On 15 December 2020, the Ruler of Dubai issued Decree No. (33) of 2020 which updates the law governing unfinished and cancelled real estate projects in Dubai (the “Decree”).
The Decree creates a special tribunal (the “Tribunal”) for liquidation of unfinished or cancelled real estate projects in Dubai and settlement of related rights which will replace the existing committee (the “Committee”) set up in 2013 for a similar purpose. The Tribunal will be authorised to review and settle all disputes, grievances and complaints arising from unfinished, cancelled or liquidated real estate projects in Dubai, including the disputes that remain unresolved by the Committee. The Tribunal will have wide-ranging powers, including, the ability to form subcommittees, appoint auditors and issue orders to the trustees of the real estate project’s escrow accounts in all matters related to the liquidation of unfinished or cancelled real estate projects in Dubai and determine the rights and obligations of investors and purchasers.
The Decree streamlines the process for resolving disputes, grievances and complaints relating to unfinished and/or cancelled real estate projects in Dubai by granting the Tribunal jurisdiction over all unfinished or cancelled disputes relating to real estate projects in Dubai and prohibiting all courts in Dubai, including the DIFC Courts from accepting any disputes, appeals or complaints under the jurisdiction of the Tribunal – thereby creating a more efficient route for resolution. The implementation of the Decree will be of interest to clients who have transactions related to unfinished and cancelled real estate projects in Dubai and may lead to the resolution / completion of projects that have stalled in Dubai.
The Decree also details the responsibilities and obligations of the Real Estate Regulatory Agency (“RERA”) related to supporting the Tribunal in performing its duties and responsibilities set out in the Decree. For example, RERA will be required to prepare detailed reports about unfinished and cancelled real estate projects in Dubai and provide its recommendations to the Tribunal to assist the Tribunal in settling disputes under its jurisdiction.
Gibson Dunn’s Middle East practice focuses on regional and global multijurisdictional transactions and disputes whilst also acting on matters relating to financial and investment regulation. Our lawyers, a number of whom have spent many years in the region, have the experience and expertise to handle the most complex and innovative deals and disputes across different sectors, disciplines and jurisdictions throughout the Middle East and Africa.
Our corporate team is a market leader in MENA mergers and acquisitions as well as private equity transactions, having been instructed on many of the region’s highest-profile buy-side and sell-side transactions for corporates, sovereigns and the most active regional private equity funds. In addition, we have a vibrant finance practice, representing both lenders and borrowers, covering the full range of financial products including acquisition finance, structured finance, asset-based finance and Islamic finance. We have the region’s leading fund formation practice, successfully raising capital for our clients in a difficult fundraising environment.
For further information, please contact the Gibson Dunn lawyer with whom you usually work, or the following authors in the firm’s Dubai office, with any questions, thoughts or comments arising from this update.
Aly Kassam (+971 (0) 4 318 4641, akassam@gibsondunn.com)
Galadia Constantinou (+971 (0) 4 318 4663, gconstantinou@gibsondunn.com)
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On December 8, 2020, the U.S. House of Representatives passed the Criminal Antitrust Anti-Retaliation Act of 2019.[1] Sponsored by Republican Senator Chuck Grassley and co-sponsored by Democratic Senator Patrick Leahy, the bill prohibits employers from retaliating against certain employees who report criminal antitrust violations internally or to the federal government. Similar legislation has previously been passed unanimously by the Senate in 2013, 2015, and 2017; each time, the legislation stalled in the House.[2] This time, however, the legislation has been adopted with overwhelming support in the Senate and the House.[3] The bipartisan bill now awaits the President’s signature.
Overview of the Criminal Antitrust Anti-Retaliation Act
If signed into law, the bill would amend the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 to protect employees who report to the federal government—or an internal supervising authority—criminal antitrust violations, acts “reasonably believed” by the employee to be criminal antitrust violations, and other criminal acts “committed in conjunction with potential antitrust violations,” such as mail or wire fraud.[4] The bill also protects employees who “cause to be filed, testify in, participate in, or otherwise assist” federal investigations or proceedings related to such criminal violations.[5] Notably, the bill’s expansive definition of “employee,” which could be read to include contractors, sub-contractors, and agents, may extend these protections to a broader population than a company’s own employees.
If an employee faces retaliation, such as discharge, demotion, suspension, threat, or harassment, he or she can file a complaint with the Secretary of Labor. If the Secretary of Labor does not issue a final decision within 180 days of filing, the employee can file a civil action in federal court. If the employee prevails, the employer would have to (1) reinstate the employee with the same seniority status, (2) pay back pay plus interest, and (3) compensate the employee for special damages (including litigation costs and attorney’s fees).
The bill would not protect employees who “planned and initiated” the criminal violations, or who “planned and initiated an obstruction or attempted obstruction” of federal investigations of such violations.[6] Further, the bill would not offer protection for reporting civil antitrust violations, unless they are also criminal violations.[7] And unlike Dodd-Frank, the bill would not provide reporting employees with a percentage of any monetary sanctions eventually collected by the Department of Justice (“DOJ”).[8]
Implications of the Criminal Antitrust Anti-Retaliation Act
The most immediate effects of the Criminal Antitrust Anti-Retaliation Act will be experienced by companies involved in criminal antitrust investigations. An employee who has engaged in a criminal antitrust violation may later claim to be a whistleblower after cooperating with an internal or government investigation into their own conduct. The bill does not provide clear guidance for an employer in these circumstances, though it is reasonable to assume alignment with existing whistleblower protections under the Sarbanes-Oxley Act of 2002 and other similar federal whistleblower statutes. Companies will understandably want to consider appropriate remedial personnel actions against the employees engaged in the wrongdoing, but should seek assistance from counsel to minimize the risk that the bill’s whistleblower protections are unintentionally triggered.
Additionally, companies may encounter situations in which employees seek to invoke the bill’s whistleblower protections by reporting unfounded allegations of criminal antitrust conduct when they anticipate termination for other reasons. Experienced labor and employment counsel will be familiar with this fact pattern from existing whistleblower laws (e.g., False Claims Act, Sarbanes-Oxley Act) and can provide invaluable guidance in helping to navigate a specific scenario. Still, companies will benefit from having robust, documented procedures for responding to whistleblower allegations, and implementing processes for assessing quickly whether reporting parties have good faith, credible bases for their allegations. For further guidance on whistleblower best practices, consult our April 6, 2020 guidance on this topic.[9]
A question that remains to be answered is whether the law’s exceptions ultimately limit its utility. In January 2017, the Antitrust Division injected uncertainty into its Corporate Leniency Policy by reserving the right to exclude certain “highly culpable” individuals from the scope of the immunity afforded to successful applicants.[10] Unfortunately, the Division did not define “highly culpable,” and left individuals uncertain about whether they could be prosecuted despite self-reporting and cooperating with the government. The Criminal Antitrust Anti-Retaliation Act introduces similar unpredictability by excluding from its protections individuals who “planned and initiated” the conduct.[11] Courts may ultimately be called upon to help clarify this standard, but until that time, employees may be hesitant to entrust themselves to the bill’s whistleblower protections.
The new whistleblower protections also subject companies to a heightened risk that employees will report to DOJ before reporting internally—potentially exposing employers to criminal liability for activities they may not even know are occurring, and depriving them of the opportunity to self-report. This “agency first” approach aligns with the SEC’s amendments to its whistleblower program earlier this year.[12] The Antitrust Division has an existing leniency policy for individuals that provides incentives for self-reporting, a program that was referenced in the Division’s widely read no-poach policy issued in October 2016.[13] However, the policy has been rarely used—the corporate leniency policy offers a more practical avenue for individuals to cooperate through their employer’s application.[14] The new whistleblower protections would open an additional pathway for DOJ to encourage these types of direct reports from a company’s employees. In some instances, the evidence disclosed by a company’s employee could be sufficient to preclude the company itself from later applying for protection under the Corporate Leniency Policy. Companies will therefore need to be vigilant in educating employees about internal conduits for reporting suspected violations and in conducting timely internal investigations to determine whether employee allegations have merit.
___________________
[1] H.R. 8226, 116th Cong. (2020).
[2] Julie Arciga, Congress Approves New Antitrust Whistleblower Protections, Law360, https://www.law360.com/articles/1335665/congress-approves-new-antitrust-whistleblower-protections.
[3] 166 Cong. Rec. S5904-05 (daily ed. Oct. 17, 2019); 166 Cong. Rec H7007-09 (daily ed. Dec. 08, 2020).
[4] H.R. 8226, 116th Cong. (2020).
[8] Whistleblower Program, U.S. Securities and Exchange Commission, http://www.sec.gov/spotlight/dodd-frank/whistleblower.shtml.
[9] When Whistleblowers Call: Planning Today for Employee Complaints During and After the COVID-19 Crisis, available at: https://www.gibsondunn.com/when-whistleblowers-call-planning-today-for-employee-complaints-during-and-after-the-covid-19-crisis/.
[10] U .S. Department of Justice, Antitrust Division, “Frequently Asked Questions about the Antitrust Division’s Leniency Program and Model Leniency Letters” (Jan. 26, 2017), available at https://www.justice.gov/atr/page/file/926521/download.
[11] H.R. 8226, 116th Cong. (2020).
[12] SEC Amends Whistleblower Rules, available at: https://www.gibsondunn.com/sec-amends-whistleblower-rules/.
[13] Antitrust Guidance for Human Resources Professionals, U.S. Department of Justice Antitrust Division, October 2016, available at: https://www.justice.gov/atr/file/903511/download. The Division’s Guidance is analyzed here: https://www.gibsondunn.com/antitrust-agencies-issue-guidance-for-human-resource-professionals-on-employee-hiring-and-compensation/.
[14] Leniency Policies for Individuals, U.S. Department of Justice, https://www.justice.gov/atr/individual-leniency-policy.
The following Gibson Dunn lawyers prepared this client alert: Daniel Swanson, Rachel Brass, Scott Hammond, Jeremy Robison, Chris Wilson and Anna Aguillard.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Antitrust and Competition practice group, or the following authors:
Antitrust and Competition Group:
Washington, D.C.
Adam Di Vincenzo (+1 202-887-3704, adivincenzo@gibsondunn.com)
Scott D. Hammond (+1 202-887-3684, shammond@gibsondunn.com)
Kristen C. Limarzi (+1 202-887-3518, klimarzi@gibsondunn.com)
Joshua Lipton (+1 202-955-8226, jlipton@gibsondunn.com)
Richard G. Parker (+1 202-955-8503, rparker@gibsondunn.com)
Cynthia Richman (+1 202-955-8234, crichman@gibsondunn.com)
Jeremy Robison (+1 202-955-8518, wrobison@gibsondunn.com)
Andrew Cline (+1 202-887-3698, acline@gibsondunn.com)
Chris Wilson (+1 202-955-8520, cwilson@gibsondunn.com)
New York
Eric J. Stock (+1 212-351-2301, estock@gibsondunn.com)
Lawrence J. Zweifach (+1 212-351-2625, lzweifach@gibsondunn.com)
Los Angeles
Daniel G. Swanson (+1 213-229-7430, dswanson@gibsondunn.com)
Samuel G. Liversidge (+1 213-229-7420, sliversidge@gibsondunn.com)
Jay P. Srinivasan (+1 213-229-7296, jsrinivasan@gibsondunn.com)
Rod J. Stone (+1 213-229-7256, rstone@gibsondunn.com)
San Francisco
Rachel S. Brass (+1 415-393-8293, rbrass@gibsondunn.com)
Caeil A. Higney (+1 415-393-8248, chigney@gibsondunn.com)
Dallas
Veronica S. Lewis (+1 214-698-3320, vlewis@gibsondunn.com)
Mike Raiff (+1 214-698-3350, mraiff@gibsondunn.com)
Brian Robison (+1 214-698-3370, brobison@gibsondunn.com)
Robert C. Walters (+1 214-698-3114, rwalters@gibsondunn.com)
Brussels
Peter Alexiadis (+32 2 554 7200, palexiadis@gibsondunn.com)
Attila Borsos (+32 2 554 72 11, aborsos@gibsondunn.com)
Jens-Olrik Murach (+32 2 554 7240, jmurach@gibsondunn.com)
Christian Riis-Madsen (+32 2 554 72 05, criis@gibsondunn.com)
Lena Sandberg (+32 2 554 72 60, lsandberg@gibsondunn.com)
David Wood (+32 2 554 7210, dwood@gibsondunn.com)
Frankfurt
Georg Weidenbach (+49 69 247 411 550, gweidenbach@gibsondunn.com)
Munich
Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com)
Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com)
London
Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com)
Charles Falconer (+44 20 7071 4270, cfalconer@gibsondunn.com)
Ali Nikpay (+44 20 7071 4273, anikpay@gibsondunn.com)
Philip Rocher (+44 20 7071 4202, procher@gibsondunn.com)
Deirdre Taylor (+44 20 7071 4274, dtaylor2@gibsondunn.com)
Hong Kong
Kelly Austin (+852 2214 3788, kaustin@gibsondunn.com)
Sébastien Evrard (+852 2214 3798, sevrard@gibsondunn.com)
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Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
In one of the most anticipated rulings of recent years, on 11 December 2020 the UK Supreme Court handed down judgment in Merricks v Mastercard, dismissing (by a majority) Mastercard’s appeal against the criteria established by the Court of Appeal for the certification of class actions by the UK’s Competition Appeal Tribunal (“CAT”). The case is a landmark £14 billion opt-out collective proceeding which was started in 2016. The application for a Collective Proceedings Order will now be remitted to the CAT to be re-heard.
Mr Merricks’ application was only the second to come before the CAT since the ability for a class representative to commence opt-out US-style class actions was introduced into the Competition Act 1998 by the Consumer Rights Act 2015. Unlike opt-in actions, which require potential claimants to explicitly sign-up, in opt-out actions anyone who falls within the scope of the proposed class definition will automatically be treated as a member of the class unless they explicitly withdraw.
In order to grant a Collective Proceedings Order, the CAT must be satisfied that the following four requirements are met: (i) it is just and reasonable for the applicant to act as the class representative; (ii) the application is brought on behalf of an identifiable class of persons; (iii) the proposed claims must raise common issues (that is, they raise the same, similar or related issues of fact and law); and (iv) the claims must be suitable to be brought in collective proceedings.
Background
In 2007, the European Commission (“EC”) found that Mastercard had violated European Union competition laws in relation to the setting of multi-lateral interchange fees (“MIFs”) that were charged between banks for transactions using Mastercard issued credit and debit cards (the “EC Decision”).
In September 2016, Mr Merricks applied to the CAT for a Collective Proceedings Order (“CPO”) on an opt-out basis under section 47B of the Competition Act 1998 in reliance on the EC Decision (the “Application”). The Application was made on behalf of all individuals over the age of 16 who had been resident in the UK for a continuous period of at least three months and who, between 22 May 1992 and 21 June 2008, purchased goods or services from merchants in the UK which accepted Mastercard (approximately 46 million consumers). The proposed class included all purchasers from those merchants during the relevant period regardless of whether or not they used a Mastercard payment card to make the purchase. Mr Merricks alleged that Mastercard’s unlawful conduct resulted in merchants paying higher MIFs which merchants passed-on to consumers by increasing the prices for the products or services they provided. The damages sought from Mastercard were estimated at over £14 billion.
CAT Judgment (Walter Hugh Merricks CBE v MasterCard Incorporated & Ors [2017] CAT 16)
In considering the requirements for certification, the CAT held that the expert methodology proposed by an applicant to calculate alleged loss had to: (i) offer a realistic prospect of establishing loss on a class-wide basis so that, if the overcharge by Mastercard was eventually established at the full trial of the common issues, there was a means by which to demonstrate that it was common to the class (i.e., that passing on to the consumers who were members of the class had occurred); and (ii) the methodology could not be purely theoretical or hypothetical, but had to be grounded in the facts of the particular case and there had to be some evidence of the availability of the data to which the methodology was to be applied.
The CAT refused Mr Merricks’ Application for two main reasons: (i) a perceived lack of data to operate the proposed methodology for determining the level of pass-on of the overcharges to consumers; and (ii) the absence of any plausible means of calculating the loss of individual claimants so as to devise an appropriate method of distributing any aggregate award of damages.
Court of Appeal Judgment (Walter Hugh Merricks CBE v MasterCard Incorporated & Ors [2019] EWCA Civ 674)
In April 2019 the Court of Appeal allowed an appeal by Mr Merricks on both issues. As to the first issue, the Court of Appeal held that:
- Demonstrating pass-on to consumers generally satisfies the test of commonality of issues necessary for certification (i.e., it was not necessary to analyse pass-on to consumers at a detailed individual level).
- At the certification stage, the CAT should only consider whether the proposed methodology is capable of establishing loss to the class as a whole.
- There should not be a mini-trial at the certification stage and it was not appropriate to require the proposed representative to establish more than a reasonably arguable case. There had been no requirement to produce all the evidence or to enter into a detailed debate about its probative value and the expert evidence had been exposed to a more vigorous process of examination than should have taken place.
- Certification is a continuing process and the CAT can revisit the appropriateness of the class action after pleadings, disclosure, and expert evidence are complete.
As to the second issue, the Court of Appeal held that:
- An aggregate award of damages is not required to be distributed on a compensatory basis and it is only necessary at the certification stage for the CAT to be satisfied that the claim is suitable for an aggregate award. Distribution is a matter for the trial judge to consider following the making of an aggregate award.
The Court of Appeal’s judgment was therefore viewed to have “lowered the bar” to certification by comparison with the narrower approach that the CAT had originally taken. Mastercard was granted permission to appeal the judgment to the Supreme Court.
Supreme Court Judgment
Mastercard’s appeal was heard in May 2020 and the Supreme Court had to consider two main issues:
- What is the legal test for certification of claims as eligible for inclusion in collective proceedings?
- What is the correct approach to questions regarding the distribution of an aggregate award at the stage at which a party is applying for a CPO?
Delivering the majority judgment, Lord Briggs emphasised that the collective proceedings regime is “a special form of civil procedure for the vindication of private rights, designed to provide access to justice for that purpose where the ordinary forms of individual civil claim have proved inadequate for the purpose” and that it follows that “it should not lightly be assumed that the collective process imposes restrictions upon claimants as a class which the law and rules of procedure for individual claims would not impose”.
