Notice to Employers: The EEOC Is Targeting Anti-American Bias
On February 19, 2025, the U.S. Equal Employment Opportunity Commission’s (EEOC) Acting Chair Andrea Lucas vowed to prioritize anti-American national origin discrimination in compliance efforts, investigations, and litigation. See EEOC Newsroom, EEOC Acting Chair Vows to Protect American Workers from Anti-American Bias (Feb. 19, 2025).
Lucas announced, “The EEOC is putting employers and other covered entities on notice: if you are part of the pipeline contributing to our immigration crisis or abusing our legal immigration system via illegal preferences against American workers, you must stop. The law applies to you, and you are not above the law. The EEOC is here to protect all workers from unlawful national origin discrimination, including American workers.”
The EEOC stated that it intends to “help deter illegal migration and reduce the abuse of legal immigration programs by increasing enforcement of employment antidiscrimination laws against employers that illegally prefer non-American workers, as well as against staffing agencies and other agents that unlawfully comply with client companies’ illegal preferences against American workers.”
The EEOC’s announcement calls out the following reasons for an employer’s preference for non-American workers as invalid:
lower cost labor (whether due to payment under the table to illegal aliens, or exploiting rules around certain visa-holder wage requirements, etc.);
a workforce that is perceived as more easily exploited, in terms of the group’s lack of knowledge, access, or use of wage and hour protections, antidiscrimination protections, and other legal protections;
customer or client preference; and
biased perceptions that foreign workers are more productive or have a better work ethic than American workers.
Potential Risks
Title VII of the Civil Rights Act of 1964 (Title VII) prohibits discrimination on the basis of various protected classes, including national origin. Employees and applicants who have been subjected to unlawful discrimination under Title VII based on their national origin may recover back- and front-pay damages, compensatory damages, punitive damages, and attorneys’ fees, subject to certain caps. Employers may also be subject to injunctive relief, including hiring or reinstatement and requirements to take actions to stop discriminatory practices and prevent discrimination going forward.
The EEOC has already demonstrated its focus on national origin discrimination in its first publicized settlement under Lucas’ leadership. On February 14, 2025, the EEOC filed suit in the U.S. District Court for the District of Guam against LeoPalace Guam Corporation, doing business as LeoPalace Resort. See U.S. Equal Employment Opportunity Commission v. LeoPalace Guam Corporation dba LeoPalace Resort and Does 1-5, Inclusive; Civil No. 1:25-cv-00004 (D. Guam consent decree filed February 19, 2025). In the lawsuit, the EEOC alleged that LeoPalace violated Title VII by subjecting non-Japanese employees, including employees of American national origin, to less favorable wages, benefits, and terms and conditions of employment compared to its Japanese employees. Ultimately, LeoPalace agreed to a settlement with the EEOC in which it must pay $1,412,500 and agree to injunctive relief, including hiring an external equal employment opportunity monitor to oversee compliance and training, review policies and procedures, and oversee former employee reinstatement.
Takeaways
The EEOC’s emphasis on national origin discrimination may have a particular impact on employers with high percentages of immigrant workers, including the construction, agriculture, hospitality, and healthcare industries. Employers should prepare for increased scrutiny of, and potential discrimination claims based on any workplace policy that appears to show a bias for or against any national origin group, including policies regarding the use of citizenship status in employment decisions.
Employers should review their workplace policies and hiring practices to ensure that they comply with federal law. The changing priorities at the EEOC can be challenging to navigate. Employers are encouraged to consult their legal counsel for advice on how to ensure that they remain compliant with the law.
Misapplied Employee Fitness Exam Leads to Back Pay Under Americans with Disabilities Act, Seventh Circuit Holds
U.S. Court of Appeals for the Seventh Circuit recently held that an employee who was neither disabled nor perceived as disabled was entitled to back pay damages under the ADA
The court found that a medical exam requirement was a form of disability discrimination, even though the plaintiff had no actual or perceived disability
Given this ruling, employers should be cautious when requiring medical examinations and ensure they are clearly job-related and consistent with business necessity
While the Americans with Disabilities Act (ADA) is generally designed to protect employees with actual or perceived disabilities, the U.S. Court of Appeals for the Seventh Circuit recently held that an employee who was neither disabled nor perceived as disabled was entitled to back pay damages under the ADA.
In Nawara v. Cook County, the plaintiff, John Nawara, engaged in a series of altercations with superiors and consequently was required to undergo a fitness-for-duty exam before he could return to work. Nawara stalled in agreeing to the exam before ultimately submitting and being returned to work. He sued under the ADA and prevailed because medical exams and inquiries are generally prohibited for active employees unless they are job-related and consistent with business necessity and his exam did not reach that threshold.
However, the jury awarded Nawara no back pay. The trial court upheld the award of zero back pay, holding that Nawara must prove he had an actual or perceived disability to prove disability discrimination that merited back pay.
Nawara appealed, and the Seventh Circuit reversed and remanded on the back-pay issue. The appellate court held that the medical exam requirement constituted a form of disability discrimination, even though Nawara had no actual or perceived disability. Once the court found that disability discrimination had occurred, the award of back pay based on this discrimination was held to be consistent with the law.
Takeaways
Employers should be cautious when requiring medical examinations or making disability inquiries once employment starts. Any such inquiries and examinations must be job-related and consistent with business necessity. While such inquiries and examinations will likely be allowed when evaluating an accommodation request or evaluating whether an employee poses a direct threat due to a medical condition, they seldom are allowed in other contexts, and an employer who makes such inquiries or requires such exams in other contexts may now be responsible for enhanced damages following the Seventh Circuit’s ruling. Employers should consider consulting with legal counsel when considering a medical examination in such contexts.
Another Win for the Administration, at Least for Now – SCOTUS Today
The motions docket of the U.S. Supreme Court remains busy.
