KEYS TO THE CASTLE: Castle Credit Stuck in TCPA Class Action Over Debt Collection Calls
TCPA class actions can be incredibly scary and pose a massive risk to callers of all sorts.
While the statute has generally been enforced against marketers as of late, servicers and collectors or debts may also find themselves in TCPA hot water, particularly if they are using prerecorded calls or ringless voicemail.
This is true even when a calling party originally has consent–that consent can burst like a bubble anytime a consumer asks for calls to stop. And it can be VERY difficult to prove a negative unless every call is recorded.
For instance in Cannon v. Castle Credit, 2025 WL 975805 (N.D. Ill April 1, 2025) a Defendant’s motion for summary judgment was denied–i.e. the collector must face trial–because the plaintiff claims he revoked his consent.
In Cannon Castle allegedly called Plaintif hundreds of times, including through the use of a ringless voicemail system (VoApps.)
Plaintiff claimed that he asked not to be called on several of those calls. However the Defendant’s records did not reflect the do not call request and calls continued.
Defendant moved for summary judgment arguing the Plaintiff’s inability to provide the specifics around his revocation coupled with the numerous call recordings of calls in which Plaintiff did not revoke consent demonstrated he never actually revoked as he claimed.
But the Court sided with Plaintiff finding his testimony that he revoked consent was sufficient admissible evidence to require a jury to figure out what really happened.
Making matters worse, although Defendant argued it had not used an ATDS the Court determined that did not matter– Castle’s concession it had used VoApps (a prerecorded RVM) meant it was potentially liable under 227(b) regardless of whether an ATDS was ued.
This last point is an important one to drive home. Even if calls are placed manually leaving a prerecorded voicemail will automatically trigger the TCPA. So be careful!
Also worth noting, this case arises out of a REVOCATION that allegedly went unheeded. Will in just 9 days the scope of revocation rules is about to EXPLODE. If you’re not ready for this you need to be! (The FCC has taken no action to stay the rule as of yet, although many are hoping it will.)
B2B BLUES: Residential Usage of Business Phone Continues to Trap Marketers
In Ortega v. Sienna 2025 WL 899970 (W.D. Tex. March 4, 2025) a company calling to offer inventory loans to businesses dialed a number that was being “held out” as a business. Yet the Plaintiff suing over those calls claimed the number was residential in nature.
The defendant moved to dismiss but the Court refused to throw out the case crediting the plaintiff’s allegation of residential usage:
At this stage in the litigation where the Court is limited to evaluating the pleadings and does not have an evidentiary record, it would not be proper to decide whether Mr. Ortega’s phone number is a business number or a personal/residential number for TCPA purposes. As the FCC has acknowledged, whether a cell phone is “residential” is a “fact intensive” inquiry. See id. This is a summary-judgment issue
Get it?
Even though Defendant claimed to have evidence of Plaintiff’s use of the number for business purposes that issue cannot be resolved at the pleadings stage. So the case lives on.
Plus although the court suggests a summary judgment might be appropriate here, past cases have found a question of fact where the plaintiff testifies to residential usage but the evidence shows otherwise. This means the issue might end up at trial!
The Court went on to find Plaintiff’s allegations his DNC request was not heeded demonstrated the caller may not have a DNC policy, which is a separate violation.
Last the Court determined a claim had been stated under under Texas Business and Commerce Code § 302.101 and § 305.053. Section 302.101 because the caller was allegedly marketing without a license, as required in Texas.
So there you go.
B2B callers need to heed the TCPA and particular the DNC requirements. Do NOT think you are exempt merely because you’re not calling residences or for a consumer purpose. You are not!
Plus state marketing registration requirements DO apply to you. Don’t get confused!
Alternative Paths: Court Denies Motion to Dismiss Quiet Hours Provision Claim
Many lawsuits in the past few months have claimed violations of 47 C.F.R. § 64.1200(c)(1) and 47 U.S.C. § 227(c)(2) (the “Quiet Hours Provision”) of the TCPA. Previously, the Quiet Hours Provision saw very few filings, meaning there is currently very little case law interpreting this area of law. On March 28, 2025, the District of New Jersey denied a motion to dismiss a Quiet Hours Provision claim—and potentially gave a preview of how the cases will be adjudicated in a practical manner.
In Jubb v. CHW Group Inc., No. 23CV23382 (EP) (MAH), 2025 WL 942961 (D.N.J. Mar. 28, 2025), the court denied a motion to dismiss which argued that the Quiet Hours Provision claim was duplicative of the plaintiff’s Do Not Call (“DNC”) claim. Id. at *7. The defendant in Jubb argued that the Quiet Hours Provision claim should be dismissed as duplicative of the DNC claim, because both claims arise from 47 U.S.C. § 227(c).
There is no doubt that both claims arise out of Section 227(c). Section 227(c)(5) of the TCPA is where we see a lot of claims—this is the DNC provision. The DNC provision provides that, when an individual whose phone number has been registered on the national DNC registry for more than thirty days receives more than one telephone solicitations in a twelve-month period, that individual has a private right of action. See 47 U.S.C. § 227(c)(5). Section 227(c)(2), on the other hand, implements additional regulations, including the Quiet Hours Provision, which provides the same private right of action for telephone solicitations made either before 8 a.m. or after 9 p.m., in the recipient’s local time. See 47 U.S.C. § 227(c)(2); C.F.R. § 64.1200(c)(1).
