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Legislative updates

Update to Notice Regarding National Small Business United v. Yellen
On March 11, 2024, FinCEN released an update to its March 4th notice regarding National Small Business United v. Yellen. The notice was updated to reflect that the Justice Department, on behalf of the Department of the Treasury, filed a Notice of Appeal to the U.S. Court of Appeals for the 11th Circuit on March 11, 2024. The entire updated notice, which includes a link to the Notice of Appeal, can be accessed on FinCEN’s website here.

Notice Regarding National Small Business United v. Yellen
On March 4, 2024 the Financial Crimes Enforcement Network (FinCEN) released a notice regarding the federal district court in the Northern District of Alabama’s March 1, 2024 decision in National Small Business United v. Yellen, No. 5:22-cv-01448, which concluded that the Corporate Transparency Act (CTA) exceeds the U.S. Constitution’s limits on Congress’ power and enjoined enforcement of the CTA against the plaintiffs (the individual small business owner and his reporting companies, the National Small Business Association and its members). FinCEN states it will comply with the court’s order as long as it remains in effect and is not currently enforcing the CTA against the plaintiffs in that action. The entire notice can be accessed on FinCEN’s website here.

Small Entity Compliance Guide for Beneficial Ownership Information Access and Safeguards Requirements
On February 20, 2024, FinCEN published the Small Entity Compliance Guide for Beneficial Ownership Information Access and Safeguards Requirements. This six page guide summarizes the Access Rule’s requirements as they pertain to small financial institutions. It details (1) how financial institutions can use BOI obtained from FinCEN, (2) the limited scenarios in which a financial institution can re-disclose BOI, (3) the security and confidentiality requirements (e.g., they can’t disclose BOI to persons located in jurisdictions that sponsor terrorism, they have to apply to BOI the same procedures they have in place to protect customer information, they have to notify FinCEN upon receiving a subpoena or demand from a foreign country, they have to obtain and document the reporting company’s consent, and certify they fulfilled the requirements of the Access Rule), (4) reasons FinCEN may reject a request, and (5) what constitutes a violation and the penalties that can be imposed. The guide can be accessed here.

Revised Jurisdictional Thresholds
The Hart-Scott-Rodino Act requires all persons contemplating certain mergers or acquisitions, which meet or exceed the jurisdictional thresholds in the Act, to file a notification with the Federal Trade Commission and the Assistant Attorney General. Each year, the Commission adjusts the minimum dollar jurisdictional thresholds that determine reportability under the Act. On January 22, 2024 the Commission announced the updated jurisdictional thresholds and updated fee schedule. Both are effective March 6, 2024. The revised thresholds and fees were published in the Federal Register and can be viewed here.

Inflation Adjustment of Civil Monetary Penalties
On January 25, 2024, the Financial Crimes Enforcement Network (FinCEN) issued a final rule to reflect annual inflation adjustments to its civil monetary penalties (CMPs) as mandated by the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended. This final rule lists adjusted CMPs associated with violations of the Corporate Transparency Act (CTA). Specifically, the CMPs for beneficial ownership information (BOI) reporting violations and for the unauthorized disclosure or use of BOI were increased from $500 to $591.

One-Time Information Collection for International Section 214 Authorization Holders
The Federal Communications Commission is requiring all International Section 214 Holders to respond to a one-time collection to update the Commission’s records regarding their foreign ownership. All Authorization Holders are required to file their responses in the One-Time Information Collection Online Filing System no later than 11:59 pm Eastern Time on January 22, 2024. For more information see “One-time Information Collection for International Section 214 Authorization Holders” on the Federal Communications Commission’s website.

FTC amending Hart-Scott-Rodino Premerger Notification Rules
The Federal Trade Commission is amending the Hart-Scott-Rodino Premerger Notification Rules that require the parties to certain mergers and acquisitions to file reports with the FTC and Department of Justice and to wait a specified period of time before consummating such transactions. The Commission is amending the rules to conform to the new filing fee tiers enacted by the Merger Filing Fee Modernization Act of 2022 contained within the Consolidated Appropriations Act of 2023. The new filing fee structure includes six tiers, based on the size of the transaction. The new fees, which take effect February 27, 2023, range from a minimum of $30,000 for transactions of less than $161.5 million, to a maximum of $2.25 million for transactions of $5 billion or more. The amended rules were published in the Federal Register on January 26 and can be viewed here.

