New Federal Case Addresses Related Claims Under Executive Protection Policy
Introduction 1
As the saying goes, we cannot choose the family to whom we are related. But courts across the country regularly grapple with choosing whether multiple lawsuits and other insurance claims are indeed related, including most recently the federal District Court of Hawaii in the case of Great American Insurance Company v. Discovery Harbour Community Association, 2025 U.S. Dist., LEXIS 26654 (D. Haw. Feb. 3, 2025).
Why are provisions defining related claims or related wrongful acts important to the scope of insurance coverage? Policies that provide executive protection coverage, such as Directors & Officers Liability or other professional liability policies, are generally written on a claims-made basis. The event triggering an insurer’s obligations is the claim first made and reported against an insured during the policy period, not the timing of the act at issue. Claims-made policies effectively provide retroactive coverage for wrongful acts taking place before the policy period. On the other hand, occurrence policies cover an event that takes place during the policy period, triggering the insurer’s obligation. Occurrences do not necessarily produce claims or lawsuits right away. Thus, for a claims-made policy, the “relatedness” provisions can impact the number of claims at issue, when such claims are deemed made, and whether one or more separate policy limits or retentions apply.
Discovery Harbour
The Discovery Harbour case, decided in February 2025, involved an insurance coverage dispute between an insurer, Great American, and its policyholder, Discovery Harbour Community Association. Great American filed a motion for judgment on the pleadings, seeking a declaratory judgment that two underlying state court lawsuits against the Association were related and subject to a single policy limit. The Association opposed the motion, arguing that the two lawsuits were distinct and unrelated.
Great American had issued two separate claims-made Non-Profit Organization Executive Protection Insurance Policies, which provided coverage only for claims initiated during the respective policy periods. The policies defined “related” claims as those involving the same wrongful acts or “Related Wrongful Acts,” i.e., acts “logically or causally connected by any common fact, circumstance, situation, transaction, casualty, event or decision.” Thus, the earlier policy applied to both if the lawsuits were related. If the lawsuits were unrelated, two separate policies could apply for the two separate policy periods.
The two state court lawsuits were filed by South Point Investment Group, LLC (“SPIG”) against the Association in the same court, and challenged the existence of the Association and disputed the legitimacy of its governing documents — one filed in 2016, and one in 2018. Both lawsuits also involved five parcels of land owned by SPIG within the Discovery Harbour subdivision.
The 2016 lawsuit sought declaratory relief regarding the Association and its members, whereas the 2018 lawsuit sought tort damages for misrepresentations made to third parties, allegedly intended to interfere with SPIG’s property rights. In addition, the 2018 lawsuit added insured individuals as defendants for the first time (none were named in the 2016 lawsuit).
In seeking coverage under two separate policy years, the Association argued that the lawsuit had been litigated independently for many years. The Association also argued that the evidence in the lawsuits was not temporally related, because the 2016 lawsuit related to Association formation issues in the ‘70s and ‘80s, whereas the 2018 lawsuit alleged misrepresentations only during the three years before the 2018 lawsuit was filed. The Association further argued that its answer in the coverage litigation generally denied much of Great American’s relatedness allegations and, taken as true, provided factual challenges to the relatedness allegations. The Association also argued that the 2018 lawsuit added insured individuals as defendants, none of whom were named in the 2016 lawsuit.
However, the court viewed established case law evaluating whether two or more claims are related as hinging more on the similarities of the allegations, not their differences. Although the timeframes of the two lawsuits differed, the court viewed them as “temporally and factually connected” because they both arose from the Association’s legal authority and formation, and involved the same plaintiff (SPIG) and the same defendant (Association). The disputes also centered on the same five parcels of land owned by SPIG and related to the Association’s covenants. The fact that the two lawsuits were litigated independently was inconsequential, and the lawsuits were viewed as related despite seeking different remedies. The court rejected the insured’s argument that the lawsuits shared only “superficial similarities,” finding at least a dozen identical allegations of wrongful acts and stating that “the existence of one common wrongful act is sufficient to establish relatedness.”
The court found that Great American’s motion should be granted because the lawsuits were related and therefore constituted a single claim subject only to the earlier policy and its single policy limit, despite the second lawsuit adding new insured persons not named in the prior lawsuit and new causes of action not previously alleged in the prior lawsuit.
Comparison and Comment
Policies contain varying “relatedness” language, whether applicable to related claims or related wrongful acts, and the courts have applied different tests to interpret that language, generally requiring a strictly fact-based analysis. For example, the seminal case of Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut. Ins. Co., 855 P.2d 1263 (Cal. 1993) involved an attorney’s failure to foreclose a mechanics lien and serve a stop notice on a construction project’s lenders. Despite what appeared to be different types of claims against various parties, the court found the claims were related in a number of ways. They arose out of the same transaction, were committed by the same attorney, and resulted in the same injury.
In contrast, in Vito v. RSUI Indem. Co., 435 F. Supp. 3d 660 (E.D. Pa. 2020), a shareholder derivative suit was filed in 2018 against the insured, Unequal Technologies, and its CEO. The insurer denied coverage, contending that the shareholder derivative lawsuit was interrelated with a February 2015 shareholder demand and a June 2016 shareholder derivative lawsuit (which was a prior demand and suit by a different plaintiff, but also alleged that the CEO disregarded corporate formalities and engaged in self-dealing). The policy broadly defined related claims as all claims “based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same or related facts, circumstances, situations, transactions or events, or the same or related series of facts, circumstances, situations, transactions or events.” However, the Judge denied the insurer’s arguments that the lawsuits were related, noting that the parties were different, the relief sought was different, and the latter suit “goes beyond” the earlier suit and had one but not all related causes of action.
