Current Developments: July 2025 Review

From the enactment of the One Big Beautiful Bill Act to US Supreme Court decisions addressing disability discrimination claims for retirees and the standard applicable to majority-group plaintiffs alleging employment discrimination, we have recently seen significant developments in estate planning, elder and special needs law, and business law. To ensure that you stay informed of these legal changes, we have highlighted some noteworthy developments and analyzed how they may impact your estate planning, elder law, and business law practice.

Estate Planning

Newly Enacted One Big Beautiful Bill Act Includes Permanent $15 Million Estate and Gift Tax Exemption

Pub. L. No. 119-21 (2025)

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), which permanently increases the estate and gift tax exemption amount to $15 million for individuals and $30 million for married couples, indexed annually for inflation using 2025 as the new base year, for the estates of individuals dying and gifts made after December 31, 2025. The OBBBA does not change rules applicable to portability elections, and the lifetime generation-skipping transfer (GST) tax exemption will continue to be equal to the basic exclusion amount.

Other provisions included in the 2017 Tax Cuts and Jobs Act that the OBBBA makes permanent include:

• the current tax brackets, with a bottom rate of 10 percent and a top rate of 37 percent
• the doubled standard deduction, which will increase to $15,750 for individuals and $31,500 for married couples filing jointly
• the $750,000 limit for the home mortgage interest deduction 

The OBBBA temporarily increases the state and local tax deduction to $40,000, which will decrease to $10,000 in 2030. The OBBBA does not impact the availability of pass-through business entity tax workarounds. The temporary increase phases out for those with incomes exceeding $500,000, or $250,000 for married individuals filing separately. This change applies to taxable years beginning after December 31, 2024.

For individuals who itemize, the OBBBA limits the charitable deduction to contributions exceeding 0.5 percent of their taxable income. For individuals who do not itemize, it adds a new charitable deduction of up to $1,000 for individuals and $2,000 for married couples filing jointly.

Takeaways: The permanent increase in the estate and gift tax exemption amount eliminates the urgency for clients to use the higher exemption amount before the scheduled 2026 sunset. Attorneys with high-net-worth clients will still need to advise them regarding tax minimization strategies. Some attorneys may want to encourage clients to use strategies designed to take advantage of the higher exemption amount sooner rather than later, in case the new law is repealed by a future Congress. Read more about the impact of the OBBBA on long-term Medicaid, ABLE accounts, Social Security, and small businesses below.

Poor Planning for Real Estate Results in Litigation and Family Disharmony

Varano v. Varano, No. 4D2024-1571, 2025 WL 1646418 (Fla. Ct. App. June 11, 2025); In re Kalbach, No. 367392, 2025 WL 1400616 (Mich. Ct. App. May 14, 2025)

Varano v. Varano. Babette Varano and her husband signed a deed conveying a life estate to themselves in their homestead property. The couple had no children in common, but both had children from previous relationships. Babette’s children had a one-half remainder interest in the property, and her husband created a trust that held the other one-half remainder interest for the benefit of one of his sons, Vincent. After Babette’s husband died, she entered into a contract to sell the property; the power to sell was NOT specifically articulated in, or granted to, the survivor in the life estate deed. Vincent opposed the sale and filed a lis pendens, but after threats of litigation from the buyer, Babette and the children all entered into a settlement agreement, which provided that the escrow proceeds would be split between Babette (50 percent), Vincent’s trust (22 percent), and continued escrow pending further agreement or litigation (28 percent). Babette then sought declaratory relief that she was entitled to the 28 percent that remained in escrow. However, the court found that she had no interest in the sale proceeds as a matter of law. The Florida Court of Appeals affirmed, holding that Babette, who possessed only a life estate, could not sell a fee simple interest in the property and was not entitled to the sale proceeds.

In re Kalbach. Charles and Betty Kalbach had five children. They created a trust naming two children, Barbara and Brett, as successor trustees and beneficiaries. The trust document explicitly stated that Charles and Betty intentionally did not name the other children as beneficiaries. A parcel of real property was the primary asset held in the trust. Many of the trust’s terms were complex and contradictory, but it clearly provided that when the surviving spouse passed away, the property would be divided into equal shares for Barbara and Brett and distributed to them as soon as possible. 

