Business Immigration in 2025: Signals from Recent Executive Orders
Immediately after assuming office on Jan. 20, 2025, President Donald Trump began issuing numerous executive orders. While they may not immediately impact business immigration, many of them presage changes in the business immigration landscape. The following is an analysis of several of these executive orders from that perspective:
Protecting the United States from Foreign Terrorists and Other National Security and Public Safety Threats. This executive order largely reiterates Trump’s Proclamation 9645, Enhancing Vetting Capabilities and Processes for Detecting Attempted Entry Into the United States by Terrorists or Other Public-Safety Threats, an executive order from his previous term. It tasks various government agencies with reviewing all visa programs to prevent foreign nation-states or other hostile actors from hurting the United States. This order will most likely result in an increase in scrutiny of visa applications and an increase in processing times across the board for all business immigration. We can expect an increase in the number of visa applications subject to administrative processing. These effects may discourage business immigration as business realities clash with system slowdowns.
America First Trade Policy. This executive order largely reiterates Trump’s Executive Order 13788, Buy American and Hire American (BAHA), from his previous term. The U.S. Trade Representative has been directed to review the implementation of trade agreements to ensure they favor domestic workers and manufacturers, consistent with the principles of that prior executive order. This may lead to a tightening of the labor market, as companies could be discouraged from hiring available foreign national candidates for positions. This could lead to an immigrant brain-drain as highly skilled immigrants trained at U.S. universities and institutions potentially immigrate to countries such as Canada. The USTR’s review may also affect treaty-based visas, such as the TN, E-1, E-2, and H-1B1 visas. Trump also issued America First Policy Directive to the Secretary of State, which may result in increased scrutiny of employment-based visa applications, as BAHA did under Trump’s previous term.
Guaranteeing the States Protection Against Invasion. This executive order characterizes migration at the southern border as an “invasion” and imposes vetting requirements on those immigrating to the United States. The likely impact is to create enhanced medical and security requirements for immigrants entering the U.S. While this executive order is drafted with the southern border in focus, Customs and Border Protection and the Department of Homeland Security will likely impose additional restrictions on business immigration as well, potentially creating travel disruptions due to inconsistent experiences at points of entry.
Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists. The designation of criminal organizations in the United States and Central America may portend a crackdown on and enhanced vetting of immigrants, including business immigrants, from areas where these organizations operate. This could cause slowdowns in business immigration across the southern border with Mexico.
Protecting the American People Against Invasion. This executive order expands expedited removal and revokes humanitarian parole programs created by the prior administration. Individuals who have secured status under those programs will be unable to renew work permits. It may also result in the return of “public charge” policies, which previously resulted in a slowdown for business immigrants seeking lawful permanent residency status. Furthermore, increased scrutiny and interior enforcement may lead businesses to forego hiring immigrant workers.
Protecting the Meaning and Value of American Citizenship. This executive order seeks to re-interpret the Constitution’s guarantee of citizenship for those born within the United States territory and who are subject to the jurisdiction of the United States. Notably, this executive order attempts to remove the grant of citizenship to certain business immigrants’ children born in the United States. Lawsuits have been filed challenging the impact of this executive order. This action may lead to increased difficulties for companies in recruiting and retaining foreign workers.
Conclusion
While these orders do not have an immediate impact on business immigration, they will likely cause an increase in administrative costs for companies with foreign workers and create retention challenges for companies. This may lead to an immigrant brain-drain, as highly skilled professionals, some of whom have been trained and educated in the United States, potentially seek to leave the country.
Corporate Transparency Act Reporting Remains Stayed—For Now
What Happened
On January 23, 2025, the United States Supreme Court granted the federal government’s request to stay the nationwide injunction on the enforcement of the Corporate Transparency Act (“CTA”) issued by the United States District Court for the Eastern District of Texas in Texas Top Cop Shop v. Garland et al. (Case 4:24-cv-00478).
On January 24, 2025, FinCEN posted the following update to its website:
On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
The court in the Smith litigation (Smith v. US Department of Treasury, No. 6:24-cv-00336 (E.D. Tx. 2025)) issued an order on January 7, 2025, granted a preliminary injunction staying all reporting under the CTA.
