The dominant narrative surrounding in-house legal departments emphasizes risk control. Legal is expected to prevent disputes, ensure regulatory compliance, and protect the enterprise from downside exposure. In boardrooms and budget discussions, legal value is often articulated in negative terms: losses avoided, fines reduced, or claims successfully defended.

This narrative, while accurate, is incomplete.

Some of the most valuable work performed by in-house legal teams does not merely internalize risk for the company; it enables customers by quietly reducing friction, clarifying legal boundaries, and building trust. This value is real and consequential, yet unrecognized because it arises as a by-product of Legal’s everyday work rather than as a discrete, customer-facing initiative.

Intellectual Property Practice as Customer Enablement

Intellectual property (“IP”) practice provides a clear illustration of how internal legal work benefits customers. The routine work of in-house IP counsel often includes identifying, challenging, and invalidating patents that pose undue risk to the company’s freedom to operate. While the intended beneficiary of this work is the employer, its effects extend well beyond the firm.

By removing weak or overbroad patents from the landscape, in-house IP counsel reduces uncertainty not only for the company but also for customers who rely on its products and technologies. Customers benefit from clearer operating boundaries, reduced exposure to downstream infringement claims, and greater confidence in adopting and integrating the company’s products.

This knock-on effect of customer enablement is rarely acknowledged as a form of legal value, despite being a predictable outcome of Legal’s ordinary responsibilities.

Legal Risk Clearance as Customer Enablement

The IP example is not unique. It reflects the secondary value of a broader category of in-house legal activity—namely, legal risk clearance.

Across legal disciplines, in-house teams routinely identify, assess, and resolve legal uncertainty to protect the enterprise. When this risk clearance occurs early and effectively, it also stabilizes the environment in which customers interact with the company’s products and services. Legal risk clearance, therefore, functions as a form of customer enablement.

Customers may not see risk clearance, but they notice the results: fewer disputes, clearer rules, safer products, and greater confidence.

Parallel Examples Across Legal Functions

Contracting offers another example. As part of contractual risk clearance, in-house legal teams develop standardized agreements, define fallback positions, and resolve recurring points of contention to manage risk and improve efficiency.

The customer-facing effects are substantial. Standardized contractual frameworks reduce negotiation time, lower transaction costs, and decrease post-execution disputes. Customers benefit from faster onboarding, clearer expectations, more predictable commercial relationships, and, when customers use outside counsel, reduced bills.

In regulated industries, in-house legal teams spend significant time interpreting regulatory requirements and engaging with regulators to align internal practices with evolving standards. This work is undertaken to reduce the company’s enforcement risk.

Early regulatory risk clearance benefits customers by enabling faster approvals, fewer disruptions, and reliable access to compliant products. Customers directly experience these outcomes even if the work is behind the scenes.

Why This Value Is Often Overlooked

This form of value creation is frequently underappreciated because it is indirect, preventive, and embedded in routine legal work. When friction is successfully removed, problems never materialize, and the value remains invisible.

As a result, legal departments are often evaluated based on activity volume or cost control rather than on the conditions they improve for customers and markets.

Why Customer Value Must Be Part of the Legal Value Story

The prevailing approaches to assessing in-house legal performance are incomplete because they focus almost entirely on the enterprise. Legal value is typically described in terms of cost containment and risk avoidance, without considering the external effects of Legal’s work.

Yet much of the everyday work performed by in-house legal teams produces tangible benefits for customers. Through legal risk clearance across areas such as IP, contracting, regulatory compliance, and product safety, Legal reduces uncertainty, removes friction, and builds trust, all of which directly affect customers.

For this reason, any serious account of in-house legal value must consider customer impact. Excluding the customer perspective systematically understates Legal’s contribution and obscures one of its most strategically important roles: enabling others to operate with confidence.

Recognizing customer enablement does not dilute Legal’s traditional mission. It strengthens it. By accounting for the external effects of Legal’s internal work, organizations can more accurately capture the full value of their in-house legal teams, and more deliberately deploy them where that value matters most.

For decades, immigration compliance in corporate transactions was often relegated to a post-closing human resources task, secondary to intellectual property, environmental, and other operational diligence. That approach is no longer defensible. Intensified federal enforcement, expanded use of the successor liability doctrine, proliferating state law compliance obligations, and the growing dependence of U.S. businesses on foreign national labor all mean that immigration compliance must be central to any informed due diligence strategy and reflected in negotiated deal terms to effectively mitigate potential post-closing risk and protect investment value.

Recent enforcement actions signal a renewed and unprecedented focus on worksite compliance, Form I-9 audits, and joint-employer liability, including aggressive scrutiny of subcontractor workforces. At the same time, long-standing but often misunderstood immigration liabilities embedded in mergers and acquisitions (“M&A”) transactions—particularly those involving workforce continuity—have become increasingly visible to regulators, deal teams, lenders, investors, insurers, and other parties central to the dealmaking process.

Immigration due diligence is essential to evaluating deal value, ensuring continuity of operations, and assessing post-closing enforcement exposure, as well as allocating risk through negotiated deal terms. Parties that fail to engage at the right depth and stage of the transaction do so at their own operational and legal peril. This article briefly describes the diligence that every transactional attorney should be prepared to conduct—or outsource—on behalf of their client.

Red-Hot Immigration Enforcement Risk

The intensity of immigration enforcement has historically ebbed and flowed with presidential administrations, but the intensity exhibited by the current administration is unprecedented. Civil Form I-9 audits can result in millions of dollars in fines even when no unauthorized employment is found. If unauthorized employment is found, exposure escalates, and the penalties can be catastrophic: significant monetary fines, debarment from government contracting, business license impact, reputational harm, operational disruption, increased labor costs, and EBITDA compression are the best-case scenario. Indictments and criminal convictions—for both the organization and individual employees—are all on the table.

Immigration and Customs Enforcement (“ICE”) is no longer focusing on low-hanging fruit; instead, they are embracing complex investigations and prosecutions premised on joint-employer liability, successor liability, and subcontractor compliance. Exposure arising from a subcontractor’s violations is no longer hypothetical. Companies can no longer hide behind shell corporations or staffing agencies to circumvent Form I-9 requirements, and, absent a robust and well-negotiated subcontractor agreement with appropriate compliance and indemnification provisions, companies may find themselves on the hook for a third party’s compliance failures.

Deal Structure and Immigration Consequences

The form of an M&A transaction—asset purchase versus stock purchase—has profound immigration implications. A stock deal preserves the employing entity and often supports continuity of immigration sponsorship under successor-in-interest principles, but it also carries forward all historical immigration liabilities to the buyer. By contrast, an asset purchase may limit inherited liability but frequently disrupts visa sponsorship, requiring employers to refile or amend petitions, reverify employment authorization, enroll or re-enroll in E-Verify as required, and, in some cases, terminate employees who cannot promptly transfer or maintain status. These disruptions can undermine deal value by causing loss of critical talent and increasing transition costs.

Another important factor is how employees are treated at closing—for example, as new hires versus continuous employees. Organizations need to be able to defend this choice when the audit arrives, supported by clear, contemporaneous, nonprivileged documentation explaining the rationale and operational steps taken. As part of diligence, buyers should, at minimum, obtain and conduct a privileged review of a risk-based sample of Forms I-9 (and, where applicable, review E-Verify compliance), with escalation to broader review where red flags appear. Sellers should be prepared to facilitate that review, remediate curable defects before closing, and align on transition plans to preserve lawful status and work authorization for key employees. Identified Form I-9 issues may justify purchase price reductions, indemnities, or escrow holdbacks, as well as additional negotiated deal terms (including representations, warranties, covenants, and conditions), and they may potentially implicate required disclosures on corresponding schedules. Additionally, such issues may result in potential exclusions from any representation and warranty insurance (“RWI”) policy.

Hidden Form I-9 Liability in Corporate Transactions

Form I-9 compliance represents one of the most frequently overlooked risks in M&A transactions. When a buyer acquires a workforce through a merger or acquisition, it must either adopt existing Forms I-9 or treat employees as new hires.

Adopting legacy Forms I-9 means inheriting all defects—substantive and technical—associated with those forms. Errors in Forms I-9 are common and can result in fines assessed on a per-form basis. In large transactions, this liability can quickly become material. The risk, however, is not cabined to monetary penalties. The larger risk is that the buyer entity may inherit a partially or wholly unauthorized workforce, thus creating compliance and legal exposure as well as workforce continuity risk. This risk can also drive increased labor costs, particularly in sectors or geographies where labor availability is limited or otherwise commands a premium.

Treating employees as new hires can reduce historical exposure but must be handled carefully. If this avenue is chosen, all new Forms I-9 must be completed no later than three business days from the closing effective date. While some transactions include a pre-closing announcement that provides additional runway to complete the new Forms I-9, many sellers resist pre-closing disclosure to the workforce because of confidentiality obligations, the risk of employee flight, union requirements, customer or vendor instability, or competitive harm if the deal does not close. As a result, buyers often have little to no advance access to the workforce, making it necessary to stand up a rapid, post-closing onboarding process. Attempting to reverify an entire workforce within the first three days after close is a difficult, but not impossible task.

Whatever the buyer’s approach to Forms I-9, E-Verify participation must also be addressed early in transaction planning. If the buyer adopts legacy Forms I-9, it generally cannot create E-Verify cases for existing employees. If employees are treated as new hires, the buyer entity must create E-Verify cases within three business days of the closing effective date and be prepared to manage tentative nonconfirmations (which indicate Form I-9 data entered does not match the records that E-Verify checks against, but do not necessarily mean the employees are not authorized to work in the United States) without taking premature adverse action.

These Form I-9 considerations add risk to the already complex landscape of E-Verify for dealmakers. The decision to implement or terminate E-Verify participation can affect workforce onboarding, employee relations, and potential labor availability, and E-Verify noncompliance creates standalone risk. If acquired employees are assigned to qualifying federal contracts, they may become subject to E-Verify, even if not treated as a new hire for Form I-9 purposes. Moreover, in addition to federal law, a growing number of states and municipalities mandate E-Verify participation for certain employers. The failure to comply can result in business license impact, debarment, or monetary fines. Conversely, other states limit how employers may use E-Verify and have expanded antidiscrimination protections related to citizenship and immigration status, creating additional exposure if onboarding practices are applied inconsistently across locations. In certain sectors or geographies, client contracts may require E-Verify enrollment even if not required by applicable law. The failure to comply with contractual E-Verify requirements may jeopardize existing or prospective contracts or, at best, may result in reputational damage and loss of trust with clients. Thorough review of not only federal and state-level obligations, but also all material customer contracts, during diligence is critical to preventing these consequences.

At the end of the day, Form I-9 compliance is not merely an HR task to be parked on a post-closing checklist. It is a critical window into workforce integrity and the overall compliance culture, as well as a mechanism for identifying, quantifying, and mitigating risks to deal value, including exposure to fines, operational disruption, and EBITDA pressure. Buyers should conduct diligence that assesses not only financial risk, but also reputational, operational, and continuity risks embedded in the target’s workforce and verification practices. While many Form I-9 defects are a problem money can solve, risks such as reputational damage or loss of key labor can have far-reaching consequences that materially erode deal economics and undermine integration plans.

Subcontractors and Joint Employer Risk

Immigration enforcement increasingly targets subcontractor arrangements, particularly where buyers attempt to insulate themselves from liability. While employers cannot directly verify subcontractor employees’ work authorization, robust pre-closing diligence and strong contractual controls are necessary to mitigate joint employer findings. Diligence should extend beyond the target’s direct payroll to high-risk relationships—subcontractors, staffing agencies, and other sources of temporary workers—and include a review of subcontractor agreements for applicable immigration compliance, indemnification provisions, audit rights, and notice covenants for government inquiries or audits.

A Transaction’s Impact on Foreign National Employees

Foreign national employees are often central to a target company’s operations. Visa categories such as H-1B, L-1, E-1, E-2, O-1, and TN are highly sensitive to changes in corporate structure. Transactions that fail to account for these dependencies risk immediate work authorization gaps, costly refilings, or forced departures.

In addition, pending green card sponsorship creates long-term exposure. Labor certifications under the PERM regulations, immigrant petitions, and adjustment applications can be invalidated by changes in legal entity, geographic location, or job duties—resetting years of progress and harming employee retention.

Immigration Due Diligence as a Deal Standard

Immigration law is complex and nuanced. At a minimum, practitioners should review the following when conducting immigration due diligence for a transaction:

• Forms I-9:
  • Ensure that a Form I-9 exists for each employee.
  • Determine error rate on existing Forms I-9.
  • Review electronic system (if used).
  • Review I-9 retention practices, including purging.
  • Determine any prior audits (state or federal) and their outcomes.
• E-Verify:
  • Determine if target is an E-Verify participant and enrolled hiring sites.
  • Determine if participation is mandatory or required by client contract.
  • Determine level of compliance.
  • Determine any prior audits (state or federal) and their outcomes.
• Subcontractors:
  • Assess which workers are employed by subcontractors or staffing agencies.
  • Assess if any temporary workers in operationally critical roles.
  • Review subcontractor agreements.
  • Assess if subcontractors used to circumvent E-Verify obligations or actual or constructive knowledge.
  • Work with employment specialists to assess potential misclassification risk.

