Import-Tariffs: Acts of God or just another Thursday?
Many of us are quietly watching and waiting to see how newly imposed tariffs will affect the U.S. and global economy in the coming weeks, months, and potentially – years.[i] Anticipating these changes and protecting your transactions is going to be crucial, but what about deals that have already been negotiated and signed? Which party will bear the greater risks and burdens of tariff-related cost increases? There are several theories that may provide relief.
A widely used contract provision that will bear considerable scrutiny is the ‘Force Majeure Clause,’ which allows a party to avoid liability if it cannot fulfill its obligations due to circumstances beyond their control or unforeseen events.[ii] The motivator behind this provision is to protect parties against defined disasters, calamities, and acts (and wraths) of God.[iii] Numerous courts have considered such clauses, and many have declined to invoke the force majeure clause.
Kyocera Corp. v. Hemlock Semiconductor, LLC:
In 2015, the Michigan First District Court of Appeals considered this question in Kyocera Corp. v. Hemlock Semiconductor, LLC.[iv] This case arose in the midst of upheaval within the solar industry caused by tensions between the United States and China. Chinese companies began engaging in the process known as “large-scale dumping,” in which a foreign producer, perhaps with state support, sells a product at a price that is lower than its cost of production to intentionally manipulate an industry and capture market share. Global solar prices began to decline (including the price of polysilicon, a critical component used in solar panels), causing numerous manufacturers to go out of business. In response, the United States imposed anti-subsidy and anti-dumping import tariffs.[v]
Kyocera, a Japanese solar panel manufacturer, had previously entered into a ten year, take-or-pay supply contract with Hemlock Semiconductor, a Michigan based polysilicon manufacturer, to purchase its polysilicon. The very nature of a take-or-pay contract allocates the risk of a rise in prices to the seller (Hemlock) and a fall in prices to the buyer (Kyocera). Kyocera argued that purchasing polysilicon at this higher price would cause its “solar business to cease to exist.” Kyocera tried and failed to negotiate a satisfactory price change with Hemlock and ultimately provided Hemlock with notice that it was excused from performance under the contract’s force majeure clause.[vi]
The Michigan First District Court of Appeals was unsympathetic, finding that economic hardship and unprofitability alone, including increased costs due to tariffs, are insufficient to invoke force majeure unless explicitly covered by the clause. The risk of falling prices fell squarely on Kyocera under its contract, and Kyocera “opted” not to protect itself.[vii] The court refused to “manufacture a contractual limitation that it may in hindsight desire by broadly interpreting the force majeure clause to say something that it does not.”[viii]
Further, the court addressed the issue of foreseeability. The court rejected Kyocera’s argument that they did not foresee the illegal actions of the Chinese government, simply stating that “markets are volatile” and that the fact that “prices may rise and fall was known to both parties and such risk was precisely allocated by the take-or-pay nature of [a]greement.”[ix]
Kyocera is one of many cases illustrating that unless very carefully drafted to say otherwise, economic hardship and decreasing profits may not be enough for a court to intervene and apply the protections of a force majeure clause. Under these cases, the most that an aggrieved party may receive is more time to comply with its contractual obligations.
So, what type of language would a court consider explicit enough to apply the force majeure clause against tariffs? We will consider this issue in an upcoming post!
[i] See Robert McClelland et al., Tariffs, Trade, China, and the States, Tax Pol’y Ctr, Urb. Inst. & Brookings Inst. (Oct. 17, 2024), https://taxpolicycenter.org/briefs/tariffs-trade-china-and-states.
[ii] See Force Majeure, Legal Info. Inst., Cornell L. Sch., (last visited Mar. 26, 2023) https://www.law.cornell.edu/wex/force_majeure#:~:text=Force%20majeure%20is%20a%20provision,or%20both%20parties%20from%20performing.
[iii] See Mark Trowbridge, Acts of God and Other Force Majeure Events, Supply Chain Mgmt. Rev. (May 2, 2022), https://www.scmr.com/article/acts_of_god_and_other_force_majeure_events.
[iv] See Kyocera Corp. v. Hemlock Semiconductor, LLC, 886 N.W.2d 445 (Mich. Ct. App. 2015).
[v] See id. at 449.
[vi] See id. at 447, 450.
[vii] See id. at 453.
[viii] See Kyocera Corp, 886 N.W.2d at 453.
[ix] See id. at 452-53.
FTC Orders Fintech Company to Pay $17 Million for Allegedly Deceptive Subscription Practices
On March 27, the FTC announced that a fintech company offering cash advances through a mobile app has agreed to pay $17 million to resolve allegations that it violated the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA). The FTC alleged that the company misrepresented the availability and cost of its services and failed to obtain consumers’ express informed consent before charging recurring subscription fees.
According to the FTC’s complaint, the company marketed its services as free and interest-free, but required users to enroll in a paid subscription plan, often without their knowledge. Consumers allegedly encountered barriers to cancellation, including disabled links and unclear steps, which resulted in unauthorized recurring charges.
