Category Archives: U.S. Supreme Court (SCOTUS)

CFPB “Firing On All Cylinders” After Surviving Constitutional Challenge To Funding Structure

by Nowell D. Bamberger, Elsbeth Bennett, and Andrew Khanarian

From left to right: Nowell D. Bamberger, Elsbeth Bennett and Andrew Khanarian. (Photos courtesy of Cleary Gottlieb Steen & Hamilton LLP)

The Supreme Court recently upheld the Consumer Financial Protection Bureau’s funding structure in a 7–2 decision that will likely pave the way for renewed regulatory activity by the agency in the near future.

Enacted as part of the Dodd-Frank Act, the CFPB’s unique funding structure permits the agency to annually request an unspecified portion of funds from the Federal Reserve System, subject to an inflation-adjusted cap. In rejecting a constitutional challenge to this funding structure by several trade associations, the Supreme Court held in Consumer Financial Protection Bureau v. Community Financial Services Association of America that the Appropriations Clause merely requires Congress to identify the source and purpose of federal funds, and that Congress’s one-time appropriation for the CFPB in the Dodd-Frank Act meets that minimal constitutional standard. The seven-member majority largely aligned in their reasoning that the Constitution’s text and history, as well as early congressional practice, endorsed funding mechanisms such as this one, and thus provided broad legal support for the fiscal independence of agencies that are delegated substantial powers. As a practical matter, this decision will likely jumpstart long-delayed regulatory and enforcement work at the CFPB, including the vacated payday lending rules that were the subject of this litigation.

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Supreme Court Holds That “Pure Omissions” Are Not Actionable Under Rule 10b-5(b)

by Elliot Greenfield, Matthew E. Kaplan, Maeve O’Connor, Benjamin R. Pedersen, Jonathan R. Tuttle, Anna Moody, Brandon Fetzer, and Mark D. Flinn

Top left to right: Elliot Greenfield, Matthew E. Kaplan, Maeve O’Connor, and Benjamin R. Pedersen.
Bottom left to right: Jonathan R. Tuttle, Anna Moody, Brandon Fetzer, and Mark D. Flinn. (Photos courtesy of Debevoise & Plimpton LLP).

On April 12, 2024, in a highly anticipated decision, the Supreme Court held in Macquarie Infrastructure Corp. v. Moab Partners, L.P.[1] that pure omissions are not actionable in private litigation under Rule 10b-5(b). Resolving a circuit split, the Court held that Rule 10b-5(b) does not support a “pure omissions” theory based on an alleged failure to disclose material information required by Item 303 of SEC Regulation S-K (Management’s discussion and analysis of financial condition and results of operations, or MD&A). Instead, a “failure to disclose information required by [MD&A] can support a Rule 10b-5(b) claim only if the omission renders affirmative statements made misleading.”[2] While the decision arose in the context of Item 303, which requires disclosure of “known trends and uncertainties” that have had or are “reasonably likely” to have a material impact on net sales, revenues or income from continuing operations,[3] the decision stands for the broader principle that Rule 10b-5(b) does not support pure omissions theories based on alleged violation of any disclosure requirement. Such claims remain viable, however, under Section 11 of the Securities Act of 1933. This ruling provides welcome clarity to issuers and eliminates the risk of pure-omission claims under Rule 10b-5(b) based on the judgment-based requirements of MD&A.

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Amid Storm of Controversy, SEC Adopts Final Climate Disclosure Rules

by Stephen A. Byeff, Ning Chiu, Joseph A. Hall, Margaret E. Tahyar, Ida Araya-Brumskine, Loyti Cheng, Michael Comstock, and David A. Zilberberg

Top from left to right: Stephen A. Byeff, Ning Chiu, Joseph A. Hall, Margaret E. Tahyar.
Bottom left to right: Ida Araya-Brumskine, Loyti Cheng, Michael Comstock, and David A. Zilberberg. (Photos courtesy of Davis Polk & Wardwell LLP).

Changes from the proposal include elimination of Scope 3 disclosures, scaled back attestation requirements, additional materiality qualifiers and narrower financial statement triggers. Given the lack of explicit congressional authorization for this new sweeping disclosure regime, its political sensitivity, complexity, cost and the substantial challenges already underway in federal courts, we anticipate rapid developments and possibly confusing stops and starts to unfold over the coming weeks.

