EEOC’s September Spree Of Filings Caps Off Landmark Year In FY 2023

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

Duane Morris Takeaways:  In FY 2023, the EEOC’s litigation enforcement activity showed that any previous slowdown due to the COVID-19 pandemic is well in the rearview mirror, as the total number of lawsuits filed by the EEOC increased from 97 in 2020 to a whopping total of 138 in FY 2023. Per tradition, September 2023 was a busy month for EEOC-Initiated litigation, as this month marks the end of the EEOC’s fiscal year. This year, 48 lawsuits were filed September, up from the 39 filed in September of FY 2022.

Overall, the FY 2023 lawsuit filing data confirms that EEOC litigation is back in full throttle, with no signs of slowing down. Employers should take heed.

Lawsuit Filings Based On EEOC District Offices

In addition to tracking the total number of filings, we closely monitor which of the EEOC’s 15 district offices are most actively filing new cases over the year and throughout September. Some districts tend to be more aggressive than others, and some focus on different case filing priorities. The following chart shows the number of lawsuit filings by EEOC district offices.

In FY 2023, Philadelphia District Office had by far the most lawsuit filings with 19, followed by Indianapolis with 13 filings, Chicago with 12 filings, and New York and Los Angeles each with 10 filings. Charlotte, Atlanta, Dallas, and Memphis had 9 each, Phoenix had 8, Miami and Birmingham had 7 each, Houston had 6, and San Francisco St. Louis also each had 5 filings.

The most noticeable trend of FY 2023 is the filing deluge in Philadelphia (19 lawsuits), compared to FY 2022 where Philadelphia District Office filed 7 lawsuits. Similarly, Indianapolis ramped up its filings compared to the 7 filings from FY 2022.  Like FY 2022, Chicago remained steady near the top of the list again with 12 filings.  Los Angeles, had a slight increase, based on the 8 filings it had in FY 2022.  Going another direction, Miami filings slightly fell compared to its 8 filings in FY 2022.   Finally, both New York and Charlotte increased their filings from FY 2022, with New York substantially increasing from 7, and Charlotte moderately increasing from 7 filings.

The balance across various District Offices throughout the country confirms that the EEOC’s aggressiveness is in peak form, both at the national and regional level.

Lawsuit Filings Based On Type Of Discrimination

We also analyzed the types of lawsuits the EEOC filed, in terms of the statutes and theories of discrimination alleged, in order to determine how the EEOC is shifting its strategic priorities.

When considered on a percentage basis, the distribution of cases filed by statute remained roughly consistent compared to FY 2023 and FY 2022. Title VII cases once again made up the majority of cases filed, making up 67% of all filings (down from the 69% filings in FY 2022, and significantly above 61 in FY 2021). ADA cases also made up a significant percentage of the EEOC’s September filings, totaling 33%, in line with 29.7% in FY 2022, although down from the 37% in FY 2021. There were also 11 ADEA cases filed in FY 2023, after 7 age discrimination cases filed in FY 2022.

The graphs below show the number of lawsuits filed according to the statute under which they were filed (Title VII, Americans With Disabilities Act, Pregnancy Discrimination Act, Equal Pay Act, and Age Discrimination in Employment Act) and, for Title VII cases, the theory of discrimination alleged.

Lawsuits Filings Based On Industry

The graphs below show the number of lawsuits filed by industry.  Three industries were the primary targets of lawsuit filings in FY 2023:  Restaurants with 26 filings, Retail with 23 filings, and Healthcare with 22 filings.  Not far off those industries are Manufacturing with 15 filings; Construction with 7 filings; Automotive, Security, and Transportation with 6 filings each; and Technology with 5 filings.

Hospitality and Healthcare employers should be keenly aware of the EEOC’s enforcement of alleged discriminatory practices in these sectors.  But in reality, employers in nearly any industry are vulnerable to EEOC-initiated litigation., as detailed by the below graph.

Looking Ahead To Fiscal Year 2024

Moving into FY 2024, the EEOC’s budget includes a $26.069 million increase from 2023, and focuses on six key areas including advancing racial justice and combatting systemic discrimination on all protected bases; protecting pay equity; supporting diversity, equity, inclusion, and accessibility (DEIA); addressing the use of artificial intelligence in employment decisions and preventing unlawful retaliation.

The EEOC also announced goals for its own Diversity, Equity, Inclusion, and Accesibility (DEIA) program where it seeks to achieve four goals, including workplace diversity, employee equity, inclusive practices, and accessibility. Additionally, the EEOC continues to polish its FY 2021 software initiatives addressing artificial intelligence, machine learning, and other emerging technologies in continued efforts to provide guidance.  Finally, the joint anti-retaliation initiative among the EEOC, the U.S. Department of Labor, and the National Labor Relations Board will continue to address retaliation in American workplaces.

Key Employer Takeaways

In sum, FY 2023 was a year of new leadership and structural changes at the EEOC.  With a significantly increased proposed budget, it is more crucial than ever for employers pay close attentions in regards to the EEOC’s strategic priorities and enforcement agendas.  We anticipate these figures will grow by next year’s report, so it is more crucial than ever for employers to comply with discrimination laws.

*Please note the information in this post contains data posted through September 29, 2023 at 3:20 p.m.  Due to the EEOC’s fiscal year ending on Saturday September 30, 2023, this blog will be updated on Monday, Oct. 2, 2023.


The Class Action Weekly Wire – Episode 32: California Court Approves $36 Million Deal In Wage & Hour Class Action

Duane Morris Takeaway:
This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Shireen Wetmore with their discussion of the $36 million settlement approved last week resolving claims from multiple cases in both federal and California state court challenging an employer’s wage and hour practices.

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

Episode Transcript

Jerry Maatman: Thank you loyal blog readers and listeners, welcome to our Friday weekly podcast series entitled The Class Action Weekly Wire. I’m very excited to welcome our guest, my partner Shireen Wetmore from our San Francisco office. Welcome, Shireen!

Shireen Wetmore: Thanks, Jerry. Happy to be here.

