NLRB Stalemate Continues: Supreme Court Keeps Wilcox Sidelined For Now
On May 22, 2025, the U.S. Supreme Court issued a decision granting President Trump’s emergency application to stay D.C. Circuit Court orders that reinstated National Labor Relations Board (“NLRB” or the “Board”) member Gwynne A. Wilcox and Merit Systems Protection Board (“MSPB”) member Cathy A. Harris. This stay will remain in effect while the D.C. Circuit Court continues to review whether their removals were lawful.
Earlier this year (as previously reported), Trump’s controversial firing of Wilcox sparked legal battles. Wilcox sued, arguing that her dismissal violated federal law that only permits removal of Board members for “neglect of duty or malfeasance.” The D.C. Circuit Court reinstated Wilcox, restoring the Board to a quorum of at least three members. However, on April 9, 2025, the Supreme Court temporarily blocked her return, foreshadowing its latest decision.
The Supreme Court’s ruling underscores the President’s power to remove executive officials at will, drawing a sharp distinction between independent federal agencies and the Federal Reserve. While the Court allowed Trump to remove officials from the NLRB and MSPB, it made clear that this authority does not extend to the Federal Reserve, which it described as a “uniquely structured, quasi-private entity” warranting special independence.
In a forceful dissent, Justice Kagan – joined by Justices Sotomayor and Jackson – argued that the ruling undermines the long-standing precedent set by Humphrey’s Executor v. United States, 295 U.S. 602 (1935), which protected members of bipartisan, expert-led agencies like the NLRB from at-will dismissal by the President.
The Supreme Court’s decision on Wilcox’s reinstatement highlights the shifting balance of power between the executive branch and independent agencies. The D.C. Circuit will weigh the merits of the legality of these removals, with a forthcoming appeal to the Supreme Court likely to follow. The outcome could reshape the legal framework governing administrative agencies for years to come. For now, the NLRB remains without a quorum, which will continue to logjam federal labor law proceedings until a third NLRB member is appointed and confirmed.
Documents Show EPA Wants to Erase Greenhouse Gas Limits on Power Plants
The Environmental Protection Agency (EPA) has reportedly drafted a plan to eliminate all limits on greenhouse gases from coal and gas-fired power plants in the US. In its proposed regulation, the agency argued that greenhouse gases from power plants “do not contribute significantly to dangerous pollution” because they are a small and declining share of global emissions.
“The argument is a solid argument,” Bracewell’s Jeff Holmstead, who served in the EPA during both Bush administrations, told The New York Times.
But he wondered if it would hold up under a legal challenge. “I just don’t know if you’re contributing 3 percent of greenhouse gas emissions the court will say ‘that’s not significant’ when there’s hardly anybody that contributes more than that.”
WAR OF ATTRITION: Lead Seller Stuck in TCPA Suit After Settling with Litigator Wins Transfer of Third-Party Suit
Interesting little case for you folks today.
Any time you are in a TCPA class action that involves multiple parties– such as when a lead seller makes calls and then transfers the calls to a buyer who is subsequently sued– the defendants need to work together to avoid a terrible mistake.
The mistake– one party trying to settle out with the Plaintiff alone.
Why is this such a mistake?
Well, first it just funds the plaintiff’s ability to fight the lawsuit against the remaining parties. So it creates a “no lose” situation for the plaintiff and his lawyers.
But that’s just the half of it.
Most of the time the settling defendant isn’t actually out of the case at all– they get sucked back in by the other defendants who pull them down like the proverbial crabs in a pot.
For instance in Katz v. Allied First Bank, 2025 WL 1489176 (N.D. Ill May 24, 20245), Katz originally sued both Allied First Bank– the lead buyer–and Consumer Nsight– the lead seller– for calls allegedly made by CN without consent.
CN thought it would be smart to settle their claims with Katz and leave Allied holding the bag.
So silly.
Although CN ended up dismissed by Katz it was immediately sued by Allied and is now stuck in the case.
Except rather than fight out the claim in the same proceeding CN made another mistake and has asked–and was granted– a transfer of the suit.
In Katz the Court determined CN was not subject to personal jurisdiction in Illinois where the case was brought. So now CN will be sued in either Florida or Arizona, which is a hollow victory. Rather than being present to help defend against the underlying suit Katz brought it is now going to be fighting a residual lawsuit in a court room thousands of miles away.
Not smart in my view.
So what should have happened?
Well CN should have used its willingness to settle to push Katz to a global resolution and should have worked with Allied to get it done. It Allied really wanted to fight it should have negotiated a release from Allied before settling with Katz.
Instead all CN has accomplished is feeding Katz to make sure he can pursue his case against Allied– and by extension Allied’s case against CN.
Just a terrible move IMO.
In any event we will keep an eye on this.
Pretty clear take aways:
Lead purchases continue to be risky so make sure you know and trust your partners!
Do NOT settle a case and expect to walk away if there are other parties involved. Negotiate the deal globally or arrange a release from co-defendants.
An EEOC Victory Provides Lessons on Applicant Drug Testing Accommodations
A recent jury verdict reminds employers of their reasonable accommodation obligations for applicants under the Americans with Disabilities Act (ADA), in the context of drug testing. The U.S. Equal Employment Opportunity Commission (EEOC) sued a retirement community for denying employment to an applicant based on a failed drug test—one that the applicant warned the employer she would fail because of her medications. And, as the EEOC announced in a recent press release, a jury awarded her over $400,000 in damages.
Quick Hits
A jury awarded more than $400,000 in damages to an applicant who was denied employment due to a failed drug test—one that the applicant, a veteran, informed the employer she might fail because of legally prescribed medications she took for PTSD.