Following the April 4 decision in Department of Education v. California—in which the Court, treating a temporary restraining order (TRO) as if it were a preliminary injunction, stayed an order that would have blocked the government from ending over 100 education-related grants and allowed the case to proceed in the U.S. Court of Appeals for the First Circuit without requiring the government to meet payment obligations—a similar result was reached today in the Court’s 7–2 order in the case of OPM v. AFGE.
In AFGE, the Court was again confronted with an application for a stay, this time with respect to an appeal to the Ninth Circuit from an injunction issued by the United States District Court for the Northern District of California that would have required the reinstatement of approximately 16,000 fired federal workers who had probationary status at the departments of Agriculture, Defense, Energy, Interior, Treasury and Veterans Affairs. The case had been brought by the American Federation of Government Employees, the AFL-CIO, and several other nonprofit organizations that argued that the terminations were based on the pretense that the employees’ performance was “deficient.” Over the dissents of Justices Sotomayor and Jackson, the Court held that the nine plaintiffs had failed to demonstrate organizational standing.
The Court’s order denying a stay does not address the claims of other plaintiffs who were not affected by the district court’s preliminary injunction. Given that there are other potential plaintiffs, as well as agencies that were not named in the instant AFGE suit, questions concerning the current administration’s mass firings of federal workers, probationary and otherwise, are still viable in other actions brought by, or on behalf of, individuals who are more likely to have sufficient standing to litigate against the government. For now, however, the administration is three for three in cases coming from the “shadow” docket (i.e., cases that have not been fully briefed and argued) that have been decided in the last two days.
Department of Education v. California is one of the three, and OPM v. AFGE is another. The third, decided late yesterday, is Trump v. J.G.G. This case concerns the detention and removal from the United States of Venezuelans believed to be members of Tren de Aragua, a gang that has been designated by the U.S. State Department as a foreign terrorist organization. The basis for these arrests and expulsions is yet another presidential proclamation, this one pursuant to the Alien Enemies Act (AEA), 50 U. S. C. §21.
In a widely publicized suit brought by five detainees and a putative class, Judge James Boasberg of the D.C. District Court issued two TROs intended to prevent the removal of the named plaintiffs and putative class members pending the resolution of their general and personal claims. As has been widely reported, many of these persons were shipped out of the country, arguably before Judge Boasberg had rendered a formal, written opinion, and their potential return from El Salvador and elsewhere is a hot political issue. Others are in Texas, and their cases will be able to proceed. It is important to note that these plaintiffs had dismissed that portion of their complaint that invoked habeas corpus.
Given that, by its literal wording, the AEA applies to individuals who are citizens of enemy nations, and then only in times of declared war, actual or attempted invasions, and “predatory incursions,” and that none of these conditions would appear to be present, I had thought that the government’s defense would have been rejected out of hand. However, any such determination will have to await future litigation. You might remember learning in high school of the Alien and Sedition Acts that, in the post-Revolutionary era, were designed by Congress to deport citizens of a “hostile government” who were at least 14 years old. Indeed, the AEA was enacted 227 years ago, in 1798, and, until now, has been employed only three times: The War of 1812, World War I, and World War II. Thus, the current state of affairs, initiated by an unprecedented presidential proclamation that foreign gangsters have infiltrated our country and activated the AEA, would appear to be an anomaly.
However, the lawfulness of the detentions and removals will not be determined at present. Instead, in yet another case where the Supreme Court treats a TRO as a preliminary injunction, seven Justices have held that, although judicial review under the AEA is limited, an “individual subject to detention and removal under that statute is entitled to ‘judicial review’ as to ‘questions of interpretation and constitutionality’ of the Act as well as whether he or she ‘is in fact an alien enemy fourteen years of age or older.” Indeed, the government now concedes the point. Thus, the Supreme Court ruled that the detainees are entitled to notice and a hearing that would enable them to challenge their removal.
Notwithstanding their dismissal of the claim that invoked habeas corpus, the Court held that this, not the Administrative Procedure Act, would be the proper basis for a cause of action and that the venue to hear it would be in the district of confinement, i.e., in Texas, not Washington, DC. The question remains as to how many detainees are still in the United States and thus able to take advantage of the relief afforded by the Court, which did not consider the fact that the administration is arguing elsewhere that it cannot be ordered to seek the return of persons expelled to another country. However, as Justice Kavanaugh notes in concurring, the issue is not whether the detainees will obtain a review of their claims—on which all nine Justices agree—but only where. Of course, one should not overlook the dissent written by Justice Sotomayor, joined by Justices Kagan and Jackson, and the (to many) surprising joinder in large part of Justice Barrett critical of the application of a statute intended for use in wartime and under circumstances here that the dissenters believe were created by the duplicity of the government.
In the final analysis, though the government will claim, not without cause, that it has achieved considerable victories and enhancements of executive authority in these three cases, such victories may very well prove transitory in the litigation maelstrom that the current administration has unleashed. An admirer of Homer’s Odyssey will recall how Odysseus’s men, driven by greed, opened the bag of winds that the god Aeolus had provided, thinking it contained treasure. It has yet to be determined how the administration will ultimately be “rewarded.”
Landmark Settlement in NCAA NIL Litigation: Federal Judge Approves Settlement Over NIL Recruiting Rules
On March 21, 2025, the U.S. District Court for the Eastern District of Tennessee made its preliminary injunction permanent and approved a settlement as it relates to the National Collegiate Athletic Association’s (NCAA) bylaw banning the use of name, image, and likeness (NIL) compensation during the recruitment of student-athletes (the NIL Recruiting Ban).
Quick Hits
A federal district court in Tennessee recently approved a settlement permanently enjoining the NCAA’s Recruiting Ban.
The NCAA will no longer enforce NIL recruiting rules.
The NCAA has committed to publicizing any new proposed rules related to NIL opportunities (on a dedicated webpage) for the next five years—at least thirty days prior to any vote on final approval.
