Litigation / Trial Practice – Page 10

(UK) The Issue With Hybrid Insolvency Claims Rumbles On

Should a claim be struck out where the applicant has failed to comply with the procedural requirements relating to “hybrid” claims? In the recent case of Park Regis Birmingham LLP [2025] EWHC 139 (ch), the High Court held that it would be disproportionate to strike out the claim on that basis.
Hybrid Claims
Hybrid claims are those that include claims under the insolvency legislation (e.g. “transaction avoidance” claims), as well as company claims (e.g. unlawful dividends or sums owing under a director’s loan account). Previously, it was common practice for such claims to be issued as a single insolvency act application, rather than as a Part 7 claim.
Since the Manolete Partners plc v Hayward and Barrett Holdings case in 2021, applicants have been required to issue these claims separately, with the insolvency claims being issued as an insolvency application, and the company claims being issued as a separate Part 7 claim. The applicant can then issue an application to request that the separate proceedings are managed together e.g. at a single trial. This has meant that the costs of issuing such claims have increased, as the issue fee for a Part 7 claim can be up to £10,000, whereas the issue fee for an insolvency application is £308.
Facts
In the Park Regis case, the applicants had incorrectly issued a hybrid claim as a single insolvency application, without issuing the separate Part 7 claim for the company claims. However, when issuing the application, the applicant’s lawyers had informed the Court that the issue fee for the application would be £10,000, as the claim was a hybrid claim, and therefore the £10,000 fee was paid.
The respondents applied to strike the claim out, on the basis that the applicant had failed to comply with the Hayward and Barrett Holdings case and argued that the applicant’s approach constituted an abuse of process.
The judge held that the applicant had failed to comply with the procedural requirements regarding hybrid claims. However, in exercising her discretion about whether to strike out the claim, the judge held that striking out the claim would be too severe a penalty for that failure. The judge therefore exercised her discretion (under CPR 3.10) to waive the procedural defect and allowed the claim to proceed as if it had been properly issued.
Commentary
While the judge in this case declined to strike out the claim, the judge was clear that the applicant’s attempt to issue the claim by way of a single insolvency application, but paying the higher Part 7 issue fee, was procedurally incorrect. Had this approach been endorsed it would have made issuing such applications more straightforward for practitioners, but the judge noted the absolute requirement for separate proceedings.
We understand that this decision has been appealed – so watch this space for further comment. In the interim practitioners should continue to apply the Hayward and Barrett Holdings approach and issue two sets of proceedings to avoid the risk of a claim being struck out. Although the procedural defect was waived in this case, the power to do that is a discretionary one!
The Insolvency Service in the First Review of the Insolvency Rules has reported that they are considering whether an amendment to the Rules is required to address the Hayward and Barrett Holdings case which would hopefully see a return to previous practice – one set of proceedings with one court fee. But to date there has been no indication from the Insolvency Service when (if) they will progress that and unless further clarity is provided on appeal it seems the sensible approach for practitioners is to follow Hayward when pursuing a claim.

Texas Supreme Court Confirms Limits of Fifteenth Court of Appeals’ Jurisdiction

The Texas Supreme Court issued a per curiam opinion that resolved a split among Texas courts of appeals regarding the jurisdiction of the Fifteenth Court of Appeals. Addressing motions to transfer appeals out of the Fifteenth Court, in Kelley v. Homminga, No. 25-9013 and Devon Energy Production Co. v. Oliver, No. 25-9014, the Court held that the Fifteenth Court does not have jurisdiction over all civil appeals in Texas.
Instead, the Court concluded the Fifteenth Court’s jurisdiction is limited to appeals that are (1) within its exclusive jurisdiction (i.e., only those appeals involving the state or appealed from the Business Court), or (2) transferred to it by the Supreme Court for docket equalization as the Texas Government Code requires.
Scope of Geographic Reach Versus Subject-Matter Jurisdiction
The Texas Supreme Court explained that through a combination of state-wide geographic reach limited by legislated subject-matter jurisdiction, the Fifteenth Court has authority to decide appeals from any Business Court across the state. Senate Bill 1045, which created the Fifteenth Court, also granted it jurisdiction to decide “certain civil cases” that may arise anywhere in the state. The “certain civil cases” within the Court’s subject-matter jurisdiction is limited to only three substantive categories of civil appeals: (1) cases brought by or against the state, with enumerated exceptions; (2) cases involving challenges to the constitutionality or validity of state statutes or rules where the attorney general is a party; and (3) “any other matter as provided by law.” The third category includes two types of appeals: those from the newly created Business Court and those transferred to it by the Texas Supreme Court in order to equalize dockets among the courts of appeals.
Procedural Posture
In both Kelley (Galveston County) and Devon Energy (DeWitt County), defendants noticed their appeals to the Fifteenth Court, asserting that the court’s statewide jurisdiction authorized it to hear their cases. The plaintiffs in each case moved to transfer the appeals to the regional courts of appeals that traditionally hear appeals from the counties where the trial courts are located—specifically, the First or Fourteenth Courts in Kelley and the Thirteenth Court in Devon Energy.
The Fifteenth Court denied both transfer motions over dissents. Both majority opinions (2-1) held that because Texas statutes grant the Fifteenth Court general appellate jurisdiction over civil cases statewide, the Fifteenth Court could decide the appeals. While the First Court of Appeals agreed with the Fifteenth Court’s majorities, the Thirteenth and Fourteenth Courts of Appeals disagreed. Because neither the Kelley nor Devon Energy appeal fell into the three substantive categories of civil appeals over which the Fifteenth Court had subject-matter jurisdiction, the Texas Supreme Court granted the motions and ordered the appeals transferred back to the courts of appeals in the districts in which the trial courts resided.
New Jurisprudential Guidance
The Texas Supreme Court applied new terminology (gleaned from collaborative writings of Justice Antonin Scalia and Bryan A. Garner) to the jurisprudence guiding statutory interpretation. The “fair meaning” standard of statutory interpretation requires courts to discern a statute’s objectives from its plain text while also considering the broader statutory context. The Court’s view is that this approach differs from strict textualism, as it seeks to harmonize all provisions of a statute into a cohesive whole rather than focusing on the hyper literal meaning of individual words. Also animating its decision, the Court explained that reversal was necessary to avoid “gamesmanship” in seeking an appellate venue and thwarting the legislature’s intent that the Fifteenth Court give special attention to categories of cases in which it has exclusive jurisdiction and not be overburdened with cases outside of its exclusive jurisdiction. The Texas Supreme Court’s decisions in Devon Energy and Kelley provide welcome clarity on the jurisdiction of the Fifteenth Court of Appeals.

