New Statute Affects Small Business Leases in California
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California Senate Bill 1103 (SB 1103) introduces changes to commercial leases, offering enhanced protections for small business tenants.
Tenants that meet the “5/10/20 rule” and provide written notice of their qualified status can seek the benefits of these new protections.
Landlords must translate leases into the tenant’s primary language for qualified commercial tenants.
Leases with qualified commercial tenants automatically renew unless landlords provide timely nonrenewal notices, aligning commercial tenancy practices more closely with residential standards.
Rent increases for short-term leases require advance notice, and any fees for building operating costs must be proportionate and documented.
Effective Jan. 1, 2025, SB 1103 makes four principal changes to commercial tenancy law:
1.
increased notice periods for rental increases on short term tenancies (month-to-month or shorter);
2.
a new requirement for translating the lease into other languages;
3.
automatic renewal of the tenancy unless the landlord objects in a timely manner; and
4.
limitations on rental increases based on building operating costs. The law provides additional leasing protections to small business commercial tenants who meet the definition of “qualified commercial tenants.”
Commercial landlords should be aware of all the related changes and should build these new requirements into their form leases, tenant notices, and operating procedures. More generally, landlords should be aware that like the protections for small commercial tenants enacted during COVID-19, these new leasing regulations indicate a legislative policy towards treating small businesses more like residential tenancies, as opposed to traditional commercial leases with larger commercial tenants.
Definition of ‘Qualified Commercial Tenant’
Businesses must meet two elements of the qualified commercial tenant definition to qualify for these new protections.
First, a business must be a “microenterprise,” a restaurant with fewer than 10 employees, or a nonprofit with fewer than 20 employees. A microenterprise is defined in Business & Professions Code section 18000 as a sole proprietorship, partnership, LLC, or corporation with five or fewer employees (including the owner), who may be full or part-time, and which generally lacks sufficient access to loans, equity, or other financial capital. A convenient way to remember this definition is the “5/10/20 rule,” based on the number of employees.
Second, the tenant must have provided to the landlord, within the previous 12 months, written notice that the tenant is a qualified commercial tenant and a self-attestation regarding the number of employees the tenant employs before or upon the lease’s execution and annually thereafter. In other words, the law’s provisions are not self-executing – the tenant must give notice first. The rental rates, the premises’ square footage, and the tenant’s income or wealth are not considered when determining qualified status.
With these definitions in mind, here are the four principal changes SB 1103 makes to commercial tenancy law.
The Four New Tenant Protections
1.
Notice of Rent Increase for Short Term Rentals
Existing Civil Code Section 827 provides that for short term residential leases, namely month-to-month or a shorter period, the landlord must give prior notice of a rent increase. The amount of notice required depends on how much the rent will increase.
SB-1103 extends this notice requirement to qualified commercial tenant leases. If the increase is 10% or less of the prior year’s rent, the notice mut be given at least 30 days before the increase date, and if it is greater than 10%, then the notice must be given at least 90 days prior. The notice itself must advise the qualified commercial tenant of the requirements of this amended statute.
It is unclear how relevant this provision would be to most small businesses. Unlike short term residential tenancies such as residence hotels, a commercial business is not likely to be a month-to-month tenancy unless it is a holdover from a longer fixed lease. Due to an apparently unresolved inconsistency in the Senate and Assembly versions of this section, however, its protections may extend beyond month-to-month leases. Landlords may assume this provision applies to rental increases for all commercial real property leases by a qualified commercial tenant.
Violation of this provision does not entitle the qualified commercial tenant to civil penalties, but qualified commercial tenants may be eligible for restitution of overpaid rent or an injunction to prevent further violations.
2.
Translation of Lease
Existing law in Civil Code Section 1632 requires a business to deliver a translation of a contract from English to the primary language in which the agreement was negotiated, specifically in Spanish, Chinese, Tagalog, Vietnamese, or Korean (translation requirement) but provides an exception if the other party uses their own interpreter (interpreter exception).
SB 1103 expands this requirement to a landlord leasing to a qualified commercial tenant for leases negotiated on or after Jan. 1, 2025. It requires the landlord to comply with the translation requirement but does not grant the landlord the interpreter exception. In other words, the landlord must always comply with the translation requirement.
If the landlord fails to comply with this requirement, the qualified commercial tenant (but not the landlord) is entitled to rescind the lease.
3.
Automatic Renewal
Existing Civil Code Section 1946.1 provides that a residential lease is deemed renewed unless the landlord gives 30 to 60 days’ notice of nonrenewal prior to termination, depending on whether the lease was for less than one year.
SB 1103 expands this protection to qualified commercial tenant leases and requires the landlord to give notice of the provisions of this section in the notice to a qualified commercial tenant. Qualified commercial tenants who believe their landlord has violated this section’s notice requirement can file a complaint with local housing authorities or pursue legal action.
4.
Limitation On Building Cost Charges
Existing Civil Code Section 1950.8 prohibits a landlord from demanding an extra fee to continue or renew a lease unless the amount is stated in the lease, but this requirement does not apply if the increase is for building operating costs incurred on behalf of the tenant and the basis for calculation is established in the lease.
SB 1103 adds a new law, Civil Code Section 1950.9, that applies to leases executed or renewed on or after Jan. 1, 2025. The section prohibits a landlord from charging a qualified commercial tenant a fee to recover building operating costs unless the costs are allocated proportionately, the costs were incurred in the prior 18 months or are reasonably expected to be incurred in the next 12 months, and the landlord provides a prospective tenant notice that the tenant may inspect the cost documentation.
There are some substantial enforcement teeth in this particular provision, including actual damages, attorneys’ fees and costs, and in the case of willful, oppressive, fraudulent, or malicious violations, treble damages, and punitive damages. The tenant can also raise this section as a defense to eviction.
Application
SB 113 applies to all commercial tenancies in California where the tenant is a qualified commercial tenant. Obvious applications are shopping malls, strip malls, and other buildings where a variety of small business are collected. Some commercial landlords, for example the owner of a large commercial office building leased to large businesses, might think the statute is not relevant to them, but smaller tenants such as a café or gift shop in the lobby may be covered.
Unanswered Questions
Unanswered questions remain, such as the case of subleases, where the tenant might not be a qualified commercial tenant, but the subtenant might qualify under SB 1103. Similarly, it remains to be seen how and when a landlord could challenge the tenant’s self-attestation of qualified status, particularly if that status changes during the tenancy.
