September 10 – Read the newsletter below for the latest Mortgage Banking and Consumer Finance industry news, written by Ballard Spahr attorneys. In this issue, our lawyers provide an update on current happenings with the DIDMCA, analyze recent developments in website tracking litigation, and spotlight upcoming breakout sessions from our HR Legal Summit, along with other noteworthy updates.
- Consumer Finance Monitor Podcast: When Consumer Protection Disclosures Work Too Well
- Consumer Finance Monitor Podcast: Cantero II: Circuit Split and OCC Preemption Determination Set Up Likely Supreme Court Review
- Kraninger Calls for Passage of Legislation Clarifying Section 525 of DIDMCA
- New York Legislator Introduces DIDMCA Opt-Out Bill – But Action Will Have to Wait Until 2027
- Crews Sworn in as Member of NCUA Board; Designated Chairman
- Website Tracking Litigation Update: Variety Media and California SB 690
- Second Circuit: No Deference to NLRB’s Dress Code Restrictions
- HR Legal Summit: Breakout Sessions Spotlight
- LOOKING AHEAD
All content can be found previously published on Ballard Spahr’s Insights page.
Consumer Finance Monitor Podcast: When Consumer Protection Disclosures Work Too Well
New Podcast Explores the Distributional Costs of Effective Consumer Regulation
Disclosure has long been one of the principal tools of consumer protection. The basic premise seems straightforward: if consumers are given better information about the terms of a transaction, they should be able to make better-informed decisions.
But what if better disclosure works differently for different consumers? And what if a disclosure that improves decision-making overall can, in some circumstances, actually worsen outcomes for financially vulnerable consumers?
Those are among the important and provocative questions explored in the latest episode released today of the Consumer Finance Monitor podcast, hosted by Alan Kaplinsky (founder and former chair for 25 years and now senior counsel of the Consumer Financial Services Group at our firm). Alan’s guest is Professor Florencia Marotta-Wurgler of NYU School of Law, a leading scholar of consumer law, behavioral law, and economics. We discuss her new article, “The Distributional Costs of Effective Consumer Regulation,” co-authored with Tamar Kricheli-Katz. The article is available for free on SSRN.
The article challenges the conventional way regulators and academics have evaluated consumer disclosures. Rather than simply asking whether disclosure “works,” the authors ask a more nuanced question: for whom does it work, under what circumstances, and at what cost?
Better Disclosure Can Reduce Mistakes, but Not Necessarily for Everyone in the Same Way
The research is based on quasi-field experiments involving more than 3,000 participants and credit-card-style gift cards. The participants were presented with different disclosure formats, including expandable disclosures, traditional full disclosures, and what the authors describe as “salient” or behaviorally informed disclosures.
The results are fascinating.
Traditional disclosures, whether terms were placed behind an expandable hyperlink or presented in a block of text, were largely ineffective. Participants generally did not click through or read the lengthy disclosures. By contrast, simplified and salient disclosures that highlighted key terms did affect consumer behavior. That is good news for regulators who believe that carefully designed disclosures can improve consumer decision-making.
But there was an important second finding. When there was a single clearly superior product, salient disclosure helped consumers across income groups, and it particularly helped financially constrained consumers avoid mistakes. In that setting, better disclosure appeared to have an equalizing effect.
The results became much more complicated when consumers had to make a genuine trade-off.
When Salience Changes the Trade-Off
In one of the experiments, consumers could choose between receiving money immediately while paying a fee or waiting two weeks to receive the money without the fee. As the disclosure became more salient, consumers generally became less likely to choose the clearly inferior option.
But when the researchers separated consumers based on financial stress, they found something quite different. For financially stressed consumers, emphasizing the immediate availability of the money appeared to make the immediate payment particularly attractive—even when the associated fee was substantial. The researchers found evidence suggesting that the salient disclosure could activate what behavioral economists describe as a “scarcity mindset,” causing financially stressed consumers to focus more heavily on immediate needs and less on longer-term costs.
As Professor Marotta-Wurgler explained during the podcast, the important question is whether this behavior represents a perfectly rational response to an urgent need for cash or whether the disclosure itself is changing the consumer’s decision-making process.
The research cannot definitively answer that question. But the findings provide evidence that something important is happening and, in the authors’ view, warrants further study.
The Implications for Regulators
The research raises a fundamental issue for consumer protection policy.
Regulators understandably want disclosures to be more effective. If consumers don’t read lengthy disclosures, the obvious response is to make important information simpler, shorter and more salient.
But salience does more than merely convey information. As Professor Marotta-Wurgler explained, it can capture attention and “reframe” the way consumers think about the choices before them.