D.C. Circuit Denies Copyright to AI Artwork – What Humans Have and Artificial Intelligence Does Not

Can a non-human machine be an author under the Copyright Act of 1976? In a March 18, 2025 precedential opinion, a D.C. Circuit panel affirmed prior determinations from the D.C. District Court and the Copyright Office that an original artwork created solely by artificial intelligence (AI) is not eligible for copyright registration, because human authorship is required for copyright protection.
Dr. Stephen Thaler created a generative AI named DABUS (or Device for the Autonomous Bootstrapping of Unified Sentience), also referred to as the “Creativity Machine,” which made a picture that Thaler titled “A Recent Entrance to Paradise.” In the copyright registration application to the U.S. Copyright Office, Thaler listed the Creativity Machine as the artwork’s sole author and himself as just the work’s owner.
Writing for the panel, D.C. Circuit Judge Patricia A. Millett opined that “the Copyright Act requires all work to be authored in the first instance by a human being,” including those who make work for hire. The court noted the Copyright Act’s language compels human authorship as it limits the duration of a copyright to the author’s lifespan or to a period that approximates how long a human might live. “All of these statutory provisions collectively identify an ‘author’ as a human being. Machines do not have property, traditional human lifespans, family members, domiciles, nationalities, mentes reae, or signatures,” the court concluded.
In rejecting Thaler’s copyright claim of entirely autonomous AI authorship, the court did not consider whether Thaler is entitled to authorship on the basis that he made and used the Creativity Machine, because Thaler waived such argument in the underlying proceedings. The court also declined to rule on whether or when an AI creation could give rise to copyright protection. However, citing the guidance from the Copyright Office, the court noted that whether a work made with AI is registrable depends on the circumstances, particularly how the AI tool operates and how much it was used to create the final work. In general, a string of recent rulings from the Copyright Office concerning “hybrid” AI-human works have allowed copyright registration as to the human-created portions of such works.
The D.C. Circuit’s statutory text-based analysis and holding stands in parallel with the counterpart U.S. patent doctrine that human inventorship is required for patent protection, provided in Thaler v. Vidal, 43 F.4th 1207 (Fed. Cir. 2022; Cert. denied) and reflected in the USPTO’s Inventorship Guidance for AI-Assisted Inventions issued February 12, 2024.
Underlying the judicial rulings to require the human authorship and inventorship for copyright and patent protection is the concept that only humans can “create” art or can conceive the invention – that there is something special and important about human creativity, which is what the intellectual property law aims to protect. This underpinning of human creativity in the authorship and inventorship requirements was addressed in detail in a White Paper published last summer by Mammen and a multidisciplinary group of scholars at the University of Oxford. The White Paper explains that creativity includes three core elements: (a) an external component (expressed ideas or made artifacts that reflect novelty, value, and surprisingness), (b) a mental component (a person’s thought process – interplay of divergent (daydreaming) thinking, convergent (task-focused), and recognition of salience (relevance)), and (c) a social context (for example, what society considers new, valuable, and surprising, and thus “creative”). IP doctrines require all three core elements. Generative AI does not presently exhibit the equivalent of the mental component that is key to human creativity.
In fact, as the White Paper discusses, there is some evidence that Generative AI can negatively impact even human creativity. First, using AI to produce creative products involves working in a way that emphasizes speed and instant answers, as well as becoming the passive consumer of such answers, rather than self-reflection or toggling between convergent and divergent thinking, which is key to creativity. Second, humans interacting with AIs tend to lose confidence in their own creative skills, and start to restrict the range of their own creative repertoire in favor of creating “mash-ups” of what AI provides.
In analyzing the causal impact of generative AI on the production of short stories where some writers obtained story ideas from a large language model (LLM), Doshi and colleagues reported that access to generative AI caused stories to be more creative, better written, and more enjoyable in less creative writers, while such AI help had no effect for highly creative writers. However, the stories produced after using an LLM for just a few minutes indicated significantly reduced diversity of ideas incorporated into the stories, leading to a greater homogeneity between the stories as compared to stories written by humans alone. Thus, generative AI augmented less creative individuals’ creativity and quality of work, but decreased collective novelty and diversity among writers, suggesting degradation of collective human creativity by use of generative AI.
To be sure, the questions raised by Dr. Thaler and DABUS are testing the boundaries and rationales for existing IP doctrines. Dr. Thaler argued that judicial opinions from the Gilded Age could not settle the question of whether computer generated works are copyrightable today. But as reflected in the White Paper and affirmed by the courts, it is not enough merely to suggest that the outputs of Generative AI warrant IP protection because they are “just as good as” human-created outputs that are entitled to protection. Moreover, in most instances of AI-created work or invention, a human factor appears to be present to some extent, either in creating the AI, desiring certain goals and outputs, commanding the AI to generate a goal-oriented output, evaluating and selecting the AI-generated output, modifying the AI-generated output, or owning the AI for the purpose of using the AI-generated output. As the capabilities of AI continue to evolve, the border between human creativity and AI capability may blur further, posing an evolving set of challenges at the frontier of IP law.

Commissions Are ‘Wages’ Under the New Jersey Wage Payment Law, New Jersey Supreme Court Rules

On March 17, 2025, the Supreme Court of New Jersey held that “commissions” must be considered “wages” under the New Jersey Wage Payment Law (WPL) and cannot be excluded as “supplementary incentives” because they are tied to the “labor or services” of employees.

Quick Hits

New Jersey Supreme Court Ruling on Commissions as Wages: On March 17, 2025, the Supreme Court of New Jersey ruled that commissions must be considered “wages” under the New Jersey Wage Payment Law (WPL) and cannot be excluded as “supplementary incentives” since they are tied to the labor or services of employees.
Case Background and Court’s Decision: In Musker v. Suuchi, Inc., the court determined that commissions earned by a sales representative for selling PPE during the COVID-19 pandemic were “wages” under the WPL, and rejected the argument that these commissions were “supplementary incentives” because they were tied to her labor or services.
Implications for Employers: The ruling clarifies that commissions are always considered “wages” under the WPL, regardless of whether they are for new or temporary products.