Mass. Appeals Court: 9-Month Repair Delay Exposes Landlord to Chapter 93A Penalties
A residential landlord is generally subject to Chapter 93A, as they engage in the “conduct of trade or commerce” by leasing residential property unless, as explained by the Massachusetts Supreme Judicial Court in Billings v. Wilson, the leased property is owner-occupied. Therefore, a non-owner-occupied landlord must contend with (i) specific Massachusetts landlord-tenant laws1 and (ii) Chapter 93A.
The Massachusetts Appeals Court recently subjected a residential landlord to Chapter 93A in Ndoro v. Torres. The litigation arose from the landlord’s action to recover possession of an apartment. In response to the lawsuit, the tenant counterclaimed and asserted that the landlord had breached the implied warranty of habitability by failing to repair “rotted bathroom underflooring” within a reasonable time. The trial judge found for the tenant on the breach of implied warranty claim and awarded her continued possession of the premises and damages. The judge, however, dismissed the tenant’s Chapter 93A claim. According to the judge, the landlord had repaired the premises within a reasonable time.
The Appeals Court disagreed. Based on the record, the landlord waited approximately nine months to repair the premises. As the defects in the bathroom underflooring presented a safety hazard, that delay breached the implied warranty of habitability. That alone was sufficient to violate Chapter 93A and, independently, 940 Code Mass. §3.17(1)(b)(1)-(2) and 3.17(1)(i). The Appeals Court noted that the landlord had not challenged the trial court’s finding that the landlord was engaged in “trade or commerce.” It is unclear from the opinion whether the landlord also lived at the premises, which may have precluded the tenant’s Chapter 93A claim.
Ultimately, the Appeals Court concluded that the tenant had prevailed on her Chapter 93A counterclaim without the need for further evidence. The Appeals Court remanded the matter to the Housing Court Department to enter judgment under Chapter 93A for the tenant, determine the tenant’s damages (and whether those damages should be doubled or trebled under Section 9), and award attorneys’ fees and costs. This case underscores the importance of understanding the laws governing landlord-tenant rights and when a landlord is engaging in “the conduct of trade or commerce” that falls into the scope of Chapter 93A.
1 See The Attorney General’s Guide to Landlord and Tenant Rights and 940 C.M.R. s. 3.17 (Landlord-Tenant Regulations)
Key Considerations for the Construction Industry in 2025 Under President-Elect Trump
As President-elect Trump prepares to take office on January 20, the construction industry must anticipate shifts in trade policy, particularly concerning tariffs. These changes are expected to have significant implications for various sectors, including energy and clean technology.
The industry’s growing reliance on energy-efficient and clean technology components is driven by sustainability goals and regulatory requirements. For example, the US Department of Energy (DOE) guidelines on “Zero Emissions Building” provide a framework for sustainable practices, offering benchmarks for energy efficiency, zero on-site emissions, and clean energy use. Similarly, New York City’s Local Law 97 (LL97) sets ambitious emissions reduction targets for buildings, focusing on energy efficiency and renewable energy.
However, potential tariffs on imported clean technology materials could lead to increased costs, hindering compliance with regulations that rely on the imports of energy-efficient materials, and posing challenges to the adoption of sustainable building practices.
As these developments unfold, the construction sector must remain vigilant in monitoring policy changes that could affect the availability and cost of clean technology components in 2025.
Key Points to Watch in 2025
1. Evolving Tariff Policies:
The topic of tariffs under Trump’s second Administration has been a source of concern as President-elect Trump has already threatened to impose universal tariffs in addition to other country-specific tariffs.
At this juncture, we can anticipate an increase in tariff measures, but the specific measures are still unknown in part due to the uncertainty surrounding the rate of potential new tariffs, the countries they may affect, and the mechanisms that will be used to impose them, which will impact the timing any tariffs will take effect.
Because the Trump Administration’s trade policies have particularly focused on imports from Mexico, Canada, and China, such targets could significantly impact the import of construction materials, such as steel, aluminum, softwood lumber, concrete, glass, and binding materials.
For example, tariffs could benefit domestic manufacturers by increasing demand for locally produced materials, such as mass timber, but could create vulnerabilities for the construction sector that relies on imports raw materials used for energy efficiency and sustainable buildings that are sourced from Canada, Mexico, or China.
2. Material Cost Fluctuations:
Be prepared for possible increases in material costs due to tariff adjustments. This could lead to higher project expenses and necessitate budget recalibrations.
Contractors may face challenges in predicting material costs and securing project financing due to economic uncertainty and potential price volatility.
3. Supply Chain Adjustments:
Anticipate disruptions in supply chains as suppliers adapt to new trade regulations. This may result in delays and increased lead times for material availability.
Evaluate current supply chain dependencies and explore alternative sourcing options to mitigate risks.
How Can We Help?
As the new administration takes office, the construction industry must remain vigilant and proactive in addressing potential challenges posed by evolving tariff measures. Companies may need to adjust their project plans to account for potential cost increases and supply chain disruptions. Strategies such as seeking alternative suppliers, exploring domestic options, and reevaluating project budgets and timelines will be crucial in navigating these challenges.
Strategic planning and collaboration with trade experts and legal advisors will be crucial in navigating these changes. Here are some strategic ideas to consider:
Diversify Suppliers: Consider expanding your supplier base to reduce reliance on any single source, particularly those affected by tariffs.
Explore Alternative Materials: Investigate the use of alternative materials that may offer cost advantages or are less impacted by tariffs.
Contractual Safeguards: Review and update contracts to address “escalation,” “force majeure,” or other potential political risks, trade restrictions, and cost fluctuations.
Engage in Advocacy: Participate in industry advocacy efforts to influence policy decisions and promote favorable outcomes for the construction sector.
Monitor Trade Policy Developments: Monitor announcements from the new administration regarding free trade agreements (FTAs) and tariff adjustments that could affect material costs. These could include benefits from the United States-Mexico-Canada Agreement (USMCA) and exclusions from tariffs, such as the Section 301 tariffs on products from China.
Industry members seeking detailed analysis and guidance are encouraged to consult with trade experts and legal advisors specializing in construction and trade policy.
