Free Speech is Not a License to Destroy
Many fervent activists are losing touch with the fact that free speech is not a license for violence, harassment, and vandalism. From college campuses and city streets to federal buildings, militant protesters are using force to draw attention to their causes. It’s time for the legal system to stop this reckless behavior.
The unlawful blockade at the Energy Department’s headquarters in Washington, D.C., this past month is a high-profile example of the slide from protected speech to misconduct. Climate Defiance, the climate activist group behind the blockade, has made national headlines over the past year through their deployment of confrontational tactics, such as storming a baseball field attended by members of Congress and rushing a stage during a book launch event featuring Minnesota Senator Amy Klobuchar.
It’s not just at our civic institutions where an “ends justify the means” attitude toward harassment and property destruction is taking hold. In the rioting after a 2020 police shooting in Kenosha, Wisconsin, the New York Times reported that 115 small businesses, many of them minority-owned, were either destroyed or damaged.
Of course, the rogue actions of a few people should not lead to the condemnation of any cause. But for some protesters, unlawful aggression is increasingly the point.
At a gathering of protesters in Portland, Oregon, literature titled Why Break Windows was disseminated, arguing that property destruction was excusable as part of a righteous cause. One recent poll found that 41% of college students believe that violence is justified if it’s used to prevent “hate speech.” This sentiment closely parallels themes conveyed in the 2021 publication How to Blow Up A Pipeline, which promotes sabotage of industrial facilities as a substitute for non-violent protests. After finding its way into college curriculums, the book was adapted into a movie that was described in the FBI Weapons of Mass Destruction Directorate as a vehicle that “could spark eco-terrorism against U.S. energy infrastructure.”
The growing juxtaposition of speech and violence by protest movements is concerning. It’s also a matter where courts may soon weigh in.
Next month, a North Dakota jury will consider whether to hold Greenpeace liable over its role in the destructive protests over the Dakota Access Pipeline. The lawsuit claims that the opposition to the pipeline devolved into property destruction, trespass, assaults on company employees, and other actions that far exceed the bounds of democratic political action. The damage from the protests cost the companies involved in the pipeline an estimated $7.5 billion.
Greenpeace argues that the lawsuit is an “attack on free speech.” But it’s not Greenpeace’s speech or public positioning that the lawsuit questions—it’s the organization’s conduct.
If the case is successful, it could mean bankruptcy for Greenpeace. A win for the plaintiffs would also send a strong signal that while the right to protest is protected by our Constitution, violence and property destruction are not.
Dog Toy Maker in the Doghouse (Again) for Tarnishing Jack Daniel’s Marks
Addressing this case for the third time, the US District Court for the District of Arizona found on remand that Jack Daniel’s was entitled to a permanent injunction after finding that VIP Products’ “Bad Spaniels” dog toy diluted Jack Daniel’s trademark and trade dress, despite VIP not having infringed those marks. VIP Products LLC v. Jack Daniel’s Properties Inc., Case No. CV-14-02057-PHX-SMM (D. Ariz. Jan. 21, 2025).
This case began more than 10 years ago when VIP filed a declaratory judgment action that its “Bad Spaniels” Silly Squeaker dog toy did not infringe or dilute Jack Daniel’s trademark rights. Jack Daniel’s counterclaimed, alleging trademark infringement and dilution. The district court initially entered a permanent injunction against VIP, finding that VIP’s “Bad Spaniels” toy violated and tarnished Jack Daniel’s trademarks and trade dress. VIP appealed, and the US Court of Appeals for the Ninth Circuit found that VIP’s use of “Bad Spaniels” was protected expressive speech under the First Amendment. On remand, the district court granted summary judgment to VIP on infringement and dilution. Jack Daniel’s appealed, but the Ninth Circuit affirmed the grant of summary judgment.
The Supreme Court granted certiorari and held that the heightened protection afforded by the First Amendment does not apply where the contested mark is used as a trademark. The Supreme Court therefore vacated the Ninth Circuit’s decision and remanded for further consideration. The Ninth Circuit remanded the case to the district court to determine whether VIP’s use of “Bad Spaniels” tarnished and/or infringed Jack Daniel’s trademarks and trade dress, consistent with the Supreme Court’s decision.
On remand, VIP attempted to challenge the constitutionality of the Lanham Act’s cause of action for dilution by tarnishment, arguing that “the statute amounts to unconstitutional viewpoint discrimination by enjoining the use of a mark that ‘harms the reputation’ of a famous mark.” Ultimately, the district court did not consider the merits of the constitutional challenge. The district court stated that although it was not precluded from considering VIP’s constitutional challenge, the issue was not properly before the court because VIP had not amended its pleadings to assert the challenge.
The district court assessed dilution by tarnishment using a three-factor analysis of fame, similarity, and reputational harm. With respect to fame, the parties did not dispute that the JACK DANIEL’S mark was famous. Nonetheless, VIP contended that Jack Daniel’s had not shown tarnishment of a famous mark by a “correlative junior mark.” Specifically, VIP argued that the famous JACK DANIEL’S mark correlated with VIP’s “Bad Spaniels,” and VIP’s use of “Old. No. 2” correlated with Jack Daniel’s mark “Old No. 7.” According to VIP, there could be no tarnishment because only the latter was offensive and Jack Daniel’s had not demonstrated that “Old. No. 7” was a famous mark. The district court disagreed with VIP’s correlative mark argument, stating, “it is VIP’s use of Jack Daniel’s marks – on a poop-themed dog chew toy – that Jack Daniel’s claims tarnish its trademarks, not ‘Bad Spaniels’ itself when taken in isolation.”
