OMB RFI Seeks Proposals to Rescind or Replace Regulations
On April 11, 2025, the Office of Management and Budget (OMB) published a request for information to solicit ideas for deregulation. 90 Fed. Reg. 15481. OMB seeks proposals to rescind or replace regulations “that stifle American businesses and American ingenuity,” including regulations “that are unnecessary, unlawful, unduly burdensome, or unsound.” According to the notice, “comments should address the background of the rule and the reasons for the proposed rescission, with particular attention to regulations that are inconsistent with statutory text or the Constitution, where costs exceed benefits, where the regulation is outdated or unnecessary, or where regulation is burdening American businesses in unforeseen ways.” Comments are due May 12, 2025.
Earlier in the week, on April 9, 2025, President Trump issued the following memorandum and Executive Orders (EO) regarding federal regulations:
Presidential Memorandum Regarding Directing the Repeal of Unlawful Regulations: EO 14219, “Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency’ Deregulatory Initiative,” directed the heads of all executive departments and agencies to identify certain categories of unlawful and potentially unlawful regulations within 60 days and begin plans to repeal them. The April 9, 2025, memorandum directs executive departments and agencies to prioritize evaluating each existing regulation’s lawfulness under the following U.S. Supreme Court decisions: Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024); West Virginia v. EPA, 597 U.S. 697 (2022); SEC v. Jarkesy, 603 U.S. 109 (2024); Michigan v. EPA, 576 U.S. 743 (2015); Sackett v. EPA, 598 U.S. 651 (2023); Ohio v. EPA, 603 U.S. 279 (2024); Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021); Students for Fair Admissions v. Harvard, 600 U.S. 181 (2023); Carson v. Makin, 596 U.S. 767 (2022); and Roman Cath. Diocese of Brooklyn v. Cuomo, 592 U.S. 14 (2020).
EO on Reducing Anti-Competitive Regulatory Barriers: The EO begins the process for “eliminating anti-competitive regulations to revitalize the American economy,” directing agency heads, in consultation with the Chair of the Federal Trade Commission (FTC) and the Attorney General, to complete a review of all regulations subject to their rulemaking authority and identify those that:
Create, or facilitate the creation of, de facto or de jure monopolies;
Create unnecessary barriers to entry for new market participants;
Limit competition between competing entities or have the effect of limiting competition between competing entities;
Create or facilitate licensure or accreditation requirements that unduly limit competition;
Unnecessarily burden the agency’s procurement processes, thereby limiting companies’ ability to compete for procurements; or
Otherwise impose anti-competitive restraints or distortions on the operation of the free market.
EO on Zero-Based Regulatory Budgeting to Unleash American Energy: The EO directs certain agencies to incorporate a sunset provision into their regulations governing energy production to the extent permitted by law, “thus compelling those agencies to reexamine their regulations periodically to ensure that those rules serve the public good.”
May v. Must – The Scope of Agency Permitting Review under Statutory Standards
The Law Court recently issued a decision in Eastern Maine Conservation Initiative v. Board of Environmental Protection that contains an enlightening discussion of what an agency must consider—as opposed to what an agency may consider—in issuing a permit. In so doing, it adopted an important limit on how far agencies must go in reviewing a project’s downstream impacts.
The case involved an appeal of a permit issued by the Department of Environmental Protection for an aquaculture facility. The permit, upheld by the Board of Environmental Protection, authorized construction of the aquaculture facility under the state Site Location of Development Law (Site Law) and installation of intake and outfall pipes under the Natural Resources Protection Act (NRPA).
Opponents of the project argued that the agency erroneously failed to conduct an independent assessment under NRPA of the harm that the project would cause to wildlife habitats. NRPA specifies that certain enumerated activities require a permit, including construction and dredging. These proposed activities must then meet various standards, including that the activity will not “unreasonably harm” wildlife habitat. Petitioners did not challenge the agency’s assessment of the impacts of construction and dredging; instead, they argued that the agency should have analyzed the effects of effluent discharge—an activity that is not enumerated in NRPA—on wildlife habitat.
The Law Court rejected this argument based on the plain language of NRPA. The Court concluded that only enumerated “activities” trigger agency review in an application for a permit under NRPA. Because the discharge of treated wastewater is not an enumerated activity, the Court held that the agency did not err by declining to analyze the issue in approving the permit.
Most interestingly, the Law Court went on to distinguish one of the cases relied upon by the petitioners, Hannum v. Board of Environmental Protection. In that case, the Law Court had upheld a denial of a NRPA permit for installation of a pier and floating dock. The agency had concluded that the use of the dock—not just its construction—would disturb tern and seal colonies. The Court affirmed because it concluded that the Board has the power to deny a permit based on its proposed use. In Eastern Maine Conservation Initiative, the Court distinguished the case as follows:
To be clear, in Hannum we did not say that the agency is obligated under NRPA to consider the expected effects on wildlife of the intended use of a structure or facility. Rather, Hannum held that it was within the agency’s discretion to take those impacts into consideration in evaluating compliance with the standard in [NRPA].
