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For the eighth successive Congress, Gibson Dunn is pleased to release a table of authorities summarizing the oversight and investigative (O&I) authorities of each House and Senate committee. Congressional investigations can arise with little warning and immediately attract the media spotlight. Understanding the full extent of a committee’s investigative arsenal is crucial to successfully navigating a congressional investigation.

Congressional committees have broad investigatory powers, including the power to issue subpoenas to compel witnesses to produce documents, testify at committee hearings, and, in some cases, appear for depositions.

Unique Features of Congressional Investigations

Congressional investigations are unlike more familiar executive branch investigations in several respects. First, there are often complex motivations at work. Committee chairs may want to advance their political agenda, heighten their public profile, develop support for a legislative proposal, expose alleged criminal wrongdoing or unethical practices, pressure a company to take certain actions, or respond to public outcry. Recognizing these underlying objectives and evaluating the political context surrounding an inquiry can therefore be a key component of developing an effective response strategy.

Second, Congress’s power to investigate is broad—as broad as its legislative authority—which can often make investigations unpredictable. The “power of inquiry” is inherent in Congress’s authority to “enact and appropriate under the Constitution.”[1] And while Congress’s investigatory power is not a limitless authorization to probe any private affair or to conduct law enforcement investigations, but rather must further a valid legislative purpose,[2] the term “legislative purpose” is understood broadly to include gathering information not only for the purpose of legislating, but also for overseeing governmental matters and informing the public about the workings of government.[3]

Finally, unlike the relatively controlled environment of a courtroom or a confidential investigation, congressional investigations often unfold through public letters and subpoenas and before television cameras in hearing rooms. Targets must coordinate their legal, political, and communications strategies to respond effectively.

Investigatory Tools of Congressional Committees

Congress has a broad range of investigatory tools at its disposal, which enable it to gather information, ensure compliance with legal and regulatory standards, and inform legislative and policy agendas. Although many of Congress’s tools present opportunities for targets to comply voluntarily, it does have the ability to issue subpoenas to compel the production of documents and testimony. It is essential for subjects of congressional oversight to understand both the scope and the limitations of these investigatory powers in order to respond effectively.

Requests for Information: Any member of Congress may request information from an individual or entity, including through documents, briefings, or other formats.[4] Absent the issuance of a subpoena, responding to such requests is voluntary as a legal matter (although of course there may be public or political pressure to respond). As such, recipients of such requests should carefully consider the merits of different degrees of engagement.
Interviews: Interviews also are voluntary, led by committee staff, and occur in private (in person or remotely). They tend to be less formal than depositions and are sometimes transcribed. Committee staff may take copious notes and rely on interview testimony in subsequent hearings or public reports. Although interviews are typically not conducted under oath, false statements to congressional staff can be criminally punishable as a felony under 18 U.S.C. § 1001.

Depositions: Depositions can be compulsory, transcribed, and taken under oath. As such, depositions tend to be more formal than interviews and are similar to those in traditional litigation. The number of committees with authority to conduct staff depositions has increased significantly over the last few years, and a member no longer needs to be present in a House committee deposition.

Hearings: While both depositions and interviews allow committees to acquire information quickly and (at least in many circumstances) confidentially,[5] testimony at hearings, unless on a sensitive topic, is conducted in a public session led by the members themselves (or, on occasion, committee counsel).[6] Hearings can either occur at the end of a lengthy staff investigation or take place more rapidly, often in response to an event that has garnered public and congressional concern. Most akin to a trial in litigation (though without many of the procedural protections or the evidentiary rules applicable in judicial proceedings), hearings are often high profile and require significant preparation to navigate successfully.
Executive Branch Referral: Congress also has the power to refer its investigatory findings to the executive branch for criminal prosecution. After a referral from Congress (or independently on its own initiative), the Department of Justice may charge an individual or entity with making false statements to Congress, obstruction of justice, or destruction of evidence. Importantly, while Congress may make a referral, the executive branch retains the discretion to prosecute, or not.

Subpoena Power

As noted, Congress will usually seek voluntary compliance with its requests for information or testimony as an initial matter. If requests for voluntary compliance are met with resistance, however, or if time is of the essence, Congress may compel disclosure of information or testimony by issuing a subpoena.[7] Like Congress’s power of inquiry generally, there is no explicit constitutional provision granting Congress the right to issue subpoenas.[8] But the Supreme Court has recognized that the issuance of subpoenas is “a legitimate use by Congress of its power to investigate” and its use is protected from judicial interference in some respects by the Speech or Debate Clause.[9] Congressional subpoenas are subject to few legal challenges,[10] and “there is virtually no pre-enforcement review of a congressional subpoena” in most circumstances.[11]

The authority to issue subpoenas is initially governed by the rules of the House and Senate, which delegate further rulemaking to each committee.[12] While every standing committee in the House and Senate has the authority to issue subpoenas, the specific requirements for issuing a subpoena vary by committee. These rules are still being developed by the committees of the 119th Congress and can take many forms. For example, in the 118th Congress, most House committee chairs were authorized to issue subpoenas unilaterally if they provided notice to the ranking member. Other chairs, however, required approval of the ranking member, or, upon the ranking member’s objection, required a vote of the majority of the committee in order to issue a subpoena.

Contempt of Congress

Failure to comply with a subpoena can result in one of three enforcement avenues: a criminal contempt referral, a civil contempt action, or exercise of Congress’s inherent contempt power.

Statutory Criminal Contempt Power: Congress possesses statutory authority to certify recalcitrant witnesses for criminal contempt prosecutions in federal court. In 1857, Congress enacted this criminal contempt statute as a supplement to its inherent authority.[13] Under the statute, a person who refuses to comply with a congressional subpoena is guilty of a misdemeanor and subject to a fine and imprisonment.[14] “Importantly, while Congress initiates an action under the criminal contempt statute, the Executive Branch prosecutes.”[15] This relieves Congress of the burdens associated with its inherent contempt authority. The statute simply requires the House or Senate to certify a contempt finding to the Department of Justice. Thereafter, the statute provides that it is the “duty” of the “appropriate United States attorney” to prosecute the matter,[16] although the Department of Justice maintains that it always retains discretion not to prosecute and often declines to do so. Although Congress rarely uses its criminal contempt authority, the House Democratic majority, following the events of January 6, 2021, employed it against a flurry of Trump administration officials, including Attorney General Bill Barr, Secretary of Commerce Wilbur Ross, Secretary of Homeland Security Chad Wolff, political adviser Steve Bannon, Trade Director Peter Navarro, and White House Chief of Staff Mark Meadows. The Department of Justice prosecuted Bannon and Navarro for defying subpoenas from the Select January 6 Committee. Juries found each guilty, and the D.C. Circuit upheld Bannon’s conviction.[17] In September 2024, the Senate unanimously voted to find Ralph de la Torre, the CEO of a bankrupt hospital operator, Steward Health Care, in contempt of the Senate and to certify the report of his contempt to the U.S. Attorney for prosecution. This was the first time the Senate had held someone in criminal contempt since 1971.[18]

Civil Enforcement Authority: Congress may seek civil enforcement of its subpoenas, which is often referred to as civil contempt. The Senate’s civil enforcement power is expressly codified.[19] This statute authorizes the Senate to seek enforcement of legislative subpoenas issued to private parties in a U.S. District Court. In contrast, the House does not have a civil contempt statute, but federal district judges have held that it may pursue a civil contempt action “by passing a resolution creating a special investigatory panel with the power to seek judicial orders or by granting the power to seek such orders to a standing committee.”[20]

Inherent Contempt Power: The oldest, and least relied upon, form of compulsion is Congress’s inherent contempt power. The inherent contempt power has not been used by either body since 1935.[21] Much like the subpoena power itself, the inherent contempt power is not specifically authorized in the Constitution, but the Supreme Court has recognized its existence and legitimacy.[22] To exercise this power, the House or Senate must pass a resolution and then conduct a full trial or evidentiary proceeding, followed by debate and (if contempt is found to have been committed) imposition of punishment.[23] As is apparent in this description, the inherent contempt authority is cumbersome and inefficient, and it is potentially fraught with political peril for legislators.[24]

Committee Procedural Rules

Committees may adopt their own procedural rules for issuing subpoenas, taking testimony, and conducting depositions, and many committees update their rules each Congress. Committees are also subject to the rules of the full House or Senate, and, in the House, the Chair of the Committee on Rules issues regulations prescribing general deposition procedures applicable to all committees. Typically, House committee chairs can issue subpoenas unilaterally, while Senate committees generally cannot. To issue a subpoena, Senate committee rules for all but one committee—Homeland Security and Governmental Affairs—and one subcommittee—Permanent Subcommittee on Investigations—require (1) consent from the Ranking Member or (2) a majority vote of the committee to authorize the subpoena.

Further, House and Senate committees afford certain subcommittees the authority to authorize the issuance of subpoenas. House Rules provide that subcommittees may authorize and issue subpoenas by a majority vote of subcommittee members.[25] In the 119th Congress, 13 House committees have given a total of 71 subcommittees subpoena authority—either implicitly or explicitly—through committee rules.[26] On the other hand, 7 committees[27] either limit or proscribe subcommittee subpoena authority, often because committee rules delegate subpoena authority solely to the committee chair. In contrast with the House, only 3 Senate committees[28]—Banking, Housing, and Urban Affairs; Health, Education, Labor, and Pensions; and Homeland Security and Governmental Affairs—provide for 12 subcommittees to exercise subpoena authority.

Failing to comply with a subpoena from a committee or to otherwise adhere to committee rules during an investigation may have severe legal, strategic, and reputational consequences. If a subpoena recipient refuses to comply with a subpoena, committees may resort to additional demands, initiate judicial enforcement or contempt proceedings (as noted above), and/or generate negative press coverage of the noncompliant recipient. Although rarely used, criminal contempt prosecutions can also be brought in the event of willful refusals to comply with lawful congressional subpoenas. As we have detailed in previous client alerts,[29] however, defenses exist to congressional subpoenas, including challenging a committee’s jurisdiction or failure to follow applicable rules, asserting attorney-client privilege and work product claims, and raising constitutional challenges.

Under the Republican majority, committee investigations have focused on censorship of conservative speech, China, environmental issues, discrimination, including failure to adequately address antisemitism, media bias, debanking, COVID origins and vaccines, and antitrust issues. We also anticipate that committees in both chambers will pursue investigations regarding healthcare, cybersecurity, and other topics.[30]

This client alert provides a table that presents the key investigative powers and authorities for each House and Senate committee. The table includes information for each committee that answers key O&I related questions, including:

What is the scope of the committee’s investigative authority?
What are the procedures for exercising the committee’s subpoena power?
Can the chair of the committee issue a subpoena unilaterally?
Does the committee permit staff to question witnesses at a hearing?
Can the committee compel a witness to sit for a deposition? If so, what are the procedures for doing so?
What are the rules that apply to depositions before the committee?

Below, we have highlighted noteworthy changes in the committee rules, which House and Senate committees of the 119th Congress adopted earlier this year.[31]

Noteworthy Changes

House

As we detailed in a client alert from earlier this year,[32] House Republicans will continue to use expansive investigative tools, including the ability to issue subpoenas without consulting the minority and deposition powers that allow staff to conduct depositions without members present.
The Rules of the 119th Congress reauthorized the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party and broadened its jurisdiction.[33] The Select Committee’s expanded jurisdiction now consists of “policy recommendations on countering the economic, technological, security, and ideological threats of the Chinese Communist Party to the United States and allies and partners of the United States,”[34] a seemingly broader and more pointed focus than its jurisdiction in the 118th Congress, which was “to investigate and submit policy recommendations on the status of the Chinese Communist Party’s economic, technological, and security progress and its competition with the United States.”[35]

Senate

In the Senate, the new Republican majority can make use of unilateral subpoena authority on one committee—Homeland Security and Governmental Affairs—and one subcommittee—Permanent Subcommittee on Investigations. Three committees—Agriculture, Nutrition, and Forestry, Small Business and Entrepreneurship, and Veterans’ Affairs—afford the committee Chair qualified unilateral subpoena authority, requiring the Chair to notify the Ranking Member and, if the Ranking Member does not communicate their objection within a period of 48 to 72 hours, the Chair may issue the subpoena without the Ranking Member’s approval.
Of note, the Committee on Commerce, Science, and Transportation scheduled a mark up in January 2025 to change its rules to give the Chair unilateral subpoena authority. The Committee postponed the markup which, to date, has not been rescheduled.[36] Accordingly, the Committee is currently operating under its rules from the 118th Congress, meaning that for the Chair to issue a subpoena the Ranking Member must consent or the Committee must authorize the subpoena through a majority vote.[37]

Our table of authorities provides an overview of how individual committees can compel a witness to cooperate with their investigations. But each committee conducts congressional investigations in its own particular way, and investigations vary materially even within a particular committee. While our table of authorities provides a general overview of what rules apply in given circumstances, it is essential to look carefully at a committee’s rules and be familiar with its practices to understand how its authorities apply in a particular context.

Gibson Dunn lawyers have extensive experience defending targets of and witnesses in congressional investigations. They know how investigative committees operate and can anticipate strategies and moves in particular circumstances because they also ran or advised on congressional investigations when they worked on the Hill. If you have any questions about how a committee’s rules apply in a given circumstance or the ways in which a particular committee tends to exercise its authorities, please feel free to contact us for assistance. We are available to assist should a congressional committee seek testimony, information, or documents from you.

[1] Barenblatt v. United States, 360 U.S. 109, 111 (1957).

[2] See Wilkinson v. United States, 365 U.S. 399, 408-09 (1961); Watkins v. United States, 354 U.S. 178, 199-201 (1957).

[3] Michael D. Bopp, Gustav W. Eyler, & Scott M. Richardson, Trouble Ahead, Trouble Behind: Executive Branch Enforcement of Congressional Investigations, 25 Corn. J. of Law & Pub. Policy 453, 456-57 (2015).

[4] Id.

[5] Id. at 457.

[6] Id. at 456-57.

[7] Id. at 457.

[8] Id.

[9] Eastland v. U.S. Servicemen’s Fund, 421 U.S. 491, 504 (1975).

[10] Bopp, supra note 3, at 458.

[11] Id. at 459. The principal exception to this general rule arises when a congressional subpoena is directed to a custodian of records in which a third party (typically the actual target of the investigation) has a legal interest. In those circumstances, the Speech or Debate Clause does not bar judicial challenges brought by the third party seeking to enjoin the custodian from complying with the subpoena, and courts have reviewed the validity of such subpoenas. See, e.g., Trump v. Mazars, 140 S. Ct. 2019 (2020); Bean LLC v. John Doe Bank, 291 F. Supp. 3d 34 (D.D.C. 2018). It also could be argued that a subpoena is subject to pre-enforcement challenge if it lacks a valid legislative purpose. The idea is that the Speech or Debate Clause might not preclude a preemptive litigation challenge to such a subpoena on the rationale that a subpoena lacking any valid legislative purpose is not a legislative act at all. In Trump v. Committee on Ways & Means, the district court explained that “in the context of investigations, and in particular cases involving congressional efforts to gather information, . . . Speech or Debate Clause immunity is available only when those efforts are undertaken for a legitimate legislative purpose, that is, to gather information ‘concerning a subject “on which legislation could be had.”‘“ 415 F. Supp. 3d 38, 45-46 (D.D.C. 2019) (quoting McSurely v. McClellan, 553 F.2d 1277, 1284-85 (D.C. Cir. 1976) (en banc), in turn quoting Eastland, 421 U.S. at 506). The argument faces the challenges discussed earlier in that we have not seen a successful challenge based on the absence of a legislative purpose in nearly a century and a half.

[12] Bopp, supra note 3 at 458.

[13] Id. at 461.

[14] See 2 U.S.C. §§ 192 and 194.

[15] Bopp, supra note 3, at 462.

[16] See 2 U.S.C. § 194.

[17] United States v. Bannon, 101 F.4th 16, 18 (D.C. Cir. 2024). Navarro’s appeal from his conviction is still pending before the court of appeals. See United States v. Navarro, No. 24-3006 (D.C. Cir.).

[18] 170 Cong. Rec. S6405-02 (daily ed. Sept. 25, 2024); S. Res. 837 (118th Cong.).

[19] See 2 U.S.C. §§ 288b(b), 288d.

[20] Bopp, supra note 3, at 465. A panel of the U.S. Court of Appeals for the D.C. Circuit ruled in August 2020 that the House may not seek civil enforcement of a subpoena absent statutory authority. Committee on the Judiciary of the United States House of Representatives v. McGahn, 973 F.3d 121 (D.C. Cir. 2020). That decision was vacated when the D.C. Circuit decided to rehear the case en banc, but the case then settled without a final judicial resolution, thereby leaving the question unresolved in the D.C. Circuit.

[21] See Congress’s Contempt Power and the Enforcement of Congressional Subpoenas: Law, History, Practice, and Procedure, Congressional Research Service (May 12, 2017), at 12.

[22] Bopp, supra note 3, at 460 (citing Anderson v. Dunn, 19 U.S. 204, 228 (1821)).

[23] Id.

[24] Id. at 466.

[25] House Rule XI(2)(m).

[26] Ten committees—Agriculture, Appropriations, Armed Services, Education and Workforce, Ethics, Foreign Affairs, Judiciary, Oversight and Government Reform, Rules, and Transportation and Infrastructure—either explicitly or implicitly provide for subcommittee subpoena authority. Three committees—House Administration, Natural Resources, and Small Business—do not reference subcommittee subpoena authority and thus default to House Rules’ default provision that allows for such authority. Two committees—the Committee on the Budget and the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party—do not have any subcommittees.

[27] Energy and Commerce; Financial Services; Homeland Security; Permanent Select Committee on Intelligence; Science, Space, and Technology; Veterans’ Affairs; and Ways and Means.

[28] Nine committees do not provide for subcommittee subpoena authority: Agriculture, Nutrition, and Forestry; Appropriations; Armed Services; Commerce, Science, and Transportation; Energy and Natural Resources; Environment and Public Works; Finance; Foreign Relations; and Judiciary. Seven committees do not have any subcommittees: Special Committee on Aging, Budget, Ethics, Indian Affairs, Rules and Administration, Small Business and Entrepreneurship, and Veterans’ Affairs.

[29] Congressional Investigations in the 119th Congress (Jan. 22, 2025), https://www.gibsondunn.com/congressional-investigations-in-the-119th-congress/.

[30] Id.

[31] This alert will be updated to reflect several committees finalizing their rules and any subsequent changes to already-adopted committee rules.

[32] Congressional Investigations in the 119th Congress, supra note 1.

[33] See H.R. Res. 5, 119th Cong. § 4(a) (2025).

[34] Id. § 4(a)(2) (2025) (emphasis added).

[35] H.R. Res. 11, 118th Cong. § 1(b)(2) (2023) (emphasis added).

[36] Senate Commerce Committee, Executive Session 2 (Postponed), January 29, 2025, https://www.commerce.senate.gov/2025/1/executive-session-2_2.

[37] Senate Commerce Committee, Rules of the Committee, https://www.commerce.senate.gov/committee-rules.

Please click below to view the complete Table of Authorities of House & Senate 119th Congress:

Table of Authorities

The following Gibson Dunn lawyers assisted in preparing this update: Michael Bopp, Thomas Hungar, Jillian Katterhagen, Kareem Ramadan, Maya Jeyendran, Tate Rosenblatt, and Kelly Yahner.

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

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

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

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

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

Amanda H. Neely – Of Counsel, Congressional Investigations Practice Group,
(+1 202.777.9566, aneely@gibsondunn.com)

Sophia Brill – Of Counsel, Congressional Investigations Practice Group,
(+1.202.887.3530, sbrill@gibsondunn.com)

Jillian N. Katterhagen – Associate Attorney, Congressional Investigations Practice Group,
(1.202.955.8283, jkatterhagen@gibsondunn.com)

Kareem W. Ramadan – Associate Attorney, Congressional Investigations Practice Group
(+1.202.887.3542, kramadan@gibsondunn.com)

Kelly M. Yahner – Associate Attorney, Congressional Investigations Practice Group
(+1.202.777.9581, kyahner@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.

