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.

As of October 11, 2024, entities responsible for reporting settlements, judgments or awards for Medicare beneficiaries face new monetary penalties if they fail to timely report these resolutions, activating a new final rule from December 2023.

The Medicare, Medicaid and SCHIP Extension Act of 2007 set forth mandatory reporting requirements, stating that responsible reporting entities (RREs) must provide information on a quarterly basis of settlements, judgments, and awards to Medicare beneficiaries.  This new final rule provides guidelines for imposing civil money penalties when resolutions are not timely reported.

The Centers for Medicare & Medicaid Services (CMS) will randomly audit 250 RRE submissions per quarter to determine if the submission complies with reporting requirements.  For any submission not timely reported – defined as 1 year from the date a settlement, judgment or award was made or funded, if delayed – penalties apply.  There are three tiers of penalties, each of which is adjusted annually under 45 CFR part 102:

  • $250 for each calendar day of noncompliance, where the record was reported more than 1 year, but less than 2 years, after the required reporting date;
  • $500 for each calendar day of noncompliance, where the record was reported more than 2 years, but less than 3 years, after the required reporting date; or
  • $1000 for each calendar day of noncompliance, where the record was reported 3 years or more after the required reporting date.

There is, however, a cap to the penalties imposed for each individual instance of noncompliant reporting by an RRE of $365,000, which is also to be adjusted annually under 45 CFR part 102.

The rule has a limited provision that could allow the RRE to avoid penalties, specifically in the situation where the RRE documents its good faith efforts to obtain the necessary information for reporting but is unable to do so.  The RRE must demonstrate that it has made a total of three attempts to obtain the required information either from the Medicare beneficiary or their counsel.  Two of these attempts must be made either by mail or by e-mail.  The third attempt may be made via telephone, e-mail or some other reasonable method, which is undefined.  Additionally, if the Medicare beneficiary or their counsel is contacted but refuses to provide the information, no further attempts are needed, but the RRE must document and maintain a record of that refusal for a minimum of 5 years.

With the potential for steep penalties to be imposed for noncompliance, it is critical for RREs to quickly identify claimants who are Medicare beneficiaries; obtain the necessary reporting information; document all attempts to obtain this information, and retain evidence of any refusals to provide it; and timely finalize and report all resolutions.

Federal Register: Medicare Program; Medicare Secondary Payer and Certain Civil Money Penalties

For years, fans who want to see their favorite performers and teams have been faced with the luck of the draw or the challenge of negotiating the secondary ticket market. Therefore, ticket reselling is big business. The challenges encountered by fans purchasing tickets for Taylor Swift’s Eras Tour and the exorbitant resale prices for those tickets thrust the issue into the spotlight. It is not uncommon that a fan comes across deceptive websites that suggest they are endorsed by the performer or venue, or is sold a ticket by a speculative seller that does not have the ticket in hand. In late 2023, Senator John Cornyn introduced the Fans First Act (the “Act’) which aims to increase ticket sale transparency, protect American consumers, and stop bad actors.[1] The reaction to the bill, which has been referred to the committee on Commerce, Science, and Transportation, has been mixed. Some of the responses, as well as the results of similar efforts in Europe, are discussed below.

The Act would require sellers and resellers of tickets to disclose the total price of the ticket at the time it is first displayed to the consumer, and to provide an itemized breakdown of the face value of the ticket, taxes, and ancillary fees. The seller would also be required to provide a full refund of the full cost of the ticket when an event is cancelled. The Act would also require the Government Accountability Office to conduct a study of the ticket marketplace, including the percentage of tickets acquired by professional resellers, the average cost of tickets in relation to their face value, and an assessment of the primary and secondary market share. Finally, the Act includes strengthening of the previously enacted Better Online Ticket Sales Act and methods for enforcement by the FTC and the States.

The Act has bipartisan sponsorship and is widely endorsed by venues, performers, and fans. The Recoding Academy, best known for the Grammy Awards, played a role in crafting the legislation.[2] Fix the Tix,[3] a group of live event industry organizations, drafted a letter in support of the Act which was signed by almost 300 musicians including Cyndi Lauper, Dave Matthews, and Billie Eilish.[4] The letter claims that resellers are buying large swathes of tickets for resale at inflated prices, using deceptive advertising and URLs to trick consumers into paying higher than face value while tickets are still available from the venue, and speculatively listing tickets for sale before they have them in hand. The artists and venues claim that these actions sever the backbone of the music industry: the relationship between artists and fans.

