Uyghur Forced Labor Prevention Act Is Coming… Are You Ready? CBP Issues Hints at the Wave of Enforcement To Come

US Customs and Border Protection (CBP) has issued some guidance relating to its enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) prior to June 21, 2022, the effective date of the rebuttable presumption.

What to Know

  • US Customs and Border Protection (CBP) has issued some guidance relating to its enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) prior to June 21, 2022, the effective date of the rebuttable presumption.
  • The new guidance imposes tighter timelines and a higher burden of evidence on importers to rebut the presumption that merchandise was produced with forced labor. If CBP does not make a decision within specific timeframes, goods will automatically be deemed excluded.
  • CBP is expected to issue additional technical guidance at the end of May or early June. The Department of Homeland Security (DHS) is also expected to issue guidance closer to June 21, 2022.
  • CBP is scheduled to host informational webinars detailing their UFLPA guidance in the coming weeks.

What’s New: Tighter Timelines  

While US importers were eagerly anticipating the issuance of technical guidance regarding implementation of the UFLPA from CBP last week, which is now expected this week, CBP did post a new guidance document summarizing the UFLPA and forced labor Withhold Release Orders (WRO) enforcement mechanisms. Specifically, CBP’s authority to detain merchandise under the UFLPA will be pursuant to 19 CFR § 151.16, which provides for a much different timeline for the detention of merchandise than the WRO process. Under this process, if Customs does not make a timely decision regarding admissibility, goods are automatically excluded.

UFLPA Timeline Enforcement under 19 CFR § 151.16

Number of Days

Actions

5 Days from Presentation for Examination

CBP must decide whether to release or detail merchandise

  • If the merchandise is not released, it is detained
5 Days after Decision to Release or Detain

CBP will issue a notice to importer advising them of:

  • The initiation of detention
  • Date merchandise examined
  • Reason for detention
  • Anticipated length of detention
  • Nature of tests and inquiries to be conducted
  • Information to accelerate disposition
  Upon written request, CBP must provide importer with testing procedures, methodologies used, and testing results
Within 30 Days of Examination

CBP will make a final determination as to the admissibility of merchandise

  • If CBP does not make a determination within the 30-day period, the merchandise will be deemed excluded
  • This means any submission to rebut the presumption should be made before this 30 day period
Within 180 Days of CBP Determination/Exclusion Importers may protest CBP’s final determination
Within 30 Days After Protest Submitted The protest is deemed denied if CBP does not grant or deny the protest within 30 days
Within 180 Days after the Date the Protest is Denied

The importer may commence a court action contesting the denied protest (28 U.S.C. § 1581(a))

  • In a court action, CBP must establish by a preponderance of the evidence that an admissibility decision has been reached for good cause
  • Customs can decide to grant the protest after the deemed denial but before a court case is filed

This is a much shorter timeline than the WRO process. Importantly, a company contesting CBP’s detention of merchandise pursuant to the UFLPA would be required to submit documentation to rebut the presumption within the 30-day period that CBP is assessing admissibility, whereas the WRO process permits 90 days. Like the WRO process, the importer may also file a protest 180 days after CBP makes its final determination regarding the exclusion.

CBP Listening Session: A Higher Burden of Evidence 

On Tuesday, May 24, 2022, CBP provided information regarding the publication of guidance and enforcement of the UFLPA:

  • CBP Publication of Guidance. CBP’s guidance regarding its enforcement of the rebuttable presumption and the UFLPA is scheduled to be published the week of May 30.
  • DHS Publication of Guidance. DHS guidance will be published on or about June 21, 2022, which will include information relating to supply chain due diligence, importer guidance, and the entity lists.
  • Clear and Convincing Evidence Required to Rebut the Presumption that Merchandise was Produced with Forced Labor. It was confirmed that the UFLPA will have a much higher burden of evidence required to rebut the presumption that merchandise was produced with forced labor than that of a WRO. Any exception to the rebuttable presumption must be reported to Congress, and thus the level of evidence that will be required to overcome the rebuttable presumption is very high. As a practical matter, it appears that very few detained entries will be released. Importers are advised to start conducting due diligence on supply chains in order to ensure that they will be able to obtain documentation should merchandise be detained once the rebuttable presumption goes into effect. Importantly, products that are subject to an existing WRO from Xinjiang will now be enforced under the UFLPA process instead of the WRO process.
  • Evidence Required if Merchandise is Detained. The forthcoming guidance will set forth information regarding how an importer may meet the exception to the rebuttable presumption and to demonstrate that merchandise was not produced with forced labor, by meeting the following three criteria:
    • Demonstrate compliance with the Forced Labor Enforcement Task Force/DHS strategy;
    • Demonstrate compliance with CBP’s guidance and any inquiries that CBP raises; and
    • Provide clear and convincing evidence that the supply chain in question is free of forced labor.
  • Binding Rulings. Importers may apply for a binding ruling to confirm or request an exception to the rebuttable presumption under the UFLPA. Although CBP is still finalizing the process for importers to apply for a binding ruling, importers would be required to prove by clear and convincing evidence that merchandise is not produced with forced labor. If the ruling is granted, it applies to future shipments for the specific supply chain in question.
  • Known Importer Letters and Detention Notices. Going forward, CBP will not issue Known Importer letters, and CBP will notify importers that merchandise is subject to the UFLPA through the issuance of detention notices.
  • Detention of Merchandise. If goods are detained by CBP because they are suspected of having a nexus to Xinjiang Uyghur Autonomous Region (XUAR) of the People’s Republic of China (PRC), importers may either provide clear and convincing evidence that merchandise was not produced with forced labor or export the products. If detained products that fall under the UFLPA are comingled with other products that are not subject to the UFLPA, importers may request the segregation of the merchandise that is not subject to the UFLPA.
  • Chain of CBP Review for Importer Submissions Relating to Detained Merchandise. Chain of CBP review for the request of an exception to the rebuttable presumption has not been finalized yet. However, importers will be required to submit evidence that rebuts the presumption that merchandise was produced with forced labor to the applicable CBP Port Director. For the moment, the CBP Commissioner is the final individual who can ultimately make an exception to the rebuttable presumption, but CBP is deciding if it will delegate this responsibility to any additional persons.

Upcoming CBP Informational Webinars

CBP will be holding three webinar sessions, all covering the same material, to discuss and review its guidance relating to the UFLPA. The dates of the webinars and the registration links are listed below.

© 2022 ArentFox Schiff LLP

How to Create an Impactful and Authentic Pride Month Social Media Campaign for Your Company

June is Pride Month, which offers companies of all kinds a unique opportunity to celebrate, show support and raise awareness for LGBTQIA+ rights on their social media channels.

Businesses of all kinds and sizes can get involved, raise awareness and give back for Pride Month regardless of their budget or reach.

While Pride is most definitely a celebration, an impactful Pride campaign should include education, awareness, and center around people.

Celebrating Pride and showing your support for the LGBTQIA+ community is not a trend— and it shouldn’t be treated as such.

Here’s how to create and implement an impactful and genuine Pride Month social media campaign at your company.

The Do’s and Don’ts of Pride Month social media planning

Before you dive head-first into planning your corporate Pride initiatives, it’s important to get a wide range of employees involved in the planning process.

If your company has an LGBTQIA+ affinity group or diversity committee, collaborate with them or if you don’t have a group, consider convening a committee of employee volunteers of diverse backgrounds to serve as a sounding board and provide their input as your plans begin to take shape.

Please note: these volunteers should be compensated for their time and efforts in some meaningful way (vacation time, bonuses, gift cards, etc.). While it may be too late to do this for this year’s campaign, activate or assemble the group now for your 2023 initiative.

Don’t: Exploit social initiatives and conversations as a means to reach business goals.

Celebrating Pride and showing your support for the LGBTQIA+ community is not a trend— and it shouldn’t be treated as such.

If you’re simply posting rainbow-branded imagery (rainbow washing) during the month or posting about your commitment to the cause without having any real initiatives or actions to back it up, you’re just paying lip service to and perhaps exploiting yet another social initiative. Make sure your company can really walk the walk before you talk the talk. Performative allyship can backfire, alienating your employees, your clients, recruits, and others.

