Diamond in the Rough: Federal Circuit Polishes § 101’s Abstract Idea Test
The US Court of Appeals for the Federal Circuit reversed and remanded a determination by the US International Trade Commission regarding subject matter ineligibility under 35 U.S.C. § 101. The Court concluded that the Commission’s “loose and generalized” analysis did not adequately consider the specific and technical improvements specified by the claims. US Synthetic Corp. v. International Trade Commission, Case No. 23-1217 (Fed. Cir. Feb. 13, 2025) (Dyk, Chen, Stoll, JJ.)
US Synthetic Corp. (USS) filed a complaint with the Commission, alleging that several entities (intervenors) violated § 337 of the Tariff Act by importing and selling certain products that infringed five of USS’s patents. The patent at issue concerned a composition of a polycrystalline diamond compact (PDC) and disclosed an improved method for manufacturing PDCs.
An administrative law judge (ALJ) determined that several claims of the patent were valid and infringed under 35 U.S.C. §§ 102, 103, and 112. However, the ALJ found the claims patent-ineligible under § 101, deeming them directed to an abstract idea. The Commission affirmed this finding while rejecting the intervenors’ argument that the claims lacked enablement under § 112. Consequently, the only bar to a § 337 violation was the § 101 ruling. USS appealed, challenging the Commission’s patent ineligibility determination, while the intervenors argued that the claims were not enabled.
The Federal Circuit determined that the patent claims were directed to a specific technological improvement rather than an abstract idea. The Court had consistently explained that claims that provide a concrete technological solution to a recognized problem in the field are patent-eligible under § 101. Here, the claimed invention was not merely an implementation of an abstract idea on a generic computer; rather, it provided a particularized solution rooted in the physical composition of matter defined by constituent elements, dimensional information, and inherent material properties.
Applying the Supreme Court’s two-step Alice framework, the Federal Circuit reasoned that, under Alice step one, courts must determine whether the claims are directed to an abstract idea or a patent-eligible improvement. In this case, the Court found that the patent claims were not directed to an abstract idea because they recited a specific solution that was directed to a non-abstract composition of matter: PDC. Unlike claims found ineligible in prior cases, USS’s patent did not merely recite a mathematical algorithm or fundamental economic practice but instead provided a tangible technological advancement for an improved method for manufacturing PDCs.
The Federal Circuit noted that even if the claims were directed to an abstract idea under Alice step one, the claimed invention contained an inventive concept sufficient to transform the nature of the claim into patent-eligible subject matter under Alice step two. The Court explained that an inventive concept exists when the claims recite a specific, unconventional solution that goes beyond well-understood, routine, and conventional activities previously known in the field. Here, the Court determined that the claimed invention included an innovative combination of components (diamond, cobalt catalyst, and substrate) in conjunction with particular dimensional information (grain size) and material properties (magnetic saturation) to achieve an improved composition: PDC. Thus, the Court determined that USS’s patent claimed a specific and inventive technological improvement rather than an abstract idea.
CTA Back in Action: FinCEN’s New BOI Report Deadline March 21, 2025
Highlights
The U.S. District Court for the Eastern District of Texas granted a stay of its earlier injunction that suspended enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting rule
FinCEN is once again permitted to enforce reporting obligations under the CTA to file BOI reports
FinCEN providing a 30-day extension of BOI reporting deadline to March 21, 2025
Continuing a series of rapid-fire legal developments regarding the Corporate Transparency Act (CTA), on Feb. 18, 2025, the U.S. District Court for the Eastern District of Texas issued a stay of its own Jan. 7, 2025 injunction prohibiting the Financial Crimes Enforcement Network’s (FinCEN) implementation of Beneficial Ownership Information (BOI) reporting requirements, which precluded FinCEN from requiring BOI reporting or otherwise enforcing the CTA’s requirements.
As a result of the new stay, reporting obligations and deadlines under the CTA can be enforced by FinCEN.
FinCEN issued a Feb. 18 notice updating the BOI report filing deadlines, including an initial BOI report filing deadline of March 21, 2025. FinCEN clarified its various deadlines as follows:
For the vast majority of reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025.
Reporting companies previously given a reporting deadline later than the March 21, 2025, deadline are required to file their initial BOI report by such later deadline. For example, if a company’s reporting deadline was extended to April 2025 as a result of certain disaster relief extensions, it should continue to follow the April deadline.
Plaintiffs in National Small Business United v. Yellen are not currently required to report their beneficial ownership information to FinCEN.
FinCEN summarized the impact of the newest stay as follows: “Given this decision, FinCEN’s regulations implementing the BOI reporting requirements of the CTA are no longer stayed. Thus, subject to any applicable court orders, BOI reporting is now mandatory, but FinCEN is providing additional time for companies to report.” FinCEN is empowered to enforce the CTA, its BOI reporting rule and all applicable deadlines until the pending appeal is completed.
