On November 20, 2025, the Illinois Supreme Court narrowly construed private rights of action under the federal Fair Credit Reporting Act (FCRA) so as to impose a de facto “concrete injury” requirement for claims under the FCRA and potentially other federal statutes with similar liability language. Fausett v. Walgreen Co., 2025 IL 131444. Although Article III’s concrete-injury requirement has become familiar in federal courts over the last decade, Illinois courts had not previously imposed such a requirement. The Court in Fausett held that the FCRA does not explicitly authorize consumers to sue for violations, so the law did not authorize consumer lawsuits unless the consumer could show that a violation caused them a concrete injury. This ruling could significantly narrow consumers’ ability to bring no-injury claims under similar statutes in Illinois state courts.
Background
The “concrete injury” requirement gained renewed focus in Spokeo, Inc. v. Robins, when the U.S. Supreme Court held that a concrete injury is required to create a “case or controversy,” which is required for a federal court to have subject-matter jurisdiction under Article III of the U.S. Constitution. Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016). Spokeo held that, even where a statute authorizes a right of action without actual damages, a lawsuit alleging a bare statutory violation without any resulting concrete harm is not a case or controversy, so a federal court lacks subject-matter jurisdiction over such a lawsuit. Id. at 1549. In federal court, the practical outcome of Spokeo is that simply pointing to a violation of a federal statute isn’t sufficient to support subject-matter jurisdiction; the plaintiff must also articulate how this violation resulted in a concrete injury.
Unlike the U.S. Supreme Court’s decision in Spokeo, Illinois courts are not bound by Article III, and had historically allowed lawsuits based solely on a statutory violation and without a requirement of concrete injury. Indeed, the appellate court in Fausett specifically noted that “federal standing law and Illinois standing law are not identical and Illinois courts are not required to follow federal law on issues of justiciability and standing.” Fausett v. Walgreen Company, 2024 IL App (2d) 230105, ¶ 28. The most significant recent example was the Illinois Supreme Court’s decision allowing a claim for violation of Illinois’s Biometric Information Privacy Act (BIPA) without any showing of injury beyond a statutory violation. Rosenbach v. Six Flags Entertainment Corp., 2019 IL 123186, ¶ 28 (“a person need not have sustained actual damage beyond violation of his or her rights under the Act in order to bring an action under it”). The Court in Rosenbach relied on the statutory language that “[a]ny person aggrieved by a violation of this Act shall have a right of action in a State circuit court or as a supplemental claim in federal district court against an offending party.” 2019 IL 123186, ¶ 21.
The Decision in Fausett
The plaintiff in Fausett alleged a violation of a provision in the FCRA (known as the Fair and Accurate Credit Transactions Act or (FACTA)) that prohibits retailers from printing more than the last five digits of a credit or debit card number on any receipt.[1] Although Fausett alleged no injury from the alleged violation, she nonetheless sued on behalf of a nationwide class of others subject to the same alleged violation.
The plaintiff relied on the Illinois Supreme Court decision in Rosenbach, arguing that a mere violation of a statutory right was sufficient to support a claim in Illinois state court. The defendant relied on Petta v. Christie Business Holdings Co., P.C., where the Illinois Supreme Court held that an increased risk of harm without any other injury was insufficient to give plaintiff standing to sue. 2025 IL 130337.
In Fausett, the Illinois Supreme Court confirmed that an alleged statutory violation can be sufficient to support standing, but only where the statute specifically authorizes a lawsuit for violations, which the Court found is not the case with the FCRA.
The Court began by noting Illinois standing law is distinct from federal law, and Illinois standing notions govern in state-court actions invoking federal statutes.[2]
The Court then noted that two different types of standing exist in Illinois: (1) common law standing, which requires an injury in fact to a legally cognizable interest; and (2) statutory standing, where the legislature creates a right of action and determines who shall sue and the conditions under which a lawsuit can be filed.[3] After “examining the plain and unambiguous language of the relevant provisions of FCRA,” the court concluded that the FCRA does not explicitly identify who may bring suit.[4] As a result, the FCRA did not provide statutory standing as the statute in Rosenbach did.
Once it found a lack of statutory standing under the FCRA, the Court held that the plaintiff must show a concrete injury to create common-law standing, and that the alleged increased risk of identity theft did not suffice.[5] Accordingly, the Court reversed class certification and remanded with directions to dismiss for lack of standing.
Notably, the Supreme Court also left open the possibility that a concrete injury would be required even in cases where the plaintiff alleges a violation of a statute that explicitly authorizes consumers to sue. Fausett, 2025 IL 131444, ¶ 46 (“Given this court has found common-law standing is at issue in this appeal, we need not determine whether a concrete injury is also required with statutory standing.”)
What This Means for Consumer Class Actions in Illinois
The immediate consequence for FCRA litigation is clear. Federal courts will continue to dismiss no-injury claims for lack of Article III standing after Spokeo. And now Fausett forecloses simply refiling those same no-injury claims in Illinois state courts.
By contrast, BIPA remains a different animal in Illinois. Rosenbach recognized statutory standing based on that statute’s “aggrieved person” language, permitting plaintiffs to proceed in Illinois state court without alleging a separate concrete injury beyond a violation of statutory rights. Fausett confirms that this statutory-versus-common-law distinction drives outcomes.
Looking ahead, the viability of no-injury cases in Illinois state court will depend on the specific statutory language involved. Many federal consumer statutes have private-right-of-action provisions similar to the FCRA, including the FDCPA, RESPA, and TILA. Defendants may be able to rely on Fausett to argue that claims under such statutes in Illinois state courts require showing a concrete injury.
