Thompson v. United States (No. 23-1095)
William Blake once observed that “a truth that’s told with bad intent, beats all the lies you can invent.” It turns out the Supreme Court agrees, at least for escaping liability under 18 U.S.C. § 1014. In Thompson v. United States (No. 23-1095), a unanimous court held that this statute criminalizes only false statements and not statements that are misleading but literally true.
Patrick Thompson took out three loans from the Washington Federal Bank for Savings at various times. He first borrowed $110,000 in 2011. Then in 2013, he borrowed an additional $20,000. The year after that, he borrowed $89,000 more. These three loans resulted in a total loan balance of $219,000. In 2017, however, the Washington Federal Bank for Savings failed, and the FDIC assumed responsibility for collecting the bank’s outstanding loans. As part of the FDIC’s collection attempts, Planet Home Lending, the FDIC’s loan servicer, sent Thompson an invoice for $269,120.58, reflecting his principal amount plus unpaid interest.
After receiving the invoice, Thompson called Planet Home Lending and professed confusion as to where the $269,120.58 figure came from. On the call (which, unfortunately for our supposedly befuddled borrower, was recorded) Thompson said “I borrowed the money, I owe the money—but I borrowed…I think it was $110,000.” Thompson later received a call from two FDIC contractors, whose notes of the call reflect that Thompson mentioned borrowing $110,000 for home improvement. He later settled his debt with the FDIC for $219,000—an amount that coincidentally reflected the exact principal amount of the loans he had taken out but apparently could not recall.
Any elation he felt over his $50,000 in interest savings was likely cut short, however, when he was indicted on two counts of violating 18 U.S.C. § 1014. That statute prohibits “knowingly mak[ing] any false statement or report . . . for the purpose of influencing in any way the action of . . . the Federal Deposit Insurance Corporation . . . upon any . . . loan.” One count related to his call to Planet Home Lending, and the second to his call with the FDIC contractors. Apparently secure in his belief in his own veracity, Thompson proceeded to trial. But the jury reached a different conclusion regarding his trustworthiness and convicted him of both counts.
He moved for acquittal or a new trial, arguing that a “conviction for false statements cannot be sustained where, as here, the alleged statements are literally true, even if misleading.” Thompson argued that his statements about borrowing $110,000 were literally true because he had in fact borrowed that amount of money from the Bank, even though he later borrowed more. Cf. Mitch Hedberg (“I used to do drugs. I still do, but I used to too.”). The district court denied the motion, finding that “literal falsity” was not required to violate section 1014 under Seventh Circuit precedent. The Seventh Circuit affirmed, holding that “misleading representations” were criminalized by that statute.
In a unanimous opinion by Chief Justice Roberts, the Supreme Court reversed and remanded. In their view, this was a simple case. The plain text of the statute criminalizes “knowingly mak[ing] any false statement or report.” But “false and misleading are two different things” because a “misleading statement can be true.” And because “a true statement is obviously not false,” misleading-but-true statements are outside the scope of the statute.
Much in the case ultimately turned on whether the natural reading of “false” includes a true but misleading statement. As one of many colorful examples of how even true statements can be misleading, Roberts discussed a hypothetical, which the Government conceded at oral argument, that “[i]f a doctor tells a patient, ‘I’ve done a hundred of these surgeries,’ when 99 of those patients died, the statement—even if true—would be misleading because it might lead people to think those surgeries were successful.” (The statement would be equally true—and equally misleading—if all 100 patients had died, but perhaps the Court thought that even its hapless hypothetical surgeon was unlikely to have botched all his operations). With that recognition in mind, Roberts quickly rejected the Government’s argument made with “dictionary in [one] hand” and “thesaurus in the other hand” that false can also simply mean “deceitful” and that “false and misleading have long been considered synonyms.” Unimpressed with the stack of books the Government brought to bear, the Court observed that this argument merely “point[ed] out the substantial overlap between the two terms.”
Finally, the Chief turned to context and precedent. Starting with the former, Roberts noted that many other criminal statutes do criminalize both false and misleading statements, including “[m]any other statutes enacted in the same period” as section 1014 (like such stalwarts of the federal code as the Perishable Agricultural Commodities Act). This gave rise to the presumption that Congress’s omission of the term “misleading” from section 1014 was deliberate. And as to precedent, Roberts found support in Williams v. United States (1982), where the Court stated that “a conviction under §1014 requires at least two things: (1) the defendant made a statement, and (2) that statement can be characterized as ‘false’ and not ‘true.’”
Justices Alito and Jackson each filed a brief concurrence. Justice Alito emphasized that “context” is key when assessing whether a misleading statement crosses the line into being false. Justice Jackson wrote separately to note that the jury instructions in Thompson’s case had actually been correct, referencing only false statements while making no mention of misleading statements. In her view, then, there was “little for the Seventh Circuit to do on remand but affirm the District Court’s judgment upholding the jury’s guilty verdict.”
Delligatti v. United States (No. 23-825)
Federal law provides a mandatory minimum sentence of five years for a person who uses or carries a firearm during a “crime of violence.” In Delligatti v. United States (No. 23-825), the Supreme Court addressed whether a crime of omission involves the “use” of physical force, thus subjecting a defendant to the sentencing enhancement. A 7-2 Court held that it does.
Salvatore Delligatti is an associate of the Genovese crime family. Delligatti had been hired by a gas station owner to take out a neighborhood bully and suspected police informant. Delligatti, in turn, recruited a local gang to carry out the job and provided them with a gun and a car. Unfortunately for Delligatti, the job was thwarted twice, once when the gang abandoned the plan because there were too many witnesses present, and second by the police, who had discovered the plot. Delligatti was charged with multiple federal offenses, including one count of using or carrying a firearm during a “crime of violence” pursuant to 18 U.S.C. § 924(c).
Section 924(c) states that an offense qualifies as a crime of violence if it “has as an element the use, attempted use, or threatened use of physical force against a person or property of another.” To determine whether an offense falls within Section 924(c), courts employ the so-called categorical approach, asking whether the offense in question always involves the use, attempted use, or threatened use of force. The Government argued that Delligatti’s offense met this requirement because he had committed attempted second-degree murder under New York law. Before trial, Delligatti moved to dismiss his Section 924(c) charge arguing the Government could not establish a predicate crime of violence. The District Court disagreed, holding that there “can be no serious argument” that attempted murder is not a crime of violence. A jury convicted Delligatitti on all counts and he was sentenced to 25 years of imprisonment.
On appeal to the Second Circuit, Delligatti argued that New York’s second-degree murder statute fell outside Section 924(c)’s elements clause because it could be committed either by an affirmative act or by an omission. But the Second Circuit affirmed his conviction, holding that causing (or attempting to cause) bodily injury necessarily involves the use of physical force, even if the injury is caused by an omission. The Supreme Court granted certiorari to decide whether an individual who knowingly or intentionally causes bodily injury or death by failing to take action uses physical force within the meaning of Section 924(c).