Specifically, the lawsuit outlines several alleged deceptive practices, including:
Misleading “no-fee” marketing. The company advertised cash advances as fee-free, but consumers were required to enroll in a paid subscription to access the service.
Delayed access to funds. Although the company promoted instant fund transfers, consumers allegedly had to pay an additional expedited delivery fee to receive funds quickly.
Recurring charges without consent. The company allegedly failed to obtain consumers’ express informed consent before initiating subscription charges.
Insufficient disclosure of trial terms. Consumers were automatically enrolled in a paid subscription following a free trial, without clear and conspicuous disclosures.
Obstructive cancellation process. Some users were allegedly unable to cancel within the app, and others encountered unnecessary and cumbersome hurdles when attempting to prevent further charges.
Retention of charges after cancellation. The FTC alleged that the company kept charging users even after they attempted to cancel their subscriptions.
Under the stipulated order, the company must pay $10 million in consumer redress and a $7 million civil penalty. The company is also expressly barred from misrepresenting product features, charging consumers without affirmative express consent, and using designs that impede cancellation.
Putting It Into Practice: While the CFPB and state regulators continue to recalibrate their supervisory priorities, the FTC has remained consistent in its focus on unfair or deceptive acts and practices. This enforcement underscores the FTC’s longstanding commitment to stamping out deceptive marketing practices (previously discussed here, here, and here). While the CFPB has taken a step back, the FTC has continued its aggressive enforcement posture. Companies should review this enforcement action with an eye towards their own marketing practices.
Wyoming’s New Non-Compete Law Starts in July: Employers Need to Look at Their Agreements Now
Takeaways
Effective 07.01.25, Wyoming law significantly restricts how and when employers can use covenants not to compete and renders most new non-compete agreements unenforceable.
The law allows exceptions for the sale or purchase of a business, trade secret protection, the recovery of training and relocation expenses, and executives and key professional staff.
The law voids non-compete provisions for physicians, giving them full rights to communicate their new practice location and information to patients with rare disorders without risk of litigation.
Article
On Mar. 19, 2025, Wyoming Governor Mark Gordon signed Senate Bill 107 into law, fundamentally reshaping the landscape for non-compete agreements in a major legislative move that will impact employers across Wyoming. Effective July 1, 2025, the new law significantly restricts how and when employers can use covenants not to compete and makes most traditional non-compete agreements executed on or after the effective date unenforceable.
What Has Changed?
Previously, Wyoming allowed employers considerable flexibility in drafting non-compete agreements. Under the new statute, non-compete agreements that restrict an employee’s ability to earn a living, either in skilled or unskilled labor, are generally void.
Important Exceptions
While the general rule is clear — non-competes are mostly unenforceable — there are important exceptions employers must understand:
1. Sale or Purchase of a Business: Non-competes remain valid when they accompany the sale or transfer of a business or its assets. This preserves protections for buyers and sellers in significant business transactions.
2. Trade Secrets Protection: Wyoming businesses can still protect legitimate trade secrets through narrowly tailored non-compete agreements. Importantly, these agreements must strictly adhere to statute. Wyo. Stat. § 6‑3‑501(a)(xi) defines “trade secret” as “the whole or a portion or phase of a formula, pattern, device, combination of devices or compilation of information which is for use, or is used in the operation of a business and which provides the business an advantage or an opportunity to obtain an advantage over those who do not know or use it.” Employers should carefully draft language reflecting this precise statutory definition.
3. Recovery of Training and Relocation Expenses: Employers can recover expenses incurred from training, education, or relocating employees, provided clear terms are outlined:
Up to 100% if employment lasted less than two years
Up to 66% if employment was between two and three years
Up to 33% if employment was between three and four years
4. Executives and Key Professional Staff: Non-compete agreements can remain valid for “[e]xecutive and management personnel and officers and employees who constitute professional staff to executive and management personnel.” This phrase is not defined in the statute. Employers should carefully consider which roles legitimately fit within this category and craft agreements accordingly.
Special Rules for Physicians
Wyoming’s legislature gave special attention to non-compete agreements involving physicians. Any provision that restricts a physician’s practice after their employment termination is now void. Although all other provisions of their agreements remain enforceable, the new law gives physicians full rights to communicate their new practice location and information to patients with rare disorders (as defined by the National Organization for Rare Disorders) without risk of litigation. This specific patient-focused exception reflects public policy prioritizing patient care continuity over contractual restrictions.
Applicability of the New Law
The statute applies only prospectively and only covers contracts executed on or after July 1, 2025. Existing non-compete agreements, and all those signed before July 1, 2025, will remain unaffected and enforceable according to their original terms.
Recommended Employer Action
Given this significant legislative shift, employers must carefully review and update employment agreements to comply with Wyoming’s new legal landscape. It is critical for businesses to:
Review and Revise: Carefully audit your existing employment agreement templates and policies to ensure compliance with the new law before July 2025.
Identify Exceptions: Evaluate which roles within your company may legitimately fall under permitted exceptions and update specific contract language accordingly.
