Court Upholds Mass Class Action Opt-Out Permitting Individual Arbitrations
No company would relish the prospect of defending against a class action lawsuit and thousands of related individual arbitrations at the same time. But following a recent federal court ruling, Google (and its parent company, Alphabet) find themselves in exactly that position. In February 2025, the United States District Court for the Northern District of California rejected Google’s efforts to invalidate the mass opt-out of over 69,000 individuals from a class action in order to pursue individual arbitrations. The case, In re Google Assistant Privacy Litigation (No. 5:19-cv-04286), centers on allegations that Google Assistant-enabled devices recorded users’ private conversations, and Google used the resulting data, without the device users’ consent. The court’s ruling has far-reaching implications for arbitration and class action strategies.
Case Overview
The litigation stems from claims that Google Assistant devices unintentionally recorded private conversations through what plaintiffs refer to as “False Accepts.” These unintended recordings, plaintiffs argue, resulted in unauthorized data collection and privacy violations. Google, on the other hand, denies the allegations, maintaining that any such recordings were either user-triggered or incidental, and were handled in line with its privacy policy.
In December 2023, the court certified a class of U.S. consumers, covering individuals who purchased Google Assistant-enabled devices between May 18, 2016, and December 16, 2022. Class members were notified of their rights, including the option to opt out if they preferred to pursue claims independently.
Dispute Over Mass Opt-Out
Following the certification, 69,507 individuals submitted an opt-out request through the law firm Labaton Keller Sucharow LLP, signaling their intent to leave the class and pursue individual arbitration claims against Google. Google contested the mass opt-out, arguing it failed to comply with procedural standards and deprived individuals of making fully informed, independent decisions.
Google’s Challenges
Google’s opposition to the opt-out relied on two key arguments:
Due Process Concerns – The company claimed the mass opt-out undermined the individual claimants’ ability to make fully-informed decisions for themselves about whether to opt out, as it was orchestrated by a law firm on behalf of the participants.
Procedural Invalidity– Google argued that the lack of individual signatures rendered the opt-out submission invalid under the class action’s notice requirements.
The Court’s Decision
The court ruled against Google, upholding the validity of the opt-out request. The court determined that:
Individual Authorization Was Clear – Direct consent from the involved individuals was established by the record evidence, making the opt-out legitimate.
Procedural Irregularities Were Insufficient Grounds – The court held that technical deficiencies, such as the lack of individual signatures, did not justify overriding the participants’ expressed intent.
Broader Implications
This ruling emphasizes that courts may validate mass opt-outs if evidence of individual consent is provided, even if procedural formalities are not strictly followed. The decision serves as a warning to defendants in class action cases that mass opt-outs, often aimed at transitioning disputes into individual arbitrations, may be challenging to overturn.
For Google, the ruling could result in navigating thousands of individual arbitration claims instead of a consolidated class action. Importantly, the language of the potentially applicable Google arbitration agreements expressly excludes consolidation of individual arbitrations. As we have explained in another e-alert, under a recent Ninth Circuit decision, that likely means Google cannot take advantage of consolidating those opt-out arbitrations and therefore may face significant arbitration costs. More broadly, the case represents a growing recognition of mass opt-outs, potentially influencing future strategies in litigation involving major corporations.
MISSOURI V. FLORIDA: Prerecorded Debt Collection Calls Get MOHELA Into Trouble in the Sunshine State
Can a non-profit corporation created by the State of Missouri be sued under the TCPA in the state of Florida?
According to the Florida district court the answer is yes!
But before we get there, why in the world did the Defendant not seek to move this case to Missouri before moving to dismiss? The world may never know.
In Coffey v. Higher Education Loan Authority of the State of Missouri 2025 WL 770396 (M.D. Fl. March 11, 2025) the Plaintiff sued claiming she received prerecorded debt collection calls without prior express written consent.
Pause.
Prior express written consent isn’t required for such calls. So this entire complaint should have been thrown out immediately.
But, the good folks at MOHELA (as the Defendant styles itself) had different plans. Rather than attack the obvious they argued Plaintiff could not sue it at all because it is entitled to something called sovereign immunity.
Sovereign immunity is a state or federal government’s ability to do whatever it wants to folks and not be sued for it. Essentially we all give up our rights to complain about what the government does when we agreed (through our forefathers without our consent) to be bound by the rules of this great country and each of its various commonwealths.
But sovereign immunity does not apply to every entity created by a state. It only applies to actions of the state or federal government taken directly. And in this case the MOHELA was set up to act independently of the state of Missouri and with its own pool of money and source of income separate and apart from the state. So, in essence, a judgment against MOHELA is not a judgment against the Show-Me state.
All that was left was to determine whether MOHELA was a “person” under the TCPA. Recall there is a dizzying analysis required to determine whether government officials qualify as “people” who can be sued under the TCPA. But here the Court had little trouble analyzing the issue because MOHELA is set up as a corporation– and corporations are specifically listed as “persons” governed by the statute.
So there you go, MOHELA can be sued for doing something that it shouldn’t be sued for because it brought the wrong argument. Nice!
Court Rules Compensation Package Offer Is Not a Security
The definition of a “security” Section 25019 was modeled after the definition in Section 2(a)(1) of the Securities Act of 1933, albeit with some notable differences. Both laws broadly define the term and therefore cover a wide variety of economic arrangements. Nonetheless not every offer necessarily constitutes an offer of a security.
In Stauffer v. Orpheus Flow Technologies, LLC, Case No. 21-cv-00567-JD (Feb. 27, 2025), the plaintiff, Job Stauffer, alleged that in exchange for working as “a co-founder and a top manager of Orpheus Flow [the defendant],” he had been offered a compensation package consisting of “a significant portion of the equity of Orpheus Flow” and “monthly earned income. Judge James Donato, however, dismissed his claim under Corporations Code Section 25401 because Stauffer’s “compensation package offer was manifestly not a security”. Judge Donato found that the plaintiff’s compensation package offer failed by a “wide margin” both the Howie [SEC v. W.J. Howie Co., 328 U.S. 293 (1946)] and “risk capital” [Silver Hills Country Club v. Sobieski, 55 Cal. 2d 811 (1961)] as applied by the California courts.
