Seven County Infrastructure Coalition v. Eagle County: A Turning Point For The National Environmental Policy Act
Last week, the Supreme Court issued its eagerly awaited National Environmental Policy Act decision in Seven County Infrastructure Coalition v. Eagle County. We were not disappointed. The Court held, 8-0,1 that the U.S. Surface Transportation Board reasonably explained in an environmental impact statement (“EIS”) that the agency did not need to consider the indirect environmental impacts of its decision to approve an 88-mile railroad spur that would connect Uinta Basin oil and gas resources to the national rail network. The Court of Appeals for the D.C. Circuit had set aside the STB’s decision on the basis that the STB did not consider the indirect environmental impacts that would result from upstream oil and gas drilling or from downstream petroleum refining. The Supreme Court reversed.
Apparently hearing our call from last spring that NEPA reforms were necessary to streamline permitting processes, the majority opinion in Seven County acts as a “course correction of sorts,” and an important and substantial step to reign NEPA back in. As the Court describes, “a 1970 legislative acorn has grown over the years into a judicial oak that has hindered infrastructure development under the guise of just a little more process.” In an opinion that will survive decades, the Supreme Court demands a high degree of deference in reviewing agency analyses performed pursuant to NEPA.
The Majority Opinion
The most striking line of the majority opinion2 is that “[t]he bedrock principle of judicial review in NEPA cases can be stated in a word: Deference.” In concluding that courts owe a high degree of deference in the NEPA context, the majority noted that NEPA is a “purely procedural statute that, as relevant here, simply requires an agency to prepare an EIS—in essence, a report.”
The Court marched through each aspect of an agency’s NEPA analysis to which courts owe deference. First, “[t]he agency is better equipped to assess what facts are relevant to the agency’s own decisions,” including whether an EIS is sufficiently detailed. Second, an agency has substantial deference in identifying “significant environmental impacts and feasible alternatives” and the reviewing court must be at its “most deferential” when reviewing such decisions. Third, regarding the scope of an EIS, courts must provide “broad latitude” so that the agency may “draw a ‘manageable line.’”
Notably, the Court distinguished the NEPA deference regime from its recent decision in Loper Bright Enterprises v. Raimondo. When an agency interprets a statute, as in Loper, judicial review of the agency’s interpretation is de novo. In contrast, when the agency exercises discretion granted by a statute or is evaluating issues of fact, the Administrative Procedure Act’s deferential arbitrary-and-capricious review standard applies.
Thus, regarding some of the most litigated NEPA issues where the agency exercises discretion granted by statute (the detail, impacts and alternatives, and scope), the Court instructs that reviewing courts must defer to the agency. In the majority’s words:
When assessing significant environmental effects and feasible alternatives for purposes of NEPA, an agency will invariably make a series of fact-dependent, context-specific, and policy-laden choices about the depth and breadth of its inquiry—and also about the length, content, and level of detail of the resulting EIS. Courts should afford substantial deference and should not micromanage those agency choices so long as they fall within a broad zone of reasonableness.
In addition to the level of deference owed to agency NEPA decisions, the Court also noted that even if an EIS “falls short in some respects,” that is not necessarily reason to vacate the underlying approval. Thus, the “zone of reasonableness” declared by the Supreme Court is quite broad. Indeed, the Court did not hesitate to clarify that the “adequacy of an EIS is relevant only to the question of whether an agency’s final decision (here, to approve the railroad project) was reasonably explained.”
Central to this particular case was whether the EIS at issue should have evaluated the possible environmental effects from upstream oil drilling and downstream oil refining, projects that were separate from the proposed railway. This question of “reasonably foreseeable impacts” has been a long-debated issue, and one that nearly every presidential administration has opined on. The Supreme Court largely put the issue to bed:
While indirect environmental effects of the project itself may fall within NEPA’s scope even if they might extend outside the geographical territory of the project or materialize later in time, the fact that the project might foreseeably lead to the construction or increased use of a separate project does not mean the agency must consider that separate project’s environmental effects. . . This is particularly true where, as here, those separate projects fall outside the agency’s regulatory authority.
The Court concluded that NEPA requires agencies to focus on the environmental effects of the project at issue. And even then, the agency’s only obligation is to prepare an “adequate report.”
There is one area, however, where the Court suggested that agency determinations may not be subject to the same level of deference: decisions to deny projects based on environmental impacts. In footnote 4, the Court explained that a denied applicant may argue that the agency acted unlawfully in weighing the environmental consequences of a proposed action. In these circumstances, “NEPA does not alter those judicial inquiries.”
The Concurrence
Justices Sotomayor, Kagan, and Jackson concurred in the Court’s reversal, but they would have done so on narrower grounds. Under their view, and the 2004 Supreme Court case Department of Transportation v. Public Citizen, the STB did not need to consider the environmental impacts of upstream oil and gas development or downstream oil refining because the STB is not authorized to consider such impacts under its organic statute. The concurrence explained: “That is the rule of Public Citizen.”
And that leads to the most notable aspect of the concurrence: its framing of the majority opinion as grounding its “analysis largely in matters of policy” and ruling more broadly than necessary to decide the case at hand. The concurrence itself is significant evidence that the majority opinion has significantly shifted the lay of the land in NEPA cases by expressly affording agencies high degrees of deference.
The majority decision will affect all NEPA cases, whereas the concurrence’s reasoning would only have affected decisions where the agency in question is not authorized to consider environmental impacts. Other agencies that approve federal projects, including the U.S. Department of the Interior, the U.S. Forest Service, and the U.S. Nuclear Regulatory Commission, would arguably not be affected under the Public Citizen line of cases because those agencies are directed to consider environmental impacts. Under the majority’s framework, however, all agencies enjoy broad deference in limiting the scope of their analysis or deciding that certain impacts on the environment are not significant.
