Photo Credit: Alamy, US Tax Court Building – Washington DC USA, https://www.alamy.com/stock-photo/us-tax-court-building-washington.html?sortBy=relevant (last visited Jan. 28, 2026).

Authored by: Anna L. Dozier

The tax code allows the Internal Revenue Service (“IRS”) the ability to levy a taxpayer’s property if they are liable for a tax they are refusing or unable to pay.[1] Before a levy can be placed on their property, the taxpayer has the right to request a collection due process hearing to raise relevant issues regarding the unpaid tax or proposed levy.[2] An IRS appeals officer will consider the issues raised by taxpayers when making their determination.[3] If the taxpayer disagrees with the determination, they have 30 days to petition the Tax Court to review the appeals officer’s determination.[4] After the Tax Court’s decision, the taxpayer can appeal to a federal court of appeals.[5]

These are the procedural and administrative actions that Jennifer Zuch undertook trying to dispute the debt the IRS claimed she owed.[6] In 2012, both Zuch and her husband filed separate tax returns for the year 2010.[7] Although Zuch’s individual tax return indicated no tax liability, her husband’s separately filed return showed an outstanding balance.[8] After her husband submitted an offer in compromise, the IRS gave them a credit and settled his debts using estimated tax payments Zuch and her husband had previously paid to the IRS.[9]

Subsequently, Zuch amended her 2010 tax return to include additional income that had not been included on her original return.[10] The inclusion of previously unreported income increased her reported tax liability.[11] However, Zuch asserted that she was entitled to a refund on the grounds that the credit from prior payments made by both her and her husband to the IRS exceeded the tax liability due after her amended 2010 return.[12]

Because the IRS already credited the previous payments to her husband’s liability, they notified Zuch of their intent to levy her property.[13] At the requested collection due process hearing, Zuch’s arguments were denied.[14] Following this denial, she sought a different outcome at the Tax Court. The Tax Court sent the case back to the Office of Appeals, which again upheld the levy, so the case continued in the Tax Court.[15] Over the span of many years, while the case was being tried, Zuch kept filing tax returns that resulted in overpayments triggering a refund; however, instead of the refunds going to Zuch, the IRS credited all the refunded money to Zuch’s unpaid tax that is being disputed in Tax Court.[16]

Now that Zuch’s unpaid tax amount is zero, the IRS filed to dismiss the hearing for the levy on her property because, without a balance due, there is no justification for a levy, thus no Tax Court jurisdiction.[17] Zuch argued that the Tax Court still had jurisdiction because she raised the dispute of the allocation of her husband’s credit under the levy action.[18] The Tax Court ruled it lost its jurisdiction, but the Third Circuit Court of Appeals held that the issue was not moot because Zuch was authorized to raise the issue of the misplaced credit, as it is a “challenge to the existence or amount of the underlying tax liability.”[19]

The Supreme Court of the United States (“SCOTUS”) heard this case on Writ of Certiorari from the Third Circuit Court of Appeals. Justice Barrett delivered the opinion of the Court, ruling that the Tax Court lost its jurisdiction when there was no basis for the levy.[20] SCOTUS identified that “the Tax Court is a court of limited jurisdiction,”[21] and the tax code allows the Tax Court to have jurisdiction “to ‘review’ a ‘determination’ made by an appeals officer in a collection due process hearing.”[22] Thus, the issue before the court is what “determination” encompasses under § 6330(d)(1).[23]

To determine whether a “determination” only pertains to a decision regarding the levy or a decision on all issues raised at the collection due process hearing, SCOTUS looks to § 6330(c)(3).[24] This section of the tax code lays out considerations for when the appeals officer is making a determination, importantly, here, the “issues raised by the taxpayer.”[25] So while the appeals officer was required to consider Zuch’s raised issue regarding the allocation of the credit, the ultimate determination concerned only the levy.[26]

In fact, the rule for challenging a tax liability dispute requires the taxpayer to pay the tax before suing for a refund.[27] To dispute the use of her refund, Zuch would have had to sue, but because the IRS proposed the levy, Zuch was able to raise her issue in her collection due process hearing.[28] SCOTUS is clear on the purpose for a collections due process hearing under § 6330, stating “[t]he taxpayer may only raise issues that pertain to the levy.”[29] Recall that once the IRS used the refunds for Zuch’s tax liability, the proposed levy was dropped.[30] Therefore, the issue that Zuch raised in court regarding the allocation of the credit no longer pertained to a levy.[31]

Beyond the power granted by § 6330 to “enjoin any action or proceeding . . . only in respect of the unpaid tax or proposed levy to which the determination being appealed relates,” the Tax Court has no jurisdiction to provide further relief.[32] Zuch argues that the Tax Court can still grant her relief in the form of a declaration on the allocation of the credit because it was raised as an issue to the levy; however, SCOTUS stands firm in its holding that the Tax Court has no authority when there is no levy.[33]            

Thus, the judgment of the Third Circuit was reversed because the Tax Court was correct in its decision to dismiss Zuch’s appeal once there was no levy.[34] The only jurisdiction the Tax Court had in this proceeding was to make a determination on “whether the levy could (or could not) go forward.”[35] While making the initial determination, the Tax Court had to consider Zuch’s allocation issue, but after there was no basis for the levy, “there was no relevant determination for the Tax Court to review.”[36] Justice Gorsuch dissents, emphasizing that the court gave the IRS a “powerful new tool” in its decision, allowing it to avoid accountability while leaving taxpayers like Zuch without a worthwhile way to challenge the IRS.[37]

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[1] I.R.C. § 6331(a).

[2] Id. § 6330.

[3] Id. § 6330(c)(3).

[4] Id. § 6630(d)(1).

[5] Id. § 7482(a).

[6] Comm’r of Internal Revenue v. Zuch, No. 24-416, slip op. at 6 (U.S. June 12, 2025).

[7] Id. at 3.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Id.

[13] Zuch, No. 24-416, at 3.

[14] Id.

[15] Id.

[16] Id. at 3-4.

[17] Id. at 4.

[18] Id.; see I.R.C. § 6330(c)(2)(B).

[19] Zuch, No. 24-416, at 4; I.R.C. § 6330(c)(2)(B).

[20] Zuch, No. 24-416, at 8.

[21] Id. at 5 (citing Comm’r v. McCoy, 484 U.S. 3, 7 (1987) (per curiam).

[22] Zuch, No. 24-416, at 5; I.R.C. § 6330(d)(1).

[23] Zuch, No. 24-416, at 6.

[24] Id.; I.R.C. § 6330(c)(3).

[25] Zuch, No. 24-416, at 6; see I.R.C. § 6330(c)(3)(B).

[26] Zuch, No. 24-416, at 6.

[27] I.R.C. § 7421(a).

[28] Zuch, No. 24-416, at 6.

[29] Id. at 7; see I.R.C. § 6330(c)(2)(A).

[30] Zuch, No. 24-416, at 3.

[31] Id. at 7.

[32] Id.; I.R.C. § 6330(e)(1).

[33] Zuch, No. 24-416, at 7-8.

[34] Id. at 8.

[35] Id.

[36] Id.  

[37] Id. at 2 (Gorsuch, J., dissenting).

Photo Credit:  Photograph of Hermes Birkins, in Everything You Need to Know About the Hermes Birkin, Sotheby’s (Feb. 21, 2024), https://www.sothebys.com/en/articles/everything-you-need-to-know-about-the-hermes-birkin.

Authored by: Abigail C. Frazier

In Cavalleri v. Hermes International, luxury shoppers brought a class action challenging the sales practices of Hermes International and Hermes of Paris (collectively, “Hermes”).[1] In their complaint, the plaintiffs allege that Hermes requires customers to purchase other Hermes products to qualify for a famed Birkin bag, which plaintiffs argue constitutes an unlawful tying arrangement under the Sherman Act Sections 1 and 2,[2] as well as several California consumer-protection statutes.[3]

Hermes, founded by harness-maker Thierry Hermes in 1837,[4] has evolved into a global luxury brand, famous for its high-end goods, including leather bags, silk scarves, and shoes, to name a few.[5] The Birkin bag, at the center of this case, is famously expensive, notoriously difficult to purchase, and widely viewed as a “symbol of ultimate luxury.”[6] Plaintiffs Tina Cavalleri and others claimed that Hermes conditioned access to a Birkin on a customer’s willingness to purchase other Hermes products first, a practice they characterized as coercive and anticompetitive.[7] The lawsuit, filed in March of 2024 in the Northern District of California, sought class action status and attempted to frame Hermes’ sales strategy as an antitrust violation.[8]

The court previously dismissed the plaintiffs’ First Amended Complaint with leave to amend, finding the allegations insufficient on several core antitrust elements such as relevant product markets, market power, and antitrust injury.[9] As the court explained, the First Amended Complaint “did not plausibly allege relevant product markets, defendant’s market power within those markets, or an injury that the antitrust laws were intended to prevent.”[10]

Before the court in this instance was the plaintiffs’ Second Amended Complaint.[11] Plaintiffs alleged that Hermes “won’t sell them a famed Birkin bag unless they are ‘deemed worthy’ by buying other Hermes products.”[12] Plaintiffs argued that this conduct constitutes an “unlawful tying arrangement in violation of Sherman Act Section 1 and 2” as well as multiple California laws that the court ultimately declined to exercise supplemental jurisdiction over.[13] Hermes moved to dismiss the case pursuant to Federal Rules of Civil Procedure 8 and Rule 12(b)(6). Ultimately, Judge James Donato dismissed the case with prejudice on September 17, 2025, finding the plaintiffs still failed to “plausibly allege[] that Hermes engaged in anticompetitive conduct with respect to the Birkin bag.”[14] According to the court, the plaintiffs’ second attempt “did not provide any new facts that might have filled in the gaps in the prior complaint and raised plaintiffs’ antitrust theories above a purely speculative level.”[15] In other words, the plaintiffs repeated the same conclusions without supplying the factual basis antitrust pleading standards require.[16]

The court’s analysis focused heavily on tying arrangements.[17] Under antitrust law, a tying arrangement occurs when a seller conditions the sale of one product (the tying product) on the purchase of another distinct product (the tied product).[18] More specifically, a tying arrangement requires proof that: (1) two distinct products are tied, (2) the seller has market power in the tying market, and (3) the arrangement affects a significant volume of commerce in the tied product market.[19] Notably, tying practices are not per se illegal; rather, they require a demonstration of market power and harm to competition.[20] Like the First Amended Complaint, the Second Amended Complaint did not adequately define the relevant market for the Birkin bag nor did it establish Hermes’ market power within that market, relying instead on outdated academic sources and conclusory statements.[21]

