Intentionally Discriminatory Public Offering Stalled At The SEC
In this February post, I pondered the question of whether an issuer could allocate shares on the basis of race, gender or ethnicity. That post was inspired by the case of Glennon v. Johnson, U.S. Dist. Ct. Case No. 1:25-cv-01057 (N.D. Ill. Jan. 6, 2025). That case involves a Fourteenth Amendment challenge to a proposed public offering by Bally’s Chicago, Inc. that would impose minority and gender based qualification requirements on investors. In February, U.S. District Court Judge Franklin U. Valderrama declined to issue a temporary restraining order, ruling that the plaintiff had shown neither a likelihood of success nor irreparable injury.
Despite winning this round in court, Bally’s still needs to have its registration statement declared effective by the Securities and Exchange Commission. That apparently has not yet occurred. On February 28, 2025, Bally’s filed a free writing prospectus with the SEC that included the following disclosure:
Bally’s Chicago, Inc. (“Bally’s Chicago”) thanks you for your interest and patience. Unfortunately, as of the time of this message, we have not yet received clearance from the U.S. Securities and Exchange Commission (“SEC”) to price and close our initial public offering. Consequently, prospective investors may seek to withdraw any amount deposited into their respective BitGo Trust accounts while we continue to work to obtain SEC clearance for our initial public offering. Bally’s Chicago intends to continue to make regular, periodic filings of its registration statement with the SEC once its annual financial statements for the fiscal year ended December 31, 2024, which are expected to become available in March. This process aims to fulfill the City of Chicago’s mandate of having 25% of Bally’s Chicago’s ownership held by individuals or entities that qualify as women or Minorities (as defined by MCC 2-92-670(n)), among other criteria, as required by the Host Community Agreement with the City of Chicago.
Apparently, Bally’s remains determined to effect a discriminatory offering. It remains to be seen whether the SEC is willing to declare effective a registration statement with respect to an unabashedly racist and sexist plan of distribution. In the meantime, Bally’s filed a Form D on March 14 disclosing that it had sold $83.15 million of an approximately $195 million offering of interests.
Texas Supreme Court Declines The Chance To Rule On Whether There Is A Right To A Jury Trial In A Trust Modification Suit
First Appellate Decision. In In re Troy S. Poe Trust, a co-trustee of a trust filed suit to modify the trust to increase the number of trustees and change the method for trustees to vote on issues as well as other modifications, including, incredibly, directing the trustees to ignore duties to remainder beneficiaries. No. 08-18-00074-CV, 2019 Tex. App. LEXIS 7838 (Tex. App.—El Paso August 28, 2019). The trial court denied the defendant co-trustee’s request for a jury trial on underlying fact issues and held a two-day bench trial. After the trial court granted all of the plaintiff’s modifications, the defendant co-trustee appealed and argued that the trial court erred in refusing him a jury trial. The court of appeals held that Texas Property Code did not waive a party’s right to a jury trial regarding a claim to modify a trust, and that the defendant co-trustee had a right to a jury trial on underlying fact questions involved in a trust modification case. The court reversed and remanded for further proceedings.
Second Appellate Decision. In In re Poe Trust, the Texas Supreme Court reversed and remanded the court of appeals. 646 S.W.3d 771 (Tex. 2022). The Court held that parties to trust modification proceedings were not entitled to a jury trial under the Texas Property Code. But the Court remanded for the court of appeals to consider whether the defendant co-trustee had a right to a jury trial under the Texas Constitution:
The Texas Constitution provides “two guarantees of the right to trial by jury” in civil proceedings. The Bill of Rights ensures that the “right of trial by jury shall remain inviolate.” Our cases have said, and the parties here do not dispute, that this provision maintains a jury right for the sorts of actions tried by jury when the Constitution was adopted and, thus, “only applies if, in 1876, a jury would have been allowed to try the action or an analogous action.”
At the time of the Constitution’s adoption, there was no common-law right to a jury trial in equitable actions and, consequently, our courts have held that the Bill of Rights did “not alter the common law tradition eschewing juries in equity.” However, to provide a jury right in equitable actions, “a special clause was introduced.” In our present Constitution, that guarantee is found in Article V, the Judiciary Article. It provides: “In the trial of all causes in the District Courts, the plaintiff or defendant shall, upon application made in open court, have the right of trial by jury; but no jury shall be empaneled in any civil case unless demanded by a party to the case, and a jury fee be paid by the party demanding a jury, for such sum, and with such exceptions as may be prescribed by the Legislature.” We have held, and no party here disputes, that the Judiciary Article “covers all ’causes’ regardless of whether a jury was available in 1876.”
…
The court of appeals confronted none of these constitutional arguments, which were first presented on rehearing. By that time, the court of appeals had concluded that the Trust Code’s incorporation of the Rules of Civil Procedure conferred a right to a jury trial. That holding made in-depth treatment of the constitutional arguments unnecessary. Our holding today, however, changes that… Following our preferred practice, we remand the case to the court of appeals to address petitioners’ constitutional arguments in the first instance. And we echo the concurrence’s view that amici input could greatly aid the court of appeals’ decisional process.
Id.
Third Appellate Decision. In In re Poe Trust, the court of appeals held that the co-trustee defendant did not have a constitutional right to a jury trial in a trust modification case, and then affirmed the trial court’s modification of the trust. 673 S.W.3d 395 (Tex. App.—El Paso, 2023). The court held that there was no right to a jury trial under the Texas Bill of Rights. The court then turned to the Judiciary Article and stated:
[T]he “Judiciary Article” states: “In the trial of all causes in the District Courts, the plaintiff or defendant shall, upon application made in open court, have the right of trial by jury; but no jury shall be empaneled in any civil case unless demanded by a party to the case, and a jury fee be paid by the party demanding a jury, for such sum, and with such exceptions as may be prescribed by the Legislature.” In contrast with the Bill of Rights, this provision expanded the jury-trial right to all “causes” in both law and equity, regardless of whether a jury trial was available for the same in 1876. However, there are differences in opinion regarding how the term “causes” in this provision should be defined.
Id. The court then held that a trust modification proceeding is not a “cause” as that term is used in the Judiciary Article:
Bock, on the other hand, argues that “cause” should include only “ordinary” causes of action, also referred to as “personal” actions, in which a plaintiff is seeking a personal judgment against a defendant based on the defendant’s breach of a duty or other wrongdoing. He posits that a plaintiff must be asserting some “personal right” for which he may obtain a remedy or enforceable judgment against the defendant. And he argues that a trust-modification proceeding lacks the attributes of an ordinary cause of action—it is not brought by a plaintiff seeking a judgment against a defendant, but instead is brought in the interest of the beneficiary and will not result in an enforceable judgment against any of the interested parties.
We conclude that Bock’s approach is the correct one, as it more closely aligns with the 1876 Constitution drafters’ intent in formulating the Judiciary Article’s jury-trial right and best comports with Texas jurisprudence over time.
