Decided July 1, 2021
Americans for Prosperity Foundation v. Bonta, No. 19-251, consolidated with Thomas More Law Center v. Bonta, No. 19-255
Today, the Supreme Court held 6-3 that California’s requirement that non-profit organizations disclose their donor lists unconstitutionally burdens those organizations’ expressive association rights, in violation of the First Amendment.
Background:
The California Attorney General requires private charities that operate or fundraise in California to register annually with the state. Registration entails filing various tax forms, including Schedule B to IRS Form 990—which requires charitable organizations to list the names and addresses of contributors that donated more than $5,000 or 2% of the organization’s budget during the tax year. California informed charities that their Schedule B disclosures would be kept confidential; in reality, however, California law required public disclosure of these documents until 2016. The state’s asserted justification for the disclosure requirement is a law-enforcement interest in regulating non-profit activity. Two non-profit organizations challenged the disclosure requirement as unconstitutional, arguing that it chills expressive association by exposing donors to harassment and that less-restrictive means are available to California to further its asserted interest. The Ninth Circuit upheld the disclosure requirement, holding that “exacting” scrutiny—not “strict” scrutiny—applied, and the requirement was sufficiently related to an important government interest.
Issue:
(1) Whether exacting scrutiny or strict scrutiny applies to disclosure requirements that burden nonelectoral, expressive association rights; and (2) whether California’s disclosure requirement violates charities’ and their donors’ freedom of association and speech facially or as applied to Petitioners.
Court’s Holding:
(1) The Court’s holding on the standard of review was fractured: A three-Justice plurality stated that disclosure laws like California’s must satisfy exacting scrutiny. While one Justice in the majority would have applied strict scrutiny, two others declined to resolve the issue. (2) A majority of the Court held that California’s law is facially unconstitutional under exacting scrutiny. California’s interest in administrative convenience is weak, and a blanket disclosure requirement for organizations not suspected of wrongdoing is not narrowly tailored to this interest.
“There is a dramatic mismatch . . . between the interest that the Attorney General seeks to promote and the disclosure regime that he has implemented in service of that end.”
Chief Justice Roberts, writing for the Court
What It Means:
- The Court’s ruling protects the sensitive donor information of non-profit organizations, ensuring that individuals may contribute to charitable organizations without fear of harassment from compelled disclosure. The ruling also calls into question the constitutionality of similar donor disclosure requirements in the federal “For the People Act” reintroduced in January 2021, and which has passed in the House and currently awaits a vote in the Senate.
- Today’s decision may have implications for mandatory disclosure requirements beyond the associational context. In writing for the Court, the Chief Justice emphasized that “[t]he ‘government may regulate in the [First Amendment] area only with narrow specificity,’ . . . and compelled disclosure regimes are no exception.” Op. 10. The Court’s holding suggests that other compelled disclosure regimes that lack narrow tailoring could be challenged under the First Amendment. It remains to be seen how the Court will apply today’s decision to other compelled disclosures.
- The Court’s decision continues its trend of affording robust constitutional protection to non-profit organizations, but leaves the standard of review for compelled-speech cases undefined. The Court has often employed strict scrutiny in assessing other First Amendment free-speech and religious liberty-challenges brought by non-profit organizations, and the Court could find only a plurality for the “exacting scrutiny” standard of review applied here. Other members of the Court indicated that government regulation of a wide range of protected First Amendment activity generally must pass strict scrutiny.
- A plurality of the Court applied Buckley v. Valeo, 424 U.S. 1 (1976)—which applied exacting scrutiny to limits on expenditures by political campaigns—to the broader context of compelled speech, and did not cabin it to the context of elections.
- In an opinion by Justice Sotomayor, three Justices dissented on the ground that California’s disclosure requirement did not burden the donors’ First Amendment rights, and so no tailoring of the law was required.
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
| Allyson N. Ho +1 214.698.3233 [email protected] | Mark A. Perry +1 202.887.3667 [email protected] | Lucas C. Townsend +1 202.887.3731 [email protected] | Bradley J. Hamburger +1 213.229.7658 [email protected] |
| Thomas G. Hungar +1 202.887.3784 [email protected] | Douglas R. Cox +1 202.887.3531 [email protected] | Jason J. Mendro +1 202.887.3726 [email protected] |
Century City partner Scott Edelman and Los Angeles associate Jillian London are the authors of “Judge ignored facts, law while taking knife to assault weapons ban,” [PDF] published by the Daily Journal on June 28, 2021.
Washington, D.C. partner Judith Alison Lee and associates Audi Syarief and Claire Yi are the authors of “United States sanctions against Myanmar’s military conglomerates” [PDF] published by Financier Worldwide in June 2021.
Decided June 29, 2021
PennEast Pipeline Co. v. New Jersey, No. 19-1039
Today, the Supreme Court held in a 5-4 decision that the Natural Gas Act authorizes a private party who has obtained federal government approval to exercise eminent domain power along a federally approved pipeline route to sue a State to condemn state land.
Background:
The Natural Gas Act, 15 U.S.C. § 717 et seq., delegates the federal government’s power to take property by eminent domain to private parties that have been issued a certificate of public convenience and necessity by the Federal Energy Regulatory Commission (FERC). PennEast Pipeline obtained a certificate from FERC to build an interstate natural gas pipeline and sued New Jersey under the Natural Gas Act to condemn properties that the State owned or had an easement over along the pipeline route. New Jersey sought to dismiss the condemnation suits for lack of jurisdiction, citing the State’s sovereign immunity under the Eleventh Amendment and PennEast’s failure to satisfy the jurisdictional requirements of the Natural Gas Act. The district court ruled in favor of PennEast. The Third Circuit reversed, holding that the Natural Gas Act does not clearly delegate to private parties the federal government’s exemption from a State’s sovereign immunity.
Issue:
Does the Natural Gas Act authorize private parties to exercise the federal government’s eminent domain power to condemn state land in which a State claims an interest?
Court’s Holding:
Yes. The Natural Gas Act delegates to private parties the federal government’s power to take property by eminent domain, and States do not have sovereign immunity from the exercise of that power.
“Since the founding, the Federal Government has exercised its eminent domain authority through both its own officers and private delegatees. And it has used that power to take property interests held by both individuals and the States. Section 717f(h) is an unexceptional instance of this established practice.”
Chief Justice Roberts, writing for the Court
What It Means:
- The Supreme Court’s decision prevents States from having a de facto veto over interstate pipelines found to be in the public interest and authorized by the Federal Energy Regulatory Commission. The Court explained that States consented to the exercise of federal eminent domain power in the plan of the Constitutional Convention and consequently “have no immunity left to waive or abrogate when it comes to condemnation suits by the Federal Government and its delegatees.”
- The Court explained that Congress added the eminent domain authority to “remedy” a “defect” in the Natural Gas Act that left pipeline certificate holders with “only an illusory right to build” pipelines authorized by the federal government.
- In dissent, Justice Barrett—joined by Justices Thomas, Kagan, and Gorsuch—emphasized that “States did not surrender their sovereign immunity to suits authorized pursuant to Congress’ power to regulate interstate commerce” and “no historical evidence” supports a different result for private condemnation suits against States.
- Justice Gorsuch, joined by Justice Thomas, wrote a separate dissenting opinion to clarify that a State’s structural immunity, waivable by consent, is distinct from its Eleventh Amendment immunity.
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
| Allyson N. Ho +1 214.698.3233 [email protected] | Mark A. Perry +1 202.887.3667 [email protected] | David Debold +1 202.955.8551 [email protected] |
| Lucas C. Townsend +1 202.887.3731 [email protected] | Bradley J. Hamburger +1 213.229.7658 [email protected] |
Related Practice: Energy
| Michael P. Darden +1 346.718.6789 [email protected] | Anna P. Howell +44 (0) 20 7071 4241 [email protected] | Brad Roach +65 6507 3685 [email protected] |
| William S. Scherman +1 202.887.3510 [email protected] |
Decided June 29, 2021
Minerva Surgical Inc. v. Hologic Inc., No. 20-440
Today, the Supreme Court upheld the doctrine of assignor estoppel in patent cases, concluding in a 5-4 decision that a patent assignor cannot, with certain exceptions, subsequently challenge the patent’s validity.
Background:
Csaba Truckai co-invented the NovaSure system, a medical device that uses radiofrequency energy to perform endometrial ablations. In 1998, Truckai and his four co-inventors filed a patent application covering the NovaSure system and later assigned their interest in the patent application and any future continuing applications to Truckai’s company, Novacept. Truckai sold Novacept to Cytyc Corporation in 2004, and Hologic acquired Cytyc in 2007.
In 2008, Truckai founded Minerva and developed a new device that uses thermal energy, rather than radiofrequency energy, to perform endometrial ablations. In 2015, Hologic sued Minerva, alleging that Minerva’s device infringed one of its NovaSure patents. The district court held that the doctrine of assignor estoppel barred Minerva from challenging the patent’s validity. The Federal Circuit affirmed in relevant part, declining to abrogate the doctrine, which federal courts have applied since 1880.
Issue:
May a defendant in a patent infringement action who assigned the patent, or is in privity with an assignor of the patent, have a defense of invalidity heard on the merits?
Court’s Holding:
Sometimes. The doctrine of assignor estoppel survives, although it applies only when the invalidity defense conflicts with an explicit or implicit representation the assignor made in assigning her patent rights. Absent that kind of inconsistency, a defendant in a patent infringement action who assigned the patent may have a defense of invalidity heard on the merits.
What It Means:
- This decision marks the first time that the Supreme Court has directly considered the viability of the assignor estoppel doctrine (the Supreme Court implicitly approved of the doctrine in 1924), and it largely secures the interests of assignees who have relied on the unanimous consensus of federal courts upholding this longstanding doctrine.
- However, the Court indicated that the doctrine may have been applied too broadly in the past, and that assignors should be estopped from contesting validity only when they have made a representation regarding validity as part of the assignment.
- The Court provided three examples of when an assignor has an invalidity defense: (1) when an employee assigns to her employer patent rights to future inventions before she can possibly make a warranty of validity as to specific patent claims, (2) when a later legal development renders irrelevant the assignor’s warranty of validity at the time of assignment, and (3) when the patent claims change after assignment and render irrelevant the assignor’s validity warranty.
- The Court reasoned that assignor estoppel furthers patent policy goals: The doctrine gives assignees confidence in the value of what they have purchased by preventing assignors (who are “especially likely infringers because of their knowledge of the relevant technology”) from raising invalidity defenses. The Court explained that this confidence will raise the price of patent assignments and in turn may encourage invention.
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
| Allyson N. Ho +1 214.698.3233 [email protected] | Mark A. Perry +1 202.887.3667 [email protected] | Lucas C. Townsend +1 202.887.3731 [email protected] |
| Bradley J. Hamburger +1 213.229.7658 [email protected] |
Related Practice: Intellectual Property
| Kate Dominguez +1 212.351.2338 [email protected] | Josh Krevitt +1 212.351.4000 [email protected] | Y. Ernest Hsin +1 415.393.8224 [email protected] |
| Jane M. Love, Ph.D. +1 212.351.3922 [email protected] |
Introduction and Overview
On 25 June 2021, the UK Supreme Court rendered its judgment in General Dynamics United Kingdom Limited v The State of Libya.[1] This much anticipated decision provides important guidance concerning the interaction of State immunity principles with the rules applicable to the service of enforcement proceedings on States. The decision has significant practical consequences for the enforcement of arbitral awards against States, with the dissenting opinion of the minority making plain the difficulty faced by the courts in seeking to balance, on the one hand, the potentially competing considerations of respecting the arbitral process with, on the other hand, the traditional privileges accorded to States when responding to English proceedings.
By a majority of 3:2 (Lord Lloyd-Jones, Lady Arden and Lord Burrows comprising the majority), the Supreme Court allowed Libya’s appeal and concluded that Section 12 of the State Immunity Act 1978 (the “SIA”) requires service of either the arbitration claim form or the enforcement order made by the English court (depending on the circumstances) in order to properly institute arbitration enforcement proceedings against a State. Such service must be effected via the UK’s Foreign, Commonwealth and Development Office (the “FCDO”)[2] and the State must then respond within two months. The majority found that this formal service procedure is mandatory and cannot be dispensed with. In doing so, the majority reversed the Court of Appeal’s 2019 judgment which had signalled greater flexibility in the interpretation of the strict rules on service.
Background
Arbitration Award
The arbitral award in question was rendered in relation to a dispute between General Dynamics and Libya arising from a contract for the supply of communication systems to Libya. The dispute was referred to arbitration before an ICC tribunal seated in Geneva in which Libya fully participated. On 5 January 2016, the tribunal rendered an award in excess of £16 million in favour of General Dynamics, together with interest and costs (the “Award”). Libya has not paid any sums under the Award.
The Enforcement Order and Set Aside Proceedings
General Dynamics applied to the English courts to enforce the Award in the United Kingdom. Civil Procedure Rules (“CPR”) Rule 62.18, which governs applications for permission to enforce most arbitration awards,[3] permits such applications to be made without notice in an arbitration claim form.
Following an ex parte hearing in July 2018, an order was made by Mr Justice Teare (i) granting permission to enforce the Award; and (ii) dispensing with service of both the arbitration claim form and the enforcement order itself, pursuant to CPR Rules 6.16 and 6.28 (which allow the court to dispense with a service requirement in “exceptional circumstances”). Teare J found that exceptional circumstances existed due to the practical difficulties of serving Libya at the time, including because there were two competing governments as well as a state of civil unrest (which had led to the closure of the British Embassy, among other things). The Court found that there was uncertainty as to the time which would be required to effect service through the FCDO, and doubts as to whether this was possible at all.
Subsequently, Libya applied to set aside those parts of Teare J’s order dispensing with service. Libya relied upon Section 12(1) of the SIA, which requires service through the FCDO of “any writ or other document required to be served for instituting proceedings against a State”. Section 12(2) of the SIA further provides that a State cannot be required to “enter[] an appearance [in]” the proceedings until the expiry of two months after service via the FCDO.
Libya’s set aside application was granted via a decision of Lord Justice Males on 18 January 2019.[4] General Dynamics appealed to the Court of Appeal.
The Court of Appeal Proceedings
In a decision dated 3 July 2019, the Court of Appeal restored Teare J’s finding that Section 12(1) of the SIA did not require service of either the arbitration claim form or the order permitting enforcement.[5] The Court of Appeal’s reasoning was that: (i) although the arbitration claim form is a document instituting proceedings under Section 12(1), CPR Rule 62.18 does not contain a requirement to serve the arbitration claim form; and (ii) while CPR Rule 62.18(8)(b) requires an order permitting the enforcement of an arbitral award to be served, such an order is not the document “instituting” the proceedings and therefore does fall within the remit of Section 12(1).
The Court of Appeal also found that, because there is no statutory requirement to serve either the arbitration claim form or the enforcement order, the court could dispense with service under CPR Rules 6.16 and/or 6.28. The Court of Appeal agreed with Teare J’s exercise of discretion in dispensing with the requirement for service of the order permitting enforcement of the award on the basis that there were “exceptional circumstances” (a discretion that Males LJ had also said he would have exercised, had he found that he had the power to do so[6]). The Court of Appeal essentially approved the findings of Teare J and Males LJ regarding the dangerous and complex circumstances in Libya.
Libya appealed the Court of Appeal’s judgment to the Supreme Court.
The Supreme Court Judgment
The majority allowed Libya’s appeal, essentially on three bases.
