Lawsuit Alleges FDA Has Unduly Delayed Response to PFAS Petition
Last month a lawsuit filed by plaintiffs including the Tucson Environmental Justice Task Force (TEJTF) filed suit against FDA and now former FDA commissioner Robert Califf alleging that FDA had unduly delayed in responding to a petition filed by TEJTF in 2023 which had requested that FDA set tolerances for 30 types of PFAS in lettuce and blueberries and 26 types of PFAS in bread, milk, eggs, salmon, clams, and corn silage.
The lawsuit argues that FDA has unduly delayed because it has not acted consistent with its statutory mandate to “promote public health by promptly and efficiently reviewing clinical research and taking appropriate action on the marketing of regulated products in a timely manner” (21 USC § 393) and the delay allegedly is to the determinant of the public health. The lawsuit argues that prior decisions holding that courts should defer to FDA on whether to promulgate tolerances is no longer good law post-Chevron and that the “only discretion FDA may exercise for such chemicals [harmful substances] is the level of tolerance to be set.”
We will continue to monitor and report on the regulation of PFAS and other chemicals, including any changes in approach that may be implemented by the new administration.
Corporate Transparency Act Reporting Obligations Effective Again With March 21, 2025, Deadline for Most Reporting Companies
On February 17, 2025, the US District Court for the Eastern District of Texas (EDTX) in Smith, et. al. v. US Department of the Treasury, et. al., entered an order staying the nationwide injunction on enforcement of the Corporate Transparency Act (CTA). With this ruling, the beneficial ownership information (BOI) reporting requirements promulgated under the CTA are back in effect.
In light of this court action, the Financial Crimes Enforcement Network (FinCEN) announced that, for most reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025. In its announcement, FinCEN noted that this new filing deadline may be subject to further modification, however, for now, existing reporting companies should begin preparations to file their required BOI reports by March 21, 2025.
Planning for Compliance
FinCEN’s new deadline of March 21, 2025 applies to all non-exempt reporting companies formed on or before February 19, 2025. Going forward, non-exempt reporting companies formed after February 19, 2025 will have 30 days from their formation to file their BOI reports.
Reporting companies should continue to closely follow developments related to the CTA. Specifically, note that Congress is considering a bill to extend the reporting deadline to January 1, 2026, but only for reporting companies in existence before January 1, 2024. Furthermore, in its announcement, FinCEN gave itself leeway to “assess its options to further modify deadlines.”
Recent Events in CTA Litigation
The EDTX’s February 17 order was based on the US Supreme Court’s order in McHenry v. Texas Top Cop Shop, Inc. issued January 23, 2025, which stayed a similar nationwide injunction issued in a different proceeding pending in the EDTX.
Below is a recap of CTA litigation developments leading up to this February 17 order:
On December 3, 2024, in Texas Top Cop Shop, Inc., et al. v. Garland, et al., a judge in the EDTX issued a nationwide preliminary injunction halting enforcement of the CTA and its implementing regulations.
On December 23, 2024, a motions panel of the US Court of Appeals for the Fifth Circuit granted an emergency motion for a temporary stay of that preliminary injunction, effectively reinstating the original filing deadlines for reporting companies under the CTA.
On December 26, 2024, a merits panel of the Fifth Circuit vacated the motions-panel stay that was issued on December 23, resulting in another pause on the CTA’s BOI reporting requirements.
On January 7, 2025, a different judge in the EDTX issued an order in the Smith v. U.S. Department of the Treasury case, imposing a separate nationwide injunction on CTA’s enforcement.
Following the Fifth Circuit’s December 26 order pausing the CTA’s BOI reporting requirements, the US Department of Justice (DOJ) filed with the Supreme Court seeking a stay of the nationwide injunction against the enforcement of the CTA issued in the Texas Top Cop Shop case, which the Supreme Court granted on January 23, 2025. However, the Supreme Court did not address the separate nationwide injunction that was issued in Smith, which meant that, until now, the enforcement of the CTA remained on hold.
On February 5, 2025, the US Department of Justice (DOJ) (on behalf of the US Treasury Department) appealed the EDTX’s January 7 order in the Smith, and concurrently filed a motion to stay the injunction pending the outcome of the appeal to the Fifth Circuit in light of the stay ordered by the Supreme Court on January 23, 2025.
As noted above, on February 17, 2025, the EDTX in Smith stayed its own January 7, 2025 order, pending appeal. Given this decision, FinCEN’s regulations implementing the BOI reporting requirements of the CTA are no longer stayed.
A Preliminary Injunction Does Not a “Prevailing Party” Make, Criminal Conviction Through Knowingly False Evidence Violates Due Process – SCOTUS Today
The U.S. Supreme Court decided two cases today, one of which, Lackey v. Stinnie, involved an action brought pursuant to 42 U. S. C. §1983 and should be of particular interest to the many readers of this blog who practice in the civil rights space.
