Final Rule Implementing U.S. Outbound Investments Restrictions Goes into Effect
On October 28, 2024, the U.S. Department of Treasury (Treasury Department) published a final rule (Final Rule) setting forth the regulations implementing Executive Order 14150 of August 9, 2023 (Outbound Investment Order), creating a scheme regulating U.S. persons’ investments in a country of concern involving semiconductors and microelectronics, quantum information technologies and artificial intelligence sectors[1]. According to the Annex to the Outbound Investment Order, China (including Hong Kong and Macau) is currently the only identified “Country of Concern”. The Final Rule went effective on January 2, 2025.
Who are the in-scope persons?
The Final Rule regulates the direct and indirect involvement of “U.S Persons”, which is broadly defined to include (i) any U.S. citizen, (ii) any lawful permanent resident, (iii) any entity organized under the laws of the United States or any jurisdiction within the United States, including any foreign branches of any such entity, and (iv) any person in the U.S.
The Final Rule requires a U.S. Person to take all reasonable steps to prohibit a “Controlled Foreign Entity”, a non-U.S. incorporated/organized entity, from making outbound investments that would be prohibited if undertaken by a U.S. Person. As such, the Final Rule extends its influence over any Controlled Foreign Entity of such U.S. Person.
The Final Rule also prohibits a U.S. Person from knowingly directing a transaction that would be prohibited by the Final Rule if engaged by a U.S. Person.
Which outbound investments are in-scope?
The “Covered Transactions” include investment, loan and debt financing conferring certain investor rights characteristic of equity investments, greenfield or brownfield investments and investment in a joint venture (“JV”) or fund, relating to a “Covered Foreign Person” (as discussed below), as described below:
Equity investment: (i) acquisition of equity interest or contingent equity interest in a Covered Foreign Person; (ii) conversion of contingent equity interest (acquired after the effectiveness of the Final Rule) into equity interest in a Covered Foreign Person;
Loan or debt financing: provision of loan or debt financing to a Covered Foreign Person, where the U.S. Person is afforded an interest in profits, the right to appoint a director (or equivalent) or other comparable financial or governance rights characteristic of an equity investment but not typical of a loan;
Greenfield/brownfield investment: acquisition, leasing, development of operations, land, property, or other asset in China (including Hong Kong and Macau) that the U.S. Person knows will result in the establishment or engagement of a Covered Foreign Person; and
JV/ fund investment: (i) entry into a JV with a Covered Foreign Person that the U.S. Person knows will or plan to engage in covered activities; (ii) acquisition of limited partner or equivalent interest in a non-U.S. Person venture capital fund, private equity fund, fund of funds, or other pooled investment fund that will engage in a transaction that would be a Covered Transaction if untaken by a U.S. Person.
What are in-scope transactions and carve-out transactions?
The Final Rule identifies three categories of Covered Transactions involving covered foreign persons – Notifiable Transactions, Prohibited Transactions, and Excepted Transactions.
A “Covered Foreign Person” includes the following persons engaging in “Covered Activities” (i.e. Notifiable or Prohibited Activities identified in the Final Rule) relating to a Country of Concern:
A person of China, Hong Kong or Macau, including an individual who is a citizen or permanent resident of China (including Hong Kong and Macau and are not a U.S. citizen or permanent resident of the United States); an entity organized under the laws of China (including Hong Kong and Macau), or headquartered in, incorporated in, or with a principal place of business in China (including Hong Kong and Macau; the government of China (including Hong Kong and Macau); or an entity that is directly or indirectly owned 50% or more by any persons in any of the aforementioned categories.
A person directly or indirectly holds a board, voting rights, equity interests, or contractual power to direct or cause the management or policies of any person that derives 50% or more of its revenue or net income or incur 50% or more its capital expenditure or its operating expenses (individually or as aggregated) from China (including Hong Kong and Macau) (subject to a $50,000 in minimum); and
A person from China (including Hong Kong or Maca) who enters a JV that engages, plans to or will engage in a Covered Activity.
Notifiable and Prohibited Transactions
The Final Rule:
Requires U.S. Persons to notify the Treasury Department regarding transactions involving covered foreign persons that fall within the scope of Notifiable Transactions, and
Prohibits U.S. Persons from engaging in transactions involving Covered Foreign Persons that fall within the scope of Prohibited Transactions.
The underlying consideration for the delineation between a Notifiable Transactions and Prohibited Transactions hinges on how impactful it is as a threat to the national security of the United States — a Notifiable Transaction contributes to national security threats, while a Prohibited Transaction poses a particularly acute national security threat because of its potential to significantly advance the military intelligence, surveillance, or cyber-enabled capabilities of a Country of Concern.
Specifically, a Notifiable Transaction necessarily involves the following Notifiable Activities, while a Prohibited Transaction necessarily involves the following Prohibited Activities:
Prohibited Activities
Notifiable Activities
Semiconductors &Microelectronics
– Develops or produces any electronic design automation software for the design of integrated circuits (ICs) or advanced packaging;
– Develops or produces (i) equipment for (a) performing volume fabrication of integrated circuit, or (b) performing volume advanced packaging, or (ii) commodity, material, software, or technology designed exclusively for extreme ultraviolet lithography fabrication equipment;
– Designs any integrated circuits that meet or exceed certain specified performance parameters[2] or is designed exclusively for operations at or below 4.5 Kelvin;
– Fabricates integrated circuits with special characteristics;[3]
– Packages any IC using advanced packaging techniques.
Designs, fabricates, or packages any ICs that are not prohibited activities.
QuantumInformationTechnology
– Develops, installs, sells, or produces any supercomputer enabled by advanced ICs that can provide a theoretical compute capacity beyond a certain threshold;[4]
– Develops a quantum computer or produces any critical components;[5]
– Develops or produces any quantum sensing platform for any military, government intelligence, or mass-surveillance end use;
– Develops or produces any quantum network or quantum communication system designed or used for certain specific purposes.[6]
None
Artificial Intelligence (AI)
– Develops any AI system that is designed or used for any military end use, government intelligence, or mass-surveillance end use;
– Develops any AI system that is trained using a quantity of computing power greater than (a) 10^25 computational operations; and (b) 10^24 computational operations using primarily biological sequence data.
Design of an AI system that is not a prohibited activity and that is:
(a) Designed for any military, government intelligence or mass-surveillance end use;
(b) Intended to be used for:
Cybersecurity applications;
(digital forensic tools;
penetration testing tools;
control of robotic system;
or
(c) Trained using a quantity of computing power greater than 10^23 computational operations.
