Publications Archives

Los Angeles partner Debra Wong Yang and associates Cynthia Chen McTernan and Adrienne Liu are the authors of “How Attorneys Can Help Combat Anti-Asian Hate” [PDF] published by Law360 on June 2, 2023.

In this webcast, Gibson Dunn attorneys discuss how the U.S. Department of Justice’s Consumer Protection Branch has quickly become a leading criminal and civil enforcer of health, safety, fraud, and privacy laws. Having recently secured more than $6 billion in monetary penalties across dozens of corporate resolutions, the Branch is now DOJ’s fastest-growing enforcement component. It also is the primary outside counsel for key consumer-protection agencies, including the FDA, FTC, CPSC, DEA, and DOT. Our discussion will feature the Branch’s recent Director and explore its current and expected enforcement trends. We also discuss the Branch’s unique relationships with agency partners, its resources and authorities, and new corporate compliance policies and expectations. The conversation is of particular interest to life-sciences, consumer-product, and online companies and executives.

PANELISTS:

Patrick F. Stokes is a litigation partner in Gibson, Dunn & Crutcher’s Washington, D.C. office. He is the co-chair of the Anti-Corruption and FCPA Practice Group and a member of the firm’s White Collar Defense and Investigations, Securities Enforcement, and Litigation Practice Groups. Mr. Stokes’ practice focuses on internal corporate investigations, government investigations, enforcement actions regarding corruption, securities fraud, and financial institutions fraud, and compliance reviews. He has tried more than 30 federal jury trials as first chair, including high-profile white-collar cases, and handled 16 appeals before the U.S. Court of Appeals for the Fourth Circuit. Mr. Stokes regularly represents companies and individuals before DOJ and the SEC, in court proceedings, and in confidential internal investigations.

Nicola T. Hanna is a partner in the Los Angeles office of Gibson, Dunn & Crutcher and co-chair of the firm’s global White Collar Defense and Investigations Practice Group. Previously, Mr. Hanna served as United States Attorney for the Central District of California in Los Angeles, where he represented the United States in all criminal, civil, national security and tax matters within the district. Mr. Hanna’s practice focuses on representing corporations in high-stakes civil litigation, white collar crime, and regulatory and securities enforcement – including internal investigations, False Claims Act cases, special committee representations, compliance counseling and class actions.

Gustav W. Eyler is a partner in the Washington, D.C. office of Gibson, Dunn & Crutcher. He is co-chair of the firm’s FDA and Health Care Practice Group and a member of the White Collar Defense and Privacy Practice Groups. An experienced litigator and a former Director of the U.S. Department of Justice’s Consumer Protection Branch, he defends companies and individuals in government investigations and enforcement actions and counsels clients on the design and implementation of compliance programs.

Svetlana S. Gans is a partner in the Washington, D.C. office of Gibson, Dunn & Crutcher where she helps clients navigate complex consumer protection (advertising, marketing, privacy, and right to repair) and competition related regulatory proceedings before the U.S. Federal Trade Commission (FTC), U.S. Department of Justice Antitrust Division, and other enforcement bodies, and provides strategic advice on related public policy issues. She previously served with distinction as Chief of Staff to Acting Chairman Maureen K. Ohlhausen at the FTC. As the agency chief of staff, Ms. Gans managed and oversaw agency operations, including bureau and office heads reporting to the Chairman, a seven-member office staff, and an agency budget of over $300 million.

Decided June 1, 2023

United States ex rel. Schutte v. SuperValu Inc., No. 21-1326; United States ex rel. Proctor v. Safeway, Inc., No. 22-111

On June 1, the Supreme Court held that an objectively reasonable interpretation of an ambiguous statutory or regulatory requirement does not preclude a finding that the defendant acted “knowingly” under the False Claims Act.

Background: Medicare and Medicaid rules often require pharmacies to disclose and charge the government for their “usual and customary” price for prescription drugs.

Two private relators sued, alleging that Safeway and SuperValu violated the FCA by reporting and charging their retail prices, rather than the prices they charged under certain discount programs, as their “usual and customary” prices to Medicare and Medicaid.

The district court agreed with the relators that the pharmacies’ “usual and customary” prices should have accounted for the discount prices, and that the pharmacies’ claims to the government accordingly were false—but granted summary judgment for the pharmacies on the ground that the pharmacies could not have acted with knowledge, as required by the FCA.

The Seventh Circuit affirmed, ruling as a matter of law that the pharmacies could not have acted “knowingly,” because interpreting the phrase “usual and customary” to refer to retail prices, rather than discount prices, was objectively reasonable—regardless of what the pharmacies themselves actually believed at the time of the claims they made to the government.

Issue: Whether an objectively reasonable interpretation of an ambiguous statutory or regulatory requirement precludes a finding of knowledge under the FCA as a matter of law—regardless of the defendant’s subjective belief at the time of the defendant’s claims for payment.

Court’s Holding:

No. The FCA’s knowledge requirement turns on a defendant’s knowledge and subjective beliefs at the time of the alleged conduct—not on an objectively reasonable interpretation the defendant may have had after the fact.

“The FCA’s scienter element refers to respondents’ knowledge and subjective beliefs—not to what an objectively reasonable person may have known or believed.”

Justice Thomas, writing for the Court

What It Means:

By ruling that the facial ambiguity of a statute or regulation alone isn’t sufficient to preclude a finding of scienter, this decision will potentially remove a way for courts to resolve FCA cases at the pleading stage because the Court’s yardstick for measuring scienter—contemporaneous subjective knowledge—may prove too fact-intensive an inquiry in some cases. That said, the decision is unlikely to amount to a sea change in FCA law. The significant majority of federal appellate courts had already held that a post hoc legal interpretation cannot vitiate a defendant’s contemporaneous, subjective belief.
Consistent with its decision in Universal Health Services v. United States ex rel. Escobar, 579 U.S. 176 (2016), the Court grounded its interpretation of the FCA’s scienter requirement in the FCA’s text and common-law principles. Because the statutory text and common-law principles both focus on a defendant’s subjective, contemporaneous knowledge, the Court held that “post hoc interpretations that might have rendered [a defendant’s] claims accurate” are irrelevant.
This decision is likely to be as significant for the issues it left open as for the ones it decided. Two undecided questions in particular stand out. First, the Court wrote that “reckless disregard”—the minimum level of scienter required under the FCA—“captures defendants who are conscious of a substantial and unjustifiable risk that their claims are false, but submit the claims anyway,” but did not elaborate on when a risk is “substantial” or “unjustifiable.” Second, the Court “assume[d] without deciding that the FCA incorporates some version of th[e] rule” that “misrepresentations of law are not actionable” as fraud.

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 Supreme Court. Please feel free to contact the following practice leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 [email protected]	Allyson N. Ho +1 214.698.3233 [email protected]	Julian W. Poon +1 213.229.7758 [email protected]
Lucas C. Townsend +1 202.887.3731 [email protected]	Bradley J. Hamburger +1 213.229.7658 [email protected]	Brad G. Hubbard +1 214.698.3326 [email protected]

Related Practice: False Claims Act / Qui Tam Defense

Jonathan M. Phillips +1 202.887.3546 [email protected]	Winston Y. Chan +1 415.393.8362 [email protected]	James L. Zelenay Jr. +1 213.229.7449 [email protected]
John D.W. Partridge +1 303.298.5931 [email protected]

Decided June 1, 2023

Glacier Northwest, Inc. v. International Brotherhood of Teamsters Local Union No. 174, No. 21-1449

Today, the Supreme Court held that the National Labor Relations Act (“NLRA”) does not preempt state-law tort claims against a union based on the intentional destruction of property as the result of a labor strike.

Background: Section 7 of the NLRA guarantees employees the right to form, join, or assist labor organizations, to bargain collectively, and to engage in other concerted activities for collective-bargaining purposes. 29 U.S.C. § 157. In San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959), the Supreme Court held that the NLRA preempts certain state tort claims that either conflict with the terms of the NLRA or implicate conduct that the statute “arguably” protects. Id. at 245.

During a collective-bargaining dispute, the employees of a concrete-mixing company, Glacier Northwest, walked off the job after their trucks were loaded with concrete. Some of the concrete hardened and became useless. Glacier sued the union under Washington state law for conversion and trespass to chattels, alleging that the union had timed the strike to destroy company property. The Washington Supreme Court, citing Garmon, held that the NLRA preempted Glacier’s claims.

Issue: Whether the NLRA preempts tort claims against a union for intentionally destroying an employer’s property as the result of a labor strike.

Court’s Holding:

No. The NLRA does not preempt tort claims for intentional destruction of property as the result of a labor strike.

“Because the Union took affirmative steps to endanger Glacier’s property rather than reasonable precautions to mitigate that risk, the NLRA does not arguably protect its conduct.”

Justice Barrett, writing for the Court

What It Means:

The Court did not change the longstanding standard for preemption under Garmon. However, the Court held that the tort claims at issue were not preempted because the NLRA does not arguably protect striking workers who decline to take reasonable precautions to avoid foreseeable and imminent harm to company property.
The Court rejected the union’s argument that Garmon requires only a modest showing before courts will decide that the NLRA preempts a state-law claim.
The Court’s decision may induce unions to be careful to avoid unnecessary destruction of company property during labor strikes.

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 Supreme Court. Please feel free to contact the following practice leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 [email protected]	Allyson N. Ho +1 214.698.3233 [email protected]	Julian W. Poon +1 213.229.7758 [email protected]
Lucas C. Townsend +1 202.887.3731 [email protected]	Bradley J. Hamburger +1 213.229.7658 [email protected]	Brad G. Hubbard +1 214.698.3326 [email protected]

Related Practice: Litigation

Reed Brodsky +1 212.351.5334 [email protected]	Theane Evangelis +1 213.229.7726 [email protected]	Veronica S. Moyé +1 214.698.3320 [email protected]
Helgi C. Walker +1 202.887.3599 [email protected]

Related Practice: Labor and Employment

Jason C. Schwartz
+1 202.955.8242
[email protected]

Katherine V.A. Smith
+1 213.229.7107
[email protected]

Decided June 1, 2023

Slack Technologies, LLC v. Pirani, No. 21-200

Today, the Supreme Court unanimously held that in a direct listing (just as in traditional IPOs), plaintiffs who claim that a company’s registration statement is misleading and who sue under Section 11 of the Securities Act of 1933 must plead and prove that they bought shares registered under that registration statement.

Background: The Securities Act of 1933 requires companies to file a registration statement with a prospectus before certain shares can trade on an exchange. 15 U.S.C. § 77e. The Act exempts some shares and transactions from that requirement, id. §§ 77c-77d, and provides that a registration statement is “effective only as to the securities specified therein,” id. § 77f(a). Section 11 enforces the registration requirement: if a registration statement is misleading, any person acquiring “such security” may sue. Id. § 77k(a).

In 2019, Slack went public through a direct listing in which both registered and exempt shares could be traded immediately. Pirani bought Slack shares after they were listed and later sued, claiming that the registration statement and prospectus Slack filed were misleading. Pirani conceded he could not show which (if any) of the shares he bought were registered as opposed to exempt. Slack moved to dismiss, invoking the longstanding rule that ’33 Act plaintiffs must show they bought shares registered under the challenged registration statement. The district court denied the motion, and the Ninth Circuit affirmed, holding that Pirani had to show only that he bought shares that could not have traded on an exchange but for the registration statement—for instance, because the New York Stock Exchange’s rules for direct listings require a registration statement before exempt shares can trade.

Issue: Whether Section 11 of the Securities Act of 1933 requires plaintiffs to plead and prove that they bought shares registered under the registration statement they claim is misleading.

Court’s Holding:

Plaintiffs suing under Section 11 of the ’33 Act must plead and prove that they bought shares registered under the registration statement they claim is misleading.

“[W]e think the better reading of [Section 11] requires a plaintiff to plead and prove that he purchased shares traceable to the allegedly defective registration statement.”

Justice Gorsuch, writing for the Court

Gibson Dunn represented the winning party: Slack Technologies, LLC

What It Means:

The Court’s opinion adopts the longstanding “tracing” requirement—that plaintiffs suing under Section 11 of the ’33 Act must plead and prove that they bought shares registered under the registration statement they are challenging. That requirement had been recognized as a core feature of Section 11 by lower courts, the SEC, and scholars dating back to the 1960s.
Plaintiffs who challenge statements in a company’s ’33 Act registration statement, but who cannot trace their shares to that statement, cannot sue under Section 11’s specialized liability provision. But they may have other remedies, such as a securities-fraud claim under Section 10(b) of the Securities Exchange Act of 1934.
In rejecting Pirani’s view of Section 11, the Court avoided an interpretation that could have unsettled the scope of liability under that section in cases beyond direct listings, including traditional IPOs and follow-on offerings. The Court’s holding protects reasonable expectations and avoids a massive increase in potential liability for companies that recently went public.
The Court declined to resolve whether Section 12 of the ’33 Act, which enforces the Act’s prospectus requirement and permits anyone who buys “such security” from the defendant to sue, 15 U.S.C. § 77l(a)(1), likewise requires proof of purchase of registered shares. It “express[ed] no views” about that question and remanded the matter to the lower courts to decide that question in the first instance.

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 Supreme Court. Please feel free to contact the following practice leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 [email protected]	Allyson N. Ho +1 214.698.3233 [email protected]	Julian W. Poon +1 213.229.7758 [email protected]
Thomas G. Hungar +1 202.887.3784 [email protected]	Lucas C. Townsend +1 202.887.3731 [email protected]	Bradley J. Hamburger +1 213.229.7658 [email protected]
Jacob T. Spencer +1 202.887.3792 [email protected]	Brad G. Hubbard +1 214.698.3326 [email protected]

Related Practice: Litigation

Reed Brodsky +1 212.351.5334 [email protected]	Theane Evangelis +1 213.229.7726 [email protected]	Veronica S. Moyé +1 214.698.3320 [email protected]
Helgi C. Walker +1 202.887.3599 [email protected]	Matthew S. Kahn +1 415.393.8212 [email protected]

Related Practice: Securities Litigation

Monica K. Loseman +1 303.298.5784 [email protected]	Brian M. Lutz +1 415.393.8379 [email protected]	Craig Varnen +1 213.229.7922 [email protected]
Michael D. Celio +1 650.849.5326 [email protected]

On May 25, 2023, in Syntel Sterling Best Shores Mauritius Ltd v. TriZetto Group Inc., the Second Circuit affirmed a jury’s finding that Syntel misappropriated TriZetto’s trade secrets under the federal Defend Trade Secrets Act (“DTSA”), while vacating the jury’s $285 million compensatory damages award under the DTSA. The decision is notable in two key respects. First, it affirms that whether a trade secret holder has identified its trade secrets with sufficient specificity is a factual question for the jury, while illustrating the amount of evidence that may be sufficient to sustain a finding at trial that the asserted trade secrets were in fact trade secrets. Second, the decision holds that an award of avoided development costs—a form of unjust enrichment damages available under the DTSA—is not available on top of lost profits, absent evidence that the value of the trade secrets was diminished as a result of the misappropriation.

The Second Circuit Holds That Trade Secret Specificity Under The DTSA Is A Factual Question For The Jury

The jury found that Syntel misappropriated TriZetto’s trade secrets, in violation of both the DTSA and New York trade secret law.[1] Syntel argued on appeal that TriZetto had failed to adequately specify its asserted trade secrets as a matter of law, such that “no reasonable jury could have found for TriZetto on the trade secret misappropriation claims.”[2] The Second Circuit held “whether TriZetto’s trade secrets were adequately identified (and proved) was ultimately a question for the jury” and that Syntel’s “argument really attacks the sufficiency of the evidence supporting the jury’s verdict.”[3]

The Second Circuit found that “a reasonable jury could have determined the asserted trade secrets were in fact trade secrets,” and adequately specified as such, based on the following evidence: for each trade secret TriZetto asserted, a fact witness “explained (1) what the secret was, (2) how the secret was developed, (3) the value of the secret to TriZetto, and (4) that the secret was maintained as confidential.”[4] Additionally, an expert “presented several demonstratives linking the title of each individual trade secret to specific exhibits.”[5] TriZetto also provided the jury with documents or source code reflective of each of the asserted trade secrets.[6]

The evidence stands in contrast to that in Olaplex, Inc. v. L’Oreal U.S., Inc., in which the Federal Circuit concluded that no reasonable jury could have found that the plaintiff met its burden of proving that it possessed protectable trade secrets.[7] There, the plaintiff failed to produce fact witness or expert testimony describing with “specificity” the alleged trade secrets—and failed to otherwise direct the Federal Circuit to evidence in the record identifying the alleged trade secrets beyond a “high level of generality.”[8] Here, the Second Circuit declined to articulate “a general specificity rule,” but was clear that TriZetto’s evidence described above sufficed to support the jury’s finding that TriZetto had trade secrets.[9]

The Second Circuit Holds That Avoided Costs Are Not Recoverable On Top Of Lost Profits Under The DTSA Absent Evidence That The Misappropriated Trade Secrets Lost Value

As to damages, Syntel argued that the district court should not have upheld the jury’s $285 million compensatory damages award under the DTSA, which was predicated on TriZetto’s avoided development costs. The parties did not dispute that avoided development costs—i.e., “the costs a trade secret holder had to spend in research and development that a trade secret misappropriator saves by avoiding development of its own trade secret”—is an unjust enrichment remedy afforded by the DTSA.[10] But Syntel argued that “avoided costs ma[d]e no sense here” because (i) TriZetto’s expert presented evidence that it had lost $8.5 million in compensable profits; and (ii) “Syntel did not take or destroy the value” of the product incorporating the trade secrets, which was still generating “hundreds of millions of dollars a year” for TriZetto.[11]

The Second Circuit agreed. The Court first emphasized that the DTSA does not permit double counting of damages for actual loss and unjust enrichment. The DTSA allows for “(1) ‘damages for actual loss caused by the misappropriation;’ and (2) ‘damages for any unjust enrichment caused by the misappropriation . . . that is not addressed in computing damages for actual loss.’”[12] In vacating the district court’s damages award, the Second Circuit held that “[b]eyond its lost profits … TriZetto suffered no compensable harm supporting an unjust enrichment award of avoided costs.”[13] That was because (i) Syntel’s misappropriation “did not diminish, much less destroy,” TriZetto’s trade secrets’ continued commercial value to the company, since the product incorporating them was “worth even more today than it was when the misappropriation occurred,” and (ii) the district court had permanently enjoined Syntel’s use of the trade secrets, ensuring it could not profit from any avoided costs in the future.[14] Accordingly, TriZetto “suffered no compensable harm” beyond its lost profits that could “support[] an unjust enrichment award of avoided costs”—and therefore was “not entitled to avoided costs as form of unjust enrichment damages” as a matter of law.[15]

The Second Circuit acknowledged that its holding was “in some tension” with the Seventh Circuit’s decision in Epic Systems Corp. v. Tata Consultancy Services, Ltd., 980 F.3d 1117 (7th Cir. 2020).[16] There, the Seventh Circuit upheld a $140 million avoided costs award under Wisconsin’s Uniform Trade Secrets Act, which mirrors the DTSA, based on the “significant head start” in operations the defendant gained through misappropriation.[17] The Second Circuit disagreed with the Seventh Circuit’s reasoning “insofar as it can be seen to endorse a view that avoided costs are available as compensatory damages under the DTSA whenever there is misappropriation of any trade secret relating to an owner’s product.”[18] In the Second Circuit’s view, that reasoning would endorse awarding “punitive damages under the guise of compensatory damages.”[19]

Here, the district court had reasoned that avoided costs were appropriate because Syntel should have born the business risk of its misappropriation. In overruling that determination, the Second Circuit held that “[t]o the extent the district court deemed it necessary to punish Syntel” for a “business risk” it took, the punishment should be considered “in the context of punitive damages under the DTSA.”[20]

In sum, the Second Circuit’s decision in Syntel demonstrates the amount of evidence that may be sufficient to adequately specify alleged trade secrets at trial—specifically, fact witness testimony supporting the elements of a trade secret under the DTSA for each alleged trade secret, expert testimony tying the alleged trade secrets to documents, and documentary support for each alleged trade secret. The decision also clarifies that, at least in the Second Circuit, unjust enrichment damages, such as avoided costs, are not recoverable absent additional evidence of damages that are not addressed in computing damages for actual loss.

