On March 13, 2025, the Texas House of Representatives introduced House Bill 4806,[1] authored by Representative Greg Bonnen, to limit the recovery of damages in civil actions. Lieutenant Governor Dan Patrick announced that this Bill is part of his second round of top 40 priority bills for the 89th regular legislative session.[2] The most notable developments in this Bill are as follows:

1. It modifies the procedure for challenging the necessity and reasonableness of a plaintiff’s medical services and expenses. Plaintiffs rely on Section 18.001 affidavits to establish the necessity and reasonableness of their medical expenses and services. In response, defendants currently contest these affidavits through a Section 18.001 controverting affidavit. House Bill 4806 proposes requiring a defendant to instead issue a notice of intent to controvert the reasonableness of the charged amounts and the necessity of services.

Furthermore, this Bill would impose a more substantial impact on such opposition. Specifically, this notice would render a plaintiff’s Section 18.001 affidavit completely ineffective, except for authentication purposes. Lastly, this Bill would prohibit a defendant from challenging the reasonableness of medical expenses in Section 18.001 affidavits when such expenses are supported by the same equation used to calculate the “past medical expenses cap” discussed in subpart 3 herein.[3]

2. It defines certain noneconomic damages. Aligning with Texas case law, this Bill clarifies that future damages are not merely “damages that are incurred after the date of the judgment” but rather “damages that, in reasonable probability, can be expected to be incurred after the date of the judgment.” This Bill’s definition of “future loss of earnings” similarly incorporates this statutory expectation of reasonable probability.

    Additionally, under House Bill 4806, “future loss of earnings” would no longer include loss of income, wages, or earning capacity. This Bill’s proposed revisions regarding the definition of key damage terms do not end there. House Bill 4806 statutorily defines what constitutes “mental or emotional pain or anguish”[4] and “physical pain and suffering.”[5]

    3. It adds two new subchapters to Chapter 41, Section 8 that limit a plaintiff’s recovery for medical expenses, and mandate often-disputed disclosures. This new subchapter would provide for a “past medical expenses cap,” namely: a plaintiff’s recovery of damages for past healthcare services would be limited to the sum of all amounts paid by third-party payors,[6] the plaintiff, and any other non-third-party payors. If no medical expenses have been paid or the foregoing is otherwise not applicable, then an award of past medical expenses would be capped at “150 percent of the median amount paid by nongovernmental third-party payors to health care providers for the same types of services provided to the injured individual during the month in which the services were provided as drawn from the database for the geozip: (A) in which the services were provided, if the services were provided in this state; or (B) in which The University of Texas Health Science Center at Houston is located, if the services were provided outside of this state.” Notably, House Bill 4806 would also ensure that should an injured individual fail to use available health benefits, a court is to deem it a failure to mitigate damages. Similarly, this new subchapter includes a “future medical expenses cap” that mirrors the “150 percent of the median amount” catchall applicable for the “past medical expenses cap.” Finally, the Bill proposes a new subchapter, which would require the disclosure of, among other things, plaintiff’s: (1) letters of protection with health care providers; (2) lists of medical providers treating the subject injuries; (3) medical authorizations; (4) lists of potential third-party payors for the disputed health care services; and (5) sources of any referrals for health care services. As to the referral disclosure requirement, should the plaintiff’s attorney be the referring party, the plaintiff must also disclose the below. The admissibility of each is specifically protected by the Bill.

    1. An anonymized list of persons referred by the attorney to the provider in the preceding two years;
    2. The date and amount of each payment made to the provider in the preceding two years by or at the direction of the attorney;
    3. If applicable, each person anonymously described under Subparagraph (a) on whose behalf a payment described by Subparagraph (b) was made; and
    4. Other aspects of any financial relationship between the attorney and the provider.

    4. It introduces several measures to curb excessive noneconomic damage awards. First, House Bill 4806 would require a unanimous jury decision—rather than the current 10-out-of-12 standard—to award damages for physical pain and suffering or for mental or emotional pain or anguish. Second, complementing the Bill’s newly added definitions discussed in subpart 2 herein, the Bill codifies Texas case law and proposes that all awards for physical pain and suffering and mental or emotional pain or anguish: (1) “must be based on evidence of the nature, duration, and severity of the injury and reflect a rational connection, grounded in the evidence, between the injury suffered and the dollar amount necessary to provide fair and reasonable compensation to a claimant;” (2) “may not be used to penalize or punish a defendant, make an example to others, or serve a social good;” and (3) “may not include amounts that are properly considered economic losses, such as lost earnings caused by physical impairment or medical expenses incurred for emotional or psychological care.” Third, House Bill 4806 specifically prohibits anchoring and attempts to establish a valuation of human life. Fourth, under the Bill, a plaintiff’s recovery of noneconomic damages would be limited to past and future physical pain and suffering, mental or emotional pain or anguish, and injury to reputation. Lastly, the Bill grants a personal injury defendant the ability to require that a trial court state the legal and factual basis for a noneconomic damages award—including references to judgments rendered in the state and affirmed on appeal with comparable amounts and facts—if the award exceeds:

    1. $1 million for past and future mental or emotional pain or anguish in a wrongful death action;
    2. For past and future damages for physical pain and suffering in a personal injury action, the lesser of:
      • three times the amount awarded for past and future health care expenses; or
      • $100,000 per year for each year of the claimant’s life expectancy;”
    3. $1 million for past and future mental or emotional pain or anguish in a personal injury action arising from an event primarily causing emotional injury to a claimant; or
    4. $250,000 for past and future mental or emotional pain or anguish in a personal injury action arising from an event primarily causing bodily injury to the claimant.

    5. It limits the calculation of prejudgment interest. House Bill 4806 calls for prejudgment interest to not only be limited to awards for economic losses, but it also provides that the operative date for calculations shall be the date that the plaintiff’s health care expenses were actually paid, or such other economic losses were actually suffered.

    [1] Senate Bill 30, authored by Senator Charles Schwertner, serves as an identical companion bill to House Bill 4806.

    [2] https://www.ltgov.texas.gov/2025/03/13/lt-gov-dan-patrick-announces-second-round-of-top-40-priority-bills-for-the-2025-legislative-session/.

    [3] House Bill 4806 would require the concession of the reasonableness of medical expenses if: (1) “the affidavit states one of the following amounts as the reasonable charge for the service: (a) the amounts received from all sources by the facility or provider to pay for the service provided to the person whose injury or death is the subject of the action; or (b) an amount that does not exceed 150 percent of the median amount paid by nongovernmental third-party payors to health care facilities or providers for the same type of service provided to the person whose injury or death is the subject of the action during the month in which the service was provided, as drawn from the Texas All Payor Claims Database established under Subchapter I, Chapter 38, Insurance Code, for the geozip: (i) in which the service was provided, if the service was provided in this state; or (ii) Ain which The University of Texas Health Science Center at Houston is located, if the service was provided outside of this state; and (2) the affidavit is accompanied by an invoice for the service that would comply with the clean claim requirements of Chapter 1301, Insurance Code.” Additionally, in the foregoing scenario, if the provider produces a statement that he or she does not intend to appear at trial for purposes of testifying as to the necessity and reasonableness of the health care services and expenses, then discovery and trial testimony of this nature from the provider would be prohibited absent a showing of good cause and lack of unfair surprise.