That means a seemingly neutral disclosure can have behavioral consequences that regulators may not anticipate.
The authors are not suggesting that regulators should create different disclosure regimes for different demographic groups. Rather, they suggest that regulators should pay greater attention to the possibility that a particular disclosure intervention can have different effects on different groups of consumers, particularly when the transaction involves meaningful trade-offs.
This is an important distinction.
The question should not simply be whether a disclosure improves consumer decision-making on average. Regulators also should consider whether the disclosure changes the distribution of outcomes and, if so, how.
What Does This Mean for Behavioral Regulation?
The discussion also has broader implications for the growing use of behavioral economics in consumer financial regulation.
Behaviorally informed regulation often assumes that consumers can be nudged toward better decisions by changing the way information or choices are presented. The research discussed in the podcast suggests that such interventions can be powerful—but that power can cut both ways.
A nudge designed to improve consumer decision-making may have unintended consequences when consumers are experiencing financial stress.
That does not mean behavioral regulation should be abandoned. Instead, it suggests that regulators need to be more careful about evaluating behavioral interventions and should consider their distributional effects rather than looking only at aggregate outcomes.
A Broader Lesson About Disclosure
One of the most interesting conclusions from the research is that it does not support the increasingly common assertion that disclosures simply don’t work.
They can work.
The problem is that their effects are not uniform.
As Alan summarized at the end of the podcast, three lessons stand out from the research:
- Disclosure matters. Contrary to the view that disclosures are inherently ineffective, making important information more salient can reduce consumer mistakes.
- The effects of disclosure can vary significantly among consumers. A disclosure that improves outcomes in one setting may produce very different behavioral responses among financially stressed consumers.
- Most importantly, regulators need to look beyond the question of whether disclosure works and ask for whom it works, under what psychological conditions, and at what potential equity cost.
The research also raises questions that extend well beyond gift cards. Professor Marotta-Wurgler and her colleagues are examining whether making non-core contractual terms, such as arbitration provisions, class-action waivers, late fees and automatic renewal provisions, more salient actually changes consumer behavior, and whether those effects differ among consumers. She is also pursuing research involving dynamic pricing and dominated contracts.
During the discussion, Professor Marita-Wurgler and Alan also briefly discussed the connection between this research and surveillance pricing, an area in which Professor Marotta-Wurgler is conducting additional research.
For anyone involved in consumer financial regulation, the podcast provides a thought-provoking examination of an issue that is likely to become increasingly important: Can consumer protection measures designed to help consumers actually produce unintended distributional consequences?
Professor Marotta-Wurgler’s research is particularly compelling because it challenges the assumption that making information more effective is necessarily an unqualified good. Sometimes, a disclosure may not merely inform consumers. It may change what they focus on, how they perceive trade-offs and ultimately what choices they make.
That is a lesson regulators, policymakers, and industry participants should keep in mind as they design the next generation of consumer protection disclosure rules.
Listen to the episode here.
Consumer Financial Services Group
First and Ninth Circuit Decisions Conflict With the Second Circuit, While the OCC has Concluded That State Escrow-Interest Laws are Preempted
National bank preemption is headed toward another Supreme Court showdown. The Second Circuit has held that New York’s mortgage escrow-interest requirement is preempted, directly conflicting with the First Circuit’s decision upholding a comparable Rhode Island requirement and the Ninth Circuit’s decision allowing a similar California law to remain in effect. The Office of the Comptroller of the Currency (OCC) has sided with the Second Circuit, issuing final preemption regulations concluding that state laws requiring national banks to pay interest on mortgage escrow accounts are preempted.
[Since our podcast was recorded, 10 “blue” state attorneys general have challenged the OCC’s preemption regulations in Oregon federal district court. Their lawsuit adds another important dimension to the dispute and could affect whether the OCC’s regulations remain in effect while the broader circuit split works its way toward possible Supreme Court review. It is probably more likely that the case gets stayed until the Supreme Court resolves the other cases.]
In the latest episode of the Consumer Finance Monitor podcast, Alan Kaplinsky (founder and former chair for 25 years, and now senior counsel of our Consumer Financial Services Group) is joined by Professor Emeritus Arthur Wilmarth of George Washington University Law School to discuss the Second Circuit’s post-remand decision in Cantero v. Bank of America, the Supreme Court’s 2024 decision in the case, the conflicting decisions in Conti v. Citizens Bank in the First Circuit, and Kivett v. Flagstar Bank in the Ninth Circuit and the OCC’s newly finalized regulations on federal preemption.