With this in mind, on the first main issue, Lord Briggs ruled that, when the CAT is considering the question as to whether claims are suitable to be brought using the collective proceedings procedure, the question that must be answered is whether the claims are more suitable to be brought as collective claims rather than individual claims. In particular, if difficulties identified with the claims forming the basis of the collective proceedings were themselves insufficient to deny a trial to an individual claimant who could show an arguable case to have suffered some loss, then those same difficulties should not be sufficient to lead to a denial of certification for collective proceedings.
As to whether the certification stage should involve an assessment of the underlying merits of the claim, Lord Briggs emphasised that, “the certification process is not about, and does not involve, a merits test”. The Court recognised an exception to this general approach only in circumstances where: (i) a proposed defendant brings a separate application for strike-out (or an applicant seeks summary judgment); or (ii) where the court is required to assess the strength of the proposed claims in the context of a choice between opt-in and opt-out proceedings.
In relation to the second main issue, Lord Briggs made clear that the compensatory principle of damages was “expressly, and radically, modified” by the collective proceedings regime and, where aggregate damages were to be awarded, the ordinary requirement to assess loss on an individual basis was removed. A central purpose of the power to award aggregate damages in collective proceedings is to avoid the need for individual assessment of loss. In particular, there will be cases where the mechanics of approximating individual loss are so difficult and disproportionate (for example because of the modest amounts likely to be recovered by individuals in a large class) that some other method may be more reasonable, fair and just. As to whether it is necessary for an applicant to demonstrate that evidence needed to calculate loss is available, Lord Briggs was clear that “the fact that data is likely to turn out to be incomplete and difficult to interpret, and that its assembly may involve burdensome and expensive processes of disclosure are not good reasons for a court or tribunal refusing a trial to an individual or to a large class who have a reasonable prospect of showing they have suffered some loss from an already established breach of statutory duty”. In reaching this conclusion, Lord Briggs noted that incomplete, or difficulties interpreting, data are everyday issues for the courts and that, even if the task of quantifying loss was very difficult, “it is a task which the CAT owes a duty to the represented class to carry out, as best it can with the evidence that eventually proves to be available”.
In their dissenting judgment, Lord Sales and Lord Leggatt agreed with the majority about the point on the compensatory principle, but otherwise considered that the CAT made no error of law in its assessment that the claims were not suitable for collective proceedings. In their view, the CAT’s decision to refuse certification should have been respected on that separate ground and they raised concerns that the approach of the majority risked undermining the CAT’s role as a gatekeeper for these types of actions.
Comment
It remains to be seen to what extent the Supreme Court’s judgment will affect the UK’s fledgling class action regime. However, whilst the majority judgment has provided much needed clarification as to what is the correct approach for the CAT to take when considering whether claims are suitable for collective proceedings, the dissenting judges have warned that the approach set out in the majority judgment has the potential to “very significantly diminish the role and utility of the certification safeguard”. If they are correct, this will lead to an increase in large scale opt-out collective actions being commenced in the UK.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Antitrust and Competition practice group, or the following authors in London:
Philip Rocher (+44 (0) 20 7071 4202, procher@gibsondunn.com)
Doug Watson (+44 (0) 20 7071 4217, dwatson@gibsondunn.com)
Susy Bullock (+44 (0) 20 7071 4283, sbullock@gibsondunn.com)
Dan Warner (+44 (0) 20 7071 4213, dwarner@gibsondunn.com)
Kirsty Everley (+44 (0) 20 7071 4043, keverley@gibsondunn.com)
UK Competition Litigation Group:
Patrick Doris (+44 (0) 20 7071 4276, pdoris@gibsondunn.com)
Steve Melrose (+44 (0) 20 7071 4219, smelrose@gibsondunn.com)
Ali Nikpay (+44 (0) 20 7071 4273, anikpay@gibsondunn.com)
Sarah Parker (+44 (0) 78 3324 5958/+44 (0) 20 7071 4073, sparker@gibsondunn.com)
Deirdre Taylor (+44 (0) 20 7071 4274, dtaylor2@gibsondunn.com)
© 2020 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 December 11, 2020, the FDA granted Emergency Use Authorization for the Pfizer/BioNTech COVID-19 vaccine candidate.[1] That vaccine, which appears to be more than 90% effective in preventing the virus’s spread,[2] will likely soon be joined by other candidates, such as a similarly effective vaccine developed by Moderna.[3]
With their blazing-fast production time and extraordinary efficacy, the COVID-19 vaccines are among our most impressive recent medical achievements. They may also be the most controversial. Despite near-universal healthcare consensus as to the vaccines’ safety and efficacy, early polling suggests deep skepticism, with many in the population indicating that, if offered the vaccine, they will refuse.[4] And in a time of endemic disinformation and controversy, this resistance may only deepen.
Given the choice, employers might prefer to stay on the sidelines in an effort to avoid the coming “vaccine wars.” Like it or not, however, America’s workplaces will be on the front lines and likely will find themselves caught between public health imperatives, liability fears, and a restive workforce. And while current guidance indicates that employers generally can mandate employee vaccination (subject to religious and medical exceptions), unless the Occupational Safety & Health Administration (OSHA) or other authority requires them to do so, employers will face strong and countervailing pressures in deciding whether or how to implement such policies.
This Client Alert offers a “Playbook” for employers to navigate these choppy waters. Below we set out key considerations, both for employers who want or ultimately may be required to pursue a mandatory vaccination program and for employers who wish to encourage voluntary compliance.
Each employment context, of course, will differ. A mandatory vaccination policy that works well for a close-quarters or contact-heavy workplace, such as a healthcare facility or even a meatpacking plant, might be too heavy handed for a low-contact team of remote computer coders. Likewise, different states, cities, and industries may adopt very different workplace vaccination rules, creating a thicket of regulation (this Alert limits its scope to nationally applicable federal regulation, but state and local rules may differ). Despite this variation, though, there are nevertheless strategies and insights that can offer guidance.
I. Deciding Who Decides: Should Employers Mandate Vaccination?
As a threshold question, employers will need to decide whether to require employees to be vaccinated or instead to make vaccination voluntary. Below are some key considerations in making this choice.
A. Why Require the Vaccine?
Protecting Workplace and Community Health: In the absence of a regulatory requirement, the single most important reason for a workplace vaccine mandate is that it will protect workers’ health and lives. Each COVID-19 vaccine authorized for emergency use will have been found by the FDA to be “safe and effective,” and that authorization will have been supported by the Vaccines and Related Biological Products Advisory Committee (VRBPAC), an FDA advisory panel of outside scientific and public health experts that has independently reviewed the data.[5] The upshot is that, based on the best evidence available, the vaccines now being rolled out will protect the health and lives of employees, customers, and communities.
To be sure, vaccinations will not ensure everyone’s safety: we do not yet have long-term data on the duration of immunity, even the most effective vaccine candidates will protect no more than 90 to 95% of patients, and bona fide medical or religious reasons mean that some individuals cannot be vaccinated. Accordingly, even in the best-case scenario, a significant minority of the population will still be exposed and dependent upon the development of herd immunity to protect them. But these caveats should not distract from this reality: by an order of magnitude, COVID-19 vaccines will be our most effective medical strategy to prevent transmission of the virus and save lives.
Ensuring Vaccines Become Vaccinations: These powerful health benefits, however, will only be realized if workers actually get the vaccine. In other words, as public health experts have noted, we must “turn vaccines into vaccinations.”[6] Here, a mandatory approach may be important because voluntary vaccine programs have often had relatively low compliance, even in industries like healthcare,[7] and even for vaccines that have been the subject of massive “persuasion” campaigns (such as for the flu).[8] Given the amount of disinformation surrounding the coronavirus in general and vaccines in particular, such opt-in rates may, without a mandate, be even lower here. Put another way, a mandatory vaccine policy likely will be vastly more successful than a voluntary one at ensuring workers actually get protected.
Reducing Costs of Absences, Lost Productivity, and Long-Run Medical Care: Because a mandatory vaccination program creates a more vaccinated workforce, it also can significantly reduce workplace costs. Vaccinated workers will be less likely to fall ill to COVID-19, impose fewer costs from absences or lost productivity, require fewer instances of acute medical care, and impose lower long-term health costs. This last point is an important one: COVID-19 might be best known for short-term (and often horrific) acute consequences, but its long-term health impacts are poorly understood, yet believed to be significant for some.[9] Therefore, the virus may lead to worker illness and impairment that can span for months or even years. A higher vaccination rate is likely to curb each of these costs.
Getting and Staying Open: A mandatory vaccination approach also makes it more likely that a business can open and stay open. Even if there are no medical consequences, a single positive COVID-19 test can lead an employer to fully stop operations, particularly in industries like dining and hospitality.[10] A highly vaccinated workplace reduces the likelihood of such stoppages. At the same time, high vaccination rates can accelerate a “return to normal” by making it safer for the workforce to return to the office or otherwise resume normal operations, and by creating a safer environment for customers.
Defend Against Civil Liability for COVID-19 Cases: Further, and especially as vaccination rates increase, an un- or under-vaccinated workforce may pose a liability risk, as individuals infected on premises look to pin the blame on employers.
Under tort law principles employers that fail to take reasonable care to protect employees (or, for that matter, vendors, visitors, customers, or others on premises) risk liability. Applying this concept, individuals who become sick based on alleged on-premises exposure can argue (and in some cases have argued) that a business’s negligent safety practices (whether related to personal protective equipment (PPE), vaccines, cleaning, or anything else) caused their illness.
For employees themselves, such COVID-19 suits are likely to be limited by workers’ compensation statutes. As we noted in a previous Client Alert, companies are already seeing lawsuits seeking relief from employee injuries ranging from wrongful workplace exposure to COVID-19 to wrongful death from COVID-19.[11] In many cases, damages related to on-the-job COVID-19 exposure (or subsequent illness) will be considered occupational injuries and so are very likely covered under the relevant state’s workers’ compensation statutes. But employees’ lawyers will no doubt argue that this bar may not provide full protection, as evidenced by extensive (and so far, unsuccessful) efforts by federal lawmakers to provide businesses with greater immunity from employee COVID-19 claims,[12] as well as by a surge of interest in drafting (potentially unenforceable) employee COVID-19 liability waivers.[13]
More importantly, workers’ compensation statutes do not account for other stakeholders who may claim COVID-19 damages from exposure to an unvaccinated workforce. This includes suits by contractors, vendors, visitors, or customers—particularly in contact-intensive industries like education, lodging, hospitality, healthcare, or fitness where PPE may not provide sufficient protection.
A mandatory vaccination policy reduces these risks. First, and most obviously, mandatory vaccination makes it less likely individuals get sick in the first place, and therefore less likely anyone suffers legally actionable damages. Separately, the adoption and implementation of a mandatory vaccine plan can itself be important evidence of the high standard of care a company provided for those on premises, which also may be important in beating back potential liability.
Unless a broad liability shield is enacted by Congress, civil suits for COVID-19 infection damages, whether by employees, contractors, visitors, or customers, will remain a threat for the foreseeable future, and mandatory vaccination could be a key tool to address it.
Potential Protection Against Enforcement Action: Apart from civil liability from private plaintiffs, businesses without vaccine mandates could confront regulatory risk as well. Under OSHA’s “general duty” clause, for instance, employers are required to furnish each employee with a workplace free from recognized hazards that could cause serious harm.[14] While current OSHA guidance suggests this “general duty” can be satisfied by measures like PPE or distancing,[15] in the longer-run the agency might take the position that a robust vaccination program is required and that workplaces without such policies are not safe. This may be particularly true for healthcare and other industries where social distancing or similar measures may not be viable.
Further, even if OSHA does not enforce the “general duty” clause in this way, private litigants, unions, or others may seize on this language to argue that employers without mandatory vaccination policies are not providing a safe workplace.
B. Why Make the Vaccine Optional?
Employee Morale and Retention: Any “mandate,” as opposed to an optional program, would need to be carefully messaged and framed to the workforce. If the purposes behind the requirement are not explained (and even if they are), it may become a source of employee discontent or dissatisfaction. Day-to-day, such a requirement may lead employees opposed to the vaccine to view the company more negatively, and to respond accordingly.
Even with excellent messaging and buy-in, it is likely that some portion of the workforce, out of “anti-vaccine” belief, political views, or other reasons, will refuse to get the vaccine, and at the extreme may choose separation of employment rather than being vaccinated. And laws like the National Labor Relations Act (NLRA) could arguably protect various forms of employee protest as to the requirement, such as through social media campaigns.
Administrative Ease: Even for “mandatory” vaccines, by law those with medical conditions or sincerely held religious beliefs that preclude vaccination are entitled to make exemption requests and to seek appropriate reasonable accommodation (both possibilities discussed in detail below). Given the controversy around the vaccine, many workers may try to claim such exemptions. Without thoughtful processes, this could put Human Resources (HR) at risk of being overwhelmed by needing to decide, on a case-by-case basis, who qualifies for an exemption. In a voluntary program, by contrast, no (or much less) formal process is needed.
Less Liability Risk for Discrimination Claims: On this point, individuals who seek an exemption but are denied may pursue legal claims, such as on the grounds that they were unlawfully discriminated against under the Americans with Disabilities Act (ADA) based on a medical condition their employer did not treat with sufficient seriousness,[16] or under Title VII of the Civil Rights Act[17] for their religious beliefs. Careful applications of the exemption process will minimize this risk, but cannot eliminate it.
Potentially Less Necessary to Certain Industries: Finally, while in some industries, like healthcare or personal services, close contact is unavoidable, in others, it is less of a concern. For workplaces that do not require close contact, and so can more effectively avoid or mitigate the potential spread of the virus on-site, a vaccine mandate might be unnecessary.
II. Playbook For Employer Vaccine Policies
As the above shows, employers may have sound safety, business, and legal reasons to pick either a mandatory or a voluntary approach to a COVID-19 vaccine. But without attention to risk points, either approach can run into trouble. Here are ways to minimize the danger, no matter which approach employers take.
A. Assess the Right to Require Vaccinations
An employer’s first step is to confirm its right to require vaccinations. For obvious reasons, this is important to workplaces that want to mandate vaccines. But even workplaces that want to pursue voluntary vaccination policies may want to confirm this information, both because conditions may change over time, and also because, even if employers do not make vaccination a condition of employment, they may want to make it a condition for certain employment activities.
For most private-sector U.S. employers, current law suggests vaccinations can likely be required as a condition of employment for at-will employees. In the context of the H1N1 flu, for example, OSHA guidance indicates that, so long as a private employer makes appropriate religious and medical exceptions, an employer may require vaccination as a condition of employment.[18] Historically such guidance was directed toward medical care facilities. Given the EEOC’s finding that COVID-19 constitutes a “direct threat” to workplace health at this time,[19] however, there is good reason to believe the EEOC would similarly view COVID-19 vaccine mandates as permissible.
That said, a given workplace may be subject to special conditions, so it is important to assess, at the outset, whether a vaccination requirement would be permissible. One example is if a collective bargaining agreement (CBA) governs the terms of employment, in which case it may speak to vaccine requirements.[20] Further, if employees are not at-will, but rather work under a contract, that contract may dictate whether a vaccine can be required.
Likewise, while to date no state or local law or regulation appears to impose any general bar to private employers requiring vaccination, the situation at the federal, state, and local level is evolving rapidly,[21] so employers should obtain legal advice and ensure no new rule (or relevant agency guidance or court decision) has changed the landscape before getting started.
B. Make a Plan to Process Exemption Requests
Even if employers choose to “mandate” a vaccine, they must still be prepared to provide legally required exceptions for employees who (1) cannot take the vaccine due to a medical disability or (2) seek an exemption from the vaccine based on sincerely held religious beliefs. Virtually all employers must comply with these important legal protections. But employers should also recognize that they can structure such requests, and the resulting accommodations, in a way that satisfies the law while ensuring that those who are not truly motivated by such concerns, but instead merely would prefer to be unvaccinated, do not take advantage of them.
1. Medical Exemptions
For medical reasons, some individuals may be unable to safely take the vaccine. We know, for example, that the vaccine should not be administered to individuals with a known history of a severe allergic reaction to any component of the vaccine. Under the ADA, if an employee claims to require an exemption based on a “disability,” [22] a workplace must engage in an “interactive process” with that individual to arrive, if possible, at a “reasonable accommodation” (which, potentially, would relieve the employee from having to get the vaccine).
Employee requests for medical exemptions should be treated like any other ADA request for accommodation. However, if employers are concerned that vaccine qualms will lead to insincere accommodation requests, there are steps they can take. First, the ADA permits requests for reasonable documentation of the disability, which an employer can enforce.[23]
Second, workers with disabilities do not have the right to the accommodation of their choice, but rather to a “reasonable accommodation,” viz, one that “reasonably” accommodates their disability, and that does not impose an “undue hardship” on an employer.[24] For example, employees who cannot be vaccinated do not necessarily need to be offered the “accommodation” of simply not receiving the vaccine but then otherwise resuming work as normal, nor must they be offered the accommodation of continuing to work from home after their colleagues have returned to work. Rather, under appropriate circumstances, an employer might instead require unvaccinated employees to attend work, but continue to distance and wear masks and PPE, even after vaccinated employees may in the future be permitted to halt such measures.[25]
Other possible accommodations may include shifting unvaccinated workers to other workplace roles or positions, relocating work sites within a building, or requiring that employees work remotely even if they want to return. This process will typically require a case-by-case assessment of the relevant facts.
In sum, employers should recognize that the ADA does not create an automatic right for anyone to “opt-out” of the vaccine, but only a right to a fair interactive process that leads to a reasonable accommodation.
2. Religious Exemptions
The second major category for possible exemptions are accommodation requests based on sincerely held religious beliefs or religion-like philosophical systems.[26] Under Title VII, such beliefs must be taken into account, and if it would not pose “undue hardship,” a reasonable accommodation must be granted.
Compared to medical exemption requests, Title VII religious accommodation requests are (1) easier to establish, with employees permitted to substantiate the “sincerity” of their beliefs with little documentation; but (2) less demanding on employers, in that the accommodations granted need only be provided if they would impose “de minimis” burdens on the employer. Both of these distinctions are relevant to any COVID-19 vaccination mandate.
On the “sincerity” of the religious belief at issue, the EEOC has noted that an employer is entitled to “make a limited inquiry into the facts and circumstances of the employee’s claim that the belief or practice at issue is religious and sincerely held, and gives rise to the need for the accommodation.”[27] That said, an employee can provide sufficient proof of sincerity by a wide variety of means, including “written materials or the employee’s own first-hand explanation,” or verification of “others who are aware of the employee’s religious practice or belief.”[28] Beyond that, probing the “sincerity” of a religious belief is risky business. So to the extent employees provide such substantiation, and even if their interpretation of a religious tenet differs from that religion’s mainstream, employers would be wise, at that point, to accept it.