The settlement does not prevent the NCAA from its ability to adopt reasonable rules that prohibit compensation that is not for a student-athlete’s or prospective athlete’s NIL.
Background
The lawsuit was initiated in January 2024 by the states of Tennessee and Virginia, with Florida, New York, and the District of Columbia joining the suit in May of the same year. The lawsuit challenged the NCAA’s bylaw that prevented student-athletes from learning about or negotiating potential NIL compensation from third parties during the recruiting process. This rule was seen as a significant barrier for student-athletes when deciding whether to commit to or transfer to a particular university.
In February 2024, the court granted a preliminary injunction blocking the NCAA from enforcing the bylaw while the lawsuit was ongoing. The court found a strong likelihood that the prohibition violated federal antitrust laws and caused harm to student-athletes. The parties involved in the lawsuit subsequently filed a joint request for the judge to approve the settlement on March 17, 2025.
The Settlement and Its Implications
The court signed off on the settlement agreement, which not only resolves the current litigation but also imposes a permanent ban on similar NIL recruiting restrictions in the future. As part of the agreement, the NCAA will no longer enforce NIL recruiting bylaws. Further, the NCAA has committed to publicizing any new proposed bylaws related to NIL opportunities on a dedicated public website for the next five years, at least thirty days prior to any vote on final approval. That public website is required to give users the option to subscribe to receive automatic updates when new information appears on the webpage.
Key Takeaways
By eliminating the NIL recruiting rules and ensuring transparency in future changes, the settlement agreement provides clarity to member schools and collectives that were concerned about compliance with the NIL Recruiting Ban. Member schools are still prohibited from engaging in NIL discussions with prospective student-athletes or potential transfer student-athletes or compensating student-athletes for NIL; however, third-party entities—including boosters or collectives of boosters—are allowed to engage in such activity due to the permanent injunction.
FinCEN Exempts U.S. Entities from Reporting, but Uncertainty Remains
On March 21, 2025, the previous deadline to report Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act (CTA), FinCEN released an interim final rule removing this requirement for U.S. companies. While U.S. companies are no longer required to report BOI under this rule, questions remain over the implementation of the CTA and the possibility that reporting for domestic companies may be reinstated.
The Interim Rule’s Impact
The interim final rule exempts domestic reporting companies and their beneficial owners from a requirement to report BOI to FinCEN by excluding domestic companies from the scope of the term “reporting company.” Under the new rule, a reporting company only includes an entity that is (a) a corporation, limited liability company, or other entity; (b) formed under the law of a foreign country; and (c) registered to do business in the United States. The rule also clarifies that foreign entities are exempt from reporting BOI about any beneficial owner who is a U.S. person.
Accordingly, U.S. entities are not required to file BOI reports, regardless of whether they have U.S. or foreign owners, and foreign entities registered to do business in the U.S. do not need to report any information about U.S. persons. Foreign entities that were registered to do business in the U.S. before March 21, 2025, must file their BOI reports no later than April 20, 2025, and any foreign entities that register to do business in the U.S. after March 21, 2025, must file the report within 30 days after receiving notice that their registration is effective.
The CTA Moving Forward
Although this rule relaxes requirements for U.S. entities, the CTA may not support FinCEN’s interim final rule. With the Supreme Court’s ruling in Loper Bright V. Raimondo, ending deference to regulatory agencies, the interim final rule may come under scrutiny in the courts. If the interim final rule is invalidated, domestic entities could be in the same position as before, having to report BOI to FinCEN.
As a result, while there is no need for domestic entities to report BOI to FinCEN at the moment, domestic entities exempted by the interim final rule should be aware that a court challenge to the interim rule could reinstate reporting requirements, and thus should plan accordingly.
District Court Dismisses Putative Nationwide TCPA Class Action Filed Against Berkshire Hathaway Home Services of Nevada Based on Failure to Allege Vicarious Liability
Companies across multiple industries that utilize promotional text messages and phone calls are being targeted by class actions filed under the Telephone Consumer Protection Act. On March 31, 2025, a Nevada federal district court dismissed a putative TCPA class action filed against a real estate company, Berkshire Hathaway HomeServices Nevada Properties because the plaintiff had failed to sufficiently allege that BHHS should be held vicariously liable for marketing calls made by nonparty real estate agents to phone numbers registered on the National Do-Not-Call Registry. The case is Kelly Usanovic v. Americana, L.L.C., No. 2:23-cv-01289-RFB-EJY, 2025 WL 961657 (D. Nev. Mar. 31, 2025).
The plaintiff had allegedly listed her home for sale, and when the listing expired, she immediately received several marketing calls, and calls using an artificial or prerecorded voice, from multiple real estate agents affiliated with BHHS, even though her number was on the NDNCR. The plaintiff claimed the calls violated the TCPA, and that BHHS, which had allegedly provided extensive training on cold calling practices to its agents, was vicariously liable for the calls. She sought to represent two nationwide classes of persons who received similar calls.
The court granted BHHS’s motion to dismiss the plaintiff’s Second Amended Complaint, with prejudice, and entered judgment for defendant. It held the plaintiff had failed to allege sufficient facts to establish an agency relationship between BHHS and the agents. As the Court observed: “To establish an agency relationship, the plaintiff must show that BHHS controlled or had the right to control the real estate agents—specifically the manner and means of the calls conducted. (citation). The essential ingredient in determining whether an agency relationship exists is the extent of control exercised by the employer.”
Although the plaintiff alleged that BHHS trained the real estate agents on how to make unsolicited calls to expired listings and that BHHS suggested where they could purchase phone numbers and dialers, the plaintiff did not allege this training was required, or that the agents had to use the specific vendors that BHHS recommended. Nor did the plaintiff allege that BHHS directed agents on how many calls to make, or that any of the calls occurred under BHHS’s supervision.