    [4] House Bill 4806 defines “mental or emotional pain or anguish” as follows: “grievous and debilitating angst, distress, torment, or emotional suffering or turmoil that: (a) causes a substantial disruption in a person ’s daily routine; and (b) arises from loss of consortium, loss of companionship and society, loss of enjoyment of life, or a similar mental or emotional injury.”

    [5] House Bill 4806 defines “physical pain and suffering” as follows: “painful or distressing sensation associated with an injury or damage to a part of a person ’s body that: A) is consciously felt; (B) is significant in magnitude; and (C)arises from an observable injury or impairment or is shown to exist through objectively verifiable medical evaluation or testing.”

    [6] House Bill 4806 explains that “third-party payors” include insurance companies, employer-provided plans, a health maintenance organization, Medicare, Medicaid, and workers’ compensation insurance.

    Deposing Corporate Representatives? You Might Get More Time Than You Think

    In complex litigation, the strategic use of discovery tools is not just beneficial – it’s imperative. Every litigator knows that a well-executed deposition can be a game-changer by uncovering key admissions, streamlining discovery, and exposing weaknesses in an organization defendant’s case.

    Among the various deposition tools available to litigators in federal court, Rule 30(b)(6) serves a distinct role in shaping the testimony of organizations. A “30(b)(6) deposition” allows a party to depose an organization and requires it to designate one or more representatives to “speak for the entity.”[1]

    It’s not a secret that an organization may designate multiple representatives, but the broader litigation implications, particularly, the time restraints associated with taking the deposition, are often overlooked.

    More Witnesses, More Time? Yes – But with Limits.

    Under Rule 30(a)(2)(A)(i) of the Federal Rules of Civil Procedure, each side is entitled to ten depositions before requiring court approval for additional depositions.[2] However, when an organization designates multiple 30(b)(6) witnesses, those individual depositions still count as one for the purposes of the ten-deposition limit.

    So, does this mean each designee gets a full seven-hour deposition under Rule 30(d)(1)?

    The answer, for the most part, is yes – but courts have discretion to impose reasonable time limits. A 2000 Advisory Committee Note to Rule 30(d)(1) clarifies:

    “For purposes of this durational limit, the deposition of each person designated under Rule 30(b)(6) should be considered a separate deposition.”

    This interpretation has been consistently cited by district courts across multiple circuits, reinforcing that each designee is generally entitled to a full seven-hour deposition. Courts in the First,[3] Second,[4] Third,[5] Fourth,[6] Fifth,[7] Sixth,[8] Seventh,[9] Ninth,[10] Tenth,[11] and Eleventh Circuits[12] have acknowledged and applied this guidance, often permitting deposition time for multiple designees in excess of the 7-hour presumption.

    This means that in many cases, if an organization designates three representatives, you could be looking at 21 hours of deposition time. But before you start planning an all-nighter with the court reporter, take note:

    Courts Can – and Do – Cap Time Limits.

    While courts don’t issue carte blanche orders for seemingly endless depositions, 30(b)(6) depositions involving multiple designees often exceed the presumptive 7-hour limit.

    For example, in Smith v. Smith,[13] an organization designated four different representatives. Instead of allowing the full 28 hours pursuant to a strict reading of Rule 30(d)(1), the court limited the four depositions to 14 hours total, citing the scope of the topics and potential for redundancy.

    Similarly, in Buie v. D.C.,[14] the Court permitted a cumulative 18 hours for 30(b)(6) depositions – not necessarily based on the number of representatives, but in light of the topics sought by the noticing party and the understanding that multiple persons would be acting as the corporate representative.[15]

    Despite consistent guidance from courts, noticed parties frequently argue that the seven-hour presumptive limit should apply collectively to all.[16] These arguments, however, have been largely unsuccessful. As the Buie Court noted:

    “Although the Advisory Committee notes are not binding on the Court, they explain the intent behind the rules and ‘are nearly universally accorded great weight in interpreting federal rules.’”[17]

    Conversely, in In re Rembrandt Technologies,[18] the court rejected a party’s argument that each 30(b)(6) designee should be treated as a separate deponent with a full seven-hour allowance per person. The court reasoned:

    A blanket rule permitting a seven-hour deposition of each designated deponent is unfair because it rewards broader deposition notices and penalizes corporate defendants who regularly maintain business information in silos and who therefore must either designate multiple individuals to respond or spend time, energy, money and other resources preparing a single individual to respond and unduly burdensome (because of the manifest increased cost and disruption of preparing more than one person to respond to a deposition notice).

    Despite this critique, the court ultimately permitted a total of ten (10) hours to depose five 30(b)(6) designees.[19]

    While Rembrandt reflects one court’s rationale, it remains a minority view. Most courts reject a strict numerical cap and instead assess time limits based on the scope of the deposition notice, the number of designees, and the complexity of the issues involved.[20]

    The variances between circuit courts – while not stark – are critical in shaping arguments. Even 25 years later, the Advisory Committee notes remain the prevailing authority, despite repeated attempts to impose a strict seven-hour time limit in the 30(b)(6) context.

    By staying informed on the evolving applications of Rule 30(b)(6), litigators can ensure they extract the most from 30(b)(6) depositions while effectively managing court-imposed constraints. Whether you’re conducting a 30(b)(6) deposition or defending one, understanding the nuances of deposition duration and designee limitations can help you strategically maximize – or reasonably limit – important testimony.

    [1] FRCP 30(b)(6).

    [2] See FRCP 30(a)(2)(A)(i).

    [3] Proa v. NRT Mid-Atl., Inc., No. CV AMD-05-2157, 2008 WL 11363286 at *11 (D. Md. June 20, 2008).

    [4] Oakley v. MSG Networks, Inc., No. 17-CV-6903 (RJS), 2024 WL 5056111 at *3 (S.D.N.Y. Dec. 10, 2024) (Denying party’s motion to limit 30(b)(6) deposition to seven hours.).

    [5] Handy v. Delaware River Surgical Suites, LLC, No. 2:19-CV-1028-JHS, 2024 WL 1539604 at *fn.1 (E.D. Pa. Feb. 21, 2024).

    [6] Oppenheimer v. Scarafile, No. CV 2:19-3590-RMG, 2021 WL 5902738 at *1 (D.S.C. July 30, 2021).

    [7] Payne v. Raytheon Techs. Corp., No. 3:22-CV-2675-BN, 2024 WL 5012054 at *2 (N.D. Tex. Dec. 6, 2024).

    [8] ChampionX, LLC v. Resonance Sys., Inc., No. 3:21-CV-288-TAV-JEM, 2024 WL 1743101 (E.D. Tenn. Jan. 12, 2024).

    [9] PeopleFlo Mfg., Inc. v. Sundyne, LLC, No. 20 CV 3642, 2022 WL 7102662 at *fn.4 (N.D. Ill. Oct. 12, 2022).

