President Trump Issues Executive Order Promoting Domestic Mineral Production
On March 20, 2025, President Donald Trump signed a sweeping executive order promoting mining and processing of “critical minerals” in the United States. The order – Immediate Measures to Increase American Mineral Production – directs agencies of the federal government to prioritize and expedite permitting for mining and mineral processing projects, invoking the Defense Production Act among and other authorities. Key provisions include:
Expanded Critical Minerals List
For purposes of the order, “critical minerals” include uranium, copper, potash, and gold, in addition to the existing list of critical minerals designated by the secretary of the interior pursuant to the Energy Act of 2020 (30 U.S.C. § 1606(a)(3). Further, the order grants authority to Interior Secretary Doug Burgum, who serves as chair of the National Energy Dominance Council (NEDC), to add “any other element, compound, or material” to the critical minerals list.
Priority Projects
The order directs permitting agencies to identify all mine and mineral processing projects awaiting federal approvals, to issue permits and approvals immediately where possible, and to expedite all permitting activities. The NEDC is to identify mine and mineral processing projects for inclusion in the expedited permitting procedures available under the Fixing America’s Surface Transportation (FAST) Act (41 U.S.C. § 41003), and the Permitting Council must add the identified projects to the FAST Act Permitting Dashboard within 30 days of the order.
Mining the Primary Land Use
The Interior Secretary is instructed to provide a list of all federal lands known to contain mineral “deposits and reserves.” Mining and mineral processing are to be prioritized as the primary land use on these lands. Federal land managers are required to revise land use plans to align with the executive order’s directives.
Permitting Reform
To address regulatory inefficiencies, Interior Secretary Burgum, in his role as NEDC chair, is directed to publish a request for information seeking industry input on “regulatory bottlenecks” and “recommended strategies for expediting domestic mineral production.” The order further instructs the NEDC to develop legislative recommendations to clarify the treatment of mine waste disposal on federal lands under the Mining Law. This direction aims to address permitting delays and uncertainty stemming from Center for Biological Diversity v. U.S. Fish & Wildlife Service, 33 Fed. 4th 1202 (9th Cir. 2022) (commonly referred to as the “Rosemont” decision).
Defense Production Act
The order delegates Defense Production Act authority to the secretary of defense to facilitate domestic mineral production. Mineral production is to be added to the Defense Department’s Industrial Base Analysis and Sustainment Program as a priority area. The defense secretary is also directed to work with the International Development Finance Corporation to use financing authorities and mechanisms to advance mineral production, including the creation of a dedicated mineral production fund.
Unneeded Federal Lands for Mining Projects
The secretaries of defense, energy, interior, and agriculture are tasked with identifying sites on “unneeded” federal lands within their jurisdiction that are suitable for “leasing or development” under the authority of 10 U.S.C. § 2667 (Defense), 42 U.S.C. § 7256 (Energy), or other applicable authorities (Interior and Agriculture).
New Jersey’s Highest Court Rules Commissions Are Wages under Wage Payment Law
In a March 17, 2025, unanimous opinion in Musker v. Suuchi, the New Jersey Supreme Court held that workers who make commissions are protected by the state wage law. Plaintiff Rosalyn Musker’s employer began selling personal protective equipment (PPE) in March 2020 as the COVID-19 pandemic was taking hold in the United States. The plaintiff’s employer informed its employees that there would be a different commission schedule for PPE sales based on net revenue instead of gross revenue. Musker eventually sold $32 million in PPE to various states and municipalities. She filed suit against her employer claiming she was entitled to $1.3 million in commissions for her sales of PPE under the New Jersey Wage Payment Law (WPL). The trial judge dismissed the WPL claims, holding that the plaintiff’s PPE commissions were not “wages” and the Appellate Division affirmed.
The Supreme Court had to determine whether commissions were a form of compensation as wages or supplementary incentives. The Court noted that the WPL defines “wages” as a “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.” N.J.S.A. 34:11-4.1(c) (emphasis added). The Court held that the definition of wages under the WPL is clear and unambiguous – compensating employees by paying commissions for labor or services always constitutes a wage.
The WPL does not define the terms “supplementary” and “incentives,” so the Court looked to their ordinary meanings, concluding that “supplementary incentives” is compensation that motivates employees to do something above and beyond their “labor or services.” A “supplementary incentive” is not payment for “labor or services,” and a “commission” earned “for labor or services rendered by an employee” can never be a “supplementary incentive.” Therefore, it would be contrary to state law to have supplementary incentives include commissions.
The Court rejected the defendant’s argument that just because the product was new and only sold temporarily did not mean that the sales of the product fell outside of the “labor or services” an employee provides.
This ruling by the Supreme Court (1) overturns the Appellate Division ruling that found payments for PPE sales were supplementary incentives because PPE sales were not part of the plaintiff’s normal role, (2) vacates the trial judge’s order dismissing the plaintiff’s WPL claims and (3) remands for further proceedings.
Federal Court Rejects FCA’s “65%-100%” Language as Insufficient to Constitute the Necessary Quantity Term in a Requirements Contract—A Win for Suppliers
A recent federal court decision marks an important win for automotive suppliers in the ongoing debate over what constitutes a valid requirements contract under Michigan law following the Michigan Supreme Court’s decision in MSSN, Inc. v. Airboss Flexible Products Co. (2023). In FCA US LLC v. MacLean-Fogg Component Solutions LLC, Judge Judith Levy of the Eastern District of Michigan ruled FCA’s use of the phrase “approximately 65%-100% of FCA’s requirements” fails to satisfy the quantity term requirement under the Michigan UCC. As a result, the court dismissed FCA’s breach of contract claims because FCA failed to establish its form contract is an enforceable requirements contract.