In the case of ADI Worldlink, LLC v. RSUI Indem. Co., 2017 WL 4112112 (E.D. Tex. Sept. 18, 2017), the policy provided a similar “relatedness” standard for all claims, based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same or related facts, circumstances.” The court considered multiple arbitration claims by employees claiming they were “exempt” and entitled to overtime pay, and thus involved different claimants, but the same wrongful conduct and the same injury. The court found the proceedings were related, and because the insured gave late notice of the first claim, it was not entitled to coverage for the subsequent related claims.
Including the latest decision in Discovery Harbour, it is clear that “relatedness” determinations hinge on the exact policy language and facts, and considerations may include but are not limited to the same or different parties, the same or different acts or omissions, and the same or different injury or damages.
1 James K. Thurston and Thomas M. Spitaletto cochair Wilson Elser’s D&O/E&O Insurance Subcommittee. James successfully briefed and argued the recent case of Great American Insurance Company v. Discovery Harbour Community Association, 2025 U.S. Dist. LEXIS 26654 (D. Haw. Feb. 3, 2025), as discussed herein.
Colorado Supreme Court’s Ruling in Fear v. GEICO – What’s Next in Colorado When Evaluating Undisputed Amounts Owed
The Colorado Supreme Court recently issued its opinion in Fear v. GEICO Casualty Company, 2024 CO 77. The Court certified two questions:
Whether it is reasonable, as a matter of law, for a UM/UIM carrier to refuse to pay non-economic damages because such damages are “inherently subjective.”
Whether an insurer’s pre-suit, internal settlement evaluations are admissible as evidence of undisputed benefits owed under State Farm Mut. Auto Ins. Co. v. Fisher, 2018 CO 39.
In answering the certified questions, the Supreme Court held that (1) it is not reasonable as a matter of law for an insurer to refuse to pay non-economic damages because such damages are inherently subjective and (2) an insurer’s pre-suit internal evaluations are not admissible to establish undisputed amounts owed but can be used for other purposes, such as to prove an insurer’s good or bad faith.
The Fear case follows the Supreme Court’s holding in Fisher in 2018, that a UM/UIM carrier is required to tender the undisputed amounts owed once determined and if it refuses to or delays in doing so, it is liable under C.R.S. § 10-3-1115/1116. Pursuant to C.R.S. § 10-3-1115/1116 (applicable to both first- and third-party claims in Colorado), an insurer is liable for two times the covered benefit owed under a policy if the benefits are unreasonably delayed or denied without a reasonable basis.
The Fisher case set the stage for Fear, as policyholder counsel pushed UM/UIM carriers to tender not only the undisputed medical expenses or wage loss but also non-economic damages based on the carriers’ evaluations. Policyholders’ counsel argued that once the insurer set a potential range for recoverable non-economic damages, that range was undisputed and thus, must be tendered. Prior to Fear, some insurers tendered non-economic damages while others did not, arguing that non-economic, general damages are inherently subjective and always reasonably disputed until determined by a jury.
A great many of the trial courts that weighed in on the issue agreed with the insurers, but the trial judge in Fear did not. Rather, the judge held that the Fisher holding extended to non-economic damages and found that GEICO’s evaluation range in its pre-suit evaluation was an undisputed value.
GEICO appealed the trial court’s ruling, and the Court of Appeals reversed. Thereafter, the Supreme Court accepted certiorari. The crux of the Supreme Court’s ruling in Fear is that a carrier cannot refuse to pay non-economic damages simply because such damages are “inherently subjective.” Further, a policyholder cannot introduce an insurer’s pre-suit claim evaluation to show the amount of undisputed benefits owed, although the evaluation may be admissible to show an insurer’s good faith or bad faith in the handling of a claim.
The Fear decision provides some guidance for carriers in addressing non-economic damages and whether such damages are reasonably disputable – noting that “circumstances may exist in which section 10-3-1115 requires an insurer to pay some or all of an insured’s alleged non-economic damages prior to final resolution of a claim.” The Fear court affirmed the Court of Appeals’ decision, albeit on different grounds, noting that the only evidence offered by the policyholder to prove that the non-economic damages were undisputed was GEICO’s pre-suit evaluation, which was inadmissible and, thus, could not be used to establish the undisputed amounts owed.
Conclusion
The questions unanswered by the Supreme Court are what circumstances would require a carrier to advance non-economic damages and how could that be proven – both of which will likely be the new frontier for UM/UIM bad faith litigation in Colorado.
Nothing in Colorado law requires a carrier to do a written evaluation of an insured’s damages, but that evaluation, if written and documented in the file, can be the touchstone in any bad faith case – proving either the carrier’s unreasonableness and, thus, bad faith conduct or, alternatively, the carrier’s reasonableness in the handling of the claim and its good faith. Carriers should consider the nature and purpose of their evaluations, identifying training and strategies going forward for their claims teams as to how the evaluation could be used in a later bad faith case to establish its reasonableness in the defense of any bad faith claim.
Colorado policyholder attorneys are aggressive and have taken advantage of adjusters inexperienced in handling Colorado claims. Going forward, carriers should look not only for ways their evaluations can be used against them but also how those evaluations could be used to help them in any subsequent bad faith case.
Where There’s Fire, There’s Smoke … and Smoke Damage Disputes
In January 2025, dozens of wildfires ripped through Los Angeles in a way no one could have imagined. We all spent the week in front of televisions waiting to see which direction the winds would take the fires. Those not forced to officially evacuate had bags ready to go in case a new fire flared closer to home. And while the City braced for decades of rebuilding efforts, the insurance coverage attorneys waited for the inevitable coverage disputes to begin.
The initial response to the wildfires was not likely to generate disputes between the insurers and insureds. According to data from the California Department of Insurance (DOI), as of January 30, 2025, out of 31,210 claims related to the fires, 14,417 were immediately partially paid to the tune of $4.2 billion. Within a week, by February 5, 2025, the number of claims increased to 33,717 with 19,854 partially paid in the amount of $6.9 billion.1
During this time, insurers were following their modified obligations under the California Regulations given the DOI’s emergency declaration of January 9, 2025, which imposed certain additional obligations on the insurers for a total loss:
The insurer must offer an immediate payment of at least 30% of the contents policy limit up to $250,000 (Cal. Ins. Code § 10103.7).