Background
In Musker v. Suuchi, Inc. the plaintiff, Rosalyn Musker, a sales representative, earned a salary plus commissions pursuant to an individualized sales commission plan (SCP) to sell software subscriptions. In March 2020, Suuchi, Inc., began to also sell personal protective equipment (PPE) because of the rise of COVID-19. Musker ultimately completed PPE sales that generated approximately $35 million in gross revenue for Suuchi. The parties disagreed regarding the amount of commissions owed to Musker pursuant to the SCP for her PPE sales and further disagreed as to whether such payment constituted “wages” or “supplementary incentives” under the WPL.
Musker then filed suit against Suuchi claiming it violated the WPL by withholding from her payment of commissions for her PPE sales. Suuchi, on the other hand, argued that Musker’s WPL claim should be dismissed because the commissions for the PPE sales in this instance would be considered “supplementary incentives” and not “wages” under the WPL. Specifically, Suuchi argued that because PPE was a new product and not its primary business, Musker’s commissions for her PPE sales should be considered “supplementary incentives” under the WPL.
Both the Superior Court of New Jersey and the New Jersey Appellate Division denied Musker’s WPL claim, concluding that because her sale of PPE went “above and beyond her sales performance, and the [PPE] commissions are calculated independently of her regular wage,” such commissions did not constitute “wages” under the WPL.
The Supreme Court of New Jersey disagreed and held that Musker’s commissions for the sale of PPE could not be excluded from the definition of “wages” as a “supplementary incentive.”
Commissions Are Wages and Cannot be Excluded as Supplementary Incentives
The supreme court pointed out that the WPL defines the term “wages” as “the direct monetary compensation for labor or services rendered by an employee, where the amount is determined on a time, task, piece, or commission basis excluding any form of supplementary incentives and bonuses which are calculated independently of regular wages and paid in addition thereto.” (Emphases in the original.) Unfortunately, however, the WPL does not define what constitutes a “supplementary incentive.”
In reviewing the WPL’s definition of “wages,” the Supreme Court of New Jersey concluded that a “supplementary incentive” is compensation that “motivates employees to do something above and beyond their ‘labor or services.’” The court opined that the “primary question addressing whether compensation is a ‘supplementary incentive’ is not whether the compensation only has the capacity to [incentivize work or provide services], but rather whether the compensation incentives employees to do something beyond their ‘labor or services.’”
In so concluding, the court clarified that a “commission” can never be a “supplementary incentive” because “supplementary incentives,” unlike “commissions,” are not payment for employees’ labor or services. To illustrate this point, the court provided several examples of “supplementary incentives” which it determined are not tied to employee’s “labor or services” and therefore would not constitute “wages” under the WPL, including: working out of a particular office location, meeting a certain attendance benchmark, or referring prospective employees to open positions.
Accordingly, the court held that Musker’s commissions from her PPE sales were not “supplementary incentives” because those sales necessarily resulted from her “labor or services.” Accordingly, the court held that those commissions would be considered “wages” under the WPL. Further, the court rejected Suuchi’s argument that because PPE was a new product for the company and it only temporarily sold such product, the sale of PPE therefore fell outside the regular “labor or services” an employee provides. Rather, as a result of the COVID-19 pandemic, selling PPE became part of Musker’s job and thus, commissions for selling PPE became owed to her as “wages” pursuant to the WPL.
Key Takeaways
The Supreme Court of New Jersey has clarified that commissions can never be “supplementary incentives” and excluded from the definition of “wages” under the WPL. Commissions are “wages” pursuant to the WPL, regardless of whether they are based on sales of new products or products temporarily marketed by their employers. Commissions are tied to employees’ “labor or services” and, as a result, are not “supplementary incentives.” Furthermore, the penalties under the WPL include liquidated damages of up to 200 percent of the wages recovered, as well as attorneys’ fees for successful claimants. Employers may want to keep in mind that all commissions are owed to employees to ensure compliance with the WPL to avoid exposure to significant financial penalties.

Breaking Down the New No Surprises Act FAQs Post-TMA III

On January 14, 2025, the US Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively, the Departments), along with the Office of Personnel Management (OPM), jointly issued Part 69 of a series of frequently asked questions (FAQs) designed to help stakeholders understand and adhere to the federal No Surprises Act (NSA). This installment of the FAQs discusses how health plans and issuers should calculate the qualifying payment amount (QPA) and provides updates to disclosure and patient cost-sharing requirements following rulings by the US District Court for the Eastern District of Texas and the US Court of Appeals for the Fifth Circuit in Texas Medical Association, et al. v. United States Department of Health and Human Services, et al. (together, the TMA III decisions).

In Depth

BACKGROUND: THE LONG HISTORY OF THE NSA
The NSA was enacted under the first Trump administration as part of the Consolidated Appropriations Act, 2021 (Public Law No: 116-260). The Departments and OPM jointly implemented provisions of the NSA through the issuance of two interim final rules (IFRs) in July 2021 and October 2021.
The NSA prohibits out-of-network (OON) providers from balance billing patients for certain services furnished at an OON facility (in the case of emergency services) or in-network facility (in the case of non-emergency services provided by OON providers). The NSA protects patients from receiving these “surprise” bills, effectively limiting patient responsibility for some services to no more than the patients’ in-network cost-sharing amounts. (The NSA includes separate considerations related to air ambulance providers, which we do not address in this article.)
Per the NSA and as further implemented in the October 2021 IFR, plans and issuers are required to determine whether claims for items or services submitted by an OON provider or facility and subject to the NSA are covered under the plan or coverage and must send an initial payment or notice of denial of payment to the OON provider or facility no later than 30 calendar days after the provider or facility submitted the claim to the plan or issuer.
To the extent the claim is covered, the NSA also sets forth a methodology by which plans or issuers must calculate the OON rate for OON providers or facilities that rendered items or services subject to the NSA. Plans and issuers must pay the provider or facility an amount determined by an applicable All-Payer Model Agreement, and if none exists, an amount determined by applicable state law. If state law does not set forth a mechanism by which the OON rate should be determined, the plan or issuer may negotiate the rate with the provider or facility through an “open negotiation” process, which lasts 30 days.
If the parties are unable to agree to an OON rate by the expiration of the open negotiation period, either party may initiate a dispute under the federal independent dispute resolution (IDR) process established by the NSA. The IDR process involves several steps:

The disputing parties must agree on and select a third-party entity (referred to as a certified IDR entity) to oversee the process.
Each party must then submit payment offers to the IDR entity.
The IDR entity evaluates the payment offers and determines each party’s payment responsibility. The NSA requires that the IDR entity consider, among other factors, the QPA, defined as the median of the contracted rates that a plan or issuer recognizes for the same or similar service by a provider in the same or similar specialty in the same geographic area as the service at issue.
Once the IDR entity makes a payment determination, the plan or issuer must make the payment to the OON provider or facility within 30 calendar days.

In August 2022, the Departments issued final rules implementing provisions regarding certain disclosure requirements for plans and issuers (discussed further below) and modifying certain requirements pertaining to how IDR entities can take into account the QPA in determining the OON rate through the IDR process.
In theory, the IDR process is straightforward. However, the NSA and the IDR process, including the significance of the QPA in determining the OON rate, have been the subject of consistent litigation and operational issues, suggesting that in practice, providers and health plans continue to encounter implementation challenges.
HISTORY OF TMA LITIGATION
A string of litigation continues to shape the NSA and the related IDR process, which originated with a suit filed by the Texas Medical Association (TMA) against HHS in October 2021. In Texas Medical Association v. United States Department of Health and Human Services, et al. (TMA I), the district court vacated the Departments’ IFR requiring IDR entities to use a rebuttable presumption in favor of the QPA. The court held that the presumption conflicted with the NSA’s plain meaning, which lists a set of factors for consideration when determining the appropriate OON rate, only one of which is the QPA.
After the TMA I decision, the Departments issued the August 2022 final rules, which specified elements that IDR entities must consider in resolving OON payment disputes, including the extent to which the QPA should be taken into account. The August 2022 rules required that IDR entities:

First consider the QPA for the same or similar service.
Limit factors to information provided by the disputing party.
Document non-QPA factors relied upon in making a payment determination.

