In a decision that resonates with many critics of mootness fees, a U.S. district judge for the Northern District of Illinois ordered counsel for Akorn Inc. shareholders to return $332,500 in attorneys’ fees extracted from a series of what he labeled as frivolous lawsuits against the company and signaled his openness to imposing additional sanctions.[1]
The litigation underlying this decision stems from a series of lawsuits filed by Akorn shareholders after Akorn announced a merger with another company. Akorn’s shareholders filed five class actions and one individual action seeking to compel Akorn to supplement its proxy statement issued in connection with the merger, arguing it violated Section 14(a) of the Securities Exchange Act of 1934. These lawsuits were voluntarily dismissed as moot after Akorn amended its proxy statement and agreed to pay $322,500 in attorneys’ fees.
Following dismissal, another Akorn shareholder, Theodore Frank, moved to intervene to challenge the mootness fee. He argued that plaintiffs’ counsel should return the payment because the shareholder claims were frivolous. The court agreed.[2] While it denied Frank’s motion to intervene, the court ultimately reconsidered the suits and found that the disclosures at issue were not “plainly material,” as articulated by the Seventh Circuit in Walgreen.[3] Finding that the disclosures were “worthless” to the shareholders, the court exercised its inherent authority to order plaintiffs’ counsel to return the attorneys’ fees Akorn paid.
On appeal, the Seventh Circuit found that the district court did not have the inherent authority to reconsider the merger challenge and the mootness fees and that the court was wrong to deny Frank’s motion to intervene.[4] The Seventh Circuit nevertheless agreed with the district court’s reasoning and determined that its reference to “inherent authority” should have been to the Private Securities Litigation Reform Act, §78u–4(c)(1) (the PSLRA), and Rule 11,[5] which supply a mechanism for review of the underlying merit of a federal securities claim. The Seventh Circuit explained that these mechanisms incorporate the “plainly material” standard articulated in the Walgreen case. Accordingly, the Seventh Circuit remanded the case to the district court to conduct a proper proceeding under §78u–4(c)(1) and Rule 11.
Consistent with its prior holding, the district court found that none of the disclosures sought by the shareholders were “plainly material.” Consequently, the court found the claims to be frivolous in violation of Rule 11 and, thus, sanctionable. As a result, the court affirmed its order that the mootness fees should be returned as a sanction.
The court also considered the additional sanctions Frank suggested, including (1) requiring all signing plaintiffs’ counsel and their firms to disclose and cite the finding, along with the Alcarez opinion, in any future lawsuits or demand letters concerning corporate merger transactions, including tender offers; (2) requiring counsel to disclose retention agreements with the plaintiffs; (3) requiring counsel to disclose all purported mootness fees extracted by them in similar suits and demand letters; and (4) imposing monetary penalties. While the court rejected the fourth suggestion to impose further monetary sanctions, it noted that it is inclined to order the first three suggestions and requested further briefing on their propriety.
This decision serves as a reminder of the judiciary’s increasing vigilance against frivolous corporate merger-related lawsuits and the improper extraction of mootness fees. By mandating the return of $332,500 in attorneys’ fees and contemplating additional sanctions, the court has underscored the necessity for plaintiffs’ attorneys to ensure that their claims are justified before filing a complaint.
[1] See Berg, et al. v. Akorn, Inc., No. 17 C 5016, 2025 WL 755704 (N.D. Ill. Mar. 10, 2025).
[2] See House v. Akorn, Inc., 385 F. Supp. 3d 616, 623 (N.D. Ill. 2019).
[3] See In re Walgreen Co. Stockholder Litig., 832 F.3d 718, 725 (7th Cir. 2016).
[4] See Alcarez v. Akorn, Inc., 99 F.4th 368, 375 (7th Cir. 2024).
[5] The PSLRA provides that in “any private action arising under this chapter, upon final adjudication of the action, the court shall include in the record specific findings regarding compliance by each party and each attorney representing any party with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion.” 15 U.S.C. §78u–4(c)(1).
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Multistate AG Updates
State AGs Allege Bitcoin ATMs Increasingly Facilitate Scams
By Troutman Pepper Locke State Attorneys General Team and Trey Smith
Recent actions by the Pennsylvania and Iowa state attorneys general (AG) suggest increasing regulatory scrutiny of bitcoin transaction machines (BTMs) in connection with the role they allegedly play in facilitating scams. In Pennsylvania, AG David Sunday issued a consumer alert, warning Pennsylvanians that scammers are using BTMs to gain access to their money. In Iowa, AG Brenna Bird brought two lawsuits against Bitcoin Depot and CoinFlip, Iowa’s two largest BTM operators, over alleged collection of illegal fees and failures that allowed Iowans to send millions of dollars to scammers through their kiosks.
Single State AG Updates
Washington AG Accuses Collection Agency of Violating Notice Requirement for Collecting Medical Debt
By Troutman Pepper Locke State Attorneys General Team and Mike Lafleur
The Washington State Attorney General’s (AG) Office filed a lawsuit against Renton Collections Inc., accusing the company of violating Washington’s Collection Agency Act by failing to include certain disclosures in their collection letters to debtors.
New Jersey Division on Civil Rights Issues Finding of Probably Cause Against Consumer Financial Services Company for Discrimination
By Troutman Pepper Locke State Attorneys General Team and Lane Page
On March 11, New Jersey Attorney General (AG) Matthew Platkin and the New Jersey Division on Civil Rights (DCR) announced that DCR issued a finding of probable cause against Advance Funding Partners/Same Day Funding (Advance Funding), a company that provides cash advances and consumer loans, alleging that it violated the New Jersey Law Against Discrimination by discriminating against both consumers and employees.
AG of the Week
Andrea Joy Campbell, Massachusetts
On January 18, 2023, Andrea Joy Campbell was sworn in to be the 45th attorney general (AG) of the Commonwealth of Massachusetts. She pledged to build economic prosperity and stability for all residents, prioritize the mental health and well-being of children, stop cycles of incarceration and violence, and ensure the people across the Commonwealth have access to the AG’s office regardless of their zip code, language, or ability.