Conclusion

Immigration compliance is no longer a peripheral issue: It is a core transactional risk with direct financial, operational, and reputational consequences. As enforcement intensifies and global mobility becomes increasingly regulated, immigration due diligence has emerged as a required discipline in corporate transactions. Addressing these issues early in the transaction positions buyers to identify potential risks and adjust valuation, negotiate targeted indemnities or holdbacks, structure deal terms around identified risks, and sequence post-closing remediation to protect deal economics and continuity of operations.

For dealmakers and counsel, the question is no longer whether to conduct immigration due diligence, but how early and how deeply it is integrated into the transaction process—from preliminary risk screens and data requests at the letter of intent (“LOI”) stage, to targeted sampling and remediation planning during confirmatory diligence, through to integration playbooks and post-closing monitoring to protect the continuity of operations and minimize EBITDA pressure. The choice is simple: integrate immigration diligence into the deal, or potentially pay for it later.

In large part due to the significant increase in special purpose acquisition company (“SPAC”) formation in the financial markets over the past few years, there has been a similar increase in SPAC-related litigation—most notably in the Delaware Court of Chancery. While some of the suits filed are standard securities class action matters, the more interesting disputes (to the writers of this article, of course) allege breaches of fiduciary duties (i.e., direct action breach of fiduciary class action lawsuits). As of the writing of this article, none of these fiduciary duty suits has been tried to verdict.

The primary focus of the fiduciary litigation is the alleged inaccuracy and insufficiency of public disclosures during the SPAC merger process. SPACs (often referred to as “blank check” companies) raise capital as a vehicle to take private companies public (“de-SPAC” transaction). Generally, the disagreements regarding the public disclosures involve the periods leading up to the de-SPAC transaction. Additionally, premerger SPAC shareholders have alleged that fiduciaries recommended unfair de-SPAC transactions and that SPAC insiders engaged in self-dealing.

SPACs Explained

On January 24, 2024, the Securities and Exchange Commission (“SEC”) published Final Rule S7-13-22, with the stated purpose of “enhanc[ing] investor protections in initial public offerings by special purpose acquisition companies . . . and in subsequent business combination transactions between SPACs and private operating companies.”^[1] In that rule, the SEC defined SPACs as follows: “[S]pecial purpose acquisition companies . . . are shell companies organized and managed by a sponsor for the purpose of merging with or acquiring one or more unidentified private operating companies, commonly known as a de-SPAC transaction, within a certain time frame.”^[2]

SEC Final Rule S7-13-22 continues to state:

The de-SPAC transaction is a hybrid transaction that contains elements of both an initial public offering . . . and a merger and acquisition . . . transaction. While structured as an M&A transaction, the de-SPAC transaction also is the functional equivalent of the private target company’s IPO, because it results in the target company becoming part of a combined company that is a reporting company and provides the private target company with access to cash proceeds that the SPAC had previously raised from the public. As part of this process, the shareholders of the SPAC go from owning shares in the shell company to owning shares in a combined company that conducts the business of the private target. As a result, the de-SPAC transaction implicates disclosure and liability concerns associated with both IPOs and M&A transactions.^[3]

The SEC also sets forth the following regarding the structure and life cycle of a SPAC:

1. SPAC initial public offering (“IPO”): Once formed, a SPAC will conduct its IPO in the form of a firm commitment underwritten IPO of $5 million or more in units consisting of redeemable shares and of warrants.^[4]
2. IPO proceeds placed in escrow: Following its IPO, a SPAC places all or substantially all of the IPO proceeds into a trust or escrow account.^[5]
3. Trading period: Typically, the SPAC registers its shares and warrants under section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and lists the units for trading on a national securities exchange.^[6]
4. Target identification: Next, the SPAC seeks to identify a target company for a de-SPAC transaction within the time frame specified in its governing documents. The governing documents often provide a time frame of twenty-four months, but it can be as long as thirty-six months. If the SPAC does not complete the de-SPAC transaction within that time frame, it may seek an extension or dissolve and liquidate.^[7]
5. Merger announcement: If the SPAC enters into a business combination agreement with a target company, the SPAC files a Form 8-K announcing the transaction and detailing certain information on the material terms of the business combination agreement.^[8]
6. Shareholder vote: Prior to the closing of the de-SPAC transaction, the shareholders of the SPAC typically have the opportunity to either (a) require the SPAC to redeem their shares and receive a pro rata share of the amount in the IPO proceeds and related assets held in trust or escrow or (b) remain a shareholder of the surviving company after the business combination.^[9]
7. Private investment in public equity (“PIPE”) financing: In order to offset aforementioned shareholder redemptions, or to fund larger de-SPAC transactions, SPACs often conduct additional private capital-raising transactions, typically in the form of PIPE transactions.^[10]
8. Proxy statement filing: Generally, shareholder approval is required for certain relevant items during the de-SPAC transaction (e.g., amendments to the governing documents of the SPAC or authorization of additional securities for issuance). In such instances, a SPAC provides its shareholders with a proxy statement on Schedule 14A of an information statement on Schedule 14C.^[11]
9. Tender offer: After issuances of required registration and proxy statements, the SPAC may disseminate a tender offer statement for the redemption offer to its security holders with information about the target company.^[12]
10. Merger completion / de-SPAC transaction: After the completion of the de-SPAC transaction, the combined company must file a Form 8-K within four business days that includes information about the target company equivalent to the information that a new reporting company would be required to provide when filing a Form 10 under the Exchange Act.^[13]

For the purposes of the fiduciary duty litigation, relevant actions occur between step #5 (merger announcement) and step #9 (tender offer) noted above. It is during this time period when SPAC shareholders evaluate the accuracy and sufficiency of public disclosures made by the SPAC sponsors. Specifically, at this time, the SPAC shareholders rely on the aforementioned disclosures to inform their decision about whether to opt into the merger or redeem their shares at par value plus interest.

Important SPAC Decisions

Denial of Motion to Dismiss: In re MultiPlan Corp. Stockholders Litigation

In the first decision to test Delaware fiduciary principles in a de-SPAC context, Vice Chancellor Lori Will denied a motion to dismiss and applied entire-fairness review to the MultiPlan merger, concluding that the sponsor’s “founder shares” and the board’s parallel incentives created a disabling conflict, and that materially incomplete disclosures deprived public stockholders of a fully informed choice about whether to redeem at the $10-per-share trust value or remain invested.^[14] The court framed the harm as a direct injury to each investor’s personal redemption right (and not, as in most mergers and acquisitions (“M&A”) litigation, a derivative injury) and confirmed that SPAC fiduciaries owe the traditional duty of candor even though investors already possess the contractual right to exit. Although the merits never reached trial, the parties settled for $33.75 million, now an informal reference point for valuing “MultiPlan claims.”

Dismissal: In re Hennessy Capital Acquisition Corp. IV Stockholder Litigation

In this decision, the Delaware Court of Chancery delivered the first post-MultiPlan dismissal of a SPAC fiduciary-duty suit, underscoring that entire-fairness scrutiny does not relax Delaware’s pleading standards.^[15] Vice Chancellor Will noted in that case that, after the MultiPlan decision, “SPAC lawsuits are ubiquitous in Delaware.”^[16] The court held that sponsor conflicts and a steep post-merger price decline, standing alone, cannot sustain a claim; plaintiffs must allege specific, knowable omissions that actually distorted the redemption decision. Because Canoo’s strategic overhaul took place only after the merger and there were no well-pled facts showing that the SPAC fiduciaries knew of undisclosed problems pre-closing, the complaint failed.

More Recent Case: Solak v. Mountain Crest Capital

On October 18, 2024, the Delaware Court of Chancery denied the defendants’ motion to dismiss in a failure-to-disclose matter even though the court stated that the allegations were “not strong” as compared with other SPAC cases that survived motions to dismiss.^[17] In this matter, John Solak v. Mountain Crest Capital, LLC, the defendant raised $57.5 million through an IPO on January 8, 2021. On April 7, 2021, the defendant announced a merger agreement with Better Therapeutics.

The defendant filed with the SEC and issued proxy statements to shareholders to approve the merger on October 12, 2021. The shareholder vote meeting was scheduled for October 27, 2021, and the deadline to redeem shares was October 25, 2021. The proxy statement valued the shares at $10, but the dilution of the redemptions and founder shares, along with the costs of the merger, reduced the actual cash balance to less than $7.50 per share.

Investors Split into Two Groups: In re InterPrivate

The shareholder complaint in the In re InterPrivate litigation^[18] shows how potential divergent shareholder class interests play out when investors split into two economically divergent groups. In the 2024 complaint, plaintiffs say the sponsor and directors steered the merger with Aeva, masked problems, and thereby impaired a fair redemption decision. The complaint adds an allegation that the price was misleading and that the value of what was purchased was not $10 per share but instead $8.50 after taking into account cash dilution as a result of the merger.

But roughly 50 percent of the issued and outstanding shares in fact redeemed at $10.20 (“Redemption Class”). Others kept (or later sold) shares that soon traded below $3 after trading at $16.16 the first day of trading (“Market-Loss Class”). The case appears headed toward settlement as of the time of this writing but presents interesting issues for consideration for damages estimation in this new twist on the MultiPlan line of cases.

Why InterPrivate Complicates Damages and Class Structure

Two economic cohorts:

• The Redemption Class claims it was tricked out of the secure $10 trust value and therefore seeks rescissory damages measured against that floor.
• The Market-Loss Class alleges classic stock-drop harm, typically quantified with an event-study anchored in the price at the time of post-merger corrective disclosures.

Typicality and predominance questions:

Because the Redemption Class and the Market-Loss Class rely on different valuation baselines, the defendants argued that Rule 23 requires separate subclasses with distinct experts and damage models; otherwise, the predominance of common issues breaks down, and the named plaintiff may not be typical of both groups.

SPAC Damages and Open Questions

SPAC damages present a unique twist on estimation of damages in Delaware fiduciary cases. The presence of the redemption option and the subsequent outcome in share price present the potential for two different estimates to exist in tension. Forensic accountants can help litigators navigate those tensions with the following general principles:

• Redemption-floor model. This model focuses on the potential damages to the Redemption Class. Lost-redemption damages equal (Trust-per-share + interest – actual disposition price) × shares. The analyst must confirm each holder’s election record and any interest earned in trust. Prejudgment interest is then subsequently applied.
• Market-loss model. This model focuses on potential damages to the Market-Loss Class. Apply an event-study to isolate price inflation attributable to the undisclosed facts at closing; then measure decline when the truth emerges (often the first post-merger corrective disclosure). Prejudgment interest is then subsequently applied.

If subclasses are required, experts must run both models and provide the court with parallel damages schedules. If a single class survives, experts should still show how aggregate damages decompose by cohort to aid plan-of-allocation negotiations and fairness-hearing scrutiny.

The following open questions remain:

• Will Delaware approve an all-in settlement when cohorts’ economic interests diverge?
• How will judgment offsets be calculated when some investors already recovered $10 through redemption?
• Will future SPAC litigants plead around InterPrivate by appointing separate subclass representatives at the outset, or will they instead focus pleading on only the Redemption Class?

Together, MultiPlan sets the fiduciary-duty and entire-fairness framework, while InterPrivate spotlights the practical valuation and certification hurdles that arise once redeeming and nonredeeming investors pursue the same direct claim.

Conclusion

The rise of SPACs was a unique phenomenon in corporate and securities law, and just as a wave of Delaware SPAC litigation from the 2020–2021 SPAC wave makes its way through Delaware courts, another wave of major SPAC deals is emerging. This article can serve as a guide to help litigators and forensic accountants navigate the unique fiduciary and damages issues in SPAC matters.

Appendix: Case Status Cheat Sheet

While many Delaware SPAC cases are pending, the chart below provides a representative sample of some of the more significant open SPAC matters in Delaware and summarizes the questions at issue and case status for each.

1. SEC Final Rule S7-13-22, at 1 (Jan. 24, 2024). ↑

2. Id. at 8. ↑

3. Id. at 8–9. ↑

4. Id. at 9. ↑

5. Id. at 10. ↑

6. Id. ↑

7. Id. at 10, n.12. ↑

8. Id. at 10–11. ↑

9. Id. at 11. ↑

10. Id. ↑

11. Id. at 11, 12. ↑

12. Id. at 12. ↑

13. Id. at 13. ↑

14. In re MultiPlan Corp. Stockholders Litig., No. 2021-0300-LWW (Del. Ch. Jan. 3, 2022). ↑

15. In re Hennessy Cap. Acquisition Corp. IV S’holder Litig., No. 2022-0571-LWW (Del. Ch. May 31, 2024). ↑

16. Id. at 1. ↑

17. John Solak v. Mountain Crest Cap. LLC, No. 2023-0469-SG (Oct. 18, 2024). ↑

18. Katz v. Fattouh (In re InterPrivate), No. 2024-0598-LWW (June 6, 2024); see also Aeva Techs., Inc., Form 10-Q, at n.14 (quarterly period ended Mar. 31, 2024) (contemporaneous description of the In re InterPrivate litigation). ↑

First Brands Group, LLC (“First Brands”) is a leading global manufacturer and supplier of automotive aftermarket parts, having acquired its portfolio of twenty-five aftermarket leading brands largely through the incurrence of third-party debt.

