Insight

Key Developments and Trends in U.S. Commercial Litigation

Whether it's multibillion-dollar water cleanliness verdicts or college athletes vying for the right to compensation, the state of litigation remains strong.

Basketball sits in front of stacks of money
JS

Justin Smulison

June 17, 2024 10:54 AM

The first half of 2024 significantly impacted the corporate and legal landscapes, marked by significant developments in and out of the courtroom. Multibillion-dollar settlements are influencing water cleanliness and safety and now permit college athletes to be compensated for their name, image and likeness. Additionally, businesses must consider the legality of their inclusivity initiatives and prepare for new federal guidance on noncompete agreements.

Let’s review the notable cases, precedents and trends announced or resolved in 2024 and their potential to reshape commercial law.

FTC Bans Noncompetes

On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule banning noncompete agreements nationwide. The FTC said the final rule provides that noncompetes present “an unfair method of competition—and therefore a violation of Section 5 of the FTC Act.”

The rule will become effective two days after Labor Day, September 4, marking the expiration of existing noncompetes for most employees. The FTC noted that the policy change will impact an estimated 30 million workers who are subject to a noncompete.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan, in April.

The FTC projects the new rule will drive major gains for various sectors and the U.S. economy, including an average of between 17,000 to 29,000 new patents each year and higher worker earnings to the tune of $400 billion to $488 billion in increased wages for workers over the next decade.

Each new federal standard comes with benefits and drawbacks, said Evan W. Bolla, a partner at Harris St. Laurent & Wechsler, which is ranked Tier 1 for Criminal Defense: White-Collar in New York City by Best Law Firms.

Though Bolla said there is an expectation that the FTC rule may be delayed due to litigation, he noted that employers should collaborate with outside counsel to ensure compliance with the requirements before the rule’s effective date.

“Business will have a greater ability to recruit top talent without concerns about potential claims of inducing a breach of a restrictive covenant and without having to wait months or even more than one year to have an employee commence employment,” said Bolla, who is also general counsel to Harris St. Laurent & Wechsler. “Employers need to be prepared to communicate with their employees concerning the changes to the law and to identify retention mechanisms for those who might want to leave their companies in light of the changes to the law.”

Forward Motion in College Athletes’ Rights and NIL Compensation

The excitement of college sports transcended fields and arenas by making its way into boardrooms and courtrooms. For decades, the National Collegiate Athletics Association (NCAA) prohibited student-athletes from earning compensation from their name, image and likeness (NIL). That tradition was upended in 2021, when the United States Supreme Court unanimously decided against the plaintiff in NCAA v. Alston. This established a new precedent in which players can earn from their NIL.

In May 2024, this precedent reached a new milestone when the NCAA and major college conferences agreed to settle charges in an antitrust suit, House v. NCAA. The settlement amount is expected to reach $2.8 billion, and a fund will be created to compensate current and former athletes for lost NIL wages dating back to 2016.

At the time of publication, the terms of the settlement are still pending. The approval is expected and only strengthens the call from stakeholders – from players and coaches to universities and advocacy groups who have testified on Capitol Hill – for a federal framework to govern NIL earnings and collegiate sports moving forward. Several bills have been introduced in Congress through the years, some even by members who are former athletes, to address NIL and also whether players could be considered employees.

The most recent bill to gain traction is the Protecting Student Athletes’ Economic Freedom Act, introduced by Congressman Bob Good (VA-05), which was passed by the House Education and Workforce Committee on June 13. Good is a former college wrestler, and the key feature of his legislation states that a student-athlete may not be considered an employee of an institution, conference, or association. This classification is in stark contrast to that of the National Labor Relations Board, which, following the Alston decision, issued a memo recognizing student-athletes as employees.

The bill claims that granting students employee status could bankrupt the schools that, according to his site, “would be required to pay salaries, provide additional insurance coverage for every sport, and increase administrative staff to implement the changes.”