Campbell graduated from Boston Latin School and then worked her way through college with the help of grants and student loans, eventually graduating from Princeton University and UCLA Law School. After earning her law degree, she worked as a legal services attorney for the EdLaw project, defending the rights of children and their families, particularly those with disabilities. She then practiced law at Proskauer LLP as an employment attorney before leaving to serve the public as general counsel at the Metropolitan Area Planning Commission. In this role, she worked across 101 cities and towns to address regional challenges such as health care access, transportation, affordable housing, and climate change.
Campbell also served as legal counsel to Governor Deval Patrick, working to improve education and transportation systems and advance an agenda of equity across the state. In 2015, she successfully ran for the Boston City Council becoming the first woman to represent District 4 on the Council. Her first piece of legislation was the Community Preservation Act, which continues to generate more than $20 million annually for new affordable housing, historical preservation, and parks and open space. In 2018, she was unanimously elected city council president — the first Black woman to hold the title.
Massachusetts AG in the News:
- On March 12, Campbell announced indictments against several MassHealth providers in connection with alleged fraud and kickback arrangements that collectively resulted in the submission of over $7.8 million in false claims to MassHealth.
- On March 12, Campbell led a coalition of 17 AGs in filing an amicus brief urging the U.S. Supreme Court to affirm a lower court’s decision recognizing Medicaid recipients’ individual right to receive care from the qualified providers of their choice.
Upcoming AG Events
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March: RAGA | Spring Golf Retreat | Pinehurst, NC
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April: NAAG | AG Symposium | Nashville, TN
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April: RAGA | Energy Summit | Houston, TX
For more on upcoming AG Events, click here.
Published in Law360 on March 19, 2025. © Copyright 2025, Portfolio Media, Inc., publisher of Law360. Reprinted here with permission.
In mid-January, a bipartisan coalition of nine state attorneys general, as well as the Washington, D.C., attorney general, announced a coordinated effort to curb illicit electronic cigarette sales. The attorneys general of California,[1] Connecticut,[2] Illinois,[3] Hawaii,[4] Minnesota,[5] New York,[6] New Jersey,[7] Vermont, Ohio and Washington, D.C., are coordinating enforcement activity targeting dealers of these products — issuing warning letters, serving civil investigative demands and filing complaints.
The crackdown illustrates the rising prominence of state attorneys general using consumer protection laws to address issues of national scope, especially when federal efforts prove ineffective. Regarding illicit e-cigarettes specifically, the U.S. Food and Drug Administration has struggled to curb the products’ market dominance, leading state regulators to fill the void.
Defining Illicit E-Cigarettes
Here, “illicit” or “unauthorized” refer to e-cigarettes that lack FDA premarket authorization and cannot lawfully be marketed in the U.S. — not including products sold pursuant to the FDA’s enforcement discretion.
Under the Family Smoking Prevention and Tobacco Control Act,[8] all new tobacco products must receive premarket authorization from the FDA.[9] A “new tobacco product” includes “any tobacco product … that was not commercially marketed in the United States as of February 15, 2007.”[10] Thus, e-cigarettes recently introduced into the market are new tobacco products that require FDA premarket authorization. New tobacco products that lack authorization are considered “adulterated” and cannot be introduced into interstate commerce.[11]
One exception is for certain products with timely submitted, pending premarket tobacco product applications. In 2020, the FDA indicated that a subset of new tobacco products on the market as of Aug. 8, 2016, can continue to be sold pursuant to FDA enforcement discretion if the products have premarket tobacco product applications that (1) were filed with the FDA by Sept. 9, 2020; and (2) are either under FDA review or the subject of negative FDA action — marketing denial order, refusal to accept or refusal to file — and have received a stay or recission of this decision.[12]
Notably, the FDA did not issue a similar enforcement discretion policy for nontobacco nicotine products. After Congress authorized the FDA to regulate nontobacco nicotine products,[13] the agency required premarket tobacco product applications to be submitted for such products by May 14, 2022, and authorized by July 13, 2022, without exception.[14]
Although the FDA has recently indicated that there is no such enforcement discretion policy in effect for any pending premarket tobacco product applications products,[15] the agency’s messages on this point have been mixed at best, and we are unaware of any enforcement actions taken against companies with timely, submitted premarket tobacco product applications that are still undergoing FDA review.[16]
Thus, it appears that the FDA, in practice, continues to exercise enforcement discretion in accordance with its 2020 guidance.
FDA Enforcement Efforts
The FDA has described[17] enforcement against illicit e-cigarettes as “among [its] highest enforcement priorities,” but there is little evidence that the agency’s enforcement efforts have meaningfully reduced the illicit products’ market share. The FDA — in coordination with the U.S. Department of Justice and U.S. Customs and Border Protection — has a variety of tools at its disposal to target illicit e-cigarettes.
These include the following.
Civil Money Penalties
Up to $15,000 per violation, or up to $250,000 per violation made with the intent to mislead or defraud, for a maximum of $1 million total civil penalties in a single proceeding.[18]
Injunctions
The DOJ, on the FDA’s behalf, initiates injunctive proceedings to restrain violations.[19]
Import Alerts
Products are placed on an import alert list, detained without physical exam upon arrival in the U.S., and potentially refused entry by the CBP unless the importer demonstrates that the product does not have the violation noted on the import alert.[20]
Seizure and Destruction
The DOJ seeks to have the products condemned as “adulterated or misbranded” by the district court, seized, and/or destroyed.[21]
Criminal Charges
The DOJ brings criminal charges for manufacturing or introducing adulterated tobacco products into interstate commerce. Conviction could result in up to one year of imprisonment, or up to three years for subsequent or intentional violations, as well as possible criminal fines.[22]
To its credit, the FDA has issued 87 civil money complaints[23] against illicit e-liquid manufacturers and at least 177 such complaints against retailers. Additionally, the DOJ has pursued eight injunction actions[24] against manufacturers regarding their alleged production of unauthorized e-cigarettes.
Through a multiagency task force,[25] the FDA has also made strides at ports of entry. In October 2024, the FDA and CBP announced[26] the seizure of approximately three million units of imported illicit e-cigarettes. The FDA also periodically publishes import alerts,[27] including a “Red List” of illicit e-cigarettes subject to detention by the CBP upon entry.