However, TMA challenged this rule in Texas Medical Association v. United States Department of Health and Human Services, et al. (TMA II), which the Fifth Circuit eventually vacated in TMA III. The Fifth Circuit stated that the Departments exceeded their authority by instructing IDR entities to prioritize one factor over others.
In August 2023, the district court issued a decision in TMA III, overturning key parts of the method set forth by the Departments to calculate the QPA. Following this ruling, the Departments have exercised their discretion in enforcing how QPAs are calculated, leading to uncertainty for plans and issuers as well as providers and facilities. The federal government appealed part of this decision, and on October 30, 2024, the Fifth Circuit issued a ruling on the TMA III case, partially reversing the district court’s decision, while upholding other parts.
The district court’s TMA III opinion found that the Departments’ methodology for calculating the QPA did not comply with the NSA. This noncompliance was due to:

The inclusion of “ghost rates” (i.e., contacted rates for services not actually provided by the contracting provider during the contract period).
The exclusion of risk-based incentive payments.
The allowance for self-insured plans administered by a third-party administrator to use other plans administered by the third-party administrator to calculate QPAs.

The district court also found that rules related to the timing and deadline for payment of OON claims subject to the NSA did not comply with the statute, because they started the 30-day payment clock on the date the plan or issuer received sufficient information to determine whether the submitted claim was a “clean claim,” rather than the date the provider or facility transmitted a “claim.”
Reversing the district court’s decision in part, the Fifth Circuit held that single-case arrangements will no longer be included in QPA calculations. The Fifth Circuit also reversed the district court’s decision that non-fee payments, such as quality bonuses and other incentives, must be included in QPA calculations. Regarding the timing of OON payments subject to the NSA, the Fifth Circuit affirmed the district court’s decision that starting the 30-day payment clock upon receipt of a “clean claim” conflicts with the text of the NSA. As decided by the district court, the 30-day prompt payment clock for NSA-eligible claims will begin on the date the provider transmits the bill, not when the plan or issuer receives the information necessary to determine whether the claim is a “clean claim.”
Regarding the QPA calculation, the Fifth Circuit reversed the district court’s decision to exclude from QPA calculations any contracts for items or services that contracting providers did not actually furnish under said contract during the designated plan year. Contracted rates can now be included in QPA calculations regardless of whether the provider actually furnished those services. However, the Fifth Circuit reiterated the statutory requirement that QPAs be calculated using contracts for the “same or similar item or service that is provided in the same or similar specialty.” This implies that “ghost rates” (e.g., anesthesia rates included in a primary care physician’s contract) must be excluded from QPA calculations.[1]
Following the TMA III decisions, the Departments stated on the Centers for Medicare and Medicaid Services’ NSA webpage in October 2024 that they were reviewing the Fifth Circuit’s decision and intended to “issue further enforcement guidance in the near future.”
NEW GUIDANCE ISSUED FOR QPA CALCULATIONS POST-TMA III DECISIONS
In the wake of the TMA III decisions, the Departments issued the FAQs addressing implementation of certain provisions of the NSA and responding to questions from stakeholders. Under the FAQs, the Departments and OPM will require health plans and issuers to calculate QPAs using a “good faith, reasonable interpretation of the applicable statutes and regulations that remain in effect following the decisions of both the Fifth Circuit and the district court in TMA III (the 2024 methodology)” once the Fifth Circuit issues its final order. Under Federal Rule of Appellate Procedure 41, a court of appeals’ mandate usually issues seven days after the deadline for rehearing petitions, unless a petition is filed. In this case, the Fifth Circuit withheld the mandate after the plaintiffs in TMA III filed a petition for rehearing en banc. Until the mandate is issued, the district court’s judgment continues to bind the Departments.
The Departments and OPM acknowledged the challenges of recalculating QPAs because of the Fifth Circuit’s decision and recognized the time and resources required for this task. Therefore, the Departments opted to prolong the existing period of “enforcement discretion” for any health plan or issuer that calculates a QPA using either the 2021 methodology (based on the IFRs and guidance issued in July 2021) or the 2023 methodology (based on the statutes and regulations that remained in effect after the district court’s decision in TMA III). Both methodologies can be used for items and services furnished before August 1, 2025, as long as they are based on a good faith, reasonable interpretation.
Once the mandate is issued, the Departments and OPM will also use their discretion to enforce the NSA for any health plan, issuer, or party involved in a payment dispute that uses a QPA calculated with the 2023 methodology for services provided before August 1, 2025. This enforcement discretion applies to patient cost-sharing, required disclosures with initial payments or notices of denials, and submissions under the IDR process. Similarly, HHS will exercise enforcement discretion for providers and facilities that bill patients based on a QPA calculated with the 2021 or 2023 methodology for services provided before August 1, 2025. Thus, the FAQs clarify that the enforcement discretion extends to providers in addition to health plans.
The FAQs encourage states, which primarily enforce the NSA, to adopt a similar approach, including that states will be considered compliant if they follow this approach. The Departments and OPM will reassess whether additional enforcement relief time is needed as health plans and issuers work to comply with the applicable laws and regulations following the TMA III decisions.
The new FAQs essentially preserve the existing circumstances, as the enforcement discretion has been operative since fall 2023 after the district court’s TMA III decision. Alongside the enforcement guidance, the Departments and OPM offer further clarifications regarding the existing QPA disclosure requirements and patient cost-sharing obligations.
DISCLOSURE REQUIREMENTS
In line with previous guidance, which remains unaffected by the TMA III decisions, health plans and issuers must continue to disclose information about the QPA. The QPA is used to determine the “recognized amount” for cost-sharing under the NSA. This recognized amount is calculated using the All-Payer Model Agreement, specified state law, or the lesser of the billed charge or QPA. A health plan or issuer may certify that a QPA was determined in compliance with applicable rules by using a good faith, reasonable interpretation of the statutes and regulations that remain in effect following the TMA III decisions.
The FAQs address questions regarding the 30-day notice and IDR process discussed earlier, and how the timing is affected when a plan sends the initial payment or denial notice electronically but provides the required disclosures in paper form. This can result in the provider receiving the payment or denial notice earlier than the disclosures. The Departments and OPM clarify that a plan must transmit the required disclosures on or near the date that it sends the initial payment or notice of denial of payment, and must ensure that both the initial payment or notice of denial of payment and the required disclosures are sent no later than 30 calendar days after the plan receives the information necessary to decide a claim for payment for the services billed by the provider.
The Departments and OPM also state in the FAQs that they recognize that sometimes providers and facilities receive required disclosures days after receiving the initial payment or denial notice. Since the 30-business-day period to start open negotiation begins when the payment or denial notice is received, this delay can shorten the time available to review the disclosures. If the disclosures are sent in paper form and arrive later than the electronic payment or denial notice, the 30-business-day period to start negotiations will be considered to begin once both the payment or denial notice and the disclosures are received. Providers can still choose to start negotiations after receiving the payment or denial notice but before receiving the disclosures.
PATIENT COST-SHARING
The Departments and OPM reiterate in the FAQs that patient cost-sharing rules under the NSA and the July 2021 IFR for OON emergency services and certain non-emergency services are based on the “recognized amount.” According to the Departments and OPM, some health plans have been found to increase cost-sharing amounts after an IDR payment determination, which is not allowed. Once an IDR entity makes a payment determination, plans cannot recalculate or increase the cost-sharing amount if it exceeds the permitted amount. The rules ensure that disputes between providers and payers do not affect the cost-sharing amount for individuals. Nonparticipating providers cannot bill individuals more than the allowed cost-sharing amount. Any payment owed to nonparticipating providers after an IDR determination must be paid in full without reducing the amount based on prohibited cost-sharing increases.
CONCLUSION/KEY TAKEAWAYS
As stated earlier, Part 69 of the FAQs extends the status quo of enforcement discretion around the calculation of the QPA. Any new regulations related to the QPA calculation will need to be drafted under the Trump administration, although the timing for issuing such regulations is unclear. If the Trump administration decides to draft new QPA regulations, it could make additional changes to the QPA methodology beyond those that have been the subject of litigation. While the courts have provided direction on what is permissible under the NSA and what aspects of previous regulations can and cannot stand, the rulings do not prevent the Trump administration from making other permissible regulatory changes as it deems appropriate, especially as stakeholders have challenged implementation of the law under the previous administration.
Beyond issuing this new set of regulations, the Trump administration also may need to deal with open operational questions and issues, including proposed regulations from the Biden administration that have yet to be finalized and whole provisions of the NSA that are yet to be implemented.[2] All of this means that, if it chooses to act, the Trump administration could decide to make its own imprint on the current NSA operations and policy.