Excepted Transactions
The Final Rule sets forth the categories of Excepted Transactions, which are determined by the Treasury Department to present a lower likelihood of transfering tangible benefits to a Covered Foreign Person or otherwise unlikely to present national security concerns. These include:
Investment in publicly traded securities: an investment in a publicly traded security (as defined under the Securities Act of 1934) denominated in any currency and traded on any securities exchange or OTC in any jurisdiction;[7]
Investment in a security issued by a registered investment company: an investment by a U.S. Person in the security issued by an investment company or by a business development company (as defined under the Investment Company Act of 1940), such as an index fund, mutual fund, or ETF;
Derivative investment: derivative investments that do not confer the right to acquire equity, right, or assets of a Covered Foreign Person;
Small-size limited partnership investment: limited partnership or its equivalent investment (at or below two million USD) in a venture capital fund, private equity fund, fund of funds, or other pooled investment fund where the U.S. Person has secured a contractual assurance that the fund will not be used to engage in a Covered Transaction;
Full Buyout: acquisition by a U.S. Person of all equity or other interests held by a China-linked person, in an entity that ceases to be a Covered Foreign Person post-acquisition;
Intracompany transaction: a transaction between a U.S. Person and a Controlled Foreign Entity (subsidiary) to support ongoing operations or other activities are not Covered Activities;
Pre-existing binding commitment: a transaction for binding, uncalled capital commitment entered into before January 2, 2025;
Syndicated loan default: acquisition of a voting interest in a Covered Foreign Person by a U.S. Person upon default of a syndicated loan made by the lending syndicate and with passive U.S. Person participation; and
Equity-based compensation: receipt of employment compensation by a U.S. Person in the form of equity or option incentives and the exercising of such incentives.
What is the knowledge standard?
The Final Rule provides that certain provisions will only apply if a U.S. Person has Knowledge of the relevant facts or circumstances at the time of a transaction. “Knowledge” under the Final Rule includes (a) actual knowledge of the existence or the substantial certainty of occurrence of a fact or circumstance, (b) awareness of high probability of the existence of a fact, circumstance or future occurrence, or (c) reason to know of the existence of a fact or circumstance.
The determination of Knowledge will be made based on information a U.S. Person had or could have had through a reasonable and diligent inquiry, which should be based on the totality of relevant facts and circumstances, including without limitation, (a) whether a proper inquiry has been made, (b) whether contractual representations or warranties have been obtained, (c) whether efforts have been made to obtain and assess non-public and public information; (d) whether there is any warning sign; and (e) whether there is purposeful avoidance of efforts to learn and seek information.
Key points relating to the notification filing procedures
A U.S. person’s obligation to notify the Treasury Department is triggered when they know relevant facts or circumstances related to a Notifiable Transaction entered into by itself or its Controlled Foreign Entity. U.S. Person shall follow the electronic filing instructions to submit the electronic filing at https://home.treasury.gov/policy-issues/international/outbound-investment-program.
The filing of the notification is time-sensitive. The filing deadline is no later than 30 days following the completion of a Notifiable Transaction or otherwise no later than 30 days after acquiring such knowledge if a U.S. Person becomes aware of the transaction after its completion. If a filing is made prior to the completion of a transaction and there are material changes to the information in the original filing, the notifying U.S. Person shall update the notification no later than 30 days following the completion of the transaction.
In addition to the detailed information requested under the Final Rule, a certification by the CEO or other designees of the U.S. Person is required to certify the accuracy and completeness in material respects of the information submitted.
What are the consequences of non-compliance?
The Treasury Department may impose civil and administrative penalties for any Final Rule violations, including engaging in Prohibited Transactions, failure to report Notifiable Transactions, making false representation or omissions, or engaging in evasive actions or conspiracies to violate the Final Rule. The Treasury Department may impose fines, require divestments, or refer for criminal prosecutions to the U.S. Department of Justice for violations of the Final Rule.
U.S. Persons may submit a voluntary self-disclosure if they believe their conduct may have violated any part of the Final Rule. Such self-disclosure will be taken into consideration during the Treasury Department’s determination of the appropriate response to the self-disclosed activity.
Joshua Tree Conservation Plan Remains Under Review
The California Fish and Game Commission (Commission) accepted public comment on the draft Western Joshua Tree Conservation Plan (Draft Conservation Plan) at its February 12, 2025 meeting, but no formal action was taken.
As detailed in our previous alert, the California Department of Fish and Wildlife (CDFW) released the Draft Conservation Plan to the Commission on December 12, 2024, as required by the Western Joshua Tree Conservation Act (Act). The Draft Conservation Plan sets forth management practices and guidelines for the avoidance and minimization of impacts to western Joshua trees.
The Commission’s February 12 meeting featured a presentation by CDFW, substantive discussion by the Commissioners, and robust public comment. Many commenters expressed concern about the cost and ultimate feasibility of the Draft Conservation Plan’s requirements. In particular, the Large Scale Solar Association voiced concerns regarding the Draft Conservation Plan’s potential to interfere with the siting and development of solar energy projects, indicating that additional costs generated by required mitigation measures would be passed on to ratepayers. Residents and politicians from desert communities — where Joshua trees are most abundant — focused on the Draft Conservation Plan’s costs and obligations as potential hindrances to affordable housing and local job opportunities. Commenters emphasized that collaboration with CDFW is essential in developing a workable and sustainable conservation effort.
CDFW acknowledged the public comments and ultimately declined to take any formal action at the meeting. Written comments are still being accepted on a rolling basis, though any substantive changes to the Draft Conservation Plan should be submitted by the beginning of March to be considered. The Act mandates that the Commission must take action to adopt the Conservation Plan by June 30, 2025.
The Commission will review the Draft Conservation Plan again at its April 16-17, 2025, meeting. In advance of that meeting, CDFW confirmed it will publish a revised set of Joshua tree relocation guidelines and a list of proposed changes to the Draft Conservation Plan. CDFW Director Bonham also suggested that, in the interim, CDFW may host workshops and/or other community outreach events to solicit further public feedback, though no further details have been provided.
Texas AG Alleges DeepSeek Violates Texas Privacy Law
On February 14, 2025, Attorney General Ken Paxton announced an investigation into DeepSeek, a Chinese artificial intelligence (“AI”) company, regarding its privacy practices and compliance with Texas law. The investigation also examines DeepSeek’s claims that its AI model rivals leading global models, including OpenAI’s technology.
As part of the investigation, Attorney General Paxton has issued Civil Investigative Demands (“CIDs”) to Google and Apple, requesting their analysis of the DeepSeek application and any documentation DeepSeek submitted before its app became available to consumers.
In a statement, Attorney General Paxton expressed concerns over DeepSeek’s potential connections to the Chinese Communist Party (“CCP”), and its implications for data security and AI competition. Citing national security and privacy risks, Paxton emphasized Texas’ commitment to upholding data protection laws and ensuring compliance with state regulations.
Additionally, on January 28, 2025, the Attorney General banned DeepSeek’s platform from all Office of the Attorney General devices, citing security concerns.
As of this publication date, the investigation remains ongoing.
First Circuit Clarifies FCA Liability Standard for AKS Violations, Deepening Circuit Split
The First Circuit has issued its long-anticipated opinion in United States v. Regeneron Pharmaceuticals, Inc., clarifying the standard for establishing False Claims Act (“FCA”) liability based on Anti-Kickback Statute (“AKS”) violations. The First Circuit held that an AKS violation must be the “but-for” cause of a claim for it to be considered “false” under the FCA. In reaching this conclusion, the First Circuit sided with the Sixth and Eighth Circuits, positioning all three courts against the Third Circuit, which has held that a mere link between an AKS violation and a claim is sufficient to establish falsity under the FCA.