    [10] Unknown Party v. Arizona Bd. of Regents, No. CV-18-01623-PHX-DWL, 2021 WL 2291380 (D. Ariz. June 4, 2021).

    [11] M.G. through Garcia v. Armijo, No. 1:22-CV-0325 MIS/DLM, 2024 WL 168270 (D.N.M. Jan. 16, 2024).

    [12] United States ex rel. Bibby v. Mortg. Invs. Corp., No. 1:12-CV-4020-AT, 2017 WL 8222659 (N.D. Ga. Oct. 12, 2017), report and recommendation adopted, No. 1:12-CV-4020-AT, 2017 WL 8221392 (N.D. Ga. Oct. 13, 2017).

    [13] Smith v. Smith, No. 19-10330, 2020 WL 1933820 (E.D. Mich. Apr. 22, 2020).

    [14] Buie v. D.C., 327 F.R.D. 1 (D.D.C. 2018).

    [15] Id.

    [16] See e.g., Smith v. Smith, No. 19-10330, 2020 WL 1933820 (E.D. Mich. Apr. 22, 2020).

    [17] Buie v. D.C., 327 F.R.D. 1 (D.D.C. 2018).

    [18] In Re Rembrandt Techs., No. 09-CV-00691-WDM-KLM, 2009 WL 1258761 at *14 (D. Colo. May 4, 2009).

    [19] Id.

    [20] See e.g., Oakley v. MSG Networks, Inc., No. 17-CV-6903 (RJS), 2024 WL 5056111 at *3 (S.D.N.Y. Dec. 10, 2024) (Denying party’s motion to limit 30(b)(6) deposition to seven hours.).

    On March 12, 2025, the U.S. Environmental Protection Agency (“EPA”) announced its deregulatory agenda.[1] Although most of the 31 actions identified by the EPA will require formal notice and comment rulemaking, with litigation ensuing, Wednesday’s announcement makes good on the Trump Administration’s promises to roll back environmental regulation.[2]

    Of particular significance to the chemical manufacturing and oil and gas industries in Louisiana and Texas, the following regulations, among others, are listed for reconsideration:

    • Clean Power Plan 2.0
    • New Source Performance Standards (“NSPS”) OOOOb and OOOOc[3]
    • Mercury and Air Toxics Standards (“MATS”)[4]
    • Greenhouse Gas Reporting Program[5]
    • PM2.5 National Ambient Air Quality Standard (“PM2.5 NAAQS”)[6]
    • Certain National Emissions Standards for Hazardous Air Pollutants (“NESHAP”)[7]
    • Regional Haze[8]
    • Good Neighbor Plan[9]
    • Risk Management Plan (“RMP”)[10]
    • Implementation of Exceptional Events[11]

    These major rulemakings will take time, and at this stage, the scope of reconsideration and the specific regulatory requirements included is uncertain. The Kean Miller environmental regulatory team is closely following all actions.

    [1] “EPA Launches Biggest Deregulatory Action in U.S. History” available at: https://www.epa.gov/newsreleases/epa-launches-biggest-deregulatory-action-us-history.

    [2] See Executive Orders, “Unleashing American Energy”, “Declaring a National Energy Emergency”, “Putting America First in International Environmental Agreements”, and others available at:  www.whitehouse.gov.

    [3] 40 C.F.R. Part 60, Subpart OOOOb (Standards of Performance for Crude Oil and Natural Gas facilities for Which Construction, Modification or Reconstruction Commenced After December 6, 2022); 40 C.F.R. Part 60, Subpart OOOOc (Emissions Guidelines for Greenhouse Gas Emissions From Existing Crude Oil and Natural Gas Facilities).

    [4] 40 C.F.R. Part 63, Subpart UUUUU.

    [5] 40 C.F.R. Part 98.

    [6]  See https://www.epa.gov/pm-pollution/national-ambient-air-quality-standards-naaqs-pm (2024 rulemaking setting the primary annual PM2.5 standard to 9.0 micrograms per cubic meter).

    [7] EPA has identified at least the following NESHAP for reconsideration: 40 C.F.R. Part 63 Subpart FFFFF (Integrated Iron and Steel Manufacturing), 40 C.F.R. Part 63 Subpart XXXX (Rubber Tire Manufacturing), 40 C.F.R. Part 63 Subparts F, G, H, I (Synthetic Organic Chemical Manufacturing Industry “SOCMI” including HON), 40 C.F.R. Part 63 Subpart O (Ethylene Oxide Emissions Standards for Sterilization Facilities), 40 C.F.R. Part 63 Subpart AAAAA (Lime Manufacturing Plants), 40 C.F.R. Subpart 63 Subpart L (Coke Ovens), 40 C.F.R. 63 Subpart QQQ (Copper Smelting) 40 C.F.R. 63 Subpart RRRRR (taconite ore processing).  

    [8] 40 C.F.R. Sec. 51.308.

    [9] 88 Fed. Reg. 49295 (July 31, 2023) and 88 Fed. Reg. 67102 (Sept. 29, 2023) (interim final actions to stay FIPs for certain states)

    [10] 40 C.F.R. Part 68.

    [11] See e.g., “Treatment of Data Influenced by Exceptional Events” (81 FR 68216; October 3, 2016) and https://www.epa.gov/air-quality-analysis/treatment-air-quality-monitoring-data-influenced-exceptional-events.

    In M&A transactions, the seller makes representations and warranties to the buyer regarding the business being sold, its ownership, assets, operations, and liabilities.  The seller typically indemnifies the buyer from losses incurred post-closing resulting from inaccuracies in those representations and warranties.  This contractual structure is used by the parties to allocate certain known and unknown business risks between the buyer and seller.  However, negotiation of these representations and warranties and the indemnity structure in the acquisition agreement can be a contentious and lengthy process.  Buyers usually prefer broad indemnity from the seller for such post-closing losses, and sellers prefer to give a limited indemnity which is targeted to specific risks identified in the seller’s business.

    Representation and warranty insurance (R&W insurance) is often an option which can help buyers and sellers avoid contentious negotiation of risk allocation by shifting some of the risks of an acquisition to an insurer.

    R&W insurance provides coverage for indemnification claims a buyer may have for losses resulting from breaches of a seller’s representations and warranties in the acquisition agreement. The use of R&W insurance in M&A transactions has increased in recent years due to efficiencies in the insurance market, including lower premiums, better terms, and lower minimum transaction value.

    R&W insurance policies can insure either the buyer or the seller in the transaction. Buy-side policies are the most common form of R&W insurance in private M&A transactions.

    The viability of using R&W insurance in an M&A transaction depends largely on the size of the deal.  Due to pricing constraints like premium costs and professional fees and expenses, R&W insurance may be cost prohibitive for deals valued less than $20 million.  However, deals with transaction values between $10 million and $20 million are sometimes insured due to increased demand by buyers and sellers.

    R&W insurance can benefit both the buyer and the seller in M&A transactions.