The district court had already found a high degree of similarity between the marks, which VIP did not contest because the “Bad Spaniels” toy had been “intentionally designed” to mimic Jack Daniel’s Tennessee Whiskey.
Addressing the third factor (reputational harm), the district court stated that “the relevant inquiry is how the use of the junior mark affects the consumer’s positive impressions of the famous mark.” Here, because “Jack Daniel’s produces a product intended for human consumption, association of Jack Daniel’s marks with something like dog feces is particularly detrimental,” even if “it is obviously true that ‘Bad Spaniels’ does not actually contain dog feces and consumers would not believe that it does.”
Although VIP’s “parodic intentions in creating ‘Bad Spaniels’ d[id] not exempt VIP from the [Trademark Dilution Revision Act’s] cause of action for dilution by tarnishment,” the district court noted that the parody was relevant to the likelihood of confusion analysis. When assessing a parody’s impact on the infringement analysis, the court first reviewed whether VIP’s “Bad Spaniels” product evoked Jack Daniel’s, and “whether it creates contrasts through humor adequate to dispel confusion as to the source of the parody.” Here, the court found that “Bad Spaniels” met both factors because it “both evokes and humorously contrasts with Jack Daniel’s marks such that it succeeds as a parody.”
Having established that “Bad Spaniels” qualified as a successful parody, the district court turned to the typical likelihood of confusion factors. The court noted that the finding of parody tipped some factors that would ordinarily favor the plaintiff in VIP’s favor: “Adjusting the Sleekcraft [likelihood of confusion] factors to account for parody neutralizes or flips three important factors – similarity of the marks, VIP’s intent, and strength of Jack Daniel’s mark.”
Here, the similarity of the marks favored VIP, as similarities were necessary for the parody to successfully evoke the Jack Daniel’s marks. Likewise, the strength of Jack Daniel’s marks weighed in VIP’s favor, as the “widespread recognition of the parodied trademark” allowed the parody to avoid consumer confusion. Finally, VIP’s intent in selecting the mark was a neutral factor, as VIP did not intend to create confusion or deceive consumers, but to create a parody product.
Although VIP prevailed on the issue of trademark infringement, the district court nonetheless found that a permanent injunction was appropriate here because “‘Bad Spaniels’ finds itself in the category of a non-confusion parody product that is nonetheless impermissible under the Lanham Act’s cause of action for tarnishment.”
Practice Note: It will be interesting to see whether and how this case continues. The ruling leaves open the possibility for a constitutional challenge to the Lanham Act’s cause of action for dilution by tarnishment. For now, it suggests that parodies that may be sheltered from infringement are still susceptible to dilution by tarnishment.
Breaking: NLRB Drops Opposition to SpaceX’s Constitutionality Arguments
On February 3, 2025, the National Labor Relations Board (“NLRB” or the “Board”) filed a letter with the U.S. Court of Appeals for the Fifth Circuit on Space Exploration Technologies Corp. v. NLRB, Consolidated Case No. 24-50627, et al., indicating that it would not address constitutionality arguments raised in SpaceX’s brief. As reported here, those arguments were as follows:
The NLRB’s structure is unconstitutional in that it limits the removal of NLRB Administrative Law Judges (“ALJs”) and Board Members, and permits Board Members to exercise executive, legislative, and judicial power in the same administrative proceeding; and
The Board’s new expanded remedies violate employers’ Seventh Amendment right to a trial-by-jury.
The Board’s position follows President Trump’s firing of Board Member Gwynne A. Wilcox, which set up a constitutional battle over the President’s removal power under Section 3(a) of the NLRA. As discussed here, that move left the Board without a quorum, which the Board indicated prevents it from “review[ing] ALJ recommended findings and orders” in the underlying unfair labor practice proceeding at issue in the SpaceX case.
While neither constitutional argument raised by SpaceX is directly implicated by Member Wilcox’s firing, the Board indicated in its letter that “[i]n light of these executive actions, Board counsel is not in a position to address the Board-member-removability arguments raised in the government’s briefs.” However, Board counsel will still argue that the injunctions—halting the merits of the SpaceX case until the constitutionality arguments are resolved—should be reversed. It remains to be seen whether interested parties will take up the defense against these constitutionality arguments in the Board’s stead.
The DEI Whirlwind Continues – New Lawsuit Challenges Constitutionality of Anti-DEI Orders
On Monday, February 3, a group of organizations, including representatives of university diversity officers, sued President Trump and his administration, seeking to halt and declare unconstitutional two executive orders aimed at ending diversity, equity, and inclusion (DEI) programs. The lawsuit, filed in the U.S. District Court of the District of Maryland, challenges Trump’s orders as exceeding his constitutional authority and violating principals of equality.
These executive orders from the first week of Trump’s presidency target DEI programs within the federal government and institutions that receive federal funding. One challenged order aims to eliminate DEI offices and positions in the federal government. The other order seeks to deter publicly traded corporations, universities, and other large entities from supporting diversity initiatives.
