Author: National Law Forum

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Whistleblower Receives $11 Million for Reporting Pharmaceutical Fraud

September 16, 2022.  The United States Department of Justice settled a case against the pharmaceutical manufacturer Bayer Corporation.  Under the terms of the settlement, Bayer paid $40 million.  A former employee in the pharmaceutical company’s marketing department filed two qui tam lawsuits alleging violations of the False Claims Act.  For reporting fraud, the whistleblower received approximately $11 million, and they pursued both cases after the Department of Justice (DOJ) declined to intervene.

According to the allegations, the pharmaceutical company was paying kickbacks to healthcare providers to “induce them to utilize the drugs Trasylol and Avelox, and also marketed these drugs for off-label uses that were not reasonable and necessary.”  This lawsuit was filed in the District of New Jersey and alleged that the because of these kickbacks, the pharmaceutical company caused submission of false claims to Medicare and Medicaid.  The lawsuit that was transferred to the District of Minnesota entailed the pharmaceutical company knowingly misrepresenting the safety and efficacy of Baycol, a statin drug, and also renewing contracts with the Defense Logistics Agency based on these misrepresentations.  To settle these allegations, Bayer paid $38,860,555 to the United States and $1,139,445 to the Medicaid Participating States.  The Principal Deputy Assistant Attorney General remarked about this settlement, “Today’s recovery highlights the critical role that whistleblowers play in the effective use of the False Claims Act to combat fraud in federal healthcare programs.”

The False Claims Act incentivizes private citizens to report fraud against the government and holds accountable companies that financially benefit from participation in government contracts and government-sponsored programs.  The Department of Justice needs whistleblowers to the be the antidote to pharmaceutical fraud.

Article By Renée Brooker and Eva Gunasekera of Tycko & Zavareei LLP

For more whistleblower and white collar crime legal news, click here to visit the National Law Review.

© 2022 by Tycko & Zavareei LLP

The Cost of Bicycle Accidents: Why Bike Safety Pays Off

Along with the COVID-19 pandemic’s stay-at-home orders and a worldwide pause on travel plans, 2020 marked the onset of another phenomenon: a boom in bicycle riding. Bicycles gave people a sense of exploration and adventure during this difficult time.

This rise in cyclists comes with some sobering statistics, including a 16% rise in preventable deaths and a 5% increase in non-fatal injuries. Of the 1,260 bicyclist deaths reported in 2020, 806 of those directly involved motor vehicles. These injuries come at a significant expense: the over 13,000 bicycle injuries each year cost more than $23 billion in the United States.

But no one wants to experience a bicycle accident or the long-term consequences of one. Here’s what you need to know about bicycle safety to protect you or your loved ones while exploring the world on two wheels.

Bike accident risk factors

While the rise in bike accidents and their associated medical costs is primarily due to the increased numbers of bicyclists, there are risk factors that can affect specific individuals more than others. Common bike accident risk factors include:

Age

While adolescents, teens, and young adults make up nearly one-third of all cycling injuries treated in emergency departments, bicycle death rates are highest in adults between the ages of 55-69.

Sex

Compared to female cyclists, the death and injury rates of males are 6 and 5 times higher, respectively.

Traffic

Most cycling accidents occur in urban areas, with 64% of deaths occurring away from intersections and 27% occurring at intersections.

Alcohol

Nearly one-third of bicycling fatalities involved alcohol, either from the motor vehicle driver or the cyclist.

Bike accident cost breakdown

Fatal and non-fatal alike, cycling accidents cost the US billions each year. In addition to the injuries and fatalities which occur as a result of road accidents, there are personal costs to account for as well:

  • Medical bills

  • Recovery/rehabilitation costs

  • Loss of wages due to missing work

  • Possible changes to earning potential

  • Possible funeral and burial expenses

In terms of costs, the individual cost of a serious adult bicycle accident has grown from $52,495—medical bills, missed work, loss of quality of life—to $77,308. Today, the number would be even higher.

Of course, that’s not to mention the emotional burden of a cycling accident—especially if a cycling accident results in a long-term injury or the loss of a loved one.

That’s why prioritizing bike safety is so important. To reduce these costs, communities need to create better conditions for cycling, including safer cycling infrastructure (cycling tracks, improved street lighting) and widespread education about safe cycling practices.

Bicycle safety measures at the state level

Personal safety while cycling is critical, but state legislators in New Jersey have been working to improve safety measures for cyclists as well.

The Safe Passing Law, which was put on the books in August of 2021, requires drivers to leave at least four feet of space between vehicles and anyone sharing the road, whether on foot or by bicycle. A violation of these rules can result in a $500 fine and two motor vehicle points if bodily harm is caused.

The Division of Highway Safety and the Department of Transportation has been running a social media campaign to spread awareness about the law, an effort that included a $78,342 grant to the New Jersey Bike & Walk Coalition to educate the public on the law and the community impacts of bicycle and pedestrian safety.

Improving your bicycling safety

It’s essential to take the necessary steps to promote safety—for yourself and for others who share the road. While bicycle safety courses and education are essential, having safe bicycles and gear should also be part of the equation.

Make sure to budget for safety

Appropriate bicycling kits, from bare necessities to high-end gear, can cost anywhere from $150 to $1,000; costs can vary depending on the type of riding you do, the features you prioritize, and your budget.

Helmets, for example, may cost as little as $25 or as much as $500. Active lighting—white front lights, red rear lights, reflective tape, gear, and accessories—will typically cost a minimum of $45. Pumps, multi-tools, and patch kits can cost between $10-30 or more. Of course, investing in bright, visible clothing to wear while riding is also a good idea.

Cyclists should also regularly maintain their bicycles to keep them in good order. Many cyclists perform routine maintenance on their bikes themselves, seeking assistance from bike shops for parts and guidance. This can run between $300-500 a year in expenses.

While the costs of your bike’s features and accessories can add up, keep in mind that the investment is well worth it, as the cost of getting into an accident can be much higher.

Article By Domenic B. Sanginiti, Jr. of Stark & Stark

For more personal injury legal news, click here to visit the National Law Review.

