Missouri Supreme Court Upholds Proposition A: Paid Sick Leave Takes Effect May 1, 20
On April 29, 2025, the Missouri Supreme Court ruled 4-3 to uphold Proposition A, the voter-approved initiative that increases the state’s minimum wage and requires employers to provide earned paid sick leave. The law will take effect as planned on Thursday, May 1.
What is Proposition A?
Proposition A raises minimum wage and introduces mandatory earned paid sick leave for most workers. Some of the key provisions of Proposition A include:
Raising the minimum wage to $13.75 per hour in 2025 and $15 by 2026 and providing for annual inflation-based increases thereafter.
Requiring employers to provide paid sick leave, with workers earning one hour of leave for every 30 hours worked.
The Legal Challenge
Business associations and other opponents of the measure challenged the law in Case No. SC100876, Raymond McCarty, et al. v. Missouri Secretary of State, et al. Plaintiffs argued that the summary statement and fiscal note summary were so misleading that they cast doubt on the fairness of the election and validity of its results. Further, Plaintiffs argued that Proposition A was invalid because it violated the “single subject” and “clear title” requirements of Art. III, Section 50 of the Missouri Constitution.
Majority Opinion
The Missouri Supreme Court’s majority held the results of the election adopting Proposition A are valid and dismissed, without prejudice, the claim contending Proposition A violated the single subject and clear title requirements for lack of jurisdiction.
Key points from the majority opinion:
Ballot Summary: The Court determined that the summary language was not materially inaccurate or seriously misleading to demonstrate an irregularity. Instead, the Court stated that Plaintiffs made conclusory allegations that the summary statement language misled voters but did not offer evidence to support those conclusions. Thus, a new election was not warranted.
Single-Subject Rule: The justices declined to rule on whether Proposition A violated the single subject rule—the Court dismissed the claim without prejudice for lack of jurisdiction, stating that the claim had not been properly raised in a lower court before coming to the Supreme Court.
Separate Opinion
Justice Ransom issued a separate opinion from the majority, stating that he disagreed that the Supreme Court possesses original jurisdiction over election contests. However, Justice Ransom agreed with the majority’s decision if, for argument’s sake, the Court had jurisdiction to hear the challenges.
What Happens Next?
With the ruling in place:
Proposition A will take effect on May 1, 2025.
Employers must comply with new minimum wage rates and paid sick leave requirements, including taking immediate steps to implement paid sick leave by May 1.
Lawmakers or business groups could still seek legislative revisions or bring new legal challenges.
Navigating Business Financing: Understanding Your Loan Options
Business financing isn’t one-size-fits-all — and choosing the wrong option can cost more than just interest. Whether you’re launching a startup, scaling operations, or managing a tight cash cycle, the type of loan you choose can shape your company’s trajectory. From asset-backed lending to merchant cash advances, the financing world is full of tools — and traps. This article breaks down the major options, clarifies key distinctions, and highlights what smart business leaders should consider before signing on the dotted line.
Debt vs. Equity
This article, of course, assumes the decision has been made to finance the company’s capital needs through debt. While this form of financing does not dilute ownership, it creates financial obligations that can strain cash flow. Entrepreneurs should carefully assess whether they can meet repayment obligations before taking on debt.
Editors’ Note: Read “The Basics of Business Formation: What Every Entrepreneur Needs to Know” for more information.
Asset-Based Lending vs. Cash Flow Lending: Understanding the Distinctions
When seeking financing, businesses often encounter two primary lending structures: Asset-Based Lending (ABL) and Cash Flow Lending.
Asset-Based Lending
This type of lending is secured by tangible assets such as inventory, accounts receivable, or equipment. The loan amount is typically determined by the value of these assets. Michael Weis, of Weis Burney, explains that in asset-based lending, the focus is on the collateral. Lenders assess the liquidation value of assets to determine the loan amount.
Purchase Order (PO) Financing: Bridging Supplier Payments
When a business receives a substantial order but lacks the immediate funds to fulfill it, Purchase Order (PO) financing can be a viable solution. This financing method allows companies to obtain the necessary capital to pay suppliers upfront, ensuring that large orders can be completed without depleting working capital.
Harvey Gross, president of HSG Services, explains that PO financing enables companies to cover the cost of goods and labor, especially when suppliers demand payment before delivery. This can be particularly useful for businesses dealing with international suppliers.
Accounts Receivable Factoring: Monetizing Outstanding Invoices
Factoring involves selling a company’s accounts receivable (invoices) to a third party (a factor) at a discount. This provides immediate cash flow, which is essential for businesses needing liquidity before their customers pay their invoices.
Gross notes that factoring is one of the oldest forms of business financing. It allows businesses to sell their receivables and gain immediate access to funds, improving cash flow without incurring additional debt.
Cash Flow Lending
This approach relies on the company’s expected future cash flows for repayment. Lenders evaluate the business’s financial health, including revenue and profitability, to assess loan eligibility. Weis adds that cash flow lending emphasizes the company’s ability to generate sufficient cash to service debt. It’s more about the income statement than the balance sheet.
Personal Guarantees: The Individual’s Commitment
Lenders often require a personal guarantee from business owners, making them personally liable for the loan if the business defaults. This ensures that the owner’s personal assets can be used to repay the debt, adding a layer of security for the lender.
Weis emphasizes that a personal guarantee serves both legal and psychological purposes. It demonstrates the owner’s commitment and aligns interests between the borrower and lender.
Business owners should take the time to understand, and potentially negotiate a personal guarantee before signing one. They come in many flavors.
Editors’ Note: Read “Good Boys and ‘Bad Boys’ — Borrower Promises and Lender Rights in Carveout Guaranties” for more information.
Construction and Bridge Loans: Financing Growth and Transition
Construction Loans: These are short-term loans used to finance the building or renovation of a property. They typically cover the costs of construction and are repaid upon completion, often through the acquisition of a mortgage. Phil Buffington, a financial expert with Balch & Bingham, notes that construction loans provide the necessary funds to cover building costs. Once the project is complete, businesses usually refinance into a long-term loan.
Bridge Loans: These interim loans provide immediate cash flow to cover current obligations while awaiting long-term financing. They are commonly used in real estate to bridge the gap between the purchase of a new property and the sale of an existing one.
Buffington explains that bridge loans are designed to offer quick liquidity during transitional periods, ensuring that businesses can meet short-term needs without disruption.
Equipment Financing: Acquiring Essential Assets
Equipment financing allows businesses to purchase necessary machinery or equipment by using the equipment itself as collateral. This type of financing is essential for companies that require expensive equipment to operate but prefer to preserve cash flow.
Buffington advises that, when considering equipment financing, a business owner should evaluate the lifespan of the equipment and the terms of the loan to balance the cost with the expected utility.
Merchant Cash Advances (MCAs): Quick Cash with Caution
A Merchant Cash Advance (MCA) provides businesses with immediate funds in exchange for a percentage of future sales. While MCAs offer quick access to capital, they often come with high costs and can impact cash flow significantly.
Gross warns that MCAs can be enticing due to their speed and lenient credit requirements, but the associated costs can be exorbitant, sometimes exceeding 100% APR. It’s crucial to understand the terms fully before proceeding.
The Regulatory Landscape
The financing industry is subject to evolving regulations aimed at protecting businesses and ensuring fair practices. For instance, certain states have introduced legislation requiring licensing for commercial financing providers and mandating clear disclosures.
Jacqueline Brooks, a partner with Duane Morris, emphasizes the importance of staying abreast of regulatory changes. Compliance not only protects the business but also fosters trust with lenders and customers.
