On October 30, 2023, President Biden signed an Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (the “Order”), which establishes an initial framework for the U.S. Government to follow to develop policies to regulate emerging artificial intelligence (“AI”) technologies. The Order’s purpose is to jumpstart a Federal Government wide effort to formalize standards and laws that ensure responsible and safe development and use of AI, which begins with a directive to develop guidelines, standards, and best practices for AI safety and security. According to a Fact Sheet the White House released with the Order, these AI standards are intended to protect Americans’ privacy, advance equity and civil rights, stand up for consumers and workers, promote innovation and competition, and advance American leadership globally. More specifically, the standards are intended to address chemical, biological, radiological, nuclear, cybersecurity, and other foreseeable national security risks, as well as risks from social harms like fraud, discrimination, and dissemination of misinformation.
President Biden Signs Executive Order Establishing Framework for Artificial Intelligence Regulation
On October 30, 2023, President Biden signed an Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (the “Order”), which establishes an initial framework for the U.S. Government to follow to develop policies to regulate emerging artificial intelligence (“AI”) technologies. The Order’s purpose is to jumpstart a Federal Government wide effort to formalize standards and laws that ensure responsible and safe development and use of AI, which begins with a directive to develop guidelines, standards, and best practices for AI safety and security. According to a Fact Sheet the White House released with the Order, these AI standards are intended to protect Americans’ privacy, advance equity and civil rights, stand up for consumers and workers, promote innovation and competition, and advance American leadership globally. More specifically, the standards are intended to address chemical, biological, radiological, nuclear, cybersecurity, and other foreseeable national security risks, as well as risks from social harms like fraud, discrimination, and dissemination of misinformation.
Corporate Transparency Act: Beneficial Ownership Information Reports Required Beginning 2024
The Financial Crimes Enforcement Network (“FinCEN”), a division of the US Treasury Department, issued its final rules (the “Reporting Rules”) under the Corporate Transparency Act (“CTA”), establishing reporting requirements of the beneficial ownership and control of companies formed or registered to do business in the United States and defined as “reporting companies” under the CTA. The CTA became effective in 2021 as part of the Anti Money Laundering Act of 2020, and the Reporting Rules’ stated purpose is “to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, while minimizing the burden on entities doing business in the United States.”
(1) “large operating companies,” which are companies with more than 20 employees, $5M in revenue, and a physical presence in the US; and
(2) “inactive entities,” which are companies not engaged in active business and formed before January 1, 2020, have no assets, are not owned by a foreign person, and that have not received or sent money over $1,000 or had an ownership change in the past year.
NVIDIA and CEO Huang Face Securities Fraud Claims
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SCOTx: No “Informal” Fiduciary Duty from Corporate Director to Shareholder, Regardless of Pre-Existing Relationship of Trust and Confidence
In the Matter of the Estate of Richard C. Poe
Supreme Court of Texas, No. 20-0178 (June 17, 2022)
Opinion (linked here) by Justice Huddle
In Ritchie v. Rupe, the Texas Supreme Court held that, “[a]bsent a contractual or other legal obligation, [an] officer or director [of even a closely held corporation] has no duty to conduct the corporation’s business in a manner that suits an individual shareholder’s interests.” Instead, officers and directors owe fiduciary duties only to the corporation, itself, including “the dedication of [their] uncorrupted business judgment for the sole benefit of the corporation.” But what if a director has a relationship of trust and confidence with a shareholder that arose prior to and independent of their relationship as director and shareholder? The Supreme Court has held previously that such a relationship can give rise to an “informal fiduciary duty.” Can a director simultaneously owe both (i) conventional fiduciary duties to the corporation and (ii) an “informal” fiduciary duty to an individual shareholder, based on their pre-existing relationship? Is the latter an “other legal obligation” that is the exception to the rule as announced in Ritchie? In Poe, the Supreme Court answered, no, “a director cannot simultaneously owe these two potentially conflicting duties.”
Richard C. (“Dick”) Poe operated several car dealerships in El Paso. He consolidated control of them in PMI, a Texas corporation, which was the general partner of several limited partnerships that, in turn, owned and operated the dealerships. Poe’s son, Richard, was the sole shareholder of PMI. But Richard gave his father, Dick, an irrevocable proxy to vote those shares, and Dick was the sole director of PMI. In 2015, Dick caused PMI to issue additional shares of stock, which he bought from PMI for $3.2 million. These new shares made Dick the majority shareholder. Son Richard was not notified of these additional shares until after Dick died, shortly after the shares were issued. Richard sued Dick’s longtime accountant, his office manager, and his attorney for, among other things, conspiring with Dick to breach his fiduciary duties both to PMI and to Richard in issuing the new shares to himself. Richard contended his father’s “informal” fiduciary duty to him, arising from their longstanding relationship of trust and confidence, triggered the “other legal obligation” language of Ritchie, meaning that Dick owed fiduciary duties to Richard, individually, as well as to PMI.
A unanimous Supreme Court of Texas disagreed, holding that
[A]s a matter of law, a corporation’s director cannot owe an informal duty to operate or manage the corporation in the best interest of or for the benefit of an individual shareholder. A director’s fiduciary duty in the management of a corporation is solely for the benefit of the corporation.
Because the trial court erred by allowing the jury to decide
about the existence and breach of an alleged “informal” fiduciary duty from
Dick to Richard, the Supreme Court reversed and (i) rendered judgment against
Richard on his claims for breach of an “informal” fiduciary duty, and, (ii)
because of other errors in the charge, remanded for a new trial on the
remaining issues.
SCOTUS Cuts Burden for Showing Waiver of Arbitration
Mandamus Relief for Denial of Advancement of Defense Costs
Dallas Court of Appeals, No. 05-21-00460-CV (April 12, 2022)
Justices Schenck, Nowell (Opinion, linked here), and Garcia