Practical Takeaways
NEPA litigation has long been used as a tool to dictate a particular outcome of an agency decision and to halt project development. And in many cases, appellants have been successful in those efforts. In this landmark decision, the Court fortified those principles that are core to NEPA. “Simply stated, NEPA is a procedural cross-check, not a substantive roadblock.” At the very least, the Court’s opinion can be expected to deter the most frivolous NEPA litigation.
The Supreme Court repeatedly underscored that judicial review of agency analyses performed pursuant to NEPA are afforded “substantial deference.” This decision can have an immediate impact for all ongoing judicial challenges raised under NEPA. Even in cases where the merits are fully briefed, the government will likely file supplemental briefs or letters explaining why the decision in Seven County further supports the reasonableness of the agency’s explanation.
Over the longer term, Seven County may have substantial salutary follow-on effects that allow for more efficient agency approvals. Indeed, the Court was acutely aware of how stringent judicial review incentivized agencies to bullet-proof their NEPA analyses to avoid judicial reversals: “All of that has led to more agency analysis of separate projects, more consideration of attenuated effects, more exploration of alternatives to proposed agency action, more speculation and consultation and estimation and litigation.”
The Supreme Court opinion was not shy in expressing frustration with the “continuing confusion and disagreement in the Courts of Appeals over how to handle NEPA cases.” The Court’s admonishment and clear command to apply deference should dissuade courts from policymaking from the bench—at least in the NEPA context.
The Court also took head on an issue tangential to the case at hand, but that has “been too often overlooked”—the length of a NEPA document. The Court went out of its way to warn that “[b]revity should not be mistaken for lack of detail,” clearly encouraging agencies and courts to be more efficient in the paperwork.
Although Seven County reviewed an EIS, nothing in the majority opinion’s reasoning or analysis would limit the deferential regime to just the EIS context. Applying Seven County, courts are also likely to apply a high degree of deference to agency decisions that an EIS is unnecessary because the proposed project will not significantly affect the quality of the environment. For this reason, more agencies might decide to pursue environmental assessments rather than EISs.
From the perspective of parties challenging agency NEPA analyses, the effort just became more difficult. Given the Supreme Court’s repeated emphasis that judicial review under NEPA is deferential, challengers will likely need to identify glaring holes in the agency’s analysis or facial inconsistencies in how the agency determines scope or which environmental impacts are significant. It is also possible that challengers will shift their focus to other statutory schemes like the National Historic Preservation Act, Endangered Species Act, or the Clean Air Act, which do indeed impose substantive constraints.
References
1 Justice Gorsuch recused himself from the case. 2 Justice Kavanaugh wrote the majority opinion, in which Chief Justice Roberts and Justices Thomas, Alito, and Barrett joined.
Prof. Examines Recent Suit for Corporate Records of Delaware Corp–filed in Illinois
The inestimable Professor Bainbridge, one the country’s leading corporate law scholars, has done a deep dive into the issues presented by a recent filing in Illinois for corporate records of a Delaware corporation. The good professor has written three articles on the issues raised, such as the internal affairs doctrine. Despite the oddity of the suit being filed in Illinois, the article still provides insights for those grappling with DGCL Section 220 claims in light of the recent changes enacted via SB 21.
Texas Legislature Passes Business Court Amendments on Last Day of Session
On June 1, 2025, which was the last day of the 2025 Regular Session of the Texas Legislature, the Legislature passed House Bill 40 (“HB 40”), which would amend Texas Government Code Chapter 25A, the statute that established the Texas Business Court, and would make various other clarifying and technical amendments to Texas statutes in relation to the Business Court. HB 40 has been sent to the desk of Governor Abbott for his signature. Unless vetoed by the Governor, these amendments will go into effect on September 1, 2025. HB 40 was the subject of much backroom negotiation over the course of the legislative session, and many of the amendments that were in the original draft of HB 40 were removed as a result of opposition or requests from various legislators.
A summary of the most significant amendments contained in HB 40 that may affect our clients are set forth below. As passed, HB40:
Lowers the threshold for the amount in controversy from $10 million to $5 million for suits arising under a “qualified transaction” and for certain actions arising out of a violation of the Finance Code or the Business & Commerce Code, among other claims.
Expands definition of “qualified transaction” to include a series of related transactions.
Provides that the amount in controversy for the Business Court’s jurisdictional purposes is “the total amount of all joined parties’ claims.”
Clarifies that, assuming the amount in controversary threshold is met, the Business Court has jurisdiction over any action “arising out of a business, commercial or investment contract or transaction,” as opposed to any action “that arises out of a contract or commercial transaction,” in which the parties to the contract or transaction agreed in the contract or a subsequent agreement that the Business Court has jurisdiction of the action.
Adds to the Business Court’s jurisdiction (1) actions arising under the Texas Uniform Trade Secrets Act, Chapter 134A, Civil Practice and Remedies Code and (2) actions arising out of or relating to the ownership, use, licensing, lease, installation or performance of intellectual property, including computer software, software applications, information technology and systems, data and data security, pharmaceuticals, biotechnology products, bioscience technologies and trade secrets.
Confirms that the Business Court has jurisdiction concurrent with district courts over actions to enforce an arbitration agreement, appoint an arbitrator, review an arbitral award and take other judicial actions relating to or in support of arbitration proceedings, so long as a claim included in the arbitration is within the Business Court’s jurisdiction and satisfies the required amount in controversy.
