Lawmakers received a draft report from the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) on Thursday morning addressing issues within the state’s childcare industry. According to WSMV News, the study, mandated by Public Chapter 934, Acts of 2024, examined the characteristics and conditions of childcare workers and explored ways to expand support for early childhood educators. Key findings included discrepancies between zoning requirements from local communities and the Department of Human Services, with some local areas enforcing stricter rules. Additionally, 55% of childcare business owners cited staffing challenges as a major concern. The report recommended increased state support for childcare workers, including incentive programs, and suggested eliminating state and local business taxes for childcare providers. Researchers are working to finalize the draft of the report.

The Tennessee Association of Recovery Court Professionals has awarded the 2024 Ellen L. Abbott Vanguard Award to the 23rd District Recovery Court for its leadership in criminal justice reform. The award recognizes a demonstrated leader in the implementation of a criminal justice initiative or advocacy project. In a press release, the association praised the court’s efforts to reform the criminal justice system, highlighting the work of Circuit Judge Suzanne Lockert-Mash. "For too long, society has used incarceration as the primary tool for dealing with those with addictions. It hasn't worked. Addiction is worse than ever. Prisons are full. The 23rd Judicial District Recovery Court, under Judge Lockert-Mash's direction, is a model of success," the release states. The 23rd District Recovery Court serves Cheatham, Dickson, Houston, Humphreys and Stewart counties.

The Shelby County Sheriff’s Office confirmed Tuesday that inmate Wesley Joyner died at the Shelby County Jail after being found unresponsive in his cell, according to the Daily Memphian. The sheriff’s office is awaiting results from the Shelby County Medical Examiner’s Office, but preliminary findings suggest Joyner died from an overdose. Joyner’s death marks the second inmate fatality at the jail in less than a month and the second overdose-related death at the facility this year.

The Napier-Looby Bar Association held its annual holiday celebration at Holland & Knight, with proceeds benefiting the Legal Aid Society of Middle Tennessee and the Cumberlands (LAS). DarKenya W. Waller, executive director of LAS, spoke at the event. Chicoya Gallman, immediate past president, began the holiday party as an LAS fundraiser during her presidency. See a photo from the event.

The Tennessee Supreme Court has ordered an increase of $100 in the annual registration fee paid by attorneys to the Board of Professional Responsibility (BPR) and adjustment to the allocation of those funds. The order amends Supreme Court Rules 9 and 33 and will be effective March 1, 2025, according to a press release from the Administrative Office of the Courts. In October, the court published for public comment the proposed amendments to increase the annual registration fee from $170 to $270 and to adjust the allocation of funds to $225 to the Board of Professional Responsibility (BPR), $30 to the Tennessee Lawyer Assistance Program (TLAP) and $15 to the Tennessee Lawyers Fund for Client Protection (TLFCP). According to the release, the court adopted the proposed amendments because the annual registration fee is one of the lowest in the country and has remained unchanged since 2009. Lawyers will begin paying the increased annual registration fee as of March 1, 2025.

New York based global management consulting firm McKinsey & Company Inc., has agreed to pay $650 million to resolve both criminal and civil investigations into its consulting work with opioid manufacturer Purdue Pharma. The Department of Justice in a press release said the resolution relates to McKinsey’s advice to Purdue on the sales and marketing of the opioid drug OxyContin, including a 2013 engagement where McKinsey recommended strategies to "turbocharge" sales. McKinsey faces one felony count for destroying records to obstruct a government investigation and one misdemeanor count for conspiring with Purdue to misbrand prescription drugs. As part of the settlement, McKinsey will pay over $231 million in penalties, more than $93 million in forfeitures and $2 million to the Virginia Medicaid Fraud Control Unit. Additionally, the firm will pay over $323 million in a civil settlement. A former McKinsey senior partner who worked on Purdue matters has also been charged with obstruction of justice in federal court. According to the DOJ statement, the resolution marks the first time a management consulting firm has been held criminally responsible for advice resulting in the commission of a crime by a client. 

The U.S. Supreme Court, in a series of decisions over the last 15 years, has expansively interpreted the 100-year-old Federal Arbitration Act (FAA) to uphold mandatory arbitration provisions in many different types of agreements. It is now well-accepted that if a contract includes a mandatory arbitration clause, the parties have given up their day in court for any disputes arising out of that contract, whether or not they negotiated or even read the clause.

