DOJ Criminal Division Updates (Part 2): Department of Justice Updates its Corporate Criminal Whistleblower Awards Pilot Program
On August 1, 2024, the Department of Justice’s (DOJ) Criminal Division launched a three-year Corporate Whistleblower Awards Pilot Program (the “Pilot Program”). (See Part 1 and Part 3 of this series for more information.) The Pilot Program marked a significant effort by the DOJ to enhance its ability to fight corporate and white collar crime by enlisting whistleblowers to aid in the effort. On May 12, 2025, the DOJ released updated guidance (the “Updated Guidance”) related to the Pilot Program in order to reflect the updated enforcement priorities and policies of the administration under President Trump, also announced on May 12, 2025. In this article, we provide an overview of the Pilot Program and lay out the recent changes to the guidance.
Overview of the Pilot Program
As originally announced in August 2024, the Pilot Program allowed for financial recovery for whistleblowers who provided successful tips relating to “possible violations of law” for four categories of crimes: (1) foreign corruption and bribery, (2) financial institution crimes, (3) domestic corporate corruption, and (4) health care fraud involving private insurance plans.
Eligibility & Key Terms
To be eligible, potential whistleblowers must meet the following criteria:
Financial Threshold. To qualify under the Pilot Program, the information provided must lead to a successful forfeiture exceeding $1 million.
Originality. The information provided by the whistleblower must be based on the individual’s independent knowledge and cannot be already known to the DOJ. Information obtained through privileged communications is excluded from the DOJ consideration.
Lack of “Meaningful Participation” in the Reported Criminal Activity. A whistleblower is ineligible for an award if they “meaningfully participated” in the activity they are reporting. Pilot Program guidance provides that an individual who was “directing, planning, initiating, or knowingly profiting from” the criminal conduct reported is not eligible. Conversely, someone who was involved in the scheme in such a minimal role that they could be “described as plainly among the least culpable of those involved” would be able to recover an award under the Pilot Program.
Truthful and Complete Information. To qualify for an award, a whistleblower must provide all information of which they have knowledge, including any misconduct they may have participated in. If a whistleblower withholds information, they are ineligible to recover an award under the Pilot Program. This requirement includes full cooperation with the DOJ in any investigation, including providing truthful testimony during interviews, before a grand jury, and at trial or any other court proceedings and producing all documents, records, and other relevant evidence.
Award Structure
If eligible, a whistleblower may be entitled to a discretionary award of up to 30% of the first $100 million in net proceeds forfeited and up to 5% of the next $100–$500 million in net proceeds forfeited. Under relevant criminal forfeiture statutes, proceeds are forfeitable only if they are derived from or substantially involved in commission of an offense. In this way, net proceeds forfeited may be less than actual loss.
Unlike other similar whistleblower programs, any award pursuant to the Pilot Program is fully discretionary — there is no guaranteed minimum amount that a whistleblower will recover. In determining whether a whistleblower will receive an award, it will consider whether the information provided was specific, credible, and timely and also whether the information significantly contributed to forfeiture. The DOJ also assesses the whistleblower’s level of assistance and cooperation throughout the investigation.
Corporate Self-Disclosure
The Pilot Program gives companies a 120-day window to self-disclose information related to an internal whistleblower report. Companies choosing to self-disclose “misconduct” covered by the Pilot Program within the allotted 120-day window will remain eligible for a presumption of declination (i.e., no prosecution) under the Corporate Enforcement and Voluntary Self-Disclosure Policy, which also was updated as announced on May 12, 2025 (the “Self-Disclosure Policy”). This 120-day window applies even if the whistleblower has already reported misconduct to the DOJ.
Companies choosing to self-disclose also must meet the other requirements of the Self-Disclosure Policy to qualify for a presumption of declination. In addition to a timely self-disclosure, companies must cooperate fully with the investigation, identify responsible individuals, remediate all harms, and disgorge ill-gotten gains.
Changes in the May 2025 Updated Guidance
The Updated Guidance reaffirms the DOJ’s commitment to the Pilot Program and does not change that the program will run for three years unless otherwise announced. The majority of the specifics of the Pilot Program remain unchanged, including the requirements for whistleblower eligibility, the self-disclosure policy, and the amount that whistleblowers stand to gain.
The primary update is a change to the subject matter to which a whistleblower’s report must pertain in order to be eligible for recovery. Under the Pilot Program as initially announced, information provided by a whistleblower must have related to the following substantive areas:
Violations by financial institutions such as money laundering, failure to comply with anti-money laundering compliance requirements, and fraud against or non-compliance with financial institution regulators.
Violations related to foreign corruption and bribery, including violations of the Foreign Corrupt Practices Act, money laundering statutes, and the Foreign Extortion Prevention Act.
Violations related to the payment of bribes or kickbacks to domestic public officials.
Violations related to federal health care offenses involving private or non-public health care benefit programs, where the overwhelming majority of claims were submitted to private or other non-public health care benefit programs.
Violations related to fraud against patients, investors, or other non-governmental entities in the health care industry, where these entities experienced the overwhelming majority of the actual or intended loss.
Any other federal violations involving conduct related to health care not covered by the federal False Claims Act (FCA).
In its Updated Guidance, the DOJ removes certain language from these categories thus broadening the substantive reach of the Pilot Program:
Removes the requirement that violations related to federal health care offenses involve “private or non-public” health care benefit programs.
Removes the requirement that the overwhelming majority of claims for federal health care offenses were submitted to private or other non-public health care benefit programs.
Removes the requirement that patients, investors, or other non-governmental entities experience the overwhelming majority of actual or intended loss.
Removes entirely the qualifying category for reports involving health care-related violations not covered by the FCA.
Consistent with the Trump administration’s focus on tariffs, immigration, and cartels, among other enforcement priorities, the DOJ adds priority subject-matter areas that now qualify for a potential whistleblower award:
Violations related to fraud against, or deception of, the United States in connection with federally funded contracting or federal funding that does not involve health care or illegal health care kickbacks.
Violations related to trade, tariff, and customs fraud.
Violations related to federal immigration law.
Violations related to corporate sanctions offenses.
Violations related to international cartels or transnational criminal organizations, including money laundering, narcotics, and Controlled Substance Act violations.
Concurrently with its Updated Guidance, the DOJ issued a memorandum entitled “Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime.” This memo clearly lays out the priorities of the DOJ’s Criminal Division under the Trump administration, including but not limited to “trade and customs fraud,” “conduct that threatens the country’s national security,” and combatting “foreign terrorist organizations” such as “recently designated Cartels and [Transnational Criminal Organizations].” The DOJ stated that amendments to the Pilot Program were intended to “demonstrate the Division’s focus on these priority areas.” The changes in the Updated Guidance closely track the stated priority areas, and they reflect that while the Pilot Program will continue, its focus may shift to reflect the additional goals of the Trump administration.
