American Privacy Rights Act Advances with Significant Revisions

On May 23, 2024, the U.S. House Committee on Energy and Commerce Subcommittee on Data, Innovation, and Commerce approved a revised draft of the American Privacy Rights Act (“APRA”), which was released just 36 hours before the markup session. With the subcommittee’s approval, the APRA will now advance to full committee consideration. The revised draft includes several notable changes from the initial discussion draft, including:

  • New Section on COPPA 2.0 – the revised APRA draft includes the Children’s Online Privacy Protection Act (COPPA 2.0) under Title II, which differs to a certain degree from the COPPA 2.0 proposal currently before the Senate (e.g., removal of the revised “actual knowledge” standard; removal of applicability to teens over age 12 and under age 17).
  • New Section on Privacy By Design – the revised APRA draft includes a new dedicated section on privacy by design. This section requires covered entities, service providers and third parties to establish, implement, and maintain reasonable policies, practices and procedures that identify, assess and mitigate privacy risks related to their products and services during the design, development and implementation stages, including risks to covered minors.
  • Expansion of Public Research Permitted Purpose – as an exception to the general data minimization obligation, the revised APRA draft adds another permissible purpose for processing data for public or peer-reviewed scientific, historical, or statistical research projects. These research projects must be in the public interest and comply with all relevant laws and regulations. If the research involves transferring sensitive covered data, the revised APRA draft requires the affirmative express consent of the affected individuals.
  • Expanded Obligations for Data Brokers – the revised APRA draft expands obligations for data brokers by requiring them to include a mechanism for individuals to submit a “Delete My Data” request. This mechanism, similar to the California Delete Act, requires data brokers to delete all covered data related to an individual that they did not collect directly from that individual, if the individual so requests.
  • Changes to Algorithmic Impact Assessments – while the initial APRA draft required large data holders to conduct and report a covered algorithmic impact assessment to the FTC if they used a covered algorithm posing a consequential risk of harm to individuals, the revised APRA requires such impact assessments for covered algorithms to make a “consequential decision.” The revised draft also allows large data holders to use certified independent auditors to conduct the impact assessments, directs the reporting mechanism to NIST instead of the FTC, and expands requirements related to algorithm design evaluations.
  • Consequential Decision Opt-Out – while the initial APRA draft allowed individuals to invoke an opt-out right against covered entities’ use of a covered algorithm making or facilitating a consequential decision, the revised draft now also allows individuals to request that consequential decisions be made by a human.
  • New and/or Revised Definitions – the revised APRA draft’s definition section includes new terms, such as “contextual advertising” and “first party advertising.”. The revised APRA draft also redefines certain terms, including “covered algorithm,” “sensitive covered data,” “small business” and “targeted advertising.”
Copyright © 2024, Hunton Andrews Kurth LLP. All Rights Reserved.2154by: Hunton Andrews Kurth’s Privacy and Cybersecurity of Hunton Andrews Kurth
For more on the American Privacy Rights Act, visit the NLR Communications Media Internet section.

Deep-Sea Mining–Article 1: What Is Happening With Deep-Sea Mining?

Debate continues on whether the UAE Consensus achieved at COP28 represents a promising step forward or a missed opportunity in the drive towards climate neutral energy systems. However, the agreement that countries should “transition away from fossil fuels” and triple green power capacity by 2030 spotlights the need for countries to further embrace renewable power.

This series will examine the issues stakeholders need to consider in connection with deep-sea mining. We first provide an introduction to deep-sea mining and its current status. Future articles will consider in greater detail the regulatory and contractual landscape, important practical considerations, and future developments, including decisions of the ISA Council.

POLYMETALLIC NODULES

Current technology for the generation of wind and solar power (as well as the batteries needed to store such power) requires scarce raw materials, including nickel, manganese, cobalt, and copper. The fact that these minerals are found in the millions of polymetallic nodules scattered on areas of the ocean floor gives rise to another debate on whether the deep-sea mining of these nodules should be pursued.
This issue attracted considerable attention over the summer of 2023, when the International Seabed Authority (ISA) Assembly and Council held its 28th Session and, in January 2024, when Norway’s parliament (the Storting) made Norway the first country to formally authorise seabed mining activities in its waters.

INTERNATIONAL REGULATION OF DEEP-SEA MINERALS: UNCLOS AND ISA

The United Nations Convention on the Law of the Sea (UNCLOS) provides a comprehensive regime for the management of the world’s oceans. It also established ISA.

ISA is the body that authorises international seabed exploration and mining. It also collects and distributes the seabed mining royalties in relation to those areas outside each nation’s exclusive economic zone (EEZ).

Since 1994, ISA has approved over 30 ocean-floor mining exploration contracts in the Atlantic, Pacific, and Indian oceans, with most covering the so-called ‘Clarion-Clipperton Zone’ (an environmental management area of the Pacific Ocean, between Hawaii and Mexico). These currently-approved contracts run for 15 years and permit contract holders to seek out (but not commercially exploit) polymetallic nodules, polymetallic sulphides, and cobalt-rich ferromanganese crusts from the deep seabed.

UNCLOS TWO-YEAR RULE AND ISA’S 28TH SESSION

Section 1(15) of the annex to the 1994 Implementation Agreement includes a provision known as the “two-year rule.” This provision allows any member state of ISA that intends to apply for the approval of a plan of work for exploitation of the seabed to request that the ISA Council draw up and adopt regulations governing such exploitation within two years.

