Published in Law360 on May 27, 2025. © Copyright 2025, Portfolio Media, Inc., publisher of Law360. Reprinted here with permission.
The release of the “America First” investment policy memorandum on Feb. 21 was a glimpse into the Trump administration’s approach to foreign investment oversight, particularly for the Committee on Foreign Investment in the United States.[1]
The memorandum underscored the administration’s heightened focus on national security concerns in the real estate sector by highlighting that the “Administration [would] protect United States farmland and real estate near sensitive facilities” and “would strengthen CFIUS authority over ‘greenfield’ investments.”[2]
Greenfield investments — business ventures initiated without acquiring existing businesses — are often discussed together with CFIUS real estate issues, because they usually begin with acquiring property. Historically, greenfield investments have remained outside of CFIUS’ authority, due to a broad perception that they present lower national security risks and provide more economic benefits than acquisitions of existing businesses or assets.
Brownfield investments — the purchase or lease of existing property for a new business activity — present similar policy issues but can more commonly be subject to CFIUS’ review authority.
The May 2024 cryptocurrency mining case involving MineOne Investment I LP underscores the critical role that real estate transactions can play in the national security review process conducted by CFIUS.[3] The property acquired by MineOne was located one mile from Francis E. Warren Air Force Base; it started as a simple acquisition of property, but the property was later improved and stocked with foreign-sourced cryptocurrency mining equipment. This case was the first and currently only prohibition by a president of a real estate transaction via the CFIUS process that ultimately required divestment.
The current administration’s focus on real estate oversight, coupled with certain states’ efforts to expand their legislative reach over foreign investors’ real-property acquisitions, suggests there could be imminent changes on the horizon for real estate and foreign investment.
CFIUS’ Regulatory Scope
Since the 2018 enactment of the Foreign Investment Risk Review Modernization Act, or FIRRMA, CFIUS has overseen covered real estate transactions involving foreign investors near certain listed military facilities, including farmland, even when the transaction does not involve an existing business.[4]
While real estate filings are voluntary — akin to a standard CFIUS filing — businesses are advised to assess carefully the specifics of the transaction in determining whether a declaration or notice should be filed. Transactions that are not filed may be subject to a nonnotified review, which is typically disadvantageous for the parties relative to those that are filed voluntarily. At the end of the review process the parties may receive safe harbor protection.
The MineOne case exemplifies a real estate transaction that was subjected to intense scrutiny during a nonnotified review, and highlights the heightened risk involved in the nonnotified process.[5]
Significant changes to the real estate process did not end with FIRRMA. Effective Dec. 1, 2024, the U.S. Department of the Treasury added more military installations to the list of locations that could subject a transaction to a CFIUS real estate review.
The U.S. Department of Defense, a CFIUS-member agency, recommends to the Treasury military facilities that should be placed on CFIUS’ covered real estate list. When these rules first took effect after FIRRMA was enacted, there were only eight listed military installations.
A new rule issued by the Treasury on Nov. 1, 2024, added 59 more installations, which in turn called for an amendment of the definition of “military installation” to include locations like Space Force bases, ammunition plants, military ranges and joint-forces training centers.[6] These updates aimed to enhance national security while providing clearer guidelines for foreign investors navigating the U.S. real estate market.[7]
The recent changes to the CFIUS regulations, expanding the list of covered military facilities subject to CFIUS jurisdiction:
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Added 40 additional military installations within a one-mile radius or in close proximity;
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Added 19 additional military installations within a 100-mile radius or in extended range; and
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Redesignated eight previously listed military installations to expand CFIUS jurisdiction from a one-mile to a 100-mile radius.
Effect of Growth in Foreign Acquisitions
A January 2024 report from the U.S. Government Accountability Office underscored a substantial rise in foreign acquisition of U.S. agricultural land.[8] This increase was largely attributed to foreign wind energy companies that secured on agricultural land.