Thus, just as arguments over Article III standing have been pervasive in federal courts since the U.S. Supreme Court’s decision in Spokeo, the Fausett decision could trigger new litigation over Illinois’s standing requirements.
[1] Fausett v. Walgreen Co., 2025 IL 131444, ¶ 1 (citing 15 U.S.C. § 1681c(g)(1)).
[2] Fausett, 2025 IL 131444 ¶ 37.
[3] Id. ¶ 39.
[4] Id. ¶ 40 (Congress did not expressly define the parties who have the right to sue for the statutory damages established in FCRA. As such, FCRA is distinguishable from the act in Rosenbach.)
[5] Id. ¶ 50.
Introduction
On October 23, the Pennsylvania Supreme Court decided Yoder v. McCarthy Const. Inc.,[1] addressing statutory employer immunity in the context of a construction project under the Pennsylvania Workers’ Compensation Act.[2] The court’s decision reaffirmed longstanding precedent that general contractors may claim statutory employer immunity against tort claims initiated by a subcontractor employee, irrespective of whether they actually pay workers’ compensation benefits to an injured subcontractor employee.
Case Background
McCarthy Construction, the general contractor, contracted with the Borough of Norwood to remove and replace the Norwood Public Library’s roof. McCarthy subcontracted the roofing work to RRR Contractors, Inc. During construction, the plaintiff, an employee of RRR Contractors, Inc., suffered severe injuries after falling through an uncovered hole while working on the roof. The plaintiff subsequently filed a negligence lawsuit against McCarthy, seeking $5 million in damages.
McCarthy defended against the lawsuit by invoking statutory employer immunity. The trial court rejected McCarthy’s defense, finding that the plaintiff was an independent contractor and not an employee of RRR Contractors, Inc. under the test established in McDonald v. Levinson Steel Co.[3] As independent contractors are categorically exempt from statutory employer immunity, McCarthy’s defense necessarily failed. The Pennsylvania Superior Court vacated the trial court’s judgment, concluding that McCarthy was the plaintiff’s statutory employer and thus immune from tort liability, and remanded to the trial court to enter judgment in McCarthy’s favor.
The plaintiff appealed to the Pennsylvania Supreme Court, challenging the applicability of statutory employer immunity and the longstanding precedents established by the Pennsylvania Supreme Court in Fonner v. Shandon, Inc.,[4] LeFlar v. Gulf Creek Indus. Park #2,[5] and McDonald.
Holding and Legal Analysis
The Supreme Court rejected the plaintiff’s many arguments and reaffirmed longstanding precedent regarding the application of statutory employer immunity as established in Fonner, LeFlar, and McDonald. The court recognized the well-traveled policy debate in Pennsylvania regarding statutory employer immunity, but declined to intervene, recognizing that any changes must be addressed by the appropriate policy-making branch, i.e., the General Assembly. The Supreme Court’s analysis of the plaintiff’s arguments is briefly set forth below.
1. Fonner and LeFlar
In addressing Fonner and LeFlar, the court reaffirmed that (i) a general contractor’s statutory employer immunity under the act does not turn on whether the contractor actually paid workers’ compensation benefits to the injured worker, and (ii) statutory employers do not waive their immunity under the act for failing to timely plead it because the act deprives the court of jurisdiction, which can be raised at any time.
The plaintiff’s arguments, largely couched in fairness principles and allegations of an historical misapplication of the act, asserted that the court must overturn well-settled law. Relying on principles of stare decisis, the court found the plaintiff did not provide any “substantial justification” warranting overturning the court’s prior decisions in Fonner and LeFlar. Further, beliefs that the act reflects poor public policy are best expressed to the legislature, not the court.
2. McDonald
Before the trial court, the plaintiff challenged McCarthy’s ability to satisfy the first, second, and fourth elements of the McDonald test. The court addressed whether the Superior Court’s determination that McCarthy established that it qualified as a statutory employer entitled to immunity under the act, and directing the trial court to enter judgment in favor of McCarthy, was appropriate. On this point, the court reversed, holding that the Superior Court lacked a record from which it could conclude that McCarthy satisfied the McDonald test. Thus, the court remanded to the trial court to consider whether McCarthy satisfied all five elements of the McDonald test such that it was protected under the act.
Conclusion
The Supreme Court of Pennsylvania’s decision in Yoder reaffirmed decades-old precedent concerning the application of the act and statutory employer immunity. The adherence to the status quo afforded by the Yoder decision provides construction project stakeholders with certainty regarding their potential liability in the event of injuries on the job, assuming they satisfy the McDonald requirements.
Yoder further highlights the Supreme Court of Pennsylvania’s apparent reluctance to allow public policy considerations that are best left to the legislature to influence judicial decision-making.
Troutman Pepper Locke attorneys are well positioned to advise clients navigating construction project disputes between general contractors, subcontractors, and subcontractor employees, and, should the need arise, represent you in such disputes that result in litigation and/or arbitration.
[1]Yoder v. McCarthy Const., Inc., No. 43 EAP 2024, 2025 WL 2981889 (Pa. Oct. 23, 2025).
[2] Act of June 2, 1915, P.L. 736, as amended 77 P.S. §§ 1-041.4, 2501-2710.
[3] McDonald v. Levinson Steel Co., 153 A. 424 (Pa. 1930). The Court established a five-part test to determine statutory employer status:
- The general contractor must be under contract with an owner or one in the position of an owner.
- The general contractor must occupy or control the premises.
- The general contractor must have contracted with a subcontractor.
