SYSTEM REBOOT ON AUTODIALERS?: McLaughlin and the Future of TCPA Statutory Interpretation
Greetings TCPAWorld!
The Supreme Court dropped another surprise that’s about to turn everything upside down again. See McLaughlin Chiropractic Assocs. v. McKesson Corp., No. 23-1226, 2025 U.S. LEXIS 2385 (June 20, 2025). McLaughlin was not, in turn, about autodialers at all—it was about whether courts must consider FCC interpretations under the Hobbs Act. But what about the ripple effects for automatic telephone dialing systems (“ATDS”)? Absolutely, potentially massive.
For the past four years, we’ve all been living in the post-Facebook (Facebook, Inc. v. Duguid, 592 U.S. 395 (2021)) world where everyone pretty much agreed on what an automatic telephone dialing system actually means. The Supreme Court seemed to settle the matter: to qualify as an ATDS, your equipment must have the capacity to store or produce telephone numbers using a random or sequential number generator and then dial those numbers.
That narrow interpretation was huge for businesses that had been facing significant challenges from TCPA class actions. Before this clarification, plaintiff attorneys were arguing that any system capable of storing phone numbers and dialing them automatically—such as a smartphone, a basic CRM system, or even predictive dialers calling from customer lists—could qualify as an ATDS. The Supreme Court’s grammatical analysis put an end to that madness by concluding that “using a random or sequential number generator” modifies both “store” and “produce,” meaning you need the random generation component for either function.
But here’s where McLaughlin comes in and changes everything we think we already know. Justice Kavanaugh’s majority opinion established a principle that will reshape how every TCPA case is litigated: district courts must independently interpret statutes under ordinary principles of statutory construction, giving only “appropriate respect” to agency interpretations. This is not a minor shift at all, as it explicitly disclaims the view that district courts are bound by FCC interpretations in private TCPA actions. WOW!
Now let’s not put the cart before the horse. That means the FCC no longer controls how district courts interpret the TCPA, although its guidance may still be considered persuasive.
This represents a gigantic shift from the old days, when FCC orders interpreting the TCPA were treated as binding under Hobbs Act jurisdictional preclusion. District courts previously could not disagree with FCC interpretations because challenges had to go to the courts of appeals. Now, following McLaughlin and last year’s Loper Bright decision, which eliminated Chevron deference entirely, federal judges must do the hard work of statutory interpretation themselves.
So what does this mean for ATDS? While Facebook settled the core definition at the Supreme Court level, there were still plenty of gray areas that the FCC had been filling in with guidance and interpretations. Now, district courts can look at those same issues with fresh eyes. See the challenge here? This will no doubt create new circuit splits and ALOT more unpredictability.
Post-McLaughlin, one district court might look at the statutory text and decide that “capacity” means what you can do right now, not what you could theoretically do with software modifications. Another court three states over might stick closer to the FCC’s broader interpretation. Yet another might split the difference and require some middle ground between current functionality and theoretical potential. Suddenly, we’re back to forum shopping and conflicting precedents across jurisdictions, with plaintiffs rushing to file in friendly districts while defendants attempt to relocate cases to more favorable venues.
Then there’s the question of human intervention. FCC guidance has generally stated that if a human must initiate every call, you’re probably not dealing with an ATDS. But how much human involvement is enough? What if a person loads the contact list, but the system dials automatically? What about click-to-call platforms where humans trigger each individual call? These cases, which seemed settled under FCC guidance, are now fair game for independent judicial interpretation.
The world of predictive dialing is an exciting one. Modern predictive dialers that operate from stored customer lists were largely exempted after Facebook, as they don’t use random generation. But there are still cases—systems that use algorithms to select numbers sequentially within targeted lists, or platforms that employ some mathematical progression that might arguably qualify as “sequential.” Without FCC deference, creative plaintiff attorneys can argue these distinctions to judges who might see things differently than the agency.
And don’t get me started on platform-specific technologies. Peer-to-peer texting systems, automated appointment scheduling, click-to-call functionality—all these technologies that the FCC has weighed in on over the years are now subject to fresh judicial analysis. A district judge unfamiliar with a specific platform may interpret the statutory language differently from an agency with telecommunications expertise.
The implications extend beyond federal courts as well. It’s only fitting that I talk about Florida, my home state. Florida’s Telephone Solicitation Act (“FTSA”) is likely the best example of how states have been attempting to fill the gap and narrow the federal interpretation. The FTSA initially defined prohibited technology as “an automated system for the selection or dialing of telephone numbers”—notice the “or” instead of “and,” and the complete absence of any random or sequential number generation requirement.
Florida amended the law in 2023 to require systems that both select and dial numbers; however, this still doesn’t incorporate the TCPA’s requirement for random or sequential number generation. You’ve got a peculiar situation where technology that’s perfectly legal under federal law may still be considered a violation of Florida state law. The McLaughlin principle doesn’t directly affect how state courts interpret state statutes. Still, it certainly signals a broader trend toward judicial skepticism of agency interpretations that extend beyond what the actual statutory text states.
Speaking of that trend, we just saw another example play out in real time. The Eleventh Circuit’s decision in Insurance Marketing Coalition v. FCC struck down the FCC’s one-to-one consent rule, essentially telling the agency that it had overstepped its authority. See Ins. Mktg. Coal. Ltd. v. FCC, 127 F.4th 303 (11th Cir. 2025). The reasoning there—that agencies can only “reasonably define” statutory provisions without altering them—sounds awfully similar to the McLaughlin approach.
