. 27, 2024), Bed Bath & Beyond argued its stock’s status as a meme stock, which put the price “in wild flux” despite the absence of new, value-relevant information, in the weeks before and during the class period, rendered the stock’s market inefficient throughout the class period. Id. at *12. The Court agreed and declined to certify the class. Id. at *19-21. Although the Court noted that typical factors indicated an efficient market, it found the short squeeze dynamics undermined the relevance of the traditional factors by rendering the market so volatile that it cannot possibly have “reflected all public, material information,” including the alleged misstatements. Id. at *12.

In Shupe v. Rocket Companies, Inc., the Court rejected the defendant’s argument that its two-day status as a “meme stock” during the two-month-long class period rendered the market for its stock inefficient. Shupe v. Rocket Companies, Inc., ___ F. Supp. 3d ____, 2024 WL 4349172, at *19-24 (E.D. Mich. Sept. 30, 2024). There, the Court held that the plaintiffs still were entitled to the Basic presumption because “meme-stocks and efficient markets are not mutually exclusive” and even inaccurately priced stocks can still respond to false statements, causing loss. Id. at *23 (citing Halliburton, 573 U.S. at 272). The Rocket Companies court still declined to certify the class because the defendants successfully rebutted the presumption of reliance by demonstrating that the analysts did not report on the alleged misstatement throughout the class period, thus severing the link between price drop and the misrepresentations. Id. at *24-26 (citing ATRS 77 F.4th at 104).

VII. Other Notable Developments

A. Second Circuit Reconsiders And Reverses Prior Decision, Now Finds Auditor Opinions Can Be Material

In New England Carpenters Guaranteed Annuity and Pension Funds v. DeCarlo (“DeCarlo II”), the Second Circuit reconsidered and reversed its own prior opinion concerning 10b-5 claims involving auditor opinions, now concluding that standardized language in auditor opinions may be material to investors. 122 F.4th 28 (2d Cir. 2023) (opinion amended on October 31, 2024).

As detailed in our 2023 Year-End Update, the plaintiffs alleged violations of the Securities Act and the Exchange Act against AmTrust Financial Services, its officers and directors, various underwriters, and its auditor, BDO, arising from AmTrust’s restatement of five years of financial statements. See New Eng. Carpenters Guaranteed Annuity & Pension Funds v. DeCarlo (“DeCarlo I”), 80 F.4th 158, 174-79 (2d Cir. 2023). In DeCarlo I, the Second Circuit affirmed the dismissal of 10b-5 claims against the auditor, finding that the “[c]omplaint fail[ed] to allege any link between BDO’s misstatements in the 2013 Auditor Opinion and the material errors contained in AmTrust’s 2013 Form 10-K,” and called the audit statements “so general . . . that a reasonable investor would not depend on them as a guarantee.” Id. at 182 (internal citations omitted).

Upon reconsideration, the Second Circuit reversed its earlier opinion, now reasoning that “[a]lthough the challenged audit certification reflects standardized language, it is not so general that a reasonable investor would not depend on it as a guarantee.” DeCarlo II, 122 F.4th at 53 (internal citations omitted). The Court further explained that “BDO’s certification that the audit was conducted in accordance with PCAOB standards succinctly conveyed to investors that AmTrust’s audited financial statements were reliable,” and had the auditor not issued an opinion, it “would have alerted investors to potential problems in the company’s financial reports.” Id.

The Second Circuit also found the complaint adequately alleged loss causation against the auditor, explaining that a “[Wall Street Journal] article revealed the specific deficiencies that rendered the audit opinion misleading” and calling the article a “‘clean match’ between the misleading audit opinion and the subsequent disclosure.” Id. at 54. The Court was also satisfied that the complaint adequately alleged scienter by “alleg[ing] that BDO consciously covered up its own misrepresentation that its audit complied with PCAOB standards.” Id. at 55.

B. Ninth Circuit Clarifies SPAC Investors Lack Standing To Challenge Statements Made By The Target Acquisition Company Prior To A De-SPAC Merger

In a follow up to our prior discussion of standing issues related to SPACs in our 2023 Mid-Year Update, the Ninth Circuit became only the second appellate court to analyze standing for 10b-5 claims challenging pre-merger statements made by the target acquisition company. In In re CCIV / Lucid Motors Securities Litigation, the Ninth Circuit addressed the standing of investors who purchased shares in Churchill Capital Corporation IV (CCIV), a SPAC, before its merger with Lucid Motors. 110 F.4th 1181, 1182 (9th Cir. 2024). Reversing the district court’s decision (previously detailed in our 2022 Year-End Securities Litigation Update), the Ninth Circuit held that investors in the SPAC lacked standing to sue for alleged misstatements by the target acquisition company made before the merger because the investors purchased stock in the SPAC, not the target acquisition company that allegedly made the misstatements. Id. at 1187. The Ninth Circuit’s decision is consistent with the Second Circuit’s decision in Menora Mivtachim Insurance Ltd. V. Frutarom Industries Ltd., 54 F.4th 82, 88 (2d Cir. 2022) (“Menora”).

The plaintiffs in CCIV alleged Lucid’s CEO “made misrepresentations about Lucid’s ability to meet certain production targets” before either company publicly announced the merger, though “extensive reporting in the financial press” speculated a deal was imminent. 110 F.4th at 1183. The plaintiffs purchased CCIV stock based on these statements by Lucid’s CEO when Lucid was still a private company and before the merger was announced. Id. The plaintiffs alleged that it was not until the day the merger was announced that the true production targets were revealed to be far below Lucid’s CEO’s projections. Id.

The Ninth Circuit held that the plaintiffs lacked standing. Id. at 1187. Relying on the purchaser-seller rule (or Birnbaum Rule) announced in Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 742 (1975), the Ninth Circuit found that Section 10(b) standing is a “bright-line rule” requiring that a “plaintiff purchased or sold the securities about which the alleged misrepresentations were made.” Id. at 1186. The plaintiffs had urged the Court to instead use a “connected to” standard, which would analyze standing on a “case-by-case basis” by looking at “whether the security plaintiff purchased is sufficiently connected to the misstatement.” Id. The Ninth Circuit declined to adopt that rule, noting the Second Circuit had recently rejected a similar argument in Menora. Id. at 1185 (citing Menora, 54 F.4th at 86). Instead, the Court explained the alleged misrepresentations were those of Lucid when it was a private company, and not of CCIV, the SPAC whose shares the plaintiffs had purchased, and dismissed the case. Id. at 1186-87.