Ultimately, there is no doubt that post-trial recovery is limited to one violation of Section 227(c) per call, a point which neither party contested. Jubb, 2025 WL 942961, at *6. However, post-trial recovery is not the issue on a motion to dismiss. The Jubb court found that a plaintiff may plead multiple claims in the alternative—then limit recovery at the time of trial. See id.
Pleading alternative claims under Section 227(c) allows a plaintiff to seek certification of two different types of classes, either in the alternative or as part of a subclass, presenting a greater risk of liability for defendants. These alternative claims have always been permitted, even under Section 227(c), for instance with internal DNC list violations and external DNC violations. The Quiet Hours Provision now offers a new option for plaintiffs.
In a silver lining here for defendants, the court seemed to take heed of a recent petition made to the Federal Communications Commission. The Petition for Declaratory Ruling and/or Waiver of the Ecommerce Innovation Alliance and Other Petitioners, CG Docket Nos. 02-278, 21-402 (filed Mar. 3, 2025) seeks a declaratory ruling that the time zone of the recipient’s area code—rather than the recipient’s actual location—should be used to determine which time zone is the “recipient’s local time” under the Quiet Hours Provision.
The Jubb court did not directly cite the petition. However, the court did note that the Plaintiff had an area code that corresponded with the pacific time zone. Jubb, 2025 WL 942961, at *2. This is a much more practical and workable way to determine the recipient’s local time than looking to the recipient’s actual location.
Currently, the language of the Quiet Hours Provision requires a telemarketer to restrict telephone solicitations to between 8 a.m. and 9 p.m., based on “local time at the called party’s location.” C.F.R. § 64.1200(c)(1). Realistically, there is no way for a telemarketer to know the precise location of the individuals they contact. Even if a telemarketer knows and actively monitors the current physical address of their leads, the recipient could be on vacation or an extended business trip in Taiwan, changing the hours of the recipient’s local time. Using the recipient’s area code rather than their actual, physical location makes the most sense—but there is an argument that this reading is not directly supported by the plain language of the Quiet Hours Provision.
Even if the FCC petition is unsuccessful, the Jubb ruling provides some support for arguing that a recipient’s area code determines the recipient’s time zone, making the Quiet Hours Provision more workable from a compliance perspective.
We have seen many cases around the Quiet Hours Provision and have seen many voluntary dismissals of those same cases since then, likely from settlements. As case law begins to come out in this area, there are sure to be more updates to follow.
Can Investors Themselves Be Liable For A Failure To Register The Offer And Sale Of Securities?
Section 12(a)(1) of the Securities Act of 1933 imposes liability on sellers of securities who violate that Act’s registration and prospectus delivery requirements. Because the statute refers to sellers, it seems unlikely that investors themselves might have liability under Section 12(a)(1). Things are not as they seem, however.
Samuels v. Lido Dao, 2024 WL 4815022 (N.D. Cal. Nov. 18, 2024), motion to certify appeal denied, 2025 WL 371797 (N.D. Cal. Feb. 3, 2025) involved a suit by an investor who bought cryptocurrency tokens on an exchange. The tokens were originally issued by an entity called Lido DAO. After losing money, the investor sued, alleging that the tokens were offered and sold without registration under the Securities Act. The defendants included four large institutional investors in Lido—Paradigm Operations, Andreessen Horowitz, Dragonfly Digital Management, and Robot Ventures. The plaintiff’s theory was that Lido was a partnership and the institutional investors were liable under California law for the activities of the partnership—including for Lido’s failure to register its crypto tokens as securities. U.S. District Judge Vince Chhabria concluded:
It’s true that a partner cannot be directly liable for a violation of Section 12 simply by virtue of their being a partner in an entity that violates that provision (as they could be for a violation of Section 11). But the Act clearly defines “person” to include “a partnership.” 15 U.S.C. § 77b(a)(2). And under California law, general partners are jointly and severally liable for the obligations of the partnership. Cal. Corp. Code § 16306(a). So even though a partner cannot be directly liable for a partnership’s violation of Section 12, the partnership can still be a co-obligor, under state law, for the partnership’s liability.
He therefore denied all of the defendants’ motions to dismiss, except Robot’s. He granted Robot Venture’s motion because the plaintiff failed to allege that Robot Ventures was a member of the Lido general partnership.
A Breath of Fresh Air for Employers Managing Extended Medical Leaves
When an employee’s on-the-job injury affects their ability to perform essential job functions, federal and state law require, among other things, that an employer engage in an “interactive process” to explore potential reasonable accommodations that would allow the employee to perform those essential job functions, absent an undue hardship. Medical leave can be an effective accommodation for employees if it enables them to recover and return to work and perform those essential job functions. However, this form of accommodation often poses significant challenges for employers due to the absence of any bright-line test as to when that leave no longer becomes reasonable or becomes an undue hardship.
A recent unpublished decision by the California Court of Appeal in George Manos v. J. Paul Getty Trust provides employers with a bit more clarity as to what is – and is not – required when it comes to extended medical leaves that are provided as an accommodation.
What Exactly Happened in This Case?