So, how will this ultimately play out? I’m glad you asked. For defense attorneys, McLaughlin opens up a whole new playbook. Instead of having to work around FCC interpretations of ATDS scenarios, you can now argue directly from statutory text and context. Got a client using technology that stores numbers but doesn’t generate them randomly? Make the textual argument. Using a system with human intervention that the FCC once deemed “automated”? Point the court to the text. Using some algorithmic selection that doesn’t quite fit the random/sequential concept? Time to get creative with statutory interpretation.
The flip side is that plaintiff attorneys also gain new opportunities. They can argue for broader textual interpretations of ATDS without having to overcome existing FCC guidance. The whole question of what “capacity,” “production,” and “storage” mean in the context of modern technology is back on the table.
From a compliance perspective, this creates a much more complex landscape. It used to be that if you followed FCC guidance, you had a pretty good safe harbor. Now you’ve got to think about how different district courts in different jurisdictions might independently interpret the same statutory language. For instance, compliance that works perfectly in the Ninth Circuit might change drastically in the Fifth Circuit, not because the law changed, but because different judges reached different conclusions about what Congress meant when it wrote about ATDS.
This all fits into the constraining of administrative power and the return of interpretive authority to the judiciary. Following Loper Bright’s elimination of Chevron deference and McLaughlin’s limitation of Hobbs Act preclusion, we’re witnessing a fundamental rebalancing toward judicial supremacy in statutory interpretation. Bottom line for anyone in the TCPA space, this means possibly less predictability in the short term, but potentially more sophisticated, text-based analysis over time. Exciting stuff!
New Jersey BPU Launches Multi-Phase Energy Storage Incentive Program
Key Takeaways:
PJM-ready projects are a must. Eligible projects must (1) be transmission-connected (PJM bulk power system) and located in a New Jersey transmission zone; (2) have PJM interconnection approval (or capacity interconnection rights (CIRs) from a deactivating facility); and (3) commit to a commercial operation date (COD) within 30 months of application period close (plus a 150-day grace period). To reach a COD, the project must be fully constructed and interconnected to the PJM transmission network.
Site control and permitting matter as developers must demonstrate they are ready to secure all required approvals.
Brownfield redevelopment, community benefits and environmental attributes may be favored over lower bid levels.
The New Jersey Board of Public Utilities (BPU) approved Phase 1 of the Garden State Energy Storage Program (GSESP) after two years of stakeholder engagement. Rules related to the GSESP were also approved for publishing in a future New Jersey Register. Phase 1 is the first of a new, multi-phase incentive program to support the development of 2,000 megawatts (MW) of energy storage by 2030, as required under the Clean Energy Act of 2018 (P.L. 2018, c.17). This is a significant milestone in New Jersey’s energy policy, allowing the integration of intermittent renewable energy sources and a critical opportunity for energy storage developers to secure long-term, fixed-price incentives.
Phase 1 targets transmission-scale, front-of-the-meter energy storage systems. Distributed storage incentives will follow in Phase 2 (expected in 2026). Below is a comprehensive breakdown of what developers need to know.
Phase 1: Transmission-Scale Storage Solicitation
To align with the pending New Jersey Assembly Bill A-5267 that would require the BPU to establish a transmission-scale energy storage procurement and incentive program, the BPU limited Phase 1 incentives to transmission-scale energy storage systems, directly interconnected to the bulk transmission system. Both standalone storage and storage additions to existing solar, solar-plus-storage and other Class I renewable energy resources (solar, geothermal electric generation, landfill gas, biogas, etc.) are eligible provided they are not already receiving incentives from the Competitive Solar Program. Despite a call for increased utility involvement and ownership of energy storage systems, the BPU will limit Phase 1 incentives to private (non-EDC) and governmental entities.
Additional components of Phase 1 include:
Final awards will determine eligible projects and the size of each project’s incentive award.
Payments will be made annually over a 15-year term.
“Pay-as-bid” model bidding process where developers propose a fixed annual incentive (e.g., $/MW/year) for providing energy storage capacity. The projects awarded funding are those that offer the lowest incentive cost per MW, promoting cost-effectiveness.
Initial solicitation (“Tranche 1”) aims to procure 350–750 MW.
Total Phase 1 goal is 1,000 MW of transmission-scale storage.
The prequalification review for deficiencies for Phase 1 applications opens on June 25, 2025, with a deadline for guaranteed review of July 23, 2025. Final bids are due by August 20, 2025. The BPU will announce awards in October 2025.
Phase 2: Distributed Storage Coming in 2026
Developers with behind-the-meter or distribution-level assets should prepare for Phase 2 in 2026. Expected features include distributed fixed incentives (capacity-based), distributed performance incentives (likely grid-service or dispatch-based), participation from distributed energy resource aggregators and systems co-located with rooftop solar and EVs, and prioritization of projects that serve overburdened communities or improve distribution system resilience.
Trade Secret Law Evolution Podcast Episode 78: When Are Misappropriators Dangerous Enough to be Enjoined? [Podcast]
In this episode, Jordan discusses a recent case from the Southern District of New York where an injunction was partially granted on a breach of contract claim but not on the trade secret claim. The Court found the plaintiffs didn’t make a sufficient showing on irreparable harm, based on a lack of “danger” that the misappropriator would disclose the trade secrets to someone else.
Ohio Leads the Way Allowing Employers to Post Digital Labor and Employment Notices
On July 20, 2025, Ohio will officially become one of the first states to allow employers to provide digital—rather than physical—copies of certain labor law notices required under Ohio law.