To recap recent developments:
Dec. 3, 2024 – The U.S. District Court for the Eastern District of Texas issued a nationwide injunction enjoining enforcement of the CTA, suspending all reporting obligations under the act (Texas Top Cop Shop, Inc. v. McHenry – formerly, Texas Top Cop Shop v. Garland). This order was amended Dec. 5, 2024.
Dec. 23, 2024 – The motions panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court injunction. The stay by the Court of Appeals restored initial reporting deadlines for reporting companies. FinCEN responded by issuing an alert extending initial reporting deadlines.
Dec. 26, 2024 – The merits panel of the Fifth Circuit vacated the stay issued by its motions panel, restoring the district court’s injunction and suspending reporting obligations under the CTA pending resolution of the appeal.
Dec. 31, 2024 – The Department of Justice filed an application for stay with the U.S. Supreme Court requesting that the Dec. 5 injunction be stayed or narrowed while the case proceeds through the Fifth Circuit.
Jan. 7, 2025 – The U.S. District Court for the Northern District of Texas issued a second nationwide injunction enjoining enforcement of the CTA, suspending all reporting obligations under the CTA (Smith v. U.S. Department of the Treasury).
Jan. 23, 2025 – The U.S. Supreme Court granted a stay of the Dec. 3rd injunction pending the disposition of the Texas Top Cop Shop appeal before the Fifth Circuit and the disposition of a petition for a writ of certiorari and related final judgment.
Feb. 18, 2025, the U.S. District Court for the Eastern District of Texas agreed to stay its Jan. 7, 2025, order until the appeal in the Smith case is completed.
FinCEN, in its notice published Feb. 19, 2025, clarified that the agency may, nevertheless, extend certain deadlines and change the BOI reporting obligations for certain low-risk entities, like small businesses. FinCEN noted that, “in keeping with Treasury’s commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.”
It may be the case that in the coming month FinCEN again extends or modifies the applicable reporting deadlines for initial and updated BOI reports. In addition, the U.S. House of Representatives unanimously passed a bill that would extend the filing deadline for a majority of entities to Jan. 1, 2026. A similar Senate bill has been introduced but, as of the date of this alert, had not been passed.
SOUR MORNING?: For Love and Lemons Faces TCPA Lawsuit Over Timing Violations
Hi TCPAWorld! The Baroness here. And we’ve got a new filing. This time, we’re taking a look at a case involving a popular clothing brand: For Love and Lemons.
Let’s start with the allegations.
The plaintiff Michelle Huang alleges that on November 28 and 29, 2024, she received two text messages from For Love and Lemons.
However, this case isn’t about the typical Do Not Call (DNC) Registry violation you might expect.
This case is actually brought under the time restrictions provisions of the TCPA.
Here’s where it gets interesting: Huang asserts that she received the messages at 7:14 a.m. and 7:45 a.m. — times she says are outside the window in which businesses are allowed to send marketing messages. Specifically, she contends she never authorized For Love and Lemons to send texts before 8 a.m. or after 9 p.m. local time.
This is significant because under 64.1200(c)(1), “[n]o person or entity shall initiate any telephone solicitation” to “[a]ny residential telephone subscriber before the hour of 8 a.m. or after 9 p.m. (local time at the called party’s location).” 47 C.F.R. § 64.1200(c)(1).
Based on this alleged violation, Plaintiff sued For Love and Lemons for violations of Section 227(c) of the TCPA and 64.1200(c)(1).
In addition, she seeks to represent a class of individuals who received similar marketing texts outside the permissible hours:
All persons in the United States who from four years prior to the filing of this action through the date of class certification (1) Defendant, or anyone on Defendant’s behalf, (2) placed more than one marketing text message within any 12-month period; (3) where such marketing text messages were initiated before the hour of 8 a.m. or after 9 p.m. (local time at the called party’s location).
It is not often that we see cases being filed pursuant to 64.1200(c)(1). But this is reminder that this provision exists!
Since this case was just filed, there is not much to report. But we will of course keep you folks updated as the case progresses.
Huang v. Love And Lemons LLC, Case No.: 2:25-CV-01391 (C.D. Cal).
Oregon Court of Appeals Affirms Summary Judgment in Slip-and-Fall Case
In Oregon slip-and-fall cases, the plaintiff must provide evidence that (a) the substance was placed there by the store; (b) the store knew the substance was there but did not use reasonable diligence to remove it; or (c) the substance was there for such a length of time that the occupant should have discovered and removed it by the exercise of reasonable diligence. In Kummer v. Fred Meyer Stores, the circuit court granted summary judgment because the plaintiff lacked admissible evidence for any of these three options.
The plaintiff argued a genuine issue of material fact was present because she had an expert who would “testify as to the industry standard for inspecting and cleaning floors and provide an opinion that the defendant’s inspection and cleaning schedule deviated from that standard.” Oregon’s Court of Appeals agreed with the circuit court’s conclusion that the expert’s opinion did not prevent summary judgment. “The expert testimony described by [the plaintiff] could not have conceivably addressed” how long the substance had been on the floor. Thus, the plaintiff lacked admissible evidence to prove a mandatory element of her case and summary judgment was affirmed.
