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Posted on by Gerald L. Maatman, Jr.

Fourth Circuit Splits The Baby In Deciding That Virginia District Court Erred By Striking Class Allegations Under One Subsection Of Rule 23 But Not Another

By Gerald L. Maatman, Jr., Rebecca S. Bjork, and Anna Sheridan

Duane Morris Takeaways: On February 9, 2026, in Oliver, et al. v. Navy Federal Credit Union, Case No. 24-1656 (4th Cir. Feb. 9, 2026), the Fourth Circuit issued a 2-1 ruling partially affirming a district court’s order striking class allegations from a complaint alleging racial discrimination in mortgage lending before any discovery had occurred.  In addition to the parties’ briefs, the Fourth Circuit received briefs from four amici supporting the defendant, indicating substantial interest in the outcome of the appeal.  Navy Federal Credit Union prevailed in the district court on its motion to strike the class allegations from the complaint pled under Rule 23(b)(2) and Rule 23(b)(3).  On appeal, the Fourth Circuit reversed the decision striking the Rule 23(b)(2) allegations because it found that the district court acted prematurely, given the legal standards governing when courts are authorized to do so (which it helpfully clarified).  However, under those same legal standards, the majority concluded that the district court properly struck the plaintiffs’ Rule 23(b)(3) allegations.  The dissenting judge concurred with the decision to affirm striking the Rule 23(b)(3) allegations but would also have affirmed the ruling striking the Rule 23(b)(2) allegations. 

The decision is a helpful illustration of how defendants facing class action litigation can use the mechanism of Rule 23(c)(1)(A) to eliminate class-wide exposure early in the process, along with the limitations of such an approach. 

Case Background

Laquita Oliver and nine other named plaintiffs, who all are either Black or Latino, brought a putative class action against Navy Federal Credit Union in 2023 alleging that the lender systematically discriminates against minority mortgage loan applicants based on their race.  Slip op. at 3.  Plaintiffs allege that the lender uses a “semi-automated underwriting process” and a single form for collecting information from every applicant that includes information that can be proxies for race, resulting in unlawful intentional and disparate impact discrimination.  Id. at 4, 15-16.  They sought class-wide relief for “all minority residential loan applicants from 2018 through the present” whose loans were denied, issued with less favorable terms, or processed more slowly than non-minority applicants.  Id. at 4. Plaintiffs sought certification of a class to provide injunctive and declaratory relief generally applicable to the class as a whole under Rule 23(b)(2), and also certification under Rule 23(b)(3) – allowing class treatment where common issues predominate over individualized issues.  Id. at 16.

The defendant filed a motion to dismiss under Rule 12(b)(6) and a motion to strike the class allegations in the complaint under Rule 12(f) and Rule 23(d)(1)(D).  Id. at 5.  It argued the case could not proceed as a class action due to myriad differences between the loan products they offer, and because the plaintiffs “failed to explain how an undefined underwriting process could produce discriminatory effects for class members who applied for different [loan] products.”  Id.  The district court denied the motion to dismiss but granted to motion to strike the class allegations, and the Plaintiffs appealed to the Fourth Circuit.  Id. at 5. 

The Fourth Circuit’s Decision

A divided panel of the Fourth Circuit affirmed the district court’s decision striking the Rule 23(b)(3) class allegations from Plaintiffs’ complaint before any discovery had occurred but reversed the decision to strike the class allegations seeking injunctive and declaratory relief under Rule 23(b)(2).  The dissenting judge would have affirmed the district court’s decision in full. 

As a threshold matter, which this blog’s more wonkish readers will appreciate, the Court of Appeals took the time to sort through a procedural miasma present in Rule 23 litigation relating to motions to strike class allegations.  Navy Federal Credit Union, like many other defendants before them, had moved to strike under Rule 12(f) – which allows courts to strike material from complaints that they deem to be “redundant, immaterial, impertinent or scandalous” (id. at 7) – along with Rule 23(d)(1)(D), which allows them to order that a party amend their pleadings to remove class allegations.  Id. at 8.  The Fourth Circuit determined that those rules, as a logical and practical matter, cannot form the basis for a district court to issue an order striking class allegations, but instead, Rule 23(c)(1)(A) does.  Id. at 6, 9.  That rule requires district courts to decide class certification issues at “an early practicable time.”  Fed. R. Civ. P. 23(c)(1)(A).  Because a decision to strike class allegations necessarily implies that those allegations cannot possibly form the basis for a decision on class certification, the Fourth Circuit concluded that Rule 23(c), which is entirely concerned with the class certification process, is the proper procedural vehicle. Id. at 6-9.  Even though Navy Federal Credit Union did not raise that rule as its procedural mechanism for seeking to strike the class allegations, the Court of Appeals decided it would do so sua sponte in affirming the order striking the Rule 23(b)(3) class.  Id. at 9, n.1. 

Then, the majority explained how district courts should analyze allegations in class action complaints when defendants move to strike them to determine whether the time is right to do so.  In other words, such motions may not be granted prematurely, and district courts within the Fourth Circuit must now do so by looking to the face of the complaint.  Applying the 1978 precedent established in Goodman v. Schlesinger, 584 F.2d 1325 (4th Cir. 1978), it decided that if the class claims fail as a matter of law, district courts may strike them before any discovery has occurred.  Id. at 6.  However, district courts commit legal error if they grant such motions where the dispute cannot readily be resolved by looking at the complaint alone.  Id. at 11-12.  The majority concluded that just as a district court may never grant class certification based solely on the face of the complaint, a court may deny class certification at that preliminary stage only if the class allegations do not satisfy Rule 23’s class certification requirements as a matter of law.  Id. at 13.  

Finally, the majority examined whether the district court erred when it granted Navy Federal Credit Union’s motion to strike both class claims before discovery occurred.  It decided that the district court exceeded its discretion when it struck the Rule 23(b)(2) class claim, but it was not error to strike the Rule 23(b)(3) class claim.  Id. at 14.  The majority noted that while it was not entirely clear based on the record before why the district court ruled the way it did on the defendant’s motion, the language used indicated a concern from the district court judge about the manageability of the Rule 23(b)(3) class claims and whether a class action would be a superior method for trying such claims, given the material variations in the types of mortgage products applied for and their various requirements.  Id. at 14-15.  Thus, the plaintiffs’ factual allegations could not be tried on a class-wide basis consistent with Rule 23.  But the allegations relating to the Rule 23(b)(2) injunctive relief class was different, the majority concluded.  The allegations underlying that class claim are far more cohesive and centralized than the others, making it error for the district court to strike those allegations under Rule 23.  Id. at 16-18. 

Implications For Class Action Defendants

When companies are sued in class actions, it is crucial for them to have corporate counsel that understand not only the stakes and extreme exposure risk such lawsuits present, but also the nuances and often-changing jurisprudence governing Rule 23. Motions to strike class allegations are a very powerful tool for such companies to use, and the Fourth Circuit’s decision is a welcome clarification of how to think deliberately and critically about the prospects for such motion practice to succeed.  The key is to understand the relationship between the specific facts alleged in such complaints and the requirements of Rule 23, in all of its nuances.

Posted on by Gerald L. Maatman, Jr.

Preservation Behavior Will Avoid Waiver:  Third Circuit Vacates District Court Decision Finding Company Waived Right To Enforce Arbitration Provisions

By Gerald L. Maatman, Jr., Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways: On January 7, 2026, in Valli et al. v. Avis Budget Group Inc. et al., Case No. 24-3025 (3d Cir. Jan. 7, 2026), the Third Circuit issued a mandate vacating an order from the District Court for the District of New Jersey denying a rental car company’s motion to compel arbitration and remanding the action for the District Court to address properly presented challenges to enforceability of the arbitration provisions that it did not reach in its decision.  Avis appealed an order from the District Court denying its motion to compel arbitration of the claims of a certified class of renters presenting legal challenges to imposition of fees associated with traffic or parking fines incurred during the rental period.  The Third Circuit found that Avis did not waive its right to compel arbitration by participating in litigation for years with the named Plaintiffs (whose rental agreements did not contain arbitration provisions) as Avis asserted its arbitration rights as an affirmative defense in its answers, raised the issue in opposition to class certification, and promptly field to a motion to compel after its Rule 23(f) petition challenging class certification was denied.  This decision underscores that where named plaintiffs are not subject to arbitration provisions, but class members may have such constraints, pre-certification conduct preserving arbitration rights is essential to avoid waiver post-certification when arbitration rights are ripe.   

Case Background

The named Plaintiff Dawn Valli filed a putative class action in September 2014 challenging Avis’ imposition of fees associated with a speeding traffic violation caught by a traffic camera that Avis paid and then charged Plaintiff Valli the $150 traffic fine it covered as well as a $30 administrative fee.  Case No. 24-3025, ECF No. 53-3, at 3.  The notice that Avis sent to Plaintiff Valli warned that Avis would charge $180 to Ms. Valli’s credit card if she did not make timely payment.  Id. at 4.  Plaintiff Valli brought an action on behalf of herself and other putative class members asserting state law claims including violations of the New Jersey Consumer Fraud Act and unjust enrichment on the theory that Avis deprived renters of an opportunity to contest the traffic violations by paying fines before notifying renters of the infractions and allowing them the ability to contest the fines.  Id. 