Collaborate with Employment Counsel: Seek strategic advice from experienced employment counsel to mitigate risks, ensure full compliance, and protect your company’s interests.
OFAC Final Rule Extends Recordkeeping Requirements to 10 Years
Highlights
U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published a new final rule to extend recordkeeping requirements to 10 years, effective March 21, 2025
The new recordkeeping requirement is consistent with last year’s statute of limitations extension for most OFAC violations from five years to 10 years
OFAC affirmed that a conflict such as EU regulations mandating a shorter recordkeeping period would not excuse compliance
On April 24, 2024, former President Joe Biden signed into law the 21st Century Peace through Strength Act. Section 3111 of the Act extends the statute of limitations for civil and criminal violations of the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) from five years to 10 years. These two statutes govern most sanctions programs enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).
Pursuant to this executive order, OFAC issued a final rule on March 21, 2025, extending recordkeeping requirements for covered parties from five to 10 years. This final rule, which was effectively immediately, followed an interim final rule published by OFAC in September 2024 soliciting public comment.
The newly extended recordkeeping requirements apply to all companies and persons engaging in transactions and holding blocked property subject to OFAC oversight. Such persons are required to keep a full and accurate record of transactions and blocked property and to ensure that these records are available for examination for at least 10 years.
OFAC also made clear that a conflict in law would not excuse compliance with these requirements. The final rule specifically addresses a scenario in which the 10-year recordkeeping period may conflict with the European Union’s regulations on anti-money laundering and counterterrorism financing that mandate deletion of records after five years. In such a scenario, OFAC points to its prior guidance that said although it would consider a conflict of law on a case-by-case basis when determining the appropriate administrative action or penalty, full compliance with OFAC requirements is still expected.
Takeaways
This rule is the most recent example of the U.S. government’s increasing use of sanctions in recent years in support of its foreign policy and national security objectives. Companies may experience higher costs related to compliance with this rule, especially as standard business record retention periods are usually shorter. Additionally, companies should consider updating training, compliance programs, and due diligence checklists to reflect the extended recordkeeping period.
CFTC Accepting Whistleblower Award Claims for Financial Grooming Scam
On March 26, the CFTC posted a Notice of Covered Action for a $2.3 million enforcement action taken against a purported digital asset platform for an alleged online romance scam, signaling that the Commissions is accepting whistleblower award claims for the case.
Key Takeaways:
A court judgement found Debiex liable for misappropriating over $2 million in customers’ funds in an online romance fraud scheme
Online romance fraud schemes, including “pig butchering,” are a focus of the CFTC
Qualified CFTC whistleblowers are eligible to receive awards of 10-30% of the funds collected in connection with their disclosure
On March 26, the Commodity Futures Trading Commission (CFTC) posted a Notice of Covered Action (NCA) for a $2.3 million enforcement action taken against a purported digital asset platform for an alleged online romance scam. The NCA signals that the Commission is now accepting whistleblower award claims for the case.
Debiex Pig Butchering Case
The CFTC announced on March 21 that the U.S. District Court for the District of Arizona issued a default judgment against Debiex in response to the CFTC’s enforcement action. The judgement finds Debiex liable for misappropriating over $2 million in customers’ funds.
According to the CFTC, “Debiex’s unidentified officers and/or managers cultivated friendly or romantic relationships with potential customers by communicating falsehoods to gain trust, and then solicited them to open and fund trading accounts with Debiex.”
“Unbeknownst to the customers, and as alleged, the Debiex websites merely mimicked the features of a legitimate live trading platform and the ‘trading accounts’ depicted on the websites were a complete ruse,” the CFTC further claims. “No actual digital asset trading took place on the customers’ behalf.”
The type of online romance scam carried out by Debiex is known as “Sha Zhu Pan” or “Pig Butchering.”
“As the graphic name suggests, these schemes liken the practice of soliciting consumers to participate in a fraudulent investment opportunity to ‘fattening up’ an unsuspecting pig prior to slaughtering it,” CFTC Commissioner Kristin N. Johnson explained in a January statement announcing the charges against Debiex.
The court order bans Debiex from trading in any CFTC regulated markets or registering with the CFTC and requires Debiex to pay a $221,466 civil monetary penalty and over $2.2 million in restitution.
“This judgment demonstrates the CFTC’s ongoing commitment to protecting U.S. citizens from online scams,” said Director of Enforcement Brian Young.
Notice of Covered Action and CFTC Whistleblower Program
The Notice of Covered Action posted by the CFTC for this enforcement action signals that individuals have 90 days to file a whistleblower award claim for the case.
Under the CFTC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information which leads to a successful enforcement action, are eligible to receive monetary awards of 10-30% of the funds collected in the action.
In 2023, the CFTC Whistleblower Office published a whistleblower alert on the ability to anonymously blow the whistle on romance investment frauds and qualify for awards and protections.
“Under the Whistleblower Program of the Commodity Futures Trading Commission (CFTC), individuals may become eligible for both financial awards and certain protections by assisting the CFTC with identifying perpetrators and facilitators of romance investment frauds under the CFTC’s jurisdiction, such as solicitations related to digital assets, precious metals, and/or over-the-counter foreign currency exchange (forex) trading,” the alert reads.