    For the Seller, R&W insurance can (1) reduce the seller’s risk of liability for breaches of its representations and warranties by lowering or eliminating the seller’s indemnity obligations; (2) provide the seller with a cleaner exit from the business by reducing or eliminating the amount of proceeds held back by the buyer or placed in escrow; and (3) allow the seller to give the more extensive representations and warranties the buyer will want in the acquisition agreement, without as many “materiality” and “knowledge” qualifiers, leading to a quicker resolution of the form of acquisition agreement and thus an expedited closing.

    For the Buyer, R&W insurance can (1) supplement or sometimes replace the indemnification protection provided by the seller by providing additional coverage beyond the liability cap and/or survival period in the acquisition agreement; (2) provide a secure source of recovery for losses resulting from breaches of the seller’s representations and warranties, particularly when recovery from the seller may be difficult; (3) allow the buyer to make a more attractive bid to the seller with no (or limited) escrow or holdback required, since the buyer will rely on the insurance for indemnification protection; and (4) preserve key relationships by mitigating the need for a buyer to pursue claims against sellers who will be working for the buyer post-closing.

    The insurer will charge a premium for issuing the policy, generally ranging between 2% and 4% of the coverage amount.  The policy coverage amount is typically a dollar amount equal to 10% of the transaction value.  There will be a deductible amount under the policy that is excluded from coverage (the “retention”), generally set at 1% of the transaction value.  So, if an M&A transaction value is $50 million, the policy coverage amount will be around $5 million, the policy premium will likely be around $100,000 – $200,000, and the retention will likely be around $500,000.

    The cost of R&W insurance (including the premium) is often split 50/50 between the seller and the buyer; however, this can vary depending on the leverage of the parties in the negotiation of the acquisition agreement.

    R&W insurance policies generally do not cover losses resulting from:  (1) breaches of covenants; (2) purchase price adjustments; (3) contingent claims based on future events; and (4) matters that are known to the insured’s deal team before the inception of the policy (including all matters disclosed on schedules to the acquisition agreement and all matters discovered in due diligence).  Other exclusions will likely apply under the policy, based on the results of the buyer’s and the insurer’s due diligence of the seller’s business.

    The insurer will typically conduct its own due diligence of the seller’s business during the underwriting process, focusing on areas or issues that could lead to material liabilities.  This process can add some additional time to close the transaction; however, efficiencies are often realized by repeat relationships between buyers, their advisors, and the insurance underwriters who have worked together on previous transactions and have developed a working understanding of each other’s processes.

    Sellers and buyers should consult their advisors (attorneys, investment bank or broker) early in the process of an M&A transaction, preferably as early as in the letter of intent/term sheet stage, to determine if R&W insurance is a viable option for the transaction, as both parties may derive significant benefit from purchasing R&W insurance for the transaction.

    On the first day of his second term in office, President Trump issued an Executive Order titled “Unleashing American Energy.” This Order contains several provisions intended to encourage American energy production and remove barriers that “have impeded the development” of energy and natural resources.

    The Order states that it is “in the national interest to unleash America’s affordable and reliable energy and natural resources.”[1] Therefore, the policy of the United States will be “to encourage energy exploration and production on Federal lands and waters, including on the Outer Continental Shelf,”[2] ensure that abundant and reliable energy “is readily accessible in every State and territory of the Nation,”[3] ensure “that all regulatory requirements related to energy are grounded in clearly applicable law,”[4] to promote consumer choice,[5] and to ensure that the global effects of a rule, regulation, or action shall, whenever evaluated, be reported separately from its domestic costs and benefits…”[6]

    In practice, this Order calls for a substantial deregulation of the energy industry. It expressly calls for eliminating the “electric vehicle mandate”[7] and abolishing regulations on household appliances designed to push consumers toward appliances with lower energy consumption.[8] The thrust of the Order is that American success will be achieved not by limiting our energy consumption, but by producing enough energy to provide for American needs however high they may be or become. Importantly, the Order calls for an immediate review by federal agency heads of “all existing regulations [broadly defined] to identify those agency actions that impose an undue burden on the identification, development, or use of domestic energy resources.”[9] Once such a review is complete, agency heads are directed to implement action plans to suspend, revise, or rescind all regulations identified as unduly burdensome.[10]

    The Order also revokes twelve prior Executive Orders related to energy and environmental regulation issued by President Biden, which addressed climate change and environmental justice.[11] The Order also revokes Executive Order 11991 of May 24, 1977,[12] related to the protection and enhancement of environmental quality, and takes direct steps to “expedite and simplify the permitting process”[13] and “prioritize efficiency and certainty over any other objectives…”[14] Additionally, all activities and operations associated with the American Climate Corps, established in September 2023, are shut down,[15] and the Working Group on the Social Cost of Greenhouse Gases is disbanded.[16] The Order directs the Chairman of the Council on Environmental Quality to provide guidance on implementing the National Environmental Policy Act in a way less burdensome to business by simplifying and expediting the permitting process. Any industry projects deemed “essential for the nation’s economy or national security” are to receive expedited action on permits, including emergency approvals granted when appropriate.[17] In all permitted matters, agencies are directed to “adhere to only the relevant legislated requirements for environmental considerations[,] and any considerations beyond these requirements are eliminated.”[18] Thus, agencies have been told to not allow considerations beyond those specified in legislation to serve as a reason for blocking any industrial project related to energy production.

    Overall, the Order loosens regulations on the energy industry and emphasizes energy production. The changes ordered will make regulatory compliance less burdensome for both upstream and downstream energy suppliers and is the first step in enacting the President’s vision and energy policy for the United States.

    [1] Executive Order, “Unleashing American Energy,” Jan. 20, 2025, §1.

    [2] §2(a).

    [3] §2(c).

    [4] §2(d).

    [5] §2(e).

    [6] §2(g).

    [7] §2(e).

    [8] §2(f).

    [9] §3(a).

    [10] §3(b).

    [11] §4(a).

    [12] §5.

    [13] §5(b).

    [14] §5(c).

    [15] §4(b).

    [16] §6(b).

    [17] §5(b) and (d).

    [18] §6(a).

    A pair of recent decisions from the US Supreme Court and the Fifth Circuit Court of Appeals signals a trend by the judiciary to closely scrutinize agency rulings where, in the past, courts have traditionally maintained a laissez-faire approach.

    In Ohio v. EPA, the Supreme Court ruled that an agency action qualifies as arbitrary or capricious if it is not “reasonable and reasonably explained”.[1] The decision was 5-4, with Justice Gorsuch writing for the majority and Justice Barrett writing the dissent. In the dissent, Justice Barrett explained that the Court did not conclude that the EPA’s actions were substantively unreasonable. Rather, the primary basis for the Court’s decision is the argument that EPA failed to provide a “satisfactory explanation for its action” and a “reasoned response” to comments. Justice Barrett noted that the Court should, as it has most often done in the past, “uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.”[2] Thus, under Justice Barrett’s view, a reasonable result can save a poorly-explained decision from an Administrative Procedure Act challenge; Justice Gorsuch and the majority rejected this conclusion.