Although FinCEN may provide additional guidance to reporting companies to modify this guidance, for now, reporting companies are still not required to file beneficial ownership information with FinCEN.
The Road Ahead
The lifting of the Texas Top Cop Shop stay and the conflict with the Smith stay is another twist in the road of what are likely to be continued protracted legal battles in these cases and in other pending lawsuits around the country that are challenging the CTA.
A three-judge panel at the Fifth Circuit in Texas Top Cop Shop will hear oral arguments on the constitutionality of the CTA on March 25, 2025. The plaintiffs may also pursue a writ of certiorari and ultimate ruling by the Supreme Court on the merits.
The government will also presumably appeal the injunction in the Smith case as well (citing the rationale of the Supreme Court’s order in the Texas Top Cop Shop case), which will introduce another round of briefing and potentially impactful orders at the appellate levels.
Additionally, the new Trump administration may take steps to limit the CTA administratively, or Congress may revoke the CTA altogether, adding another layer of uncertainty for businesses.
We’re Here to Help
We understand that many of our clients’ needs and transaction structures may require deeper analysis and that updates from FinCEN will be forthcoming. Navigating the intricacies of the CTA can be complex and our team is available to provide counsel tailored to your specific needs. We can assist you in understanding the implications of the CTA for your entities and transactions, and we can provide guidance in ensuring compliance with the new regulatory framework.
Jane Hinton, Amy McDaniel Williams, and Conor Shary contributed to this article
UPDATE: CTA Filings Remain Voluntary After Supreme Court Ruling (For the Moment)
On January 23, 2025, the Supreme Court of the United States acted to lift one of the effective nationwide injunctions on enforcement of the Corporate Transparency Act (CTA) in the Texas Top Cop Shop v. McHenry [originally Garland]case. That case was put into place by a federal district court in the Eastern District of Texas on December 3, 2024 and was subsequently appealed to the Fifth Circuit Court of Appeals, and then an application was made to the Supreme Court to stay the injunction.
A second court, Smith v. Treasury (also in the Eastern District of Texas), issued an order on January 7, 2025, after the Texas Top Cop Shop v. McHenry case was before the Supreme Court. The judge in Smith v. Treasury issued his own nationwide injunction of the CTA, on substantially similar facts and arguments as those found in Texas Top Cop Shop v. McHenry. This injunction remains in place for the moment.
FinCEN, in response to the Supreme Court ruling, issued a press release on January 24, 2025, indicating that its position is that reporting companies are not currently required to file beneficial ownership information reports with FinCEN and are not subject to liability if they fail to file this information, “while the Smith order remains in force.”
In accordance with FinCEN’s latest guidance, reporting companies may continue to voluntarily submit BOIR filings with FinCEN. Parties should remain prepared to file when and if the CTA filing obligations are reinstated in full. We will continue to follow developments and provide updates (please subscribe here).
Client Alert Update: Supreme Court Action and Treasury Department Guidance on CTA Injunction
In our previous alert, we reported that the United States Court of Appeals for the Fifth Circuit upheld a lower court’s suspension of the Corporate Transparency Act (CTA), pausing filing requirements affecting businesses ranging from startups to established companies. Yesterday, the United States Supreme Court overturned the Fifth Circuit’s decision, allowing the CTA and its filing requirements to be enforced.
However, because the Supreme Court has not yet ruled on other litigation also suspending the CTA , today the Treasury Department issued official guidance clarifying that reporting companies are still not required to file Beneficial Ownership Information Reports (BOIRs) with FinCEN.
In light of these developments, we reaffirm our prior guidance:
Reporting companies are not currently required to file BOIRs and will not face penalties for failing to do so.
FinCEN continues to accept voluntary submissions for entities that wish to proactively comply with potential future obligations.
Businesses that have already begun preparing beneficial ownership information may wish to complete the process to ensure readiness in the event FinCEN resumes enforcement of the CTA.