Judge Donato’s ruling, however, should not be understood to mean that equity awards such as stock options, stock appreciation rights, and stock purchase rights do not involve the offer and sale of a security.
Chinese Court Again Rules AI-Generated Images Are Eligible for Copyright Protection
On March 7, 2025, the Changshu People’s Court announced that it had ruled that images generated with Artificial Intelligence (AI) are eligible for copyright protection. This is believed to be the second case regarding AI-generated images with the Beijing Internet Court ruled similarly in late 2023. In the instant case, Lin XX generated an image of a half heart in a city waterfront using Midjourney and further used Photoshop to edit the image. An unnamed Changsha real estate company then used the image in a WeChat posting and further built a three-dimensional installation based on the image at one of its developments.
The Court explained that it first reviewed the user agreement of the AI software involved in the case, and clarified that the assets and rights of the pictures produced by using the software service in the Midjourney software user agreement belong to the user, and logged into the creation platform in court to review the login process, user information, and the picture iteration process such as the modification of the prompts. The court held that Lin’s modification of the prompts and the modification of the picture through the image processing software reflected his unique selection and arrangement, and the image generated by this was original and belonged to the works protected by the Copyright Law. The two defendants violated the copyright by disseminating the picture on the Internet without the permission of the copyright owner. At the same time, it was determined that the copyright enjoyed by Lin should be limited to the picture, and the manufacturing of the three-dimensional installation was only based on the image. The real estate company’s design and construction of the corresponding installation did not constitute an infringement of Lin’s copyright. The court then ruled: 1. The infringing party publicly apologized to the plaintiff Lin on its Xiaohongshu [Red Note] account for three consecutive days; 2. The infringing party compensated the plaintiff Lin for economic losses and reasonable expenses totaling 10,000 RMB; 3. The plaintiff Lin’s other claims were rejected. After the first-instance judgment, neither the plaintiff nor the defendant appealed, and the judgment has taken legal effect.
This is the opposite of the decision reached by the U.S. Copyright Office in Zarya of the Dawn (Registration # VAu001480196) that did not recognize copyright in AI-generated images.
The original announcement can be found here (Chinese only).
Two New Procedural Wrinkles That May Disincentivize Challenges to Federal Policies
The first weeks of the Trump Administration have been defined by executive orders and new policies that were immediately challenged on constitutional or statutory grounds.
Recently, the US Environmental Protection Agency indicated its intent to “launch” the “biggest deregulatory action in U.S. History” under which it will undertake 33 separate actions impacting regulations ranging from emissions limits for power plants to internal calculations for the “social cost of carbon.” Even preceding this effort, more than 100 legal challenges to other Trump Administration actions have been filed.
As these disputes move through the litigation process (including appeals and, for at least some cases, likely US Supreme Court review), district courts have issued numerous preliminary injunctions to pause or delay the effects of executive orders until litigation is complete. While some of the new efforts will be challenged in appellate courts due to venue provisions in statutes including the Clean Air Act or Clean Water Act, other challenges will proceed in district courts.
Litigating these challenges can be expensive for both sides, but two recent developments could make litigation costs — particularly in challenges lodged in district courts — higher for challengers. First, the Trump Administration issued a Memorandum titled “Ensuring the Enforcement of Federal Rule of Civil Procedure 65(c),” and subsequently a related Executive Order on the same subject, seeking to require challengers to post bond before seeking preliminary injunctions. Second, the Supreme Court recently decided Lackey v. Stinnie, which — separate and apart from the Memorandum — makes it harder for some challengers to recover attorneys’ fees after a preliminary injunction is granted.
Below, we discuss these developments and how they might apply in the litigation context.
How to Challenge Executive Branch Actions
We have outlined some of the Trump Administration’s initial actions: initial Executive Orders; initial environmental policies; initial efforts to pause government grants; and policies in the energy space. We have also addressed the new Administration’s trade policies here and here.
Individuals and entities generally initiate a challenge to the legal basis for an executive order or other action by filing a complaint in a federal district court. Depending on what is at stake and whether the facts of the case require rapid resolution, the court may use briefings, hearings, or a trial to evaluate whether the order or action should be upheld, struck down, or modified. Parties that lose in district courts may appeal, and some disputes make their way to the Supreme Court, which has the final say on most constitutional issues.
Often, challengers ask for injunctive relief, which is a legal remedy in the form of a court order compelling a party to do, or not do, a particular thing. Injunctive relief is warranted when an award of a money judgment would be insufficient to resolve the harm. Injunctive relief can be temporary — a “preliminary injunction” — or permanent, requiring a party in perpetuity not to do a particular thing.
Courts will often use preliminary injunctions to temporarily preserve the “status quo” while litigation is ongoing. This means that a challenger may win a preliminary injunction, but ultimately lose the case (or have the case mooted if the government changes course on its own before a final judgment).
The White House Memorandum on Fed. R. Civ. P. 65(c)
On March 6, after district courts had issued numerous restraining orders and preliminary injunctions temporarily delaying or reversing executive orders, the Trump Administration issued a new memorandum titled “Ensuring the Enforcement of Federal Rule of Civil Procedure 65(c),” seeking to require plaintiffs to post a bond before requesting preliminary relief. (The White House fact sheet on the Memorandum is here.)
The memo asserts that the slate of lawsuits and preliminary injunctions constitutes an “anti-democratic takeover … orchestrated by forum shopping organizations that repeatedly bring meritless suits … without any repercussions when they fail.” The memo argues that taxpayers are harmed when program cuts are enjoined and substantial government resources are spent “fighting frivolous suits instead of defending public safety.”