Recommendations for Minimizing Risk Under the Pilot Program
While the recent changes to the Pilot Program broaden the scope of potential whistleblower reports and may implicate companies in industries that were previously not likely to be subject to the program, the substantive best practices for minimizing risk of a whistleblower seeking to take advantage of the Pilot Program remain the same, even with the Updated Guidance. Companies therefore should take this opportunity to review and update their whistleblower response policies to ensure they are clear, being followed, and effective.
Have a preexisting compliance program that encompasses all relevant subject-matter areas. Given the 120-day window to self-disclose under the Pilot Program, companies must be able to undertake complete internal investigations on a short timeline. Companies should ensure they have strong and robust internal reporting structures for misconduct of any type and that they are prepared to promptly investigate any alleged misconduct. Companies should protect the confidentiality of whistleblowers, not retaliate, and not impede whistleblowers from reporting potential violations to the government. To the extent that a company’s compliance program defines potential “misconduct” more narrowly than the Pilot Program, those companies should consider expanding the scope of their compliance function to ensure all potential violations of criminal law are thoroughly investigated.
Conduct internal investigations under privilege. The Pilot Program provides that information is not “original” if the whistleblower obtained it through a communication subject to the attorney-client privilege. It also disqualifies potential whistleblowers if they learned the information in connection with the company’s process for identifying, reporting, and addressing potential violations of law. Therefore, it is essential for companies to preserve privilege while conducting internal investigations. In-house or outside counsel should guide the investigation, and the scope and purpose of the investigation should be documented in writing. Companies should be careful with the extent to which they involve non-attorneys in the investigation (if at all) and should ensure the investigation is being led by attorneys and for the purpose of obtaining attorney advice.
Consider self-disclosure where appropriate. If a company chooses to self-disclose potential misconduct within the 120-day period provided by the Pilot Program, the company is entitled to a presumption of declination under the Self-Disclosure Policy. Where there is any question regarding whether a company has uncovered “misconduct,” this presumption may put a thumb on the scale for self-disclosing, although note that the program also requires companies to cooperate throughout the ensuing government investigation.
Be aware of pre-existing self-disclosure requirements. In combatting the eligibility of potential whistleblowers, companies should consider whether they have any existing requirement to self-disclose. This may come from requirements imposed on all federal grant recipients. It could stem from serving as a government contractor, where such contractors are already required to disclose evidence of potential violations of federal criminal law. The obligation to self-disclose may also come from a corporate integrity agreement in place following a prior FCA settlement. If any of these scenarios apply, it is less likely that a potential whistleblower will be deemed to have come forward voluntarily with original information, and there may be an argument that they therefore do not qualify for an award under the Pilot Program.
Lori Rubin Garber also contributed to this article.
Employees Hiding Use of AI Tools at Work
A new study by Ivanti illustrates that one out of three workers secretly use artificial intelligence (AI) tools in the workplace. They do so for varying reasons, including “I like a secret advantage,” “My job might be reduced/cut,” “My employer has no AI usage policy,” “My boss might give me more work,” “I don’t want people to question my ability,” and “I don’t want to deal with IT approval processes.”
In 2025, a staggering 42% of employees admit to using generative AI (GenAI) tools at work. Another whopping 48% of employees admit to feeling resenteeism (a dislike of one’s job, but stays anyway) and 39% admit to feeling presenteeism (when one comes into the office to be seen, but is not productive).
The secret use of GenAI tools in the workplace poses several risks for organizations, including unauthorized disclosure of company data and/or personal information, cybersecurity risks, bias and discrimination, and misappropriation of intellectual property.
The Ivanti study emphasizes the need for organizations to adopt an AI Governance Program so employees feel comfortable using approved and sanctioned AI tools and don’t keep their use a secret. It also allows the organization to monitor the use of AI tools by employees and implement guidelines and guardrails around their safe use in the organization to reduce risk.
DOJ Criminal Division Updates (Part 3): New Reasons for Companies to Self-Disclose Criminal Conduct
On May 12, 2025, the U.S. Department of Justice (DOJ) announced revisions to its Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP). (See Part 1 and Part 2 of this series for more information.) As a part of the new administration’s priorities and policies for prosecuting corporate and white collar crimes, the head of the Criminal Division directed the Fraud Section and Money Laundering and Asset Recovery Section to revise the CEP and clarify that additional benefits are available to companies that self-disclose and cooperate.[1]
The CEP encourages companies to self-disclose misconduct, fully cooperate with investigations, and remediate issues — and, in turn, potentially reduce their criminal exposure. Though the scope and criteria for compliance with the CEP have evolved since it was announced in 2016, a constant has been the presumption of declination for a company in compliance. This amorphous “presumption” has long drawn complaints from practitioners and companies, due to its lack of certainty in outcomes — especially weighed against the often-extensive investigations and work corporations do to comply with the policy.
The latest revision to the CEP seeks to address complaints about the lack of certainty by providing specific conditions to companies considering voluntary self-disclosure and a pathway to guaranteed declination. The revised CEP also establishes significant benefits for companies that may not meet the requisite declination requirements but fall into other categories. Understanding the nuances of the revised CEP is crucial for companies to ensure they are well positioned to benefit from the revised CEP, should a company find itself in a position to self-disclose misconduct. The key aspects of the May 2025 Revised CEP are as follows:
Declination of Prosecution
Four conditions must be met for DOJ to decline criminal prosecution of company:
Voluntary Self-Disclosure. The company must have proactively and promptly reported unknown misconduct to the Criminal Division, without having an obligation to do so and without an imminent threat of disclosure or government investigation.
Full Cooperation. The company must have “fully cooperated” throughout the investigation process by, among other things, timely disclosing and voluntarily preserving relevant documents and information as well as making company officers and employees who possess relevant information available for interviews by prosecutors and investigators.
Timely and Appropriate Remediation. The company must have taken prompt and effective corrective actions, including investigating underlying conduct and root causes, appropriately disciplining wrong-doers, and implementing an effective compliance and ethics program to reduce future risks.
No Aggravating Circumstances. There should be no significant aggravating factors related to the misconduct, such as its severity, scope, or repeated occurrence, nor recent criminal adjudications for similar offenses.
Near Miss Cases: Voluntary Self-Disclosures with Aggravating Factors
The revised CEP also creates a middle ground for companies that self-report in good faith but do not meet all other voluntary self-disclosure requirements. In these “near miss” situations, the DOJ may offer a Non-Prosecution Agreement (NPA), which typically provides the following benefits:
A term length of fewer than three years.
No requirement for an independent compliance monitor.
A 75% reduction off the low end of the U.S. Sentencing Guidelines fine range.
