Supreme Court Empowers District Courts to Challenge FCC TCPA Interpretations
The Supreme Court issued a decision on June 20, 2025, in McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation, which may fundamentally alter the landscape for businesses subject to the Telephone Consumer Protection Act (“TCPA”). In a 6–3 ruling, the Court held that district courts are not required to follow the Federal Communications Commission’s (“FCC”) interpretations of the TCPA in enforcement proceedings, unless Congress has expressly stated otherwise. This marks a significant departure from the longstanding practice in many jurisdictions, where district courts treated FCC orders as binding in TCPA litigation.
Background: The TCPA, the FCC, and the Hobbs Act
The TCPA is a federal statute that restricts certain telemarketing practices, including calls, texts, and faxes, and provides for statutory damages and class actions. Over the years, the FCC has issued a series of orders interpreting the TCPA’s provisions. Under the Hobbs Act, challenges to these FCC orders had to be brought in federal appellate courts within a short window after the order was issued. For years, this framework led many courts to conclude that district courts were bound by the FCC’s interpretations in subsequent enforcement actions, effectively preventing businesses from challenging the FCC’s reading of the law when sued for alleged TCPA violations.
The Supreme Court’s Reasoning
In its decision, the Supreme Court clarified that, absent an express statutory preclusion of judicial review, district courts in enforcement proceedings are not bound by an agency’s pre-enforcement statutory interpretation. Instead, courts must independently interpret the statute, giving appropriate respect to the agency’s views but not treating them as controlling. The Court emphasized that unless Congress has clearly stated that judicial review is precluded in enforcement proceedings, the default rule is that courts may review agency interpretations. The Hobbs Act, the Court found, does not contain such a preclusion.
The Court’s opinion explained that the Hobbs Act’s grant of “exclusive jurisdiction” to the courts of appeals to “determine the validity” of agency orders refers to pre-enforcement declaratory judgments, not to the process of determining liability in enforcement actions. When a district court disagrees with an agency’s statutory interpretation in an enforcement proceeding, it is not issuing a declaratory judgment on the validity of the agency’s order, but rather determining the correct interpretation of the statute for the case at hand.
Implications and Strategic Considerations Going Forward
For businesses that make calls or send text messages, this decision opens new avenues for defending against TCPA claims. Parties are no longer locked into the FCC’s interpretation of the statute and can now argue in district court that the agency’s reading is incorrect, even if they did not challenge the FCC’s order within the Hobbs Act’s 60-day window. This change means that businesses have expanded defenses in TCPA litigation, as they can advocate for their own interpretation of the law rather than being bound by potentially unfavorable FCC guidance.
However, this new flexibility comes with increased uncertainty. With district courts now free to reach their own conclusions about the meaning of the TCPA, there is a greater likelihood of inconsistent rulings across different jurisdictions. This could lead to forum shopping, as plaintiffs and defendants seek out courts perceived as more favorable to their interpretation of the statute. Over time, divergent district court decisions may result in circuit splits, which could prompt further Supreme Court review and prolong uncertainty until key issues are resolved at the highest level.
The decision also suggests that compliance with FCC guidance is no longer a shield in court, and companies should not assume that following agency interpretations will be dispositive in litigation. Instead, businesses must be prepared for the possibility that courts will interpret the TCPA differently from the FCC, and should adjust their compliance and litigation strategies accordingly.
In light of this decision, businesses should continue to monitor both FCC guidance and judicial developments in the TCPA space. Compliance programs may need to be revisited to account for the possibility that courts will not defer to the FCC’s interpretations. In litigation, companies should be prepared to challenge FCC interpretations and defend their own reading of the statute. The legal landscape is now more fluid, and what was once settled by FCC order may now be open to judicial debate.
Conclusion
The Supreme Court’s ruling in McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation represents a potentially significant shift in TCPA enforcement and litigation. Businesses that make calls or send text messages should review their compliance strategies and be prepared for a more dynamic and potentially unpredictable legal environment. It is advisable to consult with counsel to assess how this decision may affect your risk profile and defense options in current or future TCPA litigation.
California’s New Climate-Related Disclosure Laws: Requirements, Compliance Costs, and Deadlines for Impacted Businesses
California is often the vanguard of climate-related policies and programs. From legislation requiring the state to reduce overall greenhouse gas (GHG) emissions and procure electricity from renewable and carbon-free sources to the Cap-and-Trade Program and Low Carbon Fuel Standard, businesses operating in California must constantly stay informed of the shifting regulatory landscape.
In 2023, California enacted two laws continuing this trend. Senate Bill (SB) 253, known as the Climate Corporate Data Accountability Act, is the first law in the United States to require businesses to disclose their GHG emissions in an annual report submitted to the California Air Resources Board (CARB). SB 261, known as the Climate-Related Financial Risk Act, requires businesses to assess and report every two years to CARB on how climate-related financial risks may impact their market position, operations, and supply chains. In 2024, SB 219 amended both SB 253 and SB 261 to clarify reporting requirements and extend certain deadlines.
SB 253 requires businesses to begin reporting emissions data in 2026, while SB 261’s climate-related financial risk reports are due on January 1, 2026. If they haven’t already, covered businesses should begin preparing now. This article summarizes SB 253’s and SB 261’s reporting requirements, processes, and penalties for noncompliance. It also provides an update on litigation challenging both laws in federal court and steps taken by CARB to implement SB 253 and SB 261.
SB 253: CLIMATE CORPORATE DATA ACCOUNTABILITY ACT
SB 253, as amended by SB 219, directs CARB to adopt regulations by July 1, 2025, requiring “reporting entities” — businesses with total annual revenues over $1 billion that are formed under state or federal law and do business in California — to annually disclose their Scope 1, Scope 2, and Scope 3 emissions. SB 253 defines each scope as follows:
Scope 1 emissions are “all direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.”
Scope 2 emissions are “indirect greenhouse gas emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location.”
Scope 3 emissions are “indirect upstream and downstream greenhouse gas emissions, other than Scope 2 emissions, from sources that the reporting entity does not own or directly control. These may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.”
Examples of Scope 1 emissions (direct emissions) include company-owned vehicles or heavy machinery; on-site fuel combustion (e.g., diesel backup generators or natural gas boilers); and process emissions (e.g., from cement production or refining operations). Scope 2 emissions (indirect) are associated with the generation of purchased energy.
Scope 3 emissions, typically the largest share of a company’s GHG footprint, are the most complex and resource-intensive to measure. These emissions result indirectly from a company’s operations and are not directly emitted by the company. Upstream examples include employee travel, waste disposal, capital goods, and inbound transportation. Downstream examples include delivery, use, and disposal of sold products, franchises, and investments. SB 219’s amendments to SB 253 delayed Scope 3 reporting requirements until 2027.
To accurately measure emissions, reporting entities will likely need legal counsel, environmental consultants, and accounting/auditing support. The California Chamber of Commerce estimates initial compliance costs exceed $1 million per company, with ongoing annual costs between $300,000 and $900,000, plus additional costs for supply chain data collection and verification. SB 253 allows penalties up to $500,000 for misreporting but includes a safe harbor provision for good-faith Scope 3 emissions reporting through 2030. The law also requires third-party assurance of emissions reports, with specific requirements to be defined by CARB.
SB 261: CLIMATE-RELATED FINANCIAL RISK ACT
SB 261 applies to any “covered entity” with total annual revenues over $500 million that is formed under state or federal law and does business in California. Beginning January 1, 2026, covered entities must biennially disclose on their website a report covering two categories of climate-related financial risk information, defined as information related to the “material risk of harm to immediate and long-term financial outcomes due to physical and transition risks.” This report must also be submitted to CARB.