However, the EEOC has further made clear that employers are only obligated to accommodate “religious” beliefs or comprehensive religious-type philosophical systems, as opposed to other strongly held types of beliefs. For instance, there is no legal requirement to accommodate political, scientific, or medical views, or isolated ideas (such as “vaccines are dangerous”).[29]
Given these principles, workplaces with vaccine mandates may want to create standardized Title VII exemption-request forms that (1) expressly state and remind employees that political, social, scientific, or other non-religious views are not sufficient justification and that it is not appropriate to request a Title VII exemption on those grounds, but that (2) otherwise permit employees to explain, in their own words, their religious or religious-type beliefs and why those beliefs prevent vaccination. As noted, however, to the extent an employee then completes the form and provides such an explanation, the explanation generally should be credited.
However, for the accommodation itself, as in the ADA context, even a sincere religious exception does not guarantee the right to be accommodated, but only the right to a process that may, if legally required, lead to an accommodation. And unlike the medical context, where the “undue hardship” an employer must show to deny accommodation is a “significant difficulty or expense,”[30] in the Title VII context “undue burden” is defined to require only a showing of more than a “de minimis” cost on the business.[31]
Accordingly, in addition to requiring unvaccinated employees to keep using PPE and other measures even after the rest of the workforce returns to normal, an employer likely has much more latitude to indicate that, where the risk of non-vaccination imposes burdens on the company, non-vaccination will not be allowed.[32]
C. Build Buy-In and Plan for Conflict Diffusion
Even with the legal authority to impose a mandate, employers that go this route still must be sure to build employee buy-in for compliance. This is particularly important in light of concerns regarding how a vaccine requirement might impact employee morale or office culture.
The more a workforce understands why the employer chose a mandate, and the more they have the chance to feel “heard” on the subject, the less friction there will be (and the fewer workers will attempt to claim potentially unneeded exemptions). Best practices for building buy-in include:
- Informing employees of the policy change in advance, so that they can meaningfully share their views.
- Clear communication as to the purpose of the requirement: employee safety and allowing a return to normal.
- Tying the vaccine mandate to concrete and visible changes (e.g., once the vaccine is in place, re-open formerly closed off recreation areas or office space).
- Providing accurate and reader-friendly information on the vaccine. Given the amount of mis- or disinformation available, employers and HR in particular will play a key educational role.
On this point, given the incendiary rhetoric around vaccines and strong beliefs held by individuals on many topics related to vaccination, it is possible that the accommodation process, if not carefully handled, could lead to workplace tension. Workplaces should be aware of this risk and ensure that at no time does it rise to the level of impermissible discrimination or a hostile workplace.
D. Minimize (and if Possible, Eliminate) Vaccination Costs to Employees
As a further way to ensure buy-in, whether for a mandatory or a voluntary program, employers should consider as many steps as possible to reduce the cost to employees of getting the vaccine. The medicine itself will be provided, free of charge, by the federal government.[33] But unless already covered by employee insurance, employees may still be charged an “administrative fee.”[34] Employers should consider covering those or other incidental costs, even if otherwise “out of plan” for workers.
Another “cost” to employees is that of time—such as the time to travel off-site to get a vaccine. Contracting with a third-party provider to conduct on-site vaccination can help reduce this cost and may provide further liability protection.
Finally, for the small minority of workers who experience symptoms or bad reactions to the vaccine, employers should consider adopting a permissive approach to allowing (or extending further) paid sick leave to the extent necessary, even if a worker might otherwise not be entitled to it.
As shown above, such measures, while they may not be legally required in certain circumstances (depending on wage-hour and sick leave laws, among other things), are likely to be critical to increase and encourage buy-in.
E. Take a Thoughtful Approach to Continued PPE and Distancing Requirements
One common question will be whether a vaccination policy can or should supplant mask requirements, distancing, and other measures. Because the vaccines are not one-hundred percent effective, and because it is unknown if vaccinated individuals can still spread the virus, there is no guarantee that even a vaccinated employee will be fully protected. Further, employers should also be mindful of the safety of individuals who, for medical or religious reasons, are unable to be vaccinated. Finally, even the most optimistic projections indicate that, for at least some period of time, there will not be enough vaccines to cover everyone in the workforce.[35] Each of these considerations suggests that, at least in the short term, policies like masks and social distancing may still be needed.
In the long run, however, providing the prospect of a return to relative normal for those who are vaccinated could be a powerful force toward boosting morale and commitment to a vaccination program, and toward getting greater employee buy-in.
F. Be Aware of Labor Law Issues
One further area to be aware of in rolling out a vaccine policy is the possibility of concerted labor action. Section 7 of the NLRA protects certain “concerted activity” regarding working conditions,[36] which might extend to protests or other labor action regarding a vaccine policy. Crucially, however, the NLRA does not protect non-compliance with workplace safety rules (such as employees attempting to style refusal to be vaccinated as a legally protected labor protest).[37] Further, to the extent there is a risk of labor activity against a vaccine mandate, employers should be aware that there is a countervailing risk of labor activity for a mandate, such as strikes by employees who refuse to come to work until their colleagues have been vaccinated.
G. Don’t Lean Too Hard (or Perhaps at All) on Waivers
Finally, for those employees who, whether by choice or a valid exemption, are not vaccinated, some employers are considering requiring a waiver indicating that the employee understands the medical risks of this decision and accepts any associated risk. Given the limitations on the enforceability and permissibility of such waivers, however, a robust disclosure may be a better format. OSHA, for instance, has long required an attestation for employees in the context of bloodborne pathogen vaccines acknowledging their understanding of the risks should they not be vaccinated.[38] Seeing the risks of declining the vaccine clearly laid out in writing may, at the margin, increase buy-in.
That said, as a liability protection device, there is reason to be skeptical about such disclosures or waivers. In many jurisdictions, courts will find that employee liability waivers for workplace illnesses and injuries are not enforceable or even permissible, given the perceived imbalance of bargaining power or the operation of state workers’ compensation laws (which in some cases are read to preclude such waivers).[39] Accordingly, while it may make sense to provide certain disclosures to unvaccinated employees, an actual waiver of liability may be prohibited or unenforceable.
* * *
As noted at the outset, no one size fits all, especially given the different levels of risk of infection spread in different industries and workplaces, as well as the fast-evolving legislative and regulatory environment around COVID-19. If your company is considering rolling out a vaccination program in your workplace, or otherwise has any questions on approaching the pandemic and return-to-work operations, Gibson Dunn’s Labor and Employment Group can offer assistance.
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[1] Jessica Glenza, “FDA approves Pfizer/BioNTech coronavirus vaccine for emergency use in US,” The Guardian (Dec. 11, 2020), available at https://www.theguardian.com/world/2020/dec/11/fda-approves-pfizer-biontech-covid-19-coronavirus-vaccine-for-use-in-us.
[2] Lauran Neergaard & Linda A. Johnson, “Pfizer says COVID-19 vaccine is looking 90% effective,” Associated Press (Nov. 10, 2020), available at https://apnews.com/article/pfizer-vaccine-effective-early-data-4f4ae2e3bad122d17742be22a2240ae8.
[3] Denise Grady, “Early Data Show Moderna’s Coronavirus Vaccine Is 94.5% Effective,” N.Y. Times (Nov. 16, 2020), available at https://www.nytimes.com/2020/11/16/health/Covid-moderna-vaccine.html.
[4] See, e.g., RJ Reinhart, “More Americans Now Willing to Get COVID-19 Vaccine,” Gallup (Nov. 17, 2020), available at https://news.gallup.com/poll/325208/americans-willing-covid-vaccine.aspx (survey indicating that, as of late November, 42% of Americans would not agree to be vaccinated against COVID-19, up from 34% in July); Bill Hutchinson, “Over half of NYC firefighters would refuse COVID-19 vaccine, survey finds,” ABC News (Dec. 7, 2020), available at https://abcnews.go.com/Health/half-nyc-firefighters-refuse-covid-19-vaccine-survey/story?id=74582249.
[5] For an accessible introduction to this process, see FDA, “Vaccine Development – 101,” available at https://www.fda.gov/vaccines-blood-biologics/development-approval-process-cber/vaccine-development-101.
[6] See, e.g., Testimony to the Subcomm. on Oversight and Investigation of the H. Comm. on Energy and Commerce 1 (Sept. 30, 2020) (statement of Ashish K. Jha, Dean of Brown University School of Public Health), available at https://docs.house.gov/meetings/IF/IF02/20200930/111063/HHRG-116-IF02-Wstate-JhaA-20200930.pdf.
[7] See, e.g., Carla Black et al., CDC, Health Care Personnel and Flu Vaccination, Internet Panel Survey, United States, November 2017 (2017), available at https://www.cdc.gov/flu/fluvaxview/hcp-ips-nov2017.htm (noting a 60-70% flu vaccination rate among healthcare personnel).
[8] See, e.g., CDC, Flu Vaccination Coverage, United States, 2019–20 Influenza Season (Oct. 1, 2020), available at https://www.cdc.gov/flu/fluvaxview/coverage-1920estimates.htm.
[9] See, e.g., Rita Rubin, As Their Numbers Grow, COVID-19 ‘Long Haulers’ Stump Experts, J. of Am. Med. (Sept. 23, 2020), available at https://jamanetwork.com/journals/jama/fullarticle/2771111 (noting scientific studies estimating that approximately 10% of people who have had COVID-19 experience long-term symptoms, from fatigue to joint pain, and that these effects manifested even in individuals who were not initially seriously ill).
[10] See, e.g., “Some Savannah restaurants close due to positive COVID-19 cases,” WTOC (June 19, 2020), available at https://www.wtoc.com/2020/06/24/some-savannah-restaurants-close-due-positive-covid-cases/.
[11] See, e.g., Jean Casarez, “Wrongful death lawsuit filed against long-term care facility over staffer’s Covid‑19 death,” CNN (July 10, 2020), available at https://www.cnn.com/2020/07/10/us/wrongful-death-lawsuit-care-facility/index.html.
[12] See, e.g., Eli Rosenberg et al., “Senate stimulus negotiators try to reach deal on whether companies can be sued over virus outbreaks,” Wash. Post (Dec. 8, 2020), available at https://www.washingtonpost.com/business/2020/12/08/stimulus-negotiations-liability-shield/.
[15] See generally U.S. DOL, OSHA Report 4045-06 2020, Guidance on Returning to Work (2020), available at https://www.osha.gov/Publications/OSHA4045.pdf.
[16] 42 U.S.C. § 12112 (barring discrimination on the basis of a “disability”). Because “disability,” as defined in the ADA and further defined in subsequent ADAAA, includes any “physical or mental impairment that substantially limits one or more major life activities of [an] individual,” id. § 12102, employees who do not wish to be vaccinated may argue that they have a disability that prevents them from being vaccinated.
[17] Id. § 2000e-2 (prohibiting discrimination on the basis of an “individual’s race, color, religion, sex, or national origin”).
[18] See, e.g., OSHA, Standards Interpretation of Nov. 9, 2009, available at https://www.osha.gov/laws-regs/standardinterpretations/2009-11-09 (“[A]lthough OSHA does not specifically require employees to take the vaccines, an employer may do so”).
[19] EEOC, What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws (Sept. 8, 2020), available at https://www.eeoc.gov/wysk/what-you-should-know-about-covid-19-and-ada-rehabilitation-act-and-other-eeo-laws (“An employer may exclude those with COVID-19, or symptoms associated with COVID-19, from the workplace because, as EEOC has stated, their presence would pose a direct threat to the health or safety of others.”).
[20] Note, however, that to the extent OSHA or state regulators ultimately require, as a generally applicable workplace safety rule, that certain workplace vaccination policies be put into place, such health and safety rules would likely trump contrary (that is, more permissive) CBA terms. See discussion infra; see also United Steelworkers of America v. Marshall, 647 F.2d 1189, 1236 (D.C. Cir. 1980) (noting duty to bargain with unions over safety and health matters does not excuse employers from complying with OSHA safety standards); Paige v. Henry J. Kaiser Co., 826 F.2d 857, 863 (9th Cir. 1987) (same, as applied to California’s state-level OSHA equivalent).
[21] See, e.g., Joe Sonka, “Kentucky legislator pre-files bill prohibiting colleges from mandating vaccines,” Louisville Courier J. (Dec. 4, 2020), available at https://www.courier-journal.com/story/news/politics/ky-general-assembly/2020/12/04/kentucky-bill-would-prohibit-colleges-mandating-covid-19-vaccine/3827327001/.
[22] See 42 U.S.C. §12102 (defining “disability” to include any “physical or mental impairment that substantially limits one or more major life activities of [an] individual.”).
[23] See EEOC, Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the ADA, EEOC-CVG-2003-1, Oct. 17, 2002 (“May an employer ask an individual for documentation when the individual requests reasonable accommodation? . . . Yes. When the disability and/or the need for accommodation is not obvious, the employer may ask the individual for reasonable documentation about his/her disability and functional limitations.”).
[25] For analysis of an analogous question, see, for example, EEOC v. Baystate Med. Ctr., Inc., No. 3:16-cv-30086, Dkt. No. 125 (D. Mass. June 15, 2020) (Order upholding policy that required unvaccinated healthcare workers to, as a condition of employment, wear masks even though vaccinated colleagues were not required to) [Order text accessible via PACER and CM/ECF and partially reprinted at Vin Gurrieri, “EEOC Religious Bias Suit Over Hospital Worker Firing Tossed,” Law360 (June 16, 2020), available at https://www.law360.com/articles/1283456/eeoc-religious-bias-suit-over-hospital-worker-firing-tossed]; see also Holmes v. Gen. Dynamics Mission Sys., Inc., No. 19-1771, 2020 WL 7238415, at *3 (4th Cir. Dec. 9, 2020) (suggesting that as “long as [a workplace safety] requirement is valid, any employee who is categorically unable to comply . . . will not be considered a ‘qualified’ individual for ADA purposes,” and so may independently be denied a particular requested accommodation on such basis) (internal punctuation and citation omitted).
[26] Specifically, EEOC guidance indicates such protections extend to “[r]eligious beliefs include theistic beliefs (i.e. those that include a belief in God) as well as non-theistic ‘moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views.’” EEOC, Questions and Answers: Religious Discrimination in the Workplace, EEOC-NVTA-2008-2 (July 22, 2008), available at https://www.eeoc.gov/laws/guidance/questions-and-answers-religious-discrimination-workplace/.
[28] See EEOC, Section 12 Religious Discrimination, EEOC-CVG-2008-1 (July 22, 2008), available at https://www.eeoc.gov/laws/guidance/section-12-religious-discrimination.
[30] See EEOC, Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the ADA, EEOC-CVG-2003-1 (Oct. 17, 2002), available at https://www.eeoc.gov/laws/guidance/enforcement-guidance-reasonable-accommodation-and-undue-hardship-under-ada.
[31] EEOC, Questions and Answers: Religious Discrimination in the Workplace, EEOC-NVTA-2008‑2 (July 22, 2008), available at https://www.eeoc.gov/laws/guidance/questions-and-answers-religious-discrimination-workplace/.
[32] See, e.g., Robinson v. Children’s Hosp. Bos., No. CV 14-10263-DJC, 2016 WL 1337255, at *10 (D. Mass. Apr. 5, 2016) (finding that for Title VII purposes, healthcare worker’s requested accommodation of non‑vaccination based on religious beliefs would have imposed “undue hardship” on employer and so did not need to be granted).
[33] Andrea Kane, “Federal government says it will pay for any future coronavirus vaccine for all Americans,” CNN (Oct. 28, 2020), available at https://www.cnn.com/2020/10/28/health/cms-medicare-covid-vaccine-treatment/index.html.
[34] Katie Connor, “Coronavirus vaccines may be free, but you could still get a bill. What we know,” CNET (Dec. 7, 2020), available at https://www.cnet.com/personal-finance/coronavirus-vaccines-may-be-free-but-you-could-still-get-a-bill-what-we-know/.
[35] Noah Higgins-Dunn, “Trump COVID Vaccine Chief Says Everyone in U.S. could be vaccinated by June,” CNBC (Dec. 1, 2020), available at https://www.cnbc.com/2020/12/01/trump-covid-vaccine-chief-says-everyone-in-us-could-be-immunized-by-june.html.
[37] See, e.g., Board Opinion, NLRB Case No. 12-CA-196002, Argos USA LLC d/b/a Argos Ready Mix, LLC and Construction and Craft Workers Local Union No. 1652, Laborers’ International Union of North America, AFL‒CIO, Cases 12–CA–196002 and 12–CA–203177 (Feb. 5, 2020), at 4, available at https://apps.nlrb.gov/link/document.aspx/09031d4582f8f960 (finding, in the context of cellphone-while-driving rules, that workplace rules that “ensure the safety of [workers] and the general public” do not interfere with the exercise of Section 7 rights).
[38] See, e.g., OSHA Standard 1910.1030 App A – Hepatitis B Vaccine Declination (requiring workers who opt out of the bloodborne pathogen vaccine to attest that they understand the medical risks of declining a vaccine should they decide to do so).
[39] See, e.g., Richardson v. Island Harvest, Ltd., 166 A.D.3d 827, 828-29 (N.Y. App. Div. 2018) (reasoning that employers and employees are in unequal bargaining positions, and that therefore prospective liability waivers for negligent employer conduct would be held unenforceable).
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A recent Judgment of the Court of Justice of the European Union (“Court of Justice”) in Case Groupe Canal + v. Commission (“Judgment”) provides some clarity about the sorts of commitments that defendants can give to reach a settlement with the European Commission (“Commission”) in order to avoid it adopting a Decision under Article 101(1) TFEU.[1] In its Judgment of 9 December 2020, the Court of Justice held that the Commission, when accepting commitments from defendants to overcome concerns in competition proceedings under the procedure set forth in Article 9 of Regulation 1/2003,[2] must take due account of the impact of those commitments on the position of third parties where the commitments require the defendant not to respect existing contractual obligations with third parties. This is, essentially, a proportionality test and requires the Commission to accept commitments only if they are necessary to remedy the perceived harm and if they do not have a disproportionately harmful effect on third parties.