In response to the issues it identifies, the memo invokes Federal Rule of Civil Procedure 65(c), which requires parties seeking a preliminary injunction to post security in an amount the court determines is sufficient to cover the costs and damages of the enjoined party if the enjoined party ultimately wins the case on the merits. The memo directs all federal department and agency heads to formally request security under Rule 65(c) in every case where plaintiffs seek a preliminary injunction against the government. It requires that the requests remind the court that Rule 65(c) is mandatory, reiterate that the government’s requested bond amount is “based on a reasoned assessment,” and demand that any party failing to comply with Rule 65(c) should lead to the “denial or dissolution of the requested injunctive relief.”
But despite its strong language, the memo is largely just a reminder of an already existing procedural rule. Judges have discretion to determine the appropriate amount for any Rule 65(c) bond, and, in the context of challenges to executive actions, many courts have determined that amount is zero. Federal judges are presumably aware of Rule 65(c), and many of the judges enjoining the Trump Administration already determined that Rule 65(c) did not require a bond in those cases. Two weeks before the memo, a federal district judge in Maryland granted a college diversity officer’s request for a preliminary injunction against executive orders cancelling diversity, equity, and inclusion (DEI) grants and contracts, but set the Rule 65(c) bond at $0 because the plaintiff’s constitutional rights were at issue and “a bond of the size Defendants appear to seek would essentially forestall Plaintiffs’ access to judicial review.”
Going forward, Rule 65(c) bonds will likely become a more actively contested issue and challengers to any executive action will need to provide arguments why they should not be required to pay.
Lackey v. Stinnie and Plaintiffs’ Attorney Fees
Separately but relatedly, the challengers who have successfully obtained preliminary injunctions blocking Trump Administration executive actions may have a harder time recovering their attorneys’ fees — after the recent Supreme Court decision in Lackey v. Stinnie, plaintiffs will need to see their cases through to final judgment before recovering legal fees.
42 U.S.C. § 1988 provides that civil rights plaintiffs may win reimbursement of their attorneys’ fees if they are the “prevailing party.” Historically, this fee-shifting mechanism has helped advocacy groups and law firms shoulder the substantial cost of civil rights lawsuits. For example the Lackey plaintiffs estimated that the federal appellate litigation in the case cost $800,000. In a procedurally similar case, the New York Civil Liberties Union was seeking $200,000 in attorneys’ fees against two upstate New York counties.
The Supreme Court has addressed when exactly a plaintiff becomes a “prevailing party” (and thus eligible for reimbursement) on several occasions. In Buckhannon Board and Care Home v. West Virginia Department of Health and Human Resources, the Court ruled that a party prevails only when it achieves a “judicially sanctioned changed in the legal relationship of the parties.” 532 U.S. 598, 601 (2001). If a plaintiff files a lawsuit and the defendant voluntarily does what the plaintiff asked for, the plaintiff does not “prevail” for purposes of attorneys’ fees. To prevail, the plaintiff must win a merits judgment from a court.
What if a plaintiff wins a preliminary injunction but loses a final merits judgment? That plaintiff also does not prevail, the Supreme Court has held, because the victory was only temporary, not enduring. Sole v. Wyner, 551 U.S. 74, 86 (2007). The Sole decision left open what happens when a plaintiff wins a preliminary injunction and then the defendant voluntarily provides the relief plaintiff was seeking.
That issue has now been resolved. Until last month, 11 federal appeals courts held that a plaintiff that wins a preliminary injunction can be a “prevailing party” under some circumstances. Not so, said the Supreme Court in Lackey. The Court held that a plaintiff “prevails” when it wins permanent, on-the-merits judicial relief that materially alters the legal relationship of the parties. A plaintiff that wins only a preliminary injunction, which would include several plaintiffs suing the Trump Administration at this juncture, is not yet entitled to reimbursement of its attorneys’ fees. As a result, it’s not yet clear whether plaintiffs challenging the Trump Administration’s policies will receive attorneys’ fees. It will depend on how they are ultimately resolved.
Listen to this article
USPTO’s Rescission of its Discretionary Denial Memorandum – Much Ado About Nothing?
In May 2020, the Patent Trial and Appeal Board (“PTAB”) panel in Apple Inc. v. Fintiv, Inc. (IPR2020-00019) denied institution of Apple’s petition in view of the advanced state of a parallel district court litigation and in doing so set forth six non-exclusive factors to be considered when a patent owner requested that the PTAB deny institution based on a parallel litigation. Those six factors would become known as the Fintiv factors and are:
whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;
investment in the parallel proceeding by the court and the parties;
overlap between issues raised in the petition and in the parallel proceeding;
whether the petitioner and the defendant in the parallel proceeding are the same party; and
other circumstances that impact the Board’s exercise of discretion, including the merits.
After the Fintiv decision, discretionary denials in view of parallel district court proceedings spiked considerably.
In June 2022, then-USPTO Director Kathi Vidal issued a memorandum titled “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation” (the “Interim Guidelines”) in response to this spike in discretionary denials. The Interim Guidelines stated that a petition would not be denied:
based on a parallel U.S. International Trade Commission (ITC) proceeding;
when a petitioner stipulates not to pursue in the parallel litigation the same grounds of invalidity as raised in the petition or any ground that could reasonably have been raised in the petition (referred to as a “Sotera stipulation” based on a PTAB decision by that same name); or
when a petition presents “compelling evidence” of unpatentability.
The Interim Guidelines also recognized that a court’s scheduled trial date, a key factor in Fintiv discretionary denials, is not always a good indicator of when trial will actually occur. Accordingly, the Interim Guidelines allowed parties to present evidence of the median time-to-trial statistics for civil actions in the district court where the parallel litigation was pending so that the panels could better gauge the likelihood of trial proceeding on the scheduled date.
Instances of discretionary denials notably declined following the issuance of the Interim Guidelines.
On February 28, 2025, the USPTO issued an unsigned notice stating that the Interim Guidelines had been rescinded and instructed parties and practitioners to again refer to the Fintiv and Sotera decisions when determining whether to deny institution based on a parallel proceeding.
The USPTO’s decision to rescind the Interim Guidelines was expected to increase the number of discretionary denials by removing petitioner’s safe harbors previously available under the Interim Guidelines. The first post-rescission decisions are now being published and shed some early light on what impact, if any, the rescission of the Interim Guidelines have on PTAB practice.
