Category: Administrative & Regulatory

What Does the End of Chevron Deference Mean for Federal Health Care Programs?

On June 28, 2024, the Supreme Court rejected the doctrine of Chevron deference in the closely watched case of Loper Bright Enterprises v. Raimondo.[1] In a 6-3 decision, the Court held that Chevron’s rule that courts must defer to federal agencies’ interpretation of ambiguous statutes gave the executive branch interpretive authority that properly belonged with the courts. Moreover, the Court concluded that Chevron deference was inconsistent with the Administrative Procedure Act (APA), holding that the APA requires courts to exercise independent judgment when deciding legal issues in the review of agency action.

Loper will have significant and immediate implications for the U.S. Department of Health and Human Services (HHS), the federal agency charged with the administration of the federal health care programs, including Medicare and Medicaid. As detailed below, the Court’s decision sets a more exacting standard for courts to apply when reviewing HHS’s regulations and legal positions.

What Was Chevron Deference?

The doctrine of Chevron deference was established in 1984 by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.[2] In that case, the Court held when a “statute is silent or ambiguous with respect to the specific issue” raised regarding a statute that the agency administers, “the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”[3]

Although scholars have debated Chevron’s rationale at length, it generally was read to require deference based upon agencies’ presumed subject matter expertise and an assumption that Congress delegated authority to agencies—rather than courts—to fill in gaps in statutory schemes. Notably, the Supreme Court had not itself invoked Chevron deference since 2016, although lower courts have continued to rely on it regularly.[4]

What Did Loper Decide?

Loper involved two New England fishing companies appealing the D.C. Circuit’s ruling that applied Chevron deference to uphold the National Marine Fisheries Service’s interpretation of the Federal Magnuson-Stevens Act (the “Act”) as requiring fishermen to pay for the use of compliance monitors on certain fishing boats, even though the federal law is silent on who must pay. Petitioners used the case as a vehicle to present a broader challenge to Chevron,arguing that the doctrine has led to excessive deference to federal agencies, resulting in overregulation, the abdication of judicial responsibility to interpret statutes, and the unwarranted imposition of regulatory enforcement costs.

The Loper majority firmly rejected Chevron and held that the APA requires courts to exercise their independent judgment in deciding legal questions that arise in reviewing agency action. As the majority held, “courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”[5]

Importantly, however, Loper noted that deference may still be afforded agencies in certain instances. First, the Court observed that the APA expressly mandates a deferential standard of review for agency policy-making and fact-finding.[6] Second, Loper explained that some statutes are best read to “delegate[] discretionary authority to an agency,” in which case a court’s role is to merely ensure the agency “engaged in ‘reasoned decisionmaking’” within that authority.[7] Lastly, Loper reaffirmed that an agency’s “expertise” remains “one of the factors” that may make an agency’s interpretation persuasive.[8]

How Will Loper Impact Federal Health Care Programs?

Loper’s directive that courts should construe statutes independently and not defer to agencies’ positions has enormous implications for providers and suppliers that participate in federal health care programs. Much of today’s health care landscape is governed by HHS’ regulations, impacting many Americans and much of the federal budget. For example, Medicare currently covers more than 67 million beneficiaries, and Medicare spending comprised 12% of the federal budget in 2022 and 21% of national health care spending in 2021.[9]

Federal health care programs like Medicare and Medicaid are established by statutes that set forth myriad requirements regarding the coverage of items and services, and how, when, and by whom those items and services may be furnished.[10] HHS’s various components—most notably the Centers for Medicare and Medicaid Services (CMS)—have issued numerous, detailed regulations to implement these statutes. HHS’s components also include FDA, CDC, HRSA, AHRQ, OCR, NIH, and many others that intersect with health care providers and suppliers regularly.

Going forward under Loper, future challenges to agency regulations will take place upon a much different playing field. This has several important implications:

  • More Legal Challenges: We expect to see more legal challenges brought against HHS’s regulations as they are issued. Loper expressly stated that it “does not call into question prior cases that relied on the Chevron framework,” so prior decisions affirming regulations should be stable.[11] But going forward, Loper means that courts have no “thumb on the scale” in favor of HHS’s legal positions, and so litigants may view Loper as increasing their odds of success. At the same time, this may create more uncertainty for providers and suppliers who must determine how to comply with new regulations under challenge.
  • Less Ability for HHS to Create New Programs or Impose New Requirements: Especially where HHS imposes new substantive requirements that are not clearly authorized by statute, HHS’s regulations may be vulnerable. For example, the challengers to CMS’s minimum-staffing requirements for nursing homes are sure to cite Loper.[12] Likewise, when HHS creates new programs or initiatives by regulation based on broad statutory language (e.g., HHS’s recent creation of rural emergency hospital regulations[13]), the regulations may be more vulnerable to challenges. As another example, legal challenges to FDA’s new rule on Laboratory Developed Tests are pending and will likely invoke Loper.[14]
  • More Incentive to Challenge Reimbursement Rules: Legal challenges are frequently brought to CMS’s rules governing reimbursement, which often have complicated statutory formulas subject to differing interpretations. Whereas in the past, courts often deferred to CMS’s interpretations,[15] Loper now creates more potential for providers and suppliers to seek more favorable legal interpretations to enhance reimbursement.
  • Slower and More Cautious Rulemaking: As HHS promulgates new regulations, it will now have to consider the enhanced litigation risk that Loper creates. This may lead to agencies slowing and proceeding more cautiously in rulemaking as agencies seek to craft defensible regulations.
  • Inconsistent Decisions by Courts: Because Loper directs courts to exercise independent judgment rather than defer to HHS’s interpretations, we expect that courts in different areas of the country may reach differing conclusions regarding HHS regulations. This may make certain geographic locations more advantageous for provider and supplier operations or expansions.