Moves Montgomery County (The Woodlands, Conroe) from the not yet operational Second Business Court Division, to the currently operating Eleventh Business Court Division (Houston).
Removes language in Chapter 25A that would have abolished the remaining six non-operational geographic divisions of the Business Court on September 1, 2026. These amendments preserve the potential for these six divisions to commence operations if and when the Legislature appropriates funding for their operations.
Aligns the language regarding the Business Court’s supplemental jurisdiction with its federal analog. The statute now gives the Business Court supplemental jurisdiction “over any other claim so related to the action that the claim forms part of the same case or controversy.” The statute retains the requirement that a supplemental claim may only proceed in Business Court if all parties to the claim and the Business Court judge agree to the exercise of supplemental jurisdiction.
Excludes from the Business Court’s jurisdiction any claim related to a consumer transaction to which a consumer in Texas is a party that arises out of a violation of federal or state law.
Directs the Texas Supreme Court to “establish procedures for the prompt, efficient, and final determination of business court jurisdiction on the filing of an action in the business court,” with a focus on “efficiently addressing complex business litigation in a manner comparable to or more effective than the business and commercial courts operating in other states.” The new provision authorizes the Supreme Court to, among other things, (1) provide for jurisdictional determinations based on pleadings or summary proceedings, (2) establish limited periods during which issues or rights must be asserted, and (3) provide for interlocutory or accelerated appeals.
Allows entities to establish venue in a county located in an operating division of the Business Court by provisions in the entities’ governing documents with respect to actions regarding (1) governance, governing documents or internal affairs; (2) acts or omissions of an owner, controlling person or managerial official; (3) breach of duty by an owner, controlling person or managerial official; or (4) the Business Organizations Code.
Authorizes transfers of cases from district and county courts that are within the jurisdiction of the Business Court that were commenced prior to September 1, 2024, upon an agreed motion of a party and permission of the Business Court, under rules to be adopted by the Supreme Court for that purpose. When adopting such rules, the Supreme Court is directed “to (1) prioritize complex civil actions of longer duration that have proven difficult for a district court to resolve because of other demands on the court’s caseload, (ii) consider the capacity of the business court to accept the transfer of such actions without impairing the business court’s efficiency and effectiveness in resolving actions commenced on or after September 1, 2024, and (iii) ensure the facilitation of the fair and efficient administration of justice.”
Vice Chancellor Pens Law Review Article on Delaware Corporate Law
A law review article authored by a Vice Chancellor of the Delaware Court of Chancery that chronicles nine eras of Delaware court decisions on Delaware corporate law, from the State’s founding in 1776 through the present, is featured on the Harvard Law School Corporate Governance blog (where yours truly has published several articles over the years.)
The article focuses on three areas of the law: controller transactions; third-party mergers and acquisitions; and derivative actions. Must reading for those interested in the nuances of Delaware corporate law.
Supreme Court Decision Limits the Opportunity for NEPA to Derail Projects
The U.S. Supreme Court’s recent 8-0 ruling limited the scope of the National Environmental Policy Act (NEPA), the national environmental law that mandates federal agencies to assess the environmental effects of their proposed actions before making decisions. In the May 29, 2025, decision in Seven County Infrastructure Coalition v. Eagle County, Colorado, the Supreme Court found that substantial judicial deference should be afforded to agencies under NEPA, and that NEPA does not require agencies to consider the environmental effects of projects that are separate in time or place from the project at hand.
The case concerned construction of an 88-mile railroad line connecting Utah’s oil-rich Uinta Basin to the national freight rail network to facilitate the transportation of crude oil to refineries along the Gulf Coast. As part of its project review, the Surface Transportation Board (Board) prepared a 3,600-page environmental impact statement (EIS) that addressed significant environmental effects of the project and identified feasible alternatives, as required under NEPA. The Board concluded that the project’s transportation and economic benefits outweighed its environmental impacts and approved the railroad line. Eagle County, Colorado, and several environmental organizations challenged the Board’s EIS and final approval order in federal court. The U.S. Court of Appeals for the D.C. Circuit ultimately vacated the Board’s EIS and final approval order, holding that the Board’s analysis of environmental effects should have included reasonably foreseeable impacts from upstream oil drilling and downstream oil refining projects.
The Supreme Court characterized the D.C. Circuit’s decision as belonging to a line of NEPA cases guided by an overly aggressive judicial approach. According to the Court, NEPA is a purely procedural statute that requires an agency to prepare an EIS, but does not require an agency to weigh environmental consequences in any particular way. The Court further emphasized that NEPA is a “procedural cross-check” to inform agency decision-making, not a “substantive roadblock.” It further criticized the use of NEPA by project opponents as a “blunt and haphazard tool” to stop or slow new infrastructure and construction projects.
When determining whether an agency’s EIS is compliant with NEPA, the Court affirmed that courts should afford “substantial deference” to the agency. The essential determination is “not whether an EIS in and of itself is inadequate, but whether the agency’s final decision was reasonable and reasonably explained.” Thus, courts must defer to agencies so long as they are operating within this “broad zone of reasonableness.”
The Court distinguished Seven County from its recent landmark decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), which applied de novo judicial review in cases when an agency interprets a statute. In cases in which an agency exercises discretion granted by statute, judicial review is conducted under the Administrative Procedure Act’s “arbitrary and capricious” standard, under which a court asks whether the agency action was reasonable.
This judicial deference in NEPA cases extends to factual determinations made by agencies about what details are relevant in an EIS. The Court affirmed that an EIS must address the reasonably foreseeable environmental effects of the project at hand. However, the Court also noted that courts should defer to agencies about the scope of analysis, including decisions about how far to go in considering indirect environmental effects from the project at hand and whether to analyze environmental effects from other projects separate in time or place from the project at hand.
