Specialty Podcast: How the Upcoming Presidency Is Expected to Impact Regulation and Litigation

Intro (00:00):
You are listening to the Alliant Specialty Podcast, dedicated to insurance and risk management solutions and trends shaping the market today.

Steve Shappell (00:09):
Good afternoon. Thank you everybody for joining this version of the podcast for the Legal and Claims Group. As everybody knows, we do a monthly newsletter, and following that newsletter, we try to have a podcast to talk about various topics. Today will be different in that in a couple of the last newsletters, we've had a bunch of pretty fascinating, interesting legal and claims issues, a lot of complex litigation, but probably one of the more interesting developments is the election that happened. It’s going to change a lot of things, right? One of the things we have done on this podcast in our Executive Liability Insight Newsletter is track a lot of the trends, developments as it pertains to government enforcements and regulations, and the election and Trump winning another four-year term has everybody talking. It's really interesting. I've spent a lot of time in the last month or so thinking about, talking about the SEC enforcement priorities that came out a while ago. Never mind, right? Just take those and put them in a trashcan because it's not something we can easily predict. Even though the current SEC Head of Enforcement is going to be pretty diligent and affirmative in continuing the 1,500 or so investigations they have open, I think the Trump administration's going to certainly have a different take on that.

One of the things that will be interesting, having done this a long time and having observed periods of times when there was a designed drop in regulation, particularly financial industry, banks and financial institutions, what happens here? The SEC and FINRA and other organizations investigate less and life's good, or is that void filled by civil investigations and lawsuits? Certainly for some of us in the industry, we go back and we tell the war stories of the last time we had a massive deregulation. We had a massive increase in litigation, particularly after the failed policy of less regulation for financial industry resulted in a collapse of financial industry, and we saw massive amounts of litigation including shareholder litigation. It's going to be really interesting to watch. One of the things we promise to do is to have our finger on the pulse of this. So Mike, curious what observations and predictions you might have.

Mike Radak (02:36):
Yes, thanks, Steve. I think you're spot on with the expectation that we're going to see deregulation. A couple areas that I know have been hot buttons for various numbers of our clients and various businesses over the current administration was the diversity, equity and inclusion mandates and the ESG, the environmental, social and governance mandates. I think it's pretty safe to say we're going to see those walk back, if not eliminated completely.

With the next term of Trump's presidency, I expect we're going to see the SEC lose some of their teeth as far as their ability to regulate and go after some of these businesses. One area that I think, based upon everything I've read about the game plan for Trump's next administration, is cryptocurrency is probably going to see minimal regulation. Whatever regulations that Biden has placed on them will probably be walked back to some degree because they've highlighted that as one area that they want to expand essentially.

Steve Shappell (03:33):
Yes, and the crypto is, it's been an interesting area of regulation anyway. The SEC has fundamentally struggled in getting in there, how they're going to regulate, and the additional dilemma of administration having a preference for a lack of regulation.

Mike Radak (03:49):
Yes, completely agree. It'll be interesting to see, like you said, how the enforcement abilities get shifted from the regulatory agencies to the plaintiff's attorneys now. And the increase in actual civil litigation we're going to see versus the enforcement actions or the investigative actions. So, it'll be interesting times.

Steve Shappell (04:09):
I know another area that I'm watching carefully and because it has a pretty substantial impact in our world in financial lines and financial institutions is M&A. The prediction here is that the thumb on the scale against M&A and antitrust scrutiny will be lifted, but we'll see a substantial uptick in sizable M&A activity. So, it will be indeed quite interesting. With that, David, I know one of the things that you wanted to talk about today was a recent decision out of Massachusetts. So, let me hand it to you to talk a little bit about that and any commentary you might have on the great world of Trump administration and regulation in the next four years.

David Finz (04:52):
Thanks, Steve. And just to be clear, this decision out of Massachusetts, it's so recent that it's actually going to be the subject of an article in the next month's issue of the Executive Liability Insights Newsletter. But we didn't want to wait to get some content out on this because it's a very important decision that affects a broad spectrum of our clients, particularly, although not only, in the healthcare industry. What we have seen now is a decision come out of the Massachusetts Supreme Judicial Court, that's their highest state court, upholding the dismissal of a class action.

Actually two lawsuits that were filed against hospitals alleging that they had violated the privacy of users by tracking their web browsing activities on their sites. Now, more specifically, the court rejected the applicability of the state's wiretap statutes to these claims. The plaintiffs were arguing that by collecting their IP addresses and browsing history, they had violated the user's reasonable expectation of privacy, and they were hanging their hat on the state wiretap act. However, the court reasoned that this act was designed to protect person to person communications. It’s a 1960s-era piece of legislation. While the court reasoned that it could be extended to certain types of communications like text messages, emails, DMs, things that did not exist in the sixties, those all involve two live parties, actual entities communicating with each other. Web browsing activity does not, at least in the eyes of the user, that's a one way communication. I am doing the equivalent of browsing through books in the library, right? So, that was not considered to fall under the wiretap act.

Entering a URL, accessing a specific webpage, clicking on links, scrolling through that webpage is not in the view of the court person to person communication. Now, one judge did dissent and suggest that perhaps the legislature needs to go back and protect consumers more explicitly from such web tracking, but the bottom line is that this is the law of the state of Massachusetts. The reason this is so important is because while each state may or may not have their own wiretap laws, and this decision is not precedent setting for those other states, the reasoning here could be found persuasive by defense attorneys and by courts in other jurisdictions who have similar laws on the books to those in Massachusetts. The impact of this decision, while not precedent setting, could still nevertheless be far reaching. It does not immunize hospitals and other businesses from these types of claims, but it does provide them with what we consider to be a pretty strong defense. This is important because the carriers frankly have been a little reticent about covering these, and they have begun inserting either exclusions or limitations onto the policies, the exact scope of which are beyond the time that we have here to go into today. But suffice to say that this may well be a turning point in the website tracking litigation that we have seen around the country. Now, you asked a question also regarding the incoming presidential administration and how that might affect data privacy legislation and what have you.

Certainly, there are some areas where, like children's online protection around social media and that sort of thing, where we still might see some movement in the federal realm. But I would note that much of our nation's data privacy legislation has been and continues to be at the state level. Where we might see some impact is with respect to specific federal agencies that have been flexing their muscle. I would be curious to see if there's any appointments that are made over the course of the term to the Federal Trade Commission because the FTC has been quite active in alleging that companies that play fast and loose in their data collection and management practices are in fact engaging in an unfair trade practice. And so on that basis, the FTC has been going after them. Depending on what appointments Trump is able to make, that may change. But by and large, I think we're going to continue to see both at the state level and with respect to private rights of action, those proceedings will continue unabated.

Steve Shappell (09:09):
Thanks for that assessment. And what I find pretty interesting here is the conservative states and attorneys general from conservative states, red states, were pretty instrumental and pretty aggressive about trying to repeal the Chevron doctrine. It’s going to be really interesting to see how that blows up or comes back on some of this deregulation that we see go on, where a disinterest in the FDA, for example, taken action and now the courts no longer will give deference to the FDA and Trump appointed FDA and various bureaucrats from an FDA that is Trump appointed. They'll no longer get the deference that they would've a year ago. It will be interesting to see how it plays out, particularly if our prediction of state and or civil litigation and enforcement of already existing laws fills some of the void of the deregulation. Thank you both for taking the time to join this podcast. We appreciate everybody listening into this. And as always, please feel free to review any of our newsletters at Alliant.com, and we appreciate again, the time and attention for listening to this podcast.