Jerry: Today we’re going to focus on and talk about a rather hefty settlement just approved by a court in the wage and hour space for $36 million. The name of the case is Fodera v. Equinox Holdings. Could you tell us and explain to our listeners some of the background behind a class action that would spike at $36 million?

Shireen: Of course, Jerry. Yeah, this settlement represents the resolution of claims from multiple cases in both Federal and California State Court. The settlement covers a class of over 15,000 hourly non-exempt employees and former employees of Equinox from around April 2015 through December 2022, as well as a PAGA group of non-exempt employees that includes fitness trainers and instructors. And plaintiffs alleged that Equinox, the gym where they were teaching classes and providing personal training, failed to pay for pre- and post-shift work. Plaintiffs also challenged Equinox policies regarding meal and rest breaks wage statements and other wage and hour practices. Alameda Superior Court Judge Herbert approved a final settlement just last week on September 21, 2023.

Jerry: California is a super tough place to do business, and certainly so for wage and hour liability. Many, many employers doing business in the Golden State end up receiving these sorts of lawsuits. In your opinion, and based on your thought leadership in this space, what do you think were the main takeaways from the problems in that case that resulted in a settlement of $36 million?

Shireen: You know, Jerry, oftentimes in these cases we see this with our clients all the time – settlement doesn’t always mean that there’s a problem, settlement doesn’t always mean that something wasn’t done properly – there are lots and lots of reasons why clients may choose to settle a case. Certainly a case with the scale and scope of one like this, where there’s multiple pieces of litigation progressing at the same time. That often counsels settlement, just to avoid some of the really complicated procedural issues and costs associated with litigation, as you very well know California, like you said, tough place to do business. Some of the highlights that are coming out of this particular case is that these plaintiffs claimed that they were paid per session rate for the fitness classes that they were teaching and that they weren’t getting compensation for pre- and post-shift work outside of the class time. And so they alleged that they were required to engage in certain activities, like recruiting potential students or participants, and wanted compensation for that time. Also the residual impacts of that type of work impacting their meal and rest periods.

Jerry: In terms of the overall settlement, where does this rank in calendar year 2023 among the major wage and hour class action settlements?

Shireen: That’s a great question. So far this year this settlement will go right in the middle, actually a little surprising for such a large recovery, but in the top 10 it would be the fifth largest so far this year.

Jerry: That’s incredible. I’m a believer that success begets copycats, and when there are large settlements, employers experience an uptick of lawsuits brought. Certainly workers, plants, lawyers notice these big numbers. And so that’s one of the reasons the Duane Morris Class Action review tracks and analyzes large settlements. Given that feature of our system where success begets success. Well, thank you so much, Shireen, for joining us and providing us with your thought leadership. Great to have you on the show.

Shireen: Thanks for having me, Jerry. Thank you, listeners!

New York Federal Court Rules That One Long-Tenured Employee’s Testimony Is Sufficient To Support Granting Of Conditional Certification Of An FLSA Collective Action

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Gregory S. Slotnick 

Duane Morris TakeawaysOn September 25, 2023, Judge Colleen McMahon of the U.S. District Court for the Southern District of New York District granted conditional certification of a collective class under the Fair Labor Standards Act (“FLSA”) in Ademi v. Central Park Boathouse, LLC et al., No. 22 Civ. 8535 (S.D.N.Y. Sept. 25, 2023).  In its order, the Court found that one single affidavit, submitted by a long-tenured named employee, provided allegations sufficient to grant his request to conditionally certify the collective action.  Employers in the Second Circuit (i.e., New York, Connecticut, and Vermont) should note the extremely minimal burden workers are required to meet at the conditional certification stage of a wage & hour lawsuit, as granting certification based on a single declaration is at the low end of the spectrum as certifications rulings go.  The case also serves as the latest reminder for businesses to ensure their wage & hour practices and compliance are up to date given the ever-changing landscape and evolving federal, state, and local rules and regulations concerning wage & hour issues.

Case Background

Plaintiff, a former long-tenured server who worked at the Central Park Boathouse (the “Boathouse”) from approximately January 2011 through October 16, 2022, filed a complaint on behalf of himself and all current and former front-of-the-house tipped employees (captains, assistants, bartenders, bussers, runners, and servers) employed at the Boathouse within the last six years.  In the complaint, the worker sought to recover unpaid wages (including overtime) due to an invalid tip credit policy, unreimbursed costs for maintenance of uniforms, and unpaid wages due to improper meal credit deductions in violation of the FLSA and the New York Labor Law (“NYLL”), as well as failure to provide proper wage statements under the NYLL.  Plaintiff also brought a claim for unlawful retaliation against him in violation of both laws, and all claims were filed against the Boathouse and its former owner and operator.  Id. at 1.

Plaintiff claimed that he was regularly scheduled to work seven hours a day, five days per week, but also regularly worked two or three double-shifts per week, totaling approximately 49 to 56 hours worked per week.  Id. at 3.  Plaintiff’s declaration included a list of the first (but not last) names of six other servers also allegedly scheduled to work similar hours and shifts, and he claimed there were additional names of other workers as well.  Id.  Plaintiff asserted that the Boathouse paid tipped front-of-the-house employees tip-credited wages without providing them notice that tip credits would be taken against their wages.  Id. at 4.  The complaint claimed the Boathouse thus paid the tipped employees below the New York minimum and overtime rate based on the tip credit, and attached paystubs generated between 2016 and 2020 confirming such rates.  Id.  Plaintiff claimed he personally observed and discussed the Boathouse paying below the required minimum amounts with named and unnamed co-workers.  The Complaint also alleged the Boathouse maintained a tip credit policy despite requiring tipped workers spend more than 20% of their total weekly hours performing non-tipped work and required the workers to maintain their own uniforms without proper cost reimbursement to offset cleaning costs.  Id. at 4-5.  Finally, Plaintiff alleged the restaurant improperly deducted meal credits from wages of all tipped front-of-house employees for meals that often made coworkers sick and often consisted of unsold chicken and seafood leftovers.  Id. at 5.

On March 23, 2023, Plaintiff filed a motion for conditional certification of a collective action under the FLSA, seeking the Court also allow mailing out notice of the opportunity to join the case to all putative opt-in plaintiffs.  Id. at 2.