At the heart of the case was whether the FCA’s purchase orders—providing for “approximately 65%-100%” of FCA’s requirements—created a binding obligation for MacLean-Fogg to continue supplying parts at the previously agreed price. FCA alleged that MacLean-Fogg breached by halting shipments and demanding a retroactive price increase. But the court found that FCA’s language lacks the “clear and precise” quantity term required to support a valid requirements contract under Michigan law.
Relying on the Sixth Circuit’s recent decision in Higuchi Int’l Corp. v. Autoliv ASP, Inc. (2024), the court emphasized that quantity terms must be unambiguous on their face and cannot be clarified through parol evidence. The court rejected attempts by FCA to rely on past practices and other extrinsic evidence to fill in the gaps.
This is a good development for suppliers, especially those facing aggressive pricing tactics or unilateral demands to extend programs from OEMs who have not committed to purchase 100% of their requirements (or some other set percentage) from a supplier. The ruling underscores that vague or qualified commitments—such as ranges or “approximate” percentages—do not obligate suppliers to continue deliveries absent a clearly enforceable agreement.
While this decision is favorable to suppliers, they should proceed carefully in relying upon it to guide their contract negotiations with OEMs. First, this decision, while favorable, is not binding on other courts and does not settle the issue statewide. Second, a key appellate ruling on this issue is still pending in FCA US LLC v. Kamax Inc., which is now fully briefed before the Michigan Court of Appeals. In Kamax, the Oakland County Circuit Court held the same “approximately 65%-100%” language did satisfy the quantity requirement. In fact, Judge Levy recognized that her ruling in the MacLean-Fogg matter may be in conflict with the Oakland County Circuit Court’s ruling in Kamax but indicated that the Court is not “at liberty to depart from Higuchi,” the most recent Sixth Circuit decision on requirements contracts. Judge Levy found the reference to “approximately” 65-100% in FCA’s purchase orders particularly troubling, as that phrase does not “clearly and precisely” establish a quantity term, as Higuchi required. The forthcoming ruling of the Michigan Court of Appeals in the Kamax matter is expected later this year, and its outcome will create further clarity on this issue.
But for now, suppliers —particularly those litigating in federal court— should take heart in the MacLean-Fogg decision. It affirms courts will continue to scrutinize quantity terms closely and, under the guidance provide in the Airboss and Higuchi decisions, will not stretch vague or hedged language that imposes no obligation on the buyer into binding obligations for the seller—especially where significant pricing disputes are at stake.
Patent Trial and Appeal Board Designates “Informative” Decision Regarding Claim Construction
On 20 March 2025, the Patent Trial and Appeal Board (PTAB) designated as “Informative” the majority opinion in the Decision Denying Institution in IPR2024-00952, a decision originally entered on December 13, 2024.
The primary reason for denial centered on the interplay between district court claim construction and claim construction in the Petition.
In a co-pending district court litigation involving the same patent, the Petitioner argued that certain claim terms “should be means-plus-function terms governed by §112(f) and that such terms are indefinite for failure to identify corresponding structure to perform the recited functions.” In the Petition, however, the Petitioner argued for plain and ordinary meaning because that was the Patent Owner’s litigation position.
Patent Owner opposed institution by arguing, among other things, that the Petition should be denied due to the Petitioner’s failure to adequately address the claim construction, particularly the means-plus-function issue, as required by 37 C.F.R. § 42.104(b)(3).
The Board determined that the Petition was deficient under 37 C.F.R. § 42.104(b)(3) because it failed to identify the specific portions of the specification that describe the structure corresponding to the claimed functions. The Board emphasized that the Petitioner had previously highlighted the importance of resolving whether these terms were means-plus-function limitations district court litigation yet failed to address this in the Petition. The Board highlighted that the Petition should have at least explained why inconsistent positions are warranted.
This now Informative decision highlights the complexities associated with claim construction and the importance of addressing all procedural requirements in IPR petitions. The decision underscores the PTAB’s discretion in denying petitions that do not adequately address claim construction issues, particularly when means-plus-function terms are involved, or claim construction positions in district court are inconsistent with the claim construction being advanced in an IPR. To the extent differences are necessary or appropriate, effort should be undertaken to explain why such inconsistencies exist and why any impact of those inconsistencies are minimal at best.
Ninth Circuit Clarifies Amount in Controversy Requirement in Declaratory Judgment Actions Between Insurers and Their Insureds
Plaintiff’s counsel often employ a range of strategic tactics to defeat diversity jurisdiction because they view federal court as an unfavorable forum. One such tactic is to challenge the amount in controversy—a key requirement for diversity jurisdiction. However, the Ninth Circuit’s recent decision in Farmers Direct Property & Casualty Ins. Co. v. Perez, — F.4th —, 2025 WL 716337 (9th Cir. March 6, 2025), makes it difficult to challenge the amount in controversy in declaratory judgment actions filed in federal court involving an insurer’s duty to defend and/or indemnify. In Perez, the Ninth Circuit held that in determining the amount in controversy, district courts may consider (i) the insurer’s potential excess liability and (ii) defense fees and costs that the insurer might incur in the underlying action.
