How Will the EEOC’s Investigation of Anti-American Bias and Antisemitism Impact Organizations?
The U.S. Equal Employment Opportunity Commission (EEOC) has made numerous changes in 2025 with respect to both personnel and priorities. On January 21, 2025, Acting Chair Andrea Lucas announced that one of the priorities of the EEOC’s compliance, investigations, and litigation is protecting employees from religious bias and harassment, including widespread campus antisemitism. Then, on February 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 EEOC is here to protect all workers from unlawful national origin discrimination, including American workers.” It is common for the EEOC to announce priorities in its investigations. It is believed by the current administration that the shift in the EEOC’s focus will help deter illegal migration, abuse of legal immigration programs, and anti-American discrimination through increasing enforcement of antidiscrimination laws against employers that prefer non-American workers.
If EEOC nominee Florida Assistant U.S. Attorney Brittany Bull is confirmed by the Senate, the EEOC likely will be able to move forward with enforcement of these new priorities.
EEOC Enforcement Priorities under the New Administration
The EEOC is tasked with administration and enforcement of civil rights laws against workplace discrimination. Pursuant to Title VII of the Civil Rights Act of 1964, as amended, the EEOC is comprised of five commissioners, including a chair, all of whom are political nominees. There must be at least three commissioners to have a quorum.
When President Trump was elected, many of those watching the direction of the EEOC did not believe much would change soon in terms of (1) issuance of new guidance, (2) revocation of formerly issued EEOC guidance, and (3) enforcement priorities because, due to the commissioners’ staggered five-year terms, it was believed that the earliest the EEOC could have a Republican majority would be July 2026.
Things have changed, however, since two Democrat EEOC commissioners were fired in January 2025. This was followed by the April 23, 2025, Executive Order “Restoring Equality of Opportunity and Meritocracy,” which announced that the EEOC would look at all pending investigations and lawsuits, including those under Title VII of the Civil Rights Act of 1964, that rely on the theory of disparate-impact liability and would seek “to eliminate the use of disparate-impact liability.” If current commissioner nominee Brittany Bull is confirmed by the Senate, the EEOC will have a Republican majority and a proverbial “green light” on its new enforcement priorities.
These new enforcement priorities, as set forth (above) by Acting Chair Andrea Lucas, include protecting employees from religious bias and harassment, particularly widespread campus antisemitism, and protecting workers from anti-American harassment and discrimination through a shift in focus of Title VII’s prohibition against national origin discrimination.
Lucas’s promise to hold colleges and universities accountable for rising antisemitism is part of a broader goal of many in government to protect Jewish students and employees from discrimination based on religion. For example, on March 18, 2025, Indiana Senator Jim Banks introduced the No Tax Dollars for Encampments Act, requiring colleges and universities to disclose their policies for responding to demonstrations, riots, and strikes. If enacted, this bill would potentially withhold federal funding from universities that do not adequately disclose or comply with policies for addressing civil disturbances.
In addition, on May 19, 2024, the Department of Justice announced that it will use the False Claims Act to identify and investigate recipients of federal funds that it determines allow antisemitism to thrive and promote Diversity, Equity, and Inclusion (DEI) policies. Indeed, the EEOC’s new priorities also include rooting out what it refers to as DEI-based discrimination. Its updated website describes DEI-based discrimination as occurring when DEI initiatives, policies, programs, or practices involve an employer taking an employment action motivated in whole or in part by an applicant’s or employee’s race, sex, or other protected classification. This focus on DEI extends to the religious discrimination context, as a rising number of employees are claiming that being required to comply with DEI-based initiatives violates their religious beliefs.
Religious Bias and Antisemitism
One such pending case involving claimed religious bias connected with DEI is an amended lawsuit filed in Kansas federal court in January 2025, under the caption Sullivan v. United School District 512 (24-cv-2491). In Sullivan, the plaintiff teacher alleges that her employment at the defendant public school system involved her being required to make statements and teach lessons that violate her religious beliefs. Specifically, in 2021, the plaintiff objected, in writing, to the school district’s required DEI training sessions and incorporation of DEI principles into her lesson plans, stating that they were racist, anti-White, and anti-American. The plaintiff was later disciplined for using a student’s incorrect pronouns and allegedly engaging in gender identity discrimination. In addition to alleging violations of Sullivan’s constitutional rights of free speech and free exercise of religion, the Sullivan complaint alleges that defendants violated Title VII and its prohibition against retaliation against individuals who oppose harassment based on race and/or color. How the pending Sullivan case is decided may have an impact on the outcome of several other similar lawsuits alleging violations of Title VII based on religious discrimination and opposition to DEI practices.
Another recent case involving similar issues is Brown v. Alaska Airlines, which was filed in U.S. District Court, Western District of Washington in 2022 (22-cv-668). In Brown, the two plaintiff flight attendants filed suit against Alaska Airlines, alleging that they were discriminated against because of their Christian religion after their employment was terminated for posting comments on the Alaska Airlines internal website, which the airline deemed violated its antidiscrimination and antiharassment policies.
The Brown lawsuit alleged several violations of Title VII, including religious discrimination/ disparate treatment, failure to accommodate religious beliefs, hostile work environment, and retaliation. The district court in Washington ruled in favor of the defendants, finding that they were protecting other employees from hearing offensive ideas, and that the flight attendants’ comments were not protected by Title VII because not all Christians shared their views and that they merely reflected general ethical principles. The plaintiffs have appealed this decision to the U.S. Court of Appeals for the Ninth Circuit (24-3789), where the case is currently pending. A decision on this appeal may signal how courts will review certain Title VII claims.
In addition to such lawsuits, the EEOC has been involved in seeking information about antisemitism. For example, in April 2025, it was revealed that faculty members of Columbia University and Columbia-affiliated Barnard College received text messages from the EEOC asking them to complete a survey inquiring about whether they are Jewish or Israeli. It was reported that on April 15 Columbia had sent an email to its employees advising it had received a subpoena from the EEOC “in connection with an investigation into alleged harassment of Jewish employees at the University from October 7, 2023, to the present.” It is believed that this EEOC investigation at Columbia is ongoing.
