Franchisee Must Comply with Reasonable Post-Termination Obligations in Franchise Agreements
A recent federal court decision underscores courts’ willingness to enforce clear language in franchise agreements imposing reasonable post-termination obligations on franchisees held to be in breach.
Case Background
BrightStar Franchising, LLC, a franchisor of in-home care agencies, had four franchise agreements with Foreside Management Company and its principals, Mark and Claire Woodsum. The agreements contained numerous post-termination obligations such as restraints on competition and solicitation, prohibitions on using BrightStar’s confidential information, and requirements to return property and customer data and to transfer telephone numbers. Critically, the franchise agreements also called for the application of Illinois law in the event of litigation. Furthermore, two collateral lease assignments for Foreside’s Newport Beach and Mission Viejo, California, office locations supposedly granted BrightStar possession rights upon termination of the franchise agreements.
When the agreements expired, Foreside declined renewal and started operating its in-home care services outside of the BrightStar franchise system. BrightStar filed suit in the U.S. District Court for the Northern District of Illinois and sought a motion for preliminary injunction against Foreside and the Woodsums, individually, seeking:
Foreside’s surrender of both Newport Beach and Mission Viejo offices under the collateral lease assignments; and
Enforcement of post-termination obligations under the franchise agreements.
Post-Termination Covenants in a Commercial Relationship are Judged for Reasonableness and not Per Se Invalid
Although the franchise agreements included an Illinois choice-of-law provision, Foreside and the Woodsums argued that California law should apply because a California statute, Business Code §16600, invalidated the non-compete obligations. The Court found that even under California law post-termination covenants in a commercial relationship are judged for reasonableness and not invalid per se. On this basis, the Court analyzed whether to apply California or Illinois law to the question of the enforceability of the post-termination obligations. The Court held Illinois law applied because the defendants failed to prove there was a conflict between the laws of the two states that would lead to a different outcome on the merits.
The Holding
The Court Did Not Enjoin the Assignment of the Leases
The Court found the Newport Beach lease assignment valid but moot as the defendants had surrendered the office anyway, and Brightside was able to take control of the property. The Mission Viejo lease was also void because Foreside owned the property outright and could not lease to itself. So, there was no lease for Brightstar to assume.
The Post-Termination Restrictions Were Reasonable
Applying Illinois law, the Court found BrightStar’s covenants which included an 18-month duration, 25-mile geographic restriction, and protection of legitimate business interests such as goodwill, proprietary systems, and customer relationships reasonable.
The Court found that the defendants likely breached nearly every post-termination provision through continued use of confidential information and customer data, operating a competing business in prohibited territory, soliciting former clients, holding themselves out as a BrightStar franchisee, retaining customers’ phone numbers, using elements of BrightStar’s proprietary program, and displaying BrightStar signage.
Irreparable Harm and Public Interest Weighed in BrightStar’s Favor
The Court characterized violations of restrictive covenants as a “canonical” example of irreparable harm explaining loss of goodwill, confidential data, and brand control are intangible and difficult to measure. In weighing the balance of potential harms, the Court found the harm to BrightStar outweighed any harm the defendants would suffer if the injunction was issued. The Court found that the defendants had intentionally declined renewal of the agreements and breached the post-termination covenants. Public interest favored enforcing valid franchise agreements, which would have minimal disruption to client care due to nearby BrightStar agencies.
The Court granted BrightStar’s request for a preliminary injunction, in part, enforcing post-termination obligations under the franchise agreements but, as mentioned above, denied the request to enjoin the assignment of the leases.
Why The Decision Matters
This decision emphasizes the enforceability of choice-of-law clauses in franchise agreements and clarifies California Business Code §16600 does not automatically void post-termination restrictive covenants in commercial contexts.
For franchisors, the ruling underlines the importance of reasonable scope and duration in covenants and demonstrates strong judicial protection for reasonable post-termination obligations.
For franchisees, the decision cautions that terminating a franchise without complying with post-termination obligations risks swift injunctive relief and potential operational shutdown.
Protecting Personal Data in the Age of AI- Lessons from the Latest EDPS Guidance
The European Data Protection Supervisor (EDPS) AI guidance for EU institutions has lessons for businesses. This includes when inputting personal information into these tools. The recommendations from the guidance fall into five categories, which businesses can take as potential principles. Namely:
Do your diligence. Know where personal information enters AI processes. Personal information can show up in training, during use, and in the results the AI gives. It is important to check every step for risks to personal data.
Be transparent. Do not just use public data and hope for the best. Privacy laws impose obligations to tell people why their information is being collected and how it will be used. They also require telling people who will handle their personal data.
Be accountable. This means making it clear who is responsible for decisions about personal data and keep accurate records. In the guide, the EDPS reminds EU Institutions that as AI changes, security risks like hacking become more common. So, businesses need to update their defenses often.
Respect the rights of individuals. Let people see, fix, or remove their data, even if the data is hidden in AI systems. This can be technically demanding, but the burden is on the business to make it possible.
Be thoughtful. Do not use a check-the-box approach to risk assessments. Before deploying a new generative AI system, conduct a full Data Protection Impact Assessment, question whether all data collection is genuinely necessary, and prefer anonymized or synthetic data where possible. Keeping up with regular checks for accuracy and bias, plus open communication with staff and users, helps build compliance.
Putting it into Practice: These recommendations were directed to EU Institutions, not private businesses. However, they may signal what regulators expect of businesses when implementing AI tools. As AI laws and obligations continue to develop, consider basing your privacy program on these principles from diligence to thoughtfulness. Taking a principle-based approach to compliance can allow your company to more nimbly react as laws develop and change.
