Trump-Era EEOC Conciliation Rule Repealed

On June 30, 2021, President Biden signed a joint resolution narrowly passed by Congress to repeal a Trump-era rule that would have increased the EEOC’s information-sharing requirements during the statutorily mandated conciliation process.

Under the Trump-era rule, the EEOC would have been required to give each employer the identity of the complainant, a written summary of the facts of the case, its legal bases for finding discrimination, and the criteria it would use to identify potential class members, as well as an estimate of the potential class size, if applicable.

The EEOC was not previously required to share this information upon initiating conciliation. Rather, conciliation has historically been an informal, voluntary, and confidential process during which the EEOC, charging party, and employer consider settlement once the EEOC has found reasonable cause to believe discrimination occurred.

Before the Trump-era rule, the EEOC followed the Supreme Court’s guidance set forth in Mach Mining, LLC v. Equal Employment Opportunity Commission when meeting its conciliation requirements, which have been viewed by employers as minimal. Now that Congress has overturned the more rigid conciliation rule with President Biden’s support, the EEOC will revert to the standards set forth by Mach Mining to satisfy its conciliation obligations.

EEOC Chair Charlotte Burrows lauded Congress’s repeal of the Trump-era rule, stating that the change “restores the Commission’s flexibility to tailor the conciliation process to the facts and circumstances of each case, thus increasing the likelihood of a successful resolution.”

In short, because of the rule change, the EEOC retains its discretion to limit the amount of information shared with the employer at the conciliation stage.  Employers should not be surprised if certain relevant information—such as witness identities, factual evidence, and damages information—is not shared through the conciliation process.

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

For more articles on the EEOC, visit the NLRAdministrative & Regulatory section.

An Emoji is Worth 1,000 Words

In modern communication emojis have become ubiquitous. So much so that last year Vermont introduced legislation to allow emojis to be used on vanity license plates. In fact, emoji license plates have been available in Queensland, Australia since 2019.

Emojis, first introduced in 1999, are a way to communicate tone in written communication. The “smile” emoji can take what might be interpreted as harsh criticism and change it to sarcasm or a joke. Often single emoji in a message or email can communicate an idea more effectively than a paragraph of text. Because they are an integral part of today’s communications, they are also an important part of the discovery process.

There is more and more caselaw, civil and criminal, that involves emojis—from 2018 to 2019 the number of cases nearly doubled and there are no signs of that trend slowing. Despite the increase in litigation related to emojis the technology to interpret them in discovery is lagging. Anyone who’s ever collected text messages is familiar with the dreaded “�” indicating an emoji was used but, was not rendered in the discovery production process.

There are certainly situations where that missing emoji is essentially meaningless, but then there is the nightmare scenario.  In this situation you have Anne sending an email to her co-worker Frank; they both work in the HR department.

The presence of the eggplant emoji dramatically changes the tone of the email from one that is fairly innocuous to one that is not. If the emoji doesn’t render, crucial evidence is lost. Further, if one side has a version with the emoji and the other doesn’t it can lead to an unfortunate “gotcha” moment.

Emojis have taken on secondary and even tertiary meanings and the meanings can change in the time it takes a Tweet to go viral. It’s crucial to understand these meanings and understand the timing of their evolution. For example, in September of 2019 the Anti-Defamation league added the “okay” symbol to its hate list as it’s become a symbol for white supremacy groups.

There is no definitive lexicon for emoji use and there are many challenges to beginning to create one. Context matters. The same emoji can be texted by the same person to different people and mean something completely different. Legal professionals need to be mindful of this. Often context will only be found in further discovery—interrogatories, depositions, etc., but only if you know what questions to ask.

Complicating things even more is the reality that e-discovery technology has not fully caught up to emoji use. In 2019 Relativity, a leader in e-discovery technology, introduced the Relativity Short Message Format (RSMF) as a unified message format that processes and renders short message data like, Slack, SMS, iMessage, Bloomberg, and Skype with their attachments. In this format you can search for specific emojis, but there are still issues. The RSMF format renders ~1,000 different emojis.  At last count Slack alone has 26-million different emoji.

So, what should we do? As legal professionals we must be diligent and ensure that all the data we collect is processed properly so we can take full advantage of the tools available. We also must recognize the constantly evolving world around us so we can fully understand the necessary context and recognize when we need to dig deeper.

©2021 Strassburger McKenna Gutnick & Gefsky

For more articles on emojis, visit the NLRCommunications, Media & Internet section.

SBA Will No Longer Require PPP Loan Necessity Questionnaire

In a notice sent to lenders in early July, the Small Business Administration (“SBA”) informed lenders that it is eliminating the Loan Necessity Questionnaires (the “Questionnaires”) for Paycheck Protection Program (“PPP”) loans of $2 million or greater.

The SBA’s notice stated that it would no longer request either Form 3509 (for for-profit borrowers) or SBA Form 3510 (for not-for-profit borrowers). Moreover, Questionnaires previously requested by the SBA are no longer required to be submitted and lenders have been advised to close any open requests for additional information related to Questionnaires.