Conclusion

Going forward, courts will be more amenable than ever to siding with challenges to HHS regulations. This creates both challenges and opportunities for providers and suppliers who should carefully assess the legal basis for all new regulations.

The authors acknowledge the contributions of Callie Ericksen, a student at the University of California Davis Law School and 2024 summer associate at Foley & Lardner LLP.

[1] Loper Bright Enterprises v. Raimondo, No. 22-451 (June 28, 2024), together with Relentless, Inc. v. Department of Commerce, No. 22-1219, available here.

[2] 467 U.S. 837 (1984).

[3] Id. at 843 (emphasis added).

[4] See Am. Hosp. Ass’n (“AHA”) v. Becerra, 142 S. Ct. 1896, 1904 (2022) (determining that HHS’s preclusion of judicial review “lacks any textual basis,” remaining silent with respect to Chevron); Becerra v. Empire Health Found., 142 S. Ct. 2354, 2362 (2022) (illustrating that HHS’s reading aligns with the statute’s “text, context, and structure” in calculating the Medicare fraction for purposes of Medicare Part A benefits, without any mention of Chevron); Vanda Pharms., Inc. v. Ctrs. for Medicare & Medicaid Servs.,98 F.4th 483 (2024) (holding that CMS’s definitions of “line-extension” and “new formulation” did not conflict with the Medicaid statute).

[5] Loper Bright Enterprises v. Raimondo, No. 22-451, slip op. 35 (June 28, 2024).

[6] Id. at slip. op. 14 (citing 5 U.S.C. §§ 706(2)(A), (E)).

[7] Id. at slip op. 18.

[8] Id. at slip op. 25 (citing Skidmore v. Swift & Co., 323 U.S. 134 (1944).

[9] See KFF, Medicare 101 (published May 28, 2024), available here.

[10] See 42 U.S.C. §§ 1395–1395lll.

[11] Loper Bright Enterprises v. Raimondo, No. 22-451, slip op. 34 (June 28, 2024).

[12] See Am. Health Care Ass’n v. Becerra, No. 24-cv-114 (N.D. Tex) (challenging the rule issued at 89 Fed. Reg. 40876 (May 10, 2024).

[13] Conditions of Participation, 42 C.F.R. §§ 485.500-485.546 (Subpart E), and Payments, §§ 419.90-419.95 (Subpart J), 87 Fed. Reg. 71748, 72292-93 (Nov. 23, 2022),

[14] 21 C.F.R. § 809, 89 Fed. Reg. 37286 (May 6, 2024).

[15] See, e.g., Baptist Mem’l Hosp. – Golden Triangle, Inc. v. Azar, 956 F.3d 689 (5th Cir. 2020) (deferring to CMS’s rule addressing “costs incurred” for calculating Medicaid Disproportionate Share Hospital payments).

© 2024 Foley & Lardner LLP
For more news on Supreme Court Health Care Decisions, visit the NLR Health Law & Managed Care section.

Supreme Court Rules Against Taxpayers in IRC Section 965 Case

On June 20, 2024, the Supreme Court of the United States issued a 7-2 opinion in Moore v. United States, 602 U.S. __ (2024), ruling in favor of the Internal Revenue Service (IRS).

Moore concerned whether US Congress and the IRS could tax US shareholders of controlled foreign corporations (CFCs) on those corporations’ earnings even though the earnings were not distributed to the shareholders. The case specifically focused on the so-called “mandatory repatriation tax” under Internal Revenue Code (IRC) Section 965, a one-time tax on certain undistributed income of a CFC that is payable not by the CFC but by its US shareholders. Some viewed the case as hinging upon whether Congress has the power to tax economic gains that have not been “realized.” (i.e., In the case of a house whose value has appreciated from $500,000 to $600,000, the increased value is “realized” only when the house is sold and the additional $100,000 reaches the taxpayer’s coffers.)

However, Justice Brett Kavanaugh, joined by Chief Justice John Roberts and Justices Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson, rejected that position on the ground that the mandatory repatriation tax “does tax realized income,” albeit income realized by a CFC. On this basis, they reasoned that the question at issue was whether Congress has the power to attribute realized income of a CFC to (and tax) US shareholders on their respective shares of the undistributed income. This group of justices ultimately decided Congress does have the power.