In July 2021, the Republic of Nauru triggered the two-year rule, seeking authority to undertake commercial exploitation of polymetallic nodules under license. That set an operative deadline of 9 July 2023.

At meetings of the ISA Assembly and ISA Council in July 2023, the ISA Council determined that more time was needed to establish processes for prospecting, exploring, and exploiting mineral resources, and a new target was set for finalising the rules: July 2025.

The expiration of the two-year rule in July 2023 does allow mining companies to submit a mining license application at any time. However, the above extension gives the ISA Council direct input into the approval process, which will make approval of any application difficult.

NORWAY’S DEEP-SEA MINING PLAN

State legislation regulates deep-sea mining in different EEZs. Norway is one of the only countries that has its own legislation (the Norway Seabed Minerals Act of 2019) regulating the exploration and extraction of deep-sea minerals.

In December 2023, Norway agreed to allow seabed mineral exploration off the coast of Norway, ahead of a formal parliamentary decision. The proposal was voted 80-20 in favour by the Storting on 9 January 2024.

The proposal will permit exploratory mining across a large section of the Norwegian seabed, after which the Storting can decide whether to issue commercial permits.

The decision initially applies to Norwegian waters and exposes an area larger than Great Britain to potential sea-bed mining, although the Norwegian government has noted that it will only issue licenses after more environmental research has been done.

The Norwegian government has defended the plan as a way to seize an economic opportunity and shore up the security of critical supply chains. However, there is concern that this will pave the way towards deep-sea mining around the world. Green activists, scientists, fishermen, and investors have called upon Oslo to reconsider its position. They cite the lack of scientific data about the effects of deep-sea mining on the marine environment, as well as the potential impact on Arctic ecosystems. In November 2023, 120 European Union lawmakers wrote an open letter to Norwegian members of the Storting, urging them unsuccessfully to reject the project, and in February 2024, the European Parliament voted in favour of a resolution that raised concerns about Norway’s deep-sea mining regulations. This resolution carries no legal power, but it does send a strong signal to Norway that the European Union does not support its plans.

In May 2024, WWF-Norway announced it will sue the Norwegian government for opening its seabed to deep-sea mining. WWF-Norway claim that the government has failed to properly investigate the consequences of its decision, has acted against the counsel of its own advisors, and has breached Norwegian law.

METHODS OF POLYMETALLIC NODULE EXTRACTION

Should Norway, or any other nation, initiate commercial deep-seabed mining, one of the following methods of mineral extraction may be employed:

Continuous Line Bucket System

This system utilises a surface vessel, a loop of cable to which dredge buckets are attached at 20–25 meter intervals, and a traction machine on the surface vessel, which circulates the cable. Operating much like a conveyor belt, ascending and descending lines complete runs to the ocean floor, gathering and then carrying the nodules to a ship or station for processing.

Hydraulic Suction System

A riser pipe attached to a surface vessel “vacuums” the seabed, for example, by lifting the nodules on compressed air or by using a centrifugal pump. A separate pipe returns tailings to the area of the mining site.

Remotely Operated Vehicles (ROVs)

Large ROVs traverse the ocean floor collecting nodules in a variety of ways. This might involve blasting the seafloor with water jets or collection by vacuuming.

Recent progress has been made in the development of these vehicles; a pre-prototype polymetallic nodule collector was successfully trialed in 2021 at a water depth of 4,500 metres, and in December 2022, the first successful recovery of polymetallic nodules from the abyssal plain was completed, using an integrated collector, riser, and lift system on an ROV. A glimpse of the future of deep-sea ROVs perhaps comes in the form of the development of robotic nodule-collection devices, equipped with artificial intelligence that allows them to distinguish between nodules and aquatic life.

Key to all three methods of mineral extraction is the production support vessel, the main facility for collecting, gathering, filtering, and storing polymetallic nodules. Dynamically positioned drillships, formerly utilised in the oil and gas sector, have been identified/converted for this purpose, and market-leading companies active in deep-water operations, including drilling and subsea construction, are investing in this area. It will be interesting to see how the approach to the inherent engineering and technological challenges will continue to develop.

THE RISKS OF DEEP-SEA MINING

As a nascent industry, deep-sea mining presents risks to both the environment and the stakeholders involved:

Environmental Risks

ISA’s delayed operative deadline for finalising regulations has been welcomed by parties who are concerned about the environmental impact that deep-sea mining may have.

Scientists warn that mining the deep could cause an irreversible loss of biodiversity to deep-sea ecosystems; sediment plumes, wastewater, and noise and light pollution all have the potential to seriously impact the species that exist within and beyond the mining sites. The deep-ocean floor supports thousands of unique species, despite being dark and nutrient-poor, including microbes, worms, sponges, and other invertebrates. There are also concerns that mining will impact the ocean’s ability to function as a carbon sink, resulting in a potentially wider environmental impact.

Stakeholder and Investor Risks

While deep-sea mining doesn’t involve the recovery and handling of combustible oil or gas, which is often associated with offshore operations, commercial risks associated with the deployment of sophisticated (and expensive) equipment in water depths of 2,000 metres or greater are significant. In April 2021, a specialist deep-sea mining subsidiary lost a mining robot prototype that had uncoupled from a 5-kilometer-long cable connecting it to the surface. The robot was recovered after initial attempts failed, but this illustrates the potentially expensive problems that deep-sea mining poses. Any companies wishing to become involved in deep-sea mining will also need to be careful to protect their reputation. Involvement in a deep-sea mining project that causes (or is perceived to cause) environmental damage or that experiences serious problems could attract strong negative publicity.