George Manos was an HVAC technician at the Getty who required significant time off work following a leg fracture he sustained at work. Over the span of approximately one year, he utilized 12 weeks of protected leave and then requested extensions of his leave on several occasions, which the employer granted. Notably, with each extension request, Manos’s doctor requested “indefinite” leave but provided a return-to-work date. When Manos had been out for 10 months and made his fourth leave request, he and his doctor were asked to complete a questionnaire addressing, among other things, his ability to return to work and perform the physical tasks required of the HVAC technician role. Manos’s response listed that the end date for his leave was “unknown,” and the doctor noted that the condition was temporary and the period of impairment was 12 to 18 months. Based on these responses, the Getty considered the employee’s accommodation request to be a request for indefinite leave and made the decision to terminate.
Manos filed suit eight months after being terminated, claiming the Getty failed to engage in the interactive process and failed to accommodate his disability (among other claims). According to the Getty, not only did Manos remain unable to work, but there was no other job that he could have performed, considering his substantial restrictions. The trial court granted summary judgment in favor of the Getty, and on appeal, a three-judge panel of the Court of Appeal unanimously affirmed. Specifically, the court agreed that the Getty had adequately engaged in the interactive process, citing undisputed evidence that they did accommodate the employee through several leave extensions and made reasonable efforts to explore potential accommodations to return (through the questionnaire).
Takeaways for California Employers
While employers will continue to live without any bright-line test for determining when a leave reaches the stage of “indefinite,” this decision provides several important takeaways for employers dealing with accommodation requests implicating leaves of absence:
Granting an extended (but finite) medical leave remains a potential reasonable accommodation that generally must be considered and provided, absent undue hardship.
Medical questionnaires may be a helpful tool to utilize during such a leave. They may serve several purposes, including demonstrating an employer’s good-faith engagement in the interactive process, providing often-needed clarification on the actual meaning behind the return-to-work date on a one-page doctor’s note, and helping confirm whether other effective accommodations (besides leave) may be available.
Texas Court Vacates FDA’s Laboratory Developed Test (LDT) Final Rule
A Texas judge for the U.S. District Court for the Eastern District of Texas issued a ruling on March 31, 2025, to vacate and set aside, in its entirety, the U.S. Food and Drug Administration’s (FDA) Final Rule titled Medical Devices; Laboratory Developed Tests (LDTs) (LDT Final Rule). The Court remanded the matter to the Secretary of the U.S. Department of Health and Human Services (HHS) “for further consideration.” The LDT Final Rule would have required companies to obtain FDA clearance in order to continue marketing their LDTs.
The ruling prevents the LDT Final Rule – a rule heavily criticized by many clinical laboratory industry stakeholders – from going into effect. Prior to the LDT Final Rule, FDA exercised enforcement discretion with respect to the regulation of LDTs. The LDT Final Rule would have essentially ended FDA’s general enforcement discretion approach, thereby significantly increasing the regulatory requirements imposed on manufacturers of LDTs.
LDT Background
Historically, FDA has taken a broad enforcement discretion approach to regulating LDTs. LDTs are a subset of in vitro diagnostic products (IVDs) that are designed, manufactured, and used within a single laboratory. Although FDA has long asserted its authority to regulate LDTs as devices, it previously deemed LDTs low risk and, therefore, opted to take a broad enforcement discretion approach with respect to its regulation of LDTs. Under this approach, FDA has not enforced certain device requirements, such as premarket review, reporting, registration and listing, and quality system regulation, against LDT manufacturers.
LDTs, however, have become significantly more complex in the past few decades. Currently, many laboratories manufacturing LDTs employ high-tech instruments (such as algorithms and automation), run LDTs in high volumes, and widely market and accept specimens from across the United States. To address the changing LDT landscape, both FDA and Congress have pursued changes to FDA’s enforcement discretion policy. FDA has previously attempted to modify its enforcement discretion approach through guidance, which was never finalized, and members of Congress have introduced, but failed to pass, new legislation, most recently, the Verifying Accurate, Leading-edge IVCT Development Act (VALID Act).
LDT Final Rule
On May 6, 2024, FDA issued the LDT Final Rule amending FDA’s regulations to make explicit that IVDs are medical devices under the Federal Food, Drug, and Cosmetic Act (FD&C Act), including when the IVD manufacturer is a laboratory, thus capturing LDTs within FDA’s regulatory purview. Along with this amendment, FDA finalized a policy under which FDA was set to begin a phased implementation of IVD requirements over the course of four years. These phases were set to begin in May 2025.
FDA received over 6,500 comments on the proposed LDT rule, many of which challenged FDA’s authority to regulate LDTs. FDA has continuously asserted that it has authority to regulate LDTs, but that it has chosen to adopt a policy of enforcement discretion. Many clinical laboratory industry stakeholders disagree with this assertion, believing that LDTs fall outside FDA’s scope of authority.
U.S. District Court for the Eastern District of Texas Lawsuit
Within weeks of FDA issuing the LDT Final Rule, the American Clinical Laboratory Association (ACLA) and its member company Health TrackRx filed a lawsuit against FDA claiming that the rule exceeds the agency’s legal authority to regulate LDTs. Then in August 2024, the Association for Molecular Pathology (AMP) filed its own lawsuit describing the rule as “a historically unprecedented power grab.” The two cases were consolidated. Both lawsuits claim the LDT Final Rule must be vacated under the Administrative Procedure Act (APA) because it is “in excess of [FDA’s] statutory jurisdiction, authority, or limitations” and is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law”. See 5 U.S.C. § 706(2).