Beneficial Ownership Information Reporting Requirements
On September 29, 2022, the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing the beneficial ownership information reporting requirement imposed by the Corporate Transparency Act. The final rule is effective January 1, 2024 and is published in the Federal Register at 87 FR 59498.

For more information about this rule, see our article “FinCEN Issues Final Rule Implementing the Reporting Requirements of the Corporate Transparency Act”.

Notice of Proposed Rulemaking issued for the Corporate Transparency Act (CTA)
On December 7, 2021, the Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking to implement the beneficial information reporting provisions of the Corporate Transparency Act (CTA). The proposed rule addresses, among other things, who must report beneficial ownership information, when they must report, and what information they must provide. Written comments on the proposed rule may be submitted to FinCEN on or before February 7, 2022. The proposed rule was published in the Federal Register on December 8 .

SEC Requires Universal Proxy for Contested Elections
On November 17, 2021, the Securities and Exchange Commission approved amendments to the federal proxy rules to require use of a “universal proxy card” in all non-exempt director election contests. This universal proxy card must include the names of all duly nominated director candidates presented for election by any party and for whom proxies are solicited.

According to the SEC, requiring a universal proxy card in director election contests is the most effective means to ensure that shareholders voting by proxy are able to elect directors in a manner consistent with their right to vote in person at a shareholder meeting. The SEC explained that few shareholders of public companies attend a corporation’s meeting to vote in person. Instead, the primary means for shareholders to vote on the election of directors and other matters is through the proxy process. However the current proxy rules do not allow shareholders voting by proxy in a contested election to replicate the vote they could cast if they voted in person at a shareholder meeting. Shareholders voting in person at a meeting may select among all of the duly nominated director candidates proposed for election by any party in an election contest and vote for any combination of those candidates. Shareholders voting by proxy, however, do not have this same flexibility. The dissident and registrant each send a proxy card to shareholders, with the registrant’s proxy card typically listing only the registrant’s nominees and the dissident’s proxy card typically listing only the dissident’s nominees. Therefore, shareholders voting by proxy in a director election contest had to choose between the dissident’s or registrant’s proxy card. This effectively precluded shareholders from voting by proxy for a mix of director candidates from both sides’ slates in the contest.

The amended rule will be effective August 31, 2022

IRS Issues Guidance for LLCs Seeking Tax Exemption Under Sec. 501(c)(3)
On October 21, 2021 the IRS issued Notice 2021-56 which sets forth standards that an LLC must satisfy to receive a determination letter recognizing it as tax-exempt under IRC Sec. 501(c)(3). This notice also requests public comments on these standards and states that the notice does not affect the status of organizations currently recognized as tax exempt under Sec. 501(c)(3).

Among other things the notice states the IRS will issue a determination letter recognizing an LLC as exempt from tax under Sec. 501(c)(3) only if both the LLC’s articles of organization and its operating agreement each include:

  1. Provisions requiring that each member of the LLC be either (i) an organization described in Sec. 501(c)(3) and exempt from taxation under section 501(a) or (ii) a governmental unit described in section 170(c)(1) (or wholly-owned instrumentality of such a governmental unit).
  2.  Express charitable purposes and charitable dissolution provisions in compliance with Secs. 1.501(c)(3)-1(b)(1) and (4).
  3.  The express chapter 42 compliance provisions described in Sec. 508(e)(1), if the LLC is a private foundation.
  4.  An acceptable contingency plan (such as suspension of its membership rights until a member regains recognition of its Sec. 501(c)(3) status) in the event that one or more members cease to be Sec. 501(c)(3) organizations or governmental units (or wholly-owned instrumentalities thereof).

If an LLC is formed under a state LLC law that prohibits the addition of provisions to articles of organization other than certain specific provisions required by the state LLC law, the requirements will be deemed satisfied if the LLC’s operating agreement includes the required provisions and if the articles of organization and operating agreement do not include any inconsistent provisions.

