Class Action Defense

May 9, 2024 by Class Action Defense

The Class Action Weekly Wire – Episode 54: Challenges Posed By Data Breach Class Actions

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associates Emilee Crowther and Ryan Garippo with their discussion of three recent data breach class action filings in the Northern District of Georgia and common challenges and trends they’ve identified in data breach class action litigation over the past 18 months.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Google Podcasts, the Samsung Podcasts app, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, YouTube or our RSS feed.

Episode Transcript

Jerry Maatman: Thanks so much loyal blog readers and listeners, this is our next episode the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and joining me today are Emily Crowther of our Austin office and Ryan Garippo of our Chicago office. Thanks so much to both of you for being on our podcast.

Emilee Crowther: Thank you, Jerry. I’m very happy to be here.

Ryan Garippo: Great to be here, Jerry. Thanks for having me.

Jerry: So today, our subject is the area of data breach class actions in general, and three new class actions recently filed in federal court in the Northern District of Georgia by employees, in essence, alleging that their personally identifying information was compromised during data breaches. Emilee, I know that you practice quite a bit in this space. Could you give us some information on these filings, and why they’re important to corporate counsel?

Emilee: Absolutely, Jerry. These actions were all filed by employees, as you stated: one against Arby’s fast food restaurant owner DRM, Inc., one against healthcare company Aveanna Healthcare, LLC, and then one other against automotive company Asbury Automotive Group, Inc. Each of these actions alleged that after companies were subjected to data breaches the employees’ personally identifying information was threatened by hackers, and the companies failed to take precautions to protect that information.

Jerry: We recently reported in the Duane Morris Class Action Review that among all areas of class action litigation, right now the hottest area is data breach class actions. Frankly, these lawsuits are exploding in popularity and certainly constitute a major area of focus for the plaintiffs’ bar. What is it about these cases that are attractive to the plaintiffs’ bar, and what is alleged in these new cases brought in federal court in Georgia?

Ryan: Well, Jerry, while these actions were filed separately, and the defendants businesses differ significantly, the proposed class actions all have similar allegations, including negligence, breach of warranty, and unjust enrichment. The plaintiffs in these class actions allege that they were employed at the companies, and that during their employment, their personal information, including their social security, numbers, birth dates, and driver’s license numbers, were collected by their employers. The plaintiffs asserted that the defendants failed to adhere to industry standards to protect their data which led to the data being obtained by hackers. So this information is interesting for the plaintiff’s bar, particularly because they can bring these allegations en masse and use these class actions to exert leverage against employers.

Jerry: You know, I’ve always thought the business model of plaintiffs’ class action lawyers is to file the case, certify the case, and monetize the case by getting a settlement. Yet our statistics in our Duane Morris Class Action Review showed that of all subset of areas, in the data breach space only 14% of motions for class certification were granted. Many motions to dismiss were granted, because plaintiffs weren’t able to articulate a sufficient injury-in-fact. Emilee, in these particular cases, how are the plaintiffs trying to get around those problems and what are they focusing on to establish standing through allegations of injury-in-fact?

Emilee: The plaintiffs allege that their personal information was captured in the spring, and that their personal identification information was therefore exposed to the cybercriminals at that time. The plaintiffs contend that, due to these cyber-attacks they have an increased vulnerability to identity theft. They also claim that they have spent time and money to mitigate risks, and that the actual value of their information has diminished as a result.

Ryan: Some plaintiffs have also asserted that they’ve been required to monitor their credit reports and are worried about future personal financial security. The plaintiffs also claim emotional distress from the dissemination of their personal information, because they will forever face an amplified risk of further misuse, fraud, and identity theft as a result of the defendants’ alleged conduct.

Jerry: Reminds me of the last class certification motion I argued in a data breach case, and that was the simple-notion judge – it was like a tree that fell in the forest, and nobody heard it. I still think that the plaintiffs’ bar is still finding ways to get around. Of course, the injury-in-fact requirement that comes from the famous Trans Union case decided by the U.S. Supreme Court. But thanks, Emilee and Ryan, for your analysis and your thought leadership in this particular area. Blog readers and listeners, hope you enjoyed this installment of the Class Action Weekly Wire, and thanks so much for tuning in.

Emilee: Thanks for having me, Jerry, and thank you, listeners.

Ryan: Thank you, everyone. Great to have an opportunity to be on the podcast.

May 8, 2024 by Duane Morris

California Employer’s Good Faith Defense to Wage Statement Penalties Recognized by State’s Supreme Court

On May 6, 2024, the California Supreme Court issued its decision in Naranjo v. Spectrum Security Services, Inc., Case No. S279397, handing California employers a significant victory. The court unanimously held that a good faith dispute defense applies to claims for penalties or damages for inaccurate wage statements under California Labor Code Section 226(e). The Naranjo decision, in a rare win for California employers, resolves a split in authority in the California Courts of Appeal and enables employers who act in good faith to defend against inaccurate wage statement penalties under Section 226(e). Note: Duane Morris served as appellate counsel for Spectrum in this case.

Read the full Alert on the Duane Morris LLP website.