After Charles died, Betty executed an amendment to the trust in 2014, purporting to make specific bequests of the property to Barbara and Brett in unequal shares. A year later, in 2015, Betty executed a quitclaim deed purporting to convey the property to Barbara and Brett as joint tenants with the right of survivorship and retaining a life estate. Betty died in November 2016; Brett died in December 2016 with no will or descendants. The trust was not properly administered, and the property was never distributed to Barbara or Brett. In April 2021, Barbara executed a deed purporting to convey the property to herself and a defeasible remainder to her brother Thomas and his wife. Five days after executing the deed, Barbara died. Her will provided that her estate was to go to Thomas. 

The probate court appointed a neutral successor trustee. Thomas petitioned the court for instruction, arguing that it was consistent with Charles and Betty’s intent for the trust property to be distributed to Barbara’s estate and then to him as her beneficiary. Although one of Thomas’s siblings objected, the probate court determined that the trust was ambiguous and that outside evidence—namely the 2015 deed—could be considered to determine Betty’s intention. It further determined that Betty clearly intended for the property to pass to the surviving beneficiary, which ultimately was Barbara. The court held that Barbara’s will controlled the disposition of the property and ordered the trust to be reformed to distribute the property out of the trust to Barbara’s estate. The Michigan Court of Appeals affirmed, finding that the probate court had properly ordered the modification of the trust to distribute the property to Barbara’s estate: the modification furthered the purpose of the trust to provide the property to the primary beneficiaries. In addition, under the terms of the trust, because Brett died first, Barbara was entitled to the property, which should be distributed to her estate.

Takeaways: Careful planning and open communication are crucial to ensure that clients’ real property, often one of their most significant assets, passes according to their wishes without litigation and avoids unintended and undesirable ownership structures and unexpected tax bills. The Varano case illustrates that strategies other than life estates, such as transferring the property to a trust or limited liability company or executing a Lady Bird or transfer-on-death deed (not available in all states), may be preferable to allow homeowners to avoid probate and retain possession and control over their property, including the ability to sell or mortgage it, during their lifetime.

In In re Kalbach, unclear and incomplete trust terms, Betty’s ineffective attempts to amend the trust or other elements of her estate plan, and the absence of proper trust administration led to avoidable litigation between siblings. Well-drafted trusts address foreseeable contingencies, such as the death of the trust’s primary beneficiaries prior to the distribution of its assets. Timely trust administration is also crucial: if the property had been promptly and properly distributed to Barbara, litigation might have been avoided.

Failure to Clarify Goals and Intentions When Drafting Trust Documents Creates Problems in Administration 

Seaborn v. Seaborn, No. 2D2024-1323, 2025 WL 1699703 (Fla. Ct. App. June 18, 2025); Keng v. Keng, No. A25A0090, 2025 WL 1719460 (Ga. Ct. App. June 20, 2025)

Seaborn v. Seaborn. Martha Seaborn created a revocable living trust to hold her home. She named her children, Linda and Scott, as beneficiaries and co-trustees of the trust. In 2014, Martha died, and the trust became irrevocable. Linda was the sole occupant of the home. In 2021, Scott notified Linda that he wanted her to purchase his one-half interest in the home or agree to put it up for sale. In 2022, he petitioned the court to remove Linda as co-trustee. In 2023, the court issued an order removing her as co-trustee and making Linda and Scott tenants in common with equal one-half interests in the home. Scott then filed an action seeking the sale and partition of the real property and an adjustment of the sale proceeds to account for one-half of the reasonable rental value of the home from 2014 to 2023 on the basis that Linda was the sole occupant. The trial court ordered the sale and awarded him a credit for back rent of $117,000 ($1,000 per month for the 117 months Linda occupied the property).

The Florida District Court of Appeal found that Scott was not entitled to rent for the period before 2023 because the property was held in trust until then, and any rent Linda owed would have been payable to the trust. Once the co-tenancy was established in 2023, Scott might have been entitled to rent if Linda had communicated to Scott that she had an exclusive right or title to the property, that is, she held the property adversely or as a result of ouster or its equivalent. However, Scott had not alleged or shown any such acts by Linda. The court affirmed the trial court’s judgment ordering partition and sale of the property but reversed the credit for back rent.