Perez arose out of a January 2017 auto accident between Montez and Perez, who was insured by Farmers Direct. Montez, made a policy limit demand, conditioned on an affidavit from Perez that he did not have any other insurance. Farmers Direct offered to pay its $25,000 policy limit but explained that it was unable to reach Perez to obtain an affidavit.
Montez did not accept the policy limit and filed a personal injury lawsuit against Perez in state court. Farmers Direct provided a defense, but Perez would not communicate with defense counsel and was uncooperative in his own defense. Eventually, judgment was entered against Perez for more than $11 million.
Before the state court judgment was entered, Farmers Direct filed a declaratory judgment action against Perez in federal court, seeking a declaration that it had no duty to defend and indemnify Perez because he had breached the policy’s cooperation clause. When Perez did not respond to the complaint, the district court entered a default judgment against him and found that Farmers Direct had no continuing duty to defend and no duty to indemnify Perez.
Montez intervened in the federal action to set aside the default judgment, arguing that given the face amount of the policy, the amount in controversy requirement was not satisfied. The district court agreed, found it did not have subject matter jurisdiction, and vacated the judgment.
Farmers Direct appealed, and the Ninth Circuit reversed. The court concluded that the amount in controversy was not limited to the policy’s $25,000 limit. Rather, in determining the amount in controversy, the district court was required to take into account (i) Montez’s contention that Farmers Direct should be liable for the excess amount of the underlying personal injury judgment and (ii) Farmers Direct’s ongoing defense costs in the underlying tort action. Because there was a legal possibility that Farmers Direct could be liable for these amounts, each of which exceeded $75,000, the panel held that the district court erred in vacating the default judgment and remanded the matter for further proceedings.
Valenzuela v. The Kroger Co. Chatbot Wiretapping Case Dismissed; Implications and Takeaways for Businesses
A recent noteworthy decision from a federal court in California provides helpful guidance for companies deploying chatbots and other types of tracking technology on their websites, but at the same time highlights the nuances and high wire act of safely collecting consumer information versus stepping over the line.
In Valenzuela v. The Kroger Co., the U.S. District Court for the Central District of California dismissed a proposed class action filed against the grocery chain Kroger, finding that the plaintiff did not have a viable argument under the California Invasion of Privacy Act (CIPA). Because plaintiffs’ attorneys have recently been using CIPA to bring cases against a large number of companies, this decision is potentially an important decision in privacy jurisprudence. However, the narrowness of the decision leaves open other paths for plaintiffs and demonstrates the need for companies to carefully and thoughtfully assess what online tracking they conduct in order to minimize their risk of class action litigation.
The plaintiff in the case alleged Kroger, through a third-party vendor called Emplifi, unlawfully intercepted and recorded chat-based conversations between customers and Kroger’s website (i.e., communications with a “chatbot” on the website). The central claim was that Kroger “aided and abetted” Emplifi’s allegedly wrongful conduct of allowing Meta Platforms Inc. to mine data collected through Emplifi’s chatbots (including the one deployed on Kroger’s website) to gather information about user interests and target ads to those users on Meta’s social media platforms like Facebook and Instagram.
More specifically, the case was brought under Section 631(a) of CIPA which prohibits, among other things, any person from:
Tapping or making unauthorized connections with a telegraph or telephone line;
Willfully and without consent reading the contents of communications in transit;
Using information obtained via such interception; or
“Aiding, agreeing with, employing or conspiring with” any person to commit these acts.1
After a lengthy procedural back-and-forth, the Court allowed the plaintiff to proceed only under the “aiding and abetting” theory (the fourth prong). In its ruling, the Court emphasized that to hold Kroger liable under the fourth prong, the plaintiff needed to demonstrate that Kroger knew—or plausibly should have known—of Emplifi’s alleged unlawful eavesdropping or otherwise acted with knowledge or intent to facilitate it. The plaintiff pointed to the vendor’s marketing materials and the cost and ease with which the chatbot was installed on the Kroger website, arguing that Kroger must have known Emplifi was intercepting conversations without customers’ consent. The Court rejected this argument, holding “[i]t is not a plausible inference that because Emplifi could ‘quickly and cheaply’ deploy the bot, Kroger should have known Emplifi harvested user data.”
The Court ruled that because there was not a plausible allegation that Kroger had actual or constructive knowledge of the alleged unlawful sharing of chatbot communications with social media companies, Kroger could not be held liable for “aiding and abetting” the third parties’ alleged violation of CIPA.
What the Kroger Ruling Means for Businesses
Although this decision was made at the district court level and does not have a precedential effect, the Court’s reasoning provides a roadmap of what companies should be aware of when considering integrating chatbots or other large language model enabled third-party technologies onto their websites. Of note, this case focused on section 631(a) of CIPA only, and did not involve section 638.51(a), which prohibits the installation of “pen registers” or “tap and trace” devices without appropriate approvals and which plaintiffs are regularly claiming apply to website tracking software. As a result, even if the rationale from the Kroger decision is extended to other cases by other courts, companies will continue to face the risks associated with claims brought 638.51(a). Nonetheless, there are valuable lessons to be learned from the Kroger decision and other recent court decisions:
“Knowledge” of a third party’s actions is a key to a company’s liability. This includes constructive knowledge, that a company could gain from the third-party’s documentation and marketing communications as to the capabilities of their products.
Courts will require specific, fact-based allegations showing a company’s awareness and intent regarding any purported interception of communications.
Plaintiffs with more robust support for allegations of unauthorized data collection may have more success bringing similar claims.