The second case, Glossip v. Oklahoma, is a homicide case in which the state knowingly adduced false testimony. But does the Supreme Court have jurisdiction to reverse the conviction? The answer is that it does, though an interesting mix of Justices take more than 70 pages to explain their competing views.
Lackey v. Stinnie involved a group of drivers whose licenses were suspended under a Virginia law sanctioning drivers who had failed to pay court fines. They challenged the statute as unconstitutional, and the U.S. District Court for the Western District of Virginia granted a preliminary injunction prohibiting the Virginia Department of Motor Vehicles from enforcing it. Before the case could come to trial, the state legislature repealed the law and, by agreement of the parties, the case was dismissed as moot. 42 U. S. C. §1988(b) allows the award of attorneys’ fees to “prevailing parties” under §1983, and the plaintiffs sought them. Writing for himself and six other Justices (only Justice Jackson, joined by Justice Sotomayor dissented), the Chief Justice applied a strict view of the “American Rule” and held that “the plaintiff drivers, who had gained no more than preliminary injunctive relief before the action became moot—do not qualify as ‘prevailing part[ies]’ eligible for attorney’s fees under §1988(b) because no court conclusively resolved their claims by granting enduring judicial relief.” The Court began with text, recognizing that “prevailing party” is a legal term of art. At the time when §1988(b) became law, “contemporary dictionaries defined a prevailing party as one who successfully maintains its claim when the matter is finally resolved.” A preliminary injunction doesn’t do that, because it does not conclusively decide the case on the merits. Indeed, the preliminary injunction does no more than signal likely success on the merits, “along with factors such as irreparable harm, the balance of equities, and the public interest.” The preliminary injunction’s purpose is to preserve the status quo until a trial resolves the case, and “external events that render a dispute moot do not convert that temporary order into a conclusive adjudication on the merits that materially altered the legal relationship between the parties.”
An important caveat is found in a footnote pointing out that the question of who is a “prevailing party” is different for defendants and plaintiffs. Thus, the Court’s decision today “should not be read to affect our previous holding that a defendant need not obtain a favorable judgment on the merits to prevail, nor to address the question we left open of whether a defendant must obtain a preclusive judgment in order to prevail. See CRST Van Expedited, Inc. v. EEOC, 578 U. S. 419, 431−434 (2016). “As we have explained, ‘[p]laintiffs and defendants come to court with different objectives.’” Here, the Court rejects the claim accepted by the dissenters that the drivers “prevailed” because they ultimately succeeded in having the law repealed. However, they didn’t succeed in prosecuting an actual claim in a legal action. And taking that road “made all the difference.” Frost, R., “The Road Not Taken.”
Glossip v. Oklahoma is one of those cases that, if nothing else, defies common notions about how the Justices will align. Here is a case in which Justice Sotomayor delivered the majority opinion of the Court, having been joined by the Chief Justice and Justices Kagan, Kavanaugh, and Jackson. Justice Barrett concurred in part and dissented in part, and Justice Thomas, joined by Justice Alito, dissented. Justice Gorsuch recused because he had sat on an earlier version of the case while on the U.S. Court of Appeals for the Tenth Circuit. As noted, the Justices spared no ink in dealing with this murder case. Years after Glossip was convicted of murdering his boss and sentenced to death, and after he’d filed several habeas petitions, substantial doubt about his guilt emerged through an independent law firm investigation and the state discovering documents suggesting that the main witness against Glossip had testified falsely. Indeed, “[t]he attorney general determined that Smothermon [the prosecutor] had knowingly elicited false testimony from [the witness] Sneed and failed to correct it, violating Napue v. Illinois, 360 U. S. 264, which held that prosecutors have a constitutional obligation to correct false testimony.” However, the Oklahoma Court of Criminal Appeals denied an unopposed petition for a new trial, holding that the petition was barred by Oklahoma law and that the concession was “[n]ot based on law or fact” and did not constitute a Napue error because the defense likely knew that Sneed had testified falsely about his mental condition, and this condition somehow could be tolerated because Sneed was in denial about it. The Court’s majority was plainly unimpressed with this argument because, instead of remanding the case to state court to decide whether a new trial should be granted, the Court held that “[b]ecause ample evidence supports the attorney general’s confession of error in this Court, there also is no need to remand for further evidentiary proceedings.”
Two main aspects of the Court’s ruling should be noted. First, while the independent and adequate state ground doctrine precludes the Court from considering a federal question if the state court’s decision rests on an independent and adequate state law ground, the state court’s application of its procedural rule was not such a ground because it was premised on the rejection of the attorney general’s confession of error under Napue, which was based solely on federal law. However, Oklahoma precedent confirms that rejection of an attorney general’s confession generally has been made only after finding that it was unsupported by law and the record. “By making the application of the [the state’s procedural law] contingent on its determination that the attorney general’s confession of federal constitutional error was baseless, the [state court] made the procedural bar dependent on an antecedent ruling on federal law.”
Second, and more succinctly, the Court simply reversed the conviction and held that “[u]nder Napue, a conviction obtained through the knowing use of false evidence violates the Fourteenth Amendment’s Due Process Clause.”