The majority went out of its way to avoid expressing any opinion as to whether Congress can tax unrealized appreciation, with Justice Amy Coney Barrett’s concurrence and Justice Clarence Thomas’s dissent asserting that it cannot. Perhaps the Court was signaling a distaste for the Billionaire Minimum Income Tax proposed by US President Joe Biden, which would impose a minimum 20% tax on the total income of the wealthiest American households, including both realized and unrealized amounts, among other Democratic proposals.

Practice Point: We previously noted that certain taxpayers should consider filing protective refund claims contingent on the possibility that Moore would be decided in favor of the taxpayers. In light of the case’s outcome, however, those protective claims are now moot.

© 2024 McDermott Will & Emery
For more news on US Shareholders of Foreign Corporations Taxes, visit the NLR Tax section.

EEOC Unveils Final Rule Implementing Pregnant Workers Fairness Act PWFA

Go-To Guide:
  • Effective June 18, employers covered by the Pregnancy Workers Fairness Act (PWFA) are required to offer reasonable workplace accommodations to workers who are pregnant or have a condition related to pregnancy or childbirth.
  • PWFA applies to covered entities, which include public and private employers with 15 or more employees, unions, employment agencies, and the federal government.
  • A preliminary injunction was entered on June 17, which “postpones the effective date of the Final Rule’s requirement that covered entities provide accommodation for purely elective abortions of employees that are not necessary to treat a medical condition related to pregnancy” for the states of Louisiana and Mississippi.
  • Covered employers should review the requirements of the PWFA to ensure that their workplace policies and procedures allow for the requisite accommodations under the Act and follow current challenges to accommodations regarding elective abortions under the law.

The U.S. Equal Employment Opportunity Commission (EEOC) final rule implementing the Pregnant Workers Fairness Act (PWFA) went into effect June 18, 2024, but not without legal challenge.

The final rule, covered in a previous GT Alert, requires employers to offer reasonable workplace accommodations to workers who are pregnant or have a condition related to pregnancy or childbirth. The rule includes an exception for employers if the requested accommodation would cause the business an undue hardship.

However, the requirement of a workplace accommodation for “purely elective abortions” has been enjoined from implementation and enforcement in the states of Louisiana and Mississippi and against four Catholic organizations. On June 17, 2024, Judge David C. Joseph in the U.S. District Court for the Western District of Louisiana ruled that the EEOC overstepped its authority by requiring workplace accommodations for “purely elective abortions.”

The motions for preliminary injunction, filed by the states of Louisiana and Mississippi, as well as four entities affiliated with the Catholic Church, sought injunctive relief to the extent that the PWFA requires employers to accommodate purely elective abortions of employees. The court rejected the EEOC argument “that Congress could reasonably be understood to have granted [it] the authority to interpret the scope of the PWFA in a way that imposes a nationwide mandate on both public and private employers – irrespective of applicable abortion-related state laws enacted in the wake of Dobbs – to provide workplace accommodation for the elective abortions of employees.”

Based on its analysis, the court entered a preliminary injunction which “postpones the effective date of the Final Rule’s requirement that covered entities provide accommodation for the elective abortions of employees that are not necessary to treat a medical condition related to pregnancy” for the states of Louisiana and Mississippi and any agency thereof, any covered entity under the final rule with respect to all employees whose primary duty station is located in Louisiana or Mississippi, and the entities affiliated with the Catholic Church that sought the court’s involvement.1

What should employers know to ensure compliance with the PWFA, given the limited injunctive relief issued? Below is a summary of the law and considerations for implementing the rule, which is now effective.

Application

  • The PWFA applies to employees, which include applicants and former employees where relevant based on Title VII of the Civil Rights Act of 1964 (Title VII), as amended by the Pregnancy Discrimination Act of 1978.
  • The PWFA applies to covered entities, which include public and private employers with 15 or more employees, unions, employment agencies, and the federal government.
  • The states of Louisiana and Mississippi; employers located in Louisiana and Mississippi and with employees whose primary duty station is located within the states; and the U.S. Conference of Catholic Bishops, the Society of the Roman Catholic Church of the Diocese of Lake Charles, the Society of the Roman Catholic Church of the Diocese of Lafayette, and the Catholic University of America are not required to provide accommodations for the elective abortions of employees that are not necessary to treat a medical condition related to the pregnancy.

What Is Considered a ‘Known Limitation’?

  • A limitation is “known” to a covered entity if the employee, or the employee’s representative, has communicated the limitation to the covered entity.
  • The physical or mental condition may be a modest or minor and/or episodic impediment or problem.
  • An employee affected by pregnancy, childbirth, or related medical conditions that had a need or a problem related to maintaining their health or the health of the pregnancy. “Pregnancy, childbirth, or related medical conditions” includes uncomplicated pregnancies, vaginal deliveries or cesarian sections, miscarriage, postpartum depression, edema, placenta previa, and lactation.
  • An employee affected by pregnancy, childbirth, or related medical conditions who sought health care related to pregnancy, childbirth, or a related medical condition itself.
  • There is possible overlap between the PWFA and the Americans with Disabilities Act (ADA) because in these situations, the qualified employee may be entitled to an accommodation under either statute, as the protections of both may apply.

What Is an ‘Undue Hardship’?