_______________________

[1] Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Grp., Inc., No. 21-1370, 2023 WL 3636674, at *3 (2d Cir. May 25, 2023).

[2] Id. at *4.

[3] Id.

[4] Id. at *6.

[5] Id. at *7.

[6] Id. at *6-7.

[7] Olaplex, Inc. v. L’Oreal USA, Inc., 855 F. App’x 701, 706 (Fed. Cir. 2021) (finding that no reasonable jury could have found trade secret misappropriation where, for example, certain information was readily ascertainable at the time of the alleged misappropriation).

[8] Id. at 709-10.

[9] Syntel, 2023 WL 3636674, at *5.

[10] Id. at *13.

[11] Id. at *3.

[12] Id. at *13 (citing 18 U.S.C. § 1836(b)(3)(B)) (emphasis in original).

[13] Id. at *15.

[14] Id.

[15] Id.

[16] Id. at 16*

[17] Id.

[18] Id. (emphasis in original).

[19] Id. at *17.

[20] Id.

The following Gibson Dunn lawyers assisted in the preparation of this client update: Ilissa Samplin, Angelique Kaounis, Doran Satanove, and Peter Jacobs.*

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

Ilissa Samplin – Los Angeles (+1 213-229-7354, [email protected])
Angelique Kaounis – Los Angeles (+1 310-552-8546, [email protected])
Doran Satanove – New York (+1 212-351-4098, [email protected])

Please also feel free to contact the following practice leaders and members:

Trade Secrets Group:
Angelique Kaounis – Los Angeles (+1 310-552-8546, [email protected])
Ilissa Samplin – Los Angeles (+1 213-229-7354, [email protected])

Intellectual Property Group:
Kate Dominguez – New York (+1 212-351-2338, [email protected])
Y. Ernest Hsin – San Francisco (+1 415-393-8224, [email protected])
Josh Krevitt – New York (+1 212-351-4000, [email protected])
Jane M. Love, Ph.D. – New York (+1 212-351-3922, [email protected])

*Peter Jacobs is an associate working in the firm’s New York office who is not yet admitted to practice law.

Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice. Please note, prior results do not guarantee a similar outcome.

As the flurry of headlines focused on artificial intelligence makes clear, AI is hot across industries, sectors and areas of the law.

Indeed, one recent legislative proposal in California — Assembly Joint Resolution 6 — has even called for a temporary moratorium on the training of AI systems more powerful than GPT-4 to allow time for AI governance systems to catch up. Yet, the use of AI in employment continues to grow, garnering the attention of the White House and state legislatures alike.

At this point, many employers are likely aware of the rapidly approaching July 5 enforcement date for New York City’s AI law, Local Law 144. However, many employers operate in multiple jurisdictions and are likely wondering what other legislative proposals are in the pipeline and how they compare to New York City’s law.

These proposals are rapidly evolving and, at times, fall subject to the overarching regulatory plans of their state. For example, California’s A.B. 331 — which would have required impact assessments for automated decision tools used in employment — was killed by California’s Assembly Appropriations Committee on May 18.

A few days before, members of the California Privacy Protection Agency Board raised concerns about this bill because CPPA had already been tasked with regulating automated decision making and, as CPPA Board Member Alastair Mactaggart put it, is “the only realistic AI regulator in North America.”

In this article, we offer an overview of AI-related proposals in five jurisdictions — Massachusetts, New York, New Jersey, Vermont and Washington, D.C. — including the key similarities and differences as compared to New York City’s Local Law 144, as well as practical takeaways about the regulatory and legislative trends that are emerging.

As a quick reminder, Local Law 144 requires employers using covered automated employment decision tools in hiring and promotion to: (1) have an independent auditor conduct a bias audit of the tool based on race, ethnicity and sex; (2) provide notice to applicants and employees subject to the tool; and (3) publicly post a summary of the bias audit and distribution date of the tool.

Below we provide a chart summarizing the employment decisions covered by each of the proposed laws as well as the key ways in which the proposals differ from Local Law 144.

Read More

Reproduced with permission. Originally published by Law360, New York (May 30, 2023).

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 authors:

Jason C. Schwartz – Co-Chair, Labor & Employment Group, Washington, D.C. (+1 202-955-8242, [email protected])

Naima L. Farrell – Washington, D.C. (+1 202-887-3559, [email protected])

Emily M. Lamm – Washington, D.C. (+1 202-955-8255, [email protected])

1. Introduction and Overview

In the past few weeks, the highest court of appeal in Australia[1] and the UK’s Commercial Court[2] have each issued important decisions in the context of enforcement of arbitral awards against sovereign States. Specifically, the High Court of Australia and the UK’s Commercial Court have each considered the recognition and enforcement of arbitral awards rendered under the auspices of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (the “ICSID Convention” and “ICSID”). Both judgments arise from the same arbitral proceedings, with Spain as the respondent State.

Both decisions confirm, on similar bases, that it is not open to a sovereign State to plead sovereign immunity in opposition to an order for recognition of an ICSID award. The judgments clarify the approach to the distinct concepts of recognition, enforcement and execution in relation to ICSID awards, where such relief is sought before the national courts of a Contracting Party to the ICSID Convention. Both courts have held that a State’s accession to the ICSID Convention constitutes a waiver of sovereign immunity from adjudicative jurisdiction in respect of the recognition of an ICSID award, although a State may still be entitled to plead immunity from execution measures taken against its assets.

These are investor-friendly decisions, demonstrating the commitment of both courts to investor-State arbitration. The decision of the UK Commercial Court is particularly notable in the context of the continuing debate of the “intra-EU objection”, arising out of the CJEU’s decision in Achmea and subsequent cases (discussed further below). In contrast to the approach adopted by the CJEU and certain national courts within the EU, the UK Commercial Court has affirmed the primacy of the UK’s pre-existing international law obligations, including under the ICSID Convention, which the decisions of the CJEU cannot and do not override. The decision thus re-affirms the UK’s status as a hospitable jurisdiction for the enforcement of investor-State awards, even while certain national courts within the EU (and the CJEU) are heading in the opposite direction.

In this client alert, we discuss the approaches taken by both courts; together, they present significant obstacles for States seeking to challenge ICSID award recognition orders on grounds of State immunity in the English, Australian, and other Commonwealth jurisdictions. While the UK Commercial Court’s decision may be the subject of an appeal, there is no further avenue of appeal available in Australia.

2. Background to the Judgments

The award creditors obtained an arbitral award worth EUR 101 million (the “Award”), rendered pursuant to the ICSID Convention for Spain’s violations of the Energy Charter Treaty (the “ECT”) stemming from Spain’s changes to its renewable energy subsidy scheme. The award is part of a larger group of over 20 awards issued against Spain relating to the same regulatory changes, worth in excess of USD 1 billion.

The applicants commenced proceedings in, inter alia, the UK and Australia, seeking to have the Award recognised and declared enforceable in those jurisdictions. Spain challenged the applications on the basis of, inter alia, arguments relating to sovereign immunity and the concepts of recognition, enforcement and execution.

3. UK Commercial Court Judgment

By way of statutory context: the decision concerns an application made under the UK’s Arbitration (International Investment Disputes) Act 1966 (the “1966 Act”), which is the regime governing the recognition and enforcement of ICSID Convention awards in the UK.[3] Section 1(2) of the 1966 Act provides: “A person seeking recognition or enforcement of [an ICSID Convention] award shall be entitled to have the award registered in the High Court…”.

The UK Supreme Court’s 2020 decision in Micula & Ors v Romania (European Commission intervening)[4] is a direct and binding authority on the operation both of the ICSID Convention and the 1966 Act. In Micula, the Supreme Court distinguished the ICSID Convention from the New York Convention in the context of the review permitted by the UK courts when deciding an application for recognition of an award.

A notable feature of the ICSID Convention regime is that once the authenticity of an award is established, a domestic court before which recognition is sought may not re-examine the award on its merits, nor refuse to enforce on grounds of jurisdiction, national or international public policy, nor even the fairness and propriety of the proceedings before the ICSID tribunal. This significantly reduces the options for challenge available by comparison with non-ICSID awards. The Supreme Court in Micula left open the possibility that there may be additional defences against enforcement of ICSID awards “in certain exceptional or extraordinary circumstances which are not defined…”.[5]

As to the present case: on 29 June 2021, upon an application by the award creditors (represented by Gibson Dunn), Cockerill J of the Commercial Court of the UK issued an order registering the Award (the “Registration Order”), pursuant to s. 1(2) of the 1966 Act.

Spain’s application to set aside the Registration Order consisted of two prongs:

Jurisdiction: this complaint had several strands, including arguments based on grounds of State immunity, Spain’s alleged non-agreement to arbitrate disputes under the ECT, and the validity of the Award itself.
Alleged non-disclosure of information by the claimants, arising under their duty of full and frank disclosure to the court in the context of making an ex parte application.

Spain relied primarily on State immunity arguments. Mr Justice Fraser (sitting in the Commercial Court) dismissed Spain’s application to set aside the Registration Order.

Spain’s jurisdictional and immunity objection relied on the notion that arbitration of disputes between an EU Member State and an investor of another EU Member State (where the dispute concerns an investment by the investor in the first Member State) is precluded under EU law. This has come to be known as the “intra-EU objection”, and is the subject of a vast amount of judicial and academic commentary, both inside and outside the EU.[6] It is a proposition that has received the consistent support of the Court of Justice of the European Union (the “CJEU”).

However, Fraser J observed that the CJEU’s stance on this issue does not override the UK’s pre-existing treaty obligations under treaties such as the ICSID Convention and the ECT. Critically, while the CJEU’s decisions based on the internal EU treaties may reflect internal EU law, they do not trump pre-existing treaty obligations, nor do they override the relevant domestic law mechanism in the UK.[7]

Fraser J agreed with the Supreme Court’s restrictive approach in Micula to opposing recognition of ICSID awards.[8] In the judge’s view, the availability of defences to a foreign State faced with an application to register an ICSID Convention award is “far narrower” than those that would be available if an award were being enforced under the New York Convention. Indeed, Fraser J concluded that there was only one defence potentially available to Spain, which was one based on the UK’s State Immunity Act 1978 (the “1978 Act”). The 1978 Act is the primary UK legislation in respect of State immunity. It provides for general immunity for States from the adjudicative jurisdiction of the UK courts (s. 1(1)), subject to certain exceptions, including where the State has submitted to the courts of the UK in specific situations such as prior written agreements (s. 2(2)) and where the State has agreed to arbitrate disputes (s. 9(1)).

The claimants relied upon the exceptions under both s. 2(2) and s. 9(1) of the 1978 Act. Spain, by contrast, argued that Article 54 of the ICSID Convention did not constitute such prior written agreement, and nor did it constitute a waiver by a State of its adjudicative immunity in relation in the relevant jurisdiction.

Fraser J agreed with the claimants: Article 54 of the ICSID Convention constitutes a “prior written agreement” for the purposes of the 1978 Act, as does the relevant article of the ECT (Article 26) which incorporates the ICSID Convention.[9] He noted that Spain’s argument ignores the clear terms of the ICSID Convention and the 1966 Act, and also the ratio of Micula. Further, Spain’s proposed reading of the terms would mean that s. 1(1) of the 1978 Act would only apply to awards in which the UK was a party, which was “plainly not correct”.[10]

Fraser J also dismissed Spain’s arguments that Spain had not in fact submitted to the adjudicative jurisdiction of the UK court in proceedings relating to arbitration. Spain’s argument was two-fold: (i) the exception in s. 9(1) related to commercial arbitrations and did not encompass “arbitrations involving sovereign acts” (such as the underlying ICSID award); and (ii) Spain’s offer of arbitration in Article 26 of the ECT did not extend to the claimants, such that the underlying ICSID arbitral tribunal did not have jurisdiction to hear the dispute—i.e., there was no valid arbitration agreement and the Award was therefore invalid.

The first argument was withdrawn; Fraser J dismissed the argument in any event, finding that (i) there was in fact no distinction between commercial and non-commercial awards under the relevant statue and (ii) the argument necessarily invoked a consideration by the court of the substantive, underlying dispute, which was not within the court’s purview in the context of recognition proceedings (as explained above).[11]

As to the second argument, Fraser J referred to his prior dismissal of this argument, explaining that “there is no justification for interpreting [the] effect [of the CJEU’s Achmea and Komstroy judgments] as, in some way, creating within the ECT itself, only a partial offer of arbitration to some investors, but not others, depending upon whether those investors were resident within Member States or elsewhere.”[12] Both the ICSID Convention and the ECT satisfy the requirements of s. 9(1) of the 1978 Act.

Fraser J also dismissed Spain’s argument that, in effect, the Commercial Court should give effect to EU law and find invalid the express ICSID arbitration provision included in the ECT: “it would be wrong in law to allow this argument by Spain based on EU law, as explained in Achmea and Komstroy by the CJEU, to trump the existing treaty obligations of the ICSID Convention, as enacted into domestic law here by the 1966 Act.”[13] In reaching this conclusion, Fraser J considered “persuasive” authorities from courts in the U.S. and Australia (including the decision discussed below) rendered in the context of similar proceedings involving the recognition and enforcement of ICSID awards.[14]

Lastly, Fraser J dismissed Spain’s alternative basis for its set-aside challenge, founded on allegations of non-disclosure in the context of the claimants’ duty of full and frank disclosure. Spain alleged that the claimants had failed to bring to the court’s attention Spain’s likely argument relating to sovereign immunity and EU law. The court disagreed, finding that these arguments had been properly brought before it.[15]

4. Australian High Court Judgment

The award creditors also brought proceedings in the Federal Court of Australia seeking to enforce the Award and seeking orders including that Spain pay EUR 101 million together with interest. Orders were granted and subsequently modified on appeal.

In its judgment dated 12 April 2023, the High Court of Australia (Australia’s apex court) dismissed Spain’s appeal against the earlier rulings. The High Court explained that a foreign State is generally immune from the jurisdiction of the Australian courts, pursuant to Australia’s Foreign States Immunities Act 1985 (Cth).[16] That Act, however, provides for certain exceptions to the general regime of State immunity, one of which entails the situation in which a State has submitted to the jurisdiction of the Australian courts; in such a case, the State will have waived its immunity from jurisdiction.[17] The issue, therefore, was whether Spain’s agreement to Articles 53, 54 and 55 of the ICSID Convention constituted either an express or implied waiver of immunity from jurisdiction (similar to the issues that were before the UK Commercial Court, discussed above).

The High Court analysed and noted the distinction between the different uses of the terms “recognition”, “enforcement” and “execution” within these Articles:

The obligation to “recognize” is expressed to apply to the entirety of “an award rendered pursuant to this Convention” and to be no more than an obligation to recognise the award “as binding”.
Enforcement is the legal process by which an international award is transposed a judgment of the court that enjoys the same status as any judgment of that court.
Whether or not enforcement against a State party to an award can lead to execution is left entirely to be determined under the domestic law of the Contracting State concerning State immunity or foreign State immunity from execution. In practical terms, execution can be understood to be the means by which a judgment enforcing an international arbitral award is given effect, which commonly involves measures taken against the property of the judgment debtor.

With these principles in mind, the High Court found that the effect of Spain’s agreement to Articles 53-55 amounted to a waiver of foreign State immunity from the adjudicative jurisdiction of the courts of Australia to recognise and enforce (but not to execute) the Award.[18]

Please do not hesitate to contact us with any questions.

__________________________

[1] Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11 (Kiefel CJ, Gageler, Gordon, Edelman, Steward, Gleeson and Jagot JJ) (12 April 2023) (the “Australian High Court Judgment”).

[2] Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain [2023] EWHC 1226 (Comm) (Fraser J) (24 May 2023) (the “UK Commercial Court Judgment”).

[3] Ordinarily, arbitration awards more routinely encountered are sought to be registered and enforced under the New York Convention, and therefore the Arbitration Act 1996 would usually apply.

[4] Micula & Ors v Romania (European Commission intervening) [2020] UKSC 5. See further our client alert on this decision.

[5] UK Commercial Court Judgment, paras. 72-73, citing Micula & Ors v Romania (European Commission intervening) [2020] UKSC 5, paras. 68-74, 77-78. Those observations were subsequently confirmed by Jacobs J in Unión Fenosa Gas SA v Arab Republic of Egypt [2020] EWHC 1723 (Comm). Jacobs J noted the highly theoretical nature of the availability of such a defence (para. 68): “It clearly remains the case, however, that such a defence, even if it exists at all (a point which is arguable but has not yet been finally determined), is far narrower in scope than the possible defences under the New York Convention.”

[6] Most notably in this context, see the decisions of the CJEU in: (i) Slovak Republic v Achmea BV, Case C-284/16, ECLI:EU:C:2018:158, 6 March 2018 (see further our client alert on this decision); and (ii) Republic of Moldova v Komstroy LLC (successor in law to Energoalians), Case C-741/19, EU:C:2021:655, 2 September 2021 (see further our client alert on this decision).

[7] UK Commercial Court Judgment, para. 67.

[8] UK Commercial Court Judgment, para. 79.

[9] UK Commercial Court Judgment, para. 95.

[10] UK Commercial Court Judgment, para. 95.