Specifically, under changes imposed by Senate Bill 33 (SB 33), Ohio will soon allow employers and businesses to post the following Ohio notices digitally:
Minor Labor Laws
Minimum Fair Wage Standards Law
Civil Rights Law
Prevailing Wage Law
Workers’ Compensation Law
Public Employment Risk Reduction Program Law
Employers who choose to adopt a digital format must do so in a way that is accessible to all employees, such as posting the notices to an intranet site, an employee portal, or an employee accessible webpage (in each case, ensuring accessibility for employees with disabilities). Importantly, if an employer elects to provide digital notices, SB 33 requires an employer to also post the Ohio Civil Rights Law notice on the internet “in a manner that is accessible to the public.”
In contrast to a similar law enacted by New York State in 2022, SB 33 does not require Ohio employers to use digital notices; instead, employers may still choose to post physical copies of the notices in high traffic areas such as break rooms or on bulletin boards. Additionally, SB 33 does not change any requirements under federal law to physically post certain employment-related notices.
In determining whether to provide digital notices, employers should consider:
how the employer intends to communicate any changes to its workforce. For instance, employers may want to incorporate the notices and directions on how to access the notices in their onboarding materials;
whether the employer’s digital platform is reliable; employers should avoid using systems that frequently render the notices inaccessible or unavailable; and
whether the employer needs to maintain physical postings to comply with other state or federal laws.
Reminder: California Healthcare Minimum Wage Increase Effective July 1, 2025
Employers in the healthcare industry in California are subject to a separate minimum wage from other employers.
Effective July 1, 2025, certain healthcare facilities will see an increase in their minimum wage rates. The following is a summary of the increases based on the type of employer.
Type of Healthcare Employer
Current Rate
Increased Rate
Hospitals or Integrated Health Systems with 10,000 or more full-time employees, including skilled nursing facilities operated by these employers
$23
$24
Dialysis Clinics
$23
$24
Covered Health Care Facilities run by large counties with more than five million people as of January 1, 2023
$23
$24
Hospitals with 90% or more of their patients paid for by Medicare or Medi-Cal
$18
$18.63
Independent Hospitals with 75% or more of their patients paid for by Medicare or Medi-Cal
$18
$18.63
Rural Independent Covered Health Care Facilities
$18
$18.63
Covered Health Care Facilities run by small counties with fewer than 250,000 people
$18
$18.63
While several categories of healthcare employees will receive a minimum wage increase in July 2025. The following categories of healthcare employers will not have a minimum wage increase until July 2026:
Intermittent clinics, community clinics, rural health clinics, or urgent care clinics associated with community or rural health clinics
Covered Health Care Facilities run by Medium Sized Counties (250,000 to five million people as of 1/1/23)
Skilled Nursing facilities not owned, operated, or controlled by a hospital, integrated health care delivery system, or health care system
All other covered health care facilities not listed in the other categories and not run by Counties
Who is Covered?
The definition of “health care employee” is broad, encompassing a wide range of roles within healthcare facilities. This includes employees who provide patient care, health care services, or services supporting the provision of health care. Examples of covered roles include:
Nurses
Physicians
Caregivers
Medical residents, interns, or fellows
Patient care technicians
Janitors
Housekeeping staff
Groundskeepers
Guards
Clerical workers
Non-managerial administrative workers
Food service workers
Gift shop workers
Technical and ancillary services workers
Medical coding and billing personnel
Schedulers
Call center and warehouse workers
Laundry workers.
DOJ Civil Division Prioritizes Denaturalization in New Enforcement Memo
On June 11, 2025, the U.S. Department of Justice (DOJ) Civil Division issued an internal memorandum outlining its latest enforcement priorities. The memo, signed by Assistant Attorney General Brett Shumate, directs DOJ attorneys to advance the administration’s goals through targeted civil enforcement. One of the priorities highlighted in the memo is denaturalization, or the process of revoking U.S. citizenship acquired through naturalization.
The memo outlines several areas of civil enforcement the DOJ plans to prioritize, including litigation involving alleged violations of federal civil rights laws by recipients of federal funds, enforcement actions related to antisemitism, investigations into gender-related health care practices, and challenges to state or local policies that conflict with federal immigration law (sanctuary jurisdictions). Denaturalization is identified as a key area of focus for enforcement.
What Is Denaturalization?
Denaturalization is a civil action used to revoke U.S. citizenship from individuals who obtained it unlawfully. Under federal law (8 U.S.C. § 1451), the government may initiate proceedings in federal court when it believes someone was ineligible for naturalization or obtained citizenship by concealing or misrepresenting key facts. The individual has the right to legal representation, and the government carries the burden of proof. If successful, denaturalization may result in the loss of citizenship and eventual removal from the United States.
Although this legal tool has existed for decades, it has traditionally been used sparingly and reserved for exceptional cases—typically involving individuals linked to war crimes, terrorism, or major immigration fraud.
Renewed Enforcement Emphasis
Over the past several years, denaturalization has received increased attention as an enforcement tool. During the first Trump administration, the DOJ expanded its focus on identifying cases in which naturalization may have been obtained through fraud or serious misconduct, and a dedicated Denaturalization Section was established in 2020 to pursue a broader range of denaturalization actions.
The June 2025 memo continues that trajectory, directing Civil Division attorneys to “prioritize and maximally pursue denaturalization proceedings in all cases permitted by law and supported by the evidence.”