In the Court’s view, then, Hannum establishes that (at least in certain circumstances) DEP may consider activities other than those enumerated in NRPA. As an aside, it may be reasonable to question the holding in Hannum—after all, if NRPA specifically identifies the relevant activities whose impacts must be considered, the expressio unius est exclusio alterius canon of statutory interpretation would seem to suggest that the agency may not go any further. Regardless, Eastern Maine Conservation Initiative makes clear that Hannum only goes so far—simply because it may consider certain unenumerated activities, the agency at the very least does not have to consider unenumerated activities that may follow from NRPA-regulated conduct (and which had separately been reviewed under a different statutory scheme). This is an important limitation on the required scope of agency review for environmental permits.
Windy City Wins: Seventh Circuit Backs Coverage for Chicago’s $3.75M in Attorneys’ Fees
In a significant decision, Starstone Ins. SE v. City of Chicago, No. 23-2712 (7th Cir. Apr. 02, 2025), the US Court of Appeals for the Seventh Circuit has ruled that an insurer must cover $3.75 million in attorney fees incurred by the city of Chicago in an underlying civil rights lawsuit that settled for over $18 million.
Case Background
This coverage dispute arose from an underlying lawsuit involving a man who served over 20 years in prison for murder. After being released, the man sued the City of Chicago and several Chicago police officers for violating his civil rights. The jury in the civil rights case returned verdicts in his favor, amounting to more than $17 million, and his lawyers then sought more than $6 million in attorney’s fees and costs. The case was settled for $18.75 million, of which $3.75 million represented attorney’s fees and costs. The central issue in the coverage dispute was whether the insurer was responsible for covering these legal fees/costs under the city’s insurance policy. The insurer argued that the policy it had issued to the city only covered “damages,” and legal fees/costs did not fall within the policy’s definition of “damages.”
Seventh Circuit’s Decision
The Seventh Circuit began the opinion with a discussion of federal jurisdiction over the insurer which is organized as an “SE,” a form of a European company under the European Union’s European Company Statute. The court grappled with the question of whether the insurer was a corporation for purposes of federal jurisdiction. The court compared the insurer to other non-traditional corporations from other parts of the world, and ultimately found the insurer to have the essential characteristics of a corporation. Therefore, the court found that it could exercise jurisdiction over the insurer.
The focal point of the decision, however, was whether the insurer was responsible for the component of the settlement attributed to underlying plaintiff’s attorneys’ fees and costs. The Seventh Circuit upheld the district court’s decision, affirming that the insurer must cover these fees and costs. The policy’s main coverage clause stated: “We shall pay you, or on your behalf, the ultimate net loss, in excess of the retained limit, that the insured becomes legally obligated to pay by reason of liability imposed by law or assumed under an insured contract because of bodily injury or property damage arising out of an occurrence during the Policy Period.”
In reaching this conclusion, the court observed that the policy stated the insurer would cover the “ultimate net loss” in excess of the retained limit, and that under Illinois law, language in an insurance policy must be taken to mean what the words in the policy say. The district court found that the $18.75 million settlement was an “ultimate net loss” under the policy that the city was “legally obligated to pay by reason of liability imposed by law.” It reasoned that an ordinary reader would interpret the policy’s language of “ultimate net loss” to mean the amount the insured pays out of pocket, and “legally obligated to pay” to mean “legally obligated to pay” and not some version of “legally obligated to pay as damages.” Because the city was liable for the settlement from underlying litigation, the district court found the city’s liability was an ultimate net loss that the city was legally obligated to pay. As a result, the insurer had a duty to indemnify the city as its policyholder for its attorney’s fees in the underlying action, and the Seventh Circuit concurred.
Key Takeaways
This ruling has significant implications for policyholders.
Governing Law Matters: The district court sat in Illinois, so Illinois law applied to the policy language dispute. If the court determined it could not have exercised jurisdiction over the insurer, the law of the European Union could have applied to the dispute, which would have changed the outcome. Starstone re-emphasizes the outcome-determinative role that governing law can have on the interpretation of policy language.
Policy Language is Paramount: This decision turned on the wording of the policy—not the general principles of fee-shifting or the American Rule. The court found that the terms of the policy, and not the insurer’s supposed intentions, controls.
Insurers Can Not Re-Write Coverage After the Fact: Courts will hold insurers to the language they drafted and put in their policies—no matter how expensive the outcome. Here, the court held the insurer to the language that it drafted and included in the policy.
Final Thoughts
The Seventh Circuit’s ruling serves as a crucial reminder for policyholders to carefully examine the language of their insurance policies. A policy’s language remains crucial to the resolution of any coverage disputes between policyholders and insurers. Experienced coverage counsel can help policyholders understand the language of their policies.