A copy of the opinion can be found here.
The First Circuit’s Opinion
Regeneron Pharmaceuticals, Inc. manufactures Eylea, a drug used to treat neovascular age-related macular degeneration (a/k/a, wet AMD). Regeneron allegedly donated over $60 million to an independent charity, the Chronic Disease Fund (“CDF”), which provides financial assistance to patients who need Eylea. Regeneron’s contributions to the CDF were allegedly intended to function as an indirect co-pay subsidy for patients, effectively inducing Medicare reimbursements for Eylea prescriptions and thereby violating the AKS.
On summary judgment, the government disputed the need to establish but-for causation between the alleged kickback and the submitted claim. Instead, it maintained that any claim involving a patient who benefited from an illegal payment or referral was tainted and should be considered false for purposes of the FCA. The First Circuit disagreed, relying on Supreme Court precedent interpreting the term “resulting from” as implying a presumptive but-for causation standard. In reaching its conclusion, the First Circuit rejected the government’s arguments in support of the lower “link” standard of causation.
The First Circuit rejected each of the government’s core contentions. First, the government contended that because the AKS imposes criminal liability without requiring proof that a claim was, in fact, influenced by a kickback, the same standard should apply in the civil FCA context. The First Circuit rejected this position, reasoning that FCA liability fundamentally differs from criminal liability and that the 2010 amendment to the AKS explicitly introduced a causation element that the government must meet. The First Circuit emphasized that while criminal liability under the AKS aims to prevent corruption in medical decision-making, the FCA’s focus is on financial recovery for false claims, requiring a more direct causal link. Thus, by requiring but-for causation, the First Circuit aimed to ensure that claims brought under the FCA are truly the product of illegal inducements rather than merely associated with them.
Second, the government contended that Congress enacted the 2010 amendment against a backdrop of case law that had linked AKS violations to FCA liability without requiring proof of but-for causation. The First Circuit, however, found no indication that Congress intended to eliminate the need for causation, concluding that the amendment merely established a new pathway for proving falsity without overriding existing legal principles regarding causation. Absent explicit language in the amendment removing the requirement of causation, the First Circuit declared, the default presumption of but-for causation should apply. It further noted that previous case law interpreting similar statutory language has consistently required a direct causal link, reinforcing the assumption that Congress intended the same standard to govern FCA claims predicated on AKS violations.
Finally, the government attempted to rely on legislative history, pointing to statements made by the sponsor of the 2010 amendment suggesting that the amendment was designed to ensure that all claims “resulting from” AKS violations were false. The First Circuit rejected this argument as well, noting that legislative history cannot override the plain meaning of statutory text. Rather, the First Circuit held, the phrase “resulting from” necessarily implies a but-for causation standard unless Congress explicitly provides otherwise. Here, the First Circuit reasoned that while legislative history can offer insight into congressional intent, it cannot contradict clear statutory language. Additionally, it underscored that a broad interpretation of “resulting from” would risk imposing liability even where an AKS violation had no actual influence on a submitted claim, a result inconsistent with the FCA’s purpose of targeting fraudulent claims.
What’s Next? Deepening Circuit Splits, Potential Supreme Court Intervention, and Lingering Constitutional Questions
As a threshold matter, this opinion raises the bar for the government to establish FCA liability in AKS-related cases, as it now must demonstrate that an illegal kickback was the direct cause of a false claim rather than merely showing an association between the two. Additionally, the ruling deepens an existing circuit split. With the First Circuit joining the Sixth and Eighth Circuits in requiring but-for causation, only the Third Circuit maintains the broader “link” standard. This divergence increases the likelihood that the Supreme Court will take up this issue to resolve the inconsistency among the Circuits. The potential for Supreme Court review and the deepening circuit split highlight just one of the many ways in which the FCA has recently taken on new prominence. This case unfolds against the backdrop of other developments, including the Trump administration’s stated intent to use the FCA to challenge DEI initiatives among government contractors and ongoing constitutional challenges to the FCA’s qui tam provisions. These developments will shape the future landscape of FCA litigation and compliance. Stakeholders should, accordingly, continue to monitor how courts and regulators navigate these evolving issues.
OSH Law Primer, Part XI (Continued): Understanding and Contesting OSHA Citations—The Whys and Hows
This is a continuation of the eleventh installment in a series of articles intended to provide the reader with a very high-level overview of the Occupational Safety and Health (OSH) Act of 1970 and the Occupational Safety and Health Administration (OSHA) and how both influence workplaces in the United States.
By the time this series is complete, the reader should be conversant in the subjects covered and have developed a deeper understanding of how the OSH Act and OSHA work. The series is not—not can it be, of course—a comprehensive study of the OSH Act or OSHA capable of equipping the reader to address every issue that might arise.
Quick Hits
If an employer decides to contest a citation, the employer must serve OSHA with a notice of contest within fifteen working days of receiving the citation. A failure to resolve a case through an informal settlement conference or file a notice of contest within fifteen working days will result in the citation becoming a final order of the Occupational Safety and Health Review Commission (OSHRC).
Employers may have multiple reasons for contesting citations, including the high cost of abatement, the risk of a citation being used by OSHA as the basis for a repeat violation, the risk of a citation being used in a civil lawsuit under state law, and potential impacts on business reputation and competitiveness.
Once a notice of contest is filed, OSHA forwards the citation and contest to OSHRC, which follows a litigation-like process involving hearings and evidence presentation before an ALJ. The ALJ’s decision can be appealed to the Review Commission and federal circuit courts. State plan states may have different procedures and deadlines.
The first article in this series provided a general overview of the OSH Act and OSHA; the second article examined OSHA’s rulemaking process; the third article reviewed an employer’s duty to comply with standards; the fourth article discussed the general duty clause; the fifth article addressed OSHA’s recordkeeping requirements; the sixth article covered employees’ and employers’ respective rights; the seventh article addressed whistleblower issues; the eighth article covered the intersection of employment law and safety issues; the ninth article discussed OSHA’s Hazard Communication Standard (HCS); the tenth article in the series examined voluntary safety and health self-audits; and the previous article reviewed OSHA’s citation process. In this article, we continue our discussion of the process for contesting OSHA citations.
Contesting OSHA Citations
If the employer decides to contest the citation, it must serve a notice of contest on the OSHA office that issued the citation within fifteen working days of receipt of the citation. Failure to either (a) settle a case through an informal settlement conference or (b) file a notice of contest within fifteen working days will result in the citation becoming a final order of the Occupational Safety and Health Review Commission (OSHRC).
Why Do Employers Contest Citations?
While the penalty amount may be minor, abatement can become cost-prohibitive. OSHA officials are typically not experts in the employer’s industry. The abatement methods they may request can oftentimes be broad and burdensome. Abatement may require, for example, substantial changes to manufacturing equipment, the purchase of new, expensive equipment, or change processes affecting the employer’s other facilities or ability to compete against others in the industry. These costs may quickly spiral an employer into competitive disadvantage.