Making Informed Financing Decisions
Understanding the nuances of various financing options empowers businesses to make informed decisions aligned with their goals and financial health. Collaborating with financial advisors and legal experts can provide valuable insights and help navigate the complexities of business financing.
To learn more about this topic view Business Borrowing Basics / What Kind of Loan? The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about business borrowing.
This article was originally published here.
©2025. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
Maximizing Recovery in Trade Secret Cases: A Guide to Damages and Remedies
The landscape of trade secret damages has evolved dramatically in recent years, with courts awarding unprecedented sums in cases of proven misappropriation.
Recent verdicts, including the $604.9 million award in Propel Fuels v. Phillips 66 (over confidential data, proprietary strategies, and business intelligence regarding low carbon fuels) and the $452 million verdict in Insulet Corp v. EOFlow (involving tubeless insulin pump technology), demonstrate the potential for substantial recovery. However, securing such awards requires a sophisticated understanding of available remedies and a carefully planned approach to proving damages.
Understanding Available Damages Under the DTSA
The federal Defend Trade Secrets Act (DTSA) provides several distinct paths to monetary recovery, each serving different purposes and requiring different types of proof.
At the foundation are actual damages, which compensate for direct losses caused by misappropriation. These often begin with lost profits from sales diverted to competitor,s but can encompass much more. Companies frequently incur substantial costs developing their trade secrets, implementing remedial measures after theft, investigating the scope of misappropriation, and rebuilding damaged customer relationships.
All of these expenses may be recoverable as actual damages when properly documented and linked to the defendant’s misconduct.
The challenge in proving actual damages lies in establishing causation. Courts require evidence that specific losses resulted from the misappropriation rather than from other market factors or business conditions. This often necessitates careful analysis of historical performance data, market conditions, and customer behavior patterns to isolate the impact of the misappropriation.
Unjust enrichment provides an additional (or alternative) path to recovery by focusing on the defendant’s gains rather than the plaintiff’s losses. A plaintiff may recover damages for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for their actual loss.
This approach can be particularly valuable when the defendant’s use of the trade secret generated profits beyond what the plaintiff lost. For instance, a defendant might have reached new markets or customers that the plaintiff wouldn’t have served, making unjust enrichment damages potentially larger than lost profits alone.
The scope of unjust enrichment can be quite broad. Beyond direct profits from sales, courts recognize that defendants may benefit from reduced development costs, accelerated time to market, improved manufacturing efficiency, and enhanced customer relationships. These benefits can be quantified and recovered even when they haven’t yet translated into direct profits.
As an alternative to actual damages and unjust enrichment, courts may award a reasonable royalty. This approach attempts to determine what a willing licensee would have paid a willing licensor for the right to use the trade secret.
Courts examining a reasonable royalty award of damages typically consider numerous factors, including:
Comparable licensing arrangements in the industry;
The competitive relationship between the parties;
The value of the secret to both parties;
Development costs saved by the defendant;
The portion of profit attributable to the trade secret and
Expert analysis of market conditions and value.
Enhanced Recovery Options
Beyond compensatory damages, trade secret law provides for potential recovery of enhanced damages and attorney’s fees in cases of particularly egregious conduct. When misappropriation is willful and malicious, courts can award exemplary damages up to twice the amount of compensatory damages.
Evidence of deliberate theft, attempts to cover up misappropriation, violation of court orders, or continued use after receiving notice can support such awards.
Attorneys’ fees represent another important component of potential recovery.
These become available in cases involving willful and malicious misappropriation or bad faith litigation conduct. The availability of attorneys’ fee awards can significantly impact litigation strategy and settlement dynamics, particularly in cases where proving damages may be challenging but liability (misconduct) is clear.
Permanent Injunctive Relief and Alternative Remedies
While monetary damages often take center stage, injunctive relief remains a crucial remedy in trade secret cases.
Parties typically begin a trade secret case by seeking a temporary restraining order and then a preliminary injunction. These orders prohibit a defendant from using a trade secret while litigation is pending up through trial.
However, at the conclusion of a case, parties can also seek an injunction that will prohibit the disclosure of the trade secret permanently and/or the use of the trade secret. Courts typically will permanently enjoin a defendant from sharing a trade secret, but an injunction on use of the trade secret is normally less permanent. Courts structure “permanent” injunctions regarding the use of a trade secret around the concept of a “head start” period – the time it would have taken the defendant to independently develop the trade secret. This approach aims to eliminate any unfair advantage gained through misappropriation, while recognizing that trade secrets don’t confer perpetual monopolies.
In some situations, courts may order ongoing royalty payments instead of a permanent injunction. This usually occurs when completely barring use of the trade secret would be inequitable or against the public interest. For instance, if the defendant has incorporated the trade secret into products serving essential public needs, a court might prefer a royalty solution over an injunction.
Building a Strong Damages Case
Successfully proving damages requires careful preparation from the earliest stages of the case. Early case assessment should examine potential damages theories and identify necessary evidence before critical information is lost. This initial analysis helps guide discovery requests, identify necessary experts, and make strategic decisions about settlement parameters.
Selection of expert witnesses proves crucial in most trade secret cases. Beyond technical expertise, damages experts need strong communication skills and the ability to present complex financial analyses in understandable terms.
Damages experts should be involved early enough to help shape discovery and document preservation efforts.
Documentation becomes particularly important in trade secret cases because of the need to establish both the secret’s value and the impact of its misappropriation.
Companies should maintain detailed records of development costs, efforts, and associated expenses to maintain secrecy, value derived from the secret, affected customer relationships, market impact, and remedial measures taken. This documentation helps demonstrate both the existence of damage and its quantum.
Strategic Considerations for Maximum Recovery
Several strategic considerations can significantly impact ultimate recovery in trade secret cases.
First, maintaining multiple theories of recovery throughout trial provides maximum flexibility. Courts typically allow plaintiffs to elect their preferred theory of recovery (actual damages vs. unjust enrichment vs. reasonable royalty) after all evidence is presented, so preserving all viable theories until that point maximizes potential recovery.
The international reach of trade secret claims presents another strategic consideration. The DTSA can reach conduct outside the United States when any act in furtherance of misappropriation occurs domestically. This allows recovery of damages from foreign sales or use when there’s a U.S. nexus, potentially expanding the scope of recovery significantly.
Timing considerations permeate trade secret damages analysis. Key questions include when misappropriation began, when it should have been discovered, the appropriate “head start” period, and the commercial life of the secret. These temporal factors can significantly impact the calculation of both damages and the scope of injunctive relief.
Looking Forward
The complexity of trade secret damages demands careful attention from the outset of any potential case. Success requires understanding available theories of recovery, maintaining necessary documentation, and building strong expert support.
While recent high-value verdicts demonstrate the potential for substantial recovery, achieving such results requires methodical preparation and strategic presentation of damages evidence.
Our final article will explore preventive measures and best practices for protecting trade secrets before misappropriation occurs, completing our comprehensive examination of trade secret protection and enforcement.
Ninth Circuit En Banc Reverses Panel Decision and Holds Non-Resident Corporation Providing Web-Based Payment Processing Platform Is Subject to Specific Personal Jurisdiction in California
In Briskin v. Shopify, Inc., No. 22-15815, 2025 U.S. App. LEXIS 9410 (9th Cir. Apr. 21, 2025), the United States Court of Appeals for the Ninth Circuit, sitting en banc, held that the Canada-based company Shopify, Inc. (“Shopify”), which provides a web-based payment processing platform to online merchants across the United States (and the world), is subject to specific personal jurisdiction in California based solely upon Shopify’s extraction, maintenance and commercial distribution of personal data from consumers it knew to be located in California. In making this ruling, the Ninth Circuit became the first Circuit in the nation to address this type of personal jurisdiction question involving a global online payment platform.