On September 28, 2025, First Brands and certain affiliates filed voluntary petitions for bankruptcy relief. In connection with the filings, First Brands disclosed $6.1 billion in aggregate principal amount of on–balance sheet outstanding funded debt obligations (including an asset-based loan facility), $2.3 billion in aggregate “off–balance sheet” financings incurred through special purpose vehicles, and about $800 million in unsecured supply chain financing liabilities.^[1] First Brands, additionally, had about $2.3 billion in factoring liabilities.

The extent of First Brands’ liabilities had not previously been known because a significant amount of its liabilities was comprised of off–balance sheet liabilities such as factoring arrangements. Under U.S. generally accepted accounting principles, factoring arrangements may not be required to appear on a company’s balance sheet because ownership of the asset has been transferred and the seller has no right or obligation to repurchase the asset. In addition, when a company arranges factoring programs for its own customers, those arrangements may be classified as off–balance sheet if the supplier’s obligation to the company remains a trade payable.

While financing sources were caught off guard by the extent of First Brands’ liabilities, query whether those financing sources should have been given the extensive amount of debt that First Brands incurred in connection with its acquisition strategy. First Brands’ high leverage, its ability to obtain debt from private capital sources speedily with limited diligence, and the general ability to maintain debt off–balance sheet made masking financial difficulties a realistic outcome.

The real surprise for financing sources in the First Brands case came when allegations were made that First Brands had not transferred proceeds of receivables to factors and that some invoices were financed more than once. These actions by First Brands should be the catalyst for financing sources to try to put themselves in the best position possible to detect and prevent double counting or evaporation of collateral.

How financing sources accomplish those twin goals and understanding the relevant types of working capital financings implicated are the focus of this article.

Understanding Relevant Types of Financing

Practical Tips to Protect Against Double Counting and Evaporation of Collateral

Many observers believed that the nature of First Brands’ liabilities as off–balance sheet financings was the reason for the demise of the business; however, ultimately, the over-leveraging of First Brands was the real culprit. Whether a financing is an on– or off–balance sheet liability, lenders and factors need to take steps to understand the company’s entire “debt” position and to keep track of collateral.

Due Diligence Is Crucial

Lenders need to make sure not to shortchange fully verifying collateral. Speed of execution is a benefit to getting deals done but should not stand in the way of completing robust financial and other diligence.

Lenders and factors should go beyond standard audits of collateral and demand comprehensive financial disclosures. First Brands allegedly prevented lenders from inspecting collateral, which is an obvious red flag.^[2]

Implement an Early Warning System

While financial covenants act as a “canary in the coal mine” in most deals, those covenants can be manipulated. When relying on collateral, ongoing monitoring of collateral and independent verification of accounts receivable can avoid disappearing collateral and improper recordkeeping. When factors did not receive some meaningful amount of expected proceeds from the receivables sold to them, early warning mechanisms should have resulted in alarm bells ringing.

Independent Oversight

As businesses grow (sometimes aggressively, as was the case with First Brands, corporate governance needs to include at least an independent director and auditing committee. Independent oversight of collateral, including agreed-upon procedures, adds an extra layer of transparency.

With regard to First Brands, the founder and his brother, the chief financial officer, allegedly had a history of limiting information to financing sources,^[3] and there were prior lawsuits against the founder claiming that he hid information. Having independent oversight may have helped prevent (or at least raise concerns over) the lack of transparency.

Lenders’/Factors’ Toolkits

To understand the full scope of a company’s liabilities, a lender should request disclosure of factoring arrangements, limit the amount of factoring, and require granular collateral schedules, annual updates of same, and notice of duplicate invoices. A factor should understand the scope of competing liabilities and require collateral verification. While some of these safeguards rely on the company being forthcoming, these concepts are a good start to an effective “tool kit” of action items. Lenders and/or factors also should require updated Uniform Commercial Code lien searches and random inspection of collateral.

For greater control, a lender and/or factor should require a dedicated account for the collection of receivables that are pledged to it, such as a lockbox or an account subject to exclusive control. In some asset-based loans and in factoring arrangements (particularly those that are nonrecourse), proceeds then should be swept daily for application to the outstanding debt or forwarding of payment to the factor.

As set out in the Receivables Purchase Agreement filed with the court, First Brands acted as the “servicer” or “collection agent” of/for the accounts receivable, which were required to be deposited into an account over which the factor had control or, if the factor agreed, in another company account. Upon receipt of the proceeds into the applicable account, First Brands was required to forward those payments to the factoring counterparty within a prescribed period of time. First Brands did not comply with its obligation to forward proceeds of the sale of the receivables. To avoid this possibility, a company should not be permitted to be the sole servicer for the collection of receivables in a factoring arrangement as it was in the First Brands matter. An account that is merely subject to control or relies on the company to forward proceeds may not be sufficient to ensure that the company delivers the proceeds.

Conclusion

While it is hard to protect against fraud, implementing protective measures to avoid double counting or disappearance of collateral can reduce lenders and factors’ exposure.

1. Declaration of Charles M. Moore in Support of Debtors’ Chapter 11 Petitions at 14, In re First Brands Group, LLC, No. 25-90399 (CML) (Bankr. S.D. Tex. filed Sep. 28, 2025). ↑

2. Julie Steinberg, Robert Smith, & Eric Platt, How Apollo, Soros and Others Spotted Red Flags at First Brands, Fin. Times (Nov. 14, 2025). ↑

3. Eliza Ronalds-Hannon, Irene Garcia Perez, Davide Scigliuzzo, Reshmi Basu, & Jonathan Randles, First Brands Collapse Blindsides Wall Street, Exposing Cracks in a Hot Corner of Finance, Bloomberg News (Oct. 10, 2025, at 10:24 AM ET). ↑

High Net Worth (“HNW”) and Ultra-High Net Worth (“UHNW”) families often form family offices to address three priorities: privacy, control, and continuity. Lawyers and advisors to such families know that these goals cannot be achieved with sophisticated structures alone. Indeed, the legal structure is just one part of the equation. The real work, and the real risk, lies in aligning the decisions of the people operating and impacted by the structures with those priorities.

In my practice, I have seen thriving family enterprises deteriorate not from poor legal and tax planning, but from poor decision-making and the failure to account for economic and familial realities. I’ve also seen families preserve and expand wealth because they did the internal work and embraced governance that accounted for human behavior just as much as financial strategy. As a result, I am convinced that modern family office advisory work sits at the intersection of law, governance, and behavioral finance. Lawyers who want to serve this client base must be fluent in all three.

The New Era of Family Offices

Family offices have existed for generations, but their role has expanded dramatically in the last decade. Liquidity events, business exits, intergenerational transfers, and rising private wealth have pushed families to professionalize their internal systems. As a result, lawyers are more involved than ever before, not just as estate planners or corporate counsel, but as architects of long-term strategy.

The modern family office is no longer defined by investment management alone. It is a hub that coordinates legal compliance, governance, tax strategy, philanthropy, real estate, operating companies, and family education. It is, in many ways, the “enterprise platform” for generational wealth.

But overreliance on complex legal and tax strategies exposes families to bias, and they ignore the basic realities of human behavior. This is where behavioral finance becomes indispensable.

The Legal Architecture Still Matters—But It’s Not Enough

Business lawyers advising family offices must, at a minimum, understand the central set of legal considerations:

• Entity selection and jurisdictional advantages
• Multilayered trust structures
• Tax planning across generations
• Regulatory exemptions under the Investment Advisers Act
• Fiduciary duties and conflict management
• Internal controls, oversight, and compliance protocols

These are fundamental. But they are also insufficient unless paired with an appreciation of the behaviors that shape how families actually operate.

For example, families often choose entity structures that mirror long-held beliefs about control rather than prioritize what best protects the enterprise. A founder’s overconfidence may lead to centralized decision-making that exposes the family to unnecessary risk. Anchoring bias may cause a family to cling to a valuation from the liquidity event, influencing everything from investment strategy to internal compensation. Present bias, our natural tendency to prioritize today over tomorrow, is one reason estate planning is delayed until it becomes an emergency.

Legal tools can mitigate these risks, but only if they are designed with the underlying human tendencies in mind.

Where Behavioral Finance Adds Value

Behavioral finance helps advisors understand the predictable ways people make irrational decisions, especially under pressure or uncertainty. In the family office context, several patterns appear repeatedly.

1. Cognitive Biases in Wealthy Families

• Overconfidence can lead founders or next-generation leaders to overestimate their judgment in unfamiliar asset classes.
• Loss aversion often causes overly conservative investment shifts after a downturn.
• Confirmation bias affects hiring, investment committee decisions, and selection of outside advisors.
• Anchoring on past successes or business valuations can distort long-term planning.

2. Emotional Dynamics

Wealth magnifies emotional realities rather than diminishing or erasing them. The enterprise is impacted when, for example:

• Mortality avoidance delays estate and succession planning.
• Sibling dynamics play out through governance disputes.
• A founder’s identity becomes intertwined with control.
• Guilt and fear influence inheritance structures.

If lawyers ignore these dynamics, even the strongest estate plan will fail in practice.

3. Money Scripts and Intergenerational Beliefs

Every family carries inherited narratives about wealth: scarcity, abundance, secrecy, responsibility, entitlement. These scripts shape how individuals behave within a family office, often more than any governing document.

A key role for advisors is helping clients identify the narratives that support longevity (and the ones that quietly undermine it).

Governance as a Behavioral System

Effective governance is not about thick binders or elaborate flowcharts. It is about creating processes that help people make better decisions.

When families understand that governance is a behavioral tool, not merely a corporate requirement, they engage with it differently. A well-designed governance system:

• Clarifies roles and authority
• Creates consistent decision pathways
• Reduces power conflicts
• Establishes norms for transparency
• Adds friction where needed (e.g., cooling-off periods)
• Provides accountability without eroding trust

Family constitutions, investment policy statements, trustee guidelines, and dispute-resolution protocols all serve a behavioral purpose: They reduce the cognitive load of decision-making and create structure in moments of uncertainty.

I often tell clients that governance is a form of love. It protects relationships while protecting the enterprise.

Designing the “Behavioral Family Office”

Lawyers who advise family offices have a unique opportunity to help families build systems that acknowledge how people actually behave, not how we wish they would. A modern advisor approach includes five essential steps:

1. Start with Purpose

Purpose is not a tagline; it is a strategic anchor. Families who articulate their shared purpose experience fewer conflicts and make more consistent decisions.

2. Map the Decision Network

Understanding who influences whom is as important as understanding who legally holds authority. Influence, not titles, drives most family office outcomes.

3. Identify Behavioral Risks Early

Common risks include:

• Founder dependency
• Concentrated decision power
• Lack of development of the next generation
• Emotional spending masked as “strategic”
• Avoidance of difficult conversations

A behavioral risk assessment is as important as tax analysis.

4. Build Structures That Nudge Good Decisions

Examples include:

• Incentive trusts that reward milestones
• Governance boards with diverse voices
• Voting structures that prevent concentration of authority
• Independent committee members
• Required education or training before accessing capital

When legal design aligns with behavioral insight, families are more likely to stay aligned.

5. Develop a Succession Process, Not a Moment

Succession fails when it is treated as a task or event. It succeeds when it is treated as a gradual transfer of authority, relationships, and wisdom.

The Lawyer as Architect of Wealth, Governance, and Decision Systems

Modern family office clients are not looking for technicians alone. They seek advisors who can think holistically. Professionals who understand legal frameworks, business strategy, and human behavior are most effective.

Lawyers who embrace this broader role become:

• Navigators in moments of conflict
• Interpreters of family dynamics
• Architects of governance and continuity
• Guardians of legacy
• Advisors who protect both the enterprise and the people behind it

In many cases, we are the first professionals families call when something feels “off,” long before an accountant or investment advisor is aware of the issue. That trust creates both an obligation and an opportunity.

Conclusion

The work of advising family offices demands more than legal acumen. It requires empathy, strategic thinking, and a clear-eyed understanding of how people behave when money, identity, and family intersect. When lawyers integrate behavioral finance with traditional legal frameworks, we help families build legacies that endure.

Family offices will continue to evolve, and the most effective advisors will evolve with them. For business lawyers willing to expand their toolkit, this is one of the most meaningful and impactful areas of practice today.

If you’re a lawyer reading this article, you know far too well that this job requires juggling many responsibilities at once, from managing demanding expectations and keeping your team on track to navigating constant deadlines.

If you read that line again, you will see that these responsibilities mirror what mothers do every day. We practice these skills not just forty to sixty hours during the workweek, but 24-7. I write this article as a full-time plaintiff personal injury litigator / trial lawyer in my eleventh year of practice and a mom to a two-year-old and a four-year-old.

You might be thinking, “How does navigating a toddler’s meltdown translate into being a better lawyer?” Let me answer that question by sharing my insight into the parallels between motherhood and the practice of law. I hope by the time you finish reading this article, you’ll see just how much the unique skillsets of “lawyer moms” strengthen the way we show up as attorneys—often in ways that benefit clients and teams every single day.