The immediate dispute is whether national banks must pay interest on residential mortgage escrow accounts under state law. The broader question is whether state consumer financial laws (other than state usury laws) may regulate national banks and, if so, when those laws are preempted by the National Bank Act. With certiorari petitions pending in Cantero and Kivett, further proceedings in Conti potentially bringing that case back before the Supreme Court, and the OCC’s regulations now under challenge by ten state attorneys general, the circuit split and the OCC’s intervention make another Supreme Court review increasingly likely.
What Did the Supreme Court Decide?
The Supreme Court’s 2024 decision did not determine whether New York’s law was preempted. Instead, it rejected both parties’ proposed tests and directed the Second Circuit to apply the “prevents or significantly interferes” standard articulated in Barnett Bank v. Nelson and codified in Section 25(b) of Dodd-Frank.
The Court called for a “practical” and “nuanced” analysis that considers the nature and degree of the interference and compares the challenged state law with prior Supreme Court decisions dealing with National Bank Act preemption of state laws.
On remand, the Second Circuit concluded that New York’s requirement that banks pay two percent interest on mortgage escrow balances significantly interferes with national banks’ federally authorized powers. The court emphasized, among other things, the loss of banks’ discretion over whether to pay interest and the operational difficulties created by differing state requirements.
Judge Myrna Pérez dissented, arguing that the majority had effectively returned to the categorical approach rejected by the Supreme Court. Professor Wilmarth agrees with that criticism, contending that treating reduced efficiency or flexibility as sufficient to establish preemption could make the “significantly interferes” standard far broader than the Supreme Court intended.
A Genuine Circuit Split
The First Circuit reached the opposite conclusion in Conti, holding that Rhode Island’s mortgage escrow-interest requirement was not preempted. The Ninth Circuit reached a similar result in Kivett, although its decision relied heavily on its earlier Lusnak precedent.
The important point is that the courts generally agree on the governing standard but disagree about how it should be applied. The Second Circuit views the state requirement as a significant interference with federally authorized bank powers, while the First and Ninth Circuits view the resulting costs, burdens and limitations on bank discretion as insufficient to establish preemption.
That disagreement creates a substantial incentive for the Supreme Court to revisit the issue.
The OCC Takes the Second Circuit’s Side
The OCC has now entered the controversy directly. In May 2026, it issued a final rule confirming the authority of national banks and federal savings associations to establish and maintain mortgage escrow accounts and determining that the terms of those accounts—including whether and how much interest is paid—are matters within the institutions’ federally authorized discretion.
At the same time, the OCC issued a final preemption determination covering New York and 13 other state laws. The OCC concluded that the laws are preempted because they significantly interfere with national banks’ federally authorized powers.
Professor Wilmarth questions whether the OCC adequately demonstrated the required “significant interference,” particularly because the state laws impose different interest requirements. He also questions whether the OCC’s approach effectively amounts to field preemption, which Dodd-Frank was intended to restrict.
The States Now Challenge the OCC
The 10-state lawsuit gives those issues immediate practical importance. The states contend that the OCC exceeded its authority and failed to satisfy Dodd-Frank’s requirements for making preemption determinations.
Among other things, the litigation could require a court to examine whether the OCC adequately supported its conclusion that the various state laws significantly interfere with national bank powers. It also could determine whether the OCC’s determinations remain in effect while the litigation proceeds.
The lawsuit therefore provides another potential route for judicial review of the OCC’s position even before the Supreme Court decides whether to hear Cantero, Conti, and/or Kivett.
Indeed, it is conceivable that the Supreme Court might suspend its review of Cantero II until the litigation in Oregon is resolved.
Why Cantero Matters
Although the cases concern mortgage escrow accounts, their implications are much broader. At stake is the balance between federal and state authority over national banks.
If the Second Circuit and OCC approach prevails, a much broader range of state consumer financial laws could be vulnerable to preemption when they limit federally authorized bank discretion or impose meaningful operational burdens. If the First and Ninth Circuit approaches prevail, states would retain considerably greater authority to regulate national banks unless they can demonstrate that a particular law significantly interferes with a federally authorized banking power.
The Supreme Court now has an opportunity to provide the guidance that was missing from its 2024 decision.
Our podcast with Professor Wilmarth explores these issues in depth and provides an important perspective on what could become one of the most significant national bank preemption disputes in years.
To listen to the podcast click here.
Consumer Financial Services GroupKraninger Calls for Passage of Legislation Clarifying Section 525 of DIDMCA
Proposed legislation that would clarify the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) is important to the health of the dual banking system, Kathleen Kraninger, President and CEO of the Florida Bankers Association, told the House Financial Services Committee at a hearing held on September 2, 2026, entitled “Strengthening the American Economy: Promoting Growth, Opportunity, and Prosperity.”