Id. The court further explained:
Professor Harris later described the proceeding in which a plaintiff sues a defendant seeking a personal judgment against the defendant as the “ordinary cause of action,” which he contrasted with “special civil proceedings” that do not share this key attribute… This interpretation of the term cause as meaning the ordinary cause of action in which a plaintiff seeks recourse against a defendant further comports with the Judiciary Article’s “plaintiff” and “defendant” terminology. During the era in which the 1876 Constitution was adopted, Bouvier’s Law Dictionary defined a plaintiff as a person “who, in a personal action, seeks a remedy for an injury to his rights.” Plaintiff. It defined the term “defendant” in the opposing stance as a “party who is sued in a personal action.” And in turn, it defined a “personal action” as one “brought for the specific goods and chattels; or for damages or other redress for breach of contract or for injuries of every other description; the specific recovery of lands, tenements and hereditaments only excepted.” In other words, a personal action encompasses a situation in which a party seeks a judgment against a defendant as a remedy for a violation of a personal right… [W]e find the ordinary-cause-of-action framework to be the correct framework or test by which to determine whether a proceeding can be considered a Judicial Article cause versus a special proceeding that falls outside its scope.
Id. The court then held that a trust modification proceeding is more of a special proceeding and does not involve an ordinary cause of action:
Utilizing the ordinary-cause-of-action framework, we agree with Bock that a trust-modification proceeding does not have any of the attributes of a cause for which a Judicial Article jury-trial right exists; instead, its nature is that of a special proceeding for which no jury-trial right exists. As Bock points out, in a trust-modification proceeding, there is no plaintiff seeking a right of recovery or a judgment against a defendant who has committed some wrong.
Id. So, the court of appeals affirmed the trial court’s decision to deny the defendant co-trustee’s request for a jury trial. The court then looked at the merits of the trust modification and affirmed it as well. The court essentially rejected the unambiguous intent expressed by the settlor in the trust document and focused on other evidence to modify the trust.
There was a dissenting justice who found that the defendant co-trustee did have a constitutional right to a jury trial. The dissenting justice stated:
In the years when the 1875 Constitution was drafted, Texas law used “cause” broadly… In other words, “cause” was viewed comprehensively as encompassing contested questions before a court… Moreover, as this Court held in our prior decision in this case, the record here establishes that statutory prerequisites include disputed questions of fact. Specifically, this Court concluded that “the predicate questions of whether the trust needed to be modified was a fact question that should have been decided by a jury[.]”We observed in our earlier decision that, “as a general rule, ‘when contested fact issues must be resolved before equitable relief can be determined, a party is entitled to have that resolution made by a jury.’” Because this suit is based on a long recognized equitable cause of action, I would hold it falls squarely within the meaning of “all causes” as included in the Judiciary Article’s terms.
The majority views a material distinction between the term “cases,” as included in the Constitution of 1869, and the term “causes,” as currently included. Specifically, the majority describes the term “causes,” as “narrower language.” On that point, I disagree. Controlling authorities of the era inform that “all cases of law or equity,” as included in the 1869 version, essentially means the same thing as “all causes,” which was adopted in 1876. Given the historical use of these terms, I see no indication that the voters of that era drew back from the otherwise expanding guarantee of a right to a jury trial.
Additionally, the majority places heavy importance on the use of the terms, “plaintiff” and “defendant,” as appearing in the Judiciary Article. Based in part on these terms, the majority concludes that the term “cause” can only be interpretated as meaning an “ordinary cause of action.” Again, I disagree… First, these same terms, “plaintiff” and “defendant,” appear in the Constitution of 1845, where the jury-trial guarantee was otherwise provided in “all causes in equity.” Second, the terms “plaintiff” and “defendant” are not used as terms of limitation but rather to describe that a jury trial is guaranteed to all participants when “application [is] made in open court.” Third and lastly, I see no indication here of any special circumstance that would cause a jury trial to be prohibitive. On that score, Justice Busby’s concurring opinion in Poe, which is joined by Justice Devine and Justice Young, largely provides the analytical framework for making that determination. Because this modification suit is a statutory substitute for a cause in equity, I would classify it as falling into the second category of Justice Busby’s framework. To that extent, the jury-trial right would extend in part to the disputed issues of fact of this suit while questions of equitable discretion should be decided by the court. Unlike the majority, I would hold that a trust modification proceeding qualifies as “a cause” within the meaning of the Judiciary Article’s guarantee.
Id.
Three Justices Concur in The Decision To Deny The Petition For Review. The defendant co-trustee filed a petition for review in the Texas Supreme Court on both the jury trial right issue and on the trust modification issue. The both issues are of great importance to Texas jurisprudence as they certainly impact trust modifications and many other equitable proceedings under the Trust Code and Estate’s Code.
One would think that the Texas Supreme Court would accept the petition in this case, again, and finally determine whether a party has a constitutional right to a jury trial on underlying fact disputes in these types of proceedings. Alas, the Court denied the petition for review without an explanation. However, three justices issued a concurring opinion that gave some insight on their thinking. In re Poe Trust, No. 23-0729, 2024 Tex. LEXIS 658, 2024 WL 3836556 (Tex. August 16, 2024) (concurring order). The concurring justices stated that they agreed with denying the petition because there was no showing of a fact issue that should have been presented to a jury. That in and of itself is very odd. The trial court held a two day bench trial where both parties introduced evidence to support both sides on the issue of whether the modifications should have been granted on fact specific elements of: “(1) [whether] the purposes of the trust have been fulfilled or have become illegal or impossible to fulfill; (2) because of circumstances not known to or anticipated by the settlor, the order will further the purposes of the trust…” Id. (citing Texas Trust Code Section 112.054(a)(1), (2)). Whether the purposes of the trust have been fulfilled and whether circumstances not known to or anticipated by the settlor justify modification seem to be pretty fact specific issues. The court of appeals first decision clearly thought there was a fact issue because it remanded for a jury trial. The Texas Supreme Court’s first opinion clearly assumed that there was a fact issue because it went into great length in reversing and remanding the court of appeals for an analysis of the co-trustee’s constitutional right to a jury trial. Why would the Court waste its time and resources and the court of appeals’s time and resources, including the parties’ time and resources, if it felt that there was no fact issue?
In any event, the three concurring justices addressed whether the court of appeals correctly analyzed the constitutional right to a jury trial and would find that it did not:
That guarantee, which appears in the Judiciary Article, provides that “[i]n the trial of all causes in the district courts, the plaintiff or defendant shall, upon application made in open court, have the right of trial by jury.” We have held that this guarantee applies, among other things, to “ultimate issues of fact” in “equitable action[s],” analogous actions, and statutory or rule-based substitutes for such actions, as well as when challenging disputed facts addressed in proceedings ancillary to a cause. For example, it applies to contested matters of fact arising from receivership and probate proceedings.