Trade Dress Requires Separate Articulation and Distinctiveness Requirements
The US Court of Appeals for the Second Circuit vacated and remanded a district court’s dismissal of a complaint for trade dress infringement and unfair competition, finding that the district court erred in requiring the plaintiffs to articulate distinctiveness of trade dress infringement at the pleading stage. Cardinal Motors, Inc. v. H&H Sports Protection USA Inc., Case No. 23-7586 (2d Cir. Feb. 6, 2025) (Chin, Sullivan, Kelly, JJ.)
Cardinal is a designer and licensor of motorcycle helmets. At issue was the “Bullitt” helmet, which Cardinal exclusively licenses to Bell Sports and is “one of the most popular helmets made by Bell.” H&H manufactures and sells the “Torc T-1” helmet. Both the Bullitt and Torc T-1 helmets have “flat and bubble versions,” feature “metallic borders around the bottom and front opening of the helmet,” and “share similar technical specifications.”
Cardinal sued H&H in September 2020, alleging unfair competition and trade dress infringement. Cardinal amended its complaint twice but both amended complaints were dismissed for failure “to adequately plead the claimed trade dress with precision or with allegations of its distinctiveness.” In Cardinal’s third amended complaint, it included two alternative trade dresses – a “General Trade Dress” and “Detailed Trade Dress” – which listed features of the Bullitt at different levels of detail.
Despite the amendment, the district court dismissed the third amended complaint with prejudice. Based on the general trade dress, the district court reasoned that Cardinal failed to allege distinctiveness and therefore failed to allege a plausible trade dress claim. The district court extended its reasoning to “summarily conclud[e]” that the detailed trade dress also failed to articulate distinctiveness. Cardinal appealed.
Prior to making any determinations, the Second Circuit clarified that distinctiveness and the articulation requirement are separate inquiries, and that the articulation requirement is evaluated first. A plaintiff meets the articulation “requirement by describing with precision the components – i.e., specific attributes, details, and features – that make up its claimed trade dress.” The Court explained that the articulation requirement assists courts and juries to evaluate infringement claims, ensures the design is not too general to protect, and allows a court to identify what combination of elements would be infringing.
Focusing on distinctiveness, the Second Circuit explained that a trade dress plaintiff must specifically allege that its product design has acquired distinctiveness. Acquired distinctiveness is when the mark has a secondary meaning, where the public primarily associates the mark with the “source of the product rather than the product itself.” Separate from the elements of trademark, the plaintiff must meet the articulation requirement, which entails listing the components that make up the trade dress.
Having clarified the pleading requirements, the Second Circuit found de novo that the district court erred in mixing the articulation requirement with the distinctiveness requirement at the pleading stage. The Second Circuit determined that the district court erred in dismissing Cardinal’s complaint for failure to meet the articulation requirement. The Court found that Cardinal met the articulation requirement because the general trade dress was “sufficiently precise as to the specific combination of components that comprise the Bullitt’s trade dress.” The Second Circuit also found that the district court erred in assuming the detailed trade dress was inadequate on the grounds that it found the general trade dress inadequate. The Court noted that because the detailed trade dress included more components, the district court erred in failing to consider its sufficiency independently. Lastly, the Court found that the more precise detailed trade dress met the articulation requirement even if the general trade dress did not. Having concluded that Cardinal met the articulation requirement, the Second Circuit instructed the district court on remand to identify whether Cardinal sufficiently pleaded the elements of a trade dress infringement claim.
Practice Note: Complaints for trade dress infringement should include a specific list of components of its trade dress, “such as materials, contours, sizes, designs, patterns, and colors,” in addition to pleading the three elements of trade dress infringement.
Collateral Estoppel Doesn’t Apply to Unchallenged IPR Claims
The US Court Appeals for the Federal Circuit found that despite a Patent Trial & Appeal Board determination that certain challenged patent claims were unpatentable based on a preponderance of the evidence standard, the patent owner is not collaterally estopped from asserting other, unreviewed claims of that patent in district court litigation. Kroy IP Holdings, LLC v. Groupon, Inc., Case No. 23-1359 (Fed. Cir. Feb. 10, 2025) (Prost, Reyna, Taranto JJ.)
Kroy sued Groupon for patent infringement. In response, Groupon filed two inter partes review (IPR) petitions challenging 21 claims of the patent at issue. After Groupon’s IPR deadline passed, Kroy amended its complaint to add additional claims from the challenged patent. The Board found all 21 challenged claims unpatentable. Kroy amended its complaint again, this time removing the 21 unpatentable claims and including only claims that were not at issue in the IPR proceedings.