The Order Granting Conditional Certification

In its decision, the Court noted that in assessing whether a plaintiff is “similarly situated” to employees the plaintiff seeks to represent, courts look to the pleadings, affidavits, and declarations, but often authorize notice at the conditional certification stage based “solely on the personal observations of one plaintiff’s affidavit.”  Id. at 9.  The Court confirmed that at the conditional certification stage (the first of a two-step process for certifying a collective action in the Second Circuit), courts do not resolve factual disputes or weigh the merits of the underlying claims when determining whether potential members of the collective action are similarly situated.  Id.  A more rigorous factual review takes place during the second stage of the certification analysis after discovery, where a court may decertify a conditionally certified collective action and dismiss the claims of the opt-in plaintiffs (without prejudice).  Id. at 8.

Judge McMahon specifically cited the fact that courts in the Second Circuit have “routinely” granted conditional certification of a FLSA collective action based on a single plaintiff’s affidavit when the employee declares that other co-workers were subjected to similar employer practices.  In applying the principle to this matter, the Court cited to the single affidavit submitted by the named Plaintiff that chronicled his eleven years of employment at the Boathouse during which he claimed the Boathouse failed to provide him and all other tipped front-of-house employees with notice it was taking a tip credit against their wages, including for all worked hours during which they performed non-tipped duties for more than 20% of the time.  Id. at 10-11.  According to the employee, these common practices resulted in the Boathouse unlawfully compensating him and the other tipped workers below the New York tipped minimum wage and overtime rates.  Plaintiff also claimed the Boathouse required him and all tipped front-of-house employees to maintain their work uniforms without proper reimbursement and further deducted a meal credit from their wages for meals that did not meet New York’s minimal meal requirements.  Id.

Critically, the employee declared that he had personal knowledge from his own observations and his conversations with named and unnamed co-workers during the course of his eleven years of employment of the Boathouse applying the same policies (and violations) to “all tipped front-of-house employees.”  Id. at 11.  Judge McMahon found that based on his declaration alone, Plaintiff satisfied his minimal burden of showing he is “similarly situated” to the proposed class members.  The Court found that Plaintiff set forth a factual basis for his claims of common policies violating the FLSA, i.e., specifically, policies “depriving tipped front-of-house workers of wages, failing to reimburse workers for uniform maintenance, and deducting improper meal credits.”  Id.

The Court found unconvincing the Boathouse’s arguments that the worker did receive proper notice of the restaurant’s tip credit policy, failed to plead sufficient facts to support his allegations, and that his declaration contained false statements.  The Court instead noted that at the first stage of conditional certification, it “does not resolve any factual disputes” and stated that case law is “clear” that a single plaintiff’s affidavit may be enough to meet the evidentiary burden.  Id. at 11-12.  However, the Court did agree with the Boathouse that because two of the job positions Plaintiff sought to include in his collective action (“captains” and “assistants”) did not actually exist at the restaurant while it was owned and operated by Defendants, those positions should not be included in the definition of the collective action.  Id.  Otherwise, the Court found that the worker met his “low burden” to show that he was similarly-situated with the other proposed class members.

Notably, the Court limited the proposed collective action to any persons employed at the Boathouse from October 6, 2019 through the date the Complaint was filed (October 26, 2022), but not including those currently employed on the date of the Decision and Order (September 25, 2023), unless that person was also employed on October 26, 2022.  Id. at 12-13.  This was in light of a new concessionaire (and not the defendants sued in the case) reopening the Boathouse restaurant in June 2023 after it was closed between October 16, 2022 through that time.

As a result of its granting conditional certification, the Court authorized notice to be sent out to a collective class consisting of all tipped front-of-house bartenders, bussers, runners, and servers employed at the Boathouse during the aforementioned three-year period.  In order to effectuate the notice mailing process, the Court also ordered the Boathouse to provide plaintiff with names and addresses of all collective class members to allow them the opportunity to opt-in to the case.  The Judge also denied plaintiff’s request to post the notice at the Boathouse, as it is no operated under entirely new management, but granted plaintiff’s request to equitably toll the statute of limitations from the date plaintiff filed his motion for conditional certification through the date notice is mailed out to the potential opt-in plaintiffs.

Implications for Employers

The order in this case is the latest example of the stark minimal burden employees must meet in order to conditionally certify a FLSA collective action within the Second Circuit.  In this case, a single plaintiff’s affidavit – which included alleged discussions with unnamed co-workers confirming they were subjected to common unlawful policies – was enough to convince a judge to conditionally certify a proposed collective class.  In order to give themselves a chance at defeating a conditional certification motion similar to the one filed against the Boathouse in this case, employers and businesses in the Second Circuit are well- advised to regularly keep themselves up to speed and aware of the ever-evolving developments in the world of wage& hour law, state and local rules and regulations concerning pay practices, and abide by all necessary paperwork and record-keeping requirements in their respective jurisdictions.

The Class Action Weekly Wire – Available Everywhere You Get Your Podcasts!

Our weekly podcast, the Class Action Weekly Wire, is now available everywhere you get your podcasts! Episodes are uploaded to the Duane Morris Class Action Weekly Wire RSS feed here, and we are also on Spotify, Amazon Music, the Samsung Podcasts app, Podcast Index, and Listen Notes. Now you never have to be without breaking weekly legal updates and commentary on what’s hot in the class action world. You can also rate, review, and subscribe to the podcast from your preferred platform. Tune in every Friday for a brand new episode!

Conditional Certification Denied To Illinois Jail Guards Who Were Not Paid For Time Outside Work Engaging In COVID-19 Protocols

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Derek Franklin 

Duane Morris TakeawaysIn Evans III, et al v. Dart, et al., No. 1:20-CV-02453 (N.D. Ill. Sept. 15, 2023), Judge Rebecca R. Pallmeyer of the U.S. District Court for the Northern District Of Illinois denied Plaintiffs’ motion for conditional certification of a collective action of Cook County Jail Guards who were not compensated for time spent off-the-clock decontaminating their work gear to prevent the spread of COVID-19.  In rejecting the jail correctional officers’ bid for conditional certification under 29 U.S.C. § 216(b), the Court ruled the Plaintiffs could not establish that they were victims of a common policy or plan that violated the law, as there was no evidence that the jail even had an off-the-clock decontamination policy. Thus, the Court concluded that Plaintiffs failed to establish that their cleaning efforts outside of work resulted from any requirement imposed by their employer.  The ruling is a blueprint for corporate counsel in terms of a solid approach for opposing employment-related conditional certification motions.