COPYRIGHT © 2022, STARK & STARK

EMTALA in the Post-Dobbs World

The Emergency Medical Treatment and Labor Act (EMTALA) requires hospitals with emergency departments and participating in Centers for Medicare and Medicaid Services (CMS) programs to provide medical screening, treatment and transfer for patients with emergency medical conditions (EMCs) or women in labor.1 EMTALA, which was enacted in 1986 to address concerns about patient dumping, went unnoticed for many years, but has garnered heightened attention as a result of the COVID-19 pandemic, and more recently, the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization (Dobbs).2

EMTALA is a federal law and expressly preempts state laws with which it directly conflicts. After the Dobbs decision was officially published in June, a number of states implemented laws that prohibited or restricted access to reproductive care. Many of these laws include potential civil sanctions and criminal liability for healthcare providers offering or performing these services regardless of the circumstances, including emergency situations. The Biden Administration, in contrast, has taken action to preserve access to reproductive care through a number of executive and federal agency actions. These actions are intended by the federal government to apply in all states, including those states where restrictions have been put in place. Following this activity, litigation between the federal government and several states has ensued to address potential conflicts between federal laws requiring the provision of access and state laws that prohibit or restrict access to reproductive health services. A summary of the current EMTALA landscape is set forth below.

EMTALA Requirements

Under EMTALA, hospitals with emergency departments (EDs) must provide a medical screening examination to any individual who comes to the ED, regardless of insurance status. EMTALA prohibits hospitals with EDs from refusing to examine or treat individuals with an EMC. Upon provision of a medical screening examination, hospitals must provide necessary stabilizing treatment for EMCs and labor within the hospital’s capability. If the hospital is unable to properly treat or stabilize the patient, the hospital must provide an appropriate transfer to another medical facility.

Under EMTALA, an EMC includes “a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that the absence of immediate medical attention could reasonably be expected to result in:

(i) placing the health of the individual (or, with respect to a pregnant woman, the health of the woman or her unborn child) in serious jeopardy,

(ii) serious impairment to bodily functions, or

(iii) serious dysfunction of any bodily organ or part…”3

Many common pregnancy-related complications, such as preeclampsia or ectopic pregnancies, qualify as EMCs. However, certain state anti-abortion laws prohibit or criminalize abortions regardless of the existence of an EMC under federal law, which creates a potential conflict when an abortion is necessary to stabilize an EMC under EMTALA. As a result of this friction between state and federal law, EMTALA has received renewed attention at a federal and state level in recent months.

Executive Order on Protecting Access to Reproductive Healthcare Services

On July 8, 2022, after the Dobbs decision was officially issued, President Biden issued Executive Order 14076 (Executive Order), which directed the Department of Health and Human Services (HHS) to submit a report identifying steps to ensure all patients, including pregnant women and women experiencing pregnancy loss, receive the full protections offered by EMTALA. The Executive Order also directed HHS to consider updates to guidance on obligations under EMTALA.

CMS Memorandum and HHS Letter to Healthcare Providers

On July 11, 2022, in response to the Executive Order, CMS published a memorandum to State Survey Agency Directors to restate existing guidance for hospital staff and physicians in light of new state laws that prohibit or restrict access to abortion (Memorandum). The Memorandum reinforced CMS’ view that:

  • EMTALA mandates that all patients who come to a EDs and request examination or treatment must receive an appropriate medical screening examination, stabilizing treatment, and transfer regardless of any state law restrictions about specific procedures,

  • Only physicians and qualified medical personnel may make the determination of an EMC,

  • Hospitals should ensure that all staff who interact with patients presenting to the ED are aware of the hospital’s obligations under EMTALA,

  • Hospitals may not cite state law or practice as the basis for transfer,

  • Physicians’ professional and legal duties under EMTALA preempt any conflicting state law or mandate,

  • If a physician believes that abortion is the stabilizing treatment necessary to resolve an EMC, the physician must provide that treatment, and

  • State law is preempted by EMTALA when it prohibits abortion and does not include an exception for the life and health of the pregnant person or has a more restrictive definition of EMC.

The Memorandum also clarified that pregnant patients may experience EMCs including, but not limited to, ectopic pregnancy, complications of pregnancy loss, or emergent hypertensive disorders, such as preeclampsia with severe features and that stabilizing treatment encompasses both medical and surgical interventions, such as methrotrexate therapy or dilation and curettage.

The Secretary of HHS also published on July 11, 2022 a letter to healthcare providers reminding them of their obligation to provide stabilizing medical treatment to their pregnant patients in accordance with EMTALA, regardless of the state in which the provider practices (Letter). The Letter also reiterated that:

  • any state laws or mandates which employ a more restrictive definition of EMC are preempted by EMTALA statute, and

  • the course of necessary stabilizing treatment is under the physician’s or other qualified medical personnel’s purview.

The State of Texas Sues the Biden Administration

On July 14, 2022, the Texas Attorney General brought suit against HHS and CMS to challenge the Memorandum and Letter relating to federal law obligations for pregnant patients.4 The complaint alleged that EMTALA does not preempt state law when state law prohibits abortion and does not include an exception for the life of the pregnant person or draws the exception more narrowly than the definition of EMC under EMTALA. Specifically, Texas sought to enforce a state statute, the Human Life Protection Act, which would ban and criminalize abortions unless a woman “has a life-threatening physical condition arising from pregnancy that places her ‘at risk of death or poses a serious risk of substantial impairment of a major bodily function unless the abortion is performed”(emphasis added).5 The complaint also alleged that EMTALA does not require a healthcare provider to perform an abortion if it is the stabilizing treatment necessary to resolve an EMC. On August 23, 2022, the United States District Court for the Northern District of Texas (Lubbock Division) blocked enforcement of the Memorandum and Letter in the State of Texas on the basis that federal guidance did not preempt state law, exceeded the authority of EMTALA, and was issued without a proper notice and comment period. The Court found that, because EMTALA is silent regarding abortion and “how stabilizing treatments must be provided when a doctor’s duties to a pregnant woman and her unborn child possibly conflict,” “there is no direct conflict” between federal and Texas law with the end result that “EMTALA leaves it to the states”.6

The Biden Administration Sues the State of Idaho

On August 2, 2022, the Department of Justice (DOJ) sued the State of Idaho, alleging violation of EMTALA. Under Idaho’s proposed abortion law, which was slated to go into effect on August 25th, the performance of all abortions are criminalized regardless of the reason for which they may be performed including to prevent the death of the pregnant woman.7 Instead, the law permits physicians to raise two affirmative defenses to avoid criminal liability:

(i) The physician determined, in h/her good faith medical judgment and based on the facts known to the physician at the time, that the abortion was necessary to prevent the death of the pregnant woman, and

(ii) Prior to the performance of the abortion, the pregnant woman reported the act of rape or incest to a law enforcement agency and provided a copy of such report to the physician.8