Nevertheless, most of the FDA’s domestic enforcement efforts consist of issuing warning letters.[28] The FDA’s compliance dashboard[29] indicates that, since fiscal year 2021, the FDA has issued more than 50,000 warning letters in the tobacco product category. However, the FDA is often slow to follow up — if it does at all.
Notwithstanding the FDA’s efforts, illicit e-cigarettes continue to dominate the U.S. market, and by some estimates, exceed 60% of e-cigarette sales.[30]
Multistate Attorney General Crackdown
The FDA’s failure to clear store shelves of illicit e-cigarettes has led state attorneys general to step forward, including the recent bipartisan coalition of nine state attorneys general and the Washington, D.C., attorney general. Usually, the attorneys general have used state consumer protection laws and other applicable state laws, such as restrictions on flavored tobacco products, to target illicit e-cigarettes.
Below, we discuss the recent actions taken by the multistate coalition.
Lawsuits
California
On Jan. 15, California Attorney General Rob Bonta filed a complaint[31] in the Los Angeles County Superior Court — People of the State of California v. Flumgio Technology Inc. — against a distributor alleging violations of the state’s False Advertising Law and Unfair Competition Law. Regarding the False Advertising Law, California argues that the distributor’s marketing of a “clear” e-cigarette insinuates that the product was unflavored when it is in fact mint flavored.
Regarding the Unfair Competition Law, California argues that the distributor failed to maintain required licenses, unfairly targeted underage consumers, introduced flavored products into the market that cannot be legally sold at retail under the state’s flavor ban, and encouraged retailers to sell such products.
Illinois
On Jan. 16, Illinois Attorney General Kwame Raoul filed a complaint[32] in the Cook County Circuit Court — People of the State of Illinois v. Chicago Merchandise Co. — against distributors of e-cigarettes, alleging violations of the state’s Preventing Youth Vaping Act and Consumer Fraud and Deceptive Business Practices Act.
The complaint alleges that the distributors market and sell e-cigarette brands that are “adulterated” under state law, i.e., lacking required FDA premarket authorization and not subject to enforcement discretion. It also alleges that the distributors’ website and social media posts emphasize product characteristics that encourage persons under 21 to use e-cigarettes — namely flavor options, ease of use and high nicotine content.
Minnesota
On Jan. 15, Minnesota Attorney General Keith Ellison filed a complaint[33] against a manufacturer of flavored e-cigarettes for violations of the state’s prohibition on marketing e-cigarettes that resemble non-e-cigarette products, requirements for e-cigarette delivery sales, and requirements under the Prevention of Consumer Fraud Act and Uniform Deceptive Trade Practices Act.
Specifically, in State of Minnesota v. Venture Concepts Group LLC, the complaint alleges that the manufacturer markets e-cigarettes that resemble highlighters, and accepts and ships orders of such products without conducting adequate age verification.
New York
On Jan. 16, New York Attorney General Letitia James filed a complaint[34] in the Herkimer County Supreme Court against two companies that operate a retail store for allegedly selling flavored e-cigarettes in violation of the state’s flavor ban, failing to require purchasers to provide proof of age as required under state law, and selling e-cigarettes to persons under 21.
In People of the State of New York v. G-Smoke360 Corp., the complaint also alleges that the retailer failed to follow requirements related to the display and storage of e-cigarettes in the store, made unlawful multipackage discount offerings, and sold e-cigarettes without the required certificate of registration.
Ohio
Before the January coordinated enforcement activity, Ohio endeavored “to combat the influx of illegal vaping devices flooding Ohio communities.”[35] This campaign resulted in lawsuits being filed in July 2024 against three retailers under the state’s consumer protection laws.
However, all three of these lawsuits have been dismissed by Ohio trial courts based on federal preemption — an issue discussed more fully below.[36]
Civil Investigative Demands
Connecticut
On Jan. 16, Connecticut Attorney General William Tong announced[37] that he served civil investigative demands on multiple retailers and wholesalers allegedly selling illicit e-cigarettes. Civil investigative demands are investigative subpoenas commonly issued by state attorneys general.
Connecticut’s recent civil investigative demands seek comprehensive information regarding the sale of these products, and the wholesalers and distributors supplying them.
Warning Letters
New Jersey
New Jersey Attorney General Matthew Platkin announced[38] on Jan. 16 the issuance of nearly 11,000 warning letters instructing businesses to cease and desist from selling flavored e-cigarettes in violation of the state flavor ban.
New Jersey’s warning letters follow the office’s August 2024 issuance[39] of notices of violation to 19 retailers, which assessed civil monetary penalties for their alleged sale of flavored e-cigarettes.
Hawaii
Similarly, on Jan. 16, Hawaii Attorney General Anne Lopez announced[40] the issuance of over 800 warning letters to retailers and distributors that her office believes may be dealing in illicit products. The letters[41] warn businesses to “remove from your shelves any products not authorized for sale,” and return such products to their manufacturer or distributor.
Enforcement Actions To Be Determined
Vermont and Washington, D.C.
The attorneys general of Vermont and Washington, D.C., have not announced specific actions taken as part of the coalition. The California attorney general’s press release indicates, however, that these states will be “enforcing their respective tobacco and consumer protection laws to go after the companies responsible for importing, distributing, selling, and marketing flavored disposable e-cigarettes.”
Preemption Concern for State Efforts
Although the Family Smoking Prevention and Tobacco Control Act’s premarket authorization requirements are generally enforceable only by the FDA,[42] the recent crackdown illustrates various avenues through which state attorneys general target many of the same unauthorized products. These efforts could still be barred by implied preemption, however, even when enforcement is based in state law.
Under the Federal Food, Drug and Cosmetic Act, as amended by the Family Smoking Prevention and Tobacco Control Act, enforcement actions generally must be “by and in the name of the United States.”[43] In other words, “only the FDA may enforce the [Food, Drug and Cosmetic Act],”[44] including premarket authorization requirements.
Importantly, even when a state bases an enforcement action in state law, the Food, Drug and Cosmetic Act may impliedly preempt the claim where the act is a critical element of the claim.[45]
As noted above, three recent Ohio court decisions found that preemption barred the Ohio attorney general from bringing lawsuits under the Ohio Consumer Sales Practices Act against sellers of unauthorized e-cigarettes. Although the claims were based in state law, the Ohio courts dismissed the cases in October 2024 and February 2025, finding that the attorney general’s CSPA actions were impliedly preempted by the Food, Drug and Cosmetic Act.[46]
The crux of each decision was that the state law claims would not exist but for the underlying federal regulatory scheme. Appeals in two of the cases remain pending, and the Ohio attorney general could still appeal the other decision.