C. Tenth Circuit Rejects Short Sellers’ 10b-5 And Market Manipulation Claims

In In re Overstock Securities Litigation, the Tenth Circuit made it more difficult for short seller investors to challenge statements and actions taken by companies. In brief, it provided an avenue for the defendants to rebut the presumption of reliance against short seller plaintiffs whose lending contracts include an obligation to repurchase shares, while also clarifying market manipulation requires some element of deception. 119 F.4th 787 (10th Cir. 2024).

The short-seller plaintiff alleged that Overstock manipulated the market by announcing plans to issue an unregistered digital dividend to create a short squeeze, which artificially inflated the stock price. Overstock, 119 F.4th at 795-98. The Court ultimately concluded that the short seller failed to plausibly allege reliance as required to bring a 10b-5 claim. Id. at 799. The Court clarified that short sellers (whose investment strategy is based on borrowing the stock and selling it high with an obligation to repurchase it at some point in the future) may rely upon the Basic presumption of reliance. Id. at 800 (citing Basic Inc. v. Levinson, 485 U.S. 224, 248-49 (1988)). But this presumption can be rebutted “by demonstrating that the plaintiff would have bought or sold the stock even if he was aware that the stock’s price was tainted by fraud,” or traded their shares while believing the defendants’ statements were false “because of other unrelated concerns.” Id. (quotations and citations omitted). Here, the short seller admitted it bought shares to cover its position to satisfy its lending contracts because of the dividend, not because of the alleged misrepresentations. Id.

The Tenth Circuit affirmed the dismissal of the short seller’s manipulation claims, holding “that an open-market transaction may qualify as manipulative conduct, but only if accompanied by plausibly alleged deception” and noting that Overstock’s “truthful disclosure of the terms of the upcoming dividend transaction did not deceive investors.” Id. at 802-03. The Court also reasoned that even though an open-market transaction was not inherently manipulative, such a transaction could become so if done with manipulative intent. Id. The Court concluded that manipulative intent required an element of “secrecy” that was not present. Id. at 804.

D. 2024 Marked An Increase In Securities Class Actions Related To Artificial Intelligence

As discussed in the 2024 Mid-Year Update, the number of Artificial Intelligence-related filings are on the rise as both private plaintiffs and the SEC focus on “AI washing” claims, and 2025 will likely be no different.

Similar to “greenwashing” claims, AI washing claims involve allegations that a company’s AI statements or disclosures misrepresented its AI capabilities or failed to disclose risks associated with its use of AI. These claims can be brought against AI companies or companies that use AI for various business purposes. For example, in Hoare v. Oddity Tech Ltd., 24-cv-06571 (S.D.N.Y. July 19, 2024), the plaintiffs alleged that Oddity, a consumer wellness platform that portrayed itself as a “disruptor in the cosmetics industry” falsely claimed to use “proprietary AI technologies to target consumer needs” through the use of algorithms and machine-learning models to match customers with beauty products. Dkt. 1 at ¶ 28. The plaintiffs allege that Oddity “overstated its AI technology and capabilities, and/or the extent to which this technology drove the Company’s sales” because Oddity’s AI-product-matching technology amounted to a normal questionnaire. Id. ¶¶ 44, 47. Similarly, in SEC v. Raz, 24-cv-04466 (S.D.N.Y. June 11, 2024), the SEC alleges that the founder of a technology platform that claimed to use artificial intelligence to match its clients with diverse job candidates from underrepresented backgrounds made false and misleading statements about the platform’s AI capabilities. Dkt. 1 at ¶ 2. The SEC alleges that the technology platform did not actually use AI and automation and “its technology was not as advanced” as the founder claimed. Id. at ¶¶ 67-68. The case is currently stayed pending the conclusion of a criminal case against the founder. See SEC v. Raz, 1:24-cv-04466 (S.D.N.Y. July 31, 2024), Stipulation and Order at 1.

We will continue to monitor these and similar cases in the coming year.

The following Gibson Dunn lawyers prepared this update: Monica K. Loseman, Brian M. Lutz, Craig Varnen, Jefferson E. Bell, Michael D. Celio, Allison Kostecka, Mary Beth Maloney, Mark Mixon, Lissa Percopo, Chase Weidner, Luke A. Dougherty, Lydia Lulkin, Tim Kolesk, Trevor Gopnik, Dillon M. Westfall, Megan R. Murphy, Mimra Aslaoui, Edmund Bannister, Kio Bell, Angela A. Coco, Justine Drohan, John Harrison, John Ito, Joel A. Kagan, Christopher Scott, Ty Shockley, Beshoy Shokralla, and Alon Sugarman.

Gibson Dunn 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, the authors, or any of the following leaders and members of the firm’s Securities Litigation practice group:

Christopher D. Belelieu – New York (+1 212.351.3801, cbelelieu@gibsondunn.com)
Jefferson Bell – New York (+1 212.351.2395, jbell@gibsondunn.com)
Michael D. Celio – Palo Alto (+1 650.849.5326, mcelio@gibsondunn.com)
Colin B. Davis – Orange County (+1 949.451.3993, cdavis@gibsondunn.com)
Jonathan D. Fortney – New York (+1 212.351.2386, jfortney@gibsondunn.com)
Monica K. Loseman – Co-Chair, Denver (+1 303.298.5784, mloseman@gibsondunn.com)
Brian M. Lutz – Co-Chair, San Francisco (+1 415.393.8379, blutz@gibsondunn.com)
Mary Beth Maloney – New York (+1 212.351.2315, mmaloney@gibsondunn.com)
Jason J. Mendro – Co-Chair, Washington, D.C. (+1 202.887.3726, jmendro@gibsondunn.com)
Alex Mircheff – Los Angeles (+1 213.229.7307, amircheff@gibsondunn.com)
Lissa M. Percopo – Washington, D.C. (+1 202.887.3770, lpercopo@gibsondunn.com)
Jessica Valenzuela – Palo Alto (+1 650.849.5282, jvalenzuela@gibsondunn.com)
Craig Varnen – Co-Chair, Los Angeles (+1 213.229.7922, cvarnen@gibsondunn.com)
Allison K. Kostecka – Denver (+1 303.298.5718, akostecka@gibsondunn.com)
Mark H. Mixon, Jr. – New York (+1 212.351.2394, mmixon@gibsondunn.com)

Dewberry Group, Inc. v. Dewberry Engineers, Inc., No. 23-900 – Decided February 26, 2025

Today, the Supreme Court unanimously held that a court awarding disgorgement of the “defendant’s profits” under the Lanham Act cannot include the profits of the defendant’s non‑party corporate affiliates.

“[The Lanham Act] cannot justify ignoring the distinction between a corporate defendant (i.e., Dewberry Group) and its separately incorporated affiliates. By treating those entities as one and the same, the courts below approved an award including non-defendants’ profits—and thus went further than the Lanham Act permits.”