The DOJ’s complaint alleged that  Idaho’s law does not provide a defense when the health of the pregnant patient is at stake, which is considered to fall within the definition of an EMC under EMTALA. In addition, the DOJ asserted that the fear of criminal prosecution may lead providers to avoid performing abortions even when it is a medically necessary treatment to prevent severe risk to the patient’s health. On August 24, 2022, the United States District Court for the District of Idaho found that Idaho’s law conflicted with EMTALA and granted the federal government a preliminary injunction blocking the enforcement of Idaho’s proposed abortion law.9 In contrast to the Northern District of Texas Court’s interpretation of the conflict between state law and EMTALA, the District Court of Idaho noted that found that Idaho’s criminal abortion statute deterred abortions given that it provided for an affirmative defense rather than an exception for the provision of emergency care and, therefore, obstructed EMTALA’s purpose.10

Looking to the Future

While EMTALA has been in place for decades, its applications in the post-Dobbs world continue to evolve and will be at the forefront in states with abortion restrictions, particularly where the scope of federal law obligations to provide stabilizing treatment for conditions that threaten the health of the pregnant patient conflict with state law exceptions or affirmative defenses.

The law, policy and regulatory climate surrounding the Dobbs decision is complex and quickly developing. The information included in this article is current as of writing, but it does not address all potential legal issues or jurisdictional differences, and the information presented may no longer be current. Readers should consult counsel regarding their specific situation.

FOOTNOTES

1 42 U.S.C. §1395dd.

2 For additional information regarding the Dobbs decision, please refer to the following resources: Supreme Court Decision in Dobbs v. Jackson Women’s Health Organization Overturns 50 Years of Precedent on Abortion Laws and Rights | Healthcare Law Blog (sheppardhealthlaw.com), WHLC Dobbs Series Part 1 Where are we now?: Sheppard Mullin Webinar.

3 42 U.S.C. §1395dd(e)(1).

4 State of Tex. v. Becerra, et al., No. 5:22-cv-185 (N.D. Tex. Jul. 14, 2022).

5 Tex. Health & Safety Code § 170A.

6 State of Tex. v. Becerra, et al., No. 5:22-cv-185 (N.D. Tex. Jul. 14, 2022), Memorandum Opinion and Order at 49.

7 Idaho Code § 18-622.

8  Idaho Code § 18-622(3).

9 U.S. v. Idaho, No. 1:22-cv-00329-BLW.

10 U.S. v. Idaho, No. 1:22-cv-00329-BLW, Memorandum Decision and Order at 26-31.

Article By Amy J. Dilcher and Arushi Pandya of Sheppard, Mullin, Richter & Hampton LLP

For more health and health law legal news, click here to visit the National Law Review.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

NAVEX Report Reveals Increase in Whistleblower Retaliation and Reporting of Misconduct

NAVEX’s 2022 Risk & Compliance Hotline & Incident Management Benchmark Report reveals an increase in internal reporting about misconduct and an increase in allegations of retaliation.  The analysis of data from 3,470 organizations that received more than 1.37 million individual reports identified the following trends (see the full report for a discussion of additional trends and analysis of the data):

  • “More actual allegations of misconduct, rather than inquiries about policies or possible misconduct. Ninety percent of all reports in 2021 were allegations of misconduct, up from 86 percent last year and hitting an all-time high since our first benchmark report more than ten years ago.”

  • “Reports about retaliation, harassment and discrimination jumped – especially retaliation. In 2021, reports of retaliation nearly doubled . . . Taken altogether, these findings suggest employees are more attuned to workplace civility issues. That would fit with external trends such as more talk about systemic racism, income inequality and political divisions; as well as increasing protection for whistleblowers and employees’ awareness of  those protections.”

  • “Substantiation rates continue to edge upward. Overall substantiation rates rose from 42 percent in 2020 to 43 percent in 2021, and up from 36 percent a decade ago. The reports substantiated most often were data privacy concerns (63 percent), environmental issues (59 percent), and confidential and proprietary information (54 percent). The reports substantiated least often were about retaliation (24 percent).”

  • “The substantiation rate for reports of retaliation also went up slightly, from 23 percent in 2020 to  24 percent in 2021 – the highest substantiation rate seen since 2016. While steady, this substantiation rate is significantly below the overall median case substantiation rate of 43 percent in 2021. These cases, though difficult to prove, warrant attention.”

  • “Reports of harassment exceeded levels from the height of the #MeToo movement.”

Corporate Whistleblower Protections

Whistleblower retaliation remains all too prevalent.  A September 14, 2022 Bloomberg article titled Whistleblower retaliation remains all too prevalent discusses how “choosing to be a whistle-blower can also be a lonely, risky road” and identifies many deterrents to speaking up – “[t]hey may be afraid of litigation, ruining their reputations, losing security clearances or facing jail time.”

Fortunately, federal and state laws afford corporate whistleblowers remedies to combat retaliation, and whistleblower reward laws incentivize whistleblowers to take the considerable risks entailed in reporting fraud and other wrongdoing to the government.  For example, the

SEC Whistleblower Program offers awards to eligible whistleblowers who provide original information that leads to successful SEC enforcement actions with total monetary sanctions exceeding $1 million. A whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected in actions brought by the SEC and in related actions brought by other regulatory or law enforcement authorities. The SEC Whistleblower Program allows whistleblowers to submit tips anonymously if represented by an attorney in connection with their tip.

What is Whistleblower Retaliation?

Whistleblower retaliation laws prohibit a broad range of retaliatory actions against whistleblowers, including any act that would dissuade a worker from engaging in protected whistleblowing.  Examples of actionable whistleblower retaliation include:

  • Terminating a whistleblower;

  • Constructively discharging a whistleblower;

  • Demoting a whistleblower;

  • Suspending a whistleblower;

  • Harassing a whistleblower or subjecting the whistleblower to a hostile work environment;

  • Reassigning a whistleblower to a position with significantly different responsibilities;

  • Issuing a performance evaluation or performance improvement plan that supplies the necessary foundation for the eventual termination of the whistleblower’s employment, or a written warning or counseling session that is considered discipline by policy or practice and is routinely used as the first step in a progressive discipline policy;

  • Placing the whistleblower on administrative leave;

  • Threatening to take an adverse action against a whistleblower;

  • Subjecting a whistleblower to a retaliatory investigation or retaliatory surveillance;

  • Suing a whistleblower for the purpose of retaliating against the whistleblower;

  • Outing a whistleblower;

  • Intimidating a whistleblower;

  • Initiating a law enforcement investigation or facilitating an employee’s detention by U.S. ICE after the employee reported a serious injury; or

  • Discriminating against a whistleblower in the terms and conditions of employment because of whistleblowing.