No Enforcement of Corporate Transparency Act Despite SCOTUS Ruling
On January 23, 2025, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., the Supreme Court of the United States (SCOTUS) granted the government the ability to lift the injunction which halted enforcement of the Corporate Transparency Agency (CTA) on December 26, 2024. SCOTUS also sent the case back to the Fifth Circuit Court of Appeals to be decided on the merits. Oral arguments are scheduled to take place in March 2025, meaning the future of the CTA remains in question.
However, a separate nationwide injunction, issued on January 7, 2025, in the case of Smith v. U.S. Department of the Treasury, is unaffected by SCOTUS’s order in Texas Top Cop Shop and remains in place.
The Financial Crimes Enforcement Network (FinCEN) issued the below alert on January 24, 2025:
“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
Companies wishing to make voluntary filings are reminded that Beneficial Ownership Information (BOI) filings are made at fincen.gov/boi. There is no fee to file.
CTA Still Enjoined: U.S. Supreme Court Grants Stay, But Second Nationwide Injunction Remains in Effect
Highlights
The U.S. Supreme Court granted a stay of an injunction suspending enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting rule
A separate nationwide injunction issued by a different federal judge continues to enjoin enforcement of the CTA
Obligations under the CTA to file BOI reports currently cannot be enforced by FinCEN
Continuing a series of rapid-fire legal developments regarding the Corporate Transparency Act (CTA), on Jan. 23, 2025, the U.S. Supreme Court granted a stay of the amended injunction issued Dec. 5, 2024, by the U.S. District Court for the Eastern District of Texas. However, a separate nationwide injunction – issued by a different federal judge in Texas on Jan. 7, 2025 – continues to enjoin the Financial Crimes Enforcement Network (FinCEN) from enforcing the CTA’s beneficial ownership information (BOI) reporting deadlines.
As a result, reporting obligations under the CTA currently cannot be enforced by FinCEN. It is anticipated that FinCEN will appeal the Jan. 7 injunction.
To recap recent developments:
Dec. 3, 2024 – The U.S. District Court for the Eastern District of Texas issued a nationwide injunction enjoining enforcement of the CTA, suspending all reporting obligations under the act (Texas Top Cop Shop, Inc. v. McHenry – formerly, Texas Top Cop Shop v. Garland). This order was amended Dec. 5, 2024.
Dec. 23, 2024 – The motions panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court injunction. The stay by the Court of Appeals restored initial reporting deadlines for reporting companies. FinCEN responded by issuing an alert extending initial reporting deadlines.
Dec. 26, 2024 – The merits panel of the Fifth Circuit vacated the stay issued by its motions panel, restoring the district court’s injunction and suspending reporting obligations under the CTA pending resolution of the appeal.
Dec. 31, 2024 – The Department of Justice filed an application for stay with the U.S. Supreme Court requesting that the Dec. 5 injunction be stayed or narrowed while the case proceeds through the Fifth Circuit.
Jan. 7, 2025 – The U.S. District Court for the Northern District of Texas issued a second nationwide injunction enjoining enforcement of the CTA, suspending all reporting obligations under the CTA (Smith v. U.S. Department of the Treasury).
Jan. 23, 2025 – The U.S. Supreme Court granted a stay of the Dec. 3rd injunction pending the disposition of the Texas Top Cop Shop appeal before the Fifth Circuit and the disposition of a petition for a writ of certiorari and related final judgment.
FinCEN, in an alert published Jan. 24, 2025, referenced the Jan. 7 injunction, stating that, “reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop.” FinCEN further noted that for so long as the nationwide injunction issued in Smith remains in force, companies will not be subject to liability for failure to file their BOI reports. Reporting companies may continue to voluntarily submit BOI reports.
