Alliance for Natural Health Calls for Reform to Self-GRAS
The Alliance for Natural Health (ANH) has published a white paper calling for the “balanced reform” of the GRAS system.
The ANH announcement comes shortly after HHS Secretary Robert F. Kennedy, Jr.’s directive for FDA to explore potential rulemaking to eliminate the pathway for companies to self-affirm food ingredients as GRAS, a move which Secretary Kennedy stated would “provide transparency to consumers.”
While the ANH white paper does not support the complete elimination of self-GRAS, it does propose several key reforms:
Prioritization of removal for specific unsafe ingredients such as potassium bromate, propylparaben, and brominated vegetable oil;
Creation of a comprehensive online database of all GRAS determinations;
Implementation of a four-tier system that calibrates evidence requirements based on an ingredient’s history and safety profile;
Creation of a pathway for ingredients with a documented history of safe use to be officially recognized by FDA as “historically safe;”
Use of warnings, rather than outright bans, for ingredients that are generally safe but may be harmful to specific populations.
Digital Financial Assets – Out Of The Frying Pan And Into The Fire?
The application of the securities laws to digital financial assets has been fraught for lawyers and their clients. After taking a hard line that many of these assets were securities under the federal securities laws, the Securities and Exchange Commission with the change of Administration now appears to be taking a less hostile approach. In January, Acting Commissioner Mark Uyeda announced the formation of a Crypto Task Force. Then in February, the Staff of the Division of Corporation Finance issued a statement that certain meme coins are not securities.
A conclusion that a digital financial asset is not a security may simply transfer regulation from one regulator (the SEC) to another (the California Department of Financial Protection & Innovation), or as Bilbo Baggins exclaimed: “Escaping goblins to be caught by wolves!”*
California’s Digital Financial Assets Law will require persons engaged in “digital financial asset business activity” to be licensed by the Department. Cal. Fin. Code § 3201. The DFAL defines “digital financial asset” as “a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender, whether or not denominated in legal tender.” Cal. Fin. Code § 3102(g)(1). One exclusion from this definition is a “security registered with or exempt from registration with the United States Securities and Exchange Commission or a security qualified with or exempt from qualifications with the department.” Cal. Fin. Code § 3102(g)(2). Accordingly, if the SEC determines that a digital financial asset is a security, someone exchanging, transferring, or storing that asset would be subject to the DFAL, unless exempt. Conversely, a determination that a particular digital financial asset is not a security would bring persons engaged in exchanging, transferring, or storing that asset within the ambit of the DFAL. Oddly, a security that is neither registered with nor exempt from registration would not be excluded from the definition of a “digital financial asset” for purposes of the DFAL.
___________________J.R.R. Tolkien, The Hobbit, or There and Back Again.
Court Considers Measure of Damages in California CLRA Case for Deceptive “Made in USA” Claims
A federal jury in the Central District of California has awarded $2.36 million in damages to a consumer class, finding that R.C. Bigelow Inc., without limitation, violated the Consumer Legal Remedies Act and misrepresented that the company’s tea products as were “Manufactured in the USA 100% American Family Owned” and “America’s Classic.”
Here, consumers initiated a class action lawsuit against the tea company, alleging that its branding, packaging and advertising is deceptive because it expressly and/or implied states that its tea is wholly manufactured in America. The consumers further alleged that the products are comprised solely of foreign-sourced tea. They claimed that had they known the truth about the tea that they would not have made the same purchasing decisions.
In July 2023, the court certified a class comprised of all purchasers in California of at least one box of Bigelow tea containing the label at issue between 2017 and 2023.
The class action lawsuit argued that the teas at issue are made from tea leaves that are derived from a plant that are not grown or processed in the United States and are grown in places such as Sri Lanka and India.
The issues before the jurty at trial included whether the company engaged in unfair competition and unfair or deceptive acts under the CLRA, whether the company breached its express warranty that the products were “Manufactured in the USA,” whether the company made the allegedly false statement knowingly or recklessly, and damages.
Despite the company argued that the labels were intended to reference the company’s U.S.-based blending and packaging facilities, the tea bags were manufactured in the United States, and the company owned a tea plantation in the U.S. However, the court found that the teas in question are grown and processed overseas, mostly in China, India, and Sri Lanka. The court further found that the teas undergo processing outside of the U.S. that “transformer” them from raw leaves into a consumable product. Thus, the court found that teas to be processed abroad.
The court held that the tea’s “[m]CLRA in the USA 100%” label was “literally false” because the great majority of the company’s tea is imported from overseas.
Following trial, the jury awarded a class of California tea purchasers $2.36 million in compensatory damages. No punitive damages were awarded.
A damages expert for the class attributed 11.3% of the company’s sales to the purported false label, asserting that consumers overpaid for the tea by $3.26 million. The expert testified that he conducted a study of hundreds of tea buyers and purportedly found that some of those surveyed were willing to pay more for a product that included phrases such as “Manufactured in USA 100% American-Family Owned.”
Takeaway: “Made in USA” representations are heavily policed by the Federal Trade Commission. The “Made in USA Labeling Rule” requires, in part, that for a product to be called Made in USA, or claimed to be of domestic origin without qualifications or limits on the claim, the product must be “all or virtually all” made in the U.S.; (i) final assembly or processing of the product must occur in the United States; (ii) all significant processing must occur in the U.S.; and (iii) all or virtually all ingredients or components must be made and sourced in the U.S. Additionally, the product should contain no – or negligible – foreign content. Stte attorneys general and private plaintiffs also aggressively pursue deceptive U.S. origin claims. More and more frequently, related representations become the subject of consumer class action demand letters and litigation pertaining to violation of the California Consumer Legal Remedies Act, amongst other applicable legal regulations. Importantly, here, the measure of damages for a “Made in the USA” claim was the likely increase in price attributable to eth alleged false representation of origin. This case underscores the importance of manufacturers and marketing that incorporate U.S. origin claims into their advertising, marketing and/or packaging to consult with a seasoned FTC attorney to limit liability exposure for failing to comply with applicable legal regulations, including, but not limited to, state and federal “Made in U.S.A.” requirements, and California’s CLRA.