No Ifs or Buts: Supreme Court Holds the Line on Unauthorized Profits

In Rukhadze and others v Recovery Partners GP Ltd and another [2025] UKSC 10, the Supreme Court had the task of deciding whether a change was needed to the law on equitable obligations and liabilities of fiduciaries.
The duty under the microscope was the so-called “profit rule”, i.e. that a fiduciary must account to his principal for any profit derived from or made out of the fiduciary relationship, save where the principal has provided his informed consent to the fiduciary retaining that profit. Such profit has long been treated in equity as held on constructive trust for the principal from the moment it is made.
In Rukhadze, the Court re-examined whether it needed to apply a common law “but for” causation test before granting an account of profits in such circumstances. Was the Court required to ask whether the fiduciary would have made the profit but for its breach, for example because the principal would have consented to it or because the fiduciary could have terminated the relationship before he gained the opportunity and would have made the same profit anyway?
To state the relevant facts briefly, the case centred around asset recovery services provided to the family of deceased Georgian businessman Arkadi Patarkatsishvili (“Badri”). Those services were initially carried out by “SCPI”, a company in which the individual appellants held senior roles and were fiduciaries. When the appellants left SCPI, they continued to provide the services to Badri’s family and received fees for doing so. The respondents (SCPI’s successors) claimed that the appellants were in breach of duty by, inter alia, taking for themselves SCPI’s business opportunity, and sued the appellants for an account of profits represented by the payments made to the appellants by the family. At first instance, the appellants were held to be in breach of fiduciary duty and ordered to make an account of profits, in the amount of the payments made by the family less 25% as an equitable allowance for the appellants’ work and skill in providing the services. The Court of Appeal dismissed the appellants’ appeal.
Before the Supreme Court, the appellants argued that applying “what if” counterfactuals with a “but for” common law causation test would provide more clarity, predictability, common sense and justice to this area of equity and avoid harsh results.
However, in a majority verdict, the Court declined to allow the appeal, holding that there is no requirement for a “but for” causation test, with Lord Briggs summarising at [36]:
The question is not, would the profit have been made even if there had been no antecedent breach of fiduciary duty, but did the profit owe its existence to a significant extent to the application by the fiduciary of property, information or some other advantage which he enjoyed as a result of his fiduciary position, or from some activity undertaken while he remained a fiduciary which the conflict duty required him to avoid altogether. For that purpose the court looks closely at the facts, i.e. what actually did happen, but does not concern itself with what might have happened in a hypothetical “but for” situation which did not in fact occur.

Therefore, the duty to account to a principal applies to all fiduciaries and is not merely a remedy; rather it is a duty that arises at the moment the profit is gained.
In its reasoning, the Court considered that there are in-built limitations to the application of the profit rule, namely that there must be a sufficient link between the fiduciary relationship and the profit gained. While the duty to account does not depend on any prior breach, where the profit follows on from a breach of the conflict duty, the sufficient link required will usually be established and “the accountability for the resulting profit will usually follow”. [42] Further, the Court was content that any possible injustices or harsh results would be better alleviated by its discretion to grant an equitable allowance, as the trial judge had ordered in this case, rather than an application of a broad “but-for” test.
Arguments put forward by the appellants that the increasing number of fiduciary relationships in the business world supports a relaxation of the deterrent role of the current law were not persuasive and in fact tended to underline that the duty of single-minded loyalty owed by a fiduciary should be very carefully protected.
Application to Sport
As in the wider business world, there are an ever-increasing number of fiduciaries in sport, including sports agents, whether the traditional “on-field” agents or those working in “off-field” commercial settings; directors and partners in sports clubs, governing bodies and other entities; and trustees in charitable trusts, foundations and investment structures.
Rukhadze will serve as a reminder from the highest court in the land to all sports fiduciaries of the significant obligations and liabilities they owe to their principal in that role. The consequences of breach are severe.
Sports agents have long recognised this fact. In the landmark Court of Appeal case in Imageview Management Ltd v Jack [2009] EWCA Civ 63, which considered a secret profit of £3,000 made by a football agent in assisting his football player principal’s club to obtain a work permit for him, the Court ordered both an account of the profit made and forfeiture of all remuneration received by the agent from the player. While forfeiture of remuneration was not considered on the facts in Rukhadze, until we have a Supreme Court judgment offering further clarity in this area, all fiduciaries remain mindful that this draconian remedy will be ordered by courts and tribunals in appropriate cases.
As Rukhadze confirms, it is prudent for fiduciaries to seek and obtain the informed consent of their principal if they wish to retain profits earned. Likewise, when fiduciaries wish to act for both sides in a transaction (as is common with on-field sports agents), informed consent should be obtained from each principal to avoid a breach of the fiduciary’s duty to avoid conflicts of interest. If not, fiduciaries may find that only a quantum meruit allowance remains on the table where it is held to be fair and equitable to recompense the skill and effort used in the transaction. As per Rukhadze, such an equitable allowance may only represent a fraction of the profit gained.

Litigation Minute: Emerging Contaminants: Minimizing and Insuring Litigation Risk