We are pleased to provide you with the April 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

The federal banking agencies continue to revisit their approach to digital asset- and blockchain-related activities.
- The Board of Governors of the Federal Reserve System (Federal Reserve) rescinded (i) SR 22-6, which established an expectation that state member banks notify the Federal Reserve prior to engaging in crypto-asset-related activities and (ii) SR 23-8, which required state member banks to obtain written supervisory nonobjection prior to engaging in certain “dollar token” activities.
- The Federal Reserve and Federal Deposit Insurance Corporation (FDIC) withdrew from the “Joint Statement on Crypto-Asset Risks to Banking Organizations” (Jan. 3, 2023) and the “Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities” (Feb. 23, 2023), joining the Office of the Comptroller of the Currency (OCC) which had previously withdrawn on March 7, 2025.
- The most recent actions by the Federal Reserve and FDIC now generally align the three federal banking agencies on crypto-related activities, no longer requiring institutions to receive nonobjection prior to engaging in certain crypto-related activities.
- As noted in the FDIC’s release announcing its withdrawal, the agencies “are exploring issuing additional clarity with respect to banking organizations’ crypto-asset and related activities in the coming weeks and months.”
Acting Chairman Travis Hill highlighted key policy issues in focus by the FDIC, including encouraging de novo bank formation, revamping the FDIC’s approach to digital assets and blockchain-related activities (see above), resolution planning and the failed bank resolution process (see below), and reevaluating quantitative asset thresholds in FDIC regulations.
The Federal Reserve requested comment on a proposal to reduce the volatility of the capital requirements stemming from the Federal Reserve’s annual stress test, consistent with its December 23, 2024 announcement and the December 24, 2024 suit challenging the legality of the current the stress testing framework.

DEEPER DIVES

Federal Reserve and FDIC Withdraw Guidance on Certain Crypto-Related Activities to Align with OCC. On April 24, 2025, the Federal Reserve announced the withdrawal of guidance related to crypto-asset and dollar token activities and related changes to the Federal Reserve’s supervisory expectations. The Federal Reserve rescinded both SR 22-6 establishing that state member banks should notify the Federal Reserve prior to engaging in crypto-asset-related activities and SR 23-8 requiring state member banks to obtain written supervisory nonobjection prior to engaging in certain “dollar token” activities. On the same date, the Federal Reserve and the FDIC also withdrew two other joint interagency statements that addressed crypto-asset risks and liquidity risks stemming from crypto-asset market vulnerabilities. The Federal Reserve did not issue replacement guidance, but stated that the change ensures that the Federal Reserve’s “expectations remain aligned with evolving risks and further support innovation in the banking system,” and committed to working with the agencies to consider whether additional guidance is appropriate. Similarly, the FDIC noted it is exploring issuing additional clarity with respect to banking organizations’ crypto-asset and related activities in the future.

Insights. As we have previously highlighted, the federal banking agencies continue to signal increased receptivity to crypto-related activities and digital assets. Coupled with the OCC and FDIC’s related actions last month, the withdrawal and rescission of additional guidance from the Biden Administration serves as the latest of many incremental steps toward a regulatory environment that is more accepting of crypto- and blockchain-related activities and product offerings.

As noted by Acting Chairman Hill in his April 8, 2025 update on key policy issues, “one specific area that merits attention is the use of public, permissionless blockchains by banks.” The Federal Reserve’s Policy Statement on Section 9(13) of the Federal Reserve Act notes in the preamble to the final rule that the Federal Reserve “generally believes that issuing tokens on open, public, and/or decentralized networks, or similar systems is highly likely to be inconsistent with safe and sound banking practices.” At this time, there is no indication the Federal Reserve’s Policy Statement on Section 9(13) of the Federal Reserve Act is under consideration for amendment or reversal through a subsequent rulemaking process.

In addition, other crypto-related activities and product offerings may present thorny legal authority/permissibility issues under law or raise safety and soundness concerns, all of which must continue to be evaluated by institutions. In practice, banks are still expected to engage with the Federal Reserve, FDIC and OCC regarding proposed crypto-related activities.

Acting Chairman Hill Provides an Update on Key Policy Issues. On April 8, 2025, Acting Chairman Hill highlighted key policy issues in focus by the FDIC, including encouraging de novo bank formation, revamping the FDIC’s approach to digital assets and blockchain-related activities, resolution planning and the failed bank resolution process, and reevaluating quantitative asset thresholds in FDIC regulations. With respect to de novo bank formation, Acting Chairman Hill described the de novo rate as having “fallen off a cliff.” He noted that the FDIC is considering whether there are scenarios that could warrant adjusted standards, including with respect to up-front and ongoing capital expectations for noncomplex, community banks, or adjustments to deposit insurance applications for innovative business models. He also noted that the FDIC is actively working on a request for information to ask “a comprehensive set of questions addressing issues related to ILC [industrial loan company] applications.”

He also referenced “just a few” of the issues that the FDIC is considering with respect its approach to digital assets and blockchain-related activities, noting that the FDIC expects to issue additional guidance on particular crypto-related activities and raised the prospect of whether the agency “should [] more comprehensively identify which crypto-related activities are permissible.” He highlighted the use of public, permissionless blockchains by banks as an area where additional guidance could be forthcoming, particularly in light of the withdrawal by the FDIC from the aforementioned interagency letters (see above).

On reevaluating rules’ quantitative asset thresholds, he noted the agency has been “inventorying and analyzing the dozens of numerical thresholds used by the FDIC” and “considering different options for indexing and the impact those options would have.” He called out two specific thresholds in his remarks – $100 billion and $10 billion, noting in particular that “while some uses of the $10 billion threshold are statutory, others exist at regulators’ discretion.”

Insights. The statements by Acting Chairman Hill represent a tonal change that may result in a substantial shift to legacy FDIC positions. His comments on de novos and ILCs raise potential options to consider for potential de novo community and regional banks and for fintechs that want to engage in limited banking activities, respectively. As noted above, the consistent refrain on digital assets and blockchain technology suggests that guidance will be forthcoming in the near future, but coordination and practicality will be critical.

The FDIC Revises Approach to Resolution Planning for Large Banks. In his April 8, 2025 key policy updates, Acting Chairman Hill also identified the FDIC’s work on resolution planning and the failed bank resolution process. Shortly thereafter, on April 18, 2025, the FDIC announced changes in its approach to resolution planning and issued responses to Frequently Asked Questions (FAQs) regarding IDI Resolution Planning. According to Acting Chairman Hill, the changes “deemphasize and broaden the ‘strategy’ discussion and waive the expectation that banks identify and build their plans around a hypothetical failure scenario,” to better focus instead on providing the FDIC the information it would need to rapidly sell a bank and, if needed, operate the institution for a short period of time.

Insights. Those changes align with Acting Chairman Hill’s discussion of resolution planning in his key policy updates. On resolution planning, he also noted: (i) for large institution resolutions, the FDIC’s “primary goal should be maximizing the likelihood of the optimal resolution option, which experience has demonstrated to generally be a weekend sale”; and (ii) the FDIC plans “to engage in outreach with large institutions in their capacity as potential acquirers” and engage with potential nonbank bidders “to facilitate their ability both to partner with banks on bids and to bid individually on particular asset pools.”

The OCC Restructures Supervision and Other Functions. On April 16, the OCC announced that effective June 2, 2025, the agency will: (1) combine the Midsize and Community Bank Supervision and Large Bank Supervision functions within a Bank Supervision and Enforcement Division; (2) reinstate the Chief National Bank Examiner office and both the Bank of Supervision Policy and Supervision Risk and Analysis divisions therein; and (3) elevate the Information Technology and Security function.

Insights. According to the OCC, the reorganization is intended to promote the seamless sharing of expertise and resources to address bank-specific issues or novel needs, both in practice and in approach. The streamlined structure accompanies reports from earlier this year of a hiring freeze and layoffs within the OCC, and midsize and community bank group specifically, consistent with efforts across the federal government. It is not clear whether or how the organizational change may impact existing supervisory teams, though banks on the cusp of growing into the Large Bank Supervision group may experience increased continuity if their supervisory teams remain the same as the institution grows. The announcement also comes after the OCC reported a “major security incident” to Congress earlier this month, and the elevation of the Information Technology and Security function may be an attempt to calm concerns within the industry regarding the safety of proprietary and customer information at the agency.

OTHER NOTABLE ITEMS

Federal Reserve Requests Comments on Proposal Regarding Stress Capital Buffer Requirements. On April 17, 2025, the Fed issued a proposal for comment aimed at reducing the volatility of capital requirements stemming from stress testing. The proposal is consistent with its December 23, 2024 announcement and the December 24, 2024 suit challenging the legality of the current the stress testing framework. In its announcement, the Federal Reserve also previewed that later this year, it will propose additional changes to improve the transparency of the stress test, including disclosing and seeking public comment on the models that determine the hypothetical losses and revenue of banks under stress and ensuring that the public can comment on the hypothetical scenarios used for the annual stress test before the scenarios are finalize—also consistent with the December 2024 announcement and suit.

Federal Reserve Board Publishes Financial Stability Report. On April 25, 2025, the Federal Reserve published its semi-annual Financial Stability Report. According to the Federal Reserve Bank of New York’s industry survey, there was a meaningful increase relative to its fall 2024 survey in the percentage of respondents citing risks emanating from changes to global trade policy as their top risk to financial stability, with moderate increases in the percentage of respondents citing policy uncertainty, persistent inflation, corrections in asset markets and Treasury market functioning as top risks to financial stability, with a moderate decline in the percentage of respondents citing U.S. fiscal debt sustainability as a top risk to financial stability—though it did remain at 50%.

Acting Comptroller Hood Address Areas of Strategic Focus. On April 16, 2025, Acting Comptroller Hood gave remarks before the Exchequer Club in which he expanded on his four key areas of strategic focus for the OCC: (1) reducing regulatory burden (“regulations must be effective, not excessive”); (2) promoting financial inclusion (“financial inclusion is the civil rights issue of our time”); (3) embracing bank-fintech partnerships (“innovation is not optional—it is essential”); and (4) expanding responsible bank activities involving digital assets (“Interpretive Letter 1183 confirms that national banks may engage in certain digital asset activities, provided they do so safely and soundly and under appropriate risk management standards”).

Speech by Governor Barr on AI, Fintechs and Banks. On April 4, 2025, Federal Reserve Board Governor Barr gave a speech titled “AI, Fintechs, and Banks.” In his speech, Governor Barr discussed innovation in the context of generative artificial intelligence (Gen AI) in banking and how bank–fintech partnerships may accelerate the integration of the technology and banking. He advised that bank risk managers and regulators should monitor developments outside the bank perimeter so that they are not caught off guard as this technology quickly enters the banking system, the importance of an appropriate incentive structure, and the unique role of fintechs in “laying the groundwork for good risk management of Gen AI.”

Speech by Governor Barr on AI and Cybersecurity. On April 17, 2025, Federal Reserve Board Governor Barr gave a speech titled “Deepfakes and the AI Arms Race in Bank Cybersecurity.” In his speech, Governor Barr addressed how generative AI has the potential to enable deepfake technology and “supercharge identity fraud.” Governor Barr emphasized the role of “strong, resilient financial institutions in preventing attacks” and advocated for bank controls to evolve in kind with AI-powered advances by, for example, adapting facial recognition, voice analysis and behavioral biometrics to detect potential deepfakes, among other controls. He also advocated for updated guidance and regulation, use of AI technologies by banking regulators, increasing the penalties for cybercrime and targeting upstream organizations.

Speech by Acting Comptroller Hood on AI in Financial Services. On April 29, 2025, Acting Comptroller Hood gave a pre-recorded speech titled “AI in Financial Services.” In his remarks, Acting Comptroller Hood, referencing both the “tremendous potential” as a risk management and business operations tool and the risks accompanying reliance on complex technology, championed “effective, but not burdensome, regulatory oversight” and directed banks to consider the risk-based and technology-neutral principles in existing OCC and interagency guidance.

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)

The Guidance reflects a clear intent on the SFO’s part to tighten enforcement strategy, clarify procedural expectations, and encourage early and responsible engagement from corporates facing potential criminal exposure.

On 24 April 2025, the UK Serious Fraud Office (the SFO) issued new guidance (the Guidance) concerning the self-reporting of suspected offending, expectations around cooperation and the negotiation of Deferred Prosecution Agreements (DPAs).

The Guidance removes ambiguity in some key areas, introduces defined timelines for engagement and reinforces the SFO’s commitment to using DPAs as an enforcement tool where conditions are met. It also, however, leaves a number of open questions, particularly in relation to the timing of self-reports and judicial oversight.

Summary of the Guidance

1. DPAs

The Guidance now explicitly states that corporates which self-report and provide full cooperation will be invited to enter into DPA negotiations.[1] This represents a firm commitment by the SFO, removing the previous uncertainty around the benefits of early disclosure. The Guidance is a strong signal that timely transparency will be met with prosecutorial engagement.

It is important to note, however, that while the SFO may offer to negotiate a DPA, any such agreement must ultimately be approved by a judge. This judicial safeguard remains unchanged and is not explicitly addressed in the Guidance.

2. Self-Reporting: Timing

The Guidance stops short of attempting to define precise thresholds for when corporates should self-report. It states that a report is expected once “direct evidence” of offending emerges.[2] Yet the SFO offers no clarification of what constitutes such evidence. This leaves scope for continued uncertainty, particularly where preliminary findings of any internal investigation of potential misconduct may be incomplete, contested or circumstantial, such as where the availability of relevant defences has not yet been assessed. Corporates must therefore continue to exercise judgment in assessing whether internal red flags rise to a level warranting disclosure.

3. Defined Timelines for SFO Engagement

The Guidance provides clarity on the SFO’s process and timelines around self-reporting. This offers welcome predictability for corporates and reduces uncertainty at a time when corporates may also be facing complex issues and engagement with other internal and external stakeholders.[3]

A response will be issued by the SFO’s Intelligence Division within 48 business hours of a self-report made by the company.
A decision on whether to open an investigation will follow within six months.
DPA negotiations, if appropriate, should conclude within six months of the formal invitation to negotiate.

4. Cooperation: Expectations and Exemplary Conduct

The SFO emphasises that having self-reported and being cooperative are not one and the same.[4] The Guidance provides some non-exhaustive examples of cooperative conduct covering these areas:[5]

Preservation of evidence: Promptly and proactively preserving all digital and hard copy materials that may be relevant to the investigation.
Document identification and disclosure: Identifying and providing relevant documentation, including details of document custodians, material locations, overseas documents within the organisation’s control, potentially relevant third-party materials, and translations of foreign language documents.
Factual presentation: Setting out the facts concerning the suspected criminal conduct, including identification of all individuals involved, both internal and external to the organisation.
Internal investigation protocols: Where an internal investigation is undertaken, engaging with the SFO at an early stage regarding its scope, notifying the SFO in advance of any proposed steps (particularly interviews), providing regular updates and findings, and disclosing non-privileged interview records.
Transparency: Refraining from interviewing employees where requested, and promptly notifying the SFO of any interest or involvement from other regulatory bodies, law enforcement agencies or prosecuting authorities.

The Guidance addresses the issue of legally privileged material, which has been the subject of previous litigation. It states that corporates are not required, as a pre-condition of being considered to be cooperative, to waive legal professional privilege over material. However, it also states that doing so will be a significant cooperative act and weigh strongly in favour of being considered cooperative.[6] The issue of waiver of privilege is fraught with legal risk, and is one to be considered in the context of the implications of such waiver in all relevant jurisdictions where the company may face disputes.

Crucially, the SFO preserves the route to a DPA even where no self-report is made, provided the company subsequently engages in “exemplary cooperation”.[7] This is a high threshold, effectively requiring that the organisation involve the SFO in the internal investigation process from a very early stage and that the organisation fulfil at least all the cooperation steps set out in the Guidance.[8] This may provide a valuable (albeit potentially narrow) second chance for organisations that may have delayed disclosure to achieve a non-prosecution outcome, provided their subsequent conduct meets the requisite standard once the SFO is engaged.

5. Uncooperative Conduct

By contrast, the Guidance also helpfully clarifies what the SFO considers uncooperative conduct. This includes:[9]

Forum shopping: Unreasonably reporting offending to another jurisdiction for strategic reasons.
Exploiting legal disparities: Using differences between international law enforcement agencies or legal systems.
Lack of Transparency: Concealing individual involvement or the full extent of misconduct.
Delay tactics: Tactically delaying providing information or material.
Obstructive disclosure: Submitting excessive or unnecessarily voluminous material to hamper the SFO’s investigation.

The SFO emphasises that the nature and extent of the organisation’s cooperation is one of many factors which it will take into consideration when determining an appropriate resolution alongside those detailed in the Code for Crown Prosecutors, the Corporate Prosecutions Guidance and the DPA Code.[10]

Some Observations

1. Alignment with Legislative Developments

The Guidance is timely given the imminent introduction of the failure to prevent fraud offence under the Economic Crime and Corporate Transparency Act 2023 (discussed in more detail in our client alert of November 2024). This new offence seeks to make companies criminally liable where a specified fraud offence is committed by a person associated with the company (such as an employee or agent) with the intention of benefitting, for example, the company or its clients. The Guidance appears to reinforce the SFO’s public message that enforcement of this new offence is imminent.

2. Clarity and Certainty

For in-house counsel and compliance professionals, some of the most valuable aspects of the Guidance are its clarity on cooperation and the incentives for early engagement. The defined timelines will help organisations manage expectations and resources more effectively, notwithstanding some measure of lack of definition around “direct evidence”.

3. Global Enforcement Outlook

The publication of the Guidance is particularly noteworthy in the light of recent developments in the US. In February 2025, President Trump signed an executive order suspending enforcement of the Foreign Corrupt Practices Act for 180 days, citing the need to reduce compliance burdens on American businesses. As discussed in our client alert of February 2025, this move represents a shift from the long-held view that international anti-corruption efforts benefit US businesses by creating a level playing field and strengthening the rule of law.

Against this backdrop, the UK appears to be reaffirming its commitment to corporate accountability, particularly in the light of the new International Anti-Corruption Taskforce established by the UK, France and Switzerland in March 2025, which signals a heightened focus on coordinated cross-border enforcement. The SFO’s structured approach may seek to drive more self-reports from corporates that operate across jurisdictions.

A new openness at the SFO?

The Guidance provides welcome clarity on the circumstances in which a corporate may be invited to negotiate a DPA and outlines concrete expectations for cooperation. It removes some ambiguity and reinforces the message that the SFO wants corporates to act early and transparently when faced with suspected offending.

At a recent GIR Live event, SFO Director Nick Ephgrave reinforced this message, emphasising that companies should feel able to rely on the assurances offered in the Guidance: “No ifs, no buts, no maybes, it’s as good a guarantee as you can get; if you come and work with us, we will work with you.” In a more colourful aside, he likened his approach to Margaret Thatcher’s relationship with the leader of the former Soviet Union, adding: “That’s how I like to do business … I’d like you to look at me as the Mikhail Gorbachev of the SFO.” While the Guidance may be more in the nature of glasnost than any major perestroika, it is encouraging that the Director of the SFO is describing himself explicitly and publicly as “a man [companies] can do business with”.[11]

[1] Paragraph 2 of the Guidance.

[2] Paragraph 7 of the Guidance.

[3] Paragraphs 15-17 of the Guidance.

[4] Paragraph 19 of the Guidance.

[5] Paragraph 22 of the Guidance.