We have also explained that the Judiciary Article guarantee was “intended to broaden the right to a jury,” and that the word “cause” had a “broad meaning . . . when our present Constitution was drafted” that included any “suit, litigation, or action” involving a “question . . . litigated or contested before a court” or “legal process . . . to obtain [a] demand” or “seek[] [a] right.” Thus, a “special reason” is necessary to conclude that particular “adversary proceedings” do not “qualify as a ’cause’.” Because we have identified certain special reasons—such as separate constitutional provisions—that some proceedings do not require a jury, “not all adversary proceedings are ’causes’ within the meaning of the Judiciary Article.” …
But on remand, a majority of the court of appeals panel did not examine whether there was a “special reason” of the sort we have held sufficient to exclude such an adversary equitable action from the Judiciary Article guarantee. Instead, the panel majority excluded these claims by disregarding the broader definition of “cause” we endorsed in Credit Bureau and selecting a narrower alternative definition derived from the common law: an “ordinary cause of action” or “personal action” in which a plaintiff alleges that a defendant breached a legal duty or violated a legal right and seeks recourse for that conduct…
Several weaknesses, however, underlie the panel majority’s definition and reasoning. First, the panel’s definition impermissibly departs from the “broad” definition of “cause” we endorsed in Credit Bureau, which was drawn from contemporaneous sources. Indeed, an amicus helpfully points out that Texas cases used the term “cause” in the 1870s to describe a wide variety of proceedings involving trusts. Second, the panel’s definition is based on the common law and thus excludes equitable actions, which we have long held the Judiciary Article guarantee was specifically enacted to include. The panel’s definition would collapse the Judiciary Article guarantee into the Bill of Rights guarantee, rendering the former surplusage…
For this additional reason, the panel majority erred in choosing a different and much narrower common-law definition of “cause,” which led it to depart improperly from several other binding precedents of this Court… Under these and other precedents, the court of appeals erred by adopting a binary view of the options for defining the scope of the Judiciary Article’s jury-trial guarantee and selecting the narrower option. Instead, it should have followed the middle path charted by our cases (hodgepodge though they may be), proceeding to examine whether there is a “special reason” of the kind we have held sufficient to deny a jury trial even though this adversary equitable action otherwise falls within the broad meaning of “cause” in the Judiciary Article guarantee. If any departure from our precedent is warranted, it must come from this Court. I do not analyze either point here, however—whether a “special reason” applies in this context under our existing jurisprudence or whether that jurisprudence is well grounded in the Constitution’s text and history. Because I conclude that there are no disputed questions of material fact in this case for a jury to resolve, those questions must await a future case.
Id. Of course, this order is just three justices’ opinion out of the nine-member Court as to the validity of the court of appeals’ reasoning. The Court could have accepted the case, affirmed the result, but corrected the reasoning of the court of appeals. The Court did not do that. So, as we sit today, the court of appeals’s analysis and narrow reading of “cause” in the constitutional right to a jury trial is the precedent in Texas.
Top Five Labor Law Developments for March 2025
The National Labor Relations Board once again lacks a quorum to issue decisions. The U.S. Court of Appeals for the D.C. Circuit granted the Trump Administration’s emergency request to stay a lower court’s decision reinstating Board Member Gwynne Wilcox. Wilcox v. Trump, et al., No. 25-5057 (D.C. Cir. Mar. 28, 2025). In a 2-1 decision, the court majority ruled the Trump Administration is likely to demonstrate that President Donald Trump had authority to terminate Wilcox, finding the U.S. Supreme Court’s decision in Seila Law, 591 U.S. 197 (2020), controlling. The court explained that while Humphrey’s Executor, 295 U.S. 602 (1935), upheld the constitutionality of for-cause removal protections for federal agency leaders, Seila Law subsequently narrowed that decision as applying only to multimember agencies that “do not wield substantial executive power,” and thus is inapplicable to the Board. Wilcox filed a petition for en banc review of the panel’s decision.
President Trump nominated management-side attorney Crystal Carey as the next Board general counsel (GC). If confirmed by the Senate, Carey will serve as the head of the Board’s prosecutorial arm. A former Board attorney, Carey is expected to reverse many of the pro-labor initiatives set by her predecessor, Jennifer Abruzzo. While the GC’s office cannot effectuate changes in Board policy unilaterally, the GC can advance cases and arguments that give the Board opportunities to change the law and return to more employer-friendly standards. Interim GC William Cohen has already withdrawn several exceptions to administrative law judges’ decisions filed under Abruzzo’s tenure that sought precedent shifts. He also withdrew various GC memoranda that sought test cases to pursue such precedent shifts.
President Trump’s executive order (EO) targeting the Federal Mediation and Conciliation Service (FMCS) limits the use of federal mediators to resolve labor disputes and prevent work stoppages. The EO sought to reduce and eliminate certain federal agencies’ staffing levels to the maximum extent allowed by law. Historically, FMCS has played an essential role between employers and unions, providing mediation services to prevent and resolve labor disputes, including impending or ongoing work stoppages and contentious collective bargaining negotiations. Two weeks after the EO, FMCS placed nearly all staff on administrative leave to comply with the directive. FMCS’s dismantling could lead to an increase in strikes and labor disruptions and prolong collective bargaining negotiations.
President Trump issued an EO exempting certain federal agencies and subdivisions from collective bargaining. Pursuant to the EO, covered agencies (including the Department of Defense, Department of Justice, and the Department of State) are no longer required to engage in collective bargaining with unions. Further, subsequently issued guidance generally limits performance improvement plans to 30 days and requires the covered agencies and subdivisions to revert their discipline and performance policies to those established during the first Trump Administration. The guidance explains that the EO aims to strengthen performance accountability in the federal workforce and reduce procedural impediments to separating poor performers who may be protected by collective bargaining agreements.
The U.S. Chamber of Commerce and other business groups are urging the U.S. Court of Appeals for the Eleventh Circuit to find the Board’s order banning captive audience meetings violates the First Amendment. No. 24-13819 (11th Cir. Mar. 19, 2025). The case stems from a Board decision that prohibited employers from holding mandatory employee meetings to advocate against unionizing, overturning longstanding precedent, and marking a pivotal shift in how employers can communicate with their employees about unionization. In a joint brief, the group asserts the ban on captive audience meetings is content and viewpoint discriminatory and unlawfully regulates employers’ free speech rights. Eleven states have enacted laws containing restrictions on such meetings: Alaska, California, Connecticut, Hawaii, Illinois, Maine, Minnesota, New York, Oregon, Vermont, and Washington. Many believe such state laws are preempted by the National Labor Relations Act.
Mexico Bans the Cultivation of Genetically Modified Corn, Opening Door for Other Restrictions in the Future
According to a March 21, 2025 report issued by the U.S. Department of Agriculture (USDA)’s Foreign Agricultural Service, the scope of Mexico’s recent ban on the cultivation of genetically engineered (GE) corn is “ambiguous” and may leave the door open to restrictions on corn grain imported for food or feed use in the future. U.S. growers, distributors, and developers of GE plants should carefully monitor Mexico’s implementation of the cultivation ban and potential responses by the United States, particularly as U.S.-Mexico trade issues continue to receive heightened scrutiny under the Trump administration.
Legal Background
In the United States, GE plants and other organisms are jointly regulated by USDA, the U.S. Environmental Protection Agency (EPA), and the U.S. Food and Drug Administration (FDA) consistent with the Coordinated Framework for the Regulation of Biotechnology. This nearly 40-year-old federal policy describes each agency’s regulatory responsibilities under overlapping statutory frameworks. For example, when agricultural crops, such as corn, are genetically engineered to produce pesticidal substances, EPA regulates the substance (known as a plant-incorporated protectant, or “PIP”) under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), USDA regulates the GE plant under the Plant Protection Act (PPA), and FDA ensures that GE products meet applicable food safety standards under the Federal Food, Drug, and Cosmetic Act (FFDCA).