In short, rescission of the Interim Guidelines has had no impact, yet. Since February 28th, not even a single petition has been denied based on a parallel proceeding. A brief summary of some of the post-rescission PTAB institution decisions follows.
The first PTAB institution decision addressing the USPTO’s rescission of the Interim Guidelines was Savant Technologies LLC v. Feit Electric Company, Inc. (IPR2024-01357), published March 5, 2025. In this case, patent owner requested that the PTAB deny institution based on two related litigations in different districts—the Eastern District of Kentucky and the Northern District of Texas.
In considering the Kentucky litigation, where no trial date had been set, the board considered the parties’ proffered median time-to-trial statistics and found that the trial would likely occur “well after” a final written decision would issue.
In considering the Texas litigation, which was scheduled for trial on January 20, 2026, the panel noted that “[w]hen the parties filed their papers, the USPTO was following now-rescinded guidance” that allowed parties to present median time-to-trial statistics. The panel went on to state that the time-to-trial evidence was not relevant because “the time-to-trial statistics are congruent with the scheduled trial date.” In particular, the average time to trial statistics in the Northern District of Texas suggested an earlier trial date than was scheduled. After considering the other Fintiv factors, including the merits of Petitioner’s arguments, the panel instituted the IPR.
Another decision published on March 5, 2025, Mobileye Global, Inc. v. Facet Technology Corp. (IPR2024-01110), also addressed patent owner’s request for discretionary denial. In that decision, the panel applied the Fintiv factors without any mention of the Interim Guidelines, which is notable because each party filed two post-preliminary response replies addressing the Interim Guidelines. After considering the Fintiv factors, the panel instituted IPR in this matter.
On March 7, the PTAB published its decision in Adobe Inc. v. Jaffe (IPR2024-01352). The panel did not reference the Interim Guidelines, but did consider median time-to-trial statistics while noting that the District Court had not set any trial date. Upon review of the Fintiv factors, the panel instituted IPR.
Most recently, on March 11, the PTAB issued its decision in Toyota Motor Corp. v. Emerging Automotive LLC (IPR2024-00785) denying petitioner’s request for rehearing of the panel’s prior decision denying institution. In this decision, the PTAB first agreed with petitioner that it overlooked certain aspects of a prior art reference that supported petitioner’s invalidity grounds but proceeded to deny institution for another reason—the advanced state of a parallel litigation.
In its decision, the panel noted that “we no longer apply the guidance set forth in [the Interim Guidelines]” but, as in the other cases, still at least facially considered the median time-to-trial statistics provided by the parties. Nevertheless, in light of the scheduled trial date preceding the anticipated final written decision by eight months and the merits “not [] particularly strong,” the panel denied institution.
In short, nearing two weeks after the Interim Guidelines were rescinded, it appears to be “business as usual” for discretionary denials at the PTAB.
The only discernible practice pointer from this small sample of decisions is that the PTAB continues to consider median time-to-trial statistics in the absence of a trial date but is likely to disregard such evidence when a trial date is set. Accordingly, we suggest that parties continue to address median time-to-trial statistics when no trial date has been set in the parallel proceeding but should be prepared for the PTAB to disregard such evidence if or when a trial date is set.
NO IMMUNITY: Capital One Sued Over “Refer a Friend” Text – Court Holds Section 230 Does Not Apply
Recently, while shopping around for a new credit card, I was surprised by how many people were eager to “refer” me. It’s a common promotional scheme – someone sends you a referral link or code, and if you use it, they score a bonus. Seems harmless enough, but a recent ruling out of the Western District of Washington has raised an important question—can the company behind these referral programs be held liable for the messages sent? Let’s find out.
Plaintiff Tamie Jensen alleged that she received a text message from a contact, containing content prepared by Defendant Capital One as part of its “Refer a Friend” program. Jensen filed this putative class-action lawsuit on behalf of herself and others who received a “Refer a Friend” text message – claiming that the transmission of this commercial text message violated Washington’s Commercial Electronic Mail Act (“CEMA”) and Consumer Protection Act (“CPA”).
According to the Complaint, users can click the referral button on Capital One’s app or website, prompting Capital One to generate a referral link and compose an editable text message. The user is then allegedly directed to copy and paste the message with the link and send it to their contacts. The Complaint states that on the app (but not the website), a notice underneath the referral button reads: “You confirm you have consent to send text messages to each recipient. You may edit the pre-filled message as desired.” Jensen claims the alleged text message she received had not been edited by her contact before she received it and contained only the pre-filled content composed by Capital One.
In its motion to dismiss the lawsuit, Capital One raised three contentions, including an argument that it is immune under Section 230 of the Communications Decency Act from liability for text messages it did not directly send.
Section 230 isn’t something we talk about here too often, so let me give you a little background – the operative part of Section 230(c)(1) specifies that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” The statute essentially protects online platforms such as Google, Facebook, or Amazon, as well as companies that provide broadband internet access or web hosting from being held legally responsible for information posted by an “information content provider”, or the person or entity actually responsible for the creation or development of information. However, Section 230 does not prevent an interactive computer service from being held liable for information that it has developed. Section 230, therefore, distinguishes those who create content from those who provide access to that content, providing immunity to the latter group. An entity may be both an “interactive computer service” provider and an “information content provider,” but the critical inquiry for applying Section 230’s immunity is whether the service provider developed the content that is the basis for liability.
With that out of the way, let’s get into Jensen and Capital One’s specific contentions. Jensen argued that she complains of content provided—either entirely or mostly—by Capital One, not by a third party (the “friend” who sent her the referral text). Capital One, however, argued that because it merely provided suggested language, and its customers retained control over whether to or what to text to their friends, Capital One should not be liable for the text messages and language that its customers chose to send.
