(UK) Revolution Bars: When is a Meeting Really a Meeting?
In his judgment to sanction the restructuring plan (“RP”) of Revolution Bars[1], Justice Richards proceeded on the basis that the Class B1 Landlords and the General Property and Business Rate Creditors were dissenting classes, notwithstanding that they approved the Plan by the statutory majority. This is because they did not approve the Plan at “meetings”, since only one person was physically present at each “meeting” even though the chair held proxies from other creditors.
Pursuant to Part 26A of the Companies Act 2006, to agree a RP, at least 75% in value of a class of creditors, present and voting either in person or by proxy at the meeting, must vote in favour (section 901F). This is repeated when considering the cross-class cram down (“CCCD”), which can be applied “if the compromise or arrangement is not agreed by a number representing at least 75% in value of a class of creditors… present and voting either in person or by proxy at the meeting” (section 901G).
Applying various case law on the subject, we now have the following guidance in relation to a “meeting” for the purposes of RPs:
The ordinary legal meaning of a meeting requires there to be two or more persons assembling or coming together[2];
If there is only one shareholder, creditor or member of a relevant class, that would constitute a “meeting” by necessity, but a meeting in this instance would be considered an exception to the ordinary legal meaning[3];
An inquorate and invalid “meeting” does not preclude the court from exercising its discretion to apply a CCCD to those “dissenting” classes[4].
To ensure a proper “meeting”, there must be two or more creditors physically present (where two or more creditors exist in a class). The physical presence of only one person voting in two capacities – as creditor and as proxy for another – will not suffice, nor will it suffice if the chair holds proxies and there is only one creditor in attendance. Only in cases where there is one creditor in a class, will a meeting of one be valid. If there is no valid meeting, the creditors of that class will be treated as dissenting, and potentially subject to CCCD (assuming the RP has also met the relevant voting threshold and CCCD is engaged).
It does beg the question – if the circumstance were to arise where there were no valid meetings, then what? It seems likely that the RP would fall at the first hurdle.
In this case, the judge sanctioned the CCCD of all “dissenting” classes, and the RP.
Notably, in Re Dobbies Garden Centre Limited[5] the Scottish court took a different approach. Here, only one creditor attended the meeting of the only “in the money” class which approved the plan. If the court had adopted the approach in Revolution Bars, that meeting would be considered invalid, the class categorised as dissenting and the plan would not have been sanctioned.
Focusing on the words “either in proxy or by person” as a qualifier to being “present and voting”, the Scottish court found that a meeting may be quorate where two or more creditors were in attendance or represented in person, or by proxy, or by a combination, and one person can act in two capacities; therefore the meeting was valid.
[1] [2024] EWHC 2949 (Ch)
[2] Sharp v Dawes (1876) 2 Q.B.D. 26
[3] East v Bennett Bros Ltd [1911] 1 Ch. 163; Re Altitude Scaffolding [2006] BCC 904
[4] Revolution Bars
[5] [2024] CSOH 11
Morgan Lewis Welcomes Jerry Fujii and Naoki Ueyama to Tokyo Office
Morgan Lewis Welcomes Jerry Fujii and Naoki Ueyama to Tokyo Office. Morgan Lewis is excited to announce the addition of two highly esteemed partners, Gerald “Jerry” Fujii and Naoki Ueyama, to its Tokyo office. Both bring a wealth of expertise in real estate transactions and diverse financing options, including green financing, to further strengthen the […]
Spurred on by the Steward Health Care Bankruptcy, Massachusetts Adopts Bill Regulating Private Equity and REITs in Health Care, Continuing a National Trend
On January 8, 2025, Massachusetts Governor Maura Healey signed into law House Bill 5159 (the “Bill”). The Bill grants the state new regulatory powers to oversee and review health care transactions involving private equity firms, real estate investment trusts (“REITs”), and management services organizations (“MSOs”). The Bill is the tenth law enacted in recent years to scrutinize health care transactions, and its enactment in Massachusetts highlights the continued expansion of state oversight of health care transactions.
Key Provisions
Expanded Definition of “Material Change Transaction” That Requires Reporting: As further described below, the Bill broadens the scope of what constitutes a material change transaction to include transactions involving private equity firms, REITs, and MSOs, such as changes in ownership, significant asset transfers, and conversions of nonprofit organizations to for‑profit entities.[1]
Additional Annual Reporting Requirements: For providers and facilities that have existing annual reporting obligations to the Center for Health Information and Analysis (“CHIA”), the Bill expands the reporting obligation to require detailed disclosures on ownership structures and finances, including information involving parent entities and affiliates.[2]
Penalties for Non‑Compliance: The Bill increases penalties for entities that fail to comply with reporting obligations to up to $25,000 per week.[3]
Post‑Closing Oversight by the Health Policy Commission (“HPC”): The Bill grants HPC authority to assess the impact of “significant equity investors” on health care costs, and such oversight may be exercised up to five years post‑closing of a transaction.[4]
Massachusetts False Claims Act Liability for Investors: The Bill expands the definition of “knowledge” under the Massachusetts False Claims Act, expanding potential liability to entities with an “ownership or investment interest” (defined below) that are aware of a False Claims Act violation but fail to disclose such violation within 60 days.[5] The expanded definition is presumably intended to target sponsors and investors, who, through transaction‑related diligence activities or post‑closing operational involvement, learn of potential violations of the state’s False Claims Act. Sponsors and investors with substantial exposure to businesses with Medicaid revenue should discuss the impacts of this theory of liability with regulatory and deal counsel.
Expanded Attorney General Involvement: The Bill grants the Attorney General with expanded powers to intervene in HPC hearings, and empowers the Attorney General to compel entities to produce documents or provide testimony under oath with respect to information submitted to CHIA.[6]
Prospective Prohibition on Hospital‑REIT Sale‑Leaseback Arrangements: Under the Bill, the state will not issue an acute‑care hospital license to any facility “if the main campus of the acute‑care hospital is leased” from a REIT.[7] Relationships in effect before April 1, 2024 will be grandfathered and such grandfathered status will be transferrable in a change of ownership.
History and Regulatory Backdrop
History of Regulation of Health Care Facilities
Although the Bill is among the most comprehensive and far‑reaching in the nation, it is not without precedent. As described by Proskauer in a number of recent alerts, publications, and presentations (including for the American Health Law Association and the New York State Bar Association), elected officials in a number of states have reacted to the decade‑old surge in investment in the health care sector with measures that are intended to scrutinize and increase transparency over such transactions.
In addition, transaction review laws build upon existing, and sometimes controversial, regulatory review mechanisms that impact the health care industry, particularly “Certificate of Need” (“CON”) laws. By way of background, and as a result of now‑defunct federal requirements, states in the 1970s adopted CON laws, a form of economic planning intended to avoid over‑supply.[8] State CON laws, many of which remain in effect,[9] regulate health care facilities (e.g., hospitals and ASCs) and typically impose approval or reporting requirements over certain transactions, such as facility renovations, expansions or mergers, or the purchase of complex medical equipment (e.g., CT or MRI).
Despite this backdrop of substantial regulation affecting health care facilities, many states have historically had limited to no regulatory review authority over transactions affected physicians and physician practices. In light of existing regulatory oversight affecting facilities, state legislators may view health care transaction laws as incremental expansions over state regulatory powers. In contrast, investors and their stakeholders are likely to view these laws as material expansions, given that there was historically limited regulatory oversight for these transactions.
The Impact of the Steward Health Care Bankruptcy
The Bill should be viewed as a reaction by Massachusetts elected officials to the bankruptcy of Steward Health Care. The bankruptcy, which was widely reported on and resulted in a number of federal and state‑level legislative hearings, impacted Massachusetts residents, in particular, and resulted in the Massachusetts Department of Public Health establishing a call center dedicated to answering public questions regarding the bankruptcy.
