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Posted on by Gerald L. Maatman, Jr.

Pennsylvania Superior Court Shoes In Consent Framework For State Wiretap Claims

By Gerald L. Maatman, Jr., Jennifer Riley, and Olga A. Romadin

Duane Morris Takeaways:  On October 23, 2026, in Thompson v. C. & J. Clark America, Inc., No. 74 WDA 2026, 2026 Pa. Super. LEXIS 557 (Pa. Super. Ct. Oct. 23, 2026), the Pennsylvania Superior Court vacated a lower court’s grant of summary judgment to footwear retailer C. & J. Clark America, Inc. (“Clarks”) in a putative class action alleging that a third-party analytics vendor “wiretapped” visitors’ interactions with the retailer’s website in violation of Pennsylvania’s Wiretapping and Electronic Surveillance Control Act (“WESCA”) and constituted common law invasion of privacy. The Superior Court rejected the trial court’s holding that communicating over the internet amounts to consent to interception, and adopted the framework articulated in Popa v. Harriet Carter Gifts, Inc., 772 F. Supp. 3d 592 (W.D. Pa. 2025), in its entirety, holding that a reasonably conspicuous privacy policy disclosing third-party tracking can establish implied consent under WESCA’s all-party consent exception. The decision underscores an emerging line of state court rulings scrutinizing online privacy policies more closely, with wider implications for litigation to be brought against companies with an online presence.

Background

On February 14, 2023, Plaintiff, a consumer, brought a putative class action against Clarks in the Court of Common Pleas of Washington County alleging that the shoe retailer, through third-party vendor Content Square, wiretapped the electronic communications of visitors to its website, including their “mouse movements, clicks, keystrokes … URLs of web pages visited, and/or other electronic communications,” in violation of WESCA and common law invasion of privacy.  Id. at *1-2. Plaintiff claimed that after visiting the Clarks website on her phone and browsing for sandals, she received unwanted, targeted ads for sandals, including for those sold by Clarks. Id. at *6-7. Plaintiff’s complaint stated that she had not entered her name, email address, or payment information, did not create an account on the website, and did not use the chat function. Id. Further, Plaintiff claimed that she never reviewed the website’s terms of use nor the cookie policy. Id. at *7.

The Court of Common Pleas dismissed her common law invasion of privacy claim on preliminary objections but allowed her to proceed on her WESCA claim. Id. at *2. On December 5, 2025, it granted summary judgment to Clarks. Id. at *8. In a 3-5 decision relying on Commonwealth v. Proetto, 2001 PA Super 95, 771 A.2d 823 (Pa. Super. 2001), Commonwealth v. Cruttenden, 619 Pa. 123, 58 A.3d 95 (Pa. 2012), Commonwealth v. Diego, 2015 PA Super 143, 119 A.3d 370 (Pa. Super. 2015), and Commonwealth v. Byrd, 661 Pa. 85, 235 A.3d 311 (Pa. 2020), the Court of Common Pleas held that a website visitor need not have known that she was being tracked or by whom, and that her “‘very act’ of sending an electronic communication over the Internet amounted to her express consent to recording.” Id. at *15-16. The Court of Common Pleas determined that “when [plaintiff] surfed the Internet for summer sandals and clicked on the Clarks America website, she should have known that Clarks America or another acting on its behalf was tracking her activity.” Id. at *16.

Plaintiff appealed, and the Superior Court vacated the summary judgment and remanded the matter back to the Court of Common Pleas.

The Superior Court’s Decision

On October 23, 2026, the Superior Court issued its decision after considering (1) whether the Court of Common Pleas erred in finding that a website visitor gives their express consent to being wiretapped through the act of sending an electronic communication over the internet; (2) whether the Court of Common Pleas erred in finding that Clarks’ third-party vendor was its agent and thus permitted to circumvent WESCA’s all-party consent requirement; and (3) whether the Court of Common Pleas erred in holding that Plaintiff had failed to make a prima facie showing sufficient to allow a trier of fact to find that her communications with Clarks’ website were unlawfully intercepted by the third party vendor. In an opinion written by Judge Mary P. Murray and joined by Judges Mary Jane Bowes and Judith F. Olson, the Superior Court found that the Court of Common Pleas had erred on the issue of consent, and found the last question moot, and thus vacated and remanded the decision.

The Superior Court, finding a dearth of Pennsylvania case law applying WESCA to the circumstances at issue,  based its decision on what it referred to as a “highly instructive” 2025 ruling in the U.S. District Court for the Eastern District of Pennsylvania entitled Popa v. Harriet Carter Gifts, Inc., 772 F. Supp. 3d 592 (W.D. Pa. 2025) (“Popa II”), which followed a reversal of summary judgment granted in Popa v. Harriet Carter Gifts, Inc., 544 F. Supp. 3d 535 (W.D. Pa. 2021) (“Popa I”), to a defendant in a putative class action alleging similar claims, reversed by the Third Circuit in Popa v. Harriet Carter Gifts, Inc., 52 F.4th 121 (3d Cir. 2022) (“Popa III”). Id. at *28.  In Popa II, the Third Circuit held that “there is no sweeping direct-party exception to civil liability under WESCA,” reasoning that the General Assembly’s 2012 amendment codifying a narrow intended-recipient carve-out for law enforcement limited Proetto and Cruttenden to their facts. Id. at *31. On remand, the District Court in Popa III had held that the plaintiff constructively consented to third-party tracking because the defendant retailer’s privacy statement adequately disclosed third-party data collection and was reasonably conspicuous in the website’s footer. Id. at *33-44.

The Superior Court found that the record raised a genuine issue of fact as to whether Content Square tracked Plaintiff’s communications, and that such tracking would constitute an interception under WESCA. Id. at *47. The Superior Court agreed with the Court of Common Pleas that under WESCA § 5704(4), consent turns on an objective, “reasonable user” standard: “whether a reasonable Internet user in [plaintiff’s] position knew or should have known that the contents of her communications with the Clarks website would be acquired by a third party,” and that actual knowledge is not required. Id. at *47-48. But the Superior Court held that the Court of Common Pleas erred with its application of the statute. Id. at *48.  It found that the lower court’s conclusion that a sender’s ignorance of the recipient’s identity is irrelevant was in error because of the reliance on Proetto and Cruttenden, which had involved two-party communications with police officers posing as the intended recipient, and a 2012 amendment to WESCA licensed only police officers to do so. Id. at *48-50. As the Superior Court observed, “misrepresenting one’s identity in order to receive communications appears to be a prerogative belonging to police officers.” Id. at *49.

The Superior Court found that the Court of Common Pleas had removed Proetto’s language on the “very act of sending a communication over the Internet” being consent from its context, which, in Proetto was a chat room message received in recorded form by its intended recipient. Id. at *51-53. The Superior Court explained that “Proetto and its progeny do not support the blanket ruling, which implies that any person sending any form of communication over the Internet inherently consents to the acquisition of that communication’s contents by anyone who happens to be listening/recording.” Id. at *52. The Superior Court found that the Court of Common Pleas erred by failing to apply the reasonable person standard to the particular form of communication at issue, here, a shopper’s interaction with a retail website, and by failing to consider whether a reasonable person would be aware that someone other than the intended recipient might acquire the communication. Id. at *52-53.

The Superior Court agreed with Clark’s reasoning, relying on Popa III, that “a reasonably prudent person has a lower expectation of privacy on the Internet, particularly with respect to the kind of non-sensitive data involved here.” Id. at *55. While acknowledging that WESCA is content-neutral and that a violation does not require sensitive information, the Superior Court held that the “innocuous nature” of the data is relevant to the reasonable person standard. Id. at *55.

The Superior Court then held that a website privacy policy may convey implied consent to an interception if it “disclose[s] the nature of the interception to a reasonable reader” and is “reasonably conspicuous” on the webpage. Id. at *57. It found Clarks’ privacy policy to have satisfied the first prong because it disclosed that Clarks and its “third party partners” used cookies, pixel tags, and web beacons to “track the actions of users,” and that third parties “may place cookies on your browsers for purposes of tracking consumer behavior.” Id. at *57-61. The Superior Court found the policy “rife with references to the involvement of third parties,” and concluded that “reasonable readers of the Privacy Policy would know that the content of their communications with the Clarks website would be intercepted by third parties.” Id. at *61-62. The Superior Court rejected the opinions of Plaintiff’s expert that the policy did not cover Content Square because it applied only to data collected by “www.clarksusa.com” because the Superior Court found that such a technical distinction “would not be appreciable by an average Internet user,” and it agreed with Popa III that WESCA does not require a privacy policy to “reveal granular details about the identity of the ‘third parties’ or the specific type of cookies used.” Id. at *62.