FTC Announces Final Junk Fees Rule Applying to Live-Event Tickets and Short-Term Lodging
On December 17, 2024, the U.S. Federal Trade Commission (FTC) announced its final “Junk Fees Rule” (the “Final Rule” or “Rule”) to prevent certain practices related to pricing in the live-event ticketing and short-term lodging industries. The Final Rule requires businesses that offer a price for live-event tickets or short-term lodging to disclose the total price, inclusive of mandatory charges, and to do so more prominently than other pricing information. The Final Rule also prohibits businesses from misrepresenting fees or charges in any offer, display, or advertisement for live events and short-term lodging. Notably, the Final Rule does not prohibit any one type of fee, nor does it prohibit specific pricing practices, such as itemization of fees or dynamic pricing. Instead, the Rule focuses on ensuring that fees are clearly disclosed.
The FTC’s stated aim in passing the Final Rule is to curb perceived unfair and deceptive pricing practices in these two industries, specifically so-called “bait-and-switch” pricing that hides the total price of tickets and lodging by omitting mandatory fees and charges from advertised prices and misrepresenting the nature, purpose, amount, and refundability of fees or charges. The FTC pointed to evidence that these practices are prevalent in these two industries, where most transactions occur online. The FTC emphasizes that “truthful, timely, and transparent pricing” “is critical for consumers” and claims this rule will allow American consumers to make better-informed purchasing decisions in these instances.
The Rule was published in the Federal Register on January 10, 2025, and is slated to go into effect 120 days later, putting its effective date as May 10, 2025. It is possible, however, that the incoming Administration will seek to change the rule or delay its effective date.
FTC Rulemaking Leading to Final Rule
The Final Rule is the culmination of the rulemaking process that the FTC initiated in November 2022, when it announced an Advanced Notice of Proposed Rulemaking under Section 18 of the FTC Act, to address certain purportedly unfair or deceptive acts or practices involving fees. The FTC specifically sought public comment on the prevalence of certain practices related to what it labeled “junk fees” and the costs and benefits of a rule that would require upfront inclusion of mandatory fees whenever consumers are quoted a price. After posing a series of questions to solicit data and commentary, the FTC received more than 12,000 comments in 90 days.
One year later, the FTC published a Notice of Proposed Rulemaking, which proposed a rule that prohibited misrepresenting the total price of goods or services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees. The proposed rule was not industry-specific; rather, it would have applied broadly to businesses across the national economy. The FTC then received 60,000 more comments on its proposed rule, most of which were supportive. The FTC interpreted this feedback as confirmation of the prevalence of the types of fee-related practices the FTC sought to address. The FTC estimated that its proposed rule would save consumers up to 53 million hours per year of wasted time spent searching for the total price of live-event tickets and short-term lodging, equating to more than $11 billion over the next decade.
In March 2024, the Biden Administration launched an interagency initiative, co-chaired by the FTC and U.S. Department of Justice, called the “Strike Force on Unfair and Illegal Pricing.” The Strike Force seeks to combat unfair and illegal pricing and lower prices for all Americans. Shortly after the announcement of the Strike Force, the FTC held a public hearing on its proposed rule while it continued to consider comments, leading to the announcement of the Final Rule last month.
Final Rule
The Final Rule prohibits hidden fees and makes it an unfair and deceptive practice for “any Business to offer, display, or advertise any price” of live-event tickets or short-term lodging without clearly and conspicuously disclosing the total price. Under Section 5 of the FTC Act, a representation, omission, or practice is “deceptive” if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers; that is, it would likely affect the consumer’s conduct or decisions regarding a good or service. Price, for example, is a material term. A practice is considered “unfair” under Section 5 if it causes or is likely to cause substantial injury, the injury is not reasonably avoidable by consumers, and the injury is not outweighed by benefits to consumers or competition.
As an example, in the commentary to the rulemaking, the FTC says that bait-and-switch pricing, where the initial contact with a consumer shows a lower or partial price without including mandatory fees, violates the FTC Act even if the total price is later disclosed.
The Final Rule specifies that the “total price” is the “maximum total of all fees or charges a consumer must pay for any good(s) or service(s) and any mandatory Ancillary Good or Service” (any additional goods or services offered as part of the same transaction). Government charges, shipping charges, and fees for ancillary goods or services may be excluded under the rule.
The total price must be displayed more prominently than any other pricing information. If a final amount is displayed before the consumer completes the transaction, it must be disclosed as prominently as the total price.
The total price also must be displayed clearly and conspicuously, which means easily noticeable (“difficult to miss”) and easily understandable by ordinary customers. The clear-and-conspicuous requirement also covers audible communications. In addition to the total price, a business must display clearly and conspicuously the nature, purpose, and amount of any optional fee or charge that has been excluded from the total price, what the fee or charge is for, and the final amount of payment for the transaction.
The Final Rule goes beyond disclosure: It affirmatively prohibits misleading fees. Under the Final Rule, it is unlawful to misrepresent any fee or charge in an offer, display, or advertisement for live-event tickets and short-term lodging, including the nature, purpose, amount, or refundability of any fee or charge and what it is for.
State Laws and Regulations on Fees
The Final Rule does not preclude state laws that are more restrictive pertaining to unfair or deceptive fees or charges, except to the extent such laws or regulations are inconsistent with the Final Rule (and then only to the extent of the inconsistency). According to the FTC, a state law or regulation is not inconsistent with the Final Rule if the protection it affords is greater than the protection under the rule.
Numerous states have passed laws aiming to increase transparency in pricing and fees, including California, Colorado, Connecticut, Maryland, Minnesota, New York, and Tennessee. Further, some states have provisions that violations of Section 5 of the FTC Act also constitute deceptive practices under their state consumer protection statutes. The Final Rule thus augments the government scrutiny of fee-related practices and conduct that businesses may receive.
Takeaways and the Future of the Final Rule
Once the Final Rule becomes effective, when businesses advertise or display a price for live-event tickets or short-term lodging, they must display the total price — including any mandatory fees — and ensure any explanations for fees or charges are truthful and not misleading. Businesses have discretion to list optional fees. For businesses that have not previously been subject to state laws or regulations, the Final Rule will now apply to those businesses.
Despite the Final Rule’s narrow applicability to live-event tickets and short-term lodging, the FTC made clear it has not given up on other industries. The FTC emphasized it may address unfair and deceptive practices in other industries, as discussed in its Notice of Proposed Rulemaking, but will do so using its existing Section 5 authority.