[6] Paragraphs 20 and 22 of the Guidance.

[7] Paragraph 19 of the Guidance.

[8] At paragraph 22 of the Guidance, the SFO states: “Corporates which take all these steps are likely to be assessed as providing exemplary co-operation.”

[9] Paragraph 23 of the Guidance.

[10] Paragraph 24 of the Guidance.

[11] See https://globalinvestigationsreview.com/article/look-me-the-mikhail-gorbachev-of-the-sfo-nick-ephgrave.

The following Gibson Dunn lawyers prepared this update: Allan Neil, Patrick Doris, Marija Bračković, and Victor Tong.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above, please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of Gibson Dunn’s White Collar Defense and Investigations practice group, or the authors:

Allan Neil – London (+44 20 7071 4296, aneil@gibsondunn.com)
Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com)
Marija Bračković – London (+44 20 7071 4143 mbrackovic@gibsondunn.com)
Victor Tong – London (+44 20 7071 4054, vtong@gibsondunn.com)

In “Trump Tariffs Promise Increased False Claims Act Scrutiny for Companies Throughout the Import Chain” (Global Trade, April 17, 2025), partner Jake Shields and associates Michael Dziuban and Andrew Becker discuss the application of the False Claims Act (FCA) in relation to trade and customs matters following the introduction of tariffs.

With President Trump imposing steep tariffs on key U.S. trading partners and the Department of Justice (DOJ) simultaneously promising to ramp up use of the FCA — its primary tool against fraud on government agencies — to police tariff compliance, the effect, say our lawyers, “will likely be a redoubling of DOJ’s already aggressive application of the FCA to trade matters, fueled by tariffs’ status as a top policy and political priority. The risks for businesses are significant.”

Jake previously served as Senior Trial Counsel in the Fraud Section of the Civil Division of the U.S. Department of Justice, where he investigated and litigated False Claims Act cases, including in the areas of customs and tariffs enforcement.

Read the full article here: https://www.globaltrademag.com/trump-tariffs-promise-increased-false-claims-act-scrutiny-for-companies-throughout-the-import-chain/.

This update provides an overview of key class action-related developments from the first quarter of 2025 (January through March).

Table of Contents

Part I reviews decisions from the Fourth and Eighth Circuits affirming the denial of class certification where plaintiffs failed to prove predominance under Rule 23(b)(3);
Part II summarizes a pair of decisions from the Fourth Circuit discussing Article III standing requirements at class certification, ahead of the Supreme Court’s forthcoming decision in Laboratory Corp. of America v. Davis; and
Part III highlights decisions from the Fourth and Ninth Circuits analyzing the enforceability of arbitration agreements.

1. The Fourth and Eighth Circuits Reinforce the Predominance Requirement

In two decisions from the past quarter, federal appellate courts rejected class certification under Rule 23(b)(3)’s demanding predominance requirement.

In Vogt v. Progressive Casualty Insurance Co., 129 F.4th 1071 (8th Cir. 2025), the Eighth Circuit reiterated that claims requiring an individualized look at consumers’ purchasing decisions make “poor candidates for class litigation.” Id. at 1074. The plaintiff bought a van and later learned that the insurance company that sold the van to the dealer had classified it as totaled but had sold it with a clean (rather than a salvage) title. Id. at 1072. The plaintiff brought a putative class action against the insurance company on behalf of purchasers of similarly mistitled vehicles. Id. The Eighth Circuit affirmed the denial of class certification because individual issues of reliance and causation would predominate. Id. The court explained that although “some putative class members bought their vehicles because they understood . . . that the vehicles were free of salvage title restrictions,” others “may have been satisfied with their purchase even if those restrictions applied” because salvage title cars still “have value.” Id. at 1073-74. Vogt illustrates that “common” issues often will not predominate even in cases involving uniform policies and measurable consumer spending.

In Mr. Dee’s Inc. v. Inmar, Inc., 127 F.4th 925 (4th Cir. 2025), the plaintiff companies bought coupon-processing services on behalf of retailers and later filed a putative class action claiming that the defendant had engaged in horizontal price-fixing resulting in higher fees. Id. at 927-28. In affirming the denial of certification for lack of predominance, the Fourth Circuit emphasized that the plaintiffs’ model did not show any impact of higher fees for 32% of the proposed class. “Whatever the resolution of the question posed in” Labcorp, the court concluded, “the presence of 32% of uninjured members in a proposed class [is] much too high” and would inevitably lead to many individualized proceedings. Id. at 933-34.

Mr. Dee’s and Vogt show different sides of the predominance coin—Vogt, for cases where the number of class members that would be subject to individualized proceedings is difficult to estimate, and Mr. Dee’s, where expert modeling provides some estimate of the number of uninjured class members.

2. The Fourth Circuit Discusses Article III Standing of Class Members Ahead of
the Supreme Court’s Decision in Labcorp

In two recent cases, the Fourth Circuit held that putative class representatives and absent class members lacked Article III standing, illustrating the ongoing importance of justiciability issues—especially given that the U.S. Supreme Court is poised to address whether a Rule 23(b)(3) class can be certified when some members of the proposed class lack any Article III injury.

In one case, the Fourth Circuit emphasized that a mere “risk” of economic harm is insufficient to satisfy Article III. In Alig v. Rocket Mortgage, LLC, 126 F.4th 965 (4th Cir. 2025), the plaintiffs sought to represent a class of homeowners who sued a mortgage lender, claiming that the lender shared their estimates of their homes’ market values with appraisers and so made the appraisals they bought “unreliable and worthless.” Id. at 970. The district court certified the class, but the Fourth Circuit reversed, holding that there was no evidence that class members actually did not receive fair or independent appraisals. Id. at 974-75. At best, exposing the appraisers to the homeowners’ estimates created “a risk of influence,” but that risk was not enough to create a concrete injury for standing. Id. at 975 (emphasis added).

Another case from the Fourth Circuit, Opiotennione v. Bozzuto Management Co., 130 F.4th 149 (4th Cir. 2025), reiterated Article III’s requirement that the party seeking relief suffer genuine, concrete harm. The plaintiff, who is over 50, claimed that property management companies discriminated by targeting Facebook ads for housing to users under 50. Id. at 151-52. But the district court dismissed the complaint for lack of standing, reasoning that the plaintiff did not allege that she requested housing information or was personally denied any housing opportunity based on her age. Id. at 154-55. In affirming the dismissal, the Fourth Circuit explained that the plaintiff had alleged that she was a member of a disfavored age group but not that she had suffered any concrete, personal injury due to her age. Id. at 153-56.

These decisions spotlight Article III standing ahead of the Supreme Court’s consideration of the interplay between that fundamental requirement and class actions in Laboratory Corp. of America v. Davis, No. 24-304. In late January 2025, the Court granted certiorari to decide “[w]hether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury.” Labcorp provides the Court with an opportunity to resolve a long-standing circuit split over how courts should approach the issue of uninjured class members at class certification—as we have discussed here. The Second and Eighth Circuits have applied a bright-line rule prohibiting certification if any members lack standing. The First, Seventh, and D.C. Circuits take a middle-ground approach, permitting certification if the number of uninjured members is “de minimis.” And the Ninth Circuit permits certification even when more than a de minimis number of class members lack standing. The decision in Labcorp is expected by late June.

3. The Fourth and Ninth Circuits Address Arbitrability and Assent

In a pair of recent cases, the Fourth Circuit took different approaches to clauses in arbitration agreements that allow the defendant to unilaterally change the agreement. In Johnson v. Continental Finance Co., 131 F.4th 169 (4th Cir. 2025), the court, applying Maryland law, held that a change-in-terms clause rendered an agreement illusory because such clauses are “so one-sided and vague that [they] allow[ ] a party to escape all of its contractual obligations at will.” Id. at 179. But a few days later, in Meadows v. Cebridge Acquisition, LLC, 132 F.4th 716 (4th Cir. 2025), the court held that a similar change-in-terms clause was not illusory, provided “the modifying party must give reasonable notice of modification.” Id. at 728.

Although there is apparent tension between the two cases, Judge Wynn, who concurred in both, attributed the different outcomes to differences in state law. Meadows, 132 F.4th at 735 (concurrence). Whether a change-in-terms clause is dispositive, in his view, depends on whether the state law views an arbitration provision as a “separate agreement that requires separate consideration in order to be legally formed.” Johnson, 131 F.4th at 182 (concurrence).

The Ninth Circuit also took on a pair of cases involving modern arbitration agreements. In Chabolla v. ClassPass Inc., 129 F.4th 1147 (9th Cir. 2025), the court considered the enforceability of an arbitration agreement formed through a sign-up website. Id. at 1151. The agreement was listed on the Terms of Use page, but this page was provided only as a link on login screens, and the website did not require users to read the terms before subscribing. Id. at 1154. The Ninth Circuit held that the agreement was unenforceable because it lacked reasonably conspicuous notice of and an unambiguous manifestation of assent to the terms. The court emphasized that one sign-up screen was insufficiently conspicuous because the notice was on the “periphery” of the page and that additional screens were ambiguous as to manifestation of assent because they prompted users only to “continue” or “redeem.” Id. at 1157–58.

In another case, Jones v. Starz Entertainment, LLC, 129 F.4th 1176 (9th Cir. 2025), the Ninth Circuit upheld an arbitration provider’s consolidation of thousands of mass individual arbitration demands. Id. at 1178. One plaintiff petitioned to compel individual arbitration in federal court, but the district court denied the petition and the court of appeals affirmed. The Ninth Circuit explained that federal courts had no authority to second-guess an arbitration provider’s interpretation of its rules, including to permit consolidation, and that consolidation did not present the same due process risks as in “class or representative arbitration.” Id. at 1182. The court also called out the obvious strategy behind plaintiffs’ counsel’s attempting to leverage individual arbitration fees to extract a large settlement. Specifically, the panel questioned “the true motivation underlying the mass-arbitration tactic deployed [in the case], which appear[ed] to be geared more toward racking up procedural costs to the point of forcing [the defendant] to capitulate to a settlement than proving the allegations . . . to seek appropriate redress on the merits.” Id.

The following Gibson Dunn lawyers contributed to this update: Jessica Pearigen, Katie Geary, Elizabeth Strassner, Matt Aidan Getz, Wesley Sze, Lauren Blas, Bradley Hamburger, Kahn Scolnick, and Christopher 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:

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

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

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

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

Kahn A. Scolnick – Co-Chair, Class Actions Practice 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)

Wesley Sze – Palo Alto (+1 650.849.5347, wsze@gibsondunn.com)

Consistent with the firm’s history of double-digit revenue growth since the beginning of Chair and Managing Partner Barbara Becker’s tenure in 2021, Gibson Dunn posted a 15.7% increase in gross revenue in 2024, to $3.6 billion, and a 28.4% increase in profits per equity partner, to $7.2 million.

Barbara attributed the firm’s success to its long-term strategy of developing marquee practice and industry groups. “Our strategy has been to focus on excellence and collaboration,” she said, “building destination practices and industry expertise across our platform, and it works because we are truly collaborative.”

Read the full article in The American Lawyer [PDF].

In Cunningham v. Cornell University, the Supreme Court held that “[P]laintiffs seeking to state a [prohibited transaction] claim must plausibly allege that a plan fiduciary engaged in a transaction proscribed therein, no more, no less.” However, the Court cautioned that “[t]o the extent future plaintiffs do bring barebones [prohibited transaction] suits, district courts can use existing tools at their disposal to screen out meritless claims before discovery.”

On April 17, 2025, the Supreme Court issued its decision in Cunningham v. Cornell University, which addresses the pleading requirements for prohibited transaction claims brought under the Employee Retirement Income Security Act of 1974 (ERISA). In Cunningham, the Court confronted the question of whether a plaintiff seeking to bring a claim must plead not only the elements of an ERISA Section 406 prohibited transaction, but also that the exemptions set forth in ERISA Section 408 do not apply. Justice Sotomayor, writing for a unanimous Court, answered this question in the negative, explaining that Section 408 “sets out affirmative defenses, so it is defendant fiduciaries who bear the burden of pleading and proving that a [Section 408] exemption applies to an otherwise prohibited transaction under [Section 406].”[1]

While confirming a relatively low bar for ERISA plaintiffs’ pleading requirements, the Court was also cognizant of the “serious concerns” raised by respondents that, under this standard, “plaintiffs could too easily get past the motion-to-dismiss stage and subject defendants to costly and time-intensive discovery.”[2] The Court emphasized that these concerns “cannot overcome the statutory text and structure” of ERISA but also noted various tools available to the district courts to “screen out meritless claims before discovery.”[3] In a concurring opinion, Justice Alito, with whom Justice Thomas and Justice Kavanaugh joined, encouraged district courts to “strongly consider” using these procedural “safeguards” “to achieve the prompt disposition of insubstantial claims.”[4]

Anticipating that plan sponsors and fiduciaries may have questions about the practical implications of the Court’s Cunningham decision, in this alert, we provide a brief overview of ERISA’s prohibited transaction framework, a summary of the background and key take-aways from the Cunningham decision, and a preview of what may be next for ERISA plan sponsors and fiduciaries after Cunningham.

Background on ERISA’s Prohibited Transaction Provisions

ERISA prohibits plan fiduciaries from causing a plan to enter into certain transactions with parties who may be in a position to exercise improper influence over the plan.[5] Specifically, Section 406 (29 U.S.C. § 1106) provides that, “[e]xcept as provided in [Section 408],” a fiduciary “shall not cause the plan to engage” in certain transactions with a “party in interest.” A “party in interest” is defined to include various entities that administer or support the administration of a plan, including the plan’s administrator, sponsor, officers, and other entities “providing services to [the] plan.”[6]

Examples of prohibited transactions identified in Section 406 include a direct or indirect: “sale or exchange, or leasing of any property between the plan and a party-in-interest;”[7] “lending of money or other extension of credit between the plan and a party-in-interest;”[8] and, “transfer to, or use by or for the benefit of a party in interest, of any assets of the plan.”[9]

The Cunningham case focused specifically on Section 406(a)(1)(C), which bars a plan fiduciary from “caus[ing] the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect . . . furnishing of goods, services, or facilities between the plan and a party in interest.”[10] As written, this provision, if construed broadly, could encompass many routine arms-length dealings between a plan and a third-party service provider (such as a third-party recordkeeper, claims administrator, investment manager, etc.) to the plan.[11]

Section 408 (29 U.S.C. § 1108), in turn, enumerates 21 exemptions to the prohibited transactions identified in Section 406. Section 408(b)(2)(A) exempts from Section 406 any transaction that involves “[c]ontracting or making reasonable arrangements with a party in interest for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefore.”[12]

The District Court’s and Second Circuit’s Decisions in Cunningham

The Cunningham lawsuit was brought in 2017 by a class of current and former employees of Cornell University who participated in the University’s defined-contribution retirement plans between 2010 and 2016.[13] During this time, Cornell contracted with two third-party service providers to provide recordkeeping services for the plans, which included tracking participants’ account balances and providing account statements, among other services.[14] Cornell compensated the recordkeepers using plan assets.[15] Plaintiffs sued Cornell and its plan fiduciaries alleging, among other claims, that defendants violated Section 406 by causing the plans to engage in prohibited transactions with the two service providers for recordkeeping services for the plans.[16]

Specifically, Plaintiffs claimed that the recordkeepers provided services to the plans and accordingly were “parties-in-interest” under ERISA, and that by allowing the recordkeepers to furnish services to the plans, Cornell engaged in prohibited transactions, unless it could prove an exemption.[17]

Cornell moved to dismiss plaintiffs’ prohibited transaction claims, and the district court granted the motion. The court held that a plaintiff, in addition to pleading the required elements of a prohibited transaction claim under Section 406, must also allege “some evidence of self-dealing or other disloyal conduct.”[18] The district court concluded that plaintiffs had not made that showing, and thus, dismissed their claim.

The Second Circuit affirmed, but on different grounds. The court rejected the district court’s conclusion that Section 406 “demand[s] allegations of ‘self-dealing or disloyal conduct.’”[19] But the court also noted that reading Section 406 in insolation would lead to “absurd results” because it “would appear to prohibit payments by a plan to any entity providing it with any services.”[20] The court held that plaintiffs must plead not only the elements of a prohibited transaction, but also that the applicable Section 408 exemption did not apply to the transaction.[21] And the court found that plaintiffs’ allegations failed to satisfy this standard.[22]

The Supreme Court Reverses and Remands

The Supreme Court granted certiorari in Cunningham to determine “whether a plaintiff can state a claim for relief by simply alleging that a plan fiduciary engaged in a transaction proscribed by [Section 406(a)(1)(C)], or whether a plaintiff must plead allegations that disprove the applicability of the [Section 408(b)(2)(A)] exemption.”[23] And, on April 17, 2025, in a unanimous decision, the Court concluded “that plaintiffs need do no more than plead a violation of [Section 406(a)(1)(C)], and [] therefore reverse[d].”[24]

The Court explained that Section 406(a)(1)(C) imposes a “categorical bar” on transactions that satisfy the three enumerated elements of that provision.[25] Accordingly, the Court held that, “under [Section 406(a)(1)(C)], plaintiffs need only plausibly allege each of those elements of a prohibited-transaction claim.”[26] In contrast, the Court found that Section 408’s exemptions are affirmative defenses because they are “set forth in a different part of the statute” and are “‘writ[ten] in the orthodox format of an affirmative defense.’”[27] Thus, the Court held, the Section 408 exemptions “must be pleaded and proved by the defendant who seeks to benefit from them.”[28]

Importantly, the Court also weighed Cornell’s assertion that “there will be an avalanche of meritless litigation” if plaintiffs need only plead the elements of Section 406 to state a prohibited transaction claim.[29] Although recognizing that Cornell raised “serious concerns” about “meritless litigation” that could “subject defendants to costly and time-intensive discovery,” the Court concluded that those concerns “cannot overcome the statutory text and structure.”[30]

Defendants are not without recourse, however. The Court explained that “district courts can use existing tools at their disposal to screen out meritless claims before discovery.”[31] These tools include invoking Federal Rule of Civil Procedure 7 to require that plaintiffs file a reply to a defendant’s answer and affirmative defenses that “‘put[s] forward specific, nonconclusory factual allegations’ showing the exemption does not apply.”[32] The Court also emphasized that “[d]istrict courts must also, consistent with Article III standing, dismiss suits that allege a prohibited transaction occurred but fail to identify an injury.”[33] And courts also “retain discretionary authority” to expedite or limit discovery to mitigate unnecessary costs and to impose Rule 11 sanctions against parties and counsel who lack a good faith basis for their claims.[34] The Court also recognized ERISA’s cost shifting provision that “gives district courts an additional tool to ward off meritless litigation.”[35]

In a concurring opinion, Justice Alito (joined by Justice Thomas and Justice Kavanaugh) recognized that the Court’s “straightforward application of established rules has the potential to cause . . . untoward practical results.”[36] Justice Alito noted that administrators of ERISA plans will “almost always find it necessary to employ outside firms to provide services the plan needs,” and because those firms become “parties in interest” under ERISA, their service to the plans are unlawful under Section 406, unless one of the exemptions in Section 408 applies.[37] The “upshot” Justice Alito explained, is that “all a plaintiff must do in order to file a complaint that will get by a motion to dismiss under Federal rule of Civil Procedure 12(b)(6) is to allege that the administrator did something that, as a practical matter, it is bound to do.”[38] And, “in modern civil litigation,” Justice Alito continued, “getting by a motion to dismiss is often the whole ball game because of the cost of discovery.”[39] Against this backdrop, Justice Alito encouraged district courts to “strongly consider” insisting that a plaintiff file a reply to an answer that raises one of the Section 408 exemptions as an affirmative defense “and employing the other safeguards that the Court describes” in its opinion to achieve “the prompt disposition of insubstantial claims.”[40]

What’s Next for Plan Sponsors and Fiduciaries

It remains to be seen whether the specter of an “avalanche of meritless litigation” will come to pass. For now, however, the Supreme Court has made clear that plaintiffs need only plausibly plead the three elements of a Section 406 prohibited transaction to survive a motion to dismiss. Plaintiffs need not also plead that a Section 408 exemption does not apply to their claims. As the Cunningham majority opinion and concurrence suggest, this standard may open the door to more claims against plan sponsors and fiduciaries.