DOJ Announces Modest Increase in FCA Recoveries, Fueled Largely by Whistleblower Lawsuits
The Department of Justice (“DOJ”) recently announced a modest increase in monetary recoveries for 2024 from investigations and lawsuits under the False Claims Act (“FCA”), which is the Government’s primary tool for combating fraud, waste, and abuse. In fiscal year 2024, the DOJ recovered over $2.9 billion from FCA settlements and judgments, marking a 5% increase over 2023’s total and the highest amount in three years. Recoveries were fueled largely by qui tam lawsuits previously filed by whistleblowers, which contributed to $2.4 billion of the $2.9 billion recovered. The number of qui tams filed last year was also the highest ever in a single year at 979 cases. While health care fraud continues to be the primary source of enforcement activity, the rise in lawsuits stemmed from non-health care related cases. This underscores the Government’s and private citizens’ intensified enforcement efforts through FCA investigations and litigation in both the health care sector and beyond.
FCA Recoveries by the Numbers
While the nearly $3 billion recovered last year resulted from a record-breaking number of 566 settlements and judgments, last year’s haul remains well below peak year recoveries, such as 2014’s $6.2 billion and 2021’s $5.7 billion. The following chart illustrates the FCA recoveries by fiscal year, showcasing monetary trends over the past decade.
Key Enforcement Areas
In announcing 2024’s recoveries, the Government highlighted several key enforcement areas, such as:
The opioid epidemic. The Government continues to pursue health care industry participants that allegedly contributed to the opioid crisis, focusing primarily on schemes to market opioids and schemes to prescribe or dispense medically unnecessary or illegitimate opioid prescriptions.
Medicare Advantage Program (Medicare Part C). As the Medicare Advantage Program is the largest component of Medicare in terms of reimbursement and beneficiaries impacted, the Government stressed this remains a critical area of importance for FCA enforcement.
COVID-19 related fraud. Given the historic levels of government funding provided as a result of the COVID-19 pandemic, the Government also continues to pursue cases involving improper payment under the Paycheck Protection Program as well as false claims for COVID-19 testing and treatment. Close to half of 2024’s settlements and judgments resolved allegations related to COVID-19.
Anti-Kickback Statute and Stark Law violations. Cases premised on alleged violations of the AKS and Stark Law remain a driving force in FCA litigation for health care providers. In the last several years, there seems to be renewed interest in Stark Law enforcement, in particular.
Medically unnecessary services. The provision of medically unnecessary health care services also remains a widely-used theory of FCA liability, despite this being a historically challenging enforcement area often involving disputes over subjective clinical decisions.
Corporate Transparency Act Enforcement Remains Paused
On January 23, 2025, the U.S. Supreme Court issued a stay of the nationwide preliminary injunction issued by a federal district court in Texas in December 2024 in the Texas Top Cop Shop litigation.
However, a second nationwide injunction against the Corporate Transparency Act (CTA) was issued earlier this month in the Smith v. Treasury litigation. The Supreme Court’s order in the Texas Top Cop Shop litigation does not specifically address the injunction in the Smith v. Treasury litigation. Because the injunction in the Smith v. Treasury litigation remains in effect, enforcement of the CTA remains paused.
FinCEN today stated that, because the nationwide injunction issued in the Smith v. Treasury litigation remains in place, reporting companies:
“are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
The Texas Top Cop Shop and Smith v. Treasury litigations both originated in the U.S. District Court for the Eastern District of Texas. While the Supreme Court’s order in the Texas Top Cop Shop litigation does not specifically address the injunction in the Smith v. Treasury litigation, Foley’s CTA team would not be surprised if the injunction in the Smith v. Treasury litigation was to be stayed or lifted soon. Therefore, companies may want to keep preparing their beneficial ownership information reports so that, if CTA enforcement resumes, they will be ready to submit their required reports by the applicable filing deadlines.
Swing and a Miss: The Government Strikes Out in Pharmacy Executive Kickback Trial
Last week, the government submitted its decision to the federal court not to retry partially-acquitted pharmacy executive, Chad Beene, for conspiracy and illegal kickback allegations. At the end of last year, a New Jersey jury partially acquitted Mr. Beene on charges related to an alleged $34 million illegal kickback scheme. At trial, federal prosecutors alleged that Mr. Beene and his colleagues crafted an illegal scheme through which they paid several marketing companies illegal kickbacks for securing prescriptions of “medically unnecessary” and “exorbitantly priced” compounded medications. While three of the indicted alleged co-conspirators pleaded guilty, Mr. Beene took the case to trial and was found not guilty on six counts. The jury was unable to reach a verdict on nine additional counts. These remaining counts left the door open for prosecutors to retry the case against Mr. Beene in an attempt to secure a conviction.