Case Background

The factual origins of the case stem from a COVID-19 outbreak at the Cook County Department of Corrections (“Cook County Jail”) in April 2020.  Plaintiffs allege that, amid the outbreak, the Cook County Jail required correctional officers to “engag[e] in decontamination/sanitation activities” before and/or after their shifts within the CCDOC, “including washing and sanitizing their uniforms, sanitizing their persons, sanitizing and maintaining personal protective equipment (‘PPE’), and showering.”  Id. at 2.

According to Plaintiffs, they would spend approximately 20 to 30 minutes before and after shifts completing these protocols but were not paid for that time.  As the Court noted, “each Plaintiff described slightly different activities that took slightly different amounts of time,” which formed “a consistent narrative of enhanced decontamination activities, significantly exceeding what they did prior to COVID.”  Id. at 4.

In the same month that the April 2020 outbreak began, Plaintiffs filed this lawsuit on behalf of themselves and a proposed group of all persons who worked at the Cook County Jail between January 27, 2020 and June 11, 2021 who engaged in the purported COVID-19 decontamination protocols, but who were not paid for time spent on those activities. Id. at 3.

The Court’s Decision

The Court declined to certify the proposed collective action based on finding that Plaintiffs fell short in identifying a common policy requiring workers in the proposed collective action to engage in those [decontamination] activities as a condition of their employment.”  Id. at 1.  Importantly, the Court noted that the Plaintiffs themselves acknowledged that there was no express written policy requiring correctional officers to decontaminate outside of work, and that the only instructions that they received from supervisors about decontamination was during roll call meetings, when supervisors would merely “read and disseminate general advice from the CDC” and instruct guards to not bring items home from the jail. Id. at 4-5.

Another key finding by the Court was that Plaintiffs “did not report their off-duty decontamination activities to their supervisors, nor were they asked about those efforts or disciplined for failing to decontaminate proper.”  Id. at 5. Further, the Court made important note of how “no named Plaintiff reported monitoring the time consumed by their daily decontamination activities, submitting any decontamination overtime, or asking their supervisors about decontamination overtime, although many testified that there was no clear way to submit an overtime claim for these activities in the CCDOC “Workforce” record system.” Id.

In reaching its determination, the Court also rejected the relevance of a Communicable Diseases Policy that Cook County had in place requiring workers to “use good judgment and follow training and procedures related to mitigating the risks associated with communicable disease,” and if exposed to one, to “begin decontamination procedures immediately, obtain medical attention if needed, and “notify a supervisor as soon as practical.”  Id. at 7.  According to the Court, because this policy specified that its aim was to “provide a safe work environment,” the Court found it “hard to imagine how a pre-shift shower or laundering one’s uniform after a drive home is consistent with that language” and concluded, in turn, that the policy did not require the Plaintiffs to engage in COVID-19 protocols at issue outside of work at the jail. Id. at 11.

Finally, the Court discussed how, even if the Communicable Diseases Policy applied to activities outside of work, an “insurmountable” problem for Plaintiffs was that “none of them seemed to know about the policy at the time they were undertaking those activities.”  Id. at 12.  As a result, the Court found that there was no evidence showing that the Defendants had actual or constructive knowledge of any de facto policy requiring the Plaintiffs to engage in decontamination activities away from the jail.  Id. at 15.

For these reasons, the Court concluded that the Plaintiffs fell short of satisfying the requirements for conditional certification of their proposed collective action.

Implications For Employers

The Evans ruling underscores the importance of maintaining and utilizing well-organized clearly-delineated employee conduct policies for activities at and away from the workplace, in anticipation of arguing the absence of uniform policies and procedures in collective actions under 29 U.S.C. § 216(b). In dismissing all of Plaintiffs’ arguments after finding an absence of policy or plan for all proposed collective action members that violated the law, the Court signaled its steady reliance on the well-established standards for these types of claims, providing a valuable reaffirmation to employers’ reliable defense strategies.

The Class Action Weekly Wire – Episode 31: Artificial Intelligence: The Next Generation Of Class Action Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Brandon Spurlock with their discussion of the Senate Banking Committee’s hearing this week regarding consumer protection in the financial sector from the risks of artificial intelligence, as well as their analysis of the potential implications in the regulatory environment and class action space as AI continues to be utilized in workplace and commercial operations.

Episode Transcript

Jerry Maatman: Welcome, loyal blog readers and listeners to our Friday weekly podcast series. I’m joined by my colleague Brandon Spurlock today, and we’re going to be focusing on artificial intelligence and the fact that that issue has been foremost in the mind of legislators in Washington, D.C. Brandon, welcome to our weekly podcast.

Brandon Spurlock: Thanks, Jerry. Always happy to be here.

Jerry: Brandon, there was quite a lot of activity at the Senate Banking Committee this week with respect to artificial intelligence. It involved consumers and protection of consumers. To me AI is everywhere and in the news, in terms of how it impacts the workplace, how it impacts consumers – what’s your take away from what occurred in Washington, D.C. this week?

Brandon: Yeah, Jerry, this topic is exploding everywhere, and the changes in every sector are fast and furious is AI advances. The hearing was led by the committee’s chairman, Democratic Senator Sherrod Brown from Ohio. Brown opened the hearing by highlighting positive aspects of technology for society in the financial world. And you think about things like ATM machines providing quick access to money, smartphone apps that can access banking online and bill paying, but also explain that automation has led to many of the financial crises that we’ve seen in the past two decades. Brown stressed that any AI use in the financial sector should be utilized to make the economy better for consumers, and that there should be significant safeguards in place to ensure that it does so.