The two required categories are:
The covered entity’s climate-related financial risk, following the framework and disclosures recommended in the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017); and
The covered entity’s measures adopted to reduce and adapt to the disclosed risks.
Unlike SB 253, SB 261 is self-executing and does not depend on CARB regulations, although the law directs CARB to adopt rules specifying administrative penalties — capped at $50,000 — for failure to publish a report or for inaccuracies. Business groups estimate initial compliance costs to range from $300,000 to $750,000, with recurring biennial costs between $150,000 and $500,000.
CARB’S IMPLEMENTATION OF SB 253 AND SB 261
On December 5, 2024, CARB issued an Enforcement Notice stating that it would “exercise its enforcement discretion” for the first reporting cycle, provided that reporting entities demonstrate good-faith efforts to comply. CARB explained that it understood businesses “may need some lead time to implement new data collection processes” and that, for the first reporting year, businesses may rely on information already in the businesses’ possession to determine their scope 1 and scope 2 emissions.
This prompted criticism from SB 253 and SB 261 authors, California State Senators Scott Wiener and Henry Stern, in a December 11, 2024 letter. They stated they were “beyond frustrated” with CARB’s lack of progress and warned that, unless CARB acts swiftly, they would consider calling leadership before the Legislature for oversight hearings in 2025.
On December 16, 2024, CARB issued an Information Solicitation requesting stakeholder input on the implementation of SB 253 and SB 261 (as amended by SB 219). Though the comment deadline (February 14, later extended to March 21) has passed, the questions and stakeholder feedback offer valuable insight for affected businesses who will have another opportunity to comment during CARB’s formal rulemaking process.
As of this publication, CARB has not yet issued its notice of proposed rulemaking in the California Regulatory Notice Register, which would initiate the formal rulemaking process and a 45-day public comment period. CARB conducted a widely attended virtual workshop on May 29, 2025, to further discuss the rulemaking efforts and its current views of potential regulatory approaches. Rulemaking proceedings, especially for proposed regulations that generate substantial public interest often require close to the full year allowed by statute to promulgate the regulations.
LEGAL CHALLENGES TO SB 253 AND SB 261
After the enactment of SB 253 and SB 261 in October 2023, the U.S. Chamber of Commerce and various other business groups filed suit in January 2024 in the U.S. District Court for the Central District of California. The motion for preliminary injunction is currently scheduled to be heard on July 1, 2025, though a ruling may not issue until later this summer.
NEXT STEPS
Amid active litigation and delayed regulatory implementation, significant uncertainty remains around SB 253’s reporting requirements and general compliance timelines. However, consistent with CARB’s Enforcement Notice, reporting entities and covered entities should begin good-faith efforts to comply with both SB 253 and SB 261 by 2026. Companies subject to California’s new climate disclosure laws should take immediate steps to engage consultants and establish internal systems to collect the required data.
DHS Sending Termination Notices to CHNV Foreign Nationals
On June 12, 2025, the Department of Homeland Security (DHS) began sending termination notices to foreign nationals paroled into the United States under a parole program for Cubans, Haitians, Nicaraguans and Venezuelans (CHNV).
The terminations are legally allowed under a May 30, 2025, decision by the US Supreme Court lifting a federal district court injunction that had temporarily barred the federal government from implementing the revocations.
The termination notices inform the foreign nationals that both their parole is terminated, and their parole-based employment authorization is revoked – effective immediately.
Employer Obligations
The Immigration law provides that it is unlawful to continue to employ a foreign national in the U.S. knowing the foreign national is (or has become) an unauthorized alien with respect to such employment.
How will an employer know if an employee has lost work authorization?
For E-Verify users, E-Verify is in the process of notifying employers and employer agents that they need to log in to E-Verify and review the Case Alerts on the revocation of Employment Authorization Documents (EADs). The employer is then on notice that an employee has lost work authorization.
However, many employers are not enrolled in E-Verify. Those employers may learn of a revocation when an employee presents the termination notice to the employer. Also, as the CHNV revocation is in the news, DHS may consider employers on notice, with an obligation to review the status of its employees to determine whether workers have lost authorization to work.
At this point, DHS has not provided guidance to employers on their obligations, but we recommend employers act cautiously and take reasonable steps to determine whether company employees are impacted. We encourage taking these steps:
Employers should review their I-9 records and supporting documents to determine if employees have employment authorization cards with the code C11, and that the country of citizenship on the card lists Cuba, Haiti, Nicaragua or Venezuela.
When an employer is notified or discovers that an employee’s C11 work authorization has been revoked, the employer should not immediately terminate the employee. Certain individuals, even from the impacted countries, may have C11 work authorization separate and apart from the CHNV program. These work authorizations remain valid.
When an employer is reasonably certain the employee’s C11 employment authorization has been terminated, the employer should ask the employee if they have other valid work authorization (which is common). If yes, the employer should then reverify the employee’s Form I-9 in Supplement B, with the employee presenting new employment authorization documentation.
If an employee is unable to provide new employment authorization documentation, the employer should consider terminating employment. In the event of an Immigration & Customs Enforcement investigation, knowingly to continue to employ a foreign national who is not authorized to work in the U.S. can result in a potential charge.
When an employer is uncertain regarding the correct course of action, we recommend speaking to Immigration counsel to review and determine the appropriate steps.
TEMPORARY WIN?: Liberty Mutual Escapes TCPA Class Action On Jurisdictional Grounds (For Now)
Liberty Mutual appeared to be trapped in an absolute nightmare of a TCPA class action in Indiana.
It had allegedly purchased a lead from a website called InsuredNation and made prerecorded calls to a woman named Yevonne Powers.
The problem?
Liberty Mutual allegedly wasn’t on the lead form or any associated partner pages.
Eesh.
In the old days (like, last week) Liberty Mutual would have been in a world of hurt. It allegedly made thousands of robocalls to consumers like Plaintiff who had not provided valid consent to receive calls. And if those facts are true Liberty Mutual would have been facing massive exposure.
I use the past tense here because with the new McKesson case coming down from the Supreme Court on Friday the application of the FCC’s CFR concerning express written consent is now very much in doubt. Whereas that CFR provision likely required LiMu’s name to be on the form, the TCPA’s express consent requirement stripped of the regulatory provision likely does not.
In Powers v. Liberty Mutual Insurance Company, 2025 WL 1744225 (N.D. Ind. June 23, 2025) LiMu was sued in Indiana over calls made to a Virginia resident. LiMu moved to dismiss the claim on jurisdictional grounds contending it had not purposely availed itself of Indiana jurisdiction.
The Court agreed with LiMu noting that Plaintiff was in Virginia at the time of the calls and LiMu had not directed any conduct into Indiana for the court to exercise jurisdiction over it.
Interestingly one of LiMu’s employees involved with the campaign actually did reside in Indiana but the Court held that mere coincidence was not sufficient to convey jurisdiction.
So the case was dismissed. That’s great for LiMu but it is also only temporary. The case can be re-filed in Virginia or wherever LiMu is subject to general jurisdiction. So… yay, but not really.
THE DEATH OF PRESUMPTION: Are Cell Phones Still “Residential” Post McLaughlin?