As summarized by the Massachusetts Senate in the first sentence of a press release concerning the Bill, the “Bill helps close gaps that caused the Steward Health Care collapse.”[10]
Expanded Definition of Material Change Transactions
Under existing Massachusetts law, health care providers and organizations with annual net patient service revenue exceeding $25 million are required to submit a Material Change Notice (“MCN”) to HPC, CHIA, and the Office of the Attorney General at least 60 days prior to a proposed material change.
The Bill broadens the scope of what constitutes a material change that requires the submission of an MCN to include the following:[11]
Transactions involving a “Significant Equity Investor” that result in a change of ownership or control of a provider or provider organization. The term “Significant Equity Investor” (which is excerpted, in its entirety, at the end of this post) is defined to include any private equity firm with a financial interest in a provider, provider organization, or MSO, as well as any investor or group holding 10% or more ownership in such entities.
“Significant acquisitions, sales, or transfers of assets, including, but not limited to, real estate sale‑leaseback arrangements.”
“Significant expansions in a provider or provider organization’s capacity.”
Conversion of nonprofit providers or organizations to for‑profit entities.
Mergers or acquisitions leading to a provider organization “attaining a dominant market share in a particular service or region.”
Of note, some of new categories, such as “significant expansion” in “capacity”, are ambiguous and do not adopt firm reporting threshold or parameters, which we expect are likely to be addressed via further rule‑making or guidance.
Implications for Private Equity Investors and REITs
The Bill represents a significant shift in the regulatory landscape for private equity investors and REITs in Massachusetts, and the Bill makes Massachusetts an outlier among the states with respect to the obligations and duties imposed upon investors and REITs.
Notwithstanding the foregoing, the Bill’s requirements represent a significant evolution, the product of ongoing legislative compromise. When introduced in the Massachusetts Senate as Senate Bill 2871 in 2024, the Bill’s precursor included additional statutory restrictions related to the corporate practice of medicine and “Friendly PC” model, maximum debt‑to‑EBITDA requirements for transactions involving providers or provider organizations, and bond requirements for private equity investors.
Stakeholders are advised to closely monitor further guidance and regulations that may be issued by Massachusetts authorities, and should continue to follow Proskauer’s Health Care Law Brief for continuing developments in this space.
Relevant Definitions
“Health care real estate investment trust” means a real estate investment trust, as defined by 26 U.S.C. section 856, whose assets consist of real property held in connection with the use or operations of a provider or provider organization.
“Non‑hospital provider organization” means a provider organization required to register under section 11 of the Bill that is: (i) a non‑hospital‑based physician practice with not less than $500,000,000 in annual gross patient service revenue; (ii) a clinical laboratory; (iii) an imaging facility; or (iv) a network of affiliated urgent care centers.
“Private equity company” means any company that collects capital investments from individuals or entities and purchases, as a parent company or through another entity that the company completely or partially owns or controls, a direct or indirect ownership share of a provider, provider organization, or management services organization; provided, however, that “private equity company” shall not include venture capital firms exclusively funding startups or other early‑stage businesses.
“Significant equity investor” means (i) any private equity company with a financial interest in a provider, provider organization, or management services organization; or (ii) an investor, group of investors, or other entity with a direct or indirect possession of equity in the capital, stock, or profits totaling more than 10% of a provider, provider organization, or management services organization; provided, however, that “significant equity investor” shall not include venture capital firms exclusively funding startups or other early‑stage businesses.
“Ownership or investment interest” means any: (1) direct or indirect possession of equity in the capital, stock, or profits totaling more than 10% of an entity; (2) interest held by an investor or group of investors who engages in the raising or returning of capital, and who invests, develops, or disposes of specified assets; or (3) interest held by a pool of funds by investors, including a pool of funds managed or controlled by private limited partnerships, if those investors or the management of that pool or private limited partnership employ investment strategies of any kind to earn a return on that pool of funds.
[1] Bill, Section 24.
[2] Bill, Section 42.
[3] Bill, Section 43.
[4] Bill, Section 24.
[5] Bill, Section 29.
[6] Bill, Section 49.
[7] Bill, Section 64
[8] See National Health Planning and Resources Development Act of 1974 (P.L. 93‑641).
[9] See, e.g., National Conference of State Legislatures, Certificate of Need State Laws, available at: https://www.ncsl.org/health/certificate‑of‑need‑state‑laws.
[10] Commonwealth of Massachusetts, Senate Press Room, Legislature Passes Major Health Care Oversight Legislation, Regulates Private Equity (Dec. 30, 2024), available at: https://malegislature.gov/PressRoom/Detail?pressReleaseId=164.
[11] See Bill, Section 24.
NO MORE CITY SALES TAX ON RESIDENTIAL RENTALS!
Beginning January 1, 2025, Arizona lessors will no longer be required to collect and remit city Transaction Privilege Tax (TPT) on residential rentals. Senate Bill 1131, Chapter 204, Laws 2023 amended Ariz. Rev. Stat. Ann. § 42-6004, which precludes cities from taxing residential rentals. This preclusion does not apply to health care facilities, long-term care facilities, or hotel, motel or other transient lodging businesses
What Is Changing?Under prior law, most cities taxed residential long term (30 days or more) rentals with rates varying depending on the local jurisdiction. This law standardizes and simplifies the tax landscape by prohibiting the imposition of TPT on residential rental income statewide, as residential rentals were already excluded from state and county TPT.
Who Is Affected?• Property owners currently paying TPT on residential rentals in cities and towns that taxed residential rentals.• Tenants should also see a reduction in overall costs as landlords can no longer pass the tax through to their tenants. What Does This Mean for Property Owners?After January 1, 2025, property owners will no longer be required to collect and remit TPT on residential rentals. Property owners should continue to collect and remit municipal TPT on residential rentals through December 31, 2024. If property owners are charging residential tenants for the cost of the TPT, this practice must stop on January 1, 2025.
Next Steps for Property Owners• Review current compliance requirements and ensure that all TPT filings and payments for 2024 are accurate and up to date.• Prepare for the transition by updating lease agreements, billing systems, and accounting practices to remove TPT charges passed through to tenants effective January 1, 2025.• Notify tenants of any changes in rent amounts, if applicable.
What to Expect from the ADORThe Arizona Department of Revenue will automatically cancel all TPT licenses that exclusively list Business Code 045 (Residential Rental) on the account. For licenses with other business activity codes, the residential rental code will be removed, but other business codes will remain active. Property owners do not need to take any action to close or cancel these TPT licenses. However, the cancellation of TPT licenses and/or business codes does not relieve taxpayers of any outstanding tax liabilities or filing obligations for periods before January 1, 2025.
Property Tax Legislation and Court Decisions
LEGISLATION1
Property Tax on Destroyed Property Must be Prorated (Laws 2024, chapter 34)County assessors are required to prorate the value of properties destroyed after they were valued for the year and county treasurers are required to prorate the tax bills.
Property Tax Refunds for Expenses to Mitigate Effects of Illegal Camping and Loitering (HCR 2023-2024)The Arizona Legislature authorized putting to the voters at the 2024 November general election, the approval of a law that would provide for city and county (when property is located in unincorporated county area) property tax refunds to owners who have incurred expenses to mitigate the effects of illegal camping, loitering, panhandling, public consumption of alcoholic beverages or the use of illegal drugs on their property when a city or county adopts or follows a policy declining to enforce such laws. The refund is limited to the city or county portion of the property tax paid (and does not include school taxes). This measure was approved by the voters, to begin in 2025. The purpose of this measure was to force cities and counties to enforce existing laws against camping, loitering, etc.