Congress passed DIDMCA to put state banks on par with national banks, Kraninger, former Director of the CFPB, told the House Financial Services Committee.
She said the recent efforts by Colorado and Oregon to use an opt-out from DIDMCA to regulate out-of-state banks could “undermine” the banking system and reduce access to credit by borrowers most in need of it.
H.R. 7866, sponsored by Rep. Warren Davidson, (R-Ohio), and co-sponsored by Rep. Andy Barr, (R-Ky.), would amend Section 27 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831d, to clarify the scope of the state opt-out provision in Section 525 of DIDMCA. The limited bill was introduced on March 9 and referred to the Financial Services Committee.
During the hearing, Davidson said some states are using “tortured language” to seek to justify using an opt-out as a basis to regulate state banks in other states. Litigation concerning the opt-out by Colorado and Oregon is ongoing.
Section 521 of DIDMCA permits a federally insured state-chartered bank to charge interest on a loan or other extension of credit at the rate permitted by the bank’s home state, including when the bank makes a loan or other extension of credit to a borrower in another state, whose laws are expressly preempted by Section 521. Section 525 of DIDMCA permits a state to opt out of that federal interest-rate preemption for loans “made in such State.”
H.R. 7866 would clarify that Section 525 was not intended to permit an opt-out state to regulate the interest rate that may be charged on a loan made by an out-of-state state bank to a resident of the opt-out state. Instead, the bill would make clear that the opt-out was intended only to prevent state-chartered banks located in the opt-out state from relying on Section 521 of DIDMCA—the provision that otherwise permits state-chartered banks to export their home-state interest rates when lending across state lines.
It was unclear when the Committee will act on the legislation.
Alan S. Kaplinsky and Burt M. RublinNew York Legislator Introduces DIDMCA Opt-Out Bill – But Action Will Have to Wait Until 2027
A state senator in New York introduced a bill that, if adopted, would exercise New York’s right under Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) to opt-out of DIDMCA preemption. However, there is virtually no chance that this bill will be enacted this year.
Senator Zellnor Myrie introduced S. 10688 on August 26 (which was then referred to the Rules Committee) after the New York Legislature’s regular session ended on June 5, 2026. The Legislature is not expected to return to Albany for the remainder of 2026. As a result, the bill will die at the end of this year.
That does not make the bill unimportant. That’s because we understand that a new identical or substantially similar bill will likely be introduced in January of next year with a new bill number after the Legislature reconvenes. As a result, S. 10688 could be viewed as a sneak preview of New York State’s impending entry into the continuing national battle over the meaning of Section 525 of DIDMCA. New York State is the fourth largest state in the country with a population of over 20 million people. The states that have opted out of DIDMCA have much smaller populations: Colorado (5.7 million), Oregon (4.2 million), and Iowa (3.2 million). If you combine those populations with the population of Puerto Rico (which has also opted out), it is way below the population of New York State. Thus, if New York were to enact this bill, it would substantially increase the risk for state banks engaged in interstate lending programs. It would also provide a strong incentive for the enactment of a federal bill pending before the House which would clarify that a state opt-out under Section 525 of DIDMCA would not impact the authority of an out-of-state state bank to export to residents of the opt-out state the interest rate permitted by the state where such bank is located. The House Financial Services Committee has scheduled a hearing for 10 am on Wednesday, September 2, to consider the Federal bill, among other topics.
What Would the Bill Do?
Section 521 of DIDMCA permits federally insured state-chartered banks to export the interest rate permitted by the law of the state where such bank is located. Section 525, however, permits a state to opt out of that federal authority with respect to “loans made in such State.”
S. 10688 would exercise that opt-out authority for New York. It would restore New York’s otherwise applicable interest-rate restrictions, including its 25% criminal-usury ceiling, to covered consumer-credit transactions “made” in New York.
The bill’s central feature is its expansive definition of where a loan or other consumer credit transaction is “made.” A consumer-credit transaction would be considered “made” in New York when the consumer is a New York resident when the account is opened or the transaction is consummated and at least one of the following acts relating to the transaction occurs in New York: applying for credit, accepting the agreement, receiving funds or access to credit, using the credit, receiving or activating a credit card, making payments, and servicing or collection activities. The bill expressly provides that a transaction can be “made” in more than one state, and a contractual choice-of-law provision could not override that determination.
