Civil Procedure – Page 2

Puerto Rico High Court Confirms Employers Need to Check NLRA Preemption of Local Employment Law Claims

Takeaways

Puerto Rico courts lack jurisdiction over claims involving conduct “arguably” protected or prohibited by the NLRA, even if framed under local laws.
The NLRB has exclusive authority to adjudicate unfair labor practice claims covered by the NLRA — state or local courts must defer unless the NLRB declines jurisdiction.
Employers facing claims related to union activity or retaliation should evaluate NLRA preemption early and coordinate with labor counsel to assert defenses or direct claims to the NLRB.

Historic Shift: Puerto Rico’s Supreme Court Explicitly Adopts Loper Bright, Ending Judicial Deference to Agencies’ Legal Conclusions

PR courts now independently evaluate agencies’ legal conclusions under LPAU, following the SC’s Loper Bright adoption.
A landmark decision reshaping judicial review of agency interpretations
Recently, the Supreme Court of Puerto Rico issued a landmark decision in the case Vázquez et al. v. Consejo de Titulares y Junta de Directores del Condominio Los Corales, 2025 TSPR 56, issued on May 21, 2025. In this ruling, the Court explicitly adopted the reasoning from the recent United States Supreme Court decision, Loper Bright Enterprises v. Raimondo, 144 S.Ct. 2244, 219 L.Ed.2d 832 (2024), to end the longstanding doctrine of judicial deference towards administrative agencies’ legal conclusions in Puerto Rico.
Historical context: The Traditional Doctrine of Judicial Deference
Historically, Puerto Rico’s Supreme Court consistently held that appellate judicial review of administrative decisions required deference to agencies’ legal conclusions. As previously established, administrative agencies’ decisions enjoyed a presumption of legality and correctness. Capó Cruz v. Jta. Planificación et al., 204 DPR 581, 591 (2020); García Reyes v. Cruz Auto Corp., 173 DPR 870, 893 (2008). The judicial deference was based upon the specialized knowledge and expertise agencies possessed regarding matters within their delegated authority. Pérez López v. Dpto. Corrección, 208 DPR 656, 673-674 (2022); Super Asphalt v. AFI y otros, 206 DPR 803, 819 (2021).
Under this framework, even when courts disagreed with an agency’s interpretation, judicial review was limited to determining if the agency’s determination was arbitrary, illegal, or unreasonable. Torres Rivera v. Policía de PR, 196 DPR 606, 628 (2016). Absent clear evidence of arbitrariness or unreasonableness in the agency’s determination, “the reviewing court could not substitute its own judgment for the specialized judgment of the administrative agency”. Perfect Cleaning v. Centro Cardiovascular, 172 DPR 139 (2007).
The Decisive Case: Vázquez et al. v. Consejo de Titulares y Junta de Directores del Condominio Los Corales, supra.
In Vazquez v. Condominio Los Corales, supra, the Puerto Rico Supreme Court confronted a scenario where the Department of Consumer Affairs (DACO), in a blatant abuse of discretion, issued a legal interpretation explicitly contradicting an established Supreme Court precedent in Colón Ortiz v. Asociación de Condómines B.T.I, 185 DPR 946 (2012). In Colon Ortiz, the Supreme Court had clearly determined that a condominium Administrator was an “agent” or legal representative. Nevertheless, DACO disregarded this binding Supreme Court precedent and classified the Administrator as a “contractor”, unjustifiably invoking their administrative “expertise”.
In addressing this misinterpretation, the Supreme Court carefully reviewed not only its prior jurisprudence but also examined the evolution of Puerto Rico’s administrative law statutes, particularly the shift from the former legislative framework to the current Uniform Administrative Procedure Act, Act. No. 38-2017. (LPAU).
Under the former legal regime, specifically the repealed Act. No. 170 of August 12, 1988, “Uniform Administrative Procedure Act of the Commonwealth of Puerto Rico” and its amendment by the also repealed Act No. 210 of December 8, 2016, “Administrative Law Reform Act”, administrative agencies’ legal interpretations explicitly merited judicial deference. Both laws mandated that legal conclusions by agencies were entitled to a presumption of correctness, emphasizing agency specialization and strictly limiting judicial substitution of judgment to instances of arbitrariness, illegality, or unreasonableness.
However, the Supreme Court highlighted that the legislative language underwent a fundamental transformation with the adoption of the current LPAU Act. No. 39-2017, explicitly removing the prior deferential language and stating clearly in Section 4.5 that “legal conclusions shall be reviewable in all aspects by the court”. In its Opinion, the Supreme Court interpreted this deliberate legislative shift and emphasized that the elimination of deferential language underscored the Legislature’s intent to abandon the judicial deference toward agencies’ legal conclusions or interpretations.
Adoption of the Loper Bright Doctrine
In this same decision, the Supreme Court of Puerto Rico clearly embraced the reasoning of the recent landmark decision from the United States Court, Loper Bright Enterprises v. Raimondo, supra, which overturned the longstanding Chevron doctrine. Chevron had required federal courts to defer to agencies’ reasonable interpretations of ambiguous statutes.
According to our Supreme Court’s analysis, the Loper Bright decision emphasized that statutory interpretation inherently belongs to the judiciary rather than administrative agencies. Finding the federal court’s reasoning highly persuasive, especially considering that Puerto Rico’s current LPAU closely mirrors the U.S. federal Administrative Procedure Act (APA), Puerto Rico’s Supreme Court reiterated that, while administrative interpretations may constitute informed perspectives that may guide the court, such interpretations no longer bind judicial determination. In doing so, the Supreme Court categorically underscored the shift toward judicial independence, explicitly adopting the federal position articulated in Loper Bright:
As resolved by the highest federal court, courts must exercise independent judgment when determining whether an agency has acted within the scope of its statutory authority. More importantly, contrary to the practice of recent decades, courts are no longer required to defer to an agency’s interpretation of law merely because the statute is ambiguous.

This adoption of the Loper Bright doctrine affirms a new judicial autonomy in interpreting statutory provisions, definitively ending the automatic judicial deference previously granted to administrative agencies’ legal conclusions.
Importantly, the Supreme Court of Puerto Rico emphasized that this doctrinal shift specifically applies only to agencies’ legal conclusions, leaving unchanged the longstanding judicial approach toward factual determinations. Under Section 4.5 of LPAU, factual determinations made by agencies continue to be upheld by courts if supported by substantial evidence contained in the administrative record. Consequently, while courts will now exercise full independent review of legal interpretations, they will still defer to agencies’ factual determinations provided those conclusions meet the established evidentiary standard.
Practical Impact of this Doctrinal Change
This doctrinal shift significantly enhances the judiciary’s role by empowering courts to fully and independently evaluate agencies’ legal interpretations without automatic deference, thus ensuring greater accuracy in the application of the law. As a result, administrative agencies will now be compelled to justify their legal conclusions with rigorous and sound reasoning, promoting increasing accountability and transparency in their decision-making processes.
Furthermore, this enhanced judicial oversight provides business and citizens with greater legal certainty, stability, and predictability, as judicial independence promotes more consistent and uniform interpretations of statutory provisions. Ultimately, this doctrinal change reinforces judicial independence as the ultimate interpreter of statutory law, thereby solidifying Puerto Rico’s fundamental separation of power principles.
Conclusion
The recent Supreme Court decision represents a doctrinal shift, explicitly adopting the U.S. Supreme Court’s Loper Bright Enterprises v. Raimondo, supra, reasoning and incorporating a thorough legislative analysis into its judicial reasoning. This decision ends automatic judicial deference exclusively toward administrative agencies’ legal conclusions, while maintaining the traditional deference to agencies’ factual determinations based on substantial evidence.