Taxpayers Are Entitled to Receive the Equity in their Property When Sold for Delinquent Taxes (Laws 2024, chapter 176)When a property is sold for delinquent property tax, the owner is entitled to request that the equity in their property over and above the delinquent tax amount be refunded to them rather than just losing their property in an action to foreclose.
Valuation of Golf Courses (Laws 2024, chapter 8). Golf course land is valued at $500 per acre, fairways and tees are valued based on the Department’s per hole cost, and improvements like clubhouses and other structures are valued based on replacement cost new, less depreciation. To obtain this favorable valuation treatment, the owner of the golf course must record a deed restriction that restricts the use of the property as a golf course for at least 10 years. This legislation provides that to continue to be valued as a golf course, the deed restriction must be refiled when the properties are split or combined. It also requires the owner to notify the county assessor within 30 days of converting any portion of the property to a different use.
Military Reuse Zone Status Renewed for Phoenix-Mesa Gateway Airport (House Joint Resolution 2001). Phoenix-Mesa Gateway Airport was formerly Williams Air Force Base and its status as a military reuse zone was renewed through October 19, 2031. There are both TPT and property tax incentives available for military reuse zones.
Department of Revenue Now Has Responsibility for Military Reuse Zones Laws 2024, chapter 43). The responsibility for designating military reuse zones and certifying taxpayers’ eligibility for military reuse zone incentives is transferred from the Arizona Commerce Authority to the Department of Revenue.
COURT DECISIONS
Mesquite Power, LLC v. ADOR, 2024 Ariz. LEXIS 179 (2024). Income From Power Purchase Agreement Is to Be Taken into Account when Valuing Electric Generation Plant.
While there is a statutory method the value electric generation plants (basically a cost approach), the statutory value cannot exceed its fair market value. Mesquite argued that the statutory value was indeed higher than the plant’s fair market value because the statutory value included the value of a power purchase agreement. Mesquite’s position was that the power purchase agreement was an intangible and under Arizona law intangibles cannot be taxed. The Arizona Supreme Court though observed that the power purchase agreement itself was not being valued but rather under an income approach, the income from that contract should be considered when valuing the plant and remanded to the Arizona Tax Court so the owner’s appraiser could recalculate the value of the facility taking the income from the power purchase agreement into consideration.
Agua Caliente Solar, LLC v. Arizona Dep’t of Revenue, 257 Ariz. 437 (Ct. App. 2024). Full Amount of ITC Attributable to Solar Plant Is to Be Used to Reduce the Plant’s “Original Cost” Although the Credits Had Not Yet Been Utilized.
Solar Generation Facilities are valued at 20% of their “original cost” with a reduction for the value of any investment tax credits applicable to the plant. Aqua Caliente though was not able to utilize the full amount of the ITC on its federal income tax return because it didn’t have sufficient taxable income to absorb the ITC. The Department took the position that since Aqua Caliente did not utilize the ITC, it was not entitled to use it to reduce the plant’s original cost. The Arizona Court of Appeals held that the value should be reduced by the value of federal investment tax credits not yet utilized.
South. Point Energy Ctr. LLC v. Arizona Dep’t of Revenue, 257 Ariz. 189 (Ct. App. 2024). Power Plant on Indian Reservation Subject to Property Tax.
South Point owned an electric generation plant located on the Fort Mohave Indian Reservation in northwest Arizona. The land was leased from the Indian Tribe under a ground lease approved by the BIA. South Point built the plant and owned it, but the Tribe owned the underlying land. South Point argued that under the 9th Circuit Court of Appeals decision in the Chehalis case, the state and county could not impose property tax on the plant because it became a permanent improvement to the land owned by the Tribe and Tribal property cannot be taxed. The Arizona Supreme Court in a prior decision refused to apply the Chehalis case and remanded to the Court of Appeals to consider an additional argument that under the Bracker balancing test, the state cannot tax the plant. In this decision, the Arizona Court of Appeals held that under Bracker, the plant was also subject to property tax because the: (1) extent of the federal and tribal regulations did not weigh in favor of implied federal preemption, (2) economic burden of the tax fell on the lessee rather than on the tribe, and (3) taxes were not impliedly preempted by federal law because the state had substantial interests that justified the tax.
San Diego Gas & Elec. Co. v. ADOR, 256 Ariz. 344 (App. 2023). (Review granted by Arizona Supreme Court.) Statutory Value for Electric Transmission Property Cannot be a Negative Value.
Electric transmission facilities are valued using a statutory cost approach with a reduction for accumulated depreciation. As a part of Federal Energy Regulatory Commission regulations, electric utilities must include as a part of accumulated depreciation, the future cost of removing the transmission lines. San Diego Gas & Electric included the accumulated cost of decommissioning, which reduced the statutory formula value below zero and used the negative amount to reduce the value of construction work in progress. the Court of Appeals held that the full cash value includes the accumulated depreciation of the future cost of removal but that the full cash value cannot be a negative value and that the negative amount cannot be used to reduce the value of construction work in progress.
Sales and Use Tax Legislation and Court Decisions
2024 LEGISLATION
Senate Bill 1370, Chapter 237. Youth Businesses (Lemonade Stands) Don’t Need Sales Tax Licenses. Persons under 19 no longer need a transaction privilege (sales) tax (TPT) license if their gross receipts don’t exceed $10,000 per year.
Senate Bill 2382, Chapter 142. Department of Revenue to Certify Third Parties for Sourcing City and County Transaction Privilege Tax (TPT). The Department of Revenue is required to certify third-party companies to provide sourcing services for purposes of sourcing city and county TPT by January 1, 2028 (extended from January 1, 2026 by House Bill 2909, below). Taxpayers that use certified sourcing services will not be liable for any additional tax due to sourcing errors.
House Bill 2875, Chapter 44, Electronic Funds Payments Deemed to be Made When Authorized. Taxpayers’ electronic funds payments will be deemed to be made on the date and at a time when the taxpayer successfully authorized an electronic funds transfer. The transfer must be evidenced by e-payment confirmation from their financial institution.
House Bill 2380, Chapter 33, Cities Can’t Audit Taxpayer Engaged in Business in More than One City, Unified Audit Committee Must Publish City Audit Guidelines. This legislation prohibits a city from auditing a taxpayer engaged in business in more than one city or town unless that city obtained prior approval from the Department. This bill also requires the Unified Audit Committee (composed of representatives from cities and the Department of Revenue) to publish uniform audit guidelines applicable to all cities and towns.
House Joint Resolution 2001, Military Reuse Zone Status Renewed for Phoenix-Mesa Gateway Airport. Phoenix-Mesa Gateway Airport was formerly Williams Air Force Base and its status as a military reuse zone was renewed through October 19, 2031. There are both TPT and property tax incentives available for military reuse zones.
House Bill 2634, Chapter 43, Department of Revenue Now Has Responsibility for Military Reuse Zones. The responsibility for designating military reuse zones and certifying taxpayers’ eligibility for military reuse zone incentives is transferred from the Arizona Commerce Authority to the Department of Revenue.
House Bill 2909, Chapter 221, Extended Third-Party Sourcing Date and Extends Exemption for Qualifying Forest Products Equipment. In order to give the Department of Revenue more time to certify third parties for sourcing city and county TPT, this bill extended the date from January 1, 2026 to January 1, 2028. Also extended the sales and use tax exemptions for the purchase of harvesting or processing qualifying forest products equipment through December 31, 2026. This bill was passed with an emergency clause, so it went into effect on June 18, 2024 when signed by Governor Hobbs.