Firstly, the majority focused on “the importance of the defendant state receiving notice of the proceedings against it so that it had adequate time and opportunity to respond to proceedings of whatever nature which affected its interests”.[7] As such, it held that, in cases where Section 12(1) of the SIA applies, the procedure for service on a defendant State through the FCDO is mandatory and exclusive.[8]
The minority, on the other hand, adopted a purposive construction of Section 12 of the SIA, noting that Parliament intended the applicability of Section 12(1) to depend on what was required by the relevant court rules.[9] In their view, this interpretation would give effect to the intention of the legislature to prevent States avoiding service (and thus obstructing the enforcement of awards),[10] and to hold States to their legal obligations.[11] The minority also drew attention to the potential chilling effect of the majority’s conclusion, as parties might be deterred from dealing with States (thereby restricting those States’ ability to operate in the global marketplace).[12] The minority also favoured an approach promoting “speedy and effective enforcement of arbitral awards”, and a “restrictive doctrine of state immunity”, particularly where a State has agreed to and participated in the arbitral process.[13]
Secondly, the majority concluded that there is no power to dispense with service of an enforcement order under CPR Rules 6.16 and/or 6.28,[14] holding that the CPR cannot override the SIA and give the court a discretion to dispense with a statutory requirement found in the SIA.
Finally, the majority was not persuaded by General Dynamics’ arguments on the basis of Article 6 (right to a fair trial) of the European Convention on Human Rights (the “ECHR”). General Dynamics argued that Section 12(1) of the SIA should be construed, pursuant to Section 3 of the Human Rights Act 1998 (the “HRA”)[15] and/or common law principles, to allow the court to make alternative directions as to service in “exceptional circumstances”.[16]
The majority rejected this argument, holding that the procedure prescribed by Section 12(1) of the SIA (i) is a proportionate mechanism for pursuing the legitimate objective of a workable means of service and (ii) conforms with the requirements of international law and comity, in circumstances of considerable international sensitivity. It therefore did not consider the procedure to infringe Article 6 of the ECHR, or to engage the common law principle of legality.[17]
Comment
The majority’s decision has now settled that there must always be a document that is “required to be served for instituting proceedings against a State”. In the context of enforcing arbitral awards, that document will either be the claim form (if the court requires it to be served) or the enforcement order itself. Further, such service must be via the FCDO (the FCDO, however, has no general discretion to decline to effect service).[18]
Whilst the Supreme Court’s decision provides welcome clarification of the service requirements in relation to States and the interpretation of Section 12 of the SIA, the reservations expressed in the dissenting judgment make plain that the decision will not be universally celebrated. Diplomatic service via the FCDO is often far from straightforward, particularly where it involves a recalcitrant State facing a substantial arbitral award. Lord Stephens highlighted the potential for the majority’s decision to embolden such States, with the potential for them to obtain “de facto” immunity, where they would otherwise not have it, by “being obstructive about service”.[19] At a minimum, the decision opens the door for further delays and prejudice to award creditors, thereby potentially undermining the arbitral process even where the State against which enforcement is sought had already expressly consented to and actively participated in that process.
________________________
[1] General Dynamics United Kingdom Ltd v State of Libya [2021] UKSC 22 (Lloyd-Jones, Briggs, Arden, Kitchin and Burrows JJSC).
[2] Formerly known, and referred to in some of the lower court decisions described below, as the “Foreign and Commonwealth Office”, or the “FCO”.
[3] There is a separate procedure for the enforcement of International Centre for Settlement of Investment Disputes (ICSID) awards, set out at CPR Rule 62.21.
[4] General Dynamics United Kingdom Ltd v Libya [2019] EWHC 64 (Comm) (Males LJ).
[5] General Dynamics United Kingdom Ltd v The State of Libya [2019] EWCA Civ 1110 (Sir Terence Etherton MR, Longmore and Flaux LLJ).
[6] General Dynamics United Kingdom Ltd v Libya [2019] EWHC 64 (Comm) at [89] (Males LJ).
[7] General Dynamics United Kingdom Ltd v State of Libya [2021] UKSC 22, at [73]-[75] (Lloyd-Jones JSC, citing the decision of Kannan Ramesh J (in the High Court of Singapore) in Van Zyl v Kingdom of Lesotho [2017] SGHC 104; [2017] 4 SLR 849). See also, e.g., [65]-[66] (Lloyd-Jones JSC, citing, inter alia, Hamblen J in L v Y Regional Government of X [2015] EWHC 68 (Comm); [2015] 1 WLR 3948).
[8] Subject only to the possibility of service in accordance with Section 12(6) of the SIA in a manner agreed by the defendant State. Id., at [37], [76(2)] (Lloyd-Jones JSC). See also, id., at [96] (Lady Arden JSC, who engaged in more of a discussion of the concepts of “open textured expressions” and “functional equivalence” in statutory construction).
[9] Id., at [165]-[166], [177], [189]-[191], [200], [231] (Stephens JSC).
[10] See, e.g., id., at [109]-[110] (Stephens JSC).
[11] See, e.g., id., at [134], [145] (Stephens JSC).
[12] See, e.g., id., at [145], [166], [197] (Stephens JSC).
[13] Id., at [171] (Stephens JSC, approving Unión Fenosa Gas SA v Egypt [2020] EWHC 1723 (Comm)).
[14] Id., at [81] (Lloyd-Jones JSC).
[15] The HRA gives effect in UK domestic law to the rights guaranteed by the ECHR. The HRA was enacted after the SIA was passed by the UK Parliament.
[16] General Dynamics United Kingdom Ltd v State of Libya [2021] UKSC 22, at [82] (Lloyd-Jones JSC).
[17] Id., at [84]-[85] (Lloyd-Jones JSC).
[18] Id., at [33] (Lloyd-Jones JSC) and [214]-[215] (Stephens JSC).
[19] Id., at [109] (Stephens JSC).
The following Gibson Dunn lawyers assisted in the preparation of this client update: Doug Watson, Ceyda Knoebel, Piers Plumptre, Alexa Romanelli 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:
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28. Juni 2021
Zum BMF-Schreiben vom 24.03.2021: Das Bundesministerium der Finanzen (BMF) hat vor kurzem zur körperschaftsteuerlichen Anerkennung von Gewinnabführungsverträgen Stellung genommen. Dies gibt Anlass, insbesondere sog. Altverträge, die vor dem 27.02.2013 abgeschlossen oder letztmals geändert worden sind, zu prüfen und ggf. anzupassen.
I. Hintergrund
Mit dem Gesetz zur Fortentwicklung des Sanierungs- und Insolvenzrechts vom 22.12.2020 wurde § 302 Abs. 3 Satz 2 AktG mit Wirkung zum 01.01.2021 um einen Verweis auf den ebenfalls neu eingeführten Restrukturierungsplan ergänzt. Obwohl mit dem Verweis auf den Restrukturierungsplan keine Änderung körperschaftsteuerrechtlicher Regelungen verfolgt wurde, kann die Gesetzesänderung dennoch Auswirkungen auf bestimmte Gewinnabführungsverträge haben und ihre Anpassung erforderlich machen, da u.U. die Voraussetzungen der körperschaftlichen Organschaft andernfalls nicht mehr erfüllt sind.
In § 302 AktG ist die Verlustübernahmepflicht des anderen Vertragsteils bei Bestehen bestimmter Unternehmensverträge geregelt. § 302 Abs. 3 Satz 1 AktG enthält ein diesbezügliches Verzichts- und Vergleichsverbot in Bezug auf den entsprechenden Ausgleichsanspruch. Ausnahmen von diesem Verbot sind in § 302 Abs. 3 S. 2 AktG geregelt. Der Katalog der Ausnahmen wurde mit dem Gesetz zur Fortentwicklung des Sanierungs- und Insolvenzrechts um den Fall ergänzt, dass die Ersatzpflicht in einem Restrukturierungsplan geregelt wird.
Der Wortlaut des § 302 AktG ist jedoch auch für das Körperschaftsteuergesetz von Bedeutung. Die Voraussetzungen einer steuerrechtlichen Organschaft mit einer anderen als den in § 14 KStG aufgeführten Kapitalgesellschaften sind in § 17 KStG geregelt. Unter diese „anderen“ Gesellschaften fällt insbesondere die GmbH. Die bis 26.02.2013 gültige Fassung des § 17 S. 2 Nr. 2 KStG setzte eine Verlustübernahme „entsprechend den Vorschriften“ des § 302 AktG voraus. Seit der Anpassung durch das Gesetz zur Änderung und Vereinfachung der Unternehmensbesteuerung und des steuerrechtlichen Reisekostenrechts vom 20.02.2013 ist seither gemäß § 17 S. 2 Nr. 2 KStG (a.F.) (nunmehr § 17 Abs. 1 S. 2 Nr. 2 KStG) Voraussetzung, dass eine Verlustübernahme durch Verweis auf die Vorschriften des § 302 AktG in seiner jeweils gültigen Fassung vereinbart wird. Erforderlich ist demnach ein sog. dynamischer Verweis; von der Neuregelung in 2013 waren jedoch nur Gewinnabführungsverträge erfasst, die nach dem 26.02.2013 abgeschlossen oder geändert wurden. Sog. Altverträge, die vor dem 27.02.2013 abgeschlossen oder letztmalig geändert wurden, waren für Zwecke der Organschaft weiterhin anzuerkennen, selbst wenn diese lediglich einen statischen Verweis auf § 302 AktG oder eine Wiederholung des damaligen Wortlauts enthalten.
Die nun vorgenommene Änderung des Wortlautes des § 302 AktG führt allerdings dazu, dass bei Altverträgen keine Verlustübernahme mehr entsprechend den Vorschriften des § 302 AktG vereinbart ist und im Ergebnis auch die Vorgaben des § 17 S. 2 Nr. 2 KStG in seiner alten Fassung nicht mehr erfüllt sind.
II. Betroffene Verträge
Für Gewinnabführungsverträge, die nach dem 26.02.2013 abgeschlossen oder geändert wurden, ist nach § 17 Abs. 1 S. 2 Nr. 2 KStG in seiner gegenwärtigen Fassung ohnehin schon ein expliziter dynamischer Verweis auf § 302 AktG erforderlich. Für diese sog. Neuverträge – soweit sie den Anforderungen des § 17 Abs. 1 S. 2 Nr. 2 KStG entsprechen – besteht durch die jetzige Änderung in § 302 AktG kein Anpassungsbedarf.
Für sog. Altverträge, die vor dem 27.02.2013 abgeschlossen oder letztmalig geändert wurden und die noch einen statischen Verweis auf – die nun nicht mehr aktuelle Fassung des – § 302 AktG enthalten, besteht Anpassungsbedarf.
III. Stellungnahme der Finanzverwaltung
In Bezug auf die steuerrechtlichen Auswirkungen der Änderung des § 302 AktG nahm das BMF in seinem Schreiben vom 24.03.2021 (DStR 2021, 803) Stellung. Für vor dem 27.02.2013 abgeschlossene oder letztmalig geänderte Gewinnabführungsverträge gelte Folgendes:
„Aufgrund der am 1.1.2021 in Kraft getretenen Änderung des § 302 AktG […] ist für die weitere Anerkennung der Organschaft nach § 17 KStG Voraussetzung, dass die bisherigen Vereinbarungen zur Verlustübernahme im Gewinnabführungsvertrag angepasst werden […]. Dabei muss nach aktueller Rechtslage die Verlustübernahme durch Verweis auf die Vorschriften des § 302 AktG in seiner jeweils gültigen Fassung (dynamischer Verweis) gemäß § 17 Abs. 1 S. 2 Nr. 2 KStG vereinbart werden.
Der Anerkennung der Organschaft steht es für Veranlagungszeiträume ab 2021 nicht entgegen, wenn die Anpassung der Altverträge zur Aufnahme des dynamischen Verweises nach § 17 Abs. 1 S. 2 Nr. 2 KStG spätestens bis zum Ablauf des 31.12.2021 vorgenommen wird.“
IV. Anpassung von Gewinnabführungsverträgen
Wie in der Stellungnahme des BMF angegeben ist für die Wirksamkeit einer Organschaft das Einfügen eines dynamischen Verweises in Altverträge erforderlich: Die nunmehr aufgrund der Änderung des § 302 AktG vorzunehmende Anpassung der Vereinbarung zur Verlustübernahme führt dazu, dass aufgrund § 17 Abs. 1 S. 2 Nr. 2 KStG in Altverträgen nun ein dynamischer Verweis auf § 302 AktG aufzunehmen ist.
Die Änderung ist nach der Stellungnahme des BMF bis zum Ablauf des 31.12.2021 vorzunehmen. Dabei soll nach Auffassung des BMF die notarielle Beurkundung des Zustimmungsbeschlusses der Organgesellschaft (zur privatschriftlichen Änderungsvereinbarung des Gewinnabführungsvertrags) und die Anmeldung der Änderung zur Eintragung ins Handelsregister bis zum 31.12.2021 ausreichen. Diese Aussage kann jedoch in ihrer Belastbarkeit hinterfragt werden, da es ja noch offen sei, ob die Rechtsprechung diesen Grundsätzen folgen und nicht ggf. doch auf die (zivilrechtlich erforderliche) Eintragung im Handelsregister abstellen werde. Es empfiehlt sich daher, auch die Handelsregistereintragung bis spätestens zum 31.12.2021 zu bewirken.
Die Anpassung des Gewinnabführungsvertrages zur Aufnahme eines dynamischen Verweises auf § 302 AktG soll nach Auffassung des BMF keinem Neuabschluss des Gewinnabführungsvertrages gleichgestellt sein. Eine neue Mindestlaufzeit iSd § 14 Abs. 1 S. 1 Nr. 3 S. 1 KStG werde durch diese Anpassung nicht in Gang gesetzt. Nicht erforderlich sei eine Anpassung von Altverträgen hingegen, wenn die Organschaft mit oder vor Ablauf der Umsetzungsfrist für die Änderungsvereinbarung zum 01.01.2022 beendet würde.
Wird die nach dem BMF-Schreiben geforderte Anpassung der betroffenen Altverträge nicht vorgenommen, kann die Organschaft für den Veranlagungszeitraum 2021 und zukünftige Veranlagungszeiträume steuerlich nicht anerkannt werden.
Ihre Ansprechpartner:
Steuerrecht
Dr. Hans Martin Schmid (+49 89 189 33 110, [email protected])
Gesellschafts- und Kapitalmarktrecht, Unternehmenstransaktionen
Dr. Lutz Englisch (+49 89 189 33 150, [email protected])
Dr. Birgit Friedl (+49 89 189 33 180, [email protected])
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Wenn Sie Fragen zu diesem Thema haben, sprechen Sie uns bitte an, wir stehen Ihnen gerne zur Verfügung. Dieses Client Update ist nur zu allgemeinen Informationszwecken erstellt, es dient nicht als Rechtsberatung und ersetzt nicht Ihre anwaltliche Beratung.
Decided June 25, 2021
TransUnion LLC v. Ramirez, No. 20-297
Today, the Supreme Court ruled 5-4 that every member of a class certified under Rule 23 must establish Article III standing in order to be awarded individual damages.
Background:
In February 2011, Sergio Ramirez was unable to purchase a car after a TransUnion credit report incorrectly flagged him as a “Specially Designated National” (“SDN”) who is prohibited from transacting business in the United States for national security reasons. When Ramirez requested a copy of his credit report, TransUnion mailed him a report that redacted the SDN alert and a separate letter notifying him of the alert but not how to correct inaccurate information.
Ramirez filed a putative class action against TransUnion alleging violations of the Fair Credit Report Act (“FCRA”) for failing to ensure the accuracy of the SDN alerts, to disclose the entire credit report to class members, and to include a summary of rights in the mailed letters. A jury found in favor of the class on all three claims and awarded $8 million in statutory damages and $52 million in punitive damages.