While Plaintiffs alleged Hermes conditioned Birkin sales on other purchases, the court emphasized that these claims did not rise “above a purely speculative level.”[22] First, the plaintiffs’ market definition, “elitist luxury handbags in the United States,”[23] was conclusory and unsupported. As the court put it, the plaintiffs complaint “simply described consumer perceptions about product quality and exclusivity from more than a decade ago” which under antitrust law is “a far cry from properly defining a relevant market.”[24] Lastly, the Second Amended Complaint failed to allege competitive harm, which is “another essential element of a tying claim.”[25] The court highlights that plaintiffs attempt to allege that a “kaleidoscope of products” are a part of the tied market, practically everything from clothing and accessories to home décor, but also notes that “[t]he [Second Amended Complaint] is bereft of any facts that might support lumping such a hugely diverse array of non-substitutable products into a single market.”[26] Moreover, the Complaint lacks facts that Hermes illegally restrained the competition for the aforementioned goods.[27] The court concedes that Hermes may be reserving Birkins for their biggest spenders, but it emphasizes that this business practice is not illegal under antitrust law.[28]

The dismissal of this case reinforces a longstanding principle pertaining to pleading: courts require factual, rather than conclusory, allegations.[29] Less than a month after the court dismissed the case, plaintiffs filed a notice of appeal, and the case is now before the Ninth Circuit.[30] This appeal gives the plaintiffs another opportunity to test whether luxury-goods distribution practices like Hermes’s can fit within modern tying doctrine, though the Northern District of California’s reasoning suggests the plaintiffs will face the same challenges on review. In its dismissal, the court made a point to acknowledge the fact that this was the plaintiffs’ “third opportunity to state a plausible Sherman Act claim.”[31] The court went as far as saying plaintiffs had ample notice, yet they still failed to cure the deficiencies within their federal claims.[32] The decision in Cavalleri reinforces that luxury brands may remain somewhat exclusive without automatically triggering antitrust scrutiny, so long as they do not wield market power in a way that harms competition.

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[1] Cavalleri v. Hermes Int’l, No. 24-cv-01707-JD, 2025 WL 2662897, at *1 (N.D. Cal. Sept. 17, 2025).

[2] Id.; see also 15 U.S.C. §§ 1, 2.

[3] Id. (“[T]his amounts to an unlawful tying arrangement in violation of. . . the California Cartwright Act, Cal. Bus. & Prof. Code §§ 16720 et seq., the California Unfair Competition Law, Bus. & Prof. Code §§ 17200 et seq., the California False Advertising Law, Bus. & Prof. Code §§ 17200 et seq., and California common law.”).

[4] Hermes, https://www.hermes.com (last visited Jan. 13, 2026).

[5] See id.

[6] David Kully & Jennifer Lada, Hermes Bags Antitrust Win That Clarifies Luxury Tying Claims, Holland & Knight (Jan. 12, 2026), https://www.hklaw.com/-/media/files/insights/publications/2025/10/law360_hermesbagsantitrustwinthatclarifiesluxurytyingclaims.pdf?rev=0bccd15b8d0f4849a409e639a82e51af&hash=F8937FAA2481B6C1367A6982F7BDF4E4

[7] First Amended Class Action Complaint at 8, 11, No. 3:24-cv-01707-JD (N.D. Cal. May 30, 2024).

[8] See id.

[9] Cavalleri, 2025 WL 2662897, at *1.

[10] Id.

[11] Id.

[12] Id.

[13] Id. at*1, 3.

[14] Id. at *3.

[15] Cavalleri, 2025 WL 2662897, at *1.

[16] See generally Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984); N. Pac. Ry. Co. v. United States, 352 U.S. 980 (1957); Int’l Salt Co., Inc. v. United States, 332 U.S. 392 (1947); Illinois Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006).

[17] Cavalleri, 2025 WL 2662897, at *1-2.

[18] Id. at *2; see also Rick-Mik Enters., Inc. v. Equilon Enters., Inc., 532 F.3d 963, 971 (9th Cir. 2008).

[19] Cavalleri, 2025 WL 2662897, at *1, 2.

[20]Id. at *1.

[21] Id.

[22] Id.

[23] Second Amended Class Action Complaint at 6, No. 3:24-cv-01707-JD (N.D. Cal. Oct. 11, 2024).

[24] Cavalleri, 2025 WL 2662897, at *2.

[25] Id. at *3.

[26] Id.

[27] Id.

[28] Id.

[29] See generally Jefferson Par. Hosp. Dist. No. 2, 466 U.S. 2; N. Pac. Ry. Co., 352 U.S. 980; Int’l Salt Co., Inc., 332 U.S. 392; Illinois Tool Works, Inc., 547 U.S. 28.

[30] See Notice of Appeal, No. 3:24-cv-01707 (Oct. 7, 2025).

[31] Cavalleri, 2025 WL 2662897, at *3.

[32] Id.

Photo Credit: Federal Laws Versus State Laws (illustration), in Federal Laws Versus States Rights Re-Visited, USRESISTNEWS.ORG (Jan. 1, 2022), https://www.usresistnews.org/2022/01/04/federal-laws-versus-states-rights-re-visited/.

Authored by: Mary-Michael Rhodes

I. Introduction

On December 8, 2025, the Supreme Court issued a concise, per curiam opinion in Doe v. Dynamic Physical Therapy, LLC addressing the limits of a state’s authority to confer civil immunity where a plaintiff asserts claims arising under federal law.[1] Although the opinion itself is brief, the Court’s holding clarifies an important constitutional boundary regarding the relationship between state-created immunities and federally created causes of action. Specifically, the Court reaffirmed that while states retain broad authority to define liability under their own laws, they lack the power to immunize defendants from liability imposed by federal statutes.[2]

This decision is significant not because it announces a new doctrinal framework, but because it reinforces long-standing Supremacy Clause principals in a legal landscape increasingly shaped by expansive state immunity statutes. In recent years, particularly following the COVID-19 public health emergency, states have enacted sweeping liability shields designed to protect health care providers, emergency responders, and private entities operating under extraordinary conditions. Doe makes clear that such statutes may validly restrict state-law causes of action, but they cannot operate to bar federal claims, even when those claims are litigated in state court.[3]

As a result, Doe serves as a reminder that federal statutory rights occupy a distinct constitutional space. When Congress creates a federal cause of action, that cause of action must be adjudicated according to federal standards, free from state legislative interference that would otherwise undermine uniform enforcement.

II. Background of the Case

Doe arose out of a civil action brought against a Louisiana physical therapy clinic.[4] The plaintiff asserted claims under federal disability discrimination law, alleging that the clinic engaged in discriminatory conduct during the course of providing health care services.[5] In response, the clinic invoked a Louisiana statute enacted during a declared public health emergency which conferred civil immunity on certain health care providers for actions taken in connection with emergency-related services.[6]

The Louisiana Court of Appeals treated the immunity statute as a categorical bar to liability.[7] Importantly, the state court did not limit the statute’s application to state law claims; rather, it concluded that the immunity provision foreclosed all civil claims arising from the alleged conduct, including those grounded in federal law.[8] Under that reasoning, the source of the plaintiff’s rights—whether state or federal—was immaterial so long as the conduct occurred within the temporal and substantive scope of the state immunity statute.[9]

The United States Supreme Court reversed, rejecting the premise that a state legislature may define the reach of federal law by expanding the scope of immunity beyond state causes of action.[10] The Court emphasized that while Louisiana was free to limit liability under its own laws, it could not dictate the enforceability of rights created by Congress.[11]

III. The Supreme Court’s Holding

The Supreme Court framed the issue in direct and unambiguous terms. While acknowledging that “[d]efining the scope of liability under state law is a State’s prerogative,” the Court held that “a State has no power to confer immunity from federal causes of action.”[12] The Louisiana Court of Appeals therefore erred by applying a state immunity statute to dismiss claims arising under federal law.[13]

Notably, the Court declined to address the underlying merits of the plaintiff’s federal claims. Rather, it observed that those claims “may well fail on other federal grounds” and remanded the case so that the state court court address the federal issues in the first instance.[14] In doing so, the Court cited Cummings v. Premier Rehab Keller, P.L.L.C. as an example of how federal law itself may limit available remedies in certain statutory discrimination actions.[15]

This aspect of the opinion is critical. Doe does not expand federal liability or guarantee recovery for plaintiffs. Instead, it preserves the required order of analysis. Federal claims must be evaluated under federal law, even if they ultimately fail.[16] What states may not do is bypass that inquiry by invoking state law immunity as a threshold bar at the outset of the case.[17]

IV. The Constitutional Limits on State-Created Immunity

The holding in Doe rests squarely on the Supremacy Clause, which provides that federal law “shall be the supreme Law of the Land.”[18] Under this framework, state courts are required to apply federal law when adjudicating federal claims, regardless of contrary state statutes or policies.

The Supreme Court has repeatedly addressed this issue in prior cases. In Howlett v. Rose, the Court held that a state law sovereign immunity defense could not defeat a federal civil rights claim brought in state court.[19] Once Congress creates a federal cause of action, the Court explained, the elements, defenses, and scope of that claim are matters of federal law.[20] A state may not alter those features by invoking its own immunity doctrines.

Similarly, in Haywood v. Drown, the Court invalidated a state statute that effectively stripped state courts of jurisdiction over certain damages actions against corrections officers.[21] Although the statute did not explicitly target federal claims, its practical effect was to discriminate against federal civil rights actions, thereby violating the Supremacy Clause.[22]

More recently, the Court reaffirmed this principle in Williams v. Reed, where it rejected a state procedural scheme that created a “catch-22” preventing plaintiffs from ever bringing certain federal claims.[23] Even though the state framed the scheme as a neutral exhaustion requirement, the court held that states may not use procedural devices to accomplish indirectly what they cannot do directly: immunize defendants from federal liability.[24]

Doe fits neatly within this line of cases. Whether labeled as “immunity,” “jurisdiction,” or “procedure,” state rules that function to extinguish federal causes of action are incompatible with federal supremacy.

V. Practical Implications for Legislatures and Litigants

The Court’s decision in Doe carries meaningful implications for both state legislatures and civil litigants. First, it reinforces that immunity statutes require careful limitation and should not be broadly construed. While states may validly restrict state law tort liability, those restrictions must not be drafted or applied in a manner that reaches federal claims.[25]

Second, the decision reinforces the role of state courts as forums for the enforcement of federal rights. State courts possess concurrent jurisdiction over many federal causes of action and with that jurisdiction comes a constitutional obligation to apply federal law faithfully. A state court may dismiss a federal claim for lack of standing, failure to state a claim, or other valid federal grounds, but it may not rely on state law immunity as the basis for dismissal.[26]

Third, Doe has particular relevance in areas such as health care regulation, emergency response, and privatized public services. As states continue to experiment with liability-limiting statutes to address perceived litigation burdens, Doe serves as a caution that those statutes cannot override federally protected rights.

VI. Conclusion

Although brief, Doe v. Dynamic Physical Therapy, LLC reaffirms a foundational principle of constitutional law: states may define the scope of liability under their own laws, but they may not confer immunity from federal causes of action.[27] In doing so, the Supreme Court preserved the supremacy and uniform application of federal law while respecting the traditional authority of states to regulate state law claims.