The Court, on March 31, 2025, entered a judgment in favor of the plaintiffs. In its Opinion and Order, the Court states that, “the text, structure, and history of the [FD&C Act] and [the Clinical Laboratory Improvement Act (CLIA)] make clear that FDA lacks the authority to regulate laboratory-developed test services”. Throughout its opinion, the Court outlines its disagreement with FDA’s expansion and interpretation of the definition of “device” and the agency’s overall interpretation of its authority to regulate LDTs under the FD&C Act.
Specifically, the Court states LDTs are services regulated under CLIA, for which the Centers for Medicare & Medicaid Services (CMS) is primarily responsible for issuing implementing regulations. The Court notes that Congress created a separate statutory and regulatory framework for laboratory test services under CLIA. In its opinion, the Court defines an LDT as “a methodology or process by which a laboratory generates biochemical, genetic, molecular, or other forms of clinical information about a patient specimen for use by the treating physician” and that “[e]ach laboratory uses its own unique knowledge of the protocols, performance characteristics, and means of analysis to develop such methodologies and processes”.
The Court further claims: “Unlike a drug or device, which is a manufactured and packaged article of commerce with user instructions, a laboratory-developed test service is a proprietary methodology performed by only the developing laboratory. That service generates information from test results and transmits that information to the ordering physician. The testing service is not sold as a kit, and the protocol is not transferred in any manner to other laboratories, hospitals, or other facilities outside the developing laboratory entity. No physical product is sold, and no article of personal property is transferred such that title passes from one party to another.”
By employing this particular definition of LDTs, the Court claims that LDTs are services that laboratory professionals perform rather than a physical product sold by a laboratory that could be subject to FDA jurisdiction as a device. As a result, the Court vacated and set aside the LDT Final Rule in its entirety, holding that the LDT Final Rule exceeds FDA’s statutory authority and violates the APA.
Implications
Due to the Court’s order, the LDT Final Rule will not go into effect as planned in May 2025. Unless appealed by the government, this ruling essentially halts FDA’s ability to promulgate further regulations or guidance regulating LDTs. To officially settle the debate of how LDTs should be regulated and to clarify the authority between FDA and CMS, members of Congress would need to act and reinvigorate the VALID Act or similar legislation.
We anticipate there will be further developments on the regulatory position of LDTs. Manufacturers of LDTs should be sure they have data to demonstrate their LDTs have the necessary specificity and sensitivity to ensure the data generated through such tests can be relied upon and have clinical value for physicians, and are consistent with any applicable CLIA requirements.
Illinois Supreme Court Approves Three Significant Proposals For Practicing Law In Illinois
Today, the Illinois Supreme Court announced the approval of “3 Proposals Impacting the Practice of Law in Illinois.” These are positive developments for Illinois lawyers and those needing legal assistance in Illinois, helping to bridge some gaps between the law and technology, and furthering the goal of addressing unmet legal needs in Illinois.
The approved proposals include: 1) Regulation of Intermediary Connecting Services (ICS), 2) New Supreme Court Rule 300, and 3) MCLE for Pro Bono Pilot Project.
As to the first proposal, according to the Court, ICS entities are “organizations which connect lawyers to clients, typically through the internet” and “have the potential to help address unmet legal needs by making it easier for consumers to find a lawyer.” However, as the existing Illinois rules did not clearly contemplate such arrangements, there was some uncertainty as to whether attorneys should participate. This proposal will amend Rules of Professional Conduct 1.6 and 7.2 to define ICS and permit attorney participation, assuming certain conditions, including the exercise of due diligence, are met.
The second proposal addresses the New Supreme Court Rule 300 Governing Attorney’s Fee Petitions and encourages alternative fee agreements beyond the standard billable hour, by clearly establishing that such alternative fee agreements may be the basis for recovery of attorneys’ fees. The change is intended to increase access to affordable legal services, providing consistency in the consideration of attorneys’ fee petitions.
Finally, the third proposal, the MCLE Pro Bono Pilot Project, adds a temporary category of Nontraditional Courses or Activities eligible for Continuing Legal Education credits pursuant to Illinois Supreme Court Rule 795(d)(14), for participation in Illinois Free Legal Answers, which is a “virtual, internet-based legal advice clinic administered by the Public Interest Law Initiative (PILI).” Attorneys participating in this program may earn one hour of MCLE credit for every two hours of pro bono work for Illinois Free Legal Answers, qualifying for up to five credits per two-year reporting period. This will be a two-year pilot program, and it will be monitored by PILI and the Supreme Court’s Executive Committee to see whether CLE credit will increase attorneys’ voluntary participation in such pro bono services, with a goal of broadening initiatives to help those in need.
You may read more about these proposals, which will take effect on July 1, 2025, in the Supreme Court’s press release.
In Landmark Ruling, Eastern District of Texas Strikes Down FDA’s Final Rule Regulating Laboratory Developed Tests
In the never-ending saga over the battle to regulate laboratory-developed tests (LDTs), the Eastern District of Texas took the wind out of FDA’s sails on Monday, vacating FDA’s Final Rule that intended to regulate LDTs as medical devices similar to in vitro diagnostic (IVD) tests, which are commercially manufactured and undergo pre-market review by FDA.1 Clinical laboratories can halt their plans, for now, to comply with the Final Rule’s May 6, 2025, deadline to implement certain features of FDA’s medical device quality system regulations.
As summarized in our May 6, 2024, client alert, FDA’s Final Rule was set to dramatically alter the regulatory landscape for LDTs with major regulatory and financial implications to clinical laboratories, patients and health care providers.