However, did you know that by clicking on terms and conditions that include a mandatory arbitration clause, a party could unknowingly waive the right to litigate claims that are unrelated to that contract, against unknown defendants, in perpetuity? Consider this example:

ABC Corp. and you agree to arbitrate all disputes and claims between us. This agreement to arbitrate is intended to be broadly interpreted. It includes, but is not limited to:

• claims arising out of or relating to any aspect of the relationship between us, whether based in contract, tort, statute, fraud, misrepresentation or any other legal theory;
• claims that arose before this or any prior agreement (including, but not limited to, claims relating to advertising);
• claims that are currently the subject of purported class action litigation in which you are not a member of a certified class; and
• claims that may arise after the termination of this agreement.

References to “ABC Corp.,” “you” and “us” include our respective subsidiaries, affiliates, agents, employees, predecessors in interest, successors and assigns, as well as all authorized or unauthorized users or beneficiaries of services or devices under this or prior agreements between us.

In Mey v. DIRECTV LLC, 971 F.3d 284 (4th Cir. 2020), the court held this provision in the plaintiff’s cell phone agreement with AT&T (“ABC Corp.”) meant she had waived her right to litigate her claim. Notably, her claim arose not out of the cell phone agreement, or even against AT&T itself, but out of an unrelated claim against DIRECTV, a subsidiary that AT&T acquired three years after the plaintiff entered into her cell phone agreement.

Contractual provisions like this one have become known as “infinite arbitration clauses,” thanks to an influential law review article that identified their emergence during the 2010s. They have gained public attention over the last few months due to two cases against high-profile corporate defendants, both involving tragic facts.

The first such lawsuit arose out of a death at the Walt Disney World Resort in Florida. In October 2023, Kanokporn “Amy” Tangsuan, a doctor from Long Island, and her husband, Jeffrey Piccolo, had dinner at a restaurant at Disney Springs, which is a shopping and dining area located within the resort. Tangsuan, who had severe nut and dairy allergies, died after consuming a meal that she allegedly had been told was allergen-free. Piccolo subsequently filed a wrongful death suit against the operators of the restaurant and Walt Disney Parks and Resorts Inc.

Disney filed a motion to compel arbitration, alleging that Piccolo had waived his right to litigate the wrongful death claim when he: (1) created a subscriber account to receive a month-long free trial of Disney+ in 2019, in which he agreed to arbitrate “all disputes … including any related disputes involving The Walt Disney Company or its affiliates … whether based on past, present or future events,” and (2) purchased tickets to the Epcot theme park (which he and his wife never used) through the “My Disney Experience” app, which included similar terms. The strength of Disney’s legal argument was not tested, because public backlash led Disney to withdraw its motion, waive its (purported) right to arbitration, and proceed with the case in court.

Shortly after the wrongful death suit against Disney hit the news, a personal injury case against Uber made similar headlines. John and Georgia McGinty had dinner out in March 2022 in their hometown of Princeton, New Jersey, and called an Uber to take them home. Their Uber driver allegedly ran a red light and T-boned another car. The McGintys both suffered serious injuries, which required multiple surgeries and impacted their ability to work. They sued their Uber driver, the other driver and Uber in state court in New Jersey.

Uber moved to compel arbitration because two months prior to the accident, the McGintys’ minor daughter, using her mother’s cell phone, had ordered a pizza using the Uber Eats delivery service. In so doing, she clicked on a change in terms that Uber had made in December 2021, which included an infinite arbitration provision. The trial court denied Uber’s motion to compel arbitration, but the appellate court reversed and held that the McGintys were bound to arbitrate their dispute. By clicking “agree” to the change of terms in the Uber Eats app, Mrs. McGinty (or her daughter, acting as her agent) had unambiguously waived her right to a jury trial for any and all claims against Uber.

Two federal courts of appeal have weighed in on infinite arbitration clauses, both in class action lawsuits brought against DIRECTV for aggressive telemarketing strategies towards plaintiffs who were on the “Do Not Call” list and also happened to be AT&T cell phone customers. The 4th Circuit, in the case referenced above, held the plaintiff was bound by her agreement to arbitrate all claims against AT&T and its affiliates. In Revitch v. DIRECTV LLC, 977 F.3d 713 (9th Cir. 2020), however, the 9th Circuit held there was no valid agreement to arbitrate between the plaintiff and DIRECTV because the affiliate was acquired after the agreement between the plaintiff and AT&T.

For now, mandatory arbitration clauses are not going anywhere. Until the Supreme Court places reasonable boundaries on them, the ways in which businesses and their attorneys will continue to develop creative ways to stay out of court are, well, infinite.