- The work contracted must be a regular or recurrent part of the general contractor’s business.
- The injured worker must be an employee of the subcontractor.
[4] Fonner v. Shandon, Inc., 724 A.2d 903 (Pa. 1999) (holding that the 1974 amendments to the act had not altered the statutory employer doctrine, thereby maintaining the immunity of general contractors from common law negligence suits, even when subcontractors provide workers’ compensation insurance and benefits).
[5] LeFlar v. Gulf Creek Indus. Park #2, 515 A.2d 875 (Pa. 1986) (holding that the statutory employer defense under Section 203 of the act is unwaivable because it involves the court’s subject matter jurisdiction) (emphasis added).
Over the past decade, the definition of “waters of the United States” (WOTUS) has shifted repeatedly, creating uncertainty for permitting and project planning. Building on the Supreme Court’s Sackett v. EPA decision, the EPA and the U.S. Army Corps of Engineers (together, the agencies) announced a proposal this week to further refine which water features qualify as WOTUS by narrowing key definitions and codifying — and expanding — exclusions. The proposal would apply across all Clean Water Act (CWA) programs that rely on WOTUS, including permitting under Sections 404 and 402, water quality certifications under Section 401, and Total Maximum Daily Loads (TMDLs) for impaired waters under Section 303. The proposal is directionally deregulatory, meaning fewer waters are likely to be considered federally jurisdictional and therefore regulated. The new definition was published in the Federal Register on Thursday, marking the start of a 45-day public comment period through January 5, 2026. The public comment page can be accessed here.
Today’s WOTUS regulatory landscape remains split. The “Amended 2023” WOTUS rule is operative in 24 states, the District of Columbia, and the territories, while the pre-2015 rule (as modified by Sackett) governs elsewhere. This new proposal aims to bring greater uniformity by redefining, excluding, and removing several key terms:
| Term | Definition |
| Relatively permanent waters | Bodies of surface water that are standing or continuously flowing year-round or at least during the wet season. |
| Continuous surface connection (wetlands) | Wetland must (1) abut a relatively permanent water, and (2) have a continuous surface water connection present at least during the wet season; only wet portions are jurisdictional. |
| Tributary | Has a bed and a bank, relatively permanent flow, and connects to a traditionally navigable water or the territorial seas; non-relatively permanent reaches sever upstream jurisdiction. |
| Lakes and ponds | Intrastate and interstate standing/continuously flowing bodies of water that are consistent with “relatively permanent” criteria; connections align with tributary standards. |
| Ditches in dry land (exclusion) | Ditches constructed or excavated entirely in dry land are excluded, even if those ditches have relatively permanent flow and connect to a jurisdictional water; ditches constructed in wetlands are not excluded. |
| Prior converted cropland (exclusion) | Continues to be excluded unless “abandoned” (no agricultural use for a period greater than five years and reversion to wetland); conservation/idling is not abandonment. |
| Waste treatment systems (exclusion) | Systems designed to meet CWA requirements are excluded; abandonment can remove the exclusion. |
| Groundwater (exclusion) | Explicitly excluded, including subsurface drainage (e.g., tile drains); surface expressions not excluded and remain classified as surface waters. |
| Interstate waters category (removed) | Waters no longer identified as jurisdictional solely for crossing state lines; must fall under another category. |
We expect that the proposal will reduce the number of federally jurisdictional waters, easing some Section 404 permitting, mitigation, cost, and delay challenges. Under Section 401, a reduced federal permitting footprint would yield fewer certifications and potentially less state or tribal conditioning. Under Section 402, some discharges to nonjurisdictional features may not require NPDES permitting; however, discharges that reach WOTUS could still trigger permitting requirements. Under Section 303, fewer waters may be covered under the federal standards, but states and tribes may try to fill regulatory gaps with additional, more localized regulation. The states and tribes may assume a larger role as federal jurisdiction narrows, resulting in program coverage and standards that may vary by jurisdiction.
On October 22, in Nunez v. Syncsort Inc., the Massachusetts Supreme Judicial Court ( SJC) held that retention bonuses are not “wages” under the Massachusetts Wage Act. 496 Mass. 706 (2025). The Nunez decision continues the trend of Massachusetts courts concluding that conditional or contingent compensation falls outside the scope of the Wage Act.
The Wage Act
The Wage Act requires employers to pay employee wages weekly or biweekly, and to pay final wages promptly upon termination. Mass. Gen. L. c. 149, § 148. In the case of involuntary terminations, the Wage Act requires final wages to be paid on the date of termination.
The Wage Act does not explicitly define the term wages. Instead, the Act provides that wages include “any holiday or vacation payments due an employee under an oral or written agreement,” and “commissions when the amount of such commissions, less allowable or authorized deductions, has been definitely determined and has become due and payable.” The question of what constitutes a “wage” under the Act has been frequently litigated since its enactment.
The Wage Act is a strict liability statute with severe penalties. If an employer fails to comply with the requirements of the Act, a prevailing employee can recover the unpaid wages and is entitled to mandatory treble damages and attorneys’ fees. G.L. c. 149, § 150.
Background
In Nunez, the defendant employer offered the plaintiff employee a $15,000 retention bonus payable in two tranches on two separate retention dates. Under the retention bonus agreement, the plaintiff had to be employed by the defendant and be in “good performance standing” on the retention dates to be eligible for the retention payment. The plaintiff remained employed and in good standing through the first retention date but was terminated on the second retention date. The employer paid the plaintiff’s final wages on the date of termination, but did not pay the second retention payment until eight days later.