Working with Demanding People

As a lawyer, your clients, opposing counsel, supervisors, and judges place significant pressure on you constantly. The job requires creative problem-solving, steady negotiation, and reframing expectations. Whether you’re asking for an extension or pushing back on an unrealistic demand, you’re continually managing what others want and guiding them toward what’s actually reasonable.

As a mom, you deal with the demands of kids whose wants aren’t always rational. When they don’t get what they want, the reaction can be loud and dramatic. You quickly learn how to redirect, offer practical compromises (like ten minutes of television to avoid a bedtime tantrum), and stay calm through the chaos. That patience, quick thinking, and careful expectation-setting show up every day in legal practice.

Leading Your Team to Do Their Best Work

No matter how long you’ve been practicing, as a lawyer, you lead a team. That team includes court reporters, interpreters, paralegals, associates, and law partners. The practice of law is collaborative, and the stronger you are at guiding and supporting the people around you, the better results you get for your clients.

The stakes as a leader are also high as a mom. You’re leading your children toward becoming independent, happy, and fulfilled people. Lawyer moms also find themselves leading the adults who shape their child’s life, from teachers to grandparents to coaches.

Managing Competing Deadlines and a Busy Schedule

All lawyers are busy, and trial lawyers can be even busier. We learn to juggle deadlines and obligations that constantly shift with case developments, while also thinking ahead to what needs to be scheduled—depositions, client meetings, and everything else required to keep a case moving forward.

A mom is the ultimate juggler at home. She orders diapers before they run out. She applies for preschool early so her child gets a spot. She schedules haircuts in time for picture day. She often keeps track of the entire family’s medical appointments, too. She’s an expert at managing a full calendar to make sure everything her child needs is planned for and taken care of.

Regulating Emotions

Has opposing counsel ever yelled at you? Ever stood before a judge having a bad day? Has a client insisted on something the law doesn’t support? Being a lawyer often means staying calm and guiding a situation toward a reasonable outcome.

A mom has mastered the art of staying cool as a cucumber in stressful situations and isn’t thrown off by heightened emotions. How you react to your child affects their well-being, so you learn not to sweat the small stuff. That perspective helps you see the big picture and keep going.

Practicing the Art of Resilience When You “Lose”

With a career in law comes pressure and stress. As a lawyer, you have days where you “lose,” whether a motion doesn’t go your way or a deposition feels like a failure. A good lawyer is resilient—able to bounce back immediately, refocus, and keep pushing forward for the client.

Resilience is a mom’s superpower. You know your children depend on you. So you see both good and bad moments in your child’s life and push on with the same resilience that you carry with you every day.

* * *

Motherhood has made me a stronger lawyer, and I know I’m not alone. Lawyer moms bring resilience, perspective, and an ability to stay on their A-game even when things get messy.

I hope that the legal community recognizes that having a lawyer mom as part of your legal team is incredibly valuable to your firm and your clients.

The insured covenant provisions of an insurance policy set forth a series of ongoing covenants and obligations binding on the insured with respect to the coverage under the policy.^[1] In some insurance policies, coverage under the policy is explicitly conditioned on the insured’s compliance with such covenants and obligations, provided that the insurer has suffered actual prejudice as a result of noncompliance. In some U.S. states, case law or statute imposes an insurer prejudice requirement for forfeiture of coverage to result from the insured’s covenant noncompliance, even if the policy in question does not set forth such a requirement.

In a modern representation and warranty insurance (“RWI”) policy,^[2] however, all or almost all of an insured’s ongoing covenants and obligations are made subject to an explicit insurer prejudice requirement before there will be a forfeiture or limitation of coverage due to noncompliance. The purpose of such a provision is typically to prohibit the insurer from denying or limiting coverage to an insured based on the insured’s covenant noncompliance unless and only to the extent that the insurer has been actually prejudiced by the noncompliance, with the burden of proof on the insurer. Such an insurer prejudice provision is favorable to the insured.

This article addresses the question of what measure of evidence might demonstrate insurer prejudice sufficient to permit an RWI carrier to deny or limit coverage based on an insured’s noncompliance with policy covenants and obligations, for the purpose of an insured’s refuting an assertion of insurer prejudice.

Anatomy and Meaning of the Insurer Prejudice Provision

“Any failure of an Insured to comply with Clauses 7.2 (except as provided in Clause 7.4), 7.3, 7.7, 8.1, 8.2 or 10.10 shall not relieve the Insurer of its obligations under this Policy;”

For examples of the wording of these sections, please refer to the Appendix.

The foregoing portion of the insurer prejudice provision effectively prescribes that the insured’s covenants and obligations in the RWI policy are independent of the insurer’s obligation to insure loss under the policy. Thus, an insured’s noncompliance with one or more of such covenants and obligations will not result in a forfeiture or limitation of any insured’s coverage under the policy, except and only to the extent provided in the remaining portion of the insurer prejudice provision, as discussed below.^[3]

“however, the Insurer shall be entitled to reduce the amount of Loss payable under this Policy to reflect the extent (but only the extent) to which the Insurer’s position has been actually prejudiced by such failure,”

The foregoing portion of the insurer prejudice provision sets forth a limited exception to the independent covenant portion of the provision. To the extent that the insured’s failure to comply results in actual prejudice to the insurer, the insurer can reduce the amount of loss it is obligated to cover under the policy.

“with the Insurer having the burden of proving such actual prejudice and such amount.”

As will be discussed below in the section titled “Applicable Delaware Law in the Absence of an Insurer Prejudice Provision,” the issue of whether the insurer or the insured has the burden of proving insurer prejudice can be of exceptional significance. Moreover, the burden on the insurer of proving the amount of loss affected by such prejudice may be of even greater significance in constraining the limiting effect of the insurer prejudice provision.

In some cases, applicable law may shift the burden of proof from the insurer to the insured based on the gravity of the insured’s noncompliance. The RWI policy’s insurer prejudice provision overrides such applicable law by prescribing that the insurer always has the burden of proving the fact and extent of insurer prejudice.

Applicable Delaware Law in the Absence of an Insurer Prejudice Provision

Given that many RWI policies are governed by Delaware law, this article will focus on Delaware law.^[4] Since this article assumes that the RWI policy in question contains an explicit insurer prejudice provision like the above example, this section will provide only a brief overview of applicable Delaware law in the absence of such a provision.

An important aspect of evaluating applicable Delaware law is recognizing that it is purely an evaluation by analogy analysis, generally to automotive and liability insurance policies, as there simply are no Delaware cases or statutes specific to RWI policies.^[5]

The seminal case in Delaware regarding insurer prejudice is State Farm v. Johnson, a Delaware Supreme Court case decided in 1974. The case involved an issue of untimely notice given by an insured under an automobile liability insurance policy, in which the Court established a two-part test applicable to untimely notice:

1. Has the insured complied with the policy’s notice provision, with the burden of proof on the insured?
2. If the insured has failed to comply, has the insurer suffered prejudice as a result of the insured’s noncompliance, with the burden of proof on the insurer?

A critical underpinning of the holding in Johnson was the Delaware Supreme Court’s finding that the insurance policy in question was a contract of adhesion, which meant that the policy’s terms and conditions were “‘not talked out or bargained for as in the case of contracts generally,’” and therefore that the policy “‘should be read to accord with the reasonable expectations of the [insured] so far as its language will permit.’”^[6] “[W]e hold that when an insured fails in his burden of proving compliance with the notice condition, before any forfeiture [of coverage] can result, the insurer has the burden of showing that it has thereby been prejudiced.”^[7]

There has been a series of Delaware law cases extending or distinguishing Johnson in various contexts:

• Brandywine One Hundred Corp. v. Hartford Fire Insurance, U.S. District Court for the District of Delaware, 1975—insurer prejudice not required in the case of insured noncompliance with a one-year notice of suit covenant.^[8]
• Falcon Steel v. Maryland Casualty, DE Superior Court, 1976—explanation of measure of insurer prejudice required, discussed below in section titled “Proof of Insurer Prejudice.”^[9]
• Hall v. Allstate, DE Superior Court, 1985—insurer prejudice required in the case of insured noncompliance with a prior-consent-to-settlement covenant.^[10]
• National Union Fire Insurance Co. of Pittsburgh v. Rhone-Poulenc Basic Chemicals, DE Superior Court, 1992—insurer prejudice not required if insurance policy not an adhesion contract.^[11]
• E.I. du Pont de Nemours v. Admiral Insurance Co., DE Superior Court, 1995—insured noncompliance with notice, cooperation/assistance, and prior-consent-to-settlement covenants alleged by insurer; Court stated that Delaware courts have not required insurer prejudice for cooperation/assistance noncompliance, although at least one commentator, as referenced in the case, has noted that prejudice may be relevant to the materiality of the noncompliance.^[12]
• Sutch v. State Farm, DE Supreme Court, 1995—explanation of measure of insurer prejudice required, discussed below in “Proof of Insurer Prejudice.”^[13]
• Jones v. State Farm, DE Supreme Court, 1997—demonstration of actual prejudice required, reversing lower court’s finding of prejudice as a matter of law, discussed below in “Proof of Insurer Prejudice.”^[14]
• Homsey Architects v. Harry David Zutz Insurance, DE Superior Court, 2000—insurer prejudice not required for an untimely notice under a claims-made policy, distinguishing Johnson as involving an occurrence policy.^[15]
• Allstate v. Fie, DE Superior Court, 2006—shifting of burden of proof regarding insurer prejudice to insured in case of insured noncompliance with prior-consent-to-settlement covenant.^[16]
• Sun-Times Media Group v. Royal & Sunalliance Insurance Co. of Canada, DE Superior Court, 2007—insurer prejudice required in case of insured noncompliance with a prior-consent-to-settlement covenant.^[17]
• Wilhelm v. Nationwide, DE Superior Court, 2011—explanation of measure of insurer prejudice required, discussed below in “Proof of Insurer Prejudice.”^[18]
• Medical Depot v. RSUI Indemnity, DE Superior Court, 2016—insurer prejudice required for a claims-made policy with continuing coverage, distinguishing Homsey.^[19]
• Northrop Grumman Innovation Systems v. Zurich American Insurance, DE Superior Court, 2021—explanation of measure of insurer prejudice required, questioning Wilhelm, discussed below in “Proof of Insurer Prejudice.”^[20]

In addition to the foregoing cases, a number of cases in Delaware, decided at the motion to dismiss or motion for summary judgment stage, have addressed the question of whether or not insurer prejudice is an issue of fact or an issue of law and, in that regard, whether insurer prejudice can ever be presumed to exist at the motion to dismiss or motion for summary judgment stage (such as in the case of an extended unexcused delay by an insured in giving a claim notice).^[21]

Except as discussed in the next section below, whether any of the Delaware cases dealing with insurer prejudice would be considered binding or even analogous precedent with respect to an RWI policy that does not contain an insurer prejudice provision is questionable for a number of reasons, including:

• None of the cases involved an RWI policy.
• Whether an RWI policy would be considered a claims-made policy.^[22]
• Whether an RWI policy would be considered a contract of adhesion.^[23]
• Whether an RWI policy would be considered different on some other basis from the policies involved in the cases.
• Whether the presence of a duty to defend in the policies involved in some of the cases is a distinguishing factor from an RWI policy, which disclaims any insurer duty to defend.

Proof of Insurer Prejudice

Regardless of whether or not an RWI policy contains an insurer prejudice provision, the Delaware cases dealing with the measure of proof of insurer prejudice required should be considered persuasive analogous precedent for analyzing RWI policies.