While some members of Congress have been focused on this issue for several years, this report drew increased attention from Congress, and prompted the introduction of various bills that would mandate making the secretary of agriculture a permanent member of CFIUS. However, the Consolidated Appropriations Act of 2024 ultimately only required that the participation of the secretary of agriculture in CFIUS’ reviews on a case-by-case basis — specifically when the transaction includes agriculture issues.[9]
While the 118th Congress made efforts to enhance the CFIUS real estate review process in response to the GAO report, the current Congress has introduced several bills already aimed at expanding CFIUS’ jurisdiction over real estate transactions by, for example, proposing to modify the definition of “close proximity” from one mile to 100 miles from a military installation for transactions involving foreign entities of concern like China.[10]
The memorandum’s reference to agricultural land may also continue to drive congressional and executive branch interest in prioritizing CFIUS real estate reform. For example, the Foreign Adversary Risk Management Act, or FARM Act, which was reintroduced in January, again proposes to include the secretary of agriculture as a permanent CFIUS member, and categorizes the agricultural supply chain as critical infrastructure and critical technology within the CFIUS definitions.[11]
Other legislative proposals, like the Not One More Inch or Acre Act that was introduced in January, advocate for a complete ban on real estate transactions by citizens of China, members of the Chinese Communist Party, or any individual or entity, including subsidiaries, acting on behalf of the Chinese Communist Party or citizens of China. These bills include provisions similar to restrictions already enacted in several states.[12]
CFIUS-Lite State Laws
Several states have enacted legislation to regulate the acquisition of land by foreign purchasers, each imposing varying restrictions. Currently, Arkansas, Florida, Georgia and Indiana have passed such laws. Texas recently joined this list, having passed its bill on May 9. Additionally, many other states are considering similar measures, reflecting a growing trend.
Arkansas and Florida have encountered legal challenges to their real estate foreign investment laws. Florida’s case, Shen. v. Commissioner, Florida Department of Agriculture, is still pending in part in the U.S. Court of Appeals for the Eleventh Circuit.[13]
Under the Florida law, foreign entities and individuals from countries of concern — such as China, Cuba, Russia, Iran, North Korea and Venezuela — who are not U.S. citizens or lawful permanent residents, are prohibited from acquiring or owning agricultural land or real property within 10 miles of military installations or critical infrastructure.
In Arkansas, restrictions previously applied to foreign parties that were defined under as being part “of a country subject to International Traffic in Arms Regulations (ITAR), 22 C.F.R. § 126.1″[14] — regulations restricting the exports and imports of certain defense articles and services from listed countries, including China.[15].
Both laws face challenges on preemption grounds and based on claimed violations of equal protection and due process rights. A court granted a preliminary injunction in Arkansas, leading to an amendment by the Arkansas House that narrows the restrictions to real estate within 10 miles of critical infrastructure, including military installations and communication or information technology facilities.[16]
Other states may seek to address foreign land acquisition concerns by establishing their own CFIUS-like review processes, as the Texas bill would do.[17] If more states adopt similar processes, and such laws are ultimately able to survive constitutional challenges, it could introduce additional regulatory hurdles for investors to navigate.
Moving Forward
In February, at the American Conference Institute’s CFIUS conference, Deputy Treasury Secretary Michael Faulkender previewed a fast-track process for investors from less sensitive countries.
He alluded to reducing uncertainty and unnecessary regulation for such low-sensitivity investors by collecting information from foreign investors earlier in the process and building a knowledge base that would limit the amount of additional information needed in each case, especially from repeat filers.[18]
Shortly thereafter, on May 8, the Treasury announced a pilot known-investor portal to test this expedited process.
During the ACI discussion of real estate transactions, the recurrent theme seemed to be encouraging filers and investors to coordinate and communicate with the military community related to any pending real estate transaction that could implicate these concerns. Additionally, conference speakers emphasized that CFIUS’ real estate reviews are consensus-driven, based on many factors that balance national security with economic benefit.
Individuals and businesses engaging in real estate transactions involving foreign investors should be aware that this area is as closely observed by CFIUS as other investments. Investors are advised to carefully assess their risks and consider filing with CFIUS. The MineOne case serves as a cautionary tale, highlighting the importance of risk assessment in avoiding costly damage.