Resolutions in Other Cases
The revised CEP also outlines a third route to resolution: If a company’s situation does not qualify for a declination or an NPA, prosecutors still have discretion to determine the appropriate resolution. This includes the imposition of penalties, term lengths, compliance obligations, and monetary fines. Prosecutors typically will apply a reduction from the low end of the fine range for non-recidivist companies that have fully cooperated and remediated the misconduct.
Why This Matters
DOJ’s message through the revised CEP is clear: Do the right thing and you will be rewarded.
A company’s timely and effective voluntary remediation and self-disclosure can now result in guaranteed declination of criminal prosecution, if the company complies with the steps laid out in the revised CEP. Companies should keep these benefits in mind not only when faced with a decision point regarding self-disclosure of misconduct but also as they proactively evaluate the effectiveness of their compliance programs and whether they are adequately resourced. Foley is here to help with your compliance and internal investigations needs, as well as counsel you through evaluating self-disclosure under the revised CEP.
[1] See Foley blog post on May 12, 2025 Criminal Division White Collar Enforcement Plan Memo.
Proposed Tax Legislation: Implications for Tax-Exempt Organizations
This week, the US House Ways and Means Committee released tax legislation that includes several provisions relevant to tax-exempt organizations.
The Committee’s proposed legislation is part of the highly anticipated legislative package intended to extend expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and to implement other priorities of President Trump and the Republican Majority in US Congress.
The provisions summarized below from the House Ways and Means Committee text could impact tax-exempt organizations.
The Ways and Means Committee is one of 11 House Committees that developed and reported legislation as part of the budget reconciliation process being used to advance tax reform and other key legislative priorities. The US House Budget Committee will hold a markup of the compiled legislation from the 11 Committees on May 16. The Budget Committee has announced it will accept written statements on the legislation between now and close of business on May 19. House leadership has announced plans for a floor vote on the compiled reconciliation legislation before Memorial Day.
Excise Tax on Net Investment Income of Private Foundations
Under current law, private foundations (other than exempt operating foundations) are subject to a 1.39% excise tax on their net investment income.[1] The Ways and Means Committee legislative text (proposal) replaces the flat 1.39% excise tax rate with a four-tiered structure based on the foundation’s total assets:
Foundations with assets below $50 million: 1.39%.
Foundations with assets between $50 million and $250 million: 2.78%.
Foundations with assets between $250 million and $5 billion: 5%.
Foundations with assets above $5 billion: 10%.
Under the proposal, assets of a private foundation are determined based on the fair market value of a foundation’s total assets, without reducing any liabilities. The total assets of a private foundation for this purpose also include the assets of a private foundation’s “related organizations.”[2] A related organization is any organization that controls or is controlled by the private foundation or is controlled by one or more persons that also control the private foundation. As drafted, this provision would include any related organization regardless of its tax status. It excludes, however, assets from related organizations that are not controlled by the private foundation if the assets are not intended or available for the use or benefit of the private foundation. When assets are “not intended or available for the use or benefit of the private foundation” is not defined. This could be particularly relevant for company sponsored foundations that control and provide ongoing support to the foundation.
Excess Business Holdings of Private Foundations
Under current law, Section 4943(c) of the Internal Revenue Code generally limits the holdings of a private foundation to 20% (and in some cases 35%) of the voting stock in a business enterprise that is treated as a corporation reduced by the amount of voting stock held by its disqualified persons.[3]
The proposal amends Section 4943(c)(4)(A) of the Code to allow a business enterprise to repurchase voting stock under certain conditions from a retiring employee who participated in the corporation’s Employee Stock Ownership Plan and for that stock to be considered as still outstanding stock when calculating a private foundation’s permitted holdings under the excess business holdings rules, up to a certain amount.[4] The proposal would not apply to stock buybacks within the first 10 years from when the plan is established.
Unrelated Business Taxable Income
The proposal includes three provisions that impact the determination of unrelated business taxable income (UBTI):
Name and Logo Royalties: Under current law, royalty income is excluded from UBTI unless derived from debt-financed property or certain controlled subsidiaries.[5] The proposal would modify the royalty exception for UBTI by excluding income derived from any sale or licensing of an exempt organization’s name and logo.[6] The proposal would increase the UBTI of an exempt organization that receives royalty income from the sale or licensing of its name or logo. Similar provisions were proposed in 2014 and 2017.
Parking Tax: Under current law, the amount paid or incurred for any qualified transportation fringe benefit (i.e., employee parking) is exempt from UBTI. The proposal would include in UBTI the cost of qualified transportation fringe benefits and parking facilities used in connection with qualified parking, with a carve-out for religious organizations.[7] This tax on the cost of providing parking to employees was initially enacted by the TCJA without the carve-out for religious organizations but was later repealed retroactively.[8]
Research Income: Under current law, all income from any research conducted by an exempt organization whose primary purpose is to carry out fundamental research the results of which are freely available to the general public is exempt from UBTI on all income generated from all research activities.[9] The proposal would revise this exemption provision to exclude only income derived “from such research” and not income from research in general.[10]
Executive Compensation Excise Tax
Under current law, Section 4960 imposes an excise tax on exempt organizations who pay over $1 million in remuneration or who make an excess parachute payment to any “covered employee.” A “covered employee” generally includes any employee (or former employee) of an “applicable tax-exempt organization” if the employee is one of the five highest compensated employees for the current taxable year or was a covered employee in a prior year beginning after December 31, 2016.[11]
Under the proposal, the employees covered by the excise tax would be expanded to include any employee or former employee of the organization or any related person or governmental entity regardless of whether they are (or were) one of the five highest compensated employees and regardless of whether they are (or were) an employee of an “applicable tax-exempt organization.”[12]
Termination of Tax-Exempt Status for Terrorist Supporting Organizations
Under current law, Section 501(p) generally provides for the suspension of tax-exempt status for an organization designated as a “terrorist organization” or as “supporting or engaging in terrorist activity” pursuant to certain executive orders and federal laws. For example, Executive Order 13224 authorizes the US Secretary of the Treasury, “in consultation with the Secretary of State and the Attorney General,” to designate organizations as terrorist organizations.[13]
The proposal adds a definition of “terrorist supporting organizations” to Section 501(p) and defines a “terrorist supporting organization” as any organization designated by the Secretary of Treasury as having provided material support or resources to a terrorist organization.[14] The proposal provides the Secretary of the Treasury with the authority to designate an organization as a terrorist supporting organization without consulting with the Secretary of State and the Attorney General.
The proposal also requires the Secretary of the Treasury to provide notice to the organization prior to designating them as a terrorist supporting organization and provides for a 90-day cure period. During the 90-day cure period, the organization can demonstrate to the Secretary’s satisfaction that they did not provide material support or resources to a terrorist organization or, alternatively, made efforts to recoup the funds. The designation as a terrorist supporting organization can be appealed to the Internal Revenue Service’s Independent Office of Appeals, and the designation can also be legally challenged in US district court following exhaustion of the administrative process. The proposal exempts certain humanitarian aid provided with the approval of the Office of Foreign Assets Control.