Avis moved to dismiss the complaint several times for failure to state a claim.  Id. at 4-5.  On April 1, 2016, Avis updated its rental agreement to include a mandatory arbitration provision for disputes arising out of the rental agreement and rental of its vehicles.  Id. at 5.  After Avis filed a renewed motion to dismiss (which did not mention the arbitration agreement as it only applied prospectively), the District Court denied the motion on May 10, 2017.  Id. at 6.  On May 25, 2017, Avis answered the First Amended Complaint (“FAC”) asserting its arbitration rights as an affirmative defense.  Id.  In June 2018, Avis allowed Ms. Valli to file a second amended complaint (“SAC”) adding another named Plaintiff.  Id. at 7.  Avis again invoked its arbitration rights as an affirmative defense in its answer.  Id.

In July 2019, the two named Plaintiffs moved to certify a class of renters that were required to reimburse Avis for traffic, parking, tolls, or other violations and associated administrative fees.  Id. at 8.   In support of the motion for class certification, Plaintiffs defined the class period for the first time as September 30, 2008, through the present.  Id.  In opposition to class certification, Avis argued that the named Plaintiffs—who were not subject to its 2016 arbitration provisions—could not adequately represent the interest of renters that must arbitrate their claims.  Id.  Avis also argued that, at the motion to dismiss stage, such arguments were not ripe as it was unclear how the named Plaintiffs would define the class and whether it would include renters bound by arbitration agreements.  Id.  Oral argument on class certification occurred two years later, but Avis asserted the argument that the arbitration provisions defeated class certification.  Id. at 8-9.  Plaintiffs countered that Avis waived the argument by not having raised it earlier and choosing to participate in the litigation.  Id. at 9.  The District Court ordered supplemental briefing on the issue.  Id.  In its supplemental brief filed on September 15, 2022, Avis reiterated that nearly half the members of the putative class signed arbitration agreements and the named Plaintiffs (who had not) could not fairly represent the interests of those putative class members.  Id.  Avis filed another brief approximately two weeks later, arguing that it had preserved its arbitration rights by raising arbitration as an affirmative defense in its answers to both the FAC and SAC.  Id.  Avis also emphasized that Plaintiffs’ July 2019 class certification motion was the first time they identified arbitration-bound renters as putative class members.  Id.

In October 2023, the District Court certified a subclass of individuals that rented an Avis vehicle from September 30, 2008, through the present and whose rented vehicle was the subject of an alleged parking, traffic, tolls, or other violation, where the class member was charged for such fine, penalty, and court costs, and/or associated administrative fee.  Id. at 10.  Avis filed a Rule 23(f) petition challenging certification of the class that was denied in November 2023.  Id. at 10-11.  Three months later, in February 2024, Avis moved to compel individual arbitration of the relevant class members’ claims.  Id. at 11.  Avis disputed that it waived its right to enforce its arbitration agreements arguing that any earlier motion to compel would have been directed at unnamed class members and would have therefore been futile before class certification.  Id.  On September 30, 2024, the District Court denied Avis’ motion to compel arbitration and faulted Avis for failing to formally seek to enforce arbitration until after the class had been certified.  Avis appealed that decision to the Third Circuit.

The Third Circuit’s Decision

The Third Circuit found that Avis’ pre-certification litigation conduct was indeed relevant to the waiver issue, but this conduct indicated that the company had adequately preserved its arbitration rights. 

The Third Circuit found that “[c]entral to th[e] case” was the “interplay between” the doctrine of waiver and futility.  Id. at 12.  The Third Circuit resolved the parties’ dispute as to whether Avis’ pre-certification conduct was relevant to the issue of waiver by answering this question in the affirmative.  Id. at 14.  In support of that finding, the Third Circuit found it notable that Avis “knew” of its prospective right to enforce arbitration “even if it lacked a present ability to enforce it pre-certification.”  Id. at 19.  The Third Circuit reasoned that the purpose of the waiver doctrine is to prevent “gamesmanship” or permitting a defendant to litigate aggressively for a merits advantage so that it can pivot to arbitration “the moment it becomes advantageous to do so, all without consequence.”  Id. at 20.  Yet, the Third Circuit found that the doctrine of futility “excuses the failure to file a formal motion to compel as to the unnamed class members” because to do so would be futile given that a District Court lacks jurisdiction to grant such a request.  Id.  The Third Circuit next addressed what a party must do to preserve future arbitration rights it cannot presently enforce.  Id. at 21.  The Third Circuit held that to implicitly waive arbitration rights, a party must litigate in a way that is inconsistent with a desire to arbitrate. 

The District Court had identified two such events:  (1) Avis’ motion of August 18, 2016 that did not mention arbitration; and (2) Avis’ participation in discovery and mediation.  Id. at 26.  Rejecting the first ground for finding waiver, the Third Circuit opined that it was not until two years later that plaintiffs defined the putative class to include post-April 2016 renters thus the motion to dismiss did not waive its arbitration rights.  As to the second ground for finding waiver, the Third Circuit ruled that while Avis did not object to discovery or seek to exclude information concerning arbitration-bound renters, Plaintiffs could identify “only a single instance in which Avis produced information not also relevant to other customers who are not subject to arbitration.”  Id. at 27.  Further, “critically, Avis never sought discovery specifically targeted at arbitration-bound putative class members.”   Id. at 27-28.  The Third Circuit clarified that “discovery and mediation conduct can support a finding of waiver in the appropriate circumstances,” but explained that “discovery directed at non-arbitrable claims does not, by itself, waive the right to arbitrate arbitrable claims.”  Id. at 28.   The Third Circuit also found it significant that Avis “repeatedly put its intent to arbitrate on record” by consistently asserting its arbitration rights in opposing certification and reaffirming its stance two years later during oral argument.  Id. at 29.  The Third Circuit further reasoned that the fact that Avis moved to compel arbitration four months after the District Court’s certification decision was prompt enough and “not unreasonable” particularly as Avis’ Rule 23(f) petition was still pending.  Id.  Ten days after the Third Circuit denied the Rule 23(f) petition, the District Court held a status conference on December 14, 2023, setting a deadline of February 2024 for the motion to compel which Avis met.   Id. at 29-30.

The Third Circuit stopped short of directing the District Court to compel the relevant class members to arbitrate their claims and did not reach the Plaintiff’s claims challenging the enforceability of the arbitration agreements, finding that the District Court relied exclusively on waiver in its decision and remanding the action permitting the District Court to reach the issue of enforceability if properly presented. 

On January 13, 2026, the District of New Jersey issued an order implementing the mandate of the Third Circuit and vacating its September 30, 2024 order denying Avis’ motion to compel arbitration.  A status conference is set for February 2026.

Implications For Class Action Defendants

Where named plaintiffs are not subject to arbitration agreements but defendants suspect that putative class members may be, defendants must act promptly to preserve their arbitration rights even where a motion to compel arbitration is not ripe, by asserting arbitration rights as an affirmative defense in answers to class action complaints and in opposition to class certification (as a basis for lacking commonality, adequate representation, typicality, etc.).  The Third Circuit’s decision in Avis provides a guidepost for proper preservation of arbitration rights that class action defendants are well-advised to heed.

Posted on by Gerald L. Maatman, Jr.

District Of Columbia Federal Court Declines To Narrow EEOC’s Pregnancy-Bias Suit Against Security Firm

By Gerald L. Maatman, Jr., Rebecca Bjork, and Anna Sheridan

Key Takeaways:  In EEOC v. Security Assurance Management Inc., No. 25-CV-00181, 2025 WL 2911781 (D.D.C. Oct. 14, 2025),  Judge Rudolph Contreras of the U.S. District Court for the District of Columbia refused to pare back the EEOC’s pregnancy and lactation claims against Security Assurance Management, Inc. (“SAM”), leaving all five causes of action under the Pregnant Workers Fairness Act (PWFA) and both Title VII counts intact. Applying Rule 12(c), the Court held – in an order denying Defendant’s Partial Motion to Dismiss – the “heavy burden” on a defendant seeking judgment on the pleadings and determined that the EEOC’s theories — though factually overlapping — targeted distinct harms and therefore were not “duplicative.” The Court’s refusal to dismiss any of the EEOC’s PWFA counts sends a clear signal that defendants will face an uphill battle when trying to narrow pregnancy-related claims at the pleadings stage, particularly after filing an answer.

Case Background

The EEOC filed suit under Title VII and the PWFA on behalf of Simone Cooper, a special police officer who was reassigned after the client at her post did not want her working at the site while pregnant. (Compl. ¶ 17).  As the court summarized, the EEOC “brings this employment discrimination action against Security Assurance Management, Inc. pursuant to Title VII … and the Pregnant Workers Fairness Act,” alleging that SAM “disciplined and removed an employee, Simone Cooper (‘Ms. Cooper’), from her assignment due to her pregnancy-related condition and her need for accommodations.” Id. at *3.