SEC Approves Nasdaq’s Board Diversity Proposal
In Securities Exchange Act Release No. 34-92590 (August 6, 2021) the SEC approved a rule change proposed by Nasdaq that will require each Nasdaq-listed company (other than a foreign issuer, smaller reporting company, or company with a smaller board) to have, or explain why it does not have, at least two members of its board of directors who are diverse, including (i) at least one diverse director who self-identifies as female; and (ii) at least one diverse director who self-identifies as an underrepresented minority or LGBTQ+. The SEC notes that the board diversity proposal it approved establishes a disclosure-based framework and not a mandate or quota. The SEC also approved a proposal whereby Nasdaq will offer a complimentary board recruiting service for certain eligible Nasdaq-listed companies.

Restaurant Revitalization Fund Program Opens
On May 3, 2021 the Small Business Administration began accepting applications from eligible businesses for grants under the Restaurant Revitalization Fund (RRF) program. The RRF program provides economic aid to restaurants, food carts, bars, caterers and other food and beverage establishments that experienced COVID-19 related revenue losses. The funds do not have to be repaid if used for eligible purposes. Applications may be submitted online from the SBA’s website here:

Shuttered Venue Operators Grant Program Reopens
On April 26, 2021 the Small Business Administration reopened the Shuttered Venue Operators Grant (SVOG) application portal. The SVOG program provides economic aid to eligible live venue operators impacted by COVID-19 including:

  • Live venue operators or promoters
  • Theatrical producers
  • Live performing arts organization operators
  • Museum operators, zoos and aquariums that meet specific criteria
  • Motion picture theater operators
  • Talent representatives

Applications must be submitted online from the SBA’s website here: Further information about the SVOG grant program is available from the SBA’s website as well.

H.R. 1799, signed by President Biden on March 30, 2021, enacts the PPP Extension Act of 2021 which amends the Small Business Act and the CARES Act to extend the covered period for the Paycheck Protection Program, which was scheduled to expire March 31, 2021. New loan applications may be submitted until May 31, 2021. From June 1 until June 30 the Small Business Administration may process applications submitted prior to June 1. It may not accept any new loan applications.

For more information on the PPP see our article “Paycheck Protection Program 2021: What You Need to Know”.

H.R. 1319 – The American Rescue Plan Act of 2021 – was signed by President Biden on March 11, 2021 and includes, among many other things, the following provisions designed to aid small businesses:

  • Provides an additional $7.25 billion for the Paycheck Protection Program and expands PPP eligibility for certain nonprofits and Internet news organizations
  • Establishes a $28.6 billion Restaurant Revitalization Fund which will provide grants to restaurants, bars, and other food and drink establishments that have lost revenue due to the COVID-19
  • Provides an additional $15 billion for the Economic Injury Disaster Loan Advance Program, which offers grants to small businesses in low-income communities
  • Provides an additional $1.25 billion for the Shuttered Venue Operators Grant program, which offers grants to live entertainment venue operators
  • Establishes a $175 million Community Navigator Pilot Program, designed to help small businesses in underserved communities access COVID-19 relief resources

The Federal Trade Commission announced the revised thresholds for determining when companies must file a pre-merger notification with the FTC and Department of Justice pursuant to the Hart-Scott-Rodino Act. The new thresholds are effective March 4, 2021 and can be found in the Federal Register here.

On February 22, 2021 President Biden announced that beginning on February 24, 2021 the Small Business Administration will establish a 14-day, exclusive PPP loan application period for businesses and nonprofits with fewer than 20 employees. The SBA also announced additional changes intended “to open the PPP to more underserved small businesses than ever before”.  For more information visit the Small Business Administration’s Website.

H.R. 6395, the National Defense Authorization Act of 2021, which was enacted on January 1, 2021 by Congress overriding a presidential veto, contains the Corporate Transparency Act, which requires certain LLCs and corporations to file a beneficial ownership report with the Department of Treasury’s Financial Crimes Enforcement Network. For more information, see our article “The Corporate Transparency Act Imposes New Beneficial Ownership Reporting Obligations On Business Entities.”