Seven County’s limitations on the required scope of agency analysis under NEPA to the direct and indirect environmental effects of the project at hand may streamline agency review of infrastructure, construction, and energy projects. However, uncertainty remains as agencies determine the extent of analysis required during project review, which may differ by agency or types of projects or may change with administrations. The ruling may also cause environmental groups to reconsider when and how to mount challenges to projects under NEPA.
Alexandra Prendergast contributed to this article
PANT SAGGIN PROBLEMS?!: FTSA Complaint Alleges Violations of the Caller ID Rules
Hey TCPAWorld!
Just yesterday, the Czar came across a TCPA complaint against a defendant named Pant Saggin LLC (“PSD”), if you can believe it. See Villaverde v. Pant Saggin, LLC, No. 0:25-cv-61117-AHS (S.D. Fla. June 4, 2025), ECF No. 1. And to make matters even better, Pant Saggin LLC sells underwear, which would presumably be advertised if the wearer’s pants were sagging. I really hope they have a good logo…
Anyway, this case was just removed to my home court, the Southern District of Florida, and raises claims under the Florida Telephone Solicitation Act (“FTSA”).
The allegations are simple. The plaintiff, Amanda Villaverde, is a Broward County resident that allegedly received what she dubs “Text Message Sales Calls” from PSD. Though her language is plural, she provides only one message from 91374:
PSD: Don’t settle for only one pair!
Shop PSD 3 Packs to save big on your new favorite underwear!
Cop your 3 Pack now – >
Predictably, when the plaintiff called 91374, the call could not be completed.
Therefore, the plaintiff claims that PSD violated the FTSA’s Caller ID Rules, Fla. Stat. § 501.059(8)(b). This statute dictates that if a telephone number is provided through caller ID because of a telephonic sales call, “the solicitor must ensure that telephone number is capable of receiving telephone calls and must connect the original call recipient, upon calling such number, to the telephone solicitor or to the seller on behalf of which a telephonic sales call was placed.” Id. Accordingly, the plaintiff claims that because she received “PSD Text Message Sales Calls” from a number that was incapable of receiving telephone calls, PSD violated the FTSA.
On these bases, the plaintiff seeks to represent the following class:
All persons and entities that reside in Florida whose caller identification service was transmitted a telephone number that was not capable of receiving telephone calls when PSD Text Message Sales Calls were made to them since July 1, 2021.
That’s right, there is supposedly a whole Pant Saggin class.
There are two key takeaways. First, companies sending outbound text messages to Florida consumers should ensure that the number listed on caller ID is capable of receiving telephone calls and connecting to either the company itself or the agent sending the text on its behalf. And second, pant sagging can be marketing for underwear. Do with that information what you will.
Until next time.
Chancery Assesses Damages for Unfair Valuation
A recent Delaware Court of Chancery decision is a treasure trove of fundamental principles applicable to corporate litigation. In Ban v. Manheim, C.A. No.2022-0768-JTL (Del. Ch. May 19, 2025), the 60-plus page post-trial opinion applies an exemplary legal analysis to a complex web of entities controlled by one person, to explain why the valuation of a minority interest failed the entire fairness test—and what the applicable measure of damages requires in the form of a remedy.
Basic Facts
For the benefit of busy lawyers, this is only an extreme precis with bullet points to allow interested readers to determine if they want to review the extensive facts and thorough legal analysis more carefully in order to gain a fuller understanding of the nuances involved.
The essential facts involve a controller who attempted to amend the applicable agreements to provide for a call right and a redemption right that purported to allow him to force-out minority owners at an unfairly low price. The call is referred to in the opinion as the WestCo Call. See Slip op. at 14. The redemption right is referred to as the DVRC Redemption. See Slip op. at 16.
Legal Analysis
The court begins by explaining that DGCL § 202(b) bars the restriction of shares without the consent of the shareholder. For this reason the attempted restrictions via a bylaw amendment on shares was a statutorily invalid act. The court emphasized that DGCL § 109, which provides for authority to amend bylaws does not supersede the condition to imposing a restriction on shares in Section 202(b). See Slip op. at 21-22.
The court restates the well-settled principle that the fiduciary duty of a controlling shareholder applies when that controller attempts to amend bylaws. See Slip op. at 25.
The court provides the reasons why the entire fairness standard applies to self-interested transactions generally. Slip op. at 31.
In a footnote that extends for about three pages, the court regales the reader with an analysis regarding the materiality of “non-imminent risk,” and questions the “intuition” in the recent Delaware Supreme Court TripAdvisor decision in this context, and in light of the stated purposes of the recently passed SB 21 which sought to minimize non-imminent litigation risk. See footnotes 62 and 89. See also footnote 89.
The court does an deep dive to dissect the entire fairness standard. See Slip op. 35-39.
The court acknowledges the primacy of contract but clarifies when it does not bar a fiduciary duty claim. Professor Berle’s venerable twice-testing principle can serve as one example of an exception to that preemption doctrine. See Slip op. at 42-46 and footnote 100.
The court reminds us that equity allows for flexibility to remedy a breach of the duty of loyalty such that mathematical certainty is not required in proving damages in that context.
A memorable elucidation of the differences between fair market value and fair value is presented. The court observes that it is not limited in awarding fair market value (which includes discounts like marketability) when a controller takes away equity interests of a minority owner. See Slip op. at 56.
A fiduciary can be forced to disgorge profit resulting from a breach of fiduciary duty, even if the gain did not come at the beneficiary’s expense in certain circumstances. See Slip op. at 57-60.