Justice Kagan, Writing for the Court

Background:

The Lanham Act authorizes a prevailing trademark plaintiff to recover, “subject to the principles of equity,” the “defendant’s profits,” as well as any damages the owner sustained and costs of the suit. 15 U.S.C. § 1117(a). If the court finds that “the amount of the recovery based on profits is either inadequate or excessive,” it “may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case.” Id.

Dewberry Engineers sued the similarly named Dewberry Group for infringing on its registered “Dewberry” trademark. After the district court held Dewberry Group liable, it ordered Dewberry Group to disgorge nearly $43 million in profits earned by its affiliate companies, which are separate corporations and not parties to the suit. The Fourth Circuit affirmed in a divided decision, holding that, even though Dewberry Engineers did not try to pierce the corporate veil separating Dewberry Group from its legally distinct affiliates, the district court correctly treated Dewberry Group and the affiliates as a single corporate entity when calculating the profits from infringement.

Issue:

Can an award of “defendant’s profits” under the Lanham Act include profits earned by the defendant’s separate non-party corporate affiliates?

Court’s Holding:

Under the Lanham Act, a court may not overlook corporate separateness and treat the defendant and its affiliates as a single corporate entity when calculating the “defendant’s profits” from trademark infringement, absent a showing that veil-piercing is appropriate.

What It Means:

The opinion underscores that corporate separateness is foundational and that Congress must speak clearly if it wishes to displace that rule. Because nothing in the text of the Lanham Act overcomes that principle, courts may not disregard corporate separateness when calculating a defendant’s profits, unless a traditional rationale for piercing the corporate veil applies.
The Court also rejected the argument that the provision of the Lanham Act authorizing the court to “enter judgment for such sum as the court shall find to be just” if the amount of recovery based on profits is “inadequate or excessive” permits courts to reach “non‑defendants’ profits.”
Although the opinion emphasizes the importance of corporate separateness, it left a number of questions to be resolved in future cases. It did not address, for instance, whether courts “can look behind a defendant’s tax or accounting records to consider ‘the economic realities of a transaction’ and identify the defendant’s ‘true financial gain.’”

Gibson Dunn represented winning party Dewberry Group

The Court’s opinion is available here.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the U.S. Supreme Court. Please feel free to contact the following practice group leaders:

Appellate and Constitutional Law

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Jonathan C. Bond +1 202.887.3704 jbond@gibsondunn.com	Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com	Thomas G. Hungar +1 202.887.3784 thungar@gibsondunn.com
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com	Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com	Helgi C. Walker +1 202.887.3599 hwalker@gibsondunn.com

Related Practice: Intellectual Property

Kate Dominguez
+1 212.351.2338
kdominguez@gibsondunn.com

Josh Krevitt
+1 212.351.4000
jkrevitt@gibsondunn.com

Jane M. Love, Ph.D.
+1 212.351.3922
jlove@gibsondunn.com

Howard S. Hogan
+1 202.887.3640
hhogan@gibsondunn.com

Ilissa Samplin
+1 213.229.7354
isamplin@gibsondunn.com

This alert was prepared by associates Patrick J. Fuster, Matt Aidan Getz, and Connor P. Mui.

On February 21, 2025, the White House issued the “America First Investment Policy” National Security Presidential Memorandum, signaling an intention to increase restrictions and modify review criteria for U.S. inbound investments with Chinese touchpoints and expand the scope of the nascent outbound investment restrictions.

On February 21, 2025, the White House issued a National Security Presidential Memorandum titled the “America First Investment Policy” (the “America First Investment memo”) and accompanying fact sheet (Fact Sheet) proposing material changes to the U.S. foreign direct investment and outbound investment regulatory landscape, including to regulations for the Committee on Foreign Investment in the United States (CFIUS) and the Outbound Investment Security Program. It also directs CFIUS to promulgate new rules and regulations to implement some of these changes.

The America First Investment memo both underscores some continuing trends and foreshadows more significant changes to come in the months ahead. Of note, there will be no immediate change to CFIUS or the Outbound Investment Security Program because the memo requires further implementing rules and other agency action and potentially, in some cases, further action by Congress. That said, investors and companies should start considering the memo’s directives now, while continuing to monitor new developments from the Trump Administration, as they plan for transactions that will close later in 2025 and in 2026.

Continuing Trends:

The America First Investment memo elaborates on a few continuing trends:

1. The United States will remain open to investment, particularly passive
investment.

The memo reiterates the United States’ long-held policy of being “open” to foreign investment, noting that “[o]ur Nation is committed to maintaining the strong, open investment environment that benefits our economy and our people.” Specifically, the memo states that “passive investments from all foreign persons”—which “include non-controlling stakes and shares with no voting, board, or other governance rights and that do not confer any managerial influence, substantive decisionmaking, or non-public access to technologies or technical information, products, or services”—will continue to be welcomed and encouraged.

2. The United States will continue to disfavor non-passive investment—
both inbound and outbound—implicating China and other “foreign
adversaries.”

The memo specifies that “foreign adversaries” include the People’s Republic of China, including Hong Kong and Macau (China), as well as Cuba, Iran, North Korea, Venezuela, and—notably—Russia. For nearly a decade, the United States has presented an increasingly harsh investment environment for non-passive Chinese investors. The memo reiterates a continuation of this trend. Moreover, CFIUS continues to exercise greater scrutiny of non-Chinese investors’ ties to China, including through their minority investors, joint ventures, supply chain risk, and even arms-length commercial agreements. One example of relationships that continue gaining ever greater scrutiny is cooperation on technology development.

3. The United States will maintain restrictions on outbound investments to
China and look to expand these restrictions to additional industries.

As we discussed in a recent client alert, the newly enacted Outbound Investment Security Program that places conditions on certain U.S. person investments in the Chinese semiconductors, artificial intelligence, and quantum technology sectors is here to stay, and may be expanded further this year. The America First Investment memo directs that covered sectors be “reviewed and updated regularly” and enumerates a few sectors that may be added to the list of prohibited sectors, including biotechnology, hypersonics, aerospace, advanced manufacturing, and directed energy.

Changes to Come:

1. While lacking in detail, the memo directs CFIUS to develop rules
for an expedited “fast-track” process for foreign investment from
allied and partner countries.