The DOL Administrative Review Board has emphasized that statutory language prohibiting discrimination “in any way” must be broadly construed and therefore a whistleblower need not prove that a retaliatory act had a tangible impact on an employee’s terms and conditions of employment.

What Damages Can a Whistleblower Recover in a Whistleblower Retaliation Case?

Whistleblower retaliation can exact a serious toll, including lost pay and benefits, reputational harm, and emotional distress.  Indeed, whistleblower retaliation can derail a career and deprive the whistleblower of millions of dollars in lost future earnings.

Whistleblowers should be rewarded for doing the right thing, but all too often they suffer retaliation and find themselves marginalized and ostracized.  Federal and state whistleblower laws provide several remedies to compensate whistleblowers that have suffered retaliation, including:

  • back pay (lost wages and benefits);

  • emotional distress damages;

  • damages for reputational harm;

  • reinstatement or front pay in lieu thereof;

  • lost future earnings; and

  • punitive damages.

Combating Whistleblower Retaliation: How to Maximize Your Recovery

Whistleblower protection laws can provide a potent remedy, but before bringing a retaliation claim, it is crucial to assess the options under federal and state law and develop a strategy to achieve the optimal recovery.  Key issues to consider include the scope of protected whistleblowing, the burden of proof, the damages that a prevailing whistleblower can recover, the forum where the claim would be litigated, and the impact of the retaliation claim on a whistleblower rewards claim.

Scope of Protected Whistleblowing

There is no federal statute that provides general protection to corporate whistleblowers.  Instead, federal whistleblower protection laws protect specific types of disclosures, such as disclosures of securities fraud, tax fraud, procurement fraud, or consumer financial protection fraud.  The main sources of federal protection for corporate whistleblowers include the whistleblower protection provisions of the following:

  • The False Claims Act (FCA) — protecting disclosures about fraud directed toward the government, including actions taken in furtherance of a qui tam action and efforts to stop a violation of the FCA;

  • The Defense Contractor Whistleblower Protection Act (DCWPA) — protecting whistleblowing about gross mismanagement of a federal contract or grant; a gross waste of federal funds; an abuse of authority relating to a federal contract or grant or a substantial and specific danger to public health or safety, or a violation of law, rule, or regulation related to a federal contract;

  • The Sarbanes-Oxley Act (SOX) — protecting disclosures about mail fraud, wire fraud, bank fraud, securities fraud, a violation of any SEC rule, or shareholder fraud;

  • The Dodd-Frank Act (DFA) — protecting whistleblowing to the SEC about potential violations of federal securities laws;

  • The Taxpayer First Act (TFA) — protecting disclosures about tax fraud or tax underpayment;

  • The Consumer Financial Protection Act (CFPA) — protecting disclosures concerning violations of Consumer Financial Protection Bureau rules or federal laws regulating unfair, deceptive, or abusive practices in the provision of consumer financial products or services; and

  • The Anti-Money Laundering Act (AMLA) — protecting disclosures about violations of the Bank Secrecy Act.

While most of these anti-retaliation laws protect internal disclosures (e.g., reporting to a supervisor), whistleblower protection under the DFA is predicated on a showing that the whistleblower disclosed a potential violation of federal securities law to the SEC prior to suffering an adverse action.

State law may also provide a remedy, including the anti-retaliation provisions in state FCAs.  And approximately 42 states recognize a common law wrongful discharge tort action (a public policy exception to at-will employment), which generally protects refusal to engage in illegal activity and the exercise of a statutory right.

Burden of Proof

To maximize the likelihood of winning a case (or at least getting the case before a jury), it is useful to select a remedy with a favorable causation standard (the level of proof required to link the protected whistleblowing to the adverse employment action).  SOX has a favorable “contributing factor” causation standard, i.e., the whistleblower prevails by proving that their protected whistleblowing affected in any way the employer’s decision to take an adverse action.  In contrast, the FCA and DFA require the whistleblower to prove “but for” causation, i.e., the adverse action would not have happened “but for” the protected whistleblowing (albeit there is no need to prove that it was the sole factor).

Damages and Remedies in Whistleblower Retaliation Cases

Variations in the remedies available to whistleblowers under federal anti-retaliation laws may warrant bringing more than one claim.  For example, the DCWPA authorizes an award of back pay (the value of lost pay and benefits), and the FCA authorizes an award of double back pay.  If the whistleblower’s disclosures are protected under both statutes, then the whistleblower should bring both claims.

While a prevailing whistleblower can recover back pay under both the DFA and SOX (double back pay under the former and single back pay under the latter), the DFA does not authorize special damages, i.e., damages for emotional distress and reputational harm.  In contrast, SOX authorizes uncapped compensatory damages.  Therefore, a whistleblower protected under both statutes should bring the SOX claim within the much shorter SOX statute of limitations (180 days) to recover both double back pay and special damages.

State law may also provide a remedy, and if the whistleblower can pursue both a statutory remedy and a wrongful discharge tort, the latter may offer the opportunity to seek punitive damages.

Forum Selection and Administrative Exhaustion

When selecting the optimal remedy to combat retaliation, a whistleblower should consider the forum where the claim would be tried and determine whether the claim must initially be investigated by a federal agency before the whistleblower can litigate the claim.  SOX provides an unequivocal exemption from mandatory arbitration, but Dodd-Frank claims are subject to arbitration.  Accordingly, a whistleblower protected both by SOX and Dodd-Frank should file a SOX claim within the 180-day statute of limitations to preserve the option to try the case before a jury.

Several of the corporate whistleblower protection laws require that the whistleblower file the claim initially at a federal agency and permit the agency to investigate the claim before the whistleblower can litigate the claim.  This is called administrative exhaustion, and failure to comply with that requirement can waive the claim.  In contrast, the FCA and DFA do not require administrative exhaustion.

Impact of Whistleblower Retaliation Claim on Whistleblower Rewards Claim

Another important consideration is the potential impact of a retaliation case on a qui tam or whistleblower rewards case.  Filing an FCA retaliation claim while a qui tam suit is under seal poses some risk of violating the seal, which could bar the whistleblower from recovering a relator share.  Therefore, counsel should consider filing the FCA retaliation claim under seal along with the qui tam suit.

Further, whistleblowers pursuing rewards claims at federal agencies (e.g., SEC or IRS whistleblower claims) while simultaneously pursuing related retaliation claims (e.g., a SOX or TFA claim) should assess the potential impact of the retaliation claim and the potential discoverability of submissions to the SEC or IRS on the rewards claim(s).

