This article was originally published in the Consumer Financial Services Law Monitor on June 11, 2025 and republished in insideARM on June 17, 2025.
On May 22, Illinois House Bill 3352 passed the Illinois legislature and now awaits Governor JB Pritzker’s signature. This bill amends the Illinois Collection Agency Act to provide an individual a way to avoid liability for a coerced debt. HB 3352 defines coerced debt as a debt incurred due to fraud, duress, intimidation, threat, force, coercion, undue influence, or non-consensual use of the debtor’s personal identifying information as a result of domestic abuse, sexual assault, exploitation, or human trafficking.
To prevent collection, the debtor must provide a “statement of coerced debt,” including sufficient information to identify the debt; affirming the debtor did not willingly authorize the use of their name, account, or information; explaining how the debt was incurred; providing preferred contact information for the debtor or qualified third party; supported by a police report, court order, verification from a qualified third party, or other document demonstrating coerced debt; and be verified by a signed attestation. The statement and documents must be sent by a delivery method confirming the date of delivery. Oral notice is not sufficient.
If the notice is incomplete, the debt collection agency must notify the debtor using the preferred contact information within 21 days, and the debtor has 21 days to respond with the additional information. Collection can resume if additional documents are not received within 30 days after the notice of incomplete statement was provided.
Once the complete statement is submitted, the collection agency must cease any pre-judgment collection attempts and notify consumer reporting agencies of the dispute within 10 days. Within 90 days of receiving the statement, the collection agency must determine if the debt qualifies as coerced. If the debt is found to not be coerced, the collection agency must provide the debtor with a written explanation and evidence, then may resume collection. If the debt is coerced, then the collection agency must cease collection, notify the debtor, and delete any information from consumer reporting agencies. If requested, the debtor must provide the identity of and contact information of the perpetrator, if known.
A debtor can also assert coerced debt as an affirmative defense, using the same statement. A court/arbitrator may find the perpetrator civilly liable for the debt and any damages incurred by the debtor. The court or arbitrator must take appropriate steps to protect the debtor from the perpetrator.
Any collection agency failing to comply with the law is liable to the debtor for actual damages or up to $2,500.00, plus costs and reasonable attorneys’ fees. If signed, the Department of Financial and Professional Regulation shall have 180 days to publish model forms for debtors and qualified third parties.
Cal Stein, a litigation partner at Troutman Pepper Locke, highlights the latest updates to the DOJ Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy and discusses how these updates can improve self-disclosure outcomes and benefit companies that discover potential misconduct.
Last month, the DOJ Criminal Division (Division) revised its Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), introducing several potentially significant changes intended to further incentivize companies to self-disclose criminal conduct.
Changes to the policy include:
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Criteria for Declination: The prior policy gave the Division extensive discretion to determine whether a qualifying self-disclosure would result in declination of criminal prosecution. Now, the Division has stated that it “will decline to prosecute a company for criminal conduct” if: (1) the company self-discloses; (2) the company fully cooperates with the Division’s investigation; (3) the company timely and appropriately remediates the misconduct; and (4) there are no “aggravating circumstances.” While the Division retains some discretion — particularly with respect to the last factor — the new policy purports to offer a more concrete basis for parties to self-disclose.
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Discretion in Evaluating Aggravating Factors: The updated policy also provides prosecutors with greater discretion to recommend a CEP declination even when aggravating circumstances are present by allowing them to weigh the severity of aggravating circumstances against the company’s cooperation and remediation efforts. Under the prior policy, the burden was on the disclosing party to demonstrate that its cooperation and remediation warranted declination notwithstanding the existence of aggravating factors.
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Resolution Options for “Near Miss” Cases: The updated CEP also introduces a new resolution option for certain “near miss” cases where a company acts in good faith by self-disclosing but does not meet all criteria for declination. A “near miss” resolution includes a non-prosecution agreement (NPA) with a term of less than three years (assuming there are no egregious or multiple aggravating circumstances) and a reduction in monetary penalties, in addition to the company not being subject to a compliance monitor.