Justice Thomas, writing for the majority, held that precedent, congressional intent, and logic refuted Delligatti’s challenge to his conviction. First precedent: In United States v. Castleman (2014), the Court interpreted a statute that prohibited anyone convicted of misdemeanor domestic-violence crimes, which similarly requires the use of physical force, from owning a firearm. In Castleman, the Court held that it was “impossible to cause bodily injury without applying force,” and that this force can be applied directly or indirectly, such as sprinkling poison in a victim’s drink, even though sprinkling poison does not itself involve force. Put differently: whenever someone knowingly causes physical harm, he uses force for the purposes of the statute. (Indeed, Delligatti had conceded that it was possible to use violent force indirectly, such as “when a person tricks another into eating food that has aged to the point of becoming toxic.”)
Justice Thomas then rebuffed Delligatti’s contention that one does not use physical force against another through deliberate inaction. By way of further example, a car owner makes “use” of the rain to wash a car by leaving it out on the street, or a mother who purposefully kills her child by declining to intervene when the child finds and drinks bleach makes “use” of bleach’s poisonous properties. Thomas thus concluded that crimes of omission qualify as a Section 924(c) crime of violence because intentional murder is the prototypical crime of violence, and it has long been understood that “one could commit murder by refusing to perform a legal duty, like feeding one’s child.” He noted that there is a preference for interpretations of Section 924(c) that encompass prototypical crimes of violence over ones that do not. And, at the time of Section 924(c)’s enactment, the principle that even indirect causation of bodily harm involves the use of violent force was well-established in case law, treatises, and various state laws. This violent force could be accomplished with battery-level force, i.e., force satisfied by “even the slightest offensive touching,” or by deceit or other nonviolent means.
In dissent, Justice Gorsuch, joined by Justice Jackson, continued with the majority’s approach of reasoning by example, only this time concluding that Section 924(c) does not reach crimes of omission. He began by asking the reader to imagine “a lifeguard perched on his chair at the beach who spots a swimmer struggling against the waves. Instead of leaping into action, the lifeguard chooses to settle back in his chair, twirl his whistle, and watch the swimmer slip away. The lifeguard may know that his inaction will cause death. Perhaps the swimmer is the lifeguard’s enemy and the lifeguard even wishes to see him die. Either way, the lifeguard is a bad man.” But while the lifeguard may be guilty of any number of serious crimes for his failure to fulfill his legal duty to help the swimmer, the lifeguard’s inaction does not qualify as a “crime of violence.”
Justice Gorsuch reached this conclusion primarily through statutory interpretation. In his view, when Congress enacted Section 924(c), “to use” meant “to employ,” “to convert to one’s service,” or “to avail one’s self of” something, terms that imply action, not inaction, inertia, or nonactivity. In his view, the physical force needed to commit a crime of violence must be a physical act, as well as one that is violent (extreme and severe, as opposed to “mere touching” consistent with battery). So, in the lifeguard example, by remaining in his chair, the lifeguard does not employ “even the merest touching, let alone violent physical force.” And while Gorsuch acknowledged that crimes of omission can still be serious, he explained that Section 924(c) was not written to reach every felony found in the various state codes, so the Court should not stretch the statute’s terms to reach crimes of inaction, inertia, or nonactivity. He also pointed out that when Congress was considering defining crime of violence to require the use of physical force, a Senate report discussed the hypothetical of the operator of a dam who refused to open floodgates during a flood, thereby placing residents upstream in danger, and concluded that the dam operator would not be committing a crime of violence because he did not use physical force. Finally, Gorsuch pointed out that crimes of omission more naturally fit within another subsection of Section 924(c), which the Court held was unconstitutionally vague in United States v. Davis (2019), showing that Congress has had no difficulty addressing crimes of omission elsewhere.
Virginia Expands Non-Compete Restrictions Beginning July 1, 2025
At the end of March, Governor Glenn Youngkin signed SB 1218, which amends Virginia’s non-compete ban for “low-wage” workers (the “Act”) to include non-exempt employees under the federal Fair Labor Standards Act (the “FLSA”).
The expanded restrictions take effect July 1, 2025.
What’s New?
As we discussed in more detail here, since July 2020, the Act has prohibited Virginia employers from entering into, or enforcing, non-competes with low-wage employees. Prior to the amendment, the Act defined “low-wage employees” as workers whose average weekly earnings were less than the average weekly wage of Virginia, which fluctuates annually and is determined by the Virginia Employment Commission. In 2025, Virginia’s average weekly wage is $1,463.10 per week, or approximately $76,081 annually. “Low-wage employees” also include interns, students, apprentices, trainees, and independent contractors compensated at an hourly rate that is less than Virginia’s median hourly wage for all occupations for the preceding year, as reported by the U.S. Bureau of Labor Statistics. However, employees whose compensation is derived “in whole or in predominant part” from sales commissions, incentives or bonuses are not covered by the law.
Effective July 1, 2025, “low-wage employees” will also include employees who are entitled to overtime pay under the FLSA for any hours worked in excess of 40 hours in any one workweek (“non-exempt employees”), regardless of their average weekly earnings. In other words, the amendment will extend Virginia’s non-compete restrictions to a significantly larger portion of the Commonwealth’s workforce.
A Few Reminders
The amendment does not significantly alter the other requirements under the Act regarding non-competes, including the general notice requirements and ability for a low-wage employee to institute a civil action. Although Virginia employers are not required to give specific notice of a noncompete to individual employees as some other states require, they must display a general notice that includes a copy of the Act in their workplaces. Failing to post a copy of the law or a summary approved by the Virginia Department of Labor and Industry (no such summary has been issued) can result in fines up to $1,000. Therefore, Virginia employers should update their posters to reflect the amended Act by July 1, 2025.
Employees are also still able to bring a civil action against employers or any other person that attempts to enforce an unlawful non-compete. Low-wage employees seeking relief are required to bring an action within two years of (i) the non-competes execution, (ii) the date the employee learned of the noncompete provision, (iii) the employee’s resignation or termination, or (iv) the employer’s action aiming to enforce the non-compete. Upon a successful employee action, courts may void unlawful non-compete agreements, order an injunction, and award lost compensation, liquidated damages, and reasonable attorneys’ fees and costs, along with a $10,000 civil penalty for each violation.
While the law creates steep penalties for non-competes, nothing within the legislation prevents an employer from requiring low-wage employees to enter into non-disclosure or confidentiality agreements.
Takeaways
The amendment emphasizes the importance for Virginia employers to correctly classify their employees as exempt or non-exempt under the FLSA. Additionally, the amendment does not apply retroactively, so it will not affect any non-competes with non-exempt employees that are entered into or renewed prior to July 1, 2025. Nevertheless, enforcing non-compete agreements with non-exempt employees may be more challenging after this summer, so Virginia employers may wish to consider renewing such agreements without non-compete provisions to ensure other provisions can be properly enforced.
HUD’s Enforcement of the Violence Against Women Act: What Housing Providers Should Know
The Violence Against Women Act (VAWA), enacted in 1994, was most recently amended in 2022. As part of its 2022 reauthorization, the U.S. Department of Housing and Urban Development (HUD) and the Attorney General of the United States are now mandated to implement and enforce the housing provisions of VAWA consistently and in a manner that affords the same rights and remedies as those provided for in the Fair Housing Act (FHA). This is reflected in new forms updated from HUB in February 2025 regarding the protections for victims of domestic violence.