His Republican counterpart, Senator Mike Rounds of South Dakota, who was filling in for the committee’s ranking member, also stressed the risks of AI, but took a different stance on the issues of regulation. He stated that there should be regulations regarding “transparency and explainability in decision-making, especially where credit is involved” – but that Congress should take a “pro-innovative stance” so the U.S. can attract talent, and that halting the progress of AI in the financial sector could put the U.S. at a competitive disadvantage.

Jerry: It struck me that here is a great example of technology accelerating faster than the law, and the law is trying to catch up, and government regulators are thinking about the void that exists in the system about regulation. I know that the Senate Committee and Senator Brown focused on fraud and antitrust concerns, but the overlay also was in the fear that artificial intelligence incorporates a bias, that use of the artificial intelligence could have an adverse impact on protected minority groups. What’s your takeaway in terms of what we’re going to see in the future in this particular area?

Brandon: Well, that’s spot on Jerry. Brown highlighted several AI tools that companies in the financial sector already use have been shown to have ingrained discriminatory biases towards Black and Latino American borrowers. Specifically, banks use algorithms and machine learning AI models and consumer lending that can determine a borrowers creditworthiness. But it often automates, super charges the biases that end up excluding minorities.

Jerry: I know that the Consumer Financial Protection Bureau is dabbling in this area, also focusing on regulations. But it seems to me that this is an area that the plaintiffs’ class action bar is following. And my sense is that we’re going to see a tipping point soon where there is going to be private plaintiff lawsuits brought over these issues with allegations that either the use of the AI implicated antitrust or fraud concerns or discrimination, either in the employment arena in the workplace, or with the extension of credit or with loans. What’s your takeaway of class action risks in this area?

Brandon: Well, you know there was a committee witness attending the hearing, Daniel Gorfine. He’s the founder and CEO of advisory firm Gattaca Horizons, and he’s a former chief innovation officer with the CFTC. He noted the risk of AI, but stated the “speculative fear or fear of future harm … should not broadly block development of AI in financial services.”

Another witness, University of Michigan computer science and engineering professor Michael Wellman, urged that public and open knowledge on what practices can create risk will help better prepare financial systems for AI and inspire market rules and systems that remain resilient to AI’s inevitable impacts.

So with all this said, Jerry, there will probably be no shortage of class action lawsuits that are filed, and I think as we see how those class actions progress, we’ll also see how they impact the regulatory environment. I think both are going to have an impact on one another.

Jerry: Brandon, you’re a thought leader in this area, and we’ll be closely following artificial intelligence and its implications in litigation and government regulation, and in terms of what it means to companies in the private sector. Sincerely appreciate you lending your expertise today to our podcast and thanks so much for joining us.

Brandon: Thanks for having me, Jerry.

New York Federal Court Approves Unique Wage Case Settlement Structure Providing Plaintiff-Employee A Discounted Purchase Price For Employer’s Entire Business

By Gerald L. Maatman, Jr., Gregory S. Slotnick, and Maria Caceres-Boneau

Duane Morris TakeawaysPursuant to Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015), the practice of settling lawsuits filed in district courts in the Second Circuit alleging unpaid wages under the Fair Labor Standards Act (“FLSA”) requires approval from either the Court or the U.S. Department of Labor to take effect.  On September 14, 2023, Magistrate Judge James M. Wicks of the U.S. District Court for the Eastern District of New York approved a rather unique settlement request by the parties in such an unpaid wage case.  Although nearly all wage & hour lawsuit settlements in the Second Circuit ultimately conclude with the business-employer defendant agreeing to pay a monetary amount in exchange for dismissal of the case and a release of the employees’ wage claims against the employer, in Gallagher v. Mountain Mortgage Corp. et al., Case No. 22-CV-0715 (E.D.N.Y. Sept. 14, 2023), the Court evaluated and signed-off on the parties’ proposed settlement structure whereby the plaintiff-employee, who worked as a loan processor and mortgage loan originator for a mortgage lender, agreed to resolve the matter in exchange for her receipt of a heavily-discounted purchase price and her agreement to buy the business itself.  The Court’s decision serves as an interesting thought exercise for resolving unpaid wage lawsuits through unorthodox strategies, though potentially applicable only in particular circumstances under which the Court may find such resolution fair and reasonable.

Case Background

According to the Complaint, plaintiff-employee Nicole Gallagher (“Gallagher”) has over 25 years of experience in the mortgage banking industry and is licensed to originate mortgage loans in New York, New Jersey, Connecticut, and Florida.  Gallagher alleged that she worked for a mortgage lender, Mountain Mortgage Corp. (“MMC”), for a little over a year and claimed that despite working around 85 hours per week, MMC did not pay her at all during certain months, never paid her overtime despite consistently working over 40 hours per week, and failed to provide her with accurate paystubs and weekly earnings statements or with a notice and acknowledgment of her pay rate as required by law.  Specifically, Gallagher asserted that MMC paid her a set weekly salary and no overtime during the entire year of 2021, and that MMC did not compensate her at all during November and December 2020 or at any time in 2022.  MMC claimed that at all relevant times, it understood that Gallagher was not an hourly employee, but instead “was an owner and officer” of MMC who was to be paid by commission no differently than other previously employed salespersons of MMC.

Magistrate Judge Wicks’ opinion noted that, prior to the filing of the lawsuit, Gallagher and MMC had entered into a purchase agreement whereby Gallagher was to purchase MMC for $500,000.  The parties informed the Judge that Gallagher was employed at MMC in advance of her anticipated purchase of MMC, but that when no successful application for a change in ownership of MMC was submitted to the New York State Department of Financial Services by the deadline contemplated in the purchase agreement, the parties’ relationship soured, resulting in Gallagher filing the lawsuit.

As part of the lawsuit, the parties previously submitted a request for the Judge’s approval of a settlement on May 6, 2022, whereby Gallagher would purchase MMC for $100,000 rather than the $500,000 contemplated in the original purchase agreement.  Judge Wicks ultimately denied the parties’ first request for settlement approval due to what he deemed to be a lack of essential information required for the Court to evaluate whether the proposed agreement was fair and reasonable as required by Cheeks.  Such information included the bona fide details of the parties’ FLSA dispute, calculations of Gallagher’s potential recovery, and an explanation of what portion of the reduced purchase price of MMC constituted consideration for Gallagher’s FLSA claims.  The decision of September 14 addressed the parties’ submission of a renewed settlement approval request.