The Ninth Circuit affirmed the district court’s certification of the class. Although most of the absent class members did not suffer injury from having their credit reports disclosed to third parties, the court concluded that all class members had the requisite Article III standing to recover damages because of the risk of harm to their privacy, reputational, and informational interests protected by the FCRA. The court affirmed the jury’s award of statutory damages but vacated the punitive damages award.
Issue:
Whether all class members must have Article III standing to recover individual damages in federal court.
Court’s Holding:
Yes. Every member of a class action must satisfy Article III standing requirements in order to recover individual damages, and proof of a statutory violation without a showing of concrete harm is insufficient to satisfy Article III.
“Every class member must have Article III standing in order to recover individual damages. ‘Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.’”
Justice Kavanaugh, writing for the Court
What It Means:
- The Supreme Court held that all class members must demonstrate standing at each stage of litigation “for each claim that they press and for each form of relief that they seek.” The Court explained that “an injury in law is not an injury in fact,” and “[o]nly those plaintiffs who have been concretely harmed by a defendant’s statutory violation” have standing. Although all the class members suffered a statutory violation, most did not experience a “physical, monetary, or cognizable intangible harm” necessary to establish a concrete injury under Article III.
- The Court’s decision clarifies an issue left ambiguous in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016): whether the violation of a federal statute alone is sufficient to confer Article III standing. The Court held that a violation of a federal statute is not, without more, sufficient for Article III standing. The ruling could have ramifications for other types of class actions asserting violations of federal statutes.
- The Court’s decision also resolves a circuit split as to whether the mere risk of inaccurate consumer data being disseminated is sufficient to confer standing. As the Court explained, class members whose internal credit files were not disseminated to third parties did not have Article III standing because “there is ‘no historical or common-law analog where the mere existence of inaccurate information, absent dissemination, amounts to concrete injury.’”
- In dissent, Justice Thomas—joined by Justices Breyer, Sotomayor, and Kagan—decried the Court’s decision as “remarkable in both its novelty and effects” because the Court has “[n]ever before . . . declared that legal injury is inherently insufficient to support standing.”
- The decision left undecided whether Ramirez’s claims were “typical” of the other class members’ claims. Instead, the Court remanded the case so the Ninth Circuit could determine whether class certification continues to be appropriate in light of the decision.
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
| Allyson N. Ho +1 214.698.3233 [email protected] | Mark A. Perry +1 202.887.3667 [email protected] | Lucas C. Townsend +1 202.887.3731 [email protected] |
| Bradley J. Hamburger +1 213.229.7658 [email protected] |
Related Practice: Class Actions
| Christopher Chorba +1 213.229.7396 [email protected] | Kahn A. Scolnick +1 213.229.7656 [email protected] |
On June 21, 2021, the U.S. Department of Justice’s Antitrust Division (“DOJ”) announced that two officers of Endeavor Group Holdings Inc. have resigned their positions on the board of directors of Live Nation Entertainment Inc. in the wake of concerns expressed by DOJ that the two companies formed an illegal interlocking directorate under the antitrust laws. The announcement is a reminder that companies must continue to be mindful of potential antitrust concerns when their current or prospective directors or officers serve in similar roles at other entities.
Background
Common ownership issues frequently arise in the context of interlocking directorates: competing firms that share common officers or directors. An interlocking directorate raises antitrust concerns because of the perceived risk that the officer or director may serve as the conduit for an anticompetitive agreement or information exchange. An antitrust investigation into a potential interlock may force the resignation of key officers or directors, delay the closing of a proposed transaction, or trigger consumer class actions alleging collusion. As such, it is important to be aware of applicable statutes in this area and implement appropriate measures to detect problematic interlocks before they create potential antitrust concerns.
Clayton Act, Section 8
Section 8 of the Clayton Act (15 U.S.C. § 19) is the primary vehicle by which the U.S. antitrust agencies police interlocking directorates.[1] In general, the statute prohibits one person from being an officer (defined as an “officer elected or chosen by the Board of Directors”) or director at two companies that are “by virtue of their business and location of operation, competitors.” Section 8 broadly defines “competitors” to include any two corporations where “the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws.” Section 8 is broad and potentially applies where two competing companies have an officer or director in common, subject to certain exceptions.
There are three potential safe harbors from Section 8 liability:
1) The competitive sales of either company are less than 2% of that company’s total sales;
2) The competitive sales of each company are less than 4% of that company’s total sales; or
3) The competitive sales of either company are less than $3,782,300 as of January 21, 2021.
While there are no penalties or fines imposed due to a Section 8 violation, the statute requires that the parties eliminate the interlock if a violation is found to have occurred.
Enforcement and Compliance
While enforcement actions such as the one against Endeavor and Live Nation are relatively rare, companies need to continually evaluate Section 8 concerns both for existing officers and directors as well as when vetting potential officers or director candidates.
In practice, determining whether a potential interlock exists and whether any safe harbors may apply requires a careful analysis of the products or markets in which the two firms compete. Rightly or wrongly, the antitrust agencies in the past have taken a broad view when determining whether two companies compete for purposes of Section 8, sometimes not limited by well-established market definition analysis.
Section 8 issues can also arise if a growing corporate subsidiary or acquisition may bring it into new arenas of competition and create potential overlaps that fall outside of Section 8 safe harbors. Where an interlock exists but is within Section 8 safe harbors, counsel should monitor the situation periodically to confirm the safe harbor continues to apply.
Finally, other antitrust statutes, particularly Section 1 of the Sherman Act (which prohibits agreements that unreasonably restrain trade), continue to apply even if the interlock is within the Section 8 safe harbors. A sound compliance plan will therefore also establish procedures to prevent sharing of competitively sensitive information and avoid situations that could create the appearance of potential competition concerns.
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[1] A separate statute, the Depository Institution Management Interlocks Act, governs director interlocks between unaffiliated depository institutions (FDIC-insured banks, thrifts, credit unions, and trust companies), between unaffiliated depository institution holding companies (bank and thrift holding companies), and between their nonbank affiliates.
The following Gibson Dunn attorneys assisted in preparing this client update: Elizabeth Ising, Stephen Weissman, Cassandra Tillinghast and Chris Wilson.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Antitrust and Competition or Securities Regulation and Corporate Governance practice groups, or the following:
Antitrust and Competition Group:
Rachel S. Brass – San Francisco (+1 415-393-8293, [email protected])
Adam Di Vincenzo – Washington, D.C. (+1 202-887-3704, [email protected])
Kristen C. Limarzi – Washington, D.C. (+1 202-887-3518, [email protected])
Chris Wilson – Washington, D.C. (+1 202-955-8520, [email protected])
Securities Regulation and Corporate Governance Group:
Elizabeth Ising – Washington, D.C. (+1 202-955-8287, [email protected])
Lori Zyskowski – New York (+1 212-351-2309, [email protected])
Julia Lapitskaya – New York (+1 212-351-2354, [email protected])
Cassandra Tillinghast – Washington, D.C. (+1 202-887-3524, [email protected])
© 2021 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
Decided June 25, 2021
HollyFrontier Cheyenne Refining, LLC v. Renewable Fuels Association, No. 20-472
Today, the Supreme Court held 6-3 that the Clean Air Act authorizes the EPA to exempt a small refinery from compliance with the renewable fuel standards program, even if the small refinery had not received an exemption each year since the program commenced in 2011.
Background:
The renewable fuel standard program in the Clean Air Act (“CAA”) requires refiners and importers of transportation fuel to blend certain amounts of renewable fuels into their products. The CAA exempted small refineries from the program until 2011, and provided that small refineries could “at any time petition [the EPA] for an extension of the exemption … for the reason of disproportionate economic hardship.” The EPA granted exemptions to three small refineries that had not continuously received exemptions since 2011. The Tenth Circuit vacated the EPA’s exemption orders, holding that a small refinery may not receive “an extension of the exemption” unless it has a continuous, unbroken history of exemptions since the program commenced.
Issue:
Whether the EPA may grant an extension of the hardship exemption to a small refinery that has not received continuous extensions of the initial exemption for every year since 2011.
Court’s Holding:
The EPA may grant extensions of the hardship exemption to small refineries that have not received prior extensions because the CAA permits small refineries to petition EPA “at any time.”
“[T]he key phrase at issue before us … means exactly what it says: A small refinery can apply for … a hardship extension ‘at any time.’”
Justice Gorsuch, writing for the Court
What It Means:
- The Court’s decision confirms that the CAA itself does not preclude small refineries from obtaining the hardship exemption simply because they did not obtain an exemption for one or more prior years.
- The Court observed that both sides presented “plausible accounts of legislative purpose and sound public policy,” but concluded that “[n]either the statute’s text, structure, nor history afford [it] sufficient guidance to be able to choose … between the parties’ competing narratives.” As a result, the Court rested its decision on “the statute’s text”—which, the Court held, “nowhere commands a continuity requirement.”
- The Court noted that the Tenth Circuit’s contrary interpretation would force small refineries that once attained, but could not maintain, compliance with the program’s requirements “to exit the market” but permit “the least compliant [small] refineries” that never comply with the program’s requirements to continue operating.
- The Court did not address the Tenth Circuit’s alternative ruling that EPA may not grant an exemption based on hardship flowing from “something other than” compliance with the program’s obligations, such as economic hardship caused by other factors.
- In January 2021, EPA announced that it would cease granting hardship exemptions to small refineries that had not received continuous exemptions since 2011. It is uncertain whether EPA will begin granting hardship exemptions again in light of the Court’s decision or withhold hardship exemptions on other grounds.
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
| Allyson N. Ho +1 214.698.3233 [email protected] | Mark A. Perry +1 202.887.3667 [email protected] | Lucas C. Townsend +1 202.887.3731 [email protected] |
| Bradley J. Hamburger +1 213.229.7658 [email protected] |
Related Practice: Environmental Litigaton and Mass Tort
| Daniel W. Nelson +1 202.887.3687 [email protected] | Stacie B. Fletcher +1 202.887.3627 [email protected] | David Fotouhi +1 202.955.8502 [email protected] |
Los Angeles partners Theodore J. Boutrous Jr. and Theane Evangelis are the authors of “10 Years Of Dukes: A Resounding Class Certification Legacy,” [PDF] published by Law360 on June 25, 2021. Los Angeles associate Andrew Kasabian contributed to the article.
On June 8, 2021, in Oakwood Laboratories LLC v. Thanoo, the Third Circuit “endeavored to clarify the requirements for pleading a trade secret misappropriation claim under the Defend Trade Secrets Act” (the “DTSA”).[1] Enacted in 2016, the DTSA for the first time created a federal private cause of action for civil litigants seeking to protect trade secrets, allowing plaintiffs to seek injunctive relief and/or damages in the event of misappropriation. While other federal Courts of Appeal have previously commented on the DTSA’s similarity to various state trade secret laws,[2] as well as differences between the federal statute and certain state regimes,[3] it remains to be seen whether any will adopt Oakwood’s analyses. In the meantime, Oakwood is an important decision in this fast-evolving field of federal law of which those prosecuting and defending DTSA claims should be aware.
I. Background Concerning the Defend Trade Secrets Act
Prior to the relatively recent enactment of the DTSA, parties seeking to protect their trade secrets via civil litigation were limited to rights provided by various state laws. Through the DTSA, which provides that the “owner of a trade secret that is misappropriated may bring a civil action . . . if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce,”[4] Congress sought to create uniform national standards for trade secret misappropriation.
Courts have generally required plaintiffs to allege three elements to bring a claim under the DTSA: (1) the existence of a trade secret, (2) that is related to interstate or foreign commerce, and (3) misappropriation of that trade secret.[5] The DTSA defines “trade secrets” as a wide variety of “information” for which “reasonable measures” have been taken “to keep [the information] secret,” and which “derives independent economic value . . . from not being generally known” nor “readily ascertainable through proper means” to others “who can obtain economic value from [its] disclosure or use.”[6] The statute defines “misappropriation” as the “improper” “acquisition,” “disclosure” or “use” of such a trade secret.[7]
Plaintiffs who prevail on a trade secret misappropriation claim under the DTSA may obtain an injunction against further “actual or threatened misappropriation,” and recover damages calculated based upon (i) the plaintiff’s “actual loss,” (ii) “any unjust enrichment” derived by the defendant, or (iii) “a reasonable royalty” for the misappropriation.[8] If the misappropriation was willful and malicious, plaintiffs may also be entitled to reasonable attorney’s fees and “exemplary damages” of up to twice the damages they could otherwise receive.[9]
II. The Facts of Oakwood
The dispute in Oakwood pits Oakwood Laboratories, a pharmaceutical company, against its former senior scientist, Dr. Bagavathikanun Thanoo, and his new employer, Aurobindo Pharma U.S.A., Inc. After working for Oakwood for nearly twenty years, Dr. Thanoo left to take a new job with Aurobindo. Oakwood alleged that Dr. Thanoo misappropriated trade secrets in his new role regarding its “Microsphere Project,” which focused on a particular pharmaceutical technology.[10] In addition, Oakwood and Aurobindo had previously engaged in ultimately unsuccessful negotiations regarding a possible collaboration on the Microsphere Project, in connection with which Oakwood had shared certain proprietary information with Aurobindo pursuant to a confidentiality agreement.[11]
Oakwood alleged that, over the course of nearly 20 years, a team of 20-40 full-time Oakwood employees spent countless hours and approximately $130 million on the Microsphere Project.[12] Accordingly, Oakwood alleged that “the Microsphere Project is not something that could have been replicated” by Aurobindo in under four years “absent misappropriation of Oakwood’s trade secrets.”[13] Aurobindo nevertheless claimed to have done just that, while Oakwood alleges that Aurobindo’s apparent success necessarily reflects the misappropriation of Oakwood’s trade secrets.
The parties’ dispute reached the Third Circuit following four dismissals of various iterations of Oakwood’s complaint by the district court, with each complaint adding additional details not pleaded in earlier versions. The district court initially found that Oakwood failed to identify a specific trade secret,[14] while it subsequently held that later versions of the complaint sufficiently alleged a trade secret but did not adequately plead misappropriation nor how Oakwood had suffered any harm as a result thereof.[15] Rather than amend its complaint for a fourth time, Oakwood appealed from the dismissal of its third amended complaint.
III. The Third Circuit’s Interpretation of the Defend Trade Secrets Act
The parties in Oakwood primarily disagreed on the meaning and application of the first and third elements of a DTSA claim: identification of a trade secret and misappropriation thereof.[16] Accordingly, the Third Circuit first clarified the level of specificity required to plead a trade secret before discussing the definition of misappropriation under the statute. The Court also addressed the defendants’ argument that Oakwood had alleged only speculative harms because Aurobindo had not yet launched any products based on allegedly misappropriated trade secrets. As to each issue, the Third Circuit disagreed with the district court’s reasoning and held that Oakwood’s third amended complaint was sufficient to state a trade secret claim under federal law.
In addressing the level of specificity required to plead a trade secret, the Third Circuit relied on California state law in explaining that while a “trade secret must be described ‘with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies,’” plaintiffs nevertheless “need not ‘spell out the details of the trade secret’ to avoid dismissal.”[17] In doing so, the Third Circuit joined its sister circuits in noting that the DTSA is “substantially similar as a whole” to many states’ trade secret statutes,[18] the interpretation of which can inform federal courts’ interpretation of the DTSA.