The Superior Court adopted Popa III’s rejection of Plaintiff’s argument that tracking begins before a user can reach the privacy policy. Id. at *63. It further refused to import the heightened, “unambiguous manifestation of assent” standard that the Superior Court had applied to online arbitration agreements in Duffy v. Tatum, 354 A.3d 14 (Pa. Super. 2026), explaining that Plaintiff waived no constitutional right and that the alleged infringement “is of such low stakes” that the Third Circuit had found it insufficient to confer Article III standing. Id. at *63-65. The Superior Court thus held that “a website’s browsewrap privacy policy, if reasonably conspicuous, may be sufficient to demonstrate that a reasonable user should know about the data-collection practices disclosed in the policy, thereby conferring implied consent under WESCA section 5704(4).” Id. at *66.

Ultimately, however, the Superior Court rejected Clark’s contention that a link to its privacy policy was conspicuously located at the center of the bottom of its website because it was not supported by evidence in the record. Id. at *68. Thus, viewing the record in the light most favorable to Plaintiff, the Superior Court could not conclude that Clarks had met its burden for consent. Id. The Superior Court therefore vacated without prejudice and remanded, authorizing the parties to supplement the record. Id. at *70.

Implications For Companies

With the decision in Thompson, the Superior Court of Pennsylvania has laid out the governing framework for WESCA class actions in Pennsylvania courts via Popa. Courts in the state are instructed to more closely scrutinize whether website users have been reasonably apprised of a site’s privacy policy, and whether such policies inform users of any tracking they are subject to. A simple click or scroll is, under this ruling, may no longer be argued as consent to be tracked. The key takeaway for companies operating websites utilizing tracking software or third party vendors include the importance of preparing a conspicuous and clear privacy policy that discloses use of such technology and/or vendors, and that a visible and accessible privacy policy may be the centerpiece of a defense of consent in wiretapping litigation.

Posted on by Class Action Defense

The Class Action Weekly Wire – Episode 171: “100% de Agave” Tequila Labeling Suit Dismissed By Washington Federal Court

Duane Morris Takeaway: This week’s episode features Duane Morris partner Jerry Maatman and associates Jamar Davis and Kenny Tran with their analysis of a Washington federal court’s dismissal of a product labeling class action brought by Costco customers over its “100% de Agave” Kirkland tequila.

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

Episode Transcript

Jerry Maatman: Welcome back, everyone, to our podcast, the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and joining me today here from our Los Angeles office are my colleagues, Jamar Davis and Kenny Tran. Thank you, gentlemen, for both being here.

Jamar Davis: Thank you for having me, Jerry.

Kenny Tran: Happy to be here, Jerry.

Jerry: Today, we’ll be discussing an interesting class action decision involving Costco’s Kirkland Signature Tequila and allegations that products labeled “100% de Agave” actually contained alcohol derived from other sources. The case is called Salisbury v. Costco Wholesale Corporation, and it was filed in the U.S. District Court for the Western District of Washington. Recently, Judge Kymberly Evanson dismissed the proposed class action with prejudice, and what makes the ruling particularly interesting is that the court did not ultimately decide whether or not Costco’s tequila was adulterated. Instead, it concluded that based on international comity and the act of state doctrine, it prevented a U.S. court from adjudicating the plaintiff’s claims. Jamar, can you give us some background? What were the plaintiffs alleging here?

Jamar: Absolutely. The case involved five Kirkland tequila products: Blanco, Resposado, Añejo, Cristalino, and Extra Añejo. Each was labeled “100% de Agave”, and Costco represented that the products were made in Jalisco, Mexico, using 100% Blue Agave. Fourteen plaintiffs from nine states allege that they purchased the tequila between 2019 and 2025 in reliance on those representations. They claimed the products contained cheaper, non-agave alcohol, and that they either would not have purchased them or would have paid less if they had known that. The plaintiffs asserted a federal RICO claim and proposed a nationwide class action under Washington Consumer Protection Law and a number of state law claims.

Jerry: Any of the plaintiffs claimed in this case to have scientific testing that supported their allegations in the complaint. What did that testing show?

Kenny: So, they relied on a methodology called SNIF-NMR testing. We’ll call it “SNF and NMR” testing for short, which the complaint alleged could identify the plant origin of ethanol. The plaintiffs commissioned testing of Kirkland tequila samples and alleged none of them had met the threshold they said would indicate alcohol derived entirely from agave sugars. But that evidence ultimately presented a significant problem, because substantially similar allegations based on SNIF and MRR testing had already been considered by Mexican regulatory authorities. Mexico’s DGN, essentially their National Standards and Regulations Authority, considered a complaint involving Kirkland Tequila concluded that SNIF and MRR testing was not competent or sufficient evidence to establish noncompliance with Mexico’s tequila standards. It dismissed that complaint as inadmissible and unfounded, and a separate Mexican criminal proceeding involving similar allegations also ended in a decision not to prosecute.

Jerry: So, Jamar, how did the U.S. court treat that mosaic of background facts in terms of what had occurred in Mexico?

Jamar: The plaintiffs tried to characterize the lawsuit as a domestic consumer protection case. They were U.S. consumers who purchased products in U.S. stores from an American company. But the court concluded that characterization did not account for the central issue underlying their claims, which was whether the tequila had been adulterated during production. Tequila can legally be produced only in Mexico, and its production, authentication, and certification are governed by a comprehensive Mexican regulatory system. U.S. law also requires tequila to be produced in Mexico in compliance with Mexican law. That led the court to apply the doctrine of international comity.

Jerry: And Kenny, what did that analysis look like in terms of the court then looking into that particular issue?

Kenny: So, the court considered the interests of both countries and the adequacy of the Mexican proceedings. It acknowledged that the United States had an interest because the plaintiffs were American consumers. Costco was an American corporation, and the alleged misconduct implicated U.S. consumer protection concerns. But the court found that most of the conduct at the heart of the dispute, including the alleged adulteration, the production, authentication, and the certification of tequila, all occurred in Mexico. So, Mexico’s interests were particularly strong because tequila is a distinctive product in Mexico, and is governed by Mexico’s regulatory framework. The court also pointed to the U.S. regulations and the USMCA as recognizing Mexico’s authority over tequila production.

Jerry: I found it interesting that the plaintiffs argued, as one might expect, that they couldn’t obtain justice, and that the same consumer protection remedies available under Washington state law were unavailable in Mexico. How did that argument fly?

Jamar: Absolutely. So, the court acknowledged that Costco had not established that these U.S. plaintiffs could pursue these same claims or obtain the same remedies in Mexico. But the court concluded that the absence of an identical remedy did not make the Mexican proceedings inadequate. Instead, it emphasized that the plaintiffs had not shown fraud, manifest injustice, or a failure of fundamental procedural fairness in those proceedings. The court ultimately held that international comity warranted dismissal of plaintiffs’ claims.

Jerry: And Kenny, Costco had a second defense that independently supported dismissal, what they characterized as the act of state doctrine. Could you explain the background on that concept?

Kenny: Of course, Jerry. So, the active state doctrine generally prevents U.S. courts from sitting in on judgment on certain official acts of foreign sovereigns within their own territory. The court determined that both the DGN and Mexico’s CRT, their Tequila Regulatory Council, had undertaken official acts for purposes of that doctrine. The CRT had certified Kirkland tequila as 100% agave, while the DGN had rejected adulteration allegations based on SNIF and NMR testing. So, if the U.S. courts had accepted plaintiffs’ theory and found that the products were adulterated based on that testing, it wouldn’t necessarily conflict with those Mexican determinations. The court concluded that at the active state doctrine, therefore, independently required dismissal.

Jerry: I thought that the court’s distinction was very important. It was not making a factual finding, of course, that the plaintiffs’ testing methodologies were wrong, or conclusively determining that the tequila only obtained agave alcohol. Instead, it basically concluded that adjudication of the plaintiff’s theory without official actions taken in Mexico under its tequila regulatory system would implicate all of these concerns. So, let’s finish with the practical implications. Jamar, what are the biggest takeaways for companies in this situation?

Jamar: For companies selling internationally regulated products, I think the first takeaway is to understand the regulatory framework behind the representations appearing on the actual product. Here, Mexico’s certification process was not merely background evidence. It became central to Costco’s defense because the very representation the plaintiffs challenged depended on a designation regulated in Mexico, and U.S. law itself looks to Mexican requirements governing tequila production.

Jerry: Kenny, how far should companies read this decision? Is regulatory approval something that would insulate them from consumer fraud class actions?