The plaintiff filed a lawsuit against the employer, asserting, among other claims, a claim under the Wage Act for failing to timely pay the second retention payment on the date of termination. The parties cross-moved for summary judgment on the Wage Act claim, and a district court judge denied both motions without explanation. After the parties jointly moved for reconsideration, a different district court judge granted summary judgment to the employer on the Wage Act claim, finding that the retention bonus payment was a form of contingent compensation and therefore not a “wage.” The plaintiff appealed that judgment, and a panel of the Appellate Division of the District Court Department affirmed. The plaintiff then appealed the Appellate Division’s decision to the SJC. The issue before the SJC was whether the retention bonus payments were “wages” within the meaning of the Wage Act.
The SJC’s Decision
The SJC affirmed the lower courts’ holdings that the second retention payment was not a wage under the Act, reasoning that the payment was not “made solely in exchange for the plaintiff’s labor or services” (i.e., wages), but instead was “additional contingent compensation outside the scope of the Wage Act.” 496 Mass. at 713.
In reaching that conclusion, the SJC relied on the limited definition of “wages” under the Act and the long line of appellate cases that “have uniformly rejected attempts to include other forms of contingent compensation within the meaning of ‘wages’ where the contingency at issue imposed some requirement beyond the services or labor an employee provides in exchange for his or her compensation.” Id. at 710. The SJC saw “no reason why retention agreements should be treated any differently from other types of compensation that are contingent upon continued employment to a particular date and are in addition to the compensation the employee receives in exchange for his or her labor and services.” Id., at 712.
Takeaways
While the Nunez decision provides clarity for Massachusetts employers that use retention bonuses for their employees, employers should review their agreements to ensure that such arrangements condition payment on contingencies such as continued employment and good standing, and avoid contingencies such as sales output that could be viewed as compensation for work performed and therefore a wage under the Act. Employers should also consider including language that the retention bonus is in addition to base salary and not earned pro rata for services performed.
If you have questions about the Massachusetts Wage Act, please reach out to your Troutman Pepper Locke employment counsel.
State attorneys general increasingly impact businesses in all industries. Our nationally recognized state AG team has been trusted by clients for more than 20 years to navigate their most complicated state AG investigations and enforcement actions.
State Attorneys General Monitor analyzes regulatory actions by state AGs and other state administrative agencies throughout the nation. Contributors to this newsletter and related blog include attorneys experienced in regulatory enforcement, litigation, and compliance. Also visit our State Attorneys General Monitor microsite.
Contact our State AG Team at StateAG@troutman.com.
Troutman Pepper Locke Spotlight
2026 State Attorney General Elections: What You Need to Know
By Clayton Friedman, Ashley L. Taylor, Jr., Chris Carlson, Blake Christopher, and Nick Gouverneur
The 2026 election season is poised to bring substantial changes to the roster of state attorneys general. With over 30 races, including high-stakes contests in Texas and Florida, the outcomes of these state AG elections are set to significantly influence legal and policy outcomes across the nation. These elections will not only shape the legal landscape but also impact businesses and industries that operate within these states.
Multistate State AG News
Key Takeaways From California, Connecticut, and New York’s $5.1M Settlement With Education Technology Company
By Troutman Pepper Locke State Attorneys General Team, Angelo A. Stio III, and Kaitlin Clemens
On November 6, California Attorney General (AG) Rob Bonta, Connecticut AG William Tong, and New York AG Letitia James announced a $5.1 million settlement with Illuminate Education, Inc. (Illuminate), an educational technology company that offers K-12 software solutions that enable schools and school districts to track student attendance and grades, and monitor academic progress, behavior, and mental health.
Single State AG News
New York Begins Enforcing Algorithmic Pricing Disclosure Act
By Troutman Pepper Locke State Attorneys General Team and Sydney Goldberg
On November 10, New York’s Algorithmic Pricing Disclosure Act officially took effect, requiring businesses that use individuals’ personal data to set prices to comply with the act’s disclosure requirements. New York Attorney General (AG) Letitia James, charged with enforcement of this new law, has stated that enforcement is a top priority and has urged businesses to comply and consumers to report any violations.
AG of the Week
Letitia James, New York
Letitia James is the 67th attorney general (AG) of the state of New York. Elected in 2018, she has focused on protecting vulnerable residents and ensuring accountability for individuals and companies that violate state laws. During her first term, James secured more than $7.5 billion for New York, including more than $2.5 billion from opioid manufacturers and distributors for their roles in the opioid epidemic. Her office has removed more than 4,000 guns from New York communities, dismantled numerous drug and gun trafficking rings, and taken legal action to curb the spread of ghost guns.
Prior to serving as AG, James was the public advocate for New York City, where her tenure saw the passage of more legislation than all previous public advocates combined, including a law banning questions about salary history in the employment process to address the gender wage gap. Before her role as public advocate, James represented Brooklyn’s 35th Council District in the New York City Council for a decade, where she passed the Safe Housing Act to improve living conditions for tenants in the city’s worst buildings. Earlier in her career, she led the Brooklyn Regional Office of the New York State AG’s office and began her legal career as a public defender at the Legal Aid Society.
James is a graduate of Lehman College and Howard University School of Law and is a lifelong Brooklyn resident.
New York AG in the News:
- James issued a consumer alert to New York residents, reminding them of their utilities rights as temperatures start to drop.
- James released a statement supporting the Northern District of New York dismissal of the U.S. Department of Justice’s lawsuit challenging New York’s Protect Our Courts Act.
- James urged the federal government to extend Temporary Protected Status to Jamaicans following the devastation of Hurricane Melissa.