Those entities that are entertaining greenfield or brownfield investments should continue to monitor any changes or reforms from CFIUS.
[1] America First Investment Policy, The White House, https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/.
[2] Id.
[3] Statement on the President’s Decision Prohibiting the Acquisition by MineOne Cloud Computing Investment I L.P. of Real Estate, and the Operation of a Cryptocurrency Mining Facility, in Close Proximity to Francis E. Warren Air Force Base, U.S. Department of the Treasury, https://home.treasury.gov/news/press-releases/jy2335.
[4] 31 C.F.R. §§ 802.211-212.
[5] Statement on the President’s Decision Prohibiting the Acquisition by MineOne Cloud Computing Investment I L.P. of Real Estate, and the Operation of a Cryptocurrency Mining Facility, in Close Proximity to Francis E. Warren Air Force Base, U.S. Department of the Treasury, https://home.treasury.gov/news/press-releases/jy2335.
[6] Definition of Military Installation and List of Military Installations in the Regulations Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States, 89 FR 88128, https://www.federalregister.gov/documents/2024/11/07/2024-25773/definition-of-military-installation-and-the-list-of-military-installations-in-the-regulations (Nov. 7, 2024).
[7] 31 CFR § 802.211(b); Treasury Issues Final Rule Expanding CFIUS Coverage of Real Estate Transactions Around More Than 60 Military Installations, U.S. Department of the Treasury, https://home.treasury.gov/news/press-releases/jy2708.
[8] Foreign Investments in U.S. Agricultural Land, Enhancing Efforts to Collect, Track, and Share Key Information Could Better Identify National Security Risks, Government Accountability Office, January 2024, https://www.gao.gov/products/gao-24-106337.
[9] Pub. Law 118-42, § 787, 138 Stat. 118 (2024).
[10] S.197, 119th Cong. (1st Sess. 2025).
[11] S.179, 119th Cong. (1st Sess. 2025).
[12] S.176, 119th Cong. (1st Sess. 2025).
[13] Jim Saunders, Federal court blocks Florida law restricting people from China from owning land, Tallahassee Democrat., https://www.tallahassee.com/story/news/2024/02/02/florida-law-restricting-chinese-land-ownership-is-blocked-by-court/72452713007/.
[14] 22 C.F.R. § 126.1(d)(1)-(2).
[15] Ark. Assembly Bill 383, 94th Sess. (Ark. 2023).
[16] Ark. Assembly Bill 1680, 95th Sess. (Ark. 2025).
[17] https://capitol.texas.gov/tlodocs/89R/billtext/pdf/SB02117I.pdf#navpanes=0.
[18] Deputy Secretary Michael Faulkender’s Remarks at ACI CFIUS Conference, U.S. Department of Treasury, Apr. 24, 2025, https://home.treasury.gov/news/press-releases/sb0101.
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.
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Troutman Pepper Locke Spotlight
State AGs Unite: New Privacy Task Force Signals Shift in Regulatory Power Dynamics
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In this crossover episode of The Consumer Finance Podcast and Regulatory Oversight, Chris Willis, Kim Phan, and Stephen Piepgrass provide insights on a new joint privacy task force among several state AGs, known as the Consortium of Privacy Regulators. The consortium recently outlined goals to share state resources and align enforcement priorities regarding consumer harm and privacy rights. In response to an anticipated shift of regulatory scrutiny from federal agencies to state leaders, this episode focuses on specific steps financial services companies should consider when dealing with consumer privacy, data, complaints, and inquiries to ensure compliance and mitigate potential investigations and enforcement actions.
State AG News
State AGs Fill the AI Regulatory Void
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Ashley Taylor, Clayton Friedman, Gene Fishel, and Jay Myers of Troutman Pepper Locke LLP discuss actions by state attorneys general under existing and AI-specific laws to address misuse and legal violations of AI.