Remember that everyone (employees, clients, and the general public) is watching what you post online, even if they don’t actually like or comment on it.

Do: Ask yourself why you’re supporting this initiative and have a clear purpose.

Before publishing Pride-related content, ask yourself, are we actually adding value to this conversation? What are we hoping to gain from inserting ourselves into this conversation? What are our motivations? Is our company an actual safe space or inclusive environment that includes active and engaged allies?

Remember, Pride Month should not be about your business goals. You also don’t have to have accomplished all of your LGBTQIA+ related inclusion goals to commemorate Pride, but your efforts should be more than surface level.

Do: Support LGBTQIA+ initiatives year-round.

If you don’t already take steps to support the LGBTQIA+ community year-round, take the opportunity to discuss doing so with management and staff before Pride. June is only one month out of the year, a month where it’s arguably the “most acceptable” to show support for the LGBTQIA+ community. To be a true ally, it’s important to show this level of support year-round. Work to ensure that your company’s policies and practices are inclusive and address the needs of your LGBTQIA+ employees.

In addition to internally focused actions, consider how your true commitment can be reflected externally. There are many organizations to which you can donate and volunteer. Solicit voluntary feedback from your LGBTQIA+ employees and clients to ensure that they feel involved and included in the process.

Do: Educate yourself and those around you on the origins and history of Pride Month.

Pride Month has a rich, political history that companies often fail to understand and recognize as they participate in Pride Month. Pride Month is celebrated in June to honor the 1969 Stonewall Uprising in Manhattan — a tipping point for the Gay Liberation Movement in the United States.

Not only is Pride a time to recognize the progress that’s been made since the Stonewall Riots, but it’s just as important to acknowledge how far we still must go as a society, particularly considering recent efforts to overturn or narrow the progress that has been made. A successful Pride campaign should have education and awareness at its core.

Do: Make education and awareness the core of your campaign.

Ideas for content for your Pride Campaign can include educating your followers on the meaning behind the Pride flag, using posts to tell the history of the Pride flag, and what Pride means to your employees, and run their answers in Q&A posts.

Another idea is to create posts to help followers better understand Pride Month and provide resources to help people better educate themselves on the cause and support those of the LGBTQIA+ community.

In addition, spotlighting members of the LGBTQIA+ community is a helpful way to educate your followers and amplify the contributions of individuals.

No matter what you choose, create a campaign that is rooted in improving awareness and education amongst your community.

Do: Let inclusivity be at the core of your all campaigns.

Inclusivity should be an active mission as part of your Pride campaign, and for your future marketing efforts too. Aim to have better representation on social media for your community — that means including people of all marginalized or otherwise underrepresented voices.

If you really want to reach, represent, and support your diverse community, it’s time to make active shifts towards better inclusive marketing year-round. It’s less about what you need to do for Pride today and instead, how are you supporting LGBTQIA+ folks year-round?

Do: Put your money (and time) where your mouth is.

Instead of treating Pride like a marketing campaign, put your efforts toward an activity that will positively impact the LGBTQIA+ community.

While monetary donations can be helpful, volunteering at community events or spending time with LGBTQIA+ advocacy organizations can be more impactful for your employees.

Consider hosting or taking part in LGBTQIA+ programming and donating to local charities doing work in your community to support LGBTQIA+ initiatives.

Do: Use the right hashtags to be discovered

  • #lgbtqia
  • #lgbtqpride
  • #lgbtqhumanrights
  • #equality
  • #pridemonth
  • #loveislove
  • #pride

Every organization that wants to support Pride on social media can find a way to do so, we challenge you to do it in a way that is authentic, genuine, and impactful to your brand and most importantly, to your employees and your clients. The world is watching you, so challenge yourself by doing the right thing.

This article was authored by Stefanie Marrone of Stefanie Marrone Consulting, and Paula T. Edgar, Esq, the CEO of PGE Consulting Group LLC, a firm that provides training and education solutions at the intersection of professional development and diversity, equity and inclusion. 

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

Copyright © 2022, Stefanie M. Marrone. All Rights Reserved.