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Monetary Penalty Reductions for “Near Miss” Cases: The updated policy specifies potential reductions in monetary penalties in “near miss” cases, offering 75% off the low end of the U.S. Sentencing Guidelines (USSG) fine range. In addition, companies that failed to self-disclose but properly cooperate and remediate are eligible for up to 50% reduction off the USSG fine range.
It is time to assess “foreign private issuer” status. Foreign public and private issuers enjoy the benefits of significant exemptions and exclusions from registration under U.S. federal securities laws based on whether they are “foreign private issuers” as defined under the U.S. federal securities laws. The determination of whether issuers satisfy the definition must be run on the last business day in June for issuers with a December 31 fiscal year end.
Although the U.S. Securities and Exchange Commission (the “SEC”) recently published a concept release soliciting public comment on the definition of “foreign private issuer” and whether the SEC should make certain changes to the availability of certain exemptions and exclusions for “foreign private issuers,” such changes would not come until the conclusion of a formal rulemaking process at some future time. As such, “foreign private issuer” status should still be assessed under current law. To learn more about the SEC’s concept release, please see our client alert.
The treatment under U.S. federal securities laws of issuers organized in a jurisdiction outside the United States depends upon whether such issuers (both public and private) are considered “foreign private issuers” under the current U.S. definition. This determination will govern, among other things: (1) whether issuers have a U.S. public reporting obligation, and if so, whether they report on foreign forms or domestic forms; and (2) the manner in which they offer their securities both inside and outside the United States.
In most circumstances, under U.S. federal securities laws, issuers must assess their “foreign private issuer” status as of the last business day of their most recently completed second fiscal quarter. For many companies with a December 31 fiscal year end, their “foreign private issuer” assessment date falls on Monday, June 30, 2025.
The definition of “foreign private issuer” has two parts, and an issuer must fail both parts to not be deemed a “foreign private issuer.” One part of the definition is easier to evaluate, namely whether all of the following are true:
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A majority of the executive officers and a majority of the directors of the issuer are not U.S. citizens or residents;
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More than 50% of the assets of the issuer are not located in the United States; and
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The issuer’s business is not administered principally in the United States.
If all of the above are true, then the analysis ceases, and an issuer retains its “foreign private issuer” status.
If any of the above are not true, then the issuer must move to the second part of the test, which requires the issuer to confirm that more than 50% of its outstanding voting securities are not directly or indirectly owned of record by residents of the United States. Although this determination is based on record ownership, an issuer must look through the record ownership of brokers, dealers, banks, and nominees in the United States, its jurisdiction of incorporation, and its primary trading market to the underlying holders to determine whether its U.S. ownership exceeds 50%. This determination generally requires a U.S. and foreign geographic survey to be run as of the last business day of the second fiscal quarter. If more than 50% of the outstanding voting securities are owned of record (determined as described above) by U.S. residents, then “foreign private issuer” status would be lost, and the significant ramifications of losing such status must be considered.
It is important that such analysis be run as of or as close to the last business day of the second fiscal quarter because, for example, Broadridge (which conducts the geographic surveys in Canada and the United States) cannot run this analysis retroactively.
If you have any questions about the test or need assistance in running such test, please contact Tom Rose at 757.687.7715, Shona Smith at 503.290.2335, or Nicole Edmonds at 202.274.2815.
Much has been written in recent weeks about how the renewable energy industry in Texas dodged a bullet — several bullets actually — when three high-profile bills targeting the industry failed to pass in the recent legislative session that ended June 2. Indeed, each of those bills, S.B. 819, S.B. 388, and S.B. 715, would have had a substantial negative impact on renewable energy projects in Texas. For all the attention those bills garnered, however, and the justifiable relief felt by the industry after all three failed to pass, seemingly little attention has been paid to another bill, H.B. 3556, that did pass and was signed into law by Governor Abbot on June 22. This new law poses a serious threat to the prospects for future wind projects along the Texas coast.