HBO Max Users’ Privacy Claims Divided Between Arbitration Providers
A November 4, 2025, ruling in Brooks v. WarnerMedia Direct, LLC, offers a clear reminder for organizations that changes to terms of service, especially those impacting where consumer disputes are heard, can have direct operational consequences. For WarnerMedia, the parent company of HBO Max, the result is a split process in which consumer privacy claims might proceed in two different arbitral forums, based on whether individual users can be shown to have agreed to updated terms of use regarding arbitration.
Factual Summary
The plaintiffs are former subscribers of HBO Max, a subscription-based streaming platform. The plaintiffs brought claims under the federal Video Privacy Protection Act, alleging that HBO Max improperly shared video-watching histories with third parties.
From its launch through late 2022, HBO Max’s terms of use required mandatory arbitration of nearly all disputes before the American Arbitration Association (AAA). Each plaintiff assented to those terms when subscribing to the streaming service. On December 20, 2022, WarnerMedia updated its terms to designate National Arbitration and Mediation (NAM) as the arbitral forum for all subscriber disputes, superseding AAA. Notices regarding this change were delivered to subscribers by email and via in-app pop-ups. WarnerMedia specified that continued use or access after notice would be deemed assent to the new terms.
In May 2023, HBO Max rebranded as “Max” and its updated terms continued to require NAM arbitration. Customers had to agree to these terms by clicking “Start Streaming” before accessing the Max platform. In January 2023, plaintiffs’ counsel sent letters attempting to reject the December 2022 terms and served Notices of Dispute consistent with the prior AAA agreement. WarnerMedia responded that it had delisted its AAA clause and would not register the clause again.
Plaintiffs and WarnerMedia both agreed that arbitration was the appropriate dispute resolution forum. However, the plaintiffs asserted that arbitration should be governed by the AAA and WarnerMedia held that it should be governed by NAM. The question turned on whether each subscriber had assented to be bound by the updated NAM agreement or remained covered by the prior AAA agreement.
The Court’s Analysis
WarnerMedia demonstrated that three users agreed to the updated terms by their conduct after notice. This included streaming HBO Max content, maintaining monthly subscriptions via third parties like T-Mobile and Hulu, and clicking an in-app assent button before starting streaming. For these plaintiffs, the court compelled arbitration in NAM, the forum specified in the revised contract. For the two other plaintiffs, the record showed that neither individual took any action after receiving notice that would constitute acceptance of the NAM agreement. Specifically, their subscriptions had expired before the updated terms came into effect, and discovery produced no evidence that either subscriber used HBO Max after the changes or streamed content as an authorized user on another account. Merely accessing the platform to review the new terms or sending a letter purporting to reject the new agreement was not enough to demonstrate assent under the court’s analysis. Without any post-notice activity(such as logging in, streaming, maintaining an active subscription, or clicking to agree to the new terms) there was no unambiguous manifestation of consent. Therefore, the court held that these users remained subject only to their original AAA agreement. The court stayed the underlying case pending arbitration.
Takeaways
For organizations, this opinion imparts several lessons:
Contract amendments about dispute resolution must include clear notice and mechanisms to record user assent. If consumer claims arise, a company needs to show who received updated terms and how users agreed, either by their actions or explicit acknowledgment.
Where notice and assent cannot be clearly shown, organizations risk managing disputes across multiple forums under different versions of their own agreements. This can mean higher costs, operational inefficiencies, and increased litigation risks.
Detailed business records showing user activity and consent events may be critical data points in establishing who is bound to new terms. Gaps or inconsistencies may leave some claims governed by older contracts.
Companies should review their processes for contract updates and the evidence they keep for user notice and assent. Patchwork dispute resolution is a burden and failing to manage assent with care could mean organizations face disputes in reruns across multiple arbitral stages.
Website Tracking Lawsuits- What Restaurants and Hospitality Businesses Need to Know
As restaurants and hospitality businesses adopt digital platforms to engage customers, tools like cookies, pixels, and session replay are widely used to improve user experience and marketing. However, this increased reliance on tracking technologies has triggered a sharp rise in lawsuits and regulatory investigations nationwide, even for small businesses and those outside major cities.
Restaurants and hospitality operators now face significant legal risks from website tracking, especially as privacy laws like California’s California Invasion of Privacy Act (CIPA) and the California Consumer Privacy Act are increasingly being used as grounds for civil lawsuits. Importantly, your business does not need to physically be in California to be subject to these laws; if someone accesses your website from there, you could face claims, often for allegedly collecting or sharing customer data without proper notice or consent. Potential damages are high, with CIPA alone allowing $5,000 per violation, and class actions multiplying that amount.
To reduce risk, restaurant and hospitality operators should:
Audit Tracking Tools: Regularly check which tracking technologies are active on your website and mobile apps. Ensure they don’t collect or share personal information without user consent.
Update Privacy Policies & Consent Mechanisms: Clearly inform customers about tracking. Implement cookie consent banners that comply with privacy laws.
Limit Data Collection: Only collect what’s necessary for business operations like reservations or loyalty programs. Avoid gathering sensitive data unless legally justified.
Review Vendor Contracts: Confirm that third-party service providers agree to strong data protection terms.
Stay Educated and Train Your Team: Ensure all staff members managing web or marketing activities understand privacy compliance basics.
If your business receives a legal claim regarding website tracking:
Act quickly: Consulting with privacy-savvy legal and technical professionals is essential.
Conduct technical and legal review: Assess your systems, understand the legal arguments, and plan your response.
With the legal landscape around website tracking continuing to shift, restaurants and hospitality businesses of all sizes must be proactive. Regular audits, transparency, and a culture of compliance can go a long way towards protecting your business from costly lawsuits and reputational harm.