Since issuing its first award in 2014, the CFTC Whistleblower Program has awarded nearly $390 million to qualified whistleblowers. In the 2023 Fiscal Year, the CFTC received a record 1,744 whistleblower tips and issued 12 award orders, the most it has granted in a single year.
New U.S. Import Tariffs on Certain Automobiles and Parts
On March 26, 2025, President Trump signed an executive order directing new 25% tariffs on certain automobiles and automobile parts imported into the U.S. from all countries on or after April 3, 2025. This executive order comes as businesses await the outcome of the broader reciprocal trade plan also expected to be released on April 2.
The executive order builds on an investigation undertaken during President Trump’s first term focused on U.S. imports of passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans and cargo vans), light trucks (collectively, automobiles) and certain automobile parts (engines and engine parts, transmissions and powertrain parts and electrical components — collectively, automobile parts) and their effect on the national security of the U.S. under Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. 1862) (Section 232). When the U.S. Department of Commerce (DOC) issued findings and recommendations to the President in February 2019, the President did not take any tariff action in response to the DOC’s determination that those imports threatened to impair the national security of the United States. Now, however, President Trump has determined that changes in import trends since the initial investigation and 2019 report have exacerbated risks to U.S. manufacturing, noting that “[t]oday, only about half of the vehicles sold in the United States are manufactured domestically[.]”
These new 25% tariffs, building on the prior investigation, will largely be effective for certain automobiles (to be identified in a subsequent notice in the Federal Register) on or after 12:01 a.m. Eastern Daylight Time on April 3, 2025. The effective date for parts could be deferred; the executive order specifies an effective date to be published in the Federal Register “but no later than May 3, 2025.
Automobiles and parts eligible for the U.S.-Mexico-Canada free trade agreement (USMCA) preferential treatment will be treated differently than all other imports. Where automobiles qualify for preferential tariff treatment under USMCA, importers of those automobiles may be permitted to submit documentation identifying or substantiating the amount of U.S. content in each model imported into the United States and pay duties only on the remainder. Where automobile parts qualify for preferential treatment under USMCA, those parts will be exempted from duties until such time that the DOC, in consultation with Customs, establishes a process to apply the tariff exclusively to the value of the non-U.S. content of such automobile parts and publishes notice in the Federal Register. “U.S. content” refers to the value of the automobile attributable to parts wholly obtained, produced entirely or substantially transformed in the United States.
The duties imposed by this order will be supplemental to duties on imports already imposed pursuant to other legal tools, including IEEPA (e.g. Canada, China and Mexico), Section 232 of the Trade Expansion of 1962 (e.g. steel and aluminum), Section 301 of the Trade Act of 1974 (e.g. China) and any other authority.
These duties will be imposed concurrent with other action taken under the President’s Reciprocal Trade Plan, which is expected to announce new tariffs on April 2, 2025, and with any new tariffs imposed under the President’s March 25, 2025 executive order granting the State Department discretion to impose 25% import duties on U.S. imports from countries that themselves import Venezuelan oil on or after April 2, 2025.
FERC’s Co-Location Conundrum: Balancing Grid Reliability with Data Center Development as PJM’s Tariff Faces Scrutiny
Key Points
FERC’s Order Signals Transformative Change While Navigating Jurisdictional Limits: While FERC recognizes the urgent need to address co-location arrangements (particularly given the AI/data center boom), the intricate interplay of federal and state authority means any solution must carefully navigate jurisdictional boundaries. The Order reflects FERC’s attempt to maximize its impact within the framework of the Federal Power Act’s cooperative federalism.
Cost Allocation and Reliability Concerns Drive Reform: FERC’s primary concerns center on preventing cost-shifting to other ratepayers and ensuring grid reliability. The current Tariff’s lack of clear provisions for ancillary services, different co-location configurations, and sudden load shifts poses risks that FERC seeks to address through this proceeding.
Industry Response Suggests High Stakes for Multiple Stakeholders: The approximately 100 intervention motions filed indicate that stakeholders view this proceeding as potentially industry-reshaping. The outcome will likely influence how data center developers approach power supply strategies and could affect the viability of co-location as a solution to grid connection challenges.
Last year, the Federal Energy Regulatory Commission (“FERC”) convened a technical conference to discuss issues related to large loads being co-located with generating facilities (Docket No. AD24-11-000), which we summarized in the following client alert. In a related development late last year, Constellation Energy Generation, LLC (“Constellation”) filed a complaint against PJM Interconnection, LLC (“PJM”) pursuant to Section 206 of the Federal Power Act (“FPA”), arguing that PJM’s Open Access Transmission Tariff is “unjust, unreasonable and unduly discriminatory” due to the absence of guidance on co-located configurations where the generating asset is completely isolated from the grid (Docket No. EL25-20-000).