The Court agreed with Jensen, holding that the offending content for the purposes of the alleged CEMA violation is the referral link—which was composed in its entirety by Capital One with respect to the text Jensen received. Although Capital One emphasized that senders retain the ability to modify the content of the “Refer a Friend” texts, the text Jensen allegedly received was not modified. The Court distinguished the situation here from that in Carafano v. Metrosplash.com, Inc., 339 F.3d 1119, 1122 (9th Cir. 2003), where the defendant was an online dating site that required users to complete a multiple-choice survey to create a profile. A user created a false and defamatory profile for a celebrity, who then sued the site. The Ninth Circuit held that, although the site required its users to complete the survey, because the site did not play a significant role in creating, developing, or transforming the relevant information—the defamatory information—the dating site was protected by Section 230. Here, however, because Jensen alleged that Capital One is the sole author of the content of the text that she received, the Court held that Capital One is not entitled to Section 230 immunity.
The Court also rejected Capital One’s two other grounds for dismissing the Complaint – that Jensen’s claims seek to interfere with Capital One’s power to advertise and market its credit cards, and are therefore preempted by the National Bank Act (“NBA”), and that Jensen did not state a CEMA claim because she failed to allege that Capital One either initiated the text message or substantially assisted in transmitting the message.
Briefly, CEMA imposes liability for persons conducting business in Washington who “initiate” or “assist” in transmitting a commercial text message to a telephone number assigned to a Washington resident’s cell phone. CEMA defines “assist the transmission” as providing “substantial assistance or support.” WASH. REV. CODE § 19.190.010(1). Interestingly, Capital One essentially conceded that it assisted its customers in transmitting text messages but argued that the assistance it provided was not “substantial.” The Court disagreed, finding that Jensen’s allegations that Capital One generates a referral link and other content of a text message that customers are asked to copy and send to their contacts are sufficient to support a finding that Capital One substantially assisted its customers in formulating, composing, and sending commercial text messages. Although Capital One emphasized the part of the process that is outside its control (when to send messages, who to send messages to, whether Capital One’s provided language should be edited or sent as is), the Court held that these arguments go to the merits of the CEMA claim, rather than the sufficiency of Jensen’s allegations.
Capital One also attempted to argue that it notified its customers only to send texts to people who have consented to receive them and did not know that the text messages would be sent without consent. However, Capital One’s description of the notice was found to be only partially accurate: the notice on the mobile app indicates that the customer should have received consent to send “text messages” to the recipient, but not that the customer should have received consent to send the particular commercial text message. The Court rejected Capital One’s argument that a “natural reading” of the notice would tell a consumer to only send the specific commercial text with consent and instead concluded that the plain language of the notice suggests that the consent at issue is the consent to send text messages in general.
Lastly, the Court rejected Capital One’s contention that CEMA represents a significant restriction on Capital One’s ability to advertise its credit cards, and is thereby preempted by the NBA, which gives federally chartered banks the power “[t]o exercise … all such incidental powers as shall be necessary to carry on the business of banking.” 12 U.S.C. § 24. The Court held that CEMA’s generally applicable restrictions on the manner of advertising would not restrict all forms of Capital One’s advertising, or even all forms of advertising via text message. Accordingly, the Court found that requiring Capital One to comply with CEMA would not significantly impair its ability to advertise its credit cards and thus found no preemption here.
The Future of Section 230
A particularly interesting part of this decision is when the Court notes that “the purpose of Section 230 immunity—to encourage Internet service providers to voluntarily monitor and edit user-generated speech in internet traffic—would not be served by protecting Capital One from liability in this case.” As acknowledged by the Court, the “two basic policy reasons” for Section 230 immunity are “to promote the free exchange of information and ideas over the Internet and to encourage voluntary monitoring for offensive or obscene material.” Remember, this statute was enacted back in 1996. At the time, the feeling was that the threat of being sued into oblivion by anyone who felt wronged by something someone else posted would naturally disincentivize online platforms that were still very much in their nascent stage of growth – and not the tech giants we see today. Over the years, there have been numerous attempts to reform Section 230, ranging from outright repeal to reinterpreting the scope of protected activities (for example, limiting or eliminating protection of child sexual abuse material has been one of the few bipartisan efforts in recent years), placing conditions on platforms that wish to avail the immunity, and altering the “Good Samaritan” provisions to address what are perceived to be politically motivated content removals.
Of course, this brings us to the question of who actually decides the scope of Section 230 – until not too long ago, the clear answer was the FCC. However, the Supreme Court’s decision in Loper Bright v. Raimondo stripped the FCC of its ability to broadly interpret statutes. Nevertheless, FCC Chairman Brendan Carr made his views on Section 230 perfectly clear in his chapter of Project 2025, stating that, “The FCC should issue an order that interprets Section 230 in a way that eliminates the expansive, non-textual immunities that courts have read into the statute.” While the FCC’s authority to do this in a post-Loper world is questionable, Carr also adds, “The FCC should work with Congress on more fundamental Section 230 reforms […] ensuring that Internet companies no longer have carte blanche to censor protected speech while maintaining their Section 230 protections.”
Conclusion
So, to answer the question I started with – yes, a corporation can be held liable for the transmission of a message it developed. Even with a Section 230 shakeup on the horizon, it doesn’t look like Capital One will be offered any respite in this case.
However, it will be interesting to see what stance the FCC does take on the future of Section 230 – and we may find out sooner rather than later in light of the deregulation initiative announced on March 12, 2025.
Meanwhile, you can read the Court’s order here: Jensen v. Capital One Financial Corp., 2025 WL 606194 (W.D. Wash. Feb. 25, 2025).
New Bench Card Promotes Clarity and Consistency in Virtual Court Proceedings
New York’s state court judges will soon have a new resource at their fingertips when holding court remotely. As detailed in a recent article in the New York Law Journal, New York’s Court Modernization Action Committee (“CMAC”) recently developed a bench card for judges to reference while they prepare for and implement virtual proceedings.
The CMAC is comprised of various stakeholders, including judges, court staff and attorneys, who work to modernize New York’s court system by encouraging the adoption of new technologies and maintenance of pandemic-era improvements to remote court services.