Additionally, and as always, litigation defense is costly and even a successful defense can be a burden on a company. Even though Kroger won in this case, it took almost three years of litigation expenses to obtain that victory. Taking proactive steps to assess website tracking tool deployment can lower the risk of litigation in the first place and avoid these costs:
Ensuring that proper notice is given to, and appropriate consent is obtained from, website visitors
When onboarding third-party software providers, businesses should conduct thorough due diligence on data collection and sharing practices.
Contractual provisions should clarify that any data recording or sharing be done in compliance with all applicable laws, and that providers will indemnify the business if violations arise.
Footnotes
[1] The plaintiff in this matter also sought to bring a claim under §632.7 of CIPA (illegal interception of cellular communications for individuals who used the chatbot from their internet-enabled smartphones). That claim was dismissed with prejudice in March of 2024 with the Court finding that section of CIPA only applies to communications between two or more cellular phones and not between a cellular phone and a website.
California Snags Former Resident for Tax Due on Stock Options
Many employees receive stock options as compensation from their employers. When receiving this type of compensation, the state tax implications may not be at the forefront of the employees’ minds, especially where it may be years between when the options are granted and when the options actually result in recognized income. However, failure to consider the state tax implications when stock options are granted may lead to unanticipated and sometimes costly consequences in this unsettled area of law. A recent opinion from the California Office of Tax Appeals (“OTA”) illustrates this point. Matter of Hall, 2025-OTA-113 (Cal. OTA Issued Dec. 13, 2024).
The Facts: Appellant served as president of Monster Beverage Company (“MBC”) from 2007 to 2013 and as chief brand officer of MBC in 2014. From 2009 to 2013, while Appellant was a resident of California, MBC granted Appellant non-qualified stock options (“NSOs”) and restricted stock units (“RSUs”). In December 2013, Appellant moved to Hawaii. Thereafter, in September 2014, the RSUs that Appellant received vested, and Appellant exercised his NSOs.
On Appellant’s 2014 California nonresident return, he reported none of the income that he recognized from the exercised NSOs and vested RSUs as California source income. Three years later, California commenced an examination of Appellant’s returns, during which it determined that the exercised NSOs and vested RSUs resulted in California source income because they were attributable to personal services performed by Appellant in the State. To determine the amount of income sourced to the State, California applied a ratio of California working days to total working days – resulting in a total tax assessment of $674,452 plus interest. Appellant appealed the assessment.
The Decision: In a nonprecedential opinion, the OTA first reviewed the taxability of NSOs and RSUs, identifying three critical points under California law: (i) income earned from the exercise of NSOs and the vesting of RSUs is treated as compensation for services; (ii) if an NSO does not have an ascertainable fair market value at grant, the grantee recognizes income in the taxable year the option is exercised; and (iii) taxable income from RSUs is generally taxable in the year the RSUs vest. Applying these points of law to Appellant, the OTA found “no dispute” that Appellant recognized income from the exercised NSOs and vested RSUs. Thus, the only issues remaining were: (1) whether the income Appellant recognized was subject to California income tax if Appellant was a nonresident at the time of exercise/vesting; and (2) if so, whether the State’s working day sourcing methodology was reasonable.
The OTA determined that it was “immaterial” that Appellant ceased being a California resident in 2014 because “the income from the NSOs and RSUs is treated as compensation for personal services… performed in California” between 2009 and 2013. Further, the OTA determined that the income at issue was reasonably sourced using the standard methodology of California working days to total working days – a methodology which the Appellant failed to argue, or show was incorrect.
Last, the OTA addressed Appellant’s claim that he was denied procedural and substantive due process because his ability to claim a credit for taxes paid in Hawaii was foreclosed because the statute of limitations to file such a claim in Hawaii had expired. The OTA determined it lacked jurisdiction over this claim, finding as a general rule that its jurisdiction is “limited to determining the correct amount of a taxpayer’s California [tax liability].”
The Takeaway: The Appellant would have benefited from considering the state tax implications and broader multistate issues of receiving stock options at the time of grant. If such consideration had been given, the Appellant could have at least tracked working days closely to avoid over-allocation to California and potentially timely sought a credit from Hawaii.
The importance of considering the state tax implications of stock options as compensation cannot be overstated, especially when considering that tax treatment varies by state. For example, when determining the portion of income from NSOs earned by nonresidents that is subject to tax, California looks to the taxpayer’s activities during the period from the grant of the NSOs to when they are exercised, while New York looks to the period from the grant to when the NSOs vest.
Taxpayers filing in various jurisdictions should take care to track their stock options, their working days, and consider credits for taxes paid in the various jurisdictions in a timely manner.
Tax Assessments: Minimum Evidentiary Foundation Required
When a taxpayer challenges an assessment issued by a state or local taxing authority, the taxing authority will typically assert that its assessment should be afforded a presumption of correctness, and the burden of proof is on the taxpayer to prove that the assessment is incorrect. While this is typically true, a presumption of correctness can only attach to an assessment if there is a rational basis and minimum evidentiary foundation for the assessment. While this should not be a high bar to cross for state or local taxing authorities, there are nonetheless times when they do not meet even these minimal requirements, and assessments are issued with no rational basis and no minimum evidentiary foundation.