The Final Rule was approved with a 4–1 vote, with Republican Commissioner Holyoak voting for the rule and incoming Republican FTC Chair Andrew Ferguson dissenting. Although the agency under new leadership could look to withdraw the Final Rule, under the Administrative Procedure Act, the FTC would need to publish a notice in the Federal Register explaining the reasons for the withdrawal, allow opportunity for comment, and consider those comments before repealing the Final Rule. Although incoming administrations in the past have imposed moratoriums on regulations under development, the Final Rule has been published in the Federal Register, and a moratorium likely would not impact the rule going into effect. The incoming administration, however, might choose to delay the effective date of the Final Rule. The Final Rule also falls within the window for review under the Congressional Review Act, creating another potential avenue for its repeal.
Separately, on January 14, 2025, the Consumer Financial Protection Bureau (CFPB) released a report titled “Strengthening State-Level Consumer Protections.” In the report, the CFPB encourages states to continue to go after “junk fees,” citing the FTC’s Final Rule and the FTC’s findings on the prevalence of certain practices. The CFPB provides proposed language for states to consider adding to their “state prohibitions on unfair, deceptive, and/or abusive acts or practices.” The CFPB’s recommended statutory language is industry-agnostic, meaning more states may look to adopt broad fee-related rules.
Like the FTC’s recent rule on non-compete agreements, the Final Rule may be subject to potential legal challenge, including by industry groups and trade associations. The landscape for disclosure of fees continues to evolve, and businesses should watch for developments at both the federal and state level.
California Wildfires—Insurance Tips for Policyholders
The recent wildfires in California have clearly had a catastrophic impact, destroying a vast number of homes and business premises across the region. Homeowners and businesses may have limited means to protect against nature’s forces, but, in this alert, we provide tips on steps that can be taken to protect against denials of coverage by insurers. Careful and proactive attention to insurance coverage considerations could be the key to restoring homes and business operations and weathering the financial storms that follow from such disastrous events.
Potentially Relevant Insurance Policies
It is vital for affected homeowners and businesses to review all relevant or potentially relevant insurance policies promptly, including excess-layer policies, and to comply with loss notification procedures. The most common source of coverage for most individuals and businesses is likely to be first-party property coverage insuring the damaged premises and other assets, including against the risk of fire, smoke, and related damage. In many cases, this insurance will be supplemented by specialty coverages that apply to specific situations.
For businesses, the coverage will typically include the following:
Property damage where losses are caused to the business premises and assets, including computers and machinery.
Business interruption (BI) where the business experiences loss of earnings or revenue due to property damage or loss of use caused by an insured peril, for a specified period of time after the insured event or until normal business operations have been resumed.
Contingent BI which generally covers loss of revenue arising from damage to the property of a supplier, customer, or other business partner.
Denial of access, where use or access to the insured property is prevented or restricted for a specific period of time, for example, if roads or bridges leading to the property have been blocked or destroyed.
Civil authority coverage, which covers losses arising from an order made by a civil or government authority that interferes with normal business operations.
Service interruption coverage, which typically covers the insured for losses related to electricity or interruption of other utilities or supplies.
Extra expense incurred to enable business operations to be resumed or to mitigate other losses.
When presenting an insurance claim, it is important that policy provisions are considered against the backdrop of potentially applicable insurance coverage law to ensure that the policyholder is taking the steps necessary to maximize coverage. Many property policies are written on an “all risks” basis, but there will typically be exclusions, sublimits, or restrictions applicable to certain perils or circumstances. Some coverages may be subject to different policy limits and policy deductibles that impact the amount of coverage available. A proper analysis of the policy wording is vital to enable the insured to take full advantage of the coverage provided.
Practical Tips to Maximize Coverage
There are several steps policyholders should consider when making an insurance claim arising from natural disasters like the California fires:
Be Proactive in Notifying Insurers
Most policies identify specific procedures to be followed in presenting a claim, and there are likely to be timing deadlines associated with them. Failure to comply may result in insurers seeking to restrict or deny coverage for a claim otherwise covered by the policy. Policyholders should carefully consider any notice requirements, including any clause allowing for notice of a loss or an event that may or is likely to give rise to a claim. Prompt notification may assist policyholders in securing early access to loss mitigation resources and related coverages.
Early Assessment of Coverage
There are significant benefits in evaluating coverage at an early stage to understand any issues that may impact the way in which the claim is presented. Consultation with experienced coverage lawyers will assist in identifying and analyzing responsive policies as well as anticipating coverage issues or exclusions insurers might seek to rely upon.
Collate and Preserve Relevant Documents
Insurers typically require proof of loss and damage along with extensive supporting documentation. It is critical to take steps early on to ensure that potentially relevant documents and electronic records are located and preserved. In particular, insurers may argue that some part of the revenue loss is attributable to other causes, such as poor business decisions or economic downturn, such that historical records often must be examined and relied upon.
Preparation of Proof of Loss
The preparation of a detailed inventory and proof of loss is a time-consuming and challenging process but can prove invaluable in seeking to challenge any settlement offers made by the insurers or any loss adjustors appointed on their behalf. Many commercial policies include claim preparation coverage, which covers costs associated with compiling a detailed claim submission. The appointment of independent loss assessors or forensic accountants can prove particularly beneficial for collating BI losses, which are often challenged by insurers. For example, insurers may adopt a narrow view of what constitutes “interruption” to the business, particularly where certain business activities are ongoing.
Advance Payments
Any delays by insurers in making appropriate and periodic payments will delay the rebuilding of premises and the resumption of business operations. Insureds should consider requests for interim or advance payments, prior to completion of the loss adjustment process, particularly if the policy expressly provides for this.
Evaluating and Challenging Insurer Positions
The validity of any coverage defenses or limitations raised by insurers will be impacted by the precise wording of the insurance contract and by the applicable governing law. Experienced coverage counsel will be able to assist an insured in assessing the merit and viability of any coverage issues raised by insurers, or by their appointed loss adjusters, and in maximizing the insured’s potential recovery.
New Year Resolutions Triggered by Senate Bill 382
After the North Carolina General Assembly overrode Governor Cooper’s veto of Senate Bill 382, which became Session Law 2024-57 (the “New Law”), we published a client alert describing the state-wide effect of the New Law.
With the General Assembly’s 2024 Session concluded, some interested parties hope the General Assembly might repeal or amend the New Law in 2025. But regardless of the General Assembly’s future action, the New Law controls today.
Our first alert detailed the new limitations imposed on local government zoning authority, highlighting that the New Law applies to all zoning laws adopted after June 14, 2024 (the “Effective Date”).
This alert identifies practical New Year Resolutions for local governments and property owners to consider making because of the New Law.
