Author: National Law Forum

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“NAME:WRECK” Cybersecurity Vulnerability Highlights Importance of Newly Issued IoT Act

A recently discovered security vulnerability potentially affecting at least 100 million Internet of Things (“IoT”) devices[1] highlights the importance of the newly enacted IoT Cybersecurity Improvement Act of 2020 (the “IoT Act”). Researchers at the security firms Forescout Research Labs and JSOF Research Labs have jointly published a report detailing a security vulnerability known as “NAME:WRECK.” This is exactly the type of issue that the new IoT Act was and is designed to address at the governmental level, because the vulnerability can detrimentally affect the security of millions of interconnected IoT devices. As our recent blog “New Internet of Things (IoT) Cybersecurity Law’s Far Reaching Impacts” discussed, this is the type of cybersecurity risk that all organizations should consider and factor in to their supply chain risk assessments and mitigation measures. If your organization directly uses IoT devices, or contracts with vendors who supply IoT devices or software/systems using IoT devices, whether in the healthcare, manufacturing, retail, financial services, hospitality or employment context, you should be evaluating your cybersecurity programs for protecting IoT devices.

The “NAME:WRECK” vulnerability was discovered as part of Forescout’s and JSOF’s efforts to understand underlying problems related to the Domain Name System (DNS). The DNS is responsible for routing internet traffic and as such is a critical element of infrastructure. Referred to as the “phonebook of the internet,” the DNS is a decentralized system and protocol that allows devices to access the internet using domain names (such as “google.com”). It has the potential to be exploited by malicious parties because of its open and distributed nature. Communications between devices on the Internet could not reach their intended destination without DNS.

The “NAME:WRECK” vulnerability affects software and firmware that implements the DNS, including software that uses DNS protocols that “parse” or “compress” domain names. As the researchers explain, “WRECK” gets its name because of “how the parsing of domain names can break—‘wreck’—DNS implementations[.]” An attacker leveraging this vulnerability can gain remote control of an IoT device to inject malicious code on a target and achieve Denial of Service or Remote Code Execution, thereby allowing the exfiltration of information and other attacks. As with other DNS-based vulnerabilities, the attacker may exploit “WRECK” using a man-in-the-middle attack, or other methods, as covered in our Lawline webinar “Protecting Your Domain Name System (DNS) Security To Avoid Data Loss & Insider Threat”, and our blog, “Harden Your Organization’s Domain Name System (DNS) Security to Protect Against Damaging Data Loss and Insider Threat.”

The implications of “NAME:WRECK” are significant. In their report, Forescout and JSOF identified popular software components affected by the vulnerability: FreeBSD, IPNet, NetX and Nucleus Net, which led the Cybersecurity & Infrastructure Security Agency (CISA) to issue an alert. Nucleus NET is used in over 3 billion devices including, defibrillators, ultrasound machines, avionics navigation, and MediaTek IoT chipsets and baseband processors used in smartphones and other wireless devices. The researchers found that not all devices running the above software are vulnerable; however, they conservatively estimate that over 100 million devices are at risk. The researchers noted that FreeBSD is widely used in high-performance servers in millions of IT networks. Indeed, the researchers warned, “exploitation of NAME:WRECK also will work to detect exploitation on other TCP/IP stacks and protocols that we could not yet analyze.”

The cybersecurity of IoT devices presents particular challenges because it is difficult to inventory all of the software/firmware running on the devices and to patch when vulnerabilities occur. Moreover, depending on the device, patches may need to be manually applied by the user, if the device is not centrally managed. Patching IoT devices becomes even more difficult where the IoT device, such as a medical device or industrial control system, cannot be easily taken offline due to its mission-critical nature. Among other things, the IoT Act addresses these patching difficulties and processes with respect to the acquisition and use by the federal government of IoT devices capable of connecting to the Internet.

Organizations that have devices that are susceptible to the “NAME:WRECK” vulnerability should conduct a risk assessment and take risk reduction measures, if vulnerabilities are identified, particularly if they are government contractors or subject to regulatory standards to protect sensitive information. Forescout and JSOF have identified mitigation recommendations in their report that including identifying vulnerable devices and updating the software. Recommended risk reduction measures include segmenting networks to reduce the risk of vulnerable IoT devices, implementing “a remediation plan for your vulnerable asset inventory balancing business risk and business continuity requirements” and monitoring external DNS traffic.

From the perspective of any purchaser or user of IoT devices, the recent “NAME:WRECK” report highlights supply chain risk and the unavoidable reality that vulnerabilities will continue to be exploited by wrong-doers. Organizations subject to regulatory standards to protect personal, health and other sensitive information (e.g., Gramm-Leach Bliley, HIPAA, NY SHIELD Act, California Civil Code §1781.5, Massachusetts data protection regulation, Illinois Personal Information Protection Act and Biometric Information Protection Act) are already required to use reasonable safeguards to protect IoT devices that may affect the security of protected information. The IoT Act mandates future systemic improvements for the acquisition and use of IoT devices in information systems owned or controlled by the federal government. The IoT Act and these regulatory requirements, and the “NAME:WRECK” vulnerability highlight how in our interconnected world legal standards and technology increasingly intersect. It is therefore critical that organizations plan for the cybersecurity of their IoT devices and systems in their information security and compliance programs and take reasonable steps to ensure that IoT vulnerabilities are addressed in a timely manner consistent with risk.