Accordingly, sponsors and fiduciaries may want to consider reviewing their service provider agreements to assess whether the services their plans are receiving are necessary and the fees the plans are paying for those services are reasonable. Fiduciaries should also consider documenting their decision-making processes related to plan administration, particularly with respect to service provider selection and monitoring.

Additionally, the Court in Cunningham detailed a series of tools available to plan sponsors and fiduciaries to seek early dismissal of prohibited transaction claims, limit burdensome discovery, and shift the cost of litigating meritless claims to plaintiffs. The Court’s invocation of Rule 7(a)(7) as a potential solution for screening out meritless claims is particularly notable. This rarely used procedure may help defendants dispose of claims early, and without significant discovery. Specifically, Rule 7(a)(7) requires a party, “if the court orders” it, to file “a reply to an answer.”[41] Most commonly used in the context of qualified immunity, this procedure allows defendants subject to barebones claims to test whether plaintiffs can “put forward specific, nonconclusory factual allegations” that establish that an affirmative defense does not apply.[42] As the Supreme Court explained in Crawford-El v. Britton, the Rule 7(a)(7) reply mechanism, together with motions for a more definite statement under Rule 12(e), are the “two primary options” for resolving predicate issues like the application of an affirmative defense “prior to permitting discovery at all.”[43] However, even if a court ultimately decides that discovery is warranted, defendants could still pursue an order bifurcating discovery and potentially also an early dispositive motion targeting the claims. After Cunningham, these procedures may become part of a standard toolset for sponsors and fiduciaries defending prohibited transaction claims.

Finally, it is worth noting that the Cunningham decision does not purport to limit or otherwise relax the well-established pleading standards under Twombly and Iqbal. Thus, plaintiffs seeking to bring prohibited transaction claims must still allege facts that make the claims “‘plausible,’” not merely “‘conceivable.’”[44] The Court’s opinion also does not curtail its directive in Hughes v. Northwestern University that “the circumstances facing an ERISA fiduciary will implicate difficult tradeoffs, and courts must give due regard to the range of reasonable judgments a fiduciary may make based on her experience and expertise.”[45] Plan sponsors and fiduciaries targeted with prohibited transaction claims can and should draw on the Court’s language in Hughes to support dismissal of unmeritorious claims.

[1] Cunningham v. Cornell, No. 23-1007, 604 U.S. ___ (2025), Slip. Op. 1.

[2] Id. at 14.

[3] Id.

[4] Cunningham v. Cornell, No. 23-1007, 604 U.S. ___ (2025), Concurring Op. 3.

[5] 29 U.S.C. § 1106; see also Dept. of Labor, elaws – ERISA Fiduciary Advisor, Are some transactions prohibited? Is there a way to make them permissible?, available at https://webapps.dol.gov/elaws/ebsa/fiduciary/q4d.htm (last accessed Apr. 23, 2025).

[6] 29 U.S.C. § 1002(14).

[7] 29 U.S.C. § 1106(a)(1)(A).

[8] 29 U.S.C. § 1106(a)(1)(B).

[9] 29 U.S.C. § 1106(a)(1)(D).

[10] 29 U.S.C. § 1106(a)(1)(C).

[11] See Cunningham v. Cornell, No. 23-1007, 604 U.S. ___ (2025), Concurring Op. 1-2.

[12] 29 U.S.C. § 1108(b)(2)(A).

[13] Cunningham v. Cornell Univ., 86 F.4th 961, 969 (2d Cir. 2023).

[14] Id. at 970.

[15] Id.

[16] Id. at 970-71.

[17] Id. at 973.

[18] Cunningham v. Cornell Univ., 2017 WL 4358769, at *10 (S.D.N.Y. Sept. 29, 2017).

[19] Cunningham, 86 F.4th at 975.

[20] Id. at 973.

[21] Id. at 975.

[22] Id. at 978–70 (quoting Jones v. Harris Assoc. L.P., 559 U.S. 335, 346 (2010)).

[23] Cunningham v. Cornell, No. 23-1007, 604 U.S. ___ (2025), Slip Op. 6.

[24] Id.

[25] Id.

[26] Id.

[27] Id. at 6, 8 (quoting Meacham v. Knolls Atomic Power Lab’y, 554 U.S. 84, 102 (2008)).

[28] Id. at 8.

[29] Id. at 13.

[30] Id. at 14.

[31] Id.

[32] Id. (quoting Crawford-El v. Britton, 523 U.S. 574, 598 (1998)).

[33] Id. at 15.

[34] Id.

[35] Id.

[36] Cunningham v. Cornell, No. 23-1007, 604 U.S. ___ (2025), Concurring Op. 1.

[37] Id.

[38] Id. at 2.

[39] Id.

[40] Id. at 3 (quoting Crawford-El, 523 U.S. at 597).

[41] Fed. R. Civ. P. 7(a)(7).

[42] Crawford-El, 523 U.S. at 598 (quoting Siegert v. Gilley, 500 U.S. 226, 236 (1991) (Kennedy, J., concurring)).

[43] Id.

[44] See Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007)).

[45] Hughes v. Nw. Univ., 595 U.S. 170, 177 (2022).

The following Gibson Dunn lawyers prepared this update: Eugene Scalia, Karl Nelson, Ashley Johnson, and Jennafer Tryck.

Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Labor & Employment or Executive Compensation & Employee Benefits practice groups, or the authors:

Labor & Employment:

Eugene Scalia – Washington, D.C. (+1 202.955.8673, dforrester@gibsondunn.com)
Jason C. Schwartz – Washington, D.C. (+1 202.955.8242, jschwartz@gibsondunn.com)
Katherine V.A. Smith – Los Angeles (+1 213.229.7107, ksmith@gibsondunn.com)
Karl G. Nelson – Dallas (+1 214.698.3203, knelson@gibsondunn.com)
Ashley E. Johnson – Dallas (+1 214.698.3111, ajohnson@gibsondunn.com)
Jennafer M. Tryck – Orange County (+1 949.451.4089, jtryck@gibsondunn.com)

Executive Compensation & Employee Benefits:

Michael J. Collins – Washington, D.C. (+1 202-887-3551, mcollins@gibsondunn.com)
Sean C. Feller – Los Angeles (+1 310.551.8746, sfeller@gibsondunn.com)
Krista Hanvey – Dallas (+1 214.698.3425, khanvey@gibsondunn.com)

From the Derivatives Practice Group: This week, Paul S. Atkins was sworn into office as the 34th Chairman of the Securities and Exchange Commission.

New Developments

Paul S. Atkins Sworn in as SEC Chairman. On April 21, Paul S. Atkins was sworn into office as the 34th Chairman of the SEC. Chairman Atkins was nominated by President Donald J. Trump on January 20, 2025, and confirmed by the U.S. Senate on April 9, 2025. Prior to returning to the SEC, Chairman Atkins was most recently chief executive of Patomak Global Partners, a company he founded in 2009. Chairman Atkins helped lead efforts to develop best practices for the digital asset sector. He served as an independent director and non-executive chairman of the board of BATS Global Markets, Inc. from 2012 to 2015. [NEW]
CFTC Staff Seek Public Comment Regarding Perpetual Contracts in Derivatives Markets. On April 21, the CFTC issued a Request for Comment to better inform them on the potential uses, benefits, and risks of perpetual contracts in the derivatives markets the CFTC regulates (“Perpetual Derivatives”). This request seeks comment on the characteristics of perpetual derivatives, including those characteristics which may differ across products. as well as the implications of their use in trading, clearing and risk management. The request also seeks comment on the risks of perpetual derivatives, including risks related to the areas of market integrity, customer protection, or retail trading. [NEW]
CFTC Staff Seek Public Comment on 24/7 Trading. On April 21, the CFTC issued a Request for Comment to better inform them on the potential uses, benefits, and risks of trading on a 24/7 basis in the derivatives markets the CFTC regulates. This request seeks comment on the implications of extending the trading of CFTC-regulated derivatives markets to an effectively 24/7 basis, including the potential effects on trading, clearing and risk management which differ from trading during current market hours. The request also seeks comment on the risks of 24/7 trading, and the associated clearing systems, including risks related to the areas of market integrity, customer protection, or retail trading. [NEW]
CFTC Staff Issues Advisory on Referrals to the Division of Enforcement. On April 17, the CFTC’s Market Participants Division, the Division of Clearing and Risk, and the Division of Market Oversight (“Operating Divisions”) and the Division of Enforcement (“DOE”) issued a staff advisory providing guidance on the materiality or other criteria that the Operating Divisions will use to determine whether to make a referral to DOE for self-reported violations, or supervision or non-compliance issues. According to the CFTC, this advisory furthers the implementation of DOE’s recent advisory, issued February 25, 2025, addressing its updated policy on self-reporting, cooperation, and remediation.
CFTC Staff Issues No-Action Letter Regarding the Merger of UBS Group and Credit Suisse Group. On April 15, the CFTC’s Market Participants Division (“MPD”) and Division of Clearing and Risk (“DCR”) issued a no-action letter in response to a request from UBS AG regarding the CFTC’s swap clearing and uncleared swap margin requirements. The CFTC said that the letter is in connection with a court-supervised transfer, consistent with United Kingdom laws, of certain swaps from Credit Suisse International to UBS AG London Branch following the merger of UBS Group AG and Credit Suisse Group AG. The no-action letter states, in connection with such transfer and subject to certain specified conditions: (1) MPD will not recommend the Commission take an enforcement action against certain of UBS AG London Branch’s swap dealer counterparties for their failure to comply with the CFTC’s uncleared swap margin requirements for such transferred swaps; and (2) DCR will not recommend the Commission take an enforcement action against UBS AG or certain of its counterparties for their failure to comply with the CFTC’s swap clearing requirement for such transferred swaps.
CFTC Staff Issues Interpretation Regarding U.S. Treasury Exchange-Traded Funds as Eligible Margin Collateral for Uncleared Swaps. On April 14, MPD issued an interpretation intended to clarify the types of assets that qualify as eligible margin collateral for certain uncleared swap transactions under CFTC regulations. CFTC Regulation 23.156 lists the types of collateral that covered swaps entities can post or collect as initial margin (“IM”) and variation margin (“VM”) for uncleared swap transactions. The CFTC indicated that the regulation, which includes “redeemable securities in a pooled investment fund” as eligible IM collateral, aims to identify assets that are liquid and will hold their value in times of financial stress. Additionally, MPD noted that the interpretation clarifies its view that shares of certain U.S. Treasury exchange-traded funds may be considered redeemable securities in a pooled investment fund and may qualify as eligible IM and VM collateral subject to the conditions in CFTC Regulation 23.156. According to MPD, swap dealers, therefore, (1) may post and collect shares of certain UST ETFs as IM collateral for uncleared swap transactions with any covered counterparty and (2) may also post and collect such UST ETF shares as VM for uncleared swap transactions with financial end users.

New Developments Outside the U.S.

ESMA Assesses the Risks Posed by the Use of Leverage in the Fund Sector. On April 24, the European Securities and Markets Authority (“ESMA”), the EU’s financial markets regulator and supervisor, published its annual risk assessment of leveraged alternative investment funds (AIFs) and its first analysis on risks in UCITS using the absolute Value-at-Risk (VaR) approach. Both articles represent ESMA’s work to identify highly leveraged funds in the EU investment sector and assess their potential systemic relevance. [NEW]
ESAs Publish Joint Annual Report for 2024. On April 16, the Joint Committee of the European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published its 2024 Annual Report. The main areas of cross-sectoral focus in 2024 were joint risk assessments, sustainable finance, operational risk and digital resilience, consumer protection, financial innovation, securitisation, financial conglomerates and the European Single Access Point (“ESAP”). Among the Joint Committee’s main deliverables were policy products for the implementation of the Digital Operational Resilience Act (“DORA”) as well as ongoing work related to the Sustainable Finance Disclosure Regulation. [NEW]
EC Publishes Consultation on the Integration of EU Capital Markets. On April 15, the European Commission (“EC”) published a targeted consultation on the integration of EU capital markets. This forms part of the EC’s plan to progress the Savings and Investment Union (“SIU”) strategy, published in March. According to the EC, the objective of the consultation is to identify legal, regulatory, technological and operational barriers hindering the development of integrated capital markets. Its focus includes barriers related to trading, post-trading infrastructures and the cross-border distribution of funds, as well as barriers specifically linked to supervision. The deadline for responses is June 10, 2025.
Japan’s Financial Services Agency Publishes Explanatory Document on Counterparty Credit Risk Management. On April 14, Japan’s Financial Services Agency (“JFSA”) published an explanatory document on the Basel Committee on Banking Supervision’s Guidelines for Counterparty Credit Risk Management. The document, co-authored with the Bank of Japan, indicates that it was published to facilitate better understanding of the Basel Committee’s guidelines and is available in Japanese only.

New Industry-Led Developments

ISDA/IIF Responds to EC’s Consultation on the Market Risk Prudential Framework. On April 22, ISDA and the Institute of International Finance (“IIF”) submitted a joint response to the EC’s consultation on the application of the market risk prudential framework. The associations believe the capital framework should be risk-appropriate and as consistent as possible across jurisdictions to ensure a level playing field without competitive distortions due to divergent rules. [NEW]
ISDA and FIA Respond to Consultation on Commodity Derivatives Markets. On April 22, ISDA and FIA submitted a joint response to the EC’s consultation on the functioning of commodity derivatives markets and certain aspects relating to spot energy markets. In addition to questions on position management, reporting and limits and the ancillary activities exemption, the consultation also addressed data and reporting and certain concepts raised in the Draghi report, such as a market correction mechanism to cap pricing of natural gas and an obligation to trade certain commodity derivatives in the EU only. [NEW]
ISDA Submits Letter on Environmental Credits. On April 15, ISDA submitted a response to the Financial Accounting Standards Board’s (FASB) consultation on environmental credits and environmental credit obligations. ISDA said that the response supports the FASB’s overall proposals to establish clear and consistent accounting guidance for environmental credits, but highlights that clarification is needed in certain areas, including those related to recognition, derecognition, impairment and hedge accounting impacts.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

On April 23, President Trump issued an Executive Order entitled Restoring Equality of Opportunity and Meritocracy. The order seeks to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.”

Disparate impact is a theory of discrimination applied when a facially neutral practice has a statistically significant impact on a protected group. According to the Executive Order, “disparate-impact liability” creates “a near insurmountable presumption of unlawful discrimination … where there are any differences in outcomes in certain circumstances among different races, sexes, or similar groups, even if there is no facially discriminatory policy or practice or discriminatory intent involved, and even if everyone has an equal opportunity to succeed.” The order criticizes disparate-impact liability as “all but requir[ing] individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability.” Thus, according to President Trump, disparate-impact liability prevents employers from “act[ing] in the best interests of the job applicant, the employer, and the American public” and undermines “meritocracy,” “a colorblind society,” and “the American Dream.”[*]

A. Regulatory Changes

Section 3 and Section 5 of the Executive Order direct the repeal or amendment of certain regulations that impose disparate-impact liability on, and require affirmative action by, recipients of federal funding under Title VI, such as universities, nonprofits, and certain contractors. Section 3 states that it is revoking the “Presidential approval” of these regulations. (Title VI provides that no “rule, regulation, or order” implementing the statute “shall become effective unless and until approved by the President.” 42 U.S.C. § 2000d-1.) And Section 5(a) directs the Attorney General to “initiate appropriate action to repeal or amend” those regulations.

The Title VI regulations identified by the Executive Order for repeal prohibit recipients of federal funding from “utiliz[ing] criteria or methods of administration which have the effect of subjecting individuals to discrimination,” selecting “the site or location of facilities” in a manner that has “the purpose or effect of defeating or substantially impairing the accomplishment of the objectives” of Title VI, or engaging in “employment practices” that “tend[]” to discriminate. 28 C.F.R. § 42.104(b)(2), (b)(3), (c)(2). The regulations also allow recipients to “take affirmative action to overcome the effects of conditions which resulted in [discrimination],” even if there were no prior discrimination by the recipient. § 42.104(b)(6)(ii).

Section 5(b) also directs the Attorney General, “in coordination with the heads of all other agencies,” to review “all existing regulations, guidance, rules, or orders that impose disparate-impact liability or similar requirements,” and to “detail agency steps for their amendment or repeal, as appropriate under applicable law.” Unlike Section 5(a), this portion of the Executive Order is not limited to Title VI, and likely contemplates Title VII, the Fair Housing Act, the Age Discrimination in Employment Act, the Affordable Care Act, and the Equal Credit Opportunity Act, several of which are mentioned in other sections of the order.

Section 7 of the Executive Order further instructs the Attorney General to “determine whether any Federal authorities preempt State laws, regulations, policies, or practices that impose-disparate-impact liability,” and to “take appropriate measures consistent with the policy of this order.” Section 7 also directs the Attorney General and Chair of the Equal Employment Opportunity Commission (EEOC) to “issue guidance or technical assistance to employers regarding appropriate methods to promote equal access to employment regardless of whether an applicant has a college education.”

B. Enforcement Actions

Section 4 of the Executive Order directs all federal agencies to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability.” Consistent with that direction, Section 6 instructs all heads of federal agencies, including “the Attorney General,” “the Chair of the Equal Employment Opportunity Commission,” “the Secretary of Housing and Urban Development, the Director of the Consumer Financial Protection Bureau, the Chair of the Federal Trade Commission, and the heads of other agencies responsible for enforcement of the Equal Credit Opportunity Act (Public Law 93-495), Title VIII of the Civil Rights Act of 1964 (the Fair Housing Act (Public Law 90-284, as amended)),” to “assess” or “evaluate” all pending proceedings relying on disparate-impact theories, including under Title VII, and “take appropriate action” within 45 days. Agencies must conduct a similar review of “consent judgments and permanent injunctions” within 90 days.

C. Analysis

As a result of this Executive Order, federal agencies are unlikely to initiate investigations or enforcement actions relying on disparate-impact theories. They might also close, dismiss, or narrow existing investigations, enforcement actions, and ongoing monitorships pursuant to consent decrees or other agreements where the underlying legal theory relied on disparate-impact liability. Companies facing such investigations, actions, and monitorships might wish to ask for their closure in light of the order.

Agencies also may move to repeal or amend regulations and guidance documents imposing or recognizing disparate-impact liability, such as the EEOC’s guidelines concerning affirmative action that address disparate-impact liability. See 29 C.F.R. Part 1608. Among other things, the current EEOC guidance opines that affirmative action plans are allowed to remedy “employment practices” that “[r]esult in disparate treatment,” even if there is no “violation of Title VII.” 29 C.F.R. § 1608.4(b). The EEOC may repeal or amend these guidelines, including because it is consistent with President Trump’s prior repeal of Executive Order 11246 and Acting Chair Lucas’s view that such plans may be used in “very limited circumstances.” And given that Title VII provides that “good faith” compliance with a written EEOC “interpretation or opinion” is a defense to liability, 42 U.S.C. § 2000e-12(b), rescission of the affirmative action plan guidelines could eliminate a safe harbor if the guidelines are formally rescinded. Employers with affirmative action plans should review their plans and consider whether to make changes in light of forthcoming EEOC action.

Litigation challenging the actions directed by the order is possible. Title VI is silent, for example, on whether the President may unilaterally revoke approval of regulations without a full notice-and-comment rulemaking process. Democratic state attorneys general might also litigate if the Trump Administration takes the position that federal laws preempt state laws or regulations that impose or recognize disparate-impact liability.