On the other hand, there is voiced criticism of the Act. Diana Moss,[5] the Vice President and Director of Competition Policy at the Progressive Policy Institute, argues that the ticket resale market matches more fans with more artists to expand demand for events and that the resellers are the only source of competition in ticketing.[6] Dr. Moss’s view is that the Act risks strengthening Live Nation/Ticketmaster’s monopoly on the ticketing market because it would shield Live Nation/Ticketmaster from competition. Live Nation supports the Act, and claims it has long supported a “federal all-in pricing mandate” and the banning of speculative sales.[7]

Perhaps nothing illustrates fans’ frustrations than the Swifties who found it more economical to travel to Europe to see Taylor Swift perform this year. In Germany, tickets cannot be sold at more than 25% over their face value.[8] Other countries have laws that prevent concert tickets being sold over their face value.[9] In England and Wales, tickets for certain football (soccer) matches cannot be resold.[10] Critics of price caps claim that it will force the secondary market underground, which nowadays means through social media. Lloyds Bank estimated that Swift fans lost $1.27MM in ticket scams for the first leg of the UK Eras tour, with 90% of the scams originating on Facebook.[11] The 2023 Rugby World Cup was hosted in France and ticket purchasers were unable to resell through the secondary market, but could resell for face value through an official resale website.[12] Unfortunately, some of the tournament’s premier games had unsold tickets and empty seats. Fans blamed their inability to buy tickets under face value, and ticket holders complained about their inability to recoup some of their expenses for tickets they did not want to use. Similar issues were encountered in the Paris 2024 Olympics.[13] Meanwhile, reselling platforms claim that they provide a market for tickets to be bought and sold safely and securely.[14]

Whether through legislation or litigation[15], fans, performers, and organizers seek reform. Whether fans will ultimately benefit remains left to be seen.

[1] S.3457 – 118th Congress (2023-2024): Fans First Act | Congress.gov | Library of Congress. Similar legislation titled the TICKET Act passed the House in May 2024. Text – H.R.3950 – 118th Congress (2023-2024): TICKET Act | Congress.gov | Library of Congress.  

[2] House & Senate Take Critical Steps Toward Ticketing Reform: Learn How (recordingacademy.com).

[3] Fix The Tix — National Independent Venue Association (nivassoc.org)

[4] Fix The Tix Artist Letter [FINAL].docx (squarespace.com)

[5] Progressive Policy Institute Diana Moss – Progressive Policy Institute

[6] Fans Last? How the Fans First Act Hands Live Nation-Ticketmaster More Market Power (promarket.org)

[7] Senate Introduces Long-Awaited Bill Promising Changes for Ticket Buying – The New York Times (nytimes.com)

[8] Can technology fix the ‘broken’ concert ticketing system? (bbc.com)

[9] Can technology fix the ‘broken’ concert ticketing system? (bbc.com)

[10] SN04715.pdf (parliament.uk)

[11] What would be the impact of a ticket resale price cap? – SportsPro (sportspromedia.com)

[12] EXCLUSIVE: England’s World Cup semi-final against South Africa to be played out in front of thousands of empty seats… with organisers under fire for charging up to £500 for tickets | Daily Mail Online

[13] Ticket resale cap will see fans lose out, Viagogo claims (thetimes.com)

[14] StubHub Support: StubHub’s FanProtect Guarantee

[15] Office of Public Affairs | Justice Department Sues Live Nation-Ticketmaster for Monopolizing Markets Across the Live Concert Industry | United States Department of Justice

In order to classify employees as exempt from overtime pay requirements, employers may rely on the so-called “white-collar” exemptions available for administrative, executive, and professional employees. In addition to meeting the job duties test of each exemption, employers are required to pay a guaranteed minimum salary specified in Department of Labor regulations.