Anti-American Discrimination
As noted above, the EEOC is also shifting the focus of its national origin discrimination enforcement to discrimination against Americans. In February 2025, coinciding with Lucas’s press release regarding protection of workers from anti-American discrimination, the EEOC announced a $1.4 million settlement of a lawsuit alleging national origin discrimination against American workers. EEOC v. LeoPalace Guam Corp. (D. Guam) (25-cv-00004). In that case, the Guam-based hotel LeoPalace Guam Corp. was alleged to have discriminated against non-Japanese employees, including many employees of American national origin, in terms of compensation and terms and conditions of employment. In addition to the monetary relief of more than $1.4 million, the settlement involved injunctive relief including compliance monitoring, training, and reinstatement of former employees.
Potential Concerns Going Forward
Employers should be aware of these new enforcement priorities articulated by the EEOC and be ready to defend against such allegations. While these changes reflect a difference of priority at the federal level, it does not impact prior court precedent on existing state and local laws addressing discrimination. These new enforcement priorities also do not alter the existing case law that private individuals may pursue to address liability under Title VII for organizations. What a new EEOC priority may impact going forward is the number of governmental investigations of organizations on addressing anti-American bias and antisemitism. To aide in this effort, employers should consult with counsel about revising policies and procedures to ensure that requests for religious-based accommodations are carefully evaluated and that all workers are subject to the same employment conditions regardless of national origin.
DOJ Civil Rights Fraud Initiative: FCA Enforcement Expanding Into Alleged Discrimination
On May 19, 2025, the U.S. Department of Justice (DOJ) announced a new Civil Rights Fraud Initiative that will leverage the federal False Claims Act (FCA) to investigate and litigate against universities, contractors, health care providers, and other entities that accept federal funds but allegedly violate federal civil rights laws.
The initiative will be led jointly by the DOJ Civil Division’s Fraud Section and the Civil Rights Division—with support from the Criminal Division, federal civil rights agencies, and state partners.
The initiative implements President Donald Trump’s Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (January 21, 2025), directing agencies to combat unlawful discrimination through the FCA, and complements Attorney General (AG) Bondi’s February 5 memorandum, “Ending Illegal DEI and DEIA Discrimination and Preferences.”
How DOJ Plans to Use the FCA to Combat Discrimination
DOJ signaled it will rely on the FCA’s “false certification” theory of liability: When a funding recipient expressly or implicitly certifies compliance with statutes such as Title VI or IX of the Civil Rights Act of 1964 (CRA) to obtain payment, any knowing violation that is “material” to the government’s decision to pay can trigger treble damages and statutory penalties under the FCA.
Deputy AG Todd Blanche issued a memorandum the same day (the “Blanche Memo”) underscoring that the FCA is implicated when a federal contractor or recipient of federal funds knowingly violates civil rights laws—including Titles IV, VI, and IX of the CRA—and falsely certifies compliance with those civil rights laws. The Blanche Memo, however, notes that liability does not attach to all diversity programs per se, but only when race, ethnicity, or national origin determines the allocation of benefits or burdens. This is significant because, even if an antidiscrimination false certification claim is assumed to meet the materiality standard, a diversity, equity, and inclusion (DEI) program should not be deemed improper if it does not “assign benefits or burdens on [the basis of] race, ethnicity or national origin.”
Enforcement Dynamics
Unlike many FCA matters, which often originate with whistleblowers (also known as qui tam relators) filing suit, we expect DOJ to initiate early cases itself, limiting defendants’ ability to oppose intervention or invoke typical qui tam defenses (e.g., first-to-file rule, public disclosure bar, and original source rule). DOJ nevertheless “strongly encourages” whistleblowers to come forward to report “instances of such discrimination”—a reminder that suspected violations may quickly morph into FCA investigations.
Courts will ultimately decide whether civil rights violations pass muster under the U.S. Supreme Court’s “rigorous” and “demanding” Escobar materiality standard.[1]
Key Takeaways
DOJ’s Civil Rights Fraud Initiative is poised to test the outer limits of the FCA. Whether courts embrace this expansion—or cabin it—is yet to be seen. In the meantime, entities receiving federal funds should assume heightened scrutiny and ramp up compliance efforts.
The Blanche Memo draws an uncertain line between “diversity” and “religion,” and even suggests that DOJ may apply the terms “race” or “racist” differently today than they were understood when Congress enacted the CRA. Courts, however, have yet to endorse the FCA as a generalized antidiscrimination vehicle, largely because the statute’s “rigorous” materiality standard remains a high hurdle. One district court observed that if the FCA is not an “’all-purpose antifraud statute,” it is “surely not an all-purpose antidiscrimination statute” either.[2]
When DOJ unveiled its Civil Rights Fraud Initiative, The New York Times predicted the program was “all but certain” to face immediate legal challenges. Even so, DOJ can bring FCA cases with relative ease and without many of the hurdles that slow private whistleblower suits: The government’s own complaints are immune from first-to-file and public disclosure bar defenses, and defendants cannot oppose DOJ intervention like they can in qui tam cases.
Implied certification cases are also unlikely to disappear. As we have advised previously, organizations that contract with—or receive funds from—the federal government should rigorously re-examine their contract terms and scrutinize DEI policies with counsel to ensure they would not be branded as “illegal DEI” under the FCA.
Importantly, DOJ’s new civil rights focus is one of several avenues through which the Trump administration can wield implied certification theories (e.g., compliance with cybersecurity requirements and Anti-Kickback Statute compliance, among others). Health care entities are squarely in the cross-hairs: We expect to see FCA investigations tied to Medicare and Medicaid reimbursement conditions, price-transparency obligations, and quality-of-care metrics—all areas where the administration argues that noncompliance fuels escalating federal costs. Because reining in health care spending enjoys strong bipartisan support, defendants should expect vigorous enforcement and limited political appetite to scale back those efforts.
Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this blog post.
ENDNOTES
[1] See Universal Health Services, Inc. v. United States ex rel. Escobar et al., 579 U.S. 176, 194 (2016). And while the government’s decision to expressly identify a provision as a condition of payment is relevant, it is not automatically dispositive under Escobar.
[2] U.S. ex rel. Lee v. Northern Metropolitan Foundation for Healthcare Inc., 2021 WL 3774185 (E.D.N.Y. 2021).