The TCPA landscape is being reshaped in real time and we’re here to bear witness. With the Supreme Court’s decision in McLaughlin Chiropractic Assocs. v. McKesson Corp., No. 23-1226, 2025 U.S. LEXIS 2385 (June 20, 2025), the Court has dealt a fatal blow to Hobbs Act deference in TCPA litigation. We at TCPAWorld have been covering the impact of this decision from day one, but in case you missed it, here’s the headline: district courts are no longer bound to follow FCC interpretations of the TCPA.
Instead, courts must independently determine the law’s meaning under ordinary principles of statutory interpretation. In essence, all bets are off – questions once thought settled are ripe for reconsideration. And forefront amongst these questions is this one – are cell phone users “residential telephone subscribers” for the purposes of the TCPA? Well … maybe.
As a quick refresher, Section 227(c) of the TCPA seeks to protect residential telephone subscribers from unwanted telephone solicitations. § 227(c)(1) (emphasis added). In Section 227(c)(2), Congress directed the FCC to promulgate regulations “to implement methods and procedures for protecting the privacy rights” of residential telephone subscribers. § 227(c)(3).
The relevant FCC regulation, 47 C.F.R. § 64.1200(c), provides: “No person or entity shall initiate any telephone solicitation to: … (2) A residential telephone subscriber who has registered his or her telephone number on the national do-not-call registry. . .” (“DNC”). § 64.1200(c) (emphasis added).
But the TCPA does not define “residential.” And, unlike with Section 227(b) – which prohibits making a call using regulated technologies to several categories of phones, including “any telephone number assigned to a … cellular telephone service” – Congress was silent as to whether Section 227(c)’s protections extended to cell phones.
Through 47 C.F.R. § 64.1200(e), the FCC clarified that the rules set forth in § 64.1200(c) apply to wireless telephone numbers “to the extent described in the [FCC’s] Report and Order, CG Docket No. 02–278, FCC 03–153, ‘Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991’” (the “2003 Report and Order”). § 64.1200(e). In the 2003 Report and Order, the FCC not only determined that a wireless subscriber may register their number on the National DNC “to benefit from the full range of TCPA protections”, but also created a presumption that wireless numbers on the DNC are “residential subscribers.” 2003 Report and Order at ¶ 36.
For two decades then, and despite some creative arguments to the contrary, the law has been settled – cell phone numbers are residential for the purposes of the DNC rules. Under Section 227(c), courts generally allowed a claim to proceed if the plaintiff merely alleged that his or her cell phone number is used for residential purposes and is registered on the DNC Registry. See e.g., Barton v. Temescal Wellness, LLC, 525 F. Supp. 3d 195, 201–02 (D. Mass.), adhered to on denial of reconsideration, 541 F. Supp. 3d 138 (D. Mass. 2021) (holding that the 2003 Report and Order established “a more lenient pleading standard for residential subscriber at the motion to dismiss stage”)
But McLaughlin pulls the rug out from under this theory. While the Supreme Court case itself involved a declaratory ruling – and not a C.F.R. provision – the broad language does not preclude its application across the board. If an FCC regulation interpreting the TCPA is not grounded in the statute’s text, a district court may be free to disregard it. That includes 47 C.F.R. § 64.1200(e) and the FCC’s 2003 interpretation that wireless subscribers on the DNC registry are presumptively “residential.”
The implications are staggering. Courts are no longer constrained to accept the FCC’s conclusion that wireless numbers on the registry are residential subscribers. Instead, they can ask what Congress actually meant by “residential” and examine whether that term should apply to mobile phones at all. But does this necessarily mean that a court will come to a different conclusion? Probably not.
While the McLaughlin decision is barely a week old, we do have some data points from a post Chevron-deference landscape that could indicate the paths courts may take.
In Cacho v. McCarthy & Kelly, LLP, the Southern District of New York was amongst the first to address whether a cellphone qualified as a “residential telephone subscriber” under Section 227(c). In Cacho, the defendant argued that the “absence of any reference to cellular telephones in Section 227(c),” despite explicitly referencing them in Section 227(b), was evidence of “Congress’ intent to exclude cell phone users from the definition of ‘residential subscribers.’” 739 F. Supp. 3d at 203. However, the court disagreed, noting that section 227(b) “forbids the use of artificial and prerecorded messages to enumerated categories of phone technologies,” which includes “cellular telephone[s].” Id. at 204 (emphasis added). In contrast, Section 227(c), uses the term “residential subscriber” not in reference to particular category of technology, but to the “the type or identity of the subscriber to the technology.” Id. at 205 (emphasis added). According to the court, the omission of “line” in Section 227(c) underscores that the statute protects individuals based on their use of the phone for personal, domestic purposes, irrespective of whether it is a landline or cellphone. Id. Construing “residential subscriber” functionally, the court concluded that the term includes any individual using their phone for household purposes, aligning with the TCPA’s goal of safeguarding privacy. Id. at 206-207.
However, Cacho also indicates that this determination may require more than a mere presumption afforded by a user placing their number on the National DNC Registry. Instead, the court took into consideration a multitude of facts pleaded in the complaint to conclude that the plaintiff therein was a residential telephone subscriber:
“That cellphone is ‘Plaintiff’s personal phone that he uses for personal, family, and household use.’ Indeed, Plaintiff ‘maintains no landline phones at his residence and has not done so for at least 15 years and primarily relies on cellular phones to communicate with friends and family.’ The Complaint enumerates the domestic tasks that he performs with his phone, including ‘sending and receiving emails, timing food when cooking, and sending and receiving text messages,’ and avers that ‘the phone is not primarily used for any business purpose.’ Collectively, these allegations exceed ‘conclusory’ boilerplate, and adequately plead that Plaintiff used his cellphone for residential purposes, such that he was a residential subscriber for purposes of the TCPA and its implementing regulations.”
Id. (internal citations omitted).
Other courts have echoed this view. In Lyman v. QuinStreet Inc., the court rested its decision on “both binding Ninth Circuit precedent and the applicable regulation.” Lyman, 2024 WL 3406992 at *3. The Ninth Circuit precedent the court was referring to was Chennette v. Porch.com, Inc., which held that cellphones used for “personal and business purposes [are] presumptively residential” under Section 227(c), a conclusion reinforced by FCC regulations extending protection to wireless lines. Id. But the Court noted that it would reach the same conclusion based on the statutory text:
“Finally, the Court accords due respect to the FCC’s interpretation under pre-Chevron principles. As the Court has done here, the Court needs only ‘independently identify and respect such delegation of authority, police the outer statutory boundaries of [that delegation], and ensure that [the agency exercises its] discretion consistent with the APA.’ Here, Congress has expressly conferred discretionary authority on the agency to flesh out the TCPA. Using its discretion within the boundaries of its delegation, the agency has created a presumption that a cell phone registered on the Do Not Call Registry is a residential phone, a presumption that has lasted for more than two decades. The FCC’s interpretation ‘rests on factual premises within the agency’s expertise,’ thus giving its interpretation ‘particular power to persuade, if lacking power to control.’ In this context, it is especially informative and particularly persuasive. Id. In any event, however, the Court would reach the same conclusion in the absence of any FCC interpretation of the TCPA’s statutory text.”
Id. at *4 (internal citations omitted).
Similarly, in Lirones v. Leaf Home Water Sols., LLC, No. 5:23-CV-02087, 2024 WL 4198134 (N.D. Ohio Sept. 16, 2024), the court held that “according to the TCPA’s plain language and dictionary definitions of ‘residence’ and ‘subscriber,’ ‘a residential subscriber is one who maintains a phone for residential purposes … i.e., for personal activities associated with his or her private, domestic life.’” Id. at *6. Like in Lyman, while the court found the FCC’s interpretation persuasive, it noted that “based on the text of the statute and tools of statutory interpretation, [it] would reach the same conclusion in the absence of any FCC interpretation of the term ‘residential subscriber.’” Id. at *7.