The court also held that, even if an agency relationship existed, the plaintiff did not allege facts sufficient to establish vicarious liability under an actual authority, apparent authority, or ratification theory. There were no allegations that BHHS authorized or directed agents to call numbers listed on the NDNCR, that the plaintiff relied on any statement of the agent’s authority made BHHS or by any of the agents who allegedly called her, or that BHHS knowingly accepted the benefits of or otherwise ratified any allegedly unlawful calls.
Vicarious liability has been and will continue to be a hotly contested issue in many TCPA class actions, both in the real estate space and in other industries. It is the plaintiffs, however, who have the burden of alleging specific facts which, if proven true, would establish the defendant is vicariously liable for the telemarking calls or text messages. The Usanovic decision is useful reminder that challenging the sufficiency of the plaintiff’s vicarious liability allegations may be an effective way to stop a TCPA class action in its tracks.
Weight Discrimination Takes Center Stage in Harris v. City of New York
On March 19, 2025, the New York Supreme Court issued a landmark decision in Harris v. City of New York, a suit challenging discrimination based on weight under the New York City Human Rights Law (“NYCHRL”). The Court denied the City’s motion to dismiss Ms. Harris’s suit in one of the first judicial interpretations of the 2023 NYCHRL amendments adding height and weight to the list of characteristics protected against discrimination in employment, housing, and public accommodations. See Local Law 61 of 2023.
Background of the Harris New York Weight Discrimination Case
Angela Harris alleged she was denied employment as a probation officer solely because of her weight. After she passed the civil service exam to become a probation officer in 2022, the NYPD invited Ms. Harris to undergo a medical evaluation in May 2024. According to her amended complaint, at that evaluation she was told to “leave and only return after losing 95 LBS” and was handed a pre-printed form titled “NYPD Notice of Medical Review Status PD 407-123” requiring her to be reweighed after weight loss. The form also noted her current weight.
Ms. Harris filed a case alleging discrimination based on her weight on July 8, 2024. The NYPD contacted Ms. Harris on July 19, 2024, and directed her to appear at the Candidate Assessment Division (“CAD”) on August 2. Among other things, the CAD administers a physical fitness assessment for candidates for law enforcement positions. Ms. Harris’s attorney replied on July 24, informing the NYPD that Ms. Harris had filed her weight discrimination case and requesting the appointment be rescheduled given the pending litigation. Neither the Department of Probation nor the NYPD communicated with Ms. Harris after that.
The City moved to dismiss the case, claiming that Ms. Harris failed to plead facts showing she was qualified for the position of probation officer, that she was treated less well because of her weight, or that discrimination was a motivating factor in the decision not to select her for the position. The City also characterized the directive to lose weight as a “medical determination.”
Court Finds for Harris, Citing Language and Intent of Weight Discrimination Prohibition
Justice Hasa A. Kingo denied the NYPD’s motion to dismiss, holding that Harris stated viable claims of discrimination and retaliation under the NYCHRL and granting her cross-motion to amend her complaint.
Crucially, the Court highlighted the liberal pleading standards that apply under the NYCHRL that require only fair notice of the nature of the claim. The Court concluded that Ms. Harris had adequately pleaded discrimination by alleging she was directed to lose a set amount of weight as a condition of further consideration and was not hired, even as others who passed the same exam were sworn in. The Court considered the directive to “leave and only return after losing 95 pounds” alongside a form recording Ms. Harris’ current weight and instructing her to be reweighed after losing a certain number of pounds sufficient to raise an inference of discrimination. The Court noted that there are certain exceptions where an individual’s weight may be considered when making employment-related decisions but that in this case, the City failed to identify any law or regulation that required such a policy or justified it under the NYCHRL’s narrow exceptions for when weight may be considered in employment decisions.
The Court was not persuaded by the City’s argument that the form was a medical determination. The form did not contain any statements about a medical diagnosis, and the City itself repeatedly referred to Ms. Harris as “overweight” without connecting that label to any individualized assessment of her fitness for the job. The Court quoted the NYC Commission on Human Rights, stating that “[s]tereotypes or speculative health and safety concerns regarding body size stem from entrenched bias and do not constitute permissible justifications for height or weight discrimination.” The Court emphasized that the statute proscribes discrimination on the basis of “actual or perceived weight” and “targets entrenched biases about a person’s capacity because of their weight.”
Court Also Allows Retaliation Claim to Proceed
The Court also allowed the retaliation claim to proceed. Under the NYCHRL, a plaintiff must show: (1) that she engaged in protected activity, (2) the employer was aware of such activity, (3) the employer took action that is reasonably likely to deter a person from engaging in a protected activity, and (4) that there is a causal connection between the protected activity and the employer’s action. Harris alleged that after her attorney informed the NYPD of her pending lawsuit for unlawful weight discrimination, all communication ceased, and her August appointment with the NYPD was not rescheduled. The Court found that these facts sufficiently alleged a causal connection between the lawsuit—a protected activity—and the City’s failure to continue her candidacy.
What This Weight Discrimination Ruling Means for Employers and Employees
This decision sends a clear message to employers: weight-based employment decisions cannot rest on outdated stereotypes or arbitrary policies without legal justification. With the NYCHRL’s explicit protections for height and weight now in effect, employers who rely on blanket weight thresholds without individualized analysis risk violating the law.
Harris v. City of New York is not just about one applicant—it is about how weight bias operates in institutional settings and how the law can be used to challenge it. As one of the first decisions to apply the City’s new protections, it sets an important precedent for future cases and underscores the NYCHRL’s commitment to rooting out all forms of discrimination—including those based on body size.