For courts and litigants alike, Doe provides clear guidance. When a plaintiff asserts a claim arising under federal law, that claim must rise or fall on federal grounds alone.[28] State-created immunities, however broadly framed, cannot stand as a barrier to the enforcement of federal rights.[29]

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[1] Doe v. Dynamic Physical Therapy, LLC, 223 L. Ed. 2d 222, 223 (2025).

[2] Id.

[3] Id.

[4] Doe v. Dynamic Physical Therapy, LLC, 404 So. 3d 1008, 1011 (La. Ct. App. 2024), rev’d, 223 L. Ed. 2d 222 (2025).

[5] Id.

[6] Id. at 1013-14.

[7] Id. at 1014-16.

[8] Id. at 1017-18.

[9] Id. at 1018.

[10] Doe v. Dynamic Physical Therapy, LLC, 223 L. Ed. 2d 222, 223 (2025).

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id. (citing Cummings v. Premier Rehab Keller, P.L.L.C., 596 U.S. 212, 222 (2022)).

[16] Doe, 223 L. Ed. 2d at 223.

[17] Id.

[18] U.S. Const. art. VI, cl. 2.

[19] 496 U.S. 356, 383 (1990).

[20] Id. at 376 (citing Owen v. Independence, 445 U.S. 622, 647 n. 30 (1980)).

[21] 556 U.S. 729, 736 (2009).

[22] Id. at 741-42.

[23] 604 U.S. 168, 170 (2025).

[24] Id. at 177.

[25] Doe, 223 L. Ed. 2d at 223; Howlett v. Rose, 496 U.S. 356, 383 (1990); Haywood, 556 U.S. at 740; Williams, 604 U.S. at 174.

[26] Doe, 223 L. Ed. 2d at 223.

[27] Id.

[28] Id.

[29] Id.

Photo Credit: What Is a Hostile Work Environment in California?, Azadian Law Group, PC, https://azadianlawgroup.com/what-is-hostile-work-environment-in-california/ (last visited Jan 4, 2026).

Authored by: Annabelle F. Holliday

Title VII of the Civil Rights Act prevents an employer from discriminating against an individual based on race, color, religion, sex, or national origin.[1] One way a plaintiff may show workplace discrimination is by proving that the discrimination has caused a hostile work environment, defined as conduct that is so severe or pervasive that it alters the conditions of employment and creates an abusive working atmosphere.[2] Recently, the Supreme Court’s decision in Muldrow v. City of St. Louis lowered the harm requirement for certain discriminatory acts.[3] Specifically, the Court held that a Title VII plaintiff challenging a job transfer need only show “some harm” or that the action made them “worse off” with respect to the terms or conditions of employment, thus unanimously rejecting the requirement that the harm be “significant” or “material.”[4]  Since the Muldrow decision, courts have grappled with whether it also impacts hostile work environment claims. The Sixth Circuit in McNeal v. City of Blue Ash applied Muldrow‘s holdingto both discrete action and hostile work environment claims.[5] However, in Russell v. Driscoll, the Tenth Circuit created a circuit split by rejecting the Sixth Circuit’s approach and concluding that Muldrow does not apply to hostile work environment claims.[6]

In Russell, a civilian employee of the U.S. Army alleged that his female supervisor subjected him to gender-based discrimination that created a hostile work environment.[7] The conduct he identified included being excluded from meetings and leadership email chains, being reassigned in ways that reduced his responsibilities, and being required to follow procedural barriers not imposed on female employees.[8] After complaints of the alleged discriminated, an internal Army investigation was conducted.[9] The investigation report concluded that male employees were treated less favorably, a violation of the Army’s equal-opportunity policy.[10] The investigation also reported that the supervisor “created a hostile work environment.”[11] Moreover, the investigation denied any wrongdoing of Russell.[12] Despite these findings, the district court granted summary judgment to the employer, holding that the discrimination was not “sufficiently severe or pervasive to meet the legal standard for a hostile work environment” under Title VII.[13]

On appeal Russell relied on Muldrow, arguing that the Supreme Court’s rejection of the “significant” harm requirement should also apply to hostile work environment claims.[14] In short, Russell argued that the Muldrow decision undermined the requirement that hostile work environment claims be supported by conduct that is “severe or pervasive.”[15] However, the Tenth Circuit rejected that argument and instead drew a distinction between discrete discriminatory acts found in Muldrow and hostile work environment claims.[16] Relying on Supreme Court precedent such as Meritor Savings Bank v. Vinson, Harris v. Forklift Systems, and National Railroad Passenger Corp. v. Morgan, the court emphasized that hostile work environment claims are different from claims based on isolated employment actions because discrete acts, such as transfers or demotions, are actionable on their own, while hostile work environment claims depend on the effect of repeated conduct that affects the workplace.[17] If any workplace slight that made an employee “worse off” were sufficient, the “severe or pervasive” requirement would lose its meaning.[18] Notably, the court explained that “the Supreme Court has made clear that the severity/pervasiveness inquiry is ‘crucial’ for ‘prevent[ing] Title VII from expanding into a general civility code.’”[19] Thus, the Tenth Circuit clarified that not all unfair or unpleasant behavior, even if discriminatory, rises to the level of a hostile work environment. Instead, it must still be severe or pervasive.

The Tenth Circuit also declined to give controlling weight to the Army’s internal investigative findings.[20] While such findings may be relevant, the court made clear that an employer’s internal characterization of a workplace as “hostile” does not override the legal framework governing Title VII claims.[21] Additionally, the court asserted that Russell failed to develop a legal argument connecting those findings to the “severe or pervasive” requirement, and thus the court concluded the argument was waived for lack of development.[22] Importantly, the court recognized that the Sixth Circuit had reached a different result in McNeal, where the court implied that Muldrow applies to hostile work environment claims in the same way it applies to discrete discriminatory acts.[23] However, the Tenth Circuit expressly declined to follow that approach and asserted that it disagreed with the Sixth Circuit’s reasoning.[24] Ultimately, the court affirmed summary judgment for the employer, holding that the conduct alleged did not rise to the level required to establish a hostile work environment.[25] In doing so, the Tenth Circuit’s decision in Russell reinforces that Muldrow did not rewrite the hostile work environment doctrine. Instead, the traditional framework remains intact, and thus plaintiffs still must show that discriminatory conduct was so severe or pervasive as to alter the conditions of employment and create an abusive working atmosphere.

Finally, it is important to note that Russell is only binding within the Tenth Circuit. As a result, courts in other jurisdictions may ultimately take a different view on whether Muldrow applies to hostile work environment claims, such as the Sixth Circuit did in the McNeal decision.[26] Nonetheless, though Muldrow may expand liability for certain discrete employment actions, hostile work environment claims in many courts likely remain subject to the severe/pervasive standard rooted in Supreme Court precedent. Importantly, Russell has clear implications for trial attorneys: in hostile work environment claims, plaintiffs must show severe or pervasive conduct, while defendants should rely on that standard to challenge claims. Accordingly, the Russell decision confirms that some courts will continue to draw a meaningful line between actionable discrimination and workplace conduct that, though inappropriate or unfair, does not meet the standard of a legally hostile work environment.

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[1] Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e–2000e-17 (2018).

[2] See, e.g., Harris v. Forklift Sys., Inc., 510 U.S. 17, 21‑22 (1993) (barring harassment based on race, religion, sex, or national origin).

[3] 601 U.S. 346, 355 (2024).

[4] Id. at 354, 359. 

[5] 117 F.4th 887, 900 (6th Cir. 2024).

[6] Russell v. Driscoll, 157 F.4th 1348, 1353 (10th Cir. 2025).

[7] Id. at 1349.

[8] Id. at 1349-50.

[9] Id. at 1350.

[10] Id.

[11] Id. at 1353.

[12] Russell, 157 F.4th at 1353.

[13] Id.

[14] Id. at 1351.

[15] Id.

[16] Id. at 1352 (“Hostile environment claims are different in kind from discrete acts. Their very nature involves repeated conduct . . . over a series of days or perhaps years and, in direct contrast to discrete acts, a single act of harassment may not be actionable on its own.”). 

[17] Id. at 1350-52, See Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 110 (2002) (stating that there are two major types of discrimination a plaintiff can allege: discrete discriminatory acts and hostile work environment claims); Harris v. Forklift Sys., Inc., 510 U.S. 17, 21 (1993) (“[T]he workplace is permeated with discriminatory intimidation, ridicule, and insult that is sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment[.]”); Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 67 (1986) (explaining that alleged conduct must be sufficiently severe or pervasive).

[18] Russell, 157 F.4th at 1352 (“[I]f Muldrow implicitly abrogated the severity/pervasiveness analysis for a hostile-environment claim (as Russell contends), then Muldrow abrogated the hostile-environment claim.”).

[19] Id. (quoting Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 81 (1998)).

[20] Id. at 1353.

[21] Id.

[22] Id.

[23] Russell, 157 F.4th at 1352; McNeal, 117 F.4th at 900.

[24] Russell, 157 F.4th at 1352.

[25] Id.

[26] McNeal, 117 F.4th at 900.

Photo Credit: Fed. Bureau of Investigation, White Collar Crime: Health Care Fraud, https://www.fbi.gov/investigate/white-collar-crime/health-care-fraud (last visited Sep. 10, 2025).