The most important element of establishing insurer prejudice is that actual prejudice, not merely prejudice in theory, is required for RWI coverage to be forfeited or limited.^[24] The seminal case in Delaware regarding proof of insurer prejudice is Falcon Steel v. Maryland Casualty, DE Superior Court, 1976.^[25]

The Falcon Steel Court’s holding that insurer prejudice had not been proved was with respect to a comprehensive general liability (“CGL”) insurance policy. In support of that holding, the Court’s various findings resonate in terms of what an RWI carrier should be required to demonstrate to satisfy its burden of proof regarding insurer prejudice and the amount of loss affected thereby, including:

• “[Insurer’s expert witnesses’] testimony as to the effect of delayed notice was for the most part mere speculation . . . , since they lacked sufficient specific factual information upon which to base a sound opinion.”^[26]
• “The test is not what the insurer might have done, but rather what results it is probable would have been produced if the insurer had been given the opportunity to function upon receipt of timely notice. Prejudice must be determined based upon loss of substance and not merely loss of opportunity for the insurer to follow its established procedures.”^[27]
• “The question of whether or not the delay in notification has caused prejudice to [the insurer] must be based on evidence and reasonable inferences and cannot be left to mere speculation.”^[28]
• “It is clear that the Delaware Supreme Court in Johnson rejected the concept that mere passage of time creates the kind of prejudice which bars recovery against an insurer. It is obvious that every diligent insurer upon prompt receipt of notice would take steps to preserve and perpetuate evidence and that it could be surmised that this might not be done as effectively at a later time. If this is all that Johnson stands for, it would not have been necessary for the Court to give the full consideration to the subject of prejudice which it did.”^[29]
• “In order to carry [its] burden [of proof], an insurer must show that evidence which it is reasonably probable could have been developed by prompt investigation has not or cannot be developed by later investigation or that in some other respect it is reasonably probable that a resolution of the claim could have been reached if prompt notice had been given which cannot be reached after the late notice.”^[30]

A number of Delaware cases after Falcon Steel have considered the issue of proof of insurer prejudice. In Sutch v. State Farm, DE Supreme Court, 1995, the Court reversed a determination by the Delaware Superior Court that the insurer had been prejudiced by the insured’s failure to give timely notice of the claim. In reaching that decision, the Court found that the insurer “had notice and the opportunity to intervene [in the underlying case] to protect its interests” and had failed to do so, and therefore had “failed to demonstrate any prejudice.”^[31]

In Wilhelm v. Nationwide, DE Superior Court, 2011, the Court found that the insurer had “suffered prejudice as a result of [the insureds’] delay in two way [sic] primary ways: (1) it was unable to investigate Mr. Wilhelm’s pre-accident condition because certain older medical records are no longer available, and (2) it was unable to have an expert examine Mr. Wilhelm at a time close to the 1998 accident so that it could asses [sic] what injuries were attributable to that accident as opposed to other accidents and the lapse of time in general.”^[32] The Court in Wilhelm went on to hold that “those facts, along with the ‘inordinate lapse of time’ between the accident and notification, demonstrate that [the insurer] is in a less favorable position in defending this suit as a result of [the insureds’] delayed notice. [The insurer] has suffered prejudice as a matter of law, and thus, is not obligated to provide coverage pursuant to its policy.”^[33]

The Wilhelm case seems to be an outlier from the Falcon Steel line of cases in relying on aspects of theoretical prejudice rather than of actual prejudice, in giving weight to the inordinate lapse of time in the insureds’ giving notice in determining prejudice, and in finding prejudice as a matter of law on summary judgment. In a 2021 case, Northrop Grumman Innovation Systems v. Zurich American Insurance, a different Delaware Superior Court judge seemed to call into question the viability of the holding in Wilhelm, noting that the Wilhelm Court’s determination of prejudice as a matter of law in those circumstances was “not too far from skipping a prejudice analysis altogether.”^[34]

The combination of an issuer prejudice provision of the type described above and the Falcon Steel line of cases regarding proof of insurer prejudice creates a very high hurdle for an RWI carrier seeking to deny or limit coverage based on an insured’s policy covenant or obligation noncompliance.^[35] An insurer’s burden of proving actual prejudice and the amount of loss affected thereby would be particularly challenging in the case of a settlement entered into without the prior consent of the insurer or in the case of a first-party loss, such as a purchase price overpayment loss based on a financial statement representation and warranty breach. In those types of cases, the burden on the insurer of having to prove what would have happened differently had the insured complied with the policy covenant and the amount of loss that would have thereby been avoided may simply prevent the insurer from denying or limiting coverage based solely on the policy covenant or obligation noncompliance, particularly if the insurer’s attempt to do so ends up being decided by an AAA arbitration panel, as provided for in most RWI policies.

That said, there are practical considerations an insured should take into account with respect to RWI covenant compliance, including:

• Even an AAA arbitration panel may be inclined to give an RWI insurer the benefit of the doubt in the case of an inordinate delay in covenant or obligation compliance or in the case of willful or intentional noncompliance.^[36]
• Noncompliance by an insured with an RWI policy’s covenants or obligations may present a roadblock, or at least a speed bump, in terms of getting the insurer to act promptly and reasonably with respect to a pay-out pursuant to the policy.
• Noncompliance may also exacerbate other concerns an RWI insurer may have about a claim under the policy regarding the breach, the loss, or the proximate relationship between the loss and the breach being asserted by the insured.

Conclusion

A well-crafted insured-favorable insurer prejudice provision in an RWI policy may constrain the RWI carrier’s ability to deny or limit coverage well beyond what applicable law allows in the absence of such a provision. Taken together with the obstacles upon the RWI carrier in proving actual prejudice imposed by the Falcon Steel line of cases, the hurdle for the carrier may simply be too high to overcome. However, practical considerations may weigh in favor of covenant compliance notwithstanding such a provision and the Falcon Steel line of cases.

Practice Tips for Attorneys for Insureds

Consider the following:

• In the RWI policy arrangement and negotiation phase, make sure that the policy contains an insured-favorable insurer prejudice provision applicable to all of the insured’s ongoing covenants and obligations under the policy (other than the covenant to give a claim notice prior to the expiration of the policy period for such notices), and try to avoid any carve-outs and limitations on the insurer’s obligation to prove actual prejudice and the amount of loss affected thereby. Relying on applicable state law in the absence of such a provision is dicey, at best.
• If the RWI policy does not contain an insurer prejudice provision, review applicable governing law for the policy to determine whether or not insurer prejudice is required and which party has the burden of proof, keeping in mind ways in which applicable law may not be analogous.
• Try to avoid willful or intentional noncompliance by the insured with its RWI policy covenants and obligations.
• Be cognizant of any practical considerations favoring compliance by the insured.
• If the RWI carrier asserts insured noncompliance, request that the carrier identify specifically how it has been actually prejudiced by such noncompliance and the amount of loss that would have otherwise been avoided.
• Be prepared to put the RWI carrier to the test of proving such actual prejudice and such amount.

Appendix

Examples of an Insured’s Ongoing Covenants and Obligations and of an Insurer Prejudice Provision

Example of an Insured’s Ongoing Covenants and Obligations

7.2 Notification

With respect to a Breach, the Insured shall deliver a Claim Notice to the Insurer, signed by an executive officer of the Insured, as soon as practicable after a Specified Person has Actual Knowledge of such Breach, taking into account Insured’s obligation in Clause 7.3.

7.3 Claim Notice contents

(i) The Claim Notice shall describe the facts and circumstances relating to the claim (including, where appropriate, specific references to the relevant Insured Obligations) in sufficient detail to allow the Insurer to assess the claim to the extent the Insured has knowledge of such facts and circumstances.

(ii) A Claim Notice shall not be invalid for failing to provide all necessary facts and circumstances and other information relating to the claim so as to enable the Insurer to assess the claim.

7.4 Late notification

With respect to any Breach, the Insurer shall not be liable for the underlying Loss nor shall the Retention be eroded unless the Claim Notice with respect to such Breach has been delivered to the Insurer:

(i) prior to the relevant Expiration Date for the applicable Breach; or

(ii) no later than 20 Business Days after the relevant Expiration Date to which the Claim Notice relates if a Specified Person first has Actual Knowledge of the Breach set out in the Claim Notice in the 20 Business Day period prior to such relevant Expiration Date.

7.7 Cooperation Clause

The Insurer, at its sole expense, shall be entitled to participate fully in the defense, negotiation and settlement of any Loss (with respect to a Third Party Demand, to the extent permitted by the terms of the Acquisition Agreement) such that the Insured Group shall (without limitation):

(i) to the extent reasonably permitted by the circumstances, not incur any Defense Costs without prior consultation with and the prior written consent of the Insurer, which consent shall not be unreasonably withheld, delayed or conditioned (provided, however, that the Insured Group may incur Defense Costs without the Insurer’s prior written consent up to USD$______);

(ii) not settle, compromise or discharge any Third Party Demand without prior consultation with and the prior written consent of the Insurer, which consent shall not be unreasonably withheld, delayed or conditioned, but, for clarity, such consent shall only be required if the amount of such settlement together with any Loss paid plus Losses alleged in any pending claims, would exceed the Retention in effect at such time;

(iii) to the extent reasonably practicable, use its reasonable and good faith efforts (subject to existing confidentiality agreements) to provide the Insurer with copies of all correspondence and documentation available in connection with the claim under this Policy and to the extent possible afford the Insurer sufficient time in which to review and comment on such documentation;

(iv) subject to existing confidentiality agreements, use its reasonable and good faith efforts to grant the Insurer access to documentation and information of the Insured Group relevant to the Loss as reasonably requested by the Insurer and grant the Insurer upon reasonable prior notice access to the Insured Group’s representatives for interviews and witness statements during normal business hours and in reasonable locations;

(v) use its reasonable and good faith efforts to keep the Insurer reasonably informed of proposed meetings with the Seller or any other relevant third party in connection with any Loss and allow the Insurer to attend such meetings where able to do so, and, subject to existing confidentiality agreements, where the Insurer so requests in writing, provide a detailed written description to the Insurer of the outcome of meetings and discussions at which the Insurer was not present;

(vi) use its reasonable and good faith efforts to conduct all negotiations and proceedings in respect of any Third Party Demand with advisers consented to by the Insurer in writing (such consent not to be unreasonably withheld, delayed or conditioned) and take such action as the Insurer may reasonably request to contest, avoid, resist, compromise or otherwise defend a Third Party Demand; and

(vii) subject to existing confidentiality agreements, use its reasonable and good faith efforts to provide the Insurer with such other information and assistance in connection with any (a) Loss, (b) Third Party Demand or (c) subrogation action per Clause 9 as the Insurer may reasonably request.

8.1 Mitigation and preservation of rights

To the extent required by applicable law, the Insured shall, and shall cause the other members of the Insured Group to, take all commercially reasonable steps to mitigate any Loss after any Specified Person has Actual Knowledge of any matter that would reasonably be expected to give rise to any Loss; provided that the Insured Group shall not be obligated to seek any recovery from the Seller. The Insured shall, and shall cause the other members of the Insured Group to, take all commercially reasonable steps to preserve all rights against any other person in respect of any Loss and to preserve the Insurer’s subrogation rights with respect thereto to the extent such subrogation rights exist hereunder. If the Insurer believes that the Insured should take any additional actions in order to comply with its obligations pursuant to this paragraph, the Insurer shall request such actions promptly in writing.

8.2 Maintenance of records

Until the later of 60 Business Days after (i) the expiration of the Policy Period or (ii) the final resolution of all claims or disputes relating to this Policy, the Insured Group shall, to the extent within their control and in accordance with their respective record retention policies, maintain all of their respective documentation and information relating to the due diligence and consummation of the transaction provided for in the Acquisition Agreement; provided that the Insured Group may destroy documents in the ordinary course of their businesses consistent with past practices and their respective record retention policies so long as such destruction is not done with the intent to harm the Insurer.

10 Other Insurance

The Insured shall or, to the extent practicable, shall cause its affiliates to maintain and/or purchase insurance coverage for the acquired business in a commercially reasonable manner. The coverage provided under this Policy shall be excess of any other valid and collectible insurance coverage with respect to any Loss resulting from the underlying facts and circumstances of any (i) Breach or matter that would reasonably be expected to give rise to a Breach, (ii) Third Party Demand and/or (iii) Loss. The Named Insured shall discuss with the Insurer, at the Insurer’s reasonable request, whether any bond, indemnity or other insurance policy is applicable or available with respect to the matters described in any Claim Notice. Notwithstanding any other provision in this Policy, any dispute as to the applicability of, or delay in obtaining coverage under, any such bond, indemnity or other insurance policy shall not be a basis for delay or refusal of payment hereunder, and the Insured Group shall not be obligated to first pursue claims against any other bond, indemnity or other insurance policy prior to being eligible for any payment under this Policy. If there is a dispute as to whether the coverage under this Policy shall be excess of other coverage or if other coverage shall be excess of the coverage under this Policy, the Insured Group may recover under this Policy, and the Insurer, to the extent allowed under applicable law, shall be subrogated to the Insured Group’s rights under the applicable other coverages.

Example of an Insurer Prejudice Provision

8.3 Failure to comply

Any failure of an Insured to comply with Clauses 7.2 (except as provided in Clause 7.4), 7.3, 7.7, 8.1, 8.2 or 10.10 shall not relieve the Insurer of its obligations under this Policy; however, the Insurer shall be entitled to reduce the amount of Loss payable under this Policy to reflect the extent (but only the extent) to which the Insurer’s position has been actually prejudiced by such failure, with the Insurer having the burden of proving such actual prejudice and such amount.

This article is the sixth in the RWI Practice Insights series by John T. Capetta.