Pursuant to VAWA, anyone who has experienced domestic violence, dating violence, sexual assault, and/or stalking:
Cannot be denied admission to or assistance under a HUD-subsidized or -assisted unit or program because of VAWA violence/abuse.
Cannot be evicted from a HUD-subsidized unit or have their assistance terminated because of VAWA violence/abuse.
Cannot be denied admission, evicted, or have their assistance terminated for reasons related to the VAWA violence/abuse, such as having an eviction record, criminal history, or bad credit history related to the VAWA violence/abuse.
Must have the option to remain in their HUD-subsidized housing, even if there has been criminal activity directly related to the VAWA violence/abuse.
Can request an emergency transfer for safety reasons related to VAWA violence/abuse.
Must be allowed to move with continued assistance (if the victim has a Section 8 Housing Choice Voucher).
Must be able to self-certify using the HUD VAWA self-certification form (Form HUD-5382) and not be required to provide additional proof unless the housing provider has conflicting information about the violence/abuse.
Must receive HUD’s Notice of VAWA Housing Rights (Form HUD-5380) and HUD’s VAWA self-certification form (Form HUD-5382) from the housing provider when:
Denied admission to a HUD-subsidized unit or HUD program
Admitted to a HUD-subsidized unit or HUD program and/or
Issued a notice of eviction from a HUD-subsidized unit or a notice of termination from a HUD program.
Has a right to strict confidentiality of information regarding their status as a survivor.
Can request a lease bifurcation from the owner or landlord to remove the perpetrator from the lease or unit.
Cannot be coerced, intimidated, threatened, or retaliated against by HUD-subsidized housing providers for seeking or exercising VAWA protections.
Has the right to seek law enforcement or emergency assistance for themselves or others without being penalized by local laws or policies for these requests or because they were victims of criminal activity.
EnforcementAs such, HUD’s Office of Fair Housing and Equal Opportunity (FHEO) now enforces VAWA by accepting and investigating complaints thereunder using its FHA complaint process. If a housing provider is found by HUD to have violated VAWA and the matter is not settled via HUD’s conciliation process, HUD may refer the matter to the Department of Justice (DOJ) for litigation and/or enforcement.
HUD issued a press release regarding two settlements of VAWA cases pursuant to its enforcement authority under the VAWA Reauthorization Act of 2022 in September of 2023.
THE FIRST CASE involved a tenant in Nevada who requested an emergency transfer after being stalked by a former partner. The complaint alleged that the respondent public housing agency in Nevada and its housing specialist (a) demanded confusing and contradictory documentation from the charging party that it was not permitted to request under VAWA, (b) threatened to revoke the charging party’s Housing Choice Voucher, (c) denied her request to extend her voucher, and (d) stopped paying its portion of the rent when the charging party prepared to move to protect her safety.
HUD found that the housing authority lacked an emergency transfer plan that would allow survivors who qualify to move quickly without losing their assistance. The case settled for an agreement to implement an emergency transfer plan, to hire outside experts to provide VAWA training, and to pay the charging party monetary compensation.
THE SECOND CASE cited in the 2023 press release involved a housing provider and property manager in California who were alleged to have denied the charging party’s application due to a history of violations of previous rental agreements that were allegedly related to her status as a survivor of dating violence. The housing provider maintained that the charging party did not disclose her status as a dating violence survivor, but acknowledged that it failed to provide information about her rights under VAWA or advise her about how she might appeal when it sent her the denial letter.
This settlement agreement involved (a) some monetary amount, (b) placing the charging party on the top of a waitlist for the next available unit at the property or a companion property, (c) a revision of the housing provider’s policies to include a VAWA policy, (d) the establishment of a VAWA Rights Coordinator position, and (e) the requirement that its employees undergo annual VAWA training.
HUD issued press releases regarding two more cases it settled under VAWA in 2024.
THE FIRST CASE addressed claimed violations of VAWA as well as Section 504 of the Rehabilitation Act, which prohibits discrimination in housing for residents in communities that receive federal funding. This matter involved multiple allegations that reasonable accommodation and modification requests were denied by housing providers in Tennessee, as well as allegations of failure to provide requested VAWA transfers. In addition to non-monetary components similar to those in the cases mentioned previously, this case settled for $50,000.
THE SECOND CASE, in June 2024, involved a HUD-negotiated settlement with a Michigan housing provider alleged to have violated VAWA.. That matter involved a landlord who allegedly did not respond to the charging party’s rental application due to her vision impairment and because she disclosed that a previous landlord had terminated her tenancy due to dating violence and stalking. The monetary component of that settlement agreement was $8,500, in addition to VAWA-related training and an agreement to ensure that the housing provider’s policies and procedures complied with VAWA.
TakeawaysAs noted above, housing providers should ensure that their employees are familiar with VAWA requirements and should incorporate these requirements into their regular fair housing training sessions. They also should take advantage of the website HUD released in 2023 to help navigate VAWA’s housing protections, as it features the latest updates, frequently asked questions about VAWA, and VAWA training resources. It appears that HUD’s enforcement of rights of domestic violence victims to housing pursuant to VAWA will continue to grow absent an indication from the new HUD Secretary of a change in this policy, which to date has not been announced.
NEW HAMPSHIRE DEEPFAKE SCANDAL TCPA LAWSUIT: Court Refuses To Dismiss Claims Against Platforms That Allegedly Aided In Sending The AI/Deepfake Calls Impersonating President Biden
Hi TCPAWorld! Remember last year when that political consultant from Texas hired the New Orleans magician to sound like Joe Biden in order to make calls using AI technology to New Hampshire voters in an attempt to convince them not to vote?
Well, that saga continues!
So for some background here, Steve Kramer, a political consultant, used AI technology to create a deepfake recording of President Joe Biden’s voice. Days before the New Hampshire primary, nearly 10,000 voters received a call in which the AI voice falsely suggested that voting in the primary would harm Democratic efforts in the general election. To further the deception, Kramer spoofed the caller ID to display the phone number of Kathleen Sullivan, a well-known Democratic leader. Voice Broadcasting Corporation and Life Corporation enabled the call campaign, providing the technology and infrastructure necessary to deliver the calls.
Steve Kramer, Voice Broadcasting Corporation, and Life Corporation in the US District Court of New Hampshire were sued on March 14, 2024, for violations of the TCPA (as well as violations of the Voting Rights Act of 1965 and New Hampshire statutes regulating political advertising) by the League of Women Voters of the United States, the League of Women Voters of New Hampshire, and three individuals who received those calls. League of Women Voters of New Hampshire et al v. Steve Kramer et al, No. 24-CV-73-SM-TSM.
Broadcasting Corporation and Life Corporation filed a motion to dismiss arguing 1) they did not “initiate” the at-issue calls and 2) these calls did not violate the TCPA because they were “’political campaign-related calls,’ which are permitted when made to landlines, even without the recipient’s prior consent.”
The court denied their motion on 3/26/25 finding that the plaintiffs adequately alleged a plausible claim for relief under the TCPA. League of Women Voters of New Hampshire et al v. Steve Kramer et al, No. 24-CV-73-SM-TSM, 2025 WL 919897 (D.N.H. Mar. 26, 2025).