By contrast, a de facto ban on GE corn planting has been in place in Mexico since 2013, and in effect, prohibitions have existed since 1998. In 2023, the Mexican government officially issued a decree mandating that competent authorities revoke and refrain from issuing permits for the release of GE corn seeds in Mexico, as well as authorizations for the use of such corn grain for human consumption. The decree also ordered the gradual elimination of GE corn used in animal feed and industrial uses intended for human consumption.
In August 2023, the United States formally challenged Mexico’s decree under the United States-Mexico-Canada Agreement (USMCA). In a December 20, 2024 decision, a duly established panel agreed with the United States that Mexico’s restrictions were inconsistent with USMCA principles because, among other reasons, the measures were not based on “relevant international standards, guidelines or recommendations.” In compliance with the panel’s decision, Mexico issued an agreement on February 5, 2025, that revoked the relevant portions of the 2023 decree.
New Constitutional Ban on the Cultivation of GE Corn in Mexico
On March 17, 2025, Mexican President Claudia Sheinbaum issued a new decree amending Articles 4 and 27 of the country’s Constitution, which addresses the conservation and protection of native maize varieties.
In relevant part, the amendment establishes that corn grown in Mexico “must be free from genetic modifications produced through techniques that surpass the natural barriers of reproduction or recombination, such as transgenic methods.” While it does not specifically address GE corn grain imports, the amendment provides that “any other use” of GE corn “must be evaluated in accordance with legal provisions to ensure it poses no threat to biosafety, public health, or Mexico’s biocultural heritage and population.” In addition, the amendment mandates federal promotion of traditional agricultural practices — particularly those using native seeds and agroecological methods — through investment, research, and institutional strengthening.
Continued potential for restrictions on imports under the new constitutional ban
While Mexico formally complied with the USMCA panel’s decision by nullifying the prohibitions against the uses of GE corn under the 2023 decree, the new 2025 amendment entrenches anti-GE corn principles in national law and creates a legal foundation that could support future restrictions on GE corn imports. This poses a potential risk of additional regulatory barriers, legal challenges, and renewed trade disputes, particularly if future measures are framed in terms of biosafety, biocultural protection, or food sovereignty, which are now protected goals under Mexico’s Constitution.
Despite not imposing a formal import ban, the 2025 Amendment enshrines a constitutional preference for the exclusion of GE corn from Mexican agriculture and strict oversight of any other uses. This may open the door to more rigorous approval standards on imported GE corn (such as labeling, traceability, or risk assessments) and provide a stronger legal basis for those who seek to challenge import authorizations on constitutional grounds going forward.
Fourth Circuit Stays Injunction on DEI Executive Orders – What Federal Grantees and Contractors Need to Know
As we shared in a previous client alert, on February 21, 2025, a U.S. District Court judge issued a preliminary injunction in National Association of Diversity Officers in Higher Education et al. v. Trump et al., Dkt. No. 1:25-cv-00333 (D. Md. Feb. 21, 2025) that blocked portions of the Trump administration’s executive orders on diversity, equity, and inclusion programming (“DEI”) by federal contractors and grantees and private sector entities. On March 10, 2025, the same U.S. District Court issued a clarified preliminary injunction, explaining that the February 21 preliminary injunction applied to all federal executive branch agencies, departments, and commissions, but not the President.
The federal government appealed the preliminary injunction to the Fourth Circuit Court of Appeals, arguing that the Executive Orders instructed agencies to enforce existing laws without violating First Amendment rights. On Friday, March 14, 2025, the Fourth Circuit issued an Order staying the preliminary injunction. This stay means that executive agencies may now enforce the portions of the January 20 and January 21, 2025 Executive Orders previously enjoined, including:
Executive agencies may terminate “equity-related grants or contracts” (the “Termination Provision”);
Executive agencies may require federal contractors or grantees to certify that they do not operate illegal programs promoting DEI and agree that they are in compliance with “all applicable Federal anti-discrimination laws” (the “Certification Provision”); and
The Attorney General may take “appropriate measures to encourage the private sector to end illegal discrimination and preferences” including by identifying “potential civil compliance investigations” to deter illegal DEI programs (the “Enforcement Provision”).
The Fourth Circuit’s order also clarifies that these Executive Orders only require the executive agencies that are enforcing these Executive Orders to enforce them consistent with current federal rules and law, which prevent the agencies impinging on protected speech rights. As a reminder, federal civil rights laws have not changed under the new administration (that would require an act of Congress or a court holding), so federal grantees and contractors that were complying with federal law in their programing prior to January 20 and 21, 2025 would still be in compliance with those laws today.
Notable for legal scholars, after the Fourth Circuit unanimously stayed the preliminary injunction, each judge offered a concurring opinion. Chief Judge Diaz reasoned that “how the administration enforces these executive orders … may well implicate cognizable First and Fifth Amendment concerns.” Judge Harris recognized the executive orders should only terminate funding as “subject to applicable legal limits,” only for “conduct that violates existing federal anti-discrimination law.” Judge Rushing stated that “the government is likely to succeed in demonstrating that [a narrow application of] the challenged provisions of the Executive Orders,” do not violate the First or Fifth Amendments.
Separately, Judge Rushing reasoned that a nationwide “scope of the preliminary injunction alone should raise red flags” as it “purported to enjoin nondefendants from taking action against nonplaintiffs.” It remains to be seen whether other Circuit Courts will take a similar stance.
What does this mean for institutions of higher education?
As shared in our prior client alert, institutions should review their policies or programs and confirm that their practices comply with existing federal discrimination law. Institutions should also review any federal agency requests for certification or changing terms and conditions related to their federal grants and contracts. Please continue to monitor developments and consult legal counsel with concerns related to compliance.
EdTech and Privacy of Student Information: A Case Study
On March 27, 2025, a class action lawsuit was filed against the education technology (EdTech) company Instructure, the parent company of Canvas, a popular learning management system. The complaint alleges that Instructure violated children’s federal and state privacy rights. According to the complaint, Instructure states that it collects various account information about children, including name, gender/pronouns, academic institution and student ID, as well as profile pictures. Instructure also reportedly collects student activity data, such as messages, discussion comments, test results and grades, search activity, and user-submitted content. User-submitted content includes uploaded files, such as essays, research reports, photo/video media, and creative writing. The complaint asserts that this amount of data surpasses what is traditionally considered an education record and allows Instructure to “build dynamic, robust, and intimate dossiers of children.”
Let’s dive deeper into various allegations within the complaint and consider several themes.
Words matter
According to the complaint, Instructure’s terms state that it uses and discloses student information to, among other purposes, personalize the user experience, analyze trends, and track users’ movements around products. Specifically, the plaintiffs claim that some of Instructure’s platforms are designed to assist colleges and employers with recruitment by providing them access to data-derived student “insights.”
Companies should consider whether their uses and disclosures pertaining to personal information are transparent. If data may be used for marketing or advertising purposes, that should be clear to the consumer. If the data may be used in other related contexts, policies and terms should also make that clear. Vague words could lead to allegations of misleading statements.
The complaint also compiles various statements by Instructure and its officers regarding the organization’s data practices, including the Data Protection Officer’s statement that “privacy standards are embedded in our corporate DNA” and that Instructure’s privacy approach is “built upon five key principles: transparency, accountability, integrity, security, and confidentiality.”
Companies should be able to back up their statements about privacy practices with their actual privacy approach, or such publicly-made statements could be used against them in litigation.