Illinois Department of Labor Publishes Guidance for Employers Seeking Equal Pay Registration Certificate

Effective March 24, 2022, the Illinois Equal Pay Act (IEPA) was amended to require private businesses with more than 100 employees in Illinois to obtain an Equal Pay Registration Certificate (EPRC) by March 23, 2024, and every two years thereafter.

To apply for the EPRC, businesses must submit the following to the Illinois Department of Labor (IDOL): (1) a filing fee; (2) an equal pay compliance statement; (3) a copy of the employer’s most recently filed EEO-1 report; and (4) a list of employees separated by gender and the race and ethnicity categories as reported in the employer’s most recently filed EEO-1 report, and the total wages paid to each employee during the past calendar year.

The IDOL recently updated its Frequently Asked Questions (FAQs) for the EPRC, addressing, among other things, the application and submission processes, fee requirements, recertification, publicly available data, and penalties for employer noncompliance.  Here are key takeaways:

  • All employees based in Illinois, including those working remotely, should be included in the total employee count for reporting purposes. An employer’s total employee count includes the total number of people employed who worked in or were based out of Illinois on December 31 of the 12-month calendar year immediately prior the year the employer is required to submit an EPRC application.
  • For reporting purposes, “wages” means any compensation paid to an employee by an employer pursuant to an employment contract or agreement between the two parties, including wages, salaries, earned commissions, earned bonuses, stocks and ownership shares. This does not include retirement health insurance benefits, or other fringe benefits.
  • If an employer’s submitted wage data in its EPRC application shows that the employer is paying unequal wages to male and female employees or to African-American and non-African American employees, the IDOL may initiate its own investigation pursuant to Sections 10(a) and 15(c) of the IEPA and Section 320.200 of the IEPA regulations.
  • Before any fines may be imposed for a violation of the IEPA, the IDOL will provide notice to an employer that violates the IEPA and inadvertently fails to file an initial EPRC application or recertification that they have 30 calendar days to submit the application or recertification. If the employer fails to do so, it shall be fined up to $10,000.
  • An employer that falsifies or misrepresents data on an EPRC application faces suspension or revocation of the EPRC and civil penalties up to $10,000.
  • Current employees subject to the IEPA may request anonymized data from the IDOL regarding their job classification or title and the pay for that classification.

Illinois employers should audit their pay practices to ensure that any differences in wages amongst employees of similar job classifications are justified by legitimate, non-discriminatory reasons.

© 2022 Proskauer Rose LLP.
For more articles covering labor law updates, visit the NLR Labor & Employment section.

FTC Imposes Record-Setting $10M Fine Against Multistate Auto Dealer, Settling Charges of Racial Discrimination and Unauthorized Charges

On March 31, the FTC and Illinois State Attorney General announced a settlement of charges against a large, multistate auto dealer that allegedly discriminated against black consumers and included illegal junk fees for unwanted “add-ons” in customers’ bills.

Citing violations under the FTC Act, TILA, ECOA, and comparable Illinois laws, the complaint alleged that eight of the dealerships and two general managers of Illinois dealerships tacked on illegal fees for unwanted products to customers’ bills, often at the end of hours-long negotiations. These add-ons were allegedly buried in the consumers’ purchase contracts, which were sometimes upwards of 60-pages long, and sometimes added despite consumers specifically declining the products.

In addition, employees of the auto dealership also allegedly discriminated against black consumers during the process of financing vehicle purchases.  On average, black customers at the dealerships were charged $190 more in interest and paid $99 more for similar add-ons than comparable non-Latino white customers.

The multistate dealer will have to pay $10 million to settle the lawsuit per the stipulated order, the largest monetary judgment ever required in an FTC auto lending case.

Putting it into Practice:  From FTC Chair Lina Khan and Commissioner Rebecca Slaughter, the FTC appears poised to allege violations of the FTC Act’s prohibition on unfair acts or practices in light of discrimination found to be based on disparate treatment or having a disparate impact.  Their statement discusses how discriminatory practices can be evaluated under the FTC’s three-part unfairness test and concludes that such conduct fits squarely into the kind of conduct that can be addressed by the FTC’s unfairness prong.  This joint statement echoes similar announcements by CFPB Director Chopra about the use of unfairness to combat discrimination more broadly (we discussed Director Chopra’s statement and updates to the CFPB’s exam procedures in a recent Consumer Finance and FinTech blog post here).