Amendments to New York Labor Law Establish Damages for Weekly Pay Violations
Earlier this month, the Governor of the State of New York, Kathy Hochul, approved amendments that establish the amount of damages recoverable for weekly pay violations. The amendments provide for a fraction of the damages that plaintiffs have been seeking for such violations.
The changes to the law are not just effective immediately, but also retroactive, which means they apply to currently pending claims.
New York’s pay frequency law
New York’s pay frequency law, which can be found at section 191 of the New York Labor Law (NYLL), generally requires private employers to pay a “manual worker” not less frequently than weekly and an “other worker” no less frequently than twice a month.
The rise of court claims alleging violations of the pay frequency law
New York’s pay frequency law has been around for over a century, but only recently started to become a popular claim for plaintiffs to assert in court.
In 2019, a New York intermediate appellate court (from our perspective, mistakenly) tied the pay frequency law (NYLL section 191) to a separate section of the NYLL that provides, in part, for a private right of action and 100 percent liquidated damages for underpaid wages (NYLL section 198). That decision, Vega v. CM & Associates Construction Management, LLC, opened the floodgates to lawsuits in New York federal and state courts for pay frequency claims as plaintiffs looked to Vega to insist they could pursue such claims in court and recover the equivalent of all untimely but paid wages again as damages. In many of these cases, the plaintiffs looked to maximize their potential recoveries by arguing they were manual workers who should have been paid weekly, pointing to any physical movement in which they engaged while working, such as walking.
But Vega was not the last word. Last year, in Grant v. Global Aircraft Dispatch, Inc., another New York intermediate appellate court decided the law does not provide a private right of action for pay frequency claims.
To date, neither the Court of Appeals for the State of New York (which is the highest court in the state) nor the United States Court of Appeals for the Second Circuit (which has jurisdiction over New York federal courts) has weighed-in on whether there is a private right of action for pay frequency violations, and, if so, how to measure damages. New York courts continue to wrestle with these issues.
The May 2025 amendments to the NYLL
On May 9, 2025, Governor Hochul signed off on an amendment to section 198 of the New York Labor Law that adds a new chapter to the pay frequency saga.
As amended, section 198 says liquidated damages are not available for such manual worker/weekly pay violations absent a prior finding or order that the employer committed such violation. The amendments further state that damages for such violations are lost interest of (no more than) 16 percent for each day a payment is late. Accordingly, the amendments should greatly limit the maximum potential recovery for individuals claiming they are manual workers who were not paid weekly. However, the amendments are notable because they do not expressly apply to non-manual workers, which is something of which employers should be aware.
Finally and importantly, the amendments do not address whether there is a private right of action for violations of the pay frequency law in the first place, or expand the coverage of that law beyond employees already covered.
AI Service Provider Faces Class Actions Over Catholic Health Data Breach
AI service provider Serviceaide Inc. faces two proposed class action lawsuits from a data breach tied to Catholic Health System Inc., a nonprofit hospital network in Buffalo, New York. The breach reportedly exposed the personal information of over 480,000 individuals, including patients and employees.
Filed in the U.S. District Court for the Northern District of California, the lawsuits allege that Serviceaide acted negligently and failed to protect sensitive data in its Elasticsearch database that was made publicly accessible allegedly for months before being disclosed.
Serviceaide, which provides AI-driven chatbots and IT support solutions, was contracted by Catholic Health and entrusted with managing protected health information and employment records. Plaintiffs allege that the company delayed notification to the affected individuals, waiting seven months after the incident to notify affected individuals. The affected data included patient records and personal information.
The lawsuits allege claims of negligence, breach of implied contract, unjust enrichment, invasion of privacy, and violations of California’s Unfair Competition Law.
Both plaintiffs seek to represent a nationwide class of individuals whose data was compromised and are seeking injunctive relief, damages, and attorneys’ fees.
These lawsuits highlight growing legal exposure for tech firms that handle protected health information, especially as more hospitals and healthcare systems outsource services to AI and cloud vendors. The healthcare sector remains one of the most targeted industries for cyber threats, and breaches involving third-party vendors are drawing increasing legal scrutiny.
College Student Behind Cyber Extortions
The U.S. Attorney’s Office for the District of Massachusetts has charged a student at Assumption University with hacking into two U.S.-based companies’ systems and demanding a ransom.
Matthew D. Lane, 19, has agreed to plead guilty to one count of cyber extortion conspiracy, one count of cyber extortion, one count of unauthorized access to protected computers, and one count of aggravated identity theft.
The U.S. Attorney’s Office’s press release states that Lane agreed with co-conspirators between April and May 2024 to extort a $200,000 ransom payment from a telecommunications company by threatening to publish private data. When the telecommunications company questioned the payment, Lane used stolen login credentials to access the computer network of a software and cloud storage company that served school systems. The company received threats that the “PII of more than 60 million students and 10 million teachers – including names, email addresses, phone numbers, Social Security numbers, dates of birth, medical information, residential addresses, parent and guardian information and passwords, among other data – would be ‘leak[ed] . . . worldwide’ if the company did not pay a ransom of approximately $2.85 million in Bitcoin.”
A plea hearing has not been scheduled. If convicted, “the charges of cyber extortion conspiracy, cyber extortion and unauthorized access to protected computers each provide for a sentence of up to five years in prison, three years of supervised release and a fine of up to $250,000, or twice the gross gain or loss, whichever is greater. The charge of aggravated identity theft provides for a mandatory sentence of two years in prison, consecutive to any sentence imposed on the computer fraud charges.”
Take That Conception Out of the Oven – It’s CRISPR Even If the Cook Doesn’t Know
Addressing the distinction between conception and reduction to practice and the requirement for written description in the unpredictable arts, the US Court of Appeals for the Federal Circuit explained that proof of conception of an invention does not require that the inventor appreciated the invention at the time of conception. Knowledge that an invention is successful is only part of the case for reduction to practice. Regents of the Univ. of Cal. et al. v. Broad Inst. et al., Case No. 22-1594 (Fed. Cir. May 12, 2025) (Reyna, Hughes, Cunningham, JJ.)
The Regents of the University of California, the University of Vienna, and Emmanuelle Charpentier (collectively, Regents) and the Broad Institute, Massachusetts Institute of Technology, and the President and Fellows of Harvard College (collectively, Broad) were each separately involved in research concerning CRISPR systems that “are immune defense systems in prokaryotic cells that naturally edit DNA.” At issue was the invention of the use of CRISPR systems to modify the DNA in eukaryotic cells. Regents and Broad filed competing patent applications resulting in an interference proceeding under pre-AIA law at the US Patent & Trademark Office Board of Patent Appeals & Interferences to determine which applicant had priority to the invention.
