Category: Civil Procedure

How Many Businesses Can Survive a 145% Tariff Shock?

Small business bankruptcies are about to surge, and tariffs are the match being lit. [i]
FTI Consulting’s CFO, Ajay Sabherwal, recently said that the recent uptick in FTI’s restructuring business is partly fueled by “tariff-induced” stress. Many consulting firms have already set up ‘tariff war rooms’ to help clients brace for what’s ahead. If this sounds eerily familiar to how firms scrambled to support clients during COVID-19, that’s because it is. I would not be surprised if law and accounting firms launch tariff-focused resource centers, just as they did with pandemic-related issues. Regardless, many US businesses will soon need more help than during COVID-19, but nothing like ERC or EIDL money will likely be in the offering.
Gary D. Cohn, IBM vice chairman and former director of the US National Economic Council, summed it up on Face the Nation a few weeks ago. Cohn explained that the full impact of the new tariffs is only a few weeks away, due to the typical eight-week shipping and distribution cycle:
“So what people need to understand is the cycle from a good being sold in China, loaded on a vessel, sailed across the ocean, unloaded in the United States, put in a factory, distributed to a shelf, is about eight weeks… [I]f you go back to the April 2nd date when the tariffs kicked in… we’re a few weeks away from… see[ing] the early effects of what will happen in the transportation of goods… [Toy stores typically order] their toys for Christmas today [but] those toys are now coming with a massive 145% tariff. The vast majority… cannot order toys today because they cannot afford the 145% tariff. So… they’re either going out of business or they’re just going to wait and see what happens.”
Yes, Cohn was talking about toys. But swap out ‘toys’ for just about anything else, and the story is the same. Retailers. Manufacturers. Distributors. Logistics companies. The effects will ripple quickly.
The bottom line: If tariffs remain at their current levels, and if no meaningful adjustments are made soon, we are about to see a wave of business distress and bankruptcies that makes the recent pickup in restructuring work look like a warm-up act. [ii]
Editors’ Note: This article is based in substantial part on an article that was published on LinkedIn on 4/29/25. This article is subject to the disclaimers found here.

Footnotes
[i] While no business is thrilled about a 145% tariff, not all businesses are equally equipped to weather the storm. Big companies can hedge currency exposure, renegotiate supplier contracts at scale, shift production to other countries, or pass costs along to customers with clever pricing strategies. Small businesses? Not so much.
Small business owners don’t have trade compliance departments or international logistics teams. They often lack the cash reserves, the borrowing capacity, or the leverage to get sweetheart deals from suppliers. And unlike their larger competitors, they don’t have the luxury of absorbing costs or ‘waiting it out.’ For many, the choice is stark: pay the tariff and lose money or stop ordering and lose customers. Either path leads to distress. One path just takes longer to get there.
A potent tool for struggling companies is Subchapter V of Chapter 11 of the Bankruptcy Code. Read “Subchapter V of Chapter 11: A User’s Guide” for a summary.
[ii] I don’t intend this to be political, nor do I think the impact is entirely bad. US consumer spending, for example, increased in March and early April, with people front-loading purchases in anticipation of coming price hikes. And if there is one thing the White House has proven, it can cause significant economic shifts by dominating the news. If it starts to behave more predictably, I think most negative effects can be short-lived.
However, as a friend said to me, it “seems like the impact on shipping, trucking, warehousing, and logistics will be nearly immediate.” Indeed, leaving the big boys (Fed Ex, UPS, etc.) aside, the last-mile delivery industry alone includes thousands of companies, ranging from small local courier services to larger regional logistics firms. And the recent increased demand on supply chain players caused by increased buying in advance of the tariffs’ impact will be short-lived. FedEx and UPS have both, for example, announced layoffs, due in part to the uncertainty created by the tariff situation. I’m not suggesting the impact will be catastrophic, but there likely will be fallout among weaker competitors.