H.B. 3556 is a very brief bill that seems innocuous on its face, perhaps explaining the lack of concern it has attracted. The new law requires persons proposing to build a structure taller than 575 feet along the Texas coast[1] to notify the Texas Parks and Wildlife Department (TPWD) at least 90 days before beginning construction. The TPWD is then afforded 45 days to recommend in writing measures to minimize the impact of the structure on migratory birds. The project proponent has 45 days to accept the recommendations in writing or propose alternative minimization measures. The TPWD then has another 45 days to issue a final decision on the measures that must be adopted. If the project proponent objects to the final measures imposed by the TPWD, it can seek an administrative hearing before the State Office of Administrative Hearings — a trial-like process that can take the better part of a year or more.
The new law may not seem unreasonable at first glance — after all, migratory bird conservation is a laudable objective that even the wind industry itself supports with extensive research and minimization efforts. Upon closer consideration, however, the bill grants stunningly broad regulatory authority and discretion to the TPWD, which could allow it to effectively block a wind farm almost anywhere on the Texas coast with little or no scientific justification. Consider:
- There is no requirement that TPWD base its recommendations on the best available science, or even on any science at all. This is comparable to granting EPA the discretion to impose conditions in an air permit without having to provide or defend the scientific basis for those conditions.
- There is no requirement that the measures TPWD recommends or mandates be cost-effective or even economically practicable. This is comparable to allowing EPA to require pollution control equipment in air permits without regard to the cost, commercial availability, or proven effectiveness of the required measures.
- The timelines in the law create significant uncertainty regarding the minimization measures that the project will need to employ up until at least 45 days prior to construction, and potentially past the planned start of construction if the measures proposed by TPWD are not acceptable. This creates substantial uncertainty for project financing, assuming projects can even clear investment committee review without knowing what minimization measures will be required and what the impact of those measures will be. While nothing in the law precludes a developer from commencing the approval process more than 90 days in advance, and most developers almost certainly will do so, there are limits as to how early in the process that can happen as the TPWD will likely want to know the specific number and size of the turbines that will be used and see a final or near-final project layout.
The law authorizes, but does not require, TPWD to adopt rules to implement the new requirement. Industry’s best hope may be to lobby TPWD to do so and establish reasonable standards for its recommendations based on sound science and economic practicability. Otherwise, it is easy to imagine that the anti-renewables tide in the state that almost led to passage of the other bills could result in the TPWD being pressured to kill projects with poison pill requirements by coastal landowners and/or state legislators opposed to projects being developed in their backyard. Of course, if TPWD does promulgate regulations there is no guarantee that those regulations will be workable for the industry, particularly since that would require TPWD to limit the almost unprecedented discretion delegated to it by the statute. Thus, it bears watching whether this new law will simply add one more step in the development process or spell the end of new wind development on the Texas coast.
[1] Specifically, the new law applies in any county with a population of less than 500,000 that (1) borders the Gulf of Mexico, and (2) contains all or part of a national wildlife refuge, or in any county adjacent to such a county which does not contain a municipality with a population greater than 300,000. This appears to cover every coastal county in Texas with the exception of Galveston and Nueces (Corpus Christi).
Investment funds and other financial institutions should learn lessons from this case, including the risk of dealing with intermediaries.
On June 12, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed a civil penalty of approximately $216 million on GVA Capital Ltd., a venture capital firm based in San Francisco, for violations of OFAC’s Russia regulations and failing to fully comply with a subpoena. This is a rare instance of OFAC imposing its statutory maximum civil penalty, and signals the high compliance expectations that OFAC has of “gatekeepers” like investment funds and other financial institutions.
Background
GVA was accused of managing an investment for Suleiman Kerimov while aware that he was sanctioned by OFAC. Kerimov is a prominent Russian businessman who was sanctioned in 2018. The GVA investment was initiated before Kerimov was sanctioned, but OFAC accused GVA of continuing to manage it after the sanctions by working with Kerimov’s nephew, while allegedly aware that he “served as Kerimov’s proxy.”
In 2016, before Kerimov was sanctioned, GVA’s senior management met him in person to discuss an opportunity to invest in an early-stage U.S. company. The GVA team got positive feedback and were told to discuss the details with Kerimov’s nephew, Ruslan Gadzhiyev. Kerimov then made a $20 million investment in the U.S. company backed by GVA, with the funds coming from a Guernsey-based entity. There was press reporting in 2022 about such an investment in Luminar Technologies, and additional reporting in 2023 about another such investment in a former Catholic church property that was to become a GVA-backed incubator called the “Startup Temple.”