Keng v. Keng. In 2014, Susie and Edward Keng executed a revocable living trust naming themselves co-trustees; although married, they shared no children in common but had children from previous relationships. They amended the trust in 2016 to provide that at Edward’s death, a specified investment account would be distributed equally among his three daughters; but upon the first death, the other trust assets were to go to the surviving spouse for life with the remainder to Edward’s daughters and Susie’s son. After Edward’s 2019 pancreatic cancer diagnosis, he distributed the assets of the investment account to his daughters, and, in 2020, he and Susie amended the trust again to remove the provision regarding that investment account. Edward died soon thereafter, and Susie was the sole trustee. Two of Edward’s daughters filed suit to set aside the trust amendments and have Susie removed as trustee, alleging Edward lacked capacity or Susie exerted undue influence over him and that Susie was unfit to serve as trustee. Susie filed a motion for summary judgment. The trial court granted her motion, finding no genuine issues of material fact.

The Georgia Court of Appeals agreed with the lower court that there were no genuine issues of material fact regarding the question of Edward’s capacity or supporting the exertion of undue influence by Susie. However, it reversed the lower court’s ruling regarding whether Susie should be removed as trustee. The court found that there was a genuine issue of material fact regarding whether there were irreconcilable differences and animosity between Susie and one of Edward’s daughters because Susie had sent messages to the daughter accusing her of hurting Edward, stating that Susie would never forgive her, and telling her not to try to see or contact Susie again—even though Susie was trustee of a trust partially for the benefit of that same daughter. 

Takeaways: These Florida and Georgia cases illustrate the need to use well-designed client intake questionnaires (such as the secure, online option offered by WealthCounsel) and to have in-depth discussions with clients about their goals and family relationships before drafting trust documents to ensure clients’ intentions are carried out during trust administration. In addition, estate planning documents should be reviewed regularly to ensure the plan continues to align with clients’ goals over time. In a situation involving beneficiary-occupied real property similar to the Seaborn case, grantors should be counseled to consider in-kind distributions to minimize co-ownership of the property, for example, by providing a specific distribution of the property to the occupant-beneficiary and other assets or residuary to other beneficiaries. If a beneficiary occupies the trust-owned property, it would be wise to establish the terms of such occupancy. Where such terms are not clearly established, the trustee could keep the property in trust and collect rent payable to the trust or sell the property as promptly as possible. In addition, advise clients to carefully consider family dynamics as well as other qualifications before selecting their trustees, especially in complex situations involving subsequent marriages and children from prior marriages, to avoid the need to remove a trustee who is unable to fulfill their fiduciary duty to administer the trust impartially. In many situations, independent trustees may be better suited than family members to serve as trustees.

Elder Law and Special Needs Law

One Big Beautiful Bill Act Makes Changes Impacting Long-Term Care Medicaid, ABLE Accounts, and Social Security

Pub. L. No. 119-21 (2025)

The OBBBA includes provisions impacting seniors who may need long-term care in a nursing facility, including the following:

• For applicants seeking Medicaid eligibility for long-term care, the OBBBA amends the home equity exclusion to $1 million, not indexed for inflation, meaning that individuals who would otherwise be eligible for long-term care services under the Medicaid program will not qualify if their home equity exceeds $1 million, effective January 1, 2028. The OBBBA allows states greater flexibility for properties zoned for agricultural use.
• Effective January 1, 2027, the retroactive eligibility period is reduced from three months to two months for traditional Medicaid enrollees
• The Centers for Medicare & Medicaid Services’ (CMS) Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment final rule, aimed at simplifying Medicaid long-term care enrollment (and other Medicaid processes), is suspended until 2035, effective on the date of enactment.
• The CMS final rule Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting will not be enforced or implemented until September 30, 2034, effective on the date of enactment.
• New funding is provided for home and community-based services and rural hospitals.

In addition, the OBBBA makes the increased limitation on contributions to ABLE accounts permanent and modifies the inflation adjustment to apply to taxable years beginning after December 31, 2025.

The new law also provides an extra standard deduction of $6,000 for individuals ages 65 and older between 2025 and 2028, which begins to phase out for single taxpayers whose modified gross income exceeds $75,000 ($150,000 for married couples filing jointly).