Categories of Focus
To guide enforcement efforts, the memo outlines 10 categories of individuals whose cases should be prioritized. These include:
Individuals who pose a threat to national security, including those connected to terrorism, espionage, or unlawful export of sensitive U.S. technologies;
Human rights violators, such as individuals involved in war crimes or torture;
Affiliates of transnational criminal organizations, gangs, or drug cartels;
Individuals who committed serious criminal offenses that were not disclosed during the naturalization process;
Those convicted of human trafficking, sex offenses, or violent crimes;
Individuals who engaged in fraud involving U.S. government programs (e.g., Paycheck Protection Program or Medicaid/Medicare fraud);
Individuals who committed large-scale financial fraud against private entities;
Cases involving citizenship obtained through bribery, misrepresentation, or other corruption;
Cases referred by U.S. Attorney’s Offices in connection with other criminal charges; and,
Any other case the Civil Division determines sufficiently important to pursue.
The list is not exhaustive. The memo makes clear that the DOJ retains discretion to pursue denaturalization in other cases where it deems enforcement appropriate.
Takeaways
While the legal standard for denaturalization remains high, the memo makes clear that the Civil Division plans to take a more proactive approach in cases involving suspected fraud or misconduct. For those who have already naturalized—or for lawful permanent residents preparing to apply—it reinforces the importance of ensuring the process is completed accurately and with care.
Although denaturalization actions remain relatively uncommon, they appear to be a more visible part of federal civil enforcement. For individuals navigating the naturalization process, or revisiting concerns about past filings, this development highlights the importance of accuracy and full compliance. Working with experienced immigration counsel may help ensure the process is completed properly and may reduce the risk of issues arising later.
SEC’s New Concept Release on Foreign Private Issuer Standards
On June 4, the US Securities and Exchange Commission (SEC) published a concept release soliciting public comment on potential amendments to the definition of foreign private issuer (FPI) under US securities laws.
This marks the SEC’s first comprehensive review of the FPI regulatory framework since 2008 and comes in response to shifts in the composition and overseas regulatory oversight of foreign issuers accessing US capital markets.
View concept release here.
Overview
The FPI regime was originally designed to accommodate foreign companies subject to meaningful home country regulation and whose securities were primarily traded in non-US markets. In recent years, however, the SEC has observed a marked increase in FPIs that are incorporated in jurisdictions with limited regulatory oversight with most of their equity trading occurring exclusively on US exchanges. According to the concept release, approximately 55% of Exchange Act reporting FPIs had little or no trading of their equity securities outside the United States.
The SEC is concerned that the current FPI definition may no longer ensure that only those issuers subject to robust foreign regulation and oversight benefit from the significant accommodations and exemptions available to FPIs, potentially disadvantaging US domestic issuers and reducing investor protections.
Proposals Under Consideration
The concept release seeks public input on possible approaches to revising the definition of an FPI. For example, the SEC is considering revising the existing two-prong test by lowering the US ownership threshold or tightening business contact requirements. Proposed updates also include introducing a minimum foreign trading volume requirement, mandating that FPIs maintain a listing on a major foreign exchange, and limiting FPI status to issuers from jurisdictions with robust regulatory frameworks and local disclosure requirements. Additional measures under consideration involve expanding mutual recognition systems to more countries with comparable standards and requiring that an FPI’s home country securities regulator participate in international cooperation arrangements to enhance cross-border enforcement.
Key Takeaways
If adopted, these changes could have far-reaching consequences for both existing and prospective FPIs.
A substantial number of current FPIs, especially those incorporated in the Cayman Islands, the British Virgin Islands or headquartered in China, may lose their FPI status and become subject to the more rigorous reporting, governance, and disclosure requirements applicable to US domestic issuers.
Affected issuers would need to comply with quarterly reporting requirements, US proxy rules, Regulation FD, Section 16 insider reporting, and to present financial statements in accordance with US generally accepted accounting principles.
The transition could create significant compliance and operational challenges, particularly for issuers with limited experience in US domestic reporting.
The SEC is also seeking input on appropriate transition periods and the potential market and investor impacts of any changes.
Additional Author: Jai Williams
6 Tips for Government Contractors to Avoid, Neutralize, and Mitigate Organizational Conflicts of Interest
Organizational conflicts of interest (OCIs) continue to be a critical compliance risk in the federal contracting landscape. The Federal Acquisition Regulation (FAR) mandates that contracting officers “avoid, neutralize, or mitigate” OCIs to ensure that government decisions are made objectively and without improper influence. For contractors — especially those engaged in professional services, systems engineering, or technical support — the presence (or even the appearance) of an OCI can lead to lost contract awards, contract terminations, or bid protest challenges. Below are six key tips to help contractors proactively address OCI risks throughout the procurement lifecycle.
1. Understand the Three Core Types of OCIs
Before you can avoid or mitigate an OCI, you need to know what you’re dealing with. The FAR and related case law recognize three primary categories of OCIs:
Biased Ground Rules – Occurs when a contractor helps draft or otherwise shape the requirements for a solicitation, potentially skewing the competition
Impaired Objectivity – Arises when a contractor’s judgment in evaluating products or services could be compromised due to other business interests
Unequal Access to Information – Happens when a contractor gains non-public, competitively useful information through prior or existing work, giving it an unfair advantage
Being able to spot which type may be implicated is essential for crafting an effective compliance strategy.
2. Conduct an Internal OCI Assessment Early
OCI issues often surface during proposal development or after award — both high-risk times for your business. Thus, contractors should instead conduct a pre-proposal OCI screening for each opportunity, reviewing:
Prior or current contracts that may overlap in scope or subject matter
Involvement in drafting the solicitation or advising the agency
Subcontractor or teaming partner relationships that may raise OCI concerns
This due diligence should be documented and updated regularly, especially if organizational changes occur.