Nevertheless, consistent with the recent round of actions above, state attorneys general will likely continue to try to identify stand-alone, non-Food, Drug and Cosmetic Act bases for targeting illicit e-cigarettes.
The Takeaway: Gap-Filling by State Attorneys General
The coordinated enforcement by state attorneys general in the illicit e-cigarette space illustrates a major motivator for state regulators: ineffective federal enforcement.
Enforcing premarket authorization requirements — which sellers of illicit e-cigarettes openly flout — is traditionally the province of the FDA. Unless the FDA makes significant headway in clearing market shelves of illicit e-cigarettes, however, we anticipate that manufacturers, distributors and retailers will continue to see increased enforcement efforts from state attorneys general eager to fill the perceived regulatory void.
Multistate consumer protection efforts like this coordinated crackdown on illicit e-cigarettes are likely to become even more common as the Trump administration seeks to roll back federal regulatory efforts. Beyond the tobacco and nicotine context, industries ranging from consumer packaged goods to financial services should remain vigilant for an uptick in gap-filling by state attorneys general.[47]
[4] https://ag.hawaii.gov/wp-content/uploads/2025/01/News-Release-2025-03.pdf.
[5] https://www.ag.state.mn.us/Office/Communications/2025/01/16_HighLightVapes.asp.
[6] https://www.health.ny.gov/press/releases/2025/2024-01-16_herkimer_county_vape_shop.htm.
[8] See https://uscode.house.gov/statutes/pl/111/31.pdf.
[9] 21 U.S.C. § 387j(a)(2).
[10] Id. § 387j(a)(1).
[11] Id. § 387b(6)(A).
[12] See https://www.fda.gov/media/133880/download; https://www.fda.gov/tobacco-products/compliance-enforcement-training/advisory-and-enforcement-actions-against-industry-unauthorized-tobacco-products (There are a few tobacco products that have received a marketing denial order (MDO) that are under further agency review and for which FDA has stated the Agency does not intend to pursue enforcement action during the pendency of the re-review. In addition, in a very limited number of instances, some courts have granted stays of MDOs pending judicial review in order to maintain the status quo, or FDA has administratively stayed MDOs. In those particular instances, FDA does not intend to take enforcement action.).
[13] See https://www.congress.gov/117/plaws/publ103/PLAW-117publ103.pdf.
[14] See https://www.fda.gov/tobacco-products/ctp-newsroom/reminder-electronic-submission-premarket-applications-non-tobacco-nicotine-products-due-may-14 (Manufacturers of NTN products on the market as of April 14, 2022 that wish to continue to market their products are required to submit a PMTA by May 14, 2022. . . . Further, for products on the market April 14, 2022, a PMTA must be submitted by May 14, 2022, and the product must receive a marketing granted order from FDA by July 13, 2022, in order to remain on the market.).
[15] See, e.g., https://www.fda.gov/tobacco-products/ctp-newsroom/working-states-fda-warns-more-100-retailers-illegal-sale-youth-appealing-e-cigarettes-including-geek (To date, the FDA has authorized 34 e-cigarette products and devices. These are the only e-cigarette products that currently may be lawfully marketed and sold in the United States.).
[16] See https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/compliance-actions-and-activities/warning-letters (listing warning letters to date); https://www.fda.gov/tobacco-products/compliance-enforcement-training/advisory-and-enforcement-actions-against-industry-unauthorized-tobacco-products (listing civil money penalty complaints and injunctions to date).
[18] See 21 U.S.C. § 333(f).
[19] See 21 U.S.C. § 332.
[20] See 21 U.S.C. § 381.
[21] See 21 U.S.C. § 334(a)(2), (b), (d)(1).
[22] See 21 U.S.C. § 333(a).
[23] https://www.fda.gov/tobacco-products/compliance-enforcement-training/advisory-and-enforcement-actions-against-industry-unauthorized-tobacco-products#a (Which Retailers Have Received CMP Complaints for Violations Related to Unauthorized Tobacco Products?).
[24] https://www.fda.gov/tobacco-products/compliance-enforcement-training/advisory-and-enforcement-actions-against-industry-unauthorized-tobacco-products#7 (Which Manufacturers Have CTP Initiated Permanent Injunction Actions Against Relating to Their Continued Manufacture of Unauthorized Tobacco Products?).
[27] https://www.accessdata.fda.gov/cms_ia/industry_98.html.
[29] https://datadashboard.fda.gov/ora/cd/complianceactions.htm.
[30] See https://www.altria.com/-/media/Project/Altria/Altria/Investors/events-and-presentations/2025/2024-Q4/Press-Release.pdf (We estimate that illicit products now represent more than 60% of the e-vapor category.).
[31] Complaint, California v. Flumgio Tech. Inc., No. 25PSCV00155 (Cal. Super. Ct.).
[32] Complaint, Illinois v. Chicago Merchandise Co., No. 2025CH00422 (Ill. Cir. Ct.).
[33] Complaint, Minnesota v. Venture Concepts Grp. LLC, No. 62-CV-25-382 (Minn. Dist. Ct.).
[34] Complaint, New York v. G-Smoke360 Corp., No. EF2025-112607 (N.Y. Sup. Ct.).
[36] Ohio ex rel. Yost v. Central Tobacco & Stuff Inc., No. 24-CVH-070664 (Ohio Ct. C.P. Oct. 29, 2024), appeal docketed No. 24 CAE 110103 (Ohio Ct. C.P. Nov. 26, 2024); Ohio ex rel. Yost v. Orrville Tobacco & Vape Shop LLC, No. 2024-CVC-H-0327 (Ohio Ct. C.P. Feb. 5, 2025); Ohio v. Elevate Smoke LLC, No. A2403034 (Ohio Ct. C.P. Feb. 20, 2025).
[40] https://ag.hawaii.gov/wp-content/uploads/2025/01/News-Release-2025-03.pdf.
[41] https://ag.hawaii.gov/cjd/files/2025/01/Updated-AG-Letter-to-Licensees-2025-01-17.pdf.
