The SEC Continues Its War On Crime Victims

More than a decade ago, I expressed concern when the Securities and Exchange Commission charged Koss Corporation and one its CEO, Mr. Koss, with filing materially false financial statements after the corporation had discovered that it had been the victim of employee embezzlement. In the post, I decried the SEC’s decision to punish the victims of crime:

The SEC’s decision to prosecute this case is troubling. Surely, neither Koss Corporation nor Mr. Koss intended or wanted to be the victim of a criminal embezzlement. It is also hard to see how the shareholders’ benefited from the company incurring the legal costs associated with defending and settling the SEC investigation. While the SEC did force the return of bonus compensation, the injunctive relief ordering the company and Mr. Koss not to do this again strikes me as silly. Does it really make sense for the court to order a company not to be the victim of a theft?

I was therefore heartened by the recent statement by Commissioners Hester Peirce and Mark Uyeda on the SEC’s recent settlement of administrative proceeding against R.R. Donnelly & Sons, Co.:

Also concerning is the Commission’s decision to stretch the law to punish a company that was the victim of a cyberattack. While an enforcement action may be warranted in some circumstances, distorting a statutory provision to form the basis for such an action inappropriately amplifies a company’s harm from a cyberattack.

According to the SEC’s press release, R.R. Donnelly & Sons, Co. “cooperated throughout the investigation, including by reporting the cybersecurity incident to staff prior to filing a disclosure of the incident, by providing meaningful cooperation that helped expedite the staff’s investigation, and by voluntarily adopting new cybersecurity technology and controls”. Nonetheless, the SEC thought a just resolution required payment of a $2.125 million civil penalty for transfer to the U.S. Treasury. I remain unconvinced that the expropriation of millions of dollars from a crime victim to the U.S. Treasury protects, much less helps, the shareholders of R.R. Donnelly & Sons, Co.

© 2010-2024 Allen Matkins Leck Gamble Mallory & Natsis LLP
For more news on SEC Punishing Crime Victims, visit the NLR Securities SEC 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.

Junk Science or Relevant Evidence: Supreme Court Says Experts May Now Aid in Determining Criminal Intent

In criminal cases, oftentimes the most significant element in dispute is whether the defendant harbored the intent to “knowingly” or “willfully” violate the criminal law at issue. If the defendant denies that he knew what he was doing was illegal, the government must prove beyond a reasonable doubt that the defendant had the required mens rea — or mental state — to violate the law. The government does this by presenting circumstantial evidence that it argues supports a reasonable inference that the defendant had the required mental state to violate the law. And defense lawyers test that evidence largely on cross examination and by presenting counterevidence.

The more complicated the law — think tax, securities, or federal election conduit contribution laws — the riskier it is that a person can be held criminally liable for what seemed like innocent or at least not illegal conduct. In these cases, experts may be called to testify about how a certain industry or regulatory regime is structured or how it operates, and the parties can argue to the jury whether the facts of the case circumstantially prove the reasonable inference that the defendant knowingly or willfully violated a criminal law related to that industry or regulatory regime. But Federal Rule of Evidence 704(b) prohibits an expert from stating an opinion about whether a criminal defendant “did or did not have the mental state or condition that constitutes an element of the crime charged or of a defense. Those matters are for the trier of fact alone.” FRE 704(b) was adopted in response to President Ronald Reagan’s shooter, John Hinkley, being found not guilty by reason of insanity after competing experts offered opinions on the ultimate issue of Hinkley’s sanity. So FRE 704(b) now requires that a jury alone must decide whether the defendant intended to commit a crime. And the answer to this question is often the difference between freedom or years in prison.

In Diaz v. United States, ___ S. Ct. ___, 2024 WL 3056012 (June 20, 2024), the U.S. Supreme Court ruled that FRE 704(b) does not preclude expert testimony about the likelihood that the defendant intended to commit a crime based on the defendant’s membership in a particular group. Diaz was charged with “knowingly” transporting drugs across the U.S.-Mexican border. She argued the “blind mule” defense: she did not know there were drugs in the car, therefore she did not knowingly transport them. The government called as an expert a Homeland Security Investigations Special Agent to testify that “in most circumstances, the driver knows they are hired to take drugs from point A to point B.” The Agent said that drug-trafficking organizations would expose themselves to too much risk by using unknowing couriers. The Agent admitted on cross examination that he was not involved in Diaz’s case, and that drug-trafficking organizations sometimes use unknowing couriers. The jury found Diaz guilty and she was sentenced to 84 months in prison.