An insured does not need to use the insurer’s inventory form and does not need to itemize the contents (Cal. Ins. Code § 2061(a)(2)(3)).
At an insured’s request, the insurer must advance at least four months of additional living expenses (Cal. Ins. Code § 2061(a)(1)), and the insured is entitled to at least 36 months of ALE coverage (Cal. Ins. Code § 2060(b)(1)).
Neither an insured nor an insurer can demand appraisal without the other’s consent (Cal. Ins. Code § 2071).
An insurer cannot cancel or refuse to renew a residential property policy in a zip code adjacent to a fire perimeter based solely on the wildfire location (Cal. Ins. Code § 675.1(b)(1)).
The insurer must provide a 60-day grace period for premium payments (Cal. Ins. Code § 2062).
While the total-loss claims were not going to spark much controversy, it was only a matter of time before the smoke damage claims ignited and the insurance world incurred an onslaught of coverage disputes.
Legal Decisions Regarding Smoke Damage
The question of whether smoke damage constitutes “property damage” is an ongoing issue in California. The matter was litigated heavily during the COVID-19 pandemic where businesses frequently claimed “property damage” from the virus. Courts in California generally found that COVID-19, without more, did not constitute “property damage.” Another Planet Entertainment, LLC v. Vigilant Ins. Co., 15 Cal. 5th 1106, 1117 (2024). In the weeks following the start of the 2025 wildfires, two decisions came down in California addressing coverage for smoke damage arising out of earlier fire events.
On January 10, 2025, the U.S. District Court for the Northern District of California issued a decision in Bottega LLC v. National Surety Corp., 2025 U.S. Dist. LEXIS 5666 (N.D. Cal. Jan. 10, 2025). In that case, the owner of a restaurant and a cafe sought business income loss coverage stemming from the 2017 North Bay wildfires, which had prompted a state of emergency. Id. at *2-3. While the fires did not reach the insured’s businesses, the businesses could not operate because of the related smoke and ash, requiring the employees to clean and make temporary repairs. Id. at *4. The court recognized that to trigger coverage, “there must be some physicality to the loss … of property – e.g., a physical alteration, physical contamination, or physical destruction.” Id. at *10, quoting Inns-by-the-Sea v. California Mut. Ins. Co., 71 Cal. App. 5th 688, 707 (2021) (emphasis in original). The court found there to be “direct physical loss and damage to” the businesses as “[c]ontamination that seriously impairs or destroys its function may qualify as a direct physical loss.” Bottega, 2025 U.S. Dist. LEXIS 5666 at *10-11. The court stated that, “the COVID-19 cases [the insurer] cites are unpersuasive because courts distinguished COVID-19 – a virus that can be disinfected – from noxious substances and fumes that physically alter property.” Id. at *11-12. Accordingly, the court reasoned, “[w]hereas a virus is more like dust and debris that can be removed through cleaning, [citation] smoke is more like asbestos and gases that physically alter property.” Id. at *12.
A competing decision was issued on February 7, 2025, by the California Court of Appeal in Gharibian v. Wawanesa General Ins. Co., 108 Cal. App. 5th 730 (2025). There, the insureds’ residence purportedly suffered smoke damage after the 2019 Saddle Ridge wildfire. Id. at 733. The insurer paid for the insureds to have the home professionally cleaned, but the insureds opted to clean the home themselves and filed a bad faith suit. Id. at 734-735. The Court of Appeal held that, “[u]nder California law, direct physical loss or damage to property requires a distinct, demonstrable, physical alteration to property. The physical alteration need not be visible to the naked eye, nor must it be structural, but it must result in some injury to or impairment of the property as property.” Id. at 738, quoting Another Planet Entertainment, LLC v. Vigilant Ins. Co., 15 Cal. 5th 1106, 1117 (2024). Relying on COVID-19 cases, the Gharibian court reasoned, “[h]ere there is no evidence of any ‘direct physical loss to [plaintiffs’] property.’ The wildfire debris did not ‘alter the property itself in a lasting and persistent manner.’ … Rather, all evidence indicates that the debris was ‘easily cleaned or removed from the property.’ … Such debris does not constitute ‘direct physical loss to property.’” Gharibian, 108 Cal. App. 5th at 738 (citations omitted).
These decisions leave California insurers unclear as to whether smoke damage constitutes “property damage” sufficient to trigger coverage under homeowners and commercial policies. In finding coverage, the Bottega court said the insured made some undefined “partial/temporary repairs” to the property after the nearby wildfire, which may have factored into the ultimate decision that “property damage” existed. Bottega, 2025 U.S. Dist. LEXIS 5666 at *4. In declining coverage, the Gharibian court dealt with a situation where the ash could be wiped from surfaces with no permeating smell of smoke and no referenced repairs. Gharibian, 108 Cal. App. 5th at 733. Given this conflicting precedent in California, what are insurers expected to do?
DOI Guidance
On March 7, 2025, the DOI provided guidance through Bulletin 2025-7,2 which sets forth the DOI’s “expectations with regard to how insurance companies process and pay smoke damage claims as a result of wildfires, including the recent Southern California wildfires.” The DOI’s Bulletin explicitly states that the “recent cases do not support the position that smoke damage is never covered as a matter of law.” (emphasis in original). The Bulletin reiterates the need for a full investigation into each smoke damage claim and states, “[i]t is not reasonable to deny a smoke damage claim without conducting an appropriate investigation, nor is it reasonable for the insurer to require the insured to incur substantial costs to investigate their own claim.” The DOI advised it would monitor insurers’ responses to such claims.