Disclosure in England and Wales: A Duty to Use Technology

It is not enough that we do our best; sometimes we must do what is required. This famous line attributed to Britain’s defining war time leader, Sir Winston Churchill, serves as a reminder to parties litigating through the English and Welsh courts that the use of technology is central to the discovery process – it is no longer optional.
Whether parties are operating under either of the two regimes that govern disclosure in England and Wales (Part 31 and Practice Direction (PD) 57AD of the Civil Procedure Rules (CPR)), the disclosure process is a central component that seeks to ensure transparency and fairness. However, burgeoning data volumes have increasingly necessitated the use of technology. This is why PD 57AD, which is the newer of the two regimes and in operation in the Business and Property Courts, places technology on the front line by obligating the parties’ legal representatives to use it.
The Duty
Specifically, under PD 57AD, a party’s legal representative is under a duty to promote the reliable, efficient, and cost-effective conduct of disclosure by using technology (paragraph 3.2(3) of PD 57AD). This duty persists until the conclusion of any proceedings and a failure to discharge this duty may result in sanctions from the court. Those sanctions may include adverse cost orders, or a failure may be dealt with as a contempt of court in appropriate cases.
To facilitate this duty, PD 57AD goes further to encourage and support the use of technology throughout the disclosure process. For example, when dealing with the exclusion of narrative documents (these are documents that are relevant only to the background of a dispute and are not readily disclosable) parties must consider using:

software or analytical tools, including technology-assisted review (TAR);
coding strategies, including to reduce duplication; and
prioritisation and workflows.

In addition, where the court orders Extended Disclosure, requiring parties to search for documents, the court may make specific provisions related to technology use. For example, the court might require parties to use certain software or analytical tools or provide for the use of data sampling.
Why Not?
Blindly applying technology, however, is not sufficient. In order to ensure that technology is used efficiently and effectively when Extended Disclosure is ordered, parties must provide the court and the other parties with information about the data in their control. This includes where and how the data is held and how they propose to process and search that data.
This information is set out in the Disclosure Review Document (DRD). The DRD is a comprehensive document that the parties must complete, seek to agree on, and keep updated. To do this, and despite any trench warfare that may be adopted elsewhere in the litigation, parties must cooperate and constructively engage with each other when it comes to completing the DRD and agreeing to the scope of the disclosure exercise.
Where parties consider the use of technology to facilitate collecting and reviewing any data beyond being reasonable, proportionate, and reliable, they are not obliged to justify its use. Instead, it is the opposite. If they decide not to use technology to aid either process, they should explain why such tools would not be used. The requirement to justify why technology is not being used applies especially if the number of documents that need reviewing is more than 50,000 and what is proposed is simply a manual review exercise.
PD 57AD: Ahead of the Curve
PD 57AD came into effect in October 2022, but it was drafted approximately five years prior to its implementation, meaning it came along well before the technological leap forward in terms of generative AI. However, PD 57AD was drafted to be forward-looking and flexible enough to accommodate technological advances.
Therefore, whilst generative AI is not specifically mentioned in the rules or the DRD, the references to technology throughout are purposefully non-exhaustive. Indeed, while AI is considered an umbrella term, many of the tools that are mentioned and that are already routinely used as part of the disclosure process utilise the machine learning element of AI. Tools, such as continuous active learning models that are used to assess which documents, compared to others, are more likely to be relevant to the underlying dispute, should be reviewed first.
Parties litigating before the English and Welsh courts should look to leverage new technologies, tools, and workflows as part of the disclosure process. In doing so, they are not doing their best – they are doing what is required.

A Rhode Island Town Seized 31 Acres by Eminent Domain Without Telling the Owners—Their Recent Lawsuit Claims It’s an Unconstitutional “Sham Taking”

A family of developers learned that the town of Johnston, Rhode Island, had seized 31 acres of their land through a social media post. They now claim the takeover was a sham designed to block much-needed affordable housing, in a case that could test the limits of eminent domain.
The owners had planned to develop the land into a 255-unit affordable housing project under Rhode Island’s Low and Moderate Income Housing Act. But after a contentious town meeting last December, Johnston Mayor Joseph Polisena, Jr., vowed to stop the project, calling it “destructive.” In January, he announced plans to seize the land by eminent domain and build a town hall complex on the site. The next day, the town council unanimously approved the seizure.
It wasn’t until mid-March that the owners learned Mayor Polisena had followed through with his plan. That’s when the town’s attorney filed a petition in Rhode Island Superior Court to take title to the property—apparently without notifying the owners. Two days later, the attorney sent a letter demanding they vacate and threatening a no-trespass order. But by then, the owners had already heard about the taking, which Polisena announced on social media. They promptly filed suit.
Federal law gives municipalities like Johnston broad powers to seize land, but that power is not unlimited. Eminent domain applies only if property is taken for “public use.” Since the Supreme Court’s highly debated Kelo decision, however, “public use” has been broadly defined to include any seizure that benefits the public welfare. In response, many states passed limits on the meaning of public use and the evidence required to justify a taking. Rhode Island is among them.
Rhode Island law currently limits the scope of “public use” takings for economic development through the Home and Business Protection Act. At least 46 other states have similar laws that restrict municipalities’ power to take property without just cause. And as a matter of practice, eminent domain is often a town’s last resort. But, the owners’ request for relief claims the town is “doing this in reverse” and “even now has not complied” with the Rhode Island statute.
In late March, the U.S. District Court for the District of Rhode Island issued a temporary restraining order against the town, prohibiting it from acting on the land while the owners’ request for a preliminary injunction was pending. In their filings, the owners accused Johnston of constitutional and statutory violations, claiming that the seizure amounts to a “sham taking.”
The owners’ lawsuit comes as part of a larger fight over affordable housing in New England and beyond. According to the complaint, Polisena’s plans for a new municipal complex are merely a pretext to block “desperately needed affordable homes.” In Rhode Island alone, the median home price is nearly $500,000, leading Gov. Dan McKee in 2024 to declare a “housing crisis.”
Currently, only the owners’ federal case is pending, as they voluntarily dismissed their case in Superior Court. In April 2025, the District of Rhode Island granted a preliminary injunction, which will remain until the parties resolve the case or the town decides not to pursue the taking.

Court Rules On Personal Jurisdiction In A Trust Dispute, Holding That In Rem Jurisdiction Still Requires Personal Contacts With A Defendant, But Otherwise Affirming The Trial Court’s Denial Of An Objection To Personal Jurisdiction

In Hooten v. Collins, a dispute arose between the trustee of a Texas trust and a beneficiary who resided overseas regarding the distribution of trust assets, which primarily consisted of real estate in Texas. No. 08-23-00327-CV, 2024 Tex. App. LEXIS 6805 (Tex. App.—El Paso September 16, 2024, no pet.). The trustee filed suit for instructions in Texas regarding approval of a distribution plan and discharge relief. The beneficiary shortly thereafter filed suit in California for breach of fiduciary duty based on the same set of facts. The beneficiary then objected to the Texas court’s jurisdiction based on an alleged lack of personal jurisdiction. After discovery, the trial court held a hearing and denied the objection, and the beneficiary appealed. The court of appeals affirmed the denial of the objection.
The first issue was whether the trial court had in rem jurisdiction over the beneficiary due to the trust assets residing in Texas. The court held that even in in rem jurisdiction, a court must still have in personam jurisdiction over a defendant:
More than a century ago, the U.S. Supreme Court distinguished between in personam and in rem jurisdiction for state-court jurisdictional inquiries. Pennoyer v. Neff, 95 U.S.714, 24 L. Ed. 565 (1877). As later explained in Shaffer v. Heitner, 433 U.S. 186, 189, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977):

If a court’s jurisdiction is based on its authority over the defendant’s person, the action and judgment are denominated “in personam” and can impose a personal obligation on the defendant in favor of the plaintiff. If jurisdiction is based on the court’s power over property within its territory, the action is called “in rem” or “quasi in rem.”