The Hidden Liability: Why Expert Witness Due Diligence Is No Longer Optional

In modern litigation, the strength of your expert witness can be a determining factor in the trajectory of your case. An expert’s credibility, background, and litigation history often come under intense scrutiny—both in and out of court. For attorneys, the failure to thoroughly vet an expert witness, whether retained or opposing, carries serious professional and strategic risks.
Expert Witnesses Under the Microscope
Expert testimony serves as a cornerstone in complex litigation—shaping liability, influencing damages, and framing technical issues for judges and juries alike. But with that influence comes a heightened burden: the need to ensure that an expert’s qualifications and history can withstand rigorous cross-examination and judicial scrutiny.
A growing number of cases have demonstrated how overlooked details—such as undisclosed board sanctions, prior litigation conduct, or inconsistent statements—can be leveraged by opposing counsel to impeach an expert’s credibility. Even experienced attorneys can find themselves blindsided if their expert’s record hasn’t been fully vetted. Worse, if the lapse is egregious enough, it could expose the firm to malpractice claims.
Common Pitfalls in the Vetting Process
Attorneys frequently rely on publicly available sources such as state licensing boards or disciplinary records to evaluate expert witnesses. While these are important starting points, they can be incomplete or difficult to access. Sanctions may not be updated in real-time, and some jurisdictions maintain opaque or fragmented reporting systems.
Further, expert witnesses often have extensive litigation histories, academic publications, or industry affiliations that may contain contradictory or problematic material. An expert who testifies inconsistently across cases, for example, opens the door to impeachment. Similarly, undisclosed financial relationships or conflicts of interest can call an expert’s neutrality into question.
When Expert Vetting Fails: High-Stakes Lessons from Recent Litigation
Recent high-profile cases underscore the critical importance of thoroughly vetting expert witnesses, as lapses in credibility have led to significant legal repercussions.
In the Paraquat Products Liability Litigation, (MDL No. 3004, Case No. 3:21-md-3004-NJR), thousands of plaintiffs allege that exposure to the herbicide Paraquat caused Parkinson’s disease. The plaintiffs’ sole general causation expert, a biostatistics professor, was excluded by both federal and state courts due to concerns over his methodology. This exclusion has significantly undermined the plaintiffs’ position, highlighting how even a single expert’s shortcomings can jeopardize large-scale litigation.
Meanwhile, the Karen Read trial, (Commonwealth v. Karen Read, Norfolk Superior Court, Massachusetts) has received national attention. Read is accused of murdering her boyfriend, Boston police officer John O’Keefe. The case has been marked by intense scrutiny over expert testimony and evidence handling. Notably, the defense’s use of two expert witnesses raised serious ethical and procedural concerns, leading a Massachusetts judge to suspend the retrial after discovering undisclosed payments exceeding $23,000 to experts from ARCCA LLC. The judge expressed “grave concern” over these payments and their potential to influence testimony, illustrating how non-transparent expert arrangements can threaten the integrity of a defense strategy.
These cases serve as stark reminders that expert witness credibility hinges not only on academic qualifications but also on transparency, methodology, and litigation history—all of which demand thorough and ongoing vetting.
Vetting the Opposition: A Strategic Imperative
While it’s standard practice to assess your own expert’s background, applying the same level of scrutiny to opposing experts can create valuable strategic advantages. Identifying prior credibility issues, financial incentives, or testimony that contradicts their current opinions can equip attorneys with powerful tools for cross-examination or motion practice.
This kind of intelligence gathering often goes beyond traditional research. Attorneys increasingly rely on technology-assisted review and monitoring tools that provide ongoing insight into an expert’s involvement in litigation, public commentary, and professional conduct.
How Legal Tech and AI Are Transforming Expert Witness Due Diligence
Advancements in legal technology are fundamentally reshaping how attorneys approach expert witness vetting. AI-powered tools can now aggregate and analyze vast amounts of data—spanning court filings, publications, deposition transcripts, disciplinary records, media coverage, and online content—that would take an individual attorney dozens of hours to review manually, if accessible at all.
By synthesizing this information, these technologies help attorneys identify potential red flags in both retained and opposing experts, such as inconsistent testimony, undisclosed affiliations, financial conflicts, or patterns of bias. This kind of analysis allows for a more complete and proactive assessment of an expert’s litigation history and professional conduct.
Whether leveraging sophisticated platforms or conducting manual investigations, attorneys must treat expert vetting as a critical component of case strategy. A well-documented, thoroughly scrutinized expert can offer a strategic advantage—not only at trial, but during early case evaluation, expert selection, and pre-trial motion practice.
Checklist: Key Areas to Evaluate When Vetting Expert Witnesses
To ensure credibility and minimize risk, attorneys should review the following:

Litigation HistorySearch past testimony and involvement in prior cases for inconsistencies, frequency of retention, or potential bias. 
Publications & Academic WorkExamine peer-reviewed articles, books, or public statements for positions that may contradict current opinions. 
Deposition & Trial TranscriptsIdentify patterns in how the expert performs under examination or how their testimony has been challenged. 
Licensing & Disciplinary RecordsConfirm active licensure and check for sanctions or disciplinary actions through relevant state or professional boards. 
Professional AffiliationsInvestigate organizational memberships or consulting roles that may pose conflicts of interest. 
Media Coverage & Online PresenceReview interviews, social media activity, and public commentary for any material that could affect credibility. 
Financial RelationshipsDisclose and evaluate payments received from parties with vested interests in the litigation.

A Heightened Standard of Care
In an era where expert testimony is increasingly under attack, courts and clients alike expect attorneys to meet a higher standard when it comes to expert witness due diligence. The ability to identify red flags—before opposing counsel does—can mean the difference between advancing your case and defending against an avoidable credibility crisis.
By leveraging the latest legal tech tools, attorneys are positioned to meet that heightened standard. These platforms do not replace legal judgment—but they elevate the investigative foundation on which sound decisions are made.
In high-stakes litigation, there is simply no substitute for knowing exactly who your expert is—and who the other side’s expert claims to be.