After her maternity leave, Cooper was placed at a Hampton Inn post where she “was breastfeeding and had the pregnancy-related medical condition of lactation.” Id. The court noted that she “could nonetheless perform the essential functions of her job as an Unarmed Special Police Officer,” but SAM “repeatedly denied or ignored Ms. Cooper’s accommodation requests.” Id. The consequences were significant, as “Ms. Cooper leaked through her clothing during the workday on at least two occasions,” and because SAM provided no adequate space, “Ms. Cooper had to pump in her car in the Hampton Inn parking lot.” Id.

Despite outreach by Cooper, her union representative, and her attorney, the company allegedly did not engage in any interactive process. SAM eventually issued a written warning for “excessive absenteeism” that included days she was not scheduled and the day she left after leaking through her uniform. Id. at *4. She was later removed from the schedule entirely.

The complaint asserts seven claims, including two under Title VII and five under the PWFA for failure to accommodate, adverse action based on accommodation requests, denial of employment opportunities, retaliation, and interference. After it filed its Answer, SAM filed a partial motion to dismiss seeking dismissal of three of the counts as purportedly duplicative.

The Court’s Ruling

Because SAM filed an Answer before seeking dismissal, the court treated the request as a Rule 12(c) motion. As Judge Contreras explained, such a motion “will be granted only if Defendant can demonstrate that no material fact is in dispute and that it is entitled to judgment as a matter of law,” and at this early stage the movant “shoulders a heavy burden of justification.” Id. at *6.

The Court began with its definition, citing from Wultz v. Islamic Republic of Iran’s “duplicative claim test.” It explained that “duplicative claims are those that stem from identical allegations, that are decided under identical legal standards, and for which identical relief is available.” Id. at *7 (quoting Wultz, 755 F. Supp. 2d 1, 81 (D.D.C. 2010)).  SAM argued that several PWFA claims were repetitive, but after analyzing each count, the Court held otherwise.

Most notably, SAM asserted that the “Adverse Actions” claim duplicated the PWFA retaliation claim because both concerned similar employment decisions. Judge Contreras disagreed, emphasizing that the counts “assert different motivations for Defendant’s allegedly unlawful conduct.” Id. at *8. The adverse-action theory centers on actions taken “on account of” Cooper’s accommodation requests, while retaliation requires adverse treatment because she opposed unlawful practices. “Because Count Two (Adverse Actions) and Count Four (Retaliation) arise from different allegations,” the court concluded, “the claims are not duplicative.” Id. at *9.

The Court applied the same reasoning to SAM’s attempt to collapse the PWFA adverse-action, denial-of-opportunities, and interference counts into the single failure-to-accommodate claim. Those theories, Judge Contreras explained, each addressed different harms and are evaluated under distinct legal standards. As a result, “none are duplicative,” and the Court denied the motion in full. Id. at* 7.

Implications For Employers

This opinion is a reminder that overlapping facts do not automatically render multiple statutory claims redundant — especially under the PWFA, where Congress created several discrete causes of action aimed at different workplace harms. Courts are giving each theory breathing room rather than collapsing them into a single “pregnancy discrimination” count.

Procedurally, the decision warns defendants against using post-Answer motions to trim suits. Under Rule 12(c), the movant faces a “heavy burden,” and close questions typically favor allowing the case to proceed to discovery.

Substantively, the facts the Court credited (removing a visibly pregnant worker at a client’s request, ignoring repeated lactation-related accommodation needs, forcing pumping in a car, and disciplining a worker for consequences of inadequate accommodations) are the kinds of scenarios likely to support claims not just under the PWFA, but also under Title VII.

The decision reinforces that the PWFA is a powerful, stand-alone statute with multiple actionable theories. Courts will not readily prune these claims at the pleading stage, and the EEOC is deploying them aggressively. Employers should treat pregnancy-related accommodation requests with the same rigor as disability accommodations – engage promptly, document communications, provide appropriate space and break time, and avoid client-driven decisions that move or remove pregnant workers.

Posted on by Gerald L. Maatman, Jr.

Nevada Supreme Court Rejects Portal-to-Portal Exemptions: Pre-Shift COVID Testing Counts As Work Under State Law And Legislature Quickly Reverses Course

By Gerald L. Maatman and Anna Sheridan

Key Takeaways: In Amazon.com Services, LLC v. Malloy, 141 Nev. Adv. Op. 50 (Oct. 30, 2025), the Nevada Supreme Court resolved an important certified question affecting wage-and-hour litigation statewide – it ruled that Nevada’s wage laws do not incorporate the federal Portal-to-Portal Act’s (“PPA”) broad exclusions for preliminary and postliminary activities. The ruling arose in the context of Amazon’s mandatory pre-shift COVID-19 testing policy during the pandemic, under which employees alleged unpaid time for required health screenings. Because Nevada has not adopted the PPA, the Court held that these federally recognized exemptions are not available to employers as a categorical defense under state law. However, the Nevada Legislature acted almost immediately, enacting SB 8 in a special session just weeks later to expressly import PPA style exemptions into the state law.

Case Background

Nevada Resident Dwight Malloy, a warehouse employee at an Amazon fulfillment center, filed a putative class action in the U.S. District Court for the District of Nevada alleging that Amazon violated NRS 608.016 by requiring workers to undergo mandatory health screenings without paying them for the time spent completing these protocols. He alleged that the mandatory COVID-19 testing before each shift added several minutes of unpaid time. Relying on Nevada’s broader state constitutional wage protections, Malloy brought a proposed class action seeking compensation for all employees subjected to this COVID-19 testing.

Amazon moved to dismiss, urging the district court to apply the Portal-to-Portal Act and treat the testing as non-compensable preliminary activity. Under the PPA, federal law excludes from the definition of compensable work time activities “preliminary to” or “postliminary to” an employee’s principal duties. Amazon argued that Nevada has historically mirrored the FLSA and that the PPA’s framework should follow. The district court disagreed, concluding that Nevada law had not incorporated the PPA and that mandatory testing time was compensable. Faced with competing interpretations of the statute and no controlling Nevada precedent, the federal court invoked Nevada Appellate Procedure Rule 5 and certified the central question to the Nevada Supreme Court. The Nevada Supreme Court accepted the certified question, setting the stage for a definitive interpretation of NRS 608.016.

The Nevada Supreme Court’s Ruling

Justice Ron Parraguirre authored the opinion of the Nevada Supreme Court and began by reframing the certified question to ensure a precise answer. The opinion was clear that the Supreme Court would decide only “whether Nevada’s wage-hour laws incorporate the exceptions to compensable ‘work’ that are laid out in the PPA.” Id. at 1-2. That focus on the exceptions drove the Supreme Court’s analysis.

Although Nevada’s wage laws often “mirror the FLSA,” the Supreme Court emphasized that its prior decisions have repeatedly refused to follow federal law where the texts diverge. Amazon.com Servs., LLC v. Malloy, 141 Nev. Adv. Op. 50, 2025 WL 3032215, at 2 (2025). This case, the Supreme Court explained, was one of those moments. The PPA provides a sweeping “catchall” set of exclusions for any activity deemed preliminary or postliminary. Id. at 4. Nevada’s statutes, by contrast, contain only “narrow and specific exceptions,” such as those enumerated in NRS 608.0195 and NRS 608.215. Id.

The Supreme Court stressed the structural mismatch: the PPA creates a broad outer boundary of non-compensable time, whereas Nevada’s Legislature chose not to include any analogous, general preliminary-activity exemption. The opinion makes the legislative intent point explicit: “The plain language of NRS Chapter 608 does not evince legislative intent to mirror the PPA, and the PPA’s broad exceptions do not correspond with the narrow and specific exceptions Nevada provides.” Id.

The Supreme Court also observed that the Legislature has amended Nevada’s wage-and-hour provisions “on multiple occasions” to align certain terms with federal law when it wished to do so—yet it never added PPA-style text or referred to preliminary or postliminary activities. Id. at *5. In other words, the Legislature knew how to adopt the PPA and simply chose not to.

Based on this textual and structural analysis, the Supreme Court answered the certified question “in the negative.” Id. Nevada has not incorporated the PPA’s exceptions, and employers cannot rely on them to avoid paying for required pre-shift tasks.

Notably, the Supreme Court did not resolve whether COVID testing is necessarily compensable in every scenario. Instead, the ruling’s effect is to eliminate the PPA as a categorical shield. Whether a specific pre-shift activity is compensable will depend on Nevada’s own definition of “work,” not federal carve-outs.

Implications for Employers

Although Malloy was quickly overtaken by legislative action, its interpretive significance cannot be overstated. For roughly two weeks, Malloy dramatically broadened the scope of compensable time under Nevada law by removing the federal preliminary/postliminary framework entirely. Employer groups immediately warned that the ruling could expose businesses to retroactive claims for any mandatory pre- or post-shift activity — health screenings, safety checks, clock-in delays, security gates, equipment pickups, or similar tasks.

In mid-November 2025, the Nevada Legislature enacted SB 8, expressly adding PPA-style exemptions into NRS Chapter 608 and applying them retroactively. The Governor signed it into law on November 20, and it took immediate effect. That legislation largely neutralized the backward-looking exposure that Malloy might have created. However, SB 8 itself carries a 2029 sunset, meaning Nevada may revisit the issue in future sessions. If SB 8 lapses or is modified, Malloy’s reasoning will again guide courts in interpreting Chapter 608.