Kenny: No, this was a very specific regulatory situation. What companies should take away is that when a class action challenges an imported or internationally regulated product. Counsel should ask at the outset whether the plaintiffs’ theory would require the court to contradict a foreign government certification or a regulatory determination. If it would, doctrines like international comity and the active state doctrine may provide important threshold defenses.

Jerry: And I think there’s also a broader litigation lesson to be learned here as well. Costco did not win because the federal court decided as a factual matter that the plaintiffs were wrong. It won, basically, because the court concluded that it was not the appropriate tribunal to make the determination that the plants wanted. That means companies, engaged in defending product labeling class actions should think about concepts far beyond whether the label is technically accurate. They should examine the entire regulatory chain, both domestically and internationally, particularly where a product is manufactured or regulated abroad, and its labeling or its certification may depend on that country’s regulatory regime.

Well, Jamar and Kenny, thanks so much for joining me, and thank you to our listeners for tuning in. We’ll see you next time on the Class Action Weekly Wire.

Kenny: It was great to be here, Jerry. Thanks to all the listeners for joining in.

Jamar: Thanks for having me, Jerry, and thanks, listeners.

Posted on by Gerald L. Maatman, Jr.

EEOC Rescinds Its Long-Standing Criminal History Guidance In 2-1 Vote

By Gerald L. Maatman, Jr., Karla V. Mardueño, and Christian J. Palacios

Duane Morris Takeaways:  On October 28, 2026, the Commissioners of the EEOC voted 2-1 to rescind its Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act (the “Guidance”), a document that has shaped how employers screen job applicants with criminal records for over a decade. The rescission, which the Commission announced on October 29, 2026, is effective immediately, and the Guidance has already been removed from the agency’s website.

The rescission is significant because it marks the latest step in the Commission’s retreat from disparate impact enforcement. Despite this rescission, Title VII’s disparate impact provisions remain on the books, and private plaintiffs remain free to bring such claims.

Background

On April 25, 2012, the Commission published the Guidance, which explained how an employer’s use of arrest and conviction records could violate Title VII under two theories. See U.S. Equal Emp. Opportunity Comm’n, Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act (Apr. 25, 2012). Under a “disparate treatment theory,” an employer violates Title VII by treating applicants with comparable criminal records differently on the basis of race or national origin. Under a “disparate impact theory,” a facially neutral criminal history policy may still violate Title VII if it disproportionately excludes applicants of a particular race or national origin and is not “job related for the position in question and consistent with business necessity.” See 42 U.S.C. § 2000e-2(k)(1)(A)(i). The Guidance was premised, in large part, on concerns that broad criminal record exclusions could disproportionately screen out Black and Hispanic applicants, given disparities in arrest and incarceration rates.

To help employers satisfy the business necessity defense, the Guidance recommended that employers develop “targeted screens” that consider at least three factors: (1) the nature and gravity of the offense or conduct; (2) the time elapsed since the offense or completion of the sentence; and (3) the nature of the job held or sought. The Guidance also encouraged employers to provide applicants who are screened out with an “individualized assessment,” giving those individuals an opportunity to provide information (such as evidence of rehabilitation, references, or a successful post-conviction work history) that might change the hiring decision. The Guidance further distinguished between arrests and convictions, cautioning that an arrest, standing alone, does not establish that criminal conduct has occurred. Finally, the Guidance included numerous hypothetical scenarios illustrating lawful (and unlawful) uses of background checks, and it recommended that employers eliminate blanket policies that exclude applicants based on any criminal record.

The EEOC’s Rescission 

On October 28, 2026, the Commission voted to rescind the Guidance. The rescission passed along party lines, with Chair Andrea R. Lucas and Commissioner Brittany Bull Panuccio, both Republican appointees, voting in favor, and Commissioner Kalpana Kotagal, the Commission’s sole Democratic appointee, voting against. In its announcement, the Commission emphasized that the rescission does not restore the policy statements that the Guidance superseded, nor does it require employers to abandon any lawful practices they may have adopted in response to the Guidance. See EEOC Press Release, EEOC Votes to Rescind Enforcement Guidance on Arrest and Conviction Records (Oct. 29, 2026). Chair Lucas stated that the vote “reaffirms the agency’s commitment to enforce Title VII consistent with the Constitution and the limits Congress placed on the EEOC’s authority.” Id. She further cautioned that “[r]escinding this guidance does not give employers license to engage in unlawful discrimination – Title VII continues to prohibit discrimination based on race or national origin, including employment requirements that are proxies for intentional discrimination. The EEOC will continue to vigorously enforce these protections in accordance with the law.” Id.

Although the Commission’s announcement framed the rescission in terms of constitutional and statutory limits, without expressly naming disparate impact liability, the decision fits within the current administration’s retreat from disparate impact enforcement. In April 2025, President Trump issued an executive order titled “Restoring Equality of Opportunity and Meritocracy,” which directed federal agencies to deprioritize disparate impact enforcement and to pursue the elimination of disparate impact liability to the extent possible. See Exec. Order No. 14281, Vol. 90, Fed. Reg. 17537, Apr. 28, 2025. In June 2026, the U.S. Department of Justice’s Office of Legal Counsel (“OLC”) issued an opinion concluding that the EEOC’s interpretation of Title VII’s disparate impact provisions was unconstitutional, and that opinion expressly addressed background checks. See U.S. Dep’t of Justice OLC, Constitutionality of Disparate-Impact Liability Under Title VII (June 9, 2026).

Implications for Employers

Although the rescission marks a significant shift in the EEOC’s enforcement posture, Title VII’s disparate impact framework remains the law because it is codified in the statute itself. See 42 U.S.C. § 2000e-2(k). An employer facing a disparate impact challenge must still demonstrate that its criminal history screen is “job related for the position in question and consistent with business necessity.” Id. As a practical matter, the EEOC will likely continue to pursue disparate treatment claims involving criminal background checks, while declining to pursue disparate impact charges and instead issuing right-to-sue letters. Private plaintiffs, however, remain free to bring both disparate treatment and disparate impact claims, and the plaintiffs’ bar may well step in to fill the enforcement vacuum left by the Commission.

Further, the rescission has no effect on the federal Fair Credit Reporting Act (“FCRA”), which imposes its own procedural requirements on employers that obtain background checks from third-party consumer reporting agencies. See 15 U.S.C. §§ 1681b(b)(2)-(3), 1681m(a). Nor does it affect the growing landscape of state and local fair chance and “ban-the-box” laws, many of which impose obligations that mirror, or exceed, the recommendations in the Guidance. In short, while the rescission signals a different federal enforcement approach, the legal risks associated with criminal history screening remain alive, and employers should continue to monitor state and local laws to ensure compliance.

Posted on by Gerald L. Maatman, Jr.

New York Federal Judge Denies Preliminary Approval Of FLSA Settlement Due To Proposed Publicity Provision And Attorneys’ Fees And Costs Requests

By Gerald L. Maatman, Jr., Rebecca S. Bjork, and George J. Schaller

Duane Morris Takeaways: On October 28, 2026, in Cervantes, et al. v. Careathome Medical Practice, P.C., d/b/a Vesta Healthcare, et al., 26 Civ. 570, 2026 U.S. Dist. LEXIS 247415 (S.D.N.Y. Oct. 28, 2026), Judge Arun Subramanian of the U.S. District Court for the Southern District of New York denied preliminary approval of a Fair Labor Standards Act (“FLSA”) proposed settlement and requests for attorneys’ fees and costs related to an action brought pursuant to the California Labor Code and FLSA. 

For companies faced with FLSA litigation, they should be aware of the standards courts employ in approving FLSA settlements.  Notably, courts assess the value of the settlement compared with similar settlements approved in the circuit, courts rarely allow “publicity” provisions that deny plaintiffs from making truthful statements about the lawsuit, and courts require documentation when approving attorneys’ fees and costs requests.

Background And Proposed Settlement

Plaintiff Jocelyn Cervantes brought this putative collective action against Careathome Medical Practice, P.C., d/b/a Vesta Healthcare and Careathome Medical Practice (CA), P.C. (collectively “Defendants”) alleging that Defendants violated the FLSA and California Labor Code.  Cervantes asserts that she, and the putative collective, were not compensation for 15-20 minutes of “unpaid work before the start of each shift.”  Id. at 3, fn. 1.  Defendants provides at home health care services nationwide.

The parties agreed to a proposed settlement agreement regarding the FLSA claims.  Under the proposed settlement agreement, the key terms included a “release by opt-in plaintiffs of any claims” against Defendants in exchange for a pro rata payment from a total settlement fund of $100,700.  Of that $100,700 proposed total settlement, “7,500 will be paid to named plaintiff Jocelyn Cervantes as a service award, $14,299 will go toward costs the settlement administrator incurs . . . and $35,728.80 will be paid to Cervantes’ counsel for costs and attorneys’ fees, leaving a net settlement fund of $43,172.20.”  Id. at 1.