Diaz argued that the Agent’s expert testimony violated FRE 704(b)’s proscription of expert’s providing opinions about whether a defendant did or did not have the required state of mind to violate the law. The Court affirmed the Ninth Circuit’s opinion that the Agent’s expert testimony did not violate FRE 704(b) because the expert “did not express an opinion about whether Diaz herself knowingly transported [drugs].” Instead, he testified that “most” drug couriers know they are hired to drive drugs from point A to point B. “That opinion does not necessarily describe Diaz’s mental state. After all, Diaz may or may not be like most drug couriers.” The Court acknowledged that it would have violated Rule 704(b) if the Agent had testified that “all” drug couriers know they are transporting drugs, since Diaz would be included in that drug courier group thus making it an opinion about Diaz’s mental state.

The Court said that FRE 704(b) only proscribes expert opinions “in a criminal case that are about a particular person (‘the defendant’) and a particular ultimate issue (whether the defendant has ‘a mental state or condition’ that is ‘an element of the crime charged or of a defense.’).” Because the Agent “did not give an opinion ‘about whether’ Diaz herself ‘did or did not have a mental state or condition that constitutes an element of the crime charged or of a defense,’ his testimony did not violate Rule 704(b).”

In her concurrence, Justice Ketanji Brown Jackson inferred that “what’s good for the goose is good for the gander” when she wrote that criminal defendants were now free to offer expert testimony “‘on the likelihood’ that the defendant had a particular mental state, ‘based on the defendant’s membership in a particular group.’” For example, “Diaz could have offered expert testimony on the prevalence and characteristics of unknowing drug couriers.” Justice Jackson said that the Diaz opinion will now allow psychiatrists to testify as experts “to tell the jury that when people with schizophrenia as severe as a defendant’s commit acts of violence, it is generally because they do not appreciate the wrongfulness of their conduct.” This would not create a “spectacle of dueling experts on the defendant’s mental state,” Justice Jackson wrote, but instead “could help jurors better understand a defendant’s condition and thereby call into question a mens rea that might otherwise be too easily assumed…given the biases, stereotypes, and uneven knowledge that many people have about mental health conditions.”

Justice Neil Gorsuch wrote a terse dissent that was joined by Justices Sonia Sotomayor and Elena Kagan. The dissent said the Agent’s probabilistic assessment that “most” couriers know they are transporting drugs violated FRE 704(b) because it was a statement “about whether the defendant” had a “mental state . . . that constitutes an element of the crime charged.” The word “about” is defined as “concerning, regarding, with regard to, with reference to; in the matter of.” And according to the dissent, expert testimony about what most drug couriers know was testimony about the likelihood of what Diaz knew. Justice Gorsuch warned of “warring experts” on the issue of a defendant’s intent, which he says will make the criminal justice system less reliable as lawyers may try and find probabilistic expert opinions on intent rather than doing the hard work of gathering circumstantial evidence and arguing about what that evidence reasonably infers about a defendant’s intent.

© 2024 Miller, Canfield, Paddock and Stone PLC

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.

Confused About the FCC’s New One-to-One Consent Rules– You’re Not Alone. Here Are Some FAQs Answered For YOU!

Heard a lot about what folks are concerned about in the industry. Still seems to be a lot of confusion about it. So let me help with some answers to critical questions.

None of this is legal advice. Absolutely critical you hire a lawyer–AND A GOOD ONE–to assist you here. But this should help orient.

What is the new FCC One-to-One Ruling?

The FCC’s one-to-one ruling is a new federal regulation that alters the TCPA’s express written consent definition in a manner that requires consumers to select each “seller”–that is the ultimate good or service provider–the consumer chooses to receive calls from individually.