Circuit Split on Anti-Kickback Causation Poses Complications for Whistleblowers, But First Circuit Ruling Also Provides a Path Forward
In February, a panel of three judges in the U.S. Court of Appeals for the First Circuit issued a decision in United States v. Regeneron Pharmaceuticals, Inc. ruling that “but-for” causation is the proper standard for False Claims Act (FCA) cases alleging improper kickbacks and referrals in violation of a 2010 amendment to the Anti-Kickback Statute (AKS). This decision deepens a circuit split on the issue, as the Sixth Circuit and Eighth Circuit have adopted a but-for causation standard, while the Third Circuit ruled that the kickback only needs to be a contributing factor.
The circuit split is likely to be resolved by the Supreme Court, but in the meantime, its impact on FCA enforcement poses complications for whistleblowers looking to report kickbacks under the FCA’s qui tam provisions.
However, the First Circuit panel in Regeneron also clarified that there still exists a key route for whistleblowers and the government to pursue AKS-based FCA cases under the implied false certification theory. The court held that there still remains FCA liability when compliance with the AKS is a recognized precondition of payment under a federal healthcare program and a provider falsely certifies compliance with those requirements to get a claim paid by Medicare or Medicaid. Notably, the court held that there is no but for causation required when such an implied false certification claim is pursued under the FCA.
The Anti-Kickback Statute, False Claims Act and Whistleblowers
Dating back to the Civil War, the False Claims Act targets fraud among government contractors. It holds that any person who knowingly submits, or causes to submit, false claims to the government is liable for three times the government’s damages plus a penalty.
A key element of the FCA is its qui tam provisions, which empower whistleblowers with knowledge of FCA violations to come forward and file lawsuits on behalf of the government, which then has the option to intervene and take over the lawsuit. Regardless of whether the government intervenes, whistleblowers whose qui tam suits result in successful cases are eligible to receive between 15-30% of the funds collected in the case.
The Anti-Kickback Statute prohibits the exchange (or the offer to exchange) of any form of remuneration to induce or reward referrals for services or items reimbursable by federal healthcare programs. In violating the AKS, a company or individual can also be liable under the FCA. While the AKS imposes criminal liability on violations, the FCA adds civil liability.
Over the years, the government and whistleblowers have aggressively enforced violations of the AKS and FCA in tandem. For example, in July 2024, the Department of Justice announced that DaVita Inc., a healthcare company providing kidney dialysis services, agreed to pay $34 million to settle allegations that it violated the FCA through the illegal payments of kickbacks to induce referrals to DaVita’s dialysis centers and DaVita Rx, a former subsidiary that provided pharmacy services for dialysis patients. The settlement resolved a qui tam whistleblower suit filed by Dennis Kogod, a former Chief Operating Officer of DaVita Kidney Care, who received a $6,370,000 whistleblower award from the settlement proceeds. Over the years, many of the largest False Claims Act whistleblower recoveries have been based on alleged AKS violations in the health care industry.
First Circuit Ruling and Circuit Split
The First Circuit’s ruling in Regeneron centered around a provision in the 2010 amendments to the AKS which states that “a claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].” (Emphasis added)
In Regeneron, the government alleged that drug manufacturer Regeneron Pharmaceuticals paid tens of millions of dollars in kickbacks for its macular degeneration drug Eylea by using a foundation as a conduit to cover Medicare co-pays for Eylea.
The issue before the First Circuit in Regeneron was the level of causation required to satisfy the “resulting from” language. The First Circuit ruled that that “but-for” causation is the proper standard, meaning that there is no FCA liability if the claim would have been submitted regardless of the illegal kickback.
In Regeneron therefore, the Court ruled that Regeneron Pharma was not liable under the FCA because the government could not prove that doctors prescribing Eylea would not have done so “but for” the alleged kickbacks covering the co-pay cost.
According to the First Circuit, “The Supreme Court has held that a phrase like ‘resulting from’ ‘imposes… a requirement of actual causality,’” and “Accordingly, ‘it is one of the traditional background principles ‘against which Congress legislate[s]’ that a phrase such as ‘result[ing] from’ imposes a requirement of but-for causation.” While the Court notes that textual or contextual indications may suggest a different standard of causation, it ruled that none were present in the 2010 AKS amendment.
The First Circuit ruling deepens a circuit split on the issue. The Sixth and Eighth Circuits had also previously adopted the more stringent “but-for” causation standard for AKS-based FCA claims. The Third Circuit on the other hand has rejected the “but-for” causation standard and instead adopted a broader standard allowing for FCA liability if the kickback was merely a contributing factor to the submission of the claim.
Implications and Routes Forward for Whistleblowers
The circuit split on the causation standard for AKS-based FCA claims poses some complications for whistleblowers looking to hold fraudsters accountable through qui tam lawsuits. Firstly, the split will cause confusion about what standard applies for which justifications. But even more importantly, the “but-for” causation standard will make it much harder for whistleblowers and the government to prove False Claims Act liability in kickback cases.
There still remains a key route for whistleblowers and the government to pursue AKS-based FCA cases: the false certification theory. Under the false certification theory, a violation of the AKS can give rise to FCA liability when compliance with the AKS is a recognized precondition of payment under a federal healthcare program and a provider falsely certifies compliance with the law when it submits a claim, or causes the submission of a false claim.