Justice Barrett, who agreed generally with the majority, would have remanded the case for a determination as to whether a new trial was warranted. Justice Thomas, in dissent, wrote that the state court’s denial of a new trial “should have marked the end of the road for Glossip. Instead, the Court stretches the law at every turn to rule in his favor.”
Two decisions and two bright-line tests. The Court is busy—stay tuned next week.
Preserving Camera Footage in Anticipation of Litigation
In Chepilko v. Henry, the Southern District of New York denied plaintiff’s motion for spoliation sanctions, finding that a public records request and a civilian complaint did not trigger defendants’ duty to preserve electronic evidence. In the ruling, Magistrate Judge Stewart D. Aaron analyzed when one’s obligation to preserve camera footage “in anticipation of litigation” arises for purposes of Rule 37(e) spoliation.
Chepilko v. Henry Background
Plaintiff alleged one defendant — a lieutenant with the New York City Police Department (NYPD) — used excessive force during a street encounter.[1] One year later, plaintiff brought claims against the defendant and the NYPD, including for excessive force, failure to intervene, and malicious prosecution. During discovery, a dispute arose regarding preservation (or lack thereof) of NYPD camera footage that may have captured the incident. Although the footage at issue was destroyed pursuant to the NYPD’s 30-day retention policy for camera footage, plaintiff argued its destruction was improper because defendants had an obligation to preserve it at the time it was destroyed.
Plaintiff filed a motion for sanctions under Rule 37(e). In opposition, defendants argued that at the time of its deletion, defendants were not on any notice of an obligation to preserve the footage. Plaintiff did not file suit for more than 11 months and at no time prior to the filing did defendants reasonably anticipate litigation arising from the incident. Plaintiff countered that other factors – including a Freedom of Information Law (FOIL) records request and a civilian complaint filed with the New York City Civilian Complaint Review Board (CCRB) triggered defendants’ obligation to preserve the footage. In denying plaintiff’s Rule 37(e) motion, Judge Aaron considered each of plaintiff’s arguments.
At the outset of his decision, Judge Aaron noted the well-established “threshold” requirement for a successful Rule 37(e) sanctions motion – that the allegedly spoliating party have a reasonable “anticipation of litigation” at the time the evidence is destroyed. Judge Aaron rejected plaintiff’s argument that “the incident itself” should have put defendants on notice of litigation sufficient to trigger obligations to preserve and refused to “endorse a bright line rule that a police officer should anticipate litigation every time he issues a summons.” Moreover, where, as here, plaintiff was not injured and the force used was not excessive (as found on the merits), defendants are not deemed to have “reasonably foreseen litigation” as a result. Similarly, Judge Aaron noted that a 911 call after the incident did not trigger a preservation obligation as “Plaintiff merely advised the 911 operator that [the lieutenant] ‘pushed [Plaintiff] several times.’”
Judge Aaron also rejected plaintiff’s argument that his FOIL requests for the footage from relevant cameras, filed immediately after the incident, put defendants on notice of a duty to preserve. Because initiating a public records request does not equate to a request predicated upon a potential litigation, a FOIL request does not necessarily trigger a preservation obligation. Finally, Judge Aaron rejected the argument that a plaintiff-prompted CCRB investigation triggered an obligation to preserve. The judge found that the CCRB is a separate entity from the NYPD and merely filing a civilian complaint – a relatively common occurrence – does not necessarily trigger an obligation upon another entity to preserve evidence. Accordingly, Judge Aaron rejected plaintiff’s Rule 37(e) sanctions motion in its entirety.
Takeaways for Electronic Evidence Preservation
This case serves as a useful reminder that one’s obligation to preserve evidence is triggered when litigation is reasonably anticipated, and when that obligation is triggered can be a fact intensive inquiry. There are no bright line rules about when one should reasonably anticipate litigation, and the standard can be subjective.
[1] Plaintiff received a criminal summons for disorderly conduct in disrupting vehicular traffic for standing in the street during this encounter. The summons was dismissed soon after it was issued.
Texas Supreme Court Rejects Repackaging of Professional Claims
Artful Pleading Suffers Smackdown from Texas Supreme Court
On February 21, 2025, in Pitts v Rivas, the Texas Supreme Court finally accepted and applied the “anti-fracturing rule” to professional liability claims. The rule “limits the ability of plaintiffs to recharacterize a professional negligence claim as some other claim – such as fraud or breach of fiduciary duty – in order to obtain a litigation benefit like a longer statute of limitations.”1 This rule shall apply to any professional liability claim. Long recognized by Texas Courts of Appeals – primarily in legal malpractice cases – the Court applied the anti-fracturing rule in an accountant’s malpractice case.
