HB Litigation News

Tag: Compliance

Spotting the Risk, Reaping Rewards: Avoiding Increased Antitrust Scrutiny

The Authors

Katie ReillyWheeler Trigg O’Donnell LLP

Katie has favorably represented antitrust clients in matters involving monopolization, conspiracy, price fixing, exclusive dealing, and other competition-related disputes, including trade secrets and non-compete actions. She has extensive knowledge of the regulatory hurdles and obligations her clients face. Katie earned her J.D. from the New York University School of Law, cum laude.

Natalie WestWheeler Trigg O’Donnell LLP

Natalie West represents sophisticated clients in complex commercial disputes. She regularly serves as the lead brief writer in antitrust cases, employment and consumer class actions, and appellate matters. Natalie graduated with high honors from the University of Texas School of Law, where she served as a member of the Texas Law Review and was elected to the Order of the Coif.

Emerging Litigation PodcastProduced by HB Litigation and Law Street Media

Interviews with leading attorneys and other subject matter experts on new twists in the law and how the law is responding to new twists in the world.

Avoiding Antitrust Scrutiny

Spotting the Risk, Reaping Rewards

The increase in aggressive antitrust enforcement has certainly received significant attention. For the moment, juries are not rewarding the prosecutors. That said, even an unsuccessful government investigation is itself costly and can motivate plaintiffs’ lawyers. Best practices involve not only following the law but also maintaining solid optics to avoid the need for an expensive, if ultimately successful, defense.

Abstract:

A decade ago, few lawyers across the country spent significant time thinking about antitrust law. But, since then, there has been an onslaught of antitrust attacks on businesses and executives across all sectors of the economy. Enforcement efforts have skyrocketed following President Biden’s July 2021 executive order directing a “whole of government” crackdown on competition abuses—and the trend shows no sign of letting up.

Today, no matter the industry or the size of the business, everyone needs to understand these risks and have strategies to minimize them.

This article will walk through the top antitrust risks of the moment and conclude with strategies on how to avoid not only violations but also bad optics that increase exposure.

Download the article now!

September 15, 2023
International Discovery Tool Kit Aims to Facilitate Discovery in Both Domestic and Foreign Litigation

The Authors

Benjamin DanielsRobinson+Cole

Benjamin Daniels advises financial institutions and global corporations about litigation and dispute resolution. As a member of the Business Litigation Group, Ben provides creative and ardent advocacy during litigation, enforcement actions, investigations, crisis management, and white-collar defense matters.

Ben’s clients often face complex, cross-border disputes. He has deep experience with the interplay between domestic and international courts, including discovery disputes and Hague convention proceedings. He also represents clients in international arbitrations and mediations.

Jenna ScovilleRobinson+Cole

Jenna Scoville is a member of the firm’s Business Litigation Group. She focuses her practice on all aspects of general business litigation and dispute resolution, as well as government enforcement matters, and appellate work. She helps companies respond to a variety of business disputes, including claims for breach of contract, unfair trade practices and fraud.

Jenna also has extensive appellate experience. Prior to joining the firm, she clerked for the Honorable Peter W. Hall of the U.S. Court of Appeals for the Second Circuit.

Emerging Litigation PodcastProduced by HB Litigation and Law Street Media

Interviews with leading attorneys and other subject matter experts on new twists in the law and how the law is responding to new twists in the world.

International Discovery Tool Kit Aims to Facilitate Discovery in Both Domestic and Foreign Litigation

“At a time when litigants have increasingly relied on U.S. federal courts to obtain otherwise unobtainable evidence from entities located within the United States, the U.S. Supreme Court has decisively closed the door to U.S.-style discovery in private arbitrations abroad. That means U.S. companies will no longer face the time, exposure, and expense of U.S.-style discovery that § 1782 had injected into those proceedings.“

Abstract: Business knows no borders. Every year companies increase their global reach and open new offices both domestically and abroad. The COVID-19 pandemic accelerated this process—remote employees spread documents and witnesses from Chicago to Shanghai to Sumatra. This has made litigation—especially discovery—more complex. Navigating this environment requires a tool kit of resources to secure discovery in support of both domestic and foreign litigation. This article discusses those tools and several traps for the unwary practitioner facing cross-border discovery to anticipate to effectively use those tools to their benefit.

When evaluating whether to allow a party to use the Hague Evidence Convention, courts consider several factors, including:

1) the importance of the documents or information to the case,

2) the specificity of the request,

3) whether the information originated in the United States,

4) the availability of other ways to secure the information, and

5) whether compliance with the request would undermine important interests of the United States or the foreign country.

Download the article now!

Enjoyed reading Ben & Jenna’s article?

Ben has a podcast exploring the subject more in 2024!

Podcast: Navigating International Discovery

September 15, 2023
The Light and Dark Sides of Auto-GPT

The Light and Dark Sides of Auto-GPT with Jason Epstein

Auto-GPT is a new generative artificial intelligence application which autonomously “self-prompts” to engage beyond a human-chatbot discussion.

This takes us into a realm of AI self-prompted actions that do not need additional human inputs. It also potentially puts the “traditional” GPT models on a fast track to further reduce human interaction. The number of use cases as well as the number of legal and ethical questions is inevitable. For that reason, it’s becoming increasingly important for businesses to understand how Auto-GPT technologies use data, the potential for biased results, and how to responsibly leverage these powerful technologies.