Meanwhile, the order does not directly impact private plaintiff litigation invoking disparate impact. The order also has no immediate impact on existing disparate-impact case law. However, litigation catalyzed by the order could lead to reconsideration of precedents upholding disparate-impact theories of liability, such as the Supreme Court’s decision interpreting Title VII in Griggs v. Duke Power Co., 401 U.S. 424 (1971).

[*] This order is consistent with other Administration actions regarding disparate-impact liability. On April 23, for example, President Trump issued an executive order rejecting the use of disparate-impact analysis to evaluate the lawfulness of school discipline. And earlier this year, Attorney General Bondi ordered the Department of Justice to issue updated guidance that “narrow[s] the use of ‘disparate impact’ theories that effectively require use of race- or sex-based preference” and “emphasize that statistical disparities alone do not automatically constitute unlawful discrimination.” Moreover, these actions were proposed in the Project 2025 policy document.

The following Gibson Dunn lawyers prepared this update: Jason Schwartz, Ryan Stewart, Cynthia Chen McTernan, and Josh Zuckerman.

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

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)

Naima L. Farrell – Partner, Labor & Employment Group,
Washington, D.C. (+1 202.887.3559, nfarrell@gibsondunn.com)

Cynthia Chen McTernan – Partner, Labor & Employment Group,
Los Angeles (+1 213.229.7633, cmcternan@gibsondunn.com )

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

Greta B. Williams – Partner, Labor & Employment Group,
Washington, D.C. (+1 202.887.3745, gbwilliams@gibsondunn.com)

Zoë Klein – Of Counsel, Labor & Employment Group,
Washington, D.C. (+1 202.887.3740, zklein@gibsondunn.com)

Anna M. McKenzie – Of Counsel, Labor & Employment Group,
Washington, D.C. (+1 202.955.8205, amckenzie@gibsondunn.com)

While questions about the overall level of white collar enforcement in the new administration persist, the direction at the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) is clear, according to Gibson Dunn partner Matthew Axelrod, who told Export Compliance Daily that all signs indicate “BIS is going to be aggressive in going after companies that violate their rules.”

Matt also said “the BIS view is that they would rather educate industry so that industry complies with the rules on the front end rather than having violations that get enforced on the back end” and that, because of funding cuts and staff turnover, “the bigger question mark than the policy direction is whether BIS will have the resources it needs to deliver on the policy direction.”

After serving as BIS Assistant Secretary for Export Enforcement under the Biden administration, Matt joined Gibson Dunn in early 2025 to co-chair our newly launched Sanctions and Export Enforcement Practice Group, where he works closely with clients to conduct internal investigations, evaluate compliance programs, advise on voluntary self-disclosures, and defend against government-facing investigations.

Read the full article in Export Compliance Daily (subscription required).

The French Ministry of Justice has unveiled the first draft of the reform of French arbitration law, a major step in modernizing the country’s arbitration framework. This draft reform builds on the 2011 overhaul, aiming to consolidate France’s position as a leading place of international arbitration.

A Reform Rooted in Continuity, Aimed at Autonomy

The reform is built on the foundation of France’s established arbitration tradition but proposes a dedicated Arbitration Code to enhance clarity and coherence, and strengthen the autonomy of arbitration law while improving its integration with French judicial procedures.

Three Main Pillars of the Reform:

1. A More Flexible Arbitration Framework

Trend towards unification of the rules governing domestic and international arbitration, favoring the more liberal international standards.
Reduced formalism: No mandatory form for arbitration clauses, electronic awards explicitly recognized.
Practice-driven updates: Simplified signing requirements, streamlined communication of awards.

2. A More Protective Legal Environment

Impartiality and independence of arbitrators reaffirmed.
Financial hardship mechanism introduced: Courts may provide assistance in case of proven inability to pay arbitration costs to avoid denial of justice.
Strengthened guarantees for weaker parties (e.g., consumers, employees, financially constrained parties).
Protection of third-party rights: Provisions allowing third-party intervention in court proceedings relating to the award (annulment / exequatur) and possibility for third-party opposition against court decisions.

3. A More Efficient System

Reinforced “juge d’appui”: Enhanced powers to support arbitration proceedings, prevent denial of justice, and enforce interim measures issued by the arbitral tribunal.
Enhanced tribunal tools: Consolidation of related claims into a single arbitral proceeding, liquidation of penalty payments (astreintes), obligation for parties to raise all claims and objections concurrently under penalty of subsequent inadmissibility, and issuance of binding preliminary determinations on jurisdiction or admissibility.
Streamlined enforcement and recourse: Revised procedural rules on recognition, exequatur, and appeal proceedings before French courts; stay of annulment no longer automatic in domestic cases.

A Strategic Move for Arbitration in France:

This initiative reflects France’s commitment to arbitration-friendly policies and to the continuing reinforcement of its position in the global dispute resolution landscape.

A consultation is now open to refine the draft, collect the industry feedback and clarify outstanding issues.

We are closely monitoring the legislative process and will continue to provide insights as it evolves.

The following Gibson Dunn lawyers prepared this update: Eric Bouffard, Martin Guermonprez, and Imane Choukir.

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 International Arbitration practice group, or the authors in Paris at +33 1 56 43 13 00:

Eric Bouffard – ebouffard@gibsondunn.com

Martin Guermonprez – mguermonprez@gibsondunn.com

Imane Choukir – ichoukir@gibsondunn.com

As companies prepare to go public, the need for strong enterprise risk management (ERM) and financial reporting systems becomes critical for long-term success. Please join us for a presentation that provides a comprehensive guide to navigating the IPO process with an emphasis on establishing effective risk management strategies and robust financial systems. Attendees will gain insights into key considerations for planning and implementing enterprise risk management (ERM) frameworks and financial reporting systems that align with public company requirements.

This presentation is ideal for general counsel, legal professionals, corporate executives, and legal teams involved in the IPO process. It offers practical, legally focused strategies to ensure regulatory compliance and reduce risk exposure as companies transition to public markets.

MCLE CREDIT INFORMATION:

This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.

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

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

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

PANELISTS:

Andrew Fabens is a partner in the New York office of Gibson, Dunn & Crutcher. Mr. Fabens serves as co-partner in charge of the New York office, co-chair of Gibson Dunn’s Capital Markets Practice Group and is a member of Gibson Dunn’s Securities Regulation and Corporate Governance Practice Group.

Mr. Fabens advises companies on long-term and strategic capital planning, disclosure and reporting obligations under U.S. federal securities laws, corporate governance issues and stock exchange listing obligations. He represents issuers and underwriters in public and private corporate finance transactions, both in the United States and internationally. His experience encompasses initial public offerings, follow-on equity offerings, investment grade, high-yield and convertible debt offerings and offerings of preferred, hybrid and derivative securities. In addition, he regularly advises companies and investment banks on corporate and securities law issues, including M&A financing, spinoff transactions and liability management programs.

Michael J. Scanlon is a partner in the Washington, D.C. office of Gibson Dunn. He is a member of the firm’s Securities Regulation and Corporate Governance, Securities Enforcement, and Corporate Transactions Practice Groups, and has an extensive practice representing U.S. and foreign public company and audit firm clients on regulatory, corporate governance, and enforcement matters.

Michael advises corporate clients on SEC compliance and disclosure issues, the Sarbanes-Oxley Act of 2002, and corporate governance best practices, with a particular focus on financial reporting matters. He frequently represents both accounting firms and public company clients on SEC and PCAOB accounting and auditing matters, including financial statement materiality and restatement issues, internal control issues, auditor independence, and other accounting-related disclosure issues. Michael has represented large accounting firms in enforcement investigations conducted by the SEC, PCAOB, and state accountancy boards. He also is experienced in conducting internal investigations involving accounting irregularities for management, audit committees, and other Board committees, and represents clients on these matters before the SEC. Michael also represents several public company boards of directors and audit committees, as well as not-for-profit organizations, with respect to corporate governance and other compliance matters.

Patty Holman is a partner in the Orange county office of Deloitte in the Accounting & Reporting Advisory services practice.

Patty has extensive experience working with public and private companies of all sizes, serving as a trusted business advisor to leaders in the accounting and finance departments. She primarily focuses IPO readiness gap assessments and IPO execution services, mergers & acquisitions-related accounting and reporting, technical accounting, and SOX (internal controls) readiness and co-sourcing. Her experience covers a variety of industries, including technology, consumer products, manufacturing, real estate and aerospace and defense.

Patty is a Certified Public Accountant and holds a bachelor’s degree in business administration from the Haas School of Business at the University of California, Berkeley and a M.S. in Accountancy from the University of Notre Dame.

We are pleased to provide you with Gibson Dunn’s Accounting Firm Quarterly Update for Q1 2025. The Update is available in .pdf format at the below link, and addresses news on the following topics that we hope are of interest to you:

Presidential and SEC Transitions Continue
SEC Abandons Defense of Climate Rule
Ninth Circuit Considers First Amendment Challenge to SEC’s Gag Rule
AICPA Seeks Comment on Alternative Practice Structures
CPAB Amends Rules to Increase Disclosure of Inspection Results
Supreme Court Distinguishes Between False and Misleading Statements
Second Circuit Applies Crime-Fraud Exception to Overcome Attorney-Client Privilege
Texas Supreme Court Adopts Anti-Fracturing Rule
EU Proposes Simplified Rules Regarding Sustainability Reporting
Other Recent PCAOB Regulatory and Enforcement Developments

Please let us know if there are topics that you would be interested in seeing covered in future editions of the Update.

Download Full Newsletter

Warmest regards,
Jim Farrell
Monica Loseman
Michael Scanlon

Chairs, Accounting Firm Advisory and Defense Practice Group, Gibson, Dunn & Crutcher LLP

In addition to the practice group chairs, this update was prepared by David Ware, Benjamin Belair, Monica Limeng Woolley, Bryan Clegg, Hayden McGovern, John Harrison, Nicholas Whetstone, and Ty Shockley.

Accounting Firm Advisory and Defense Group Chairs:

Jim Farrell – Co-Chair, New York (+1 212-351-5326, jfarrell@gibsondunn.com)

Monica K. Loseman – Co-Chair, Denver (+1 303-298-5784, mloseman@gibsondunn.com)

Michael Scanlon – Co-Chair, Washington, D.C.(+1 202-887-3668, mscanlon@gibsondunn.com)

In an article for the Harvard Law School Forum on Corporate Governance, partners Krista Hanvey, Kate Napalkova, Sean Feller, Michael Collins, and Gina Hancock have outlined the considerations that compensation decision-makers must bear in mind as they navigate periods of macroeconomic uncertainty.

While executive management teams and human resources leaders may feel pressure to act quickly, the authors suggest that plotting a successful course relies on employing policies that are systematic and consistent with an organization’s broader philosophy and mission.

Read the full article [PDF]

Los Angeles partner Drew Flowers shared his perspectives on disruptions and uncertainties in the marketplace, when to take a pause, and multifamily units as a secure asset class, regardless of market conditions, with Law360 Real Estate Authority. “In reality, multifamily for real estate has been the safest investment for a long time, not just now, because guess what? People need places to live,” Drew said.

Read the article, “Real Estate Lawyers Chart Dealmaking Under Tariffs,” in Law360 Real Estate Authority [PDF].

Gibson Dunn’s Workplace DEI Task Force aims to help our clients navigate the evolving legal and policy landscape following recent Executive Branch actions and 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 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 April 15, three current law students sued the Equal Employment Opportunity Commission (EEOC) in the U.S. District Court for the District of Columbia, seeking to enjoin the EEOC’s efforts to collect workplace demographic information from twenty law firms. The plaintiffs, who are proceeding pseudonymously, state that they have applied to work at one or more of the twenty targeted firms and that they are “deeply worried that their data will be divulged [to the EEOC], and that they may be targeted as a result.” The plaintiffs assert that the EEOC engaged in ultra vires action by informally investigating the law firms without a charge being filed with the agency. They ask the court to enjoin the EEOC from “investigating any law firm through means that do not satisfy the requirements of conducting an investigation under Title VII’s EEOC charge process,” to order the EEOC to withdraw the letters it sent to the twenty law firms, and to order the EEOC to return any information already collected from those firms.

As reported in our April 8 Task Force Update, on March 27, Judge Matthew Kennelly of the U.S. District Court for the Northern District of Illinois granted a nationwide temporary restraining order (TRO) blocking the Department of Labor from enforcing the Certification Provision of Executive Order (EO) 14173, which requires federal contractors and grantees to certify that they do not operate any unlawful DEI programs. The TRO also prohibited enforcement of the Termination Provision of EO 14151, which requires termination of all “equity-related” federal grants, against the plaintiff, the non-profit organization Chicago Women in Trade (CWIT). On April 14, the court issued an opinion preliminarily enjoining enforcement of these EOs to the same extent and for the same reasons articulated in its prior opinion. Accordingly, the Department of Labor remains prohibited from enforcing the Certification Provision nationwide. It is also enjoined from enforcing the Termination Provision against CWIT. The court’s order leaves the remainder of the EOs’ provisions in effect, and it does not impede other agencies’ ability to enforce the Certification or Termination Provisions, nor does it hinder the Department of Labor’s ability to enforce the Termination Provision against other federal grantees. The court’s entry of a preliminary injunction clears the path for the government to appeal to the Seventh Circuit and seek a stay of the court’s order pending the outcome of the appeal.

In an April 3 letter to state leaders, the U.S. Department of Education stated that it will withdraw Title I funding from public schools that maintain DEI-related programs. The letter stated that “the use of [DEI] programs to advantage one’s race over another” violates civil rights laws and is thus “impermissible.” The letter directed schools and state officials to return an attached certification within 10 days, confirming compliance with the directive. Craig Trainor, the Department’s Acting Assistant Secretary for Civil Rights, said in a statement that “[f]ederal financial assistance is a privilege, not a right . . . [and that] [w]hen state education commissioners accept federal funds, they agree to abide by federal antidiscrimination requirements. Unfortunately, we have seen too many schools flout or outright violate these obligations, including by using DEI programs to discriminate against one group of Americans to favor another based on identity characteristics.” Following an emergency motion by the National Educational Association for a temporary restraining order blocking this certification requirement, the Department agreed to extend the deadline to April 24. As Jonaki Mehta of NPR reports, the threat to withdraw funding could have sizable effects on schools nationwide. While the federal government only provides around 10% of public-school funding, Title I funding benefits nearly 90% of school districts nationwide. To date, the Department has already allocated $18.38 billion under Title I in the current fiscal year.

Media Coverage and Commentary:

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

Reuters, “Former US Labor Officials Urge Contractors to Stand Firm on DEI” (April 15): Simon Jessop and Richa Naidu of Reuters report on an open letter sent from ten former U.S. Department of Labor officials to federal contractors, urging them to maintain their corporate diversity policies despite legal threats from the Trump Administration. The letter reads: “Although the federal government has chosen to dismantle diversity, equity, inclusion, and accessibility programs in its own workplaces at its own peril, the government cannot prohibit private employers from engaging in fully lawful strategies to advance equal opportunity for all.” The letter explains why, in the authors’ view, President Trump may not retroactively impose liability for complying with prior federal requirements or change legal standards through executive order. The letter also extolls the benefits of “proactive barrier analysis,” including collecting and analyzing workforce data and setting demographic benchmarks, which the letter asserts do not violate federal anti-discrimination law.
New York Times, “Harvard Says It Will Not Comply With Trump Administration’s Demands” (April 14): Vimal Patel of the New York Times reports on Harvard University’s decision to reject the policy changes requested of it by the Trump Administration, making it “the first university to directly refuse to comply with the administration’s demands and setting up a showdown between the federal government and the nation’s wealthiest university.” In an April 11 letter, the Administration requested that Harvard engage in a series of changes to its hiring, admissions, student discipline, and DEI policies and practices. In a statement following the letter, Harvard’s president Alan Garber said: “No government—regardless of which party is in power—should dictate what private universities can teach, whom they can admit and hire, and which areas of study and inquiry they can pursue.” Patel reports that, shortly thereafter, the Administration announced it would freeze $2.2 billion in multiyear grants to Harvard along with a $60 million contract.
Law360, “Florida Won’t Hire Law Firms With DEI Initiatives, AG Says” (April 9): Madison Arnold of Law360 reports that the Attorney General of Florida, James Uthmeier, has issued a memorandum stating that the state will no longer engage law firms with DEI programs or environmental, social, and governance (ESG) initiatives. The memorandum also provided that Uthmeier will cease approving engagements between firms with these programs and other Florida agencies. The Attorney General’s office will also conduct a review of existing outside counsel engagements to assess compliance with the memorandum’s requirements. Uthmeier identified several initiatives he views as problematic, such as the Mansfield Certification Program and diversity mentorship programs. Uthmeier stated, “Like the EEOC, I am deeply troubled that these discriminatory practices have been embraced and amplified by many of our nation’s law firms. If we are truly committed to the rule of law, then we must be truly committed to equal justice under law. DEI and ESG practices flout those bedrock principles.”
LA Times, “California Signals Possible Defiance of Trump Anti-DEI Order that Threatens School Funding” (April 8): Howard Blume of the LA Times reports that California is resisting the Trump administration’s threat to cut federal funding for public schools that maintain DEI programs. The state’s education officials argue that DEI initiatives are essential for creating inclusive and equitable learning environments. California Governor Gavin Newsom and other state leaders have vowed to fight the administration’s directive, which they view as an attempt to undermine civil rights protections.
The New York Times, “When It Comes to D.E.I. and ICE, Trump Is Using Federal Grants as Leverage” (April 7): Benjamin Oreskes, Zolan Kanno-Youngs, and Hamed Aleaziz of The New York Times report that the Department of Homeland Security (DHS) is updating its grant funding contracts to require city and state grantees—many of which receive money from DHS for public safety services, such as police, fire, and emergency response—to “honor requests for cooperation, such as participation in joint operations, sharing of information or requests for short-term detention of an alien pursuant to a valid detainer.”