The plaintiffs are the National Association of Diversity Officers in Higher Education, the American Association of University Professors, the Restaurant Opportunities Center United, and Baltimore’s mayor and city council. They argue that the executive orders undermine efforts to correct historical discrimination against women, racial minorities, and LGBTQ individuals.
In their complaint, the plaintiffs allege that these executive orders:
Exceed President Trump’s constitutional authority, infringing on the spending power, which the Constitution grants exclusively to Congress, by threatening economic sanctions for those who advocate equality and inclusion;
Violate the separation of powers enshrined in the Constitution;
Are unconstitutionally vague, meaning they fail to provide a person with fair notice of what is prohibited in violation of the Fifth Amendment; and
Violate the First Amendment Free Speech Clause by creating a chilling effect on expression or participation in anything that might be related to DEI.
The plaintiffs seek both preliminary and permanent injunctions to block the orders, as well as a declaration that both executive orders are unlawful and unconstitutional.
This lawsuit evidences ongoing debates over the role of DEI programs in addressing inequality. Those challenging the orders argue that DEI programs are necessary to correct long-standing disparities. Those in favor of eliminating DEI programs contend that such programs unfairly disadvantage other applicants. As this challenge to President Trump’s anti-DEI orders unfolds, it will have significant implications for the future of diversity efforts in both the public and private sectors.
Employers and universities alike should work with outside counsel to ensure they are compliant with applicable law and assess organizational risk where appropriate.
Federal Judge Blocks President Trump’s Executive Order on Birthright Citizenship
On February 5, 2025, a federal judge in Maryland issued a nationwide preliminary injunction that halts President Donald Trump’s executive order aimed at terminating birthright citizenship for children born in the United States to undocumented and temporary immigrants.
Quick Hits
Nationwide preliminary injunction issued: U.S. District Judge Deborah Boardman blocked President Trump’s executive order restricting birthright citizenship, citing constitutional conflicts and long-standing legal precedent.
Temporary relief granted: The injunction, brought by five undocumented pregnant women and two immigrant rights groups, provides temporary relief while the lawsuit proceeds, with the administration expected to appeal the decision.
In a significant development, U.S. District Judge Deborah Boardman issued a nationwide preliminary injunction on February 5, 2025, blocking President Trump’s executive order, titled, “Protecting the Meaning and Value of American Citizenship.” The executive order sought to make children born on American soil on or after February 19, 2025, ineligible for U.S. citizenship if they were born to parents who were either unlawfully present in or temporary visitors to the United States. The president signed the executive order on January 20, 2025, the day he took office.
Judge Boardman’s ruling stated that President Trump’s executive order conflicted with the Fourteenth Amendment to the U.S. Constitution and contradicted more than one hundred years of binding Supreme Court precedent, as well as the United States’ 250-year history of birthright citizenship. Unlike the fourteen-day temporary restraining order issued on January 23, 2025, by Judge John Coughenour of the U.S. District Court for the Western District of Washington, today’s preliminary injunction will remain in effect until the lawsuit is resolved or the injunction is overturned by a higher court.
The lawsuit in Maryland was brought by five undocumented pregnant women and two nonprofit organizations that work with immigrants, who argued that the executive order would cause irreparable harm by denying citizenship rights to their children.
Judge Boardman emphasized that “citizenship is a most precious right” guaranteed by the Fourteenth Amendment, noting the instability, uncertainty, and “irreparable harm” the executive order would create for affected families across the country. The injunction will remain in place while the lawsuit proceeds, though the Trump administration is expected to appeal the decision.
Next Steps
As legal challenges to the executive order continue across the country—including challenges brought by twenty-two state attorneys general—it is likely that the matter will eventually reach the Supreme Court. For now, Judge Boardman’s ruling provides a reprieve for those affected by the executive order, reaffirming the constitutional right of citizenship by birth and through the Fourteenth Amendment.
California’s Kids’ Social Media Law Wrangling Continues, and Maryland Too!
The Ninth Circuit continued the pause on California’s SB 976 (Protecting Our Kids from Social Media Addiction Act) as of late January 2025. The law was signed by Governor Newsom in September 2024, and challenged by NetChoice shortly thereafter.
A federal judge first enjoined the law until February 1, 2025. The case continued in the courts, and most recently the Ninth Circuit blocked the law until April of 2025. At that time, it will examine substantively whether the law infringes free speech rights. This delay will impact the AG’s drafting of rules for the law.
This is not NetChoice’s first attempt to stop kid-focused social media laws. It took similar steps in Utah in 2024, and has challenged similar laws in Arkansas, Ohio, Mississippi, Texas, and most recently, as of Maryland’s similar Age Appropriate Design Code Act.
Putting it into Practice: These decisions are a reminder that the social media laws being passed at a state level are continuing to be challenged. We will be continuing to monitor them for further developments.
James O’Reilly also contributed to this article.
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MAKE OUR PHONES GREAT AGAIN: R.E.A.C.H. Files Critical Petition Asking FCC to End Rampant Call/SMS Blocking, Labeling, and Registration Abuses by Wireless Carriers and their Partners
Well folks, its time to save the telecom world (again.)
With the distraction of one-to-one finally behind everybody we can now focus on the real battle– the blatant censorship and defamation being carried out everyday by the nation’s wireless carriers and their cohort of aggregator chums.