BackgroundIn Pitts, a former client alleged multiple causes of action including fraud, breach of fiduciary duty, and breach of contract, as well as negligence, gross negligence, and professional malpractice against a group of accountants. On summary judgment, the accountant defendants argued the negligence claims were barred by Texas’s two-year limitations statute, and the fraud, contract, and fiduciary duty claims were barred by the anti-fracturing rule. The accountant defendants also claimed the breach of contract action was barred by Texas’s four-year limitations. The trial court granted summary judgment and dismissed the suit. The Court of Appeals disagreed regarding dismissal of the fraud and fiduciary duty claims and allowed them to proceed. The Texas Supreme Court reversed and held that under the undisputed facts, there was no viable claim for breach of fiduciary duty, and the fraud claim was barred by the anti-fracturing rule.
The Texas Supreme Court explained that the anti-fracturing rule limits plaintiffs’ attempts “to artfully recast a professional negligence allegation as something more – such as fraud or breach of fiduciary duty – to avoid a litigation hurdle such as the statute of limitations.”2 The Court cautioned that it is the “gravamen of the facts alleged” that must be examined closely rather than the “labels chosen by the plaintiff.”3
If the essence, “crux or gravamen of the plaintiff’s claim is a complaint about the quality of professional services provided by a defendant, then the claim will be treated as one for professional negligence even if the petition also attempts to repackage the allegations under the banner of additional claims.”4 To survive application of the rule, a plaintiff needs to plead facts that extend beyond the scope of what has traditionally been considered a professional negligence claim.5
In Pitts, the gravamen of the claims was that the accountants made accounting errors that eventually were fatal to the Rivas’s business, resulting in its bankruptcy. Although certain the accountants’ alleged errors occurred outside of the confines of their engagement agreement, the Court noted those errors still fell within the work that an accountant might generally perform for a small business. “The rule extends to any allegation that traditionally sounds in professional negligence[.]”6 The thrust of the claim based upon the facts was that the accountants were allegedly merely negligent in providing competent accounting services, which did not fall within a breach of fiduciary duty or fraud.7
AnalysisIn dissecting the difference between fraud and negligence, the Court noted that “[o]verstating one’s professional competence is a classic example of malpractice.”8 While the accountants realized their mistakes, failed to confess hoping “nothing would come of it,” and “finally suggested ways to hide them,” the Court noted that there was no evidence that the accountants were “engaged in a fraudulent scheme” against the business and its owners or intended in any way to harm them.9 Indeed, the actual harm to the business was due to the accounting errors made by the defendants and not from any misrepresentations associated with those errors.10
With respect to the claim for breach of fiduciary duty, the Court held that whether the anti-fracturing rule was applicable, no fiduciary duty existed as a matter of law.11
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1 Pitts v Rivas, 2025 Tex. LEXIS 131 *1 (Tex. 2025).2 Id. at *6-7.3 Id. at *7.4 Id.5 Id. at *8.6 Id. at *12.7 Id. at *13-14.8 Id.at *14.9 Id. at *14-15. 10 Id. at *15.11 Id. at *17.
OSH Law Primer, Part XI (Continued): Understanding and Contesting OSHA Citations—The Whys and Hows
This is a continuation of the eleventh installment in a series of articles intended to provide the reader with a very high-level overview of the Occupational Safety and Health (OSH) Act of 1970 and the Occupational Safety and Health Administration (OSHA) and how both influence workplaces in the United States.
By the time this series is complete, the reader should be conversant in the subjects covered and have developed a deeper understanding of how the OSH Act and OSHA work. The series is not—not can it be, of course—a comprehensive study of the OSH Act or OSHA capable of equipping the reader to address every issue that might arise.
Quick Hits
If an employer decides to contest a citation, the employer must serve OSHA with a notice of contest within fifteen working days of receiving the citation. A failure to resolve a case through an informal settlement conference or file a notice of contest within fifteen working days will result in the citation becoming a final order of the Occupational Safety and Health Review Commission (OSHRC).
Employers may have multiple reasons for contesting citations, including the high cost of abatement, the risk of a citation being used by OSHA as the basis for a repeat violation, the risk of a citation being used in a civil lawsuit under state law, and potential impacts on business reputation and competitiveness.
Once a notice of contest is filed, OSHA forwards the citation and contest to OSHRC, which follows a litigation-like process involving hearings and evidence presentation before an ALJ. The ALJ’s decision can be appealed to the Review Commission and federal circuit courts. State plan states may have different procedures and deadlines.
The first article in this series provided a general overview of the OSH Act and OSHA; the second article examined OSHA’s rulemaking process; the third article reviewed an employer’s duty to comply with standards; the fourth article discussed the general duty clause; the fifth article addressed OSHA’s recordkeeping requirements; the sixth article covered employees’ and employers’ respective rights; the seventh article addressed whistleblower issues; the eighth article covered the intersection of employment law and safety issues; the ninth article discussed OSHA’s Hazard Communication Standard (HCS); the tenth article in the series examined voluntary safety and health self-audits; and the previous article reviewed OSHA’s citation process. In this article, we continue our discussion of the process for contesting OSHA citations.