I. Background
On 13 January 2014, the Commission opened a formal investigation into licensing agreements for the distribution of content entered into between several major US film studios (including Paramount Pictures International ltd and its parent company, Viacom Inc., together referred to as “Paramount”) on the one hand, and European pay-TV broadcasters including Sky UK Ltd and Sky plc (together referred to as “Sky”) and Groupe Canal + SA (“Canal +”), on the other.
In July 2015, the Commission adopted a Statement of Objections[3] regarding the enforceability of certain clauses in the licensing agreements concluded between Paramount and Sky and other broadcasters, namely:
- restrictions on Sky’s ability to respond favourably to unsolicited requests from consumers resident in the EEA but outside the United Kingdom and Ireland, to provide access to television distribution services; and
- the prohibition on broadcasters established in the EEA but outside the UK or Ireland to respond favourably to unsolicited requests from consumers resident in the United Kingdom or in Ireland.
The Commission took the preliminary view that these clauses prevented broadcasters from providing their services across EU Member State borders, and led to a situation of absolute territorial exclusivity. This was capable of constituting a restriction of competition under Article 101(1) TFEU and Article 53 of the EEA Agreement because they partitioned the European Single Market into a series of national markets.
The Commitments
In April 2016, in an attempt to meet the Commission’s concerns about the restrictive effects of its arrangements, Paramount offered the following commitments,[4] to apply throughout the territory of the EEA:[5]
- when licensing its film output for pay-TV to a broadcaster in the EEA, Paramount would not (re-)introduce contractual obligations which prevented or limited a pay-TV broadcaster from responding to unsolicited requests from consumers within the EEA but outside the pay-TV broadcaster’s licensed national territory (the “Broadcaster Obligation”);
- when licensing its film output for pay-TV to a broadcaster in the EEA, Paramount would not (re-)introduce contractual obligations which required Paramount to prohibit or limit pay-TV broadcasters located outside the licensed territory from responding to unsolicited requests from consumers within the licensed territory (the “Paramount Obligation”);
- Paramount would not seek to bring an action before a court or tribunal for the violation of a Broadcaster Obligation in an existing agreement licensing its film output for pay-TV; and
- Paramount Pictures would not act upon or enforce a Paramount Obligation in an existing agreement licensing its film output for pay-TV.
Consistent with its administrative practice, the Commission sought comments on the proposed commitments from interested third parties, including Canal +. It then adopted a Decision on 26 July 2016 accepting the commitments offered by Paramount (the “Commitment Decision”).[6]
On appeal at first instance
As an exclusive licensee in France prior to the Commitment Decision being adopted, Canal + brought an action for the annulment of the Commitment Decision before the General Court of the European Union (“General Court”). The General Court dismissed Canal +’s action, holding that the commitments offered by Paramount were not binding on Paramount’s contracting partners (including Canal +) and that the rights of third parties were not violated because civil proceedings before national courts were still available to them.[7]
Grounds of appeal before the Court of Justice
Canal + appealed to the Court of Justice, arguing that:
- by adopting the Commitment Decision, the Commission had misused its powers and was trying to circumvent the need for legislation to address the issue of geo-blocking within the EEA;
- the relevant clauses in the licensing agreements were lawful under Article 101(1) TFEU and there were therefore no grounds for adopting the Commitment Decision;
- the Commission had wrongly analysed the impact of the contested licensing clauses on the EEA as a whole and, in doing so, had failed to conduct individual assessments of their impact on a country-by-country basis;
- the General Court erred in law in its assessment of the effects of the Commitment Decision on the contractual rights of third parties by not taking sufficient account of the fundamental legal principle of proportionality.
II. Judgment of the Court of Justice
The Court of Justice upheld the General Court’s findings with respect to the first three pleas raised on appeal.[8] However, it found that the General Court had failed to take into account sufficiently the contractual rights of third parties when adopting commitments decisions.
The Court of Justice first recalled that a commitment decision adopted on the basis of Article 9 of Regulation 1/2003 is only binding on the undertakings that have actually offered commitments. As a result, the Commitment Decision could not lead to third parties – in this case, Canal + – being bound by those commitments. Therefore, by making the commitments binding on a contracting party that had not consented to the commitments in question, the Commission was considered to have interfered with Canal +’s contractual freedom. In doing so, the Commission was considered to have exceeded its powers under Article 9 of Regulation 1/2003.
In arriving at this conclusion, the Court of Justice overturned the General Court’s finding that the third party could seek redress before a national court to enforce its contractual rights. The Court of Justice referred to the Masterfoods Case,[9] which held that the effectiveness of EU law is a fundamental legal principle[10] which must not be undermined by private parties being encouraged to approach national courts to dilute the effectiveness of EU law, as applied by the Commission in the exercise of its competition law powers.[11] The same principle is found in Article 16(2) of Regulation 1/2003, which provides that “[w]hen competition authorities of the Member States rule on agreements, decisions or practices under Article 81 or Article 82 of the Treaty [now Articles 101 or 102 TFEU] which are already the subject of a Commission decision, they cannot take decisions which would run counter to the decision adopted by the Commission”.
The Court of Justice declined to refer the case back to the General Court for the error of law to be rectified. Instead, the Court annulled the Commission Decision[12], holding that “by adopting the decision at issue, the Commission rendered the contractual rights of the third parties meaningless, including the contractual rights of Groupe Canal + vis-à-vis Paramount, and thereby infringed the principle of proportionality”.[13]
III. Implications of the Case
This is the first case in which a commitment decision has been overturned by the European courts. As such, it provides an important clarification as to the scope of commitments that parties under investigation can offer and that the Commission can accept. In practical terms, it limits the scope of commitments that the Commission can extract.
First, the Judgment confirms the principle established in the Alrosa Case, in which the Court held that “the fact that the individual commitments offered by an undertaking have been made binding by the Commission does not mean that other undertakings are deprived of the possibility of protecting the rights they may have in connection with their relations with that undertaking”.[14] However, it should not be forgotten that in Alrosa, the Court found that the Commission had not contravened the principle of proportionality – rather, it found that the General Court had been wrong to link the principle of proportionality in the context of commitment decisions adopted under Article 9 of Regulation 1/2003 to the test for proportionality for infringement decisions adopted under Article 7 of Regulation 1/2003.[15] By appearing to take the view that the doctrine of proportionality has a different scope depending on whether the Commission is adopting a commitments decision under Article 9 or an infringement decision under Article 7, the Court seems to have created an elusive shifting standard by which to apply a doctrine usually considered to be universal in its significance.[16]
In this Judgment, the Court has brought some clarity to that problematic distinction. A commitment decision short-circuits the usual procedure for infringement decisions, given that a commitment decision does not reach definitive conclusions about the legality or otherwise of the conduct in question. The procedure for commitment decisions is nevertheless still designed to ensure the effective application of Community law by allowing the Commission to take action in a more expedited manner than would otherwise be the case under the much more cumbersome procedure for infringement decisions. This trade-off means that commitments are limited to unilateral obligations agreed by defendants and there is no full investigation.
Second, it is not the case that the Commission is inexperienced in the handling of multi-party proceedings involving commitments relating to contractual obligations designed to put alleged anti-competitive conduct to an end. The Cannes Agreement[17] and Container Shipping[18] Cases are two clear examples of the Commission interfering with contractual relations, as are a series of multi-party JVs in the airline sector.[19] The Commission might be justifiably concerned, however, that its decision-making capacity will be impaired if it must in each case take into account third party contractual arrangements before agreeing commitments, especially if it has already consulted with third parties in a stakeholder consultation on the suitability of the commitments.
Third, the Commission and General Court clearly erred in finding that third parties could have recourse to national courts to enforce their contractual rights. The availability of such a remedy would clearly call into question the enforceability of the commitments, and would therefore undermine the principle that EU law must be implemented effectively. Insofar as the Court’s Ruling is based on the principle that national courts must refrain from adopting a decision that would contradict a binding Commission Decision, it is difficult to find fault with the Court’s logic.
In conclusion, it may be expected that the Commission will respond to the Court’s Canal+ Judgment by demanding more information and greater legal certainty in relation to commitments which might interfere with the contractual rights of third parties. In addition, the Commission may take the view that the Court, by asking it to pay greater attention to the rights of third parties in its proportionality analysis, has made commitment decisions too susceptible to legal challenge. If that is the case, the Commission may feel that it has little option other than to pursue infringement decisions more aggressively rather than seeking settlements under Article 9.
_____________________
[1] Judgment of 9 December 2020, Groupe Canal + v. Commission, Case C-132/19 P, EU:C:2020:1007.
[2] Council Regulation (EC) 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L 1, 4.1.2003, pp. 1-25. Regulation 1/2003 sets out the procedural rules which the Commission must respect in pursuing an infringement action under Articles 101-102 TFEU. According to Article 9 of Regulation 1/2003, where the Commission takes the preliminary view that an infringement of the competition rules has taken place, the suspected undertakings can offer commitments to meet the concerns expressed by the Commission. If considered satisfactory, the Commission may by decision render these commitments binding on the undertakings concerned in a Decision.
[3] This is a preliminary assessment setting out the Commission’s views that an infringement of EU competition rules has taken place.
[4] Commitments by Paramount in Case AT.40023 – Cross-border access to pay-TV, 22.04.2016, available at: https://ec.europa.eu/competition/antitrust/cases/dec_docs/40023/40023_4638_3.pdf.
[5] At the time, the EU consisted of 28 Member States (including the United Kingdom) and the three additional jurisdictions of Norway, Iceland and Lichtenstein, which collectively constitute the European Economic Area (EEA).
[6] Commission Decision of 26 July 2016 in Case AT.40023 – Cross-border access to pay-TV adopted pursuant to Article 9 of Regulation 1/2003.
[7] Judgment of 12 December 2018, Groupe Canal + v Commission, T-873/16, EU:T:2018:904, paras. 93-98.
[8] Namely: (i) the Commission had not misused its powers on the issue of geo-blocking given that the legislative process relating to geo-blocking had thus far not resulted in the adoption of a legislative text, and this process was without prejudice to the powers conferred on the Commission under Article 101 TFEU and Regulation 1/2003; (ii) the licensing clauses under Article 101(1) TFEU were unlawful insofar as they eliminated the cross-border provision of broadcasting services and granted broadcasters absolute territorial protection; and (iii) the impact of the licensing clauses over the entire EEA territory was appropriate, without there being a necessity for the Commission to analyse those commitments on an individual basis. One would have thought that the simpler avenue for the Court of Justice would have been to agree with the appellant that the Commission had erred by not assessing each national exclusivity in terms of their competitive impacts, rather than accepting that the Commission was entitled to consider the competitive impacts of the territorial grants of exclusivity in their entirety over the territory of the EEA. By so holding, it would arguably have been more straightforward for the Court to conclude that the interference of the commitments with the appellant’s contractual right was “disproportionate” under the fourth plea.
[9] Judgment of 14 December 2000, Masterfoods and HB, C-344/98, EU:C:2000:689, para. 51.
[10] The principle of effectiveness is enshrined in Article 19 TEU, in Article 47 of the Charter of Fundamental Rights of the European Union and in numerous cases such as in the Judgment of 13 March 2007, Unibet, Case C-432/05, EU:C:2007:163. In the Judgment of 27 March 2014, Saint-Gobain Glass France SA, Joined Cases T-56/09 and T-73/06 EU:T:2014:160, paragraph 83, the General Court further emphasised that “the judicial review of the decisions adopted by the Commission in order to penalise infringements of competition law that is provided for in the Treaties and supplemented by Regulation No 1/2003 is consistent with that principle”.
[11] The doctrine of effective application of EU law is itself based on the doctrine of “sincere cooperation” between EU institutions and the Member States, as found in Article 4(3) TEU, which provides the legal basis for many of the provisions contained in Regulation 1/2003.
[12] In accordance with Article 61(1) of the Statute of the Court of Justice of the European Union.
[13] Judgment of 9 December 2020, Groupe Canal + v. Commission, C-132/19 P, EU:C:2020:1007, para. 123.
[14] Judgment of 29 June 2010, Commission v. Alrosa, C-441/07 P, EU:C:2010:377, paragraph 49.
[15] See Judgment of 29 June 2010, Commission v. Alrosa, C-441/07 P, EU:C:2010:377, paragraph 47, where the Court of Justice held that there is no reason that would explain “why the measure which could possibly be imposed in the context of Article 7 of Regulation No 1/2003 should have to serve as a reference for the purpose of assessing the extent of the commitments accepted under Article 9 of the regulation, or why anything going beyond that measure should automatically be regarded as disproportionate”.
[16] The principle of proportionality is a general principle of EU law provided in Article 5(4) TEU. This principle regulates the exercise of powers by the European Union, by requiring that the actions taken by the EU are limited to what is necessary to achieve the objectives set in the Treaties.
[17] Commission Decision of 04.10.2006 in Case AT.38681 – Cannes Agreement. The commitments offered by the Parties consisted of: (i) ensuring that collecting societies could continue to give rebates to record companies; and (ii) the removal of a non-competition clause.
[18] Commission Decision of 07.07.2016 in Case AT.39850 – Container Shipping. The commitments offered by 14 container liner shipping companies aimed to increase price transparency for customers and to reduce the likelihood of coordinating prices. See also Commission Decision of 16 September 1998 in Case no IV/35.134 – Trans-Atlantic Conference Agreement, in which the Commission imposed an obligation on the infringing undertakings to inform the customers with whom they had concluded joint service contracts that those customers were entitled to renegotiate the terms of those contracts or to terminate them forthwith.
[19] Commission Decision of 23.05.2013 in Case AT.39595 – Continental/United/Lufthansa/Air Canada; Commission Decision of 14.07.2010 in Case AT.39596 – American Airlines/British Airways Plc/ Iberia Líneas Aéreas de España; and Commission Decision of 12.05.2015 in Case AT.39964 – Air France/KLM/Alitalia/Delta. In these cases, the affected airlines committed to making slots available in order to facilitate the entry or expansion of competitors, and to enter into agreements in order to allow competitors to offer more attractive services.
Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. For additional information, please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Antitrust and Competition Practice Group, or the following authors in Brussels:
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On December 7, 2020, the Foreign Affairs Council of the Council of the European Union, adopted Decision (CFSP) 2020/1999 (the Council Decision) and Regulation (EU) 2020/1998 (the Council Regulation) concerning restrictive measures against serious human rights violations and abuses, which together establish the first global and comprehensive human rights sanctions regime to be enacted by the European Union (the EU) (the EU Human Rights Sanctions).
The EU Human Rights Sanctions will allow the EU to target individuals and entities responsible for, involved in or associated with serious human rights violations and abuses and provides for the possibility to impose travel bans, asset freeze measures and the prohibition of making funds or economic resources available to those designated.
The adoption of the EU Human Rights Sanctions emphasizes that the promotion and protection of human rights remain a cornerstone and priority of EU external action and is expected to contribute towards progressing global human rights by strengthening the international community’s ability to hold individuals and entities accountable for decisions or actions that lead to blatant or systematic human rights violations.
Background
The need for adopting a regime that specifically addresses serious human rights violations worldwide has long been the subject of debate in the EU.
In November 2018, the Dutch Government launched preliminary discussions among EU member states for a specific human rights sanctions regime. In March 2019, the European Parliament adopted a resolution calling “for the swift establishment of an autonomous, flexible and reactive EU-wide sanctions regime”. However, it was only in December 9, 2019, that the Council of the European Union formally reflected on how to improve the EU’s toolbox when it comes to addressing human rights violations, and the EU High Representative announced the launch of preparatory work on a possible sanctions regime.
More recently, on September 16, 2020, in her State of the Union Address, European Commission President Ursula von der Leyen prompted member states to “be courageous and finally move to qualified majority voting – at least on human rights and sanctions implementation”. She not only recalled that the EU Parliament had already called for a “European Magnitsky Act” many times, but also announced that the European Commission “will now come forward with a proposal”.
Moving towards this goal, on November 17, 2020, the European Council approved conclusions on the EU Action Plan on Human Rights and Democracy 2020-2024 which set out the EU’s priorities in this field and contained a commitment to developing a new EU global human rights sanctions regime.
It is important to note that the enactment of the EU Human Rights Sanctions comes after the adoption of the U.S. Magnitsky Act of 2012, and its 2016 expansion, the U.S. Global Magnitsky Human Rights Accountability Act (collectively, the Magnitsky Act), which was the first legal instrument worldwide addressing human rights violations through sanctions. Since then, Canada, Estonia, Latvia, Lithuania and the United Kingdom (for more details on the UK regime please see Gibson Dunn Client Alert of July 9, 2020) have also adopted Magnitsky-like sanctions regimes. Other countries, including Japan and Australia, are also considering adopting similar legislation.
Scope of application
Mirroring the Magnitsky Act, the new sanctions regime will provide the EU with a legal framework to target natural and legal persons, entities and bodies – including state and non-state actors – responsible for, involved in or associated with serious human rights violations and abuses worldwide, regardless of where these might have occurred.
The EU Human Rights Sanctions applied to acts such as genocide, crimes against humanity and other serious human rights violations or abuses, such as torture, slavery, extrajudicial killings, arbitrary arrests or detentions. Other human rights violations or abuses can also fall under the scope of the sanctions regime where those violations or abuses are widespread, systematic or are otherwise of serious concern as regards the objectives of the common foreign and security policy set out in Article 21 of the Treaty on European Union.[1]
Notably, contrary to the U.S. and Canadian sanctions regimes, and similarly to the United Kingdom human rights sanctions regime, the list of human rights violations does not include corruption.
Restrictive measures
Under the EU Human Rights Sanctions designated human rights offenders can be targeted by travel bans (applying to individuals) and asset freezes (applying to both individuals and entities). In addition, individuals and entities in the EU will be forbidden from making funds available, either directly or indirectly, to the designated individuals or entities. Further, it is prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent EU Human Rights Sanctions.
Similarly to other EU sanctions regimes, under the EU Human Rights Sanctions, the competent authorities of the member states may authorize the release of certain frozen assets and the provision of certain funds and economic resources on the basis of humanitarian grounds.
Member states may also grant exemptions from travel restrictions where travel is justified on the grounds of an urgent humanitarian need, in order to facilitate a judicial process or on grounds of attending intergovernmental meetings, where a political dialogue is conducted that directly promotes the policy objectives of restrictive measures, including the ending of serious human rights violations and abuses.
Procedural Aspects
Following the structure of existing sanctions programs, the EU Human Rights Sanctions were introduced by the Council of the European Union through a Council Decision (setting out key principles binding to the member states) and a Council Regulation (with more detailed provisions that are directly binding to any person subject to the EU’s jurisdiction).