[1] IoT devices “have at least one transducer (sensor or actuator) for interacting directly with the physical world, have at least one network interface, and are not conventional Information Technology devices, such as smartphones and laptops, for which the identification and implementation of cybersecurity features is already well understood, and can function on their own and are not only able to function when acting as a component of another device, such as a processor.” The wide range of IoT devices that connect to the Internet include security cameras and systems, geolocation trackers, smart appliances (e.g., tvs, refrigerators), fitness trackers and wearables, medical device sensors, driverless cars, industrial and home thermostats, biometric devices, manufacturing and industrial sensors, farming sensors and other smart devices.

©2021 Epstein Becker & Green, P.C. All rights reserved.

ARTICLE BY Brian G. Cesaratto and Alexander J. Franchilli of
Epstein Becker & Green, P.C.
For more articles on cybersecurity, visit the NLR Communications, Media & Internet section.

Bradley’s Bankruptcy Basics: COVID-19 Bankruptcy Relief Extension Act Extends Various CARES Act Amendments to the Bankruptcy Code

Last March, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) made several changes to the Bankruptcy Code, including those changes discussed in more detail here. As it became clear that we would be dealing with COVID-19 for much longer than previously anticipated, Congress passed the Consolidated Appropriations Act (CAA), which made additional changes to the Bankruptcy Code, including those explored in more detail in this article.

Originally, several of the Bankruptcy Code amendments included in the prior legislation were scheduled to sunset in March 2021, on the first anniversary of the CARES Act. However, on March 27, 2021, hours before the originally scheduled sunsets, the COVID-19 Bankruptcy Relief Extension Act of 2021 (Extension Act) was passed. While the Extension Act extended certain aspects of the Bankruptcy Code amendments included in the CARES Act, it did not extend any of the amendments in the CAA.

Below is a summary of various CARES Act and CAA amendments to the Bankruptcy Code and their respective sunset dates as modified by the Extension Act.

Set to Sunset on December 27, 2021

  • COVID stimulus payments do not constitute property of the bankruptcy estate.
    • CAA Section 1001(a)
    • Modifies Bankruptcy Code Section 541(b)(11)
  • Chapter 13 debtors who have missed three (3) or fewer mortgage payments due to COVID-19 or have entered into a loan forbearance or mortgage modification agreement can seek an early bankruptcy discharge.
    • CAA Section 1001(b)
    • Modifies Bankruptcy Code Section 1328(i)(1)
  • Debtors in bankruptcy or individuals who have received bankruptcy discharges cannot be denied relief under the CARES Act or denied a mortgage forbearance or protection under foreclosure and eviction moratoria.
    • CAA Section 1001(c)
    • Modifies Bankruptcy Code section 525(d)
  • Mortgage servicers can file a Supplemental Proof of Claim for forborne amounts pursuant to a CARES Act forbearance within 120 days of the expiration of the forbearance period.
    • CAA Section 1001(d)
    • Modifies Bankruptcy Code Sections 501(f) and 502(b)(9)
  • Any party in standing, including a mortgage servicer, can file a motion to modify a Chapter 13 plan to provide for payment for a CARES Act Supplemental Proof of Claim.
    • CAA Section 1001(e)
    • Modifies Bankruptcy Code Section 1329(e)

Set to Sunset on March 27, 2022

  • COVID-19-related income is not included when calculating a debtor’s “current monthly income.”
    • CARES Act Section 1113(b)(1)(A)
    • Modifies Bankruptcy Code Section 101(10A)(B)(ii)(V)
  • COVID-19-related income does not constitute a Chapter 13 debtor’s “disposable income.”
    • CARES Act Section 1113(b)(1)(B)
    • Modifies Bankruptcy Code Section 1325(b)(2)
  • A Chapter 13 debtor whose plan was confirmed prior to March 27, 2021, and who is experiencing a COVID-19-related hardship can move to modify his plan to allow for plan payments over a period of seven (7) years, rather than a period of three (3) or five (5) years.
    • CARES Act Section 1113(b)(1)(C)
    • Modifies Bankruptcy Code Section 1329(d)(1)

© 2021 Bradley Arant Boult Cummings LLP

ARTICLE BY Elizabeth R. Brusa, Christian W. Hancock and
Alexandra Dugan of Bradley
For more articles on bankruptcy, visit the NLR Bankruptcy & Restructuring section.

The Ongoing US Vaccine Passport Debate

One main principle among public health measures is to use the least restrictive method necessary to protect the population, or to do the greatest good. From the public health perspective, requiring COVID status credentials (“Credentials”) makes sense because it allows people who present a low risk to others to not be subject to unnecessary restrictions. However, implementation and use of Credentials will require careful consideration of individual privacy concerns, as well as the ethical questions related to access and additional privilege.

In late March, the Biden administration announced that vaccination credentials or “passports” would not be mandated at the federal level and that there would be no centralized universal federal vaccinations database. Instead, the federal government’s role will be to develop standards for such solutions so they are designed to protect people’s privacy and are “simple, free, open source, and accessible both digitally and on paper,” according to White House coronavirus coordinator Jeff Zients.

To date, federal standards for the interoperability, security, or privacy of Credentials have not been published. Despite this fact, smartphone apps are already popping up that allow individuals to upload their COVID-19 test results and vaccinations that create a digital QR code, which can be scanned to validate a person’s COVID status.  A few companies are also developing a “smart card” option that does not require a smart phone.

Despite the lack of federal standards, these digital Credential solutions are already being implemented by health care providers administering the vaccine and others who are looking to meet “reopening” requirements. Reason being, while federal and state governments are not willing to require vaccination, proof of COVID status will otherwise be required in order for people to enter certain places. For example, in California the rules for reopening indoor live events require proof of vaccination or a negative test result from individuals before they are allowed to enter the venue. In New York, some state employees reportedly are required to use the state’s Credential solution, the Excelsior Pass, when returning to work.