3. Develop and Maintain an OCI Compliance Plan
An effective OCI mitigation or avoidance strategy often hinges on a written, proactive plan. Key components should include:
Firewalls – Clearly separate personnel and systems to prevent the flow of non-public or sensitive information
Screening Procedures – Pre-assignment reviews to ensure staff are not conflicted
Non-Disclosure Agreements (NDAs) – Ensure employees, subcontractors, and teaming partners sign NDAs specific to each project
Training – Regular OCI training for staff involved in proposal development, contract performance, and business development
The existence of a documented and credible plan can also be persuasive in responding to agency inquiries or protest allegations.
4. Engage with the Contracting Officer Early
If there’s any ambiguity about a potential OCI, it’s usually best to disclose the issue to the agency up front. FAR Subpart 9.5 requires that contracting officers identify and resolve OCIs. Voluntary disclosure shows good faith and allows you to shape the narrative and propose your own mitigation approach, rather than waiting for the agency or a protester to define the issue for you.
5. Tailor Mitigation Strategies to the Specific Conflict
Not all OCIs are created equal — and not all can be mitigated. But where mitigation is appropriate, it is important to be specific. Generic assertions of “firewalls” or “screening” will not suffice. Instead, provide information such as:
Named individuals responsible for OCI compliance
Details of data segregation procedures
Timing and documentation of mitigation efforts
Evidence that mitigation measures are in place and effective
Tailored mitigation is often the difference between staying in the competition and being eliminated.
6. Stay Vigilant Post-Award
OCI compliance doesn’t end when the contract is awarded. Performance-related conflicts may arise if your company acquires a new business, hires former government officials, or is awarded additional work. Regular internal reviews, coupled with clear communication with the contracting officer, are essential to staying on the right side of FAR 9.5.
Conclusion
OCIs are a complex and evolving area of government contracts law — but they’re not insurmountable. With proactive planning, robust internal controls, and open communication with the government, contractors can avoid or mitigate even complex OCI scenarios. Failing to do so, however, can result in costly bid protests, reputational damage, and lost opportunities.
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SCOTUS Says District Courts Are Not Bound by FCC Orders Interpreting the TCPA
On June 20, 2025, the U.S. Supreme Court delivered an opinion that could dramatically change the landscape of class actions under the Telephone Consumer Protection Act (TCPA).
In the case—McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation—the Court held that the Hobbs Act does not bind district courts in civil enforcement proceedings to accept an agency’s interpretation of statutes such as the TCPA. The Court emphasized that district courts “instead must determine the meaning of the law under ordinary principles of statutory interpretation, affording appropriate respect to the agency’s interpretation.” More directly, the FCC’s word is not the last in determining the TCPA’s definitional and liability standards.
The underlying case involved a dispute as to whether the district court was bound to follow an FCC order that “an online fax service is not a ‘telephone facsimile machine’” actionable under the TCPA. The district court ultimately decided that the FCC’s ruling was “a final, binding order” dictating how the law must be applied. The Ninth Circuit affirmed that decision.
A 6-3 Supreme Court majority, however, held that both lower courts got it wrong. District courts are not barred from independently assessing whether the FCC’s interpretation of the statute is correct and, in fact, categorically refusing to interpret the statute is error.
Suddenly with the Court’s decision, decades of FCC orders—as well as years of judicial precedent adopting the FCC’s interpretation of the law—are called into question. New battlegrounds are sure to arise as litigants seek to redefine “correct” interpretations of the TCPA’s requirements, including with respect to definitional language in the statute, its applicability to text message communications, and the scope of consent and opt-out compliance requirements under the law.
A three-justice dissent, led by Justice Kagan, notably raises concern with the majority’s holding, finding that the decision will lead to regulatory uncertainty, undermine the stability of administrative programs, and cause parties to disregard pre-enforcement agency orders.
Whatever the end result may be, there should be no dispute that McLaughlin will change how parties previously litigated TCPA class actions, and it opens opportunities for defense attorneys to make new arguments protecting clients against massive TCPA liability risks moving forward.
Texas Enacts “Responsible AI Governance Act”
The Texas Responsible AI Governance Act (TRAIGA), signed into law on June 22, 2025, represents a significant evolution in state-level AI regulation. Originally conceived as a comprehensive risk-based framework modeled after the Colorado AI Act and EU AI Act, TRAIGA underwent substantial modifications during the legislative process, ultimately emerging as a more targeted approach that prioritizes specific prohibited uses while fostering innovation through regulatory flexibility. Set to take effect on January 1, 2026, TRAIGA marks Texas as a key player in the developing landscape of AI governance in the United States. TRAIGA’s evolution from comprehensive risk assessment to targeted prohibition also reflects deeper challenges in AI governance: how do we regulate technologies that can modify their own behavior faster than traditional oversight mechanisms can adapt?
From Sweeping Framework to Targeted Regulation. The original draft, introduced in December 2024, proposed an expansive regulatory scheme that would have imposed extensive obligations on developers and deployers of “high-risk” AI systems, including mandatory impact assessments, detailed documentation requirements, and comprehensive consumer disclosures. The final version, following stakeholder feedback and legislative debate, represents a significant shift from process-heavy compliance requirements to outcome-focused restrictions. Rather than creating broad categories of regulated AI systems, the enacted version attempts to strike a balance of preventing specific harms while maintaining Texas’s business-friendly environment.