At the time of the investment, there were no applicable sanctions. Kerimov was sanctioned by OFAC two years later, in 2018, and Gadzhiyev in 2022. After OFAC sanctioned Kerimov in 2018, GVA got a legal opinion, which OFAC, remarkably, said “concluded incorrectly” that the Guernsey entity that had made the investment “was not itself” subject to sanctions “because it was not nominally owned 50 percent or more by a person on the SDN List.” OFAC seemed to hint that among the shortcomings with the legal opinion was an inadequate exploration of the entity’s links to Kerimov. OFAC’s sanctions can apply quite broadly when a “blocked” person like Kerimov has any “interest of any nature whatsoever, direct or indirect,” in an asset like this U.S. company’s shares.
OFAC stated cryptically that in April 2021 it somehow “learned” of an upcoming transfer of shares in the U.S. company and conducted an investigation. OFAC determined that the shares were owned by Heritage Trust, a Delaware trust. Then, in 2022, OFAC issued a rare Notification of Blocked Property to Heritage Trust, stating publicly that this trust held over $1 billion in assets that were connected to Kerimov.
OFAC could have learned of this planned share transfer and the potential sanctions connection in a variety of ways, including reporting by any one of the numerous financial institutions that presumably would have been involved. OFAC may have also learned about it from the litigation that apparently the parties were engaged in about the value of the interest in the U.S. company. OFAC did indicate that it was tracking that litigation.
OFAC determined that, after the sanctions were imposed on Kerimov in 2018, GVA continued to manage transactions by entities owned by Heritage Trust involving this U.S. company’s shares. GVA had a “formal” line of communication with the trust’s U.S.-based fiduciary and an “informal” line to Kerimov’s nephew, Gadzhiyev. OFAC found that GVA knew of Kerimov’s interest, with Gadzhiyev acting as his representative. On this basis, OFAC determined that GVA violated the sanctions applicable to Kerimov.
As part of the investigation, OFAC issued an administrative subpoena to GVA in June 2021, and GVA provided approximately 173 documents in response. Then, over two years later, after OFAC issued a pre-penalty notice to GVA, it suddenly produced another 1,300 or so documents to OFAC that it said were also responsive to the subpoena. OFAC found this 28-month delay in the full subpoena response to constitute 28 separate violations of its reporting regulations, which were in addition to the violations of the sanctions applicable to Kerimov. OFAC’s Enforcement Guidelines state that additional penalties “may be imposed each month that a party has continued to fail to comply with the requirement to furnish information.”
Key Takeaways
Investment funds and others should take away the following key lessons from this case:
- Shell games typically don’t work in OFAC’s world. Dealing with an intermediary, nominee, offshore company, complex trust structure, etc. often won’t provide any protection if an OFAC sanctions target is behind the scenes and information about that ultimate beneficiary is available. OFAC is not afraid to dig deeply into the facts and impose devastating penalties when it finds a violation, particularly when the agency deems the conduct to be “egregious,” as it did here.
- An opinion from outside counsel won’t necessarily help if it’s not based on a thorough exploration of the facts and a clear understanding of the nuances of OFAC’s regulations.
- If you get an OFAC subpoena, don’t play games with partial responses – provide a robust and well-vetted response the first time.
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State AG News
Maryland Ramps Up Fair Housing Enforcement
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Maryland Attorney General (AG) Anthony G. Brown recently announced three settlements with real estate and property management companies, resulting in more than $310,000 in combined civil penalties and restitution. Brown alleged that the property management and real estate companies discriminated against various tenants that utilized housing vouchers or had criminal records, in violation of federal and state fair housing laws.
California AG Takes Action Against $1.3 Million Insurance Fraud Scheme
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In May, California’s attorney general (AG) charged a local dermatologist with more than 20 counts of fraud after uncovering a scheme that allegedly resulted in the state’s Medicaid program paying out over $1.3 million for services that were never rendered.