Clarity of third-party access
The complaint asserts that Instructure uses an application programming interface (API) to allow third-party developers to build integrations through Instructure’s product suite. An API allows software applications to communicate and exchange data. According to the plaintiffs, Instructure’s Live Event API enables third parties to “access granular, child-specific information, such as time taken to finish a test, when a student submits a test, how long a child uses a product at a time, ‘common patterns’ among a child’s product usage, [and] what assignments are most challenging.” Furthermore, the product-specific Canvas API reportedly allows third parties to access data relating to user communications and group discussions, quiz submissions, and grades.
The average consumer does not understand “API” and “live event” nor know how an API transfers information, even if a company discloses its API use. Companies should make clear, in plain language, the nature and extent of information they share with partner institutions to avoid unauthorized disclosure claims.
Reasonably understandable information and informed consent
The plaintiffs assert that users of Instructure products cannot provide informed consent because a reasonable person would not know what they were consenting to in agreeing to use these products. The complaint lists 19 separate policies on Instructure’s data practices available on its website – including terms of use, privacy notice, and acceptable use policy – noting that “information relating to Instructure’s data practices and those of its third-party partners are scattered across its sprawling website and others’ websites.”
Companies may consider making their website terms of use and related agreements more understandable and accessible to the average consumer of that product/service to minimize the risk of “no consent” claims. For example, consumers in states with opt-out rights should easily be able to access information to exercise those rights. Providing numerous forms across varying locations could leave room for allegations that the company hid the ball regarding privacy.
Evolving role of EdTech
Among other state law claims, the complaint sets forth claims under the Fourth and 14th Amendments to the U.S. Constitution. Though claims of constitutional violations can only be brought against government entities, plaintiffs allege that Instructure is authorized to “perform a function that is traditionally and exclusively a public function performed by the government, namely, the collection and management of public-school-related data, including education records and other student information,” thereby making the company subject to constitutional requirements as a “state actor.” When our parents and grandparents went to school, digital access to student information with the click of a button did not exist. The digital transformation has allowed public and private entities to outsource various functions to third-party technology companies. In the state actor context, this evolution of roles poses an interesting question of where to draw the line on whether private technology companies themselves should become subject to the same regulations imposed on public actors in the interest of protecting fundamental rights
‘Catch and Revoke’ Program Takes Off: State Department AI-Driven Visa Crackdown
The U.S. State Department’s “Catch and Revoke” program uses artificial intelligence (AI) to monitor foreign nationals, particularly student visa holders. The program aims to identify individuals who express support for Hamas, Hezbollah, or other U.S.-designated terrorist organizations through social media activity or participation in protests and revoke their visas. To date, approximately 300 foreign nationals have had their visas revoked under this initiative.
AI tools scan social media accounts, news reports, and other publicly available information to flag individuals on visas for further investigation. The U.S. government maintains the program is a national security measure to help identify foreign nationals who should have been denied visas based on support for designated terrorist organizations. Critics argue the AI-driven process may rely on basic keyword searches that are prone to errors, raising concerns about fairness and accuracy. Advocacy groups warn the initiative undermines First Amendment rights by specifically targeting political speech and activism.
Recent arrests by ICE have included doctoral candidate students at several universities, following revocation of their visas. Students identified under the program have reported receiving online notifications that their visas are being canceled and advised them to “self-deport” using the CBP Home mobile app. Schools may also be notified through the Student and Exchange Visitor Program (SEVP) of a visa revocation under national security-related grounds, in which case the school’s designated school official (DSO) may be required to either cancel or terminate the I-20 record.
This initiative arises out of two executive orders that President Donald Trump issued shortly after taking office:
1. Executive Order No. 14161, “Protecting the United States from Foreign Terrorists and Other National Security and Public Safety Threats,” directing the secretary of state, in coordination with the attorney general, the secretary of homeland security, and the director of national intelligence, to promptly “vet and screen” all noncitizens who are already inside the United States “to the maximum degree possible.”
2. Executive Order No. 14188, “Additional Measures to Combat Anti-Semitism,” directing the secretary of state, the secretary of education, and the secretary of homeland security to provide “recommendations for familiarizing institutions of higher education with the grounds for inadmissibility under 8 U.S.C. § 1182(a)(3),” related to national security and support for terrorist organizations, so that schools can monitor and report activities in violation of the law.
On Mar. 25, 2025, the Knight First Amendment Institute filed a lawsuit seeking to block the Trump Administration’s policy of arresting, detaining, and deporting noncitizen students and faculty, including the “Catch and Revoke” program. American Association of University Professors, et al. v. Rubio, et al., No. 1:25-cv-10685 (D. Mass.).
The Catch and Revoke program reflects the Trump Administration’s heightened scrutiny of foreign nationals and highlights the tension between national security measures and civil liberties.
Corporate Transparency Act Update: Drastic Reduction in Scope of BOI Reporting in March 21, 2025 FinCEN Guidance
On March 21, 2025, the United States Treasury announced a significant reduction in scope of the definition of “reporting company” under the Corporate Transparency Act, limiting the obligation to file beneficial ownership reports to foreign entities only and removing the obligation to file from U.S. persons and U.S. companies.
As noted in our previous online posts, following significant litigation regarding the constitutionality of the regulation, on February 19, 2025, FinCEN suspended reporting obligations under the CTA and promised further guidance on reporting obligations to be issued on or before March 21, 2025. On March 21, 2025, FinCEN issued an interim final rule:
The new rule exempts U.S. persons from having to disclose BOI under the regulations by narrowing the definition of a “reporting company”. This means that any entity created in the United States does not need to report beneficial ownership to FinCEN under the CTA, even if it has non-US persons as beneficial owners.
The rule is now narrowed to only foreign entities that are registered to do business in the United States by the filing of a document with a secretary of state or similar office. The rule reduces the scope of the CTA dramatically, as most foreign enterprises doing business in the United States will have created a legal subsidiary within the country in order to conduct business. As above, U.S. entities are exempt from reporting.
Entities in existence prior to Friday have 30 days to complete their BOI filings with FinCEN. Entities that come into existence after the issuance of the rule have 30 days following formation to complete their filing obligations.
FinCEN continues to accept comments to this interim final rule and intends on issuing a final rule later this year. The final rule may change the scope of the CTA, and litigation continues before the courts regarding the CTA. We will continue to follow the law’s progress and will provide updates as this regulation evolves.
Our prior posts on CTA developments can be found here:
Client Alert: Corporate Transparency Act Beneficial Ownership Information Reporting On Hold – Business Law
Client Alert: Supreme Court Allows Corporate Transparency Act Enforcement But FinCEN Notes Another Stay Prevents Current Implementation – Business Law
CTA Reporting Now Required, but FinCEN Waives Penalties and Indicates New Reporting Deadline Extension Likely Later This Year – Business Law
This Week in 340B: March 25 – 31, 2025
Find this week’s updates on 340B litigation to help you stay in the know on how 340B cases are developing across the country. Each week we comb through the dockets of more than 50 340B cases to provide you with a quick summary of relevant updates from the prior week in this industry-shaping body of litigation.
Issues at Stake: Rebate Model; Contract Pharmacy; Other
In four cases against the Health Resources and Services Administration (HRSA) alleging that HRSA unlawfully refused to approve drug manufacturers’ proposed rebate models, 37 state and regional hospital associates filed an amici brief in support of HRSA.