Does a Trustee Have a Duty to Investigate Whether the Trust Document is Valid?
Elderly persons often sign new estate documents, including trusts and trust amendments. Certainly, all persons with competence and without improper influences have the right to leave their property to whoever, and however, they please. However, there are instances where individuals have signed documents where they do not have the mental capacity to do so or where they are unduly influenced. This can place the person or entity named in the newly signed document as the executor, trustee, or agent into a difficult position. Does the person or entity have the duty to investigate the document that names them in their fiduciary role?
The first issue is whether the named person or entity has a duty before he, she or it accepts the position. A named person or entity can formally accept the position by signing an acceptance document or being named in a court order or the named person can constructively accept the position. A named successor trustee that has not formally accepted the role of trustee can constructively accept the role of trustee by exercising power or performing duties under the trust, unless the named successor trustee was merely (1) acting to preserve trust property, and within a reasonable time after acting gives notice of the rejection of the trust to the settlor or to the beneficiaries if the settlor is deceased, or (2) inspecting or investigating trust property for any purpose. Tex. Prop. Code Ann. § 112.009(a).
Before formally or constructively accepting the role of successor trustee, a named successor trustee has no duty to take any actions on behalf of the trust. In re Est. of Webb, 266 S.W.3d 544, 549 (Tex. App.—Fort Worth 2008, pet. denied) (stating “A person designated in a trust instrument as a trustee incurs no liability with respect to the trust until he accepts the trust.”) (citing Tex. Prop. Code Ann. § 112.009(b)); Blieden v. Greenspan, 751 S.W.2d 858, 859 (Tex. 1988) (stating “a breach of the duty to administer the trust can only occur if the trustee has accepted or acquiesced in his appointment as trustee.”); Tex. Prop. Code Ann. § 112.009(b) (“A person named as trustee who does not accept the trust incurs no liability with respect to the trust.”); Restatement (Third) of Trusts § 35 (2003) (“A person who has not accepted the office cannot be compelled to act as trustee.”); Restatement (Third) of Trusts § 76 (2007) (“A person has no duty to administer the trust unless he or she accepts the trusteeship.”); Restatement (Second) of Trusts § 169 (1959) (“[T]he trustee is not under a duty to administer the trust unless he accepts” the appointment of trustee); McCarthy v. Poulsen, 173 Cal. App. 3d 1212, 1217 (Ct. App. 1985) (“the universal rule in this country [is] that a person may not be forced to be a trustee without his consent.”). So, a named trustee who has not formally or constructively accepted the position has no duty to investigate whether the trustor had the requisite capacity to execute the trust instrument before accepting the role.
There is little authority in Texas regarding whether a person who has accepted the role of trustee has a duty to investigate whether the trustor had capacity. From a general standpoint, a trustee has two potentially conflicting duties: (1) the duty to uphold and defend the trust instrument as modified by the settlor, and (2) the duty to not comply with a trust instrument that it knows, or should have known, is invalid. Tex. Prop. Code § 113.051 (a trustee has a duty to administer the trust in accordance with the terms of the trust instrument); Tex. Prop. Code Ann. § 113.002 (“a trustee may exercise any powers in addition to the powers authorized by this subchapter that are necessary or appropriate to carry out the purposes of the trust.”); Restatement (Third) of Trusts § 76 (2007) (a trustee has a duty to administer the trust in accordance with the terms of the trust instrument including terms that have been modified or amended by the settlor); 2 Tex. Prac. Guide Wills, Trusts and Est. Plan. § 5:376 (where there is a challenge to the terms of the trust, the trustee is under a duty to uphold and defend the terms of the trust); Restatement (Third) of Trusts § 72 (2007) (“A trustee has a duty not to comply with a provision of the trust that the trustee knows or should know is invalid because the provision is unlawful or contrary to public policy.”).
While there is no case law discussing this issue in regards to a trustee, there is a case discussing this issue in regards to an executor. See In re Estate of Robinson, 140 S.W.3d 801 (Tex. App.—Corpus Christi 2004, pet. dism’d). Because “[t]he fiduciary standards of an executor of an estate are the same as the fiduciary standards of a trustee,” this case law can be applied to trustees. McLendon v. McLendon, 862 S.W.2d 662, 670 (Tex. App.—Dallas 1993, writ denied). In Robinson, the court held that an executor did not have a duty to investigate or contest the validity of decedent’s will and concluded that the trial court abused its discretion in disqualifying the executor based on the alleged duty to investigate or contest the will. In re Estate of Robinson, 140 S.W.3d at 811.
In Robinson, Garland Sandhop (“Sandhop”) served as the co-executor of the estate of Velma Robinson (“Robinson”), and co-trustee of certain trusts executed by Robinson. Id. at 804. The trial court admitted Robinson’s 1995 will to probate. Id. Contestants filed a will contest alleging that Robinson lacked the requisite mental capacity when she signed the 1995 will and was unduly influenced. Id. Contestants offered a different will for probate—one that Robinson had signed in 1983 which named Sandhop as co-executor and named different beneficiaries than the 1995 will. Id. Sandhop did not join in contesting the 1995 will. Id. The 1995 will was set aside and the 1983 will was admitted to probate. Id. When Sandhop sought to be appointed co-executor of the estate under the 1983 will, a contestant filed a motion to disqualify Sandhop alleging, among other things, that he had disregarded his duty to investigate and contest the validity of the 1995 will. Id. at 811. Ultimately, the trial court disqualified Sandhop from serving as co-executor and denied his request for appointment. Id. at 805. On appeal, Sandhop argued that he did not investigate or contest the validity of the 1995 will because: (1) he did not think he had a duty to do so, and (2) he had no reason to do so. Id. at 811. The court addressed the issue, “[Contestant] provides no authority for her argument that [Sandhop], who was named co-executor in Robinson’s 1983 will, had a duty to investigate or contest the 1995 will, and we find none.” Id. The court concluded that the trial court had abused its discretion in disqualifying Sandhop as co-executor based on the alleged duty to investigate or contest the will. Id. Using the court’s rationale from Robinson, it follows that a trustee or executor would not have a general duty to investigate the validity of a will or trust affecting the trust or estate or to bring claims to have the document set aside.