It will now be for the Council of the European Union, acting upon a proposal from a member state or from the High Representative of the EU for Foreign Affairs and Security Policy, to establish, review and amend the list of those individuals and entities that are subject to EU Human Rights Sanctions. Designating an individual or an entity will require a significant degree of consensus, as the Council of the European Union can only proceed with designations on the basis of unanimity among all member states.
Enforcing the EU Human Rights Sanctions, including determining the applicable penalties for the infringement of the restrictive measures, falls within the competency of member states.
Outlook
Human rights violations have already been subject to EU sanctions, imposed on the basis of a sanctions framework linked to specific countries, conflicts or crises.[2] Linking the possibility of sanctioning human rights violations to specific countries or conflicts, however, limited the EU’s ability to respond swiftly whenever a new crisis emerged.
EU Human Rights Sanctions are expected to confer more flexibility and speediness to the EU’s response to significant human rights violations. Since EU Human Rights Sanctions put the emphasis on the individual responsibility of designated persons and entities (rather than on their nationality), it dissociates to a certain extent the geographical link between the perpetrator of a human rights violation and third countries. This provides the EU with the opportunity to proceed with designations, without necessarily entailing political, economic and strategic conflicts with third countries.
U.S. Secretary of State Mike Pompeo said that the U.S. “welcomes” the EU’s sanctions regime, calling it a “groundbreaking accomplishment” and encouraging the EU “to adopt its first designations as soon as possible”.
Additionally, despite welcoming the EU’s move, several civil society organizations called for additional rules to also target corruption.
The adoption of the restrictive measures under the EU Human Rights Sanctions means that companies active in the EU will be obliged to freeze the assets of designated human rights offenders and must not make funds or economic resources available to them. Further, it will limit access to the EU by imposing travel bans on those designated.
Although no specific individual or entity have yet been designated under EU Human Rights Sanctions, companies active in the EU should be mindful of this new sanctions regime and take it into consideration in their compliance efforts.
____________________
[1] Such violations may, inter alia, include: (i) trafficking in human beings, as well as abuses of human rights by migrant smugglers as referred to in that Article; (ii) sexual and gender-based violence; (iii) violations or abuses of freedom of peaceful assembly and of association; (iv) violations or abuses of freedom of opinion and expression and; (v) violations or abuses of freedom of religion or belief.
[2] See, for instance, Council Regulation (EU) 36/2012 concerning restrictive measures in view of the situation in Syria (including the continued brutal repression and violation of human rights by the Government of Syria); Council Regulation (EU) 2016/44 concerning restrictive measures in view of the situation in Libya (including serious human rights abuses); Council Regulation (EU) 2017/2063 concerning restrictive measures in view of the situation in Venezuela (including the continuing deterioration of human rights).
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Trade practice group, or the following authors:
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Decided December 10, 2020
Rutledge v. Pharmaceutical Care Management Ass’n, No. 18-540
Today, the Supreme Court held 8-0 that ERISA does not preempt an Arkansas statute regulating the rates at which pharmacy benefit managers reimburse pharmacies for prescription drug costs.
Background:
Section 514(a) of the Employee Retirement Income Security Act of 1974 (“ERISA”) preempts state laws that “relate to” employee benefit plans. 29 U.S.C.§ 1144(a). In 2015, Arkansas adopted a law, Act 900, to regulate the rates and procedures by which pharmacy benefit managers (“PBMs”) reimburse pharmacies for the costs of drugs administered on behalf of benefit plans. The Pharmaceutical Care Management Association, the trade association representing PBMs, filed suit alleging that ERISA preempted Act 900.
The Eighth Circuit held that Act 900 is preempted because it has an impermissible “connection with” ERISA plans by interfering with central plan functions and nationally uniform plan administration, and also because it impermissibly “refers to” plans by regulating PBMs administering benefits for the plans.
Issue:
Does ERISA preempt Arkansas’ Act 900 regulating the rates and reimbursement procedures of pharmacy benefit managers?
Court’s Holding:
ERISA does not preempt Arkansas’ Act 900. Act 900 merely affects costs without dictating plans’ choices of benefit structure, either directly or indirectly. It has neither an impermissible connection with nor a reference to ERISA plans.
“Act 900 is merely a form of cost regulation . . . [that] applies equally to all PBMs and pharmacies in Arkansas. As a result, Act 900 does not have an impermissible connection with an ERISA plan.”
Justice Sotomayor, writing for the Court
What It Means:
- The Court’s decision may lead to further state regulation of PBMs, which are engaged by the majority of employers to deliver prescription-drug benefits. Dozens of other states have already passed similar laws regulating PBM pricing, and more could follow. Today’s decision could lead to new litigation over whether other states’ laws are sufficiently distinguishable from Arkansas’ Act 900 to be preempted.
- The Court’s decision also could lead to new attempts by states to regulate other aspects of plan administration, including other third-party administrators beyond the PBM context. Third parties—including claims administrators, external reviewers, and healthcare provider networks—play a vital role in many aspects of modern plan administration.
- In a concurrence, Justice Thomas reiterated his previously expressed doubts about the Court’s ERISA preemption doctrine, which he believes has departed from the text of the statute.
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:
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Gibson Dunn provides a discussion regarding the latest developments and trends in anti-money laundering and sanctions laws, regulations, and enforcement. This webcast includes a particular focus on international AML developments, including the increasing overlap between sanctions and AML enforcement. We also discuss updates related to the FinCEN files, FinCEN’s new enforcement guidance, virtual currency, marijuana-related businesses, and sports betting. With respect to sanctions, we cover the increasing complexity of complying with the growth in both traditional U.S. sanctions and newer export controls. We also analyze the mounting challenges for companies seeking to navigate global compliance stemming from the enforcement of “counter-sanctions” imposed by China, the European Union, and others.
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MODERATOR:
F. Joseph Warin is co-chair of Gibson Dunn’s global White Collar Defense and Investigations Practice Group, and chair of the Washington, D.C. office’s 200-person Litigation Department. Mr. Warin’s group is repeatedly recognized by Global Investigations Review as the leading global investigations law firm in the world. Mr. Warin is a former Assistant United States Attorney in Washington, D.C. He is ranked annually in the top-tier by Chambers USA, Chambers Global, and Chambers Latin America for his FCPA, fraud and corporate investigations experience. Among numerous accolades, he has been recognized by Benchmark Litigation as a U.S. White Collar Crime Litigator “Star” for ten consecutive years (2011–2020).
PANELISTS:
Stephanie L. Brooker is co-chair of Gibson Dunn’s Financial Institutions Practice Group and member of the White Collar Group. She is the former Director of the Enforcement Division at FinCEN, and previously served as the Chief of the Asset Forfeiture and Money Laundering Section in the U.S. Attorney’s Office for the District of Columbia and as a DOJ trial attorney for several years. Ms. Brooker represents multi-national companies and individuals in internal corporate investigations and DOJ, SEC, and other government agency enforcement actions involving, for example, matters involving BSA/AML; sanctions; anti-corruption; securities, tax, and wire fraud; whistleblower complaints; and “me-too” issues. Her practice also includes BSA/AML compliance counseling and due diligence and significant criminal and civil asset forfeiture matters. Ms. Brooker has been named a Global Investigations Review “Top 100 Women in Investigations” and National Law Journal White Collar Trailblazer.
Kendall Day is a litigation partner in Washington, D.C. and was a white collar prosecutor for 15 years, eventually rising to become an Acting Deputy Assistant Attorney General, the highest level of career official in the Criminal Division at DOJ. He represents financial institutions, multi-national companies, and individuals in connection with criminal, regulatory, and civil enforcement actions involving anti-money laundering (AML)/Bank Secrecy Act (BSA), sanctions, FCPA and other anti-corruption, securities, tax, wire and mail fraud, unlicensed money transmitter, false claims act, and sensitive employee matters. Mr. Day’s practice also includes BSA/AML compliance counseling and due diligence, and the defense of forfeiture matters.
Adam M. Smith is a partner in Washington, D.C. and was the Senior Advisor to the Director of the U.S. Treasury Department’s OFAC and the Director for Multilateral Affairs on the National Security Council. His practice focuses on international trade compliance and white collar investigations, including with respect to federal and state economic sanctions enforcement, the FCPA, embargoes, and export controls. He routinely advises multi-national corporations regarding regulatory aspects of international business. Mr. Smith is ranked by Chambers and Partners and was named by Global Investigations Review as a leading sanctions practitioner.
Ella Alves Capone is a senior associate in the Washington, D.C. office. Her practice focuses primarily in the areas of white collar criminal defense, corporate compliance, and securities litigation. Ms. Capone regularly conducts internal investigations and advises multinational corporations and financial institutions, including major banks and casinos, on compliance with anti-corruption and anti-money laundering laws and regulations.
Our webcast provides a preview of what Congress is likely to investigate in the coming Congress. We look at the investigative committees, including who is likely to lead them and on what topics they are likely to focus. We discuss the impact of the Presidential election on congressional investigative and oversight priorities. We examine how recent rules changes and court cases impact the ability of congressional committees to enforce compliance with document, information and deposition requests. And we discuss strategies for responding to congressional requests. This is a fast-paced, practical look at the landscape of the 117th Congress, which promises an active slate of investigations focused on the private sector.
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PANELISTS:
Michael Bopp is a partner in the Washington, D.C. office. He spent more than a decade on Capitol Hill running congressional investigations in both the House and Senate and brings his extensive government and private-sector experience to help clients navigate through the most difficult crises, often involving investigations as well as public policy and media challenges.
Thomas Hungar is a partner in the Washington, D.C. office. Mr. Hungar served as General Counsel to the U.S. House of Representatives from July 2016 until January 2019, when he rejoined the firm. He has presented oral argument before the Supreme Court of the United States in 26 cases, including some of the Court’s most important patent, antitrust, securities, and environmental law decisions, and he has also appeared before numerous lower federal and state courts.
Roscoe Jones is counsel in the Washington, D.C. office, and a member of the firm’s Public Policy, Congressional Investigations, and Crisis Management groups. Mr. Jones formerly served as Chief of Staff to U.S. Representative Abigail Spanberger, Legislative Director to U.S. Senator Dianne Feinstein, and Senior Counsel to U.S. Senator Cory Booker, among other high-level roles on Capitol Hill.
Megan Kiernan is an associate in the Washington, D.C. office. She practices in the firm’s Litigation Department and is a member of its White Collar Defense, Congressional Investigations, and Crisis Management Practice Groups. She defends clients in Executive and Congressional Branch investigations as well as in civil litigation at the trial and appellate level.
On December 4, 2020, the Securities and Exchange Commission (“SEC”) announced its first enforcement action against a public company for misleading disclosures about the financial effects of the pandemic on the company’s business operations and financial condition. In a settled administrative order, the Commission found that disclosures in two press releases by The Cheesecake Factory Incorporated violated Section 13(a) of the Exchange Act and Rules 13a-11 and 12b-20 thereunder. Without admitting the findings in the order, the company agreed to pay a $125,000 penalty and to cease-and-desist from further violations.[1] In March 2020, the SEC’s Division of Enforcement formed a Coronavirus Steering Committee to oversee the Division’s efforts to actively look for Covid-related misconduct.
The Company’s Form 8-Ks
On March 23, 2020, the company furnished a Form 8-K to the Commission, disclosing, among other things, that it was withdrawing previously-issued financial guidance due to economic conditions caused by Covid-19. As an exhibit to the Form-8-K, the company included a copy of its press release providing a business update regarding the impact of Covid-19. The press release announced that the company was transitioning to an “off-premise” model (i.e., to-go and delivery) that would enable the company to continue to “operate sustainably.” This press release did not elaborate on what “sustainably” meant. The release also disclosed a $90 million draw down on the company’s revolving credit facility, and stated that the company was “evaluating additional measures to further preserve financial flexibility.”
On March 27, 2020, in response to media reports, the company filed another Form 8-K, disclosing that it was not planning to pay rent in April and that it was in discussion with landlords regarding its rent obligations, including abatement and potential deferral. The company also disclosed that as of April 1, it had reduced compensation for executive officers, its Board of Directors, and certain employees, and that it furloughed approximately 41,000 employees.
On April 3, 2020, the company furnished another Form 8-K to the Commission that attached a copy of an April 2, 2020 press release. This press release provided a preliminary Q1 2020 sales update, which reflected the impact of Covid-19. The release stated that “the restaurants are operating sustainably at present under this [off-premise] model.”
The SEC found that the March 23 and April 3 Form 8-Ks – but not the March 27 Form 8-K – were materially misleading.
What the Company Did Not Disclose
The company’s disclosures on March 23 and April 3 did not disclose:
- a March 18, 2020 letter from the company to its restaurants’ landlords stating that it was not going to pay its rent for April 2020;
- that the company was losing $6 million in cash per week;
- that it had only approximately 16 weeks of cash remaining even after the $90 million revolving credit facility borrowing; and
- that it was excluding expenses attributable to corporate operations from its claim of sustainability.
The SEC’s Findings
The SEC found that the company’s March 23 and April 3, 2020 Forms 8-K were materially false and misleading in violation of Section 13(a) of the Exchange Act and Rules 13a-11 and 12b-20 thereunder. These sections require that every issuer of a security registered pursuant to Section 12 of the Exchange Act file with the Commission accurate and current information on its Form 8-K, including material information necessary to make the required statements made in the reports not misleading.
Observations and Takeaways
Although this is the first enforcement action against a public company based on disclosures about the financial effects of the pandemic, the findings against the company are fairly unusual.
Two observations:
- First, the SEC’s order focuses on two press releases included as exhibits in Form 8-Ks that are deemed to be “furnished,” and not “filed,” under the Exchange Act. Specifically, one was filed under Item 7.01 and the other under Item 2.02. Because these Form 8-Ks are not deemed to be “filed” for purposes of Section 18 of the Exchange Act, there is no private right of action under Section 18 that can arise in connection with these Form 8-Ks. So, although “furnishing” reports results in lower liability exposure, it does not mean that the SEC cannot take enforcement action if it believes the disclosure is misleading.
- Second, the language at issue in the two Form 8-Ks is the word of the moment, “sustainably,” as in “operating sustainably.” It should be noted that, nine months after the disclosures were made, the company remains in business (and did not file for bankruptcy) and, in fact, as of the close of trading on December 4, 2020, its stock price closed near the high of the 52-week range. The concept of sustainability is generally thought to encompass the concept of over the long- or longer term, so it is not self-evident that these disclosures were materially misleading.
Some takeaways:
- In using the word “sustainably” without further qualification or explanation, issuers run the risk of being misunderstood. Sustainably in what sense (as a synonym for liquidity?) or to which degree? Over what period of time? It is not self-evident what sustainability entails.
- Where the subject matter involves the impact of Covid, the Commission’s order certainly demonstrates its willingness to take action even if, at worst, the disclosure at issue is vague or unclear. This was not a case in which the company claimed it had no liquidity issues when, in fact, it was experiencing significant liquidity issues. Put another way, this case raises the question as to whether Covid disclosures are attracting greater scrutiny than other corporate disclosures in the current climate.
- To state the obvious, the Commission brought this action for a reason: to underscore the importance of carefully drafted disclosures with respect to the impact of Covid on issuers’ results of operations, financial condition and liquidity; and to signal its willingness to take action if issuers’ Covid-related disclosures are not carefully drafted. A quote from the SEC Chair in the press release announcing this action is a further indication of the importance the SEC is placing on this area of enforcement.[2]
_______________________
[1] Order Instituting Cease-and-Desist Proceedings, Securities Exchange Act of 1934 Release No. 90565 at 4 (Dec. 4, 2020).
[2] Press Release, Securities and Exchange Commission, SEC Charges The Cheesecake Factory For Misleading COVID-19 Disclosures (Dec. 4, 2020), available at https://www.sec.gov/news/press-release/2020-306.
Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these issues. To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Securities Enforcement or Securities Regulation and Corporate Governance practice groups, or the following authors:
Thomas J. Kim – Washington, D.C. (+1 202-887-3550, tkim@gibsondunn.com)
Mark K. Schonfeld – New York (+1 212-351-2433, mschonfeld@gibsondunn.com)
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Ronald O. Mueller – Washington, D.C. (+1 202-955-8671, rmueller@gibsondunn.com)
Lauren Myers – New York (+1 212-351-3946, lmyers@gibsondunn.com)
Please also feel free to contact the practice group leaders:
Securities Enforcement Practice Group Leaders:
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Mark K. Schonfeld – New York (+1 212-351-2433, mschonfeld@gibsondunn.com)
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This year presented unique challenges for the Court, as New York was situated at the national epicenter of the COVID-19 pandemic. When the virus’s effects took hold in March, the Court responded by limiting access to its courthouse. By the end of the month, the Governor issued an Executive Order suspending various litigation deadlines and issued a statewide work-from-home order. New York courts—led by Chief Judge Janet DiFiore—took measures to restrict the virus’s spread. The Court closed its courthouse and elected not to hear oral argument during its remaining March, April, and May sessions. In late May, however, the Court began reopening, and it is now accepting in-person filings and hearing oral arguments with appropriate safety protocols.
Both the pace of decisions and new additions to the docket appear to have been reduced by approximately 20%. Nevertheless, the Court has continued resolving cases of exceptional importance, on a broad array of issues spanning from due process, freedom of speech, and arbitration, to class actions, statutes of limitations, consumer protection, administrative law, and employment law.
This year continued the Court’s recent lack of unanimity, with judges issuing a large number of concurring and dissenting opinions. Moreover, Judge Leslie Stein announced that she will retire in June 2021, and Judge Eugene Fahey will reach his mandatory retirement age next year. Their replacement marks a potential shift for the Court, which has been perceived by some as ideologically moderate and growing increasingly conservative on certain issues in recent years, including law enforcement and business regulation.
The New York Court of Appeals Round-Up & Preview summarizes key opinions in civil cases issued by the Court over the past year and highlights a number of cases of potentially broad significance that the Court will hear during the coming year. The cases are organized by subject.
To view the Round-Up, click here.