The America First Investment memo directs the U.S. government to create an “expedited ‘fast-track’ process, based on ‘objective standards,’ to facilitate greater investment from specified allied and partner sources in United States businesses involved with United States advanced technology and other important areas.”[1] The memo states that the investments may include certain security provisions and assurances that the investors will not partner with U.S. foreign adversaries “in corresponding areas.” The memo raises critical, threshold questions, which we expect will be answered in the implementing laws and regulations and associated guidance:

How will this work? The memo provides no detail on what the fast-track process will look like or what the timing for reviews will be, nor what the attendant security provisions may look like. Important terms, such as “objective standards” remain undefined.

What will count as partnering with foreign adversaries? The memo does not provide any information on what constitutes “partnering.” While we would expect investments to be covered, it remains unclear whether investors will receive unfavorable treatment based on having Chinese vendors, customers, or entities and facilities located in China. Similarly, the memo does not explain to what extent partners and allies must distance themselves from China to gain favorable investment treatment. While the Fact Sheet indicates that any restrictions on partnering will be limited to “corresponding areas” (i.e., “advanced technology and other important areas”), the memo itself does not include any such qualification and suggests a rather broad restriction on engagement with Chinese counterparties.

To whom will this apply? Although the memo does not provide a list of approved allies and partners, it explains that some have “tremendous sovereign wealth funds.” This suggests a possible deviation from long-held practice for CFIUS to more strictly scrutinize government-controlled investors, including those from the Middle East.

2. The memo calls for expanded authorities for CFIUS to more strictly
scrutinize greenfield investments.

In past years, CFIUS’s primary tool to review and restrict greenfield investment in the United States, particularly by investors affiliated with China, was through its real estate regulations. We discussed expansions to real estate reviews in a recent client alert. Some of the real estate-related risks that the memo highlights include China’s investments in U.S. “food supplies, farmland, minerals, natural resources, ports, and shipping terminals,” with particular attention on “farmland and real estate near sensitive facilities.” In addition to restrictions on investment in real estate, President Trump appears poised to continue the previous administration’s efforts to further restrict greenfield investments by seeking additional authority for CFIUS to review these projects. This will require, as the memo notes, “consultation with Congress” and updated laws to expand CFIUS’s already expansive jurisdiction.

3. The memo portends sweeping changes to how CFIUS uses national
security mitigation agreements.

The memo states that the Trump Administration will “cease the use of overly bureaucratic, complex, and open-ended ‘mitigation’ agreements for United States investments from foreign adversary countries.” This suggests that more transactions from adversary countries could be blocked outright, rather than being approved subject to mitigation. Allied and partner nations may also feel pressure to reduce future investments in U.S. foreign adversaries in order to receive more favorable mitigation agreement conditions, or to avoid mitigation altogether. More generally, the memo states that “mitigation agreements should consist of concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.” The memo raises many questions about how this will work in practice because, owing to the nature of developing technology and evolving threats to national security, compliance efforts for areas related to personal data, cybersecurity, and sensitive and export-controlled technology are ongoing efforts—not one and done fixes.

4. The memo directs greater scrutiny be applied to investment in Chinese
companies.

The memo calls attention to Chinese companies raising capital by selling interests to American investors through foreign public exchanges and U.S. exchanges, which the memo warns “exploits United States investors to finance and advance the development and modernization of [China’s] military.” The memo directs the review of a few laws and regulations governing investments into Chinese companies, including the 1984 U.S./China tax treaty, financial auditing standards and rules for U.S. exchanges, and restrictions on U.S. pension plan investments through foreign exchanges. Notably, review of the outbound investment restrictions will also include the potential application of restrictions to investments by U.S. pension funds, university endowments, and other limited-partner investors in publicly traded securities of Chinese companies engaged in certain sensitive sectors. Such restrictions would mark a significant intensification of the Outbound Investment Security Program that currently specifically excludes investments in publicly traded securities from its ambit, though investments by U.S. persons in certain publicly traded securities of Chinese military-industrial complex companies are separately restricted by the U.S. Department of the Treasury.

As the Trump Administration attempts to leave its mark on U.S. inbound and outbound investments, we expect additional action in the coming months to implement provisions of the America First Investment memo. Companies should remain abreast of changing regulations and enforcement priorities moving forward.

[1] The memo also highlights expedited environmental reviews for investments over $1 billion but does not provide any details of the conditions or process for these reviews, nor the timing for when they will be implemented.

The following Gibson Dunn lawyers prepared this update: Adam M. Smith, Stephenie Gosnell Handler, David Wolber, Michelle Weinbaum, Dharak Bhavsar, and Chris Mullen.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s International Trade Advisory & Enforcement practice group:

United States:
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
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Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)

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Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
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Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
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Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)

Pitts v. Rivas, No. 23-0427 – Decided February 21, 2025

On Friday, a unanimous Texas Supreme Court adopted the anti-fracturing rule, confirming that plaintiffs can’t use artful pleading—for example, recasting professional negligence claims as fraud or breach of fiduciary duty—to gain a litigation advantage.

“Under the anti-fracturing rule, if the crux or gravamen of the plaintiff’s claim is a complaint about the quality of professional services provided by the defendant, then the claim will be treated as one for professional negligence even if the petition also attempts to repackage the allegations under the banner of additional claims.”

Chief Justice Blacklock, writing for the Court

Background:

A home builder and real estate developer sued his accountants, alleging they improperly prepared his financial statements. He asserted claims for professional negligence, fraud, breach of fiduciary duty, and breach of contract.

The accountants argued that the fraud and breach of fiduciary duty claims were barred by the anti-fracturing rule, which prevents plaintiffs from pleading around a professional negligence claim for some litigation advantage—here, to avoid the statute of limitations. The trial court granted summary judgment, but the court of appeals reversed, finding that the fraud and breach of fiduciary duty claims survived because they alleged additional misconduct and acts beyond the scope of the parties’ written agreements.

Issue:

Does the anti-fracturing rule bar plaintiffs from relabeling their professional negligence claims to gain a litigation advantage, even if the professional services at issue are outside the scope of a written contract?

Court’s Holding:

Yes. The anti-fracturing rule applies whenever the crux of the plaintiff’s allegations sound in professional negligence.

What It Means:

By formally adopting the anti-fracturing rule—which Texas courts of appeals have applied for decades—the Court made clear that parties can’t use artful pleading to evade the procedural and substantive rules that would otherwise apply to their claims. Courts should look beyond immaterial or formal distinctions between the claims pursued and a professional negligence claim to determine whether the conduct alleged and supporting evidence equate to professional negligence.
The Court explained that the anti-fracturing rule “ensure[s] that professional malpractice allegations are litigated under the law applicable to professional malpractice claims.”
Friday’s decision fits within with the Court’s broader jurisprudence, which consistently refuses to permit artful pleading to defeat substantive or procedural rules. It should make it easier for defendants to winnow artfully pleaded claims earlier in litigation.
The Court held that the plaintiff had not met the high bar for showing that an informal fiduciary relationship—a fiduciary duty that arises from “personal relationships of special trust and confidence” rather than a defined, legally recognized fiduciary role—existed between him and the accountants. A four-Justice concurrence (Justice Huddle, joined by Justices Lehrmann, Bland, and Young) went further, arguing that the doctrine should be discarded entirely. The remaining Justices expressed no view on this question.