A recent decision by the Alabama Tax Tribunal (“Tribunal”) highlights such an instance where local Alabama taxing authorities issued sales tax assessments that could not even satisfy these minimal requirements, and the assessments were voided without the company or a representative of the company even appearing at the trial. VV & Co., LLC v. City of Boaz; Docket No. City 23-1081-LP; VV & Co., LLC v. City of Albertville; Docket No. City 23-1082-LP (Ala. Tax Trib. Feb. 3, 2025). While it is never recommended that an appealing company not show up for its trial, the decision is a reminder that state and local taxing authorities are not unrestrained in their authority to issue assessments, and minimum requirements must be satisfied before the burden of proof shifts to a taxpayer to prove that an assessment is erroneous.
The two Alabama localities here engaged a third-party auditor that conducted a “desk audit” of the company that resulted in the sales tax assessments. In its appeal to the Tribunal, the company asserted that it did not do any business in the localities and that it only made wholesale sales of cars, and had no sales tax liability because it made no retail sales. At trial, the auditor from the third-party firm testified and the company did not appear. The auditor testified that the reason for the assessments was that the company had historically filed sales tax returns in the localities (several reporting zero sales), but beginning with the audit period, the company stopped filing returns. The assessments were calculated using estimation techniques based on the amounts reported on the company’s historic sales tax returns. The auditor further testified that neither locality had received any documents from the taxpayer indicating that the company made any sales in the localities during the audit period.
The Tribunal explained that while assessments in Alabama are “prima facie correct,” it is also “well established that the final assessments must be ‘based on a minimum evidentiary foundation.’” The Tribunal also noted that sales tax liabilities may only be estimated if “there is evidence reasonably establishing that the retailer conducted business and made sales during the period.” Finding that the “sole foundation” for the assessments issued by the localities was that the company “had filed tax returns at some point prior to the audit periods in issue but then stopped filing returns,” the Tribunal concluded that such reasoning was “insufficient to justify the final assessments,” and voided the assessments.
City’s Electric Slide Stumbles as Invalid Tax
We often focus on whether a levy is a tax masquerading as a fee because a state tax must be fairly apportioned under United States Constitutional precedent, while a fee is not so limited. Some “fees” can be quite material in amount, so it is important to have a second route of attack: challenge the levy as an improperly enacted tax. After improper enactment, the City of East Lansing (the “City”) lost badly to such a challenge. Heos v. City of East Lansing, Docket No. 165763 (Mich. Feb. 3, 2025).
The City of East Lansing realized that its budgeting was resulting in the City’s underfunding of its pension and other post-employment benefits obligations. To fill the gap, the City determined to charge a franchise “fee” for providers of electricity services and passed an ordinance to enact the levy – the levy was never voted on by City voters.
The franchise “fee” levy was negotiated into the franchise agreement for one of the City’s two electricity providers (the second provider refused to participate). The franchise agreement included a levy of 5% of revenue and was to be collected and remitted by the electricity system provider and placed on the bills of customers who receive and pay the energy bills. The provider was not liable for the levy itself, only for collecting and remitting it to the City.
Prior to the above-mentioned creative budgeting ordinance by the City, the “Headlee Amendment” to the Michigan Constitution was enacted. The Amendment prohibits units of local government:
from levying any tax not authorized by law or charter when [the Headlee Amendment was] ratified or from increasing the rate of an existing tax above that rate authorized by law or charter when [the Headlee Amendment was] ratified, without the approval of a majority of the qualified electors of that unit of Local Government voting thereon. Const 1963, art 9, § 31 (emphasis added).
As the Michigan Supreme Court aptly framed the issue: “Although the levying of a new tax without voter approval violates the Headlee Amendment, a charge that constitutes a user fee does not.” The Court observed with broadbrush that: “Generally a ‘fee’ is ‘exchanged for a service rendered or a benefit conferred, and some reasonable relationship exists between the amount of the fee and the value of the service or benefit.’ . . . A ‘tax,’ on the other hand, is designed to raise revenue.” This is as useful a distillation as the author has seen by a high court over the past nearly thirty years.
The Court explained with particularity that for a levy to be considered a fee, the levy must: (1) “have a regulatory purpose and not a general revenue-raising purpose[;]” (2) “be proportionate to the required costs of the service[;]” and (3) “be voluntary.”
A majority of justices found that (1) the City stated publicly that the fee had a revenue raising purpose to fill a budget gap and funds collected and remitted by the electricity service provider went into the general revenue fund to be used for any City purpose, (2) the fee was not “proportional to the costs the City incurred for granting [the electricity service provider] the right to provide electrical services to plaintiff[,]” and (3) the fee was not voluntary because, if the plaintiff did not pay the electric bill that contained the fee, the electric service was subject to being turned off. Applying those findings, the Court concluded that the levy was indeed a tax. Further, inasmuch as the City’s voters had never had the opportunity to vote on the levy, the levy failed as a tax on which a proper vote had not been conducted.
On a secondary issue, whether plaintiff electricity user was a taxpayer eligible to bring suit, a majority of justices answered in the affirmative. However, one justice wrote in dissent to conclude that the plaintiff was not a taxpayer (two justices did not participate in the decision).
The takeaway here is that if you are faced with a levy, ask what the levy is accomplishing and determine whether the levy is susceptible to challenge either as an unapportioned tax or, as in Heos, an improperly enacted tax.
Power Play: Pull the Plug on Parallel District Court Litigation, ITC Investigation
The US Court of Appeals for the First Circuit vacated a preliminary injunction, explaining that the district court should have immediately issued a statutory stay of the proceeding under 28 U.S.C. § 1659(a) because a co-pending case at the International Trade Commission involved the same issues and parties. Vicor Corp. v. FII USA Inc., Case No. 24-1620 (1st Cir. Mar. 6, 2025) (Gelpí, Thompson, Rikelman, JJ.)