Conclusion
Ultimately, and consistent with the DOI Bulletin, the coverage evaluation will likely turn on a case-by-case basis, looking at the scope of damage to the insured and the physical alteration of the property. Absent the lack of a physical loss, smoke damage is usually not excluded by other provisions in the policy.3
Our best advice? Insurers are encouraged to continue to actively investigate these claims and be diligent throughout the claims handling process. To that end, insurers should hire experts where needed and push for information from the insureds as necessary to complete the claims investigation. Insurers also must be mindful of the growing anti-insurer sentiment in Los Angeles (regardless of the billions already paid on claims). We anticipate the litigation following these latest wildfires will provide new insight on whether smoke damage constitutes “property damage” to trigger coverage.
1 https://www.insurance.ca.gov/01-consumers/180-climate-change/Wildfire-Claims-Tracker.cfm.
2 https://www.insurance.ca.gov/0250-insurers/0300-insurers/0200-bulletins/bulletin-notices-commiss-opinion/upload/Bulletin-2025-7-Insurance-Coverage-for-Smoke-Damage-and-Guidance-for-Proper-Handling-of-Smoke-Damage-Claims-for-Properties-Located-in-or-near-California-Wildfire-Areas.pdf.
3 Other jurisdictions have held that smoke damage is not precluded by pollution exclusions. Kent Farms, Inc. v. Zurich Ins. Co., 140 Wn. 2d 396, 400 (2000); Allstate Ins. Co. v. Barron, 269 Conn. 394 (2004).
Understanding the FOIA Process: Submitting, Appealing, and Litigating Requests for Government Records
The Freedom of Information Act (FOIA), enacted in 1966, grants the public the right to access records from any federal agency, promoting transparency and accountability in government. Whether you’re a business owner, researcher, journalist, or private citizen, understanding the FOIA process — and how to challenge an agency’s response — is essential for ensuring your access rights are protected.
Step 1: Submitting a FOIA Request
To initiate a FOIA request:
Identify the Agency – Determine which federal agency holds the records you’re seeking. Each agency processes its own FOIA requests.
Draft the Request – Clearly describe the documents you seek. Be as specific as possible, including names, dates, locations, or subject matter to help narrow the search.
Submit the Request – Most agencies accept requests via email, web portals, or mail. Ensure your request is directed to the correct FOIA office and that it includes your contact information. Alternatively, FOIA.gov offers a submission portal for every federal agency subject to FOIA.
Fees and Waivers – Agencies may charge fees for search, duplication, or review time. You can request a fee waiver by demonstrating that disclosure is in the public interest.
Once submitted, agencies are generally required to respond within 20 business days, though this period can be extended for “unusual circumstances.”
Step 2: Appealing a Denial or Inadequate Response
If your request is denied in whole or in part, or if you receive no substantive response within 20 business days (absent any extensions), you can file an administrative appeal.
Deadlines – You typically must file your appeal within 90 days of the denial. Check the agency’s FOIA regulations for specific timelines.
Format – Appeals must be in writing and should include:
A copy of the original FOIA request.
The agency’s response (or a statement of the lack thereof).
Arguments explaining why the denial was improper.
Grounds for Appeal – Common bases include improper redactions, unjustified use of exemptions, failure to conduct an adequate search, or lack of timely response.
Agencies are required to decide administrative appeals within 20 business days. If the appeal is denied or ignored, the next step is usually litigation.
Step 3: Challenging the FOIA Response in Court
You have the right to challenge a denial in federal district court.
Jurisdiction – You generally can file a lawsuit in the district where you live, where the records are located, or in the District of Columbia.
Timing – You may sue after exhausting administrative remedies (i.e., completing the appeal process), or if the agency fails to respond to your original request or appeal within the statutory deadline.
Scope of Judicial Review – Courts will examine whether the agency:
Properly invoked FOIA exemptions.
Conducted an adequate and reasonable search.
Complied with procedural requirements.
Burden of Proof – The government bears the burden of justifying its withholding or redactions. Courts may order the release of improperly withheld records.
Attorneys’ Fees – If you substantially prevail in litigation, the court may award reasonable attorneys’ fees and litigation costs.
Final Thoughts
The FOIA process can be complex and time consuming, especially when agencies resist disclosure. However, the law provides multiple avenues for redress. Whether through administrative appeal or litigation, you have tools to hold the government accountable and access the records that shape public policy.
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DOJ Files Suit against Hawaii, Michigan, New York, and Vermont Related to Climate Legal Actions
The U.S. Department of Justice (DOJ) recently filed four lawsuits against states related to specific climate change actions they have taken or planned to take. On April 30, 2025, DOJ preemptively sued Hawaii and Michigan to prevent both states from going forward with their stated intent to pursue legal action against fossil fuel companies for alleged harms caused by climate change and to declare those states’ claims unconstitutional. The following day, on May 1, 2025, DOJ sued New York and Vermont for their enactment of climate “superfund” laws, which create retroactive cost recovery claims on producers of fossil fuels, seeking to enjoin the enforcement of those statutes and to have them declared unconstitutional as well.
DOJ’s lawsuits come on the heels of President Trump’s April 8, 2025 Executive Order, Protecting American Energy From State Overreach. The Executive Order directs the DOJ to identify any and all laws “burdening” the use or production of domestic energy and to “expeditiously take all appropriate action to stop the enforcement of [the] laws.”
While state and local government initiated climate lawsuits have been ongoing through state courts for some time, the lawsuits filed by DOJ under this Administration are a new approach building the federal government’s “active and continuous” interest in maintaining its control over energy and climate policy. The four lawsuits allege the climate “superfund” laws and any state-based claims pertaining to climate-related damages are preempted by the comprehensive nature of the Clean Air Act. Similarly, DOJ avers that constitutional due process prevents the states from imposing extraterritorial liability for primarily out-of-state activity.