The importance of this topic is underscored by nearly daily announcements of new data center projects, such as the $500 billion proposed investment on AI infrastructure by OpenAI, SoftBank and Oracle highlighted by President Trump on the day after his inauguration. The massive power demands from both training and inference applications of AI are anticipated to place significant strains on power grids, while grid operators are contending with lengthy interconnection queues and insufficient buildout of transmission networks. In order to secure power supply for their projects, many data center developers are exploring co-location opportunities with new and existing generating facilities.
On February 20, 2025, FERC issued an order (the “Order”) consolidating the two dockets mentioned above and instituting for cause proceedings under Section 206 of the FPA, finding that PJM’s tariff appears to be unjust, unreasonable, unduly discriminatory or preferential (Docket No. EL25-49-00). FERC ordered PJM and the relevant transmission owners to either:
“show cause as to why the Open Access Transmission Tariff, the Amended and Restated Operating Agreement of PJM, and Reliability Assurance Agreement Among Load Serving Entities in the PJM Region (the “Tariff”) remains just and reasonable and not unduly discriminatory or preferential without provisions addressing with sufficient clarity or consistency the rates, terms and conditions of service that apply to co-location arrangements; or
explain what changes to the Tariff would remedy the identified concerns if [FERC] were to determine that the Tariff has in fact become unjust and unreasonable or unduly discriminatory or preferential and, therefore, proceeds to establish a replacement Tariff.”
On March 24, 2025, PJM and the transmission owners filed their responses to the Order, with both PJM and a joint answer submitted on behalf of a significant majority of the transmission owners arguing that the Tariff remains just and reasonable. The transmission owners urged FERC to clarify that co-located load served by generation interconnected to the transmission or distribution system is network load for the purposes of the Tariff. PJM presented a number of different configurations under the existing Tariff, while noting jurisdictional concerns based on federal/state shared jurisdiction and differences in regulation among the states.
Interested parties are able to respond with comments by April 23, 2025. Approximately 100 such entities have filed motions to intervene, which is indicative of the significance industry players are placing on these proceedings and FERC’s ultimate resolution.
FERC’s Analysis
Although the Order relates specifically to the complaint initiated by Constellation under Section 206 of the FPA, FERC is clearly conscious of many policy considerations that need to be addressed in the context of co-located large load configurations.
Jurisdiction. Although FERC has indicated that it is aware of the nationwide importance of co-located large load configurations, particularly with respect to the national security interests identified in facilitating the rapid buildout of AI infrastructure, it is also plainly conscious of its jurisdictional limitations. The Order highlights that the FPA only allocates jurisdiction to FERC for transmission and wholesale sales of electricity in interstate commerce, whereas retail sales, intrastate transmission and wholesaling, as well as siting authority, are all subject to state jurisdiction. Accordingly, there are jurisdictional limits to how transformative FERC’s guidance can be on this issue. The Order invites comments on when and under what circumstances co-located load should be considered as interconnected to the transmission system in interstate commerce. Specifically, FERC poses the query of whether fully isolated load should be understood as being connected to the transmission system, and if so, what characteristics would result in such a determination.1
Tariff Provisions. The Order makes a determination that the Tariff is “unjust and unreasonable or unduly discriminatory or preferential” due to its lack of clarity and consistency regarding rates and terms of use. For example, FERC comments that the Tariff does not account for costs associated with ancillary services that the co-located generator would be unable to provide, such as black start capabilities and load following services. There is also significant discussion about how the Tariff does not account for different co-location configurations, and specifically, how those differences may impact overall costs. Due to the ambiguities in the Tariff, FERC seems to be acutely concerned with the potential for parties to a co-location arrangement to shift costs to other ratepayers.
Reliability and Resource Adequacy. The concerns raised in the Order with respect to reliability and resource adequacy were identified and thoroughly discussed at the technical conference. For example, in the event a generator co-located with a large load customer temporarily goes offline, the large load customer could suddenly be drawing from the grid, thus potentially impacting overall network performance. Grid operators would be better placed if they had the ability to model such scenarios. Further, concerns relating to the removal of existing generating assets from capacity markets, and thus increasing rates of other consumers (at least in the short-term), were raised by many participants to the technical conference and restated in the Order. On the other hand, FERC notes that many of the concerns raised by serving large load customers would be present even if the customer is treated as network load rather than in a behind-the-meter configuration.
Questions. The Order stipulates that PJM and the transmission owners must include responses to a number of questions relating to: 1) transmission service, 2) ancillary or other wholesale services, 3) interconnection procedures and cost allocation, 4) the PJM capacity market, reliability and resource adequacy, and 5) general and miscellaneous questions which do not fall under any of these headings. The responses to these questions will assist FERC in framing its analysis of how revisions can be made to the Tariff to ensure it is just, reasonable and not unduly discriminatory.
Final Thoughts
Electricity infrastructure is already being built out at a rapid pace in the United States. This trend is set to continue, particularly to meet the needs of increased electrification across numerous sectors such as industry and transportation, along with the anticipated expansion of the data center fleet. Developers have pursued co-located arrangements as a potential means of reducing time frames for getting projects online. FERC’s guidance will result in greater certainty for developers on the costs and timing associated with co-location, which should clarify the role of co-location in the ongoing data center build-out.