Good’s bill is co-sponsored by 10 other members of Congress influential NCAA conferences, including the ACC, Big Ten, Big 12, Pac-12 and SEC, publicly expressed their support of the legislation in June, which is critical for H.R. 8534 as it is now eligible to receive consideration on the House floor.

Exploring the Benefits and Costs of DEI Initiatives

Following a Supreme Court ruling in 2023 that struck down race-based affirmative action in higher education, private companies have encountered legal challenges concerning their diversity, equity, and inclusion initiatives (DEI). A key resolution in an Ohio federal court was reached recently that businesses and counsel should look to for guidance and perspective.

Hello Alice, an online platform aimed at helping small businesses and entrepreneurs, fought a months-long lawsuit filed by the owner of a trucking company. The trucking company owner, Nathan Roberts, said he could not apply for a grant program co-run with Progressive since he is white and the program offers grants to black-owned small businesses. A discrimination claim was filed on Roberts’ behalf by America First Legal, an anti-DEI group founded by former Trump White House senior adviser Stephen Miller.

In May 2024, a judge from the United States District Court for the Northern District of Ohio dismissed the case, which America First Legal is appealing, as per Axios reporting.

Though some companies may view results like the Hello Alice case as a legal rationale to reinforce their DEI initiatives, there are also drawbacks to consider. For example, the dismissal came at the expense of Hello Alice’s finances, operations and reputation. Inc.com reported that the cost of the litigation forced the company to lay off 69% of its workforce.

On the legal front, Hogan Lovells Partner Neal Katyal, lead counsel for Hello Alice in the case, considered the dismissal a victory for his client and other defendants in similar situations.

“We are pleased by the resolution of this case. It beats back a meritless lawsuit and clarifies that the federal courts will not hear weak challenges such as these,” Katyal said. “The dismissal of this case is significant because the lawsuit would make it more difficult for diverse small businesses to compete in today’s economy.”

‘Forever Chemicals’ Cost Companies Billions to Remove and Prevent

Per- and polyfluoroalkyl substances (PFAS), also known as “forever chemicals,” are the focus of significant litigation across the globe, with allegations ranging from water pollution to bodily injuries.

On June 22, 2023, chemical manufacturer 3M Co. announced it had settled lawsuits with more than 300 communities and U.S. public drinking water systems in a litigation led by the City of Stuart, Florida, due to contamination with PFAS used in firefighting foam and various consumer products. The $10.3 billion settlement was finalized in March 2024 and will support PFAS remediation for public water suppliers (PWS) that detect PFAS at any level starting from the date of the 2023 announcement.

It will also resolve current and future drinking water claims by PWS related to PFAS, including perfluorooctanoic acid (PFOA) and those included as a portion of the Aqueous Film Forming Foam (AFFF) multi-district litigation based in Charleston, South Carolina.

Additional resolutions with other entities are being announced, such as in April 2024, when Tyco Fire Products L.P. (Tyco), a wholly owned, indirect subsidiary of Johnson Controls, agreed to provide an additional $750 million in settlement benefits. Preliminary approval was granted in June, increasing the total value of the settlement to more than $13.5 billion for U.S. drinking water providers.

Taft Partner Rob Bilott serves as the court-appointed Advisory Counsel to plaintiffs in the AFFF MDL and is Co-Chair of the Science Committee. Bilott was named the 2024 Best Lawyers “Lawyer of the Year” for Environmental Law in Cincinnati and, in a statement, referred to the resolution as a gain in the fight for public safety.

“This new settlement with Tyco is another historic step forward in what many years of work has been to make sure that those responsible for the contamination of our nation’s drinking water supply with PFAS ‘forever chemicals’ pay for the damage,” said Bilott, “not the victims of the contamination.”

Justin Smulison is a professional writer who regularly contributes to Best Lawyers. He was previously a reporter for the New York Law Journal and also led content and production for the Custom Projects Group at ALM Media. In addition to his various credited and uncredited writing projects, he has developed global audiences, hosting and producing podcasts and audio interviews for professional organizations and music sites. JustinSmulison.contently.com

Headline Image: AdobeStock/Tharshan

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