INVESTOR CONSIDERATIONS

Regulations have not kept up with the increased interest in deep-sea mining, and there are no clear guidelines on how to structure potential deep-sea investments. This is especially true in international waters, where a relationship with a sponsoring state is necessary. Exploitative investments have not been covered by ISA, and it is unclear how much control investors will have over the mining process. It is also unclear how investors might be able to apportion responsibility for loss/damage and what level of due diligence needs to be conducted ahead of operations. Any involvement carries with it significant risk, and stakeholders will do well to manage their rights and obligations as matters evolve.

Copyright 2024 K & L Gates
For more news on Deep Sea Mining, visit the NLR Environmental, Energy & Resources section.

A Primer for Creditors Navigating the Bankruptcy System

Bankruptcy filings affect businesses across America.

The Bankruptcy Code is complex and difficult to navigate. But used properly, it can help creditors to minimize losses when a customer files bankruptcy. This article will guide you on how to stay out of trouble and improve your chances of getting paid by a bankrupt customer.

What Does the Bankruptcy Filing Mean?

The Bankruptcy system serves three basic purposes: It (i) provides a single forum to deal with the assets and liabilities of an insolvent debtor, (ii) provides the honest, but unfortunate, debtor with a “fresh start,” and (iii) if a debtor chooses to reorganize its debts, it provides a process for saving and preserving the going-concern value of a business.

Bankruptcy has different chapters depending on the debtor’s objectives. Chapter 7 is liquidation. A trustee is appointed to take control of and sell the debtor’s property. Typically, the Customer’s assets will be surrendered to those creditors holding security interests sold by the trustee to generate proceeds for distribution to creditors. Individuals or businesses may file Chapter 7, but only individuals can obtain a discharge of their debts.

Chapter 13 is called the “wage-earner” filing, and it’s available to individuals only. In a Chapter 13, the debtor keeps his or her assets and proposes a three to five-year payment plan. Depending on several factors, including the debtor’s income and available assets and whether you are a secured or unsecured creditor, recovery can vary. Similar to Chapter 7, Chapter 13 has a trustee. But his or her role is to be a monitor and conduit for distributing plan payments to creditors.

Chapter 11 bankruptcy is a reorganization proceeding available to businesses and wealthier individuals whose debt levels exceed the less burdensome Chapter 13 requirements. Similar to Chapter 13 cases, the Customer will file a plan of reorganization outlining the Customer’s proposal to modify and repay debts. However, in Chapter 11 cases, creditors generally take a more active role in the proceeding and plan approval process to ensure that their rights are preserved and not adversely affected by the Customer’s proposed plan. Once a plan has been approved by the Bankruptcy Court, payments are made pursuant to its terms.

The Automatic Stay

Immediately upon the Customer’s bankruptcy filing, a substantial impact on a creditor’s ability to exercise its rights is imposed. The “automatic stay” provision of the Bankruptcy Code stops creditors in their tracks from virtually any collection activity against Customer, providing Customer with room to reorganize its debts without the threat of collection actions from their creditors.

Any action to collect the balance of the money the Customer owes or to recover the property now under the protection of the Bankruptcy Court is considered a violation of the stay. Similarly, actions to obtain, perfect, or enforce a lien on property of the bankruptcy estate are prohibited. Further, if the Customer files under Chapter 13 and the debt owed is a “consumer debt” (i.e., a debt incurred for personal, as opposed to business, needs), the “co-debtor stay” prevents actions to collect from individuals jointly liable with Customer on that debt, even if they have not filed their own bankruptcy case.

In light of the automatic stay, proceeding with great caution is of the utmost importance. In the event of willful violations of the automatic stay, the Customer may be awarded sanctions against the creditor, including payment of fines, the Customer’s attorneys’ fees, and/or the creditor losing rights in the bankruptcy case itself. If you receive notice that the Customer is seeking sanctions for your violation of the automatic stay, quickly seek the assistance of knowledgeable legal counsel to minimize your exposure.

Payment Rights and Other Remedies

In certain instances, you may be entitled to “relief” from the automatic stay. If relief is granted by the Bankruptcy Court, creditors may proceed with taking those actions initially prohibited at the outset of the bankruptcy case. For example, a creditor may be able to obtain relief and file suit against a non-filing individual that was once protected by the co-debtor stay, in order to preserve its rights and increase the likelihood of payment on the delinquent account.

If it is customary for you to sell goods on credit, and if goods were sold to Customer within 45 days immediately preceding the bankruptcy filing, you may be able to reclaim the goods from the Customer. You may also be entitled to assert an administrative priority claim for the value of any goods sold to Customer in the ordinary course of business during the 20 days immediately preceding the bankruptcy filing. To avail yourself of these options, formalities and procedures must be strictly followed, and quickly, to avoid expiration of your rights.

Some debts may be “non-dischargeable.” In other words, if the creditor can show some exception to the general rule (e.g., debts incurred through fraud, larceny, or embezzlement), the debt will not be discharged, and the Customer will remain responsible to you for repayment at the conclusion of the proceeding. Again, there are strict burdens and time requirements for creditors seeking to have their claims declared non-dischargeable, so creditors should closely monitor those deadlines and discuss with their legal counsel to preserve their rights.