The proposed settlement agreement also contained “a ‘publicity’ provision whereby plaintiffs’ counsel and named plaintiff ‘agree that they shall not, directly or indirectly, whether verbally, in writing or otherwise, issue any press releases, make any statements to the media, advertise in any media, or make any other public statements regarding the existence of nature of this Agreement or its terms and conditions.’”  Id. at 5.  The parties moved for approval of the settlement agreement.

The Court’s Decision

The Court denied the parties motion for approval of the settlement agreement finding the “publicity” provision inappropriate and finding the attorneys’ fees and costs had no supporting documentation and was “unreasonably high.”  Id. at 5-6. 

First, the Court explained the proposed settlement amount compared to the possible range of recovery was “comparable to other settlements approved in this circuit.”  Id. at 4.  Plaintiff estimated that the maximum amount recoverable based on the claims alleged is “approximately $630,860” based on damages for 218 potential plaintiffs.  Id. at 3, fn. 1.  Defendants agreed to a settlement in the total gross amount of “$100,700, representing approximately 16% of the maximum possible recovery.”  Id. at 3. 

The Court found the proposed settlement amount was “fair and reasonable in light of the risks and expenses of continued litigation, both sides were represented by experienced counsel, and there [was] no evidence of fraud or collusion between the parties.”  Id. at 4.  The Court also noted that even if Cervantes prevailed at trial that “defendants’ serious financial problems suggest that a judgment could be difficult or impossible to collect in full.”  Id. at 5.

Second, the Court determined the “publicity” provision ran afoul of the “well-settled principle” that “an FLSA plaintiff ordinarily cannot—as a matter of public policy—be prohibited from making truthful public statements concerning his lawsuit, its settlement, or the underlying facts.”  Id.  It explained this case was not “the very rare case . . . where confidentiality terms in a settlement agreement would be appropriate” and therefore rejected the provision.  Id. at 6.

Finally, the Court rejected Plaintiff’s attorneys’ fees and costs requests as unreasonable.  In rejecting Plaintiff’s costs request, the Court stated the motion “contains no explanation or documentation for the costs plaintiff’s counsel seeks to recoup” and that it could not “adjudicate or approve” reasonableness of costs where “counsel made no effort to explain or document.”  Id. at 6-7. 

As to Plaintiff’s attorneys’ fees request, the Court initially reasoned “the proposed fee is unreasonably high” where Plaintiff’s fee request represented “a whopping 77.67% as a percentage of the fund less costs and service awards.”  Id. at 7.  The Court also determined Plaintiff’s counsel “failed to submit adequate documentation supporting the request for fees.”  Id.  Counsel submitted billing records “documenting 18.4 hours of work performed through May 19, 2026” and after that date only attested to “performing ‘substantial additional work,’” without providing supporting documentation on specific tasks performed.  Id. at 8.  The Court held that Plaintiff’s “conclusory, after-the-fact ‘estimate’ of total hours worked, untethered from any specific dates or tasks,” did not meet the documentation required and gave no factual basis to assess reasonableness.  Id.

The Court found that the proposed settlement agreement did not meet FLSA approval requirements and denied Plaintiffs’ request for attorneys’ fees and costs.  Id. at 9.  However, the Court explained the parties may either (i) “submit a revised settlement, request for conditional certification as an FLSA collective, and proposed attorneys’ fees for preliminary approval under Fed. R. Civ. P. 41(a)”; or (ii) if they do not go “the conditional certification route, they may also pursue an offer of judgment under Fed. R. Civ. P. 68(a).”  Id.   

Implications For Companies

Cervantes illustrates standards that courts routinely follow in assessing FLSA settlement agreements and attorneys’ fees and costs requests.  Here, the Court could not assess reasonable attorneys’ fees and costs without proper documentation and the proposed “publicity” provision was deemed inappropriate.

Companies faced with FLSA actions, and negotiating settlement agreements, should be mindful of the reasonableness standard courts use when construing such settlement agreements.

Posted on by Gerald L. Maatman, Jr.

New Jersey Federal Court Affirms “Modest Factual Showing” Required During Conditional Certification Of FLSA Collective Action

By Gerald L. Maatman, Jr., Shannon Noelle, and Olga A. Romadin

Duane Morris Takeaways: On October 12, 2026, Judge Brian R. Martinotti of the U.S. District Court for the District of New Jersey denied an employer’s Rule 72 objection of Magistrate Judge Michael A. Hammer’s decision granting conditional certification in Dotson, et al. v. TZ Insurance Solutions LLC, Case No. 2:25-CV-13323 (D.N.J. Oct. 12, 2026).   Three named plaintiffs, former and current sales agent employees of the insurance company-defendant, brought a collective action alleging the Company violated the FLSA by failing to compensate them for time spend logging in and out of computer systems and excluded non-discretionary bonus and commission payments from the regular rate of pay.   The Company challenged the Magistrate Judge’s conditional certification decision on the basis that it did not adequately consider the Company’s declarations regarding its timekeeping process and certified an overbroad collective action not requested in the complaint that included non-remote and remote employees.  These arguments were rejected as was the Company’s request for interlocutory review of whether the two-step framework is applicable in the Third Circuit.  The Court opined that a two-step process applies requiring only a “modest factual showing” at the first, conditional certification stage during which Plaintiffs can rely on declarations establishing that “similarly situated plaintiffs do in fact exist” that were affected by a common employer policy.

Case Background

Plaintiffs Kimberly Dotson, Jennifer Connor, and Amenda McConnell brought a putative collective action individually and on behalf of others similarly situated, against TZ Insurance Solutions LLC (“TZ Insurance,” or “Defendant”), alleging violations under the Fair Labor Standards Act (“FLSA”) and common law by failing to compensate them for all time worked.  Id. at 2.  Plaintiffs, current and former hourly insurance sales agents that all worked remotely, specifically alleged that TZ Insurance did not pay them for required pre-shift, meal-period, and post-shift bootup and boot-down work, and that it underpaid their overtime by leaving non-discretionary bonus and commission payments out of their regular rate of pay.  Id.

The Company moved to dismiss the claims, but the District Court denied the motion.  Id.  On February 11, 2026, Plaintiffs moved for conditional certification.  On July 29, 2026, Magistrate Judge Michael A. Hammer granted the motion.  On August 12, 2026, the Company challenged the ruling. It advanced three arguments challenging the Magistrate Judge’s decision, including:  (1) it failed to consider Defendants’ declarations explaining its timekeeping process for Sales Agents and detailing two studies it commissioned to estimate the time it takes Sales Agents to bootup and log-in or shut down and log out of computer systems; (2) it was overbroad in conditionally certifying a group of non-remote and remote Sales Agents that are not similarly situated; and (3) included a breach of contract claim that could not be certified under the FLSA because it was not pled as such in the complaint.  Id. at 4. The Company also requested, in the alternative, for certification of an interlocutory appeal on the question of whether the two-step framework for FLSA actions applies in the Third Circuit.  Id. Defendants’ three arguments were denied as was its request for interlocutory certification of whether the two-step framework applies.   

The Court’s Ruling

As to the Company’s first challenge, the Court, in rejecting the argument, found that the first stage of conditional certification requires only a “modest factual showing” to demonstrate a “factual nexus between the manner in which the employer’s alleged policy affected him or her and the manner in which it affected the proposed collective” and that “similarly situated plaintiffs do in fact exist.” Id. at 5.  This factual showing, to be clear, is a low threshold requiring just “something beyond mere speculation.” Id.  As such, the Court found that Defendants’ declarations regarding timekeeping processes went to the merits of Plaintiffs’ claims as the evidence “seeks to disprove Plaintiffs’ allegations of the timekeeping process Defendant required them to perform and the amount of time the processes took.” Id. at 6-7.  Moreover, on the modest factual showing front, the Court found that though Magistrate Judge Hammer’s “conclusion was based on Plaintiffs’ declarations, courts in this circuit have consistently found declarations sufficient to satisfy Plaintiff’s burden of demonstrating similarly situated plaintiffs exist.”  Id. This portion of the Court’s opinion underscores the leniency of the modest factual showing standard; whereas, Plaintiffs’ declarations were sufficient to meet their burden, Defendants’ declarations were insufficient to rebut their showing. 