DOJ additionally claims that the laws and lawsuits facially discriminate against interstate commerce and would impose substantial undue burden that would disrupt the national market for fossil fuels. Likewise, DOJ alleges violations of the Foreign Commerce Clause because the lawsuits and laws discriminate against foreign commerce and impose liability that is not fairly related to the services provided in the states. Lastly, DOJ claims the laws and lawsuits seek to regulate a “uniquely international problem” and undermine and interfere with U.S. foreign policy, which is exclusively in the purview of the federal government, and thus are preempted by the Foreign Affairs Doctrine.
DOJ’s proactive strategy of filing original lawsuits to attack the four states’ actions puts the full weight of the federal government behind arguments that have been made by defendants in other cases. It also serves as a signal to other states that may be considering similar actions.
Hawaii and Michigan Announced Climate Lawsuits
DOJ’s lawsuits against Hawaii and Michigan are notable for seeking to preemptively block the states from filing lawsuits against fossil fuel producers for alleged climate related damages. Attorneys General for both states had previously announced their intention to sue fossil fuel producers, but, at the time of DOJ’s filings, neither state had initiated any legal action. Subsequent to DOJ’s filings, Hawaii moved forward to file its lawsuit against seven oil and gas companies in the First Circuit Court in Honolulu.
New York and Vermont Climate Superfund Laws
Vermont was the first state to enact a climate “superfund” law, with New York quickly following suit. These laws claim to draw inspiration from the federal Superfund law; however, they are very different from the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). They create retroactive liability for responsible parties but apply it to prior emissions of greenhouse gas (GHGs) into the environment by companies that have previously extracted or refined fossil fuels. The Vermont and New York laws explicitly establish strict liability on out-of-state sources of GHG emissions. 10 V.S.A. § 597(1); N.Y. Env’t Conserv. § 76-0103(2)(a).
Both statutes enable cost recovery claims on any entity engaged in the trade or business of extracting fossil fuel or refining crude oil and is determined to be responsible for one billion tons of global greenhouse gas emissions. 10 V.S.A. § 596(22); N.Y. Env’t Conserv. § 76.0101(20). Funds collected in response to cost recovery demands will be placed in a “climate superfund” to be used to pay for qualifying climate change adaptation projects and implement climate adaption action as identified by their respective agencies designated to oversee the funds.
Vermont’s statute covers GHGs from fossil fuels extracted or refined by a responsible party from January 1, 1995, to December 31, 2024, and New York’s law covers a wide range of conduct, including production, transport, and sale or distribution of fossil fuels, that occurred from January 1, 2000, to December 31, 2018. New York’s statute places an overall $75 billion cap on recovery from responsible parties, holding them strictly liable for their respective shares of the $75 billion based on the amount of emissions. Vermont’s law, however, places no cap on the recovery of penalties and allocates liability for each responsible party “equal to an amount that bears the same ratio to the cost to the State of Vermont and its residents” from emissions during the applicable time period under the statute. N.Y. Env’t Conserv. § 76-0103(3); 10 V.S.A. § 598(b).
These laws are novel because each attempts to recover compensatory damages from companies that have lawfully sold substances in commerce, and each purports to reach conduct wholly outside of the enacting state’s borders. Several other states, including California, Maryland, Massachusetts, New Jersey, and Oregon, are in the process of considering similar legislation. Both the proposed California and Oregon climate “superfund” legislation would include a private right of action provision which could allow individuals or entities allegedly harmed by climate-related impacts to sue fossil fuel companies for damages.
False Connection: Post-Application Date Evidence Can Be Considered
The US Court of Appeals for the Federal Circuit affirmed the Trademark Trial & Appeal Board’s refusal to register a mark on the grounds of false connection, explaining that the false connection inquiry can include evidence that arises during the examination after filing. In re Thomas D. Foster, APC, Case No. 23-1527 (Fed. Cir. May 7, 2025) (Moore, Prost, Stoll, JJ.)
Under § 2(a) of the Lanham Act (15 U.S.C. § 1052(a)), a trademark can be refused registration if it “falsely suggests a connection with persons, living or dead, institutions, beliefs, or national symbols.” To determine if a mark falsely suggests a connection, the Board can use a non-exhaustive four-part test that inquires whether:
The mark is the same, or a close approximation of, the name previously used by another person or institution.
The mark points uniquely or unmistakably to that person or institution.
That person or institution is not connected with the activities performed by the applicant under the mark.
The fame or reputation of the person or institution is such that, when the mark is used with the applicant’s goods or services, a connection with the person or institution would be presumed.
Here, Thomas D. Foster filed a trademark application for the mark US SPACE FORCE on March 19, 2018, six days after President Trump proposed forming a “Space Force.” Registration was refused on the grounds of a false suggestion of a connection with the US government. The Board affirmed and denied reconsideration. Foster appealed.
Foster argued that the Board improperly considered evidence that post-dated the application’s filing date and that substantial evidence did not support the Board’s findings under the first two elements of the four-part false connections test.
Regarding Foster’s first argument, the Federal Circuit found it permissible to use facts that arise after an application’s filing date and during the examination process to assess a false connection. The Court reasoned that this was consistent with other § 2 inquiries that consider evidence that arises through the date the Board issues its decision, such as likelihood of confusion (§ 2(d)) and distinctiveness (§ 2(f)). Therefore, the Court found that the Board did not err in its consideration of evidence that arose during the examination process.
The Federal Circuit disagreed with Foster’s second argument, finding that substantial evidence supported the Board’s findings under the false connection test. Under the first part of the test, the Board found that US SPACE FORCE was the same as, or a close approximation of, a name or identity of the United States. The Court concluded that this was supported by substantial evidence, specifically pre-application evidence (President Trump’s announcement and national news articles discussing the formation of the US Space Force) and post-application evidence (the official establishment of the US Space Force and national news articles). Under the second part of the test, the Board had found that US SPACE FORCE pointed uniquely and unmistakably to the United States. The Board again relied on news coverage and the fact that the mark and the name of the military branch were identical. The Court determined this was sufficient for substantial evidence and therefore affirmed the refusal of registration.