Even if a trustee could be charged with a duty to investigate the validity of a trust document, that duty would only spring forward when the trustee had some knowledge of facts that would trigger the duty and would be judged against the trustee’s discretionary standard. In determining whether a trustee should have known that a trust instrument was invalid, or should have investigated the instrument’s validity, “among the relevant factors for a court to consider are the particular trustee’s experience, familiarity with trust law and practice, and representations concerning competence to serve as a trustee.” Restatement (Third) of Trusts § 72, cmt. c (2007). Trustees owe beneficiaries “an unwavering duty of good faith, fair dealing, loyalty, and fidelity.” In re Estate of Boylan, No. 02-14-00170-CV, 2015 Tex. App. LEXIS 1427, at *10 (Tex. App.—Fort Worth Feb. 12, 2015, no pet.). This duty requires trustees to “exercise the judgment and care that persons of ordinary prudence, discretion, and intelligence exercise in the management of their own affairs.” Id. Good faith is no defense when the trustee or executor has not exercised diligence or has acted unreasonably. See, e.g., id. at *11–12; In re Estate of Bryant, No. 07-18-00429-CV, 2020 Tex. App. LEXIS 2131, at *16–17 (Tex. App.—Amarillo March 11, 2020, no pet.).
Courts scrutinize a fiduciary’s conduct in a given situation for reasonableness and diligence. See Boylan, 2015 Tex. App. LEXIS 1427, at *10–11 (analyzing reasonableness and good faith of executor’s interpretation of a will); American Nat’l Bank v. Biggs, 274 S.W.2d 209, 220–21 (Tex. App.—Beaumont 1954, no writ) (analyzing facts supporting trustees’ reasonableness and good faith when administering trust); In re XTO Energy Inc., 471 S.W.3d 126, 131–32 (Tex. App.—Dallas 2015, no pet.) (analyzing trustee’s conduct and determining that trustee’s understanding of certain conveyances was not wrongful, fraudulent, or an abuse of discretion). The Third Restatement of Trusts states:
The duty of care requires the trustee to exercise reasonable effort and diligence… in making and implementing administrative decisions, and in monitoring the trust situation, with due attention to the trust’s objectives and the interests of the beneficiaries. This will ordinarily involve investigation appropriate to the particular action under consideration, and also obtaining relevant information about such matters as the contents and resources of the trust estate and the circumstances and requirements of the trust and its beneficiaries.
…
In addition to the duty to use care and skill, the trustee must exercise the caution of a prudent person managing similar assets for similar purposes. The duty to act with caution does not, of course, mean the avoidance of all risk, but refers to a degree of caution that is reasonably appropriate or suitable to the particular trust, its purposes and circumstances, the beneficiaries’ interests, and the trustee’s plan for administering the trust and achieving its objectives.
Restatement (Third) Of Trusts § 77 cmt b.
Further, a court may not interfere with the exercise of a trustee’s discretionary powers and substitute its discretion for that of the trustee except in cases of fraud, misconduct, or a clear abuse of discretion. In re XTO Energy Inc., 471 S.W.3d at 131–32 (citing Di Portanova v. Monroe, 229 S.W.3d 324, 330 (Tex. App.—Houston [1st Dist.] 2006, pet. denied). A trustee’s power is discretionary if a trustee may decide whether or not to exercise it. Id. (citing Caldwell v. River Oaks Trust Co., No. 01–94–00273–CV, 1996 WL 227520, at *12 (Tex. App.—Houston [1st Dist.] May 2, 1996, writ denied) (not designated for publication)). When a trustee is granted the authority to commence, settle, arbitrate or defend litigation with respect to the trust, the trustee is authorized, but not required, to pursue litigation on the trust’s behalf. Id. (citing DeRouen v. Bryan, No. 03–11–00421–CV, 2012 WL 4872738 at *4 (Tex. App.—Austin Oct. 12, 2012, no pet.) (mem. op.), and quoting Restatement (Second) of Trusts § 177 cmt c). “It is not the duty of the trustee to bring an action to enforce a claim which is a part of the trust property if it is reasonable not to bring such an action, owing to the probable expense involved in the action or to the probability that the action would be unsuccessful or that if successful the claim would be uncollectible owing to the insolvency of the defendant or otherwise.” Restatement (Second) of Trusts § 177 cmt c. Based on the foregoing, a trustee likely has no duty to investigate whether the trustor had the requisite capacity to execute the trust instrument, unless refusing to do so would be unreasonable or an abuse of discretion.
Finally, a trustee has a duty to disclose “all material facts known to [it] that might affect [the beneficiaries’] rights.” Montgomery v. Kennedy, 669 S.W.2d 309, 313 (Tex.1984). A trustee may owe a duty to provide the beneficiaries with any information known to the trustee that indicated the trust instrument was invalid. If a trustee fails to do so, it may be in breach of a duty to disclose.
The issue of whether a trustee has a duty to investigate the validity of the document naming it a trustee, is a complicated one, and an issue for which there is little guidance in Texas. The only authority in Texas would seem to imply that there is no duty to investigate. Even if a duty could arise, a trustee’s conduct would likely be judged against a discretionary standard.
FTC Review Rule Lawyer on What Marketers Need to Know About the FTC Final Rule on the Use of Consumer Reviews and Testimonials
The FTC’s Rule on the Use of Consumer Reviews and Testimonials went into effect on October 21, 2024 and addresses deceptive and unfair conduct involving consumer reviews and testimonials. You can also review the FTC’s other guidance on reviews and testimonials, including FAQs relating to the agency’s Endorsement Guides.
Here are 10 things that marketers must be aware of concerning the Rule in order to avoid liability exposure, including the initiation of regulatory investigations. Consult with an FTC review and testimonial lawyer if you or your company have received an access letter, a civil investigative demand (CID) or if you are interested in discussing the implementation of preventative compliance measures.