People are rightly waking up to the abuses of content-monitoring on social media networks but they remain largely blind to the far-more insidious censorship taking place on the most critical “social” network of all– the nation’s telephone system.
For years now the wireless carriers in this nation–banding together to form a cartel-like organization known as the CTIA–have dictated what Americans are allowed to say to each other over the phone and how they are allowed to communicate.
They have blocked billions of constitutionally-protected and perfectly legal calls/texts simply because they did not like the content of those calls– because they used certain “banned” words like “free” or “debt.”
They have served as judge, jury, and executioner of speech day in, day out.
And the worst part– the vast majority of Americans don’t even know its happening.
Oh sure they may have detected it here and there. Where was that reminder the company said it was going to send out? I know I needed to submit another loan document but I was supposed to receive a text? I thought I had a payment due, but the link for credit card never came through?
Most Americans assume these unfortunate everyday occurrences are just glitches. Network traffic jams or misdirected communications.
No. The truth is far worse.
Messages such as these are commonly blocked or delayed specifically based upon their content– a real-time censorship regime of the highest order operating right beneath our noses.
The carriers answer to no one. The FCC has never provided guidelines in terms of what can be blocked and what can’t be. All that carriers know now is they can use “reasonable analytics” to block “unwanted calls.”
But what does that even mean?
Its time for the FCC to answer that and give the carriers CLEAR rules of the road for the sorts of calls and texts they can block and what they CANNOT. Specifically, R.E.A.C.H. this morning has asked the FCC to clarify the following:
Clarify and confirm no member of the U.S. telecommunication ecosystem (including the wireless carriers and parties with whom they are in contractual privity) may block, throttle, or limit calls or text, MMS, RCS, SMS or other communications to telephone numbers on the basis of content;
Clarify and confirm no member of the U.S. telecom ecosystem (including the wireless carriers and parties with whom they are in contractual privity) may block, throttle, or limit calls or text, MMS, RCS, SMS or other communications to telephone numbers that were sent consistent with the TCPA’s statutory text and applicable regulation; and
Clarify and confirm any blocking, throttling, or limiting of calls or texts on the basis of content or any blocking, throttling, or limiting of calls or texts that were initiated consistent with the TCPA’s text and any applicable Commission’s rules is presumptively “unreasonable” under the Communications Act.
But call blocking is only half of the problem.
The wireless networks are also talking trash about callers behind their backs.
They label callers “scam” or “spam” or even “likely fraud” many time with ZERO actual indication the call is improper or illegal. I have heard stories of people missing calls from schools, friends, lawyers– even the police!–due to the INSANE mislabeling of callers taking place right now.
And the worst part?
The carriers are likely intentionally over-labeling to drive companies to use their “solutions”– white-label branded caller ID products that make the carriers millions in ill-gotten revenue.
Its terrible.
Many businesses won’t play the carriers little protection-money game so they turn to buying massive quantities of phone numbers to cycle through when one gets mislabeled. The carriers don’t like that and try to stop the practice to make sure they can maximize profits– but its only a natural response to the insane mislabeling practices exercised by the carriers themselves.
We need to put a stop to ALL of this.
As such R.E.A.C.H. is also asking the FCC today to prevent any labeling of legal calls. PERIOD.
Last– the biggest problem of all.
TCR– the Campaign Registry.
Every single business and political campaign in the nation that wishes to use a regular phone number to send high-volume text messages has to jump through the shifting and uncertain hoops presented by something called the TCR. Registration requires various disclosures of the types of messages to be sent, content, lists, practices, plans, etc.
A complete blueprint of every SMS program in America.
And guess what?
TCR’s parent is foreign owned.
*head exploding emoji*
Why in the world America would deliver a ready-made model of every SMS strategy deployed by every American business into the hands of a foreign company whose practices cannot be tracked and data footprint cannot be traced is a question beyond answer. It is entirely insane–especially when we consider political content is also disclosed.
WHAT ARE WE THINKING?
If TikTok is a threat to America, TCR is triple the threat.
R.E.A.C.H. asks the FCC to look into TCR and evaluate shutting down the entire campaign registration process or, alternatively, requiring the registry to be sold to an American-owned business.
Rather obviously these three asks– stopping call/text blocking, mislabeling, and a registration process that is a threat to national security– are the most important changes needed to preserve and protect our nation’s critical telecommunications infrastructure.
R.E.A.C.H., as an organization, is proud to be the vehicle behind this absolutely necessary movement. But we need your help!
When the FCC issues a notice of public comment we can expect the wireless carriers to fight tooth and nail in a short-sighted effect to preserve the current mess–truthfully, while carriers profit now they stand to lose everything in the long term by these errant practices as businesses move away from the PTSN altogether and toward OTT services– but we need YOUR help to assure the right movement is taken by the Commission on these items.
We will provide much more information over time. But for now begin cataloging all the ways the current SMS/call-blocking/labeling/registration paradigm is crippling consumers and your businesses.
Let’s put an end to censorship. An end to wide-scale defamation. An end to foreign companies snooping through our SMS practices.
Let’s get smart America.
And let’s save our damn telephone network.