Navigating Website Privacy Risks in California- CIPA Tracker Claims, TCPA Marketing, CCPA Compliance, and Why Arbitration in Your Terms Matter
As privacy litigation intensifies in California, companies operating websites and engaging in online marketing must be aware of the major legal risks and compliance strategies shaping digital business today. Below, I examine:
The surge in California Invasion of Privacy Act (CIPA) lawsuits targeting website tracking technologies;
Telephone Consumer Protection Act (TCPA) risks in digital marketing;
Key California Consumer Privacy Act (CCPA) compliance and litigation trends; and
The vital role of arbitration clauses and class action waivers in website Terms of Use.
CIPA and Website Tracker Claims
CIPA (Cal. Penal Code §§ 630-638) prohibits certain forms of wiretapping and eavesdropping on “confidential communications” without the consent of all parties. Recently, plaintiffs’ law firms have targeted website operators for:
Use of session replay tools that record user interactions for analytics;
Chatbots and third-party customer service widgets embedding code on websites; and
Allegedly “intercepting” or “eavesdropping” on website visitors’ communications.
CIPA permits statutory damages of $5,000 per violation, making claims lucrative for class actions. Multiple federal courts have declined to dismiss claims stemming from websites using third-party tracking scripts that record or transmit user communications. Companies should:
Assess all scripts and tracking tools on their sites, especially those relaying data to third parties;
Update privacy disclosures and obtain explicit user consent where required; and
Consider disabling or modifying session replay technologies for California visitors.
TCPA Risks in Digital Marketing
The TCPA, 47 U.S.C. § 227, restricts telemarketing and the use of automated technologies (including text messages and pre-recorded voice messages) to contact consumers.
Website operators face TCPA risks when:
Collecting contact information for promotional texting, call, or robodialing; and
Using pre-checked boxes or ambiguous consent language in lead forms.
The TCPA imposes statutory damages of $500 to $1,500 per violation, encouraging class-action litigation. To reduce risk:
Collect prior express written consent using clear, conspicuous language;
Maintain robust records of consent; and
Regularly review marketing workflows for TCPA compliance.
CCPA: Compliance and Litigation
The CCPA and its amendment (the California Privacy Rights Act) have created sweeping privacy rights for California residents, including:
The right to know, delete, and opt-out of the sale/sharing of personal information; and
Strict notice and transparency requirements for data practices.
Recent CCPA class actions have focused on alleged “sales” or “sharing” of personal data via analytics/ad tech scripts, and on disclosures deemed incomplete.
Best practices for CCPA compliance:
Implement and maintain Do Not Sell/Share links or toggles on websites;
Provide accurate, up-to-date privacy notices;
Carefully vet all service provider- and third-party data-sharing relationships;and
Promptly respond to access and deletion requests.
Including Arbitration and Class Action Waiver in Website Terms
Given the surge of privacy-related class actions, it is crucial to implement arbitration agreements and class action waivers in your website’s Terms of Use:
Arbitration clauses require disputes to be resolved in private arbitration which is typically quicker and less costly than court; and
Class action waivers prevent users from aggregating claims into costly class actions.
California’s evolving privacy landscape poses major compliance and litigation risks for digital businesses. Proactive steps such as auditing website tracking, securing proper marketing consents, ensuring airtight CCPA compliance, and embedding robust dispute resolution clauses, are critical defenses against costly class actions.
Good Faith, Bad Timing- Musk, Privilege, and the Price of the Advice-of-Counsel Defense
To plead securities fraud, a plaintiff must allege that the defendant made a false statement or omitted a material fact, did so with scienter, and that the plaintiff relied on that misrepresentation and suffered injury.
Many cases rise or fall on the scienter element—did defendant have the requisite “intent to deceive, manipulate, or defraud”? That’s where a familiar refrain often surfaces: “My lawyer said it was fine.” The so-called advice-of-counsel defense can be a powerful shield. When a defendant has laid out all the facts for their lawyer and acted with the lawyer’s blessing, it becomes harder for a plaintiff to prove the intent required under §10(b) of the Securities Exchange Act and related provisions.
Yet this defense carries a significant cost. As Oklahoma Firefighters Pension & Retirement System v. Musk et al., 22-cv-03026 (S.D.N.Y. 2022), illustrates, asserting an advice-of-counsel defense is likely to trigger an implied waiver of the attorney-client privilege—effectively exposing confidential communications with counsel to discovery. The rationale is simple: a defendant who claims a good-faith belief in the lawfulness of their conduct necessarily places at issue the communications that shaped that belief.
The Musk litigation arose from Elon Musk’s 2022 accumulation of Twitter stock. Under Security and Exchange Commission rules, an investor exceeding 5% ownership of a company must, within 10 days, disclose to the agency their “interest in, and intentions for” the company. Plaintiff alleges that Musk and his co-defendants crossed the 5% threshold on March 14, 2022, but did not file the required disclosure until April 4, 2022—after the 10-day window had closed. The delay allegedly allowed Musk to purchase additional shares at artificially low prices, harming investors who sold during that period.
Throughout the litigation, plaintiff repeatedly inquired whether defendants intended to invoke an advice-of-counsel defense. Defendants’ position shifted. Initially, they disclaimed reliance on advice of counsel. Later, they wrote in a court filing that they had “followed … counsel’s guidance in making proper disclosures.” Plaintiff sought clarification, asking the court to require defendants to decide whether they would assert the defense.
Defendants attempted to pursue a middle course: they took the position that they would advance an advice-of-counsel defense only if doing so would not waive the attorney-client privilege. The court, relying on United States v. Bilzerian and its progeny, rejected that approach, holding that a party cannot rely on counsel’s involvement to demonstrate good faith while simultaneously withholding the communications that informed that belief. The court accordingly precluded defense evidence relating to advice of counsel.
In Bilzerian, the Second Circuit found that where a defendant testified that he believed his actions were lawful, communications with counsel regarding that belief became “directly relevant.” This came to be known as the implied-waiver doctrine, which allows for a finding of waiver even where the privilege holder does not attempt to make use of a privileged communication. Why? A party may not wield privileged advice as both “a sword and a shield.” Once a defendant’s state of mind is said to have been informed by legal advice, the opposing party must be permitted to test that claim.