The TCPA makes it unlawful “to initiate any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party.” While the TCPA does not specifically define what it means to “initiate” a call, the FCC has established clear guidance. According to In the Matter of the Joint Petition filed by Dish Network, Federal Communications Commission Declaratory Ruling, 2013 WL 1934349 at para. 26 (May 9, 2013), a party “initiates” a call if it takes the steps necessary to physically place it or is so involved in the process that it should be deemed responsible.
In this case, the court assumed, without deciding, that neither Voice Broadcasting nor Life Corporation physically placed the calls. But that didn’t absolve them. The court turned to the totality of the circumstances to determine whether the companies were sufficiently involved to bear liability.
The allegations were that Voice Broadcasting didn’t merely act as a passive service provider. Instead, it actively collaborated with Kramer to refine the message and even suggested adding a false opt-out mechanism that directed recipients to call Kathleen Sullivan’s personal phone number. Life Corporation, in turn, allegedly facilitated the delivery of thousands of the calls using its telecommunications infrastructure. The court found that these facts were more than enough to justify holding the companies accountable under the TCPA.
Quoting the FCC’s guidance, the court explained that companies providing calling platforms cannot simply “blame their customers” for illegal conduct. Liability attaches to those who “knowingly allow” their systems to be used for unlawful purposes. Voice Broadcasting and Life Corporation had the means to prevent the deepfake calls— but they didn’t. As the court explained, “Even if one were to assume that neither Voice Broadcasting nor Life Corp. actually ‘initiated’ the Deepfake Robocalls, they might still be liable for TCPA violations, depending upon their knowledge of, and involvement in, the scheme to make those illegal calls.”
As for the defendants’ second argument, that the calls were political and therefore exempt from the TCPA’s consent requirements, the court acknowledged that political campaign calls using regulated technology, such as the AI-voice technology used in the alleged calls, to landlines are generally permissible, even without prior express consent. However, this exemption is not a free pass. The calls must comply with other key provisions of the TCPA, including the requirement to provide a functional opt-out mechanism.
Here, instead of providing a legitimate way for recipients to opt-out, the alleged calls instructed the recipients to call Kathleen Sullivan’s personal phone number. This sham opt-out mechanism not only failed to meet TCPA standards but also contributed to the deception. The court had no trouble rejecting the claim that this constituted compliance: “Little more need be said other than to note that such an opt-out mechanism plainly fails to comply with the governing regulations and is not, as defendants suggest, ‘adequate.’”
And in case you are all wondering about Mr. Kramer himself, a default was entered against Kramer on 8/29/24.
The entire story behind these calls has been something to watch. This is definitely a case to keep an eye on!
A Final Rule Bites the Dust: Federal Court Rules FDA Lacks Authority to Regulate LDTs
The order is in, and the LDT Final Rule is out.
In May 2024, the U.S. Food & Drug Administration (“FDA” or the “Agency”) published its Final Rule establishing its regulatory framework over laboratory developed tests (“LDTs”) as medical devices and, in effect, announced the end to decades of enforcement discretion by the Agency. The deadline to comply with the first phase of the Final Rule was set for May 6, 2025. On Monday, March 31, however, a federal judge in the U.S. Eastern District of Texas ordered that “FDA’s final rule exceeds its authority and is unlawful” and that “[t]herefore, consistent with controlling circuit precedent, the proper remedy is vacatur of the final rule and remand to FDA for further consideration in light of this opinion.”
Epstein Becker & Green’s Life Sciences Team is continuing to review and digest this order and its impact on the clinical lab industry, and we plan to release a more fulsome analysis in the coming days.
In the meantime, we draw stakeholders’ attention to a few key takeaways from the order—namely, the judge’s statement that (1) “the [federal Food, Drug, & Cosmetic Act]’s relevant text is unambiguous and cannot support FDA’s interpretation” and (2) “FDA’s asserted jurisdiction over laboratory-developed test services as ‘devices’ under the FDCA defies bedrock principles of statutory interpretation, common sense, and longstanding industry practice.”
These findings—along with other elements of the district court’s legal analysis—arguably leave little to no room for FDA to salvage its effort to regulate LDTs, absent either a successful appeal of the court’s order or congressional action.
Georgia Regulates Third Party Litigation Financing in Senate Bill 69
On February 27, 2025, by a vote of 52 to 0, the Georgia Senate passed Senate Bill 69, titled “Georgia Courts Access and Consumer Protection Act.”
If signed into law, the bill would regulate third-party litigation financing (“TPLF”) practices in Georgia where an individual or entity provides financing to a party to a lawsuit in exchange for a right to receive payment contingent on the lawsuit’s outcome. This bill represents another effort by states to restrain the influence of third-party litigation financiers and increase transparency in litigations.
Senate Bill 69 sets forth several key requirements. First, a person or entity engaging in litigation funding in Georgia must register as a litigation financier with the Department of Banking and Finance and provide specified information, including any affiliation with foreign persons or principals. Such filings are public records subject to disclosure.
Second, the bill restricts the influence of a litigation financier in actions or proceedings where the financier provided funding. For example, a litigation financier cannot direct or make decisions regarding legal representation, expert witnesses, litigation strategy, or settlement, which are reserved only for the parties and their counsel. A litigation financier also cannot pay commissions or referral fees in exchange for a referral of a consumer to the financier, or otherwise accept payment for providing goods or services to a consumer.
Third, the bill renders discoverable the existence, terms, and conditions of a litigation financing agreement in the underlying lawsuit. Although mere disclosure of information about a litigation financing agreement does not make such information automatically admissible as evidence at trial, it opens the door to that possibility.
Fourth, the bill delineates specific requirements for the form of a litigation financing agreement and mandates certain disclosures about the consumer’s rights and the financier’s obligations. A financier’s violation of the bill’s provisions voids and renders unenforceable the litigation financing agreement. Willful violations of the bill’s provisions may even lead to a felony conviction, imprisonment, and a fine of up to $10,000.
Fifth, the bill holds a litigation financier “jointly and severally liable for any award or order imposing or assessing costs or monetary sanctions against a consumer arising from or relating to” an action or proceeding funded by the financier.
According to a Senate press release, Senate President Pro Tempore John F. Kennedy, who sponsored the legislation, lauded the Senate’s passage of the bill as enhancing transparency and protection for consumers. He commented that “[Georgia’s] civil justice system should not be treated as a lottery where litigation financiers can bet on the outcome of a case to get a piece of a plaintiff’s award” and that “SB 69 establishes critical safeguards for an industry that continues to expand each year.” He further stressed the need to “level the playing field and ensure that [Georgia’s] legal system serves the people—not powerful financial interests.” Since passing the Senate, the bill has also proceeded through the House First and Second Readers.