Upcoming AG Events
- November: AGA | International Delegation | Tokyo, Japan
- December: DAGA | Holiday Party | Washington, D.C.
- December: NAAG | 2025 Capital Forum | Washington, D.C.
For more on upcoming AG Events, click here.
Troutman Pepper Locke’s State Attorneys General team combines legal acumen and government experience to develop comprehensive, thoughtful strategies for clients. Our attorneys handle individual and multistate AG investigations, proactive counseling and litigation, and manage ancillary regulatory issues. Our successful approach has been recognized by Chambers USA, which ranked our practice as a leader in the industry.
This article was originally published on Law360 and is republished here with permission as it originally appeared on November 19, 2025.
On Oct. 22, social media platform Reddit sued artificial intelligence startup Perplexity AI, along with three other companies: SerpApi LLC, Oxylabs UAB, and AWMProxy, in the U.S. District Court for the Southern District of New York.
Reddit’s lawsuit against Perplexity — Reddit Inc. v. SerpApi LLC — and several scraping/proxy providers is notable for what it is, and what it is not.
Unlike many pending cases against generative AI companies seeking training content that center on copyright infringement and fair use of materials that are otherwise available on the Internet, Reddit’s claims focus on how the defendants allegedly obtained Reddit data — the alleged use of false identities, proxies and other antisecurity techniques to scrape at an industrial scale.
So instead of reading like a law school treatise on the future of fair use after the U.S. Supreme Court‘s 2023 decision in Andy Warhol Foundation for the Visual Arts v. Goldsmith, the Reddit v. Perplexity lawsuit reads like the cyber tactics of a computer super hacker from a movie — well, maybe the most legalese cyber hacker movie ever.
Whether this represents an aberration or the future of generative AI remains to be seen.
In its complaint, Reddit accuses the defendants, collectively, of violating the Digital Millennium Copyright Act’s circumvention of technological control measures pursuant to Title 17 of the U.S. Code, Section 1201(a)(1)(A).
While SerpApi and Oxylabs each face additional charges pursuant to the DMCA, SerpApi and Perplexity also face claims of civil conspiracy.
Notably, the complaint frames the dispute as unlawful circumvention and unfair competition, not a classic copyright infringement fight. It also underscores that Reddit’s data is already licensed to major AI companies and is available for lawful use — if you pay.
What Makes This Case Different
At bottom, Reddit’s complaint is about access, not use.
In Reddit’s telling, the defendants allegedly masked identities, disguised web scrapers, hid locations, rotated IPs, forged credentials, ignored robots.txt, and overwhelmed or sidestepped anti-bot defenses — conduct aimed at defeating technical and contractual gatekeeping rather than anything to do with downstream model training or outputs.
Instead of alleging traditional copyright infringement, Reddit anchors its claims in anti-circumvention and trafficking-in-circumvention-technology theories, supplemented by state unfair competition or unjust enrichment laws.
Content licensing is also front and center: Reddit emphasizes that it licenses programmatic access — including to Google and OpenAI — and signals a willingness to license the defendants on commercial terms.
The thrust of the narrative is that the defendants chose to evade those terms and protections with the assertion that they just did not want to take the time or pay the money to get an available license.
The Alleged Conduct
Reddit alleges that the defendants orchestrated industrial scale scraping of Reddit content by pulling Reddit pages from Google’s search results rather than accessing Reddit directly, and by defeating both Google’s and Reddit’s technical defenses.
According to the complaint, the defendants deployed “server-swarms” to mimic human traffic — tactics aimed at evading robots.txt, rate limits, captchas and other anti-bot controls.
Reddit further claims that none of the defendants had authorization or a license to access or use Reddit data in this manner. Instead of using Reddit’s data application programming interface under agreed terms, the defendants allegedly bypassed Reddit’s licensing program and continued their activity despite notice, including a 2024 cease-and-desist order, with Perplexity allegedly increasing its reliance on Reddit content afterward.
Reddit asserts this conduct undermined its licensing model, damaged user trust and forced significant investment in additional security.
The complaint attributes specific roles:
- SerpApi and Oxylabs are said to market and provide scraping tools and vast proxy networks designed to bypass website protections used by Reddit and others;
- AWMProxy allegedly supplies proxy infrastructure that conceals identity and location for industrial-scale scraping; and
- Perplexity is alleged to have obtained and used the scraped Reddit data — including via SerpApi — for commercial purposes, engaging in stealth behavior to avoid detection.
Reddit’s Licensing Posture
Reddit’s position is that its data is invaluable to AI companies, especially commercially. It points to existing licensing agreements — including with Google and OpenAI — and a structured data application programming interface program that offers lawful, bulk access under clear terms.
Reddit states that it is willing to license the defendants as well, provided they enter commercial agreements and adhere to guardrails designed to protect users, content integrity and platform reliability.
Reddit further argues that unlicensed scraping undermines its licensing relationships by devaluing paid, compliant access and eroding the incentives for others to honor agreed protections and fees.
This conduct, in Reddit’s view, weakens the sustainability of its licensing model, encourages noncompliance, and forces additional enforcement and security costs while risking user trust and the integrity of the platform.
Why This Matters for AI Companies
A Shift in Legal Exposure
Even if a company avoids, or defends against, infringement or fair use claims, it can still face substantial risk if it acquires training datasets through methods characterized as circumvention, trespass-like conduct or unfair competition.
The path by which data is obtained is legally consequential.
Business Model Pressure
This case spotlights an economic question: Can generative AI businesses sustainably train on licensed datasets at scale, or do they depend on free — and often restricted — content?