At the start of 2024, the minimum salary requirement for the white-collar exemptions stood at $684 per week, or $35,568 on an annual basis, reflecting an increase implemented by the Department of Labor (“DOL”) in 2019 under the Trump administration. In April 2024 the DOL issued a new rule that implemented a two-stage increase to the exempt employee salary amount – a smaller increase effective July 1, 2024, to $844 per week/$43,888 per year and a larger increase which goes into effect January 1, 2025, to $1,128 per week/$58,656 per year. The rule also provides for automatic increases to the salary threshold every three years (starting on July 1, 2027) to reflect current earnings data.

Multiple lawsuits have been filed challenging the legality of the salary increase rule, including three lawsuits filed in Texas federal courts. One these lawsuits was brought by the State of Texas, State of Texas v. Department of Labor et al., United States District Court for the Eastern District of Texas, Civil Action No. 24-cv-499. On June 28, 2024, the Court issued a preliminary injunction blocking the DOL rule (and related salary increases) from going into effect – but this ruling only blocked enforcement of the DOL rule against the State of Texas in its capacity as an employer. Although this decision did not decide the legal validity of the DOL rule on the merits, the Court’s ruling explained that the State of Texas had demonstrated a likelihood of success on the merits of these arguments as the basis for issuing the preliminary injunction.

Arguments against the validity of the DOL rule gained a significant boost from the United States Supreme Court’s decision in Loper Bright Enterprises v. Raimondo issued on June 28, 2024 – which eliminated the requirement that federal courts give broad deference to federal agencies when reviewing the validity of administrative agency rules. In the wake of the Loper Bright decision, a number of federal courts have invalidated federal agency rules, including other rules issued by the DOL. The district court in the State of Texas case cited Loper Bright in granting its limited preliminary injunction.

The State of Texas, and other business groups whose cases were later consolidated with the State of Texas action, have filed motions for summary judgment seeking a judgment on the merits of their legal challenge, and the DOL has opposed these motions. The briefing of these motions in the State of Texas case was completed on September 19, 2024, and the motions are now under submission for decision by the district court. Should the Court grant the motion for summary judgment and rule that the DOL’s rule is legally invalid, the decision may have the effect of invalidating the DOL salary increases on a nationwide basis – similar to the outcome of litigation in 2017 which blocked a salary threshold increase attempted by DOL rule under the Obama administration.

With the second DOL salary increase (to $1,128 per week/$58,656 per year) set to go into effect on January 1, 2025, employers nationwide are anxiously awaiting the outcome of the legal challenges currently pending in multiple federal courts. With the motion for summary judgment fully briefed in the State of Texas case, a ruling before the end of the year is anticipated. But there is no hard deadline for the Court to issue its ruling. And, of course, there are no guarantees that the Court’s decision (even if it invalidates the rule) will do so in a way that will block the DOL rule nationwide (although that relief has been requested). Beyond this, any district court decision will almost certainly be appealed to the federal Fifth Circuit Court of Appeals (and perhaps eventually to the United States Supreme Court). Earlier this month in Mayfield v. Department of Labor, Case No. 23-50724 (5th Cir. September 11, 2024), the Fifth Circuit Court of Appeals (which covers Louisiana, Texas, and Mississippi) recently upheld the legal validity of the DOL’s 2019 salary threshold increase; however certain language in the Court’s opinion suggests that the new 2024 increases by the DOL may not be protected by the Court’s analysis in this decision. Future developments in these cases bear close watching as we move into the final quarter of 2024.

While awaiting the outcome of this litigation, employers should be reviewing their current wage payment practices and making contingency plans for how they will adjust pay practices for employees who salaries are currently below the new threshold should the second salary increase go into effective January 1, 2025. Planning options include increasing the salaries of employees to comply with the higher salary threshold, re-classifying employees as non-exempt and paying these employees time and a half overtime (for all hours worked in excess of 40 hours per week), or taking steps to limit the number of hours worked by these employees to ensure they do not trigger overtime pay requirements.

There is good reason for employers to be optimistic that the new DOL rule may be blocked by federal courts from going into effect, but employers should remain vigilant and start making contingency plans now for how they will meet this new compliance challenge should the second salary increase go into effect on January 1, 2025. Employers should consult their labor and employment counsel in developing the best strategy for managing this legal risk.