While Credentials make sense from a public health perspective, concerns remain. Politicians in multiple states have proposed anti-passport legislation, citing privacy and civil liberty violations created by public and private entities requiring proof of vaccination.

One concern is the lack of comprehensive federal legislation that would protect the information that could be collected from individuals in connection with digital Credentials. While health care providers, health plans, and their contracted technology providers are generally subject to the Health Insurance Portability and Accountability Act (HIPAA) and its implementing regulations – which impose certain security requirements and limit how health information may be used without a patient’s consent – HIPAA may not always apply to the data involved. For example, a patient could authorize their health care provider to disclose their test results and/or vaccine record to the Credentials vendor, who would then generate and maintain the passport credentials. The customer in this case is the patient, not a health care provider or health plan, which means that HIPAA would not apply.

While it seems like HIPAA applicability is a minor distinction, the privacy and security implications can be significant. Under HIPAA, patients may share their health information however they choose, and health care providers and plans are required to send records to third parties upon a patient’s request. The sending of such records does not, in itself, make the third party recipient subject to HIPAA.  Digital Credential vendors and the public and private entities verifying testing/vaccination status thus may bypass HIPAA’s privacy and security requirements.

Businesses who collect COVID status and other consumer information may still be regulated by the Federal Trade Commission (FTC). However, generally speaking, fewer privacy protections apply in this kind of situation, and the applicable security standards are less specific. At the state level, digital Credential vendors may be subject to laws that are similar to, or even more stringent than, HIPAA, but this is not always the case.

As a result, the door is potentially left open for companies to collect substantial amounts of electronic health and other data without the privacy and security protections that exist in a traditional health care environment. Due to the potential value of the data and the fact that the Credentials will be offered for free, some skeptics believe companies will want to monetize the data collected to the fullest extent possible. Additionally, the potential for government agencies to collect data using Credentials and utilize it for other purposes beyond public health (e.g. monitoring and law enforcement) is a legitimate concern.  If either of these things happen, there will still be a “cost” to people in using these Credentials, and in the absence of a reasonable alternative people may have little choice but to pay it.

The use of Credentials raises ethical concerns as well. Ultimately, Credentials should be available and accessible by all, via a variety of mechanisms. In practice, the use of Credentials raises the question of equal access and the further divide that could be created in society.  Reports indicate that vaccine availability still varies greatly among communities, and that the rate of vaccination among racial minorities and low-income populations remains low. As a result, requiring or allowing use of a Credential becomes a privilege for those who have been vaccinated, which could lead to significant bias toward anyone without a Credential. Implementation and use of Credentials also needs to account for the subset of the population who are unable to receive a vaccine for medical reasons and those who may object to a vaccine based on religious or philosophical beliefs. Without some form of accounting in the implementation of Credentials, these groups may be unnecessarily penalized.

For the moment, individual users of digital Credentials are trusting the recipients of their data. Private and public entities are left to make tough decisions about the development and use of Credentials from a legal and ethical perspective while trying to anticipate the guidelines that might be articulated by the Biden administration.

©1994-2021 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

ARTICLE BY Lara D. Compton and Bridgette A. Keller of Mintz
For more articles on vaccine passports, visit the NLR Coronavirus News section.

Executive Order Increases the Minimum Wage for Federal Contractors to $15

On April 27, 2021, President Biden signed Executive Order 14026, which increases the minimum wage for workers on or in connection with a federal government contract to $15.00 as of January 30, 2022.  This Executive Order increases the minimum wage level set by President Obama’s 2014 Executive Order 13658, which has been set at $10.95 per hour since January 1, 2021.

The new minimum wage applies to most new federal contracts, contract-like instruments, solicitations, extensions or renewals of existing contracts or contract-like instruments, and exercises of options on existing contracts or contract-like instruments that are entered into or exercised on or after January 30, 2022.  However, the Executive Order “strongly encourage[s]” agencies to ensure, to the extent permitted by law, that the wages paid under existing contracts are consistent with the Executive Order’s requirements.  The Executive Order provides that compliance with the increased minimum wage will be a condition of payment on the government contract, raising the potential for False Claims Act liability if a government contractor accepts payment on a federal contract while failing to pay covered workers the required wage.  The Executive Order’s requirements must, in many circumstances, be included in subcontracts.

Although the Executive Order does not elaborate on which employees work “on or in connection” with a federal contract, it is likely that the Department of Labor’s forthcoming regulations implementing the Executive Order will follow the lead of its previous regulations implementing Executive Order 13658.  Under those regulations, workers perform services “on” a contract if they directly perform the services called for by the contract’s terms, and they perform services “in connection with” a contract if they perform work activities that, although not specifically called for by the contract, are necessary to the contract’s performance.

The Executive Order also addresses the cash portion of the tipped minimum wage for covered workers.  The cash wage for covered workers who qualify as tipped employees will increase to $10.50 as of January 30, 2022.  The wage will then increase as of 85% of the general minimum wage as of January 30, 2023, and 100% of the general minimum wage as of January 30, 2024, at which point the tip credit will be eliminated.

The Department of Labor is required to issue regulations implementing the Executive Order by November 24, 2021.  Federal contractors and subcontractors should consider beginning preparations for the increased minimum wage now, in advance of the regulations, by identifying potentially covered workers whose wages may require adjustment.  Polsinelli will continue to update the contractor community when regulations are issued.