This expansive definition of where a loan or other consumer credit transaction is “made” seems to be an exercise in futility since federal law, Sections 521 and 525, and not New York State law determines where a loan is “made.”
Credit Cards and Fintechs Would Be Affected
The proposed legislation is not limited to traditional installment loans. “Consumer credit transaction” expressly includes open-end credit, credit-card accounts, balance transfers, and cash advances.
It also reaches well beyond state banks. A “covered participant” includes entities that market, solicit, arrange, facilitate, underwrite, fund, service, administer, purchase, securitize, collect, or enforce covered transactions—or receive a material portion of their revenues, interest, or fees from a covered transaction.
If the bill were to become law and not be preempted by Section 521 of DIDMCA, that could have significant implications for bank-fintech lending arrangements in which the bank is located outside New York.
The bill does not purport to regulate national banks or other federally chartered institutions to the extent federal law preempts state regulation. That acknowledges existing federal preemption of state usury laws by Section 85 of the National Bank Act and the fact that Sections 521 and 525 of DIDMCA apply only to state-chartered banking institutions.
Who Could Enforce the Bill and What Would the Ramifications Be for Violating It if It Becomes Law?
Either the New York Attorney General or the Superintendent of the New York Department of Financial Services may enforce it if it becomes law. They could investigate violations, subpoena records, seek injunctions, obtain restitution or refunds of unauthorized interest and fees, seek disgorgement, require corrections to account and credit-reporting information and pursue other equitable relief. Civil penalties could reach $2,500 per violation and $10,000 for each knowing or willful violation.
While private civil litigants could not enforce the bill, they could, of course, seek whatever remedies are available for usury violations.
Why Was the Bill Introduced?
The legislative memorandum accompanying the introduction of the bill states that New York consumers are currently offered credit, including credit cards, at APRs above the criminal usury ceiling of 25% through programs involving state-chartered institutions located in states that permit higher interest rates than New York.
The position of the bill’s sponsor is that the location of a bank’s headquarters or where it performs its core lending functions should not be determinative when the borrower’s involvement in a remote lending transaction (described earlier in this blog) occurs in New York. The bill specifically invokes the Second Circuit’s 2014 decision in Otoe-Missouria Tribe of Indians v. New York State Department of Financial Services, 769 F.3d 105, which recognized New York’s regulatory interest in remote lending involving New York residents.
If the Bill Is Enacted It Will Face a Legal Challenge
The bill arrives while the basic legal question concerning the scope of an opt-out under Section 525 is already before the federal courts.
Colorado’s DIDMCA opt-out is being challenged before the en banc 10th Circuit in National Association of Industrial Bankers v. Weiser. Oregon’s recently enacted opt-out also has been challenged in Federal District Court in Oregon. The central issue in both cases is whether Section 525 permits an opt-out state to impose its interest-rate restrictions on loans made to its residents by state-chartered banks located elsewhere.
The federal banking agencies and industry groups have advanced the narrower interpretation, that the key operative language of Section 525 of DIDMCA (“loans made in such State”) refers only to loans made by institutions located in the opt-out state. Consumer advocates and the states supporting Colorado and Oregon advocate the broader interpretation that looks to where the borrower receives and uses the credit.
New York’s proposed legislation essentially takes the latter position and attempts to codify it in considerable detail.
New York is currently the only new state DIDMCA opt-out effort still alive in 2026, according to information provided to us. Rhode Island’s 2026 proposed legislation has been held for further study. In 2025, Oregon and Rhode Island pursued opt-out legislation, while in 2024 proposals were introduced in Minnesota, Rhode Island, and the District of Columbia, and a draft ballot initiative was considered in Nevada.
Thus, while S. 10688 has no realistic prospect of becoming law this year, it is still worth watching. If reintroduced in January with additional co-sponsors, New York could become the next major state battleground over whether states can use a Section 525 opt-out to apply their own usury laws to interstate loans made to their residents by out-of-state state banks.
Alan S. Kaplinsky and Burt M. RublinCrews Sworn in as Member of NCUA Board; Designated Chairman
John Crews has been sworn in as a member of the National Credit Union Administration (NCUA) board and has been designated by President Trump as its Chairman.
Crews, who has worked for President Trump and Republicans on Capitol Hill, currently is the sole member of the three-member NCUA board. Crews replaces Kyle Hauptman.
“I appreciate the trust and support that the President has placed in me, and the U.S. Senate for confirming me,” Crews said. “I would also like to thank outgoing Chairman Kyle Hauptman for his nearly six years of service at NCUA and for the thoughtful regulatory reform effort he led as Chairman. I intend to capitalize on the agency’s progress on two of the Administration’s most ambitious goals: enabling innovation and right sizing the regulatory framework that governs the financial services industry.”