Takeaways: The change to the home equity limit will have a noticeable short-term benefit for single clients in a supermajority of jurisdictions throughout the country, where the prior limit was between $730,000 and $750,000. The tightening of the retroactive eligibility scheme, however, will impact both applicants and facilities alike. Elder law attorneys must be prepared during the application process to ensure the best outcomes. 

See our May 2024 and May 2025 monthly recaps for additional information about the CMS minimum staffing final rule. Many in the long-term care industry were concerned that the rule’s unintended consequences would be that nursing facilities would have to reduce the number of beds available or even close due to their inability to hire adequate numbers of nurses to meet the mandates. Advocates for the change, however, argued that these long-needed patient care considerations would have resulted in better outcomes in an industry often prone to cutting corners in search of profit maximization.

Retiree Not a Qualified Individual Under ADA Where Alleged Discrimination Occurred After Retirement

Stanley v. City of Sanford, Florida, 145 S. Ct. 2058 (2025)

Karyn Stanley worked for the city of Sanford, Florida (the City) from 1999 until 2018, when she was forced to retire because of a disability. When the City hired her, it offered health insurance until age 65 for both those who retired after 25 years of service and those who retired because of a disability before working 25 years. In 2003, the City changed its policy regarding those who retired early due to disability: for those employees, it would only provide health insurance for 24 months unless the retiree began to receive Medicare benefits earlier. Karyn began to suffer from a disability after the change in the City’s policy and was only able to receive health insurance for 24 months after her retirement.

Karyn brought a lawsuit against the City alleging it had violated the ADA by providing different health insurance benefits to retirees who retired early because of a disability than those who retired after 25 years of work. The City filed a motion to dismiss for failure to state a claim. The federal district court dismissed Karyn’s ADA claim. The Eleventh Circuit Court of Appeals affirmed, concluding that under 42 U.S.C. § 12112(a), Karyn was required to allege that she was a qualified individual under the ADA, i.e., that she was someone who could perform the essential functions of her employment with or without accommodations. The court held that because she was a retiree who did not hold or desire to hold an employment position, Karyn’s ADA claim must be dismissed.

The US Supreme Court granted certiorari because of a split among the circuit courts of appeal regarding whether § 12112(a) prohibits discrimination against retirees who do not hold or desire to hold a job whose tasks they can perform with or without reasonable accommodation. The Sixth, Seventh, and Ninth Circuits agreed with the Eleventh Circuit that § 12112(a) does not protect those who do not hold or seek a job at the time of the discrimination, but the Second and Third Circuits held that the definition of qualified individual is ambiguous and should be interpreted in favor of extending the statute’s protections to retirees. The Court noted that § 12112(a) prohibits discrimination against a qualified individual based on disability in regard to compensation. Karyn and the City agreed that retirement benefits, including health insurance, were compensation under the ADA. In addition, for the purposes of its review, the Court assumed that the City’s change to its health insurance policy was discrimination. As a result, the only issue it considered was whether discrimination against disabled retirees like Karyn was within the scope of § 12112(a).

The Court examined the language of § 12112(a), noting that Congress had chosen to prohibit discrimination against an individual who can perform the essential functions of the job she holds or desires, using present-tense verbs. The Court determined that those verbs indicated that the ADA only protects those who are able to do the job at the time they suffered discrimination. In addition, other statutory language reinforced that conclusion; for example, the definition of reasonable accommodation refers to modifications of existing facilities used by employees, which makes sense when applied to current employees or applicants but does not when applied to retirees who neither hold nor seek a job.

The Court also relied on its precedent in Cleveland v. Policy Management Systems Corp., 526 U.S. 795 (1999), in which it held that an ADA plaintiff had the burden of proving that they were able to perform the essential functions of the job with or without accommodations and that a plaintiff who asserts that they are unable to work has negated an essential element of the ADA case.

The Court rejected Karyn’s arguments that retirees should be included in the definition of qualified individuals under the ADA, including her assertion that § 12112(a) only requires plaintiffs who claim discrimination related to a job they seek or hold to show that they are able to perform the job’s essential functions, but does not require that showing if the plaintiff does not seek or hold a job. The Court determined that Karyn’s interpretation of § 12112(a), which would mean that every retiree was a qualified individual under the ADA, was not supported by its language. Accordingly, the Court affirmed the judgment of the Eleventh Circuit.

