We are closely tracking and providing information on developments facing companies and organizations arising from the COVID-19 pandemic. In the latest alerts, our lawyers offer guidance on financial and tax relief provisions in Illinois; share observations of how landlords and real estate lenders are responding to defaulting tenants and borrowers; consider the effects of the crisis on M&A transactions; explore how social distancing affects ongoing environmental investigations and mediation; analyze how state and federal legislation may combat insurance coverage denials for COVID-19; and examine the Department of Labor’s guidance regarding expanded family and medical leave under the Families First Coronavirus Response Act. These alerts and others are available in the library of our COVID-19 / Coronavirus Resource Center. 

By: Susanna D. Evarts

On March 18, 2020, the Federal Deposit Insurance Corporation (FDIC) approved the deposit insurance applications for industrial bank applicants Square, Inc., a provider of payment services for small businesses, and Nelnet, Inc., a student loan servicer.  The approvals allow Square and Nelnet to create new industrial banks chartered under Utah law.  Obtaining an industrial bank charter allows companies that are not bank holding companies to own banks that are authorized to originate consumer and commercial loans and collect insured deposits.  Square and Nelnet’s applications are the first that the FDIC has approved in over a decade, marking a potentially significant shift in how the FDIC will treat such applications, and reflecting an increase in the number of active Utah industrial banks, which has hovered at fifteen.  These state-chartered financial institutions are generally subject to the same banking laws and regulations as other types of bank charters.

The approvals come one day after the FDIC issued a proposed rule for public comment, which would impose certain conditions on industrial bank applicants.  This marks a change in the FDIC’s position on approving deposit insurance applications for industrial banks, indicating that the long-dormant industrial bank charter may begin to attract attention once more.  The two new approvals and proposed rule may prompt FinTech and other tech companies to consider seeking a charter as a way to expand their market presence.

We continue our efforts to do everything we can to support our clients as they navigate these times.  Our lawyers have provided practical insight into the legal and strategic challenges companies are facing.  To stay abreast of the quickly changing landscape, Jenner & Block has assembled a multi-disciplinary team, drawn from a variety of our practice areas and sector gro ups, to support clients as they navigate these uncharted waters.  We also continue to update our COVID-19 / Coronavirus Resource Center.  It provides helpful and timely information on the legal and strategic challenges companies are facing. Following is a list of some of those pieces.

First COVID-19 Securities Class Action Lawsuits Hit Cruise Line and Pharmaceutical Company

The rapid developments in the spread and economic impact of COVID-19 present particular challenges for officers and directors of public companies trying to manage their businesses while providing timely and truthful information to shareholders.  Over the last few days, shareholders have filed the first suits alleging that public companies materially misrepresented the impact of COVID-19 on their operations.  If history is any guide, derivative litigation alleging director and officer mismanagement is likely to follow.  Directors and officers of public companies should exercise great care in any public statements regarding the impact of COVID-19 on their businesses, and carefully consider and document the steps they are taking to oversee and respond to COVID-19 developments.

To read more, please click here.

COVID-19: "Employer Guidance for Addressing Possible Layoffs and Closures"

As employers grapple with staffing while dealing with the current COVID-19 crisis, they need to be mindful of their obligations under federal and state legislation addressing certain closures and layoffs.

Under the federal Work Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. §2101, covered employers must provide at 60 calendar days written notice of a covered “plant closing” or “mass layoff.”  WARN contains various definitions that establish:

• Which employers must give notice;
• When such notice must be given;
• Who must receive notice;
• What must the notice contain; and
• When notice may be excused.

To read more, please click here.

COVID-19: Issues Facing the Airline Industry

As the novel coronavirus / COVID-19 continues to cause economic and social turmoil across the globe, the airline industry is suffering particularly acute hardships.  US carriers, including Delta, American, United and Southwest, have announced plans to cut their international routes by as much as 80% to 90% over the next several months, and domestic capacity is now being reduced by 20%-40%.  Foreign carriers have been impacted even more harshly.  Ryanair has announced it may have to ground its entire fleet, Air France has announced cuts into its flight schedule of up to 90% and British Airways has made similar cuts of up to 75%.  Furthermore, the aircraft that continue to fly are far from full.  Along with these flight reductions, airlines have grounded fleets of their larger aircraft, instituted hiring freezes and in some cases commenced layoffs, and US airlines are actively seeking ways to preserve cash on hand and obtain relief from the federal government.

To read more, please click here.

To stay abreast of developments through this unprecedented situation, continue to monitor the Consumer Law Round-Up blog and visit the resource library for helpful reference materials.