Gibson Dunn’s New York office is home to a team of top appellate specialists and litigators who regularly represent clients in appellate matters involving an array of constitutional, statutory, regulatory, and common-law issues, including securities, antitrust, commercial, intellectual property, insurance, unfair trade practice, First Amendment, class action, and complex contract disputes. In addition to our expertise in New York’s appellate courts, we regularly brief and argue some of the firm’s most important appeals, file amicus briefs, participate in motion practice, develop policy arguments, and preserve critical arguments for appeal. That is nowhere more critical than in New York—the epicenter of domestic and global commerce—where appellate procedure is complex, the state political system is arcane, and interlocutory appeals are permitted from the vast majority of trial-court rulings.
Our lawyers are available to assist in addressing any questions you may have regarding developments at the New York Court of Appeals, or any other state or federal appellate courts in New York. Please feel free to contact any member of the firm’s Appellate and Constitutional Law practice group, or the following lawyers in New York:
Mylan L. Denerstein (+1 212-351-3850, mdenerstein@gibsondunn.com)
Akiva Shapiro (+1 212-351-3830, ashapiro@gibsondunn.com)
Seth M. Rokosky (+1 212-351-6389, srokosky@gibsondunn.com)
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Please also feel free to contact the following practice group leaders:
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© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
New York partner Akiva Shapiro is the author of “Holocaust Survivors Deserve Their Day in Court,” [PDF] published by The Wall Street Journal on December 6, 2020.
On December 1, 2020, The Nasdaq Stock Market LLC (“Nasdaq”) announced that it filed with the U.S. Securities and Exchange Commission (the “SEC”) a proposal to advance board diversity and enhance transparency of board diversity statistics through new listing requirements. This client alert provides a summary of the proposed rules and the rationale for the proposals. In summary, if approved by the SEC, the proposed rules would require certain Nasdaq-listed companies to: (A) annually disclose diversity statistics regarding their directors’ voluntary self-identified characteristics in substantially the format proposed by Nasdaq for the current year and (after the first year of disclosure) the immediately prior year; and (B) include on their boards of directors at least two “Diverse” directors (as defined in the rules) or publicly disclose why their boards do not include such “Diverse” directors.
Nasdaq’s Annual Board Diversity Disclosure Proposal
The proposed rules would require Nasdaq-listed companies, other than “Exempt Entities” (as defined below), to provide statistical information about each director’s self-identified gender, race, and self-identification as LGBTQ+ in substantially the format proposed by Nasdaq under new proposed Rule 5606 (the “Board Diversity Matrix”), which is reproduced as Exhibit A below and is also available at the Nasdaq Listing Center here. Following the first year of disclosure, companies would be required to disclose the current year and immediately prior year diversity statistics using the Board Diversity Matrix or in a substantially similar format.
This statistical information disclosure would be required to be provided (A) in the company’s proxy statement or information statement for its annual meeting of shareholders, or (B) on the company’s website. If the company provides such disclosure on its website, the company must also submit such disclosure and include a URL link to the disclosure through the Nasdaq Listing Center no later than 15 calendar days after the company’s annual shareholders meeting.
The proposed diversity disclosure requirement is limited to the board of directors of the company, and does not require disclosure of diversity metrics for management and staff. Foreign Issuers may elect to satisfy the board composition disclosure requirement through an alternative disclosure matrix template. (See Nasdaq Identification Number 1761).
Include Diverse Directors or Explain
The proposed listing rule would require most Nasdaq-listed companies, other than “Exempt Entities” (as defined below), to:
|
(A) |
have at least two members of its board of directors who are “Diverse,” which includes: | |||||||||||||
| ||||||||||||||
| ||||||||||||||
|
(B) |
explain why the company does not have at least two directors on its board who self-identify as “Diverse.” |
For the purposes of the proposed rule described above, the term “Diverse” means an individual who self-identifies in one or more of the following categories defined above: Female, Underrepresented Minority or LGBTQ+.
Foreign Issuers (including Foreign Private Issuers) and Smaller Reporting Companies would have more flexibility to satisfy the requirement for two Diverse directors by having two Female directors. In the case of a Foreign Issuer, in lieu of the definition above, “Diverse” means an individual who self-identifies as one or more of the following: Female, LGBTQ+, or an underrepresented individual based on national, racial, ethnic, indigenous, cultural, religious or linguistic identity in the company’s home country jurisdiction.
While Nasdaq’s definition of a “Diverse” director is substantially aligned with California’s Board Gender Diversity Mandate, there are some key differences, which are highlighted by Nasdaq here. Also, according to Nasdaq, the proposed rule “would exclude emeritus directors, retired directors and members of an advisory board. The diversity requirements of the proposed rule would only be satisfied by Diverse directors actually sitting on the board of directors of the company.” (See Nasdaq Identification Number 1770).
The definition of “Underrepresented Minority” is consistent with the categories reported to the U.S. Equal Employment Opportunity Commission through the Employer Information Report EEO-1 Form.
Exempt Entities
The following entities are exempt from the requirements described under “Nasdaq’s Annual Board Diversity Disclosure Proposal” and “Include Diverse Directors or Explain” above (the “Exempt Entities”):
- acquisition companies listed under IM-5101-2 (Listing of Companies Whose Business Plan is to Complete One or More Acquisitions);
- asset-backed issuers and other passive issuers (as set forth in Rule 5615(a)(1) (Asset-backed Issuers and Other Passive Issuers));
- cooperatives (as set forth in Rule 5615(a)(2) (Cooperatives));
- limited partnerships (as set forth in Rule 5615(a)(4) (Limited Partnerships));
- management investment companies (as set forth in Rule 5615(a)(5) (Management Investment Companies));
- issuers of nonvoting preferred securities, debt securities and Derivative Securities (as set forth in Rule 5615(a)(6) (Issuers of Non-Voting Preferred Securities, Debt Securities and Derivative Securities)); and
- issuers of securities listed under the Rule 5700 Series (Other Securities).
Compliance Period
Annual Board Diversity Disclosure Proposal
Each Nasdaq-listed company would have one calendar year from the date the SEC approves the Nasdaq rules (the “Approval Date”) to comply with the board diversity disclosure requirement. Each company newly listing on Nasdaq, including any Special Purpose Acquisition Company (“SPAC”) listed or listing in connection with a business combination under Nasdaq’s IM-5101-2, would be require to comply with the board diversity requirement within one year of listing, subject to the conditions further discussed under “Phase-in Period” below.
Board Diversity Rule Proposal
Each Nasdaq-listed company would have two calendar years from the Approval Date to have, or explain why it does not have, at least one Diverse director. Further, Nasdaq proposes for each company to have, or explain why it does not have, two diverse directors no later than: (i) four calendar years after the Approval Date, for companies listed on the Nasdaq Global Select or Nasdaq Global Market; or (ii) five calendar years after the Approval Date, for companies listed on the Nasdaq Capital Market. A company listing after the Approval Date, but prior to the end of the periods set forth in this paragraph, must satisfy the Diverse directors requirements by the latter of the periods set forth in this paragraph or one year from the date of listing. A SPAC “would be exempt from the proposed board diversity and disclosure rules until one year following the completion of [the SPAC’s] business combination.” (See Nasdaq Identification Number 1762).
Phase-in Period
Any company newly listing on Nasdaq will be permitted one year from the date of listing on Nasdaq to satisfy the requirements of Diverse directors, as long as such company was not previously subject to a substantially similar requirement of another national securities exchange, including through an initial public offering, direct listing, transfer from the over-the-counter market or another exchange, or through a merger with an acquisition company listed under Nasdaq’s IM-5101-2. This phase-in period will apply after the end of the transition periods described under “Compliance Period” above.
Cure Period
If a company does not have at least two Diverse directors and fails to provide the required disclosure, the Nasdaq’s Listing Qualifications Department will notify the company that it has until the later of the company’s next annual shareholders meeting or 180 days from the event that caused the deficiency to cure the deficiency.
Rationale
The proposed requirements are an extension of Nasdaq’s (and other securities exchanges’) use of the listing rules to improve listed companies’ corporate governance (e.g., the requirement of independent committees). The proposed disclosure requirements build on the SEC Division of Corporation Finance’s Compliance and Disclosure Interpretations 116.11 and 133.13, issued on February 6, 2019, regarding director and director nominee diversity disclosure under Items 401 and 407 of Regulation S-K, and reflect similar movement in the market (e.g., Goldman Sachs’s new standard requirement to have at least one diverse board member on companies it helps take public in 2020 and two in 2021). However, according to the New York Times, “[o]ver the past six months, Nasdaq found that more than 75 percent of its listed companies did not meet its proposed diversity requirements.”
Nasdaq’s proposal cited studies about the positive correlation of diversity and shareholder value, investor protection, decision making and monitoring management. In connection with the proposed rules, Nasdaq also announced that it “conducted an internal study of the current state of board diversity among Nasdaq-listed companies based on public disclosures, and found that while some companies already have made laudable progress in diversifying their boardrooms, the national market system and the public interest would best be served by an additional regulatory impetus for companies to embrace meaningful and multi-dimensional diversification of their boards.”
Additional Information
Nasdaq has provided additional information through a summary and Frequently Asked Questions available on Nasdaq’s Reference Library Advanced Search, in Identification Numbers 1745 through 1777.
Nasdaq also announced a partnership with Equilar, Inc., a provider of corporate leadership data solutions, to aid Nasdaq-listed companies with board composition planning challenges and allowing Nasdaq-listed companies, through the Equilar BoardEdge platform, to have access to diverse board candidates to amplify director search efforts.
Next Steps
The proposed rules will be published in the Federal Register and subject to public comment. Comments to the proposed rules should be submitted to the SEC within 21 days of their publication in the Federal Register.
The approval period may take as little as 30 calendar days and as long as 240 calendar days from the date of publication of the proposed rules in the Federal Register (as described in further detail below). If approved by the SEC, the “Compliance Period” discussed above would begin.
- Section 19(b)(2)(C)(iii) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), provides that the SEC may not approve a proposed rule change earlier than 30 days after the date of publication of the proposed rules in the Federal Register, unless the SEC finds good cause for so doing and publishes the reason for the finding.
- Under Section 19(b)(2)(A)(i) of the Exchange Act, within 45 days of the date of publication of the proposed rules in the Federal Register, the SEC may approve or disapprove the proposed rule change by order or, under Section 19(b)(2)(A)(ii) of the Exchange Act, extend the period by not more than an additional 45 days (to a total of 90 days).
- However, if the SEC does not approve or disapprove the proposed rule change, Section 19(b)(2)(B)(i)(II) of the Exchange Act allows the SEC the opportunity for hearings to be concluded no later than 180 days after the notice of the proposed rule change (which can be extended by not more than 60 days (to a total of 240 days), pursuant to Section under Section 19(b)(2)(B)(ii)(II) of the Exchange Act).
Exhibit A
Board Disclosure Format
| Board Diversity Matrix (As of [DATE]) | ||||
| Board Size: | ||||
| Total Number of Directors | # | |||
| Gender: | Male | Female | Non-Binary | Gender Undisclosed |
| Number of directors based on gender identity | # | # | # | # |
| Number of directors who identify in any of the categories below: | ||||
| African American or Black | # | # | # | # |
| Alaskan Native or American Indian | # | # | # | # |
| Asian | # | # | # | # |
| Hispanic or Latinx | # | # | # | # |
| Native Hawaiian or Pacific Islander | # | # | # | # |
| White | # | # | # | # |
| Two or More Races or Ethnicities | # | # | # | # |
| LGBTQ+ | # | |||
| Undisclosed | # | |||
| Board Diversity Matrix (As of [DATE]) Foreign Issuer under Rule 5605(f)(1) | ||||
| Country of Incorporation: | [Insert Country Name] | |||
| Board Size: | ||||
| Total Number of Directors | # | |||
| Gender: | Male | Female | Non-Binary | Gender Undisclosed |
| Number of directors based on gender identity | # | # | # | # |
| Number of directors who identify in any of the categories below: | ||||
| LGBTQ+ | # | |||
| Underrepresented Individual in Home Country Jurisdiction | # | |||
| Undisclosed | # | |||
Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. For additional information, please contact the Gibson Dunn lawyer with whom you usually work, any lawyer in the firm’s Securities Regulation and Corporate Governance and Capital Markets practice groups, or the authors:
Hillary H. Holmes – Houston (+1 346-718-6602, hholmes@gibsondunn.com)
Elizabeth Ising – Washington, D.C. (+1 202-955-8287, eising@gibsondunn.com)
Ron Mueller – Washington, D.C. (+1 202-955-8671, rmueller@gibsondunn.com)
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Join our panel of seasoned Gibson Dunn partners from our Paris, Munich and London offices in a discussion concerning the ongoing impact of the current pandemic on employers in Europe.
PANELISTS:
Bernard Grinspan – Moderator: A French and New York qualified partner based in the Paris office of Gibson Dunn. For more than twenty years, Mr. Grinspan has advised publicly traded and privately held business entities on mergers and acquisitions, joint ventures and works closely with clients to provide guidance on strategic and financial investments. He plays a major role in the growth of Gibson Dunn’s European practices. He was and continues to be instrumental in the development of the firm’s European offices into high quality legal service providers, capable of advising foreign clients on the laws of their respective jurisdictions.
James Cox: A partner in the London office and a member of the firm’s Labor and Employment Practice Group. Mr. Cox has extensive experience in contentious and non-contentious labor and employment matters.
Nataline Fleury: A partner in the Paris office and a member of the firm’s Labor and Employment Practice Group. Ms. Fleury heads the employment practice in Paris, which focuses on employment law and social security issues, notably advising French and international clients on employment law aspects of M&A transactions. She has significant expertise in all aspects of employment law, in particular in relation to restructuring transactions, acquisitions and disposals, including the implementation of workforce reduction plans, employment audits, employment contracts, executive earnings programmes, transactional agreements and dealing with employee representatives, in particular for the implementation of collective agreements and codes of compliance.
Mark Zimmer: A partner in the Munich office and a member of the firm’s Labor and Employment Practice Group. Mr. Zimmer advises companies on all employment-related matters. He represents his clients in particular in connection with reorganizations, mergers and acquisitions, as well as the hiring and separation of executives.
The two most influential proxy advisory firms—Institutional Shareholder Services (“ISS”) and Glass, Lewis & Co. (“Glass Lewis”)—recently released their updated proxy voting guidelines for 2021. The key changes to the ISS and Glass Lewis policies are described below along with some suggestions for actions public companies should take now in light of these policy changes and other developments. An executive summary of the ISS 2021 policy updates is available here and a more detailed chart showing additional updates to its voting policies and providing explanations for the updates is available here. The 2021 Glass Lewis Guidelines are available here and the 2021 Glass Lewis Guidelines on Environmental, Social & Governance Initiatives are available here.
ISS 2021 Voting Policy Updates
On November 12, 2020, ISS released updates to its proxy voting guidelines for shareholder meetings held on or after February 1, 2021. This summary reviews the major policy updates that apply to U.S. companies, which are used by ISS in making voting recommendations on director elections and company and shareholder proposals at U.S. companies.
ISS plans to issue a complete set of updated policies on its website in December 2020. ISS also indicated that it plans to issue updated Frequently Asked Questions (“FAQs”) on certain of its policies in December 2020, and it issued a set of preliminary FAQs on the U.S. Compensation Policies and the COVID-19 Pandemic in October 2020, which are available here. In January 2021, ISS will evaluate new U.S. shareholder proposals that are anticipated for 2021 and update its voting guidelines as necessary.
- Director Elections
Board Racial/Ethnic Diversity
While ISS has not previously had a voting policy regarding board racial or ethnic diversity, ISS noted that many investors have shown interest in seeing this type of diversity on public company boards, especially in light of recent activism seeking racial justice. In its annual policy survey administered in the summer of 2020, ISS reported that almost 60% of investors indicated that boards should aim to reflect a company’s customer base and the broader societies in which companies operate by including directors drawn from racial and ethnic minority groups, and 57% of investors responded that they would also consider voting against members of the nominating committee (or other directors) where board racial and ethnic diversity is lacking.
Under ISS’s updated policy, at companies in the Russell 3000 or S&P 1500 indices:
- For the 2021 proxy season, the absence of racial/ethnic diversity on a company’s board will not be a factor in ISS’s voting recommendations, but will be highlighted by ISS in its research reports to “help investors identify companies with which they may wish to engage and foster dialogue between investors and companies on this topic.” ISS will only consider aggregate diversity statistics “if specific to racial and/or ethnic diversity.”
- For the 2022 proxy season, ISS will generally recommend votes “against” the chair of the nominating committee (or other directors on a case-by-case basis) where the board has no apparent racially or ethnically diverse members. Mitigating factors include the presence of racial and/or ethnic diversity on the board at the preceding annual meeting and a firm commitment to appoint at least one racially and/or ethnically diverse member within a year.
ISS highlighted several factors in support of its new policy, including obstacles to increasing racial and ethnic diversity on boards (citing studies conducted by Korn Ferry and the “Black Corporate Directors Time Capsule Project”), new California legislation, AB 979, to promote the inclusion of “underrepresented communities” on boards, recent comments by SEC Commissioner Allison Lee in support of strengthened additional guidance on board candidate diversity characteristics, diversity-related disclosure requirements and SEC guidance, and investor initiatives focused on racial/ethnic diversity on corporate boards.
Board Gender Diversity
ISS announced a policy related to board gender diversity in 2019, and provided a transitional year (2020) for companies that previously had no female directors to make a commitment to add at least one female director by the following year. In its recent policy updates, ISS removed the transition-related language, as the transition period will end soon. After February 1, 2021, ISS will recommend votes “against” the chair of the nominating committee (or other directors on a case-by-case basis) at any company that has no women on its board except in situations where there was at least one woman on the board at the previous annual meeting, and the board commits to “return to a gender-diverse status” by the next annual meeting.
Material Environmental & Social Risk Oversight Failures
Under extraordinary circumstances, ISS recommends votes “against” directors individually, committee members, or the entire board, in the event of, among other things, material failures of risk oversight. Current ISS policy cites bribery, large or serial fines or sanctions from regulatory bodies, significant adverse legal judgments or settlements, or hedging of company stock as examples of risk oversight failures. The policy updates add “demonstrably poor risk oversight of environmental and social issues, including climate change” as an example of a board’s material failure to oversee risk. ISS previously noted in its proposed policy updates that this policy is intended for directors of companies in “highly impactful sector[s]” that are “not taking steps to reduce environmental and social risks that are likely to have a large negative impact on future company operations” and is “expected to impact a small number of directors each year.”