College and University Endowment Tax
Under current law, Section 4968 imposes a flat 1.4% excise tax of the net investment income of certain private colleges and universities. Under the proposal, the flat 1.4% excise tax rate would be replaced with a four-tiered structure based on the institution’s student adjusted endowment:
Institution’s student adjusted endowment between $500,000 and $750,000: 1.4%.
Institution’s student adjusted endowment between $750,000 and $1,250,000: 7%.
Institution’s student adjusted endowment between $1,250,000 and $2,000,000: 14%.
Institution’s student adjusted endowment above $2,000,000: 21%.
The institution’s “student adjusted endowment” is determined based on the total fair market value of the institution’s assets (other than assets used directly in carrying out the institution’s exempt purposes) per “eligible student.”[15] For purposes of determining the institution’s total assets, the assets and net investment income of any related organization of the institution will be treated as assets of the institution. A related organization is any organization that controls or is controlled by the institution, is controlled by one or more persons that also control the institution or is a supported or supporting organization with respect to the institution.
An “eligible student” for this purpose means a student who is a “citizen or national of the United States, a permanent resident of the United States, or able to provide evidence from the Immigration and Naturalization Service that he or she is in the United States for other than a temporary purpose with the intention of becoming a citizen or permanent resident.”[16] Based on the definition of eligible student, institutions with more international students on temporary visas and undocumented students are more likely to become subject to the endowment excise tax or a higher excise tax rate.
The proposal excludes certain religious colleges or universities that have continuously maintained an affiliation with a church and have a mission that includes religious tenets, beliefs, or teachings.[17]
Charitable Deductions
Individual Taxpayers: Under current law, only taxpayers who itemize are able to deduct their charitable contributions.[18] The proposal would temporarily reinstate a charitable contribution deduction for non-itemizing taxpayers, capped at $150 ($300 for joint returns) for cash contributions to certain qualifying charities for tax years 2025 through 2028.[19]
Corporate Taxpayers: Under current law, corporate taxpayers are generally allowed a charitable contribution deduction up to 10% of taxable income, and charitable contributions exceeding the 10% limit can be carried forward and deducted in the following five tax years, subject to the same 10% limitation in each year.[20] The proposal would establish a new floor on charitable deductions for corporations equal to 1% of taxable income and impose new restrictions on the ability of corporations to carry forward disallowed charitable deductions to future years.[21] A corporate taxpayer with charitable contributions exceeding the 10% limitation can only add the amount disallowed under the 1% floor to the amount carried over to the subsequent year.
[1] Code Section 4940(a).
[2] The One, Big, Beautiful Bill, Proposed Section 112022.
[3] Code Section 4943.
[4] Proposed Section 112023.
[5] Code Section 512(b)(2).
[6] Proposed Section 112025.
[7] Proposed Section 112024.
[8] Public Law No. 116-94, Section 302 (repealing Code Section 512(a)(7)).
[9] Code Section 512(b)(9).
[10] Proposed Section 112026.
[11] Code Section 4960.
[12] Proposed Section 112020.
[13] Executive Order 13224.
[14] Proposed Section 112209.
[15] Proposed Section 112021.
[16] Proposed Section 112021; Section 484(a)(5) of the Higher Education Act of 1965.
[17] Proposed Section 112021.
[18] Code Section 170(p).
[19] Proposed Section 110112.
[20] Code Section 170(b)(2).
[21] Proposed Section 112028.
The VPPA: The NBA and NFL Ask SCOTUS to Referee
On April 22, 2025, the National Football League (NFL) filed an amicus brief asking the United States Supreme Court to take on a Video Privacy Protection Act (VPPA) class action case against the National Basketball Association (NBA). In my last post, we covered a recent VPPA lawsuit against a movie theater company and reviewed the provisions of the Act. In recent years, we analyzed how plaintiffs have applied the VPPA outside of traditional video contexts. This week, we dive deeper into a VPPA case against the NBA and explore the NFL’s amicus brief supporting the NBA’s position, asserting why the Act should not apply in the modern video streaming context, particularly for sports leagues.
Case Background
In the case against the NBA, the plaintiff alleged that they subscribed to the NBA’s newsletter and watched free videos on its website while logged into their Facebook account. In doing so, the NBA reportedly shared their personal viewing information with Facebook via the Meta Pixel tracking technology. The plaintiff asserted that they were a “subscriber of goods and services” and therefore met the definition of a consumer under the VPPA. See Salazar v. Nat’l Basketball Ass’n, 118 F.4th 533 (2d Cir. 2024).
To recap, the VPPA prohibits a video tape service provider from knowingly disclosing a consumer’s personally identifiable information—including information identifying a person as having requested or obtained specific video materials or services from a video tape service provider—to a third party without the consumer’s express consent. A “video tape service provider’ is defined as someone “engaged in the business … of rental, sale, or delivery of prerecorded video cassette tapes or similar audiovisual materials,” and has been interpreted to apply to video streaming service providers. A “consumer” refers to a renter, purchaser, or subscriber of goods or services from a video tape service provider.
In October 2024, the Second Circuit held that the plaintiff was the NBA’s consumer under the VPPA, interpreting that the term “consumer” should include an individual who rents, purchases, or subscribes to any of a provider’s goods or services, not just those that are audiovisual. The Second Circuit also concluded that even though the NBA may have obtained only the plaintiff’s name, email, IP address, and cookies associated with their device, the provision of such information in exchange for receiving services constitutes a “subscription.” Further, the Second Circuit also held that the VPPA applies even for videos accessed on a public page that does not require a sign-in for exclusive content.
The NBA filed a petition for certiorari, requesting the Supreme Court to review the Second Circuit’s decision.
The NFL’s Amicus Brief
The NFL’s amicus brief highlights that the Second Circuit is not alone in this broad interpretation of the VPPA. The Seventh Circuit has also held that a plaintiff need not have rented, purchased, or subscribed to the defendant’s audiovisual goods or services to qualify as a consumer under the VPPA, but that any goods or services are sufficient. However, the Sixth Circuit has held to the contrary, reasoning that the definition of “consumer” in the statute does not encompass consumers of all goods or services imaginable, but only those offered in a video tape service provider context. The NFL supports the latter position.
The NFL warns that the “explosion of VPPA class actions” is a concern for content providers like the NBA and NFL, who risk “massive liability” that was “unforeseen by Congress” when the VPPA was enacted in 1988. According to the NFL, tracking technology is “ubiquitous” and “makes much of the content on the Web free.” The NFL warns that if online content providers face such liability, “many content providers would be forced to pursue alternative sources of revenue as a result of the reduction in targeted advertising revenues,” which may result in consumers paying for currently free applications and services.