Resolutions for Local Governments
Because the New Law invalidates all “down-zonings” adopted after the Effective Date and a down-zoning is a law which (1) reduces density, (2) reduces the number of permitted uses, or (3) creates a nonconformity on non-residential property, local governments should consider the following:
1. Review and Categorize: Consider identifying zoning regulations adopted after the Effective Date and divide them into three categories: (A) laws that are down-zoning under the New Law, (B) laws that might be down-zoning under the New Law, and (C) laws that are not down-zoning under the New Law. For laws falling into category (A), the local government should direct staff to not enforce these laws at this time. For regulations falling within category (B), the answer is uncertain, but enforcement of these regulations may trigger litigation, including claims for attorney fees and monetary claims.
Simple. Right? Of course not!
Note the Distinctions: Some local land use regulations are authorized by the General Assembly as zoning regulations and as local police authority regulations. For example, the General Assembly adopted statutes enabling local floodplain regulations and water supply watershed regulations.
Authorized by the General Assembly (N.C.G.S. §160D-103), many local governments have simplified and unified local land use regulations for citizen convenience through adopting and codifying all land use regulations together in a unified development ordinance. The New Law applies to “zoning regulations,” but does the New Law apply to zoning regulations when such regulations are separately authorized by the General Assembly? The New Law does not expressly answer this question.
2. Consider Moratoria: While waiting (and perhaps hoping) for action by the General Assembly, development moves forward. Under the New Law, the right to develop is vested as permitted on the Effective Date. Can the General Assembly later modify this right? The answer is beyond the scope of this alert.
But let’s assume the General Assembly has authority to remove or modify this right by new legislation. For projects where an applicant has submitted an application for a development permit or approval after the Effective Date, the applicant secures a separate, independent vested right via the permit choice statutes.
Is there anything a local government can do to, perhaps, minimize vesting under the New Law by permit choice while the General Assembly might be considering changes to the New Law? Local governments may consider adopting a targeted moratorium on issuing development approvals to lessen obvious adverse impacts to public health and safety.
The possible advantage of adopting a moratorium would be to stay processing of applications for development approvals and issuing development approvals. As N.C.G.S. § 160D-107 is worded, permit choice may only apply to complete applications submitted before the moratorium became effective.
When, specifically, might a moratorium be appropriate? When a local government adopted new FEMA flood maps after the Effective Date. Local governments do not create these federal government maps but do adopt them so their citizens may purchase federal flood insurance. A moratorium provides “breathing room” for local governments to adopt standalone flood hazard regulations outside the reach of the New Law while awaiting clarifying action by the General Assembly.
But even a moratorium doesn’t provide breathing room for all development within newly identified flood prone areas. Local governments lack authority to adopt a moratorium on “development regulations governing residential uses.” N.C.G.S. § 160D-107.
Therefore, local governments have many potential New Year Resolutions but none of them restore the status quo existing before the New Law.
Resolutions for Property Owners and Developers
Local governments have many New Year Resolutions to consider, but for property owners and developers, New Year Resolutions are fewer and simpler:
1. Verify Zoning Laws: Property owners have a vested right in the zoning laws existing on the Effective Date. Like a contract, these laws establish specific rights. While most times, an electronic copy of zoning regulations is available on local government websites, frequently they are not completely current. Property owners should consider seeking a certified copy from the local government of all land use laws existing on the Effective Date. These are the terms of the property owners’ contract.
2. Expedite Development Plans: Property owners and developers who started designing a development and who like the terms of their contract should consider expediting their design and planning activity to submit a complete application and vest their development rights via permit choice. This will provide certainty that they can move forward under the version of zoning regulations existing on the Effective Date.
Like most significant changes in law, the New Law adds to the “to do” list for a New Year and the New Year brings potential for changes to the New Law. Stay tuned.
Jordan Love contributed to this article
California Attorney General Issues Two Advisories Summarizing Law Applicable to AI
If you are looking for a high-level summary of California laws regulating artificial intelligence (AI), check out the two legal advisories issued by California Attorney General Rob Bonta. The first advisory is directed at consumers and entities about their rights and obligations under the state’s consumer protection, civil rights, competition, and data privacy laws. The second advisory focuses on healthcare entities.
“AI might be changing, innovating, and evolving quickly, but the fifth largest economy in the world is not the wild west; existing California laws apply to both the development and use of AI.” Attorney General Bonta
The advisories summarize existing California laws that may apply to entities who develop, sell, or use AI. They also address several new California AI laws that went into effect on January 1, 2025.
The first advisory points to several existing laws, such as California’s Unfair Competition Law and Civil Rights Laws, designed to protect consumers from unfair and fraudulent business practices, anticompetitive harm, discrimination and bias, and abuse of their data.
California’s Unfair Competition Law, for example, protects the state’s residents against unlawful, unfair, or fraudulent business acts or practices. The advisory notes that “AI provides new tools for businesses and consumers alike, and also creates new opportunity to deceive Californians.” Under a similar federal law, the Federal Trade Commission (FTC) recently ordered an online marketer to pay $1 million resulting from allegations concerning deceptive claims that the company’s AI product could make websites compliant with accessibility guidelines. Considering the explosive growth of AI products and services, organizations should be revisiting their procurement and vendor assessment practices to be sure they are appropriately vetting vendors of AI systems.
Additionally, the California Fair Employment and Housing Act (FEHA) protects Californians from harassment or discrimination in employment or housing based on a number of protected characteristics, including sex, race, disability, age, criminal history, and veteran or military status. These FEHA protections extend to uses of AI systems when developed for and used in the workplace. Expect new regulations soon as the California Civil Rights Counsel continues to mull proposed AI regulations under the FEHA.
Recognizing that “data is the bedrock underlying the massive growth in AI,” the advisory points to the state’s constitutional right to privacy, applicable to both government and private entities, as well as to the California Consumer Privacy Act (CCPA). Of course, California has several other privacy laws that may need to be considered when developing and deploying AI systems – the California Invasion of Privacy Act (CIPA), the Student Online Personal Information Protection Act (SOPIPA), and the Confidentiality of Medical Information Act (CMIA).
Beyond these existing laws, the advisory also summarizes new laws in California directed at AI, including:
Disclosure Requirements for Businesses
Unauthorized Use of Likeness
Use of AI in Election and Campaign Materials
Prohibition and Reporting of Exploitative Uses of AI
The second advisory recounts many of the same risks and concerns about AI as relevant to the healthcare sector. Consumer protection, anti-discrimination, patient privacy and other concerns all are challenges entities in the healthcare sector face when developing or deploying AI. The advisory provides examples of applications of AI systems in healthcare that may be unlawful, here are a couple:
Denying health insurance claims using AI or other automated decisionmaking systems in a manner that overrides doctors’ views about necessary treatment.