Although the patchwork of whistleblower protection laws fails to protect disclosures about certain forms of fraud, there are important pockets of protection.  To effectively combat retaliation, whistleblowers should avail themselves of all appropriate remedies.

Article By Jason Zuckerman and Matthew Stock of Zuckerman Law

For more criminal law / business crimes legal news, click here to visit the National Law Review.

© 2022 Zuckerman Law

Could Leagues and Teams be Joint Employers Before the NLRB?

The National Labor Relations Board (NLRB) has released a Notice of Proposed Rulemaking to change the standard for determining if two employers may be joint employers under the National Labor Relations Act (NLRA). The proposed rule, expected to become effective sometime in 2023, could make it more likely that professional and collegiate leagues would be found to be joint employers of any unionized professional players or collegiate student-athletes who play for teams that are members of those leagues.

As a joint employer of unionized players of member teams, a league could be jointly responsible for unfair labor practices committed by the teams or the team’s supervisors or managers (i.e., coaches and administrators), be required to participate in collective bargaining negotiations with the teams concerning the wages and other terms and conditions of employment of the players, and picketing directed at the league would be considered primary and therefore permissible (rather than secondary and subject to injunction).

Currently, the NLRB will find two or more employers to be joint employers if there is evidence that one employer has actually exercised direct and regular control over essential employment terms of another employer’s employees. An employer that merely reserves the right to exercise control or that has exercised control only indirectly will not be found to be a joint employer. The NLRB has proposed that the Browning Ferris standard be restored. Under the proposed rule, two or more employers will be found to be joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment.” Importantly – and the critical import of the proposed rule – the NLRB will consider both evidence that direct control has been exercised and that the right to control has been reserved (or exercised indirectly) over these essential terms and conditions of employment when reviewing two or more employers for status as joint employers.

Professional athletes are employees under Sec. 2(3) of the NLRA, of course. As for collegiate student-athletes, NLRB General Counsel Jennifer Abruzzo issued a memorandum, GC 21-08, announcing the intention to consider scholarship athletes at private colleges and universities to be employees because, as she wrote, they “perform services for their colleges and the NCAA, in return for compensation, and subject to their control.” Stating in summation “that this memo will notify the public, especially Players at Academic Institutions, colleges and universities, athletic conferences, and the NCAA, that [she] will be taking that legal position in future investigations and litigation” under the NLRA, Abruzzo signaled that conferences, leagues, and the NCAA will face joint-employer analysis in an appropriate case.

The “essential terms and conditions of employment” will translate to the sports workplace in the nature of game, practice and meeting times, travel and accommodation standards, equipment and safety standards, conduct rules and disciplinary proceedings, the length of a season, the number of games and playoff terms, and numerous other areas. Professional leagues may already coordinate with their member teams on a number of employment terms for players. For collegiate conferences and leagues, this may be new. Under the current standard, a league could better insulate itself from the decisions made by its members’ coaches and administrators by not exercising direct involvement in those matters. Under the proposed rule, a league or conference that merely has the power (even if reserved and unexercised) to make decisions affecting the “work” conditions for student-athletes could be jointly liable along with the institution for decisions made solely by the institution’s agents.

Consequently, conferences and leagues should consider training managers on their responsibility under the NLRA to private sector employees. They should also consider the role they want to play in collective bargaining should any of the student-athletes at their member institutions unionize.

Article By Patrick L. Egan of Jackson Lewis P.C.

For more labor and employment legal news, click here to visit the National Law Review.

Jackson Lewis P.C. © 2022

OFAC Offers Guidance in the Wake of Tornado Cash Sanctions

The U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) updated its “frequently asked questions” (FAQs) Tuesday, providing guidance relating to the sanctions against Tornado Cash, the Ethereum “mixer” it blacklisted in August, following allegations that North Korea used Tornado Cash to launder stolen digital assets. The updated information from OFAC comes as a welcome snippet of communication, allowing for clarity on the scope of the action taken against Tornado Cash, as well as providing guidance for U.S. persons affected by the blacklisting who, through no fault of their own, were caught up in federal action.

The updated FAQs provide guidance on four points: (1) the ability to withdraw funds from wallets associated with the Tornado Cash blacklist; (2) whether the OFAC reporting obligations apply to “dusting” transactions; (3) whether U.S. persons can engage in transactions involving addresses implicated in the blacklist without a license; and (4) what, more generally, is prohibited in the wake of the OFAC blacklisting of Tornado Cash.

(1)        Withdrawing Funds

If a U.S. person sent virtual currency to Tornado Cash, but did not complete the mixing transaction or otherwise withdraw such virtual currency prior to August 8, 2022 (the effective date of the OFAC blacklist), such person can request a specific license from OFAC to engage in transactions involving that virtual currency (assuming such person conducts the contemplated transactions within U.S. jurisdiction).

In order to obtain this license, such persons will need to provide, “at a minimum, all relevant information regarding these transactions with Tornado Cash, including the wallet addresses for the remitter and beneficiary, transaction hashes, the date and time of the transaction(s), as well as the amount(s) of virtual currency.”

OFAC indicates that they will embrace a favorable licensing policy towards such applications, so long as the contemplated transactions did not involve conduct that it deems to be otherwise sanctionable, and that licensing requests can be submitted by visiting the following link: https://home.treasury.gov/policy-issues/financial-sanctions/ofac-license-application-page.

(2)        “Dusting” Transactions

Dusting is the act of sending unsolicited and nominal amounts of virtual currency or other digital assets to third parties. This can be done in order to cause consternation on the part of the recipient, particularly in a situation where there is confusion as to the legality of receiving such funds or actions.

OFAC indicates that it has been made aware of Dusting involving virtual currency or other virtual assets from Tornado Cash, and indicates that while, technically, OFAC’s regulations would apply to these transactions, to the extent that these Dusting transactions have no other sanctions associated with them other than Tornado Cash, “OFAC will not prioritize enforcement against the delayed receipt of initial blocking reports and subsequent annual reports of blocked property from such U.S. persons.”

In short, while not a desirable transaction to take place, OFAC does not intend to pursue action against persons simply because they are the target of Dusting.

(3)        Engaging in Transactions With Tornado Cash

OFAC clarified that, without explicit license from OFAC, U.S. persons are prohibited from engaging in any transaction involving Tornado Cash, including any transaction done via currency wallet addresses OFAC has identified as part of the blacklist.

Specifically, “[i]f U.S. persons were to initiate or otherwise engage in a transaction with Tornado Cash, including or through one of its wallet addresses, such a transaction would violate U.S. sanctions prohibitions, unless exempt or authorized by OFAC.”