Indiana and Maryland Become Latest States to Enact Earned Wage Access Legislation
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Indiana and Maryland became the most recent states to enact legislation regulating earned wage access (EWA) services, with Indiana passing House Enrolled Act 1125 on May 6, and Maryland passing House Bill 1294 on May 20.
AG of the Week
Aaron Ford, Nevada
Aaron Ford is Nevada’s 34th attorney general (AG). He took office on January 7, 2019.
Before becoming AG, Ford served in the Nevada State Senate, where he held roles as both majority leader and minority leader. He also served on numerous legislative committees. Before entering public service, Ford practiced law at Snell & Wilmer LLP and Eglet Adams in Las Vegas, and previously worked as a public-school math teacher.
As a legislator, Ford led efforts to pass legislation requiring law enforcement officers to wear body cameras and supported the creation of a “Conviction Integrity Unit” to review allegations of wrongful convictions.
As AG, Ford has prioritized consumer protection. By the end of 2024, Nevada’s Bureau of Consumer Protection recovered more than $118.5 million for consumers and secured more than $1.1 billion from opioid-related litigation and mitigation efforts.
Ford has also focused on addressing human trafficking and sexual assault. He hosted statewide law enforcement summits and led Nevada’s sexual assault kit initiative — resulting in the testing of nearly 8,000 previously untested kits — and helped resolve a decades old cold case.
Ford holds five degrees, including a law degree and a Ph.D. in Educational Administration from Ohio State University. His academic background also includes degrees in interdisciplinary studies, international education, and educational administration.
Nevada AG in the News:
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Ford joined a coalition of 20 other AGs to obtain a preliminary injunction against an executive order directing the closure of the Department of Education.
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Ford announced that he, along with 38 other AGs, signed a letter to congressional leadership in support of the bipartisan Youth Substance Use Prevention and Awareness Act (YSUPA).
Upcoming AG Events
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June: AGA | 2025 Annual Meeting | U.S. Virgin Islands
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July: RAGA | Victory Fund Golf Retreat | Pebble Beach, CA
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July: DAGA | Presidential Partners Retreat | Santa Fe, NM
For more on upcoming AG Events, click here.
This article was originally published on June 17, 2025 on Law360 and is republished here with permission.
On May 7, the U.S. Court of Appeals for the Federal Circuit held in Ingenico Inc. v. Ioengine LLC that inter partes review estoppel does not extend to arguments that the claimed invention is invalid because it was known or used by others, on sale, or in public use.
The court ruled that such arguments constitute grounds that cannot be raised in an IPR according to the statute that established IPR procedures.
This holding limits the scope of IPR estoppel, which may encourage more petitioners to utilize the IPR mechanism to challenge patents. Ironically, this decision comes at a time when the U.S. Patent and Trademark Office has altered its standards on discretionary denials of IPR petitions in order to manage current Patent Trial and Appeal Board workloads and avoid overburdening the office.
The PTAB has also clarified the petitioner’s burden when relying on prior art cited on an information disclosure statement, but not utilized by the USPTO during prosecution to reject any claims, which may make it more difficult to rely on such art and increase instances of discretionary denial.
Case Background
The appeal in Ingenico included an argument that the district court improperly allowed introduction of certain prior art evidence that the appellant argued should have been precluded based on the statutory IPR estoppel provision.
Specifically, Ingenico filed an IPR challenging Ioengine’s patents asserted in an underlying district court action, which reached a final written decision invalidating certain claims.
At trial, Ingenico relied on a prior art device, and written documentation describing that device, to show that the claimed invention was invalid as known or used by others, on sale, or in public use before the date of invention. The jury returned a general verdict finding the claimed invention invalid as anticipated and obvious in view of that prior art device.
Ioengine’s appeal of the verdict argued that IPR estoppel should have precluded the introduction of documentation related to the prior art device because Ingenico reasonably could have raised that material as part of the IPR. Accordingly, the Federal Circuit was called upon to review the scope of IPR estoppel.[1]
IPR estoppel under Title 35 of the U.S. Code, Section 311(b), prevents IPR petitioners — as well as any other real parties in interest or privies of the petitioner — from asserting in district court that a claim is invalid on any ground that the petitioner raised or reasonably could have raised in an IPR that reaches a final written decision.