Any citation on an employer’s record may be used by OSHA as the basis for a repeat violation. Repeat violations will typically subject an employer to a multiple of five or ten times the previous citation.
If an employer has multiple citations and violations in a brief amount of time, the odds increase that, for subsequent inspections and citations, an OSHA inspector will conclude the company is willfully or intentionally violating the OSH Act.
Depending on state law, OSHA citations may be used in a variety of ways in civil lawsuits, such as wrongful death or personal injury actions. For example, in some states, violations of safety standards can be introduced to prove that the employer was negligent per se. In other states, violations may be used as evidence of the employer’s gross negligence.
When soliciting business and new contracts, prospective customers are more frequently scrutinizing vendors’ safety records, including a review of OSHA citations issued to the employer. Citations cannot be concealed; each one is published on OSHA’s website, dating all the way back to 1971. Vendors with certain violations or several violations may be disqualified from soliciting business.
In addition, each citation on an employer’s record increases the likelihood of damage to the employer’s goodwill and business reputation. The more violations on an employer’s record, the more likely it is for the employer to be perceived as an unsafe company, scaring away business, lowering morale, inviting organized labor to recruit employees to a union for protection, and increasing additional scrutiny from OSHA.
The Process of an OSHA Contest
The notice of contest must be in writing. Federal OSHA has no form for a notice of contest. While there are no formalities or magic words to intone, an employer must adequately identify all aspects of the citation that it wishes to contest—the alleged violation, the characterization of the violation, the penalty, the abatement, the abatement date, or all the above. The notice must be adequate to put OSHA on notice that the employer is contesting either all or at least some part of the citation.
The notice of contest must be served on OSHA within fifteen working days of receipt of the citation. With very few exceptions, a citation not timely contested becomes a final order of the Occupational Safety and Health Review Commission (OSHRC) (known also as “the Review Commission”), and the order may not be reviewed by any court or agency.
OSHA starts counting the fifteen-day clock on the day when the citation is received by any agent of the employer. The agency typically sends the citation via certified mail to the closest local office where the alleged violation occurred, but sometimes OSHA will serve citations in person. In large companies, this can create confusion as to when a citation was received, as the citation moves from local offices to the legal and health, safety, and environment (HSE) departments. Rather than waste time guessing when the citation was received by the company, the safest practice is to assume OSHA hand-served the citation on the company on the date of issuance listed on the citation and count fifteen working days from then.
Engaging in settlement discussions with OSHA does not stop the clock on the contest period. In many employers’ minds, the contest period creates a way-too-short deadline to negotiate a settlement with OSHA. But keep in mind settlement talks can always continue after an employer submits its Notice of Contest.
Once OSHA receives an employer’s notice of contest, the agency must immediately forward the citation and contest to the Occupational Safety and Health Review Commission in Washington, D.C. The Review Commission is frequently mistaken as being part of OSHA. It is an independent federal agency tasked by the U.S. Congress to resolve contested OSHA citations. Upon receipt of the contest materials, an OSHRC clerk will docket the matter and pass the case on to the Chief Administrative Law Judge (ALJ). The chief ALJ will then assign the case to one of the Review Commission’s ALJs in the District of Columbia, Atlanta, or Denver.
The Review Commission will send the employer a two-part docketing card with the case number. The employer must detach and post the half of the card that contains a notice to employees informing them that the citation is under contest and of their rights to participate in the proceedings. The employer must then date and sign the other half of the card and mail it back to the Review Commission. This second half of the card notifies the Review Commission of the posting. If the employer fails to return the card, the Review Commission will send a reminder. If OSHRC receives no card back from the employer, it reserves the right to dismiss the employer’s contest.
Once docketed with the Review Commission, the case will follow certain procedures that appear very similar to a normal litigation track in state or federal courts. Ultimately, the ALJ will schedule a hearing to hear witnesses and receive evidence from all parties. OSHA will proceed first, and typically call the compliance officer who conducted the inspection as its first witness. The employer/respondent will have the opportunity to cross-examine any of OSHA’s witnesses, just as OSHA will have an opportunity to cross-examine the respondent’s witnesses. The hearing can continue for days or weeks, until both sides have presented their full cases to the ALJ. Thereafter, the ALJ will issue a decision that can be appealed by either party to the Review Commission, and thereafter, federal circuit courts.
State Plan States
Currently, there are twenty-two state plan states. State plan states maintain their own state OSH Act and have some subtle differences in the manner they handle citations and deadlines for appeal. Typically, the specific jurisdictional requirements are included in the citation packet the state plan sends to the employer. An employer seeking to appeal a state citation may want to carefully review the expectations outlined in the specific jurisdiction.
Choice-of-Law Provisions Cannot Circumvent Ending Forced Arbitration Act, Court of Appeal Rules
On February 3, 2025, the California First District Court of Appeal held that a party to an arbitration agreement cannot rely on a choice-of-law provision to wire around the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “EFAA”). The case, Casey v. Superior Court, clarifies that a party cannot circumvent the EFAA and compel a dispute to arbitration by using a pre-litigation choice-of-law provision.
Legal Background
The Federal Arbitration Act (“FAA”) requires courts to enforce arbitration agreements arising from transactions involving interstate commerce. Passed in 1925, the FAA embodies a liberal federal policy in favor of enforcing arbitration agreements. The California Arbitration Act (“CAA”) was passed in 1961 and applies even in situations where the FAA does not. Like the FAA, the CAA provides that pre-dispute arbitration agreements are “valid, enforceable and irrevocable.”
As we have previously written, Congress passed the EFAA in March 2022 to exclude sexual harassment claims from mandatory arbitration provisions. The EFAA provides that “at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, . . . no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.” The EFAA therefore permits a person to bring a claim for sexual harassment or sexual assault in court, even if the person previously agreed to arbitrate such disputes. The EFAA amended, and is now part of, the FAA. There is no California statutory counterpart to the EFAA.
Facts and Procedural History
In Casey, the plaintiff signed an employment contract in 2017 that included an arbitration agreement (the “Employment Agreement”). A clause in the Employment Agreement provided that the construction and interpretation of the agreement shall “be governed by the laws of the State of California.” In September 2023, the plaintiff filed a lawsuit against her employer and a coworker, alleging that the coworker made a series of unwanted sexual remarks in late 2022. The plaintiff brought a claim for sexual harassment under the Fair Employment and Housing Act (“FEHA”) against both her employer and her coworker. The plaintiff’s suit included several other claims against her employer only, including wage-and-hour violations unrelated to her sexual harassment dispute.
The employer and the coworker defendant jointly filed a motion to compel arbitration. The plaintiff opposed the motion, arguing that the EFAA applied and the dispute could not be compelled to arbitration. The trial court granted the motion to compel arbitration on the basis that the Employment Agreement’s choice-of-law provision rendered the EFAA inapplicable to the dispute. The plaintiff immediately appealed.