Contesting OSHA Citations
If the employer decides to contest the citation, it must serve a notice of contest on the OSHA office that issued the citation within fifteen working days of receipt of the citation. Failure to either (a) settle a case through an informal settlement conference or (b) file a notice of contest within fifteen working days will result in the citation becoming a final order of the Occupational Safety and Health Review Commission (OSHRC).
Why Do Employers Contest Citations?
While the penalty amount may be minor, abatement can become cost-prohibitive. OSHA officials are typically not experts in the employer’s industry. The abatement methods they may request can oftentimes be broad and burdensome. Abatement may require, for example, substantial changes to manufacturing equipment, the purchase of new, expensive equipment, or change processes affecting the employer’s other facilities or ability to compete against others in the industry. These costs may quickly spiral an employer into competitive disadvantage.
Any citation on an employer’s record may be used by OSHA as the basis for a repeat violation. Repeat violations will typically subject an employer to a multiple of five or ten times the previous citation.
If an employer has multiple citations and violations in a brief amount of time, the odds increase that, for subsequent inspections and citations, an OSHA inspector will conclude the company is willfully or intentionally violating the OSH Act.
Depending on state law, OSHA citations may be used in a variety of ways in civil lawsuits, such as wrongful death or personal injury actions. For example, in some states, violations of safety standards can be introduced to prove that the employer was negligent per se. In other states, violations may be used as evidence of the employer’s gross negligence.
When soliciting business and new contracts, prospective customers are more frequently scrutinizing vendors’ safety records, including a review of OSHA citations issued to the employer. Citations cannot be concealed; each one is published on OSHA’s website, dating all the way back to 1971. Vendors with certain violations or several violations may be disqualified from soliciting business.
In addition, each citation on an employer’s record increases the likelihood of damage to the employer’s goodwill and business reputation. The more violations on an employer’s record, the more likely it is for the employer to be perceived as an unsafe company, scaring away business, lowering morale, inviting organized labor to recruit employees to a union for protection, and increasing additional scrutiny from OSHA.
The Process of an OSHA Contest
The notice of contest must be in writing. Federal OSHA has no form for a notice of contest. While there are no formalities or magic words to intone, an employer must adequately identify all aspects of the citation that it wishes to contest—the alleged violation, the characterization of the violation, the penalty, the abatement, the abatement date, or all the above. The notice must be adequate to put OSHA on notice that the employer is contesting either all or at least some part of the citation.
The notice of contest must be served on OSHA within fifteen working days of receipt of the citation. With very few exceptions, a citation not timely contested becomes a final order of the Occupational Safety and Health Review Commission (OSHRC) (known also as “the Review Commission”), and the order may not be reviewed by any court or agency.
OSHA starts counting the fifteen-day clock on the day when the citation is received by any agent of the employer. The agency typically sends the citation via certified mail to the closest local office where the alleged violation occurred, but sometimes OSHA will serve citations in person. In large companies, this can create confusion as to when a citation was received, as the citation moves from local offices to the legal and health, safety, and environment (HSE) departments. Rather than waste time guessing when the citation was received by the company, the safest practice is to assume OSHA hand-served the citation on the company on the date of issuance listed on the citation and count fifteen working days from then.
Engaging in settlement discussions with OSHA does not stop the clock on the contest period. In many employers’ minds, the contest period creates a way-too-short deadline to negotiate a settlement with OSHA. But keep in mind settlement talks can always continue after an employer submits its Notice of Contest.
Once OSHA receives an employer’s notice of contest, the agency must immediately forward the citation and contest to the Occupational Safety and Health Review Commission in Washington, D.C. The Review Commission is frequently mistaken as being part of OSHA. It is an independent federal agency tasked by the U.S. Congress to resolve contested OSHA citations. Upon receipt of the contest materials, an OSHRC clerk will docket the matter and pass the case on to the Chief Administrative Law Judge (ALJ). The chief ALJ will then assign the case to one of the Review Commission’s ALJs in the District of Columbia, Atlanta, or Denver.
The Review Commission will send the employer a two-part docketing card with the case number. The employer must detach and post the half of the card that contains a notice to employees informing them that the citation is under contest and of their rights to participate in the proceedings. The employer must then date and sign the other half of the card and mail it back to the Review Commission. This second half of the card notifies the Review Commission of the posting. If the employer fails to return the card, the Review Commission will send a reminder. If OSHRC receives no card back from the employer, it reserves the right to dismiss the employer’s contest.
Once docketed with the Review Commission, the case will follow certain procedures that appear very similar to a normal litigation track in state or federal courts. Ultimately, the ALJ will schedule a hearing to hear witnesses and receive evidence from all parties. OSHA will proceed first, and typically call the compliance officer who conducted the inspection as its first witness. The employer/respondent will have the opportunity to cross-examine any of OSHA’s witnesses, just as OSHA will have an opportunity to cross-examine the respondent’s witnesses. The hearing can continue for days or weeks, until both sides have presented their full cases to the ALJ. Thereafter, the ALJ will issue a decision that can be appealed by either party to the Review Commission, and thereafter, federal circuit courts.