COURT DECISIONS
9W Halo Opco, LP v. ADOR, No. 1 CA-TX 23-0003 (11-7-2024). Laundry Rental Business Not Engaged in Processing; Machinery and Equipment Used in Laundry Operations Not Exempt M&E. Taxpayer launders and sanitizes textiles (sheets, etc.) and rents them to entities in the healthcare industry. Taxpayer sought a refund of use tax paid on their purchases of the laundry equipment used in their laundry and sanitization activities. The Department of Revenue denied the refund claim and the taxpayer appealed. The Court reasoned that the term “processing” as is commonly understood within its ordinary meaning does not fall within the meaning of processing. In denying the taxpayer’s claim for refund, the Court relied upon the definition of “processing” contained in Moore v. Farmers Mut. Mfg. & Ginning Co., 51 Ariz. 378 (1938), which stated: “to subject (especially raw material) to a process of manufacturing, development, preparation for market, etc.; to convert into marketable form, as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurizing, fruits and vegetables by sorting and repacking.”RockAuto, LLC v. Ariz. Dept. of Revenue (App 2024) (petition for review to Arizona Supreme Court pending); In-State Distributors Provided Nexus for Sales Tax Collection.
RockAuto is an internet seller of auto parts throughout the United States. It used local distributors to fulfill their internet orders. It had no physical presence in Arizona but had local distributors in the state that fulfilled RockAuto’s orders for orders to be shipped to Arizona customers. The Court of Appeals found that the local Arizona distributors acted on RockAuto’s behalf and constituted the sufficient physical presence requiring RockAuto to collect and remit the Arizona sales tax. It should be noted that the years at issue in this case were prior to Arizona’s adoption of economic nexus, so that the applicable test used in this case was “physical presence.”Dove Mountain Hotelco, LLC v. Arizona Dep’t of Revenue, 257 Ariz. 366 (2024). Compensation Received from a Hotel Rewards Program for Complimentary Stays is Subject to TPT. Marriott, as most hotels, has a loyalty marketing program that Dove Mountain, a Marriott branded hotel, participated in. The Marriott rewards program was administered by Marriott Rewards, LLC. When a guest would use points for a complimentary stay at Dove Mountain, Marriot Rewards would compensate Dove Mountain. The issue is whether that compensation was subject to the transaction privilege tax under the hotel classification. The Arizona Supreme Court held that the compensation for the complimentary stays was taxable.
City of Tucson v. Orbitz Worldwide, Inc., No. 1 CA-TX 23-0001, 2024 WL 123640 (Ariz. Ct. App. Jan. 11, 2024). (Memorandum decision. Review denied by Arizona Supreme Court.) Orbitz is Not an “Operator” of Hotels.
Tucson has an occupational license tax on persons that “operate or cause to be operated a hotel.” Tucson assessed Orbitz for that tax, but the Court of Appeals held that Orbitz was not subject to the tax because it did not operate or cause hotels to be operated.
Income Tax Legislation
Senate Bill 1358, Chapter 55. Can Request Arizona Withholding on Distributions from Pension and Retirement Accounts. A recipient of a distribution from a pension or retirement account may request that Arizona income tax be withheld and the distribution is treated as if it were a payment of wages by an employee for a payroll period.
House Bill 2379, Chapter 7. Internal Revenue Code Conformity. This is the annual bill that conforms the Arizona income tax statutes to the Internal Revenue Code as amended and in effect as of January 1, 2024. According to the Arizona Department of Revenue, there is no anticipated fiscal impact to the state General Fund since no enacted federal acts modified the U.S. IRC in 2023.
House Bill 2875, Chapter 44, Electronic Funds Payments Deemed to be Made When Authorized. Taxpayers’ electronic funds payments will be deemed to be made on the date and at a time when the taxpayer successfully authorized an electronic funds transfer. The transfer must be evidenced by e-payment confirmation from their financial institution.
House Bill 2909, Chapter 221. Caps Corporate Tuition Tax Credit at $135 Million Annually, Eliminated Inflation Adjusted Increase. Caps the aggregate dollar level of the Corporate Low Income Student Tuition Tax Credit at $135 million annually, beginning in FY25. Previously, the aggregate cap was $10 million to be increased annually 2020 through 2024 by set percentages and thereafter by the greater of 2% or the percentage of the annual increase in the Metro Phoenix consumer price index.
Other Tax Legislation
Senate Bill 1636, Chapter 242. Expands Definition of Jet Fuel. An excise tax is imposed on the retail sale of jet fuel. Jet fuel was previously defined based on reference to “crude oil.” This definition is expanded to include (a) aviation turbine fuel that consists of conventional and synthetic blending components that can be used without the need to modify aircraft engines and existing fuel distribution infrastructure; and b) jet fuels derived from coprocessed feedstocks at a conventional petroleum refinery.
House Bill 2909, Chapter 221. Department Can Assess and Collect Fees from Cities, Counties and Other Governmental Bodies to Pay for Department’s Tax System Modification. Provides that the amount to be charged to counties, cities, towns, Council of Governments and regional transportation authorities with a population greater than 800,000 for the Integrated Tax System Project, may not exceed $6,626,900 for FY25.
Allows Property Tax Districts to Issue Tax Anticipation Notes to Cover Qasimyar Refunds. Taxing jurisdictions, including school districts, that are liable for tax refunds in the Qasimyar v. Maricopa County litigation where the refunds would result in a property tax increase of 4% or more may issue tax anticipation notes that mature in four years to pay the refunds.
Allegations of Redlining and Discriminatory Practices at The Mortgage Firm
With changes in leadership eminent and changes in regulatory priorities likely to follow, the Department of Justice (DOJ) and the CFPB kicked off 2025 with a pair of significant fair lending actions. On January 7, 2025, the United States filed a complaint against The Mortgage Firm, Inc., alleging violations of the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) due to unlawful redlining in predominantly Black and Hispanic neighborhoods in the Miami-Fort Lauderdale-Pompano Beach area from 2016 through 2021.
Ten days later, the CFPB filed a complaint and announced a proposed consent order involving Draper & Kramer Mortgage Corporation. The charges were brought under ECOA and the Consumer Financial Protection Act (CFPA) and include allegations of redlining majority- and high Black and Hispanic neighborhoods in the Chicago and Boston Metropolitan Statistical Areas from 2019 through 2021.
Many similarities exist between the two cases. Both involve allegations of redlining practices, including receiving a disproportionately low number of residential mortgage applications and approving a disproportionately low number of home loans in underserved communities. The claims are supported by extensive Home Mortgage Disclosure Act (HMDA) data analysis for each company. Additionally, each of the lenders is accused of locating its offices in predominantly white areas, failing to ensure that its loan officers served majority-Black and Hispanic communities, and targeting its marketing efforts primarily at predominantly white neighborhoods. Similarly, it is alleged that each of the lenders’ fair lending policies and procedures were insufficient to ensure equal access to credit. And both lenders are accused of failing to analyze mortgage lending data in real time. In The Mortgage Firm’s case, it is alleged that the company failed to sufficiently track HMDA data until it received notice of a fair lending examination from the CFPB, and that it took no action to address redlining risks until after the CFPB delivered its findings. For Draper & Kramer, the complaint alleges that it failed to make needed course corrections for fair lending deficiencies, such as its marketing practices nearly two years after the CFPB identified the problems.
Internal emails were problematic to say the least for the lenders in each case. The DOJ referenced several internal communications to support the claims against The Mortgage Firm. These communications included derogatory references to majority-Black and Hispanic neighborhoods, with employees using terms like “ghetto” or “in the ‘hood.’” The DOJ also highlighted that one loan originator who made these remarks remained employed and was not disciplined promptly or effectively. Instead, the individual only received a written warning over nine months after the emails were reported to The Mortgage Firm. The complaint further notes that another non-Hispanic white loan officer, one of the top producers in the Miami area, sent emails containing a racial slur and similarly received just a written warning nine months after the incident was brought to the company’s attention.