In Lirones, the court also addressed instances of other district courts dismissing Section 227(c) claims brought by cellular telephone users, noting that in many of these cases the plaintiff did not plead that the cellular telephone number called was used for residential purposes. Id. at *5. See e.g., Cunningham v. Rapid Response Monitoring Servs., Inc., 251 F. Supp. 3d 1187, 1201 (M.D. Tenn. 2017) (dismissing Section 227(c) claim because the plaintiff pled no facts sufficient for the court to conclude that he used his cellular number for residential purposes).
But even before McLaughlin and Loper, district courts have deviated from the FCC’s interpretation. In Gaker v. Q3M Ins. Sols., No. 3:22-CV-00296-RJC-DSC, 2023 WL 2472649 (W.D.N.C. Feb. 8, 2023), the court held that “the FCC’s rulemaking authority under section 227(c) extends only to unwanted telephone solicitations directed at ‘residential telephone subscribers.’” Id. at *3. The court also noted that Congress’s specific reference to ‘cellular telephone service’ in § 227(b) evidenced that it was aware of the distinction between a cellular telephone and a residential telephone and “purposely protected only ‘residential telephone subscribers’ under § 227(c).” Id. Further, in a sharp break from other district courts that have cited heightened privacy invasions as a reason to include cell phone users within “residential telephone subscribers”, the court held “cell phones do not present the same concerns as residential telephones [because] the findings in the TCPA show a concern for privacy within the sanctity of the home [and] cell phones are often taken outside of the home and often have their ringers silenced, presenting less potential for nuisance and home intrusion.” Id.
Similarly, in Cunningham v. Sunshine Consulting Grp., LLC, No. 3:16-cv-2921, 2018 WL 3496538, at *6 (M.D. Tenn. July 20, 2018), the court held that “the language of the TCPA specifically provides that the regulations implemented pursuant to Subsection 227(c) concern only ‘the need to protect residential telephone subscribers’ privacy rights.”
And some courts in the Eleventh Circuit have observed that they would have reached a different conclusion were it not for Hobbs Act deference: in Turizo v. Subway Franchisee Advert. Fund Tr. Ltd., 603 F. Supp. 3d 1334, 1342 (S.D. Fla. 2022), the court characterized the inclusion of cell phone subscribers within Section 227(c) as “an unauthorized expansion of the private right of action for violations of the TCPA’s do-not-call provision”, noting that “when Congress granted the FCC authority to create the DNC Registry via section 227(c)(3), [it] intentionally withheld from the FCC any authority to create a registry that included cellular telephone numbers.”
Welcome to the post-McLaughlin era. The presumptions are gone. The pleading bar is higher. And the definition of “residential telephone subscriber” just got a lot more complicated.
AI CALLS AFTER MCLAUGHLIN: Why Consent Is Still Required
I’ll keep this short and sweet.
The Supreme Court’s decision in McLaughlin Chiropractic v. McKesson has undeniably altered how the Telephone Consumer Protection Act will be enforced. But for companies using artificial intelligence voice technologies to communicate with consumers, the crucial question remains: Does this ruling actually provide a viable escape from the TCPA’s restrictions?
Previously, the FCC in its February 2024 Declaratory Ruling clarified that the TCPA’s prohibition on “artificial or prerecorded voice” calls applies to current AI technologies that mimic human voices or generate call content from a prerecorded voice.
The Court’s 6-3 decision in McLaughlin held that federal district courts are no longer bound by an agency’s interpretation of a statute. Instead, judges must independently analyze the law, giving “appropriate respect” to the agency view.
However, this ruling does not change the reality for companies using artificial intelligence voice technologies. The text of the TCPA is clear: it prohibits calls made using an “artificial OR prerecorded” voice without prior express consent. There is no viable legal argument that a call generated by Artificial Intelligence is not “artificial.”
One might argue that a sophisticated, conversational AI that generates responses in real-time is not “prerecorded” in the traditional sense of a static audio file being played. This is a plausible argument, and a debate that can now happen in court.
But that’s only half the battle. The real challenge is the word: artificial. Arguing that a technology literally named “Artificial Intelligence” is not, in fact, “artificial” is a formidable, if not impossible, task.
So to be clear: The use of AI to make voice calls without consent is illegal under the plain text of the TCPA.
The McLaughlin decision does not create a loophole to make this conduct lawful.
Supreme Court Allows Fuel Producers to Contest California’s Emissions Rules
For decades, California has been granted unique deference in setting Clean Air Act (CAA) emissions limitations for California-sold vehicles through use of a state-specific waiver.
California’s state-specific waiver allows the state to impose stricter emission standards than those issued at the federal level. In recent years, California has aggressively used this state-specific waiver to target greenhouse gas emissions and mandate a shift toward electric vehicles (EVs). This approach has been controversial and — unsurprisingly — led to litigation as product manufacturers of all kinds factor in California regulatory particularities in determining their nationwide mix of products.
We have chronicled recent, though frequent, push-and-pull between states like California seeking stricter environmental controls and others favoring less regulations. (e.g.,here and here.) And if you have been following the ongoing saga of state-led climate regulation, the US Supreme Court’s new decision in Diamond Alternative Energy, LLC v. EPA is a must-read. It addresses environmental policy, federalism, and the question of who gets to challenge government action in court. Below, we break down what happened and why it matters to the regulated community.
CAA and California’s Climate Ambitions
California has long been the nation’s laboratory by enacting aggressive vehicle emissions standards. Under the CAA, the US Environmental Protection Agency (EPA) sets nationwide emissions rules for new cars, but it allows California, as a result of US Congress recognizing its unique air quality challenges like smog, to seek a waiver to impose stricter CAA standards. Other states can then choose to adopt California’s rules but are not permitted by CAA to unilaterally create their own rules in the same manner as does California. The rules, as currently in effect, require automakers to sell more EVs and limit average greenhouse gas emissions across their fleets. As of now, 17 other states and Washington, DC, have followed California’s lead, together representing about 40% of the buyers in the US auto market.
The Legal Challenge: Who Gets to Sue?
Enter the fuel producers — companies that make and sell gasoline, diesel, and ethanol. Before the Court, fuel producers argue that California’s rules, by reducing the number of gas-powered cars on the road in favor of EVs which can meet California’s requirements, directly hurt their bottom line because less demand for gasoline means less revenue. The litigation focuses on EPA’s approval of California state-specific waiver, claiming the agency overstepped its authority by greenlighting state rules aimed at global climate change rather than addressing local air quality.
As with many challenges, before reaching the merits, reviewing courts needed to determine if fuel producers had standing to sue. Legal standing requires plaintiffs to show that they have suffered a concrete injury, that the injury is caused by the challenged action and that a favorable court decision would likely redress that injury. “Injury in fact,” causation, and redressability are often referred to as the three prongs of standing analysis. The Supreme Court frequently reviews standing. Last term, the Court reviewed the organizational standing case FDA v. Alliance for Hippocratic Medicine (for more, see here).
The Court’s Decision
The DC Circuit Court of Appeals determined that the challengers lacked standing because they depended on claims that automakers could have asserted but did not pursue. It reasoned that even if it struck down EPA’s approval of California’s rules, the holding might not lead automakers to actually build more gas-powered cars. After all, consumer demand for EVs is surging, and manufacturers have already invested heavily in electrification. Without clear evidence that the market would shift back toward gasoline vehicles, the court found the fuel producers’ alleged injury too speculative.