Finally, you can also file a Proof of Claim with the Bankruptcy Court evidencing the debt owed to you by the Customer. Coming as no surprise, this option similarly imposes strict burdens and deadlines on filing requirements. Acting early is advisable, ensuring your claim is recognized, and you are kept abreast of the status of the bankruptcy proceeding. Filing a Proof of Claim does not guaranty repayment but does preserve your right to payment in the case.

Every bankruptcy filing is different, and the underlying facts will impact your rights and influence your overall collection strategy. Proactively seek guidance on proper pre-bankruptcy loss mitigation efforts and understand that all risks of loss cannot be avoided. If a customer does file bankruptcy, act carefully, but quickly to meet deadlines, preserve rights, mitigate losses, and receive payment during the life of the case. The most effective way to do so is by seeking competent legal counsel experienced in navigating the complex and intricate bankruptcy system.

© 2024 Ward and Smith, P.A.. All Rights Reserved.
For more news on Navigating the Bankruptcy Code, visit the NLR Bankruptcy & Restructuring section.

How to Achieve and Improve Chambers Rankings: A Comprehensive Guide for Law Firms

For law firms and lawyers, a Chambers & Partners ranking is an influential badge of recognition, signifying a firm’s expertise, professionalism and client service. While many firms submit basic information and lackluster, dull matter descriptions, you can distinguish your firm and its lawyers by creating strategic and compelling submissions. Achieving a coveted Chambers ranking requires more than just excellent legal work; it also requires a thoughtful approach. Here’s a guide to crafting a winning Chambers submission.

  • Understand the Criteria: Before you start writing, familiarize yourself with Chambers’ assessment criteria. Understand what they’re looking for in terms of client service, commercial vision, diligence, value for money and depth of expertise. Knowing these criteria will help you tailor your submission to highlight the most relevant aspects of your practice.
  • Be Precise and Relevant: Chambers researchers read countless submissions, so it’s crucial that yours stands out by being clear and concise. Avoid legal jargon and ensure that the information is directly relevant to the category for which you’re applying. Use straightforward language to convey your firm’s strengths and achievements.
  • Highlight Key Matters: Showcase cases that best demonstrate your firm’s expertise and accomplishments. Include a brief description of each matter, outlining the challenge, your approach and the outcome. Ensure client confidentiality by anonymizing sensitive information. Highlighting landmark cases or those involving significant complexities can make your submission more compelling.
  • Demonstrate Consistency: It’s not just about one-off successes. Show that your firm and its lawyers (especially those ones you are putting forth in the submission) consistently deliver results. Highlight any repeat business or long-term clients as evidence of sustained excellence. Consistency in performance and client satisfaction can significantly boost your submission’s strength.
  • Showcase Your Team: Highlight key individuals in your team, detailing their specific contributions, skills, and expertise. Chambers rankings often spotlight individual lawyers within specific practice areas and jurisdictions. Highlighting the strengths of your team members in the introduction sections and matter write-ups can enhance your overall submission. By showcasing the standout qualities and achievements of individual lawyers, you can provide a comprehensive picture of your firm’s capabilities.
  • Proofread and Review: Ensure that your submission is polished and free of errors. Consider having multiple team members review the document for clarity, accuracy and impact. A well-reviewed submission is likely to be more persuasive and professional.
  • Follow Submission Guidelines: Adhere strictly to guidelines and parameters provided by Chambers. This includes word limits, format specifications, number of matters submitted, firm demographic information and of course, deadlines.
  • Be Visible in Your Industry: Feedback from peers is a significant part of the Chambers research process. Staying visible in your industry is crucial. Attend and speak at industry conferences, publish articles and thought leadership pieces, and participate in relevant legal associations and groups. Engaging in these activities not only enhances your visibility but also positions you as an expert in your field, making it more likely that your peers will provide positive feedback during the Chambers research process.
  • Group Matters Around Common Themes: Highlighting your expertise in specific legal areas or developments can strengthen your submission. Group similar cases or matters under common themes or practices, such as recent legal developments or industry trends. This approach showcases your depth of knowledge and specialized skills, helping researchers and clients see the broader impact of your work.

Key Tips for Strong Matter Descriptions

  • Client Anonymity: Ensure you maintain the confidentiality of your clients unless you have explicit permission to name them. Use generic terms like “a major pharmaceutical company” or “a leading financial institution.”
  • Start with Key Points: Begin with a crisp, one-line summary that captures the essence of the matter to grab attention immediately.
  • Detail the Complexity or Significance: Highlight why the matter was particularly challenging or important, such as involving multiple jurisdictions or being precedent-setting.
  • Role of the Firm: Clearly describe the role your firm played, whether as lead counsel or in a supporting role.
  • Legal Expertise: Specify the areas of law involved, showcasing the breadth and depth of your firm’s expertise.
  • Outcome: Briefly describe the outcome, especially if it was favorable for your client, but avoid exaggerations.
  • Value Add: Highlight any additional value your firm provided, such as achieving a swift resolution or reducing potential costs.
  • Avoid Jargon: While the description should display expertise, avoid overly technical language that might alienate readers unfamiliar with specific legal terms.
  • Proofread: Ensure there are no grammatical or factual errors, and that the description is polished and professional.
  • Feedback: Consider getting feedback from colleagues or other professionals to ensure clarity and effectiveness before submitting the description.