A federal grand jury indicted Mr. Beene and his alleged co-conspirators in July of 2020 for allegedly using their positions as pharmacy executives at Main Avenue Pharmacy to identify the most expensive medications, such as compounded scar creams, pain creams, migraine medication, and vitamins, and create pre-written prescription pads to encourage doctors to write prescriptions that would result in the highest pharmacy reimbursement, even where the medications were not medically necessary. The defendants then allegedly disbursed the prescription pads nation-wide through their contacts with marketing companies. As part of the scheme, the marketers would pay telehealth companies and healthcare providers to authorize the prescriptions, which were then sent back to the conspirators’ pharmacy and filled. The defendants would then submit requests for reimbursement from patient’s private health insurance, Tricare, and Medicare. After receiving their reimbursements, the defendants allegedly paid kickbacks to the marketers for the prescriptions received.
Federal prosecutors argued that the signed contracts with the marketers laid out the illicit kickback arrangement with the pharmacy. In total, the defendants, along with Main Avenue Pharmacy, were alleged to have received almost $34 million in reimbursements.
Two of the defendants, Jeffrey Andrews, the former pharmacy Chief Financial Officer, and Adam Brosius, the former pharmacy Director of Business Development and President, pleaded guilty to charges of conspiracy earlier this year. The remaining defendant Robert Schneiderman had previously pled guilty in 2022 to conspiracy to commit health care fraud and conspiracy to violate the Anti-Kickback Statute. Sentencing is scheduled for June 2025.
Mr. Beene did not agree to a plea deal and proceeded to trial where he argued that there was insufficient evidence of an illegal conspiracy and that he acted in “good faith”, or, in other words, that in his honest opinion and belief his conduct was entirely legal. Mr. Beene acknowledged that he served as the National Sales Manager of the Main Avenue Pharmacy, where he used his skill and knowledge of graphic software to clean up pre-prepared prescription pads and developed marketing plans, but showed that he had no previous health care work experience. Based on his limited health care training and understanding, Mr. Beene claimed that he lacked the understanding that certain business practices, such as commission-based payments to marketers or insufficient oversight of prescription authorizations, could be considered unlawful. Witnesses against Mr. Beene included his alleged co-conspirators Brosius and Schneiderman, others who worked at the pharmacy, and pharmacy patients.
The trial record indicates that the jury intently reviewed the evidence and jury instructions, sending notes to the judge during deliberations asking for specific pieces of evidence or copies of relevant statutes. In their verdict, the jury acquitted Mr. Beene of all counts related to the allegations that he caused the pharmacy to submit allegedly fraudulent claims to Medicare and other health care plans. However, after five days of deliberations, the jury could not come to a conclusion on the counts of conspiracy to commit health care fraud or to violate the Anti-Kickback Statute and other alleged payments of illegal kickbacks. The government’s conspiracy theories rested on Mr. Beene entering into an agreement with others to commit the crimes. After the verdict was issued, a juror reached out to defense counsel offering to speak regarding the verdict offering to answer any questions about the case and stating “ . . . I want you to know your team did a fantastic job at trial . . . I wanted to ensure I exhausted all options in securing a Not Guilty verdict on all counts. We were so close . . . I am unsure of the chances for a retrial, but the government’s case is weak.”
Mr. Beene’s acquittal is a reminder that the government does not win every case it brings to trial, especially where the regulations are complex and intent is not easily proven. In heavily regulated industries like health care, it can be difficult for industry participants to parse through convoluted regulatory framework. For jurors without any health care industry experience, it can be even more difficult to understand or focus on the non-criminal intent behind convoluted business practices. While the Department of Justice continues to aggressively pursue health care fraud cases, Mr. Beene’s acquittal shows that proving illicit intent in the midst of the increasing complexities of regulatory compliance is difficult and a conviction is not a foregone conclusion simply because the government alleges that individuals “knew” that their conduct was improper. The government must prove knowledge beyond a reasonable doubt.
