New U.S. Regulations on Vehicle Connectivity and Automated Driving Systems: Compliance Starts Now!
Starting today, March 17, 2025, new U.S. regulations impose sweeping restrictions on the importation and sale of connected vehicles (CV) and related components with ties to China and Russia. Issued by the Bureau of Industry and Security (BIS), the Connected Vehicles Rule (CV Rule) aims to curb potential national security threats posed by foreign-made vehicle connectivity and automated driving systems. These restrictions, which will be phased in over the coming years, require businesses to conduct rigorous supply chain assessments and file compliance declarations. Importers and manufacturers must act now to ensure compliance and avoid steep penalties for violations.
Key components of the CV Rule are as follows:
Controls. The CV Rule focuses on two main categories: vehicle connectivity systems (VCS) and automated driving systems (ADS). VCS includes hardware and software that “directly enables” the transmission, reception, or processing of radio frequencies over 450 MHz. ADS encompasses hardware and software capable of performing the entire dynamic driving task for a connected vehicle.
Scope. Consistent with the Notice of Proposed Rulemaking published in September 2024 (NPRM), the CV Rule prohibits the import or sale of CVs and VCS hardware or ADS with a defined nexus, significant connection, or association to the People’s Republic of China (PRC) and Russia. This means the CV, VCS, or ADS was either (i) manufactured in the PRC or Russia, (ii) developed by companies based in the PRC or Russia, or (iii) supplied by entities with substantial ties to the PRC or Russia.
Implementation. Starting with Model Year (MY) 2027 for covered software and MY 2030 for VCS hardware, the CV Rule will be gradually implemented over the next several years to minimize supply chain disruptions. Specifically, the CV Rule will not apply to legacy software and components designed, developed, manufactured, or supplied in or from the PRC or Russia prior to March 17, 2026.
Declarations. Importers should conduct a supply chain assessment to document the origin of all hardware and software used in a connected vehicle. This supply chain assessment will allow for the identification and mitigation of risks while forming the basis for the BIS Declarations of Conformity (Declarations). BIS will require Declarations from importers and CV manufactures to certify compliance annually prior to importing or selling CVs with VCS hardware or covered software in the US.
Declarations may be filed using forms to be made available on the BIS website and should include:
Confirmation that the VCS hardware or covered software is not designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of the PRC or Russia.
The importer has conducted due diligence to inform the Declaration and maintains supporting documents.
The importer has taken all possible measures to ensure all information is furnished to the BIS upon request.
The importer will submit material changes to Declarations within 60 days.
The importer will maintain records for 10-years.
Authorization. The BIS will issue general authorizations for parties to engage in otherwise prohibited transactions, provided the party meets certain conditions. The general authorizations and conditions will be published on the BIS website. Expected general authorizations include exemptions for (i) small businesses, (ii) CVs not used on public roads, (iv) CVs imported for display, testing, or research, and (iv) CVs imported for repair. Specific authorizations may also be provided by the BIS following an application and approval process. These specific authorizations may be granted for higher-risk transactions, where importers and manufacturers apply to the BIS for permission to engage in transactions that would otherwise be prohibited.
Advisory Opinions. Importers and manufacturers that remain unsure whether a transaction is subject to a prohibition or requirement under the CV Rule may request an Advisory Opinion from the BIS’s Office of Information and Communications Technology and Services.
Penalties. Persons who violate, attempt to violate, conspire to violate, or knowingly cause a violation of the CV Rule may be subjected to civil and/or criminal penalties under the International Emergency Economic Powers Act. The maximum civil penalty is currently $368,136 per violation with the maximum criminal penalty of $1,000,000. If the BIS has reason to believe a violation has occurred, then BIS will inform the alleged violator with a written notice of the intent to impose a penalty. Alleged violators will then have 30 days to respond in writing and provide additional information to contest the penalty.
For importers of CVs, VCS, or ADS planning and supply chain due diligence will be critical in adapting to this new final rule.
Court: Investment Adviser Has No Duty To Warn Non-Clients
According to the Court of Appeal:
An imposter posing as investment advisor Daniel Corey Payne of Lifetime Financial, Inc. (Lifetime) stole more than $300,000 from Mark Frank Harding. Before this occurred, Lifetime had received several inquiries from other individuals about a potential imposter who was posing as Payne and asking for funds; Lifetime did not post a warning about the imposter on its website or take any other significant action.
Harding v. Lifetime Financial Inc., 2025 WL 815697 (Cal. Ct. App. Mar. 14, 2025). In an effort to recover his life savings, Harding sued Lifetime alleging “if Lifetime and LPI [a related advisory firm] had posted a warning on their website about the imposter, or if they had reported the matter to FINRA, Harding would have realized the person he was communicating with was an imposter, and he would not have lost his life savings”.
Harding’s efforts failed to meet with success in the trial court which granted summary judgment for the defendants. In affirming the trial court, the Court of Appeal noted that as a general matter there is no duty to protect others from the conduct of others. More specifically, it could find “no statutory or case authority holding that an investment advisor owes a duty to nonclients to post a notice on its website or notify law enforcement that someone has been impersonating the investment advisor.”
Harding argued that FINRA Rule 4530 created a duty to warn. That rule requires FINRA members to “promptly report to FINRA . . . after the member knows or should have known . . . [that] [¶] (1) the member or an associated person of the member: [¶] . . . [¶] (B) is the subject of any written customer complaint involving allegations of theft or misappropriation of funds or securities or of forgery.” The Court of Appeal disagreed, finding:
in order for Defendants to have had a reporting duty under this rule, they would have had to receive a written complaint which alleged Defendants engaged in theft, misappropriation of funds or securities, or forgery, and that written complaint would have had to come from a person whom Defendants engaged or sought to engage in security activities. That is not what happened here.
Harding illustrates how difficult it can be to detect an impersonation. The imposter initially contacted the plaintiff by phone and the plaintiff spoke with the imposter several times thereafter. The imposter used the name of a representative at Lifetime and had an email address that included “lifetime” as part of the address. The plaintiff researched Lifetime online and verified Lifetime’s CRD number and Lifetime’s registration.
Not Much of a Thank You: TRICARE Contractor Resolves $11M False Claims Act Liability for Known Cybersecurity Violations
February 2025 saw an important False Claims Act settlement involving allegations of known cybersecurity failures by Health Net Federal Services Inc. (HNFS), a government contractor that provides TRICARE healthcare management services to active duty military members and their families. HNFS as well as its parent corporation Centene agreed to pay just over $11 million to resolve alleged false claims submitted to the U.S. Department of Defense.
