Commercial Litigation Update

With DOJ and state Medicaid Fraud Control Unit (“MFCU”) enforcement increasing in the ABA space, proactive compliance programs are more important than ever. State Medicaid billing rules, scope-of-practice requirements, the CMS Toolkit, and recent OIG audit findings provide an important framework for identifying and monitoring compliance risk.

Recent enforcement actions involving a small number of ABA providers have brought increased regulatory attention to the industry. The most prominent example is the recent Minnesota prosecution involving allegations of billing for services that never occurred, falsified documentation, kickbacks, and concealed ownership interests. While the allegations are extreme and not representative of most ABA providers, cases like these have raised alarm among federal and state regulators.

Parties use arbitration provisions for a variety of reasons, including enhanced efficiency and advantages of resolving disputes in private and outside of court. In crafting arbitration clauses, businesses often retain some asymmetry, giving one party rights the other party does not enjoy. Courts generally permit this, even in adhesion contracts, as long as the provision is clearly disclosed and presented fairly. But a recent Fifth Circuit decision illustrates that clear presentation is not enough: a provision can be legible, labeled, and free of fine print, and still fail.

Applied behavior analysis (ABA) therapy for autism has become one of the fastest-growing service categories in Medicaid. Rapid growth, significant workforce demands, extensive use of paraprofessional staff, and complex documentation and supervision requirements have also created heightened compliance and payment-integrity risks. In response to increasing expenditures, varying clinical practices, and reported fraud schemes, the Centers for Medicare & Medicaid Services (CMS) recently released its Applied Behavior Analysis Toolkit (linked here) to support state Medicaid and Children’s Health Insurance Program (CHIP) oversight. Providers and investors should understand both the legitimate forces driving demand for ABA and the compliance issues receiving increased regulatory attention.

In this three-part series, we examine the factors driving increased regulatory attention to ABA, how routine compliance concerns can escalate into enforcement matters, and the steps providers and investors can take to reduce risk and strengthen compliance.

In a decision of first impression in Massachusetts, a judge in the Business Litigation Session of the Superior Court ruled that material generated by an artificial intelligence tool, or “AI output,” is not protected under the work product doctrine unless performed for or at the direction of counsel.

Shealy v. Seaside Investments, LLC, serves as a cautionary example of courts analyzing AI-generated materials through the lens of established attorney-client privilege and work product frameworks and deciding that information disclosed to a non-attorney, including an AI-powered tool, potentially exposes those materials to discovery.

In June 2026, the Supreme Court held in a unanimous decision that a defendant falsifying a document in violation of 18 U.S.C. § 1519 must be tried in the district where the falsification occurred, not the district where the federal investigation was located.

Many employers rely on arbitration agreements with class action waivers, provisions that prevent employees from filing or joining collective lawsuits, to manage wage and hour litigation risk. That strategy works reliably in states like California where courts typically uphold arbitration agreements with class action waivers. In Washington, however, courts disfavor class action waivers and arbitration agreements generally, and will invalidate such agreements when employees lacked a meaningful opportunity to review and agree to their terms. This refusal to enforce arbitration agreements or class action waivers creates a gap exposing employers to potential class action risk .[1]

[1] See Burnett v. Pagliacci Pizza, Inc., 196 Wash. 2d 38 (2020) (refusing to enforce arbitration clause in employee handbook when employer failed to provide separate, conspicuous notice).

On December 19, 2025, Governor Kathy Hochul signed the Avoiding Vexatious Overuse of Impleading to Delay (AVOID) Act into law, significantly reshaping third-party practice in New York State. Effective April 18, 2026, the Act imposes strict time limits on impleading third parties who may bear responsibility for all or some of the claims in a litigation, requiring defendants to identify and pursue potential third-party claims much earlier than previously required.

What General Counsel and Business Leaders Need to Know

• One National Standard: The U.S. Department of Justice’s (DOJ’s) Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) creates a national policy for how the DOJ may award companies cooperation credit for the voluntary self-disclosure of corporate misconduct in the criminal context.
• A 120-Day Clock: The CEP gives a company 120 days to self-report after a whistleblower’s internal complaint, signaling that the DOJ may treat anything past roughly four months as untimely—far less time than most internal investigations take to finish.
• Disclosure as a Business Decision: A company’s decision to self-disclose misconduct is no longer just a legal judgment call but a business-critical risk decision that can have real financial and reputational consequences.

In this episode of Speaking of Litigation^®, Epstein Becker Green attorneys Zachary S. Taylor, Melissa L. Jampol, and Elena M. Quattrone break down the DOJ’s new CEP and what it means for how quickly companies must investigate, escalate, and decide whether to self-disclose potential misconduct.

In April 2026, a complaint alleging “one of the most egregious examples of piracy in the medical technology industry” landed on the docket of the U.S. District Court for the Eastern District of Texas.

The 180-page patent infringement lawsuit by Heartflow, Inc.—a California-based medical company that advances coronary care through artificial intelligence (AI)-powered three-dimensional models of a patient’s heart—alleges that a former Heartflow consultant founded a rival company, Cleerly, Inc., using Heartflow’s “revolutionary cardiovascular diagnostic technology, trade secrets, and confidential business information” while still bound by contractual obligations.

“By this action, Heartflow seeks to protect the extraordinary investment—measured in hundreds of millions of dollars, decades of research protected by hundreds of patents, and the contributions of countless scientists, engineers, and physicians—that created the world’s first AI-powered, non-invasive cardiac diagnostic platform, as recognized by the U.S. Food and Drug Administration (FDA) and Centers for Medicare & Medicaid Services (CMS),” the Heartflow complaint states.

Cleerly issued a statement on April 17, calling the filing a “lawsuit to limit competition.”

“We strongly disagree with the allegations and will vigorously defend against these baseless claims,” Cleerly wrote. The company’s answer is due July 8, 2026.

We discuss this patent infringement case in further detail below.