Georgia’s proposed legislation is largely in line with recent proposed or enacted TPLF legislation in other states. In October 2024, the New Jersey Senate Commerce Committee advanced Senate Bill 1475, which similarly requires registration by a consumer legal funding company, restricts the actions and influence of a consumer legal funding company, and mandates certain disclosures in a consumer legal funding contract, among other things. Indiana and Louisiana also enacted TPLF legislation codified respectively at Ind. Code §§ 24-12-11-1 to -5 (2024), and La. Stat. Ann. §§ 9:3580.1 to -.7 and 9.3580.11 to .13 (2024). West Virginia expanded its TPLF laws by enacting legislation codified at W. Va. Code §§ 46A-6N-1, -4, -6, -7, and -9 (2024). But different from these legislations, Georgia’s proposed legislation explicitly provides for the possibility of felony consequences for willful violations of its provisions.
TPLF has also reverberated at the federal level. In October 2024, the United States Supreme Court’s Advisory Committee on Civil Rules reportedly proposed to create a subcommittee to examine TPLF. H.R. 9922, the Litigation Transparency Act of 2024, was also introduced in the United States House of Representatives that same month and would require disclosure of TPLF in civil actions.
But while some argue that TPLF regulation would bring greater transparency and reduce frivolous litigation, others protest that such regulation would harm litigants with less resources. Either way, litigants would be well-served to monitor important developments regarding TPLF at both the state and federal levels.
Can An Employer Require Employees To Invest In The Business?
Employee stock bonus, stock purchase, and stock option plans are extremely common. Most employees and prospective employees are undoubtedly happy to receive these types of equity compensation awards, but can an employer require an employee to invest in the employer’s business. The California Labor Code provides:
Investments and the sale of stock or an interest in a business in connection with the securing of a position are illegal as against the public policy of the State and shall not be advertised or held out in any way as a part of the consideration for any employment.
Cal. Lab. Code § 407. This would seem to be a problem.
Fortunately, Section 408(c) of the Corporations Code provides:
Sections 406 and 407 of the Labor Code shall not apply to shares issued by any foreign or domestic corporation to the following persons:
(1) Any employee of the corporation or of any parent or subsidiary thereof, pursuant to a stock purchase plan or agreement or stock option plan or agreement provided for in subdivision (a).
(2) In any transaction in connection with securing employment, to a person who is or is about to become an officer of the corporation or of any parent or subsidiary thereof.
A similar provision was added in 2015 with respect to domestic and foreign limited liability companies. Cal. Corp. Code § 17704.01(e).
This does not mean that corporations and LLCs are out of the woods in every case in which it is alleged that the employee was forced to invest. In Hulse v. Neustar, Inc., 2019 WL 13102321 (S.D. Cal. Dec. 18, 2019), the court denied the defendant’s motion for judgment on the pleadings because the plaintiff alleged that the defendant required the plaintiff to participate in an equity rollover that was separate and apart from the terms of the initial stock option plans pursuant to which the plaintiff acquired his equity.
Another Court Partly Blocks DEI-Related Executive Orders; U.S. Government Continues to Stay Its Course
On Thursday, March 26, 2025, a federal judge for the Northern District of Illinois issued a Temporary Restraining Order (TRO) prohibiting enforcement of portions of Executive Order 14151 (“the J20 EO”) and Executive Order 14173 (“the J21 EO”), two of President Trump’s first directives seeking to eliminate Diversity, Equity, and Inclusion (DEI), previously explained here.
This order has implications for federal contractors and grant recipients nationwide, at least for now.
The Case
The case, Chicago Women in Trades v. Trump et. al., was brought by a Chicago-based association, Chicago Women in Trades (CWIT), that advocates for women with careers in construction industry trades. Federal funding has constituted forty percent of CWIT’s budget. After the issuance of the J20 and J21 EOs, CWIT received an email from the U.S. Department of Labor’s (DOL) Women’s Bureau stating that recipients of financial assistance were “directed to cease all activities related to ‘diversity, equity and inclusion’ (DEI) or ‘diversity, equity, inclusion and accessibility’ (DEIA).” Similarly, one of its subcontractors emailed CWIT to immediately pause all activities directly tied to its federally funded work related to DEI or DEIA. CWIT brought the action against President Trump, the DOL, and other agencies alleging, among other things, that its Constitutional rights were violated by various provisions in both EOs. For example, CWIT argued that the J20 EO targeted “DEI,” “DEIA,” “environmental justice,” “equity,” and “equity action plans” without defining any such terms. This lack of definition, according to CWIT, makes it difficult to understand what conduct is permissible and what is not.
Contractor “No DEI” Certifications Blocked
The ruling enjoins the DOL and, by extension, its Office of Federal Contract Compliance Programs (OFCCP) from enforcing two discrete portions of the Executive Orders: (1) Section 2(b)(i) of the J20 EO (the “Termination Provision”), authorizing the agency to terminate a government contract or grant based on the awardee’s alleged DEI-related activities; and (2) Section 3(b)(iv) of the J21 EO (the “Certification Provision”), requiring federal contractors and grant recipients to certify that they do not operate any program promoting unlawful DEI. A Memorandum Opinion and Order accompanying the TRO emphasizes that its ruling constrains only one agency, at least for now.
The injunction against the Termination Provision is also narrow in that it applies only to the plaintiff, CWIT. Specifically, the TRO blocks the DOL from taking any adverse action related to any contracts with the plaintiff. The TRO further forbids the federal government from initiating any enforcement action under the False Claims Act against the plaintiff. Nevertheless, the TRO does carry nationwide implications, in that it prohibits the DOL from requiring any contractor or grantee to make any certification or other representation pursuant to the terms of the J21 EO’s Certification Provision.
Other Initiatives to Curb DEI Continue
Despite judicial opinions criticizing the EOs, most notably in a case currently under review by the U.S. Court of Appeals for the Fourth Circuit, governmental agencies continue to move forward with actions supportive of the EOs, and enforcement against public and private entities for DEI initiatives or other practices. For example:
On March 19th, the U.S. Equal Employment Opportunity Commission and the U.S. Department of Justice (DOJ) issued multiple documents explaining the administration’s view of DEI as a form of workplace discrimination.
On March 26th, the DOJ issued a Memorandum to all U.S. law schools regarding race-based preferences in admissions and employment decisions.
On March 27th, two agencies issued press releases announcing investigations: the U.S. Department of Health and Human Services announced action against an unnamed “major medical school in California,” and the DOJ issued a press release stating that it is looking into whether four major universities in California use “DEI discrimination” in their admissions practices. The DOJ announcement concludes that “compliance investigations into these universities are just the beginning of the Department’s work in eradicating illegal DEI and protecting equality under the law.”
On March 28th, the administration made headlines across Europe after two French newspapers published the template of a letter and accompanying form sent by the U.S. Department of State to companies in France, Belgium, Italy, and other European Union nations that do business with the federal government, demanding compliance with the J21 EO and requesting completion of a form to certify “compliance in all respects with all applicable federal anti-discrimination law…” and that the contractor does not “operate any programs promoting Diversity, Equity, and Inclusion that violate any applicable Federal anti-discrimination laws.”
What’s Next?
The court will consider further injunctive relief in the coming weeks, and may convert the TRO into a preliminary injunction after a hearing scheduled for April 10, 2025. At present, at least a dozen lawsuits have been filed challenging the Executive Orders regarding DEI, while Executive Branch agencies continue to pursue enforcement activities aligned with the EOs and administration policy.