The Supreme Court, in a 7-2 decision authored by Justice Brett Kavanaugh, disagreed. The majority held that the fuel producers had standing to challenge EPA’s approval. Here is why:
Injury in Fact: The Court found it “straightforward” that fuel producers are financially harmed by regulations designed to reduce gasoline consumption. Indeed, it noted that the point of the rules was to compel a transition away from gasoline-powered vehicles.
Causation: It ruled that the link between California’s regulations and reduced fuel sales is direct. The regulations compel automakers to build more EVs and fewer cars that use gas or other liquid fuels, something that directly affects the fuel producers.
Redressability: Here, the Court pushed back hardest against the circuit court’s decision. The majority reasoned that it’s “predictable,” based on common sense and the record, that if the regulations were invalidated, at least some automakers would build more gas-powered cars leading to more fuel sales. The Court emphasized that even a small increase in sales would satisfy the legal standard.
The Court also rejected the idea that plaintiffs must provide expert affidavits or direct evidence from automakers about how they would respond to regulatory changes. Instead, it noted that it is enough for plaintiffs to show a “predictable chain of events” based on economic logic and the government’s own statements about the regulations’ impact.
Practical Takeaways
This ruling is significant for several reasons:
Broader Access to the Courts: The decision may lower the bar for industry plaintiffs to challenge environmental regulations, especially when they can show a direct economic impact — even if the market is complex and third-party behavior is involved. Justice Ketanji Brown Jackson’s dissent argues that the Supreme Court does not apply standing doctrine “evenhandedly” and notes that allowing petrochemical companies to sue here is inconsistent with precedent and “comes at a reputational cost for the Court, which is already viewed as being overly sympathetic to corporate interest.” Justice Jackson concluded that the Court should have refrained from deciding this case.
Increased Regulatory Uncertainty: By allowing fuel producers to challenge EPA’s approval of California’s rules, the Court has injected new uncertainty into the future of state-led climate initiatives. If the fuel producers ultimately prevail on the merits, it could upend California’s (and other states’) ability to push the auto industry toward electrification of changing the kinds of cars they sell.
A Signal to Agencies and States: The Court’s skepticism toward arguments that regulations are “irrelevant” because the market has already shifted should be taken as a warning to regulators. If an agency is still enforcing and defending a rule, do not expect courts to believe it has no real-world effect.
The Bottom Line
The decision did not determine whether California’s rules are lawful; that fight is ongoing in the courts, in Congress, and at EPA. But by clearing the way for fuel producers to have their day in court, the justices have set one stage for a high-stakes battle over the future of vehicle emissions regulation, the scope of state authority, and the role of courts in refereeing these disputes. For anyone monitoring the intersection of climate policy, industry, and the law, this is a case worth following.
SJC Confirms Nonsolicitation Agreements Are Excluded by Scope of Massachusetts Noncompetition Agreement Act
On June 13, 2025, the Massachusetts Supreme Judicial Court (SJC) issued a decision in Miele v. Foundation Medicine, Inc., confirming that the Massachusetts Noncompetition Agreement Act does not apply to nonsolicitation agreements incorporated into a termination agreement even if the termination agreement includes a forfeiture provision.
Quick Hits
In 2018, the Massachusetts Noncompetition Agreement Act (MNAA), effective prospectively only for agreements entered into on or after October 1, 2018, was enacted.
The Massachusetts Supreme Judicial Court affirmatively held that nonsolicitation agreements are not subject to the MNAA.
The parties’ dispute centered on whether a nonsolicitation agreement, although expressly excluded from the statutory definition of a “noncompetition agreement,” may nevertheless constitute a “forfeiture for competition agreement” within the meaning of the MNAA when the violation of the nonsolicitation agreement triggers a forfeiture clause.
The SJC held that just because a nonsolicitation agreement is coupled with a forfeiture provision does not change the fact that nonsolicitation provisions are excluded from the MNAA.
Factual Summary
In 2017, Foundation Medicine, Inc. (FMI) hired Susan Miele. Miele signed a restrictive covenant agreement as a condition of her employment, which included a noncompetition, nonsolicitation, and confidentiality and assignment provisions. The nonsolicitation provision barred Miele, both during her employment and for one year after the end of her employment, from directly or indirectly soliciting any employees or consultants of FMI to leave FMI or facilitate their hire by her subsequent employer.
In 2020, Miele and FMI executed a transition agreement in connection with her separation from the company, and that transition agreement expressly incorporated the restrictive covenant provisions that Miele had signed upon her hire by FMI. The transition agreement included a forfeiture provision that provided that if Miele committed a breach of any agreement with FMI, Miele would forfeit any unpaid benefits under the transition agreement and would have to immediately repay any previously paid benefits. FMI ultimately paid Miele over $1 million in transition benefits.
In 2021, after Miele left her employment with FMI, she joined Gingko Bioworks. FMI alleges that during the one-year period after she left FMI, Miele recruited several FMI employees to work at Gingko. FMI then notified Miele that she had breached her transition agreement, and that pursuant to the forfeiture clause in that agreement, FMI ceased further payments to Miele and demanded that she repay all benefits already disbursed. Miele did not comply with that demand.
Procedural History and the Parties’ Arguments
Miele sued FMI in late 2021, alleging that FMI breached the transition agreement by withholding her transition benefits. FMI counter-claimed for breach of contract, stating that Miele violated both her transition agreement and her restrictive covenant agreement, and asked the court for judgment declaring it did not need to pay Miele any additional benefits under the transition agreement.
Miele moved for judgment on the pleadings, arguing that while the MNAA did not expressly apply to nonsolicitation agreements, it should apply here because the inclusion of the forfeiture clause made the non-solicitation agreement subject to the Massachussetts noncompetition agreement. FMI argued in response that the MNAA did not apply here, noting that it only governs “noncompetition agreements” and expressly excludes non-solicitation agreements.
The lower court granted Miele’s motion in part, arguing that FMI could not enforce the forfeiture provision of the transition agreement, but also holding that FMI could still assert Miele’s breach of the restrictive covenant agreement as a defense to her breach of contract claim or from seeking damages for that alleged breach. In its holding, the lower court rejected FMI’s position that all non-solicitation agreements fall outside of the noncompetition act, and instead held that nonsolicitation agreements are only excluded if they do not impose a forfeiture provision for breach of the agreement.
FMI moved for an interlocutory ruling to the appeals court, and the SJC then allowed FMI’s application for direct appellate review.
The SJC’s Holding
The SJC framed the parties’ dispute as follows: whether a nonsolicitation agreement, although expressly excluded from the statutory definition of a “noncompetition agreement,” may nevertheless constitute a “forfeiture for competition agreement” within the meaning of the Massachusetts Noncompetition Agreement Act when the violation of the nonsolicitation agreement triggers a forfeiture clause.
In reaching its holding, the SJC looked to legislative history and the plain language of the Massachusetts Noncompetition Agreement Act, noting that noncompetition agreements do not include nonsolicitation agreements, and forfeiture for competition agreements are a subset of noncompetition agreements. The court found that it then necessarily followed that forfeiture for competition agreements also exclude nonsolicitation agreements, and that to conclude otherwise would contradict the statute’s express exclusion of nonsolicitation agreements from the broader category of noncompetition agreements.