Practice Note: To determine whether a false suggestion of a connection exists, the Board may consider evidence that arises during the examination process. The Board will typically use either the four-part false connections test or consider the factors identified by the Federal Circuit in Univ. of Notre Dame Du Lac v. J.C. Gourmet Food Imps. (1983) or In re E.I. du Pont de Nemours & Co. (1973).
Massachusetts Court Denies Permanent Injunction in Chapter 93A Case: Insufficient Evidence of Ongoing or Future Violations
The Superior Court of Massachusetts recently weighed in on the necessity of entering a permanent injunction under Chapter 93A, Section 4, in Commonwealth v. Mega Life & Health Ins. Co. Following the court’s entry of findings of fact, rulings of law, and judgment in favor of the Commonwealth, the Commonwealth sought permanent injunctive relief to prohibit the defendants, along with their successors and related entities, from selling insurance products in Massachusetts. Despite finding in favor of the Commonwealth, the court declined to enter a permanent injunction, concluding that the Commonwealth had not presented sufficient evidence to justify its necessity.
To obtain a permanent injunction, a government litigant must demonstrate that the requested order promotes the public interest or, alternatively, that the relief sought will not adversely affect the public. Such relief is warranted only when there is evidence of ongoing harm from past unlawful conduct or a likelihood of future violations. In this case, the Commonwealth did not present evidence of recent or ongoing violations by the defendants. Instead, the trial evidence focused solely on violations that occurred between 2012 and 2018.
The court noted that it lacked information about the defendants’ current market activities, business plans, or intentions to reenter the Massachusetts market. Without evidence of recent or ongoing misconduct or a clear indication of future violations, the court found no basis for issuing a permanent injunction. Accordingly, the request for injunctive relief was denied, as the court determined that such an order would have no appreciable impact on protecting consumers.
No Article III Appellate Standing Under the Sun
The US Court of Appeals for the Federal Circuit dismissed Incyte’s appeal of a Patent Trial & Appeal Board decision, holding that a disappointed validity challenger lacked appellate standing to challenge the Board’s final written decision. Incyte Corp. v. Sun Pharmaceuticals Industries, Inc., Case No. 23-1300 (Fed. Cir. May 7, 2025) (Moore, C.J.; Hughes, Cunningham, JJ.) (Hughes, J., concurring).
After the Board upheld the validity of challenged claims of a patent owned by Sun Pharmaceuticals in a post-grant review proceeding (PGR), Incyte appealed and sought a determination that the claims were unpatentable. Sun Pharmaceuticals challenged whether Incyte had Article III standing to support an appeal to the Federal Circuit based on a lack of injury-in-fact.
The Federal Circuit focused on its jurisdiction to hear the appeal as a threshold issue and whether Incyte, as the party seeking review, met its burden of establishing Article III standing at the time it filed its appeal.
As context, the Federal Circuit noted that standing requires a concrete, actual, or imminent injury that is traceable to the challenged conduct and likely to be redressed by the court’s decision. Incyte asserted it had standing to appeal based on potential infringement liability and under the competitor standing doctrine.
Addressing potential infringement liability, the Federal Circuit noted Incyte’s reliance on a supplemental declaration from an in-house business development leader submitted during briefing. Noting that Incyte’s Article III standing was “not self-evident,” the Court ruled that Incyte should have presented evidence prior to its reply brief and declined to consider the supplemental evidence. Incyte was on notice that its appellate standing was challenged, and that evidence of its standing should have been submitted at the earliest possible opportunity. Finding no good cause for the delay, the Court declined to exercise its discretion to consider Incyte’s supplemental evidence and, based only on earlier submitted evidence, found that Incyte failed to establish that it had “concrete plans for future activity” that would create a “substantial risk of future infringement.”
In its discussion of the competitor standing doctrine, which allows competitors to challenge patents that could harm their competitive position, the Federal Circuit found the doctrine inapplicable because Incyte failed to show it would suffer economic harm from the Board’s ruling on patent validity. Rather, the Board’s ruling upholding specific patent claims “does not, by the operation of ordinary economic forces, naturally harm a [challenger] just because it is a competitor in the same market as the beneficiary of the government action (the patentee).” As the Court explained, “it is not enough to show a benefit to a competitor to establish injury in fact; the party seeking to establish standing must show a concrete injury to itself.”
The Federal Circuit held that because Incyte had not shown it was currently engaged in or had non-speculative plans to engage in conduct covered by the challenged patent, it was unable to establish injury-in-fact.
In his concurrence, Judge Hughes stated that while Incyte lacked Article III standing, he believed that Federal Circuit precedent was “overly rigid” and “narrow.” It is Judge Hughes’ belief that:
In the context of appeals from administrative post-grant proceedings generally, and the facts of this case[,] present a circumstance in which I believe our precedent dictates an outcome inconsistent with the spirit of Article III standing. Our precedent on whether parties have standing to appeal to this court from an adverse administrative post-grant review is too restrictive and creates a special standing rule for patent cases. The existence of this narrower special rule is even more pronounced in the pharmaceutical space, where our precedent leads to the (in my opinion, improper) conclusion of no standing for the inventor of the underlying compound.
Clickbait: Actual Scope (Not Intended Scope) Determines Broadening Reissue Analysis
The US Court of Appeals for the Federal Circuit affirmed the Patent Trial & Appeal Board’s rejection of a proposed reissue claim for being broader than the original claim, denying the inventors’ argument that the analysis should focus on the intended scope of the original claim rather than the actual scope. In re Kostić, Case No. 23-1437 (Fed. Cir. May 6, 2025) (Stoll, Clevenger, Cunningham, JJ.)