Arizona AG Secures More Than $30M in Restitution After Obtaining Criminal Conviction in Health Care Fraud Scheme
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On May 8, the Superior Court of Arizona in Maricopa County ordered a health care company to pay more than $30 million in restitution to the Arizona Health Care Cost Containment System (AHCCCS) due to the company’s alleged fraudulent billing practices. The underlying criminal convictions and the resulting restitution order reflect a broader trend among state attorneys general (AG), who are taking a more active role in prosecuting and pursuing various forms of health care fraud.
Legal Filing Services Provider Agrees to Pay $95,000 in Refunds to Resolve Colorado AG’s Allegations Regarding Deceptive Solicitations
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Compliance Services Colorado, Inc. (CSC) and Colorado Compliance Services, LLC (CCS) (collectively, the parties) recently entered into an Assurance of Discontinuance (AOD) with Colorado Attorney General (AG) Phil Weiser to resolve allegations that, beginning in August 2023, CSC sent deceptive solicitations to businesses in violation of the Colorado Consumer Protection Act.
Connecticut Dentists Bite Off More Than They Can Chew; Settle False Claims Allegations for Nearly $500,000
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On May 9, Connecticut Attorney General (AG) William Tong, in collaboration with the U.S. Attorney’s Office for the District of Connecticut, announced a $495,721 false claims settlement with Advanced Dental Center PC (Advanced Dental) and its owners, Tal Yossefi and Elad Yossefi. The settlement resolves allegations that the business violated both state and federal False Claims Act (FCA) statutes by receiving so-called “recruiting fees” for each Connecticut Medicaid patient referred to the business. No liability was admitted as part of the settlement.
New Jersey AG Platkin Reaches $450M PFAS Settlement With 3M
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On May 13, New Jersey Attorney General (AG) Matthew Platkin announced a proposed $450 million settlement agreement with 3M regarding allegations that, among other issues, contamination of perfluoroalkyl and polyfluoroalkyl substances (PFAS) emanated from a site now owned by 3M. The settlement resolves these claims and New Jersey’s broader claims that the state and its agencies have or may have in the future regarding PFAS. The settlement agreement remains subject to court approval.
AG of the Week
Lynn Fitch, Mississippi
Lynn Fitch was sworn in as Mississippi’s 40th attorney general (AG) and first-ever woman AG on January 9, 2020. She was re-elected to her second term in 2023.
Raised in Holly Springs, MS, Fitch earned both a B.B.A. and a JD at the University of Mississippi. At the age of 23, she began her legal career as special assistant AG at the Mississippi AG’s office. She continued her career in private practice as a bond attorney, accumulating more than 35 years of legal experience in both private practice and public service.
Before becoming the state’s chief legal officer, Fitch served as Mississippi’s elected state treasurer for eight years, from January 2012 to January 2020. Before that, she was selected by Governor Barbour to serve as executive director of the Mississippi State Personnel Board (MSPB), and she served as deputy executive director at the Mississippi Department of Employment Security (MDES) and as counsel for the Mississippi House of Representatives Ways and Means and Local and Private Legislation Committees.
Fitch was active on the national level as state treasurer, serving as vice president for the National Association of State Treasurers and as chair of the State Financial Officers Foundation. Since taking office as AG, she has served on the executive committees of the Republican Attorneys General Association (RAGA) and the National Association of Attorneys General (NAAG), and as co-chair of NAAG’s Human Trafficking Committee.
In 2022, TIME named Fitch to its list of the 100 most influential people in the world and Worth Magazine named her to its Worthy 100 for her work protecting women and children. She was recognized as one of Mississippi’s Top 50 Most Influential in 2017, 2022, and 2023; selected as Outstanding Woman Lawyer of 2012 and a Woman Trailblazer by the Mississippi Bar Association; and honored with the prestigious Susie Blue Buchanan award by the Mississippi Bar Association’s Women in the Profession Committee. Fitch was also named a Mississippi Business Journal Leader in Finance in 2016 and Leader in Law in 2010, as well as a 2015 Honoree of the Women in Government Leadership Program by Governing Magazine.
Fitch has also been active in her community, serving as a member of the boards of several charitable organizations, including First Responders of Mississippi, the Juvenile Diabetes Research Foundation, Goodwill Industries, and the American Red Cross.