The SJC found that the inclusion of a forfeiture clause in Miele’s transition agreement did not alter this analysis, reasoning that there was no justification for treating a nonsolicitation agreement differently simply because it includes a forfeiture provision. In support of its decision, the SJC pointed out that the critical flaw in Miele’s position was that her reading of the statute would expand the scope of forfeiture for competition agreements to include nonsolicitation provisions even though the statute clearly excluded them from the definition of noncompetition agreements. The SJC further explained that “solicitation cannot be reintroduced through a back door without rendering the statute internally contradictory.”
The SJC remanded the matter to the lower court with instructions to reverse the order partially granting Miele’s motion for judgment on the pleadings.
Key Takeaways
This decision clarifies the scope of the MNAA and provides further guidance to employers regarding remedies they can pursue or enforce for potential breaches of nonsolicitation agreements. Employers may want to review their current agreements to consider the implications of the Miele decision for their existing or future agreements.
Navigating Maritime Evidence: The Power and Practice of Using Demonstrative Aids in Litigation
Navigating the complexities of maritime litigation presents unique challenges distinct from other areas of law. The cases are often steeped in technical detail, involving complex vessel operations, intricate navigation principles, and highly specialized equipment. For judges and juries—many of whom may have little or no maritime experience—grasping the nuances of such cases can be a daunting task. This is where demonstrative aids help to transform dense, technical evidence into clear, compelling presentations that illuminate the facts and arguments at the heart of a dispute. Drawing on recent developments in the Federal Rules of Evidence and illustrative case law, demonstrative aids can be the difference between confusion and clarity, disengagement and persuasion, and, ultimately, between losing and winning a case.
Legal Framework: Federal Rules of Evidence and Demonstrative Aids
The use of demonstrative aids is governed by the Federal Rules of Evidence (“FRE”), local court rules, and case law. Two rules are particularly central: FRE 107 and FRE 1006.
FRE 107: Illustrative Aids
Enacted on December 1, 2024, FRE 107 clarifies the distinction between demonstrative aids (also called illustrative aids) and demonstrative evidence. Demonstrative aids are not evidence; they are presentations designed to help the trier of fact understand the evidence or argument.
FRE 107 establishes a balancing test: a demonstrative aid may be used if its utility in assisting comprehension is not substantially outweighed by the danger of unfair prejudice, confusion, misleading the jury, undue delay, or wasting time. The rule also provides guidance on discovery, notice, instruction, and preservation of demonstrative aids, and restricts their use during jury deliberations unless all parties consent or the court orders otherwise.
FRE 1006: Summaries to Prove Materials
FRE 1006, recently amended, governs the use of summaries, charts, or calculations to prove the content of voluminous admissible writings, recordings, or photographs that cannot be conveniently examined in court. Such summaries are admissible as evidence, provided the underlying materials are admissible and available to the other parties. Importantly, if a summary functions only as an illustrative aid, it falls under FRE 107, not FRE 1006.
Other Relevant Rules
FRE 401 & 402: Define and govern the admissibility of relevant evidence.
FRE 403: Allows exclusion of relevant evidence if its probative value is substantially outweighed by risks such as unfair prejudice or confusion.
FRE 611: Grants courts control over the mode and order of presenting evidence.
FRE 901 & 902: Address authentication and identification of evidence.
Case Study: SCF Waxler Marine L.L.C. v. Aris T M/V
The successful use of an accident reconstruction video in litigation, incorporating automatic identification system (“AIS”) footage into the video, is exemplified in SCF Waxler Marine L.L.C. v. Aris T M/V, 24 F.4th 458 (5th Cir. 2022).
On the evening of January 31, 2016, the Aris T was upbound on the Mississippi River at the same time towboats Elizabeth and Loretta, each pushing loaded red-flagged (petroleum) barges, were downbound. An allision occurred in the Hahnville Bar, a bend between mile markers 124.5 and 126 in the Mississippi River where a number of moorings are located. Aris T was passing Loretta and Elizabeth at the same time Loretta was overtaking Elizabeth. Given their relative positions, there simply was not enough room for the three vessels to be adjacent to each other simultaneously. Id. at 466. To avoid colliding with Loretta’s loaded petroleum barges, Aris T veered to starboard and allided with docks owned by Valero and Shell, causing a massive amount of damage.
A video reconstruction of the allision was used as part of Valero’s case-in-chief. The video reconstruction of the allision showed the path of the vessels and included relevant audio recordings from Aris T’s vessel data recorder (“VDR”), which recorded all transmissions sent or received by Aris T’s VHF radio and all voices recorded on the four microphones located on Aris T’s bridge. At the inception of trial, the court admitted the video reconstruction into evidence and no party contested its accuracy. Id. at 466, n. 2. In effect, the court accepted the video, not just as an illustrative aid, but as an admissible summary of the evidence. The video dominated the ensuing two weeks of trial.
On appeal, the Fifth Circuit affirmed the district court’s causation findings as not clearly erroneous. In doing so, the Fifth Circuit outlined that the district court did not err in discounting eye-witness testimony about the timing of the failure of certain equipment and instead crediting other expert testimony and evidence (e.g., radar and video footage) that the equipment failed earlier and contributed to the allision. Id. at 474.
The accident reconstruction video played a pivotal role in shaping the Fifth Circuit’s decision in SCF Waxler Marine L.L.C. v. Aris T M/V. By combining AIS data with audio from the Aris T’s VDR, the video provided a comprehensive and accurate depiction of the events leading to the allision. Its unchallenged reliability allowed the court to weigh it heavily over contested eyewitness testimony, reinforcing the district court’s findings. This case underscores the value of demonstrative evidence in litigation, as accident reconstruction videos can distill complex scenarios into clear and compelling evidence, enabling courts to make well-informed decisions.
Conclusion: The Strategic Value of Demonstrative Aids
In the high-stakes, technically complex world of maritime litigation, demonstrative aids are invaluable. They educate, engage, and persuade, transforming intricate evidence into compelling narratives that resonate with judges and juries. The legal framework—anchored by FRE 107 and FRE 1006—provides clear guidelines for their use, while case law demonstrates their potential to shape outcomes.
The power of demonstrative aids derives from careful planning, creativity, and strict adherence to evidentiary standards. In the end, the strategic use of demonstrative aids can be the key to navigating the complexities of maritime litigation, turning the tide in favor of clarity, comprehension, and justice.
Transparency in Homeowners Associations in North Carolina: The Good, the Bad, and the Risky
Community and homeowners’ association managers and board members often walk a fine line when it comes to transparency.
While openness fosters trust among members, there are instances where confidentiality is necessary for legal or practical reasons. Finding the right balance can mean the difference between a harmonious community and one fraught with conflict.
Understanding Your Legal Transparency Requirements in Community Associations
North Carolina law establishes specific guidelines for what records must be available to association members. These requirements vary based on whether the person requesting access is a director or only a regular member and whether the access rights are qualified or unqualified.
Directors generally have broader access rights than regular members. Unless there’s a clear conflict of interest, directors are entitled to review all association records of any kind. This extensive access allows them to fulfill their fiduciary responsibilities to the association and make informed decisions.
For regular members, access rights are more limited and fall into two categories: unqualified inspection rights and qualified inspection rights. In both cases, members must notify the association in writing at least five business days in advance of the requested inspection. The association may choose the time and location for inspection, but these choices must be reasonable.