Another important consideration for defendants is timing. Typically, element-negation defenses, unlike affirmative defenses, are not waived if not plead and can be raised later in a case. Notwithstanding, courts in the Second Circuit require defendants to decide whether to invoke an advice-of-counsel defense during discovery because courts treat counsel’s advice as a factual issue. This approach ensures plaintiffs have an opportunity to obtain relevant evidence—specifically, the substance and scope of any legal opinion secured by the defendants. But it also forces defendants to make their strategic choice early, and the discovery consequences of doing so are immediate and irreversible. Where the risk of waiving privilege outweighs the potential benefit, defendants may, for example, instead seek to negate scienter by arguing reliance on advice from non-legal professionals or by marshaling circumstantial evidence that undermines intent.
From a broader policy perspective, both Bilzerian and Musk affirm the judiciary’s willingness to hold that the attorney-client privilege, while foundational, is not absolute. For defendants and their counsel, the implications are substantial. Counsel must determine early whether to pursue the defense and accept the resulting waiver, or to preserve privilege and forgo that defense.
Gratitude- Continuing the Conversation
Last week’s post gave me an opportunity to share my thoughts on how choosing to lead a business with a gratitude mindset can have a remarkably positive impact on the company’s performance, as well as on the people who work for or with the business. The post received positive feedback, and several readers expressed interest in learning how to bring more gratitude into their daily lives. Making gratitude a regular practice can be challenging, especially when life often feels overwhelming.
Fortunately, there are low-cost or free tools that can help you build a gratitude practice. Below are links to three different resources. The first is a short article from Teladoc Health that offers realistic steps for incorporating gratitude into your routine. The second is a YouTube presentation by Dr. Joseph Dispenza, titled 21 Days of Gratitude: Transform Your Life With This Powerful Meditation in 2025. The final resource is a book published earlier this year, The Gratitude Effect: Transform Your Life in Minutes a Day Through Mindful Appreciation, which presents a simple solution: dedicating just five minutes a day to mindful appreciation.
I hope you find these resources helpful, and I wish you a healthy and gratitude-filled holiday season. Please feel free to share comments about your own gratitude journey and let us know if you have resources that have been meaningful to you along the way.
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Executive Compensation Today
Executive compensation is far more than a paycheck; it reflects a company’s values, its long-term strategy, and its governance culture, and in this way, can affect the legal, financial, and operational domains within an organization. With increasing regulatory scrutiny and rising expectations from shareholders, companies must design compensation frameworks that are competitive, compliant, and aligned with sustainable performance.
The Components of Executive Compensation
A strong executive compensation framework blends fixed pay, performance incentives, equity, and supplemental benefits to create a package that supports organizational goals.Base salary and annual bonuses remain the foundation of executive compensation packages, offering stability and rewarding near-term achievements. However, cash alone cannot create long-term alignment. Companies, therefore, rely heavily on performance-based and equity incentives to reinforce sustainable results.
Equity Compensation
Equity remains one of the most influential tools for driving executive behavior. Equity awards take many forms, including restricted stock, stock options, stock appreciation rights (SARs), and ‘phantom equity.’ These instruments place executives in a position where their financial outcomes correspond with shareholder value. Elizabeth Richert of Much Shelist, P.C., points out that there is a growing shift in compensation plan structure that conditions equity on performance rather than simply time.
Deferred Compensation
Deferred compensation plans allow executives to shift income to a later time, typically at separation or retirement. However, these arrangements must comply with IRS §409A regulations.
“409A is very broad, very strictly enforced,” warns Andrea Powers of Donelson, Bearman, Caldwell, & Berkowitz, PC. “Even administrative mistakes can trigger substantial penalties, including immediate taxation.”
Perks and Supplemental Benefits
Contemporary executive benefits may include relocation reimbursement, commuter allowances, supplemental disability insurance, executive health programs, and enhanced retirement benefits. While less flamboyant than the perks of earlier decades, these benefits continue to influence recruiting and retention efforts.
Pay for Performance
Choosing the Right Metrics
‘Pay for performance’ remains the norm, but selecting the proper metrics by which to measure performance is critical.
Common financial metrics include revenue growth, EBITDA, earnings per share, cash flow, and total shareholder return. Each metric will have its own limitations, of course, and so it is important to use a diverse set of metrics. For instance, market swings often distort total shareholder return, making it an imperfect standalone measure. And as Daniel Cotter of Aronberg Goldgehn observes, only a small percentage of the stock price can be attributed to management’s actions in a given year.
Non-financial metrics include innovation and product development, customer satisfaction and retention, employee culture and turnover, compliance and safety, and ESG-related performance.
Most experts recommend using five to ten metrics with a mix of short-, medium-, and long-term targets. This avoids overweighting any single factor and encourages balanced performance.
Benchmarking
Benchmarking executive pay against relevant organizations helps maintain competitiveness.
Here, Neil Lappley of Lappley & Associates, Ltd. stresses the importance of choosing appropriate peers: “You need to sort out what makes sense in terms of competitors in size and geography.”
Peer groups are typically selected based on:
Industry sector
Revenue range
Geographic scope
Talent-market competition
Compensation committees play an essential role in designing and administering executive pay and rely on these comparisons to ensure pay is reasonable and aligned with market standards.
Their responsibilities include:
Hiring and supervising compensation consultants
Selecting performance metrics and plan structures
Evaluating risk created by compensation plans
Overseeing proxy disclosures
Ensuring legal and regulatory compliance
Committees must also keep shareholder perceptions in mind as executive compensation remains a frequent target of shareholder activists seeking governance changes.
The Regulatory and Legal Landscape
Securities law, tax regulations, and exchange rules form the backbone of compensation governance.