    Likewise, a day prior to the Supreme Court’s ruling in Ohio v. EPA, the Fifth Circuit issued its opinion in National Association of Manufacturers v. SEC and held that the SEC had acted arbitrarily and capriciously in two ways: 1) the agency failed to adequately explain its decision to disregard its prior factual finding; and 2) the agency failed to provide a reasonable explanation regarding the significance of certain risks at issue in the matter.[3] The panel’s criticism focused on the agency’s rationale and its decision-making process, rather than the final resulting rule.

    In each of the decisions, the courts cite FCC v. Prometheus Radio Project,[4] which had reformulated the arbitrary and capricious inquiry. In that case the Supreme Court ruled that “[a] court simply ensures that the agency has acted within a zone of reasonableness, and in particular, has reasonably considered the relevant issues and reasonably explained the decision.”[5] Per this language, the agency’s decision-making process, along with its final determination, will be scrutinized by the courts if a rulemaking is challenged.

    Thus, it appears the “zone of reasonableness” test has usurped previous iterations of the arbitrary and capricious analysis. Combined with the overturning of Chevron deference also announced by the Court last year,[6] the likely overall effect of this new precedent will be greater scrutiny over agency action and a more restricted scope for permissible agency action.

    [1] Ohio v. Env’t Prot. Agency, 603 U.S. 279, 292 (2024) (quoting FCC v. Prometheus Radio Project, 592 U.S. 414, 423 (2021)).

    [2] Id. at 311 (Barrett, J., dissenting) (quoting Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).

    [3] Nat’l Ass’n of Manufacturers v. United States Sec. & Exch. Comm’n, 105 F.4th 802, 811 (5th Cir. 2024).

    [4] Fed. Commc’ns Comm’n v. Prometheus Radio Project, 592 U.S. 414 (2021).

    [5] Id. at 423.

    [6] See Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).

    As a business owner, one of the most important decisions of your business career is the decision to sell your business, and once you make the decision to sell, it can be a long and complicated process. To maximize the value of your business and to minimize obstacles and delays in getting to closing, you should carefully prepare your company for sale and prepare for the challenges which arise in each stage of the sale process.  This article includes suggestions for making those preparations, as well as how to manage the multiple stages of the sale process, all with the aim of achieving a successful closing.

    Assemble Your Deal Team

    You should assemble a team to manage your sale efforts as early as possible. Your deal team should include:

    (1) your company management team of key executives to engage and work with your professional advisors, perform due diligence, and negotiate the transaction documents;

    (2) legal counsel to draft and negotiate the transaction documents, coordinate the signing and closing of the transaction, and work with the management team in the due diligence process;

    (3) an investment bank, broker, or other financial advisor to identify potential buyers and market the business, value the company, manage the sale process, and prepare the marketing materials and organize the due diligence process; and

    (4) accountants (and tax advisor) to assist in preparing your company’s financial statements and financial projections and advise you on your (and your company’s) tax liability related to the transaction.

    You should choose legal, financial, and tax advisors who have significant experience with mergers & acquisitions (M&A) transactions.  It is not wise to assume that your company’s general legal counsel and CPA have the expertise necessary to guide you through all of the legal, financial, and tax issues that will arise during the sale process.

    Find Your Buyer & Value Your Business

    Obviously, finding not only a buyer, but the right buyer, is essential to a successful transaction.  An investment banker, broker, or other financial advisor can assist in identifying potential buyers and marketing your company to maximize the purchase price.  This may include an auction in which multiple potential buyers are invited to bid on your company.  Even if you have already identified a willing and suitable buyer, you should still consider engaging an investment bank or other financial advisor to determine an accurate and realistic value for your company, so that you can negotiate an acceptable purchase price with a buyer.

    Your company’s potential buyers will generally come in one of two forms:  (1) “strategic buyers”, which are operating companies which are usually competitors, suppliers, or customers of your company; or (2) “financial buyers”, which are generally private equity firms or venture capital firms looking to purchase your company as an investment.

    Each type of buyer has pros and cons, and your financial and legal advisors can help you select a suitable buyer based on your preferences.  For instance, a financial buyer’s offer often includes a requirement that the seller stockholders “roll over” a portion of their existing equity in the target company by exchanging that equity portion for one or more classes of equity in the buyer entity or the buyer’s parent company.  The equity received by the sellers in the rollover can constitute a significant portion of the overall consideration paid to the sellers, which means less cash is paid to the sellers at closing.

    Due Diligence & Confidentiality

    Before a potential buyer is willing to make an offer to purchase your company, the buyer will want to conduct due diligence of your company in order to gather information and identify issues that are relevant to the acquisition.  Before sharing any of your company’s proprietary or sensitive information, you should require each potential buyer to sign a confidentiality agreement at the outset of discussions to ensure each potential buyer maintains the confidentiality of the negotiations as well as any due diligence information.  You should look to your legal counsel to prepare a proper confidentiality agreement that you can use with each potential buyer.

    Also, you should conduct your own due diligence of your company to ensure there are no problems that could delay or otherwise adversely affect the sale, including any corporate, regulatory, or third-party consents that may be required for the sale.  Your legal and financial advisors can guide you in your diligence efforts to help you discover any issues or problems during this stage, so that you have time to either cure any problems or develop negotiating strategies to deal with them.

    Letter of Intent

    A letter of intent (sometimes referred to as an LOI, memorandum of understanding (MOU), or term sheet) is a letter agreement which is usually entered into early in the sale process, setting forth the parties’ initial understanding of key terms of the deal.  The LOI helps the parties identify deal breakers early in the deal process before the parties incur significant costs.  An LOI is generally not intended to create a legally binding commitment to close the transaction on the terms set out in the LOI, but the parties often include certain binding provisions in the LOI like exclusivity commitments, expense sharing, and confidentiality covenants.

    The seller typically wants the LOI to be as detailed as possible because once the LOI has been signed, and especially if the buyer is given exclusivity in the LOI, the leverage in the negotiations shifts to the buyer.  Usually, the letter of intent is drafted by the buyer’s counsel, but the seller should negotiate the LOI carefully with the help of its legal and financial advisors.

    A seller should resist earnouts, claw-backs, holdbacks, and large escrows at the LOI stage (and during negotiation of the definitive transaction documents), all of which are commonly proposed by buyers.  In the LOI, a seller should negotiate and include acceptable liability caps, deductibles, and survival periods for seller’s representations and warranties, as well as a narrow set of “fundamental” representation and warranty categories, all of which will be incorporated into the purchase agreement.  If economically feasible for the transaction, a seller should push the buyer to agree at the LOI stage to purchase representation and warranty insurance.

    Deal Structure

    At the LOI stage, the parties are not always prepared to commit to a transaction structure, but it is wise to select a transaction structure which is advantageous to the seller in the LOI if possible.  Selecting the best structure is critical to the success of your transaction. The three legal structures most commonly used to sell a business are:  (1) asset sale; (2) stock sale; and (3) merger.  Choosing which structure to use involves many factors, and buyers and sellers often have competing interests.