© Polsinelli PC, Polsinelli LLP in California

ARTICLE BY Jack Blum of Polsinelli PC
For more articles on federal contractor minimum wage, visit the NLR Government Contracts, Maritime & Military Law section.

You Can Require It, But It’ll Cost You: COVID Vaccinations and Mandatory Pay

On April 21, 2021, Chicago became the latest locale to require employers that mandate COVID-19 vaccinations to compensate certain employees for time spent getting vaccinated. While the new ordinance does not go as far as legislation in other parts of the country, it does create new obligations for employers, whether vaccinations are mandated or merely encouraged.

Mandated Vaccines

Under the new ordinance, employers that require their Chicago employees to receive the COVID-19 vaccine must compensate those employees at their regular rates of pay, up to four hours per dose, if the vaccination takes place during an employee’s regular working hours. Employers also are prohibited from requiring employees to receive vaccinations outside working hours, or requiring employees to use any available paid sick leave or vacation time toward those hours.

While the ordinance does not require employers mandating vaccinations to pay employees for the time spent being vaccinated outside working hours, employers should be mindful of the Illinois Department of Labor’s position that employees who are required to obtain a vaccination must be compensated for their time spent being vaccinated, regardless of whether that is during or outside of working hours.

Non-Mandated Vaccines

The ordinance also creates some new obligations for employers that merely encourage (but don’t mandate) COVID-19 vaccinations. These employers also cannot require that employees choosing to receive a vaccination do so outside of working hours, and employees who choose to use any available paid sick leave or paid time off must be allowed to do so.

Notably, the ordinance does not create a new bank of paid time off for employees to receive their vaccinations. Therefore, employees who obtain their vaccinations during working hours but do not have any available paid sick leave or paid time off can be required to take the time off as unpaid. The ordinance also prohibits all employers from retaliating against any employee who chooses to be vaccinated during working hours.

Other Locales

The relative restraint of the Chicago ordinance is a marked difference from the approach in other parts of the country. For example, last month the state of New York enacted a new law requiring all employers to provide employees with a “sufficient period” of paid time off to receive their COVID-19 vaccinations, not to exceed four hours per injection, through the end of 2021. In Colorado, the state’s new Public Health Emergency Leave provides employees with up to 80 hours of paid sick leave for, among other uses, “preventative care concerning a communicable illness that is the cause” of the applicable public health emergency – at the moment, COVID-19.

And then there’s California, which requires employers with 26 or more employees to provide supplemental paid sick leave, retroactive to January 1, 2021, for uses that include attending a vaccine appointment and for periods an employee cannot work or telework due to vaccine-related side effects.

More state and local laws of this nature likely are on the way. However, employers operating in places without leave laws specific to COVID-19 vaccinations should still be mindful that already-existing leave laws may apply to time spent obtaining vaccinations. Most state and local paid sick leave laws allow the use of sick leave for preventative care and for the recovery from illness – which likely would apply to obtaining a vaccination and recovering from the side effects of that vaccination.

Tax Credits

That said, keep in mind that with the enactment of the American Rescue Plan Act of 2021 (ARPA), employers with fewer than 500 employees that voluntarily choose to extend paid sick leave under the Families First Coronavirus Response Act (FFCRA) beyond its original December 31, 2020 expiration date can claim a payroll tax credit for any FFCRA paid sick leave used by employees to obtain or recover from COVID-19 vaccinations. These tax credits are available to eligible employers for payments made from April 1, 2021 through September 30, 2021 in respect of such leave.

As employers decide whether to mandate vaccinations now or down the road, they should keep these evolving requirements in mind, and they should consult with experienced legal counsel to ensure compliance with applicable laws.

Legal vs. Practical

Of course, putting aside legalities, there is a practical aspect of these types of decisions. While vaccine availability continues to expand, many people in many parts of the country are still struggling to get vaccine appointments. If those appointments happen to fall during working hours, employers should remember that a little understanding may go a long way, and the benefits of a more fully vaccinated workforce – and populace – will far outweigh any short-term effects of an employee’s absence from the workplace for a brief period.

© 2021 Much Shelist, P.C.

ARTICLE BY Matthew J. Feery and Sheryl Jaffee Halpern of Much Shelist, P.C.
For more articles on vaccinations and mandatory pay, visit the NLR Coronavirus News section.

Chicago’s Vaccine Anti-Retaliation Ordinance – What Employers Need to Know

On April 21, the Chicago City Council (“City Council”) passed the Vaccine Anti-Retaliation Ordinance (the “Ordinance”) establishing protections for Chicago workers who take time off of work to receive the COVID-19 vaccine. The Ordinance broadly applies to individuals, including independent contractors, who perform work in the City of Chicago. It is effective immediately and remains in effect until further notice.

Overview of the Ordinance

Under the Ordinance, employers must allow workers to take time off to obtain the COVID-19 vaccine without retaliation against them in their terms and conditions of employment—whether the worker voluntarily chooses to get vaccinated or whether vaccination is mandated by the employer. Workers may either choose to take time off to receive the vaccine, or to do so outside of work. However, the Employer may not force employees to receive the vaccine outside of work if the employee opts to get the vaccine during working time.

Unless the employer mandates the vaccine, employers do not need to pay employees for the time off. However, employers must allow workers to use any accrued paid time off (“PTO”) for unpaid time required to receive the vaccine. Please note, it is at the option of the employee whether or not to use PTO to receive the vaccine: An employer cannot force the use of accrued PTO.