Use generative AI or other automated decisionmaking tools to draft patient notes, communications, or medical orders that include erroneous or misleading information, including information based on stereotypes relating to race or other protected classifications.
The advisory also addresses data privacy, reminding readers that the state’s CMIA may be more protective in some respects than the popular federal healthcare privacy law, HIPAA. It also discusses recent changes to the CMIA that require providers and electronic health records (EHR) and digital health companies enable patients to keep their reproductive and sexual health information confidential and separate from the rest of their medical records. These and other requirements need to be taken into account when incorporating AI into EHRs and related applications.
In both advisories, the Attorney General makes clear that in addition to the laws referenced above, other California laws—including tort, public nuisance, environmental and business regulation, and criminal law—apply to AI. In short:
Conduct that is illegal if engaged in without the involvement of AI is equally unlawful if AI is involved, and the fact that AI is involved is not a defense to liability under any law.
Both advisories provide a helpful summary of laws potentially applicable to AI systems, and can be useful resources when building policies and procedures around the development and/or deployment of AI systems.
Beachfront Boundaries: Regulatory Takings Clarified
Jones v. Town of Harwich involved a dispute over the application of the Wetland Protection Bylaw and Regulations in Harwich, Massachusetts (“Wetland Protection Regulations”). In 1958, Lois H. Jones (“Jones”) purchased two distinct lots separated by a private driveway. The lots were known as 5 and 6 Sea Street Extension (“5 Sea Street” and “6 Sea Street”). 5 Sea Street was, and remains, a vacant lot that abuts the ocean. 6 Sea Street is improved with a four-bedroom house. In 1999, Jones sold 6 Sea Street. The record in the case indicated that Jones long intended to construct a single-family dwelling on 5 Sea Street.
In 2011, Jones filed a Notice of Intent with the Harwich Conservation Commission, proposing construction of a single-family residence on 5 Sea Street. In 2012, the Commission issued a denial Order of Conditions. Later that year, the Massachusetts Department of Environmental Protection issued a Superseding Order of Conditions, denying the project under the Massachusetts Wetlands Protection Act. In 2013, the Town of Harwich changed the tax assessment designation associated with 5 Sea Street to “unbuildable” and reduced the assessed valuation from $1,434,500 to $24,000. In 2015,1 the DEP, Jones, and some abutters, reached a settlement, which included a Final Order of Conditions. Nonetheless, the Harwich Conservation Commission maintained its position that Jones’s proposed construction would violate the Wetlands Protection Regulations, as well as the state wetlands regulations, and denied approval.
Jones filed suit against the Town of Harwich in the U.S. District Court for the District of Massachusetts, alleging that the application of the Wetland Protection Regulations to 5 Sea Street constituted a regulatory taking, entitling her to compensation. The Town argued that Jones could only recover if the Wetland Protection Regulations were the “but for” cause of 5 Sea Street being unbuildable. The Town argued that since state wetlands regulations also precluded developing 5 Sea Street, the local Regulations could not be the but for cause of Jones’s harm, and therefore, she could not recover from the Town. The District Court rejected this argument on summary judgment because the record contained evidence that the DEP’s 2015 decision could be amended, and the project might be allowed under state wetland regulations.
Next, the Court applied the cornerstone Penn Central test to determine whether or not the Town’s application of the Wetlands Regulation could constitute a regulatory taking. Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 124 (1978). The factors applied by the Court include: economic impact of the Regulations on the Plaintiffs; the extent to which the Regulations have interfered with distinct investment-backed expectations; and the character of the governmental action.
The District Court found that the significant decrease in the property’s value supported a substantial economic impact as a result of the Town’s Regulations. Additionally, the extent to which the Regulations interfered with investment-backed expectations was not appropriate for summary judgment because the parties presented competing arguments and evidence as to Jones’ intention to develop the property, and the alleged “windfall” that her estate would receive from development. Id., at 6. Finally, the District Court held that the character of the governmental action could be equivalent to a typical taking because the Regulations prevent any structure on the lot despite being generally applicable to all property.
Jones is a helpful reminder that application of local regulations may constitute a regulatory taking.
1 Jones passed away in 2014, but her estate continued her efforts to develop 5 Sea Street.
Appeals Court Shines Light on Solar Panel Protections
Kearsarge Walpole LLC v. Zoning Board of Appeals of Walpole involved a dispute over where a large-scale solar array could be placed in Walpole, Massachusetts. In Kearsarge, a solar developer (Kearsarge), along with Norfolk County Agricultural High School (Norfolk Aggie), and Norfolk County, entered into an agreement to construct a solar facility on the Norfolk Aggie campus, which is located in Walpole’s rural residential zoning district.
Kearsarge applied to the Walpole building commissioner for a building permit. The commissioner denied the permit, deeming the project a nonconforming use under Walpole’s zoning bylaw. The Walpole Planning Board upheld the commissioner’s decision, finding that the project was a nonconforming use and did not qualify for any exception from the Walpole zoning bylaw, which established that large-scale solar facilities be located within certain overlay districts. Kearsarge appealed to the Land Court, arguing that the project was exempt from Walpole’s restrictions pursuant to the “Solar Energy Provision” of G. L. c. 40A, § 3.1 Kearsarge also argued that the project was exempt under the “Education Provision” of G. L. c. 40A, § 3.2
The Land Court granted summary judgment in favor of Kearsarge, reasoning that the board’s decision indeed violated the Solar Energy Provision. However, the Land Court rejected Kearsarge’s assertion that the project constituted an educational use.
The Appeals Court affirmed the Land Court, applying the doctrine set forth in Tracer Lane II Realty, LLC v. Waltham, 489 Mass. 775, 781 (2022). Under Tracer Lane, the Court’s determination hinged on “whether the interest advanced by the ordinance or bylaw outweighs the burden placed on the installation of solar energy systems.” In Tracer Lane, the Court of Appeals ruled that Waltham’s near total ban on solar facilities (except in “one to two” percent of the city’s land area) constituted a violation of the Solar Energy Provision.