Authored by: Sarah K. Conway

On February 18, 2025, the First Circuit joined two of its sister circuits in ruling that the 2010 amendment to the Affordable Care Act (“ACA”) imposed a “but-for” causation standard for determining whether a violation of the Anti-Kickback Statute may also create liability under the False Claims Act.[1] The Anti-Kickback Statute (“AKS”) makes it a crime to knowingly and willfully solicit or receive “any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind” in exchange for payment made under a federal health care program.[2] Conversely, the False Claims Act (“FCA”) is a civil statute that imposes liability for knowingly presenting false or fraudulent claims to the federal government for payment or approval.[3]

Although distinct, these health care fraud and abuse laws are often interwoven.  The most prominent example of this link is inscribed in the 2010 amendment to the ACA, which allows criminal violations under the AKS to form the basis of civil liability under the FCA.[4] The amendment specifically states that a claim “that includes items or services resulting from a violation” of the AKS will constitute a false or fraudulent claim sufficient to also impose liability under the FCA.[5] Recently, this “resulting from” language within the amendment has become the center of an ongoing circuit split that asks whether the language was intended to impose a “but-for” causation requirement or some lesser causation standard.[6] 

The differences in these standards can be vast.  For instance, a but-for causation standard requires the plaintiff to prove that, without the defendant’s action, they would not have sustained the alleged injuries.[7]  Compare this standard with a “causal link” standard which merely requires some recognizable link between “the alleged kickbacks and the medical care received by at least one of [the defendant’s] federally insured patients.”[8]  Defining the precise causation standard is crucial as it impacts the evidentiary burden for plaintiffs along with the breadth of potential liability for defendants.[9] 

This burden of proof analysis took center stage in the First Circuit case of United States v. Regeneron Pharmaceuticals.[10] At issue in this case is an alleged violation of the AKS that stems from Regeneron’s prescriptions of a costly drug used to treat neovascular age-related macular degeneration.[11] This drug, called Eylea, is administered in office via an injection that costs $1,850 per patient, per dose.[12] As the First Circuit notes, “Medicare Part B has spent over $11.5 billion on Eylea,” making the drug an economic powerhouse for manufacturers like Regeneron.[13]  According to the government, Regeneron developed a rebate scheme to induce Medicare Part B beneficiaries to purchase Eylea by refunding any co-pays associated with the prescription.[14] The alleged refunds were not made directly to beneficiaries.[15] Rather, they took the form of donations to a charity that provides financial assistance to those suffering with the same disease Eylea is designed to treat.[16]  While genuine donations to charitable foundations are permitted under federal law, the Department of Health and Human Services (“HHS”) has warned about the fine line between donations and so-called “rebate conduits,” such as the one Regeneron allegedly developed.[17]

At trial, the government argued that Regeneron’s AKS rebate scheme was sufficient to form the basis of an FCA claim because the words “resulting from” in the 2010 amendment merely require a causal link between patient exposure to the rebate scheme and provider claims for reimbursement.[18] The government’s adoption of this lesser causation standard aligned with that of the Third Circuit, which held that but-for causation was “too exacting” of a standard.[19] Contrarily, Regeneron argued that actual influence or causation, also termed but-for causation, must exist to link a violation of the AKS to an FCA claim.[20] Regeneron’s position aligned with that of the Sixth and Eighth Circuits, which both interpreted the phrase “resulting from” to indicate a but-for causation requirement.[21] 

Upon review, the First Circuit sided with Regeneron’s interpretation—and by extension the Sixth and Eighth Circuits—and ruled that the “resulting from” language imposed a “requirement of actual causality, which in [the] ordinary course takes the form of but-for causation.”[22]  The First Circuit emphasized that the Supreme Court has regularly held the phrase “resulting from” to constitute a but-for causation requirement absent textual indication to the contrary.[23] Despite this, the government continued to argue that imposition of a but-for causation requirement would upend the false certification theory of FCA liability.[24] While the First Circuit agreed that there had been no change to false certification case law which would impose a but-for causation requirement, it clarified that liability under the false certification theory is distinct from liability brought under the 2010 amendment.[25] In other terms, the 2010 amendment offers an alternative pathway for establishing a violation of the FCA that does not require the same elements as the false certification theory.[26]

Other circuits have held similarly to the First.[27]  For example, in 2024, the Seventh Circuit interpreted the phrase “resulting from” to require a causal nexus between a defendant’s violation of the FCA and their involvement with an illegal kickback scheme.[28] Although the Supreme Court has yet to weigh-in on the issue, the ongoing circuit split seems to be gaining enough traction to place it on the Court’s radar.  The resolution of the split is likely to have monumental repercussions for health care attorneys.  If the Supreme Court were to side with the majority and impose a but-for causation requirement, there will be an increased burden on whistleblowers and the government to present evidence of a genuine connection between an AKS violation and the associated false claims.[29]  This heightened causation requirement would also provide defense teams with another avenue to combat AKS based FCA claims, ultimately tipping the burden of proof scale for such health care fraud cases in favor of defendants.[30]

---

[1] United States v. Regeneron Pharms., Inc., 128 F.4th 324, 336 (1st Cir. 2025).

[2] 42 U.S.C. § 1320a-7b(b).

[3] 31 U.S.C. § 3729(a)(1).

[4] Patient Protection & Affordable Care Act, Pub. L. No. 111-148, § 6402(f)(1), 124 Stat. 119, 759 (2010) (codified as amendment at 42 U.S.C. § 1320a-7b(g)).

[5] 42 U.S.C. § 1320a-7b(g) (emphasis added).

[6] Regeneron Pharms., Inc., 128 F.4th at 326; see also Andrew McGirty, Cracking Causation: The Need for a Workable Link Between the Anti-Kickback Statute and False Claims Act, 74 Case W. Rsrv. L. Rev. 429, 452-57 (discussing the opinions of the First, Third, Sixth, and Eighth Circuits).

[7] Univ. of Tex. S.W. Med. Ctr. v. Nassar, 570 U.S. 338, 346-47 (2013); Stuart M. Speiser, Charles F. Krause & Alfred W. Gans, 3 American Law of Torts § 11:6 (Monique C. M. Leahy, ed., 2025); see also Robin Dembroff & Issa Kohler-Hausmann, Supreme Confusion About Causality at the Supreme Court, 25 CUNY L. Rev. 57, 69-70 (2022) (discussing the but-for causation test under modern tort law and approaches to alleviating its ambiguity).

[8] United States ex rel. Greenfield v. Medco Health Sols., 880 F.3d 89, 100 (3d Cir. 2018).

[9] See, e.g., Nassar, 570 U.S. at 358 (“Even if the employer could escape judgment after trial, the lessened causation standard would make it far more difficult to dismiss dubious claims at the summary judgment stage.”); Nesbitt v. Candler Cnty., 945 F.3d 1355, 1358 (11th Cir. 2020) (“To avoid losing, [Plaintiff] argues for application of the motivating factor standard.  That more plaintiff-friendly standard requires only a showing that the protected conduct ‘was a motivating factor for any employment [decision].’” (second alteration in original) (quoting Nassar, 570 U.S. at 349)).

[10] Regeneron Pharms., Inc., 128 F.4th at 327-38.

[11] Id. at 326.

[12] Id.

[13] Id.

[14] Id. at 326-27.

[15] Id.

[16] Regeneron Pharms., Inc., 128 F.4th at 327.

[17] Id.; Publication of OIG Special Advisory Bulletin on Patient Assistance Programs for Medicare Part D Enrollees, 70 Fed. Reg. 70623-03 (Nov. 22, 2005).

[18] Regeneron Pharms., Inc., 128 F.4th at 327; see Greenfield., 880 F.3d at 100 (“A kickback does not morph into a false claim unless a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.” (emphasis added)).

[19] Greenfield, 880 F.3d at 100.

[20] Regeneron Pharms., Inc., 128 F.4th at 327-38; see United States ex rel. Martin v. Hathaway, 63 F.4th 1043, 1052 (“The ordinary meaning of ‘resulting from’ is but-for causation.”).

[21] Martin, 63 F.4th at 1052-53; United States ex rel Cairns v. D.S. Med., LLC, 42 F.4th 828, 834 (8th Cir. 2022).

[22] Regeneron Pharms., Inc., 128 F.4th at 330.

[23] Id. at 329.

[24] Id. at 333 (“Under [the false certification] pathway, it is not the AKS violation itself that renders the claim false.  Rather, it is the false representation that there is no AKS violation.”)

[25] Id. at 334.

[26] Id. 333-34.

[27] Stop Ill. Health Care Fraud, LLC v. Sayeed, 100 F.4th 899, 908 (7th Cir. 2024).

[28] Id. at 908-09 (acknowledging the current circuit split but declining explicitly adopt a precise standard for causation); see also United States ex rel Wilkerson v. Allergan Ltd., No. 22-CV-3013, 2025 WL 1181010, at *9-10 (N.D. Ill. Apr. 23, 2025) (relying on Regeneron in holding that “resulting from” indicates a but-for causation requirement).

[29] Compare Greenfield, 880 F.3d at 97 (finding that neither the Anti-Kickback Statute nor False Claims Act “requires a plaintiff to show that a kickback directly influenced a patient’s decision to use a particular medical provider”), with D.S. Med., LLC., 42 F.4th at 836-37 (“[W]hen a plaintiff seeks to establish falsity or fraud through the 2010 amendment, it must prove that a defendant would not have included particular ‘items or services’ but for the illegal kickbacks.”).

[30] See Hathaway, 63 F.4th at 1054 (requiring the government establish at least “one claim for reimbursement identified with particularity . . . that would not have occurred anyway” to meet causation requirements under an AKS-based FCA claim).

Photo Credit: Cara Halligan, Protecting Democracy Through Checks and Balances, The Hawk, https://sjuhawknews.com/36446/opinions/protecting-democracy-checks-balances/ (last visited Aug. 17, 2025).

Authored by: Bennett N. Vest

On June 27, 2025, the Supreme Court addressed the issue of whether federal district courts could issue universal injunctions in Trump v. Casa, Inc.[1] In a 6-3 decision, authored by Justice Barrett, the Court reversed the courts of appeals and granted the government’s applications for partial stays because (1) the government was likely to succeed on the merits that universal injunctions were beyond the power of federal courts under the Judiciary Act and (2) that the government showed a likelihood of irreparable harm.[2]

On January 20, 2025, President Trump issued an executive order revoking automatic birthright citizenship for children born in the United States with alien parents.[3] Almost as soon as President Trump signed the order, many states and groups filed for universal injunctions in federal district courts to stop the President from enforcing the executive order.[4] Three district courts issued universal injunctions against the executive branch and the president, and the court of appeals denied the government’s partial petition to stay.[5] The Supreme Court heard oral arguments on the case after the government filed emergency appeals.[6]

District courts issuing universal injunctions are relatively new, but they have become increasingly popular since George W. Bush’s presidency. [7] They block the executive branch from implementing its own policies that are “unconstitutional.”[8] In the first one hundred days of President Trump’s second term, 25 universal injunctions were issued against President Trump and the Executive Branch.[9] Under the Judiciary Act, federal courts have power over cases “in equity,” but the question is whether universal injunctions are included as part of their equitable powers.[10]

 Without addressing the substance of the executive order, the majority opinion only addressed the power of federal district courts to issue universal injunctions.[11] Under a historical analysis, the majority opinion rejected the dissents arguments that universal injunctions (1) have a historical basis in American law, (2) provide complete relief for parties, and (3) serve “important policy objectives.”[12] Going back to the Court of Chancery in England, the majority opinion concluded that universal injunctions were not historically part of our system of law.[13] Moreover, our current system distinguishes complete relief from universal relief by providing aggregated relief in the form of class action lawsuits or formerly Bills of Peace in England.[14] Therefore, the government proved that it was likely that the Judiciary Act did not include universal injunctions as a form of equitable relief.