“Deadhand” or “Slowhand” Poison Pills
ISS generally recommends votes case-by-case on director nominees who adopted a short-term poison pill with a term of one year or less, depending on the disclosed rationale for the adoption and other relevant factors. Noting that the unilateral adoption of a poison pill with a “deadhand” or “slowhand” feature is a “material governance failure,” ISS will now also generally recommend votes “against” directors at the next annual meeting if a board unilaterally adopts a poison pill with this feature, whether the pill is short-term or long-term and even if the pill itself has expired by the time of that meeting.
ISS explains that a deadhand pill provision is “generally phrased as a ‘continuing director (or trustee)’ or ‘disinterested director’ clause and restricts the board’s ability to redeem or terminate the pill” and “can only be redeemed if the board consists of a majority of continuing directors, so even if the board is replaced by shareholders in a proxy fight, the pill cannot be redeemed,” and therefore, “the defunct board prevents [the redemption]” of the pill. Continuing directors are defined as “directors not associated with the acquiring person, and who were directors on the board prior to the adoption of the pill or were nominated by a majority of such directors.” A slowhand pill is “where this redemption restriction applies only for a period of time (generally 180 days).”
Classification of Directors as Independent
While there are several changes to ISS’s policy, the primary change is to limit the “Executive Director” classification to officers only, excluding other employees. According to ISS, this change will not result in any vote recommendation changes under its proxy voting policy, but may provide additional clarity for institutional holders whose overboarding policies apply to executive officers.
- Other Board-Related Proposals
Board Refreshment
Previously, ISS generally recommended votes “against” proposals to impose director tenure and age limits. Under the updated policy, ISS will now take a case-by-case approach for tenure limit proposals while continuing to recommend votes “against” age-limit proposals. With respect to management proposals for tenure limits, ISS will consider the rationale and other factors such as the robustness of the company’s board evaluation process, whether the limit is of sufficient length to allow for a broad range of director tenures, whether the limit would disadvantage independent directors compared to non-independent directors, and whether the board will impose the limit evenly, and not have the ability to waive it in a discriminatory manner. With respect to shareholder proposals for tenure limits, ISS will consider the scope of the proposal and whether there is evidence of “problematic issues” at the company combined with, or exacerbated by, a lack of board refreshment.
ISS noted that the board refreshment is “best implemented through an ongoing program of individual director evaluations, conducted annually, to ensure the evolving needs of the board are met and to bring in fresh perspectives, skills, and diversity as needed,” but it cited the growing attention on board refreshment as a mechanism to achieve board diversity as an impetus for this policy change.
- Shareholder Rights and Defenses
Exclusive Forum Provisions
Exclusive forum provisions in company governing documents historically have required shareholders to go to specified state courts if they want to make fiduciary duty or other intra-corporate claims against the company and its directors. In March 2020, a unanimous Delaware Supreme Court confirmed the validity of so-called “federal forum selection provisions”—provisions that Delaware corporations adopt in their governing documents requiring actions arising under the Securities Act of 1933 (related to securities offerings) to be filed exclusively in federal court. Noting that the benefits of eliminating duplicative litigation and having cases heard by courts that are “well-versed in the applicable law” outweigh the potential inconvenience to plaintiffs, ISS updated its policy to recommend votes “for” provisions in the charter or bylaws (and announced it would not criticize directors who unilaterally adopt similar provisions) that specify “the district courts of the United States” (instead of particular federal district court) as the exclusive forum for federal securities law claims. ISS will oppose federal exclusive forum provisions that designate a particular federal district court. ISS also updated its policy on state exclusive forum provisions. At Delaware companies, ISS will generally support provisions in the charter or bylaws (and will not criticize directors who unilaterally adopt similar provisions) that select Delaware or the Delaware Court of Chancery. For companies incorporated in other states, if the provision designates the state of incorporation, ISS will take a case-by-case approach, considering a series of factors, including disclosure about harm from duplicative shareholder litigation.
Advance Notice Requirements
ISS recommends votes case-by-case on advance notice proposals, supporting those that allow shareholders to submit proposals/nominations as close to the meeting date as reasonably possible. Previously, to be “reasonable,” the company’s deadline for shareholder notice of a proposal/nomination had to be not more than 60 days prior to the meeting, with a submittal window of at least 30 days prior to the deadline. In its updated policy, ISS now considers a “reasonable” deadline to be no more than 120 days prior to the anniversary of the previous year’s meeting with a submittal window no shorter than 30 days from the beginning of the notice period (also known as a 90-120 day window). ISS notes that this is in line with recent market practice. This policy applies only in limited situations where a company submits an advance notice provision for shareholder approval.
Virtual Shareholder Meetings
In light of the ongoing COVID-19 pandemic and other rule changes regarding shareholder meeting formats, ISS has added a new policy under which it will generally recommend votes “for” management proposals allowing for the convening of shareholder meetings by electronic means, so long as they do not preclude in-person meetings. Companies are encouraged to disclose the circumstances under which virtual-only meetings would be held, and to allow for comparable rights and opportunities for shareholders to participate electronically as they would have during an in-person meeting. ISS will recommend votes case-by-case on shareholder proposals concerning virtual-only meetings, considering the scope and rationale of the proposal and concerns identified with the company’s prior meeting practices.
- Social and Environmental Issues
Mandatory Arbitration of Employment Claims
The new policy on mandatory arbitration provides that ISS will recommend votes case-by-case on proposals requesting a report on the use of mandatory arbitration on employment-related claims, taking into account the following factors:
- The company’s current policies and practices related to the use of mandatory arbitration agreements on workplace claims;
- Whether the company has been the subject of recent controversy, litigation, or regulatory actions related to the use of mandatory arbitration agreements on workplace claims; and
- The company’s disclosure of its policies and practices related to the use of mandatory arbitration agreements compared to its peers.
ISS added this policy because proposals on mandatory arbitration have received increased support from shareholders, and ISS clients have expressed interest in a specific policy on this topic.
Sexual Harassment
ISS’s new policy on sexual harassment provides that ISS will recommend votes case-by-case on proposals requesting a report on actions taken by a company to strengthen policies and oversight to prevent workplace sexual harassment, or a report on risks posed by a company’s failure to prevent workplace sexual harassment. ISS will take into account the following factors:
- The company’s current policies, practices, and oversight mechanisms related to preventing workplace sexual harassment;
- Whether the company has been the subject of recent controversy, litigation, or regulatory actions related to workplace sexual harassment issues; and
- The company’s disclosure regarding workplace sexual harassment policies or initiatives compared to its industry peers.
Similar to the new policy on mandatory arbitration discussed above, ISS cited increasing shareholder support for sexual harassment proposals and client demand as reasons for establishing this new policy.
Gender, Race/Ethnicity Pay Gap
ISS recommends votes case-by-case on proposals requesting reports on a company’s pay data by gender or race/ethnicity, or a report on a company’s policies and goals to reduce any gender or race/ethnicity pay gaps. In its updated policy, ISS adds to the list of factors to be considered in evaluating these proposals “disclosure regarding gender, race, or ethnicity pay gap policies or initiatives compared to its industry peers” and “local laws regarding categorization of race and/or ethnicity and definitions of ethnic and/or racial minorities.” ISS notes that this change is to “highlight that some legal jurisdictions do not allow companies to categorize employees by race and/or ethnicity and that definitions of ethnic and/or racial minorities differ from country to country, so a global racial and/or ethnicity statistic would not necessarily be meaningful or possible to provide.”
Glass Lewis 2021 Proxy Voting Policy Updates
On November 24, 2020, Glass Lewis released its updated proxy voting guidelines for 2021. This summary reviews the major updates to the U.S. guidelines, which provides a detailed overview of the key policies Glass Lewis applies when making voting recommendations on proposals at U.S. companies and on environmental, social and governance initiatives.
- Board of Directors
Board Diversity
Glass Lewis expanded on its previous policy on board gender diversity, under which it generally recommends votes “against” the chair of the nominating committee of a board that has no female members. Under its expanded policy:
- For the 2021 proxy season, Glass Lewis will note as a concern boards with fewer than two female directors.
- For the 2022 proxy season, Glass Lewis will generally recommend votes “against” the nominating committee chair of a board with fewer than two female directors; however, for boards with six or fewer members, Glass Lewis’s previous policy requiring a minimum of one female director will remain in place. Glass Lewis indicated that, in making its voting recommendations, it will carefully review a company’s disclosure of its diversity considerations and may refrain from recommending that shareholders vote against directors when boards have provided a sufficient rationale or plan to address the lack of diversity on the board.
In addition, Glass Lewis noted that several states have begun to address board diversity through legislation, including California’s legislation requiring female directors and directors from “underrepresented communities” on boards headquartered in the state. Under its updated policy, Glass Lewis will now recommend votes in accordance with board composition requirements set forth in applicable state laws when they come into effect.
Disclosure of Director Diversity and Skills
Beginning with the 2021 proxy season, Glass Lewis will begin tracking the quality of disclosure regarding a board’s mix of diverse attributes and skills of directors. Specifically, Glass Lewis will reflect how a company’s proxy statement presents: (i) the board’s current percentage of racial/ethnic diversity; (ii) whether the board’s definition of “diversity” explicitly includes gender and/or race/ethnicity; (iii) whether the board has adopted a policy requiring women and minorities to be included in the initial pool of candidates when selecting new director nominees (also known as the “Rooney Rule”); and (iv) board skills disclosure. Glass Lewis reported that it will not be making voting recommendations solely on the basis of this assessment in 2021, but noted that the assessment will “help inform [its] assessment of a company’s overall governance and may be a contributing factor in [its] recommendations when additional board-related concerns have been identified.”
Board Refreshment
Previously, Glass Lewis articulated in its policy its strong support of mechanisms to promote board refreshment, acknowledging that a director’s experience can be a valuable asset to shareholders, while also noting that, in rare circumstances, a lack of refreshment can contribute to a lack of board responsiveness to poor company performance. In its updated policy, Glass Lewis reiterates its support of periodic board refreshment to foster the sharing of diverse perspectives and new ideas, and adds that, beginning in 2021, it will note as a potential concern instances where the average tenure of non-executive directors is 10 years or more and no new directors have joined the board in the past five years. Glass Lewis indicated that it will not be making voting recommendations strictly on this basis in 2021.
- Virtual-Only Shareholder Meetings
Glass Lewis has removed its temporary exception to its policy on virtual shareholder meeting disclosure that was in effect for meetings held between March 30, 2020 and June 30, 2020 due to the emergence of COVID-19. Glass Lewis’s standard policy will be in effect, under which Glass Lewis will generally hold the governance committee chair responsible at companies holding virtual-only meetings that do not include robust disclosure in the proxy statement addressing the ability of shareholders to participate, including disclosure regarding shareholders’ ability to ask questions at the meeting, procedures, if any, for posting questions received during the meeting and the company’s answers on its public website, as well as logistical details for meeting access and technical support.
- Executive Compensation
Short-Term Incentives
Glass Lewis has codified additional factors it will consider in assessing a company’s short-term incentive plan, including clearly disclosed justifications to accompany any significant changes to a company’s short-term incentive plan structure, as well as any instances in which performance goals have been lowered from the previous year. Glass Lewis also expanded its description of the application of upward discretion, including lowering goals mid-year and increasing calculated payouts, to also include instances of retroactively prorated performance periods.
Long-Term Incentives
With respect to long-term incentive plans, under its updated policy Glass Lewis has defined inappropriate performance-based award allocation as a criterion that may, in the presence of other major concerns, contribute to a negative voting recommendation. Glass Lewis will also review as “a regression of best practices” any decision to significantly roll back performance-based award allocation, which may lead to a negative recommendation absent exceptional circumstances. Glass Lewis also clarified that clearly disclosed explanations are expected to accompany long-term incentive equity granting practices, as well as any significant structural program changes or any use of upward discretion.
- Environmental, Social & Governance Initiatives
Workforce Diversity Reporting
Glass Lewis has updated its guidelines to provide that it will generally recommend votes “for” shareholder proposals requesting that companies provide EEO-1 reporting. It also noted that, because issues of human capital management and workforce diversity are material to companies in all industries, Glass Lewis will no longer consider a company’s industry or the nature of its operations when evaluating diversity reporting proposals.
Management-Proposed E&S Resolutions
Glass Lewis will take a case-by-case approach to management proposals that deal with environmental and social issues, and will consider a variety of factors, including: (i) the request of the management proposals and whether it would materially impact shareholders; (ii) whether there is a competing or corresponding shareholder proposal on the topic; (iii) the company’s general responsiveness to shareholders and to emerging environmental and social issues; (iv) whether the proposal is binding or advisory; and (v) management’s recommendation on how shareholders should vote on the proposal.
Climate Change
Glass Lewis will no longer consider a company’s industry when reviewing climate reporting proposals, noting that because of the extensive and wide-ranging impacts climate change can have, it is an issue that should be addressed and considered by companies regardless of industry. As a result, under its new policy, Glass Lewis will generally recommend votes “for” shareholder proposals requesting that companies provide enhanced disclosure on climate-related issues, such as requesting that the company undertake a scenario analysis or report that aligns with the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”). Glass Lewis explained that that while it is generally supportive of these types of proposals, it will closely evaluate them in the context of a company’s unique circumstances and when making vote recommendations will continue to consider: (i) how the company’s operations could be impacted by climate-related issues; (ii) the company’s current policies and the level and evolution of its related disclosure; (iii) whether a company provides board-level oversight of climate-related risks; (iv) the disclosure and oversight afforded to climate change-related issues at peer companies; and (v) if companies in the company’s market and/or industry have provided any disclosure that is aligned with the TCFD recommendations.
Glass Lewis’s updated policy also addresses its approach to proposals on climate-related lobbying. When reviewing proposals asking for disclosure on this issue, Glass Lewis will evaluate: (i) whether the requested disclosure would meaningfully benefit shareholders’ understanding of the company’s policies and positions on this issue; (ii) the industry in which the company operates; (iii) the company’s current level of disclosure regarding its direct and indirect lobbying on climate change-related issues; and (iv) any significant controversies related to the company’s management of climate change or its trade association memberships. Under its policy, while Glass Lewis will generally recommend that companies enhance their disclosure on these issues, it will generally recommend votes “against” any proposals that would require the company to suspend its memberships in or otherwise limit a company’s ability to participate fully in the trade associations of which it is a member.
Environmental and Social Risk Oversight
Glass Lewis has updated its guidelines with respect to board-level oversight of environmental and social issues. Under its existing policy, for large-cap companies and in instances where Glass Lewis identifies material oversight concerns, Glass Lewis will review a company’s overall governance practices and identify which directors or board-level committees have been charged with oversight of environmental and/or social issues. Under its updated policy:
- For the 2021 proxy season, Glass Lewis will note as a concern when boards of companies in the S&P 500 do not provide clear disclosure (in either the company’s proxy statement or governing documents such as committee charters) on board-level oversight of environmental and social issues.
- For the 2022 proxy season, Glass Lewis will generally recommend votes “against” the governance committee chair at S&P 500 companies without explicit disclosure concerning the board’s role in overseeing these issues.Glass Lewis clarified in its updated policy that, while it believes it is important that these issues are overseen at the board level and that shareholders are afforded meaningful disclosure of these oversight responsibilities, it believes that companies should determine the best structure for this oversight (which it noted may be conducted by specific directors, the entire board, a separate committee, or combined with the responsibilities of a key committee).
- Other Changes
Glass Lewis’s 2021 voting policies also include the following updates:
- Special Purpose Acquisition Companies (“SPACs”): New to its policy this year is a section detailing Glass Lewis’s approach to common issues associated with SPACs. Under its new policy, Glass Lewis articulates a generally favorable view of proposals seeking to extend business combination deadlines. The new policy also details Glass Lewis’s approach to determining independence of board members at a post-combination entity who previously served as executives of the SPAC, whom Glass Lewis will generally consider to be independent, absent any evidence of an employment relationship or continuing material financial interest in the combined entity.
- Governance Following an IPO or Spin-Off. Glass Lewis clarified its approach to director recommendations on the basis of post-IPO corporate governance concerns. Glass Lewis generally targets the governance committee members for such concerns; however, if a portion of the governance committee members is not standing for election due to a classified board structure, Glass Lewis will expand its recommendations to additional director nominees, based on who is standing for election. Glass Lewis also clarified its approach to companies that adopt a multi-class share structure with disproportionate voting rights, or other anti-takeover mechanisms, preceding an IPO, noting it will generally recommend voting against all members of the board who served at the time of the IPO if the board: (i) did not also commit to submitting these provisions to a shareholder vote at the company’s first shareholder meeting following the IPO; or (ii) did not provide for a reasonable sunset of these provisions.
- Board Responsiveness. Glass Lewis did not change its board responsiveness policy, but clarified its approach to assessing significant support for non-binding shareholder resolutions. Specifically, for management resolutions, Glass Lewis will note instances where a resolution received over 20% opposition at the prior year’s meeting and may opine on the board’s response to such opposition; however, in the case of majority-approved shareholder resolutions, Glass Lewis generally believes significant board action is warranted in response.
Recommended Actions for Public Companies
- Submit your company’s peer group information to ISS for the next proxy statement: As part of ISS’s peer group construction process, on a semiannual basis in the U.S., companies may submit their self-selected peer groups for their next proxy disclosure. Although not determinative, companies’ self-selected peer groups are considered in ISS’s peer group construction, and therefore it is highly recommended that companies submit their self-selected peer groups. Certain companies with annual meetings to be held between February 1, 2021 and September 15, 2021 may submit their self-selected peer groups through the Governance Analytics page on the ISS website from November 16, 2020 to December 4, 2020. The peer group should include a complete peer list used for benchmarking CEO pay for the fiscal year ending prior to the next annual meeting. Companies that have made no changes to their previous proxy-disclosed executive compensation benchmarking peers, or companies that do not wish to provide this information in advance, do not need to participate. For companies that do not submit changes, the proxy-disclosed peers from the company’s last proxy filing will automatically be considered in ISS’s peer group construction process.
- Evaluate your company’s practices in light of the updated ISS and Glass Lewis proxy voting guidelines: Companies should consider whether their policies and practices, or proposals expected to be submitted to a shareholder vote in 2021, are impacted by any of the changes to the ISS and Glass Lewis proxy voting policies. For example, companies should consider whether their exclusive forum provisions or poison pills in the charter or bylaws contain any specific feature that would lead to adverse voting recommendations for directors by ISS or Glass Lewis.