[42] See 21 U.S.C. § 337(a).
[43] See id.
[44] Diccroce v. McNeil Nutritionals LLC 
, 82 F.4th 35, 40 (1st Cir. 2023).
[45] See Buckman Co. v. Plaintiffs’ Legal Comm. , 531 U.S. 341, 353 (2001).
[46] Ohio ex rel. Yost v. Central Tobacco & Stuff Inc., No. 24-CVH-070664 (Ohio Ct. C.P. Oct. 29, 2024); Ohio ex rel. Yost v. Orrville Tobacco & Vape Shop LLC, No. 2024-CVC-H-0327 (Ohio Ct. C.P. Feb. 5, 2025); Ohio v. Elevate Smoke LLC, No. A2403034 (Ohio Ct. C.P. Feb. 20, 2025).
Republished in The Daily Bugle on March 20, 2025. This article was quoted on Agriculture.com on March 21, 2025.
Following a petition from five national labor unions seeking an investigation into China’s policies and practices aimed at dominating the maritime, logistics, and shipbuilding industries, the U.S. Trade Representative (USTR) conducted a formal investigation into the concerns raised. On January 16, the USTR concluded through a Notice of Determination that China’s strategic efforts to dominate the maritime, logistics, and shipbuilding sectors are unreasonable and place burdens on U.S. commerce rendering these actions “actionable” under Section 301 of the Trade Act of 1974. The USTR determined that China’s aggressive expansion in shipbuilding —subsidizing its domestic industry and securing dominant control over global cargo flows — raised concerns about its strategic leverage over international trade. In response, the USTR issued a “Notice of Proposed Action” on February 21, to impose substantial fees on vessels operated by Chinese companies or built in China that call on U.S. ports. The proposed action is part of a broader effort to strengthen the U.S. maritime industry, curb China’s influence in global shipping, and incentivize domestic shipbuilding.
The public comment period for the USTR’s proposal runs until March 24, allowing industry stakeholders to voice concerns or propose modifications. To submit comments, use the USTR Electronic Portal under docket USTR-2025-0002. Given the significant economic and trade policy implications, the final version of the rule may see refinements based on industry feedback and legal review.
The Proposal
The proposal includes:
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Service Fees on Chinese Vessel Operators: A service fee will be imposed on vessel operators from China, requiring payment of up to $1 million per entry into a U.S. port or up to $1,000 per net ton of the vessel’s capacity. In practice, most ships are expected to incur the maximum $1 million fee per port call. If a vessel makes multiple stops at U.S. ports, the operator will be required to pay this fee for each entry.
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Service Fees on Vessel Operators With Fleets That Include Chinese-Built Vessels: A service fee of up to $1.5 million per port call will apply to any operator with a vessel constructed in China or a fleet that includes such vessels, regardless of their flag or operator nationality. Even if a specific ship was not built in China, its operator may still be subject to the fee based on the overall composition of their fleet. The amount assessed is proportional to the percentage of Chinese-built ships within the fleet. For instance, operators whose fleets consist of at least 50% Chinese-built vessels will face a fee of up to $1 million per vessel for each U.S. port entry. Those with 25% to 50% Chinese-built vessels will be charged up to $750,000 per entry per vessel, while operators with less than 25% Chinese-built ships will pay up to $500,000 per vessel per entry.
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Fees for Operators With Pending Chinese Ship Orders: Operators will incur additional charges ranging from $500,000 to $1 million per vessel entry, depending on the proportion of ships ordered from Chinese shipyards that are scheduled for delivery within the next two years.
To encourage the use of U.S.-built vessels, the proposal offers a reimbursement of up to $1 million per port entry for operators utilizing U.S.-built vessels for international maritime transport services.
The USTR also introduced proposed measures to decrease reliance on Chinese shipping, by incrementally increasing the percentage of all U.S. exports that must be transported on U.S.-flagged or U.S.-built vessels in accordance with the proposed timeline:
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Effective Immediately: A minimum of 1% of U.S. exports must be transported on U.S.-flagged vessels.
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After Two Years: At least 3% of U.S. exports are required to be carried on U.S.-flagged vessels.
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After Three Years: A minimum of 5% of U.S. exports must be transported on U.S.-flagged vessels, of which at least 3% must be on U.S.-flagged, U.S.-built vessels, by U.S. operators.
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After Seven Years: At least 15% of exports must be carried on U.S.-flagged vessels, of which a minimum of 5% must be on U.S.-flagged, U.S.-built vessels, by U.S. operators.
Industry Implications and Concerns
The proposal has sparked debate across multiple industries. Supporters see it as a necessary step toward revitalizing the U.S. maritime sector, reducing reliance on Chinese shipping, and bolstering national security. Critics, however, warn of increased costs, supply chain disruptions, and regulatory ambiguities.
Key concerns include:
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Lack of clarity on definitions: The term “Chinese maritime operator” remains undefined, leaving uncertainty around whether vessels owned by U.S. companies but flagged elsewhere, or those with indirect Chinese investment, would be subject to fees. Further, vessel ownership and operator constructs are complicated to say the least. Consequently, “ownership” is not always a straightforward inquiry, and could fail to capture beneficial ownership or other aspects of “control” through lease or equity interests that may not fall within the language of the proposal without further clarification.
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Potential cost increases: The added costs of shipping goods via Chinese-built or operated vessels could be passed down the supply chain, ultimately impacting U.S. businesses and consumers, which represents a significant escalation in the ongoing trade tensions between the U.S. and China.
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Cargo preference implementation challenges: The U.S. shipbuilding industry currently lacks the capacity to construct a sufficient number of large commercial vessels to accommodate the proposed export cargo requirements. Moreover, the cost of building vessels in the U.S. is significantly higher than in many non-U.S. shipyards. With a short timeline for compliance, the USTR proposal may not fully account for the capacity challenges to finance a rapidly scaled U.S.-flagged fleet.
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Potential for circumvention: Higher port fees may lead to a shift in cargo traffic to Canada and Mexico, where goods could then be transported into the U.S. to avoid direct penalties, with the unintended consequence of actually reducing port traffic, and related revenue, at U.S. shipping ports.
