August 2025 – Page 2 – Class Action Defense

August 6, 2025August 6, 2025 by Gerald L. Maatman, Jr.

The Seventh Circuit Raises The Bar For Conditional Certification Under The FLSA And The ADEA

By Gerald L. Maatman, Jr., Ryan T. Garippo, and George J. Schaller

Duane Morris Takeaways: On August 5, 2025, in Richards, et al. v. Eli Lilly & Co., et al., No. 24-2574, 2025 U.S. App. LEXIS 19667 (7th Cir. Aug. 5, 2025), the Seventh Circuit issued an opinion that vacated and remanded a district court’s decision to conditionally certify a group of potential opt-in plaintiffs in an Age Discrimination in Employment Act (“ADEA”) collective action. The opinion breaks new ground on the contours of 29 U.S.C. Section 216(b), and as a result, also applies to conditional certification of wage & hour collective actions under the Fair Labor Standards Act (“FLSA”). The opinion elucidates the standards for notice in FLSA collective actions. While the opinion is undoubtedly a win for employers, only time will tell the scope of the win, as this opinion ultimately may create more questions than it answers.

Background

In 2022, Monica Richards (“Richards” or “Plaintiff”) sued Eli Lilly & Co and Lilly USA, LLC (collectively, “Eli Lilly”), the international pharmaceutical manufacturers and her one-time employer, alleging discrimination under the ADEA. The ADEA incorporates the FLSA’s “enforcement provision, permitting employees to band together in collective actions when suing an employer for age discrimination.” Id. at *3. Richards, as a result, alleged that Eli Lilly promoted younger employees in violation of the ADEA.

Shortly after she filed her lawsuit, Richards “moved to conditionally certify a collective action, asserting that the unfavorable treatment she experienced was part of a broader pattern of age discrimination against Eli Lilly’s older employees.” Id. at *9. “Conditional certification” of such claims has traditionally been thought of in two steps. At the first step, an employee moves for conditional certification, i.e., to send notice of the lawsuit, to all individuals that he or she contends are similarly situated to him or her. Drawing on a District Court of New Jersey opinion from 1987, Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987), many courts hold that the employee has a light burden at this stage, and thus rely solely on the plaintiff’s allegations, and do not consider competing evidence submitted by the employer.

If the employee’s motion is granted, as they are with exceedingly high rates, those individuals covered by the collective action definition receive notice of the lawsuit and then have the ability to opt-in as party plaintiffs to the case and participate in discovery. At the close of discovery, if the case has not settled, the employer can then move to decertify the conditionally certified collective action, and prove the employees are not similarly situated, which results in the opt-in plaintiffs’ claims being dismissed without prejudice if successful.

In this case, the fight over the applicability of Lusardi took center stage as it has in many other collective actions. In recent years, the Fifth and Sixth Circuit Courts of Appeal, have found that Lusardi’s two step approach is inconsistent with the text of the FLSA. Swales v. KLLM Transp. Servs., LLC, 985 F.3d 430 (5th Cir. 2021); Clark v. A&L Homecare & Training Ctr., LLC, 68 F.4th 1003 (6th Cir. 2023). In Swales, 985 F.3d at 443, the Fifth Circuit rejected Lusardi’s two-step approach outright, and required its district courts to “rigorously enforce” the FLSA’s similarity requirement at the outset of the litigation in a one-step approach. Similarly, in Clark, 68 F.4th at 1011, the Sixth Circuit adopted a comparable, but slightly more lenient standard, requiring the employee to show a “strong likelihood” that others are similarly situated to him or her before the district court can send notice.

In contrast, the Second, Ninth, Tenth, and Eleventh Circuits continue to either follow or allow the district court to adopt the two-step framework outlined in Lusardi. Harrington v. Cracker Barrel Old Country Store, Inc., 142 F.4th 678 (9th Cir. 2025); Thiessen v. Gen. Elec. Cap. Corp., 267 F.3d 1095 (10th Cir. 2001); Myers v. Hertz Corp., 624 F.3d 537 (2d Cir. 2010); Hipp v. Liberty Nat’l Life Ins. Co., 252 F.3d 1208 (11th Cir. 2001). This brewing circuit split gave rise to the dispute in Richards.

Against this backdrop, the district court in Richards ultimately followed Lusardi, and decided to send notice to the employees whom Richards contended were similarly situated to her. But Eli Lilly filed a motion for interlocutory appeal, which was subsequently granted, and the Seventh Circuit set out to opine on the circuit split for itself.

The Seventh Circuit’s Opinion

The Seventh Circuit, in an opinion written by Judge Thomas Kirsch, rejected the Lusardi framework but declined to go as far as Clark or Swales. The Seventh Circuit observed that the notice process should be facilitated by three guiding principles: (1) the timing and accuracy of notice; (2) judicial neutrality; and (3) the prevention of abuses of joinder. Richards, 2025 U.S. App. LEXIS 19667 at *14. It reasoned that the Lusardi standard threatened the latter two principles by “incentivizing defendants to settle early rather than attempt to ‘decertify’ at step two . . . transforming what should be a neutral case management tool into a vehicle for strongarming settlements and soliciting claims.” Id. at * 17. Thus, the Seventh Circuit rejected Lusardi, but what to do in the alternative was a more difficult question.