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White-Collar and Regulatory Enforcement: What Mattered in 2023 and What to Expect in 2024

by John F. Savarese, Ralph M. Levene, Wayne M. Carlin, David B. Anders, Sarah K. Eddy, Randall W. Jackson, and Kevin S. Schwartz

Top left to right: John F. Savarese, Ralph M. Levene, Wayne M. Carlin, and David B. Anders.
Bottom left to right: Sarah K. Eddy, Randall W. Jackson, and Kevin S. Schwartz. (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

This past year was yet another notable and intensely active one across the entire range of white-collar criminal and regulatory enforcement areas. We heard continued tough talk from law enforcement authorities, especially concerning the government’s desire to bring more enforcement actions against individuals and on the need to keep ramping up corporate fines and penalties. The government largely lived up to its talking points about increasing the numbers of individual prosecutions and proceedings, particularly with respect to senior executives in the cryptoasset industry. But there were some notable stumbles. The most striking example of this was DOJ’s failure to secure convictions in cases where it attempted to extend criminal antitrust enforcement in unprecedented areas, such as no-poach employment agreements and against certain vertical arrangements—neither of which has historically been viewed as involving per se violations of the federal antitrust laws. And, as in years past, many state attorneys general remained active throughout 2023, using broad state consumer-protection statutes to bring blockbuster cases across a wide array of industries, from ridesharing and vaping to opioids and consumer technology offerings.

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DEI Initiatives Post-SFFA: Considerations for Boards and Management

by Martin Lipton, John F. Savarese, Adam J. Shapiro, Erica E. Bonnett, Noah B. Yavitz, and Carmen X. W. Lu

Top left to right: Martin Lipton, John F. Savarese, and Adam J. Shapiro.
Bottom left to right: Erica E. Bonnett, Noah B. Yavitz, and Carmen X. W. Lu
(Photos courtesy of Wachtell, Lipton, Rosen & Katz)

It is no secret that American corporations face vigorous — and often conflicting — demands concerning diversity, equity and inclusion (DEI) initiatives. Over the past year, DEI initiatives and commitments have come under pressure in the face of macroeconomic headwinds, political scrutiny and legal challenges. That pressure has only grown following the Supreme Court’s recent decision against affirmative action in SFFA v. Harvard (as discussed in our prior memo), after which Attorneys General from both red and blue states sent conflicting letters to Fortune 100 companies on what the SFFA decision meant for corporate DEI initiatives.

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Former Federal Prosecutors and Defense Attorneys React to Dubin v. United States

Editor’s Note: The NYU Law Program on Corporate Compliance and Enforcement is following the Supreme Court’s recent decision in Dubin v. United States, in which it circumscribed the application of the aggravated identity theft statute, 18 U.S.C. § 1028A. In this post, former federal prosecutors and current defense attorneys react to the decision.

Top left to right: Elizabeth Geddes, Brian Jacobs, Paul Krieger, and Harry Sandick.
Bottom left to right: Justin Weddle, Elisha Kobre, and Sarah Krissoff
(Photos courtesy of authors and their firms)

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Supreme Court Issues Decision in High-Stakes False Claims Act Case: Outcome and Future Implications

by Kayla Conti

Kayla Conti (Photo courtesy of Kohn, Kohn & Colapinto LLP)

On June 1, 2023, the Supreme Court issued a unanimous decision[1] in the consolidated case of U.S. ex rel. Schutte v. SuperValu, Inc. (“SuperValu”)[2] and U.S. ex rel. Thomas Proctor v. Safeway, Inc. (“Safeway”),[3] holding that subjective intent is relevant for determining whether a defendant acted “knowingly” under the False Claims Act. The Supreme Court reversed the Seventh Circuit’s decisions in favor of Petitioners, which effectively preserves the False Claims Act as a major tool for both prosecuting and deterring fraud. While whistleblowers, taxpayers, and anti-fraud advocates have ample reason to rejoice, the decision left more to be desired by the Department of Justice and many entities who submit claims for payment to federal programs.