H.R. 133, the Consolidated Appropriations Act of 2021, was signed into law on December 27, 2020. This bill, which is in excess of 5500 pages, among many other things, continues the Paycheck Protection Program. The PPP provisions of Act include a clarification of the tax deductibility of expenses, allow borrowers who obtained a PPP loan under the original program and used, or will use the proceeds, to obtain a “second draw” PPP loan, expand the definition of eligible expenses, add to the list of eligible borrowers, and much more.

H.R. 7010, effective June 5, 2020, enacts the Paycheck Protection Flexibility Act of 2020, amending the Small Business Act and CARES Act to modify provisions related to the forgiveness of loans under the paycheck protection program.

H.R. 748, signed into law by President Trump on March 27, 2020, enacts the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The bill is 880 pages and contains provisions aimed at providing relief for individuals and businesses negatively affected by the COVID-19 outbreak. Below are some of the highlights of the CARES Act:

  • Small Business Payroll Relief – The CARES Act allocates $349 billion for loans to small businesses to help them maintain their payroll. In general, businesses with fewer than 500 employees are eligible. Nonprofits are eligible as well. The maximum loan is $10 million. The funds can be used for certain expenses including payroll, mortgage and interest payments, rent, and utilities.
  • Economic Stabilization Loans – $500 billion is allocated for loans and guarantees for eligible businesses, states and municipalities. The loans are subject to a number of conditions including a business agreeing to cap the salaries of certain highly paid employees and officers, while mid-size businesses (those with 500 – 10,000 employees) must agree to, among other things, not buy back stock or pay dividends during the term of the loan plus one year thereafter and not layoff more than 10% of their workforce, outsource or offshore jobs during the term of the loan plus two years thereafter.
  • Unemployment Benefits – Eligibility for unemployment benefits is extended to workers affected by COVID-19 who would not otherwise be eligible. The duration of regular benefits is extended and benefit payments increased.
  • Employment Taxes – An Employee Retention Credit against employment taxes is created for eligible employers. In addition, employers can delay the payment of their share of the 2020 employment taxes.
  • Health Care Support – $140 billion is appropriated to support the US health care system.
  • Taxpayer Rebates – A rebate of $1,200 plus $500 per child is provided for individual taxpayers with incomes of up to $75,000 for single filers, $150,000 for joint filers, and $112,500 for head of household filers.
  • CARES Act Oversight – A Congressional oversight committee will be created as well as a new office of Special Inspector General for Pandemic Recovery.

H.R. 6201, signed on March 18, 2020, enacts the Families First Coronavirus Response Act (FFCRA). The FFCRA temporarily requires certain employers to provide employees with paid sick leave for certain COVID-19 related reasons and expands the Family and Medical Leave Act (FMLA) to provide expanded paid leave to care for children for specified COVID-19 related reasons. The FFCRA generally applies to private employers with fewer than 500 employees. The FFCRA states that the paid sick leave and expanded FMLA provisions will go into effect not later than 15 days after enactment and are to expire December 31, 2020. The FFCRA can be viewed here. (See Division C, Secs. 3102-3106 and Division E, Secs. 5102-5111). In addition the Department of Labor has posted a fact sheet and a questions and answers document.

Case summaries

Nasdaq’s Board Diversity Rule
Alliance for Fair Board Recruitment v. Securities and Exchange Commission, No. 21-60626, decided October 18, 2023. The U.S. Court of Appeals for the Fifth Circuit denied petitions to review the Securities and Exchange Commission’s approval of the Nasdaq Stock Market’s proposed board of directors’ diversity disclosure rules. In 2020, Nasdaq proposed rules to require each Nasdaq-listed company, subject to certain exceptions, to publicly disclose information on the diversity of the company’s board of directors and to have, or explain why it does not have, at least two members of its board of directors who are diverse.

In August 2021, the SEC approved the proposed rule changes after which two groups petitioned for review, contending that the Rules violate the First and Fourteenth Amendments to the U.S. Constitution and violate the SEC’s statutory obligations under the Securities Exchange Act and the Administrative Procedure Act. In denying the petitions to review, the court held that Nasdaq is not a state actor subject to constitutional constraints and that SEC had acted within its statutory authority in approving Nasdaq’s Rules.