The USTR proposal comes against a backdrop of renewed federal focus on bolstering the U.S. maritime industry. Introduced in the Senate in December 2024, the Shipbuilding and Harbor Infrastructure for Prosperity and Security for America (SHIPS) Act, and likely to be reintroduced in the current Congress, intends to create a fleet of 250 U.S. flagged vessels (up from 87 currently), within the next 10 years. It also looks to bolster the U.S. shipbuilding industry, infusing capital in U.S. yards for commercial and military construction. The SHIPS Act would further create a maritime security advisor in the White House to lead an interagency Maritime Security Board and administer a Maritime Security Trust Fund.
The American Cargo for American Ships Act was also recently introduced in the House, which would require an increase in cargo preference requirements for all U.S. Department of Transportation cargoes from 50% to 100%. The Cargo Preference Act of 1954 requires that 50% of civilian agencies’ cargo and agricultural cargo be carried on U.S. flag vessels.
While there is clear momentum behind reinvigorating the U.S. shipping industry, there are significant issues yet to be ironed out in the implementation of any of these proposed legislative and regulatory measures.
Conclusion
While the proposal aligns with broader efforts to strengthen U.S. supply chain resilience and domestic maritime capabilities, the potential for unintended consequences remains high. Uncertainties around implementation, cost implications, and compatibility with existing regulations suggest that stakeholders should closely monitor developments and prepare for potential trade and operational impacts.
This alert is intended as a guide only and is not a substitute for specific legal or tax advice. Please don’t hesitate to reach out to us with questions.
As part of the “America First” Investment Policy Memorandum, released on February 21, the Trump administration signaled that it may increase restrictions on investments made by American university endowments relating to foreign adversaries, as well as stopping the “granting of university access to supporters of terrorism.” This new policy memo should serve as a warning to colleges and universities that more regulatory hurdles on endowment investment policies and other areas could be forthcoming.
Reporting foreign money by colleges and universities is nothing new. As part of the Higher Education Act, certain institutions must report, for example, any foreign gifts or contracts of $250,000 or more in a calendar year. Institutions that fail to comply could face penalties.
There has been growing concern from some members of Congress and nonprofit groups that foreign adversaries are utilizing college campuses as part of their political influence and counterintelligence campaigns. In 2020, the Department of Education (Department) conducted an investigation into foreign money and influence on colleges and universities, which lent some support to these concerns. Additionally, the protests across many institutions resulting from the Israel/Hamas war have contributed to heightened concerns about foreign influence on college campuses.
In February, two House Republican members reintroduced the Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act (Deterrent Act), which would amend the Higher Education Act by decreasing the reporting threshold to $50,000 for certain covered foreign gifts and contracts (or $0 for “countries of concern”); require the Department to share information with certain agencies, including national security agencies; require certain private institutions to disclose whether they “purchase[], sell[], or hold (directly or indirectly through any chain of ownership) one more investments of concern,” along with other detailed information related to those investments; and prohibit entering into any contract with a foreign country or entity of concern unless a waiver is granted by the Department. Institutions that do not abide by these regulations would face hefty penalties and could lose Title IV funding. The House Education and Workforce Committee has already voted to advance the bill to the House floor.
Congress’ increased attention to the impact of foreign influence in colleges and universities is not limited to investments, funding sources, and contracts, but extends to a variety of other national security areas as well. For example, on March 10, Chairman John Moolenaar of the Select Committee on the Chinese Communist Party addressed a letter to Secretary of Commerce Howard Lutnick requesting a briefing from the Bureau of Industry and Security on concerns over potential export control violations linked to foreign access to U.S. university supercomputers.
As Troutman Pepper Locke continues to track these developments, institutions should consider the following:
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Entrust knowledgeable national security and foreign investment attorneys to assist in conducting audits of endowments to properly assess risk.
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Review and update policies on foreign investments to ensure they align with current and proposed regulations.
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Review or implement mechanisms designed to track and disclose foreign funding sources and contracts.
If institutions are conducting research dealing with sensitive information or technologies, it would be prudent to review current policies and practices in place to comply with export controls and other applicable laws, including in some cases auditing those involved in conducting the research.
Licensed by the U.S. Small Business Administration (SBA) under the Small Business Investment Act of 1958, a small business investment company (SBIC) represents a privately owned and operated investment fund that makes long-term investments in U.S. small businesses. SBICs invest billions of dollars in American small businesses — the drivers of economic growth and jobs in the U.S. A fund primarily becomes licensed as an SBIC to obtain access to low-cost, long-term financing (leverage) from SBA to enable making these private investments.
On March 13, approximately $1.895 billion of “standard” debentures issued by SBICs since the September 2024 pooling and sale of SBA-guaranteed trust certificates for debentures were priced at an interest rate of 4.963% (excluding an annual SBA charge and fees described below), representing a 70-basis point premium to the 10-year Treasury note rate of 4.263%. This interest rate reflected an increase from the 4.380% rate set in the September 2024 pooling. The maturity date for each debenture included in the March 2025 pooling is March 1, 2035. Each debenture may be prepaid in whole (and not in part), without premium or penalty, effective as of specified payment dates. There are no “accrual” debentures in the pooling.
SBA’s standard debentures are unsecured 10-year loans issued by SBICs with interest only payable semiannually. SBA obtains funds enabling it to supply leverage for pooled debentures by guaranteeing payment of trust certificates purchased by traditional purchasers of government-guaranteed notes. SBA then invests the proceeds in SBICs in the form of debentures. SBA-guaranteed trust certificates for debentures are pooled and sold to the public in March and September each year. Most debentures bear a temporary interest rate equal to the FHLBC Fixed Regular Advance Rate (Bank Advance Rate), plus 41 basis points until they are pooled and sold. The interest rate (excluding an annual SBA charge and 3.435% in commitment, user, underwriting, trustee, and selling agent fees) on these debentures is fixed at the time of each pooling, and the maturity date is 10 years from the pooling date. The following chart shows the premium over the 10-year Treasury note rate for each of the last 10 poolings:
|
Pooling Date |
10-Year Treasury Rate |
Premium |
Total Interest Rate (Excluding SBA Charge) |
|
September 2020 |
0.677% |
0.357% |
1.034% |
|
March 2021 |
1.614% |
0.053% |
1.667% |
|
September 2021 |
1.276% |
0.028% |
1.304% |
|
March 2022 |
2.138% |
0.800% |
2.938% |
|
September 2022 |
3.412% |
0.850% |
4.262% |
|
March 2023 |
3.568% |
1.600% |
5.168% |
|
September 2023 |
4.288% |
1.400% |
5.688% |
|
March 2024 |
4.185% |
0.850% |
5.035% |
|
September 2024 |
3.730% |
0.650% |
4.380% |
|
March 2025 |
4.263% |
0.700% |
4.963% |
For additional information, contact:
Christopher A. Rossi (SBIC Practice Group Chair) | 610.640.7846 | christopher.rossi@troutman.com
Michael A. Temple | 248.359.7385 | michael.temple@troutman.com
Patrick J. Bianchi | 617.204.5118 | patrick.bianchi@troutman.com
Tamer Tullgren | 312.201.2432 | tamer.tullgren@troutman.com
Jim Shreve and Joel Lutz, attorneys with Troutman Pepper, were quoted in the March 5, 2025 Cybersecurity Law Report article, “FTC Settlement Spotlights Security of APIs Proliferating Across the Internet.”