The EEOC successfully argued that the employer, a retirement community, violated the ADA by failing to allow the applicant to explain her non-negative drug test result.
The verdict serves as a reminder for employers of their reasonable accommodation obligations to applicants under the ADA, both before and after a conditional job offer, when an applicant discloses disability-related prescription drug use and/or has a non-negative test result.
Background
In EEOC v. The Princess Martha, LLC, an applicant interviewed for and was offered a position as an activities coordinator for a retirement community, pending the community’s standard background check and drug test. According to the EEOC’s complaint, during her interview, the applicant told the activities director that she was a veteran with post-traumatic stress disorder (PTSD), for which she took legally prescribed medications that would cause her to fail a drug test. The activities director responded that the position did not involve tasks that would be impaired by those medications and that the testing facility would take copies of her prescriptions.
When the applicant offered her prescriptions to the testing facility, however, she was told it was unnecessary because they would call her later to verify any foreign substances. But she did not hear back from them, or from the retirement community. Six days later, she called the activities director and was told that the human resources (HR) department should have contacted her. After being transferred to HR, the applicant left a voicemail, expressing concern that she had not received a drug test result and reiterating that her medications would cause a non-negative result. The next day, her offer of employment was rescinded.
The Jury Verdict
The applicant filed a charge of discrimination with the EEOC, and the EEOC subsequently sued the retirement community, asserting a failure to allow the applicant to explain the non-negative result and a failure to employ her. A jury agreed, awarding the applicant $5,083 in back pay, $50,000 in compensatory damages, and $350,000 in punitive damages.
What the ADA Requires
As set forth in the EEOC’s “Enforcement Guidance on Preemployment Disability-Related Question and Medical Examinations,” the ADA prohibits employers from asking an applicant to answer medical questions or take a medical exam prior to making a conditional job offer. This specifically includes questions about prescription drug use.
If an applicant has voluntarily disclosed a disability or noted a need for accommodation during the pre-offer stage, however, the ADA permits an employer to ask limited questions about what type of reasonable accommodation would be needed now or in the near future—but not about the underlying condition or accommodation needs in the more distant future. (This is what happened here—the applicant voluntarily disclosed her PTSD and use of prescription medication. The activities director appropriately responded that the prescriptions should be provided to the testing facility to explain the non-negative result. Unfortunately, the employer then took a wrong turn.)
After a conditional job offer is extended but before employment begins, an employer is free to ask any disability-related questions and require any medical examinations of an applicant, so long as it does so for all applicants entering the same job category. The questions and/or examinations do not have to be job-related. An employer may reject an applicant because of the applicant’s answer or results, however, only where it is “job-related and consistent with business necessity.”
There are special rules around drug testing. Because the current use of illegal drugs is not protected under the ADA, drug tests are not considered medical examinations. Nonetheless, the results of drug tests can implicate disabilities, triggering coverage by the ADA. In particular, the EEOC’s guidance contains the following question and answer (Q&A), in the context of a post-offer drug test:
May an employer ask applicants about their lawful drug use if the employer is administering a test for illegal use of drugs?
Yes, if an applicant tests positive for illegal drug use. In that case, the employer may validate the test results by asking about lawful drug use or possible explanations for the positive result other than the illegal use of drugs.
Example: If an applicant tests positive for use of a controlled substance, the employer may lawfully ask questions such as, “What medications have you taken that might have resulted in this positive test result? Are you taking this medication under a lawful prescription?”
Although the language in this guidance sounds permissive (“may”), other EEOC guidance suggests otherwise. For example, in the EEOC’s guidance on the “Use of Codeine, Oxycodone, and Other Opioids: Information for Employees,” the EEOC offers the following Q&A:
What if a drug test comes back positive because I am lawfully using opioid medication?
An employer should give anyone subject to drug testing an opportunity to provide information about lawful drug use that may cause a drug test result that shows opioid use. An employer may do this by asking all people who test positive for an explanation.
Accordingly, it seems that the EEOC believed that the employer in the current case had an obligation to ask those questions since the applicant had disclosed her use of legally prescribed medications that would cause her to fail the drug test. And this information was effectively a request for accommodation—to be excused from disqualification from employment based on the drug test results. The failure to ask those questions was, arguably, the employer’s first stumble.
Of course, once an applicant requests a reasonable accommodation, that may trigger the interactive process by which the employer may obtain more information (if necessary) to establish if there is a disability and to assess whether a reasonable accommodation can be provided without imposing an undue hardship on the employer. And here, the employer encountered a potential pitfall. Given that the activities director had stated that the responsibilities of the job would not be impacted by the applicant’s medication, it was hard to then argue that excusing the applicant from the drug test results would be an undue hardship.
Key Takeaways for Employers
This case reminds employers that there are specific rules with regard to the treatment of applicants under the ADA. The ADA and interpretive guidance promulgated by the EEOC delineate what employers can and cannot do if an applicant voluntarily discloses disability-related information before an offer is made, or if an applicant fails a post-offer/preemployment medical examination. And employers may not want to categorically disqualify an applicant who fails a drug test—particularly where the applicant has made clear that he or she may have a legal reason for doing so.
New York Attorney General Advances Consumer Protection FAIR Act Intended to Bolster GBL Section 349
In March 2025, Office of the Attorney General for the State of New York introduced the Fostering Affordability and Integrity Through Reasonable (“FAIR”) Business Practices Act in the State Senate and State Assembly. The proposed legislation is intended to revise Article 22-A of New York’s General Business Law.