The false certification theory predates the 2010 amendments at issue and is considered a distinct pathway towards proving FCA liability. In Regeneron, the First Circuit clearly states that “claims under the 2010 amendment run on a separate track than do claims under a false-certification theory” and that “there is nothing in the 2010 amendment that requires proof of but-for causation in a false certification FCA case.”
Barring a Supreme Court decision striking down “but-for” causation or a Congressional amendment clarifying a different standard of causation, FCA whistleblower claims can still survive if they can file qui tam suits based upon the false certification theory. Additionally, many whistleblower qui tam FCA cases alleging illegal kickbacks and violations of the AKS can meet the but for causation test. Consequently, whistleblowers and their counsel will need to evaluate the possible routes available when there are allegations of illegal kickbacks being paid in the context of providing health care that is reimbursed by Medicare, Medicaid or other government healthcare programs.
The government has made AKS enforcement a major FCA priority in recent years and the Deputy Assistant Attorney General Michael Granston recently promised that under the Trump administration the Department of Justice “plans to continue to aggressively enforce the False Claims Act.”
Individuals looking to blow the whistle on illegal kickbacks should contact an experienced False Claims Act whistleblower attorney.
Geoff Schweller also contributed to this article.
Changes to Long Island Development: Oversight Through Special Use Permits
Go-To Guide:
Special use permits are becoming more common for various developments across Long Island municipalities.
These permits allow certain uses in zoning districts, subject to additional standards or conditions.
The approval process typically involves public hearings and consideration of factors like traffic, environmental impact, and community compatibility.
Municipalities aim to balance development needs with community concerns through special use permits, but the process may be time-consuming for applicants.
Long Island municipalities have been revising their zoning ordinances to address evolving community needs, environmental considerations, and intelligent development, expanding the list of uses that require special use permits. This GT Advisory explains what a special use permit is, what it entails, and analyzes the potential implications of a special use permit on future development.
In the past year, the towns of Babylon, Huntington, and Smithtown have revised, or are considering revising, their respective zoning codes to incorporate or expand special use permit requirements.
Town of Babylon – The town board revised its code to require a special use permit for recreational marijuana dispensaries.
Town of Huntington – In the Melville Town Center overlay, the town board adopted amendments to its zoning code to require a special use permit for mixed-use buildings, breweries, wineries, and similar uses. Huntington is also considering requiring a special use permit for certain warehouse uses in industrially zoned properties.
Town of Smithtown – Officials are considering amending the zoning code to require a special use permit for rail transfer stations and rail freight terminals.
A special use permit (also known as a “special permit,” “special exception,” or “conditional use permit”) is a land use approval for a use that is generally considered to be permitted in the respective zoning district subject to compliance with additional standards or conditions. The special use permit differs from a variance in that “[a] variance is an authority to a property owner to use property in a manner forbidden by the ordinance while a special [use permit] allows the property owner to put his property to a use expressly permitted by the ordinance.” North Shore Steak House, Inc. v. Board of Appeals of the Inc. Village of Thomaston, 30 N.Y.2d 238, 331 N.Y.S.2d 645 (1972). Simply put, a special use permit is an “as of right” use subject to additional conditions that ensure compatibility with the character of the surrounding community.
Throughout Long Island, special use permits are often required for religious or educational uses within a residential zone, drive-through establishments, and active recreational uses. Municipalities favor special use permits because they require a public hearing where the deciding board can ensure that the application conforms to the required standards or conditions. These standards or conditions are set forth in the local zoning ordinance and vary from municipality to municipality, but often center around traffic and parking impacts, conformity with the municipality’s comprehensive plan, environmental effects, and pedestrian safety. This provides the municipality flexibility by allowing the deciding board to consider each application on a case-by-case basis.
Oftentimes, the deciding board may waive the conditions of the special use permit. Where the board deciding the special use permit is the local planning or zoning board, under the New York State Town Law and Village Law, the governing board (typically the town board or village board of trustees) may authorize the board to waive approval conditions. As long as the board has the authority to do so, it may waive conditions if it determines the conditions, as they apply to the specific application, are not in the interest of the public health, safety, or general welfare, or inapplicable to the requested use. To make this determination, boards will often consider the application’s consistency with the local zoning code, the comprehensive plan, compatibility with surrounding uses, precedent, fairness, and – often most importantly – public input.
Regardless of whether the board decides to grant or deny the special use permit application, the decision must be based upon substantial evidence in the written record. North Shore Steak House, 30 N.Y.2d at 245. Generalized community objections, community pressure, and speculation cannot be the sole basis for denial of a special use permit. Instead, the written record must support that the special use permit’s specific negative impacts will exceed similar as-of-right uses. Robert Lee Realty Co. v. Village of Spring Valley, 61 N.Y.2d 892, 474 N.Y.S.2d 475 (1984).
Municipalities throughout Long Island face challenges as they increase reliance on special use permits. The special use permit application process requires significant time and resources – including traffic studies, civil and architectural plans, and environmental review under the State Environmental Quality Review Act. Some applicants may grow impatient and choose to abandon projects that might have economic and community benefits to the locality. As such, the reviewing agency should have the resources to ensure a speedy review so that the applicant can secure a public hearing.