Core Prohibitions. TRAIGA enacts a prohibited uses framework that prohibits AI systems designed or deployed for:
1. Behavioral Manipulation: Systems that intentionally encourage physical harm or criminal activity.
2. Constitutional Infringement: AI developed with the sole intent of restricting federal Constitutional rights.
3. Unlawful Discrimination: Systems intentionally designed to discriminate against protected classes.
4. Harmful Content Creation: AI for producing child pornography, unlawful deepfakes, or impersonating minors in explicit conversations.
Notably, the Act requires intent as a key element for liability. This intent-based standard provides important protection for developers whose systems might be misused by third parties, while still holding bad actors accountable. The provision clarifying that “disparate impact” alone is insufficient to demonstrate discriminatory intent aligns with recent federal policy directions and provides clarity for businesses navigating compliance. While this intent-based framework addresses obvious harmful uses, it leaves open more complex questions about AI systems that influence human decision-making through design choices that fall below the threshold of conscious intent — systems that shape choice environments without explicitly intending to manipulate. Companies should consider how their AI systems structure user choice environments, even when not explicitly designed to influence behavior.
The Sandbox Program. TRAIGA implements a regulatory sandbox program administered by the Department of Information Resources. This 36-month testing environment allows AI developers to experiment with innovative applications while temporarily exempt from certain regulatory requirements. Participants must submit quarterly reports detailing system performance, risk mitigation measures, and stakeholder feedback.
Enforcement. TRAIGA vests enforcement authority exclusively with the Texas Attorney General, avoiding the complexity of multiple enforcement bodies or private rights of action. The enforcement framework includes several features designed to incentivize proactive compliance and self-correction while providing meaningful deterrents for intentional bad actors:
60-day cure period for violations before enforcement actions can proceed
Affirmative defenses for companies that discover violations through internal processes, testing, or compliance with recognized frameworks like NIST’s AI Risk Management Framework (RMF)
Scaled penalties ranging from $10,000 – $12,000 for curable violations to $80,000 – $200,000 for uncurable ones
The Texas AI Council. TRAIGA establishes the Texas Artificial Intelligence Advisory Council, which is explicitly prohibited from promulgating binding rules, and instead focuses on:
Conducting AI training for government entities
Issuing advisory reports on AI ethics, privacy, and compliance
Making recommendations for future legislation
Overseeing the sandbox program
Implications for Businesses. For companies operating in Texas, TRAIGA offers both clarity and flexibility. It’s focus on intentional harmful uses rather than broad categories of “high-risk” systems reduces compliance uncertainty. Key considerations for businesses include:
1. Intent Documentation: Companies should maintain clear records of their AI systems’ intended purposes and uses
2. Testing Protocols: Implementing robust testing procedures can provide affirmative defenses
3. Framework Adoption: Compliance with recognized frameworks like NIST’s AI RMF offers legal protection
4. Sandbox Opportunities: Innovative applications can benefit from the regulatory flexibility offered by the sandbox program
National and Policy Implications. TRAIGA’s passage positions Texas as a significant voice in the national AI governance conversation. Its pragmatic approach contrasts with more prescriptive frameworks proposed elsewhere, potentially offering a model for AI regulation that prioritizes innovation while addressing concrete harms. However, TRAIGA also contributes to the growing patchwork of state AI laws, raising questions about regulatory fragmentation. With Colorado, California, Utah, and now Texas each taking different approaches to more comprehensive AI regulation, businesses face an increasingly complex compliance landscape. This fragmentation may accelerate calls for federal preemption or a unified national framework.
Conclusion
The Texas Responsible AI Governance Act charts a distinctive course in AI governance by focusing on specific prohibited uses rather than comprehensive risk assessments. However, TRAIGA’s effectiveness will ultimately depend on how well traditional regulatory frameworks can adapt to technologies that operate at machine speed while making decisions that fundamentally affect human agency and choice. While the act addresses intentional harmful uses, the more challenging questions may involve AI systems that influence decision-making environments in ways that fall outside traditional regulatory categories. As other states and the federal government continue to grapple with AI regulation, the Texas model offers valuable lessons — and reveals limitations — of applying legal frameworks to technologies that challenge basic assumptions about agency, intent, and choice.
SEC Reassesses Foreign Private Issuer Eligibility
Earlier this month, the US Securities and Exchange Commission (SEC) issued a concept release to solicit public comment on potential changes to the definition of a foreign private issuer (FPI), marking the SEC’s first review of this regulatory framework since 2008. The proposed revisions introduce more stringent standards for FPI qualification, which may lead to a decrease in eligible companies.
Currently, FPIs are afforded significant accommodations, including the following:
Reduced SEC reporting obligations.
The ability to prepare financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board instead of US Generally Accepted Accounting Principles.
Exemptions from Section 16 reporting requirements, federal proxy rules, and Regulation Fair Disclosure.
The potential loss of FPI status, and the resulting loss of these accommodations, could have a material impact on current and future FPIs.
The SEC noted in its release that this review was prompted by the significant changes in the FPI population over the past two decades. The current FPI definition and accommodations were adopted with the understanding that most FPIs would be subject to meaningful disclosure and regulatory requirements in their home countries, and that their securities would be traded in foreign markets. As issuers have shifted away from jurisdictions of incorporation and headquarters that have more significant regulatory requirements for issuers, such as Canada and the United Kingdom, toward jurisdictions with lesser requirements, such as the Cayman Islands and China, the SEC has raised the question as to whether the current FPI definition still benefits its intended issuers while continuing to protect investors and promote capital formation.