Brief Introduction:

On July 1, 2024, the Western District of Louisiana ruled in favor of the plaintiffs in the case, State of Louisiana et al. v. Joseph R. Biden Jr. et al. No. 2:24-CV-00406 (W.D. La. July 1, 2024), ordering that the Biden Administration’s ban on the export of liquified natural gas (LNG) be stayed in its entirety, effective immediately. Plaintiffs in this case are sixteen (16) states (Louisiana, Alabama, Alaska, Arkansas, Florida, Georgia, Kansas, Mississippi, Montana, Nebraska, Oklahoma, South Carolina, Texas, Utah, West Virginia, and Wyoming) who jointly filed to challenge the Biden Administration’s LNG export ban to countries without a free trade agreement (“non-FTA countries”) in violation of the Administrative Procedure Act (“APA”), Congressional Review Act, and the United States Constitution. Under this ban, the Department of Energy (“DOE”) halted permit approvals to export LNG to non-PTA countries while the agency reviewed how the shipments affect climate change, the economy, and national security.  The Court granted the plaintiffs’ request for a preliminary injunction, which will freeze the Biden Administration’s LNG ban in its entirety while litigation is pending and will stop the Administration’s delay of consideration of projects aimed at the exportation of LNG. This ruling has nationwide impacts.  

Top 2 Takeaways:

  1. The Biden Administration’s ban departs from historical precedent and the legal requirements for the approval process of LNG export licenses, especially considering the DOE’s relatively recent dismissal of a similar petition, stating that there is “no factual or legal basis” for “halt[ing] approval of pending applications to export LNG.” DOE, Order Denying Petition for Rulemaking on Exports of Liquified Natural Gas at 27 (July 18, 2023), https://perma.cc/TB8Y-56TV.
  • While the instant decision is a major win for the LNG industry, given the DOE can continue scrutinizing proposals for new LNG exports, the short-term practical effects of the ruling are likely to be minimal. This ban creates uncertainty for American citizens employed in LNG production and exportation and likely discourages new investments.

Substantive Content:

            The United States is the largest producer and largest exporter of LNG in the world. In 2023, it was reported that 88.9% of the total U.S. LNG exports were to non-Free Trade Agreement countries, and the remaining 11.1% went to Free Trade Agreement countries. Natural Gas Imports and Exports Monthly February 2024.pdf (energy.gov). The domestic LNG market is not only crucial to the United States’ capital expenditures and job markets, but also critical to global energy markets.  

In January of 2024, President Joe Biden and his administration announced a temporary and possibly indefinite hold on pending decisions of LNG exports. The DOE also announced that it was pausing determinations of applications to export LNG exports to all but eighteen (18) countries to “update the assessments used to inform whether additional LNG export authorization requests to non-FTA countries are in the public interest.”

Leading foreign and domestic business groups seeking to quash their dependence on Russian natural gas have expressed concern. In a letter dated January 26, 2024, the U.S. Chamber of Commerce, Business Europe and Keidanren (Japan Business Federation) wrote to President Biden expressing concern with the pause on new LNG export license applications. https://www.keidanren.or.jp/en/policy/2024/011.pdf.  The groups noted their dependence on U.S. LNG imports for energy security and urged President Biden to reconsider his decision “in light of the unique and vital role of American natural gas in meeting the critical energy security and Paris Agreement objectives that our nations share.” Id. Similarly, on March 18, 2024, nearly 150 state and local chambers from thirty-five states joined the U.S. Chamber of Commerce in a letter to the DOE expressing their concerns about the recent moratorium on LNG export license applications. https://www.uschamber.com/assets/documents/240318_Coalition_LNGExports_Sec.-Granholm.pdf. Sixteen states – including Louisiana, Texas, and West Virginia – took matters a step further and filed a civil action in the United States District Court for the Western District of Louisiana.

These sixteen states filed suit against President Biden and the DOE moving for a preliminary injunction on the Biden Administration’s LNG export ban. The states argued that the ban exceeded statutory authority, abused the federal government’s discretionary authority, posed significant harm to the economy, and violated the Natural Gas Act (NGA), which governs LNG exports and strives to “encourage the orderly development of plentiful supplies of electricity and natural gas at reasonable prices.” More importantly for purposes of the injunction, Plaintiffs argued that the LNG ban inflicted significant harms to each individual state, including loss of jobs and revenue streams. Louisiana, for example, is home to 18,000 jobs rooted in LNG production and export. LNG production has contributed to more than $175 million in state tax revenue and had over $4.4 billion in statewide economic impact. Thus, the LNG export ban could cost Louisiana thousands of jobs and deprive the state of weighty revenues.