Id. at 199. Consequently, the jurisdictional analysis following Pennoyer centered on the physical—and in some cases constructive—presence of people and things within the forum state. Id. at 201-03. Texas courts acknowledge the same distinction: “The general rule of in rem jurisdiction is that the court’s jurisdiction is dependent on the court’s control over the defendant res.” Costello v. State, 774 S.W.2d 722, 723 (Tex. App.—Corpus Christi 1989, writ denied). “[A]n in rem action affects the interests of all persons in the world in the thing,” but an in rem judgment’s effect is limited only “to the property that supports jurisdiction.” Bodine v. Webb, 992 S.W.2d 672, 676 (Tex. App.—Austin 1999, pet. denied). For that reason, the “court need not acquire jurisdiction over the person.” City of Conroe, 602 S.W.3d at 457-58 (citing Batjer v. Roberts, 148 S.W. 841, 842 (Tex. App.—El Paso 1912, writ ref’d)) (observing that service of process in in rem suits may be constructive, and persons with interest in rem may never know of suit).

Robert argues that this is not a true in rem action because it is not a suit against the property. We agree that the claim here would be better described as quasi in rem:
A quasi in rem proceeding is an action between parties where the object is to reach and dispose of property owned by them or of some interest therein. While an in rem action affects the interests of all persons in the world in the thing, a quasi in rem action affects only the interests of particular persons in the thing.
Bodine, 992 S.W.2d at 676 (internal citations omitted); see also Hanson v. Denckla, 357 U.S. 235, 246 n.12, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958) (“A judgement quasi in rem affects the interest of particular persons in designated property.”).
Drawing on these principles, Marsha contends that the court need not have in personam jurisdiction over Robert because Texas has in rem jurisdiction over the trust property. Robert disagrees with Marsha’s characterization of the claims and argues that, even if the location of property provides part of the alleged jurisdictional basis, a Texas court must still have in personam jurisdiction over him. In this respect, we agree with Robert that developments since Pennoyer have cemented due process protections into both in personam and in rem jurisdictional inquiries.

In Shaffer v. Heitner, the Court was asked to decide whether the seizure of property in the forum state could justify a court’s exercise of jurisdiction over nonresident defendants in a suit unrelated to the ownership of that property. Shaffer, 433 U.S. at 189. The Court traced the constitutional doctrine of state-court jurisdiction to Pennoyer v. Neff. See Shaffer, 433 U.S. at 196. But the Schaffer Court recognized the watershed change occasioned by International Shoe. Id. at 203 (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945)). After International Shoe, the focus of the personal jurisdictional inquiry changed from a state’s sovereignty over persons within its border to the “relationship among the defendant, the forum, and the litigation.” Id. at 204.

The Shaffer Court then reasoned that an assertion of jurisdiction over property is equivalent to an assertion of jurisdiction over a person’s interest in that property. It dispensed with the theoretical distinction between in rem and in personam jurisdiction and concluded that all assertions of personal jurisdiction — whether based on property ownership (i.e., “in rem” or “quasi in rem”) or personal contacts with the forum (i.e., “in personam”) — are to be measured against the minimum-contacts and fairness prongs of the International Shoe test. Id. at 212 (“We therefore conclude that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.”).

Several Texas courts have resolved challenges to personal jurisdiction in trust litigation where the trust res included Texas real property; each conducted a thorough minimum-contacts tests analyzing the defendant’s contacts with the state. See Johnson v. Kindred, 285 S.W.3d 895, 899 (Tex. App.—Dallas 2009, no pet.); Alexander v. Marshall, No. 14-18-00425-CV, 2021 Tex. App. LEXIS 1952, 2021 WL 970760, at *5 (Tex. App.—Houston [14th Dist.] Mar. 16, 2021, pet. denied) (mem. op.); JPMorgan Chase Bank, N.A. v. Campbell, No. 09-20-00161-CV, 2021 Tex. App. LEXIS 5001, 2021 WL 2583573, at *5 (Tex. App.—Beaumont June 24, 2021, no pet.) (mem. op.). Similarly, we must determine whether Texas has personal jurisdiction over Robert based on a detailed analysis of his alleged forum contacts and the relationship between those Texas contacts and the litigation. See Dawson-Austin v. Austin, 968 S.W.2d 319, 327 (Tex. 1998) (conducting a minimum-contacts analysis in a divorce case relating to the distribution of Texas property that was part of the marital estate); see also Smith v. Lanier, 998 S.W.2d 324, 333 (Tex. App.—Austin 1999, pet. denied) (conducting separate minimum-contacts analyses to determine the character of an estate’s property—i.e., separate or community—and to determine the propriety of jurisdiction over the nonresident representative of the deceased’s estate in her individual capacity).

Id.
The court then discussed personal jurisdiction standards:
The Texas long-arm statute extends a Texas court’s personal jurisdiction “as far as the federal constitutional requirements of due process will permit,” but no further. Thus, the contours of federal due process guide our decision.
Federal due process limits a court’s jurisdiction over nonresident defendants unless: (1) the defendant has established minimum contacts with the forum state; and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. “As a general rule, the exercise of judicial power is not lawful unless the defendant ‘purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.’” Due process requires purposeful availment because personal jurisdiction “is premised on notions of implied consent—that by invoking the benefits and protections of a forum’s laws, a nonresident consents to suit there.” Purposeful availment includes deliberately engaging in significant activities within a state or creating continuing obligations with residents of the forum. It includes seeking profit, benefits, or advantage from the forum. It excludes, however, “random,” “fortuitous,” or “attenuated” contacts or the “unilateral activity of another party or a third person.” Moreover, a party may purposefully avoid a particular forum by structuring its transactions in such a way as to neither profit from the forum’s laws nor subject itself to jurisdiction there.

A plaintiff asserting that a court has specific jurisdiction over a nonresident defendant must also show that its claim arises out of, or relates to, the defendant’s contacts with the forum. Under the Texas application of that requirement, “for a nonresident defendant’s forum contacts to support an exercise of specific jurisdiction, there must be a substantial connection between those contacts and the operative facts of the litigation.” Specific jurisdiction is not as exacting as general jurisdiction in that the contacts may be more sporadic or isolated so long as the cause of action arises out of those contacts.

Id. (internal citations omitted). The court held that there was sufficient evidence to support the trial court’s exercise of personal jurisdiction over the beneficiary:
First, we acknowledge the significant role that the Texas properties play in this dispute. When it established International Shoe as the standard for all assertions of jurisdiction for in rem actions, the United States Supreme Court in Shaffer v. Heitner observed the following:

[T]he presence of property in a State may bear on the existence of jurisdiction by providing contacts among the forum State, the defendant, and the litigation. For example, when claims to the property itself are the source of the underlying controversy between the plaintiff and the defendant, it would be unusual for the State where the property is located not to have jurisdiction. In such cases, the defendant’s claim to property located in the State would normally indicate that he expected to benefit from the State’s protection of his interest.

Shaffer, 433 U.S. at 207. The Court specifically noted the interest of a forum in “the marketability of property within its borders,” “providing a procedure for peaceful resolution of disputes about the possession of that property” and the reality that “important records and witnesses will be found in the State.” Id. at 208.
The Court’s observation rings particularly true here. This trust had 21 Texas income-producing properties. Their aggregate value was in the tens of millions of dollars. The properties required the services of a property management firm to collect rents, undertake maintenance, and handle the day-to-day tasks inherent with commercial real estate. Because Robert wanted to be involved in their disposition, he asked to receive an ongoing stream of information for the properties. The income generated by the properties further required accounting advice for quarterly tax obligations, here provided to Robert by a Texas CPA. And when many of the properties were sold (at Robert’s urging), the beneficiaries only enjoyed the fruits of those sales under the benefits and protection of Texas law.
To be sure, Robert’s ownership interest in Texas property was only equitable and resulted from decisions made by the settlors and trustees. Which brings us to Robert’s core argument: as a passive trust beneficiary, he cannot be deemed to have contacts in a jurisdiction where the trust happens to own property. Owning an equitable interest in the trust property alone is insufficient to confer jurisdiction when an interested person assumes only a passive role in the trust’s administration. Johnson, 285 S.W.3d at 903 (finding no jurisdiction over passive beneficiary of trust).