[11] UK Commercial Court Judgment, paras. 96-100.

[12] UK Commercial Court Judgment, para. 101.

[13] UK Commercial Court Judgment, para. 125.

[14] UK Commercial Court Judgment, paras. 111-119. Fraser J also considered a decision of the Commercial Court in the BVI: Tethyan Copper Company Pty Ltd v Islamic Republic of Pakistan and others BVIHC (Com) 2020/0196, which found that by virtue of Pakistan being a party to the ICSID Convention, it was not immune from the jurisdiction of the courts of the BVI under the BVI’s equivalent State immunity legislation. Fraser J disagreed with this conclusion (paras. 120-121).

[15] UK Commercial Court Judgment, paras. 143-159.

[16] Australian High Court Judgment, paras. 11-13.

[17] Australian High Court Judgment, para. 14.

[18] Australian High Court Judgment, paras. 8, 69-70, 75.

The following Gibson Dunn lawyers assisted in the preparation of this client update: Doug Watson, Piers Plumptre, and Theo Tyrrell.

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

Doug Watson (+44 (0) 20 7071 4217, [email protected])
Piers Plumptre (+44 (0) 20 7071 4271, [email protected])
Robert Spano (+44 (0) 20 7071 4902, [email protected])
Theo Tyrrell (+44 (0) 20 7071 4016, [email protected])

Please also feel free to contact the following practice group leaders:

International Arbitration Group:
Cyrus Benson (+44 (0) 20 7071 4239, [email protected])
Penny Madden KC (+44 (0) 20 7071 4226, [email protected])

Transnational Litigation Group:
Susy Bullock (+44 (0) 20 7071 4283, [email protected])

The European Court of Human Rights (the “ECtHR” or the “Court”) has issued two decisions this year in cases concerning the Russian Federation’s (“Russia”) actions in Ukraine and Georgia which are alleged to be violations of the European Convention on Human Rights (the “Convention”). In this client alert, we unpack relevant aspects of the decisions.

A summary of relevant aspects is as follows:

Although Russia ceased being a High Contracting Party to the Convention as from 16 September 2022, under Article 58 of the Convention, the ECtHR can still examine alleged violations of the Convention committed by Russia up to that date.
The involvement of armed forces in extraterritorial conflict will not preclude the ECtHR from finding that a respondent State has extraterritorial jurisdiction (that is, jurisdiction outside of the State’s recognised geographical borders) over the area in which the alleged violations take place.
These findings may have implications for investors seeking recourse against Russia in relation to the recent invasion of Ukraine, on the basis that these decisions lend support to the notion that Russia’s territory may be understood to span further than its recognised geographical borders. Thus, under certain bilateral investment treaties, investors may have grounds to argue that Russia’s extraterritorial actions fall within the scope of protection that would ordinarily be understood to cover only Russia’s recognised territory.
The factual findings of the ECtHR in these decisions can have material evidentiary relevance for disputes under bilateral investment treaties pursued by investors against Russia as well as to the lack of effectiveness of local remedies in Russia for the purposes of seeking redress for breaches of property rights of investors.

I. Ukraine and the Netherlands v. Russia

On 25 January 2023, the ECtHR rendered its decision on the admissibility of the inter-State complaints made by Ukraine and the Netherlands against Russia in respect of alleged violations of the Convention in Donbass (eastern Ukraine), stemming from the conflict that began in Spring 2014.[1]

The ECtHR declared the applications partly admissible, and the merits of the applications will now be heard by the Grand Chamber in the near future.

a. Background

In early March 2014, pro-Russian protests began across eastern regions of Ukraine, including the Donetsk and Luhansk regions (“Donbass”). Armed groups formed, and the violence rapidly escalated. In mid-April, the government of Ukraine launched an “Anti-Terrorist Operation” to re-establish control over territory controlled by the separatist armed groups. On 11 May 2014, the separatists held sham “referendums” in the territory they controlled and subsequently declared the independence of the “Donetsk People’s Republic” (the “DPR”) and the “Lugansk People’s Republic” (the “LPR”).[2]

The fighting intensified and on 17 July 2014 Malaysian Airlines flight MH17 was downed near Snizhne, in the Donetsk region. All 298 civilians aboard, including 196 Dutch nationals, were killed.[3] The subsequent investigations performed by the Dutch Government and the international community into this incident concluded that a Buk missile had been fired from separatist-held territory in Ukraine and that the missile in question belonged to Russian armed forces.[4]

Between June and August 2014, three groups of children, all of whom were orphans or in care homes, were abducted by armed separatists and transferred to Russia from Donbass. All 94 children were eventually returned to Ukraine.[5]

A ceasefire agreement was reached in September 2014 and a line of separation was established. The ceasefire was subsequently broken and, over the ensuing years, further ceasefires were agreed and then breached.[6]

At the date of the admissibility hearing in the case, the conflict was ongoing. The case concerns allegations of violations of human rights in the context of these events in Donbass.

The case concerns three inter-State applications:

The Government of Ukraine’s application, which consolidated a number of separate applications, regarding military action which allegedly put the life and health of the civilian population at risk.[7]
The Government of Ukraine’s application regarding the alleged abduction by armed separatists of three groups of children.[8]
The Government of the Kingdom of the Netherlands’ application regarding the downing of flight MH17.[9]

b. The ECtHR’s Findings

i. Temporal Scope: Russia’s Relationship with the Convention and the ECtHR

On 25 February 2022, the day after Russia’s recent invasion of Ukraine, Russia was suspended from its rights of representation in the Council of Europe. In March 2022, the Committee of Ministers of the Council of Europe adopted a Resolution by which Russia ceased to be a member of the Council of Europe as from 16 March 2022.[10] Six days later, the ECtHR adopted the Resolution of the European Court of Human Rights on the consequences of the cessation of membership of the Russian Federation to the Council of Europe in light of Article 58 of the European Convention on Human Rights, which stated that Russia would cease to be a High Contracting Party to the Convention on 16 September 2022.[11]

As a result, Russia ceased being a High Contracting Party to the Convention as from 16 September 2022. But under Article 58 of the Convention, the ECtHR can still examine claims against Russia committed up to that date.[12]

ii. Whether the Alleged Complaints Fell Within Russia’s Jurisdiction

Article 1 of the Convention provides: “The High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in Section I of [the] Convention.” In order for an alleged violation to fall within the ECtHR’s Article 19 jurisdiction to “ensure the observance of the engagements undertaken by the High Contracting Parties”, it must fall under the Article 1 jurisdiction of a High Contracting Party. In other words, the respondent State’s jurisdiction must first be established in order to trigger the ECtHR’s own jurisdiction to hear the claims.

The ECtHR explained that where an allegation of extraterritorial jurisdiction is made—which is an exception to the principle of territoriality—the ECtHR will consider two main fact-specific criteria in deciding whether there are exceptional circumstances justifying a finding that the State concerned was exercising extraterritorial jurisdiction:

effective control by the State over an area outside its national territory (the “spatial” concept of jurisdiction, or jurisdiction ratione loci), usually as a consequence of lawful or unlawful military action, including occupation or annexation of territory of another State; and
State agent authority and control over individuals (the “personal” concept of jurisdiction, or jurisdiction ratione personae).[13]

The ECtHR held that Russia had had effective control over all separatist-controlled areas from 11 May 2014 up to at least 26 January 2022—the date when the Court had held its hearing in the case—on account of Russia’s military presence in Donbass and the decisive degree of influence it enjoyed over these areas as a result of its military, political and economic support to the DPR and the LPR.[14] The ECtHR found it established beyond any reasonable doubt that there had been Russian military personnel present in an active capacity in Donbass from April 2014 and that there had been a large-scale deployment of Russian troops from, at the very latest, August 2014. It further found that Russia had a significant influence on the separatists’ military strategy, that it had provided weapons and other military equipment to separatists on a significant scale from the earliest days of the DPR and the LPR and over the following months and years and that it had carried out artillery attacks following requests by the separatists.[15] There was also clear evidence of political support being provided to the DPR and the LPR, and Russia had played an active role in their financing.[16]

The Ukraine complaints concerning events which had occurred wholly within the territory in separatist hands from 11 May 2014 therefore fell within the jurisdiction of Russia (i.e., its “spatial” jurisdiction).[17]

Ukraine also complained about bombing in areas outside separatist control, but the ECtHR found that this did not fall within Russia’s spatial jurisdiction. The ECtHR considered whether the complaints could be within Russian “personal” jurisdiction because the attacks were carried out on Russian authority. The ECtHR held that as this issue is closely related to the merits of the case, it would be considered during the merits stage.[18] If the incidents are found to be “military operations carried out during the active phase of hostilities” (rather than the period that follows), they will be excluded from Russia’s personal jurisdiction.[19]

As regards the complaints of the Netherlands, the ECtHR found that the downing of flight MH17 had occurred wholly within the territory in the hands of the separatists. The complaints therefore fell within Russia’s spatial jurisdiction.[20]

Russia’s objection to the ECtHR’s subject matter jurisdiction (ratione materiae) over complaints concerning armed conflict was also rejected.[21] The ECtHR emphasised that the Convention’s safeguards continued to apply in situations of international armed conflict. However, the Convention guarantees were to be interpreted in harmony with other rules of international law, including relevant provisions of international humanitarian law. In particular, the ECtHR will determine at the merits stage of the proceedings how Article 2 of the Convention should be interpreted, having regard to the content of international humanitarian law.

iii. Admissibility of the Complaints

1. The Exhaustion Rule

At the time of lodging of the applications, Article 35(1) of the Convention provided that “[t]he Court may only deal with the matter after all domestic remedies have been exhausted, according to the generally recognised rules of international law, and within a period of six months from the date on which the final decision was taken.”[22] This is known as the “exhaustion rule”—the Court had to determine Russia’s objection that domestic remedies had not been exhausted:

As regards the downing of flight MH17, the Court took into account (i) the blanket denial of the Russian authorities of any involvement in the downing of the flight, (ii) the fact that the events had occurred outside Russian sovereign territory by perpetrators whose identities had not been known at the time, and (iii) the political dimension of the case implicating Russian state agents in the commission of a crime condemned by the UN Security Council. On this basis, the Court found that Russia had failed to show that there was an effective remedy available in Russia in respect of the complaints.[23]
As regards the general military action and the abductions[24], the Court explained that where there is sufficient evidence of “administrative practices” (as here—see below), domestic remedies would clearly be ineffective at putting an end to the violations.[25] The Court found this to be the case and so the rule on exhaustion of domestic remedies was not applicable.

2. The Administrative Practices

The Court held that where “administrative practices” are alleged, two elements must be shown: (i) the “repetition of acts” constituting the alleged violation of the Convention; and (ii) “official tolerance” of those acts by the superiors of those immediately responsible.[26]

Applying those principles to the facts, the Court found:

In respect of the complaints regarding the general situation in eastern Ukraine: there was sufficient prima facie evidence to declare admissible the complaints regarding:
- Article 2, consisting of unlawful military attacks against civilians and civilian objects;
- Article 3, consisting of the torture of civilians and Ukrainian soldiers who were prisoners of war or otherwise hors de combat;
- Article 4(2), consisting of forced labour;
- Article 5, consisting of abductions, unlawful arrests and lengthy unlawful detentions;
- Article 9, consisting of deliberate attacks on, and intimidation of, various religious congregations not conforming to the Russian Orthodox tradition;
- Article 10, consisting of the targeting of independent journalists and the blocking of Ukrainian broadcasters;
- Article 1 of Protocol No. 1, consisting of the destruction of private property;
- Article 2 of Protocol No. 1, consisting of the prohibition of education in the Ukrainian language; and
- Article 14, taken together with the above Articles, consisting of the targeting of civilians of Ukrainian ethnicity or citizens who supported Ukrainian territorial integrity.[27]
In respect of the complaints regarding the abduction and transfer to Russia of three groups of children: there was a pattern of violations such that the complaints regarding Articles 3, 5 and 8 and Article 2 of Protocol No. 4 of the Convention were admissible.
In respect of the complaints regarding the downing of flight MH17: there was sufficient prima facie evidence to declare admissible the complaints regarding Articles 2, 3 and 13 of the Convention.[28]

This Decision relates to the admissibility of these applications. The next stage—examining the merits of the applications—will involve the Grand Chamber of the ECtHR considering whether there has been a violation of the Convention in respect of the admissible complaints.

II. Georgia v. Russia (IV)

On 20 April 2023, the ECtHR rendered its judgment on the admissibility of the inter-State complaints made by Georgia against Russia in respect of alleged violations of the Convention by Russia relating to the deterioration of the human-rights situation along the administrative boundary lines between Georgian-controlled territory and Abkhazia and South Ossetia.[29] It is the fourth Georgia v. Russia inter-State application before the ECtHR.

a. Background

Following the armed conflict between Georgia and Russia in August 2008, Russia recognised Abkhazia and South Ossetia as independent States. It established military bases in each of the two regions and stationed Russian soldiers there. It also set up a joint military command between Russia and Abkhazia and incorporated the South Ossetian “military” into the Russian armed forces. Russian border guards patrol the administrative boundary line between the two regions and the territory controlled by the Georgian Government.

Since 2009, physical barriers and other measures have gradually been established to block people from crossing the administrative boundary line freely. This process—referred to as “borderisation”—includes three main elements: (1) the establishment of physical infrastructure; (2) surveillance and patrols; and (3) a crossing regime requiring commuters to have specific documents and only use “official” crossing points.

Georgia and many States consider the process of “borderisation” illegal under international law. The Georgian authorities refer to the administrative boundary line as the occupation line; whereas the Russian and the de facto Abkhazhian and South Ossetian authorities treat the administrative boundary line as an international border on the grounds that Russia has recognised the two breakaway entities as independent States.

Against this backdrop of events, the Georgian Government contends that:

Russia engaged (and continues to engage) in an administrative practice of harassing, unlawfully arresting and detaining, assaulting, torturing, murdering and intimidating ethnic Georgians attempting to cross, or living next to, the administrative boundary lines that now separate Georgian-controlled territory from Abkhazia and South Ossetia;
Russia engaged (and continues to engage) in an administrative practice of failing to conduct Convention-compliant investigations in this connection;
a Georgian civilian who was abducted while trying to enter South Ossetia was unlawfully deprived of his liberty, tortured and murdered by persons for whom Russia bears responsibility; and
Russia failed to conduct a Convention-compliant investigation into the civilian’s unlawful arrest and murder and into the unlawful arrests and murders of two other Georgians who were arrested and killed.

b. The ECtHR’s Findings

i. Temporal Scope: Russia’s Relationship with the Convention and the ECtHR

Similar to its findings in the Ukraine and the Netherlands v. Russia decision, the ECtHR considered that it had jurisdiction to consider Georgia’s complaints up to 16 September 2022—the date on which Russia ceased to be a High Contracting Party to the Convention.[30]

ii. Russia’s Complaints about an Alleged Lack of Genuine Application

Russia objected to the application on the basis that Georgia’s application did not genuinely raise issues related to the protection of human rights under the Convention, but rather that it was brought to seek a decision on issues of general international law.[31]

The ECtHR rejected this argument, finding that although the issues raised by Georgia had “political aspects”, they also concerned violations of human rights protected by the Convention.[32]

iii. Whether the Alleged Complaints Fell within Russia’s Jurisdiction

Relying on the ECtHR’s findings in the related case of Georgia v. Russia (II) that—in respect of Abkhazia and South Ossetia, in particular—the strong Russian presence and the dependency of the de facto Abkhazian and South Ossetian authorities on Russia indicated that there had been continued “effective control” over those two breakaway regions at least until 23 May 2018. In the absence of any relevant new information, the ECtHR considered that this conclusion remains valid and the alleged complaints therefore fell within Russia’s jurisdiction.[33]

iv. Admissibility of the Complaints

1. The Exhaustion Rule

The ECtHR reiterated that the rule of exhaustion of domestic remedies did not apply to inter-State cases in which the applicant State complained of administrative practices of violations of the Convention and where the Court was not being asked to decide individually on each of the cases put forward as proof or illustrations of those practices. Therefore, as the Court would be examining the allegations of administrative practices only in this inter-State case, it found that the exhaustion rule did not apply.[34]

2. The Administrative Practices

The ECtHR declared the application admissible on the basis that there was sufficient prima facie evidence to establish an “administrative practice” of human-rights violations. The ECtHR found that the available material was sufficient to amount to evidence of the “repetition of acts” which were sufficiently numerous and interconnected to amount to a “pattern or system” in breach of Articles of the Convention.[35] Likewise, the ECtHR found that there was sufficient evidence to satisfy the Court that the “official tolerance” element at the level of direct supervisors of the relevant regions met the appropriate threshold.[36]

Accordingly, having met the admissibility criteria, the case will now proceed to a hearing on the merits.

Please do not hesitate to contact us with any questions.

__________________________

[1] Ukraine and the Netherlands v. Russia [GC], nos. 8019/16, 43800/14 and 28525/20, 25 January 2023 (“Ukraine and the Netherlands v. Russia”), available here.

[2] Ukraine and the Netherlands v. Russia, paras. 43-53, 59.

[3] Ukraine and the Netherlands v. Russia, paras. 68-69.

[4] Ukraine and the Netherlands v. Russia, paras. 82, 85.

[5] Ukraine and the Netherlands v. Russia, paras. 94-96.

[6] Ukraine and the Netherlands v. Russia, paras., 74, 77-80.

[7] Ukraine and the Netherlands v. Russia, para. 2.

[8] Ukraine and the Netherlands v. Russia, para. 4.

[9] Ukraine and the Netherlands v. Russia, para. 6.

[10] Resolution of the Committee of Ministers of the Council of Europe (CM/Res(2022)2) on the cessation of the membership of the Russian Federation to the Council of Europe, 16 March 2022, available here; see also Ukraine and the Netherlands v. Russia, para. 35.

[11] Press Release from the Plenary of the European Court of Human Rights (ECHR 286 (2022)), 16 September 2022, available here; see also Ukraine and the Netherlands v. Russia, para. 36.

[12] Convention, Article 58; see also Ukraine Decision, para. 389.

[13] Ukraine and the Netherlands v. Russia, para. 559.

[14] Ukraine and the Netherlands v. Russia, paras. 690-697.

[15] Ukraine and the Netherlands v. Russia, paras. 628-639, 643-644, 649-654, 659-662.

[16] Ukraine and the Netherlands v. Russia, paras. 670-689.

[17] Ukraine and the Netherlands v. Russia, para. 696.

[18] Ukraine and the Netherlands v. Russia, paras. 698-700.

[19] Ukraine and the Netherlands v. Russia, para. 698, referring to Georgia v. Russia (II) (dec.), no. 38263/08, 13 December 2011, paras. 125-138.

[20] Ukraine and the Netherlands v. Russia, paras. 701-706.