California Supreme Court Prohibits Contractual Limitation of Liability Clauses for Intentional Misconduct

In New England Country Foods, LLC v. VanLaw Food Products, Inc., the California Supreme Court recently held that California Civil Code section 1668 prohibits contractual limitation of liability clauses that limit liability for harm caused by intentional misconduct.
In pertinent part, Section 1668 provides:
“All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.”
Manufacturer VanLaw was sued by a barbecue sauce company for allegedly trying to copy its barbecue sauce and sell it to Trader Joe’s. New England Country Foods’ claims sounded both in contract and tort. In response, VanLaw argued that a contract between the parties limited damages for injuries caused by intentional actions and were therefore against public policy.
In response, the plaintiff asserted that the contractual limitation of liability provision was not enforceable pursuant to California Civil Code Section 1668 because it it permitted the defendant to engaged in intentional tortious conduct with impunity.
The applicable limitation on damages clause stated, in pertinent part:
“In no event will either party be liable for any loss of profits, loss of business, interruption of business, or for any indirect, special, incidental or consequential damages of any kind, even if such party has been advised of the possibility of such damages.”
After its contract with Trader Joe’s had expired, NECF discovered emails between VanLaw and Trader Joe’s that purportedly stated that the former intended to copy the barbecue sauce. NECF  then initiated legal action against VanLaw seeking lost profits and punitive damages. NECF’s claims included breach of contract, intentional and negligent interference with prospective economic relations, intentional interference with contractual relations and breach of fiduciary duty.
The U.S. District Court for the Central District of California dismissed the plaintiff’s complaint, reasoning that the applicable contract limited the parties remedies to direct damages or injunctive relief. The court permitted NECF to amended its complaint by seeking “remedies permitted under” the contract or “plead why the available remedies are unavailable or so deficient as to effectively exempt Defendant from liability.”
In its amended complaint, NECF stated, in pertinent part:
“Upon information and belief, all of Plaintiff’s harm from the wrongful conduct alleged herein is a form of lost profits (both past and future). Further, the only possible harm to Plaintiff from the wrongs committed by Defendant are a loss of profits.”
Plaintiff further asserted that the contractual limitation of liability provision “would completely exempt Defendant from liability for the wrongs alleged.” NECF asserted that the subject contractual provision was voidable as per California Civil Code Section 1668.
The complaint was once again dismissed by the district court which reasoned that the contractual provision substantially limiting damages for willful tortious conduct was valid and agreed upon.
NECF appealed to the case to the Ninth Circuit that, in turn, referred the issue to the California Supreme Court to determine whether the provision was enforceable pursuant to California Civil Code Section 1668.
According to the California Supreme Court explained, Section 1668 is intended to “vindicate social policy” by precluding parties from “granting themselves licenses to commit future aggravated wrongs.” The court noted a different, recent California case similarly held that the existence of a contractual relationship between two parties does not mean one party can tortiously injure the other but limit its liability to a contract remedy.
The court opined that it may be possible to release ordinary negligence, but not gross negligence or willful conduct.
For ordinary negligence claims, the court cited to legal precedent that previously held that contractual limitations of liability for ordinary negligence may be prohibited if they affect the public interest as assessed under various, enumerated factors.
Consequently, the California Supreme Court held that, regardless of the relative sophistication of the parties, the contractual limitation of liability clause was not enforceable because it violated public policy and Section 1668 of the California Civil Code. Note, that the court stated that its holding applied only to the extent the claims at issue involve a tort claim independent of the parties’ contract.
Parties negotiating contracts should be aware of this decision, particularly when considering choice of law provisions.

Eleventh Circuit Addresses Rule 9(b) Heightened Pleading Standard in False Claims Act Case

The U.S. Court of Appeals for the Eleventh Circuit has concluded that a successful False Claims Act (FCA) claim should “allege not just a scheme, but a scheme that actually led to false claims being submitted to the government”—and must do so with particularity.
This heightened pleading standard cost the qui tam relators in United States ex rel. Vargas v. Lincare, Inc. et al., 24-11080, 2025 WL 1122196 (11th Cir. Apr. 16, 2025), three out of the four claims in their fourth amended complaint. The U.S. District Court for the Middle District of Florida had dismissed the entire complaint for failing to plead sufficient facts under Federal Rule of Civil Procedure 9(b) (“Rule 9(b)”).
The Eleventh Circuit reversed in part, holding that certain allegations of upcoding were adequately pleaded under Rule 9(b) to survive a motion to dismiss. The complaint alleged that the defendants, a medical supplier and its subsidiary, improperly coded the accessories (i.e., batteries, chargers, and cables) of continuous positive airway pressure (CPAP) machines as ventilator accessories. Ventilator accessories are covered by TRICARE, a health insurance program for military personnel and their families; CPAP accessories are not.
The Eleventh Circuit affirmed the dismissal of claims alleging: (1) the routine waiver of patient copays in violation of TRICARE conditions of participation; (2) automatic shipments of CPAP supplies, such as masks (TRICARE covers these supplies only upon a request); and (3) illegal kickbacks to employees of labs or medical offices who could choose which supplier was used.
“The most direct way to satisfy [Rule 9(b)] is by identifying specific claims submitted to the government: invoices, billing records, reimbursement forms,” wrote Senior U.S. Circuit Judge Gerald Bard Tjoflat. Alternative means (other than documentary proof) may satisfy Rule 9(b), the court noted, as long as the claim has “sufficient indicia of reliability”—a case-by-case determination.
Reliability and Falsity
The Eleventh Circuit concluded that the relators successfully pleaded specific allegations relating to the CPAP accessory scheme. The court rejected the defendants’ arguments that: (1) there were insufficient indicia of reliability to show that an actual claim was submitted, and (2) even if claims were submitted, they were not false. On these points, the court determined the following:

Reliability: The relators adequately alleged hands-on access to private records, including patient files, billing correspondence, and authorizations for payment—“the type of inside information that [is] sufficient at the pleading stage.” The relators identified specific claims (i.e., specific instances of upcoding), with dates, amounts, and billing codes.
Falsity: The relators adequately alleged that the coding practices were improper and the resulting claims were false. Though the defendants claimed that TRICARE allowed the substitute ventilator codes, this was a factual dispute and not grounds for dismissal, per the court.

Meanwhile, the relators identified no specific false claims submitted to TRICARE in connection with: (1) any co-pay waiver, (2) the auto-ship scheme involving CPAP replacement supplies, or (3) the alleged kickbacks.
No Shotgun Pleadings
In a separate concurrence, Judge Tjoflat called attention to a “foundational pleading defect that the District Court did not reach.” The relators’ fourth amended complaint, he noted, packed all four of the fraud claims described above into a single count—burdening the courts, defendants, and the appellate process.
“That is not how litigation works,” he wrote. “The fourth amended complaint is a shotgun pleading—something we have condemned time and time again. It…forces courts to play detective rather than umpire.”
Shotgun pleadings, the judge stated, run counter to Rule 8 (requiring statements in a claim to be “short and plain,” with allegations that are “simple, concise, and direct”) and Rule 10 (requiring each claim founding on a separate transaction or occurrence to be stated in a separate count, “if doing so would promote clarity”). When confronted with a shotgun complaint, he said, a defendant should move for a more definite statement under Rule 12(e). And a district court should sua sponte strike it—“early and firmly.”
Takeaways
The Vargas decision offers clarity in the Eleventh Circuit on the rigorous application of the Rule 9(b) “reliable indicia” standard in the FCA context. With this decision, the Eleventh Circuit has made clear that merely alleging fraudulent schemes or practices is not enough to survive a Rule 9(b) challenge. Relators must allege concrete details connecting alleged schemes to actual false claims submitted to the government. Failure to do so is likely to result in dismissal. As demonstrated in Vargas, the Eleventh Circuit’s strict application of the standard underscores the high bar that relators must clear to avoid dismissal at the pleading stage.
Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.

Navigating Lost Profits Claims

When business operations are disrupted — whether by a broken contract, a supply chain failure, or an unforeseen event like a fire — companies often look to the courts for relief. One of the most common remedies in commercial litigation is a lost profits claim, which seeks compensation for the earnings the business would have made ‘but for’ the damaging event.
But proving lost profits is a complex and often contentious process. It requires credible evidence, clear causation, and expert financial analysis. This article breaks down the essential concepts and strategies that attorneys, accountants, and financial professionals need to understand when preparing or defending such claims.
What Exactly Are Lost Profits?
Lost profits are the net earnings a business would have realized if not for the actions — or inaction — of another party. As Ben Thomas, CPA and Senior Director at Alvarez & Marsal, explains, you can’t just count lost sales. The proper measure is lost revenue minus the costs saved by not having to fulfill those sales. In other words, economic loss is based on profits, not gross sales.
Variable costs, like raw materials and hourly wages, are typically deducted. Fixed costs, such as rent or insurance, usually remain unchanged and are not part of the lost profits equation. As Thomas notes, lost profits simply reflect the income the company would have gained after subtracting costs it avoided because of the disruption.
Three Legal Hurdles Every Plaintiff Must Clear
It is important to understand the legal framework for a lost profits claim. Plaintiffs need to demonstrate:

Causation – A direct link between the defendant’s wrongful conduct and the business’s financial loss.
Foreseeability – The loss must be one that the defendant could reasonably have anticipated when entering into the business relationship.
Reasonable Certainty – The plaintiff must support their claim with a solid evidentiary foundation. Courts won’t award damages based on speculation.