This article was contributed by Matt Lyon. He is a member of the TBA Business Law Section’s Executive Council and vice president and dean of the Lincoln Memorial University Duncan School of Law in Knoxville. He teaches contracts, business associations, civil procedure and payment systems. Prior to joining the LMU Law faculty in 2011, Lyon served as senior judicial clerk to Justice Gary R. Wade of the Tennessee Supreme Court and was a commercial litigation associate at Sidley Austin LLP in Chicago. Matt can be reached at Matthew.Lyon@lmunet.edu or 865-545-5318.

Consumer reviews and testimonials play a significant role in today's marketplace. While individual consumers may place varying degrees of importance on these reviews, it's clear that they can greatly influence purchasing decisions. Though most people know that some reviews can be fake or biased, indicators suggests that over 90% of consumers read at least one online review prior to making a purchase. Additionally, most consumers read at least three reviews as part of their decision-making process. According to one projection, the global market for consumer experience management services is expected to grow from over $13 billion in 2023 to nearly $50 billion over the next decade.

Businesses need to be mindful about how they handle customer reviews and testimonials, whether they choose to manage them in-house or hire a third party. A recent enforcement action by the Federal Trade Commission (FTC) highlights its active role in this area and serves as a reminder about the FTC’s new regulations concerning related business practices.

On Nov. 6, 2024, the FTC announced that it had charged that GGL Projects Inc., d/b/a Sitejabber, a company offering AI-enabled reputation and consumer review management services to online businesses, had deceived consumers with its business practices.  Specifically, the FTC accused Sitejabber of misleading consumers by collecting ratings and reviews at the time of purchase, before customers had a chance to experience the products or services. These premature reviews were used to inflate the average ratings and review counts on Sitejabber's platform, falsely suggesting high customer satisfaction. Sitejabber also provided tools for clients to publish these misleading reviews on their own websites. The FTC's proposed order prohibits Sitejabber from misrepresenting customer ratings and reviews and from assisting others in doing so. This action is part of the FTC's broader effort to combat deception in the review ecosystem.

In August 2024, the FTC published the Final Rule on the Use of Consumer Reviews and Testimonials, a/k/a The Consumer Reviews and Testimonials Rule, intended to combat fake reviews and testimonials by prohibiting their sale or purchase.[1] FTC Chair Lina M. Khan emphasized that fake reviews waste resources, mislead consumers and harm honest business competitors. The rule aims to protect consumers and ensure fair competition. The rule prohibits fake or false reviews or testimonials — including those generated by AI — by consumers or celebrities, buying positive or negative reviews, and insider reviews without disclosure. It also bans misrepresentations regarding company-controlled review sites, suppressing negative reviews through threats and misusing fake social media indicators such as bot-generated followers or views. The rule addresses deceptive practices by businesses and strengthens the FTC's enforcement capabilities in this area.

While the alleged conduct that is the subject of this proposed order against Sitejabber was not claimed to have violated The Consumer Reviews and Testimonials Rule (and the alleged conduct also occurred before the publication of the rule), this enforcement action serves as further notice of the FTC's enforcement interest in this realm. With AI-enabled tools, the problem of improperly collecting and publishing consumer reviews can be accelerated and amplified, and businesses can quickly run afoul of the FTC’s new rule. Businesses should monitor and manage their consumer reviews and testimonials — whether done internally or with the help of a third party — within the scope of the FTC’s new regulations governing this area.

Justin Joy is a shareholder in the Memphis office of Lewis Thomason PC, and he is a former chair and current executive council member of the TBA Business Law Section. In addition to a range of experience in information privacy, cybersecurity and health law matters, Joy has a variety of experience in various civil litigation matters, including business and commercial litigation, insurance coverage disputes and business torts. He also provides counsel to small and midsize private businesses in various governance, operational and strategic matters.

A new Corporate Transparency Act (CTA) ruling has hit the newsstands, setting the stage for significant changes in corporate reporting requirements. On Dec. 3, Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas granted a motion for preliminary injunction in favor of plaintiffs, effectively suspending the impending "reporting rule" deadline of Jan. 1, 2025. Notably, this is not the typical preliminary injunction. Instead, the court found it appropriate to make this injunction a nationwide one, primarily on the reasoning that "the CTA and the reporting rule apply nationwide, to 'approximately 32.6 million existing reporting companies,'" and the court felt it could not provide Plaintiffs with meaningful relief without practically enjoining the CTA and reporting rule nationwide.