To grant the partial stays for the government, the government also had to provide enough evidence to suggest that the executive branch was likely to suffer “irreparable harm” if the stay was not granted.[15] The Court ruled that universal injunction by itself causes irreparable harm because it cannot enforce its own policies.[16]

Justice Thomas, Alito, and Kavanaugh wrote separate concurring opinions, with Justice Gorsuch joining Justice Thomas’ concurrence and Justice Thomas joining Justice Alito’s concurrence.[17]  Justice Thomas advocated for a “plaintiff-specific injunction” while Justice Alito focused on third-party standing and class certification.[18] Finally, Justice Kavanaugh’s concurrence focused on the Supreme Court’s power to rule on such injunctions and equitable relief.[19] In opposition to the majority’s ruling, Justice Sotomayor, joined by Justice Kagan and Jackson, and a separate dissent by Justice Jackson, uphold universal injunctions as an appropriate equitable remedy, but the majority of the dissenting opinions focus on the substance of the executive order.[20]

This ruling comes at a time where the concept of federalism and the power of the presidency are constantly being challenged by President Trump. To date, President Trump is on pace to set a record number of executive orders during his second term.[21] These orders have caused disagreements amongst his “political enemies” over politics and policy, and these battle are being played out in venues favorable to the Plaintiffs, resulting in universal injunctions being granted.[22] As a result of “weaponizing the courts,” there is increasing skepticism that the courts are not impartial but rather that they impose their own political beliefs.[23] Even some members of the Supreme Court have made these accusations of their own colleagues by stating their recent rulings favor of President Trump.[24]

Beyond Casa, the question remains whether Executive Order 14160 is constitutional. Justice Barrett and the other justices joining the majority opinion did not opine or indicate how it would rule on that issue, but the dissenting opinions make it clear that they believe President Trump and the executive branch overstepped their constitutional bounds.[25] It is plausible that the Court would rule that Executive Order 141460 exceeds constitutional bounds in the future.  However, the Casa decision limited district courts’ powers to issue universal injunctions. It does not suggest that district courts cannot rule that executive orders are unconstitutional, but that the remedy needs to be more specific or tailor to the person or persons seeking the relief. With the Supreme Court defining the powers of federal courts, the hope is that courts will not be used as much for favorable rulings and the three branches of government can operate more effectively within their defined constitutional powers.

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[1] See 145 S. Ct. 2540 (2025).

[2] See id. at 2549.

[3] Exec. Order No.14160, 90 Fed. Reg. 8449 (Jan. 20, 2025) (restricting birthright citizenship when “(1) when that person’s mother was unlawfully present in the United States and the father was not a United States citizen or lawful permanent resident at the time of said person’s birth, or (2) when that person’s mother’s presence in the United States at the time of said person’s birth was lawful but temporary (such as, but not limited to, visiting the United States under the auspices of the Visa Waiver Program or visiting on a student, work, or tourist visa) and the father was not a United States citizen or lawful permanent resident at the time of said person’s birth”).

[4] See Mike Catalini, 22 States Sue to Stop Trump’s Order Blocking Birthright Citizenship, AP News (Jan. 21, 2025), https://apnews.com/article/birthright-citizenship-trump-executive-order-immigrants-fc7dd75ba1fb0a10f56b2a85b92dbe53.

[5] See Casa, Inc. v. Trump, 763 F. Supp. 3d 723 (D. Md. 2025); Washington v. Trump, 765 F. Supp.3d 1142 (W. D. Wash. 2025); Doe v. Trump, 766 F.Supp.3d 266 (D. Mass 2025).

[6] See Casa, Inc., 145 S. Ct. at 2540.

[7] See id. at 2553 (stating that universal injunctions were not used until the 20th century).

[8] Id. at 2548.

[9] See Joanna R. Lampe, Nationwide Injunctions in the First Hundred Days of the Second Trump Administration, Congressional Research Service (updated May 16, 2025)https://www.congress.gov/crs-product/R48476.

[10] See Casa, Inc., 145 S. Ct. at 2551.

[11] See id. at 2562-63.

[12] Id. at 2554.

[13] See id. at 2551.

[14] See id. at 2555.

[15] Id. at 2562.

[16] See Casa, Inc., 145 S. Ctat 2562.

[17] See id. 145 S. Ct. at 2563 (Thomas, J., concurring); Casa, Inc., 145 S. Ctat 2565 (Alito, J., concurring); Casa, Inc., 145 S. Ctat 2567 (Kavanaugh, J. concurring).

[18]  See Casa, Inc., 145 S. Ct. at 2565.

[19] See id. at 2567.

[20]  See id. at 2574 (Sotomayor, J. dissenting); Casa, Inc., 145 S. Ctat 1596 (Jackson, J., dissenting).

[21] See Bert Jensen, Everything’s an ‘Emergency’: How Trump’s executive order record pace is testing the courts, USA Today, (April 5, 2025), https://www.usatoday.com/story/news/politics/2025/04/05/trump-executive-orders-lawsuits-emergencies/82792612007/.

[22] See Katrina Kaufman & Matt Clark, The Courts Where Nationwide Injunctions are Originating, CBS News (May 15, 2025, 11:12 P.M.), https://www.cbsnews.com/news/courts-nationwide-injunctions-originating/.

[23] See Benedict Vigers & Lydia Saad, Americans Pass Judgement on Their Courts, Gallup (Dec. 16, 2024), https://news.gallup.com/poll/653897/americans-pass-judgment-courts.aspx.

[24] Trump v. U.S., 603 U.S. 593, 684 (2024) (highlighting that Justice Sotomayor stated that the majority’s opinion made the president “a king above the law”).

[25] See Casa, Inc.,145 S. Ct. at 2674.

Photo Credit: Kevin Dietsch/Getty Images, Photograph of demonstrators outside of the U.S. Supreme Court during arguments regarding a Tennessee law banning controversial gender-affirming care for trans youth in U.S. Department of Justice backs out of Tennessee transgender care case (Dec. 4, 2024), https://tennesseelookout.com/2025/02/07/u-s-department-of-justice-backs-out-of-tennessee-transgender-care-case/.

Authored by: Arielle H. Foster

On March 22, 2023, Tennessee’s Senate Bill 0001 (SB1) was passed, amending the Tennessee Code to prohibit healthcare workers from performing on or administering to a minor certain medical procedures if the purpose of the procedures is to enable the child to “identify with, or live as, a purported identity inconsistent with the minor’s sex.”[1] Following the SB1’s enactment, three families raising transgender youth and a Memphis doctor sued the state of Tennessee in 2023, and the federal government, under President Biden’s administration, stepped in to carry the plaintiff’s challenge. [2] The U.S. Supreme Court heard argument on December 4, 2024 and two months later, the U.S. Department of Justice under President Trump’s administration withdrew their challenge of the Tennessee law stating “the government’s previously stated views no longer represent the United States’ position.”[3] Regardless, the Supreme Court continued toward a ruling, noting that the Government did not request a dismissal and rather requested “prompt resolution” as the ruling will control many pending cases in lower courts.[4]

In a slip opinion decided on June 18, 2025, the U.S. Supreme Court voted in a 6-3 decision to uphold the Tennessee law, ruling that the “law prohibiting certain medical treatments for transgender minors is not subject to heightened scrutiny under the Equal Protection Clause of the Fourteenth Amendment and satisfies rational basis review.”[5] In their opinion, Justice Roberts noted that laws containing “sex-based classifications” are subject to intermediate scrutiny, requiring the State to show the “classification serves important governmental objectives and that the discriminatory means employed are substantially related to the achievement of those objectives.”[6] However, the Court disagreed with Plaintiff’s argument that heightened scrutiny was warranted as this law relies on sex-based classifications, finding that SB1 prohibits the administration of puberty blockers and hormones to “minors for certain medical uses, regardless of a minor’s sex.”[7]

The Supreme Court determined that the only two classifications incorporated in SB1 are (1) based on age, as treatments can be administered to adults, but not minors; and (2) the basis of medical use, as the use of these procedures may be used to treat conditions in minors, but not to treat children for the purpose of treating gender dysphoria or gender identity disorders; both of which are only subject to a rational basis review.[8] Finding that Tennessee established a “legitimate, substantial and compelling interest in protecting minors from physical and emotional harm,” and acknowledges Tennessee’s finding that “the prohibited medical treatments are experimental, can lead to later regret, and are associated with harmful-and sometimes irreversible-risks.”[9]

The plaintiffs further argued that SB1 discriminates against transgender individuals, which constitute a “quasi-suspect class” and thus warrants higher scrutiny, but the Supreme Court again disagreed.[10] The Court emphasized that regulating a medical procedure that only one sex can undergo does not trigger higher scrutiny unless it is a pretext for invidious sex discrimination.[11] This does not qualify as such, because SB1 is not excluding an individual from eligibility because of their sex, “but rather ‘remove[d] one physical condition . . . from the list of compensable disabilities,” ultimately stating that individuals aren’t excluded from medical treatments on the basis of being transgender, it is simply removing those diagnoses from the treatable conditions.[12]

Justice Sotomayor dissented, claiming that the law “expressly classifies on the basis of sex and transgender status.”[13] She was joined by her fellow democratic party appointees, Justices Kagan and Jackson, in explaining that: [i]n addition to discriminating against transgender adolescents, who by definition ‘identify with’ an identity ‘inconsistent’ with their sex, that law conditions the availability of medications on a patient’s sex. Male (but not female) adolescents can receive medicines that help them look like boys, and female (but not male) adolescents can receive medicines that help them look like girls.”[14]

Tennessee is one of 27 states that restrict medical care for transgender youth, and this Supreme Court ruling could affect dozens of states.[15] The Tennessee Attorney General, Jonathan Skrmetti, praised the Supreme Court’s ruling, calling it a “historic Supreme Court win” and further stated, “the common sense of Tennessee voters prevailed over judicial activism.”[16] Alternatively, however, transgender-rights activists called this decision “a punch in the gut for the transgender community,” as she believes the prohibited care in this case is “life-saving” in many cases.[17]

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[1] S.B. 0001, 113th Gen. Assemb., 1st Extra.. Sess. (Tenn. 2023), https://legiscan.com/TN/bill/SB0001/2023 (summarizing Senate Bill 0001 as enacted); SB0001 Bill Summary, Tenn. Gen. Assemb., https://wapp.capitol.tn.gov/apps/Billinfo/default.aspx?BillNumber=SB0001&ga=113 (last visited Aug. 11, 2025).

[2] Sam Stockard, U.S. Department of Justice backs out of Tennessee transgender care case, Tenn. Lookout, Feb. 7, 2025, https://tennesseelookout.com/2025/02/07/u-s-department-of-justice-backs-out-of-tennessee-transgender-care-case/.

[3] Id.

[4] Id.

[5] United States v. Skrmetti, 145 S. Ct. 1816, 1821 (2025); Greg Stohr, Supreme Court Upholds Curbs on Care for Transgender Minors, Bloomberg News, Jun. 18, 2025, https://www.bloomberglaw.com/product/blaw/bloombergterminalnews/bloomberg-terminal-news/SY2382DWLU68?criteria_id=8ca6b6280b2dc7ead434cbe7e4f43497.

[6] Skrmetti, 145 S. Ct. at 1828-29 (quoting J. Ginsburg in United States v. Virginia, 518 U.S. 515, 533).

[7] Id. at 1829.

[8] Id.

[9] Id. at 1832.

[10] Id.

[11] Id. at 1833.