    In an asset sale, the buyer acquires specific assets and liabilities of the target company as described in the asset purchase agreement. After the deal closes, the buyer and seller maintain their corporate structures, and the seller retains those assets and liabilities not purchased by the buyer.  Asset sales are often disadvantageous to sellers because the seller is left with known and unknown liabilities not assumed by the buyer, and the seller usually receives better tax treatment when selling stock.  Also, asset acquisitions are typically more complicated and time-consuming than stock acquisitions because of the formalities of assigning specific assets, and the numerous third-party consents which are often required.

    In a stock sale, the buyer acquires the target company’s stock directly from the selling stockholders, thus the buyer indirectly acquires all of the target company’s assets, rights, and liabilities.  Sellers often prefer to sell stock since they are not left with any contingent liabilities. In addition, sellers typically receive better tax treatment when selling stock as opposed to assets.

    A merger is a stock acquisition in which two companies combine into one legal entity. The surviving entity assumes all assets, rights, and liabilities of the non-surviving entity.  Mergers sometimes require less than unanimous consent from the target company’s stockholders while still allowing the buyer to obtain 100% of the stock, which provides an advantage over a stock acquisition (where usually all of the stockholders must agree to sell).  A merger is therefore a good choice for buyers that want to acquire a going concern that has many stockholders, especially when some of them may be opposed to selling their stock.  However, the corporate laws of most states provide that dissenting stockholders to a merger can petition the court to force the buyer to pay them “fair value” for their shares. This process often adds additional time, complexity, and expense to a merger.

    Definitive Agreements, Continued Due Diligence, and Closing

    Once you have a signed LOI, the buyer’s counsel usually provides proposed drafts of the purchase agreement and other important transaction documents.  The purchase agreement is the primary transaction document, and it describes what is being sold, details the sale process, and lays out the liabilities and obligations of the parties.  The purchase agreement is usually heavily negotiated over 1-2 months and sometimes longer, depending on the complexity of the transaction and the parties’ respective willingness to compromise.

    While the parties are negotiating the purchase agreement and other transaction documents, the buyer continues its due diligence of the target company.  The buyer may use certain information it discovers in the due diligence process to negotiate contractual protections (such as indemnification) in the purchase agreement or to adjust the purchase price.

    There is often a period of time between signing the purchase agreement and closing. This may be for legal or practical reasons. For example, the parties may need to obtain regulatory and/or third-party consents for the transaction, but they may not want to pursue such consents until they have a signed purchase agreement.

    Purchase agreements for M&A transactions are usually lengthy and complex documents.  Your legal counsel can help you understand your rights and obligations under the purchase agreement and help you negotiate a fair and reasonable agreement so that you can minimize your liability and hold on to your sale proceeds.

    Multi-million-dollar jury awards, commonly known as nuclear or thermonuclear verdicts, are on the rise in the post-pandemic era.  Consequently, practitioners are now more reliant than ever on appellate courts’ review of the legal sufficiency and the potential excessiveness of jury awards.  Accordingly, this article seeks to offer practitioners a tool to assist in the pursuit of appellate relief by (1) summarizing pertinent standards and corresponding evidentiary requirements serving as the foundation for appellate courts’ analyses when reviewing a jury’s damage awards; and (2) providing an overview of Gregory v. Chohan, 670 S.W.3d 546 (Tex. 2023), the Texas Supreme Court’s most recent guidance on the proper method for quantifying non-economic damages.

    Courts and juries have long wrestled with the challenge of assessing, measuring, and quantifying the economic and non-economic damages routinely asserted by personal injury plaintiffs.  Economic damages are those that can be easily quantified and include past and future medical expenses and lost earning capacity.  In contrast, non-economic damages are more abstract damages, contemplating awards for physical pain and suffering, physical impairment, disfigurement, and mental anguish.  With respect to each of the foregoing, jurors hold the unique responsibility to “logically” and “fairly” quantify the damages sought. Hyundai Motor Co. v. Rodriguez, 995 S.W.2d 661, 664 (Tex. 1999).  Try as they might, juries do not always succeed.

    To protect the sanctity of this process, a defendant generally has the right to call for a review on appeal of the legal sufficiency of the evidence, see City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005), or the excessiveness of the award, see Pope v. Moore, 711 S.W.2d 622, 624 (Tex. 1986).  Under a legal sufficiency review, the verdict cannot stand unless the evidence deduced at trial affords a reasonable and fair-minded juror to reach the verdict in question. Wilson, 168 S.W.3d at 827.  For a review based on excessiveness, the inquiry centers on whether the trial evidence is so factually deficient or against the great weight and preponderance of the evidence that it results in manifest injustice. Moore, 711 S.W.2d at 624.  The considerations for determining whether a claimant meets these evidentiary thresholds differ based on the category of damage at issue, though future damages of any kind all invoke a “reasonable probability” standard.[1]

    I. Elements for Design Claims

    Below is an overview of the elements that a plaintiff must establish for each category of damages commonly asserted in a personal injury dispute.

    Damages Elements of Claimed Damage
    Medical ExpensesAn award of past medical expenses seeks to compensate the plaintiff for the medical expenses incurred as a result of the injuries sustained in connection with an accident. 
     
    To obtain an award for past medical expenses, a claimant must show that the expenses (1) were actually paid or incurred and (2) were reasonable. In re K&L Auto Crushers, LLC, 627 S.W.3d 239, 249 (Tex. 2021). Medical charges or invoices alone do not prove reasonableness. See id. (“proof of the amount charges does not itself constitute evidence of reasonableness”).
     
    To combat excessively high medical bills that a claimant may not ultimately owe, defendants can and should issue carefully tailored subpoenas to a claimant’s medical providers, requesting information related to the provider’s billing practices and customary rate charges of other patients over a period of time. Id. (finding this information to be relevant and discoverable to show reasonableness of medical expenses).
    Lost Earning Capacity“Lost earning capacity” is an assessment of the plaintiff’s capacity to earn a livelihood prior to injury and the extent to which the injury impaired that capacity. Scott’s Marina at Lake Grapevine, Ltd. V. Brown, 365S.W.3d 146, 158-59 (Tex. App—Amarillo 2012, pet. denied).  It is not measured by what a claimant actually earned before the injury, but rather by the person’s capacity to earn, even if the claimant did not work in that capacity in the past. Id.; Gen. Motors Corp. V. Burry, 203 S.W.3d 514, 553 (Tex. App.—Fort Worth 2006, pet. denied).
     
    A plaintiff must present evidence sufficient to permit a jury to reasonably measure earning capacity in monetary terms. Tagle v. Galvan, 155 S.W.3d 150, 519-20 (Tex. App. —San Antonio 2004, no pet.).  Non-exclusive factors to consider include evidence of past earnings and plaintiff’s stamina, efficiency, ability to work with pain, and work-life expectancy. Big Bird Tree Servs. V. Gallegos, 365 S.W.3d 173, 178 (Tex. App.—Dallas 2012, pet. denied).  There must be some evidence that the claimant had the capacity to work before the injury and that that capacity was impaired as a result of the injury to obtain future damages for lost earning capacity. Plainview Motels, Inc. V. Reynolds, 127 S.W.3d 21, 35 (Tex. App.—Tyler 2003, pet. denied).
    Physical PainAn award for physical pain seeks to compensate a claimant for the conscious physical pain resulting from the negligent action or inaction at issue. See Texas Pattern Jury Charge 30.3.  Damages awarded based on physical pain are speculative in nature. Hunter v. Texas Farm Bureau Mut. Ins. Co., 639 S.W.3d 251, 260 (Tex. App. —Houston [1st Dist.] 2021).  For this reason, much discretion is afforded to a jury for the valuation of physical pain. Id.  In fact, even when an injury is proven, a jury can still decline to award damages for physical pain. Id.
     