  • An employer or covered entity does not need to provide a reasonable accommodation if it causes an undue hardship, meaning significant difficulty or expense, to the employer.

The PWFA Prohibits the Following Conduct by Covered Employers

  • Failure to make a reasonable accommodation for the known limitations of an employee or applicant, unless the accommodation would cause an undue hardship;
  • Requiring an employee to accept an accommodation other than a reasonable accommodation arrived at through the interactive process;
  • Denying a job or other employment opportunities to a qualified employee or applicant based on the person’s need for a reasonable accommodation;
  • Requiring an employee to take leave if another reasonable accommodation can be provided that would let the employee keep working;
  • Punishing or retaliating against an employee or applicant for requesting or using a reasonable accommodation for a known limitation under the PWFA, reporting or opposing unlawful discrimination under the PWFA, or participating in a PWFA proceeding (such as an investigation); and/or
  • Coercing individuals who are exercising their rights or helping others exercise their rights under the PWFA.

Non-Exhaustive List Of Examples of ‘Reasonable Accommodations’

  • Additional, longer, or more flexible breaks to drink water, eat, rest, or use the restroom;
  • Changing food or drink policies to allow for a water bottle or food;
  • Changing equipment, devices, or workstations, such as providing a stool to sit on, or a way to do work while standing;
  • Changing a uniform or dress code or providing safety equipment that fits;
  • Changing a work schedule, such as having shorter hours, part-time work, or a later start time;
  • Telework;
  • Temporary reassignment;
  • Temporary suspension of one or more essential functions of a job;
  • Leave for health care appointments;
  • Light duty or help with lifting or other manual labor; or
  • Leave to recover from childbirth or other medical conditions related to pregnancy or childbirth.

Employer Training

  • Employers should consider training supervisors on how to respond to requests for accommodation.
  • Unlike requests for accommodation under the ADA, an accommodation pursuant to the PWFA may include a temporary suspension of essential job functions for qualified individuals (barring undue hardship to the employer).
  • Employees do not need to use specific words to request an accommodation to begin the interactive process.
  • Employers may not require that the employee seeking an accommodation be examined by a health care provider selected by the employer.
1 Further efforts to enjoin the implementation of the Rule were thwarted when the U.S. District Court for the District of Arkansas denied a motion for injunctive relief filed by a group of Republican state attorneys general on the grounds that the plaintiffs lacked standing to challenge the rule.
©2024 Greenberg Traurig, LLP. All rights reserved.
For more on the PWFA, visit the NLR Labor Employment section.

Implications of Executive Action for Family Unity and Retention of DACA Talent for Employers and Individuals

Highlights

  • On June 18, the executive branch announced one of the most significant executive actions affecting U.S. immigration since establishing the Deferred Action for Childhood Arrivals (DACA) program in 2012
  • The family unity action would allow many undocumented spouses of U.S. citizens to obtain green cards in the U.S. without needing to depart the country
  • The DACA provisions would make it easier for some DACA recipients to qualify for a work visa

On June 18, 2024, the Biden administration announced one of the most significant executive actions promoting family unity and streamlining the process for Deferred Action for Childhood Arrivals (DACA) recipients seeking to transition to work visas using existing legal authority.

Family Unity and Parole in Place for the Undocumented Spouses of U.S. Citizens

The executive actions initiate a process that will allow certain non-citizen spouses of U.S. citizens to apply for their green cards without leaving the U.S. Currently, a U.S. citizen can sponsor their non-citizen, foreign-born spouse for permanent residency by filing an I-130 immigration petition for the individual, regardless of their immigration status. Immigrant visas are available in this category without backlogs, unlike many other categories. However, undocumented spouses who didn’t enter the U.S. legally typically don’t qualify under current law to complete the permanent residency process in the U.S. In these situations, the spouse typically must depart from the U.S. to complete the process at a U.S. embassy or consulate abroad, thereby triggering a 10-year penalty to lawful readmission under immigration law unless waived due to hardship to a qualifying relative. This process is lengthy, uncertain and expensive, discouraging many of these families from pursuing these steps.

To provide relief, the Biden administration proposes to use the humanitarian parole authority of the executive branch to place qualifying individuals in a legal “parole,” which would then allow them to apply for adjustment of status. Approximately half a million spouses and stepchildren of U.S. citizens in “mixed-status” households could benefit from this change, if implemented.

The availability of this program, also known as Parole in Place, for qualifying non-citizen spouses will be formalized through a rule-making process and publication in the Federal Register. However, the subsequent announcement by the Department of Homeland Security (DHS) on June 18 included the following specifics for individuals to qualify:

  • Continuously resided in the U.S. for 10 years since June 17, 2014
  • Physically present in the U.S. on June 17, 2024
  • Legally married to a U.S. citizen as of June 17, 2024
  • Entered the U.S. without admission or parole and do not currently hold any lawful immigrant or nonimmigrant status
  • Have not been convicted of any disqualifying criminal offense
  • Do not pose a threat to national security or public safety
  • Merits a favorable exercise of discretion

This program would also include non-citizen children of these spouses (i.e., stepchildren).