[12] Skrmetti, 145 S. Ct. at1833.

[13] Id. at 1868; Stohr, supra note 5.

[14] Skrmetti, 145 S. Ct. at 1868.

[15] Stohr, supra note 5.

[16] Id.

[17] Id.

Photo Credit: Building a Workers’ Comp Policy for GA Staffing Agencies, Work Comp Options Program (Aug. 5, 2025), https://workcompoptions.com/building-a-workers-comp-policy-for-ga-staffing-agencies/.

Authored by: Brady W. Heard

Background of Alabama’s Workers’ Compensation Act

Since the adoption of Alabama’s first Workers’ Compensation Act in 1919, the Alabama legislature has provided a statutory remedy for individuals sustaining injuries while in the line and scope of their employment.[1] The codification of a statutory compensation scheme serves as a means to ensure that workers receive adequate monetary relief, in lieu of potentially receiving inconsistent or inadequate remedies through the common law system.[2] Prior to codifying Alabama’s Workers’ Compensation Act (“the Act”), employers were capable of asserting several “common-law defenses,” ultimately preventing employees from recovering monetary relief for their on-the-job injuries.[3] Before the codification of Alabama’s Workers’ Compensation Act, employers and co-employees could assert the common-law defenses of “contributory negligence, assumption of risk, and [the] fellow servant doctrine” to limit recovery for workplace injuries.[4]

Two key features of the Act—which have recently become a point of contention—are the exclusivity provision[5] and the non-severability clause.[6] The exclusivity provision ultimately bars a litigant from initiating a negligence action against their employer to recover damages for injuries or death resulting from a workplace accident.[7] In other words, the exclusivity provision provides a blanket of substantive immunity for employers receiving coverage under the Act, shielding the employer from the exorbitant costs of litigation, unpredictable pay-outs due to the growing trend of nuclear verdicts, and detrimental impacts to commercial productivity that constantly having to litigate workplace injuries would incur.[8] At the same time, the provision ultimately preserves the efficacy of the State’s judicial system, by ensuring the courts are not bogged down by excessive cases. The tradeoff is that employees may receive less than desirable monetary relief afforded by the Act; however, where an employee would be without due compensation until the entering of a final judgment under the common-law system, the Act guarantees that an employee will receive weekly compensation until the conclusion of their workers’ compensation case.[9]

The art of encouraging legislative reform has oft been left to lobbyists and the judiciary.[10] Remaining mindful of the centuries-old doctrine of stare decisis, the latter has been successful in orchestrating reform through masterfully crafted opinions, nudging legislatures to enact change, all the while showing deference to constitutionally vested powers of the coequal branches of government.

However, as of late, a concerted effort has commenced across the state of Alabama to abrogate its Workers’ Compensation Act. Through creative and carefully crafted arguments, challenges have been launched questioning the constitutional standing of the Act.[11] Below is a detailed analysis of the most recent case the Alabama Supreme Court has reviewed regarding the constitutionality of Alabama’s Workers’ Compensation Act.

Crenshaw v. Sonic Drive in of Greenville, Inc.

In Crenshaw v. Sonic Drive in of Greenville, Inc., the Alabama Supreme Court was tasked with determining the constitutionality of Alabama’s Workers Compensation Act.[12] Crenshaw involved a minor’s parent bringing a negligence action against Sonic, due to injuries the minor sustained  from an accident “‘arising out and in the course of [the minor’s] employment’ with [the restaurant].”[13]  Although the events giving rise to the plaintiff’s cause of action occurred while in the line and scope of their employment, the plaintiff’s complaint was devoid of any request for relief via workers’ compensation benefits.[14] Subsequently, Sonic filed a dispositive motion contending that the plaintiff, by asserting a cause of action under the common law theory of negligence, failed to state a claim upon which relief may be granted because the plaintiff’s negligence claim is “barred by the exclusive remedy provision of the Act.”[15]

Crenshaw contends that the Act specifically violates Article I, § 13, of the Alabama Constitution of 2022,[16] because the Act does not contain a mutually elective feature allowing an employee to voluntarily “opt out of [workers’ compensation] coverage.”[17] Crenshaw supports his position by focusing on two decisions from 1978, namely, Grantham v. Denke[18]and Pipkin v. Southern Electrical & Pipefitting Co.[19] The court in Crenshaw acknowledged that the Grantham and Pipkin courts ultimately determined that the Act violated Article  I, § 13 of Alabama’s Constitution[20]; however, the Crenshaw court notes Crenshaw is mistaken in the controlling law, because the “seminal decision regarding challenges to the Act made under § 13”[21] is Reed v. Brunson.[22]

In Reed, the court recognized that Grantham and Pipkin used the “‘common-law-rights approach’ in evaluating whether [the Act] . . . violated § 13.”[23] However, the Reed court explains that in similar challenges to the constitutionality of statutory provisions, the Alabama Supreme Court subjects constitutional challenges, particularly proclaiming violations the “open courts doctrine,” to the “vested rights approach.”[24] Thus, the Crenshaw court elected that the constitutional challenge to the Act should be subjected to scrutiny under the “common-law-rights approach” and the “vested rights approach.”[25]

Under the common law rights approach, legislation will ultimately survive scrutiny and be deemed constitutional if it satisfies one of the two following conditions: “(1) [t]he right is voluntarily relinquished by its possessor in exchange for equivalent benefits or protection, or (2) [t]he legislation eradicates or ameliorates a perceived social evil and is thus a valid exercise of the police power.”[26]

Previously, the court applied the “vested rights approach,” which allows for the Act to “pass[] constitutional muster with respect to Article I, § 13” if “[the plaintiff’s] injuries occurred after the Act became law . . . .”[27] The Crenshaw court ultimately subjected the plaintiff’s constitutional challenge to both the common-law-rights and vested-rights approaches to determine the constitutionality of the Act.[28] The court determined that the Act survives constitutional scrutiny under the vested rights approach, because “[the employee’s] workplace injury occurred after the Act became law. Thus, [the plaintiff] did not have a vested right in a cause of action when the Act was enacted.”[29]

When evaluating the case under the common-law-rights approach, the court determined it was unnecessary to consider the first prong of the two-part test, because the Act only needs to pass one part of the disjunctive test.[30] The court reasons that since the Act satisfies the “the police-power condition” a discussion of the first condition is pretermitted.[31] In reaching this conclusion, the court relied on the legislative intent of the act[32] and a treatise on Alabama’s Workers’ Compensation.[33] Ultimately, the court determined that the exclusivity provision of the Act, was a valid exercise of the legislature’s police power, because the provisions guarantees that an injured employee will receive compensation without the need for incurring extensive legal expenses or having to face the high probability of a disfavorable outcome under the common law system.[34]

Conclusion

The Alabama Supreme Court’s decision in Crenshaw v. Sonic Drive in of Greenville, Inc., underscores the necessity of preserving the statutory compensation scheme, guaranteeing employees adequate monetary relief for workplace injuries, while at the same time illustrating the court’s deference to legislative policy choices in the field of workers’ compensation. By reaffirming that the Act withstands constitutional scrutiny under both the vested-rights and common-law-rights approaches, the court not only preserved the quid pro quo structure of workers’ compensation, but also reinforced the principle that balancing employee remedies with employer liability rests primarily with the legislature.

---

[1] 1 Michael Roberts, Alabama Tort Law § 13.01 (7th 2022).

[2] See Steven W. Ford & James A. Abernathy, II, Historical Development of Alabama’s Workers’ Compensation Law: Remedies Existing Prior to Workers’ Compensation Legislation, 61 Ala. Law. 48, 50 (“The beneficent purposes of the Alabama Act are: to provide certain relief to workers . . . avoid delay of relief associated with taking a tort claim to trial . . . [and] shift[ing] the burden of industrial injuries on the industry that caused the injury.”).

[3] Id.

[4] Id.

[5] Ala. Code § 25-5-52.

[6] Ala. Code § 25-5-17 (“The provisions of this act are expressly declared not to be severable. If any provision of this act shall be adjudged to be invalid by any court of competent jurisdiction, then this entire act shall be invalid and held for naught.”); see also Lawrence T. King, A Tort Defense in Crisis? The Defense That is the Alabama Workers’ Compensation Act, 81 Ala. Law. 136, 137 (quoting Clower v. CVS Caremark Corp., No. 2013-904687 (Jefferson CO. Cir. Ct., Order of May 8, 2017) (Judge Ballard) (“Because the Court finds those statutes to be unconstitutional, the entire Workers’ Compensation Act is declared unconstitutional because of the non-severability statute . . . .”)). Judge Ballard’s ruling was ultimately abandoned due to the parties executing a settlement of all claims prior to the implementation of the ruling or before initiating an appeal of the underlying case. See King, supra.  

[7] Ala. Code § 25-5-52 (“[N]o employee of any employer subject to this chapter, nor the personal representative, surviving spouse, or next of kin of the employee shall have a right to any other method, form, or amount of compensation or damages for an injury or death occasioned by an accident or occupation disease . . . resulting from and while engaged in the actual performance of his or her employment . . . .”).

[8] See Chapman v. Railway F. Co., 101 So. 879, 881 (Ala. 1924) (quoting Jensen v. Southern Pacific Co., 109 N.E. 600, 602 (N.Y. 1915) (“It protects both employer and employee, the former from wasteful suits and extravagant verdicts, the latter from the expense, uncertainties, and delays of litigation in all cases, and from the certainty of defeat if unable to establish a case of actionable negligence.”)).

[9] Id. at §§ 25-5-57(a)(1)-(2); see also 1 Temple Trueblood, Alabama Employment Law                           § 11.02(2)(b) (Mathew Bender) (“[W]age loss benefits are only received following a three-day waiting period.”).

[10] Thomas W. Merrill, Symposium: Justice Stevens and the Chevron Puzzle, 106 Nw. U.L. Rev. 551, 563 (2012).

[11] See e.g., Clower v. CVS Caremark Corp., No. 2013-904687 (Jefferson Co. Cir. Ct., Order of May 8, 2017) (challenging the constitutionality of the $220 per week cap on benefits for permanent partial disability and the Act’s statutory cap on attorney’s fees); Taylor v. Cloud Enterprises Corp., Inc., No. 2023-902537 (Jefferson Co. Cir. Ct., dismissed Mar. 6, 2024) (challenging the constitutionality of the Act because of the $220 per week cap for permanent partial disability benefits, the inability for employees to opt out of coverage, and the Act is “so eroded that it no longer affords an adequate quid pro quo”); Larry Huey v. Stryker Trailers, LLC., No. 2023-900328 (Calhoun Co. Cir. Ct., dismissed Dec. 4, 2023), appeal docketed, No. 2024-0083 (Ala. Feb. 13, 2024), No. 2024-0083 (Ala. dismissed May 28, 2024) (challenging the constitutionality of the Act because of the $220 per week cap for permanent partial disability benefits, the inability for employees to opt out of coverage, and the Act is “so eroded that it no longer affords an adequate quid pro quo”); Weaver v. Frank Norton, LLC, No. 2024-901440 (Jefferson Co. Cir. Ct., dismissed Aug. 5, 2024); Carter-Shepherd v. Royal Furniture Co., No. 2022-900008 (Jefferson Co. Cir. Ct., Order Mar. 21, 2025), appeal docketed, (Ala. Civ. App., Apr. 14, 2025) (challenging the constitutionality of Ala. Code § 25-5-90(a), the attorney fee cap);

[12] No. SC-2024-0081, 2024 Ala. LEXIS 197, at *1 (Dec. 6, 2024).