The SEC requested comments on 69 different proposals, including:
Updating Existing FPI Eligibility Criteria
Lowering the 50% ownership threshold in the “shareholder test” or revising the “business contacts test” criteria to better identify issuers with substantial connections to the United States.
Adding a Foreign Trading Volume Requirement
Require FPIs to have a certain percentage of their securities’ annual trading volume occur in markets outside the United States.
Adding a Major Foreign Exchange Listing Requirement
Require FPIs to be listed on a “major foreign exchange” to ensure they are subject to robust oversight in a foreign market. The SEC would define what constitutes a “major” exchange based on criteria like market size, corporate governance, disclosure, and enforcement authority.
SEC Assessment of Foreign Regulation
Limiting FPI status to issuers incorporated or headquartered in a jurisdiction that the SEC has determined has sufficient securities regulation and oversight to protect US investors.
Establishing New Mutual Recognition Systems
Similar to the current Multijurisdictional Disclosure System with Canada, new systems could be developed allowing FPIs from selected foreign jurisdictions to comply with home country securities regulations if they offer “comparable protections” to US investors.
Applicability to New Versus Existing FPIs
The SEC is considering whether any of these contemplated changes should apply only to new FPIs registering for the first time to eliminate transition costs for the existing FPI population. Alternatively, existing FPIs might be permitted to rely on current FPI eligibility requirements indefinitely or become subject to any changes to the FPI definition following a transition period, the parameters of which would need to be determined.
Next Steps
Although there is uncertainty surrounding the specifics of any potential changes in the FPI framework, FPIs are encouraged to track these potential changes, assess how their existing structure, trading patterns, and home country regulatory framework aligns with the proposed new criteria, and weigh the significant compliance and strategic implications of potentially losing FPI status.
The SEC invites public comments on all aspects of the concept release, including potential costs, benefits, and competitive impacts of any changes. Comments are due on or before 8 September 2025, (90 days after publication in the Federal Register).
“Prior Knowledge” Claims and How to Avoid Them
The Sixth Circuit recently affirmed a professional liability insurer’s denial of coverage based on an assembly-line equipment designer and manufacturer’s prior knowledge of a customer dispute that predated the policy’s effective date. The decision, Fives ST Corp., v. Allied World Surplus Lines Ins. Co., No. 24-1921, 2025 WL 1639637 (6th Cir. June 10, 2025), highlights the importance of adequate disclosures during policy underwriting and common missteps based on alleged prior knowledge of claims or alleged wrongdoing that can lead to denials and coverage disputes months or years later when those disputes escalate into formal litigation.
Background
Fives ST Corporation was consistently late in delivering equipment to a customer. In 2020, the customer made a demand for liquidated damages, which eventually led to the parties settling for €100,000 and an agreement for FST to provide on-site services.
The negotiated resolution did not last long. In 2021, the customer sent another letter alleging that FST’s ongoing design failures had required the customer to bear substantial costs. FST disagreed, but a specialist retained by FST had already concluded that FST’s equipment was defective, which was causing it to malfunction.
In the midst of the customer quarrel, FST applied for a new professional liability insurance policy, which would cover FST’s provision of services to customers like the design and construction of assembly lines already at issue in the dispute.
The insurance application used to underwrite the policy asked if any officers or employees at FST had “knowledge of any act, error or omission, unresolved job dispute (including fee disputes), accident or any other circumstance that is or could be the basis for a claim” under the proposed policy. The application form also stated that “if such knowledge or information exists, any claim arising therefrom is excluded from this insurance.” FST had originally left this question blank, but when pressed by the underwriters, FST responded “no.”
The insurer eventually issued the policy, agreeing to indemnify FST for any “Claim” “arising out of a Wrongful Act in the rendering or failure to render Professional Services,” which was defined to include services performed for others in FST’s capacity as a construction manager. Concurrently, FST’s customer dispute continued to escalate, leading the customer to file a lawsuit alleging that FST breached its contractual obligations in “mis-designing the equipment, failing to own up to its own failure, and continuously stringing [the customer] along with missed deadlines, false promises, and partial fixes.”
After the insurer denied FST’s claim, FST sued seeking defense and indemnification under its professional liability policy. The district court upheld the denial, finding that FST knew about circumstances that could give rise to a claim under the policy and failed to disclose that on the application.
The Court’s Analysis
The Sixth Circuit affirmed the no-coverage ruling on appeal, focusing principally on one fact: FST had knowledge of its dispute with the customer when it applied for the policy and inaccurately responded “no” to the question in the application asking about FST’s knowledge of any act, error, or omission that could give rise to a claim under the policy.
The Sixth Circuit began by asking “Did FST have knowledge of its ongoing dispute with its customer when it applied for the Allied World policy?” Applying Michigan law, the court concluded the answer was yes.
The policy required two conditions to get coverage. First, the claimant’s alleged “wrongful acts” had to have taken place during the covered period of December 29, 2003, and December 31, 2022. And second, more importantly, FST’s officers and employees could not have any knowledge of those “wrongful acts” or circumstance that could give rise to a claim under the policy. When FST applied for the policy, it claimed no knowledge of disputes related to its professional services, despite being aware of potential design-defect claims from the customer assembly line for over a year prior. While the parties were negotiating a settlement, the customer continued to find defects with FST’s equipment and emailed FST a list of issues it had with the equipment FST had provided. These design and assembly issues, the court concluded, “fell at the heart of FST’s role” as a construction manager. At the time it applied for coverage, therefore, FST knew about acts, errors, or omissions, or unresolved job disputes that could be the basis for a claim.