(4)        Further Tornado Cash Guidance

Referencing FAQs 561 and 562, OFAC reemphasized their authority to include as identifiers on the Specially Designated Nationals and Blocked Persons List (SDN List) specific virtual currency wallet addresses associated with blocked persons, and that such SDN List entry for Tornado Cash included as identifiers certain virtual currency wallet addresses associated with Tornado Cash, as well as the URL address for Tornado Cash’s website.

While the Tornado Cash website has been deleted, it remains available through certain Internet archives, and accordingly OFAC emphasized that engaging in any transaction with Tornado Cash or its blocked property or interests in property is prohibited for U.S. persons.

Interacting with open-source code itself, in a way that does not involve a prohibited transaction with Tornado Cash, is not prohibited. By way of example, “U.S. persons would not be prohibited by U.S. sanctions regulations from copying the open-source code and making it available online for others to view, as well as discussing, teaching about, or including open-source code in written publications, such as textbooks, absent additional facts.  Similarly, U.S. persons would not be prohibited by U.S. sanctions regulations from visiting the Internet archives for the Tornado Cash historical website, nor would they be prohibited from visiting the Tornado Cash website if it again becomes active on the Internet.”

While this update to FAQs come as a welcome bit of clarity, Web3 investors, entrepreneurs, and users should continue to tread carefully when engaging with opportunities and technologies on the periphery of Tornado Cash and the accompanying OFAC action. When questions arise, it is important to seek out informed counsel, to discuss the risks of proposed actions and how best to mitigate that risk while working to pioneer new and emerging technologies.

Article By David A. Lopez-Kurtz of Dinsmore & Shohl LLP

For more finance and cryptocurrency legal news, click here to visit the National Law Review.

© 2022 Dinsmore & Shohl LLP. All rights reserved.

Accounting Cases Involving SPACs

The Accounting Class Action Filings and Settlements—2021 Review and Analysis report features a spotlight section on accounting-related SPAC cases.

Special purpose acquisition companies (SPACs) have become an increasingly popular way for private companies to become publicly traded. The process typically proceeds through four phases:

  1. The SPAC initial public offering (IPO), when the SPAC becomes public as a shell company;
  2.  the search for a merger target, which typically involves a definitive time period (e.g., two years);
  3. the merger closing, during which time the SPAC sponsor and target company announce the merger, file a proxy statement, and solicit shareholder approval; and
  4. the period when the equity of the combined company becomes publicly traded, often referred to as the “De-SPAC” period.

Commentators have cited various reasons for the popularity of SPACs, including the perception of market participants that a private company may have more certainty as to pricing and control over the deal terms through a SPAC as compared to a traditional IPO.1 During 2021, there were 613 SPAC IPOs—nearly twice the number of traditional IPOs—and the $144.5 billion of capital raised was record-setting.2

SPAC filings that include accounting allegations tripled in 2021 as compared to the prior year.

SEC Statements Regarding Financial Accounting and Reporting

The increased popularity of SPACs has led to certain concerns from regulators. For example, the U.S. Securities and Exchange Commission (SEC) issued an investor bulletin on SPACs highlighting that the increased number of SPACs seeking to acquire an operating business may result in fewer attractive initial acquisitions.3 As of December 31, 2021, 575 SPACs were still searching for a merger target.4

The SEC has also highlighted concerns related to financial accounting and reporting issues that SPACs may face. For example, the SEC’s Acting Chief Accountant, Paul Munter, issued a statement on March 31, 2021, that raised questions about whether private company targets have the people and processes in place and the time that is needed to successfully transition to public company reporting requirements. Mr. Munter highlighted examples of complex financial accounting and reporting issues, including accounting for complex financial instruments and the need to comply with public company requirements for reporting on internal controls.5

Shortly after his March 31 statement, Mr. Munter and John Coates, the Acting Director of the SEC’s Division of Corporation Finance, issued a statement on April 12, 2021, that addressed accounting and reporting considerations for warrants issued by SPACs.6 The statement resulted in almost 500 SPACs restating their accounting for warrants by June 22, nearly all of which identified a material weakness in internal controls.7

Recent Trends in SPACs Involving Accounting Issues

During 2019 and 2020, only a handful of federal securities class actions involving SPACs were filed, but in 2021, federal filings involving SPACs became the dominant filing trend.8 Consistent with that overall trend, SPAC filings that include accounting allegations tripled in 2021 as compared to the prior year.

There are several trends in SPAC cases involving accounting issues over the past three years:

  • Approximately one in three initial complaints involving SPACs from 2019 through 2021 included accounting issues.
  • Three law firms—The Rosen Law Firm, Glancy Prongay & Murray LLP, and Pomerantz LLP—were associated with almost 80% of accounting case filings involving SPACs from 2019 through 2021.
  • Short-seller reports were commonly cited in cases involving SPACs. However, those reports were cited over one and a half times more often in accounting cases as compared with non-accounting cases filed during 2019 through 2021.
  • The median filing lag after a De-SPAC transaction was much greater in 2019–2020 (450 days) than it was in 2021 (106 days) for accounting case filings from 2019 through 2021 involving SPACs.
  • Inappropriate revenue recognition and weaknesses in internal controls were the most common allegations in SPAC accounting cases, followed by allegedly omitted disclosures of related-party transactions.

Because filings of SPAC cases have largely occurred very recently, based on our research only one of these cases had reached settlement as of the end of 2021, and this case included accounting allegations. As more of these cases progress, SPAC cases may play a role in future accounting case settlement trends.

1     “What You Need to Know About SPACs – Updated Investor Bulletin,” U.S. Securities and Exchange Commission, May 25, 2021, https://www.sec.gov/oiea/investor-alerts-and-bulletins/what-you-need-know-about-spacs-investor-bulletin.

2     Jay R. Ritter, “Initial Public Offerings: Updated Statistics,” Warrington College of Business, University of Florida, p. 48, https://site.warrington.ufl.edu/ritter/files/IPO-Statistics.pdf, accessed April 8, 2022.

3   “What You Need to Know About SPACs – Updated Investor Bulletin,” U.S. Securities and Exchange Commission, May 25, 2021, https://www.sec.gov/oiea/investor-alerts-and-bulletins/what-you-need-know-about-spacs-investor-bulletin.

4   SPACs still searching for a target are those that have completed their IPO but not yet announced a De-SPAC transaction target. See SPAC Insider.

5  Paul Munter, Acting Chief Accountant, “Financial Reporting and Auditing Considerations of Companies Merging with SPACs,” U.S. Securities and Exchange Commission, March 31, 2021, https://www.sec.gov/news/public-statement/munter-spac-20200331.