Clinical laboratories will see the ruling as a major victory for the laboratory industry. The district court’s ruling also comes as one of the first major checks on FDA’s power in the post-Chevron world following last year’s Supreme Court decision in Loper Bright.
Background and LDT Regulatory Timeline
In 1976, Congress enacted the Medical Device Amendments to the Federal Food, Drug, and Cosmetic Act (FDCA), granting FDA explicit authority to regulate medical devices, which included IVDs developed by manufacturers and sold for commercial purposes to laboratories, health care organizations and consumers.
Separate from FDA’s authority, in 1988 Congress passed the Clinical Laboratory Improvement Amendments (CLIA), creating a statutory framework to certify clinical laboratories through quality, proficiency standards and personnel requirements. The Centers for Medicare and Medicaid Services (CMS) oversees CLIA certification and compliance for most laboratories in the country2 that examine materials derived from the human body for the diagnosis, treatment or prevention of disease or to assess the health of human beings.
For decades, FDA did not attempt to assert authority or regulate laboratories or LDTs, which are defined as IVDs “intended for clinical use and that [are] designed, manufactured and used within a single laboratory that is certified under [CLIA].”3 Starting in 1992, FDA claimed that it could regulate LDTs as medical devices through the issuance of a draft Compliance Policy Guide.4 FDA declined to finalize the guidance, however, and assured laboratories that it did not intend to “routinely” exercise its authority over LDTs.5
FDA next asserted that it had jurisdiction over LDTs in a 1996 preamble to a proposed rule regarding device classification levels for certain active ingredients used for preparing LDTs.6 FDA also recognized in the same preamble that “significant regulatory changes in this area could have negative effects” and that FDA would therefore only focus its oversight on “ingredients . . . that moved in commerce” and other tangible articles. FDA never took any final regulatory action to assert its authority over these tests.
In 2010, FDA held a two-day public meeting soliciting feedback on LDT regulation, hinting that it may consider formally regulating LDTs. Four years later, FDA formally released two draft guidance documents proposing a framework for LDT regulation.7 The guidance documents were not well received by Congress, which criticized FDA for significantly shifting the way LDTs are regulated and directed FDA to suspend any efforts to finalize its guidance documents.8 FDA complied and retreated from enacting any final guidance document.
A few years later, Congress considered two different pieces of legislation — The Verifying Accurate Leading-edge IVCT Development Act (VALID) of 2020 and the Verified Innovative Testing in American Laboratories (VITAL) Act of 2020.9 Both bills proposed different approaches to regulating LDTs that would have created a new regulatory pathway under FDA premarket review or deemed LDTs as “services” to be regulated under CLIA. Both bills failed to pass even after being reintroduced in subsequent Congresses.
With failed attempts to regulate LDTs in Congress, FDA announced its attempt to move forward with regulating virtually all LDTs as medical devices in October 2023, which ultimately led to the Final Rule, effective May 6, 2024.
Shortly after the Final Rule went into effect, the American Clinical Laboratory Association (ACLA) and the Association for Molecular Pathology (AMP) sued FDA in two separate lawsuits challenging that the Final Rule violated the Administrative Procedure Act (APA) because it exceeded FDA’s statutory authority and was arbitrary and capricious. The two cases were consolidated into one.
Summary of Court Ruling
Explaining the storied history of LDT regulation, the district court found no question that Congress had considered the unique regulatory issues raised by clinical laboratories and the tests that they develop and perform, and that Congress chose to regulate these tests as “services” under CLIA. This contrasts with the authority Congress granted FDA to regulate “devices,” which the district court concluded under the FDCA to mean “articles in commerce,” not “services” performed by doctors and laboratories.
Considering the distinct legislative history of medical devices and laboratory services, the district court agreed with the plaintiffs that LDTs are “professional medical services that are qualitatively and categorically different from the tangible goods that FDA may regulate as a ‘device,’” and that medical devices defined under the FDCA only refer to “tangible, physical products.” The district court was further unpersuaded by FDA’s argument that an LDT is an “IVD test system” made up of physical components that meet the definition of a medical device.
Rejecting FDA’s argument on two grounds, the court found that (1) FDA had no statutory authority to alter the definition of a device under the FDCA to expand the definition to include laboratory services, and (2) FDA’s self-created “IVD test system” conflates discrete tangible objects with an assortment of laboratory tools that professionals use to deliver a service. Relying heavily on last year’s Supreme Court decision in Loper Bright, the court closely scrutinized the statute and made it abundantly clear that it was not deferring to FDA’s interpretation of the statute and the authority that FDA was claiming from the statute. The court warned that should it accept FDA’s position, it would lead to limitless implications of FDA oversight on all surgical procedures and physical examinations that use “devices,” giving the term an “extraordinary, expansive meaning with far-reaching consequences.”
The court further noted that, should it accept FDA’s theory that an LDT does in fact meet the definition of a medical device under the FDCA, it would “render[] CLIA largely, if not entirely, pointless.” For these reasons, the court determined that FDA’s “asserted jurisdiction” over LDTs “defies the bedrock principles of statutory interpretation, common sense and longstanding industry practice.” Therefore, the court concluded that the Final Rule exceeds FDA’s authority, is unlawful and should be set aside pursuant to the APA.