For sports leagues specifically, the NFL asserts that these organizations often have “hundreds of millions of fans,” many of whom purchase or rent non-audiovisual goods and services that would qualify them as a consumer under a broad interpretation of the VPPA. For example, a fan who bought tickets to a sports game or purchased league apparel through the NBA or NFL website, who then happened to watch a free video on the league’s website while logged into Facebook, may be considered a consumer, and could seek VPPA damages.
The NFL also asserts that there is no real harm to VPPA plaintiffs because using pixels is not a secret and that “consumers are well aware that enabling the use of cookies permits personalized advertising.” The NFL emphasizes that the plaintiff in the NBA case admitted they could have seen that the NBA was using the Meta Pixel by viewing the code on the NBA’s website. In addition, Meta’s Cookie Policy informs users that it may obtain information from third parties. Therefore, the NFL also questions consumers’ standing for such VPPA suits based on no real harm.
Last year, plaintiffs initiated over 250 VPPA lawsuits. Yet, the circuit split still leaves open the question: Who qualifies as a consumer under the VPPA in this modern video streaming context? The NBA, with support from the NFL, has punted the question to the Supreme Court. If the writ of certiorari is granted, we might find the ball in SCOTUS’ court.
FTC and DOJ Direct Agency Heads to Identify Anticompetitive Regulations for Elimination—Including in Health Care
President Trump’s Executive Order No. 14267, “Reducing Anti-Competitive Regulatory Barriers” (“EO 14267”), requires agency heads to provide by June 18, 2025, a list of anticompetitive regulations to the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) to facilitate the review and possible elimination of these regulations.
In furtherance of EO 14267, the DOJ recently launched an Anticompetitive Regulations Task Force, and the FTC issued a Request for Information inviting members of the public to identify regulations with anticompetitive effects.
On May 5, 2025, the FTC and DOJ sent a jointly prepared letter (“joint letter”) to various agency heads that further emphasized the requirements of EO 14267. The joint letter directs agency heads to identify regulations that:
“create or facilitate the creation of monopolies;
create unnecessary barriers to entry for new market participants;
limit competition or have the effect of limiting competition between competing entities;
create or facilitate licensure or accreditation requirements that unduly limit competition;
unnecessarily limit companies’ ability to compete for agency procurements; or
otherwise impose anticompetitive restraints or distortions on the operation of the free market.”
The joint letter goes on to state that anticompetitive regulations can be found across the federal government, pointing to several industries, including health care. In this regard, the joint letter states the following:
Federal regulations in the healthcare sector, especially those promulgated under the Affordable Care Act, may have the effect of pushing low-cost insurance plans out of the market and inducing vertical consolidation that raises prices, while burdensome pharmaceutical regulations may delay the introduction of new, more affordable medicines.
No specific regulations were identified, but it is reasonable to expect health care regulations generally to be targeted for potential elimination soon.
CFPB Rescinding the 2021 COVID-19 Mortgage Servicing Final Rule
On May 15, 2025, the Consumer Financial Protection Bureau (CFPB) filed an interim final rule in the Federal Register that will rescind its prior 2021 COVID-19 mortgage servicing final rule. The interim final rule is set for publication in the Federal Register on May 16, 2025, and would become effective 60 days after publication. Comments will be accepted for 30 days after publication.
As a refresher, the 2021 COVID-19 final rule added the following to Regulation X:
Temporary enhanced early intervention live contact requirements;
Temporary “procedural safeguards” that had to be satisfied before making the first notice or filing to initiate foreclosure; and
An exception to the anti-evasion provision that allows “[c]ertain COVID-19-related loan modification options” to be offered to a borrower based upon an evaluation of an incomplete loss mitigation application.
The CFPB’s stated rationale for rescinding the 2021 COVID-19 final rule is twofold. First, it explains that much of the 2021 final rule was intended to be temporary. For example, the enhanced early intervention live contact requirements contained an expiration date of October 1, 2022. Similarly, the procedural safeguards only applied to first notices or filings made prior to January 1, 2022. Therefore, those provisions “have been sunset by their own terms, and . . . [t]hus, borrowers and servicers are no longer utilizing these safeguards.” Furthermore, as these were COVID-19-related protections added to the law, the CFPB notes that former President Biden formally ended the COVID-19 national emergency when he signed a joint resolution of Congress on April 10, 2023.
With respect to the anti-evasion exception for certain loan modification options, the CFPB notes that it has already proposed a rule that would provide servicers with flexibility to offer loss mitigation options more freely. “As part of the revised framework, the proposal would have removed the provisions implemented in response to the COVID-19 pandemic, and the Bureau did not receive public comments on the proposed removal of those provisions.”
The second reason for this interim final rule is, as the CFPB explains, that “it is the policy of the Bureau to streamline regulatory requirements to reduce burdens on the American public. The Bureau has determined that, in light of the end of the COVID-19 pandemic, these regulations needlessly complicate Regulation X without commensurate benefits.”
Takeaways and Observations
The CFPB’s decision to rescind the enhanced early intervention live contact requirements and the foreclosure procedural safeguards is almost certainly inconsequential, as those provisions have sunset and no longer have any effect. However, in our opinion, the CFPB is understating the impact of rescinding the anti-evasion exception for some loan modifications. While that provision was enacted in response to COVID-19 and the pandemic is over, the wording chosen by the CFPB in the 2021 final rule was intentionally (albeit subtly) broader in scope and has allowed servicers to continue offering certain loan modification options in a streamlined fashion (i.e., without having to receive a complete loss mitigation application). Therefore, rescinding that provision and only providing servicers with 60 days to change internal processes is going to be a significant challenge.
In that regard, it is noteworthy that the Section 1022 analysis portion of the interim final rule states that “[t]his rule does not impose any costs to consumers or covered persons or have any direct impact on consumers’ access to consumer financial products or services.” To the contrary, this rule is likely to impose implementation costs on servicers and will reduce consumers’ access to loan modification options. That is certainly relevant when thinking about the cost-benefit analysis associated with this rulemaking.
It is also notable that this interim final rule does not rescind the anti-evasion exception for COVID-19-related deferral and partial claim loss mitigation options in 1024.41(c)(2)(v). That exception was separately enacted as a part of the CFPB’s June 30, 2020, interim final rule, and so we will be watching to see whether the CFPB takes separate action to rescind that provision in the future since it also deals with COVID-19.
In sum, while the CFPB arguably suggests that this interim final rule is uncontroversial and will have minimal impact that is very likely not the case. Servicers should immediately consider the impact of this interim final rule on their internal processes and consider whether to submit comments to the CFPB and/or begin making necessary changes to their business.