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:

American Alliance for Equal Rights v. American Bar Association, No. 1:25-cv-03980 (N.D. Ill. 2025): On April 12, 2025, the American Alliance for Equal Rights (AAER) sued the American Bar Association (ABA) in relation to its Legal Opportunity Scholarship, which AAER asserts violates Section 1981. According to the complaint, the scholarship awards $15,000 to 20-25 first year law students per year. To qualify, an applicant must be a “member of an underrepresented racial and/or ethnic minority.” The complaint alleges that “White students are not eligible to apply, be selected, or equally compete for the ABA’s scholarship.” AAER seeks a TRO and preliminary injunction barring the ABA from selecting winners for this year’s scholarship, as well as a permanent injunction barring the ABA from knowing or considering applicants’ race or ethnicity when administering the scholarship.
- Latest update: The docket does not yet reflect that the ABA has been served.
American Alliance for Equal Rights v. Southwest Airlines Co., No. 24-cv-01209 (N.D. Tex. 2024): On May 20, 2024, AAER filed a complaint against Southwest Airlines, alleging that the company’s ¡Lánzate! Travel Award Program, which awards free flights to students who “identify direct or parental ties to a specific country” of Hispanic origin, unlawfully discriminates based on race. AAER seeks a declaratory judgment that the program violates Section 1981 and Title VI, a temporary restraining order barring Southwest from closing the next application period (set to open in March 2025), and a permanent injunction barring enforcement of the program’s ethnic eligibility criteria. On March 3, 2025, AAER filed a motion for summary judgment, arguing that there was no genuine dispute of material fact on three relevant questions: (1) whether ¡Lánzate! involved contracts; (2) whether ¡Lánzate! intentionally discriminated against non-Hispanics; and (3) whether that ethnic discrimination harmed one of AAER’s members by preventing them from competing for ¡Lánzate! in 2024.
- Latest update: On April 10, 2025, the United States filed an unopposed motion for Leave to File Statement of Interest in support of AAER’s Motion for Summary Judgment. In a three-page motion, the United States argued that it had a strong interest in protecting the civil rights of all Americans, including the right to be free from discrimination on the basis of protected characteristics. On April 9, 2025, Southwest filed a Motion for Entry of Judgment of $0.01 in nominal damages for AAER. Southwest argued the following: (i) it previously moved to dismiss AAER’s complaint in its entirety on the basis of mootness, as Southwest has already ceased operating the challenged Award Program, (ii) it is willing to accept judgment against it for $0.01 in nominal damages, without an admission of liability, (iii) its request to accept judgment for $0.01 follows a straightforward path to end this litigation, (iv) Justice Kavanaugh’s concurrence in Uzuegbunam v. Preczerski supports the conclusion that this path is available in a case like this one, (v) the proposed judgment would resolve AAER’s allegation that Southwest was resisting judgment and, therefore, had not obtained mootness, and (vi) the proposed judgment would also address the Court’s earlier conclusion that an offer to settle does not render the nominal damages claim moot.
National Association of Diversity Officers in Higher Educ., et al., v. Donald J. Trump, et al., No. 1:25-cv-00333-ABA (D. Md. 2025): On February 3, 2025, the National Association of Diversity Officers in Higher Education, the American Association of University Professors, the Restaurant Opportunities Centers United and the Mayor and City Council of Baltimore, Maryland brought suit against the Trump Administration challenging EOs 14151 and 14173. The plaintiffs contend that the executive orders exceed presidential authority, violate the separation of powers and the First Amendment, and are unconstitutionally vague. On February 13, the plaintiffs moved for a temporary restraining order and a preliminary injunction to prevent the Trump Administration from enforcing the executive orders. On February 21, the Court granted in part the preliminary injunction. The Fourth Circuit Court of Appeals stayed the injunction on March 14.
- Latest update: On March 21, the plaintiffs filed a motion in the district court to vacate the preliminary injunction without prejudice, asserting that they “intend to seek additional relief based on developments that have occurred since the motion for preliminary injunction was filed on February 13, 2025.” The defendants opposed the motion on the ground that the district court lost jurisdiction when the defendants appealed the preliminary injunction order to the Fourth Circuit. The court heard argument on the motion on April 10.
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 (NYSHRL) 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. PayPal is represented by Gibson Dunn in this matter.
- Latest update: On April 16, 2025, PayPal moved to dismiss the complaint, asserting that the plaintiffs lack standing because they never applied for funding under the challenged program. PayPal also argued that the plaintiffs’ claims are untimely because the challenged conduct occurred outside the three-year limitations period and that the plaintiffs engaged in improper “group pleading” by failing to make allegations against each defendant. Lastly, PayPal argued that complaint fails to state a claim on the merits because the plaintiffs allege no contractual relationship (Section 1981), do not allege PayPal received federal financial assistance (Title VI), and do not allege PayPal extended “credit” (NYSHRL).
National Association of Scholars v. U.S. Dep’t of Energy, et al., No. 25-cv-00077 (W.D. Tex. 2025): On January 16, 2025, the National Association of Scholars—a group of professors, faculty, and researchers at colleges and universities across the United States—sued the United States Department of Energy, alleging that the Department’s Office of Science unlawfully requires research grant applicants to show how they would “promote diversity, equity, and inclusion in research projects” through its Promoting Inclusive and Equitable Research (PIER) plan. The Association alleges that requiring grant applicants to show how they would promote DEI in their projects violates applicants’ First Amendment rights by requiring them to express ideas with which they disagree, that the Department lacked statutory authority to adopt the plan, and that the plan violates the procedural requirements of the Administrative Procedure Act. The Association seeks declaratory and injunctive relief. On March 31, 2025, the defendants filed a motion to dismiss. The defendants argue that the Association’s claims are moot, as the Department of Energy has rescinded the PIER plan requirement after President Trump issued EO 14151.
- Latest update: On April 14, 2025, the Association filed an opposition to the motion to dismiss, arguing that the recission of the PIER plan requirement does not sufficiently moot the controversy because the requirement was “suspended,” and not “rescinded,” making the change temporary. The Association also argues that EO 14151 is currently being challenged in multiple lawsuits, and it is likely that the PIER plan requirement, or something similar, could be reimposed.
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 regarding 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 President. The plaintiffs seek preliminary and permanent injunctive relief. On March 3, the plaintiffs filed a motion for preliminary injunction.
- Latest update: On April 11, 2025, the defendants filed an opposition to the plaintiff’s motion for preliminary injunction. The defendants argued that the plaintiffs are not likely to establish the Court’s jurisdiction, the plaintiffs’ Due Process, First Amendment, separation-of-powers, statutory, and Equal Protection Clause claims will likely fail on the merits, the plaintiffs have not shown irreparable injury, and the balance of inequities and public interest weigh against relief. The defendants also argued that “to the extent the Court intends to grant Plaintiffs’ request for a preliminary injunction, such relief should be narrowly tailored to apply only to [the] defendant agencies, Plaintiffs, and the provisions that affect them” and that any injunctive relief should be stayed pending an appeal and bond.
Strickland et al. v. United States Department of Agriculture et al., No. 2:24-cv-00060 (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. 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. On March 27, 2025, the parties filed a joint status report requesting additional time to discuss “the possibility of a resolution.” On March 31, 2025, the court granted the parties’ request to stay all proceedings until April 10, 2025.
- Latest update: On April 10, 2025, the parties filed a joint status report. The defendants stated they would be open to a voluntary remand to “take any available and necessary administrative steps to no longer use the race- and sex-based ‘socially disadvantaged’ designation[s] in the challenged programs,” and to financially compensate the plaintiffs, but aver they are unable to compensate non-parties affected by the program, either by clawing back funds paid to disadvantaged farmers under the challenged program or by providing compensation to non-disadvantaged farmers previously denied funds under the program. The plaintiffs argued that USDA’s objection “misses the point,” because “[t]he only way to cure Plaintiffs’ injuries is to rework the challenged programs to be lawful.”

2. Employment discrimination and related claims:

Dill v. International Business Machines, Corp., No. 1:24-cv-00852 (W.D. Mich. 2024): On August 20, 2024, America First Legal filed a discrimination suit against IBM on behalf of a former IBM employee, alleging violations of Title VII and Section 1981. The plaintiff claims that IBM placed him on a performance improvement plan as a “pretext to force him out of [IBM] due to [its] stated quotas related to sex and race.” The complaint cites to a leaked video in which IBM’s Chief Executive Officer and Board Chairman, Arvind Krishna, allegedly states that all executives must increase representation of underrepresented minorities on their teams by 1% each year to receive a “plus” on their bonuses. On March 26, 2025, the court denied a motion to dismiss, concluding that the plaintiff alleged sufficient facts to support a discrimination claim.
- Latest update: On April 9, 2025, IBM answered the complaint, denying that the plaintiff consistently received high scores on the internal employee performance metric. IBM also denied having “executive compensation metrics that include a diversity modifier.” IBM raised seventeen affirmative defenses, including (1) failure to state a claim, (2) failure to show the irreparable harm required for injunctive relief, (3) failure to show the plaintiff was treated less well or materially different from other similarly situated employees, and (4) failure to mitigate damages.
Steffens v. Walt Disney Co., No. 25NNCV00944 (Cal. Super. Ct. Los Angeles Cnty. 2025): On February 11, 2025, a white former executive for Marvel Entertainment sued Disney, alleging the company discriminated against him on the basis of race, sex, and age. He alleged he was denied a promotion because of his race and age, and that the Company failed to promote him as retaliation for his objection to “effort[s] to promote presidents to senior vice presidents based on their race and a memorandum that would have referred to employees with the racial signifier ‘BIPOC.’” He brought claims under California state antidiscrimination and unfair business practices laws. On February 13, the court issued an order to show cause for failure to file proof of service. On March 17, 2025, the plaintiff filed a proof of personal service.
- Latest update: On April 9, 2025, Disney answered the complaint, “generally den[ying] each and every material allegation set forth in the complaint,” and the amount or manner in which the plaintiff has been injured. Disney also asserted twenty-two affirmative defenses, including (1) failure to state a claim, (2) failure to file within the applicable statute of limitations period, (3) failure to exhaust administrative remedies, and (4) failure to mitigate damages.

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

American Alliance for Equal Rights v. City of Chicago, et al., No. 1:25-cv-01017 (N.D. Ill. 2025): On January 29, 2025, AAER and two white male individuals filed a complaint against the City of Chicago and the City’s new casino, Bally’s Chicago, alleging that the City precluded them from investing in the new casino based on their race, in violation of Sections 1981, 1982, 1983, and 1985. Under the Illinois Gambling Act, an application for a casino owner’s license must contain “evidence the applicant used its best efforts to reach a goal of 25% ownership representation by minority persons and 5% ownership representation by women.” The plaintiffs alleged that the casino precluded them from participating in the casino’s initial public offering by limiting certain shares to members of specified racial minority groups.
- Latest update: On April 4, 2025, the City of Chicago moved to dismiss the complaint for failure to state a claim on the following grounds: (1) AAER lacks both organizational and associational standing; (2) the plaintiffs’ Sections 1981, 1982, and 1983 claims fail because the complained of action was undertaken by a private company, not a state actor; and (3) the plaintiffs’ Section 1985 claim fails because the alleged harm was not caused by a City policy. Also an April 4, 2025, the individual named defendants—all members of the Illinois Gaming Board—also moved to dismiss, contending that (1) the plaintiffs lack Article III standing; (2) Section 1981 does not create a private right of action against state actors; (3) in any event, the Eleventh Amendment bars the plaintiffs’ claim for damages; and (4) the plaintiffs fail to allege any action by the Board that caused any injury. That same day, defendants Bally’s Chicago and Bally’s Chicago Operating Company moved to dismiss for failure to state a claim under Sections 1981, 1982, and 1985.
American Alliance for Equal Rights v. Walz, 24-cv-1748 (D. Minn. 2024): On May 15, 2024, AAER filed a complaint against Minnesota Governor Tim Walz, challenging a state law that requires Governor Walz to ensure that five members of the Minnesota Board of Social Work are from a “community of color” or “an underrepresented community.” AAER claimed that two of its white female members were “qualified, ready, willing and able to be appointed to the board,” but that they would not be given equal consideration. AAER sought a permanent injunction and a declaration that the law violates the Equal Protection Clause of the Fourteenth Amendment. On January 3, 2025, AAER filed an amended complaint to reflect the fact that they no longer rely on one of their original white female members. On January 17, 2025, Governor Walz answered the amended complaint, denying the allegations of unlawful discrimination and asserting that the plaintiffs lacked standing and failed to state a claim upon which relief can be granted. He specifically denied that the law required him to consider the race of potential appointees to the Board or otherwise limits the pool of candidates based on race or ethnicity.
- Latest update: On April 3, 2025, the parties filed a joint stipulation of dismissal, in which Governor Walz denied any wrongdoing. On April 4, 2025, the court dismissed the case.
Doe 1 v. Office of the Director of Nat’l Intel., No. 1:25-cv-00300 (E.D. Va. 2025): On February 17, 2025, 11 unnamed employees of the Office of the Director of National Intelligence and the Central Intelligence Agency sued their employers after they were placed on administrative leave from their DEI-related positions. They assert that the decision to place 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, 2025, the plaintiffs moved for a temporary restraining order. The court entered an administrative stay to allow additional briefing on the motion. On February 24, 2025, the plaintiffs filed an amended complaint adding eight unnamed plaintiffs to the case. The court held a hearing on the plaintiffs’ motion for a temporary restraining order on February 27, 2025. That same day, the court denied the motion in a single page order and lifted the administrative stay.
- Latest update: On March 27, 2025, the plaintiffs moved for a preliminary injunction preventing the defendants from terminating their employment, as well as the employment of similarly situated individuals. The plaintiffs argued that they are likely to succeed on their Fifth Amendment Due Process claim, they will suffer irreparable economic and reputational harm absent an injunction, the balance of hardships weigh in their favor, and an injunction will serve the public interest. They asked the court to (1) order the CIA Director to “personally review and reconsider his termination decisions”; (2) order the CIA Director and the Director of National Intelligence “to state why each individual termination somehow serves the national interest”; and/or (3) allow the plaintiffs and other similarly situated individuals to be considered for reassignment to positions in the Intelligence Community. On March 31, 2025, the court enjoined the defendants from “effectuating or implementing any decision to terminate the Plaintiffs without further Court authorization.” The court ordered the defendants to “provide Plaintiffs a requested appeal from any decision to terminate him or her” and to “consider any Plaintiffs’ request for reassignment for open or available positions in accordance with their qualifications and skills.”

4. Actions against educational institutions:

Students for Fair Admissions v. Air Force Academy, No. 1:24-cv-03430 (D. Co. 2024): On December 10, 2024, Students for Fair Admissions (SFFA) filed a complaint against the United States Air Force Academy alleging that the Academy considers race in admissions decisions in violation of the equal protection component of the Fifth Amendment. SFFA alleges that the Academy impermissibly considers the race of applicants to achieve explicit statistical goals for the racial makeup of each incoming class. SFFA claims that the Academy’s admissions decisions “treat race as a ‘plus factor,’” in violation of Students for Fair Admissions v. President & Fellows of Harvard College. SFFA also alleges that the Academy’s justifications for considering race in admissions—that prioritizing diversity assists with recruiting and retaining top talent and preserves unit cohesion and the Air Force’s legitimacy—are flawed and not meaningfully furthered by the Academy’s admissions policies. SFFA seeks both declaratory relief and a permanent injunction preventing the Academy from considering race in admissions.
- Latest update: On April 11, 2025, the defendants filed a motion to hold the case in abeyance while the parties consider a recent change in the United States Air Force Academy’s admissions policy. On January 27, 2025, Acting Secretary of the Air Force Gary A. Ashworth issued a memorandum directing “cessation of all Diversity, Equity, and Inclusion (DEI) considerations regarding the Department of the Air Force (DAF) officer applicant pools.” And on February 6, 2025, Acting Assistant Secretary of the Air Force for Manpower and Reserve Affairs Gwendolyn R. DeFilippi eliminated “quotas, objectives, and goals based on sex, race or ethnicity for organizational composition, academic admission, career fields, or class composition.” The defendants asked the court to hold the case in abeyance to provide the parties an opportunity to determine how to proceed in light of these recent developments. In a minute order issued on April 14, 2025, the court, construing the consent motion to hold the case in abeyance as a motion to stay the case, granted the motion to stay.
Students for Fair Admissions v. United States Naval Academy et al., No. 1:23-cv-02699 (D. Md. 2023), on appeal at No. 24-02214 (4th Cir. 2024): On October 5, 2023, SFFA filed suit against the Naval Academy, claiming that the Academy’s consideration of race in its admissions process violates equal protection guarantees. After a year of discovery, the dispute proceeded to a nine-day trial in September 2024, during which SFFA argued that the Academy’s consideration of race in its admissions process violated the Constitution because it was not narrowly tailored to achieve a compelling government interest. The Academy countered that its consideration of race is necessary to achieve a diverse officer corps, which furthers a compelling government interest in national security. On December 6, 2024, the court issued a decision finding that the Academy’s admissions process withstands strict scrutiny mandated by Students for Fair Admissions v. President & Fellows of Harvard College, 600 U.S. 181 (2023), and entered judgment in favor of the Academy. SFFA appealed the decision to the Fourth Circuit. On March 28, 2025, the parties filed an unopposed motion to hold briefing in abeyance while the parties “consider a recent change in the United States Naval Academy’s admissions policy.”
- Latest update: On April 1, 2025, the court held the “case in abeyance to allow the parties a reasonable amount of time to discuss the details of the Academy’s new policy and to consider the appropriate next steps for this litigation.” The court directed the parties to file a status report on June 2, 2025.

Legislative Updates

On March 20, 2025, West Virginia State Senator Tom Willis introduced Senate Bill 850. The bill provides that a corporate director’s or officer’s “prioritiz[ation of] any element of environmental, social, and governance interest over pecuniary interests” serves as “prima facie evidence” that the corporation at which the director or officer works breached its fiduciary duty to its shareholders. SB 850 would define “environmental, social, and governance” to include “considering diversity, equity, and inclusion” in corporate decision-making.

On March 26, 2025, the Ohio legislature passed and sent to the Governor Senate Bill 1, the Advance Ohio Higher Education Act. The Act would direct the boards of trustees of state public institutions of higher education to adopt and enforce policies that prohibit the following: (1) “any orientation or training course regarding [DEI]” absent permission from the state chancellor of higher education; (2) operation of DEI offices and departments; (3) “[u]sing [DEI] in job descriptions”; (4) the “establishment of any new institutional scholarships that use diversity, equity, and inclusion in any manner”; and (5) contracting with consultants or third parties whose role is to promote racial, gender, religious, or sexual orientation diversity in admissions and hiring. The Act would also require these institutions to publicly declare alongside their mission statements—as well as in any offer of admission or employment—that their “duty is to treat all faculty, staff, and students as individuals, to hold them to equal standards, and to provide them equality of opportunity, with regard to those individuals’ race, ethnicity, religion, sex, sexual orientation, gender identity, or gender expression.”

On April 9, 2025, Texas Senate Bill 1006, was referred to the Texas House Insurance Committee. The bill had been approved by the Texas Senate on March 26, 2025. The bill would amend the Texas Insurance Code to require that insurers provide a quarterly report to the Texas Department of Insurance “summarizing the insurer’s written statements of reasons for declination, cancellation, or nonrenewal provided to applicants for insurance or policyholders.” The report must disclose if any decision to decline, cancel, or fail to renew a policy was based on “a score that is based on measuring exposure to long-term environmental, social, or governance risks” or “diversity, equity, and inclusion factors.”

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, José Madrid, Jenna Voronov, Emma Eisendrath, Kristen Durkan, Simon Moskovitz, Teddy Okechukwu, Beshoy Shokralla, Heather Skrabak, Maryam Asenuga, Angelle Henderson, Kameron Mitchell, Lauren Meyer, Chelsea Clayton, Maya Jeyendran, Albert Le, Allonna Nordhavn, Felicia Reyes, Godard Solomon, Laura Wang, and Ashley Wilson.

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

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

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

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

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

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

From the Derivatives Practice Group: This week, the CFTC issued a staff advisory that provides additional guidance on the criteria used to determine whether to refer self-reported violations or supervision or non-compliance issues to the Division of Enforcement.