The Biden Administration responded to plaintiffs’ Complaint and Motion for Preliminary Injunction with a Motion to Dismiss for Failure to State a Claim and a Motion to Dismiss for Lack of Jurisdiction. Defendants contended (1) that the Western District of Louisiana did not have jurisdiction, (2) Plaintiffs failed to establish standing, (3) Plaintiffs did not challenge a final agency action under the APA, and (4) Plaintiffs failed to state a claim for relief.  

Less than two weeks after the hearing, on July 1, 2024, U.S. District Judge James Cain, Jr. ruled in favor of the plaintiffs, granting the preliminary injunction and finding that the states demonstrated there was “evidence of harm” caused by the ban “specifically to Louisiana, Texas, and West Virginia in the loss of revenues, market share, and deprivation of a procedural right.” DOE, Order Denying Petition for Rulemaking on Exports of Liquified Natural Gas at 46 (July 18, 2023), https://perma.cc/TB8Y-56TV. In temporarily blocking the ban on new LNG approvals, Judge Cain stated that the states will likely succeed in their case, citing the evidence the states presented showing loss of revenues and deferred investments in LNG projects due to the Biden Administration’s actions and noting that the DOE had failed to provide a “detailed justification” for stopping the permit approval process when it had continued to process applications during previous updates to the agency’s analyses. The Court also noted its confusion with the Biden Administration’s decision to halt the LNG approval process in the first place, given the Natural Gas Act’s “express language that applications are to be processed expeditiously” and the DOE’s July 2023 decision on essentially the same topic. The Court was of course referring to the DOE’s July 2023 order denying a petition for rulemaking on LNG exports, in which the DOE acknowledged that “there is no factual or legal basis” to “halt approval of pending applications to export LNG.” DOE, Order Denying Petition for Rulemaking on Exports of Liquified Natural Gas at 27 (July 18, 2023), https://perma.cc/TB8Y-56TV. The Court had strong words regarding the DOE’s decision to halt the permit approval process for LNG exports to non-FTA countries stating that it is “completely without reason or logic and is perhaps the epiphany of ideocracy.”

The Biden Administration, fighting to uphold the ban, filed an appeal to the Fifth Circuit Court of Appeals on August 5, 2024.  

Conclusion:

This victory for the energy industry may be short-lived as everyday Americans, business groups, and global energy markets await the Fifth Circuit Court of Appeals decision on whether to permanently strike down the LNG ban. The potential implications of this ruling on the global natural gas supply are significant, as countries in Europe and Asia, in need of a reliable natural gas supply, may now be forced to seek natural gas from sources other than the United States.

Kean Miller will continue to monitor these developments and the pending appeal. For questions or to discuss any of the foregoing, please contact Kean Miller’s Energy/Environmental Team.

As previously reported, on April 23, 2024, by a vote of 3-2 along party lines, the Federal Trade Commission (FTC) voted to approve a final rule effectively banning employers from entering into non-compete agreements with their workers, with few limited exceptions (the “Rule”). The Rule was set to go into effect on September 4, 2024.

But, on August 20, 2024, the federal district court for the Northern District of Texas entered a Memorandum Opinion and Order and a Final Judgment in the Ryan LLC v. Federal Trade Commission case, holding that the Rule is unlawful and setting it aside. Pursuant to the court’s order, the Rule shall not be enforced or otherwise take effect on September 4, 2024, or thereafter. And although the FTC sought to limit the application of the court’s order to the named plaintiffs in the lawsuit only, the court confirmed the relevant law did not contemplate party-specific relief, that setting aside agency action has nationwide effect, and the ruling affects persons in all judicial districts equally.

Although the FTC will likely appeal the district court’s ruling, for the time being, all employers can halt any preparations they were taking and/or planning to take in anticipation of the Rule’s September 4, 2024 effective date. As a result of the district court’s ruling, employers: (1) may continue drafting and entering into non-compete agreements with their workers consistent with applicable state and other laws; (2) will no longer be required to rescind existing non-compete agreements that otherwise comply with applicable laws; and (3) are no longer required to provide individualized notice of rescission to current and former workers bound by non-compete agreements.