May 6, 2024 by Class Action Defense

Class Action Issues In 2024 – Report From The Beard Group Class Action Conference In New York City

By Gerald L. Maatman, Jr., Jennifer A. Riley, Greg Slotnick, and Maria Caceres-Boneau

Duane Morris Takeaways: On May 6, 2024, the Beard Group sponsored the Class Action Money & Ethics Conference in New York City. The agenda is here. During the conference, over 150 attendees discussed key issues impacting class action litigation in 2024. We were privileged to chair the Conference and present the keynote address on class action litigation trends for the past year and what 2024 has in store for Corporate America. The discussion at the program underscores the cutting-edge issues facing companies in this area of law.

Key Trends For The Past Year

In our keynote address, we discussed the top ten developments in the class action litigation space. The leading trends center on the new era of heightened risks and elevated exposures that pivot on record-breaking settlement numbers; the high conversion numbers for class certification motions into certified classes, and the rise in privacy and data breach class actions.

On the settlement front, 2022 saw $66 billion in total proceeds when measured by the top ten settlements in all areas of law. In 2023, that figure totaled $51 billion, for a combined total of $117 billion over the past 24 months.

The pace of class action settlements thus far in 2024 shows no signs of slowing down. In the first four months of the year, three settlements of over $1 billion are in the books and the total (just for the top five settlements in each area) are at $19.8 billion.

In terms of class certification motions, the Plaintiffs bar successfully secured certification in 74% of cases over the past year. Those figures ranged from nearly 97% in securities fraud lawsuits to 14% in data breach cases. That said, the plaintiffs’ bar has proven its track record to convert class action lawsuit filings in to certified classes at a high rate.

In the privacy and data breach space, such claims became ubiquitous in 2023, with a virtual explosion in those types of lawsuits. While certification rates were quite low in data breach situations, the plaintiffs’ bar secured certification in privacy class actions at a higher rate.

Data Breach Panel

An interesting panel discussion – consisting primarily of plaintiffs’ lawyers – ensued after the keynote address on wiretapping class claims under the Video Privacy Protection Act and data privacy class action litigation. They reflected on the patchwork quilt of rulings in these areas over the past year and the low certification rates due to problems in surmounting standing issues based on lack of injury-in-fact showings.

The panelists predicted a subtle shift in privacy and data breach lawsuits to effectuate a “work around” to these impediments. Multiple plaintiffs’ counsel predicted more reliance on state law claims and litigation of class-wide claims in state court.

Panel On Use Of Qualified Settlement Funds

A panel of plaintiffs and defense lawyers addressed best practices in establishing and working on class-wide settlement with qualified settlement funds (QSF).

Several settlement administrators joined the panel and discussed new challenges in handling QSF funds posed by fraud (both by claimants and cyber criminals), as well as better interest rates that result in generation of more money for distribution.

Panel On Class Notice Strategies

The next panel focused on trends for class notice in 2024 and how artificial intelligence is now mainstream in terms of its use to facilitate the notice send to class members. The panelists expressed how these practices are quite innovative and rapidly evolving. Notice through social media and/or texts or email also is considerable cheaper than U.S. Mail, which is driving down settlement administration costs.

The challenge, however, is to prevent fraudulent claims from individuals seeking a share of the settlement pot. As to take rates, social media advertising is driving the rates upward, but the rates in data breach cases remain low at 2% to 5% (as compared to other types of settlements).- Class member demographics also impact the take rate, as older individuals are apt to view social media notice as “junk mail” or a scam. Conversely, staying ahead of fraudsters has created an imperative for settlement administrators (e.g., where settlement shares are claimed by an IP address of a bot).

Panel On Fraud In The Class Action Process

Another panel discussed the rise of fraudsters in the class action space. Some involve “deep fakes” of persons who seek to assert false claims as named plaintiffs or class members. Others involve cyber-criminals who infiltrate the settlement administration process and seek class settlement shares on a false basis.

Judicial responses have run the gamut from shutting down the settlement administration process and rebooting it with enhanced security measures to referrals to law enforcement personnel to combat fraud. Panelists predicted that judges are apt to ratchet up the scrutiny of final settlement approval of class actions, and possibly promote direct mail notice over digital communications.

ESG Class Action Litigation Panel

Class actions over environmental. social, and governance issues went mainstream in the past year. Panelists tracking these cases predicted that ESG class actions will continue to increase, especially as the plaintiffs’ bar refines their theories of recovery and begin to monetize their claims.

in particular, securities fraud class actions over DEI commitments are increasing as a result of the U.S. Supreme Court’s recent decision in Students For Fair Admissions, Inc., et al. v. President And Fellows Of Harvard College, Case No. 20-1199 (U.S. June 29, 2023). Both plaintiffs’ lawyers and defense counsel anticipate more litigation in this space.

Panel On “Lead Generation” Techniques In Mass Torts & Class Actions

The final panel explored new strategies utilized by the plaintiffs’ bar in reaching out to potential litigants in mass tort and class action litigation situations. The numbers behind the advertising – on television, social media, and radio – top $1.1 billion on an annual basis. On average, plaintiffs’ law firms run over 45,000 advertisements per day across the country with mass tort cases constituting the majority of ad placements.