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Privacy Tip #443 – Fake AI Tools Used to Install Noodlophile
Threat actors are leveraging the publicity around AI tools to trick users into downloading the malware known as Noodlophile through social media sites.
Researchers from Morphisec have observed threat actors, believed to originate from Vietnam, posting on Facebook groups and other social media sites touting free AI tools. Users are tricked into believing that the AI tools are free, and unwittingly download Noodlophile Stealer, “a new malware that steals browser credentials, crypto wallets, and may install remote access trojans like XWorm.” Morphisec observed “fake AI tool posts with over 62,000 views per post.”
According to Morphisec, Noodlophile is a previously undocumented malware that criminals sell as malware-as-a-service, often bundled with other tools designed to steal credentials.
Beware of deals that are too good to be true, and exercise caution when downloading any content from social media.
Foley Automotive Update- 15 May 2025
Trump Administration and Tariff Policies
The U.S. lowered the base level of duties on most Chinese goods to 30% from 145%, and China cut its levies on many U.S. products to 10% from 125% as part of a 90-day tariff pause scheduled between the nations that is to take effect this week.
A U.S.-UK trade deal announced May 8 would allow imports of 100,000 vehicles annually by UK car manufacturers under a 10% “reciprocal tariff,” with additional vehicles subject to 25% levies. The American Automotive Policy Council expressed disappointment that in certain instances, “it will now be cheaper to import a UK vehicle with very little U.S. content than a USMCA compliant vehicle from Mexico or Canada that is half American parts.”
A U.S. Customs and Border Protection guidance document for the auto parts tariffs that took effect May 3 indicated that US-Mexico-Canada Agreement (USMCA)-compliant parts have a “0 percent additional ad valorem rate of duty.” The duration of this exemption is unknown.
A pair of executive orders announced on April 29 will ease some of the impact of certain automotive import tariffs. One order will establish a complex system of temporary and partial reimbursements for certain tariffed auto parts, and another order indicates tariffed vehicles and auto parts will not “stack” on other levies, such as the 25% duty on steel and aluminum. One large supplier quoted in Automotive News indicated the orders were a positive step, while an unnamed major supplier stated the tariff revisions were “not cause for celebration” as the industry will still encounter significantly higher operational costs. An analyst from Wedbush described the revised tariffs as a “gut punch” for the auto industry.
May 16, 2025 is the deadline for submitting public comments regarding the Trump administration’s Section 232 investigation into imports of processed critical minerals and their derivative products.
Automotive Key Developments
Automotive News provided updates on suppliers’ concerns regarding the potential for lower production volumes this year as a result of automotive import tariffs, as well as the challenges of assessing USMCA-compliant content in vehicles.
GM estimated the Trump administration’s tariffs could increase its costs by up to $5 billion this year, and potentially reduce 2025 net profit by up to 25% year-over-year. The automaker expects to offset its projected tariff exposure by roughly 30% through spending reductions and shifting more supplies and manufacturing to the U.S. In 2024, GM imported more vehicles into the U.S. than any other automaker.
Japanese automakers could collectively experience a $19 billion impact from U.S. import tariffs, according to analysis from Bloomberg.
Toyota and Honda projected annual net profit declines of 35% and 70%, respectively, for fiscal year ending March 2026, if U.S. automotive import tariffs are maintained. Toyota estimated its tariff impact reached $1.3 billion within just two months, while Honda expects an annual tariff impact of up to $3 billion.
Ford projected a $2.5 billion impact from tariffs in 2025, but noted it plans to offset up to $1 billion of the costs.
Revised analysis from the Anderson Economic Group estimates the Trump administration’s current automotive tariff policies will raise vehicle costs from $2,000 to $15,000.
U.S. new light-vehicle inventory is down by an estimated 24% year-over-year, representing a 61 days’ supply, following robust sales in April.
Kelley Blue Book estimated the U.S. new light-vehicle average transaction price (ATP) rose 2.5% in April 2025 from March. New-vehicle sales incentives fell to 6.7% of ATP last month, down from 7% in March and compared to a pre-pandemic norm of roughly 10%.
The U.S. House Ways and Means Committee included a measure to eliminate consumer tax credits of up to $7,500 for a new EV and $4,000 for a used EV at the end of 2025 in the “Big, Beautiful” tax package introduced on May 12. The initial proposal would extend new EV tax credits until the end of 2026 for automakers that sold less than 200,000 EVs in the U.S. between 2010 and 2025.
California and 16 other states filed a lawsuit over the Trump administration’s suspension of the $5 billion National Electric Vehicle Infrastructure (NEVI) program created by the 2021 Bipartisan Infrastructure Law.
The U.S. House on May 1 passed the third of three Congressional Review Act resolutions to repeal Clean Air Act waivers issued by the Environmental Protection Agency for California’s vehicle emissions programs. A Senate vote related to the proposals has not yet been scheduled.
Federal Reserve Chair Jerome Powell cautioned the U.S. “may be entering a period of more frequent, and potentially more persistent, supply shocks” due to economic and trade policy uncertainty.
OEMs/Suppliers
First-quarter 2025 profitability dropped by 2.3% for Hyundai, 6.6% for GM, nearly 40% for Volkswagen, and over 60% for Ford.
Automakers that include Ford, Volvo, Stellantis and Mercedes recently suspended 2025 financial guidance due to tariff-related uncertainty.
Magna estimated its annual direct tariff costs will reach $250 million for 2025.
Nissan reported a net loss equivalent to $4.55 billion for its fiscal year ended March 31, 2025 due in part to restructuring charges. The automaker intends to cut 15% of its global workforce, and consolidate its global production base to 10 assembly plants from 17.
Ford plans to raise prices by as much as $2,000 on certain Mexico-produced models in response to U.S. import tariffs.
GM plans to eliminate a shift at its Oshawa Assembly plant in Ontario in response to “forecasted demand and the evolving trade environment.”
Aptiv plans to establish two new plants in China in the second half of this year that will produce high-voltage connectors and active safety products.
Stellantis plans to launch a lower-priced version of its U.S.-made Ram pickup truck later this year to boost sales and mitigate tariff exposure. The automaker previously shifted pickup truck production for certain models from Michigan to Mexico.
Market Trends and Regulatory
AlixPartners predicts Chinese brands will account for 30% of the global auto market by 2030, compared with 21% in 2024.
BYD has a goal to achieve 50% of its sales outside of China by 2030.
Congress voted to repeal an Environmental Protection Agency rule on National Emission Standards for Hazardous Air Pollutants related to rubber tire manufacturing.
According to a Gartner survey of 126 supply chain executives, 47% of respondents were renegotiating contracts with suppliers to mitigate the impact of tariffs.
Autonomous Technologies and Vehicle Software
Automotive News provided an overview of recent developments in autonomous driving.