Last year, the CMAC identified a key issue: Although judges have continued to hold virtual proceedings since the pandemic, many have lacked ongoing formal training on the best practices for remote court appearances. As a result, court users and attorneys might encounter judges who manage their virtual courtrooms in drastically different ways or who have varying levels of proficiency with technology.
To address this inconsistency, the CMAC developed a Virtual Proceedings Bench Card. The bench card is a double-sided reference guide for New York State judges to use when planning and conducting remote court appearances. One side of the card lists best practices for judges to implement before and during proceedings, such as instructing participants to mute themselves when joining and reminding them to enable livestreaming where appropriate. It also contains blank spaces for judges to fill in information specific to their needs, such as the phone number for their courthouse’s IT department.
The other side contains a list of recommended formats for various proceedings in different courts. For example, in Family Court, the card recommends that child support proceedings are held virtually by default, while most custody proceedings are presumptively in-person. These recommendations were developed with input from many judges and other stakeholders as part of the 2022 Report of the court system’s Pandemic Practices Working Group. Since the default formats are only recommendations, the bench card also provides a list of factors that courts should consider when deciding whether to deviate from the guidelines, such as whether a particular format would present hardships for a party or whether a party’s health or disability favors one format over another.
The option to conduct virtual proceedings provides significant benefits to court users and should be widely encouraged. Remote court attendance allows court users to avoid lengthy travel, time off work, arrangement of childcare and other impediments that can make in-person attendance difficult. Greater flexibility allows for greater access to justice. With the publication of the bench card, both judges and court users alike will hopefully have a smoother, more predictable experience, empowering them to utilize remote options more often and improve the virtual proceeding experience for all.
EPA and the Army Make More Waves on WOTUS
On March 12, the Environmental Protection Agency and the Office of the Assistant Secretary of the Army took steps to address lingering questions about the meaning and implementation of “waters of the United States” (WOTUS) following the US Supreme Court’s 2023 decision in Sackett v. United States. Although the Sackett decision narrowed the types of features that could be WOTUS, there are several implementation questions that remain on particular issues related to identifying WOTUS. Further, subsequent litigation over the prior administration’s WOTUS rule has resulted in the 2023 WOTUS rules (as amended after Sackett) applying in 24 states, while the pre-2015 rules, as consistent with Sackett, are applied in 26 states.
As the agencies begin a new effort to promote clarity and uniformity for Clean Water Act implementation across the country, EPA Administrator Lee Zeldin announced the availability of new guidance for implementing the “continuous surface connection” requirement outlined in Sackett. Administrator Zeldin also announced that the agencies will conduct listening sessions in March and April to solicit feedback and hear public comment on implementation issues that remain post-Sackett. The agencies hope that the guidance and the listening sessions will assist their efforts to arrive at both (a) legally comprehensible and durable provisions for identifying jurisdictional features governed by the Clean Water Act, and (b) effective, transparent, and predictable field implementation of the principles for identifying WOTUS.
The Guidance
Whether a wetland is jurisdictional under the Clean Water Act depends on the connection that the wetland has to another jurisdictional water — a traditional navigable water or a relatively permanent body of water connected to a navigable water. When the Supreme Court confirmed in Sackett that a wetland needed to have a continuous surface connection with other covered waters, it seemed to provide additional clarity with respect to wetland jurisdiction. But guidance documents issued by the prior administration continued to generate controversy by concluding that “continuous surface connection” did not only mean that a wetland had to abut a covered water, but that it could be connected by a “discrete feature,” like a non-jurisdictional ditch, to a jurisdictional waterway.
The new guidance clarifies that wetlands must be “adjacent” to, or “directly abut” a jurisdictional water like a river or tributary and prohibits non-jurisdictional intermediate features from qualifying as a continuous surface connection. The guidance emphasizes that, after Sackett, the test for the jurisdictional status of adjacent wetlands is twofold. First, the wetland must be adjacent to a body of water that is itself a traditionally navigable water or a “relatively permanent” body of water that is connected to a traditionally navigable water. Second, the wetland (which must meet the existing regulatory definitions of wetlands) must have a continuous surface connection to a jurisdictional water such that it is difficult to determine where the jurisdictional water ends and the wetland begins. This eliminates the “discrete feature” test.
This continuous surface connection guidance supersedes all other guidance documents on the issue. The agencies recognize that the second prong of the test, the “line-drawing problem” that exists between waters and wetlands, may present case-by-case challenges in identifying a continuous surface connection in the field. The agencies commit to working with stakeholders to resolving these line-drawing problems on a case-by-case basis and may provide additional guidance on the line-drawing problem in the future.
Listening Sessions
The agencies have announced a series of six listening sessions to take place in late March and April to receive public input on several WOTUS topics:
Relatively Permanent Waters. To determine whether a tributary is a WOTUS, the agencies look to whether the tributary is a “relatively permanent water.” The agencies are soliciting feedback on what kinds of characteristics, like flow regime, flow duration, seasonality, or others should inform a definition of “relatively permanent.”
Continuous Surface Connection. Although the new guidance is clear that discrete features connecting a wetland to a traditionally navigable water is not a basis for treating a wetland as jurisdictional, there are lingering questions on what it means for a wetland to “abut” a jurisdictional water. The agencies are seeking input on whether wetlands behind natural (not artificial) berms or other landforms would be considered “abutting,” and whether artificial flood control structures, pumps, and other features would remove a wetland behind the feature from Clean Water Act jurisdiction.
Jurisdictional Ditches. The agencies are also seeking public response on whether flow regime, physical features, excavation location, biological indicators like the presence of fish, or other characteristics would make a ditch jurisdictional.
Listening sessions will be public and conducted in-person, as well as streamed. Individuals or organizations seeking to present comments will be selected on a first-come, first-served basis and will be required to limit their remarks to three minutes.
Two New Procedural Wrinkles That May Disincentivize Challenges to New Federal Policies
The first weeks of the Trump Administration have been defined by executive orders and new policies that were immediately challenged on constitutional or statutory grounds.