Listen to my interview with Jason I. Epstein, Partner at Nelson Mullins Riley & Scarborough as we explore this emerging field. Jason is the co-head of the firm’s technology and procurement industry group which provides legal services to global buyers and sellers of technology in industries that include FinTech, HealthIT, and manufacturing. An experienced business and technology negotiator, Jason has dealt with a variety of matters, e.g., the metaverse, technology transfer, privacy, cryptocurrency, IoT, open-source code, and more. Jason received his JD from the University of Tennessee College of Law. He formerly taught “Law of Cyberspace” as an adjunct professor at Vanderbilt University Law School.

I hope you enjoy the episode. If so, give us a rating!

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This podcast is the audio companion to the Journal on Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation Conferences and the Fastcaselegal research family, which includes Full Court Press, Law Street Media, and Docket Alarm. The podcast itself is a joint effort between HB and our friends at Law Street Media. If you have comments or wish to participate in one our projects please drop me a note at Editor@LitigationConferences.com.

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Tom Hagy
Litigation Enthusiast and
Host of the Emerging Litigation Podcast
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Jason EpsteinNelson Mullins Riley & Scarborough

Jason Epstein is the co-head of the firm’s technology and procurement industry group. Jason and the technology team provide legal services to buyers and sellers of technology both domestically and internationally in various industries, from FinTech and HealthIT to auto and manufacturing

He often serves as outside general counsel and relationship partner to companies in a variety of industries. His areas of focus include board governance, technology, venture capital and private equity, mergers and acquisitions, reorganizations, international commerce, and litigation. Whether advising clients of Fortune 500, mid-market, or small businesses (including under the SBA), he serves as an advisor to the C-Suite and inside General Counsel regarding business-related law.

August 2, 2023
The IRS and Rules About Rules

The IRS and Rules About Rules with Jeff Luechtefeld

Concepts: IRS, Internal Revenue Service, APA, The Administrative Procedure Act

The IRS closed more than 72,000 appeals last year and its Chief Counsel’s Office received more than 65,000 cases.

That’s a lot of disputes. Safe to say they are about rules. Following rules. Not following rules. Questioning rules. Then, there are rules about rules that the IRS must follow.

The Administrative Procedure Act (APA) is such a beast. The APA places requirements on federal agencies when engaged in a “rule making” that has the force and effect of law. The APA has become a focal point in tax litigation, due in large part to the IRS’s record of refusing to comply with the law’s notice-and-comment mandate. In his article for the Journal on Emerging Issues in Litigation, our guest – Jeffrey S. Luechtefeld, shareholder at Chamberlain Hrdlicka – wrote about challenging the IRS, recent trends in tax litigation, and the future of APA challenges. And now, he’s here on our humble podcast.

Jeff is a tax controversy and litigation attorney with a strong technical tax background and a deep understanding of the inner workings of the agency. Jeff advocates on behalf of clients in IRS examinations, appeals and litigation. Previously, he led the regional tax controversy practice for a Big Four accounting firm. He began his career with the IRS Office of Chief Counsel as a litigator, eventually becoming a Special Trial Attorney in the Large Business and International Division. Jeff received his JD from the University of Missouri, Columbia School of Law.

I hope you enjoy the episode. If so, give us a rating!

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This podcast is the audio companion to the Journal on Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation Conferences, and the Fastcaselegal research family, which includes Full Court Press, Law Street Media, and Docket Alarm — all now part of vLex. If you have comments or wish to participate in one our projects please drop me a note at Editor@LitigationConferences.com. I’m often polite.

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Tom Hagy
Litigation Enthusiast and
Host of the Emerging Litigation Podcast
Home Page
LinkedIn

Jeffrey S. LuechtefeldChamberlain Hrdlicka

Jeff is a tax controversy and litigation attorney with a strong technical tax background as well as a deep understanding of inner-workings of the Internal Revenue Service. Jeff’s practice focuses on representing clients in IRS examinations, appeals and litigation. His knowledge, combined with strong strategic thinking and negotiation skills allows him to effectively advocate for his clients before the IRS.

Previously, Jeff led the regional Tax Controversy practice for a “Big Four” accounting firm, where he assisted clients in resolving disputes administratively within the IRS either while still in examination or before the IRS Office of Appeals.

Read the article.

June 24, 2023
Does the European Union Commission’s Proposal on AI Liability Act as a Game Changer for Fault-Based Liability Regimes in the EU?

Guest Writer

Nils LölfingBird & Bird LLP

Does the European Union Commission’s Proposal on AI Liability Act as a Game Changer for Fault-Based Liability Regimes in the EU?

By Nils Lölfing

Photo by Christian Lue on Unsplash

Abstract: In this article, the author discusses increasing risks that artificial intelligence system providers, developers, and users will face from a liability directive proposed by the European Union Commission.

The AI Liability Directive proposed by the European Union Commission puts additional liability risks on providers, developers and users of specifically high-risk artificial intelligence (AI) systems. If enacted, it could become a game changer for fault-based liability regimes in the European Union, as it introduces a presumption of causality to prove fault and a right of access to evidence from companies and suppliers regarding high-risk AI systems. This will help victims enforce non-contractual civil law claims for damages caused by an AI system.