Similarly, the CFPB referenced internal communications from Draper & Kramer’s loan officers that included deeply inappropriate and discriminatory language. These emails contained offensive remarks that perpetuated harmful stereotypes and racial biases. The complaint does not indicate what, if any, disciplinary penalties may have been applied to the authors of the emails.
Also of note in the Draper & Kramer case are allegations by the CFPB that the company’s recruiting and hiring practices, which were based on “prior relationships with the company’s Regional Sales Manager, referrals from its existing mostly white loan officers, and word of mouth,” created a fair lending closed loop. The complaint alleges that the company failed to adequately monitor or document its marketing or outreach materials “to ensure that such distribution occurred in all neighborhoods…” and that “[n]early all of the most frequently used preapproved advertisements contained images of exclusively white-appearing loan officers.” These practices, according to the CFPB, discouraged residents in the underserved communities from making or pursuing applications for credit.
Uptick in Referrals
The complaint against The Mortgage Firm was referred to the DOJ by the CFPB. Agencies with enforcement authority under section 704 of ECOA, including the CFPB, Comptroller of the Currency, Board of Governors of the Federal Reserve System, Board of Directors of the Federal Deposit Insurance Corporation and National Credit Union Administration, must refer cases to the DOJ if they suspect a creditor of engaging in a pattern of lending discrimination (see § 1002.16 (b)(3) [15 U.S.C. § 1691e(g)]). They can also refer other potential ECOA violations to the DOJ.
According to the CFPB’s 2023 Fair Lending Report (the 2024 fair lending data is not yet available as of the date of this publication), in 2023, the FDIC, NCUA, FRB, OCC, and CFPB referred 33 cases to the DOJ, up from 22 such referrals in 2022, setting a high-water mark for Section 704 fair lending referrals to the DOJ in a calendar year.
The jump in 2023 follows a period of fluctuating referrals, with the CFPB’s numbers having steadily declined from 24 in 2013 to a dramatic low of just two referrals in 2018. This sharp drop in 2018 stands out as an anomaly in the data and suggests a year where fewer cases were escalated to the DOJ for action. However, the trend began to shift after 2018, with referrals picking up again in the following years. By 2022, referrals had rebounded to 23, and in 2023, they surged to 33, nearly doubling the previous year’s total and reflecting a notable change in the volume of cases referred for DOJ involvement.
Of the 33 cases referred in 2023, the CFPB contributed 18. These referrals involved a range of discriminatory practices, including redlining in mortgage lending based on race and national origin; underwriting discrimination against those receiving public assistance; predatory targeting based on race and national origin; pricing exceptions discrimination based on race, national origin, sex, and age; and credit card discrimination based on national origin and race.
The significant increase in 2023, following years of relative decline, highlights the growing recognition of fair lending violations and the CFPB’s increasing focus on addressing these discriminatory practices.
Implications
When viewed through the lens of DOJ referral trends, The Mortgage Firm and Draper & Kramer complaints serve to highlight several key areas of focus for financial institutions’ fair lending efforts:
Regularly analyze mortgage lending data in real time, including HMDA data, to identify and address any potential disparities in lending practices — do not wait until a fair lending examination to take action. Corrective actions are difficult if not impossible to take in an information vacuum.
Ensure that fair lending policies and procedures are robust and effectively promote equal access to credit across all communities, particularly in historically marginalized areas. The CFPB specifically noted that Draper & Kramer’s fair lending policies and procedures did not adequately address redlining and contained only general prohibitions against discrimination.
Both The Mortgage Firm and Draper & Kramer were cited for inadequate fair lending training. The CFPB noted that “Certain relevant training materials did not even contain a definition of redlining.” Financial institutions should ensure that training materials are accurate, relevant and enforced, particularly for its loan officers, who are often positioned as “the primary public-facing points of contact of applicants and prospective applicants.”
Take immediate, meaningful action when discriminatory behavior or derogatory remarks are known or reported, including timely and consistent discipline for violations of company conduct standards.
Investigate and address any disparities in office location and marketing practices to ensure that outreach efforts are inclusive and not concentrated in predominantly white neighborhoods. The two cases serve as a reminder that marketing approval should include a critical fair lending review. The DOJ noted that The Mortgage Firm failed to translate its website into Spanish or indicate which offices could assist Spanish-speaking clients. Lenders should view similar missteps as regulatory low-hanging fruit.
Lenders may also wish to consider the consequences of marketing to past customers. The CFPB cited Draper & Kramer’s reliance on marketing to past customers, who were predominantly white, as exacerbating the consequences of its failure to advertise, assign loan officers, and place offices in historically underserved neighborhoods.
Foster an inclusive company culture by conducting regular training on cultural competency and the implications of discriminatory language and behavior in the workplace.
Develop a comprehensive plan to proactively identify and mitigate redlining risks, especially in communities that have been historically underserved or targeted by discriminatory practices.
Hold all employees, including top producers, accountable for adhering to fair lending standards, ensuring that no one is above the rules, regardless of their performance.
Regulatory priorities may change as a new attorney general and CFPB director assume their roles. But these cases provide live guidance for lenders to develop compliance programs with respect to redlining, including policies and procedures, employee training, and internal monitoring, that will comply with regulatory guidelines under any administration.
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Senate Banking Committee Announces Digital Asset Agenda
Under Chair Tim Scott (R-SC), the Senate Committee on Banking, Housing and Urban Affairs has announced several policy objectives favorable to the digital asset industry. We expect the Committee to take a more favorable view of the industry during the next Congress than in years past.
In announcing the Banking Committee’s priorities for the next Congress, Chair Scott noted that will be a key focus.
Under Chair Gensler, the SEC refused to provide clarity to the cryptocurrency industry, which has forced projects overseas. Moving forward, the committee will work to build a regulatory framework that establishes a tailored pathway for the trading and custody of digital assets that will promote consumer choice, education, and protection and ensure compliance with any appropriate Bank Secrecy Act requirements. The committee will also foster an open-minded environment for new innovative financial technologies and digital asset products, like stablecoins, that promote financial inclusivity.
To that end, the Committee announced the formation of the first ever Subcommittee on Digital Assets, to be chaired by Senator Cynthia Lummis (R-WY), an outspoken supporter of cryptocurrency innovation. The Subcommittee’s jurisdiction covers a wide range of issues, including:
Digital assets, including but not limited to cryptocurrencies and stablecoins; activities of digital asset issuers, trading and lending platforms, custody providers, and other intermediaries, when such activities are related to digital assets; regulatory activities of the Department of Treasury, the Federal Reserve System, OCC, FDIC, NCUA, SEC, to the extent they directly or indirectly exercise supervisory or regulatory authority over digital assets and digital asset intermediaries; and financial literacy in digital assets.
Chairman Scott also issued a press release trumpeting President Trump’s executive order on digital assets. Further, the Committee announced a hearing on February 5 to discuss possible “debanking” of certain industries, including digital assets.
Texas Railroad Commission’s New Environmental Rules: A Step Toward Sustainability or Business as Usual?
In 1984, while Ronald Reagan was securing a landslide reelection and Apple introduced the Macintosh, the Railroad Commission of Texas (RRC) last updated the state’s primary oil and gas waste regulations. Now, four decades later, the RRC is revisiting these rules to better align them with modern industry practices and rising demands for stronger environmental protections.
Oil and gas extraction methods have evolved dramatically since the 1980s. Hydraulic fracturing (fracking) and horizontal drilling have sparked a production boom, significantly increasing both the volume and complexity of waste generated. This waste includes drilling fluids, fracking chemicals, and produced water—all of which, if mishandled, pose serious risks to soil, water, and public health.