The case arose after a California resident, while present in California, used his iPhone to purchase goods online from a California-based retailer that, unknown to him at the time, utilized Shopify’s payment system. In the process of facilitating the transaction, Shopify allegedly installed “cookies” on the individual’s iPhone without his knowledge or consent, which permanently remained on his device and tracked its physical location, while also collecting data regarding his online shopping activity. Shopify allegedly used the data it extracted from its tracking software to compile a customer profile that it marketed widely, including to California merchants. The individual filed a class action lawsuit against Shopify in the United States District Court for the Northern District of California, alleging violations of various California state privacy and unfair competition laws.
Shopify moved to dismiss the complaint for lack of personal jurisdiction in California. The district court agreed, dismissing the operative complaint without leave to amend. Plaintiff appealed, and a three-judge panel of the Ninth Circuit affirmed the district court’s ruling that it lacked specific personal jurisdiction over Shopify. (See blog article here.) However, a majority of the active judges of the Ninth Circuit voted to rehear the appeal en banc.
The en banc Court reversed the district court’s judgment (and, thus, the panel decision), applying traditional personal jurisdiction jurisprudence to conclude that the district court has specific personal jurisdiction over Shopify because its allegedly tortious actions were purposefully directed toward California. Specifically, Court determined that Shopify “expressly aimed its conduct at California through its extraction, maintenance, and commercial distribution of the California consumers’ personal data” without their knowledge or consent. The Court also emphasized that Shopify, through its geolocation technology, allegedly knew plaintiff was located in California prior to or shortly after installing its tracking software onto his iPhone.
The en banc Court also overruled precedent, including the decision in AMA Multimedia, LLC v. Wanat, 970 F.3d 1201 (9th Cir. 2020), requiring a non-resident defendant’s globally-accessible website to have a “forum-specific focus,” otherwise known as “differential targeting,” in order to establish specific personal jurisdiction in that forum. The Court held that such a requirement runs contrary to longstanding Supreme Court authority and would have “the perverse effect of allowing a corporation to direct its activities toward all 50 states yet to escape specific personal jurisdiction in each of those states for claims arising from or relating to their relevant contacts in the forum state that injure that state’s residents.”
The Ninth Circuit’s en banc ruling establishes that universal data collection through a globally- or nationally-accessible website may make the site operator subject to specific personal jurisdiction wherever its users are located, particularly when the site operator has the capability to determine where users are located or utilizes the data it extracts for commercial purposes. The en banc Court’s decision, particularly if followed by other Circuits, is likely to dramatically increase the forums where participants in the vast and growing e-commerce market may be sued.
Navigating the 2025 Tariff Landscape: A Practical Guide for Small and Midsize Business Owners
Big Picture Messages from the Panel
The U.S. has entered a new era of trade protection with significant tariffs now in place:
Tariff application has “paused” for 90 days, but consensus was that the trade agreement process could take six to 18 months, rather than 90 days. There’s a lot of complexity to trade negotiations.
The U.S.-China process of de-coupling started well before the change in tariff policy and will likely be a long-term trend. Tariffs are merely playing a part in accelerating or shaping the evolution. Plan accordingly.
Don’t be afraid to negotiate better terms with suppliers. They usually don’t want to lose your business and can help play a part in a cost-management solution.
Better managed companies are taking advantage of the uncertainty. Never waste a good crisis!
They are using the cover of tariffs to raise prices 5% to 10%, to extend payment terms to net 60 or even 90 days, and to use their capital resources flexibly (factoring, use of revolving credit, etc.).
They are also using the cover of tariffs to improve internal performance, such as trimming unproductive staff or divesting from underperforming product lines.
Healthy balance sheets also are allowing them to make favorable acquisitions, sometimes at favorable multiples.
Our panelists estimated that about 20% of the small/midsized businesses they see are in a position to act proactively. They put themselves in this position intentionally, to be ready for a downturn. That’s a good position to be in!
As a businessowner, you’re likely feeling the effects already. Costs are up, supply chains are strained, and planning for the future has become more challenging. While there are hints of potential de-escalation, for now these tariffs are a business reality you need to navigate.
Why Your Business Is Particularly Vulnerable
Small and midsized businesses face unique challenges in this environment:
Less negotiating power with suppliers
Tighter financial resources to absorb higher costs
Limited capacity to quickly change supply chains
The impacts you’re likely experiencing include:
Higher costs for imported materials and goods
Supply chain disruptions and inventory problems
Pressure on your competitive pricing
Difficulty making long-term business plans
Potential loss of export markets due to retaliatory tariffs
Practical Strategies to Protect Your Business
1. Make Your Supply Chain More Resilient
Find alternative suppliers
Look for options in countries not heavily affected by tariffs.
Understand Country of Origin (COO) rules when evaluating new suppliers.
Consider that the lowest price may not mean the lowest total cost when tariffs are added.
Consider moving production closer to home
Evaluate if moving production to nearby countries (Mexico, Canada) makes financial sense.
Look into bringing some manufacturing back to the U.S.
Be realistic about challenges like finding skilled workers and higher costs.
Use Foreign Trade Zones (FTZs) strategically
These special zones let you store, modify, and re-export goods without immediate tariff payments.
Decide whether you can improve cash flow by deferring or eliminating tariffs on goods you’ll eventually re-export.
Explore “tariff engineering”
Minor modifications to your products or component sourcing might qualify for lower tariff rates.
Work with experts (customs brokers, trade attorneys) to do this properly.
2. Strengthen Your Financial Position
Cut costs where possible
Look for efficiencies throughout your business to offset tariff-related expenses.
Focus on areas that won’t impact your product quality or customer experience.
Protect against currency swings
If you do international business, consider currency hedging strategies.
Talk to your financial advisor about extending hedging timeframes given the current volatility.
Manage your cash flow aggressively
Keep enough cash reserves to handle unexpected cost increases.
Try to negotiate better payment terms with suppliers.
Use data to optimize your inventory levels.
3. Navigate the Legal and Regulatory Landscape
Partner with experts
Work with experienced customs brokers to ensure accurate product classification.
Consider consulting with a trade attorney to understand your options.
Stay informed about International Emergency Economic Powers Act (IEEPA) developments.
Monitor policy changes
Keep an eye on updates from U.S. Customs and Border Protection.
Watch for rulings from the Court of International Trade, which handles tariff disputes.
Join industry associations that track and advocate on trade issues.
4. Adapt Your Market Strategy
Diversify your markets
Reduce dependence on regions affected by retaliatory tariffs.
Research and develop new domestic and international opportunities.
Emphasize your unique value
Double down on what makes your business special beyond just price.
Highlight quality, service, innovation, or expertise to maintain customer loyalty despite price adjustments.
Consider ethical sourcing as a differentiator
If relevant to your industry, emphasize fair trade and ethical practices.
This can attract customers willing to pay more for responsibly sourced products.
Get involved in advocacy
Join with others in your industry to voice concerns to policymakers.
Collective efforts can sometimes influence policy adjustments.
Plan for different scenarios
Develop contingency plans for various possible changes in tariff policies.
This preparation allows you to react quickly when the situation evolves.
