Corporate crises are inevitable. From cyberattacks to whistleblower complaints of executive misconduct, lawyers, both in-house and outside counsel, are usually among the first people pulled in to assist in addressing these crises. Lawyers are often expected not just to answer the legal questions associated with such crises, but also to guide corporate leaders in identifying problems, preserving attorney-client privilege, selecting appropriate resources, and satisfying fiduciary duties, all while maintaining legal and ethical standards throughout the process. The CLE program “When the Alarm Sounds: Boardroom Crisis Management in Real Time,” presented at the 2026 ABA Business Law Section Fall Meeting in Chicago, Illinois, provided practical guidance on governance, privilege and internal investigations, communications strategy, regulatory exposure, and legal and ethical compliance when facing moments of crisis.

This showcase program was moderated by Mac McCoy, a partner at Carlton Fields, P.A. in Tampa, FL, and past chair of the Business Law Section, and featured Margarita Rohaidy Delgado, founder and president of MRD Consulting; Cara Bradley, deputy general counsel of Brooks Automation; Ami N. Wynne, partner at Morgan, Lewis & Bockius; and Forrest J. Deegan, principal consultant at Spark Compliance Consulting, a Diligent brand. Together, these panelists led an interdisciplinary, thought-provoking conversation by walking through three fictional case studies— (1) a cyberattack, (2) a CEO ethics crisis, and (3) a patent and trademark war—and discussing best practices for tackling the issues in each respective scenario.

What Keeps You Up at Night?

Prior to diving into the case studies, the panelists set the stage for the discussion by sharing, from their unique perspectives, the thoughts that consume their minds in moments of crisis. “Do you have a game plan? . . . Do you have a team?” Bradley said, alluding to the need to have the proper resources in place before a crisis arises. Deegan stated that when it comes to a crisis, it is not a matter of how it will happen, but when it will happen. Next, Delgado emphasized concerns surrounding communication strategies and understanding vulnerabilities and communication risks before a crisis. Lastly, Wynne stressed what appeared to be the common, overarching theme shared by all: proper preparation.

Case Study #1: The Cyberattack

When a national healthcare company experiences a ransomware attack that risks compromising patient information, how does counsel respond? It is certain that in-house counsel will be pulled in immediately, but what should their priority be? In these situations, the lawyer’s job is not to slow the process, but instead to impose order on chaos. True to the theme of preparation, to impose such order, it is important for counsel to adhere to the incident response plan—which requires that companies and organizations have an incident response plan in place and ready to be executed.

But having a plan in place is not the only thing that matters. Bradley noted how important it is to determine who the team to carry out this plan will be. That includes considering which internal stakeholders are best equipped to address the situation, and what outside experts are the best fit to support the internal team; combined, they will form the core crisis team. An example of a core crisis team for a cyberattack may include the general counsel and other in-house counsel (as needed), the CEO or other designated executive lead, outside counsel, an IT or other information security lead, a communications professional, a compliance or regulatory lead, and an insurance or risk management lead. Ultimately, it becomes the job of the assembled team to collaborate by carrying out their respective tasks and following the plan in place.

Case Study #2: The CEO Ethics Crisis

Imagine the CEO of a publicly traded company is accused of maintaining a personal relationship with a major vendor, where emails are discovered that evidence a consulting arrangement in exchange for luxury travel and gifts. Although formal charges have yet to be filed, employees and investors are raising important questions. In this situation, it is imperative to address the elephant in the room: accountability. According to Wynne, it is important for the investigation team not just to focus on the policies and procedures in place to address such situations, but to consider the accountability factor, as that is ultimately what can have major implications here.

In scenarios like this, communication plans are also key components of the crisis response, as audiences, both internally and externally, will be waiting for responses. Per Delgado, appropriate disclosures may include acknowledgement of the situation, messaging that an investigation has been initiated, notice that counsel has been retained, and, most importantly, assurance that the company takes this issue seriously and will take appropriate actions based on the findings. In this particular situation, the lawyers assigned to this crisis should evaluate legal liability, regulatory exposure, fiduciary duties, disclosure obligations, employment consequences, insurance coverage, contractual obligations, litigation risk, privilege and waiver, and reputation and stakeholder trust.

Case Study #3: The Patent and Trademark War

A technology company launches a new artificial intelligence platform, and within hours a competitor files a lawsuit alleging patent infringement, trademark confusion, and theft of property concepts. Media outlets publish the story under headlines like “AI Company Accused of Stealing Competitor’s Innovation.”

As a best practice, the public statement that should be made in this situation and related situations is that you do not discuss active litigation in public. Further, it is important to note that anything that is discussed may be used in litigation.

Another best practice in this instance is that, given the high litigation stakes, attorneys need to be involved in approving all messaging, both internally and externally. It is important that attorneys review messaging for accuracy, consistency with public statements, preservation instructions, confidentiality obligations, media response guidance, whistleblower and anti-retaliation issues, and litigation hold language. Deegan shared that in these situations, it is imperative that communications teams have the correct legal contact to avoid delays; this ultimately needs to be addressed and planned for in the applicable crisis management plan.

Key Takeaways

In discussing these crisis scenarios that boards may face, the panel’s most common takeaway was that preparation and timing are key. To be prepared in a timely manner, crisis response plans must address who will lead and who should be informed, how to preserve privilege while gathering facts, how to navigate legal and ethical dilemmas, how to coordinate communications strategies without increasing liability, and how to advise boards through difficult governance decisions. Ultimately, it is important to plan the dive, and dive the plan.

Jessica Mendelson and Emily J. Stover served as Editors for this publication, Shera Y. Kwak and Aja Nunn served as Assistant Editors, and Rosemary M. Soliz served as Editorial Assistant.

Contributors to this publication include: MacKenna Alvarez, Yoon Cho, Kaveh Dabashi, Madalyn Doucet, David R. Gobel, Matthew L. Honig, Alex Kargher, Lauren Kazen, Nyssa Leonardi, Josh Lopez, Boris Lubarsky, Vanna Mavromatis, Candace Polster, Devonae Robinson, Joshua Salinas, Remy Snead, Nicole Tackabery, and Nicole K. Wong.

Introduction

2025 saw a continuing trend of pending noncompete bills proposed across over 30 states nationwide. Many of the pending bills continue to propose applying limitations around healthcare workers or providing or implementing wage thresholds for certain professionals or low-wage workers. Most recently, Washington state’s chambers of the Legislature approved Engrossed Substitute House Bill (ESHB) 1155, which would prohibit the use of nearly all noncompetes in Washington state. Governor Bob Ferguson signed this bill on March 23, 2026.

Further, though the Federal Trade Commission’s (“FTC”) attempt to impose a nationwide ban on employee noncompete agreements is no more, we have continued to see federal regulatory actions and judicial scrutiny. The FTC issued a request in September 2025 for information on employee noncompete agreements, “to better understand the scope, prevalence, and effects of employer noncompete agreements, as well as to gather information to inform possible future enforcement actions.” Specifically, the FTC requested that “[m]embers of the public including current and former employees restricted by noncompete agreements, and employers facing hiring difficulties due to a rival’s noncompete agreements, are encouraged to share information about the use of noncompete agreements.” Additionally, many courts are continuing to express reluctance in enforcing post-employment restrictive covenants.

In light of these ongoing trends that show no signs of reversing, it is critical that businesses continue to stay current on both federal enforcement trends and state legislative changes. This Trade Secrets and Employee Mobility chapter provides an overview of the key developments for 2025, highlighting the implications and ongoing trends for businesses and practitioners.

First Circuit

In 2025, legislative activity in the First Circuit reflected continued efforts to further limit noncompete agreements broadly (S0302 in Rhode Island) and in specific sectors (healthcare in Rhode Island and New Hampshire, veterinarians in Massachusetts), though all of these attempts ultimately stalled short of passage. See S. 302, 2025 Gen. Assemb., Jan. Sess. (R.I. 2025); S. 703, 2025 Gen. Assemb., Jan. Sess. (R.I. 2025); H.B. 386, 2025 Gen. Ct. (N.H. 2025); S. 1366, 2025 Gen. Ct. (Mass. 2025). The advancement of S. 302 in Rhode Island—which passed the Senate but was never brought up in the House—is a notable attempt to revisit broad noncompete legislation that was previously vetoed by Governor Dan McKee in 2024.

There were also a number of cases out of the First Circuit this year, all from Massachusetts courts interpreting various aspects of the 2018 Massachusetts Noncompetition Agreement Act (MNAA). Massachusetts’ highest court confirmed that non-solicitation agreements are outside the scope of the MNAA. A state trial court upheld an employer’s garden leave clause and provided valuable guidance on how courts will apply the Act. And in two other cases, courts refused to enforce noncompete agreements for failing to comply with the highly technical requirements of the MNAA.

In Miele v. Foundation Medicine, Inc., 250 N.E.3d 294 (Mass. 2025), the Massachusetts Supreme Judicial Court (SJC) ruled that a forfeiture clause triggered by breach of a non‑solicitation agreement is not a “forfeiture for competition agreement” within the scope of the MNAA. Although the Act specifically excludes “covenants not to solicit,” the trial court issued a ruling in favor of the plaintiff-employee, finding the forfeiture provision was unenforceable under the Act. The SJC disagreed and explained that treating a non-solicitation clause differently because it contains a forfeiture mechanism would contradict the MNAA’s express exclusion of covenants not to solicit and render the statute “internally contradictory.”

In Misiaszek v. Korn Ferry, No. 2584CV01766 (Mass. Sup. Ct. July 29, 2025), the Massachusetts Superior Court sided with the employer, finding its garden leave clause enforceable under the MNAA’s requirement that a noncompete be supported by payment during the “entirety of the restricted period” and “except in the event of a breach by the employee [does] not permit the employer to unilaterally discontinue or otherwise fail or refuse to make the payments.” Mass. G. L. c. 149 § 24L(b)(vii). Korn Ferry’s noncompete provision provided that an employee would not compete for a six-month period after their employment ended, “provided that Korn Ferry continues to pay you your then existing base salary during that six-month time period.” The court found this conditional language consistent with the MNAA which “contemplates that an employer need not pay garden leave if it waives ‘the restriction upon post‑employment activities.’” The court also found the employer’s proffered legitimate business interest—the protection of confidential business information—a sufficient and protectable interest that could not be adequately protected by nondisclosure and non-solicit agreements.

In Warren v. Zapata Computing, Inc., 2025 WL 1556040 (D. Mass. June 2, 2025), a Massachusetts federal court held that an employer’s counterclaims based on violation of a noncompete provision failed because there was no evidence to establish that the employee was expressly informed of the right to consult legal counsel prior to signing the agreement. In Anaplan Parent LP v. Brennan, No. 2025-J-0685 (Mass. Sup. C. Oct. 7, 2025), a state court dealt another blow to an employer’s attempt to enforce a noncompete provision for failing to comply with a technicality: the parent company, rather than the subsidiary that directly employed the executive, had signed the agreement. The court imposed a narrow definition of the term “employer” under the MNAA and held the agreement was therefore unenforceable because it was not signed by the employer. Together, these cases illustrate the continued importance for Massachusetts employers to understand and comply with all requirements of the MNAA when drafting and implementing noncompete agreements.

Second Circuit

In 2025, the Second Circuit did not significantly change how courts address noncompete and trade secret litigation. On the legislative side, a New York bill (Senate Bill S4641) was introduced that would prohibit most noncompete agreements if passed and will likely be closely watched in 2026. The Southern District of New York issued two instructive rulings regarding the requisite level of specificity necessary to bring, and maintain, a trade secret action.

First, in Cartiga, LLC v. Aquino, the Court confirmed that the Second Circuit has not required that a trade secret be pled with a particular degree of specificity but must provide enough specificity to put a defendant on notice. No. 24 CIV. 1014, 2025 WL 388804, at *8 (S.D.N.Y. Feb. 4, 2025). In Cartiga, the Court denied defendant’s motion to dismiss plaintiff’s trade secret cause of action for failure to state a claim holding that a “plaintiff cannot get away with nebulous descriptions at the highest level of generality,” but that “‘a DTSA plaintiff has no obligation to reveal its secrets in the Complaint simply to prove that they exist.’” Id. (internal citation omitted). The Court found the plaintiff had sufficiently identified five categories of information which it plausibly alleged were trade secrets including the compilation of client information.

Second, in Hayden v. IBM, the Court granted defendant’s motion for summary judgment holding that plaintiff had failed to define alleged trade secrets with requisite specificity to identify a protectable trade secret. No. 21-CV-2485, 2025 WL 1697021 (S.D.N.Y. June 17, 2025). The Court found that plaintiff was inconsistent when identifying the purported trade secrets, failed to identify the individual elements of the trade secret, and how those components combined to form a trade secret. The Court noted that the numerous documents provided by plaintiff created a “moving target” due to the vague labels and high-level content. The Court concluded that even though this may have been a tactic to protect the trade secret from competitors, this tactic ultimately proved to be fatal to the misappropriation claims.

Third Circuit

On the legislative front, Pennsylvania’s Fair Contracting for Health Care Practitioners Act went into effect on January 1, 2025. The Act generally makes noncompete covenants entered into after the effective date void and unenforceable against “health care practitioners,” as defined by the Act. The Act has exceptions. Most notably, employers may enforce noncompetes if the duration is no more than one year and the employer did not cause the health care practitioner’s dismissal.

While New Jersey legislators continued to push two bills (Senate Bill No. 4385 and Assembly Bill No. 5708) that would ban most noncompete agreements in the state, neither passed before the 2025 legislative session ended. Both bills are expected to be reintroduced during the 2026 legislative session, likely with more momentum and support than in prior years.

Delaware does not have legislation addressing restrictive covenants, so case law continues to shape the landscape. Through its 2024 rulings in Cantor Fitzgerald, L.P. v. Ainslie, 312 A.3d 674 (Del. 2024) and LKQ Corp. v. Rutledge, 337 A.3d 1215 (Del. 2024), the Delaware Supreme Court upheld forfeiture-for-competition clauses and found that because they are not a restraint on trade, they do not need to meet Delaware’s reasonableness standards for enforcing restrictive covenants.

Pointing to the holdings in Ainslie and Rutledge, the plaintiffs in Fortiline, Inc. v. McCall, 341 A.3d 1027 (Del. Ch. 2025) argued that damages for breach of a restrictive covenant are akin to the loss of a supplemental benefit under a forfeiture-for-competition provision, and thus, if the remedy sought is money, rather than injunctive relief, the covenants should not be subject to review for reasonableness. The court rejected this argument. It explained that application of the reasonableness standards hinges “on what the provision demands of the employee, not what the company seeks as a remedy for its breach. If the provision restrains the employee from work, then reasonableness review kicks in. If it does not—if instead, for example, it allows the employer to retain a benefit the employee would otherwise receive—then courts must enforce that term as written.” Id. at 1033. The McCall court held that the plaintiffs were not entitled to any damages because the restrictive covenants were unreasonable and unenforceable.

Additionally, several 2025 decisions highlight enforcement issues that arise when equity or profit incentive agreements contain forfeiture clauses in addition to, and separate from, affirmative restrictions such as noncompetes. For example, in North American Fire Ultimate Holdings, LP v. Doorly, No. 2024-0023-KSJM, 2025 WL 736624 (Del. Ch. Mar. 7, 2025), the for-cause termination of the employee’s employment resulted in the automatic forfeiture of his incentive units. As a result, the Delaware Court of Chancery held that the employer had eliminated the sole consideration for restrictive covenants set forth in the incentive unit agreement, making them unenforceable. Similarly, in Payscale Inc. v. Norman, No. 2025-0118-BWD, 2025 WL 1622341 (Del. Ch. June 9, 2025), the Delaware Court of Chancery held that a noncompete provision set forth in a director-level employee’s incentive equity agreements was unenforceable. The court reasoned that even if the director’s forfeited equity had some value when the parties executed the incentive equity agreements, that consideration could not support the broad 18-month, nationwide noncompete.

Notably, the court in Payscale also declined to blue-pencil the noncompete. The refusal to blue‑pencil is consistent with other recent decisions from Delaware courts.

Fourth Circuit

Over the past year, states in the Fourth Circuit have sought to expand the protections available to employees against restrictive covenants through proposed legislation and case law. For example, the Fourth Circuit has narrowed the employees bound by noncompete agreements by imposing minimum income requirements and near-categorical exemptions for employees in certain fields. District courts similarly expressed reluctance to enforce restrictive covenants, suggesting convergence in legislative and judicial attitudes toward post-employment restrictive covenants.

There were several notable developments relating to state noncompete and non-solicitation laws.

• North Carolina introduced HB 269—the “Workers Freedom and Protection Act”—which would broadly prohibit employers from entering into, requiring, enforcing, or threatening to enforce noncompete agreements, including restrictions on employee mobility between franchise locations, for workers earning less than $75,000 annually.
• South Carolina introduced two bills: HB 3273, which would prohibit noncompete agreements between nonprofits and their employees—nullifying existing covenants for nonprofits with over $1 billion in gross revenue—and HB 4767, which would prohibit noncompete clauses in physician contracts.
• Maryland expanded its restriction on noncompete agreements, rendering them null and void for workers earning 150% or less of the state minimum wage and for veterinary practitioners and technicians. For licensed healthcare workers providing direct patient care who earn $350,000 or less, noncompete provisions are limited to one year in duration and a 10-mile radius from the primary place of employment.
• Effective July 1, 2025, Virginia expanded its ban on noncompetes with low-wage employees to include workers who earn less than the Commonwealth’s average weekly wage or who are entitled to overtime under the FLSA. See Va. Code. Ann. § 40.1-28.7:8.

There are a couple of interesting cases that have been decided in the Fourth Circuit in 2025. In Allegis Grp., Inc., et al. v. Bero, No. 23-2023, 2025 WL 2141298 (4th Cir. July 29, 2025), the Fourth Circuit affirmed summary judgment in favor of former employee Christopher Bero. The court held that Bero did not breach his non-solicitation agreement because his post-employment recruiting activities did not relate to the specific business area he had serviced while employed. Id. at *3. As a result, the employers could not show that his conduct fell within the scope of the contractual restriction. The court also rejected the nondisclosure claim, finding that Bero merely sent confidential information to himself and that there was no evidence he disclosed the information to any third party. Id. at *4. Without proof of external disclosure or misuse, the nondisclosure agreement could not support liability.

In Sysco Machinery Corp. v DCS USA Corp., 143 F.4th 222 (4th Cir. 2025), the Court articulated the pleading standards for trade secret claims under both the Defend Trade Secrets Act and North Carolina’s Trade Secrets Protection Act. The Court emphasized that a plaintiff must plausibly allege the existence of a protectable trade secret and facts showing misappropriation. Id. at 228. It further held that depositing technical drawings with the U.S. Copyright Office extinguished any trade secret protection in those materials. Id. at 229. The Court reiterated that misappropriation requires the acquisition, disclosure, or use of a trade secret by improper means or without the owner’s consent. Id. at 229.

Fifth Circuit

The Fifth Circuit saw some minor developments in the last year, with a few cases of note. In Worldvue Connect Global, L.L.C. v. Szuch, 155 F.4th 472 (5th Cir. 2025), the Fifth Circuit addressed the scope of a noncompete and non-solicitation provision that arose out of the sale of a business, and held that they covered both independent contractors employed by a third-party agency and employees who physically resided outside of the restricted area but provided services within the restricted area.

The provision at issue provided, in relevant part, that the defendants would not solicit its customers or “recruit, solicit, induct or attempt to induce, directly or indirectly, any of the employees or independent contractors of [Plaintiff] or any of its direct or indirect subsidiaries, to terminate their employment or contractual relationship with [Plaintiff] or any such subsidiary . . . .” The agreement also provided that the defendants could not engage in competitive business in the restricted area for one year.

At issue in the case was whether this provision applied to employees and contractors of the plaintiff who physically lived out of the restricted area but provided services to clients of the plaintiff in the restricted area, and whether it applied to customer service agents who provided services to the plaintiff in the restricted area but were employed by a third-party staffing company.

The defendants argued that the parties agreed that they would not solicit or compete “in” the restricted area, and that the provision should, therefore, not apply to remote workers who live and work outside the restricted area. According to the defendants, interpreting the provision to cover workers who did not live in the restricted area but provided services in that area would erase the contractual restricted area limitation.

The majority of the Fifth Circuit rejected that argument both because the plain language of the agreement confirmed this interpretation and because the evidence showed that the scope of the restriction was reasonable given the nature of the plaintiff’s business. The majority also rejected the argument that the non-solicitation provision did not apply to customer service agents who provided services to the plaintiff but were employed by a third-party staffing company. As the court noted, agreeing with the defendants’ argument “would exclude the customer service agents from the solicitation agreement entirely despite those agents performing essential work for the [plaintiff] in the operation of its business.” This would create an “unreasonable construction.”

Hon. James L. Dennis issued a dissenting opinion, but it did not deal with the substance of these conclusions. Instead, Circuit Judge Dennis took issue with a threshold point—whether there was a basis for injunctive relief at all. He felt that the District Court failed to assess this issue and improperly relied on a contractual provision which permitted the issuance of an injunction in the event the noncompete or non-solicitation provisions were violated.

In the trade secrete theft space, the Fifth Circuit once again confirmed that demonstrating the existence of a trade secret is essential to suing for theft of a trade secret. In DeWolff, Boberg & Associates Incorporated v. Pethick, 133 F.4th 448 (5th Cir. 2025), the Fifth Circuit affirmed an order granting summary judgment for the defendant as to a misappropriation claim due to Plaintiff’s failure to identify with specificity what information in its Salesforce Database was non-public, or distinguish between public and non-public information in that database. It also found that there was no evidence that the defendants used or disclosed any trade secrets, which also supported affirming the trial court’s ruling.

Finally, at the state court level, there was an interesting decision about the importance of drafting an enforceable noncompete agreement. In Allen & Smith Insurance Agency Inc. v. Merrill, No. 2023-CA-00468-COA, — So.3d –, 2025 WL 1441926 (Miss. Ct. App. May 20, 2025), the Court of Appeals of Mississippi affirmed a trial court ruling that struck the noncompete and non-solicitation provisions in an agreement between an insurance agent and their former employer on the grounds that they were so vague as to be unenforceable. Among other issues, the Court found the provisions internally inconsistent such that the defendant was placed in a “very uncertain position” when trying to determine their scope. As the Court of Appeals noted, “[t]he agreement’s terms should have been clear, unambiguous, and reasonable from the onset.” That the provisions at issue in this decision were not rendered them unreasonable and unenforceable.

Sixth Circuit

The past few years, the Sixth Circuit has reversed several district courts that disposed of trade secret claims as time-barred on summary judgment, allowing those claims to survive. In 2025, the Sixth Circuit ended its streak. In Cincom Systems, Inc. v. Labware, Inc., the Court agreed with the district court that the plaintiff’s former employee’s social media activity put the plaintiff on “inquiry notice” of misappropriation, thus starting the countdown for filing its complaint, which expired by the time of filing. No. 24-3726, 2025 WL 2742573, at *8 (6th Cir. Sept. 26, 2025). The limitations period begins running either when “the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.” Kehoe Component Sales Inc. v. Best Lighting Products, Inc., 796 F.3d 576, 582 (6th Cir. 2015). These decisions discuss when misappropriation “should” be discovered with reasonable diligence.

Let’s recap the previous decisions. In B&P Littleford v. Prescott Mach., LLC, the district court held that “B&P’s claim accrued no later than 2012 and was therefore time-barred,” citing a 2012 customer tip as when B&P should have discovered the misappropriation, and it granted summary judgment over the claim filed in 2018. No. 20-1449, 2021 WL 3732313, at *6 (6th Cir. Aug. 24, 2021). However, the Sixth Circuit reversed. Id. at *7. After the tip in 2012, B&P had inquired whether Prescott showed B&P’s drawings to other customers, and it submitted a criminal complaint to the FBI. Id. at *8. Although those efforts did not successfully yield additional evidence, the Sixth Circuit held that “a jury could find that B&P satisfied its obligation of conducting a reasonable investigation.” Id. In Campfield v. Safelite Group, Inc., the district court granted summary judgment that Safelite’s trade secret counterclaim was time-barred; Campfield had sent Safelite a letter in 2010 (outside the limitations period), listing materials to support Campfield’s Lanham Act claim, which Safelite would later allege had been misappropriated. 91 F.4th 401, 415 (6th Cir. 2024). According to the district court, the 2010 letter should have triggered a further investigation into Campfield’s alleged misappropriation. Id. The Sixth Circuit reversed, agreeing with Safelite that “[n]othing in the letter suggested that the information at Campfield’s disposal had been stolen,” and Safelite was not obligated to further investigate any potential misappropriation. Id. Last, in Metron Nutraceuticals, LLC v. Cook, the district court granted summary judgment that Metron’s claim was time-barred, reasoning that because Metron had filed a lawsuit in 2016 against Thomas (another co-defendant), Metron was obligated “to investigate further” at that time. No. 23-3596, 2024 WL 3877388, at *12 (6th Cir. 2024). The Sixth Circuit reversed, noting that the prior lawsuit against Thomas involved different operative facts, and that “the district court did not explain what investigative steps Metron should have taken” to discover the misappropriation at that time. Id. at *13.

We turn to 2025. In Cincom Systems, Inc. v. LabWare, Inc., the Sixth Circuit affirmed a district court’s award of summary judgment that trade secret misappropriation was time-barred. No. 24‑3726, 2025 WL 2742573 (6th Cir. 2025). In 2014, a former disgruntled Cincom employee posted on his personal blog that he was both joining defendant LabWare and working on “Smalltalk [virtual machine] work.” Id. at *4. This raised red flags among Cincom personnel, saying “there was no way [LabWare] could have legally obtained a copy of the underlying source code” for that technology. Id. at *5. However, a repost of the former employee’s post provided additional information suggesting to Cincom that “it was far more likely that LabWare would be using an open-source Smalltalk variant,” and Cincom decided to wait until “we have evidence that he and/or his company are in violation” before following the lead. Id. In 2014, Cincom did nothing further to investigate, such as reaching out to the defendant or another entity suspected of having pertinent information. Id. Instead, it was not until 2019 when Cincom conducted a “rapid, successful investigation” to gather evidence of misappropriation. Id. at *8. The district court time-barred the 2019 claim, finding that Cincom was on “inquiry notice” based on the blog post in 2014. Id. at *4. On appeal, the Sixth Circuit rejected Cincom’s attempts to rely on all three cases discussed above (B&P Littleford, Campfield, and Metron), distinguished them, and agreed that the claims were time-barred. Id. at *7. The Court discussed all the facts at Cincom’s disposal in 2014, including the social media posts and other public information about LabWare’s technology. Id. at *6. The Court explained, “If Cincom had made at least some showing of chasing down these leads, then it would at least arguably have behaved as a reasonably prudent person should.” Id. *8. Cincom was therefore on “inquiry notice,” and if it had investigated (even if unsuccessfully, like B&P Littleford), it could have avoided summary judgment. See id.

Seventh Circuit

There were no relevant authorities in this circuit over the past year.

Eighth Circuit

Case law in the Eighth Circuit remains largely unchanged with respect to matters regarding employee mobility, restrictive covenants, and trade secrets. That said, there are a few notable points of discussion:

On March 4, 2025, Arkansas Governor Sarah Huckabee Sanders signed into law Senate Bill 139, now Act 232 (the “Act”), which amended the state’s noncompete statute to provide that noncompete covenants that “restrict the right of a physician to practice within the physician’s scope of practice” are now void. The Act became effective 90 days after the conclusion of the current legislative session in mid-July 2025.

A few interesting cases have also come out of the Eight Circuit in the past year. In Choreo, LLC v. Kevin Lors et al., No. 25-1706, 2026 WL 82841, (8th Cir. Jan. 12, 2026), the Eighth Circuit vacated a preliminary injunction that had been granted to Choreo, LLC, against its former employee, Kevin Lors, and his new employer, Compound Planning. Choreo had sought the injunction based on allegations that Lors violated a non-solicitation clause by encouraging former clients to switch to his new employer. The district court granted the injunction, finding irreparable harm based on Choreo’s further loss of customer relationships. On appeal, the Eighth Circuit emphasized that mere allegations of competition or potential loss of clients were insufficient to establish irreparable harm without clear evidence that such harm could not be adequately remedied by monetary damages. As a result, the court vacated the injunction, reinforcing the need for a strong showing of harm to obtain a preliminary injunction.

In Ellingson Drainage, Inc. v. Kippen, No. 3:22-cv-189, 2025 U.S. Dist. LEXIS 265935, No. 3:22-cv-189 (D.N.D. Sep. 30, 2025), the U.S. District Court addressed a claim under the Defend Trade Secrets Act (DTSA), where Ellingson Drainage alleged that Kippen, a former employee, and Landmark, Kippen’s new employer, misappropriated its trade secrets. Ellingson contended that Kippen took valuable, proprietary information, such as client lists and pricing data. The court examined whether Kippen’s actions constituted misappropriation of such information. Ultimately, the court found that Ellingson Drainage had not taken reasonable measures to keep the information secret. While Ellingson Drainage had directed its employees that the information was confidential, evidence showed that employees sometimes left the supposedly confidential information with Ellingson Drainage’s customers, or in file cabinets that were accessible by anyone. As such, Kippen and Landmark were entitled to summary judgment on the DTSA claim.

Finally, Zest Labs sued Walmart in 2018 for allegedly stealing its Zest Fresh technology, which tracks produce freshness from farms to stores. Zest Labs Inc. et al. v. Walmart Inc., Case No. 4:18-cv-00500 (E.D. Ark.). Following a retrial in May 2025, a jury in Arkansas federal court found that Walmart owed Zest Labs more than $222 million. The jury awarded Zest Labs 72.7 million in compensatory damages and $150 million in punitive damages, finding that Walmart had misused its trade secrets after Zest shared its technology for improving food preservation with Walmart. After the jury award, the parties agreed to a confidential settlement to resolve all issues between them.

Ninth Circuit

AB 692

California recently adopted new legislation impacting employee mobility, namely AB 692, or California Business & Professions Code Section 16608. This statute, which went into effect on January 1, 2026, prohibits employers from including “in any employment contract, or to require a worker to execute as a condition of employment or a work relationship a contract that includes, specified contract terms, including a term that requires the worker to pay an employer, training provider, or debt collector for a debt if the worker’s employment or work relationship with a specific employer terminates.” The law creates a private right of action, allowing affected workers to bring claims on behalf of themselves and similarly situated individuals. Remedies include minimum damages of $5,000 per affected worker, injunctive relief, and recovery of attorneys’ fees and costs.

While AB 692 restricts certain repayment obligations, it includes several important exceptions. First, loan repayment assistance and forgiveness programs, which include contracts “entered into under any loan repayment assistance program or loan forgiveness program provided by a federal, state, or local governmental agency,” are excluded from the law. Second, agreements for “the repayment of the cost of tuition for a transferable credential” are excluded provided all of the following conditions are met: (1) the agreement is offered “separately from any contract for employment”; (2) “the contract does not require obtaining the transferable credential as a condition of employment” (3) the repayment amount is specified in advance, not exceeding “the cost to the employer of the transferable credential received by the worker”; (4) the agreement provides for a “prorated repayment amount during any required employment period that is proportional to the total repayment amount and the length of the required employment period and does not require an accelerated payment schedule if the worker separates from the employment”; and (5) repayment is not required if the worker is terminated, “except if the worker is terminated for misconduct.” Third, contracts “related to enrollment in an apprenticeship program approved by the Division of Apprenticeship Standards” are excluded from the prohibition. Fourth, contracts for discretionary or unearned monetary payments “at the outset of employment that is not tied to specific job performance” are excluded provided all of the following conditions are met: (1) repayment terms are in a “separate agreement from the primary employment contract”; (2) the employee is told of the right to consult an attorney and given at least five business days to do so prior to executing the repayment obligation agreement; (3) repayment is “not subject to interest accrual,” prorated based on remaining retention period, up to two years, and may be deferred until “the end of a fully served retention period”; and (4) repayment may only be required if separation is voluntary or due to employee misconduct. Finally, contracts relating to the “lease, financing, or purchase of residential property, including, but not limited to, a contract pursuant to the California Residential Mortgage Lending Act” are excluded from the statute.

Oregon Bureau of Labor & Industries updates to ORS 653.295

Effective January 1, 2026, Oregon’s minimum compensation required to enforce employee noncompetition agreements increased to an annual gross salary and commissions threshold of $119,541. This change narrows the group of employees who may be subject to enforceable noncompetition agreements while leaving intact Oregon’s existing statutory requirements for enforcement of a noncompete. As a result, employers should reassess current and future noncompetition agreements to ensure compliance with the heightened compensation threshold.

Quintara Biosciences, Inc. v. Ruifeng Biztech, Inc., 149 F.4th 1081 (9th Cir. 2025)

In Quintara Biosciences, Inc. v. Ruifeng Biztech, Inc., the Ninth Circuit clarified the level of detail plaintiffs must provide about their trade secrets in order to survive dismissal in the early stages of federal trade secrets litigation. 149 F.4th 1081 (9th Cir. 2025). There, Quintara Biosciences, a California-based DNA sequencing company, filed suit against its competitor also based in California, Ruifeng Biztech, for misappropriation of trade secrets under the federal Defend Trade Secrets Act (DTSA), 18 U.S. Code § 1836. Quintara alleged that Ruifeng misappropriated several trade secrets, including but not limited to customer and vendor databases, marketing plans, and computer software code. From the beginning of discovery, Ruifeng argued that Quintara must specify its trade secrets with “reasonable particularity” under the California Uniform Trade Secret Act (“CUTSA”). After several attempts to force Quintara to provide more detail about its trade secrets, Ruifeng eventually moved to strike Quintara’s trade secrets claims under Federal Rule of Civil Procedure 12(f), which the District Court for the Northern District of California granted for nine of them.

The Ninth Circuit, however, reversed, and clarified that unlike for CUTSA, plaintiffs bringing claims under the federal statute need only identify their trade secrets with “sufficient particularity” at the outset of litigation. Further, the question of whether or not a plaintiff has defined their trade secrets with sufficient particularity is a factual one that should be resolved at trial or through summary judgment, not through motions to strike. According to the Ninth Circuit, the District Court should have allowed Quintara “to refine its identifications through discovery” instead of “functionally dismiss[ing]” nine of its trade secret claims so early on. The District Court’s failure to do so was an abuse of discretion.

David v. Freedom Vans LLC, 4 Wash. 3d 242, 562 P.3d 351 (Wash. 2025)

David v. Freedom Vans LLC has recently given greater clarity to Washington statute RCW 49.62, which—somewhat paradoxically—both prohibits employers from restricting low wage employees from moonlighting at other jobs to supplement their income, but also preserves employees’ common law duty of loyalty to their employers. Low wage employees are considered those making less than twice the minimum hourly wage (which, as of 2025, is $33.32 per hour or $69,305 per year).

In David v. Freedom Vans LLC, Freedom Vans employees were subject to in-term noncompete agreements prohibiting them from “directly or indirectly engaging in any business that competes” with Freedom Vans during their employment. Two former employees sued Freedom Vans. In compliance with these noncompete agreements, they had forgone “side jobs” that would have supplemented their income while working for Freedom Vans. Although the lower courts found that Freedom Vans could lawfully prohibit low wage employees from engaging in “any kind of assistance” to competitors due to the exception for the common law duty of loyalty under RCW 49.62.070, the Washington Supreme Court demanded a narrower interpretation of the duty of loyalty exception. The Washington Supreme Court held that a blanket prohibition against such “side jobs” with an employer’s competitors would unreasonably broaden employees’ duty of loyalty and would undermine the legislature’s intent to permit low wage employees to supplement their income. The Washington Supreme Court remanded the case. The Court advised that, on a case-by-case basis, anti-moonlighting and duty of loyalty provisions must be narrowly drafted and will be strictly construed when applicable to low wage employees in Washington. This case sets the precedent for Washington companies to re-evaluate, and potentially narrow, their “anti-moonlighting” or noncompete provisions in their employment agreements or company handbooks. In the wake of David v. Freedom Vans LLC, counsel for the plaintiff employees have filed new lawsuits against Amazon, Alaska Airlines and Costco to similarly challenge the companies’ restrictions on their workers.