The size of the financial judgment in this case underscores the seriousness with which the FTC takes discriminatory practices in consumer credit transactions entered into by entities over which they have authority, which includes auto dealerships.  As the FTC becomes increasingly focused on enforcement of key laws to protect consumers against discriminatory conduct, companies should use these latest agency pronouncements as a reason to be on high alert for potential discriminatory outcomes in their business activities, even if unintentional.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

Judge Ketanji Brown Jackson Confirmed to U.S. Supreme Court

Judge Ketanji Brown Jackson will become the first Black woman and the third Black Justice to serve on the U.S. Supreme Court.

With support of only a handful of Republican senators, a Senate majority voted to confirm Judge Jackson’s nomination to the Supreme Court, 53-47, on April 7, 2022. Judge Jackson will fill the vacancy left by Justice Stephen Breyer, who will retire at the end of the Court’s current term.

During Judge Jackson’s distinguished legal career, she served as a federal district judge from 2013 to 2021, a judge on the U.S. Court of Appeals for the D.C. Circuit from 2021 to 2022, assistant special counsel and then vice chair on the U.S. Sentencing Commission, a federal public defender, and a private practice attorney.

Despite bringing a new perspective to the bench, Judge Jackson is unlikely to affect the current composition of the Court. Her decisions as a district and appellate judge suggest that, like Justice Breyer, she takes a pragmatic approach to the law.

Judge Jackson’s legal methodology will become apparent shortly after she takes her seat for the 2022-2023 term, which begins on October 3, 2022. The Court is scheduled to hear oral arguments on three cases touching on contentious issues during Judge Jackson’s first term. Judge Jackson, who serves on Harvard University’s board of overseers, has stated she will recuse herself from hearing Students for Fair Admissions, Inc. v. President & Fellows of Harvard, a case involving the use of race in college admissions. However, she will participate in 303 Creative LLC v. Elenis, which asks the Court to decide on the constitutionality of a Colorado state law that prohibits business owners from refusing to provide service to people on the basis of sex, including sexual orientation and gender identity. Judge Jackson also will participate in the Court’s hearing of Merrill v. Millgan, which asks the Court to weigh in on whether Alabama’s proposed congressional district plan violates Section 2 of the Voting Rights Act of 1965.

Judge Jackson is expected to be sworn in before the start of the 2022-2023 term.

Jackson Lewis P.C. © 2022

HIPAA Enforcement Continues Under Right of Access Initiative

On March 28, 2022, the Department of Health and Human Services (HHS) Office for Civil Rights (OCR) announced the resolution of two additional cases as part of OCR’s HIPAA Right of Access Initiative.

The Right of Access Initiative was launched by OCR in 2019 “to support individuals’ right to timely access their health records at a reasonable cost under the HIPAA Privacy Rule” as explained by OCR. In the March 28 announcement, OCR indicated its continuing commitment to enforce compliance with the HIPAA Rules, including the “foundational” Right of Access provision. With the two most recent cases, there have now been 27 investigations and settlements under the Right of Access Initiative (see full chart below).

Nearly all of the investigations in the Right of Access Initiative involve a single individual unable to obtain a copy of some or all of their protected health information from a health care provider or to do so within the timeframe required or in accordance with fees permitted by the HIPAA Privacy Rule. In some cases, additional issues found during the investigation, such as failure to have conducted a HIPAA risk assessment or lack of HIPAA policies, are part of the settlement.  In all cases, in addition to the monetary penalty, the settlement has included a Corrective Action Plan imposing various obligations, such as policy development, training, and mandatory reporting to OCR.

The Right of Access Initiative remains one of the most active areas of HIPAA enforcement. In its most recent Annual Report to Congress on HIPAA Privacy, Security, and Breach Notification Rule Compliance, OCR noted that right of access was the third most common issue of complaints resolved. Moreover, the Right of Access Initiative coordinates with the ONC 2020-2025 Federal HIT Strategic Plan and the goal of “Providing patients and caregivers with more robust health information.” It is a core tenant of the Federal HIT Strategic Plan that access to health information will “better support person-centered care and patient empowerment.”