The FAIR Act is designed to expand and strengthen consumer and small business protections, in part, by amending New York’s General Business Law §349 to also cover “unfair” and “abusive” practices, rather than just “deceptive” practices. Many other states have already enacted UDAP statutes. The bill may foreshadow what is to come from numerous state consumer protection enforcers as federal consumer protection enforcement is being rolled back and policy under the current administration remains uncertain.
As drafted, the program bill would provide the New York Attorney General and private plaintiffs the ability to seek enhanced civil penalties and restitution in amounts significantly more than available statutory damages pursuant to New York General Business Law Section 349. The FAIR Act would significantly increase statutory damages available under GBL §349 from $50 to $1,000, and permit recovery of actual and punitive damages. Penalties for unfair, deceptive or abusive practices could potentially include penalties of up to $5,000, per violation. Knowing or willful violations could result in penalties totaling the greater of $15,000 or three times the amount of restitution, per violation. Prevailing plaintiffs in private actions would also be permitted to recover attorneys’ fees and costs.
Analogous to federal policy, the proposed legislation provides for enhanced civil penalties for harm to vulnerable people, veterans and those with limited English proficiency. The FAIR Business Practices Act contemplates stopping lenders, including auto lenders, mortgage servicers, and student loan servicers, from deceptively steering people into higher cost loans. It would purportedly reduce unnecessary and hidden fees and stop unfair billing practices by health care companies.
The bill would also permit the NY AG and private plaintiffs (individuals, small businesses and non-profits) to enforce even a single instance of unfair, deceptive and abusive acts and practices, including, but not limited to, false advertising. Moreover, its prohibitions apply regardless of whether the act or practice is “”consumer-oriented,” possesses a “public impact,” or is part of a “pattern of conduct” – judicially imposed limitations that presently exist pursuant to GBL §349.
“This legislation will strengthen New York’s consumer protection law, GBL §349, to protect New Yorkers from a wide array of scams, including deed theft, artificial intelligence (AI)-based schemes, online phishing scams, hard-to-cancel subscriptions, junk fees, data breaches, and other unfair, deceptive, and abusive practices. Forty-two other states and federal law already prohibit unfair practices, making New York’s current law both antiquated and inadequate,” according to the NY Office of the Attorney General.
New York’s current consumer protection law, GBL §349, currently prohibits only deceptive business acts and practices, not unfair or abusive acts by companies and individuals. The FAIR Business Practices Act is designed to protect New Yorkers from unfair and abusive business acts, such as:
The imposition of hidden “junk fees” in various industries
Companies that make it difficult for consumers to cancel subscriptions
Student loan servicers that steer borrowers into the most expensive repayment plans
Car dealers that refuse to return a customer’s photo ID until a deal is finalized and charge for add-on warranties that the customer did not actually purchase
Nursing homes that routinely sue relatives of deceased residents for their unpaid bills despite not having any basis for liability
Companies that take advantage of consumers with limited English proficiency and obscure pricing information and fees
Debt collectors that collect and refuse to return a senior’s Social Security benefits, even though they are exempt from debt collection
Health insurance companies that use long lists of in-network doctors who turn out not to accept the insurance
The proposed legislation reflects the federal Consumer Financial Protection Act that prohibits unfair, deceptive or abusive acts and practices (“UDAAP”).
The Fair Business Practices Act provides specific definitions for the following terms:
Unfair: An act or practice is considered unfair when it causes or is likely to cause substantial injury to a person, the injury is not reasonably avoidable by such person, and the injury is not outweighed by countervailing benefits to consumers or competition. Note, however, that the FAIR Act’s definition of “unfair” does not possess a provision similar to the CFPA’s § 5531(c)(2) that permits regulatory agencies to weigh public policy when assessing whether an act or practice is unfair.
Deceptive: An act or practice is deceptive when the act or practice misleads or is likely to mislead a person and the person’s interpretation of the act or practice is reasonable under the circumstances.
Abusive: An act or practice is abusive when it materially interferes with the ability of a person to understand a term or condition of a product or service, or it takes unreasonable advantage of (i) a person’s lack of understanding of the material risks, costs, or conditions of the product or service; (ii) a person’s inability to protect such person’s interests in selecting or using a product or service; or (iii) a person’s reasonable reliance on a person covered by this section to act in such person’s interests.
New York business groups have criticized the consumer protection bill intended to strengthen consumer protection against deceptive practices such as junk fees and hard-to-cancel subscriptions. Business groups are aggressively resistant to the program bill, asserting that the legislation would be exploited, resulting in frivolous and abusive litigation that will weaken New York’s ability to attract and keep businesses.
Affirmative defenses to the Fair Business Practices Act could potentially include, without limitation, a private plaintiff meeting minimum threshold standing requirements, the alleged harm being capable of remedy via federal securities or intellectual property laws, and/or the alleged harm arising during the course of a high-value experienced commercial transaction and directed to the involved parties only. Contact a States Attorney General law firm if you or your business are the subject of a New York State or other State Attorney General subpoena or inquiry.
The Act is intended to expand consumer and small business protections, and enhance the scope of available remedies. If passed, it is anticipated that the law will result in a dramatic increase in private consumer lawsuits, and New York State Attorneys General investigation and enforcement.