The Court of Appeal’s Decision
On February 3, the Court of Appeal issued a decision reversing the trial court’s judgment and concluding that the plaintiff’s dispute was covered by the EFAA. In reaching that decision, the Court of Appeal found the plaintiff’s employment relationship sufficiently involved interstate commerce because both the employer’s business and the plaintiff’s specific job duties included interstate business and communication. The Court of Appeal also concluded that the CAA is preempted by the EFAA under the doctrine of conflict preemption—which occurs when “state law stands as an obstacle to the accomplishment and execution” of Congress’s objectives. Relying on the choice-of-law provision, the Court of Appeal noted, would “directly contravene Congress’s purpose and objectives in enacting the EFAA.” The Court stated that in enacting the EFAA, Congress expressed an intention to guarantee judicial forums for suits involving sexual harassment or sexual assault disputes. Accordingly, the Court reasoned, the plaintiff could elect to render the arbitration provisions of the Employment Agreement invalid with respect to her sexual harassment dispute.
The Court of Appeal also rejected the employer’s argument that the EFAA did not apply retroactively to the plaintiff’s 2017 Employment Agreement. The Court noted that the EFAA covers any dispute or claim that arises or accrues on or after March 3, 2022. Here, plaintiff’s complaint alleged the sexual harassment occurred in December 2022. Because the plaintiff’s claims accrued on or after March 3, 2022, the Court found that the EFAA applied.
Finally, the Court of Appeal concluded that the EFAA applied to the plaintiff’s entire lawsuit—including the wage-and-hour claims that were factually unrelated to the plaintiff’s sexual harassment dispute. Accordingly, the plaintiff could not be compelled to arbitrate any part of her lawsuit. This result is consistent with prior decisions from California Courts of Appeal that we have covered here.
Ultimately, the Court of Appeal ordered the trial court to vacate its order compelling arbitration and enter a new order denying the defendants’ motion to compel.
Key Takeaways
Casey confirms that parties cannot use choice-of-law provisions in arbitration agreements to circumvent the EFAA. Accordingly, if a plaintiff brings a claim involving sexual assault or harassment, the EFAA precludes the defendant from forcing the plaintiff to litigate the claims—regardless of whether a choice-of-law provision exists in the contract.
The Casey decision comes four months after the California Court of Appeal’s decision in Liu v. Miniso Depot CA, Inc.—which also held that if a plaintiff brings a suit that merely includes a sexual harassment claim, none of the other claims may be arbitrated. Together, Casey and Liu ensure that more lawsuits containing sexual harassment and sexual assault claims will be heard in court and not compelled to arbitration.
Employers should consult with outside counsel to review their existing employment and arbitration agreements. In addition, employers—working with experienced counsel—should understand what these holdings mean for them and what steps they should take to prevent and defend against future lawsuits that may be subject to the EFAA.
California Bill Seeks to Expand Scope of OHCA’s Review to Private Equity, Management Service Organizations and Others
California is considering an expansion of the types of entities that would comprise “health care entities” as defined by and subject to the review of the Office of Health Care Affordability (OHCA). AB 1415 would require private equity groups, hedge funds and their respective affiliates (including newly created entities) entering into material change transactions with health care entities to provide notice of the transactions to OHCA. Current law only requires the health care entities themselves to provide such notice. The bill would also add certain management services organizations, health systems and entities that “own, operate or control” providers (as defined by OHCA) to the list of health care entities that are subject to OHCA’s review. Further, the bill would change the definition of “provider” to “a private or public health care provider” with an expanded list of entity types. The proposed revisions are detailed below:
1. Private Equity Groups, Hedge Funds and Entities Newly Formed to Contract with Health Care Entities Would Be Subject to OHCA’s Notice Requirements
AB 1415 would require private equity groups, hedge funds and newly created business entities created for the purpose of entering into agreements or transactions with a health care entity to provide notice to OHCA of transactions or agreements that would transfer ownership or control over a material amount of the assets or operations of the health care entity. While health care entities party to material change transactions are already subject to OHCA’s notice requirements, the bill would expand the required disclosures to the private equity groups and hedge funds themselves. The definitions of “private equity group” and “hedge fund” generally include the investment entities managed by fund managers for their investors but exclude the individual investors themselves if they do not participate in the management of the funds. The definition of “hedge fund” specifically excludes entities that solely provide or manage debt financing secured in whole or in part by the assets of a health care facility, including, but not limited to, banks and credit unions, commercial real estate lenders, bond underwriters and trustees. AB 1415’s definitions of “private equity group” and “hedge fund” largely mirror the definitions included in last year’s AB 3129, which would have required prior notice to and approval of the California Attorney General for certain health care investments by private equity groups and hedge funds. 1
The proposed expansion of OHCA’s jurisdiction to private equity groups and hedge funds is likely a response to Governor Newson’s veto of AB 3129 last year, in which the Governor reasoned that it was OHCA’s role to review certain health care transactions and that additional, separate processes like those in AB 3129 appeared to be unnecessary and duplicative. Instead of attempting another run at a separate review process aimed at private equity and hedge funds (among others), this time the approach is to expand OHCA itself. Unlike the Attorney General under AB 3129, OHCA does not and still would not have the authority to block transactions, but transactions subject to OHCA’s review are not permitted to close until the completion of OHCA’s review process, which can be burdensome and lengthy.
2. “Provider” Would Be Defined as a “Private or Public Health Care Provider” and Include a Potentially Non-Exclusive List of Entity Types
OHCA’s governing statute defines “provider,” one of the sub-categories of “health care entity,” with an exhaustive list of entity types. AB 1415 would change the definition to “a private or public health care provider” and states that the definition includes the list of entity types from the original definition (with some additions, described below).
If passed as drafted, the language may create ambiguity over whether certain entities are captured under the definition of “provider.” First, the definition does not define the difference between a “private” or “public” provider. Second, it is unclear whether the list of entities is exhaustive. If the list is non-exhaustive, members of the health care industry would have little guidance on whether they constitute a health are entity. This definition would benefit from clarifications in revisions to the bill or OHCA’s implementing regulations.
3. Management Services Organizations Would Become Health Care Entities Subject to OHCA’s Review
AB 1415 would add management services organizations (MSOs) to the definition of health care entity. MSOs would include any entity that provides administrative services or support for a provider (as defined by statute), not including the direct provision of health care services. Administrative services or support would include, but not be limited to, utilization management, billing and collections, customer service, provider rate negotiation and network development.
This addition could include many types of management arrangements that were previously excluded from OHCA’s statute and governing arrangement. The legislature may be targeting “friendly PC” arrangements where MSOs operate all non-clinical business operations of a health care practice, but the addition could also capture arrangements that manage smaller portions of practice operations. For example, the addition may capture arrangements that outsource billing and collections or customer service functions to vendors that otherwise have no influence over the health care operations of their clients.
4. Entities that Own, Operate or Control Entities Listed Under the Definition of “Provider” Would Be Health Care Entities Subject to OHCA’s Review
Under AB 1415, entities that own, operate or control the entities listed under the definition of “provider” would become health care entities subject to OHCA’s notice and review “regardless of whether it is currently operating, providing health care services, or has a pending or suspended license.” This addition would expand the notice requirements to a broad range of owners and operators over health care entities that have not otherwise been captured by the current law.