The main issue before the Board was a priority dispute over who first conceived of the invention and sufficiently reduced it to practice under pre-AIA patent law. Regents submitted three provisional patent applications dated May 2012, October 2012, and January 2013 and moved to be accorded the benefit of the earliest filing date, May 2012, for the purpose of determining priority. Alternatively, Reagents sought to be accorded either October 2012 or January 2013 as its priority date. The Board found that Regents’ first and second provisional applications (filed in May and October 2012, respectively) were not a constructive reduction to practice because neither satisfied the written description requirement of 35 U.S.C. § 112. The third provisional application, filed in January 2013, was the first to amount to a constructive reduction to practice of the counts in interference. The Board then ruled that Broad was the senior party for the purposes of priority in the interference proceeding because Broad reduced the invention to practice by October 5, 2012, when a scientist submitted a manuscript to a journal publisher. The Board ruled that Regents failed to prove conception of the invention prior to Broad’s actual reduction to practice. Regents appealed.
Regents argued that in assessing conception, the Board “legally erred by requiring Regents’ scientist to know that their invention would work.” The Federal Circuit agreed and vacated the Board’s decision. As the Court explained, there are three stages to the inventive process: conception, reasonable diligence, and reduction to practice. At the conception stage, “an inventor need not know that his invention will work for conception to be complete.” Rather, knowledge that the invention will work, “necessarily, can rest only on an actual reduction to practice.” The Board therefore legally erred by requiring Regents to know its invention would work to prove conception.
The Court found that the Board should have considered whether a person of ordinary skill in the art could have reduced the conception to practice using only routine skill or routine techniques “without extensive research or experimentation.”
Evidence of purported experimental success by others (at the time of the conception), and the use of routine methods in subsequent successful experiments are pertinent to the inquiry. Here the Board erred by focusing on the difficulties Regents’ inventors encountered and their doubts of success rather than on “routine methods or skill.” The Federal Circuit noted that a complete conception does not occur if “a research plan requires extensive research before the inventor can have a reasonable expectation that the limitations of the count will actually be met.” That issue should be determined by considering “the reasonable expectation of a person of ordinary skill in the art” and whether that person would “have been able to reasonably predict” that experimentation would produce the claimed result. On remand, the Court instructed the Board to evaluate whether the later party to reduce to practice was the first to conceive of the invention and subsequently exercised reasonable diligence in reducing the invention to practice, or whether it was the first to conceive of the invention that then communicated the conception to the adverse claimant.
Regent also argued that the Board legally erred in its written description analysis by requiring the first provisional application “to convince a person of ordinary skill in the art that the invention will work in eukaryotes.” The Federal Circuit disagreed because the written description requirement mandates that a patent’s disclosure “must clearly recognize that the inventor invented what is claimed.” The test requires a court to “determine how a person of ordinary skill in the art would understand the four corners of the specification.” The Board correctly analyzed whether a person of ordinary skill in the art would understand that Regents had possession of the claimed subject matter considering the “highly unpredictable and complex” subject matter.
Take it Back – A Federal Court in Texas Vacates Portions of the EEOC’s Sexual Harassment Guidance
Recall that just last year, the EEOC updated its Enforcement Guidance on Harassment in the Workplace for the first time in 30 years. We blogged about it here. Earlier this year, President Trump issued Executive Order 14168 directing the EEOC to rescind portions of the guidance; however, the EEOC took no action because it lacked quorum. Now, in Texas, et al. v. Equal Employment Opportunity Commission, et al., a federal judge in the Northern District of Texas has taken action for the EEOC by vacating portions of the guidance.
The Opinion
In Fall 2024, the state of Texas and the Heritage Foundation challenged the definition of “sex” and the scope of sexual harassment set forth in the guidance, as it relates to sexual orientation and gender identity. The guidance provided, in relevant part, that sex-based harassment included “harassment based on sexual orientation or gender identity, including how that identity is expressed” and gave examples of harassment based on sexual orientation and gender identity. The guidance also provided that outing an individual or the denial of access to a bathroom or other sex-segregated facility is harassing conduct.
The Northern District of Texas disagreed. In the recent opinion, the court held that the guidance “contravenes Title VII’s plain text by expanding the scope of ‘sex’ beyond the biological binary: male and female” and took issue with the guidance’s instruction that “effectively requires employers to provide accommodations to all transgender employees to avoid the threat of litigation[.]” The court held that the Supreme Court’s opinion in Bostock does not cover the expansion of the definition set forth in the guidance and therefore “does not authorize the Guidance’s explanation of Title VII ‘sex’ to include new categories or classes.” The opinion states “the Guidance enters the forbidden realm of substance, moving beyond the plain text of Title VII or binding Supreme Court precedent to create a new unauthorized definition.” The court also pointed out that the guidance expanded an area that the Supreme Court explicitly refused to address in Bostock: “bathrooms, locker rooms, or anything else of the kind.” Ultimately, the court vacated certain portions of the guidance.
The EEOC’s Response
Earlier this week and in response to the order, the EEOC issued a press release indicating that while it cannot rescind or modify the guidance at this time (because there is no quorum), “to assist the public” “it has labeled and shaded the vacated portions.” The edited guidance may be found here.
So, What Do You Do?
While the Northern District of Texas believes the EEOC went too far, other districts and circuits, including the Eleventh Circuit, have held that intentionally and repeatedly misgendering someone could contribute to a hostile work environment. Some states, such as California and Colorado, also have state laws prohibiting discrimination based on sexual orientation and gender identity. So, where do we stand? In murky water.
While it looks like the Trump administration won’t be championing transgender and gender identity issues, mistreatment in the workplace based on these characteristics could still be an issue in court and under state law. The best practice is to stay vigilant. If employees are complaining about mistreatment of any kind, even mistreatment based on transgender or gender identity issues, address it. Train your workforce, investigate as soon as you hear of alleged misconduct, and ensure that you are not dismissing these complaints as no big deal. We don’t believe we’ve seen the end of this yet and will keep you updated.