Securities Act of 1933
Slack Technologies, LLC v. Pirani, No. 22-200, decided June 1, 2023. The U.S. Supreme Court held that a plaintiff in an action alleging a violation of Sec. 11 of the Securities Act of 1933 must plead and prove that the stock purchased can be traced back to the registration statement that the plaintiff alleges contained material misstatements or omissions. In this case, the corporation sold shares to the public through a direct listing, with some shares registered under Sec. 11 and some unregistered. The corporation moved to dismiss on the grounds that the plaintiff did not allege facts showing that the shares he purchased were traceable to the registration statement. The district court denied the motion. The Ninth Circuit affirmed, holding that Sec. 11 could apply to unregistered securities sold in a direct listing. The Court disagreed and vacated the Ninth Circuit’s decision.

Forum Selection Bylaw Clause
Lee v. Fisher, No. 21-15923, decided June 1, 2023. The U.S. Court of Appeals, Ninth Circuit, affirmed the California district court’s decision dismissing a shareholder derivative suit brought against a Delaware corporation and its directors alleging violations of Sec. 14(a) of the Securities Exchange Act of 1934 on forum non conveniens grounds. The corporation had a bylaw clause stating that the Delaware Chancery Court is the sole and exclusive forum for derivative actions. The court rejected the plaintiff’s arguments that the forum selection clause was void under the Exchange Act’s anti-waiver provision, violated public policy, or was invalid under Sec. 115 of the Delaware corporation law, which requires bylaws to be consistent with applicable jurisdictional requirements.

Waiver of Arbitration
Morgan v. Sundance, Inc., No. 21-328, decided May 23, 2022. The U.S. Supreme Court held that lower courts cannot require a showing of prejudice to the opposing party when deciding whether a party litigated too long and thus waived its right to compel arbitration. Thus, the Court reversed the lower court’s ruling that an employer had not waived its right to arbitrate although it initially defended against the lawsuit as if no arbitration agreement existed and did not move to compel arbitration until eight months after the case began, because it had not prejudiced the other party by its inconsistent actions. The Court noted that prejudice is not a condition of finding that a party waived its right to stay litigation or compel arbitration under the FAA. The text of the FAA makes clear that courts are not to create arbitration-specific procedural rules like the one here.

Alien Tort Statute
Nestle USA, Inc. v. Doe, No. 19–416, decided June 17, 2021. The U.S. Supreme Court held (1) that a plaintiff does not plead facts sufficient to support domestic application of the Alien Tort Statute simply by alleging “mere corporate presence” of a defendant. Because making “operational decisions” is an activity common to most corporations, generic allegations of this sort do not draw a sufficient connection between the cause of action respondents seek—aiding and abetting forced labor overseas—and domestic conduct and (2) the ATS is a jurisdictional statute creating no new causes of action and the Court cannot create a cause of action that would let them sue petitioners. That job belongs to Congress, not the Federal Judiciary.

Securities Fraud Class Action
Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System, No. 20–222, decided June 21, 2021. The U.S. Supreme Court, in an action alleging a corporation and certain of its executives violated securities laws and regulations prohibiting material misrepresentations and omissions in connection with the sale of securities, stated that the generic nature of a misrepresentation often will be important evidence of a lack of price impact, and that on remand, the Second Circuit must take into account all record evidence relevant to price impact, regardless of whether that evidence overlaps with materiality or any other merits issue. The Court also held that the defendants bear the burden of persuasion to prove a lack of price impact by a preponderance of the evidence at class certification.

Standing to Sue
TransUnion LLC v. Ramirez, No. 20-297, decided June 25, 2021. The U.S. Supreme Court held that to have Article III standing to sue in federal court, plaintiffs must demonstrate, among other things, that they suffered a concrete harm. In this case, a class of 8,185 individuals sued TransUnion under the Fair Credit Reporting Act. The plaintiffs claimed that TransUnion failed to use reasonable procedures to ensure the accuracy of their credit files. For 1,853 of the class members, TransUnion provided misleading credit reports to third-party businesses. The court concluded that those 1,853 class members had demonstrated concrete reputational harm and thus had Article III standing to sue. The internal credit files of the other class members were not provided to third-party businesses during the relevant time period and those class members had not demonstrated concrete harm and lacked standing. In two other claims, all class members complained about formatting defects in certain mailings sent to them by TransUnion. But the class members other than the named plaintiff had not demonstrated that the alleged formatting errors caused them any concrete harm. Therefore, except for named plaintiff, the class members did not have standing as to those two claims.