The panelists opined that nuclear verdicts, large class action settlements, and social inflations are the main factors fueling the advertising. They concluded that these forms of advertising are a staple of the litigation system and not going away anytime soon.

Implications For Companies

Class action litigation is a fact of life for corporations operating in the United States. Today’s conference underscored that change is inevitable, and class actions litigation is no exception.

May 2, 2024 by Class Action Defense

The Class Action Weekly Wire – Episode 53: 2024 Preview: EEOC Litigation And Strategy

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman, Jennifer Riley, and Alex Karasik with their discussion of our upcoming webinar, the Duane Morris Mid-Year Review of EEOC Litigation and Strategy. Reserve your virtual seat for the program here, and check out the 2024 edition of the Duane Morris EEOC Litigation Review here.

Episode Transcript

Jerry Maatman: Welcome to all of our listeners. Thank you for being here for our weekly podcast, the Class Action Weekly Wire. I’m Jerry Maatman, partner at Duane Morris, and joining me today are my colleagues and fellow partners, Jen Riley and Alex Karasik. Thanks so much for being on the podcast today.

Jennifer Riley: Thank you, Jerry, happy to be part of the podcast.

Alex Karasik: Thanks, Jerry. Glad to be here.

Jerry: Today we’re very excited, we have a great message about an upcoming webinar, the Duane Morris Mid-Year Review of the EEOC Litigation and Strategy. This is a must-see and must-attend webinar, that in essence gives a mid-year report card on what the EEOC is doing in the courthouse. And the hosts will be myself, Jen, and Alex, and we wanted to personally invite each of you, our listeners and our readers, to sign up and attend the event, which, of course, is for free. Jen, could you talk a little bit for our listeners about the contents of this year’s webinar?

Jen: Sure, Jerry. Essentially, this is a quick 30 min panel discussion, where the three of us will do two primary things. First, we’ll analyze the EEOC’s latest strategic priorities. And second, we will analyze and review the lawsuit filings that we’ve seen so far during the first half of the Commission’s fiscal year 2024. We will bring that analysis to you in a half hour segment.

Jerry: Thanks. This is a great virtual program that’s perfect for human resource professionals, business leaders, and corporate counsel, and is designed to provide insights, in essence, inside baseball news, regarding the EEOC’s latest enforcement initiatives and strategies. And it’s designed to keep businesses off the radar of the EEOC. Alex, what are some of the details of the webinar that our listener should know?

Alex: The webinar is scheduled for Monday, May 13 at 2 pm, and it runs from 2 pm to 2:30 pm Central Time. We will provide a sign up link in the episode transcript on the class action defense blog. This webinar is a great information-packed 30 minutes – we understand a lot of our corporate counsel, HR professionals, and business leaders, that you just mentioned, Jerry, have busy schedules. So we’re going to do our best to pack this into a 30 minute webinar, and then we’ll go from there and to give insights into the EEOC’s activities throughout the first half of the fiscal year.

Jerry: Well, the past is prologue. Last year we had over a thousand attendees, from the United States, Europe, and Asia, so we hope all the listeners can tune in this year.

Jen: We also want to remind listeners that we recently published a primer on EEOC litigation, called the EEOC Litigation Review – 2024. Complying with workplace anti-discrimination laws is important for companies looking to stay out of the EEOC’s crosshairs. The review is a great resource for corporate counsel and human resources professionals alike. It is available on the class action defense blog in e-book format.

Alex: We were also fortunate enough to discuss the EEOC strategic priorities with EEOC Commissioner Keith Sonderling at our Duane Morris Class Action Review book launch in February 2024 – for anyone interested in watching that discussion, it is also available on our blog.

Jerry: Thanks, Alex, and thanks, Jen. Certainly looking forward to the upcoming webinar on the EEOC in a few weeks, and, as always, we will keep our blog readers and listeners fully updated on these important announcements.

Alex: Thanks, Jerry. We look forward to seeing everyone soon.

Jen: Thanks for having me, Jerry, and, thanks to all of our listeners.

Jerry: Have a great day.

April 29, 2024 by Class Action Defense

Join Us! Duane Morris Invitation: Chicago Developments In Workplace Law And Practice Seminar

Duane Morris Takeaway: Join Duane Morris attorneys in Chicago for this special event! Duane Morris’ annual Developments in Workplace Law and Practice seminar series provides our clients and friends with a comprehensive update of important employment, labor relations, benefits and immigration law developments over the past year, as well as imminent changes that may seriously impact their businesses. Emphasis is placed on understanding the practical implications of these developments and the key strategies that immediately can be implemented to deal with them efficiently and effectively. This session encourages lively, thought-provoking discussions. Participants will have the opportunity to network with their peers and the presenters before and after the event. The program is of particular interest to business owners and executives, in-house counsel and HR professionals.

This program is open to all – click here to attend in person!

About the Chicago Program

Join Dan Canales, Alex Karasik, Jennifer Long, Jerry Maatman, John Reade, Jen Riley, Lisa Spiegel and Brandon Spurlock for a discussion of the following topics:

What’s New for Illinois Employers in 2024 and Beyond?