The changes are effective immediately, but the SBA said it would release an FAQ shortly with more details.

© Polsinelli PC, Polsinelli LLP in California

For more articles on PPP loans, visit the NLRCoronavirus News section.

Federal Judge Blocks Enforcement of Tennessee’s Bathroom Signage Law

On July 9, 2021, a federal district court in Nashville, Tennessee, granted a preliminary injunction, halting enforcement of a new Tennessee law on bathroom signage. That law mandates that businesses post specific signs next to their public bathrooms, if they allow people to use the bathroom that conforms with their gender identity. The first-of-its-kind law went into effect on July 1, 2021. It requires that any

public or private entity or business that operates a building or facility open to the general public and that, as a matter of formal or informal policy, allows a member of either biological sex to use any public restroom within the building or facility shall post notice of the policy at the entrance of each public restroom in the building or facility.

The law specifies the size, font, color, and content of the sign, which must state the following:

THIS FACILITY MAINTAINS A POLICY OF ALLOWING THE USE OF RESTROOMS BY EITHER BIOLOGICAL SEX, REGARDLESS OF THE DESIGNATION ON THE RESTROOM

The act gives any entity or business that is in violation of its edict 30 days from being “notified that it is not in compliance” to post the required signage, after which “action” may be “taken against the entity or business.” Failure to remedy the violation would constitute a Class B criminal misdemeanor.

Two businesses in Nashville and Chattanooga have filed a lawsuit challenging the law. They assert that being forced to place these signs on their premises violates their rights under the First Amendment of the U.S. Constitution. Both argue that the act requires them to engage in a form of speech that they find offensive and that is contrary to their beliefs on diversity, inclusion, and mutual respect.

The Court’s Analysis

District Judge Aleta Trauger of the U.S. District Court for the Middle District of Tennessee agreed with businesses, holding that they were likely to succeed in their lawsuit. When granting the preliminary injunction precluding the enforcement of the law, Judge Trauger did not mince words. She noted that the Supreme Court of the United States has held that “‘[c]ompelling individuals to mouth support for views they find objectionable violates [a] cardinal constitutional command’ unless justified by the strongest of rationales.”

Judge Trauger wrote that “[p]articularly repugnant to the First Amendment is when the government forces a private party to voice the government’s compelled message, not merely in private or in direct dealings with government itself, but ‘in public,’ as an involuntary ‘instrument for fostering public adherence to an ideological point of view.’” Judge Trauger found that the government had failed to plausibly articulate any legitimate rationale for the law, let alone one that would survive strict-scrutiny review.

Judge Trauger concluded her memorandum opinion by observing that

“[i]f there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein.” That rule is not founded simply on an abstract love of unfettered and uncompelled speech. The First Amendment holds its privileged place in our constitutional system because, “[w]henever the Federal Government or a State prevents individuals from saying what they think on important matters or compels them to voice ideas with which they disagree, it undermines” both “our democratic form of government” and the very “search for truth” necessary for a thriving society to persist.

(Internal citations omitted.)

Key Takeaways

The court’s ruling provides a measure of clarity to Tennessee business owners and managers who were concerned about compliance with the law and worried about criminal liability for violating its mandates. Since the Tennessee General Assembly’s passage of bathroom signage legislation at the conclusion of the 2021 session, and Tennessee Governor Bill Lee’s signing the legislation into law, employers had expressed concern regarding the potential consequences resulting from noncompliance with the law. Some employers had expressed dismay at the effect that such a law could have on their employees who are members of the LGBTQ community. For the time being at least, while this case works its way through the courts, it appears that Tennessee businesses may have a reprieve from enforcement of the law.

© 2021, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

For more articles on bathroom laws, visit the NLRCivil Rights section.

Federal Judge Says President Can Fire NLRB General Counsel

As we have previously reported, on his first day in officePresident Biden fired former NLRB General Counsel Peter Robb after Robb refused to resign. This controversial move immediately sparked debate over the President’s authority to fire Robb, who was serving in the last year of his statutory four-year term when fired.

In response to Robb’s abrupt departure, challengers have argued that Robb’s replacement, Acting General Counsel Peter Sung Ohr, does not have authority to bring cases before the NLRB because his appointment was invalid. The NLRB has refused to weigh in on the issue, saying that it is a matter for federal courts to decide.

The United States District Court for the District of New Jersey addressed the issue in its recent order in the case Goonan v. Amerinox Processing. U.S. District Judge Noel Hillman granted the NLRB’s request for an injunction, despite Amerinox’s argument that the NLRB acting general counsel does not have authority to prosecute this matter because of Robb’s removal. Judge Hillman stated that federal labor law gives the President authority to fire NLRB general counsels without cause, and that the temporary assignment of an acting general counsel without compliance with the Appointments Clause does not render the NLRB’s petition for injunctive relief invalid.