Federal Circuit Decision
The Federal Circuit, for this first time in Ingenico, interpreted the meaning of the term “ground,” which is not defined in the Patent Act, to resolve a split among district courts. The Federal Circuit found that a “ground,” in the context of an IPR, is a theory of invalidity available to challenge a claim for anticipation under Section 102, or obviousness, under Section 103, not the specific prior art asserted.
The Federal Circuit noted that IPR challenges are statutorily constrained to invalidity challenges under Sections 102 and 103, i.e. anticipation or obviousness, based on prior art consisting of patents and printed publications.
Thus, under the statutory framework, an IPR petitioner cannot raise invalidity theories that the claimed invention being known or used by others, on sale, or in public. Accordingly, since those theories that cannot be raised as part of an IPR, they would not be subject to the IPR estoppel provision.
Importantly, because the grounds are not coextensive with the prior art asserted, i.e., the prior art cited is evidence of the asserted ground, not the ground itself, the Federal Circuit stated that IPR estoppel does not preclude an IPR petitioner from relying on the same patents and printed publications used in an IPR proceeding if the invalidity theory is that the claimed invention was known or used by others, on sale, or in public use.
That is, IPR estoppel does not preclude a petitioner from asserting the same prior art relied upon in an IPR in district court, it merely constrains the particular invalidity theories for which that prior art may be utilized in district court.
Impact of Decision
The clarification provided by the Federal Circuit resolves a split among district courts and narrows IPR estoppel. This holding may encourage patent challengers to utilize the IPR procedure, particularly where there may be arguments available in district court that the challenged patent is invalid as being known or used by others, on sale, or in public use.
However, the Ingenico decision comes at a time when the PTAB is increasing the number of discretionary denials based on co-pending district court litigation, to manage PTAB workload. Thus, while Ingenico might narrow IPR estoppel and encourage more petitions, it will not necessarily increase IPR institutions.
As part of its discretionary denial analysis, the PTAB looks at a list of factors based on its precedential decision in Apple Inc. v. Fintiv Inc. in 2020, including whether there is overlap between the issues raised in the IPR petition and the parallel district court proceeding.
To try to avoid discretionary denial, petitioners have utilized stipulations, which have become known as Sotera stipulations, to indicate that they will not advance the same grounds asserted in the IPR petition in district court should the IPR be instituted.
Under prior PTAB guidance, the introduction of a Sotera stipulation at the preinstitution phase, was sufficient to avoid discretionary denial of an IPR petition. However, under the most recent PTAB guidance, issued March 24, the PTAB now analyzes the inclusion of a Sotera stipulation as merely one factor in the Fintiv analysis. We are already seeing discretionary denial rates increase based on this new PTAB guidance
For example, in Solus Advanced Materials Co. Ltd. v. SK Nexilis Co. Ltd. in April, the PTAB provided that while a Sotera stipulation weighs strongly against exercising discretion to deny institution, “a Sotera stipulation that does not moot all invalidity issues before the district court, such as invalidity assertions based on combinations of art with ‘unpublished systems prior art,’ is less effective and will not necessarily outweigh other Fintiv factors that favor discretionary denial.”
In Solus, the PTAB denied institution under the Fintiv factors, despite the Sotera stipulation provided by the petitioner. Thus, while Ingenico narrowed IPR estoppel, petitioners might nevertheless consider providing a stipulation that effectively forecloses any invalidity challenges in the co-pending district court that rely on the particular prior art references raised in the IPR petition, in order to reduce the risk of discretionary denial.
As a result, the ultimate impact of Ingenico is unclear. Narrower IPR estoppel might encourage more petitions, but the tougher standards for petitioners on discretionary denial, and the increasing institution denial rates, might compel petitioners to provide broader Sotera stipulations. Thus, there may be an emerging disconnect between the scope of IPR estoppel and the breadth of a Sotera stipulations necessary to try to avoid institution denial.
Further, petitioners may need to be more selective regarding prior art in light of the increased burden of using art that is cited on an information disclosure statement but not applied by the office to reject the claims during prosecution.