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS
As the scientific and regulatory landscape surrounding various emerging contaminants shifts, so too do the options that companies can consider taking to minimize and insure against the risk of emerging-contaminant litigation.
The second edition in this three-part series explores considerations for companies to minimize that risk and provides consideration for potential insurance coverage for claims arising from alleged exposure to emerging contaminants.
In a minute or less, here is what you need to know about minimizing and insuring emerging-contaminant litigation risk.
Minimizing Litigation Risk
As we discussed in our first edition of this series, regulation of emerging contaminants often drives emerging-contaminant litigation. For example, in emerging-contaminant litigation that alleges an airborne exposure pathway, plaintiffs’ complaints often prominently feature information from the US Environmental Protection Agency’s (EPA’s) National Air Toxics Assessment (NATA) screening tool and its predecessor, the Air Toxics Screening Assessment (AirToxScreen). AirToxScreen, and NATA before it, is a public mapping tool that can be queried by location, specific air emissions, and specific facilities to identify census tracts with potentially elevated cancer risks associated with various air emissions. Despite these tools’ many limitations, their simplicity and the information they provide have served as a foundation for many civil tort claims.
The takeaway: Since NATA and AirToxScreen use the EPA’s National Emission Inventory (NEI) as a starting point, companies with facilities that have emissions tied into NEI should carefully consider the implications of their reported emissions. For example, in some situations for some companies, it could be appropriate to consider whether to examine reported emissions and control technologies to determine whether adjustments can be made to reduce reported emissions to better reflect reality on a going-forward basis. In addition, requests for emerging contaminants sampling and reporting by regulatory agencies may be made publicly available.
Regulatory compliance is not always an absolute defense in tort litigation, but in most situations, compliance with existing regulations will be relevant to whether a company facing emerging-contaminant litigation met the applicable standard of care. Companies should examine applicable regulations against established compliance efforts and, as appropriate and applicable to any given company, consider whether it may be appropriate to closer examine compliance programs for continued improvements or audit established protocols to substantiate safety.
Insurance Coverage Considerations
Policyholders facing potential liability for claims arising out of alleged exposure to emerging contaminants should consider whether they have insurance coverage for such claims.
Commercial general liability insurance policies typically provide defense and indemnity coverage for claims alleging “bodily injury” or “property damage” arising out of an accident or occurrence during the policy period. While some insurers are now introducing exclusions for certain emerging contaminants (and most policies today have pollution exclusions), the underlying claim(s) may trigger coverage under occurrence-based policies issued years or decades earlier, depending on the alleged date of first exposure to the contaminant and the alleged injury process.
These older insurance policies are less likely to have exclusions relevant to emerging contaminants, and policies issued before 1986 are more likely to have a pollution exclusion with an important exception for “sudden and accidental” injuries, or no exclusions at all. In addition, some courts have ruled that pollution exclusions do not apply to product-related exposures or permitted releases of certain emerging contaminants.
In deciding whether there is potential insurance coverage for claims alleging exposure to emerging contaminants, policyholders should also consider whether they have potential coverage for such claims under insurance policies issued to predecessor companies. If insurance records are lost or incomplete, counsel can often coordinate an investigation, potentially with the assistance of an insurance archaeologist, and may be able to locate and potentially reconstruct historical insurance policies or programs.
The takeaway: Do not overlook the possibility of insurance coverage for potential liability regarding claims arising out of alleged emerging contaminant exposure. To maximize access to potential coverage, policyholders should act promptly to provide notice under all potentially responsive policies in the event of emerging-contaminant claims. Our experienced Insurance Recovery and Counseling lawyers can help guide policyholders through this process.
Our final edition will touch on considerations for companies defending litigation involving emerging contaminants. For more insight, visit our Emerging Contaminants webpage.