Securities Law
The Sarbanes-Oxley Act imposes significant restrictions, including:
A ban on most executive loans
Accelerated reporting of insider trades
Enhanced disclosure and internal control obligations
These measures curtailed compensation practices that once contributed to perceived inequities or abuses.
The Dodd-Frank Act remains one of the most significant compensation-related laws. Its key provisions include:
‘Say-on-Pay’ shareholder votes
Disclosure of the CEO-to-median-employee pay ratio
Mandatory clawback requirements
Independence standards for compensation committees
Detailed pay-for-performance disclosures
Tax Regulations
Tax law greatly shapes compensation strategy. Noncompliance can result in immediate income inclusion, excise taxes, and reputational damage. Relevant tax code regulations include:
83: Property transferred in connection with performance of services
162(m): Deduction limits on executive pay
409A: Deferred compensation
457: Deferred compensation for tax-exempt organizations
Stock Exchange Regulations
NYSE and NASDAQ require compensation committees to maintain strict independence, evaluate consultant independence, and approve equity plans transparently. Even private companies often emulate these standards to strengthen governance and prepare for potential public offerings.
Differences Across Employer Types
Public Companies: Public companies face the greatest scrutiny due to SEC reporting obligations, ‘Say-on-Pay’ votes, and exchange requirements. Their disclosures must clearly articulate how compensation supports performance.
Private Companies: Private companies enjoy more flexibility but still must consider tax compliance, investor expectations, and competitive pressures. Negotiation between executives and owners is typically more individualized.
Nonprofit and Tax-Exempt Organizations: Tax-exempt organizations face special rules under IRS §457 regulations and private inurement laws. Board members may even face personal liability for approving excessive pay, making documentation and benchmarking essential.
Best Practices for Effective Compensation Design
Executive compensation shapes organizational performance, culture, and public perception. When designed thoughtfully, it reinforces long-term value creation, legal compliance, and shareholder confidence. In the end, compensation should motivate leaders to build long-term performance. With balanced incentives and strong governance, companies can implement compensation plans that achieve exactly that.
Best practices include:
Aligning incentives with long-term strategic goals
Combining financial and non-financial metrics
Avoiding overreliance on any single metric
Using multi-year performance cycles
Evaluating peer groups and metrics annually
Maintaining strict tax law compliance
Keeping documentation clear and thorough
Communicating expectations transparently to executives
To learn more about this topic, view Executive Compensation. 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 in reading other articles about governance.
This article was originally published here.
©2025. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
Price Tags and Personal and Competitor Data- States Step Up Algorithmic Pricing Regulation
As price-setting by computer algorithm becomes increasingly prevalent, states are stepping in to address transparency and fairness concerns that federal legislation has yet to comprehensively tackle. Lawmakers argue that clear disclosure and limits on algorithmic practices are essential to protect consumers from opaque pricing methods that may leverage their personal data or result from anti-competitive collaboration among businesses. The growing patchwork of state-level initiatives signals a broader trend toward local oversight of algorithmic decision-making in commerce, but the landscape is rapidly changing as lawmakers attempt to catch up to rapidly changing technology.
As they are often at the forefront of these issues, recent legislative and regulatory developments in California and New York are leading the way on regulating the growing technology. In the meantime, federal courts have issued divided decisions dealing with algorithmic pricing.
New York: Algorithmic Pricing Disclosure Act Survives Legal Challenge
In May 2025, New York passed the Algorithmic Pricing Disclosure Act, requiring businesses to inform customers when prices are set using personalized algorithms. The Act broadly applies to entities domiciled or doing business in New York. The Act requires businesses to disclose when a price is set using an algorithm that incorporates personal consumer data by requiring the following disclosure: “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA.” The New York Act is enforced solely by the New York Attorney General, who must first issue a cease-and-desist notice before pursuing penalties of up to $1,000 per violation.
The passage of the New York law marked a significant milestone, as it recently withstood a legal challenge brought by industry groups who argued that the mandated disclosure infringed on commercial free speech and imposed undue burdens on businesses.[1] On October 8, 2025, the court granted New York State’s motion to dismiss, finding the disclosure was factual and uncontroversial and that it served a valid consumer protection interest.
California: Restrains use of Competitor Data to Influence Price
On October 6, 2025, California signed AB 325 into law. AB 325 prohibits agreements to use or distribute a “common pricing algorithm,” defined as any software or other technology that two or more people use which ingests competitor data to recommend, align, stabilize, set, or otherwise influence a price or commercial term (including terms related to both upstream vendors and downstream customers), and lowers the pleading standard under the Cartwright Act (California’s antitrust statute, Cal Bus. & Prof. Code § 16720) for certain civil claims. The law also prohibits coercing another person to set or adopt a recommended price or commercial term generated by such an algorithm for the same or similar products or services in California.
Other Efforts to Regulate Algorithmic Pricing
In 2025 alone, more than 50 bills have been introduced to regulate algorithmic pricing across 24 state legislatures, including the following:
Illinois introduced several bills that, if enacted, would regulate or ban dynamic pricing in selected situations, including ticket sales (HB 3838) or the use of consumer data in pricing (SB2255).
Texas introduced SB 2567, which would require retailers to disclose algorithmic pricing at the point of sale.
Massachusetts introduced House Bill 99 which, if enacted, would ban dynamic pricing based on customers’ biometric data.
Colorado’s legislature passed, but the governor vetoed, HB25-1004, legislation that would have prohibited the sale or distribution of an algorithmic device sold or distributed with the intent to be used by two or more landlords in the same market to set or recommend the amount of rent, level of occupancy, or other commercial terms.
New Jersey introduced SB 3657, which seeks to make it unlawful for landlords or property managers to use algorithmic systems to influence rental prices or housing supply in New Jersey.