So, what caused the court to arrive at this result? The beginning of the opinion wades through a discussion on federalism principles and the inability of Congress to act where it lacks the power to do so. Nonetheless, the court's decision was based largely on a combination of two details: 1) Irreparable harm to the plaintiffs (in the form of unrecoverable costs); and 2) A substantial likelihood of success on the merits. These are only the first two elements of a successful preliminary injunction, but the bulk of the court's analysis is found within these two elements. Let's look at each in turn as they pertain to the CTA.

• The plaintiffs had to first show a "substantial threat of irreparable harm," and according to the court, they did so. Namely, the plaintiffs pointed to the fact that complying with the CTA will require significant costs. The government disagreed here, arguing that any costs Plaintiffs will incur are at the most de minimis and compliance as a whole is not difficult. The court disputed the government on this point, finding persuasive FinCEN's concession that "the total cost of filing BOI reports is approximately $22 billion in the first year and $5 billion in the years after." As such, the court reasoned that the costs plaintiffs must incur "are far more than speculative" and most certainly not de minimis.
• Along with the above, plaintiffs alleged the CTA violates three of their fundamental rights: the right to be free from laws Congress does not have the authority to enact, rights under the 1st Amendment, and rights under the 4th Amendment. Without delving into too much detail, the court concluded that by the time Jan. 2, 2025, rolls around, the plaintiffs would have "disclosed the information they seek to keep private under the 1st and 4th Amendments and surrendered to a law that they contend exceeds Congress's powers." This is enough to show irreparable harm.
• As to the "substantial likelihood of success on the merits" prong, the plaintiffs argue that the CTA is unconstitutional facially and as applied. This is where things became interesting. In sum, the plaintiffs allege that Congress is acting beyond the powers granted to it by the Constitution (to which the government obviously disagrees) on the basis that the CTA is authorized by the Commerce Clause and Necessary & Proper Clause.
• The Necessary & Proper argument by the government was more of a futile attempt to recover after being denied on the hard-hitting analysis surrounding the Commerce Clause. The court did not find it convincing that the government should be able to regulate all reporting companies simply because it uses the channels of interstate commerce (like telecommunications and bank routing systems). For one, the court noted that the word "commerce" or any reference to instrumentalities is found nowhere in the CTA, and reporting companies are not a "channel" or "instrumentality." Further, the court noted that the CTA does not only regulate companies that use channels or instrumentalities; rather, the CTA "assumes that every company does use channels and instrumentalities of interstate commerce without a jurisdictional hook of any kind that would limit the CTA's reach to only those companies who do use those channels ...".
• Even so, the government's last attempt at success under the commerce clause came under the premise that Congress has the ability to regulate anything that, in the aggregate, substantially impacts interstate commerce. This did not pass muster either, as the court found that the CTA does not regulate activity but rather regulates an entity's existence. For this reason, the court didn't even need to get to the "aggregation" point of the Commerce Clause because the government is compelling activity, not regulating existing activity. Put succinctly, "In other words, the CTA is a law enforcement tool — not an instrument calibrated to protect commerce; an exercise of police power, rather than a regulation of an activity which might impair commerce among the several states. This the Commerce Clause will not tolerate."

Now, with all that said, there is of course still a lack of clarity on where the discourse surrounding the CTA will lead. As the court said in the opinion, "Whether the CTA and the Reporting Rule are absolutely unconstitutional is a question for another day." The court acknowledges that Congress's intentions may be pure, but this cannot circumvent the interest of the people. All things considered, with the number of companies the CTA affects, it is sure to be the subject of further litigation and constitutional analysis.

Van East is a partner at Bradley Arant Boult Cummings LLP. He represents clients on matters involving closely held business entities, including formations, conversions, mergers, acquisitions and dispositions, as well as restructuring ownership and control. East has represented clients in purchasing and selling a variety of businesses, including home-building, real estate development, manufacturing and restaurant entities. He routinely organizes limited liability companies, corporations and partnerships for a variety of business purposes, including preparation of buy-sell, employment and noncompetition agreements.

Christian Wilkinson is an attorney at Bradley Arant Boult Cummings LLP. He is an associate in the firm’s Real Estate Practice Group. Wilkinson assists in the drafting and editing process of purchase and sale agreements, financing documents and ancillary closing documents. He also assists in the due diligence process for various commercial real estate transactions.

The TBA will be closed Tuesday and Wednesday in observance of the Christmas holiday. Offices will reopen Thursday at 8 a.m. CST. Online CLE programming will remain available throughout the holidays.