…
Yet when interested parties take an active role in the trust’s affairs with the knowledge that their actions will create continuing obligations towards Texas residents, those parties are subject to personal jurisdiction in Texas… Here, Marsha’s evidence is legally sufficient to show that Robert assumed an active role in managing the trust’s assets. For example, for 18 months, Robert kept in continuous communication with the trust’s Texas-based property manager, Investar, and the trust’s tax advisor, J.M. Trippon & Co., receiving information about the financial health of the Texas trust assets. Robert attended two in-person meetings in Texas to discuss the trust’s administration, analyze its assets, and make additional requests for information from the trust’s Texas-based professionals. While Robert minimizes the Texas visit by arguing his primary purpose was to attend his father’s funeral, that explanation does nothing to refute the fact that he purposefully engaged in these contacts in Texas.
More importantly, Robert attempted to insert himself into the trust’s management such that there is some evidence he was more than a passive beneficiary… The trial court could have fairly considered how Robert’s requests had some influence over the plans to distribute the trust… Collectively, these contacts are legally sufficient to show Robert purposefully availed himself of the Texas forum: he inserted himself in the distribution plans of Trust B’s property to obtain a benefit, advantage, or profit from transactions or conveyances of Texas real estate. For the above reasons, we find the evidence is legally sufficient to confer jurisdiction over Robert.

Id. The court also held that there was a sufficient connection between the defendant, the forum, and the litigation:
This case arises out of the parties’ inability to agree on a plan to realize an appropriate and equitable distribution of a trust’s Texas property. Robert sought to influence the sale and distribution of Texas assets to beneficiaries of the trust. Additionally, Robert’s demands and criticism of Marsha’s performance as trustee are tied to the declaratory relief that Marsha now seeks. He accused Marsha of ignoring his interests and withholding information. Accordingly, some claims for declaratory relief enumerated in Marsha’s petition are a request for the court to approve her actions as trustee and an accounting of the trust.

Id. The court finally found that the exercise of jurisdiction was consistent with fair play and substantial justice and affirmed the order denying the defendant’s objection to the Texas court’s jurisdiction over him.
Interesting Note: When there are trust disputes, finding a forum or state to determine those disputes can be a very important factor in resolving them. One issue that can be confounding is filing suit in a state and a trustee or beneficiary objecting the jurisdiction’s personal jurisdiction. The Model Trust Code has a provision that expressly discusses personal jurisdiction in trust disputes. Unform Trust Code Section 202 is entitled: “Jurisdiction Over Trustee And Beneficiary,” and it states:
(a) By accepting the trusteeship of a trust having its principal place of administration in this State or by moving the principal place of administration to this State, the trustee submits personally to the jurisdiction of the courts of this State regarding any matter involving the trust.
(b) With respect to their interests in the trust, the beneficiaries of a trust having its principal place of administration in this State are subject to the jurisdiction of the courts of this State regarding any matter involving the trust. By accepting a distribution from such a trust, the recipient submits personally to the jurisdiction of the courts of this State regarding any matter involving the trust.
(c) This section does not preclude other methods of obtaining jurisdiction over a trustee, beneficiary, or other person receiving property from the trust.

The comments to the Uniform Trust Code Provision state:
The jurisdiction conferred over the trustee and beneficiaries by this section does not preclude jurisdiction by courts elsewhere on some other basis. Furthermore, the fact that the courts in a new State acquire jurisdiction under this section following a change in a trust’s principal place of administration does not necessarily mean that the courts of the former principal place of administration lose jurisdiction, particularly as to matters involving events occurring prior to the transfer. The jurisdiction conferred by this section is limited. Pursuant to subsection (b), until a distribution is made, jurisdiction over a beneficiary is limited to the beneficiary’s interests in the trust. Personal jurisdiction over a beneficiary is conferred only upon the making of a distribution. Subsection (b) also gives the court jurisdiction over other recipients of distributions. This would include individuals who receive distributions in the mistaken belief they are beneficiaries.

Under the Hooten opinion, Texas courts will lose jurisdiction to other states, who may have less of a connection to the administration of trusts, solely because of Texas’s common-law jurisdictional precedent. Other states do not require the same contacts analysis for in rem or quasi in rem jurisdiction. So, at this point, a trustee of a Texas Trust may not be able to get jurisdiction for trust disputes in Texas if there are beneficiaries who do not take an active role in trust management and live in another state. That fact does not deprive a Texas court of jurisdiction. Further, potentially, a Texas court can appoint a guardian ad litem or attorney ad litem to represent absent beneficiaries. Legislature needs to address this important issue.

Contract Adjustment In The Event Of Inflation And Crises: When The World Is Upside Down, What Are The Implications For Ongoing Agreements?

The economic environment has changed dramatically in recent years. COVID-19, the war in Ukraine, geopolitical conflicts, supply chain disruptions, skyrocketing prices for raw materials and energy, and natural disasters all highlight the fragility of international supply relationships. But what does this mean in concrete terms for companies and their contractual arrangements? What happens if a contracting party is suddenly no longer able to deliver or if the agreed prices are no longer sufficient for economic viability?
In this post, we explore the legal options available under German law to adjust contracts in response to changing circumstances.
Interference with the Basis of the Agreement: When the Foundation Shifts
Under German law, a contracting party may demand an adjustment to the agreement if the circumstances that formed the basis of the contract change significantly after its conclusion, and continued adherence to the contract would be unreasonable for that party (so-called “interference with the basis of the agreement”, according to Section 313 (1) of the BGB, the German Civil Code). If a contractual adjustment is impossible or unreasonable for one party, it may even request rescission of the agreement by withdrawal or termination, as codified in the BGB.
However, such an adjustment or rescission is generally excluded if the risk of the respective contractual interference is clearly allocated to one of the parties by law or contract. Adjustments due to supply shortages or price increases resulting from a crisis are only considered if they go beyond the scope of typical contractual risk. In other words, the interference must create a performance risk so exceptional that the parties did not assume it when entering into the agreement.

A fixed-price agreement is one example of contractual risk allocation. If the supplier’s material costs rise significantly, this typically falls within its risk sphere due to the fixed-price agreement. As a rule, the supplier cannot demand a price adjustment. For this reason, price adjustment clauses are frequently agreed upon in practice, as described in more detail below.
An example of a statutory risk allocation is the risk of use, meaning the risk of not being able to use the received goods or services as intended. This risk is typically assigned to the recipient under reciprocal contracts. For instance, if a tool manufacturer takes out a loan to invest in its production capacity in anticipation of a rise in demand, the manufacturer cannot request a contract adjustment or termination of the loan agreement if demand for its tools later collapses and the loan, therefore, becomes economically pointless. In such cases, there is generally no room for an interference-based contract adjustment.
Furthermore, an interference is excluded if the contract already contains mechanisms for adjusting performance in cases of unforeseeable events (g., force majeure, hardship, or price adjustment clauses, as explained below). In these instances, there is usually little or no scope for adjusting the contract using the legal concept of interference with the basis of the transaction.