Miodrag Kostić and Guy Vandevelde are the owners and listed inventors of a patent directed to “method[s] implemented on an online network connecting websites to computers of respective users for buying and selling of click-through traffic.” Click-through links are typically seen on an internet search engine or other website inviting the user to visit another page, often to direct sales. Typical prior art transactions would require an advertiser to pay the search engine (or other seller) an upfront fee in addition to a fee per click, not knowing in advance what volume or responsiveness the link will generate. The patent at issue discloses a method where the advertiser and seller first conduct a trial of click-through traffic to get more information before the bidding and sale process. The specification also discloses a “direct sale process” permitting a seller to bypass the trial and instead post its website parameters and price/click requirement so advertisers can start the sale process immediately.
The independent claim recites a “method of implementing on an online network connecting websites to computers of respective users for buying and selling of click-through traffic from a first exchange partner’s web site.” The claim requires “conducting a pre-bidding trial of click-through traffic” and “conducting a bidding process after the trial period is concluded.” A dependent claim further requires “wherein the intermediary web site enables interested exchange partners to conduct a direct exchange of click-through traffic without a trial process.”
The patent was issued in 2013, and the inventors filed for reissue in 2019. The reissue application cited an error, stating that the “[d]ependent claim [] fails to include limitations of [the independent] claim,” where the dependent claim “expressly excludes the trial bidding process referred to in the method of [the independent] claim,” which would render it invalid under 35 U.S.C. § 112. To fix the error, the inventors attempted to rewrite the dependent claim as an independent claim that omitted a trial process.
The examiner issued a nonfinal Reissue Office Action rejecting the reissue application as a broadening reissue outside of the statutory two-year period. The examiner found that the original dependent claim is interpreted to require all steps of the independent claim, including the trial period, and further to require a direct sale without its own trial, beyond the trial claimed in the independent claim. The inventors attempted to rewrite the dependent claim as the method of independent claim with “and/or” language regarding the trial process versus direct to sale process. The amendment was rejected for the same reasons. The Board affirmed on appeal.
Whether amendments made during reissue enlarge the scope of the claim in violation of 35 U.S.C. § 251 is a matter of claim construction. The inventors argued that the proper inquiry was not whether the scope of the proposed reissue version of the dependent claim was broader than the scope of the original dependent claim but whether the scope of the proposed reissue claim was broader than the “intended scope” of original dependent claim.
The Federal Circuit rejected the inventors’ argument, finding that it contradicted the plain text of § 251(d), which prohibits reissue patents enlarging the scope of the claims, not reissue patents enlarging the intended scope of the claims. The Court further reasoned that “[l]ooking at the intended scope rather than the actual scope of the original claim would prejudice competitors who had reason to rely on the implied disclaimer involved in the terms of the original patent.” Finding that the text, history, and purpose of § 251 all counsel against reviewing the “intended scope” of claims on reissue, the Court affirmed the Board’s denial.
Breaking New Grounds to Limits of IPR Estoppel
In a matter of first impression, the US Court of Appeals for the Federal Circuit found that inter partes review (IPR) estoppel does not preclude a petitioner from relying on the same patents and printed publications as evidence in asserting a ground that could not have been raised during the IPR proceeding, such as that the claimed invention was known or used by others, on sale, or in public use. Ingenico Inc. v. IOENGINE, LLC, Case No. 23-1367 (Fed. Cir. May 7, 2025) (Dyk, Prost, Hughes, JJ.)
IOENGINE owns patents directed to a portable device, such as a USB thumb drive, that includes a processor that causes communications to be sent to a network server in response to user interaction with an interface on a terminal. Ingenico filed a declaratory judgment action against IOENGINE after one of Ingenico’s customers was sued for infringement based on Ingenico’s products. Ingenico filed IPR petitions challenging the asserted patents, which resulted in final written decisions that held most of the challenged claims unpatentable.
Back at the district court, IOENGINE proceeded with the remaining claims. At summary judgment, IOENGINE moved, under 35 U.S.C. § 315(e)(2), to preclude Ingenico from relying on “documentation related to DiskOnKey Upgrade software,” arguing that Ingenico reasonably could have been expected to raise that prior art during the IPR proceedings. The district court ruled that “Ingenico will be estopped from relying on those documents [to prove invalidity] except to the extent . . . that they form part of a substantively different combination of references that could not reasonably have been raised in the IPRs.”
At trial, Ingenico introduced evidence of a prior art USB device known as the DiskOnKey. The DiskOnKey device was offered with various software applications, including an application called Firmware Upgrader, and was equipped with capabilities described in a Software Development Kit (together, the DiskOnKey system). Ingenico argued that the DiskOnKey system invalidated the asserted claims as anticipated or obvious because it was either “on sale” or “in public use” under 35 U.S.C. § 102(b), or “known or used by others . . . before the date of the invention” under 35 U.S.C. § 102(a). The jury returned a verdict finding the patents were infringed but invalid as anticipated and obvious. Both parties appealed.
IOENGINE did not dispute the jury’s finding that the DiskOnKey system invalidated the claims-at-issue as anticipated or obvious if the DiskOnKey system was prior art, but instead argued that the jury’s finding that the Firmware Upgrader portion of the DiskOnKey system was either “on sale” or “in public use,” or “known or used by others . . . before the invention.”
The Federal Circuit found that the jury’s finding that the Firmware Upgrader was accessible to the public was supported by substantial evidence. Specifically, Ingenico had introduced a press release promoting the launch of the Firmware Upgrader and a website from which the Firmware Upgrader was available for download. IOENGINE argued that this evidence did not show actual use, but the Court rejected this argument, finding there was substantial evidence in the record from which the jury could have concluded that the DiskOnKey system, including the Firmware Upgrader, was in public use.