Judge Hillman, however, did not specifically rule on the legality of President Biden’s firing of Peter Robb, nor were his comments about firing general counsels a deciding factor in issuing the injunction. Moreover, Judge Hillman noted that the NLRB’s regional director was seeking an injunction on behalf of the Board, not the general counsel.

Given the peripheral nature of Judge Hillman’s comments about firing general counsels generally, this case is not likely the end-all, be-all on the matter. Thus, unless the Supreme Court rules squarely on the issue of Robb’s firing, challenges will likely still roll in as potential defenses to charges brought by Ohr.

© 2021 BARNES & THORNBURG LLP

For more articles on the NLRB, visit the NLRLabor & Employment section.

Immigration and Compliance Briefing: COVID-19 Summer Scoop & Quick Tips

Since March 2020, the U.S. Department of Homeland Security (DHS), Department of State (DOS), and Department of Labor (DOL) have issued and/or revised a significant number of rules and policies in response to the global COVID-19 pandemic. Below is a roundup of the current rules/policies covering the major areas of global mobility impacted by COVID-19.

International Travel

U.S. Land Borders

  • Canada: The border between the U.S. and Canada remains closed until July 21, 2021 except for essential workers and services. As of July 5, fully vaccinated Canadian citizens, permanent residents, and certain exempted individuals are not required to quarantine upon entry or undergo an 8-day COVID test.
  • Mexico: The border between the U.S. and Mexico remains closed until July 21, 2021 except for essential workers and services.

The U.S. land borders have been closed since March 21, 2020. While the border closures are currently set to expire on July 21, they may be extended for additional 30-day periods. As a reminder, the following types of travel/travelers are exempt from the restrictions:

  • U.S., Canadian, and Mexican citizens and permanent residents returning to their home country
  • Individuals traveling for medical purposes (e.g., to receive medical treatment)
  • Individuals traveling to attend educational institutions
  • Individuals traveling to work in the U.S.
  • Individuals traveling for emergency response and public health purposes (e.g., government officials or emergency responders)
  • Individuals engaged in lawful cross-border trade (e.g., truck drivers transporting cargo between the U.S., Canada and Mexico)
  • Individuals engaged in official government or diplomatic travel
  • Individuals engaged in military-related travel or operations

Geographical Travel Bans

Entry into the U.S. is prohibited, with some exceptions, for most travelers who have been in any of the following countries at any time within the past 14 days (including transit):

  • ChinaIranEuropean Schengen area (Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Monaco, San Marino, Vatican City); United Kingdom (England, Scotland, Wales, Northern Ireland); Republic of IrelandBrazilSouth AfricaIndia

Exceptions to this ban include, but are not limited to:

  • U.S. Citizens and Lawful Permanent Residents (LPRs)
  • Certain family members of U.S. citizens
  • Diplomatic Travelers
  • Individuals traveling with an approved National Interest Exception (NIE)

QUICK TIP: The current COVID-19 travel bans are based on physical presence and do not ban citizens or residents of any country.

QUICK TIP: Even a layover/connecting flight in an impacted countries is enough to trigger the entry ban, so if traveling to the U.S. from a non-banned country, travelers are advised to double-check their itineraries to ensure that they do not inadvertently become subject to the ban.

National Interest Exceptions

Travelers and their derivative beneficiaries who would otherwise be subject to the geographic travel ban may request a National Interest Exception (NIE) based on their visa type and/or their intended purpose of stay in the United States.

QUICK TIP: Effective July 6, 2021, the DOS announced that approved NIEs are valid for 12 months and multiple entries. This policy applies retroactively to travelers granted an NIE within the prior 12 months. Previously, NIEs were valid for a single entry within 30 days of approval.

On June 24, 2021, the DOS updated its guidance on NIEs, including categories of individuals who are automatically considered for an NIE at ports of entry and those who may apply for an NIE at the U.S. Consulate.

Individuals automatically considered for an NIE include:

  • Immigrants (those seeking permanent residence in the U.S.)
  • Fiancé(e)s of U.S. citizens and their dependents (K visas)
  • Students (F and M visas)

Note: New or returning students present in China, Brazil, Iran, South Africa, or India may arrive no earlier than 30 days before the start of an academic program beginning August 1, 2021 or after, including Optional Practical Training (OPT)

Individuals who may apply for an NIE include:

  • Certain J-visa holders (exchange visitors, students, and academics; Educational Commission for Foreign Medical Graduates (ECFMG) participants)
  • Journalists
  • Travelers providing executive direction or vital support for critical infrastructure sectors, or directly linked supply chains
  • Travelers providing vital support or executive direction for significant economic activity in the U.S.
  • Travelers whose purpose of travel falls within one of these categories: 1) Lifesaving medical treatment for the principal applicant and accompanying close family members; 2) Public health for those travelling to alleviate the effects of the COVID-19 pandemic, or to continue ongoing research in an area with substantial public health benefit (e.g., cancer or communicable disease research); 3) Humanitarian travel, including those providing care, medical escorts, and legal guardians
  • Travelers whose work is in the national interest of the U.S.
  • Derivative family members accompanying or following to join a noncitizen who has been granted or would be reasonably expected to receive an NIE

Individuals who are automatically considered for an NIE at a port of entry do not need to apply for the NIE at their consulate in advance of their travel. Those who believe they may be eligible for an NIE should contact their local consulate for instructions.