State Plan States
Currently, there are twenty-two state plan states. State plan states maintain their own state OSH Act and have some subtle differences in the manner they handle citations and deadlines for appeal. Typically, the specific jurisdictional requirements are included in the citation packet the state plan sends to the employer. An employer seeking to appeal a state citation may want to carefully review the expectations outlined in the specific jurisdiction.
Choice-of-Law Provisions Cannot Circumvent Ending Forced Arbitration Act, Court of Appeal Rules
On February 3, 2025, the California First District Court of Appeal held that a party to an arbitration agreement cannot rely on a choice-of-law provision to wire around the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “EFAA”). The case, Casey v. Superior Court, clarifies that a party cannot circumvent the EFAA and compel a dispute to arbitration by using a pre-litigation choice-of-law provision.
Legal Background
The Federal Arbitration Act (“FAA”) requires courts to enforce arbitration agreements arising from transactions involving interstate commerce. Passed in 1925, the FAA embodies a liberal federal policy in favor of enforcing arbitration agreements. The California Arbitration Act (“CAA”) was passed in 1961 and applies even in situations where the FAA does not. Like the FAA, the CAA provides that pre-dispute arbitration agreements are “valid, enforceable and irrevocable.”
As we have previously written, Congress passed the EFAA in March 2022 to exclude sexual harassment claims from mandatory arbitration provisions. The EFAA provides that “at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, . . . no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.” The EFAA therefore permits a person to bring a claim for sexual harassment or sexual assault in court, even if the person previously agreed to arbitrate such disputes. The EFAA amended, and is now part of, the FAA. There is no California statutory counterpart to the EFAA.
Facts and Procedural History
In Casey, the plaintiff signed an employment contract in 2017 that included an arbitration agreement (the “Employment Agreement”). A clause in the Employment Agreement provided that the construction and interpretation of the agreement shall “be governed by the laws of the State of California.” In September 2023, the plaintiff filed a lawsuit against her employer and a coworker, alleging that the coworker made a series of unwanted sexual remarks in late 2022. The plaintiff brought a claim for sexual harassment under the Fair Employment and Housing Act (“FEHA”) against both her employer and her coworker. The plaintiff’s suit included several other claims against her employer only, including wage-and-hour violations unrelated to her sexual harassment dispute.
The employer and the coworker defendant jointly filed a motion to compel arbitration. The plaintiff opposed the motion, arguing that the EFAA applied and the dispute could not be compelled to arbitration. The trial court granted the motion to compel arbitration on the basis that the Employment Agreement’s choice-of-law provision rendered the EFAA inapplicable to the dispute. The plaintiff immediately appealed.
The Court of Appeal’s Decision
On February 3, the Court of Appeal issued a decision reversing the trial court’s judgment and concluding that the plaintiff’s dispute was covered by the EFAA. In reaching that decision, the Court of Appeal found the plaintiff’s employment relationship sufficiently involved interstate commerce because both the employer’s business and the plaintiff’s specific job duties included interstate business and communication. The Court of Appeal also concluded that the CAA is preempted by the EFAA under the doctrine of conflict preemption—which occurs when “state law stands as an obstacle to the accomplishment and execution” of Congress’s objectives. Relying on the choice-of-law provision, the Court of Appeal noted, would “directly contravene Congress’s purpose and objectives in enacting the EFAA.” The Court stated that in enacting the EFAA, Congress expressed an intention to guarantee judicial forums for suits involving sexual harassment or sexual assault disputes. Accordingly, the Court reasoned, the plaintiff could elect to render the arbitration provisions of the Employment Agreement invalid with respect to her sexual harassment dispute.
The Court of Appeal also rejected the employer’s argument that the EFAA did not apply retroactively to the plaintiff’s 2017 Employment Agreement. The Court noted that the EFAA covers any dispute or claim that arises or accrues on or after March 3, 2022. Here, plaintiff’s complaint alleged the sexual harassment occurred in December 2022. Because the plaintiff’s claims accrued on or after March 3, 2022, the Court found that the EFAA applied.
Finally, the Court of Appeal concluded that the EFAA applied to the plaintiff’s entire lawsuit—including the wage-and-hour claims that were factually unrelated to the plaintiff’s sexual harassment dispute. Accordingly, the plaintiff could not be compelled to arbitrate any part of her lawsuit. This result is consistent with prior decisions from California Courts of Appeal that we have covered here.
Ultimately, the Court of Appeal ordered the trial court to vacate its order compelling arbitration and enter a new order denying the defendants’ motion to compel.
Key Takeaways
Casey confirms that parties cannot use choice-of-law provisions in arbitration agreements to circumvent the EFAA. Accordingly, if a plaintiff brings a claim involving sexual assault or harassment, the EFAA precludes the defendant from forcing the plaintiff to litigate the claims—regardless of whether a choice-of-law provision exists in the contract.