1 Key questions about jurisdiction, cost allocation, and reliability turn on what it means for load to be isolated from the grid. For example, in the Complaint, Constellation describes “Fully Isolated Co-Located Loads” as behind the meter load with system protection facilities designed to ensure power does not flow from the grid to the load, with the PJM transmission owners refer to “fully isolated” load where both load and generator serving the co-located load are islanded from the transmission and distribution systems. PJM saw the nuance of different co-location agreements as risking to introduce regulatory gaps in federal and state jurisdiction.
No APA Review of Commission Refusal to Issue Sua Sponte Show Cause Order
The US Court of Appeals for the Federal Circuit dismissed an appeal challenging a US International Trade Commission decision that upheld an administrative law judge’s (ALJ) order, ruling that such an order was within the Commission’s discretion and unreviewable. Realtek Semiconductor Corp. v. International Trade Commission, Case No. 23-1095 (Fed. Cir. Mar. 18, 2025) (Moore, C.J.; Reyna, Taranto, JJ.)
DivX filed a complaint at the Commission against Realtek alleging a violation of § 1337 of the Tarriff Act. DivX later withdrew the complaint. Realtek subsequently filed a motion for sanctions against DivX, alleging certain misconduct. The ALJ denied the motion on procedural grounds. Realtek subsequently petitioned for Commission review, asking the Commission to exercise its authority to issue a sua sponte order requiring DivX to show cause explaining why it had not engaged in sanctionable conduct. The Commission decided not to review and adopted the ALJ’s order without comment.
Realtek appealed, contending that the Commission violated the Administrative Procedure Act (APA) by not issuing a sua sponte show cause order. The Commission argued that Realtek’s appeal should be dismissed, contending that the issue raised was unreviewable.
The Federal Circuit agreed with the Commission, stating that under § 701(a)(2) of the APA, decisions made by an agency are unreviewable by the Court when they are entrusted to the agency’s discretion by law. The Court explained that the sua sponte issuance of a show cause order is a decision that “may be, not must be,” entered by the ALJ or on the Commission’s initiative. Therefore, the decision not to act sua sponte is a decision that remains wholly within the agency’s discretion.
The Federal Circuit rejected Realtek’s argument that the Commission’s refusal to act was reviewable because the Commission failed to provide reasoning, and that Commission review would have allowed the Court to determine if there were “illegal shenanigans” in exercising discretion. However, the case cited by Realtek involved the review of “shenanigans” that fell within the Court’s reviewable categories, not one related to the Commission’s refusal to issue a show cause order sua sponte. The Court found no support for Realtek’s claim that discretionary agency actions under § 701(a)(2) become reviewable under the APA simply because the agency fails to provide its reasoning.
Massachusetts Court Denies Certification of Privacy Class Action for Failure to Meet Ascertainability Requirement
On February 14, 2025, in Therrien v. Hearst Television, Inc., the District of Massachusetts denied a motion for class certification due to the plaintiff’s failure to meet the implied ascertainability requirement of Rule 23. The court concluded that the named plaintiff’s claims for unlawful disclosure of personally identifiable information could not be maintained on a class-wide basis because the proposed method for identifying proposed class members was “administratively infeasible” and raised due process concerns.
Therrien’s Video Privacy Protection Act Claim Based on Geolocation Data
Charles Therrien brought this case on his own behalf and other similarly situated individuals against Hearst Television, Inc. (“HTV”) for allegedly unlawfully disclosing his personally identifiable information to third parties in violation of the Video Privacy Protection Act (VPPA), 18 U.S.C. § 2710. The VPPA prohibits a videotape service provider from knowingly disclosing personally identifiable information concerning any of its consumers.
HTV is a news and weather broadcaster that offers mobile phone apps on which users can read articles and watch associated videos. The apps collect users’ geolocation data. To send push and email updates, HTV utilizes Braze, a third-party software-as-a-service-provider. Although users have the option to enable or disable sharing geolocation data, when it is enabled, users’ geolocation data is shared with Braze.
In addition, HTV also uses Google Ad Manager to send targeted advertisements to its apps’ users. Like Braze, if a user has enabled geolocation services, the geolocation data is shared with Google.
Thus, Therrien claimed that, because his geolocation data was shared with third parties, HTV violated the VPPA.
Therrien’s Proposed Class Definition of Mobile App Users
Therrien sought certification for this class action claim, for which he was required to establish the four threshold requirements of Rule 23(a) — numerosity, commonality, typicality, and adequacy — as well as the two additional prerequisites of Rule 23(b)(3) – predominance and superiority.
Although not one of the four threshold requirements of Rule 23(a), ascertainability is an implicit requirement that a plaintiff also must meet for class certification. Ascertainability requires that the class is “currently and readily identifiable based on objective criteria.” Additionally, the plaintiff’s proposed mechanism for determining class members must be both administratively feasible and protective of the defendant’s Seventh Amendment and due process rights.