Tenth Circuit

Litigation Updates

In 2024, Colorado enacted a law strengthening protections for employees subject to training repayment agreement provisions (“TRAPs”). Similar restrictions are increasingly being adopted nationwide, and noncompliance can result in significant exposure, including government enforcement actions and private litigation. State attorneys general have been actively enforcing these laws. More recently, in November 2025, Colorado Attorney General Phil Weiser settled a lawsuit against PetSmart LLC for $225,000 and secured an agreement to stop enforcing TRAPs with groomers. In July 2025, the attorneys general of California, Colorado, and Nevada reached a multi-state settlement with HCA Health Care, Inc., which paid approximately $2.9 million and agreed to additional remedial measures over allegedly unlawful training repayment agreements.

In 2025, courts in the Tenth Circuit underscored that plaintiffs must clearly identify trade secrets before seeking judicial relief. In Double Eagle Alloys, Inc. v. Hooper, 134 F.4th 1078 (10th Cir. 2025), the U.S Court of Appeals for the Tenth Circuit affirmed summary judgment for the defendants after the plaintiff broadly claimed that an employee’s notes and more than 2,600 downloaded files were trade secrets. The plaintiff failed to show that the information was protectable, did not demonstrate reasonable efforts to maintain secrecy, and could not overcome evidence that the defendants independently developed similar specifications or that much of the material was publicly available. Similarly, in Applied Predictive Technologies Inc. v. MarketDial Inc., Case No. 2:19-CV-00496 (D. Utah Mar. 25, 2025), a Utah federal court sharply rebuked Applied Predictive Technologies for pursuing trade secret claims without evidence of an identifiable secret, ultimately awarding $2.8 million in attorneys’ fees to the defendants. Both cases highlight that trade secret claims must be clearly defined, supported by evidence, and protected through reasonable secrecy measures—or risk dismissal and potential sanctions.

Developments in the Healthcare Space

In 2025, Colorado and Utah joined a growing list of states limiting the use of restrictive covenants in the healthcare space.

In March 2025, Utah passed SB-228, which prohibits healthcare services platforms—defined as any “program, system, or application through which a health care worker may accept a shift to perform a health care service or role, as an independent contractor, at a health care facility”—from requiring a healthcare worker to enter into a noncompete agreement. The law defines healthcare workers broadly as any “individual who provides or delivers a health care service, or assists in the provision or delivery of a health care service, including a service for which no license or certification” is required.

In June 2025, Colorado passed SB-25-083, which prohibits covenants—such as noncompetes and patient non-solicitation provisions—that restrict the practice of medicine, advanced practice registered nursing, or dentistry, regardless of whether the practitioner is a highly compensated worker. The law also expressly permits healthcare providers departing their practice to disclose to their patients (a) that they will continue to practice medicine; (b) their new professional contact information; and (c) patients’ right to choose a healthcare provider.

Other Developments

In Kansas, the Governor signed SB 241, which amends the Kansas Restraint of Trade Act. SB 241 took effect on July 1, 2025. The amendment establishes a presumption that certain customer and employee non-solicitation agreements are enforceable. Covered circumstances include employee non-solicitation or non-recruitment provisions that either (1) seek to protect confidential or trade secret information, customer or supplier relationships, goodwill, or loyalty, OR (2) do not extend beyond two years following the end of employment. The presumption also extends to customer non-solicitation provisions that do not continue for more than two years. A presumption of enforceability also now exists for agreements in “which an owner agrees to provide prior notice of the owner’s intent to terminate, sell or otherwise dispose of such owner’s ownership interest in the business entity.” SB 241 further mandates judicial modification of overbroad restrictive covenants. Kansas courts are now required to “modify the covenant, enforce the covenant as modified and grant only the relief reasonably necessary to protect such interests.”

In Wyoming, the Governor signed Senate File 107, now Enrolled Act No. 87 (the “Act”), which renders void any covenant not to compete that restricts a person’s right to receive compensation for the performance of labor. The Act applies to contracts entered into on or after the effective date of July 1, 2025. The Act contains language broad enough to make most noncompete covenants with workers void regardless of a worker’s status as an employee or an independent contractor, or the type of agreement the covenant may be found in. Also included in the Act is a restriction on training repayment agreements and expense relocation agreements that do not satisfy statutory limitations. The Act contains several common exemptions, including agreements with “executive and management personnel” and with “employees who constitute professional staff to executive and management personnel,” although these terms are not defined. It also permits noncompete provisions in connection with the purchase or sale of a business or its assets, and allows covenants to the extent they protect trade secrets. These exceptions, however, do not extend to any agreements “between physicians that [restrict] the right of a physician to practice medicine.”

Eleventh Circuit

Over the past year, practitioners in the Eleventh Circuit saw significant developments that changed the contours of restrictive covenant enforcement and trade secret litigation.

The Federal Trade Commission dismissed its appeals in Properties of the Villages v. FTC (11th Cir.) and Ryan, LLC v. FTC (5th Cir.), stepping away from a nationwide noncompete ban. The agency’s leadership has indicated it instead plans to rely on case‑by‑case enforcement to challenge unjustified or overly broad noncompetes, particularly for lower‑wage workers, with the goal of pushing firms to use only narrowly tailored restrictions tied to legitimate business interests.

Florida’s Legislature moved in the opposite direction of many states by enacting the Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act, effective July 1, 2025. The CHOICE Act supplements Fla. Stat. § 542.335 and creates a parallel, employer‑friendly enforcement track for covered employees (generally those earning at least twice the county’s annual mean wage). It codifies robust tools for noncompetition and garden‑leave arrangements, including a strong presumption of enforceability, mandatory issuance of preliminary injunctions absent a clear‑and‑convincing showing by the employee, a seven‑day review period, and continued salary and benefits during garden leave. It also authorizes notice and garden‑leave periods up to four years. With states around the country continuing to restrict or ban post‑employment noncompetes, the CHOICE Act positions Florida as one of the most employer‑friendly jurisdictions for restrictive covenants.

In Alabama Aircraft Indus., Inc. v. Boeing Co., 133 F.4th 1238 (11th Cir. 2025), the court reversed the district court’s dismissal of a trade secret misappropriation claim under the Missouri Trade Secrets Act, which the court applied pursuant to the parties’ contractual choice-of-law provision rather than Alabama law. The court held that although a contractual limitation‑of‑liability provision may bar most forms of damages, it does not categorically foreclose an unjust‑enrichment remedy where that recovery would not duplicate contract damages.

In NetRoadshow, Inc. v. Carrandi, No. 25-10388, 2025 WL 2435411 (11th Cir. Aug. 25, 2025) (unpublished), the court vacated the dismissal of an employee’s counterclaim under California Business and Professions Code section 16600.5. The court held that a Georgia choice‑of‑law clause limited to “this Agreement” did not automatically bar a statutory tort claim arising from a source outside the contract, and therefore did not prevent the employee from invoking California’s noncompete statute. On remand, the district court must apply Georgia’s choice‑of‑law precedent and its public‑policy exception to determine which state’s law governs the statutory claim. For multistate employers confronting the extraterritorial reach of California’s noncompete ban, the decision cautions that a contractual choice‑of‑law provision alone may not resolve statutory counterclaims, and although unpublished, it still signals how the Eleventh Circuit may approach conflicts‑of‑law issues involving foreign noncompete statutes.

At the state level, the Georgia Court of Appeals in All States AG Parts, LLC v. Herzig, 374 Ga. App. 389, 913 S.E.2d 26 (2025), reaffirmed that noncompetes restricting work “in any capacity” are facially overbroad and are unlikely to be salvaged through blue‑penciling.

Finally, in Rotech Healthcare, Inc. v. Carmichael, No. 6:23‑cv‑2338‑JA‑RMN, 2025 WL 2879775 (M.D. Fla. Oct. 9, 2025), the court held that an employee’s act of forwarding the employer’s detailed referral‑source lists and sales notes to his personal email shortly before joining a competitor constituted misappropriation under both the Defend Trade Secrets Act and the Florida Uniform Trade Secrets Act, even without evidence of post‑departure use or disclosure.

DC Circuit

There were no relevant authorities in this circuit over the past year.

Modern frameworks for corporate liability assume that corporate actions ultimately reflect human choices, employing concepts such as intent, authority, foreseeability, and control. But the emergence of agentic artificial intelligence challenges these frameworks by introducing new, nonhuman “decision-makers” into corporate environments, raising difficult questions about who is at fault when something goes wrong.

This article discusses a recent Ninth Circuit decision involving an AI agent. It also explores the challenges of applying existing liability frameworks when AI agents cause harm, and practical steps businesses using AI tools can take to mitigate the risk of causing such harm.

On August 4, 2026, in Amazon.com Services, LLC v. Perplexity AI, Inc. (No. 26-1444, 2026 WL 2237587), the Ninth Circuit noted that an AI agent at issue in the case “is a tool, not a person for statutory purposes.” Although that distinction may seem self-evident, how courts will analyze liability in the context of agentic AI is not.

In Amazon v. Perplexity, the Ninth Circuit grappled with this conundrum in a first-of-its-kind case. Amazon alleged that the AI company Perplexity’s AI agent accessed Amazon’s computer systems without authorization. The AI agent, called the Assistant, is a feature of Perplexity’s internet browser that can perform tasks such as online shopping via an Amazon customer’s account.

In the lawsuit, Amazon claimed that Perplexity’s Assistant accessed its online store in violation of the Computer Fraud and Abuse Act (“CFAA”) and the California Comprehensive Computer Data Access and Fraud Act (“CDAFA”). Amazon also requested a preliminary injunction enjoining Perplexity from allowing the Assistant to access Amazon’s computer systems. The district court granted the preliminary injunction.

Perplexity appealed, and the Ninth Circuit vacated the preliminary injunction, reasoning that Amazon was unlikely to succeed on the merits because the Assistant did not technically “access” Amazon’s computer systems. Notably, the court acknowledged there is little to no case law on liability and agentic AI, and it sought to limit the implications of its decision, writing:

We do not establish a new legal regime governing agentic AI. We do not address whether in other contexts, including tort claims, Perplexity can avoid liability for the Assistant’s actions. . . . The legal understanding of agentic AI will doubtless change as AI technology grows increasingly sophisticated.

The court’s decision raises a question: What is the legal regime governing agentic AI?

The emergence of AI agents presents real and present challenges in both civil and criminal contexts. AI agents—essentially tools that use AI models to execute complex series of steps—can “make decisions” about how to most effectively perform a task. But who is responsible for those decisions? And what if intent is an element of a crime or tort allegedly committed by an AI agent?

Consider civil fraud. If an employee acting in good faith prompts an AI agent to develop and execute a marketing campaign, but the campaign contains false representations inserted by the AI agent, and it is later discovered that several customers relied on the campaign’s false representations when entering into new contracts with the company, can the company be liable for fraud? Can the employee? The AI developer? How can anyone be liable for fraud without an intent to mislead?

Similarly, imagine a CEO who prompts an AI agent to research a competitor, leaves the agent running overnight, and returns in the morning to find that the agent hacked into the competitor’s servers and copied confidential business plans onto the CEO’s computer. Did the CEO hack the competitor?

These scenarios may sound like science fiction, but they are not. OpenAI, for example, recently announced it is reassessing its security and monitoring standards after AI agents being tested for cybersecurity capabilities escaped their testing environment and hacked into another AI company’s systems without any human instruction to do so. These scenarios may also leave organizations wondering how they can protect themselves from AI agents acting in unintended ways.

Even without guidance from courts or legislators, companies using AI agents can take steps now to mitigate the risk of AI-related harm. These steps typically require collaboration between legal and IT departments, and they include the following:

• Set parameters on AI agents’ authority: Organizations should think carefully before permitting AI agents to communicate externally. Granting this authority increases the risk of an AI agent misleading third parties.
• Establish human-in-the-loop processes: AI agents need to be managed. This management should include requiring human approval before an agent executes sensitive steps, such as accessing files in a shared drive.
• Keep records of AI agents’ activities: Implement systems to track the tasks agents perform. Knowing how agents are used can help identify risks before they materialize.
• Implement an AI usage policy: Organizations should provide clear guidance to employees about what AI agents may or may not be used for.
• Deter “shadow AI”: Shadow AI is the unapproved use of AI tools within an organization, often by employees using their own personal accounts. While there are technical tools that can govern this use, good management practices can also help identify and deter shadow AI.

As the Ninth Circuit noted in Amazon v. Perplexity, the law on agentic AI will continue to evolve. In the meantime, organizations that use AI agents can and should take proactive steps to mitigate the risk of an AI-related incident while still capturing the efficiencies AI agents can offer.

Starting a nonprofit organization can be deeply rewarding, not only for its founders but also for society at large. However, just like starting a for-profit company, forming a nonprofit demands careful planning and due diligence. Counsel for nonprofit founders must not only establish the entity under applicable state law but also structure the organization and its governing documents to support the client’s intended activities and, where applicable, qualify for federal and state corporate tax exemption. This article will attempt to demystify the formation process and provide an overview of the steps involved in creating a nonprofit corporation, from incorporation to obtaining an EIN, drafting corporate documents, and applying for recognition of federal tax-exempt status.

Nonprofits come in all shapes and sizes and can be formed in any state, the District of Columbia (“DC”), and all territories of the United States. For the sake of brevity, this article will focus primarily on the process of forming a DC nonprofit corporation, though the incorporation process is similar in most other jurisdictions.

1. Identify the Nonprofit’s Mission and Organizational Structure

Before preparing the nonprofit’s initial corporate documents, counsel should work with the client to identify the nonprofit’s proposed activities, anticipated funding sources, governance structure, and intended federal tax-exempt classification. At a minimum, counsel should understand the following:

• what activities the nonprofit will conduct
• who will benefit from those activities
• where the nonprofit will operate
• how the nonprofit will be funded
• whether the nonprofit will have statutory members (i.e., individuals or entities who have some level of control and voting power within the nonprofit, such as electing the nonprofit’s directors and officers or the ability to approve a merger or dissolution)
• whether the nonprofit will solicit contributions from the public
• whether the nonprofit will charge for goods or services

These are not merely business planning considerations. They directly inform the nonprofit’s appropriate entity structure, type of federal tax exemption, state and local tax obligations, licensing requirements, and charitable solicitation registration requirements. I recommend advising the client to develop a comprehensive business plan that covers the above and other information about the nonprofit, its business, and finances. Doing this work early on can save a lot of time and expense later in the formation process.

Additionally, counsel should discuss the composition of the nonprofit’s initial board of directors with the client. A nonprofit corporation should have at least three directors (but preferably five or more) who will manage and oversee the nonprofit’s affairs. In many jurisdictions, the initial directors must be listed in the nonprofit’s articles of incorporation (more on articles of incorporation below), so it’s important to identify the initial directors as early in the process as possible. At this time, the client also should be thinking about who will serve as the nonprofit’s initial corporate officers (e.g., president, secretary, treasurer). The officers are charged with carrying out the nonprofit’s day-to-day activities, so those individuals should be genuinely and enthusiastically dedicated to the nonprofit’s mission.

2. Prepare and File Articles of Incorporation, and Obtain an EIN

After those preliminary items are nailed down, the next step is to prepare and file the articles of incorporation. Articles of incorporation state the name of the nonprofit, its initial directors, its office address, its registered agent information, whether the corporation will have statutory members, and other basic information. To qualify for federal tax exemption, some nonprofits also must include certain IRS-required language in their articles of incorporation. For example, a nonprofit that is organized as a 501(c)(3) entity must include a purposes clause and a dissolution clause that complies with the federal Internal Revenue Code’s (and corresponding U.S. Treasury Regulations’) requirements. The articles of incorporation become public record once they are accepted by the jurisdiction of incorporation, so I generally recommend keeping them brief and concise, only disclosing the information required by law and needed to qualify for recognition of federal tax exemption.

Once the articles of incorporation have been drafted, they must be submitted, along with a state filing fee, to the corporation regulator in the jurisdiction of incorporation. In DC, that is the DC Department of Licensing and Consumer Protection. When the articles of incorporation are approved, the DC Department of Licensing and Consumer Protection (or other applicable corporation regulator) will issue a certificate of incorporation recognizing the nonprofit as an officially formed corporation. Some states also have a publication requirement, whereby the nonprofit must publish certain information ora copy of the articles of incorporation in a newspaper of regular circulation in the jurisdiction of incorporation. Be sure to reference the relevant jurisdiction’s nonprofit corporation statutes to determine all requirements for incorporation.

Immediately following incorporation, counsel should obtain a federal employer identification number (“EIN”) from the IRS on the nonprofit’s behalf. This can be done by filing an application (called the IRS Form SS-4) online, which usually takes ten to twenty minutes to complete. The nonprofit’s EIN serves as its tax identifier with the IRS and is required to open a bank account in the nonprofit’s name, register for state-level taxes, and apply for recognition of federal tax-exempt status, among other things, so it is important to obtain an EIN early in the formation process.

At this time, if the nonprofit intends to operate as a 501(c)(4) organization, counsel should prepare and file an IRS Form 8976 to notify the IRS that the nonprofit will operate as a 501(c)(4) entity. Note that this filing must be made within sixty days of the nonprofit’s incorporation or financial penalties may apply.

3. Draft Bylaws, Policies, and Organizational Meeting Documents

After incorporation, counsel should prepare bylaws and governance policies for the nonprofit.

The bylaws describe in detail the nonprofit’s internal structure and operating procedures. This includes rules relating to director and officer elections and removals, meetings, board committees and membership, and other matters related to the conduct of the nonprofit’s business and affairs. Counsel should ensure that the bylaws are consistent with the articles of incorporation and the relevant jurisdiction’s nonprofit corporation statutes.

A set of governance policies also should be prepared. An effective set of governance policies enables the nonprofit to follow best practices and comply with applicable laws and regulations while providing clear guidance for navigating typical nonprofit transactions. Standard governance policies include confidentiality, anti-discrimination and harassment, joint venture, whistleblower protection, executive compensation, and conflict of interest policies. Certain nonprofits may require additional policies based on their planned activities, such as a scholarship policy for a nonprofit that will operate a scholarship program or a foreign transactions due diligence policy for a nonprofit that will provide foreign aid or otherwise transfer goods or funds across borders.

Many jurisdictions, including DC, require that the board of directors hold an initial board meeting after incorporation. The first board meeting is called the “organizational meeting.” At the organizational meeting, the board will adopt the bylaws and policies and take care of other initial housekeeping matters and corporate formalities, such as adopting a fiscal year, electing officers, authorizing the opening of a bank account, and ratifying any corporate acts taken prior to the meeting. Often this will be done via unanimous written consent—a document stating the relevant corporate resolutions and signed by all directors—in lieu of holding a meeting. Counsel should prepare draft sample organizational meeting minutes or a unanimous written consent to guide the client through its first board actions.

4. Apply for Recognition of Federal Tax-Exempt Status

Once the nonprofit is incorporated, has adopted bylaws and governance policies, and has held its organizational meeting, the next step is to prepare and file a federal tax exemption application. There are four federal tax exemption applications: IRS Form 1023, IRS Form 1023-EZ, IRS Form 1024, and IRS Form 1024-A. The appropriate application depends on the (anticipated) size of the nonprofit and type of federal tax exemption sought. For example, the IRS Form 1024-A is used to apply for recognition of 501(c)(4) status, while the IRS Form 1023 is used to apply for recognition of 501(c)(3) status. The IRS Form 1023-EZ also is used to apply for recognition of 501(c)(3) status but is reserved for smaller, less complex nonprofits.

The federal tax exemption applications (except for the IRS Form 1023-EZ) are comprehensive and require counsel to explain the nonprofit’s business, finances, and affairs in detail. This includes a detailed description of the nonprofit’s planned activities and financial projections for the first few years of operation. It is important to be as detailed as possible in the federal tax exemption application to maximize the nonprofit’s chances of approval and minimize the chances of questions and requests for additional information.

The federal tax exemption application is filed, along with a mandatory user fee, online with the IRS. While it is hard to gauge exactly how long it will take the IRS to process and approve an application, currently, the general rule of thumb is to expect to wait six to eight months. When the application is approved, the nonprofit will receive a favorable “determination letter” from the IRS that confirms the recognition of its tax-exempt status. While the application is pending, the nonprofit may begin operating, but it is important to remind the client that it must be clear with the public, and especially potential donors, that the nonprofit’s federal tax exemption application is pending with the IRS and, for would-be 501(c)(3) organizations, that donations are not yet tax deductible as charitable contributions. If the application is filed within twenty-seven months of the nonprofit’s incorporation, when the IRS does approve the nonprofit’s application, it will recognize the nonprofit’s exemption retroactively to the date the nonprofit was incorporated, and charitable contributions made to the nonprofit prior to receiving its determination letter then become tax deductible for the donor.

5. Register for DC Taxes and Apply for a Basic Business License and for Charitable Solicitation Purposes, if Necessary

As a corporation, the nonprofit is subject to state and local taxes. Each jurisdiction has different taxes (e.g., income, franchise, sales, use, real and personal property) and tax reporting requirements. In DC, if the nonprofit has employees, it will need to withhold DC-level income tax from wages, consistent with current DC withholding requirements. Generally, the nonprofit must register with the relevant tax authorities in each jurisdiction where it is conducting business or has employees (including remote employees). In DC, corporations must register as a new business with the DC Office of Tax and Revenue (“DC OTR”). To register as a new business, the nonprofit must complete and file Form FR-500 with the DC OTR.

It is important to remember, and to remind the client, that federal tax exemption does not necessarily provide exemption from state and local taxes. Each jurisdiction has different rules for qualifying for, applying for, and maintaining state and local tax exemptions. In many cases, state and local tax exemption is available only after the IRS has issued a favorable determination letter. In DC, certain 501(c)(3) organizations may qualify for exemption from DC’s income and franchise, sales and use, and personal property taxes. To apply for these tax exemptions, counsel should prepare and file Form FR-164 with the DC OTR.

In DC, any entity that provides goods or services for compensation must obtain a Basic Business License from the DC Department of Licensing and Consumer Protection. Accordingly, if the nonprofit’s activities include the sale of goods or services (even at a discounted rate), the nonprofit will need to obtain a Basic Business License.

Finally, most jurisdictions require charitable organizations to register with the appropriate state authority (typically, the state attorney general’s office) if the nonprofit will solicit donations from individuals or businesses located within that jurisdiction. The purpose of these “charitable solicitation registrations” is to protect the public from deceptive or misleading fundraising activities. In DC, charitable organizations intending to solicit donations must apply for a Basic Business License with the DC Department of Licensing and Consumer Protection under the “Charitable Solicitation” category. To maintain its charitable solicitation registration, the nonprofit must file annual reports, which typically include a copy of the nonprofit’s most recently filed IRS Form 990 (annual information return). The definition of “solicitation” varies with each jurisdiction. In several states, simply having a “donate” button on the nonprofit’s website may trigger registration, depending on the circumstances. Counsel should determine if and where the nonprofit must register before the client begins soliciting contributions. The rules and requirements applicable to charitable solicitations vary by jurisdiction, and counsel should not assume that registration is required only where the nonprofit is incorporated or maintains a physical office. Many third-party corporate compliance vendors offer charitable solicitation registration services to nonprofits, so if you are unsure of the requirements in any jurisdiction, the safest option is to refer the client to one of those vendors.

Conclusion

For business attorneys, nonprofit formations should be viewed as more than merely an entity formation exercise. Effective counsel weighs the business considerations against potential risks to ensure that the nonprofit is structured in such a way to accomplish the nonprofit’s mission under the client’s desired structure while qualifying for federal (and, if desired, state) corporate income tax exemption. Each step of the formation process is interconnected. Decisions made at the outset can affect the organization’s governance, fundraising activities, eligibility for tax exemption, and corporate compliance obligations for years to come.

For attorneys who do not regularly handle nonprofit matters, engaging nonprofit counsel—or obtaining specialized advice on nonprofit tax, governance, and charitable solicitation issues—can be particularly valuable where the client’s activities, funding arrangements, or intended tax-exempt classification raise issues beyond routine corporate formation.

For more information, contact the author at [email protected].

Cross-border infrastructure acquisitions have traditionally been driven by commercial expansion, operational efficiencies, and financial return; infrastructure assets have long attracted strategic investors because of their relatively stable cash flows, inflation-linked revenues, long concession periods, and portfolio diversification benefits. Nevertheless, global infrastructure mergers and acquisitions (“M&A”) activity slowed during 2025. Excluding the proposed acquisition of Hutchison Ports, global infrastructure deal value declined from approximately US$28 billion in 2024 to US$22 billion in 2025, while the number of completed transactions fell from fifty-one to forty.^[1] Although financing conditions and broader macroeconomic uncertainty contributed to this decline, investor appetite for strategically significant infrastructure assets has remained resilient.

Within the infrastructure sector, ports occupy a distinctive position. They are no longer viewed merely as transportation assets but increasingly as critical infrastructure connecting global supply chains, logistics networks, industrial development, and national security interests. The disruptions experienced in recent years—including the COVID-19 pandemic, the Red Sea crisis, and renewed tensions surrounding the Strait of Hormuz—have further highlighted the strategic importance of geographically diversified port networks.

This article argues that the recent geopolitical developments suggest that strategic resilience is becoming an increasingly important investment consideration, particularly when you look at the instability surrounding the Strait of Hormuz. These kinds of developments are influencing not only where operators based in the Persian Gulf (“Gulf”) invest but also how cross-border acquisitions are evaluated, structured, and negotiated. While the legal framework governing M&A transactions remains fundamentally unchanged, geopolitical considerations appear to be playing an increasingly prominent role throughout the transaction life cycle, influencing valuation, due diligence, transaction structuring, and contractual risk allocation.

Why Strategic Infrastructure Is Different from Other Assets

When M&A involves infrastructure, it does not fundamentally alter the legal mechanics of an acquisition. Share purchase agreements (“SPAs”), due diligence, valuation methodologies, and transaction structuring remain the core tools of every cross-border transaction. However, the nature of the underlying asset significantly influences how those tools are applied. In this respect, acquisitions involving strategic infrastructure—and ports in particular—differ from acquisitions of ordinary commercial businesses.

Unlike many corporate assets, ports perform a dual function. They are commercial enterprises generating revenue for their owners, but they also constitute critical infrastructure supporting international trade, supply chains, energy security, and, in some jurisdictions, national security. Their operation is therefore closely connected with public policy objectives and is frequently governed by concession agreements, public-private partnership frameworks, or sector-specific regulatory regimes.

This means that the acquisition of a port is rarely assessed solely through the lens of projected cash flows or expected operational synergies. Because governments and regulators increasingly view ports as assets whose ownership may affect broader public interests, foreign investment approvals, sector-specific regulation, and ongoing governmental oversight often assume greater significance than in transactions involving nonstrategic assets.

The strategic nature of ports also influences how buyers evaluate value creation. While conventional valuation techniques remain unchanged, the commercial attractiveness of a port may extend beyond its standalone financial performance. Its geographic location, connectivity to global logistics networks, access to alternative trade corridors, and contribution to a diversified infrastructure portfolio may all enhance its strategic value. In this sense, a port may represent not merely an operating business but a long-term strategic position within an investor’s broader network.

The United States provides a useful illustration of how national security considerations have increasingly influenced the regulatory framework governing foreign acquisitions of strategic infrastructure. Although the Committee on Foreign Investment in the United States (“CFIUS”) has long reviewed foreign acquisitions presenting national security concerns, its jurisdiction was expanded under the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to cover certain noncontrolling investments in U.S. businesses involved in critical infrastructure, critical technologies, and sensitive personal data.^[2] This expansion reflects the growing recognition that national security concerns may arise not only from the acquisition of control over strategic assets but also from certain minority investments and associated governance rights.

The political sensitivity of port acquisitions was evident well before FIRRMA, however. In 2006, Dubai Ports World’s proposed acquisition of the U.S. port operations of British firm P&O generated substantial congressional opposition and public debate over national security, notwithstanding the transaction’s prior review by CFIUS.^[3] The controversy illustrates that acquisitions of strategically important infrastructure may face political and national security considerations extending beyond conventional competition law analysis.

Investment Strategies’ Evolution

The first question an investment committee asks is not “How should the SPA be drafted?” but rather, “Why are we acquiring this port?” The answer to that question has evolved significantly over time. In the early 2000s, the response would most likely have focused on increased container throughput, higher revenues, greater EBITDA, economies of scale, and market expansion. In short, the primary objective was growth. Port acquisitions were fundamentally about generating greater financial returns.

A decade later, the investment rationale became more sophisticated. Port operators increasingly evolved into integrated logistics providers, expanding beyond terminals into inland depots, rail connections, warehouses, logistics parks, and other value-added services. The strategic objective was no longer simply to own ports, but to control larger segments of the supply chain and create integrated logistics platforms.

Today, however, investment committees ask different questions. What happens if a major trade corridor is disrupted? What if sanctions affect a key market? Is the existing portfolio overly concentrated in one region? How resilient is the operator’s global network? Growth remains important, but resilience has become an equally significant investment objective. The legal mechanics of the acquisition have not fundamentally changed; the commercial rationale has.

For transactional lawyers, this evolution is significant. We continue to negotiate the same legal documents—SPAs, shareholder agreements, and transaction documents—but we do so in support of a different business strategy. Transactional lawyers are not merely document drafters. They must understand why their client or company is acquiring a particular asset because that commercial objective inevitably influences the priorities of the transaction. A client acquiring a port to strengthen network resilience will not necessarily negotiate different legal concepts, but it may place considerably greater emphasis on governance rights, concession stability, expansion opportunities, and long-term regulatory certainty than a buyer motivated solely by short-term financial returns. The role of the transactional lawyer is therefore no longer limited to documenting the acquisition. It increasingly requires an understanding of the commercial, regulatory, and geopolitical considerations that shape the investment itself. In strategic infrastructure transactions, legal execution and business strategy are no longer separate disciplines—they are increasingly intertwined.

The Gulf’s Outbound Diversification Strategy

Recent transaction activity suggests that Gulf-based port operators are increasingly pursuing geographic diversification as part of their long-term investment strategy. Although few transactions expressly identify geopolitical risk as their principal driver, several acquisitions and investments indicate an emphasis on expanding beyond traditional regional trade corridors. Examples include DP World’s reported interest in acquiring a stake in Associated British Ports in the United Kingdom,^[4] DP World’s continued investments in Senegal and India,^[5] and AD Ports Group’s acquisition of MBS Logistics.^[6] More recently, DP World also announced plans to develop a port and logistics hub in Fujairah on the United Arab Emirates’ east coast.^[7] While the project serves multiple commercial objectives, its location outside the Strait of Hormuz also illustrates the growing strategic importance of geographic diversification and supply-chain resilience in infrastructure investment decisions.

Rather than viewing these transactions in isolation, they may be understood as part of a broader effort to strengthen portfolio resilience. For operators with significant exposure to trade routes affected by geopolitical tensions, investments in geographically diverse jurisdictions may reduce concentration risk while expanding access to new markets and supply chains. In this respect, transaction activity itself may provide a more meaningful indicator of evolving investment priorities than public statements accompanying individual acquisitions.

Implications for M&A Practice

Valuation

Traditional infrastructure valuations continue to focus primarily on projected cash flows, concession durations, growth prospects, and the regulatory environment in which the target operates. However, strategic buyers may increasingly assess an acquisition through the broader lens of portfolio resilience. For a Gulf-based port operator whose existing assets are concentrated within a particular maritime corridor, acquiring a port in another jurisdiction may generate strategic value beyond the target’s stand-alone financial performance.

The strategic importance of ports is also evolving beyond their traditional role as stand-alone maritime assets. This broader strategic perspective may also influence valuation. While established valuation methodologies such as discounted cash flow and comparable transactions remain unchanged, acquirers may attribute additional strategic value to assets that strengthen portfolio resilience, expand logistics connectivity, or provide access to alternative trade corridors. Consequently, a target’s contribution to an integrated logistics network may justify a strategic premium beyond its stand-alone operating performance. Thus, geopolitical diversification as well as an integrated logistics network may influence strategic premium that a particular buyer is willing to pay because the acquisition contributes to a more balanced portfolio and reduces concentration risk.

Beyond the Traditional Due Diligence

Legal due diligence traditionally focuses on the target’s assets, contracts, permits, litigation, regulatory compliance, and liabilities. Acquisitions motivated by strategic diversification, however, may require an additional layer of commercial analysis.

The relevant question is no longer confined to whether the target represents a legally and commercially attractive investment. Acquirers may also consider whether the transaction achieves its broader strategic objective of reducing geographic concentration risk and enhancing network resilience. Due diligence therefore extends beyond identifying legal risks within the target itself to evaluating how the acquisition complements the acquirer’s existing portfolio.

Foreign Investment Screening

An increasingly important consideration in cross-border infrastructure M&A is the expansion of foreign direct investment (“FDI”) screening regimes. This is actually a direct consequence of geopolitics. Traditionally, M&A analysis focused primarily on the identity of the investor and competition law considerations. Increasingly, however, regulators also examine the nature of the target itself. Infrastructure assets performing critical supply chain, logistics, or public functions—including ports—may attract enhanced regulatory scrutiny regardless of whether the acquirer is considered a low-risk investor.

This development has important implications for transaction execution. Regulatory approvals under FDI regimes must be factored into transaction timetables, conditions precedent, and long-stop dates, and parties may also negotiate the allocation of regulatory risk if approvals are delayed, conditioned, or refused. The commercial agreement remains central, but the SPA must also address the allocation of regulatory and national security risk, particularly where the target operates critical infrastructure.

Aligning Governance with Strategic Objectives

From a transactional lawyer’s perspective, we can say that strategy determines structure. This becomes especially crucial where a project is developed and operated with multiple partners. Mechanisms such as reserved matters, board composition, business plan approvals, capital commitments, and exit provisions have always been integral components of shareholder agreements and joint venture arrangements. However, where the strategic objective extends beyond financial returns to include portfolio resilience and long-term network diversification, greater emphasis may be placed on governance rights that facilitate those objectives.

For example, investors may seek stronger protections to ensure that strategically important expansion projects—such as the construction of additional berths, logistics parks, inland terminals, or rail connections—cannot be blocked by a joint venture partner. Similarly, shareholders may negotiate mandatory capital contribution obligations, agreed capital expenditure programs, or other funding mechanisms to ensure that future expansion cannot be frustrated by a shareholder’s refusal to finance the business. Business plans may incorporate long-term diversification projects, logistics integration, and capacity expansion as strategic priorities rather than purely operational objectives. Deadlock mechanisms may also have greater importance where disagreements over expansion or strategic investment could undermine the long-term purpose of the acquisition. Likewise, parties may attach greater significance to reserved matters relating to the disposal of strategic land, amendments to concession agreements, changes to the business model, or the surrender of concession rights. The legal tools themselves remain familiar; what changes is the strategic purpose they are intended to serve.

Transaction Structuring and Risk Allocation

Geopolitical uncertainty may also influence the manner in which transactions themselves are initially structured. Rather than pursuing immediate full acquisitions, parties may favor phased investments, joint ventures, minority investments, or staged capital commitments that preserve strategic flexibility while facilitating expansion into new jurisdictions.

An emerging structural response is the pairing of port operators with sovereign co-investors, whether their own state’s fund or another Gulf Cooperation Council (“GCC”) sovereign wealth fund, rather than operators pursuing acquisitions on a stand-alone basis. This model—operator as strategic and operational lead, sovereign wealth fund as capital partner—allows portfolio diversification to be pursued without concentrating balance-sheet risk in any single jurisdiction, while also potentially easing the path through target-state FDI screening, given the increasing scrutiny that sovereign-controlled acquirers face in certain jurisdictions. It further reflects a broader shift already visible across the region, where GCC sovereign wealth funds increasingly negotiate co-investment rights and direct deal access rather than passive allocations.