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Minnesota Supreme Court Upholds Enforceability of Contract Release Language Against Negligence Claims
The Minnesota Supreme Court issued an important decision this week about the enforceability of contract release language. Lund v. Calhoun Orange, Inc., ___ N.W.3d __, 2025 WL 1450213 (Minn. May 21, 2025). The case arose when a client at Calhoun Orange, one of the defendant’s fitness clubs, went into cardiac arrest and collapsed while working out. The client suffered significant brain damage, and his conservator sued for negligence.
When he joined the fitness club, the client was required to sign a “Client Intake Form.” The Form provided: “Client hereby waives all claims against [the club, its employees and staff];” and “Client hereby agrees to indemnify[,] defend, hold harmless, release and discharge [the club, its employees and staff] from all claims demands, injuries, damage actions[,] causes of action and from all acts of active or passive negligence on the part of the [club, its employees and staff] for any damages, injuries or losses that may be sustained by the Client” while working out at the club.
The club contended that the Client Intake Form barred the negligence claims, while the conservator argued that the release language in the Form was not enforceable. The district court and court of appeals agreed with the club and upheld the release. The Minnesota Supreme Court granted review and affirmed.
The case asked the Court to determine whether the release language in the Client Intake Form the client signed was enforceable under Justice v. Marvel, 979 N.W.2d 894 (Minn. 2024). In Justice, the Court held that the release in that case, which purported to release “any and all claims,” was not sufficiently clear to release claims arising from the defendant’s own negligence. Id. at 902. While the language “‘any and all claims’” was “theoretically broad enough to encompass claims of negligence, the language was not specific enough to manifest a ‘clear and unequivocal’ intent of the parties to shield the [defendant] from liability for its own negligence and was therefore unenforceable.” Lund, __ N.W.3d at __, 2025 WL 1450213 at *4.
In Lund, the Court concluded that the release language in the Form satisfied the test it laid out in Justice. The Court relied specifically on the language that the client “agrees to indemnify [the club, its employees and staff] from all claims . . . and from all acts of active or passive negligence.” This language, the Court held, “clearly and unequivocally states the contracting parties’ intent to shield [the club] from liability for its own negligence.” Id.
The case is important because it provides an example of release language enforceable against negligence claims brought in Minnesota. The case is also significant because the Court affirmed summary judgment for the defense in a civil case.
Texas Adopts Significant Pro-Business Corporate Law Reforms
With a pair of bills signed by Texas Governor Greg Abbott on May 14, 2025, and May 20, 2025, Texas took a major step in positioning itself as the pro-business jurisdiction of choice for public and private companies. The legislation adopts a series of amendments to the Texas Business Organizations Code (TBOC), which governs Texas corporations, limited liability companies, limited partnerships and other legal entities, that are designed to make Texas more attractive for entity formation and redomestication.
Senate Bill 29
On May 14, 2025, Governor Abbott signed Senate Bill 29 (S.B. 29) into law with immediate effect. The changes to the TBOC enacted by S.B. 29 clarify areas of existing Texas law and strengthen a company’s defenses against certain types of shareholder litigation.
Business Judgment Rule Statute
S.B. 29 enacts new Section 21.419 codifying the “business judgment rule” presumption. The statute applies automatically to public corporations (any corporation with a class or series of voting shares listed on a national securities exchange) and includes an option for any private corporation to “opt-in” by including an affirmative election in its governing documents.
Directors and officers of corporations that are subject to the statute are presumed to have acted (1) in good faith; (2) on an informed basis; (3) in furtherance of the interests of the corporation; and (4) in obedience to the law and the corporation’s governing documents, in taking or declining to take any action on any matters of the corporation’s business.
Further, the statute provides that neither the corporation nor any of its shareholders has a cause of action against a director or officer as a result of any act or omission in the person’s capacity as a director or officer unless (1) the claimant rebuts one or more of the codified presumptions and (2) it is proven by the claimant that (A) the director’s or officer’s act or omission constituted a breach of the person’s duties as a director or officer and (B) the breach involved fraud, intentional misconduct, an ultra vires act or a knowing violation of law.
Advance Independence Determination
S.B. 29 also overhauls provisions of the TBOC relevant to the evaluation and approval of certain conflict of interest transactions.
Specifically, the new legislation expressly empowers a board of directors of a public corporation or a private corporation that has opted-in to the business judgment rule statute (new Section 21.419) to form a committee of independent and disinterested directors to review and approve transactions involving the corporation or any of its subsidiaries and a controlling shareholder, director or officer, and to petition the Texas Business Court (or the district court in the county in which the corporation’s principal place of business in Texas is located, if that county is not located within an operating division of the Texas Business Court), to seek an advance determination as to whether the directors on the committee are independent and disinterested.
The court’s determination in such a proceeding is dispositive in the absence of evidence not presented to the court that one or more of the directors is not independent and disinterested with respect to a particular transaction involving the corporation or any of its subsidiaries and a controlling shareholder, director or officer.
Minimum Ownership Threshold for Derivative Actions
S.B. 29 allows public corporations and private corporations that have opted-in to the business judgment rule statute and have 500 or more shareholders (at the time the derivative proceeding is instituted) to proscribe, in the corporation’s certificate of formation or bylaws, a minimum ownership threshold for shareholders that are eligible to bring a derivative lawsuit, provided that such minimum ownership threshold does not exceed three percent of the corporation’s outstanding shares.
Limitation of Books and Records Demands
For public corporations and private corporations that have opted-in to the business judgment rule statute, S.B. 29 provides that a shareholder is not entitled to bring a books and records demand if it is reasonably determined by the corporation that the demand is in connection with (1) an active or pending derivative proceeding in the right of the corporation that is or is expected to be instituted or maintained by the holder or the holder’s affiliate or (2) an active or pending civil lawsuit to which the corporation or its affiliate and the holder or the holder’s affiliate are or are expected to be adversarial.
S.B. 29 also clarifies that, for all Texas corporations, “e-mails, text messages or similar electronic communications, or information from social media accounts” are not records that may be subject to a books and records demand, unless the particular communication effectuates action by the corporation.