Special use permits likely will remain a central land use regulation in Long Island’s future. The regulation generally provides a tool to allow municipalities to promote sustainable development and ensure compatibility with the comprehensive plan. However, municipalities should work with applicants and residents to navigate the challenges and opportunities discussed in this GT Advisory.
Court Reverses $10 Million Sexual Harassment Verdict Due To Judge’s “Bizarre Comments”
On April 7, 2025, the California Court of Appeal reversed a whopping $10 million verdict in favor of an employee in a sexual harassment case due to the trial judge’s improper evidentiary rulings and inappropriate comments during the post-judgment phase of trial. Odom v. Los Angeles Cmty. Coll. Dist., No. B327997, 2025 WL 1021951, at *1 (Cal. Ct. App. Apr. 7, 2025).
Sabrena Odom, a tenured Los Angeles Community College (“LACC”) professor, sued LACC and one of its top administrators for sexual harassment and retaliation. After a three-week trial, the jury awarded plaintiff a total of $10 million for past and future mental suffering and emotional distress damages.
The appellate court reversed, finding that the trial judge improperly admitted 20-year old newspaper articles regarding the administrator-defendant’s alleged stalking and sexual assault of a previous partner. The judge also erred in allowing “me too” testimony from a student at LACC regarding her complaint against a different administrator.
The trial court committed additional error when the judge made “extreme and bizarre” racial and gender-based comments to defendant’s counsel, a Black woman, during the post-judgment phase of trial. Among other things, the judge talked about “miscegenation” and the societal impact of mixed-race football players as well as his support for Black Lives Matter. He also repeated an offensive joke he heard as a young lawyer about female secretaries doing a better job providing sexual favors than typing. The judge eventually recused himself after defendant’s counsel moved to disqualify him.
The Court of Appeal found the $10 million jury award to be “excessive” in that plaintiff continued to work through the close of trial and had no economic damages. The Court agreed with defendants that there is no precedent for this high of an award absent economic or debilitating injuries, and the award was grossly disproportionate to awards in comparable cases; the Court remanded for a new trial.
This case is just the latest example of a “nuclear” verdict rendered by a California jury and serves as yet another reminder to employers of the unparalleled benefits of having an arbitration program, as we have previously reported. We will continue to monitor this case for updates.
The Sunflower State (Kansas) Passes Employer-Friendly Restrictive Covenant Legislation
Consistent with our previous reporting that states would continue to address noncompete issues even after the apparent end of the FTC Noncompete Rule, Kansas has joined the growing list of jurisdictions to pass or introduce legislation addressing restrictive covenants.
The difference between Kansas and the other states’ legislation and proposed legislation is that Kansas’s legislation is employer friendly.
On April 8, 2025, Kansas enacted a law “concerning restraint of trade; relating to restrictive covenants; providing that certain restrictive covenants are not considered a restraint of trade and shall be enforceable; amending K.S.A. 2024 Supp. 50-163” (the “Kansas Law”). Pursuant to the Kansas Law, Kansas’s “restraint of trade act shall not be construed to apply to … any franchise agreements or covenants not to compete.”
Although the Kansas Law sets forth requirements for non-solicit provisions (as discussed below), it does not place requirements or restrictions on the use of noncompetes. Thus, it is likely that noncompetes will continue to be enforced consistent with Kansas case law. The “freedom to contract” and “wide discretion” for parties to entered into employment agreements “extends to restrictive covenants in employment contracts. Doan Family Corp. v. Arnberger, 522 P. 3d 364, 369-70 (Kan. App. 2022) (citing Foltz v. Struxness, 215 P. 2d 133 (Kan. 1950)). Under Kansas law, “noncompete agreements are ‘valid and enforceable if the restraint on competition is reasonable under the circumstances and not adverse to the public welfare.’” Id. at 370 (quoting Weber v. Tillman, 913 P. 2d 84 (Kan. 1996)).
Under the Kansas Law, customer non-solicits that seek to limit a former employee’s ability to provide or offer any product or service that is competitive with those provided by the employer “shall be conclusively presumed to be enforceable and not a restraint of trade[,]” provided that the customer non-solicit “is limited to material contact customers and the covenant is between an employer and an employee and does not continue for more than two years following the end of the employee’s employment[.]” The statute broadly defines “material contact customers” as any “customer or prospective customer that is solicited, produced or serviced, directly or indirectly, by the employee” or any customer or prospective customer about whom the employee, directly or indirectly, had confidential business or proprietary information or trade secrets in the course of the employee’s relationship with the customer.” Customer non-solicits must be in writing.
Employee non-solicits must also be in writing. The Kansas Law states that employee non-solicits “shall be conclusively presumed to be enforceable and not a restraint of trade if the covenant is between an employer and one or more employees[,]” and the covenant: (i) seeks, on the part of the employer, to protect the employer’s confidential or trade secret business information or customer or supplier relationships, goodwill or loyalty; or (ii) is not for a period longer than two years following the end of the employee’s employment. Thus, as long as the restricted period of the employee non-solicit is no longer than two years, then the non-solicit covenant is presumed to be enforceable.