Takeaways: The Court’s resolution of the circuit split provides employers with more certainty regarding the ADA’s scope by holding that postretirement modification or discontinuation of retirement benefits for workers who retired due to a disability but not for workers who retired after a certain number of years of service is not discrimination prohibited by the ADA. As noted by the Court, laws other than Title I of the ADA may protect retirees from disability-based discrimination with respect to postemployment benefits, including claims under state law, the federal Rehabilitation Act of 1973, and an equal protection claim under 42 U.S.C. § 1983. In addition, the Court indicated that relief under Title I of the ADA “may be available to others who happen to be retired at the time they sue, if they can plead and prove they were both disabled and ‘qualified’ when their employer adopted a discriminatory retirement-benefits policy.” Stanley v. City of Sanford, Florida, 145 S. Ct. 2058 (2025).

Probate Court Properly Appointed Professional Guardian for Incapacitated Individual When Preferred Guardian Was Unsuitable  

In re Guardianship of CY, No. 370828, 2025 WL 1667107 (June 12, 2025)

CY was a 93-year-old woman with three daughters and one son. She chose her son, Leon Jukowski, to have primary responsibility for her care as her patient advocate. After her husband died in 2020, CY’s daughters filed a petition in the probate court seeking the appointment of one of the daughters, Lesley Yolkowski, as CY’s guardian, alleging that CY suffered from dementia and that Leon, as CY’s patient advocate and agent under a medical durable power of attorney, had not acted in her best interest, had not ensured that CY was receiving adequate care, and had not cooperated with CY’s daughters. 

CY, through counsel, objected to the petition for guardianship, asserting that she was not legally incapacitated, but if the court determined that a guardian was needed, she wanted Leon to be appointed as her guardian. She asserted that because she had listed Leon as her patient advocate and had repeatedly expressed her preference for Leon to act on her behalf, he should have priority to serve as her guardian. 

The probate court found that the evidence indicated that CY was an incapacitated individual and needed a guardian, and that she required more supervision and care than Leon was willing or able to provide. The trial court appointed a professional guardian because Leon was an unsuitable guardian and the evidence showed that CY did not want her daughters to make decisions about her medical care. CY appealed, contesting the trial court’s appointment of a professional guardian on the basis that Leon was providing proper care as her patient advocate and medical power of attorney.

On appeal, the Michigan Court of Appeals found that the evidence demonstrated that CY was an incapacitated individual under Michigan law and that appointing a guardian other than Leon was vital to her continuing care and supervision. The evidence showed that Leon did not communicate with his sisters or medical professionals who provided care for CY, CY’s health had deteriorated following her husband’s death, Leon had hired an unqualified caregiver who did not provide proper care for CY, CY’s person and home were dirty, and CY was not taking her medications. The court found that although CY had indicated her preference for Leon to make medical decisions on her behalf, Mich. Comp. Laws § 700.5306 permits the court to appoint a different person to act as guardian for an individual who has designated a patient advocate who has not acted in the individual’s best interests. Based on the evidence, the court determined that appointing a guardian other than Leon was critical to CY’s well-being because Leon had “demonstrated that he was utterly unwilling or unable to address CY’s acute needs.” In re Guardianship of CY, No. 370828, 2025 WL 1667107, at *5 (June 12, 2025). Thus, the court affirmed, holding that the probate court was within its discretion to appoint another person as CY’s guardian despite CY’s designation of Leon as her patient advocate. 

Takeaways: Attorneys should become familiar with their state’s guardianship statute, as statutes vary significantly from state to state. Typically, courts may choose a guardian identified by the ward as the person they prefer to serve if the ward has the capacity to make that determination. However, the court must choose a guardian based on the ward’s best interest. Where the court determines that the ward’s preferred guardian is unwilling or incapable of serving, it will appoint another guardian despite the ward’s preference. Although family members or others with close ties to the ward are often preferred by courts, where no family member or friend is able or willing to serve, a professional guardian may be appointed.