IOENGINE also asserted that the district court improperly allowed Ingenico to rely on prior art at trial, arguing that under 35 U.S.C. § 315(e)(2), Ingenico should have been estopped from presenting the Firmware Upgrader. IOENGINE asserted that IPR estoppel applied because the Firmware Upgrader was entirely cumulative and substantively identical to the Readme instructions and screenshots – which, according to IOENGINE, were printed publications that reasonably could have been raised during the IPR.
Under § 315(e)(2), a petitioner is estopped from asserting invalidity “on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” The Federal Circuit stated that whether Ingenico should be estopped depended on the proper interpretation of the term “ground” used in the statute. Analyzing the statutory language and legislative history surrounding the statute, the Court found that a “ground” is not the prior art asserted during an IPR but is instead the invalidity assertion on which the prior art is based.
The only invalidity challenges that a petitioner can make during an IPR proceeding are that the claims were patented or described in a printed publication, and this is the scope of estoppel. Thus, the Federal Circuit concluded that “IPR estoppel does not preclude a petitioner from relying on the same patents and printed publications as evidence in asserting a ground that could not be raised during the IPR, such as that the claimed invention was known or used by others, on sale, or in public use.”
Designated Informative: PTO Director Declines IPR Institution Following District Court § 101 Invalidation
The US Patent & Trademark Office (PTO) designated a recent Director Review decision as informative, signaling its significance for future proceedings. The decision emphasizes that a final district court ruling invalidating a patent weighs heavily against instituting inter partes review (IPR) under the Fintiv framework, reinforcing the agency’s stance on minimizing duplicative litigation. Hulu LLC v. Piranha Media Distribution LLC, IPR2024-01252; -01253 (PTAB Director Review Apr. 17, 2025) (Stewart, PTO Dir.)
Piranha requested Director Review of the Patent Trial & Appeal Board’s decision granting institution of two IPRs filed by Hulu. Piranha argued that the decision should be reversed and the IPRs denied institution, citing a district court final judgment invalidating the challenged claims under 35 U.S.C. § 101 issued before the institution decision was made. Hulu argued that Director Review was unwarranted.
In the district court litigation, Piranha asserted that Hulu infringed claims from two patents related to integration of advertising content into digital media streams. Hulu moved to dismiss the complaint, arguing that the asserted patents were ineligible for patenting under § 101. The district court determined that the asserted claims were directed to the abstract idea of “displaying an advertisement in exchange for access to copyrighted material, as well as the abstract idea of receiving, organizing, and displaying data,” and contained no inventive concept. The district court granted Hulu’s motion to dismiss and held the claims patent ineligible and therefore invalid under § 101.
The Director explained that since a district court had already ruled the patent claims invalid, launching separate IPRs to assess their patentability on other grounds was unnecessary. The Director noted that if the Federal Circuit overturned the district court’s decision, Hulu could still pursue its invalidity arguments during remand proceedings. Declining to institute review was the more efficient and practical path under the circumstances, the Director said.
While the Board applied the Fintiv framework in its institution decision, the Director observed that the framework does not align neatly with the facts of this case, where a final district court judgment under § 101 preceded the Board’s decision. The Director ultimately concluded that a second review proceeding was unwarranted given the claims’ current invalid status.
AAA Updates Consumer Arbitration Rules: What Businesses Need to Know
The American Arbitration Association (AAA) recently rolled out significant updates to its Consumer Arbitration Rules and Mediation Procedures, which took effect on May 1, 2025. These changes reflect AAA’s continued commitment to fairness, efficiency, and clarity in alternative dispute resolution. While AAA also revised its employment-related rules, this post focuses on what’s new for businesses handling consumer disputes.
Common types of claims that fall under the updated consumer arbitration rules include Telephone Consumer Protection Act (TCPA) claims, data privacy violations, false advertising, subscription billing disputes, warranty or product defect claims, and issues related to financial services or online transactions. Businesses operating in these areas should carefully review how the AAA’s revised procedures may affect dispute resolution outcomes.
Integrated Mediation Option
One of the most notable changes is the formal integration of mediation into the consumer dispute process. AAA’s newly launched Consumer Mediation Procedures (effective April 1, 2025) are now incorporated directly into the updated rulebook. This gives businesses and consumers a more accessible and cost-effective way to resolve disputes before arbitration becomes necessary.
Expanded Guidance on Claim Consolidation
The updated rules now allow AAA to consolidate multiple claims brought by the same consumer under a single contract into one case. Conversely, if claims stem from separate contracts, AAA can require them to proceed individually. While this administrative discretion initially lies with AAA, the final decision rests with the appointed arbitrator.
Virtual Hearings Now the Default
Acknowledging the evolution of remote dispute resolution, AAA’s revised rules now default to virtual hearings unless the parties agree otherwise, or the arbitrator orders an in-person proceeding. This adjustment can substantially reduce costs and logistical hurdles for both sides.
Enhanced Arbitrator Authority in Managing Disputes
The revisions also expand the powers of arbitrators to streamline the process. Arbitrators can now direct how parties exchange necessary information and enforce compliance through sanctions. These rules aim to ensure both fairness and efficiency while giving arbitrators tools to manage the process effectively.
Additionally, when there is disagreement over which arbitration clause governs a dispute, AAA will make an initial determination — subject to the arbitrator’s final decision.
New Appeals Framework
For consumer contracts that include an arbitration appeal process, AAA has introduced a formal rule to administer those appeals. The updated framework ensures that any appeal complies with the Consumer Due Process Protocol, and that fees and costs align with the Consumer Arbitration Fee Schedule.
Bottom Line
AAA’s updated Consumer Arbitration Rules mark a shift toward more streamlined, transparent, and consumer-friendly procedures. Businesses that rely on arbitration clauses should review these changes closely and consider how the integrated mediation procedures, virtual default settings, and new appeal framework could impact their dispute resolution strategies.
While this post focuses on the consumer rules, it’s worth noting that AAA made similar structural updates to its employment arbitration rules as well — another reminder for organizations to keep their arbitration practices current.