Finally, in considering the appropriate remedy, the district court found that the circumstances in this case favor nullifying and revoking the Final Rule instead of remanding the Final Rule back to FDA to modify without vacating. In reaching this conclusion, the court considered the extreme financial impact the Final Rule would have on clinical laboratories as well as the unlikelihood that FDA could justify its decision on remand. Therefore, the Final Rule was vacated in its entirety.
What’s Next?
With the Final Rule now vacated, FDA’s “phaseout” policy to bring LDTs under the same regulatory scheme as IVDs is also terminated. Once the LDT Final Rule went into effect last year, laboratories were subject to a phaseout policy that would have required companies to begin complying with certain medical device requirements, such as medical device reporting and complaint handling, beginning on May 6, 2025.
While it is possible that FDA could appeal the decision, we do not expect the current Administration to do so. Experts had already predicted that President Trump was likely to order FDA to repeal, or not enforce, the Final Rule, as HHS under the first Trump Administration had revoked FDA’s guidance document claiming authority to regulate LDTs as devices.
In light of the district court’s ruling, it seems less likely that Congress, and in particular the Republican controlled House, will attempt to revive the bipartisan VALID Act.
In a town where we are taught to “never say never,” we will keep a watchful eye on the Administration and Congress’s reaction to the court’s ruling.
[1] American Clinical Laboratory Ass’n v. FDA, Case No. 4:24-cv-00479 (E.D. Tex.).
[2] New York and Washington are exempt from CLIA, as they have their own state law regulatory oversight framework, which is enforced by the applicable state agency.
[3] LDT Final Rule, 89 Fed. Reg. 37286, 37289 (May 6, 2024).
[4] See FDA, Draft Compliance Policy Guide: Commercialization of Unapproved In Vitro Diagnostic Devices Labeled for Research and Investigation (Aug. 1992).
[5] Food & Drug Admin., IVD Policy Will Not Include Exemptions for “Standard of Care” Tests, The Gray Sheet (Oct. 11, 1993).
[6] 61 Fed. Reg. 10,484, 10,485 (Mar. 14, 1996).
[7] Food & Drug Admin., FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs), and Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs) (Oct. 2, 2014).
[8] H.R. Rep. No. 114-531, at 72 (2016).
[9] VALID Act of 2020, H.R. 6102, 116th Cong. (2020); VITAL Act of 2020, S. 3512, 116th Cong. (2020).
PTAB Discretion in Flux: Lessons from Stellar LLC v. Motorola Solutions Inc.
Overview
Following the Patent Trial and Appeal Board’s (PTAB) new guidance on discretionary denials, the PTAB proceeding in Stellar LLC v. Motorola Solutions Inc., IPR2024-01208, presents an early case study for PTAB practitioners navigating discretionary denials under 35 U.S.C. § 314(a).
This decision highlights how the PTAB is now weighing Fintiv factors, including Sotera stipulations, the effort the parties have spent on co-pending litigation and the existence of additional invalidity grounds in the litigation. As such, this case offers a lens into how discretionary standards are shifting in practice following the rescission of the Guidance Memo.
Why This Case Matters
This case is notable for three primary reasons:
It tests the boundaries of Fintiv factor analysis after the USPTO issued a new guidance memo on discretionary denials.
It forces consideration of how Sotera stipulations are weighed when parallel litigation includes invalidity contentions based on grounds that cannot be addressed in inter partes review (IPR).
It underscores the importance of timing, completeness and strategic framing, both at the Petition and Patent Owner Preliminary Response stages.
Key Lessons for Practitioners
Sotera Stipulations Are Still Powerful but Not Bulletproof: Although a Sotera stipulation can reduce overlapping issues, it may not fully mitigate the Director’s concerns if the petitioner raises broader invalidity arguments in district court, including prior use system prior art not covered by the stipulation.
Advanced Parallel Litigation Can Prompt Denial: The Director stressed that when a district court case is far along, especially with substantial resources already invested and a trial date that precedes the projected PTAB final written decision, this factor strongly favors denial.
Stay of Litigation Entered After Institution of IPR Does Not Factor Into Discretionary Denial: The Director acknowledged that the underlying litigation had been stayed pending the outcome of the IPR but dismissed that fact in a footnote suggesting that the Director will not give any weight to a stay entered after the institution of IPR proceedings.
Fintiv Factor Analysis Remains the Primary Consideration: The Director’s memo confirms that the Fintiv factors are still the focus of the analysis but that the weighing of these factors may change going forward. As this decision demonstrates, even if certain factors (like a Sotera stipulation) weigh against denial, other factors (like the significant investment in the parallel proceeding) can tip the scales toward discretionarily denying institution.
This decision highlights the need for petitioners and patent owners to recalibrate their strategies considering the evolving PTAB approach toward discretionary denials. Petitioners must act swiftly, frame petitions comprehensively and understand how Sotera stipulations, while still valuable, may no longer be sufficient in cases involving advanced district court proceedings or broader invalidity issues.
For patent owners, this decision underscores the strategic importance of building a robust litigation record early to fortify the Fintiv-based challenges. As the PTAB’s discretionary standards continue to shift, timing, procedural posture and substantive alignment across forums will be critical to succeed.