Business Law

One Big Beautiful Bill Act Provides Permanent Advantageous Tax Deductions for Small Businesses 

Pub. L. No. 119-21 (2025)

The OBBBA includes provisions that impact small businesses. Specifically, these provisions do the following:

• Make the section 199A pass-through deduction permanent and keep the deduction rate at 20 percent
• Permanently restore the 100 percent bonus depreciation for qualified property acquired and used after January 19, 2025
• Allow a section 179 deduction for investment in qualified business equipment and certain other assets and increase the deduction cap from $1.5 million to $2.5 million
• Increase the amount of business interest expenses that can be deducted by removing depreciation, amortization, and depletion deductions from the calculation of adjusted taxable income
• Permit domestic research and development expenses to be deducted in the year incurred, or costs may be capitalized and amortized over the life of the research (at least 60 months)
• Make the excess business loss limitation permanent
• Expand the exclusion of gain recognition for the sale of qualified small business stock

Takeaways: Attorneys and other tax professionals should assist business-owning clients in taking steps to enable them to take advantage of OBBBA’s tax benefits. The new law provides small businesses with additional certainty by making beneficial provisions permanent and providing additional tax advantages designed to encourage investment.

Majority-Group Plaintiff Not Subject to Heightened Standard to Establish Prima Facie Case of Disparate Treatment under Title VII of Civil Rights Act

Ames v. Ohio Dept. of Youth Servs., 145 S. Ct. 1540 (2025)

In 2004, the Ohio Department of Youth Services (the Department) hired Marlean Ames, a heterosexual woman, to serve as executive secretary; she was eventually promoted to program administrator. In 2019, Marlean applied for a management position in the Department, but the Department hired a homosexual woman for the job. Several days after Marlean’s interview for the management position, she was removed from her job as program director and demoted to her original position as executive secretary. A homosexual man was hired to fill the program director position.

Marlean filed a lawsuit in federal district court against the Department, alleging that it had violated Title VII of the Civil Rights Act, specifically the disparate treatment provision (42 U.S.C. § 2000e–2(a)(1)), which prohibits employers from intentionally discriminating against employees based on race, color, religion, sex, or national origin, by denying her the promotion and demoting her based on her sexual orientation. The Department filed a motion for summary judgment. The federal district court granted summary judgment in favor of the Department, holding that Marlean had failed to meet a heightened evidentiary burden applicable to plaintiffs who are members of a majority group. The Sixth Circuit Court of Appeals affirmed.

The US Supreme Court granted certiorari to resolve a split between the circuit courts of appeals regarding whether majority-group plaintiffs are subject to a different evidentiary burden than minority-group plaintiffs under McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), which provides several steps for evaluating disparate treatment claims based on circumstantial evidence. The first step requires a plaintiff to make a prima facie case by producing sufficient evidence to support an inference that the defendant acted with a discriminatory motive. The Court noted that Sixth Circuit precedent also required plaintiffs who are members of a majority group to establish background circumstances supporting the “suspicion that the defendant is that unusual employer who discriminates against the majority.” Ames v. Ohio Dept. of Youth Services, 145 S. Ct. 1540, 1546 (2025) (citation omitted). 

The Court determined that the language of 42 U.S.C. § 2000e–2(a)(1), which makes it unlawful “to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin,” makes no distinctions between majority- and minority-group plaintiffs. To the contrary, its focus is on individuals, not groups, and it provides the same protections to all individuals, regardless of their membership in a majority or minority group, revealing that Congress did not intend additional requirements to be imposed only on majority-group plaintiffs.

In addition, the Court reviewed its own precedent, which made it clear that under Title VII, there is no variation in the standard for proving disparate treatment based on whether the plaintiff is a member of a majority group. The Court ruled that the Sixth Circuit’s background circumstances rule was inconsistent with that basic principle. In addition, the Court determined that the background circumstances rule ignored the court’s precedent precluding “inflexible applications” of McDonnell Douglas’s first step by “subjecting majority-group plaintiffs to the same, highly specific evidentiary standard in every case.” Id. at 1547. For example, under the heightened standard, majority-group plaintiffs must provide certain types of evidence to establish a prima facie case, such as statistical proof or information about the protected traits of the decisionmaker, that minority-group plaintiffs would not be required to produce. The Court rejected such inflexibility, holding that the “precise requirements of a prima facie case can vary depending on the context and were ‘never intended to be rigid, mechanized, or ritualistic.’” Id. at 1546 (citations omitted).