1. Insurance policies, including RWI policies, typically also contain covenants and obligations of the insured in order for coverage to be put into place, often structured as conditions to the coverage’s commencing or remaining in place (such as payment of the premium). The ongoing covenants and obligations referred to in this article instead are the covenants and obligations of the insured that apply with respect to the making and pursuit of claims by the insured under the policy. ↑

2. This article focuses on U.S. buyer-side RWI policies and U.S. law, principally Delaware law. ↑

3. The parenthetical in the foregoing portion of the insurer prejudice provision—“(except as provided in Clause 7.4)”—effectively carves out claim notices not given on a timely basis in accordance with Clause 7.4 from the effects of the insurer prejudice provision (contained in Clause 8.3 in this example). An insurer may also try to carve out from the purview of Clause 8.3: (i) settlements, compromises or discharges of Third Party Demands to which it has not provided its prior consultation or consent as required by Clause 7.2; and/or (ii) willful and/or intentional noncompliance with any of an insured’s ongoing covenants and obligations under the RWI policy. ↑

4. For a discussion of U.S. law regarding the giving of claim notices generally, see 3 New Appleman on Insurance Law Library Edition § 16.03[1] (2024), including § 16.03[1][d][iii] regarding what constitutes insurer prejudice. ↑

5. Because almost all U.S. RWI policies provide for American Arbitration Association (“AAA”) arbitration of disputes, customarily at the choice of the insured, there is a dearth of U.S. case law generally regarding RWI policies. However, in Ratajczak v. Beazley Solutions Ltd., 870 F.3d 650 (7th Cir. 2017), the United States Seventh Circuit Court of Appeals, applying New York law, found that actual prejudice was not required with respect to an insured’s failure to comply with a warranty and indemnity policy’s covenant not to settle without the insurer’s consent. Id. at 656–657. A warranty and indemnity policy is the U.K. version of an RWI policy. ↑

6. State Farm Mut. Auto. Ins. Co. v. Johnson, 320 A.2d 345, 347 (Del. 1974) (quoting Cooper v. Gov’t Emps. Ins. Co., 237 A.2d 870 (N.J. 1968), a New Jersey Supreme Court case). ↑

7. Id. (footnote omitted). ↑

8. Brandywine One Hundred Corp. v. Hartford Fire Ins. Co., 405 F. Supp. 147 (D. Del. 1975). ↑

9. Falcon Steel Co. v. Md. Cas. Co., 366 A.2d 512 (Del. Super. Ct. 1976). ↑

10. Hall v. Allstate Ins. Co., No. 79C-DE-56,1985 WL 1137299 (Del. Super. Ct. Jan. 11, 1985). ↑

11. Nat’l Union Fire Ins. Co. of Pittsburgh v. Rhone-Poulenc Basic Chems. Co., No. 87C-SE-11, 1992 WL 22690 (Del. Super. Ct. Jan. 16, 1992). ↑

12. E.I. du Pont de Nemours & Co. v. Admiral Ins. Co., No. 89C-AU-99, 1995 WL 654010 (Del. Super. Ct. Oct. 27, 1995). ↑

13. Sutch v. State Farm Mut. Auto. Ins. Co., 672 A.2d 17 (Del. 1995). ↑

14. Jones v. State Farm Fire & Cas. Ins. Co., 703 A.2d 644 (Del. 1997) (unpublished table decision). ↑

15. Homsey Architects, Inc. v. Harry David Zutz Ins., Inc., No. 96C-06-082, 2000 WL 973285 (Del. Super. Ct. May 25, 2000). ↑

16. Allstate Ins. Co. v. Fie, No. 03C-02-185, 2006 WL 1520088 (Del. Super. Ct. Mar. 9, 2006). ↑

17. Sun-Times Media Grp., Inc. v. Royal & Sunalliance Ins. Co. of Canada, No. 06C-11-108, 2007 WL 1811265 (Del. Super. Ct. June 20, 2007), abrogated on other grounds, First Solar, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 274 A.3d 1006 (Del. 2022). ↑

18. Wilhelm v. Nationwide Gen. Ins. Co., No. 09C-07-155, 2011 WL 4448061 (Del. Super. Ct. May 11, 2011). ↑

19. Med. Depot, Inc. v. RSUI Indem. Co., No. N15C-04-133, 2016 WL 5539879 (Del. Super. Ct. Sep. 29, 2016). ↑

20. Northrop Grumman Innovation Sys., Inc. v. Zurich Am. Ins. Co., No. N18C-09-210, 2021 WL 347015 (Del. Super. Ct. Feb. 2, 2021). ↑

21. Most of these motion to dismiss and motion for summary judgement cases involve the denial of the relevant motion on grounds that make the cases of little or no relevance to this article. However, in Rodriguez v. Great American Insurance Co., No. N21C-11-051, 2022 WL 591762 (Del. Super. Ct. Feb. 23, 2022), Delaware Vice Chancellor Slights (sitting as Superior Court Judge pro tempore by designation of the Chief Justice of the Delaware Supreme Court) granted the defendant director & officer (“D&O”) insurance company’s motion to dismiss, finding, among other things, that the insured target company directors had failed to satisfy their duty to defend under the applicable D&O insurance policy, and that this failure to defend in the underlying action constituted “a material breach of the [D&O] Policy that has resulted in obvious [material] prejudice to” the defendant D&O insurance company, preventing the plaintiffs (former target company stockholders) from maintaining an action for coverage against the defendant D&O insurance company. Id. at *10. Because Vice Chancellor Slights found that the breach of the policy’s duty to defend prevented coverage under the policy, he did not have to make a ruling on whether the plaintiff target company stockholders’ “notion of subrogation” permitted them to bring an action directly against the D&O insurance company. Id. at *9.

    In Rodriguez, a specific provision of the applicable D&O insurance policy (the “No Action Clause”) required the insureds’ full compliance with all of the terms of the policy as a condition precedent to coverage, as to which Vice Chancellor Slights determined that, even if a showing of actual prejudice was implicitly required for coverage to be forfeited, actual prejudice had occurred based solely on the allegations set forth in the plaintiffs’ complaint. Id. at *10. Vice Chancellor Slights also found that insured target company directors had failed to comply with their obligation to obtain the D&O insurance company’s consent to any admission of liability in the underlying case, which admission resulted from the insureds’ defaulting in the underlying action. However, he did not make reference to that failure to comply with the consent obligation in finding that the No Action Clause had been triggered. Id. ↑

22. RWI policies are generally considered to be claims-made policies, rather than occurrence policies. However, RWI policies differ in significant ways from typical claims-made liability insurance policies, including by providing coverage for a multiyear claims period rather than a one-year claims period followed by a series of additional one-year claims periods with the same carrier or different carriers. ↑

23. The question of whether or not an RWI policy would be considered a contract of adhesion centers around whether or not the terms and conditions of the RWI policy were negotiated by the insured, either in the course of arranging the policy or in the case of a policy based on a previously negotiated form between the insurer and the insured (or, in some cases, by counsel to the insured for its clients), including whether the insurer or the insured prepared the first draft of the policy. For an example of a Delaware case in which a court found that the insured had been involved in the negotiation of the terms and conditions of a liability insurance policy, and therefore that the policy was not a contract of adhesion requiring insurer prejudice for potential forfeiture of coverage, see Nat’l Union Fire Ins. Co. of Pittsburgh v. Rhone-Poulenc Basic Chems. Co., No. 87C-SE-11, 1992 WL 22690 (Del. Super. Ct. Jan. 16, 1992). ↑

24. See Jones v. State Farm Fire & Cas. Ins. Co., 703 A.2d 644 (Del. 1997) (unpublished table decision). ↑

25. Falcon Steel Co. v. Md. Cas. Co., 366 A.2d 512 (Del. Super. Ct. 1976). ↑

26. Id. at 516. ↑

27. Id. at 517 (citations omitted). ↑

28. Id. at 518 (citations omitted). ↑

29. Id. at 518. ↑

30. Id. at 518 (citations omitted). Some courts outside Delaware have also focused on the amount of insurer actual prejudice required, such as “substantial prejudice” or “appreciable prejudice.” ↑

31. Sutch v. State Farm Mut. Auto. Ins. Co., 672 A.2d 17, 22 (Del. 1995). ↑

32. Wilhelm v. Nationwide Gen. Ins. Co., No. 09C-07-155 MJB, 2011 WL 4448061, at *5 (Del. Super. Ct. May 11, 2011) (footnote omitted). ↑

33. Id. at *5. ↑

34. Northrop Grumman Innovation Sys., Inc. v. Zurich Am. Ins. Co., No. N18C-09-210, 2021 WL 347015, at *15 (Del. Super. Ct. Feb. 2, 2021). ↑

35. Among other things, how an insurer can uncover sufficient information regarding actual prejudice to it and the amount of loss affected thereby from a recalcitrant insured results in a particularly daunting burden of proof for the insurer. ↑

36. Whether there is any substantive difference between “willful” and “intentional” for this purpose is uncertain. Definitions of “willful” often include “intentional” as a synonym or an element of the definition. However, some resources describe a difference for the term “willful” in requiring an element of “maliciousness” or the like. See, e.g., Willful, Black’s Law Dictionary (12th ed. 2024). ↑

On December 11, 2025, the U.S. House of Representatives passed a bipartisan capital formation bill, H.R. 3383 or the Incentivizing New Ventures and Economic Strength Through Capital Formation (“INVEST”) Act of 2025, with a vote of 302 to 123. Announced by the U.S. House Committee on Financial Services (“Financial Services Committee”) on December 2, 2025, the INVEST Act includes more than twenty bills that advanced out of the Financial Services Committee. The INVEST Act attempts to build on the Jumpstart Our Business Startups (“JOBS”) Act of 2012, with reforms designed to expand access to capital for small businesses, broaden investor participation in the private markets, and reinvigorate U.S. public markets. See the text of H.R. 3383 and the Financial Services Committee’s summary list of the bill’s sections.

The INVEST Act and other recently enacted bills reprise themes from prior legislative proposals and may offer perspective on future legislative initiatives that could shape the way businesses raise capital.

Key Provisions of the INVEST Act at a Glance

Title I: Expanding Access to Capital for Small Businesses

The INVEST Act would establish an Office of Small Business in each of the Securities and Exchange Commission’s Divisions of Corporation Finance, Investment Management, and Trading and Markets to coordinate matters related to capital formation. The bill also proposes to raise multiple exemption thresholds and modernize definitions to reflect current market conditions, including:

• increasing the crowdfunding exemptive offering threshold requiring accountant review to $250,000 from $100,000 (with discretion up to $400,000),
• raising the exemption threshold under the Investment Advisers Act to $175 million from $150 million with inflation indexing, and
• expanding the qualifying venture capital fund size from $10 million to $50 million while increasing the investor cap from 250 to 500.

The legislation would direct the SEC to revise Regulation D to permit presentations at specified sponsored events (e.g., universities, nonprofits, angel groups, accelerators) without these being deemed “general solicitation.”

Title II: Increasing Opportunities for Investors

The bill proposes to modernize the accredited investor definition, allowing inflation-adjusted wealth thresholds and adding criteria based on professional licensure, education, or experience, alongside an SEC-administered exam-based pathway to accredited status. It would authorize electronic delivery of investor documents with safeguards, opt-out rights, and transition rules in an effort to improve disclosure for investors. The INVEST Act would remove constraints on closed-end fund investments in private funds, facilitating professionally managed access to private markets for retail investors. The legislation also focuses on protecting seniors from financial exploitation by creating a Senior Investor Task Force at the SEC and directing a Government Accountability Office study on senior financial exploitation.

Title III: Strengthening Public Markets

The INVEST Act proposes to reduce the registration requirements for Emerging Growth Companies (“EGCs”) from three years to two years of audited financial statements, as well as to broaden the availability of confidential submissions and testing-the-waters to all issuers. The legislation also expands well-known seasoned issuer (“WKSI”) eligibility by lowering the public-float threshold from $700 million to $400 million, thereby streamlining shelf access for additional public companies.

The bill would also update Acquired Fund Fees and Expenses (“AFFE”) disclosure to avoid distortive expense ratios for certain fund-of-funds products. AFFE disclosure requires acquiring funds, including business development companies (“BDCs”) to aggregate and disclose in their prospectuses the amount of total annual acquired fund operating expenses and to express the total amount as a percentage of an acquiring fund’s net assets.

Other Legislative Efforts

Just prior to the announcement of the INVEST Act, the House passed three other bills also intended to promote capital formation on December 1, 2025. All bills have been received in the Senate, with H.R. 4429 and H.R. 4431 referred to the Committee on Banking, Housing, and Urban Affairs and H.R. 2066 referred to the Committee on Small Business and Entrepreneurship:

1. Developing and Empowering Our Aspiring Leaders (“DEAL”) Act (H.R. 4429) would expand the category of qualifying venture investments to include fund-of-funds and secondary investments.
2. Improving Capital Allocation for Newcomers (“ICAN”) Act (H.R. 4431) proposes to increase the size and investor limits for qualifying venture capital funds.
3. Investing in All of America Act (H.R. 2066) would expand access to capital for small businesses in rural and underserved areas, businesses operating in national security or critical tech sectors, and small manufacturers by excluding investments by Small Business Investment Companies (“SBICs”) in these areas from an SBIC’s financing limit calculation.

Why Now?

The focus on capital formation has intensified. The number of U.S. public companies has fallen from roughly 8,800 in 1997 to fewer than 4,000 in 2024, a contraction that has reduced investor choice and limited access to public market growth. The Financial Services Committee concludes that successive layers of regulation, including Sarbanes-Oxley and Dodd-Frank, have raised compliance costs in ways that disproportionately impact smaller issuers, making it more expensive to remain public. It also notes that private market rules have lagged behind inflation and market realities, warranting reform. If enacted as proposed, the legislation would likely reduce transaction costs at the margin, broaden the investor base for private offerings, and streamline pathways to public capital. Read the Financial Services Committee’s statement on the passage of the bill.