In a breach of contract case filed by a covered entity against a Medicare Advantage plan, the covered entity dismissed the case in its entirety with prejudice.
In an appealed case challenging a proposed West Virginia law governing contract pharmacy arrangements, plaintiff-appellees filed a brief, and in another similarly appealed case, appellants filed a reply brief.
In a case challenging a proposed state law governing contract pharmacy arrangements in Missouri, plaintiffs filed a notice of appeal with the Eighth Circuit.
The Supreme Court Finds An Income Tax Statute Unconstitutional – Pollock v. Farmers Loan and Trust Co. 158 U.S. 601 (1895)
The 16th Amendment to the United States Constitution, ratified in 1913, provides as follows: “The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States and without regard to any census or enumeration.” Why the reference to “apportionment”? Why the reference to a census? To answer these questions, it is necessary to turn to one of the most forgotten of forgotten Supreme Court cases, Pollock v. Farmers Loan and Trust Co. 158 U.S. 601 (1895). The case was forgotten because it was rendered moot by the passage of the 16th Amendment. Few today remember that the Supreme Court invalidated an income tax statute passed by Congress in the 1890s.
Until eclipsed by the Great Depression of the early 1930s, the Panic of 1893 was regarded as the greatest economic downturn in American history. Prompted by bankers, bondholders, and other financial interests, the nation’s currency had been on the gold standard for 20 years. This contributed to deflationary pressures that pushed the prices of farm products below farmers’ costs[1]. A wave of farm bankruptcies and foreclosures was followed by widespread unemployment and wage cuts for urban workers, prompting strikes to protest the wage cuts.
The Panic of 1893, like the Stock Market Crash of 1929, was ushered in by a period in which the nation’s wealth was concentrated in the hands of fewer and fewer people. In a 2017 installment of the PBS series The American Experience, titled “The Gilded Age,” the narration discussed the 1890 Census, which revealed that there were approximately 12 million families in America, of whom 4,000 held as much wealth as the combined wealth of approximately 11.6 million other families.
During the 1890s, as had been the case at almost all previous times in American history, the federal government derived most of its revenue from tariffs and excise taxes. In January 1894, a young Congressman from Nebraska named William Jennings Bryan joined a growing contingent that questioned the wisdom of financing the government with an indirect tax on basic goods.[2] Bryan and others reasoned that most people spent most of their income on necessities and that the sellers of many of these necessities passed on the costs of tariffs imposed on those goods to consumers who bought them. It followed that those who spent all or most of their income on living expenses (most Americans) paid taxes on a larger portion of their income than the wealthy, who spent only a fraction of their income on living expenses and were not subject to any tax on their income. It followed that an income tax would be a fairer way to distribute the cost of supporting the federal government. This idea had great appeal in this era of concentrated wealth. Hence, in 1894, Congress passed the first peacetime income tax.[3] Some monied interests saw this law as the first step on the road to socialism and the confiscation of most of their wealth. Hence, the challenge that brought the Pollock case before the Court.
The Court’s majority found that Congress could not tax income from land or money invested in financial assets. This decision rested on some brief and perhaps confusing language in the Constitution. Article I § 2 ¶ 3 says, “Representatives and direct taxes shall be apportioned among the several States which may be included within this Union according to their respective numbers.”[4] Article I §8 ¶1 gives Congress the power “To lay and collect taxes duties, imposts, and excises…to be uniform throughout the United States.”
From these provisions came the distinction between direct taxes, which must be apportioned among the States according to the population as determined by the Census, and indirect ones, such as tariffs, which must be uniform throughout the country. Thus, the crucial question for the Court in Pollock was what constitutes a direct tax.
There was no disagreement among the Justices that an income tax did not lend itself to apportionment among the States according to population. A head tax, a “capitation” in which each individual paid the same amount, was the archetype of a direct tax apportioned according to population. Because some States had aggregate incomes that were greater per capita than others, ensuring that an income tax was apportioned equally among the States on a per capita basis presented some obvious problems. From this reality, the majority, as expressed in Chief Justice Melville Fuller’s opinion, drew a very different conclusion from those of four Justices, who wrote separate dissenting opinions. Most notable among the dissents was that of Justice John Marshall Harlan, which was more in tune with the sentiments of Main Street than of Wall Street.[5]
The majority found that a tax on income derived from rents or earnings from securities or other investments was a direct tax that could not be imposed without violating the apportionment mandate of Article I §2 ¶3 and was, therefore, unconstitutional.
In his dissent, Harlan cited precedents going back to George Washington’s day as authority for his view that direct taxes within the meaning of the Constitution were limited to head taxes and taxes on land. He noted the terrible contortions that would be necessary to apportion a tax on the income from land and other invested personal assets among the States according to population.[6] He concluded that the Framers could not have intended to include such taxes as direct ones within the meaning of Article I §2 ¶3. Pollock, Id. at 652.
What is most notable about Harlan’s dissent is that he eloquently expressed the sentiments that led Congress to pass the 1894 income tax legislation in the first place. Although the majority found that all the provisions of the income tax statute were tainted by the unconstitutional tax on the profits of land and invested capital, the opinion theoretically held open the possibility of taxes on salaries.[7] Thus, in his dissent, Harlan protested that “The practical effect of the decision to-day is to give to certain kinds of property a position of favoritism” Id at 685.
“In the large cities or financial centers of the country there are persons deriving enormous incomes from the renting of houses that have been erected not to be occupied by the owner, but for the sole purpose of being rented. Near by are other persons, trusts, combinations, and corporations, possessing vast quantities of personal property, including bonds and stocks of railroad, telegraph, mining, telephone, banking, coal, oil, gas, and sugar-refining corporations, from which millions upon millions of income are regularly derived. In the same neighborhood are others who own neither real estate, nor invested personal property, nor bonds, nor stocks of any kind, and whose entire income arises from the skill and industry displayed by them in particular callings, trades, or professions, or from the labor of their hands, or the use of their brains. And it is now the law, as this day declared, that …congress cannot tax the personal property of the country, nor the income arising either from real estate or from invested personal property…while it may compel the merchant, the artisan, the workman, the artist, the author, the lawyer, the physician, even the minister of the Gospel, no one of whom happens to own real estate, invested personal property, stock, or bonds, to contribute directly from their respective earnings, gains, and profits, and under the rule of uniformity or equality, for the support of the government.” Id at 672-673.
Harlan’s dissent makes nearly the same point made by William Jennings Bryan in a portion of his famous “Cross of Gold” speech at the Democratic National Convention in Chicago in 1896.[8] In this portion of the speech, Bryan addressed his remarks to the monied interests who supported the gold standard and opposed bimetallism.
“When you come before us and tell us that we shall disturb your business interests, we reply that you have disturbed our interests by your action….The man who is employed for wages is as much a businessman as his employer. The attorney in a country town is as much a businessman as the corporation counsel in a great metropolis. The merchant at the crossroads store is as much a businessman as the merchant in New York. The farmer who goes forth in the morning and toils all day, begins in spring and toils all summer, and by the application of brain and muscle to the natural resources of this country creates wealth, is as much a businessman as the man who goes upon the Board of Trade and bets on the price of grain. The miners who go 1,000 feet into the earth or climb 2,000 feet upon the cliffs and bring forth from their hiding places the precious metals to be poured in the channels of trade are as much businessmen as the few financial magnates who in a backroom corner the money of the world.” [Commager (ed) Documents Of American History, P. 174]
The Main Street v. Wall Street theme was present in both Harlan’s dissent in Pollock and Bryan’s Cross of Gold speech.