In practice, many adjustment attempts fail because the risk that has materialized was contractually or legally allocated from the outset. Without tailored contractual clauses – such as force majeure or price adjustment provisions – a party may be denied the right to amend or terminate the contract. This underscores the importance of such clauses at the time of contract formation.
Force Majeure Clauses: Contractual Protection Against the Unforeseeable
Force majeure clauses regulate what happens if an extraordinary event makes performance impossible or unreasonable. Although not specifically defined in German law, the concept is gaining importance due to the expansion of EU legislation and the increasing international nature of commercial contracts.
Force majeure clauses are designed to shield parties from liability when events occur that are unforeseeable and beyond their control. The burden must be so high that one party cannot reasonably be expected to bear it. Whether these requirements are met in individual cases depends on the nature and content of the contract.
Because there is no statutory definition of force majeure in German law, the parties must define it themselves and set out the legal consequences. The parties usually draw up a list of events that are expressly considered to be force majeure. The clause often provides that the affected party is released from liability or that deadlines are extended. To account for cases of prolonged force majeure, it may also be advisable to include a right to terminate the contract for cause.
A valid force majeure clause generally releases the affected party from the obligation to perform or allows the performance to be postponed without triggering damages, provided the party is not at fault and the event that prevents it from fulfilling its contractual obligation is outside its control. According to the German Federal Court of Justice, force majeure is ruled out if there is even slight negligence on the part of the affected party.
The clause should also clarify under what circumstances a party may invoke force majeure. This is especially important if the event only affects a supplier further down the supply chain (e.g., a production site destroyed by an earthquake) because the parties are then generally only indirectly affected by the supplier’s failure to deliver. In such cases, the party may be expected to source alternatives, even if costly or impractical.
Typical force majeure events include natural disasters, war, pandemics, strikes, and trade restrictions. The model clause for force majeure recommended by the International Chamber of Commerce – widely used in German practice – lists such examples and defines, for example, war and hostilities, starting with extensive military mobilization, as presumed events of force majeure. If the parties have included this clause in their agreement, the occurrence of a defined event generally constitutes a case of force majeure.
Similar provisions exist under international commercial law, particularly Article 79 of the United Nations Convention on Contracts for the International Sale of Goods. This article exempts a party from liability for non-performance if it proves that the failure was due to an impediment beyond its control, which could not reasonably have been foreseen or avoided.
Service and Price Adjustment Clauses: Built-in Flexibility
Because reliance on Section 313 of the BGB or force majeure clauses can be uncertain, many businesses include performance and price adjustment clauses in their contracts from the outset. These clauses allow parties to adapt to changes in raw material prices, inflation, or other factors. However, these clauses can be problematic and must strike a balance between predictability and flexibility.
When used in general terms and conditions, these clauses must be drafted with clarity and transparency, and they must align with the interests of the parties. German courts impose strict requirements:

Performance adjustment clauses are only permitted if they are reasonable for the counterparty, taking into account both parties’ interests. There must be a valid reason, and the adjustment must preserve the balance between performance and consideration.
Price adjustment clauses aim to maintain equivalence between performance and consideration during long-term relationships. These clauses must clearly specify the reason and scope of the price change and must not retroactively increase the user’s profit margin. The counterparty must be able to assess and verify the adjustment.

According to recent case law from the Federal Court of Justice, it is easier to justify price adjustment reservations, which allow the user to modify the price “at reasonable discretion” under certain conditions. It is sufficient to name the main cost drivers as change parameters in a comprehensible manner. A full breakdown of all cost components is not required.
Conclusion: Contracts Are Not A One-way Street – But Not A Wish List Either
Contracts cannot be changed easily. German law places great value on contractual certainty. Still, global economic volatility calls for updated legal tools.
The BGB’s doctrine of interference with the basis of the transaction offers relief when unforeseeable events significantly disturb the contract’s balance. Force majeure clauses provide clarity and prevent litigation. Price adjustment clauses and comparable contractual provisions create flexibility and reduce exposure on both sides.
Best Practices
Prepare for crises before they happen. In long-term contracts, include flexible mechanisms. Seek legal advice when circumstances change. And remember: Contracts should not just secure rights; they should enable fair solutions.
Because when the world is upside down, the goal remains: Getting through hard times together.

Dangerous Traps in the Fourth Circuit: Three Easy Ways to Lose an Issue on Appeal

One of the core competencies of a good appellate lawyer is spotting arguments that have been preserved.
Whether you’re the appellant or the appellee, knowing when an argument is properly preserved goes a long way.
The United States Court of Appeals for the Fourth Circuit publishes very few opinions, so finding a roadmap for issue preservation can sometimes be tricky. In this article, we’ll highlight three common questions about practice before the Court, set out the Court’s rules on each, and offer practical advice to help alleviate the stress of responding to a waiver argument.
1. Motions in limine preserve issues, but only if done correctly.
Trial lawyers love a motion in limine. It’s often a smart way to lock in a ruling and avoid mid-trial scrambles. But in the Fourth Circuit, just filing one doesn’t mean you’ve preserved all related issues for appeal.
The Court said as much in United States v. Williams, 81 F.3d 1321 (4th Cir. 1996). The defendant in that case filed a motion in limine requesting that, if his wife attempted to invoke spousal privilege, the court decide the issue outside the jury’s presence. But the court never ruled on the motion, and when the wife took the stand, defense counsel didn’t object.
On appeal, the defendant argued his wife’s testimony was privileged and should’ve been excluded. The Fourth Circuit disagreed: that exclusion issue wasn’t preserved. Why? Two reasons. First, the motion in limine never directly challenged the testimony—it just asked for a sidebar if privilege came up. Second, the court never ruled on the motion. And although the defense could’ve preserved the issue by objecting when the testimony was offered, he never did.
The upshot: A motion in limine preserves an issue only if: (1) the party raises the exact argument later asserted on appeal, and (2) the court issues a definitive ruling on that issue. A vague motion or a provisional ruling won’t cut it. If your pretrial motion is denied—or the ruling isn’t crystal clear—you need to object again.
2. Even if you don’t have to, raise even losing arguments.
When precedent clearly bars your argument, it can feel pointless to make it. Fortunately, in the Fourth Circuit, your client may benefit from a change in the law—whether from the Supreme Court or the en banc Fourth Circuit—even if you didn’t raise the foreclosed argument below.
The Court generally won’t consider any argument that wasn’t raised in the district court.
But that rule might not apply when an argument was foreclosed by “strong precedent” that is later overruled. United States v. Chittenden, 896 F.3d 633, 639 (4th Cir. 2018). In those cases, the Court has the discretion to consider new arguments that were previously unavailable.
That said, litigants should be cautious about relying too heavily on the Fourth Circuit’s “change in the law” exception. The Court hasn’t clearly defined when precedent is “strong” enough to excuse waiver. And in any event, the rule applies only when the legal change arises from someone else’s case. If you’re trying to change the law, the Court’s precedent suggests you must raise the issue clearly at every stage.
3. That footnote might not preserve your argument.
Lawyers love footnotes. And judges—for the most part—read them. But don’t count on that last-minute argument you slide in below the line to carry the day.
The Fourth Circuit, like many of its sister circuits, won’t consider an argument so unimportant that it appears only in a footnote.
At first, the Court noted that it would not consider an argument relegated to a footnote because the footnote itself was too cursory to comply with the Rules of Appellate Procedure. Wahi v. Charleston Area Med. Ctr., 562 F.3d 599, 607 (4th Cir. 2009).
But what started as a means of enforcing the rule prohibiting underdeveloped arguments later took on a life of its own. In Foster v. University of Maryland Eastern Shore, the Court cited Wahi to support its conclusion that a “discussion” limited to “an isolated footnote” was not enough to preserve an argument for appeal. 787 F.3d 243, 250 n.8 (4th Cir. 2015).
Quibble with the rule if you’d like, but the best practice is to raise your substantive arguments above the line in your brief. Even if you fully develop a footnoted argument, under Foster the Court may conclude you’ve waived it.
This best practice will also prepare you for practice in several other circuits. The Fifth, Seventh, and Eleventh Circuits have adopted the same view. So if you’re briefing an appeal, treat every important argument like it deserves to be heard. If you bury it in a footnote, the court will treat it like you didn’t raise it at all.
Final Thoughts
The Fourth Circuit isn’t out to trap lawyers. But it does expect precision. Trial lawyers briefing issues with appellate implications should raise them clearly, object when rulings are vague, and avoid the temptation to write off bad precedent as a reason to stay silent. Appellate counsel should scour the record for footnote-only arguments, fuzzy objections, and unpreserved motions.