Last month in Ecto World LLC v. RAI Strategic Holdings Inc., the PTAB issued a decision on director review clarifying the petitioner’s burden when using prior art cited on an information disclosure statement but not used in a rejection during prosecution.
Under Section 325(d), the director may deny institution when “the same or substantially the same prior art or arguments previously were presented to the Office.”
In Ecto World, which has been designated precedential with respect to its discussion of that section, the PTAB held that petitioners relying on art appearing on an information disclosure statement but not applied by the office must articulate how the office erred in a manner material to patentability of the challenged claims.
Importantly, the petitioner cannot simply rely on its unpatentability contentions to imply that an error occurred. This decision may also increase the instances of discretionary denial where the petitioner does not adequately demonstrate a material error when relying on art cited on an information disclosure statement.
[1] The Federal Circuit found that there was substantial evidence to support the jury’s verdict of invalidity for anticipation or obviousness based at least on public use and therefore did not evaluate the known or used by others or the on-sale issues.
Zachary Lerner published an article titled “8 Considerations for Buyers and Sellers of Insurance Agencies” in the Insurance Journal.
Pending expected approval from Gov. Ron DeSantis, Florida’s Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act (summary available here) is expected to go into effect on July 1, 2025. Once in place, the CHOICE Act will significantly strengthen the ability of employers to protect their workforce, confidential information, and other business interests.
Going against the strong current of recent state legislation and federal efforts to limit the enforceability of similar agreements, Florida’s CHOICE Act would further enhance Florida’s already favorable landscape for drafting and enforcing non-compete agreements. While the CHOICE Act is more employer-friendly than the general trend elsewhere, employers with operations or workers in Florida still must satisfy the CHOICE Act’s specific requirements to take advantage of its protections.
What does the CHOICE Act do?
The CHOICE Act allows covered non-compete and garden leave agreements in Florida to extend up to four years from separation of employment. Courts are required to issue preliminary injunctions to enforce covered agreements unless the employee or contractor demonstrates the agreement is unenforceable or unnecessary to prevent unfair competition. The CHOICE Act places a high burden on employees and prospective new employers who attempt to dissolve or modify an injunction enforcing a covered non-compete or garden leave agreement.
Importantly, the CHOICE Act does not modify Florida’s existing non-compete statute, so any non-compete agreements which do not meet the CHOICE Act’s requirements may still be enforceable if they contain reasonable restrictions and meet a legitimate business interest such as protecting trade secrets.
Who does the CHOICE Act apply to?
The CHOICE Act applies to:
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Covered employers – Any business or individual that employs a covered employee.
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Covered employees – Any employee or independent contractor, excluding health care professionals, “who earns or is reasonably expected to earn a salary greater than twice the annual mean wage of the county in this state in which the covered employer has its principal place of business.” Recent average annual wages for each Florida county can be found here.
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Per the CHOICE Act, “salary” means the base compensation, calculated on an annualized basis, which a covered employer pays a covered employee, including a base wage, a salary, a professional fee, or other compensation for personal services, and the fair market value of any benefit other than cash.
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Per the CHOICE Act, salary does not include health care benefits, severance pay, retirement benefits, expense reimbursement, distribution of earnings and profits not included as compensation for personal services, discretionary incentives or awards, or anticipated but indeterminable compensation, including tips, bonuses, or commissions.
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Covered agreements – Covered garden leave and non-compete agreements with either a covered employee who maintains a primary place of work in Florida (regardless of any choice of law provision); or a covered employer whose principal place of business is in Florida and the agreement identifies Florida in its choice of law provision.
The CHOICE Act does not apply to standalone confidentiality or non-solicitation agreements that do not contain non-competition restrictions.
Covered Non-Compete Agreements
Covered non-compete agreements under the CHOICE Act can restrict a covered employee from working for another employer up to four years after separation of employment in any geographic area if the individual is providing services for their new employer similar to the services they performed for the covered employer. Under the CHOICE Act, non-compete agreements do not require a reasonable geographic scope so long as any geographic scope is specified in the agreement.
To be enforceable under the CHOICE Act, the covered non-compete provision must:
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Not exceed four years.
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Advise the covered employee, in writing, of their right to seek legal counsel prior to entering into the covered non-compete agreement and allow the covered employee at least seven days to consider the offer before it expires.