On December 5, 2025, Governor Kathy Hochul signed a bill^[1] adopting the 2022 amendments to the Uniform Commercial Code recommended by the American Law Institute and the Uniform Law Commission (“2022 Revisions”).^[2] These 2022 Revisions bring digital assets, including cryptocurrencies and other instruments based on blockchain technology, within the scope of the Uniform Commercial Code (“U.C.C.”),^[3] the nation’s primary body of commercial laws.

Legal developments at the federal level, including the GENIUS Act^[4] and regulatory guidance indicating that banks may engage in crypto-asset activities,^[5] have garnered attention. The 2022 Revisions, less so. Architects of financial products would be remiss to ignore them, however, because the 2022 Revisions provide the raw material with which to build an economy that fully integrates digital assets. The 2022 Revisions introduce entirely new financial assets; create the legal mechanism by which traditional financial instruments can leverage the blockchain and similar distributed ledger technologies; and offer the nascent digital asset market the legal certainty, predictability, and recourse that the U.C.C. has provided to traditional commercial and financial markets for decades.

Recent announcements of tokenized alternative investment products^[6] signal a market acceptance of blockchain technology and an appetite for financial instruments that take advantage of the efficiencies that the blockchain and related technologies offer. The 2022 Revisions offer the means by which blockchain technology can be coupled with established financial products. It is tempting to speculate how such a powerful combination could be put to use. One can imagine, to name a few possibilities, controllable electronic records tethered to limited partnership interests of private equity funds, rights to carried interest payments, or interests based on the outcome of protracted litigation.

The Controllable Electronic Record: A Versatile New Tool

Perhaps the most prominent of the 2022 Revisions is the creation of a new asset category: the controllable electronic record.^[7] This new concept, along with corresponding revisions to Articles 1 and 9, is “a major part of the effort to adapt the UCC to emerging technologies,” such as “distributed ledger technology . . . including blockchain technology.”^[8] Despite its simple definition (“a record stored in an electronic medium that can be subject to control”),^[9] the controllable electronic record is a versatile new tool at the disposal of designers of financial products. This versatility stems from the fact that it can be either a record that has “inherent value,” as is the case with bitcoin and other cryptocurrencies,^[10] or a record associated with another asset of value such as an account, payment intangible, or financial asset.^[11]

When associated or “tethered” to conventional financial instruments and assets, a controllable electronic record that is based on distributed ledger technology (or other innovative technologies) becomes the mechanism by which such technology can be brought to bear to enhance such conventional financial instruments and assets, some of which predate the computer age. In short, the controllable electronic record can link the automation, efficiency, and transparency of the blockchain with the legal certainty, predictability, and market acceptance of established financial products.

This was the express intention of the drafters of the 2022 Revisions. They offer examples of how controllable electronic records can be used as “tokens” to “facilitate transfers of the shares” of a corporation by treating the transfer of control thereof as “instructions to the . . . issuer for the transfer of registration of the share(s) represented by the token.”^[12] They hasten to note, however, that, notwithstanding any efficiencies gained from tethering a traditional asset to a controllable electronic record, parties involved in the transfer of such assets must still comply with applicable laws, including corporate and securities laws and regulations.^[13] Even so, the 2022 Revisions afford legal clarity and certainty to parties seeking to leverage blockchain technology in developing new or enhancing existing financial products.

Controllable Accounts and Controllable Payment Intangibles: A Blueprint as to the New Tool’s Use

Rather than leave it to the reader’s imagination, the 2022 Revisions put the tethering technique into practice. By linking a controllable electronic record with the established U.C.C. concepts of accounts and payment intangibles, the 2022 Revisions mint two additional asset categories: controllable accounts and controllable payment intangibles.^[14] Controllable accounts and controllable payment intangibles offer a blueprint of how to develop new tools of commerce and finance using the controllable electronic record as a bridge between old concepts and new technology. Each can be created via an undertaking by an account debtor to pay the person who has control of the controllable electronic record evidencing the account debtor’s underlying obligation.^[15]

Control: An Alternative Means of Perfection

Because controllable electronic records are general intangibles, a security interest in them may be perfected by filing a financing statement.^[16] Indeed, prior to the 2022 Revisions, filing was the only means of perfection available to lenders wishing to take cryptocurrencies as collateral. The 2022 Revisions offer secured lenders an alternative means of perfection: control, ^[17] which results in a security interest senior to one perfected by filing.^[18]

An accepted way to perfect security interests in deposit and securities accounts, control is not a new concept to the U.C.C.^[19] In the context of a controllable electronic record, control is established if the secured party has (a) the power to avail itself of substantially all of the benefits of the controllable electronic record; (b) the exclusive power to prevent others from availing themselves of such benefits; (c) the exclusive power to transfer these powers to another person; and (d) the ability to identify itself, including by name, identifying number, cryptographic key, office, or account number, as the person having such powers.^[20] It follows that, to serve as collateral that can be perfected by control, a controllable electronic record, such as cryptocurrency, must be maintained on a system that permits a secured party to be identified as the person having the exclusive right to enjoy and transfer the controllable electronic record. This pattern extends to controllable accounts and controllable payment intangibles in that security interests in each are perfected by establishing control over the controllable electronic record associated with them.^[21]

Secured parties should be mindful of the potential of changes to blockchain protocols that may occur after their security interest in a controllable electronic record is perfected. If such a change results in a new controllable electronic record that exists alongside the original controllable electronic record in an event often referred to as a “hard fork,” and the secured party is unable to establish control over the new record, the security interest will remain perfected for only twenty-one days.^[22] A protective measure against this admittedly unlikely scenario is to perfect security interests in controllable electronic records both by filing and by control.^[23]

Adaptations to Blockchain Technology’s Decentralization and Pseudonymity

The 2022 Revisions build upon long-established U.C.C. concepts, adapting them to blockchain technology. These adaptations come into relief in how the 2022 Revisions amend provisions of the U.C.C. dealing with control of electronic documents of title and electronic chattel paper.^[24] The 2022 Revisions change these provisions to accommodate two novel blockchain attributes: decentralization^[25] and pseudonymity.^[26]

Prior to the 2022 Revisions, these provisions of the U.C.C. presumed a “single authoritative copy . . . which is unique” that identifies the individual asserting control, or designated as assignee of, the record in question.^[27] A blockchain ledger, however, provides no such unique record. The ledger is instead decentralized with records of transactions distributed among its users, residing not in one place or computer but in many.^[28] Similarly, because blockchain ledgers assign users random alphanumeric codes instead of capturing their names, there is no way to identify the individual who would have control for purposes of these U.C.C. provisions.^[29]

The 2022 Revisions resolve these inconsistencies with distributed ledger technology. They provide that control may be established using a system that allows “each electronic copy to be identified as an authoritative or nonauthoritative copy”^[30] and the person asserting control to be identified “in any way, including by name, cryptographic key, office or account number.”^[31] Absent these revisions, electronic documents of title and electronic chattel paper maintained on blockchain ledgers would be out of the U.C.C.’s scope, depriving holders of such property of the legal certainty and efficiencies that the U.C.C. affords to holders of more traditional types of personal property.

The Take-Free Principle: Protection of the Good Guys

Among the many useful concepts embedded in the U.C.C. is the principle that the interests of a good-faith purchaser who acquires an asset for value ought to be protected from competing interests regardless of what rights, if any, the seller of that asset may have had.^[32] This “take-free” principle promotes commerce by affording good actors a measure of certainty that would otherwise require costly and lengthy due diligence into the provenance of the asset in question.

Prior to the 2022 Revisions, however, this principle was available only in the context of physical, paper-based transactions. By extending the take-free principle to “qualifying purchasers” of controllable electronic records, controllable accounts, and controllable payment intangibles,^[33] the 2022 Revisions afford the digital economy a substantial degree of legal certainty.^[34] Keeping to the formula established in the analogous U.C.C. provisions, a “qualifying purchaser” is one who obtains control of a controllable electronic record “for value, in good faith, and without notice of a claim of a property right” that competes with the interests of the purchaser.^[35]

These protections have a limit, however. They only extend to controllable electronic records (which includes cryptocurrencies), controllable accounts, and controllable payment intangibles.^[36] A purchaser of other assets, even if tethered to a controllable electronic record, would not enjoy take-free protections unless provided for by laws other than the U.C.C.^[37]

The 2022 Revisions: The Master Crypto Key

Since October 31, 2008, when bitcoin was first proposed,^[38] the idea of cryptocurrencies and other digital assets based on distributed ledger technology has gained wide acceptance. Until recently, despite acceptance of cryptocurrencies,^[39] digital assets have remained apart from the traditional elements of mainstream commerce. With the tools forged by the 2022 Revisions, however, designers of financial products will be equipped to unlock the full potential of the blockchain and similar distributed ledger technology.

1. S. 1840A, 2025–2026 Leg. (N.Y. 2025); Assemb. A3307A, 2025–2026 Leg. (N.Y. 2025). ↑

2. Uniform Commercial Code Amendments with Prefatory Note and Comments (2022) (Am. L. Inst. & Unif. L. Comm’n 2022) [hereinafter 2022 Revisions]. ↑

3. Unif. L. Comm’n, Summary of the 2022 Amendments to the Uniform Commercial Code (2022). ↑

4. 12 U.S.C. §§ 5901–5916. Jessie Cheng offers a good overview of the Act. Jessie Cheng, A GENIUS Act Gameplan: Strategic Paths for Payment Stablecoin Issuers, Bus. L. Today (Aug. 13, 2025). See generally The Genius Act Is Enacted, Davis Polk (July 18, 2025). ↑

5. See, e.g., OCC Interpretive Letters No. 1170 (July 22, 2020) (confirming authority of a national bank to provide cryptocurrency custody services), No. 1172 (Sept. 21, 2020) (concluding that a national bank may hold deposits as reserves for stablecoins), No. 1174 (Jan. 4, 2021) (permitting national banks and federal savings associations to use distributed ledger technology, referred to as independent node verification networks, in the course of performing permitted payment activities), No. 1186 (Nov. 18, 2025) (granting a petitioner bank’s request to pay blockchain network fees and hold “crypto-assets” on its balance sheet as principal for such fees). ↑

6. See, e.g., Vicky Ge Huang, JPMorgan Tokenizes Private-Equity Fund on Its Own Blockchain, Wall Street J. (Oct. 30, 2025). ↑

7. U.C.C. § 12-102 (Am. L. Inst. & Unif. L. Comm’n 2022) (proposed U.C.C. amendments). Unless stated otherwise, references herein to the U.C.C. are to the U.C.C. as amended by the 2022 Revisions. ↑

8. 2022 Revisions, supra note 2, prefatory n. to art. 12, at cmt. 1. ↑

9. U.C.C. § 12-102. ↑

10. 2022 Revisions, supra note 2, prefatory n. to art. 12, at cmt. 4(a). ↑

11. Id.; see also id. official cmt. 9 to U.C.C. § 12-104 (“certain controllable electronic records may carry with them rights to other assets”); id. official cmt. 9 to U.C.C. § 8-102 (discussing treatment of a “digital asset such as a controllable electronic record” as a financial asset); U.C.C. § 9-102(27A) (defining controllable account as an account evidenced by a controllable electronic record); U.C.C. § 9-102(27B) (defining controllable payment intangible as a payment intangible evidenced by a controllable electronic record). ↑

12. 2022 Revisions, supra note 2, official cmt. 18 to U.C.C. § 8-102. ↑

13. Id. ↑

14. U.C.C. §§ 9-102(27A), 9-102(27B). ↑

15. Id. ↑

16. U.C.C. § 9-312. ↑

17. U.C.C. § 9-314 ↑

18. U.C.C. § 9-326A. ↑

19. U.C.C. § 9-314(a). ↑

20. U.C.C. § 12-105 ↑

21. U.C.C. § 9-107A. ↑

22. 2022 Revisions, supra note 2, official cmt. 13(f) to U.C.C. § 9-102. ↑

23. Id. ↑

24. U.C.C. §§ 7-106(b), 9-105(b). ↑

25. 2022 Revisions, supra note 2, official cmt. 6 to U.C.C. § 7-106 (“The utility of distributed ledger technology depends on there being multiple authoritative copies of an electronic record.”). ↑

26. Id. prefatory n. to art. 12, at cmt. 1 (“Many systems for transferring controllable electronic records are pseudonymous, so that the transferee of a controllable electronic record may be unable to verify the identity of the transferor. . . .”). ↑

27. U.C.C. §§ 7-106(b)(1), 9-105(1) (as in effect prior to the 2022 Revisions). ↑

28. Michael J. Casey & Paul Vigna, The Truth Machine 64 (St. Martin’s Press 2018). ↑

29. Id. at 33. ↑

30. U.C.C. §§ 7-106(c)(1), 9-105(c)(1). ↑

31. U.C.C. §§ 7-106(c)(2), 9-105(c)(2). ↑

32. See U.C.C. §§ 2-403, 3-305, 7-502, 9-317. ↑

33. U.C.C. § 12-104(e). ↑

34. 2022 Revisions, supra note 2, official cmt. 7 to U.C.C. § 12-104. ↑

35. U.C.C. § 12-102. ↑

36. U.C.C. §§ 12-104(a), 12-104(e); 2022 Revisions, supra note 2, official cmt. 9 to U.C.C. § 12-104. ↑

37. U.C.C. § 12-104(f); 2022 Revisions, supra note 2, official cmt. 9 to U.C.C. § 12-104 (“Subsection (f) . . . limits the application of the take-free rule . . . to controllable electronic records and . . . controllable accounts and controllable payment intangibles evidenced by a controllable electronic record.”). ↑

38. Casey & Vigna, supra note 28, at 29. ↑

39. See, e.g., Alexander Osipovich & Vicky Ge Huang, Trump 2.0 Era Brings Flurry of Crypto Deals, Wall St. J. (Apr. 26, 2025). ↑

As told to Hon. Elizabeth S. Stong and Mauricio Videla, Esq.^[1]

Have you ever wondered how someone who has a dream job—say, for example, general counsel of a Major League Baseball team—got to that position? Or what kinds of leadership lessons they learned along the way? Matthew J. Shuber, General Counsel and Senior Vice President of Legal Affairs for the Toronto Blue Jays, shares his thoughts and reflections on this subject with the ABA Business Law Section’s Leadership Development Committee, in conversation with past Chair Hon. Elizabeth S. Stong and Mauricio Videla, Esq.