The LDT Final Rule Bites the Dust: Examining the Repercussions of the Federal Court’s Vacatur and What the Future May Hold
On March 31, 2025, Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas ruled that the Food and Drug Administration (FDA) lacks the statutory authority to regulate laboratory developed tests (LDTs).[1]
The court’s judgment vacates the agency’s controversial final rule of May 6, 2024 (“Final Rule”), regulating LDTs as medical devices—just weeks before the Final Rule’s initial implementation deadline—and remands the issue back to FDA for further consideration.
The two cases that were the subject of the ruling were filed shortly after FDA’s issuance of the Final Rule. In American Clinical Laboratory Association et al. v. FDA, and Association for Molecular Pathology et al. v. FDA, the plaintiffs challenged the Final Rule under the Administrative Procedure Act (APA).[2] Notably, the strength of the plaintiffs’ cases was enhanced when, on June 28, 2024, the U.S. Supreme Court issued its landmark decision in Loper Bright Enterprises v. Raimondo, overruling the long-standing Chevron doctrine. Under Loper, courts considering challenges to agency action under the APA must now exercise their independent judgment in deciding whether an agency has acted within its statutory authority, rather than deferring to an agency’s interpretation of an ambiguous statute, as had been the prevailing rule under Chevron.
The impact of that decision was not lost on U.S. District Judge Jordan, who—like the Supreme Court in Loper—noted that this exercise of independent judgment “is rooted in the ‘solemn duty’ imposed on courts under the Constitution to ‘say what the law is.’” Reiterating Loper’s directive that courts use “‘all relevant interpretive tools’ to determine the ‘best’ reading of a statute; a merely ‘permissible’ reading is not enough,” Judge Jordan’s 51-page memorandum opinion and order granting summary judgment to the plaintiffs explores the history of LDTs, their regulation over time, and, more broadly, FDA’s historical regulation of medical devices. The order also explores why the text, structure, and history of the federal Food, Drug, and Cosmetic Act (FDCA) and the Clinical Laboratories Improvement Act of 1967 and 1988 Amendments (CLIA) support the court’s conclusion that the Final Rule is unlawful.
Part One: History
Judge Jordan’s order noted that FDA began regulating medical devices in 1938 with the advent of the FDCA: “FDA was authorized to regulate ‘foods,’ ‘drugs,’ ‘devices,’ and ‘cosmetics,’ all of which were physical products that were mass-manufactured and commercially distributed.” The Medical Device Amendments of 1976 (MDA) expanded FDA’s authority to regulate devices so that unless exempt, the agency must grant one of three types of premarket authorization before any new medical device can be commercially distributed, based substantially on a device’s classification, risk profile, and marketing history. Focusing on the terms used in the FDCA to define a medical “device” subject to its authority—namely those describing a device as an “instrument,” “apparatus,” “implement,” “machine,” “contrivance,” “implant,” “in vitro reagent” and “article”—the court determined that each term refers only to a tangible, physical object and does not include intangible services.
By contrast, the order states that CLIA, not the FDCA, governs laboratory test services: “A[n LDT] is a methodology or process by which a laboratory generates biochemical, genetic, molecular, or other forms of clinical information about a patient specimen for use by the treating physician … [LDTs] are offered as services.” CLIA is administered primarily by the Centers for Medicare & Medicaid Services (CMS). Although the court acknowledged that FDA had claimed authority to regulate LDTs as medical devices starting in the early 1990s, and although FDA has relied on its claimed authority on several occasions on a case-by-case basis throughout the years (e.g., through sending FDA warning letters to clinical laboratories), the 2024 Final Rule was its first attempt to establish binding, industry-wide regulations for LDTs. Similarly, the court noted that since CLIA’s 1988 amendments, Congress has considered several pieces of legislation that would have overhauled the regulatory framework for LDTs, including certain bills that would have expressly regulated LDT services as medical devices subject to FDA’s oversight. However, to date, Congress has declined to pass any such legislation. As such, the court concluded that FDA is bound to the current statutory framework and cannot impose regulations that would circumvent it.
Part Two: Text and Structure
After finding that the laboratory plaintiffs had standing to sue—owing to the potential for injury by the Final Rule’s “massive compliance costs … often amounting to hundreds of thousands or millions of dollars per test”—the court’s order concluded that the “text, structure, and [additional] history of the FDCA and CLIA” precluded expansion of FDA’s authority to regulate LDTs as medical devices. In particular, the court noted the following:
The FDCA’s text is clear that the “devices” within its purview do not include professional medical services, which include LDTs.
FDA has no authority to expand or alter the FDCA’s definition of “device.”
The Final Rule’s regulation of in vitro device (IVD) test systems made by laboratories improperly collapses the distinction between test kits and testing services. Specifically, the court explained that a laboratory test kit made by a laboratory for commercial distribution is a device, but when laboratory professionals use a series of tools to perform a test, or develop new test protocols that call for the use of such tools, they are conceiving and carrying out professional services.
An examination of various canons of statutory construction confirms that LDT services are not “devices” under the FDCA.
The statute as a whole “repeatedly and consistently refers to the making of devices as ‘manufacturing,’” which is distinct from professional services.
The FDCA and the MDA were not enacted to regulate clinical laboratory test services.
CLIA’s 1988 amendments, passed after the MDA of 1976, created a detailed statutory framework to govern clinical laboratories.
The FDCA’s relevant text, being unambiguous, cannot support FDA’s “untenable” interpretation of the FDCA to include LDTs as detailed in the Final Rule.
Notably, the court also determined that FDA’s assertion of its long-standing authority to regulate LDTs as medical devices turns on the assumption that the laboratory industry has been operating for decades “in open and direct violation of the law.” FDA’s continued exercise of enforcement discretion for many categories of LDTs, as expressed in the Final Rule, would result in the industry continuing to operate going forward at substantial risk of civil and criminal penalties if FDA decides to curtail its policy of enforcement discretion. In rendering its ruling, the court declined to accept an interpretation of FDA’s authority under existing law that would result in that outcome and would require many years and an implausible level of administrative effort and resources to bring the industry into compliance with the Final Rule.