While American values dictate that we thank service members for their role in protecting our freedoms, this government contractor instead chose to submit false claims in order to keep up their deal with the Department of Defense. Ultimately, it was taxpayers who footed the bill for fraud and false claims with government contractors. Taxpayers should never pay for shoddy services, especially not when it comes to healthcare and protecting personal and sensitive data relating to military members and their families.
The Allegations Against Health Net Federal Services, LLC and Centene Corporation
According to the DOJ, parent corporation Centene and its subsidiary Health Net Federal Services (HNFS) failed to meet these minimum cybersecurity protocols between the period of 2015 and 2018 while providing data management services to the U.S. Department of Defense through its administration of TRICARE. HNFS may have exposed U.S. service members’ personal and health data, as well as that of their families, due to failing to scan for known vulnerabilities and patching known security flaws. The networks and systems maintained by HNFS during this three year period were reported by third party security auditors as well as the company’s own internal audit department for being inadequate in terms of:
Asset management
Access controls
Flawed configuration settings
Weak firewalls or lack of firewalls in use
End-of-life hardware and software in place
Lack of patch management
Vulnerability scanning
Shoddy password policies
HFNS not only allegedly failed to install updates from vendors that would have countered known threats; they also allegedly falsely certified compliance with annual reports to DHA in order to keep their government contract with TRICARE. In order to resolve these allegations, the company Centene Corporation, which acquired all shares of HFNS as well as its liabilities, has agreed to pay $11,253,400. The matter was resolved in collaboration with the U.S. Department of Justice Civil Division’s Commercial Litigation Branch (Fraud Section) and the U.S. Attorney’s Office for the Eastern District of California, as well as with assistance from the DoD Office of Inspector General, the DCIS, Cyber Field Office Western Region, the Inspector General’s Office of Audits, Cyberspace Operations Directorate, and the DoD’s Defense Contract Management Agency, Defense Industrial Base Cybersecurity Assessment Center.
What Is TRICARE?
TRICARE is a federal health insurance program administered by the U.S. Department of Defense and its contracts. TRICARE provides healthcare coverage to qualifying members of the U.S. military and their families, including:
Active duty service members and their families
National Guard and Reserve members and families
Medal of Honor recipients and their families
Survivors
Children
Former spouses
TRICARE is similar to Medicare in that it is a primary health insurance provider funded by taxpayer dollars and administered by a federal agency. While Medicare covers older Americans ages 65 and up, TRICARE provides medical, dental, and pharmacy coverage for U.S. military members, veterans, and family members. Because of this, TRICARE also maintains personal and sensitive data for military members, including some confidential location information for active duty personnel. Like all health data, TRICARE records include HIPAA-protected information and other confidential information, which can be exposed to data breaches by criminal hackers and contractors who do not take their cybersecurity obligations seriously. TRICARE breaches are especially troubling because they can lead to the unlawful dissemination of protected information that compromises individual health privacy and potentially national security.
Federal Healthcare Programs Are Vulnerable to Cybersecurity Breaches
Acting U.S. Attorney Michele Beckwith for the Eastern District of California spoke about the HNFS settlement, saying “Safeguarding sensitive government information, particularly when it relates to the health and well-being of millions of service members and their families, is of paramount importance. When HNFS failed to uphold its cybersecurity obligations, it didn’t just breach its contract with the government, it breached its duty to the people who sacrifice so much in defense of our nation.”
Both healthcare and defense spending for government contracts are two of the most at-risk areas for fraud, waste, and abuse. Taxpayers lose billions of dollars every year to government contractors and healthcare organizations that take advantage of federal healthcare programs like Medicare, Medicaid, and TRICARE, with an estimated 10% of program expenses at risk. Meanwhile, the Government Accountability Office reports that the U.S. Department of Defense is particularly vulnerable to false or fraudulent claims involving overbilling, billing for work never performed or services not rendered to beneficiaries, fraudulent bid submissions, non-competitive bids, the provisions of substandard parts or services, and the failure to disclose data breaches and other cybersecurity risks.
How Whistleblowers Can Protect Americans Through the False Claims Act
Under the U.S. Department of Justice’s Civil Cyber Fraud Initiative, private companies that contract with the federal government are obligated to uphold certain minimum cybersecurity standards. When they fail to do so, or falsely certify compliance with cybersecurity requirements, they can be held accountable under the False Claims Act for treble damages and penalties to the federal government. Through a qui tam lawsuit, whistleblowers who report on these kinds of violations can also receive a percentage of the government’s total recovery. These percentages can range from 10% to 30% of the final settlement. The False Claims Act imposes treble damages upon violators, as well as individual penalties for each false claims of up to $13,946 to $27,894 per violation. The law also allows whistleblowers (known as relators) who meet certain eligibility requirements and are the first to report cybersecurity fraud, government contractor fraud including DOD fraud, or healthcare fraud a reward for their inside information.
Whistleblowers can come from all walks of life and may include current or former employees of any potential defendant such as employees of government contractors, health care entities, or any regulated company, non-employees (examiners, competitors, clients, customers, auditors, reviewers, consultants, industry experts), anyone with evidence and knowledge of fraud involving government money. As long as you come forward willingly and in a timely manner you may be able to bring a qui tam case with the help of a qui tam lawyer and recover a reward. There are also additional protections for employees, including cybersecurity professionals, who speak up. These may include:
The option to initially report anonymously through a qui tam law firm
A federal right of action to sue for reinstatement if you are fired from your company as a result of your protected disclosure
Up to double back pay with interest from the period during which you were demoted, suspended, or let go
Possible front pay, in cases where reinstatement is not possible
Additional damages and attorneys’ fees.
5-Year Prison Term for Counterfeiting Burberry in China
On March 13, 2025, the Shanghai Procuratorate Third Branch announced that the Shanghai Third Intermediate People’s Court upheld a 5-year prison term and 2 million RMB fine for the crime of counterfeiting registered trademarks belonging to Burberry. In 2021, the defendant, Gong XX, resumed operating an online store “XXX Overseas Shopping” and started selling counterfeit Burberry brand clothing. The cost of making a single piece of clothing involved in the case ranged from 500 to 700 RMB, but the selling price could reach 3,500 RMB per piece. From 2021 to 2023, Gong sold the clothing involved in the case in his own online store and WeChat Moments, with sales reaching more than 4 million RMB.