ESS/MV: So, how do you get to be general counsel of a Major League Baseball team—a dream job in the eyes of many lawyers (and sports fans)?

Matthew Shuber: This is a natural question to ask and one that I am asked frequently. And if I simply respond directly to it, then it tells a story. Is that story one with a lesson in it? Perhaps, but not the one people might expect. So, my guidance to everyone is that if you wish to become general counsel in professional baseball, the surefire steps to take are as follows:

1. Join a band and write and perform music, in high school and into college. Optimally, you should also deeply immerse yourself in recorded music and attend a lot of live music concerts.
2. In college, focus initially on computer science and mathematics.
3. Then, midway through college, change directions entirely, moving away from science and math—and next, head off to law school.
4. Midway through law school, dive into a broad range of different substantive areas of the law, and perhaps develop a bit of a specialty in criminal law.
5. After your second year of law school, work at one of the big national law firms, with a focus on litigation, with particular emphasis on drug patent litigation.
6. When you complete law school, pursue a career in criminal defense work. Be sure to work with a wonderful group of uniquely intelligent and thoughtful lawyers, on complex and interesting cases. If they are high-profile matters, so much the better.
7. Keep assessing your choices—and after about three years, move on from private practice and . . . this part is critical . . . do so without a clear plan for your next position, or even your next step.
8. Pursue an odd and unexpected business opportunity with friends, developing skills in sales and negotiation. Be sure that the business doesn’t ultimately generate substantial revenue, and that it comes to an end on its own.
9. Through networking and some number of events—some random, and others less so—be invited by a professional baseball team to interview for a job that you never applied for.

Of course, I say all of this in jest. The point is that this is only my path. And if I were to try to draw some lessons from that path, it’s that there is no single set of decisions or experiences that definitively lead to a legal or business affairs job in sports. Rather, like many things in life, there are many factors that come together to create any particular outcome. With hindsight, you can see how each experience may have led, one way or another, to the next. I try to advise young lawyers that, while a goal or direction is always a good thing, perhaps equally important are the skills and opportunities that present themselves along the way—and you never know for certain where they will lead, but you can be pretty sure that they will lead somewhere interesting.

ESS/MV: Tell us something about you, or your path, that has made a difference, and that does not come up in your “official” bio.

Matthew Shuber: On the one hand—to state something that is entirely obvious—I’m a product of my training and work experience. Even though I did not ultimately stay in criminal law as my field of practice, I was immersed in the representation of clients in unique and complex matters, exposed to novel concepts and theories, and—probably most important—worked on a close-knit team with great, motivated, highly intelligent people. Those people influenced my work ethic and substantive skills, certainly, but they also challenged me, trusted me, and demonstrated how to maintain core values despite outside challenges.

On the other hand, a great deal of what I’ve done in my commercial legal–general counsel–business leadership role has, in all honesty, been self-taught—or perhaps more accurately, developed through the process of challenging myself deeply: to seek out learning opportunities, to question my own work and decisions, and to continually look to grow and improve.

ESS/MV: What are one or two skills that are especially useful for success in the business of law?

Matthew Shuber: One skill is the ability and willingness to dig deeper—deeper into the project that you are working on, for sure, but really what I mean is really investing in every facet of the work, including the environment in which it is taking place; the processes and norms that affect the work; the people with whom you are working and the people you are negotiating with; and your goals for the relationships or arrangement that you are working to establish. And don’t overlook the more nuanced / less obvious factors that may affect all those details.

When I express these things, I wonder if they sound a bit trite. But in my experience, they are not trite at all. Many people, even very intelligent and hardworking people, tend to stop at a particular point and either assume they know “enough” to complete the task, or that there is some kind of known limit that exists beyond which the return on investment isn’t justified. My experience is different. I’ve found that when you challenge yourself to develop a real understanding of all the components of the task, then you become far more comfortable building on that knowledge in the future. And it allows you to invest in your own continual improvement over time—and you’re worth it.

As a real-world example, businesses negotiate commercial services agreements every single day. It’s possible to negotiate some of these agreements with only a limited understanding of the specific services and, if the services are good and useful, the central goals will be achieved. But for myself, I’ve always found that I will do a better job, and get a better result, if I know as much as possible about the services we are negotiating about. I’m determined that when I conclude a negotiation or sign a contract, I should be able to understand and explain it—and anyone else who reads that contract should also be able to do the same. The benefit of this is that then the contract can truly be tailored for risk allocation and responsibilities with precision. And beyond that, as the parties continue to work together, they will have a clear document—and an effective roadmap—going forward.

Here is another real-world example: take the time to learn from the subject matter experts with whom you come into contact and collaborate. I am at my best when I have knowledgeable and capable people to partner with on the team. I always remember the people from whom I have learned the most. And I’ve seen that the best projects, negotiations, and results of my career have been in circumstances of true collaboration and knowledge-sharing.

ESS/MV: What is the best—or worst—piece of advice that you have ever received?

Matthew Shuber: That’s a good question. The best piece of advice is “there is always a place for someone who makes themself indispensable.” I view this as another way of saying that what matters is what you invest in and contribute. Put another way, it’s advice along the lines of “in each situation and with each opportunity, do the very best you can and don’t spend time or energy thinking about what you get back for it.” I’ve found that following that advice always leads to developing new skills and knowledge, and to new pathways that might not have existed or been visible previously.

The worst piece of advice I’ve ever received is “if you find something you’re good at, stick with that.” If I had followed that advice, I would have stuck with criminal defense work. I was at a good firm, with good people, doing interesting and challenging work. But something inside me told me that there were other paths that I could pursue that I might connect with more deeply and sustainably. And I let myself take that chance. I’m glad I did.

ESS/MV: Staying with advice, what advice would you give your twenty-five-year-old self?

Matthew Shuber: To begin, the possibilities are endless! It’s okay not to know precisely where you will be in five or ten years. At twenty-six, I had already been called to the bar, and I was about to start what I thought would be my career, in criminal law. This may seem contradictory, but I think it’s possible both to be committed to a career (and investing deeply in that career to build skills and relationships) and to be open to the fact that, at some point, you may wish to change directions.

ESS/MV: As you have taken on greater leadership roles in your career, and especially now as general counsel, how has your mindset changed in order to meet the demands and expectations?

Matthew Shuber: Honestly, I’m not sure that my mindset has changed at all. At the core, one of my guiding principles has been to evaluate decisions, plans, arrangements, processes, and opportunities against what is best for the organization (as opposed to any particular person or department), and over the long term (as opposed to a short time frame). I’m thankful to be part of an organization that also values long-term, sustainable thinking and decision-making. And while the external demands and expectations may have evolved, I expect a fair bit of myself, and so those external factors haven’t really changed my way of thinking.

ESS/MV: There’s a saying that “leadership is often baptism by fire.” Tell us about a particular significant or memorable business decision or challenge that you confronted and how you approached it.

Matthew Shuber: I would point to the role I had the privilege to play in connection with our Spring Training facility / player development complex in Dunedin, Florida. These facilities are a unique element of Major League Baseball—as a business and as a sport—to say the least, and that is even more true for the Blue Jays as the lone Canadian team.

For obvious reasons, Spring Training facilities projects don’t happen frequently, and when they do, they are made up of a myriad of different discussions, decisions, and factors, each of which is individually complex and challenging. The tasks include financing, working with multiple levels of government, construction and design, internal organizational needs, and more. And while this was a group project, within that group, at particular times I needed to take on various leadership roles and rely on persuasion as opposed to positional authority or direction. I probably learned as much from that experience and opportunity as from any other in my career.

ESS/MV: We have to ask—what’s your “superpower”?

Matthew Shuber: Well, I could say that I have two: neuroticism and self-doubt. I’m being silly, of course. Those aren’t really things I suffer from, but there’s still a nugget of truth there, in that I think we all feel sometimes that we don’t have all the answers.

To be serious, perhaps my “superpower” is my inability to kid myself. If something looks and feels a certain way, then even if there may be outside pressures to ignore that assessment, I simply can’t go there. I ultimately feel driven to tackle reality, even when that reality is unpleasant or seemingly challenging. And I don’t say any of this in any kind of judgmental way. I understand why some people feel that they are facing binary decisions and that they don’t have choices—for example, that either a project or plan must go ahead immediately and without full consideration, or it just won’t be able to go ahead at all.

My experience and approach are more along the lines of “if it’s worth doing, it’s worth doing well.” Not perfectly, mind you, because there’s usually no such thing. Just well. And as I’ve said, I do believe in long-term thinking, so I’ve seen that spending a little more time and energy at the outset pays dividends over time.

ESS/MV: Sometimes a young—or not-so-young—lawyer may find themselves as the only person like them in the room. What tips would you share to deal with that situation?

Matthew Shuber: Honestly, I feel that a mindset that focuses on being the “only” has the potential to be self-limiting. I recognize that there are situations in which people are, in fact, the “only”—there is a reality to that lived experience.

But I think it’s far more productive to take the mental and emotional step that’s needed to emphasize the “in the room” portion, instead of the “the only” portion. That is, once you are in the room, it’s critical to recognize that first, there’s a reason you are there and second, being in that room presents an opportunity. So, own it, try to make a difference by your presence, and don’t limit or sabotage yourself!

Postscript

ESS/MV: When we met, at our Leadership Dialogue program in Toronto, the Blue Jays were in the final weeks of the regular season. Over the course of working on this article, they defeated the New York Yankees in the Division Series and won the American League pennant after an epic matchup with the Seattle Mariners. The World Series between the Blue Jays and the defending champions, the Los Angeles Dodgers, was one for the ages, with the Dodgers ultimately winning Game 7 of the World Series by the slimmest of margins, and then only after 11 innings. I’m sure that the experience of the last six weeks has been something special for you, and I’d be remiss if I didn’t ask you if there are any reflections that you would like to share.

Matthew Shuber: Thank you for asking that. This experience truly has been like no other, and not simply because of the obvious accomplishments of the team on the field. Although the final result wasn’t what any of the Blue Jays players, front office personnel, or our incredible fans would have hoped for, the more I reflect on the experience, the more I’m struck by something even more important than a championship trophy.

Sometimes, in sports and in life, you lose. Although it stings, you know there were specific reasons for the loss and that there was more to do. And so you look to learn from the experience and get better as a result. This experience has been a little bit different. I believe—actually, I know—that everyone in the organization, on and off the field, did all that they could and that we are second to none, whether or not that shows in the final score or the record books.

At this moment I’m struck by the fact that so many people saw—and were moved by—the character, resilience, and fellowship of the Blue Jays players. More than one person has observed and commented to me that this was truly a team, in a way they’ve never seen or experienced before, in any sport.

That makes me enormously proud, because I know that what those people are seeing isn’t an accident. The characteristics of the group of players that competed on the field this October reflects and exemplifies the values and approach of the Blue Jays organization that exists off the field. And I know from many years of working in professional sports that it is hard enough to establish those things in a front office, let alone to have the commitment to do so on the playing field. But our organization has that commitment—and it showed. And it resonated with people. To me, that’s something to be proud of, because in some ways, it’s the most meaningful outcome possible.

* * *

This article is related to a CLE program presented at the ABA Business Law Section’s 2025 Fall Meeting titled “Leadership Defined: A Fireside Chat with Matthew Shuber, Senior Vice President of Legal & Government Affairs and General Counsel of the Toronto Blue Jays (MLB).” For further information, view the program materials.

1. Matthew J. Shuber is Senior Vice President, Legal Affairs and General Counsel of the Toronto Blue Jays Baseball Club (Major League Baseball’s only Canadian franchise) and for Rogers Centre stadium. Hon. Elizabeth S. Stong is a U.S. Bankruptcy Judge for the Eastern District of New York, sitting in Brooklyn. Mauricio Videla, Esq., MPA, is a Banking & Financial Services Counsel and Securities Arbitrator. Judge Stong and Mr. Videla are active in the leadership of the ABA Business Law Section and its Leadership Development Committee. ↑