Even with SB 8 in place, Malloy is a consequential decision for Nevada employers. It clarifies that Nevada’s wage statutes stand on their own terms and will not absorb federal exemptions absent explicit legislative action. Employers with Nevada operations should ensure that any required pre- or post-shift activity is properly categorized, measured, and recorded — and should keep a close eye on the evolving legislative environment as the 2029 sunset approaches.

Posted on by Gerald L. Maatman, Jr.

What The Click?:  Third Circuit Finds No Standing For Class Complaining Of Website Operator Monitoring Clicks 

By Gerald L. Maatman, Jr., Anna Sheridan, and Shannon Noelle

Duane Morris Takeaways: On August 7, 2025, in an opinion authored by Circuit Judge D. Michael Fisher, the United States Court of Appeals for the Third Circuit issued a precedential decision in Cook v. GameStop, Inc., 148 F.4th 153 (3d Cir. 2025), affirming the U.S. District Court for the Western District of Pennsylvania’s dismissal for lack of standing of a putative class action asserting privacy causes of action against a website operator monitoring clicks.  The Third Circuit found that merely tracking internet users’ browsing time and website interactions — without recording or disclosing sensitive or personal information — fails to constitute the type of concrete injury required to confer Article III standing.  The decision is instructive for corporate counsel dealing with privacy issues and defense of class action litigation.

Case Background

Plaintiff Amber Cook (“Cook” or “Plaintiff”) was an internet user that visited GameStop’s website in Pennsylvania.  See Cook, 148 F.4th 153, 156.  Through third-party vendor Microsoft and its programming script called Clarity, GameStop was tracking internet user’s browsing history and interaction with its website.  Id.  The script Clarity creates is known as a “session replay code” that aggregates data about how long the user browsed the website, mouse movement, links clicked, scrolling, search bar entries, and products added and removed from the “cart.”   Id.  The script creates a unique id and profile for each user and recaptures each user’s session through a video which GameStop could review to improve functionality and user experience.  Id.  The unique ids and profiles do not utilize personally identifying information such as names, addresses, and the like.  Id. at 160.  GameStop’s website has a privacy policy describing the script and information collected but this policy is “buried at the very bottom of the website.”   Id. at 156.

Cook sued GameStop for its use of the Clarity script, alleging that it violated the Pennsylvania Wiretapping and Electronic Surveillance Control Act (“WESCA”) and asserting a common law cause of action for intrusion upon seclusion.  Cook alleged that the WESCA and privacy tort for intrusion upon seclusion prohibit the interception of electronic communications without prior consent and she suffered an injury in fact “‘‘when her communications with . . . GameStop’s website were intercepted’ by the session replay code.”   GameStop moved to dismiss the First Amended Complaint at the District Court level pursuant to Federal Rule of Civil Procedure 12(b)(6) and 12(b)(1).  See Case No. 2:22-CV-01292, ECF No. 25-27.  The District Court granted GameStop’s motion under Rule 12(b)(1) with prejudice and, in the alternative, held that Cook failed to “plead the necessary facts to support her claims for violation of [WESCA] or intrusion upon seclusion.”  See Case No. 2:22-CV-01292, ECF No. 45-46.  Specifically, the District Court concluded that Cook’s harms were not analogous to the traditional intangible harms recognized by privacy torts because none of the data gathered “could connect her browsing activity to her.”   See Case No. 2:22-cCV01292, ECF No. 46, at 8 (emphasis in the original).  Cook appealed the District Court’s decision on standing to the Third Circuit.

The Third Circuit’s Ruling

Reviewing whether Cook’s allegations met the Article III standing threshold de novo, the Third Circuit determined that the appeal concerned only the first element of the analysis, or whether Cook had sufficiently alleged an injury in fact (as opposed to the other requirements of traceability and redressability).  The Third Circuit adopted the standard articulated in Barclift and Transunion that — to determine whether a plaintiff has suffered a concrete injury — the framework is whether the harm asserted bears a “close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American courts — such as physical harm, monetary harm, or various intangible harms including . . . reputational harm.”  Id. at 158 (citing Barclift v. Keystone Credit Servs., LLC, 93 F.4th 136, 141, 145 (3d Cir. 2024); TransUnion LLC v. Ramirez, 594 U.S. 413, 417 (2021)). 

The Third Circuit clarified that it would not take as “rigid” of an approach as other federal circuits but that it would consider the privacy torts that Cook identified of disclosure of private information and intrusion upon seclusion to determine if the harm she alleges is “the kind of harm caused by the comparator tort[s].”   The Third Circuit found that she failed to identify sufficiently concrete harms under either analogy.

  1. Tracking Information That Is Not Personal Or Sensitive Nor Disclosed Publicly Not Sufficient To Allege Concrete Injury

With regard to the disclosure of private information analogy, the Third Circuit found that the information captured by the session replay code — recording clicks, mouse hovers, and search bar searches — was neither sensitive or personal.  In support of this conclusion, the Third Circuit reasoned that the disclosure of such information cannot plausibly be said to result in embarrassment or humiliation.  Cook did not share her name, contact information, address, or billing information while on GameStop’s website.  Further, though Cook alleged that GameStop obtained information about her device and browser and created a unique ID and profile for her to capture the session replay information, she did not allege that GameStop identified her through this information.  Id. at 160.  Cook alleged only that if a user “eventually identifies themselves” then GameStop could “back-reference all of that user’s other web browsing.”   Id.  The Third Circuit found these allegations were too hypothetical to meet Article III’s injury-in-fact requirement.

Going one step further, the Third Circuit found that “even assuming the information was the type that could cause Cook humiliation under ‘public scrutiny,’” Cook did not allege that the information was ever publicized or disclosed publicly.  Id.  Cook alleged only that the information was disclosed to third-party vendor Microsoft, “not the broader public.”  Id. 

As the information collected was not personal or sensitive, the Third Circuit also rejected Cook’s intrusion upon seclusion analogy.  As an additional basis for rejecting this tort analogy, the Third Circuit acknowledged that “[m]ost of us understand that what we do on the Internet is not completely private.”   Id. (citation omitted). 

  1. The WESCA Does Not Provide A Statutory Avenue For Circumventing The Injury-In-Fact Requirement For Standing

The Third Circuit next considered and rejected Cook’s argument that the WESCA provides a separate avenue to circumvent Article III’s injury-in-fact requirement.  In making this argument, Cook relied on language in the TransUnion decision that the legislature can “‘elevate harms that exist in the real world’ to make them legally actionable” and went on to claim the WESCA did just that in protecting a “wider range of information” from collection during electronic communications.  The Third Circuit disagreed with this logic and reading of the TransUnion decision, determining that the theory “contradicts the fundamental holding of TransUnion” which instructs courts to consider the concrete harm actually alleged by the Plaintiff rather than the “harm the statutory cause of action typically protects against.”   Id.at 161 (emphasis added).  The Third Circuit analyzed that a statutory violation of the WESCA for tracking web browsing information does not dispense with the Article III standing inquiry and Cook was still required to articulate a harm existing in the “real world” under TransUnion, as legislatures cannot “transform something that is not remotely harmful into something that is.”  Id. 

  1. Precedent In Which Website Operators Affirmatively Represented They Would Not Track Information Are Not Controlling

The Third Circuit further opined that the Nickelodeon and Google II decisions — which Cook cited in favor of her argument that tracking internet browsing history has been found to constitute a concrete harm — were not controlling.  The Third Circuit explained that Nickelodean involved claims that a website operator was collecting minors’ personal information despite affirmatively representing that it would not do so.  Id. at 162 (citing In Re Nickelodeon Consumer Priv. Litig., 827 F.3d 262, 269 (3d Cir. 2016)).  And, similarly, Google II involved allegations that Google bypassed browser privacy settings through the use of browser cookies to track user information.  Id. (citing In Re Google Inc. Cookie Placement Consumer Priv. Litig., 934 F.3d 316, 321 (3d Cir. 2019) (Google II)).  The Third Circuit found that both were instances of affirmative “promises not to” collect information that the website operator collected in any event.  Id.  Here, by contrast, Cook failed to identify an affirmative representation on the part of GameStop to refrain from tracking user browsing and website usage information.

  1. Current Status of GameStop Action

A mandate was issued on September 12, 2025 transferring the action back to the jurisdiction of the District Court, where the matter is still pending.

Implications for Website Operators Tracking Browsing History and Use:

The Third Circuit has provided a helpful roadmap for website operators — at least in this jurisdiction — that merely tracking clicks and interaction with a website is insufficient to confer standing in federal court to potential plaintiffs challenging such tracking.  It is critical that the tracking at issue in GameStop, however, did not collect personal or sensitive information nor disclose the same.  GameStop also did not affirmatively represent that it would not track website use and interaction.  Website operators would be well-advised to review any website tracking using this rubric and to seek legal advice in the event of doubt or ambiguity. 

Posted on by Gerald L. Maatman, Jr.