Crews emphasized a focus on strengthening financial stability, fostering responsible innovation, and ensuring effective oversight. “My priorities include safeguarding the interests of credit union member-owners, promoting regulatory efficiency, maintaining a strong and healthy National Credit Union Share Insurance Fund, and supporting initiatives that promote access to affordable financial services nationwide,” he added.
Crews was nominated to the board on May 11, 2026, and confirmed by the Senate on August 7, 2026. His term will expire on August 2, 2031.
Before joining the NCUA board, Crews served as the Treasury Department’s deputy assistant secretary for financial institutions.
Before assuming that position, Crews was policy director for House Majority Leader Steve Scalise, (R-La.), where he covered economic and financial services policy. Before joining Scalise’s staff, Crews served as policy director for the Senate Banking Committee. During the first Trump administration, Crews worked in the White House on the National Economic Council, where he served as a special assistant to the president for economic policy.
“His leadership will be a benefit to the future of the credit union industry, and we look forward to working closely with him to achieve a regulatory environment that allows credit unions to thrive,” America’s Credit Unions President/CEO Scott Simpson said. “The safety and soundness of the industry is paramount, and this can be achieved alongside meaningful regulatory modernization, enhanced access, and innovation.”
John L. Culhane, Jr. and Joseph J. SchusterWebsite Tracking Litigation Update: Variety Media and California SB 690
On August 21, 2026, the California Court of Appeal issued a tentative ruling in Variety Media, LLC v. Superior Court (Case No. B350578), tackling a question businesses have been asking for years: does the California Invasion of Privacy Act’s (CIPA) pen register provision reach everyday website tracking tools like cookies and pixels?
At nearly the same moment, the California Legislature was finalizing Senate Bill 690, which would eliminate the private right of action under that same provision. Together, these developments might look like relief for businesses. They aren’t—at least not fully.
The Status of Senate Bill 690
The most significant of the two developments is the unexpected rise of amended SB 690. A broader bill was sidelined last year, but after a wave of demand letters—often from self-represented (pro se) claimants—threatening businesses with lawsuits over alleged pen register violations, the Legislature introduced an amended bill that would eliminate private lawsuits under CIPA’s pen register/trap-and-trace provision, leaving enforcement solely to the California Attorney General. The bill also includes a retroactivity provision reaching claims filed within two years before it takes effect.
SB 690 passed the Assembly Appropriations Committee 15-0 on August 13, cleared the Assembly on August 28, and was approved by the Senate that same day. It’s now undergoing final administrative review before heading to the Governor’s desk.
The Tentative Ruling in Variety Media
Just a week before amended SB 690 reached the Assembly floor, the California Court of Appeal issued a tentative ruling in Variety Media, holding that CIPA’s “pen register” definition is technology-neutral, meaning it can extend beyond telephone equipment to internet communications—a setback for businesses that have argued CIPA was never meant to reach cookies or analytics tools.
The ruling was not entirely unfavorable to businesses: the plaintiff still lost on the specific claim. The court held that a pen register must capture information about where a communication is headed, not where it originated. Because an IP address identifies the visitor’s device—the source, not the destination—the claim failed as pleaded.
That doesn’t end the case. Assuming the Court of Appeal finalizes its tentative ruling without material changes, which seems likely based on the bench’s commentary at the August 25 oral argument, the plaintiff will still have an opportunity to amend the complaint.
A Paradigm Shift for CIPA Litigation? Not Really
Businesses have been eager for clarity on how CIPA applies to common website tracking practices. If SB 690 passes, plaintiffs will lose the ability to bring pen register or trap-and-trace claims. But does that end the wiretap litigation wave? Unfortunately, no.
Before pen register theories became popular, plaintiffs pursued website tracking claims under a different CIPA provision, Section 631(a). Expect a quick pivot back to that theory if SB 690 becomes law. Businesses should also watch for new claims under other privacy statutes and common-law theories. The legal label may change, but the underlying exposure won’t disappear.
If SB 690 doesn’t pass, attention shifts to the final ruling in Variety Media. Either way, the impact on the overall litigation landscape will likely be marginal—trial courts will still have to work out, case by case, whether a company’s tracking tools meet the technical definition of a pen register or trap-and-trace device.
Bottom line: litigation risk tied to web tracking technologies is evolving, not disappearing. Businesses that wait for a final court opinion or the Governor’s signature before assessing their exposure are already behind. They should take stock of their tracking practices now, understand where their specific risk lies, and be ready to act—regardless of which legal theory plaintiffs pursue next.