United States Court of Appeals Enforces Arbitration Agreement Against Third-Party Non-Signatories
Arbitration agreements often seem straightforward—until they unexpectedly bind parties who never signed them. The United States Court of Appeals for the Eleventh Circuit’s recent decision in Various Insurers v. General Electric International, Inc., ___ F.4th ___ (11th Cir. 2025), underscores the reach of arbitration clauses and the courts’ willingness to enforce them against third parties. This case highlights how third-party beneficiaries—and their insurers—can be required to arbitrate disputes, even though they were not signatories to the contract. The ruling is a good reminder for businesses, insurers, and legal practitioners to carefully consider the third-party implications of arbitration clauses when drafting, reviewing, and enforcing international commercial agreements.
Background: Arbitration Battle Following a Catastrophic Failure
The dispute arose from a catastrophic turbine failure at an Algerian power plant owned by Shariket Kahraba Hadjret En Nouss (SKH). SNC-Lavalin Constructeurs International Inc. (SNC) operated the plant on SKH’s behalf pursuant to an Operations and Management Agreement. In turn, SNC had entered a Services Contract with General Electric International (GE) to supply parts and services for the power plant. The Services Contract between SNC and GE International contained an arbitration clause.
Following the turbine failure, various insurers and reinsurers, acting as subrogees of SKH, sued GE International and other General Electric companies in the U.S. State of Georgia’s state-wide business court. GE International and the other General Electric companies removed the case to federal court and then sought to compel arbitration, arguing that SKH was a third-party beneficiary of the Services Contract and, as such, its insurers and reinsurers were also bound by the arbitration clause.
The Eleventh Circuit’s Analysis: Why the Insurers Were Bound to Arbitrate
The central issue was whether SKH, as the power plant’s owner, was a third-party beneficiary of the Services Contract between SNC and GE International. If so, SKH’s subrogated insurers and reinsurers would also be required to arbitrate.
The court applied federal common law to determine SKH’s third-party beneficiary status, to hold that SNC and GE International intended “to grant SKH the benefit of the performance promised” under the Services Contract, and therefore that SKH was indeed a third-party beneficiary.
The key facts about the Services Contract that led the court to that conclusion included the following:
The Services Contract explicitly referenced SKH’s ownership of the power plant and the Operations and Maintenance Agreement between SNC and SKH, including SNC’s obligations to operate and maintain the power plant for SKH’s benefit.
SKH had decision-making authority over certain changes to the power plant’s operations that would trigger GE International’s contractual obligations.
The Services Contract allowed SKH to act unilaterally in order to limit damages and losses during emergencies.
SKH had rights to access certain reports that the Services Contract required GE International to prepare, further evidencing SKH’s direct interest in the contract’s performance.
Because SKH was deemed a third-party beneficiary, the court ruled that its insurers—via subrogation—were also bound by the arbitration clause in the Services Contract. The court distinguished two other federal decisions declining to compel arbitration against third-party beneficiaries where the arbitration clause covered only disputes between the contracting parties.
Delegation of Arbitrability: The Role of ICC Rules
The court then addressed who should decide whether the insurers’ and reinsurers’ specific claims were subject to arbitration, the courts or the arbitrator. The Services Contract incorporated the International Chamber of Commerce (ICC) arbitration rules, which expressly delegate arbitrability decisions to the arbitrator. Citing its own precedent (Terminix Int’l Co., LP v. Palmer Ranch Ltd. P’ship, 432 F.3d 1327 (11th Cir. 2005)), the court found that incorporating the ICC rules was clear evidence that the parties intended to delegate arbitrability decisions to the arbitrator.
This means that the arbitrator, not the court, has to decide which, if any, of the insurers’ and reinsurers’ claims were subject to arbitration.
Key Implications of the Ruling
Contracts should clearly define whether third parties—such as affiliates, subcontractors, and beneficiaries—are bound by arbitration clauses. Manufacturers, suppliers, and distributors should consider whether they are bound by arbitration clauses in vendor contracts they have not signed but for which they could be deemed third-party beneficiaries—or conversely, whether they wish to enforce an arbitration clause against a third party that has not signed it. The same holds true for parties to large-scale construction and engineering contracts involving agreements between multiple stakeholders. Insurers stepping into the shoes of an insured party will normally be bound by the insured’s arbitration obligations, potentially limiting litigation options. And because these issues may depend on which law applies to the arbitration clause, contracts should state that clearly as well.
You can read the court’s full opinion here.
Chapter 15: A More Efficient Path for Recognition of Foreign Judgments as Compared with Adjudicatory Comity
Chapter 15 of the United States Bankruptcy Code, which adopts the United Nations Commission on International Trade Law’s (“UNCITRAL”) Model Law on Cross-Border Insolvency, provides a streamlined process for recognition of a foreign insolvency proceeding and enforcement of related orders. In adopting the Model Law, the legislative history makes clear that Chapter 15 was intended to be the “exclusive door to ancillary assistance to foreign proceedings,” with the goal of controlling such cases in a single court. Despite this clear intention, U.S. courts continue to grant recognition to foreign bankruptcy court orders as a matter of comity, without the commencement of a Chapter 15 proceeding.
While it is tempting choice for a bankruptcy estate representative to seek a quick dismissal of U.S. litigation, without the commencement of a Chapter 15 case, it is not always the most efficient path.[1] First, because an ad hoc approach to comity requires a single judge to craft complex remedies from dated federal common law, there is a significant risk that such strategy will fail (and the estate representative will subsequently need Chapter 15 relief), increasing litigation/appellate risk and thus, the foreign debtor’s overall transaction costs in administering the case.[2] Second, the ad hoc informal comity approach is of little use to foreign debtors, who need to subject a large U.S. collective of claims and rights to a foreign collective remedy in the United States because it does not give the foreign representative the specific statutory tools available in Chapter 15—the ability to turn over foreign debtor assets to the debtor’s representative; to enforce foreign restructuring orders, schemes, plans, and arrangements; to generally stay U.S. litigation against a foreign debtor in an efficient, predictable manner; to sell assets in the United States free and clear of claims and liens and anti-assignment provisions in contracts; etc.[3]
Wayne Burt Pte. Ltd. (“Wayne Burt”), a Singaporean company, has battled to recognize a Singaporean liquidation proceeding (the “Singapore Liquidation Proceeding”) (and related judgments) in the United States, highlighting the inherent risks in seeking recognition outside of a Chapter 15 case. The unusually litigious and expensive pathway Wayne Burt followed to enforce certain judgments shows how Chapter 15 provides an effective streamlined process for seeking relief.
First, Wayne Burt sought dismissal, as a matter of comity, of a pending lawsuit in the U.S. District Court for New Jersey (the “District Court”). On appeal, after years of litigation, the Third Circuit concluded that the District Court did not fully apply the appropriate comity test and remanded the case for further analysis. Thereafter, the liquidator sought, and obtained, recognition of Wayne Burt’s insolvency proceeding under Chapter 15 in the U.S. Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”), including staying District Court litigation that had been in dispute for five years in the United States and ordering the enforcement of a Singaporean turnover order that had been the subject of complex litigation as well within two months of the commencement of the Chapter 15 case.