“While addressing risks from no-longer-supported software is a common element of many security standards, the requirements in this settlement to disconnect hardware using the unsupported software, or develop a mitigation plan if disconnection is infeasible, is new for an FTC consent order,” Troutman Pepper Locke partner James Shreve told the Cybersecurity Law Report.
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A quarter of companies had their number of APIs increase 100% or more over the past year, according to the Salt Survey Report. At 55% of companies, the API inventory grew by at least 50%. The number of APIs companies are using has jumped because of expanding AI use, Shreve observed.
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The good news, Troutman Pepper Locke counsel Joel Lutz reported, is that “more technical solutions are available today to help identify APIs and inventory them, which is the foundational step to ensuring they are secure.”
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Initial priorities to establish comprehensive API governance go beyond inventorying to “validating the configuration of all those APIs found, and monitoring for newly implemented APIs,” Lutz said.
“The challenge in catching up if a company is behind on API governance,” Lutz noted, “is usually around understanding exactly what the API is doing, keeping documentation accurate and up to date, and ensuring existing APIs are properly configured in accordance with documentation and security standards.” Inadequate focus on documentation was a concern for 13% of Salt’s respondents.
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For the most part, APIs do not pose unique security risks. Thus, “security controls employed in many other contexts help in securing APIs as well,” noted Shreve.
2025 is already shaping up to be an active year for False Claims Act (FCA) litigation. With the recent announcements of executive orders that may expand the FCA as an enforcement tool, as discussed in a recent Troutman Pepper Locke client alert, everyone is keeping a close eye on what is next. In the past few weeks, the U.S. Supreme Court has gotten in on the FCA action.
On February 21, the Supreme Court issued its opinion in Wisconsin Bell v. United States ex rel. Health, holding that requests for reimbursements submitted to the Federal Communication Commission’s (FCC) Education-Rate (E-rate) program are “claims” for FCA purposes. The E-Rate program aims to ensure the availability of telecommunications services, like the internet, to everyone. The FCC advances its mission by providing subsidies for internet and other telecommunication services to low-income consumers and those in rural areas. A significant portion of the funds for the E-Rate program come from private telecommunications corporations, but some of the funds come from the U.S. Treasury. FCC regulations govern the disbursement of the funds. In Wisconsin Bell, the defendants argued that the funds from the program were managed by private corporations and, therefore, requests for reimbursements were not “claims” to the government under the FCA. However, the Supreme Court concluded that if even a small amount of funds from the federal government are intermingled with the private funds, then the program falls within the scope of the FCA. The court emphasized that “all the [FCA] requires is that [federal funds] provide ‘any portion’ — not the whole — of the sums requested.”
The Supreme Court’s interpretation of “claim” will be important to private companies as they brace for enforcement activity from the Trump administration’s Department of Justice (DOJ). In her February 2025 memo, Attorney General Pam Bondi announced that DOJ’s Civil Rights Division and the Office of Legal Policy were preparing a report on how DOJ should approach “encourag[ing] the private sector to end illegal discrimination and preferences, including policies relating to DEI and DEIA.” As mentioned in our prior article, Bondi has indicated that she used Executive Order 14173 (EO 14173), which mandates that private companies must certify that they do not operate any programs promoting DEI that violate applicable federal anti-discrimination laws, as a guide for her enforcement strategy. EO 14173′s certification requirement is an apparent signal of pending FCA enforcement efforts against private companies that receive federal funds while operating DEI programming. These enforcement priorities from DOJ should take on enhanced importance in light of the decision in Wisconsin v. Bell. Given the Supreme Court’s holding, private companies that receive even a very small amount of their funding from the government can still be subject to FCA claims (including DOJ enforcement actions and qui tam lawsuits from private citizens).
This article was originally published on March 17, 2025 and updated on August 13, 2025. It was republished in the July-August 2025 issue of Dispute Resolution Journal.
For commercial parties globally, England has long been heralded as a leader for dispute resolution, particularly in arbitration. To maintain its competitive position, in 2022, the Law Commission of England and Wales conducted a review of the current framework, the Arbitration Act 1996 (1996 Act), and subsequently made recommendations for various improvements to be incorporated into the Arbitration Bill.
This is in-keeping with governmental support of London as an international arbitration hub: its stated hope is that the reforms will “turbocharge the UK’s position as the world-leader in arbitration” by (i) making arbitration “fairer and more efficient by simplifying procedures to reduce costs” and (ii) strengthening “courts’ powers to support emergency arbitration so time-sensitive decisions can be made more easily.”
The new Arbitration Act 2025 (2025 Act) formally came into force on August 1, 2025. It introduces enhancements and brings further clarity to the 1996 Act. Its effect will be to amend the existing 1996 Act, rather than to replace it. Below is a summary of key changes commercial parties should consider:
1. Determining the law that governs the arbitration proceedings:
The 2025 Act provides welcome clarity as to the choice of law governing the arbitration where the parties have failed to expressly state this. In doing so, it effectively reverses the common law position.
Following a period of inconsistency as to the position at common law, the Supreme Court decision in Enka v Chubb [2020] UKSC 38 determined that if an arbitration clause is silent as to the governing law, the choice of law made in the contract containing the arbitration agreement applies to the arbitration proceedings.