Virginia Federal Court Slices Away Out-of-State FLSA Claims Against Pizza Company

By Gerald L. Maatman, Jr., Anna Sheridan, and Ryan T. Garippo

Duane Morris Takeaways: On August 22, 2025, in Shamburg, et al. v. Ayvaz Pizza, LLC, et al., No. 24-CV-00098, 2025 WL 2431652 (W.D. Va. Aug. 22, 2025), Judge Jasmine Yoon of the U.S. District Court for the Western District of Virginia partially dismissed a proposed nationwide collective action brought by pizza delivery drivers.  Although Plaintiff Chandler Shamburg (“Plaintiff” or “Shamburg”), and other plaintiffs, asserted nationwide Fair Labor Standards Act (“FLSA”) and state law claims from multiple jurisdictions, the Court dismissed nearly all of them for lack of personal jurisdiction. This ruling reinforces the growing trend of federal courts willing to apply the Due Process Clause’s protections to expansive FLSA collective actions and underscores the difficulty plaintiffs face in keeping sprawling, multi-state, wage claims altogether in one federal court.

Case Background

In 2024, Shamburg filed a putative class and collective action that alleged that Ayvaz Pizza (“Ayvaz”), a franchisee that “operates an unidentified number of Pizza Hut Franchise Stores within” Virginia, that is neither incorporated in nor has its principal place of business in Virginia, violated the FLSA and various state laws.  Id. at *1.  They also sued Ayvaz’s owner, Shoukat Dhanani, for this conduct as well.  Id.

Shamburg (and, ultimately several other plaintiffs) alleged that both himself, and other drivers, were “required to use their own cars, ensure their cars were legally compliant, pay car-related costs including gasoline expenses, maintenance and part costs, insurance, financing charges, and licensing and registration costs, pay storage costs, cell phone costs, and data charges, and pay for other necessary equipment.”  Id.  As a result, Shamburg and the out-of-state plaintiffs alleged that their hourly rate of pay dropped below the FLSA’s minimum wage guarantee because these expenses were “kicked back” to Ayvaz.  Id. at *1-2.  They also brought seventeen state law claims that “assert causes of action from seven different states and invoke both state statutory and common law.”  Id. at *8.

But, Ayvaz was no stranger to these issues.  It was also recently sued in Garza, et al. v. Ayvaz Pizza, LLC, No. 23-CV-01379 (S.D. Tex.), and Stotesbery, et al. v. Muy Pizza-Tejas, LLC, et al., No. 22-CV-01622 (D. Minn.), based on similar allegations.  Based on the existence of these prior two actions, and the presence of the out-of-state plaintiffs’ claims, Ayvaz and its owner moved to dismiss based on lack of personal jurisdiction (both general and specific), lack of supplemental jurisdiction, and the first-to-file doctrine.  Judge Yoon’s decision followed.

The Court’s Ruling

In general, Judge Yoon’s decision was split into four discrete parts — each addressing whether the Court could exercise various forms of jurisdiction over Ayvaz and its owner.  For the most part, the Court declined each type of jurisdiction.

General Personal Jurisdiction & Out-Of-State Plaintiffs

First, although it was uncontested that Ayvaz was neither incorporated in nor headquartered out of Virginia, Plaintiffs argued that Ayvaz was subject to general personal jurisdiction in Virginia based on the U.S. Supreme Court’s decision in Mallory v. Norfolk Southern Railway Co., 600 U.S. 122 (2023).  In Mallory, the U.S. Supreme Court held that Due Process does not prohibit “a State from requiring an out-of-state corporation to consent to personal jurisdiction to do business there.”  Id. at 127.  Like the Pennsylvania statute at issue in Mallory, Virginia also has “an out-of-state business registration statute.”  Shamburg¸ 2025 WL 2431652, at *5.

Judge Yoon, however, reasoned that “unlike Pennsylvania, Virginia law does not require the out-of-state business to condition its registration on submitting to general personal jurisdiction” consistent with the decisions of several other district courts.  Id.  Thus, the Court “conclude[d] that, absent explicit consent to jurisdiction in Virginia’s business registration statute” it could not exercise general personal jurisdiction over Ayvaz or its owner.

Specific Jurisdiction & Out-Of-State Plaintiffs

Second, the Court addressed the out-of-state plaintiffs’ argument that the Court could exercise specific personal jurisdiction over Ayvaz as to the out-of-state plaintiffs but disagreed.  Judge Yoon weighed in on the pending circuit split regarding the applicability of Bristol-Myers Squibb v. Superior Court, 582 U.S. 255 (2017), to FLSA collective actions.  The Third, Sixth, Seventh, Eighth and Ninth Circuits hold that Bristol-Myers applies, whereas the First Circuit stands alone and holds otherwise.

Judge Yoon agreed with “the approach taken by the majority of the Courts of Appeals” and held each plaintiff “must present independent, sufficient bases for the exercise of the court’s specific jurisdiction over that claim.”  Id. at *6.  Similarly, because none of the plaintiffs alleged facts related to the owner’s minimum contacts with Virginia “beyond the fact that Ayvaz is registered to do business in Virginia and operates an unidentified number of Pizza Hut Franchise Stores,” their claims could not proceed against him either.

The Seventeen State Law Counts

Third, having dismissed the out-of-state plaintiffs’ claims, Judge Yoon declined to exercise supplemental jurisdiction over the seventeen state law counts. The Court observed that “the presence of more subclasses (eight) than states (seven) provides evidence of both complexity and the lack of commonality” that show that the state law claims “would substantially predominate over the FLSA claim.”  Id. at *8.  The court dismissed those claims without prejudice, leaving only the FLSA claims brought by Virginia-based employees.

The First-To-File Doctrine

Fourth and finally, the Court declined Ayvaz’s request to dismiss the case under the “first-to-file” doctrine due to the existence of the earlier filed suits in Garza and Stotesbury.  The first-to-file rule allows a federal court to decline jurisdiction when a substantially similar lawsuit involving the same parties and issues is already pending in another court.  Id. at *10.  But, the court concluded that the “putative classes and respective issues” in the two prior suits differ enough that the first-to-file rule should not be applied.  Id. at *12.

Indeed, “Stotesbery, by design, includes an FLSA claim limited to those who work in Minnesota” and thus did not overlap based on the Court’s ruling.  Id.  And, the Court declined to apply the first-to-file doctrine to Garza because the “case was settled and dismissed with prejudice” and thus was not pending at the time of the decision.  Id. at *10.   “Accordingly, Plaintiffs’ complaint will survive the motion to dismiss with respect to the FLSA claim for Plaintiffs who live in or work in Virginia.”  Id. at *12.

Implications for Employers

The Shamburg decision demonstrates that courts are increasingly unwilling to allow out-of-state employees to anchor nationwide collective actions against employers without first affording employers certain due process protections.  This growing trend prevents employers from having to defend these actions in distant and unfamiliar courts, and forces plaintiffs to bring these actions where these employers are incorporated or headquartered.

With these trends in mind, corporate counsel should continue to monitor this blog for developments because the Bristol-Myers circuit split is sure to be decided by the U.S. Supreme Court soon, and if their companies are sued in putative class and collective actions, it is better to prepared in advance for when these important issues are decided.

Posted on by Gerald L. Maatman, Jr.

Maryland Joins With Other States Precluding Employees From Seeking Damages For De Minimis Claims For Allegedly Uncompensated Work Time Under State Law

By Gerald L. Maatman, Jr., Anna Sheridan, and Rebecca S. Bjork

Duane Morris Takeaways: On July 3, 2025, the Maryland Supreme Court held in Martinez v. Amazon.com, Serv., No. Misc. 17 (Md. July 3, 2025), that the long-standing common law doctrine de minimis curat lex applies to both the Maryland Wage & Hour Law (MWHL) and the Maryland Wage Payment and Collection Law (MWPCL).  The Supreme Court aligned Maryland with federal precedent, reinforcing the principle that employers are not required to compensate employees for truly trivial amounts of uncompensated work time – what the U.S. Supreme Court has called “split second absurdities.”  This ruling marks a notable win for employers in Maryland, who now have a potential defense against claims for brief unpaid time.  For the defendant, the litigation will return to U.S. District Court for the District of Maryland – which had certified the question to the Maryland Supreme Court – for factual analysis on whether the time claimed by employees waiting in line to pass through security screening was truly de minimis.

Case Background

On December 2, 2021, Plaintiff Estefany Martinez brought a putative class and collective action in the U.S. District Court for the District of Maryland on behalf of current and former Amazon employees at its Baltimore fulfillment center.  Id. at 2, 6. The Complaint alleged that Amazon failed to compensate employees for post-shift time spent in mandatory security screenings, which allegedly took between 3 and 15 minutes per shift.  Id. at 5.

Martinez brought claims under the Fair Labor Standards Act (FLSA), MWHL, and MWPCL, seeking to recover unpaid wages and associated damages. On November 18, 2024, the District Court certified to the Maryland Supreme Court the following question: Does the doctrine of de minimis non curat lex, as described in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), and Sandifer v. U.S. Steel Corp., 571 U.S. 220 (2014), apply to claims brought under the Maryland Wage Payment and Collection Law and the Maryland Wage and Hour Law?  Martinez v. Amazon.com Servs. LLC, No. 22-CV- 00502, 2024 WL 4817214, at *33 (D. Md. Nov. 18, 2024).