In response, Groupon moved to dismiss the complaint, arguing that the Board’s prior IPR rulings on the unpatentable claims collaterally estopped Kroy from asserting the new claims. The district court agreed, finding that if the Board issues final judgment that a patent claim is unpatentable and another claim is immaterially different, then collateral estoppel applies to that other claim for purposes of invalidity. Applying that standard, the district court determined that the new claims were not materially different from the unpatentable claims in terms of invalidity and granted Groupon’s motion to dismiss with prejudice. Kroy appealed.
Kroy argued that collateral estoppel should not apply because the burden of proof for invalidity in an IPR proceeding (preponderance of the evidence) is lower than in the district court (clear and convincing). The Federal Circuit noted that this case presents a distinct question of collateral estoppel law; that is, whether a prior final written decision of the Board that certain patent claims are unpatentable precludes a patentee from asserting other claims from the same patent, even assuming the asserted claims are immaterially different from the unpatentable claims for purposes of invalidity.
Referring to its recent 2024 decision in ParkerVision v. Qualcomm, the Federal Circuit clarified that collateral estoppel does not apply to new claims that have not yet been adjudicated. The Court explained that Groupon must prove the invalidity of these new claims in the district court by clear and convincing evidence. The Court dismissed Groupon’s reliance on the 2013 Ohio Willow Wood decision, noting that this case addressed whether a prior district court’s invalidity ruling estopped the patentee from asserting claims in the district court that are immaterially different for purposes of invalidity. On the other hand, the Ohio Willow Wood estoppel scenario occurred in district courts involving the same burden of proof. Because the Board determined unpatentability on separate patent claims based on a preponderance of the evidence standard, courts cannot collaterally estop a patentee from asserting other, unadjudicated patent claims in district court litigation.
Anti-Kickback Statute Premised False Claims Cases: The “But For” Causation Standard Finds Support from First Circuit
It’s now 3–1, with the First Circuit (2025) aligning with the Sixth (2023) and Eighth (2022) Circuits finding the meaning of the words “resulting from” — as used in a 2010 amendment to the federal Anti-Kickback Statute (AKS) — to require “but for” causation in AKS-premised False Claims Act (FCA) cases. This is the third time a circuit court has diverged from the 2018 Third Circuit decision, which held that the phrase “resulting from” requires the government (or relator) to prove only a link “between the alleged kickbacks and the medical care received. . . .”
Notably, in October 2023, the Supreme Court declined to review the Sixth Circuit Court of Appeals case. As such, the circuit split on causation continues — and all parties should be aware of the applicable case law where they reside.
Background
In 2010, Congress amended the AKS to provide that any Medicare claim “that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].” Fifteen years later, the courts are still working through what this amendment means for FCA cases.
In the First Circuit case, United States v. Regeneron Pharmaceuticals, Inc., the complaint alleged Regeneron’s efforts to funnel money into Chronic Disease Fund — an independent charitable foundation — specifically to reimburse patients’ copays from one of Regeneron’s products, Eylea, violated the AKS, and the resulting claims to Medicare were allegedly tainted by these illegal kickbacks in violation of the FCA.
This case was before Chief Judge Saylor in the District of Massachusetts. Three months after a different District of Massachusetts court judge found “but for” causation is not the causation standard in AKS-premised FCA cases, Chief Judge Saylor wrote the opinion in Regeneron, finding the “but for” standard applicable in AKS-premised FCA cases and denied the government’s motion for summary judgment. Chief Judge Saylor explicitly called out that the Third Circuit case was not binding and that the “only a link” standard “is divorced from the actual language of the statute and from basic principles of statutory interpretation.” The case was then appealed to the First Circuit.
On July 22, 2024, the First Circuit heard oral argument on what the appropriate standard of causation is for AKS-premised FCA claims. The specific issue on appeal was whether a “claim” under the FCA “result[s] from” a kickback only if the claim would not have included the items or services but for the kickback. On February 18, 2025, the First Circuit released its opinion in United States v. Regeneron Pharma., Inc., finding against the government in holding an AKS violation must be a “but for” cause of the challenged claim.
But-For Causation in Regeneron
There is a default assumption derived from the Supreme Court that “resulting from” is read as calling for a but-for causation standard “in the usual course.” While this is not an immutable rule, there needs to be support for any deviation to the typical reading.
Regeneron argued that a but-for causation standard was appropriate, and there is no reason to deviate from the standard reading. Specifically, Regeneron argued that under the 2010 AKS amendment, the government bears the burden of proving an AKS violation actually caused a provider to provide different medical treatment (and thus caused the false claim). That is, the claim would not have been submitted but for the alleged kickback.
Meanwhile, the government argued that this is exactly this situation where the usual does not apply with three points:
The AKS itself requires no proof that the government would not have paid a claim but for the inducement of the offered kickback.
Congress did not intend to alter false-certification case law by imposing a but-for causation requirement in the 2010 AKS amendment.
Legislative history for the 2010 AKS amendment supports something other than the but-for causation.