Moving Forward
The current tariff environment is challenging but navigable. By implementing these strategies, your business can become more resilient and potentially find new opportunities amid the disruption. Stay vigilant, be proactive, and remember that adaptation is key to sustainability in today’s evolving trade landscape.
* * *
Quick Reference: Key Trade Terms
Baseline Tariff: The standard 10% tariff now applied to most imports (effective April 5, 2025)
Reciprocal Tariffs: Higher, country-specific tariffs imposed based on perceived trade imbalances
Country of Origin (COO): Rules determining where a product is considered to be made, affecting which tariffs apply
Customs Broker: Licensed professional who helps navigate import/export regulations
Automated Commercial Environment (ACE): The electronic system used by U.S. Customs for import/export processing
Court of International Trade (CIT): Federal court that handles disputes related to tariffs and trade
Foreign Trade Zones (FTZs): Designated areas where goods can be stored or modified without immediate tariff payment
Nearshoring: Moving operations to nearby countries (like Mexico or Canada)
Onshoring/Reshoring: Bringing production back to the United States
Colorado Bill Would Ban Restrictive Covenants With Healthcare Providers
On April 21, 2025, Colorado legislators passed a bill to outlaw restrictive covenants with healthcare providers. The bill further clarifies when noncompete agreements can be enforced in the purchase or sale of a business.
Quick Hits
The Colorado legislature passed a bill to ban noncompete agreements with doctors, physician assistants, dentists, nurses, and midwives.
The bill clarifies when noncompetes can be used in the purchase or sale of a business, including the sale of direct and indirect ownership interests.
If signed by the governor, the bill will take effect on August 6, 2025.
State law permits noncompete agreements and nonsolicitation agreements with certain highly compensated employees, but the bill would exclude healthcare providers from that provision.
State law permits restrictive covenants designed to protect trade secrets. However, the bill would not allow a restrictive covenant if it “prohibits or materially restricts a health-care provider” from disclosing to existing patients prior to the provider’s departure the following information:
the healthcare provider’s continuing practice of medicine,
the healthcare provider’s new professional contact information, or
the patient’s right to choose a healthcare provider.
The bill clarifies the state law provision that permits noncompete agreements related to the sale of a business. The bill would allow the purchase or sale of a business exception to be applied to the sale of all, or substantially all, of a business’s assets. For the sale of a minority interest in a business for individuals who received the equity as part of their compensation, the noncompete agreement’s duration in years would not be permitted to exceed “the total consideration received by the individual from the sale divided by the average annualized cash compensation received by the individual from the business.”
Next Steps
Employers in Colorado may wish to inventory all of their noncompete agreements and determine if any apply to healthcare providers. They may wish to consider using other strategies, such as nondisclosure agreements and employee retention strategies, to serve similar purposes, including protecting an employer’s trade secrets and training investments.
The bill does not apply to existing noncompete agreements, but if signed by the governor, it will apply to those entered or renewed after August 6, 2025.
This article was co-authored by Leah J. Shepherd
Delaware’s New Approach To Interested Director and Minority Stockholder Protections
On March 25, Delaware governor, Matt Meyer, signed into law Substitute 1 to Senate Bill 21 (SB 21), following its rapid approval by the Delaware state legislature. This legislative measure aims to counter the current trend of companies relocating their headquarters out of Delaware, following a January 2024 Delaware Chancery Court ruling that overturned a $56 billion compensation package for a high-profile tech CEO.
SB 21 and the changes to the Delaware General Corporation Law (DGCL) it contains could potentially lower litigation risks for Delaware-based corporations, including their directors, officers, and majority shareholders.
This strategic move to refine corporate governance in Delaware will most significantly impact how interested director and interested stockholder transactions are handled. These amendments introduce new safe harbor provisions and redefine key terms, which greatly enhance the protections for interested directors, interested officers, and majority shareholders. As Delaware aims to retain its status as the renowned hub for corporations, often leading the way in corporate law, these changes promise to provide a more predictable and favorable legal environment for corporations.
The amendments took effect immediately following the Governor’s signature and, in most cases, are applied retroactively. Regarding SB 21’s retroactive application, these amendments cover all acts or transactions, regardless of whether they occurred before, on, or after the date of enactment. However, they do not apply to any actions, proceedings, or requests to inspect books or records that were initiated or made on or before February 17, which is when the initial draft of the amendments was first made public.
Interested Director, Officer, and Stockholder Transactions
Prior to the amendments, DGCL §144(a) provided a safe harbor for transactions involving interested directors, ensuring they were not automatically void or voidable due to conflicts of interest, provided that all relevant facts about the director’s or officer’s conflict, including their involvement in the transaction, were fully disclosed. The transaction then had to be approved by (1) a majority of disinterested directors on the board or a board committee, even if they did not constitute a quorum, and (2) a majority of informed, disinterested, and uncoerced stockholders.
If these conditions went unmet, the transaction had to be “fair to the corporation and its stockholders” to qualify for the safe harbor, necessitating compliance with the “entire fairness” doctrine. Entire fairness is historically the highest standard of review in corporate law, requiring boards to demonstrate both fair pricing and fair procedures in transactions with conflicts of interest.
In a recent case, the Delaware Supreme Court demonstrated that transactions could be deemed entirely fair, despite flaws, emphasizing factors like independent negotiation, expert advisory involvement, and informed stockholder approval. The court emphasized that fair dealing and fair pricing can be established through comprehensive vetting, appropriate timing, and market validation, even when certain procedural safeguards are not employed. Although DGCL §144(a) previously ensured that such transactions were not void or voidable solely due to director interest, directors and officers could still face litigation for breaches of fiduciary duties, if they failed to demonstrate entire fairness in the transaction or both of the aforementioned requirements.
The amendments from SB 21 broaden the scope of protection under the safe harbor provisions, now preventing any claims for equitable relief or monetary damages if there is either, (1) approval by a well-informed and functioning special committee with at least two disinterested directors or (2) an informed, uncoerced vote by disinterested stockholders. This significantly lessens the stress on interested parties and corporations, allowing them to transact without the same fear of legal repercussions. However, under SB 21, as discussed below, in a going private transaction where there is a controlling shareholder, both mechanisms, designed to protect minority shareholders from conflicted transactions, must still be used in order to take advantage of the safe harbor.
Controlling Stockholder Transactions
SB 21 amends the DGCL to introduce a more structured framework for transactions involving controlling stockholders. These amendments, particularly to DGCL §144, aim to streamline the approval process for such transactions, excluding “going private” deals, and provide a clearer path to avoid legal challenges if specific conditions are met.
The amendments to DGCL §144(b) establish a safe harbor for transactions involving controlling stockholders. This safe harbor is designed to protect these transactions from actions seeking equitable relief and damages, provided they meet certain criteria. The transaction must be approved, in good faith, by a special committee that has the express authority to negotiate and reject the transaction. The committee must consist of a majority of disinterested directors and must exclude the controlling stockholders. This ensures that the decision-making process is unbiased and focused on the best interests of the corporation and its minority shareholders.
Alternatively, the safe harbor can be applied if the transaction is approved or ratified by a majority of informed, disinterested, and uncoerced stockholders, provided that all material facts regarding the transaction are disclosed to them. This dual pathway for approval offers flexibility, while maintaining rigorous standards for transparency and fairness.
For “going private” transactions, the amendments introduce a new subsection, DGCL §144(c), which outlines a more stringent dual requirement for safe harbor protection. This provision mandates that the transaction must be approved by both a special committee and a majority of disinterested stockholders, with all material facts disclosed to both parties. This is essentially invoking the DGCL’s entire fairness standard of review.