The Decision

As noted by Magistrate Judge Wicks, in support of the parties’ renewed settlement agreement approval request, the parties aimed to kill two bird with one stone – resuscitate the parties’ failed transaction and settle Gallagher’s wage & hour claims against MMC.  Id. at 6.  This time around, Gallagher submitted detailed information to the Court concerning her purported unpaid wage damages, which she alleged to be approximately $295,000.  This figure included alleged “underpayments, liquidated damages, pre-judgment interest, and penalties” owed to her by MMC.  Id. at 4.  Gallagher also provided the Court with the specific details of her alleged employment, including time periods, weekly hours worked, regular rate of pay, and periods during which she claims that she did not receive proper compensation.

Magistrate Judge Wicks noted that under the original settlement approval request, he had been unable to determine which portion of the $400,000 reduction in MMC’s purchase price, if any, was consideration for the release of Gallagher’s FLSA claims, and which portion was attributable to other factors.  As part of the renewed approval request, Gallagher informed the Court that no formal valuation was conducted to reach the original $500,000 purchase price, and that her reduced purchase price of $100,000 was similarly not calculated based on a formal valuation.  Instead, both figures were the product of advice from her attorneys, her experience in the industry, and her “sense of the value” of the mortgage banking licenses (whereby MMC’s New York Mortgage Banker’s license was in the process of being surrendered).  Id. at 5.  Gallagher submitted that she was unable to “break down exactly” what portions of the reduced purchase price were attributable to what specific single factor; however, in her view, the value of her FLSA claims and the loss of MMC’s New York license were both factors that were “in the mix” along with her desire to own MMC outright, avoid costly arbitration, avoid the stress and expense of the lawsuit, and generally “just move on” with her life.  Id. at 5-6.

In evaluating and approving the renewed settlement request, Magistrate Judge Wicks noted his satisfaction with the fairness of the proposed settlement, giving due weight to Gallagher’s more than 25 years of experience in the mortgage banking industry and the fact that Gallagher herself worked at MMC with the intention of inevitably owning it (as opposed to a disinterested third-party purchase of a business).  As such, although there was no formal valuation of MMC’s value conducted, Judge Wicks acknowledged that Gallagher’s experience and familiarity with the business was relevant to her comfort level with the reduced purchase price.  The Court also gave weight to Gallagher’s desire to move on with her life and put these issues behind her.

Magistrate Judge Wicks further cited the fact that Gallagher now owns 100% of MMC, and that a trial loss should he not approve the settlement could potentially turn her status as 100% owner into a 0% owner with no remaining claims against MMC.  The Court noted that no settlement amount was earmarked for payment of attorneys’ fees, as all of Gallagher’s attorneys except for one were paid on an hourly basis (rather than a contingency), that the one exception only represented Gallagher briefly and was replaced within 3 months of filing the case, and the attorney had not expressed any intention of asserting a lien over the reduced purchase price of MMC.

Based on all of these factors, the Court finally confirmed that the renewed settlement agreement properly revised and limited two troublesome provisions concerning non-disparagement and confidentiality – both of which are regularly found by courts to be inconsistent with the public policy intent underlying the FLSA.

Implications for Employers

The decision is an interesting thought experiment for small employers who are subject to unpaid wage lawsuits brought on behalf of a small number of plaintiffs.  In this instance, the parties agreed that rather than separate Gallagher’s desire to purchase MMC and her alleged unpaid overtime wages and related penalties, a more logical solution was to combine the two and provide for one global resolution.  Creative, innovative thinking along these lines likely saved MMC from incurring additional litigation expenses and the unknown of a jury trial verdict.  Moreover, the parties ultimately were able to provide the Court with evidence from which the settlement could be deemed fair and reasonable.

Although potentially limited to specific factual situations along the lines of an experienced employee initially employed by a small business with the goal of owning the business, this decision illustrates that in evaluating the reasonableness of proposed unpaid wage case settlements, judges may be open to approving agreements when the parties think outside the box (as long as the parties are able to defend and support their actions).

Colorado Supreme Court Applies Litigation Privilege To Attorney’s Allegedly Defamatory Statements About Class Action Defendant

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Derek Franklin 

Duane Morris TakeawaysIn Killmer, Lane & Newman, LLP v. BKP, Inc., No. 21-SC-930, (Col. Sept. 11, 2023), the Colorado Supreme Court ruled that an attorney’s allegedly defamatory statements about a company’s wage-and-hour practices during a press conference to announce filing a class action against that same company were protected by the litigation privilege.  The Supreme Court’s unanimous en banc opinion held that the Colorado Court of Appeals erred in concluding that there was an exception to the applicability of the litigation privilege where the size and contours of the proposed class were easily ascertainable from the employer’s records and undermined the need to identify and alert potential class members through the press.  In reversing the appellate panel’s ruling, the Colorado Supreme Court determined that the attorney’s statements were shielded from defamation claims by the litigation privilege since the statements merely repeated wage-and-hour allegations made in the complaint and advanced the goals of the lawsuit.  The decision in BKP serves as a reminder to companies of the potential pitfalls of bringing defamation claims against attorneys who disseminate information to the public about a party that they are suing in a class action.

Case Background

In 2018, two law firms, Killmer, Lane & Newman, LLP and Towards Justice (collectively, along with attorney Mari Newman of Killmer, Lane & Newman, “the Attorneys”), filed a federal class action lawsuit claiming that Ella Bliss Beauty Bar (“Ella Bliss”), an operator of beauty salons in the Denver metropolitan area, failed to properly pay its nail technicians for required custodial work under federal and Colorado state law.  Id. at 5.

On the same day the federal lawsuit was filed, one the Attorneys, Mari Newman, held a press conference in which she stated that Ella Bliss nail technicians had to clean the businesses “for no pay whatsoever,” that the salons “only pay [employees] for the hours they feel like paying,” and that Ella Bliss “is simply too cheap to pay its workers the money they deserve.”  Id. at 43.  The Attorneys collectively also issued a press release that day asserting that “Ella Bliss Beauty Bar forced its service technicians to perform janitorial work without pay, refused to pay overtime, withheld tips, and shorted commissions.”  Id. at 44.