The 2025 Act introduces welcome clarity by setting out the position as a matter of statute. This is achieved through the new Section 6A, whereby if the parties have not expressly agreed on the governing law within an arbitration agreement, then the law of the seat of the arbitration will apply to the arbitration proceedings.
The introduction of this default rule is intended to bring more certainty to the question of applicable governing law where an arbitration agreement doesn’t specify one, and to reduce preliminary disputes litigating the choice of law.
Section 6A(2) clarifies that the express agreement by the parties of a governing law to the underlying contract, does not constitute the parties’ express agreement of the law of the arbitration for the purposes of Section 6A(1). Other caveats to the default rule have been included in Section 6A(3).[1]
The default rule does not apply to proceedings that commenced prior to the 2025 Act coming into force.
2. Arbitrators’ power to make an award on a summary basis:
Section 39A provides an express power for a tribunal to make an award on a summary basis where a party has no real prospect of succeeding on a particular aspect or issue of their case. This power is triggered where a party applies for summary disposal of an issue and the parties have not otherwise agreed to exclude this power from the arbitration proceedings. This has the obvious ambition of promoting efficiency and saving the parties time and costs.
3. Challenges to arbitration awards in the English courts based on lack of jurisdiction:
Following the Supreme Court’s decision in Dallah v Pakistan [2010] UKSC 46 and under Section 67 of the 1996 Act, a party could challenge an arbitration award in the English courts on grounds that the tribunal lacked substantive jurisdiction[2]. Until now, this has provided a means to a full rehearing of the dispute, as opposed to a review of the tribunal’s decision. The 2025 Act shall prevent parties from submitting new evidence or grounds of objection to the English court that had not already been put before the arbitral tribunal. Furthermore, the English court shall no longer be able to rehear evidence previously heard by the arbitral turbinal, save when it would be in the interests of justice. Under this section, the court may confirm, vary, set aside, declare an award has no effect (in whole or part), or remit an award to the tribunal for reconsideration.
This provision is therefore expected to reduce the potential delays which parties might incur as a result of jurisdiction challenges.
4. Emergency arbitrator powers:
When the 1996 Act was enacted, it did not include provision for the appointment of emergency arbitrators to provide urgent relief in circumstances where an arbitral tribunal is not fully constituted. Since then, many arbitral institutions have introduced rules to enable emergency arbitrators to make interim orders which are open to modification by a tribunal, once fully constituted.
The amendments introduced by the 2025 Act grant powers to emergency arbitrators to make orders in relation to Section 44 of the 1996 Act (including powers to make interim orders relating to evidence) and peremptory order, which are equal to those made by an arbitral tribunal. Furthermore, the changes included in the 2025 Act permit a party to apply to court for interim relief in support of arbitration, including in relation to third parties. This is a significant power because arbitral tribunals ordinarily have no powers over third parties and can only make decisions concerning the parties to the arbitration agreement. Notably, parties may use this provision to garner the support of the English court against third parties, whether seated in England or elsewhere, for example, to obtain an order for witness evidence from a third party.
5. Extension of arbitrator rights and duties:
The 2025 Act bolsters the 1996 Act legislation by extending the rights and duties of arbitrators. Under the 1996 Act, arbitrators are required to disclose factors affecting their impartiality. The changes to be introduced under Section 23A of the 2025 Act in relation to the appointment of arbitrators extend a duty to disclose relevant circumstances which shall include what they ought reasonably to be aware in addition to what they actually know.
Furthermore, the 2025 Act provides further protection to arbitrators, including immunity from civil suit and exclusion of any liability following the resignation of an arbitrator, unless the resignation was unreasonable.
This provision should provide arbitrators with comfort that they may make decisions, acting reasonably, independently, and in good faith, without fear of civil suit from disgruntled or dissatisfied parties.
6. Power to award costs despite no substantive jurisdiction:
The 2025 Act incorporates amendments to Section 61 of the 1996 Act clarifying that arbitral tribunals may make costs awards even in circumstances where they, or a court, have declared that the tribunal has no jurisdiction in respect of the dispute.
Implications
The 2025 Act applies to arbitration agreements whenever they were made, but it shall not apply to arbitration proceedings which have commenced prior to August 1, 2025 or to any related court proceedings.[3]
When drafting arbitration clauses in cases where the governing law of the main contract and the seat are different, practitioners should consider specifying the governing law for the arbitration clause. If the governing law is not specified in the arbitration agreement and if London is specified as the seat of the arbitration, English law will govern the arbitration agreement. In view of the English court’s pro-arbitration stance and expertise in supporting arbitration, practitioners and commercial parties are expected to welcome the introduction of these provisions which should ultimately reduce satellite litigation as to the law applicable to an arbitration agreement.
Until now, the 1996 Act has been largely unaltered and has proven to be an effective and robust framework for the conduct of arbitration, ultimately culminating in England having forged a reputation as a leading seat for commercial parties globally. The amendments introduced by the 2025 Act constitute positive developments to the UK’s statutory arbitration framework and should bolster England’s reputation as a leader for international arbitration.
[1] The default rule shall not apply to an arbitration agreement derived from a standing offer to submit disputes to arbitration where the offer is contained in a treaty, or legislation of a country or territory outside the UK, Section 6A (3)(a) and (b).
[2] Section 30 (1) Arbitration Act 1996, a tribunal’s competence to rule on its own jurisdiction i.e. as to “(a)whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement”
[3] Section 17(4)(ii) This includes“court proceedings (whenever commenced) in connection with pre-commencement arbitral proceedings or an award made in pre-commencement arbitral proceedings…”. Furthermore, the 2025 Act shall not apply to:“any other court proceedings commenced before the day on which the section making the amendment comes into force” -Section 17(4)(iii).
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Cannabis Regulatory Updates
Suit Against Cannabis Giant Trulieve Underscores Cashless ATM Risks and the Need for Banking Reforms
By
In a February 19 complaint filed in Arizona state court, Texas-based payment processer Switch Commerce LLC argued that multistate cannabis operator Trulieve Cannabis Corp. and its affiliates should be responsible for a $950,000 fine from Visa for their alleged fraudulent use of “cashless ATMs” — not Switch.