The plaintiffs are drawing a bright line: Pay for access, comply with policies, and respect technical controls — or risk injunctions and damages.
Compliance and Provenance Become Differentiators
As licensing pathways expand, investors, enterprise customers, and regulators will look for verifiable data provenance, adherence to robots.txt and site policies, transparent user agents, and auditable ingestion practices.
“Clean” training pipelines may become a competitive advantage and a requirement for partnerships.
Practical Takeaways for AI and Data Ingestion Teams
Audit your acquisition routes.
Map every data source and confirm compliance with site terms, robots.txt and authentication requirements. Avoid indirect scraping via intermediaries that circumvent controls, e.g., SERP scraping at scale.
Use licensed application programming interfaces and contracts.
Where bulk access is needed, pursue commercial licenses and abide by guardrails, i.e., rate limits, use restrictions and privacy protections.
Build technical guardrails.
Enforce robots.txt respect by default, maintain transparent user-agent strings, throttle responsibly, and document consent or authorization. Create a provenance ledger for training sets.
Align product and legal strategy.
If your model depends on high-volume web content, budget for licensing or redesign ingestion to rely on permissible public sources. Be realistic about the cost and timing of licensed datasets.
Conclusion
According to a Wall Street Journal article published May 12, Perplexity raised $500 million, which valued the company at $14 billion.[1]
Yahoo! Finance reported in a story published July 18 that in June, it raised another $100 million, lifting its valuation to $18 billion with the backing of Nvidia, Softbank and others.[2]
At the same time, The Wall Street Journal also reported in an article published Nov. 13 that OpenAI’s losses in 2025 could reach $74 billion.[3]
So, with a tremendous upside, but significant expenses and losses, the question remains whether generative AI companies will use their equity to fund licenses with content providers, or their expanding expenses will lead to claims that they are breaking the law to get much-needed content.
Michael D. Hobbs Jr. is a partner and Di’Vennci K. Lucas is an associate at Troutman Pepper Locke LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[2] https://finance.yahoo.com/news/perplexity-ai-achieves-18bn-valuation-113151944.html?.
[3] https://finance.yahoo.com/news/big-tech-soaring-profits-ugly-122500177.html.
In This Update
Covering legal developments and regulatory news for funds, their advisers, and industry participants for the quarter ended September 30.
Rulemaking and Guidance
- SEC and CFTC Extend Form PF Compliance Date to October 1, 2026
- FINRA Requests Comment on Modernizing FINRA Rules, Guidance and Processes to Facilitate Capital Formation
- FINRA Adopts Exemption From FINRA Rules 5130 and 5131 for Business Development Companies
- FINRA Reminds Members and Associated Persons, Wherever Located, of Their Obligation to Comply With Rule 8210
- SEC OKs Dual Classes of Shares for Mutual Funds and Exchange Traded Funds (ETF)
SEC and SRO News
- SEC Names Judge Margaret Ryan as Director of the Division of Enforcement
- SEC Names James Moloney as Director of the Division of Corporation Finance
Click here to read this issue.
Troutman Pepper Locke’s Investment Management Group serves a wide range of businesses in the investment management community. Our practice involves three general areas: representation of registered investment companies and registered investment advisors, representation of alternative investment funds and investors in alternative products, and counseling regarding securities regulation, enforcement and litigation. Contact any of our professionals if you have questions about this update or any other investment management issues.
On November 17, 2025, the U.S. Department of Justice (DOJ) announced criminal charges against a company and three individuals in connection with a large-scale duty and tariff evasion scheme. As alleged, the charged defendants engaged in a complex scheme “to illegally evade more than $86 million in customs duties and tariffs on more than $1.2 billion in jewelry imports into the United States.”[1]
Acting U.S. Attorney and Special Attorney for the District of New Jersey Alina Habba stated that these charges reflect the dedication of the U.S. Attorney’s Office “to rooting out efforts by foreign companies and individuals to defraud the United States and undercut American businesses.” These charges were brought with the support of IRS Criminal Investigation (IRS-CI), Homeland Security Investigations (HSI), and U.S. Customs and Border Protection (CBP).
The charged company, UBS Gold, is an Indonesian jewelry company that ships jewelry globally, including to the United States. The three individuals charged alongside the company are senior executives and an employee who serviced customers in the U.S. The criminal complaint alleges the defendants engaged in a conspiracy to evade lawful duties and tariffs for shipments of jewelry to the U.S. by routing shipments through Jordan and falsely representing that the goods were manufactured in Jordan, which had a free trade agreement with the U.S. during the relevant period. The complaint alleges further that, after the imposition of tariffs on goods in 2025 from Indonesia and Jordan, among other countries, the defendants engaged in a scheme to avoid tariffs by falsely claiming that the jewelry was manufactured in the U.S. The four defendants are charged with one count of conspiracy to commit wire fraud.[2]
These charges reflect the current administration’s increased focus on enforcing potential violations of U.S. trade laws, which we forecasted previously. The announcement further reflects, as discussed in a prior client alert, that the DOJ is devoting significant prosecutorial and law enforcement resources to “protecting the integrity of U.S. trade and ensuring that those who attempt to evade lawful duties or circumvent U.S. laws are held accountable.”[3] This focus is consistent with the DOJ’s May 12, 2025 announcement that “trade and customs fraud, including tariff evasion” would be a “high-impact” area of white-collar crime that the DOJ Criminal Division would prioritize for investigation and prosecution.