Matt Blumenstein of Statera Capital cautions that lost profits are often challenged for being too speculative. The more attenuated or aspirational the claim, the less likely it will stand up in court.
Picking the Right Method: Four Common Approaches
There’s no one-size-fits-all formula for calculating lost profits. The right approach depends on the available data, the industry context, and the business’s history.
Here are four commonly accepted methods:
1. Before-and-After
This compares business performance before and after the disruptive event. If there’s a sudden decline post-event, and no other plausible explanation, the difference may be recoverable.
2. Yardstick
Here, the business is compared to a similar company or industry benchmark unaffected by the harmful act. This can be especially useful for new businesses that lack a long track record.
3. Sales Projection
This approach relies on the company’s own financial forecasts — ideally created in the ordinary course of business before the dispute arose.
4. Market Share
This method uses the company’s historical market share to estimate its expected revenue during the damage period. It’s often applied when robust industry data is available.
Megan Becwar, Principal at Dispute Economics, notes that a key challenge is data availability. Ideally, multiple methods would be used to triangulate a reliable result, but realistically, companies often have to go with the best available evidence and adapt accordingly.
The ‘But For’ World: Why Counterfactuals Matter
A cornerstone of any lost profits analysis is the ‘but for’ scenario — an estimate of what the business would have earned had the harmful event not occurred. This involves a comparison between the actual outcome and the projected financial outcome under normal conditions.
As John Levitske, Partner at HKA Global, explains, the company needs to provide a credible explanation for the projected outcome. This can include past financials, signed contracts, and industry trends. A flawed or unrealistic projection can seriously undermine the claim.
What If the Business Is New?
Historically, new businesses have had a tough time claiming lost profits because they lacked performance history. In the past, courts have often deemed such claims too speculative.
But that’s changing. Thomas explained that modern courts now allow new businesses to pursue lost profits if they meet the reasonable certainty standard. That often means relying on:

Industry benchmarks
Startup contracts
Founders’ track records
Market data

Recent cases — such as Williamson Co. v. Ill-Eagle Enterprises — show that courts may allow discovery and even recovery where a startup can document its path to profitability.
The Crucial Role of Experts
A qualified expert witness is almost always necessary in these cases. They help:

Select the appropriate methodology
Build a damages model
Interpret and analyze financial data
Testify credibly in court

As Becwar highlights, credentials matter. Someone with training in both valuation and litigation is ideal because they will understand the standards and know how to explain them in a courtroom.
Useful certifications include:

CPA (Certified Public Accountant)
ABV (Accredited in Business Valuation)
ASA (Accredited Senior Appraiser)
CFA (Chartered Financial Analyst)

Don’t Forget Mitigation and Incremental Costs
A plaintiff also has a duty to mitigate damages. That means taking reasonable steps to reduce losses. For example, if a manufacturing facility is shut down, the company should try to lease a temporary space or source parts elsewhere — even if that’s more expensive.
Megan Becwar pointed out that such efforts can be recoverable. Costs incurred to mitigate damages — such as renting an alternate facility — can be added to the claim, so long as they’re well documented and directly related to the harm.
Just as important is accurately calculating incremental costs — those expenses that would have been incurred had the business continued operating. These typically include:

Raw materials
Sales commissions
Hourly wages

Costs that don’t change with production — like office rent or corporate overhead — usually won’t count.
Common Defense Strategies
If you’re on the defense side, there are several ways to poke holes in a lost profits claim:

Speculation – Challenge the reliability of projections or business plans.
Causation – Argue that external factors (e.g., COVID-19, economic downturn) contributed to the losses.
Overreach – Highlight ‘hockey stick’ forecasts that show unrealistic growth.
Limitations in the Contract – Point to contractual language that disclaims consequential or indirect damages — including lost profits.

Blumenstein emphasizes the importance of a reasonable claim, pointing out that if a company’s claim looks like a windfall, it risks losing credibility with the jury.
Final Thoughts
Lost profits claims sit at the intersection of law, finance, and common sense. Whether you’re asserting or defending such a claim, success depends on your ability to prove the numbers, tell a persuasive story, and anticipate the scrutiny of opposing counsel.

For plaintiffs, that means careful preparation, sober projections, and expert support.
For defendants, it means knowing where to look for weak assumptions, outside influences, or contractual protections.

With the right team and the right tools, lost profits cases are winnable—but they’re rarely easy.

To learn more about this topic view Nuts & Bolts of Lost Profit Cases. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about litigation. 
This article was originally published here.
©2025. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.

Is Delaware Forum Selection Bylaw Binding On Shareholder Who Filed Suit When The Corporation Was Incorporated In California?