Counterfeit clothing involved.
In February 2023, the Jing’an Temple Police Station received a report from the public that they spent thousands of RMB to buy a brand-name windbreaker from the “XXX Overseas Shopping” online store, but found that it was a fake. Based on the evidence, the public security organs quickly launched an investigation and arrested the suspect Gong. Afterwards, the Jing’an District Procuratorate indicted Gong at the Jing’an District Court in accordance with the law on the grounds that Gong committed the crime of counterfeiting registered trademarks. In November, the court made a first-instance judgment, sentencing Gong to five years in prison for the crime of counterfeiting registered trademarks and a fine of RMB 2 million. Gong appealed to the Shanghai Third Intermediate People’s Court. In February 2024, the court ruled on the second instance of the counterfeit registered trademark case handled by the Third Branch, dismissing Gong’s appeal and upholding the original judgment.
On February 23, 2024, the Shanghai No. 3 Intermediate People’s Court held a second-instance trial of the case, and the prosecutor in charge of the Third Branch attended the court.
During the trial, Gong argued that his “Knight” graphic was different from the mark registered by Burberry. However, the prosecutor pointed out that identical trademarks include not only “completely identical” but also “basically indistinguishable.” The Burberry trademark has been widely used and promoted for a long time, and has a high market visibility and strong distinctiveness. Comparing Gong’s counterfeit logo with the registered trademark of the right holder, there is basically no difference in the overall shape and arrangement of elements, with only slight differences in individual lines, which makes it impossible for ordinary consumers to distinguish them in appearance, thus misleading the public. Therefore, the “Knight” graphic trademark used by Gong can be identified as “a trademark identical to the registered trademark”.
During the trial, Gong also argued that the “BURBERRY BLACK LABEL” text trademark has not been used in China for several years, and the series of clothing is only sold in a certain country and has been discontinued. Based on this, he believed that reference should be made to the relevant provisions in the civil field where infringers of trademarks “not used for three consecutive years without justifiable reasons” may not be liable for compensation, and thus his counterfeiting behavior should not be considered a crime in the criminal field.
The prosecuting attorney pointed out that China’s criminal law currently does not have special provisions for the above situation. According to the certification letter issued by Burberry and the series of trademark registrations, “BURBERRY BLACK LABEL” is a legally registered trademark in China and is within the validity period, approved for use on clothing products, and should be protected by law. At the same time, the products of the involved text trademark still circulate in the secondary market in China, and the “BURBERRY BLACK LABEL” text trademark still plays the core function of identifying the brand.
In addition, “BURBERRY” itself is also a registered trademark of Burberry. The arrangement of the “BURBERRY BLACK LABEL” word trademark is: “BURBERRY” and “BLACK LABEL” are arranged in separate lines, and the “BURBERRY” word is enlarged, bolded and highlighted. “BLACK LABEL” itself only means “black label”, which is a common industry term for distinguishing product categories and is not a distinctive element of the trademark. According to regulations, if only the common name of the product, model number and other elements lacking distinctive features are added to the registered trademark, and it does not affect the distinctive features of the registered trademark, it can be determined as “a trademark identical to its registered trademark.”
The original announcement is available here (Chinese only).
DOJ Turns Attention to Tariff Evasion and Customs Fraud
At the recent Federal Bar Association annual qui tam conference, U.S. Department of Justice (DOJ) officials stated the agency would aggressively pursue False Claims Act (FCA) investigations and that battling customs fraud would be one of its major areas of focus. Given the recent wave of new tariffs (customs duties) under President Donald Trump’s administration and the DOJ’s emphasis on battling tariff evasion using the FCA, U.S. importers should conduct business with a heightened sense of awareness of compliance with U.S. Customs and Border Protection (CBP) laws and regulations.
Traditional Customs Enforcement
Parties that act as U.S. importers of record have traditionally been held liable for payment of duties to CBP. If an importer underpays duties, CBP’s main statutory authority for enforcement is under 19 U.S.C. § 1592. This statute authorizes CBP to not only recover duties underpaid, but also impose penalties that start at two times the amount underpaid and up to the domestic value of the merchandise, depending on the importer’s level of culpability. Though private parties can file allegations of customs violations with CBP (e.g., via CBP’s e-allegations portal), only CBP can initiate an enforcement action under 19 U.S.C. 1592.
How FCA Cases Work
Unlike 19 U.S.C. 1592, both the U.S. government and private parties that act as whistleblowers (known as “relators”) can bring a case under the FCA against an importer for tariff evasion. Federal law says a person or company who knowingly makes, uses or caused to be made or used, a false record or statement, material to an obligation to pay or transmit money or property to the government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money to the government violates the FCA. Such claims are generally referred to as reverse false claims.
Relators and the DOJ have previously investigated companies under the FCA, using this provision to allege that an individual or company underpaid a tariff or import duty (an obligation), thereby creating a false claim through the underpayment of an obligation to the government.
Parties can take some solace in the fact that innocent mistakes or errors are not subject to the FCA. For an underpayment of import duties to constitute a reverse false claim, it must be knowing, meaning that the individual or company making the underpayment has either subjective knowledge that they are underpaying the obligation, is deliberately ignorant of the obligation, or recklessly disregards the obligation. One caveat to this knowledge standard as it relates to a reverse false claim is that even if the initial underpayment is an innocent mistake, it can become a reverse false claim if the individual or company learns of the underpayment and takes no action to correct it.
Predicting Likely Targets in FCA Tariff Cases
Based on the recent DOJ comments, importers should expect, at the very least, misdeclaration of value and country of origin to CBP to be areas of focus for FCA investigations during the Trump administration.
Valuation affects duties, as the amount owed is based on the declared value of merchandise multiplied by the applicable duty rate. For instance, importers importing from a related overseas manufacturer or supplier will be frequent targets for enforcement. Related party import transactions are subject to higher scrutiny, as declaration of the transaction value may not be acceptable to CBP if certain tests are not met.
Country of origin also directly affects duties owed. Most products of China are now subject to an additional 45 percent duty rate (25 percent under Section 301 combined with 20 percent under IEEPA). Even products that are manufactured outside of China could be subject to the additional 45 percent, if Chinese-origin material contained in the product is not “substantially transformed” into a product of a different country.
Thus, we could certainly see more FCA cases involving importers that fail to declare the proper country of origin on goods, particularly in scenarios where manufacturing has shifted outside of China without satisfying the proper rule of origin.