For covenants that are not presumed to be enforceable and are determined to be overbroad or otherwise not reasonably necessary to protect a business entity’s legitimate business interest, a “court shall modify the covenant, enforce the covenant as modified and grant only the relief necessary to protect such interests.” Thus, the Kansas Law explicitly authorizes courts to modify overbroad restrictive covenants, thereby further demonstrating the legislature’s intention that restrictive covenants be enforced to the fullest extent permitted by law.
We expect other states to continue to restrict noncompetes, including a recently passed Wyoming law that we will report on soon, as well as pending legislation in Texas and New York. Stay tuned for our posts on those bills. The Kansas Law is an example of a jurisdiction enacting an employer-friendly restrictive covenant law. It remains important for employers to review their restrictive covenants to ensure they are complying with applicable law.
CONFIDENTIAL?: AmEx Compels Individual TCPA Suit to Arbitration And I am Intrigued
Arbitration provisions can by a TCPA defendant’s best friend, but usually that’s to avoid class litigation.
While a TCPA suit can–and very often is–be filed as a class action in court such cases are not permitted under most arbitration provisions. That means if a defendant can successfully compel arbitration it may take a billion dollar exposure case and take it down to $500.00. Not a bad day in court.
But there are other reasons to seek arbitration where available, even in an individual suit as AmEx just demonstrated.
In Adler v. American Express Co., 2025 WL 904462 (N.D. Oh. March 25, 2025) AmEx compelled an individual TCPA claim to arbitration.
The background facts here are interesting. Plaintiff claims AmEx was mistakenly calling him repeatedly–say, 15 times a month– for years with prerecorded calls related to a debt he didn’t owe.
If these allegations are true Plaintiff seemingly has a six figure case against AmEx ($500.00 is the MINIMUM liability for such errant robocalls to a cellular phone) but the good news for AmEx is that the suit was brought on an individual basis.
Despite the individual nature of the suit AmEx asked the court to compel arbitration. Plaintiff opposed arguing the calls at issue were not related to HIS account but the Court determined that did not matter– any dispute between the parties had to go to arbitration. And since Plaintiff was a cardholder who had accepted the arbitration provision by using the card he was a party stuck bringing suit in arbitration only.
So this was a fine win by AmEx but only because it will make it harder for everyone to find out what happened in the lawsuit. Everything that happens in federal court is public, but arbitrations are private proceedings. So we may never know what happened with Mr. Adler.
Folks facing TCPA trouble should ALWAYS think about compelling arbitration– and anyone in the lead gen space should be leveraging these provisions as part of every form.
CONSENT DOESN’T HELP: Travel and Leisure Co. Stuck in TCPA Class Action As Court Refuses to Credit Consent at the Pleadings Stage
Nothing more frustrating for a TCPA defendant than to be stuck in a class action when the named plaintiff provided consent to be contacted in the first place.
However the rules of litigation often prevent that issue from being addressed until much later in the case–sometimes even after expensive class discovery– which is why so many TCPA plaintiffs file frivolous lawsuits and manage to extract a high-dollar settlement.
Take the case of Hodge v. Tavel + Leisure Co., 2025 WL 1093243 (N.D. Cal. April 11, 2025). There the Defendant moved to dismiss arguing the Plaintiff had consented to receive the calls at issue. But the Court was unimpressed noting it would only credit the allegations of the complaint at this stage:
Hodge therefore had no obligation to negate Defendant’s claim of express consent through her allegations, and the Court can only dismiss Hodge’s TCPA claim on the consent defense if the “allegations in the complaint suffice to establish” consent. Sams v. Yahoo! Inc., 713 F.3d 1175, 1179 (9th Cir. 2013) (quoting Jones v. Bock, 549 U.S. 199, 215 (2007)). Nothing in the SAC, when construed in Hodge’s favor, shows that she consented to artificial or prerecorded messages.
Get it?
Even though the defendant might have a complete defense it is simply too early in the case for the Court to throw out the class action. As a result the defendant must litigate and deal with discovery demands– all of which gives Plaintiff’s counsel the opportunity to extort… er.. extract a high dollar resolution.
There are some tricks to get past the pleadings stage limitation on extrinsic consent evidence–Troutman Amin, LLP has earned great pleadings stage wins for example– but anytime there is a dispute of fact on consent you are DEFINITELY not going to win at the pleadings stage, and maybe not even at the MSJ stage. So be careful.
At the end of the day making outbound prerecorded or artificial voice calls (including voicemails) carries substantial risk. Make sure you know the rules of the game before playing!
Are Many Nasdaq Global Select Corporations Subject To The California General Corporation Law?