Approaches to outbound capital deployment vary across GCC port operators. Some pursue acquisitions primarily through internally generated cash flows, prioritizing balance-sheet control and execution speed, while others increasingly structure transactions alongside sovereign co-investors to share capital exposure and broaden deal capacity. Neither approach is inherently superior; the choice reflects the country’s preference and priorities, as well as each operator’s balance-sheet strength, risk appetite, and strategic priorities at a given point in its growth trajectory.

Similarly, established contractual protections may receive greater scrutiny during negotiations. Material adverse change (“MAC”) clauses provide a useful example. In acquisitions of existing port operators, where the target company already holds the relevant concession, parties may negotiate whether the commercial consequences of future geopolitical developments—such as sanctions, disruption of key trade routes, significant increases in operating costs, or other material adverse effects on the target’s business—should fall within the agreed definition of a MAC or instead remain with the buyer as part of ordinary market risk. The significance of this negotiation extends beyond a traditional no-MAC condition to closing. Where geopolitical risks are addressed through representations and warranties, the agreed allocation of risk may also have implications during the post-closing indemnity period, subject to the agreed survival periods and the indemnification regime under the SPA. More broadly, sanctions-related representations, interim period covenants, and conditions precedent may also be tailored to reflect the increased importance of geopolitical considerations. The evolution lies not in the creation of new legal concepts, but in the increasing significance attached to existing mechanisms for allocating commercial risk.

Conclusion

Whether current geopolitical tensions persist or gradually ease, recent developments demonstrate that geographic diversification has become an increasingly important strategic consideration in infrastructure acquisitions. Buyers may therefore evaluate potential targets not only on the basis of their stand-alone financial performance but also on the extent to which an acquisition enhances the resilience and geographic balance of their wider portfolio.

As geopolitical considerations become more deeply embedded in investment decision-making and structuring the deal, they are also likely to receive greater attention throughout the transaction process. Valuation, due diligence, transaction structuring, and contractual risk allocation may increasingly reflect various objectives extending beyond the target itself.

For M&A practitioners, the challenge is no longer confined to executing transactions efficiently. It also involves advising clients and companies on how geopolitical developments influence investment strategy and the legal execution of cross-border acquisitions. In this respect, port M&A activity offers a compelling illustration of the growing intersection of infrastructure investment, geopolitics, and corporate law. It demonstrates that the legal toolkit available to M&A lawyers has not fundamentally changed: What has changed is the commercial environment in which that toolkit operates.

1. McKinsey & Co., Travel, Logistics, and Infrastructure: A Fragile Reset Paves Way for M&A Momentum (Feb. 13, 2026). ↑

2. Press Release, U.S. Department of the Treasury, Treasury Releases Final Regulations to Reform National Security Reviews for Certain Foreign Investments and Other Transactions in the United States (Jan. 13, 2020). ↑

3. National Security Implications of the Dubai Ports World Deal to Take Over Management of U.S. Ports: Hearing Before the H. Comm, on Armed Servs., 109th Cong. (2006). ↑

4. Pramod Kumar, DP World Evaluates Stake in Associated British Ports, Arabian Gulf Bus. Insight (Apr. 9, 2026). ↑

5. Press Release, DP World, DP World to Launch $2.5bn Logistics Infrastructure Investment in 2025 (May 20, 2025); see also Press Release, DP World, DP World Pledges $5 bn Infrastructure Investment in India (Oct. 30, 2025). ↑

6. AD Ports Grp., AD Ports Group Further Consolidates Its Global Logistics Platform with the Acquisition of MBS Logistics (May 18, 2026). ↑

7. Nicolas Parasie, Andrew England & Alice Hancock, Dubai Plans New Port to Bypass Strait of Hormuz, Fin. Times (July 13, 2026). ↑

As a lawyer, what’s your superpower? What perspectives can you bring to a boardroom table that other professionals may overlook? How can you help a board of directors lean into risk, while maintaining boundaries?

In September 2026, the American Bar Association held its Business Law Section Fall Meeting in Chicago, Illinois. I had the opportunity to attend a panel entitled “From Legal Advisor to Boardroom Decision-Maker: The Lawyer as a Value-Creating Director,” which focused on three leaders in industry, who have had the opportunity to add “board member” to their resumes. The discussion was moderated by Katayun Jaffari of Cozen O’Connor, chair of the firm’s Corporate Governance Group, co-chair of its Capital Markets & Securities Group, and chair of its ESG Practice. The program featured insights from panelists Tanuja Dehne, managing director at DSG Global and independent board director; Sherrin Ross Ingram, founder and CEO of the International Center for Strategic Planning and independent board director; and Michelle Hong, counsel at Stradley Ronon and independent board director.

What’s Your Superpower?

To kick off the panel discussion, Jaffari asked each panelist to discuss the superpower that they bring to the boardroom. Dehne described her superpower as “leaning towards the edge.” As a corporate M&A and securities attorney, she is able to “push the edges” and lean into risk while knowing the boundaries. She also highlighted time management and communications as transferable skills from the legal profession that have served her well in the boardroom. Ingram’s superpower as a litigator is her “ability to challenge, to ask the probing questions.” She described lawyers as particularly well suited to ask those probing questions, because that is how we are trained. Hong comes from a trusts and estates legal background, and she highlighted her ability to think both inside and outside of the box in making risk-weighted judgments.

Understanding the Blind Spots

The panelists were asked to consider how lawyers can understand their own blind spots as they pertain to boardroom decision-making. As a lawyer turned strategic advisor, Ingram enjoys unpacking biases and the underlying assumptions that form those biases. She thinks that questioning biases and helping others understand their own biases is a huge part of the value that lawyers can bring to an organization and a board. Dehne emphasized that you cannot get comfortable and must keep consistently learning and building. Hong highlighted the value of reviewing the board materials and then going for a walk or taking a shower to let your mind wander and find the strategic questions to ask.

Dehne also noted that a person does not get invited to be a board member because of their title as “lawyer”; rather, they earn that invitation as a well-rounded executive, and it takes time to grow into that role. Ingram added on that “there is a preconceived notion on how you are going to show up [as a lawyer]. You want to challenge that notion from day one.” In that context, the panel discussed that lawyers must shift from problem solver to challenge tester in a board role. A board member is expected to work with management but also to challenge assumptions. Ultimately, the board has to step back and let management solve the problems and do the work—a potentially difficult role shift for lawyers who are used to being the problem solvers in their organization.

The Importance of Guardrails

When the panel explored the boundaries that help separate the role of a lawyer from that of a board member, the main takeaway from the discussion was that lawyers need to stop focusing primarily on risk, which is “lawyer speak,” Ingram said. One way to make this leap is to reframe risk as assumptions. Ingram thinks that all assumptions are risk because they are unproven, and every strategic decision is built on assumptions. Dehne pointed out that “we live in crisis,” and, in this volatile world, boards must make swift decisions in gray space. She went on to point out the importance of shifting from defense (risk identification) to offense.

A Lawyer’s Path to the Boardroom

The panelists provided the following tips for anyone who might be looking to make the jump from lawyer to director:

1. Make it obvious on your LinkedIn profile that you are interested in board work, as many boards use search firms to identify potential directors.
2. Branding matters. Know your “why,” your brand, and your positioning. It is important to be able to articulate the value you can bring from day one. If you have not really thought your future role as director through, you are doing yourself a disservice.
3. When forming your value proposition, pay attention to why people are coming to you. Listen to what people are already saying about you. Massage this into a narrative that you can repeat.
4. Governance and strategic experience are an asset.
5. Understand a potential board’s governance and processes for adding new directors, evaluating directors, and term limits. Ensure those align with what you are looking for in a board role.

Key Takeaways

For those looking to parlay their legal skills into opportunities in the boardroom, it is clear that a legal career helps build key competencies that lend themselves well to a director role. The panel made clear that, while lawyers generally bring value, a prospective director should be thoughtful and able to articulate their unique value and skills. As a director, a lawyer should be able to take off the lawyer hat, ask the probing questions, lean into risk (instead of just identifying it), and ultimately let others (i.e., the management team) work to solve the problem.

To learn more about this topic, view the program as on-demand CLE, free for Business Law Section members.

Editor Emeritus and Editors

Lee Applebaum, Editor Emeritus

Contributors

§ 1. Introduction

This edition of Recent Developments describes developments in business courts and summarizes significant cases from a number of business courts with publicly available opinions.^[1] There are currently functioning business courts of some type in cities, counties, regions, or statewide in twenty-six states: (1) Arizona; (2) Delaware; (3) Florida; (4) Georgia; (5) Illinois; (6) Indiana; (7) Iowa; (8) Kentucky; (9) Maine; (10) Maryland; (11) Massachusetts; (12) Michigan; (13) Nevada; (14) New Hampshire; (15) New Jersey; (16) New York; (17) North Carolina; (18) Ohio; (19) Pennsylvania; (20) Rhode Island; (21) South Carolina; (22) Tennessee; (23) Texas; (24) Utah; (25) West Virginia; and (26) Wyoming.^[2] States with dedicated complex litigation programs encompassing business and commercial cases, among other types of complex cases, include California, Connecticut, Minnesota, and Oregon.^[3] The California and Connecticut programs are expressly not business court programs as such.^[4]

§ 2. Recent Developments

§ 2.1. Business Court Resources

American College of Business Court Judges. The American College of Business Court Judges (ACBCJ) provides judicial education and resources, in terms of information and the availability of its member judges, to those jurisdictions interested in the development of business courts.^[5] The ACBCJ’s Twentieth Annual Meeting took place in Newport Beach, California, from February 25, 2026, to February 27, 2026.^[6]

Section, Committee, and Subcommittee Resources. The ABA Business Law Section provides a Diversity Clerkship Program that sponsors current first or second-year law students of diverse backgrounds in summer clerkships with business and complex court judges.^[7] The ABA Business Law Section has created a pamphlet, Establishing Business Courts in Your State, which is available among other resources in the online library for the Business and Corporate Litigation Committee’s community web page.^[8] The Business and Corporate Litigation Committee’s Subcommittee on Business Courts provides documents and/or hyperlinks to business court resources.^[9] This includes links to public sources and legal publications, as well as business court related materials and panel discussions presented at ABA Business Law Section meetings. The Section also has established a Business Courts Representatives (BCR) program,^[10] where a number of specialized business, commercial, or complex litigation judges are selected to participate in and support Section activities, committees, and subcommittees. These BCRs attend Section meetings, and many have become leaders within the Section. Judge Daniel Collins of the U.S. Bankruptcy Court, District of Arizona in Phoenix and Judge David Cunningham of the Los Angeles Superior Court serve as BCRs for the 2024-2026 term while Judge Kathleen M. Miller of the Superior Court of Delaware and Judge Brian Stern of the Rhode Island Superior Court serve as BCRs for the 2025-2027 term.^[11] Finally, this publication has included a chapter on updates and developments in business courts every year since 2004.

Other Resources. “The National Center for State Courts (NCSC) and the Tennessee Administrative Office of the Courts (AOC) developed an innovative training curriculum^[12] and faculty guide^[13]—along with practical tools—to help state courts establish and manage business court dockets more efficiently and effectively.”^[14] The Business Courts Blog,^[15] created by Lee Applebaum and now guided by Doug Toering, aims to serve as a national library to those interested in business courts, with posts on past, present, and future developments. This includes posts on reports and studies going back twenty years, as well as recent developments in business courts.^[16] In 2025, articles and reports addressed various aspects of business courts.^[17] There are also various legal blogs with content relating to business courts in particular states.^[18]

§ 2.2. Developments in Existing Business Courts

§ 2.2.1. Florida’s Complex Business Litigation Courts

Following 2023’s expansion from six business court divisions to seven, with a few exceptions, little has changed in Florida’s business courts. Judge Chad K. Alvaro was appointed to preside over the Ninth Judicial Circuit’ new (for 2023) business court division in Osceola County (Division 23), as well as the pre-existing business court division in Orange County (Division 43).^[19] In the Eleventh Judicial Circuit, Judges Thomas Rebúll (Division 43) and Lisa Walsh (Division 44) continued to preside over the business court divisions.^[20] However, in early 2025, a new administrative order establishing certain new procedures for the business court divisions was entered, which also indicated that revised Complex Business Litigation Rules and Procedures for the Eleventh Circuit were to be published (though that has not yet occurred).^[21] The new administrative order specifies which types of cases are subject to mandatory and discretionary assignment to the complex divisions, as well as which cases shall not be assigned, and certain case management, assignment, and transfer procedures related to situations in which the number and complexity of cases already assigned to the divisions warrants suspension of further transfers of cases. In the Seventeenth Judicial Circuit, newly-appointed Chief Judge Carol-Lisa Phillips (Division 26)^[22] continued to preside over one business court division and was joined by Judge David A. Haimes (Division 07),^[23] who now presides over the other division following the retirement of Chief Judge Jack Tuter in May of 2025.^[24] In the Thirteenth Judicial Circuit, Judge Darren Farfante (Division L) continued in his role presiding over the business court.^[25]

§ 2.2.2. Georgia State-wide Business Court

The Georgia State-wide Business Court—which started accepting filings on August 1, 2020—celebrated its fifth anniversary in 2025. The Court issued a press release with administrative data showing that, as of July 31, 2025: 124 cases had been filed in the Court since its inception; 96 cases closed with a 299-day average disposition time and 10-day average wait time for orders on ripe motions; 1,010 orders issued; 108 hearings conducted; 3 jury trials held; and about $1 billion in controversy.^[26] The Honorable William “Bill” Grady Hamrick, III and his team reflected on the milestone. Judge Hamrick said that passing the 100-cases-filed mark in spring 2025 was especially meaningful given the Court’s limited jurisdiction. He also conveyed that the Court expected AI generated briefing to become a recurring issue.^[27]

Two pieces of legislation relevant to the Georgia State-wide Business Court were enacted in 2025. First, HB 86—part of the state’s judicial-compensation reform—amends provisions of the Georgia Code relating to annual salaries of certain state officials, among them, the judge of the Georgia State-wide Business Court.^[28] Second, HB 179, as relevant, provides for digital recording of Business Court proceedings, including trials.^[29]

§ 2.2.3. Iowa Business Specialty Court

The Iowa Supreme Court adopted an Amended Memorandum of Operation on August 19, 2025, modifying the Business Court’s operation to improve its operations and enhance access to the court.^[30] The 2025 amended memorandum replaced the January 18, 2022, Amended Memorandum of Operation in its entirety.^[31] The 2025 amended memorandum continues to specify the types of cases that are eligible for the Business Court.^[32] However, the Iowa Supreme Court clarified that medical malpractice and dissolution of marriage cases are ineligible for the Business Court docket.^[33] And it clarified that legal malpractice cases are also ineligible unless a case arises from an underlying dispute that would otherwise meet the eligibility criteria.^[34] While continuing to outline the procedural mechanics on transferring matters to and from the Business Court, the 2025 amended memorandum included a change that allows a presiding business court judge to transfer a case back to the regular docket if the judge determines the case no longer meets the eligibility criteria for the Business Court’s docket.^[35] Any decision to transfer the case back to the regular docket is not subject to review or appeal.^[36]

§ 2.2.4. Maryland Business and Technology Courts

In April 2025, the Maryland Standing Committee on Rules of Practice and Procedure proposed new Rule 15-1601, which would for the first time establish a comprehensive procedural framework for derivative actions in Maryland courts. Proposed at the recommendation of Senior Appellate Judge James Eyler and members of the Maryland State Bar Association Business Law Section, the rule is modeled on Federal Rule of Civil Procedure 23.1 and Delaware law. It would require plaintiffs to plead with particularity the facts supporting their entitlement to bring a derivative cause of action, and the efforts made to obtain the desired action from the entity, mandate that the plaintiff fairly and adequately represent the interests of the business entity, require court approval for any settlement or voluntary dismissal, and authorize an award of reasonable attorneys’ fees. The proposed rule applies to derivative actions against any business entity, including corporations, limited liability companies, and limited partnerships, and fills a significant gap in Maryland’s procedural framework, which previously contained no statute or rule specifically governing the initiation and maintenance of such actions.

§ 2.2.5. Michigan Business Courts

Appointment of Business Court Judges. The business court legislation became effective January 1, 2013.^[37] The terms for the business court judges are six years.^[38] On March 6, 2025, the Michigan Supreme Court announced who was reappointed as business court judges as well as new appointments to the business courts.^[39]

Statutory Developments. House Bill 4840 overwhelmingly passed the Michigan House of Representatives. That bill clarifies that shareholder litigation and litigation among LLC members under Mich. Comp. L. §§ 450.1489 and 450.4515 would be assigned to the business court, regardless of whether the company is a party to the suit. It also clarifies that enforcement of business court judgments would occur in the business courts. The bill has advanced to the Michigan senate.

Conferences. On April 10, 2025, the LLC & Partnerships Committee, the Corporate Laws Committee, and the Commercial Litigation Committee co-sponsored a program on succession planning, shareholder/LLC member litigation, estate planning, drafting, valuation, and tax. The program included helpful insight from eight business court judges as well as distinguished attorneys.^[40]

The 19^th meeting of the American College of Business Court Judges occurred in Traverse City from April 30 to May 2, 2025. Michigan Court of Appeals Judge (and former business court judge) Christopher Yates presided as President, and Oakland County Business Court Judge Michael Warren was elected as a Director.

On September 12, 2025, four current or former business court judges spoke at the annual Business Law Institute, presented by the State Bar of Michigan’s Business Law Section and Michigan Institute for Continuing Legal Education.

Then on October 23, 2025, the Michigan Judicial Institute hosted a program for the Michigan business court judges and invited mediators.^[41] The subject was “Business Court Mediation: Advanced Strategies and Techniques for Settling Cases.”

Publications. The Michigan Business Law Journal publishes a regular column, Touring the Business Courts. In 2025, three columns were published: Spring 2025^[42]; Summer 2025^[43]; and Fall 2025.^[44] These included interviews with Judge James S. Jamo (Ingham County), Judge Carol Ann Kuhnke (Washtenaw), and Judge Matthew W. Antkoviak (Allegan) as well as summaries of developments in Michigan’s business courts.

Business Court Statistics. The Michigan State Court Administrative Office has established a “dashboard” that allows the user to obtain a trove of information on Michigan courts. The user can manipulate the information. One can sort by business court case type (BC) and run information for the entire state or just for particular counties. The dashboard can also show the method of disposition.^[45] The most comprehensive, “one-stop” source of information about the Michigan business courts may be found at https://www.courts.michigan.gov/administration/trial-court/trial-court-operations/business-court/. Updates on Michigan’s business courts (and business courts throughout the country and, in some cases, worldwide) may be found at www.businesscourtsblog.com.^[46]

§ 2.2.6. New York Commercial Division

Business Courts Generate Tax Revenues for State Governments. For many years, bar associations and many other organizations and individuals throughout the United States have supported the provision of adequate resources to the Judiciary to enable it to fulfill its Constitutional responsibilities. For many years, these bar associations have been met with the perception that the courts are a “cost center” that incurs expenses for its operations but does not generate revenues. The New York County Lawyers Association (NYCLA) has now submitted written testimony to the New York State Joint Legislative Budget Hearing which demonstrates that that perception is not always true. Instead, as NYCLA’s written testimony demonstrates, New York’s business court attracts businesses and business activities to New York State and thereby adds jobs and increases tax revenues.

In its unprecedented and potentially transformative written testimony, NYCLA has asked the New York State Legislature to take these very substantial economic benefits into account when it makes decisions about funding the New York State Courts. This is the first time that a major bar association has urged the Legislature to consider what NYCLA described as “The Judiciary’s Magnificent Contributions to Economic Development and Tax Revenue in New York State.”

NYCLA’s written testimony was approved by NYCLA’s Board of Directors on February 11, 2026. NYCLA’s testimony was submitted on February 26, 2026, to the New York State Joint Legislative Budget Hearing on Economic Development in connection with the Fiscal Year 2027 Budget Request of the New York State Unified Court System.

In its written testimony, NYCLA briefly describes its mission and activities, the Commercial Division of the New York State Supreme Court, the Commercial Division’s contributions to economic development and generation of tax revenues, and the national and international trend toward creation of business courts as economic development vehicles. NYCLA’s written testimony contains a link to a 12-minute film about the Commercial Division which features court leaders, Commercial Division Justices, more than a dozen Chief Legal Officers of major corporations, leaders of business organizations, and prominent practitioners.

§ 2.2.7. North Carolina Business Court

New Judge Joins North Carolina Business Court. On February 17, 2025, the Honorable Matthew T. Houston was designated as a Special Superior Court Judge for Complex Business cases (the process that appoints a judge to the North Carolina Business Court). Judge Houston’s chambers are located in Raleigh. Prior to joining the Business Court, Judge Houston served as a Special Superior Court Judge presiding over civil and criminal sessions of court throughout North Carolina. Before he began his judicial service, Judge Houston was a partner at K&L Gates LLP.

§ 2.2.8. Texas Business Court

2025—The first full year of operation of the Texas Business Court and Fifteenth Court of Appeals. The Texas Business Court, created by the 2023 Texas Legislature’s enactment of House Bill 19 (HB 19 (2023)), opened its doors on September 1, 2024. The court is staffed by ten judges appointed to the court by Governor Abbott in June of 2024 to serve five multi-county Business Court divisions encompassing the state’s major business and population centers.^[47] Six additional Business Court Divisions, covering the remainder of the state, were also created in 2023 but remain inactive, having not been funded by the Texas Legislature at this point.

The 2023 Texas Legislature also created the Fifteenth Court of Appeals (15^th COA)^[48] as the state’s first specialized appellate court, with statewide geographic reach, that serves as the exclusive destination for appeals of orders and decisions of the Business Court.^[49] That court also opened its doors on September 1, 2024, with three justices appointed by Governor Abbott.^[50] Unlike the Business Court judges, who are subject to reappointment by the governor at the expiration of their two-year terms on August 31, 2026, and every two years thereafter, the 15^th COA justices are standing for election to six year terms on a statewide basis, commencing with the November 2026 general election, and are each opposed by a Democrat candidate.

The Business Court received a total of 56 case filings (averaging 14 per month) during its first four months of operation in 2024. The court received 230 case filings in 2025, averaging 15 per month during the first six months of the year and 23 per month during the second six months.^[51] The Eleventh and First Divisions based in Houston and Dallas, respectively, continued to receive the lion’s share of filings (99 in 2025 for the Eleventh, 65 for the First). The Business Court judges issued 55 opinions in 2025 applicable to 45 individual cases.^[52] Of those cases only two represented decisions on the merits disposing of the case, which are discussed below.

The Business Court addressed the imbalance of case filings received in the Eleventh Division (Houston) by making random assignments of 29 of those cases to judges from the Third (Austin—10 cases), Fourth (San Antonio—12 cases) and Eighth (Fort Worth—7 cases) Divisions in reliance upon Texas Government Code (TGC) Sec. 25A.009(f): “(f) To promote the orderly and efficient administration of justice, the business court judges may exchange benches and sit and act for each other in any matter pending before the court.”

The statute is further reflected in Business Court Local Rule 2:

The administrative presiding judge may reassign cases for the purpose of equalizing the docket. The trial and all in-person hearings in a reassigned case will remain in the same Division regardless of the judge assigned, absent the agreement of all parties. When a case is reassigned for any reason, the assigned judge’s forms, templates, and division-specific guidelines and procedures, if any, govern.^[53]

It is important to note that these cases have not been transferred out of the Eleventh Business Court Division where they were initially filed; the cases continue in the Eleventh Division and the assigned judges are sitting as judges of that Division. In-person hearings and trial settings are occurring in chambers and courtrooms physically located in the Eleventh Division unless the parties agree otherwise. While the Business Court is early in its life as an active trial venue, several instances have already occurred where the parties have agreed to move the situs of trials or hearings for convenience or to obtain a more suitable location.

Business Court Legislation in the 2025 Texas Legislature. HB 19 (2023) enacted by the 2023 Texas Legislature to create the Business Court was a 30-page bill that has been described as making the most significant changes in the Texas court system in a century. It provided the necessary foundation to support the 2025 “Y’all Street” phenomenon, leading to three stock exchanges establishing branches in Texas and the development over the past 18 months of unprecedented competition among Delaware, Texas and Nevada, among others, to serve as preferred issuers of corporate charters for publicly traded companies and preferred venues for resolution of their disputes.

House Bill 40 (HB 40 (2025)),^[54] the Business Court Improvements Act, enacted in the final hours of the final day of the 2025 Texas Legislature, clocked in at a robust 45 pages, a 50% increase over 2023. It has had a decidedly less seismic effect on the Texas judiciary and commercial litigation practice. A majority of HB 40 (2025) consists of amendments to Texas Government Code (TGC) Chapters 24 and 25A, and the Texas Civil Practice and Remedies Code (TCPRC), to add numerous references to the Business Court in statutes governing Texas courts generally.

The balance of HB 40 (2025) clarifies and makes technical corrections and modest improvements in the law applicable to the existence and functioning of the Business Court, including, among other things, provisions that:

• Confirm that the Business Court’s subject matter jurisdiction includes:
  • Actions arising from or relating to the ownership or use of intellectual property and protection of trade secrets; (TGC Sec. 25A.004(d)(4), (5))
  • Actions relating to domestic and international arbitral proceedings subject to TCPRC Chs. 171 or 172, the Federal Arbitration Act or pursuant to arbitration agreements, which may provide for the Business Court to decide questions of law (which may then then be appealed to the 15th COA), if a claim included in the arbitral proceeding is described in TGC Sec. 25A.004(b) or (d); (TGC Sec. 25A.004(d-1)) and
  • Actions described in the Texas Business Organizations Code (TBOC) where Texas district courts are granted general or exclusive jurisdiction over certain matters;^[55] (TGC Sec. 25A.004(b))
• Reduce the required amount in controversy for Business Court jurisdiction over disputes relating to “qualified transactions” and other business, commercial and investment agreement claims from $10 million to $5 million; (TGC Secs. 25A.001(14), 25A.004(d))
• Confirm that in determining whether an action satisfies the $5 million “qualified transaction” and “amount in controversy” requirements, related transactions and claims are to be aggregated. (TGC Secs. 25A.001(14), 25A.004(i))
• Direct the Texas Supreme Court to adopt rules for the Business Court that will support the prompt and final determination of jurisdictional questions;^[56] (TGC Sec. 25A.0041)
• Direct the Texas Supreme Court to adopt rules that will allow a civil action commenced before September 1, 2024, that is within the subject matter jurisdiction of the Business Court to be transferred to the Business Court upon an agreed motion of a party and permission of the Business Court; ^[57] (TGC Sec. 25A.021)
• Provide for Business Court cases to be transferred for pretrial proceedings in the state’s multidistrict litigation program and for the judicial panel on multidistrict litigation to transfer cases to the Business Court for pretrial proceedings if the Business Court has jurisdiction; (TCPRC Sec. 74.162)
• Authorize active judges and justices having the requisite qualifications (35 or older, 10 years of experience in complex civil business litigation or service as a judge of a court with civil jurisdiction) to serve as visiting judges of the Business Court, and authorize Business Court judges to serve as visiting judges of district courts located in their divisions, when approved by the Chief Justice of the Texas Supreme Court; (TGC Sec. 25A.014)
• Move Montgomery County, located in the inactive Second Division of the Business Court (which is adjacent to Harris County (Houston) and is the home of large public companies, such as Exxon Mobil Corporation and Occidental Petroleum), to the active Eleventh Division of the Business Court that includes Harris County; (TGC Sec. 25A.003(d), (m)) and
• Move Bastrop County, also located in the inactive Second Division (but which is adjacent to Travis County (Austin) and is the home of large public companies, such as Starlink and Agilent), to the active Third Division of the Business Court that includes Travis County.^[58] (TGC Sec. 25A.003(d), (e))

Senate Bill 29 (SB 29 (2025))^[59] provides the Business Court with the first instances in which it is given exclusive jurisdiction to hear specific types of cases. Section 9 of the Bill adds a new TBOC Section 21.4161, applicable to a corporation having voting shares listed on a national securities exchange (as defined), or that has made an affirmative election to be governed by TBOC Section 21.419. It empowers such a corporation that adopts a resolution to form a committee of independent and disinterested directors under TBOC Section 21.416(g) to “petition a court having jurisdiction to hold an evidentiary hearing to determine whether the directors appointed to the committee are independent and disinterested . . .” with respect to specified transactions. New TBOC Section 21.4161(b) provides that the referenced petition “shall be filed in the business court unless the corporation’s principal place of business in this state is located in a county not contained within an operating division of the Business Court . . . .”

Section 14 of the Bill amends TBOC Section 21.554 to provide that the board of directors of a corporation having voting shares listed on a national securities exchange that receives a demand relating to a threatened derivative proceeding should respond by petitioning “the court having jurisdiction” to make a finding as to whether the directors or committee responding to the allegations are “independent and disinterested” with respect to the allegations. If no derivative proceeding has yet been instituted, Section 21.554 provides that the petition is to be filed by the corporation “in the business court unless the corporation’s principal place of business in this state is located in a county not contained within an operating division of the business court . . . .”

Does the Texas Business Court Comply with the Texas Constitution? The 2024 edition of this article reported that while the 15^th COA had received a prompt challenge asserting its failure to comply with the Texas Constitution, resolved by an August 2024, 9-0 opinion of the Texas Supreme Court in In Re Marian Brown^[60] confirming that court’s validity, as of mid-2025 no party to a Business Court proceeding had yet sought to assert that it suffered any constitutional weakness. Maintaining a lookout for constitutional challenges to the Business Court is not too difficult—they are required to be filed in the Texas Supreme Court, and may not be filed in a trial court, by Section 4(a) of HB 19 (2023), which provides: “The Texas Supreme Court has exclusive and original jurisdiction over a challenge to the constitutionality of this Act or any part of this Act and may issue injunctive or declaratory relief in connection with the challenge.”^[61]

The disinterest of top Texas trial lawyers in raising such questions while vigorously seeking to keep their clients out of the Business Court was attributed to (i) the clarity provided by the In Re Marian Brown decision and a 1950 Texas Supreme Court opinion^[62] that confirmed the constitutionality of a similar legislatively created court, (ii) 1985 amendments to Article V, Section 8 of the Texas Constitution confirming the broad and complete authority of the Texas Legislature to make changes in district court jurisdiction,^[63] and (iii) a concise, well-argued October 2024 Texas Lawyer article by Chief Justice (Ret.) Tom Phillips and Matthew Hilderbrand that concluded “In our view, there should be no doubt that the business court is well within the legislative prerogative to create.”^[64]

The constitutional pass received by the Business Court may have come to an end in the late Fall of 2025 when the plaintiffs in two cases removed by the defendants to the Eleventh Division of the Business Court from district courts in Houston countered with motions seeking remand of those proceedings to the originating district courts and gave notice of their intent to challenge the constitutionality of the Business Court if their remand motions failed (which they have at this point): Unico Commodities, LLC, v. Castleton Commodities International LLC^[65] and Brown v. Exxon Mobil Corporation.^[66]

The uncertainty suggested by use of the word “may” above is intentional. While the plaintiffs in each case have made filings in the Business Court and with the Texas Attorney General asserting the unconstitutionality of the Business Court, neither has thus far made the required filing in the Texas Supreme Court, the only Texas court having jurisdiction to hear that claim. The plaintiffs’ filings provide only summary briefing to support their positions. Their arguments based in the Texas Constitution do no more than repeating positions that opponents of the Business Court argued to the 2023 Texas Legislature, unsuccessfully. Tellingly, neither the plaintiffs’ Business Court filings nor any other legal writing in Texas over the past two years addresses, much less calls into question, any of the arguments supporting Business Court constitutionality referenced above.

Observers of these two proceedings have suggested that (i) in Unico, plaintiff’s counsel may not have been aware of Section 4(a) of HB 19 (2023) giving the Texas Supreme Court exclusive authority to hear a constitutional challenge to the Business Court, and (ii) in Brown, the assertion of constitutional objections may reflect an early-stage tactical move by plaintiff’s counsel rather than a strong intention to pursue a constitutional challenge. In the meantime, it appears that the judges in each case (Judge Dorfman of the Eleventh Division in Unico, Judge Sweeten of the Third Division in Brown (sitting by assignment in the Eleventh Division)) have thus far declined to any take action on the constitutional challenges, essentially ignoring them, in view of the court’s complete lack of authority to hear such claims.

The constitutional challenges do not appear to have resulted in any slowing of the rate of case filings in the Business Court or public expressions of concern by Texas lawyers active in Business Court practice. Given the precedent of In re Dallas County, where the Texas Supreme Court determined the 15^th COA’s constitutionality in three months’ time, start to finish, if either plaintiff does move forward with the required filing in the Texas Supreme Court, a decision would be expected on a similarly expedited timetable.

§ 2.2.9. Wisconsin Commercial Docket Pilot Project

Update following 2024 Termination of the Commercial Docket Pilot Project. For 2025, Wisconsin still has not reactivated steps toward another business court pilot program. In 2024, the Wisconsin Supreme Court voted 4-3 to conclude Wisconsin’s Commercial Docket Pilot Project, which began in 2017. Twenty-six Wisconsin counties participated in the program during its 5-year run: Waukesha, Dane, Racine, Kenosha, Walworth, Brown, Door, Kewaunee, Marinette, Oconto, Outagamie, Waupaca, Ashland, Barron, Bayfield, Burnett, Chippewa, Douglas, Dunn, Eau Claire, Iron, Polk, Rusk, St. Croix, Sawyer, and Washburn.

The Project was originally approved in 2017 for a three-year term and was extended in 2022 for an additional two years, with an end date of July 30, 2024. On May 30, 2024, the Business Court Advisory Committee filed a petition seeking to extend the Project until July 1, 2026. The Supreme Court voted to solicit public comments regarding the Committee’s petition and temporarily extended the Project while disposition of the petition was pending. Those comments were considered at a public hearing on September 24, 2024. Following that hearing, the Court met in an open administrative conference where they voted to deny the petition and terminate the Project. On October 7, 2024, the Court ordered that no additional cases shall be assigned to the commercial court docket, but cases already assigned to the commercial court docket shall continue under the existing interim rules pending further order of the Court. Chief Justice Annette Kingsland Ziegler, Justice Rebecca Grassl Bradley, and Justice Brian Hagedorn dissented. The Court has not since issued any orders regarding dissolution of the Project. Although there is some discussion about proposing a new pilot program to the Court, there were no new developments during 2025.

No 2025 Opinions. The Wisconsin Commercial Docket did not publish any written decisions in 2025 since the Pilot Program concluded in 2024.

§ 2.2.10. West Virginia Business Court Division

The Supreme Court of Appeals of West Virginia has adopted a process for managing and resolving business-related litigation through the establishment of a Business Court Division. The Division is governed by West Virginia Trial Court Rule 29.

The Division consists of up to seven (7) active or senior status circuit court judges appointed by the Chief Justice of the Supreme Court of Appeals. Each appointment is for a term of seven (7) years. The Chief Justice designates a judge of the division every three years to serve as its chair, presiding over the Division’s activities and reporting to the Supreme Court of Appeals.

The West Virginia Business Court Division rules specifically define business litigation as:

(1) the principal claim or claims involve matters of significance to the transactions, operations, or governance between business entities; and

(2) the dispute presents commercial and/or technology issues in which specialized treatment is likely to improve the expectation of a fair and reasonable resolution of the controversy because of the need for specialized knowledge or expertise in the subject matter or familiarity with some specific law or legal principles that may be applicable; and,

(3) the principal claim or claims do not involve: consumer litigation, such as products liability, personal injury, wrongful death, consumer class actions, actions arising under the West Virginia Consumer Credit Act and consumer insurance coverage disputes; non-commercial insurance disputes relating to bad faith, or disputes in which an individual may be covered under a commercial policy, but is involved in the dispute in an individual capacity; employee suits; consumer environmental actions; consumer malpractice actions; consumer and residential real estate, such as landlord-tenant disputes; domestic relations; criminal cases; eminent domain or condemnation; and administrative disputes with government organizations and regulatory agencies, provided, however, that complex tax appeals are eligible to be referred to the Business Court Division.

Business Litigation transferred to the division by the Chief Justice is assigned a presiding and a resolution judge by the Division’s chair. The case remains in the county of origin, but the presiding judge may conduct hearings and trials in any circuit courtroom within the assignment region.