Takeaway: New York’s existing consumer protection law is primarily governed by GBL §349 which focuses primarily on “deceptive” acts and practices. According to the New York AG, GBL §349 is antiquated and insufficient to adequately protect New Yorkers. Businesses operating in New York should consult with an Attorney General defense lawyer and monitor the progress of the FAIR Act. As drafted, the bill would increase the damages available in a private right of action from the greater of $50 or actual damages under current law to $1,000 in statutory damages, plus the aggrieved person’s actual damages, if any. In cases involving willful or knowing violations, courts would be mandated to award treble damages, reasonable attorneys’ fees and costs to a prevailing plaintiff. The Act would also permit class action lawsuits to recover actual, statutory or punitive damages if the prohibited act or practice has caused damage to others similarly situated. The availability of supplemental civil penalties for vulnerable persons would also be significantly expanded. If enacted into law, an experienced State Attorneys General law firm can assist with the implementation of business practices designed to comply with applicable New York State legal regulatory requirements, including, but not limited to additional restrictions relating to “unfair” and “abusive” acts or practices, and the review of applicable business and advertising practices.
Dangerous Traps in the Fourth Circuit: Three Easy Ways to Lose an Issue on Appeal
One of the core competencies of a good appellate lawyer is spotting arguments that have been preserved.
Whether you’re the appellant or the appellee, knowing when an argument is properly preserved goes a long way.
The United States Court of Appeals for the Fourth Circuit publishes very few opinions, so finding a roadmap for issue preservation can sometimes be tricky. In this article, we’ll highlight three common questions about practice before the Court, set out the Court’s rules on each, and offer practical advice to help alleviate the stress of responding to a waiver argument.
1. Motions in limine preserve issues, but only if done correctly.
Trial lawyers love a motion in limine. It’s often a smart way to lock in a ruling and avoid mid-trial scrambles. But in the Fourth Circuit, just filing one doesn’t mean you’ve preserved all related issues for appeal.
The Court said as much in United States v. Williams, 81 F.3d 1321 (4th Cir. 1996). The defendant in that case filed a motion in limine requesting that, if his wife attempted to invoke spousal privilege, the court decide the issue outside the jury’s presence. But the court never ruled on the motion, and when the wife took the stand, defense counsel didn’t object.
On appeal, the defendant argued his wife’s testimony was privileged and should’ve been excluded. The Fourth Circuit disagreed: that exclusion issue wasn’t preserved. Why? Two reasons. First, the motion in limine never directly challenged the testimony—it just asked for a sidebar if privilege came up. Second, the court never ruled on the motion. And although the defense could’ve preserved the issue by objecting when the testimony was offered, he never did.
The upshot: A motion in limine preserves an issue only if: (1) the party raises the exact argument later asserted on appeal, and (2) the court issues a definitive ruling on that issue. A vague motion or a provisional ruling won’t cut it. If your pretrial motion is denied—or the ruling isn’t crystal clear—you need to object again.
2. Even if you don’t have to, raise even losing arguments.
When precedent clearly bars your argument, it can feel pointless to make it. Fortunately, in the Fourth Circuit, your client may benefit from a change in the law—whether from the Supreme Court or the en banc Fourth Circuit—even if you didn’t raise the foreclosed argument below.
The Court generally won’t consider any argument that wasn’t raised in the district court.
But that rule might not apply when an argument was foreclosed by “strong precedent” that is later overruled. United States v. Chittenden, 896 F.3d 633, 639 (4th Cir. 2018). In those cases, the Court has the discretion to consider new arguments that were previously unavailable.
That said, litigants should be cautious about relying too heavily on the Fourth Circuit’s “change in the law” exception. The Court hasn’t clearly defined when precedent is “strong” enough to excuse waiver. And in any event, the rule applies only when the legal change arises from someone else’s case. If you’re trying to change the law, the Court’s precedent suggests you must raise the issue clearly at every stage.
3. That footnote might not preserve your argument.
Lawyers love footnotes. And judges—for the most part—read them. But don’t count on that last-minute argument you slide in below the line to carry the day.
The Fourth Circuit, like many of its sister circuits, won’t consider an argument so unimportant that it appears only in a footnote.
At first, the Court noted that it would not consider an argument relegated to a footnote because the footnote itself was too cursory to comply with the Rules of Appellate Procedure. Wahi v. Charleston Area Med. Ctr., 562 F.3d 599, 607 (4th Cir. 2009).
But what started as a means of enforcing the rule prohibiting underdeveloped arguments later took on a life of its own. In Foster v. University of Maryland Eastern Shore, the Court cited Wahi to support its conclusion that a “discussion” limited to “an isolated footnote” was not enough to preserve an argument for appeal. 787 F.3d 243, 250 n.8 (4th Cir. 2015).
Quibble with the rule if you’d like, but the best practice is to raise your substantive arguments above the line in your brief. Even if you fully develop a footnoted argument, under Foster the Court may conclude you’ve waived it.
This best practice will also prepare you for practice in several other circuits. The Fifth, Seventh, and Eleventh Circuits have adopted the same view. So if you’re briefing an appeal, treat every important argument like it deserves to be heard. If you bury it in a footnote, the court will treat it like you didn’t raise it at all.
Final Thoughts
The Fourth Circuit isn’t out to trap lawyers. But it does expect precision. Trial lawyers briefing issues with appellate implications should raise them clearly, object when rulings are vague, and avoid the temptation to write off bad precedent as a reason to stay silent. Appellate counsel should scour the record for footnote-only arguments, fuzzy objections, and unpreserved motions.
Tenth Circuit Decision Highlights Distinction Between Traditional Non-Compete and Forfeiture-for-Competition
In Lawson v. Spirit AeroSystems, Inc., the U.S. Court of Appeals for the Tenth Circuit upheld the forfeiture of certain stock awards for violating a covenant not to compete. Like the Seventh Circuit in LKQ Corp. v. Rutledge(which applied Delaware law), the Tenth Circuit concluded that, under Kansas law, the remedy of forfeiting future compensation is not subject to the same reasonableness standard as traditional enforcement of a non-compete obligation. The Tenth Circuit reached this conclusion even though the executive’s agreement included both a forfeiture-for-competition provision and traditional enforcement rights (i.e., the right for the company to pursue monetary damages and specific performance), because the agreement terms enabled the forfeiture provision to be severed from the traditional enforcement provisions.