These amendments effectively roll back previous expansions of the MFW Doctrine, which was established in the landmark case of Kahn v. M&F Worldwide Corp. The Delaware Supreme Court had previously ruled that controlling stockholder transactions could be reviewed under the business judgment rule, rather than the “entire fairness” standard, only if such transactions were conditioned on approval by both an independent special committee and a majority of disinterested stockholders.
SB 21 confirms that the full scope of the MFW Doctrine is now limited to going private transactions. For other controlling stockholder transactions, compliance with either of the MFW procedural mechanisms (i.e., approval by an independent special committee or a majority of disinterested stockholders) allows under the business judgment rule. This simplification could potentially reduce litigation risks and provide a more predictable legal framework for corporate transactions involving controlling shareholders.
These amendments reflect a strategic shift in Delaware’s corporate law, aiming to balance the interests of minority shareholders, with those of controlling stockholders. By providing a more predictable and streamlined process for approving transactions, the amendments could encourage more efficient dealmaking.
Now, following SB 21, it is paramount for companies to ensure that all material facts are thoroughly disclosed and that the decision-making process is free from coercion of informed, disinterested, and uncoerced stockholders.
Controlling Stockholder Classification
SB 21 also introduced DGCL §144(e), a subsection that sharpens the focus on corporate governance by clearly defining key terms related to stockholder and director roles. The new definitions are pivotal under the DGCL, especially the term “controlling stockholder,” which now refers to an entity or individual with significant influence, either by owning a majority of voting power, having the contractual right to elect a majority of directors, or wielding equivalent power through substantial voting shares and managerial control. This clarity helps pinpoint who holds sway in corporate affairs, promoting more transparent governance.
In tandem, SB 21 outlines what makes a “disinterested director.” Such a director is uninvolved in the transaction, free from material interests, and lacks significant ties to interested parties. This definition is crucial for ensuring directors act impartially, safeguarding the corporation’s and shareholders’ interests. SB 21 also presumes independence for directors meeting these criteria, a presumption that can only be overturned with detailed evidence, bolstering directors’ defenses against potential shareholder lawsuits. The enhanced protection allows directors to act more freely and confidently, knowing that their independence is presumed and safeguarded against unwarranted challenges. This assurance can make Delaware a more attractive jurisdiction for companies, as it reduces the risk of litigation over director decisions and reinforces the state’s reputation for strong, clear corporate governance standards, potentially discouraging companies from considering relocation.
The amendments further introduce safe harbor provisions for transactions involving conflicted directors or officers. These provisions shield such transactions from legal challenges if they receive approval from an independent board committee with at least two directors or are ratified by a majority of disinterested stockholders. This process ensures that even potentially conflicted transactions are handled with transparency and fairness. The final amendments in SB 21 refine a pre-existing safe harbor provision for disinterested directors, mandating that disinterested director approvals occur within an independent committee context.
Redefining Stockholder Inspection Rights
SB 21 amends DGCL §220, making significant changes to the rights of stockholders and directors in inspecting the books and records of Delaware corporations. Historically, Section 220 allowed stockholders to inspect corporate records for a “proper purpose,” which courts have interpreted to include a variety of reasons such as investigating potential misconduct, engaging in proxy contests, and assessing stock value. Once a proper purpose was established, stockholders were entitled to access records deemed “necessary and essential” to their purpose. However, the scope of what constituted “necessary and essential” had broadened over time, extending beyond traditional board materials to include electronic communications like emails and texts.
The amendments aim to curtail this expansion by clearly defining “books and records” as core materials, such as board minutes from the past three years, board presentations, director independence questionnaires, and communications with stockholders. While stockholders can still request additional materials, they must now demonstrate a “compelling need” and provide “clear and convincing evidence” that these materials are essential to their purpose.
Furthermore, the amendments provide corporations with greater certainty and protection, by allowing them to impose reasonable confidentiality restrictions on the use and distribution of inspected records. Corporations can also redact information that is not directly related to the stockholder’s purpose. These changes address previous challenges where courts sometimes denied confidentiality protections, depending on the circumstances.
Overall, the amendments to Section 220 establish a structured framework for record inspection, aiming to balance the rights of stockholders with the need to protect corporate confidentiality and limit the scope of inspection to truly essential materials.
SEC Policy Shift and Recent Corporation Finance Updates – Part 2
Since the beginning of the year, the US Securities and Exchange Commission’s (SEC) Division of Corporation Finance staff (Corp Fin Staff) has issued several important statements and interpretations, including a Staff Legal Bulletin on shareholder proposals and multiple new and revised Compliance and Disclosure Interpretations (C&DIs). Given the pace and importance of these recent changes, it is critical that public companies be aware of the significant policy shift at the Division of Corporation Finance and the substance of the updated statements and interpretations.
This is the second part of an ongoing series that will discuss recent guidance and announcements from the Corp Fin Staff. This installment will review the new and revised C&DIs released by the Corp Fin Staff relating to unregistered offerings.
Securities Act Rules
On 12 March 2025, the Corp Fin Staff released a number of new and revised C&DIs relating to Regulation A and Regulation D under the Securities Act and withdrew many C&DIs that were no longer applicable.
Regulation A – Nonpublic Correspondence and State Securities Laws
Regulation A is a framework that is used primarily by smaller companies to raise capital in unregistered offerings. Regulation A has two offering tiers (Tier 1 and Tier 2) that have different eligibility requirements, offering limits, and disclosure obligations.
With respect to C&DIs regarding Regulation A, and specifically Securities Act Rules 251 to 263, the Corp Fin Staff revised three C&DIs to clarify certain filing requirements, requesting confidential treatment during a review, and certain registration requirements. The Corp Fin Staff revised Question 182.01 to specify how issuers can make previously submitted nonpublic draft offering statements publicly available at the time of the first public filing of the offering statement. It also clarifies that Corp Fin Staff will make nonpublic correspondence publicly available at the end of their review of the offering statement.
Revised Question 182.02 provides that during the review of a nonpublic draft offering statement, an issuer can request confidential treatment for correspondence by utilizing Rule 83 in the same way it would during a typical registered offering review. Additionally, Question 182.10 now clarifies that even though securities initially sold in a Tier 2 offering are exempt from registration, registration and qualification requirements under state securities laws are not preempted with respect to resales of the securities purchased in that Tier 2 offering unless separately preempted.
Regulation D – Foreign Issuers, Demo Days, and Accredited Investors
Regulation D provides an exemption from the registration requirements under the Securities Act for limited unregistered offerings and sales of securities. With respect to Regulation D, the SEC revised or issued new C&DIs regarding disclosure requirements for foreign private and Canadian issuers, the interplay between Regulation D and Regulation S for foreign offerings, when “demo days” or similar events would constitute a general solicitation, and verification of accredited investor status.
A demo day is an event in which startup companies can show their product or services to prospective investors. With respect to investor accreditation, issuers are limited in the number of nonaccredited investors they can offer and sell securities to in certain Regulation D offerings, and they have greater disclosure obligations to those nonaccredited investors.
Foreign Issuers
In revised Question 254.02, the Corp Fin Staff removed the reference to disclosure requirements for foreign private issuers being set forth in Securities Act Rule 502(b)(2)(i)(C) when using Regulation D, and this C&DI now just states “yes” to the question of whether foreign issuers can use Regulation D.