©2022 Epstein Becker & Green, P.C. All rights reserved.

Ohio Court of Appeals Affirms $30 Million Libel Verdict Against Oberlin College

The Ohio Court of Appeals affirmed a judgment in excess of $30,000,000 against Oberlin College, holding that Oberlin was responsible for libelous statements made during the course of a student protest. Gibson Bros., Inc. v. Oberlin College, 2022 WL 970347 (Ohio Ct. App. March 31, 2022). The court’s rationale, if followed elsewhere, could lead to significantly broader institutional and corporate liability for statements by students and employees.

The case arose out of an incident in which an employee of the Gibson Brothers Bakery and Food Mart accused a black student of shoplifting, and then pursued and held the student until police arrived. Over the next few days, large groups of student protestors gathered outside the bakery and among other things handed out a flyer describing the incident as an “assault,” and stating that the bakery had a “long account of racial profiling and discrimination.” The day following the incident, the student senate passed a resolution calling for a boycott. It likewise described the incident as an assault on the student and stated that the bakery had a “history of racial profiling and discriminatory treatment of students….” The resolution was emailed to the entire campus and posted on the senate bulletin board, where it remained for over a year. The court found the statements to be factually untrue, because the student pled guilty to the shoplifting charge and admitted racial profiling did not occur, and the College presented no evidence of any past racial profiling or instances of discrimination at the bakery.

The court acknowledged that there was no evidence that Oberlin participated in drafting the flyer or the student senate resolution. Instead, the court found Oberlin liable on the theory that one who republishes a libel, or who aids and abets the publication of a libelous statement, can be liable along with the original publisher. As to the flyer, the court cited the following as evidence sufficient to support a jury finding that Oberlin had either republished or aided and abetted its publication:

  • Oberlin’s Dean of Students attended the protests as part of her job responsibilities;
  • the Dean of Students handed a copy of the flyer to a journalist who had not yet seen it and told students they could use a college copier to make more copies of the flyer;
  • the associate director of a multicultural resource center was seen carrying a large number of flyers, which he appeared to be distributing to others to redistribute to the public; and
  • the College provided a warming room with coffee and pizza at a site near the protests.

As to the student senate resolution, the court cited:

  • the senate was an approved organization;
  • the College created the senate’s authority to adopt and circulate the resolution;
  • the senate faculty moderator was the Dean of Students; and
  • despite having knowledge of the content of the resolution, neither the President nor the Dean of Students took any steps to require or encourage the student senate to revoke the resolution or to remove it from the bulletin board.

The court then held that despite the publicity the bakery received once the dispute arose, at the time of the protests and resolution the bakery and its owners were private persons, not public figures. Thus, the bakery only had to show that Oberlin had been negligent, rather than that it acted with reckless indifference as to the truth or falsity of the statements published.

Particularly in these polarized times, university administrators should be aware of and take steps to manage legal risks when external disputes become the subject of campus discussion and activism. Student organizations, faculty and administrators should be reminded that, to the extent they participate in protests or other public commentary outside their official roles, they should make clear they are acting for themselves and not the institution. Institutional responses to causes espoused by students or faculty need to be carefully vetted to assure that any factual assertions about third parties are accurate.

© 2022 Miller, Canfield, Paddock and Stone PLC

The X Box: EEOC Announces Addition of Nonbinary Gender Option to Discrimination Charge

In recognition of Transgender Day of Visibility, today, the EEOC announced that it would be providing members of the LGBTQI+ community the option to select a nonbinary “X” gender marker when completing the voluntary self-identification questions that are traditionally part of the intake process for filing a charge of discrimination.

Specifically, in an effort to promote greater equity and inclusion, the EEOC will add an option to mark “X” during two stages of the intake and charge filing process. This addition will be reflected in the EEOC’s voluntary demographic questions relating to gender in the online public portal, which individuals use to submit inquires regarding the filing of a charge of discrimination, as well as related forms that are used in lieu of the online public portal. The nonbinary “X” gender marker will also be included in the EEOC’s modified charge of discrimination form, which will also include “Mx” in the list of prefix options.