Background and the Court’s Analysis
A retirement agreement allowed the former CEO of Spirit AeroSystems (“Spirit”) to receive cash payments and continue vesting in certain stock awards if he continued working for Spirit as a consultant and complied with a non-compete agreement. The CEO subsequently contracted with a hedge fund that was pursuing a proxy contest against one of Spirit’s suppliers. Spirit determined that this activity breached the non-compete and therefore stopped payments to the CEO and cut off continued vesting of the stock, resulting in forfeiture of the CEO’s then-unvested stock awards. Notably, Spirit did not seek to claw back cash that had already been paid or stock that had already vested: only future compensation and vesting were affected.
The court first found under Kansas case law a distinction between a traditional penalty for competition and forfeiture of future compensation for competition. Under Kansas case law, the former is valid and enforceable only if “reasonable under the circumstances and not adverse to the public welfare.” But the court concluded that Kansas law does not subject the latter to the same reasonableness standard because it does not restrain competition in the same way. Rather than imposing a penalty, a forfeiture for competition provision “merely provides a monetary incentive in the form of future benefits for not competing.” The court reasoned that a forfeiture for competition provision gives the worker “a choice between competing and thereby forgoing the future benefits or not competing and receiving those benefits.” And because the forfeiture applied only to future compensation, it did not amount to a penalty: the executive forfeited only “the opportunity for the shares to vest notwithstanding his retirement.”
Second, the court reasoned that the policy justifications for reasonableness review did not apply to forfeiture in this case. The court stated that reasonableness review addresses the risk that (1) the employer’s bargaining power can lead to a one-sided non-compete that leaves former employees unable to support themselves after their employment ends and (2) “overbroad” restrictions on competition can “decrease options available to consumers and generate market inefficiencies.” The court concluded that neither of those risks were present in this case, noting that the executive was sophisticated and had support of counsel and that the executive had an opportunity to receive substantial compensation if he had complied with the covenant.
Third, the court reasoned that “[f]reedom of contract is the fountainhead of Kansas contract law.” Accordingly, the court determined that the forfeiture-for-competition provision should be presumed enforceable, absent the policy concerns described above.
Unlike the Seventh Circuit in LKQ—which certified a question of Delaware law to the Delaware Supreme Court—the Tenth Circuit refused to certify the question of Kansas law to the Kansas Supreme Court. For the reasons described above, the court determined that it could predict the Kansas Supreme Court’s interpretation of Kansas law with sufficient confidence to make certification unnecessary.
Finally, the court rejected an argument that reasonableness review should be required because Spirit had both the right to invoke forfeiture and the right to seek traditional enforcement (monetary damages and specific performance). The court determined that, in this case, the right to seek traditional enforcement could be severed from the right to invoke forfeiture. Because Spirit relied exclusively on the forfeiture provision and expressly declined to pursue traditional enforcement, the fact that Spirit could have pursued traditional enforcement was not fatal.
Takeaways
Although Lawson is binding only on federal courts in the Tenth Circuit that are applying Kansas state law (and Kansas state courts could still reach a different conclusion), it provides meaningful authority for the proposition that a forfeiture for competition provision can be enforced even if applicable law otherwise limits the enforceability of non-compete provisions. (Notably, however, some states reject forfeiture for competition.) The decision offers a few important practical takeaways:
The particular facts matter. In this case, the court noted that the forfeiture provision had been negotiated by sophisticated parties represented by counsel and determined that policy concerns with non-compete provisions (interfering with the ability to make a living and potential to generate market inefficiencies) were not present.
Drafting matters. If an agreement has more than one enforcement mechanism (e.g., a right to seek damages and injunctive relief and a separate statement that breach will result in forfeiture of certain compensation or benefits), it is important to make each enforcement mechanism distinct and severable from the others. The result of this case could have been different if the agreement did not have a severability clause. It also helps to state clearly that amounts subject to forfeiture are not considered earned or fully vested (even if considered vested for tax purposes) unless and until the employee has satisfied all applicable conditions. Clarity on this point helps the court to distinguish between a permissible compensatory incentive to comply and a potentially impermissible penalty for breach.
Enforcement strategy matters. The court emphasized that Spirit did not pursue injunctive relief or damages and that the forfeiture applied only with respect to future payments and vesting. Had Spirit sought to claw back prior payments or stock that had already vested, the court might have treated the forfeiture as a penalty that required reasonableness review.
Federal Court Enjoins DHS’s Revocation of Harvard’s Ability to Enroll International Students
On May 22, 2025, Secretary of Homeland Security Kristi Noem ordered the Department of Homeland Security (“DHS”) to terminate Harvard University’s Student and Exchange Visitor Program (“SEVP”) certification for alleged “pro-terrorist conduct.” SEVP certification enables universities to enroll international students.
The revocation of Harvard’s SEVP authorization has sent shockwaves through the academic community, as it means Harvard would not be able to enroll international students and enrolled students must transfer to another university, obtain some other legal visa status, or depart the U.S. The DHS decision is premised on allegations that Harvard’s leadership has failed to address pervasive antisemitism and pro-terrorist conduct on its campus, as well as accusations of collaboration with the Chinese Communist Party, and failed to cooperate with DHS’s demands for information regarding its students.