Hear all about current updates for Illinois employers including the latest regulatory guidance on mandatory paid leave requirements, how to prepare for mandatory pay transparency requirements beginning in 2025, the latest requirements impacting employers using temporary labor, and other anticipated employee-friendly changes in the legislative pipeline for 2025 and beyond.

Learn how recent federal developments impact your employment practices, including the Department of Labor’s regulatory action on independent contractor and employee misclassification, the NLRB’s recent regulatory action on joint employer issues, how OSHA’s new union representative walkaround rule impacts non-union employers, and other nationwide trends in state and local legislation.

Class Action Review: Top Developments Employers Should Expect for 2024 and Beyond

Class action litigation presents one of the most significant risks to corporations today. Learn the latest highlights in class action trends, decisions and settlements in crucial areas impacting Corporate America, including civil rights, employment discrimination, wage payment, labor and other class and collective actions brought by current and former employees. We will also share our insight on what companies and corporate counsel can expect to see in 2024 and beyond.

Digital Developments: What Businesses Need to Know About AI, Privacy and Data Breach Class Actions

Emerging technologies such as AI, biometric timekeeping software and cloud storage of data have exploded onto the scene of the modern workplace. Hear the latest developments about:

How employers are handling the emergence of AI
How courts are adjudicating privacy class actions following two major Illinois Supreme Court decisions involving the Biometric Information Privacy Act (BIPA)
What employers need to know about the latest trend in class action litigation: data breach claims

Employee Benefits Update

The rules governing employee benefit plans are always changing and it is no different in 2024. We will discuss the biggest issues that employers should keep in mind this year – including:

Health and welfare plan fiduciary developments
Recent guidance under SECURE 2.0 that impacts all 401(k) plan
Updates on ERISA retirement plan litigation and the steps that employers can take to minimize their potential exposure

The Latest Updates for Employers on Immigration Sponsorship and Immigration Related Investigations

Employer sponsorship of employees for work authorization and green cards can be a long, complex process. Over time, organizations, jobs, locations, and employees all change. Learn what rights employers have during the sponsorship process to stop, change or redirect sponsorship efforts and how those decisions will impact the sponsored employees.

USCIS, ICE and the DOJ regularly investigate employers for immigration-related compliance during visa sponsorship, and immigration-related discrimination during the I-9 and E-Verify processes. These investigations can be onerous with unexpected government visits to employer locations, large document productions and significant fines for civil liability. Get the latest updates for employer compliance in these situations.

April 26, 2024 by Class Action Defense

Artificial Intelligence Litigation Risks in the Employment Discrimination Context

By Gerald L. Maatman, Jr., Alex W. Karasik, and George J. Schaller

Duane Morris Takeaway: Artificial intelligence took the employment world by storm in 2023, quickly becoming one of the most talked about and debated subjects among corporate counsel across the country. Companies will continue to use AI as a resource to enhance decision-making processes for the foreseeable future as these technologies evolve and take shape in a myriad of employment functions. As these processes are fine-tuned, those who seek to harness the power of AI must be aware of the risks associated with its use. This featured article analyzes two novel AI lawsuits and highlights recent governmental guidance related to AI use. As the impact of AI is still developing, companies should recognize the types of claims apt to be brought for use of AI screening tools in the employment context and the implications of possible discriminatory conduct stemming from these tools.

In the Spring 2024 issue of the Journal of Emerging Issues in Litigation, Duane Morris partners Jerry Maatman and Alex Karasik and associate George Schaller analyze key developments in litigation and enforcement shaping the impact of artificial intelligence in the workplace and its subsequent legal risks. Read the full featured article here.

April 25, 2024 by Class Action Defense

SB 2979 – Illinois Biometric Privacy Act Legislation Passes The Illinois Senate

By Gerald L. Maatman, Jr., Alex W, Karasik, and George J. Schaller

Duane Morris Takeaways: On April 11, 2024, the Illinois Senate passed Senate Bill 2979 (the “Bill”) by vote of 46 to 13. The Bill introduces legislation that would amend the Biometric Information Privacy Act (“BIPA”) to limit claims accrued to one violation of the BIPA in stark contrast to the statute’s current “per-collection basis.” The Bill’s proposed revisions are accessible here and the status of the Bill can be tracked here. For any companies involved in privacy class action litigation, the proposed legislations is exceedingly important.

Background On The BIPA

The BIPA currently provides for “a violation for every scan,” based on the Illinois Supreme Court’s decision in Cothron v. White Castle Sys., 2023 IL 128004 (Feb. 17, 2023). In Cothron, the Illinois Supreme Court held that “the plain language of §§ 15(b) and 15(d) shows that a claim accrues under the Act with every scan or transmission of biometric identifiers or biometric information without prior informed consent.” Id. at ¶ 45.

The majority of the Illinois Supreme Court opined that any policy-based concerns “about potentially excessive damage awards under the Act are best addressed by the legislature.” Id. at ¶ 43.

On January 31, 2024, Senator Bill Cunningham introduced SB 2979 to the Illinois Senate.

The Proposed Revisions To The BIPA Under SB 2979

The Bill’s proposed revisions articulate two key amendments regarding: (1) the “every scan” violation under §§ 15(b) and 15(d); and (2) an additional definition for “electronic signature” that augments the BIPA’s current “Written release” definition.