The court makes the noteworthy distinction between the measure of damages in an appraisal case as compared to the damages analysis when a breach of fiduciary duty claim is involved. See Slip op. at 60.
One of the many treasures in this opinion is the analysis of the competing expert opinions on valuation and how the court finds fault with the experts for both parties. The court selects the parts of each opinion that the court finds reliable, and discards those to which the court does not give any weight.
Essential reading for any litigant relying on experts is the court’s explanation about the limitation on what additional information an expert may appropriately rely on in rebuttal reports or supplemental expert reports. See Slip op. at 60-68.
Supreme Court Scales Back the NEPA Roadblock to Infrastructure Projects
Overview
On May 29, 2025, the U.S. Supreme Court issued a significant decision clarifying the scope of environmental review required under the National Environmental Policy Act (“NEPA”) for major infrastructure projects. The Court recognized and reined in what infrastructure practitioners have long understood: NEPA strayed far beyond its “procedural” and “informational” roots to become an obstruction to infrastructure projects across the country.
As brief background, a project developer filed an application with the Surface Transportation Board (“STB”) for a proposed 88-mile railroad line in Utah. The STB, pursuant to its NEPA requirements, issued a 3,600-page environmental impact statement (“EIS”) analyzing the environmental effects of the project and ultimately approved the railroad line. Groups challenged the STB’s approval, and the D.C. Circuit vacated the STB’s decision, ordering the STB to analyze the potential “upstream” impacts of the proposed railroad, which included possible increased oil and gas drilling activities in Utah, and potential “downstream” impacts of the railroad, such as increased oil refining in Texas.
The Supreme Court reversed the D.C. Circuit Court’s prior decision, finding that the D.C. Circuit: (1) did not afford substantial deference to the STB required in NEPA cases, and (2) incorrectly ordered the STB to review the environmental effects of projects separate in time and place from the actual 88-mile railroad under consideration.
Substantial Deference to Agencies in NEPA Reviews
First, the Court emphasized that lower courts should provide deference to agencies when evaluating the agencies’ NEPA review of a project. This is because an agency’s environmental review will include “a series of fact-dependent, context-specific, and policy laden choices about the depth and breadth of [the agency’s] inquiry….” Courts should thus afford agencies “substantial deference” when the agencies’ choices are “within a broad zone of reasonableness,” described further as “a rule of reason.”
Reasonably Close Causal Relationship to the Project
Second, the Court reined in the scope of what the environmental review must consider, i.e., the “proposed action.” Future or geographically separate projects that may be built or expanded are not generally part of NEPA’s scope. The Court characterized this finding in legal terms as “proximate causation,” those effects that have a reasonably close causal relationship between the project at hand and the environmental effects of other projects would be included in a NEPA review.
The Court rejected, however, a “but for” causal relationship, providing that even though environmental effects may be reasonably foreseeable, such as increased oil and gas development from the proposed railroad line, lower courts should not second guess an agency’s decision to exclude from NEPA review projects that are separate in time or place from the actual project being considered. The Court noted that the agency may draw a “manageable line” for what it reasonably concludes should be considered. Summarizing this point, the Court stressed that “[a] relatively modest infrastructure project should not be turned into a scapegoat for everything that ensues from upstream oil drilling to downstream refinery emissions.”
Conclusion
While a significant victory for project proponents, this decision does not foreclose the scope of the extent of an environmental review in a NEPA EIS beyond the confines of the actual project. Project proponents should evaluate potential environmental impacts beyond the actual project and analyze whether or not those environmental impacts would be considered “reasonable,” for example:
Does the agency that is making the decision regulate the potentially foreseeable environmental effects?
Are the potentially foreseeable environmental effects geographically separate from the actual project?
Are the potentially foreseeable environmental effects a hypothetical future event?
Are the potential environmental effects speculative?
U.S. Supreme Court Reverses ‘Reverse’ Employment Discrimination Pleading Standard
Takeaways
The U.S. Supreme Court invalidated the “background circumstances” rule for Title VII claims, resolving a split in the circuits and holding that courts must evaluate claims brought by majority-group plaintiffs under the same evidentiary framework as minority-group plaintiffs.
Justices Thomas and Gorsuch outlined their criticisms of the McDonnell Douglas framework and encouraged parties to litigate Title VII discrimination claims under the summary judgment standard used in almost all other contexts.
Employers should continue to focus on equal employment for all individuals regardless of their race, color, sex, national origin, religion, age, disability, or other classification and regardless of any perceived “majority” status.
On June 5, 2025, the U.S. Supreme Court invalidated the “background circumstances” rule in “reverse” employment discrimination claims brought under Title VII of the Civil Rights Act in a unanimous decision overturning precedent held by five federal circuit courts of appeals. Ames v. Ohio Department of Youth Services, No. 23-1039.
The background circumstances rule required plaintiffs from historically advantaged groups — typically, white or male employees — to provide additional evidence suggesting that their employer was inclined to discriminate against the majority. Justice Ketanji Brown-Jackson, writing for the Court, explained that under this framework, “plaintiffs who are members of a majority group bear an additional burden … : They must also establish background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority.” The imposition of this additional burden, Justice Jackson wrote, “cannot be squared with the text of Title VII or our longstanding precedents.”
The Supreme Court’s decision resolves a split in the circuits and now all courts must evaluate claims brought by majority group plaintiffs under the same framework as any other Title VII claim, without the need for plaintiffs to prove “background circumstances.”