The Rule authorizes courts to impose civil penalties for knowing violations and is important because fake, false or otherwise deceptive reviews and testimonials have, according to the agency, polluted the marketplace. There is no private right of action under the Rule.
There is a difference between a consumer review and a testimonial. A consumer review is a consumer’s evaluation, or a purported consumer’s evaluation, of a product, service, or business that is submitted to and published on a website or platform dedicated in whole or in part to receiving and displaying such evaluations. So, consumer reviews could appear, for example, on a site dedicated to consumer reviews or on product pages of retailer websites. A testimonial, one type of endorsement, is an advertising message that consumers are likely to believe reflects the opinions, beliefs, or experiences of a consumer or celebrity who has purchased, used, or otherwise had experience with a product, service, or business. Testimonials can appear in a variety of contexts, such as in television or radio ads, on a company website, in Internet ads, or in social media.
Note: Most consumer reviews are not consumer testimonials, and most consumer testimonials are not consumer reviews. However, if a business pays for or gives incentives for consumer reviews of its business, products, or services, then those incentivized reviews would also be considered consumer testimonials under the Rule.
In some instances the lack of a Rule violation could still violate the FTC Act. See, e.g., Endorsement Guides.
Can your business ask for reviews only from customers whom you think are happy with the products/services? The Rule does not contain a specific prohibition against such conduct. However, this practice could violate the FTC Act. See, e.g., Endorsement Guides 16 C.F.R 255.2(d) and (e)(11).
Example: A marketer contacts recent online, mail-order, and in-store purchasers of its products and asks them to provide feedback to the marketer. The marketer then invites purchasers who give very positive feedback to post online reviews of the products on third-party websites. Less pleased and unhappy purchasers are simply thanked for their feedback. Such a practice may be an unfair or deceptive practice if it results in the posted reviews being substantially more positive than if the marketer had not engaged in the practice. If, in the alternative, the marketer had simply invited all recent purchasers to provide feedback on third-party websites, the solicitation would not have been unfair or deceptive, even if it had expressed its hope for positive reviews.
The Rule does not prohibit giving incentives for reviews, as long as there is not an express or implied requirement that the reviews have to express a particular sentiment. Remember that failing to disclose incentives could be a violation of the FTC Act. See, e.g., Endorsement Guides 16 C.F.R 255.5(a) and (b)(6)(ii).
Note: A business does not violate the provision by offering a consumer an incentive for a review that it merely expects to be positive. Just because a business expects that an incentivized review will be positive does not mean there is either an express or implied requirement that it needs be positive to obtain the incentive. However, such a practice could violate the FTC Act. See, e.g., Endorsement Guides 16 C.F.R 255.2(d) and (e)(11).
Note: The Rule does not prohibit your business from offering compensation to a consumer to remove or change a review. However, paying consumers to change or remove truthful negative reviews may violate the FTC Act as an unfair or deceptive act or practice, because it may wind up distorting or otherwise misrepresenting what consumers think about your business or its products/services. See, e.g., Endorsement Guides 16 C.F.R 255.2(d).
Note: Also, individual consumers would not be violating the Rule by accepting money in exchange for posting a 5-star review. Section 465.4 only applies to the businesses that provide compensation or other incentives, not to the consumers who accept them.
Your business cannot pay incentives for 5-star reviews on third-party review platforms, even if you ask the reviewers to add a disclosure about the incentive. Such conduct would violate Section 465.4. This section applies whether the reviews appear on your website or third-party review platforms. Section 465.4 only applies to consumer reviews. Hired influencers are providing testimonials, which are covered under other parts of the Rule.
Additionally, you cannot suggest to consumers that their reviews must be positive (or negative) in order to obtain a promised incentive – even if you do not say so explicitly. For example, you would be implying that reviews have to be positive if you said: “Tell us how much you loved your visit to John’s Tavern and get a $5 coupon” or “Tell your friends about all the fun you had at Bob’s Arcade for a chance to win prizes.”
The Rule does not prohibit your business from offering compensation to a consumer to remove or change a review. However, paying consumers to change or remove truthful negative reviews may violate the FTC Act as an unfair or deceptive act or practice, because it may wind up distorting or otherwise misrepresenting what consumers think about your business or its products. See, e.g., Endorsement Guides 16 C.F.R 255.2(d).
The Rule does not prohibit offering incentives to consumers for taking take down their negative reviews. However, offering such incentives could be an unfair practice in violation of the FTC Act. See, e.g., Endorsement Guides 16 C.F.R 255.2(d).
The Rule prohibits businesses from implying that a review has to be positive in order for consumers to get an incentive for the review. You cannot suggest to consumers that their reviews must be positive (or negative) in order to obtain a promised incentive – even if you do not say so explicitly.
Example: You would be implying that reviews have to be positive if you said: “Tell us how much you loved your visit to Ray’s Tavern and get a $5 coupon” or “Tell your friends about all the fun you had at Jennifer’s Pottery Shack for a chance to win prizes.”
Advertising agencies, public relations firms, review brokers and reputation management companies are potentially liable under the Rule. For example, they could be liable under Section 465.2(a) if they write, create, or sell a fake or false consumer review, consumer testimonial, or celebrity testimonial. They could potentially be liable under Section 465.4 if they provide compensation or other incentives conditioned on the writing or creation of consumer reviews expressing a particular sentiment. They could also potentially be liable under Section 465.7(a) if they engage in review suppression or under Section 465.8 if they misuse fake or false indicators of social media influence.
The Rule does not cover when and how influencers should disclose their relationship to a brand. The Rule’s disclosure requirements relate to certain situations involving company insiders. But failing to disclose relationships between influencers and brands could violate the FTC Act. FTC staff has guidance about such disclosures to help businesses and influencers avoid violations.
Brokers of fake reviews would generally fall under Section 465.2(a)’s prohibition against selling a consumer review, given that such brokers are generally being paid to provide fake reviews.
If you host consumer reviews of products/services that you sell, you should be concerned about whether the reviews submitted are fake or false. However, you may not face liability under the Rule for such reviews, assuming you did not write or purchase them. Section 465.2(d) of the Rule provides an exception for reviews that appear on a website or platform when the business is doing nothing more than hosting consumer reviews.