For violations under §§ 15(b) and 15(d), the Bill endeavors to limit alleged violations of the BIPA to a “single violation” for these respective sections.

The Bill narrows an aggrieved person’s entitled recovery to “at most, one recovery under this section,” provided that biometric identifier or biometric information was obtained from the same person using the same method of collection. See SB 2979, 740 ILCS 14/20(b). Similar single violation language is proposed under sub-section (d) of § 15 on the BIPA’s dissemination provision. See SB 2979, 740 ILCS 14/20(c).

Also included in the Bill is a new definition for ‘electronic signature’ as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” See SB 2979, 740 ILCS 14/10. This definition is then incorporated to the BIPA’s already defined “Written release.” See id.

As of April 25, 2024, the Bill advanced to Illinois General Assembly’s House of Representatives and is assigned to the Judiciary – Civil Committee.

Implications For Employers

Employers should monitor SB 2979 closely as it progresses through the Illinois House of Representatives. The unfettered potential damages from BIPA claims may be limited to a single scan if the Bill passes. This would be a major and much-needed legislative coup for businesses with operations in Illinois who utilize biometric technology.

April 25, 2024 by Class Action Defense

The Class Action Weekly Wire – Episode 52: 2024 Preview: Antitrust Class Action Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associates AJ Rudowitz and Daniel Selznick with their discussion of 2023 developments and trends in antitrust class action litigation as detailed in the recently published Duane Morris Antitrust Class Action Review – 2024.

Episode Transcript

Jennifer Riley: Welcome to our listeners. Thank you for being here for our weekly podcast, the Class Action Weekly Wire. I’m Jennifer Riley, partner at Duane Morris, and joining me today are associates AJ Rudowitz and Daniel Selznick from our Philadelphia office. Thank you for being on the podcast today, guys.

AJ Rudowitz: Thanks, Jen. Happy to be part of the podcast.

Daniel Selznick: Thanks, Jen, glad to be here.

Jen: Today on the podcast we are discussing the recent publication of this year’s edition of the Dwayne Morris, Anti-trust, class Action Review. Listeners can find the e-book publication on our blog, the Duane Morris Class Action Defense Blog. AJ, can you tell our listeners a bit about the publication?

AJ: Absolutely, Jen. Happy to talk a little bit about the publication, and I know all the contributors are very happy with and proud of the final work product. So, in 2023, we saw many key developments in class action litigation involving antitrust claims. And as we know, most antitrust class actions are settled before trial, and one of the most crucial phases of the case, if not the most crucial phase, is class certification. Thus the order granting or denying a motion to certify a class in all these cases is critical to the ultimate outcome, and particularly the settlement of all these cases. This stage is it’s akin to winning or losing the coin toss, and over time in an NFL game for any football fans out there. It’s very determinative of the outcome, which is usually settlement. To assist companies and employers with understanding what these key developments mean in facing antitrust claims, Duane Morris has released the 2024 Duane Morris Antitrust Class Action Review, which analyzes the key rulings and litigation developments from 2023, and the significant trends that are necessarily going to impact these types of cases, these types of class actions in 2024 and beyond. And we hope that companies and employers will benefit from this resource in their compliance with these evolving and highly impactful laws and standards that can oftentimes result in high-stakes litigation.

Jen: Daniel, what were some of the key takeaways from the publication with regard to litigation in this area in 2023?

Dan: Sure. So one of the topics that was actually fairly prevalent this year, and what we discussed in the publication, was courts’ treatment of so called no-poach or no-hire agreements. As a general matter, a recurring issue, and sort of major battleground in antitrust cases is whether the court is going to apply a per se treatment, a quick look, analysis, or a rule of reason test, and that was certainly the case in 2023 with respect to cases involving no poach agreements.

One of the most significant cases came out of the Seventh Circuit in a case captioned Deslandes, et al. v. McDonald’s. In that case, a group of former McDonald’s workers alleged that they had been restricted in their ability to earn higher wages because of a provision in McDonald’s franchising agreements that prohibited a franchise from hiring another franchise’s employee who was within 6 months of leaving that franchise. The district court concluded that the plaintiffs were not entitled to a per se treatment, because in the courts view, the no-poach agreement at issue was ancillary to the franchise agreement. In the court’s view, it expanded the output of McDonald’s food, and it aided in the success of a cooperative venture. On appeal, the Seventh Circuit reversed and remanded the district court’s decision, and what the Seventh Circuit essentially said was that while there was a possibility that these no-poach provisions were ancillary to the franchise agreement – and one of the things that the Seventh Circuit mentioned was it may have been there to protect franchise, franchise investments, and training of employees – the court was not satisfied with the district court’s reasoning, and found that just because it could potentially increase the output of burgers and fries, that determination is immaterial and does not justify any detriment to workers that could have been caused by these no-poach agreements.

Jen: Interesting. AJ, what are some of the setbacks, and what will this really mean for companies in 2024?