Read the full petition here: REACH Petition to Save the World
Vested Rights Revisited
In recent years, numerous state courts across the country have been asked to consider the question whether a plaintiff’s claim can be retroactively revived by the legislature after the claim has been extinguished by a statute of limitations. The Law Court, in Dupuis v. Roman Catholic Bishop of Portland, has now addressed that question in a lengthy and thorough opinion. The Court—building on its long history of vested rights decisions as well as its groundbreaking 2022 decision on that topic—emphatically answered the question “no.”
More than two decades ago, Maine’s Legislature prospectively eliminated the statutes of limitations for sexual abuse. More recently, however, the Legislature sought to revive claims that had previously been barred by the statute of limitations. The validity of this later action was at issue in Dupuis.
The majority opinion, authored by Justice Connors, primarily relied on two centuries of Maine precedent stating the principle that an amendment to a statute of limitations cannot retroactively revive cases in which the statute of limitations has expired without violating a party’s vested rights. As the Court wrote,
[W]e have declared flatly, many times, with no articulated restriction, in varied types of cases, both common law and statutorily created, that a claim cannot be revived after its statute of limitations has expired.
Most interestingly, however, the Court went on examine Maine’s “longstanding antipathy toward retroactive legislation of this type, first pronounced at the founding of our state.” The Court’s examination occurred in the context of its application of the primacy doctrine, pursuant to which it interprets the Maine Constitution independently (without being bound by federal precedent).
In interpreting the Constitution, the Court relied most heavily on two factors:
The Constitution’s text. The Court emphasized the importance of a “holistic review” of the Constitution’s provisions. In conducting this review, the Court noted first the Constitution’s provisions protecting property, privileges, and natural rights—each of which substantively protect rights that have vested under the law, and each of which requires “general, equal, and fixed application of the law.” The Court also noted that the Constitution limits the scope of legislative power to adoption of general and prospective rules. Based on these principles, the Law Court observed that, “as early as our founding and many times thereafter, [it has] interpreted our constitutional text to reject retrospective legislation impairing vested rights.”
Contemporaneous common law principles. The Court also placed significant weight on the fact that, at the time of the drafting of the Maine Constitution, “the common law condemned the concept of retroactive liability.” In light of this history, and the subsequent two hundred years of practice, the Legislature’s action in seeking to revive expired claims was “aberrant”—indeed, unprecedented in Maine.
The Court’s primacy analysis of the Constitution’s text and history—notable for its thoroughness—led the majority to conclude:
[O]ur case law prohibiting the revival of claims after the expiration of their statute of limitations flows inexorably from the anti-retroactivity theme permeating our constitutional text, which in turn was forged from longstanding principles of common law.
The Court, however, did not stop there; it also examined precedent from federal and other state courts. It concluded that its holding was supported by a majority of state courts and rejected the contrary rule as unworkable and unrealistic. The Court discarded the primary argument in support of the Legislature’s action, namely, that retroactive reinstatement of expired claims does not deprive a person of vested rights but merely affects legal remedies, as an artificial distinction. Notably, the Court also concluded that subjecting vested rights to an ad hoc balancing approach (as under federal law) would contradict Maine precedent and would “strip[] long protected rights of meaningful protection.” As the Court wrote,
[C]onsistent with the understanding of the founders, we have always adhered to and affirmed as recently as 2022 the protection of vested rights under our Constitution; these rights are not subject to destruction, however compelling the reason for destroying the right. A balancing test is not only contrary to our precedent but unsupported by our constitutional text and the common law, and is amorphous, inconsistent, unworkable, and could potentially trample constitutionally protected rights based on transient majority inclination or the view of an individual judge.
Thus, as the Court held, “[o]nce a statute of limitations has expired for a claim, a right to be free of that claim has vested, and the claim cannot be revived.”
The Court’s opinion is notable enough for its holding, but is notable for numerous other reasons as well. It provides to practitioners the most important recent guidance regarding how the Law Court thinks about serious constitutional questions. It highlights the importance of careful (and holistic) textual analysis informed by historical understandings, contemporaneous common law principles, and post-enactment legal developments that illuminate the Constitution’s meaning. It also affirms the Law Court’s emphasis on the value and importance of its own prior precedent, as compared to federal precedent. And, finally, it highlights the Court’s willingness to reach an independent conclusion based on this distinctively Maine text, history, and jurisprudence.
California Air Resources Board Solicits Input On California Greenhouse Gas Emissions Disclosure Laws
I recently published a post questioning the legality of the California Air Resources Board’s Enforcement Notice. The California legislature charged CARB with the responsibility of implementing SB 253 (Wiener) and SB 261 (Stern), both as amended by SB 219 (Wiener, Statutes of 2024). These bills, both enacted in 2023, require business entities formed under the laws of California, the laws of any other state of the United States or the District of Columbia, or under an act of the Congress of the United States to report specified greenhouse gas (GHG) emissions and climate related financial risks. Although these bills require disclosures by businesses meeting specified annual gross revenue thresholds, they will impose significant financial burdens on smaller businesses.
Last month, the CARB issued a notice soliciting public input concerning these bills. This is a prelude to formal rulemaking by the CARB. The deadline for comments is February 14, 2025. It remains to be seen, however, whether either of these bills will survive constitutional challenge. See As Foretold, California’s New Forced Speech Laws Are Being Challenged.