The Casey decision comes four months after the California Court of Appeal’s decision in Liu v. Miniso Depot CA, Inc.—which also held that if a plaintiff brings a suit that merely includes a sexual harassment claim, none of the other claims may be arbitrated. Together, Casey and Liu ensure that more lawsuits containing sexual harassment and sexual assault claims will be heard in court and not compelled to arbitration.
Employers should consult with outside counsel to review their existing employment and arbitration agreements. In addition, employers—working with experienced counsel—should understand what these holdings mean for them and what steps they should take to prevent and defend against future lawsuits that may be subject to the EFAA.
Corporate Transparency Act Update: Reporting Requirements Now Back in Effect
Beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) are now back in effect. As a result, all entities subject to the CTA are once again obligated to file BOI reports with FinCEN.
Following the most recent order from the U.S. District Court for the Eastern District of Texas in Smith v. U.S. Department of Treasury, FinCEN’s regulations are no longer stayed. With that being said, FinCEN has extended the reporting deadline to March 21, 2025 (30 calendar days from February 19, 2025). In its recent notice extending the deadline, FinCEN also announced that during this 30-day period, reporting deadline modifications will be further assessed in order to reduce regulatory burdens on businesses.
While additional updates from FinCEN are expected prior to the March 21 deadline, reporting companies that were previously required to file before March 21 are currently obligated to file BOI reports by the extended deadline. Companies should continue to closely monitor for updates over the course of the next 30 days.
For information on filing, see our prior alert here.
For more information on the recent update, see the recent FinCEN Notice here.
Courtroom Chemistry: How Trial Team Dynamics Shape Case Outcomes – Speaking of Litigation [Video] [Podcast]
In this episode, Epstein Becker Green attorneys Shruti Panchavati, Melissa Jampol, and Diana Costantino Gomprecht share their trial team experiences, breaking down how trial team dynamics can directly affect courtroom outcomes.
Tune in as the panel uncovers signs of dysfunction that can derail momentum and explores how jury, judge, and arbitrator perceptions hinge on a team’s professionalism, chemistry, and preparation.
With practical insights, real-world anecdotes, and nods to courtroom cinema classics, this episode offers a compelling glimpse into what it takes to handle complex litigation with precision and skill. Listen now to gain a deeper understanding of the factors that drive success in the courtroom.
Trump Administration Rescinds Council on Environmental Quality’s Guidelines, Creating Widespread Uncertainty for the National Environmental Policy Act Compliance by Energy and Infrastructure Projects
On February 19, 2025, the Trump Administration issued an Interim Final Rule rescinding the Council on Environmental Quality’s (CEQ’s) regulations setting forth the requirements for compliance with the National Environmental Policy Act (NEPA). The validity of the CEQ’s NEPA regulations has been cast into substantial doubt by two recent court cases and two of President Trump’s executive orders. Publication of that rule in the Federal Register on February 25 sets in motion the elimination of the CEQ’s NEPA regulations as the binding standards for NEPA compliance, a role they have served since 1978. Without these standards, federal agencies and project developers will need to base their environmental reviews on the vague provisions of the statute. Unless Congress steps in to revise the statute itself, this change creates significant uncertainty for major infrastructure projects and project developers.
Why NEPA Matters
Signed by President Nixon on New Year’s Day in 1970, NEPA requires federal agencies to review the environmental impact of discretionary actions (such as issuing permits). In 1978, in response to an executive order issued by President Carter, the Council on Environmental Quality issued regulations that require all federal agencies to complete an environmental impact statement, an environmental assessment, or to determine that the action qualifies for a “categorical exclusion.”
Compliance with NEPA can create significant uncertainty for projects. Preparation of an environmental impact statement can require years to complete, impacting project timelines. Challenges to the sufficiency of NEPA review are common and can add further years of uncertainty to energy and infrastructure projects.
Recent NEPA Decisions, Executive Orders, and the Interim Final Rule
In the past three months, two court rulings and two executive orders preceded repeal of the CEQ’s NEPA regulations.
On November 12, 2024, the D.C. Circuit Court of Appeals ruled in Marin Audubon Society v. Federal Aviation Authority that the CEQ does not have rulemaking authority and therefore, the CEQ’s NEPA regulations were promulgated without Congressional authorization. The court denied requests for en banc review on January 31, 2025. On February 3, 2025, the District Court for the District of North Dakota decided Iowa v. CEQ, adopting the reasoning of Marin Audubon Society and concluding that the 2024 CEQ NEPA regulations were issued without authority and therefore invalid.
In between those two decisions, on January 20, 2025, the Trump Administration issued Executive Order 14154, revoked President Carter’s executive order that first directed CEQ to issue binding regulations implementing NEPA and directed the CEQ to take action within 30 days to propose recission of the CEQ’s NEPA regulations.