All requests will consider the applicant’s previous immigration history, criminal history, the results of background checks, national security, and public safety vetting, and any other relevant information available to or requested by the U.S. Citizenship and Immigration Services.

Employers may stand to benefit from a substantial new group of individuals who will be work authorized and whose statuses could be legalized in the U.S. if this program proceeds.

DACA Recipients and Undocumented College Students

The administration subsequently announced that it is also taking additional steps to facilitate the process for DACA recipients to obtain work visas. DACA was created in 2012 by President Barack Obama as a means for immigrant youth who met certain eligibility requirements to qualify for work authorizations and obtain “deferred action.” While DACA protection has enabled hundreds of thousands of individuals to legally work and live in the U.S., the program has faced considerable uncertainty since 2017, when the Trump administration initially sought to terminate the program but was prevented from doing so in the federal courts.

The program continues to face legal challenges, and additional litigation before the U.S. Supreme Court is very likely. Fundamentally, DACA is not a legal status – the reliance on “deferred action” simply reflects DHS’ decision not to bring immigration removal proceedings against a specific individual. While many DACA recipients and their employers have since sought to transition to a work visa or other legal status that Congress specifically established in the Immigration and Nationality Act (INA), the process for doing so is uncertain, expensive and cumbersome. Since DACA recipients either entered without authorization or were out of status when they received DACA protection, they are typically ineligible for a transition to a lawful status within the U.S.

Instead, they are required under immigration law to “consular process” outside the U.S. and obtain a work visa at a U.S. consulate. The individual’s departure from the U.S. could trigger removal bars (similar to those described above), requiring the individual to obtain a temporary waiver of inadmissibility from the government. These waivers, known as “d3 waivers” based on the section of the INA to which they relate, can take months to obtain and the outcome of such a waiver is not certain. These cumulative issues have chilled the interest of many employers and DACA recipients in pursuing these waivers.

In the coming weeks, the administration is expected to announce additional steps to streamline the availability of d3 waivers. The U.S. Department of State will announce changes to its process for granting such waivers to DACA recipients through updates to the Foreign Affairs Manual, and DHS has indicated that it will adopt the State Department’s policy changes. These steps, if implemented, are very good news for many employers and the DACA recipients that they employ by providing a more efficient, robust and reliable process for transitioning DACA recipients to a more stable and lawful status in the U.S.

© 2024 BARNES & THORNBURG LLP
For more on the DACA Provisions, visit the NLR Immigration section.

Office Tenants: Do Due Diligence on Your Landlord

Office markets from coast-to-coast are struggling mightily, especially in major urban downtowns. Chicago’s downtown business district (i.e. the Loop) is no exception. Right now, Chicago’s Loop office vacancy rates are the highest since such rates have been recorded.

In April of this year, Crain’s Chicago Business reported that downtown office vacancy broke 25% for the first time on record, landing at 25.1%. This number reflects seven consecutive quarters of increasing vacancy.

What does this mean for tenants? Well…a lot.

It means opportunity as landlords feel pressure to fill vacant office space. Lease concessions that never would have been considered three years ago, might be available now. These days, on most office deals, tenants enjoy considerable leverage. While this market brings tenant’s many benefits, it also brings significant risks. Here are a few risks for tenants to consider before signing a lease:

1. Is your landlord in financial distress? Landlords will always vet an incoming tenant’s financial condition. The same often does not happen in reverse. Many office landlords face financial pressure now. If the landlord is at risk of foreclosure, or otherwise in financial peril, the tenant should have a number of concerns ranging from how well the building will be maintained to whether or not they will be staying in a bank-owned building soon. Tenants should fully inquire into landlord’s financial condition, especially if meaningful tenant allowances have been agreed to.

2. Subordination and Non-Disturbance Agreements are more important now than ever. “SNDAs” can go a long way towards protecting tenant’s lease rights in the event of a foreclosure.

3. Will “creative” uses come to the building? Never underestimate the ingenuity of the commercial real estate industry. All kinds of ideas have sprouted up as to what could be done to fill empty downtown office space. Indoor dog parks, pickle ball courts and the often tossed about notion of converting vacant office space into residential apartments are good examples. Tenants should find out before signing if the landlord has any designs on filling vacant space with uses that the tenant might find objectionable.

4. Co-tenancy provisions and the careful review of how operating costs will be allocated are critical. Who bears the risk of vacancy as to operating expenses? Tenants needs to know if fewer tenants means they will have a higher share of operating costs. Tenants also need to know if they have any way out of the lease if the building really struggles. No one wants to be alone in an empty tower.

© 2024 Chuhak & Tecson P.C.
For more on Office Tenants, visit the NLR Real Estate section.

Supreme Court Upholds Refusal to Register Trademark Containing the Name of Living Individual – Donald Trump

In a recent unanimous decision in the case Vidal v. Elster (602 U.S. ___ (2024)), the U.S. Supreme Court upheld the refusal to register a federal trademark for the phrase “Trump Too Small” based on the fact that the Lanham Act prohibits the registration of the name of a living individual without their consent. The plaintiff in this case, Mr. Elster, filed a federal trademark application in 2018 for the mark “TRUMP TOO SMALL” for use on clothing as shown below, without the prior consent of former President Trump, arguing that the phrase was intended to be a criticism of Donald Trump and his policies and that the refusal was a violation of Mr. Elster’s First Amendment right of free speech. Mr. Elster claimed he wanted to register the mark to convey a political message about the former president.