Upcoming AG Events
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June: RAGA | Summer National Meeting | New York, NY
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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
For more on upcoming AG Events, click here.
We are pleased to share with you our latest publication, “Navigating Change: First 100 Days under the Trump Administration,” authored by our Digital Assets + Blockchain team. This retrospective examines the pivotal developments in the digital assets industry during the initial phase of the Trump administration.
The first 100 days were marked by significant changes across various levels, including federal government actions, state and federal legislative initiatives, regulatory updates, and industry advancements. As the new administration began to shape its policies, the United States navigated its approach to cryptocurrency and blockchain technology, setting the stage for future financial innovation.
Our Digital Assets + Blockchain team offers comprehensive services for both emerging and established participants in the digital asset markets. We provide seamless support in areas such as corporate, regulatory compliance, intellectual property, data use, privacy, litigation, cybersecurity, tax, and more. Our team is experienced with cryptocurrencies, Web 3.0, regulatory due diligence, blockchain technology, and other peer-to-peer distributed ledger technologies, including smart contract platforms.
We invite you to explore the insights and analyses provided in this publication, which aim to shed light on the evolving landscape of digital assets during this transformative period.
To access the publication, please click here.
David Kupetz, a partner in Troutman Pepper Locke’s Bankruptcy + Restructuring Practice Group, published the article “3M and the Use of the Bankruptcy Code and Power of the Bankruptcy Court to Stay Actions Against Non-Debtors” in the 2024 edition of Norton Annual Survey of Bankruptcy Law published by Thomson Reuters.
In a high profile decision seemingly constraining the bankruptcy court’s power to serve as the avenue for resolving mass tort claims, a bankruptcy court in the chapter 11 cases of Aearo Technologies and its affiliates (Aearo) declined to apply or, in effect, extend the automatic stay to litigation against Aearo’s parent, 3M Corporation (3M). The bankruptcy court’s decision parallels the subsequent decision of the Third Circuit Court of Appeals dismissing the initial chapter 11 bankruptcy case of LTL Management, LLC (LTL), an entity created by Johnson & Johnson (J&J) to file bankruptcy for the purpose of addressing mass tort liability. In both cases, the decisions centered on funding agreements that the courts construed as insulating the chapter 11 debtors from financial distress and creditors from risk of non-payment.
Click here to read an excerpt of the book.
Click here to purchase the full publication.
Charles Baker, a partner with Troutman Pepper Locke, was quoted in the May 27, 2025 Bloomberg Law article, “VLSI’s Fortress Ties to Take Center Stage in Intel Patent Trial.”
Patent licensees often bargain for that sort of broad language to ensure they’re protected from infringement litigation, Troutman Pepper Locke LLP partner Charles Baker said.
“The language ‘affiliate’ is what you typically see as some type of definition,” Baker said, noting it could mean a certain percentage of ownership and include a future entity.
Judges typically don’t like breaking up a case into separate disputes and having multiple trials, according to Baker. But pushing for an issue to be resolved separately can be beneficial and prevent the need to submit an additional jury question if all issues are presented together, the Texas-based attorney said.
Picture this: It’s a scorching summer day. You’re at the pool, cold drink in hand, music playing, with your gear lined up. The cooler, the chair, the Bluetooth speaker. For a lot of people, that cooler is a YETI. Or is it? A decade ago, if you looked closely, you might’ve noticed an almost identical cooler, same shape, same rubber latches, but a different name: RTIC. And it was half the price of YETI, as they advertised widely.
Behind the insulated walls of those premium containers was a much hotter fight over patents.
Click here to read the full article on IP Watchdog.
Many people swear the lyrics were “I’m stuck on Band-Aid, ’cause Band-Aid’s stuck on me.” And they’re right, but only sort of. What feels like a Mandela Effect moment is actually the result of a quiet legal pivot. In the late 1980s, the company changed the jingle to say “Band-Aid brand,” adding a single word to help protect their trademark from something called genericide.