Limiting Recovery of Attorney’s Fees in “Disclosure Only” Settlements
Under existing provisions of the TBOC, a court may order a corporation to reimburse a plaintiff’s attorney’s fees and other litigation costs incurred in a derivative proceeding if it is determined that the proceeding has resulted in a “substantial benefit” to the corporation. Under S.B. 29, the provision is amended to provide that additional or amended disclosures made to the shareholders, regardless of materiality, are not a “substantial benefit” to the corporation.
Waiver of Jury Trial
S.B. 29 codifies the right of a Texas entity to contain in its governing documents a provision waiving the right to a jury trial concerning any “internal entity claim,” which is a claim of any nature, including a derivative claim, that is based on, arises from, or relates to the internal affairs of the entity.
Exclusive Forum Selection
S.B. 29 also codifies the right of a Texas entity to contain in its governing documents a provision stipulating one or more courts in Texas as the exclusive forum and venue for “internal entity claims.”
Class and Series Voting Rights
S.B. 29 eliminates certain mandatory separate class and series voting requirements, providing greater flexibility for a Texas corporation to structure its voting rights among different classes and series of stock. The amendment addresses one of the more significant hurdles that corporations seeking to redomicile in Texas have historically encountered, as the rigidity of the prior regime was often incompatible with the way voting rights are typically structured in certain types of corporations with multiple classes or series of stock.
Limited Liability Companies and Limited Partnerships
While S.B. 29 will have the greatest impact on Texas corporations, the legislation also includes a number of analogous reforms for Texas limited liability companies and limited partnerships.
Senate Bill 1057
Senate Bill 1057 (S.B. 1057) was signed by Governor Abott on May 19, 2025, and will become effective on September 1, 2025. While not as expansive as S.B. 29, S.B. 1057 allows public companies with a specific nexus to Texas, either due to the location of its principal office or its decision to list its shares on one of the new Texas-based stock exchanges, the ability to “opt-in” to a statute that applies minimum ownership requirements to shareholder proposals.
A Texas corporation is eligible to opt-in to the statute by adopting an amendment to its governing documents if it (1) has a class of equity securities registered under Section 12(B) of the Securities Exchange Act of 1934; (2) is admitted to listing on a national securities exchange; and (3) either (A) has its principal office in Texas or (B) is admitted to listing on a Texas-based stock exchange.
Once a corporation has opted-in, in order to be eligible to submit a proposal on a matter to the shareholders for approval, a shareholder or group of shareholders must (1) hold an amount of voting shares of the corporation equal to at least (A) $1 million in market value or (B) three percent of the corporation’s outstanding voting shares; (2) hold the shares for a continuous period of at least six months before the date of the meeting and throughout the duration of the meeting; and (3) solicit the holders of shares representing at least 67 percent of the voting power of shares entitled to vote on the proposal.
Summary
The changes implemented by S.B. 29 and S.B. 1057 represent a significant evolution in Texas corporate law. We expect the changes will promote new entity formation in Texas and will influence many companies organized in Delaware and other jurisdictions to consider a move to Texas. We also expect many existing Texas companies to adopt amendments to their governing documents to take advantage of various features of the new legislation.
Disagreeing with the Supreme Court, the Ninth Circuit and Two District Courts Find APA Jurisdiction in Challenges to Federal Contract and Grant Terminations
One of the immediate priorities of the second Trump administration has been the termination of a slew of federal contracts and grants. This, predictably, has led to litigation, mostly filed in the U.S. District Courts, which as we have previously written, have authority to grant equitable relief. The government has been arguing that these cases belong in the U.S. Court of Federal Claims, where only monetary damages are available (and only upon meeting the high burden of establishing that the government acted in bad faith). On April 4, 2025, the Supreme Court issued an emergency stay of a District Court’s preliminary injunction in a case challenging grant terminations, with the five-justice majority suggesting that the termination case belonged in the Court of Federal Claims. But since then, two U.S. District Courts and the Ninth Circuit Court of Appeals have ruled—contrary to the Supreme Court’s emergency stay order—that there is indeed district court jurisdiction in cases challenging contract and grant terminations. As Judge Young of the District Court of Massachusetts stated, “…this Court, after careful reflection, finds itself in the somewhat awkward position of agreeing with the Supreme Court dissenters and considering itself bound by the still authoritative decision of the Court of Appeals of the First Circuit…” which ruled that the Tucker Act did not apply, and that the government’s actions were reviewable under the Administrative Procedures Act (“APA”).
Commonwealth of Massachusetts et al. v. Robert F. Kennedy, Jr. et al., Case No. 25-10814-WHY, U.S. District Court for the District of Massachusetts
On May 12, 2025, the U.S. District Court for the District of Massachusetts ruled that it—not the Court of Federal Claims—has subject matter jurisdiction over a lawsuit brought by a coalition of states challenging the withdrawal of funding opportunities and grant terminations by the National Institutes of Health based on perceived connections to diversity, equity, and inclusion and gender issues.
The District Court noted that the Court of Federal Claims was established, and the Tucker Act was enacted, to allow contractors and grantees to pursue monetary claims against the United States. But not every claim against the government is cognizable under the Tucker Act, even if the remedy may involve the payment of money. The Court noted that “whether a claim is contractual in nature under the Tucker Act [and therefore belongs in the Court of Federal Claims] is based on a determination of the essence of the action,” which requires a court to examine the source of the rights underlying the claim and the type of relief sought or appropriate to redress the claim. Applying this “essence” test, the District Court found that the States are primarily challenging the allegedly unlawful policies and actions of public officials, not the terms of their terminated grants, and the relief sought—directing the expenditures of already-appropriated funds—is mainly injunctive, not compensatory.
The District Court extensively quoted Justice Jackson’s dissent in the Supreme Court’s order to explain why District Court review of terminations under an APA standard is appropriate, including that the government’s “robotic rollout of its new mass grant-termination policy means that grant recipients and reviewing courts are compelled to guess at the theory underlying the agency’s action. Moreover, the agency’s abruptness leaves one wondering whether any reasoned decision making has occurred with respect to these terminations at all. These are precisely the kinds of concerns that the APA’s bar on arbitrary-and-capricious agency decision making was meant to address.”