New Developments

CFTC Staff Issues Advisory on Referrals to the Division of Enforcement. On April 17, the CFTC’s Market Participants Division, the Division of Clearing and Risk, and the Division of Market Oversight (“Operating Divisions”) and the Division of Enforcement (“DOE”) issued a staff advisory providing guidance on the materiality or other criteria that the Operating Divisions will use to determine whether to make a referral to DOE for self-reported violations, or supervision or non-compliance issues. According to the CFTC, this advisory furthers the implementation of DOE’s recent advisory, issued February 25, 2025, addressing its updated policy on self-reporting, cooperation, and remediation. [NEW]
CFTC Staff Issues No-Action Letter Regarding the Merger of UBS Group and Credit Suisse Group. On April 15, the CFTC’s Market Participants Division (“MPD”) and Division of Clearing and Risk (“DCR”) issued a no-action letter in response to a request from UBS AG regarding the CFTC’s swap clearing and uncleared swap margin requirements. The CFTC said that the letter is in connection with a court-supervised transfer, consistent with United Kingdom laws, of certain swaps from Credit Suisse International to UBS AG London Branch following the merger of UBS Group AG and Credit Suisse Group AG. The no-action letter states, in connection with such transfer and subject to certain specified conditions: (1) MPD will not recommend the Commission take an enforcement action against certain of UBS AG London Branch’s swap dealer counterparties for their failure to comply with the CFTC’s uncleared swap margin requirements for such transferred swaps; and (2) DCR will not recommend the Commission take an enforcement action against UBS AG or certain of its counterparties for their failure to comply with the CFTC’s swap clearing requirement for such transferred swaps. [NEW]
CFTC Staff Issues Interpretation Regarding U.S. Treasury Exchange-Traded Funds as Eligible Margin Collateral for Uncleared Swaps. On April 14, MPD issued an interpretation intended to clarify the types of assets that qualify as eligible margin collateral for certain uncleared swap transactions under CFTC regulations. CFTC Regulation 23.156 lists the types of collateral that covered swaps entities can post or collect as initial margin (“IM”) and variation margin (“VM”) for uncleared swap transactions. The CFTC indicated that the regulation, which includes “redeemable securities in a pooled investment fund” as eligible IM collateral, aims to identify assets that are liquid and will hold their value in times of financial stress. Additionally, MPD noted that the interpretation clarifies its view that shares of certain U.S. Treasury exchange-traded funds may be considered redeemable securities in a pooled investment fund and may qualify as eligible IM and VM collateral subject to the conditions in CFTC Regulation 23.156. According to MPD, swap dealers, therefore, (1) may post and collect shares of certain UST ETFs as IM collateral for uncleared swap transactions with any covered counterparty and (2) may also post and collect such UST ETF shares as VM for uncleared swap transactions with financial end users. [NEW]
Senate confirms Atkins as SEC chair. On April 9, the Senate voted 52-44 to confirm Paul Atkins as the next chair of the SEC. Atkins, a former SEC commissioner and a longtime financial industry consultant, was tapped in December by Donald Trump for the position. In his March 27 confirmation hearing before the Senate Banking Committee, Atkins indicated he would streamline the agency’s regulatory activity. Atkins is expected to be friendlier toward the financial industry than the previous SEC chair, Gary Gensler.
CFTC Releases Staff Letter Relating to Certain Foreign Exchange Transactions. On April 9, MPD and DMO issued an interpretative letter providing the divisions’ views on the characterization of certain foreign exchange (“FX”) transactions as being “swaps,” “foreign exchange forwards,” or “foreign exchange swaps,” in each case, as defined in the Commodity Exchange Act. Specifically, the interpretative letter states: Window FX Forwards, as described in the letter, should be considered to be “foreign exchange forwards;” and Package FX Spot Transactions, as described in the letter, should not be considered to be “foreign exchange swaps” or “swaps.”
Acting Chairman Pham Lauds DOJ Policy Ending Regulation by Prosecution of Digital Assets Industry and Directs CFTC Staff to Comply with Executive Orders. On April 8, CFTC Acting Chairman Caroline D. Pham praised a recently-announced Justice Department policy ending the practice of regulation by prosecution that has targeted the digital asset industry in recent years, and directed CFTC staff to comply with the President’s executive orders and Administration policy, consistent with DOJ’s digital assets enforcement priorities and charging considerations. The DOJ policy comes as Acting Chairman Pham has similarly refocused the CFTC’s enforcement resources on cases involving fraud and manipulation.
CFTC Staff Issues No-Action Letter Regarding Pre-Trade Mid-Market Mark. On April 4, MPD issued a no-action letter in relation to the Pre-Trade Mid-Market Mark (“PTMMM”) requirement in Regulation 23.431 for swap dealers and major swap participants. The CFTC first issued a no-action letter regarding the PTMMM requirement in 2012, shortly after the PTMMM compliance date, because it did not provide significant informational value and created costly operational challenges. Unlike prior no-action letters which provided relief nofor certain specified types of swaps, this relief under this no-action letter applies to all swaps and does not require advanced counterparty consent.
Rahul Varma Named Acting Director of CFTC Division of Market Oversight. On April 2, CFTC Acting Chairman Caroline D. Pham announced Rahul Varma will serve as the Acting Director of DMO. Varma joined the CFTC in 2013 as an Associate Director for Market Surveillance in DMO, with responsibility for energy, metals, agricultural, and softs markets. In 2017, he helped start the Market Intelligence Branch in DMO and served as its Acting Deputy Director. In 2024, he took on the role of Deputy Director for the combined Market Intelligence and Product Review branches.

New Developments Outside the U.S.

EC Publishes Consultation on the Integration of EU Capital Markets. On April 15, the European Commission (“EC”) published a targeted consultation on the integration of EU capital markets. This forms part of the EC’s plan to progress the Savings and Investment Union (“SIU”) strategy, published in March. According to the EC, the objective of the consultation is to identify legal, regulatory, technological and operational barriers hindering the development of integrated capital markets. Its focus includes barriers related to trading, post-trading infrastructures and the cross-border distribution of funds, as well as barriers specifically linked to supervision. The deadline for responses is June 10, 2025. [NEW]
JFSA Publishes Explanatory Document on Counterparty Credit Risk Management. On April 14, Japan’s Financial Services Agency published an explanatory document on the Basel Committee on Banking Supervision’s Guidelines for Counterparty Credit Risk Management. The document, co-authored with the Bank of Japan, indicates that it was published to facilitate better understanding of the Basel Committee’s guidelines and is available in Japanese only. [NEW]
ESMA Publishes Consultation on Clearing Thresholds. On April 8, ESMA published a consultation on a revised approach to clearing thresholds under the European Market Infrastructure Regulation (“EMIR”) 3. The consultation covers the following topics: proposals for a revised set of clearing thresholds; considerations for hedging exemptions for non-financial counterparties; and a trigger mechanism for reviewing the clearing thresholds.
FCA Publishes Policy Statement on the Derivatives Trading Obligation and Post-trade Risk Reduction Services. On April 3, the UK Financial Conduct Authority (“FCA”) published policy statement PS25/2 on changes to the scope of the UK derivatives trading obligation (“DTO”) and an extension of exemptions from certain obligations under the UK Markets in Financial Instruments Directive (“MIFID”) and MIFIR.
ESMA Consults on Transparency Requirements for Derivatives Under MiFIR Review. On April 3, ESMA asked for input on proposals for Regulatory Technical Standards (“RTS”) on transparency requirements for derivatives, amendments to RTS on package orders, and RTS on input/output data for the over-the-counter (“OTC”) derivatives consolidated tape. ESMA said that it is developing various technical standards further specifying certain provisions set out in the Market in Financial Instruments Regulation Review. The consultation paper covers the following three areas: transparency requirements for derivatives, RTS on package orders, and RTS on input/output data for the OTC derivatives consolidated tape. The consultation will remain open until 3 July 2025.
ESMA Publishes Annual Peer Review of EU CCP Supervision CCP Supervisory Convergence. On April 2, ESMA published its annual peer review report on the supervision of European Union (“EU”) Central Counterparties (“CCPs”) by National Competent Authorities (“NCAs”). The peer review measures the effectiveness of NCA supervisory practices in assessing CCP compliance with the European Market Infrastructure Regulation (“EMIR”) requirements on outsourcing and intragroup governance arrangements. ESMA indicated, for this exercise, the review of the functioning of CCP colleges remains overall positive. ESMA also said that the peer review identified the need to promote further supervisory convergence in respect of the definition of major activities linked to risk management.
The European Supervisory Authorities Publish Evaluation Report on the Securitization Regulation. On March 31, the Joint Committee of the European Supervisory Authorities published its evaluation report on the functioning of the EU Securitization Regulation. The report purports to put forward recommendations to strengthen the overall effectiveness of Europe’s securitization framework through simplification, while ensuring a high level of protection for investors and safeguarding financial stability. This report identifies areas where the regulatory and supervisory framework can be enhanced, supporting the growth of robust and sound securitization markets in Europe.

New Industry-Led Developments

ISDA Submits Letter on Environmental Credits. On April 15, ISDA submitted a response to the Financial Accounting Standards Board’s (FASB) consultation on environmental credits and environmental credit obligations. ISDA said that the response supports the FASB’s overall proposals to establish clear and consistent accounting guidance for environmental credits, but highlights that clarification is needed in certain areas, including those related to recognition, derecognition, impairment and hedge accounting impacts. [NEW]
ISDA CEO Testifies Before House Financial Services Committee Task Force. On April 8, ISDA CEO Scott O’Malia testified on the implementation of mandatory US Treasury clearing before the House Committee on Financial Services Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity. The testimony highlighted several key issues that need to be resolved before the clearing mandate comes into effect, including recalibration of the supplementary leverage ratio to ensure banks have the balance sheet capacity to provide intermediation and client clearing services in the US Treasury market, making changes to the proposed Basel III endgame and surcharge for global systemically important banks to avoid a disproportionate capital charge for client clearing businesses, and ensuring the margining and capital treatment of client exposures reflects the actual risk of a client’s overall portfolio.
ISDA Responds to ESMA Consultation on CCP Model Validation. On April 7, ISDA responded to ESMA’s consultation on the draft RTS under article 49(5) of the EMIR, on the conditions for an application for validation of model changes and parameters under Articles 49 and 49a of EMIR, which have been revised as part of EMIR 3. In the consultation paper, ESMA sets out proposed quantitative thresholds and qualitative elements to be considered when determining whether a model change is significant. In the response, ISDA noted that more information would be necessary to understand the rationale behind the thresholds that are proposed. ISDA provided comments on ESMA’s interpretation of ‘concentration risk’ and on the proposed lookback period for assessing whether a change in significant.
Cross-product Netting Under the US Regulatory Capital Framework. On April 4, ISDA, the Futures Industry Association (“FIA”) and the Securities Industry and Financial Markets Association (“SIFMA”) developed a discussion paper to: (i) provide an overview of cross-margining programs developed by clearing organizations and their importance in the context of implementing recent market reforms with respect to US Treasury securities clearing; (ii) describe cross-product netting arrangements with customers as a means to effectively reduce risk and their relation to cross-margining programs; (iii) describe the treatment of cross-product netting arrangements under the current US regulatory capital framework; and (iv) propose potential targeted changes to US regulatory capital rules to more appropriately reflect the economics of, and facilitate firms’ use of, cross-product netting arrangements with customers, particularly with respect to transactions based on US Treasury securities.
ISDA/IIB/SIFMA Request to Extend 22-14. On April 3, a joint ISDA/IIB/SIFMA letter requested reporting relief for certain non-US swap dealers in Australia, Canada, the European Union, Japan, Switzerland or the United Kingdom with respect to their swaps with non-US persons. The joint trade association letter, submitted to CFTC on 26 March 2025, requests an extension of the no-action relief in Letter 22-14 until the adoption and effectiveness of final rules addressing the cross-border application of Part 45/46.
IOSCO Issues Final Report on Standards Implementation Monitoring for Regulator Principle. On April 2, IOSCO published a Final Report following its review of IOSCO Standards Implementation Monitoring (ISIM) for Regulator Principles 6 and 7, which address systemic risk and perimeter of regulation. IOSCO’s Objectives and Principles of Securities Regulation 6 and 7 stipulate that regulators should have or contribute to processes to identify, monitor, mitigate and manage systemic risk, as well as have or contribute to a process to review the perimeter of regulation regularly. This ISIM Review by IOSCO’s Assessment Committee found a high level of implementation across the 55 jurisdictions from both emerging and advanced markets. According to IOSCO, the report highlights some good practices and also identifies a few areas where there is room for improvement, observed primarily in some emerging markets. For example, the Report notes that some jurisdictions do not have clear responsibilities, definitions and regulatory processes with respect to systemic risk.
ISDA Sends Letter on Changes to the French General Tax Code. On March 31, ISDA, the Association for Financial Markets in Europe and the International Securities Lending Association sent a letter to the French tax authority about changes being made to Articles 119 bis A and 119 bis 2 of the general French tax code in the Loi des Finances pour 2025. In February, the French parliament passed budget legislation that broadened the application of withholding tax for both cleared and non-cleared derivatives involving payments related to manufactured dividends. In the letter, the associations request that detailed administrative guidelines are issued as soon as possible. The lack of guidelines makes it more difficult for the associations’ member firms to accurately determine the scope of the new legislation and calculation of the withholding tax when due.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This update provides a brief overview of ERISA pension risk transfer litigation, a summary of the recent Camire and Konya decisions, and an update on what may be next for ERISA plan sponsors and fiduciaries in light of these court orders.

On March 28, 2025, two federal district courts issued divergent decisions on whether plaintiffs had Article III standing to bring class action lawsuits challenging pension risk transfer transactions under the Employee Retirement Income Security Act (ERISA). The cases—Camire v. Alcoa USA Corp. and Konya v. Lockheed Martin Corp.—are two of ten class action lawsuits filed over the past 12 months targeting employers with substantial pension plans that have executed pension risk transactions with Athene Annuity & Life Assurance Company.[1] Plaintiffs rely for standing not on any reduction in their current benefits, but on allegations of an increased risk that, if Athene fails, they will not receive the benefits their pension plans guarantee them. These two decisions provide the earliest indications of how courts might rule on plaintiffs’ standing to bring this new wave of ERISA litigation. The court in Camire granted defendants’ motion to dismiss, holding that plaintiffs lacked standing because they had received all benefits owed to them and were not at substantial risk of failing to receive future benefits. In contrast, the Konya court denied a similar motion to dismiss, finding that it was a “close call” but plaintiffs had stated sufficient facts to nudge that case into discovery.

Background on Pension Risk Transfers

Pension risk transfers, also known as de-risking transactions, are a mechanism used by employers to help reduce pension liabilities.[2] In a pension risk transfer, an employer causes its defined benefit pension plan to transfer some or all of its pension benefit obligations to an insurance company that in turn assumes responsibility for making payments to impacted pensioners.[3] The transfer reduces the plan’s liabilities to the pensioners (and thus the employer’s future funding risks), and the pensioners continue to receive benefits pursuant to the terms of their benefit plans (albeit from a different source).[4] These transfer transactions can be very large, extending into the hundreds of millions—or even billions—of dollars.[5]

Recent Litigation

Beginning in March 2024, pension recipients have brought a series of class action lawsuits against employers that engaged in pension risk transfers.[6] Many of the cases involve a private equity-backed insurance provider (Athene), which is not named as a defendant.[7] The plaintiffs in the cases argue that Athene is a particularly high risk annuity provider, and that plaintiffs’ employers, motivated by a desire for cost savings that was not in pensioners’ best interests, breached their fiduciary duties by failing to choose the safest annuity provider available.[8] The plaintiffs argue that the transfer puts their savings at risk by stripping them of federal protection available to them under ERISA and by instead placing them in the state-regulated insurance market, which, according to the plaintiffs, provides inferior protections in the case of insolvency compared to those available to them from the federal Pension Benefit Guaranty Corporation.[9]

These pension risk transfer lawsuits recount the 1991 bankruptcy of California-based Executive Life Insurance Company, which resulted in financial losses to pension annuitants.[10] As a result of the incident, Congress passed the Pension Annuitants Protection Act of 1994, which created a right of action to obtain appropriate relief for ERISA violations involving the “purchase of an insurance contract or insurance annuity.”[11]

The plaintiffs also argue that the U.S. Department of Labor’s Interpretive Bulletin 95-1 requires employers to find the “safest annuity available” in the case of a de-risking transaction, unless doing otherwise would be in the interest of participants and the plan.[12] The complaints involving Athene allege that Athene’s private equity backing and structure demonstrate that the employer’s choice is out of alignment with this DOL guidance and ERISA.[13]

This new wave of lawsuits is not the first time that employers have been sued over pension de-risking. In 2012, a group of Verizon retirees sued Verizon in an attempt to prevent it from transferring $7.4 billion in pension obligations in exchange for a group annuity contract from Prudential.[14] After the pensioners lost their bid to enjoin the transfer, the Fifth Circuit Court of Appeals ultimately dismissed the case because the plaintiffs lacked Article III standing and the transfer did not breach Verizon’s ERISA obligations.[15]

In the present cases, the employers’ motions to dismiss argue that plaintiffs lack standing because, as in the 2012 Verizon case, plaintiffs cannot point to any concrete, imminent injury that they have suffered as a result of the pension risk transfers.[16] In other words, there is no evidence that any plaintiff is in imminent risk of not receiving a pension payment. And even if the plaintiffs did have standing, the motions argue, the decision whether to terminate an ERISA plan is a settlor function exempt from ERISA’s fiduciary obligations.[17]

The Recent Decisions

On March 28, 2025, two federal district courts ruled on employers’ motions to dismiss two of the pending pension risk transfer cases. Despite substantially similar allegations, the courts reached divergent conclusions, with one court granting a motion to dismiss on standing grounds and the other denying it (including a standing argument).

Camire v. Alcoa USA Corp.

On March 28, 2025, the U.S. District Court for the District of Columbia granted Alcoa’s motion to dismiss on standing grounds.[18] The court held that the plaintiffs had not established Article III standing because they had suffered neither actual harm nor was there a risk of future harm.[19] The plaintiffs had not suffered actual harm from the pension risk transfer to Athene because they continued to receive their benefit payments.[20] And the plaintiffs had not established future harm because they had not shown a sufficiently substantial risk of Athene being unable to fulfill its obligations under the annuity contract; instead, they merely alleged that Athene was “at a greater risk of failure than its competitors.”[21] The court relied heavily on the constitutional requirement that an injury be “imminent” for standing to exist.[22] A risk is not sufficiently “imminent” unless there is a “substantial probability of harm” to the plaintiff.[23] Because the court dismissed the lawsuit on standing grounds, it did not reach Alcoa’s arguments that the plaintiffs had failed to state a claim.[24]

Konya v. Lockheed Martin Corp.

Conversely, on March 28, 2025, the U.S. District Court for the District of Maryland denied Lockheed Martin Corp.’s motion to dismiss.[25] The court held that the plaintiffs had standing and had stated a plausible claim that Lockheed Martin had violated ERISA by selecting Athene as its annuity provider.[26] The court explained that the plaintiffs had established Article III standing (albeit “barely”) because they “provided plausible allegations that the transfer to Athene put their pensions at serious risk” and that the Pension Benefit Guaranty Corporation would not “provide a requisite backstop to protect their retirement,” thus potentially causing the plaintiffs harm.[27] The court added that the plaintiffs’ requested remedy, the posting of security and disgorgement, “would serve to protect their ability to receive their vested retirement benefits.”[28] The court went on to reject Lockheed Martin’s argument that the plaintiffs’ claims were unripe, explaining that, because the pension risk transfers had already occurred, the evidence needed to adjudicate the decision already existed and was not contingent on future events.[29] The court also explained that the plaintiffs had statutory standing because, although they were no longer participants in the plans at the time of the lawsuit (by virtue of being part of the pension risk transfer to Athene), they were participants at the time of the alleged breach of fiduciary duty.[30]

Because the court denied the motion to dismiss for lack of standing, it proceeded to address the merits of the ERISA claim. The court rejected Lockheed Martin’s arguments that the plaintiffs had failed to state an ERISA claim. With regard to the plaintiffs’ claims for breach of fiduciary duties and failure to monitor fiduciaries (which are not identified in the Complaint), the court held that the plaintiffs had plausibly alleged that Lockheed Martin was acting as a fiduciary and had “breached its fiduciary duty when it transacted with Athene to increase its own profits,” explaining that the plaintiffs need not show harm to state a claim for breach of fiduciary duty.[31] The court also declined to dismiss the plaintiffs’ claim that Lockheed Martin had engaged in a prohibited transaction with Athene because “it is plausible enough that Lockheed acted for its own benefit in selecting Athene if, in fact, it proves true that the decision to choose Athene placed Lockheed’s interests, even if only in the short run, over those of participants in the Plans.”[32]

What’s Next for Plan Sponsors and Fiduciaries

It remains to be seen whether other courts will follow the lead of the courts in Camire or Konya or will forge a new path. The plaintiffs’ mixed record in these early cases may well be enough to suggest that plan sponsors and fiduciaries can expect to see more suits alleging claims related to pension risk transfers. Over the next year, the prognosis for these cases will no doubt become clearer as motions to dismiss that are currently pending in the remaining cases are decided. Additionally, the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, which overruled Chevron deference to administrative agencies’ interpretations of statutes, may impact whether and how much courts weigh the Department of Labor’s Interpretive Bulletin 95-1 when evaluating the merits of plaintiffs’ claims.[33] But for now, and absent further guidance from the courts or the Department of Labor, Interpretive Bulletin 95-1 remains in place and provides guidance to plan sponsors and fiduciaries when selecting an annuity provider as part of a de-risking transaction for an ERISA-governed pension plan.[34] Plan sponsors and fiduciaries evaluating de-risking transactions should review this guidance in connection with implementing any pension de-risking transaction.