Texas Legislature Proposes Amendments to Texas Business Organizations Code

On February 27, 2025, a significant bill affecting entities organized under Texas law was filed in the Texas Legislature as Senate Bill 29 by Senator Bryan Hughes and as House Bill 15 by Representative Morgan Meyer. The Senate and House bills are currently identical and are referred to herein as the “Bill.” The Bill proposes a series of amendments to the Texas Business Organizations Code (“TBOC”) that apply to domestic Texas entities. Most of the amendments are applicable to Texas corporations, including in particular Texas corporations having shares listed on a national securities exchange. The authors of the Bill believe the amendments would reinforce corporate governance protections in Texas and reduce the risk of opportunistic shareholder litigation.
These reforms follow the commencement of operation of specialized Business Courts in Texas last fall and coincide with ongoing efforts to develop a new Texas-based stock exchange in Dallas. Together, these initiatives signal an ongoing commitment in Texas to providing a business-friendly jurisdiction that offers a stable legal environment for corporate governance and investment.
Many of the provisions of the Bill are tailored for publicly traded companies listed on a national securities exchange. The Bill would expand the definition of “national securities exchange” to include exchanges registered with the Securities and Exchange Commission as well as any stock exchange with its principal office in Texas that has received approval to operate by the Texas Securities Commissioner. [Bill Section 1; Amending TBOC Section 1.002(55-a).]
We discuss other key provisions of the Bill below.
Other states’ laws governing internal affairs and governance
The Bill provides that although a Texas entity’s managerial officials, in exercising their powers, may consider the laws and judicial decisions of other states and the practices observed by entities formed in other states, the failure to do so does not constitute or imply a breach of the TBOC or of any duty arising under Texas law. In fact, the Bill is clear that the plain meaning of the text of the TBOC “may not be supplanted, contravened, or modified by the laws or judicial decisions of any other state.” [Bill Section 2; Adding TBOC Section 1.056.]
Choice of forum and waiver of jury trial
The Bill would amend the TBOC to clarify that a domestic entity’s governing documents may require that one or more courts in Texas having jurisdiction shall serve as the exclusive forum and venue for any internal entity claims. [Bill Section 3; Amending TBOC Section 2.115(b).] For purposes of the TBOC, an “internal entity claim” means a claim of any nature, including a derivative claim in the right of an entity, that is based on, arises from or relates to the internal affairs of the entity [TBOC Sec. 2.115(a)].
The Bill would also add a new section to the TBOC to permit the governing documents of a Texas entity to contain an enforceable waiver of the right to jury trial if specified conditions are satisfied. Some commentators have questioned whether such a provision would be found to be constitutional because the Texas Constitution provides that the right to jury trial “shall remain inviolate.” In an attempt to satisfy the standards established in prior Texas case law for enforceable jury trial waivers, the Bill affirmatively states that a person’s waiver of jury trial is knowing and informed if the person (1) voted for or affirmatively ratified the governing document containing the waiver, (2) acquired an equity security in the entity when the waiver was included in the governing documents, or (3) is shown by evidence in a court proceeding to have knowingly and informedly consented or acquiesced to the waiver. [Bill Section 4; Adding TBOC Section 2.116.]
Codification of the business judgment rule
The Bill seeks to codify the business judgment rule in Texas by stating that, in the case of a Texas for-profit corporation having shares listed on a national securities exchange or affirmatively electing in its governing documents to be governed by this new provision, directors are presumed to act (1) in good faith, (2) on an informed basis, (3) in furtherance of the interests of the corporation, and (4) in a manner consistent with the law and the corporation’s governing documents. Neither the corporation nor its shareholders would have a cause of action against the corporation’s officers and directors unless one or more of the four preceding presumptions are rebutted by the claimant and the claimant proves both a breach of duty and that the breach involved fraud, intentional misconduct, an ultra vires act or a knowing violation of law. In any legal proceeding, the claimant must state with particularity the circumstances constituting the fraud, intentional misconduct, ultra vires act or knowing violation of law. The provision expressly states that it is not intended to affect any exculpation of monetary liability included in the corporation’s certificate of formation pursuant to TBOC Section 7.001. The Bill would also apply the same standards to any claims against directors or officers for breach of duty as a result of their authorization or performance of any conflict-of-interest contract or transaction with an interested director or officer under the TBOC’s interested person statute, if the corporation has shares listed on a national securities exchange or elects to be governed by the new business judgment rule provision. [Bill Sections 9 and 10; Adding TBOC Sections 21.418(f) and 21.419.]
Inspection of books and records
The Bill would amend the shareholder inspection rights provisions of the TBOC to clarify that a shareholder making a demand to inspect a Texas for-profit corporation’s books and records is not entitled to review emails, text messages or similar electronic communications, or information from social media accounts, unless the information affects an action by the corporation. Further, building on the existing statutory principle that a shareholder is not permitted to make a books and records demand for an improper purpose, the Bill would provide that, in the case of a corporation having shares listed on a national securities exchange or electing in its governing documents to be governed by the business judgment rule provisions, a written inspection demand will not be for a proper purpose if the corporation reasonably determines that the demand is in connection with a derivative proceeding that has been instituted or is expected to be instituted by the demanding holder or the holder’s affiliate, or if the demand is in connection with an active or pending civil lawsuit in which the demanding holder or the holder’s affiliate is or is expected to be an adversarial named party. [Bill Section 4, Amending TBOC Section 21.218.]
Advance determinations of independent and disinterested directors
The Bill would permit the board of directors of a Texas for-profit corporation having shares listed on a national securities exchange to adopt resolutions that authorize the formation of a committee of independent and disinterested directors to review and approve transactions, whether or not contemplated at the time of the committee’s formation, involving the corporation or any of its subsidiaries and a controlling shareholder, director or officer. In a novel new provision, the corporation adopting such a resolution would be able to petition a court of appropriate jurisdiction to hold an evidentiary hearing to validate the status of committee members as independent and disinterested.
There are various procedural provisions regarding this process that are beyond the scope of this alert. However, importantly, the new provision states that the court’s determination that the directors are independent and disinterested is dispositive in the absence of facts, not presented to the court, constituting evidence sufficient to prove that one or more of the directors is not independent and disinterested with respect to a particular transaction. Accordingly, the corporation may be able to avoid in subsequent litigation issues of whether directors are independent and disinterested. [Bill Sections 7 and 8; Adding TBOC Sections 21.416(g) and 21.4161.] The Bill also adds to the TBOC provisions governing shareholder derivative proceedings similar provisions that would authorize a court to make an advance dispositive determination as to whether the directors who are involved in making a decision whether to pursue a derivative action claim on behalf of the corporation are disinterested and independent. [Bill Section 13; Amending TBOC Section 21.554.]
Derivative litigation
The Bill would amend the TBOC to provide, for a Texas for-profit corporation having common shares listed on a national securities exchange or electing to be governed by the new business judgment rule provision, that a shareholder may not institute or maintain a derivative proceeding on behalf of the corporation unless the shareholder beneficially owns, at the time of instituting the derivative proceeding, a number of common shares to meet the required ownership threshold to institute a derivative proceeding in the right of the corporation as specified in the corporation’s certificate of formation or bylaws. However, that required ownership threshold may not exceed 3 percent of the corporation’s outstanding shares. [Bill Section 12; Adding TBOC Section 21.552(a)(3).] For these purposes, a “shareholder” can be a holder of record, a beneficial owner, or under a proposed amendment, two or more shareholders acting in concert. [Bill Section 11, Amending Section 21.551(2)(c).]
Disclosure-only settlements
Section 21.561 of the TBOC specifies certain circumstances in which a plaintiff’s attorneys may be awarded fees and expenses in a derivative proceeding, including the condition that the court finds the proceeding has resulted in a substantial benefit to the corporation. The Bill would amend this section of the TBOC to provide that a substantial benefit does not include “additional or amended disclosures made to shareholders, regardless of materiality.” [Bill Section 14; Adding TBOC Section 21.561(c).]
Status of Bill
The full text of SB 29 is available here. HB 15 is an identical companion bill. During the week of March 10, 2025, the Bill was heard in the Senate State Affairs Committee, which is chaired by Senator Hughes, and in the House Judiciary & Civil Jurisprudence Committee. The Bill was left pending in both Committees, and there was no significant testimony at the hearings in opposition to the Bill. Accordingly, the prospects for passage of the Bill by the Texas Legislature appear to be positive. However, the Bill has attracted a negative fiscal note from the Office of Texas Secretary of State, which estimates that the cost of implementing the amendments to TBOC Section 4.051 would be $1,752,965 for fiscal year 2026 and $513,040 annually for each fiscal year thereafter. If passed, the Bill would take effect on September 1, 2025, unless adopted by a two-thirds vote in both the Senate and House, in which case it would become immediately effective. In any case, any existing derivative proceedings would be grandfathered under pre-existing laws after the Bill’s amendments take effect.

Trump Revokes Biden Federal Contractor Minimum Wage Mandate: What to Expect Next

Takeaways

President Trump has rescinded President Biden’s 2021 executive order increasing the minimum wage for employees of federal contractors.
The minimum wage is now $13.30 per hour for federal contractors covered by President Obama’s 2014 executive order, which remains in effect.
Trump’s action does not formally revoke a Department of Labor rule implementing Biden’s wage mandate. However, there is no longer a basis for enforcing the rule.

EEOC Enforcement Activities Take Shape Under Second Trump Administration

The Equal Employment Opportunity Commission (EEOC) has been a regular topic of the flurry of executive orders issued by President Trump since his inauguration. Even before his return to the Oval Office, there was speculation about how the EEOC’s enforcement activities and priorities might change during a second Trump administration, as well as how the composition of the EEOC’s leadership would likely transform. In the weeks following the inauguration, the EEOC’s goals began to take shape, with its leadership seeing significant rearrangement. Manufacturers should stay current on these modifications as they signal substantial changes in the agency’s policies and anticipated future enforcement priorities and initiatives.
On January 24, 2025, President Trump dismissed two of the EEOC’s Democratic Commissioners and appointed Andrea Lucas as Acting Chair, leaving one Democratic Commissioner and one vacancy. The EEOC’s current leadership composition means it lacks a quorum and cannot issue regulations or guidance, or rescind or replace regulations or guidance issued by the previous administration. Importantly, these changes do not affect the EEOC’s ability to engage in enforcement activities.
Prior to President Trump’s second term, it was anticipated that the EEOC was preparing to scale back protections for LGBTQ+ workers. This shift came to fruition beginning in February, when the EEOC moved to voluntarily dismiss six lawsuits that it had filed during the Biden administration on behalf of aggrieved plaintiffs, alleging discrimination based on transgender status in violation of Title VII of the Civil Rights Act of 1964. In withdrawing from its representation, the EEOC noted in filings that continued litigation is untenable “in light of recent [a]dministration policy changes.” The EEOC’s voluntary dismissal of the lawsuits represents a major departure from its prior interpretation of the protections afforded under Title VII and its guidance issued during the Biden administration, in which the EEOC took the position that the intentional misuse of an employee’s preferred pronouns constituted discrimination and harassment.
Although the EEOC has chosen to step back from its representation of the plaintiffs in these lawsuits, the same federal law that authorizes the EEOC to sue on their behalf also provides the plaintiffs with a right to intervene in and pursue the litigation on their own behalf.
In light of these developments, manufacturers should remain aware of the following when making decisions related to the recruitment, hiring, and termination, as well as other terms and conditions of employment:

Although the EEOC may change its enforcement priorities, an executive order cannot override federal laws and constitutional rights. This includes the federal law authorizing individuals to intervene in litigation brought by the EEOC and pursue litigation on their own behalf as well as the Supreme Court’s holding in Bostock v. Clayton County, 590 U.S. 644 (2020), that discrimination based on sexual orientation or gender identity constitutes “sex discrimination” in violation of Title VII.
The federal government’s labor and employment law enforcement activities and policies are separate from those of state and local governments, which may continue or even increase their efforts in reaction to changes at the federal level.
It is possible that the EEOC’s enforcement activities will continue to change, so it is crucial for manufacturers to stay current on executive orders, guidance, and enforcement initiatives at the federal level.