The ruling also limits the scope of consent to matters “logically and topically” related to the transaction that lead to consent.

Under the TCPA express written consent is required for any call that is made using regulated technology, which includes autodialers (ATDS), prerecorded or artificial voice calls, AI voice calls, and any form of outbound IVR or voicemail technology (including ringless) using prerecorded or artifical voice messages.

Why Does the FCC’s New One-to-One Ruling Matter?

Currently online webforms and comparison shopping websites are used to generate “leads” for direct to consumer marketers, insurance agents, real estate agents, and product sellers in numerous verticals.

Millions of leads a month are sold by tens of thousands of lead generation websites, leading to hundreds of millions of regulated marketing calls by businesses that rely on these websites to provide “leads”–consumers interested in hearing about their goods or services.

Prior to the new one-to-one ruling website operators were free to include partner pages that linked thousands of companies the consumer might be providing consent to receive calls from. And fine-print disclosures might allow a consumer to receive calls from business selling products unrelated to the consumer’s request. (For instance a website offering information about a home for sale might include fine print allowing the consumer’s data to be sold to a mortgage lender or insurance broker to receive calls.)

The new one-to-one rule stop these practices and requires website operators to specifically identify each good or service provider that might be contacting the consumer and requires the consumer to select each such provider on a one by one basis in order for consent to be valid.

Will the FCC’s One-to-One Ruling Impact Me?

If you are buying or selling leads, YES this ruling will effect you.

If you are a BPO or call center that relies on leads– YES this ruling will effect you.

If you are a CPaaS or communication platform–YES this ruling will effect you.

If you are a telecom carrier–YES this ruling will effect you.

If you are lead gen platform or service provider–YES this ruling will effect you.

If you generate first-party leads–Yes this ruling will effect you.

When Does the Rule Go Into Effect?

The ruling applies to all calls made in reliance on leads beginning January 27, 2025.

However, the ruling applies regardless of the date the lead was generated. So compliance efforts need to begin early so as to assure a pipeline of available leads to contact on that date.

In other words, all leads NOT in compliance with the FCC’s one-to-one rule CANNOT be called beginning January 27, 2025.

What Do I have to Do to Comply?

Three things:

i) Comply with the rather complex, but navigable new one-to-one rule paradigm. (The Troutman Amin Fifteen is a handy checklist to assist you);

ii) Assure the lead is being captured in a manner that is “logically and topically” related to the calls that will be placed; and

iii) Assure the caller has possession of the consent record before the call is made.

© 2024 Troutman Amin, LLP
For more news on FCC Consent Regulations, visit the NLR Communications, Media, & Internet section.

The Privacy Patchwork: Beyond US State “Comprehensive” Laws

We’ve cautioned before about the danger of thinking only about US state “comprehensive” laws when looking to legal privacy and data security obligations in the United States. We’ve also mentioned that the US has a patchwork of privacy laws. That patchwork is found to a certain extent outside of the US as well. What laws exist in the patchwork that relate to a company’s activities?

There are laws that apply when companies host websites, including the most well-known, the California Privacy Protection Act (CalOPPA). It has been in effect since July 2004, thus predating COPPA by 14 years. Then there are laws the apply if a company is collecting and using biometric identifiers, like Illinois’ Biometric Information Privacy Act.

Companies are subject to specific laws both in the US and elsewhere when engaging in digital communications. These laws include the US federal laws TCPA and TCFAPA, as well as CAN-SPAM. Digital communication laws exist in countries as wide ranging as Australia, Canada, Morocco, and many others. Then we have laws that apply when collecting information during a credit card transaction, like the Song Beverly Credit Card Act (California).

Putting It Into Practice: When assessing your company’s obligations under privacy and data security laws, keep activity specific privacy laws in mind. Depending on what you are doing, and in what jurisdictions, you may have more obligations to address than simply those found in comprehensive privacy laws.

Copyright © 2024, Sheppard Mullin Richter & Hampton LLP.
For more on Privacy Laws, visit the NLR Communications Media Internet section.