[1] See Camire v. Alcoa USA Corp., No. 1:24-cv-01062, 2025 WL 947526 (D.D.C. Mar. 28, 2025); Konya v. Lockheed Martin Corp., No. 8:24-cv-00750, 2025 WL 962066 (D. Md. Mar. 28, 2025).

[2] See Dept. of Labor Rpt. to Congress on Employee Benefits Security Administration’s Interpretive Bulletin 95-1 2–3, 5 (June 2024), available at https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/laws/secure-2.0/report-to-congress-on-interpretive-bulletin-95-1.pdf (last accessed Apr. 11, 2025).

[3] See id. at 3.

[4] See id.

[5] See id. at 5.

[6] See, e.g., Konya, No. 8:24-cv-00750 (D. Md. 2024); Camire, No. 1:24-cv-01062 (D.D.C. 2024); Doherty v. Bristol-Myers Squibb Co., No. 1:24-cv-06628 (S.D.N.Y. 2024).

[7] See, e.g., Complaint, Konya, No. 8:24-cv-00750, at ¶ 3 (D. Md. Mar. 13, 2024), ECF 1; Amended Complaint, Camire, No. 1:24-cv-01062, at ¶ 3 (D.D.C. July 2, 2024), ECF 28; Consolidated Class Action Complaint, Doherty, No. 1:24-cv-06628, at ¶ 3 (S.D.N.Y. Nov. 4, 2024), ECF 45.

[8] See Complaint, Konya, No. 8:24-cv-00750, at ¶¶ 3–4; Consolidated Class Action Complaint, Doherty, No. 1:24-cv-06628, at ¶¶ 29–30.

[9] See Complaint, Konya, No. 8:24-cv-00750, at ¶¶ 30–32; Consolidated Class Action Complaint, Doherty, No. 1:24-cv-06628, at ¶¶ 68–69.

[10] See Complaint, Konya, No. 8:24-cv-00750, at ¶ 33; Consolidated Class Action Complaint, Doherty, No. 1:24-cv-06628, at ¶¶ 75–76.

[11] See 29 U.S.C. § 1132(a)(9); see also Complaint, Konya, No. 8:24-cv-00750, at ¶ 39; Consolidated Class Action Complaint, Doherty, No. 1:24-cv-06628, at ¶¶ 80–82.

[12] See 29 C.F.R. § 2509.95-1(d); see also Complaint, Konya, No. 8:24-cv-00750, at ¶ 21; Consolidated Class Action Complaint, Doherty, No. 1:24-cv-06628, at ¶ 86.

[13] See Complaint, Konya, No. 8:24-cv-00750, at ¶ 60; Consolidated Class Action Complaint, Doherty, No. 1:24-cv-06628, at ¶ 149.

[14] See Lee v. Verizon Commc’ns, Inc., 837 F.3d 523, 532 (5th Cir. 2016).

[15] Id. at 529–31.

[16] See, e.g., Memorandum of Law in Support of Defendant’s Motion to Dismiss, Konya, No. 8:24-cv-00750, at 2 (D. Md. May 3, 2024), ECF 26-1; Memorandum of Law in Support of the Bristol-Myers Squibb Defendants’ Motion to Dismiss Plaintiffs’ Consolidated Complaint, Doherty, No. 1:24-cv-06628, at 2 (S.D.N.Y. Jan. 15, 2025), ECF 51.

[17] See, e.g., Memorandum of Law in Support of Defendant’s Motion to Dismiss, Konya, No. 8:24-cv-00750, at 2; Memorandum of Law in Support of the Bristol-Myers Squibb Defendants’ Motion to Dismiss Plaintiffs’ Consolidated Complaint, Doherty, No. 1:24-cv-06628, at 2.

[18] See Camire v. Alcoa USA Corp., No. 1:24-cv-01062, 2025 WL 947526 (D.D.C. Mar. 28, 2025).

[19] Id. at *4, *7.

[20] Id. at *4.

[21] Id. at *7.

[22] Id.

[23] Id.

[24] See id. at *8.

[25] See Konya v. Lockheed Martin Corp., No. 8:24-cv-00750, 2025 WL 962066 (D. Md. Mar. 28, 2025).

[26] Id. at *13, *17–18.

[27] Id. at *10.

[28] Id. at *9.

[29] Id. at *15.

[30] Id. at *14.

[31] Id. at *16–17.

[32] Id. at *18.

[33] See Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024).

[34] Dept. of Labor, News Release, UPDATED: US Department of Labor issues report to Congress on considerations for defined benefit pension plan fiduciaries choosing an annuity provider, available at https://www.dol.gov/newsroom/releases/ebsa/ebsa20240624 (last accessed Apr. 11, 2025); see also Dept. of Labor Rpt. to Congress on Employee Benefits Security Administration’s Interpretive Bulletin 95-1 (June 2024), available at https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/laws/secure-2.0/report-to-congress-on-interpretive-bulletin-95-1.pdf (last accessed Apr. 11, 2025).

The following Gibson Dunn lawyers prepared this update: Michael Collins, Ashley Johnson, Jennafer Tryck, and Rachel K. Nardone.

Labor & Employment:

Karl G. Nelson – Dallas (+1 214.698.3203, knelson@gibsondunn.com)
Geoffrey Sigler – Washington, D.C. (+1 202.887.3752, gsigler@gibsondunn.com)
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Executive Compensation & Employee Benefits:

Cunningham v. Cornell University, No. 23-1007 – Decided April 17, 2025

Today, the Supreme Court unanimously held that plaintiffs bringing a prohibited-transaction claim under ERISA Section 406(a)(1)(C) need only allege, in their complaints, the elements set forth in that provision—they need not negate the affirmative defenses set forth in ERISA Section 408. The Court also emphasized that district courts have a variety of other means to screen out insubstantial claims at the pleading stage.

“[P]laintiffs seeking to state a [Section 406(a)(1)(C)] claim must plausibly allege that a plan fiduciary engaged in a transaction proscribed therein, no more, no less. … To the extent future plaintiffs do bring barebones [Section 406] suits, district courts can use existing tools at their disposal to screen out meritless claims before discovery.”

Justice SOTOMAYOR, writing for the Court

Background:

Health and retirement plans governed by the Employee Retirement Income Security Act (ERISA) commonly transact with third-party entities for various services that benefit plan participants, such as recordkeeping and investment advising. But Section 406(a)(1)(C) of ERISA prohibits a plan fiduciary from “caus[ing] the plan to engage in a transaction” that the fiduciary “knows or should know … constitutes a direct or indirect … furnishing of goods, services, or facilities between the plan and” a service provider for the plan, 29 U.S.C. § 1106(a)(1)(C); see id. § 1002(a)(14)(B), subject to exemptions listed in Section 408 (29 U.S.C. § 1108). Among other things, Section 408 exempts “reasonable arrangements with” a plan service provider “for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor.” Id. § 1108(b)(2)(A).

The Eighth and Ninth Circuits held that merely alleging the elements set forth in Section 406(a)(1)(C)—that a plan fiduciary caused a plan to enter into a service transaction with a third-party service provider—is sufficient to plead a prohibited-transaction claim and proceed to discovery. But the Second Circuit held that a plaintiff also must plausibly allege that the Section 408(b)(2)(A) exemption does not apply—i.e., that the services were unnecessary or the compensation was unreasonable. The Supreme Court granted review to resolve the conflict.

Issue:

Whether a plaintiff can state a prohibited-transaction claim under Section 406(a)(1)(C) of ERISA solely by alleging that a plan fiduciary engaged in a service transaction with a plan service provider.

Court’s Holding:

Yes. The only elements of a prohibited-transaction claim under Section 406(a)(1)(C) are the elements set forth in that provision. To state a claim, the plaintiff need not allege facts negating Section 408’s exemptions, such as the exemption for necessary service transactions that are compensated reasonably. But district courts have several other tools at their disposal to weed out unmeritorious claims at the pleading stage.

What It Means:

The Court’s decision clarifies that, under ERISA’s text and structure, Section 408’s exemptions are affirmative defenses that defendants must plead—not elements of a prohibited-transaction claim under Section 406. So ERISA plaintiffs need not allege, in their complaints, facts that negate the necessity or reasonableness of a service transaction with a plan service provider.
The Court acknowledged, however, that this scheme raises “serious concerns” for ERISA plans and fiduciaries given the ubiquity of service transactions in the plan-administration context. The Court thus highlighted several tools that district courts can deploy to prevent meritless prohibited-transaction claims from reaching full-blown discovery. For example, the Court suggested that, once a defendant pleads a Section 408 exemption as an affirmative defense in its answer, the district court could order the plaintiff to file a reply setting forth “specific, nonconclusory factual allegations” showing that the exemption does not apply. The plaintiff’s inability to do so could result in dismissal.
The Court also highlighted four other mechanisms of protecting ERISA plans and fiduciaries from onerous and costly discovery: (1) Article III standing principles require dismissal of suits that fail to allege a concrete injury; (2) district courts retain discretion to expedite or limit discovery; (3) district courts can impose Rule 11 sanctions if a Section 408 exemption “obviously applies,” and “a plaintiff and his counsel lack a good-faith basis to believe otherwise”; and (4) ERISA authorizes district courts to shift attorneys’ fees and costs to plaintiffs.
In a concurring opinion, Justice Alito, joined by Justices Thomas and Kavanaugh, likewise acknowledged that the Court’s decision could cause “untoward practical results.” They urged district courts to “strongly consider” using the various mechanisms outlined by the majority opinion—especially the option of requiring plaintiffs to file post-answer replies—to ensure “the prompt disposition of insubstantial claims.”

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:

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This alert was prepared by associates Robert Batista and Maya Jeyendran.

This edition of Gibson Dunn’s Federal Circuit Update for March summarizes the current status of petitions pending before the Supreme Court and recent Federal Circuit decisions concerning forfeiture, obviousness, patent term extensions, whether separately recited components in a claim must refer to distinct components in the patented invention, and 35 U.S.C. § 102(e).

Federal Circuit News

Noteworthy Petitions for a Writ of Certiorari:

There were no new potentially impactful petitions filed before the Supreme Court in March 2025. We provide an update below of the petitions pending before the Supreme Court, which were summarized in our February 2025 update:

In Converter Manufacturing, LLC v. Tekni-Plex, Inc. (US No. 24-866), a response was filed April 16, 2025.

The Court will consider the petitions filed in Brumfield v. IBG LLC, et al. (US No. 24-764) and Celanese International Corp. v. International Trade Commission (US No. 24-635) at its April 17, 2025 and April 25, 2025 conferences, respectively.

The Court denied the petitions in Koss Corp. v. Bose Corp. (US No. 24-916), Lighting Defense Group LLC v. SnapRays, LLC (US No. 24-524), and Parker Vision, Inc. v. TCL Industries Holdings Co., et al. (US No. 24-518).

Upcoming Oral Argument Calendar

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

Key Case Summaries (March 2025)

Odyssey Logistics & Technology Corp. v. Stewart, No. 23-2077 (Fed. Cir. Mar. 6, 2025): Odyssey appealed an examiner’s rejection of its patent application, which was affirmed by the Federal Circuit in 2020. Over a year later, the Supreme Court issued its decision in United States v. Arthrex, Inc., 594 U.S. 1 (2021), which held that administrative patent judges’ unreviewable authority in inter partes review proceedings violated the Appointments Clause. Odyssey petitioned for review by the Director of the United States Patent and Trademark Office (USPTO) based on that decision. The Director denied the request. Odyssey then filed a complaint in district court to compel Director review, but the district court dismissed Odyssey’s complaint for lack of subject matter jurisdiction, reasoning that whether the Director decides to review Odyssey’s request was committed to the agency’s discretion and judicial review of that decision is improper.

The Federal Circuit (Dyk, J., joined by Reyna and Stoll, JJ.) affirmed. The Court held that Odyssey had forfeited its Appointments Clause challenge by not raising it in its first appeal despite its knowledge of the Appointments Clause challenge addressed by the Federal Circuit in Arthrex in 2019. Considering the standard set forth in Fed. R. Civ. P. 60(b), the Federal Circuit found no extraordinary circumstances existed that would excuse Odyssey’s failure to raise its stated ground for relief earlier and decided that the USPTO did not abuse its discretion in denying Odyssey’s request for review. Therefore, the Court concluded that Odyssey’s complaint failed to state a claim for relief and affirmed the district court’s decision on that basis, rather than for lack of subject matter jurisdiction.

ImmunoGen, Inc. v. Stewart, No. 23-1762 (Fed. Cir. March 6, 2025): ImmunoGen’s patent application is directed to a dosing regimen for administering IMGN853, an antibody drug conjugate (ADC) for treating certain ovarian and peritoneal cancers. While a promising cancer therapy, the drug was known to cause ocular toxicity, including keratitis and blurred vision. ImmunoGen developed an effective dosing regimen that resulted in minimal adverse effects and sought to patent its solution, which included limitations reciting the administration of IMGN853 at a dose of 6 mg/kg based on an adjusted ideal body weight (AIBW) of the patient (the “dosing limitation”). The examiner rejected the claims as obvious primarily relying on ImmunoGen’s own prior patent publication related to IMGN853, which disclosed the 6mg/kg AIBW dosage. ImmunoGen brought an action under 35 U.S.C. § 145, and the district court determined that the claims are unpatentable as obvious.

The Federal Circuit (Lourie, J., joined by Dyk and Prost, JJ.) affirmed. ImmunoGen argued that the prior art did not disclose that IMGN853 caused ocular toxicity in humans and therefore did not render the dosing limitation obvious. However, the Federal Circuit held that a solution to “an unknown problem is not necessarily non-obvious.” Instead, “any need or problem known in the field of endeavor at the time of invention can provide a reason for combining the elements in the manner claimed.” Accordingly, the Court determined that it would have been obvious to a skilled artisan to experiment with changing the dosage to reduce toxicity, and AIBW was a known dosing methodology for anticancer drugs. Furthermore, the Court found that ImmunoGen’s own prior patent publication disclosed the 6mg/kg AIBW dosing regimen for ADCs. Thus, the Court concluded that a person of ordinary skill in the art would have been motivated to try an AIBW dosing methodology with IMGN853 at the 6 mg/kg AIBW dosage.

Merck Sharp & Dohme B.V. et al v. Aurobindo Pharma USA, Inc., No. 23-2254 (Fed. Cir. Mar. 13, 2025): Merck owns a patent directed to sugammadex, which is the active ingredient in BRIDION®, a drug that reverses neuromuscular blockade, which is a certain form of paralysis induced by certain types of surgery. While regulatory review for sugammadex was pending, Merck filed an application to reissue the patent. After both the patent reissued and the regulatory process concluded, Merck sought and received a five-year patent term extension (PTE) under 35 U.S.C. § 156(c), which provides limited extensions of patent terms due to regulatory review delay. Merck sued Aurobindo for infringement of its reissued patent based on Aurobindo’s filing of an abbreviated new drug application (ANDA) for approval to sell generic versions of BRIDION®. Aurobindo challenged the length of the reissued patent’s PTE and argued that 35 U.S.C. § 156(c) requires calculating the extension for “the patent,” as recited in the statute, from the date of issuance of the reissued patent, not the original patent. The district court disagreed, concluding that the amount of delay should be calculated from the date of issuance of the original patent.

The Federal Circuit (Dyk, J., joined by Mayer and Reyna, JJ.) affirmed. The Court held that, when calculating a patent term extension for reissued patents that include “the same claims directed to a drug product subject to FDA review” as the original patent, the statutory language of “the patent” in 35 U.S.C. § 156(c) refers to the original patent. The Court reasoned that the purpose of the Hatch-Waxman Act, in providing patent term extensions to recover a portion of market exclusivity lost during regulatory review, required interpreting “the patent” as the original patent in the context of reissued patents to fully compensate patent owners for the period of exclusivity lost due to regulatory delay.

Regeneron Pharmaceuticals, Inc. v. Mylan Pharmaceuticals Inc., No. 24-2351 (Fed. Cir. March 14, 2025): Regeneron owns a patent directed to pharmaceutical formulations for a fusion protein known as aflibercept, claiming “a vascular endothelial growth factor (VEGF) antagonist” and “a buffer,” among other limitations. The patent covers Regeneron’s biologic product EYLEA® (“Eylea”) and is listed in FDA’s Purple Book, which is a searchable online database that lists all FDA-approved biological products. Eylea is used to treat angiogenic eye disorders associated with uncontrolled blood vessel growth in the retina, which can cause vision loss or blindness. Amgen filed an abbreviated Biologics License Application (aBLA) at the FDA, which stated that its formulation differs from Regeneron’s formulation because it does not contain a separate buffer protein. Regeneron sued Amgen alleging infringement of its patent and filed a motion for preliminary injunction. Amgen opposed the preliminary injection arguing that the claims separately require a VEGF antagonist and a buffer, so Amgen’s formulation did not infringe. The district court determined that the claims required that the claimed VEGF antagonist be a separate component from the claimed buffer, concluded that Regeneron had not demonstrated a likelihood of success on the merits, and denied the preliminary injunction.

The Federal Circuit (Lourie, J., joined by Moore, C.J. and Stark, J.) affirmed. The Court held that “where a claim lists elements separately, the clear implication of the claim language is that those elements are distinct components of the patented invention,” citing Becton, Dickinson & Co. v. Tyco Healthcare Grp., LP, 616 F.3d 1249 (Fed. Cir. 2010). The Court further determined that the claims and specification only reinforced the interpretation that the claimed components are distinct, and therefore, the implication of separateness had not been overcome.

In re Riggs et al., No. 22-1945 (Fed. Cir. March 24, 2025): The named inventors (collectively, “Riggs”) filed a patent application directed to an integrated logistics system, which an examiner rejected in part as anticipated by prior art reference, Lettich, under 35 U.S.C. § 102(e). Riggs appealed to the Patent Trial and Appeal Board (Board), and the Board sustained the examiner’s rejections. Applying Dynamic Drinkware, LLC v. National Graphics, Inc., 800 F.3d 1375 (Fed. Cir. 2015), the Board determined that Lettich was entitled to the priority date of its provisional application as at least one claim in the Lettich non-provisional application was supported by the Lettich provisional application, and thus, qualified as prior art.

The Federal Circuit (Stoll, J., joined by Moore, C.J., and Cunningham, J.) vacated and remanded. The Court explained that while Dynamic Drinkware held that a patent “cannot be accorded the benefit of its provisional application’s filing date absent a showing that the provisional application provides support for the claims of the patent or published application,” it did not stand for the conclusion that support for only one claim from the provisional would be sufficient for the other portions of the specification to be afforded the provisional’s filing date. Instead, the Board needed to analyze whether Lettich’s provisional application provided “written description support for the specific disclosures in Lettich that the Examiner identified and relied on in the prior art rejections.”

The following Gibson Dunn lawyers assisted in preparing this update: Blaine Evanson, Audrey Yang, Al Suarez, Hannah Bedard, and Michelle Zhu.

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

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