What this is about and how it increases the liability risk exposure of actors in the AI systems supply chain will be discussed in this article.

Background

On September 28, 2022, the EU Commission published its proposal for a Directive to establish new fault-based liability rules for AI systems (AI Liability Directive), along with a reform for the existing rules on the strict liability of manufacturers for defective products. The current article focuses on the draft AI Liability Directive, which complements the AI Act by facilitating fault-based civil liability claims for damages, which the AI Act as specific product safety Regulation does not offer.

On June 30, 2021, the EU Commission published an inception impact assessment road map on adapting civil liability rules to the digital age, in particular considering AI (based on the EU Commission’s White Paper on AI of February 19, 2020). With respect to AI in particular, the AI liability proposal is part of the approach by the EU Commission to develop an ecosystem of trust for AI (together with the proposed AI Act and the revised Product Safety and Machinery Directive).

The proposal addresses the peculiarities tied to AI such as autonomous behavior and limited predictability, when applying fault-based liability rules. According to the EU Commission, the peculiarities of AI create legal uncertainties for businesses and make it difficult for consumers and other injured parties to receive compensation. In fact, in a representative survey of 2021, liability ranked among the top three barriers to the use of AI by European companies that are planning to but have not yet adopted AI.

These new requirements, such as a presumption of the burden of proof, have the potential to fundamentally change the EU’s liability regime and will increase the exposure to liability risks for businesses who are involved in manufacturing, distributing, or using AI.

What Is It All About and Why Is It a Potential Game Changer?

The AI Liability Directive proposal intends to enable consumers and businesses injured by AI-based products like robots, drones, or smart-home systems to claim compensation more easily by way of non-contractual civil law claims for damages caused by such AI systems. The proposal generally covers any type of AI system (although, like the AI Act, it seems to predominantly intend to cover highrisk AI) and obliges providers, developers, and users of AI systems to compensate any type of damage covered by national law (life, health, property, privacy, discrimination, etc.) and for any type of victim (individuals, companies, organizations, etc.). This requires errors made by someone from within the supply chain, such as a provider, developer, or user of an AI system who caused the damages. Because of the peculiarities mentioned in AI systems, it will typically be difficult to prove a wrongful action or omission by a provider, developer, or user of an AI system.

Therefore, the AI Liability Directive proposal recommends two groundbreaking changes, which will modify common liability rules, as we currently know them across most of the European Union:

• Presumption of causality to prove fault. The proposed AI Liability Directive establishes a rebuttable presumption of causality, to enable claimants to be able to demonstrate a causal link between a failure of an AI system (e.g., in the form of flawed output) and any damage caused to the claimant as the individual or business using the AI system. For example, where certain obligations under the AI Act are not complied with, fault of the relevant person that developed, provided, or used the AI system will be presumed. The presumed fault occurs only if it is reasonably likely, from the circumstances in which the damage occurred, that such fault has influenced the output produced by the AI system or the failure of the AI system to produce an output that gave rise to the damage. Such a fault can also be presumed
by a court of law, on the basis of non-compliance, which would lead to a court order for disclosure or preservation of evidence (detailed in the next point). The presumption of causality generally applies to all AI systems, but in the case of non-high-risk AI systems it only applies where a court determines that it is excessively difficult for the claimant to prove the causal link. If the presumption is triggered, the burden is on the defendant to show that its system is not the cause of the harm suffered.
• Right to access evidence from companies and suppliers regarding high-risk AI. When claiming damages from a high-risk AI system provider, developer, or user, claimants have disclosure powers and may ask the court to order the disclosure of relevant evidence about specific high-risk AI systems that are suspected of having caused damage. For this to happen, the claimant must make its claim plausible and show to a court that the damages were potentially caused by a high-risk AI system. The right to access evidence will ease the proving of claims and identify non-responsible actors in the supply chain much faster. However, commercially sensitive information (like trade secrets) is still protected. The access right does not pertain to AI systems that are not considered high-risk under the AI Act.

What Are the Resulting Risks for Providers, Developers, and Users of AI Systems and How to Protect Against Them?

The proposed AI Liability Directive significantly helps victims that suffered damages through AI systems with the presumption of causality and the right to access evidence, specifically with regard to high-risk AI systems.

Risks for providers, developers, and users of (specifically highrisk) AI systems are not negligible in this regard. Claims brought by the AI Liability Directive can be very broad and far-reaching, as they include any type of damage covered by national law, and therefore typically also include non-material damages, such as for discrimination or potentially even privacy harms resulting from, for example, ad targeting. With the prospect of mass claims, providers, developers, and users of AI systems may see big obstacles in the future.

If the proposed AI Liability Directive is enacted, it will be much more difficult for providers, developers, and users of AI to adequately protect themselves against damage claims due to acts or omissions of their AI systems. Nevertheless, providers, developers, and users of AI systems should find strategies to protect themselves
against the presumption of causality by showing that a fault of their specific AI system could not have caused the damage. Additionally, strategies on how their information can be protected from being disclosed to claimants are sensible to mitigate disproportionate liability risk exposure.