The Court vacated the Sixth Circuit’s judgment and remanded the case for application of the proper prima facie standard.

Takeaways: The US Supreme Court’s unanimous decision abrogates not only the ruling of the Sixth Circuit Court of Appeals, but also similar longstanding rulings in the Seventh Circuit (Mills v. Health Care Serv. Corp., 171 F.3d 450 (7th Cir. 1999)); Eighth Circuit (Hammer v. Ashcroft, 383 F.3d 722 (8th Cir. 2004)); Tenth Circuit (Notari v. Denver Water Dept., 971 F.2d 585 (10th Cir. 1992)); and D.C. Circuit (Harding v. Gray, 9 F.3d 150 (D.C. Cir. 1993)) that had established a heightened evidentiary burden for majority-group plaintiffs in disparate treatment cases under Title VII. As a result of the Court’s decision, all plaintiffs, regardless of their membership in any group, will be subject to the same framework in establishing a prima facie case of disparate treatment under Title VII. Attorneys should counsel businesses with employees to take steps to ensure their employment decisions are not based on protected characteristics and properly document the reasons for those decisions.

Shopify’s Installation of Cookies on California Plaintiff’s Device Resulted in Specific Personal Jurisdiction in California

Briskin v. Shopify, Inc., 135 F.4th 739 (9th Cir. Apr. 21, 2025)

California resident Brandon Briskin purchased clothing online from IABMFG. To complete the purchase, Brandon was required to submit private, personally identifying information, including his name, address, phone number, and credit card information. When he submitted the information on the platform, he did not know that his information was also submitted to Shopify, an e-commerce platform that facilitates online sales for merchants. The privacy policy on IABMFG’s website did not mention Shopify or that Shopify would send cookies to his device. Shopify installed cookies on Brandon’s device when he first viewed items in the store, enabling Shopify to track his behavior over its entire network of merchants, including his geolocation and other identifying information. It stored and used the data collected for its benefit and the benefit of the merchants it contracted with. The data were also shared with third parties who stored, analyzed, and marketed it to their customers.

Brandon filed a putative class action against several Shopify companies in a California federal district court, alleging that Shopify’s actions violated California data privacy and access laws and were unfair and deceptive trade practices. The federal district court dismissed the complaint in part due to its conclusion that it lacked specific personal jurisdiction over the defendants. A three-judge panel of the Ninth Circuit Court of Appeals affirmed the district court’s ruling.

The Ninth Circuit reheard the appeal en banc. In addressing whether California courts had specific personal jurisdiction over Shopify, the court noted that for tort claims such as the privacy and data use violations Brandon asserted, it was first necessary to determine whether the tort was purposefully directed to the state as set forth in Calder v. Jones, 465 U.S. 783 (1984). The Calder “effects” test looks at the forum in which the defendant’s actions were felt, regardless of whether those actions took place within the forum: The defendant (1) must commit an intentional act that is (2) expressly aimed at the forum state, and (3) which causes the harm that the defendant knows will be suffered in the forum state. The court recognized that the parties did not dispute that the first and third factors had been met. They disagreed about the second prong, whether Shopify’s conduct was expressly aimed at the state of California or its residents or merely arose from a California resident’s decision to purchase from an online store that contracted with Shopify. The court determined that Shopify had engaged in intentional activities expressly aimed toward California and its consumers to obtain and use their personal information for its commercial gain in violation of California law. The fact that Shopify had entered California electronically rather than physically to obtain Brandon’s information did not preclude its entry from being a relevant contact with that state. The court rejected Shopify’s argument that it had not expressly aimed its conduct at California because it operated nationwide and had not engaged in differential targeting specifically at California. Rather, it stated that

requiring differential targeting would have the perverse effect of allowing a corporation to direct its activities toward all 50 states yet to escape specific personal jurisdiction in each of those states for claims arising from or relating to their relevant contacts in the forum state that injure that state's residents.

Briskin v. Shopify, Inc., 135 F.4th 739, 758 (9th Cir. Apr. 21, 2025). Therefore, the court held that an interactive platform such as Shopify expressly aims its wrongful conduct toward a forum state when it engages in contacts with the forum that are not random, isolated, or fortuitous, but are its choice, regardless of whether the platform cultivates markets nationwide for commercial gain.