[21] Ukraine and the Netherlands v. Russia, paras. 718-721.

[22] Article 35(1) has since been amended to reduce the six-month period to four months.

[23] Ukraine and the Netherlands v. Russia, paras. 800-807.

[24] The Court found that, as regards Ukraine’s alternative argument that the alleged abductions amounted to individual violations of the Convention, Ukraine had not discharged its burden in relation to the exhaustion rule: the fact of the transfer allegation concerning the groups of children had not been met with a blanket denial by the Russian authorities and the underlying fact of the transfer of the Ukrainian children to Russia was agreed by the parties. The Court found that Ukraine could have challenged the relevant finding of Russia’s investigative committee and put before the Russian authorities their own evidence, challenging the findings. This claim was therefore declared inadmissible. Ukraine and the Netherlands v. Russia, paras. 791-798.

[25] Ukraine and the Netherlands v. Russia, paras. 775, 789.

[26] Ukraine and the Netherlands v. Russia, paras. 450, 824.

[27] Ukraine and the Netherlands v. Russia, paras. 828-889. The remaining complaints of administrative practices in respect of application no. 8019/16 were declared inadmissible.

[28] Ukraine and the Netherlands v. Russia, paras. 904-905, 916-918, 939-942, 948-949.

[29] Georgia v. Russia (IV), no. 39611/18, 20 April 2023 (“Georgia v. Russia (IV)”), available here.

[30] Georgia v. Russia (IV), paras. 22-23.

[31] Georgia v. Russia (IV), para. 24.

[32] Georgia v. Russia (IV), paras. 26-29.

[33] Georgia v. Russia (IV), para. 44.

[34] Georgia v. Russia (IV), para. 49.

[35] Georgia v. Russia (IV), paras. 61-69.

[36] Georgia v. Russia (IV), para. 70.

The following Gibson Dunn lawyers assisted in the preparation of this client update: Robert Spano (former President of the ECtHR), Piers Plumptre, and Theo Tyrrell.

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

Robert Spano (+44 (0) 20 7071 4902, [email protected])
Piers Plumptre (+44 (0) 20 7071 4271, [email protected])
Theo Tyrrell (+44 (0) 20 7071 4016, [email protected])

Please also feel free to contact the following practice group leaders:

International Arbitration Group:
Cyrus Benson (+44 (0) 20 7071 4239, [email protected])
Penny Madden KC (+44 (0) 20 7071 4226, [email protected])

Transnational Litigation Group:
Susy Bullock (+44 (0) 20 7071 4283, [email protected])

Decided May 25, 2023

Sackett v. EPA, No. 21-454

Today, the Supreme Court held that the Clean Water Act covers only those wetlands with a continuous surface connection to other covered waters.

Background: Under the Clean Water Act, the EPA has jurisdiction over “navigable waters,” which are defined as “the waters of the United States.” The Sacketts purchased property containing wetlands that were separated by a road from a tributary that eventually fed into a traditionally navigable intrastate lake. After the Sacketts made certain improvements to the property, the EPA determined that they violated the Clean Water Act by discharging fill material into those wetlands without a permit.

The Sacketts sued, alleging that the EPA lacked jurisdiction under the Clean Water Act because any wetlands on their property were not “waters of the United States.” The district court granted summary judgment to the EPA, and the Ninth Circuit affirmed. Applying the test set forth in Justice Kennedy’s opinion concurring in the judgment in Rapanos v. United States, 547 U.S. 715 (2006), the court determined that the wetlands on the Sacketts’ property, together with wetlands across the road, were “waters of the United States” subject to the EPA’s jurisdiction because they had a “significant nexus” to a traditionally navigable water.

Issue: Whether the Ninth Circuit set forth the proper test for determining whether wetlands are “waters of the United States” under the Clean Water Act.

Court’s Holding:

No. The Clean Water Act covers wetlands only if they have a continuous surface connection to bodies of water that are “waters of the United States” in their own right, such that the wetlands are indistinguishable from those waters.

“[T]he CWA extends to only those ‘wetlands with a continuous surface connection to bodies that are “waters of the United States” in their own right . . . .’”

Justice Alito, writing for the Court

What It Means:

Today’s decision should provide more assurance to landowners, property developers, and farmers. If wetlands do not have a continuous surface connection to waters of the United States, those wetlands do not fall under the Clean Water Act’s reach.
Following the Rapanos plurality, the Court concluded that the term “waters” encompasses “only those relatively permanent, standing or continuously flowing bodies of water forming geographical features that are described in ordinary parlance as ‘streams, oceans, rivers, and lakes.’” And the Court clarified that wetlands qualify as jurisdictional waters only if they are “indistinguishably part of a body of water that itself constitutes ‘waters’ under the [statute],” which requires a “continuous surface connection” and the absence of any “clear demarcation between ‘waters’ and wetlands.”
The Court recognized that “phenomena like low tides or dry spells” may sometimes cause “temporary interruptions in surface connection” and clarified that landowners cannot “carve out wetlands from federal jurisdiction by illegally constructing a barrier on wetlands otherwise covered by the” statute.
The Court explained that adopting the significant-nexus test advanced by Justice Kennedy in Rapanos would interfere with traditional state authority over private property and require a “freewheeling inquiry” that is inconsistent with the statutory text, provides landowners little guidance, and creates “serious vagueness concerns” in light of the statute’s criminal penalties.
Justice Kavanaugh (joined by three other Justices) concurred in the judgment. He agreed the wetlands on the Sacketts’ property were not covered by the statute, but he would have held that the statute covers both “wetlands contiguous to or bordering a covered water” and “wetlands separated from a covered water only by a man-made dike or barrier, natural river berm, beach dune, or the like.”

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 Supreme Court. Please feel free to contact the following practice leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 [email protected]	Allyson N. Ho +1 214.698.3233 [email protected]	Julian W. Poon +1 213.229.7758 [email protected]
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Related Practice: Environmental Litigation and Mass Tort

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Related Practice: Land Use and Development

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On April 25, 2023, the IRS’ Treaty and Transfer Pricing Operations (“TTPO”) director introduced new internal procedures for handling requests for Advance Pricing Agreements (“APAs”), a voluntary process for prospectively resolving transfer pricing issues and ensuring tax compliance.

Background

APAs are a valuable tool for taxpayers and taxing authorities to reach binding agreement on the arm’s length price for present and future intercompany transactions. For many taxpayers, the principal benefit is tax certainty, and for bilateral or multilateral APAs (those involving more than one taxing authority) the elimination of double tax. Rev. Proc. 2015-41[1] (here) is the governing APA revenue procedure, and the Advance Pricing and Mutual Agreement (“APMA”) program, a representative office of the U.S. competent authority and one of the divisions of TTPO, oversees the APA program. While APAs offer a collaborative and proactive method for resolving transfer pricing issues, APMA’s acceptance of an APA request is discretionary. As indicated below, it appears that APMA will exercise more selectivity going forward.

New APMA Guidelines Effective April 25, 2023

In the “Memorandum for Treaty and Transfer Pricing Operations Employees” (the “Memorandum”), TTPO (1) provides guidance to its personnel (which include those in APMA) on how to review and determine whether to accept APA requests and (2) instructs TTPO personnel to provide taxpayers who submit prefiling memoranda with guidance on whether an APA workstream is well-suited to achieve certainty for the proposed intercompany transactions (i.e., whether a APA request will be accepted or likely be successful). Per the Memorandum, these instructions are not intended to limit or decrease the number of APA requests accepted by APMA but aim to improve the quality and timeliness of the APA program by identifying potential roadblocks and opportunities for alternative paths to certainty, such as the International Compliance Assurance Program (the “ICAP”) or joint audits. The Memorandum is effective for all submissions and requests filed as of April 25, 2023, and the IRS intends the guidance to be incorporated into the Internal Revenue Manual within two years.

Prior to publication of the Memorandum, IRS officials previewed the forthcoming guidance. In late 2022, Nicole Welch, Acting Director of TTPO, emphasized that APAs are just one tool to prevent transfer pricing disputes and that the program should focus on ensuring that an APA is the best workstream to resolve a taxpayer’s transfer pricing issue. She also highlighted the need for the program to align resources with the risks posed by transactions and learn from the successes and challenges of other jurisdictions that have adopted a more selective approach to advance pricing agreements.[2] In March 2023, Jennifer Best, the acting Deputy Commissioner of the Large Business and International division (“LB&I”), previewed the April guidance, explaining that this process would allow taxpayers to obtain preliminary views from the APMA before submitting a formal APA request, providing more clarity on the IRS’ perspective. Best noted that this approach is aimed at investing time upfront in the APA process, with early engagement to communicate the IRS’ thoughts on the feasibility of the proposed APA.[3]

Under Rev. Proc. 2015-41, 2015-35 I.R.B. 263 (Aug. 31, 2015) (“Rev. Proc. 2015-41”) (here), APMA encourages taxpayers to voluntarily submit an optional pre-filing memorandum and request a pre-filing conference prior to filing the APA request.[4] The Rev. Proc. specifically recommends such voluntary submissions for novel or complex issues, but it does not explicitly provide reasons why a voluntary pre-filing memoranda may be beneficial to the taxpayer or the U.S. competent authority. The Memorandum (although directed to TTPO employees) and recent comments by IRS officials both provide valuable insight to taxpayers considering APAs as a means to achieve certainty with respect to significant intercompany transactions.

TTPO’s New Criteria for Acceptance of APA Submissions

Given the expense of filing an APA application and the 3-year average time frame to reach APA resolutions, an advance opinion from APMA on whether the APA submission would likely reach a successful result serves a valuable function (and brings the APA process into closer alignment with Chief Counsel’s private letter ruling (“PLR”) program),[5] but perhaps more meaningful is TTPO’s new criteria for determining whether APAs (including renewals) should be accepted and whether TTPO may “recommend” that taxpayers seek an alternative workstream, such as a joint or multilateral audit with foreign tax authorities.

Relevant to the pre-filing submissions and formal APA requests, including APA renewals, TTPO provides a long list of criteria that must be evaluated to determine whether an APA will be accepted as the preferred avenue to achieve transfer-pricing certainty. For large, bilateral or multilateral issues, the criteria appear to reflect a few specific underlying concerns regarding (1) APMA’s and foreign competent authorities’ ability to adequately develop the facts, (2) whether treaty partners are likely to be helpful in improving transfer-pricing compliance, and (3) whether the APA is principally prospective in nature.

Implications for the APA Program

Although the Memorandum’s stated purpose is not to limit or reduce the number of accepted APA requests, we believe the criteria reflect a more selective approach to APAs (consistent with Nicole Welch’s prior statements) and that it indicates a preference for relatively more unilateral action by the IRS Examination function (with the assistance of TTPO) to audit large taxpayers or to replace the APA process with other processes that do not provide the legal certainty of an APA. Thus, the guidance appears to reflect a shift in the IRS’ approach that reduces certainty with respect to challenging transfer pricing issues and increases the likelihood of double tax, at least from our perspective.[6] Perhaps it is yet to be seen, but the Memorandum guidance does not appear to comport with recent OECD inclusive framework initiatives, including the recent OECD guidance in the “Bilateral Advance Pricing Agreement Manual” and the “Manual on the Handling of Multilateral Mutual Agreement Procedures and Advance Pricing Arrangements” (both of which the US approved). Beyond resource constraints, perhaps the more stringent APA case selection process (including with respect to APA renewals) is in reaction to the Eaton case, which involved the IRS’s failed attempt to revoke two APAs.[7]

Presumably this is the first of many updates to APA procedures. Since 2021, Treasury’s Priority Guidance plan has included, “Guidance updating Rev. Proc. 2015-41, providing the procedures for requesting and obtaining advance pricing agreements and guidance on the administration of executed advance pricing agreements.”[8] Prior to the issuance of Rev. Proc. 2015-41, the IRS issued a proposed version in Notice 2013-79, 2013-2 C.B. 653 for public comment. The public is not afforded the opportunity to comment on internal IRS processes and procedures, but the new, immediately effective, APA procedures detailed in the Memorandum (which the IRS intends to incorporate into the IRM), rather than a Revenue Procedure, are an unusual surprise. APAs are a critical multilateral, inclusive, program that should be enhanced and supported as primary means to resolve challenging transfer pricing positions that are innate to the complex business operations of large multinationals. The tax community (including the IRS) is benefited by taxpayers’ comments to proposed changes. The opportunity to comment on future, material changes to APA procedures would be most welcome.

In conclusion, before taxpayers invest time and effort in drafting and submitting a formal APA request, the new IRS procedures for pre-submission review allow the APMA to provide a preliminary opinion on the suitability of the APA workstream for achieving certainty in proposed transactions and whether an alternative workstream is recommended and may also offer assurance for taxpayers. It could be assumed that, even though the new guidance asserts it “is not intended to limit or decrease the number of APA requests accepted by APMA,” the new procedures under the interim guidance issued by the IRS may potentially lead to a decline in the number of APAs requested and accepted into the program.

_____________________

[1] Rev. Proc. 2015-41, 2015-35 I.R.B. 263 (Aug. 31, 2015).

[2] See David van den Berg, IRS Advance Pricing Unit May Become More Selective, Law360 Tax Authority (Oct. 6, 2022), https://www.law360.com/tax-authority/articles/1537536; Shaw Tim, Transfer Pricing Enforcement, Advance Agreement Changes Coming, IRS Official Says, Thompson Reuters, Checkpoint Learning (Mar. 14, 2023), https://tax.thomsonreuters.com/news/transfer-pricing-enforcement-advance-agreement-changes-coming-irs-official-says/.

[3] See Isabel Gottlieb, IRS Planning Changes to Advance Pricing Agreement Process, Daily Tax Rep. (BNA), Mar. 7, 2023, https://www.bloomberglaw.com/product/tax/bloombergtaxnews/daily-tax-report-international/X86FR3PC000000?bna_news_filter=daily-tax-report-international#jcite.

[4] Rev. Proc. 2015-41, 2015-35 I.R.B. 263, § 3.02.

[5] See IRS Pre-Submission Conf., IRM 32.3.2.4.2 (Aug. 11, 2004), https://www.irs.gov/irm/part32/irm_32-003-002#idm140414975120816. One potentially important difference between Chief Counsel’s PLR program and the current APA Rev. Proc. is that the Rev. Proc. permits pre-submission conferences on an anonymous basis, whereas the PLR procedures do not.

[6] See also Kristen A. Parillo, IRS Refining Its Transfer Pricing Approach, 106 Tax Notes Int’l 1696 (June 24, 2022) (quoting Jennifer Best’s comments that LB&I is expanding audit coverage for transfer pricing and looking to become more selective in accepting APAs).

[7] Eaton Corp. v. Comm’r, 47 F.4th 434 (6th Cir. 2022), aff’g in part, rev’g in part, T.C. Memo. 2017-147.

[8] See IRS 2022—2023 Priority Guidance Plan, at 17 (May 5, 2023), https://www.irs.gov/pub/irs-utl/2022-2023-pgp-3rd-quarter-update.pdf.

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

C. Terrell Ussing – Washington, D.C. (+1 202-887-3612, [email protected])
Anne Devereaux* – Los Angeles (+1 213-229-7616, [email protected])
Galya Savir – New York (+1 212-351-2399, [email protected])

Tax Group:
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Hans Martin Schmid – Munich (+49 89 189 33 110, [email protected])
Eric B. Sloan – Co-Chair, New York/Washington, D.C. (+1 212-351-2340, [email protected])
Jeffrey M. Trinklein – London/New York (+44 (0) 20 7071 4224 /+1 212-351-2344), [email protected])
John-Paul Vojtisek – New York (+1 212-351-2320, [email protected])
Edward S. Wei – New York (+1 212-351-3925, [email protected])
Lorna Wilson – Los Angeles (+1 213-229-7547, [email protected])
Daniel A. Zygielbaum – Washington, D.C. (+1 202-887-3768, [email protected])

Global Tax Controversy and Litigation Group:
Michael J. Desmond – Co-Chair, Los Angeles/Washington, D.C. (+1 213-229-7531, [email protected])
Saul Mezei – Washington, D.C. (+1 202-955-8693, [email protected])
Sanford W. Stark – Co-Chair, Washington, D.C. (+1 202-887-3650, [email protected])
C. Terrell Ussing – Washington, D.C. (+1 202-887-3612, [email protected])

*Anne Devereaux is an of counsel working in the firm’s Los Angeles office who is admitted only in Washington, D.C.

On May 18, 2023, the U.S. Equal Employment Opportunity Commission (“EEOC”) announced the release of its second set of guidance regarding employers’ use of artificial intelligence (“AI”).[1] The EEOC’s technical, non-binding guidance outlines key considerations that, in the EEOC’s view, help ensure that automated employment tools do not violate Title VII of the Civil Rights Act of 1964 (“Title VII”).[2]

This guidance comes on the heels of reports that the EEOC is training staff on how to identify discrimination caused by automated systems and AI tools,[3] and the EEOC’s joint statement with officials from the Department of Justice (“DOJ”), the Consumer Financial Protection Bureau (“CFPB”), and the Federal Trade Commission (“FTC”) emphasizing the agencies’ commitment to “vigorously” enforce existing civil rights laws against biased and discriminatory AI systems.[4]

AI and Title VII Guidance

The EEOC’s guidance centers on the potential risk that, in the EEOC’s view, AI tools used in employment decision making could give rise to disparate impact under Title VII. The guidance provides that a disparate impact could arise if an automated tool disproportionately excludes individuals based on protected characteristics, without being job related or consistent with business necessity. Below we summarize the key aspects of the EEOC’s guidance.

5 Key Takeaways for Employers:

Coverage of AI: The guidance emphasizes that an automated decision-making tool would be treated as a “selection procedure” subject to the EEOC’s Uniform Guidelines on Employee Selection Procedures (the “Uniform Guidelines”)[5] when used to “make or inform decisions about whether to hire, promote, terminate, or take similar actions toward applicants or current employees.”
Joint Liability: The guidance provides that “if an employer administers a selection procedure, it may be responsible under Title VII if the procedure discriminates on a basis prohibited by Title VII, even if the test was developed by an outside vendor.” Specifically, the guidance notes that liability could arise where an employer relies on the results of a selection procedure that is administered on its behalf or if a vendor’s assessment of the tool is incorrect and results in discrimination. Notably, this is in alignment with what the New York City Department of Consumer and Worker Protection (“DCWP”) underscored during its May 22, 2023 roundtable regarding New York City’s Local Law 144, which will govern the use of automated employment decision tools in hiring and promotion beginning July 5, 2023.[6] Specifically, DCWP asserted that Local Law 144 places all compliance responsibility on the employer and does not permit employers to merely rely on a vendor’s representations.
Four-Fifths Rule of Thumb: The four-fifths rule is a measure of adverse impact that determines whether the selection rate of one group is substantially (e., less than 80%) different than that of another group. Under the rule, a selection procedure could be found to have a disparate impact if the selection rate of a protected group is less than 80% of the rate of the non-protected group. The guidance echoes the Uniform Guidelines in stating that the four-fifths measure is “merely a rule of thumb” and should be used to draw preliminary inferences and prompt further assessment of the underlying processes. Accordingly, compliance with the rule is not necessarily sufficient to show that a tool is lawful under Title VII.
EEOC Charges: In a footnote, the guidance asserts that the Uniform Guidelines “do not require the Commission to base a determination of discrimination on the four-fifths rule when resolving a charge.”
Auditing: The EEOC encourages employers to routinely conduct self-assessments of their AI tools to monitor for potentially disproportionate effects on individuals subject to the automated selection procedure. The guidance also states that if an employer fails to take steps to adopt a less discriminatory algorithm that was considered during the development process, this might give rise to liability. Based on the guidance, the EEOC’s expectation is that employers will conduct bias audits of their AI tools even in jurisdictions that do not require them.