None of these arguments were persuasive to the First Circuit, which found “no convincing ‘textual or contextual’ reason to deviate from the default presumption that the phrase ‘resulting from’ as used in the 2010 amendment imposes a but for causation standard.” As a result, the First Circuit held the government must show that an illicit kickback was the but-for cause of a submitted claim.
Looking Ahead
While the spoken Circuit Courts are generally finding in favor of “but for” causation for AKS-premised FCA cases, several circuit courts have yet to weigh in, and there is a split with the Third Circuit. Unless and until the Supreme Court grants certiorari on a causation case, we will continue to see differences on how courts approach these issues within district courts without controlling case law. Government attorneys and the relators’ bar may continue to try out different theories, hoping a court may find them persuasive, which could result in splits between district courts and a deeper divide at the circuit courts.
Observers and impacted parties will want to watch the developing case law in this area to see how courts square with this circuit split.
Want to learn more about recent FCA developments?
Renewed Prohibition on Use of Sub-Regulatory Guidance – Key to False Claims Act Cases
Medicare Advantage: A Circuit Court Addresses What is (or is not) Material in False Claims Act Cases
Chevron’s Demise Creates New False Claims Act Defenses
Loper Bright False Claims Act Developments
Insurance – Texas Style, Part 1: Stowers Liability and Insurance Towers
This is the first in a series of discussions about insurance issues unique to the Lone Star State.
For nearly a century, the Stowers doctrine has been a critical cornerstone of Texas insurance law protecting insureds facing the threat of a nuclear verdict. This doctrine, named after the seminal 1929 case G.A. Stowers Furniture Co. v. American Indemnity Co., is both a powerful sword for plaintiffs – allowing them to recover damages exceeding the available insurance limits – and a shield for insureds – shifting the risk of an excess judgment to the insurer. But obtaining Stowers protection can be a challenge for defendants with multiple layers of coverage.
Under the Stowers doctrine, an insurer faced with a settlement offer within policy limits must accept the offer if “an ordinarily prudent insurer would do so” (G.A. Stowers Furniture Co., 15 S.W.2d 544, 547 (Tex. Comm’n App. 1929)). If the insurer rejects that offer, the insurer is liable to its insured for the resulting judgment – even if that judgment exceeds the insurance policy limits. Stowers liability is based on the premise that it is usually the insurer, not the insured, who has the power of the purse and therefore control over both settlement and defense of the case, as provided in a standard form commercial general liability policy.
In the common circumstance of a single insurer with a single policy, the risk of Stowers liability is clear. The insurer controls settlement discussions and bears the corresponding Stowers risk. For example, standard form ISO commercial auto policies (CA 00 01 11 20), CGL polices (CG 00 01 04 13), and cyber liability policies (CY 00 02 11 21) all cede control of both defense and settlement to the insurer. Any proper Stowers demands made within the policy limits of these policies raise the specter of excess exposure for the insurer. But what if there are multiple insurers, such as an umbrella or excess insurer? Under standard form ISO commercial umbrella (CU 00 01 04 13) and excess policies (CX 00 01 04 13), the insurer can only take control of defense and settlement once the underlying limits have been exhausted. The interplay between the duties of the primary and umbrella/excess insurers can put insureds at risk.
Let’s use a basic $3 million, three-layer insurance program as an example. Insurer A provides coverage for the insured’s first $1 million in liability, Insurer B covers the second $1 million under an umbrella policy, and Insurer C covers the final $1 million under an excess policy – for a total of $3 million in liability coverage. A wrongful death claimant sues the insured, alleging liability within the limits of all three policies, and makes a settlement demand against the insurers for $3 million. Are the three insurers in this hypothetical subject to Stowers liability?
The insurers may contend that Stowers does not apply if they do not agree on settlement strategy. The Stowers doctrine rests on the premise that an insurer confronted with a properly made Stowers demand controls the decision to settle, and accordingly should be held to account for an unreasonable refusal to do so. In the hypothetical above, the insurers may disagree on strategy and, as a result, contend that none of them controls the settlement. Insurers A and B may wish to accept the settlement offer, but both are powerless to accept the full $3 million demand unless Insurer C also agrees. Furthermore, Insurer C may argue that its policy is not implicated until Insurer A’s and Insurer B’s policy limits are exhausted by payment of judgment or settlement. Insurers will cite case law suggesting that Stowers liability does not attach in this scenario. See, e.g., AFTCO Enterprises, Inc. v. Acceptance Indem. Ins. Co. 321 S.W.3d 65 (Tex. App. 2010). But relieving all three insurers of their Stowers obligations would effectively eliminate the critical protection Stowers provides — leaving the insured exposed to a potentially nuclear verdict arising from the insurers’ collective refusal to settle. This outcome would be particularly perverse given that only relatively high-value claims implicate multiple layers of insurance.