Business Trusts
In re EHT US1, No. 21-10036, decided June 1, 2021. The U.S Bankruptcy Court for the District of Delaware held that whether a trust is a business trust under the Bankruptcy Code is governed by the law of the jurisdiction of formation and not federal common law. The court therefore looked to the law of Singapore, which governed the existence and operation of the debtor trust and found that it was a business truest and thus was an eligible debtor under the Bankruptcy Code. Although the trust was not registered under the Singapore Business Trusts Act, it carried on a business and therefore was a business trust.

FTC Enforcement of FTC Act
AMG Capital Management, LLC v. Federal Trade Commission, No. 19-508, decided April 22, 2021. The U.S. Supreme Court held that Section 13(b) of the Federal Trade Commission Act, which authorizes the FTC to obtain, in proper cases, a permanent injunction in federal court against any person, partnership, or corporation that it believes is violating, or is about to violate, any provision of law the FTC enforces, does not authorize the FTC to seek, and a court to award, equitable monetary relief such as restitution or disgorgement.

(U.S. Supreme Court) – Personal Jurisdiction Over Out-of-State Corporations
Ford Motor Co. v. Montana Eighth Judicial District Court, No. 19-368, decided March 25, 2021. The U.S. Supreme Court affirmed the rulings by Montana and Minnesota state courts that they had personal jurisdiction over the defendant - a global auto company - in products liability suits stemming from car accidents that happened in the states where the suits were brought and where the victims were residents. The defendant was a Delaware corporation with its principal place of business in Michigan. The Court rejected the defendant’s contention that jurisdiction was improper because the particular cars involved in the crashes were not first sold in the forum states, nor were they designed or manufactured there. The Court stated that a suit does not have to arise out the defendant’s contacts with the forum. Jurisdiction also exists where the suit relates to the defendant’s contacts in the forum. Here, the defendant did substantial business in the states—among other things, advertising, selling, and servicing the model of vehicles the suits claim were defective. When a company like the defendant serves a market for a product in a state and that product causes injury in the state to one of its residents, the state’s courts may entertain the resulting suit.

Forfeiture of LLC Property
United States v. Lucas, No. 19-3427, decided January 20, 2021. The U.S. Court of Appeals, 3rd Circuit, in an action in which the U.S. Government sought criminal forfeiture of a farm, held that an LLC could file a petition asserting an interest in the farm superior to that the Government because it acquired the farm before the LLC was purchased by the defendant as part of his criminal scheme. The Government did not dispute that the LLC acquired the farm over 5 years before the defendant’s crimes and that it is a legitimate, separate legal entity from the defendant. Those facts sufficed to vindicate the LLC’s claim of right to file its petition. The court also rejected the Government’s argument that the defendant’s acquisition of the LLC with illicit proceeds “reconstituted” the LLC so it was no longer a third party with an interest in the farm.

Diversity Jurisdiction
Tennessee Wellness, Inc. v. Holmes, No. 3:20-cv-335, decided November 18, 2020. The U.S. District Court, Eastern District of Tennessee, held that diversity was lacking where some defendants were Tennessee citizens and where the principal place of business of the plaintiff – a Wyoming corporation – was found to be in Tennessee. Although the corporation argued its principal place of business was in Wyoming, the Secretary of State’s records demonstrated that its corporate activities occurred primarily in Tennessee, where its principal address and mailing address were located and which was the address of its incorporators and president. Without a location in Wyoming from which the officers could direct, control, and coordinate activities, the corporation’s principal place of business cannot be located in Wyoming.