Background
Marlean Ames, a straight woman, started working for the Ohio Department of Youth Services (DYS) in 2004. Ames claimed that DYS discriminated against her when it promoted a gay man instead of her.
Holding
The Court held that the “background circumstances” rule is irreconcilable with the plain text of Title VII. Title VII establishes “the same protections for every individual—without regard to that individual’s membership in a minority or majority group,” the Court said, leaving “no room for courts to impose special requirements on majority-group plaintiffs alone.” And Supreme Court precedent has consistently interpreted Title VII faithfully to its plain text.
Citing Bostock v. Clayton County, 590 U.S. 644 (2020), Justice Jackson outlined the basic principle “that the standard for proving disparate treatment under Title VII does not vary based on whether or not the plaintiff is a member of a majority group,” but rather “works to protect individuals … from discrimination.”
Justice Jackson observed that the Court always has said that courts should be flexible when determining whether a plaintiff met her burden of proving her initial case. Justice Jackson wrote, “The ‘background circumstances’ rule disregards this admonition by uniformly subjecting all majority-group plaintiffs to the same, highly specific evidentiary standard in every case.… [T]he rule effectively requires majority-group plaintiffs (and only majority-group plaintiffs) to produce certain types of evidence—such as statistical proof or information about the relevant decisionmaker’s protected traits—that would not otherwise be required to make out a prima facie case.”
Thomas/Gorsuch Concurrence; Fate of McDonnell Douglas Framework
Justice Clarence Thomas and Justice Neil Gorsuch joined the Court’s opinion in full but wrote separately “to highlight the problems that arise when judges create atextual legal rules and frameworks.” In their concurrence, Justices Thomas and Gorsuch criticized the longstanding McDonnell Douglas framework, a legal standard established by the Supreme Court in McDonnell Douglas Corp. v. Green, 411 U. S. 792 (1973), and applied when there is no direct evidence of discrimination.
Acknowledging that Ames did not present the question of whether the McDonnell Douglas framework is an “appropriate tool for evaluating Title VII claims at summary judgment,” Justice Thomas promised that if that issue comes before the court, he would “consider whether the framework should be used for that purpose.” Justice Thomas noted that litigants and lower courts were free to apply the standard until that time but encouraged them instead to apply the straightforward summary judgment standard used by district courts “every day—and in almost every context except the Title VII context.”
The issue, in fact, did come before the Court early this year on plaintiff’s petition for certiorari in Hittle v. City of Stockton, 145 S. Ct. 759 (2025). The Court denied review on March 10, 2025. Justices Thomas and Gorsuch wrote a rare dissent to the denial outlining their criticisms of the framework.
Impact on Employers
Ames v. Ohio Youth Services joins two other recent Supreme Court cases with significant impact on employment discrimination law: Students for Fair Admissions, Inc. v. President & Fellows of Harv. Coll., 600 U.S. 181 (2023); and Muldrow v. City of St. Louis, 601 U.S. 346 (2024). Although Justice Thomas’s concurrence questioning the legitimacy of the McDonnell Douglas framework is not controlling, it likely will affect how parties plead and litigate discrimination cases going forward. Employers may see an uptick in discrimination claims from all individuals (including, but not limited to, those historically believed to be in the “majority”).
Employers should continue to focus on equal employment for all individuals regardless of their race, color, sex, national origin, religion, age, disability, or other classification and regardless of any perceived “majority” status.
A Fact-Intensive Inquiry: How California Courts Are Resolving Authenticity Disputes of Electronically Signed Arbitration Agreements
For more than a decade, California courts have wrestled with the challenge of how to resolve disputes over the authenticity of electronically signed arbitration agreements.
While the State Supreme Court has not yet offered conclusive guidance, decisions by the State’s various appellate courts offer insight into what factors a court is likely to consider.
As we have noted before, the holding in Epic Systems v. Lewis contributed to a proliferation of arbitration agreements with class and collective action waivers. Our prior analysis predicted certain datapoints one should consider capturing to support a petition to compel arbitration when disputing the authenticity of an electronically signed agreement. The holdings in four cases over the last 11 years confirm that success will require surviving a demanding and fact intensive inquiry, one that asks much of parties seeking to compel arbitration.
Ruiz v. Moss Bros. Auto Group, Inc., 232 Cal. App. 4th 836 (2014)
Well before remote work and remotely onboarding employees were common practice, California courts faced the question of how to determine the authenticity of electronically signed arbitration agreements. In Ruiz v. Moss Bros. Auto Group, Inc., the Court of Appeal addressed this issue in resolving a wage and hour class action dispute. Citing an electronically signed arbitration agreement from 2011, the defendant petitioned the trial court for an order compelling arbitration of the named plaintiff’s individual claims. In support of its petition, the defendant provided declarations by an employee that summarily described the company’s onboarding process and—based on that summary description—asserted that the named plaintiff electronically signed the agreement by virtue of his employment with the company. The evidence also included a copy of the executed agreement, which bore the named plaintiff’s alleged electronic signature and the date and time the document was signed. In response, the named plaintiff stated he did not recall signing an arbitration agreement, insisted that he would not have signed such an agreement, and argued that the defendant had not proven the authenticity of his electronic signature by a preponderance of the evidence. The trial court denied the petition, finding that the defendant failed to establish the existence of an enforceable agreement to arbitrate.