Only a few publicly traded corporations are incorporated in California. Most either started life in Delaware or later decamped to that state (and more recently other states). Nonetheless, many of these corporations have their principal offices in California and/or significant operations and shareholders located in California. The Golden State has long been sensitive to the phenomenon of pseudo-foreign, or “tramp”, corporations. In response, it has peppered its General Corporation Law with provisions that expressly apply to foreign corporations, provided they have certain specified nexus to the state. The most far-reaching of these provisions is Section 2115 which imposes numerous provisions of the GCL to foreign corporations “to the exclusion of the law of the jurisdiction in which it is incorporated”. In general, a foreign corporation will be subject to 2115 if more than one-half of its business and one-half of its shares are held of record by persons with addresses in California (there is, of course, much more detail in the statute, but hanc marginis exiguitas non caparet.
Corporations listed on major stock exchanges for the most part do not perseverate excessively over Section 2115 because the statute expressly exempts “with outstanding securities listed on the New York Stock Exchange, the NYSE American, the NASDAQ Global Market, or the NASDAQ Capital Market”. On closer inspection, however, there appears to be a noticeable omission in this list of exchanges. Nasdaq has three listing tiers, the Nasdaq Global Select Market, the Nasdaq Global Market, and the Nasdaq Capital Market, and the statute only lists the last two tiers. The omission of the Nasdaq Global Select Market is unlikely to have been intentional because that market has the highest listing criteria. Apparently, the omission arises from California’s view that the Nasdaq Global Market itself is comprised of two tiers. Apparently, this was the view of the Commissioner of Corporations when he certified the Nasdaq Global Market for purposes of an exemption under the Corporate Securities Law of 1968: “Moreover, effective July 1, 2006, the Nasdaq National Market was renamed the NASDAQ Global Market. The NASDAQ Global Market now contains two tiers (NASDAQ Global Market and NASDAQ Global Select Market) . . .”. The Commissioner, however, has no authority to administer or enforce Section 2115.
Some readers will likely protest that Section 2115 is unconstitutional. Indeed, that was the conclusion of the Delaware Supreme Court in Vantage Point Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005). However, a California Court of Appeal has arrived at the opposite conclusion in Wilson v. Louisiana-Pacific Resources, Inc., 138 Cal. App. 3d 216, 187 Cal. Rptr. 852 (1983). Therefore, the status of Section 2115 may depend upon where the case is brought.
DExit And The Concomitant Malapropisms Continue
On Friday, the global entertainment company, AMC Networks Inc., filed preliminary proxy materials that include a proposal to approve the company’s “redomestication to the State of Nevada by conversion”. Readers will recognize that this statement makes no sense because it conflates two different processes, domestication and conversion. See Converting A Corporation Is Not Domestication.
Preserve or Perish: The North Carolina Supreme Court Reinforces Rule 50 Specificity in Vanguard Pai Lung v. Moody
In Vanguard Pai Lung, LLC v. Moody, No. 15A24 (N.C. Mar. 21, 2025), the Supreme Court of North Carolina delivered a cautionary message for every trial lawyer: to preserve an issue for a motion for judgment notwithstanding the verdict (JNOV), counsel must first raise that precise issue—specifically—in a motion for directed verdict.
While this requirement is not new, the Court’s decision formally adopts a line of Court of Appeals precedent that enforces this rule with precision, particularly in complex cases involving multiple claims or defenses. The opinion not only raises the stakes for trial counsel at the directed verdict stage, but also underscores the value of involving appellate counsel early to ensure preservation is properly executed.
This article summarizes the decision and offers practical guidance for lawyers who want to protect their clients’ positions in post-trial motions and on appeal.
Background of the Case
The dispute in Vanguard stemmed from a failed business relationship within a textile machinery company. Vanguard Pai Lung, LLC—a North Carolina manufacturer and distributor of circular knitting machines—filed claims against its former CEO, William Moody, and related business entities under his control. The plaintiffs alleged fraudulent misrepresentation, embezzlement, conversion, unfair and deceptive trade practices, and unjust enrichment.
The case proceeded to a jury trial before the North Carolina Business Court. At the close of the evidence, the jury returned a verdict for the plaintiffs on nearly every claim. The defendants moved for JNOV under Rule 50(b), but the trial court denied most of the motion. On appeal, the Supreme Court affirmed, focusing in particular on the defendants’ failure to preserve key arguments at trial.
The Court’s Holding on Preservation
The central issue was whether the defendants had properly preserved the arguments raised in their JNOV motion by articulating those same grounds in their earlier directed verdict motion under Rule 50(a).
The Court held that a Rule 50(b) motion must be made “in accordance with” the earlier Rule 50(a) motion. That means a party may only renew issues it raised with specificity during trial. Citing and formally endorsing Plasma Centers of America, LLC v. Talecris Plasma Resources, Inc., 222 N.C. App. 83 (2012), the Court stated:
“To preserve an issue for use in a motion for JNOV under Rule 50(b), the movant first must have timely moved for a directed verdict based on that same issue.”
The Court emphasized that in cases involving multiple claims, theories of liability, or defenses, general or vague Rule 50 motions fall short. Trial courts and opposing counsel must receive adequate notice of the legal or evidentiary deficiency being asserted—otherwise, the argument is waived.