To assess whether Therrien met the Rule 23 requirements, the court scrutinized the proposed class definition. In the present case, Therrien’s proposed class was defined as, “All persons in the United States that (i) downloaded one of the Class Apps onto their mobile phone, (ii) enabled location permissions for the Class App for at least 250 sessions over a period of at least one month, and (iii) watched at least ten (10) videos between May 5, 2021, and April 16, 2024 (the “Class Period”).”
Courts considering class definitions will often assess the way the definition has been drafted, but in this case, the court’s analysis did not turn on the drafting of the definition but on the validity of Therrien’s proposed mechanism for identifying class members.
Court’s Critique of Therrien’s Proposed Methodology and Denial of Certification
For purposes of identifying class members, Therrien aimed to rely on an expert witness’s methodology using geolocation data. This method would involve analyzing geolocation data points to generate names of mobile app users, followed by testimony from each user confirming that the information obtained belongs to them and is accurate.
The court highlighted that this method would be administratively infeasible and could potentially violate HTV’s due process rights, running afoul of In re Nexium Antitrust Litig. Expanding upon the infeasibility of this method, the court noted that, for addresses where there are multiunit apartment buildings with hundreds of occupants, geolocation points could not be used to identify specific unit numbers, and therefore specific users, of the HTV apps.
Thus, the generated user data could not be used to differentiate putative class members from other users, making it nearly impossible to provide notice of a pending class action. Applying the reasoning from In re Asacol Anitrust Litig., the court noted that the proposed process would likely result in thousands of class members waiting to provide testimony on individual issues, which would predominate over common ones.
Moreover, the court explained that, although affidavits may be sufficient for differentiating between individuals who were injured and who were not injured, testimony used as part of a party’s affirmative case cannot be used to certify a class, “without providing the defendant an opportunity to litigate its defenses.” Because the determination of whether HTV shared personally identifiable information with Braze and Google is an essential element of the VPPA claim, this information could not be used for the purpose of fulfilling the ascertainability requirement.
Based on the foregoing administrative hurdles and due process considerations, the court denied the motion for class certification.
The court’s analysis highlights the importance of a sound mechanism for identifying class members and the potency of an ascertainability challenge if defense counsel can effectively illustrate practical challenges for the court.
More than anything, this case makes clear that it would be imprudent for litigants to treat ascertainability as an afterthought in their Rule 23(a) analysis because, as the holding of this court illustrates, failing to meet ascertainability is fatal for class certification within the First Circuit.
Finally, the decision in Hearst Television highlights that venue can be outcome determinative in class action litigation, where there is a persistent circuit court split on whether a class representative must prove an administratively feasible method of identifying absent class members as a precondition for class certification under Rule 23, with the First Circuit aligned with the Third and Fourth Circuits and the Second, Sixth, Seventh, Eighth, Ninth, and Eleventh Circuits following a more permissive standard.
Until the Supreme Court speaks on this division that is ripe for review, litigants should continue to address ascertainability as a critical issue at the certification stage.
New Office of Financial Sanctions Implementation Financial Services Threat Assessment
On 13 February 2025, the Office of Financial Sanctions Implementation (OFSI) published its assessment of suspected sanctions breaches involving financial services firms since February 2022 (the Assessment). The Assessment forms part of a series of sector-specific assessments by OFSI that address threats to UK financial sanctions compliance by UK financial or credit institutions.
The Assessment highlights three areas of main concern:
Compliance;
Russian-Designated Persons (DPs) and enablers; and
Intermediary Countries.
This alert provides a summary of these concerns and suggests action financial services firms can take to combat these threats when developing their risk-based approach to compliance.
Compliance
OFSI has identified several compliance issues and advised steps that firms can take to improve and strengthen their compliance. These include:
Improper Maintenance of Frozen Assets
All DPs accounts and associated cards, including those held by entities owned or controlled by DPs, must be operated in accordance with asset freeze prohibitions and OFSI licence permissions. Financial institutions should review existing policies or contracts as these can often automatically renew, resulting in debits from DP accounts.
Breaches of Specific and General OFSI Licence Conditions
Firms need to carefully review permissions when assisting with transactions they believe are permitted under OFSI licences. Firms must ensure that OFSI licenses are in date, bank accounts are specified in OFSI licences and licence reporting requirements are adhered to.
Inaccurate Ownership Assessments
Firms must be able to identify entities that are directly owned by Russian DPs, and subsidiaries owned by Russian conglomerates that are themselves designated or majority owned by a Russian DP. Firms should conduct increased due diligence where necessary and regularly update due diligence software.
Inaccurate UK Nexus Assessments
Firms should take extra care to understand the involvement of UK nationals or entities in transaction chains when assessing the application of a UK nexus. They must also ensure they understand the difference between United Kingdom, European Union and United States sanctions regimes to make correct assessments of how UK sanctions might be engaged.