In the past year, two new judges have joined the Business Court Division. Judge Jennifer Bailey of Kanawha County was appointed following Judge Maryclaire Akers’ decision to step down from the Division, and Judge Jeffrey D. Cramer of Marshall County assumed a seat after the expiration of Judge Andrew Dimlich’s term. During this period, six motions to refer cases to the West Virginia Business Court Division were filed, of which the Supreme Court of Appeals approved two. At present, eighteen cases remain pending before the Division. The most significant recent decisions involving the Business Court Division are summarized below.

§ 2.2.11. Wyoming Chancery Court

The year 2025 marked the Wyoming Chancery Court’s first full year operating with a full-time judge and dedicated staff. Benjamin Burningham (co-editor of this publication) was sworn in on January 2, 2025, and assumed responsibility for all pending and newly filed chancery matters.

During the year, the court resolved 48 cases, an increase from 36 in 2024 and 27 in 2023, continuing the court’s steady growth. With full-time staff and a manageable caseload, the court resolved cases in an average of 116 days from filing and issued written decisions on motions within an average of 10 days following the close of briefing or oral argument. These metrics reflect the court’s ongoing emphasis on expedited resolution.

In addition to resolving cases promptly, the court launched a public outreach campaign. Judge Burningham delivered presentations to bar associations, law firms, chambers of commerce, and civic organizations to increase awareness of the court’s role in Wyoming’s business and legal landscape.

The court’s procedural rules saw no significant amendments in 2025. However, the Chancery Court Division of the Permanent Rules Advisory Committee undertook a comprehensive, year-long review of the court’s rules and procedures and has proposed updates for adoption in 2026.

§ 3. 2025 Cases

§ 3.1. Arizona Commercial Court

Bingham Restoration LLC v. State Farm Mutual Automobile Insurance Company^[67] (Assignability of post-loss insurance rights under anti-assignment provisions). This order addresses whether an insured’s right to demand appraisal and right to bring a bad faith lawsuit in a first-party context may be validly assigned to a third-party restoration company when the applicable insurance policies contain anti-assignment provisions. Plaintiffs Bingham Restoration and Dry Star Restoration obtained post-loss assignments of benefits from State Farm’s insureds after performing emergency mitigation services.

The court acknowledged that under Farmers Insurance Exchange v. Udall, 245 Ariz. 19 (App. 2018), a post-loss breach of contract claim is assignable even in the face of an anti-assignment provision, but it held that the Udall framework does not extend to the right to demand appraisal or to pursue a claim for breach of the duty of good faith and fair dealing. The court reasoned that an assignment of “benefits and rights under the policies,” as Plaintiffs characterized it, amounts to an impermissible assignment of the policies themselves. The court further held that even if such claims were theoretically assignable, the claims at issue had not yet accrued at the time of the assignment, and an assignment of a chose in action cannot carry with it an assignment of a right of action for a tort that has not yet been committed, citing City of Phoenix v. Johnson, 51 Ariz. 115 (1938). The court also rejected Plaintiffs’ attempt to invoke collateral estoppel based on a prior trial court ruling in a separate case, holding that the prior decision involved different insureds, was not binding precedent, and did not preclude re-litigation. Summary judgment was granted in favor of State Farm.

Temco LLC v. Micela Properties Inc.^[68] (Alter ego, constructive trust, and fraud in residential construction dispute). This order addresses multiple claims arising from a cost-plus residential construction management agreement in which the homeowners alleged that the contractor and its principal diverted construction funds for personal use. The court granted summary judgment in favor of the homeowners on claims for breach of contract, breach of the covenant of good faith and fair dealing, fraud, alter ego, and constructive trust, while denying claims for unjust enrichment, consumer fraud, and unpled punitive damages.

On the contract claims, the court rejected the defendants’ argument that the parties’ course of dealing had modified the written agreement, crediting emails from the homeowners that demanded compliance with the original contract terms. The court found that management and cancellation fees totaling over $500,000 were unenforceable penalties under Dobson Bay Club II DD, LLC v. La Sonrisa de Siena, LLC, 242 Ariz. 108 (2017). On the alter ego claim, the court found undisputed evidence that the individual defendant commingled personal and corporate funds in a single bank account and used homeowner funds to purchase a rental property for one of his entities—satisfying the “intermingling of corporate and personal assets” standard under Chapman v. Field, 124 Ariz. 100 (1979). The court imposed a constructive trust on the rental property purchased with diverted funds, invoking A.R.S. § 33-1005, which creates a trust obligation with respect to funds held by a contractor. Notably, the court concluded that no trial on damages was necessary because the defendants failed to come forward with any documentation to dispute the plaintiffs’ damage calculation.

RMOJO Higley LLC v. Caffeine Sunset Inc.^[69] (Compelling arbitration under a related agreement’s broad arbitration clause). This order addresses whether a promissory note that contains no arbitration clause—but includes a forum-selection provision and integration clause—is nonetheless subject to mandatory arbitration by virtue of a broad arbitration clause found in a related operating agreement executed on the same date. Plaintiff Rmojo and Defendant Caffeine Sunset entered into four interrelated documents on May 19, 2022, to facilitate Rmojo’s purchase of a 49% membership interest in an LLC formed to operate a coffee franchise: a Term Sheet, an Operating Agreement, an Intellectual Property Licensing Agreement, and the Promissory Note at issue. The Operating Agreement contained a broad arbitration provision covering “any and all disputes and controversies arising under or in connection with this Agreement.”

Applying the framework set forth in Sun Valley Ranch 308 Ltd. Partnership v. Robson, 231 Ariz. 287 (App. 2012), the court first determined that the arbitration clause was broad, then evaluated the four factors for compelling arbitration of claims under a related, non-arbitration agreement: (1) the documents incorporated or referenced each other; (2) the Note and Operating Agreement related to the same subject matter—the purchase of membership interests; (3) the Operating Agreement’s arbitration exceptions did not apply; and (4) all four documents were executed on the same day by the same parties. Accordingly, the court granted the motion to compel arbitration.

§ 3.2. Delaware Superior Court Complex Commercial Litigation Division

Textron Inc. v. Endurance Am. Ins. Co.^[70] (Holding that insurer did not have right to recoupment of payment under reservation-of-rights letter or voluntary payment doctrine). This case involves an insurance coverage dispute stemming from a personal injury lawsuit referred to as the Grace Action, in which a passenger sued Textron alleging that he was injured in an off-highway vehicle made by Textron’s indirect subsidiary. Textron had an insurance policy with Endurance for $25 million in generally liability coverage in limits excess of $75 million. Textron initially notified its insurers, including Endurance, of the Grace Action and that it expected a settlement value in the range of $15 to $20 million. Textron failed to, however, notify Endurance that it was accused of engaging in discovery misconduct in the Grace Action specifically related to its failure to produce evidence of a better-designed option for the off-highway vehicle before settling the matter for $105 million.

Endurance argued that it should be able to recoup its voluntary payment of the settlement amount because Textron’s discovery misconduct caused the exposure in excess of the policy limits. Textron filed a motion for judgment on the pleadings for a declaration that Endurance had no right to recoupment for its payment. The Court agreed with Textron and granted the motion because the insurance policy had no express contractual right permitting Endurance to recoup the payment, and because the voluntary payment doctrine does not apply where Endurance had “full knowledge of the facts” when it made the settlement payment. The Court noted that Endurance’s remedy was to file a lawsuit to determine coverage before agreeing to pay the settlement, or to refuse to pay the settlement and defend itself in a subsequent coverage action.

Movora LLC v. Gendreau^[71] (Entering judgment in plaintiffs’ favor relating to purchase agreement indemnification provision). In this post-trial opinion, the Court entered judgment in favor of plaintiffs and awarded more than $40 million in damages for defendants’ breach of a membership interest purchase and exchange agreement (the “MIPA”) pursuant to its indemnification provision. This matter arises out of a purchase dispute in which the company being acquired was defending a patent infringement suit throughout the duration of the acquisition. The suit eventually settled for $70 million after execution of the MIPA. The MIPA contained an indemnification provision relating to the ongoing patent infringement suit, pursuant to which the plaintiffs sought indemnification for the settlement payment.

The Court held that plaintiffs proved that the defendants breached the MIPA by not providing indemnification for the settlement after analyzing the plain text of the indemnification provision which contained broad language that was not temporally limited. The Court did not, however, find that plaintiffs could recover for portions of the settlement related to certain licenses because they were purely forward-looking and therefore, not recoverable under the MIPA’s definition of damages. The Court further rejected defendants’ argument that public policy prevents the indemnification of willful misconduct and noted that Delaware is a contractarian state that cautions against voiding otherwise valid indemnity contracts as contrary to public policy.

JanCo FS 2, LLC v. ISS Facility Servs., Inc.^[72] (Proof of damages for breach of contract must be tied to the particular breach rather than a total figure for multiple claimed breaches and fraud claims). This case involves a purchase agreement dispute in which the seller was accused of fraudulently inducing the buyer into signing the purchase agreement because the business was worth less than disclosed. In the post-trial opinion, the Court found that the seller breached one provision of the purchase agreement but failed to prove any damages for that breach and that the buyer breached the agreement by failing to pay certain post-closing purchase price adjustments.

Specifically, the buyer argued that the seller provided false or misleading financial statements, breached several sections of the purchase agreement, and committed fraud and willful misconduct by concealing the decline of the business. The Court ultimately found that the only breach of the purchase agreement that the buyer proved was that the seller breached the “Absence of Changes Representation” which required the buyer to prove some adverse effect but did not require the adverse effect to be a material one. Post-trial, the Court found that there was some adverse effect as evidenced by an increase in temporary labor costs and other issues. The Court held, however, that the seller did not tie its damages calculation to that specific breach and therefore, failed to prove its damages to a reasonable certainty as required under Delaware law.

§ 3.3. Florida’s Complex Business Litigation Courts

De Simone v. Orlando, et al.^[73] (Court lacks personal jurisdiction over dispute alleging plaintiff was defrauded by defendant in Switzerland notwithstanding defendant’s alleged intent to use proceeds of fraud in Florida). Plaintiff Claudio De Simone (“De Simone”)—a resident of Switzerland—alleged that he was defrauded by a trusted business associated, Defendant Salvatore Orlando (“Orlando”)—another resident of Switzerland, and tricked into making a $600,000 loan for the purpose of constructing a certain restaurant in Miami, Florida. Orlando moved to dismiss on the basis of a lack of personal jurisdiction, and by attached declaration swore to his lack of contacts with Florida. De Simone failed to refute Orlando’s declaration and instead focused on his threadbare allegations of a fraudulent scheme and conspiracy to use his funds for the Miami restaurant. The Court determined that, even if it were to accept De Simone’s tort allegations as true, it would nonetheless lack personal jurisdiction because the substantial and essential aspects of the underlying torts (i.e., the lies and resulting transactions which purportedly occurred in Switzerland and other foreign jurisdictions) occurred outside of Florida, and Orlando otherwise lacked sufficient minimum contacts with Florida. The sole Florida connection—that Orlando and the restaurant purportedly had an agreement for Orlando to commit the underlying torts for the Miami restaurant’s partial and eventual benefit—was deemed insufficient to meet the jurisdictional requirement that Orlando be alleged to have committed a substantial aspect of the tort in Florida. “In other words,” the Court found, “conspiracy-imputed jurisdiction still requires that the ‘key events’ underlying the torts upon which the civil conspiracy is based occur in Florida.”^[74] On that basis, De Simone’s claims against Orlando were dismissed without prejudice to re-file in an appropriate jurisdiction.

§ 3.4. State-wide Business Court in Georgia

Lincoln Parkway, LLC v. Krystal Restaurants LLC^[75] (Grant of motion for judgment on the pleadings under contract interpretation). This lease dispute arose from Krystal’s exercise of a one-time early-termination option in the third amendment to a commercial lease for property on Lincoln Parkway in Atlanta. The third amendment extended the lease through mid-2028 and provided for annual rent abatements and a $348,466 refurbishment allowance for improvements, with up any unused portion (up to $245,976) automatically credited to base rent. It also permitted Krystal to terminate the lease effective June 30, 2025, on timely, “irrevocable” notice and payment of a termination fee. The termination fee, in turn, was calculated based on the unamortized value of leasing commissions, improvement allowances, and any free or abated base rent or base-rent credits. Krystal timely invoked the option, but the parties disagreed over the amount due. Lincoln calculated the fee at over $700,000 by including the full refurbishment allowance—even though no improvements were made and no refurbishment funds had been paid. Krystal disputed the calculation, contending that only amounts actually dispersed to Krystal or incurred by Lincoln in making improvements could be counted. Krystal tendered just under $350,000—less than half of what Lincoln sought. Lincoln then sued for anticipatory repudiation, breach of contract, and declaratory relief. Both sides moved for judgment on the pleadings.

The court denied Lincoln’s motion and granted Krystal’s. Looking to the third amendment, the court recognized that “granted” and “incurred” in the termination-fee provision could support the parties’ competing readings. But the context of the third amendment, as a whole, made clear that those terms referred only to portions of the refurbishment allowance and rent concessions disbursed or realized. The court explained that Lincoln’s contrary interpretation would render the provision’s reference to unamortized value “as of the Termination Date” surplusage. It would also make most of the improvement-allowance language redundant. And it would either double count or eliminate the unused refurbishment allowance by sweeping that amount into both the improvement-allowance and rent-credit components of the fee. Finally, to the extent any ambiguity remained, the court construed the termination-fee provision against Lincoln as its drafter. Krystal had thus timely paid the correct termination fee and neither breached nor repudiated the lease. The court dismissed the complaint and held that Krystal, as the prevailing party, was entitled to recover reasonable attorneys’ fees under the lease.

North American Field Service LLC v. Ole Mexican Foods, Inc.^[76] (Good cause for additional discovery requests). This case stems from a payment dispute for electrical services performed at three of the defendant’s facilities in Texas, Tennessee, and Georgia. In discovery, the defendant sought leave to serve an additional 430 requests for admissions past Business Court Rule 6-2(b)’s presumptive limit of just 50 RFAs. The court granted the request, in part. It began by rejecting the defendant’s argument that Rule 6-2(b) is constitutionally and statutorily infirm because it allows for less requests than the Georgia Civil Practice Act does, thereby putting the defendant on different footing than civil litigants in other courts. The court found that Rule6-2(b) does not violate due process or the equal protection clause because it applies equally to all parties before the court, and because the Civil Practice Act is silent on how many RFAs a party may serve, Rule6-2(b) did not conflict with that provision either. The court went on, however, to evaluate whether good cause supported the defendant’s additional requests. The court found a deviation from the presumptive limit was proper for 167 of the 480 proposed requests. The court recognized this was “a considerable increase” from the 50 RFAs typically allotted. But the court viewed that increase justified to narrow the issues, given the number of parties, claims, and defenses at issue. Notably, in deciding whether to exercise its discretion, the court examined each of the proposed requests to decide which were supported by good cause and which were not.

Steuer, M.D. v. Tomaras, M.D.^[77] (The court’s third jury trial). This action centers on a dispute over a neurosurgery practice. The case went to a 14-day trial in March. It was one of only three jury trials conducted in the court since its opening in 2020. The jury returned a verdict, but the parties separately reached a settlement agreement. The court entered a consent final judgment against the defendants in an amount of just over $4 million.

§ 3.5. Iowa Business Specialty Court

Kern v. Seed Savers Exch., Inc.^[78] (Granting motion to dismiss because conversion claim was time-barred). Plaintiff Judith Kern sued Defendant Seed Savers Exchange, Inc. (“SSE”) alleging that SSE wrongfully converted her deceased husband’s personal effects. SSE had fired her husband and barred him from his office in 2007. He left behind various materials that he had accumulated since he founded SSE. When he asked for these documents after his termination, SSE refused to hand them over. Kern continued to seek the documents after her husband’s death. But SSE refused to provide them without any conditions, and the parties continued to negotiate until Kern sued SSE in 2024. SSE moved to dismiss arguing that Kern’s claim was time-barred.

The Business Court concluded Kern’s claim was time-barred under Iowa Code § 614.1(4), which provides a five-year limitations period for certain civil claims. It determined Kern’s conversion claim accrued when her husband originally demanded his materials in 2007 after termination. The Business Court determined that even assuming SSE became a bailee of the materials, Kern’s claim still accrued when SSE refused to return the materials and SSE claimed to own the materials. The Business Court also rejected Kern’s argument that the discovery rule tolled the limitations period.

In re J. Bruce McDonald Generation Skipping Trust^[79] (Ruling on petition to invoke jurisdiction over trust and order obligations). Trustee U.S. Bank asked the Business Court to declare its legal obligations after a district court’s prior order required it to pay out certain funds contained in a trust subaccount even though the Iowa Trust Code and the trust’s spendthrift provisions required U.S. Bank to retain the funds. In earlier litigation that did not include U.S. Bank, a judgment creditor sought to garnish funds held in a trust subaccount of which Michael McDonald was a beneficiary after it received a judgment against McDonald. A district court ruled that placing the funds in a trust subaccount constituted distribution and allowed garnishment. Neither party appealed that order. In a later related appeal, the Iowa Court of Appeals concluded issue preclusion prevented it from reconsidering that order, but it also concluded the trust spendthrift provisions generally protect trust money from collection until the beneficiary actually receives it. Thus, U.S. Bank who held a trust subaccount for beneficiary McDonald faced conflicting obligations.

The Business Court held that U.S. Bank was required to comply with the prior garnishment order and disburse the funds to the judgment creditor. The Business Court explained that an appellate court had already determined that the earlier district court order carried preclusive effect because McDonald failed to appeal the distribution issue. But the Business Court clarified that its ruling applied only to the funds previously held in the subaccount and did not undermine the trust’s spendthrift protections more broadly. The Business Court concluded the spendthrift provision would protect the remaining trust principal and income from creditors unless and until the trustee chose to distribute them to McDonald.

Iowa Pathology Assocs., P.C. v. Abbott^[80] (Issuing findings of fact and conclusions of law after trial on claims that employees established competing business while employed). Plaintiffs Iowa Pathology Associates, P.C. (“IPA”) and a related entity sued Defendants who were four physician-shareholders of IPA, alleging Defendants secretly developed a competing business while still working at IPA thereby breaching their employment agreements, violating a common-law duty of loyalty, and committing civil conspiracy. The Business Court found that before announcing their departure, Defendants incorporated a new entity, developed a business plan, secured business space, retained consultants, obtained regulatory approvals, and established operational infrastructure. Plaintiffs claimed these actions constituted active participation in a competing business and sought damages for lost profits. Defendants counterclaimed, alleging various contract and tort claims.

After trial, the Business Court ruled in favor of Defendants on Plaintiffs’ claims. The Business Court explained that employees may organize a new enterprise before resignation so long as they remain loyal during their employment. The Business Court found Defendants did not solicit IPA’s clients or employees before their departure. It emphasized that Defendants continued working full time for IPA, maintained production levels, and did not begin processing laboratory work for the new business until their employment ended. Thus, the Business Court concluded Defendants’ actions were preparatory acts necessary to establish a new business rather than participation in a competing enterprise. The Business Court then rejected Defendants’ counterclaims except for their claim of unjust enrichment related to a signing bonus paid while Defendants were shareholders of IPA.

§ 3.6. Maine Business and Consumer Docket

LeFevre v. LeFevre^[81] (Shareholder litigation closely held corporations). The Maine Business and Consumer Docket’s decision in LeFevre, provides important guidance regarding shareholder litigation in closely held corporations. The dispute arose between a minority shareholder and his sons, who controlled two family-owned businesses as majority shareholders, directors, and officers. The plaintiff alleged that the defendants used corporate assets for personal purposes, paid excessive compensation to family members, restricted his access to corporate information, and excluded him from company affairs. After the companies rejected his statutory demand to investigate and pursue claims against the defendants, the plaintiff commenced both direct and derivative claims for conversion, breach of fiduciary duty, unjust enrichment, fraud, removal of directors, and appointment of a custodian.

The court’s most significant holding concerned standing. Although claims alleging injury to a corporation ordinarily must be brought derivatively, the court emphasized the realities of closely held corporations and permitted the plaintiff to pursue direct claims alongside derivative claims. Relying on Moore v. Maine Industrial Services, Inc., 645 A.2d 626, 629-30 (Me. 1994), the court reasoned that where controlling shareholders allegedly caused and benefited from the misconduct, and the minority shareholder was effectively the sole injured party, strict adherence to derivative-action requirements could produce inequitable results. The court also rejected the defendants’ attempt to rely on the corporation’s demand-response letter as a basis for dismissal, holding that a plaintiff does not adopt the truth of an attached document when the complaint expressly challenges its accuracy and adequacy.

The court denied the motion to dismiss as to the conversion, fiduciary duty, unjust enrichment, and related statutory claims, but dismissed the fraud counts for failure to satisfy M.R. Civ. P. 9(b). Although the plaintiff alleged that improper expenditures and compensation were disguised in corporate records as legitimate business expenses, the complaint failed to identify with sufficient particularity what action the plaintiff or the corporations would have taken absent the alleged misrepresentations. The decision underscores that minority shareholders in closely held corporations may pursue parallel direct and derivative claims, internal investigations generally will not defeat claims at the pleading stage, and fraud claims remain subject to heightened pleading requirements notwithstanding Maine’s notice-pleading standard.

§ 3.7. Maryland Business and Technology Courts

Doe v. MedStar Health, Inc.^[82] (Class certification in data-privacy litigation). In this putative class action, the plaintiffs alleged that MedStar Health collected and shared patient website browsing data, including data from its myMedStar patient portal, by placing cookies on its web properties and transmitting that data to Google and Facebook for marketing purposes. The plaintiffs asserted claims for violation of Maryland’s Wiretap Act, intrusion upon seclusion, publication of private facts, and negligence.

The Circuit Court for Baltimore City denied class certification on multiple grounds. First, the proposed class was not ascertainable as to patients who merely visited publicly accessible websites because no administratively feasible method existed to identify them.Second, the plaintiffs failed to establish typicality and adequacy because all remaining class representatives used the patient portal, yet the proposed class included members who only visited public webpages.Third, common issues did not predominate for three of the four claims due to individualized inquiries, such as browser configurations and whether disclosures were “highly offensive.”Fourth, the novelty of the plaintiffs’ legal theories precluded a finding that class treatment was a superior method of adjudication.

This opinion reflects the court’s careful application of Maryland Rule 2-231 in emerging data-privacy litigation, underscoring the challenges of demonstrating ascertainability, typicality, predominance, and superiority in technology-driven claims.

Hartman v. Silver Star Properties REIT, Inc.^[83] (Stockholder rights, charter construction, and corporate governance in a non-traded REIT). Following a six-day bench trial, the Circuit Court for Baltimore City addressed a complex intra-corporate dispute within Silver Star Properties REIT, Inc., a Maryland public non-traded REIT. The plaintiff, Silver Star’s founder, former CEO, and current director, sought, among other things, a declaration requiring immediate liquidation under a charter termination provision, an order compelling an annual meeting, and a declaration voiding a stockholder rights plan (also commonly known as a “poison pill”).

On the liquidation claim, the court construed the charter’s ambiguous termination provision and found, based on Silver Star’s own SEC filings, that the ten-year liquidation deadline had passed. However, the court declined to order immediate liquidation on equitable grounds—including the plaintiff’s own misconduct, Maryland’s strong public policy disfavoring dissolution, and the board’s judgment that liquidation was not in stockholders’ best interest—instead ordering a stockholder vote within six months on whether to liquidate or defer.

Regarding the stockholder rights plan/poison pill, the court upheld its validity, finding that the board adopted it in good faith in response to the plaintiff’s hostile actions and that MGCL § 2-201(c) expressly authorizes such plans. The court further held that the board validly ratified the plan’s triggering under MGCL § 2-703(b)(1), which permits ratification of defective corporate acts with retroactive effect. Finally, the court made express credibility findings adverse to the founder and reserved ruling on a bylaw amendment pending a related appeal.

Kakar v. Privilege Underwriters Reciprocal Exchange^[84] (Insurer’s duty to defend under a homeowner’s policy against a defamation suit). The Circuit Court for Montgomery County granted summary judgment in favor of the plaintiff, Arvinder Kakar, declaring that his homeowner’s insurance carrier, Privilege Underwriters Reciprocal Exchange (“PURE”), owed him a duty to defend against a defamation lawsuit brought by his former business, Octo Platform Holdings, LLC (“Octo”). The plaintiff sold his company to Octo, served as an employee and director, and subsequently, approximately one year after his employment and board service ended, made allegedly defamatory statements to IBM intended to derail IBM’s acquisition of Octo.

The PURE policy required the insurer to provide a defense “even if the suit is groundless, false or fraudulent” for claims of “personal injury,” including defamation. PURE initially denied coverage based on the absence of an “occurrence” and four policy exclusions. At the motions hearing, however, PURE conceded the “occurrence” issue and relied solely on the four exclusions: the Business Exclusion, the Directors E&O Exclusion, the Contracts or Agreements Exclusion and the Expected or Intended Injury Exclusion.

Relying on Maryland’s broad “potentiality of coverage” doctrine from Brohawn v. Transamerica Insurance Co., the court held that the insurer was obligated to defend and systematically rejected all four exclusions. The Business Exclusion failed because the plaintiff was no longer engaged in any business pursuit when the statements were made. The Directors E&O Exclusion was inapplicable because he had resigned from the board ten months prior. The Contracts or Agreements Exclusion also failed because the underlying lawsuit alleged defamation per se beyond mere contractual non-disparagement breaches. Finally, the Expected or Intended Injury Exclusion was unavailing because, under Virginia law governing the underlying claims, liability could rest on negligence as well as knowing defamation. The court entered judgment for the plaintiff on both the declaratory judgment and breach of contract claims.

The Spruce House Partnership (AI) LP v. CohnReznick LLP^[85] (Auditor liability and summary judgment in a professional liability dispute). The Circuit Court for Baltimore City granted summary judgment in favor of CohnReznick LLP, the auditor for GTT Communications (“GTT”), dismissing all three counts: (a) intentional misrepresentation, (b) concealment, and (c) negligent misrepresentation, brought by The Spruce House Partnership, an investment firm that made substantial investments in GTT, including an initial purchase of 4 million shares worth $143 million and a subsequent $170 million commitment related to GTT’s acquisition of Interoute.Spruce House ultimately recorded its GTT shares as worth $0 and abandoned them entirely before GTT filed for bankruptcy on October 31, 2021. Spruce House alleged that CohnReznick issued false audit reports and failed to detect material accounting irregularities. However, the court found that Spruce House’s forensic accounting expert offered only speculative opinions that did not amount to conclusions based on the factual record, and that plaintiffs failed to establish that GTT’s financial statements were materially misstated.

Applying New York law, the court found the claims failed on multiple independent grounds. First, there was no direct communication between CohnReznick and Spruce House, which conducted its due diligence without ever speaking to the auditor. Second, the plaintiffs could not demonstrate reliance because Spruce House’s own principal, Mr. Sternberg, acknowledged in deposition testimony that acting on material nonpublic information about GTT’s financial deficiencies would have been impractical due to insider trading prohibitions, stating that “your choices are very limited at that point in time” and “[y]ou don’t have the option of selling.” The other principal, Mr. Stein, stated that “[i]t’s hard to speculate” what actions Spruce House might have taken in response to an adverse opinion on GTT’s financials. Third, the parties lacked the privity or near-privity required under New York law for negligent misrepresentation claims against auditors.

The court further observed that the alleged wrongdoing was attributable to GTT itself, the SEC’s cease-and-desist order made no reference to CohnReznick, highlighting the court’s rigorous application of summary judgment standards in complex financial and professional liability disputes involving sophisticated investors.

Smith v. Bozzuto Management Company^[86] (Debt-collection licensing and statutory interpretation under the MCALA). The Circuit Court for Montgomery County granted Bozzuto Management Company’s motion to dismiss with prejudice in this putative class action brought by a residential tenant. The plaintiff alleged that Bozzuto engaged in unlicensed debt collection activities in violation of the Maryland Collection Agency Licensing Act (“MCALA”) and included a lease provision permitting late fees ten days after the rent due date, in alleged violation of a fifteen-day grace period under Md. Code Ann., Com. Law § 14-1315(f).

The court rejected the plaintiff’s assertion that Bozzuto, as a property management company collecting rent on behalf of an owner, is a “debt collection agency” requiring licensure. Adopting a “primary purpose/incidental nature” test and relying on legislative history, the court concluded that the MCALA was enacted to regulate entities whose primary business is purchasing or collecting consumer debts—not property managers for whom rent collection is merely incidental.^[38] The court further found that because Bozzuto signed the lease directly with the plaintiff, it was not collecting rent “for another” within the meaning of the statute, providing an independent basis for its holding.

The court also held that the fifteen-day late fee grace period in Commercial Law § 14-1315(f) does not apply to residential leases, which are neither “goods” nor “services” under the statute. Even assuming Bozzuto qualified as a debt collector, the court found dismissal warranted because the plaintiff failed to allege actual injury—the payment of rent in exchange for use of an apartment does not constitute a cognizable “loss”—and because disgorgement is a remedy reserved exclusively to the Maryland Attorney General’s Consumer Protection Division.

§ 3.8. Michigan Business Courts

Biotech Clinical Laboratories, Inc. v. RSL Medical Marketing, LLC.^[87] (Liquidated-damages clause unenforceable as penalty). This dispute arose out of a marketing agreement between Biotech Clinical Laboratories, Inc. (“Biotech”) and RSL Medical Marketing, LLC (“RSL”) for the provision of marketing services by RSL in exchange for monthly compensation.

The parties’ agreement contained a restrictive covenant and a liquidated-damages provision, which required Biotech, in addition to any equitable relief, to pay RSL liquidated damages equal to three times the contractor’s last twelve months of compensation for “any breach” of the agreement, including failure to pay earned compensation. After the relationship deteriorated, Biotech sued RSL over a marketing agreement, and RSL asserted a counterclaim for breach of contract seeking to enforce a liquidated damages clause tied to alleged breaches of restrictive covenants. Both parties argued they were entitled to summary disposition on defendant’s counterclaim for breach of contract.

The Oakland County Business Court granted summary disposition in favor of Biotech, determining that the clause was an unenforceable penalty under Michigan law. The court explained that liquidated damages are enforceable only when they reasonably approximate damages that are difficult to calculate at the time of contracting. Here, the provision applied the same large damages amount to any breach of the agreement, including breaches where actual damages, such as unpaid compensation, would be readily ascertainable. Because the fixed amount would be excessive in relation to foreseeable damages in several possible breach scenarios, the court concluded the provision functioned as a penalty rather than a valid liquidated damages clause and therefore could not be enforced.

A123 Systems, LLC v. Voltari Marine Electric Inc., Voltari Electric Inc., and Voltari Power Systems Inc.^[88] (Personal jurisdiction in international supply contract dispute). Plaintiff A123 Systems, LLC, a Delaware limited liability company headquartered in Novi, Michigan, did not meet its burden of demonstrating that the court had jurisdiction over defendants: Voltari Power Systems Inc. (“VPS”), a Canadian corporation with its principal place of business in Quebec, Canada; Voltari Marine Electric Inc. (“VME”), a Canadian corporation with its principal place of business in Ontario, Canada; and Voltari Electric Inc. (“VEI”), a Florida corporation with its principal place of business in St. Petersburg, Florida. Accordingly, the court granted the defendants’ motion for summary disposition pursuant to Mich. Ct. R. 2.116(C)(1) for lack of personal jurisdiction.

The underlying dispute involved fourteen purchase orders issued in 2021 and 2022 for the sale of the plaintiff’s battery-related products to the defendants, who would then utilize the parts in their production of electric boats. Plaintiff alleged that defendants failed to pay approximately $1.58 million in outstanding invoices and contractual interest (1.5% per month) after defendants acknowledged the debt but declined to resolve it.

The purchase orders were issued by VPS to plaintiff’s parent company, Wanxiang A123 Systems Asia Co. Ltd. (“Wanxiang A123”), a Chinese company, for batteries Wanxiang A123 manufactured in China and shipped from China to Canada. Wanxiang A123 issued invoices to VPS in Quebec, and invoice payments were made by VPS to Wanxiang A123’s bank account in China. Plaintiff handled all aspects of the contract negotiations with VPS; coordinated the manufacture of the battery products through its parent company Wanxiang A123; was the point of contact with VPS regarding their business partnership, products, purchase orders, invoices, and outstanding balances; and was the sales office that worked directly with VPS to order, source, and ship the products manufactured by Wanxiang A123.

Plaintiff’s complaint alleged that the Michigan court had personal jurisdiction over defendants because they transacted business within the state under Mich. Comp. L. § 600.715. Specifically, the complaint alleged that defendants solicited business within the state and negotiated and entered into contracts for the purchase of goods within the state.

The Oakland County Business Court first concluded that plaintiff failed to present evidence that defendants were present within the state on a regular basis. They did not have a physical location, employees, agents, or a bank account in Michigan. As a result, defendants were not subject to the exercise of general personal jurisdiction under Mich. Comp. L. § 600.711.

As to limited (or long-arm or specific) jurisdiction under Mich. Comp. L. § 600.715, the court found that VPS had transacted business within Michigan and, therefore, the court could exercise limited personal jurisdiction over VPS under Mich. Comp. L. § 600.715. However, plaintiff failed to provide any evidence of a transaction with VEI and VME. Accordingly, the court could not exercise limited personal jurisdiction over VEI and VME under Michigan’s long-arm statute.

With respect to VPS, the court then proceeded to the second step of the analysis, whether the exercise of personal jurisdiction over it would offend due process, which requires that a defendant have a certain minimal contact with the state so that the suit does not offend the traditional notions of fair play.

The court applied Michigan’s three-part test. First, the defendant must have purposefully availed itself of the privilege of conducting activities in the state. Second, the cause must arise from the defendant’s activities in the state. Third, such activities must be substantially connected with the state to make the exercise of jurisdiction reasonable.

The court found that VPS had purposefully availed itself of the privilege of conducting activities in the state. It initiated contact with the plaintiff to solicit business, executed a non-disclosure agreement, engaged in ongoing negotiations with Michigan based personnel, traveled to Michigan for meetings, and sought investment from the plaintiff in the Voltari business. These contacts showed that VPS deliberately reached into Michigan to pursue a business relationship.

With respect to the second factor, however, the court determined that plaintiff’s cause of action, which concerned breached purchase orders and unpaid invoices, did not arise from any activities in the state. The purchase orders and invoices involved products manufactured in China, shipped to Canada, and payable in China, and the alleged breach did not stem from any Michigan-related conduct.

Finally, the court held that exercising jurisdiction would be unreasonable. The transactions occurred outside the state, key witnesses were located elsewhere, and VPS had no presence in the state. Because the alleged breach was not substantially connected to the state, requiring VPS to litigate there would impose a substantial burden. Accordingly, the court found the third prong unsatisfied and granted summary disposition for lack of personal jurisdiction.

Zakaria v. Gjokaj.^[89] (Summary disposition on contractor fraud, statutory conversion, and breach of construction contract). The Wayne County Business Court granted summary disposition in favor of plaintiffs pursuant to Mich. Court R. 2.116(C)(10) on their breach of contract claim because there was no genuine issue as to any material fact. In March 2022, plaintiffs contracted with defendant Gjokaj and his company, Renaissance Building Services, LLC (“Renaissance”), to build a medical facility. Plaintiffs sued for breach of contract, alleging that defendant Renaissance breached the agreement and left the job unfinished. As a result, plaintiffs allege they paid $499,449.39 over the contract price to complete the project and that they paid $363,600 to subcontractors whom Renaissance allegedly failed to pay.

Renaissance did not dispute that it breached the contract but argued that plaintiffs breached first by providing deficient engineering specifications, excusing its performance. The court rejected this defense because Renaissance produced no admissible evidence supporting that claim and relied only on conclusory assertions. Because Renaissance admitted breaching the agreement and failed to present evidence creating a genuine issue of material fact, the court granted summary disposition in plaintiffs’ favor on the breach of contract claim.