The Court’s opinion is available here.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Texas Supreme Court. Please feel free to contact the following practice group leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com

Related Practice: Texas General Litigation

Trey Cox +1 214.698.3256 tcox@gibsondunn.com	Collin Cox +1 346.718.6604 ccox@gibsondunn.com	Gregg Costa +1 346.718.6649 gcosta@gibsondunn.com
Ashley Johnson +1 214.698.3111 ajohnson@gibsondunn.com

This alert was prepared by Texas associates Elizabeth Kiernan, Stephen Hammer, and Catherine Frappier.

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.

On February 19, 2025, President Trump signed an executive order titled, Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative. The order aims to focus “limited enforcement resources on regulations squarely authorized by constitutional” statutes and to “commence the deconstruction of the overbearing and burdensome administrative state,” which the accompanying “fact sheet“ claims will “unleash a new Golden Age of America.” While the executive order leaves many questions about the Trump Administration’s enforcement plans unanswered, it confirms that the Administration is likely to move regulatory enforcement in a direction that will have significant implications for corporate America.

The order’s core mandates are two-fold. First, agency heads are directed, “in coordination with their DOGE Team Leads,” to initiate a review process to identify potentially unconstitutional or otherwise problematic regulations and guidance documents—a process that Gibson Dunn has analyzed in a separate alert. As further described in that alert, the order directs agency heads to initiate a 60-day review of all regulations “for consistency with law and Administration policy,” with the goal of rescinding or modifying inconsistent regulations in conjunction with the Administrator of the Office of Information and Regulatory Affairs (OIRA). Second, the executive order requires agency heads to de-prioritize or terminate enforcement actions that are based on regulations that are at odds with federal statutory authority, the Constitution, or Administration policy.

Specifically, in parallel with reviewing regulations, the order directs agency heads to exercise their enforcement discretion to de-prioritize and terminate certain types of enforcement, subject to their “paramount obligation to discharge their legal obligations, protect public safety, and advance the national interest.” Agency heads should identify enforcement actions arising from regulations “that are based on anything other than the best reading of a statute” or that exceed the powers vested by the Constitution in the federal government.

Agency heads are also directed to “determine whether ongoing enforcement of any regulations identified in their regulatory review is compliant with law and Administration policy,” and, in consultation with the Director of the Office of Management and Budget (OMB), “on a case-by-case basis and as appropriate and consistent with applicable law, then direct the termination of all such enforcement proceedings that do not comply with the Constitution, laws, or Administration policy.”

The order defines enforcement actions broadly to include “all attempts, civil or criminal, by any agency to deprive a private party of life, liberty, or property, or in any way affect a private party’s rights or obligations” regardless of how the agency historically labeled the action. The order’s directives thus appear to reach not only administrative agencies charged with civil enforcement, but also the Department of Justice’s (DOJ) criminal enforcement policies, guidelines, and actions. We can anticipate that many ongoing Biden-era enforcement actions may be reviewed under the order.

Several areas are expressly exempted from the order—specifically, “any action related to a military, national security, homeland security, foreign affairs, or immigration-related function of the United States.” The order also does not apply to personnel decisions within the executive branch or “anything else” exempted by the director of OMB.

Potential Impact and Implications

The order’s directive regarding enforcement may affect different areas of federal enforcement to different extents, both in the immediate days ahead, as the order is implemented and faces any legal challenge, and longer into the future.

The extent of the impact of the order remains to be seen. In the short term, the order could lead agencies to pause or abandon ongoing investigations and enforcement actions, whether because those actions appear immediately to be contrary to Administration priorities or as a result of a review process. Additionally, the rapidly changing personnel landscape following DOGE-related initiatives and reductions in force may slow agency actions, including the review of enforcement actions required under this order, as a function of limited enforcement resources.

The order’s focus on ensuring that enforcement actions are properly grounded in authority granted to the agency by statute echoes the reasoning of the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), impacts of which Gibson Dunn has discussed previously. In that opinion, the Supreme Court overruled Chevron v. Natural Resources Defense Council, 467 U.S. 837 (1984), ending judicial deference to administrative agencies’ reasonable interpretations of ambiguous statutes and requiring that judges, rather than administrative agencies, declare what the law is, including with respect to statutes that may be the basis for enforcement actions. The executive order expressly directs agencies to focus enforcement on regulations that are “squarely authorized by constitutional” statutes. And this action by President Trump follows his direction a day earlier, in EO 14215, that “[n]o employee of the executive branch acting in their official capacity may advance an interpretation of the law as the position of the United States that contravenes the President or the Attorney General’s opinion on a matter of law, including but not limited to the issuance of regulations, guidance, and positions advanced in litigation.”

The implications may be more readily apparent for certain industries and areas than others. For example, even before the order, the U.S. Securities and Exchange Commission (SEC) had begun to reverse its Biden Era enforcement positions in the cryptocurrency space (including some that harken back to the first Trump Administration), as evidenced by the SEC seeking to dismiss high-profile litigation,[1] announcing internal reorganizations with the express goal of deploying enforcement resources judiciously,[2] rescinding certain staff bulletins that were part of the Biden Administration’s “stark aberration from longstanding norms as to” the SEC’s “legal authority, policy priorities, and use of enforcement,”[3] and forming a task force to “operate within the statutory framework provided by Congress” and establish “a sensible regulatory path” regarding crypto “that respects the bounds of the law.”[4]

Even for industries that have not yet been touched by Trump Administration shifts in focus, the executive order may create opportunities for entities that are highly regulated or subject to elevated enforcement scrutiny to argue that ongoing enforcement actions should be terminated. Such entities may need to brace for an extended period of uncertainty as their regulators determine how to implement the order. As a result, identifying, assessing, and quantifying regulatory and enforcement risks in the next several years might involve aiming at a moving target.