QUICK TIP:  Approved NIEs may be noted directly in a visa or an applicant may be notified via email that they have received a digital approval. Both formats are equally valid, and travelers are advised to carry copies of the application materials and confirmation of approval with them when they travel.

I-9 Compliance

Extended Flexibility

For employees hired between June 1, 2021 and August 31, 2021, Immigration and Customs Enforcement (ICE) has temporarily waived the in-person I-9 document inspection requirement for employers that are fully remote due to COVID-19. Initially implemented on March 20, 2020, this guidance has been extended in 30 to 60-day increments since and may be extended after August 31.

To avoid inadvertent I-9 regulatory violations, employers should note the following:

  • As of April 1, 2021, an employer may utilize the flexible I-9 guidelines even if some employees are present at the worksite. However, this flexibility ends once the employee begins non-remote work on a regular, consistent, or predictable basis. This guidance does not extend to remote employees whose employment is normally remote, but only applies to remote employees who are temporarily remote due to COVID-19.
  • Prior to April 1, 2021, these guidelines applied only to employers and workplaces operating fully remotely due to COVID-19. If employees were present at the worksite, no exceptions were permitted. This guidance did not extend to remote employees whose employment is normally remote, but only applied to remote employees who are temporarily remote due to COVID-19.
  • Within three days of the remote employee returning to regular in-person employment or the termination of the flexible guidelines, whichever is earlier, the employer must physically inspect any I-9 documents that were inspected electronically in reliance on this policy. Failure to timely physically inspect these documents constitutes an I-9 violation.

QUICK TIP:  To avoid missing the three-day deadline, employers may begin the physical I-9 document inspection for individual employees prior to the return to in-person employment.

QUICK TIP:  To avoid I-9 compliance violations, employers are encouraged to conduct regular internal I-9 audits and periodically review the M-274 Handbook for Employers, guidance for completing Form I-9.

Ongoing COVID-19 Flexibilities

Additional Time For Responding To Agency Requests

On June 24, 2021, U.S. Citizenship and Immigration Services (USCIS) extended its policy granting additional time to respond to the following types of agency requests as long as they were mailed by the agency between March 1, 2020 and September 30, 2021:

  • Requests for Evidence
  • Continuations to Request Evidence (N-14)
  • Notices of Intent to Deny, Revoke, Rescind, or Terminate
  • Motions to Reopen an N-400 Pursuant to 8 CFR 335.5

If a response to an eligible USCIS request and/or notice is received within 60 days of the stated deadline, then USCIS will consider the response prior to making a final determination.

Refiling Certain Applications Due To Delayed Rejection From USCIS Lockbox

Due to COVID-19, USCIS Lockbox facilities are experiencing significant delays in intake and processing of immigrant and nonimmigrant applications and petitions. In some cases, delayed rejections can prevent an applicant from timely refiling or cause an applicant to “age out” of a benefit. Therefore, for certain applications filed at a USCIS Lockbox between October 1, 2020 and August 9, 2021, the agency has issued the following guidance:

  • For applicants whose application was rejected solely because the filing fee expired due to USCIS Lockbox delays, the applicant may refile and USCIS will deem the application to have been received on the date the initial application was received. USCIS will also waive the $30 dishonored check fee.
  • For applicants, co-applicants, beneficiaries, or derivatives who aged out of eligibility for the requested benefit due to a delayed rejection from a USCIS lockbox, the applicant may refile and USCIS will deem the application to have been received on the date the initial application was received. This does not apply to Form N-600K, Application for Citizenship and Issuance of Certificate.

QUICK TIP:  Both petitioners and applicants should periodically review the USCIS COVID-19 Response webpage (https://www.uscis.gov/about-us./uscis-response-to-covid-19) and the websites of other government agencies for up-to-date information on guidance on COVID-19 related policies and flexibilities.

Form I-539 Biometrics

On May 3, 2021, USCIS announced that it will suspend the biometrics requirements for I-539 applicant categories (H-4, L-2, E-1, E-2, E-3) for a two-year period beginning on May 17, 2021. The suspension applies to Form I-539 applications that are 1) pending on May 17, 2021, and have not yet received a biometric services appointment notice, or 2) new applications received by USCIS from May 17, 2021, through May 23, 2022.

© 1998-2021 Wiggin and Dana LLP

For more articles on COVID-19 travel restrictions, visit the NLRImmigration section.