While most oil and gas wastes are exempt from federal hazardous waste laws under the Resource Conservation and Recovery Act, states maintain broad authority to regulate their disposal and management. In Texas, the RRC oversees this responsibility. However, increasing environmental concerns and evolving industry practices have driven calls for regulatory updates, resulting in the recent revisions in the RRC’s rules.
Key Changes in the New Rules
The new rules, published in the Texas Administrative Code (“TAC”) on January 3, 2025, reflect a multiyear effort by the RRC to modernize waste management, encourage and expand recycling, and strengthen groundwater protections. These changes aim to balance industry needs with environmental stewardship, though their impact will depend on implementation and enforcement when they take effect on July 1, 2025.
Oil and Gas Waste Pits and Produced Water Recycling Pits (16 TAC §§ 4.113-114). A major change consolidates provisions from Statewide Rule 8 (“Disposal of Oil and Gas Waste”) and Rule 57 (“Produced Water Recycling”) into a new subchapter. Key updates include:
Authorization for certain pits (e.g., reserve and mud circulation pits) to operate without a specific RRC permit, with new registration requirements.
Updated standards for pit liners, groundwater monitoring, and closure procedures.
Stricter location restrictions, construction standards, and closure requirements for produced water recycling pits.
Produced Water Recycling (16 TAC § 4.112). One of the most significant shifts is facilitating produced water recycling. Operators can recycle produced water for reuse in drilling, fracking, and completion operations without requiring an RRC permit. However, they must still meet specific design, groundwater monitoring, and siting requirements. This change reflects growing interest in recycling as a solution to mitigate environmental risks, especially in areas like the Permian Basin, where seismicity concerns are increasing.
Transportation of Oil and Gas Waste (16 Tex. Admin. §§ 4.190-195). The new rules introduce enhanced accountability for waste transportation. Notable provisions include:
Detailed manifests for waste characterization.
Special waste authorizations.
Enhanced recordkeeping for waste haulers, improving tracking and compliance.
Public Participation (16 Tex. Admin. § 4.125). To boost transparency and public involvement, the new rules require that affected individuals and entities be notified about permit applications for waste facility construction. The notice must include details about the application, the protest process, and the location of the proposed facility. Notices must be sent via registered or certified mail, and recipients have 30 days to protest. If a protest is filed, the applicant must respond within 30 days. If no protests are received, the permit may be issued. Protests may lead to a hearing, with notice given to all affected parties.
Recycling Drill Cuttings (16 Tex. Admin. §§ 4.301-302)The rules aim to promote recycling of drill cuttings for beneficial use. Operators must comply with specific treatment and recycling requirements. The Commission may approve permits for using treated drill cuttings in commercial products like lease pads or roads, provided the products meet engineering standards, ensure public safety, and avoid water pollution.
Reactions to the New Rules
The revisions have sparked mixed reactions. For the oil and gas industry, the rules provide much-needed clarity, particularly on produced water recycling and waste transportation. However, many changes merely codify existing practices—like new registration requirements for certain pits—so their day-to-day impact may be minimal. That said, the ability to recycle produced water presents an opportunity for operators to reduce disposal costs and environmental impacts, especially in areas with limited disposal well capacity.
Environmental groups and landowners, however, view the revisions as insufficient. While the new rules offer clearer guidance on waste management and promote recycling, critics argue they fall short in addressing critical environmental issues. Concerns include a lack of more stringent regulations on pit liners, groundwater monitoring, and disposal in sensitive areas. Environmental advocates are also frustrated by the RRC’s decision not to require operators to notify landowners about waste disposal activities on their property. Despite these concerns, the RRC maintains it lacks the statutory authority to require such notifications or consent.
Practical Considerations for Landowners
Landowners whose properties are affected by oil and gas operations may need to take proactive steps to protect their interests. Since mandatory landowner notification is not required, surface owners should negotiate specific lease provisions, such as:
Restrictions on the types of waste disposed of on their land.
Designated disposal locations and management methods.
Operator notification before disposal activities—or even consent for certain types of waste disposal.
Landowners may also seek additional safeguards, such as stricter pit liner requirements, enhanced groundwater monitoring, or more comprehensive closure plans for waste pits.
Looking Ahead
The RRC’s overhaul of its oil and gas waste management regulations marks a significant step toward modernizing Texas’s regulatory framework in response to changing industry practices and environmental concerns. However, the real impact of these revisions will depend on how they are implemented and enforced when they take effect on July 1, 2025. Stakeholders—from industry operators to environmental advocates—should carefully consider the potential implications. For landowners, consulting legal counsel may be wise to ensure their interests are protected under the new rules. These final regulations could shape Texas’s oil and gas industry and environmental stewardship for years to come.
Pricing Considerations in the Aftermath of the California Wildfires
The devastating January 2025 wildfires in southern California prompted Governor Newsom to declare a state of emergency on January 7, 2025 for Los Angeles and Ventura counties. This triggered California laws around price gouging and pricing restrictions in the wake of the emergency. While other, overlapping states of emergency will impact how price restrictions are ultimately calculated and considered – including local emergencies, and a statewide emergency relating to the ongoing bird flu outbreak – that the unprecedented scale of the wildfires will undoubtedly lead to increased scrutiny of pricing practices during the immediate aftermath, recovery and rebuilding.
The California Penal Code prohibits selling, or offering for sale, covered products at a price more than 10% greater than the price offered for that good in the 30 days prior to the declaration of an emergency. While application and enforcement of the pricing restrictions can be complex, the key considerations to keep in mind are these.
When did price restrictions go into effect? January 7, 2025. The price restrictions immediately go into effect when the President of the United States, the Governor of California, or a city/county executive officer declare a state of emergency.
When do they expire? This will be a moving target in some places. The price limitations typically stay in effect for 30 days after the emergency declaration date, subject to extensions. For repair or reconstruction services or any services used in emergency cleanup, these typically stay in effect for an initial period of 180 days. Specifically for Los Angeles County, Governor Newson has already extended certain categories of pricing restrictions by executive order to remain in effect until January 7, 2026.
What is the price increase ceiling? 10% more than the price offered in the 30 days prior to the emergency declaration.
What if a seller starts selling a covered item only after a state of emergency is declared? That seller is prohibited from marking up the price of that item more than 50% of its costs.
Does this only apply to California-based businesses? No. The statute applies to all sellers, including manufacturers, wholesalers, individuals, distributors, and retailers, and to all kinds of sales.
What goods are covered? The statute covers a wide range of products such as: rental housing, building materials, gasoline, goods or services used for emergency cleanup, consumer food items, and medical supplies.
What are the potential consequences? Violations are criminally punishable by up to one year in jail and a fine up to $10,000 or civil penalties up to $2,500 per violation, injunctive relief, or mandatory restitution.
Where do they apply? Even when trigged by an emergency that is specifical to a particular geographic area, California Department of Justice interprets the statute to provide that the pricing restrictions are not restricted to the city or county where the emergency is declared, and that the statute is intended to prevent price gouging elsewhere in the state where this is increased consumer demand as a result of the emergency.
While the horizon for enforcement is long – the California statute provides a 4-year statute of limitations for bringing price gouging complaints – we have already seen the state eyeing enforcement opportunities. On January 22, 2025, the California Department of Justice (CDOJ) filed charges against a real estate agent. A couple who had lost their home in the wildfires applied to rent a property and were allegedly told the price would be raised 38% more than the prior advertised rate. The CDOJ has also announced that it has sent upwards of five hundred “warning letters” to hotels and landlords.
Considering the scope of pricing restrictions in place, and expected enforcement, businesses may want to consider additional diligence and documentation supporting compliance with pricing restrictions triggered by the California wildfires.