Court Halts Trump Administration Order Pausing Government Grants (For Now)
Many parties are rightly concerned about the impact of yesterday’s announcement that nearly all federal funds will be frozen for an indeterminate period. Minutes before it was intended to go into effect today, a federal judge in Washington, DC, temporarily ordered the freeze to be lifted until at least Monday February 3, when a full hearing will occur as to whether the freeze is permissible under federal administrative procedure laws and the First Amendment.
The court’s action pauses the US Office of Management and Budget’s (OMB) instruction of the heads of all federal executive departments and agencies to temporarily pause all obligation and disbursement activity related to federal financial assistance. The pause was to go into effect at 5pm EST, January 28, but this is now temporarily on hold.
The OMB Memo M-25-13 entitled “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs” (OMB Memo) requires federal agencies to identify and review all federal financial assistance programs and activities to ensure consistency with President Trump’s policies, stating that “the use of Federal Resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve.”
OMB Memo
Purposes
The OMB Memo, issued by Matthew J. Vaeth, acting director of OMB, states that federal financial assistance should be dedicated to advancing the Trump Administration’s priorities, strengthening national security, taming inflation, increasing domestic manufacturing and energy production, ending “wokeness,” promoting efficiency, and improving Americans’ health. The OMB Memo specifically references seven of the executive orders signed by President Trump on January 20[i] as examples of the Trump Administration’s intent to safeguard taxpayer funds. See our previous alerts on Trump’s Executive Orders here and here.
Requisite Agency Comprehensive Program Analyses
The OMB Memo directs each federal agency to complete a comprehensive analysis of all federal financial assistance programs, identify programs and activities potentially implicated by the Executive Orders, including, but not limited to, “financial assistance for foreign aid, nongovernmental organizations, diversity, equity, and inclusion (DEI), woke gender ideology, and the green new deal,” and submit to OMB detailed information on such programs and activities no later than February 10. OMB also released a set of instructions for programs with funding or activities planned before March 15, which requires that answers to 14 specific questions regarding the programs listed on the accompanying spreadsheet be submitted to OMB by February 7, 2025.
Interim Guidance
In the interim, the OMB Memo requires each federal agency to pause issuance of new awards, disbursement of federal funds under all open awards, and any other relevant agency actions potentially implicated by the Executive Orders until OMB reviews and responds to the agency’s analysis. In a subsequent guidance FAQ issued on January 28, OMB clarified that “the pause does not apply across-the-board” and is instead “expressly limited to programs, projects, and activities implicated by the President’s Executive Orders, such as ending DEI, the green new deal, and funding nongovernmental organizations that undermine the national interest.” The OMB Memo states that the purpose of the pause is to provide the Trump Administration with time to review federal programs and determine use of federal funds consistent with the Administration’s priorities.
The OMB Memo also requires all agencies to promptly identify legally mandated actions or deadlines for federal assistance programs that arise during the federal funding pause and report this information to OMB with an analysis of the applicable legal requirement.
Policy Realignments
Finally, the OMB Memo requires agencies to take the following steps with respect to each federal financial assistance program:
Assign oversight and responsibility to a senior political appointee.
Review pending federal financial assistance to ensure the Administration’s priorities are sufficiently addressed.
Modify unpublished federal financial assistance announcements consistent with the Administration’s priorities and withdraw any announcements already published.
Cancel awards that conflict with the Administration’s priorities.
Ensure adequate oversight of federal assistance programs.
Initiate investigations to identify underperforming recipients and address underperformance issues, including cancelling awards.
Medicare and Social Security Benefits
The OMB Memo states that it does not apply to assistance received directly by individuals or to Medicare or Social Security benefits. OMB’s subsequent follow-up FAQ further made clear that “any program that provides direct benefits to Americans is explicitly excluded from the pause and exempted from this review process” and that “[i]n addition to Social Security and Medicare… mandatory programs like Medicaid and SNAP will continue without pause.” Similarly, the FAQ noted that “[f]unds for small businesses, farmers, Pell grants, Head Start, rental assistance, and other similar programs will not be paused.”
Exceptions
The OMB Memo provides that exceptions to the mandatory pause will be considered on a case-by-case basis.
Timing
While the OMB memo itself did not specify how long the pause might continue, OMB’s subsequent FAQ provided that “[a] pause could be as short as day” and that “OMB has worked with agencies and has already approved many programs to continue even before the pause has gone into effect.”
There already have been two lawsuits to stop the Trump Administration’s proposed funding freeze. The first, filed by a coalition of nonprofits and small businesses, led to the judicial pause; that complaint is available here. An additional lawsuit to stop the Trump Administration’s proposed funding freeze was filed by a coalition of 23 states and the District of Columbia in federal district court in Rhode Island. The plaintiff jurisdictions request an emergency temporary restraining order and allege violations of the Administrative Procedure Act (APA), separation of powers, and the Spending, Presentment, Appropriations, and Take Care Clauses of the US Constitution.
What Should You Do If You Are Concerned About An Award or Grant?
Affected Program Assessment
Grant recipients and subrecipients should first assess whether their grant or financial assistance award is covered by the pause. Despite its potentially broad reach, the pause is not intended to cover all grants and awards. The pause is instead limited to funds in support of programs implicated by the Executive Orders. Award recipients should reach out to their federal agency contacts to determine the agency’s view on whether their specific grant program is subject to the pause. If the grant or award is subject to the pause, the grantee may wish to inquire whether the program might receive an exception.