Next, the Court explained that “[t]here are three ways to establish misappropriation under the DTSA: improper acquisition, disclosure, or use of a trade secret without consent.”[19] Although Oakwood had alleged misappropriation via improper acquisition and disclosure, the Third Circuit limited its analysis to “the ‘use’ of a trade secret” because each of the underlying facts relating to acquisition and disclosure concerned events that took place prior to the DTSA’s effective date of May 11, 2016.[20] In interpreting the term “use,” Oakwood turned to Texas state authority, under which “use” was “broadly defined” to mean “any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant,” including “marketing goods that embody the trade secret, employing the trade secret in manufacturing or production, relying on the trade secret to assist or accelerate research or development, or soliciting customers through [its] use.”[21] In other words, the Court deemed a trade secret “used” through any way in which one “take[s] advantage” of it “to obtain an economic benefit, competitive advantage, or other commercial value.”[22] In particular, the Third Circuit rejected the district court’s equating of the term “use” with the term “replicate,” noting that the latter term is used elsewhere in the DTSA and thus the two words could not have been intended as synonyms.[23] The Third Circuit thus held that Oakwood could state a DTSA claim without expressly alleging that Aurobindo had copied its trade secret.
Lastly, the Third Circuit held that a plaintiff need not allege harm separate and apart from misappropriation because “misappropriation is harm.”[24] Trade secrets derive “‘economic value . . . from not being generally known’” or “‘readily ascertainable through proper means,’” such that their “economic value depreciates or is eliminated altogether upon its loss of secrecy when a competitor obtains and uses that information without the owner’s consent.”[25] Accordingly, the Third Circuit in Oakwood reasoned that even where defendants “have not yet launched a competing product, that does not mean that [a plaintiff] is uninjured” so long as it “has lost the exclusive use of trade secret information,” which is a “real and redressable harm,”[26]
Conclusion
The Third Circuit’s interpretation of elements of the DTSA will be instructive for litigants based within that Court’s jurisdiction, and may also have an impact in its sister circuits. Given the differing state trade secret regimes that have developed over many decades, as well as the developing case law regarding the DTSA, parties will be well-served by promptly consulting with experienced trade secret counsel when evaluating actual or potential trade secret claims.
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[1] 2021 WL 2325127, at *1, — F.3d — (3d Cir. 2021).
[2] See, e.g., InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 657 (9th Cir. 2020); Akira Techs., Inc. v. Conceptant, Inc., 773 F. App’x 122, 125 (4th Cir. 2019).
[3] See, e.g., Compulife Software Inc. v. Newman, 959 F.3d 1288, 1311 (11th Cir. 2020) (noting “one important difference” between DTSA’s definitions of “misappropriation” and “improper means” and the definitions under Florida law).
[5] Oakwood, 2021 WL 2325127, at *8.
[10] Oakwood, 2021 WL 2325127, at *2.
[14] Oakwood Labs., LLC v. Thanoo, No. 17 Civ. 5090, 2017 WL 5762393, at *4 (D.N.J. Nov. 28, 2017).
[15] Oakwood Labs., LLC v. Thanoo, No. 17 Civ. 5090, 2019 WL 5420453, at *3–4 (D.N.J. Oct. 23, 2019).
[16] Oakwood, 2021 WL 2325127, at *8.
[17] Id. (quoting Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244, 252-53 (Cal. Ct. App. 1968)).
[18] Oakwood, 2021 WL 2325127, at *8.
[21] Id. at *11 (quoting Gen. Universal Sys., Inc. v. HAL, Inc., 500 F.3d 444, 450-51 (5th Cir. 2007)).
[25] Id. at *15 (quoting 18 U.S.C. § 1839(3)(B)).
The following Gibson Dunn attorneys assisted in preparing this client update: Michael L. Nadler, Brian C. Ascher, Ilissa Samplin, Alexander H. Southwell, and Joshua H. Lerner.
Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Trade Secrets practice group, or any of the following:
Joshua H. Lerner – Chair, Trade Secrets Practice, San Francisco (+1 415-393-8254, [email protected])
Brian C. Ascher – New York (+1 212-351-3989, [email protected])
Ilissa Samplin – Los Angeles (+1 213-229-7354, [email protected])
Alexander H. Southwell – New York (+1 212-351-3981, [email protected])
© 2021 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
Decided June 23, 2021
Collins v. Yellen, No. 19-422
Yellen v. Collins, No. 19-563
Today, the Supreme Court held 6-3 that the structure of the Federal Housing Finance Agency—led by a single Director, removable only “for cause”—violates the Constitution’s separation of powers, but ruled 8-1 that a remand is necessary to determine the proper scope of relief.
Background:
Congress created the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) to provide liquidity and stability to the national mortgage market. In the Housing and Economic Recovery Act of 2008, Congress created the Federal Housing Finance Agency (“FHFA”) to regulate these enterprises. FHFA is headed by a single Director who serves a five-year term and is removable by the President only “for cause.”
In 2008, FHFA placed Fannie Mae and Freddie Mac into conservatorship and secured financing from the Treasury Department—which agreed to infuse hundreds of billions of dollars into the enterprises in exchange for preferred stock, dividends, fees, and the like—to keep them afloat.
In 2012, FHFA (led at the time by an Acting Director) and Treasury amended their financing agreements to require Fannie Mae and Freddie Mac to pay Treasury a quarterly dividend equal to nearly all of their net worth, rather than a dividend tied to Treasury’s capital investment.
Three shareholders challenged the amendment on statutory and constitutional grounds, arguing that FHFA’s single-Director structure independent-agency structure violates the Constitution’s separation of powers. The en banc Fifth Circuit held that FHFA’s structure violated the constitution but that the unconstitutionality could be cured by severing the Director’s “for cause” removal restriction. The Fifth Circuit also held that the Recovery Act forecloses the statutory claims against Treasury but not FHFA.
In January 2021, FHFA and Treasury amended the agreements for a fourth time to eliminate the net-worth-based dividend formula that caused the shareholders’ injuries.
Issues:
(1) Whether FHFA’s structure violates the separation of powers;
(2) If so, whether the fourth amendment (2021) moots the shareholders’ claims;
(3) If FHFA’s structure violates the separation of powers, whether the proper retrospective remedy is to set aside all actions taken by the unconstitutionally structured FHFA (including the 2012 amendment at issue); and
(4) Whether the Recovery Act forecloses the shareholders’ statutory claim.
Court’s Holding:
(1) Yes. FHFA’s structure as an “independent” federal agency headed by a single Director removable by the President only “for cause” violates the Constitution’s separation of powers.
(2) Yes, in part. Shareholders’ claims for prospective relief were rendered moot by the adoption of the fourth amendment in 2021. The retrospective claims were not mooted by the fourth amendment.
(3) No. There is no reason to set aside the third amendment because it was (i) adopted by an Acting Director who was removable at will and (ii) subsequently implemented by confirmed Directors who were appointed in a manner consistent with the constitution and thus possessed lawful executive power (only the statute’s removal provision was unconstitutional). The Court remanded for further proceedings to determine the retrospective relief, if any, to which the shareholders are entitled.
(4) The Recovery Act’s anti-injunction provision bars shareholders’ statutory claim.
What It Means:
- In step with the Court’s decision last term in Seila Law LLC v. CFPB, 140 S. Ct. 2183 (2020), today’s decision again recognizes the significant limitation on Congress’s ability to insulate agencies from presidential control. Agencies that execute federal law and are headed by a single Director, including financial regulators, cannot be “independent” of the President, but instead must be subject to the President’s constitutional duty to control the federal officers who assist the President in executing federal law.
- The Court’s holding that a federal agency headed by a single Director removable by the President only “for cause” is unconstitutional could have ripple effects. For example, the validity of the Social Security Administration’s leadership structure, which has been led by a single commissioner since 1994, may be called into question.
- The Court’s decision that all of FHFA’s actions while unconstitutionally structured need not be set aside could impact other litigation challenging actions that the Consumer Financial Protection Bureau took when it was unconstitutionally structured. But as the Court made clear, plaintiffs are entitled to retrospective relief so long as they can show that the unconstitutional removal provision inflicted compensable harm.
- The Court’s 8-1 decision on standing reiterated that, for traceability purposes, the relevant inquiry turns on whether the injury can be traced to the defendant’s allegedly unlawful conduct—not the provision of law being challenged.
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
| Allyson N. Ho +1 214.698.3233 [email protected] | Mark A. Perry +1 202.887.3667 [email protected] | Lucas C. Townsend +1 202.887.3731 [email protected] |
| Bradley J. Hamburger +1 213.229.7658 [email protected] |
Related Practice: Administrative Law and Regulatory Practice
| Eugene Scalia +1 202.955.8543 [email protected] | Helgi C. Walker +1 202.887.3599 [email protected] |
Overshadowed in the media by the historic judgment of 3 February 2021 by the Administrative Court of Paris in the “Affaire du siècle” (the Case of the century), a ruling by the Versailles Administrative Court of Appeal (the Court) on 29 January 2021 could also result in a historic ruling by the Court of Justice of the European Union (the CJEU). Indeed, upon referral by the Court, the CJEU will be called upon to rule on the existence of a right to breathe clean air and on the liability incurred by the Member States of the European Union in the case of disregard of their obligations in terms of air quality (Case C-61/21).
I. Context of the ruling rendered by the Court
Under Directive 2008/50/EC of 21 May 2008 on “ambient air quality and cleaner air for Europe” (the Directive), Member States must establish zones and agglomerations throughout their territory in which air quality is assessed (Article 4).
Article 13-1 of the Directive requires Member States to ensure that levels of fine particulate matter (PM10), carbon monoxide or nitrogen dioxide (NO2) do not exceed limit values set out in an annex.
Article 23-1 of the Directive provides that where these limit values are exceeded by levels of pollutants in ambient air, Member States must, in the given zone or agglomeration, adopt “air quality plans”. If the limit values are exceeded after the deadline for their application, the air quality plans provide for appropriate measures to ensure that the period of exceedance is as short as possible.
At the end of 2019, following an action for failure to fulfil obligations brought by the European Commission, the Court of Justice of the European Union ruled that France had failed to fulfil its obligations under Articles 13(1) and 23(1) of the Directive with regards to NO2 for several French regions, including the Paris region (CJEU, 24 October 2019, case C-636/18). On 30 October 2020, the European Commission announced that it would bring a new action against France before the CJEU for failure to fulfil obligations , it being specified that the failures this time deal with the excessive level of PM10 in the air.
For its part, the Conseil d’Etat (Council of State, France), the highest administrative court in France, had already ruled in 2017 that, given the persistence of observed exceedance of PM10 and NO2 concentrations in the air, the air quality plans for certain areas, including the Paris region, had to be considered insufficient with respect to the obligations and thresholds set by the Directive. The Conseil d’Etat had then enjoined the State to take the necessary measures to bring PM10 and NO2 concentrations below the limit values (CE, 12 July 2017, No. 394254). In a decision dated 10 July 2020, the Conseil d’Etat considered that the French State had not complied with the injunctions requested in the decision of 12 July 2017, and imposed a €10 million penalty on them if they did not justify having taken the required measures within six months of the decision (CE, ass., 10 July 2020, No. 428409). In light of the publicly available information, the Conseil d’Etat should soon rule on whether the French State has finally fulfilled its obligations.
It is in this context that the Court, sitting in plenary session, was called upon to rule on the action for damages brought by an applicant, resident of the Paris region, who attributed his various allergies to air pollution. The applicant considered that the deterioration of the air quality resulted in particular from the disregard by the French authorities of the obligations set by Articles 13(1) and 23(1) of the Directive.
II. Reasoning steps followed by the Court
It has been consistently held that “the principle of State liability for loss and damage caused to individuals as a result of breaches of [Community] law for which it can be held responsible is inherent in the system of the [Treaty on the Functioning of the European Union]” (CJEU, 5 March 1996, cases C-46/93 and C-48/93).
The CJEU also recalls that a right to reparation is recognized by European law if the following three conditions are met:
- the rule of law infringed must be intended to confer rights on individuals;
- the breach must be sufficiently serious, it being specified that this is the case if the breach has persisted despite a judgment by the CJEU finding the infringement in question to be established;
- there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties.
In the present case, since it was seized of a claim for damages based on the breach of the Directive, i.e. of a norm of European law, the Court had to verify whether the three conditions mentioned above were met.
In order to determine whether the first condition had been met, the Court had first to decide whether Articles 13(1) and 23(1) of the Directive, which the applicant claimed had been disregarded, gave him a “right”. In other words, the Court had to determine whether these Articles conferred a “right to breathe clean air” eligible of giving rise to a compensation claim.
As early as 2014, the CJEU had indicated that Articles 13(1) and 23(1) allowed “persons directly concerned by the limit value being exceeded” to obtain, before the national authorities and courts, the establishment of an air quality plan in accordance with the requirements of Article 23 (CJEU, 19 November 2014, case C-404/13). It is, moreover, this right that was implemented by the Conseil d’Etat in the 2017 and 2020 decisions outlined above.
The Court probably considered that the right thus available to individuals to compel Member States to implement the obligations laid down by the Directive did not necessarily imply the recognition for their benefit of a “right to breathe clean air”, the disregard of which is likely to give rise to an action for damages.
Since the answer was uncertain and the issue was related to the scope of a European norm, the Court chose to refer two questions to the CJEU for a preliminary ruling on Articles 13(1) and 23(1) of the Directive in order to obtain the appropriate interpretation of these Articles.
The first question is relative to whether Articles 13(1) and 23(1) of the Directive give individuals, in the event of a sufficiently serious breach by a Member State of the European Union of the obligations arising therefrom, a right to obtain from the Member State in question, compensation for damage to their health which has a direct and certain causal link with the deterioration of air quality.
If the answer to the first question is affirmative, the Court then asked the CJEU to specify the conditions for the opening of this right, in particular with regards to the date on which the existence of the breach attributable to the Member State in question must be assessed.
III. Possible consequences of the Court’s ruling
If the CJEU were to answer the first of the questions asked by the Court in the affirmative, it would then be for the Court to determine whether the other two conditions for the French State’s liability to be characterized are met.
Insofar as France has already been subject of a breach judgment for failure to comply with its obligations with respect to NO2 (CJEU, 24 October 2019, cited above), the condition relating to the sufficiently serious breach of a right conferred on individuals does not seem to pose any particular difficulty.
It will then be up to the Court to assess whether there is a direct causal link between the violation and the damage claimed by the applicant, it being specified that this demonstration will depend on the answer given by the CJEU to the second question, namely from what date the existence of the violation attributable to the Member State in question must be assessed, and will probably require recourse to a medical expert opinion.
The recognition of a right to breathe clean air likely to be subject of an action for compensation would very probably constitute a strong constraint weighing on the Member States of the European Union. In this respect, it should be emphasized that France is far from being the only country in the European Union to have been condemned for failure to comply with the obligations set out in Articles 13(1) and 23 of the Directive: Italy has been condemned for systematic and persistent exceeding of the PM 10 limit values (CJEU, 10 November 2020, case C-644/18), the United Kingdom and Germany have been condemned in the same way, but for N02 (CJEU, 4 March 2021, case C-664/18 and CJEU, 3 June 2021, case C-635/18). The question of a possible compensation claim based on the disregard of the right to breathe clean air could thus have a repercussion in all of the European Union States.
The following Gibson Dunn attorneys assisted in preparing this client update: Nicolas Autet and Grégory Marson.