The second consideration in determining personal jurisdiction is that the plaintiff’s claims must arise out of or relate to the defendant’s contacts with the forum state. The court determined that Brandon’s claims arose out of Shopify’s contact with his device, which it knew was in California. In addition, his claims related to Shopify’s contacts in California because the kind of injury he alleged—Shopify’s installation of cookies onto his device without his knowledge or consent in violation of California law—was a type that would tend to be caused by Shopify’s contacts with California online stores and consumers. Therefore, the court held that the second requirement for personal jurisdiction was satisfied.

The court found that since Brandon had alleged facts sufficient to support the first and second requirements for personal jurisdiction, the burden shifted to Shopify to present a compelling case that the third part of the test—the exercise of personal jurisdiction comports with fair play and substantial justice (i.e., is reasonable)—has not been met. To meet that burden, Shopify must show the presence of other considerations that would render jurisdiction unreasonable. The court noted that Shopify did not contest multiple factors in the balancing test it had adopted to determine the reasonableness of exercising personal jurisdiction, but it primarily disputed the extent of its purposeful business activities in California. Because the court had already concluded that Shopify’s regular business activities were purposefully directed at California, it determined that the factors weighed in favor of a determination that the exercise of personal jurisdiction in California was reasonable and that Shopify had not met its burden of presenting a compelling case of unreasonableness. 

Takeaways: Despite the Briskin court’s ruling, it is still clear that “something more” than the mere passive nationwide accessibility of an out-of-state website is required to show that a defendant has expressly aimed at a forum state for purposes of exercising personal jurisdiction. Id. at 752. However, what constitutes “something more” has continued to evolve, and standards vary in different jurisdictions. Websites’ use of cookies is pervasive, so the Briskin court’s reliance on Shopify’s use of them to establish specific personal jurisdiction over Shopify in California is notable. Further, the Briskin decision is important in that it expressly overruled precedent in which the court had determined that to establish personal jurisdiction over a globally accessible website, a plaintiff must allege that the website had a forum-specific focus or had engaged in differential targeting to show that its business was expressly aimed at the forum state. Because of the lack of uniformity between the circuit courts of appeals regarding the standards for exercising personal jurisdiction over out-of-state websites, the US Supreme Court may eventually resolve this issue.

Limited Partners Extensively Involved in Running Partnership Subject to Employment Tax

Soroban Capital Partners v. Comm’r, T.C. Memo 2025-52 (May 28, 2025)

Soroban Capital Partners was a Delaware limited partnership with a general partner and three limited partners. It reported guaranteed payments made to the limited partners and the general partner’s share of ordinary business income as net earnings from self-employment on its tax returns for 2016 and 2017. Soroban excluded distributions of ordinary income to the limited partners based on the limited partner exception of Internal Revenue Code § 1402(a)(13), which excludes “the distributive share of any item of income or loss of a limited partner, as such” from net earnings from self-employment.

In a previous related case (see the discussion in our February 2024 monthly recap), the Tax Court held that a functional analysis test should be applied to determine whether the limited partnership exception applied to limited partners in state-law limited partnerships. In the present case, the court applied a functional analysis test, taking into account all relevant facts and circumstances, to determine whether the limited partners’ earnings constituted net earnings from self-employment. The court held that under the functional analysis test, to fall within the limited partner exception, the surrounding circumstances of a partner’s economic relationship with the partnership must show that it is generally a passive investment. In the present case, however, the court found that the limited partners were “limited partners in name only.” Soroban Capital Partners v. Comm’r, T.C. Memo 2025-52, at *14 (May 28, 2025). They played an essential role in generating Soroban’s income, oversaw its daily management, worked for Soroban full time, and held out to the public that they played an essential role in the business. Further, their earnings were not investment earnings. Therefore, the court ruled that the Internal Revenue Service was correct in including their distributive share of partnership income in their net earnings from self-employment.

Takeaways: Attorneys representing limited partners should advise them that even if they are limited partners under state law, under the functional analysis test, they will not qualify for the self-employment tax exemption unless they are truly passive investors; the distributive share of partnership income for partners who play an active role in the business will be considered net earnings from self-employment.