On May 23, 2025, Harvard filed suit in U.S. District Court for the District of Massachusetts seeking an injunction on revocation of Harvard’s SEVP certification, alleging that the revocation violates both the U.S. Constitution and Administrative Procedure Act. On the same day, the District Court issued a Temporary Restraining Order enjoining the U.S. government and its agents, including DHS, from implementing the SEVP termination until there is a hearing on the matter. The Court found that Harvard would face immediate and irreparable injury if the termination takes effect before such a hearing.
If the termination takes effect, the impact of the decision will be substantial. Harvard, which had 6,793 international students enrolled during the 2024-2025 academic year, would face the loss of one quarter of its student population. International students would either have to transfer to other institutions or lose their legal student status in the U.S. by remaining enrolled at Harvard. Termination would have serious financial and academic implications, as international students contribute substantially to Harvard’s revenue and academic scholarship. The university’s leadership has vowed to provide guidance and support to affected students during this tumultuous period.
New York’s Highest Court Defers to Tax Tribunal, Finds Sales Tax Exception for Information Service Providers Does Not Apply
A recent decision by the State of New York Court of Appeals (New York’s highest court), issued over a fiery and well-reasoned dissent, calls into question the continued viability of what has historically been an important exception to New York’s imposition of sales tax on otherwise broadly defined so-called “information services.” In the Matter of Dynamic Logic Inc., v. Tax Appeals Tribunal of the State of New York et al., 2025 NY Slip Op 02262 (N.Y. Apr. 17, 2025). New York’s current sales tax scheme, as enacted by the New York Legislature, is a tax on tangible property and a limited number of enumerated services mostly connected to the sale of tangible property. It may be time for the Legislature to step in to defend the sales tax scheme it has enacted, otherwise the state taxing authorities, with an assist from the courts, will continue to reinterpret New York’s sales tax scheme into a broad-based tax on services.
While an “information service” is broadly defined in New York as the service of “furnishing information” and includes “the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons,” New York law also provides for an exception to taxability when the information service involves “the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons….” NY Tax Law § 1105(c)(1).
Dynamic Logic Inc. (“Dynamic”) offers solutions to help its clients measure the effectiveness of their advertising campaigns and, specifically, at issue in the case was a solution offered by Dynamic known as AdIndex. Dynamic identified individuals who had been exposed to the client’s advertisements and then would survey those individuals along with a control group. The final deliverable was a report that Dynamic created for its client that included “survey data collected, an analysis of the ‘story’ the data tells, as well as client-specific ‘insights,’ ‘implications,’ ‘next steps,’ and ‘recommendations’ gleaned from the data.” One component of the report was a comparison of the client’s data “to broader market data” contained in a database maintained by Dynamic. Data collected for clients as part of the AdIndex solution would later be incorporated into the database where it would be “aggregated and anonymized” and become a part of the “broader market data” for use in future AdIndex reports.
On appeal, the parties agreed that the information at issue in the AdIndex reports was “personal or individual in nature,” but the Department of Taxation and Finance (“Department”) took the position, and the Tax Tribunal agreed, that the exception nonetheless did not apply because the information “was substantially incorporated into reports furnished to other people.”
The Court of Appeals first adopted a highly deferential standard of review stating that its job was only to determine whether the Tribunal’s decision was “rational” and “supported by substantial evidence.” The Court next found that the Tribunal’s decision had been “rational” because “every AdIndex report contains benchmark data, which, in turn, contains a meaningful amount of data generated from prior AdIndex reports.” While the Court acknowledged that the benchmark data was “a relatively small portion of each subsequent report[,] that reincorporation is qualitatively important to the analytical value of the report rendering it ‘substantial.’”
A powerful dissenting opinion found that the plain meaning of the exception, supported by the Department’s own regulation and its examples, “looks to whether the end product is substantially incorporated into reports furnished to others.” Here, there was never an instance where an AdIndex report for one client was substantially incorporated into the AdIndex report for another client. The dissent observed that by finding aggregated and anonymized background data is “substantially incorporated” into subsequent AdIndex reports because that background data adds “qualitative value” to the subsequent AdIndex reports, the Court’s interpretation “judicially nullifies the exclusion created by the [L]egislature.”
The Legislature should take note!
Texas AG Announces $1.375 Billion Settlement with Google for Privacy Violations
On May 9, 2025, Texas Attorney General Ken Paxton announced a $1.375 billion agreement in principle to settle cases it filed against Google in 2022 alleging that Google unlawfully collected, stored and used certain personal data of Texans without consent, including location information, biometric identifiers and web browsing activity. More specifically, according to the AG’s allegations, Google (1) continued to collect and use precise location data even when users disabled location services, (2) misled users to think that activity would not be tracked when using the “Incognito” mode in Google’s Chrome browser, and (3) captured and used biometric identifiers, such as voiceprints and facial geometry, in violation of the Texas Capture or Use of Biometric Identifier Act through products such as Google Photos and Google Assistance.
A press release from the Texas AG’s Office stated that the settlement delivers “a historic win for Texans’ data privacy and security rights. . . . To date, no state has attained a settlement against Google for similar data-privacy violations greater than $93 million. Even a multistate coalition that included forty states secured just $391 million — almost a billion dollars less than Texas’s recovery.”
A Google spokesperson said in a statement that the agreement “settles a raft of old claims, many of which have already been resolved elsewhere, concerning product policies we have long since changed.” The spokesperson said that Google is pleased to put the claims behind them and will continue to build robust privacy controls into Google services.