Question 255.33 provides that under Securities Act Rule 500(g), as long as a foreign offering meets the safe harbor conditions set forth in Regulations S relating to offerings made outside the United States, then the offering does not need to comply with the conditions of Regulation D (which in part limit the number of nonaccredited investors that can be included). The Corp Fin Staff revised this question to specify that the 35-person limit for the number of nonaccredited investors under Regulation D applies only within any 90-calendar-day period.
The Corp Fin Staff revised Question 256.15 to clarify that under Securities Act Rules 502(b)(2)(i)(B)(1) and (2), a Canadian issuer can satisfy the information requirements of Securities Act 502(b) using financial statements contained in a multijurisdictional disclosure system (MJDS) filing. The revision captures all financial statements rather than just the issuer’s most recent Form 20-F or Form F-1 and requires preparing the MJDS filing in accordance with International Financial Reporting Standards.
Demo Days
Question 256.27 now adds that in relation to “demo days” or other similar events, communications meeting the requirements of Securities Act Rule 148 will not constitute general solicitation or general advertising, even if the issuer does not have a pre-existing, substantive relationship with the persons in attendance. Revised Question 256.33 similarly highlights that if a demo day meeting the Rule 148 requirements is not a general solicitation, then it will also not be subject to limitations on the manner of offering by Securities Act Rule 502(c) (which sets forth limits on issuers from offering and selling securities through general solicitation or general advertising). Events that do not comply with Rule 148 will continue to be evaluated based on facts and circumstances to determine if they constitute a general solicitation or general advertisement.
Accredited Investors
Newly issued Question 256.35 establishes that, aside from the verification safe harbors in Securities Act Rule 506(c)(2)(ii), taking “reasonable steps to verify accredited investor status” first involves the issuer conducting an objective consideration of facts and circumstances of each investor and the transaction. Factors that should be considered under this analysis include the nature of the purchaser and what type of accredited investor they claim to be, the type and amount of information that the issuer has about the purchaser, and the nature of the offering. These factors should be considered interconnectedly to assess the reasonable likelihood that a purchaser is an accredited investor, which then helps the issuer determine the reasonable steps needed to verify that status.
New Question 256.36, in conjunction with Question 256.35, indicates that based on the particular facts and circumstances, a high minimum investment amount for an offering may serve to allow an issuer to reasonably conclude that it took reasonable steps to verify accredited status. This aligns with Securities Act Release No. 9415 (10 July 2013) and the recent Latham & Watkins no-action letter (12 March 2025) issued by the Corp Fin Staff that provides more detail about what conditions, along with a minimum investment amount, would evidence reasonable steps that a purchaser is accredited.
Conclusion
Many of the new and revised C&DIs discussed above are welcome changes and provide greater clarity with respect to unregistered offerings and sales of securities. These C&DIs are just a handful of the new and updated guidance issued by the Corp Fin Staff since the beginning of the year and reflect a policy shift by the SEC overall that will likely be continued in the months ahead.
Uncle RICO Gets the High Court Treatment: Cannabis Companies and Those Who Provide Services to Them May Be Subject to RICO Claims for Labeling, Advertising
Recently, a divided United States Supreme Court held that a cannabis product manufacturer could face civil liability under the Racketeer Influenced and Corrupt Organizations Act (RICO) if a consumer suffered a personal injury that created a business or property loss to the consumer. Specifically, the Court concluded that an employee could state a claim under RICO for losing his job after testing positive for THC when the product he took was advertised as being THC-free.
Unfortunately, this post won’t be replete with Napoleon Dynamite references (although now we want to watch that beautifully stupid piece of cinema and write such a post). Instead, at the risk of sounding like grumpy lawyers and alarmists, this case could dramatically alter the landscape of cannabis marketing and substantially change the industry as a whole.
Our preferred style at Budding Trends is to write for the cannabis industry and not for naval-gazing lawyers, but in this instance it is important for cannabis operators to understand what the Supreme Court said, and what it didn’t say, about RICO liability for cannabis companies.
So, What’s This All About?
In the case, Medical Marijuana, Inc. v. Horn, the Court addressed the sole and broad question of “whether civil RICO categorically bars recovery for business or property losses that derive from a personal injury.”
The facts are relatively straightforward:
Douglas Horn, a commercial truck driver who injured his back and shoulder in an automobile accident, treated his injuries, in part, with a product called “Dixie X.” That product is a tincture infused with CBD that is advertised as “CBD-rich” and containing “0% THC.” A few weeks after ingesting “Dixie X,” Horn’s employer selected Horn for a random drug screening. The test detected “THC” in his system, and Horn’s employment was subsequently terminated. Horn alleged to have ingested no other products that could have contained THC and sent a sample of “Dixie X” for third-party lab testing, the results of which confirmed some presence of THC.
Horn sued the manufacturer of “Dixie X,” Medical Marijuana, Inc., in a United States District Court in New York alleging, among other claims, a civil RICO claim. The complaint contends Medical Marijuana is a RICO “enterprise” that distributes and sells “Dixie X,” and that Medical Marijuana’s false and misleading advertising constituted mail and wire fraud and that those crimes represented a “pattern of racketeering activity.” The district court dismissed Horn’s RICO claim on summary judgment because RICO only affords relief to plaintiffs who suffer business or property injuries. Horn’s injury, according to the lower court, was merely a personal one. As any business or property injuries Horn allegedly suffered stemmed from a personal injury, the district court further reasoned that RICO offered Horn no redress.
Horn appealed that ruling to the United States Court of Appeals for the Second Circuit, which disagreed with the district court’s conclusion and reversed that decision and remanded the matter back to the district court for continued litigation. In doing so, the Second Circuit characterized Horn’s personal injury as one regarding his personal employment and, therefore, a business injury under the RICO statute. As such, the court rejected the notion that RICO imposes an “antecedent-personal-injury bar” to recovery. That holding added to the existing circuit split on the issue, and the High Court decided to review Medical Marijuana’s appeal.
The Supreme Court, at the outset of its opinion affirming the Second Circuit, made clear that the sole question it was deciding was: “whether civil RICO bars recovery for all business and property harms that derive from a personal injury.” Answering in the negative, the Court sent Horn’s RICO claim back to the trial court, allowing Horn’s RICO claim to fight another day – treble damages and all (more on this below).
The Court’s opinion was not unanimous, however, and was not split on perceived political lines. Justice Amy Coney Barrett authored the majority opinion, which was joined by Justices Sonia Sotomayor, Elena Kagan, Neil Gorsuch, and Ketanji Brown Jackson. Justice Jackson also filed a concurring opinion, and Justices Clarence Thomas and Brett Kavanaugh filed dissents, the latter of which was joined by Chief Justice John Roberts.
What Is RICO?
RICO was passed in the 1970s and imposes both criminal and civil penalties for a “pattern of racketeering activity.” Racketeering activity is broadly defined and includes not only the sale of illegal drugs but also wire and mail fraud, both of which can be implicated when a product is intentionally mislabeled and sent to a customer.
Originally aimed to aid in mafia prosecutions, the law now operates to punish those that commit crimes that constitute a pattern. While significant criminal penalties can befall a RICO defendant, the civil penalties are nothing to sneeze at. In addition to attorneys’ fees and litigation costs, a successful RICO plaintiff can recover treble damages. That is, a successful RICO plaintiff can recover as much as three times the actual damages incurred. That’s a heavy sword.
What Does This Mean for Cannabis Operators and Service Providers?