The Dispute Before the District Court
The Wayne Burt case originated, almost exactly five years ago, as a simple breach of contract claim and evolved into a complex legal battle between Vertiv, Inc., Vertiv Capital, Inc., and Gnaritis, Inc. (together “Vertiv”), Delaware corporations, and Wayne Burt. The litigation began in January 2020, when Vertiv sued Wayne Burt in District Court, seeking to enforce a $29 million consent judgment entered in its favor. At the time the consent judgment was entered, however, Wayne Burt was already in liquidation proceedings in Singapore. Thus, a year after the entry of judgment, the liquidator moved to vacate the judgment on the grounds of comity.
On November 30, 2022, the District Court granted Wayne Burt’s motion and dismissed the complaint with prejudice.[4] The District Court based its decision on a finding that Singapore shares the United States’ policy of equal distribution of assets and authorizes a stay or dismissal of Vertiv’s civil action against Wayne Burt. Vertiv appealed to the Third Circuit.
The Third Circuit Establishes a New Adjudicatory Comity Test
In February 2024, the Third Circuit, in its opinion, set forth in detail a complex multifactor test for determining when comity will allow a U.S. court to enjoin or dismiss a case, based on a pending foreign insolvency proceeding, without seeking Chapter 15 relief.[5] This form of comity is known as “adjudicatory comity.” “Adjudicatory comity” acts as a type of abstention and requires a determination as to whether a court should “decline to exercise jurisdiction over matters more appropriately adjudged elsewhere.”[6]
As a threshold matter, adjudicatory comity arises only when a matter before a United States court is pending in, or has resulted in a final judgment from, a foreign court—that is, when there is, or was, “parallel” foreign proceeding. In determining whether a proceeding is “parallel,” the Third Circuit found that simply looking to whether the same parties and claims are involved in the foreign proceeding is insufficient. That is because it does not address foreign bankruptcy matters that bear little resemblance to a standard civil action in the United States. Instead, drawing on precedent examining whether a non-core proceeding is related to a U.S. Bankruptcy proceeding, the Third Circuit created a flexible and context specific two-part test. A parallel proceeding exists when (1) a foreign proceeding is ongoing in a duly authorized tribunal while the civil action is before a U.S. Court, and (2) the outcome of the U.S. civil action could affect the debtor’s estate.
Once the court is satisfied that the foreign bankruptcy proceeding is parallel, the party seeking extension of comity must then make a prima facie case by showing that (1) the foreign bankruptcy law shares U.S. policy of equal distribution of assets, and (2) the foreign law mandates the issuance or at least authorizes the request for the stay.
Upon a finding of a prima facie case for comity, the court then must make additional inquiries into fairness to the parties and compatibility with U.S. public policy under the Third Circuit Philadelphia Gear[7] test. This test considers whether (1) the foreign bankruptcy proceeding is taking place in a duly authorized tribunal, (2) the foreign bankruptcy court provides for equal treatment of creditors, (3) extending comity would be in some manner inimical to the country’s policy of equality, and (4) the party opposing comity would be prejudiced.
The first requirement is already satisfied if the proceeding is parallel.[8] The second requirement of equal treatment of creditors is similar to the prima facie requirement regarding equal distribution but goes further into assessing whether any plan of reorganization is fair and equitable as between classes of creditors that hold claims of differing priority or secured status.[9] For the third and fourth part of the four-part inquiry—ensuring that the foreign proceedings’ actions are consistent with the U.S. policy of equality and would not prejudice an opposing party—the court provided eight factors used as indicia of procedural fairness, noting that certain factors were duplicative of considerations already discussed. The court emphasized that foreign bankruptcy proceedings need not function identically to similar proceedings in the United States to be consistent with the policy of equality.
In the Wayne Burt appeal, the Third Circuit vacated the District Court’s order finding that although there was a parallel proceeding, the District Court failed to apply the four-part test to consider the fairness of the parallel proceeding.
The Chapter 15 Case
On remand to the District Court, Wayne Burt’s liquidator renewed his motion to dismiss. Following his renewed motion, protracted discovery ensued, delaying a District Court ruling on comity.
Additionally, during the pendency of the appeal, Wayne Burt’s liquidator commenced an action in Singapore seeking that Vertiv turn over certain stock in Cetex Petrochemicals Ltd. that Wayne Burt pledged as security for a loan from Vertiv (the “Singapore Turnover Litigation”). Wayne Burt’s liquidator contended that the pledge was void against the liquidator. Vertiv did not appear in the Singapore proceedings and the High Court of Singapore entered an order requiring the turnover of the shares (the “Singapore Turnover Order”).
As a result, Wayne Burt’s liquidator shifted his strategy to obtain broader relief than what adjudicatory comity could afford in the pending U.S. litigation—recognition and enforcement of the Singapore Turnover Order. The only way to accomplish both the goal of dismissal of the U.S. litigation and enforcement of the Singapore Turnover Order is through a Chapter 15 proceeding.
On October 8, 2024, Wayne Burt’s liquidator commenced the Chapter 15 case (the “Chapter 15 Case”) by filing a petition along with the Motion for Recognition of Foreign Proceedings and Motion to Compel Turnover of Cetex Shares (the “Motion”). Vertiv opposed the Motion, contending that, under the new test laid out by the Third Circuit, the Singapore Liquidation Proceeding should not be considered the main proceeding because it may harm Vertiv.[10] Vertiv further contended that even if the Singapore Liquidation Proceeding was considered the main proceeding, the Bankruptcy Court should not “blindly” enforce the Singapore Turnover Order and should itself review the transaction to the extent it impacts assets in the United States.[11]
Less than two months after the Chapter 15 Case was commenced, the Bankruptcy Court overruled Vertiv’s objection, finding that recognition and enforcement of a turnover action was appropriate.[12] In so ruling, the Bankruptcy Court applied the new adjudicatory comity requirements set forth by the Third Circuit, in addition to Chapter 15 requirements.
The Bankruptcy Court began its analysis with finding that recognition and enforcement of the Singapore Turnover Order is appropriate under 11 U.S.C. §§ 1521 and 1507. Under Section 1521, upon recognition of a foreign proceeding, a bankruptcy court may grant any additional relief that may be available to a U.S. trustee (with limited exceptions) where necessary to effectuate the purposes of Chapter 15 and to protect the assets of the debtor or the interests of creditors. Courts have exceedingly broad discretion in determining what additional relief may be granted. Here, the Bankruptcy Court found that the Singapore insolvency system was sufficiently similar to the United States bankruptcy process.
Under Section 1507, a court may provide additional assistance in aid of a foreign proceeding as along as the court considers whether such assistance is consistent with principles of comity and will reasonably assure the fair treatment of creditors, protect claim holders in the United States from prejudice in the foreign proceeding, prevent preferential or fraudulent disposition of estate property, and distribution of proceeds occurs substantially in accordance with the order under U.S. bankruptcy law. Here, the Bankruptcy Court found that the Singapore Turnover Litigation was an effort to marshal an asset of the Wayne Burt insolvency estate for the benefit of all of Wayne Burt’s creditors and that enforcement of the Singapore Turnover Order specifically would allow for the equal treatment of all of Wayne Burt’s creditors.