Do What You Learned in Kindergarten: Fight Fair and Play by the Rules—Avoiding Litigation Misconduct

Holding

In Performance Chemical Company v. True Chemical Solutions, LLC, No. W-21-CV-00222-ADA (W.D. Tex. May 21, 2021), Judge Albright of the Western District of Texas found that True Chemical Solutions (“True Chem”) violated the Court’s discovery order in bad faith and caused substantial prejudice to Performance Chemical Company (“PCC”). The district court granted PCC’s motion for sanctions against True Chem and dismissed the case.

Background

PCC filed suit alleging that True Chem infringed PCC’s patented Automated Water Treatment Trailers, or frac trailers. Id. at 2. Throughout the litigation, a key issue was whether True Chem automated its frac trailer by using a programmable logic controller (“PLC”) to automate the pumps within the trailer.

During discovery, PCC requested that its expert be allowed to inspect a True Chem frac trailer, which True Chem resisted. Id. The Court ordered True Chem to allow the inspection. When PCC expressed concern that True Chem would present an incomplete trailer for inspection, the Court specifically ordered that the inspection be of a trailer that was complete and included all relevant components. Id. at 3.

In response to the Court’s order, True Chem produced trailers for inspection. However, when PCC inspected the trailers, it found no PLC automation device, even though the trailers were manufactured to be capable of automation. Id.

PCC also tried to ascertain from True Chem’s employees in depositions whether True Chem’s frac trailers were automated. Under oath, True Chem employees repeatedly testified that True Chem did not automate frac trailers by installing a PLC. Id. Due to these representations, PCC could only rely on circumstantial evidence to prove its infringement theories regarding automation. Id. at 4.

After the close of discovery and in response to a court-ordered document search, True Chem produced more than 50,000 new documents. Id. Those documents contained information appearing to show that third-party automation companies had been retained by True Chem to automate its frac trailers. Id.  PCC deposed representatives of these third-party companies, which confirmed that, in 2019, True Chem had hired a third party to install a PLC on frac trailersand that those PLC devices were still mounted the last time the third-party company interacted with the trailer. Id. at 5.  The PLC device in question was large and would have required considerable effort to install and maintain. Id. PCC argued, and the Court agreed, that removing it from a trailer would have required considerable effort. Id.

True Chem did not dispute that the third-party company installed a PLC on frac trailers but, unsurprisingly, disputed the implication that it removed the PLC device specifically to dodge discovery.

Legal Standard

Under the Federal Rules of Evidence, a court may issue sanctions against a party who “fails to obey an order to provide or permit discovery.” Fed. R. Civ. P. 37(b)(2)(A). One of the sanctions allowed by Rule 37 is “rendering a default judgment against the disobedient party.”

The Fifth Circuit requires a finding of bad faith or willful conduct for the severest sanctions under Rule 37, such as striking pleadings, dismissing a case, or rendering default judgment. Additionally, before dismissing a case for discovery abuse, the Fifth Circuit requires that several factors be met. The factors include: (1) that the violation of the discovery order be attributable to the client instead of the attorney; (2) that the violating party’s misconduct must cause substantial prejudice to the opposing party; and (3) a finding that less drastic sanctions would not be appropriate. Performance Chemical Co., No. W-21-CV-00222-ADA (W.D. Tex. May 21, 2021), at 2 (citing FDIC v. Conner, 20 F. 3d 1376, 1380-81 (5th Cir. 1994)).

First Factor: Violation of the Discovery Order be Attributable to the Client Instead of the Attorney

The Court found that True Chem committed discovery violations with a pattern of “contumacious conduct and delay.” The Court issued a specific order that True Chem make all components in its custody or control, whether attached to trailers or not, available for inspection.

A True Chem employee testified that the company did not employ automation—even though True Chem had received an invoice for the automation project. Id. at 6. True Chem had not produced the PLC, or even notified counsel of the PLC’s existence, or taken steps to amend pleadings, supplement interrogatories, or notify opposing counsel or the Court, until a year later. Id. at 7. In fact, it was only after PCC subpoenaed a third-party company that it could determine the nature of the invoices and discover the PLC device.  It was only 154 days after the close of discovery as part of a 50,000-piece document dump that True Chem produced invoices pertaining to the allegedly non-existent automation. Id. at 4, 7.  Even then, True Chem still had not turned over the PLC device for inspection.

The Court found that, for a full year, True Chem stonewalled production of the PLC device. This led the Court to determine that the first factor, violation of the discovery order, was attributable to True Chem.[1]

Second Factor: Violating Party’s Misconduct Must Cause Substantial Prejudice to the Opposing Party

The Court found that PCC was forced to incur unnecessary attorneys’ fees and discovery costs as a result of the misconduct of True Chem and its counsel. Specifically, PCC was forced to engage in thorough and extensive third-party discovery, including up to the week before trial, when True Chem finally disclosed the PLC device. Id. at 8.

True Chem tried to use its failure for its own gain by arguing that, since PCC forced disclosure by True Chem of the PLC project, PCC had to limit its timeframe for damages. Id. at 8-9. The Court rejected that argument, stating that it “cannot understand why any attorney would attempt to use its own blatant discovery violations as a sword to argue that the opposition must limit its properly pleaded claims.” Id. at 9.