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, the authors, or any of the following lawyers in Paris by phone (+33 1 56 43 13 00) or by email:
Nicolas Autet ([email protected])
Grégory Marson ([email protected])
Nicolas Baverez ([email protected])
Maïwenn Béas ([email protected])
© 2021 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
On June 11, 2021, New York Governor Andrew M. Cuomo signed into law a Uniform Foreign Country Money Judgments Act (the “2021 Recognition Act”), amending New York’s Uniform Foreign Country Money-Judgments Recognition Act of 1970 (the “1970 Recognition Act”).[1] The bill was designed to update and bring New York’s existing legislation in line with the revisions proposed by the Uniform Law Commission in 2005.[2] With this enactment, New York follows a growing number of U.S. states that have modernized their recognition acts over the last decade.
As detailed herein, the 2021 Recognition Act both clarifies the procedural mechanisms and substantive arguments that litigants can invoke in a proceeding to recognize foreign country money judgments (“foreign judgments”), while also significantly expanding the defenses to recognition and enforcement of foreign judgments available to defendants in New York. In particular, the substantive changes seek to ensure that the New York courts only recognize foreign judgments that have been procured through a fair and impartial process.
I. Overview of Recognition of Foreign Judgments in the United States
There is no federal law governing recognition of foreign judgments in the United States. However, the rules are broadly similar across all 50 U.S. states and the District of Columbia, providing for recognition of foreign judgments that are final, conclusive, and enforceable where rendered. Over the last 60 years, a majority of U.S. states have codified their rules on recognition, following initially the Uniform Foreign Money Judgments Recognition Act of 1962 (the “1962 Uniform Act”) or now increasingly the Uniform Foreign-Country Money Judgments Recognition Act of 2005 (the “2005 Uniform Act”).
The 1962 Uniform Act was designed to increase the predictability and stability in this area of the law, facilitate international commercial transactions, and encourage foreign courts to recognize U.S. judgments.[3] Notably, the 1962 Uniform Act did not prescribe any enforcement procedure, providing instead that a foreign judgment, once domesticated, is enforceable in the same manner as the judgment of a court of a sister U.S. state, which is entitled to full faith and credit. That is still the prevailing rule today.
The 1962 Uniform Act defined certain threshold requirements for recognition and outlined certain mandatory and discretionary grounds for non-recognition. For example, the recognizing U.S. court was directed to consider, inter alia, whether the judgment was rendered under a judicial system that provides for impartial tribunals and procedures compatible with due process; whether the foreign court had personal and subject matter jurisdiction; whether the defendant received sufficient notice of the proceedings to mount a defense; whether the judgment was obtained by fraud; and whether the cause of action or claim for relief on which the judgment is based is repugnant to the public policy of the recognizing state.
In 2005, the Uniform Law Commission issued the 2005 Uniform Act.[4] Its purpose was to update and clarify the 1962 Uniform Act and “to correct problems created by the interpretation of the provisions of that Act by the courts over the years since its promulgation” while maintaining “the basic rules or approach.”[5] In particular, the 2005 Uniform Act created new discretionary bases for non-recognition, updated and clarified the definitions section, clarified the procedure for seeking (and resisting) recognition of a foreign judgment, expressly allocated the burden of proof, and established a statute of limitations for recognition actions.[6]
Since 2007, a growing number of U.S. states have enacted the modernized 2005 Uniform Act (see map below). As of June 2021, 27 states and the District of Columbia have adopted the 2005 Uniform Act, while one state has introduced this legislation.[7] Another 11 states and the U.S. Virgin Islands currently still apply the 1962 Uniform Act.[8] In the remaining 12 states, the recognition of judgments remains primarily a matter of common law or unique statutory provisions.
Law on Recognition of Foreign Judgments in the United States
Data Source: Uniform Law Commission
II. Overview of Recognition of Foreign Judgments in New York
New York adopted the 1962 Uniform Act as CPLR Article 53 in 1970. Traditionally in New York, once the judgment creditor had made the initial showing that the foreign judgment falls within the scope of New York’s recognition statute, the judgment debtor had to establish a basis for non-recognition if it wished to avoid recognition. As in most U.S. states, New York’s 1970 Recognition Act set out both mandatory grounds for non-recognition—under which the court is prohibited from granting recognition—and discretionary bases on which a court may decline recognition.
With the enactment of the 2021 Recognition Act, New York largely leaves intact the legal framework established by the 1970 Recognition Act while adopting the key updates from the 2005 Uniform Law:
- New Proceeding-Specific Discretionary Criteria. There are two new discretionary criteria for non-recognition, providing that a court may decline recognition where (i) “the judgment was rendered in circumstances that raise substantial doubt about the integrity of the rendering courts with respect to the judgment,”[9] or (ii) “the specific proceeding in the foreign court leading to the judgment was not compatible with the requirement of due process of law.”[10] These two new grounds are significant because they are proceeding-specific—i.e., the judgment debtor can challenge recognition based on a lack of due process or impartial tribunals in the specific proceedings that gave rise to the foreign judgment, regardless of the fairness or procedural safeguards available in the foreign country’s judicial system overall. Under the 1970 Recognition Act, by contrast, complaints about the particular proceeding against the judgment debtor were generally insufficient. To avoid recognition, by statute, a judgment debtor had to establish that the foreign country’s judicial system as a whole lacked impartial tribunals or due process—a high bar in state courts that may be loath to condemn the entire judicial system of a foreign country. Nonetheless, as the Uniform Law Commission noted in its letter of support of the bill, a number of U.S. courts applying the 1962 Uniform Act were either ignoring the “system” language in the governing statute or else “stretching” that language to import proceeding-specific considerations.[11] Such interpretative issues were sufficiently significant to warrant the Uniform Law Commission’s revision of the 1962 Uniform Act.[12]
- Updated Grounds for Non-Recognition. The 2021 Recognition Act also expands the mandatory and discretionary grounds for non-recognition available to a judgment debtor seeking to resist recognition. For example, whereas a lack of subject matter jurisdiction was a discretionary basis for non-recognition under the 1970 Recognition Act, it is mandatory under the 2021 Recognition Act, meaning that a New York court must refuse recognition where the foreign court lacked subject matter jurisdiction over the underlying dispute.[13] Further, the 2021 Recognition Act expands the scope of the (discretionary) public policy non-recognition ground, providing that a court may consider either whether the foreign judgment or the cause of action on which the judgment is based is “repugnant to the public policy of New York or of the United States.”[14] Under the 1970 Recognition Act, this ground was limited to cases where the underlying cause of action—and not the foreign judgment itself—was repugnant to New York’s public policy.
- Burden of Proof. The 2021 Recognition Act clarifies and makes explicit that the party seeking recognition of a foreign judgment bears the burden of establishing that the judgment is subject to the act,[15] while the party resisting recognition has the burden of establishing that a specific ground for non-recognition applies.[16]
- Procedure. The Act clarifies that when recognition is sought as an original matter, the party seeking recognition must file an action on the judgment (or a motion for summary judgment in lieu of complaint) to obtain recognition,[17] but when recognition is sought in a pending action, it may be filed as a counter-claim, cross-claim, or affirmative defense.[18]
- Statute of Limitations. The 2021 Recognition Act establishes a limitations period, providing that a New York court may only enforce a foreign judgment that is still “effective in the foreign country.”[19] If there is no limitation on enforcement in the country of origin, recognition must be sought within 20 years of the date that the judgment became effective in the foreign country.[20]
As with the 1970 Recognition Act, the 2021 Recognition Act applies to any foreign judgment that is “final, conclusive and enforceable” where rendered.[21] It does not apply to a foreign judgment for taxes, a fine or penalty, and it further clarifies that it does not apply to a “judgment for divorce, support or maintenance, or other judgment rendered in connection with domestic relations.”[22] Within those defined limits, the 2021 Recognition Act will apply to all recognition actions commenced on or after the effective date of the act (i.e., June 11, 2021)[23] even if the relevant transactions or proceedings in the foreign country took place before then.
III. Implications of New York’s 2021 Recognition Act
As noted above, the 2021 Recognition Act provides certain definitional, procedural, and substantive changes that will impact judgment creditors and debtors litigating recognition in New York courts.
Many of these revisions will benefit both parties by providing greater clarity and precision about the procedural mechanisms and substantive arguments they can plausibly invoke in a recognition proceeding. Some of the revisions, like the statute of limitations, reduce the incentive to forum-shop where foreign law provides for a shorter effectiveness period than New York law.
The most immediate effect of the 2021 Recognition Act will be felt on the scope and complexity of litigation. As the Sponsor Memo noted, the 2021 Recognition Act “revises the grounds for denying recognition of foreign country money judgements to better reflect the even more varied forms of judicial process on the modern global stage.”[24] Notably, the 2021 Recognition Act will permit judgment debtors to challenge foreign judgments based on proceeding-specific concerns so as to ensure the foreign judgment being recognized has adhered to fundamental principles of due process that the New York courts have a vested interest in protecting. This was previously more difficult to do where only systemic (as opposed to proceeding-specific) due process considerations could be considered in denying recognition.[25] The inclusion of proceeding-specific grounds, which will inevitably expand the range of arguments a judgment debtor can now raise, will likely increase the number of foreign judgments denied recognition in New York courts.
These additional defenses will require greater sophistication by both judgment creditors and debtors in recognition actions in terms of what kinds of foreign legal and expert evidence to marshal. At the same time, these defenses give the New York courts additional bases to ensure that they only recognize judgments that result from a fair and impartial proceeding.
______________________________
[1] The bill was signed into law (Chapter 127) on June 11, 2021. See Senate Bill S523A, N.Y. State Senate (last visited June 21, 2021), https://www.nysenate.gov/legislation/bills/2021/s523.
[2] S.B. S523A (N.Y. 2021) (“An act to amend [New York’s] civil practice law and rules, in relation to revising and clarifying the uniform foreign country money-judgments recognition act.”).
[3] See Uniform Law Comm’n, Uniform Foreign Money-Judgments Recognition Act (with Prefatory Note and Comments) (1962).
[4] See Uniform Law Comm’n, Uniform Foreign-Country Money Judgments Recognition Act (with Prefatory Note and Comments) (2005).
[5] Id., Prefatory Note, at 1.
[7] Foreign-Country Money Judgments Recognition Act 2005, Uniform Law Comm’n (last visited June 22, 2021), https://www.uniformlaws.org/committees/community-home?CommunityKey=ae280c30-094a-4d8f-b722-8dcd614a8f3e.
[8] Foreign-Country Money Judgments Recognition Act 1962, Uniform Law Comm’n (last visited June 22, 2021), https://www.uniformlaws.org/committees/community-home?CommunityKey=9c11b007-83b2-4bf2-a08e-74f642c840bc.
[9] N.Y. CPLR § 5304(a)(7) (McKinney 2021).
[11] See Letter from the Uniform Law Commission to the Chairmen of the New York Assembly Judiciary Committee, dated March 11, 2021, at 2.
[13] N.Y. CPLR § 5304(a)(3) (McKinney 2021).
[24] Sponsor’s Mem., S.B. S523A (N.Y. 2021), https://www.nysenate.gov/legislation/bills/2021/s523.
[25] See, e.g., Shanghai Yongrun Inv. Management Co., Ltd. v. Kashi Galaxy Venture Capital Co., Ltd., No. 156328/2020, 2021 WL 1716424 (N.Y. Sup. Ct. Apr. 30, 2021); Chevron Corp. v. Donziger, 974 F. Supp. 2d 362 (S.D.N.Y. 2014), aff’d, 833 F.3d 74 (2d Cir. 2016); Bridgeway Corp. v. Citibank, 45 F. Supp. 2d 276 (S.D.N.Y. 1999), aff’d, 201 F.3d 134 (2d Cir. 2000). See also Osorio v. Dole Food Co., 665 F. Supp. 2d 1307 (S.D. Fla. 2009), aff’d sub nom. Osorio v. Dow Chem. Co., 635 F.3d 1277 (11th Cir. 2011); Bank Melli Iran v. Pahlavi, 58 F.3d 1406 (9th Cir. 1995).
The following Gibson Dunn lawyers prepared this client alert: Rahim Moloo, Lindsey D. Schmidt, Maria L. Banda, and Peter M. Wade.
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 following:
Rahim Moloo – New York (+1 212-351-2413, [email protected])
Lindsey D. Schmidt – New York (+1 212-351-5395, [email protected])
Anne M. Champion – New York (+1 212-351-5361, [email protected])
Maria L. Banda – Washington, D.C. (+1 202-887-3678, [email protected])
Please also feel free to contact the following practice group leaders:
International Arbitration Group:
Cyrus Benson – London (+44 (0) 20 7071 4239, [email protected])
Penny Madden QC – London (+44 (0) 20 7071 4226, [email protected])
Judgment and Arbitral Award Enforcement Group:
Matthew D. McGill – Washington, D.C. (+1 202-887-3680, [email protected])
Robert L. Weigel – New York (+1 212-351-3845, [email protected])
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Susy Bullock – London (+44 (0) 20 7071 4283, [email protected])
Perlette Michèle Jura – Los Angeles (+1 213-229-7121, [email protected])
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William E. Thomson – Los Angeles (+1 213-229-7891, [email protected])
© 2021 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
Decided June 21, 2021
United States v. Arthrex, Inc., No. 19-1434; Smith & Nephew, Inc. v. Arthrex, Inc., No. 19-1452; Arthrex, Inc. v. Smith & Nephew, Inc., No. 19-1458
Today, the Supreme Court held 5-4 that the absence of Executive Branch review of decisions rendered by Administrative Patent Judges (APJs) of the Patent Trial and Appeal Board (PTAB) violates the Appointments Clause, and that the proper remedy is to sever a statutory provision so that the Director of the Patent and Trademark Office may review PTAB decisions.
Background:
The Constitution’s Appointments Clause, art. II, § 2, cl. 2, requires principal Officers of the United States to be appointed by the President with the advice and consent of the Senate, but permits inferior Officers to be appointed by a department head such as the Secretary of Commerce. Under the Patent Act, the Secretary appoints APJs to preside over adjudicatory proceedings such as inter partes review (IPR) and may fire them for cause. The Director of the Patent and Trademark Office supervises APJs in various ways, but cannot unilaterally review their patentability decisions. Smith & Nephew petitioned for IPR of Arthrex’s patent claims and a panel of APJs decided the claims were unpatentable. On appeal, Arthrex argued that APJs are unconstitutionally appointed principal Officers because they are insufficiently supervised by others. The Federal Circuit agreed that APJs’ appointment violated the Appointments Clause. As a remedy, it severed APJs’ for-cause removal protections to render them inferior Officers, and remanded Arthrex’s IPR to a new panel of APJs.
Issue:
Does the Appointments Clause require administrative review of PTAB decisions?
Court’s Holding:
Yes. The Appointments Clause does not permit APJs to exercise executive power unreviewed by any Executive Branch official. Accordingly, the Director has the authority to unilaterally review any PTAB decision, and a contrary statutory provision (35 U.S.C. § 6(c)) is unenforceable as applied to the Director.
“The structure of the PTO and the governing constitutional principles chart a clear course: decisions by APJs must be subject to review by the director.”
Chief Justice Roberts, writing for the majority
Gibson Dunn represented the petitioners: Smith & Nephew, Inc. and ArthroCare Corp.
What It Means:
- The Court’s 5-4 decision holding that the Patent Act provided for constitutionally inadequate supervision of APJs may make it easier for future challengers to raise Appointments Clause objections to other administrative adjudicators.
- By a 7-2 vote, the Court rejected calls by critics of the PTAB to invalidate the entire system. Although the Court’s decision allows the PTAB to continue operating, the Director now will be able to review final PTAB decisions and, upon review, may issue decisions on behalf of the Board.
- The Court clarified that its opinion concerns only the Director’s ability to supervise APJs in adjudicating petitions for IPR. The opinion does not address the Director’s supervision over other PTAB adjudications, such as the examination process.