Russian DPs and Enablers
OFSI defines an enabler as “any individual or entity providing services or assistance on behalf of or for the benefit of DPs to breach UK financial sanctions prohibitions.” Broadly, there are two types of enablers:
professional enablers that provide professional services “that enable criminality. Their behaviour is deliberate, reckless, improper, dishonest and/or negligent through a failure to meet their professional and regulatory obligations”; and
non-professional enablers, such as family members, ex-spouses or associates.
Maintaining Lifestyles and Assets
Most identified enabler activity has been in relation to maintaining the lifestyles of Russian DPs and assets as they face growing liquidity pressures from UK sanctions.
OFSI urges firms to scrutinise the following red flags:
New individuals or entities making payments to satisfy obligations formerly met by a DP;
Individuals connected to Russian DPs receiving funds of substantial value;
Regular payments between companies owned or controlled by a DP;
Crypto-asset to fiat transactions involving close associates of a Russian DP;
Family member of a DP that is an additional cardholder on a purchasing card that uses the card for personal expenses and overseas travel; and
Deposits of large sums of cash without sufficient explanation;
Fronting
With a significant value of the assets of DPs having been frozen in the United Kingdom, an increasing amount of enablers are attempting to front on behalf of DPs and claim ownership of frozen assets. The links between enablers fronting on behalf of DPs are not always clear, and so OFSI has outlined several red flags for firms to be aware of:
Individuals with limited profiles in the public domain, for instance, those with limited related professional experience;
Inconsistent name spellings or transliterations;
Recently obtained non-Russian citizenships; and
Repeated or unexplained name changes or declared location of operation.
Utilising Alternative Payment Methods to Breach Prohibitions
Financial services firms need to remain diligent when assessing the threat posed by the increasingly sophisticated methods employed by DPs and enablers to evade UK financial sanctions prohibitions. Particular attention should be paid to attempts at money laundering on behalf of Russian DPs, including any indications of high value crypto-asset to cash transfers.
Intermediary Countries
Emphasis is placed on the use of intermediary jurisdictions in suspected breaches of UK financial sanctions prohibitions. The following jurisdictions are utilised most often: British Virgin Islands, Guernsey, Cyprus, Switzerland, Austria, Luxembourg, United Arab Emirates and Turkey. These jurisdictions offer secrecy or particular commercial interests.
There has also been a change in the third countries referenced in suspected breach reports, with increased activity in the Isle of Man, Guernsey, United Arab Emirates and Turkey. Indeed, the United Arab Emirates accounted for the largest section of suspected breaches reported to OFSI in the first quarter of 2024. This shift has likely been caused by various factors, including capital flight by Russians to jurisdictions that do not have sanctions on Russia.
The Assessment helpfully outlines a non-exhaustive list of specific activities in various countries that could be indicative of UK financial sanctions breaches. Financial institutions are encouraged to review and familiarise themselves with this list so that they can identify potential threats to sanctions compliance. Businesses should then consider the involvement of these jurisdictions when conducting due diligence, and evaluate the risks associated with various transactions.
Conclusion
The recent expansion of the United Kingdom’s financial sanctions regime, particularly in relation to Russia’s invasion of Ukraine, has resulted in sanctions evasion becoming increasingly sophisticated and widespread. Considering the scale of evasion being conducted, financial institutions need to remain proactive and vigilant in identifying transaction activity that may be indicative of attempts to circumvent UK sanctions regimes.
When designing sanctions compliance programmes, financial institutions should refer to the Assessment to account for methodologies of evasion and recognise specific behaviours that might present warning signs. By taking a proactive approach to prevent their services from being exploited as instruments of circumvention, financial institutions will contribute to efforts to combat sanctions evasion, whilst avoiding the financial and reputational repercussions of non-compliance.
If you have any questions on the Assessment or want further advice on developing your policies for UK sanctions compliance, please do not hesitate to contact our Policy and Regulatory practice.
The Digital Chamber Publishes US Blockchain Roadmap
The Digital Chamber (TDC), a trade association focused on advancing blockchain adoption and regulatory clarity, has unveiled its U.S. Blockchain Roadmap, a plan aimed at enhancing America’s leadership in blockchain technology. The roadmap emphasizes blockchain’s potential in reshaping financial systems, global trade, and digital infrastructure. It argues that blockchain development could impact the United States’ economic growth, financial sovereignty, and technological competitiveness.
The roadmap outlines several priority areas and policy recommendations. These include integrating digital assets into the nation’s financial infrastructure, protecting decentralized networks, and establishing clear regulatory frameworks. It also examines Bitcoin mining’s potential role in strengthening U.S. energy security and recommends modernizing the banking system to adapt to the evolving digital economy. Additionally, the roadmap explores blockchain’s potential applications in government operations and fiscal oversight.
Trade Secret Law Evolution Episode 75: New Cases on Statute of Limitations and Trade Secret Identification [Podcast]
In this episode, Jordan discusses a Second Circuit Court of Appeals opinion on statute of limitations, and a Central District of California decision on trade secret identification, and specifically the importance of distinguishing alleged trade secret information from public information included in patents.