The court also granted summary disposition on plaintiffs’ claims under the Michigan Building Contract Fund Act, Mich. Comp. L. § 570.151 et seq., fraudulent misrepresentation, and statutory conversion. Gjokaj admitted that he retained project funds, failed to pay subcontractors in full, commingled project funds with funds from other jobs, and diverted approximately $221,000 to another project. He also admitted submitting false lien waivers and sworn statements to obtain loan proceeds, including representations that certain subcontractors had been paid when they had not. An affidavit from the title company’s settlement agent further indicated that payments were made based on inaccurate submissions and that approximately $495,000 remained unaccounted for. Because defendants presented no evidence creating a genuine issue of material fact, the court granted summary disposition in plaintiffs’ favor on those claims as well.

Get Health Physical Therapy, LLC v. Yousif^[90] (Dismissing fiduciary duty claim against nonmember; denying motion otherwise). The Macomb County Business Court granted in part and denied in part defendants’ motion for summary disposition brought under Mich. Ct. R. 2.116(C)(7), (8), and (10) in a lawsuit based on nine causes of action arising from the alleged diversion of patients and misappropriation of funds from a physical therapy business. Plaintiffs, Get Health Physical Therapy, LLC (“Get Health”) and two of its members, filed suit asserting various claims against Yousif, a co-member, members of Yousif’s family, and several competing entities.

Defendants moved for summary disposition under Mich. Ct. R. 2.116(C)(7) (i.e., statutory bar to claim), arguing that most of the claims were barred by the statute of limitations. The court denied defendants’ motion, finding that they failed to establish when the claims accrued. Defendants argued the claims arose from checks issued between 2018 and 2021, but the court found that assertion conclusory and unsupported. The court also noted that some claims, including breach of fiduciary duty and trade secret misappropriation, are governed by a discovery rule. Because discovery had not yet occurred and the record did not establish the accrual dates, it concluded that summary disposition based on the statute of limitations was premature.

Under Mich. Ct. R. 2.116(C)(8) (i.e., failure to state claim), defendants challenged the sufficiency of plaintiffs’ breach of fiduciary duty and unjust enrichment claims. The court denied dismissal of the fiduciary duty claim against Narmin, finding that LLC members owed fiduciary duties under the operating agreement, but dismissed the claim against Nivin because she was not a member of the LLC. The court also denied dismissal of the unjust enrichment claims, holding that the complaint sufficiently alleged defendants received benefits from company funds or diverted patients and that retention of those benefits would be inequitable under Michigan’s notice-pleading standard.

The court also denied defendants’ motion under Mich. Ct. R. 2.116(C)(10), finding that summary disposition was premature because discovery had not yet begun in the case, notwithstanding that discovery had closed in a related earlier action.

The court granted defendants’ motion for summary disposition only as to plaintiffs’ breach of fiduciary duty claim against Yousif, and denied the motion in all other respects.

Priority Waste, LLC v. Bischer Technologies, LLC^[91] (Granting summary disposition on account-stated claim). The Macomb County Business Court granted defendant’s/counter-plaintiff’s, GRIT Technologies’ motion for partial summary disposition under Mich. Ct. R. 2.116(C)(10) on its counterclaim for account stated arising from unpaid IT services invoices.

Plaintiff/counter-defendant Priority Waste entered into a Master Services Agreement with GRIT for managed IT services. After alleging GRIT failed to provide adequate support, Priority Waste withheld payment, and GRIT suspended services for nonpayment of invoices. Priority Waste then sued GRIT for conversion, breach of contract, and injunctive relief arising from an alleged breach of a managed IT services agreement. GRIT counterclaimed for breach of contract (collection), breach of contract (poaching), and account stated for unpaid invoices and moved for partial summary disposition on its account-stated claim.

The court granted GRIT’s motion for partial summary disposition. It concluded that GRIT established a prima facie case under Mich. Comp. L. § 600.2145 by attaching to its counterclaim an affidavit and account reflecting the balance owed. Priority Waste failed to file a counter-affidavit denying the account within the statute’s 10-day period and instead submitted an affidavit more than 50 days later. The court rejected Priority Waste’s attempt to cure the untimely filing by seeking leave to amend its answer, explaining that the statute requires the affidavit to be filed within the prescribed period.

The court further found that Priority Waste’s late affidavit contained only conclusory assertions disputing the invoices and alleging that GRIT breached the parties’ agreement. Because an account stated constitutes a new and independent contract based on assent to the balance due, disputes over the underlying service agreement were irrelevant. Having failed to timely or substantively rebut GRIT’s prima facie evidence of the account stated, it determined that Priority Waste could not create a genuine issue of material fact, and summary disposition on GRIT’s counterclaim on account stated was warranted.

Independent Bank v. Adelaide Pointe Boaters Services, LLC.^[92] (Denying receiver and requiring evidentiary hearing where material factual disputes existed regarding default, collateral value, and risk to lender’s collateral). Plaintiff, Independent Bank, filed suit seeking contract damages, judicial foreclosure of several mortgages, and the appointment of a receiver for a large mixed-use development in Muskegon, Michigan. Defendants were the borrower entities involved in the Adelaide Pointe development, along with affiliated management entities, a guarantor, and the trustee of the guarantor’s asset protection trust. Plaintiff alleged that defendants defaulted on more than $28 million in loans used to finance the project after failing to repay matured promissory notes and failing to pay property taxes and contractors. Relying on cross-default provisions and receivership clauses in the loan documents, plaintiff declared all loans in default and moved ex parte for the immediate appointment of a receiver to preserve and manage the collateral.

Defendants argued that the receivership motion was a bad-faith attempt to circumvent a recently executed forbearance agreement and that no emergency or threat to the bank’s collateral existed. They maintained that any alleged defaults were known or cured and that the bank’s actions had worsened the project’s temporary cash flow issues.

The Kent County Business Court concluded that although the loan documents allowed the lender to seek appointment of a receiver upon default, receivership remains an equitable remedy and the court must independently evaluate whether it is warranted. Applying Michigan law governing receiverships, the court emphasized that the remedy is harsh and generally reserved for extreme circumstances to prevent loss or deterioration of property. Because the parties presented sharply conflicting evidence regarding the existence of uncured defaults, the value and stability of the project, the effect of a recent forbearance agreement, and whether the lender’s collateral was actually at risk, the court concluded that these factual disputes could not be resolved on affidavits alone. The court therefore denied without prejudice plaintiff’s motion to appoint a receiver and determined that an evidentiary hearing would be required before deciding whether receivership was appropriate, leaving all foreclosure and contract claims pending.

§ 3.9. New Hampshire Commercial Dispute Docket

CMG CIT Acquisition, LLC D/B/A CoreMedical Group v. Perron^[93] (Preliminary injunction based on noncompete agreement). There were no business court decisions in New Hampshire in 2025 that addressed novel issues or broke any new ground. This decision granted a preliminary injunction in a case involving a confidentiality and noncompete agreement, and it covers the ground comprehensively in terms of the elements required to obtain such relief. It is worthy of a citation for no other reason. 

Atlantic Anesthesia, P.A. v. Ira Lehrer, et al.^[94] (Common interest doctrine and crime fraud exception). Five years ago, this business court decision addressed the common interest doctrine and the crime-fraud exception to the attorney-client privilege. As reported then, the decision made the following rulings:

• In this case, the court addressed an issue on which the New Hampshire Supreme Court had not yet ruled: whether the “common interest” provision within the attorney client privilege rule of evidence (“in a pending action and concerning a matter of common interest”) applied in the circumstances.
• There was no pending action, but the defendants and a third party had communicated regarding the subject of the later litigation, and the defendants sought to protect discovery of their communications with that third party pursuant to the “common interest” rule.
• The court ultimately determined that it need not resolve the issue of whether this doctrine can apply to communications before there is a “pending action,” because it further determined that the crime-fraud exception to the privilege applied in the context of an alleged breach of fiduciary duty. In doing so, the court concluded that the New Hampshire Supreme Court would find persuasive the reasoning of decisions from other jurisdictions finding sufficient parallels between fraud and the intentional breach of fiduciary duties to trigger the exception to the privilege rule.

Atlantic Anesthesia, P.A. v. Ira Lehrer, et al.^[95] (Common interest doctrine and crime fraud exception). The New Hampshire Supreme Court recently reversed the business court decision, ruling that the common interest doctrine did not apply in advance of actually anticipated or pending litigation:

The doctrine is codified in New Hampshire Rule of Evidence 502(b)(3), which provides that the privilege extends to communications “by the client or the client’s representative or the client’s lawyer or a representative of the lawyer to a lawyer or a representative of a lawyer representing another party in a pending action and concerning a matter of common interest therein.” N.H. R. Ev. 502(b)(3). The language of the rule unambiguously provides that it applies when: (1) there was an action pending at the time the communications were made; and (2) the communications pertained to a matter of common interest. Id. at p. 20 (cleaned up).

With respect to the crime-fraud exception to the attorney-client privilege, the Supreme Court determined that this exception was not triggered by allegations of breach of fiduciary duty, but limited specifically to crimes or frauds:

The essence of fraud is a fraudulent misrepresentation. To establish common law fraud under New Hampshire law, a plaintiff must prove that the defendant made a representation with knowledge of its falsity or with conscious indifference to its truth with the intention to cause another to rely upon it. In addition, the plaintiff must prove that it justifiably relied upon the representation, to its detriment. Accordingly, the appropriate inquiry is not, as framed by the trial court, whether there was a reasonable basis for believing that the physician defendants breached their fiduciary duties and that WDH tortiously interfered with Atlantic/NAPA-NH’s contractual relations and that each used the services of attorneys to accomplish the breach and the tortious interference. Rather, the appropriate inquiry is whether there is a reasonable basis to conclude that the physician defendants and WDH intended to use the services of their attorneys to assist them in making a false representation to Atlantic/NAPA-NH upon which they intended Atlantic/NAPA-NH to rely to its detriment. Id. at p. 28 (cleaned up).

§ 3.10. New Jersey’s Complex Business Litigation Program

Jack Jaffa v. Abraham Kraus, et al.^[96] (Preliminary injunction and appointment of receiver). In this dispute concerning plaintiff’s purported ownership interests in multiple New Jersey healthcare facilities, the New Jersey Superior Court reaffirmed the exacting standards governing injunctive relief in New Jersey. The Court rejected Plaintiff’s request for a preliminary injunction restraining defendants from transferring assets outside the ordinary course of business, as well as his request for appointment of a custodial receiver to oversee the finances of the subject nursing homes.

Plaintiff Jack Jaffa alleged that in 2018, he entered into agreements with non-party Joseph Schwartz concerning the ownership of three New Jersey healthcare facilities, and that Schwartz thereafter entered into management agreements with the defendant entities wherein the defendant entities assumed operational control of the facilities. Plaintiff alleged that defendants continued to direct proceeds to Schwartz-controlled entities, thereby depriving Plaintiff of his alleged contractual ownership interest, and sought a preliminary injunction to preserve his claimed interests. Defendants countered that Plaintiff relinquished his ownership rights by virtue of a 2019 Memorandum of Understanding (“MOU”) and associated termination agreements. Defendants also argued that Plaintiff’s requested preliminary injunction would disrupt the long-standing operational status quo, jeopardize the facilities’ stability and treatment of patients, and serve only Plaintiff’s monetary interests—not any urgent equitable right.

In denying Plaintiff’s motion for preliminary injunction and appointment of a receiver, the court began by emphasizing that “a preliminary injunction is an extraordinary remedy that involves ‘the most sensitive exercise of judicial discretion.”’ The court highlighted that Plaintiff did not bring the action until nearly six years after defendants began managing the facilities, and that defendants had been providing care to New Jersey residents for years while operating the nursing homes profitably and in compliance with contractual and regulatory obligations. The court also stressed that Plaintiff’s feared harm—the loss of monetary receipts—was not a unique real property or possessory interest that rose to the level of irreparable injury justifying extraordinary relief, and that the documentary evidence (notably the 2019 MOU) negated Plaintiff’s claim that he retained a settled ownership or contractual interest in the subject facilities. Thus, the court concluded that Plaintiff failed to establish any of the elements (reasonable probability of ultimate success of the merits, a settled legal right to the ultimate relief sought, that irreparable harm will occur absent injunctive relief, and that the balance of hardships favors Plaintiff) necessary for issuance of a preliminary injunction or any further equitable relief.

§ 3.11. New York Supreme Court Commercial Division

Slice Wireless Services, LLC v. Yakubov^[97] (Compliance with Commercial Division rules). The procedural rules for the Commercial Division, located at 22 N.Y.C.R.R. § 202.70, are intended to ensure the most efficient, prompt, and fair resolution of complex commercial disputes. Attorneys practicing in New York’s Commercial Division courts ignore those rules at their peril. In this case, Judge Robert R. Reed of the New York County Commercial Division denied plaintiff’s motion to compel discovery because plaintiff failed to comply with New York Commercial Division Rule 14 (22 N.Y.R.R. 202.70) and the court’s individual part rules. The court held that plaintiff’s failure to abide by the rules deprived the court of its ability to supervise disclosure in an orderly manner.

PFNGT LLC v. Liquid Capital LLC^[98] (Motion for summary judgment in lieu of complaint granted in part). New York’s Commercial Division courts are attractive venues for clients seeking to resolve their commercial disputes and enforce their contractual agreements quickly and efficiently. Here, the plaintiff lender filed a motion for summary judgment in lieu of complaint, pursuant to CPLR 3213, against the borrower, guarantor and pledgor under a loan agreement and accompanying promissory note. Judge Joel M. Cohen of the New York County Commercial Division granted plaintiff lender’s motion for summary judgment against the borrower and the guarantor, finding that the plaintiff had established that: (1) the borrower had executed the loan agreement and promissory note; (2) the note contained an unconditional promise to repay the plaintiff in accordance with the loan agreement; (3) the guarantor had unconditionally and irrevocably guaranteed payment of the note; and (4) the borrower defaulted. The court rejected defendants’ arguments that the note and guaranty were not instruments for the payment of money only because they contained additional provisions requiring the borrower and guarantor to provide certain financial disclosures and comply with all laws. The court concluded, “[t]hese ancillary clauses do not affect or limit Guarantor’s or Borrower’s unconditional obligation to make payment.” Although the court denied plaintiff’s motion against the pledgor, holding that the right to enforce the security interest was independent from the obligation to pay on the note, the court held that if payment on the note and guaranty is not forthcoming, plaintiff may move separately against the collateral. Thus, the plaintiff was able to obtain a court order enforcing its contractual agreement within a matter of months of its initial filing.

DOIT Hospitality Delaware LLC v. Reuben Bros. Ltd.^[99] (Absent parties’ consent, good cause required to permit remote deposition). Particularly after the COVID pandemic, parties and their counsel may wrongly assume that they can unilaterally take depositions or produce witnesses for depositions virtually. Absent parties’ consent, New York’s Commercial Division courts require a showing of good cause to take a deposition remotely. In this case, one of the plaintiffs resided in India. Defendant insisted that the plaintiff be produced in-person in New York. Plaintiffs argued that a virtual deposition should be allowed because the Indian witness would not be able to obtain an appointment for a visa interview, let alone get a visa, in time to travel to New York for his deposition. Commercial Division Judge Robert R. Reed of the New York County Commercial Division noted that the Commercial Division Rules permit the court to order a remote deposition upon consent of the parties or upon a motion showing good cause but concluded that extensive wait time for a visa appointment or interview did not constitute good cause to permit a remote deposition. The court found good cause particularly lacking where the plaintiff failed to make any showing that it had taken any steps needed to assist in obtaining the travel visa for a key witness in a case it commenced three years before the motion was decided. The court ordered the plaintiff to produce the witness for an in-person deposition in New York within 180 days and further ordered that if the plaintiff failed to do so, the complaint would be stricken for non-compliance.

Ader v. Ader^[100] (Awarding of sanctions for filings containing artificial intelligence hallucinations). Judges in New York, as elsewhere, have significant discretion to impose sanctions, including in cases involving court filings containing artificial intelligence hallucinations. In Ader, defense counsel included an AI-hallucinated citation and quotation in opposition to plaintiff’s summary judgment brief, and then included multiple new-AI-hallucinated citations and quotations in defendant’s brief opposing plaintiff’s motion for sanctions, including four citations that did not exist, seven quotations that did not exist in cited cases, and three citations that did not support the propositions for which they were offered. In granting plaintiff’s motion for sanctions, Judge Joel M. Cohen of the New York County Commercial Division noted that to fail to impose sanctions just because the legal propositions were accurate would “create [] the risk that a fake citation may make its way into a judicial decision, forcing courts to expend their limited time and resource to avoid such a result.” Judge Cohen ordered defendants and their counsel, jointly and severally, to pay attorney’s fees, costs, and out-of-pocket expenses incurred in connection with the motion for sanctions, as well as fees attributable to addressing defendant’s unvetted AI citations and quotations in the summary judgment motion. In addition, the court ordered that its opinion be provided to the Grievance Committee for the Appellate Division, First Department, and the Office of Attorney Ethics in New Jersey, where defense counsel was also admitted. As Judge Cohen noted, counsel have a responsibility to ensure that their representations to the court are accurate.

Linkable Networks, Inc. v. Mastercard Inc.^[101] (Standard for motion to seal records). This case addressed the standard for sealing or redacting court records on a showing of “good cause.” Judge Robert R. Reed of the Commercial Division, New York County noted that Section 216.1(a) of the Uniform Rules for Trial Courts permits courts to seal documents only upon a written finding of good cause. The court noted that “[i]n the business context, courts permit records to be sealed when trade secrets are involved or when disclosure of information contained in documents ‘could threaten a business’s competitive advantage’” but also noted that under New York law, there is a “clear presumption that the public is entitled to access to judicial proceedings and court records.” The court found that, where most if not all of the documents sought to be sealed were used as trial exhibits, the parties had failed to overcome the “broad presumption of public entitlement” to court records.

§ 3.12. North Carolina Business Court

Shively v. ACI Learning Holdings, LLC^[102] (Personal jurisdiction). This case arose out of the termination of Plaintiff Shively’s employment with ACI Learning Holdings (“ACI”) and Shively’s execution of and attempt to enforce the provisions of a severance agreement (the “Agreement”). Shively alleged that ACI and affiliates failed to purchase Shively’s equity interests in ACI pursuant to the Agreement. The defendants moved to dismiss the action for lack of personal jurisdiction, contending that they lacked minimum contracts with North Carolina such that the Court’s exercise of personal jurisdiction would offend due process.

The ACI defendants are Delaware entities with their principal places of business in Colorado and Shively is a North Carolina resident. The parties’ contractual relationship was a critical factor in the Court’s analysis regarding whether ACI purposefully availed itself of the State. ACI offered a severance agreement to a known North Carolina resident, such severance agreement was accepted in North Carolina, and such North Carolina resident performed required consulting services in North Carolina. Although some factors weighed against the exercise of personal jurisdiction, and notwithstanding the Agreement’s Delaware choice of law provision, the Court concluded that defendants had sufficient minimum contacts with this State to support personal jurisdiction. This opinion has since been cited by two other Business Court judges for the proposition that personal jurisdiction will be extended where the defendant willingly instigated and entered into an agreement with a North Carolina individual (or entity) when the defendant knew the agreement would be performed within North Carolina.^[103]

rFactr, Inc. v. McDowell^[104] (Defamation claims at summary judgment). This case concerns a dispute among rFactr, Inc., a technology company (“rFactr”), rFactr executives Richard Brasser (“Richard”) and Greg Gentner (“Greg”), and former investor Chris McDowell (“Chris”). rFactr, Richard, and Greg sued Chris and his wife Caroline McDowell (“Caroline” and collectively, the “McDowells”) for defamation, alleging that Caroline told a potential client of rFactr that Richard and Greg were under criminal investigation. During a stay in the litigation due to criminal charges against Richard and Greg, Richard and his wife Megan Brasser (“Megan,” and collectively, the “Brassers”) created online fundraisers, videos, and social media posts. Megan posted numerous videos alleging that the McDowells were plotting to bring about personal, financial, and physical harm to the Brassers. The McDowells filed counterclaims against the Brassers for defamation per se and subsequently moved for summary judgment on the same.

At summary judgment, the Court emphasized that for statements to be defamatory per se, such statements must be slanderous or libelous on their face, when stripped of all insinuations. A statement cannot be defamatory by implication. And, to recover for defamation, the allegedly false statements must be “of or concerning the plaintiff.” The Court considered each online post separately, rather than the aggregate effect of all posts taken together. In doing so, the Court emphasized that for defamatory words to be actionable, they must refer to some ascertained or ascertainable person, and such person must be the defamed plaintiff. If the words used contain no reflection on any ascertainable individual, no averment can make them defamatory.

Regarding one social media post, the Court held that such post, at best, revealed that the subject lived in “Richmond” and had some connection to Richard. From the perspective of an ordinary person, this information alone did not contain a reflection of any particular individual. A different post concerned a “Chris,” who was with his partner “up in Richmond,” an otherwise undescribed location. The Court determined that it could not, as a matter of law, determine that an ordinary reader would identify the McDowells in the context of the post, particularly because the name “Chris” is a fairly common name. Ultimately, the information provided in the Brassers’ videos and posts were descriptors, but the Court held that they did not include information sufficient to determine that the statements were “of or concerning” the McDowells. The Court therefore denied the motion for summary judgment with respect to all of the alleged defamatory statements.

State of N.C. v. E.I. Du Pont de Nemours & Co.^[105] (Subject matter jurisdiction and common law authority of the Attorney General). This case concerns the State of North Carolina’s (the “State”) allegation that defendants contaminated North Carolina’s land, air, and water with polyfluoroalkyl substances (PFAS). At issue in this decision is the defendants’ motion to dismiss for lack of subject-matter jurisdiction, predicated on the North Carolina General Assembly’s repeal of N.C.G.S. § 114-2(8)(a) in December 2024, several years after this case was filed.

The Court first determined that, prior to the repeal of N.C.G.S. § 114-2(8)(a), the statute conferred upon the Attorney General (“AG”) the authority to originate and maintain the action. In light of the repeal, the Court considered whether the AG has the common law authority to maintain the action. Based on the Court’s decision, which cited back to English common law, it appears well settled in the eyes of the Court that the AG has the power to prosecute all actions necessary for the protection and defense of the property and revenue of the people of North Carolina. North Carolina has a quasi-sovereign interest in its natural resources, which is a form of property interest. The Court determined that, under the common law, the AG had and continues to have the power to originate and maintain suits for the protection and defense of North Carolina’s natural resources. As a result, the repeal of § 114-2(8)(a) did not strip the AG of the authority to initiate the action, as the AG has common law authority to originate and maintain environmental actions such as this one.

Wilmington Trust, Nat. Ass’n v. TM Northlake Mall, L.P.^[106] (Receivership sale and objections). In this case, the appointed receiver, Spinoso Real Estate Group, DLS, LLC moved for approval to sell a shopping mall pursuant to N.C. Gen. Stat. § 1-507.46. Spinoso took over management of the Northlake Mall in Charlotte in 2021, restoring tenancy at the mall and positioning it for sale. Spinoso eventually entered into a purchase agreement to sell the mall for $39 million, $5 million due upfront, no due diligence period, and closing to be completed within 10 days of court approval of the sale. Two parties objected to the sale: Ryan Investment Group, LLC, who claimed Spinoso failed to advertise the sale adequately and undervalued the property, and the Estate of Amari Spencer, who also claimed Spinoso undervalued the property, meaning there would not be sufficient assets to compensate them if they succeed in their pending premises liability lawsuit arising out of a shooting at the mall in 2022.

Because the North Carolina receivership statute is silent as to the standard courts should apply when deciding whether to approve a proposed sale of receivership property, and there was no applicable North Carolina case law on the subject, the court looked to federal bankruptcy law for guidance, using the “business judgment test” used by bankruptcy courts. This test assesses only whether the trustee’s judgment was reasonable and whether a sound business justification exists supporting the sale and its terms. The court found that the proposed sale was reasonable and justified. The court noted that Spinoso had worked with a marketing company and provided notice to 11,000 interested purchasers. Likewise, the court found the sale price to be reasonable, given the current declining demand and sale prices for shopping malls. Both the primary secured creditor and the debtor also endorsed the sale, believing the price to be fair. Finally, the court concluded that because the Estate’s claims for damages in its lawsuit were over ten times the sale price, there was little realistic chance that any sale would occur that would be able to satisfy all the secured and unsecured creditors. Therefore, there was no basis to stop the sale.

JT Russell & Sons, Inc. v. Russell^[107] (Survival of derivative claims after inquiry by court-appointed panel, claim for removal of directors, and motion to strike). The Court addressed intra-family shareholder disputes within a closely held corporation and clarified the role of a court-appointed special litigation panel (“SLP”) under N.C.G.S. § 55-7-44. After a shareholder asserted derivative counterclaims alleging fiduciary breaches and misuse of corporate assets, the corporation invoked an SLP process. The Court held that where an independent panel conducts a reasonable, good-faith inquiry and determines that pursuing derivative claims is not in the corporation’s best interest, dismissal is mandatory. Applying that framework, the Court found the panel’s investigation—supported by document review, witness interviews, and independent counsel—was sufficiently thorough and its conclusions well-founded, and therefore dismissed the derivative claims with prejudice.

The Court, however, drew a sharp distinction between derivative claims and direct claims. It denied the motion to dismiss the shareholder’s claim for judicial removal of directors under N.C.G.S. § 55-8-09, emphasizing that such claims are evaluated solely on the pleadings at the Rule 12(b)(6) stage. Allegations that directors unlawfully amended bylaws, seized control of the board, and engaged in self-dealing were sufficient to state a claim for this “extraordinary remedy,” even if those allegations overlapped with issues considered by the SLP. Notably, the court refused to consider the panel’s report in assessing the direct claim, underscoring the procedural divide between SLP-based dismissal and traditional pleading standards.

Finally, the Court denied the corporation’s motion to strike large portions of the pleading, reiterating the disfavored nature of Rule 12(f) motions and the broad relevance standard. The decision highlights both the strength of the SLP mechanism in terminating derivative litigation and its limits: while an SLP can effectively foreclose derivative claims, it does not insulate directors from direct claims based on alleged misconduct or corporate governance violations.

Hart v. First Oak Wealth Mgmt., LLC^[108] (Securities law; statute of limitations; fraud; constructive fraud; conspiracy). Between 2009 and 2014, Plaintiff Stephen Hart, an accredited investor under Regulation D of the Securities Act of 1933, invested in several private offerings through DMW Advisors, LLC, working with Defendants Joseph Davis III and Airis Abolins. In several of these transactions Davis was either on the board of directors or in management of the companies in which DMW was investing Hart’s money. By 2014, Hart informed Davis and Abolins that he wanted to pursue a more conservative investment strategy and did not want to invest in private offerings any longer. By 2017, multiple lawsuits had begun to be filed against Davis and DMW, alleging fraud arising out of their investments. Davis also became the target of multiple investigations by regulators. That year, Abolins formed First Oak Wealth Management, LLC with another advisor. First Oak purchased DMW’s public accounts but left all private holdings, including Hart’s, with DMW. Davis informed Hart via email that First Oak had purchased DMW’s accounts and that Hart’s account would transfer to First Oak unless he affirmatively opted out. However, Davis did not clarify that First Oak would not be transferring any private investments. In April 2018, after Hart inquired with Abolins about his private investments, Abolins informed Hart that they had not been transferred to First Oak. Ultimately, Hart did not confirm the whereabouts of his private accounts until he spoke with Davis in January 2019. Meanwhile, First Oak itself came under federal and state investigation for its association and representations to clients regarding its relationship with Davis.

Hart filed suit in October 2021 against First Oak, Davis, and Abolins, alleging common law fraud, constructive fraud, negligent misrepresentation, violations of the North Carolina Investment Advisers Act, and civil conspiracy. Hart claimed that the defendants’ private investments were contrary to his express desire for a more conservative investment strategy. The defendants moved for summary judgment on statute of limitations grounds. The Court granted the defendants’ motions with respect to the fraud, negligent misrepresentations, and Investment Advisers Act claims. The Court concluded that “obvious red flags” had appeared even before First Oak was formed, causing the limitations period to begin running well before 2017. The Court explained that Hart failed to take any further action despite: Davis’s obvious conflicts of interest; several of Hart’s investments being risky and worthless; multiple public lawsuits and investigations into Davis; and Hart learning no later than April 2018 that his private investments were not with First Oak. Thus, Hart’s claims were barred by the applicable 3-year statute of limitations.

However, the Court denied summary judgment with respect to the constructive fraud claim, which in North Carolina has a 10-year limitations period. With constructive fraud, a plaintiff is entitled to rely on the fiduciary’s duty to disclose the truth when deciding whether to conduct his own inquiry. The Court concluded that the defendants were fiduciaries and that a jury could find that the defendants had deterred Hart from suspecting or investigating the alleged fraudulent conduct at issue. Thus, the date the statute of limitations began to run was a question for the jury. The Court also concluded that a jury could find that the defendants worked together to keep Hart from learning the truth about his investments. Thus, the civil conspiracy claim survived as well.

CRH Eastern, LLC v. Berastain^[109] (Rule 12(b)(6) motion to dismiss claims arising from employee departures and competition). This case arose from the plaintiff’s allegations that former executives and employees formed a competing company after leaving the plaintiff, deleted information from the plaintiff’s project-management platform, and used the plaintiff’s confidential information to compete. Certain defendants moved to dismiss under Rule 12(b)(6).

The Court allowed a tortious interference claim against the competing company to proceed based on allegations that it knowingly induced the former executives to violate restrictive covenants, but dismissed tortious interference claims based on customer, vendor, and subcontractor relationships because the complaint failed to identify specific contracts or business opportunities lost as a result of the alleged conduct. The Court held that allegations concerning customer lists and subcontractor/vendor lists, together with detailed information associated with those relationships, identified the plaintiff’s alleged trade secrets with sufficient particularity. The Court, however, dismissed the plaintiff’s trade secret misappropriation claim to the extent that it was based on a generalized category of “business operation information,” concluding that those allegations were too vague to identify a trade secret. The Court further held that allegations that a former employee had access to the plaintiff’s trade secrets and used them while working for the competing company were sufficient to support trade secret misappropriation claims against the competing company, the former employee, and the entity that later acquired the competing company.

The Court denied dismissal of a claim under North Carolina’s computer trespass statute based on allegations that the former employees had deleted jobs from the project-management platform, copied company data, and returned company-issued laptops that had been damaged, encrypted, or wiped. The Court further reasoned that the statute did not foreclose the possibility of vicarious liability because the competing company allegedly profited from the computer trespass.

Tanger Props. Ltd. P’ship v. Ace American Ins. Co.^[110] (Choice of law regarding interpretation of insurance contract and UDTPA). The Court denied insurers’ motion to dismiss in a COVID-19 business interruption coverage dispute, allowing all claims to proceed past the pleading stage. The case centers on whether “all-risk” commercial property policies cover pandemic-related losses suffered by Tanger Properties, a North Carolina–based operator of outlet centers nationwide. A key issue was choice of law: although the insurers argued that another state’s law should apply under lex loci contractus, the Court held that N.C.G.S. § 58-3-1 required application of North Carolina law due to a “close connection” between the state and the insured interests, emphasizing Tanger’s headquarters in North Carolina, in-state operations, and the insurers’ awareness of those ties.

Applying North Carolina law—significant because North Carolina is uniquely favorable to insureds on pandemic coverage—the Court declined to dismiss the breach of contract and declaratory judgment claims. It also allowed the plaintiff’s UDTPA claim to proceed, rejecting the insurers’ argument that post-litigation conduct (i.e., failure to reconsider denial after the North Carolina Supreme Court’s decision in North State Deli) cannot form the basis of unfair claims practices. The Court noted the absence of controlling North Carolina authority on this issue and found it sufficient at the Rule 12(b)(6) stage that the plaintiff plausibly alleged statutory violations based on the insurers’ refusal to reevaluate coverage in light of intervening law.

Finally, the Court denied dismissal of the claim for breach of the implied covenant of good faith and fair dealing, addressing a nuanced limitations issue. Construing policy language in favor of the insured, the Court held that Florida’s longer statute of limitations potentially applied via a contractual provision, and that factual development was necessary to determine accrual. More broadly, the opinion underscores the continued viability of COVID-19 business interruption claims in North Carolina, particularly where choice-of-law principles permit application of its comparatively policyholder-friendly jurisprudence.

WP Church, LLC v. Whalen^[111] (Disqualifying counsel from jointly representing LLC and its sole manager in derivative action alleging self-dealing and misappropriation against sole manager). This order determined that a law firm may not simultaneously represent both an LLC and its sole manager in a derivative action alleging self-dealing and misappropriation of company funds against the manager. The complaint asserted that the manager diverted millions in company assets to affiliated businesses and personal expenses, creating a direct conflict between the company’s interests and the manager’s defense. The Court also relied on its prior preliminary injunction findings indicating a likelihood of conflicted transactions involving company assets and affiliated entities.

Applying Rules 1.7 and 1.13 of the North Carolina Rules of Professional Conduct, the Court concluded that dual representation is impermissible where derivative claims allege serious wrongdoing such as self-dealing and diversion of corporate assets. The Court rejected arguments premised on client consent and absence of direct adverse claims, finding no adequate evidence of informed waiver and noting that purportedly consenting parties were not sufficiently disinterested. The Court therefore disqualified the law firm from representing the company, struck filings made on its behalf, and permitted continued representation only of the manager.

Moore v. Brooks^[112] (Personal jurisdiction; legal services). In this case, the North Carolina Business Court examined personal jurisdiction in the context of an out-of-state attorney providing legal services to North Carolina residents. Scott Robinson, a resident and practicing attorney in Wyoming, performed legal services for Drue Moore, a North Carolina resident, from approximately 2009 to 2025, helping Moore set up several Wyoming LLCs, including Winthrop Intelligence, LLC. Robinson later became the manager and attorney of Winthrop, a position he held until January 2025. Robinson also drafted several trust documents for Moore and his family, received and forwarded property tax notices to Moore for his North Carolina residence, and received checks from Moore to pay several life insurance premiums. Robinson, however, never traveled to North Carolina. Robinson and Moore’s relationship deteriorated suddenly in 2024, after Robinson and Winthrop’s CFO, Robert Brooks, came to believe that Moore had been taking unauthorized distributions from Winthrop for several years, amounting to millions of dollars. Robinson and Brooks met with Moore in Arizona to discuss the matter and formulate a repayment plan for Moore. Robinson also gave Brooks broad authority to negotiate a return of the money to Winthrop with Moore. Brooks regularly communicated with Moore regarding these repayments, expressing his displeasure that Moore was not cooperating with the repayment plan. When negotiations failed, Robinson attempted (unsuccessfully) to transfer property from the various trusts to Winthrop. Eventually, after receiving an ultimatum from Brooks to transfer the property, Moore took his own life. Afterward, Robinson contacted his widow, Kelly Moore, telling her that her late husband had embezzled millions of dollars from Winthrop and had not cooperated with returning the money.

On March 7, 2025, Kelly Moore, on behalf of herself and Moore’s Estate, filed an amended complaint against Robinson, his law firm, and others, seeking, among other things, a declaratory judgment and damages for intentional infliction of emotional distress, conversion, unjust enrichment, and breach of fiduciary duty. Robinson and his firm moved for dismissal for lack of personal jurisdiction. The Court agreed that personal jurisdiction was lacking. The Court rejected a bright-line rule that an attorney-client relationship with a North Carolina resident subjects an out-of-state attorney to the jurisdiction of the North Carolina courts. Rather, the nature of the attorney-client relationship must be examined individually. Here, the Court focused on the fact that Robinson did not market his services towards North Carolina or solicit Moore. Instead, Moore had reached out to Robinson in Wyoming to set up the Wyoming LLCs and avail himself of Wyoming’s law. Additionally, any harm suffered by the North Carolina beneficiaries of the Moore trusts when Robinson attempted to transfer property out them was too attenuated to create sufficient minimum contacts. The Court also concluded that performing routine legal services, such as transmitting property tax and insurance bills to Moore for payment and filing annual reports with the North Carolina Secretary of State, did not rise to the level of purposeful availment of the forum for Robinson or his law firm, nor did Robinson’s single email to Kelly Moore after Moore’s death. Finally, the Court rejected the plaintiffs’ attempt to establish an agency relationship between Brooks and Robinson. Although Robinson had authorized Brooks to have wide latitude in negotiating with Moore, that authorization was on behalf of Winthrop and did not create an agency relationship between Brooks and Robinson individually. Ultimately, the plaintiffs failed to make a prima facie showing that jurisdiction existed with respect to Robinson, and their claims against him and his firm were dismissed.