- The Court held that because “the source of the constitutional violation is the restraint on the review authority of the Director, rather than the appointment of APJs by the Secretary,” the appropriate remedy is a limited remand to the Acting Director to decide whether to rehear Smith & Nephew’s IPR petition, rather than a hearing before a new panel of APJs.
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
| Allyson N. Ho +1 214.698.3233 [email protected] | Mark A. Perry +1 202.887.3667 [email protected] | Lucas C. Townsend +1 202.887.3731 [email protected] |
| Bradley J. Hamburger +1 213.229.7658 [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 – New York +1 212.351.4000 [email protected] |
| Jane M. Love, Ph.D. +1 212.351.3922 [email protected] |
Decided June 21, 2021
Nat’l Collegiate Athletic Ass’n v. Alston, No. 20-512; and Am. Athletic Conf. v. Alston, No. 20-520
Today, the Supreme Court unanimously held that the NCAA’s current limits on education-related benefits for student-athletes violate the Sherman Act.
Background:
The NCAA imposes eligibility rules fixing the compensation and benefits that member schools can offer student-athletes. The NCAA maintains that its rules, including its restrictions on certain education-related benefits, are necessary to preserve amateurism in college athletics, which is what distinguishes its product from professional sports.
Several student-athletes brought class-action suits against the NCAA and its member conferences, arguing that the restrictions on compensation and benefits run afoul of the Sherman Act. After a bench trial, the district court enjoined the NCAA’s restrictions on education-related benefits after ruling that they violated the Sherman Act. The court ordered the NCAA to allow its member schools to offer athletes education-related benefits such as academic incentive awards and paid, post-eligibility internships. The court did not, however, enjoin NCAA rules that restrict benefits unrelated to education.
The Ninth Circuit affirmed, holding that the NCAA’s limits on education-related benefits violate the Sherman Act, and that allowing student-athletes to receive certain education-related benefits beyond the cost of college attendance, such as paid post-eligibility internships, would not eliminate the distinction between college athletics and professional sports.
Issue:
Whether the NCAA’s restrictions on education-related benefits for student-athletes violate the Sherman Act.
Court’s Holding:
Yes. The NCAA’s restrictions on education-related benefits violate Section 1 of the Sherman Act. Substantially less restrictive rules that permit student-athletes to receive certain limited education-related benefits would adequately preserve the distinction between college athletics and professional sports.
The district court’s injunction “does not float on a sea of doubt but stands on firm ground—an exhaustive factual record, a thoughtful legal analysis consistent with established antitrust principles, and a healthy dose of judicial humility.”
Justice Gorsuch, writing for the Court
Gibson Dunn submitted an amicus brief on behalf of the Players Associations of the NFL, NBA, WNBA, and National Women’s Soccer League, and the National Collegiate Players Association, in support of respondents: Shawne Alston, et al.
What It Means:
- Today’s decision rejects the NCAA’s argument that it is effectively immune from antitrust scrutiny because its rules should receive abbreviated, deferential review, and instead holds that the NCAA’s restrictions are subject to review under the “rule of reason.”
- The Court confirmed that antitrust law does not require businesses “to use anything like the least restrictive means of achieving legitimate business purposes,” but upheld the district court’s conclusion that restrictions on education-related benefits were not necessary to preserve consumer demand for college athletics, in light of the record evidence establishing that the immense popularity of college sports is largely unrelated to education-related benefits paid to student-athletes and given the existence of substantially less restrictive alternatives.
- The Court’s decision permits student-athletes to receive a variety of education-related benefits that go beyond the cost of college attendance, such as academic and graduation incentive awards, graduate-school scholarships, and paid, post-eligibility internships. That said, there is nothing that requires member schools to offer such benefits, nor are individual conferences prohibited from imposing their own restrictions.
- The continued viability of the NCAA’s restrictions on benefits unrelated to education remains an open question. The student-athletes did not press their challenge to these rules—which the Ninth Circuit upheld—before the Court. Justice Kavanaugh wrote a separate concurrence “to underscore” his view that those rules “raise serious questions under the antitrust laws.” He indicated that the NCAA may lack a valid procompetitive justification for its remaining compensation rules because its argument—“that colleges may decline to pay student athletes because the defining feature of college sports . . . is that the student athletes are not paid”—“is circular and unpersuasive.”
- Nothing in the Court’s decision prevents states or Congress from devising different rules to govern the compensation and benefits available to college athletes. Many states have adopted or are considering proposals to loosen restrictions on such benefits. Congress is considering similar proposals, as well as a bill, the “Fairness in Collegiate Athletics Act” (S. 4004), which would arguably give the NCAA the antitrust immunity it sought in this case.
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
| Allyson N. Ho +1 214.698.3233 [email protected] | Mark A. Perry +1 202.887.3667 [email protected] | Lucas C. Townsend +1 202.887.3731 [email protected] |
| Bradley J. Hamburger +1 213.229.7658 [email protected] | Kristen C. Limarzi +1 202.887.3518 [email protected] |
Related Practice: Antitrust and Competition
| Rachel S. Brass +1 415.393.8293 [email protected] | Stephen Weissman +1 202.955.8678 [email protected] |
Related Practice: Sports Law
| Richard J. Birns +1 212.351.4032 [email protected] | Maurice M. Suh +1 213.229.7260 [email protected] |
Decided June 21, 2021
Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System, No. 20-222
Today, the Supreme Court held 8-1 that the Second Circuit must clarify its reasoning in its certification of a securities class action against Goldman Sachs, and held 6-3 that the defendant bears the burden of persuasion when attempting to rebut the “fraud on the market” presumption.
Background:
Goldman Sachs was sued under the securities laws for making statements suggesting that it did not have any conflicts of interest in the management of its mortgage business. The plaintiffs sought to certify a class of investors in Goldman stock and invoked the “fraud on the market” presumption, recognized in Basic Inc. v. Levinson, 485 U.S. 224 (1988), to show that every class member relied on Goldman’s alleged misrepresentations in buying or selling at the market price. Goldman tried to rebut this presumption of reliance by pointing to the generic nature of its challenged statements (e.g., “Integrity and honesty are at the heart of our business”). As Goldman saw it, no investors could have truly relied on such statements in buying their shares because the statements were too generic to impact the stock’s price. The district court rejected that argument and certified the class.
The Second Circuit initially reversed the class-certification order and remanded, after which the district court recertified the class; the Second Circuit then affirmed that second certification order. The Second Circuit held that the generic nature of the statements was irrelevant at the class-certification stage, and instead should be litigated at trial.
Issues:
Can a defendant in a securities class action rebut the presumption of classwide reliance recognized in Basic by arguing that the statements were too generic to have had any impact on the price of the security?
Does a defendant seeking to rebut the Basic presumption with evidence of a lack of price impact bear only the burden of production or also the ultimate burden of persuasion?
Court’s Holdings:
A court should consider the generic nature of the statements at the class certification stage, and the Second Circuit must clarify on remand whether it in fact did so here.
The defendant bears the ultimate burden of persuasion when attempting to rebut the Basic presumption.
“The generic nature of a misrepresentation often will be important evidence of a lack of price impact, particularly in cases proceeding under the inflation maintenance theory.”
Justice Barrett, writing for the Court
What It Means:
- Today’s decision is the first time the Supreme Court has discussed the “inflation-maintenance” theory of securities fraud, although the Court expressly noted that it was taking no view on the “validity” or “ contours” of that theory. Under the inflation-maintenance theory, a misrepresentation causes a stock price to remain inflated by preventing inflation from dissipating from the price. The theory, which has become increasingly common in securities class actions, often depends on an inference that a negative disclosure about the company corrected an earlier misrepresentation, and that a drop in the stock price associated with the disclosure is equal to the amount of inflation maintained by the earlier misrepresentation.
- The Court’s decision suggests important limitations on the theory. The Court explained that the inference that the back-end price drop equals front-end inflation “starts to break down when there is a mismatch between the contents of the misrepresentation and the corrective disclosure,” and this occurs “when the earlier misrepresentation is generic . . . and the later corrective disclosure is specific.”
- The decision thus holds that defendants in securities class action suits may rebut the Basic presumption by arguing that the allegedly fraudulent statements are too generic to have impacted the price of the security, even if those arguments overlap with the ultimate merits of the case.
- The Court also clarified that its prior decisions in Basic and Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. 804, 813 (2011), established that securities-fraud defendants bear the ultimate burden of persuading the court that the Basic presumption does not apply. The Court’s decision thus underscores the importance of defendants offering factual and expert evidence at the class certification stage to rebut the Basic presumption.
The Court’s opinion is available here.
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On June 11, 2021, the Securities and Exchange Commission released Chair Gary Gensler’s Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions (the “Reg Flex Agenda”). This agenda reflects Chair Gensler’s willingness to reopen and perhaps even undo certain rulemakings that were completed in the last two years of former Chair Jay Clayton’s leadership and adopted by the Commission over the dissent of the Democrat Commissioners. Shortly after the Reg Flex Agenda was issued, Republican Commissioners Hester Peirce and Elad Roisman issued a public statement criticizing Chair Gensler for “reopening large swathes of work that was just completed without new evidence to warrant reopening” and thereby, in their view, “undermin[ing] the Commission’s reputation as a steady regulatory hand.”[1]
In this Client Alert, we summarize the key and noteworthy aspects of the Reg Flex Agenda that potentially impact public companies. It should be noted that the items listed in the agenda reflect only the priorities of Chair Gensler and do not necessarily reflect the views and priorities of any other Commissioner. In addition, the agenda does not contain much substantive information, only a brief “abstract” describing each rulemaking item. Nevertheless, just the appearance of an item on the agenda can be informative.[2]
As the Gensler Commission begins to appoint senior staff and to implement this agenda, it will be important for public companies and market participants to pay attention to the development and execution of Gensler’s agenda. While no one expected the Gensler Commission to continue Clayton’s policy initiatives, at the same time, the extent to which Chair Gensler appears willing to undo or unwind the Clayton Commission’s previously adopted rulemakings is surprising, in part because, as a general matter, the SEC Staff tasked with doing the actual work of drafting the releases do not change. What Gensler’s Reg Flex Agenda makes clear is that rulemakings that were adopted exclusively along party-line votes are particularly vulnerable to being “revisited,” and the roadmap for any future actions can be discerned from past dissenting statements the Democrat Commissioners issued when the rules were adopted.[3]
Proxy Reform
On June 1, 2021, Chair Gensler issued a public statement in which he directed the Division of Corporation Finance to revisit the Commission’s recent amendments regarding the application of the proxy rules to proxy advisory firms.[4] These amendments, adopted in July 2020, codified the Commission’s view (which has also been the Staff’s longstanding view) that proxy voting advice generally constitutes a “solicitation” as defined in Exchange Act Rule 14a-1; added new conditions to the exemptions in Rule 14a-2(b)(9) from the proxy rules’ information and filing requirements that are used by proxy advisory firms; and amended the Note to Rule 14a-9 to include specific examples of material misstatements or omissions related to proxy voting advice. These rule amendments took effect on November 2, 2020, and the proxy advisory firms are required to comply with the new conditions as of December 1, 2021.
Consistent with Chair Gensler’s June 1 statement, the Reg Flex Agenda lists “Proxy Voting Advice” as a new item and indicates that it is at the “proposed rule stage” as opposed to the “prerule stage.”[5] In addition, also on June 1, 2021, the Division announced that it would not enforce the Commission’s 2019 interpretation and guidance or the 2020 rule amendments during the period in which the Commission is considering further regulatory action in this area.[6] This development does not affect the ability of private parties to file suit under the proxy rules, as amended; and the parties subject to the rule amendments technically must continue to comply with the provisions that have become effective.
The agenda also includes “Rule 14a-8 Amendments” as a new item in the “proposed rule stage,” thereby putting into question whether the September 2020 amendments to the procedural requirements and resubmission thresholds in Rule 14a-8 will remain in effect by the time of the peak 2021/2022 shareholder proposal season.[7] Although they became effective on January 4, 2021, the September 2020 amendments only apply to proposals submitted for an annual or special meeting to be held on or after January 1, 2022, and there is an even longer transition period for the new share ownership thresholds, which need not be satisfied for meetings held before January 1, 2023.
The Reg Flex Agenda continues to list “Universal Proxy” as a “final rule stage” item, which is the last step in the rulemaking process in which the Commission responds to public comment on the proposed rule and makes appropriate revisions before publishing the final rule in the Federal Register. Although the proposing release for this rulemaking was issued in October 2016 under Chair Mary Jo White’s leadership, it was first included in Chair Clayton’s Reg Flex Agenda in Spring 2020.
Exempt Offerings
One of the last rulemaking projects completed by the Clayton Commission was amending the accredited investor definition in August 2020[8] and simplifying the Securities Act integration framework in November 2020, as part of a larger effort to harmonize the exempt offering framework.[9]
Given the scope of these amendments, it was not generally expected that exempt offerings would be a priority for the Gensler Commission. Nevertheless, the Reg Flex Agenda lists “Exempt Offerings” as a new “prerule stage” item and describes the rulemaking project with greater specificity as compared to other items, as follows:
“The Division is considering recommending that the Commission seek public comment on ways to further update the Commission’s rules related to exempt offerings to more effectively promote investor protection, including updating the financial thresholds in the accredited investor definition, ensuring appropriate access to and enhancing the information available regarding Regulation D offerings, and amendments related to the integration framework for registered and exempt offerings.”
ESG Disclosure
As expected, the Reg Flex Agenda lists a number of items relating to Environmental/Social/Governance disclosures, all of which are “proposed rule stage” items:[10]
- “Climate Change Disclosure” – whether to “propose rule amendments to enhance registrant disclosures regarding issuers’ climate-related risks and opportunities”;[11]
- “Human Capital Management Disclosure” – whether to “propose rule amendments to enhance registrant disclosures regarding human capital management”;
- “Cybersecurity Risk Governance” – whether to “propose rule amendments to enhance issuer disclosures regarding cybersecurity risk governance”; and
- “Corporate Board Diversity” – whether to “propose rule amendments to enhance registrant disclosures about the diversity of board members and nominees.”
On March 15, 2021, then-Acting Chair Allison Herren Lee solicited public input on climate change disclosures by publishing 15 questions for comment.[12] The informal comment period for this solicitation of input ended on June 13, 2021.
Rule 10b5-1 Plans and Share Buybacks
As early as 2007, then-Director of Enforcement Linda Chatman Thomsen gave a speech in which she expressed concern about possible abuse of Rule 10b5-1 plans, which were first authorized in 2000.[13] She noted that “[r]ecent academic studies suggest that Rule 10b5-1 may be being abused. The academic data shows that executives who trade within a 10b5-1 plan outperform their peers who trade outside of a plan by nearly 6%.” As a result, “[t]his raises the possibility that plans are being abused essentially to facilitate trading on inside information. So we’re looking…. If executives are in fact trading on inside information and using a plan for cover, the plan will provide no defense.”
Although the Commission has brought only a handful of enforcement actions involving the alleged abuse of a Rule 10b5-1 plan,[14] Chair Gensler recently stated that, “[i]n my view, these plans have led to real cracks. Thus, I’ve asked staff to make recommendations for the Commission’s consideration on how we might freshen up Rule 10b5-1.”[15] Gensler cited four areas of concern. First, there is no cooling off period required before an insider can make his or her first trade under the plan. He noted that cooling-off periods of four to six months have received bipartisan support. Second, he noted that there is currently no limitation on when Rule 10b5-1 plans can be cancelled. In his view, “canceling a plan may be as economically significant as carrying out an actual transaction.” Third, there are no mandatory disclosure requirements regarding Rule 10b5-1 plans. Fourth, there are no limits on the number of 10b5-1 plans that insiders can adopt. Finally, Gensler noted that he is interested in Rule 10b5-1’s “intersection with share buybacks.”