J. Matthew Thornton, Nathaniel Cardinal, Lexi Chapman, and Elizabeth A. James
Second Circuit: No Deference to NLRB’s Dress Code Restrictions
Last week, the U.S. Court of Appeals for the Second Circuit refused to enforce the National Labor Relations Board’s (NLRB) restrictive view of employer dress code policies, as premised on the Board’s erroneous legal foundation for assessing such policies.
In Starbucks Reserve Roastery, No. 24-3168 (2d Cir. Sept. 2, 2026), the Starbucks Workers United union challenged the following Starbucks dress code policies:
- In addition to Starbucks-approved or issued pins, Starbucks employees may wear on their apron “one reasonably sized and placed button or pin that identifies a particular labor organization or a partner’s support for that organization, except if it interferes with safety or threatens to harm customer relations or otherwise unreasonably interferes with Starbucks’ public image.”
- Employees are “not permitted to wear buttons or pins that advocate a political, religious, or personal issue.”
- While employee shirts may have a small manufacturer’s logo, they may not have “other colors, designs, logos, or writings” other than those pre-approved by Starbucks.
The Second Circuit refused to enforce the Board’s findings that these policies were unlawful, reasoning that the Board’s reliance on its decision in Tesla, Inc., 371 NLRB No. 131 (Aug. 29, 2022), misapplies precedent and rests on erroneous legal foundations.
In Tesla, the NLRB adopted the presumption that all employer dress code policies that limit an employee’s right to display union insignia are presumptively unlawful. There, the Board invalidated Tesla’s content-neutral dress code policy, which required employees to wear Tesla-issued shirts. The Second Circuit now joins the Fifth Circuit in refusing to enforce Tesla. The Second Circuit said that Tesla applies a “strict-scrutiny like burden on all employers to justify even facially neutral, partial dress code restrictions,” which is inconsistent with precedent.
Referencing Supreme Court precedent from Republic Aviation, 324 U.S. 793 (1945), the Second Circuit urged a return to the balancing test between “the undisputed right of self-organization assured to employees…and the equally undisputed right of employers to maintain discipline in their establishments.” The court further opined that employees have the right to wear items that relate to unionization and other protected matters at work, but employers are not prevented from making and enforcing reasonable rules covering the conduct of employees on company time, because “working time is for work.”
The Second Circuit remanded the case to the Board to “apply a more evenly measured balancing test” and gave the Board guidance about what factors to consider in its analysis, including: 1) the extent of intrusion on employees’ Section 7 rights (i.e. whether the employer enforced a full or partial ban on union insignia during working time); 2) whether the employer’s policy is facially neutral, nondiscriminatory, and consistently enforced; and 3) the context or circumstances underlying the intrusion.
Deference to Board Decisions Under Loper Bright
The Second Circuit also had the opportunity to weigh in on the level of deference owed to NLRB decisions following the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), where the Court held that deference to federal agency interpretations of enabling legislation is not required. The Second Circuit said that the courts retain “unfettered authority” under Loper Bright to analyze questions of law de novo, and that the NLRB’s legal conclusions may have the “power to persuade” but not the “power to control.” Citing Loper, 603 U.S. at 402 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)). The court distinguished its authority to decide questions of law de novo, from the requirement to defer to the NLRB’s factual findings that are supported by “substantial evidence,” holding that Loper Bright did not disturb the nature of review of an agency’s factual findings. However, the court made clear that it has the “primary interpretive responsibility” on statutory meaning.
Key Takeaway for Employers
The Starbucks decision signals wider breadth for employers to maintain and enforce facially neutral dress code policies, even if they may restrict an employee’s right to wear union insignia at work. At least for employers in the Second and Fifth Circuits, the NLRB will not be permitted to apply Tesla and instead, will be required to balance an employee’s Section 7 right to display union insignia against the employer’s right to maintain workplace rules. Employers may be successful in maintaining content-neutral dress code policies where it can show special circumstances for a restriction, including where the insignia may jeopardize employee safety, damage machinery or products, or interfere with a public image that the employer has established as part of its business plan through appearance rules for employees.
On August 26, 2026, the NLRB’s General Counsel issued GC Memo 26-04 and included dress codes and reversal of Tesla as one of her priorities for future Board Action, indicating that any such action could reinstate the Board’s former standard for dress codes announced in Wal-Mart Stores, Inc., 368 NLRB No. 146 (2019).