A Ticking Time Bomb—Universal Injunctive Relief at Risk – SCOTUS Today
The U.S. Supreme Court has stayed the nationwide injunction that had been blocking the enforcement of the Corporate Transparency Act (CTA) while the merits of the CTA are pending a decision in the U.S. Court of Appeals for the Fifth Circuit, which will hear oral argument on March 25 in McHenry v. Texas Top Cop Shop, Inc.
The CTA requires more than 32 million existing businesses to disclose their beneficial owners. That number is expected to grow by five million new businesses per year. Texas Top Cop Shop, a firearms retailer, has challenged the CTA’s constitutionality.
During this interim period, it is unclear what, if any, action the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) will take. Today’s decision does not reinstate the previous January 13 filing deadline. Throughout the tortured history of this case, FinCEN has updated earlier compliance deadlines, but with a new administration, it is possible for the agency to await the action of the Fifth Circuit, which many believe is a commodious environment for firearms purveyors. Others stress the importance of a law designed in part to disclose foreign and domestic criminals who use anonymous U.S. companies to launder profits from drugs such as fentanyl or mask cybercrime-related transactions.
The purpose of this post is not to give legal advice but to describe important developments in the law. We do recommend that affected businesses consult with their own counsel as they survey the road ahead. We also caution, with respect to this current chapter in the life of the CTA, that there is a ticking time bomb that not only might undermine the enforcement of this act but also might augur fundamental change to the remedies available across administrative law writ large.
The Supreme Court’s order is a simple one, occupying eleven lines of text. What follows that text, also concise, is potentially more important. Justice Jackson dissented from the grant of the stay, believing that imminent injury is unlikely given the expedition being offered in the Fifth Circuit. However, the more impactful statement is that of Justice Gorsuch, who concurred in the granting of the stay. In doing so, he stated that he not only agreed “that the government is entitled to a stay of the district court’s universal injunction” [emphasis added], but that he would “go a step further and . . . resolve definitively the question whether a district court may issue universal injunctive relief.”
The issue of the geographic scope of injunctive relief has been discussed before in this blog and elsewhere, but Justice Gorsuch is attempting to give it new energy.
With what many observers think will be the retirement of at least one justice during the new Trump term and President Trump’s likely appointment of a significantly right-of-center successor adding to that leaning in the Court, it is not improbable for Justice Gorsuch’s preference to gain sufficient traction to provide at least the necessary four votes to grant cert. in a given case, and maybe a fifth vote to set off the decisional explosion. This is an issue upon which I’d place the “to be confirmed” warning label.
EU Updates Codes of Conduct on Countering Illegal Hate Speech Online
The European Commission has strengthened its framework for combating illegal hate speech online through an enhanced Code of Conduct, building upon the success of its 2016 predecessor. This updated version, known as the Code of Conduct on countering illegal hate speech online +, aligns with the Digital Services Act (DSA) and represents a significant step forward in the EU’s efforts to create a safer digital environment.
The Code brings together major technology platforms as signatories, including established participants like Google (YouTube), Meta platforms, and Microsoft, alongside newer additions such as TikTok, LinkedIn, and Twitch. These companies have committed to reviewing the majority of illegal hate speech notifications within 24 hours, with an ambitious target of processing at least 67% of notices from designated Monitoring Reporters in this timeframe.
Key improvements in the updated Code include enhanced transparency requirements, structured monitoring processes, and strengthened multi-stakeholder cooperation. Signatories must maintain clear terms and conditions prohibiting illegal hate speech and implement efficient notice-and-action mechanisms in compliance with the DSA.
The Code introduces a robust monitoring framework involving specialized Monitoring Reporters – non-profit or public entities with expertise in illegal hate speech. Annual monitoring exercises will evaluate the performance of signatories, with results published by the European Commission.
A notable innovation is the establishment of regular exchange forums for sharing best practices and addressing emerging challenges. The Code also emphasizes the importance of awareness-raising initiatives and educational programs to promote online civility and counter-narratives.