The Court found that True Chem’s actions caused substantial prejudice to PCC, preventing PCC’s “timely and appropriate preparation for trial.” Therefore, the Court found that the second factor was satisfied.

Third Factor: Less Drastic Sanctions Would Not be Appropriate

The Court held that the third factor was satisfied because True Chem demonstrated “flagrant bad faith and callous disregard of its responsibilities.” Id. at 9.  Specifically, the Court found that had it not been for the diligent comb through of 50,000 documents at the eleventh hour, the continuous and lengthy egregious conduct of the case would have gone undiscovered. Id. at 10.

Since all three prongs were satisfied, the Court held that it was only adequate to sanction True Chem with a “death-penalty sanction,” and that anything less would not provide sufficient deterrence from similar behavior in other cases. Id. at 10.

The Court granted PCC’s motion for sanctions and struck True Chem’s non-infringement defense and invalidity counterclaims. The Court further found that True Chem willfully infringed the asserted patents, ordered that True Chem be permanently enjoined from continuing its infringing activity, and that PCC be awarded its attorneys’ fees.

Further Developments

On June 7, 2021, PCC moved for entry of a damages award of $16.9M (representing treble lost profits through 2019 ($5.6M) plus prejudgment interest ($0.6M)) and attorneys’ fees. PCC argued no damages trial was necessary for a number of reasons: the Court’s inherent powers in connection with its sanctions ruling, the status as a default case with no party entitled to a jury trial on damages, the fact that PCC’s evidence conclusively established lost profits, and the fact that True Chem’s damages expert’s opinions had been struck “in their entirety.”

On June 15, 2021, Judge Albright granted True Chem’s attorneys’ motion to withdraw from the case.

Takeaways

While this case may seem like an outlier, it is important to remember that litigation is supposed to be a fair fight. Each side should timely disclose any relevant documents during discovery and adhere to any Court orders to allow trial to proceed in a timely manner and to prevent undue burden on the opposing party. Flagrantly disrespecting these principles may lead to an unforgiving response by the court.

The same is true in patent prosecution. The duty of good faith and candor set forth in Rule 56 is supposed to guarantee that patents are procured in a fair and timely proceeding that avoids placing an undue burden on the USPTO. As prosecution counsel, you should ask hard questions, which here would have involved questions regarding possible public use or sale. The prosecutor should consider asking those questions in writing. And if the patent prosecutor has suspicions of untruthful statements or other misconduct by the applicant, withdrawal from prosecution may be the best move.


[1]Note that on March 25, 2021, PCC seems to have argued TrueChem’s counsel was also complicit.  According to a Law360 article, in PCC’s Response in Opposition to True Chemical Solutions LLC’s Motion to Strike Scott Weingust’s Expert Report (sealed), “PCC replied that True Chem’s response highlighted for the first time that True Chem’s former attorneys . . . were ‘complicit’ and that they made things worse in the two months since they were informed of the misconduct.” Hu, Tiffany, “Chemical Co. Wants to Skip IP Damages Trial After Sanctions,” Law360, June 16, 2021. Although Judge Albright only assigned responsibility to True Chem and not its counsel, in the sanction order he commented, “it is worth noting that True Chem’s counsel . . . knew of the existence of the automation project on January 20, 2021, two months before such information was revealed to PCC.” See Order, FN1, (emphasis in original). Also, “PCC located invoices that were either concealed or overlooked as the result of willful incompetence on the part of the attorneys and then had to engage in third-party discovery to determine the nature of the invoices. Id. at 7.

© 2021 Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

For more articles on IP law, visit the NLR Litigation / Trial Practice section.

Forced Labor Sanctions in the Solar Industry – What You Need to Know

U.S. Customs and Border Protection (“CBP”) issued a Withhold Release Order (“WRO”) against Hoshine Silicon Industry Co. Ltd. , a company located in China’s Xinjiang Uyghur Autonomous Region (“XUAR”). The WRO has instructed personnel at all U.S. ports of entry to immediately begin to detain shipments containing silica-based products made by Hoshine and its subsidiaries. The WRO applies not only to silica-based products made by Hoshine and its subsidiaries but also to materials and goods derived from or produced using those silica-based products. CBP’s investigations into allegations of forced labor have produced six WROs this fiscal year.

CBP’s move comes the day after the Department of Commerce placed Hoshine and four other companies operating out of the XUAR on its Entity List. The Department imposed a license requirement for all items subject to the Export Administration Regulations (EAR) and a license review policy of case-by-case review for certain Export Control Classification Numbers (ECCNs) and certain items designated as EAR99. The administration made clear at the G7 summit that it would take action to ensure global supply chains are free from the use of forced labor. We noted in March that the Biden administration would use all of the tools at its disposal to combat forced labor, and we continue to expect the pace and scope of enforcement to increase.