Companies operating in the targeted sectors should anticipate increased scrutiny and enforcement actions related to tariff and customs duties. Businesses are encouraged to review their compliance programs and ensure that robust measures are in place to prevent and detect potential violations, including training employees on import compliance, monitoring supply chains, and accurate recordkeeping.
Troutman Pepper Locke is closely monitoring the administration’s evolving priorities. If you have questions on how these priorities impact your business or wish to begin evaluating your existing compliance programs procedures, please do not hesitate to contact a member of our White Collar Litigation and Investigations team.
[1] https://www.justice.gov/usao-nj/pr/indonesian-jewelry-company-co-owner-and-two-other-employees-charged-large-scale-duty-and
[2] https://www.justice.gov/usao-nj/media/1417871/dl?inline
[3] https://www.justice.gov/usao-nj/pr/indonesian-jewelry-company-co-owner-and-two-other-employees-charged-large-scale-duty-and
Last week, the U.S. Environmental Protection Agency (EPA) announced that it will formally grant the Railroad Commission of Texas (RRC) primary authority (known as “primacy”) to administer the Class VI Underground Injection Control (UIC) program for the geologic sequestration of carbon dioxide under the Safe Drinking Water Act. With this approval, developers pursuing carbon capture and storage (CCS) projects in Texas will work directly with the RRC for Class VI well permitting, rather than navigating the EPA’s permit queue.
What the New Regulatory Framework Means
Under Texas’s new Class VI program:
- The RRC is now the primary permitting authority for Class VI wells, overseeing applications, technical review, construction, operation, monitoring, and long-term site care. Concurrent authorization by both the EPA and the RRC will no longer be required.
- The state’s Class VI rules have been developed to meet or exceed federal UIC requirements, with the EPA maintaining an oversight role.
- Texas-based regulation is expected to streamline permit timing, increase regulatory certainty, and align CCS development with the state’s existing subsurface and injection-well experience.
This shift is significant for CCS developers seeking to advance projects under the federal Section 45Q tax credit framework, where a permitted Class VI well is essential for secure geological storage.
The final rule granting primacy to the RRC is effective on December 15, 2025.
How Troutman Pepper Locke Can Assist
Troutman Pepper Locke advises clients across the full lifecycle of Class VI development, and our team has extensive experience working with the RRC on injection-well, subsurface, and energy regulatory matters. Our work includes:
- Preparing Class VI applications and supporting technical materials.
- Advising on site characterization, well design, corrective action plans, and monitoring requirements.
- Guiding clients through public notice obligations and stakeholder engagement.
- Supporting long-term compliance, reporting, and project financing considerations tied to 45Q.
Our attorneys closely follow regulatory developments in Texas and provide practical guidance to help clients navigate the state’s new permitting structure with confidence.
This article was originally published on Reuters and Westlaw Today and is republished here with permission as it originally appeared on November 18, 2025.
The 2026 election season is poised to bring substantial changes to the roster of state Attorneys General (AG). With over 30 races, including high-stakes contests in Texas and Florida, the outcomes of these state AG elections are set to significantly influence legal and policy outcomes across the nation. These elections will not only shape the legal landscape but also impact businesses and industries that operate within these states.
Open states
In 2026, a minimum of 11 new AGs will be elected, marking a pivotal shift in state leadership. Races are open due to term limits on the previous AG or the previous AG vacating to pursue another office.
Each category poses a different challenge for companies. The latter category, for instance, is more likely to result in senior staff turnover, as devoted staff follow the principal to other campaigns and/or higher office. This could leave companies with active investigations or litigations to decide whether to seek a resolution before the current AG leaves or to let the matter proceed under a new AG.
For businesses, these open states represent both opportunities and risks. The transition to a new AG can lead to shifts in enforcement priorities and regulatory approaches, potentially affecting compliance requirements and legal strategies. Companies may need to adapt quickly to new policies or face increased scrutiny under a new administration. Additionally, the uncertainty surrounding these transitions can impact strategic planning, particularly for industries heavily regulated at the state level, such as healthcare, finance, and technology.
Understanding the potential changes is crucial for businesses to navigate the evolving legal landscape effectively. Companies must stay informed and engaged with the electoral process to anticipate and respond to the implications of new AG leadership.
Texas
Texas has an open seat for the first time in over 10 years. With Republican AG Ken Paxton running for Senate, he endorsed Aaron Reitz in the AG race. Reitz previously worked for AG Paxton and briefly served as head of DOJ’s Office of Legal Policy.
Senator Ted Cruz is backing Texas House Representative Chip Roy, his former chief of staff. Two other Republican State Senators Joan Huffman and Mayes Middleton are running, with the latter pledging to spend millions of dollars of his own money on the race.
On the Democratic side, State Senator Nathan Johnson will compete against former Galveston Mayor Joe Jaworski.
Georgia
Republican AG Chris Carr is running for governor, likely taking much of his senior staff with him. Two candidates from each party have declared. Democratic State Representative Tanya Miller will face Bob Trammell, former minority leader of the Georgia House, while State Senators Bill Cowsert and Brian Strickland face off in the Republican primary.
Michigan
In Michigan, every state office is up for election. Term-limited AG Dana Nessel is considering a run for higher office. Three candidates from each party have filed paperwork to run for state AG.
Former U.S. Attorney and 2014 Democratic nominee Mark Totten is running again. Two former prosecutors will oppose him: Karen McDonald and Eli Savit. Incoming attorneys general with prosecutorial backgrounds typically allocate more resources to criminal matters.
Former superintendent of schools for the Archdiocese of Detroit Kevin Kijewski, prosecutor Doug Lloyd, and 2022 nominee Matt DePerno have filed paperwork to run in the Republican primary.