Consistent with these statements, the Reg Flex Agenda lists “Rule 10b5-1” as a new “proposed rule stage” item regarding whether to “propose amendments to address concerns about the use of the affirmative defense provisions of Exchange Act Rule 10b5-1.” The agenda also lists “Share Repurchases Disclosure Modernization” as a new “proposed rule stage” item regarding whether to “propose amendments to modernize disclosure of share repurchases, including Item 703 of Regulation S-K.” Currently, share repurchase information (total number of shares purchased each month and the average price paid per share for that month) is required to be included in periodic reports, with footnote disclosure indicating whether purchases have been made pursuant to publicly announced plans or programs or outside of any such plans or programs.
Beneficial Ownership Reporting and Swaps
The Reg Flex Agenda notes that the Division is “considering recommending that the Commission propose amendments to enhance market transparency, including disclosure related beneficial ownership or interests in security-based swaps.” This new “proposed rule stage” item is likely related to the recent blow-up at Archegos Capital, a family office with extensive security-based swap and derivative positions that resulted in significant losses at several major investment banks.[16] The magnitude of the losses emanating from this unregulated entity attracted much attention among legislators and the Commission, so it comes as no surprise that the Commission is considering whether to propose new rules seeking to enhance the transparency of significant holdings of swaps by market participants. What is surprising is the absence of any mention of rulemaking that would potentially accelerate the current 10-calendar day deadline for filing initial Schedule 13D beneficial ownership reports – a generous filing deadline that has been of keen interest to public companies, legal practitioners, market participants and academics alike for decades.[17]
SPACs
Given the recent and significant volume of SPAC filings, it is not surprising that the Reg Flex Agenda lists, as a new “proposed rule stage” item, “Special Purpose Acquisition Companies.” As the abstract indicates only that the Division is considering whether to recommend that the Commission propose rule amendments “related to special purpose acquisition companies,” it is not possible to discern the nature or objective of this rulemaking project based on the Reg Flex Agenda.
Dodd-Frank Items Added Back to the Reg Flex Agenda
The Fall 2020 Reg Flex Agenda, the last one issued under the Clayton Commission, did not include certain Dodd-Frank-mandated rulemakings; these have now been added back to the Spring 2021 Reg Flex Agenda. Specifically, these are “Listing Standards for Recovery of Erroneously Awarded Compensation,” which is to implement Section 954 of Dodd-Frank and is now in the “proposed rule stage” (i.e., it is being reproposed); “Incentive-Based Compensation Arrangements,” which is to implement Section 956 of Dodd-Frank and is also being reproposed; and “Pay Versus Performance,” which is to implement Section 953(a) of Dodd-Frank and is listed (alarmingly, given the critical comments that were submitted on the initial rule proposal) as a “final rule stage” item.
Dropped from the Reg Flex Agenda
In July 2018, the Commission published a concept release on “Compensatory Securities Offerings and Sales,” which solicited comment on Securities Act Rule 701, which exempts from registration offers and sales of securities issued by non-reporting companies pursuant to compensatory arrangements, as well as on Form S-8, which is the registration statement for compensatory offerings by reporting companies. Noting that “[s]ignificant evolution has taken place both in the types of compensatory offerings issuers make and the composition of the workforce since the Commission last substantively amended these regulation,” the Commission sought comment on “possible ways to modernize the exemption and the relationship between and Form S-8, consistent with investor attention.”
This concept release then served as the basis for an item in the Fall 2020 Reg Flex Agenda, “Amendments to Rule 701/Form S-8.” Also listed in the Fall 2020 Reg Flex Agenda was a new “proposed rule stage” item, “Temporary Rules to Include Certain ‘Platform Workers’ in Compensatory Offerings Under Rule 701 and Form S-8,” which Commissioners Peirce and Roisman described in their June 14, 2021 statement as “allow[ing] companies to compensate gig workers with equity.” Both of these items have been dropped from the Spring 2021 Reg Flex Agenda.
Conclusion
Not unlike what is happening elsewhere in the Executive Branch, it now appears that part of the agenda of the Gensler Commission will be undoing the work of the Trump Administration. In particular, in the last year of the Clayton Commission, many significant rulemakings were adopted over the dissent of the Democrat Commissioners. Rereading now the “Statement on Departure of Chairman Jay Clayton” by Commissioners Allison Herren Lee and Caroline A. Crenshaw, their use of the possessive pronoun takes on more meaning: “In addition to advancing his policy priorities, Chairman Clayton has led the agency through difficult times for the markets and our staff” (emphasis added).[18]
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[1] Commissioner Hester M. Peirce and Commissioner Elad L. Roisman, “Moving Forward or Falling Back? Statement on Chair Gensler’s Regulatory Agenda,” June 14, 2021, available at: https://www.sec.gov/news/public-statement/moving-forward-or-falling-back-statement-chair-genslers-regulatory-agenda.
[2] It should also be noted that the requirement to provide a bi-annual reg flex agenda stems from the Regulatory Flexibility Act, which was enacted in 1980 to require agencies to consider the impact of their rules on small entities and to consider less burdensome alternatives. A reg flex agenda provides notice to the public about what future rulemaking is under consideration and is not binding upon an agency in any way.
[3] In a June 17, 2021 newsletter, the Council of Institutional Investors (CII) stated, “The SEC on June 11 released a Spring 2021 rulemaking agenda that closely aligns with most of the priorities that CII set out for this year.”
[4] Chair Gary Gensler, “Statement on the application of the proxy rules to proxy voting advice,” June 1, 2021, available at: https://www.sec.gov/news/public-statement/gensler-proxy-2021-06-01. Chair Gensler’s statement also referred to the Commission’s guidance and interpretation issued in 2019 relating to proxy advisory firms, which have effectively been superseded by the 2020 rule amendments. This guidance and interpretation addressed two questions: first, whether proxy voting advice constitutes a “solicitation”; and second, whether proxy voting advice is subject to the antifraud rule, Exchange Act Rule 14a-9. In October 2019, Institutional Shareholder Services, Inc. filed suit in the U.S. District Court for the District of Columbia to challenge the 2019 interpretation and guidance. On June 1, 2021, the Commission filed an unopposed motion to hold the case in abeyance, noting that “[f]urther regulatory action on the items Chair Gensler has directed staff to consider revisiting could substantially narrow or moot some or all of ISS’s claims.”
[5] A “prerule” means that the Commission will solicit public comment on whether or not, or how best, to initiate a rulemaking. In contrast, a “proposed rule” means that the Commission is at the stage in which it will propose to add to or change its existing regulations and will solicit public comment on a rule proposal.
[6] Division of Corporation Finance, “Statement on Compliance with the Commission’s 2019 Interpretation and Guidance Regarding the Applicability of the Proxy Rules to Proxy Voting Advice and Amended Rules 14a-1(1), 14a-2(b), 14a-9,” June 1, 2021, available at: https://www.sec.gov/news/public-statement/corp-fin-proxy-rules-2021-06-01.
[7] Release No. 34-89964, Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8, Sept. 23, 2020, available at: https://www.sec.gov/rules/final/2020/34-89964.pdf. On June 15, 2021, a group of investors led by the Interfaith Center on Corporate Responsibility filed suit against the Commission in U.S. District Court in the District of Columbia to vacate these rule amendments. Interfaith Center on Corporate Responsibility et al. v. SEC, U.S. District Court, District of Columbia, No. 21-01620 (June 15, 2021).
[8] Accredited Investor Definition, Release No. 33-10824 (Aug. 26, 2020) [85 FR 63726]
[9] Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets, Release No. 33-10884 (Nov. 2, 2020) [86 FR 3496].
[10] The first three items are new; the last is a continuation from the Fall 2020 Reg Flex Agenda.
[11] On June 16, 2021, the U.S. House of Representatives passed a bill, the Corporate Governance Improvement and Investor Protection Act, H.R. 1187, that would direct the Commission to issue rules within two years requiring every public company to disclose climate-specific metrics in financial statements.
[12] Acting Chair Allison Herren Lee, “Public Input Welcomed on Climate Change Disclosures,” March 15, 2021, available at: https://www.sec.gov/news/public-statement/lee-climate-change-disclosures.
[13] Linda Chatman Thomsen, “Opening Remarks Before the 15th Annual NASPP Conference,” Oct. 10, 2007, available at: https://www.sec.gov/news/speech/2007/spch101007lct.htm.the
[14] See, for example, the SEC’s Enforcement action in 2010 against Angelo Mozilo, the former head of Countrywide Financial. The SEC’s complaint alleged that, “During the course of this fraud, Mozilo engaged in insider trading in Countrywide’s securities. Mozilo established four sales plans pursuant to Rule 10b5-1 of the Securities Exchange Act in October, November, and December 2006 while in possession of material, non-public information concerning Countrywide’s increasing credit risk and the risk that the poor expected performance of Countrywide-originated loans would prevent Countrywide from continuing its business model of selling the majority of the loans it originated into the secondary mortgage market.”
[15] Gary Gensler, “Prepared Remarks at the Meeting of SEC Investor Advisory Committee,” June 10, 2021, available at: https://www.sec.gov/news/public-statement/gensler-iac-2021-06-10?utm_medium=email&utm_source=govdelivery.
[16] See Alexis Goldstein, These Invisible Whales Could Sink the Economy, N.Y. Times, May 18, 2021, available here: https://www.nytimes.com/2021/05/18/opinion/archegos-bill-hwang-gary-gensler.html
[17] See, e.g., Wachtell, Lipton, Rosen & Katz rulemaking petition on Schedule 13D filing deadlines (Mar. 7, 2011) available here: https://www.sec.gov/rules/petitions/2011/petn4-624.pdf.
[18] Commissioners Allison Herren Lee and Caroline A. Crenshaw, “Statement on Departure of Chairman Jay Clayton,” Nov. 16, 2020, available at: https://www.sec.gov/news/public-statement/lee-crenshaw-statement-departure-chairman-jay-clayton.
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On June 8, 2021, the New York Senate confirmed the appointment of Anthony Cannataro and Madeline Singas to the seven-member New York Court of Appeals. Judge Cannataro, who was formerly the Administrative Judge of the Civil Court of the City of New York, will fill the vacancy left by Judge Paul Feinman, who recently passed away. Judge Singas, who was formerly the Nassau County District Attorney, will fill the vacancy left by the retiring Judge Leslie Stein.[1] These new judges will leave a lasting mark on the Court of Appeals, which is New York’s court of last resort.
Governor Andrew Cuomo has now appointed all seven members of the Court,[2] and because Judges Cannataro and Singas could serve on the Court for a decade or more, they could serve well past the Governor’s time in office.[3] Judge Singas’s confirmation, however, was not unanimous, with opposition coming from Democrats as well as Republicans.[4]
Although the replacement of Judges Feinman and Stein marks an important development for the Court and its litigants, it remains to be seen whether, and if so in what ways, the confirmation of these new judges portends a shift in the Court’s jurisprudence.
Judge Cannataro Replaces Judge Feinman
Judge Cannataro has had a distinguished career in public service, particularly on the bench. After graduating from New York Law School in 1996, he served in the New York City Law Department and then as principal law clerk to Carmen Beauchamp Ciparick on the New York Court of Appeals, and to Lottie Wilkins on the New York Supreme Court. He then served on the New York County Civil Court and held positions on the Kings County Family Court, Bronx County Civil Court, and New York Supreme Court. In 2017, he was elected to Supreme Court, New York County, and was appointed as Administrative Judge for the Civil Court of the City of New York.[5]
Judge Cannataro is the second openly LGBTQ judge on the Court of Appeals, following his predecessor (Judge Feinman), who was the first.[6] Judge Cannataro has been the Co-Chair of the Richard C. Failla LGBT Commission of the New York State Courts, and he has been a member of the Plain Language Committee of the Permanent Commission on Access to Justice.[7] He has publicly emphasized that judges are attuned to the needs of litigants, and that they are “regular people” who “come in all different types, sizes, and backgrounds.”[8]
Despite his lengthy judicial career, Judge Cannataro has not yet sat an appellate bench, and he has published only a handful of opinions in the New York Official Reports.[9] Predicting his judicial philosophy is therefore particularly difficult. Nevertheless, at least one commentator has predicted that he will resolve cases somewhere on the Court’s ideological center-left.[10]
Judge Cannataro replaces recently deceased Judge Feinman, who was appointed in 2017 to fill a vacancy created by the tragic death of Judge Sheila Abdus-Salaam.[11] Judge Feinman graduated from the University of Minnesota Law School in 1985, then worked as a staff attorney for the Legal Aid Society and as a principal law clerk for Justice Angela Mazzarelli on the New York Supreme Court and in the Appellate Division, First Department. From there, he began a lengthy judicial career, starting with his election to the Civil Court of the City of New York in 1996. He then was assigned to the Criminal Court until 2001, designated an acting Supreme Court Justice in 2004, and elected a Justice of Supreme Court in 2007. Governor Cuomo appointed him to the Appellate Division, First Department, in 2012.[12]
Judge Feinman made history as the first openly gay judge to serve on the New York Court of Appeals.[13] His confirmation was unanimous, and he received strong support from LGBTQ rights groups, with experience and leadership positions in LGBTQ and other organizations.[14] He was highly regarded for his thoughtfulness, collegiality, and “sparkling” intellect, with an ability to parse a wide range of issues in a balanced, non-biased manner.[15] Some described him as a “moderate with progressive instincts” who was not “dogmatic in his thinking.”[16] In the year preceding his passing, he voted with Chief Judge DiFiore and Judge Michael Garcia in nearly 90% of cases—a far higher rate than did other members of the current Court.[17]
Judge Singas Replaces Judge Stein
Judge Singas comes to the bench with a distinguished public career as a former prosecutor. The daughter of Greek immigrants, she graduated from Fordham Law School and began her legal career as an Assistant District Attorney in Queens in 1991 “at the height of the crack wars.” She eventually joined the Nassau County District Attorney’s Office in 2006 as chief of the Special Victims Bureau, focusing on crimes against the elderly, children, and victims of domestic and sexual abuse. She became the District Attorney of Nassau County in 2015.[18]
As a district attorney, Judge Singas touted her focus on combatting drug and gun trafficking, violent gangs, sexual assaults, and government corruption.[19] The Governor appointed her to investigate Eric Schneiderman, the state’s former Attorney General accused of assaulting four women, and although the investigation found credible allegations, it did not lead to criminal charges because of purported legal impediments.[20] In nominating Judge Singas, Governor Cuomo praised her work in championing “justice for all” through the creation of an Immigrant Affairs Office, dedicating resources to post-incarceration resources, and working on behalf of Nassau County’s “most vulnerable victims” such as children and victims of domestic and sexual abuse.[21]
Judge Singas’s confirmation followed a debate in the Senate, with opposition coming from both sides of the political aisle.[22] Democratic senators and advocates for criminal justice cautioned that her confirmation could lead to an expansion of police powers and a less equitable justice system, given the Court’s current slate of former prosecutors and her public statements about measures such as bail reform.[23] Republican senators expressed concern that she could rule favorably for the Governor in a potential impeachment trial.[24] Judge Singas was strongly supported by moderate Long Island Democrats who helped propel her to confirmation; at her confirmation hearing, Judge Singas highlighted her immigrant background and experience working with vulnerable individuals, assuring the Senate that she would rule fairly and impartially if confirmed.[25]
Given her lack of judicial experience, it is difficult to predict how her confirmation will impact the Court. Notably, however, her appointment follows the confirmation of two other former prosecutors who often vote together—Chief Judge DiFiore, a former Republican whom she has called a friend and mentor,[26] and Judge Garcia, who served as a U.S. Attorney during the George W. Bush administration.[27] Some commentators have predicted that she will rule consistently with these judges on certain issues, particularly in criminal cases,[28] but that remains to be seen.