The Supreme Court of Maryland’s Ruling

On July 3, 2025, in a 5-2 opinion, the Supreme Court of Maryland held that the de minimis doctrine does apply to Maryland wage laws. Martinez. Slip op. at 2.  The Supreme Court reasoned that Maryland wage laws are silent on the issue but were modeled on the FLSA, which has long been interpreted to permit employers to disregard “split-second absurdities” – short, administratively burdensome periods of unpaid time. See Anderson, 328 U.S. at 692.

The Supreme Court emphasized that Maryland’s General Assembly did not express any intent to abrogate the common law rule that the law does not concern itself with trifles. It reasoned that had the General Assembly intended to prohibit a de minimis exception, it would have said so. Martinez, Slip op. at 17-19. It further observed that Maryland’s regulatory definitions of compensable time, as reflected in COMAR 09.12.41.10, are consistent with federal standards and do not contradict the de minimis doctrine.

In support, the Supreme Court relied on Anderson v. Mt. Clemens Pottery Co., where the U.S. Supreme Court held that employees must be paid for all time spent working, including pre-shift activities integral to their principal duties. However, Anderson recognized that courts need not impose liability for “negligible time,” noting that “it is only when an employee is required to give up a substantial measure of his time and effort that compensable working time is involved.” Anderson, at 692. After Anderson, the FLSA was not amended regarding the de minimis doctrine, rather it was determined that it was included in the statute all along.

Anderson also recognized the impracticality of recording every minute of work-related activity. It is from this recognition that the de minimis doctrine in wage law was born and later codified and clarified by the Portal-to-Portal Act of 1947.

The Supreme Court of Maryland also cited Sandifer v. U.S. Steel Corp., 571 U.S. 220, 229 (2014) (Martinez, Slip op. at 15), in which the U.S. Supreme Court reiterated that even under the FLSA, employers are not obligated to compensate for time that is too fleeting or difficult to track with precision. Maryland case law authorities have described the MWHL as the State “equivalent,” “parallel,” “partner,” and “counterpart” of the FLSA (id. at 23), and the MWHL mirrors many of the FLSA features, definitions, and exemptions and has remained “substantially similar” to the FLSA since the 1960s. Id. at 24-25.  The Supreme Court emphasized that when the General Assembly enacted the Maryland wage laws, it did so against the backdrop of Anderson, Sandifer, and the Portal-to Portal Act, thereby implicitly adopting their contours unless stated otherwise.

Implications for Employers

While the Martinez decision provides employers some breathing room regarding irregular, brief, and administratively difficult to track periods of unpaid time, it does not offer a blanket exemption. Whether a given period of unpaid time qualifies as de minimis remains a highly fact-specific question. In future litigations, plaintiffs must now show that the time they allegedly were not paid for is more than “trifling.” We will follow the proceedings in the U.S. District Court in the Martinez case and keep our readers apprised of developments. 

Posted on by Gerald L. Maatman, Jr.

Clear Sailing To $3.2 Million:  Third Circuit Affirms Hefty Fee Award Despite Low Claim Rate In Data Breach Class Action Settlement

By Gerald L. Maatman, Jr., Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways:  On June 25, 2025, in In Re Wawa Data Security Litigation, No. 24-1874, 2025 WL 175035 (3d Cir. June 25, 2025), the Third Circuit approved a $3.2 million class fee award for class counsel contained in a settlement agreement finding that fees can be based on relief made available to the class and does not have to be capped by a percentage of the relief actually claimed in low-harm data breach security class action where the claim rate is notoriously low.  The Third Circuit also held that clear sailing agreements (agreements not to challenge class counsel fee petitions) and fee reversions (where amount of agreed-upon fee not awarded reverts to defendant) are not per se impermissible and, rather, there must be evidence of collusion or harm to class members to invalidate a fee award on this basis.

Case Background Leading to Wawa I

On December 19, 2019, Wawa — a convenience store chain with 850 locations throughout the mid-Atlantic and Florida that sells fuel as well as convenience store items — released a public statement through its CEO detailing a data security breach Wawa had experienced in which hacker stole payment information including credit and debit card numbers used at all Wawa stores and fuel dispensers.  As the Third Circuit noted “a race to the courthouse promptly ensued” with plaintiffs filing 15 different state statutory and common law class action claims that were ultimately consolidated by Chief Judge Juan Sanchez of the U.S. District Court for the Eastern District of Pennsylvania on January 8, 2020.  In Re Wawa Inc. Data Security Litigation, Civ No. 24-1874, at *6 (3d Cir. June 25, 2025) (hereafter “Wawa II”). Three litigation tracks emanated out of this consolidation, including: (1) a financial institution track; (2) an employee track; and (3) a consumer track.  The consumer track is the subject of the Wawa II decision at issue and involved numerous common law, state consumer protection, and data privacy claims.  The consumer plaintiffs sought compensatory relief and an injunction requiring Wawa to: (1) strengthen its data security systems and monitoring procedures to prevent further breaches; (2) submit to future annual audits of those systems; and (3) provide several layers of free credit monitoring and identify theft insurance to all class members. 

Several months after the consolidated class complaint was filed, settlement talks began in which the parties retained a mediator to supervise a mediation session that lasted almost 12 hours.  As a result of this mediation session, the parties agreed Wawa would provide either compensation for out-of-pocket losses or a Wawa gift card.  Plaintiffs were divided into three tiers:  (1) customers who affirmed they spent at least some time monitoring their credit card statements were eligible for a $5 Wawa gift card (this tier was subject to a $6 million cap and a $1 million floor); (2) customers who saw a fraudulent charge that required some effort to sort out were eligible for a $15 Wawa gift card (this tier was subject to a $2 million cap with no floor); and (3) customers who could show certain out-of-pocket losses caused by the breach could receive up to $500 in cash (this tier was subject to a $1 million cap without a floor).  Wawa also agreed to a range of injunctive relief to improve its security systems through a continuation of a $25 million investment in security that the Wawa board authorized pre-settlement in February 2020.  This security system improvement commitment included retaining a security firm to evaluate compliance, conducting an annual penetration test for potential vulnerabilities to data breaches, operating a system to encrypt payment information at sale terminals, implementing security procedures at sale terminals, and maintaining written security programs and policies.  Wawa further committed to provide class members notice of the settlement via updates posted in stores, a settlement website, and a press release.  After the terms for compensatory and injunctive relief were settled, the parties then agreed that Wawa would pay class counsel $3.2 million in attorneys’ fees and related costs “paid by Wawa as directed by the Court” and further providing that Wawa would “cooperate with Class Counsel, if and as necessary, in providing information Class Counsel may reasonable request from Wawa in connection with preparing the petition” for fees. Id. at *9. The settlement agreement was silent about what would happen if the district court awarded less than the full $3.2 million in fees.  

On July 30, 2021, Judge Gene Pratter of the Eastern District of Pennsylvania issued an opinion preliminarily approving the settlement finding it “fair, reasonable, and adequate” as the settlement negotiations took place at arm’s length,” the relief offered provided both monetary and injunctive components, and there was “no reason to doubt that settlement [would] provide a tangible benefit to plaintiffs and proposed class members while avoiding the costs and risks associated with continued litigation.” In re Wawa, Inc. Data Sec. Litig., No. CV 19-6019, 2021 WL 3276148, at *9, 11 (E.D. Pa. July 30, 2021).

On November 10, 2021, class member Theodore Frank filed objections arguing: (1) Wawa’s notice procedures were improper; (2) the gift card claims rate was too low; (3) the attorneys’ fees contemplated by the settlement agreement were too high given that most of the relief made available to the class was not cash-based; and (4) the fee provision of the agreement contained an improper clear sailing (i.e., an agreement not to challenge class counsel’s fee petition) and fee reversion (i.e., agreement that any amount of the $3.2 million not awarded to class counsel reverts to Wawa) that restricted the district court’s ability to fix any potential imbalance between attorneys’ fees and the final relief awarded to the class.  Frank raised no objection to the certification process or the certification decision.

In response to this objection, a Second Amended Settlement Agreement was submitted on November 12, 2021 making tier 1 gift cards automatically available to mobile application users and eliminating the gift cards’ expiration date.  An Objector, Frank, submitted further objections that the settlement would permit any amount of attorneys’ fees short of the $3.2 million agreed-upon to revert back to Wawa.  As a result, on February 4, 2022, counsel submitted a Third Amended Settlement Agreement clarifying that Wawa would not benefit from approval of less than $3.2 million in attorneys’ fees and committing that any shortfall would be distributed to tier 1 and tier 2 gift card holders.  On April 20, 2022, Judge Pratter issued an opinion giving final approval of the settlement agreement and deeming it fair, reasonable, and adequate, as required by Rule 23(e)(2).