Exactly one year later, Ella Bliss’ parent company, BKP, Inc. (“BKP”) filed a defamation lawsuit against the Attorneys in Colorado state court pertaining to five allegedly defamatory statements that the Attorneys made during their 2018 press remarks, including the ones quoted above.  Id. at 13.  The district court dismissed the defamation suit and found that the Attorneys’ statements were protected by the litigation privilege, which shields from defamation claims statements by an attorney that have “some reference to the subject matter of . . . proposed or pending litigation.”  Id. at 22.

When the Plaintiffs appealed the dismissal to a three-judge panel of the Colorado Court of Appeals, the appellate panel partially reversed the district court’s decision and found that some of the statements at issue were not shielded by the litigation privilege.  Id. at 49.  While the Attorneys argued that the goals of the media statements were to promote their class action and publicize it to potential additional class members, the appellate panel rejected that notion since the Attorneys were set to receive employment records and payroll documents in discovery that could have easily identified the class members without needing to resort to harmful press statements.  Id. at 14.

Following the appellate decision, the Colorado Supreme Court granted the petitioner’s writ for certiorari and analyzed on the question of “whether the common law litigation privilege for party-generated publicity in pending class action litigation excludes situations in which the identities of class members are ascertainable through discovery.”  Id. at 1.

The Colorado Supreme Court’s Decision

On further appeal, the Colorado Supreme Court reversed the appellate panel’s ruling and determined that the litigation privilege applied to the allegedly defamatory attorney statements at issue.  Id. at 49.  The Supreme Court reasoned that the statements “merely repeated, summarized, or paraphrased allegations in the class action complaint” and, therefore, “served to notify the public, absent class members, and witnesses about, and therefore furthered the objective of, the litigation.”  Id. at 42.

The Supreme Court also held that the appellate panel erred by basing its litigation privilege analysis on whether the identities of class members were easily ascertainable through discovery.  Id. at 2.  According to the Supreme Court, two reasons led to that conclusion: “(1) ascertainability is generally a requirement in class action litigation, and imposing such a condition would unduly limit the privilege in this kind of case;” and (2) “the eventual identification of class members by way of documents obtained during discovery is not a substitute for reaching absent class members and witnesses in the beginning stages of litigation.”  Id.

Implications For Employers

The Colorado Supreme Court’s decision in BKP, Inc. is notable in that it may serve to embolden the inclination of some class action plaintiffs’ attorneys to use strategic communication techniques to air their clients’ claims in the ‘court of public opinion’ in an attempt to gain leverage, as well as using mass communication tools to grow the reach of their lawsuit to more potential class members. While employers understandably may want to fight back against weaponized misinformation by asserting defamation claims, employers should exercise caution and pick their battles when it comes to such claims, given the high potential for variance in judicial outcomes in states where the case law on this issue remains unsettled and the jurisdictional variables also at play.  Ultimately, corporate counsel should carefully consider the potential risks of pursuing a defamation claim against an attorney based on statements that a court may find shielded by privilege regardless of their truthfulness.

The Class Action Weekly Wire – Episode 30: The State Of BIPA Privacy Class Action Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Tyler Zmick with their discussion of a $7 million BIPA class action settlement announced this month and analysis of developing trends in biometric privacy litigation spurred by cutting-edge technology and the ever-evolving innovation of the plaintiffs’ class action bar.

Episode Transcript

Jerry Maatman: Hello, loyal blog readers and listeners. Welcome to our Friday weekly podcast, the Class Action Weekly Wire. I’m joined by my colleague Tyler Zmick today, one of our BIPA thought leaders, to discuss privacy class action litigation in general and Illinois BIPA lawsuits in particular. Welcome, Tyler.

Tyler Zmick: Great to be here, Jerry. Thanks for having me.

Jerry: I look on the docket every day, and there seems to be just a mushroom cloud explosion of BIPA class action filings. What’s going on there, and what’s driving the plaintiffs’ bar to file so many of the BIPA cases?

Tyler: Sure, I mean, that’s absolutely accurate. It seems for years now that plaintiffs’ lawyers on the class action side have been filing BIPA cases on seemingly a daily basis. The impetus, the sort of driving force, I believe, is really just the possibility of very high levels of damages. It could be a lot of money involved for both class members and plaintiffs’ counsel, especially in the wake of very plaintiff-friendly Illinois Supreme Court decisions. We have just plaintiffs’ lawyers really just looking to cash in and join the many high dollar settlements that have been come into play in recent years.

Jerry: One of the areas of focus of the Duane Morris Class Action Review has been our tracking of settlements. I’m a believer that success begets copycats, and big settlements result in more filings and more plaintiffs’ lawyers attracted to the area. Recently in the news there was a large BIPA class action settlement preliminarily approved in federal court here in Illinois, about a Little Caesars. Could you tell us a little bit about that, and share your thoughts about what was going on in that case?

Tyler: Sure, Jerry, so this is a settlement between Little Caesars, the Pizza company, and thousands of employees who targeted the company’s finger scanning time clock. It’s a fairly old case filed initially in 2019, so it’s been pending for over four years now. The employees in the case asserted that Little Caesars violated BIPA by requiring employees to scan their fingerprints to clock in and out of work without first providing the necessary disclosures, or obtaining their express written consent. Little Caesars denied all allegations of wrongdoing, and denied that it violated BIPA.

This type of case – probably by and large, if you were to count by the numbers the factual context of different BIPA cases – employee timekeeping cases involving fingerprint scanning is probably the most common fact pattern, although far from the only fact pattern you would find in BIPA cases that are being filed.

Jerry: Can you explain to our listeners where you would peg this $7 million settlement kind of on the range of what large-scale BIPA cases have been settling for – either on an aggregate basis or on a per claimant per class member basis?