6  John Coates, Acting Director, Division of Corporation Finance, and Paul Munter, Acting Chief Accountant, “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (‘SPACs’),” U.S. Securities and Exchange Commission, April 12, 2021, https://www.sec.gov/news/public-statement/accounting-reporting-warrants-issued-spacs.

7   See Will SPAC Restatement Wave Trigger Shareholder Litigation?, Cornerstone Research (2021), for further discussion.

8   See Securities Class Action Filings—2021 Year in Review, Cornerstone Research (2022), for further discussion.

Article By Elaine M. Harwood, Laura E. Simmons, Frank T. Mascari, and Sally Bai of Cornerstone Research

For more SEC and securities legal news, click here to visit the National Law Review.

Copyright ©2022 Cornerstone Research

What Are the Standards and Procedures for Jury Selection in My Jurisdiction?

As a national trial consulting firm, we are often asked to assist with jury selection in jurisdictions where lead counsel has been admitted pro hac vice and may not be closely familiar with the standards and procedures for jury selection in the trial jurisdiction. Although local counsel can be a great resource for obtaining more information about jurisdictional rules and individual judges’ preferences, there is also a wealth of information available in online publications to help you prepare for what to expect in most trial venues.

Rules of Civil Procedure

The vast majority of states outline their procedures for jury selection, including standards for hardship and cause, within their Rules (or Codes) of Civil Procedure. These days, many states post their statutory Rules of Civil Procedure directly on the court’s website. It may take a little fishing, but a search for the “[State] Rules of Civil Procedure” on any major search engine will often yield a link directly to the table of contents, where you can then locate the sections pertaining to jury selection.

For example, California’s Code of Civil Procedure Sections 190-237 on Trial Jury Selection and Management provides detailed guidance to judges and attorneys regarding juror questionnaires, mini-openings, breadth and scope of voir dire, and the processes and standards for exercising challenges, among other things. Though less detailed than California, Virginia’s standards and procedures are also online. As another example, the Louisiana Legislature posts its Code of Civil Procedure online, with the procedures and standards for jury selection beginning with Article 1751.

Of course, this information can also be obtained through subscription services like Westlaw and LexisNexis, but if you need to access the statutory language quickly from a tablet or cell phone in court, it is wise not to discount these shortcuts.

Handbooks and Articles

Other valuable resources for trial attorneys include handbooks and articles that summarize the pertinent information. These handbooks are sometimes published by the courts themselves, such as New York’s Implementing New York’s Civil Voir Dire Laws and Rules. This 32-page handbook is especially helpful since, in this jurisdiction, voir dire and jury selection is conducted almost entirely outside the judge’s presence and there are bound to be disagreements between the parties. The handbook is written in common vernacular and includes a helpful table of contents for quick reference, along with citations (and corresponding links) to supporting statutory language from the New York Civil Practice Laws and Rules.

Many bar associations also publish articles that summarize the applicable statutes, as well as the subsequent case law, that further define the scope of voir dire in these jurisdictions. For example, this article on the law of jury selection in Missouri state courts, published in the Journal of the Missouri Bar, discusses limits that the court has imposed on the scope and manner of jury selection, including the incorporation of jury instructions, previewing case facts, seeking commitments and rehabilitation—to name a few. It also includes a lengthy explanation of how the courts deal with juror non-disclosure in this jurisdiction.

While we always recommend that counsel review and Shepardize or KeyCite any case law they find in articles such as these, they can be a valuable first step in identifying the important rulings that may be at issue during jury selection in any given jurisdiction.

Incorporate Cause Standard into Voir Dire Questions

Some of the most important pieces of information to know in advance of voir dire are the court’s standards for securing cause challenges. While each judge may have their own “magic words,” incorporating the statutory language into your cause sequence and rehabilitation efforts can be a powerful tool for gaining an edge over opposing counsel.

For example, knowing whether the statute references words such as “fair,” “impartial,” “bias,” “unequivocal,” “assurance,” or “leaning” should guide the language you use when questioning the jurors. Then, when cause challenges are argued before the judge, we advise counsel to first cite the statutory language, followed by the quotes from jurors that mirror such language. While this is not a fool-proof technique—judges can always exercise their discretion—it will be difficult for any judge to deny a challenge that directly reflects the legal standard.

Similarly, if opposing counsel fails to get jurors to echo the statutory language, you can argue that they have failed to meet the requisite cause standards, increasing the odds that their challenges will be denied.

Prepare for Jury Selection

We recommend researching the applicable rules or code in advance of jury selection and printing them, so they are readily available to cite or hand over to the judge when appropriate. It is also helpful to know your judge’s procedures for jury selection. (Some important questions to ask local counsel can be found in this article.)

Though most jury consultants are not lawyers, selecting a jury consultant with experience in your trial jurisdiction is an important consideration. Your consultant may be able to help you prepare for jury selection by identifying what information you will need to gather in advance and helping you find it quickly.

Article By Christina Marinakis, JD, PsyD of IMS Consulting & Expert Services

For more business of law legal news, click here to visit the National Law Review.

© Copyright 2002-2022 IMS Consulting & Expert Services, All Rights Reserved.

It’s Time To Review Your Online Patient-User Interface: DOJ Issues New Federal Guidance on Telemedicine and Civil Rights Protections

As online digital health services continue to enjoy broader use and appeal, federal regulators are concerned some telemedicine online patient-user interfaces fail to accommodate persons with disabilities and limited English proficiency. Such failures in “product design” can violate federal civil rights laws and the Americans with Disabilities Act (ADA), according to new policy guidance jointly issued by the U.S. Department of Health and Human Services (HHS) and Department of Justice (DOJ).

The document, Nondiscrimination in Telehealth, is specifically directed to companies offering telemedicine services and instructs such covered entities to immediately take specific steps to comply with the various “accessibility duties” under federal civil rights laws. The guidance focuses on ensuring accessibility for two populations of users: 1) people with disabilities and 2) people with Limited English Proficiency (LEP).

Who is Subject to these Rules?

The guidance refers to “covered entities” subject to these rules. Under the rules, “covered entities” are any health programs and activities receiving federal financial assistance (in addition to programs and activities administered by either a federal executive agency or an entity created by Title I of the Affordable Care Act). While the guidance does not define what constitutes “receiving federal financial assistance”, HHS has historically held that providers who receive federal dollars solely under traditional Medicare Part B were not covered entities. However, a recently-proposed rule suggests HHS will significantly expand the scope of covered entities, and soon. Telemedicine providers should be prepared to comply with these federal laws.