Environmental YIR: 2024 Regulatory Legacies and Impacts
This report provides an overview of major federal environmental regulations and court decisions of 2024. Landmark U.S. Supreme Court decisions with lasting consequences for environmental policy include Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024),1 which ended judicial deference to administrative agencies, and Corner Post v. Federal Reserve, 603 U.S. 799 (2024), which opened the doors of federal courts to many more plaintiffs challenging regulations. These decisions have subsequently bolstered efforts to limit or rollback regulatory actions, both by industry and by members of the Trump administration. The Congressional Review Act (CRA), which allows Congress to rescind or invalidate new regulations, has also been used as the basis for invalidating many of the environmental regulations adopted since August 2024.
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Fifth Circuit Court of Appeals Negates Ruling on Federal Contractor Minimum Wage
On March 28, 2025, the Fifth Circuit Court of Appeals vacated its previous ruling that permitted a $15 per hour minimum wage for federal contractors, shortly after President Donald Trump revoked the Biden administration rule setting that wage rate.
Quick Hits
The Fifth Circuit vacated its decision to uphold a $15 per hour minimum wage for federal contractors.
The court acted shortly after President Trump rescinded a Biden administration rule raising the minimum wage for federal contractors to $15 per hour.
An Obama-era rule establishing a $13.30 per hour minimum wage for federal contractors still stands.
On the website for the U.S. Department of Labor, the agency said it is “no longer enforcing” the final rule that raised the minimum wage for federal contractors to $15 per hour with an annual increase depending on inflation.
As of January 1, 2025, the minimum wage for federal contractors was $17.75 per hour, but that rate is no longer in effect. Therefore, an Obama-era executive order setting the minimum wage for federal contractors at $13.30 per hour now remains in force.
Some federal contracts may be covered by prevailing wage laws, such as the Davis-Bacon Act or the McNamara-O’Hara Service Contract Act. Those prevailing wage laws are still applicable.
Many states have their own minimum wage, and those vary widely.
Background on the Case
In February 2022, Louisiana, Mississippi, and Texas sued the federal government to challenge the Biden-era Executive Order 14026, which directed federal agencies to pay federal contractors a minimum wage of $15 per hour. The states argued the executive order violated the Administrative Procedure Act (APA) and the Federal Property and Administrative Services Act of 1949 (FPASA) because it exceeded the president’s statutory authority. The states also claimed the executive order represented an “unconstitutional exercise of Congress’s spending power.”
On February 4, 2025, the Fifth Circuit Court of Appeals upheld the $15 per hour minimum wage for federal contractors. A three-judge panel ruled that this minimum wage rule was permissible under federal law.
On March 14, 2025, President Trump rescinded the Biden-era executive order that established a $15 per hour minimum wage for federal contractors. In effect, that made the earlier court ruling moot, according to the Fifth Circuit.
Next Steps
Going forward, the Obama-era $13.30 minimum wage rate for federal contractors still stands. Federal contractors operating in multiple states may wish to review their policies and practices to ensure they comply with state minimum wage laws and federal prevailing wage laws. If they use a third-party payroll administrator, they may wish to communicate with the administrator to confirm legal compliance.
Delaware Enacts Sweeping Changes to the Delaware General Corporation Law
On March 25, 2025, the governor of Delaware signed into law Senate Bill 21, over much opposition from the plaintiffs’ bar and some academics. The bill, which amends Sections 144 and Section 220 of the Delaware General Corporation Law, 8 Del. C. (the “DGCL”), seeks to provide clarity for transactional planners in conflicted and controller transactions, and seeks to limit the reach of Section 220 books and records demands. These amendments significantly alter the controller transaction and books and records landscape.
Background
Senate Bill 21 comes in the backdrop of heightened anxiety over whether Delaware will retain its dominance in the corporate law franchise. Businesses have cited a seemingly increased litigious environment in Delaware, and when coupled with a handful of high-profile companies redomesticating or considering redomesticating to other jurisdictions (see our blog article about the Tripadvisor redomestication here), other states such as Texas and Nevada making a strong push to accommodate for new incorporations and redomestications, and a series of opinions out of the Delaware Court of Chancery that were unpopular in certain circles, concern was growing of Delaware falling from its position as the leading jurisdiction for corporate law.
This is not the first time the Delaware legislature has acted to re-instill confidence in Delaware corporate law to the market. Senate Bill 21 also comes less than a year after Senate Bill 313 was signed into law. Senate Bill 313, coined the “market practice” amendments, sought to address the decisions in West Palm Beach Firefighters’ Pension Fund v. Moelis & Company, 311 A.3d 809 (Del. Ch. 2024), Sjunde AP-Fonden v. Activision Blizzard, 124 A.3d 1025 (Del. Ch. 2024), and Crispo v. Musk, 304 A.3d 567 (Del. Ch. 2023), which many found surprising. And perhaps most famously, Section 102(b)(7), the director exculpation clause (now the director and officer exculpation clause following an amendment in 2022), was enacted in the wake of the Delaware Supreme Court’s decision in Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985), which caused shockwaves throughout the corporate law community as well as the director and officer insurance market.
Senate Bill 21 Amendments
Section 144. Section 144 of the DGCL was revamped entirely from being a provision speaking on the voidability of conflicted transactions, into a statutory safe harbor for conflicted and controller transactions. The essence of the new Section 144 is defining what a controlling stockholder is, and providing different safe-harbor frameworks for conflicted transactions, controlling stockholder transactions, and controlling stockholder “go private” transactions for public companies.
Controllers are now statutorily designated as those persons (together with affiliates and associates) that (1) has majority control in voting power, (2) has the right to nominate and elect a majority of the board, or (3) possess the functional equivalent of majority control by having both control of at least one-third in voting power of the outstanding stock entitled to vote generally in the election of directors and the power to exercise managerial authority. The last category will likely be the subject of much litigation in the future, but the defined boundaries will limit a plaintiff’s ability to cast a person as a controller.