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U.S. Supreme Court Rejects Anti-Terrorism Act Claims Against Social Media Platforms Used By ISIS

by Carmine D. Boccuzzi Jr., Mark E. McDonald, Leila Mgaloblishvili, Miranda Herzog, Nowell D. Bamberger, Chase D. Kaniecki, and Rathna Ramamurthi

From top left to right: Carmine D. Boccuzzi Jr., Mark E. McDonald, Leila Mgaloblishvili, and Miranda Herzog.
From bottom left to right: Nowell D. Bamberger, Chase D. Kaniecki, and Rathna Ramamurthi.
(Photos courtesy of Cleary Gottlieb Steen & Hamilton LLP)

On May 18, 2023, the Supreme Court issued a decision in Twitter, Inc. v. Taamneh, et al.,[1] unanimously rejecting claims against Twitter, Facebook and Google (as the owner of YouTube) for allegedly aiding and abetting ISIS in its commission of terrorist attacks. Plaintiffs, who were injured in an ISIS-sponsored terrorist attack on the Reina nightclub in Istanbul in 2017, alleged that Twitter, Facebook and Google were liable under the Anti-Terrorism Act (“ATA”), 18 U.S.C. § 2333(a), as amended by the Justice Against Sponsors of Terrorism Act (“JASTA”), 18 U.S.C. § 2333(d)(2), because they allegedly knowingly allowed ISIS to use their social media platforms and “recommendation” algorithm tools, profited from advertising revenue on ISIS content, and failed to take sufficient steps to remove ISIS-affiliated accounts. The Supreme Court held that these allegations were insufficient to establish aiding and abetting liability under JASTA, in a decision that substantially clarifies the circumstances under which companies in the U.S. who offer widely-available and generalized services may be liable for complicity in terrorist attacks.

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The Supreme Court’s Upcoming Affirmative Action Decision: Potential Implications for Private-Sector Employers

by Jyotin Hamid, Simone S. Hicks, Mary Beth Hogan, Arian M. June, Tricia Bozyk Sherno, Rachel Tennell, and Katelyn Masket

Top row from left to right: Jyotin Hamid, Simone S. Hicks, Mary Beth Hogan, and Arian M. June.
Bottom row from left to right: Tricia Bozyk Sherno, Rachel Tennell, and Katelyn Masket.
(Photos courtesy of Debevoise & Plimpton LLP)

The Supreme Court of the United States is expected to issue a widely anticipated decision next month concerning the permissibility of race-conscious affirmative action in higher education in the Harvard College and University of North Carolina cases.[1] Although these cases arise in the context of education, not employment, and do not formally concern laws governing private-sector employment, we expect that the decision may have far-reaching implications for how courts, lawmakers, employers, and employees address efforts to promote diversity in private-sector workplaces. In particular, the decision may have an impact on how employers navigate the line between permissible efforts to promote workplace diversity and avoiding so-called “reverse discrimination” lawsuits brought by employees who may claim that they are disadvantaged by such efforts.

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Supreme Court Overturns Wire Fraud Conviction of Private Citizen Under Honest- Services Theory After Holding That the Jury Instructions Given Were Too Vague

Editor’s Note: The NYU Law Program on Corporate Compliance and Enforcement (PCCE) is following the recent U.S. Supreme Court decisions in Percoco v. United States and Ciminelli v. United States, which narrow the scope of honest services fraud and eliminate the so-called “Right to Control” theory in federal fraud cases, respectively. Together, these two cases continue a trend of circumscribing the federal government’s ability to prosecute domestic public corruption in the United States.

by Thomas H. Dupree Jr., Bradley J. Hamburger, Allyson N. Ho, Brad G. Hubbard, Lucas C. Townsend, and Julian W. Poon

Top row from left to right: Thomas H. Dupree Jr., Bradley J. Hamburger, and Allyson N. Ho. Bottom row from left to right: Brad G. Hubbard, Lucas C. Townsend, and Julian W. Poon. (Photos courtesy of Gibson, Dunn & Crutcher LLP)

“‘[T]he intangible right of honest services’ codified in § 1346 plainly does not extend a duty to the public to all private persons.” – Justice Alito, writing for the Court

The Supreme Court overturned a wire fraud conviction based on an honest-services theory. The Court reasoned that while such a theory can potentially cover private persons, it does not extend to all private persons. The jury instructions given in this case were too vague because they failed to define the intangible right to honest services with sufficient definiteness.

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