If an employer mandates the vaccine, the employer must pay the employee for the time spent getting vaccinated, if the vaccine appointment is during a shift, at their regular rate of pay, capped at four hours per vaccine dose. Employers that mandate COVID-19 vaccinations cannot require workers to use accrued paid time off as an alternative to compensating workers in accordance with the Ordinance.

Enforcement and Penalties for Violations

The Chicago Office of Labor Standards will enforce the Ordinance. Employers found to violate the Ordinance are subject to fines that may range from $1,000 to $5,000 per violation.

Individuals may also sue in court for remedies including reinstatement and triple damages.

Practical Considerations for Employers

At present, neither the Ordinance nor any accompanying guidance addresses what documentation, if any, may be required from a worker to verify the need for leave under the Ordinance. The Ordinance is also silent as to whether a covered worker is entitled to additional protected leave—or whether an employer may require the worker to use accrued PTO—in the event the worker is temporarily unable to return to work due to adverse effects/symptoms experienced as a result of receiving the vaccine. We anticipate that additional guidance for employers will be issued addressing questions left unanswered by the current language of the Ordinance.

We suggest that employers consider the following to maximize compliance and reduce legal risk:

  1. Update COVID-19 leave policies to reflect the requirements of the Ordinance;
  2. Train supervisors and managers on the requirements of the Ordinance;
  3. Communicate updated vaccine leave policies with employees;
  4. Determine whether vaccine mandation is appropriate for the business, consistent with state and federal labor and employment laws;
  5. Establish policies for the documentation of the need for leave, consistent with other state and federal anti-discrimination and confidentiality laws.
    ©2021 von Briesen & Roper, s.c

For more articles on vaccines, visit the NLR Coronavirus News section.

The Latest Legal Industry News: Attorney Promotions, Law Firm Innovation & Firm Recognition

Welcome back to another edition of our legal and consulting industry news column. Below, we discuss the latest attorney promotions, lawyer recognition and law firm innovation. Keep reading for all the latest news:

Attorney Hires and Promotions

Peter W. Thomas was elected the new President and Managing Partner of Powers Pyles Sutter & Verville P.C., effective April 1, 2021.  Mr. Thomas succeeds Jim Jorling, who held the position since 2016.

Mr. Thomas joined Powers in 1991 and has been a Principal in the firm since 1996. Mr. Thomas focuses his practice on disability and rehabilitation policy, Medicare coverage and reimbursement and other areas of healthcare policy.

Matthew A. Rossi joined Vedder Price as a Shareholder in their Government Investigations & White Collar defense group. Mr. Rossi previously served as Assistant Chief Litigation Counsel in the Securities and Exchange Commission’s (SEC) Enforcement Division, where he primarily investigated and litigated violations of the federal securities laws by investment advisers, broker-dealers, large financial institutions and others. Mr. Rossi also served as Senior Counsel in the SEC’s Asset Management Unit, a specialized unit within the Enforcement Division that investigates misconduct by investment advisers, private funds and registered investment companies.

“Matt’s outstanding experience and credentials, in particular at the SEC’s home office in the Asset Management Unit and as Assistant Chief Litigation Counsel, are a great fit for our practice,” said Junaid A. Zubairi, Chair of the firm’s Government Investigations & White Collar Defense group.

Alison P. Snyder joined Romer Debbas LLP as an associate, supporting the residential real estate practice. Ms. Snyder specializes in assisting buyers, sellers and lending institutions involved in residential real estate transactions. She also has experience in pre-contract due diligence, including the review of offering plans, financial statements, and co-op/condo board minutes.

Scott W. MacCormack was confirmed as Davis Wright Tremaine’s new managing partner, who will begin his new position this summer. Mr. MacCormack, who joined the firm in 2008, served on the Executive Committee for six years,  also chaired the firm’s Compensation Committee, and served as co-chair of the firm’s energy practice.

“Scott is committed to executing our strategic plan to drive growth, building on our commitment to foster a more diverse, equitable, and inclusive environment, and strengthening the firm’s culture as we evolve how we work post-pandemic,” said Jeffrey P. Gray, who was the former managing partner. “He is an excellent choice to maintain the firm’s success and continue to grow it.”

Attorney and Law Firm Recognition

Fourteen Gilbert attorneys were recognized on the 2020 Capital Pro Bono Honor Roll, which represents nearly half of the attorneys at the firm. The 2020 Capital Pro Bono Honor Roll highlights attorneys in Washington, D.C. who have contributed 50 hours or more of pro bono work to those who cannot afford legal counsel.

Chief Judge Anna Blackburne-Rigsby of the District of Columbia Court of Appeals and Chief Judge Anita Josey-Herring of the Superior Court of the District of Columbia said of the winners, “we salute you for using your talents and expertise to help those unable to afford an attorney.”

All attorneys and employees at Gilbert participate in public service activities, including substantial pro bono legal work, including participation in and support of public interest organizations, community initiatives, and local educational and charitable activities. The firm makes itself available to individuals and organizations who need expert legal assistance in a wide variety of areas including immigration, family law, torts, civil rights, housing, special education, insurance, and asylum. The D.C. Chief Judges further noted that, due to the COVID-19 pandemic, they “saw even greater need for pro bono service in 2020.”

BTI Consulting ranked Barnes and Thornburg as No. 38 on its 2021 Client Service A-Team list, a 19-place climb from the firm’s previous ranking. Barnes and Thornburg ranked within the top 25 firms for categories such as “Deals with Unexpected Changes,” “Fielding the Absolute Best Team,” “Quality Products,” “Quickly Assessing Your Situation” and “Understands the Client’s Business.”