Regarding the attorneys’ fee award, Judge Pratter awarded the agreed-upon amount of $3.2 million, allocating $3,040,060 to attorneys’ fees, $45,940 to litigation expenses, and $100,000 for settlement administration expenses.  Judge Pratter found that the Gunter factors supported an award of this amount which requires consideration of:  (1) the size of the fund created and the number of persons benefitted; (2) the presence or absence of substantial objections by members of the class to the settlement terms and/or fees requested by counsel; (3) the skill and efficiency of the attorneys involved; (4) the complexity and duration of the litigation; (5) the risk of nonpayment; (6) the amount of time devoted to the case by plaintiffs’ counsel; and (7) the awards in similar cases.  See Gunter v. Ridgewood Energy Corp., 223 F.3d 190 (3d Cir. 2000).   For Gunter factor 1, Judge Pratter relied on the value of the funds made available to the class; for factor 2 the only substantive objections before the Court were raised by Frank and were addressed in the third iteration of the settlement agreement; for factor 3 the Judge was satisfied that the skill of the attorneys involved weighed in favor of approval; for factor 4 the Judge noted that data breach litigation is “inherently complex;” for factor 5 the fact that counsel took the case on a contingency basis weighed in favor of approval; for factor 6 the attorneys spent 6,000 hours on the litigation; and, as to factor 7 the Judge noted that other data breach class actions have resulted in fee awards significantly higher. In re Wawa, Inc. Data Sec. Litig., No. CV 19-6019, 2022 WL 1173179, at *11 (E.D. Pa. Apr. 20, 2022). A lodestar cross-check also supported the fee award. 

Third Circuit’s Decision in Wawa I

Objector Frank challenged the fee award portion of the settlement agreement on appeal to the Third Circuit arguing that the provision on fees constituted a “clear sailing” agreement because, according to Frank’s interpretation of the provision, Wawa agreed not to contest a fee request from class counsel and Frank also claimed that a “fee reversion” was still contained in the agreement despite the fact that the amended iteration of the settlement agreement clarified that any amount not awarded to counsel would be distributed amongst the class and would not revert back to Wawa.  In Re: Wawa, Inc. Data Security Litigation, 85 F.4th 712, 717-18 (3d Cir. 2023) (hereinafter “Wawa I”).  Frank argued that attorneys’ fees should be capped at 25% of the amount actually awarded to the class, not the amount offered to the class.  The Third Circuit issued a decision in Wawa I, on November 2, 2023, vacating the fee award and remanding the action back to the district court to determine the reasonableness of the attorneys’ fee in light of the benefit rendered to the class and to evaluate the presence of side agreements indicating “collusion,” i.e. a commitment from Wawa not to dispute a fee request from class counsel or an agreement amongst the parties that any portion of the attorneys’ fee not awarded to class counsel would revert back to Wawa.  Id. at 727.  The Court also remanded for additional consideration about the reasonableness of the award finding that the district court “saw itself as bound to consider only the funds made available to the class” when it could evaluate reasonableness by reference to “either amounts paid or amounts made available.”  Id. at 725-26. 

On remand, Judge Pratter requested the parties provide submissions containing any information they believed she should consider based on the panel’s decision in Wawa I.  See Wawa II, at *7 (3d Cir. June 25, 2025).  Objector Frank expressly declined to argue that collusion occurred between counsel for the class and Wawa and suggested the panel used the word “collusion” as “semantic shorthand” to consider potential conflicts with broad brushstrokes.  Class counsel and Wawa submitted declarations that there was no collusion.  Id.  Objector Frank pointed out that counsel admitted there was a clear sailing agreement in a joint declaration class counsel filed in October 2021 and again proposed that an attorney fee award should be based on actual rather than proposed recovery.   Id.  Class counsel countered that Objector Frank had conceded there was no collusion.  Id.  On April 9, 2024, Judge Pratter issued an opinion and judgment that the fee awarded was reasonable and that there were no side agreements or anything problematic in settlement negotiations which were conducted at arms’ length under the supervision of a mediator.  See 2024 WL 1557366, at *7-13. She specifically found that Wawa’s agreement to “cooperate” in the preparation of a fee petition meant no more than the common meaning of that term which did not waive Wawa’s right to object to fees.  Id. at *7.  On the issue of fee reversion, Judge Pratter found that there was “never any discussion of any tradeoff” and any insinuation of an unintentional fee reversion was “diligently corrected” prior to her final approval of the settlement.  Id. at *10.  On the issue of reasonableness of the fee award, Judge Pratter again evaluated the funds offered finding the gift cards to be a “meaningful benefit” because they “closely approximate cash” and that the injunctive relief was also “central” to the award and “weigh[ed] strongly in favor” of granting the fee figure.   Id. at *14-17.  Judge Pratter further acknowledged that the appeal and remand proceedings already reduced the value of counsel’s fee by an estimated $408,492.  Id. at n.13. 

Third Circuit’s Decision in Wawa II

On appeal for the second time to the Third Circuit in Wawa II, Objector Frank mounted three arguments, including:  (1) Judge Pratter did not follow the panel’s mandate in Wawa I which he claimed found that a clear sailing agreement and intentional fee reversion existed between counsel; (2) Judge Pratter’s findings as to the clear sailing and fee reversion were clearly erroneous; and (3) Judge Pratter erred by relying on the amount “made available” to the class as the basis of the fee award rather than the amount actually paid to class members.  Wawa II, 2025 WL 1750352, at *9-12.  The Third Circuit rejected all three arguments and affirmed the fee award. 

First, the Third Circuit found the Wawa I panel did not hold that a clear sailing agreement existed or that the fee reversion was intentional.  Rather, the parties and Judge Pratter “assumed” the existence of a clear sailing agreement and the panel followed suit but the issue was never squarely decided.  Id. at *9-10.  Likewise, the Wawa II panel did not agree that Wawa I found that any fee reversion was intentional.  Id.  In any event, the Wawa II Court clarified that clear sailing agreements and fee reversions are not “per se impermissible” but are rather “red flags” requiring further scrutiny which they felt satisfied Judge Pratter performed during the remand proceedings.  Id.  The Third Circuit held, as a result, that Judge Pratter did comply with the Wawa I mandate.  Id. at 10.

Second, applying the clearly erroneous standard to Judge Pratter’s factual findings, the Third Circuit agreed with Judge Pratter’s finding that there was no clear sailing agreement or intentional fee reversion indicating collusion.  Id. at 10-12.  The Wawa II Court assessed and agreed with Judge Pratter’s findings that the language in the settlement agreement on fees did not constitute a clear sailing agreement and, regardless, Judge Pratter “thoroughly examined the parties’ negotiation process” and found it to be devoid of any evidence of collusion or negative implications for the class.  Id. at *11.  The panel afforded “great deference” to the Judge’s decision to credit testimony from Wawa’s counsel on this issue.  The panel also did not find any credible evidence that the class was harmed at all by the provision on attorneys’ fees.  Id.  Further, the Court also agreed that any fee reversion in the initial draft of the settlement agreement was unintentional and due to counsel’s impression that the fee award was low and therefore it was unlikely the court would award anything less.  Id.

Third, on the issue of the reasonableness of the fee award, the Court agreed with the district court that the fee award was reasonable.  Id. at 12-14.  In support of this conclusion, the Court found that the gift cards were designed to be spendable cash at any Wawa store, three-fourths of Wawa’s inventory is under $5, and the gift cards did not have an expiration date.  The Court further acknowledged the injunctive relief that the class received as justifying the amount of attorneys’ fees which “they themselves requested in the Consolidated Complaint” and, though “difficult to value,” nevertheless “has real value.”  Id. at *13. The Third Circuit disagreed with Objector Frank that the injunctive relief should not be considered in evaluating the reasonableness of the award because Wawa was already in the process of implementing the improved security measures pre-settlement, finding that “Wawa’s post-settlement security updates and formal commitment to the relief are attributable to the settlement.”   Id. (emphasis added).  Finally, and of significant note, the Court took into account the fact that the low claim rate present—the class consisted of 22 million members and 563,955 claims which meant a claim rate of 2.56%—is typical in low-harm data breach class action settlements, such as this one.  Id. at *13-14.  Though the claim rate is axiomatically low given the low overall harm, this does not negate the attorney time dedicated to finalizing meaningful relief to address the alleged harms at issue.  Id.  The Court also affirmed the district court’s use of the Gunter factors and lodestar cross check to support its analysis.  Id. at *14. 

Implications of Wawa II Decision

The Wawa II decision evidences the Third Circuit’s endorsement of basing fee awards in class settlements on the recovery offered to class members, setting aside the claim rate, in the context of low-harm data breach class actions where low claim rates are well-documented.  So long as the recovery secured is meaningful (be it through injunctive, monetary, or other means) and the hours class counsel spent on securing that relief justify the award sought, the fee petition is colorable.  This provides good guidance for defense counsel and objectors that in objecting to fee awards in such cases more is needed than the mere suggestion of a clear sailing agreement or fee reversion, and rather evidence of harm to the class or collusion amongst counsel must be shown to demonstrate that the fee is unreasonable or exorbitant. 

Posted on by Gerald L. Maatman, Jr.