It is undoubtedly a good thing that our Constitution cannot be amended easily. Only overwhelming sentiment in favor can secure the two-thirds majorities in both houses of Congress and ratification by the legislatures of three-fourths of the States necessary for an amendment. It took until 1913, 18 years after the Pollock decision, for the 16th Amendment to be passed. However, public support for financing the federal government with an income tax rather than tariffs was likely already building at the time of the decision.
By 1913, what became known as the Progressive Era was in full swing. Woodrow Wilson, of the Progressive wing of the Democratic Party, was President. Theodore Roosevelt of the Progressive wing of the Republican Party had been president from 1901 to 1908. The 17th Amendment, which provides for the direct election of members of the U.S. Senate, another Progressive reform, was also passed in 1913. The Federal Trade Commission, the Interstate Commerce Commission, the Federal Reserve System, and the Clayton Anti-Trust Act were all part of this era of reform. By 1913, Charles Evans Hughes and Oliver Wendell Holmes, two Justices sympathetic to Progressive reforms, were already on the Supreme Court; another Justice with these sympathies, Louis Brandeis, would follow in 1916. With the 16th Amendment in place, Congress passed the Revenue Act of 1913, which simultaneously implemented the income tax and lowered tariffs. [Link & McCormick, Progressivism, James, The Supreme Court In American Life, Chambers, The Tyranny Of Change, and McGerr, A Fierce Discontent].
The Pollock decision was moot, but the sentiments expressed in Harlan’s dissent had prevailed and made a lasting impact on law and public policy.
[1] The underlying cause of the problem was a long-term downward trend in grain prices. This trend was a result of the worldwide expansion of railroads, which opened new land for cultivation, facilitated access to markets, and reduced transportation costs. The decreasing prices they received for their products made the debts American farmers had incurred in earlier years relatively more burdensome. Many farmers viewed the monetization of silver, known as “bimetallism,” as a remedy to the deflationary pressure squeezing them. [Blum, et. al. The National Experience (3rd ed.), PP. 475-476; Parkes, The American Experience, P. 298; Foner, Give Me Liberty, P. 631; Schieber et. al., American Economic History (9th edition), PP. 213-214.; Goodwyn, The Populist Moment, P. 12; Brands, American Colossus, P. 487]
[2] Canellos, The Great Dissenter, P. 108.
[3]. A special emergency income tax existed during the Civil War, which was not continued after the War’s end.
[4] What followed, although not relevant here, was the language embodying the infamous Three-Fifths Compromise.
[5] See generally, Canellos, supra Chapter 14, and Urofsky, Dissent and the Supreme Court at PP. 126-128.
[6] Such as imposing a higher rate on States with lower aggregate incomes from these sources so that the amount paid per capita was equal.
[7] This possibility would require the tax on salaries to be categorized as an indirect tax within the meaning of Article I §8 ¶1, or the contortions needed to apportion it equally among the States according to population would also apply to it.
[8] This speech is considered one of American history’s greatest speeches. Bryan was 36 years old and not one of the leading contenders for the Party’s nomination for President at the time. The speech electrified the Convention. There was pandemonium on the floor and in the galleries. Bryan was carried around the hall on the shoulders of elated delegates for 25 minutes and instantly vaulted over all the other candidates to become the Party’s nominee. The language quoted above was merely part of the build-up to the dramatic final words of the speech, “You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.” [See H.W. Brands, American Colossus, PP. 547-548; Lears, Rebirth of a Nation, PP. 186-187; Cashman, America in the Gilded Age, PP. 332-334, and Wikipedia Article “Cross of Gold Speech” accessed 3/25/25.]
Split D.C. Circuit Panel Rules Trump Can Remove Wilcox from NLRB – NLRB to Stay Without a Quorum
A three-judge panel for the U.S. Court of Appeals issued a favorable ruling for President Trump, staying a recent district court decision that ruled his termination of National Labor Relations Board (“NLRB” or the “Board”) Member Gwynne Wilcox was unlawful. Thus, it appears that the Board again is left without statutory quorum, which under the National Labor Relations Act (“NLRA”) requires at least three members.
Trump Initially Removes Wilcox
By way of background, on January 28, 2025, in one of his first moves in office, President Donald Trump removed Board Member Gwynne Wilcox. President Trump sent an email to Member Wilcox, who began her term in September 2023, stating that he had lost confidence in Wilcox’s ability to lead the Board and that there were no valid constitutional limits on the President’s ability to remove a Board member with or without cause. The email also stated the statutory limitations on removal power were unconstitutional because they are inconsistent with the vesting of the executive power in the President. Marvin Kaplan, who Trump tapped to replace Ms. Wilcox as Board Chair, instructed his direct report to begin Ms. Wilcox’s termination, cut off her access to her accounts, and have Ms. Wilcox clean out her office. Trump’s decision to remove the Democratic appointee left the Board with only two sitting members and without a quorum to hear cases.
D.C. District Judge Then Reinstates Wilcox
Ms. Wilcox then proceeded to challenge her removal and filed a lawsuit alleging Trump violated the NLRA. Under the NLRA, Board Members can only be removed before their term’s end for “malfeasance” or “neglect of duty,” and they also must be given “notice and a hearing.” Ms. Wilcox sought a ruling that her termination was unlawful and void, along with injunctive relief against Board Chair Kaplan so that she may resume her role as a Board member.
As we reported here, on March 6, 2025, U.S. District Judge Beryl A. Howell agreed with Wilcox and determined that she was illegally fired. Judge Howell ordered that Kaplan not prevent Wilcox from doing her job and completing her five-year term, which expires on August 27, 2028. In her decision, Judge Howell relied on Humphrey’s Executor v. U.S., 295 U.S. 602 (1935), a Supreme Court case that outlined the principle for Congress to establish independent, multimember commissions whose members are appointed by the President. In 1935, the Supreme Court in Humphrey’s Executor upheld restrictions on the President’s authority to remove officers of certain types of independent agencies—in that case, a commissioner of the Federal Trade Commission. Humphry’s Executor has historically been applied to the NLRA, limiting the President to only remove Board Members for cause. The district court held that Humphrey’s Executor is still good law, and in effect still allows Congress to insulate the heads of multi-member expert agencies from presidential removal.
D.C. Circuit Now Reverses Course, At Least for the Time Being
Trump immediately appealed the district court’s decision to the U.S. Court of Appeals for the District of Columbia. On March 28, 2025, a panel of the D.C. Circuit, in a 2-1 decision, paused the district court’s ruling and found that restrictions on the President’s power to remove officers of the executive branch are likely unconstitutional.
The two Republican-appointed judges, Judge Justin Walker and Judge Karen Henderson, agreed with Trump’s arguments granting him broader executive power. Judge Walker wrote, “The Supreme Court has said that Congress cannot restrict the President’s removal authority over agencies that ‘wield substantial executive power.’” Democratic-appointed Judge Patricia Millet dissented in a 53-page opinion, criticizing the panel for deciding to “rewrite controlling Supreme Court precedent” in a way that will end up “disabling agencies that Congress created.”