In Drulias v. 1st Century Bancshares, Inc. 30 Cal. App. 5th 696 (2018), the plaintiff was a shareholder in a Delaware corporation whose board of directors approved a merger agreement and at the same time adopted a forum selection bylaw, requiring claims to be adjudicated in Delaware. After the forum selection bylaw was adopted, the plaintiff sued the corporation and its directors in California alleging breach of fiduciary duty related to the merger. On appeal, it was undisputed that Delaware law governed the validity of the forum selection bylaw. The trial court concluded the bylaw was enforceable and, accordingly, stayed the action under Code of Civil Procedure section 410.30. The shareholder appealed, but the Court of Appeal affirmed the trial court’s ruling. See Court Of Appeal Finds No Right To Sue Directors In California.
In Drulias, the corporation had been a Delaware corporation. What if the corporation was a California corporation that reincorporates in Delaware when the plaintiff purchased shares and when he filed suit? That was the question in Sanchez v. Robbins, 2024 WL 2952546 (June 12, 2024). In an unpublished opinion, the Court of Appeal found that the trial court did not abuse its discretion in enforcing the Delaware forum selection bylaw. The Court of Appeal noted that there was no indication that the corporation had adopted the bylaw in response to the plaintiff’s suit. The Court further noted that the reincorporation proposal (which included the Delaware bylaw provision) had been approved overwhelmingly by the corporation’s shareholders.
The plaintiff unsuccessfully argued that the trial court’s decision should reversed because it would lead to forum gamesmanship:
Plaintiff contends . . . under the trial court’s reasoning nothing “would stop a company from unilaterally adopting a forum bylaw any time it is sued in a forum that it does not like,” or “from litigating a lawsuit in the forum of its choosing and then, if it is losing, unilaterally adopting a forum bylaw and moving to dismiss on that basis[.]”

The Court of Appeal rejected this argument: “Plaintiff’s concerns ignore the discretion vested in trial courts case-by-case to deny a motion to dismiss if applying a forum selection clause in a specific case would be ‘unfair or unreasonable.'”
In the meantime, readers may recall EpicentRX, Inc. v. Super. Ct., 95 Cal. App. 5th 890 (2023), the Fourth District Court of Appeal held that enforcement of the forum selection clauses in a Delaware corporation’s corporate documents would operate as an implied waiver of the plaintiff’s right to a jury trial—a constitutionally-protected right that cannot be waived by contract prior to the commencement of a dispute. See Don’t Say You Weren’t Warned! Court Of Appeal Declines To Enforce Delaware Forum Selection Clause In Delaware Corporation’s Certificate Of Incorporation. The California Supreme Court granted review of that case, 539 P.3d 118 (2023), and according to the Supreme Court’s docket, argument has now been scheduled.

The State of Employment Law: Jury Duty Leave Laws Can Make Multistate Handbook Drafting More Challenging

In this series, we will explore some of the ways states vary from one another in their employment laws.
When multi-state employers draft employee handbooks, they typically want policies to apply everywhere because it is simplest to enforce a single policy. However, this streamlined approach becomes difficult when it comes to widely-varying state-specific leave laws. Jury duty leave is a good example.
Most states do not require employers to pay employees for jury duty leave (although exempt employees still receive full pay for a week in which they perform work). Alaska, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming allow jury duty to be unpaid. Some of these states allow an employer to require that the absent employee use paid time off during jury duty leave.
Conversely, there are a few states that require employers to pay employees their usual compensation the entire time they serve on a jury, regardless of the length of service. Alabama requires full pay for full-time employees on jury duty and Georgia, Nebraska, and Tennessee require full pay for all employees on jury duty. While months-long trials may be relatively uncommon, they could be expensive undertakings for Alabama, Georgia, Nebraska, and Tennessee employers that have to pay employees for extended jury-related absences.
Other states fall in the middle, offering some pay, but not full pay for the entire length of jury duty. New York and Colorado require payment of up to $40 and $50 per day, respectively, for the first three days of jury duty. Louisiana requires full pay for one day of jury duty. Massachusetts requires full pay for full-time employees for the first three days of jury duty. Connecticut and the District of Columbia require full pay for full-time employees for the first five days of jury duty. 
Do these widely-varying state laws mean a multi-state employer cannot have a single jury duty leave policy? I wouldn’t say so – a single policy can still work as long as it is general and flexible enough to cover all relevant states. An employer could state that jury duty will be paid to the maximum extent required by applicable law, but otherwise be unpaid, and such a statement would be consistent with any state’s law. Such a statement could be followed by an instruction to report a jury summons to Human Resources as soon as it is received and to ask an HR representative for additional details. Depending on the state where the employee works, that HR representative could provide more detailed instructions about whether jury duty time would be paid and whether the employer would require the employee to take paid time off.

NIST releases draft Privacy Framework 1.1 to align with Cybersecurity Framework 2.0, address AI risks, and enhance usability; public comments due June 13, 2025.