Like the changes to the definition of “provider,” this language creates ambiguities that will benefit from further revision to the bill or OHCA’s regulations. For example, holding companies that own provider entities would become health care entities subject to notice even if they held other assets unrelated to the provision of health care services in California and or included other assets and services lines that do are not health care entity services. The legislature may have intended to capture transactions that occur at a holding company level that do not include the health care entities themselves. If that is the case, arguably some these types of transactions are already captured by OHCA’s regulations, which apply to health care entities that are a “subject of” a material change transaction.
5. Health Systems Would Be Included as Health Care Entities Subject to OHCA’s Review
AB 1415 would add health systems to the enumerated list of providers. “Health system” would mean (1) a hospital system, as defined in subdivision (e) of Section 127371; (2) a combination of one or more hospitals and one or more physician organizations; or (3) a combination of one or more hospitals, one or more physician organizations, or one or more health care service plans or health insurers.
Health systems were likely already captured by current law, which includes health facilities like acute care hospitals. However, the addition of “health system” as a type of health care entity could create further ambiguity. For example, the bill does not define the word “combination” as used in the definition of “health system” and does not appear to apply to a specific legal entity. It may be uncertain whether the definition of health care entity would capture an entity that is a subsidiary of a health system that would not otherwise be considered a health care entity but for its affiliation with the health system. The addition could also expand OHCA’s jurisdiction by potentially pulling in holding companies up the corporate chain from health care entities that do not directly own or operate any health care entity services solely by virtue of its inclusion in the overall “health system.”
Takeaways
AB 1415 demonstrates that California’s interest in reviewing private equity and hedge fund investments as well as MSOs in health care did not end with AB 3129.2 It also shows a continued appetite to expand OHCA’s jurisdiction less than a year after its review process has begun. It remains to be seen how the bill may be amended in the legislature to further expand its scope or clarify ambiguities in the current language. If passed, AB 1415 would also require OHCA to revise its implementing regulations. Members of the California health care industry should monitor the developments of AB 1415 to determine if their current operations and anticipated transactions may be subject to OHCA’s expanded jurisdiction and strategize early.
[1] Our prior discussions of AB 3129 can be found here:
https://natlawreview.com/article/californias-ab-3129-continues-national-trend-scrutinizing-private-equity
https://natlawreview.com/article/california-considers-revisions-legislation-health-care-investments-and-regulations
https://natlawreview.com/article/california-legislators-pass-ab-3129-require-notice-and-consent-private-equity-and
https://natlawreview.com/article/governor-newsom-vetoes-ab-3129-addressing-private-equity-california-health-care
[2] The California Senate is currently considering SB 351, which would revive some of AB 3129’s corporate practice of medicine-related restrictions on private equity affiliates providing management services to physicians and dentists. Our analysis of SB 351 can be found here: https://natlawreview.com/article/california-reintroduces-legislation-restrict-private-equity-management-health-care
Trump Administration Asserts Control Over Independent Agencies
The Trump administration has taken two actions that will dramatically increase White House control over federal commissions, boards, and officials that were previously considered independent. These actions are likely to impact a wide range of industries and sectors of the American economy, including energy, financial services, transportation, healthcare, and many others.
First, President Trump issued an Executive Order (EO) to increase presidential supervision over the “so-called independent agencies.” The EO, entitled “Ensuring Accountability for all Agencies,” is a fundamental change to historical practice where independent agencies like the Securities and Exchange Commission, National Labor Relations Board, and Federal Energy Regulatory Commission fell outside the White House’s regulatory oversight. This EO sets forth new requirements that would formally subject the actions taken by these and other independent agencies to White House control for the first time. The new requirements include:
Regulatory Review
Section 1 of the EO extends to “independent regulatory agencies” the pre-existing requirement that Executive Departments and agencies submit for review all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs in the Executive Office of the President, before publication in the Federal Register.
Agency Performance
Section 4 of the EO requires the Director of the Office of Management and Budget (OMB) to establish “performance standards and management objectives” for independent agency heads, and to periodically report to the president on these agencies’ progress in meeting the standards.
Funding
Section 5 of the EO requires the OMB director to “adjust” the independent regulatory agencies’ “apportionments” as necessary to advance the president’s policies and priorities. The EO contemplates that OMB may prohibit spending on particular activities.
Regular Consultation With the White House
Section 6 of the EO requires independent regulatory agencies to establish a White House liaison within each agency, who will regularly consult and coordinate with the Executive Office of the President on policies and priorities.
Singular Legal Interpretations
Section 7 provides that the president and the attorney general shall set forth the authoritative and binding interpretations of the law for the entire executive branch.
These requirements are largely aimed at “independent regulatory agencies” as defined by 44 U.S.C. 3502(5), which identifies nineteen independent agencies and includes a catchall clause for “any other similar agency designated by statute.”1 A 2019 opinion from the Justice Department’s Office of Legal Counsel notes that there are potentially several other agencies (beyond those listed) that would fall into the catchall clause, including the United States International Trade Commission.
In a related move, the administration also asserted greater authority to fire certain federal commissioners and other officials “at will” who could previously only be terminated by the president “for cause.” For nearly a century, the prevailing view was that although the president enjoys absolute authority to remove the singular head of an executive agency, Congress could condition the removal of multimember heads of “independent” boards or commissions that Congress designed to be balanced along partisan lines and in which it vested quasi-judicial and quasi-legislative power. That view dates back to the 1935 Supreme Court case of Humphrey’s Executor v. United States; however, many believe that this view may no longer be favored by the current Supreme Court.
The Solicitor General of the United States recently informed Congress that the federal government will “no longer defend the[] constitutionality” of “certain for-cause removal provisions that apply to members of multimember regulatory commissions”—specifically the Federal Trade Commission, National Labor Relations Board, and the Consumer Product Safety Commission—that were permitted under Humphrey’s Executor. Instead, the Department of Justice “intends to urge the Supreme Court to overrule [Humphrey’s Executor], which prevents the President from adequately supervising principal officers in the Executive Branch who execute the laws on the President’s behalf, and which has already been severely eroded by recent Supreme Court decisions.”
These two steps—the “Ensuring Accountability for all Agencies” EO and the Justice Department’s rejection of Humphrey’s Executor—would dramatically increase White House control over federal commissions, boards, and officials which were previously considered independent and insulated from such control.
Article II of the U.S. Constitution vests the president with somewhat opaque “executive” powers. These powers include ensuring that the laws of Congress are “faithfully executed,” which requires some degree of oversight of the officers who actually execute them. The Constitution also permits the president to “require the Opinion” of executive department heads on any subject relating to their duties. While other presidents have not required this level of consultation by independent agency heads, some view the more hands-off approach to regulatory review to be a matter of executive discretion rather than a lack of legal authority. Together, these recent steps by the Trump administration highlight the likely hallmarks of the new legal frontier—one that will test the limits of the president’s constitutional powers.