That’s the paradox at the heart of trademark law. You work tirelessly to build a strong brand, making it distinctive, recognizable, maybe even iconic. But in your success lies a hidden threat. The more your brand becomes the go-to term for an entire category, the more it risks slipping into generic territory, losing its legal protection altogether.
Click here to read the full article on IP Watchdog.
On May 19, 2025, the U.S. Department of Justice (DOJ) announced the launch of a Civil Rights Fraud Initiative, which will use the False Claims Act (FCA) as a basis for investigating the diversity, equity, and inclusion (DEI) practices of recipients of federal funds, including colleges and universities who receive Title IV student financial aid and research grants. Calling out academic institutions specifically, the Civil Rights Fraud Initiative will invoke the FCA “against those who defraud the United States by taking its money while knowingly violating civil rights laws.”
The announcement of the new initiative comes just days after reports that the DOJ launched an FCA investigation against Harvard University based on whether its admission policies comply with the recent Supreme Court decision ending affirmative action. Our colleagues forecasted the use of the FCA as a weapon against DEI after President Donald Trump issued Executive Order 14173, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” directing the federal government to take numerous specific actions to terminate all DEI and diversity, equity, inclusion, and accessibility (DEIA) initiatives. The initiative also was previewed in a memo issued by Attorney General Pam Bondi on February 5, titled “Ending Illegal DEI and DEIA Discrimination and Preferences,” which directed the DOJ’s Civil Rights Division to “investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” The memo cited the 2023 Supreme Court decision, Students for Fair Admissions, Inc. v. President & Fellows of Harvard Coll., 600 U.S. 181 (2023), which held that the admissions practices of Harvard and the University of North Carolina violated the Title VI of the Civil Rights Act of 1964 and the Equal Protection Clause of the Fourteenth Amendment because they resulted in admission decisions based on a person’s race.
The initiative and the DOJ’s new investigation into Harvard demonstrate a willingness to use the FCA in unique contexts as a tool to further the administration’s priorities. The significant financial penalties available to the government under the FCA — including treble damages and per-claim penalties — signal how seriously the DOJ is taking its efforts to end allegedly discriminatory DEI programs. All recipients of federal funds and government contractors should evaluate their DEI or DEIA programs now to identify and remediate any areas of potential risk.
Understanding the FCA
The FCA serves as the primary mechanism for the DOJ to combat fraud against the federal government. The FCA, codified at 31 U.S.C. § 3729 et seq., is a federal statute that imposes civil liability on individuals or entities that knowingly submit, or cause to be submitted, false claims for payment to the federal government. Violations can result in treble damages and significant penalties. The FCA also includes qui tam provisions, allowing private individuals (known as relators or whistleblowers) to file actions on behalf of the government and share in any recovery.
Notably, the FCA applies not only to companies that receive government grants, but also to contractors and subcontractors that cause the submission of false payment claims, even if they do not get paid directly by the government.
The Civil Rights Fraud Initiative
In his May 19, 2025, memorandum, Deputy U.S. Attorney General Todd Blanche explained that the initiative will be co-led by the Civil Division’s Fraud Section, which enforces the FCA, and the Civil Rights Division, which enforces civil rights laws. He directed each of the 93 U.S. attorney’s offices to identify an assistant U.S. attorney to work on the initiative. Blanche explained that other federal agencies, as well as state attorneys general and local law enforcement, will be enlisted to help.
Because FCA violations are premised on the receipt of federal funds, the initiative will focus on federal contractors and grant recipients that knowingly violate civil rights laws and falsely certify compliance with these laws, particularly through DEI programs that the memorandum alleges result in racial discrimination. Consequently, any entity or company that contracts with the federal government and/or receives government funds will be at risk of an FCA investigation or a qui tam lawsuit if it has policies in place that might be construed as promoting DEI or DEIA as the memorandum now interprets those terms.
Blanche strongly encouraged private individuals to act as whistleblowers under the FCA and to report violations to the DOJ. If the government’s FCA theory is successful, the DOJ will seek to leverage that success into large settlements based on the substantial amount of federal funding that colleges, universities, and federal contractors and grant recipients receive.