Unqualified Inspection Rights for HOA Members
Community association members have an unqualified right to inspect and copy nine specific types of documents:
Articles of Incorporation, including all amendments
Association Bylaws, including all amendments
Resolutions related to the number or classification of directors
Resolutions related to member characteristics, qualifications, rights, limitations, and obligations
Minutes of all membership meetings for the prior three years
Records of all actions taken by the membership without a meeting for the prior three years
All written communications to members as a group within the prior three years
Names and business or home addresses of current directors and officers
Annual financial statements from the prior three years
For annual financial statements, additional requirements apply. If the statements were audited by a public accountant, the accountant’s report must accompany the statement. If they weren’t audited, they should include a statement from the president or another authorized person affirming whether the statements were prepared in accordance with generally accepted accounting principles and noting any inconsistencies with previous years’ accounting practices.
The association also must make annual income and expense statements and balance sheets available to all members at no charge within 75 days after the close of the fiscal year.
Additionally, members are entitled to receive a statement of their unpaid assessments, fines, and other charges within ten days of making a written request.
Qualified Inspection Rights for Community Association Members in North Carolina
Beyond the documents covered by unqualified inspection rights, members have qualified rights to inspect and copy seven additional categories of records. These rights are qualified because they come with conditions.
The association can only be compelled to provide these documents when members demonstrate they’re making the request in good faith and for a proper purpose.
Members also must articulate with reasonable specificity not only what records they wish to examine but also why they need to see them. This means vague requests like “I want to review all financial records” without a clearly stated purpose would not be adequate.
The final requirement creates an important connection: the records being requested must directly relate to the purpose the member has stated.
This three-part qualification process ensures that while members maintain important access rights, they must exercise these rights responsibly and with legitimate aims rather than for harassment or frivolous purposes.
If these requirements are satisfied, members can inspect the following:
Minutes of all association member meetings
Records of all actions taken by members without a meeting
Minutes of all board of directors meetings
Records of all actions taken by directors without a meeting
Records of all actions taken by committees acting on behalf of the board
Accounting records and financial statements
The association’s membership list (with limitations on use)
Beyond Legal Requirements: Strategic Transparency Choices
While legal requirements establish the minimum level of transparency, many associations choose to go beyond these basics to foster trust and engagement.
Here are some strategic choices to consider:
Document Inclusion in Minutes: One of the most common ways members gain access to documents they wouldn’t normally be entitled to see is when those documents are incorporated into meeting minutes. Board members should be mindful of this when deciding what to attach to minutes. Consider whether including detailed reports, correspondence, or other documents serves the association’s interests.
Answering Member Questions. Associations have a statutory obligation to provide documents, but there is no statutory right for a member to get written questions or emails answered or to have a Q&A session with the board or the association manager. Answering questions in meetings or in writing is a choice for the board.
Voluntary Document Sharing: Boards can choose to share additional documents beyond what is legally required. Being proactive about sharing information can prevent speculation and rumors.
Open Forums and Town Halls: Regular opportunities for community dialogue can help members feel heard and informed. When planning these events, the board decides whether there will be presentations by the board, manager, accountant, attorney, or other professional and whether there will be a question-and-answer session. Boards should select speakers carefully, as their communication skills and comfort level can significantly influence how information is received.
Board Meeting Access: While North Carolina law establishes minimum requirements for open board meetings, associations can decide to be more accessible. Some associations open all meetings to members at least in part, while others might allow members to observe but not participate. Streaming meetings for members who are unable to attend in person is an option. Recording meetings is discouraged.
Enhanced Written Communications: Regular newsletters, email updates, and website postings can keep members informed without requiring them to formally request information. Transparent communication about upcoming projects, rule changes, and community events helps members feel connected and reduces surprises.
Safeguarding Confidential Information in Community Associations
Despite the value of transparency, certain matters must remain confidential for legal and practical reasons.
The association must carefully protect information related to litigation, as public discussion could compromise its legal strategy or weaken its position in court. Comments in a meeting also could create evidence for trial without intending to do so, and public discussion of litigation could impact the association’s insurance carrier’s coverage position.
Similarly, contract negotiations should remain private until finalized, as premature disclosure could undermine the association’s bargaining power or create confusion about terms that are still in flux. Bids for contracts should not be shared, even after the contract is finalized, because sharing may deter future bidding by a potential vendor.
Member enforcement actions present another area requiring discretion, as public discussion of individual violations could accidentally create evidence for trial and potentially expose the association to defamation claims. If the enforcement action involves fines or the other collection of money, discussion of this enforcement action should not occur to avoid state or federal fair debt collection laws being violated.
Personnel matters involving association employees must be handled with the same confidentiality that any employer would provide. These discussions should remain confidential within the board.
Assessment delinquencies also fall into this protected category. Delinquent account information should not be shared outside of the board and with those persons involved in collections.
Board members and managers should approach these sensitive topics with particular care, clearly marking relevant documents as confidential and discussing them only in properly convened closed portions of board meetings. This judicious approach to confidentiality isn’t contrary to transparency—rather, it represents responsible stewardship of the association’s interests and respect for individual rights in areas where openness could cause harm.
Another Published California Appellate Decision Finds Waiver of Right to Arbitrate Due to Untimely Payment of Fees, Ahead of California Supreme Court Ruling on Same Issue
A recent decision from the Second District California Court of Appeal highlights the importance of employers making timely payments of arbitration fees and offers a glimpse of one of the several potential outcomes of a case pending before the California Supreme Court involving the same issue.
In this decision, Sanders v. Superior Court (2025) 110 Cal.App.5th 1304, former employee Mone Yvette Sanders had filed a lawsuit against her former employer Edward Jones. Sanders’ complaint alleged class action claims and claims under California’s Private Attorneys General Act based on purported violations of the California Labor Code. At the trial court level, Edward Jones had successfully enforced an arbitration agreement signed by Sanders during her employment, thereby dismissing Sanders’ class action claims, moving Sanders’ individual claims into arbitration, and staying Sanders’ representative PAGA claims pending arbitration.
During the course of the arbitration of Sanders’ individual claims, the arbitration service provider (JAMS) issued an invoice for $54,000, indicating, “Payment is due upon receipt,” and noting “Please see California Code of Civil Procedure sections 1281.97 – 1281.99 regarding the payment of fees for this arbitration.”
California Code of Civil Procedure section 1281.98, which the JAMS invoice referenced, requires that in an employment arbitration, the party who drafted the arbitration agreement (typically the employer) must pay fees required to continue the arbitration within 30 days of their due date. Failure to pay invoices within 30 days of their due date waives an employer’s right to require an employee proceed with arbitration.
Thirty-five days after issuance of the invoice, JAMS emailed the parties that the $54,000 invoice remained unpaid. In response, Sanders’ counsel asserted that Edward Jones had violated section 1281.98 by failing to pay arbitration fees within 30 days of their due date. That same day, Edward Jones made payment of the invoice in full.
Sanders then filed a motion in the trial court to return proceedings to the trial court, pursuant to section 1281.98. The trial court denied Sanders’ motion, finding that the Federal Arbitration Act (FAA) preempted section 1281.98, because the provision discriminated against arbitration and imposed procedural requirements that interfered with its fundamental attributes. Sanders appealed.
The Court of Appeal disagreed with the trial court, reasoning that section 1281.98’s imposition of a 30-day time limit to pay arbitration fees does not hinder arbitration, but rather, promotes it as an expedited and cost-efficient way to resolve disputes. As such, the Court of Appeal concluded that section 1281.98 is not preempted by the FAA and Edward Jones had waived its right to require Sanders to pursue her individual claims in arbitration.