The bad news is that RICO claims carry the possibility of criminal penalties (yeah, that means prison time) or significant money damages (again, up to three-times actual damages plus attorneys’ fees and costs). And the Horn opinion, at least on its face, provides plaintiffs’ attorneys a blueprint of sorts to assert more civil RICO claims.
But the good news is that cannabis companies can mitigate against the risk of RICO liability by ensuring that their practices remain fully compliant with state laws in which they operate.
I’ve seen arguments about whether this is a hemp case or marijuana case. After all, in 2012 the term “hemp” was not included in the Controlled Substances Act; rather, most of the cannabis sativa plant was included within the definition of “marijuana.”
I’m willing to be turned around on this but I’m not yet sold that the effort to distinguish marijuana and hemp under these facts is a worthwhile exercise under current law. Because the underlying claim relates to the labeling of the product, I believe wire and/or mail fraud claims would apply with equal force to either marijuana or hemp companies engaged in the shipment of mislabeled products. And there may be more instances of overlap not addressed by the Court.
The takeaway for cannabis operators: While you can’t eliminate the chances of being sued for anything, don’t mislabel your products and then you’re less likely to face the kind of claim filed by Horn.
Conclusion
There are few acronyms that strike fear in a defense lawyer like RICO. Regardless of how you feel about the wisdom of the policy, RICO is an extraordinarily wide-reaching law and its application to the hemp industry poses a threat that has probably seemed more theoretical than pressing in the minds of hemp operators. Not anymore.
Notably, the Court recognized Congress was the proper place to decide the scope of RICO. Hemp operators should consider whether a tweak to the RICO law could exempt their products from its scope. In the meantime, be careful out there. Stay vigilant.
Thanks for stopping by.
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What Every Multinational Company Should Know About … Potential Antitrust Exposure of Tariff-Related Pricing Changes
As companies face mounting cost and supply pressures from rising tariffs, pricing managers are under growing pressure to adjust pricing strategies in fast-moving and uncertain conditions. As recently reported by the Wall Street Journal, companies have employed various strategies to deal with increased costs, with 47% of small businesses reporting they already have increased prices in 2025 and 60% indicating they plan to do so in the next three months.
Gathering timely and accurate market intelligence is often a critical component of informed decision making when it comes to developing a sound pricing strategy. Many such efforts are legitimate and should not draw scrutiny from enforcement officials. U.S. antitrust regulators, however, have made clear that tariff-related uncertainty is no excuse for crossing competitive boundaries. Further, the Department of Justice (DOJ) and other global authorities are actively scrutinizing whether businesses are using trade disruptions as a pretext for coordinated pricing behavior. In sectors already strained by supply-chain volatility, rising input costs, and unpredictable demand, enforcers are signaling their heightened vigilance for signs of anticompetitive conduct. For example, the Korea Fair Trade Commission (KFTC) noted in its annual work plan for 2025 that given “domestic and international uncertainties,” it would implement measures enhancing economic recovery, including by cracking down on vertical relationships harming small business owners and monitoring for collusion in four key sectors (“health and safety,” “food, clothing, and shelter,” “construction and intermediate goods,” and “public procurement”).
Heightened Regulatory Vigilance Around Tariff-Driven Pricing Adjustments
Roger Alford, Principal Deputy Assistant Attorney General at the DOJ Antitrust Division, recently emphasized the need for competition authorities to remain vigilant for signs of collusion and manipulation of dynamic pricing models, particularly as companies adjust to heightened tariff levels. He warned that the imposition of trade barriers — such as tariffs that could reduce competition from abroad — can lead to market concentration, reducing the number of active suppliers and thereby increasing the risk of coordinated pricing or supply restrictions. Alford reiterated his warning in a media interview and noted that state attorneys general can sue for price gouging. He also shared that federal authorities are ready to act even in the absence of collusion. “I won’t give people comfort to feel free to price high, as long as you do it on your own [without colluding],” insisted Alford. “We’ll monitor the negative consequences of these tariffs very closely.”
In a social media post, FTC Chairman Andrew Ferguson also cautioned against increasing prices under the guise of responding to tariffs: “President Trump is reorienting our nation’s economy to put Americans first. As we adjust to the new economic order, the [FTC] will be watching closely to make sure American companies are vigorously competing on prices. These necessary tariffs should not be interpreted as a green light for price fixing or any other unlawful behavior. We will always protect American consumers.” Ferguson’s post came shortly after President Trump delivered a similar message to U.S. carmakers, urging them not to abuse tariffs by piling on additional price hikes.
One example of such scrutiny is the DOJ’s recent investigation into egg prices. Despite arguments that rising egg prices resulted from market factors such as avian influenza outbreaks disrupting supply, after the DOJ issued subpoenas to major egg producers to examine potential collusion, prices dropped sharply, from $8 to $3 per dozen. Alford cited this as an example of risk that companies may engage in anticompetitive conduct in response to external pressures.
This is not the first time regulators have indicated they would aggressively investigate price increases during periods of systemic disruption. For example, during the COVID-19 pandemic, the DOJ and the FTC issued joint guidance stating they were on the alert for individuals and businesses using the pandemic as “an opportunity to subvert competition or prey on vulnerable Americans.” The joint guidance further stated the agencies would stand ready to “pursue civil violations of the antitrust laws, which include agreements between individuals and business to restrain competition through increased prices, lower wages, decreased output, or reduced quality as well as efforts by monopolists to use their market power to engage in exclusionary conduct.” The joint guidance also noted the agencies would “prosecute any criminal violations of the antitrust laws, which typically involve agreements or conspiracies between individuals or businesses to fix prices or wages, rig bids, or allocate markets.”
Characterizing any price increases as a “tariff surcharge” also may raise scrutiny by regulators if doing so might promote coordination among competitors. For example, from 2006–2010, the DOJ Antitrust Division successfully investigated and prosecuted air cargo companies for colluding to implement fuel and security surcharge increases in response to rising security costs and oil prices. Coordination on the timing, surcharge range, or even the description and justification for surcharges could result in exposure to antitrust scrutiny. Even the act of collecting information — particularly around competitors’ pricing or cost projections — can raise antitrust concerns if not properly structured. In recent years, the Antitrust Division has initiated civil antitrust actions against companies in various sectors that shared sensitive cost and pricing data under the theory that such conduct facilitated price collusion.
Practical Guidelines for Pricing Managers Navigating Tariff and Antitrust Risks
In this environment, pricing managers must walk a careful line between pricing responsively and implementing pricing changes that raise antitrust compliance risks, particularly when gathering market intelligence to inform pricing decisions. To mitigate exposure, consider the following guidelines:
Document the Independence of Decision Making: When adjusting pricing, document the independent nature of the pricing decisions by setting forth the business rationale for the changes based on your unique supply and cost structures.
Avoid Questionable Competitor Contacts: Gathering market intelligence is a necessary part of the decision-making process, but obtaining market information directly from competitors will always be viewed as problematic by antitrust enforcers.
Rely on Third Parties or Public Sources of Information: Whenever possible, rely on independent consultants or research firms with experience in collecting and disseminating market data in an antitrust-compliant manner.
Document the Business Rationale for Collecting Market Intelligence: Maintain a record of why market information is being gathered and how it will be used (e.g., for gaining a high-level understanding of industry trends to remain competitive when implementing pricing adjustments). This helps demonstrate a legitimate, procompetitive purpose for the activity.
Exercise Heightened Caution with Forward-Looking Information: Information about competitors’ forward-looking pricing, production levels, or future market behavior is particularly sensitive and can raise red flags. Ensure any analysis involving projections does not imply alignment or mutual awareness among market participants. Be mindful that competitors can be prosecuted for reaching an agreement even when using a third party as a conduit to reach the agreement.