Note: The Rule’s exemption for mere review hosting may apply to a business that solicits review submissions or aggregates star ratings. That exemption applies to mere consumer review hosting, even if the business prompts review submissions or aggregates star ratings. The exemption for review hosting does not apply to consumer reviews that a business features in its advertising or marketing materials. When featured in that context, consumer reviews become testimonials and the exemption for review hosting does not apply.
Note: A business that hosts reviews on its retail website be liable if it wrote or created fake or false reviews or if it purchased consumer reviews that it knew or should have known were false.
Note: A business can be liable under the Rule for hosting false testimonials on its website. Testimonials are, by definition, advertising or promotional messages. A business that puts testimonials on its own website is disseminating them and is not merely “hosting” them. If those testimonials are fake or false, the business could be liable.
If your business sells its products/services on its website and routinely emails every purchaser and asks them to post a consumer review, one of those purchasers happens to be an employee of your business, and if that employee sees such an email and writes a false review, you may not be responsible for it. Section 465.2(d) of the Rule provides an exception for reviews that resulted from a business making generalized solicitations to purchasers to post reviews about their experiences with a product, service, or business.
If your business hires influencers to review your products/services, are those reviews covered by the Rule? Under the Rule, a hired influencer’s social media post touting a product/service would be considered a celebrity testimonial, not a review. Your business could be liable under Section 465.2(b) if it knew or should have known that any such influencers misrepresented that they used or had experience with the product/service or misrepresented their experiences with it.
Note: Businesses should look for red flags indicating that a testimonial is likely fake or false, and they should act accordingly if such a flag is present. For example, if someone gives a testimonial and then asks for the product/service, a business should question whether the testimonialist used the product/service.
When should a business know that it is buying reviews that are fake or false? The Rule does not impose a general duty for businesses to investigate whether each consumer review of its products/services is/are fake or false. However, sometimes there may be clear indications that purchased reviews are likely to be fake or false, in which case failing to investigate may trigger liability under the “should have known” standard. For example, let’s say that a business hires a third party to generate reviews by providing free samples of its products/services to consumers. The business would likely be on notice that resulting reviews are likely fake or false if, for example, the reviews appear so quickly after purchase that it is doubtful they reflect real experiences with the product/service, an unusually large number of reviews appear in a very short period of time, or they refer to the wrong product/service.
Your business is in compliance with the Rule if it asks insiders to write reviews of your products/services, so long as they disclose their relationships to the company in the reviews. However, the disclosures must be “clear and conspicuous.” Also, if the reviews materially increase the average star rating of a product/service, the business could be violating the FTC Act even with such disclosures, because consumers might see only the star rating and not look at the individual reviews. See, e.g., Endorsement Guides 16 C.F.R 255.5(b)(6)(ii).
When a disclosure is required, it has to be “clear and conspicuous.” The definition of that term says that the disclosure needs to be “unavoidable.” What does “unavoidable” mean? “Unavoidable” is an objective standard that turns on whether consumers could have avoided the disclosure. The Rule’s “clear and conspicuous” definition says that a disclosure is avoidable when “a consumer must take any action to see it.
Can a hashtag be a “clear and conspicuous” disclosure? If so, can it be a short one like “‘#Ad”? Maybe. Depending upon their wording and appearance, hashtags can be clear and conspicuous disclosures for purposes of the rule. Whether “#Ad” would be adequate depends on the specific context. For testimonials in social media, it could work at the beginning of a text-only post, as readers are more likely to see it there, but it may be too easy to miss in a video post. In general, disclosures can indeed be short and simple. The only provision for which the “clear and conspicuous” definition is relevant is Section 465.5, which addresses the failure to disclose insider relationships. An adequate disclosure could be the testimonialist’s description of a product as “my company’s” or “my wife’s company’s.”
Note: Would using a platform’s built-in disclosure tool make the disclosure clear and conspicuous? Not necessarily. Some of these tools may generate inadequate disclosures that are fleeting, too hard to read because of poor contrast or small size, or placed in locations too easy to miss.
Takeaway: In conjunction with the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, the FTC aggressively investigates and enforces false and misleading review practices and testimonials. The Rule on the Use of Consumer Reviews and Testimonials prohibits certain practices identified as unfair or deceptive in the updated Endorsement Guides. Unlike the Endorsement Guides, violations of the Rule carry specific consequences (for example and without limitation, civil monetary penalties). The Guides address a broader range of conduct than the Rule and set forth general principles relating to the use of endorsements/testimonials in advertising.
Marketers and agencies should consult with experienced digital marketing counsel and implement written compliance and training policies.
State Department Revokes Existing Visas and Bans the Issuance of New Visas for South Sudanese Passport Holders
On April 5, 2025, the U.S. Department of State announced it was taking immediate action to revoke all existing visas and ban the issuance of any new visas for all South Sudanese passport holders.
Quick Hits
The United States will revoke all existing visas held by South Sudanese passport holders.
U.S. consulates and embassies abroad will be prevented from issuing any new visas for South Sudanese passport holders.
South Sudanese passport holders who are not currently in the United States are banned from entering the United States until further notice.
Secretary of State Marco Rubio issued a press release announcing that the State Department would take immediate action to revoke any existing visas and prevent the issuance of any new visas for any individual holding a South Sudanese passport. Secretary Rubio stated that the State Department was implementing this ban in response to the South Sudan transitional government’s refusal to accept South Sudanese citizens who had been ordered removed from the United States.
How Long Will the Restrictions Last?
It is unclear how long this ban will be in effect. The State Department noted that it would review the visa revocation and ban if the South Sudanese government began accepting its returning citizens in cooperation with U.S. removal efforts.
South Sudan was one of the forty-three countries under consideration for a travel ban earlier this month. There are no indicators as to whether the State Department will issue bans for other countries on the list at this time.