Considerations for Recipients of Federal Funds
The initiative, executive order, AG memo, and the investigation create heightened FCA risk for clients that participate in government programs and scrutiny of the DEI practices of recipients of federal funds, especially academic institutions. Given the legal and financial consequences of any DOJ investigation, and especially one initiated under the FCA, organizations should review their DEI policies and practices now to ensure they align with federal civil rights requirements and do not give rise to potential liability under the FCA. This review should include:
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Auditing DEI programs and practices to ensure compliance with civil rights laws.
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Establishing robust reporting mechanisms to address potential violations and encourage potential whistleblowers to report their concerns internally.
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Implementing training programs to educate staff on the legal implications of DEI initiatives and the requirement not to retaliate against whistleblowers.
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Considering work with legal counsel to navigate the complexities of FCA compliance and address any potential liabilities.
While health care remains a primary focus of FCA enforcement actions, the initiative and this investigation represent examples of the broad reach of the FCA and the administration’s willingness to use it in new contexts.
Troutman Pepper Locke is closely monitoring the administration’s and the DOJ’s evolving priorities and guidance. If you have questions on how these priorities impact your business/organization or wish to begin evaluating your existing compliance programs and policies and procedures, please do not hesitate to contact a member of our White Collar Litigation and Government Investigations team.
In North American Fire Ultimate Holdings, LP v. Alan Doorly, the Delaware Court of Chancery held that the restrictive covenants included in an incentive unit grant agreement were unenforceable when the units received by the grantee, a now former employee, were forfeited.
Facts
Plaintiff North American Fire Ultimate Holdings, LP acquired Cross Fire & Security, Inc. (Cross Fire) to add to its portfolio of life services companies. Defendant Alan Doorly (Doorly) was a long-time employee of Cross Fire, who maintained his role post-acquisition. As part of a restructuring, the plaintiff’s predecessor company entered into an incentive unit grant agreement with Doorly that contained time and performance vesting conditions, and included restrictive covenants related to the use of confidential information, solicitation of employees and customers, and competition. The agreement was governed by Delaware law and identified the issuance of the units as “adequate and sufficient consideration” for the restrictive covenants. The agreement further provided that if Doorly was terminated for cause or breached the restrictive covenants, his vested and unvested units would be “automatically forfeited.” Relevant here, the agreement did not create a right of employment, nor were there any allegations that Doorly received a promotion, increased compensation, expanded responsibilities, or enhanced access to company information in exchange for signing the agreement.
Doorly eventually resigned from Cross Fire, but Cross Fire subsequently characterized the separation as “for-cause termination” because Doorly allegedly breached the restrictive covenants in the agreement by creating an entity that competed with Cross Fire customers and recruited a Cross Fire employee, resulting in the automatic forfeiture of the units. The plaintiff filed this action against Doorly seeking an injunction to enforce the restrictive covenants, damages for breach of contract, and a declaratory judgment. Doorly moved to dismiss and argued that the forfeiture of the units eliminated the consideration for the agreement, rendering the restrictive covenants unenforceable.
Holding and Takeaways
The court agreed with Doorly and dismissed the plaintiff’s claims because the agreement explicitly provided that the units were the sole consideration for the restrictive covenants. Without the units, according to the court, there was no consideration to support the agreement, making the restrictive covenants unenforceable under basic contract law principles. In its analysis, the court emphasized the necessity of consideration for the enforceability of contracts, particularly when imposing new restrictive covenants on an existing employee. The decision is important for employers, especially sponsor-backed companies, who intend to constrain employees with restrictive covenants, to ensure that any restrictive covenants are supported by valid consideration (e.g., promotion or bonus) to be enforceable.
The Ninth Circuit Bankruptcy Appellate panel recently reaffirmed the longstanding principle that a UCC-1 financing statement securing personal property must be filed at the debtor’s location. In a recent case[1], the lender did not file the UCC-1 statement in the correct location, leading the court to rule that the lender’s security interest was not properly perfected. Consequently, the lender’s claim was considered unsecured.