Nevada
Democratic AG Aaron Ford is term-limited and running for governor. We expect some of his senior staff to follow him. The Democratic primary should be competitive, and the general election is expected to be extremely close.
Democratic candidates include current Nevada Senate Majority Leader Nicole Cannizzaro and State Treasurer Zach Conine. Only Danny Tarkanian, Douglas County Commissioner and perennial candidate for various Nevada offices, has declared on the Republican side. This race will affect the technology industry, as AG Ford has been a leader in child privacy cases against various technology companies.
Ohio
Republican AG Dave Yost is term-limited, leading to some turnover in his office with one senior staffer moving to a government affairs role and another to head the DOJ’s Office of Legal Counsel.
The only declared Republican candidate is State Auditor Keith Faber. As for the Democrats, former Ohio House Representative Elliot Forham and Upper Arlington city councilman John Kulewicz have declared.
Oklahoma
AG Gentner Drummond is running for governor. The Oklahoma AG office remains small compared to neighboring states, and it is unclear how Drummond’s campaign may impact the current AG staff. Nonetheless, the Republican nominee is expected to prevail.
GOP candidates Jon Echols, an Oklahoma state representative, and Oklahoma Energy and Environment Secretary Jeff Starling have declared their candidacy. No Democratic candidates have declared.
Rhode Island
Rhode Island Democratic AG Pete Neronha is term-limited. On Aug. 18, his Chief of Policy, Keith Hoffmann, announced his candidacy. State Representatives Jason Knight, Robert Craven, and State Senator Dawn Euer are each considering a run.
Former U.S. Attorney for Rhode Island Zachary Cunha is expected to run for the Republicans, where he likely will face 2022 nominee Charles Calenda. The outcome of the Rhode Island race could impact the wind industry’s future in the state, as the current AG has been a staunch supporter of wind development.
Alabama
Two-term AG Steve Marshall’s Senate bid opens a competitive Republican primary and a leadership gap at the Republican Attorney General Association (RAGA), which AG Marshall has helped lead in recent years.
Marshall endorses his former chief counsel, Katherine Robertson, for AG. District Attorney Pamela Casey and Alabama Supreme Court Associate Justice Jay Mitchell are also candidates. No matter who prevails in this race, we expect the political and legal philosophies of the office will remain consistent with those of AG Marshall.
Colorado
Term-limited AG Phil Weiser is running for governor. Considering Colorado’s Democratic lean in past elections, it is no surprise that five candidates have declared for the Democratic primary. These candidates include District Attorney and 2018 AG candidate Michael Dougherty, former Speaker of the Colorado House Crisanta Duran, and current Secretary of State Jena Griswold. Former Deputy Assistant AG Hetal Doshi and nonprofit law firm executive David Seligman have also declared. In the Republican primary, only Conner Pennington has declared.
South Carolina
Republican AG Alan Wilson is running for governor. Barring more declarations, the Republican primary will feature State Senator Stephen Goldfinch and former Democrat David Pascoe. As for the Democrats, commentators have suggested State Senator Margie Bright Matthews as a potential candidate. We expect this race to remain in GOP hands.
South Dakota
Republican AG Marty Jackley is planning a House of Representatives run in 2026. Lance Russell — former State Senator, former candidate for AG, and current county prosecutor — is the lone candidate to announce. Republicans are likely to retain the seat, with no stark departures from AG Jackley’s current governing philosophies.
Uncompetitive incumbent states
The incumbent AG is expected to run without substantial opposition in Arkansas, California, Connecticut, Delaware, Washington, D.C., Idaho, Illinois, Maryland, Massachusetts, Minnesota, Nebraska, New Mexico, New York, North Dakota, and Vermont. We do not expect much change in how these AG offices are currently run; companies with business in these jurisdictions can continue with their current strategies for those offices.
Competitive incumbent states
The following states involve an incumbent AG facing either primary or general election challenges.
Arizona
Democratic AG Kris Mayes is running for a second term. She won the last election by just .01%; 2026 is expected to remain tight. For Republicans, former Tucson city councilman Rodney Glassman will likely face President of the Arizona Senate Warren Petersen in the GOP primary.
Florida
Florida is the main draw here, with the AG James Uthmeier, appointed by Governor Ron DeSantis, facing his first election. Florida’s AG Office has competed with Texas for the most active Republican office, with Florida leaning hard into current cultural issues.
Former State Senator José Javier Rodríguez has declared his Democratic candidacy. Jerry Demings, the Mayor of Orange County, has publicly expressed interest but has not filed to run.
Iowa
Republican AG Brenna Bird recently announced her re-election bid, foreclosing a rumored governorship race. She will likely face Democrat and current State Representative Nathan Willems.
AG Bird has focused her tenure on kitchen table issues, often emphasizing the work of her consumer protection division. We expect that focus to continue as she seeks reelection.
Kansas
Kansans can expect a rematch of 2022, which had the closest margin among Kansas statewide elections that year. Incumbent Republican AG Kris Kobach, current RAGA chair, is due to face Democrat Chris Mann.
Mann announced his candidacy in July, hoping to close the 1.6 percentage point margin that allowed Kobach to take the seat in 2022. The Kansas AG office is large for the state’s size, and the election’s outcome will determine whether resources are used toward Republican or Democratic priorities.
Wisconsin
The Wisconsin AG race should be a toss-up. Incumbent Democrat Josh Kaul is facing Republican Eric Toney in a rematch from the 2022 election, where Kaul beat Toney by just 1.33%.