Judge Singas replaces Judge Stein, who followed a different path on her way to the Court. Judge Stein graduated from Albany Law School in 1981 and began her career as a law clerk to the Schenectady Family Court Judges. After focusing on matrimonial and family law in private practice, she was appointed and elected to the Albany City Court, in addition to serving as an Acting Albany County Court Judge and New York State Supreme Court Judge. In 2008, she was appointed to the New York State Appellate Division, Third Department. She has served as the Administrative Judge of the Rensselaer County Integrated Domestic Violence Part, and she was a former co-chair of the State Unified Court System Family Violence Task Force.[29]
Judge Stein’s nomination was easily confirmed in 2015. She promised to keep an open mind and refrain from being an “activist judge.”[30] Her simultaneous confirmation with Judge Eugene Fahey swung the court from a Republican-appointed to a Democrat-appointed majority for the last several years.[31] Her announcement last year, however, that she would retire from the bench after serving less than half of her term was surprising. She has explained that she wished to spend more time on private pursuits, particularly after the pandemic, and that she sought to step down in advance of Judge Fahey’s impending exit from the Court at the end of this year.[32]
During Judge Stein’s career, court analysts perceived her to be aligned with the Court’s more liberal judges, typically siding with women, children, and other vulnerable individuals, but without a particularly strong pattern in criminal cases and with a concededly deferential approach to administrative agencies.[33] She has recently characterized herself as a “consensus builder” and stated that she believes her judicial record cannot be “easily pigeonholed” or criticized as prejudging cases for preferred results.[34] Indeed, analysts who regularly follow the Court suggest she likely left the Court as its “swing vote,” having voted with the majority in 95% of cases last year and sided often with the “DiFiore-Garcia-Feinman block” in sharply divided decisions.[35]
Conclusion
The departures of Judges Feinman and Stein mark a significant and unexpected development for the Court. The Court’s changing composition could impact both its opinions and its caseload, especially at a time when the Court has been reviewing fewer civil cases per year and has been issuing a growing number of fractured concurring and dissenting opinions.[36]
Although some believe that newly confirmed Judges Cannataro and Singas will spark a “dramatic rightward turn for the Court,”[37] particularly given the latter’s prosecutorial background, it remains to be seen how the two collectively will affect future rulings. Indeed, the Court has been perceived by some as fairly moderate in recent years,[38] with Judges Feinman and Stein (and Judge Fahey) considered to form the Court’s ideological center,[39] and similarities between the new and departing judges, such as judicial experience and a focus on protecting especially vulnerable individuals, suggest a possible continuation of that trend.
Since Judge Feinman’s passing, the Court has ordered several cases to be reargued in a “future court session,”[40] which may suggest that his was a potential swing vote in those cases. Regardless, analysts have expressed some concern that the new Court lacks “professional diversity,” which now includes three former prosecutors and only one judge (Fahey) who has judicial experience on the Appellate Division.[41]
The Court’s future will grow even more uncertain in the coming months, as Judge Fahey will reach his mandatory retirement age at the end of this year.[42] Not only is he considered a potential swing judge on the current Court,[43] but his replacement will undoubtedly have an opportunity to join the newly confirmed judges in shaping the Court’s jurisprudence moving forward.
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[1] https://www.governor.ny.gov/news/governor-cuomo-announces-nominations-court-appeals-and-court-claims-and-first-round.
[2] https://www.democratandchronicle.com/story/news/politics/albany/2021/05/25/cuomo-new-york-court-of-appeals-nominations/7435678002/.
[3] See N.Y. Const. art. VI, § 2; see also, e.g., https://www.democratandchronicle.com/story/news/politics/albany/2021/05/25/cuomo-new-york-court-of-appeals-nominations/7435678002/; https://www.law.com/newyorklawjournal/2021/06/04/singas-nomination-to-ny-court-of-appeals-draws-concern-from-law-professors/; https://www.law.com/newyorklawjournal/2021/06/08/weathering-fiery-confirmation-fight-singas-confirmed-to-nys-high-court-along-with-cannataro/.
[4] https://www.law.com/newyorklawjournal/2021/06/08/weathering-fiery-confirmation-fight-singas-confirmed-to-nys-high-court-along-with-cannataro/; https://www.nydailynews.com/news/politics/new-york-elections-government/ny-cuomo-court-of-appeals-candidates-approved-20210608-nalzuynhxrb2lchgk5nutem2h4-story.html; https://www.wsj.com/articles/gov-andrew-cuomo-scores-victory-with-judicial-confirmations-11623625200; https://www.newsday.com/news/region-state/singas-court-of-appeals-senate-1.50271826; https://spectrumlocalnews.com/nys/central-ny/ny-state-of-politics/2021/06/08/lawmakers-look-to-a-potential-impeachment-future; https://nynow.wmht.org/blogs/criminal-justice/cuomos-court-nominees-approved-but-faced-scrutiny-from-the-left-and-the-right/.
[5] http://ww2.nycourts.gov/courts/1jd/supctmanh/bio_Cannataro.shtml (last visited June 9, 2021); https://www.governor.ny.gov/news/governor-cuomo-announces-nominations-court-appeals-and-court-claims-and-first-round.
[6] See, e.g., https://www.cityandstateny.com/articles/politics/news-politics/3-things-know-about-cuomos-new-judicial-picks.html.
[7] Id.; http://ww2.nycourts.gov/courts/1jd/supctmanh/bio_Cannataro.shtml (last visited June 9, 2021).
[8] https://www.amny.com/news/a-conversation-with-judge-anthony-cannataro-civil-court-of-the-city-of-new-york-and-justice-of-the-new-york-state-supreme-court/.
[9] See https://iapps.courts.state.ny.us/lawReporting/Search?searchType=opinion.
[10] https://nysappeals.com/2021/05/26/governor-andrew-cuomo-nominates-madeline-singas-and-hon-anthony-cannataro-to-the-court-of-appeals/.
[11] https://www.nycourts.gov/ctapps/jfeinman.htm; https://www.timesunion.com/allwcm/article/Senate-confirms-Court-of-Appeals-nominee-Paul-11237072.php?_sm_au_=iHVs4RVLTRvMnVF7FcVTvKQkcK8MG.
[12] https://www.nycourts.gov/ctapps/jfeinman.htm (last visited June 10, 2021); http://www.courts.state.ny.us/whatsnew/pdf/Feinman-Statement-33121.pdf; https://nysba.org/court-of-appeals-judge-paul-feinman-has-died/; https://www.nytimes.com/2021/04/01/nyregion/paul-feinman-dead.html?login=email&auth=login-email.
[13] See, e.g., https://www.lambdalegal.org/blog/20210401_mourning-the-passing-of-judge-paul-feinman.
[14] https://www.nytimes.com/2021/04/01/nyregion/paul-feinman-dead.html?login=email&auth=login-email; https://www.timesunion.com/allwcm/article/Senate-confirms-Court-of-Appeals-nominee-Paul-11237072.php; https://nysba.org/court-of-appeals-judge-paul-feinman-has-died/; https://www.governor.ny.gov/news/governor-cuomo-nominate-justice-paul-g-feinman-associate-judge-new-york-state-court-appeals.
[15] https://www.nydailynews.com/news/politics/new-york-elections-government/ny-obit-ny-supreme-court-judge-paul-feinman-20210331-gyjcxfokcjh5hnue74g5jgfhgq-story.html; http://www.courts.state.ny.us/whatsnew/pdf/Feinman-Statement-33121.pdf; https://www.democratandchronicle.com/story/news/politics/albany/2017/06/21/new-yorks-top-court-gets-first-openly-gay-judge/103079984/.
[16] https://www.nytimes.com/2017/06/21/nyregion/paul-feinman-court-of-appeals-gay-judge.html.
[17] https://twentyeagle.com/twentyeagles-2020-2021-new-york-court-of-appeals-statistics/.
[18] https://nassauda.org/299/Meet-The-District-Attorney (last visited June 7, 2021); https://www.cityandstateny.com/articles/politics/news-politics/3-things-know-about-cuomos-new-judicial-picks.html?.
[19] https://nassauda.org/299/Meet-The-District-Attorney (last visited June 7, 2021).
[20] https://nysappeals.com/2021/05/26/governor-andrew-cuomo-nominates-madeline-singas-and-hon-anthony-cannataro-to-the-court-of-appeals/; https://www.politico.com/states/new-york/albany/story/2018/11/08/no-criminal-charges-for-schneiderman-after-abuse-complaints-687755; https://www.npr.org/2018/11/08/665673141/eric-schneiderman-wont-face-criminal-charges-over-allegations-of-abuse; https://www.npr.org/2018/11/08/665673141/eric-schneiderman-wont-face-criminal-charges-over-allegations-of-abuse; https://www.cnn.com/2018/11/08/politics/no-charges-for-former-ny-ag-schneiderman/index.html.
[21] https://www.governor.ny.gov/news/governor-cuomo-announces-nominations-court-appeals-and-court-claims-and-first-round.
[22] https://www.law.com/newyorklawjournal/2021/06/08/weathering-fiery-confirmation-fight-singas-confirmed-to-nys-high-court-along-with-cannataro/; https://patch.com/new-york/gardencity/madeline-singas-confirmed-new-york-court-appeals-justice; https://news.wbfo.org/post/cuomos-court-nominees-approved-faced-scrutiny-left-and-right.
[23] https://www.nysenate.gov/newsroom/press-releases/alessandra-biaggi/new-york-state-senators-issue-joint-statement-opposition; https://slate.com/news-and-politics/2021/06/cuomo-criminal-justice-court-nominees.html; https://www.law.com/newyorklawjournal/2021/06/07/a-great-day-for-mediocrity-many-lawyers-left-disappointed-by-nominees-for-nys-top-court/; https://www.newsday.com/news/region-state/singas-court-of-appeals-senate-1.50271826; https://www.law.com/newyorklawjournal/2021/06/04/singas-nomination-to-ny-court-of-appeals-draws-concern-from-law-professors/.
[24] https://news.wbfo.org/post/cuomos-court-nominees-approved-faced-scrutiny-left-and-right; https://spectrumlocalnews.com/nys/central-ny/ny-state-of-politics/2021/06/08/lawmakers-look-to-a-potential-impeachment-future; https://www.wsj.com/articles/gov-andrew-cuomo-scores-victory-with-judicial-confirmations-11623625200; https://www.newsday.com/news/region-state/singas-court-of-appeals-senate-1.50271826.
[25] https://www.law.com/newyorklawjournal/2021/06/08/weathering-fiery-confirmation-fight-singas-confirmed-to-nys-high-court-along-with-cannataro/; https://news.wbfo.org/post/cuomos-court-nominees-approved-faced-scrutiny-left-and-right; https://www.newsday.com/news/region-state/singas-court-of-appeals-senate-1.50271826.
[26] https://www.law.com/newyorklawjournal/2021/06/04/singas-nomination-to-ny-court-of-appeals-draws-concern-from-law-professors/; https://www.politico.com/states/new-york/city-hall/story/2015/12/cuomo-picks-janet-difiore-to-lead-new-yorks-court-of-appeals-000000.
[27] http://www.nycourts.gov/ctapps/jgarcia.htm; see https://twentyeagle.com/twentyeagles-2020-2021-new-york-court-of-appeals-statistics/.
[28] See, e.g., https://nysappeals.com/2021/05/26/governor-andrew-cuomo-nominates-madeline-singas-and-hon-anthony-cannataro-to-the-court-of-appeals/; https://www.newsday.com/news/region-state/singas-court-of-appeals-senate-1.50271826.
[29] http://www.nycourts.gov/ctapps/jstein.htm (last visited June 10, 2021); https://nysba.org/a-candid-interview-with-court-of-appeals-associate-judge-leslie-e-stein/.
[30] https://www.nbcnewyork.com/news/local/new-york-court-of-appeals-judges-confirmed-leslie-stein-eugene-fahey/2022980/?_sm_au_=iHVs4RVLTRvMnVF7FcVTvKQkcK8MG.
[31] https://www.timesunion.com/news/article/Two-new-judges-taking-seats-on-state-s-top-court-6071942.php.
[32] https://nysba.org/a-candid-interview-with-court-of-appeals-associate-judge-leslie-e-stein/.
[33] See, e.g., Charlotte Rehfuss, Note, Judge Stein: Neither Left nor Right, 81 Albany L. Rev. 1185 (2018); http://www.newyorkcourtwatcher.com/2015/02/part-4-more-of-judge-steins-tendencies.html?_sm_au_=iHVs4RVLTRvMnVF7FcVTvKQkcK8MG; https://nysba.org/a-candid-interview-with-court-of-appeals-associate-judge-leslie-e-stein/.
[34] https://nysba.org/a-candid-interview-with-court-of-appeals-associate-judge-leslie-e-stein/; https://twentyeagle.com/interview-with-judge-leslie-stein/.
[35] https://twentyeagle.com/twentyeagles-2020-2021-new-york-court-of-appeals-statistics/.
[36] See, e.g., Mylan L. Denerstein, Akiva Shapiro, Seth M. Rokosky & Genevieve Quinn, New York Court of Appeals Roundup & Preview (2020), https://www.gibsondunn.com/new-york-court-of-appeals-round-up-december-2020/; https://twentyeagle.com/twentyeagles-2020-2021-new-york-court-of-appeals-statistics/; see also https://www.nycourts.gov/ctapps/news/annrpt/AnnRpt2020.pdf.
[37] https://www.washingtonexaminer.com/politics/cuomo-picks-two-for-seats-on-new-yorks-highest-court.; see, e.g., https://www.nysenate.gov/newsroom/press-releases/alessandra-biaggi/new-york-state-senators-issue-joint-statement-opposition; https://slate.com/news-and-politics/2021/06/cuomo-criminal-justice-court-nominees.html.
[38] See, e.g., https://www.newsday.com/news/region-state/janet-difiore-andrew-cuomo-court-of-appeals-1.30301355 (explaining that the Court has recently “moved in a more conservative direction” to a “more centrist viewpoint”). .
[39] https://nysappeals.com/2021/05/26/governor-andrew-cuomo-nominates-madeline-singas-and-hon-anthony-cannataro-to-the-court-of-appeals/.
[40] Keshia Clukey, Prosecutor, City Judge Nominated for New York’s Highest Court, Bloomberg Law News (June 3, 2021).
[41] See, e.g., https://nysappeals.com/2021/05/26/governor-andrew-cuomo-nominates-madeline-singas-and-hon-anthony-cannataro-to-the-court-of-appeals/; https://www.law.com/newyorklawjournal/2021/06/07/a-great-day-for-mediocrity-many-lawyers-left-disappointed-by-nominees-for-nys-top-court/.
[42] https://nysba.org/nominees-to-fill-judge-paul-feinmans-court-of-appeals-seat-announced/; see N.Y. Const. art. VI, § 25(b).
[43] https://nysappeals.com/2021/05/26/governor-andrew-cuomo-nominates-madeline-singas-and-hon-anthony-cannataro-to-the-court-of-appeals/.
The following Gibson Dunn lawyers prepared this client alert: Mylan Denerstein, Akiva Shapiro, Seth Rokosky, Seton Hartnett O’Brien, Grace Assaye, and Lavi Ben Dor.
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