What Happens Now?
As we explained in our 2024 blog post, the Final Rule would have required virtually all clinical laboratories that offer their own LDTs to come into compliance with FDA’s expectations for medical device manufacturers in phases over a four-year period. The Final Rule provided for different levels of enforcement discretion for certain LDTs that were on the market prior to May 6, 2024; LDTs that are approved by the New York State Clinical Laboratory Evaluation Program (CLEP); LDTs for unmet needs manufactured and performed by labs integrated in a health system; and others. Yet it still required all labs, regardless of enforcement discretion category, to comply with Phase 1 and Phase 2 implementation requirements. Phase 1 requirements included implementation of Medical Device Reporting requirements, correction and removal reporting requirements, and quality systems requirements under 21 C.F.R. § 820.198 (complaint files), beginning on May 6, 2025. In Phase 2, laboratories were required to comply with establishment registration and device listing, labeling, and investigational use requirements, beginning on May 6, 2026. Those mandates, and others that were supposed to follow in Phases 3, 4, and 5 to the extent applicable (including, notably, submission of product applications to FDA by November 6, 2027, for high-risk tests and by May 6, 2028, for all other tests), are no longer enforceable. As the March 31 order states, data suggests that the Final Rule would have affected about 1,181 existing laboratories, resulting in the need for submission by laboratories and the review by FDA of approximately 10,013 new tests each year. Implementation of the Final Rule would have imposed major burdens on many laboratories that will, now, no longer apply.
The vacated and remanded Final Rule now goes back to FDA for further consideration, and the laboratory plaintiffs’ motions for summary judgment are granted. Yet as we noted in our April 1 blog post, the judge’s conclusions that (1) “the [FDCA]’s relevant text is unambiguous and cannot support FDA’s interpretation” and (2) “FDA’s asserted jurisdiction over laboratory-developed test services as ‘devices’ under the FDCA defies bedrock principles of statutory interpretation, common sense, and longstanding industry practice”—leave little to no room for FDA to salvage its effort to regulate LDTs broadly under existing statutory authorities. While still a possibility, the legal arguments relied on by the court and the post-Loper legal landscape suggest that an appeal of the court’s order is unlikely to be successful. Perhaps more likely would be future congressional action. Therefore, stakeholders and advisors should keep an eye on news coming from Capitol Hill.
Looking to the Future of FDA’s Role in LDTs
Although, absent an appeal of the court’s order, this chapter of the decades-long LDT saga may be winding down, FDA has not yet been written out of the story. Even though the court decided that FDA cannot regulate LDTs under existing law, it, of course, acknowledged that the FDCA provides FDA with authority to regulate device “articles” in interstate commerce. While it remains to be seen whether the current administration has an interest in, or if FDA will have sufficient remaining personnel and resources to effectuate, an increase in oversight of laboratory industry stakeholders, FDA could enhance its reliance on its existing authorities to exert oversight of several aspects of the laboratory industry even if it is unable to regulate LDTs directly.
Enhanced Oversight of Specimen Collection Kits and the Laboratories That Distribute Them
Existing device authorities continue to allow the FDA to reach many of the articles that labs rely upon to provide LDT services. For example, FDA regulates specimen collection devices. As a result of the court’s vacatur of the Final Rule, FDA could, in theory, seek to more aggressively enforce these authorities. Occasionally in the past, FDA has taken the position that a lab distributing specimen collection kits for use with its LDTs resulted in violations of the FDCA if the collection kits had not been cleared by FDA for use with the LDT. Of note, FDA has exercised enforcement discretion for what the agency calls “convenience kits” since 1997, taking the position that multiple articles packaged together are not subject to premarket review requirements if they all are in their respective original packaging and are intended for use consistent with their respective labeling. While the enforcement discretion allows such kits to forego premarket review, the kit assembler still must register as a manufacturer and list the kit product with FDA. Thus, if a lab assembling and distributing such a kit fails to follow that registration process, the lab could be subject to agency scrutiny. Also, if a component of a kit is only FDA-cleared for specific uses (e.g., use with specific FDA-cleared tests), manufacturing and distributing a kit intended for use that is not consistent with those uses (e.g., use with a non-cleared LDT) might be argued by FDA to result in commercial distribution of an unapproved and misbranded collection kit. FDA could use these and similar approaches to restrict access to LDTs, discourage their use, or try to persuade laboratories to share information about test performance in order to secure clearance of their test kits
Enhanced Enforcement Against Manufacturers and Distributors of Laboratory Reagents and Equipment
Another approach FDA has taken to indirectly regulate LDTs is to threaten enforcement against manufacturers and distributors of laboratory equipment, reagents, and other FDA-regulated articles when they view those entities as inappropriately supporting the development of LDTs using their devices. Manufacturers may be subject to FDA enforcement if their support or advice to a clinical laboratory regarding LDT development is deemed by FDA to be evidence that the products they provide to a clinical lab are intended for unapproved uses. As a result, barriers remain regarding communications between laboratories and manufacturers of equipment used to perform LDTs, such as analyte-specific reagents, instrument platforms, and research-use-only products. Though there are mechanisms for “scientific exchange” under some FDA guidances, the means of communication, who can communicate, and what they can say about medical device products used in the performance of LDTs impose significant limitations and hinder more organic collaborations between product manufacturers and labs that could potentially aid in optimizing LDTs.
Therefore, even in the absence of an FDA regulation that directly regulates their laboratory testing services, it is important for laboratories and their component suppliers, as well as others collaborating with labs to provide direct access testing services, to consider how they mitigate risks of potential FDA enforcement going forward, whether on a case-by-case basis or as part of a broader initiative. As to broader initiatives, with the recently added “suggestion box” on Regulations.gov for areas that should be considered for deregulation, an opportunity may have arisen for stakeholders concerned about these issues to coalesce around proposals that would support access to components and collaboration in LDTs going forward with fewer restrictions.
