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Alston & Bird Webinar Series: Coronavirus: What Does My Business Need to Know?

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Thursday, March 12, 2020  | 11:00am ET 
For Employers: Coronavirus and Travel: A Complicated Business Decision 

The 2019 novel coronavirus outbreak (also known as COVID-19) causes respiratory illness and can spread from person to person. There have been thousands of deaths reported globally, making the coronavirus deadlier than SARS. Coronavirus infections have been reported in dozens of countries. Individuals are being extracted from and departing China and the region, and pandemic fears have also affected shipping and travel around the world. Concerns about the coronavirus have closed factories and forced quarantines throughout China – delaying and even stopping manufacturing and deliveries.

The number of COVID-19 cases in the U.S continues to rise, affecting employers and employees in every industry, from hospitality to manufacturing to health care. What should employers consider in making decisions? This Alston & Bird webinar will review advice we are giving clients related to:

  • Travel, both foreign and domestic
  • Employee health precautions
  • Events and conferences
  • Office/workplace visitors
  • Remote workforce
  • Force majeure and the coronavirus

Our Speakers:

Dawnmarie Matlock regularly advises health care clients on complex regulatory issues, including Stark Law and AntiKickback compliance. She counsels clients facing government investigations and other enforcement actions to mitigate risks and help resolve active matters. She serves as Alston & Bird’s HIPAA privacy officer and counsels clients on HIPAA compliance and breach response.

Angie Burnette assists hospitals, physicians, and other providers with a variety of issues, including those involving medical staff, the National Practitioner Data Bank, mental health, surrogate births, minors, duty to warn, do-not-resuscitate orders, end-of-life issues, and refusal of blood transfusions. Angie provides general risk management and compliance advice to health care facilities, providers, and health plans. She also advises health care providers and non-health-care companies on HIPAA privacy, HIPAA security, and breach notification issues under the HITECH Act and state laws.

Christy Eikhoff will discuss force majeure in light of the coronavirus. She represents clients in significant and high-profile complex commercial litigation matters, with experience in manufacturing, media, and insurance. She is the co-chair of Alston & Bird’s Industrials & Manufacturing Litigation Team. She has handled several multimillion-dollar cases for publicly and privately held entities, with extensive experience in trial, arbitration hearings, mediation, written advocacy, settlement negotiations, and discovery management. Christy has been instrumental in helping business clients achieve resolution in litigated disputes involving claims of breach of contract, fraud, business torts, property torts, defamation, negligence, and unfair and deceptive trade practice and consumer protection statutes.

Charlie Morgan concentrates his practice in litigation and government and internal investigations, including occupational safety and health, employment and traditional labor matters. He represents Fortune 500 companies, retailers, manufacturers and privately held organizations across the U.S. in investigations and litigation involving accidents and safety issues, in class and collection actions, and in anti-union campaigns. He also develops programs and training initiatives for compliance with safety and health laws and federal sentencing guidelines.

Our Experience 

Alston & Bird has formed a working group to advise clients on the business and legal implications of the coronavirus. Our multidisciplinary team can assist and advise a broad range of economic sectors on responses to coronavirus news and proactive steps to ensure business continuity, supply-chain alternatives, data security if remote access for all employees is required, and new product development. We regularly work on coronavirus-related issues with the gamut of relevant regulatory bodies as well as congressional policymakers who are leading the response to this fast-moving event. Our team includes members with experience in regulations for employment issues, medical product development, and pharmaceuticals, as well as every type of business interruption scenario. Members of our team have previously worked for, or represent clients before, the White House, Congress, HHS—especially staff and operating divisions such as the Assistant Secretary for Preparedness and Response (ASPR) — FDA, CDC, USDA, EPA, DEA, DOD, SEC, DHS, DOS, and OSHA.

Webinar Details

Thursday, March 12, 2020

Login information will be provided to participants before the program.

Additional Programs 

Thursdays | 11:00 am ET  

March 19 – For Hospitals, Health Systems, Laboratories and Other Providers: Reimbursement issues, new codes, special employee issues, telemedicine, and how to navigate this new environment.