AJ: Well, there’s certainly a few takeaways from the Seventh Circuit’s Deslandes decision. First and foremost, it is important in the antitrust class action context, because it supports the Justice Department’s position that no-poach agreements can be adjudicated as per se violations of Section 1 of the Sherman Act, and the U.S. Supreme Court has since denied McDonald’s petition for review. So, as a very general matter, it is, of course, easier for plaintiffs in antitrust class actions to secure class certification, and to win on the merits, if the alleged anti-competitive conducted issue is treated as per se anti-competitive, rather than being required to go through the full rule of reason analysis, or the so-called quick look analysis. And the Deslandes case will certainly impact any future no-poach cases specifically, and we can anticipate more class actions being brought by plaintiffs in this context. Companies and employers will need to develop new strategies both before litigation to try to prevent it, and during any such litigation to try to defeat it.

Jen: Thanks so much for that information – very important for companies navigating compliance with the antitrust statutes. The review also talks about another important no poach anti-trust class action ruling in 2023. Daniel, could you tell us a bit about that decision?

Dan: Sure, Jen. So that case came out of the United States District for the District of Connecticut, and the case captioned Borozny, et al. v. Raytheon Technologies Corp. In that case the plaintiff filed a class action alleging six corporate defendants violated Section 1 of the Sherman Act by conspiring to restrain wages, essentially by secretly agreeing to restrict competition for the recruitment and hiring of aerospace engineers and similarly skilled workers in in that space. The defendants move to dismiss, arguing that the alleged anti-competitive agreement was vertical in nature rather than horizontal, and therefore it should not be afforded per se treatment. The court disagreed with defendants and denied the motion, holding that even though the defendants were operating at different levels in the supply chain – for example, some of the defendants were manufacturers and some were distributors – the court found that, in fact, the relevant market was the market for aerospace workers, and that, even though defendants were participating in a vertical supply chain, with respect to the market for workers, they competed horizontally. So in this instance, the court found that the labor market restraint at issue was a naked restrain on trade, and not ancillary to any legitimate or competitive purpose such that the complaint adequately pleaded for per se treatment.

Jen: Thanks so much. I anticipate that these issues will remain hotly debated in the courts in 2024. The review also talks about the top antitrust class action settlements in 2023. How do plaintiffs do in securing settlement funds this past year?

AJ: Plaintiffs were hugely successful. In 2023, the top 10 antitrust class action settlements totaled over $11.7 billion, which was nearly a threefold increase over the prior year. By comparison, the top 10 settlements for antitrust class actions in 2022 totaled only $3.7 billion. And that’s something to keep an eye on here in 2024.

Jen: Wow! We will continue to track those settlement numbers in 2024, as record breaking settlement amounts have been a trend that we’ve been tracking over the past two years. Thank you to AJ and Daniel for being here today, and thank you to our listeners for tuning in. Please stop by the blog for a free copy of the Antitrust Class Action Review e-book.

Dan: Thanks for having me, Jen. Thanks, listeners, and I hope you enjoy the publication, and look forward to doing another one of these.

AJ: Thanks, so much, everybody.

April 22, 2024 by Gerald L. Maatman, Jr.

EEOC Weighs In On Novel Artificial Intelligence Suit Alleging Discriminatory Hiring Practices

By Gerald L. Maatman, Jr., Alex W, Karasik, and George J. Schaller

Duane Morris Takeaways: In Mobley v. Workday, Inc., Case No. 23-CV-770 (N.D. Cal. April 9, 2024) (ECF No. 60), the Equal Employment Opportunity Commission (“EEOC”) filed a Motion for Leave to File an Amicus Brief in Support of Plaintiff and in Opposition to Defendant’s Motion to Dismiss. This development follows Workday’s first successful Motion to Dismiss, about which we previously blogged here, after which the Court allowed Plaintiff a chance to amend his complaint.

For employers utilizing Artificial Intelligence in their hiring practices, this notable case is worth monitoring. The EEOC’s decision to insert itself in the dispute demonstrates the Commission’s commitment to continued enforcement of anti-discrimination laws bearing on artificial intelligence use in employment.

Case Background

Plaintiff, an African American male over the age of forty alleged that he suffered from anxiety and depression and brought suit against Workday claiming that its applicant screening tools discriminated against applicants on the basis of race, age, and disability. Plaintiff further alleged that he applied for 80 to 100 jobs, but despite holding a bachelor’s degree in finance and an associate’s degree in network systems administration, he did not get a single job offer. Id., 1-2 (ECF No. 45).

Workday moved to dismiss the Complaint in part arguing that Plaintiff did not allege facts to state a plausible claim that Workday was liable as an “employment agency” under the anti-discrimination statutes at issue.

On January 19, 2024, the Court granted the defendant’s motion to dismiss, but with leave for Plaintiff to amend, on the ground that plaintiff failed to plead sufficient facts regarding Workday’s supposed liability as an employer or “employment agency.” Shortly thereafter, Plaintiff filed his Amended Complaint. Id. (N.D. Cal. Feb. 20, 2024) (ECF No. 47.)

On March 12, 2024, Workday filed its Motion to Dismiss Amended Complaint, asserting that Workday is not covered by the statutes at issue – Title VII, the Americans with Disabilities Act (“ADA”), and/or the Age Discrimination in Employment Act (“ADEA”) – because Workday merely screens job seekers rather than procuring them. Id., (ECF No. 50.) On April 2, 2024, Plaintiff filed his opposition (id., ECF No. 59) and, on April 12, 2024, Workday filed its reply. Id., (ECF No. 61.)