Outlook

Specifically, developers of high-risk AI systems will face additional burden going forward. They not only have to comply with the complementary future AI Act, which is likely to put in place a couple of onerous obligations before their AI systems can be brought on the EU market. Under the AI Liability Directive, developers will also have to find strategies to defend themselves against potential claims as another layer of AI-related legal burdens on top of the AI Act.

However, there is still enough time for providers, developers, and users of AI systems to influence the AI Liability Directive proposal. The European Parliament and the Council will soon start discussing and negotiating the Commission’s proposal. This may still not be the end of the road, at all. For now, the EU Commission has refrained from proposing strict liability regimes for AI systems, although the public consultations have highlighted a preference for such a regime among its respondents (whether with or without insurance).

However, the EU Commission also highlighted that if AI systems could affect the public at large, namely putting a risk to important legal rights, such as the right to life, health, and property, then such strict liability regime will be reconsidered. To monitor developments, the EU Commission put in place a program to obtain information of incidents involving AI systems.

With this information the EU Commission intends to assess whether additional measures would be needed, such as introducing a strict liability regime and/or mandatory insurance. This space must be closely watched!

June 22, 2023
The Blueprint for an “AI Bill of Rights”

Authors

Peter SchildkrautArnold & Porter Kaye Scholer LLP.

Peter Schildkraut is a co-leader of the firm’s Technology, Media & Telecommunications industry team and provides strategic counsel on artificial intelligence, spectrum use, broadband, and other TMT regulatory matters. Mr. Schildkraut helps clients navigate the ever-changing opportunities and challenges of technology, policy, and law to achieve their business objectives at the US Federal Communications Commission (FCC) and elsewhere. He is the author of “AI Regulation: What You Need To Know To Stay Ahead of the Curve.

James KimArnold & Porter Kaye Scholer LLP.

James W. Kim is a nationally recognized expert in procurement law that regularly advises companies that do business with the US government, with a focus on professional services organizations and the life sciences industry. He is a regular speaker and author on procurement and drug pricing matters and his work is regularly featured in nationally-distributed industry print and digital media.

Mr. Kim provides clients with strategic counsel related to US government funding and US market access, including assistance with more than $5 billion in procurement and grant awards and regulatory counsel related to more than $40 billion in successful M&A transactions.

Marne MarottaArnold & Porter Kaye Scholer LLP.

Marne Marotta works with clients facing complex challenges to develop and implement dynamic government relations strategies. Drawing from her experience in the Senate and the executive branch, she provides clients with strategic guidance and counseling, devises and implements comprehensive advocacy campaigns, and builds coalitions with allied stakeholders. Focused on the intersection between business and public policy, Marne uses a multidisciplinary approach to help clients achieve their legislative and agency goals.

James Courtney, Jr.Arnold & Porter Kaye Scholer LLP.

James Courtney focuses his work on a variety of policy areas, including technology, national security, education, and energy and environmental. He conducts research and monitors developing policy issues to aid clients and engage with members of Congress and the Executive Branch. Mr. Courtney works closely with and advises clients on a wide range of regulatory and legislative issues related to technology, privacy, education, workforce development, and energy.

Paul WatersArnold & Porter Kaye Scholer LLP.

Paul Waters focuses on a variety of policy areas, including financial services, tax, digital asset regulation, technology, and defense. He monitors policy developments and analyzes legislation to support client strategy development and stakeholder outreach in Congress and the Executive branch.

First Published inThe Journal of Robotics, Artificial Intelligence & Law

The Journal of Robotics, Artificial Intelligence & Law (RAIL) is the ﬂagship publication of Full Court Press, an imprint of Fastcase. Since 1999, Fastcase has democratized the law and made legal research smarter. Now, Fastcase is proud to publish books and journals that are pioneering, topical, and visionary, written by the law’s leading subject matter experts. Look for more Full Court Press titles available in print, as eBooks, and in the Fastcase legal research service, or at www.fastcase.com/fullcourtpress.

Blueprint for an “Artificial Intelligence Bill of Rights”

Photo by Possessed Photography on Unsplash

Abstract: In this article, the authors discuss the blueprint for an “AI Bill of Rights” unveiled recently by the Biden administration. The blueprint provides a clear indication of the Biden administration’s artificial intelligence regulatory policy goals. This article was first published in The Journal of Robotics, Artificial Intelligence & Law by Fastcase Full Court Press.

More and more, artificial intelligence (AI) and other automated systems make decisions affecting our lives and economy. These systems are not broadly regulated in the United States—although that will change this year in several states. President Biden recently unveiled a blueprint for an “AI Bill of Rights,” motivated by concerns about potential harms from automated decision-making. Arising from an initiative the White House Office of Science and Technology Policy (OSTP) launched in 2021, the AI Bill of Rights lays out five principles to foster policies and practices—and automated systems—that protect civil rights and promote democratic values.

For now, at least, adherence to these principles (and the steps recommended for observing them) remains voluntary—the blueprint is a guidance document with no enforcement authority attached to it. Notably, at inception, OSTP was unsure how the AI Bill of Rights might be enforced:

Possibilities include the federal government refusing to buy software or technology products that fail to respect these rights, requiring federal contractors to use technologies that adhere to this “bill of rights” or adopting new laws and regulations to fill gaps. States might choose to adopt similar practices.