Joint Statement

On April 25, 2023, Charlotte A. Burrows, Chair of the EEOC, joined officials from the DOJ, CFPB, and the FTC to release a joint statement emphasizing the agencies’ pledge “to vigorously use [their] collective authorities to protect individuals’ rights regardless of whether legal violations occur through traditional means or advanced technologies.”

Highlighted Risk Areas. The statement noted the agencies’ concern with AI tools’ reliance on “vast amounts of data to find patterns or correlations” in making recommendations or predictions and flagged the following three aspects of AI as potential sources of discrimination:

(1) Model Opacity and Access: The agencies note that where automated systems lack transparency, it becomes difficult for all stakeholders to ascertain whether the system is fair.

(2) Data and Datasets: The statement emphasizes that an AI tool’s outcomes may be impacted by unrepresentative and imbalanced datasets as well as data that incorporates historical biases and other errors.

(3) Design and Use: When developers design an AI tool without understanding the underlying practices, context, and users, the statement warns that the tools might be based on flawed assumptions.

Sustained Focus. In an accompanying statement, EEOC Chair Burrows said that the EEOC would “continue to raise awareness on this topic; to help educate employers, vendors, and workers; and where necessary, to use our enforcement authorities to ensure AI does not become a high-tech pathway to discrimination.”[7] She also noted that the agency is also looking “down the road” and considering establishing “some guardrails” to regulate AI in the future.

This message from the EEOC is not new. Rather, it reiterates the agency’s stance that AI systems and tools will be subject to existing equal employment opportunity laws and regulations.

Gibson Dunn’s “Keeping Up with the EEOC” series launched nearly a year ago in May 2022 when the EEOC filed its first complaint alleging algorithmic discrimination and issued guidance with the DOJ on how AI tools might violate the Americans with Disabilities Act (“ADA”).[8] Since then, the EEOC has taken a number of steps that indicate its increased focus on the use of automated employment decision-making systems and tools, including its draft strategic enforcement plan’s prioritization of AI issues[9] and its algorithm-rewriting settlement with a job search website operator.[10]

* * *

Given this increased attention, vendors of automated employment decision-making tools and employers using or considering the use of AI tools should ensure that they are keeping up with the rapid-fire developments from the EEOC and other regulators, the White House, Congress, and the flurry of proposed and forthcoming laws at the state and local level.[11] Indeed, on April 13, 2023, Senate Majority Leader Chuck Schumer announced a high-level framework outlining a new regulatory regime for AI,[12] and on May 1, 2023, the White House announced that it will be releasing a request for information to learn more about AI tools being used by employers to monitor, evaluate, and manage an array of workers, including those in call centers, warehouses, offices, and rideshare and delivery services.[13]

Together, these announcements from Congress and the White House as well as the EEOC’s ongoing focus on AI suggest that vendors and employers could face regulatory oversight by multiple federal authorities, and there are indications that state authorities, including State Attorneys General, are looking at AI as a potential new area for enforcement as well.[14]

______________________

[1] EEOC Releases New Resource on Artificial Intelligence and Title VII (May 18, 2023), https://www.eeoc.gov/newsroom/eeoc-releases-new-resource-artificial-intelligence-and-title-vii.

[2] EEOC, Select Issues: Assessing Adverse Impact in Software, Algorithms, and Artificial Intelligence Used in Employment Selection Procedures Under Title VII of the Civil Rights Act of 1964 (May 18, 2023), https://www.eeoc.gov/select-issues-assessing-adverse-impact-software-algorithms-and-artificial-intelligence-used.

[3] Rebecca Rainey, EEOC to Train Staff on AI-Based Bias as Enforcement Efforts Grow, Bloomberg Law (May 5, 2023), https://news.bloomberglaw.com/daily-labor-report/eeoc-to-train-staff-on-ai-based-bias-as-enforcement-efforts-grow.

[4] For more information on the EEOC’s first enforcement action and conciliation agreement, please see Gibson Dunn’s Client Alert Keeping Up with the EEOC: Artificial Intelligence Guidance and Enforcement Action (May 23, 2022), https://www.gibsondunn.com/keeping-up-with-the-eeoc-artificial-intelligence-guidance-and-enforcement-action/ and Keeping Up with the EEOC: 5 Takeaways from its Algorithm Rewriting Settlement (Mar. 23, 2023), https://www.gibsondunn.com/keeping-up-with-the-eeoc-5-takeaways-from-its-algorithm-rewriting-settlement/.

[5] 29 C.F.R. part 1607; EEOC, Questions and Answers to Clarify and Provide a Common Interpretation of the Uniform Guidelines on Employee Selection Procedures (March 1, 1979), https://www.eeoc.gov/laws/guidance/questions-and-answers-clarify-and-provide-common-interpretation-uniform-guidelines.

[6] 10 Ways NYC AI Discrimination Rules May Affect Employers (Apr. 19, 2023), https://www.gibsondunn.com/10-ways-nyc-ai-discrimination-rules-may-affect-employers/.

[7] EEOC, EEOC Chair Burrows Joins DOJ, CFPB, And FTC Officials to Release Joint Statement on Artificial Intelligence (AI) and Automated Systems (Apr. 25, 2023), https://www.eeoc.gov/newsroom/eeoc-chair-burrows-joins-doj-cfpb-and-ftc-officials-release-joint-statement-artificial.

[8] Gibson Dunn’s Client Alert, Keeping Up with the EEOC: Artificial Intelligence Guidance and Enforcement Action (May 23, 2022), available at https://www.gibsondunn.com/keeping-up-with-the-eeoc-artificial-intelligence-guidance-and-enforcement-action/.

[9] For more information, please see Gibson Dunn’s Client Alert, Keeping Up with the EEOC: 10 Key Takeaways from its Just-Released Draft Strategic Enforcement Plan (Jan. 13, 2023), https://www.gibsondunn.com/keeping-up-with-the-eeoc-10-key-takeaways-from-its-just-released-draft-strategic-enforcement-plan/.

[10] For more information, please see Gibson Dunn’s Client Alert, Keeping Up with the EEOC: 5 Takeaways from its Algorithm Rewriting Settlement (Mar. 23, 2023), https://www.gibsondunn.com/keeping-up-with-the-eeoc-5-takeaways-from-its-algorithm-rewriting-settlement/.

[11] For more information about the laws in New York City and California, please see Harris Mufson, Danielle Moss, and Emily Lamm, 10 Ways NYC AI Discrimination Rules May Affect Employers (Apr. 19, 2023), https://www.law360.com/articles/1596454/10-ways-nyc-ai-discrimination-rules-may-affect-employers; Cassandra Gaedt-Sheckter, Danielle Moss, and Emily Lamm, What Employers Should Know About Proposed Calif. AI Regs (Apr. 12, 2023), https://www.law360.com/employment-authority/articles/1594222/what-employers-should-know-about-proposed-calif-ai-regs.

[12] Senate Democrats, Schumer Launches Major Effort To Get Ahead Of Artificial Intelligence (Apr. 13, 2023), https://www.democrats.senate.gov/newsroom/press-releases/schumer-launches-major-effort-to-get-ahead-of-artificial-intelligence.

[13] The White House, Hearing from the American People: How Are Automated Tools Being Used to Surveil, Monitor, and Manage Workers? (May 1, 2023), https://www.whitehouse.gov/ostp/news-updates/2023/05/01/hearing-from-the-american-people-how-are-automated-tools-being-used-to-surveil-monitor-and-manage-workers/.

[14] Paul Singer, Abigail Stempson, and Beth Chun, State AGs “Regulating Algorithms – The How and Why” (Apr. 24, 2023), https://www.adlawaccess.com/2023/04/articles/state-ags-regulating-algorithms-the-how-and-why/.

The following Gibson Dunn attorneys assisted in preparing this client update: Jason Schwartz, Danielle Moss, Harris Mufson, Naima Farrell, Molly Senger, and Emily Lamm.

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

Jason C. Schwartz – Co-Chair, Labor & Employment Group, Washington, D.C.
(+1 202-955-8242, [email protected])

Katherine V.A. Smith – Co-Chair, Labor & Employment Group, Los Angeles
(+1 213-229-7107, [email protected])

Decided May 22, 2023

People ex rel. Garcia-Brower v. Kolla’s, Inc., S269456

The California Supreme Court held today that Labor Code section 1102.5(b), which protects an employee from retaliation for disclosing unlawful activity to an employer or government agency, encompasses reports of information already known to the recipient.

Background: A bartender at a nightclub in Orange County complained to the club’s owner that she had not been paid for her previous three shifts. In response, the owner threatened to report the bartender to immigration authorities and terminated her employment.

The bartender filed a complaint with the Division of Labor Standards Enforcement, which found that the nightclub owner’s threats and termination of the bartender’s employment violated several provisions of the Labor Code. The Labor Commissioner then filed an action under Labor Code section 1102.5(b), which prohibits employers from retaliating against employees for “disclosing information” about suspected violations of the law to their employers or a government agency.

The trial court and Court of Appeal ruled against the Commissioner on the section 1102.5(b) claim. The Court of Appeal concluded that a “disclosure” of information required “the revelation of something new, or at least believed by the discloser to be new, to the person or agency to whom the disclosure is made,” but the bartender had not disclosed anything the owner did not already know.

Issue: Does Labor Code section 1102.5(b), which protects employees against retaliation for “disclosing information” about suspected violations of the law to their employer or a government agency, encompass a report of unlawful activities made to an employer or agency that already knew about the violation?

Court’s Holding:

Yes. Labor Code section 1102.5(b) protects employees from retaliation for disclosing unlawful activity to employers or agencies whether or not the recipients already know about the unlawful activity. Although the word “disclosure” sometimes “refers to sharing previously unknown information,” it “does not require that the [information] be unknown to the current recipient.” The Court concluded that the legislative history of section 1102.5(b) supported a broad reading of “disclose.”

“Although the word ‘disclose’ often refers to sharing previously unknown information, the word also means bringing into view in a particular context a type of information to which the discloser tends to have special access.”

Justice Liu, writing for the Court

What It Means:

California’s whistleblower statute is now in accord on this issue with the federal Whistleblower Protection Act, which Congress amended to protect the disclosure of information regardless of whether it is already known to the recipient.
Employees are protected under California’s whistleblower statute even if they report widely known violations of local, state, or federal law, or disclosures previously reported by other employees.
The Court reaffirmed that employers may rebut claims of retaliation if they demonstrate, by clear and convincing evidence, that the alleged retaliatory action would have occurred for legitimate reasons independent of the employee’s protected activity.

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 California Supreme Court. Please feel free to contact the following practice leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 [email protected]	Allyson N. Ho +1 214.698.3233 [email protected]	Julian W. Poon +1 213.229.7758 [email protected]
Blaine H. Evanson +1 949.451.3805 [email protected]	Bradley J. Hamburger +1 213.229.7658 [email protected]	Michael J. Holecek +1 213.229.7018 [email protected]

Related Practice: Labor and Employment

Jason C. Schwartz
+1 202.955.8242
[email protected]

Katherine V.A. Smith
+1 213.229.7107
[email protected]

Related Practice: Litigation

Theodore J. Boutrous, Jr.
+1 213.229.7804
[email protected]

Theane Evangelis
+1 213.229.7726
[email protected]

Federal lawmakers and policymakers have expressed increasing alarm about artificial intelligence (AI) and debated how to effectively provide transparency and protections for consumers following the success of ChatGPT and other rapid advances in AI technology.[1] At the same time, lawmakers and policymakers have expressed an awareness of the utility of AI for innovation, defense, and security, including the imperative for the United States to stay ahead of China.[2]

In recent weeks, we have seen significant activity on AI issues in Washington:

On May 16, 2023, both the Senate Judiciary Committee’s Subcommittee on Privacy, Technology, and the Law and the Senate Homeland Security and Governmental Affairs Committee held public hearings to discuss AI issues, with one featuring high-profile testimony from industry leaders like OpenAI CEO Sam Altman.[3]
On May 4, 2023, the White House held a high-level meeting with the CEOs of companies at the forefront of AI innovation[4] and announced new actions to promote responsible American innovation in AI.[5] These actions include new investments in AI research and development, public assessments of existing generative AI systems, and policies to ensure the federal government is leading the way on mitigating AI risks and harnessing AI opportunities.
On April 27, 2023, the White House released a request for information (RFI) on how AI is “being used to surveil, monitor, and manage workers.”[6]
On April 25, 2023, the heads of multiple key federal agencies—including the Civil Rights Division of the Department of Justice (DOJ), Equal Employment Opportunity Commission (EEOC), Federal Trade Commission (FTC), and Consumer Financial Protection Bureau (CFPB)—outlined their commitment to focus on mitigating potential discrimination arising from AI systems,[7] which the Chair of the EEOC called a “new civil rights frontier.”[8]
On April 13, 2023, Senate Majority Leader Chuck Schumer (D-NY) announced that he would lead a Senate effort to develop a legislative framework that outlines a new regulatory regime for AI.[9]

This alert highlights the major federal legislative efforts on AI and the White House initiatives on AI, which together represent a growing momentum for Washington to potentially play a major role in the regulation of AI to balance innovation, accountability, and transparency.

I. Federal Legislation

Bipartisan urgency has arisen in Washington around the need to regulate risks and create uniform standards for AI. Representative Frank Lucas (R-OK-3), Chair of the House Science, Space, and Technology Committee, recently remarked that legislators are “all trying to focus” on AI in response to the technology’s rapid growth.[10] Senator Mark Warner (D-VA), Chair of the Senate Intelligence Committee, observed the “mad rush amongst many members to try to get educated as quickly as possible” on AI issues.[11]

Lawmakers in both chambers of Congress have recently introduced new legislation and regulatory frameworks that try to address the risks associated with AI. They now face the challenge of striking the appropriate balance between countering potential risks in connection with AI systems and ensuring that regulatory burdens do not stifle American innovation in AI.

a. Majority Leader Schumer’s AI Framework:

In April 2023, Senate Majority Leader Schumer announced his intent to craft a framework to regulate AI in collaboration with stakeholders and experts from academia, advocacy groups, industry, and government.[12] Majority Leader Schumer expects robust actions from Senate committees with jurisdiction over the development of AI legislation. The key question is what will the final comprehensive AI legislation look like and what will it mean for companies utilizing this technology?

What we know now is that the framework is expected to center around four “guardrails” designed to guide the effective disclosure and testing of AI technologies by independent experts without stifling innovation.[13] These guardrails, which aim to regulate AI technology properly and align AI systems with American values, are:

Who: Identification of the AI system’s intended audience, as well as “who trained the algorithm;”[14]
Where: “[D]isclosure of [the AI system’s] data source;”[15]
How: Explanation for “how [the AI system] arrives at its responses;”[16] and
Protect: Transparent and strong ethical boundaries, focused on “aligning AI systems with American values and ensuring that AI developers deliver on their promise to create a better world.”[17]

When announcing the framework, Majority Leader Schumer encouraged Republican senators to contribute to the development of the comprehensive AI legislation the framework envisions. Notably, the framework’s focus on transparency in the AI industry mirrors past efforts at AI regulation that have been widely supported by Republicans, such as the Trump Administration’s 2020 Executive Order on Promoting the Use of Trustworthy Artificial Intelligence in the Federal Government.[18]

Majority Leader Schumer’s AI framework is still in its early stages, with no particulars yet on what exactly the legislation will entail. Additionally, no timeline has been provided for the release of the AI legislative framework, and it may even carry over to future Congresses. But bipartisan interest exists on AI issues generally with both political parties leaning into its potential for innovation and utility in defense.

Beyond the lack of specifics for the AI framework, Majority Leader Schumer’s announcement is significant because, as Majority Leader, he determines what bills are considered on the Senate floor and has outsized influence in setting the agenda on behalf of Senate Democrats. Given that Majority Leader Schumer urged Congress to “move quickly,” it is fair to expect multiple Senate committees to hold hearings and potentially advance AI bills during the 118th Congress.[19] But, the key factor to watch is whether these bills will be bipartisan, which will impact both whether the bills can obtain the 60-votes needed to pass the Senate over a filibuster and whether a Republican-led House will take up an AI bill from a Democratic-led Senate. This is especially true with a Democratic-controlled administration during a presidential election year, which could prove to be an obstacle to AI legislation during this Congress.

b. Algorithmic Accountability Act of 2022:

While it remains unclear if Washington will pass comprehensive AI legislation during this Congress, it is possible that Congress could take up narrower AI bills aimed at increasing transparency and preventing bias, like the Algorithmic Accountability Act. This legislation is an example of a policy proposal that could be included in Majority Leader Schumer’s broader framework or a proposal that could move as a stand-alone bill if a comprehensive framework lacks momentum.