How to Get a Lawyer Ranked in Chambers

To get a lawyer ranked in Chambers, focus on the following steps:

  1. Highlight Individual Achievements: In your submission, emphasize the individual lawyer’s key cases, leadership roles and contributions to significant matters. Detail their specific impact and success in these cases.
  2. Client Testimonials: Secure and include strong client testimonials that speak to the lawyer’s expertise, client service and successful outcomes.
  3. Peer Recognition: Ensure the lawyer is visible within the industry through speaking engagements, publications and participation in professional associations. Peer recognition can significantly influence Chambers’ evaluation.
  4. Detailed and Relevant Information: Provide comprehensive and relevant information in the submission, avoiding generic descriptions. Specifics about the lawyer’s contributions and successes will make the submission stand out.
  5. Peer Relationships: Building and maintaining strong peer relationships is essential. Make time for networking, assisting colleagues, and being active in legal communities. Helping others and being a visible, active participant in your industry can lead to positive peer reviews, which are crucial for Chambers rankings.

How Lawyers Can Move Up in Chambers Rankings

To help a lawyer move up in Chambers rankings, consider these strategies:

  1. Consistent Excellence: Demonstrate sustained excellence by highlighting repeat business and long-term client relationships. Show how the lawyer consistently delivers high-quality results.
  2. Professional Development: Encourage continuous professional development and involvement in high-profile matters or industry-leading initiatives. This demonstrates ongoing growth and expertise.
  3. Enhanced Visibility: Increase the lawyer’s visibility through strategic marketing, including thought leadership articles, media appearances and active participation in relevant industry events.
  4. Feedback and Improvement: Utilize feedback from previous Chambers submissions and the Chambers Confidential report to identify areas for improvement. Make necessary adjustments to strengthen future submissions.

Key Takeaways for Crafting a Winning Chambers Submission

A Chambers submission is more than just any other award submission; it’s an opportunity to showcase your firm’s achievements, expertise and dedication to client service. Be concise, relevant and honest in your approach. Tailor your submission to reflect both the category(ies) to which you’re applying and the unique strengths of your firm and its lawyers. Attention to detail, from adhering to guidelines to proofreading, can make the difference between a good submission and a winning one.

Crafting a standout Chambers submission requires effort, but the potential rewards, in terms of recognition and business development, are well worth the investment.

For more on Chambers submission best practices, take a look at these articles:

Copyright © 2024, Stefanie M. Marrone. All Rights Reserved.
For more news on Chambers Ranking Best Practices, visit the NLR Law Office Management section.

Navigating the Nuances of LGBTQ+ Divorce in California

The end of a marriage is always challenging for the couple involved, and the impact on family members can be significant. Those in LGBTQ+ marriages are no different. Issues around child custody, property division, spousal support, and the enforcement of prenuptial agreements all apply to same-sex couples.

In California, there is no common-law marriage. In some cases, the LGBTQ+ couple may not have been married long at the time of the divorce, but they may have been together for much longer than the marriage itself. Whether they were registered as a domestic partnership will make a difference. In such cases, the couple will have similar rights and obligations as those married for the same length of time.

For example, in California, if the couple were married four years ago, spousal support—in most cases—would only be for approximately two years. However, if they were registered as domestic partners for 20 years and then had a four-year marriage, spousal support could be until either party’s death or the recipient spouse’s remarriage.

The Unique Challenges Around Parental Rights

Dealing with parental rights is difficult regardless of the orientation of the couple involved. When I advise clients, I try my best to have them focus on the best interests of their children. Divorce is typically the most challenging for the children.

Nuanced complications can arise depending on how the children came into the family. Was it by adoption, surrogacy, or assisted reproductive technology? For LGBTQ+ couples, it is essential that everything is done legally and correctly and that both parents are included in legally binding contracts. In the case of surrogacy or assisted reproductive technology (also known as IVF), mainly when sperm or eggs are donated from someone outside the relationship, it is critically important that the sperm or egg donor has no rights or obligations. Otherwise, things can get murky in a legal sense.

The bottom line is that couples need to secure an excellent lawyer to protect their interests and those of their children. Putting the children first should always be the priority.

Additional Considerations

I have been told that in the LGBTQ+ community, particularly amongst those who identify as men, there can be a preponderance of open relationships. I have been asked if that can complicate a potential divorce. Because California is a no-fault state regarding divorce, it does not matter who sleeps with whom. The only issue is if one person spends community dollars on another person outside the marriage. A relevant factor would be if it were an open marriage and what the understanding of that meant financially and otherwise. Ideally, a couple would document these nuances with their lawyer. Without pre- or post-nuptial agreements addressing such relationship guidelines, spending outside the marriage on another relationship can become a problem during divorce proceedings.

Another question I am often asked is if same-sex couples should seek divorce attorneys who identify as similar to themselves. I can easily see how that might be a comfortable choice. And I do not advocate against it. The most important criterion is the attorney’s skill and if you can relate to them. I know for myself, I am confident I can help my clients, whether they are gay, non-binary, or fluid. My commitment and level of advocacy are always going to be the same.

Concerns over the Future Loom Large

In the past, same-sex couples who married in other states faced the risk that their marriages would not be recognized in another state. The U.S. Supreme Court’s landmark Obergefell v. Hodges decision in 2015 required that all states, including California, recognize same-sex marriages performed in other jurisdictions. For those married in California, we are fortunate that LGBTQ+ rights have long been progressive. On the other hand, recent rumbling from the U.S. Supreme Court suggests those protections may be in jeopardy.

I am personally troubled by what some Justices have indicated in dissenting opinions. I remember life before Roe v. Wade and life before Obergfell. I have always been concerned about subsequent elections and the future makeup of our nation’s highest court. Personally, I would hate to see our country go backward on marriage equality.