March 26 – For employers, health plan sponsors and insurers, hospitals, hospitality, and pharmaceutical and medical device manufacturers: What’s still pending on the legislative and regulatory front in response to the coronavirus pandemic.

CLE

These programs are provided as a complimentary service to clients and friends of Alston & Bird. CLE credit is pending for Georgia, Texas, California, New York, Pennsylvania, and Missouri. Additional states may be available upon request.

CLICK HERE TO RSVP

Why Consumer Finance Companies Should Hit “Delete” On Using Emojis In Business Communications

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A&B ABstract:  What does the increased use of emojis in business communications mean for consumer finance companies, and how can risks be mitigated?

Discussion

As emojis increasingly make their way into business communications, their use is creating unanticipated and problematic legal exposure for companies and their employees. Roughly 200 published court decisions since 2004 have grappled with emojis as evidence, and the number of these cases spiked as of 2017.  In business settings, these cases run the gamut from contract disputes to sexual harassment and discrimination.

The potential problems arising from workplace emoji use are particularly acute for consumer finance companies such as lenders and mortgage servicers, given the wide diversity of backgrounds among – and thus the greater potential for miscommunication with – their clients. The emoji trend shows no signs of slowing, and their legal complications in business communications will likely worsen absent common-sense safeguards.

Background on Emojis

Emojis, of course, are small picture characters used in emails and text messages. They integrate visual images into text, and they can expand depth and emotional content in ways that written words cannot. As explained by Professor Eric Goldman, , as of January 1, 2018, there were 2,600 emojis with codes under the Unicode Consortium. Countless more emojis are specific to different messaging platforms. Other related symbols are “emoticons,” which are letters, numbers, and other standard keyboard characters that are strung together to resemble a picture (e.g., the “smiley” emoticon – :-)). According to recent surveys, 92% of online participants use emojis, and 2.3 trillion mobile messages include emojis annually. They are ubiquitous and now common in business communications between colleagues and with clients in emails, texts, and instant messages, among other media.

The Problems With Emojis In Business Communications

The major problems with emojis involve their interpretation and meaning. If, as the saying goes, a picture is “worth a thousand words,” then so is each emoji. This reflects two major attributes of emojis that can lead to unintentional and profound misunderstandings in business communications with colleagues and clients.

First, different platforms translate and depict emojis differently. This means that an emoji sent via an iPhone may look quite different on an Android device, and vice versa. The same problem occurs with new versions of the same platform. Further, the sender and receiver have no easy way of knowing they are looking at symbols rendered differently across platforms, and they also do not necessarily even know that the emoji is being read on a different platform. All of this can lead to major misunderstandings. A classic example is the Unicode-coded emoji known as “grinning face with smiling eyes.” A 2016 survey revealed that most people thought the Android version meant “blissfully happy,” but thought the iPhone version meant “ready to fight.” The burgeoning field of emoji research reveals many similar examples. So a seemingly innocent email or text to a colleague or client that contains an emoji could inadvertently send an entirely different message than intended, solely based on technological issues beyond the participants’ control or knowledge.

Second, emojis often have multiple meanings that not all senders and recipients will mutually recognize. Indeed, Unicode Technical Standard #51 states a preference for adopting emojis with multiple meanings. Although this allows senders to convey many different concepts at once, it also raises the prospect of serious misunderstandings. The absence of any comprehensive and accepted emoji dictionary exacerbates this problem. The “folded hands” emoji, for example, can symbolize please, thank you, prayer, and a high-five – all very different meanings, with different implications. A 2016 survey showed that the iPhone “unamused face” emoji is variously interpreted as signaling disappointment, depression, being unimpressed, and being suspicious.

There may also be differences in emoji interpretation among different user groups, industries, and generations of users, all of whom may have their own idiosyncratic understandings of given emojis. This risk is heightened when corresponding with colleagues and clients from diverse groups that may not share a common background or frame of reference with the sender – a particularly acute issue for large client-facing organizations in the consumer finance industry.