Orange Book Listings: Republican Led FTC Picks Up Where Democrat Led FTC Left Off
Key Takeaways
The Federal Trade Commission (FTC), now under Republican leadership, has continued its scrutiny of Orange Book listings for device patents, signaling bipartisan concern over potential anti-competitive practices
Despite new Warning Letters, many of the questioned patents were already delisted or tied to discontinued products, suggesting limited immediate impact on generic competition
Both branded and generic drugmakers may need to reassess litigation strategies and patent listings as regulatory and enforcement dynamics evolve
During the past two years, we have reported on actions regarding the listing of certain patents in the U.S. Food and Drug Administration’s (FDA) Orange Book for drug/device products where the patents focus on the device aspect of the product.1 During the Biden Administration, the FTC, under Democratic-led leadership, started taking note of what it deemed to be “improper” Orange Book patent listings. With all of the changes being implemented by the Trump Administration and at FTC, an open question remained as to whether the FTC would remain active in this area. We now have at least a partial answer to this question – the propriety of certain Orange Book patent listings will remain a focus of FTC.
Under the Biden Administration, the FTC issued two sets of Warning Letters (on November 7, 2023, and April 30, 2024) to multiple drug manufacturers and FTC commenced so-called patent listing dispute proceedings before FDA. Historically, however, the FDA has treated the listing of patents as an administrative matter and does not challenge the information submitted by the NDA holder. As we noted on July 17, 2024, those proceedings initiated by FTC had a minimal impact, as many of the patents remained in the Orange Book.
However, on December 20, 2024, the United States Court of Appeals for the Federal Circuit held that certain patents that were listed in the Orange Book for an asthma inhaler should have been delisted as the claims in question did not recite the active ingredient. Teva Branded Pharmaceutical Products R&D, Inc. et al. v. Amneal Pharmaceuticals of New York, LLC et al., (Fed. Cir Case 2024-1936, Dec. 20, 2024). On March 3, 2025, the Federal Circuit denied Teva’s petition for an en banc hearing. We have observed that in recent updates to the Orange Book, many device type patents have been delisted, presumably at the NDA holder’s request.
For certain products, the Teva decision could lead to additional patent listing disputes and the potential for antitrust counterclaims where patents focusing on the device aspect of drug/device patents are listed. Determining when this would be a potential strategy for generic companies involves an analysis of the competitive landscape, the timeliness of the FDA’s review, the types of patents the brand holds and what the expiration date is for each patent. But, with the significant changes brought about by the Trump Administration, it was an open question how active the FTC would be going forward, even after the Teva decision.
Specifically, on January 20, 2025, President Trump designated Andrew Ferguson to become the new Chairman of the FTC. Then, on March 18, 2025, President Trump fired the two remaining FTC Democratic Commissioners. All these changes begged the question as to whether a Republican-led FTC would continue to take aim at Orange Book listings? The answer to that question appears to be ‘yes’! On May 21, 2025, the new FTC leadership issued Warning Letters that were similar to the ones sent in 2023 and 2024 to seven companies, questioning the legitimacy of the listings for multiple products. Like the previous Warning Letters, FTC’s action was to institute patent dispute procedures at FDA.
In the May 21, 2025, FTC Press Release, Commissioner Ferguson stated:
The American people voted for transparent, competitive, and fair healthcare markets and President Trump is taking action. The FTC is doing its part, . . . . When firms use improper methods to limit competition in the market, it’s everyday Americans who are harmed by higher prices and less access. The FTC will continue to vigorously pursue firms using practices that harm competition.
We have reviewed each of the seven Warning Letters published by FTC (that cover 16 products) and a deeper dive indicates that Commissioner Ferguson’s proclamation may not have a significant impact on competition. Of the 16 brand products identified, seven have been discontinued by the brand, one of the products already has multiple generic competitors, the patents for two of the products will expire in roughly three months, and, for five others, the products in question have Orange Book listed patents whose legitimacy for listing was not questioned by FTC expiring later than those whose legitimacy was questioned. It appears that only one of the sixteen products appears to only list patents questioned by FTC. Moreover, at the time the FTC’s letters were sent, several of the patents in question had already been delisted from the Orange Book.
We also note that FTC has deferred action to the FDA, which is in the midst of significant staffing reductions that have led to slower response times. And, as discussed above, the FDA has traditionally taken the position that its role in patent listings is only ministerial. That being said, it will be interesting to see whether the new FDA leadership will take a different view.
While the new FTC has continued in its predecessor’s wake by sending out a series of Warning Letters relating to Orange Book patents, whether this action will create a more competitive landscape remains to be seen. And, both branded and generic companies may need to rethink their strategies in dealing with patents whose Orange Book listing is questionable. For example, for those products where there are both FTC questioned and unquestioned patents listed in the Orange Book, both the brand and generic company may desire legal certainty and the inclusion of both types of patents in a single lawsuit may be preferred to separate suits. Even if device patents are ultimately removed from the Orange Book, the possibility of litigation over these patents at some point in time still exists. The industry should certainly pay close attention to future developments in this area.