The panel’s decision is not a final decision on the merits, and only stays the district court’s ruling until a final decision on the merits is reached. The panel is scheduled to hear oral arguments on the merits on May16.
However, on April 1, Wilcox filed a petition for initial hearing en banc and for rehearing en banc with the full D.C. Circuit. In court filings, Wilcox told the full D.C. Circuit that the full court should hear her case because the special panel’s opinion rewrote U.S. Supreme Court precedent. According to Wilcox, this “is an extraordinary case justifying initial en banc review of the merits.”
What’s at Stake?
The ongoing legal between Trump and Wilcox raises several constitutional issues. President Trump conceded that his email termination issued to Wilcox violated statutory requirements under the NLRA for removing a Board member. Instead, Trump’s strategy has been to contend that the President’s removal power is fundamentally unrestricted, and therefore the NLRA’s good-cause requirement is unconstitutional. Article I of the Constitution vests all legislative powers in Congress (the Senate and House of Representatives). Article II vests the executive power in the President. Article III vests the judicial power in one Supreme Court and other inferior Courts established by Congress. The ongoing legal battle between President Trump and Wilcox presents a clash between the executive and legislative branches. By terminating Wilcox, President Trump wielded executive power to overcome the NLRA, a statute enacted by Congress. The executive and legislative branches now look to the courts (Article III) to interpret the Constitution, past practice, and judicial precedent to resolve the current conflict.
Takeaways
For now, Trump’s termination of Wilcox stands, leaving the Board without a quorum. But the decision may not last. On April 1, Wilcox asked the full D.C. Circuit to hear her case challenging her termination instead of having a three-judge panel of the court conduct the initial review on the merits.
We will continue to monitor future developments on our blog. Employers with questions about how the decision affects them should consult experienced labor counsel.
Attention Department of Labor Contractors and Grantees: A Federal Court Hits Pause on Executive Orders Related to Diversity, Equity, and Inclusion
Federal courts continue to grapple with challenges to President Trump’s executive orders (“EOs”) related to diversity, equity, and inclusion (“DEI”), particularly EO 14151, Ending Radical And Wasteful Government DEI Programs And Preferencing, and EO 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity. As we’ve noted in our coverage of the litigation first filed in the District Court of Maryland, there has been a sense of whiplash among the courts, with the District Court initially issuing a nationwide injunction that was then stayed by the Fourth Circuit Court of Appeals. Now a second federal court has weighed in, issuing a new, nationwide temporary restraining order (“TRO”). This new TRO is more limited than the prior preliminary injunction issued by the District Court of Maryland, in that the new TRO only applies to Department of Labor (“DOL”) contractors and grantees. Nevertheless, the Court’s reasoning could be helpful to the contractors and grantees of other agencies facing renewed demands to execute the DEI Certification.
Case Background
The case is Chicago Women in Trades v. Trump et al., 1:25-cv-02005. It was filed on February 26, 2025, in the U.S. District Court for the Northern District of Illinois by Chicago Women in Trades (“CWIT”), an Illinois-based non-profit and DOL grantee whose mission is to prepare women to enter and remain in high-wage skilled trades, such as carpentry, electrical work, welding, and plumbing.
On March 18, 2025, CWIT filed a Motion for a TRO broadly seeking to preclude “any and all federal agencies” from taking action adverse to a federally funded contract, grant, or other implementing vehicle, where that action is animated by either EO 14151 or EO 14173. Alternatively, CWIT sought an injunction prohibiting only DOL from (1) taking any adverse action animated by EO 14151 or EO 14173 on any of the federal grants by which CWIT receives funding, as either a grant recipient, sub-recipient, or subcontractor; and (2) directing any other grant recipient or contractor under which CWIT operates as a sub-recipient or subcontractor from taking any adverse action on any of those grants on the basis of the anti-diversity EOs. Thus, the Plaintiff essentially offered the Court a choice of whether to fashion broad relief, or narrow relief.
The Executive Orders
We have previously written extensively about the two EOs at issue. The EO provisions that are relevant to the CWIT litigation include (1) the Termination Provision of EO 14151 (requiring the termination of “equity-related” contracts and grants), (2) the Certification Provision of EO 14173 (requiring contractors and grantees to execute a certification that they do not operate DEI programs that run afoul of applicable antidiscrimination laws and stating that compliance with antidiscrimination laws is material to the government’s payment decisions under the False Claims Act (“FCA”)), and (3) the Enforcement Provision of EO 14173 (requiring the Attorney General to prepare a report identifying potential targets for investigation and enforcement related to DEI).
Scope and Effect of the March 27, 2025, TRO
The Termination Provision: Per the terms of the TRO, DOL “shall not pause, freeze, impede, block, cancel, or terminate any awards, contracts or obligations” or “change the terms of” current agreements “with CWIT” on the basis of the Termination Provision in EO 14151. Note that this part of the TRO does not apply to agencies other than DOL or to contractors or grantees other than CWIT.
The Certification Provision: The Court ordered that DOL “shall not require any grantee or contractor to make any ‘certification’ or other representation pursuant to” the Certification Provision of EO 14173. Note that this applies not only to CWIT, but to any and all DOL contractors and grantees. The Court found that a TRO precluding “any enforcement” of the Certification Provision is warranted in order to ensure that CWIT has complete relief, given that CWIT works in conjunction with other organizations that may be deemed to provide DEI-related programming, and because other similarly situated organizations would not need to show different facts to obtain the relief sought by CWIT.
The Enforcement Provision: The Court ordered that the Government shall not initiate any False Claims Act enforcement “against CWIT” pursuant to the Certification Provision of EO 14173.
The main takeaway for the federal contracting and grant community is that DOL cannot ask any of its contractors and grantees to sign the DEI Certification of EO 14173. The rest of the TRO is limited to CWIT. The Northern District of Illinois may have limited the relief available under the TRO due to the Fourth Circuit’s March 14, 2025, ruling to stay a much broader preliminary injunction that was issued by the District Court of Maryland. (According to Judge Rushing of the Fourth Circuit, “[t]he scope of the preliminary injunction alone should raise red flags: the district court purported to enjoin nondefendants from taking action against nonplaintiffs.”)
Conclusion
Although Judge Kennelly of the Northern District of Illinois issued a TRO that applies only to DOL contractors and grantees, his reasoning can serve as a roadmap for the contractors and grantees of other agencies who may receive the EO 14173 DEI Certification. Judge Kennelly expressed concern that the EOs likely violate the First and Fifth Amendments of the Constitution, as well as the Spending Clause and the Separation of Powers. As such, the Northern District of Illinois is now the second federal court to call out both the vagueness of the challenged EOs and the government’s unwillingness to define the EOs’ key concepts, such as “DEI” and “illegal DEI”. Accordingly, contractors and grantees faced with the DEI Certification should increasingly feel that it is reasonable to respond by bringing the ambiguities in the certification language to the attention of the Contracting Officer, while, as we have previously suggested, contemporaneously memorializing the basis for the contractor’s reasonable interpretation of the ambiguous certification, in order to assist in the defense of any potential FCA claim.