Fourth Circuit Decides “Non-Ink-to-Paper” Agreement Among Defense Contractors May Toll Statute of Limitations for Antitrust Claims

On May 9, 2025, the U.S. Court of Appeals for the Fourth Circuit published a significant decision in Scharpf v. General Dynamics Corp., reviving a dormant class action lawsuit against a group of the country’s largest naval defense contractors. The plaintiffs, two former naval engineers, alleged that the defendants maintained an unwritten “no-poach” agreement not to recruit each other’s employees, thereby suppressing labor mobility and wages for over two decades. While the district court dismissed the claims as time-barred under the Sherman Act’s four-year statute of limitations, the Fourth Circuit reversed, holding “that an agreement that is kept ‘non-ink-to-paper’ to avoid detection can qualify as an affirmative act of concealment” sufficient to toll the statute of limitations.
The case is notable for both its subject matter – a purported industry-wide, decades-long no-poach conspiracy among the largest players in the $40 billion shipbuilding industry – as well as its reaffirmation and arguable expansion of a relatively plaintiff-friendly fraudulent concealment standard. In adopting a practical view of what constitutes an “affirmative act” of concealment, the Fourth Circuit aligns itself with a growing consensus among federal courts and signals that unwritten antitrust conspiracies cannot escape judicial scrutiny merely because they were designed to leave no paper trail.
Background
The plaintiffs, Susan Scharpf and Anthony D’Armiento, are former naval engineers who worked for various naval shipbuilding companies between 2002 and 2013. In 2023, they brought a putative class action against “many of the largest shipbuilders and naval-engineering consultancies in the country,” alleging that the defendants had entered into an unwritten agreement to not actively recruit each other’s employees. This alleged no-poach conspiracy, which the plaintiffs claim “began as early as 1980 and was ubiquitous by 2000,” purportedly suppressed wages and prevented labor mobility across the industry.
The plaintiffs only discovered the alleged conspiracy in April 2023, following an investigation centered on insider witness accounts. According to the complaint, the conspiracy was deliberately concealed through a “non-ink-to-paper agreement,” which consisted of verbal agreements, passed down through oral instruction and enforced through coded language and informal executive communications. The plaintiffs argued that such tactics justified tolling the statute of limitations under the doctrine of fraudulent concealment.
The district court disagreed. In granting the defendants’ Rule 12(b)(6) motion, the court held that merely keeping an agreement unwritten did not constitute an affirmative act of concealment and dismissed the suit as barred by the statute of limitations. The plaintiffs appealed.
Fourth Circuit Decision
The Fourth Circuit reversed and remanded. Writing for the majority, Judge James Wynn concluded that the district court misapplied the standard for fraudulent concealment. Under “cornerstone” Fourth Circuit precedent in Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, a plaintiff can toll the statute of limitations by alleging that the defendants engaged in affirmative acts intended to conceal their illegal conduct. In Scharpf, the majority held that maintaining a “non-ink-to-paper” agreement specifically for the purpose of avoiding detection qualified as such an affirmative act.
The court rejected the defendants’ argument that “a secret agreement… is not an affirmative act of concealment” and emphasized that “neither logic nor our precedent supports distinguishing between defendants who destroy evidence of their conspiracy and defendants who carefully avoid creating evidence in the first place.” Indeed, the latter may be even more effective at concealing misconduct. According to the court, the defendants’ alleged strategy of enforcing the no-poach agreement exclusively through oral instruction, euphemistic language (such as referring to other firms as “friends”), and private phone calls amounted to a deliberate scheme to avoid scrutiny. These tactics, if proven, reflected more than mere silence or passive nondisclosure and instead amounted to affirmative efforts to suppress evidence of the conspiracy.
Importantly, the court also applied a relaxed pleading standard under Rule 9(b), which governs fraud allegations. Recognizing the challenges plaintiffs face in pleading fraud-by-omission claims without access to discovery, the court held that the plaintiffs’ detailed factual allegations, “the bulk of [which] are quotes from interviews with industry insiders,” constituted particularity sufficient to survive a motion to dismiss.
Context in Federal Antitrust Law
Scharpf reinforces the Fourth Circuit’s alignment with the intermediate “affirmative-acts standard” for fraudulent concealment – a standard increasingly favored by federal courts. The First, Fourth, Fifth, Sixth, and Ninth circuits have adopted this standard holding that concealment need not be separate from the underlying antitrust violation, so long as the defendants undertook deliberate acts to keep the conspiracy hidden. For instance, the Fourth Circuit cited for support Texas v. Allan Construction Co., in which the Fifth Circuit held that covert price-fixing meetings could qualify as acts of fraudulent concealment, and Conmar Corp. v. Mitsui & Co., in which the Ninth Circuit emphasized that plaintiffs need not show additional deception beyond the conspiracy itself if the antitrust violation was secretly executed.
The Fourth Circuit again declined to adopt the “inapplicable” “self-concealing standard” enforced in the Second, Eleventh, and D.C. circuits, which allows tolling whenever “deception or concealment is a necessary element of the antitrust violation.” The court also declined to follow the Tenth Circuit’s lonely adherence to the restrictive “separate-and-apart” standard that allows tolling only on a showing of active concealment distinct from the underlying misconduct. Scharpf explained that the self-concealing standard is “inapplicable” to cases involving alleged price-fixing because “price-fixing is not inevitably deceptive or concealing.” Without discussion, the majority summarily dismissed the separate-and-apart standard as “too stringent and indeterminate.”
Notably, the Fourth Circuit also distinguished its ruling from its earlier, arguably more defendant-friendly decisions in Pocahontas Supreme Coal Co. v. Bethlehem Steel and Robertson v. Sea Pines Real Estate, in which the court had rejected tolling arguments based on an alleged “failure to admit wrongdoing” despite little to no initiative by plaintiffs to uncover such wrongdoing. In Scharpf, by contrast, the court held that defendants engaged in active concealment through coordinated non-documentation, covert verbal policies, and indirect enforcement mechanisms, all of which are hallmarks of intentional secrecy rather than mere passive non-disclosure.
Diaz Dissent
Chief Judge Albert Diaz dissented, arguing that the majority effectively adopted the lenient self-concealing standard rather than applying the Fourth Circuit’s established affirmative acts standard for fraudulent concealment. He contended that the plaintiffs failed “to allege discrete and particularized acts by the defendants to conceal the conspiracy” beyond “general descriptions” of the conspiracy itself. According to the dissent, simply labeling the no-poach agreement as unwritten or secret was insufficient to constitute an affirmative act of concealment, as the concealment was inherent in the alleged unlawful conduct. Diaz warned that the majority’s approach risks collapsing the distinction between conspiratorial conduct and concealment, thereby undermining the statute of limitations and permitting time-barred claims to proceed based solely on the inherently secretive nature of the original violation.
The Impact
The Scharpf decision is poised to create ripple effects in antitrust and employment litigation, particularly as courts and enforcers increasingly scrutinize collusion in labor markets.
Most immediately, the decision reinforces that the statute of limitations will not shield conspirators who hide their agreements through sophisticated concealment tactics. Employers in high-skill or high-security industries – especially those with limited pools of specialized labor – should pay close attention to this ruling. “Gentlemen’s agreements” and “non-ink-to-paper agreements” among competitors, even if never memorialized or acknowledged publicly, may still allow tolling for actionable antitrust claims.
More broadly, the ruling validates plaintiffs’ reliance on insider testimony and circumstantial evidence to plead fraudulent concealment in complex conspiracies. In practical terms, the Fourth Circuit may have lowered the procedural barriers for employees and other would-be plaintiffs to challenge long-running but unwritten anticompetitive arrangements.