FST argued that the dispute was simply “run-of-the-mill business and contractual disputes around the timing of delivery.” Not so, the Sixth Circuit reasoned, because FST itself recognized that the dispute centered around a “design issue,” which FST knew about when it applied for coverage.
The court also rejected FST’s argument that the alleged design defects were about a component part designed by one of FST’s subcontractors. That defense failed because FST, not its subcontractor, was contractually responsible for supplying the relevant equipment to the customer.
FST finally contended that insurers usually are not allowed to deny coverage just because the policy took effect after the circumstances giving rise to the claims. The court acknowledged that principle under Michigan law but found it inapposite to FST’s customer dispute because FST’s knowledge of the ongoing or potential claims meant that there was no coverage at all.
“Prior Knowledge” Issues and Ways to Avoid Them
Liability policies written on a “claims made” basis are designed to respond to claims asserted after the policy’s effective date, even if the alleged wrongdoing took place prior to the effective date. But insurers are wary of insuring “known risks,” which can arise in numerous ways.
Like the questionnaire in the FST dispute, one way insurers identify those risks is through application questions, asking the applicant to disclose knowledge of past disputes, demands, claims, and other grounds that may give rise to a potential claim under the anticipated policy. Another way is through the policy itself, which may include exclusions or other limitations aimed at preventing an insured from purchasing a policy for risks it knew about before applying for coverage.
The Fives ST coverage litigation highlights several key takeaways for policyholders looking to avoid similar prior-knowledge issues arising from either the underwriting process or problematic policy language.
Pay Close Attention to Underwriting Disclosures. Policyholders must remain vigilant in completing applications and fielding underwriter inquiries to avoid potential gaps in coverage, coverage denials, or policy rescission.
Misrepresentations or omissions on applications can lead to coverage denials or policy rescission. As shown in the Fives ST lawsuit, small details (or omissions) in policy applications and other disclosures to underwriters can be the difference between recovery and denial. Beyond applications, policyholders could run afoul of prior knowledge issues in other ways, like signing warranty letters (to obtain higher limits) or even making offhand statements to underwriters on phone calls or in emails. The bottom line is that these disclosures are more than a procedural hurdle to clear before obtaining insurance coverage—the facts and information disclosed in underwriting can later bar coverage—or worse, lead to rescinded policies—if the information is later deemed incomplete or inaccurate.
Beware of Prior Knowledge Exclusions. FST learned the hard way that incomplete or inaccurate representations during the underwriting process can limit or eliminate coverage for future exposures. But that is not the only way prior knowledge impacts claims. Liability carriers often include “prior knowledge” exclusions that can bar coverage if prior to policy inception the insured had a reasonable basis to believe that the wrongful acts at issue could result in a claim.
As with most exclusions, prior knowledge clauses vary widely and are subject to negotiation and, if needed, modification. Whose knowledge is relevant? What knowledge is required to trigger the exclusion and how, if at all, is that requirement qualified? Asking these and other questions in reviewing policy proposals can help identify overbreadth and avoid surprises when submitting claims.
Consider Retroactive Dates. A corollary to the prior knowledge exclusion is the policy’s so-called “retroactive” date. A retroactive date in many claims-made policies is a provision eliminating coverage for claims for wrongful acts taking place before a specific date, even if the claim is first made against the insured during the policy period. Some policies provide “full” prior acts coverage, without a retroactive date.
As you can imagine, the difference in coverage between a policy with a recent retroactive date and full-prior-acts coverage is stark. While extensions to cover all prior acts may not be possible in all cases, understanding these distinctions at the time of policy placement is important to avoid mismatched expectations when a claim arises.
Reporting and Understanding Different Types of “Claims.” Another feature of modern claims-made policies is that coverage is triggered based on when a claim is first made against the insured and reported to the insurer. This is very different from other coverages—like commercial general liability policies—that allow for reporting months or years after a policy expires, so long as the underlying occurrence (e.g., injury, accident) happened during the policy period.
For those reasons, providing notice early and often is paramount. That includes reporting both actual and potential claims (referred to as “notice of circumstances”) consistent with policy requirements. Those notice obligations turn on whether a “Claim” is made against an insured, regardless of whether the claim is frivolous, will be dismissed, or will pose a material exposure to the company or the liability insurer.
To assess whether and how to report claims, one must first understand what constitutes a “Claim” in the first place. Many sophisticated companies and executives are surprised to learn about how broadly-defined that term is in many claims-made policies, including that seemingly routine emails and other written communications from customers, investors, and other putative claims can arise to the level of a claim that triggers a reporting obligation. And that’s not even accounting for lesser-known but equally important coverage extensions for things like “pre-claim inquiries” and other matters.
In short, arming in-house counsel, risk managers, executives, and other key decision makers with adequate knowledge of how policies operate and how the company needs to respond to claims can help avoid late notice and the coverage denials that come with it.
Conclusion
Insurers will not hesitate to investigate all potentially viable defenses to coverage—including rescission—based on the policyholder’s prior knowledge of facts or circumstances giving rise to a claim submitted under a liability policy. The Fives ST opinion illustrates that coverage missteps can occur long before a claim arises and that the time to assess disclosure obligations and exclusions that might foreclose coverage based on prior knowledge is before the policy is procured or renewed. Engaging experienced brokers, consultants, coverage counsel, and other risk professionals before a claim or dispute arises can help mitigate the risk of a coverage dispute and to maximize recovery in the event of a claim.