Run Drafts Past Antitrust Counsel: Before circulating or relying on competitive intelligence, pricing models, or benchmarking documentation — especially where external market data is used — consult with antitrust counsel to confirm that the content and context comply with applicable laws.
By following these steps, companies can be better prepared to respond swiftly and effectively in the event of an unannounced government inspection. Proactive preparation is critical to minimizing disruption, protecting legal rights, and ensuring compliance in high-stakes enforcement scenarios.
For Delaware, Are The Times A-changin’?
Last Friday, California headquartered Affirm Holdings, Inc. filed preliminary proxy materials for a special meeting of stockholders to consider a proposal to reincorporate from Delaware to Nevada. Affirm is joining several other well-known and non-so-well known defectors to the Silver State. In proposing the move, Affirm cites the changing litigation landscape in Delaware:
We have observed that the legal environment in Delaware has changed, with a greater frequency of litigation activity brought by well-funded firms who frequently have a significant financial interest in the outcome of the litigation. This has resulted in a less predictable and less stable landscape and body of case law in Delaware, particularly for companies, like ours, with an executive who is also a significant stockholder.
Delaware’s recent and highly controversial amendments to the General Corporation Law was not enough to keep Affirm in Delaware:
We have considered the amendments to the DGCL [Delaware General Corporation Law] that took effect on March 25, 2025 concerning transactions involving a conflict of interest on the part of directors, officers or controlling stockholders and stockholders’ inspection rights. We have also considered the related Senate Concurrent Resolution requesting evaluation of the approach to plaintiffs’ attorneys fee awards in Delaware, the outcome of which is not yet known. Delaware law could continue to evolve and adapt in a way that addresses some of the concerns we have identified, but the effect of these developments is not yet known and the amendments will be subject to judicial interpretation.
“The order is rapidly fadin’And the first one nowWill later be lastFor the times they are a-changin'”*
___________________________*Bob Dylan, The Times The Are A Changin’ (quoting Matthew 20:16 in part).
Selling Your Business? What to Do When Family Members Work There but Don’t Own a Piece
For many owners, the business isn’t just a business—it’s their personal legacy. That’s especially true when family members are involved. Maybe your son runs operations or your sister handles HR. They’re not owners, but for years they have been a part of the business’ day-to-day operations.
Now you’re thinking about selling and may wonder:
What happens to them? How do I handle this without creating friction—or derailing the deal?
Here’s what you need to know.
The Emotional vs. Business Balancing Act
Selling a business is one of the biggest financial decisions you’ll ever make. But family involvement can blur the lines between business judgment and personal loyalty.
You may feel a sense of responsibility for family members who’ve helped build the company. At the same time, the buyer is focused on operations, profitability, and risk—not family ties.
Striking the right balance early is key. Make decisions based on what’s best for the deal and the people involved. Waiting too long to address it often leads to conflict and confusion later.
How Buyers See Family Employees
Buyers tend to look closely at all key employees. This is especially true if key employees are related to the business owner.
Buyers may ask the following questions:
Are these family members critical to running the business?
Do family members have the right skills for their roles—or are they legacy hires?
Will they stay post-sale, or will they leave (voluntarily or otherwise)?
Is there any risk of disruption if they are not part of the future team?
The reality is that some buyers may view family employees as a risk. Others may see them as valuable team members with deep institutional knowledge. Either way, you need a plan for addressing these concerns.
Employment Isn’t Ownership
One of the biggest sources of misunderstanding is when family members working in the business assume they should have a say in the sale—or a share of the proceeds—because of their years of involvement.
Employment doesn’t automatically mean ownership.
If a family member isn’t holding a stock certificate or listed on the cap table, they’re not an owner. That can be a tough conversation, but it’s an essential one.
Plan Ahead for Roles Post-Sale
If your family members play significant roles in the company, their future may be part of the deal discussions. Some things to consider:
Are they staying with the business? If yes, will their roles remain the same? Will they need employment agreements with the buyer? Their interests may not necessarily align with yours and they will likely need separate legal counsel to review any employment agreement the buyer wants them to sign.
Are they transitioning out? If so, is there a need for severance, a consulting arrangement, or a smooth exit plan?
Will they be upset about the sale? Even if they aren’t staying on, you’ll want to manage their expectations to avoid souring the deal.
Clear, early communication is essential. Don’t wait for the buyer to ask about it—be proactive.
Legal Considerations You Can’t Ignore
If your family members are employees, they’re subject to the same rights and protections as any other employee. That means:
Documented job descriptions and responsibilities.
Where appropriate based on their role in the business, formal employment agreements (or understanding what happens if there aren’t any).
Consider whether severance or bonuses make sense as part of the sale or transition.
It’s also a good time to review whether any promises—formal or informal—were made. If there’s a perception of “you’ll get something someday,” now’s the time to clarify what that means (or doesn’t mean).
What About Succession? Protecting Family Relationships Through Transition
For many business owners, the plan was always to keep it in the family—until it wasn’t. Maybe the next generation isn’t interested. Maybe they’re not ready. Or maybe you’ve decided that a sale is the best move for your future and theirs. Whatever the reason, if your family members were expecting to take the reins, announcing a sale can feel like pulling the rug out from under them.
Have the Hard Conversations Early
If succession was ever on the table—even informally—you need to address it head-on. These conversations can be uncomfortable but delaying them only makes things harder.
Be honest about why you’re selling. Whether it’s the right time financially, the market conditions are ideal, or you’re ready for a new chapter, clarity can ease resentment.
The goal isn’t just to explain why you’re selling but to reinforce that this decision doesn’t diminish their contributions or your relationship.
Family First, Business Second
At the end of the day, most people sell their businesses to create better futures for themselves and their families. But the business is just one piece of that equation. Preserving personal relationships is often more important than maximizing the sale price.
Before you get deep into negotiations, ask yourself:
How will this impact my family dynamic?
Is there a way to involve them in the process that makes sense?
What legacy am I leaving—not just financially, but relationally?
Sometimes, offering family members clarity on their role post-sale, whether that’s continuing employment, a consulting opportunity, or even helping them start their next venture, can go a long way toward preserving goodwill.
Setting Expectations: Ownership vs. Opportunity
It’s common for non-owner family members to feel they have a stake in the outcome, especially if they’ve worked in the business for years. Be clear about what they can expect. If they’re not owners, they won’t share in the sale proceeds—unless you choose to provide a bonus or some other voluntary recognition for their contributions. That’s a personal decision but communicating early helps avoid hurt feelings.
On the other hand, if you’ve always intended to provide for family members in other ways—trusts, estate planning, or other assets—this is a good time to reinforce that they are still part of the bigger picture.
Don’t Let the Deal Damage What Matters Most
Even the cleanest deal can leave lasting personal fallout if the process damages family ties. M&A transactions are high-stress, emotional events for owners. It’s easy to get caught up in the deal and lose sight of the relationships that last long after the ink dries.
A few tips to protect family relationships:
Be transparent about your reasons and intentions.
Acknowledge the contributions of family members, even if they aren’t owners.
If possible, offer support for their next steps—whether in the business or elsewhere.
Separate business decisions from personal ones. Don’t let the negotiations define your relationships.
Bottom Line: Preserve the Family, Not Just the Deal
You’ve spent years building the business, but you’ve spent a lifetime building your family relationships. The sale of your business can be a positive milestone for everyone if handled with care, honesty, and respect.