First introduced by Senator Ron Wyden (D-OR) and Representative Yvette Clarke (D-NY-9) in 2019,[20] the Algorithmic Accountability Act would authorize the FTC to require companies under its jurisdiction to study and address potential unfair bias and discrimination in computer algorithms. Senator Cory Booker (D-NJ) has said this bias is “significantly harder to detect” than many other forms of discrimination.[21] As examples of possible undetectable discrimination, Booker cited “houses that you never know are for sale, job opportunities that never present themselves, and financing that you never become aware of.”[22]

Specifically, the Algorithmic Accountability Act would require the FTC—in consultation with other stakeholders in the private sector, civil society, and government—to promulgate regulations requiring “covered entit[ies]” to perform impact assessments of certain AI systems and “augmented critical decision process[es].”[23] These impact assessments would include detailed documentation of consultations with relevant stakeholders, ongoing testing and evaluation efforts, employee training, and consumers’ rights. Covered entities would also be required to assess any likely negative impacts on consumers, as well as the need for any guardrails on the use of the AI system.[24]

For any new AI system, the covered entity would submit an “initial summary report” of its impact assessment to the FTC prior to deployment.[25] Non-covered entities that deploy covered AI systems and processes are also encouraged, but not required, to submit summary reports of their AI impact assessments.[26] The Act lays out specific requirements for the form and substance of these summary reports.[27]

In addition to these individual impact assessments, covered entities would be required to submit a “summary report” to the FTC on an annual basis to demonstrate ongoing impact assessment of deployed AI systems and processes.[28]

These requirements apply to any entity over which the FTC has jurisdiction and that meets certain cut-offs for annual gross receipts, quantity of personal identifying information used, and AI use.[29] The “critical decision[s]” covered by this bill are likewise broad, incorporating any decision with “legal, material, or similarly significant effect” on a person’s access to a wide range of interests such as housing and employment.[30]

Identical versions of the Algorithmic Accountability Act enjoyed broad Democratic support in both the Senate and the House during the 117th Congress, but neither version was able to obtain any Republican co-sponsors.[31] We expect the bills to be reintroduced in both chambers in the 118th Congress.

c. Algorithmic Justice and Online Platform Transparency Act:

Another example of a narrower bill that could be acted upon by Congress as a stand-alone bill or rolled into Senator Schumer’s broader AI bill is the Algorithmic Justice and Online Platform Transparency Act. This bill, introduced by Senator Ed Markey (D-MA) and Representative Doris Matsui (D-CA-6), would make it unlawful for someone to use AI on an online platform in a manner that deprives an individual of a right or privilege under the Civil Rights Act of 1964. Representative Matsui called the bill “an essential roadmap for digital justice to move us forward on the path to online equity” by addressing what Senator Markey described as “[b]iased artificial intelligence systems that have become embedded in the fabric of our digital society.”[32]

Specifically, the Algorithmic Justice and Online Platform Transparency Act would:

Prohibit algorithmic processes on online platforms that discriminate on the basis of race, age, gender, ability and other protected characteristics. This includes discrimination against users, the use of platform design features in a discriminatory manner, discriminatory advertising, and the processing of personal information in a manner that intentionally deprives any individual of their right to vote in federal, state, or local elections;[33]
Establish a safety and effectiveness standard for algorithms, such that online platforms may not employ automated processes that harm users or fail to take reasonable steps to ensure algorithms achieve their intended purposes;[34]
Require any online platforms that uses an “algorithmic process” to disclose the types of algorithmic processes they employ and the information they collect to power them;[35]
Require online platforms to publish annual public reports detailing their content moderation practices;[36]
Empower the FTC to enforce the Act by making any violation qualify as an “unfair or deceptive act or practice.”[37] It also would empower the FTC to issue advisory opinions on compliance with the Act upon request from any online platform.[38]
Create an inter-agency task force comprised of the FTC, Department of Education, Department of Housing and Urban Development, Department of Commerce, and DOJ, to investigate discriminatory algorithmic processes employed in sectors across the economy.[39]

Substantively identical versions of the bill enjoyed Democratic support in both the Senate and the House during the 117th Congress, but neither version was able to garner a Republican co-sponsor.[40] Given the 118th Congress’s focus on AI, we expect the bills to be reintroduced in both chambers.

II. Recent White House Initiatives

Congress is far from the only branch of the U.S. government focused on potential benefits and risks associated with AI. On May 1, 2023—International Workers’ Day—the White House Office of Science and Technology Policy released an RFI seeking guidance on how AI is “being used to surveil, monitor, and manage workers.”[41] The RFI cited concerns about public reporting suggesting that eight of the ten largest private employers had used advanced technologies to monitor workplace productivity.[42] Specifically, the White House is seeking “workers’ firsthand experiences with surveillance technologies,” “details from employers, technology developers, and vendors on how they develop, sell, and use these technologies,” and “best practices for mitigating risks to workers,” along with any other relevant data or research.[43] The White House intends to use these responses to inform new policies and amplify best practices among employers and other stakeholder groups.

Notably, the blog post announcing this RFI was authored jointly by the White House Office of Science and Technology Policy and the White House’s Deputy Assistant to the President for Racial Justice and Equity.[44] The announcement specifically links these surveillance concerns with the administration’s goal of “advancing racial equity” and “promot[ing] fair and equitable workplaces.”[45]

On May 4, 2023, the Biden Administration announced a number of different actions designed to “promote responsible American innovation in artificial intelligence.”[46] Although noting AI’s great potential for positive change, President Biden emphasized that his administration would “place people and communities at the center” of AI policies.[47]

These efforts to promote responsible AI growth include:

New Investments in American AI Research & Development: The National Science Foundation announced $140 million in funding to launch seven new National AI Research Institutes focused on promoting responsible innovation by facilitating collaborative efforts across government, academia, and the private sector and by pursuing transformative (but ethical) AI advances. This will bring the total number of Institutes in the United States to 25.
Public Assessments of Existing Generative AI Systems: The Biden Administration announced that it had secured independent commitments from a wide range of leading AI developers to participate in a public evaluation of their AI systems. As part of this evaluation, AI experts will consider how these systems align with the draft Blueprint for an AI Bill of Rights published by the White House in October 2022.[48]
Policies to Mitigate AI Risks and Harness AI Opportunities: The White House Office of Management and Budget announced that it will be releasing for public comment a draft policy on the use of AI systems by the U.S. government. The policy is intended to empower agencies to responsibly use AI to advance their missions and improve their ability to equitably serve Americans.

The same day that these actions were announced, President Biden, Vice President Harris, the Secretary of Commerce, and other senior officials in the Biden White House and Administration met with CEOs of key technology companies such as Microsoft and Open AI at the White House.[49] President Biden told the CEOs that they have a “fundamental responsibility to make sure their products are safe and secure before they are deployed or made public.”[50] Vice President Harris noted AI’s “potential to improve people’s lives and tackle some of society’s biggest challenges.”[51] However, echoing remarks from the President, the Vice President warned that their companies have an “ethical, moral, and legal responsibility” to ensure the safety and security of AI technologies.[52] Given that the meeting was attended by a wide range of top administration officials, expect a whole of government approach to address issues involving AI.

III. How Gibson Dunn Can Assist

Gibson Dunn’s Public Policy, Artificial Intelligence, and Privacy, Cybersecurity and Data Innovation Practice Groups are closely monitoring legislative and regulatory actions in this space and are available to assist clients through strategic counseling; real-time intelligence gathering; developing and advancing policy positions; drafting legislative text; shaping messaging; and lobbying Congress.

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[1] Cat Zakrzewski, Federal regulators call AI discrimination a ‘new civil rights frontier,’ WASH. POST (Apr. 25, 2023), https://www.washingtonpost.com/technology/2023/04/25/artificial-intelligence-bias-eeoc/ (“Though this generation of regulators long has sounded the alarm about the risks posed by AI, its work has taken on greater urgency as tech companies engage in an arms race following the release of ChatGPT.”).

[2] Press Release, Senate Democrats, Schumer Launches Major Effort to Get Ahead of Artificial Intelligence (Apr. 13, 2023), https://www.democrats.senate.gov/newsroom/press-releases/schumer-launches-major-effort-to-get-ahead-of-artificial-intelligence (“Leader Schumer believes that it is imperative for the United States to lead and shape the rules governing such a transformative technology and not permit China to lead on innovation or write the rules of the road.”).

[3] Oversight of A.I.: Rules for Artificial Intelligence: Hearing Before the Subcomm. on Privacy, Tech., and the Law of the S. Comm. on the Judiciary, 118th Cong. (2023), https://www.judiciary.senate.gov/committee-activity/hearings/oversight-of-ai-rules-for-artificial-intelligence; Artificial Intelligence in Government: Hearing Before the S. Comm. on Homeland Sec. & Gov’t Affairs, 118th Cong. (2023), https://www.hsgac.senate.gov/hearings/artificial-intelligence-in-government/.

[4] Ashley Gold, Top AI CEOs will meet at White House, Axios (May 2, 2023), https://www.axios.com/2023/05/02/white-house-ai-leaders-ceos-meeting.

[5] Press Release, White House, FACT SHEET: Biden-Harris Administration Announces New Actions to Promote Responsible AI Innovation that Protects Americans’ Rights and Safety (May 4, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/04/fact-sheet-biden-harris-administration-announces-new-actions-to-promote-responsible-ai-innovation-that-protects-americans-rights-and-safety/.

[6] The White House, Office for Science and Technology Policy, Blueprint for an AI Bill of Rights, https://www.whitehouse.gov/ostp/ai-bill-of-rights/; Deirdre Mulligan & Jenny Yang, Hearing from the American People: How Are the Automated Tools Being Used to Surveil, Monitor, and Manage Workers?, The White House – OSTP Blog (May 1, 2023), https://www.whitehouse.gov/ostp/news-updates/2023/05/01/hearing-from-the-american-people-how-are-automated-tools-being-used-to-surveil-monitor-and-manage-workers/.

[7] Press Release, Fed. Trade Comm’n, Joint Statement on Enforcement Efforts Against Discrimination and Bias in Automated Systems (Apr. 25, 2023), https://www.ftc.gov/system/files/ftc_gov/pdf/EEOC-CRT-FTC-CFPB-AI-Joint-Statement%28final%29.pdf.

[8] Zakrzewski, supra note 1.

[9] Press Release, Senate Democrats, Schumer Launches Major Effort to Get Ahead of Artificial Intelligence (Apr. 13, 2023), https://www.democrats.senate.gov/newsroom/press-releases/schumer-launches-major-effort-to-get-ahead-of-artificial-intelligence (“Leader Schumer believes that it is imperative for the United States to lead and shape the rules governing such a transformative technology and not permit China to lead on innovation or write the rules of the road.”).

[10] Brendan Bordelon, Congress in a ‘mad rush’ to catch up on AI, Politico (Apr. 26, 2023), https://subscriber.politicopro.com/article/2023/04/congress-in-a-mad-rush-to-catch-up-on-ai-00094070.

[11] Id.

[12] Press Release, Senate Democrats, Schumer Launches Major Effort to Get Ahead of Artificial Intelligence (Apr. 13, 2023), https://www.democrats.senate.gov/newsroom/press-releases/schumer-launches-major-effort-to-get-ahead-of-artificial-intelligence.

[13] Andrew Solender & Ashley Gold, Scoop: Schumer lays groundwork for Congress to regulate AI, Axios (Apr. 13, 2023), https://www.axios.com/2023/04/13/congress-regulate-ai-tech.

[14] Id.

[15] Id.

[16] Id.

[17] Press Release, Senate Democrats, Schumer Launches Major Effort to Get Ahead of Artificial Intelligence (Apr. 13, 2023), https://www.democrats.senate.gov/newsroom/press-releases/schumer-launches-major-effort-to-get-ahead-of-artificial-intelligence. Schumer has often invoked American values when discussing the need to “grapple with artificial intelligence” while also “seek[ing] to invest in American ingenuity” and “solidify[ing] American innovation and leadership.” See Press Release, Senate Democrats, Majority Leader Schumer Floor Remarks on Artificial Intelligence (May 4, 2023), https://www.democrats.senate.gov/newsroom/press-reports/majority-leader-schumer-floor-remarks-on-artificial-intelligence.

[18] See Press Release, White House, Office of Science and Technology Policy, Promoting the Use of Trustworthy Artificial Intelligence in Government (Dec. 3, 2020), https://trumpwhitehouse.archives.gov/articles/promoting-use-trustworthy-artificial-intelligence-government/ (listing transparency as one of the “nine common principles for the design, development, acquisition and use of AI” that must guide federal agencies).

[19] Press Release, Senate Democrats, Schumer Launches Major Effort to Get Ahead of Artificial Intelligence (Apr. 13, 2023), https://www.democrats.senate.gov/newsroom/press-releases/schumer-launches-major-effort-to-get-ahead-of-artificial-intelligence.

[20] See Press Release, Booker, Wyden, Clarke Introduce Bill Requiring Companies to Target Bias in Corporate Algorithms (Apr. 10, 2019), https://www.booker.senate.gov/news/press/booker-wyden-clarke-introduce-bill-requiring-companies-to-target-bias-in-corporate-algorithms.

[21] Id.

[22] Id.

[23] Algorithmic Accountability Act of 2022, S. 3572, 117th Cong. § 3(b)(1) (2022). See also Algorithmic Accountability Act of 2022, H.R. 6580, 117th Cong. § 3(b)(1) (2022). [Because the Senate and House versions of this bill are identical, all subsequent citations will be to S. 3572 only.]

[24] Id. at § 4(a).

[25] Id. at § 3(b)(1)(D)–(E).

[26] Id. at § 3(b)(1)(F).

[27] Id. at § 5.

[28] Id. at § 3(b)(1)(D).

[29] Id. at § 2(7)(A).

[30] Id. at § 2(8).

[31] In the Senate, nine Democratic senators currently co-sponsor the bill, while thirty-nine Democrat Members co-sponsor the House bill. Algorithmic Accountability Act of 2022, S. 3572, 117th Cong. (2022); Algorithmic Accountability Act of 2022, H.R. 6580, 117th Cong. (2022).

[32] Press Release, Senator Markey, Representative Matsui Introduce Legislation to Combat Harmful Algorithms and Create New Online Transparency Regime (May 27, 2021), https://www.markey.senate.gov/news/press-releases/senator-markey-rep-matsui-introduce-legislation-to-combat-harmful-algorithms-and-create-new-online-transparency-regime.

[33] Algorithmic Justice and Online Platform Transparency Act, S. 1896, 117th Cong. § 6(a)–(d) (2022); Algorithmic Justice and Online Platform Transparency Act, H.R. 3611, 117th Cong. § 6(a)–(d) (2022). [Because the Senate and House versions of this bill are substantively identical, all subsequent citations will be to S. 1896 only.]

[34] Id. at § 6(e).

[35] Id. at § 4(a).

[36] Id. at § 4(b).

[37] Id. at § 8(a).

[38] Id. at § 6(h).

[39] Id. at § 7.

[40] Algorithmic Justice and Online Platform Transparency Act, S. 1896, 117th Cong. (2022); Algorithmic Justice and Online Platform Transparency Act, H.R. 3611, 117th Cong. (2022).

[41] Deirdre Mulligan & Jenny Yang, Hearing from the American People: How Are the Automated Tools Being Used to Surveil, Monitor, and Manage Workers?, The White House – OSTP Blog (May 1, 2023), https://www.whitehouse.gov/ostp/news-updates/2023/05/01/hearing-from-the-american-people-how-are-automated-tools-being-used-to-surveil-monitor-and-manage-workers/.

[42] Id.; see The Daily: The Rise of Workplace Surveillance, N.Y. Times (Aug. 24, 2022), https://www.nytimes.com/2022/08/24/podcasts/the-daily/workplace-surveillance-productivity-tracking.html.

[43] Mulligan & Yang, supra note 43.

[44] Id.

[45] Id.

[46] Press Release, White House, FACT SHEET: Biden-Harris Administration Announces New Actions to Promote Responsible AI Innovation that Protects Americans’ Rights and Safety (May 4, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/04/fact-sheet-biden-harris-administration-announces-new-actions-to-promote-responsible-ai-innovation-that-protects-americans-rights-and-safety/.

[47] Id.

[48] See The White House, Office for Science and Technology Policy, Blueprint for an AI Bill of Rights, https://www.whitehouse.gov/ostp/ai-bill-of-rights/.

[49] Press Release, White House, FACT SHEET: Biden-Harris Administration Announces New Actions to Promote Responsible AI Innovation that Protects Americans’ Rights and Safety (May 4, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/04/fact-sheet-biden-harris-administration-announces-new-actions-to-promote-responsible-ai-innovation-that-protects-americans-rights-and-safety/.

[50] Press Release, White House, Readout of White House Meeting with CEOs on Advancing Responsible Artificial Intelligence Innovation (May 4, 2023), https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/04/readout-of-white-house-meeting-with-ceos-on-advancing-responsible-artificial-intelligence-innovation/.

[51] Press Release, White House, Statement from Vice President Harris After Meeting with CEOs on Advancing Responsible Artificial Intelligence Innovation (May 4, 2023), https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/04/statement-from-vice-president-harris-after-meeting-with-ceos-on-advancing-responsible-artificial-intelligence-innovation/.

[52] Id.

The following Gibson Dunn lawyers prepared this client alert: Michael Bopp, Roscoe Jones, Jr., Vivek Mohan, Alexander Southwell, Amanda Neely, Daniel Smith, Frances Waldmann, and Sean Brennan*.

Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following in the firm’s Public Policy, Artificial Intelligence, or Privacy, Cybersecurity & Data Innovation practice groups:

Public Policy Group:
Michael D. Bopp – Co-Chair, Washington, D.C. (+1 202-955-8256, [email protected])
Roscoe Jones, Jr. – Co-Chair, Washington, D.C. (+1 202-887-3530, [email protected])
Amanda H. Neely – Washington, D.C. (+1 202-777-9566, [email protected])
Daniel P. Smith – Washington, D.C. (+1 202-777-9549, [email protected])

Artificial Intelligence Group:
Cassandra L. Gaedt-Sheckter – Co-Chair, Palo Alto (+1 650-849-5203, [email protected])
Vivek Mohan – Co-Chair, Palo Alto (+1 650-849-5345, [email protected])
Eric D. Vandevelde – Co-Chair, Los Angeles (+1 213-229-7186, [email protected])
Frances A. Waldmann – Los Angeles (+1 213-229-7914, [email protected])

Privacy, Cybersecurity and Data Innovation Group:
S. Ashlie Beringer – Co-Chair, Palo Alto (+1 650-849-5327, [email protected])
Jane C. Horvath – Co-Chair, Washington, D.C. (+1 202-955-8505, [email protected])
Alexander H. Southwell – Co-Chair, New York (+1 212-351-3981, [email protected])

Sean J. Brennan is an associate working in the firm’s Washington, D.C. office who currently is admitted to practice only in New York.

Gibson Dunn’s Public Policy Practice Group is closely monitoring developments regarding the infrastructure permitting debate in Congress. We offer this alert summarizing and analyzing the U.S. Senate Environment and Public Works Committee’s hearing on May 17, 2023, to help our clients prepare for potential changes in infrastructure permitting and environmental authorization laws. We are also available to help our clients arrange meetings on Capitol Hill to discuss permitting reform proposals or to share real-world examples of how the permitting process has affected them.

* * *

On May 17, 2023, the U.S. Senate Committee on Environment and Public Works (“EPW” or the “Committee”) held a hearing to hear testimony from administration officials regarding the need for federal infrastructure permitting reform. Committee Chairman Tom Carper (D-DE) started the hearing by echoing President Biden’s campaign slogan, saying, “We need to finish the job” on infrastructure reform.” He emphasized the importance of connecting clean energy power to the grid.