Litigation Involving Emojis In Business Communications

Given the ubiquity of emojis, their use and interpretation have become fodder for the courts. Since 2008, U.S. courts in published decisions have addressed emojis in dozens of business cases involving breach of contract, employment discrimination, and sexual harassment.

For example, in Murdoch v. MedJet Assistance, an employee based claims of sexual harassment against her CEO on texts containing emojis with hearts and similar symbols, but her claims were dismissed in part because she responded with emojis that seemed receptive to his advances. Thus, emojis were important evidence for both sides in the case. In Apatoff v. Munich Re American Services (2014 U.S. Dist. LEXIS 106665 (D.N.J. 2014)), the court denied a company’s motion for summary judgment in a wrongful termination case because several managers’ emojis in internal emails discussing the termination suggested an improper motive, contrary to their deposition testimony.  These are but two examples of many similar cases.

Takeaways

Given the problems stemming from emoji use, companies in the consumer finance industry should consider implementing strict emoji-use policies. Because it is impossible to impose universally-accepted meanings on emojis among clients, colleagues, and other email or text counterparts, it may be most prudent to ban the use of emojis in employees’ business communications. The corporate IT department could also disable emojis on company systems.

Possible limited exceptions could be made for purely social communications with clients and colleagues. But the high risk of misunderstandings in a business context, which can give rise to disputes over contract formation, and potentially harassment or discrimination claims, seems to militate in favor of a bright-line rule against the use of emojis altogether. This may limit the spontaneity of business communication and make it more formal, but these downsides must be weighed against the real possibility of inadvertently forming (or breaching) contracts or other real consequences of emoji use. Another policy could require the insertion of disclaimers at the bottom of emails, expressly stating that emojis may form no part of any offer, acceptance, or agreement.

Unless and until the technology and societal understanding of emojis evolves further, the indeterminate meanings that can make emojis fun can also make them perilous in a business context. Companies must consider whether emojis are more trouble than they are worth.

Puerto Rico Office of the Commissioner of Financial Institutions Announces Mandatory Mortgage Servicer Reporting in Response to Recent Earthquakes

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A&B ABstract:

In the wake of the recent earthquakes in Puerto Rico, the Puerto Rico Office of the Commissioner of Financial Institutions (“OCFI”) released Circular Letter No. CFI-2020-01 (the “Circular Letter”). The Circular Letter imposes weekly and monthly reporting requirements on all Puerto Rico licensed mortgage lenders, mortgage servicers, Home Equity Conversion Mortgage servicers, reverse mortgage servicers, and all financial institutions acting as mortgage servicers (collectively “Mortgage Servicers”) for specific zip codes and “persons affected by the earthquake” in Puerto Rico. Significantly, the Circular Letter does not include a deadline for Mortgage Servicers to submit the first monthly report, but it provides that the first weekly report is due by 4:30 P.M. on February 5, 2020, for the week ending January 31, 2020.

Purpose of the Circular Letter

The Circular Letter requires that all Mortgage Servicers report to OCFI on their on-going activities to assist all persons affected by the earthquakes that took place in southern Puerto Rico commencing on December 28, 2019, and which continue as of the date of the Circular Letter, January 31, 2020. Specifically, the OCFI is interested in the efforts undertaken by Mortgage Servicers to help the affected persons to file insurance claims to recover their property losses caused by the earthquakes.

Covered Persons for Reporting

For purposes of the reporting requirement, “persons affected by the earthquake” include “persons who suffered a physical damage to their residence or buildings (whether or not covered by hazard or homeowner’s insurance and/or other type of property insurance), persons who have suffered economic injury or loss attributable to the earthquakes (including, but not limited to, loss of income from employment or business), and persons who have been harmed or suffered injuries from the earthquakes or circumstances or events directly related to the earthquakes, which persons’ principal residence or place of employment or business is located in [the following 17 zip codes in Puerto Rico]”:

  • Adjuntas, 00601
  • Maricao, 00606
  • Arecibo, 00612
  • Peñuelas, 00624
  • Sabana Grande, 00637
  • Ciales, 00638
  • Utuado, 00641
  • Guánica, 00653
  • Guayanilla, 00656
  • Hatillo, 00659
  • Jayuya, 00664
  • Lajas, 00667
  • Lares, 00669
  • Yauco, 00698
  • Ponce, 00730
  • Ponce, 00731
  • Juana Díaz, 00795