The Court of Appeal for the Fourth District affirmed the trial court’s decision, holding that the defendant-appellant failed to carry its burden of proving the authenticity of the electronic signature because the summary language and assertions in the employee’s declarations did not explain how the employee reached her conclusions or how she was able to infer that the named plaintiff was in fact the person who signed the agreement. While the declarations explained the steps the company took for employee onboarding—including the use of a unique login ID and password to complete the onboarding paperwork, which included the arbitration agreement—the Court held that this evidence was lacking because it did not explain with sufficient specificity how the employee could conclude the named plaintiff actually executed the agreement. The Court also rejected the defendant-appellant’s argument that it was not required to authenticate the named plaintiff’s signature, holding that precedent and statute both shifted the burden of authentication back onto the defendant when the named plaintiff claimed he did not recall signing the agreement and that he would not have signed it if presented to him.
In short, Ruiz introduced the concept that a summary statement of how an arbitration agreement might have been electronically signed in the normal course of an employee’s onboarding is insufficient. Instead, it called for a specific, detailed explanation of how one could conclude no one else but the signatory could have placed his or her electronic signature on the document.
Espejo v. Southern California Permanente Medical Group, 246 Cal. App. 4th 1047 (2016)
Two years after Ruiz, another appellate court weighed in. This time, however, the court reached the opposite conclusion and held in favor of the party moving to compel arbitration. In Espejo, the plaintiff sued his former employer for wrongful termination. As in Ruiz, the defendant petitioned for an order to compel arbitration on the basis of an electronically signed agreement. The defendant also submitted declarations that described in detail the company’s employee onboarding program, its process for reviewing electronically signed documents, and security features meant to ensure the authenticity of the electronic signature. Specifically, the declarations referenced the use of private and unique login credentials provided directly to the employee, system safeguards that required the employee to reset credentials with their own self-selected password before being able to complete the onboarding paperwork, and explained how only the employee could have inserted their name into the electronic signature fields. The plaintiff denied signing the arbitration agreement, and, despite the detailed declaration, the trial court denied the petition to compel arbitration in part because it declined to consider a supplemental declaration submitted by the defendant that contained the detailed information that explained how no one other than the employee could have caused the electronic signature.
On review, the appellate court outlined the same process and approach as used in Ruiz, but found its way to a different outcome by holding that the declarations in Espejo went further than the summary and conclusory statements offered by the declarant in Ruiz. The appellate court concluded that the defendant-appellant did meet its burden here and that it did not repeat the error the defendant in Ruiz committed. The appellate court further held that the trial court committed error by refusing to consider the defendant-appellant’s supplemental declaration, concluding that it was timely submitted and that the trial court’s refusal to consider the document was an abuse of discretion.
Post-Espejo Cases
Bannister v. Marinidence Opco, LLC, 64 Cal. App. 5th 541 (2021)
Whether it realized this or not, the court’s holding in Espejo signaled to future courts when an electronically signed arbitration agreement is sufficiently authenticated. This is demonstrated in Bannister, which came five years after Espejo and concerned an action for discrimination, retaliation, and other claims. Like in Espejo, the plaintiff in Bannister denied signing the arbitration agreement. In response, the defendant did not present evidence of any kind of unique or user-specific credentials or log in data. Instead, the record was mixed and suggested that a single employee input personnel data for as many as 20 employees, including data for the plaintiff, who may or may not have used the computer terminal to complete her onboarding paperwork. In the absence of a secure, user-specific login method, as well as the suggestion that another person input key data, the Bannister court concluded the defendant did not satisfy its burden of proving the authenticity of the electronic signature.
Garcia v. Stoneledge Furniture, LLC, 102 Cal. App. 5th 41 (2024)
More recently, the Court of Appeal for the First District seemingly endorsed the approach in Espejo and went further by outright suggesting that the proponent of an arbitration agreement must offer substantive assurances that no one other than the plaintiff could have signed the arbitration agreement in question. In Garcia, the plaintiff sued her former employer and other entities for sexual harassment. Citing an electronically signed arbitration agreement completed during Ms. Garcia’s onboarding, the defendants petitioned to compel arbitration. In support of their petition, the defendants relied on a declaration by a human resources information systems analyst, which stated that Ms. Garcia would have created a unique user ID and confidential password for her onboarding paperwork. The analyst’s declaration further averred that Ms. Garcia’s unique credentials would have served as her electronic signature on her new hire documentation, that she accessed the arbitration agreement through a dedicated link, and that her electronic signature on that document signaled her assent to the arbitration agreement. In other words, the evidence presented echoed that offered by the defendants in Espejo.
Ms. Garcia, however, disputed the authenticity of her signature on the arbitration agreement by pointing to discrepancies between the electronic signature there and other signature fields in her onboarding paperwork. She further noted that the arbitration agreement did not contain an indication that her unique credentials had been entered or used to complete that form, unlike the other documents she completed for her onboarding. Ms. Garcia also noted the absence of an IP address on the arbitration agreement, which stood in contrast to the other documents, all of which did have an IP address listed. Ms. Garcia also alleged the analyst’s declaration was insufficient because the analyst did not have personal knowledge of her completing the onboarding paperwork.
At the hearing on the petition to compel arbitration, the defendants argued that an evidentiary hearing was necessary to resolve the factual dispute, but the trial court denied this request and found in favor of Ms. Garcia, citing the absence of a date, time, or IP address on the executed arbitration agreement, as well as the fact that the analyst was not a percipient witness to Ms. Garcia’s alleged completion of the paperwork.