Community Legal Services in Palo Alto et al. v. HHS et al., Case No. 3:25-cv-02847-AMO
On May 14, 2025, the Ninth Circuit ruled that the district court has jurisdiction to hear challenges to agency actions terminating funding for legal representation of unaccompanied children, despite the government’s argument that such cases should be brought exclusively in the Court of Federal Claims under the Tucker Act. The plaintiffs in this case specifically alleged that the government violated the Trafficking Victims Protection Reauthorization Act (“TVPRA”) by withholding all congressionally authorized funding for direct legal representation of unaccompanied migrant children, thereby failing to “ensure, to the greatest extent practicable,” that unaccompanied children receive legal counsel as mandated by 8 U.S.C. § 1232(c)(5). The majority emphasized that the claims were rooted in statutory and regulatory violations, not contract disputes, noting, “To the greatest extent practicable does not mean to no extent at all.” The court further explained that the Tucker Act did not bar the plaintiffs’ APA claims, particularly since the plaintiffs, as the subcontractors on the program, have no direct contract with the government and thus could not sue under the Tucker Act. In dissent, Judge Callahan went further than arguing that the claims belonged in the Court of Federal Claims, and insisted that the plaintiffs’ claims are unreviewable, because the decision to terminate funding was “committed to agency discretion by law under 5 U.S.C. § 701(a)(2).” As Judge Callahan wrote, “Even if the district court had jurisdiction under the Administrative Procedure Act, the decision to terminate funding—or the decision of who to fund—is committed to agency discretion by law.” Notwithstanding the dissent, this decision underscores the judiciary’s increasing willingness to review agency actions that implicate statutory mandates, even when the government invokes arguments of unreviewability or exclusive jurisdiction elsewhere.
State of Colorado et al. v. HHS et al., Case No. 1:25-cv-00121-MSM-LDA
On May 16, 2025, the U.S. District Court for the District of Rhode Island reached the same conclusion, ruling that it has subject matter jurisdiction under the APA over a lawsuit brought by a coalition of States challenging the termination of public health grants by the Department of Health and Human Services (“HHS”). The Court rejected HHS’s argument that the States’ claims were contractual and fell under the exclusive jurisdiction of the Court of Federal Claims pursuant to the Tucker Act.
Applying the “essence” test, Judge Mary S. McElroy ruled that the District Court has jurisdiction because the essence of the case is not contractual, but rather centers on alleged violations of federal statutes, regulations, and constitutional principles. The judge distinguished between claims that arise from contract disputes—which would typically fall under the exclusive jurisdiction of the Court of Federal Claims via the Tucker Act—and claims seeking prospective, equitable relief for unlawful agency action under the APA. She emphasized that the States’ claims do not arise in any contract, but rather arise under the APA—particularly that statute’s provisions forbidding arbitrary and capricious action, action contrary to law, and action in excess of statutory authority and the Constitution’s Spending Clause and underlying separation of powers principles. The court found that the gravamen of the States’ allegations “does not turn on terms of a contract between the parties; it turns largely on federal statutes and regulations put in place by Congress and HHS.”
Judge McElroy further explained that the States are seeking relief that is prospective and equitable—namely, an injunction to halt the allegedly unlawful termination of federal funding—rather than money damages for breach of contract. She cited Supreme Court precedent, particularly Bowen v. Massachusetts, to support the distinction between actions for money damages (which fall under the Tucker Act) and actions for specific relief (which are reviewable under the APA in district court). The judge wrote, “Merely because their requested equitable relief would result in the disbursement of money is not a sufficient reason to characterize the relief as money damages.” She concluded that the case concerns the process and legality of HHS’s actions, not the enforcement of contractual obligations, and that district courts are the proper forum for reviewing such claims. This reasoning was reinforced by her observation that “the source of the States’ rights is based on federal law rather than on contract,” and that the States “have asked this Court to review and interpret the governing federal statute and regulations.” Thus, the District Court retained jurisdiction to adjudicate the States’ claims for injunctive and declaratory relief under the APA and the Constitution.
Conclusion
These recent decisions provide important guidance for parties seeking to challenge broad federal funding directives and contract and grant terminations, clarifying the circumstances under which such claims may proceed in district court rather than the Court of Federal Claims. As the Government continues to contest subject matter jurisdiction in ongoing litigation, further guidance from the Circuit Courts or the Supreme Court is likely. We will continue to monitor these developments and provide updates as the legal landscape evolves.
Enforcement of Mental Health Parity Regulations Suspended: Takeaways for Plan Sponsors and Health Insurance Issuers
In January 2025, The ERISA Industry Committee (ERIC) filed a complaint against the US Departments of Labor, Health and Human Services, and the Treasury (the departments) seeking to invalidate the 2024 final regulations under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and the Consolidated Appropriations Act, 2021 (CAA). The US Department of Justice recently filed a motion for abeyance in the pending litigation, requesting that the court pause its review of the case and announcing that the Trump administration will stay enforcement of the final regulations to give the government an opportunity to reconsider the rule, “including whether to issue a notice of proposed rulemaking, rescinding or modifying the regulation.” The motion was approved on May 9, 2025.
In Depth
On May 15, 2025, the departments issued a communication titled “Statement of U.S. Departments of Labor, Health and Human Services, and the Treasury Regarding Enforcement of the Final Rule on Requirements Related to the Mental Health Parity and Addiction Equity Act.” The departments’ action is at least partially in response to Executive Order 14219, titled “Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency’ Deregulatory Initiative,” which directs federal agencies to review regulations to identify those that may impose undue burdens on small businesses or significant costs upon private parties that are not outweighed by public benefits.
The statement is significant, as it advises that the departments “will not enforce the 2024 Final Rule or otherwise pursue enforcement actions, based on a failure to comply that occurs prior to a final decision in the litigation, plus an additional 18 months.” Notably, the relief applies only to those portions of the 2024 Final Rule that are newly added since the 2013 Final Rule. The statement reinstates the 2013 Final Rule, as interpreted by “FAQs About Mental Health and Substance Use Disorder Parity Implementation and the Consolidated Appropriations Act, 2021 Part 45.” The departments also note that MHPAEA’s statutory obligations, as amended by the CAA, continue to apply. In the case of the application of the MHPAEA rules within the jurisdiction of the department of Health and Human Services (i.e., the rules that apply to carriers), the statement encourages states, which are the primary enforcers of MHPAEA, to adopt a similar approach to enforcement.