Misdeclaration of value and origin are just examples of the types of FCA customs fraud cases we should expect to see in the next four years. There will undoubtedly be other areas of risk that could result in non-compliance and trigger an FCA case, such as tariff misclassification. Likewise, we can expect private relators will target their efforts toward whistleblowing on valuation, origin and classification violations, as it will increase the chances of DOJ’s intervention in the lawsuit.
In light of the expected increase in enforcement not only under CBP regulations, but also under the FCA, importers now need to ensure they have updated and robust policies and procedures to take into account areas of risk associated not only with past tariff action, but also new tariffs imposed under the current administration.
A senior U.S. Department of Justice official said … that the Trump administration’s focus on government efficiency will include “aggressively” enforcing the False Claims Act, including a strong focus on FCA enforcement of foreign trade issues amid recently imposed tariffs.
www.law360.com/…
The Big Six Items That Family Offices Need to Consider in 2025
Across all industries, family offices and their owners and management teams face rapidly evolving challenges, opportunities, and risks in the dynamic environment that is 2025. Here are six issues that family offices should consider and be mindful of this year.
1. Impending Sunset after December 31 of Temporarily Doubled Federal Estate, Gift and Generation-Skipping Transfer Tax Exemption — or Maybe Not?
In 2025, the Internal Revenue Service (IRS) increased the lifetime estate and gift tax exemption to $13.99 million per individual ($27.98 million per married couple). Clients who maximized their previous exemption ($13.61 million per individual in 2024), can now make additional gifts of up to $380,000 ($760,000 per married couple) in 2025 without triggering gift tax. Clients who have not used all (or any) of their exemption to date should be particularly motivated to make lifetime gifts because, under current law, the lifetime exemption is scheduled to sunset.
Since the 2017 Tax Cuts and Jobs Act, the lifetime exemption has been indexed for inflation each year. Understandably, clients have grown accustomed to the steady and predicable increase in their exemption. However, absent congressional action, if the exemption lapses, the lifetime estate and gift tax (and generation-skipping transfer tax) exemption will be cut in half to approximately $7.2 million per individual ($14.4 million per married couple) at the start of 2026. That being said, as a result of the Republican trifecta in the 2024 election, it is very plausible that the temporarily doubled exemption may be extended for some additional period of time as part of the budget reconciliation process, which allows actions by majority vote in the Senate (with the vice president to cast the deciding vote in the event of a tie). This is in contrast to the ordinary rules of procedure that require 60 votes out of 100 in the Senate for Congressional action. But there are no assurances that such an extension will occur, and any legislation may not be enacted (if at all) until very late in the year.
To ensure that no exemption is forfeited, clients should consider reaching out to their estate planning and financial advisors to ensure they have taken full advantage of their lifetime exemption. If the exemption decreases at the start of 2026, unused exemption will be lost. Indeed, absent Congressional action to extend the temporarily doubled exemption, this is a use-it-or-lose-it situation.
2. Buy-Sell Agreements and Their Role in Business Succession Planning
The death, disability, or retirement of a controlling owner in a family-controlled business can wreak havoc on the entity that the owner may have spent a lifetime building from scratch. If not adequately planned for, such events can lead to the forced sale of the business out of family hands to an unrelated third party.
A buy-sell agreement is an agreement between the owners of a business, or among the owners of the business and the entity, that provides for the mandatory purchase (or right of first refusal) of an owner’s equity interest, by the other owners or by the business itself (or some combination of the two), upon the occurrence of specified triggering events described in the agreement. Such triggering events can include the death, disability, retirement, withdrawal or termination of employment, bankruptcy and sometimes even the divorce of an owner. Buy-sell agreements may be adapted for use by all types of business entities, including C corporations, S corporations, partnerships, and limited liability companies.
Last June, in Connelly v. United States, the US Supreme Court affirmed a decision of the Eighth Circuit Court of Appeals in favor of the government concerning the estate tax treatment of life insurance proceeds that are used to fund a corporate redemption obligation under a buy-sell agreement. The specific question presented was whether, in determining the fair market value of the corporate shares, there should be any offset to take into account the redemption obligation to the decedent’s estate under a buy-sell agreement. The Supreme Court concluded that there should be no such offset. In doing so, the Supreme Court resolved a conflict that had existed among the federal circuit courts of appeal on this offset issue.
As a result of the Supreme Court’s decision, buy-sell agreements that are structured as redemption agreements should be reviewed by business owners that expect to have taxable estates. In many cases it may be desirable instead to structure the buy-sell agreement as a cross-purchase agreement.
For further information, please see our article that addresses the Connelly decision and its implications: US Supreme Court Affirms the Eighth Circuit’s Decision in Favor of the Government Concerning the Estate Tax Treatment of Life Insurance Proceeds Used to Fund a Corporate Redemption Obligation.
3. Be Very Careful in Planning With Family Limited Partnerships and Family Limited Liability Companies
The September 2024 Tax Court memorandum decision of Estate of Fields v. Commissioner, T.C. Memo. 2024-90, provides a cautionary tale of a bad-facts family limited partnership (FLP) that caused estate tax inclusion of the property transferred to the FLP under both sections 2036(a)(1) and (2) of the Internal Revenue Code with loss of discounts for lack of control and lack of marketability. In doing so, the court applied the Tax Court’s 2017 holding in Estate of Powell v. Commissioner, 148 T.C. 392 (2017) — the ability of the decedent as a limited partner to join together with other partners to liquidate the FLP constitutes a section 2036(a)(2) estate tax trigger — and raises the specter of accuracy-related penalties that may loom where section 2036 applies.
Estate of Fields illustrates that, if not carefully structured and administered, planning with family entities can potentially render one worse off than not doing any such planning at all.
4. The IRS Gets Aggressive in Challenging Valuation Issues
The past year and a half has seen the IRS become very aggressive in challenging valuation issues for gift tax purposes.
First, in Chief Counsel Advice (CCA) 202352018, the IRS’s National Office, providing advice to an IRS examiner in the context of a gift tax audit, addressed the gift tax consequences of modifying a grantor trust to add tax reimbursement clause, finding there to be a taxable gift. The facts of this CCA involved an affirmative consent by the beneficiaries to a trust modification to allow the trustee to reimburse the grantor for the income taxes attributable to the trust’s grantor trust status. Significantly, the IRS admonished that its principles could also apply in the context of a beneficiary’s failure to object to a trustee’s actions, or in the context of a trust decanting.