On review, the Court of Appeal affirmed the trial court’s decision. In reaching that conclusion, the Court deferred to the trial court’s findings of fact and noted that the analyst’s declaration merely explained how the signature could have gotten there rather than show that only Ms. Garcia could have placed the electronic signature on the arbitration agreement. In short, the Garcia court took a concept first articulated in Ruiz—the idea of confirming the electronic signature was the act of the plaintiff—and extended it further in two ways. It did so first by not rejecting the trial court’s suggestion that the analyst, who did not personally witness the act of Garcia signing the document, could not unilaterally prove the authenticity of the electronic signature. By not engaging with this idea, the appellate court may have inadvertently endorsed a standard where a percipient witness is always necessary to determine authenticity. The appellate court also went further than Ruiz by requiring that the defendant offer evidence that excluded the possibility that anyone other than the plaintiff could have been the source of the signature. In essence, the Court held that proving authenticity necessarily includes eliminating all possible or even imaginary doubt over the authenticity of the electronic signature. This is a staggering requirement given California law has long recognized that the concept of eliminating even imaginary or all possible doubts exceeds proof beyond a reasonable doubt—the highest burden in the American legal system,[1] suggesting that the proponent of an arbitration agreement must meet a burden even higher than the one that safeguards our most fundamental Constitutional rights.
The evolution from Ruiz to Garcia suggests an embrace of exacting requirements on parties seeking to enforce arbitration agreements. This new standard, however, raises two untested questions: 1.) Does the requirement of excluding all possible alternatives prejudice proponents of arbitration agreements by impermissibly subjecting them to a heightened evidentiary standard (i.e., one beyond a preponderance of the evidence), and 2.) Do these demanding standards work against the long held and recognized public policy that favors use of arbitration as a means of dispute resolution? Both are questions that could be raised and explored as the law further develops.
Takeaways
For the time being, parties seeking to ensure the enforceability of arbitration agreements should take the lessons from these four cases to heart and design their processes in a way that arms them with the facts necessary to convince a trial court that an electronic signature is authentic. Such strategies include:
Developing or using secure platforms that can trace back directly to the intended recipient/signatory to an arbitration agreement;
Requiring the electronic signatory to the arbitration agreement to create a unique username and password;
Ensuring that no one else accessed the electronic signatory’s account;
Recording the date, time, and IP address at the time the agreement is electronically signed;
Requiring written consent from the electronic signatory that they consent to using an electronic signature;
Using consistent formatting and eliminating any differences or inconsistencies in how an electronic signature appears across different forms or fields when presented together;
Having another person present to witness the electronic signature; and
Sending a confirmation email to the signatory and the originating party listing and providing copies of all electronically signed documents.
While these steps might be burdensome or challenging, the holdings in these cases demonstrate their significance should litigation arise.
ENDNOTES
[1] See CALCRIM No. 220, Judicial Council of California Criminal Jury Instructions (2024 edition).
SCOTUS Declines to Rule on Whether District Court can Certify a Class Containing Uninjured Members
On Thursday, June 5, 2025, the United States Supreme Court issued an 8-1 Opinion in the matter of Laboratory Corp. of Am. Holdings v. Davis in which it declined to take up the issue of whether district courts can certify a class that contains uninjured members.
In the Opinion, the Supreme Court dismissed as improvidently granted the appeal of a Ninth Circuit decision affirming class certification despite the fact that the class, as certified, contained some uninjured class members.
Writing in dissent, Justice Kavanaugh framed the question presented as “whether a federal court may certify a damages class pursuant to Federal Rule of Civil Procedure 23 when the class includes both injured and uninjured class members.” Justice Kavanaugh stated that he would hold that a federal court may not certify such a class under Rule 23.
Notably, Justice Kavanaugh also examined the real-world consequences of improvidently granted motions for class certification on business, explaining: “[c]oerced settlements substantially raise the costs of doing business. And companies in turn pass on those costs to consumers in the form of higher prices; to retirement account holders in the form of lower returns; and to workers in the form of lower salaries and lesser benefits. So overbroad and incorrectly certified classes can ultimately harm consumers, retirees, and workers, among others.”
The Court’s decision to dismiss the appeal defers a potentially significant decision impacting businesses throughout the country. Given this lack of clarity, it is important that businesses facing class action allegations retain knowledgeable and sophisticated counsel to advance their rights.
FTC Permanently Bans Debt Collector for UDAP and FDCPA Violations
On April 30, the FTC filed a stipulated order for a permanent injunctive relief and a monetary judgment against a Georgia-based debt collection company and its owner, which the court granted on May 9, to resolve allegations that the company used false claims, threats, and harassment to collect more than $7.6 million in bogus debts.
The FTC’s complaint alleged violations of Section 5(a) of the FTC Act, the Fair Debt Collection Practices Act (FDCPA) and Regulation F, the Gramm-Leach-Bliley Act, and the FTC’s Impersonation Rule. Under the order, the defendants are permanently banned from participating in debt collection or brokering activities. The judgment imposes a $9.6 million in monetary relief, which was partially suspended based on the defendants’ inability to pay.
The FTC alleged the company engaged in several unlawful practices, including:
Making false claims. The company allegedly fabricated or misrepresented debts to extract payments from consumers.
Threatening consumers with arrest or lawsuits. Consumers were told they would face arrest, wage garnishment, or civil litigation unless they paid immediately.
Harassing consumers and family members. The company made repeated, unsolicited calls and contacted relatives to pressure consumers into paying.
Obtaining financial information through false pretenses. The company misrepresented its purpose to gain access to consumers’ bank accounts and personal data.
Pretending to be affiliated with other businesses. The company used fictitious names and falsely claimed to represent, or be associated, with legitimate lenders or mediation firms.
Putting It Into Practice: The enforcement action highlights the FTC’s ongoing focus on UDAP violations, particularly those involving threats, impersonation, or deception (previously discussed here). Debt collectors and affiliated vendors should ensure their practices comply not only with the FDCPA and Regulation F, but also with broader federal UDAP standards and the FTC’s Impersonation Rule.
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