In rejecting the Company’s second challenge, the Court found that “Plaintiffs’ declarations alleged the same policies applied to all Sales Agents” and that the Company’s declarations did not dispute this point, either.  Id. at 7. The Court also noted that Plaintiffs submitted job postings for the Sales Agent position, which listed uniform responsibilities for remote and location-specific Sales Agents.  Id. All of which the Court reasoned supported the Magistrate Judge’s finding that Sales Agents were subject to the same treatment, “amounting to the required modest factual showing.”  Id. The Court clarified, “Judge Hammer was not yet required to determine [if] the members of the collective were in fact similarly situated to the named plaintiffs.” Id.

As to the Company’s third challenge, the District Court found that Plaintiffs did allege that the Company’s failure to include commissions and non-discretionary bonus payments into the regular rate of pay violated the FLSA disagreeing with Defendant’s claim that such a claim was not asserted in the operative complaint.  Id. at 8. The Court also found that the claim that Magistrate Judge Hammer certified was separate and distinct from the breach of contract claim — i.e., Plaintiffs alleged that they were not paid commissions in breach of their sales agent agreements and also alleged that such commissions were not factored into the regular rate of pay resulting in an underpayment of overtime pay.  Id. at 9. The second allegation was certified as part of the FLSA collective action.  Id. The Court further noted that the Third Circuit has rejected the argument that the regular rate of pay under the FLSA always has to be “actual wages.”  Id. Therefore, Plaintiffs simply brought two concurrent claims as they are permitted to do under applicable case law.  Id.

Finally, as to the Company’s request, in the alternative, that the Court certify the question of whether a two-step framework applies for interlocutory review, the Court declined to do so. It opined that this a settled area in the of law in the Third Circuit. Id. at 12.

Implications for Companies

The District Court’s decision in Dotson reinforces the Third Circuit’s firm adherence to the “modest factual showing” standard and the leniency in applicable of this standard as a practical matter.  In opposing conditional certification, employers would be well-advised to submit detailed declarations and documents showing differences in policies applicable to the proposed collective (remote vs. non-remote and locale-specific) and should also draft job postings carefully to avoid what could be viewed as concessions in litigation.

Posted on by Class Action Defense

The Class Action Weekly Wire – Episode 170: $272.5 Million Settlement Proposed To Resolve California Rideshare Driver Misclassification Lawsuit

Duane Morris Takeaway: This week’s episode features Duane Morris partners Jennifer Riley and Daniel Spencer with their analysis of a monumental settlement proposed to resolve misclassification claims involving four legal actions on behalf of California-based rideshare drivers.

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

Episode Transcript

Jennifer Riley: Hello, everyone, and thank you for being here again for the next episode of the Class Action Weekly Wire. I’m Jennifer Riley, and joining me today is my colleague, Daniel Spencer. Daniel, thank you so much for being on the podcast today.

Daniel Spencer: Glad to be here, Jen.

Jen: So today, we’re discussing a major development in California worker classification litigation: Lyft’s proposed $272.5 million settlement of coordinated litigation, alleging that it misclassified drivers as independent contractors. This is notable, not only because of the size of the settlement, but because it brings together claims by the California Attorney General, several city attorneys, the California Labor Commissioner, and two plaintiffs pursuing claims under the Private Attorneys General Act, or PAGA. Let’s start with the background, Daniel. How did we get to a settlement this large?

Daniel: So, this dispute goes back several years, and it’s pretty much at the intersection of California’s changing workers’ classification rules and the growth of the gig economy. The settlement revolves around four actions against Lyft that were ultimately coordinated in the Uber Technologies Wage and Hour Cases. The plaintiffs allege that list misclassified drivers as independent contractors, and as a result, denied them compensation and protections available to employees under California law. Lyft denied those allegations, and importantly, the proposed judgment expressly states the court has made no determination that Lyft is liable in this case. The settlement covers all unlawful conduct before December 16, 2020, and the effective date of Prop 22. So, this is essentially resolving all the historical misclassification fights involving Lyft and in these coordinated cases, rather than deciding how the driver should be classified under the current Prop 22 framework.

Jen: Got it. So, that distinction seems pretty important, because someone just seeing a $272 million price tag could perhaps easily conclude that Lyft has agreed now that its drivers are employees.

Daniel: Exactly. That would be a bridge too far, so to speak. So, the agreement specifically says it does not constitute an admission that Lyft drivers were, or currently are employees, or that Lyft was ever or currently its employer. It also says that the settlement does not bear on the classification of drivers under Prop 22. So, this resolves a very substantial historical claim, but it doesn’t produce any type of ruling on the ultimate classification question.

Jen: Got it, that makes sense. So, I will note that this settlement itself is a non-reversionary common fund settlement with a principal amount of $272.5 million, but Lyft is scheduled to pay this over time. Lyft is scheduled to pay $120 million during the first year after the settlement becomes effective, beginning with a $30 million payment within 14 days of the effective date. The remaining $152.5 million is payable over the following three years with a 5% simple annual interest on the outstanding principal after the first year. Lyft also has the option to accelerate those later payments. There are also several specific allocations. Just over $20.4 million, or 7.5% of the gross fund is set aside as penalties under the California Unfair Competition Law. Nearly $15 million, or 5.5%, is allocated for the PAGA plaintiffs’ attorneys’ fees and costs. The two individual named plaintiffs, Mr. Olson and Mr. Seifu, can seek service awards of up to $20,000 each, subject to court approval. And then, $5.45 million is specifically allocated to what the agreement calls Berman Claimants, meaning the cover drivers who had pending wage claims with the labor commissioner when that action is filed.

Daniel: That’s right, Jen, and the remaining Drivers’ Compensation Fund generally will be distributed according to the miles drivers accumulated during what the agreement calls P2 and P3 time. So, in simplified terms, that covers mileage associated with traveling to pick up a rider after accepting a trip and then transporting a rider. Eligible drivers who are Berman Claimants receive double credit for those miles in that portion of the allocation formula. The agreement defines covered drivers as people who completed at least one Lyft ride, beginning or ending in California between April 5, 2016, to December 15, 2020, although eligibility for payment is subject to additional criteria under the agreement.

Jen: Daniel, another thing that stood out to me is that this isn’t simply Lyft writing a check and walking away. There are also some fairly substantial enforcement mechanisms built into the agreement.

Daniel: Absolutely. So, the agreement provides a 14-day notice and cure period if Lyft misses a required payment, although Lyft has that cure provision, as a matter of right, only three times. After that cure period is discretionary. If Lyft fails to cure on an overdue payment when required, the outstanding judgment amount can become immediately due, and the plaintiffs can seek enforcement, along with attorneys’ fees and costs. There are also provisions addressing significant asset transfers, successors, and bankruptcy. And the parties are required to report periodically to the court on its implementation, with the San Francisco Superior Court retaining jurisdiction during that process. So, although the principal payments are spread over several years, the agreement creates mechanisms designed to secure and enforce those obligations if those payments are not timely met.

Jen: Got it. So, let’s shift to the bigger question for our listeners: What should employers take away from a settlement involving a business model as unusual as an app-based rideshare platform?

Daniel: Well, I think the first takeaway is that workers’ classification risk can compound dramatically over time. The period here covers from April 2016 to December 2020, and the allegations were not just coming from individual workers. The coordinated litigation involved the California Attorney General, City’s Attorney, the labor commissioners, and numerous PAGA plaintiffs. So, for employers, this illustrates why classification decisions should not be viewed simply as a question of whether one worker might bring a wage claim. A disputed classification model can potentially impact wages, expense reimbursement, penalties, PAGA exposure, and government enforcement simultaneously. Employers should be careful about assuming that a business model has operated for years without final adverse judgment is insulated from some sort of risk. California classification landscape has changed considerably during the period involved here, and the settlement itself recognizes that Proposition 22, referred to as Prop 22, as a dividing line, and resolves all alleged conduct before that law took effect. That means that companies using independent contractors should revisit their classification analysis as the case law develops, and, frankly, review classification decisions on a pretty regular basis to make sure that those decisions are grounded in applicable law.

Jen: And the settlement seems to demonstrate another point that we’ve talked about before, which is that classification isn’t just about the label, let’s say in a contract or a job description.

Daniel: That’s absolutely right, and I hear this all the time. Calling someone an independent contractor does not end the analysis. Companies operating in California are required to look at classification and they need to pay attention to the governing statutory framework in any industry-specific rules or exemptions. This is especially important for businesses that rely on heavy contractors as part of their core operations. The potential exposure can increase dramatically when the classification decisions is replicated across a large workforce and over a period of years.

Jen: So, if you had to leave employers with two or three things to do after seeing a settlement like this, what would they be?