I have always believed in the institution of marriage. And I am a realist who recognizes that marriages can and do end for a multitude of reasons. It might be surprising to hear a divorce attorney say this, but I would prefer to see couples work things out. But when they cannot, I will be the best advocate for my clients, regardless of how they identify. In the end, divorce is a tricky thing to go through, and whether you are part of a same-sex couple or opposite-sex makes little difference.

© 2024 Blank Rome LLP
For more news on LGBTQ+ Family Law, visit the NLR Family Law / Divorce / Custody section.

Whistleblower Tax Fraud Lawsuit Against Bitcoin Billionaire Settles for $40 Million

MicroStrategy’s founder is alleged to have falsified tax documents for ten years. The settlement resolves the first whistleblower lawsuit filed under 2021 amendments to the DC False Claims Act.

Key Takeaways
On June 3, the District of Columbia Office of the Attorney General announced the $40 million settlement with Michael Saylor
It is the largest income tax recovery in D.C. history
The settlement, which resolves a qui tam lawsuit filed under the DC False Claims Act, underscores the power of whistleblowers in combatting tax fraud
On June 3, the District of Columbia Office of the Attorney General (OAG) made a landmark announcement. The billionaire founder of MicroStrategy Incorporated, Michael Saylor, settled a tax fraud lawsuit for a staggering $40 million. This case, stemming from a qui tam whistleblower suit filed under the District’s False Claims Act, marks a significant milestone in the fight against tax fraud. The OAG declared this as the largest income tax recovery in D.C. history, underscoring the importance of this case.

The DC False Claims Act
This settlement is not just a victory for the District but also a testament to the power of whistleblowers. Under the 2021 extension of the D.C. False Claims Act, individuals have the power to file qui tam suits against large companies and suspected tax evaders. The 2021 amendments even offer monetary awards to those who report tax cheats. This settlement, the first settlement under these amendments, serves to put would-be tax cheats on notice.

As the District of Columbia expands its arsenal against tax fraud, other states should take note. The DC False Claims Act, now covering tax fraud, has become a powerful tool in the fight against financial misconduct. With the District joining the ranks of Delaware, Florida, Illinois, Indiana, Nevada, New York, and Rhode Island as states where false claims suits may be brought based on tax fraud claims, the fight against tax cheats looks promising.

The Case Against Saylor
In 2021, unnamed whistleblowers filed a lawsuit against Saylor, alleging that he had defrauded the District and failed to pay income taxes from 2014 to 2020. The OAG independently investigated these claims and filed a separate complaint against Saylor. The District’s lawsuit alleged that Saylor claimed to be a resident of Florida and Virginia to avoid paying over $25 million in income taxes. Another suit was filed against MicroStrategy, claiming it falsified records and statements that facilitated Saylor’s tax avoidance scheme.

The District’s allegations against Saylor paint a picture of a lavish lifestyle. Saylor is accused of unlawfully withholding tens of millions in tax revenue by claiming to live in a lower tax jurisdiction to avoid paying D.C. income taxes. The OAG’s investigation revealed that Saylor owned a 7,000-square-foot luxury penthouse overlooking the Potomac Waterfront and docked multiple yachts in the Washington Harbor. He purchased three luxury condominium units at 3030 K Street NW to combine into his current residence and a penthouse unit at the Eden Condominiums, 2360 Champlain St. NW. The Attorney General compiled several posts from Saylor’s Facebook, in which he boasted about the view from his D.C. residence.

Whistleblower Tax Fraud Lawsuit Against Bitcoin Billionaire Settles For $40 Million

Furthermore, the OAG found evidence that Saylor purchased a house in Miami Beach, obtained a Florida driver’s license, registered to vote in Florida, and falsely listed his residence on MicroStrategy W-2 forms. Attorney General Brian L. Schwalb stated, “Saylor openly bragged about his tax-evasion scheme, encouraging his friends to follow his example and contending that anyone who paid taxes to the District was stupid.”

The lawsuits allege that records from Saylor’s security detail provide Saylor’s physical location and travel from 2015 to 2020 and show that across six years, Saylor spent 449 days in Florida and 1,397 days in the District. Saylor allegedly directed MicroStrategy employees to aid his scheme to avoid paying District income taxes. The District claims that for the last ten years, MicroStrategy has falsely reported its income tax exemption on Saylor’s wages, claiming he was tax-exempt due to his residential status.

Saylor agreed to pay the District $40 million to resolve the allegations against him and MicroStrategy.

A copy of the settlement can be found here.

Copyright Kohn, Kohn & Colapinto, LLP 2024. All Rights Reserved.

by: Whistleblower Law at Kohn Kohn Colapinto of Kohn, Kohn & Colapinto

For more on Whistleblowers, visit the NLR Criminal Law / Business Crimes section.

New Florida Law Requires HOAs to Adopt Hurricane Protection Measures

Last week, Florida Gov. Ron DeSantis signed into law House Bill 293 in an effort to help protect Florida’s single-family homes. Effective immediately, all homeowners associations in the state are mandated to establish hurricane protection specifications along with any other pertinent factors as determined by the association’s board of directors. These specifications should be adopted to ensure a cohesive external appearance for buildings within the HOA – including considerations such as “color and style” – while adhering to relevant building codes and affording exceptional protection to Florida homes.