Next, in a pair of 2024 Tax Court decisions — the Anenberg and McDougall cases — the IRS challenged early terminations of qualified terminable interest property (QTIP) marital trusts in favor of the surviving spouse that were then followed by the surviving spouse’s sale of the distributed trust property to irrevocable trusts established for children. While the court in neither case found there to be a gift by the surviving spouse, the Tax Court in McDougall determined that the children made a gift to the surviving spouse by surrendering their remainder interests in the QTIP trust.
5. The Show Continues: The CTA No Longer Applicable to US Citizens and Domestic Companies
After an on-again-off-again pause of three months beginning in late 2024, the Corporate Transparency Act (CTA) is back in effect, but only for foreign reporting companies. On March 2, the US Department of the Treasury (Treasury) announced it will not enforce reporting requirements for US citizens or domestic companies (or their beneficial owners).
Pursuant to Treasury’s announcement, the CTA will now only apply to foreign entities registered to do business in the United States. These “reporting companies” must provide beneficial ownership information (BOI) and company information to the Financial Crimes Enforcement Network (FinCEN) by specified dates and are subject to ongoing reporting requirements regarding changes to previously reported information. To learn more about the CTA’s specific requirements, please see our prior client alert (note that the CTA no longer applies to domestic companies or US citizens, and the deadlines mentioned in the alert have since been modified, as detailed in the following paragraph).
On February 27, FinCEN announced it would not impose fines or penalties, nor take other enforcement measures against reporting companies that fail to file or update BOI by March 21. FinCEN also stated it will publish an interim final rule with new reporting deadlines but did not indicate when the final rule can be expected. Treasury’s March 2 announcement indicates that the government is expecting to issue a proposed rule to narrow the scope of CTA reporting obligations to foreign reporting companies only. No further details are available at this time, but domestic reporting companies may consider holding off on filing BOI reports until the government provides additional clarity on reporting requirements. Foreign reporting companies should consider assembling required information and being prepared to file by the March 21 deadline, while remaining vigilant about further potential changes to reporting requirements in the meantime.
On the legislative front, earlier this year, the US House of Representatives passed the Protect Small Businesses from Excessive Paperwork Act of 2025 (H.R. 736) on February 10, in an effort to delay the CTA’s reporting deadline. The bill aims to extend the BOI reporting deadline for companies formed before January 1, 2024, until January 1, 2026. The bill is currently before the US Senate, but it is unclear whether it will pass in light of the latest updates.
6. Ethical and Practical Use of AI in Estate Planning
The wave of innovative and exciting artificial intelligence (AI) tools has taken the legal community by storm. While AI opens possibilities for all lawyers, advisors in the estate planning and family office space should carefully consider whether, and when, to integrate AI into their practice.
Estate planning is a human-centered field. To effectively serve clients, advisors develop relationships over time, provide secure and discrete services, and make recommendations based on experience, compassion, and intuition.
Increasingly, AI tools have emerged that are marketed towards estate planning and family office professionals. These tools can (1) assist planners with summarizing complex estate planning documents and asset compilations, (2) generate initial drafts of standard estate planning documents, and (3) translate legal jargon into client-friendly language. Though much of the technology is in the initial stages, the possibilities are exciting.
While estate planning and family office professionals should remain optimistic and open about the emerging AI technology, the following recommendations should be top of mind:
First, advisors must scrutinize the data privacy policies of all AI tools. Advisors should be careful and cautious when engaging with any AI program that requires the input of sensitive or confidential documents to protect the privacy of your clients.
Next, advisors should stay up to date on the statutory and case law developments, as the legal industry is still developing its stance on AI.
Finally, advisors should honor and prioritize the personal and human nature of estate planning and family advising. Over-automating one’s practice can come at the expense of building strong client relationships.
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Proving Fraud is and Should Be Hard: Lessons from a Recent Medicare Advantage False Claims Act Decision
The litigator’s adage “it’s easy to plead, it’s hard to prove” once again came true in the long-running False Claims Act (FCA) case targeting Medicare Advantage (“MA”) plans operated by UnitedHealth (United). Eight years after the complaint was filed, a Special Master recommended granting United’s motion for summary judgment. U.S. ex rel. Poehling v. UnitedHealth Group, Inc., 2025 U.S. Dist. LEXIS 40921 (CD CA). Both the litigation and the Special Master’s report contain valuable insights for all FCA defendants, and especially for those matters involving allegations related to diagnosis coding.
The government alleged that United violated the FCA’s “reverse false claim” provision by failing to return overpayments related to the submission of allegedly invalid diagnosis codes in connection with the MA program. The Special Master recommended summary judgment in United’s favor due to the government’s inability to prove both that United was actually overpaid, and that it improperly avoided an obligation to repay the government. In doing so, the ruling highlights the government’s burden to prove that 1) a diagnosis code is false; and 2) that a defendant “deceived” the government in “improperly” withholding an overpayment. It also confirms that materiality is an essential element of a “reverse” FCA violation.
Lesson #1: The Government Must Prove Its Case
The Special Master found that the government did not prove the diagnosis codes were unsupported by medical records because the government did not actually review the medical records. Instead, the government identified nearly 28 million diagnosis codes that it argued were invalid, but “did not compare the diagnosis codes submitted by United’s doctors against the underlying medical records to identify unsupported diagnosis codes.” Rather, “if United’s coders did not identify a diagnosis code during chart review as supported by a medical record, the government assume[d] the diagnosis code was, in fact, not supported.” (Emphasis in original). The Special Master found that assumption woefully insufficient.
The Special Master also found it compelling that CMS’s own RADV audits “found support in medical records for diagnosis codes that the government has alleged were unsupported based solely on such codes not having been coded during United’s chart review. These findings undercut the government’s theory that any diagnosis code submitted by United to CMS but not identified by coders in chart review is presumptively invalid.”
The Special Master further pointed out that “the government has repeatedly attempted to shift the burden to United to disprove the government’s allegations. Rather than review medical records itself, the government served discovery asking United to identify which of the approximately 28 million diagnosis codes, if any, United contends were supported by medical records and to produce the medical records providing such support.” (Emphases in original). United properly objected to this as “‘an improper contention interrogatory that impermissibly seeks to shift the burden of proving an essential element of the government’s False Claims Act case on to UnitedHealth . . .’” but offered to produce the 21 million underlying medical records in order to resolve the discovery dispute. The government rejected that offer, apparently, due to the volume of documents. The Special Master wryly noted that “the government was responsible for placing that volume of records in dispute.” Defendants should push back on government attempts to force them to prove their innocence, and to take on the government’s own investigatory and evidentiary obligations.