The Supreme Court reviewed the matter based on the initial refusal to register issued by the United States Patent & Trademark Office, which was then appealed to the U.S. Court of Appeals for the Federal Circuit, who overturned the refusal holding that barring registration of “Trump Too Small” under a provision of federal trademark law unconstitutionally restricted free speech. The Court’s ruling upholds the “living-individual rule” established under the Lanham Act which requires the consent of the living individual prior to registration. Specifically, “No trademark … shall be refused registration … on account of its nature unless it…[c]onsists of or comprises a name, portrait, or signature identifying a particular living individual except by his written consent….” 15 U.S.C. §1052(c). Proponents of the law, including the International Trademark Association, argue that this provision of trademark law is consistent with the concepts of the right of publicity and privacy, and assists in preventing the unauthorized use of individuals’ names in commercial contexts. In explaining the rationale for the decision, Justice Thomas wrote: “This Court has long recognized that a trademark protects the markholder’s reputation, and the connection is even stronger when the mark contains a person’s name,” and further stated, “This history and tradition is sufficient to conclude that the names clause — a content-based, but viewpoint-neutral, trademark restriction — is compatible with the First Amendment.”

It is worth noting the Court’s decision does not affect the ability of Mr. Elster to offer goods or services under any particular name or brand – in fact, Mr. Elster’s T-shirts bearing the phrase “Trump Too Small” are still available online for $24.99, even though his trademark application was refused. But the ruling does uphold the prohibition of seeking and obtaining federal trademark protection where the mark contains the name of a living individual without their consent. This ruling from the Supreme Court joins a string of other First Amendment challenges to provisions of the Lanham Act, the main statute governing trademarks. The high court in 2017 struck down a section of the law that barred registration of disparaging marks and did the same for a provision prohibiting immoral or scandalous marks in 2019.

The key takeaway from this narrowly tailored decision is that, prior to seeking federal trademark protection for a mark containing the name of a living individual, consent from that individual must be obtained. In the context of protecting a name or brand focused on a living individual, or in the continuation of such use post-merger or other transaction, it is important to ensure that the consent of the living individual is secured in some manner.

© Polsinelli PC, Polsinelli LLP in California

SBA Eliminates Self-Certification for SDVOSBs

The U.S. Small Business Administration (SBA) recently issued a direct final rule that eliminates self-certification for service-disabled veteran-owned small businesses (SDVOSBs). The SBA’s final rule — which implements a provision in the National Defense Authorization Act for Fiscal Year 2024 (NDAA 2024) — is effective August 5, 2024.

Background

  • To be awarded an SDVOSB set-aside or sole source contract, firms must be certified by SBA through the Veteran Small Business Certification (VetCert) Program.
  • Currently, firms that do not seek SDVOSB set-aside or sole source contracts but that meet the VetCert Program eligibility requirements may self-certify their SDVOSB status, receive prime contract or subcontract awards that are not SDVOSB set-aside or sole source contracts, and be counted toward an agency’s SDVOSB small business goals or a prime contractor’s subcontracting goal for SDVOSB awards.
  • Section 864 of the NDAA 2024 amends the SDVOSB requirements so that, effective October 1, 2024, each prime contract award and subcontract award counted for the purpose of meeting the goals for participation by SDVOSBs in procurement contracts for federal agencies or federal prime contractors shall be entered into with firms certified by VetCert under Section 36 of the Small Business Act (15 U.S.C. 657f).
  • Section 864 also creates a grace period so that firms that file an application for certification with SBA by December 22, 2024, may continue to self-certify for such federal government contracts and subcontracts until the SBA makes a final decision.
  • SDVOSBs that do not file an application for certification with SBA by December 22, 2024, or are not certified by SBA’s VetCert program and do not file an application by the deadline, will not be eligible to self-certify for such federal government contracts or subcontracts after December 22, 2024.
  • To implement the statutory language of Section 864 of the NDAA 2024, SBA is amending parts 125 and 128 of its regulations.

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© 2024 Bradley Arant Boult Cummings LLP
For more on Small Businesses, visit the NLR Corporate Business Organizations section.

Understanding the Enhanced Regulation S-P Requirements

On May 16, 2024, the Securities and Exchange Commission adopted amendments to Regulation S-P, the regulation that governs the treatment of nonpublic personal information about consumers by certain financial institutions. The amendments apply to broker-dealers, investment companies, and registered investment advisers (collectively, “covered institutions”) and are designed to modernize and enhance the protection of consumer financial information. Regulation S-P continues to require covered institutions to implement written polices and procedures to safeguard customer records and information (the “safeguards rule”), properly dispose of consumer information to protect against unauthorized use (the “disposal rule”), and implementation of a privacy policy notice containing an opt out option. Registered investment advisers with over $1.5 billion in assets under management will have until November 16, 2025 (18 months) to comply, those entities with less will have until May 16, 2026 (24 months) to comply.