What Else Could the Future Hold?
It is important to appreciate that nothing in the court’s order prohibits the Executive Branch from pursuing changes to how it regulates LDTs in the future. The order only appears to prohibit the government from establishing a regulatory regime for LDTs under its FDCA authorities. CLIA continues to govern clinical laboratories and their testing services and, like the FDCA, vests authority for regulation with the Secretary of the Department of Health and Human Services (HHS). The Secretary has historically delegated authorities further to HHS’s subagencies FDA (for the FDCA) and CMS (for CLIA). However, some states (like New York) have implemented an LDT-specific review and approval process under their own clinical laboratory regulatory regime (e.g., CLEP, which is approved by CMS as satisfying CLIA requirements in New York). It is not beyond reason that some other states could decide to follow suit in the wake of this development.
To proponents of the Final Rule, one of its virtues was to provide parity in terms of the performance requirements and premarket review of the development of laboratory tests. The idea was that whether a laboratory test for a given disease was an IVD or LDT, it would (i) need to meet similar standards with regard to analytical and clinical validity and performance, and (ii) be subject to a similar level of review to demonstrate that those standards were met. FDA’s preference was that tests go through the FDA regulatory process to achieve this goal, but that’s not what parity requires. Parity in this context could be achieved by other means of ensuring that IVDs and LDTs receive comparable treatment, e.g., establishing the clinical validity of a new diagnostic test marker should require the same amount of data whether the test is an LDT or IVD, or that tests should be held to the same requirements for sensitivity and specificity if they have the same indicated use. Although there are differences in the manner of test production (e.g., manufacturing concepts in an IVD plant versus LDT assembly in a clinical laboratory), the idea that both kinds of tests should meet the standard for analytical and clinical validity and performance because the results—regardless of test type—will have the same potential clinical impact on patient’s clinical care does not lose its appeal from a parity perspective simply because FDA lost a court case.
HHS itself could potentially move to establish comparable standards and requirements for IVDs and LDTs by relying on both its FDCA and CLIA authorities—perhaps reaching a middle ground between the current FDA and CMS approaches. Under the previous administration, just before issuance of the Final Rule, FDA and CMS issued a joint statement aligning on their respective roles in the regulation of LDTs, so it will be interesting to see whether an update to that position will be released. Epstein Becker Green will continue to monitor whether there will be further efforts toward greater parity between test requirements.
ENDNOTES
[1] Memorandum Opinion and Order, American Clinical Laboratory Association et al. v. U.S. Food and Drug Administration, No. 4:24-CV-479-SDJ (E.D. Tex. Mar. 31, 2025).
[2] These cases were subsequently consolidated for review by the Texas district court, which considered the parties’ cross-motions for summary judgment.
Analysing the Case of Krishna Holdco Ltd v Gowrie Holdings Ltd: Insights into Litigation Privilege Executive Summary
Executive Summary
In a recent judgment, the High Court in Krishna Holdco Ltd v Gowrie Holdings Ltd [2025] EWHC 341 (Ch) has found that litigation privilege did apply to a valuation report prepared for the potential sale of a subsidiary company because that sale was driven by litigation – namely a dispute between two shareholders. The court’s decision underscores the intricacies associated with determining the dominant purpose of a document for the purposes of a claim to litigation privilege, and advocates for an approach which considers the wider context in which a document has been created.
Background
The dispute between Krishna Holdco Limited (Krishna) and Gowrie Holdings Limited (GHL) centers around unfair prejudice proceedings, with Krishna having previously secured a judgment requiring GHL to purchase Krishna’s shares in their jointly owned company, LBNS. The case involves multiple parties, including individual respondents and several corporate entities, with the litigation primarily focusing on the valuation of Krishna’s shares and the associated disclosure of documents.
The conflict goes back to early 2019, when tensions arose between Krishna and GHL over the management and financial stability of LBNS. A critical issue emerged regarding the potential withdrawal of banking facilities by HSBC, allegedly due to Krishna’s refusal to provide certain “Know Your Client” information. In response, GHL considered purchasing LBNS’s trading subsidiaries, GLL and LL, to mitigate the risk posed by the banking issues. This led to the creation of valuation reports concerning GLL and LL by PwC, over which a claim to litigation privilege was subsequently made.[1]
Court Decision
In determining whether the PwC valuation reports were subject to litigation privilege, emphasis was placed on the dominant purpose behind the creation of these documents.
In determining the purpose, the Court considered the context in which the documents were created, including the ongoing litigation and the strategic response to the potential withdrawal of banking facilities. The Court found that the valuation work was not merely a commercial transaction but a subset of a defense strategy in the broader dispute. This approach aligns with recent authority, such as the Director of the Serious Fraud Office v Eurasian Resources Corporation [2017, EWHC 1017 (QB)], where the court emphasized the importance of understanding the factual and commercial context when determining the dominant purpose of document creation.
Accordingly, the court concluded that the reports were produced for privileged purposes, as they were created as part of a broader strategy to address the ongoing dispute between Krishna and GHL.
Implications
In comparison to other recent cases, such as the Eurasian Resources case, the Krishna decision underscores a consistent judicial approach to evaluating the dominant purpose of documents for the purposes of litigation privilege. Both cases illustrate the willingness of the Courts to look beyond the surface of transactions and consider the underlying motivations and strategic considerations behind them.
Accordingly, this decision supports an approach of taking a broader view as to the purpose of a document by taking into account the wider context in which the document was created. As a result, what on the face might appear to be a separate purpose for creating a document may in fact be part of a broader and overall litigation purpose, in which case the “dominant purpose” test for litigation privilege may well be satisfied.