Oak Grove Technologies, LLC v. Seventh Dimension, LLC^[113] (Rule 12(b)(6) motion to dismiss counterclaims and third-party claims arising from government subcontract dispute). The Court applied North Carolina’s notice-pleading standard to contract, tort, and statutory counterclaims and third-party claims arising from a government subcontracting dispute. It allowed certain breach of contract claims to proceed where the pleading identified specific contractual obligations and alleged concrete failures tied to those duties. The Court dismissed other breach theories that were pleaded in general terms without factual detail. It also allowed a limited declaratory judgment claim to proceed where there was a live dispute over whether a government-directed pricing reduction required a corresponding adjustment to subcontract rates, while dismissing requested duplicative declaratory relief tied to a separate contract interpretation theory that was already resolved through dismissal of the related breach claim.

The Court dismissed the fraud, fraudulent inducement, and negligent misrepresentation claims in full, reasoning that the counterclaimants failed to plead reasonable reliance or actionable misrepresentations in an arm’s-length relationship between sophisticated contracting parties. It held that statements about cooperation, partnership, or future performance were not actionable absent factual allegations showing that they were false when made or made with a present intent not to perform. The Court also dismissed most of the unfair and deceptive trade practices claim because it depended on dismissed tort theories and lacked independent factual support, allowing it to proceed only to the extent that it was based on separately pleaded defamation allegations against one third-party defendant.

§ 3.13. Rhode Island Superior Court Business Calendar

Soares v. Anon Prods.^[114] (Successor liability). The plaintiffs, Brian and Susan Soares, asserted claims of liability for mesothelioma allegedly caused by asbestos-containing talc products, including Johnson & Johnson’s baby powder. They alleged that Susan’s use of these products over decades led to her diagnosis of malignant pleural mesothelioma in 2023. The defendants, subsidiaries of Johnson & Johnson, sought dismissal of the claims, arguing that Texas law, which limits successor liability, should apply due to the corporate restructuring under Texas law. However, the Rhode Island Superior Court denied the motion to dismiss, finding that Rhode Island law, which provides broader exceptions to the general rule against successor liability, should apply.

Under Rhode Island law, exceptions to the general rule against successor liability include the “mere continuation” and “de facto merger” theories. These theories allow for liability to transfer to a successor corporation if certain factors are met, such as continuity of management, shareholders, and business operations, or if the predecessor corporation ceases operations and the successor assumes its obligations. The court noted that Rhode Island’s interest in providing remedies for injuries and wrongs, as enshrined in its constitution, outweighed Texas’s interest in this case. Additionally, the court found that the plaintiffs had adequately alleged fraudulent transfers of assets among Johnson & Johnson subsidiaries to hinder or delay talc-related litigation, which could also establish successor liability under both Rhode Island and Texas law.

The court emphasized that even if Texas law were applied, the plaintiffs’ claims would not necessarily fail, as Texas law also recognizes an exception for fraudulent transfers intended to escape liability. The court concluded that the plaintiffs had sufficiently pled facts to support their claims under Rhode Island law, and the motion to dismiss was denied as to the remaining defendants.

Karten v. Proclamation Ales, LLC.^[115] (Membership interest agreement, breach of fiduciary duty). Karten and Witham formed Proclamation Ales LLC in 2013. In 2016 they executed a Membership Interest Agreement and Operating Agreement. In 2020, Witham terminated Karten as manager because Karten had engaged in improper financial management, including an undocumented loan scheme. A new Operating Agreement was executed in November of 2020 without Karten’s involvement. Witham passed away in December of 2020.

The Plaintiff, Karten, filed an Amended Verified Complaint against Proclamation Ales and Ms. Witham, the Executrix of the Estate of David Witham following a business dispute between Karten and Mr. Witham during their joint management of Proclamation Ales for breach of fiduciary duty, breach of contract, affirmative injunctive relief, declaratory relief, specific performance, breach of membership interest agreement, and breach of operating agreement. The claim against the Estate was for breach of the membership interest agreement and breach of the operating agreement.

The court held that the 2016 Membership Interest Agreement remained valid and binding on the parties because no written modification was signed by all parties as required. Additionally, the court held that the 2020 Operating Agreement was valid and enforceable because it was properly ratified by majority vote after Mr. Witham granted power of attorney. However, the court also decided that Witham breached his fiduciary duty to Mr. Karten by terminating him without legitimate business purpose, and Karten breached his fiduciary duty to Proclamation Ales through improper financial management and comingling of funds which put Proclamation Ales at risk. Furthermore, the court found that Karten committed an event of dissociation in June of 2017 by failing to perform his managerial duties in good faith. Therefore, the court determined that Karten’s membership interest was converted to non-member economic units as of January 2020 and that Proclamation must redeem Karten’s non-member economic units and Witham’s 68.5% membership interest. The court scheduled a further hearing to determine the valuation of membership interests for redemption.

State of R.I. v. AECOM Tech. Servs.^[116] (Breach of contract, breach of fiduciary duty). The State of Rhode Island brought claims against AECOM Technical Services, Inc. and other defendants related to the emergency closure of the Washington Bridge on December 11, 2023. The State alleged breach of contract, negligence, breach of fiduciary duty, and sought indemnity and declaratory relief. The closure was necessitated by structural failures, including tie-down rod failures and widespread deterioration of the post-tensioning system, which rendered the bridge irreparable and required its demolition and replacement.

Regarding the breach of contract claims, the State alleged that AECOM and other defendants failed to adequately perform inspections and design services under various contracts, including a 2014 contract with AECOM. The Court found that the State sufficiently alleged that AECOM’s inadequate performance may have contributed to the bridge’s deterioration and emergency closure. At the motion to dismiss stage, the Court determined that the State’s claims were plausible, even though the State did not identify a specific contractual provision breached by AECOM. The allegations provided sufficient notice of the breach of contract claims to survive dismissal.

On the breach of fiduciary duty claim, the State argued that AECOM assumed fiduciary duties by holding itself out as a trusted expert in engineering and by the State’s reliance on AECOM’s expertise. The Court found that the State sufficiently alleged a relationship of trust and confidence, which could conceivably create a fiduciary duty. This claim also survived the motion to dismiss.

The State’s indemnity claim, however, was deemed not ripe for judicial review. The indemnity provision in question applied only to third-party claims, and the State failed to allege any actual or imminent third-party liability. The Court noted that under Rhode Island law, an indemnity claim does not arise until the indemnitee’s liability is fixed by judgment or settlement, which had not occurred in this case.

Ponte v. Independence Bank^[117] (Liability/damages limitation clause). Plaintiffs GBC and Ponte entered agreements with Independence Bank (IB) to act as loan originators for IB’s SBA Loan Program from 2015-2019. IB allegedly concealed from plaintiffs that it was being cited by regulators for noncompliance with SBA and FDIC regulations. Plaintiffs alleged IB and individual defendants made misrepresentations about the program’s compliance status. Plaintiffs learned in 2022 that they were targets of an FDIC investigation related to the SBA Loan Program.

The court held that the liability/damages limitation clause in the contract between the parties could be unenforceable due to public policy concerns, given the allegations of fraud and concealment. The individual defendants RAC, RSC, and Marshall may be personally liable for actions beyond the scope of their employment, but Faris, Bain, and Andrew were dismissed from personal liability claims. The claims for breach of contract, fraud, misrepresentation, and civil conspiracy were sufficiently pled to survive the motion to dismiss. However, the claims for tortious interference with contract, tortious interference with prospective business advantage, negligence, and RICO violations were dismissed for failure to state a claim.

The court granted in part and denied in part the defendants’ motions to dismiss. Counts I, II, III, and VI survive. Counts IV, V, VII, and VIII were dismissed. The individual defendants Bain, Faris, and Andrew were dismissed from personal liability claims.

§ 3.14. Texas Business Court

Applying the Business Court’s Amount in Controversy Jurisdictional Requirement.

In the first Business Court opinion of 2025, C Ten 31 v. Tarbox,^[118] (C Ten) rendered January 3, 2025, Judge Andrews of the Third Division clarified a number of important issues of first impression relative to how parties are to establish, or successfully contest, the court’s jurisdiction at the commencement of a case based upon satisfaction of the requisite “amount in controversy” and related procedural matters.^[119] Key holdings include:

• The Business Court statute’s references to the “amount in controversy” in Texas Gov’t Code Section 25A.004 are requirements for the court’s jurisdiction to the same extent as are the statute’s descriptions of specific causes of action.^[120]
• The amount in controversy requirement applies at the level of the “action” being litigated, including all “claims” that are before the court, not as a per-claim minimum.
• The removal provisions of the Business Court’s authorizing statute, Texas Gov’t Code Secs. 25A.004(f),(g) and .006, anticipate that removal of an action from a district court to the Business Court will remove the entire action to the Business Court, including individual claims included in the action over which the Business Court does not have subject matter jurisdiction.^[121] Those claims will at some future point early in the case have to be dismissed by the Business Court, severed into a separate case remanded or transferred to a district court, or made subject to the Business Court’s jurisdiction as supplemental claims by agreement of the parties and the Business Court judge. Until that resolution occurs the Business Court has authority to take over management of the entire lawsuit, including hearing procedural matters scheduled by the district court where the case originated.^[122]
• The Business Court’s jurisdiction in injunctive and other equitable actions, set forth in Texas Gov’t Code Sec. 25A.004(e)^[123], which does not itself reference any amount in controversy, by relying upon references to Texas Gov’t Code Sec. 25A.004(b) and (d), incorporates their amount in controversy jurisdictional requirements, and, in the case of Texas Gov’t Code Sec. 25A.004(c), incorporates its exemption of publicly traded companies from the amount in controversy requirement of Texas Gov’t Code Sec. 25A.004(b).
• The court relies upon a considerable body of Texas court decisions addressing the application of statutory amount in controversy requirements to confirm, in the case of the injunctive and equitable actions described above, that the applicable amount in controversy requirement is met by the value of the rights being litigated.^[124] This same principle is applied to the construction of the defendant’s assertions in the notice of removal, which is treated as part and parcel with the parties’ pleadings in petitions and answers. The court further held that the removing defendant had no obligation to file jurisdictional evidence with the notice of removal and could rely upon subsequent filings and evidence presented at a hearing before the court if the notice of removal is contested.^[125]
• A party contesting the Business Court’s jurisdiction (in this case the plaintiff in a district court case removed to the Business Court by the defendant, who pled in the notice of removal that the amount in controversy exceeded the Business Court’s amount in controversy requirement, without specifying an amount) bears the initial burden of showing that the amount pled by the removing defendant (or implied by the general assertion of adequacy in the defendant’s notice of removal) is fraudulent or that a different amount less than the jurisdictionally required amount (here $5 million) can be readily established. If the plaintiff provides such evidence, the burden shifts to the removing defendant to raise a fact issue (i.e., providing more than a scintilla of evidence) regarding the amount in controversy, relying on the same framework that governs pleas to the jurisdiction in Texas courts.
• The opinion relies upon the Texas policy of construing pleadings liberally in favor of jurisdiction, and contrasts the approach to this issue by federal courts. The opinion notes that the Texas Supreme Court has consistently declined to require a party to marshal its evidence or prove its claims in order to survive early jurisdictional challenges of this nature. In contrast, federal courts require parties facing a jurisdictional challenge at the outset of a case to meet the same evidentiary burden they would have to satisfy at trial—proof by a preponderance of evidence of the amount in controversy. This distinction reflects that moving a case between the Business Court and a Texas district court is in effect an administrative determination of where a case would most efficiently be heard within a single court system, compared to the complete loss of authority that will occur if a federal court loses its diversity jurisdiction.

The C Ten decision was cited and relied upon by a number of other Business Court judges during the course of 2025.^[126] Under Texas law, the decisions of a Business Court judge, like the decisions of other Texas trial court judges, do not create any precedent binding upon that or any other judge in any other proceeding. The Business Court judges are known to confer regularly regarding legal and procedural questions they are addressing and have to date taken consistent positions on issues before their courts.^[127] This reflects the Texas Legislature’s intent that the court develop a consistent and predictable body of procedural and substantive jurisprudence to support the efficient execution of business and resolution of business disputes across the state.

Determining the “Consideration” and “Amount in Controversy” Applicable to Business Court Jurisdiction in Litigation Arising Out of a Qualified Transaction.

In Atlas IDF, LP v. Nexpoint Real Estate Partners LLC,^[128] Judge Whitehill of the First Division addressed a number of fine points of law necessary to the interpretation of the Business Court’s jurisdiction to hear a dispute arising out of a series of issuances, purchases and sales of due-on-demand promissory notes asserted by the plaintiff, and denied by a defendant seeking to defeat Business Court jurisdiction, to constitute a “qualified transaction”^[129] subject to the Business Court’s jurisdiction provided by Sec. 25A.004(d), Texas Gov’t Code: “The business court has civil jurisdiction concurrent with district courts in the following actions in which the amount in controversy exceeds $5 million, excluding interest, statutory damages, exemplary damages, penalties, attorney’s fees, and court costs (emphasis added): (1) an action arising out of a qualified transaction; . . . .” The court’s holdings include:

• Based on the language of the “qualified transaction” definition, whether the qualified transaction definition is satisfied is to be determined based on the value of the consideration exchanged, or contemplated by the parties’ agreement to be exchanged, as of the time when the transaction occurred.
• The “amount in controversy,” on the other hand, is to be determined based on the facts existing when the suit is filed, and includes both direct claims and counterclaims.
• The opinion acknowledges that the principal amount of the demand notes as of the dates of the applicable transactions was below the statutory amount in controversy requirement, and the expected amount of future accrued interest at the time of issuance of the notes was unknown and unknowable. However, the plaintiff had pled that the value it was suing for was in excess of the Business Court’s minimum jurisdictional amount. The court’s analysis of the pleadings supported that the amount in controversy might exceed the applicable statutory minimum. Based on the above, the court accepted that (i) the parties could have reasonably placed a value on the notes in excess of their face amount at the time of the transaction sufficient to satisfy the definitional requirement for a “qualified transaction” and (ii) the amount being sued for by the plaintiff could reasonably be expected to exceed the applicable amount in controversy requirement.
• The defendant having provided no contrary evidence to support a lower consideration value for the promissory notes, the plaintiff’s allegations were accepted as adequate to support the existence of a “qualified transaction.”
• The defendant asserted that Sec. 25A.004(d)’s exclusion of “interest” in the list of claims that are not to be considered in establishing the amount in controversy—“excluding interest, statutory damages, exemplary damages, penalties, attorney’s fees, and court costs . . . .” (emphasis added) did not mean that the plaintiff could not include a negotiated amount of contractually accrued interest on the promissory notes being sued upon. Judge Whitehill interpreted the reference to interest to mean, like the other items in the list, non-negotiable statutory amounts that might be collectable as a matter of law.

The 30-Day Period to Remove an Action to Business Court Does Not Commence Until Claims are Filed Against the Removing Party.

In SafeLease Insurance Services LLC, v. Storeable, Inc.^[130] Judge Andrews of the Third Business Court Division confirmed that the 30-day period allowed for removal of an action to the Business Court by Texas Gov’t Code Sec. 25A.006(f)(1)^[131] does not begin running until the action has been filed, rejecting the defendant’s assertion that the 30-day deadline begins running when a party has knowledge of facts that support claims that fall within the Business Court’s jurisdiction. The opinion notes conundrums that would result from the defendant’s position, such as the possibility that a defendant with knowledge that removal jurisdiction existed would be blocked from removing the case if the plaintiff delayed filing the case by more than 30 days. The case also points up an interesting feature of the Texas statute, which allows a plaintiff that has elected to file suit in a Texas district court to later remove the case to the Business Court.

The issues raised by SafeLease were sufficiently concerning to the 2025 Texas Legislature that it amended Sec. 25A.006(f)(1)^[132] to definitively resolve the issue (amendments italicized):

(f) If all parties to the action have not agreed to remove the action, the notice of removal must be filed: (1) not later than the 30th day after the later of:

(A) the date the party requesting removal of the action was served with process in accordance with rules adopted by the supreme court; or

(B) the date the party requesting removal of the action discovered, or reasonably should have discovered, facts establishing the business court’s jurisdiction over the action; . . . .

First Completed Business Court Trials—Filing to Judgment in Eight Months.

The Business Court’s judges generally seek to obtain the parties’ commitment to a trial date within 18 months of the commencement of a proceeding, a time period not reached by any Business Court cases during 2025 given its September 1, 2024, starting date, after which only newly filed cases would be accepted by the court. That being said, two cases were moved along with unusual dispatch by the parties and the judges, allowing bench trials and judgments on the merits during 2025: Primexx Energy Opportunity Fund II, LP, v. Primexx Energy Corporation (Primexx) in the First Division^[133] and Marathon Oil Co. v. Mercuria Energy America, LLC (Marathon) in the Eleventh Division.^[134] In each case the judge made use of Texas Rule of Civil Procedure 166(g) in connection with the development of the case’s Scheduling Order to identify issues of law that would be briefed by the parties and argued to the court early in the case to accelerate and increase the efficiency of the proceeding:

In an appropriate action, to assist in the disposition of the case without undue expense or burden to the parties, the court may in its discretion direct the attorneys for the parties and the parties or their duly authorized agents to appear before it for a conference to consider: . . . (g) The identification of legal matters to be ruled on or decided by the court; . . . .^[135]

While Rule 166 is reported to be seldom used in this way in Texas trial courts, it shows good promise of becoming a regularly used tool by the Business Court that can support early resolution of cases through settlement or adjudication and reduction of costs by avoiding discovery and trial preparation in areas no longer relevant to the proceeding.

The opinions in these cases provide instructive reading for business lawyers negotiating and drafting Texas law agreements as well as for trial lawyers litigating those agreements. They amply demonstrate the benefits of having complex business disputes decided by specialized judges who support their decisions with written opinions. The cases also demonstrate the willingness of the Business Court’s judges to take innovative approaches that improve the efficiency of the trial process.

Primexx.^[136] The plaintiffs in Primexx were two limited partners suing a private equity limited partnership’s controlling and managing partners over their exercise of a drag-along sale right on terms the limited partners believed had violated duties owed to them under the Texas Business Organizations Code (TBOC), Texas common law and the partnership agreement, producing a grossly inadequate sale price. The agreement at issue included terms limiting specified partner duties to the maximum extent permitted by the TBOC, and giving the defendant controlling and managing partners significant latitude to act based upon their sole interests, specifically when exercising their drag-along sale rights in circumstances where, as in this case, the sale occurred more than two years after the partnership’s formation.^[137]

This case followed an interesting path to the Business Court. Following two earlier false starts, successively in Texas and federal courts, the third predecessor lawsuit to this proceeding had again been filed in Texas state court on July 31, 2023. On September 1, 2024, the case was pending in the 298th Judicial District Court in Dallas County. The enthusiasm of the parties over the Business Court’s opening on September 1, 2024, led them to remove the action to the Business Court’s First Division, by agreement of the parties, on September 27, 2024. After being made aware that the Business Court could not accept removals of pending cases that had commenced prior to September 1, 2024, the 2023 state district court case was nonsuited. Following that, again by agreement of the parties, the action was refiled as a new proceeding in the Business Court’s First Division on October 25, 2024, where it proceeded to final judgement on June 16, 2025.

Judge Whitehill’s three opinions on the merits address in detail the nature and scope of partners’ statutory and common law duties and their obligations to perform them in good faith and in the best interest of the partnership. The opinions highlight the extent to which freedom of contract principles (described as a “sacred right”) are embedded in Texas law, particularly in the case of agreements made by sophisticated parties represented by counsel.^[138] The opinions review in detail each action of the defendants that plaintiffs assert to constitute “bad faith,” finding none that clearly fit into the factual situations supporting the mainstream of Texas partnership breach of duty cases.

These principles are then analyzed in the specific context of the exercise of detailed, heavily negotiated contractual drag-along rights to force the sale of the partners’ investments at a time and upon terms of the defendants’ choosing. The opinion observes that such agreements are well understood by sophisticated business parties to entail the risk of being exercised in the context of material conflicts of interest among the parties to the partnership agreement. The court notes the absence of any prior Texas judicial decisions applying the law of partners’ duties to the specific context of an exercise of drag-along sale rights.

Ultimately, Judge Whitehill saw the plaintiffs’ arguments as an attempt to make use of general, conclusory assertions of “bad faith” based on a bad business result to rewrite the relevant language of the partnership agreement, with which the defendants were found to have fully complied, in ways that the plaintiffs could have, and should have, negotiated for when the agreement was drafted. In the context of experienced parties with expert counsel negotiating this type of complex agreement, when Texas principles of freedom of contract as applied to sophisticated parties are also considered, Judge Whitehill found there was no basis in Texas law or the evidence produced that would support the court doing anything other than enforcing the agreement as written, denying the plaintiffs’ claimed right to recover damages.

Marathon. This case arose from a declaration of force majeure by Marathon as it became unable to perform under an agreement to sell and deliver natural gas to Mercuria during “Winter Storm Uri” in February 2021. That event’s widespread freezing temperatures caused a severe power crisis in Texas as demand for electric power and natural gas peaked just as the freezing weather caused the widespread failure of natural gas infrastructure across the state. Businesses and millions of residents lost electricity, natural gas and water. More than 240 deaths were reported. The weather conditions resulted in widespread disruptions in the performance of contracts to deliver natural gas and electricity, and wide swings in the market prices for those resources, resulting in billions of dollars in losses and hundreds of lawsuits.

Marathon filed this action seeking declaratory relief under Texas Civil Practice and Remedies Code Sec. 37.001 on March 4, 2025, after Mercuria invoiced Marathon for more than $17 million dollars in asserted “cover damages” incurred as a result of Marathon’s failure to deliver to Mercuria agreed quantities of natural gas under the parties’ agreement after Marathon declared a force majeure event during Winter Storm Uri under the terms of the parties’ agreement.

The parties had entered their contract through a semi-automated system established by the natural gas industry to support ease of contracting by industry parties. The system relies upon a Base Contract for Sale and Purchase of Natural Gas, underlying principles of Texas contract law, particularly the Texas Business and Commerce Code, and incorporates related terms and methods for modifying the agreement to fit a specific transaction. The parties had communicated electronically and by telephone as the agreement was negotiated, exchanging confirmations as one of the final steps in the process. In hindsight, Mercuria asserted that the confirmations had conflicting terms and that its confirmation terms should prevail over Marathon’s, materially changing Marathon’s obligations.

Judge Andrews’ first opinion^[139] goes painstakingly through the technicalities of the contracting process and the parties’ communications to determine whether or not they had reached a common agreement with a single set of material, binding terms, such as whether Marathon’s duty to exercise reasonable efforts to perform the contract extended to obtaining alternative gas supplies after a force majeure event. Her opinion ultimately concludes that the agreement terms, including the two competing confirmations, when appropriately interpreted, did not conflict and were part of a single complete agreement that excused Marathon from any obligation to purchase gas at the best (exorbitant during the emergency) price available.

Her second opinion^[140] parses the agreement of the parties and Texas law of force majeure in detail on the way to concluding that Marathon was not obligated to acquire replacement gas, or compensate Mercuria for doing so, as a required “reasonable effort” to alleviate the adverse effect of the force majeure declaration on Mercuria, providing Marathon a partial summary judgment on that issue. The third opinion^[141] declines to take a firm position on the parties’ various damage theories due to inadequacy of legal argument and evidentiary support, other than to conclude that one theory advanced by Marathon was not available in the circumstances of the case.

The case proceeded to a bench trial on November 3, 2025, after which Judge Andrews rendered judgment for Marathon on its requested declaratory judgement that it owed nothing to Mercuria, and for Mercuria on Marathon’s claim for attorney’s fees.

§ 3.15. West Virginia Business Court Division

American Bituminous Power Partners, L.P. v. Employers’ Innovative Network, LLC et al.^[142] (Order granting dismissal for lack of personal jurisdiction). Originally filed in 2020, this matter concerned an allegedly wrongfully retained sum of more than $970,000 in payroll overpayments made under a services agreement between the parties. The plaintiff asserted claims for breach of contract, conversion, unjust enrichment, breach of fiduciary duty, breach of good faith and fair dealing, and civil conspiracy, and sought full repayment, contractual interest, punitive damages, attorneys’ fees, and other appropriate relief against the defendant and its two holding companies. On December 8, 2021, the defendant moved to dismiss the holding companies for lack of personal jurisdiction. In response, the plaintiff requested leave to conduct jurisdictional discovery to establish the holding companies’ minimum contacts, tortious conduct, and alter ego relationships.

The Business Court Division granted the defendants’ motion to dismiss on September 22, 2025, concluding that mere status as a holding company does not establish personal jurisdiction under the West Virginia long‑arm statute. In reaching its decision, the Court closely examined the relationships among the entities and found that, beyond bare ownership, neither holding company was a party to the underlying contract nor conducted business in West Virginia in a manner supporting the plaintiff’s claims. Additionally, four years of discovery failed to reveal any additional jurisdictional ties. Thus, the Court dismissed the holding companies from the action.

Alltranstek, LLC and Rescar Companies v. Axiall Corp.^[143] (Order denying motion to dismiss or stay complaint for declaratory judgment). This matter concerns a dispute over the interpretation of a settlement agreement that the defendant now seeks to use to recover certain litigation-related fees. The underlying facts involve an industrial incident that led to multiple lawsuits, and, ultimately, a global settlement between the parties.

On April 21, 2025, the defendant filed a combined motion asking the Business Court Division to either dismiss the plaintiffs’ declaratory judgment action or stay it in favor of ongoing proceedings in Pennsylvania. In support, the defendant argued that the Pennsylvania court was the appropriate forum, that the West Virginia court lacked a justiciable controversy, and that the request for declaratory relief was premature. The Business Court Division rejected each of those arguments. It held that the declaratory judgment complaint was sufficiently pled under West Virginia law; that a real, present controversy existed because the defendant expressly stated its intent to pursue attorneys’ fees despite the settlement; and that West Virginia courts have clear jurisdiction to interpret and enforce the settlement agreement, which did not exist when the Pennsylvania judgment was entered. The Court further found that the Pennsylvania remand is narrowly limited to identifying what portion of fees relate to third‑party defense—not to interpreting a later contract—and therefore does not preclude or supersede West Virginia’s authority. Finally, the Court concluded that issuing a declaration would meaningfully resolve the parties’ dispute and thus denied the motion to dismiss or stay in its entirety.

§ 3.16. Wyoming Chancery Court

Keystone Capital Partners, LLC v. Life Clips, Inc.^[144] (Receivership). This case summarizes Wyoming’s statutory grounds for appointing custodians or receivers for Wyoming corporations. Wyoming’s statute permits appointment of a receiver or custodian when the board is deadlocked or engaged in fraud. Wyo. Stat. § 17-16-748(a). Elaborating on the concept of corporate deadlock, the court explained that “corporate abandonment is not corporate deadlock.” Deadlock requires actual dissension, not mere inaction.

A separate Wyoming statute authorizes appointment of a receiver when a corporation has been dissolved, is insolvent, is in immediate danger of insolvency, has forfeited its corporate rights, or in any circumstance where courts of equity have appointed receivers. Wyo. Stat. § 1-33-101(a)(vii) and (viii). The chancery court added some color to each of these grounds.

Beginning with dissolution and corporate forfeiture, the court noted these grounds include administrative dissolution by the Wyoming Secretary of State for failure to deliver annual reports or pay annual license taxes.

Turning to insolvency, the court observed the term’s different meaning depending on context and the different tests for insolvency, noting the Wyoming Supreme Court had not offered recent guidance. The chancery court suggested that a Wyoming court would likely find insolvency when a corporation either has assets insufficient to cover liabilities without a reasonable prospect of successful continuation or is unable to meet maturing obligations as they fall due in the ordinary course of business. When evaluating insolvency, stock price is a data point, but only for stocks traded on open, efficient markets. As to imminent danger of insolvency, drawing on Wyoming caselaw, the court explained that the following can suggest imminent insolvency: risk of asset value depreciation, corporate abandonment, and lack of operational funds.

The court also discussed the catchall provision permitting receivership where equity courts have traditionally exercised that power, noting courts of equity appointed receivers in circumstances such as gross mismanagement, abandonment of corporate responsibilities, or a solvent corporation’s cessation of operations without any likelihood of resuming operations successfully. Whatever the grounds, the court reiterated that receivers must be appointed only when necessary and only to perform acts essential to accomplishing the receivership’s purpose.

Applying these principles, the court granted a request by a Delaware company and shareholder of the Wyoming corporation to appoint its CIO as custodian or receiver. The court grounded its decision to appoint a receiver for reinstatement purposes on the corporation’s administrative dissolution and further relied on the equitable catchall provision, citing the gross mismanagement and dereliction of duty by the corporation’s directors. Notably, the court declined to rest its decision on abandonment, reiterating that while the directors had abandoned the corporation, abandonment does not constitute deadlock. The court likewise declined to ground the appointment in insolvency because the record did not provide a clear picture of the corporation’s financial condition or the value of its assets.

Chagnon v. Nelson^[145] (Improper use of AI). Responding sua sponte to a motion to dismiss filed by pro se defendant Nelson, this order discerned a high likelihood of unchecked use of generative artificial intelligence and ordered Ms. Nelson to show cause why the case should not be dismissed. The motion raised hallucinated precedent of the Wyoming Chancery Court and, at 31 pages single spaced, presented no governing authority to support its numerous legal rules. While noting that the chancery court embraces new technology, the order highlighted that improper use of AI is sanctionable because it requires almost no effort of the drafter while tasking the court and opposing counsel with the arduous task of determining what points, if any, are valid under Wyoming law. Defendant Nelson did not file in response to the order, and the case was accordingly dismissed. See Chagnon v. Nelson, 2025, WYCH 9 (Wy. Ch. Ct. July 11, 2025).

1. For a more detailed discussion on what may be defined as a business court, see generally A.B.A. Bus. Law Section, The Business Courts Bench Book: Procedures and Best Practices in Business and Commercial Cases (Vanessa R. Tiradentes, et al., eds., 2019) [hereinafter Business Courts Bench Book]; Mitchell L. Bach & Lee Applebaum, A History of the Creation and Jurisdiction of Business Courts in the Last Decade, 60 Bus. Law. 147 (2004) [hereinafter Business Courts History]. ↑

2. For an overview of business courts in the United States, see, e.g., Business Courts Bench Book, supra note 1, Business Courts History, supra note 1, Lee Applebaum & Mitchell L. Bach, Business Courts in the United States: 20 Years of Innovation, in The Improvement of the Administration of Justice (Peter M. Koelling ed., 8th ed. 2016); Joseph R. Slights, III & Elizabeth A. Powers, Delaware Courts Continue to Excel in Business Litigation with the Success of the Complex Commercial Litigation Division of the Superior Court, 70 Bus. Law. 1039 (Fall 2015); John Coyle, Business Courts and Inter-State Competition, 53 Wm. & Mary L. Rev. 1915 (2012); The Honorable Ben F. Tennille, Lee Applebaum, & Anne Tucker Nees, Getting to Yes in Specialized Courts: The Unique Role of ADR in Business Court Cases, 11 Pepp. Disp. Resol. L. J. 35 (2010); Ann Tucker Nees, Making a Case for Business Courts: A Survey of and Proposed Framework to Evaluate Business Courts, 24 Ga. St. U. L. Rev. 477 (2007); Tim Dibble & Geoff Gallas, Best Practices in U.S. Business Courts, 19 Court Manager, no. 2, 2004, at 25. Further, the Business Courts chapter of this publication has provided details on developments in business courts every year since 2004. Finally, the Business Courts Blog went online in 2019, and serves as a library for past, present and future business court developments, www.businesscourtsblog.com (last visited May 27, 2026). ↑

3. Business Courts Bench Book, supra note 1, at xx. ↑

4. Business Courts History, supra note 1, at 207, 211. ↑

5. American College of Business Court Judges, https://masonlec.org/divisions/mason-judicial-education-program/american-college-business-court-judges/ (last visited May 27, 2026). ↑

6. See Meeting Agenda, Law & Econ. Ctr., https://masonlec.org/wp-content/uploads/2026/03/WordPress-Agenda-20th-ACBCJ-02.26.pdf (last visited May 27, 2026). ↑

7. Diversity Clerkship Program, ABA: Bus. Law Section, https://www.americanbar.org/groups/business_law/about/awards-initiatives/diversity/ (last visited May 27, 2026). ↑

8. Establishing Business Courts in Your State, https://communities.americanbar.org/topics/13510/media_center/file/0040887f-858d-41e9-a1a3-b1c1aa1c7440 (ABA login required) (last visited May 27, 2026). ↑

9. These materials are located on the Business Court Subcommittee’s Library web page, https://communities.americanbar.org/topics/13503/media_center/folder/8c312eb8-3c18-4feb-acba-bbce37a8ff97 (ABA login required) (last visited May 27, 2026). ↑

10. Business Court Representatives, ABA: Bus. Law Section, https://www.americanbar.org/groups/business_law/about/awards-initiatives/business-court-representatives/?login (ABA login required) (last visited May 27, 2026). ↑

11. Id. ↑

12. Business and Commercial Courts Training Curriculum, Nat’l Ctr. for State Courts, https://ncsc.contentdm.oclc.org/digital/collection/traffic/id/92/rec/9 (last visited May 27, 2026). ↑

13. Faculty Guide, Business and Commercial Litigation Courts Course Curriculum, Nat’l Ctr. for State Courts, https://ncsc.contentdm.oclc.org/digital/collection/traffic/id/91/rec/4 (last visited May 27, 2026). ↑

14. New business court docket curriculum developed for courts nationwide, State Justice Institute, https://www.sji.gov/new-business-court-docket-curriculum-developed-for-courts-nationwide/ (last visited May 27, 2026). ↑

15. www.businesscourtsblog.com. ↑

16. See, e.g., Business Court Studies and Reports 1994–2009, Bus. Courts Blog (Jan. 5, 2019), https://www.businesscourtsblog.com/business-court-studies-and-reports-2000-2009/?doing_wp_cron=1744055288.5445179939270019531250; Business Court Studies and Reports 2010–2018, Bus. Courts Blog (Jan. 5, 2019), https://www.businesscourtsblog.com/business-court-studies-and-reports-2010-2018/?doing_wp_cron=1744055459.3612639904022216796875; Business Court Studies and Reports 2019-2023, Bus. Courts Blog (May 30, 2023), https://www.businesscourtsblog.com/business-court-reports-and-studies-from-2019-to-present/?doing_wp_cron=1744055539.7395520210266113281250; https://www.businesscourtsblog.com/category/reports-and-studies/?doing_wp_cron=1744055619.9372909069061279296875. ↑

17. See, e.g., Business and Corporate Litigation Committee, Recent Developments in Business Courts 2025, ABA: Bus. Law Section (Sept. 3, 2025), https://businesslawtoday.org/2025/09/recent-developments-in-business-courts-2025/ (ABA login required); Ellen Bardash, A Look at the Wild West of Business Court Constitutionality, Litig. Daily (Dec. 4, 2025), https://www.law.com/litigationdaily/2025/12/04/a-look-at-the-wild-west-of-business-court-constitutionality/; Benjamin M. Burningham, Chancery: Focused, Fast, & Fair Business & Trust Dispute Resolution, The Coffee House, Fall 2025, at 24, https://www.wyocourts.gov/app/uploads/2025/01/CH_25_Fall_web.pdf; Benjamin M. Burningham & Benjamin Norman, From Tarheels to Cowboys: Pioneering Business Courts, Wyo. Law., June 2025, at 25, https://digitaleditions.walsworth.com/publication/?i=847508&p=24&view=issueViewer; Tom O’Brien et al., A Year in Review: Highlights from the Texas Business Court’s Inaugural Year, Tex. Law. (Sept. 25, 2025), https://www.law.com/texaslawyer/2025/09/25/a-year-in-review-highlights-from-the-texas-business-courts-inaugural-year/; Nick Brown, Legislature’s Expansion of the Business Court Proves Lone Star State’s Commitment to Commercial Justice, Tex. Lawbook (June 24, 2025), https://texaslawbook.net/legislatures-expansion-of-the-business-court-proves-lone-star-states-commitment-to-commercial-justice/; Report on North Carolina Business Court (Jan.–Dec. 2025), N.C. Jud. Branch (Feb. 2026), https://www.nccourts.gov/documents/publications/nc-business-court-reports. ↑