The Seventh Circuit decided that rather than endorse the rigid standards of Clark or Swales, its approach would be guided by “flexibility” and an analysis that is not an “all-or-nothing determination.” Id. at *19. Indeed, a plaintiff must now “make a threshold showing that there is a material factual dispute as to whether the proposed collective is similarly situated.” Id. at *21. Or, in other words, a plaintiff must “produce some evidence suggesting that they and the members of the proposed collective are victims of a common unlawful employment practice or policy.” Id, at *21-22. To counter a plaintiff’s evidence, an employer “must be permitted to submit rebuttal evidence and, in assessing whether a material dispute exists, courts must consider the extent to which plaintiffs engage with opposing evidence.” Id., at *22.It is not clear, however, the burden a plaintiff must satisfy to refute the defendant’s evidence to move forward.

In considering that threshold determination, the district court has the discretion to send notice or not.It also has the discretion to resolve some of the disputed issues, and narrow the scope of notice, or not. It also may authorize limited and expedited discovery to make the determination, or not. Id., at *24.It also has the discretion to allow a plaintiff to come forward with more evidence, or not. In essence, “[t]he watchword here is flexibility.” Id. And, with those principles in mind, the Seventh Circuit vacated and remanded for further proceedings consistent with the opinion.

Implications For Employers

The Seventh Circuit’s opinion is undoubtedly a win for employers, but the opinion introduces ambiguity into the equation with its focus on “flexibility.” See id. Plaintiffs in Illinois, Wisconsin, and Indiana can no longer rely on mere allegations to send notice and must wrestle with an employer’s evidence contradicting claims of a common unlawful policy or practice. This result is most certainly a win.

It is what comes next that is the problem. What is the level of scrutiny a district court must apply when deciding whether a plaintiff engaged with an employer’s evidence? Should a district court apply a one-step approach or two-step approach? Should it allow limited and expedited discovery? What is the standard to obtain such discovery? When should a court allow a plaintiff to come forward with more evidence? When should it not? All these questions go unanswered.

These unanswered questions continue to contribute to the procedural morass that employers must navigate in wage-and-hour collective actions under the FLSA. In addition to these questions, employers are also now navigating the 4-way circuit split on whether Lusardi applies at all and a separate circuit split, also discussed on our blog, regarding the applicability of Bristol Myers Squibb Co. v. Super. Ct. of Cal., 582 U.S. 255 (2017) to collective actions. With both issues ripe for consideration by the U.S. Supreme Court, corporate counsel facing a collective action should consider hiring experienced outside counsel to help navigate these complicated procedural issues and monitor this blog for further developments.

August 1, 2025August 1, 2025 by Class Action Defense

The Class Action Weekly Wire – Episode 112: Sanctions Issues In Class Actions

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Rebecca Bjork with their discussion of key sanctions rulings in class action litigation over the past 12 months.

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

Episode Transcript

Jerry Maatman: Thank you, loyal blog readers and listeners, for joining us for our next episode of the Duane Morris Class Action Weekly Wire. I’m Jerry Maatman, a partner here at Duane Morris, and joining me today is special counsel Rebecca Bjork of our Washington, D.C. office. Thanks so much, Rebecca, for being on our podcast.

Rebecca Bjork: Jerry, it’s great to be here. Thanks for having me.

Jerry: Today we have a little bit of a different topic. We’re going to focus on significant issues considering motions for sanctions in class action litigation. Rebecca, describe for our listeners some of the reasons why a court might contemplate entering sanctions in class action litigation.

Rebecca: Sanctions are just simply thought of as penalties – in civil cases, they are typically in the form of a monetary fine usually issued in response to violating procedures or abusing the judicial process somehow. But the most extreme sanction that can be imposed in civil cases is dismissal with prejudice of the filing party or dismissal of the answer of the responding party, which means that the sanctioned party would have no further recourse available, and the case would be over with judgment entered against them.

Jerry: Well, thanks for that overview. Let’s jump right into it and talk about some of the most significant rulings over the past 12 months. What about the Ikea case – what happened there?

Rebecca: Sure. In Donofrio, Ikea was hit with sanctions in an age discrimination collective action. Plaintiffs had alleged that older workers were passed over for promotions in favor of younger employees based on so-called “future potential” and their willingness to relocate. The court had ordered Ikea to preserve and produce emails from certain managers, which is obviously common in such litigation, but instead, Ikea deleted four of those accounts in violation of the court’s order. The court said that this spoliation wasn’t intentional, but it still caused significant prejudice to the plaintiffs, and as a result Ikea had to pay attorneys’ fees and expenses related to their sanctions motion.