Subject Matter Jurisdiction
Healthcare Ventures of Ohio, LLC v. HVO Operations Windup LLC, No. 20-cv-04991, decided November 13, 2020. The U.S. District Court, Southern District of Ohio, held that the federal court lacked subject matter jurisdiction over the plaintiffs’ lawsuit alleging the defendants committed fraud under Ohio law by, among other things, filing documents with the Ohio Secretary of State using the plaintiff entity’s name without its authority and opening a bank account in its name without its authority. Although the parties were involved in another lawsuit involving CARES Act funds, this lawsuit did not implicate the CARES Act. The issue is whether the defendants’ actions were lawful under Ohio law.

Standing Under FATCA
Muransky v. Godiva Chocolatier, Inc., No. 16-16486, decided October 28, 2020. The U.S. Court of Appeals, 11th Circuit (en banc), held that a plaintiff lacks Article III standing to pursue a class action or settlement under the Fair and Accurate Credit Transactions Act (FACTA) by alleging a bare procedural violation of FACTA. The plaintiff must also allege a concrete injury.

Securities Law
Liu v. Securities and Exchange Commission, No. 18-1501. The U.S. Supreme Court held that in a suit brought by the SEC, a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims, is equitable relief permissible under 15 U.S.C. Sec. 78u(d)(5).

Stockholder Suit
Freedman v. MajicJack VocalTec Ltd., No. 18-15303, decided June 25, 2020. The U.S. Court of Appeals, 11th Circuit held that as a federal rule of decision, the federal courts should look to the law of the place of incorporation to answer whether a stockholder’s claim is derivative or direct.

Federal District Court Dismisses Challenge to California Law Requiring Women on Boards of Directors
Meland v. Padilla, No. 2:19-cv-02288, decided April 20, 2020. The U.S. District Court, Eastern District of California dismissed a complaint filed by a shareholder of a publicly traded corporation subject to Senate Bill 826, the California bill requiring publicly held corporations headquartered in California to have at least one woman on their board of directors, claiming that S.B. 826 impaired his right to vote for directors in violation of his equal protection rights. The court held that the plaintiff lacked standing, noting that both the requirement to have a woman on the board of directors and the penalty for lack of compliance are imposed on the corporation and not the shareholders. In addition, his right to vote was not legitimately impaired. He could still vote for any director he wanted, including a male nominee. Thus, the plaintiff had not suffered an injury in fact, as required to have to standing. Read our article for more information about S.B. 826.

Corporate Income Tax
Rodriguez v. FDIC, No. 18-1269, decided February 25, 2020. The U.S. Supreme Court held that the Bob Richards rule is not a legitimate exercise of federal common law rulemaking. The Bob Richards rule dealt with how an affiliated group of corporations filing a consolidated federal return distributed a tax refund among the members of the group. The Court stated that the rule was not necessary to protect uniquely federal interests and that state law is well equipped to hear disputes involving corporate property rights.

ERISA’s Statute of Limitations
Intel Corporation Investment Policy Committee v. Sulyma, No. 18-1116, decided February 26, 2020. The U.S. Supreme Court held that for the purposes of the section of ERISA that requires plaintiffs with actual knowledge of an alleged fiduciary breach to file suit within three years of gaining that knowledge rather than within the six year period that would otherwise apply, a plaintiff does not have actual knowledge of the information contained in disclosures that he receives but does not read or cannot recall reading. The plaintiff must in fact have become aware of that information.

Other notices

October 17, 2023 — The Financial Crimes Enforcement Network (FinCEN) has posted an alert about recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. According to the alert, the fraudulent correspondence may be titled "Important Compliance Notice" and asks the recipient to click on a URL or to scan a QR code. FinCEN states that it does not send unsolicited requests and that people should not respond to the messages, or click on any links or scan any QR codes within them.

August 13, 2020 — The U.S. Small Business Administration is sending a cyber warning alert to loan applicants seeking federal aid in response to the COVID-19 pandemic. The warning states that “Email phishing campaigns where malicious actors are impersonating the SBA and its Office of Disaster Assistance to collect personally identifiable information (PII) for fraudulent purposes have surfaced.” It further states “It should be noted that any email communication from the SBA will come from email accounts ending in, and nothing more. Loan applicants are being advised to look out for email scams and phishing attacks using the SBA logo.”

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