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.

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.