    Of note, while an appellate court can review other verdicts in comparable cases to gauge the reasonableness of a physical pain award, this method is not often fruitful, as courts posit that “comparison of injuries in different cases is virtually impossible.” Primoris Energy Servs. Corp. v. Myers, 569 S.W.3d 745, 761 (Tex. App.—Houston [1st Dist.] 2018, no pet.).
    Physical ImpairmentIn contrast to an award for physical pain, an award for physical impairment, also referred to as loss of enjoyment of life, focuses not on the injury or the symptoms elicited, but rather, the resulting loss of a former lifestyle. PNS Stores, Inc. v. Munguia, 484 S.W.3d 503 (Tex. App.—Houston [14th Dist.] 2016).  To safeguard against double recovery with pain, mental anguish, disfigurement, and diminished earning capacity, a physical impairment award must hinge on a showing that the impairment is “substantial and extremely disabling.” See Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 772 (Tex. 2003). 
     
    For example, courts have found the following limitations sufficient to demonstrate the loss of a former lifestyle, an inability to: sleep, physically play with one’s children, participate in pre-incident hobbies, and perform yard work or other household maintenance activities. Patlyek v. Brittain, 149 S.W.3d 781, 787 (Tex. App.—Austin 2004, pet. denied).
    DisfigurementAn award for disfigurement considers the impairment or injury to the “beauty, symmetry, or appearance of a person,” or an injury which results in an unsightly, imperfect, or deformed appearance. Goldman v. Torres, 341 S.W.2d 154, 160 (Tex.1960); Four J’s Cmty. Living Ctr., Inc. v. Wagner, 630 S.W.3d 502, 517 (Tex. App. — Houston [1st Dist.] 2021).  While an award for disfigurement may contemplate the embarrassment associated with the impairment, a claimant need not show embarrassment to recover under a disfigurement theory. Four J’s Cmty. Living Ctr., Inc. v. Wagner, 630 S.W.3d 502, 517 (Tex. App.—Houston [1st Dist.] 2021, pet. denied).
    Customary forms of compensable disfigurement include burns, amputations, or scars; however, “the mere presence of a surgical scar does not automatically constitute compensable disfigurement.” Wei v. Lufkin Royale Nail Spa 75901, LLC, No. 12-23-00309-CV, 2024 WL 2798847, at *7 (Tex. App.—Tyler May 31, 2024, no pet. h.) (unreported); see, e.g., Belford v. Walsh, No. 14-09-00825-CV, 2011 WL 3447482, at *8 (Tex. App.— Houston [14th Dist.] Aug. 9, 2011, no pet.) (unreported).
    Mental AnguishMental anguish is available in a court of law only when it is “more than mere worry, anxiety, vexation, embarrassment, or anger.” Parkway Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex. 1995). Specifically, a claimant must put forth “legally sufficient ‘evidence of the nature, duration, and severity’ of mental anguish to support both the existence and the amount of compensable loss.” Gregory v. Chohan, 670 S.W.3d 546, 557 (Tex. 2023) (citing Parkway, 901 S.W.2d at 444; Saenz v. Fid. & Guar. Ins. Underwriters, 925 S.W.2d 607, 614 (Tex. 1996); Bentley v. Bunton, 94 S.W.3d 561, 605 (Tex. 2002).

    II. Gregory v. Chohan, 670 S.W.3d 546 (Tex. 2023)

    Courts routinely express recognition for the arduous task that is assessing non-economic damages. Thus, it is no surprise that jury awards for non-economic damages often carry the great weight of nuclear verdicts, solidifying a defendant’s decision to appeal. Responding to this call, the Texas Supreme Court recently weighed in on the discussion and further confirmed a pivotal safeguard when considering the excessiveness of an award for non-economic damages.

    In Gregory v. Chohan, 670 S.W.3d 546 (Tex. 2023), a Dallas County jury awarded a decedent’s spouse, three children, and parents a total of $16,447,272.31 in damages following a tragic car accident. Gregory, 670 S.W.3d at 553. Notably, $15,065,000 was attributed to the non-economic damages of mental anguish and loss of companionship. Id. Defendants appealed this award, challenging, among other things, the size of the non-economic damages award. Id.

    Borrowing the framework from a review of an award for mental anguish, the Texas Supreme Court held that a jury’s award for non-economic damages must be supported by “a rational connection, grounded in the evidence, between the injuries suffered and the dollar amount awarded.” Id. at 551. The Court explained that this approach protects against “arbitrary outcomes” and encourages damages awards that genuinely compensate plaintiffs as opposed to punishing defendants. Id. Applying this doctrine, the Court reversed the jury’s award and remanded for re-trial, reasoning that while the plaintiffs sufficiently demonstrated the existence of non-economic damages, they wholly failed to establish the requisite rational connection between the injury and the amount awarded. Id.

    While the Court did not expound upon how one discharges the evidentiary burden with respect to an amount awarded for non-economic damages, it did provide clear examples as to what is not sufficient. Id at 557-59. Specifically, at the trial court level, plaintiffs’ counsel employed several methods commonly used to “assist” a jury in valuing a claim for non-economic damages, namely referencing “the price of fighter jets, the value of artwork, and the number of miles driven by [defendant’s] trucks” so as to “place a monetary value on human life” and bolster the estimates offered — i.e., “unsubstantiated anchoring.” Id at 557-58. The Court made clear that such “improper” considerations bear no rational basis for compensating plaintiffs. Id. Likewise, plaintiffs’ counsel attempted to rely on quantifiable economic damages as a frame of reference for determining the appropriate amount to award for non-economic damages. Id. at 559. The Court too rejected this rationale, explaining that the “unexamined use of the ratio between economic and noneconomic damages—without case-specific reasons for why such analysis is suitable—cannot provide the required rational connection between the injuries suffered and the amount awarded.” Id.

    III. Conclusion

    In the aftermath of Gregory, practitioners are more equipped to mitigate the risks associated with non-economic damages by demanding proof of the requisite rational connection between the injury suffered and the non-economic damages awarded.  Critically, as Gregory demonstrated, it is easier to identify what falls short of this standard than to elaborate on the ways in which a plaintiff may carry this burden on appeal — a fact that speaks to the potential for this antidote in the context of nuclear verdicts.  In fact, in May of 2024, the Fourteenth Court of Appeals reversed a $222 million verdict for mental anguish and loss of companionship based on Gregory. See generally Team Indus. Services, Inc. v. Most, No. 01-22-00313-CV, 2024 WL 2194508 (Tex. App.—Houston [1st Dist.] May 16, 2024, no pet.).  With Gregory and its promising progeny, perhaps “logically” and “fairly” measuring the immeasurable is within reach.