The Biden administration decided to publish a nonbinding white paper, potentially recognizing the difficulty of shepherding legislation through any potential 118th Congress. Indeed, the document’s first page proclaims that it “is non-binding and does not constitute U.S. government policy.” Nor does it “constitute binding guidance for the public or federal agencies and therefore does not require compliance with the principles described herein.” Notwithstanding this disclaimer, the blueprint provides a clear indication of the Biden administration’s AI regulatory policy goals.

The Executive Branch and also independent agencies are likely to follow this lead in their respective domains.

Issues of Definition

In the debate over the European Union’s pending Artificial Intelligence Act, the definition of “artificial intelligence” has attracted much discussion. OSTP sidesteps this issue in the blueprint by addressing “automated systems,” which are defined as “any system, software or process that uses computation as whole or part of a system to determine outcomes, make or aid decisions, inform policy implementation, collect data or observations, or otherwise interact with individuals and/or communities.” OSTP adds, “Automated systems include, but are not limited to, systems derived from machine learning, statistics or other data processing or AI techniques, and exclude passive computing infrastructure,” which OSTP also defines.

The blueprint’s coverage of “automated systems” instead of “artificial intelligence” offers business a mixed bag. On the one hand, the broader scope aligns with the regulation of automated decision-making under California, Colorado,10 Connecticut, and Virginia12 privacy laws and New York City’s law on automated employment decision tools, all taking effect this year, as well as Article 2214 of the EU/UK General Data Protection Regulation.

On the other hand, it potentially threatens international harmonization of regulations based on the seemingly narrower scopes of the UNESCO Recommendation on the Ethics of Artificial Intelligence and the OECD AI Principles (also shared by the G20). Much of the blueprint concerns protection of “rights, opportunities or access.” OSTP explains this phrase as “the set of: civil rights, civil liberties and privacy, including”:

• “freedom of speech, voting, and protections from discrimination, excessive punishment, unlawful surveillance, and violations of privacy and other freedoms in both public and private sector contexts”;

• “equal opportunities, including equitable access to education, housing, credit, employment, and other programs”; or

• “access to critical resources or services, such as healthcare, financial services, safety, social services, non-deceptive information about goods and services, and government benefits.”

This explanation’s expansiveness underscores the Biden administration’s stated intent that the blueprint apply to automated systems affecting any facet of society or the economy.

Guiding Principles

The blueprint outlines five principles for all automated systems with the potential to “meaningfully impact individuals’ or communities’ exercise of rights, opportunities or access”:
• Safe and Effective Systems. Automated systems should be safe and effective. They should be evaluated independently and monitored regularly to identify and mitigate risks to safety and effectiveness. Results of evaluations, including how potential harms are being mitigated, should be “made public whenever possible.”
• Algorithmic Discrimination Protections. Automated systems should not “contribute to unjustified different treatment” or impacts that disfavor members of protected classes. Designers, developers, and deployers should include proactive equity assessments in their design processes, use representative data sets, watch for proxies for protected characteristics, ensure accessibility for people with disabilities, and test for and mitigate disparities throughout the system’s life cycle.
• Data Privacy. Individuals should be protected from abusive data practices and have control over their data. Privacy engineering should be used to ensure automated systems include privacy by default. Automated systems’ design, development, and use should respect individuals’ expectations about their data and the principle of data minimization, collecting only data strictly necessary for the specific context. OSTP stresses that consent should be used only where it can be appropriately and meaningfully provided, limited to specific use contexts and unconstrained by dark patterns; moreover, notice and requests for consent should be brief and understandable in plain language. Certain sensitive data (including data related to work, home, education, health, and finance) should be subject to additional privacy protection, including ethical review and use prohibitions.
• Notice and Explanation. Operators of automated systems should inform people affected by their outputs when, how, and why the system affected them. This principle applies even “when the automated system is not the sole input determining the outcome.” Notices and explanations should be clear and timely and use plain language.
• Human Alternatives, Consideration, and Fallback. People should be able to opt out of decision-making by automated systems in favor of a human alternative, where appropriate. Automated decisions should be appealable to humans.

The blueprint also includes a “Technical Companion” that details “concrete steps” for building these five principles into “policy, practice or the technological design process.” Organizations developing, procuring, and deploying AI and other automated systems will find these concrete steps to be generally consistent with other guidance on best practices.

What Next from the U.S. Government?

Having drawn up the blueprint, the Biden administration is ready to build out its AI policies through guidance, rulemaking, and enforcement. This work is already under way.
Thus far, guidance—both for ethical best practices and compliance with existing laws—has been most common. For instance:
• Department of Energy AI Advancement Council. In May 2022, the Department of Energy established the AI Advancement Council20 to oversee coordination, advise on AI strategy, and address issues on the ethical use and development of AI systems.
• Algorithmic Discrimination in Hiring. In May 2022, the Equal Employment Opportunity Commission (EEOC) and the Department of Justice released a technical assistance document that explains how employers’ use of algorithmic decision-making may violate the Americans with Disabilities Act. EEOC’s guidance is a part of its larger initiative to ensure that AI and “other emerging tools used in hiring and other employment decisions comply with federal civilbrights laws that the agency enforces.”
• Consumer Protection. In May 2021, the Federal Trade Commission’s (FTC) published a blog post providing tips for responsible use of AI in compliance with Section 5 of the Federal Trade Commission Act, the Fair Credit Reporting Act, and the Equal Credit Opportunity Act.