Interesting one for you today.
Lending Tree–whose incredible general counsel Heather Enlow-Novitsky will be speaking at Law Conference of Champions in just a couple of months– just gained home field advantage in an odd suit arising out of a Lending tree brokered loan.
In Pro REO Settlement Services v. Lending Tree, 2025 WL 1225221 (N.D. Oh. April 28, 2025) the Court elected to enforce a forum selection clause in the parties’ agreements and kicked the case from Ohio to North Carolina where Lending Tree lives. The Court disagreed with Plaintiff’s argument Tree had waived the forum selection clause by failing to respond to an email about the claim and easily determined the forum selection clause should be enforced.
The background here is interesting.
Per the court’s summary of the facts Plaintiffs Pro REO Settlement Services, LLC and Kevin Ra applied for and received a business loan from Headway Capital, LLC and LendingTree, Inc. brokered the loan. (I didn’t even know Lending Tree did that.)
Allegedly Pro REO Settlement Services and Mr. Ra informed LendingTree and Headway Capital that their phone numbers and email addresses should not be shared with third parties for marketing purposes and that they do not consent to receiving any calls other than those required to complete the loan process. (Sounds made up, but ok.)
Since then, Plaintiffs allege that unsolicited telemarketing calls and emails have inundated their phone numbers and email addresses, overwhelming those communication channels and rendering them useless. Pro REO Settlement Services and Mr. Ra contend that this flood of telemarking resulted from LendingTree and Headway Capital sharing their phone numbers and email addresses with third-party marketers, if not engaging in unlawful telemarketing themselves.
Hmmmm.
This is a weird story.
Plaintiffs claim LT brokered a loan and then they got a bunch of marketing calls from third-partied and that, therefore, LT must have shared its information with a bunch of parties. And then the Plaintiffs sue LT–rather than the callers– for TCPA violations.
I feel like there are pieces missing to this story. None of this really adds up. But perhaps we will learn more as the case progresses in North Carolina.

SCOTUS Considers Article III Questions with Significant Implications on Class Action Certification

The Supreme Court of the United States (SCOTUS) heard oral argument this week in Labcorp v. Davis (No. 24-304) to determine “[w]hether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury.” If the Court’s answer is “no” or some form of “no”, that would support defense counsel’s mechanisms for challenging class certification on the front end of litigation.
There is currently a split among the federal circuit courts on the question. When faced with the issue of how many uninjured persons can be certified within a class without tripping over Article III, courts have taken three general viewpoints. Some circuits hold that Article III bars certification when the class would include any persons who lack standing. Other circuits, viewing the question through Rule 23(b)(3), permit certification if no more than a de minimis portion of the class includes uninjured parties. The third group of circuit courts all but defers the question to post-certification stages of a case, unless it is evident that a “great many” or “large portion” of unnamed class members lack standing.
The Labcorp case comes to SCOTUS out of the Ninth Circuit, one of the handful of circuits that do not impose a material Article III hurdle at the class certification stage. The plaintiffs in the case successfully obtained class certification from the district court for disability discrimination claims, even though there did not seem to be much dispute that the class definition captured an appreciable number of uninjured persons. After the Ninth Circuit affirmed the certification order, Labcorp petitioned and obtained certiorari from SCOTUS, leading to Tuesday’s argument before the Court.
At oral argument, Labcorp principally argued that district courts must address jurisdictional questions of standing (injury) before reaching the merits of a class action—i.e., before certifying a class. Otherwise, defendants are faced with the prospect of defending a large number of claims by parties who independently lack standing, increasing the scope of potential litigation risk in the case and creating monumental settlement pressure. Courts also would be in a position of entering dispositive orders that are binding on unnamed class members who suffered no injury and therefore had no standing to be included in the first place, in violation of Article III. Alternatively, Petitioner addressed that a class certification encompassing uninjured parties would plague litigation with individualized inquiries as to who was actually injured, contrary to Rule 23(b)(3). Labcorp argued that the first issue (Article III standing) can typically be addressed by requiring courts to define the class to only include those individuals who have been injured. But even assuming a class can be redefined to exclude individuals who lack injury, Labcorp argued that a class cannot be certified under Rule 23 unless there is an administrable way to separate non-injured individuals without conducting minitrials as to each. To do so would present clear ‘predominance’ and ‘commonality’ issues under Rule 23(b)(3).
In contrast, Respondents’ counsel argued that courts need not take up all Article III questions at the class certification stage and specifically that absent class members should not be required to demonstrate their standing until the court acts on them as individuals, typically at the relief phase of the case. Respondents’ counsel placed particular emphasis in their briefing on existing precedent, in which the Court suggested that “class certification issues” in some cases are “logically antecedent to Article III concerns” and “should be treated first.”
The Solicitor General of the United States also participated in the argument and focused primarily on Rule 23’s certification requirements. Specifically, the government argued that the Rule 23(b) certification analysis encompasses elements of ‘predominance,’ ‘commonality,’ and the like, that cannot be satisfied when the class includes injured members. The government firmly pressed that Rule 23 requires class members to share a common injury or else the class action mechanism breaks down. Therefore, an individual who has not first suffered an injury should not be part of the class. See U.S. Amicus Brief, Mar. 12, 2025 (“Courts should not certify a class under Rule 23(b)(3)—which permits class actions seeking money damages—when some members of the proposed class lack any Article III injury.”).
Many of the Justices, especially from the more liberal side of the Court, confronted the Petitioner’s Article III positions head on. These included challenges regarding the logistical difficulties district courts would face in sorting out broad Article III inquiries at the class certification stage, as compared to current measures that allow standing to be addressed after all class members come before the court at the relief stage. Some Justices also raised procedural concerns as to whether they could even consider Petitioner’s arguments given the procedural posture from which the case was presented from the Ninth Circuit below. These discussions signaled that the Court may defer or limit its ruling on the Article III and Rule 23(b)(3) questions at issue.
The Court’s ultimate resolution of the case is difficult to predict. For now, the key takeaways are that many Justices appear unprepared to impose a strict Article III requirement applicable to unnamed class members at the certification stage, and the Court may even punt some or all of the meatier constitutional issues for a later day. Given that the Court’s prior class action standing opinions—e.g., Spokeo (2016) and TransUnion (2021)—were rendered as split decisions, it would not be surprising to see a similar outcome here.