The primary objective of House Bill 239 is to safeguard the welfare and safety of the state’s residents, as well as to guarantee consistency and uniformity in the implementation of hurricane protection measures by parcel owners. It is imperative to note that, except in cases where violations to these specifications occur, HOAs are prohibited from preventing homeowners from installing or upgrading hurricane protection products. This legislation applies universally to all homeowners associations, regardless of when the community was created.

Hurricane protection products under House Bill 239, include but are not limited to:

  • Roof systems recognized by the Florida Building Code which meet ASCE 7-22 48 standards
  • Permanent fixed storm shutters
  • Roll-down track storm shutters
  • Impact-resistant windows and doors
  • Reinforced garage doors
  • Erosion controls
  • Exterior fixed generators
  • Fuel storage tanks
  • Other hurricane protection products used to preserve and protect the structures or improvements on a parcel governed by the association

Most weather analysts have projected an above average hurricane season for 2024, predicting one of the busier hurricane seasons on record. This increase in activity has been attributed to record warm water temperatures and the influence of La Niña. As such, it underscores the critical importance of proactive measures to safeguard property and ensure the well-being of residents.

It is strongly encouraged that all homeowners associations begin the process of considering the standards for hurricane protection that are right for their communities and adopt a resolution encompassing these guidelines immediately.

© 2024 Varnum LLP
For more news on Protecting Florida Homes during Hurricane Season, visit the NLR Real Estate section.

NJDEP Proposes Bald Eagle Removal and Other Changes to New Jersey’s Threatened and Endangered Species Lists

On June 3, 2024, the New Jersey Department of Environmental Protection announced a rule proposal which would update the endangered species and the nongame species lists promulgated by the Fish & Wildlife Endangered and Nongame Species Program (“ENSP”). These proposed updates would reflect, among other changes, the recategorization of the conservation status of certain species from the ENSP lists along with other structural and organizational amendments.

Primarily, the proposal celebrates the prospective reduced conservation status of three species, including the Peregrine Falcon, Bobcat, and Cope’s Gray Treefrog which each will have their conservation status reduced from “Endangered” to “Threatened.”

More significantly, the Bald Eagle, Red-headed Woodpecker, and Osprey are proposed to have their status reduced to “Special Concern” or “Secure/Stable.” The Department has further proposed partial conservation status reductions for the non-breeding populations of certain bird species including the Yellow-crowned Night-Heron, and Red-headed Woodpecker which have both been reduced to “Special Concern” for non-breeding activities. In effect, these species are being delisted, which is significant for Land Resource permitting under the Coastal Rules and Freshwater Wetlands Protection Act. This also should impact permitting under Pinelands Commission regulations.

Inapposite to those species having their conservation status reduced, the Department has proposed increased conservation designations for thirty (30) species, including select species particularly impactful to development and redevelopment initiatives in New Jersey. Those include three species of bat, the Northern Myotis, Little Brown Bat, and Tricolored Bat, which will each move from an undetermined/unknown status to “Endangered.”

Lastly, the Department proposes moving currently threatened species listed on the nongame species list at N.J.A.C. 7:25-4.17 to the endangered species list at N.J.A.C. 7:25-4.13. This restructuring will leave the species’ conservation status unchanged and includes a number of special species for New Jersey development and redevelopment, such as the Bobolink and Grasshopper Sparrow.

In addition to these conservation status changes, the Department has proposed a new procedure which would allow the addition of species to the list of endangered species by notice of administrative change when that species has been added to the Federal list of endangered and threatened species of wildlife pursuant to the Endangered Species Act of 1973 at 16 U.S.C. § 1531 et seq. and is indigenous to New Jersey. The Department notes this procedure seeks to further the goal of creating a listing that is more consistent with the Federal standard but in doing so the State will obviate the typical Administrative Procedure Act public comment process.

Matthew L. Capone contributed to this article

© 2024 Giordano, Halleran & Ciesla, P.C. All Rights Reserved
For more news on New Jersey’s Threatened and Endangered Species Lists, visit the NLR Environmental, Energy & Resources section.

Navigating Politics in the Workplace

In this election year, employees inevitably will engage in discussions of the impactful and divisive political issues that are at the forefront of our national discourse. Employers must be aware of the ways in which political discussions in the workplace have intensified and be prepared to navigate the legal and other challenges posed by these interactions. This checklist provides employers with an overview of key topics to consider when addressing issues related to political speech in the workplace.

1. First Amendment Protection. The First Amendment protects freedom of speech, but it generally applies only to governmental action. Private employers generally have latitude to restrict political speech in the workplace unless it implicates other legal protections.

2. National Labor Relations Act (NLRA). Section 7 of the NLRA protects non-supervisory employees in the private sector, regardless of whether they are members of a union. Employers generally cannot restrict covered employees’ discussions related to the terms and conditions of their employment, i.e., “protected concerted activity.” Political speech that also falls under NLRA protection must be considered carefully.

3. Anti-Discrimination and Anti-Harassment Policies. Political speech may implicate discrimination or harassment concerns when it includes topics related to protected categories or characteristics, e.g., race, gender, religion. Employers should have robust anti-discrimination and anti-harassment policies that cover these issues.

4. State Laws Protecting Political Speech. State laws may protect employees’ political activity, expression or affiliation. These laws include prohibitions against initimdation, threats, or adverse actions based on employee voting, political activities, or candidate endorsements. Employers must assess their policies and practices in each state where they have employees because the scope of these laws varies by jurisdiction.

5. Respectful Workplace and Other Policies. Employers should consider adopting policies that promote respectful behavior and prevent political discussions from escalating into conflicts. Employers also should consider dress code and other workplace policies concerning political attire or messages, and ensure consistent, content-neutral enforcement of those policies. When reports of potential policy violations are made, employers should respond promptly.