The statement restores the status quo that was in effect before the adoption of the 2024 Final Rule, with at least three immediate consequences:
The 2024 Final Rule’s “relevant data” requirement is suspended. Thus, compliance with the mental health parity requirements will no longer be tested on outcomes. Rather, the standard that applies temporarily is in the preamble to the 2013 final regulation (i.e., outcomes are not determinative of compliance).
The 2024 Final Rule’s controversial “meaningful benefit” requirement is also suspended. This is the requirement that a plan that provides any benefits for a mental health condition or substance use disorder in any classification of benefits must provide meaningful benefits for that mental health condition or substance use disorder in every classification in which medical/surgical benefits are provided. For this purpose, a plan does not provide meaningful benefits unless it also provides benefits for a core treatment for the mental health condition or substance use disorder in each such classification.
The 2024 Final Rule’s “fiduciary certification” requirement is suspended, at least temporarily. Absent the suspension, the 2024 Final Rule required fiduciaries to certify that they commissioned and reviewed an analysis of their compliance with the MHPAEA nonquantitative treatment limitations (NQTLs) requirements and that they selected and monitored their NQTL vendor.
One important obligation that remains is the requirement to prepare and make available an NQTL comparative analysis. The continued application of the CAA also means that plan sponsors and health insurance issuers must continue with their compliance efforts.
With respect to ongoing plan audits and investigations, the departments offered little insight as to how they may approach review or if their enforcement efforts may change moving forward. The statement notes that “The Departments will also undertake a broader reexamination of each department’s respective enforcement approach under MHPAEA” and that “the Departments may make updates to the subregulatory guidance implementing MHPAEA, including FAQs Part 45,” suggesting that some relief may be forthcoming. Additional guidance on the impact of the departments’ statement on these ongoing audit and enforcement activities would be welcome.
Action Items
Plan sponsors and health insurance issuers should continue to make good-faith efforts to comply with the MHPAEA guidance, as modified by the CAA. This includes, for example, preparation and maintenance of a written NQTL comparative analysis and ongoing review of benefit plans for compliance as applied to the plans’ written terms and operation.
EEOC’s Abortion Accommodation Provision in PWFA Rule Vacated
On May 21, 2025, a federal judge for the U.S. District Court for the Western District of Louisiana vacated a portion of the Biden-era U.S. Equal Employment Opportunity Commission (EEOC) implementing the Pregnant Workers Fairness Act (PWFA) to require employers to reasonably accommodate employees who choose to have an abortion.
Quick Hits
The U.S. District Court for the Western District of Louisiana vacated the EEOC’s final rule interpreting the PWFA to require elective abortion-related accommodations and removing abortion from the definition of a pregnancy-related medical condition.
The ruling tracks a prior preliminary injunction ruling that found the EEOC exceeded its authority and evidence of congressional intent for the PWFA to apply to elective abortion lacking.
U.S. District Judge David Joseph, a Trump appointee, found that the EEOC exceeded its statutory authority by including the “abortion accommodation mandate” in the April 2024 final rule and violated the “major questions doctrine,” which requires clear congressional authorization for agency actions of significant economic and political importance.
The court granted summary judgment in favor of the plaintiffs, vacating the “abortion accommodation mandate” and sent the rule back to the EEOC to revise it and any implementing regulations or guidance, accordingly.
“[T]he record before the Court clearly establishes that the EEOC has exceeded its statutory authority to implement the PWFA and, in doing so, both unlawfully expropriated the authority of Congress and encroached upon the sovereignty of the Plaintiff States under basic principles of federalism,” Judge Joseph said in the decision.
The ruling comes in consolidated litigation filed by the states of Louisiana and Mississippi and a group of four Catholic organizations led by the United States Conference of Catholic Bishops, challenging the EEOC’s interpretation of the PWFA’s requirement to reasonably accommodate employees for “related medical conditions” to pregnancy as to include “termination of pregnancy, including via miscarriage, stillbirth, or abortion.” (Emphasis added.)
Both Louisiana and Mississippi passed abortion bans following the 2022 ruling from the Supreme Court of the United States in Dobbs v. Jackson Women’s Health Organization, in which the Court overturned Roe v. Wade and held that the U.S. Constitution does not provide a right to abortion.
In June 2024, Judge Joseph issued a preliminary injunction delaying enforcement of the “abortion accommodation mandate” as it applied to certain employers in Louisiana and Mississippi. Judge Joseph kept that preliminary injunction in place until the final dismissal of the matters by the court.
The latest ruling vacates the mandate for reasons that largely track the findings in the preliminary injunction order. In that order, the judge found that the “abortion accommodation mandate” exceeded the EEOC’s authority under the Administrative Procedure Act (APA) and principles of statutory construction and was not clearly authorized by Congress.
That ruling noted that it must be presumed that Congress’s decision not to include explicit references to elective abortion in the PWFA was intentional. The preliminary injunction ruling pointed out that while the PWFA cross-references Title VII of the Civil Rights Act of 1964, the statute fails to incorporate Title VII’s protections for employees who choose to have abortions.
Further, the preliminary injunction found that the “abortion accommodation mandate” implicated the “major questions doctrine,” and that the EEOC cannot point to clear language in the PWFA that would empower it to make such a rule, which likely would have been addressed by Congress had it intended to do so given the highly contentious political nature of the issue.
The Louisiana district court ruling is the latest blow to the Biden-era EEOC. The ruling comes less than one week after the U.S. District Court for the Northern District of U.S. District Court for the Norther District of Texas vacated portions of the EEOC’s workplace harassment guidance regarding harassment based on sexual orientation and gender identity. Employers should note, however, that the April 2024 enforcement guidance has not been officially rescinded because the EEOC currently lacks a quorum.
Next Steps
Since it is unlikely that the current EEOC will appeal the ruling given the prior statements of EEOC Acting Director Andrea Lucas, this decision presumably means that employers are not required to follow the PWFA’s requirement to provide accommodations for purely elective abortions that are not necessary to treat medical conditions related to pregnancy. While the court vacated the need to accommodate elective abortions under the PWFA, it noted that terminations of pregnancy or abortions stemming from the underlying treatment of medical conditions related to pregnancy are not affected by the order. Employers must continue to provide accommodations for such terminations or abortions to the extent required by the PWFA. Employers should remember that the decision to have or not an abortion remains protected by Title VII.