Additionally, the EEOC will incorporate the CDC and NCHS’s proposed definition of “X,” which provides as follows: (1) “unspecified,” which promotes privacy for individuals who prefer not to disclose their gender identity; and (2) “another gender identity,” which promotes clarity and inclusion for those who wish to signify that they do not identify as male or female.

The EEOC’s announcement came shortly after the White House released a detailed Fact Sheet highlighting the steps the federal government has taken to address equality and visibility for Transgender Americans.

©2022 Roetzel & Andress

Regulation by Definition: CFPB Broadens Definition of “Unfairness” to Rein in Discrimination

In a significant move, the CFPB announced on March 16revision to its supervisory operations to address discrimination outside of the traditional fair lending context, with future plans to scrutinize discriminatory conduct that violates the federal prohibition against “unfair” practices in such areas as advertising, pricing, and other areas to ensure that companies are appropriately testing for and eliminating illegal discrimination.  Specifically, the CFPB updated its Exam Manual for Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs) noting that discrimination may meet the criteria for “unfairness” by causing substantial harm to consumers that they cannot reasonably avoid.

With this update, the CFPB intends to target discriminatory practices beyond its use of the Equal Credit Opportunity Act (ECOA) – a fair lending law which covers extensions of credit – and plans to also enforce the Consumer Financial Protection Act (CFPA), which prohibits UDAAPs in connection with any transaction for, or offer of, a consumer financial product or service.  To that end, future examinations will focus on policies or practices that, for example, exclude individuals from products and services, such as “not allowing African-American consumers to open deposit accounts, or subjecting African-American consumers to different requirements to open deposit accounts” that may be an unfair practice where the ECOA may not apply to this particular situation.

The CFPB notes that, among other things, examinations will (i) focus on discrimination in all consumer finance markets; (ii) require supervised companies to include documentation of customer demographics and the impact of products and fees on different demographic groups; and (iii) look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA.

In a statement accompanying this announcement, CFPB Director Chopra stated that “[w]hen a person is denied access to a bank account because of their religion or race, this is unambiguously unfair . . . [w]e will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance.”

Putting it Into Practice:  This announcement expands the CFPB’s examination footprint beyond discrimination in the fair lending context and makes it likely that examiners will assess a company’s anti-discrimination programs as applied to all aspects of all consumer financial products or services, regardless of whether that company extends any credit.  By framing discrimination also as an UDAAP issue, the CFPB appears ready to address bias in connection with other kinds of financial products and services.  In particular, the CFPB intends to closely examine advertising and marketing activities targeted to consumers based on machine learning models and any potential discriminatory outcomes.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

Broad Majority Decisions in Terrorist Torture and Abortion Law Cases Resolve Important State Secrets and Intervention Procedural Issues: SCOTUS Today

The Court has decided two important cases today, United States v. Zubaydah, upholding the government’s assertion of the state secrets privilege and rejecting the al Qaeda terrorist leader’s discovery request for information concerning his torture by the CIA, and Cameron v. EMW Women’s Surgical Center, P.S.C., allowing the intervention of the Kentucky attorney general to assume the defense of the state’s abortion law after the official who had been defending the law decided not to seek further review. Both cases are, at root, about significant issues of public interest and policy—the torture of terrorists and restrictive abortion policies—but neither opinion resolves any such question. Indeed, the lessons learned from each of these cases are essentially procedural, and though the outcomes are determined by significant margins, the alliances of Justices on the multiple opinions published are also instructive.

Zubaydah has been among the most closely watched cases on the Court’s docket. Full disclosure: I am a board member of the Center for Ethics and the Rule of Law at the University of Pennsylvania, which has advocated for the closing of the Guantanamo Bay Naval Base in Cuba, where Zubaydah is detained, and for the rejection of privilege claims as to non-classified information concerning torture. Though I am not surprised by the outcome in the case, it is contrary to what many human rights organizations have been advocating. The admixtures of Justices also provide interesting insights as to how they approach matters of privilege and national security.