6. Train Employees. Employees should receive regular training on company policies and their rights, including the boundaries of political speech in the workplace.

Employers should tailor their policies to address political speech while respecting employees’ rights and maintaining a positive work environment. Each workplace is unique, however, and issues often require context and fact-specific solutions with the assistance of counsel.

2024 Goulston & Storrs PC.
For more news on Navigating Political Discussions in the Workplace, visit the NLR Labor & Employment section.

Acting U.S. Attorney Levy Forecasts False Claims Act COVID Cases Targeting Private Lenders Of CARES Act Loans That Failed In Their Obligation To Safeguard Government Funds

Acting U.S. Attorney Joshua Levy discussed the enforcement priorities for the Massachusetts U.S. Attorney’s Office (USAO) during a Q&A session on May 29, 2024, and made clear that the historical focus of the office remains the top priority: detecting and combating health care fraud, waste, and abuse. In particular, both Levy and Chief of the USAO’s Civil Division, Abraham George, have recently indicated that the government will pursue large dollar COVID fraud cases both criminally and civilly. As we have discussed previously, we expect False Claims Act (FCA) COVID cases to materialize in the coming years as the government zeroes in on wrongdoers via enhanced data analytics and AI tools as well as via traditional investigative methods and the forthcoming Whistleblower Rewards Program.

Recent COVID FinTech Lender, Kabbage, $120 MM False Claims Act Settlement

The recent Kabbage settlement is illustrative of the types of COVID cases the office is looking to bring pursuant to the FCA. Acting U.S. Attorney Levy discussed the settlement, publicized in May, with now-bankrupt online lender, Kabbage Inc. Kabbage allegedly knowingly processed and submitted thousands of false claims for Paycheck Protection Program (PPP) loan forgiveness, loan guarantees, and processing fees. The PPP – a loan program for small businesses created via the Coronavirus Aid, Relief, and Economic Security (CARES) Act – was administered the federal Small Business Administration (SBA). The CARES Act authorized private lenders to approve PPP loans for eligible borrowers who could later seek forgiveness for the loans if borrowers used the loans for eligible expenses, including employee payroll.

Among other things, participating PPP lenders were obligated to 1) confirm borrowers’ average monthly payroll costs by PPP loan documentation; and 2) follow applicable Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements. SBA guaranteed any unforgiven or defaulted PPP loans as long as the private lender adhered to PPP requirements.

Private lenders received a fixed fee calculated as a percentage of the loan amount. Here, U.S. Attorney Levy’s office alleged that Kabbage awarded inflated and fraudulent loans to maximize its profits, then sold its assets and left the remaining company financially depleted, leading to bankruptcy. Kabbage was allegedly aware of the following errors as of April 2020, failed to correct them, and continued to make improper loan disbursements after learning of the issues:

  1. double-counting state and local taxes paid by employees when calculating gross wages;
  2. failing to exclude annual compensation above $100,000 per employee; and
  3. improperly calculating employee leave and severance payments.

Kabbage also allegedly failed to implement appropriate fraud controls to comply with the PPP, BSA, and AML by knowingly:

  1. removing underwriting steps to facilitate processing a high volume of loan applications and maximizing loan processing fees;
  2. setting substandard fraud check thresholds;
  3. relying on automated tools that were inadequate in identifying fraud;
  4. devoting insufficient personnel to conduct fraud reviews;
  5. discouraging its fraud reviewers from requesting information from borrowers to substantiate their loan requests; and
  6. submitting to the SBA thousands of dubious PPP loan applications that were fraudulent or highly suspicious.

The settlement, which will result in the U.S. securing up to $120 million pursuant to bankruptcy proceedings, resolves qui tam complaints brought by two separate whistleblowers: an accountant who submitted PPP loan applications to multiple lenders and a former analyst in Kabbage’s collection department.

Predictions for Future COVID Fraud Enforcement

Acting U.S. Attorney Levy’s comments make clear that we can expect to see FCA COVID cases targeting private lenders of CARES Act loans that failed in their obligation to safeguard government funds. To date, COVID fraud prosecution has largely targeted “low-hanging fruit” criminal cases, such as those involving submission of false information to obtain COVID relief funding that the recipient spends on luxury items. We discussed in April that the COVID Fraud Enforcement Task Force (CFETF) and a bipartisan group of Senators had, via a report and draft legislation, pleaded with Congress to increase funding to prosecute COVID fraud. Investigations such as those involving Kabbage require a large investment of resources and, as U.S. Attorney Levy commented, his office must prioritize large-dollar COVID fraud cases most likely to result in specific and general fraud deterrence.

As we have written previously, the government is playing a long game tracking COVID fraud. The Justice Department’s CFETF reported in April that to date, the DOJ had seized or forfeited $1.4 billion in stolen relief funds as well as bringing criminal charges against 3,500 defendants and 400 civil settlements. With a ten-year statute of limitations and increasingly more accurate data analytics tools, we expect the DOJ will continue to identify and recover misappropriated funds from large and lower dollar fraudsters. So long as COVID fraud enforcement remains a well-funded priority of the government, we anticipate a steady stream of FCA COVID settlements involving lenders and borrowers. The government is casting a wide net to recoup the nearly $300 billion in COVID fraud estimates. We will continue to monitor and report on developments.

©1994-2024 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more on COVID, visit the NLR Coronavirus News section.