While voluntary in nature, this Code serves as a practical framework for implementing DSA requirements specifically related to illegal hate speech, demonstrating the EU’s commitment to combining regulatory oversight with industry collaboration in the fight against online hate speech, which is becoming increasingly relevant in the current global political climate.
Apple’s PFAS Consumer Fraud Lawsuit the Latest in Growing Trend
Directly on the heels of our article this week regarding the latest PFAS consumer fraud lawsuit (this time, against Samsung for its smart watches), Apple finds itself in a similar lawsuit over its smartwatches. The number of product types targeted for these lawsuits are growing and diverse in terms of the industries targeted. While there has been at least one significant settlement in these lawsuits to date, recently a few of the lawsuits that we previously reported on related to PFAS consumer fraud allegations were dismissed by separate courts.
However, this has not deterred plaintiffs from filing these types of cases, and in fact there are other lawsuits that successfully defeated Motions to Dismiss. The latest PFAS consumer fraud lawsuit targets Apple and shows that the number of consumer fraud lawsuits is likely to continue, and consumer goods industries, insurers, and investment companies interested in the consumer goods vertical must pay careful attention to these lawsuits.
PFAS Consumer Fraud Lawsuit – Overview
The consumer fraud PFAS lawsuits filed to date follow a very similar pattern: various plaintiffs bringing suit on behalf of a proposed class allege that companies market consumer goods as safe, healthy, environmentally friendly, etc., or that the companies themselves market their corporate practices as such, yet it is allegedly discovered that certain products marketed with these buzzwords contain PFAS. The lawsuits allege that since certain PFAS may be harmful to human health and PFAS are biopersistent (and therefore environmentally unfriendly), the companies making the good engaged in fraud against consumers to entice them to purchase the products in question.
In the Complaints, plaintiffs typically allege the following counts:
Violation of state consumer protection laws and the federal Magnuson-Moss Warranty Act
Violations of various state consumer protection laws
Breach of warranty
Fraud
Constructive fraud
Unjust enrichment
The plaintiffs seek certification of nationwide class action lawsuits, with a subclass defined as consumers in the state in which the lawsuits are filed. In addition, the lawsuits seeks damages, fees, costs, and a jury trial. Representative industries and cases that have recently been filed include:
Cosmetics industry:
Brown v. Cover Girl, New York (April 1, 2022)
Anderson v. Almay, New York (April 1, 2022)
Rebecca Vega v. L’Oreal, New Jersey (April 8, 2022)
Spindel v. Burt’s Bees, California (March 25, 2022)
Hicks and Vargas v. L’Oreal, New York (March 9, 2022)
Davenport v. L’Oreal, California (February 22, 2022)
Food packaging industry:
Richburg v. Conagra Brands, Illinois (May 6, 2022)
Ruiz v. Conagra Brands, Illinois (May 6, 2022)
Hamman v. Cava Group, California (April 27, 2022)
Azman Hussain v. Burger King, California (April 11, 2022)
Little v. NatureStar, California (April 8, 2022)
Larry Clark v. McDonald’s, Illinois (March 28, 2022)
Food and drink products:
Bedson v. Biosteel, New York (January 27, 2023)
Lorenz v. Coca-Cola, New York (December 28, 2022)
Toribio v. Kraft Heinz, Illinois (November 29, 2022)
Apparel products:
Krakauer v. REI, Washington (October 28, 2022)
Hygiene products:
Esquibel v. Colgate-Palmolive Co., New York (January 27, 2023)
Dalewitz v. Proctor & Gamble, New York (August 26, 2022)
Feminine hygiene products:
Gemma Rivera v. Knix Wear Inc., California (April 4, 2022)
Blenis v. Thinx, Inc., Massachusetts (June 18, 2021)
Destini Canan v. Thinx Inc., California (November 12, 2020)
Latest PFAS Consumer Fraud Lawsuit
In Dominique Cavalier and Kiley Krzyzek v. Apple Inc., the plaintiffs alleges that they purchased various Apple smart watches designed to encourage and support personal fitness goals of consumers. The products, plaintiffs argue, were marketed as promoting human health, environmentally sustainable, and suitable for everyday use and wear. Upon testing, the watches were found to have various types of PFAS. Plaintiffs allege that they were therefore deceived by Apple, and never would have purchased the product if they knew that they contained PFAS. Plaintiffs seeks a class certification of all purchasers of the products in question for the time period in question, with a subclass of all purchasers of the products from California.