[13] Crenshaw, 2024 Ala. LEXIS 197, at *1.

[14] Id.

[15] Id. at *1-2 (citing Ala Code §§ 25-5-52 to -53).

[16] Ala. Const. art. I, § 13 (“That all courts shall be open; and that every person, for any injury done him, in his lands, goods, person, or reputation, shall have a remedy by due process of law; and right and justice shall be administered without sale, denial, or delay.”).

[17] Crenshaw, 2024 Ala. LEXIS 197, at *4 (“[O]nly an employer, not an employee, may choose to completely opt out of coverage under the Act.”).

[18] 359 So. 2d 785 (Ala. 1978).

[19] 358 So. 2d 1015 (Ala. 1978).

[20] Crenshaw, 2024 Ala. LEXIS 197, at *4-8.

[21] Id. at *8-9.

[22] 527 So. 2d 102 (Ala. 1988).

[23] Crenshaw, 2024 Ala. LEXIS 197, at *8-9.

[24] Id. (discussing how the court in Reed applied both the “common-law-rights approach” and the “vested rights approach”).

[25] Id. at *21.

[26] Id. at *14 (quoting Reed, 527 So. 2d at 352).

[27] Id. at *13-4 (“When a duty has been breached producing a legal claim for damages, such claimant cannot be denied the benefit of his claim for the absence of a remedy. But this provision does not undertake to preserve existing duties against legislative change made before the breach occurs. There can be no claim for damages to the person or property of anyone except as it follows the breach of a legal duty.”).

[28] Id. at *21-3.

[29] Id. at *22.

[30] Id. at *26.

[31] Id.

[32] Id. at *29 (“The intent of the Alabama Legislature in adopting the exclusivity provisions of the Act was to provide complete immunity to employers and limited immunity to officers, directors, agents, servants or employees of the same employer . . . for all causes of action except those based on willful conduct.”).

[33] Id. at *35 (quoting 1 Terry A. Moore, Alabama Workers’ Compensation §§ 1:4 and 1:5 (2d ed. 2013)) (“By adhering to the concept of fault, Alabama courts assured that most workers who were injured on the job would not receive financial relief from employers. In most cases, employment-related injuries did not arise out of the employer’s negligence. By relying on the concept of negligence . . . the Alabama courts practically foreclosed employees from meaningful redress for the injuries they suffered due to their employment.”).

[34]  Id. at *34-7.

Photo Credit: Michelle Rippy, The Ghost Guns Haunting National Crime Statistics, Federation of American Scientists, (June 6, 2023), https://fas.org/publication/the-ghost-guns-haunting-national-crime-statistics/.

Authored by: Ashley B. Carroll

Ghost guns have been a rising threat to society with the number recovered by law enforcement growing from nearly 1,600% from 2017 to 2023.[1] A study conducted by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) found that during that period 92,702 ghost guns  “which can be obtained without background checks and do not contain serial numbers, were recovered and reported to law enforcement.”[2] Ghost guns recovered in crimes from this timeframe grew exponentially from 1,629 to 27,490.[3] Among the recovered materials, “1,700 of them have been tied to homicides, while another 4,000 have been linked to a number of other violent crimes.”[4] Additionally, the ATF found that there was an astonishing increase of 784% of illicit machine gun conversion devices from 658 in 2019 to 5,816 in 2023.[5] ATF’s director, Steven Dettelbach, voiced his concern over this issue and in his perspective the study supports the need for more regulation especially pertaining to “the need for background checks before firearms are sold.”[6] He stressed the involvement of ghost guns being entangled with another major concern inflicting the United States stating, “[t]he data show[s] that in 60% of trafficking investigations, the end recipient of a trafficking firearm is a convicted felon.”[7]

Ghost guns, an informal expression denoting the more technical term privately made firearms (PMFs), “are firearms (including a frame or a receiver) that have been completed, assembled or otherwise produced by a person other than a licensed manufacturer.”[8] These ghost guns are typically produced and sold by licensed manufacturers without any serial numbers.[9] The ATF has recognized 10 different types of PMFs to include: “pistol, revolver, rifle, shotgun, frame or receiver, machinegun conversion device (MCD), destructive device, machinegun, firearm silencer, and any other weapon.”[10] The ATF points out however, that not all of these devices are illegal or are required to be branded with a serial number.[11]

The Gun Control Act of 1968 (GCA) was passed to prevent firearms from landing in the hands of criminals and to aid law enforcement in investigative measures involving firearms.[12] The GCA accomplished this by requiring the firearm industry to comply with stricter licensing requirements and regulation which barred the sale of firearms and ammunition to felons and other prohibited persons.[13] Firearm as defined in the GCA is “(A) any weapon (including a starter gun) …which will or is designed to or may readily be converted to expel a projectile by the action of an explosive; [and] (B) the frame or receiver of any such weapon.”[14] With the rapid development of weapon parts kits that have changed the way guns are made and sold, it has provided a way for these ghost guns, typically assembled at home, to evade the GCA’s definition of a firearm.[15] In 2022, in order to address concerns surrounding this issue, the ATF established a rule that would alter the interpretation of the GCA “to cover weapon part kits that are ‘designed to or may readily be converted to expel a projectile’[16] and ‘partially complete, disassembled, or nonfunctional’[17] frames or receivers.”[18] This decision sparked widespread controversy among gun manufacturers alongside others who protested this change by filing “a facial challenge under the American Procedure Act, arguing that the GCA cannot be read to reach weapon parts kits or unfinished frames or receivers.”[19] The district court ruled in favor of the gun manufacturers and vacated ATF’s new interpretation of the rule.[20] The Fifth Circuit affirmed this decision, “holding that § 921(a)(3)(A) categorically does not reach weapon parts kits regardless of completeness or ease of assembly, and that § 921(a)(3)(B) reaches only finished frames and receivers.”[21]

The conflict surrounding the regulation of ghost guns was recently decided on March 26, 2025, in the Supreme Court case of Bondi v. VanDerStok.[22] The Court first addressed subsection (A) of §921(a)(3) which sets out two requirements.[23] The first requires a weapon to be present.[24] The second requires that the weapon “be able to expel a projectile by the action of an explosive, deigned to do so, or susceptible of ready conversion to operate that way.”[25] Those opposed to the interpretation of this subsection under §478.11’s new provisions contend that no weapon parts kits can successfully satisfy the two requirements as noted above.[26] The Polymer80’s “Buy Build Shoot” kit is presented as an example to show that there are in fact at least some weapon parts kits that do satisfy both of the requirements.[27]

Three points are raised in support of the “Buy Build Shoot” kit along with other weapon parts kits satisfying the two requirements under subsection (A) of §921(a)(3).[28] The first point considers the plain language of the word weapon itself.[29] The Court recognizes the word weapon as an artifact noun – “a word for a thing created by humans. Artifact nouns are typically ‘characterized by an intended function,’ rather than by ‘some ineffable “natural essence.'”‘[30] A “Buy Build Shoot” kit, as the Court describes, clearly fits into this definition; even though it might take time to assemble, it is sold with all of the essential components and “its intended function as [an] instrument of combat is obvious.”[31] The second point looks to how the statute itself addresses the word weapon.[32] The term weapon in the statute includes “a starter gun” within its definition.[33] A starter gun does not come ready to use live fire and would require assembly in order to be used for that purpose; yet before it is assembled, “the statute teaches that . . . it is a ‘weapon’ before anyone invests that work.”[34] This same logic, the Court asserts, should be applied on weapon part kits such as the “Buy Build kit”.[35] The third point also looks to the words in the statute that include weapons that are “‘designed’ to accomplish that function (“‘expel a projectile by the action of an explosive'”) or ‘capable of being readily . . . converted’ to do so.”[36] This language, known as the “ready conversion” test, has been applied to starter guns.[37] The “Buy Build Shoot” kit, for example, passes this test as it can be readily converted into a firearm without any “more time, effort, expertise, or specialized tools to complete” compared to a starter gun.[38]

The Court then moved to examine whether subsection (B) of § 921(a)(3) regarding frames or receivers is facially inconsistent with ATF’s new interpretation in § 478.12(c).[39] To decipher this, the complete frame of a Glock-variant firearm and a partially complete Polymer80 frame were compared.[40] The main difference, the Court pointed out, are tabs located on the Polymer80 frame that “‘are easily removable by a person with novice skill using common tools . . . within minutes.”[41] After the tabs are removed a “few holes are drilled for the pins that hold [other] parts in place . . . [and] the Polymer80 product is a fully functional frame.”[42] Just as the word weapon above was defined as an artifact noun, the terms “frame’ and “receiver” in subsection (B) are also artifact nouns. Under this reasoning, the Court maintains these terms can be described as partially completed items which qualifies the Polymer80 to fall within this definition.[43] The use of the word frame and receiver, under the GCA in other sections, was also supportive to the Court’s analysis.[44] They look to how these words were interpreted under §923(i) that includes some unfinished frames or receivers within the definition stating, “it is hard to see how those same words might bear a more restrictive meaning when they appear just a few sections away in § 921(a)(3)(B).”[45] In this instance the Court rejects the “categorical conclusion” of the GCA regulating only finished frames or receivers and interprets it to regulate “at least some ‘partially complete’ frames or receivers.”[46]

The Court in VanDerStok has recognized that subsequent cases may give rise to additional and more complex questions regarding the control of ghost guns under ATF’s regulations.[47] In June, following this decision, gun manufacturer plaintiffs in VanDerStok, along with others, moved “for a preliminary injunction on the grounds that [this new ATF] rule violates the Fifth Amendment’s Due Process Clause and the Second Amendment.[48] Additionally, the Trump administration may decide to intervene by repealing the new rule.[49] The Attorney General, under the current administration, has been ordered to review ATF rules passed during the Biden Administration to ensure they are consistent with the Second Amendment and gun rights.[50]

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[1] Sarah N. Lynch, Number of Ghost Guns Recovered at Crime Scenes has Surged since 2017, Study Shows, Reuters, (Jan. 8, 2025), https://www.reuters.com/world/us/number-ghost-guns-recovered-crime-scenes-has-surged-since-2017-study-shows-2025-01-08/.

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Lynch, supra note 1.

[7] Id.