Incident Response Program

Covered institutions will have to implement an Incident Response Program (the “Program”) to their written policies and procedures if they have not already done so. The Program must be designed to detect, respond to, and recover customer information from unauthorized third parties. The nature and scope of the incident must be documented with further steps taken to prevent additional unauthorized use. Covered institutions will also be responsible for adopting procedures regarding the oversight of third-party service providers that are receiving, maintaining, processing, or accessing their client’s data. The safeguard rule and disposal rule require that nonpublic personal information received from a third-party about their customers should be treated the same as if it were your own client.

Customer Notification Requirement

The amendments require covered institutions to notify affected individuals whose sensitive customer information was, or is reasonably likely to have been, accessed or used without authorization. The amendments require a covered institution to provide the notice as soon as practicable, but not later than 30 days, after becoming aware that unauthorized access to or use of customer information has occurred or is reasonably likely to have occurred. The notices must include details about the incident, the breached data, and how affected individuals can respond to the breach to protect themselves. A covered institution is not required to provide the notification if it determines that the sensitive customer information has not been, and is not reasonably likely to be, used in a manner that would result in substantial harm or inconvenience. To the extent a covered institution will have a notification obligation under both the final amendments and a similar state law, a covered institution may be able to provide one notice to satisfy notification obligations under both the final amendments and the state law, provided that the notice includes all information required under both the final amendments and the state law, which may reduce the number of notices an individual receives.

Recordkeeping

Covered institutions will have to make and maintain the following in their books and records:

  • Written policies and procedures required to be adopted and implemented pursuant to the Safeguards Rule, including the incident response program;
  • Written documentation of any detected unauthorized access to or use of customer information, as well as any response to and recovery from such unauthorized access to or use of customer information required by the incident response program;
  • Written documentation of any investigation and determination made regarding whether notification to customers is required, including the basis for any determination made and any written documentation from the United States Attorney General related to a delay in notice, as well as a copy of any notice transmitted following such determination;
  • Written policies and procedures required as part of service provider oversight;
  • Written documentation of any contract entered into pursuant to the service provider oversight requirements; and
  • Written policies and procedures required to be adopted and implemented for the Disposal Rule.

Registered investment advisers will be required to preserve these records for five years, the first two in an easily accessible place.

COPYRIGHT © 2024, STARK & STARK
For more news on SEC Amended Regulations, visit the NLR Securities & SEC section.

United States | New DACA Report Breaks Down the Trillion-Dollar Cost of Ending the Program

Coalition for the American Dream published a report this week detailing the projected economic and societal costs of ending the Deferred Action for Childhood Arrivals program.

Key Points:

  • Coalition for the American Dream published the report days ahead of the 12th anniversary of the DACA program on June 15.
  • Current DACA recipients number more than 500,000. The report finds that future long-term economic losses and costs could approach $1 trillion over the lifetimes of DACA recipients.
  • Other economic and workforce impacts include:
    • As many as 168,000 U.S. jobs in DACA-owned businesses could be lost.
    • U.S. workforce losses could include 37,000 healthcare workers, 17,000 STEM professionals and 17,000 educators.
    • Lost business training and recruitment costs for current DACA employees could reach $8 billion.

Additional Information: The report’s demographic and economic estimates and business impacts are based in part on data collected in the U.S. Census Bureau’s 2022 American Community Survey, the March 2022-2023-2024 Current Population Surveys and data from U.S. Citizenship and Immigration Services.

Coalition for the American Dream is an organization of more than 100 businesses, trade associations and other groups representing every major sector of the U.S. economy and more than half of American private sector workers. Its mission is to seek the passage of bipartisan legislation that gives Dreamers a permanent solution.

BAL Analysis: The report notes if DACA ended and work authorizations were denied renewal, 440,000 workers would be forced from the U.S. workforce over a two-year period, with the most acute impact on health, education and STEM occupations. The business community continues to show strong support for DACA and the crucial role Dreamers play in the U.S. economy. Given the uncertain environment, DACA recipients who qualify for a renewal are urged to apply for one as soon as they can.

©2024 Berry Appleman & Leiden. All Rights Reserved.
For more on the DACA, visit the NLR Immigration section.

Biden Administration Announces Voluntary Carbon Market Principles

The recent Joint Policy Statement and Principles (Principles) released by the Biden Administration, and related remarks by Secretary of the Treasury Janet L. Yellen, mark a significant milestone in the development of the voluntary carbon market (VCM).

Our views on this announcement and a brief summary of these Principles are set out below.

This is a very encouraging, and intriguing, governmental announcement in respect of an unregulated, international market.

One of the critical aspects of this announcement is the US government’s approach to balancing market promotion with non-regulation. The VCM is notably unregulated, and the intention is for it to remain so. As such, the announcement appears to be striving to foster integrity and growth within the market whilst avoiding the imposition of rigid regulatory frameworks that could stifle growth. There is a clear nod from the government to the market’s voluntary nature, thereby allowing for flexibility and the opportunity for diverse, creative solutions to emerge. However, the VCM has faced challenges that are not unusual for a nascent, evolving market and the government clearly wants to stimulate the market by providing clear guidance that enhances trust and integrity. This delicate equilibrium is essential for the long-term success and scalability of the VCM.