Finally, the Bankruptcy Court found that recognition and enforcement of the Singapore Turnover Order was appropriate under the Third Circuit’s comity analysis. Specifically, the Bankruptcy Court found that the Singapore Turnover Litigation is parallel to the Motion, relying on the facts that: (1) Wayne Burt is a debtor in a foreign insolvency proceeding before a duly authorized tribunal, the Singapore High Court, (2) Vertiv has not challenged the Singapore High Court’s jurisdiction over the Singapore Liquidation Proceeding, and (3) the outcome of the Bankruptcy Court’s ruling would have a direct impact on the estate within the Singapore Liquidation Proceeding as it relates to ownership of the Cetex shares. The Bankruptcy Court concluded that the Singapore Liquidation Proceeding and the Chapter 15 Case are parallel.
The Bankruptcy Court’s analysis primarily focused on the third and fourth factors of the Philadelphia Gear test, determining that it was clear that the first factor was met because the Singapore Liquidation Proceeding is parallel to the Chapter 15 Case and that the second factor did not apply as there was no pending plan. The third inquiry was also satisfied for the same reasons detailed above for the Singapore insolvency laws being substantially similar to U.S. insolvency laws. The fourth inquiry—whether the party opposing comity is prejudiced by being required to participate in the foreign proceeding—was satisfied for the same reasons stated for Section 1507.
In recognizing and enforcing the Singapore Turnover Order, the Bankruptcy Court overruled Vertiv’s opposition finding it rests on an “unacceptable premise” that the Bankruptcy Court should stand in appellate review of a foreign court. Such an act would directly conflict with principles of comity and the objectives of Chapter 15. The Bankruptcy Court noted that this is especially true where the party maintains the capacity to pursue appeals and other necessary relief from the foreign court.
Vertiv appealed the Bankruptcy Court’s decision to the District Court, and the appeal is still pending.
Implications
Adjudicatory comity and Chapter 15 both aim to facilitate cooperation and coordination in cross-border insolvency cases. Indeed, Chapter 15 specifically incorporates comity and international cooperation into a court’s analysis, as Chapter 15 requires that a “court shall cooperate to the maximum extent possible with a foreign court.” In deciding whether to use adjudicatory comity and/or Chapter 15 it is important to consider the ultimate objective and the cost-benefit analysis of each approach. While seeking comity defensively in a U.S. litigation, without Chapter 15 relief, is possible, it can lead to inconsistent and unpredictable outcomes. Additionally, the multiple factors involved in applying adjudicatory comity can led to protracted discovery and, concomitantly, delaying recognition. By contrast, the Bankruptcy Court’s recent analysis demonstrates that the existing Chapter 15 framework, along with the well-established case law interpreting Chapter 15, provides an effective, reliable, and efficient tool for recognition and enforcement of foreign orders. That is particularly true, whereas here, a party seeks multiple forms of relief.
[1] Michael B. Schaedle & Evan J. Zucker, District Court Enforces German Stay, Ignoring Bankruptcy Code’s Chapter 15, 138 The Banking Law Journal 483 (LexisNexis A.S. Pratt 2021).
[2]Id.
[3]Id.
[4]Vertiv, Inc. v. Wayne Burt Pte, Ltd., No. 3:20-CV-00363, 2022 WL 17352457 (D.N.J. Nov. 30, 2022), vacated and remanded, 92 F.4th 169 (3d Cir. 2024).
[5]Vertiv, Inc. v. Wayne Burt PTE, Ltd., 92 F.4th 169 (3d Cir. 2024).
[6]Id. at 176.
[7]Philadelphia Gear Corp. v. Philadelphia Gear de Mexico, S.A., 44 F.3d 187, 194 (3d Cir. 1994)).
[8]Wayne Burt PTE, Ltd., 92 F.4th at 180.
[9]Id.
[10]See Vertiv’s Brief in Opposition to Motion for Recognition of Foreign Proceedings and Motion to Compel Turnover of Cetex Shares, Case No.: 24-196-MBK, Doc. No. 29, at 10-14 (D.N.J October 29, 2024).
[11]Id. at 13.
[12]In Re: Wayne Burt Pte. Ltd. (In Liquidation), Debtor., No. 24-19956 (MBK), 2024 WL 5003229 (Bankr. D.N.J. Dec. 6, 2024).
The SEC Effectively Ends Climate Disclosure Requirements Under Trump Administration
On Thursday, March 27, 2025, the U.S. Securities and Exchange Commission announced via letter to the U.S. Court of Appeals for the Eighth Circuit that SEC attorneys would no longer defend its climate change disclosure rules. These disclosure obligations were established by the SEC’s “Enhancement and Standardization of Climate-Related Disclosures for Investors” Rule, adopted by the Commission on March 6, 2024.
According to the SEC’s current acting chair, Mark Uyeda, the disclosure requirements are “costly and unnecessarily intrusive.”
Disclosure Rule Background
The Disclosure Rule targeted material risks that companies face related to climate change and how those companies are managing that risk. The Disclosure Rule required companies to disclose certain climate-related information in their registration statements and annual reports including:
Climate-related risks that have or may impact business strategy, results of operation, or financial condition;
Actions to mitigate or adapt to material climate-related risks;
Management’s role in assessing and managing material climate-related risks;
Processes used by the company to assess or manage these risks;
Any targets or goals that have materially affected or are likely to affect the company’s business; and
Financial statement effects of severe weather events and other natural conditions, including costs and losses.
Following multiple petitions seeking review of the final Rule, the SEC stayed the Disclosure Rule pending judicial review before the Eight Circuit. In February, Uyeda provided some indication that its position was changing when he directed staff to notify the court not to schedule the case for argument to provide the Commission time to deliberate and determine appropriate next steps. The reason cited for the notice was “changed circumstances.” As such, the March 27 announcement is not all that surprising.
Impact of SEC Announcement
While the SEC has not officially repealed the Disclosure Rule, by no longer defending the Rule, the SEC will allow the stay to continue indefinitely and/or allow the Eighth Circuit to remand the rule to the SEC. This sequence of events indeed creates “changed circumstances,” as it means the SEC will likely take no further action to effectuate a new Rule. As a result, the March 27, 2025, announcement by the SEC effectively terminates the Disclosure Rule.
What Does this Development Mean for You?
While the SEC’s announcement means that public companies operating in the United States are not required to make publicly available disclosures concerning greenhouse gas emissions and climate-change risks and impacts, the impact of this action may be quite limited in reality. Many U.S. companies already report climate-related risks voluntarily in response to investor demand and this action has done nothing to change the requirements imposed by individual states like California or elsewhere around the globe. And, despite this limited reprieve, companies should consider potential changes to SEC rules under future administrations. While the “pendulum” of regulatory focus has swung wide under the Trump administration, there is a strong possibility that there will be a reciprocal swing in the future. As a result, companies should consider maintaining documentation of climate-related risks and management strategies should a similar rule be promulgated.
These events are developing rapidly and will continue to move at a fast pace.