Open Questions

Although the language in the executive order reaches broadly, the full extent and specific bounds of its impact remain unclear. We expect at least two types of shifts, occurring in parallel and sometimes overlapping: (1) steps to end enforcement actions not based on the best reading of the relevant statute, and (2) changes that further the Administration’s new policy priorities. Some immediate questions arising from the order include, in each category:

Shifts to End Enforcement Not Based on the “Best Reading” of the Law

Might the reviews of enforcement actions cause agencies to terminate compliance monitors, other mandated remedial measures, and undertakings arising from previously resolved enforcement actions? The order directs a review only of “ongoing” enforcement actions, contemplates termination of any non-compliant enforcement actions, and provides direction for prospective enforcement. In contrast to at least one other recent executive order (EO 14209), it does not expressly require agencies to review prior enforcement actions that have concluded. With respect to actions that have already been resolved, it remains unclear to what extent an agency might—or could, legally—seek to terminate ongoing obligations (such as corporate compliance commitments and self-reporting obligations) or to redress past enforcement actions that are now determined to be federal overreach or non-compliant with Administration policy. Such a possibility would be consistent with the approach required by EO 14209 regarding Foreign Corrupt Practices Act (FCPA) enforcement actions, discussed in our recent client alert. In a recent memorandum, the Administration also signaled an end, in the context of the foreign investment in the United States, to “open-ended ‘mitigation’ agreements” in favor of “concrete actions . . . within a specific time, rather than perpetual and expensive compliance obligations.”
What are the implications of this executive order on the use of guidance documents as a basis for enforcement actions? During the previous Trump Administration, DOJ’s Office of the Associate Attorney General issued a policy prohibiting the use of guidance documents to establish violations of law in civil enforcement actions.[5] This executive order directs agencies to de-prioritize actions to enforce certain regulations and defines “regulation” as including non-binding guidance documents, but it does not explicitly address enforcement actions that enforce guidance documents. We expect this Administration may reinstate its previous policy, or a version thereof, and view with skepticism investigations and enforcement actions premised on violations of agency guidance. Such skepticism could have particularly meaningful effects in False Claims Act or criminal enforcement actions related to healthcare, government contracting, and regulated products.
What is the interplay between this executive order and Attorney General Bondi’s recently issued policy memoranda? The Attorney General’s memoranda issued shortly after her swearing in are consistent with the policy pronouncements in this order. For example, we previously asked whether Attorney General Bondi’s February 5, 2025 memorandum, Reinstating the Prohibition on Improper Guidance Documents, signaled that DOJ may rescind Biden Administration guidance and memoranda regarding criminal enforcement, such as the current incarnations of the Criminal Division’s Evaluation of Corporate Compliance Programs guidance or Corporate Enforcement and Voluntary Self-Disclosure Policy. This executive order is another sign pointing in the direction of possible significant revisions in this space.
Do agency administrative proceedings have much of a future? The order’s focus on regulations’ conformity with clearly vested authority could dovetail with a continued push to constrain regulatory enforcement processes with a strict reading of the Constitution. In the wake of the Supreme Court’s opinion in Loper Bright, it would not be a surprise to see Trump Administration agencies bring more enforcement actions in federal courts, which is already required for certain categories of enforcement following the Supreme Court’s opinion in SEC v. Jarkesy, 603 U.S. 109 (2024).

Shifts in Furtherance of Administration Policies and Priorities

What impact will the executive order have on negotiated resolutions and settlements of enforcement actions? The order may have some impact on settlements and negotiated resolutions, but it remains an open question whether an interest in saving limited resources will lead to a greater tendency to settle or whether agencies will opt instead for litigation to press aggressive readings of statutes, regulations, or executive branch authority in service of the Administration’s priorities. By broadly defining enforcement actions, the order appears to apply equally to enforcement actions in adversarial proceedings and to those on pathways to negotiated resolutions. Agencies have historically used such settlements to save limited agency resources—one of the stated goals of the order. However, the order’s central theme of ensuring agencies bring only a subset of the enforcement actions they have historically pursued may mean less appetite for negotiated resolutions, if that subset is composed of stronger cases in areas important to the Administration.
How will agencies continue enforcement outside the Administration’s stated priorities? It remains unclear how and to what extent agencies with legal obligations and a remit that partially touch on stated Administration priorities will conduct enforcement in other areas, and how agencies without such a remit will continue enforcement or receive further guidance and direction. In the latter category, the Consumer Financial Protection Bureau (CFPB) stands out as an early example of the Administration taking steps that effectively end agency enforcement that did not align with its policies, as Gibson Dunn discussed in a recent alert.

Questions Implicating Both Types of Shifts

Do the order’s exemptions and “paramount obligations” matter? Although the subject matters explicitly exempted by the order appear straightforward, the devil may lie in the details. For example, EO 14209, which a week earlier mandated a review of FCPA enforcement, expressly relied on those enforcement actions’ importance in foreign affairs—an area exempt from this order. The accompanying fact sheet to that executive order also characterized the need for strategic advantages in critical minerals, deepwater ports, and other key infrastructure or assets around the world as “critical” to national security—another exemption from this order. Assuming the Administration maintains a consistent view, enforcement actions in these areas—and related regulations, policies, and guidance—would all be exempt from this order’s directives. It is equally possible, in theory, that agency heads’ “paramount obligations” to discharge their duties, protect public safety, and further national interests could exempt certain types of enforcement from the order’s directives.
Is change the only constant? These directives are but the latest in a series of executive orders, which we track and have analyzed at length. It would be difficult to summarize succinctly their collective breadth and varying degrees of specificity. One thing we can say is that we have now seen several instances of executive orders intersecting with, and building upon, earlier ones. It is possible, if not probable, that the Administration will issue other directives that have an impact on a particular agency, regulation, or enforcement action before the agencies complete their reviews or OIRA develops a Unified Regulatory Agenda, as prescribed by this order.

We will continue monitoring and reporting on the changes implemented by the new Administration.

[1] See Dave Michaels & Vicky Ge Huang, Coinbase Says SEC Intends to Drop Lawsuit Against Crypto Exchange, Wall St. J., Feb. 21, 2025.

[2] See Press Release, SEC, SEC Announces Cyber and Emerging Technologies Unit to Protect Retail Investors (Feb. 20, 2025), https://www.sec.gov/newsroom/press-releases/2025-42.

[3] Mark T. Uyeda, Acting Chairman, SEC, Remarks at the Florida Bar’s 41st Annual Federal Securities Institute and M&A Conference (Feb. 24, 2025), https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-florida-bar-022425.

[4] Press Release, SEC, SEC Crypto 2.0: Acting Chairman Uyeda Announces Formation of New Crypto Task Force (Jan. 21, 2025), https://www.sec.gov/newsroom/press-releases/2025-30.