Here, Walpole argued that its zoning bylaw (which also restricted solar facilities to less than 2% of the town) was different than Waltham’s law given that the Waltham bylaw amounted to a blanket ban on solar facilities while the Walpole law allowed for expansion of the overlay districts wherein solar facilities were permitted. The Court rejected this argument holding that a town need not impose a blanket ban on solar facilities to violate the Solar Energy Provision. Rather, the Solar Energy Provision prohibits local ordinances that “unduly restrict . . . solar energy systems.” Walpole’s bylaw, by requiring “discretionary zoning relief” in order to construct solar facilities in all but 2% of the city constituted such an undue restriction – especially where expansion of the overlay districts would require an applicant to “petition to amend the Walpole zoning bylaws [by] submit[ing] their proposed amendment to a public hearing and town vote.” This, in the Court’s view was “a significant hurdle.” The Court also rejected Walpole’s argument that the interests advanced by its bylaw (protecting agriculture) promoted public health, safety, and welfare sufficient to justify that significant burden on solar development. According to the Court, “[t]he record . . . [did] not support a conclusion that a bylaw this stringent is necessary to protect the public health, safety, or welfare interests that Walpole seeks to promote.”
Kearsarge is another instance where the Appeals Court makes clear that Massachusetts courts will not hesitate to reign in local authority in the interest of enforcing the Solar Energy Provision.
1 Pursuant to Mass. Gen. Laws Ann. c. 40A, § 3, Ninth Paragraph, “[n]o zoning ordinance or by-law shall prohibit or unreasonably regulate the installation of solar energy systems or the building of structures that facilitate the collection of solar energy, except where necessary to protect the public health, safety or welfare.”
2 Under Mass. Gen. Laws Ann. c. 40A, § 3, Second Paragraph, “[n]o zoning ordinance or by-law shall regulate or restrict the interior area of a single-family residential building nor shall any such ordinance or by-law prohibit, regulate or restrict the use of land or structures for religious purposes or for educational purposes . . .”
RealPage Antitrust Consent Decree Proposed
In August 2024, the Department of Justice (DOJ) and eight states filed a civil antitrust lawsuit against RealPage Inc., alleging that its software was used to unlawfully decrease competition among landlords and maximize profits. Last week, the DOJ, now joined by ten states, filed an amended complaint alleging that landlords Greystar Real Estate Partners LLC, Blackstone’s LivCor LLC, Camden Property Trust, Cushman & Wakefield Inc., Pinnacle Property Management Services LLC, Willow Bridge Property Company LLC, and Cortland Management participated in the price-fixing scheme. These companies operate over 1.3 million residential units across 43 states and the District of Columbia.
According to the amended complaint, these landlords shared sensitive information through RealPage’s pricing algorithm to decrease competition and increase corporate profits. Jennifer Bowcock, RealPage’s Senior Vice President of Communications, rebutted the allegations, arguing that issues with housing affordability stem from the limited supply of residential units and that the government should “stop scapegoating RealPage – and now [its] customers – for the housing affordability problems.”
The DOJ also announced a proposed consent decree with Cortland Management, where the claims against Cortland would be resolved in exchange for agreeing to cooperate with the DOJ’s ongoing investigation against the remaining defendants. Under the terms of the proposed agreement, Cortland would be barred from using a competitor’s sensitive data to train a pricing model, pricing units with the assistance of an algorithm without court supervision, and soliciting or disclosing sensitive information with other companies to set rental prices. A spokesman for Cortland indicated that it is pleased with the outcome and is looking forward to “improv[ing the] resident experience” in 2025. Under the Tunney Act, P.L. 93-528, the proposed consent decree will be published in the Federal Register for a 60-day comment period, after which the court can enter final judgment. The case is United States v. RealPage Inc., dkt. no, 1:24-cv-00710 (LCB) (M.D.N.C. filed Aug. 23, 2024).
Potential Impact of FHA’s Revised Defect Taxonomy on Mortgage Originators and Servicers
On January 7, 2025, the Federal Housing Administration (FHA) officially revised its Defect Taxonomy (Final Defect Taxonomy) with the publication of Mortgagee Letter (ML) 2025-01 and the related attachment detailing those changes. The changes are effective as of January 15, 2025, and will be implemented in Appendix 8.0 of FHA Handbook 4000.1 at a later date.
FHA first proposed revising the Defect Taxonomy on October 28, 2021, with the publication of FHA INFO 2021-92. Since then, FHA announced a new proposed version of the Defect Taxonomy with the publication of FHA INFO 2024-25 on July 10, 2024 (Proposed Defect Taxonomy). As we reported at the time, the proposed revisions to the Defect Taxonomy were broad and, most notably, created a new section specific to loan servicing defects. The Proposed Defect Taxonomy did not suggest revisions to the Underwriting Loan Review section of the Defect Taxonomy, but it did propose revisions to the generally applicable introduction of the Defect Taxonomy, as well as the creation of an entirely new Servicing Loan Review section. The Final Defect Taxonomy generally aligns with the Proposed Defect Taxonomy from July 10, 2024. However, based on its own internal review and/or industry feedback, FHA has made some notable revisions to the Final Defect Taxonomy that will likely impact how the U.S. Department of Housing and Urban Development (HUD) applies it in practice.
Examples/Explanation of What Constitutes a Tier 2 or Tier 3 Finding
The Defect Taxonomy has general definitions of what constitutes either a Tier 1 or Tier 4 defect. Both relate to Findings of fraud or materially misrepresented information, but a Tier 1 defect is a Finding that the “Mortgagee knew or should have known” about and a Tier 4 defect is a Finding that the “Mortgagee did not know and could not have known” about. Unlike the clearly stated definition of a Tier 1 or Tier 4 defect, the Defect Taxonomy uses specific examples of Mortgagee conduct to define a Tier 2 or Tier 3 defect as something that falls between a Tier 1 or Tier 4 defect. These examples are included in multiple parts of the Defect Taxonomy, including the introduction, the Underwriting Loan Review section, and the Servicing Loan Review section. The recent revisions only impact the introduction and Servicing Loan Review sections.
The edits to the introduction section of the Final Defect Taxonomy are generally clarifying edits. However, FHA made a more substantive change to the examples given in defining a Tier 3 defect. Specifically, the Final Defect Taxonomy now states that a Tier 3 defect includes a Finding “of noncompliance remedied by the Mortgagee prior to review by the FHA.” This example is not included in the Proposed Defect Taxonomy. The addition is helpful in drawing a line between a Tier 3 and Tier 2 defect, because the Final Defect Taxonomy defines a Tier 2 servicing defect as a Finding that requires “mitigating documentation, corrective servicing action, and/or financial remediation.” As a result, it appears FHA recognizes that a self-mitigated defect merits a lower tier rating for purposes of the Defect Taxonomy.