Tyler: I would say that this settlement of just under $7 million for a class of approximately 8,500 class members is right in the middle of the range of recoveries that we have seen over the past couple of years. When all fees for administrative costs and plaintiffs’ attorney fees are taken out of the picture, each class member will receive roughly $545 each – and that is really consistent with a number we’ve seen in a lot of BIPA class action settlements. And, importantly, if that number of class members stated in the settlement agreement turns out to be higher, the gross settlement fund will increase by $832 for each class member, just to make sure that the per class member payments do not change.

Jerry: You had mentioned this as an older case. Could you provide your analysis to our listeners about kind of the average length of time it takes for BIPA cases to work through either the state court system as compared to the federal system? This one, of course, was in the federal court.

Tyler: Yeah, sure, Jerry. So I think it’s hard to come up with an average lifespan for a BIPA case, just because some can be dismissed very early on if the fact investigation done by plaintiffs’ counsel reveals that there actually is no biometric data at issue in the in the case, and their allegations and complaint were actually untrue, then they’ll voluntarily dismiss the case. Other cases can reach settlements on an individual basis early on, or even on a class basis, early on. Whereas other defendants, this case Little Caesars, for a good period of time opt instead to litigate the case, and really to prove, either at the summary judgment stage or trial stage, that they did not, in fact, violate BIPA for a number of different reasons.

Jerry: Well, in following that mantra of ‘success begets copycats,’ and more of these cases get filed, could you share with corporate counsel what you view as the future of BIPA litigation, the types of claims apt to be brought? I know that in talking you to before, claims are divided into two boxes, one being employee-related cases and others being non-employee related cases.

Tyler: Yeah, absolutely. And that’s a great question. I think, as I mentioned, the most common type of BIPA case, historically, has been the employee. Timekeeping context and facts involving employees clocking in and out – either with fingerprints or face scans. I think, moving forward, we are likely to see non-employee BIPA class actions, and we can also expect to see BIPA cases brought against people that are further downstream than you might think. For example, a company like Amazon Web Services that provides cloud storage services, and is pretty far removed from any “collection” of biometric data that may have occurred relative to an end user. So it may have been collected by one entity, whether it’s an employer or timekeeping vendor, and then sent to another company and ultimately sent to some kind of cloud of storage service provider that really has no idea what’s on its servers. And we are seeing companies like that being sued under BIPA or other companies in similar situations, that are one step or two steps removed from consumers or employees, being named as defendants in BIPA cases.

Jerry: That’s an interesting perspective. I’d call that “BIPA 2.0: The Next Generation.” And the plaintiffs’ bar, I’ve found in my experience, is nothing if not innovative, and is pressing the envelope of statutes like BIPA. Well, Tyler, thank you so much for sharing your analysis and your thought leadership in this area. Loyal listeners, that signs off on another Friday weekly podcast – thanks so much for joining us.

Tyler: Thanks for having me, Jerry, always great to be here.

Illinois Federal Court Orders Defendant To Pay Over $4 Million In Arbitration Fees In Mass Arbitration Alleging Violation Of The BIPA

By Gerald L. Maatman, Jr., Rebecca S. Bjork and Derek Franklin

Duane Morris Takeaways: Mass arbitration continues to be a formidable tool for plaintiffs’ attorneys seeking to deal with class action waivers in arbitration agreements. This trend is aptly demonstrated by a new ruling in Wallrich, et al. v. Samsung, Case No. 22-CV-5506 (N.D. Ill. Sept. 12, 2023), where Judge Harry D. Leinenweber of the U.S. District Court for the Northern District of Illinois ordered the defendants – who had been served with just shy of 50,000 arbitration demands – to pay the arbitration fees and submit to arbitrating consumers’ claims that the defendants had committed violations of the Illinois privacy laws.  Those fees had been waived by the arbitration authority, as allowed by a provision in its’ supplemental rules, but the Court sided with the plaintiffs, who had moved to compel arbitration after the fees were waived, and seeking also to require the defendants to pay them.

Case Background

The Named Plaintiffs filed 49,986 arbitration claims with the American Arbitration Association (“AAA”) on September 7, 2022 on behalf of consumers who are users of Samsung mobile devices. Id. at 2, 5.  They alleged that the defendants had unlawfully collected their biometric information in violation of the Illinois Biometric Information Privacy Act.  The user agreement required all disputes be resolved in final, binding arbitration and it prohibited class actions.  Id. at 3.

The agreement also required use of the services of the AAA and explicitly invoked the AAA’s rules, including its supplemental rules relating to arbitration fees.  Id.  On September 27, 2022, Samsung refused to pay its portion of the initial arbitration fees to the AAA because it believed the claimants included deceased individuals and others who did not reside in Illinois.  Id. at 6.  Plaintiffs responded by moving to compel arbitration on October 7, 2022.  Id. at 7.

The Court’s Decision

Judge Leinenweber compelled arbitration of the claims of living, Illinois resident petitioners and ordered the respondents to pay the AAA arbitration fees. He first concluded that the arbitration agreements are valid between Samsung and those who actually are its consumers.  Id. at 21-22.  Second, he noted that as to the petitioners that respondents suspected were either deceased or not Illinois residents, he explained that petitioners’ counsel used Samsung’s own customer list to remove ineligible petitioners.  Id.  Third, he determined that the arbitration agreement left questions of arbitrability to the arbitrator, thereby declining to rule on respondents’ argument that the collective action waiver in the agreement applies to mass arbitrations, which would bar petitioners’ claims with the AAA.  Id. at 25.  Finally he ruled that he had the authority to construe and enforce the AAA’s rules about arbitration fees, and determined that respondents are required to pay approximately $4.13 million in fees.  Id. at 30, 33-34.

Implications For Employers

As corporations who employ large numbers of individuals in their workforces know, agreements to arbitrate claims related to employment-related disputes are common.  They serve the important strategic function of minimizing class action litigation risks.  But corporate counsel also are aware that increasingly, plaintiffs’ attorneys have come to understand that arbitration agreements can be used to create leverage points for their clients.  Mass arbitrations seek to put pressure on respondents to settle claims on behalf of large numbers of people, even though not via the procedural vehicle of filing a class or collective action lawsuit.   As a result, corporate counsel should carefully review arbitration agreement language with an eye towards mitigating the risks of mass arbitrations as well as class actions.

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

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