1] See Chad A. Landmon, Andrew M. Solomon, Federal Circuit Refuses to Rehear Case Involving Orange Book Listing of Device Patents, Polsinelli (Mar. 05, 2024), https://natlawreview.com/article/federal-circuit-refuses-rehear-case-involving-orange-book-listing-device-patents ; Court Ruling Alters the Calculus for Orange Book Patent Listings, Polsinelli (Jan. 23, 2025), https://www.polsinelli.com/publications/court-ruling-alters-the-calculus-for-orange-book-patent-listings; Federal Circuit Decides Case Involving Orange Book Listing of Device Patents, Polsinelli (Dec. 23, 2024), https://natlawreview.com/article/federal-circuit-decides-case-involving-orange-book-listing-device-patents; The FTC’s Challenge to the Listing of Device Patents in the Orange Book: What Challenge?, Polsinelli (Jul. 17, 2024), https://natlawreview.com/article/ftcs-challenge-listing-device-patents-orange-book-what-challenge
Tenth Circuit Rules Forfeiture-for-Competition Not Subject to Non-Compete Reasonableness Test
In Lawson v. Spirit AeroSystems, Inc., the U.S. Court of Appeals for the Tenth Circuit upheld the forfeiture of certain stock awards for violating a covenant not to compete. Like the Seventh Circuit in LKQ Corp. v. Rutledge(which applied Delaware law), the Tenth Circuit concluded that, under Kansas law, the remedy of forfeiting future compensation is not subject to the same reasonableness standard as traditional enforcement of a non-compete obligation. The Tenth Circuit reached this conclusion even though the executive’s agreement included both a forfeiture-for-competition provision and traditional enforcement rights (i.e., the right for the company to pursue monetary damages and specific performance), because the agreement terms enabled the forfeiture provision to be severed from the traditional enforcement provisions.
Background and the Court’s Analysis
A retirement agreement allowed the former CEO of Spirit AeroSystems (“Spirit”) to receive cash payments and continue vesting in certain stock awards if he continued working for Spirit as a consultant and complied with a non-compete agreement. The CEO subsequently contracted with a hedge fund that was pursuing a proxy contest against one of Spirit’s suppliers. Spirit determined that this activity breached the non-compete and therefore stopped payments to the CEO and cut off continued vesting of the stock, resulting in forfeiture of the CEO’s then-unvested stock awards. Notably, Spirit did not seek to claw back cash that had already been paid or stock that had already vested: only future compensation and vesting were affected.
The court first found under Kansas case law a distinction between a traditional penalty for competition and forfeiture of future compensation for competition. Under Kansas case law, the former is valid and enforceable only if “reasonable under the circumstances and not adverse to the public welfare.” But the court concluded that Kansas law does not subject the latter to the same reasonableness standard because it does not restrain competition in the same way. Rather than imposing a penalty, a forfeiture for competition provision “merely provides a monetary incentive in the form of future benefits for not competing.” The court reasoned that a forfeiture for competition provision gives the worker “a choice between competing and thereby forgoing the future benefits or not competing and receiving those benefits.” And because the forfeiture applied only to future compensation, it did not amount to a penalty: the executive forfeited only “the opportunity for the shares to vest notwithstanding his retirement.”
Second, the court reasoned that the policy justifications for reasonableness review did not apply to forfeiture in this case. The court stated that reasonableness review addresses the risk that (1) the employer’s bargaining power can lead to a one-sided non-compete that leaves former employees unable to support themselves after their employment ends and (2) “overbroad” restrictions on competition can “decrease options available to consumers and generate market inefficiencies.” The court concluded that neither of those risks were present in this case, noting that the executive was sophisticated and had support of counsel and that the executive had an opportunity to receive substantial compensation if he had complied with the covenant.
Third, the court reasoned that “[f]reedom of contract is the fountainhead of Kansas contract law.” Accordingly, the court determined that the forfeiture-for-competition provision should be presumed enforceable, absent the policy concerns described above.
Unlike the Seventh Circuit in LKQ—which certified a question of Delaware law to the Delaware Supreme Court—the Tenth Circuit refused to certify the question of Kansas law to the Kansas Supreme Court. For the reasons described above, the court determined that it could predict the Kansas Supreme Court’s interpretation of Kansas law with sufficient confidence to make certification unnecessary.
Finally, the court rejected an argument that reasonableness review should be required because Spirit had both the right to invoke forfeiture and the right to seek traditional enforcement (monetary damages and specific performance). The court determined that, in this case, the right to seek traditional enforcement could be severed from the right to invoke forfeiture. Because Spirit relied exclusively on the forfeiture provision and expressly declined to pursue traditional enforcement, the fact that Spirit could have pursued traditional enforcement was not fatal.
Takeaways
Although Lawson is binding only on federal courts in the Tenth Circuit that are applying Kansas state law (and Kansas state courts could still reach a different conclusion), it provides meaningful authority for the proposition that a forfeiture for competition provision can be enforced even if applicable law otherwise limits the enforceability of non-compete provisions. (Notably, however, some states reject forfeiture for competition.) The decision offers a few important practical takeaways:
The particular facts matter. In this case, the court noted that the forfeiture provision had been negotiated by sophisticated parties represented by counsel and determined that policy concerns with non-compete provisions (interfering with the ability to make a living and potential to generate market inefficiencies) were not present.
Drafting matters. If an agreement has more than one enforcement mechanism (e.g., a right to seek damages and injunctive relief and a separate statement that breach will result in forfeiture of certain compensation or benefits), it is important to make each enforcement mechanism distinct and severable from the others. The result of this case could have been different if the agreement did not have a severability clause. It also helps to state clearly that amounts subject to forfeiture are not considered earned or fully vested (even if considered vested for tax purposes) unless and until the employee has satisfied all applicable conditions. Clarity on this point helps the court to distinguish between a permissible compensatory incentive to comply and a potentially impermissible penalty for breach.
Enforcement strategy matters. The court emphasized that Spirit did not pursue injunctive relief or damages and that the forfeiture applied only with respect to future payments and vesting. Had Spirit sought to claw back prior payments or stock that had already vested, the court might have treated the forfeiture as a penalty that required reasonableness review.