Key Takeaways
Possible Regulatory Delays While Independent Agencies Adjust to the New Normal
The increased coordination and consultation that is now expected from the White House could result—at least initially—in some delays to the normal decision-making processes of independent regulatory agencies. These agencies will now need to build in an additional layer of review to ensure that certain policy decisions are aligned with those of the administration.
Fewer Open Interagency Disputes
President Trump intends to interact with independent agency heads in the same way as other federal agency heads. Subject to congressional or judicial intervention, it is expected that independent agencies will follow the White House’s lead, particularly given that President Trump has asserted authority to terminate board and commission members without cause. This will likely result in fewer—if any—open interagency disputes, like that which arose in the Bostock case, where the Justice Department and Equal Employment Opportunity Commission took conflicting legal positions on the scope of Title VII. The White House will aim to resolve more policy disputes in the interagency process, perhaps without the regulated community even learning of such disputes.
The Likely Rise of Executive Deference Arguments
Look for the White House to argue that this EO is entitled to deference from the courts, as it relates to the president’s core constitutional powers. While the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo put an end to Chevron deference for agency interpretations of the law, it did not address a different strain of deference where core presidential power is concerned. That form of deference—traditionally invoked to support the executive branch’s preferred national security policies—may well be increasingly invoked by the president and attorney general. President Trump may also assert that the EO should take precedence over existing regulations to the contrary, as the administration has maintained in other contexts.
Increased Opportunities for Engagement
In making these changes, the White House’s stated goal is to increase the public accountability of agencies that have historically exercised significant regulatory control over the American people. By requiring these agencies to coordinate with the White House at an unprecedented level, there may now also be an increased opportunity for regulated parties to be heard on important policy matters.
Footnotes
1 Notwithstanding that definition, the EO explicitly does not apply to the Board of Governors of the Federal Reserve System or to the Federal Open Market Committee in its conduct of monetary policy; it does apply to the Board of Governors’ supervision and regulation of financial institutions.
Anti-DEI Executive Orders Enjoined: Implications for Federal Funding Recipients and Private Employers
On Friday, February 21, 2025, a federal judge issued a Preliminary Injunction in National Association of Diversity Officers in Higher Education, et al. v. Trump, blocking significant portions of two Executive Orders (EOs) issued by President Donald Trump.
The decision, which will be appealed, creates more uncertainty for employers with programs that may fall under the broad umbrella of “Diversity, Equity, and Inclusion” (DEI) or “Diversity, Equity, Inclusion, and Accessibility” (DEIA) in light of the Trump administration’s efforts to eliminate DEI programs within federal agencies and impose restrictions on private sector DEI initiatives. For now, the court’s order blocks most – but not all – of the provisions in the two EOs.
Background
The U.S. District Court for the District of Maryland addressed a motion seeking relief from EO 14151 (“Ending Radical and Wasteful Government DEI Programs and Preferencing,” which the court labeled “J20 Order”) and EO 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” referred to by the court as the “J21 Order”). Epstein Becker Green has published several advisories explaining these EOs and how they may affect federal contractors and other federal funding recipients (see here and here) as well as other public and private employers (see here).
Both EOs were challenged by a group of plaintiffs that includes the City of Baltimore, the American Association of University Professors, and National Association of Diversity Officers in Higher Education. In brief, the plaintiffs argued that:
The EOs use vague terminology, creating compliance difficulties and violating the Fifth Amendment.
Failure to comply with the EOs’ unclear directives could, in some circumstances, even lead to criminal liability under the False Claims Act, creating untenable risk for those affected.
The EOs’ requirements that organizations certify that they do not engage in vaguely defined “illegal DEI” and threats of investigations of private organizations with DEI programs or enforcement action against entities create an unlawful chilling effect on speech protected by the First Amendment.
The EOs exceed the President’s constitutional authority because they violate the separation of powers and due process provisions of the Constitution.
Implementation of the EOs would cause irreparable harm to the plaintiffs and similarly situated federal contractors, grantees, and entities identified as targets for investigations and other compliance initiatives.
Highlights of the Court’s Analysis
In a 63-page Memorandum Opinion, Judge Adam B. Abelson found that the challenged provisions were unconstitutionally vague, and that the plaintiffs are likely to succeed on their claims under the First Amendment and the Fifth Amendment’s Due Process Clause. Noting that, despite duties of unrivaled gravity and breadth, a president is not exempt from the general provisions of the Constitution, the court found sufficient grounds to halt enforcement of two EO provisions in full, and a portion of a third provision.
Unlawful Viewpoint Discrimination Violates the First Amendment
Reviewing the First Amendment claims, the court considered the potential effects of both EOs. Section 3 of EO 14173 (referred to as the “Certification Provision”) requires every federal contract or grant award recipient to certify, among other things, that “it does not operate any programs promoting DEI that violate any applicable Federal antidiscrimination laws.” Section 4 of the same EO (referred to as the “Enforcement Threat Provision”) calls for civil compliance investigations and even actions under the False Claims Act (FCA) against entities engaging in protected speech, as we previously explained. Additionally, as we wrote here, the Enforcement Threat Provision, along with ensuing agency activity, has broad implications for the private sector. Finally, a “Termination Provision” contained in EO 14151 (in its Section 2) requires the federal government to terminate all “equity-related” grants or contracts (read more here).
The court found that such threats of “enforcement against perceived violators of undefined standards” place an unlawful viewpoint-based restriction on protected speech. The opinion describes the private-sector-oriented Enforcement Threat Provision, with its stated purpose of eliminating one type of principle (DEI) without a similar restriction on anti-DEI principles that may also violate anti-discrimination laws, as “textbook viewpoint-based discrimination.”
Impermissibly Vague Language Violates the Fifth Amendment
The court also found merit in arguments that certain terms in both EOs violate the Fifth Amendment’s Due Process clause by being so vague as to invite “arbitrary and discriminatory enforcement” and failing to sufficiently inform current contractors or grantees what they must do to avoid termination of their agreements with the government.
Specifically, the court agreed that the term “equity-related” in the Termination Clause’s discussion of grants or contracts that could be cancelled was ill-defined. The court also found that the Certification Provision could be interpreted very broadly, so that even DEI-related activities unrelated to any federally funded programs could be foreclosed. Describing a colloquy at the hearing in which “the government refused to even attempt to clarify what the Certification Provision means,” the court found that “even the government does not know what constitutes DEI-related speech that violates federal anti-discrimination laws,” which in turn leads to the conclusion that such an overbroad term is highly likely to cause self-censorship by contractors to mitigate risk.
The court also found that both EOs fail to explain what, exactly, constitutes “illegal DEI” or “illegal DEI and DEIA policies.” The absence of clear definitions for such terms grants excessive discretion to federal agencies and potentially leads to arbitrary enforcement.
A Broadly Applicable Nationwide Injunction – But Not A Blanket
The court, noting “prudential and separation-of-powers issues,” declined to halt the EOs with respect to any language directing the U.S. Attorney General to prepare a report or engage in investigations. The Preliminary Injunction also expressly excludes the President, but otherwise prohibits enforcement of the three provisions nationwide based on the finding that other employers would be affected in the same way as the plaintiffs. Specific prohibitions for each are as follows:
Termination Provision (EO 14151): may not be invoked to “pause, freeze, impede, block, cancel, or terminate … or change the terms of any [awards, contracts or obligations].”