In this respect, the decision also serves as a reminder of the importance of maintaining clear and comprehensive records of the intentions behind document creation, as these records can be pivotal in asserting privilege.
[1] A claim was also made that the reports were subject to “without prejudice” privilege.
REFRESHING: Coca Cola Wins Huge TCPA Victory With Motion to Strike Massive Class
The Plaintiff’s bar has grown incredibly aggressive in TCPA class actions recently and filed suits with the broadest possible class definition to sweep in as many potential plaintiffs as possible.
In doing so, of course, the plaintiff’s attorneys hope to create massive risk for the defendant–and ultimately massive settlements.
In order to beat these guys you need to be aggressive right back, and Coca Cola deployed an ole trick of the Czar’s recently to strike a class at the pleadings stage and I love to see it.
In Barnes v. Coca Cola, 2025 WL 1027431 (E.D. Cal April 7, 2025) the Plaintiff had asserted a class consisting of every call Coca Cola had ever made.
Rather obviously such a class could never be certified because the vast majority of class members will have no standing and would have consented to the calls. TCPA plaintiffs often file such classes, however, arguing that consent is an affirmative defense that they have no duty to plead around.
In Barnes, however, the court correctly determined that a plaintiff needs to plead the real class he intends to certify– not some overly broad nonsense. Noting that the class as plead was simply “implausible” the Court found “Coca-Cola—like all defendants facing suit—is “entitled to know the class definition being alleged against them.”
This is a massive win for Coca-Cola as the plaintiff will now have to redefine his class and narrow it to the group of people he is actually trying to represent. This will allow Coca Cola to better refine its arguments in opposition to class certification, narrow discovery, and prepare laser focused expert reports.
THIS is the way it is supposed to work. But courts commonly (erroneously) deny defense motions to strike as premature. Good to see that didn’t happen here.
Interesting the court also granted Coke’s motion to dismiss finding the portion of the message in the complaint from the plaintiff mentioned only a delivery being available–which is not marketing. Although plaintiff contended there was more to the message that encouraged the call recipient to place an order that portion of the message was not alleged in the complaint– so it could not be considered.
Really great ruling over all.
Notably this motion to dismiss was filed over two years ago in January, 2023! The court took that long to issue this ruling–highlighting just how long it takes to get rulings out of the Eastern District of California right now. It is a VERY backed up federal court.
Unreasonableness Or Carelessness Is Insufficient to Prove Liability in Nevada
Nevada’s exculpatory statute, NRS 78.138(7), requires a plaintiff to both rebut a statutory presumption of good faith and prove a breach of fiduciary duty involving intentional misconduct, fraud, or a knowing violation of the law. In Tsatas v. Airborne Wireless Network, Inc., 2015 WL 973840 (March 31, 2025), the plaintiff brought a derivative action against, among others, the CEO (Warrent) and another officer of Airborne. U.S. District Court Judge Richard F. Boulware, II’s ruling illustrates the high hurdle that plaintiffs’ must overcome when suing directors and offices of Nevada corporations:
A jury may find from this that Warren was unreasonable or careless as CEO, but that is not sufficient to show intentional misconduct, fraud, or a knowing violation of law.
This is a higher standard of care than the gross negligence standard applied by Delaware courts. See, e.g. , Stone v. Ritter , 911 A.2d 362, 369 (Del. 2006) ( “. . . the conduct giving rise to a violation of the fiduciary duty of care (i.e., gross negligence)”).
Appeals Court Reinstates MSPB Chair Cathy Harris After Trump Firing, Restoring Quorum on Board
On April 7, the U.S. Court of Appeals for the District of Columbia issued a ruling temporarily reinstating Cathy A. Harris, who leads the Merit Systems Protection Board (MSPB), after the Trump administration fired her without cause in February. The court voted 7-4 to vacate an earlier ruling from a three-judge panel on the court which had upheld the firing.
“The DC Circuit has followed the law and has prevented the President of the United States from undermining the entire civil service,” said whistleblower attorney Stephen M. Kohn, founding partner of Kohn, Kohn & Colapinto and Chairman of the Board of National Whistleblower Center. “If the president’s decision to terminate Cathy Harris was upheld the MSPB would have lost its quorum and would have been unable to issue relief to the millions of civil servants protected under civil law.”
“Every federal employee would have been at risk of being illegally fired with no effective recourse if President Trump delayed or failed to nominate a successor and the U.S. Senate delayed or failed to approve the nomination,” Kohn continued. “The MSPB has exclusive jurisdiction over the majority of civil servants. Whistleblowers would be most at risk. Whistleblowers and anyone who dared to blow the whistle would be at risk for summary and illegal discharge.”
President Trump fired Cathy Harris on February 10 without cause. Under federal law, members of the MSPB may be removed from office “only for inefficiency, neglect of duty, or malfeasance in office.” According to the DC Circuit, while the Supreme Court has found certain laws with removal protections unconstitutional, it “has repeatedly stated that it was not overturning the precedent established in Humphrey’s Executor and Wiener for multimember adjudicatory bodies.”
If Harris is removed from her post, the MPSB would be without the two members needed for a quorum. The MSPB, a quasi-judicial agency, is the sole venue to adjudicate whistleblower complaints and anti-retaliation claims brought by federal employees. For a period of five years from 2017 through 2022, the MSPB lacked a quorum, meaning they were unable to issue final rulings in whistleblower retaliation cases. By the time quorum was established, the Board faced a backlog of over 3,500 cases.
On March 26, Senator Richard Blumenthal (D-CT) introduced the Congressional Whistleblower Protection Act of 2025. The bill strengthens protections for federal employee whistleblowers who make disclosures to Congress, expanding the types of whistleblowers covered and granting them the right to have their case heard in federal court if there are delays in administrative proceedings. Under the bill, a federal employee whistleblower may seek relief in federal court if corrective action is not reached within 180 days of filing a complaint to the MSPB.