NYC’s Aggressive Enforcement of the Earned Safe and Sick Leave and Fair Workweek Laws [Podcast]
In this podcast, Diana Nehro (shareholder, New York/Boston) sits down with Jamie Haar (of counsel, New York) to discuss the New York City Department of Consumer and Worker Protection’s (DCWP) rigorous enforcement of the Earned Safe and Sick Leave Law and the Fair Workweek Law. Jamie and Diana provide an overview of these laws, including their requirements, compliance challenges, and the significant penalties for violations. Diana and Jamie also offer best practices for employers to mitigate risks and discuss the DCWP’s audit and investigatory processes.
Trending in Telehealth: March 2025
Trending in Telehealth highlights monthly state legislative and regulatory developments that impact the healthcare providers, telehealth and digital health companies, pharmacists, and technology companies that deliver and facilitate the delivery of virtual care.
Trending in March:
Youth counseling and mental health services
Insurance coverage
Interstate compacts
A CLOSER LOOK
Proposed Regulations and Legislation:
In Hawaii, the House proposed House Bill (HB) 951 to allow a patient seen in person by another health care provider in the same medical group as the prescribing physician to be prescribed opiates for a three-day supply or less via telehealth.
Tennessee proposed Senate Bill (SB) 231 to require health benefit plan coverage of speech therapy, both in person and via telehealth.
Oklahoma proposed amendments revising the office location requirements for tele-dentistry. While dentists were previously required to maintain office locations in Oklahoma, the amendment increases flexibility by allowing dentists to maintain office locations in Oklahoma or in states adjacent to Oklahoma, so long as the offices are located within 50 miles of an Oklahoma border of a state with an interstate dental and dental hygienist compact.
Both chambers of the Tennessee legislature passed SB 1122 to create a youth mental health service program, which includes the use of telehealth.
Both chambers of the Maryland legislature passed SB 94, an amendment that would require Medicaid to cover maternal health self-measured blood pressure monitoring for all eligible recipients. Specifically, the program must cover the provision of validated home blood pressure monitors and reimbursement of health care providers and other staff time used for patient training, remote patient monitoring, transmission of blood pressure data, interpretation of readings, and the delivery of co-interventions.
Also in Maryland, the House proposed an amendment that would allow certain out-of-state providers to deliver clinical professional counseling services via telehealth to students. Among other changes, the amendment removes limitations that previously capped counseling services at five days per month and 15 days per calendar year.
West Virginia’s SB 299 would require legislative telehealth rules to include a prohibition on prescribing or dispensing gender-altering medication.
In Colorado, the Department of Regulatory Agencies and the Medical Board proposed a rule imposing requirements for physicians and physician groups entering into collaborating agreements. Physicians must actively practice medicine in Colorado and, for purposes of the rule, practicing medicine based primarily on telehealth technologies does not constitute as “actively practicing medicine.”
Finalized Regulatory and Legislative Activity:
Virginia passed HB 1945, requiring that each school board consider developing and implementing policies that allow public school students to schedule and participate in telehealth services and mental health teletherapy services during regular school hours with parental consent. The bill mandates that any such policies developed by a school board must (i) require each school to designate a location for student use for such telehealth appointments, (ii) implement measures to ensure the safety and privacy of any student participating in a telehealth appointment, and (iii) prohibit any student from being subject to disciplinary measures for participating in an appointment during regular school hours.
The Mississippi governor signed SB 2415 into law, mandating that health insurance plans cover telemedicine services to the same extent as in-person consultations. Similarly, the bill requires that all health insurance and employee benefit plans in Mississippi reimburse out-of-network providers for telemedicine services under the same reimbursement policies applicable to other out-of-network providers.
North Dakota adopted an amendment revising telehealth licensure requirements for optometrists. Notably, the bill removes previous certification requirements, permits licensed optometrists to use telemedicine to provide care, and imposes new informed consent obligations.
Utah finalized three telehealth bills:
HB 39 requires the US Department of Health and Human Services to contract with a telehealth psychiatric consultation provider to offer consultation services to staff responsible for inmates’ psychiatric care.
SB 64 allows medical providers to electronically renew a recommendation to a medical cannabis patient cardholder or guardian cardholder using telehealth services.
HB 281 clarifies that only licensed psychologists, social workers, and counselors can provide mental health services in school settings, except as provided in a student’s individualized education plan or Section 504 accommodation plan, and other students may not be present when services are provided. Additionally, the school or provider must obtain written parental consent before providing or facilitating telehealth or another health care service to a student within a public school.
Virginia passed SB 1041, enabling healthcare providers to conduct telehealth sexual assault forensic examinations for victims of sexual assault if a forensic examiner is not readily available.
Colorado enacted HB 1132. The bill creates the military family behavioral health grant program to provide grants to local nonprofit organizations for the establishment and expansion of community behavioral health programs that provide behavioral health services to service members, veterans, and family members of service members and veterans. The bill requires the program to reimburse providers for telehealth visits at the same rate as in-person visits.
In Ohio, the Department of Mental Health and Addiction Services finalized a rule regarding mobile response and stabilization services (MRSS), structured intervention and support services designed for people under the age of 21 who are experiencing emotional symptoms, behaviors, or traumatic circumstances. The rule delineates the circumstances in which MRSS can be delivered using a telehealth modality, including, but not limited to, when the young person or family requests telehealth services or there is a contagious medical condition present in the home.
Compact Activity:
Several states have advanced licensure compacts. These compacts enable certain healthcare professionals to practice across state lines, whether in person or via telemedicine. The following states have introduced bills to enact these compacts:
Dietitian Licensure Compact: South Carolina, North Dakota, Iowa, and Oklahoma
Counseling Compact: New Mexico
Social Work Licensure Compact: North Dakota
Why it matters:
As youth mental health concerns rise, states increasingly turn to telehealth. Virginia, Tennessee, Utah, Maryland, and Ohio all advanced legislation or regulations to expand youth access to telehealth services, particularly for virtual counseling services in schools. Telehealth providers may be well-positioned to collaborate with teachers, caregivers, and school counselors to bridge gaps in youth healthcare.