[5] Memorandum from the Associate Attorney General to Heads of Civil Litigating Components, DOJ, Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases (Jan. 25, 2018), https://www.justice.gov/archives/opa/press-release/file/1028756/dl?inline. See Press Release, DOJ, Associate Attorney General Brand Announces End to Use of Civil Enforcement Authority to Enforce Agency Guidance Documents (Jan. 25, 2018), https://www.justice.gov/archives/opa/pr/associate-attorney-general-brand-announces-end-use-civil-enforcement-authority-enforce-agency.

The following Gibson Dunn lawyers prepared this update: F. Joseph Warin, Stephanie Brooker, David Burns, M. Kendall Day, Stuart F. Delery, Gustav W. Eyler, Melissa L. Farrar, Amy Feagles, Svetlana S. Gans, Katlin McKelvie, David C. Ware, Bryan H. Parr, Chelsea D’Olivo, Veronica Goodson, and Todd Truesdale.

Gibson Dunn’s White Collar Defense and Investigations Practice Group successfully defends corporations and senior corporate executives in a wide range of federal and state investigations and prosecutions, and conducts sensitive internal investigations for leading companies and their boards of directors in almost every business sector. The Group has members across the globe and in every domestic office of the Firm and draws on more than 125 attorneys with deep government experience, including more than 50 former federal and state prosecutors and officials, many of whom served at high levels within the Department of Justice and the Securities and Exchange Commission, as well as former non-U.S. enforcers.

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, the authors, or any leader or member of Gibson Dunn’s White Collar Defense and Investigations or Anti-Corruption and FCPA practice groups:

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Gibson Dunn is closely monitoring regulatory developments and executive orders in this fast-paced environment for administrative law. Our lawyers are available to assist clients as they navigate the challenges and opportunities posed by the current, evolving legal landscape.

In just the first month of the new administration, President Trump has taken several actions to exercise Executive Branch control over “independent” agencies. Agencies generally have been considered “independent” from presidential control if a statute provides that the agency’s leader or leaders may be removed only for cause.[1] These include many powerful and important agencies, including the Securities and Exchange Commission (SEC), Federal Trade Commission (FTC), the Federal Communications Commission (FCC), National Labor Relations Board (NLRB), Federal Energy Regulatory Commission (FERC), Board of Governors of the Federal Reserve System, Equal Employment Opportunity Commission (EEOC), and many more.

In his recent Executive Order titled “Ensuring Accountability For All Agencies,” President Trump ordered all independent agencies to submit their major regulations for White House review and approval in the same manner that traditional Executive Branch agencies do, authorized the Office of Management and Budget (OMB) to review and adjust independent agencies’ use of funds to ensure consistency with the President’s policies, and ordered all Executive Branch officers and employees to adopt as “controlling” the interpretations of law advanced by the President and Attorney General. A number of President Trump’s other executive orders, including the order requiring each agency to establish its own Department of Government Efficiency (DOGE) Team and the order requiring review of all existing regulations, lack carveouts for independent agencies that past administrations have frequently included in similar directives. Separately, the acting Solicitor General has informed Congress that the Department of Justice will no longer defend the constitutionality of for-cause removal protections at certain agencies and will seek to limit or overturn Humphrey’s Executor—the Supreme Court decision upholding the independence of the 1930s version of the FTC. The acting Solicitor General also has stated that multiple layers of for-cause removal protections for administrative law judges are unconstitutional. President Trump has also fired agency leaders at the EEOC, NLRB, the Merit Systems Protection Board, and the Office of Special Counsel, though litigation is ongoing as to whether those terminations were lawful.

I. The President’s Historical Control Over Independent Agencies.

Since the Interstate Commerce Commission was established in the late 1800s and the FTC in 1914, Congress has protected some agency leaders from presidential removal on the theory that nonpolitical experts should be insulated from political pressure. Almost from the start, these limits on the President’s removal powers proved controversial, and in 1926 the Supreme Court ruled that the Constitution requires that the President be able to remove certain Executive Branch officials. Recent Supreme Court decisions have established only “two exceptions to the President’s unrestricted removal power.” The first exception applies to “multimember expert agencies that do not wield substantial executive power.” Notably, this exception tracks the Court’s 1935 decision in Humphrey’s Executor v. United States, which upheld removal protections for FTC commissioners because, as the 1935 Court framed it, the commissioners exercised primarily “quasi-judicial and quasi-legislative” functions. The second exception applies to “inferior officers with limited duties and no policymaking or administrative authority.”

The Court has rejected removal protections beyond these two exceptions, including double layers of protection for certain lower-level agency employees and removal protections for a single-member agency head. Today, independent agencies generally consist of multimember, partisan-balanced boards where statutes provide that leaders may be removed only for cause and not at the President’s pleasure.

The Trump Administration has taken an assertive view of the President’s removal powers and the corresponding power to control the entire Executive Branch, including independent agencies. It has asserted that a number of statutory removal protections for heads of independent agencies are unconstitutional because they wield substantial executive power and the President must be able to supervise all executive power. To the extent Humphrey’s Executor allows such removal protections, the Trump Administration has said that it will ask the Supreme Court to overrule that decision. Likewise, the Trump Administration has concluded that multiple layers of removal protections for administrative law judges (officials who preside over agency adjudications) are unconstitutional.

II. The Implications Of President Trump’s “Ensuring Accountability For All Agencies” Executive Order.

President Trump’s Order on “ensuring accountability” would subject independent agencies to significant political control across activities including rulemaking, legal interpretations, enforcement priorities, and expenditures. This Order has a number of implications that are discussed in turn below.

OIRA Review. The Order requires independent agencies to submit their major regulations to the Office of Information and Regulatory Affairs (OIRA) for review and approval in the same way traditional executive branch agencies have done for decades. OIRA is a division of OMB that reviews agency rules before they are issued to ensure the rules are consistent with principles of administrative law and consistent with the President’s policy priorities. While some independent agencies have informally and voluntarily cooperated with OIRA reviews in the past, this Order for the first time makes compliance with the OIRA process mandatory. The need to clear proposed and final rules through OIRA prior to publication could delay independent agencies’ ability to initiate and finalize rulemakings. As part of the review process, independent agencies will need to conduct a cost-benefit analysis under Executive Order 12866, which OIRA will review. By subjecting independent agencies’ economic analyses to OIRA review, the Order could improve the quality and consistency of the methodology underlying agencies’ estimates of the costs and benefits of their rules. In some instances, OIRA’s review could persuade agencies not to proceed with a planned rulemaking or could result in a White House directive that the rulemaking be halted.