Ford plans to cut 350 connected-vehicle software jobs in the U.S. and Canada, and the reductions account for roughly 5% of the total team, according to a report in The Detroit News.
Waymo will partner with Toyota to develop robotaxi technology for personally-owned vehicles. Waymo’s self-driving partnerships include Hyundai and China’s Geely.
Electric Vehicles and Low-Emissions Technology
U.S. EV sales declined by roughly 5% in April, amid a 10% YOY increase in overall new-vehicle sales. Global EV sales in April were up by an estimated 29% YOY, led by a 35% increase in China.
Honda will postpone a planned $11 billion investment in new EV factories in Ontario, Canada due to slowing demand in North America.
GM’s Orion Assembly Plant in Michigan may not operate as a fully electric vehicle factory as originally planned, according to unnamed sources in Crain’s Detroit.
The American and Chinese car markets are likely to diverge further due to differences in supply chain costs and consumer preferences, as well as the nations’ ongoing trade conflicts.
GM suspended a project with Piston Automotive to establish a $55 million hydrogen fuel cell plant in Detroit.
Stellantis delayed production of its first battery-electric Ram pickup truck until 2027.
Hyundai plans to launch a hydrogen production and dispensing facility for heavy-duty trucks in Georgia.
Toronto-based battery recycler Li-cycle is pursuing a sale of its business or assets.
Canadian electric truck and bus maker Lion Electric faces a “very high” likelihood of liquidation after the Quebec government decided not to support a public bailout.
Increased Clarity for White-Collar Clients: The Department of Justice Unveils its Revised Corporate Self-Disclosure Policy
What should U.S. businesses take from the Department of Justice’s (“DOJ”) revisions to its Corporate Enforcement and Voluntary Self-Disclosure Policy (“CEP”)? While DOJ has long promoted self-disclosure of wrongdoing as a key way to obtain leniency, DOJ’s revised policy states clearly and unequivocally that self-disclosure will lead to non-prosecution in certain circumstances.
On May 12, 2025, the Criminal Division released a memorandum detailing the new administration’s goals for prosecuting corporate and white-collar crimes. The memorandum sets forth the government’s view that “overbroad and unchecked corporate and white-collar enforcement burdens U.S. businesses and harms U.S. interests,” and directs federal prosecutors to scrutinize all their investigations to avoid overreach that deters innovation by U.S. businesses. Matthew R. Galeotti, Chief of the DOJ Criminal Division, recently underscored these sentiments on May 12, 2025, at SIFMA’s Anti-Money Laundering and Financial Crimes Conference, stating that under the revised CEP, companies can avoid “burdensome, years-long investigations that inevitably end in a resolution process in which the company feels it must accept the fate the Department has ultimately decided.”
Companies that self-disclose possible misconduct and fully cooperate with the government will not be required to enter into a criminal resolution with the DOJ. Galeotti said that under CEP’s “easy-to-follow” flow chart, companies that (1) voluntarily self-disclose to the Criminal Division (2) fully cooperate, (3) timely and appropriately remediate, and (4) have no aggravating circumstances “will receive a declination, not just a presumption of a declination.” The revised CEP allows that even a company that self-discloses in good faith after the government becomes aware of the misconduct may still be eligible to receive a non-prosecution agreement with a term of fewer than three years, 75% reduction of the criminal fine, and no corporate monitorship.
To be sure, this does not mean that U.S. companies should use these policy changes as an opportunity to take unnecessary risks without fear of prosecution. Indeed, DOJ’s main priority is to prosecute individuals, including executives, officers, or employees of companies, and will “investigate these individual wrongdoers relentlessly to hold them accountable.” Although it remains to be seen how the government will implement its new guidelines, the revised enforcement policy is helpful to U.S. businesses, white-collar clients, and their advisors, who have long hoped for heightened transparency and clearer guidelines for potential outcomes under the DOJ’s corporate self-disclosure program.
Where There’s Fire, There’s Smoke … and Smoke Damage Disputes
In January 2025, dozens of wildfires ripped through Los Angeles in a way no one could have imagined. We all spent the week in front of televisions waiting to see which direction the winds would take the fires. Those not forced to officially evacuate had bags ready to go in case a new fire flared closer to home. And while the City braced for decades of rebuilding efforts, the insurance coverage attorneys waited for the inevitable coverage disputes to begin.
The initial response to the wildfires was not likely to generate disputes between the insurers and insureds. According to data from the California Department of Insurance (DOI), as of January 30, 2025, out of 31,210 claims related to the fires, 14,417 were immediately partially paid to the tune of $4.2 billion. Within a week, by February 5, 2025, the number of claims increased to 33,717 with 19,854 partially paid in the amount of $6.9 billion.1
During this time, insurers were following their modified obligations under the California Regulations given the DOI’s emergency declaration of January 9, 2025, which imposed certain additional obligations on the insurers for a total loss:
The insurer must offer an immediate payment of at least 30% of the contents policy limit up to $250,000 (Cal. Ins. Code § 10103.7).
An insured does not need to use the insurer’s inventory form and does not need to itemize the contents (Cal. Ins. Code § 2061(a)(2)(3)).
At an insured’s request, the insurer must advance at least four months of additional living expenses (Cal. Ins. Code § 2061(a)(1)), and the insured is entitled to at least 36 months of ALE coverage (Cal. Ins. Code § 2060(b)(1)).
Neither an insured nor an insurer can demand appraisal without the other’s consent (Cal. Ins. Code § 2071).
An insurer cannot cancel or refuse to renew a residential property policy in a zip code adjacent to a fire perimeter based solely on the wildfire location (Cal. Ins. Code § 675.1(b)(1)).
The insurer must provide a 60-day grace period for premium payments (Cal. Ins. Code § 2062).
While the total-loss claims were not going to spark much controversy, it was only a matter of time before the smoke damage claims ignited and the insurance world incurred an onslaught of coverage disputes.
Legal Decisions Regarding Smoke Damage
The question of whether smoke damage constitutes “property damage” is an ongoing issue in California. The matter was litigated heavily during the COVID-19 pandemic where businesses frequently claimed “property damage” from the virus. Courts in California generally found that COVID-19, without more, did not constitute “property damage.” Another Planet Entertainment, LLC v. Vigilant Ins. Co., 15 Cal. 5th 1106, 1117 (2024). In the weeks following the start of the 2025 wildfires, two decisions came down in California addressing coverage for smoke damage arising out of earlier fire events.