Rebecca A. Leaf and Brian D. PedrowHR Legal Summit: Breakout Sessions Spotlight
Our breakout sessions are designed to help you dive deeper into timely, real-world HR, and employment law challenges. You’ll be able to choose two sessions, and topics include workplace accommodations, HR legal fundamentals, DEI-related legal risks and enforcement trends, and updates on ERISA and benefit plan litigation.
Steering Through Uncharted Waters: Advanced Strategies for Workplace Accommodation Compliance
Speakers
Priya Vivian (Ballard Spahr)
Robyn Ruderman (Starbucks)
This advanced session is designed for experienced practitioners who already possess a foundational understanding of workplace accommodation law and are looking to deepen their expertise in handling complex disability, religious, and pregnancy-related accommodation requests under federal and state laws. Moving beyond the basics, attendees will examine multi-factor scenarios and novel requests, while exploring the evolving legal standards following recent court cases and trends. Through complex case studies and advanced hypotheticals, the session will address the intersection of accommodation obligations with other workplace laws—equipping seasoned session participants with sophisticated strategies for navigating the interactive process, avoiding high-risk pitfalls, and anticipating emerging areas of litigation exposure.
On Course With HR Law: Foundational Knowledge for Emerging HR Professionals
Speakers
Lou Chodoff (Ballard Spahr)
This introductory session will provide HR professionals and small HR teams with a practical overview of the core legal issues that arise throughout the employee life cycle. Participants will learn how to recognize common compliance risks in hiring, wage and hour practices, leave and accommodations, performance management, investigations, discipline, and terminations. The session will focus on real world issue spotting, documentation, and knowing when to escalate matters to legal counsel or senior leadership, with particular attention to the challenges faced by HR professionals who are building systems, policies, and credibility in lean or stand-alone HR functions.
DEI in the Cross Hairs – From Title VII to False Claims Act Liability
Speakers
Dee Spagnuolo (Ballard Spahr)
Virginia Essandoh (TD Bank)
As employers continue to reassess diversity, equity, and inclusion initiatives amid intensifying political, regulatory, and litigation scrutiny, human resources professionals and counsel face a challenging and increasingly sophisticated landscape. This session examines the growing legal challenges to DEI programs through the lens of federal anti-discrimination law, government enforcement trends, and emerging whistleblower theories. Drawing on recent litigation, agency guidance, and practical experience, we will explore how traditional civil rights principles are being applied to workplace policies, hiring and promotion practices, affinity programs, trainings, and compensation initiatives, while also addressing the expanding use of the False Claims Act and other enforcement mechanisms to challenge DEI-related representations and practices by government contractors, educational institutions, healthcare entities, and other federally funded organizations. We will discuss how organizations can evaluate and structure initiatives to advance institutional goals while minimizing legal and reputational risk.
Seeing Around Corners: Preparing for the Next Wave of Benefit Plan Litigation
Speakers
Brian Pinheiro (Ballard Spahr)
Finn Pressly (Ballard Spahr)
With ERISA fiduciary litigation on the rise, employers must understand the fiduciary obligations associated with their benefit plan administration. After an update on the current state of the law, the presenters will review the new trends in benefit plan litigation and equip attendees with best practices for protecting themselves from class action complaints.
Thursday, September 17, 2026
8:00 AM – 4:30 PM ET
Presidential Caterers
2910 Dekalb Pike
East Norriton, Pennsylvania 19401
CLE Credits: This program is approved for 4.5 (incl. 1.0 PA Ethics; and 1.0 CA and NY Elimination of Bias) CLE credits in CA, NY, and PA; and 5.7 (incl. 1.2 Ethics) NJ. Uniform Certificates of Attendance will also be provided for the purpose of seeking credit in other jurisdictions.
HRCI Credits: 6.00 (Approved)
SHRM Credits: 6.00 PDCs (Approved)
September 16 – 17, 2026 | Mayer Brown's Washington, D.C. offices
Washington Update: What to Expect for Midterm Elections and Update on Housing Policy
September 16, 2026 – 4:30 PM ET
Speaker: Maria Tripplaar
CFPB Update
September 17, 2026 – 1:00 PM ET
Speaker: Richard J. Andreano, Jr.
MBA Compliance and Risk Management Conference
September 27 – 29, 2026 | Grand Hyatt, Washington, D.C.
COMPLIANCE CONVERSATIONS TRACK: RESPA Section 8
September 27, 2026 – 1:00 PM ET
Speaker: Richard J. Andreano, Jr.
TRENDING COMPLIANCE ISSUES TRACK: Innovation in Mortgage Lending – Balancing Affordability, Compliance, and Risk
September 27, 2026 – 2:15 PM ET
Speaker: John D. Socknat
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