On May 1, 2024, the U.S. 5th Circuit reversed an Eastern District of Louisiana decision based on a differing interpretation and application of the Supreme Court’s Lauritzen-Rhoditis factors; holding that the law of the flag state governed the injured mariner’s maritime law claims against the vessel operator.

In Ganpat v. Eastern Pacific Shipping PTE, Ltd., Kholkar Ganpat, an Indian citizen and seaman, contracted malaria while aboard the M/V STARGATE due to the ship’s alleged failure to stock enough anti-malaria medicine when it stopped at Savannah, Georgia. Ganpat became symptomatic, however, during the ship’s voyage from Savannah to Brazil. Upon reaching Brazil, Ganpat was hospitalized and had to have his toes amputated.

During Ganpat’s ordeal, the ship’s operator was Eastern Pacific Shipping (“EPS”), a Singaporean company, and the ship flew under the flag of Liberia. Ganpat was employed by a Liberian corporation, and his employment contract contained a clause providing that the agreement would be governed by and interpreted in accordance with the laws of the ship’s flag. A collective bargaining agreement was also incorporated into Ganpat’s employment contract. The ship was owned by a Liberian company.

In December 2018, Ganpat sued EPS in the Eastern District of Louisiana (“EDLA”) asserting Jones Act and U.S. General Maritime Law tort claims, as well as a claim for breach of his collective bargaining agreement. Notably, Ganpat did not sue the owner of the ship or his own employer. After consenting to jurisdiction in the EDLA, EPS sued Ganpat in India seeking an anti-suit injunction preventing the U.S. litigation. In turn, Ganpat sought his own anti-suit injunction against EPS’ suit in India. The EDLA granted Ganpat’s injunction, which EPS appealed. However, the 5th Circuit affirmed the decision, holding that EPS’ lawsuit in India was vexatious and oppressive enough to outweigh any comity concerns. EPS then sought writs with the U.S. Supreme Court, which was ultimately denied.

The EDLA was tasked next with determining what substantive law applied to Ganpat’s maritime claims. The district court concluded that U.S. law applied after analyzing the Lauritzen-Rhoditis factors. These factors include: (1) the place of the wrongful act; (2) the law of the flag; (3) the allegiance or domicile of the injured worker; (4) the allegiance of the defendant shipowner; (5) the place of the contract; (6) the inaccessibility of the foreign forum; (7) the law of the forum; and (8) the shipowner’s base of operations. The district court concluded that factors two, four, and eight pertained to the ship’s owner who was not sued, so they were inapplicable, while factors three and five favored Indian law. However, the latter factors traditionally do not carry much weight because a seaman’s work is transient and his place of contract fortuitous. Factor six was found to only be relevant in a forum non conveniens determination, which would not appear here. Finally, the district court found that factor seven favored U.S. law. Similarly, the district court concluded that this same analysis would apply to Ganpat’s collective bargaining agreement.

Thereafter, the EDLA’s ruling was appealed and Ganpat found himself back in the 5th Circuit. With respect to governing choice of law, the 5th Circuit held that “the only Lauritzen-Rhoditis factor that favored an application of U.S. law is the seventh factor—the law of the forum,” but noted that this factor is typically given “little weight” in choice of law determinations. The 5th Circuit also disagreed with the district court’s assessment that the “law of the flag” and the “base of operations” factors lack choice-of-law significance in cases where the shipowner is not a defendant because another party can act in place of the shipowner—like EPS. The fact that the allegedly tortious conduct occurred in Savannah, Georgia was also held to be fortuitous as EPS was visiting many other countries throughout the voyage as well. Lastly, the Court held that Liberian law applied to Ganpat’s breach of contract claim because his claim for disability was based on his employment contract, which contained a clear choice-of-law provision.

Thus, the 5th Circuit remanded the case back to the EDLA with instruction to apply Liberian law to Ganpat’s maritime tort and contract claims. Given the history of this case, it would not be surprising if Ganpat sought writs with the U.S. Supreme Court as EPS did after the last 5th Circuit decision.