    [1] The reasonable probability standard requires a plaintiff seeking future damages to “(1) present evidence that, in reasonable probability, he will suffer damages in the future and (2) prove the probable reasonable amount of the future damages. See MCI Telecommunications Corp. v. Tex. Utilities Co., 995 S.W.2d 647, 654 (Tex. 1999); Katy Springs & Mfg., Inc. v. Favalora, 476 S.W.3d 579, 595 (Tex. App.—Houston [14th Dist.] 2015, pet. denied).

    Employers nationwide can breathe a collective sigh of relief. On Friday November 15, 2024, District Judge Sean D. Jordan of the federal district court for the Eastern District of Texas granted a motion for summary judgment finding that the Department of Labor (DOL)’s 2024 Rule – that would have increased the minimum salary level required to qualify executive, administrative, and professional employees for overtime exempt status to $58,565 per year ($1,128 per week) effective January 1, 2025 – is legally invalid. State of Texas v. United States Department of Labor, United States District Court for the Eastern District of Texas, Civil Action No. 4:24-CV-499.

    The first phase of the DOL’s 2024 Rule (which went into effect July 1, 2024) that increased the minimum salary level from $35,568 per year ($684 per week) to $43,888 ($844 per week) was also struck down part of the Court’s decision. Judge Jordan found that the DOL’s 2024 Rule exceeded its statutory authority under the federal Fair Labor Standards Act. In reaching this decision, the Court relied on the expanded standard of judicial review of federal agency action announced in the Supreme Court’s recent Loper Bright decision.

    The Court’s decision vacating the 2024 Rule pursuant to the federal Administrative Procedures Act applies nationwide. An appeal of the District Court’s ruling to the federal Fifth Circuit Court of Appeals is a possibility, so employers should continue to monitor future developments carefully. But for now, employers can continue to qualify their executive, administrative, and professional employees as overtime exempt (for purposes of the federal Fair Labor Standards Act) at the current annual salary requirement of $35,568 per year ($684 per week).

    Late last month, the U.S. Eastern District of New York dismissed a suit by the U.S. Environmental Protection Agency (“EPA”) against eBay claiming that it sold products that are prohibited under federal environmental statutes.[1] The Court held that eBay is not a “seller” of prohibited products under either the Clean Air Act (“CAA”) or the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”). Although the Court found that eBay could be liable as a “seller” under the Toxic Substances Control Act (“TSCA”), it held that eBay is immune to TSCA claims as a “publisher” for third-party content under Section 230 of the Communications Decency Act (“CDA”) of 1996.

    Liability for Marketplace Platforms Under CAA, FIFRA, and TSCA

    The EPA sought to hold eBay liable under the CAA for the sale of “aftermarket defeat products,” which bypass a vehicle’s emissions controls. See Section 203(a)(3)(B) of the Clean Air Act. Because those products were available for sale on eBay’s website, it met the definition of a “seller” under the CAA. Similarly, EPA alleged that eBay violated FIFRA’s prohibition on unlawful distribution or sale of unregistered, misbranded, and restricted use pesticides for allowing those products to be available on its platform. See Sections 3 and 12 of FIFRA.[2] Although neither statute defines the terms “sell” or “sale,” the Court applied an ordinary definition of the terms and found that to be a seller, eBay would have to actually own or possess the physical item being sold.[3] The Court determined that as a marketplace platform service, eBay did not actually own or possess the physical items.[4]

    Specifically in relation to EPA’s CAA claims, the Court also analyzed eBay’s support functions for sellers like marketing, creating product listings, directing customers towards products, and ensuring customer satisfaction. EPA argued these ancillary services violated the CAA because they “cause the sale or offer for sale of” prohibited products. The Court concluded instead that although eBay creates a forum in which buyers and sellers can transact more efficiently, eBay’s services “do[] not ‘induce[] anyone to post any particular listing or express a preference for’ Aftermarket Defeat Devices.”[5]

    On the other hand, the Court held that eBay could be liable under the TSCA because it restricts a wider range of conduct than either the CAA or FIFRA. Significantly, TSCA prohibits a seller from introducing or delivering any banned product “for introduction into commerce.”[6] Thus, even though eBay was not “selling” the banned paint-strippers under the Court’s interpretation, eBay’s contribution to the transaction could impose TSCA liability. But the Court ultimately found eBay is immune under Section 230 of the CDA.

    CDA Immunity

    Section 230 of the CDA protects online service providers and users from being held liable for information shared on the platform by users or third parties. The Court found that the CDA protections also extend to website platforms that connect buyers and sellers of physical goods, such as eBay, unless the platform “materially contributes” to a product’s unlawful status. Thus, the Court held that eBay is immune to TSCA liability under Section 230 because it is “[a]n interactive computer service” and it does not actively “assist in the development of what made the content unlawful.”[7]

    EPA argued that eBay is not protected by the CDA because it only shields companies from liability for their speech and does not address transactions. But the Court rejected this argument, holding that Section 230 is interpreted broadly enough to cover eBay’s role in the transaction.[8] Although the Court only addressed CDA immunity for EPA’s TSCA claim, the immunity could be similarly applied to defeat other statutory claims.

    Impacts

    The decision serves as a roadblock to EPA efforts to hold marketplace platforms liable for the sale of prohibited goods when sold by third-party sellers. It also signals that courts could apply a strict reading of the “seller” provisions of environmental statutes, such as the CAA and FIFRA, to only those entities that actually “possess” a potentially noncompliant product. Thus, a third-party seller may be the only party that has a duty to ensure compliance with CAA and FIFRA restrictions for products sold on a marketplace platform. And even if an environmental statute, such as TSCA, applies more broadly to other support functions performed by a marketplace platform, a web-based platform may still be immune to claims through the CDA Section 230 immunity provisions.

    [1] United States of America v. eBay Inc., 23 Civ. 7173, 2024 WL 4350523 (E.D.N.Y. Sept. 30, 2024).

    [2] See also 7 U.S.C. § 136a(a); 7 U.S.C. § 136j(a)(l)(A), (a)(1)(E), (a)(1)(F).

    [3] eBay, slip op. at 5, 7.

    [4] Id. at 9 (citing Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010) in which the Second Circuit found that eBay was not a “seller” in the context of a trademark infringement claim).

    [5] Id. at 11 (quoting Chi. Lawyers’ Comm. For C.R. Under L., Inc. v. Craigslist, Inc., 519 F.3d 666, 671-672 (7th Cir. 2008), as amended (May 2, 2008)).

    [6] 15 U.S.C. § 2602(5).

    [7] Ratermann v. Pierre Fabre USA, Inc., 651 F. Supp. 3d 657, 667 (S.D.N.Y. 2023); see also Fed. Trade Comm’n v. LeadClick Media, LLC, 838 F.3d 158, 173 (2d Cir. 2016).

    [8] See EPA Memorandum in Opposition to Motion to Dismiss, p. 24.