Daniel: So first, I’d periodically audit the independent contractor relationships that I have, any employees who we’re saying are working on a 1099 basis, particularly in California, but I would also look at other jurisdictions where the governing tests have evolved over time. The second thing I would do is examine the relationship in practice. Not merely the language of the contractor agreement, I would look at what is actually being done by that person, labeled an independent contractor, to determine whether or not it fits within any exemption. And third, and finally, I preserve the records that allow the company to reconstruct the relationship, the payment of invoices, and everything that’s gone on between the company and the contractor in case it’s challenged years later. The case demonstrates how significant the stakes can become when a classification issue affects a large workforce for an extended period.

Jen: All right, that’s a good place to leave it. The Lyft settlement is remarkable for its size, but perhaps the more important story for employers is the combination of worker classification questions, California’s evolving legal landscape, PAGA exposure, public enforcement, and years of potential accumulated liability. Daniel, thank you so much for joining me today.

Daniel: Thanks for having me, and thanks to everybody for listening.

Jen: Thanks so much for joining the latest episode of the Class Action Weekly Wire. We will see you next week.

Posted on by Class Action Defense

Not On The Papers: Connecticut Federal Court Denies Cross-Motions For Summary Judgment In EEOC Challenge To Hospital’s Age-Based Physician Screening Policy

By Gerald L. Maatman, Jr., Jennifer A. Riley, Karla Mardueno, and Denis I. Yavorskiy

Duane Morris Takeaways: On October 23, 2026, in EEOC v. Yale New Haven Hosp., Inc., No. 3:20-CV-00187 (D. Conn. Oct. 23, 2026), Judge Kari A. Dooley of the U.S. District Court for the District of Connecticut denied cross-motions for summary judgment in a closely watched suit brought by the Equal Employment Opportunity Commission (“EEOC”) under the Age Discrimination in Employment Act (“ADEA”) and the Americans with Disabilities Act (“ADA”).  The suit challenges a hospital policy requiring physicians aged 70 and older to undergo cognitive and eye testing.  The Court held that genuine disputes of material fact precluded judgment for either side on the hospital’s bona fide occupational qualification (“BFOQ”) defense and its “business necessity” defense. Judge Dooley put it bluntly: “This case cannot be tried on the papers.”  Id. at *13.

The decision highlights how fact-intensive defenses play out when an employer relies on age as a proxy for safety-related job qualifications.  Employers in health care and other safety-sensitive industries should expect that age-triggered screening policies will be tested at trial and might not be resolved early in the litigation.

Case Background

Yale New Haven Hospital, Inc. (“YNHH”) is a private, non-profit hospital in New Haven, Connecticut.  YNHH adopted a Late Career Practitioner Policy (“LCPP”), which requires practitioners aged 70 and over who want to obtain or renew clinical privileges to undergo “ophthalmic and neuropsychological testing” at appointment and every two years thereafter.  Id. at *2-3.  If testing reveals signs of impairment, more tests may be recommended, and Yale’s Medical Staff then decides on privileges after further review.

The EEOC sued on behalf of YNHH physicians over age 70, alleging that the LCPP is age discrimination under the ADEA and an unlawful employment practice under the ADA.  After almost three years of discovery, both parties moved for summary judgment.

The Court’s Analysis

Judge Dooley explained that the case “will turn on Yale’s BFOQ and ‘business necessity’ affirmative defenses,” and that “these inquiries are fact intensive and cannot be resolved on the record evidence.”  Id. at *8.  Yale argued that patient safety is the “foundational purpose” of the LCPP and that age is the single greatest indicator of cognitive decline.  The EEOC countered that the policy is “far too broad in its design” and unnecessary given Yale’s existing competency metrics and “exemplary safety record.”  Id. at *8.

The ADA Business Necessity Defense

First, Judge Dooley found a genuine issue of material fact over whether the LCPP “genuinely serves” patient safety.  Id. at *9.  The parties presented dueling experts.  While the EEOC’s expert opined that neuropsychological tests “often do not accurately predict real-world behavior,” Yale’s experts countered that the tests are “well-accepted within the field of psychometrics.”  Id. at *9-10.  Because weighing that conflict is a job for the factfinder, the question of whether the LCPP is “vital to Yale’s business” had to go to trial.  Id. at *10.

Second, the parties disputed whether the LCPP is overly broad.  The EEOC pointed out that the policy covers practitioners who only teach and do not see patients, while Yale responded that those practitioners train others who will care for patients.  Judge Dooley held that the reasonableness of Yale’s policy “will require assessment of the factual record upon a trial of this matter” and may turn on a “quantitative assessment” of how many non-treating physicians are covered.  Id. at *11.

The ADEA BFOQ Defense

Yale argued that age is “a legitimate proxy for the safety-related job qualifications” because “it is impossible or highly impractical to deal with the older employees on an individualized basis.”  Id. at *6, 11.  The experts again disagreed.  Yale’s expert relied on a study estimating that cognitive impairment “may be as high as 28% in physicians aged 70 years and older,” while the EEOC’s expert opined that the rate at age 70, the LCPP’s trigger, is “probably below 5%.”  Id. at *12.  The Court held that the proxy question presented “a genuine issue of material fact.”  Id. at *12.

Judge Dooley also found a “fundamental factual dispute” over whether individualized assessment is impractical.  Id. at *13.  Yale argued that the LCPP is “proactive and forward looking,” while its existing metrics identify problems only “after the fact, and perhaps after a patient has been harmed.”  Id. at *13. Judge Dooley framed the question as whether Yale’s current methods are adequate or “whether the LCPP is a ‘solution in search of a problem.’”  Id. at *13.  Judge Dooley acknowledged “Yale’s significant interest in patient safety” but explained that the disputes over the LCPP’s “purpose; its function; its implementation; its efficacy; its impact” are “the very disputes that are determinative of the claims.”  Id. at *13-14.  She also criticized the parties’ “largely unusable” Local Rule 56(a) statements.  Id. at *11 n.12.  She denied both motions and announced a conference to schedule trial.

Implications For Employers

Yale New Haven Hospital shows that age-based safety policies often will be won or lost on the factual record, not on legal argument. The case turned on whether the LCPP actually works, whether it is properly tailored, and whether age 70 is the right line. Those are likely going to involve questions for experts and factfinders.

The Court observed that the case matters “to the health care industry generally as well as other industries where age is arguably a ‘legitimate proxy’ for safety related job qualifications.”  Id. at *14.

Employers with age-triggered screening programs should build that empirical record before a policy is challenged.  For example, they should make sure covered positions match safety-sensitive duties, develop data supporting the specific age cutoff, apply the program uniformly, and document why individualized competency metrics cannot address the risk proactively.

Posted on by Gerald L. Maatman, Jr.

Click To Arbitrate: Washington Federal Court Compels Wage-And-Hour Class Action To Individual Arbitration

By Gerald L. Maatman, Jr., Jamar D. Davis, and Caitlin Capriotti

Duane Morris Takeaways: On October 21, 2026, in Arturo Palacios, Jr. v. RDO Equipment Co., No. 1:26-CV-03120 (E.D. Wash. Oct. 21, 2026), Judge Rebecca L. Pennell of the U.S. District Court for the Eastern District of Washington granted an employer’s motion to compel individual arbitration in a putative wage-and-hour class action. The Court held that the employee explicitly agreed to the arbitration provision contained in the employer’s handbook via an electronic dialog box acknowledgment, notwithstanding the employee’s declaration that he did not remember that he clicked the dialog box. The Court also rejected the employee’s arguments that the agreement was invalid because he was unsophisticated and that the agreement was unilateral.

The decision offers employers a useful roadmap for structuring and implementing electronic arbitration agreements contained in employee handbooks.

Case Background

Plaintiff Arturo Palacios, Jr. (“Plaintiff”) worked for RDO Equipment Co. (“RDO”) as a parts specialist from approximately February 2022 through September 2025. Arturo Palacios, Jr. v. RDO Equipment Co., No. 1:26-CV-03120 (E.D. Wash. Oct. 21, 2026), at *2. In early 2025, RDO electronically distributed an employee handbook containing a “Mediation and Arbitration” provision that required employment-related claims to be submitted to non-binding mediation and, if necessary, final and binding arbitration. Id. The provision also covered disputes concerning arbitrability and incorporated the American Arbitration Association’s Employment Dispute Resolution Rules. Id. at *3.

According to RDO’s electronic records, on February 4, 2025, Plaintiff electronically checked a dialog box to acknowledge that he reviewed and agreed to be bound by the terms of the arbitration and mediation procedures. Id. In 2026, Plaintiff filed a putative class action against RDO alleging wage and hour violations of Washington and federal law. Id. at *5. In response, RDO filed a motion to compel arbitration and stay proceedings, or in the alternative a motion to dismiss. Id. Plaintiff filed an opposition to RDO’s motion, along with a supporting declaration asserting that he did not recall checking the acknowledgement dialog box. Id. at *6. Plaintiff’s opposition broadly argued that no valid arbitration agreement existed and, alternatively, that if the agreement did exist it was unenforceable. Id.