Recently, the US Environmental Protection Agency indicated its intent to “launch” the “biggest deregulatory action in U.S. History” under which it will undertake 33 separate actions impacting regulations ranging from emissions limits for power plants to internal calculations for the “social cost of carbon.” Even preceding this effort, more than 100 legal challenges to other Trump Administration actions have been filed.
As these disputes move through the litigation process (including appeals and, for at least some cases, likely US Supreme Court review), district courts have issued numerous preliminary injunctions to pause or delay the effects of executive orders until litigation is complete. While some of the new efforts will be challenged in appellate courts due to venue provisions in statutes including the Clean Air Act or Clean Water Act, other challenges will proceed in district courts.
Litigating these challenges can be expensive for both sides, but two recent developments could make litigation costs — particularly in challenges lodged in district courts — higher for challengers. First, the Trump Administration issued a Memorandum titled “Ensuring the Enforcement of Federal Rule of Civil Procedure 65(c),” and subsequently a related Executive Order on the same subject, seeking to require challengers to post bond before seeking preliminary injunctions. Second, the Supreme Court recently decided Lackey v. Stinnie, which — separate and apart from the Memorandum — makes it harder for some challengers to recover attorneys’ fees after a preliminary injunction is granted.
Below, we discuss these developments and how they might apply in the litigation context.
How to Challenge Executive Branch Actions
We have outlined some of the Trump Administration’s initial actions: initial Executive Orders; initial environmental policies; initial efforts to pause government grants; and policies in the energy space. We have also addressed the new Administration’s trade policies here and here.
Individuals and entities generally initiate a challenge to the legal basis for an executive order or other action by filing a complaint in a federal district court. Depending on what is at stake and whether the facts of the case require rapid resolution, the court may use briefings, hearings, or a trial to evaluate whether the order or action should be upheld, struck down, or modified. Parties that lose in district courts may appeal, and some disputes make their way to the Supreme Court, which has the final say on most constitutional issues.
Often, challengers ask for injunctive relief, which is a legal remedy in the form of a court order compelling a party to do, or not do, a particular thing. Injunctive relief is warranted when an award of a money judgment would be insufficient to resolve the harm. Injunctive relief can be temporary — a “preliminary injunction” — or permanent, requiring a party in perpetuity not to do a particular thing.
Courts will often use preliminary injunctions to temporarily preserve the “status quo” while litigation is ongoing. This means that a challenger may win a preliminary injunction, but ultimately lose the case (or have the case mooted if the government changes course on its own before a final judgment).
The White House Memorandum on Fed. R. Civ. P. 65(c)
On March 6, after district courts had issued numerous restraining orders and preliminary injunctions temporarily delaying or reversing executive orders, the Trump Administration issued a new memorandum titled “Ensuring the Enforcement of Federal Rule of Civil Procedure 65(c),” seeking to require plaintiffs to post a bond before requesting preliminary relief. (The White House fact sheet on the Memorandum is here.)
The memo asserts that the slate of lawsuits and preliminary injunctions constitutes an “anti-democratic takeover … orchestrated by forum shopping organizations that repeatedly bring meritless suits … without any repercussions when they fail.” The memo argues that taxpayers are harmed when program cuts are enjoined and substantial government resources are spent “fighting frivolous suits instead of defending public safety.”
In response to the issues it identifies, the memo invokes Federal Rule of Civil Procedure 65(c), which requires parties seeking a preliminary injunction to post security in an amount the court determines is sufficient to cover the costs and damages of the enjoined party if the enjoined party ultimately wins the case on the merits. The memo directs all federal department and agency heads to formally request security under Rule 65(c) in every case where plaintiffs seek a preliminary injunction against the government. It requires that the requests remind the court that Rule 65(c) is mandatory, reiterate that the government’s requested bond amount is “based on a reasoned assessment,” and demand that any party failing to comply with Rule 65(c) should lead to the “denial or dissolution of the requested injunctive relief.”
But despite its strong language, the memo is largely just a reminder of an already existing procedural rule. Judges have discretion to determine the appropriate amount for any Rule 65(c) bond, and, in the context of challenges to executive actions, many courts have determined that amount is zero. Federal judges are presumably aware of Rule 65(c), and many of the judges enjoining the Trump Administration already determined that Rule 65(c) did not require a bond in those cases. Two weeks before the memo, a federal district judge in Maryland granted a college diversity officer’s request for a preliminary injunction against executive orders cancelling diversity, equity, and inclusion (DEI) grants and contracts, but set the Rule 65(c) bond at $0 because the plaintiff’s constitutional rights were at issue and “a bond of the size Defendants appear to seek would essentially forestall Plaintiffs’ access to judicial review.”
Going forward, Rule 65(c) bonds will likely become a more actively contested issue and challengers to any executive action will need to provide arguments why they should not be required to pay.
Lackey v. Stinnie and Plaintiffs’ Attorney Fees
Separately but relatedly, the challengers who have successfully obtained preliminary injunctions blocking Trump Administration executive actions may have a harder time recovering their attorneys’ fees — after the recent Supreme Court decision in Lackey v. Stinnie, plaintiffs will need to see their cases through to final judgment before recovering legal fees.
42 U.S.C. § 1988 provides that civil rights plaintiffs may win reimbursement of their attorneys’ fees if they are the “prevailing party.” Historically, this fee-shifting mechanism has helped advocacy groups and law firms shoulder the substantial cost of civil rights lawsuits. For example the Lackey plaintiffs estimated that the federal appellate litigation in the case cost $800,000. In a procedurally similar case, the New York Civil Liberties Union was seeking $200,000 in attorneys’ fees against two upstate New York counties.
The Supreme Court has addressed when exactly a plaintiff becomes a “prevailing party” (and thus eligible for reimbursement) on several occasions. In Buckhannon Board and Care Home v. West Virginia Department of Health and Human Resources, the Court ruled that a party prevails only when it achieves a “judicially sanctioned changed in the legal relationship of the parties.” 532 U.S. 598, 601 (2001). If a plaintiff files a lawsuit and the defendant voluntarily does what the plaintiff asked for, the plaintiff does not “prevail” for purposes of attorneys’ fees. To prevail, the plaintiff must win a merits judgment from a court.