These Principles therefore serve as voluntary (but government-endorsed) guidelines, moving towards establishing a structure that market participants can follow to ensure the credibility and reliability of carbon credits.

The Principles do not reshape the current market. They are based instead, in large part, on existing best practice advocated by private sector and non-governmental organisations and initiatives. We have considered in some detail in a prior article these existing quasi-regulatory bodies and their functions – much of which is echoed in the Principles.

The Principles seek to bolster integrity in three main areas: on the supply side, demand side and the actual market itself.

Supply-side

  • Principle 1 – “Integrity & Standards”: Carbon credits must meet strict integrity standards and be certified through robust, transparent verification processes to ensure additionality, quantifiability and permanence.
  • Principle 2 – “Avoid Harm”: Generating credits should cause no environmental or social harm and promote co-benefits including sustainable development and increased biodiversity, involving relevant stakeholders in the process.

Demand-side

  • Principle 3 – “Buyer Responsibility”: Companies offsetting credits should set net-zero strategies, maintain an inventory of emissions (detailing Scope 1, 2, and 3 emissions) and regularly report.
  • Principle 4 – “Transparency”: Companies offsetting credits should publicly disclose details of purchased and retired credits annually, ensuring information is accessible and comparable.
  • Principle 5 – “Accurate Claims”: Public offsetting claims must accurately reflect the climate impact of credits and only use those meeting high integrity standards, prioritising internal emissions reductions.

Market-side

  • Principle 6 – “Market Integrity”: Stakeholders should seek to improve market functionality, transparency and equity to enhance the market’s overall health and high-integrity.
  • Principle 7 – “Facilitate Participation”: Policymakers and market participants should lower transaction costs and barriers for credit providers, ensuring market certainty and bankability of VCM projects, especially from developing regions.

On the supply side (Principles 1 and 2), inspiration has been drawn from, amongst other sources, the Core Carbon Principles and other standards of the Integrity Council for the Voluntary Carbon Market. On the demand side (Principles 3, 4 and 5), inspiration has been drawn from, amongst other sources, the Claims Code of Practice and other standards of the Voluntary Carbon Market Initiative. On the market side (Principles 6 and 7) the message is more general and is aimed at promoting the integrity of the standards/registries and their participants and focussing on the policymakers. The Principles conclude with a rallying cry for policymakers and buyers to consider ways to enhance market certainty for lenders undertaking long term investments. The current financing landscape of the VCM is an area which we have also considered in some detail in a prior article.

The Principles and comments from Treasury acknowledge that the VCM, in its current state, suffers from some key challenges that inhibit growth at the scale needed to achieve national and international climate goals. The seven Principles outlined above are the government’s initial efforts at assisting to overcome those challenges. They reflect the importance of a functioning carbon reduction infrastructure (both physical and financial) to the government, and a high level of understanding of the carbon abatement ecosystem. And, perhaps most importantly, these statements recognise and encourage the involvement and initiative of all participating stakeholders to take demonstrative steps to establish a market-based approach to carbon reduction. As Secretary Yellen’s statement says, “harnessing the power of markets and private capital is critical.”

While the VCM principles announcement reflects an attempt to improve confidence in voluntary carbon offsets, at the same time the US Department of Agriculture (USDA) signalled its interest in establishing public protocols specifically for third-party verification of offsets deriving from forestry and farming. This action reflects a keen interest on both sides of the political aisle in Congress. Sen. Debbie Stabenow (D-MI), chair of the Senate Agriculture Committee noted that both the VCM principles and the USDA announcement established that, “Voluntary carbon credit markets generate new revenue streams for farmers, foresters, and rural communities, and there is clear enthusiasm across private industry and the public sector to tap into that potential.” Sen. Stabenow further notes that these actions “will strengthen the integrity of these markets and build a foundation for the future.”

The VCM principles and USDA statement can be seen as part of an effort to implement the Growing Climate Solutions Act which was designed to break down barriers for farmers, ranchers, and foresters interested in participating in carbon markets and in embracing so-called climate-smart agricultural practices. The Act was passed by Congress on a bipartisan basis and signed into law by President Biden on December 29, 2022. As the House and Senate consider “farm bills” in the near future, we can expect more action on agricultural offsets.

These announcements clearly underscore the government’s commitment to promoting the VCM without the enforcement of laws or regulations. It is a firm message of support for the VCM, and explicit recognition that development of the VCM is critical to unlocking carbon abatement projects globally. It clarifies that the current administration recognises the VCM as another component of the energy transition required to achieve national and international climate goals, as well as sustainable environmental practices. In particular, these seven Principles provide a framework that can guide the VCM’s growth. Whilst the Principles goldplate (rather than reinvent) existing best practice, this achieves the sensitive balancing act required from a government seeking to promote an unregulated market.

© 2024 Bracewell LLP
For more on the Carbon Market, visit the NLR Environmental Energy Resources section.