The motion is fully briefed and set for hearing on May 7, 2024.

The EEOC’s Motion for Leave to File an Amicus Brief

On April 9, 2024, before Workday filed its Reply, the EEOC filed a Motion for Leave to File an Amicus Brief in Support of Plaintiff and in Opposition to Defendant’s Motion. Id., (ECF Nos. 60 & 60-1.) The EEOC noticed its Motion for hearing on May 7, 2024. Id., (ECF No. 60.)

The EEOC describes Mobley as a case that “implicate[s] whether,” Title VII, the ADA, and the ADEA, “cover[s] entities that purportedly screen and refer applicants and make automated hiring decisions on behalf of employers using algorithmic tools.” Id., at 1 (ECF No. 60-1.) The Commission argues that Plaintiff’s Amended Complaint satisfies federal pleading standards “with respect to all three theories of coverage alleged.” Id., at 4.

First, with respect to Workday as an employment agency, the EEOC notes that Title VII, the ADA, and the ADEA, all prohibit discrimination by employment agencies. Under each statute, the term “employment agency” includes “any person regularly undertaking with or without compensation to procure employees for an employer.” Id. The EEOC maintains courts generally construe “employment agency” based on “‘those engaged to a significant degree’ in such procurement activities ‘as their profession or business,’” and the focus on the degree to which an entity engages in “activities of an employment agency.” Id.

The EEOC argues, among these activities, screening and referral activities are classically associated with employment agencies. Id., at 5. The Commission asserts that “[Plaintiff] has plausibly alleged that Workday’s algorithmic tools perform precisely the same screening and referral functions as traditional employment agencies—albeit by more sophisticated means.” Id., at 6. In contrasting Workday’s position, the EEOC urged the Court to find Workday’s arguments that “screening employees is not equivalent to procuring employees,” and that Workday does not “actively recruit or solicit applications” as unpersuasive. Id., at 7.

Second, the EEOC argues leading precedent weighs in favor of Plaintiff’s allegations that Workday is an indirect employer. Taking Plaintiff’s allegations as true, the EEOC contends that “Workday exercised sufficient control over [Plaintiff’s] and others applicants’ access to employment opportunities to qualify as an indirect employer,” and “Workday purportedly acts as a gatekeeper between applicants and prospective employers.” Id., at 11.

The EEOC argues Workday’s position on sufficient control misses the point. Workday’s assertion that it “does not exert ‘control over its customers,’ who ‘are not required to use Workday tools and are free to stop using them at any time,” is not the inquiry. Id., at 12. Rather, the relevant inquiry is “whether the defendant can control or interfere with the plaintiff’s access to that employer,” and the EEOC notes that the nature of that control or interference “will always be a product of each specific factual situation.” Id.

Finally, the EEOC maintains that Plaintiff plausibly alleged Workday is an agent of employers. The EEOC also maintains that under the relevant statutes the term “employer” includes “any agent of” an employer and several circuits have reasoned that an employer’s agent may be held independently liable for discrimination under some circumstances. Id.

In analyzing Plaintiff’s allegations, the EEOC argues that Plaintiff satisfies this requirement, where Plaintiff “alleges facts suggesting that employers delegate control of significant aspects of the hiring process to Workday.” Id., at 13. Accordingly, the EEOC concludes that Plaintiff’s allegations are sufficient and demonstrate “Workday’s employer-clients rely on the results of its algorithmic screening tools to make at least some initial decisions to reject candidates.” Id., at 14.

On April 15, 2024, the Court ordered any opposition or statement of non-opposition to the EEOC’s motion for leave shall be filed by April 23, 2024. Id. (ECF No. 62.)

Implications For Employers

With the EEOC’s filing and sudden involvement, Employers should put great weight on EEOC enforcement efforts in emerging technologies, such as AI. The EEOC’s stance in Mobley shows that this case is one of first impression and may create precedent for pleading in AI-screening tool discrimination cases regarding the reach of “employment decisions,” by an entity – whether directly, indirectly, or by delegation through an agent.

The Mobley decision is still pending, but all Employers harnessing artificial intelligence for “employment decisions” must follow this case closely. As algorithm-based applicant screening tools become more common place –the anticipated flood of employment discrimination lawsuits is apt to follow.

April 19, 2024April 19, 2024 by Class Action Defense

Ninth Circuit Strikes Down Defendant’s Attempt At “Super Snap Removals”

By: Gerald L. Maatman, Jr., Sarah Gilbert, and Nick Baltaxe

Duane Morris Takeaways: In a consolidated appeal – entitled Casola v. Dexcom, Inc., Bottiglier v. Dexcom, Inc., and Pfeifer v. Dexcom, Inc., Nos. 23-55403, 23-55435 & 23-55437 (9th Cir. Apr. 10, 2024) – the Ninth Circuit held that it lacked jurisdiction to review the District Court’s remand orders in three cases, Defendant-Appellant Dexcom, Inc (“Dexcom”) challenged the District Court’s decision to remand each of the cases under the forum defendant rule, which prohibits removal based on diversity jurisdiction if any of the parties in interest “properly joined and served as defendants is a citizen of the state in which such action is bought.” 28 U.S.C. § 1441(b)(2). Dexcom argued that the forum defendant rule did not apply as it had filed the removal notice before it had been “joined and served,” a gambit known as a “snap removal.” The Ninth Circuit held that Dexcom’s attempt to avoid the forum defendant rule by removing before it had been served was ineffectual and it dismissed the appeals for lack of jurisdiction.