Increasingly, however, the Executive Branch and independent agencies have been shifting to rulemaking and enforcement:
• Broad AI Regulation. In August 2022, FTC opened its “commercial surveillance” proceeding, which could lead to a wide range of rules on AI and other automated systems (as well as privacy and data security). FTC’s Advance Notice of Proposed Rulemaking asks a number of questions about algorithmic accuracy, validity, reliability, and error; algorithmic discrimination against traditionally protected classes and “other underserved groups”; and whether AI and other automated systems yield unfair methods of competition or unfair or deceptive acts or practices that violate Section 5 of the FTC Act.25
• Workplace Protections. The Department of Labor is ramping up enforcement of required surveillance reporting to protect worker organizing. The Department of Labor also released a blog post titled “What the Blueprint for an AI Bill of Rights Means for Workers.”
• Algorithmic Healthcare Discrimination. The Department of Health and Human Services (HHS) issued a proposed rule in August 2022 that, in relevant part, would prohibit algorithmic discrimination in clinical decision-making by covered health program and activities. HHS also planned to release an evidence-based examination of healthcare algorithms and racial and ethnic disparities by late e 2022.
• Algorithmic Housing Discrimination. In June 2022, Meta (formerly, Facebook) settled a Justice Department Fair Housing Act suit (following a Department of Housing and Urban Development investigation). The government alleged that Meta had used algorithms in determining which Facebook users received housing ads and that those algorithms relied, in part, on characteristics protected under the Fair Housing Act. As part of the settlement, Meta agreed to change its targeted advertising practices and to pay the maximum civil penalty of $115,054.
• Algorithmic Credit Discrimination. In March 2022, the Interagency Task Force on Property Appraisal and Valuation Equity released an Action Plan to Advance Property Appraisal and Valuation Equity that includes a commitment from regulators to include a nondiscrimination standard in proposed rules for automated valuation models. Also that month, the Consumer Financial Protection Bureau revised its Supervision and Examination Manual to focus on algorithmic discrimination as a prohibited unfair, deceptive or abusive acts or practice. Businesses should expect the blueprint to inform all such agency actions going forward. It is likely that these agencies will expand their AI initiatives while other agencies will become active addressing AI and other automated systems within their ambits.

The Chamber of Commerce’s Concerns Following the blueprint’s release, the U.S. Chamber of Commerce (the Chamber) wrote34 OSTP Director Dr. Arati Prabhakar,
highlighting a number of concerns:
• Lack of Stakeholder Engagement. OSTP received insufficient stakeholder input in formulating the blueprint, having sought comments only on biometric-identification systems.
• Poor Definitions. The blueprint supplies definitions of key terms, including “Automated System,” which lack precision and could undercut international harmonization of AI policies and standards.
• Independent Evaluations. The current lack of “concrete” auditing standards and metrics for AI systems makes it “pointless” to allow journalists, third-party auditors, and other independent evaluators “unfiltered access” to AI systems—as called for in the blueprint.
• Conflation of Data Privacy and Artificial Intelligence. Data privacy and AI raise “distinctly different” “nuances and complexities,” so the two issues should not be conflated.

The Chamber’s “unexpectedly forceful pushback” (to quote Politico’s Brendan Bordelon) to a supposedly nonbinding guidance document reflects the blueprint’s potential influence. In an interview, a representative said the Chamber expects dozens of federal agencies to incorporate the guidance into regulatory mandates and
fears “copycats at the state and local level.” A patchwork of differing requirements could impose a substantial burden on businesses.

Having released the Blueprint for an AI Bill of Rights with great fanfare, the Biden administration is unlikely to withdraw it in response to the Chamber’s critique. However, the critique probably does foreshadow coming battles in rulemaking dockets and legislative chambers around the country.

Conclusion

AI regulation is arriving swiftly. Businesses should monitor these changes and prepare their compliance programs. Companies with particular concerns may wish to raise them early in legislative and rulemaking processes while proposals remain fluid.

June 22, 2023
How Companies Seeking to Leave China for Mexico Can Mitigate Their Legal Risks and Protect Against New Ones

The Author

Dan HarrisHarris Bricken

Dan Harris (dan@harrisbricken.com) is co-founder of Harris Bricken where he focuses his practice on international law and protecting businesses in their foreign operations. A leading authority on the subject, he is also editor of the highly regarded China Law Blog, and a valued member of the Editorial Board of Advisors for the Journal of
Emerging Issues in Litigation.

Emerging Litigation PodcastProduced by HB Litigation and Law Street Media

Interviews with leading attorneys and other subject matter experts on new twists in the law and how the law is responding to new twists in the world.

How Companies Seeking to Leave China for Mexico Can Mitigate Their Legal Risks and Protect Against New Ones

“Chinese manufacturers commonly seek retaliation against foreign buyers that cease buying product from them. For this reason, it is critical that you line up your new suppliers (preferably in a country other than China) and have them ready to go before you even hint to anyone in China that you might cease or reduce production with an existing China supplier.”