Supreme Court Clarifies ERISA Prohibited Transaction Pleading Standards

On April 17, 2025, the U.S. Supreme Court, in a unanimous opinion, resolved a circuit split and established a plaintiff-friendly pleading standard for ERISA prohibited transaction claims in Cunningham v. Cornell University, No. 23-1007.
Background
The plaintiffs in Cunningham accused Cornell’s retirement plans of engaging in prohibited transactions by paying excessive fees for recordkeeping and administrative services, among other claims. The university contended that these transactions were exempt under ERISA Section 408(b)(2), which permits certain transactions with parties in interest if the compensation is reasonable. The Second Circuit had previously affirmed the district court’s dismissal of the participants’ prohibited transaction claims, ruling that plaintiffs must plead and prove the absence of such exemptions to state a claim under ERISA Section 406(a)(1)(C).
Supreme Court’s Ruling
In a decision authored by Justice Sonia Sotomayor, the Supreme Court reversed the Second Circuit’s ruling. The Court held that plaintiffs are not required to preemptively allege that ERISA’s exemptions do not apply. Instead, the burden is on the plan fiduciaries to raise and prove these exemptions as affirmative defenses. The Court reasoned that:

Affirmative defenses, such as the exemptions at issue, must be plead by the defendant seeking to benefit from them.
It is an undue burden to require plaintiffs to plead the non-application of exemptions since these facts are typically within the defendant’s knowledge and control.
Such preemptive requirement could unfairly force plaintiffs to engage in discovery before having the necessary information.

Implications for ERISA Litigation
The Cunningham decision resolved a circuit split and aligned with the Eighth and Ninth Circuits to treat ERISA exemptions as affirmative defenses rather than necessary elements of the claim to be initially plead by plaintiffs. This standard seemingly makes it easier for plaintiffs to state a prohibited transaction claim and may increase the number of lawsuits surviving motions to dismiss, as plaintiffs are no longer required to anticipate and address potential exemptions. An overall uptick in 401(k) fee litigation is also possible.
The Cunningham court acknowledged that defendants may feel increased pressure to engage in expensive discovery and settlement talks — even in cases they believe are meritless — and pointed to tools to help screen meritless claims, including:

Dismissing claims where Plaintiffs do not have Article III standing;
Limiting discovery;
Rule 11 sanctions;
Cost shifting under ERISA Section 1132(g)(1); and
Using Fed. R. Civ. P. 7(a) to order plaintiffs to address exemptions by filing a reply to answers raising this issue.

Justice Alito’s concurrence echoed the importance of such safeguards while highlighting that Rule 7(a) may be the most promising tool. Still, Justice Alito recognized that Rule 7(a)’s reply mechanism is not a “commonly used procedure,” and thus its effective usage “remains to be seen.”
Ultimately, employers and plan fiduciaries should take note of the Supreme Court’s clarified pleading standard for prohibited transaction claims. Employers should review service provider fee arrangements for reasonableness and confirm that policies are in place to maintain detailed records of fiduciary decision-making.

FRUSTRATING!: TCPA Defendant Stuck in Class Action Despite No Record of Making Prerecorded Calls

The deck can really be stacked against TCPA defendants in class litigation. Even in seemingly straightforward cases.
For instance in Suarez v. Portfolio Recovery Associates, 2025 WL 1191119 (April 8, 2025) the Plaintiff brought suit over unwanted collection calls.
Usually these cases don’t get very far anymore because courts hold debt collectors do not use an ATDS and, in this case at least, the Defendant had no record of using any prerecorded or artificial voice calling.
So, no marketing. No ATDS. No prerecorded or artificial voice calls.
Seems like a winner for the defense right?
Well, wrong.
The Plaintiff claimed she received prerecorded calls. And despite the fact she had no evidence to that effect– no call recordings, etc.–and despite the fact the defendant had no record of such calls either the issue is going to be sent to the jury.
That’s got to be frustrating for the defense here. But unlike in many cases I do not find fault in anything their lawyers did or didn’t do– this is just how the procedural rules work. If a plaintiff is willing to lie and say they received prerecorded calls–even if they didn’t– a judge is going to have a jury figure that out.
We shall see how this all turns out.