When we read the daily news, we see uncharted waters. Industries are being impacted overnight. We continue to do everything we can to support clients as they navigate these times. Our lawyers have provided practical insight into the legal and strategic challenges companies are facing. Jenner & Block has assembled a multi-disciplinary team, drawn from a variety of our practice areas and sector groups, to support clients as they navigate these uncharted waters. We also continue to update our COVID-19 / Coronavirus Resource Center.  It provides helpful and timely information on the legal and strategic challenges companies are facing.  Following is a list of some of those pieces.

Evaluating Force Majeure Clauses in Connection with the COVID-19 Outbreak

As governments and businesses take action to mitigate the impact of COVID-19, companies must consider whether and to what extent their existing contractual agreements oblige parties to perform while events related to COVID-19 are impacting the performance under those contracts. Many contracts contain force majeure clauses that may excuse performance in the face of COVID-19. These provisions are not uniform, and the scope of relief they afford may vary considerably based upon the language used, the jurisdictions involved, and the unique facts and circumstances of each case. We provide a brief overview here of how a force majeure clause may excuse performance with respect to COVID-19-related events. To read more, please click here.

SEC Reacts to COVID-19 Crisis and Issues Relief Relevant to Public Companies and Regulated Entities

On Friday, March 13, 2020, and over the subsequent weekend, the Securities and Exchange Commission (SEC) and its staff made announcements with guidance and/or relief for public companies and firms experiencing challenges because of COVID-19 / coronavirus. The SEC and its staff appear to have calibrated the guidance and relief to balance investors’ need for information with the practical realities of an unprecedented public health event. The SEC also emphasized that it is continuing to “assess impacts relating to the coronavirus on investors and market participants, and will consider additional relief from other regulatory requirements.” To read more, please click here.

Cybersecurity Concerns with Regard to Work-From-Home Policies

The COVID-19 outbreak is causing many companies to consider work-from-home programs for many of their employees. Any arrangement where employees are permitted to work from home poses a unique set of cybersecurity risks and challenges, but those risks are heightened when a majority of the work force are away from offices that are controlled. Ensuring that appropriate technical and administrative safeguards are in place prior to launching wide-scale work-from-home programs is critical to ensuring the safety of your network and data.  For considerations that businesses should take into account when implementing work from home programs, please click here.

To stay abreast of developments through this unprecedented situation, continue to monitor the Consumer Law Round-Up blog and visit the resource library for helpful reference materials.

By:  Alexander M. Smith 

While the Ninth Circuit’s decision reflects a welcome concern about the use of pre-certification discovery to identify potential clients, it further exacerbates the stark contrasts between class action practice in California state courts and California federal courts.

In class actions, named plaintiffs frequently seek discovery from the defendant regarding the identities and contact information of other putative class members. While some view this practice as a normal method of obtaining information about other similarly situated consumers, others view it as a way for plaintiffs’ lawyers to fish for potential plaintiffs—either in new lawsuits, or as a “backup” in the event the court finds the original named plaintiff atypical or inadequate.

In spite of these concerns about fishing expeditions, California state courts have consistently permitted named plaintiffs in class actions to obtain pre-certification discovery regarding the names and contact information of other putative class members. Indeed, the California Supreme Court has repeatedly blessed this practice, holding that the interests of named plaintiffs in seeking relief on behalf of similarly situated consumers—and the broad scope of discovery under California law—weighed in favor of requiring defendants to identify other potential members of the class. See Pioneer Elecs. (USA) v. Superior Court, 40 Cal. 4th 360, 373-74 (2007); Williams v. Superior Court, 3 Cal. 5th 531, 547 (2017).

Conscious of the human, operational and financial strain that coronavirus is placing on businesses and organizations worldwide, Jenner & Block has assembled a multi-disciplinary team, drawn from a variety of our practice areas and sector groups, to support clients as they navigate these uncharted waters.  We have also developed a COVID-19 / Coronavirus Resource Center.  It provides helpful and timely information on the legal and strategic challenges companies are facing. Following is a list of some of those pieces.

US OSHA Issues Guidance for Employers Regarding Preparing for COVID-19 Risks
On March 9, 2020, the federal Occupational Safety and Health Administration (OSHA) issued its “Guidance on Preparing Workplaces for COVID-19,” (Guidance) compiling best practices and existing regulatory standards for evaluating and preparing for risks to workers from exposure to the novel coronavirus and COVID-19. OSHA urges that “it is important for all employers to plan now for COVID-19.” (p. 3)  The Guidance describes: (1) how a COVID-19 outbreak could affect workplaces; (2) steps employers can take to reduce workers’ risk of exposure; (3) classification of jobs into categories of risk and controls to protect workers in each category; and (4) how to protect workers living or traveling outside the US. To read more click here.