Manufacturers should consult competent employment counsel for assistance with regard to the EEOC’s enforcement initiatives, guidance, and other communications.

Top Five Labor Law Developments for February 2025

A federal judge for the District of Columbia held President Donald Trump’s termination of National Labor Relations Board Member Gwynne Wilcox violated the National Labor Relations Act; Wilcox’s reinstatement restores Board quorum. Wilcox v. Trump and Kaplan, No. 1:25-cv-00334 (D.D.C Mar. 6, 2025). The decision stems from President Trump’s removal of Wilcox as a Board member prior to the expiration of her term. In her lawsuit, Wilcox argued her unprecedented removal violated the Act, which allows the president to remove Board members only in cases of “neglect of duty or malfeasance in office, but for no other cause,” and only after “notice and hearing.” Wilcox cited for support the U.S. Supreme Court’s 1935 decision in Humphrey’s Executor, in which the Court upheld the constitutionality of for-cause removal protections for federal agency leaders. The Trump Administration filed a Notice of Appeal with the D.C. District Court shortly after the judge’s decision. In the meantime, Wilcox’s return restores the Board’s three-member quorum, and it can resume issuing decisions.
Acting Board General Counsel (GC) William Cowen issued a memorandum rescinding dozens of former GC Jennifer Abruzzo’s enforcement initiatives. GC Memo 25-05. The memo signals Cowen’s intention to undo many of Abruzzo’s policies, including those related to protected concerted activities, settlement agreements, and employment agreement provisions like “stay-or-pay” provisions. While GC memos do not reverse Board decisions, the memo indicates the GC will interpret the law and act in a manner more favorable to employers’ interests. The memo also aims to address the Board’s unsustainable case backlog, largely due to the prior administration’s expansive enforcement priorities. Overall, GC Memo 25-05 impacts 31 GC memos issued between 2021 and 2025. It is likely the Board’s regional offices will no longer prosecute cases seeking to overturn longstanding Board law in favor of more employee-friendly standards.
The U.S. Senate confirmed Trump’s nominee for the U.S. Department of Labor (DOL) Secretary — former U.S. Representative Lori Chavez-DeRemer — by a 67-32 vote. Chavez-DeRemer’s nomination faced criticism from business groups and Republican lawmakers due to her previous support for the Protecting the Right to Organize (PRO) Act, which would significantly expand union organizing rights if passed. However, Chavez-DeRemer backtracked on her support for the PRO Act during the Senate Health, Education, Labor, and Pensions Committee hearing. Chavez-DeRemer has since committed to preserving states’ right-to-work laws and protecting independent contractor and franchise models.
The International Longshoremen’s Association (ILA) ratified a six-year contract with the U.S. Maritime Alliance (USMX), with almost 99 percent of members voting in favor of the agreement. The contract provides job guarantees amid concerns that automated technology would replace many union jobs. It also provides a 62 percent pay raise that was agreed to prior to a three-day strike in October 2024. Both parties previously praised President Trump for his assistance in helping the parties reach an agreement. The contract, which covers approximately 45,000 workers, will be effective through Sept. 30, 2030. Ratification also prevents another port strike that would have disrupted the nation’s supply chain.
The Board issued a “Return to Office Policy” requiring workers to return to the office full-time by March 31, 2025, according to a letter obtained by Law360. The Board cited guidance from the Office of Personnel Management and a recent Trump memorandum as the basis for the decision. Exceptions to the policy include accommodations under the Rehabilitation Act and temporary medical conditions. The policy has sparked backlash from the unions representing Board workers, including the NLRB Professional Association, which argue the policy violates their collective bargaining agreements. Acting GC Cowen recently stated that, while he will do what he can to prevent a reduction in the Board’s staff, the Agency is not immune from layoffs.

The Headless PAGA Saga Continues

On February 26, 2025, in Parra Rodriguez v. Packers Sanitation, Inc., the California Court of Appeal (Fourth Appellate District) issued the latest published decision addressing the practice of filing so-called “headless” Private Attorneys General Act (PAGA) claims. In such cases, the plaintiff seeks civil penalties for all allegedly aggrieved employees except themself. In the wake of Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022), this tactic has become increasingly common among plaintiffs seeking to circumvent contractual obligations to submit “individual” PAGA claims to arbitration.
The Parra Rodriguez decision added some fuel to the headless PAGA debate by upholding a Superior Court order denying a motion to compel a headless PAGA claim to arbitration, concluding that because only an individual PAGA claim can be compelled to arbitration, there is nothing to arbitrate when no individual PAGA claim is pled.
In doing so, Parra Rodriguez created a split of authority with Leeper v. Shipt, Inc., decided December 30, 2024, by the Second Appellate District. In Leeper, the court held that a PAGA claim cannot be headless, because “the unambiguous language in section 2699, subdivision (a), [states that] any PAGA action necessarily includes both an individual PAGA claim and a representative PAGA claim” (emphasis added). Under the reasoning of Leeper, where a defendant moves to compel arbitration of a headless PAGA claim, the individual PAGA claim is implicitly pled, and may be compelled to arbitration.
While a split unquestionably exists between Parra Rodriguez and Leeper regarding what courts should do when a defendant moves to compel arbitration of a headless PAGA claim, practitioners and courts should not overread these decisions as differing on whether it is procedurally proper to plead a headless PAGA claim in the first place. By concluding that a PAGA claim necessarily includes an individual component, Leeper clearly answers this question in the negative. By contrast, Parra Rodriguez expressly avoided that question, leaving open the possibility that a complaint pleading a headless PAGA claim “fails to comply” with PAGA’s pleading requirements, exposing it to “an appropriate pleading challenge.”
Nor does Balderas v. Fresh Start Harvesting, Inc., 101 Cal. App. 5th 533 (2024) contradict Leeper. In Balderas, the Second Appellate District held that a plaintiff had standing to pursue a representative PAGA action on behalf of other employees despite not filing an individual action seeking PAGA relief for herself. But the issue of standing merely concerns who may pursue a claim, not whether the statute permits a claim to be pled in headless fashion.
Parra Rodriguez may very well incentivize plaintiffs to continue the practice of pleading headless PAGA claims. Its disagreement with Leeper on how to handle motions to compel arbitration in this context injects new uncertainty into this issue and increases the likelihood that the California Supreme Court will take up the issue. But for the moment, the only published appellate authority coming to a holding regarding whether a plaintiff may properly plead a headless PAGA claim is Leeper, which holds that a plaintiff may not.
We will continue to monitor developments in this space and provide updates.