- Assess racial/ethnic diversity on your board and consider enhancing related disclosures in the proxy statement: Companies should assess the composition of their board with respect to gender and racial/ethnic diversity, and consider whether any changes are needed to the board’s director recruitment policies and practices. Companies should also consider whether their diversity disclosures in the proxy statements or other public filings are adequate. To facilitate this assessment and support enhanced public disclosures, companies should consider asking their directors to self-identify their diverse traits in their upcoming director and officer questionnaires. As also noted by ISS, investors, too, are increasingly focused on racial/ethnic diversity. California recently passed the new board racial/ethnic diversity bill that expands upon the 2018 gender diversity bill, and the Illinois Treasurer launched a campaign representing a coalition of state treasurers and other investors in October 2020 asking Russell 3000 companies to disclose the race/ethnicity and gender of their directors in their 2021 proxy statements. In August 2020, State Street sent a letter to the board chairs of its U.S. portfolio companies, informing them that starting in 2021, State Street will ask companies to provide “specific communications” to shareholders regarding their diversity strategy and goals, measures of the diversity of the employee base and the board, goals for racial and ethnic representation at the board level and the board’s role in oversight of diversity and inclusion. In addition, earlier this week, Nasdaq filed a proposal with the SEC to adopt new listing rules related to board diversity and disclosure. The proposed rules would require most Nasdaq-listed companies to publicly disclose statistical information in a proposed uniform format on the company’s board of directors related to a director’s self-identified gender, race, and self-identification as LGBTQ+ and would also require such Nasdaq-listed companies “to have, or explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+.”
- Consider enhancing board oversight and disclosures on environmental and social matters: Although ISS noted that its update related to material environmental and social risk oversight failures is expected to affect a small number of directors in certain high-risk sectors, it is notable that ISS explicitly adds environmental and social risk oversight as an area where it will hold directors accountable. Also, institutional investors continue to focus on these issues in their engagements with companies and voice their concerns at companies that lag behind on this front. For example, BlackRock recently reported that, during the 2020 proxy season, it took actions against 53 companies for their failure to make sufficient progress regarding climate risk disclosure or management, either by voting against director-related items (such as director elections and board discharge proposals) or supporting certain climate-related shareholder proposals. Regardless of sector or industry, companies should evaluate whether their board has a system that properly enables them to oversee how the company manages environmental and social risks and establishes policies aligned with recent developments.
Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these issues. To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work in the Securities Regulation and Corporate Governance and Executive Compensation and Employee Benefits practice groups, or any of the following practice leaders and members:
Securities Regulation and Corporate Governance Group:
Elizabeth Ising – Washington, D.C. (+1 202-955-8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202-887-3550, tkim@gibsondunn.com)
Ron Mueller – Washington, D.C. (+1 202-955-8671, rmueller@gibsondunn.com)
Michael Titera – Orange County, CA (+1 949-451-4365, mtitera@gibsondunn.com)
Lori Zyskowski – New York, NY (+1 212-351-2309, lzyskowski@gibsondunn.com)
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Courtney Haseley – Washington, D.C. (+1 202-955-8213, chaseley@gibsondunn.com)
Julia Lapitskaya – New York, NY (+1 212-351-2354, jlapitskaya@gibsondunn.com)
Cassandra Tillinghast – Washington, D.C. (+1 202-887-3524, ctillinghast@gibsondunn.com)
Executive Compensation and Employee Benefits Group:
Stephen W. Fackler – Palo Alto/New York (+1 650-849-5385/+1 212-351-2392, sfackler@gibsondunn.com)
Sean C. Feller – Los Angeles (+1 310-551-8746, sfeller@gibsondunn.com)
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New York partners Reed Brodsky and Avi Weitzman and associate David Salant are the authors of “Due Process Protections Act Sends a Message to the Government” [PDF] published by the New York Law Journal on December 2, 2020.
Following the U.S. election of 2020, this webcast explores the agenda and policy goals of the Administration and Congress in 2021 that could impact the private sector. The webcast discusses the upcoming Washington agenda, potential roadblocks, and how the process may play out. The webcast highlights who could lead cabinet-level agencies and powerful congressional committees next year. With the potential for a new legislative and regulatory environment impacting companies, the webcast addresses questions including:
- What legislation and regulations should we expect next year?
- What could be barriers to the new agenda and what are the prospects for reforms?
- Who will populate the cabinet and chair congressional committees?
- How will the changing Washington landscape impact corporate America?
View Slides (PDF)
PANELISTS:
Michael Bopp is a partner in the Washington, D.C. office. He spent more than a decade on Capitol Hill running congressional investigations in both the House and Senate and brings his extensive government and private-sector experience to help clients navigate through the most difficult crises, often involving investigations as well as public policy and media challenges.
Roscoe Jones is counsel in the Washington, D.C. office, and a member of the firm’s Public Policy, Congressional Investigations, and Crisis Management groups. Mr. Jones formerly served as Chief of Staff to U.S. Representative Abigail Spanberger, Legislative Director to U.S. Senator Dianne Feinstein, and Senior Counsel to U.S. Senator Cory Booker, among other high-level roles on Capitol Hill.
Chantalle Carles Schropp is an associate in the Washington, D.C. office. As a member of the firm’s Litigation Department, her practice focuses on complex business and commercial litigation at both the trial and appellate levels as well as white collar criminal defense matters.
Developments in 2020, including with respect to the COVID-19 pandemic, have resulted in new ways of doing deals and new issues for dealmakers. Hear from seasoned practitioners on how deals are getting done and the issues being confronted. This discussion covers various M&A-related topics, including the following:
- Key deal issues to navigate during the current uncertainty;
- Lessons learned from broken deals during the pandemic;
- Clauses to include in deal documents to avoid pitfalls; and
- Current state of play for SPAC transactions, and forecasts for the future.
View Slides (PDF)
PANELISTS:
Robert Little is a partner in the Dallas office and a member of the firm’s Mergers and Acquisitions, Energy and Infrastructure, Private Equity, and Securities Regulation and Corporate Governance practice groups. Repeatedly admired by clients in Chambers USA for providing “timely, efficient and cost-effective solutions for clients,” Mr. Little’s practice focuses on corporate transactions, including mergers and acquisitions, securities offerings, joint ventures, investments in public and private entities, and commercial transactions. Mr. Little represents clients in a variety of industries, including energy, retail, technology, transportation, manufacturing, and financial services.
Candice Choh is a partner in the Century City office where she has a broad-based practice encompassing public and private company mergers and acquisitions across a wide variety of industries and other private equity transactions, including investment fund formation, co-investments, secondary transactions, and investments in sponsors.
Evan M. D’Amico is a partner in the Washington, D.C. office where he advises companies, private equity firms, boards of directors and special committees in connection with a wide variety of complex corporate matters, including mergers and acquisitions, asset sales, leveraged buyouts, spin-offs and joint ventures.
Andrew Kaplan is an associate in the New York office where his practice focuses on mergers and acquisitions, and corporate governance matters. Mr. Kaplan represents both public and private acquirors and targets in connection with mergers, acquisitions and takeovers, both negotiated and contested.
The Financial Conduct Authority (“FCA”) continues to show a desire to take action in sectors of the financial services industry where there has been traditionally less supervisory oversight and to push the importance of firm’s internal governance and oversight structures. Enforcement cases are often used as a way to convey key messages to such sectors and an important Final Notice[1] was published on Monday 23 November 2020 when the FCA imposed a fine of nearly £3.5m on TFS-ICAP Limited for breaches of Principle 2 (due skill, care and diligence), Principle 3 (reasonable care in organising and controlling its affairs responsibly and effectively) and Principle 5 (proper standards of market conduct) of the Authority’s Principles for Businesses.
Although many of the issues in the Notice are specific to the facts in question, there are a number of themes underlying them which are of more general application to regulated firms. With today’s very broad application of the Senior Managers and Certification Regime (“SMCR”) and accompanying conduct rules it is important that firms and Senior Managers are aware of the messages in the Notice and consider whether their control frameworks meet the regulatory expectations in this area.
The key themes are set out below, together with some suggestions on practical steps firms can take to address the issues raised.
1. Risk identification should drive control design
The FCA expects firms to consider the specific risks within their business, given the sector of the market in which they operate, execution methods and any firm-specific issues which have arisen.
- Risks considered must include conduct as well as operational, reputational, prudential and any other relevant risk type. The risks identified should then flow through into the design and implementation of the control framework, and controls must be reasonably designed to prevent and detect each type of risk crystallising.
The obligation to assess risk lies not only with Risk and Compliance Departments but also with the business units.
- Those involved in day-to-day execution of the firm’s strategy are better placed than any others to properly understand what might go wrong.
- Business unit senior managers will be expected to own the risks inherent within their areas of the firm and to satisfy themselves that controls are appropriate.
- In extreme cases, where they are not satisfied that risks are adequately managed or mitigated, they will be expected to stop executing business.
For firms who outsource compliance or rely on off-the-shelf policies or training programmes, a key message is that the FCA is likely to expect a firm to go beyond simply adopting generic material or processes.
- The firm should consider the particular risks it faces and tailor the generic product to be specifically relevant to its business.
Where allegations of misconduct arise the efficacy of controls should be revisited and where necessary, enhanced.
- Firms will be expected to read-across from different areas. Where an issue arises in one section of the business, firms should ensure they have both a process in place and a record to show that they have given positive thought to whether the same issue might be arising elsewhere.
- Equally, good practice would suggest firms should have a process whereby management are alerted to any signs that controls are not operating as intended or otherwise need improving so that they can remediate in a timely fashion (i.e. before issues are raised with regulators).
Managers may wish to ensure that any common industry practices are carefully considered, recognising that although rules may not have drastically changed, standards and regulatory expectations have, especially post-financial crisis.
- The work of the FICC Market Standards Board can be very helpful in understanding the expected industry standards.
- Arguments such as ‘everyone else does it’ or ‘that’s just how the market operates’ will not prevent action being taken – in fact, the opposite may be true.
- Where misconduct is common within a sector of industry, a failure by a firm to recognise it as such, may be seen as a failure of oversight and management.
2. Governance structures and documentation of key decisions are crucial parts of reasonable oversight processes
Governance and oversight must be about more than just delivering financial performance and results. Structures and processes are required to ensure risk is properly managed, conduct is appropriate, delegation and oversight mechanisms work and culture meets expectations.
- The Notice links inadequate governance structure to inadequate oversight and management in what should be taken as a clear message to Senior Managers looking for statements regarding how they should execute their functions and meet the Senior Manager Conduct Rules.
Any governance structure which cannot produce evidence of its consideration of risk will struggle in the face of the regulatory scrutiny that follows any kind of incident.
- Sometimes the issue is one of failure to document or record discussions that have actually taken place, and the best fix can be to put in place a structure that makes recordkeeping easier.
- However, if management meet too infrequently, with limited agendas and focus only on profitability, it will be difficult for them to show that they adequately discharged the full breadth of their responsibilities.
3. Conduct Risk management and robust internal reviews are also key in meeting Senior Manager responsibilities
Firms and Senior Managers must ensure that they have in place all the steps they need to tackle allegations of misconduct. A failure to have a process to manage the risk of misconduct – often called conduct risk – has been deemed by the FCA to be a breach of Principle 3, and therefore could in post-SMCR terms be a breach of a Senior Managers Conduct Rule.
- Processes must be in place for handling allegations of misconduct whatever the source, recognising that different sources may involve different considerations (e.g. anonymity or confidentiality).
- Processes should cover robust investigations and notifications to control functions and management so that risks can be properly addressed.
- It is prudent to make good records where issues are deemed not to be made out or it is determined that no action is required. In these circumstances demonstrating that a robust review has taken place will be crucial when showing that issues were not ignored.
- It can be particularly useful to use past incidents – proven or not – as scenarios in future training. This allows training to target real or probable issues and also allows management to set out how they expect individuals to react to real-life situations.
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[1] FCA Final Notice, TFS-ICAP, 23 November 2020 (https://www.fca.org.uk/publication/final-notices/tfs-icap-2020.pdf)
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above – whether issues raised or potential solutions – please contact the Gibson Dunn UK Financial Services Regulation team:
Matthew Nunan (+44 (0) 20 7071 4201, mnunan@gibsondunn.com)
Michelle M. Kirschner (+44 (0) 20 7071 4212, mkirschner@gibsondunn.com)
Martin Coombes (+44 (0) 20 7071 4258, mcoombes@gibsondunn.com)
Chris Hickey (+44 (0) 20 7071 4265, chickey@gibsondunn.com)
© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
Announcements
On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the Federal Reserve Board and the UK Financial Conduct Authority, announced plans to consult on specific timing for the path forward to cease the publication of USD LIBOR. In particular, IBA plans to consult on ceasing the publication of USD LIBOR on December 31, 2021 for only the one week and two month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors (i.e., overnight, one month, three month, six month and 12 month tenors). This announcement is significant as regulators had indicated that all USD LIBOR tenors would cease to exist or become non-representative at the end of 2021. This proposal significantly lengthens the transition period to June 30, 2023 for most legacy contracts, allowing time for many contracts to mature before USD LIBOR ceases to exist. Legacy contracts with maturities beyond June 30, 2023 would still need to be amended to incorporate appropriate fallback provisions to address the ultimate cessation of USD LIBOR.
This announcement follows on the heels of IBA’s November 18th announcement that it plans to consult on ceasing publication of all GBP, EUR, CHF and JPY LIBOR settings after December 31, 2021. IBA plans to close the consultation for feedback on both proposals by the end of January 2021. IBA noted that any publication of the overnight and one, three, six and 12 month USD LIBOR settings based on panel bank submissions beyond December 31, 2021 will need to comply with applicable regulations, including as to representativeness.
Concurrently, a statement by the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation included supervisory guidance that encourages banks to stop new USD LIBOR issuances by the end of 2021, noting that entering into new USD LIBOR-based contracts creates safety and soundness risks.
The regulators and IBA make clear that these announcements should not be read as an index cessation event for purposes of contractual fallback language (i.e., they should not be read to say that LIBOR has ceased, or will cease, to be provided permanently or indefinitely or that it is not, or no longer will be, representative). IBA will need to receive feedback on the consultation and will make separate announcement(s) regarding the cessation dates once final. Accordingly, the IBA proposal is not final and is subject to the feedback on the consultation.
The Alternative Reference Rates Committee (the “ARRC”) also released a statement in support of the announcements, expressing that the developments “would support a smooth transition for legacy contracts by allowing time for most to mature before USD LIBOR is proposed to cease, subject to consultation outcomes.” The ARRC further stated that “these developments align with the ARRC’s transition efforts, and will accelerate market participants’ use of the Secured Overnight Financing Rate (SOFR), the ARRC’s preferred alternative to USD LIBOR.”
Impact
If commonly used USD LIBOR tenors continue to be published and remain representative until June 30, 2023, this will provide an extra 18 months for the completion of the LIBOR transition process beyond what was previously expected. Fallback provisions in existing contracts using these USD LIBOR tenors would not be triggered until June 30, 2023, when, under the proposal, LIBOR would ultimately cease to exist. This will also allow additional time for the development of a forward-looking version of SOFR (“Term SOFR”), which could further ease the transition.
Counterparties with existing loans, derivatives and other contracts that mature prior to June 30, 2023 and reference most USD LIBOR rates would not need to incorporate fallback amendments, since these contracts will terminate before the transition. Additionally, with respect to derivatives and loans that reference USD LIBOR and have maturities beyond June 30, 2023, counterparties are likely to consider delaying adoption of fallback amendments because there no longer is an immediate threat of application of the fallback, yet uncertainty remains as to the extent of the mismatch between the ARRC-recommended fallback provisions for loans (Term SOFR, if available, or, otherwise, daily simple SOFR) and the ISDA 2020 IBOR Fallbacks Protocol for derivatives (SOFR compounded in arrears).
Furthermore, counterparties may opt to wait and see how the market develops before amending legacy contracts, especially given uncertainty around the appropriate adjustment to contractually specified spreads over the reference rate when adopting SOFR in place of LIBOR.
Although certain tenors of USD LIBOR may continue to be published until mid-2023, banks have now been advised, for safety and soundness concerns, not to enter into any new contracts that reference LIBOR after December 31, 2021. This will result in a longer period during which banks and other market participants will have both LIBOR loans and swaps and SOFR loans and swaps. Banks and other market participants should consider the operational and pricing impacts of maintaining products based on both benchmarks and confirm whether they have any contracts that reference one week or two month USD LIBOR, which are expected to be discontinued after December 31, 2021.
Gibson Dunn’s Capital Markets, Derivatives, and Financial Institutions practice groups are available to answer questions about the LIBOR transition in general and these developments in particular. Please contact any member of the Gibson Dunn team, the Gibson Dunn lawyer with whom you usually work in the firm’s Capital Markets, Derivatives, or Financial Institutions practice group, or the authors of this client alert:
Andrew L. Fabens – New York (+1 212-351-4034, afabens@gibsondunn.com)
Michelle M. Kirschner – London (+44 (0) 20 7071 4212, mkirschner@gibsondunn.com)
Arthur S. Long – New York (+1 212-351-2426, along@gibsondunn.com)
Ben Myers – London (+44 (0) 20 7071 4277, bmyers@gibsondunn.com)
Jeffrey L. Steiner – Washington, D.C. (+1 202-887-3632, jsteiner@gibsondunn.com)
John J. McDonnell – New York (+1 212-351-4004, jmcdonnell@gibsondunn.com)
Please also feel free to contact any of the following practice leaders:
Capital Markets Group:
Andrew L. Fabens – New York (+1 212-351-4034, afabens@gibsondunn.com)
Hillary H. Holmes – Houston (+1 346-718-6602, hholmes@gibsondunn.com)
Stewart L. McDowell – San Francisco (+1 415-393-8322, smcdowell@gibsondunn.com)
Peter W. Wardle – Los Angeles (+1 213-229-7242, pwardle@gibsondunn.com)
Derivatives Group:
Michael D. Bopp – Washington, D.C. (+1 202-955-8256, mbopp@gibsondunn.com)
Jeffrey L. Steiner – Washington, D.C. (+1 202-887-3632, jsteiner@gibsondunn.com)
Financial Institutions Group:
Matthew L. Biben – New York (+1 212-351-6300, mbiben@gibsondunn.com)
Stephanie Brooker – Washington, D.C. (+1 202-887-3502, sbrooker@gibsondunn.com)
Arthur S. Long – New York (+1 212-351-2426, along@gibsondunn.com)
Michelle M. Kirschner – London (+44 (0) 20 7071 4212, mkirschner@gibsondunn.com)
© 2020 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.