Vicor filed a § 337 complaint with the Commission against Foxconn asserting power converter module patents while simultaneously suing Foxconn for patent infringement in a Texas district court. Under § 1659, at the request of the party charged in the § 337 complaint, a federal district court must stay proceedings in a civil action between the same parties “with respect to any claim that involves the same issues [as those] involved” in the Commission action. Foxconn successfully secured a stay of the Texas litigation under § 1659.
Foxconn then initiated arbitration in China before the China International Economic and Trade Arbitration Commission (CIETAC), claiming that Vicor had agreed to such arbitration under the terms of their purchase order. The Commission’s administrative law judge denied Foxconn’s request to terminate the § 337 case, finding that Foxconn had waived that defense by failing to timely raise an arbitration defense.
Vicor then sued Foxconn in a Massachusetts district court, disputing any arbitration agreement. The district court issued a temporary restraining order (TRO) and later a preliminary injunction, blocking the CIETAC arbitration. In the Massachusetts litigation, Foxconn sought a § 1659 stay and sought to vacate the TRO. Although the district court agreed that a stay would be permitted, the court rejected the motion to vacate the TRO. The court referenced the All Writs Act, which provides that federal courts “may issue all writs necessary or appropriate in aid of their respective jurisdictions,” as justifying injunctive relief. Foxconn appealed.
The First Circuit agreed that § 1659 applied in the Massachusetts litigation and found that the statute’s plain text required an immediate stay upon Foxconn’s request without granting Vicor a preliminary injunction. The primary issue before the First Circuit was whether Vicor’s claims against Foxconn at the Commission involved the same issues as those in the Massachusetts litigation.
Reviewing the text of § 1659, the First Circuit determined that Vicor’s district court claims in the Massachusetts litigation encompassed the same issues as those raised in the § 337 proceeding. In its Massachusetts litigation, Vicor sought relief under the Federal Arbitration Act to enjoin the CIETAC arbitration and relief under the Declaratory Judgment Act for a ruling that Vicor was not bound by the arbitration terms of the purchase order agreements with Foxconn. Central to both proceedings was Vicor’s argument that it had not agreed to the purchase order terms. Because this issue was common to both the § 337 proceedings and the Massachusetts litigation, the First Circuit determined that the district court needed to issue an immediate stay to Foxconn under § 1659.
Vicor argued that for § 1659 to apply, all issues in a district court case must align with those in the Commission proceeding. Vicor argued that because the Massachusetts litigation did not involve the same patent infringement claims as the § 337 investigation or the Texas litigation, the issues were not identical. Vicor also argued that § 1659 was inherently ambiguous because § 337 proceedings involve elements (such as the existence of a domestic industry) that district court patent infringement claims do not. Foxconn countered that § 1659’s plain text recitation of “the same issues” does not require complete overlap but a substantial identity of issues between the two proceedings. The First Circuit agreed with Foxconn, interpreting § 1659’s language as clear and unambiguous.
Vicor further argued that ambiguity required examination of the legislative history. Even though the First Circuit found the statute clear, it reviewed the legislative history of § 1659 and confirmed the statute’s purpose, which was to prevent duplicative litigation at the Commission and the district courts. The First Circuit also disagreed with the district court’s grant of the preliminary injunction, explaining that the All Writs Act cannot override specific congressional enactments.
No Bull: Historically Generic Term Can Become Non-Generic
The US Court of Appeals for the Federal Circuit affirmed Trademark Trial & Appeal Board rulings, finding that a previously generic term was not generic at the time registration was sought because at that time the mark, as used in connection with the goods for which registration was sought, had achieved secondary meaning. Bullshine Distillery LLC v. Sazerac Brands, LLC, Case Nos. 23-1682; -1900 (Fed. Cir. Mar. 12, 2025) (Moore, C.J.; Reyna, Taranto, JJ.)
In 2015 Bullshine sought to register the trademark BULLSHINE FIREBULL for its line of “[a]lcoholic beverages except beers.” Sazerac, the owner of the FIREBALL marks used for liqueurs and whiskey, opposed registration. Sazerac argued that the registration of BULLSHINE FIREBULL would likely cause consumer confusion due to its similarity to Sazerac’s FIREBALL marks. Bullshine counterclaimed, asserting that the term “fireball” had become generic and was commonly used to describe a type of alcoholic drink, thus invalidating Sazerac’s claim to exclusivity.
The Board found that the FIREBALL mark was not generic either at the time of registration nor at the time of trial, and that BULLSHINE FIREBULL was not likely to cause confusion with Sazerac’s marks. The Board determined that the FIREBALL mark was “commercially strong but conceptually weak,” that the respective marks of Sazerac and Bullshine were dissimilar when considered in their entireties, and that Bullshine did not act in bad faith in choosing its marks. The Board denied Sazerac’s opposition to the BULLSHINE FIREBULL mark as well as Bullshine’s counterclaim that the FIREBALL mark was generic. Both parties appealed.
Bullshine argued that the Board applied the incorrect legal standard in finding FIREBALL not generic and that consequently, the finding of non-genericness (upon consideration of secondary meaning) was erroneous. Bullshine argued that since “fireball” was a generic term prior to Sazerac’s registration (as both parties agreed), that fact should have precluded Sazerac’s registration, and the Board erred in considering evidence of secondary meaning. Bullshine argued that if a term was generic at any time prior to registration, it remains generic, regardless of how it might be understood at the time of registration (i.e., once generic, always generic). Sazerac argued that the time to assess genericness is at the time of registration. The Federal Circuit agreed with Sazerac.