Witnesses included:

The Honorable Brenda Mallory, Chair, Council on Environmental Quality;
Christine Harada, Executive Director, Federal Permitting Improvement Steering Council; and
The Honorable Jason Miller, Deputy Director for Management, Office of Management and Budget.

We provide a full hearing summary and analysis below. Of particular interest to clients, however:

The divides between Democratic and Republican permitting reform goals were stark. Chairman Carper re-emphasized the three points he said must be included in any permitting reform proposal that he raised during the last EPW hearing: (1) it must reduce greenhouse gas emissions, including addressing transmission barriers that make it harder to connect to the grid, without undermining bedrock environmental laws; (2) it must support early and meaningful community engagement; and (3) it must provide businesses with certainty and predictability to make long term decisions. He said that the House Republicans’ proposals would undermine NEPA and in some cases eliminate judicial review, which is not acceptable to him. He endorsed the idea of expanding programmatic environmental impact statements for certain offshore wind projects.
Ranking Member Shelley Moore Capito (R-WV) argued that regulators need firm deadlines for environmental reviews and constant oversight. She urged that Congress not pit renewable energy against conventional energy or various projects against each other. She endorsed judicial reform to prevent projects from being held in limbo during litigation. She called for a transparent committee process in Congress and compromise on a bipartisan solution.
Ms. Mallory said that CEQ soon would be proposing rules to update National Environmental Policy Act (“NEPA”) regulations and promote more community engagement in the NEPA environmental review process.
When asked for specific permitting process improvements, the administration witnesses broke little new ground. All three relied heavily on the administration’s May 2022 Permitting Action Plan and the President’s permitting priorities released on May 10, 2023.

Key substantive issues surrounding permitting reform raised in the hearing included: (1) the effectiveness of the FAST-41 permitting reforms; (2) community engagement; (3) the scope of permitting reform; (4) enforceable timelines, regulatory clarity, and judicial review; and (5) resources.

1. Effectiveness of FAST-41 Permitting Reforms

At every recent hearing on permitting reform, witnesses and members have coalesced around the effectiveness of the FAST-41 reforms.[1] It continues to be likely that any permitting reform package will expand FAST-41 reforms such as identifying a lead agency for each project, increasing communication between permitting agencies, and allowing the public more transparency into the permitting process to more projects.

Ms. Harada touted FAST-41’s success, noting that the Federal Permitting Improvement Steering Council (“Permitting Council”) has helped permit 31 projects involving direct capital investments with a value of $160 billion. The Permitting Council is currently working on projects valued at $100 billion.

Ms. Mallory praised Congress for making FAST-41 permanent and credited its work for helping to reduce permitting timelines. She explained that the administration has applied many of the FAST-41 principles to projects beyond those covered by the FAST-41 program, including assigning lead agencies to projects, setting a clear and publicly available timeline, and monitoring performance throughout.

Senator Ben Cardin (D-MD) urged the Permitting Council to include more water supply projects as part of FAST-41.

2. Community Engagement

In his first line of questions, Chairman Carper focused on the importance of community engagement. All of the witnesses agreed that community engagement, “early and often,” is key to project success. He asked the witnesses to comment on coordination with state and local government, which Ms. Mallory acknowledged is incredibly important. She cited efforts on projects in Georgia and New York to coordinate with state governments and said no balls had been dropped in those processes. Senator Ed Markey (D-MA) noted the importance of including environmental justice communities early in the process.

Ranking Member Capito said she had no objection to increasing engagement, but expressed frustration that early and frequent community engagement was one of the only ideas being discussed.

3. Scope of Permitting Reform

A frequent point of contention between the Republicans and Democrats in the recent series of permitting hearings has been whether to reform permitting only for clean energy projects or for all energy projects. Senator Jeff Merkley (D-OR) argued that the administration should not be approving any new fossil fuel projects, while Ranking Member Capito argued that permitting reform needs to apply to all energy projects.

4. Enforceable Timelines, Regulatory Clarity, and Judicial Review

Ranking Member Capito expressed concern about regulators changing permitting standards through guidance rather than official notice-and-comment rulemaking. She also voiced support for clear and enforceable timelines. Mr. Miller explained that the administration had set timeline goals, but Ranking Member Capito pointed out that agencies “blow by them.” Mr. Miller suggested one remedy was to ensure that the administration understood the cause of each delay and was requiring agencies to provide remediation plans. Ranking Member Capito, however, was not satisfied with the lack of enforceability.

Senator Markey, on the other hand, expressed skepticism that setting strict timelines or page counts for NEPA filings would improve the permitting process. Ms. Harada agreed that targets should not “rigidly constrain” agencies from coming to the best solution.

Mr. Miller noted that, while it’s important to have a mechanism to resolve conflicts, it’s important for those conflicts not to drag out, and FAST-41 does include time limits associated with judicial review (FAST-41 projects are subject to a two-year statute of limitations under NEPA, instead of six).

5. Resources

Several senators, including Senator Markey and all of the witnesses commented on the importance of ensuring that federal agencies are sufficiently funded to handle the permitting process. Ms. Harada and Mr. Miller both pointed out the need for the Permitting Council also to be well resourced to facilitate project reviews, and they also discussed the need for improved technology to enhance the permitting process—some of which still takes place on paper forms.

* * *

Senior members of Gibson Dunn’s Public Policy Practice Group have more than 40 years of combined experience on Capitol Hill. Our team includes former congressional staff and Administration officials who have significant experience tracking, developing, and implementing infrastructure permitting reform legislation and regulations. We also have strong working relationships with key members of Congress and Biden administration officials focused on federal permitting reform.

Our team is available to assist clients through strategic counseling; real-time intelligence gathering on federal permitting reform legislation; developing and advancing policy positions; drafting legislative text; shaping messaging; and lobbying Congress. We also work with clients to craft regulatory comment letters; advocate before executive branch agencies; and navigate legislative and regulatory changes to federal infrastructure permitting laws.

_____________________

[1] The FAST-41 program was created in Title 41 of the Fixing America’s Surface Transportation (“FAST”) Act of 2015, Pub. L. No. 114–94. It created the Federal Permitting Improvement Steering Council and established a process under which sponsors of some of the largest infrastructure projects could apply to become “covered projects.” Once covered, a project receives certain benefits, including coordination of all participating agencies by a lead agency; a two-year statute of limitations under NEPA; and the opportunity for the Permitting Council executive director to resolve disputes between agencies. The permitting process for each covered project is tracked publicly at www.permits.performance.gov.

Gibson, Dunn & Crutcher’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 in the firm’s Public Policy or Environmental Litigation and Mass Tort practice groups, or the following authors:

Michael D. Bopp – Co-Chair, Public Policy Group, Washington, D.C. (+1 202-955-8256, [email protected])

Roscoe Jones, Jr. – Co-Chair, Public Policy Group, Washington, D.C. (+1 202-887-3530, [email protected])

David Fotouhi – Washington, D.C. (+1 202-955-8502, [email protected])

Amanda H. Neely – Washington, D.C. (+1 202-777-9566, [email protected])

Daniel P. Smith – Washington, D.C. (+1 202-777-9549, [email protected])

Decided May 18, 2023

Twitter, Inc. v. Taamneh, No. 21-1496
Gonzalez v. Google LLC, No. 21-1333

Today, a unanimous Supreme Court rejected claims that social-media companies could be held liable under the Anti-Terrorism Act for allegedly not doing “enough” to remove terrorist-related content from their services. In light of that ruling, the Court declined to address whether plaintiffs’ claims were barred by Section 230 of the Communications Decency Act.

Background: Under the Anti-Terrorism Act (ATA) a United States national who is injured by an “act of international terrorism” may recover treble damages. 18 U.S.C. § 2333(a). Victims may also seek recovery from “any person who aids and abets, by knowingly providing substantial assistance, or who conspires with the person who committed such an act of international terrorism.” Id. § 2333(d)(2).

In Twitter, Inc. v. Taamneh, family members of a victim of the 2017 ISIS shooting at the Reina nightclub in Istanbul, Turkey, sued Facebook, Twitter, and Google under the ATA for aiding and abetting the attack. Plaintiffs did not allege that the terrorists who carried out the attack used the companies’ services or that the companies were aware of any specific ISIS accounts tied to the attack. Despite the extensive measures the companies take to block and remove terrorist accounts and terrorist content, plaintiffs alleged that the companies violated the ATA by not doing more.

The district court rejected plaintiffs’ claims, because (1) plaintiffs failed to plausibly allege that the defendants assisted committing the particular attack at issue and (2) it is not enough to allege that the defendants provided general assistance to a terrorist organization. The Ninth Circuit reversed, holding that allegations that a defendant assisted a “broader campaign of terrorism” are enough, even absent allegations that the defendant assisted the particular attack at issue.

Gonzalez v. Google LLC involves substantially similar allegations asserted by family members and the estate of a victim of the 2015 ISIS attacks in Paris. The trial court dismissed plaintiffs’ claims as barred by Section 230 of the Communications Decency Act of 1996, 47 U.S.C. § 230(c)(1), which protects websites and other “interactive computer service” providers from claims based on third-party content, and the Ninth Circuit affirmed.

Issues:

Taamneh: Whether a defendant that provides generic, widely available services to all its numerous users and “regularly” works to detect and prevent terrorists from using those services “knowingly” provided substantial assistance under Section 2333 merely because it allegedly could have taken more “meaningful” or “aggressive” action to prevent such use.

Gonzalez: Whether Section 230 applies to recommendations of third-party content.

Court’s Holdings:

Taamneh: No. Section 2333 requires allegations that the defendant consciously, voluntarily, and culpably participated in the terrorist act at issue in such a way as to help make it succeed.

Gonzalez: Given the overlap with the allegations in Taamneh, the Court declined to address the Section 230 issue and instead remanded for consideration in light of Taamneh.

“[T]he fundamental question of aiding-and-abetting liability [is]: Did defendants consciously, voluntarily, and culpably participate in or support the relevant wrongdoing? … [T]he answer in this case is no.”

Justice Thomas, writing for the Court

Gibson Dunn represented Meta Platforms, Inc. as Respondent Supporting Petitioner in Taamneh and Amicus in Gonzalez.

What It Means:

In Taamneh, the Court refused to expand aiding-and-abetting liability under Section 2333(d)(2) beyond the traditional, common-law understandings of aiding and abetting.
Liability under Section 2333(d)(2) is limited to defendants who “consciously and culpably” participate in the specific act of international terrorism that injured the plaintiffs. Although that requirement does not always demand “a strict nexus,” “the more attenuated the nexus, the more courts should demand that plaintiffs show culpable participation though intentional aid that substantially furthered the tort.”
Today’s opinion also underscores that providing goods or services to the general public should not itself give rise to aiding-and-abetting liability, even if the provider may become aware that its goods or services are being put to illicit ends. As the Court emphasized, imposing liability based on an alleged failure to act requires the plaintiff to make a heightened showing of assistance and scienter.
The Court also concluded that “[t]he mere creation of” social-media services “is not culpable.”
The Court’s decision to vacate and remand in Gonzalez without addressing Section 230 returns questions about the scope, interpretation, and application of Section 230 to the courts of appeals, which have developed an extensive body of cases construing and applying Section 230 since the statute was enacted in 1996.

The Court’s opinion is available here and here.

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

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 [email protected]	Allyson N. Ho +1 214.698.3233 [email protected]	Julian W. Poon +1 213.229.7758 [email protected]
Lucas C. Townsend +1 202.887.3731 [email protected]	Bradley J. Hamburger +1 213.229.7658 [email protected]	Brad G. Hubbard +1 214.698.3326 [email protected]

Related Practice: Litigation

Reed Brodsky +1 212.351.5334 [email protected]	Theane Evangelis +1 213.229.7726 [email protected]	Veronica S. Moyé +1 214.698.3320 [email protected]
Helgi C. Walker +1 202.887.3599 [email protected]

Related Practice: Media, Entertainment and Technology

Scott A. Edelman
+1 310.557.8061
[email protected]

Kevin Masuda
+1 213.229.7872
[email protected]

Benyamin S. Ross
+1 213-229-7048
[email protected]

Related Practice: Privacy, Cybersecurity and Data Innovation

Ahmed Baladi +33 (0)1 56 43 13 50 [email protected]	S. Ashlie Beringer +1 650.849.5327 [email protected]	Jane C. Horvath +1 202.955.8505 [email protected]
Alexander H. Southwell +1 212.351.3981 [email protected]

Related Practice: White Collar Defense and Investigations

Stephanie Brooker +1 201.887.3502 [email protected]	Nicola T. Hanna +1 213.229.7269 [email protected]	Chuck Stevens +1 415.393.8391 [email protected]
F. Joseph Warin +1 202.887.3609 [email protected]

Decided May 18, 2023

Andy Warhol Foundation for the Visual Arts v. Goldsmith, No. 21-869

Today, the Supreme Court held 7-2 that the fact that a secondary work of art that incorporates copyrighted source material conveys a distinct meaning or message is not sufficient to render the secondary work transformative for purposes of the fair use analysis.

Background: Photographer Lynn Goldsmith licensed a black and white photograph of Prince to Vanity Fair for use as an artist’s reference in its November 1984 issue. The artist Vanity Fair chose, Andy Warhol, cropped the photograph, silkscreened it onto multiple canvases, and layered each canvas with different brightly colored paints. In all, Warhol created four drawings and 12 silkscreens from the photograph, one of which Vanity Fair ultimately published. After Prince’s death in 2016, the Andy Warhol Foundation licensed one of Warhol’s other silkscreened Prince images to Condé Nast for a special tribute issue. When Goldsmith asserted that Warhol’s image infringed her copyright, the Foundation sued her for a declaration that Warhol’s Prince series was protected under the fair use doctrine. Goldsmith countersued for copyright infringement. The district court held that the images were protected fair use because Warhol transformed Goldsmith’s original photograph to convey a different meaning. The Second Circuit reversed, cautioning that the addition of new meaning was not necessarily transformative.

Issue: Is a work of art sufficiently transformative for purposes of the fair use doctrine when it conveys a different meaning or message from the source material?

Court’s Holding:

No. That a work of art adds a new meaning or message to the source material is not sufficient to render that work transformative—courts must also consider the purpose and commercial nature of both the source material and the secondary work.

“Many secondary works add something new. That alone does not render such uses fair.”

Justice Sotomayor, writing for the Court

What It Means:

The decision is the first time the Supreme Court has addressed fair use in the context of visual art. The Court addressed only the first fair use factor, namely, “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” 17 U.S.C. § 107(1). For this factor, the Court confirmed that uses that have a further purpose or different character can be “transformative,” but clarified that the degree of difference must be balanced against the commercial nature of the use.
The Court explained that if the secondary use shares the same or similar purpose as the source material and is of a commercial nature, the factor is likely to weigh against fair use “absent some other justification for copying.” Slip op. 20. For example, the purpose of Warhol’s Soup Can series was “to comment on consumerism rather than advertise soup,” and thus served “a completely different purpose” than the original Campbell’s Soup label. Id. at 27. Here, in contrast, “portraits of Prince used to depict Prince in magazine stories about Prince . . . share substantially the same purpose” and “the copying use is of a commercial nature.” Id. at 12–13.
The Court limited its holding in Campbell v. Acuff-Rose Music, Inc., 510 U. S. 569 (1994), which upheld fair use in the context of musical parody. The Court explained that Campbell “cannot be read to mean that § 107(1) weighs in favor of any use that adds some new expression, meaning or message.” Slip op. 28. By limiting the availability of the fair use defense for secondary works that merely claim some further purpose or different character, the Court thus placed a premium on incentivizing and protecting original creation.
The Court’s decision could create new avenues to allege infringement by secondary works that build on or reference other works, although the Court emphasized that its analysis was “limit[ed]” to Warhol’s “commercial licensing of Orange Prince to Condé Nast.” Slip op. 21.

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 Supreme Court. Please feel free to contact the following practice leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 [email protected]	Allyson N. Ho +1 214.698.3233 [email protected]	Julian W. Poon +1 213.229.7758 [email protected]
Lucas C. Townsend +1 202.887.3731 [email protected]	Bradley J. Hamburger +1 213.229.7658 [email protected]	Brad G. Hubbard +1 214.698.3326 [email protected]

Related Practice: Intellectual Property

Kate Dominguez +1 212.351.2338 [email protected]	Y. Ernest Hsin +1 415.393.8224 [email protected]
Josh Krevitt +1 212.351.4000 [email protected]	Jane M. Love, Ph.D. +1 212.351.3922 [email protected]

Related Practice: Fashion, Retail and Consumer Products

Howard S. Hogan
+1 202.887.3640
[email protected]

Decided May 18. 2023

Amgen Inc. et al. v. Sanofi et al., No. 21-757

Today, the Supreme Court unanimously held that the Patent Act’s enablement requirement is satisfied only when a patent’s specification allows persons skilled in the art to make and use the full scope of the invention without more than a “reasonable” amount of experimentation under the circumstances.

Background: Amgen and Sanofi produce antibody medications to treat high LDL cholesterol. In 2011, each party obtained a patent covering the specific antibody used in its drugs. The antibodies in the drugs work by preventing a protein from interfering with the body’s natural regulation of LDL cholesterol. In 2014, Amgen obtained two patents that covered not only 26 specifically listed antibodies by their amino acid sequences, but also the “entire genus” of antibodies that performs this function—a claim that arguably covers millions of antibodies. Amgen then sued Sanofi for patent infringement.

Sanofi argued that the relevant claims were invalid because they did not satisfy the enablement requirement of the Patent Act, which requires a patent specification to describe “the manner and process of making and using” the invention in such a way “as to enable any person skilled in the art to which it pertains . . . to make and use the same.” 35 U.S.C. § 112(a). According to Sanofi, the claims for the antibodies beyond the 26 specifically listed essentially required scientists to engage in a trial-and-error process of discovery. After lengthy proceedings, the district court agreed, and the Federal Circuit affirmed.

Issue: Where a patent claims an entire class of processes, machines, manufactures, or compositions of matter, must the patent specification enable a person skilled in the art to make and use the entire class?

Court’s Holding:

Yes. To satisfy the Patent Act’s enablement requirement, a patent’s specification must enable the full scope of the invention as defined by the patent’s claims, subject to a reasonable amount of adaptation or experimentation.

“[T]he specification must enable the full scope of the invention as defined by its claims. The more one claims, the more one must enable.”

Justice Gorsuch, writing for the Court

What It Means:

The Patent Act’s enablement requirement is not satisfied when a patent claims a broad class but its specification requires undue experimentation or trial-and-error discovery to make and use the entire class.
The Court stopped short of requiring that a patent specification need always describe with particularity how to make and use every embodiment within a claimed class. In some cases, it may be sufficient to provide an example that discloses a general quality running through the class.
The Court stated that a specification is not necessarily inadequate simply because it involves some measure of adaptation or testing, but such experimentation must be reasonable. Reasonableness will depend on the nature of the invention and the underlying art, meaning that courts will likely make this determination on a case-by-case basis.
Overall, the decision reinforces the enablement requirement as a defense to patent-infringement claims, and will likely incentivize more detailed specifications in patent applications.