EPA Issues Emergency Guidance to Mitigate Spread of coronavirus in the United States
United States Environmental Protection Agency (USEPA) activated its Emerging Viral Pathogens Guidance for Antimicrobial Pesticides (the Guidance) in an attempt to help curb the spread of the novel coronavirus (COVID-19) (the coronavirus) in the United States.  Drafted pursuant to USEPA’s authority under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), the Guidance sets forth a voluntary process by which companies holding FIFRA registrations for disinfecting/antimicrobial products can promote the use of their products against specific “emerging pathogens,” including the coronavirus. While the Guidance was finalized in August 2016, it had remained inactive prior to USEPA’s recent announcement.  To read more click here.

Insurance Law Update: Applying Commercial Property Insurance to COVID-19 Losses
Governments and health authorities worldwide are responding to an outbreak of respiratory disease caused by a novel coronavirus that was first detected in China and which has now been detected in almost 100 locations internationally, including in the United States.  To read more click here.

Action Plan for Government Contractors: An Ounce of Prevention is Worth a Pound of Cure: Be Prepared for coronavirus (COVID-19)
The headlines on coronavirus (COVID-19) continue to escalate.  The World Health Organization now categorizes the outbreak as a “pandemic.”  The Office of Personnel Management (OPM) recently circulated new, additional guidance for federal workers. This guidance intends to ward off criticism that the government had not yet signaled that federal employees and their contractors should not be asked to choose between financial obligations and public health.  To read more click here.

To stay abreast of developments through this unprecedented situation, continue to monitor the Consumer Law Round-Up blog and visit the resource library for helpful reference materials.

By: Michael T. Brody, Gabriel K. Gillett, Howard S. Suskin and Brenna J. Field

This week, the Seventh and DC Circuits issued long-awaited and major decisions addressing a critical issue in class action litigation explicitly left unresolved in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017)—whether a federal court has jurisdiction to hear claims by out-of-state members of a putative nationwide class action whose claims lack a connection to the forum. Both courts said yes, albeit for different reasons. As other circuit courts weigh in, and possibly disagree, the Supreme Court will likely be called upon to resolve the issue.

In Bristol-Myers Squibb, 600 plaintiffs brought a coordinated mass tort action asserting California state law claims in California state court using a California rule for consolidating individual suits. But only 86 plaintiffs were California residents. The defendant argued that it was not subject to specific personal jurisdiction as to the non-resident plaintiffs’ claims because they and their claims lacked a sufficient connection to the forum. The Supreme Court agreed, but stated that it did not decide whether its holding applied to federal courts or to class actions. Since then, some federal district courts have taken this to mean that federal courts have specific personal jurisdiction over defendants facing claims by absent non-resident putative class members in any type of aggregated litigation while others have taken the opposite view, that this ruling limits the court’s jurisdiction to claims by plaintiffs (named and unnamed) with a connection to the forum.

By: Angela M. Allen, Marc B. Hankin and Melissa M. Root

COVID-19 presents an unprecedented global public health challenge that is placing significant stress on economic activity and financial markets.  Widespread mitigation efforts including social distancing and travel restrictions are most directly affecting businesses such as airlines and manufacturers reliant on an international supply chain.  However, at this point it is not possible to accurately predict COVID-19’s second and third order effects.

Just as a business needs to take appropriate steps to safeguard the health and well-being of its employees, it should also ensure its financial viability during this period of significant disruption and uncertainty.  While each enterprise necessarily faces unique challenges, as a general matter   a business would be well served to assess its current financial situation, with a particular focus on maintaining sufficient liquidity and compliance with its financing agreements so as to not trigger a default.  Recognizing that addressing the risk of financial distress is among the many challenges facing businesses at this time, the following are examples of the principal issues they should address in this regard. 

• Financial Planning
  • Maintain Liquidity: During periods of financial and operational stress, the cliché  “Cash is King” rings true.  Conduct a table top exercise with leaders from finance, operations and legal to determine impact of COVID-19 on cash flow, with a goal of creating a 13-week cash flow forecast.  Update the forecast on a regular basis to incorporate new events and insights regarding the impact that COVID-19 is having on employees, customers and suppliers.  Consider delaying non-essential expenditures to address potential liquidity shortfalls.
  • Providing Credit: Consider changing credit terms for customers with liquidity restraints or whose revenue will be reduced due to common mitigation responses to COVID-19, such as travel restrictions and event cancellations.  Options include obtaining third-party guarantees, letters of credit, or moving to COD before fulfilling the customer’s next order.  Before making any such request, confirm that all applicable agreements with the customer permit the changing of such terms.
  • Insurance: Review coverage and consider making a claim under (1) business interruption insurance, (2) civil authority coverage and (3) trade-disruption insurance.
  • Contracts: Evaluate and understand terms of any key contracts where COVID-19 may impair the ability to timely perform. In particular, focus on “force majeure” clauses and cure periods in the event of a potential breach.  
• Maintain Access to Credit
  • Evaluate credit documents for covenant default triggers.
  • Evaluate credit documents for substantive compliance with all reporting obligations. These often include matters relating to litigation, material contracts and events that have a material impact on the business – all of which may arise as a result of COVID-19.
  • Where business interruption insurance is available, review loan covenants to determine if proceeds of that policy may be added back to EBITDA or Net Income when calculating compliance with financial covenants.
• Supply Chain Risks
  • Know and understand your supply chain and map it several tiers down to understand how your business inputs may be affected by COVID-19.
  • Identify critical vulnerabilities and take action. For key suppliers, identify potential alternatives (in particular any local sources) and seek to diversify supply chain to mitigate disruption.
  • Anticipate disruptions in key counterparty supply chain and evaluate potential implications on cash flow, EBIDTA, financial covenants, etc.