Reporting Requirements

Monthly Reporting Requirement: For all persons affected by the earthquake, Mortgage Servicers must provide a monthly report, for each of the 17 zip-codes listed above, on the OCFI’s “Report of Moratorium Granted Due to Earthquake PR” Form. This form does not appear to be publicly-available on the OCFI’s website. The Circular Letter did not specify when Mortgage Servicers must submit the monthly reports or any associated timing requirement. A conservative reading of the Circular Letter would suggest that the end of the first monthly reporting period would be February 29, 2020, one month after the OCFI released the Circular Letter.

Weekly Reporting Requirement: For all consumer mortgages on properties located in the 17 listed zip-codes, or for persons affected by the earthquake, Mortgage Servicers must provide weekly individual reports by zip-code using the OCFI’s “Mortgage Delinquency Report” Form for the entirety of their portfolio. This form also does not appear to be publicly-available on the OCFI’s website. The Circular Letter states that the first weekly report is due to the OCFI by 4:30 p.m. on Wednesday, February 5, 2020, and all subsequent weekly reports must be submitted the Wednesday after the proceeding week, by 4:30 p.m. Each weekly report must cover all activity Monday-Friday from the previous week.

The Circular Letter specifies that Mortgage Servicers are required to transmit the weekly and monthly reports to the OCFI in electronic form using the corresponding excel forms in the appendix of the Circular Letter. However, the Circular Letter does not provide an email or portal where licensed Mortgage Servicers are supposed to submit their reports.

Takeaways:

Licensed Mortgage Servicers in Puerto Rico are now required to submit a monthly report for mortgage servicing activity taken to help borrowers affected by the recent earthquakes and are required to submit weekly reports for all consumer mortgages located in the 17 zip-codes and for all persons affected by the earthquake. The first weekly report, which shall cover activities undertaken in the week commencing on January 27, 2020, is due tomorrow, February 5, 2019, in electronic format to the OCFI by 4:30 P.M. EST. Going forward, weekly reports are due every Wednesday at 4:30P.M. EST, which must include any relevant activity from the previous week.

Mortgage Servicers that fail to provide their reports to the OCFI in a timely manner may be subject to penalties: the OCFI may impose fines of up to $10,000 for each violation of any rules and regulations under title 7 chapter 143 of the Laws of Puerto Rico, and the OCFI may also impose fines of up to $5,000 for each day that a Mortgage Servicer fails to comply with any orders issued by the Commissioner.

FHFA Proposes New Minimum Financial Requirements for Fannie Mae and Freddie Mac Seller/Servicers

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A&B ABstract

 In keeping with broader scrutiny on non-bank servicers, the Federal Housing Finance Agency (FHFA) is proposing new financial eligibility requirement for non-bank servicers doing business with Fannie Mae or Freddie Mac.

The Proposal:

On January 31, the FHFA proposed new financial eligibility requirements for approved nonbank Seller/Servicers doing business with Fannie Mae or Freddie Mac.  FHFA will accept comments for 60 days and anticipates that the requirements will be finalized in the second quarter of 2020 and take effect six months thereafter.

FHFA’s announcement follows the Financial Stability Oversight Council’s (FSOC) finding in its 2019 Report to Congress that nonbank mortgage companies are a “potential emerging threat” to the U.S. economy.  Specifically, FSOC noted that such nonbanks play a large role in originating and servicing mortgage loans, including those held by Fannie Mae, Freddie Mac and Ginnie Mae securities.

FSOC:

The Dodd-Frank Act created FSOC to identify risks, promote market discipline, and respond to emerging threats to the stability of the U.S. financial system.  FSOC comprises 10 voting members (one of which is FHFA), and five nonvoting members (that serve an advisory role).