What You Need to Know about the California Fair Access to Insurance Requirements Plan (FAIR Plan)
This alert begins our series discussing legal issues related to the Southern California wildfires. We invite you to contact us if you would like a free consultation related to this topic. We will continue to provide updates as more information becomes available.
Due to the high risk of wildfires in California, many private homeowner insurers have made a business decision to leave the state. These decisions have left thousands of homeowners seeking insurance from an ever-dwindling pool of providers. Those who are unable to obtain insurance have instead turned to the “insurer of last resort,” better known as the California Fair Access to Insurance Requirements Plan (FAIR Plan).
What is the FAIR Plan?
The FAIR Plan is an insurance “pool” comprised of all California-licensed insurers that allows high-risk California homeowners to have access to basic fire insurance protection while limiting any one insurer’s liability. The plan is run by the California FAIR Plan Association, which, notably, is not a state or public agency. This means it is not taxpayer-funded, and profits from participating insurers come primarily from the sales of policies. However, though the FAIR Plan reported that the number of FAIR Plan dwelling and commercial policyholders grew by a reported 225% over the past two fiscal years, FAIR Plan’s exposure has also significantly increased.
If you were affected by the recent Eaton and Palisades fires in Southern California, there is a relatively good chance you are preparing to, or are in the process of, submitting an insurance claim through your FAIR Plan. You are not alone. Recent reports suggest more than 3,600 policyholders in Altadena, Pacific Palisades, and other parts of greater Los Angeles have already submitted claims to the FAIR Plan. Unfortunately, the claims submission and adjudication process for these policyholders is unlikely to be smooth due to the sheer number of claims and the FAIR Plan’s high exposure in the Southern California area. As such, there are a few points to remember when submitting a claim and communicating with FAIR Plan representatives.
How to Submit a Claim
Policyholders should understand the process for submitting claims. The FAIR Plan website provides a claims submission link. This link can be found here, along with a brief “FAQ” page here. We encourage all policyholders to submit their claims as soon as possible due to the expected delays in the claims adjudication process. Moreover, policyholders should take special care to document all communications with the FAIR Plan in case disputes arise later in the process. All emails with FAIR Plan representatives should be preserved, and, if possible, all phone conversations with representatives should be confirmed in writing through email. In addition, all documentation relevant to a policyholder’s claim, including pictures of the premises and receipts for lost or affected property, should be kept in a secure location. We also encourage policyholders to document the condition of their homes to the extent possible. Pictures should be taken of every room and all surrounding property prior to any remediation work.
We encourage policyholders to review the language of their FAIR Plan carefully and to submit all possible claims. When in doubt, make the claim. This applies even if your home is not destroyed, as the FAIR Plan should cover fire damage even if the home is left standing.
Understanding Smoke Damage Coverage
Policyholders should be aware of FAIR Plan administrators’ views on coverage for smoke damage. Properties of many policyholders have experienced profound smoke damage that prevents them from returning to their homes. While FAIR Plan policies are required to cover smoke damage, the FAIR Plan has recently narrowed its policies so that smoke damage may only be covered if there are clearly visible signs of damage or if smoke is detectable through smell. Class-action lawsuits have been filed in Alameda and Los Angeles Counties addressing the FAIR Plan’s narrowing of their policies. A primary argument by the plaintiffs in those cases is that the FAIR Plan is required to provide coverage for all smoke damage in accordance with California Insurance Code Section 2071. This would expand policies issued by the FAIR Plan to cover damages beyond permanent physical damage or damage detectable through smell. However, litigation on these issues is ongoing and may drag on for several years. In the meantime, policyholders should assume that all fire damage to their homes, including all smoke damage, will be covered by the FAIR Plan and submit claims accordingly. This should ensure that your claims are included in the class of claims covered by these class-action lawsuits, and that you benefit from any favorable rulings.
Mass. Chapter 93A and Non-Owner-Occupied Properties
In a previous post we highlighted that landlords of non-owner-occupied properties must navigate both specific Massachusetts landlord-tenant laws and Chapter 93A. A recent case, Pennetti v. Beauregard, reaffirmed this when the Appeals Court of Massachusetts upheld a Housing Court judgment in favor of tenants on their Chapter 93A counterclaim.
The case began when the landlord sought to evict tenants from a three-family unit. In response, the tenants stopped paying rent and counterclaimed, alleging that the landlord (1) retaliated against them for complaining about cross-metering electricity, (2) breached the warranty of habitability, and (3) violated Chapter 93A. The latter two claims were based on defects in the common areas and the landlord’s failure to replace a door damaged from an attempted break-in, which was temporarily covered with “a plywood board secured with only a ‘slide chain’ inside the apartment” for over 30 days. The Housing Court ruled in favor of the tenants, offsetting their unpaid rent against the damages awarded and allowing them to retain possession of the apartment.
The Appeals Court agreed, noting that the landlord’s failure to make timely repairs breached the implied warranty of habitability. Moreover, not addressing sanitary code violations within a reasonable time after notice was deemed an unfair and deceptive business practice under Chapter 93A, § 2. The longstanding defects in the common area and inadequate repair of the entry door violated the sanitary code, establishing the landlord’s willful and knowing misconduct. Consequently, this justified imposing double damages on the tenants’ chapter 93A counterclaim.
This case underscores the importance of understanding the laws governing landlord-tenant rights and an individual’s rights and obligations under those laws.
5 Trends to Watch in 2025: United Arab Emirates
Abu Dhabi Continues to Host International Sporting Events – For the third year in a row, the NBA came to Abu Dhabi in 2024. The 2024 showcase included the Boston Celtics and Denver Nuggets facing off in two pre-season games in October at the Etihad Arena on Yas Island, bringing NBA excitement to the United Arab Emirates capital. In May 2025, Abu Dhabi will host the EuroLeague basketball’s “Final Four” tournament—the first time the event has been staged outside of Europe. As with the NBA, EuroLeague is planting its footprints in the region, and they will likely take advantage of top-class infrastructure, professional support services, and a growing fan base, with festivities including dynamic fan engagement opportunities and multi-day matches.
M&A Trends in the UAE’s Corporate Transactional Landscape and AI Advancements –In 2025, the UAE’s corporate transactional landscape is expected to be driven by notable external and internal factors. A key trend will be the rise in outbound M&A activity, as UAE-based sovereign wealth funds and private investors look to deploy capital into international markets, particularly the United States. This trend is likely to be influenced by recent changes in the U.S. administration, which could present more favorable conditions for investment, particularly in technology, infrastructure, and health care sectors. As a result, UAE investors are expected to pursue strategic acquisitions to diversify their portfolios and gain access to high-growth sectors in developed markets. Simultaneously, the UAE is poised to emerge as a global leader in artificial intelligence innovation. The country’s ongoing investments in AI infrastructure, research, and development, coupled with its commitment to fostering a business-friendly ecosystem, will likely accelerate its attraction of top-tier AI companies, startups, and talent from around the world. As a result, the UAE is positioned to become a key hub for AI technology development, contributing to both regional and global advancements in industries such as finance, health care, and manufacturing, while providing fertile ground for corporate ventures and strategic partnerships in this rapidly evolving field.
Capital Markets Trends in the UAE –Two major trends are expected to shape the UAE capital markets in 2025. Lower interest rates have resulted in a substantial increase in debt capital market offerings across the entire bond spectrum, including Sharia-compliant sukuk offerings. The trend is gaining momentum, and we expect the debt capital market to grow substantially in 2025. We expect the equity capital market to be shaped by the following trends: an increased number of IPOs by non-government-related entities, including a number of tech companies; secondary offerings by listed companies in the form of accelerated non-documented block trades as well as fully documented equity offerings; and an increased focused on dual listing structures between the UAE and other countries, driven in particular by regulatory efforts of the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX).