People with Disabilities

The guidance explains that no person with a disability shall – because of the disability – be excluded from participation in or be denied the benefits of the services, programs, or activities of a covered entity, or otherwise be subjected to discrimination by a covered entity. The requirements in the guidance is supported by several federal laws, including the Americans With Disabilities Act, the Affordable Care Act Section 1557, and the Rehabilitation Act Section 504.

Applying these federal civil rights protections to telemedicine services, the guidance states companies must make reasonable changes to their policies, practices, or procedures in order to provide “additional support to patients when needed before, during, and after a virtual visit.”

DOJ and HHS provided the following as examples of such “additional support” obligations:

  • A dermatology practice that typically limits telehealth appointments to 30 minutes may need to schedule a longer appointment for a patient who needs additional time to communicate because of their disability.

  • A doctor’s office that does not allow anyone but the patient to attend telehealth appointments would have to make reasonable changes to that policy to allow a person with a disability to bring a support person and/or family member to the appointment where needed to meaningfully access the health care appointment.

  • A mental health provider who uses telehealth to provide remote counseling to individuals may need to ensure that the telehealth platform it uses can support effective real-time captioning for a patient who is hard of hearing. The provider may not require patients to bring their own real-time captioner.

  • A sports medicine practice that uses videos to show patients how to do physical therapy exercises may need to make sure that the videos have audio descriptions for patients with visual disabilities.

People with LEP

The second area of the guidance is protections for LEP individuals under Title VI of the Civil Rights Act of 1964 (Title VI). Under Title VI, no person shall be discriminated against or excluded from participation in or be denied the benefits of services, programs, or activities receiving federal financial assistance on the basis of race, color, or national origin.

For telemedicine services, the guidance states that the prohibition against national origin discrimination extends to LEP persons. Namely, telemedicine companies must take reasonable steps to ensure meaningful access for LEP persons. Such “meaningful access” includes providing information about the availability of telehealth services, the process for scheduling telehealth appointments, and the appointment itself. In many instances, HHS states, language assistance services are necessary to provide meaningful access and comply with federal law.

These language assistance services can include such measures as oral language assistance performed by a qualified interpreter; in-language communication with a bilingual employee; or written translation of documents performed by a qualified translator

DOJ and HHS provided the following as examples of such “meaningful access” obligations:

  • In emails to patients or social media postings about the opportunity to schedule telehealth appointments, a federally assisted health care provider includes a short non-English statement that explains to LEP persons how to obtain, in a language they understand, the information contained in the email or social media posting.

  • An OBGYN who receives federal financial assistance and legally provides reproductive health services, using telehealth to provide remote appointments to patients, provides a qualified language interpreter for an LEP patient. The provider makes sure that their telehealth platform allows the interpreter to join the session. Due to issues of confidentiality and potential conflicts of interest (such as in matters involving domestic violence) providers should avoid relying on patients to bring their own interpreter.

What if Making These Changes is Expensive?

While not directly addressed in the guidance, the cost for implementing accessibility measures generally falls on the company itself. Federal ADA regulations prohibit charging patients extra for the cost of providing American Sign Language (ASL) interpreters or similar accommodations. In fact, a covered entity may be required to provide an ASL interpreter even if the cost of the interpreter is greater than the fee received for the telemedicine service itself. With respect to LEP interpreters, HHS issued separate guidance stating it is not sufficient to use “low-quality video remote interpreting services” or “rely on unqualified staff” as translators.

However, companies are not required to offer an aid or service that results in either an undue burden on the company or requires a fundamental alteration in the nature of the services offered by the company. This is an important counterbalance in the law. Yet, the threshold for what constitutes an “undue burden” on a company or a “fundamental alteration” to the nature of the services is not bright line and requires a fact-specific assessment under the legal requirements.

Conclusion

Telemedicine companies subject to the guidance should heed the government’s warning and look inward on patient-facing elements. The first step is to simply have the website and app platform reviewed (most particularly the patient online user interface) by a qualified third party to determine if its design and features are sufficiently accessible for people with disabilities, as well as LEP persons. That time is also a prudent opportunity to review the user interface to confirm it complies with state telemedicine practice standards, e-commerce rules, electronic signatures or click-sign laws, and privacy/security requirements. Because these laws have undergone rapid and extensive changes during the Public Health Emergency, it is recommended to conduct these assessments on a periodic/annual basis.

If a company believes the expense of making these product design changes to ensure accessibility would be prohibitively expensive, it should check with experienced advisors to determine if the changes would constitute an “undue burden” or “fundamental alteration.” Otherwise, federal guidance is clear that refusing to make reasonable changes can be a violation of federal civil rights laws.

Article By Kate L. Pamperin, Larry S. Perlman, and Nathaniel M. Lacktman of Foley & Lardner LLP

For more health and telemedicine legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

FTC Commercial Surveillance and Data Security Forum Highlights Industry and Consumer Perspectives

On September 8, 2022, the Federal Trade Commission hosted a virtual public forum on its Advanced Notice of Proposed Rulemaking (“ANPR”) concerning “commercial surveillance and lax data security.” The forum featured remarks from FTC Chair Lina Kahn, Commissioner Rebecca Kelly Slaughter and Commissioner Alvaro Bedoya, as well as panels with industry leaders and consumer advocates.

Remarks from Chair Khan and Commissioners Slaughter and Bedoya focused on the need for public participation in the rulemaking process and the FTC’s role in privacy regulation in the absence of comprehensive federal legislation. Commissioner Slaughter noted that, until such federal legislation is passed, the FTC will continue to use its Section 5 authority to regulate unfair and deceptive practices related to privacy and data security.

The industry panel was moderated by FTC Senior Advisor Olivier Sylvain and focused in part on how the FTC should structure a potential rule. Multiple industry panelists emphasized the need for rules that limit out-of-context data use or tracking, while still allowing in-context use to as consumers expect. Industry panelists also highlighted the need for heightened rules for “dominant” industry players and financial penalties for bad behaviors.

The consumer advocate panel focused on issues surrounding meaningful consumer consent and the negative effects of commercial surveillance on consumers, such as one-click background checks and demographic-tailored advertising that disproportionately affects minority groups in negative ways. Similar to the industry panel, consumer advocate panelists also highlighted out-of-context data use and dominant industry actors as some of the major issues the FTC should address in its rulemaking.  The FTC will receive public comments on the ANPR until October 21, 2022.

Article By Privacy and Cybersecurity Practice Group of Hunton Andrews Kurth

For more antitrust and FTC legal news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.