Insureds can turn to a federal district court case, Pride Transp. v. Cont. Cas. Co., 804 F.Supp.2d 520 (N.D. Tex. 2011), as a solution. Pride provides a guidepost for how umbrella and excess insurers can still be held to their Stowers obligation if the lower insurers tender their policy limits to the excess insurers. Interestingly, Pride is the reverse of the prototypical Stowers case, as it involved the insurer arguing that its Stowers duties were triggered and the insured arguing that no Stowers duty existed. Pride involved an auto accident where the owner of the at-fault vehicle, Pride Transportation, was insured by a $1 million primary policy and a $4 million excess policy. The underlying plaintiff made a Stowers demand against Pride’s driver for $5 million – the combined limits of the primary and excess policies. Pride demanded that its primary insurer (Continental) tender its limits to its excess insurer (Lexington) – which Continental did. Lexington then settled the claims against Pride’s driver for the full $5 million limits of both insurance policies. After settling the claims against the driver, Lexington withdrew its defense of Pride, and Pride’s exposure was left uninsured. Pride sued Continental and Lexington for breach of contract, arguing in part that the insurers had no duty to accept the $5 million demand against Pride’s driver because the demand did not impose Stowers liability. Relying on AFTCO, Pride argued that there could be no Stowers liability where the demand exceeded each individual policy’s limits. The court rejected this argument, reasoning that, because Continental had tendered its limits to Lexington, Lexington could unilaterally accept the $5 million demand, triggering Lexington’s Stowers duty (804 F. Supp. 2d at 529-530).
So, what are the practical implications for a Texas insured covered by a multi-layer insurance tower? Once a claim has been made, an insured faced with a Stowers demand that implicates multiple layers of its insurance tower should demand that the lower-tier insurers tender their limits to the highest insurer. The highest insurer, now in complete control of the settlement – and therefore now subject to Stowers liability – may find itself open to a settlement it previously rejected.
While the excess insurer may not be contractually bound to accept the tender of the lower-level policy limits, Stowers liability may attach even if the excess rejects the tender. As the Texas Supreme Court has noted, Stowers liability can arise from “the insurer’s control over settlement” – not just from the insurer’s formal duty to defend (Rocor Intern., Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 77 S.W.3d 253, 263 (Tex. 2002)). Once the primary insurer tenders its limits to the excess insurer and cedes control of settlement negotiations to the excess insurer, the excess insurer would have the sole and unilateral ability to settle the case within its policy limits – which is the hallmark of Stowers liability – regardless of whether the excess insurer exercises that control. Furthermore, an excess insurer who refuses to exercise the settlement authority provided by the lower-level insurers could also be pursued by those same lower-level insurers (in addition to the insured) should an excess verdict result.
In sum, Texas policyholders faced with a Stowers demand should demand that their insurers tender the limits to the highest excess insurer in play and then demand that the excess insurer settle the case or face Stowers liability. Doing so will increase the possibility that the insurer – not the insured – bears the risk of an excess verdict.
Listen to this post
“NOT MINIMAL”: Court Holds TCPA Defendant Can Be Liable for Illegal RVM Even Though Platform Sent the Message
There’s an interesting tension between platforms and callers that use their services when it comes to the TCPA.
And it all comes down to who is actually “making” the call.
This is so because the TCPA only applies to individuals that make or initiate calls–which is why lead gen data brokers always seem ti get off easy and the lead buyers are always caught in a snare.
But in the platform context, the caller wants the platform to be viewed as the “initiator” wheras the platform operator always wants to be very careful to be nothing more than a conduit.
Well in Saunders v. Dyck-O’Neal, 2025 WL 553292 (W.D. Mich Feb 19, 2025)–and unbelievably old case I can’t believe is still around– Defendant moved for summary judgment arguing it could not be liable for ringless voicemails left by the (in)famous VoApps.
To my eye this motion was a real long shot. The facts here are pretty clear. Per the order:
Dyck O’Neal provided VoApps with (1) the telephone number to be contacted, (2) the day and time the voicemails were sent, and (3) the caller ID number to be used. Dyck O’Neal also selected the message to be played. For example, one script of the voicemail message provided: “This is Dyck O’Neal with a message. This is an attempt to collect a debt. Please do not erase this message, and will you call us at 1-877-425-8998. Again, that number is 1-877-425-8998.” (ECF No. 294-8 at PageID.4091).
Ok, so the Defendant gave a file of numbers to the platform, told the platform to deliver a specific message at a specific time and also supplied the DIDs. I mean, long as the platform faithfully carried out those instructions I don’t see how you get around a determination that Defendant “initiated” those calls– they were the party instructing the transmission of the call. So yeah, they initiated the calls.
And that is just what the Court held.