For the Servicing Loan Review section, FHA made numerous revisions to the examples provided for what constitutes a Tier 2 or Tier 3 defect under each specific defect area. The revisions generally reflect a more specific or clear example of a Tier 2 or Tier 3 defect, so these revisions do not present a significant departure from the Proposed Default Taxonomy. However, it would be beneficial for all servicers or impacted parties to review the new examples of Tier 2 and Tier 3 defects under the Final Defect Taxonomy.
Remedies for Tier 2 Findings
Like the revisions to the examples of a Tier 2 or Tier 3 defect, the Final Defect Taxonomy outlines different potential remedies for a Tier 2 defect compared to the remedies outlined in the Proposed Defect Taxonomy. Some of these revisions may be impactful for Mortgagees. For example, in the context of a Loss Mitigation Processing defect, the Proposed Defect Taxonomy stated that FHA would accept a one-year or five-year indemnification if the borrower did not accept the terms of the appropriate loss mitigation option. But now, the Final Defect Taxonomy states that “FHA will accept indemnification (1-Year or 5-Year) only when the Servicer provides documentation of a good faith effort to complete” the loss mitigation option. Similar revisions were incorporated in the context of Home Disposition defects and Home Retention defects. It is unclear what constitutes “a good faith effort,” but at the very least, this revision will potentially impose a new reporting obligation on impacted servicers.
Rebuttal of a Finding or Severity Determination
The introduction section of both the Final and Proposed Defect Taxonomies state that a Mortgagee may provide supporting documentation through the Loan Review System (LRS) to rebut any Finding or severity determination under the Defect Taxonomy. However, the Final Defect Taxonomy also specifies that “Rebuttals are based on information available to FHA prior to the initial Finding.” This seemingly small addition appears to meaningfully limit the scope of the information a Mortgagee can use to rebut HUD’s determinations pursuant to the Defect Taxonomy. As a result, this limitation on the rebuttal process could be a future cause of Mortgagee concern.
Takeaways
Going forward, Mortgagees and other impacted parties likely should review the Final Defect Taxonomy to develop a better idea of what FHA and HUD view as a Tier 1, Tier 2, Tier 3, or Tier 4 defect. It would also likely be beneficial for Mortgagees to implement this information in their policies and procedures, such as internal audit and quality control, to try to preempt potential origination or servicing defects. Other factors to consider include: (1) identifying defects that could be self-mitigated and therefore characterized as a Tier 3 defect; (2) documenting good faith efforts to complete loss mitigation; and (3) reviewing the information submitted in the LRS to ensure that it is detailed enough to support a potential rebuttal to a Finding or severity determination pursuant to the Defect Taxonomy.
The impact of the Final Defect Taxonomy will become clearer as HUD interprets and implements it in the near future.
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DOJ Reports Substantial Procurement Fraud Recoveries in FY 2024
The Department of Justice (DOJ) recently announced that it obtained more than $2.9 billion in False Claims Act (FCA) settlements and judgments in the fiscal year ending Sept. 30, 2024.
DOJ reports that matters that involved the healthcare industry comprised the largest portion of these FCA recoveries in FY 2024, but that “procurement fraud” recoveries, once again, were significant for DOJ this past year.
Among the more notable procurement fraud recoveries from the past year were:
A large government contractor paid $428 million to resolve allegations that it knowingly provided false cost and pricing data when negotiating with the Department of Defense for numerous government contracts and double billed on a weapons maintenance contract, leading to the company receiving profits in excess of negotiated rates. This is the second largest government procurement fraud recovery under the False Claims Act in history.
A large federal contractor paid $70 million to resolve allegations they overcharged the U.S. Navy for spare parts and materials needed to repair and maintain the primary aircraft used to train naval aviators. The government alleged that these entities, which were owned by the same parent company, entered into an improper subcontract that resulted in the Navy paying inflated costs for parts.
A federal contractor paid $811,259 to resolve allegations that it knowingly supplied valves that did not meet military specifications. The government alleged that, under a U.S. Navy contract, the company invoiced for military-grade valves to be installed on certain combat ships when the company knew the valves had not met the testing requirements to be deemed military grade.
DOJ brought claims against a federal contractor and an individual estate of the founder, majority owner and chief operating officer of the company for allegedly causing the submission of false claims to the Department of Defense under contracts to provide Army combat uniforms. The government alleged that the company and the founder falsified the results of the insect repellant testing to conceal failing test results, including by inappropriately combining results from different rounds of testing, re-labeling test samples to hide the true origin of the samples, and performing re-tests of uniforms in excess of what the contract permitted.
A government contractor paid $55.1 million to satisfy a judgment that it made knowingly false claims to the United States when it misrepresented its commercial sales practices during the negotiation and subsequent performance of a General Services Administration (GSA) contract. The court found that the false disclosures induced GSA to accept and then continue to pay higher prices than it would have had it known of the company’s actual commercial pricing practices. The court also found that the company continuously violated the Price Reduction Clause, “a standard term in these types of contracts that requires the contractor throughout performance of the contract to maintain GSA’s price position in relation to an identified customer or category of customer agreed upon in contract negotiations.”
The City of Los Angeles paid $38.2 million to resolve allegations that it failed to meet federal accessibility requirements when it sought and used Department of Housing and Urban Development (HUD) grant funds for multifamily affordable housing. The government alleged that the city failed to make its affordable multifamily housing program accessible to people with disabilities. The government also alleged that the city failed to maintain a publicly available list of accessible units and their accessibility features, and the city, on an annual basis, falsely certified to HUD that it complied with related grant requirements.
A federal contractor paid $26.8 million to resolve allegations that Hahn Air failed to remit to the United States certain travel fees collected from commercial airline passengers flying into or within the United States.
A government contractor paid $18.4 million to resolve allegations that it billed for time not worked at the National Nuclear Security Administration’s Pantex Site near Amarillo, Texas.
A large federal contractor paid $11.8 million to resolve allegations that it submitted false claims to the Federal Emergency Management Agency for the replacement of certain educational facilities located in Louisiana that were damaged by Hurricane Katrina. The government alleged that the contractor submitted to FEMA fraudulent requests for disaster assistance funds and did not correct applications that included materially false design, damage and replacement eligibility descriptions. Combined with settlements with other entities involved in the alleged conduct, the government recovered over $25 million in connection with the disaster assistance applications prepared by the contractor.
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