Background
In 2022, Newtek Small Business Finance, LLC loaned $2.7 million to Global One Media, Inc., a Delaware corporation, to help purchase and operate radio broadcast companies. These loans were secured by Global One’s personal property. Newtek tried to perfect its security interest in the collateral by filing UCC-1 financing statements with the Secretary of States of New Mexico and Nevada, where the collateral was located.
Two years later, Global One filed for Chapter 11 bankruptcy in Nevada. Newtek claimed $2.8 million, partially secured by Global One’s personal property, but the trustee for Global One objected. The trustee argued that Newtek should have filed the financing statements in Delaware, Global One’s state of incorporation, not Mexico and Nevada. Although the bankruptcy court initially sided with Newtek, the trustee appealed.
On appeal, the Appellate Panel reversed the decision. They emphasized that since 2001, Revised Article 9 of the Uniform Commercial Code (UCC) requires filing financing statements at the debtor’s location, not where the collateral is located.
Analysis
In 2001, all states adopted revisions to Article 9 of the UCC, to make the process of perfecting security interests easier. According to UCC § 9-301(1), the location of the debtor determines where a UCC-1 financing statement should be filed for non-possessory security interests. Accordingly, financing statements are typically filed in the debtor’s state of organization, which simplifies the process and reduces the risk of losing perfection if the collateral moves between jurisdictions.
UCC § 9-301(3)(C) specifies that the legal effects of whether a security interest is perfected are governed by the jurisdiction where the collateral is located. This determines the priority of the secured party’s interest compared to other creditors or the debtor.
Newtek made a mistake by filing UCC-1 forms in Nevada and New Mexico, where Global One’s personal property was located, instead of Delaware, where Global One is incorporated. This mistake was due to Newtek’s misunderstanding of UCC § 9-301(3)(C). As a result, Newtek’s security interest was not perfected, leaving them with only an unsecured claim on Global One’s personal property, except possibly for bank accounts. This situation underscores the importance of filing based on the debtor’s location.
Takeaways – Where to File
Determining the correct location to file a UCC-1 is governed by UCC § 9-301(1), which specifies that the debtor’s location dictates the jurisdiction for filing.
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Individual Debtor: For individuals, the debtor’s location is their principal residence (UCC § 9-307(b)(1)).
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Registered Organization: For U.S.-based registered organizations, the state of organization is the debtor’s location (UCC § 9-307(e)).
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Unregistered Organization With One Place of Business: For unregistered organizations (e.g., trusts or general partnerships) with a single place of business, it is that place of business (UCC § 9-307(b)(2)).
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Unregistered Organization With Multiple Places of Business: For unregistered organizations with multiple places of business, it is the chief executive office (UCC § 9-307(b)(3)).
For foreign debtors, filing rules depend on the organization’s structure and location (UCC § 9-307(b)).
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Individual Foreign Debtor: If the foreign debtor is an individual, they are located at their principal residence.
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Organizational Foreign Debtor With One Place of Business: If the foreign debtor is an organization with only one place of business, it is located at that place of business.
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Organizational Foreign Debtor With Multiple Places of Business: If the foreign debtor is an organization with more than one place of business, it is located at its chief executive office.
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Jurisdictional Considerations: If the debtor’s residence, place of business, or chief executive office is in a foreign jurisdiction that requires public filing or registration of nonpossessory security interests in the foreign jurisdiction’s security interest filing system, such as Canada’s Personal Property Security Act (PPSA) for priority over lien creditors, filing is in such system.
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Other Jurisdictional Considerations: If no such system exists, the foreign debtor is located in the District of Columbia and District of Columbia serves as the default filing location. Creditors may also file in District of Columbia as a precautionary measure.
UCC § 9-301(3)(C) specifies that the law of the jurisdiction where collateral is located determines the legal effects of whether a security interest is perfected, as well as the priority of the secured party’s interest compared to other creditors or the debtor.
Creditors should carefully distinguish between these legal concepts to avoid costly errors.
[1] In re Global One Media Inc., BAP No. 24-1130, 2025 WL 1009412 (B.A.P. 9th Cir. Apr. 2, 2025)).