Jerry: Always viewed that case as a great example of how simple negligence and not intentional or bad faith conduct can trigger sanctions in the class action space. Let’s pivot to a sanctions ruling that made a lot of headlines in the consumer fraud class action space. The Dukas v. KLM Airlines case. What stood out for you there in that situation?

Rebecca: Well, that one centered on climate-related advertising. Plaintiffs, led by class action lawyer named Spencer Sheehan, claimed that KLM had misled customers about their environmental commitments. But the named plaintiff admitted that she never saw the ads in question – so she never had standing. Now the attorney Sheehan did not withdraw the suit or fix the issue even after KLM raised these points with the court, so the court hit him with a $1,000 fine and ordered him to pay KLM’s legal fees. The court also referenced this attorney’s history of filing questionable consumer class actions, so this is a clear signal – do your diligence before filing your lawsuit.

Jerry: Good admonition. But speaking of high costs, what about Durant v. Big Lots that involved over $140,000 in attorneys’ fees? What happened there?

Rebecca: Well, that case was about allegedly deceptive labeling of coffee, and the court found that the lawsuit was frivolous, especially since it mirrored previously dismissed case out of New York. The judge used the lodestar method to calculate fees, and rejected the plaintiff’s objections as vague. But importantly, while the defendant requested a multiplier for the work their attorneys did, the court said that standard fees were enough, but still this was a big hit for the plaintiff’s counsel, both financially and reputationally.

Jerry: Let’s continue and take a tour of the sanctions jurisprudence that developed over the last year. Tell us briefly about the cases of Hamm v. Acadia Healthcare and Plunkett v. FirstKey Key Homes.

Rebecca: Sure. In Hamm, the court partially granted sanctions against the plaintiff’s counsel in a wage and hour case, and it was all about discovery misconduct, which is often the case in these cases – missed depositions, failure to cooperate. The judge trimmed the fee award, though, for inefficiencies like block billing, but he still ordered reimbursement for time spent preparing the sanctions motion.

But in Plunkett v. FirstKey, the other case you mentioned, the tables were turned there. The plaintiffs were awarded sanctions because the defendant, FirstKey Homes, tried to settle directly with potential opt-in plaintiffs outside of court supervision. The court called this coercive, issued a protective order, and awarded fees and costs to the plaintiffs. So, there’s another cautionary tale – never sidestep judicial oversight in FLSA cases.

Jerry: Let’s talk about courts declining to order sanctions or appellate review of sanctions order. Let’s talk about the rare reversal in the In Re Sanford Law Firm case.

Rebecca: Yeah, in that case the Eighth Circuit concluded that the district court had not given the firm that was involved there, or its managing partner, sufficient notice before suspending them from handling FLSA cases for two years – that’s another type of sanction that courts have the authority to impose. It was about allegedly excessive billing, but the appeals court said that due process matters, even in sanctions proceedings.

Jerry: And then what about the word count – in a very interesting decision, called Larsen v. PTT?

Rebecca: Yeah, that case was funny. The plaintiffs accused the defense team of submitting overly long briefs in violation of local rules by falsely certifying compliance with word limits, and it turns out that the Microsoft Word settings excluded footnotes from the count. Now the court here wasn’t thrilled, but called it inadvertent, and actually denied sanctions in that case.

Jerry: Well, that’s a good reminder to double check your software settings. We have time for two quick ones – how about the Mazurek v. Metalcraft case and the Ortiz v. Sazerac case?

Rebecca: There, plaintiffs lost their FLSA claims after not being able to show unrecorded work hours. But the court said that their legal theories were not frivolous, so, even though they ultimately lost no sanctions were awarded.

And in the Ortiz case. the plaintiffs voluntarily dismissed their suit alleging Fireball’s malt labeling was misleading. The defendant sought fees under Rule 11, but because they withdrew the complaint within the safe harbor period. Under that rule, the court concluded that sanctions were not appropriate there either.

Jerry: As always, it’s been an interesting year in terms of sanctions decisions throughout the United States. I know that you focused a lot in your writings and thought leadership in this area – what would you share with our readers and listeners as the general takeaways in this space?

Rebecca: Oh, it’s definitely a fun area of the law to work in – very unique area of class action jurisprudence. I would say that the courts try to balance accountability of the parties to comply with the rules and fairness. and that’s probably reflective of what the rules require. Courts are willing to impose serious consequences, but only after very careful consideration, and I see the trend being judges increasingly scrutinizing discovery matters and professional conduct matters in complex litigation, and that both sides, plaintiffs and defendants, are being held to the same standards.

Jerry: Well, thanks so much for your insights, Rebecca, and I know our readers are looking forward to the launch of the 2026 Duane Morris Class Action Review and the Appendix II on sanctions orders throughout the United States over the past 12 months, which you’re the co-author of. Thanks so much for joining us today and sharing your thought leadership.

Rebecca: You’re very welcome. Thanks so much for having me on.