States are increasingly adopting coverage parity legislation. Tennessee proposed a bill requiring health benefit plan coverage of speech therapy services provided via telehealth while Mississippi enacted broader legislation mandating health insurance coverage of telehealth services to the same extent as in-person services. These coverage parity initiatives improve telehealth access by ensuring that providers are equally incentivized to provide virtual and in-person services.
States continue to expand practitioners’ ability to provide telehealth services across state lines. Expanding interstate licensure compacts improves access to qualified practitioners, particularly in underserved and rural areas. These compacts also enhance career opportunities and reduce the burdens associated with obtaining multiple state licenses.
Telehealth is an important development in care delivery, but the regulatory patchwork is complicated. The McDermott digital health team works alongside the industry’s leading providers, payors, and technology innovators to help them enter new markets, break down barriers to delivering accessible care, and mitigate enforcement risk through proactive compliance.
State Privacy Regulators Announce Formation of Privacy ‘Supergroup’
The concept of the “supergroup” may have originated with rock and roll, but on April 16, 2025, privacy practitioners in the United States learned that a whole new type of supergroup has been formed. Far from being a reboot of Cream or the Traveling Wilburys, however, this latest supergroup is comprised of eight state privacy regulators from seven states (each of which has enacted a comprehensive state privacy law), who announced they have formed a bipartisan coalition to “safeguard the privacy rights of consumers” by coordinating their enforcement efforts relating to state consumer privacy laws.
Quick Hits
State attorneys general from California, Colorado, Connecticut, Delaware, Indiana, New Jersey, and Oregon, as well as the California Privacy Protection Agency, announced the formation of the “Consortium of Privacy Regulators.”
While the creation of the Consortium does not reflect a closer alignment in the contents of the actual consumer privacy laws themselves, it will likely heighten regulators’ abilities to enforce those elements of consumer privacy law that are common across states.
Businesses may wish to take this announcement as a sign to revisit their consumer privacy policies and practices, lest they find themselves subject to additional scrutiny by this new regulatory “supergroup.”
The Consortium of Privacy Regulators, comprised of state attorneys general from California, Colorado, Connecticut, Delaware, Indiana, New Jersey, and Oregon, as well as the California Privacy Protection Agency, seeks to facilitate discussions of privacy law developments and shared regulatory priorities, and to share expertise and resources to focus on multijurisdictional consumer protection issues. The constituent attorneys general come from states that have been particularly active in the privacy regulation space, and this coalition will ostensibly allow them to pursue more coordinated, large-scale efforts to investigate and hold companies accountable for noncompliance with common legal requirements applicable to personal information. Of particular importance to this new regulatory body is the facilitation of consumer privacy rights, such as the “rights to access, delete, and stop the sale of personal information, and similar obligations on businesses.”
While this announcement is certainly big news, it is not entirely surprising. Over the course of the past several years, there has been an apparent uptick in coordinated regulation in other areas of data privacy law, especially with respect to data breach investigation and enforcement at the state regulatory level. Just as state attorneys general have been following up with companies that have reported data breaches with an increased diligence and depth (and, in some cases, imposing more substantial civil penalties and seeking to enter into consent orders with these companies), companies can likely expect similarly heightened scrutiny with respect to their consumer privacy practices. And, given the Consortium’s announced intent to hold regular meetings and coordinate enforcement based on members’ common interests, businesses can likely expect that this additional scrutiny will begin very quickly.
Next Steps
Given this increased focus on regulatory enforcement, companies that have not already done so may wish to prioritize taking steps to shore up their personal information handling practices. Businesses that collect personal information might consider revisiting their privacy policies to ensure they accurately reflect their personal information collection, disclosure, and other handling practices. They may also want to review their procedures for handling highly visible elements of consumer privacy law, including their processes for responding to data subject rights requests. And, of course, businesses might give some thought to whether this announcement is a timely reminder to refresh their employees’ training with respect to consumer personal information. Finally, given the requirements in many of the constituent states’ privacy laws that consumer personal information be appropriately protected, businesses might consider revisiting their cybersecurity measures, including by updating (or even implementing for the first time) incident response plans and performing tabletop exercises to identify potential gaps and opportunities for increased alignment with applicable legal requirements before the Consortium comes knocking.
Enhancing Efficiency in Foreign Defense Sales: Key Takeaways from Recent Executive Order
On April 9, 2025, President Trump issued an Executive Order (EO) titled “Reforming Foreign Defense Sales to Improve Speed and Accountability.” This EO aims to reform the foreign defense sales (FDS) system, which encompasses U.S. sales of defense products and services to foreign governments through both Foreign Military Sales (FMS) and Direct Commercial Sales (DCS) by:
Improving accountability and transparency throughout the FDS system;
Consolidating parallel decision-making by granting simultaneous certifications and approvals during the FMS process. The current FMS process involves various steps that generally must be completed sequentially. These steps include securing approvals from multiple government agencies for the Letter of Offer and Acceptance, congressional approvals for sales exceeding certain thresholds and export licenses as necessary;
Reducing rules and regulations involved in the development, execution and monitoring of FDS and transfer cases;
Increasing government-industry collaboration to achieve cost and schedule efficiencies in the execution of the FMS program;
Advancing U.S. competitiveness abroad, revitalizing the defense industrial base and lowering unit costs for the U.S. and its allies and partners by integrating exportability features in the design phase, improving financing options for partners and increasing contract flexibility overall.
The EO will follow a phased implementation. The EO immediately directs the Secretary of State (SecState) and the Secretary of Defense (SecDef) to:
Implement National Security Presidential Memorandum 10 of April 19, 2018 (United States Conventional Arms Transfer Policy) or any successor policy directive;
Reevaluate restrictions imposed by the Missile Technology Control Regime on Category I items and consider supplying certain partners with specific Category I items, in consultation with the Secretary of Commerce (SecCom);
Submit a joint letter to Congress proposing an update to statutory congressional certification thresholds of proposed sales under the FMS and DCS programs in the Arms Export Control Act (22 U.S.C. 2751 et seq.). SecState is also tasked with working directly with Congress to review congressional notification processes to ensure the timely adjudication of FMS and DCS cases.