Cash Flow and Cost Concerns
Where implicated, the temporary pause in funding may raise liquidity and cash flow concerns and could lead to additional costs, delays, and other consequences for projects. As a result, many award recipients may have to consider temporarily laying off or permanently furloughing those responsible for administrating awards for an affected program (see ‘Potential Labor Implications’ below).
Rights and Remedies
Award recipients should review the specific terms of their grant award for procedures to take during the pause as the award itself is the most definitive source for the recipient’s rights and remedies during the pause. Grant recipients should review agency grant regulations for the specific agency that granted the award as these regulations may provide additional remedies and/or procedures.
Downstream Impact on Subcontract and Supplier Arrangements
Additionally, unless subcontracts and supplier agreements under grants include in case of government suspension or stop work, downstream contractors and suppliers could seek continued payment from the grant holder notwithstanding the pause in funding. This could lead to claims and disputes with subcontractors and suppliers. Grantees should review such agreements to determine their legal rights to place subcontractor and supplier agreements on hold during the pause.
Potential Reimbursement for Pause/Termination Costs
If the pause is only temporary, recipients may potentially be able to receive a payment adjustment for reasonable costs arising out of the pause.[ii] Grantees should review their grant agreements for potential requirements to notify of additional incurred costs or changes to their budget and push agencies to expressly authorize such additional costs.[iii]
If a grant does fall within the ambit of one of the Executive Orders, however, recipients might remain concerned about longer term implications, including whether the financial assistance award will ultimately be terminated or have its funding withdrawn. Federal regulations require that agencies provide recipients with written notice of termination including the reasons for termination, the effective date, and the portion of the federal award to be terminated, if applicable.[iv] Federal agencies must also maintain written procedures for processing objections, hearings, and appeals.[v] If the termination proceeds forward, a recipient may potentially receive reimbursement for costs properly incurred before the effective date of the termination where the agency authorizes such termination costs.[vi]
Possible Legal Challenges
Receiving reimbursement for termination costs may be cold comfort for aid recipients that rely extensively on federal funding to remain afloat. In such cases, grant recipients may seek to enjoin or halt federal action to terminate the award.
Potential bases to challenge termination might include one or more of the following arguments:
OMB’s action violates the Impoundment Control Act, 2 U.S.C. § 681 et seq., which requires the President to request authority from Congress to rescind funding authorization insofar as awarded grant funds have already been obligated.
The agency’s action constitutes a breach of “contract” sufficient to invoke the Tucker Act where the grant resembles a “contract” through competitive acquisition, offer, acceptance, and consideration.
The agency’s action violates the APA, 5 U.S.C. § 706, to the extent it is in excess of statutory jurisdiction, authority, or limitations, or short of statutory right, or is otherwise arbitrary, capricious and/or contrary to law.
An APA challenge might include arguments that the agency’s action was ultra vires, violative of regulations specifying termination procedures (e.g. under 2 C.F.R. § 200.340), or contrary to constitutional protections (e.g., limits imposed by the Spending Clause, Due Process concerns, Takings Clause issues, and First Amendment concerns).
Potential Employment Implications
WARN Warning Requirements
Recipients of federal financial assistance that have employees whose positions are entirely grant-funded may be faced with the difficult question of whether it is necessary for them to furlough employees or even layoff all or part of their workforce until disbursements resume. Employers who do so may have to comply with the notice requirements of the federal Work Adjustment and Retraining Notification (WARN) Act[RAM5] [TC6] , which requires covered employers to notify employees, unions, and government officials in advance of covered plant closings or mass layoffs. Moreover, a number of states have their own “mini WARN” Acts, some of which have more onerous or expansive notice requirements. Employers who fail to comply with federal or state WARN Act requirements may be subject to government enforcement actions as well as private lawsuits from employees seeking the maximum allowable damages for noncompliance.
Layoffs and Furloughs
Employers considering temporary or permanent layoffs of employees without pay should first consider the type of action that is best suited to their workplace and employees — whether that means temporarily reducing impacted employees’ paid hours, temporarily reducing their pay, or requiring employees to take time off without pay. Employers for whom it is necessary to require employees to take time off without pay should ensure that employees do not perform any work during that time. This is particularly important for employees who are exempt from applicable minimum wage and overtime requirements, as any work they perform in a week would entitle them to pay for the full workweek. Employers should also determine whether a temporary furlough would trigger an obligation to pay out employees for any unused, accrued paid time off under applicable state law.
Finally, employers who have no choice but to furlough employees should decide whether and to what extent they are able to support employees in maintaining their benefits during the furlough period. If feasible, many employers may wish to cover both the employer and employee cost of any health insurance premiums during the furlough period, or otherwise make alternative arrangements for employees to pay their premiums directly. Employees whose hours are reduced such that they no longer meet plan eligibility requirements may be entitled to continue their coverage through COBRA. Employers who lay off employees and offer severance pay will have to determine if such pay is an allowable expense.
[i] The Executive Orders subject to the OMB memorandum include: (1) Protecting the American People Against Invasion; (2) Reevaluating and Realigning United States Foreign Aid; (3) Putting America First in International Environmental Agreements; (4) Unleashing American Energy; (5) Ending Radical and Wasteful Government DEI Programs and Preferencing; (6) Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government; (7) and Enforcing the Hyde Amendment.