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Include a written acknowledgment from the covered employee they will receive confidential information or customer relationships during the course of their employment.
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If the non-compete also contains a garden leave provision, specify the non-compete period is reduced day-for-day by any non-working portion of the notice/garden leave period.
Covered Garden Leave Agreements
The CHOICE Act authorizes garden leave agreements, which allows employers to require covered employees to provide advance notice (up to four years) before employment is terminated. During this garden leave period, employees remain on their employer’s payroll at their base salary (though discretionary bonuses aren’t required) and continue to receive benefits. Employers may still require the covered employee to continue working during the first 90 days of the garden leave period. After the initial 90-day garden leave period, covered employees may engage in non-work activities for the remainder of the notice period, including working for another employer with permission from the covered employer.
Similar to covered non-compete agreements, garden leave agreements require:
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Seven days’ notice before signing.
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Written advice about seeking legal counsel.
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A written acknowledgment of access to confidential information or customer relationships.
Employers may reduce the salary and benefits of employees who engage in undefined “gross misconduct” during the garden leave/notice period and such reduction will not be considered a breach by the employer. Relatedly, covered employers may reduce the notice period if they provide at least 30-days’ advance notice in writing to the covered employee.
Best Practices For Employers With Florida Operations Or Florida Employees
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Identify any workers who meet the definition of a “covered employee” (i.e., meet the compensation thresholds based on county wage data) and are not currently subject to a non-compete clause, to determine if one is necessary.
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Upon identifying “covered employees,” determine whether the individuals serve in a key role and should be subject to a non-compete or garden leave agreement.
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Review existing form non-compete clauses with current and former employees to assess compliance with the CHOICE Act and revise agreements as appropriate to include required notices, acknowledgements, and counsel advisories.
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Review and revise hiring practices to include compliance with the notice periods for covered agreements and a determination whether prospective employees are subject to a covered agreement.
Troutman Pepper Locke’s Cannabis Practice helps clients throughout their business cycle enter or expand into the cannabis space. Our team combines the resources of attorneys in areas such as licensing and taxation, regulatory compliance, corporate and transactional, intellectual property, and real estate, among others, to provide comprehensive services.
Our Cannabis Practice provides advice on issues related to applicable federal and state law. Cannabis remains an illegal controlled substance under federal law.
Cannabis Regulatory Updates
Texas Senate Bill 3: A Sweeping Ban on Intoxicating Hemp-Derived Products — Implications for the Industry
By Jean Smith-Gonnell and Cole White
On May 27, the Texas Legislature sent Senate Bill 3 (SB3) to Gov. Greg Abbott for signature, marking a potentially seismic shift in the legal landscape for hemp-derived cannabinoid products in the state. If signed into law – or allowed to take effect without a veto – SB3 will impose one of the most comprehensive bans on consumable hemp products in the country, to include all products containing any measurable amount of tetrahydrocannabinol (THC) or other natural and synthetic intoxicating cannabinoids. The legislation targets a market that has flourished since the passage of the 2018 federal Farm Bill and Texas’s 2019 hemp law, creating new compliance, enforcement, and business continuity questions for stakeholders across the supply chain. This article summarizes SB3’s major provisions and provides an example of the impacts the bill will have on manufacturers, retailers, and consumers through the lens of infused beverage products.
Recent SEC AML Enforcement Actions’ Impact on Compliance Efforts in the Cannabis Sector
By Jay Dubow and Jessica McClellan
Investing in the cannabis industry is not without its risks, given the evolving regulatory landscape and the varying state and federal statuses of the product itself. The Financial Crimes Enforcement Network (FinCEN) has shown it will continue to enforce its 2014 Marijuana Bank Secrecy Act (BSA) Guidance, despite the rescission of the Cole Memo in 2018, which initially informed this guidance. Additionally, for public companies and other entities subject to oversight by the Securities and Exchange Commission (SEC), recent SEC enforcement cases reinforce the necessity of rigorous due diligence and adherence to anti-money laundering (AML) protocols, especially given that FinCEN maintains that all financial transactions involving marijuana remain federally illegal.