Additional key deadlines in the EO include:
By June 8, 2025, SecState in consultation with SecDef must:
Develop a list of priority partners for conventional arms transfers, issue updated guidance to Chiefs of the United States Diplomatic Missions regarding this list and update and reissue the list annually;
(1) Develop a list of priority end-items for potential transfer to priority partners, (2) ensure the transfer of priority end-items to priority partners would not cause significant harm to U.S. force readiness and (3) ensure the transfer of priority end-items to priority partners would advance the Trump Administration’s goal of strengthening allied burden-sharing.
By July 8, 2025:
SecState and SecDef, in consultation with SecCom, must prepare a plan to (1) improve transparency of U.S. defense sales to foreign partners by developing metrics for accountability, (2) secure exportability as a requirement in the early stages of the acquisition process and (3) consolidate technology security and foreign disclosure approvals.
By August 7, 2025:
SecDef, in collaboration with SecState and SecCom, must prepare a plan to develop a single electronic system to track all DCS export license requests and ongoing FMS efforts throughout the case life cycle.
Potential Impact on Defense Contractors
Once implemented, these actions will simplify the landscape for contractors to sell defense products and services to foreign governments. These changes should lead to increased opportunities for defense contractors as the approval process is expected to be substantially streamlined and the regulatory barriers reduced. Despite some U.S. allied countries seeking to develop in-country defense manufacturing capabilities, the streamlining of the FDS regulations may lead to increased sales opportunities for contractors with offerings that are sought by foreign militaries.
While not called out specifically in the EO, Foreign Military Financing (FMF) is a popular facilitating mechanism for DCS. FMF provides grants and loans to certain foreign governments to purchase U.S. defense products and services. The FMF rules are also likely to be streamlined by the EO. The specific effects of the EO will remain unclear until the agencies’ final plans are released. In the meantime, contractors should remain diligent in tracking changes to the FDS approval process.
California Pay Reports Are Due on May 14—Are You Ready?
All 2024 California pay data reporting filings are due to be filed no later than May 14, 2025. Failing to meet this deadline could subject employers to fines or penalties of up to $100 per employee for a first violation and up to $200 per employee for a second violation.
Quick Hits
The deadline for filing 2024 California pay data reports is May 14, 2025.
California requires that covered employers file payroll employee and labor contractor employee reports.
Both reports require demographic information, pay data, and work hours for covered employees and labor contractor employees.
With less than a month left to complete the 2024 pay data filings, employers with a presence in California may want to note that the filing threshold for these reports is low, such that having a single payroll employee working remotely in California may require the filing of the payroll employee report.
Specifically, an employer with one hundred or more W-2 employees working anywhere in the United States, with at least one employee working in California, is required to file a payroll report. Likewise, an employer with one hundred or more labor contractor employees anywhere in the United States, with at least one working in California, is required to file the labor contractor report. More specifics on the jurisdictional requirements and definition of a California employee/labor contractor employee can be found here.
Based on the enactment of Senate Bill No. 1162 in 2022, the Civil Rights Department (CRD) of the State of California can now seek civil penalties of $100 per employee against an employer that fails to file a required report. The penalties increase to $200 per employee for a subsequent failure to file a required report. CRD is also entitled to recover its costs in any enforcement action. For an employer with a sizeable California workforce, these penalties could be significant.
Employers that have not completed their 2024 pay data filings may want to begin preparations by gathering the necessary information so that they can complete an on-time filing by May 14. More information about the 2024 filings, including changes, can be found here and here.
In Welcome News for Tax Whistleblowers, IRS Whistleblower Office Releases Operating Plan
Today, the Internal Revenue Service (IRS) Whistleblower Office released its first-ever multi-year operating plan, “outlining guiding principles, strategic priorities, recent achievements and current initiatives to advance the IRS Whistleblower Program.”
“This is welcome news for IRS whistleblowers whose cases languish for years, sometimes up to a decade or more, before the whistleblower can be paid an award,” says David Colapinto.
“This is an important step forward,” adds Stephen M. Kohn. “This is a critical program that has been held back by antiquated regulations. It’s time to modernize the program and effectively prosecute tax evaders.”
The plan lays out six strategic priorities:
Enhance the claim submission process to promote greater efficiency.
Use high-value whistleblower information effectively.
Award whistleblowers fairly and as soon as possible.
Keep whistleblowers informed of the status of their claims and the basis for IRS decisions on claims.
Safeguard whistleblower and taxpayer information.
Ensure that our workforce is supported with effective tools, technology, training and other resources.
“Of particular interest to the whistleblower community is the IRS’ emphasis on increasing efficiencies to speed up the process and issuing whistleblower awards faster and as soon as possible,” Colapinto adds.
“While paying whistleblower awards can incentivize other whistleblowers to report major tax fraud by wealthy tax cheats, the failure to pay whistleblower awards timely by taking over a decade to make payments, can act as a disincentive to blowing the whistle,” Colapinto adds. “This is an important step towards making the IRS whistleblower program more effective. To date, the IRS reports that it has collected more than $7.4 billion in taxes attributable to whistleblowers reporting tax fraud and underpayments. The IRS Whistleblower Program has potential to collect even more if it improves its program to encourage more whistleblowers to come forward.”
Modernized in 2006, the IRS Whistleblower Program offers monetary awards to whistleblowers who voluntarily provide original information about tax noncompliance. While the program has resulted in the collection of billions of dollars, in recent years payouts to whistleblowers have dipped while the processing time for award payments have risen to over 11 years on average.
Since taking over as the Director of the IRS Whistleblower Office in 2022, John Hinman has overseen a number of administrative reforms aimed at making the program more efficient and effective, including increasing staffing at the office and disaggregating whistleblower claims to speed up award payouts.
While the newly released operating plan promises to make needed changes to the IRS Whistleblower Program, Congressional reforms are also needed. In January, Senators Ron Wyden (D-OR) and Mike Crapo (R-ID) unveiled a discussion draft of a bipartisan IRS reform bill which contains reforms to the IRS Whistleblower Program previously found in the IRS Whistleblower Improvement Act of 2023.
Geoff Schweller also contributed to this article.