Lesson #2: The FCA Is A Fraud Statute
At base, the False Claims Act is a “fraud statute.” See e.g., United States ex rel. Schutte v. SuperValu, Inc., 598 U.S. 739, 750-51 (2023). As such, the Special Master appropriately focused on the government’s position that “mere avoidance of an obligation to repay money to the government is enough to create liability under the FCA, without the need to prove any deceptive conduct” and found that this position obviates the nature of a fraud statute. The Special Master ruled that “the impropriety of a defendant’s retention of an overpayment cannot be grounded in the mere fact of the defendant having received the overpayment, or even of being obligated to return it. Otherwise, the requirement of ‘improper’ conduct would introduce circularity and surplusage into a statute where Congress clearly intended nothing of the kind.” Quite simply, “a reverse FCA claim requires proof that the defendant engaged in conduct that deceived the government about an obligation to repay funds.”
Here, the government did not allege “any sort of deception.” Even if United had retained an overpayment, “[t]he mere retention of overpayments may deprive the government of funds it is owed, but that is not fraud.” While the failure to allege deception was fatal by itself, here there was also evidence that “the government knew of the very chart review practices of which it now claims United prevented it from learning, and thus the government cannot have been duped into relying on any action or inaction by United in determining whether it had been the victim of overpayments.”
The bar for both pleading and proving fraud is high. Fed. R. Civ. Pro. 9(b). Here, the Special Master correctly recognized that “[i]n relying upon only the ‘knowing and improper avoidance’ formulation of reverse FCA liability, the government must establish that United knew it had received overpayments and acted in a way that kept the government from learning of the overpayment.” Defendants should hold the government to those requirements. Quite simply, fraud and breach of contract are radically different, and proving fraud is, and should be, hard.
Lesson #3: Materiality Matters
In the eight years since the publication of Universal Health Services v. United States ex rel. Escobar, 579 U.S. 176 (2016), this blog has written extensively about materiality. More than 1,100 court decisions cite to Escobar. Escobar’s impact is significant and pervasive. Here, the government argued that “materiality is not a required element of establishing liability under the second prong of the reverse false claim provision.” The Special Master disagreed:
Escobar and subsequent Ninth Circuit cases recognize that, like the FCA as a whole, its reverse false claims provision incorporates the elements of common law fraud (although the provision expands the notion of what constitutes a “false claim” under the statute). Accordingly, a materiality element must apply to that provision, regardless of which of its two prongs is the basis for the government’s claim in a given case, because of the inconceivability of fraud absent a materiality element.
(Emphasis added, citations omitted). FCA defendants should continue to hold the government to its burden to prove materiality as well.
Conclusion
While the threat of treble damages, per claim penalties, and a variety of administrative remedies (including, but not limited to, suspension and debarment) are intimidating, FCA defendants should take comfort in this decision, which underscores the value of investing in a good defense and litigation strategy. Courts will hold the government’s feet to the fire and require it to meet its burden to prove fraud which, as here, it often simply cannot do.
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Another CTA Freeze: Treasury Department Announces Suspension of Enforcement Against Domestic Reporting Companies
If you have been following our reports on the subject, you know that the Corporate Transparency Act (CTA) had a tumultuous end to 2024 and start to 2025, with a series of court actions leading to oscillating reports about whether the CTA was enforceable. Now, the elements of the executive branch of government that were pushing courts to allow for enforcement of the CTA have announced a self-initiated freeze on enforcement until the CTA reporting regime can be reformed through their further rulemaking.
FinCEN’s February 27 Release
On February 27, 2025, the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of Treasury (Treasury), announced: “that it would not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines…until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed.”
FinCEN also stated that it intends to issue an interim final rule no later than March 21, 2025, that extends BOI reporting deadlines and recognized “the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.”
Treasury’s March 2 Release
Then, on March 2, 2025, Treasury went a step further than FinCEN, stating that it will not enforce any penalties or fines against US citizens or domestic reporting companies or their beneficial owners after the forthcoming FinCEN interim rule takes effect.
Treasury also stated that it will issue a proposed rule that will narrow the scope of the CTA to foreign reporting companies only. The CTA defines a foreign reporting company as a corporation, limited liability company or other entity formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing of a document.
As of the time of this release neither FinCEN’s interim final rule nor Treasury’s proposed rule had been made publicly available.
State Corporate Transparency Laws
As a reminder, certain states have adopted regimes modeled on, and in some cases referencing, the provisions of the CTA. For example, the New York LLC Transparency Act will start requiring beneficial ownership reporting as of January 1, 2026, for limited liability companies organized or registered to do business in New York. It will be interesting to see what, if any, changes are made by New York and other states based on future CTA rulemaking.
The Bracewell CTA Task Force will continue to monitor and report on developments regarding the CTA.
FinCEN Suspends Enforcement of CTA Against U.S. Citizens and Domestic Reporting Companies
Article highlights:• Treasury Dept. will no longer enforce CTA reporting requirements against U.S. citizens and domestic companies• Future rule changes expected to limit reporting requirements to foreign entities• March 21, 2025, filing deadline no longer relevant for U.S. businesses
The Corporate Transparency Act (CTA) has taken yet another dramatic turn. As previously reported, the final nationwide injunction against enforcement of the CTA was lifted on February 17th. Days later, FinCEN announced another 30-day extension of the filing due date, making the new deadline March 21, 2025. However, on March 2, 2025, the Treasury Department announced it would suspend enforcement of the CTA’s beneficial ownership information (BOI) reporting requirements for U.S. citizens and domestic reporting companies, even if those companies failed to meet the previously extended March 21st filing deadline. The agency said that it intends to issue new rulemaking proposals to focus the CTA’s enforcement solely on “foreign reporting companies.” It remains to be seen whether enforcement would include foreign individuals/entities holding ownership interests in domestic reporting companies — as presumably intended by the original law.
What does this mean?Because FinCEN will not enforce the CTA reporting rules against domestic businesses, the March 21 deadline for BOI filings is effectively no longer relevant for most entities. The Treasury Department has not yet provided a timeline for issuing its proposed rule changes. However, even though the Treasury has decided not to enforce the CTA right now, the underlying statute remains in effect — meaning Congress will still need to take some action to repeal or modify the existing law. How and when that might happen remains to be seen.