18. See, e.g., Delaware Corporate & Commercial Litigation Blog, http://www.delawarelitigation.com (last visited May 27, 2026); Mass Law Blog, http://www.masslawblog.com (last visited May 27, 2026); New York Business Divorce Blog, http://www.nybusinessdivorce.com (last visited May 27, 2026); New York Commercial Division Practice, https://www.nycomdiv.com (last visited May 27, 2026); Duane Morris Delaware Business Law Blog, http://blogs.duanemorris.com/delawarebusinesslaw/ (last visited May 27, 2026); Commercial Division Blog: Current Developments in the Commercial Division of the New York State Courts, https://www.schlamstone.com/blogs/commercial (last visited May 27, 2026); The North Carolina Business Litigation Report, https://ncbusinesslitigationreport.lexblogplatform.com/ (last visited May 27, 2026); It’s Just Business (North Carolina), https://itsjustbusiness.foxrothschild.com/ (last visited May 27, 2026); and the New York Commercial Division Roundup, https://www.newyorkcommercialdivroundup.com/ (last visited May 27, 2026). ↑

19. Ninth Judicial Circuit of Florida, Judicial Directory, Judge Chad K. Alvaro, https://ninthcircuit.org/judges/circuit/john-e-jordan (last visited May 28, 2026). ↑

20. Eleventh Judicial Circuit of Florida, Judicial Section Details, About the Court, Court Divisions, Civil, Complex Business Litigation, https://www.jud11.flcourts.org/About-the-Court/Ourt-Courts/Civil-Court/Complex-Business-Litigation (last visited May 28, 2026). ↑

21. Administrative Order No. 25-01, (11th Cir. Ct. Jan. 3, 2025) (Sayfie, CJ), https://www.jud11.flcourts.org/docs/1-25-01%20RE-ESTABLISHMENT%20OF%20THE%20PROCEDURES%20FOR%20CBL%20-%20CIRCUIT%20CIVIL%20COURT%20-%20SAYFIE-conformed.pdf (last visited May 28, 2026). ↑

22. Seventeenth Judicial Circuit of Florida, Circuit Civil Division, Judiciary, Carol-Lisa Phillips (26) Procedures (December 4, 2023), https://www.17th.flcourts.org/division-26/ (last visited May 28, 2026). ↑

23. Seventeenth Judicial Circuit of Florida, Judiciary, David A. Haimes https://www.17th.flcourts.org/2726-2/?smid=399 (last visited May 28, 2026). ↑

24. Chief Judge Jack Tuter to Retire from the Bench in May, https://news.flcourts.gov/All-Court-News/Chief-Judge-Announces-Retirement (last visited May 28, 2026). ↑

25. Thirteenth Judicial Circuit of Florida, Judicial Directory, Judge Darren D. Farfante, https://www.fljud13.org/JudicialDirectory/DarrenDFarfante.aspx (last visited May 8, 2026). ↑

26. Aug. 2025 Press Release, Ga. Statewide Business Court, https://assets.georgiacourts.gov/2/wp-content/uploads/2025/08/19110219/2025-07-31-Press-Release-GSBCs-5th-Anniversary.pdf. ↑

27. Judge Bill Hamrick and Staff Reflect on State-wide Business Court’s Fifth Anniversary, Ga Courts Journal (Aug. 25, 2025), https://georgiacourtsjournal.org/2025/08/25/judge-bill-hamrick-and-staff-reflect-on-state-wide-business-courts-fifth-anniversary. ↑

28. HB86, https://www.legis.ga.gov/legislation/69425. The appropriations bill adopted on April 4, 2025, includes line items for the salary enhancement, as well as targeted recruitment and retention initiatives for the Georgia State-wide Business Court. HB86, https://www.legis.ga.gov/api/document/docs/default-source/house-budget-and-research-office-document-library/2026-fiscal-year/fy_2026_house_and_senate_agreements_%28hb_68%29.pdf?sfvrsn=fa6cd291_. ↑

29. HB179, https://www.legis.ga.gov/legislation/69658. ↑

30. Iowa Judicial Branch, Supreme Court Orders, In the Matter of the Iowa Business Specialty Court: Order (Aug. 19, 2025), https://www.iowacourts.gov/collections/937/files/2068/embedDocument (last visited Mar. 16, 2026). ↑

31. Id. ↑

32. Iowa Judicial Branch, Supreme Court Orders, In the Matter of the Iowa Business Specialty Court: Amended Memorandum of Operation, § E (Aug. 19, 2025), https://www.iowacourts.gov/collections/937/files/2071/embedDocument (last visited Mar. 16, 2026). ↑

33. Id. ↑

34. Id. ↑

35. Iowa Judicial Branch, Supreme Court Orders, In the Matter of the Iowa Business Specialty Court: Amended Memorandum of Operation, § F(3) (Aug. 19, 2025), https://www.iowacourts.gov/collections/937/files/2071/embedDocument (last visited Mar. 16, 2026). ↑

36. Id. ↑

37. Mich. Comp. L. § 600.8031 et seq. ↑

38. Mich. Comp. L. § 600.8037(2). ↑

39. https://www.courts.michigan.gov/siteassets/rules-instructions-administrative-orders/proposed-and-recently-adopted-orders-on-admin-matters/recent-court-appointments/2025-01_2025-03-06_formor_assignbusct.pdf ↑

40. Gerard V. Mantese, of Mantese Honigman, PC, the co-chair of the Business Law Section’s LLCs and Partnerships Committee and current chair of the In-House Counsel Committee, organized, moderated, and presented at the program. A summary of that program is included in Toering, Mantese, and Klida, Touring the Business Courts: Succession Planning and Shareholder Litigation Program; Recent Developments Nationally and in Delaware and New York, 45 Mich. Bus. L. J. 12 (Summer 2025), https://higherlogicdownload.s3.amazonaws.com/MICHBAR/ebd9d274-5344-4c99-8e26-d13f998c7236/UploadedImages/pdfs/journal/Summer25.pdf#page=14. ↑

41. The Michigan Judicial Institute is responsible for training business court judges. Mich. Comp. L. § 600.8043. The MJI typically conducts two training sessions each year specifically for the business court judges. Business court judges typically attend other MJI events over the course of a year, some of which may be relevant to business disputes. Many Michigan business court judges also attend events sponsored by the American College of Business Court Judges. ↑

42. Toering and Williamson, Touring the Business Courts: Interviews with Judge James S. Jamo and Judge Carol Anne Kuhnke; Status of Business Court Judges Statewide, 44 Mich. Bus. L. J. 12 (Spring 2025), https://higherlogicdownload.s3.amazonaws.com/MICHBAR/ebd9d274-5344-4c99-8e26-d13f998c7236/UploadedImages/pdfs/journal/Spring25.pdf#page=14 ↑

43. Toering, Mantese, and Klida, Touring the Business Courts: Succession Planning and Shareholder Litigation Program; Recent Developments Nationally and in Delaware and New York, 45 Mich. Bus. L. J. 12 (Summer 2025), https://higherlogicdownload.s3.amazonaws.com/MICHBAR/ebd9d274-5344-4c99-8e26-d13f998c7236/UploadedImages/pdfs/journal/Summer25.pdf#page=14 ↑

44. Toering, Touring the Business Courts: Interview with Hon. Matthew W. Antkoviak; Recent Developments in Michigan and Nationally, 45 Mich. Bus. L. J. 10 (Fall 2025), https://higherlogicdownload.s3.amazonaws.com/MICHBAR/ebd9d274-5344-4c99-8e26-d13f998c7236/UploadedImages/pdfs/journal/Fall25.pdf#page=12 ↑

45. https://www.courts.michigan.gov/publications/statistics-and-reports/interactive-court-data-dashboard/. ↑

46. One of the authors of article, Douglas L. Toering, is responsible for the business courts blog. This was previously handled by Philadelphia attorney Lee Applebaum. ↑

47. H.B. 19, 88th Leg., Reg. Sess. (Tex. 2023) (https://www.legis.state.tx.us/tlodocs/88R/billtext/html/HB00019F.HTM) codified as Tex. Gov’t Code Ann. § 25A.001, et seq. The Business Court’s website can be found at https://www.txcourts.gov/businesscourt, which includes links to relevant statutes, all published opinions of the court, biographical details of the judges, applicable rules of procedure and administration, and the court’s first annual report (https://www.txcourts.gov/media/1461667/bcot-ar-fy-25.pdf). Full Business Court case records are available at https://research.txcourts.gov. It should be noted that most of the reported opinions of the Business Court do not include the terms of the court’s final judgment deciding the case, making it advisable to review both the opinion and the final judgment to obtain a complete statement of the result. The Business Court’s judges serve two year terms ending August 31 of even numbered years and are subject to reappointment by the Governor. A map of the Business Court’s divisions can be found at https://www.txcourts.gov/media/1461706/operational-map-divisions-as2-of-dec2025.png. ↑

48. S.B. 1045, 88th Leg., R.S. (Tex. 2023), codified in Tex. Gov’t Code Chapter 22, primarily Subsecs. 22.201(p), 22.2151, 22.216(n-1), (n-2) and 22.220(d) (https://statutes.capitol.texas.gov/Docs/GV/pdf/GV.22.pdf). The largest part of the 15th COA docket consists of cases where the State of Texas is a party or state constitutional issues are raised. ↑

49. Texas Gov’t Code Sec. 25A.007(a): “Notwithstanding any other law, and except in instances when the supreme court has concurrent or exclusive jurisdiction, the Fifteenth Court of Appeals has exclusive jurisdiction over an appeal from an order or judgment of the business court or an original proceeding related to an action or order of the business court.” The Fifteenth Court of Appeals also has exclusive jurisdiction over a list of cases in which the State of Texas is a party or the interests of the state are implicated, as set forth in Texas Gov’t Code Sec. 22.220. ↑

50. The 15th COA website can be found at https://www.txcourts.gov/15thcoa/, which includes access to the court’s full case records. ↑

51. Filings during the first four months of 2026 continued the gradual upward trend: January—28; February—23; March—30; April—39. 2026 has brought to the court an initial steady flow of bench and jury trials in cases filed in 2024 and 2025, generating a broadening base of experience and generally favorable reviews from the litigants. ↑

52. Business Court opinions can be found at https://www.txcourts.gov/businesscourt/opinions/ as well as on WestLaw and at South Western Reporter Third. ↑

53. https://www.txcourts.gov/media/1462507/tbc-local-rules-4126-with-signatures.pdf. ↑

54. H.B. 40, 89th Leg., Reg. Sess. (Tex. 2025) https://capitol.texas.gov/tlodocs/89R/billtext/pdf/HB00040F.pdf. ↑

55. See also Senate Bill 2411, Sec. 1 (https://capitol.texas.gov/tlodocs/89R/billtext/pdf/SB02411F.pdf), which amends Texas Business Organizations Code (TBOC), Subchapter B, Chapter 1, by adding a new Section 1.056, which reads as follows:

    Sec. 1.056. REFERENCES IN CODE TO CERTAIN DISTRICT COURTS INCLUDES BUSINESS COURTS. Notwithstanding any other law, a reference or grant of jurisdiction in this code, including a grant of exclusive jurisdiction, to a district court constitutes a reference or grant of concurrent jurisdiction to a business court established under Chapter 25A, Government Code, if the business court has authority and jurisdiction under Chapter 25A, Government Code, to adjudicate the action or claim. This section does not expand the authority of the business court under Chapter 25A, Government Code.

    This amendment was made to address the TBOC’s inclusion of dozens of references to Texas district courts having authority to hear and decide specific matters, in some cases describing the authority of the district court as “exclusive.” ↑

56. An example would be the Business Court’s Local Rule 2: “A party is deemed to agree to this Court’s supplemental jurisdiction of any claim, including a counterclaim, cross-claim, or third-party claim, unless that party moves to sever or otherwise objects within 30 days after the later of (1) the moving party’s appearance in this Court; or (2) the filing of the first pleading or removal notice containing fair notice of the claim.” ↑

57. As of the time this article was written the Texas Supreme Court had not published proposed rules in response to the two referenced rule-writing assignments made by the Texas Legislature in HB 40 (2025). ↑

58. This change was made by separate legislation passed in the Second Called Session of the 89th Texas Legislature. H.B. 16, 89th Leg., 2nd Called Sess. (Tex. 2025) https://capitol.texas.gov/tlodocs/892/billtext/pdf/HB00016F.pdf. ↑

59. S.B. 29, 89th Leg., Reg. Sess. (Tex. 2025) https://capitol.texas.gov/tlodocs/89R/billtext/pdf/SB00029F.pdf. ↑

60. In re Dallas County, Texas and Marian Brown, in her official capacity as Dallas County Sheriff, 697 S.W.3d 142 (Tex. 2024) (https://search.txcourts.gov/Case.aspx?cn=24-0426&coa=cossup). ↑

61. However, due to a quirk of Texas rules for codified statutes, such as Chapter 25A of the Texas Government Code that governs the Business Court (https://statutes.capitol.texas.gov/docviewer?docName=GV.25A.htm), provisions like Section 4(a) of HB 19 (2023) are considered “transitory” and appear only in the enrolled bill passed by the Texas Legislature (e.g. https://capitol.texas.gov/BillLookup/Text.aspx?LegSess=88R&Bill=HB19) and not in the codified statute, creating a very real possibility that they will be overlooked. ↑

62. Jordan v. Crudgington, 231 S.W.2d 641 (Tex. 1950). ↑

63. “District Court jurisdiction consists of exclusive, appellate, and original jurisdiction of all actions, proceedings, and remedies, except in cases where exclusive, appellate, or original jurisdiction may be conferred by this Constitution or other law on some other court, tribunal, or administrative body.” (emphasis added) ↑

64. Phillips, T., & Hilderbrand, M., Is the Texas Business Court Constitutional?, Tex. Lawyer (Oct 21, 2024). No articles in Texas legal publications or continuing education courses asserting the Business Court’s unconstitutionality have been noted by the author since the Business Court began receiving cases on September 1, 2024. ↑

65. No. 25-BC11B-059 (Tex. Bus. Ct., filed Sept. 18, 2025), removed from 215th District Court, Harris County, Texas (No. 2025-24769, filed Aug. 2, 2025). ↑

66. No. 25-BC11B-099 (Tex. Bus. Ct., filed Dec. 22, 2025), removed from 11th District Court, Harris County, Texas (No. 2025-89925, filed Nov. 26, 2025). ↑

67. No. CV 2024-016777, 2025 WL 2657283 (Ariz. Super. Ct. June 17, 2025). ↑

68. No. CV 2023-095731, 2025 WL 3080512 (Ariz. Super. Ct. Oct. 15, 2025). ↑

69. No. CV 2024-024924, 2025 WL 2657286 (Ariz. Super. Ct. May 13, 2025). ↑

70. 346 A.3d 639, 653 (Del. Super. Ct. 2025). ↑

71. 345 A.3d 997, 1032 (Del. Super. Ct. 2025), as revised (Oct. 1, 2025). ↑

72. 344 A.3d 1009 (Del. Super. Ct. 2025). ↑

73. Order Granting Defendant, Salvatore Orlando’s Motion to Dismiss Complaint, No. 2024-011079-CA-01 (Fla. 11th Jud. Cir. May 27, 2025) (Rebúll, J.). ↑

74. Id. at 7. ↑

75. 2025 WL 1797368 (Ga. Bus. Ct. June 18, 2025). ↑

76. 2025 WL 1313769 (Ga. Bus. Ct. April 14, 2025). ↑

77. 2025 WL 1313765 (Ga. Bus. Ct. April 22, 2025). ↑

78. No. CVCV027073 (Iowa Dist. Ct. Winneshiek Co. Mar. 17, 2025). ↑

79. No. TRPR053580 (Iowa Dist. Ct. Dubuque Co. Jan. 14, 2025). ↑

80. No. EQCE088372 (Iowa Dist. Ct. Polk Co. Mar. 7, 2025). ↑

81. No. BCD-CIV-2025-00016, 2025 WL 2880411 (Me. B.C.D. Aug. 28, 2025). ↑

82. No. 24-C-20-000591 (Cir. Ct. Balt. City Jan. 17, 2025) (Vittoria, J.). ↑

83. No. 24-C-23-003722 (Cir. Ct. Balt. City Jan. 21, 2025) (Vittoria, J.). ↑

84. No. C-15-CV-24-001529 (Cir. Ct. Montgomery Cnty. Feb. 25, 2025) (McGuckian, J.). ↑

85. No. 24-C-22-004264 (Cir. Ct. Balt. City May 14, 2025) (Carrión, J.). ↑

86. No. C-15-CV-25-000340 (Cir. Ct. Montgomery Cnty. Dec. 18, 2025) (McGuckian, J.). ↑

87. No. 24-205547-CB (Mich. Cir. Ct. Oakland Cnty. Bus. Ct. July 1, 2025) (Valentine, J.). ↑

88. No. 25-213486-CB (Oakland Cnty. Bus. Ct. Dec. 5, 2025) (Warren, J.). ↑

89. No. 24-003581-CB (Mich. Cir. Ct. Wayne Cnty. Jan. 29, 2026) (Ewell, J.). ↑

90. No. 2025-003280-CB (Mich. Cir. Ct., Macomb Cnty. Bus. Ct. Nov. 18, 2025) (Viviano, J.). ↑

91. No. 2025-002273-CB (Mich. Cir. Ct. Macomb Cnty. Sept. 22, 2025) (Viviano, J.). ↑

92. No. 25-20760-CBB (Mich. Cir. Ct. Kent Cnty. Oct. 16, 2025) (Benson, J.). ↑

93. 2025 N.H. Super. LEXIS 11 (Nov. 12, 2025). ↑

94. 2020 N.H. Super. LEXIS 21 (Oct. 15, 2020). ↑

95. 2025 NH 42, 2025 N.H. LEXIS 243 (Sept. 16, 2025). ↑

96. No. ESX-L-2657-25 (N.J. Super. Law Div., Complex Business Litigation Program, Nov. 26, 2025 (unpublished)). ↑

97. 86 Misc. 3d 1251(A) (N.Y. Sup. Ct. 2025). ↑

98. 2025 WL 1221104 (N.Y. Sup. Ct. Apr. 28, 2025). ↑

99. 85 Misc. 3d 1254(A) (N.Y. Sup. Ct. 2025). ↑

100. 87 Misc. 3d 1213(A) (N.Y. Sup. Ct. 2025). ↑

101. 85 Misc. 3d 1225(A) (N.Y. Sup. Ct. 2025). ↑

102. Case No. 25CV000500-890, 2025 NCBC 51 (Union Cnty. Super. Ct. Aug. 27, 2025) (Robinson, J.) https://www.nccourts.gov/documents/business-court-opinions/shively-v-aci-learning-holdings-llc-2025-ncbc-51. ↑

103. See, e.g., JKH Cap., LLC v. Tanglewood Owners, LLC, 2026 NCBC 22, at *19 (Mar. 13, 2026); Moore v. Brooks, 2025 NCBC 69, at *56 (Nov. 7, 2025). ↑

104. Case No. 18CVS012299-590, 2025 NCBC 64 (Mecklenburg Cnty. Super. Ct. Oct. 16, 2025) (Robinson, J.) https://www.nccourts.gov/documents/business-court-opinions/rfactr-inc-v-mcdowell-2025-ncbc-64. ↑

105. Case No. 20CVS005612-250, 2025 NCBC 44 (Cumberland Cnty. Super. Ct. Aug. 7, 2025) (Robinson, J.) https://www.nccourts.gov/documents/business-court-opinions/state-of-nc-v-ei-du-pont-de-nemours-co-2025-ncbc-44. ↑

106. No. 21CVS007997-590, 2025 NCBC Order 7, 2025 WL 371390 (Mecklenburg Cnty. Super. Ct. Jan. 31, 2025) (Conrad, J.) https://www.nccourts.gov/documents/orders-of-significance/wilmington-tr-na-v-tm-northlake-mall-lp-2025-ncbc-order-7. ↑

107. No. 23CVS000363-830, 2025 NCBC 7 (Stanly Cnty. Super. Ct. Mar. 4, 2025) (Conrad, J.), https://www.nccourts.gov/documents/business-court-opinions/jt-russell-sons-inc-v-russell-2025-ncbc-7. ↑

108. No. 21CVS015763-590, 2025 NCBC 11, 2025 WL 817493 (Mecklenburg Cnty. Super. Ct. Mar. 14, 2025) (Earp, J.) https://www.nccourts.gov/documents/business-court-opinions/hart-v-first-oak-wealth-mgmt-llc-2025-ncbc-11. ↑

109. No. 23 CVS 039534-590 (MASTER FILE), 23 CVS 2124, 2025 NCBC 3 (Mecklenburg Cnty. Super. Ct. Feb. 4, 2025) (Earp, J.), https://www.nccourts.gov/documents/business-court-opinions/cts-metrolina-llc-v-berastain-2025-ncbc-3. ↑

110. No. 25CV005614-400, 2025 NCBC 66 (Guilford Cnty. Super. Ct. Oct. 27, 2025) (Davis, J.), https://www.nccourts.gov/documents/business-court-opinions/tanger-props-ltd-pship-v-ace-am-ins-co-2025-ncbc-66. ↑

111. No. 25CV028702-590, 2026 NCBC Order 10 (Mecklenburg Cnty. Super. Ct. Jan. 29, 2026) (Davis, J.), https://www.nccourts.gov/documents/orders-of-significance/wp-church-llc-v-whalen-2026-ncbc-order-10. ↑

112. No. 25CV001214-310, 2025 NCBC 69, 2025 WL 3141871 (Durham Cnty. Super. Ct. Nov. 7, 2025) (Houston, J.) https://www.nccourts.gov/documents/business-court-opinions/moore-v-brooks-2025-ncbc-69. ↑

113. No. 24CVS000311-290, 2025 NCBC 50 (Davie Cnty. Super. Ct. Aug. 22, 2025) (Houston, J.), https://www.nccourts.gov/documents/business-court-opinions/oak-grove-techs-llc-v-seventh-dimension-llc-2025-ncbc-50. ↑

114. 2025 R.I. Super. LEXIS 27 (R.I. Super. Ct. Mar. 21, 2025). ↑

115. 2025 R.I. Super. LEXIS 30 (R.I. Super. Ct. Mar. 31, 2025). ↑

116. 2025 R.I. Super. LEXIS 21 (R.I. Super. Ct. Feb. 27, 2025). ↑

117. 2025 R.I. Super. LEXIS 22 (R.I. Super. Ct. Feb. 28, 2025). ↑

118. 2025 Tex. Bus. 1 (3d Div.). ↑

119. How this issue has been addressed for the Texas Business Court is significant given the Court’s somewhat unique structure among the nation’s business courts as having been created as an entirely new type of statutory court, uniquely staffed with judges appointed by the governor, rather than resulting from administrative and procedural rule changes made applicable to existing trial courts and their judges as has occurred more frequently in other states. ↑

120. Note that House Bill 40 enacted by the Texas Legislature in 2025, in Section 45, reduced the required amount in controversy for actions arising out of qualified transactions and certain other commercial, financial and business disputes as set forth in Sec. 25A.004(d) from $10 million to $5 million, effective September 1, 2025, with the change to be applicable to actions commenced on or following September 1, 2024. ↑

121. 2025 Tex. Bus. 1, ¶ 31. The Business Court when a case is removed from a district court, and before any motion to remand is decided, assumes administrative responsibility for continuing to move the case along through scheduled procedural hearings, and enforcing procedural deadlines. ↑

122. See Bus. Ct. Local Rule 8 (a) and (c) [https://www.txcourts.gov/businesscourt/practice-before-the-court/]: “(a) Removal does not alter any deadline imposed by the TRCP. Deadlines under an existing scheduling order remain in place until a new scheduling order is entered by the Business Court. All court settings are vitiated upon removal; however, the removing party must apprise the Business Court of any existing court settings in the removal notice filed under TRCP 355. . . . (c) To be considered in the Business Court, any motions pending at the time of removal must be re-filed in the Business Court and set for hearing or submission according to these rules.” ↑

123. Text of 25A.004(e) “The business court has civil jurisdiction concurrent with district courts in an action seeking injunctive relief or a declaratory judgment under Chapter 37, Civil Practice and Remedies Code, involving a dispute based on a claim within the court’s jurisdiction under Subsection (b), (c), or (d). ↑

124. “The Texas Supreme Court has stated that, when an action is brought to protect a right or privilege, ‘[t]he subjective value of a privilege, if asserted in good faith, establishes jurisdiction if that value meets the requisite amount in controversy.’ Independent of their other allegations, Defendants have pleaded that the value of the rights at issue exceeds $5 million.” Citing Tune v. Tex. Dep’t of Public Safety, 23 S.W.3d 358, 362 (Tex. 2000). ↑

125. Citing the U.S. Supreme Court’s decision in Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81 (2014), by analogy in the absence of applicable Texas precedent. ↑

126. ET Gathering & Processing LLC v. Tellurian Productions LLC, 2025 Tex. Bus. 11 (11th Div.) [defendant did not produce evidence that plaintiff’s assertion of amount in controversy jurisdictional requirements being met amounted to a sham]; Atlas IDF v. NexPoint Real Estate Partners, 2025 Tex. Bus. 16 (1st Div.); Slant Operating, LLC, v. Octane Energy Operating, LLC, 2025 Tex. Bus. 22 (8t h Div.) [plaintiff pled sufficient jurisdictional allegations, which the defendant failed to successfully refute]; Black Mountain SWD v. NGL Water Solutions Permian, 2025 Tex. Bus. 24 (8th Div.) [remand granted because uncontroverted evidence established that unpaid royalties sued for would not exceed the jurisdictional minimum]; Kassam v. Dosani, 2025 Tex. Bus. 25 (11th Div.) (mem. op.); M&M Livestock v. Robinson, 2025 Tex. Bus. 29 (8th Div.) (mem. op.); Chaudhry v. Stillwater Capital Investments, 2025 Tex. Bus. 31 (1st Div.). ↑

127. Business Court judges have also adopted a small number of individual rules of practice applicable to cases filed in their courts, which can be found at: https://www.txcourts.gov/businesscourt/divisions. ↑

128. 2025 Tex. Bus. 16 (11th Div.). ↑

129. Sec. 25A.001(14), Texas Gov’t Code: “’Qualified transaction’ means a transaction, or series of related transactions other than a transaction involving a loan or an advance of money or credit by a bank, credit union, or savings and loan institution, under which a party: (A) pays or receives, or is obligated to pay or is entitled to receive, consideration with an aggregate value of at least $5* million (emphasis added); or (B) lends, advances, borrows, receives, is obligated to lend or advance, or is entitled to borrow or receive money or credit with an aggregate value of at least $5* million.” *House Bill 40 enacted by the 89th Texas Legislature to be effective September 1, 2025, amended Sec. 25A, Texas Gov’t Code, to reduce these amounts from $10 million to $5 million. ↑

130. 2025 Tex. Bus. 6 (3d Div.). ↑

131. Texas Gov’t. Code Sec. 25.006(f) [as in effect at time opinion issued on Feb. 10, 2025] “. . . If all parties to the action have not agreed to remove the action, the notice of removal must be filed: (1) not later than the 30th day after the later of the date the party requesting removal of the action discovered, or reasonably should have discovered, facts establishing the business court’s jurisdiction over the action; . . . .” ↑

132. Section 47, House Bill 40, 2025 Texas Legislature. ↑

133. Judge Whitehill produced a total of five opinions in the course of resolving this dispute. Two opinions dealt with the court’s jurisdiction over some out-of-state individual defendants considered in special appearances: 2025 Tex. Bus. 5 (1st Div.; Feb. 10, 2025) and 2025 Tex. Bus. 26 (1st Div.; Jul. 16, 2025). 2025 Tex. Bus. 9 (1st Div.; Mar. 10, 2025) is the primary 79-page opinion explaining Judge Whitehill’s decision on the merits, which granted summary judgment to the defendants based on an extensive, detailed parsing of Texas partnership and contract law and the lengthy, complex agreement of the parties. 2025 Tex. Bus. 13 (1st Div.; Apr. 15, 2025) is a rare instance of a Texas trial court considering further rebuttal arguments from plaintiffs on the issues adjudicated in favor of the defendants by the court’s earlier judgment (all of which further arguments the court rejected) in order to clarify the record. Lastly, in 2025 Tex. Bus. 21 (1st Div: May 22, 2025) Judge Whitehill addressed a narrow set of issues, dismissing with prejudice the plaintiff’s causes of action against specific individual defendants in response to a request for clarification supported by all parties. On June 3, 2025, the parties completed a Rule 11 Agreement providing for dismissal without prejudice of the remaining claims not addressed in the opinions issued at that date against all but the primary defendants, allowing the causes of actions and claims dismissed by Judge Whitehill to proceed to an appealable judgment. Summary judgement was granted in favor of the remaining defendants, with two minor exceptions, with plaintiffs taking nothing by a Final Judgment dated June 16, 2025 (1st Div.). That Final Judgment is currently before the Fifteenth Court of Appeals. ↑

134. Judge Andrews (of the Third Division, sitting by assignment in the 11th Division) produced three opinions in the course of resolving this declaratory judgment action in favor of Marathon. The first opinion, 2025 Tex. Bus. 36 (11th Div.; Sep.18, 2025), addressed issues of contract interpretation raised in a Joint Advisory on Early Legal Issues included in the case’s Scheduling Order that sought early decisions by the judge to support efficiency or resolution of the action. The second opinion, 2025 Tex. Bus. 39 (11th Div.; Oct. 14, 2025), addressed further issues of contract interpretation and supported the court’s grant of partial summary judgment to Marathon. The third opinion, 2025 Tex. Bus. 40 (11th Div.; Oct. 28, 2025), evaluated the parties’ competing theories of damages, resulting in a “no decision” on Mercuria’s proposed actual and spot-price data due to a lack of sufficient arguments and evidence and a determination that Marathon’s proposed cost-based measure of actual damages was not the correct legal standard. Neither of the parties appealed Judge Andrews’ decisions. ↑

135. Tex. R. Civ. P. 166(g) (2026). ↑

136. The speed with which these cases were decided likely had some non-replicable tailwind supplied by their arrival in the Business Court’s early months of docket building, the relatively narrow legal and factual focus of each case and avoidance of what would have been difficult determinations of damages. The cases do demonstrate the efficiency that can result from the Business Court’s early resolution of legal questions that then avoid unnecessary ongoing expenditures of the parties’ time and money. ↑

137. 2025 Tex. Bus. 9 (1st Div.) ¶¶ 26, 27. ↑

138. 2025 Tex. Bus. 9 (1st Div.) ¶¶ 136-140. ↑

139. 2025 Tex. Bus. 36 (11th Div.). ↑

140. 2025 Tex. Bus. 39 (11th Div.). ↑

141. 2025 Tex. Bus. 40 (11th Div.) ↑

142. No. 20-C-136-MRN (W. Va. Bus. Ct. Div. Sept. 22, 2025). ↑

143. No. 2025-C-28-MSH (W. Va. Bus. Ct. Div. July 9, 2025). ↑

144. 2025 WYCH 4 (Wy. Ch. Ct. June 18, 2025). ↑

145. 2025 WYCH 8 (Wy. Ch. Ct. July 2, 2025). ↑

Artificial intelligence features are rapidly being embedded into the enterprise software that organizations rely on daily. From customer relationship management platforms and document management systems to human resources tools and financial reporting software, technology vendors are racing to integrate AI capabilities into their existing products, particularly software-as-a-service (“SaaS”) offerings. For clients, this trend presents a mix of opportunity and risk.

When your vendor announces that it is adding AI features to a product you already license under an existing contract, the legal and practical implications can be significant. Legacy agreements were not drafted with AI in mind, and the terms governing data use, intellectual property, termination, and liability may be wholly inadequate once AI enters the picture.

This article provides a practical framework for evaluating and responding to vendor-initiated AI changes, including the risks created by legacy contract gaps and critical considerations when reviewing vendor-proposed AI addenda. A follow-up article will discuss the key features that should be included when a client decides to develop its own AI addendum for use in negotiations and contracts.

I. AI Features Are Coming—Whether You Asked for Them or Not

Most major SaaS providers have introduced, or are actively rolling out, AI-powered features within their existing product suites. These range from AI-assisted search and summarization tools to automated drafting, predictive analytics, and large language model (“LLM”) integrations. These features are often activated by default—without explicit customer consent and sometimes without any advance notification. Unfortunately, this so-called “stealth AI” can create significant contract challenges. Under traditional SaaS contracts, your organization provides data, the vendor hosts and processes it, and defined terms control what happens to that data during and after the relationship. AI challenges and changes many of these assumptions.

Legacy Contracts Were Not Drafted for AI

When your vendor adds an AI feature into an agreement that was never designed for it, several critical contract gaps may emerge:

• Outdated definitions. It’s highly unlikely that the standard definition of “Customer Data” in your existing SaaS agreement captures prompts, outputs, embeddings, or other AI-specific data categories. If your “Customer Data” definition is narrowly defined, the protections you negotiated—including deletion obligations, export rights, and confidentiality protections—may not reach the data that AI features generate or consume.
• Inadequate deletion obligations. Any termination obligation to delete “Customer Data” at the end of the contract is quite limited if the definition does not capture prompts, outputs, embeddings, or trained model weights. Your vendor may be contractually compliant in deleting your CRM records while retaining the AI-derived insights and analytics learned from your data indefinitely.
• Broken data flow assumptions. The original SaaS contract may assume a relatively straightforward data flow between your organization and the vendor’s infrastructure, with a few subprocessors thrown in (once you review the data processing agreement). However, AI features may introduce new data complexities. For example, your data may be sent to third-party LLM providers, used to train vendor or third-party models, or otherwise processed in jurisdictions not contemplated by the original agreement. The details may (or may not) be in the fine print.
• Default activation without consent. Perhaps the most concerning gap is that many AI features are activated by default without express notice from your vendor. Your organization may already be feeding sensitive data into an AI tool without anyone having reviewed or approved the terms under which that data will be processed.
• Insufficient legacy termination clauses. Traditional termination provisions address subjects such as material breach and bankruptcy/insolvency, but they do not contemplate AI-specific termination trigger events such as model deprecation/degradation, foundation model substitution, changes in the vendor’s acceptable use policy that restrict use cases, or regulatory prohibitions. These are new categories of risk that require new exit rights.

Why This Matters Now

The window for negotiating favorable AI terms is often narrow. Once AI features are live and customer data is being processed through them, your leverage diminishes significantly. Vendors have little incentive to renegotiate terms after the fact, and the practical difficulty of unwinding AI data processing creates a form of lock-in that is fundamentally different from traditional SaaS lock-in.

Clients should treat any vendor communication about new AI features—whether a product announcement, a contract amendment, or a click-through addendum—as a trigger to review their existing agreement and take any necessary action to remedy any concerns.

II. Reviewing a Vendor-Proposed AI Addendum

When a vendor proposes an AI addendum to an existing agreement, it is essential to approach the document with the same level of diligence, rigor, and scrutiny that you would apply to a new contract. Typically, vendor-drafted AI addenda are designed to expand the vendor’s rights and limit its liabilities, often in ways that directly contradict the protections you painstakingly negotiated in the underlying agreement.