Companies in the solar industry should take increasing care to ensure compliance programs are up to date, that new (and current) suppliers are carefully vetted, and supply chain audits are completed to their satisfaction. The State Department has recently noted that the employees of at least one supply chain auditor located in China were detained and interrogated for several days, and that supply chain audit companies are beginning to fear for their employees’ safety. If these allegations are credible, companies sourcing materials from China will need to reevaluate the effectiveness of their compliance programs and diligence procedures and, if they are dissatisfied with the results of their supply chain audits, consider sourcing from elsewhere.

Companies doing business with Hoshine – particularly those who have shipments en-route to U.S. ports – should review their contracts for force majeure and other compliance provisions. Companies should also review their commercial project contracts to determine the impact of supply chain delays and determine compliance with relevant notice provisions. Companies importing silicon of any kind should evaluate whether they have sufficient tracing information to ensure compliance with the WRO. CBP will be on the lookout for potential transshipment attempts by Chinese companies, to try to evade the WRO. If your company acts as an importer of record, it will be held responsible for any such attempt, underscoring the importance of full-spectrum supply chain due diligence for the solar industry.

© 2021 Foley & Lardner LLP

For more articles on the solar industry, visit the NLR Environmental, Energy & Resources section.

District of Columbia Increases Minimum Wage to $15.20, and Tipped Minimum Wage to $5.05, Effective July 1, 2021

As we previously reported, starting in 2016 the District of Columbia by statute gradually increased its minimum wage to $15.00 per hour, and its tipped minimum to $5.00, effective July 1, 2020. However, included in the statute were provisions for subsequent increases of both these rates based on the annual average increase in the Consumer Price Index for All Urban consumers in the Washington Metropolitan Statistical Area. See D.C. Code §32-1003(a)(6) and (f)(2).  The D.C. Department of Employment Services (DOES) recently announced that pursuant to these provisions, effective July 1, 2021 the minimum wage for all employees will increase to $15.20 per hour, and the tipped minimum to $5.05. The same rate applied to the Living Wage Act covering various government contractors.

D.C. employers should make sure that their payroll systems are adjusted to reflect these new rates. They should also post the updated DOES poster available here.

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

For more articles on minimum wage, visit the NLR Labor & Employment section.

“C.T.A.,” NOT “Chicago”

In the late 1960s when I was in law school, rock bands began to name themselves after public utilities and transportation entities, such as “Pacific Gas & Electric” with its gospel-tinged sound and even more famously the instrumental powerhouse (forgive the pun) the “Chicago Transit Authority.” In both cases, those choices were not well-received by the entities after which they were named. In the face of threatened legal action, “Pacific Gas & Electric” became “PG & E,” ironically foreshadowing what that utility now calls itself. Similarly, the “Chicago Transit Authority” became “Chicago.” Nonetheless, for American capital markets, “C.T.A.” became even more important than “Chicago.” Indeed, the C.T.A. became the “information grid” of those capital markets.

By the late 1970s, all stock exchanges registered with the U.S. Securities and Exchange Commission (“SEC”) were required to send a record of their trades AND quotes to a central consolidator, the Consolidated Tape System (“CTS”) in the case of trades and the Consolidated Quotation System (“CQS”) in the case of quotes. Both the CTS and the CQS are operated and governed by the Consolidated Tape Association (“CTA”), established by the SEC in 1974 under the authority of the Securities Exchange Act of 1934, as amended.

The Consolidated Tape System

The name “Consolidated Tape” comes from the ticker tape created by Edward Calahan in 1867. It was improved by Thomas Edison and patented in 1871. By the end of the 19th Century, most stockbrokers had offices near the New York Stock Exchange (“NYSE”) at 11 Wall Street in the south end of Manhattan Island, just up from The Battery. The brokers received a steady supply of the ticker tape reports of transactions on the NYSE. Messengers (called “pad shovers”) delivered these reports of trades by running (quite literally) between the Exchange’s trading floor and the brokers’ offices, where a shorter distance meant more up-to-date quotes. The ticker tapes were the common “confetti” for “ticker tape parades” of politicians and champion athletic teams on lower Broadway.

Mechanical ticker tapes gave way to electronic ones in the 1960s, but the “confetti” use continued through the celebration of the unexpected World Series victory of the New York Metropolitans in 1969 (I was in a third base box seat at Shea Stadium for the fifth and final game and watched the ensuing ticker tape parade a few days later).

Capital Markets

By 1976, there was a consolidated tape reporting transactions at each of the participating stock exchanges. Each entry on the tape displays the stock symbol for the issuer, the number of shares traded, the price per share, a triangle pointing up or down (showing whether the trade price is above or below the previous day’s closing price, a number showing how much higher or lower the trade price was from the last closing price and the exchange where the trade occurred). By 1978, the CQS was operational, providing the quotations for stock traded on an exchange (identifying the exchange) as well as stock traded by members of the Financial Institution Regulatory Authority, Inc. (“FINRA”) on the third market. By 1979, both NASDAQ and the Cincinnati Stock Exchange had become CQS participants.