To determine what firms made the list, BTI Consulting conducted a survey of 350 top legal decision-makers at large organizations with $700 million or more in revenue. However, only 282 law firms were mentioned by name for the categories surveyed by legal decision makers.

Lex Machina, a LexisNexis company and a leading provider of Legal Analytics® to law firms and companies, recognized Perkins Coie as a leading firm for patent litigation defense in 2020 in its annual Patent Litigation Report. The firm ranked second for national law firms handling the most patent defense cases with 72 cases across 18 jurisdictions.

Perkins Coie also ranked as one of the top firms for petitioners in post-grant proceedings. Lex Machina develops the rankings by summarizing federal district court data from the past decade and post-grant data since the Patent Trial and Appeal Board’s (PTAB) inception in 2012. Lex Machina’s report also highlights the top patent litigation trends from the past year.

Law Firm Innovation and Development

The Wage & Hour Guide for Employers app from Epstein Becker Green (EBG) was recently updated to incorporate employment law changes for 2021. Over 46 states and / or localities had changes to their employment laws that were effective January 1, 2021, and the EBG app was updated to track those changes.  First released in February 2012, the app provides wage and hour information on a variety of employment law concerns, including:

  • Overtime exemptions
  • Minimum wages
  • Overtime
  • Meal periods
  • Rest periods
  • On-call time
  • Travel time
  • Tips

Information on new employment law changes is organized on the app and includes citations to statutes, regulations and guidelines.

Legal tech platform Joinder, incubated at Orrick Labs and helmed by former Orrick partner Don Keller, is now pursuing growth as an independent SaaS (Software as a Service) company.

Joinder facilitates corporate legal department and legal service provider collaboration by creating a single digital workspace for data storage, task management, communications and document management.

Orrick Labs was launched as a way to identify solutions for problems where there was no workable solution in the marketplace.  Mitch Zulkie, Orrick Chairman and CEO, says, “Joinder is the result of our client’s demands for more insight into their records and it is just that: a better platform for legal engagement, built by a team that understands how lawyers and legal departments work together.”

Copyright ©2021 National Law Forum, LLC

ARTICLE BY Eilene Spear, Hanna Taylor and Rachel Popa of
The National Law Review / The National Law Forum LLC
For more articles on the legal industry, visit the NLR Law Office Management section.

“I Robot:” The SEC Evaluates the First Law of Robotics

One of the priorities announced in the 2021 Examination Priorities Report of the U.S. Securities and Exchange Commission’s Division of Examinations (“EXAMS”) is a review of robo-advisory firms that build client portfolios with exchange-traded funds (“ETF’s”) and mutual funds. EXAMS notes that these clients are almost entirely retail investors without investments large enough to support the costs of regular human investment advisers. EXAMS sees that the risks involved in these robo-advisor accounts pose particular issues, that retail clients may well not recognize.

Law of Robotics

Accordingly, it may help to reflect on the Laws of Robotics invented by that science fiction author Isaac Asimov (for “I Robot,” a short story in his 1950 collection), particularly the First Law:

A robot may not injure a human being or, through inaction, allow a human being to come to harm.

This “policy” undergirds the 2021 Examination Priorities Report’s focus on robo-advisors. EXAMS notes the following as matters of particular concern:

Investors may not understand the risks associated with specific investments; the risk profiles of mutual funds and of ETF’s vary widely, from diversified to concentrated, from simple to complex strategies. Robo-advisors have a fiduciary duty to provide adequate disclosure to investors and to insure that the information is understood.

Funds used in client accounts may not be suitable for the investor, again the robo-advisor has a fiduciary duty to know a client’s particular financial situation and investment goals. EXAMS notes that it will be checking on the bases for selecting investments, especially when niche or leveraged/inverse ETF’s are involved.

Full disclosure of any conflicts of interest are mandatory, noting the continuing enforcement actions for abuses in mutual fund investments involving higher cost fund shares.

The SEC Evaluates

Now is the time for compliance personnel to review all of the account opening documentation to ensure that relevant information about a client’s financial condition, investment objective, and time horizons are captured. Further, the firm brochure and websites should be carefully scrutinized to ensure that disclosures are written in plain English AND are robust. Then compliance personnel should review the process by which investments are recommended to ensure it adequately takes into account the client’s risk tolerance and investment objectives, and to be able to confirm that a recommended investment aligns with those factors, all of which should be documented.

The 2021 Examination Priorities Report makes clear that the Law invented by Isaac Asimov some 70 years ago equally applies to robo-advisory firms.

©2021 Norris McLaughlin P.A., All Rights Reserved
ARTICLE BY Peter D. Hutcheon of Norris McLaughlin P.A.
For more articles on the SEC, visit the NLR Securities & SEC section.

How the UK Legal Market Adapted to COVID-19: Top Trends for Firms in 2021

Ongoing pressures such as the effects of the coronavirus pandemic are causing disruptions and the shifting of priorities in the UK legal market in 2021, according to findings from the State of the UK Legal Market 2021 report from the Thomson Reuters Institute.  The State of the UK Legal Market 2021 combines research on 250 senior corporate counsel, financial results from the UK operations of 34 US-based law firms and 156 stand-out private practice lawyers.

With law firms switching to fully remote working environments as well as other pressures such as courthouse closures and Brexit, there has been a shift in client priorities. As a result, UK law firms are re-evaluating how their clients’ legal needs can best be met amidst these pressures and disruptions.

How Has the COVID-19 Pandemic Affected UK Law Firm Client Partnerships?