Under the new Section 144, controllers (and directors or officers of a controlled company) can shield themselves from a fiduciary claim in a conflicted transaction if (1) a committee of 2 or more disinterested directors that has been empowered to negotiate and reject the transaction, on a fully-informed basis, approve or recommend to approve (by majority approval) the transaction, or (2) it is approved by a fully-informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholder. And in a “go private” transaction, both (1) and (2) above need to be accomplished. Such actions will grant the transaction “business judgment rule” deference. This is a significant change from recent Delaware Supreme Court precedent under Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”), and its progeny holding that a controller transaction providing a non-ratable benefit to the controller will be reviewed under the discerning “entire fairness” standard unless the transaction is conditioned “ab initio” (i.e., at the outset) on the approval of a majority of fully-informed disinterested director and fully-informed, disinterested and uncoerced stockholders. The legislature has spoken that the spirit and structure of MFW will only apply to “go private” transactions, whereas in a non-“go private” transaction the controller needs to meet just one of the MFW prongs, and a disinterested director cleansing does not have to be “ab initio.” Note also that Section 144 provides that controllers are not liable for monetary damages for breaches of the duty of care.
New Section 144 also creates a new presumption that directors of public corporations that are deemed independent to the company under exchange rules are disinterested directors under Delaware law (and, if the director meets such independence criteria with respect to a controller, the director is presumed disinterested from such controller). To overcome this presumption, there must be “substantial and particularized facts” of a material interest or a material relationship with a person with a material interest in the act or transaction. Note that NYSE and NASDAQ independence is a somewhat different inquiry from director disinterestedness under Delaware corporate law. To qualify as independent for exchange purposes, directors cannot hold management positions at the company, its parents or subsidiaries, and former executives are not considered independent for three years after their departures. See Nasdaq Rule 5605 and NYSE Listed Company Manual 303A.02. A director also does not qualify as independent if the director or their families received more than $120,000 in compensation from the company in any 12-month period in the prior three years. In contrast, disinterestedness of a director under Delaware law has been historically a much more fact-and-circumstances inquiry, where judges have looked to things like co-owning an airplane, personal friendships and other “soft” factors.
Section 220. Under Section 220, a stockholder is entitled to examine a corporation’s “books and records” in furtherance of a “proper purpose” reasonably related to the person’s status as a stockholder. The use of this potent tool has proliferated through the years, with stockholders of Delaware corporations becoming increasingly savvy, sophisticated and demanding with their books and records demands to investigate potential corporate wrongdoings before filing suit. Delaware courts have encouraged the use of Section 220, in many cases urging stockholders to use the “tools at hand” ahead of filing suit, presumably with the hope of curtailing bad claims clogging up the docket.
The amended Section 220 limits the universe of what a stockholder may demand under Section 220. Prior to the amendments, a stockholder could pursue materials, even if not “formal board materials,” if they make particularized allegations of the existence of such materials and a showing that an investigation of the suspected wrongdoing was “necessary and essential.” The statute, as amended, limits the ability for stockholders to pursue materials such as personal director or officer emails that may have relevant information, which could be allowed under the prior regime. Under the amended Section 220, if what the stockholder seeks is not part of the nine types of “books and records” spelled out in the statute, the stockholder cannot have access to it in a Section 220 books and records demand.
Questions Going Forward
The amendments to Sections 144 and 220 collide with or directly overturn several Delaware caselaw precedents. The landscape has changed, and we will see how Delaware corporations and its constituents respond. From a transactional planning perspective, the safe-harbors of Section 144 provide much-needed guidance, but with limited caselaw overlay interpreting the boundaries of the safe-harbors, the structuring is not without risk.
Turning back to the backdrop of Senate Bill 21: does this fix the “DExit” concern? Perhaps. But these amendments undoubtedly swing the pendulum to the corporation, controller and management. Whether it is swinging back toward the center is up for debate, but what is not debatable is that preserving the Delaware corporate law franchise depends upon balance. Through the legislative process there were some institutional investors that opposed Senate Bill 21. We will see what kinds of moves, if any, investors of Delaware corporations will make going forward.
Finally, is Section 144 an “opt out” provision? The DGCL is a regime of mandatory statutes, enabling statutes, and default statutes one can opt in or out of. Returning to Section 102(b)(7), this exculpation provision is a well-known example of an opt-in, where a corporation has the option to add that exculpation clause to the company’s certificate of incorporation. Section 203, on the other hand, is an “opt out” statute where a corporation can choose not to have certain restrictions on business combinations with interested stockholders. In the legislative process, several prominent corporate law professors sought to have Senate Bill 21 revised such that it would be a charter “opt-in,” meaning that the default is the status quo, and companies (with stockholder approval) can adopt the controller transaction safe-harbor and books and records limitations in the new Sections 144 and 220. This proposal was ultimately not accepted, but there has been some mention that the text of the new Section 144 suggests it is actually an “opt out” statute. If that is the case, and investors do feel strongly about the Senate Bill 21 amendments, we may see stockholder proposals in the coming years for amendments to the corporate charter to opt out of the new Sections 144 and 220. We will watch the SEC Rule 14a-8 proposals in upcoming proxy cycles to see if this is the case.