Pennsylvania introduced HB 1779, which seeks to require disclosure of algorithmic pricing and prohibits dynamic pricing based on protected class data (e.g., race, gender, religion).
Last week, U.S. Senators Ron Wyden and Peter Welch introduced The End Rent Fixing Act of 2025. The Act is targeted at algorithms that use competitors’ data to set rental rates. The Act would make it unlawful for rental property owners to contract for the services of a company that coordinates rental housing prices and supply information and would designate such arrangements as a per se violation of the U.S. antitrust laws. It would also prohibit the practice of coordinating price, supply, and other rental housing information among two or more rental property owners. The Act would also allow individual plaintiffs to invalidate any pre-dispute arbitration agreement or pre-dispute joint action waiver that would prevent the plaintiff from bringing suit.
Algorithms Using Competitors’ Data to Set Prices
U.S. antitrust law hasn’t fully caught up with how algorithmic price setting, and the legal landscape, is changing fast. Some experts think there could be liability in certain situations. For example, the Department of Justice has argued that if competitors use the same pricing algorithm—and that algorithm relies on competitors sharing their data to set prices—it could violate the Sherman Antitrust Act.
In September 2025, the Ninth Circuit issued the first federal appellate decision on algorithmic pricing in Gibson v. Cendyn Group, ruling that competing Las Vegas hotels did not violate Section 1 of the Sherman Act by independently using the same third-party pricing software, where there was no underlying agreement among competitors and the software did not share confidential information among licensees.
In contrast, in December 2023, an Illinois federal court denied motions to dismiss claims in multi-district class action litigation alleging software vendors and rental property owners and managers conspired by sharing property rental pricing and supply data to fix prices for multi-family house rentals across the country.[2] Last week, the court granted preliminary approval of settlements with 27 defendants for $141.8 million. The litigation continues with the larger defendants whose conduct, the plaintiffs contend, comprised the larger volume of the alleged illegal commerce at issue in the case.
In June 2025, an Illinois federal court denied a motion to dismiss allegations that health insurers unlawfully conspired to underpay out-of-network providers by outsourcing rate-setting to analytics firm MultiPlan. The court applied the per se standard, finding plaintiffs “plausibly alleged a horizontal hub-and-spokes price-fixing agreement.”
Conclusion
The legislative developments and growing litigation over the legality of dynamic pricing tools reflect growing concern among policymakers about the fairness and transparency of algorithmic pricing models. As states continue to debate and refine proposed laws, businesses that rely on dynamic pricing must closely monitor these changes and proactively assess their compliance obligations. Staying informed about both state and federal actions will be essential to avoid potential legal pitfalls and ensure responsible use of pricing algorithms.
[1] National Retail Federation v. James, 1:25-cv-05500-JSR
[2] In Re: RealPage, Inc., Rental Software Antitrust Litigation, Case No. 3:23-md-3071, MDL No. 3071.
Understanding the M&A Process
Buying or selling a business is one of the most significant milestones an entrepreneur will face. Whether the goal is succession, liquidity, growth, or simply moving on, the M&A process forces owners to take a deep and honest look at their business. And while no two deals are identical, the overall structure of a transaction tends to follow a predictable path: confidentiality, preliminary discussions, a letter of intent, due diligence, negotiation of the definitive agreements, closing, and then post-closing obligations. Understanding this roadmap can greatly reduce stress and improve outcomes.
Many owners go into the process believing they can figure it out along the way, but professionals in this space know the opposite is true. Preparation is what prevents surprises, protects value, and keeps momentum.
Getting Ready To Sell
One of the earliest and most repeated points made by advisors is that owners must begin preparing long before they formally launch a sale. “Don’t wait till you’re thirsty to drill your well,” advises Allan Grafman of All Media Ventures.
Preparing early means dealing with issues that would raise eyebrows or trigger follow-up questions from any sophisticated buyer. These include messy financials, missing corporate records, outdated contracts, unassigned intellectual property, related-party transactions, or the classic family-business issues, such as relatives on payroll or personal expenses run through the company. Cleaning these up early avoids uncomfortable conversations later and removes friction when buyers dig into the details.
Early preparation also means clarifying the owner’s goals and ensuring expectations align with market reality. An owner who expects a premium valuation must understand what drives that valuation and whether their business matches those expectations.
Assembling the Deal Team
An effective deal team typically includes an M&A attorney, an accountant familiar with transaction-level diligence, a tax advisor, and often an investment banker. Together, they help organize the process, protect the seller’s interests, and maintain momentum.
The attorney coordinates the legal structure, drafts documents, and helps manage risk allocation.
The accountant supports the quality-of-earnings process, ensures financial information is accurate, and prepares the seller for the scrutiny to come.
The investment banker shapes the narrative, manages buyer outreach, runs a structured process, and helps maximize value.
When these professionals work cohesively, the owner benefits from consistent messaging and stronger negotiation leverage.
Key Considerations in the Sale Process
Confidentiality First
Before any meaningful documents or financial information are shared, the parties must sign a non-disclosure agreement (NDA). The NDA governs how sensitive information may be used, ensures that only approved individuals can access it, and often includes critical protections such as employee non-solicitation provisions. Naming a single ‘conduit’ through whom buyer inquiries must flow will give the seller better control over what information is shared and when.
According to Robert Londin of Jaspan Schlesinger Narendran LLP, many sellers often forget to include non-solicitation provisions in the NDA. This is a critical oversight as prospective buyers may learn the identities, roles, and compensation of key employees through the process. That information could otherwise tempt a buyer to recruit staff if the deal does not close.
The Virtual Data Room
After an NDA is in place, the seller will populate what is referred to as a ‘virtual data room,’ which is a secure online portal that houses corporate documents, financial statements, tax returns, contracts, policies, intellectual property records, regulatory materials, and more. A well-organized data room signals professionalism and reduces delays.