On January 10, 2025, the U.S. District Court for the Northern District of California issued a decision in Bottega LLC v. National Surety Corp., 2025 U.S. Dist. LEXIS 5666 (N.D. Cal. Jan. 10, 2025). In that case, the owner of a restaurant and a cafe sought business income loss coverage stemming from the 2017 North Bay wildfires, which had prompted a state of emergency. Id. at *2-3. While the fires did not reach the insured’s businesses, the businesses could not operate because of the related smoke and ash, requiring the employees to clean and make temporary repairs. Id. at *4. The court recognized that to trigger coverage, “there must be some physicality to the loss … of property – e.g., a physical alteration, physical contamination, or physical destruction.” Id. at *10, quoting Inns-by-the-Sea v. California Mut. Ins. Co., 71 Cal. App. 5th 688, 707 (2021) (emphasis in original). The court found there to be “direct physical loss and damage to” the businesses as “[c]ontamination that seriously impairs or destroys its function may qualify as a direct physical loss.” Bottega, 2025 U.S. Dist. LEXIS 5666 at *10-11. The court stated that, “the COVID-19 cases [the insurer] cites are unpersuasive because courts distinguished COVID-19 – a virus that can be disinfected – from noxious substances and fumes that physically alter property.” Id. at *11-12. Accordingly, the court reasoned, “[w]hereas a virus is more like dust and debris that can be removed through cleaning, [citation] smoke is more like asbestos and gases that physically alter property.” Id. at *12.
A competing decision was issued on February 7, 2025, by the California Court of Appeal in Gharibian v. Wawanesa General Ins. Co., 108 Cal. App. 5th 730 (2025). There, the insureds’ residence purportedly suffered smoke damage after the 2019 Saddle Ridge wildfire. Id. at 733. The insurer paid for the insureds to have the home professionally cleaned, but the insureds opted to clean the home themselves and filed a bad faith suit. Id. at 734-735. The Court of Appeal held that, “[u]nder California law, direct physical loss or damage to property requires a distinct, demonstrable, physical alteration to property. The physical alteration need not be visible to the naked eye, nor must it be structural, but it must result in some injury to or impairment of the property as property.” Id. at 738, quoting Another Planet Entertainment, LLC v. Vigilant Ins. Co., 15 Cal. 5th 1106, 1117 (2024). Relying on COVID-19 cases, the Gharibian court reasoned, “[h]ere there is no evidence of any ‘direct physical loss to [plaintiffs’] property.’ The wildfire debris did not ‘alter the property itself in a lasting and persistent manner.’ … Rather, all evidence indicates that the debris was ‘easily cleaned or removed from the property.’ … Such debris does not constitute ‘direct physical loss to property.’” Gharibian, 108 Cal. App. 5th at 738 (citations omitted).
These decisions leave California insurers unclear as to whether smoke damage constitutes “property damage” sufficient to trigger coverage under homeowners and commercial policies. In finding coverage, the Bottega court said the insured made some undefined “partial/temporary repairs” to the property after the nearby wildfire, which may have factored into the ultimate decision that “property damage” existed. Bottega, 2025 U.S. Dist. LEXIS 5666 at *4. In declining coverage, the Gharibian court dealt with a situation where the ash could be wiped from surfaces with no permeating smell of smoke and no referenced repairs. Gharibian, 108 Cal. App. 5th at 733. Given this conflicting precedent in California, what are insurers expected to do?
DOI Guidance
On March 7, 2025, the DOI provided guidance through Bulletin 2025-7,2 which sets forth the DOI’s “expectations with regard to how insurance companies process and pay smoke damage claims as a result of wildfires, including the recent Southern California wildfires.” The DOI’s Bulletin explicitly states that the “recent cases do not support the position that smoke damage is never covered as a matter of law.” (emphasis in original). The Bulletin reiterates the need for a full investigation into each smoke damage claim and states, “[i]t is not reasonable to deny a smoke damage claim without conducting an appropriate investigation, nor is it reasonable for the insurer to require the insured to incur substantial costs to investigate their own claim.” The DOI advised it would monitor insurers’ responses to such claims.
Conclusion
Ultimately, and consistent with the DOI Bulletin, the coverage evaluation will likely turn on a case-by-case basis, looking at the scope of damage to the insured and the physical alteration of the property. Absent the lack of a physical loss, smoke damage is usually not excluded by other provisions in the policy.3
Our best advice? Insurers are encouraged to continue to actively investigate these claims and be diligent throughout the claims handling process. To that end, insurers should hire experts where needed and push for information from the insureds as necessary to complete the claims investigation. Insurers also must be mindful of the growing anti-insurer sentiment in Los Angeles (regardless of the billions already paid on claims). We anticipate the litigation following these latest wildfires will provide new insight on whether smoke damage constitutes “property damage” to trigger coverage.
1 https://www.insurance.ca.gov/01-consumers/180-climate-change/Wildfire-Claims-Tracker.cfm.
2 https://www.insurance.ca.gov/0250-insurers/0300-insurers/0200-bulletins/bulletin-notices-commiss-opinion/upload/Bulletin-2025-7-Insurance-Coverage-for-Smoke-Damage-and-Guidance-for-Proper-Handling-of-Smoke-Damage-Claims-for-Properties-Located-in-or-near-California-Wildfire-Areas.pdf.
3 Other jurisdictions have held that smoke damage is not precluded by pollution exclusions. Kent Farms, Inc. v. Zurich Ins. Co., 140 Wn. 2d 396, 400 (2000); Allstate Ins. Co. v. Barron, 269 Conn. 394 (2004).
Virginia Will Add to Patchwork of Laws Governing Social Media and Children (For Now?)
Virginia’s governor recently signed into law a bill that amends the Virginia Consumer Data Protection Act. As revised, the law will include specific provisions impacting children’s use of social media. Unless contested, the changes will take effect January 1, 2026. Courts have struck down similar laws in other states (see our posts about those in Arkansas, California, and Utah) and thus opposition seems likely here as well. Of note, the social media laws that have been struck down in other states attempted to require parental consent before minors could use social media platforms. This law is different, as it allows account creation without parental consent. Instead, it places restrictions on account use for both minors and social media platforms.
As amended, the Virginia law will require social media companies to use “commercially reasonable” means to determine if a user is under 16. An example given in the law is a neutral age gate. The age verification is similar to those proposed other states’ social media laws. (And it was that requirement that was central to the court’s decision when striking down Arkansas’ law.) Use of social media by under-16s will default to one hour per day, per app. Parents can increase or decrease these time limits. That said, the bill expressly states that there is no obligation for social media companies to give those parents who give their consent “additional or special access” or control over their children’s accounts or data.
The law will limit use of age verification information to only that purpose. An exception is if the social media company is using the information to provide “age-appropriate experiences” – thought the bill does not explain what such experiences entail. Finally of note, even though these provisions may increase costs on companies, the bill specifically prohibits increasing costs or decreasing services for minor accounts.
Putting it Into Practice: We will be monitoring this law to see if the Virginia legislature has success in regulating children’s use of social media. This modification reflects not only a focus on children’s use of social media, but also continued changes to US State “comprehensive” privacy laws.
James O’Reilly contributed to this article