Case Background

Plaintiffs Casola, Bottiglier, and Pfeifer brought similar product liability suits against Defendant Dexcom in late 2022 in the Superior Court of California, County of San Diego. Id. at 6. Plaintiff Casola submitted her complaint electronically on November 23, 2022, and Dexcom received notice of that submission via the Courthouse News Service, an organization that publishes daily reports about civil litigation. Id. at 7. On Monday, November 28, 2022, before the Court had officially “filed” the Complaint or issued a summons, Dexcom filed a Notice of Removal, invoking diversity jurisdiction. Id. Dexcom followed a similar strategy for the complaints filed by Plaintiffs Bottiglier and Pfeife by filing “snap removals” before the case was officially filed. Id. at n. 4.

On December 29, 2022, 31 days after the original Notice of Removals were filed, Plaintiffs filed motions for remand, framing the remand on the basis of “subject matter jurisdiction” in an attempt to avoid the 30-day deadline for remand. Id. at 9. Plaintiffs argued that the District Court lacked subject-matter jurisdiction because Dexcom’s notices were “legally void” since they were filed before the complaint had been processed, while also asserting that remand was proper due to the forum defendant rule. Id. In March of 2023, after additional briefing from both parties, the District Court granted the remand motions, holding that the remand was proper due to the forum defendant rule. Id. Importantly, the District Court rejected Dexcom’s argument that Plaintiffs had waived their forum-defendant objections by filing their remand motions 31 days after the removal was filed because the notices of removal were “defective,” which did not start the 30-day window. Id.

Dexcom appealed these remand orders. Id.

The Ninth Circuit’s Decision

The Ninth Circuit addressed whether the District Court had the power to remand each of the cases on the basis of a non-jurisdictional defect, i.e., the forum-defendant rule, that was asserted more than 30 days after the notice of removal was filed. To do so, the Ninth Circuit addressed three subsidiary issues.

First, the Ninth Circuit agreed that Dexcom’s Notice of Removals were premature. Id. at 14. Specifically, the Ninth Circuit held that, for purposes of removability, the complaint was filed in California state court when it was processed and acknowledged as officially filed by the clerk. Id. at 15. The Ninth Circuit noted that the Complaint is not filed when it is electronically submitted because the clerk must then review the submission for compliance with local court rules, ensure that filing fees are paid, and can even reject the submission if defective. Id. at 19. On that basis, the Ninth Circuit disagreed with Dexcom’s position that the complaints were deemed filed upon electronic submission. Id. at 24.

The Ninth Circuit also addressed Dexcom’s policy argument that the it should avoid adopting different rules for the timing of filing of a complaint for removal purposes on the one hand, and statute of limitations and similar timeliness purposes on the other. Specifically, Dexcom argued that rejection of its position that the Complaint is filed on delivery will lead to situations where a complaint could be treated as filed for the purposes of the statute of limitations but not filed for purposes of removal. Id. at 28. The Ninth Circuit found this argument unpersuasive. The Ninth Circuit noted that the stakes here are minimal, as the 30-day deadline for removal only starts upon service of the Complaint. Id. Additionally, the Ninth Circuit opined that “snap removals” are still viable in some district courts in California, so adopting Dexcom’s position would give in-forum defendants with access to services like Courthouse News Services a safe harbor in which to remove while not concerning themselves with service of the Complaint. Id. at 30.

Finally, the Ninth Circuit addressed whether or not the premature notices of removal nonetheless started the 30-day clock for non-jurisdictional objections to removal. The Ninth Circuit determined that, if the notices of removal were defective for merely procedural or technical reasons, they may have held that the defectiveness did not block the 30-day window from starting. Id. at 32. However, the Ninth Circuit instead held that these notices of removal had a foundational defect, which rendered them legally null and void. Id. at 33. The Ninth Circuit maintained that because there was no pending civil action to be removed, the notices of removal did not confer jurisdiction on the District Court. Id. While that defect was cured by Dexcom’s subsequent filing of supplemental notices of removal, the Ninth Circuit found that the 30-day clock would have started on the date of supplemental filing, not the original date of filing. Id.

In sum, the Ninth Circuit made it clear that it did not decide whether or not Dexcom violated the forum-defendant rule. Id. at 34. Additionally, the Ninth Circuit refused to address whether or not pre-service “snap removals” are proper, even though the District Court had impliedly held that pre-service “snap removals” are improper. Id.

Implications For Companies

While the Ninth Circuit did not address the applicability of pre-service “snap removals,” it has effectively closed the door on pre-filing “snap removals.”

While companies may prefer to have cases heard in the federal courts, this decision makes it clear that the removal must be lodged after the Complaint is filed and acknowledged by the clerk. A failure to follow this guideline will lead to remand of the claims.