The Growth of Private Credit and the Possible Impact of AAOIFI Standard 62 on the UAE Finance Market –As creditors continue to look across the global market for strategic opportunities, the UAE further developed as a hub for private credit providers in 2024 and we have seen an increased appetite for both international and regional credit funds to operate in the UAE and the wider Middle East, resulting in a number of high-profile private credit transactions closing during the year. Historically, the market has been dominated by local financial institutions offering relationship-based lending to local corporate entities, however the market terms that have evolved within the UAE as a result of regional bank market dominance have created a regime that has become of particular interest to a number of private credit providers. Given this, as banks and financial institutions continue to gain more share of the leveraged market in 2025 and private credit providers continue to search for opportunities, we expect the importance of private credit to continue to grow within the UAE (and the wider Middle East) in 2025 and beyond.
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which sets the standards in the Islamic finance industry, is considering new guidelines on sukuk (fixed income instruments that comply with Sharia principles). Standard 62, if enacted, would transform how sukuk are structured and treated in accounting and financial reporting processes, and would bring with it significant implications for issuers and investors. As it stands, sukuk are asset-based, but not asset-backed, meaning that investors are notionally exposed to the assets’ performance risk, but do not bear any direct financial or legal risk tied to those assets. Standard 62 would change this by transferring full ownership and risk of the underlying assets to the investors. Rather than resembling bonds (as they do currently), sukuk would be treated more like securitized assets, altering the risk dynamics for issuers and investors such that investors would bear the full risk of the underlying assets’ performance and no longer be protected from the specific performance of those assets. This reclassification could deter issuers, potentially limiting the volume of capital raised in the sukuk market, although much will depend on how the new rules (if enacted) are interpreted and implemented in practice. Issuers and investors will need to closely monitor developments in the coming months.
The UAE Remains one of the Most Vibrant Markets for the Real Estate and Construction Industry – The future of the real estate and construction industry in the region is filled with opportunity, with the primary goal of establishing the region as the preeminent location for investment and growth. The UAE continues to invest heavily in tourism and hospitality, with significant developments in luxury hotels, resorts, and entertainment complexes. One of the largest growing areas in the development space is branded residences (of which there are over 700 projects globally), which command higher yields for both owners and operators and diversify the real estate market. This trend is expected to continue into 2025, with ongoing and upcoming projects totaling over U.S. $100 billion in value, including state-sponsored infrastructure projects and landmark real estate developments. As of 2024, the top three causes of disputes in the region remain design-related, with scope change at 52.9%, late design at 32.1% and incomplete design at 26.3% (versus 31.8%, 17.9% and 11.3%, respectively, in the rest of the world) according to the CRUX 2024 report. The technological advancements used in the UAE construction market (for instance, AI, robotics, wearable IoT trackers, and augmented reality outlays) are likely to have an impact on the labour market. A key trend seen in state-sponsored projects is the increasing demand by international contractors and investors for early advice on the structuring of their local construction arms to benefit from investment treaty protections. Careful (legal and technical) early assessments of the time, cost, and quality risks are increasingly adopted by key market players in the UAE.
5 Trends to Watch in 2025: AI and the Israeli Market
Israel’s AI sector emerging as a pillar of the country’s tech ecosystem. Currently, approximately 25% of Israel’s tech startups are dedicated to artificial intelligence, according to The Jerusalem Post, with these companies attracting 47% of the total investments in the tech sector (Startup Nation Finder). This strong presence highlights Israel’s focus on AI-driven innovation and entrepreneurs’ belief in the growth opportunities related to AI. The Israeli AI market is expected to grow at a compound annual growth rate of 28.33% from 2024 through 2030, reaching a value of $4.6 billion by 2030 (Statista). This growth is driven by increasing demand for AI applications across diverse industries such as health care, cybersecurity, and fintech. Government-backed initiatives, including the National AI Program, play a critical role in supporting startups by providing accessible and non-dilutive funding for research and development (R&D) purposes. Despite facing significant challenges since the start of the war in Gaza, Israel has continued to produce cutting-edge technologies that are getting the attention of global markets. Additionally, Israel’s highly skilled workforce and partnerships with academic institutions provide a steady supply of talent to meet the sector’s demands. With innovation, resilience, and collaboration at its core, the Israeli AI landscape is poised to remain a global force in 2025 and beyond.
Mergers and acquisitions to remain a cornerstone of deals. According to IVC Research Center, 47 Israeli AI companies successfully completed exits in 2024, showcasing the global demand for AI-driven innovation. Investors are continually identifying the differences between companies whose foundations were built on AI, versus those leveraging AI to enhance other core elements of their value proposition—sometimes only marginally. Savvy buyers look beyond the “AI label” and seek out companies with genuine, scalable AI solutions rather than superficial integrations, understanding that value lies in robust and transformative applications. AI is also sector agnostic and may disrupt virtually every vertical. From health care and finance to retail and manufacturing and others, numerous industries are increasingly leveraging AI to enhance or even change their core competency to gain competitive advantages. Deals in this space are coming from strategics such as automobile manufacturers, banks, digital marketing companies and life science firms, among others. As AI continues to permeate multiple sectors, Israeli companies are poised to receive increased attention from strategic M&A buyers looking to unlock new technologies and business opportunities in the market.
Intersection of PropTech and AI to further revolutionize the global real estate industry. Israeli innovation is expected to be at the forefront of this trend. According to IVC Research Center, over 70 PropTech companies headquartered in Israel are leveraging AI to develop cutting-edge technologies that are reshaping the industry on a global scale. We anticipate these companies will continue advancing AI-driven tools and third-party solutions to streamline acquisition strategies, enhance underwriting processes, and drive operational efficiencies. By harnessing AI to identify leasing opportunities, forecast rental trends, and optimize costs, Israeli PropTech firms are set to solidify their position as global leaders in real estate innovation in the year ahead.
AI to become increasingly important across global industries. Israeli companies have demonstrated genuine thought/R&D leadership in AI innovation. Some of the AI-centric legal trends that may stand out in 2025 include (1) a greater focus on data rights management as Agentic AI continues to carve new learning standards; (2) regulatory advancements in science, highlighted by two AI-related Nobel Prizes in science, that will likely materialize in the U.S. Food and Drug Administration adopting new rules for AI-driven drug approvals, as well as new AI patenting standards and requirements; (3) greater emphasis on responsible AI usage, particularly around ethics, privacy, and transparency; (4) the adoption of quantum AI across many industries, including in the area of securities trading, which will likely challenge securities regulators to address its implications; and(5) turning to AI-powered LegalTech strategies (both in Israel and in other countries). Israeli entrepreneurs are likely to continue working within each of these industries and help drive the AI transformation wave.
AI-based technology to continue changing how companies handle recruitment and hiring. While targeted advertising enables employers to find strong talent, and AI-assisted resume review facilitates an efficient focus on suitable candidates, the use of AI to identify “ideal” employees and filter out “irrelevant” applicants may actually discriminate (even if unintentionally) against certain groups protected under U.S. law (for example, women, older employees, and/or employees with certain racial profiles). In addition, AI-assisted interview analysis may inadvertently use racial or ethnic bias to eliminate certain candidates. Israeli companies doing business in the United States should not assume their AI-assisted recruitment and hiring tools used in Israel will be permitted to be utilized in the United States. Also, Israeli companies should be mindful of newly enacted legislation in certain U.S. states requiring companies to notify candidates of AI use in hiring, as well as conduct mandatory self-audits of AI-based employee recruitment and hiring systems. AI regulation on the state level in the United States is likely to increase, and Israeli companies that recruit and hire in the United States will be required to balance their use of available technology with applicable U.S. legal constraints.