We will continue to monitor and provide updates as new information becomes available. In the meantime, for those who still have questions about their reporting obligations, stay up to date by monitoring the Chuhak Newsroom regularly or contact a member of our CTA team for the latest guidance.
Corporate Transparency Act Enforcement Suspended Once Again!
On March 2, 2025, the U.S. Treasury Department announced it would not enforce any penalties or fines associated with the Beneficial Ownership Information (“BOI”) reporting rule, a key requirement under the Corporate Transparency Act (“CTA”).
In a press release, Treasury officials confirmed they would not impose fines on U.S. citizens or domestic reporting companies, effectively pausing the reporting obligations for the time being.
Relief for Domestic Businesses
Under the original CTA guidelines, most companies with fewer than 20 full-time employees and less than $5 million in annual revenue—as well as community associations—would have been required to file their BOI reports with the Financial Crimes Enforcement Network (FinCEN).
After weeks of legal back-and-forth, with temporary injunctions followed by stays of those injunctions, a U.S. District Court ultimately stayed the nationwide injunction, extending the compliance deadline to March 21, 2025. Now, with the Treasury’s latest move, domestic businesses are temporarily off the hook from meeting the CTA’s reporting requirements, offering much-needed breathing room for companies struggling with compliance.
A Shift in Focus: Foreign Companies Under Scrutiny
Perhaps the biggest takeaway from the Treasury’s announcement is a shift in enforcement priorities. Moving forward, the agency plans to limit BOI reporting obligations to foreign reporting companies, signaling a departure from the previous broad enforcement approach. Treasury officials said they intend to issue new regulations to formally adjust the CTA’s scope, concentrating efforts on international entities rather than U.S.-based businesses.
While the full implications of this change remain to be seen, the decision is expected to ease compliance concerns for American companies. Meanwhile, foreign businesses should prepare for heightened scrutiny as the Treasury reshapes its corporate transparency policies.
For Whom the Bell Tolls? The Impact of Wisconsin Bell v. United States ex rel. Todd Heath and United States v. Regeneron Pharmaceuticals Inc. on False Claims Act Litigation
The Supreme Court’s decision in Wisconsin Bell v. United States ex rel. Todd Heath clarifies what constitutes a “claim” under the federal False Claims Act (FCA). At issue in Wisconsin Bell was whether reimbursement requests submitted to the FCC’s “E-Rate Program” are considered “claims” under the FCA. The U.S. Supreme Court agreed that they were, finding that the plaintiff’s liability theory could move forward.
While the issues presented in Wisconsin Bell occurred in the context of the FCC, the implications of the Court’s decision appear to extend far beyond—reaching industries frequently targeted for FCA enforcement, such as health care, aerospace, defense, energy and others involving government contracts (like cybersecurity). As in years past, SCOTUS’s docket and Wisconsin Bell reflects the continued significance of FCA litigation and its importance to the government’s recovery of funds. Therefore, all companies that receive federal funds, particularly in highly regulated industries such as health care, should be interested in understanding this ruling and its impact.
Wisconsin Bell had argued that it could not be exposed to FCA liability because the E-rate program, congressionally mandated to help certain schools and libraries afford internet and telecommunications, is administered by a private nonprofit organization and funded by government-mandated payments from private telecommunications carriers into the Universal Service Fund (USF). But the Court ruled narrowly that, because the U.S. Treasury itself had provided $100 million to the USF, through its collection of delinquent debts to the USF and related penalties and interest, as well as other settlements and criminal restitution payments, the federal government did “provide” a portion of the funds at issue, so the whistleblower’s allegations are thus covered under the FCA.
One thing of interest is seen in the concurrence from Justice Kavanaugh (with Thomas concurring) who renewed their questions about the constitutionality of the FCA’s qui tam provisions (and thereby invited future challenges), writing in Wisconsin Bell that “the [False Claims] Act’s qui tam provisions raise substantial constitutional questions under Article II. … [I]n an appropriate case, the Court should consider the competing arguments on the Article II issue.” Ultimately though, it was a unanimous decision, where the Supreme Court found that that E-Rate reimbursement requests were “claims” under the FCA.
Another interesting aspect is that the Court’s decision was notably narrow, relying on the U.S. Treasury’s supply of a $100 million ancillary sliver of overall USF funding, which totals nearly $10 billion annually. Justice Thomas’s concurrence (with Justice Kavanaugh concurring, and Justice Alito concurring in part) highlights the limits of this approach, observing that, “the Government paid scant attention to the fact that courts historically have not applied the FCA to cover fraud on nongovernment entities unless the Government itself will face a financial loss.” And, the Court’s opinion itself forewarns that issues of, “whether (and, if so, how) the amount of money the Government deposited should limit the damages Heath can recover” are likely to emerge if Heath ultimately prevails.
The narrow holding was necessary because, as the Court explained, larger questions as to the constitutionality of the USF under the nondelegation doctrine are looming in a separate case, Consumers’ Research v FCC, Docket Nos. 24-354, 24-422 (set for oral argument on March 26, 2025). Notably, Justice Thomas’s concurrence sends a warning shot for the Government in that case, questioning the implications of its other two arguments – either that the entire USF constitutes government funds, or that the private, non-profit USF administrator is an agent of the United States – for those constitutional questions, and for compliance with a separate statute, the Government Corporation Control Act. Those answers are likely to affect Heath’s potential for eventual recovery. (The fact that Justice Kavanaugh – seen as a potential swing vote in Consumers’ Research – joined this concurrence may also be an ominous portent for the future of the USF as currently constituted. See our recent Client Alert for more details about the issues presented in the Consumers’ Research case.)
In another recent and important FCA decision, United States v. Regeneron Pharmaceuticals Inc., the First Circuit joined some other courts of appeal in holding that the “but-for” causation standard applies when purported Anti-Kickback Statute (AKS) violations result in FCA violations. This is a commonly used theory because it allows plaintiffs to allege that when a relationship becomes tainted by kickbacks then all reimbursement claims to a federal payor that follow are tainted and fraudulent, triggering FCA liability.