Given the demands that 2020 put on UK corporate legal departments, there was an increased focus on the strength of their relationship with external law firms. The report showed that amidst the shift to remote working, clients are looking to create long-term partnerships with law firms that have a deep understanding of their business operations. The report found that 47 percent of corporate law departments said firms who commit to a long-term partnership create more value in the relationship. This focus on strong interpersonal skills comes as a result of investing non-billable time in clients, the report said.

“This wasn’t the year where clients looked out and said, ‘Hey are we going to bring three or four of our firms on a roster?’ This was the year that clients looked at all of the firms they are currently working with and said, ‘Actually, which two or three do we trust the most?’” said David Johnson, Account Director for Thomson Reuters Acritas in an interview with the National Law Review.  “We’ll start to see firms doing a bit more to make sure that they are that trusted advisor.”

While technology plays an important role both with those working within law firms and with clients, the importance of the more meaningful connection has taken center stage. According to the report, the greatest changes in what drove favorability in the UK market are customer service (17 percent) and a good working relationship (15 percent).

The report predicted that in 2021 and beyond, many firms will strive to create sustainable servicing models that focus on developing a more involved and strategic relationship with clients. Specifically, the report showed that law firms need to appraise which skills are valued most in the industry they serve and then determine how to develop those skills. The top skills that help the UK legal market stand out compared to global markets include being practical and pragmatic, being approachable and friendly and investing in developing good working relationships, according to the report.

“The big things that come through from the UK side from our research in particular is that it’s the ability to be practical and pragmatic in the way that you deliver the work,” Mr. Johnson said. “It’s having industry knowledge. How that feeds into the kind of pain points that their clients are facing is definitely going to be one that we are going to see more of.”

Brexit and Coronavirus Play a Role in UK Legal Market

Alongside higher demand for long-term firm partnerships, the report found that the demand for cross-border legal advice had increased since 2017 because of the uncertainty caused by Brexit. Specifically, 80 percent of UK corporates were looking for international legal support, and 47 percent of UK corporate legal spend was dedicated to international legal work.

“I think the interesting thing here is that we’ve gone through a global pandemic, and we’ve gone through an incredibly disruptive political and economic period. We’re still very much transitioning through that period,” Mr. Johnson said about Brexit. “There’s still a lot more unknowns than knowns in terms of how this is going to play out. I can’t imagine it’s going to drop off dramatically in the next couple of years. I think the challenge is about how firms can organize themselves around this international need to support clients.”

One pain point that developed as a result of remote work during the coronavirus pandemic was the deterioration of collaboration between cross-border teams.  Eighty-three percent of UK partners reported internal barriers to international relationships, including IT and knowledge sharing structures. The report notes firms that foster a culture of collaboration between cross-border teams will be able to better support their clients’ international needs.

This is especially important considering 38 percent of UK corporates are looking to increase their international legal spend moving forward.

Even though UK corporates are looking to increase spend, the report notes that 28 percent of UK-based buyers felt the main thing that could be done to improve their satisfaction with firms was for services to be more competitively priced. Firms that are willing to address pricing issues with clients foster more long-term relationships and bring more, the report noted. This can be achieved through exploring alternative fee arrangements.

However, with increased demand also comes increased competition, according to the report.

How Have UK Law Firms Adapted to Competition During COVID-19?

Alternative legal service providers (ALSPs), non law-firm providers of legal services such as accounting firms, provide competition and increase the pressure on UK law firms to adopt innovative, technology-driven legal service delivery models that can provide greater flexibility and value. As a result, UK law firms are adopting more flexible working arrangements and focusing on technology.

“I think one of the areas that’s going to be here to stay from personal conversations with managing partners in the market is how do you create an office environment that provides that kind of flexibility for those who want to come into the office and those who don’t?” Mr. Johnson said. “I think that discussion has got to be right top and center in terms of managing committees across the next six to 12 months.”

Law firm partners touted a shortened commute, improved efficiency and more productive use of technology as the top benefits of flexible working. According to the report, 86 percent of attorneys want flexible working arrangements to continue after the coronavirus pandemic ends, and would consider leaving their firm if such arrangements weren’t available.

Specifically, stand-out UK lawyers surveyed said they’d like to work remotely two days a week, see a 10 percent reduction in working hours (even with a reduction in pay) and the ability to have different start and finish times or spread hours across the day. However, 80 percent of stand-out lawyers cited remote working as a barrier to developing new business during the pandemic, further highlighting the importance of improving current client relationships.

That being said, law firms are looking to invest more in technology amidst the shift to remote work and increased competition from ALSPs, with 74 percent of senior UK partners believing that their firms should be investing more in technology. Eighty-four percent of corporates think their firms should explore more innovative ways to use technology.

“The ALSP market is not necessarily being adopted as strongly as we’re seeing from the US at the moment, but we’re starting to see more because of the pushback on price and the financial challenges that UK businesses and legal departments are being put under,” Mr. Johnson said. “I think that this is going to become more prominent and we’ll see higher levels of usage of these over the course of the next couple of years. And the last 18 months have accelerated that process.”

How the UK Legal Market May Change After COVID-19

One of the most important takeaways from the report is that clients’ desire for deeper institutional relationships and an increased level of business understanding with firms isn’t new, but that the COVID-19 pandemic amplified the need for an increased focus on these areas. Specifically, the report noted that for the first time, the UK legal industry may be facing the consequences of failing to adapt to those needs earlier.

However, UK firms can emerge from the pandemic in a better position through evaluating the relationship between the firm and its clients, focusing on cross-border collaboration and adopting technology to foster flexibility, efficiency and innovation.