Gradual Implementation of the National Code of Civil and Family Procedure in Mexico City: Key Dates and Broader Impact

Although the National Code of Civil and Family Procedure (CNPCyF) was enacted on June 8, 2023, its implementation will be gradual. At both the federal and state levels, its entry into force depends on each judicial branch requesting the corresponding declaration of enforceability from the federal or local congress. The deadline for this to happen is April 1, 2027. At the federal level, this declaration has not yet been issued.
In Mexico City, the declaration has already been published, which resulted in the abrogation of the local Code of Civil Procedure. However, the CNPCyF will be applied gradually, with a distinction between civil and family matters. In civil matters, the key effective dates are:

December 1, 2024: applicable to oral special mortgage and oral residential lease proceedings.
June 1, 2025: applicable to voluntary jurisdiction, interim relief, and oral executive proceedings.
November 15, 2025: applicable to ordinary oral civil proceedings, enforcement proceedings, and all other cases not previously mentioned. This date will also mark the start of its supplementary application to other laws.

Additionally, on November 29, 2024, a decree was published amending various legal provisions in Mexico City to harmonize them with the CNPCyF. This reform is significant, as it lays the groundwork for the Code to be applied on a supplementary basis in administrative proceedings, including at the federal level. However, its concrete implementation in this area remains pending and will require close monitoring.

New Procedural Rules for Trade Secrets in Germany

On April 1, 2025, the Act to Strengthen Germany as a Location for Justice—formally titled Justizstandort-Stärkungsgesetz of October 7, 2024 (Federal Law Gazette 2024 I No. 302)—entered into force. This legislation aims to enhance Germany’s attractiveness as a venue for international commercial litigation by, among other things, establishing commercial courts and permitting the use of English in civil proceedings.
To strengthen the protection of trade secrets, the new law amends both the German Code of Civil Procedure (ZPO) and the Introductory Act to the Code of Civil Procedure (EGZPO). These changes respond to a growing practical need for stronger procedural safeguards for trade secrets across a broader range of legal disputes.
Procedural protection for trade secrets is primarily governed by Sections 16–20 of the Trade Secrets Act (Geschäftsgeheimnisgesetz, or GeschGehG). However, these provisions only apply directly to proceedings involving claims brought under the Trade Secrets Act itself. They do not extend to other civil cases where trade secrets could be relevant—such as disputes over confidentiality obligations in employment or service contracts, or in copyright matters.
This limited scope was confirmed by the Higher Regional Court of Düsseldorf in a decision dated January 11, 2021 (Case No. 20 W 68/20, GRUR-RS 2021, 7875, paras. 12–13), where the court held that Sections 16 ff. GeschGehG could not be applied analogously to copyright disputes.
While certain provisions of the German Courts Constitution Act (GVG)—namely Sections 172 no. 2, 173(2), and 174(3)—do allow for some restriction of public access in civil proceedings, they offer only limited protection. For one, parties do not have a legal entitlement to a non-public hearing. More importantly, these provisions only take effect from the oral hearing onward and do not protect sensitive information disclosed in earlier stages, such as in the statement of claim. As a result, litigants may be forced to choose between withholding crucial information—thereby risking procedural disadvantages—or disclosing trade secrets and compromising confidentiality.
Furthermore, under the current legal framework, the confidentiality obligation in Section 174(3) sentence 1 GVG does not restrict the use of information acquired through the proceedings. This means an opposing party may legally use trade secret information for their own benefit outside the courtroom (see Bundestag printed matter 20/8649 of October 6, 2023, p. 32).
To address this gap, the newly introduced Section 273a ZPO now provides a comprehensive framework for the procedural protection of trade secrets in all civil proceedings governed by the ZPO—not just in commercial court matters. Upon request by a party, the court may designate certain disputed information as confidential, in whole or in part, if it qualifies as a trade secret under Section 2 no. 1 GeschGehG. Notably, it is sufficient for the information to potentially be a trade secret.
Once such a designation is made, the procedural protections of Sections 16–20 GeschGehG apply accordingly. This includes, for example, the obligation to treat the information confidentially under Section 16(2) GeschGehG, and the prohibition on using or disclosing it outside the proceedings—unless the information was already known to the parties independently of the litigation.
According to the transitional provision in Section 37b EGZPO, the new Section 273a ZPO applies immediately upon the Act’s entry into force, including to cases that were already pending at the time. Parties and practitioners must therefore be aware that the new rule is applicable to ongoing proceedings.
Why This Matters
The new Section 273a ZPO marks a significant shift in the procedural protection of trade secrets in German civil litigation. Whether you’re navigating ongoing proceedings or planning future litigation strategy, it’s crucial to understand how these changes affect your rights and obligations.