The Court’s Decision

The Court granted RDO’s motion. Id. at *10. It explained that, under Washington law, an arbitration agreement contained in an employee handbook is enforceable only if the employee receives explicit notice of the provision. Id. (citing Burnett v. Pagliacci Pizza, Inc., 196 Wn.2d 38, 50 (2020)). The Ninth Circuit similarly requires that the choice to arbitrate be explicitly presented to and accepted by the employee. Id. (citing Nelson v. Cyprus Bagdad Copper Corp., 119 F.3d 756, 762 (9th Cir. 1997)).

Applying these principles, the Court concluded that Plaintiff explicitly agreed to arbitration. Id. Unlike cases where an arbitration provision was inconspicuously buried in lengthy text or fine print, RDO’s electronic platform called out the arbitration clause in a prominent dialog box and required Plaintiff to affirm his acceptance as part of his agreement to the handbook. Id. at *7. The Court further reasoned that Plaintiff’s inability to remember signing the agreement did not establish that he had not done so, particularly because he neither disputed the accuracy of RDO’s electronic records nor denied clicking on the dialog box. Id. (citing Patrick v. Running Warehouse, LLC, 93 F.4th 468, 477 (9th Cir. 2024)).

The Court also rejected Plaintiff’s argument that the arbitration agreement was illusory because RDO retained the unilateral ability to modify its Handbook. Id. at *8. While the Handbook permitted RDO to revise various policies, it expressly distinguished the mediation and arbitration provision by stating that it created a separate binding contractual obligation between RDO and its employees. Id. The Court therefore held that the arbitration agreement was valid and not illusory. Id.

Finally, the Court held that the parties clearly and unmistakably delegated questions of arbitrability to the arbitrator. Id. The mediation and arbitration provision of the handbook expressly covered “any dispute concerning the ability to arbitrate” and incorporated the AAA Employment Dispute Resolution Rules. Id. at *9. The Court explained that incorporation of the AAA rules constitutes clear and unmistakable evidence of an agreement to arbitrate arbitrability under Ninth Circuit precedent. Id. (citing Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015)). Although Plaintiff argued that he was too unsophisticated to understand these provisions, the Court found no evidence regarding his sophistication or lack thereof and declined to presume that he was unsophisticated merely from his job description or pay rate. Id. The Court therefore granted RDO’s motion, delegated issues regarding the scope of arbitration to the arbitrator, denied the motion to dismiss as moot, and stayed the action pending completion of arbitration. Id.

Implications For Employers

The Palacios ruling provides several practical lessons for employers seeking to enforce arbitration agreements distributed through electronic employee handbooks. Most significantly, the decision demonstrates the value of making an arbitration provision conspicuous and requiring employees to take an affirmative step to acknowledge it. Reliable electronic records documenting an employee’s acceptance may also become important evidence of assent when the employee later claims not to remember agreeing to arbitration.

The decision also highlights the importance of distinguishing binding arbitration provisions from other, non-contractual handbook policies. RDO expressly identified its mediation and arbitration provision as creating contractual obligations, a distinction that proved important in defeating Plaintiff’s argument that the agreement was illusory. Employers likewise should pay close attention to delegation language. Here, the agreement both expressly covered disputes concerning arbitrability and incorporated the AAA rules, which supported the Court’s determination that threshold questions regarding arbitrability belonged to the arbitrator.

Posted on by Gerald L. Maatman, Jr.

EEOC Lawsuit Challenging Women-Only Corporate Retreat Survives Dismissal

By Gerald L. Maatman, Jr., Bernadette M. Coyle, and Andrew P. Quay

Duane Morris Takeaways: In EEOC v. Coca-Cola Beverages Northeast, Inc., No. 1:26-CV-115, 2026 WL 3093454 (D.N.H. Oct. 16, 2026), the Court denied the Defendant’s motion to dismiss an EEOC lawsuit alleging that a regional Coca-Cola bottler violated Title VII by excluding male employees from a company-sponsored, women-only networking event.  Applying the U.S. Supreme Court’s “some harm” standard from Muldrow v. City of St. Louis, the Court held that missed networking opportunities, the potential loss of paid time off, and the denial of perks such as a company-paid hotel stay, food, and beverages were enough to plausibly allege an adverse employment action.  The Court also rejected the employer’s argument that the event was a lawful effort to expand its pool of candidates for promotion, at least at the pleading stage.  The case comes as the Commission has made enforcing Title VII against diversity programs it deems discriminatory, including toward majority groups, a stated priority.

Case Background

The EEOC brought the lawsuit on behalf of a male production employee at Coca-Cola Beverages Northeast, Inc.’s (“Coca-Cola”) facility in Londonderry, New Hampshire.  Id. at *1.  Coca-Cola sponsored a two-day, women-only networking event, called the “Women’s Forum,” at the Mohegan Sun and Casino in Connecticut.  Id.  Coca-Cola characterized the event as a means of growing the number of qualified candidates for advancement.  Id.  The event included a social reception, team-building exercises, recreational activities, and speeches from executives about their career paths.  Id.

Only women received invitations.  According to the EEOC, the women who attended were excused from their normal work duties and paid their usual salary or wages without using paid time off, and Coca-Cola provided their hotel rooms, food, and beverages.  Id.  The EEOC alleged that male employees were not provided with any of the benefits associated with attending the event and would have attended if they had been invited.  Id.  In the EEOC’s view, shutting men out of the event meant they were treated less favorably than women in their compensation and the terms, conditions, and privileges of their employment, in violation of Title VII.  Id.

Coca-Cola moved to dismiss under Rule 12(b)(6), advancing three arguments: that the men suffered no legally cognizable injury from missing a single event; that the event was a permissible initiative to broaden the field of candidates ready for promotion; and that nothing in the complaint justified a punitive damages award.  Id. at *1-2.

The Court’s Ruling

The Court denied the motion to dismiss.

In 2024, the Supreme Court shifted the standard for Title VII discrimination claims and held that a plaintiff need only show “some harm respecting an identifiable term or condition of employment,” and that the harm need not be “significant.”  Muldrow v. City of St. Louis, 601 U.S. 346, 354-55 (2024).  The First Circuit has since read Muldrow to reach any employment event, however minor, that leaves the worker “worse off” in the terms or conditions of their employment.  Coca-Cola Beverages Northeast, Inc., 2026 WL 3093454, at *3 (citing Walsh v. HNTB Corp., 169 F.4th 330, 339 (1st Cir. 2026)).

The EEOC pointed to three categories of injury – (i) the male employees lost out on the event’s executive talks and networking; (ii) they did not receive the paid days away from work that the female employees enjoyed; and (iii) they went without the free lodging and meals that came with the trip.  Id. at *3.  Reading the complaint in the EEOC’s favor, the Court concluded that these allegations, taken together, were enough at the pleading stage to suggest that male employees may have been left worse off, even though the Court described the paid-time-off injury as only a potential one.  Id. at *4.  It also found it significant that the event was an official company function, which made it easier to link the unequal treatment to the men’s employment, particularly given the expansive way the Supreme Court has construed Title VII’s language.  Id.

Coca-Cola also argued that event was a lawful effort to encourage female employees to pursue advancement, and that attending it had no bearing on who was actually promoted.  Id.  The Court rejected this argument, explaining that the EEOC did not attack Coca-Cola’s promotion decisions.  Id. at *5.  Instead, the agency’s theory is that the particular method Coca-Cola chose, a women-only event with paid time off and perks, took away opportunities and benefits from current male employees.  Id.  

As to punitive damages, the Court noted that the complaint did not appear to allege facts supporting an award of punitive damages.  Id.  However, the Court found dismissal of the EEOC’s request for punitive damages to be improper at the motion to dismiss stage because punitive damages are a form of relief rather than a claim and are not appropriately challenged by a motion to dismiss pursuant to Rule 12(b)(6).  Id.

Implications For Employers

Employer-sponsored DEI programs are now squarely within the EEOC’s sights, and EEOC Chair Andrea Lucas has identified enforcing Title VII against diversity programs deemed discriminatory as a Commission priority. 

The decision also shows how Muldrow’s lower “some harm” threshold can make it easier for these challenges to survive the pleading stage.  Under that standard, networking access, paid time away from work, and event perks may be enough to plead an actionable injury when they are provided on the basis of sex.  A legitimate goal, such as expanding the pool of candidates for promotion, may not by itself be a defense if the means chosen ultimately deny current employees benefits because of a protected characteristic.  Employers still have arguments to press: the Court made clear that a plaintiff must show some disadvantageous consequence, and Coca-Cola may renew its arguments at summary judgment.