[8] Gun Control Act, Bureau of Alcohol, Tobacco, Firearms, and Explosives, https://www.atf.gov/rules-and-regulations/laws-alcohol-tobacco-firearms-and-explosives/gun-control-act (last visited October 5, 2025).

[9] Id.

[10] Id.

[11] Id.

[12] Pub. L. No. 90-618, 82 Stat.1213 (1968).

[13] Gun Control Act, Bureau of Alcohol, Tobacco, Firearms, and Explosives, https://www.atf.gov/rules-and-regulations/laws-alcohol-tobacco-firearms-and-explosives/gun-control-act (last visited October 5, 2025).

[14] 18 U.S.C. § 921(a)(3); See Bondi v. VanDerStok, 604 U.S. 458 (2025).

[15] VanDerStok, 604 U.S. at 458.

[16] 27 C.F.R. § 478.11; VanDerStok, 604 U.S. at 458.

[17] 27 C.F.R. § 478.12(c); VanDerStok, 604 U.S. at 458.

[18] VanDerStok, 604 U.S. at 458.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id. at 468.

[24] VanDerStok, 604 U.S. at 468.

[25] Id.

[26] Id.

[27] See id. (The “‘Buy Build Shoot’ kit comes with ‘all of the necessary components to build’ a Glock-variant semiautomatic pistol. And it is so easy to assemble that, in an ATF test, an individual who had never before encountered the kit was able to produce a gun from it in 21 minutes using only ‘common’ tools and instructions found in publicly available YouTube videos.”)

[28] Id. at 470-72.

[29] Id. at 470.

[30] VanDerStok, 604 U.S. at 470.

[31] Id. at 471.

[32] Id.

[33] 18 U.S.C. § 921(a)(3)(A); VanDerStok, 604 U.S. at 471.

[34] VanDerStok, 604 U.S. at 471.

[35] Id.

[36] 18 U.S.C. §921(a)(3)(A); VanDerStok, 604 U.S. at 471-72.

[37] VanDerStok, 604 U.S. at 472.

[38] Id.

[39] Id. at 477.

[40] Id. at 478.

[41] Id. at 478-79.

[42] Id. at 479.

[43] VanDerStok, 604 U.S. at 479.

[44] Id.

[45] Id.

[46] 27 C.F.R. § 478.12; VanDerStok, 604 U.S. at 477.

[47] VanDerStok, 604 U.S. at 473.

[48] Andrew Touma, How are States Responding to VanDerStok, Duke Center for Firearms Law, (Aug. 27, 2025), https://firearmslaw.duke.edu/2025/08/how-are-states-responding-to-vanderstok.

[49] Id.

[50] Id.

Photo Credit: How We Can Help: Business Loan Solutions, Pure Business Finance (September 29, 2025), https://purebusinessfinance.co.uk/business-loans/.

Authored by: Benjamin Cole Parker

If payday loans grew up and went to business school, they’d look a lot like merchant cash advances, and bankruptcy courts generally aren’t buying such a disguise.

A merchant cash advance (“MCA”) is a substitute form of financing used by businesses to quickly obtain lump sums of cash in exchange for future accounts receivables and sales, plus fees.[1] MCAs can prove useful, as they offer rapid funding, repayments tied solely to sales, and easy qualification criteria – especially for businesses with poor credit.[2] Nevertheless, the cash injections afforded by MCAs carry “plainly exorbitant”[3] rates, impede cash flow with high payment frequency, and can leave a business vulnerable due to lax industry regulations.[4] With the line on MCAs blurred between a loan or a sale, the bankruptcy world is seeing ripple effects.

In examining an MCA through a bankruptcy lens, the categorization of the advance as a sale or loan has differing implications for the makeup of the bankruptcy estate.[5] Further, the categorization governs the application of the automatic stay, disputes over cash collateral, preferential transfer claims, as well as the debtor’s ability to challenge claims particularly those of usurious interest.[6] Courts ordinarily focus on three factors when analyzing whether the MCA agreement is a loan or sale: (1) whether a reconciliation provision exists; (2) whether there is a finite term; and (3) whether there is recourse in the event of bankruptcy.[7] Importantly, a key distinction lies in whether the “lender ‘is absolutely entitled to repayment under all circumstances.’”[8] Recent trends show that courts are increasingly characterizing these advances as loans, triggering usury laws. [9] Shouldn’t courts embrace such a recharacterization to shield small businesses from exploitation to predatory rates?

On one hand, loan rate caps can safeguard small businesses from abusive lending practices; on the other, lenders offering MCAs might become more selective in lending and could constrain the total credit they made available. As of early 2023, 29% of small businesses cited lack of capital as a reason for failure.[10] In Haymount Urgent Care, the MCAs provided the company a much needed source of cash flow during a period of ‘economic strain’ in spite of allegations of disproportionate fees.[11] So which interest ultimately tips the scale: the risk of reduced credit extensions or the threat of loans burdened with excessive rates?

Recent caselaw does not indicate there is a clear consensus.  However, some courts are showing a growing trending toward classifying the advances as loans. The United States Court of Appeals for the Second Circuit recently upheld the district court’s decision in Fleetwood Servs. LLC, ruling that the MCA was a usurious loan.[12] The district court’s rationale rested on the fact that pursuant to the agreement, “there are virtually no circumstances where, if the accounts receivable would not be sufficient to pay the Purchased Amounts, Richmond would not be absolutely entitled to repayment of that amount by Fleetwood.[13] Alternatively, the U.S. Bankruptcy Court for the Northern District of Illinois found that the MCAs were not loans under New York law but instead sales “in exchange for a portion of [] future receivables…”[14] Still, the judgments and settlements of 2025 keep the ball of uncertainty rolling.

Earlier this year, the New York Attorney General’s (“NYAG”) office cracked down on Yellowstone Capital for over predatory loans the firm made to over 18,000 small businesses across the nation.[15] These predatory loan agreements falsely used MCA language – e.g. “Purchase and Sale of Future Receivables – in order to lure businesses in and impose inflates rates.[16] NYAG’s office and Letitia James unveiled a judgment and settlement against Yellowstone Capital as well as its affiliates and officers for over $1 billion in its campaign to squash such predatory lending.[17] The settlement highlights the force with which states are cracking down on exploitative financing, but ironically, the NYAG’s office explicitly stated they do not condemn MCA practice as a whole.[18] There is no question that certain MCA use is highly criticized, but there seems to be little doubt that such lending offers critical financing for small businesses needed alternative funding.

Following such an enormous settlement, a New York court ruled on September 24, 2025, in an important state law decision, that a cash advance transaction between Apollo Funding and Dave Reilly was not a loan.[19] Using the three-factor test, the judge found no evidence of a disguised loan since the agreement allowed adjustments of payment, did not have a fixed term, and did not make bankruptcy an event of default.[20] Such a ruling complicates the trend of characterizing the agreements as loans but underscores the fact that carefully drafted agreements can still be found to be true sales of receivables.[21] Per the NYAG’s office, lenders “would be well served to review their contractual arrangements and operations in light of the issues that the identified in the Yellowstone complaint.”[22]

Ultimately, the MCA landscape remains subject to a delicate balancing scale. There is little doubt that courts are increasingly scrutinizing such agreements, and the Yellowstone settlement seems to indicate that state officials are now on high alert regarding these transactions. Two questions appear to be at the front line of the MCA conversation: (1) how will lenders adjust their pricing, scheduling, and agreement standards to account for heightening scrutiny from authorities, and (2) how far will judges and regulators go in cracking down on predatory prices without suppressing legitimate MCA financing? The future remains anything but certain, yet courts and regulators alike are beginning to sketch the outline of the alternative financing landscape. One thing is certain: the façade of predatory lenders passing of exploitative loans as equitable receivers is nearing an end.

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[1] Update on Merchant Cash Advances: Quick Money Paybacks Are Still Hell, Branson Law, PLLC (March 17, 2025), https://www.bransonlaw.com/blog/update-on-merchant-cash-advances-quick-money-paybacks-are-still-hell.

[2] Eddie Rybarski et al., The Pros and Cons of Merchant Cash Advances, ondeck (August 22, 2024), https://www.ondeck.com/resources/pros-and-cons-merchant-cash-advances.

[3] Haymount Urgent Care PC v. GoFund Advance, LLC, 609 F. Supp. 3d 237, 250 (S.D.N.Y. 2022).

[4] Jamie Johnson et al., Pros and Cons of Merchant Cash Advance Loans, Business.com, (April 28, 2025), https://www.business.com/articles/pros-and-cons-of-merchant-cash-advance-loans.

[5] See Robert D. Aicher William J., Characterization of A Transfer of Receivables As A Sale or A Secured Loan Upon Bankruptcy of the Transferor, 65 Am. Bankr. L.J. 181, 185 (1991) (underscoring the fact that UCC reflects no intention to provide guidance on the sale/loan categorization).

[6] In re Shoot The Moon, LLC, 635 B.R. 797, 835 (Bankr. D. Mont. 2021) (holding that a downward adjustment of the MCA fee was warranted).

[7] Lateral Recovery, LLC v. Cap. Merch. Servs., LLC, 632 F. Supp. 3d 402, 452 (S.D.N.Y. 2022).

[8] Id.

[9] Id. at 466.

[10] Maddie Shepherd, Small Business Lending Statistics and Trends, fundera by nerdwallet (January 23, 2023), https://www.fundera.com/resources/small-business-lending-statistics.  

[11] 609 F. Supp. 3d 237 at 172.

[12] Fleetwood Servs., LLC v. Richmond Cap. Grp. LLC, No. 22-1885-CV, 2023 WL 3882697, at *2 (2d Cir. June 8, 2023), Aff’g Fleetwood Servs., LLC v. Ram Cap. Funding, LLC, No. 20-CV-5120 (LJL), 2022 WL 1997207, at *20 (S.D.N.Y. June 6, 2022).

[13] Fleetwood Servs., LLC, No. 20-CV-5120 (LJL), 2022 WL 1997207, at *13.

[14] In re Hill, 589 B.R. 614, 630 (Bankr. N.D. Ill. 2018).

[15] Parag Patel et al., NY Attorney General Secures $1 Billion-Plus Judgment For Illegal Loans Misrepresented as Merchant Cash Advances, Latham and Watkins LLP, Global Fintech and Digital Assets Blog (February 7, 2025), https://www.fintechanddigitalassets.com/2025/02/ny-attorney-general-secures-1-billion-judgment-for-illegal-loans-misrepresented-as-merchant-cash-advances.

[16] Id. (“Overcollection from merchants was a frequent occurrence, such as daily payments debited from merchants’ bank accounts even after the agreed amount was paid back in full.”)

[17] Id.

[18] Id.

[19] Apollo Funding Co. v. Dave Reilly Constr., LLC, No. 2024-03453, 2025 WL 2714439, at *2 (N.Y. App. Div. Sept. 24, 2025).

[20] Id.

[21] Id.

[22] Parag Patel, supra note 15 (noting that various states continue to scrutinize MCAs).