Interpretation of Laws. The Order also provides that “[t]he President and the Attorney General . . . shall provide authoritative interpretations of law for the executive branch” and their “opinions on questions of law are controlling on all employees in the conduct of their official duties.” Further, no employee or officer “may advance an interpretation of the law as the position of the United States that contravenes the President or the Attorney General’s opinion on a matter of law, including but not limited to the issuance of regulations, guidance, and positions advanced in litigation, unless authorized to do so by the President or in writing by the Attorney General.”[2] Accordingly, when the President or Attorney General have provided an opinion or authoritative interpretation of any statute or regulation, the agency official generally may not advance a contrary interpretation of the law.

This is a meaningful limitation for independent agencies. President Trump has already advanced a number of legal interpretations through executive orders and memoranda, and traditionally, the Department of Justice (headed by the Attorney General) offers opinions on many legal issues. Although in the past independent agencies have often advanced their own legal interpretations in regulations and in litigation (at least until a case reached the Supreme Court, where the Solicitor General takes over)—sometimes in opposition to positions put forward by the Department of Justice—the Order requires them to adopt the views of the President and Attorney General moving forward.

Apportionment. The Order authorizes the Director of OMB to “review independent regulatory agencies’ obligations for consistency with the President’s policies and priorities” and to “adjust such agencies’ apportionments by activity, function, project, or object … to advance the President’s policies and priorities” including to “prohibit independent regulatory agencies from expending appropriations on particular activities, functions, projects, or objects, so long as such restrictions are consistent with law.”

This provision grants the Director of OMB control over independent agencies’ budgets, expenditures, and—to a significant extent—discretion. The “obligations,” “apportionments,” and “appropriations” are budgetary terms referring to various ways agencies are authorized to spend and do spend money. Notably, the Director’s authority to prohibit expenditures on certain activities could allow him to order nonenforcement of regulations or defunding programs that are inconsistent with the President’s policy preferences.

Exceptions for Monetary Policy and Other Legal Authorities. The Order exempts the Federal Reserve’s monetary policy from its scope. Accordingly, the Federal Reserve’s interest rate decisions will not be subject to OIRA review, though its banking regulatory functions are covered by the scope of the Order.

The Order also notes that it should not be read to affect “the authority granted by law to an executive department, agency, or the head thereof.”

Indirect Implications. The President’s assertion of Executive Branch control over independent agencies will have additional consequences not mentioned in the Order. As we previously noted, many of President Trump’s other executive orders do not include carve outs for independent agencies. Accordingly, the executive orders requiring cooperation with DOGE appear to apply to independent agencies. These orders include requirements to establish a DOGE team, share information with DOGE, engage in workforce-optimization efforts, and conduct comprehensive reviews of existing regulations and deregulation. In combination with the Order’s requirement that independent agencies follow the President’s interpretation of the law, independent agencies may also be required to adopt the President’s legal views as espoused in executive orders such as those that describe certain DEI and DEIA policies as illegal.[3]

Two of these orders may have particular significance for independent agencies:

“Ensuring Lawful Governance And Implementing The President’s ‘Department Of Government Efficiency’ Deregulatory Initiative.” This order requires agencies to identify all regulations that are potentially unlawful and then develop a plan to rescind or modify them. Specifically, in coordination with OMB, DOGE, and the Attorney General, agencies have sixty days to identify all regulations that: (1) are “unconstitutional” or “raise serious constitutional difficulties;” (2) “are based on unlawful delegations of legislative power;” (3) contravene the “the best reading of the underlying statutory authority or prohibition;” (4) violate the major-questions doctrine; (5) “impose significant costs upon private parties that are not outweighed by public benefits;” (6) “significantly and unjustifiably” impede innovation; or (7) “impose undue burdens on small business and impede private enterprise and entrepreneurship.” The OIRA Administrator (who has not yet been designated) shall then consult with agency heads to develop a Unified Regulatory Agenda to rescind or modify these regulations.

“Unleashing Prosperity Through Deregulation.” As we have previously discussed, this order requires that agencies identify at least ten existing regulations to repeal for every new regulation they promulgate, and it requires the total incremental cost of new regulations be “significantly less than zero.”

Because independent agencies have historically been exempt from similar deregulatory efforts, these orders could materially change the agencies’ longstanding regulatory processes.

III. Pending Litigation Regarding the President’s Control Over Independent Agencies.

The President’s assertion of control over independent agencies has already begun to attract legal challenges. These challenges could affect the practical consequences of the Order and of President Trump’s other actions regarding independent agencies. Currently, some of the most notable litigation has been brought by heads of independent agencies who were fired without an explanation or compliance with statutory notice requirements (e.g., without complying with a “for cause” removal restriction). For example:

Dellinger v. Bessent, 1:25-cv-00385 (D.D.C. filed Feb. 10, 2025), is a case by the Special Counsel leading the Office of Special Counsel (which oversees various whistleblower and government accountability projects), whom President Trump fired without explanation. The District Court issued a temporary restraining order reinstating Dellinger as the Special Counsel, the D.C. Circuit dismissed an appeal/denied mandamus for lack of jurisdiction, and the Supreme Court held the government’s appeal in abeyance until the temporary restraining order expires on February 26.

Wilcox v. Trump, No. 1:25-cv-00334 (D.D.C. filed Feb. 5, 2025), is a suit by a former Democratic member of the National Labor Relations Board whom President Trump fired without explanation. The case is currently before the U.S. District Court for the District of Columbia, and expedited summary judgment briefing is underway.

Harris v. Bessent, No. 1:25-cv-00412 (D.D.C. filed Feb. 11, 2025), is a suit by the former chair of the Merit Systems Protection Board, whom President Trump demoted and subsequently fired without explanation. The U.S. District Court for the District of Columbia issued a temporary restraining order reinstating Harris as the Chair. The Trump Administration has appealed the case to the D.C. Circuit and/or the Supreme Court, where it would likely have the same fate as Dellinger. Meanwhile, the plaintiff moved for a preliminary injunction in the district court.

IV. Conclusion

[1] Congress sometimes labels agencies as “independent” without providing any removal protections. See Collins v. Yellen, 594 U.S. 220, 248–50 (2021).

[2] The Executive Order just refers to “employees,” but defines employees according to 5 U.S.C. § 2105, which includes officers.

[3] A federal district court recently granted a preliminary injunction enjoining some of these orders, so the efficacy of these orders may be subject to change.

The following Gibson Dunn lawyers prepared this update: Michael Bopp, Stuart Delery, Eugene Scalia, Helgi Walker, 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)

Eugene Scalia – Co-Chair, Administrative Law & Regulatory Practice Group,
(+1 202.955.8673, dforrester@gibsondunn.com)

Helgi C. Walker – Co-Chair, Administrative Law & Regulatory Practice Group,
(+1 202.887.3599, hwalker@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,
(+1 202.777.9566, aneely@gibsondunn.com)