The California Supreme Court is presently weighing the same question, that is, whether section 1281.98 is preempted by the FAA, in another matter: Hohenshelt v. Superior Court (S284498). The facts in Hohenshelt are similar to those in Sanders. In Hohenshelt, a former employee sued his former employer for claims under the California Fair Employment and Housing Act and the California Labor Code. The employer successfully compelled arbitration, and arbitration commenced through JAMS. During the course of arbitration, the employer paid an arbitration invoice past section 1281.98’s 30-day deadline, and the employee moved to return the matter to court pursuant to section 1281.98. While the trial court denied the employee’s request to return the matter to court, the employee appealed the trial court’s ruling. On appeal, the employer argued that section 1281.98 is preempted by the FAA but, like the court in Sanders, the appellate court determined that section 1281.98 was not preempted because section 1281.98 furthers the goals of arbitration rather than frustrating them.
The Hohenshelt decision is currently under review by the California Supreme Court. The Court heard arguments in the Hohenshelt case on May 21 and 22, 2025, and a decision is expected in the coming weeks.
The Sanders and Hohenshelt case decisions underscore that it remains crucial for California employers to make timely payments of arbitration invoices in order to enjoy the benefits of arbitration agreements.
AI Wins Big on “Fair Use,” But Judge Slams Brakes on Piracy in Landmark Anthropic Copyright Ruling
A federal judge has handed the AI industry a massive victory. Still, it came with a crucial catch: innovation can’t be built on a foundation of theft, and AI systems must earn their authority through legitimate means.
In a closely watched case, a US District Judge ruled that AI company Anthropic’s use of copyrighted books to train its powerful AI model, Claude, was “exceedingly transformative” and qualified as a legal “fair use.” The decision is a game-changer for AI developers who argue that learning from vast datasets is essential for innovation.
However, the judge drew a sharp line in the sand, ruling that Anthropic’s separate act of downloading and storing millions of books from “pirate sites” was not a fair use and that the company will have to face a trial for it.
This nuanced decision strikes a balance in the high-stakes battle between copyright holders and the rapidly evolving world of artificial intelligence, reflecting a growing recognition that how AI systems acquire their capabilities matters as much as what they can do with them.
When AI models shape human understanding and decision-making at an unprecedented scale, the legitimacy of their knowledge sources becomes a question of technological integrity, not just legal compliance.
The Core of the Case: A Tale of Three Authors
A trio of authors brought the lawsuit:
Andrea Bartz, author of thrillers like The Lost Night and We Were Never Here
Charles Graeber, who penned the true-crime story The Good Nurse and the medical chronicle The Breakthrough
Kirk Wallace Johnson, author of nonfiction works including The Feather Thief and The Fishermen and the Dragon
The authors alleged that Anthropic, a multi-billion-dollar frontier large language model (LLM) backed by Amazon and Google, built its AI by infringing on their copyrights by feeding their books into Claude without permission or payment. Section 107 of the Copyright Act identifies four factors for determining whether a given use of a copyrighted work is a fair use: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.
The Ruling: A “Quintessentially Transformative” Use
Judge William Alsup of the Northern District of California sided with Anthropic on the most critical question — the use of copyrighted works to train an AI model. He reasoned that Anthropic’s approach to the books was not to replace them, but to learn from them to create something entirely new.
In a powerful analogy, Judge Alsup wrote that the process was “quintessentially transformative. Like any reader aspiring to be a writer, Anthropic’s LLMs trained upon works not to race ahead and replicate or supplant them — but to turn a hard corner and create something different.”
The court emphasized that the AI did not simply spit out copies of the authors’ work. The judge noted that Anthropic’s models “have not reproduced to the public a given work’s creative elements, nor even one author’s identifiable expressive style.” Because the final product didn’t compete with or replace the original books, the training process was deemed fair.
This part of the ruling is a significant relief for AI companies, who have long argued their training methods are a modern form of research and learning.
The Catch: “You Can’t Just Bless Yourself”
While the ruling on AI training was a clear win for Anthropic, the judge took a much dimmer view of how the company acquired a large portion of its data. The court found that before Anthropic began purchasing and scanning millions of physical books, it first downloaded over seven million books from known pirate libraries, such as LibGen.
Anthropic kept these books in a massive “central library” to use for “research,” retaining them “forever” even if they were never used for training. The court’s reasoning suggests that AI systems can legitimately “read” human cultural output to develop their capabilities, but only when that reading occurs through recognized channels of access and permission.
Judge Alsup rejected the idea that a future fair use can excuse initial theft. He quoted Anthropic’s own lawyer’s argument back at them in his decision: “You can’t just bless yourself by saying I have a research purpose and, therefore, go and take any textbook you want. That would destroy the academic publishing market if that were the case.”
The ruling implicitly acknowledges that AI systems do not operate in isolation — they function as intermediaries that shape how humans access and understand information. When these systems are built on illegitimately acquired content, they potentially perpetuate unauthorized appropriation at scale, influencing human choices based on improperly obtained knowledge.
The ruling was blunt about the piracy:
“This order doubts that any accused infringer could ever meet its burden of explaining why downloading source copies from pirate sites that it could have purchased or otherwise accessed lawfully was itself reasonably necessary to any subsequent fair use.”
For Anthropic, this means it will face a trial for damages. The judge scheduled a trial to determine the damages Anthropic may have to pay for the infringement. He concluded that a later purchase doesn’t erase the initial crime: “That Anthropic later bought a copy of a book it earlier stole off the internet will not absolve it of liability for the theft, but it may affect the extent of statutory damages.”
What This Means for AI and Authors
This landmark decision offers both sides a partial victory and sets a critical precedent.
For AI Companies: The ruling validates the core argument that training LLMs on copyrighted material can be a transformative fair use. This suggests a legal green light for the fundamental process that powers generative AI, provided the material is lawfully acquired. This creates a framework where AI systems can legitimately learn from human cultural expression while respecting the rights of creators. It also establishes, however, that the means of acquisition matter — AI systems that will increasingly mediate human access to information must themselves be developed through legitimate channels.
For Authors and Creators: The court proclaims that AI companies are not above the law. They cannot simply scrape content from pirate sites to build their models. This creates an incentive for AI developers to license content or find other legitimate ways to source their training data.
Looking Forward: Beyond Legal Compliance
This ruling arrives as AI systems become more sophisticated mediators of human knowledge and decision-making. The court’s emphasis on legitimate acquisition suggests a recognition that AI development practices have implications that extend beyond copyright law. When AI systems can influence human understanding through their responses, the integrity of their training processes becomes a matter of technological accountability.
The decision may also influence how courts approach other aspects of AI development, where the methods used to create AI capabilities affect their legitimacy as information intermediaries. As AI systems become more integrated into research, education, and professional decision-making, questions about the integrity of their development processes will likely extend beyond copyright to encompass broader concerns about technological transparency and accountability.
If upheld, the decision will stand for the notion that AI can read the world’s books to learn, but it first needs a library card. More broadly, it suggests that as AI systems become powerful mediators of human knowledge and choice, their authority must be earned through legitimate means. The future of AI will not be built on piracy — either of content or of the trust necessary for AI systems to serve as reliable partners in human decision-making.
Over time, Anthropic came to value most highly for its data mixes books like the ones Authors had written, and it valued them because of the creative expressions they contained. Claude’s customers wanted Claude to write as accurately and as compellingly as Authors. So, it was best to train the LLMs underlying Claude on works just like the ones Authors had written, with well-curated facts, well-organized analyses, and captivating fictional narratives — above all with “good writing” of the kind “an editor would approve of.” Opinion, p. 6