Copyright ©2021 National Law Forum, LLC
For more articles on the UK legal industry, visit the NLR Law Office Management section.

Supreme Court to Hear Arguments regarding Natural Gas Act and Eminent Domain Power

On April 28, the Supreme Court will hear oral argument in PennEast Pipeline Co., LLC v. New Jersey et al., No. 19-1039, a case with significant implications for pipeline projects.  The main issue is whether the Natural Gas Act (NGA) delegates the federal government’s eminent domain power to Federal Energy Regulatory Commission (FERC) certificate holders and allows them to sue a state to condemn land in which the state claims an interest, or whether the Eleventh Amendment immunizes states from such lawsuits.

Factual and Legal Background

In 2018, following an extensive application and approval process that included public participation and numerous route modifications, FERC granted PennEast a certificate of public convenience and necessity allowing it to construct and operate a nearly 120-mile natural gas pipeline to transport gas in Pennsylvania and New Jersey.

The state of New Jersey has an interest in several properties in the pipeline’s approved route.  Section 717f(h) of the NGA provides that when any holder of a public convenience and necessity certificate cannot obtain by negotiation or contract the necessary rights-of-way to construct, operate, and maintain an interstate pipeline, it “may acquire the same by the exercise of the right of eminent domain” in federal district court.  Under that provision, PennEast brought several in rem actions against New Jersey in district court to establish just compensation and obtain by condemnation the rights-of-way that it had been unable to obtain.

New Jersey moved to dismiss, asserting Eleventh Amendment sovereign immunity from the suit.  The district court rejected New Jersey’s argument and granted the condemnation orders.  However, the Third Circuit disagreed, and vacated the district court’s ruling.  The Third Circuit expressed doubt that the United States can delegate to a private party the federal government’s exemption from Eleventh Amendment immunity that allows it to sue states.  The Third Circuit likened such delegation to an abrogation of sovereign immunity, which Congress can accomplish only through certain federal powers.  Regardless, the court held, the federal government’s eminent domain power and its exemption from state sovereign immunity “are separate and distinct,” and Section 717f(h) delegates only the former, not the latter.

The Third Circuit noted that its “holding may disrupt how the natural gas industry, which has used the NGA to construct interstate pipelines over State-owned land for the past eighty years, operates.” The Third Circuit stated that as “a work-around,” eminent domain actions could be filed by some “accountable federal official.” On January 30, 2020, in response to PennEast’s petition for a declaratory order interpreting the Third Circuit’s decision, FERC issued an order “confirm[ing its] strong belief in” the correctness of PennEast’s position.  FERC also disclaimed the authority to file condemnation actions itself, in place of natural gas companies.

On February 3, 2021, the Supreme Court granted PennEast’s petition for a writ of certiorari.  In addition, the Court instructed the parties to brief and argue a second issue—whether the Third Circuit properly exercised jurisdiction over the case.

Eleventh Amendment Arguments

New Jersey argues that the federal government cannot delegate its exemption from state sovereign immunity to allow private parties to bring condemnation suits against states, but even if it could, Congress did not clearly do so through the text of the NGA.  Thus, New Jersey asserts that the Court “need not conclusively resolve the constitutional question” because the text of the NGA disposes of the issue presented.

By contrast, PennEast asserts that the NGA’s delegation of the federal government’s eminent domain power necessarily includes the ability to sue states.  Concluding otherwise, PennEast argues, would overlook the history of eminent domain proceedings and the fact that Section 717f(h) includes no exception for state-owned properties.  It would also frustrate the NGA’s fundamental purpose of facilitating interstate pipelines.  PennEast also emphasizes that the condemnation actions are in rem proceedings that do not implicate the same state sovereign immunity concerns that in personam suits implicate.  Finally, PennEast argues that the Third Circuit’s decision “not only gives states a veto power over federally approved pipelines but creates gravely misaligned incentives, as a private property owner seeking to preclude construction of a pipeline could do so by granting an easement to a state that shares its opposition.”

A coalition of 19 states—including some facing potential suits regarding pipeline projects—filed an amicus brief in support of New Jersey, primarily based on “the constitutional questions that undergird [New Jersey’s] statutory analysis.”  PennEast’s argument on the merits is supported by numerous industry amici and the federal government.  Those industry amici argue that the Third Circuit’s decision will have significant negative impacts on the industry’s ability to reliably supply the country with affordable natural gas.  Similarly, the federal government has emphasized that an affordable and reliable interstate natural gas supply is a general purpose of the NGA, which the Third Circuit’s decision threatens.

Other Jurisdictional Arguments

In June 2020, the Supreme Court invited the Solicitor General to file a brief expressing the United States’ views on the certiorari petition.  The United States subsequently filed a brief characterizing the case as a “collateral attack on [PennEast’s] authority to execute the terms of the FERC-issued certificate.”  It, therefore, argued that the lower courts lacked jurisdiction to entertain the case because Section 717r(b) of the NGA vests exclusive jurisdiction for direct review of the certificate in the D.C. Circuit or the circuit in which the certificate-holder has its principal place of business.

PennEast and New Jersey both argue that the lower courts properly exercised jurisdiction; neither party understands New Jersey’s Eleventh Amendment challenge as a collateral attack on the FERC certificate.

***

The Supreme Court is expected to return a decision before the term ends in late June.

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.

ARTICLE BY Kate Perkins of Hunton Andrews Kurth
For more articles on SCOTUS, visit the NLR Litigation / Trial Practice section.