Abstract: The author, one of the leading authorities on the legal issues related to international manufacturing, discusses the risks companies will face if they move their manufacturing out of China, what they should do to mitigate those risks, and what new risks they will face in a new country, such as Mexico. He comments on a variety of concepts, including manufacturing agreements, protection of intellectual property, strategies for a safe departure, potential retaliation tactics, and even personal security matters.

Download the article now!

June 21, 2023
Procedural Challenges to the IRS’s Compliance With the APA and Its Impact on Tax Litigation

The Author

Jeffrey S. LuechtefeldChamberlain | Hrdlicka

Jeffrey S. Luechtefeld (jeff.luechtefeld@chamberlainlaw.com) is a tax controversy and litigation attorney with Chamberlain, Hrdlicka, White, Williams, and Aughtry (Atlanta, Georgia) where he focuses his practice on resolving tax disputes with the Internal Revenue Service, administratively or through litigation. Jeff previously was a Special Trial Attorney for the IRS Office of Chief Counsel as well as a director in the tax controversy practice of a big four accounting firm.

Emerging Litigation PodcastProduced by HB Litigation and Law Street Media

Interviews with leading attorneys and other subject matter experts on new twists in the law and how the law is responding to new twists in the world.

Procedural Challenges to IRS Compliance With the APA and Its Impact on Tax Litigation

Abstract: The Administrative Procedure Act (APA) places specific requirements on agencies of the federal government when engaged in a “rule making” that has the force and effect of law. Recently, the APA has become a focal point in tax litigation, due in large part to the IRS’s history of refusing to comply with the process mandated by the APA. This article focuses on procedural challenges to the IRS’s compliance with the APA based on the IRS’s history of non-compliance with the APA’s notice-and-comment requirement. It highlights recent trends in tax litigation and considers the future of APA challenges in this area.

“IRS’s level of APA non-compliance matters significantly …

“APA challenges predicated on the IRS’s failure to adequately follow the APA’s notice-and-comment process are inherently fact-intensive endeavors …

“The challenging party should gauge the usefulness of the relief requested and balance that against the cost required to prevail …

“Ultimately, APA challenges are important, and may be necessary for a taxpayer to get to argue the merits of their case, but they do not often end the dispute with the IRS.”

Download the article now!

June 16, 2023
Persuasion as Direct and Honest Trial Advocacy with Jack Siegal

Persuasion as Direct and Honest Advocacy with Jack Siegal

The relevance to jury trials and jury persuasion is obvious. According to studies cited in a 2019 article in Business Insider, people develop first impressions of you “even before you open your mouth.” That means your mere appearance “affects how trustworthy, promiscuous, and powerful people think you are.”

It’s the trustworthy part that attorneys need to pay attention to. Regardless of the strength of their case or whether the law is on their side, an attorney still must be persuasive. And, unless the audience – whether it is a judge, a panel of judges, a regulatory body, or a jury – sees you as credible, the rest will likely not matter. But what makes an attorney, or anyone for that matter, credible? Is this something you’re born with or is it something you can develop over time? Is it true, as some studies suggest, that you can change some first impressions by making some changes in how you present yourself, or are you just stuck with a less than trustworthy vibe? Interested in upping your jury persuasion game?

A Good Place to Start

Listen to my interview with attorney Jack I. Siegal, a partner with Fox Rothschild LLP in Boston. Jack believes we can all make positive adjustments in the nuanced practice of achieving credibility.

This podcast is the audio companion to the Journal on Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation Conferences and the Fastcase legal research family, which includes Full Court Press, Law Street Media, and Docket Alarm. The podcast itself is a joint effort between HB and our friends at Law Street Media. If you have comments or wish to participate in one our projects please drop me a note at Editor@LitigationConferences.com.

P.S. Toward the end I could barely manager my ADHD and took the conversation into a chat that ranged from TikTok clips of the attorneys in the Amber Heard/ Johnny Depp trial, somewhat on point, to discussion of great drumming, which would take some crafty knots to tie that in. Jack, being good natured and a good sport, went right along with me. Also, that’s me on the bongos.

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Tom Hagy
Litigation Enthusiast and
Host of the Emerging Litigation Podcast
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Jack SiegalFox Rothschild LLP

Jack is a seasoned trial lawyer with experience spanning 20 years experience, during which he has tried cases in several jurisdictions. He also provides transactional counseling for executive compensation agreements, mergers, and other matters. Jack focuses on complex commercial disputes, government investigations and white-collar defense, regulatory proceedings, and compliance across a wide range of industries, including financial, healthcare, high-technology, and government contracting. Education: Santa Clara University School of Law, J.D., magna cum laude; Santa Clara University, B.A., Greek and Latin, magna cum laude, Phi Beta Kappa; University of Virginia, Graduate Study, Classics and Classical Languages, Literature, and Linguistics.