The Federal Circuit explained that the genericness inquiry is ultimately guided by “what consumers would think at the time of registration,” and that this ruling is supported by the statutory scheme of the Lanham Act. The Court explained that the Lanham Act, in addition to preventing registration of generic terms, also provides for cancellations of marks “[a]t any time,” and even marks with incontestable statuses can be challenged based on genericness. Therefore, Congress intended that the analysis of whether a term is generic can change over time, and Bullshine’s argument was inconsistent with the statute. This conclusion follows from the legal premise that impression of consumers is “necessarily contemporaneous with the time of registration.”
Bullshine cited the 1961 CCPA decision in Weiss Noodle in support of its argument that a term cannot be registered regardless of the time interval between the finding of genericness and the registration. The Federal Circuit disagreed, noting that in Weiss Noodle, the mark for which registration was sought was the Hungarian word for noodles, and “no amount of secondary meaning would make the common name of a product registerable.”
The Federal Circuit also affirmed that the Board did not err in finding that the FIREBALL mark was not generic. The Board found that the record evidenced a preponderance of evidence against genericness, noting that record recipes related to the term “fireball” were from specialized publications and hence did not represent the impression of general consumers of whiskey and liqueurs.
On the likelihood of confusion issue, Sazerac argued that the Board made three errors in its analysis:
Analyzing the fame of FIREBALL.
Finding that the mark was conceptually weak.
Not considering the sixth DuPont
The Federal Circuit rejected all three arguments.
The Federal Circuit found that the Board’s finding that FIREBALL was not famous was supported by substantial evidence. The primary reason for the Board’s finding was that there was no context for Sazerac’s sales and advertising figures and how those compared with other brands of whiskey and liqueurs. The evidence presented by Sazerac was mostly related to shots, a subset of the genus of identified goods. Moreover, since the Board held that (despite not finding fame) FIREBALL was commercially strong and entitled to a broad scope of protection, even if the Board erred in its fame analysis, the error would have been harmless.
The Board found the FIREBALL mark conceptually weak because it was highly suggestive. There was evidence that Sazerac had admitted in the past that its mark was “not inherently distinctive,” that the term was suggestive of the taste of Sazerac’s product, and that the term was used to describe recipes having whiskey/liqueur as ingredients. Sazerac also admitted that its product had the same flavoring as the “Atomic Fireball” candy, and that third parties widely used the term to denote flavor in items such as popcorn and liquid flavorings added to food and beverages. Even though Sazerac argued that it was an error to consider dissimilar goods (such as popcorn), it failed to persuasively explain its reasoning. The Federal Circuit pointed out that even if considering use of the mark in connection with dissimilar goods was an error, other record evidence satisfied the requirements of substantial evidence and hence supported the Board’s findings.
The Federal Circuit also rejected Sazerac’s arguments that the Board erred by not considering the sixth DuPont factor (number and nature of similar marks in use on similar goods). The Court explained that the Board found in favor of Sazerac regarding the sixth DuPont factor but determined that Sazerac’s mark was “so conceptually weak” that the two marks were too different for consumer confusion to occur.
Practice Note: Attorneys should not solely rely on historical evidence of genericness but should provide substantial evidence, including surveys and expert testimony (if possible), in support of genericness at the time registration is sought.
DEI-Related Executive Orders Move Forward After Fourth Circuit Grants Stay of Preliminary Injunction; Federal Agency Actions
On March 14, 2025, the Fourth Circuit Court of Appeals issued a stay of the U.S. District Court’s preliminary injunction, which will allow the Trump administration to continue enforcing the Executive Orders (EOs) related to Diversity, Equity and Inclusion (DEI) programs while the litigation continues.
The National Association of Diversity Officers in Higher Education filed a lawsuit in the U.S. District Court for the District of Maryland (Maryland District Court) challenging the constitutionality of the following EOs, arguing they are vague under the Fifth Amendment and violate the First Amendment’s Free Speech Clause:
Executive Order 14151, “Ending Radical and Wasteful Government DEI Programs and Preferencing.”
Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.”
Earlier, the Maryland District Court issued an injunction against three key provisions in the two Executive Orders, effectively blocking the federal government from enforcing: 1) the termination of equity-related grants or contracts by executive agencies, 2) a requirement for federal contractors and grantees to certify that they will not operate DEI programs that violate federal anti-discrimination laws and 3) the U.S. Attorney General’s authority to investigate and initiate civil compliance actions against private sector entities continuing DEI practices.
Federal agencies have taken actions to enforce the EOs. Below are examples of three federal agencies that have issued guidance and enforcement letters to public and private entities on ensuring they are compliant with removing DEI from its policies, practices and other programs.