Certification Provision (EO 14173): may not be enforced, eliminating (at least for now) requirements for federal contractors and grantees to certify they do not operate DEI programs that violate federal anti-discrimination laws.
Enforcement Threat Provision (EO 14173): may not be implemented to bring any anti-DEI enforcement action, including actions under the FCA, against private entities or government contractors and grantees.
Note that other portions of the EOs, including those directing agencies to take internal actions, remain in place. EO 11246, which required federal contractors to maintain affirmative action programs (AAPs) since 1965, remains revoked, and contractors are still required to wind down AAPs by April 21, 2025.
Employers should also note that this case has no effect on enforcement priorities or actions by other federal agencies such as the Equal Employment Opportunity Commission, whose Acting Chair, Andrea Lucas, has expressed a commitment to “rooting out unlawful DEI-motivated race and sex discrimination,” “[c]onsistent with the President’s Executive Order.”
The Battle Will Continue
On Monday, February 24, the Trump administration filed a Notice of Appeal, signaling that the case will proceed to the United States Court of Appeals for the Fourth Circuit. It is entirely plausible that the matter will proceed from there to the Supreme Court.
Meanwhile, there is no statement about or mention of the court’s preliminary injunction anywhere on the official White House website, including the pages listing the EOs. Other lawsuits challenging these (and other) EOs are pending. We will keep you apprised.
Staff Attorney Elizabeth A. Ledkovsky contributed to the preparation of this article.
Food & Chemicals Unpacked: Making-up for Lost Time: FDA’s Increased Oversight of Cosmetics [Podcast]
In this episode of Food & Chemicals Unpacked, we are joined by guest speakers, Partners Cynthia Lieberman and Rick Stearns, who dive into the recent evolution of FDA’s cosmetics regulations. They explore the Modernization of Cosmetics Regulation Act (MOCRA), including new requirements relating to adverse event reporting, Good Manufacturing Practices, and other topics. The discussion also provides insights on how cosmetics and personal care product manufacturers and their suppliers can ensure that finished products (makeup, soaps, sunscreen, shampoo, etc.) maintain compliance with MOCRA and other current legal obligations in the United States.
The EU Suspends Certain Sanctions on Syria to Support Economic Stabilisation, Political Transition and Reconstruction
To help the Syrian people achieve a peaceful and inclusive political transition, to aid the swift economic recovery and reconstruction of the country and to facilitate its eventual reincorporation into the global financial system, the EU has suspended with immediate effect a number of sanctions and restrictive measures that had targeted key sectors of the Syrian economy, including its banking, energy and transport sectors.
The five specific actions that EU foreign ministers took following a meeting yesterday in Brussels are as follows:
Suspending sectoral measures in the energy (oil, gas and electricity) and transport sectors
Removing five entities (Agricultural Cooperative Bank, Industrial Bank, Popular Credit Bank, Saving Bank and Syrian Arab Airlines) from the list of those subject to asset freezes, and allowing financial resources to be made available to the Syrian Central Bank
Introducing exemptions to the prohibition on banking relations between Syrian banks and financial institutions in EU member states to permit transactions related to the energy and transport sectors, as well as those necessary for reconstruction purposes
Extending the existing exemption for transactions for humanitarian purpose indefinitely
Introducing an exemption to the prohibition on the export of luxury goods to Syria for personal usage
The European Council announced that it will continuously monitor the situation in Syria to assess whether the suspensions remain appropriate, and/or whether further sanctions could be suspended.
While many commentators will champion the deferral of sweeping sectoral sanctions because of the unintended negative consequences that they can have, such as impeding economic stability and denying the ordinary person access to essential services such as electricity, water, healthcare and education, the EU has seen fit to maintain other important sanctions and restrictive measures that were imposed during the previous regime, including those related to:
Arms trafficking
Chemical weapons
Dual-use goods
Equipment misused for internal repression
Narcotics smuggling
Software misused for interception and surveillance
Trade of Syrian cultural heritage items.
The EU’s stated goal when it enacted these sanctions was to protect the civilian population from the previous regime. Under new leadership, Syria now has the opportunity to earn a wind-down of all remaining sanctions and restrictive measures, and for its war-torn economy to benefit from resurgent EU-Syria economic relations and trade flows.
IRS Roundup February 10 – 14, 2025
Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of February 10, 2025 – February 14, 2025.
TAX-CONTROVERSY-RELATED DEVELOPMENTS
The previous IRS Roundup provided general coverage of the proposed Taxpayer Assistance and Service (TAS) Act. This post highlights Section 310 of the TAS Act, which would give the US Tax Court authority to hear general refund suits similar to those currently heard in the US district courts and the US Court of Federal Claims.
Historically, taxpayers could only contest their tax liability by first paying the tax and then suing for a refund in a district court or the Court of Federal Claims. The Board of Tax Appeals (BTA), the forerunner to the Tax Court, was created in 1924 to give taxpayers a prepayment forum in which to dispute their tax liability. The BTA was initially proposed to have general refund suit jurisdiction, but Congress limited its jurisdiction to cases brought in response to a notice of deficiency. Several proposals have been made over the years to expand the jurisdiction of the BTA and (now) the Tax Court to include general refund suits, which they would share with the district courts and the Court of Federal Claims. Recent support for this approach has come from National Taxpayer Advocates Nina Olson and Erin Collins. As one commentator noted, the proposed expansion to the Tax Court’s jurisdiction has the potential to improve access to justice for taxpayers and reduce the burden on district courts and the Court of Federal Claims.
IRS GUIDANCE
February 12, 2025: The IRS issued Revenue Procedure 2015-16, which provides depreciation deduction limitations for “passenger automobiles” (including trucks and vans) placed in service during 2025 and income inclusion amounts for lessees of such vehicles. The revenue procedure also includes two tables detailing depreciation limits based on whether the Internal Revenue Code (Code) § 168(k) additional first-year depreciation deduction applies. Additionally, the revenue procedure outlines the inflation adjustment calculation for these limits and provides a table for determining income inclusions for leased passenger automobiles. The tables reflect the automobile price inflation adjustments required by Code § 280F(d)(7).
February 12, 2025: The IRS released Notice 2025-14, which provides guidance on the corporate bond monthly yield curve, spot segment rates under Code § 417(e)(3), and 24-month average segment rates under Code § 430(h)(2). The notice also provides guidance as to the interest rate on 30-year Treasury securities under Code § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Code § 431(c)(6)(E)(ii)(I).
February 13, 2025: The IRS issued Revenue Procedure 2025-15, which provides discount factors for the 2024 accident year for insurance companies to use when computing discounted unpaid losses under Code § 846 and discounted estimated salvage recoverable under Code § 832. The revenue procedure includes tables with discount factors for various lines of business (both short- and long-tail) and addresses the use of the composite method for computing these factors. The IRS requests comments on the composite method and changes by the National Association of Insurance Commissioners to Schedule P of the annual statement.