May 6, 2023
“Years of Deception” Behind Consumer Privacy Violations Alleged
Mental Health Platform’s Data Sharing Practices Challenged.
- BetterHelp allegedly shared personal identifiable info with third parties.
- FTC files administrative complaint asserting “years of deception.”
- Days later, two class actions were filed in the Northern District of California.
Photo by Nik Shuliahin 💛💙 on Unsplash

Online mental health company BetterHelp, Inc. is facing allegations on two fronts for allegedly sharing personal identifiable information with third parties and breaching consumer privacy.

The Federal Trade Commission (“FTC”) initiated an administrative complaint against the California-based online mental health company on March 2, 2023, after what they call years of deceptive practices and blatant denial of a media report published by Jezebel in February 2020. The article cited evidence that BetterHelp shares sensitive patient information and email account information with third parties such as Facebook, Snapchat, Criteo, and Pinterest.

Days after the FTC filed its complaint, consumers filed two class actions in the Northern District of California’s San Jose Division (C.M. v. BetterHelp, Inc., March 7, 2023, 5:23-cv-01033 and Jane Doe v. BetterHelp, Inc., March 11, 2023, 5:23-cv-01096). Both consumer privacy lawsuits state that their facts are largely supported by experts in the field of data privacy.

BetterHelp is a Delaware corporation with its principal office or place of business in Mountain View, Calif. On its website the company claims it is the “world’s largest therapy platform” with more than 25,000 licensed therapists available. BetterHelp operates generalized mental health therapy services and operates specialized therapy services for members of the LGBTQ community, members of the Christian Faith, Spanish-speaking clients, and teen counseling with parental consent. BetterHelp founder Alon Matas stated in a Medium article published Oct. 8, 2018, that, “One of our core missions is to destigmatize mental health. We firmly believe that nobody should ever feel ashamed or embarrassed to reach out for help.”

Explosive Growth

The FTC complaint states that BetterHelp’s website and app “has seen explosive growth over the last few years,” adding more than 118,000 U.S. users in 2018, 158,000 in 2019, and 641,000 in 2020. BetterHelp required new users between August 2017 to December 2020 to fill out mandatory questionnaires. These intake questionnaires reportedly ask a user’s age, marital status, whether they’ve been in therapy before, how they rate their sleeping and eating habits, employment status, and whether they are experiencing overwhelming emotions such as sadness, grief, and depression, and whether they have suicidal ideation.

BetterHelp repeatedly assured users filling out these questionnaires that their email addresses and information would be “kept strictly private” and “never shared, sold or disclosed to anyone.” However, FTC said its investigation revealed that the company used clandestine tactics to share health information of more than 7 million users with Facebook, Snapchat, Criteo, and Pinterest.

The FTC has filed a proposed order that would require BetterHelp to pay $7.8 million as compensation to users who signed up for BetterHelp’s services between Aug. 1, 2017 and Dec. 31, 2020. The compensation is intended to recoup costs patients paid to BetterHelp. The average patient paid an average $60 – $90 per week for these counseling services. The proposed order would also prohibit BetterHelp from sharing consumers’ health data for advertising, sharing their personal information for re-targeting, or serving ads to consumers who had visited the company’s website or app. The FTC is pushing for BetterHelp to accept a settlement where the company agrees to limit their data sharing in the future and the company would be directed to contact affected consumers about the case and must also direct third parties such as Facebook or Pinterest to delete consumers’ health and other personal data shared with them.

Consumer Privacy Investigative Report

During the Covid-19 pandemic, Jezebel gathered information on how BetterHelp handles its users’ data by having Jezebel employees sign up for therapeutic services and monitoring the kinds of information BetterHelp was collecting and sending to third parties. When presented with the findings, BetterHelp said their methods were “standard and that they far exceed all applicable, regulatory, ethical and legal requirements.” Jezebel reported that BetterHelp slipped data to dozens of third parties, monitored their behavior online, and signaled to companies like Facebook, Google, Snapchat, and Pinterest that the applicants were considering BetterHelp services.

The FTC’s investigation followed the investigative report. The Commission states that in December 2020 BetterHelp changed its privacy statement to say, “Rest assured – your health information will stay private between you and your counselor” which was in use until September 2021. Upon notice of the FTC’s investigation and public pressure from consumers, the company changed its privacy statement again in October 2021 to say that it does disclose visitors’ IP addresses and other personal identifiers for advertising, and offered visitors an opportunity to out of these disclosures. Users did not have the option to opt out prior to October 2021.

The FTC describes two methods that BetterHelp used to send information to Facebook.
- In the first, the company compiled visitors’ and users’ email addresses which they then uploaded to Facebook to match the individuals with their Facebook user accounts for the purposes of targeting them and others like them with advertisements.
- Secondly, between 2013 and December 2020, Better Help shared visitors’ and users’ email address, their IP address, and records known as “events” to Facebook. These events automatically tracked when each visitor or user on the main website or affiliate websites answered certain questions on the intake questionnaire or when they enrolled in a certain service. BetterHelp automatically disclosed these events to Facebook through what are known as web beacons that were placed on every website they operated.
With two consumer privacy class actions looming and the FTC’s administrative complaint, BetterHelp faces significant pressure to make serious changes.

By Hunter SchmitzGuest Writer

Hunter Schmitz is a freelance legal writer and paralegal with Focus on Property Law and Civil Litigation.
May 2, 2023