Employers should audit the eligibility criteria for their networking events, mentoring programs, conferences, and retreats.  They should make sure that these events are available without regard to sex or other protected characteristics.  Otherwise, an EEOC action may be on the horizon.

Posted on by Gerald L. Maatman, Jr.

Fifth Circuit Reverses Dismissal Of Adtech Class Action On Narrow Grounds, Finding Sufficient Factual Allegations Of Disclosure Of PHI

By Gerald L. Maatman, Jr., Justin Donoho, Hayley Ryan, and Tyler Zmick

Duane Morris Takeaways:  On October 23, 2026, in Rand, et al. v. Eyemart Express, LLC, 2026 WL 3180055 (5th Cir. Oct. 23, 2026), the U.S. Court of Appeals for the Fifth Circuit reversed an order by the U.S. District Court for the Northern District of Texas in which the district court had dismissed a class action brought by website users alleging that a prescription eyewear seller’s use of website advertising technology (“adtech”) violated the Electronic Communications Privacy Act (“ECPA”) and other laws. 

This ruling is significant in that it shows that in the hundreds of adtech class actions across the nation seeking millions (or billions) in dollars in statutory damages under the ECPA and other laws, courts ruling on Rule 12(b)(6) motions and drawing all reasonable inferences in the light most favorable to plaintiffs may find plausible allegations that a website operator in fact transmitted private information to an adtech company, such that website owners seeking to challenge adtech class actions under Rule 12(b)(6) may find more success in foregoing such factual challenges to well-pled allegations and instead pressing more legal arguments such as that alleged adtech transmissions do not plausibly allege an “interception” or a “criminal or tortious purpose” under the ECPA. 

Background

This case is one of a legion of class actions that plaintiffs have filed nationwide alleging that Meta Pixel, Google Analytics, and other similar software embedded in defendants’ websites secretly captured plaintiffs’ web-browsing data and sent it to Meta, Google, and other online advertising agencies and/or data analytics companies.  In these adtech class actions, the key issue is often a claim brought under the ECPA on the theory that hundreds of thousands of website visitors times $10,000 per claimant in statutory damages equals a huge amount of damages.  Plaintiffs have filed the bulk of these types of lawsuits to date against healthcare providers, but they have filed suits against companies that span nearly every industry including education, retailers, and consumer products.  Several of these cases have resulted in multimillion-dollar settlements, several have been dismissed, and the vast majority remain undecided.

To state a claim for violation of the ECPA, also known as the federal wiretap act, a plaintiff must show an intentional interception of the contents of an electronic communication.  The ECPA is a one-party consent statute, meaning that there is no liability under the statute for any party to the communication “unless such communication is intercepted for the purposes of committing a criminal or tortious act in violation of the Constitution or laws of the United States or any State.”  18 U.S.C. § 2511(2)(d)); 18 U.S.C. § 2511(2)(d).

In Rand, plaintiffs, Meta users who had already shared their names, photos, and other personal information through their Facebook accounts, brought suit against a seller of prescription eyewear.  According to the plaintiffs, the eyewear seller installed the Meta Pixel on its website, thereby transmitting to Meta, allegedly without the plaintiffs’ consent, the following data about their visits to the website: (1) search terms and web browsing activities, as to those plaintiffs who used the site to search and browse for prescription glasses (the “Search Plaintiffs”); (2) prescription information, as to plaintiffs who made purchases on the site (the “Prescription Plaintiffs”); and (3) as to both sets of plaintiffs, an anonymized identifier sufficient for Meta to link these search terms, web-browsing activities, and prescription information to the plaintiffs’ Facebook profiles and send them targeted advertisements.  Id. at *2.

The plaintiffs also alleged that these allegedly transmitted data types met the definition of individually identifiable health information (“IIHI”) protected under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).

Further, the plaintiffs alleged that these alleged data transmissions of IIHI without consent violated the ECPA, the Missouri Wiretap Act, and Illinois Eavesdropping act, and constituted an intrusion upon seclusion and breach of contract.

The district court dismissed the complaint under Rule 12(b)(6), finding that the Search Plaintiffs failed to state a claim for relief because they did not allege that they shared any IIHI with the eyewear seller.  As to the Prescription Plaintiffs, the district court acknowledged that they allegedly shared IIHI with the eyewear seller by entering their prescription information but found that they had failed to plausibly allege that any IIHI was disclosed to Meta.  Without sufficient allegations that any plaintiff’s IIHI was shared with Meta, the district court concluded that each of the plaintiffs’ claims necessarily failed.  Id. at *1-2.

On appeal, the plaintiffs argued that the district court’s dismissal order should be reversed and their class action complaint reinstated because they adequately alleged both that they shared their IIHI with the defendant and that the Pixel on defendant’s website conveyed that IIHI to Meta without their knowledge or consent.

The Fifth Circuit’s Decision

The Fifth Circuit agreed with the plaintiffs and reversed, finding, first, that the district court erred in finding lack of any plausible allegations that the Search Plaintiffs did not share any IIHI with the defendant.  As the Fifth Circuit explained, the defendant conceded that the information received through the Pixel was individually identifiable because through Facebook, the information was linked to specific users.  Id. at *5.   Moreover, the Fifth Circuit found that the Search Plaintiffs adequately alleged that they shared information relating to their health conditions or the provision of healthcare by using website.  Specifically, the Fifth Circuit found that while the Search Plaintiffs did not allege the transmission of diagnoses or symptoms, “IIHI is not so narrow” and also includes information collected from an individual that “relates to” an individual’s health or condition, to the provision of healthcare to an individual, or the individual’s payment for healthcare.  Thus, taking the plaintiffs’ allegations as true, the Fifth Circuit held that the district court erred in finding that the Search Plaintiffs had not shared any IIHI with the defendant.  Id. at *5-7.

Second, the Fifth Circuit found that the district court also erred in finding that the plaintiffs failed to plead that their IIHI was shared with Meta.  The district court had considered a figure from the complaint representing an example of transmitted data (created by the plaintiffs’ attorney, not representing plaintiffs’ activity), reasoning that it did not sufficiently specify transmission of the either plaintiffs’ data or any prescription information.  Accordingly, the district court found that the complaint did not sufficiently allege that any IIHI was shared with Meta.  Id. at *7.  The Fifth Circuit disagreed. It opined that IIHI is not so narrow that it applies only to specific prescription information and includes, also, interactions on the website relating to plaintiffs’ health.  Moreover, the Fifth Circuit found that the figure in the complaint was provided only by way of example and did not contradict other factual allegations that the Fifth Circuit found alleged the transmission of data to Meta relating to the “Prescription Plaintiffs’ actual purchases.”  Id.

For these reasons, the Fifth Circuit reversed the dismissal order and remanded for further proceedings.

Implications For Companies

Rand is a cautionary tale for defendant website operators seeking to dismiss adtech class actions under Rule 12(b)(6) on the basis that plaintiffs failed to plausibly allege that the defendant transmitted the plaintiffs’ private data to an adtech company. 

While whether any given plaintiff’s private data was in fact transmitted to an adtech company by a website operator remains an individualized issue dependent on browser type, social media account login status, and cookie blocking features, which courts have found sufficiently individualized to prevent named plaintiffs from establishing the defendant’s liability to alleged class members under Rule 23 (as we blogged about here and here), courts must, however, take any allegations of adtech transmissions as true for purposes of Rule 12(b)(6).

For these reasons, adtech class action defendants bringing Rule 12(b)(6) motions often argue for and sometimes achieve dismissal of ECPA claims, instead, on the basis of no plausibly alleged interception, when an internet-based communication is allegedly forwarded to an adtech company as opposed to being intercepted mid-flight, and no plausibly alleged criminal or tortious purpose where the plaintiffs fail to allege that the defendant had the purpose to violate any statute but allege a purpose rather to engage in advertising or data analytics.  (See, e.g., our prior blog entry discussing one of these successful dismissals, here.)  Notably, the Fifth Circuit’s decision in Rand did not address these arguments.  Website owners facing adtech ECPA class actions would do well to press such arguments where appropriate.

Corporate counsel seeking to deter ECPA litigation should also keep in mind the following best practices (discussed in more detail in our prior blog post, here): (1) add or update arbitration clauses to deter class actions and mitigate the risks of mass arbitration; (2) update website terms of use, data privacy policies, and vendor agreements; and (3) audit and adjust uses of website advertising technologies.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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