These developments arose in the course of the capital markets working their way out from the close call of the market collapse in the late 1960s – early 1970s in dealing with what had been a marketplace of paper certificates and manual record keeping. See my April 29, 2021, blog post, “Tightening the Reins: SEC Approves Proposed Rule Change to Clearing Agency Investment Policy,” for some of the history of this period and the development of Clearing Agencies to respond to the need to automate and otherwise modernize the capital markets. These American market developments stand in stark contrast to the disarray extant in Europe, where there is no “consolidated” system of trading information. See my November 5, 2020, blog post, “The European Stock Markets: Still at Sixes and Sevens,” and especially the inability to trade the stock of Danone SA when one exchange shut down.

SEC Notice of Participants

In 2020, came increases to the membership of the CTA. The members, called Participants, were, as of June 29, 2020, the following:

  • Cboe BYX Exchange, Inc.
  • Cboe BZX Exchange, Inc.
  • Cboe EDGA Exchange, Inc.
  • Cboe EDGX Exchange, Inc.
  • Cboe Exchange, Inc.
  • FINRA
  • The Investors’ Exchange LLC
  • Long-Term Stock Exchange, Inc.
  • MEMX LLC (formally admitted in the Summer of 2020)
  • Nasdaq BX, Inc.
  • Nasdaq ISE, LLC
  • Nasdaq PHLX, Inc.
  • The Nasdaq Stock Market LLC
  • New York Stock Exchange LLC
  • NYSE American LLC
  • NYSE Arca, Inc.
  • NYSE Chicago, Inc.
  • NYSE National, Inc.

On July 29, 2020, the SEC issued a Notice that the Participants proposed to amend the CTA Plans to include MEMX LLC as a Participant. MEMX (standing for The Members Exchange) is an interesting new capital market development, a technology-driven stock exchange founded by its members in early 2019 seeking to create a lower-cost exchange for the benefit of its members. Those members were:

  • BofA Securities
  • Charles Schwab  Corporation
  • Citadel LLC
  • E-Trade
  • Fidelity Investments
  • Morgan Stanley
  • TD Ameritrade
  • UBS
  • Virtu Financial

Nine other firms invested in the MEMX: Blackrock, Citigroup, J.P. Morgan, Goldman Sachs, Wells Fargo, and Jane Street.

One might note that Citadel LLC and Virtu Financial are the two leading wholesale trading houses in the U.S. and have been the subjects of intense Congressional and regulatory scrutiny because they together handle some 70+% of stock trades and provide great amounts of payment for order flow, all of which figured prominently in the GameStop and other so-called “meme” stock trading excesses in the first half of 2021.

In October 2020, the CTA membership was amended again to add MIAX PEARL, LLC. MIAX PEARL is owned by Miami Holdings Inc., a financial services firm that owns and operates a number of trading bodies, including the Minnesota Grain Exchange. MIAX PEARL is focused primarily on option trading.

Trading and Reporting

Beginning in January 2020, the CTA entertained a series of proposed adjustments to its operations to address how accurately to report the effect of a regulatory halt to trading and then the reestablishment of trading in that security culminating on May 28, 2021, of approval by the SEC of the 36th Amendment to the CT Plan and the 27th Amendment to the CQ Plan. Finally, 2020 saw the CTA engaged in lengthy and complex discussions and revisions both to improve the transparency of Participant actions AND to enhance the disclosure of conflicts of interest, as detailed knowledge of trading and quotation information can potentially give Participants inappropriate insight into trading strategy and market anomalies. The revisions proposed in an SEC Notice of January 8, 2020, included required disclosures by professional advisers to the Participants, such as auditors and attorneys.

In connection with the January 8 Notice, the SEC posed 14 specific requests for comments. Those proposals, with some modifications by the SEC in response to comments submitted, were approved by the SEC on May 6, 2020, and deserve careful reading by Participants, their advisors, and others interested in the functioning of the U.S. capital markets and the flow of information about their operations. The SEC, in its May 6 action, emphasizes that “responses to the required disclosures must be sufficiently detailed to disclose all material facts to identify applicable conflicts of interest.” Further, the May 6 action requires Participants to identify situations where service providers are constrained from making full disclosure due to “potentially conflicting laws or professional standards” and to discuss “the basis for its inability to provide a complete response,” specifically citing concerns for attorney-client privilege.

Protecting Investors

The May 6 SEC action concludes with a reference to a Congressional finding that:

“It is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to ensure the prompt, accurate, reliable and fair collection, processing, distribution, and publication of information with respect to quotations and transactions in…securities and the fairness and usefulness of the form and content of such information. The conflicts of interest Amendments, as modified by the Commission, further these goals…”

©2021 Norris McLaughlin P.A., All Rights Reserved

For more articles on SEC, visit the NLR Securities & SEC section.