In what likely will be one of the last majority opinions written by retiring Justice Stephen Breyer, and subject to various concurrences by Justices Thomas, Kagan, Kavanaugh, and Barrett, the Court reversed the Ninth Circuit and upheld the government’s assertion of state secrets privilege to deny Zubaydah’s attempt to subpoena two CIA contractors from whom he sought to obtain information for use in litigation in Poland concerning his torture at an alleged “black site” in that country. The state secrets privilege allows the government to bar the disclosure of information that, were it revealed, would harm national security. United States v. Reynolds, 345 U. S. 1, 6–7 (1953). While the Ninth Circuit had accepted much of the government’s claim, it concluded that the privilege did not cover information about the location of the detention site, which the court believed had already been publicly disclosed. Indeed, it is clear from the record in the case that there has been substantial public discussion of such a detention site in Poland. However, although the government has concluded that the “enhanced interrogation” to which Zubaydah had been subjected constituted torture, the fact of its location in Poland has never been formally confirmed by the United States. The state secrets privilege permits the government to prevent disclosure of information when that disclosure would harm national security interests, such as “the risk of revealing covert operatives, organizational structure and functions, and intelligence-gathering sources, methods, and capabilities.” Here, Justice Breyer, in a textbook case displaying the essential role that he has played on the Court in pragmatically fashioning majorities to form consensus opinions in controversial cases, accepted the view that verifying the existence, or non-existence, of a CIA black site in Poland, falls within the state secrets privilege because confirmation or denial of the site’s existence and location, even if such information has already been made public through unofficial sources, would harm relations among foreign intelligence services vital to U.S. interests. The majority also noted that the locational information is not essential to the case that Zubaydah is attempting to make, but it also rejected the remand to consider issues of Zubaydah’s treatment that Justices Kagan, concurring, and Justice Gorsuch (interestingly, joined by Justice Sotomayor), dissenting, would have allowed. In a case where there is virtually no disagreement among the Justices as to what the law is, the decision comes down to a procedural formulation that Justice Breyer loosely compares to applying exemptions under the Freedom of Information Act. In any event, the majority held that, as an objective matter, the government’s assertions of privilege and national security risk satisfied its burden of responding to the demand for information.

Notwithstanding the great public interest that surrounds the debate and litigation concerning the efforts of various state legislatures to restrict abortion and to obtain the reversal or narrowing of Roe v. Wade, the Court’s 8-1 majority (only Justice Sotomayor dissented) held only that the Court would not adopt an arbitrary claims-processing rule barring a non-party intervener from taking over an appeal, especially under the conditions presented here. Having first concluded that neither a jurisdictional requirement nor a mandatory claims-processing rule barred consideration of the attorney general’s motion, the Court concluded that no statute or rule restricts the jurisdiction of a court of appeals or provides a general standard to apply in deciding whether intervention on appeal should be allowed. The one passing reference to intervention made in the Federal Rules of Appellate Procedure only concerns the review of agency action. Accordingly, with “respondents cit[ing] no provision that deprives a court of appeals of jurisdiction in the way they suggest, and no such supporting language can be found in 28 U. S. C. §2107, Federal Rules of Appellate Procedure 3 and 4, or any other provision of law. . . [the] Court refuses to adopt what would essentially be a categorical claims-processing rule barring consideration of the attorney general’s motion. When a non-party enters into an agreement to be bound by a judgment in accordance with the agreement’s terms, it is hard to see why the non-party should be precluded from seeking intervention on appeal if the agreement preserves that opportunity. Here, the attorney general reserved ‘all rights, claims, and defenses . . . in any appeals arising out of this action.’ That easily covers the right to seek rehearing en banc and the right to file a petition for a writ of certiorari.”

Justice Sotomayor’s dissent, like the cheese, stands alone. She argues that every case should have a certain end point, and one should be applied here. One wonders if she would entertain a similar opinion in a case like this but where the plaintiffs are appealing. In any event, all of the other Justices are unified by the absence of any textual limitation on their jurisdiction to entertain a motion to intervene on appeal and the reasonable justification made for it by the state attorney general. Where Justice Alito found a constitutional basis for this conclusion and Justice Kagan would only have relied upon statutory interpretation, the vast majority of the Court agreed on the procedural regime adopted irrespective of the fact that there likely would be considerable disagreement about the constitutionality of the statute at issue in the underlying litigation.

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