Acting within the required 30 days, on February 19 the CEQ issued the Interim Final Rule proposing the rescission of the CEQ’s NEPA regulations. The Interim Final Rule cites President Trump’s Executive Order 14154 as well as the decisions in Marin Audubon Society and Iowa v. CEQ as grounds for the decision. That Interim Final Order was accompanied by a memorandum, directing federal agencies to “[c]onsider voluntarily relying on [the soon-to-be-rescinded] regulations in completing ongoing NEPA reviews or defending against” challenges to project, and not delaying ongoing NEPA reviews while the NEPA procedures are updated.
Significant Uncertainty Ahead
Unless the Interim Final Rule and the decision in Iowa v. CEQ are overturned on judicial review or Congress takes action to clarify the law, the end of the CEQ’s NEPA regulations will lead to significant legal uncertainty for any project that requires federal approvals.
In light of the Interim Final Rule, federal agencies lack clear guidance regarding whether to voluntarily follow the 2020 CEQ NEPA regulations, or whether to rely on the statutory text and any agency-specific NEPA regulations as the basis for their NEPA reviews. The “voluntary” nature of this directive, as well as differences between the level of detail in individual agency NEPA regulations, could result in inconsistent approaches across agencies.
That uncertainty will provide additional grounds for challenges to forthcoming NEPA reviews through litigation, especially if the validity of the Interim Final Rule itself faces a protracted challenge in federal court. Until federal courts establish a new “doctrine” for sufficiency of NEPA review in the post-CEQ NEPA regulations world, the future for NEPA lawsuits will likely be fact- and court-specific, potentially leading to variation between circuits and greater uncertainty for infrastructure projects.
A Deepened Divide: Appellate Court Joins False Claims Act Circuit Split in Favor of Health Care Defendants
On February 18, 2025, the United States Court of Appeals for the First Circuit issued its opinion in United States v. Regeneron Pharmaceuticals Inc., finding that, in Anti-Kickback Statute (AKS) cases, the government must show a claim would not have been submitted “but for” the AKS violation to establish False Claims Act (FCA) liability.1
This appeal stemmed from allegations that Regeneron Pharmaceuticals induced prescriptions of Eylea, an ophthalmological drug, by covering copayments for certain recipients of the drug. The government contended that the funding of copayments constituted kickbacks and therefore resulted in false claims made to Medicare in violation of the FCA. At issue for the First Circuit was the interpretation of “resulting from” in the 2010 amendment to the AKS, which provides that a “claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].”2 The Court ultimately decided that “statutory history provides no reason to deviate from the ordinary course, in which we treat ‘resulting from’ as requiring but-for causation” and that this interpretation would not render it difficult for the government to establish liability. 3
The First Circuit’s ruling is favorable for health care providers, as it sets a higher bar for the government to prove causation in FCA cases involving AKS violations. Nevertheless, the decision deepens a circuit split regarding the causation requirements of FCA claims arising from AKS violations. While this decision aligns the First Circuit with the Sixth and Eighth Circuits, the decision contrasts with the Third Circuit, which requires only a demonstration of a link “between the alleged kickbacks and the medical care received . . .”4 This circuit split will continue to persist until the Supreme Court addresses the issue. However, the timing of such a decision is uncertain, especially after the Supreme Court declined to hear a related appeal from the Sixth Circuit in 2023.5
As courts continue to take on this issue, health care providers and FCA litigants should closely monitor developments in this area, particularly if they operate in jurisdictions without controlling case law. Understanding the applicable causation standard is crucial for navigating FCA litigation effectively and staying informed will be key to managing potential risks and liabilities as the legal landscape evolves.
[1] United States v. Regeneron Pharmaceuticals Inc., No. 23-2086, 2025 WL 520466 (1st Cir. Feb. 18, 2025).
[2] See 42 U.S.C. § 1320a-7b(g).
[3] Regeneron Pharmaceuticals Inc., 2025 WL 520466, at *8-9.
[4] United States ex rel. Greenfield v. Medco Health Solutions, Inc., 880 F.3d 89, 93 (3d Cir. 2018).
[5] United States, ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023), cert. denied, No. 23-139, 2023 WL 6378570 (Oct. 2, 2023).
Court Ruling Reinstates Corporate Transparency Act Enforcement; Filing Deadlines Now Set
On February 18, 2025, the nationwide injunction against enforcing the Corporate Transparency Act (CTA) was “stayed” by Eastern District Court Judge Jeremy Kernodle (citing the Supreme Court’s ruling in Texas Top Cop Shop), and FinCEN has stated (in a February 18, 2025 notice) that the deadline for most reporting companies to make required filings is now March 25, 2025. Although FinCEN did not explicitly so state, it appears the March 25, 2025 deadline applies to reporting companies formed or registered between January 1, 2024 and February 17, 2025. Reporting companies formed or registered on or after February 18, 2025, must file within 30 days from the date of creation or registration.
In its notice, FinCEN stated that, during the next 30 days, it “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.”
The government is not expected to appeal Judge Kernodle’s ruling. The next ruling that could alter the status quo (absent legislation, executive order, or new FinCEN rule) is likely to be following the oral arguments scheduled to occur on March 25, 2025 in the Texas Cop Shop case.