The Court also held Defendant could be liable under vicarious liability principles since it controlled VoApps in the context of sending the messages:
Dyck O’Neal’s involvement was not minimal. It decided what phone numbers would be called. It decided what prerecorded voicemail messages would be played. It uploaded a “campaign” each day, on the day it wanted calls to be made. It had the message it wanted played during calls recorded and designed the prerecorded message and caller ID to conform to its debt collection purpose. It had alleged debtors’ addresses and directed VoApps to send messages only during permissible time of day, depending upon the physical location of the debtor. By the terms of the contract, VoApps acted as a “passive conduit for the distribution of content and information.”
Yeah… this one was pretty obvious.
Indeed, this motion was borderline frivolous–and perhaps not even borderline–and I rarely say that.
What I find really fascinating is that a different RVM platform was found to be exempt from TCPA liability by Section 230 of the Communications Act so not sure why that issue wasn’t raised as part of Defendant’s motion.
C’est la vie.
This is a good data point on a couple of things:
Platforms should always try to position themselves as mere conduits to avoid findings that they are responsible for the conduct of callers using their services;
Callers who wish to treat their platforms as the “makers” of the call need to really place trust in those platforms and also have clear contract terms to that effect– and handing off a list of numbers with explicit instructions is going to sink your chances;
Ringless voicemail are covered by the TCPA as regulated technology and prerecorded calls–which means you need express written consent for marketing purposes and express consent for informational purposes to leverage these systems; and
Folks caught up in RVM cases should keep Section 230 in mind!
LONG GAME: Is One-to-One Coming Back in January, 2026? NCLC Wants to Make that Happen– Here’s How It Might
CPAWorld is an absolutely fascinating place.
So many incredible storylines always intersecting. And the Czar at the center of it all.
Enjoyable beyond words.
So here’s the latest.
As I reported yesterday NCLC is seeking to intervene before the Eleventh Circuit Court of Appeals in an apparent effort to seek an en banc re-hearing of the Court’s determination that the FCC exceeded its authority in fashioning the one-to-one rule. If successful, the NCLC could theoretically resurrect the rule before the one-year stay runs that the FCC put into effect following R.E.A.C.H.’s emergency petition last month.
So, in theory, one-to-one could be back in January, 2026 after all.
So let’s back up to move forward and make sure everyone is following along.
Way back in December, 2022 Public Knowledge–a special interest group with high power over the Biden-era FCC–submitted a proposal to shut down lead generation by banning the sale or transfer of leads.
I went to work trying to spread the word and in April, 2023 the FCC issued a public notice that was a real headfake— the notice suggested it was considering only whether to ban leads that were not “topically and logically” related to the website at issue. Most people slept on this–and many lawyers in the industry told folks this was no big deal– but I told everyone PRECISELY what was at stake.
Regardless of my efforts industry’s comments were fairly week as very few companies came forward to oppose the new rule.
In November, 2023–as only the Czar had correctly predicted– the FCC circulated a proposed rule that looked nothing like their original version– THIS version required “one-to-one” consent, just as I said it would.
Working with the SBA, R.E.A.C.H. and others were able to convince the Commission to push the effective date for the rule from 6 months to 12 months to give time for another public notice period to evaluate the rule’s impact on small business.
This additional six months also gave time for another trade organization to challenge the ruling in court (you’re welcome).
Ultimately with the clock winding down the final week before the rule was set to go into effect January 27, 2025 R.E.A.C.H. filed an emergency petition to stay the ruling with the FCC.
On Friday January 24, 2025 at 4:35 pm the FCC issued the desired stay— pushing back the effective date for up to another year. Twenty minutes later the Eleventh Circuit court of appeals issued a ruling striking down the one-to-one rule completely.
Now the NCLC enters and is seeking to reverse the appellate court’s decision and reinstate the rule. To do so it would need to:
Be granted an unusual post-hac intervention; and either
Be granted an unusual en banc re-hearing and then win that re-hearing; or
Be granted an unusual Supreme Court cert and then win that Supreme Court challenge.
As anyone will tell you, every piece of this is a long shot.
Still, however, it is possible.
For instance the Eleventh Circuit standard for en banc review is high but not overwhelmingly so:
“11th Cir. R. 40-6 Extraordinary Nature of Petitions for En Banc Consideration. A petition for en banc consideration, whether upon initial hearing or rehearing, is an extraordinary procedure intended to bring to the attention of the entire court a precedent-setting error of exceptional importance in an appeal or other proceeding, and, with specific reference to a petition for en banc consideration upon rehearing, is intended to bring to the attention of the entire court a panel opinion that is allegedly in direct conflict with precedent of the Supreme Court or of this circuit. Alleged errors in a panel’s determination of state law, or in the facts of the case (including sufficiency of the evidence), or error asserted in the panel’s misapplication of correct precedent to the facts of the case, are matters for rehearing before the panel but not for en banc consideration.”
To be sure the Eleventh Circuit’s ruling was quite extraordinary. Turned appellate review of agency action more or less on its head. A complete departure from established analytic norms in such cases.
But, as I have said multiple times, we are living in a whole new world right now. So what was weird and inappropriate six months ago may be very much the new paradigm today.