In Regeneron Pharmaceuticals Inc., the First Circuit had to evaluate competing arguments from the government and defendant about whether the 2010 amendments to the AKS effectively changed the proof requirements under this theory. As the court explained,
Regeneron argued that, under the 2010 amendment, the government “b[ore] the burden of proving that an AKS violation … actually caused [a] physician to provide different medical treatment (and thus caused the false claims).” United States v. Regeneron Pharms., Inc., No. 20-11217, 2023 WL 6296393, at *10 (D. Mass. Sept. 27, 2023). In other words, Regeneron asserted that the phrase “resulting from” in the 2010 amendment imposed a “ ‘but-for’ causation standard.” Id. The government disagreed, and it urged the district court to adopt the Third Circuit’s view that “all that is required to prove a causal link [under the 2010 amendment] is that ‘a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.’ ” Id. (quoting United States ex rel. Greenfield v. Medco Health Sols., Inc.,880 F.3d 89, 100 (3d Cir. 2018)).
After evaluating various textual arguments asserted by the government, the First Circuit found that was no good reason “to deviate from the default presumption that the phrase ‘resulting from’ as used in the 2010 amendment imposes a but-for causation standard” and that “to demonstrate falsity under the 2010 amendment, the government must show that an illicit kickback was the but-for cause of a submitted claim.”
Since there is a clear circuit court split on this issue, it is ripe for certiorari by the Supreme Court.
Since False Claims Act plaintiffs are motivated by the potential of obtaining significant bounties by suing companies and individuals that do business with government agencies and affiliates, these and other recent decisions underscore the continued importance for companies that receive federal funds to have robust compliance plans and take appropriate steps to avoid becoming embroiled in these bet-the-company cases.
Texas Federal Court Holds that Dodd-Frank Act Whistleblower Protection Law Does Not Authorize Jury Trials [Video]
On February 20, 2025, Judge Horan held in Edwards v. First Trust Portfolios LP that a Dodd-Frank whistleblower retaliation plaintiff is not entitled to a jury trial. This opinion underscores the importance of bringing additional claims that can be heard by a jury, including a Sarbanes-Oxley (SOX) whistleblower retaliation claim.
Aaron Edwards filed suit against his former employer, First Trust, alleging that he was terminated in retaliation for raising concerns about a gift program. Edwards claimed that First Trust’s practice of only awarding gifts to financial advisors at the end of the year who sold the most First Trust products during that year constituted an illegal sales contest under SEC regulations. He brought claims under the whistleblower protection provisions of SOX, the Dodd-Frank Act, and the Consumer Financial Protection Act (CFPA). After Judge Horan denied First Trust’s motion for summary judgment, First Trust moved to strike Edwards’ jury demand for his Dodd-Frank retaliation claim.
In contrast to an express provision in SOX clarifying that a SOX plaintiff “shall be entitled to trial by jury,” the whistleblower protection provision of the Dodd-Frank Act does not expressly provide for a right to a jury trial, so this dispute hinges on whether Dodd-Frank Act retaliation remedies are legal or equitable in nature (if the remedies are legal, then there is a right to a jury trial under the Seventh Amendment). Per the Supreme Court’s decision in SEC v. Jarkesy, the key factor determining “whether a monetary remedy is legal is if it is designed to punish or deter the wrongdoer, or, on the other hand, solely to restore the status quo.” 603 U.S. 109, 123 (2024).
A prevailing whistleblower in a Dodd-Frank whistleblower retaliation action is entitled to reinstatement, double back pay with interest, and litigation costs, including attorneys’ fees. Edwards argued that double back pay damages are legal in nature because they “go beyond restoring the status quo to deter and punish Dodd-Frank violators” and that Dodd-Frank’s doubling of back pay transmutes it from an equitable to legal remedy because it “serves to deter future misconduct by litigants.”
First Trust, however, asserted that under Fifth Circuit precedent, Dodd-Frank retaliation remedies, including reinstatement and back pay, are equitable in nature. Relying on a Georgia district judge decision, Judge Horan held that reinstatement and back pay are generally recognized as equitable remedies and that the automatic doubling of back pay does not change it from an equitable remedy to a legal one. See Pruett v. BlueLinx Holdings, Inc., No. 1:13-cv-02607-JOF, 2013 WL 6335887 (N.D. Ga. Nov. 12, 2013).
Since Edwards is already trying his SOX claim before a jury, and the motion to strike was filed close to trial, Judge Horan held that a binding jury will be empaneled for Edwards’s SOX claim and the same jury will serve as an advisory jury for Edwards’s Dodd-Frank claim.
Strategic Considerations: Why a Whistleblower Should Bring Both SOX and Dodd-Frank Whistleblower Retaliation Claims
Where a whistleblower that suffered retaliation qualifies for protection both under SOX and the Dodd-Frank Act, we recommend bringing both claims uto maximize the potential recovery. There are four advantages to bringing a SOX claim in addition to a Dodd-Frank claim:
Uncapped special damages: The Dodd-Frank Act authorizes economic damages and equitable relief but does not authorize non-economic damages. In contrast, SOX authorizes uncapped “special damages” for emotional distress and reputational harm.
Exemption from mandatory arbitration: SOX provides an unequivocal exemption from mandatory arbitration, but Dodd-Frank claims are subject to arbitration.
Preliminary reinstatement: If an OSHA investigation concludes that an employer violated the whistleblower protection provision of SOX, OSHA can order the employer to reinstate the whistleblower. However, there is some dispute as to whether an OSHA order of reinstatement is enforceable. See, e.g., Gulden v. Exxon Mobil Corp., 119 F.4th 299 (3d Cir. 2024).
Favorable causation standard: A far more generous burden of proof (“contributing factor” causation under SOX, rather than “but for” causation under Dodd-Frank).
There are four advantages to bringing a Dodd-Frank claim in addition to a SOX claim:
Double back pay: Dodd-Frank authorizes an award of double back pay (double lost wages) plus interest, whereas SOX authorizes ordinary back pay with interest along with other damages. Both statutes authorize reinstatement and attorney fees.
Longer statute of limitations: Whereas the statute of limitations for a SOX retaliation claim is just 180 days, the statute of limitations for a Dodd-Frank retaliation claim is a minimum of 3 years after the date when facts material to the right of action are known or reasonably should have been known by the whistleblower.
Broader scope of coverage: SOX whistleblower protection applies primarily to employees of public companies and contractors of public companies. The Dodd-Frank prohibition against whistleblower retaliation applies to “any employer,” not just public companies.
No administrative exhaustion: In contrast to SOX, Dodd-Frank permits a whistleblower to sue a current or former employer directly in federal district court without first exhausting administrative remedies at DOL.
Whistleblower Protections for SEC Whistleblowers
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