The Click-Through Trap

Many vendors present AI addenda to clients through click-through mechanisms, such as hyperlinked documents within the existing platform, pop-up acceptance screens, or standalone nonnegotiable terms posted on a vendor website. These are likely not benign administrative updates that should be blindly accepted. They are often substantive contract amendments that can fundamentally alter the rights and obligations under your existing agreement. Key risks of click-through AI addenda include the following:

• Contradicting negotiated terms. The AI addendum may contain broad license grants, liability disclaimers, or indemnification carve-outs that directly override the extensively negotiated representations, warranties, limitation of liability, data protection, and restriction provisions that you carefully negotiated in the master agreement.
• Embedded and hyperlinked terms. Vendors frequently embed additional terms through hyperlinks within the addendum itself, creating multiple layers of contractual obligations that you may miss during a casual review.

As a best practice, you should ask to see the vendor’s standard AI addendum at the procurement stage or renewal phase before any AI features are activated. Instruct your organization’s users not to click through or accept any vendor-presented AI terms without legal review.

Data Use, Data Privacy, and Data Security

Data provisions are typically where vendor-drafted AI addenda are most vendor-focused. Areas of concern may include the following:

• Broad training rights. Vendors often seek the right to use customer data (including prompts, outputs, and usage patterns), to train, fine-tune, or “improve” their AI models. This may be framed as improving “the Services,” but it effectively grants the vendor a perpetual right to benefit commercially from your data, including potentially sensitive or proprietary data, without economic benefit to you.
• De-identification as a workaround. Vendors frequently propose de-identification or aggregation as a compromise, permitting them to retain and use data in de-identified form. However, AI systems can re-identify individuals from patterns across datasets, making de-identification far less protective than it appears. Contracts should reference an industry standard for de-identification, such as NIST SP 800-188, and include an affirmative covenant by the vendor not to re-identify your data or your users.
• Gaps between contract and practice. Actual vendor data usage may differ materially from what the contract says, or the contract may be silent on key data practices. It is critical to understand how the vendor (and its affiliates, subcontractors, and subprocessors) actually uses your data (including personal information or the information of your customers), and where it is stored and processed, particularly if you are in a highly regulated industry.

Liability and Indemnification for AI-Generated Outputs

AI-generated outputs additionally introduce new categories of risk. Vendor-drafted addenda typically seek to limit the vendor’s exposure in several ways:

• Disclaiming accuracy. Almost all standard AI agreements state that outputs are made available on an “as-is,” “as-available” basis, and vendors commonly disclaim any representation or warranty regarding the accuracy, completeness, or reliability of AI-generated outputs. This leaves the customer to bear the risk if an AI output is incorrect, misleading, harmful, or biased or violates applicable laws.
• Excluding outputs from indemnification. The vendor’s standard intellectual property indemnity often does not extend to AI-generated outputs (and the same is true of other indemnities). If an output infringes a third party’s intellectual property rights, you may have no contractual recourse against the vendor.
• Disclaiming uniqueness. Vendors routinely disclaim any guarantee that AI outputs will be unique, meaning multiple customers may receive identical or substantially similar outputs. While this reflects a genuine technical limitation, it also underscores the need for robust IP protections.

Intellectual Property Ownership

IP ownership in the AI context is more complex than traditional software licensing because there are distinct categories of intellectual property at stake, each often addressed in different sections of the vendor’s contract. These include the following:

• Inputs and prompt libraries. While the vendor may acknowledge that you technically own your inputs, prompts, configurations, and fine-tuning data, the fine print may reveal that such terms are then reincluded in definitions like “Service Data” or “Usage Data” and licensed back to the vendor perpetually and irrevocably. This means the vendor retains a right to use your proprietary prompts and configurations even after termination of the contract with no compensation to you.
• Outputs. The statement “you own your outputs” is often not entirely accurate. In practice, ownership is frequently conditioned on ongoing compliance with the vendor’s acceptable use policy, and outputs are generally excluded from the vendor’s standard IP indemnity. What you receive may be a conditional assignment rather than true, unfettered and unconditional ownership, so confirm the contract language carefully.
• Feedback and ratings. Customer feedback and ratings, which may be provided via thumbs up/down ratings, corrections, and evaluation results, are typically defined outside of the standard “Customer Data” definition and may be licensed to the vendor under a separate perpetual, irrevocable license that survives termination. As this data sits outside your negotiated data protections, none of the negotiated contractual safeguards will apply.

Opt-Out Rights and Transparency

• Opt-out rights. Clients should also ask whether the proposed AI features are optional or required to use the updated vendor product. Unfortunately, even where a vendor offers the ability to turn off an AI feature, toggling off the user interface may not actually stop the vendor from using your data for training or model improvement purposes. Clients should confirm whether toggling off the feature actually stops all data processing associated with it. Similarly, you should ask whether toggling off the AI feature preserves your right to delete what has already been ingested.
• Transparency and model substitution. Vendors may swap, replace, or materially reconfigure their underlying foundation models without providing notice to customers. A model swap can materially change the data practices, accuracy, and performance characteristics of the vendor product. Clients should require advance written notice of any vendor model changes and should understand whether a model swap changes any data-use, training, or processing commitments of the vendor.

Compliance with Applicable Law

The regulatory landscape for AI is evolving rapidly. Vendor-drafted addenda may not adequately address (i) compliance with current and emerging AI-specific regulations in applicable jurisdictions; (ii) regulatory actions or adjudicated IP findings that could impair the client’s permitted use of the product; or (iii) the allocation of regulatory risk between vendor and customer, particularly where the vendor’s AI features create compliance headaches for the customer (e.g., bias, discrimination, or failure to meet transparency requirements). Additionally, the vendor-drafted AI addenda may not contain sufficient obligations on the part of the vendor to stay abreast of key regulatory developments during the contract period.

III. Creating a Client-Side AI Addendum

Rather than accepting vendor-drafted AI terms, it is far better for clients to proactively develop their own standard-form AI addendum for use in negotiations. A well-crafted client-side addendum establishes the client’s baseline expectations and provides a structured framework for evaluating the vendor’s AI capabilities and practices. Stay tuned for Part Two of this article for a more detailed discussion about suggested AI addendum best practices and next steps.

The Moment Before Bankruptcy

Bankruptcy law has a timing problem. A company may still be paying its debts, no petition may have been filed, and no court may be involved. Yet a lender’s credit model may already have detected deterioration in that company’s risk profile. A supplier may be reassessing payment terms. An insurer may be repricing exposure, while a major customer may be quietly considering whether the company remains a reliable counterparty. None of these decisions requires a bankruptcy filing or any formal legal recognition of distress.

The gap matters because prediction can change the condition it predicts. A lender that reduces exposure affects liquidity. A supplier that shortens payment terms does the same. A customer that begins shifting orders elsewhere changes expected revenue. Each actor may simply be managing its own risk. But a company that eventually reaches Chapter 11 may arrive there with its commercial position already altered by decisions made well before bankruptcy law entered the picture.

In earlier work, I used the term Algorithmic Shadow Insolvency to describe the predictive gap in which financial distress begins shaping restructuring decisions before those decisions become legally visible.^[1] This article looks at that gap from a practitioner’s perspective: What changes when commercially important actors can see, price, and act upon financial deterioration before a bankruptcy case begins? The concept does not suggest that an algorithm can declare a company insolvent, nor does it propose another legal test for insolvency.

From Prediction to Commercial Consequence

Credit models have long influenced lending decisions. What is changing is not simply their sophistication. Risk can increasingly be reassessed through model-based processes and translated into commercial decisions before the events that traditionally make distress unmistakable. That question is becoming more immediate as model-based risk assessment moves deeper into ordinary financial decision-making. U.S. banking regulators’ revised 2026 model risk guidance reflects how embedded quantitative models have become in significant banking activities.^[2] Bankruptcy-prediction research likewise shows that machine-learning methods can improve predictive performance over traditional approaches.^[3]

For restructuring lawyers, however, prediction accuracy is only half the question. The harder problem begins when prediction changes behavior. A lender may reduce exposure without terminating a facility. A supplier may shorten terms without ending the relationship. An insurer may reprice risk. A customer may diversify its supply chain before canceling a contract. Each decision may be rational in isolation. Taken together, they can progressively reduce the company’s room to maneuver.

This is where Algorithmic Shadow Insolvency differs from the familiar idea of an early warning system. Early warning generally asks whether distress can be identified soon enough for the company, its advisers, its creditors, or public authorities to respond. Predictive systems operating throughout a company’s commercial network create a different possibility.^[4] The company may not control those systems, know which signals they are detecting, or even realize that counterparties have begun to react. The warning may no longer be delivered to the company in distress. It may be delivered to everyone around it.

That distinction matters in Chapter 11. Filing activates legal mechanisms that can protect the debtor and support continued operations, including the automatic stay, debtor-in-possession authority, and access to postpetition financing subject to statutory requirements.^[5] But formal protection does not recreate every commercial condition that existed before filing. If credit has tightened, suppliers have reduced exposure, customers have begun diversifying, or strategic capital has become hesitant, the legal process inherits those changes. The filing date remains legally decisive. Commercially, it may no longer be the beginning of the story.

Protecting the Restructuring Window

The practical response is not necessarily to file earlier. That would confuse predictive information with the decision to invoke a formal bankruptcy process and, in many cases, miss the problem entirely. The more immediate question is whether the company is losing viable restructuring options while management and counsel are still measuring distress principally through liquidity, covenant compliance, debt maturities, defaults, and other familiar indicators.

A different approach begins with the reactions surrounding the company. Shorter payment terms, reduced credit availability, additional collateral demands, insurance repricing, customer diversification, or hesitation by strategic investors may each be ordinary commercial events. They should not automatically be treated as evidence of impending bankruptcy. But when several appear together around a financially pressured company, treating each as an unrelated inconvenience may obscure something more important: The company’s risk is being reassessed outside the company itself.

A restructuring lawyer does not need access to a lender’s proprietary model or a supplier’s risk system to recognize that shift. The algorithm may be invisible; its commercial footprint is not. Counsel can observe changes in counterparty behavior and ask whether they form a broader pattern. The relevant inquiry is whether those changes are beginning to affect liquidity, operating continuity, or the range of restructuring choices still available.

That distinction matters because restructuring options do not disappear at once. They narrow. A financing source becomes more expensive. A critical supplier becomes less patient. A customer becomes less willing to depend on the company. Strategic capital becomes harder to secure. None of these developments necessarily requires Chapter 11. But each can make a restructuring that later becomes necessary more difficult to execute.

The appropriate response is therefore preparation rather than panic. Counsel and management can identify the relationships most capable of affecting continuity, determine whether adverse changes are isolated or cumulative, preserve liquidity, engage critical counterparties while confidence can still be stabilized, test alternative financing, and prepare restructuring options before those options become materially narrower.

The objective is not to file earlier. It is to recognize earlier when the ability to restructure is beginning to erode.

In practical terms, that means three things: detect the reaction, map the pattern, and preserve optionality. This does not turn every adverse commercial signal into a restructuring event, and it does not require lawyers to become data scientists. It asks restructuring counsel to do something much more familiar: understand the company as a business operating within a network of relationships and recognize when those relationships begin changing faster than the traditional indicators of distress.

The Question for Chapter 11

Chapter 11 will continue to have a legally identifiable beginning. Algorithmic Shadow Insolvency concerns the period before it—that is, the weeks or months during which commercially consequential responses may accumulate without a filing, judicial supervision, or a formal restructuring process. That period matters precisely because meaningful choices may still exist within it.

The point is not to give predictive models legal authority, nor to treat every algorithmic warning as evidence of insolvency. The more immediate implication is for restructuring practice. If the commercial environment surrounding a company can recognize changing risk earlier, counsel may need to ask not only whether a filing or other restructuring step is approaching but also whether important counterparties have already begun behaving as though the company’s risk has changed.

That suggests a different form of early intervention. It does not begin with a petition. It begins with preserving the conditions under which a restructuring can still work. By the time distress is obvious enough to force the filing question, some of those choices may already be gone.

1. Esin Civelek, Algorithmic Shadow Insolvency: The Predictive Turn in European Restructuring Law, SSRN (May 5, 2026). ↑

2. Off. of the Comptroller of the Currency, Bd. of Governors of the Fed. Rsrv. Sys. & Fed. Deposit Ins. Corp., OCC Bulletin 2026-13: Model Risk Management: Revised Guidance (Apr. 17, 2026). ↑

3. Flavio Barboza, Herbert Kimura & Edward Altman, Machine Learning Models and Bankruptcy Prediction, 83 Expert Sys. with Applications 405, 405–17 (2017). ↑

4. Jing Wu, Zhaocheng Zhang & Sean X. Zhou, Credit Rating Prediction Through Supply Chains: A Machine Learning Approach, 31 Prod. & Operations Mgmt. 1613, 1613–29 (2022). ↑

5. 11 U.S.C. §§ 362, 364, 1107–1108; U.S. Courts, Chapter 11—Bankruptcy Basics (last visited Sept. 30, 2026). ↑

Tokenization—the representation of assets as digital tokens on a decentralized ledger or blockchain—has attracted significant attention among market participants, particularly in the financial sector. Analysts predict that tokenized assets, driven in part by the prospect of greater efficiency and accessibility in the financial system, could be valued between $10 trillion and $16 trillion by 2030.^[1] Attorneys advising clients in this dynamic area of the law need to stay informed about the complex issues and changes in this space.

This piece examines a confluence of key regulatory, market, legal, and legislative issues driving tokenization adoption in financial markets through the lens of the prevailing competition between incumbents and new entrants, as stakeholders balance the technology’s value proposition against its idiosyncratic risks. It provides a snapshot and a useful framework for analyzing the rapidly evolving developments in digital assets as regulators and policymakers attempt to calibrate the optimal purview of regulation when it is at odds with technological development, in a manner that maintains market integrity, fosters competition, and supports a bedrock principle of our capitalist system in which market forces dictate winners and losers.

Essentially, tokenization is a new technology applied to financial products and services. As with the dematerialization of paper stock certificates to uncertificated form, the introduction of electronic exchanges, and other innovations, the use of blockchain and tokenization as a new medium for transferring value introduces distinct risks and opportunities juxtaposed to its traditional counterpart of book-entry or centralized ledgers.

Core value propositions of tokenization include:^[2]

• programmability—the ability to embed code-based instructions that automatically execute when predetermined triggering conditions are met;
• fractionization—dividing assets into smaller, tradable units;
• atomicity—the execution of multiple inseparable transactions, such that either all occur or none occur; and
• composability—the ability to combine and reuse programmed instructions in new ways to develop different products and services.

While tokenization aims to provide a more direct, trustless, and dynamic way to transfer value, blockchain technology is in discord with various established regulatory frameworks and legal constructs. Specifically, the current financial, legal, and regulatory system relies on conventional custody of assets and a network of intermediaries to facilitate transactions and to assign legal responsibility and accountability, practices that are often incongruous with blockchain-based systems.

Differentiating Factors Between Tokenization and Blockchain-Based Systems and Conventional Book-Entry Systems

Pinpointing the key differences between tokenization and blockchain-based systems, and conventional book-entry systems, helps advance the conversation. Specifically, on a blockchain, ownership and asset transfers are not recorded and validated centrally on a master ledger but rather on every computer node running the software, collectively, in accordance with the agreed-upon protocol. As such, the authority of the determinative entity (the blockchain or code) that establishes ownership is decentralized. This creates idiosyncratic risks—notably, the relative immutability of transactions, which makes fraud and errors difficult to reverse.^[3] Additionally, blockchain infrastructure poses various custody risks, including the risk that the loss or theft of the private key associated with an asset can result in irreversible loss.^[4] Furthermore, blockchain’s decentralized features create challenges in ascribing legal responsibility and accountability to intermediaries and market participants.

Intrinsically, the core value proposition of tokenization—to increase the dynamism and velocity of asset transfers and reduce opacity in financial markets—rests on the diffusion of authority within the network and the ubiquity of the ledger among participants. These same forces also create potential friction points in the financial system and discord with traditional legal and regulatory frameworks. Policymakers are balancing the need to provide a conducive pathway for new technology to compete (including adjusting regulatory approaches when technology renders certain constructs obsolete) against other mandates and priorities.

Primary Ways to Structure a Token

Principally, there are three ways to structure a token: as a token issued by the issuer or its representative of the underlying asset in the form of a digital twin token (“DTT”) or a digital-native token (“DNT”) or through various models of a third-party token (“TPT”). In a DTT model, an issuer issues a token that serves as a digital representation of an asset on a blockchain that exists or was issued off-chain, and the master record of ownership of the asset is maintained in traditional book-entry form. In a DNT model, a token represents an asset issued on-chain, and a decentralized ledger or blockchain serves as the master record of ownership. A TPT, by contrast, does not derive from the issuer of the underlying asset or its affiliate. This narrow framework is not meant to be exhaustive; rather, it highlights key issues in tokenization.

SEC’s Directives on Tokenization

Primarily, there are two main potential development models for tokenization: one in which the technology eliminates the need for certain intermediaries (clearinghouses, exchanges, brokers, dealers, etc.) and upends bedrock principles such as custody; and another in which market intermediaries incorporate the technology into their products and services.

Proponents of blockchain technology argue that today’s market infrastructure is the legacy of decades of layering intermediaries and regulations atop one another in pursuit of policy goals before better technology existed.^[5] This raises an important point for analysis: in the absence of legislation, what posture should regulators adopt when confronted with new technology that challenges the merits of the current regulatory infrastructure and creates market competition?

The U.S. Securities and Exchange Commission (“SEC”) Statement on Tokenized Securities issued on January 28, 2026 (“Statement”),^[6] along with other enactments, provides important clarity and highlights the varied regulatory approaches to balancing technological developments with regulatory objectives and priorities. Key points of the Statement include the following:

• The only difference between a security issued by an issuer (or its agent) as a DNT and a security issued in traditional form is that instead of maintaining the master security-holder file through conventional book-entry, the issuer (or its agents) maintains it on one or more decentralized ledgers or blockchains.
• The format in which a security is issued (e.g., paper stock certificate, digital token) or the method by which holders are recorded (e.g., book-entry, decentralized ledger) does not affect the application of federal securities laws. Stated differently, regardless of form or recordkeeping method, if securities laws are implicated, market participants must comply with federal securities laws.
• An issuer (or its agent) recordkeeping system can include a combination of decentralized ledger technology and a conventional book-entry database.
• An issuer may issue its securities in various classes and formats, enabling security holders to hold them in different forms, including a combination of traditional and tokenized formats.
• The Statement applies substance-over-form principles. If a tokenized security is substantially similar in character to a security issued in traditional format and holders of the tokenized security enjoy substantially similar rights and privileges, the tokenized security may be considered of the same class as the security issued in traditional format.
• Third parties unaffiliated with an issuer of a security could tokenize the unaffiliated issuer’s security.
• A TPT may or may not represent an ownership interest in or a contractual obligation of the issuer of the underlying security and, as such, may or may not confer upon the holder of the TPT any rights as a holder of the underlying security.
• The structures of TPTs may vary and include custodial tokenized securities, in which an unaffiliated third party issues a token representing the underlying security held in custody, and the TPT evidences the holder’s ownership interest in the underlying security.
• A TPT may be structured to provide synthetic exposure to an underlying asset, such as a tokenized securities–based swap, but must comply with applicable securities laws.

The Statement adopts a merit- and technology-neutral tone, stating that the format in which a security is issued, or whether holders are recorded on a centralized or decentralized ledger, does not affect the application of federal securities law. It emphasizes that “regardless of its format, the Securities Act requires that every offer and sale of a security must be registered with the Commission unless an exemption from registration is available.”^[7] The Statement deftly opens the door for issuers to tokenize their securities, aiming to establish fair competition between centralized and decentralized ledgers and to reduce regulatory arbitrage opportunities by applying a substance-over-form approach to federal securities law, thereby fostering an environment where market forces can determine outcomes.

The Statement is silent on the interplay between market intermediaries and tokenization and blockchain technology. Theoretically, the Statement provides an avenue for an issuer to issue its securities through a direct listing as a DNT, such that transferring the DNT results in a title transfer recorded on the selected blockchain. In this admittedly oversimplified hypothetical, market intermediaries are removed from the market infrastructure as much as possible, establishing a close nexus between the buyer and the seller of the securities involved in the transaction.

Applying the substance-over-form principle from the Statement, presumably, in the hypothetical presented above, an issuer would need an “exchange”^[8] as defined by the Securities Exchange Act to provide a marketplace that brings together purchasers and sellers of its securities. The posture of the Statement suggests that, regardless of form, a function that performs commonly known tasks of a stock exchange will be treated as such under the securities laws.

To the point, on July 22, 2026, SEC Commissioner Hester M. Peirce issued a statement, stating in part that “[m]oving activities that fall within the scope of the federal securities laws onchain, as a general matter, does not take those activities outside the scope of the laws the Commission administers.”^[9] Although Peirce’s statement is not formal SEC guidance, it offers valuable insight into how the flexible-by-design federal securities laws and regulatory principles are being applied to new technological innovations such as blockchain-based vaults. Through her statement, Peirce encourages market participants whose activities fall within the securities laws to work with the SEC “to find a compliant path forward,”^[10] which could lead to a series of no-action letters for various vault use cases.

The substance-over-form approach is evolving in interesting ways in the context of blockchain technology. Conventionally, the concept is used to determine whether a set of facts and circumstances warrants applying a regulatory regime. Subtly, blockchain technology is creating a scenario in which technological advancements might achieve the substance of a regulatory objective, rendering certain regulatory forms or constructs superfluous.

Illustratively, thought leaders in the space proffer that the SEC’s custody rule, operationalized through the qualified-custodian requirement, should be viewed functionally as a mechanism to advance a set of regulatory objectives—specifically, to protect client assets against misappropriation, commingling, insolvency exposure, fabricated reporting, and unchecked adviser control. As such, the rule should not favor a particular form or construct.^[11] Stated differently, regardless of form, if a structure satisfies a rule’s regulatory objectives, it should be afforded the same regulatory imprimatur as its counterparts.

Entrepreneurs are developing on-chain vault applications to fulfill the core function of the custody rule promulgated under Section 206(4) of the Investment Advisers Act for tokenized securities. The SEC’s posture toward blockchain-based applications that satisfy the investor protection and prudential objectives of qualified custodians will significantly shape the competitive landscape. If the SEC extends the substance-over-form principle to assess whether a product or service meets statutory objectives and mandates regardless of form, competition between blockchain-based vault systems and traditional custodians for market share is likely to intensify. Recently, through a series of statements, no-action relief, rule proposals, and functional equivalents of a regulatory sandbox, the SEC has shown a propensity to provide pathways for decentralized systems to bring products and services to market within the current regulatory framework.

On March 18, 2026, the SEC approved the Nasdaq Stock Market LLC proposed rule change to enable the trading of securities on the exchange in tokenized form.^[12] Similarly, on January 19, 2026, the New York Stock Exchange, Inc., announced that it is developing a platform for trading and on-chain settlement of tokenized securities, for which it will seek regulatory approvals. The platform will enable 24/7 operations, instant settlements, and stablecoin-based funding.^[13]

Additionally, on December 17, 2025, the SEC’s Division of Trading and Markets staff issued a statement providing its views on the application of paragraph (b)(1) of Rule 15c3-3 under the Exchange Act regarding broker-dealers’ responsibilities when they are in custody of “crypto asset securities” for customers.^[14] As with exchanges, if a market participant in a blockchain ecosystem meets the statutory definition of a broker-dealer, it will be subject to the securities laws; however, recent SEC directives provide an avenue for broker-dealers to engage with the technology. To the extent that tokenization and blockchain technology eliminate the need for broker-dealers, market forces will presumably phase them out.

Market Adoption

As tokenization gains momentum, market participants are working to leverage its potential benefits while managing its risks. On December 11, 2025, in a no-action letter, the SEC granted the request of the Depository Trust Company (“DTC”) to confirm that the Division of Trading and Markets staff would not recommend enforcement action for violations of applicable securities laws if its parent company, the Depository Trust and Clearing Corporation (“DTCC”), launched its pilot program for securities tokenization.^[15] DTCC provides custody, clearing, and settlement services to the financial industry. In 2020, DTCC processed $2.3 quadrillion in securities; and as of 2025, DTC custodies over $100 trillion in securities.^[16]

Broadly, the no-action letter provides a three-year regulatory sandbox for DTCC to launch its Pilot Tokenization Service Program. Strategically, it gives DTCC an advantage as the first major mover in the space. The program allows participants to elect to convert their securities entitlements in the Russell 1000 index and other qualified securities into a DTT^[17] on preapproved blockchains and using preapproved wallets. Any transfer of a DTT would be tracked and made visible to DTC through its LedgerScan software.

The program establishes two layers for recording transactions. The primary layer functions as the definitive record of ownership and will be maintained in book-entry form. The program does not alter the ultimate custodian of record for the “subject securities” or the legal framework governing their ownership, and DTC will continue to serve as the “securities intermediary” for the subject securities in accordance with Article 8 of the Uniform Commercial Code (“UCC”). The second layer enables participants to conduct peer-to-peer transactions on preapproved blockchains without DTC executing these transactions, with all transactions eventually reconciled on the primary layer. The program enables participants to leverage the benefits of blockchain and tokenization technology without forgoing the value of a central securities depository (“CSD”) to help mitigate risks associated with the technology.

The no-action letter highlights the development models for tokenization and the interaction between decentralized ledgers and market intermediaries, such as CSDs and clearing agencies. Similarly, on August 12, 2026, the SEC staff granted no-action relief to Franklin Templeton–affiliated funds, permitting the custody of tokenized shares of certain money market funds without complying with certain provisions of Rule 17f-2, promulgated under Section 17(f) of the Investment Company Act. Importantly, the administrative controls allow transfer agents “to correct errors or unauthorized transactions, freeze or mitigate wallet records if necessary, and maintain or restore the official record of share ownership in the Integrated System.”^[18] This marks another step in the SEC’s growing treatment of blockchain technology as a recordkeeping mechanism, functionally equivalent to traditional book-entry.

During these early stages of tokenization development, market participants are leveraging tokenization’s benefits while maintaining the advantages of traditional market structures to minimize risk. As blockchain technology evolves to reduce its idiosyncratic risks, as long as the regulatory framework stays flexible, market forces will help dictate the role of intermediaries in market infrastructure.

Commercial Law Implications

The law’s significance for intermediaries in the custody of tokenized assets extends beyond the securities law regulatory framework and has significant commercial law implications. CSDs dominate the custodial services market by volume and are subject to numerous laws and regulations.^[19] CSDs are typically designated as “financial market utilities” and are part of a broader network of subsidiaries of “custodial banks” regulated by the Office of the Comptroller of the Currency. If a CSD provides clearing services, it also falls under Section 17A of the Exchange Act. Additionally, as securities intermediaries that custody securities, CSDs are governed by Article 8 of the UCC for commercial law purposes, which provides a comprehensive set of investor protection rules. Part 5 of Article 8 was codified in 1994 to accommodate market trends toward indirect holding of securities.^[20]

Tokenization and blockchain technology will have to contend with certain foundational aspects of commercial law principles that were designed with traditional book-entry as the primary means of recording and transferring value. Stated succinctly, fundamental principles of commercial law are based on established concepts of custody, intermediaries, and recordkeeping that do not easily align with blockchain infrastructure. As blockchain technology becomes more widely adopted, how these challenges are addressed will affect tokenization’s penetration rate in financial markets.

Notably, the UCC 2022 Amendments, highlighted by Article 12, modernize the UCC to “accommodate emerging technologies, such as artificial intelligence, distributed ledger technology, and virtual currency.”^[21] The revised UCC introduces a new class of electronic property, controllable electronic records, which presumably covers a broad range of digital assets. In essence, the amendments aim to provide pathways for emerging technologies, including blockchain-based custody systems, to use the UCC infrastructure—a critical pillar of commercial transactions. To date, thirty-two jurisdictions have adopted these amendments.^[22] The manner in which Article 12 is implemented will be instrumental in the proliferation of tokenization.

Legislative Activities

Recent legislative activity underscores the importance of the evolving securities law regulatory regime for the development of blockchain technology and digital assets. Broadly, policymakers employ four approaches to address new technologies that enter the market and conflict with the existing regulatory or legal framework: prohibition, regulation by enforcement, ex ante nonbinding guidance and regulatory rulemaking, and legislative enactment. These approaches reflect risk tolerance, governing philosophies, and the potential impact of the new technology. Each approach has its advantages and disadvantages, ranging from facilitating innovation and minimizing uncertainty to mitigating market and prudential risks.^[23]

On July 17, 2025, the House of Representatives passed the Digital Asset Market Clarity Act (“CLARITY Act”); and on July 22, 2026, Senate Republicans released their latest version of the bill. On September 15, the bill failed a procedural Senate vote to advance, significantly reducing the likelihood of comprehensive federal market-structure legislation for digital assets in the near future—and further prompting regulators to fill the gap.^[24] In the absence of comprehensive legislation, the SEC is expected to continue applying the securities laws in a post-Chevron era, in which regulators can no longer rely on judicial deference to an agency’s statutory interpretation^[25] to regulate blockchain technology and tokenization through interpretive releases and rulemaking.

On March 17, 2026, the SEC issued an interpretive release clarifying how federal securities law applies to certain crypto assets and transactions involving them (“2026 Interpretive Release”).^[26] Among other things, the 2026 Interpretive Release provides a taxonomy that defines five categories for crypto assets: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. Except for digital or tokenized securities, the enumerated types of crypto assets are not viewed as securities in and of themselves, but they can be offered and sold as part of an investment contract, thereby making them securities under the Howey test.^[27] Additionally, the 2026 Interpretive Release provides guidance on when crypto assets are no longer considered investment contracts and on the types of representations or promises that create reliance under the Howey test.

Additionally, on August 18, 2026, the SEC released its proposed rules, “Regulation Crypto Assets,” “to create a tailored offering regime for certain investment contracts involving crypto assets.”^[28] Subsequently, on September 1, 2026, the SEC released its proposed modernized rules for registered transfer agents.^[29] The proposed rules revisit the current regulatory framework “to reflect transfer agents’ current processes and operations, including the use of electronic communications and blockchain technology in connection with securities offerings and the transfer of shares.”^[30]

Most recently, on October 1, 2026, the SEC proposed new rules and amendments for the custody of crypto assets under the Investment Advisers Act of 1940 and the Investment Company Act of 1940.^[31] Among other things, the new rules provide a tailored framework and a pathway for advisers and regulated funds to self-custody crypto assets and to maintain client or regulated fund crypto assets with a state trust company. Conceptually, the proposed rules and amendments aim to modernize custody rules and adopt a substance-over-form approach to the custody rules’ objectives of protecting client assets from loss, theft, misuse, and misappropriation. In a recent statement, Chairman Paul S. Atkins emphasized that only Congress can ensure that regulations in this space establish a durable framework for blockchain technology and decentralized ledgers.^[32] This underscores that interpretive releases convey the SEC’s current views and that regulatory rules are subject to change, whereas legislative actions are more enduring.

Conclusion

As tokenization gains traction, attorneys must have a keen understanding of the intersectionality of key regulatory, market, legal, and legislative issues that influence the technology’s adoption in the financial markets. They should also be familiar with the core features tokenization offers, the problems it aims to solve, its evolving technology stack, and the unique regulatory and legal challenges it faces relative to conventional systems so that they can provide value-added counsel in this rapidly evolving area of the law.

For example, the evolving legal and regulatory landscape and its impact on the programmability and composability features of tokenization, as market participants attempt to leverage developments in artificial intelligence, smart contracts, and decentralized autonomous organizations toward the technology’s use cases, will help drive tokenization’s proliferation rate. Attorneys with a thorough understanding of these issues will play an important role in helping clients navigate any discord between the current market infrastructure and the tokenization of financial assets. A holistic view and an understanding of the interplay of these issues will be an invaluable asset in helping clients meet their short- and long-term objectives.

1. Broadridge Fin. Sols., Inc., Next-Gen Markets: The Rise and Reality of Tokenization (2025). ↑

2. Int’l Org. of Sec. Comm’ns, Tokenization of Financial Assets (2025). ↑

3. Meredith Somers, The Risks and Unintended Consequences of Blockchain, MIT Sloan Expert Insights (June 18, 2019). ↑

4. Trevor Laurence Jockims, For Bitcoin Bulls Who Self-Custody Crypto, the Global Risks Are Growing, CNBC (Apr. 6, 2025). ↑

5. Tuongvy Le & Austin Campbell, Crypto and the Evolution of the Capital Markets, SSRN (May 12, 2025). ↑

6. Press Release, Div. of Corp. Fin., Div. of Inv. Mgmt. & Div. of Trading & Mkts., U.S. Sec. & Exch. Comm’n, Statement on Tokenized Securities (Jan. 28, 2026). ↑

7. Id. ↑

8. Definitions and Application, 15 U.S.C. § 78c(a) (definition of exchange). ↑

9. Statement, Hester M. Peirce, U.S. Sec. & Exch. Comm’r, Headstands and Summervaults: A Statement on Crypto Vaults and Lending Strategies (July 22, 2026). ↑

10. Id. ↑

11. Chris Brummer & TuongVy Le, Vaults as Qualified Custodians: A Joint White Paper (June 2026). ↑

12. Self-Regulatory Organizations, Exchange Act Release No. 34-105047 (Mar. 18, 2026). ↑

13. Press Release, Intercont’l Exch., The New York Stock Exchange Develops Tokenized Securities Platform (Jan. 19, 2026). ↑

14. Statement, Div. of Trading & Mkts., U.S. Sec. & Exch. Comm’n, Statement on the Custody of Crypto Asset Securities by Broker-Dealers (Dec. 17, 2025). ↑

15. Depository Trust Co., SEC No-Action Letter (Dec. 11, 2025). ↑

16. Press Release, Depository Trust Co., DTCC Central Securities Depository Subsidiary Surpasses $100 Trillion in Assets Under Custody, Marking Historic Milestone (June 18, 2025). ↑

17. As defined earlier in this article. ↑

18. Franklin Templeton, SEC No-Action Letter (Aug. 12, 2026). ↑

19. Financial Market Infrastructures and Critical Service Providers, BIS Data Portal (2024). ↑

20. Carl S. Bjerre, Sandra M. Rocks, Edwin E. Smith & Steven O. Weise, Missing an Opportunity: Cryptocurrency Exchanges and Their Customers Should Consider Using UCC Article 8, ABA Bus. L. Today (Apr. 3, 2023). ↑

21. 2022 Amendments to UCC (Unif. L. Comm’n 2022). ↑

22. Id. ↑

23. Florence G’Sell, Balancing Code and Law: Governance and Policy Challenges of Blockchain (2026). ↑

24. Stephen T. Gannon & Elizabeth Lan Davis, The Long, Winding, and Rocky Road Toward Crypto Clarity, Davis Wright Tremaine LLP (Sep. 21, 2026). ↑

25. Loper Bright Enters. v. Raimondo, 603 U.S. 369, 144 S. Ct. 2244, 219 L. Ed. 2d 832 (2024). ↑

26. Application of the Federal Securities Law to Certain Types of Crypto Assets, Exchange Act Release Nos. 33-11412, 34-105020 (Mar. 17, 2026). ↑

27. See SEC v. W.J. Howey Co., 328 U.S. 293 (1946); Frantz Jacques, Intersectionality of Regulatory Law and Development of Digital Assets, Bloomberg L.: Prac. Guidance (Dec. 2024). ↑

28. Regulation Crypto Assets, 91 Fed. Reg. 54510 (proposed Aug. 21, 2026). ↑

29. Press Release, U.S. Sec. & Exch. Comm’n, SEC Proposes to Modernize Rules for Registered Transfer Agents (Sep. 1, 2026). ↑

30. Id. (citing Chairman Atkins). ↑

31. Adviser and Regulated Fund Custody Rules, U.S. Sec. & Exch. Comm’n (proposed Oct. 1, 2026); Adviser and Regulated Fund Custody Rules, 91 Fed. Reg. 63870 (proposed Oct. 6, 2026). ↑

32. Statement, Paul S. Atkins, U.S. Sec. & Exch. Comm’n Chairman, Regulation Crypto Assets: A Token Safe Harbor (Mar. 17, 2026). ↑