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 Supreme Court. Please feel free to contact the following practice leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 [email protected]	Allyson N. Ho +1 214.698.3233 [email protected]	Julian W. Poon +1 213.229.7758 [email protected]
Lucas C. Townsend +1 202.887.3731 [email protected]	Bradley J. Hamburger +1 213.229.7658 [email protected]	Brad G. Hubbard +1 214.698.3326 [email protected]

Related Practice: Intellectual Property

Kate Dominguez +1 212.351.2338 [email protected]	Y. Ernest Hsin +1 415.393.8224 [email protected]
Josh Krevitt +1 212.351.4000 [email protected]	Jane M. Love, Ph.D. +1 212.351.3922 [email protected]

Unfair business practices encompass fraud, misrepresentation, and oppressive or unconscionable acts or practices by businesses, often against consumers. In California, individuals and specified governmental agencies are authorized to bring civil actions for unfair competition and to recover civil penalties or injunctive relief pursuant to the Unfair Competition Law (UCL) under Business and Professions Code Section 17200.

California’s Government Code authorizes the Attorney General, as a head of a state department, to investigate and prosecute actions concerning certain matters, including UCL violations. It also equips the Attorney General with certain investigatory tools, including pre-litigation subpoena power, to effectuate enforcement of the law.

Among the agencies authorized to prosecute UCL actions are city attorneys of cities with populations in excess of 750,000 and county counsel of any county within which a city has a population in excess of 750,000, as well as (in the case of San Francisco) city attorneys of a city and county. Although certain county counsel and city attorneys can bring UCL actions, prior to the passage and enactment of AB 2766, these entities were not afforded the same tools as the Attorney General and district attorneys to investigate possible unfair competition cases. AB 2766, enacted on January 1, 2023, amended Section 16759 of the Business and Professions Code to extend these same investigatory powers to city and county attorneys who are also authorized to bring UCL claims (subject to certain requirements).

Sponsors and supporters of the bill cited increased reports of consumer fraud and price gouging during the COVID-19 pandemic, which they claimed demonstrated a need for greater enforcement of California’s consumer protection laws.

Pre-Existing Relevant Law

There is a constellation of statutes that are relevant to enforcement of the UCL.

Business and Professions Code Section 17200 defines “unfair competition” to include any unlawful, unfair, or fraudulent business act or practice and any unfair, deceptive, untrue, or misleading advertising, and any act prohibited by the False Advertising Law, Business and Professions Code Section 17500 et seq. Accordingly, the UCL is a tool for enforcement relating to a wide range of consumer-facing business activity.

Government Code Section 11181 authorizes the heads of each state department to make investigations and prosecute actions concerning matters relating to the business activities and subjects under their jurisdiction; violations of any law or rule or order of the department; and such other matters as may be provided by law. In order to effectuate these investigations and actions, the law provides the heads of these departments with certain investigatory powers. Among these powers is the ability to promulgate interrogatories; the ability to issue subpoenas for the attendance of witnesses and the production of certain documents, testimony, or other materials, and the ability to inspect and copy those same documents and materials. With regard to the UCL specifically, the relevant “state department head” is the Attorney General.

But the Attorney General is not the only entity authorized to prosecute violations of the UCL. Under Business and Professions Code Section 17204, in addition to the Attorney General, actions under the UCL may be brought by a district attorney, a city attorney or county counsel, or an individual person who has suffered injury in fact and has lost money or property as a result of the unfair competition. In the case of city attorneys and county counsels of counties and cities with populations smaller than 750,000, consent from the district attorney is required to bring an action under the UCL. In counties and cities with populations larger than that number, no such consent is required. Thus, the only city attorneys with authority to independently bring actions under the UCL are those in San Jose, San Diego, and Los Angeles, and the only county counsel are those in San Diego County, Los Angeles County, and Santa Clara County (as the cities of San Diego, Los Angeles, and San Jose all have populations over 750,000).

In order to facilitate their investigation of violations of the UCL, district attorneys are granted the same investigative powers given to the Attorney General pursuant to Section 16759 of the Business and Professions Code, subject to certain safeguards. In particular, district attorneys’ investigations under this section must abide by the procedures laid out in the relevant sections of Government Code and are subject to the California Right to Financial Privacy Act.

Changes to the Law Under AB 2766

AB 2766 extended the same investigatory powers granted to the Attorney General and the district attorneys to the city attorneys and county counsel which are already authorized to bring UCL claims when these entities reasonably believe that there may have been a violation of the UCL.

Specifically, the new law:

Grants all of the powers that are granted to the Attorney General as the head of a state department to make investigations and prosecute actions regarding unfair competition laws (commencing with Business and Professions Code Section 17200) to the city attorney of any city having a population in excess of 750,000, to the county counsel of any county within which a city has a population in excess of 750,000, or to a city attorney of a city and county, when the city attorney or county counsel reasonably believes that there may have been a violation of the unfair competition laws;
Makes any action brought by a city attorney or county counsel pursuant to the bill, like an action brought by the Attorney General or district attorney, subject to the provisions of the “California Right to Financial Privacy Act” set forth in existing law; and
Clarifies that court orders sought pursuant to the bill shall be sought in the superior court of the county in which the district attorney, city attorney, or county counsel, who is seeking the order and authorized to bring an action pursuant to the bill, holds office.

AB 2766 amended Business and Professions Code section 16759—which previously provided district attorneys with pre-litigation investigatory authority for potential UCL actions—to expressly provide city attorneys and county counsel in large jurisdictions with the same pre-litigation investigative authority for suspected UCL violations. Based on the law’s population requirements, AB 2677 applies to legal authorities in San Diego City and County, Los Angeles City and County, Santa Clara County and San Jose, and San Francisco (which co-sponsored the bill).

Arguments For And Against AB 2766

AB 2766 garnered substantial support on both the Senate and Assembly floors (29 in favor versus 9 against and 57 in favor versus 15 against, respectively). This section will detail some highlights of the discourse regarding the bill in the Legislature prior to its passage.

Proponents of the law argued that “AB 2766 will bolster consumer protection enforcement efforts” and will “[e]nsur[e] a robust consumer protection investigatory framework to protect businesses that play by the rules.” Further, it will “ensure consistency in the UCL for those empowered to enforce [it].”

Opponents argued that the bill—particularly the subpoena power—”potentially infring[es] on the judicial due process rights of businesses, organizations and individuals in California,” and “makes businesses vulnerable to baseless fishing expeditions and political maneuvers, as standard necessary (sic) to issue a pre-litigation subpoena is disturbingly low.”

Supporters of the bill claimed that opponents’ concerns about overreaching were unfounded, as “important safeguards exist under current law to protect against overreach by a prosecutor,” which also apply under AB 2766. Specifically, the city attorneys and county counsels with new investigative authority are subject to the same parameters currently applied to district attorneys’ use of these investigatory powers in Section 16759, including the procedures laid out in the Government Code, and will also be subject to the California Right to Financial Privacy Act. This Act protects the confidential relationship between financial institutions and their customers by, in part, providing more procedural safeguards with respect to subpoenaing financial records. In addition, these city attorneys and county counsel are only granted these expanded investigatory powers when the city attorney or county counsel “reasonably believes that there may have been a violation of [the UCL].” Further, the recipient of the subpoena can refuse to comply, leaving it up to the prosecutor to go to court to compel production.

Potential Impacts of AB 2766

Proponents of AB 2766 claimed that complaints of UCL violations rose during the pandemic, necessitating the bolstering of UCL enforcement measures. In response, Assembly Member Brian Maienschein (D-San Diego) authored the bill after “work[ing] with numerous attorneys to identify solutions to strengthening consumer protection laws in California.” The bill was co-sponsored by the City and County of San Francisco, City of San Diego, County of Los Angeles, and County of Santa Clara.

Exactly how widely the new powers granted under the bill will be operationalized remains to be seen, but there are many indications from attorneys in the co-sponsoring cities and counties that they intend to use them widely. Following Governor Gavin Newsom’s signing of AB 2766 in September 2022, many public prosecutors lauded the legislation and publicly forecasted their offices’ plans to use the new investigative powers once the law took effect. Said San Francisco City Attorney David Chiu:

“During the pandemic we saw a troubling surge in price gouging, consumer fraud, and unfair business practices,” said San Francisco City Attorney David Chiu. “As our office continues to pursue bad actors that seek to defraud the public, this new law will give us more tools to better protect consumers and workers.”

Then-Los Angeles City Attorney Mike Feuer echoed this sentiment, stating:

“Time and again, we’ve successfully fought for hard-working Angelenos who’ve been ripped off—sometimes devastated—by unlawful business practices. Our office will be all the more impactful now that we have this key investigative tool, allowing us to get to the heart of scams and put a stop to them even faster.”

Acting Los Angeles County Counsel Dawyn Harrison, Santa Clara County Counsel James R. Williams, and San Diego City Attorney Mara W. Elliott also released similar statements.

Indeed, the San Francisco and San Diego City Attorneys’ offices have already begun utilizing their investigative powers in a highly public context—openly touting their initiation of an investigation into a home title locking business, which the city attorneys allege to be deceptive and predatory. Not only did the San Francisco City Attorney issue a press release proudly proclaiming that “[t]he subpoena [it issued] reflects an early use of city attorney’s authority under Assembly Bill 2766”–it coupled the announcement with a clear indication that the office was seeking to use its new power immediately to stop, and not just investigate, the target’s conduct, which the office labeled as “a scam, plain and simple.”

It is impossible to say with certainty that AB 2766 will result in increased numbers of UCL prosecutions by public prosecutors, as county counsel have possessed the power to prosecute UCL violations since the passage of SB 709 in 1991 and city attorneys since the passage of SB 1725 in 1974. However, AB 2766 is aligned with a general push toward broader power to prosecute and enforce the UCL since the advent of the statute. Most recently, the Supreme Court of California confirmed that local prosecutors’ power to enforce the UCL goes beyond their territorial jurisdictions, in lockstep with that of the Attorney General. (Abbott Lab’ys v. Superior Ct. of Orange Cnty. (2020) 9 Cal. 5th 642, 661.) Because of the relationship between Sections 17200 and 16759 of the Business and Professions Code, the new investigatory powers of city and county attorneys under AB 2766 also likely extend outside of local prosecutors’ jurisdictions, granting them the authority to investigate conduct that occurred elsewhere. This combination of greater authority to investigate UCL offenses, more expansive jurisdictional reach, and early signals from newly empowered city and county attorneys following the passage of AB 2766, point to the potential for a pronounced rise in aggressive UCL investigations by public prosecutors—particularly by city attorneys in California’s largest cities, which are already known for their frequent use of affirmative enforcement lawsuits on behalf of consumers.

The following Gibson Dunn lawyers prepared this client alert: Winston Chan, Michael Farhang, Douglas Fuchs, Nicola T. Hanna, Meredith Spoto, Chuck Stevens, Eric D. Vandevelde, Benjamin Wagner, and Debra Wong Yang.

Gibson Dunn has more than 250 white collar lawyers around the globe who are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any member of the firm’s U.S. White Collar Defense and Investigations or Anti-Corruption and FCPA practice groups below:

White Collar Defense and Investigations Group – United States:

Los Angeles
Michael H. Dore (+1 213-229-7652, [email protected])
Michael M. Farhang (+1 213-229-7005, [email protected])
Diana M. Feinstein (+1 213-229-7351, [email protected])
Douglas Fuchs (+1 213-229-7605, [email protected])
Nicola T. Hanna – Co-Chair (+1 213-229-7269, [email protected])
Poonam G. Kumar (+1 213-229-7554, [email protected])
Marcellus McRae (+1 213-229-7675, [email protected])
Eric D. Vandevelde (+1 213-229-7186, [email protected])
Debra Wong Yang (+1 213-229-7472, [email protected])
Meredith K. Spoto (+1 213-229-7060, [email protected])

San Francisco
Winston Y. Chan (+1 415-393-8362, [email protected])
Charles J. Stevens – Co-Chair (+1 415-393-8391, [email protected])
Michael Li-Ming Wong (+1 415-393-8333, [email protected])

Palo Alto
Benjamin Wagner (+1 650-849-5395, [email protected])

Washington, D.C.
Stephanie Brooker – Co-Chair (+1 202-887-3502, [email protected])
Courtney M. Brown (+1 202-955-8685, [email protected])
David P. Burns (+1 202-887-3786, [email protected])
John W.F. Chesley (+1 202-887-3788, [email protected])
Daniel P. Chung (+1 202-887-3729, [email protected])
M. Kendall Day (+1 202-955-8220, [email protected])
David Debold (+1 202-955-8551, [email protected])
Michael S. Diamant (+1 202-887-3604, [email protected])
Gustav W. Eyler (+1 202-955-8610, [email protected])
Richard W. Grime (+1 202-955-8219, [email protected])
Scott D. Hammond (+1 202-887-3684, [email protected])
George J. Hazel (+1 202-887-3674, [email protected])
Judith A. Lee (+1 202-887-3591, [email protected])
Adam M. Smith (+1 202-887-3547, [email protected])
Patrick F. Stokes – Co-Chair (+1 202-955-8504, [email protected])
Oleh Vretsona (+1 202-887-3779, [email protected])
F. Joseph Warin – Co-Chair (+1 202-887-3609, [email protected])
Amy Feagles (+1 202-887-3699, [email protected])
David C. Ware (+1 202-887-3652, [email protected])
Ella Alves Capone (+1 202-887-3511, [email protected])
Nicholas U. Murphy (+1 202-777-9504, [email protected])
Melissa Farrar (+1 202-887-3579, [email protected])
Nicole Lee (+1 202-887-3717, [email protected])
Jason H. Smith (+1 202-887-3576, [email protected])
Pedro G. Soto (+1 202-955-8661, [email protected])

New York
Zainab N. Ahmad (+1 212-351-2609, [email protected])
Reed Brodsky (+1 212-351-5334, [email protected])
Mylan L. Denerstein (+1 212-351-3850, [email protected])
Barry R. Goldsmith (+1 212-351-2440, [email protected])
Karin Portlock (+1 212-351-2666, [email protected])
Mark K. Schonfeld (+1 212-351-2433, [email protected])
Orin Snyder (+1 212-351-2400, [email protected])
Alexander H. Southwell (+1 212-351-3981, [email protected])
Brendan Stewart (+1 212-351-6393, [email protected])

Denver
Kelly Austin – Co-Chair (+1 303-298-5980, [email protected])
Ryan T. Bergsieker (+1 303-298-5774, [email protected])
Robert C. Blume (+1 303-298-5758, [email protected])
John D.W. Partridge (+1 303-298-5931, [email protected])
Laura M. Sturges (+1 303-298-5929, [email protected])

Houston
Gregg J. Costa (+1 346-718-6649, [email protected])

Gibson Dunn is pleased to announce the establishment of its Child and Forced Labor Risks Global Task Force to help our clients prevent illegal child and forced labor in their workforce, evaluate their supply chains, and respond to investigations and litigation arising from illegal child labor and forced labor allegations.

Governments around the world are increasing their scrutiny of illegal child labor and forced labor. In the United States, the Department of Labor and Congress have recently launched investigations of companies’ child labor policies and compliance practices that pose substantial legal, financial, and reputational risks for those companies. Congress also has enacted statutes to prevent forced labor globally and recently questioned several companies regarding allegations of forced labor in their supply chains. In Europe, laws combating modern slavery and child labor are emerging across individual jurisdictions, with potential for additional legislation that will impose mandatory human rights and due diligence obligations on certain corporations with a European commercial footprint. Similarly, governments in the Asia Pacific region are grappling with ways to address the issue through a combination of legislation and enforcement.

The Gibson Dunn team offers holistic compliance and response strategies to help our clients implement best-of-class policies related to forced labor and illegal child labor and to ensure they are prepared to respond effectively to civil, criminal, or congressional investigations or litigation relating to alleged forced labor or illegal child labor in their workforce or their supply chains.

Working together, our Labor and Employment, White Collar Defense and Investigations, Congressional Investigations, Crisis Management, Public Policy, Environmental Social Governance (ESG), Securities Regulation and Corporate Governance, Transnational Litigation, International Trade, and Litigation practice groups provide a range of services to root out and prevent forced labor and illegal child labor in clients’ workforce and help clients emerge stronger after investigations and enforcement actions.

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This document is for informational purposes only and does not, and is not intended to, constitute legal advice or create an attorney-client relationship. You should contact a Gibson Dunn attorney directly to see if they are able to provide legal advice with respect to a particular legal matter.

Gibson Dunn’s multidisciplinary Child Forced Labor Risks Global Task Force ([email protected]) members are available to assist clients in their efforts to prevent illegal child labor in their own and their suppliers’ workforce and to guide clients through government investigations and litigation based on allegations of illegal child labor or forced labor. Please contact the Gibson Dunn lawyer with whom you usually work, the Task Force, or any of the following authors for additional information about how we may assist you.

Congressional Investigations and Public Policy:
Michael D. Bopp – Washington, D.C. (+1 202-955-8256, [email protected])
Roscoe Jones, Jr. – Washington, D.C. (+1 202-887-3530, [email protected])
Amanda H. Neely – Washington, D.C. (+1 202-777-9566, [email protected])

Environmental Social Governance (ESG):
Susy Bullock – London (+44 (0) 20 7071 4283, [email protected])
Perlette Michèle Jura – Los Angeles (+1 213-229-7121, [email protected])
Robert Spano – London (+44 (0) 20 7071 4902, [email protected])

International Trade:
Adam M. Smith – Washington, D.C. (+1 202-887-3547, [email protected])
Christopher T. Timura – Washington, D.C. (+1 202-887-3690, [email protected])

Labor and Employment:
Eugene Scalia – Washington, D.C. (+202-955-8210, [email protected])
Jason C. Schwartz – Washington, D.C. (+1 202-955-8242, [email protected])
Katherine V.A. Smith – Los Angeles (+1 213-229-7107, [email protected])

Litigation and Transnational Litigation:
Perlette Michèle Jura – Los Angeles (+1 213-229-7121, [email protected])
William E. Thomson – Los Angeles (+1 213-229-7891, [email protected])

Securities Regulation and Corporate Governance:
Lori Zyskowski – New York (+1 212-351-2309, [email protected])

White Collar Defense and Investigations:
Michael S. Diamant – Washington, D.C. (+1 202-887-3604, [email protected])
Oliver D. Welch – Hong Kong (+852 2214 3716, [email protected])