Pay Up or Lawsuit Up: The 30-Day Countdown That’s Fueling Arbitration Disputes

Online businesses are increasingly facing a wave of arbitration demands under the California Invasion of Privacy Act (“CIPA”) and similar laws. Enterprising law firms have been at the forefront of this trend, filing claims on behalf of individuals who are often not genuine customers, but rather “litigation testers” or professional plaintiffs. Some law firms recruit claimants from advertisements on social media or elsewhere, often recruiting individuals to bring claims against multiple companies simultaneously. These claimants typically allege technical privacy violations, such as the use of website cookies, chatbots, or session replay tools, and then initiate arbitration demands, often en masse. The underlying strategy is not to resolve the merits of each claim, but to exploit the high cost of initiating and defending one or more arbitrations, thereby pressuring businesses into settlements regardless of the actual validity of the claims. Because the major arbitration providers charge businesses a fee for each case filed, businesses can often face tens or hundreds of thousands of dollars in fees simply to have their cases heard, even if the claims against them ultimately fail.
This development has placed a significant burden on well-intentioned businesses. Many of the arbitration demands are based on dubious or manufactured claims, yet the cost of responding to each individual arbitration—including substantial administrative and arbitrator fees—can quickly become overwhelming. As a result, the threat of arbitration is increasingly being used as a tool for extracting settlements, rather than for resolving legitimate disputes.
In this article, we will examine the legal framework that has enabled this trend, focusing on California’s 30-day arbitration fee payment rule and its potential consequences for businesses. We will then explore the arguments raised by major retail industry groups challenging the rule, review the appellate decisions in the Hohenshelt and Hernandez cases, and preview the upcoming California Supreme Court review that could reshape the landscape for consumer arbitrations in California.
California’s 30-Day Arbitration Fee Rule: Strict Deadlines and Harsh Consequences
California law, specifically Code of Civil Procedure sections 1281.97 and 1281.98, requires that businesses pay arbitration fees within 30 days of the invoice being issued by the arbitration provider, such as JAMS or AAA. In consumer and employment arbitrations, the business is typically responsible for a large part of these fees. In the mass arbitration context, the required payment can be substantial sums—tens or even hundreds of thousands of dollars—that not all businesses have readily available. If the business fails to pay within the 30-day window, the business may be in material breach of the arbitration agreement. The consequences can be severe: the claimant may withdraw from arbitration and proceed in court, and the business may be required to pay the claimant’s attorneys’ fees and costs. The statute does not permit extensions unless all parties agree, and there is no exception for inadvertent delay, substantial compliance, or lack of prejudice to the claimant.
Sections 1281.97 and 1281.98 single out arbitration agreements for uniquely harsh treatment, as no other type of contract is voided on such a hair-trigger basis for a minor delay in payment. Outside of the arbitration context, courts consider the facts and circumstances, including whether the delay was excusable or whether the other party was prejudiced. The law’s lack of flexibility in the arbitration context is also problematic, as it does not allow for any discretion or relief for excusable neglect, inadvertent error, or even situations where the payment is only a few days late due to circumstances beyond the business’s control, such as a payment lost or delayed in the mail or an invoice sent to a spam folder. Courts have held that even disagreement as to whether the amount of the fee is correct does not alter the strict interpretation of the 30-day deadline.
Appellate Decisions To-Date
The legal landscape surrounding California’s 30-day arbitration fee rule is sharply illustrated by the appellate decisions in Hohenshelt v. Superior Court and Hernandez v. Sohnen Enterprises, Inc. These cases not only highlight the practical consequences of the rule for businesses but also frame the core legal debate over federal preemption and the enforceability of arbitration agreements in California.
Hohenshelt v. Superior Court
In Hohenshelt, the dispute arose when an employer, Golden State Foods Corp., failed to pay arbitration fees within 30 days of receiving invoices from JAMS, the arbitration provider. The employee, Dana Hohenshelt, invoked Code of Civil Procedure section 1281.98, which deems such a failure a “material breach” of the arbitration agreement. Hohenshelt elected to withdraw from arbitration and return to court, seeking to lift the stay on litigation.
The Court of Appeal sided with the employee, holding that the statutory language was clear and left no room for discretion: if the drafting party (typically the employer or business) does not pay the required fees within 30 days, it is in material breach, and the claimant may proceed in court. The court rejected the argument that an extension granted by the arbitration provider could cure the breach, emphasizing that the statute only allows extensions if all parties agree. The court also found that the Federal Arbitration Act (“FAA”) did not preempt California’s rule, reasoning that the statute furthered the FAA’s objectives by preventing businesses from stalling arbitrations through nonpayment and ensuring a speedy resolution of disputes.
A notable aspect of the Hohenshelt decision is its strict, almost mechanical application of the 30-day rule, regardless of the reasons for late payment or the absence of prejudice to the claimant. The court’s approach was to treat the statutory deadline as absolute, with no exceptions for inadvertent delay, good faith participation, or even payment made shortly after the deadline. This rigid interpretation has significant consequences for businesses, as even minor administrative errors can result in the loss of the right to arbitrate and exposure to additional sanctions.
Hernandez v. Sohnen Enterprises
In contrast, Hernandez presented a different scenario. The employer, Sohnen Enterprises, paid the arbitration fees after the 30-day deadline, and the employee sought to withdraw from arbitration under section 1281.97. The trial court granted the motion, but the employer appealed.
The Court of Appeal reversed, holding that the FAA preempted California’s 30-day rule in this context. The court’s analysis focused on the “equal-treatment principle” established by the U.S. Supreme Court, which prohibits states from imposing special burdens on arbitration agreements that do not apply to other contracts. The court found that section 1281.97’s mandatory finding of material breach and waiver for late payment was an arbitration-specific rule that conflicted with the FAA. Under general contract law, whether a breach is “material” is a fact-specific inquiry, and courts typically consider the circumstances, including whether the delay was excusable or whether the other party was prejudiced. By contrast, California’s statute imposed a strict, automatic penalty for late payment, singling out arbitration agreements for disfavored treatment. The court held that the state law did not override the federal policy favoring arbitration.
What’s Next: California Supreme Court Review
These two cases encapsulate the current legal uncertainty facing businesses in California. Hohenshelt suggests that the 30-day rule is absolute and not preempted by federal law, while Hernandez holds that the FAA preempts the rule. The split in authority has led to confusion and inconsistent outcomes and ultimately creates pressure for businesses to settle non-meritorious claims or risk having to pay the claimant’s attorneys’ fees and costs as a sanction.
The California Supreme Court has granted review in Hohenshelt, with oral argument scheduled for May 21, 2025. The Court’s upcoming review of Hohenshelt could provide much-needed clarity for businesses and claimants alike. The decision may determine whether California can continue to enforce its strict 30-day rule in all consumer and employment arbitrations, or whether the FAA’s equal-treatment mandate will require a more flexible approach.
The outcome could have significant implications for businesses facing arbitration demands, especially in the consumer privacy context, where claimants may attempt to leverage the current statutory regime to pressure businesses into settlements.
We will continue to monitor this case closely and provide updates as the Supreme Court’s decision approaches. Virtually any business with a website faces potential CIPA or similar privacy claims, so those businesses with consumer arbitration agreements should review their arbitration provisions and consult with counsel regarding best practices for managing arbitration fee payments and mitigating the risk of arbitration exposure.

Understanding the FOIA Process: Submitting, Appealing, and Litigating Requests for Government Records

The Freedom of Information Act (FOIA), enacted in 1966, grants the public the right to access records from any federal agency, promoting transparency and accountability in government. Whether you’re a business owner, researcher, journalist, or private citizen, understanding the FOIA process — and how to challenge an agency’s response — is essential for ensuring your access rights are protected.
Step 1: Submitting a FOIA Request
To initiate a FOIA request:

Identify the Agency – Determine which federal agency holds the records you’re seeking. Each agency processes its own FOIA requests.
Draft the Request – Clearly describe the documents you seek. Be as specific as possible, including names, dates, locations, or subject matter to help narrow the search.
Submit the Request – Most agencies accept requests via email, web portals, or mail. Ensure your request is directed to the correct FOIA office and that it includes your contact information. Alternatively, FOIA.gov offers a submission portal for every federal agency subject to FOIA.
Fees and Waivers – Agencies may charge fees for search, duplication, or review time. You can request a fee waiver by demonstrating that disclosure is in the public interest.

Once submitted, agencies are generally required to respond within 20 business days, though this period can be extended for “unusual circumstances.”
Step 2: Appealing a Denial or Inadequate Response
If your request is denied in whole or in part, or if you receive no substantive response within 20 business days (absent any extensions), you can file an administrative appeal.

Deadlines – You typically must file your appeal within 90 days of the denial. Check the agency’s FOIA regulations for specific timelines.
Format – Appeals must be in writing and should include:

A copy of the original FOIA request.
The agency’s response (or a statement of the lack thereof).
Arguments explaining why the denial was improper.

Grounds for Appeal – Common bases include improper redactions, unjustified use of exemptions, failure to conduct an adequate search, or lack of timely response.

Agencies are required to decide administrative appeals within 20 business days. If the appeal is denied or ignored, the next step is usually litigation.
Step 3: Challenging the FOIA Response in Court
You have the right to challenge a denial in federal district court.

Jurisdiction – You generally can file a lawsuit in the district where you live, where the records are located, or in the District of Columbia.
Timing – You may sue after exhausting administrative remedies (i.e., completing the appeal process), or if the agency fails to respond to your original request or appeal within the statutory deadline.
Scope of Judicial Review – Courts will examine whether the agency:

Properly invoked FOIA exemptions.
Conducted an adequate and reasonable search.
Complied with procedural requirements.

Burden of Proof – The government bears the burden of justifying its withholding or redactions. Courts may order the release of improperly withheld records.
Attorneys’ Fees – If you substantially prevail in litigation, the court may award reasonable attorneys’ fees and litigation costs.

Final Thoughts
The FOIA process can be complex and time consuming, especially when agencies resist disclosure. However, the law provides multiple avenues for redress. Whether through administrative appeal or litigation, you have tools to hold the government accountable and access the records that shape public policy.
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