What if a plaintiff wins a preliminary injunction but loses a final merits judgment? That plaintiff also does not prevail, the Supreme Court has held, because the victory was only temporary, not enduring. Sole v. Wyner, 551 U.S. 74, 86 (2007). The Sole decision left open what happens when a plaintiff wins a preliminary injunction and then the defendant voluntarily provides the relief plaintiff was seeking.
That issue has now been resolved. Until last month, 11 federal appeals courts held that a plaintiff that wins a preliminary injunction can be a “prevailing party” under some circumstances. Not so, said the Supreme Court in Lackey. The Court held that a plaintiff “prevails” when it wins permanent, on-the-merits judicial relief that materially alters the legal relationship of the parties. A plaintiff that wins only a preliminary injunction, which would include several plaintiffs suing the Trump Administration at this juncture, is not yet entitled to reimbursement of its attorneys’ fees. As a result, it’s not yet clear whether plaintiffs challenging the Trump Administration’s policies will receive attorneys’ fees. It will depend on how they are ultimately resolved.
What is AI Washing and Why are Companies Getting Sued?
With the proliferation of artificial intelligence (AI) usage over the last two years, companies are developing AI tools at an astonishing rate. When pitching their AI tools, these companies claim that their products can do certain things and promise and exaggerate their capabilities. AI washing “is a marketing tactic companies employ to exaggerate the amount of AI technology they use in their products. The goal of AI washing is to make a company’s offerings seem more advanced than they are and capitalize on the growing interest in AI technology.”
Isn’t this mere puffery? No, according to the Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), and investors.
The FTC released guidance in 2023, outlining certain questions companies can assess to determine if they are AI washing. It urges companies to determine whether they are overpromising what the algorithm or AI tool can deliver. According to the FTC, “You don’t need a machine to predict what the FTC might do when those claims are unsupported.”
In March 2024, the SEC charged two investment advisors with AI washing by making “false and misleading statements about their use of artificial intelligence.” Both cases were settled for $400,000. The SEC found the two companies had “marketed to their clients and prospective clients that they were using AI in certain ways when, in fact, they were not.”
Investors are getting into the hunt as well. In February and March 2025, investors sued two companies in securities litigation that alleged AI washing. In the first case, the company allegedly made statements to investors about its AI capabilities and reported “impressive financial results, outlooks and guidance.” It was subsequently the subject of short-seller reports that alleged they were using “manipulative practices” that inflated its numbers and profitability. The litigation alleged that, as a result, the company’s shares declined.
In the second case, the class action named plaintiff alleged that the company overstated “its position and ability to capitalize on AI in the smartphone upgrade cycle,” which caused investors to invest at an artificially inflated price.
Lessons learned from these examples? Look at the FTC’s guidance and assess whether your sales and marketing plan takes AI washing into consideration.
Validity Analysis for Product-by-Process Claim Focuses on Product
The US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board patentability finding, explaining that an anticipation analysis for a product-by-process claim focuses on the product and not the process. Restem, LLC v. Jadi Cell, LLC, Case No. 23-2054 (Fed. Cir. Mar. 4, 2025) (Moore, Schall, Taranto, JJ.)
Jadi Cell owns a patent directed to stem cells that have specific cell markers expressed. These stem cells are obtained from the subepithelial layer of mammalian umbilical cord tissue by first placing the layer in contact with a tissue culture growth substrate and then culturing the layer. The claims of the patent are product-by-process claims. Restem challenged certain claims of the patent in an inter partes review (IPR) petition as being anticipated by the Majore reference or obvious in view of Majore in combination with other references. The Board found that none of the challenged claims were shown to be unpatentable. Restem appealed.
The Board construed the claim term “placing a subepithelial layer of a mammalian umbilical cord tissue in direct contact with a growth substrate” to mean “to intentionally place umbilical cord tissue comprising the subepithelial layer so that it touches a growth substrate to permit cell culture.” The Board found that while the prior art references disclosed the two-step process in the claims, the references failed to disclose the claimed cells because the references did not necessarily produce cells with the claimed cell marker expression profile. Restem argued that the Board erred by construing the claims to require steps beyond the claimed two-step process. The Federal Circuit rejected that argument, finding that the Board had made underlying factual findings that supported its anticipation analysis in construing the “placing” step and therefore did not err.
In the underlying proceeding, the Board declined to construe “isolated cell” but construed “expresses/does not express” to mean that “the marker is confirmed present/absent relative to a control sample,” consistent with its interpretation of isolated cell to indicate a cell population. In construing this claim, the Board relied on extrinsic evidence to assess how a person of ordinary skill in the art would determine whether the cell markers were expressed. The Board found that both parties’ experts agreed that cell marker analysis was done at the cell population level at the time of invention. Restem argued that the Board erred in implicitly construing “isolated cell” contrary to the express definition in the challenged patent. However, the Federal Circuit upheld that implicit construction as supported by the intrinsic evidence because the specification consistently described the claimed invention as a cell population and the prosecution history indicated that the examiner only allowed the patentee to claim a cell population.
As for the Board’s finding that the Majore reference did not inherently or expressly anticipate the challenged claims, the Federal Circuit affirmed. The Board found that the cell marker expression profile distinguished the claimed cells from other stem cells and was therefore limiting, and that Majore did not expressly disclose the nonexpression limitations included in the patent claims. Restem argued that inherency is automatic for product-by-process claims and that the Board erred in finding Majore did not inherently anticipate patent claims. The Court disagreed, explaining that in determining validity of a product-by-process claim, “the focus is on the product and not on the process of making it,” because “an old product is not patentable even if it is made by a new process.” The Court noted that when determining infringement (as opposed to validity), “the focus is on the process of making the product as much as it is on the product itself.” The Court explained that Restem’s invalidity argument conflated the anticipation and infringement analyses for product-by-process claims by improperly shifting the analysis from whether the prior art discloses the claimed product to whether the prior art discloses the claimed process.