Federal Agencies: Guidance and Enforcement Letters from the DOE, HHS and EEOC Guidance from The Department of Education
Guidance by federal agencies regarding DEI has been published since the signing of the EOs. In its initial Dear Colleague Letter issued on February 14, 2025, the Department of Education (DOE) advised educational institutions receiving federal funding to stop using race, color or national origin in decisions related to admissions, hiring, promotions, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies and all aspects of campus life.1 Additionally, the DOE advised that institutions are prohibited from using non-racial information (such as personal essays) as a proxy for race when making decisions.2 For example, the DOE asserts that using a students’ personal essays or other materials to determine a student’s race would constitute the misuse of non-racial information when used to make decisions about the student’s admission or status.3 To further clarify its guidance, the DOE shared a frequently-asked-questions (FAQs)4 document stating that “race cannot be used as a proxy for socioeconomic disadvantage.”5
The DOE emphasized that simply using terms like “diversity,” “equity” or “inclusion” is not enough to determine whether a program or policy violates federal law. The DOE’s Office for Civil Rights (OCR) will review additional materials for more subtle forms of discrimination. The DOE has stated that institutions failing to comply may face the potential loss of federal funding.6 The department has set up a new website where private individuals can report a school or school district for discriminatory practices.
On March 14, 2025, the DOE and the OCR published a press release that it has launched Title VI and Title IX investigations into 52 universities in 41 states in order to “reorient civil rights enforcement to ensure all students are protected from illegal discrimination.” The departments are looking into the universities’ race-based practices in their graduate and scholarship programs.
Pushback Against DOE’s Dear Colleague Letter
In response to the DOE’s Dear Colleague Letter, 14 state Attorneys General issued guidance7 on March 5, 2025 setting out their position that the EOs and the DOE’s guidance do not change current laws. These Attorneys General argued that the DOE misinterprets the SFFA ruling, and that while schools cannot use race as a factor in admissions, they can still evaluate applicants who discuss how race has influenced their lives—provided the mention of race ties back to “that student’s courage and determination.”8 In essence, these Attorneys General advise that schools cannot factor race into admissions decisions but may “consider the ways… race affected a particular student’s life.”9
HHS Investigates Alleged Discrimination in Medical School and Health Care Workforce Training Programs
On March 7, 2025, the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) announced it is investigating four medical schools and hospitals that may be operating programs for education, training, or scholarships that discriminate based on race, color, national origin or sex. These investigations align with President Trump’s Executive Order 14173. The stated focus is on ensuring that healthcare professionals and students are not excluded from opportunities based on these factors. OCR’s actions are intended to enforce the Trump Administration’s position that DEI Programs violate civil rights laws under Title VI of the Civil Rights Act of 1964 and Section 1557 of the Affordable Care Act.
EEOC Requesting DEI-Related Employment Practices of 20 National Law Firms
On March 17, 2025, based on publicly available information, Equal Employment Opportunity Commission (EEOC) Acting Chair Andrea Lucas sent letters to 20 law firms requesting each firm’s employment practices with respect to using DEI or other employment programs that would violate Title VII of the Civil Rights Act of 1964. These firms are asked to create spreadsheets with personal information of each applicant for its diversity internship, fellowship and scholarship programs. The data points include the name, race, sex and GPA of the applicants. If the applicants were selected for these programs, the EEOC asks for the applicants’ compensation during the program, whether they received a full-time associate attorney position, and whether they received additional funds. Additionally, the letters requested similar data in relation to the firm’s compensation and partnership decisions, and whether any DEI or diversity considerations (ex. participation in firm-sponsored or third-party affinity group) play a role in such decisions. The information requested dates as far back as 2015.
What Does This Mean for Organizations and Employers?
Given the rapidity with which new orders, guidance, and judicial decisions are being issued, it is important for organizations and employers to stay as current as possible on legal developments.
All organizations and employers, but particularly grant recipients and federal contractors, should consider reviewing any DEI-related documents, policies, programs, initiatives, affirmative action plans, etc. for potential issues. This may include going beyond the obvious, and evaluating scholarship programs, hiring policies and processes, onboarding and application documents, marketing materials, governing documents, trainings, compensation and performance materials, equity language, mission and vision statements, internship programs and website language.
Organizations and employers may also want to review their workplace facility and pronoun usage policies. These policies and initiatives should apply equally to be lawful. In addition, organizations and employers may want to do department level reviews to ensure all DEI-related documents and materials are properly evaluated.
Finally, federal contractors do have a deadline by which to comply with Executive Order 14173. Thus, they likely will want to put additional resources to this task in the short-term. Other employers should begin evaluating these documents and be ready to show good faith efforts in case of questions from employees or governmental agencies.
[1] Craig Trainor, United States Department of Education (Feb. 14, 2025), https://www.ed.gov/media/document/dear-colleague-letter-sffa-v-harvard-109506.pdf.
[2] Id. at 3.
[3] Id. at 2.
[4] Press Release, U.S. Department of Education, U.S. Department of Education Releases Frequently Asked Questions on Dear Colleague Letter About Racial Preferencing (Mar. 1, 2025), https://www.ed.gov/about/news/press-release/us-department-of-education-releases-frequently-asked-questions-dear-colleague-letter-about-racial-preferencing.
[5] United States Department of Education (Feb. 28, 2025), https://www.ed.gov/media/document/frequently-asked-questions-about-racial-preferences-and-stereotypes-under-title-vi-of-civil-rights-act-109530.pdf.
[6] Craig Trainor at 4.
[7] The Attorneys General of Illinois, Massachusetts, New York, California, Connecticut, Delaware, Maine, Maryland, Minnesota, New Jersey, Nevada, Oregon, Rhode Island, Vermont, and the District of Columbia, Office of the New York State Attorney General (Mar. 5, 2025), https://ag.ny.gov/sites/default/files/publications/joint-guidance-re-school-programs-guidance-2025.pdf.
[8] Id. at 2 n.7.
[9] Id. at 2.