Application to the Case
In Vanguard, the defendants challenged various elements of the jury’s verdict in their JNOV motion, including whether there was sufficient evidence to support the claims for fraud and conversion. But the Supreme Court concluded that many of these arguments had not been preserved at trial.
For example, in their JNOV motion, the defendants asserted that there was insufficient evidence that Moody personally converted company funds, vehicles, or other assets. But at trial, their directed verdict motion addressed only one narrow point: that Moody had not converted laptops used by his children. As the Court observed, the motion “did not refer to the disputed money, cars, cell phones, and football tickets,” and therefore failed to preserve broader conversion arguments.
Similarly, the defendants challenged the fraud verdict post-trial asserting that plaintiffs had not shown intent to deceive. Yet at the directed verdict stage, they had only contested whether any misrepresentation occurred—ignoring the element of intent. The Court found the distinction dispositive:
“To preserve the argument raised in the JNOV motion, Moody and Nova Trading needed to specifically assert to the business court that they were challenging the sufficiency of the evidence that the alleged misrepresentations were made with an intent to deceive… They did not do so.”
In both instances, the Court reaffirmed that in complex, multi-issue trials, it is not enough to hint at a general deficiency. Counsel must identify each specific ground for relief on the record.
Practical Guidance for Trial Counsel
Vanguard reinforces the critical role of detailed, strategic motion practice at trial. The Court’s holding clarifies that preservation is not a technicality—it is a foundational requirement for post-trial motions and appellate review. These practices can help counsel protect their record:
Be Specific—Even If It Feels Redundant
Direct your motion to the specific claim, the precise element at issue, and the evidentiary deficiency. In lengthy trials, it can be tempting to generalize. Resist that urge. Specificity protects your ability to seek post-verdict relief.
File Written Motions When Possible
Although oral Rule 50(a) motions are permitted, a written motion provides a clear and reliable record. In complex or high-value cases, a written submission ensures no ground is missed or misunderstood.
Renew at the Close of All Evidence
A Rule 50(a) motion must be renewed after all evidence is presented. Failing to do so forfeits even properly articulated grounds. Preservation requires diligence throughout the trial.
Engage Appellate Counsel Early
Appellate counsel can help trial teams craft targeted Rule 50 motions, identifying preservation risks, and protecting key legal theories. In high-stakes litigation, that support can prove decisive.
Avoiding Waiver in Multi-Theory Cases
The Vanguard opinion also clarifies that directed verdict motions must address each theory presented to the jury. For example, if a fraud claim proceeds under two distinct theories and counsel challenges only one, the other remains unchallenged and therefore preserved in the verdict.
The Court summarized this principle clearly:
“In cases involving multiple defenses and theories of liability, it is critical that the movant direct the trial court with specificity to the grounds for its motion for a directed verdict.”
When the plaintiff pleads multiple theories and presents them to the jury, the Rule 50(a) motion must match that complexity. Anything less risks partial preservation—or total waiver.
Conclusion
The Supreme Court’s decision in Vanguard Pai Lung, LLC v. Moody offers both clarification and caution. Preservation under Rule 50 requires more than good intentions or general objections—it demands precision. Trial counsel must identify the exact ground for relief with clarity, or the issue is lost.
This decision is an opportunity for trial lawyers to reassess their Rule 50 practices and consider integrating preservation protocols into trial planning—especially in business and commercial disputes where the stakes are high.
Early coordination with appellate counsel can help safeguard the record, refine trial strategy, and ensure that no argument is left behind.
CFPB Drops Lawsuit Against Money Transmitter
On April 8, a federal court granted the CFPB’s motion to withdraw from its joint enforcement action against a global money transmitter. The lawsuit, originally filed in April 2022 in partnership with the New York Attorney General, alleged violations of the Electronic Fund Transfer Act (EFTA), including the Remittance Rule under its implementing Regulation E.
The complaint detailed a range of statutory and regulatory violations affecting remittance transfers used by consumers to send funds abroad. The core allegations included:
Inaccurate availability disclosures. The company allegedly failed to accurately disclose the date on which funds would be available to recipients.
Deficient error resolution. The company purportedly failed to promptly investigate consumer complaints, issue required fee refunds, or provide mandated explanations and documentation.
Noncompliant internal procedures. Regulators alleged the company lacked adequate written policies to identify covered errors, ensure timely investigations, and retain necessary compliance documentation.
Unfair acts under the CFPA. The Bureau and the New York AG alleged that the company unnecessarily delayed remittance transfers and refunds after completing internal screenings, leaving consumers without timely access to funds.
The lawsuit will now proceed with the New York AG as the sole plaintiff.
Putting It Into Practice: The CFPB’s withdrawal from this case is consistent with a broader trend of reassessing enforcement actions initiated under prior leadership (previously discussed here and here). While the Bureau appears to be narrowing its enforcement focus, state regulators—such as the New York Attorney General—continue to pursue consumer protection matters with vigor (discussed here). Financial services companies should not interpret reduced federal activity as a reprieve.