Recent Rulings In Consumer Fraud PFAS Lawsuits
In California, the Yeraldinne Solis v. CoverGirl Cosmetics et al. case made allegations that cosmetics were marketed as safe and sustainable, yet were found to contain PFAS. The defendants in the lawsuit filed a Motion to Dismiss, arguing in relevant part that the plaintiff had no standing to file the lawsuit because she did not sufficiently allege that she suffered any economic harm from purchasing the product. The plaintiff put forth two theories to counter this argument: (1) the “benefit of the bargain” theory, under which the plaintiff alleged that she bargained for a product that was “safe”, but received the opposite. The court dismissed this argument because the product packaging did not market the product as safe, and the ingredient list explicitly named the type of PFAS found in testing; and (2) an overpayment theory, under which plaintiff alleged that if she knew the product contained PFAS, she would not have paid as much for it as she did. The Court dismissed this argument because the product packaging specifically listed the type of PFAS at issue in the case.
In Illinois, the Richburg v. Conagra Brands, Inc. alleged that popcorn packaging was marketed as containing “only real ingredients” and ingredients from “natural sources”, yet the popcorn contained PFAS (likely from the packaging itself), which was allegedly false and misleading to consumers. The defendant moved to dismiss the lawsuit on several grounds and the Court found in defendant’s favor on one important ground. The Court held that the statements on the popcorn packaging would not mislead an ordinary and reasonable consumer because a consumer would understand “ingredients” to mean those items that are required to be disclosed by the FDA and not materials that may have migrated to the food from the product packaging. In fact, the Court ruled that the FDA “exempts substances migrating to food from equipment or packaging;” and those “do not need to be included in the ingredients list.” The defendant argued that reasonable consumers would not consider PFAS to be an “ingredient” under this regime. In other words, whether or not PFAS migrated into the popcorn, the representations that the popcorn contained “only real ingredients” and “100% ingredients from natural sources” were “correct as a matter of law.” The court dismissed plaintiffs claims on this basis.
Conclusion
Several major companies now find themselves embroiled in litigation focused on PFAS false advertising, consumer protection violations, and deceptive statements made in marketing and ESG reports. The lawsuits may well serve as test cases for plaintiffs’ bar to determine whether similar lawsuits will be successful in any (or all) of the fifty states in this country. Companies must consider the possibility of needing to defend lawsuits involving plaintiffs in numerous states for products that contain PFAS. It should be noted that these lawsuits would only touch on the marketing, advertising, ESG reporting, and consumer protection type of issues. Separate products lawsuits could follow that take direct aim at obtaining damages for personal injury for plaintiffs from consumer products. In addition, environmental pollution lawsuits could seek damage for diminution of property value, cleanup costs, and PFAS filtration systems if drinking water cleanup is required.
While the above rulings are encouraging for companies facing consumer fraud PFAS lawsuits, it is far too early to tell if the trend will continue nationally. As the recent California case shows, plaintiffs continue to file PFAS consumer fraud cases despite the recent dismissals. Different courts apply legal standards differently and these cases are very fact specific, which could lead to differing results. This has been the case in several jurisdictions, where PFAS consumer fraud cases have been permitted to proceed to litigation after initial challenges were made.
It is of the utmost importance that businesses along the whole supply chain in the consumer products industry evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate PFAS at an ever-increasing pace. Similarly, state level EPA enforcement action is increasing at a several-fold rate every year. Now, the first wave of lawsuits take direct aim at the consumer products industry. Companies that did not manufacture PFAS, but merely utilized PFAS in their manufacturing processes, are therefore becoming targets of costly enforcement actions at rates that continue to multiply year over year. Lawsuits are also filed monthly by citizens or municipalities against companies that are increasingly not PFAS chemical manufacturers.