As during any period of significant disruption, clear and credible communication within an organization and to customers, suppliers and lenders is key.  Recognize that no one has experienced the substantial and widespread disruption that COVID-19 is causing.  Customers, suppliers and lenders are usually more willing to make reasonable accommodations to assist an enterprise experiencing financial distress when they have transparency into the problem, and the business leaders maintain credibility by providing accurate information and demonstrating that they have carefully considered the interests of all stakeholders. 

By: Julian J. Ginos

The below summary is based on the Court’s official transcript of the argument, which remains subject to final review.

The March 3, 2020 oral argument in Seila Law LLC v. Consumer Financial Protection Bureau[1] focused on whether the Consumer Financial Protection Bureau’s (CFPB) single-director leadership structure is unconstitutional on the ground that the President, by statute, cannot remove that director at will.

Most questioning concerned whether (and how) the Court could draw a principled line distinguishing permissible and impermissible removal restrictions. The justices also probed the advocates about the likely breadth and impact of the rules being proposed. As usual, Justice Thomas asked no questions. Several themes emerged:

• Many justices pursued lines of questioning concerning the possibility of a limited ruling.
  • The Chief Justice asked several times how the CFPB’s budgetary independence should affect the Court’s analysis, which suggests he might propose a resolution distinguishing the CFPB from other agencies to produce a narrower opinion.
  • Justice Kavanaugh pointed out that past decisions treating severability clauses as merely creating a presumption of severability date to an era when the Court’s analysis focused less on statutory text, which may indicate a view that the Court is bound to treat the removal restrictions as severable.
  • Justice Ginsburg asked whether Petitioner had even been harmed, given that the investigative demand was later ratified by an acting director (who was removable at will).
  • Justice Sotomayor similarly asked if the Court should address severability first and reserve consideration of the removal restriction for when a concrete dispute arises between a President and a director, if one ever does.

By: Keturah R. James

In January 2020, the Federal Reserve’s Division of Consumer and Community Affairs published an article titled “From Catalogs to Clicks: The Fair Lending Implications of Targeted, Internet Marketing.”[1]  In the article, Federal Reserve staff Carol Evans and Westra Miller discuss how new technologies have made it possible for companies to obtain a “treasure trove of data about consumers”—including their race, gender, internet browsing patterns, where they live, and with whom they do business—and to use that data to target consumer groups.[2]  As the authors put it, this “targeted marketing” cuts both ways: it can facilitate financial inclusion and tailoring for consumers, but it may also be discriminatory under civil rights and consumer protection laws.[3]

In particular, Evans and Miller acknowledge that the use of consumer data to market credit can raise fair lending concerns, but also recognize that little regulatory guidance exists despite the increased use of Internet-based targeted marketing.[4]  Financial institutions are largely left to their own devices in determining how best to comply with laws that prohibit discrimination in lending, like the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA).  Evans and Miller therefore provide specific recommendations to financial institutions who use targeted marketing, such as:

• Lenders should “ensure that they understand how they are employing targeted, Internet-based marketing and whether any vendors use such marketing on their behalf.”[5]

• Lenders that use online advertising services or platforms should “monitor the terms used for any filters, as well as any reports they receive documenting the audience(s) that were reached by the advertising.”[6]

• Lenders should learn “whether a platform employs algorithms . . . that could result in advertisements being targeted based on prohibited characteristics.”[7]

Evans and Miller conclude by emphasizing the importance of carefully designing and monitoring online targeted advertising, especially given the high stakes that fair access to housing and credit have for minority consumers.[8]  Accordingly, as regulation in this area remains to be more thoroughly developed, financial institutions and others may choose to draw on the guidance in this article in their efforts to ensure that their marketing practices comply with applicable law.

[1] Carol A. Evans & Westra Miller, From Catalogs to Clicks: The Fair Lending Implications of Targeted, Internet Marketing, Consumer Compliance Outlook, Third Issue 2019, at 1.

[2] Id. at 2.

[3] Id. 

[4] Id. at 4. 

[5] Id. at 7. 

[6] Id. 

[7] Id.

[8] Id.