Today’s virtual data rooms are very sophisticated, offering multiple layers of confidentiality. Some documents will require additional approvals or even separate confidentiality acknowledgments before access is granted. This structure protects the seller and ensures sensitive information is shared thoughtfully and strategically.
Quality of Earnings Report
In nearly all mid-market transactions, a Quality of Earnings report is an essential component of the virtual data room. According to Bob Dekker of The Peakstone Group, firms won’t consider taking a deal to market without one.
This independent analysis evaluates the sustainability of earnings, identifies non-recurring items, and normalizes expenses. For example, it may adjust for excess owner compensation, personal expenses run through the business, or one-time charges.
Buyers also rely heavily on these reports when assessing valuation and negotiating deal terms. A well-prepared seller uses this reporting process to proactively identify issues rather than wait for the buyer to uncover them.
Phil Buffington of Balch & Bingham LLP points out that sellers often believe they have everything in the data room, only to realize near closing that critical vendor agreements or litigation documents are missing. Because buyers will request these items eventually, it is important to ensure they are placed in the data room at the outset. Delays can create unnecessary tension and invite renegotiation.
The Letter of Intent
After preliminary review and initial conversations, the buyer will issue a letter of intent (LOI). Although usually non-binding, the LOI outlines key economic terms, including purchase price, structure, timing, exclusivity, and closing conditions. It creates alignment and provides a roadmap before parties expend significant time and money drafting a comprehensive purchase agreement. Without this alignment, drafting the definitive agreements becomes inefficient and expensive. The LOI also helps buyers secure internal approvals from lenders, boards, or investors.
Due Diligence
Once the LOI is signed, formal diligence begins. Buyers thoroughly examine financial statements, tax filings, corporate governance, customer concentration, litigation history, regulatory compliance, intellectual property, employment matters, leases, data security practices, and more.
Family-owned businesses are often surprised by how far diligence goes. Londin notes that buyers will not ignore issues like multiple family members on payroll, personal expenses, or aggressive accounting choices. These items can reduce valuation, create escrow requirements, or generate concerns about management practices.
Negotiations and Closing
The purchase agreement is the centerpiece of the entire transaction. By the time the parties reach drafting, the broad economic terms are usually set, but the details, where most of the risk lives, still require substantial negotiation. A well-structured purchase agreement allocates risk between buyer and seller, defines each party’s obligations, and creates a roadmap for the final steps toward closing.
At its core, the purchase agreement combines several major components, including.
Purchase price and payment terms
Representations and warranties
Indemnification provisions
Covenants
Working-capital adjustments
Closing conditions
In addition to the core agreement, the parties prepare a suite of ancillary documents that support the transfer of the business. These may include:
Bills of sale or assignment agreements transferring specific assets.
Stock transfer documents in equity deals.
Escrow agreements establishing holdback funds.
Corporate resolutions authorizing the deal.
Third-party consents, such as landlord approvals, vendor consents, or lender permissions.
Disclosure schedules listing exceptions to the seller’s representations.
Ultimately, negotiating the purchase agreement is about managing risk. Buyers want certainty about what they are acquiring; sellers want predictability about their future liability. The more organized and transparent the seller has been throughout the process, especially in the data room, the smoother the final negotiation tends to be.
Once all conditions are met, including financing, consents, and final diligence, the deal moves to closing. Funds are transferred, ownership changes hands, and the parties execute final documents. Yet many obligations continue after closing. Post-closing items may include working-capital adjustments, escrow releases, earn-out calculations, customer notifications, and employee transition matters. Integration is often one of the most challenging phases, requiring operational alignment, cultural adjustment, and careful communication.
The Importance of Process Fundamentals
The M&A process may appear linear on paper, but in practice, it is a carefully choreographed combination of preparation, timing, and disciplined execution. While every deal has its unique twists, the core principles discussed here apply universally to business owners preparing for a sale. In short, successful sellers approach the M&A process as a disciplined project, not a one-time event. With planning, organization, and the right advisors, business owners can navigate the complexities confidently and maximize both value and certainty.
This article was originally published on November 25, 2025, here.
ILPA Updates Capital Call & Distribution Template: Implications for GPs and LPs
The Institutional Limited Partners Association (ILPA) has released an updated Capital Call & Distribution Template (CC&D Template) to standardise the accounting details embedded in call and distribution notices and to align the template with the updated ILPA Reporting Template and the new ILPA Performance Template. The updated template is intended to supplement existing General Partner (GP) call and distribution notices. ILPA undertook a broad, industry‑wide process, including a nine‑week public comment period with nearly 50 responses, to finalise the design.
This article summarises what has changed in ILPA’s updated CC&D Template and why those changes matter for fund operations and performance reporting, who is affected and when, and practical implementation considerations for GPs, Limited Partners (LPs) and their legal teams.
Key Updates to the CC&D Template
While the overarching structure of the updated CC&D Template remains unchanged from the 2011 version, there have been a number of changes, namely:
Introduction of a standalone LP Unfunded Commitment section aligned to the ILPA Reporting Template, designed to capture the notice’s impact on unfunded commitments, and it adds “Inside Fund” and “Outside Fund” transaction subtotals to clarify whether cash flows occur within the fund entity or where the fund acts as a conduit.
Alignment of the transaction types in the CC&D Template with the transaction types included in the ILPA Granular and Gross Up Performance Templates, enabling direct mapping between call/distribution entries and performance reporting.
Addition of ‘Inside Fund’ and ‘Outside Fund’ transaction subtotals to clarify whether cash flows occur within the fund entity or where the fund acts as a conduit.
Removal of ‘Recallable Distribution’ and ‘Inside/Outside Commitment’ transaction types, which can now be inferred by the transaction’s impact to LP unfunded commitment.
Scope and Timing
The updated template is designed for closed‑end private markets funds, including private equity, venture capital, private credit, real assets, fund‑of‑funds/secondaries and co‑investments, across geographies, and supplements existing notices at the Total Fund and Individual LP levels.