In its annual report to Congress, FSOC made several statements concerning the potential risks from nonbank mortgage companies.  For example, FSOC found that nonbanks “rely heavily on short-term funding sources,” “typically have low capital levels,” and “have few resources to absorb adverse economic shocks.”  FSOC concluded that “[g]iven these fragilities, the nonbank sector could potentially be a source of weakness as a contraction in the largest nonbanks’ ability to originate and service mortgages may transit risk to the broader financial system  through several channels.”   FHFA is taking steps to address FSOC’s concerns.

FHFA’s New Financial Requirements

FHFA proposes the following updates to its minimum net worth and liquidity requirements:

Increased Net Worth for Ginnie Mae Servicing:

FHFA would increase by 10 basis points the minimum net worth requirement to service Ginnie Mae mortgages.  Currently, the minimum net worth is $2.5 million plus 25 basis points of the unpaid principal balance for total 1-4 unit residential mortgage loans serviced.  FHFA proposes to increase the minimum net worth for servicing of Ginnie Mae mortgages to 35 basis points.

Liquidity Requirements
Increased Minimum Base Liquidity:

Currently, the base liquidity is 3.5 basis points of the aggregate unpaid principal balance of single-family mortgages serviced by the Seller/Servicer for Freddie Mac, Fannie Mae and Ginnie Mae (Agencies). FHFA proposes to increase the base liquidity to 4.0 basis points, plus an additional 10 basis points of the unpaid principal balance of Ginnie Mae servicing.

Reduced Allowable Assets: 

FHFA would revise the allowable assets for determining liquidity to exclude the unused/available portion of the committed servicing advance lines of credit.  As a result, it would limit allowable assets for liquidity to: (i) cash and cash equivalents and (ii) Available for Sale or Held for Trading Investment Grade Securities: Agency MBS, Obligations of GSEs or U.S. Treasury Obligations.

Changes to NPL Threshold and Charges:

FHFA also proposes increases to the liquidity requirements for nonperforming loans (NPLs), including loans 90 days or more delinquent and loans in the foreclosure process.  Under the proposed standards, FHFA would reduce the NPL threshold from 6% to 4%.  As a result, a Seller/Servicer would be subject to increased liquidity requirements (in the form of an Incremental NPL Charge) for the portion of non-performing single-family mortgages serviced by the Agencies.  The proposal also would increase the Incremental NPL Charge from 200 basis points to 300 basis points.  Thus, for NPLs, Seller/Servicers would be subject to an incremental 300 basis point charge for the portion of Agency NPLs that exceeds 4%.

The proposal clarifies that the requirements apply to the master servicer only; loans that are subserviced are not subject to these capital or liquidity requirements. Rather, a subservicer must meet minimum net worth and tangible capital ratio requirements.  The minimum capital ratio remains unchanged under the proposal.

Further, FHFA clarifies that only nondepository institutions will be tested against the new liquidity requirements, with reviews done on a quarterly basis. While the proposal requires Seller/Servicers to be in compliance as of the effective date, it also provides Fannie Mae and Freddie Mac latitude to: (1) take appropriate action for a Seller/Servicer who does not maintain compliance; (2) grant exception requests; or (3) institute requirements beyond the minimum for certain Seller/Servicers that pose heightened risk.

Takeaways

Nonbank mortgage servicers should prepare for increased financial requirements taking effect later in 2020.  Seller/Servicers concerned with these requirements and how they will be implemented should consider submitting comments to ServicerEligibility@fhfa.gov.

NYDFS Issues Final Mortgage Loan Servicer Business Conduct Rules (Part 419)

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The New York Department of Financial Services (“NYDFS”) has issued final mortgage servicer business conduct rules found in Part 419 of the Superintendent’s Regulations.  Our January 24 client advisory provides a full analysis of the changes, which include:

  • New provisions governing affiliated business arrangements;
  • Expanded restrictions on servicing fees (including property valuation fees);
  • A broader servicer duty of fair dealing;
  • Expanded protections available to delinquent borrowers and borrowers seeking loss mitigation assistance; and
  • Detailed third party vendor management requirements.

Although the rules took effect on December 18, the NYDFS added Section 419.14 to provide a 90-day transition period for servicers who were compliant with the previous version of the rules as of the effective date.