Of course being granted the rehearing in this environment would just be step one. NCLC would then actually have to win the resulting en banc review– which is by no means guaranteed even if the rehearing is granted.
But from a timing perspective all of this could theoretically happen within one year.
If NCLC is denied a rehearing they could theoretically seek Supreme Court review which could theoretically result in a ruling sometime in May or June, 2026– in the meantime the FCC’s stay of proceedings would likely be extended in light of the Supreme Court taking the case. But the odds of the Supremes taking such an appeal and then reversing the one-to-one rule seem astronomically small given the current makeup of the Court.
Then again, with Mr. Trump seizing control of independent agencies the rules regarding how courts review regulatory activity by these agencies just became INSANELY important. Again, we have a whole new paradigm and the Supremes may theoretically look for any vehicle to opine on the subject ahead of potentially catastrophic separation of power issues set up by Mr. Trump’s executive order this week.
The bottom line is this: one-to-one consent may rise again, and if the NCLC has its way–it will.
We will keep everyone posted on developments, of course, and the R.E.A.C.H. board will be discussing its own potential intervention efforts shortly.
More soon.
Guess Who’s Back? That’s Right – the CTA
Reporting Companies Are Now Required to Comply with the CTA by March 21, 2025
The U.S. District Court for the Eastern District of Texas lifted the stay on enforcement of the Corporate Transparency Act’s reporting requirements with its February 18, 2025, decision in Smith, et al. v. U.S. Department of the Treasury, et al.
As a result, BOI reporting is again mandatory.
As of the date of this alert, the new deadline for (a) reporting companies formed prior to January 1, 2024, to file an initial report and (b) all other reporting companies to file updated and/or corrected BOI reports is now March 21, 2025. However, if FinCEN previously gave a deadline later than March 21, 2025, to a reporting company (e.g., a disaster relief extension until April 2025), the later deadline continues to apply to that reporting company.
In FinCEN’s February 18, 2025 notice (available here: Beneficial Ownership Information Reporting | FinCEN.gov), it acknowledges that it may provide further guidance on reporting requirements prior to March 21, 2025, and as a result reporting companies may be granted additional time to comply with their BOI reporting obligations once this update (if any) is provided.
If you have been following our guidance to date, you have already gathered your BOI and should be able to file prior to March 21, 2025. If you still need assistance determining if your company is a “reporting company” or if you are required to report BOI, please reach out to your Bradley contact as soon as possible.
Legislative Note: The House of Representatives recently passed the “Protect Small Businesses from Excessive Paperwork Act,” which provides in part for an extension of the CTA reporting deadline until January 1, 2026, for reporting companies formed prior to January 1, 2024. That bill is now in committee in the Senate.
Listen to this article
The Supreme Court Gears Up to Resolve Circuit Split on Class Injury Requirements
On January 24, 2025, the Supreme Court granted certiorari in Laboratory Corp. of America v. Davis, No. 24-0304, which may result in the resolution of a long-standing circuit split on a dispute key to class certification. In its petition for writ of certiorari, petitioner Labcorp sought Supreme Court review of an issue that has divided federal circuit courts: what should courts do when a putative class contains numerous members who lack any Article III injury?
The underlying class action was filed against Labcorp, a leading clinical diagnostic laboratory, alleging that Labcorp’s self-service check-in kiosks, which are not independently accessible to blind individuals, violate the Americans with Disabilities Act (ADA) and California’s Unruh Act. The standing issue concerned how many members of the class were actually injured—Labcorp presented evidence that a significant percentage of visually-impaired patients were either unaware of or did not intend to use the self-service kiosks, preferring to check in with the front desk. Despite these standing issues, and applying existing Ninth Circuit law, the district court in the underlying action certified the class and the Ninth Circuit affirmed.
In its petition for certiorari, Labcorp identified three Circuit blocs that answer the question of absent class member injury in different ways: (1) “the Article III Circuits,” which deny class certification where the class includes members who have suffered no Article III injury; (2) “the De Minimis Circuits,” which apply Federal Rule of Civil Procedure 23(b)(3) and not Article III to reject classes where there are more than a de minimis number of uninjured members; and (3) “the Back-End Circuits” (including the Ninth Circuit), which do not deny class certification based on Article III issues with uninjured class members and only deny class certification under Rule 23(b)(3) if the class contains a large number of uninjured members.
The Supreme Court granted certiorari on the question: “Whether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury.” Notably, both the district court and Ninth Circuit’s decisions were unpublished. This suggests that the Court is likely poised to address the Circuit split and provide a definitive answer to the question whether any or many uninjured class members may be encompassed within a class in at the time of class certification. An answer restricting class certification to those who suffered harm from the alleged legal violation would be a game-changer for defendants facing lawsuits challenging practices that affect few people but present large potential exposure—such as those under the ADA and those concerning labels on consumer products that do not drive consumer purchasing decisions.