All three ILPA templates are expected to be implemented by GPs starting in 2026. Use of the template should begin immediately after commencement of operations, but the first delivery is not required until Q1 2027, providing an implementation window to align processes and systems. For funds commencing on or after Q1 2026 that are implementing the ILPA Performance Template, ILPA recommends adopting the updated CC&D transaction types from inception to ensure consistent performance reporting. Otherwise, funds commencing on or after Q1 2027 should adopt on a go‑forward basis.
ILPA’s Wider Goals
The CC&D Template is part of a wider ILPA effort to standardise documentation and reporting in the private equity industry. The previous template allowed, to some degree, flexibility. Rather than simply tweaking the previous version, ILPA has removed sections altogether.
The CC&D Template needs to be considered together with the ILPA reporting and performance templates that seek to provide for standardised calculation methodologies enabling investors to compare the relative performance returns among private equity funds. ILPA intends for the call and distribution notices to use the same terminology and categories as the performance template to reduce the reconciliation burden. As such, the ILPA CC&D Template is a complementary building block to the other two templates.
Practical Considerations
The new CC&D Template has several practical considerations:
GPs who itemize calls should use granular call types (e.g. Investments, Management Fees and Partnership Expenses), and where a portion of a draw has no immediately identifiable use, “Working Capital” should be used rather than defaulting to “Total Amount.”
GPs who do not itemise calls should use “Capital Call: Total Amount – Inside Fund/Outside Fund,” consistent with the Gross Up methodology, and should avoid estimates when possible.
Subscription line repayments should be captured by selecting the call type that matches the original use of proceeds (investments or fees) and noting repayment in the transaction description, which enables accurate performance mapping and unfunded tracking.
Negative contributions for returns of excess capital are treated as reductions of paid‑in and increases to unfunded commitment (and not as distributions), while recallable distributions are shown as distributions with a corresponding increase to unfunded commitment.
Withheld taxes may be reported as “Outside Fund” where the fund acts as a conduit with taxing authorities, and distributions should be captured net of carry but gross of withheld taxes in the ILPA Performance Template.
Notice Content and Transparency
ILPA provides best‑practice guidance for the narrative cover and description letters that accompany the standardised template, including the information to include for investment calls, fee/expense calls, subscription facility repayments, cash distributions, stock distributions, and distributions from net asset value‑based facilities, with clear references to limited partnership agreement (LPA) sections and wire instructions.
Operational Readiness – Resources, Modifications and Consistency
ILPA expects use of the standardised transaction list and discourages template modifications by GPs and LPs to promote comparability, while allowing limited optionality such as the use of supplemental calculations and certain disclosure choices that should be footnoted if exercised.
Preparers should align entries to their LPA and accounting framework and ensure that the template’s values reconcile with financial statements and notices, recognising that accurate completion will require knowledgeable accounting personnel and enabling technology third‑party commentary likewise emphasises the need for capable accounting and system support to re‑map general ledger transaction types and implement the new structure.
TMA Chicago/Midwest Podcast Hosted by Paul Musser | Tina Hughes on the Evolution of Receivership Law and Illinois’ New Receivership Act [Podcast]
In the latest episode of the Turnaround Management Association (TMA) Chicago/Midwest podcast, host Paul Musser sat down with seasoned restructuring professional and Senior Managing Director-Business Advisor at Creative Planning Business Services, Tina Hughes. They began the conversation by tracing Tina’s career path from early days at GE Capital and American National Bank, where collateral analysis sharpened her workout instincts, to her more than two decades in middle-market turnaround consulting and fiduciary roles.
Then, Tina provided a clear, practical overview of receiverships, describing the receiver as a court-appointed neutral with a fiduciary duty to all stakeholders, empowered to preserve and, when appropriate, monetize assets. From a lender’s perspective, Tina noted that receiverships provide a structured and transparent framework for operating a business using cash collateral under court-approved budgets, thereby improving reporting, control and creditor treatment while enabling competitive sale processes. She emphasized that receiverships can mitigate value erosion through timely actions and limited stays that stabilize proceedings and prioritize maximization of collateral value.
A centerpiece of their discussion is Tina’s role in the drafting and passing of the Illinois Receivership Act (the “Act”), a comprehensive statute slated to take effect on January 1, 2026. She recounts the year-long, grassroots effort led by a diverse team of attorneys and practitioners, the bill’s sponsorship and support from key professional associations, and the foundational work of educating lawmakers on receivership concepts. The new law brings coherence and predictability to Illinois receiverships by consolidating practices previously scattered across statutes, case law and local custom. Among the Act’s most important features, Tina highlights the authority to sell assets free and clear of liens with senior lender consent, clarity around creditor claims and notice when no unsecured recoveries are expected, and a formal discharge for receivers that strengthens fiduciary protections. The Act also preserves the separate Illinois Mortgage Foreclosure Act, carving out exclusions for certain residential properties and governmental entities.
Paul and Tina then explored the practical implications of the Act for lenders, judges and practitioners. Tina was confident that the statute would make Illinois state court receiverships a more attractive, efficient tool by codifying eligibility standards, hearing and notice requirements, and sale procedures, which can drive consistent outcomes and faster monetization compared to traditional foreclosure timelines. For capital markets, this consistency can also enhance decision-making and increase confidence in Illinois as a venue for resolutions to distressed situations.
Finally, Tina shares takeaways from her long-standing engagement with the Turnaround Management Association (TMA), where she has held multiple leadership roles in a community that has been integral to both her professional growth and personal mentorship. She advises fellow practitioners to prioritize follow-up with new contacts immediately after meeting them, invest in relationships through meaningful touchpoints and seek out mentors who are active dealmakers, or “rainmakers,” and to learn by observing.