[ii] See 2 C.F.R. §§ 200.305(b)(7) (“When a Federal award is suspended, payment adjustments must be made in accordance with § 200.343.”); 200.343 (“[C]osts during suspension or after termination are allowable if: (a) The costs result from financial obligations which were properly incurred by the recipient or subrecipient before the effective date of suspension or termination, and not in anticipation of it; and (b) The costs would be allowable if the Federal award was not suspended or expired normally at the end of the period of performance in which the termination takes effect.”).
[iii] See C.F.R. § 200.343 (“Costs to the recipient or subrecipient resulting from financial obligations incurred by the recipient or subrecipient during a suspension or after the termination of a Federal award are not allowable unless the Federal agency or pass-through entity expressly authorizes them in the notice of suspension or termination or subsequently.”).
[iv] See 2 C.F.R. § 200.341(a), Notification of termination requirement.
[v] See 2 C.F.R. § 200.342, Opportunities to object, hearings, and appeal.
[vi] See C.F.R. § 200.343.
Elizabeth L. Horner, Alexandra M. Romero, Brian D. Schneider, J. Michael Showalter, Michael L. Stevens, and David Tafuri contributed to this article.
Breaking: In a Novel Move, President Trump Fires National Labor Relations Board Member and, following Biden precedent, the NLRB General Counsel
On January 27, 2025, President Trump fired National Labor Relations Board (“NLRB” or “Board”) Member Gwynne A. Wilcox, marking the first time that a president has ever attempted to remove a Board member prior to the end of their five-year term. The move – if it withstands court scrutiny – leaves the Board with only two (2) remaining members: Chair Marvin E. Kaplan and Member David M. Prouty and without a quorum to rule on matters, as covered here. See New Process Steel, L.P. v. NLRB, 560 U.S. 674 (2010). Chair Kaplan’s term lasts through August 27, 2025, and Member Prouty’s term lasts through August 27, 2026.
This came soon after President Trump fired NLRB General Counsel Jennifer A. Abruzzo. As reported here, the firing of GC Abruzzo was expected and has been held to be lawful in various Circuit Courts. However, the firing of Board Member Wilcox sets up a constitutional fight regarding President Trump’s removal power.
Section 3(a) of the NLRA states that “[a]ny member of the Board may be removed by the President, upon notice and hearing, for neglect of duty or malfeasance in office, but for no other cause,” which has led prior presidents to refrain from firing sitting Board members. It is expected that the administration will argue that this removal requirement is unconstitutional under Article II, which requires that the president “shall take Care that the Laws be faithfully executed,” meaning the president cannot be prohibited from hiring and firing certain administrative officials, such as Board members, at will. Employers have made similar arguments as to the alleged unconstitutional nature of the NLRA’s removal requirements, as previously reported here, here, and here.
President Trump will likely appoint an Acting General Counsel in the near future and nominate a new General Counsel soon after, subject to Senate approval. It is less certain what President Trump will do concerning the three (3) vacant seats on the Board, who also would need to be nominated subject to Senate approval. Historically, the administration’s party has had three (3) of the five (5) seats. If President Trump does choose to appoint new members, there is an obvious question of whether he will continue this precedent or rather appoint only Republican members to the seats.
While in the short term, some parties with matters pending before the Board may have some relief, the longer term implications of a complete standstill at the Board and the resulting uncertainty can actually be very difficult for organizations looking to move forward and make decisions on both day-to-day employment matters and large scale initiatives.
Trump Transition: Shakeup at National Labor Relations Board Stalls NLRB Action (US)
It’s been a little more than a week since Inauguration Day, but the seismic shifts of presidential change in Washington, D.C. continue, now extending to and impacting the National Labor Relations Board (NLRB or Board). On January 28, President Donald Trump shook up the NLRB with two major personnel decisions: one anticipated, the other unprecedented.
In an expected move, President Trump fired Jennifer Abruzzo, the union-friendly General Counsel of the NLRB appointed under former President Joe Biden. But Trump also fired NLRB member Gwynne Wilcox, a Democrat also appointed by President Biden, leaving the Board with only two members.
In an early morning press release, now former NLRB General Counsel Jennifer Abruzzo announced that Tuesday, January 28, would be her final day on the job. The NLRB General Counsel serves as the agency’s chief prosecutor, selecting the cases to be heard and decided by the Board. Abruzzo’s departure should be welcome news to many employers. During her tenure, among other pro-union moves, she issued a slew of memoranda directing the work of the agency into controversial territory. For example, Abruzzo pursued aggressive enforcement action against employer non-competition and non-solicitation agreements, as guided by a May 2023 memorandum she authored wherein she articulated her view that restrictive covenants like non-competes “generally violate federal labor law.” A new Trump-appointed General Counsel is anticipated to rescind that memorandum and many others in which Abruzzo directed her enforcement efforts in the direction of her overtly pro-union interpretation of the National Labor Relations Act.
Likewise, a Trump-appointee majority NLRB is expected to abandon many of the Biden-era decisions issued by the formerly Democrat-appointee majority Board. However, right now, the Board cannot act, as it does not have a quorum of three members following the ouster of Member Wilcox. The only current Board members are Republican Marvin Kaplan, who President Trump appointed NLRB Chairman shortly after inauguration, and Democrat David Prouty. At least one of the three currently vacant Board positions will have to filled before the Board can resume issuing decisions. When that will happen is unclear.