Nothing Common or Predominant About Emotional Distress Damages

By Gerald L. Maatman, Jr., Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways:  In an opinion issued on May 29, 2025, Judge Christy Wiegand of the U.S. District Court for  the Western District of Pennsylvania denied class certification of two proposed classes under the Fair Debt Collections Practices Act (“FDCPA”) (one in the alternative in the event of failure of the first) finding that the predominance requirement of Rule 23(b)(3) was not met where putative class members’ standing would depend on individualized inquiries “highly specific” to each member or was based solely on the fact that the member was a consumer that received a debt collection letter (whether it was read or not).  The ruling is a defense blueprint for defending FDCPA cases.

Case Background

Named Plaintiff Jeffrey Lezark brought a putative class action under the FDCPA against I.C. System, Inc. (“ICS”), a debt collector, that allegedly sent Lezark and putative class members debt collection letters (“540 Letters”) to collect on a medical debt.  The 540 Letter stated in relevant part that “[i]f you fail to contact us to discuss payment of this account, our client has authorized us to pursue additional remedies to recover the balance due, including referring the account to any attorney.” (ECF  91 ¶ 17).  Lezark alleged that, in sending the 540 Letter, ICS violated the FDCPA by implying that legal action was possible to collect the debt when it was not.  The Court authorized distribution of a Claim Form Questionnaire to putative class members to enable Lezark to collect information regarding their standing.  The Questionnaire asked respondents for their individual experience upon reading the 540 Letter.  Putative class members were instructed not to fill out the questionnaire if they did not read the 540 Letter.  The questionnaire asked if putative class members:  (1) felt anxious, overwhelmed, or stressed because they believed they could be subject to legal action or have debt referred to an attorney; (2) contacted an attorney or some other person because they believed they could be subject to legal action or debt could be referred to an attorney; (3) contacted ICS because they believed that they could be subject to legal action or that their debt could be referred to an attorney; (4) made a payment on their account because they believed they could be subject to legal action or their debt could be referred to an attorney; or (5) experienced some other event or engaged in some other conduct after reading the 540 Letter.

Lezark proposed one class definition consisting of “all individuals in the state of Pennsylvania who within the applicable statute of limitations, received a letter from Defendant in which Defendant claimed it was authorized to refer a medical debt to an attorney, incurred said debt from a medical provider that entered into a contract with Defendant in which the provider elected [NLAR] and/or litigation referral and incurred such debt for personal, family, and/or household purposes.” (ECF 130, at 4). There were over 15,000 putative class members of this first proposed class.  Lezark also sought certification of an alternative class definition if the Court determined the first class definition could not be certified consisting of “[a]ll individuals who: signed, dated, and returned the Claim Form Questionnaire; checked the first, second, third, fourth, and/or fifth box on the Claim Form Questionnaire; and did not indicate that they failed to receive or read the 540 Letter.” Id. There were over 700 putative class members of this alternative proposed class. 

ICS focused its opposition on challenging both proposed class definitions adherence to Rule 23(b)(3)’s predominance requirement.  ICS specifically cited to and relied on TransUnion LLC v. Ramirez, 594 U.S. 413 (2021), where the U.S. Supreme Court held that federal courts must “affirmatively determine that each putative class member has Article III standing before awarding that class member damages,” arguing that both proposed class definitions would require individualized factual inquiries into the injuries sustained by each putative class member.  See ECF No. 142 (citing ICS’ opposition brief, ECF No. 136 at 14).  As to the first class definition, Lezark argued that there was standing under Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982) as each class member suffered an injury “in precisely the form [that the FDCPA] was intended to guard against.”  Havens, 455 U.S. at 364.As it regards the alternative proposed class definition, Lezark argued that Huber v. Simon’s Agency, Inc., 84 F.4th 132, 150 (3d Cir. 2023), confers standing as, in that case, the Third Circuit held that the named plaintiff that received a debt collection letter had standing as the plaintiff identified “an allegedly deceptive communication and specific harmful action and inaction she took as a result of the communication.”  Huber, 84 F.4th at 150.  The District Court rejected both proposed class definitions and Plaintiff’s argument that case law precedent supported certification in this context.    

As to the Havens standing argument for the first proposed class definition, the Court found that the Havens decisions was a distinguishable and narrow holding applicable to the Fair Housing Act (“FHA”) and not a proposed FDCPA class definition.  The Court explained that  “the plaintiff in Havens was not just given false information but suffered a concrete injury in the form of racial discrimination prohibited by the FHA.”  See ECF No. 142, at 13 (citing Havens, 373-74).  The Court found that Lezark’s argument — that any consumer that is the object of a misrepresentation made unlawful under the FDCPA has de facto suffered an injury in the precise form prohibited by the FDCPA — was in direct tension with the TransUnion decision.  The Supreme Court in TransUnion rejected the proposition that “a plaintiff automatically satisfied the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”  594 U.S. at 426.  The Court, therefore, declined to extend the logic in Havens to “the 15,000-plus Proposed Class members” that “simply . . . receive the 540 Letter” with no “evidence that they read it, let alone suffered any downstream harm as a result.”  See ECF No. 142 at 14.

As to the alternative proposed class definition that Plaintiff argued had viability under Huber, the Court pointed out that Huber only found standing as to the named plaintiff and had been remanded to the district court to make a predominance determination.  The Court highlighted that Huber guided the district court on remand to evaluate whether each putative class member “undertook the kind of determinant action or inaction required for standing” and could show the same with a “plausible straight forward method” suitable for class adjudication.  Huber, 84 F.4th at 157-58.  Applying this directive, the District Court found that Lezark himself had demonstrated standing, having shown evidence of emotional distress and the decision to file for bankruptcy based on the 540 Letter, but the putative class members did not.  Plaintiff had to show that putative class members could “likely” demonstrate standing through summary judgment and trial but the Court found that given that standing was “premised on suffering emotional distress and/or taking particular actions in response to the 540 Letter” this “necessarily” would require “individualized and highly” specific inquiries as to each member requiring deposition testimony, cross and direct examination, and medical records.  See ECF No. 142 at 10-11.

Implications For Employers and Debt Collectors

This decision reinforces that plaintiffs’ burden at the certification stage of demonstrating concrete, particularized injury is not a mere formality.  To the contrary, plaintiffs must come forward with evidence showing that putative class members can likely demonstrate standing through summary judgment and trial using a method that is common amongst all class members and unlikely to produce individualized mini trials on the issue of damages.  The Lezark decision also further underscores that this burden is particularly high in cases asserting standing on the basis of emotional distress or intangible injuries.

Posted on by Gerald L. Maatman, Jr.

When Removing Diversity Cases Defendants Cannot “Embiggen” The Amount-In-Controversy Through Attorneys’ Fee Estimates

By Gerald L. Maatman, Jr., Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways:  In an order issued on May 13, 2025, Judge Joshua Wolson of the U.S. District Court for the Eastern District of Pennsylvania ruled that a case removed to federal court on the basis of diversity jurisdiction had to be remanded back to state court given that the amount-in-controversy (AIC) alleged was based on an attorneys’ fee award that exceeded the plaintiff’s damages award by “at least seven times.”

Case Background

On January 9, 2025, Plaintiff Frank Wise sued his former employer Kimberly-Clark, a manufacturer of paper-based consumer products, in the Philadelphia Court of Common Pleas on behalf of himself and a putative class, accusing his former employer of violating the Pennsylvania Minimum Wage Act (“PMWA”) by failing to pay overtime for the time spent walking to and from job assignments in the Defendant’s manufacturing facility.  As part of its remedial regime, the PMWA permits a prevailing party to recover “reasonable” attorneys’ fees.  Plaintiff Wise estimated that his damages totaled $9,350.30, but on his cover sheet he indicated that the amount in controversy totaled “[m]ore than $50,000.00” for the amalgamated claims of the class.  (ECF No. 1-3, p. 2). 

On February 26, 2025, Defendant Kimberly-Clark removed the action to federal court, asserting that the amount in controversy was over $75,000 because Plaintiff Wise “may try to recover at least $78,375.00 in attorney’s fees.”  (ECF No. 1 ¶¶ 24, 29). Plaintiff Wise moved to remand by including with that motion a declaration from his attorneys that if the lawsuit proceeded on an individual, rather than a class wide basis, the Plaintiff and his attorneys would waive the right to recover attorneys’ fees that would cause the amount in controversy to cross $75,000.

The Court’s Order

Judge Wolson found that Defendant Kimberly-Clark did not carry its burden to demonstrate that the amount in controversy exceeded $75,000, which the Defendant primarily based on its attorneys’ fees estimate.  Although attorneys’ fees can be factored into the amount in controversy threshold, the attorneys’ fees sought must be reasonable.  To pinpoint the legal standard under Pennsylvania law for determining when an award of attorneys’ fees is reasonable, Judge Wolson surveyed case law interpreting statutes similar to the PMWA, such as the Pennsylvania Unfair Trade Practices and Consumer Protection Law, where Pennsylvania courts determined that the “term reasonable” incorporates the concept of proportionality between the damages award and attorneys’ fees award.  Though Pennsylvania law contains no “hard-and-fast rule for the acceptable ratio,” courts consider “the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite properly to conduct the case, the customary charges of the members of the bar for similar services, the amount involved in the controversy and benefits resulting to the clients from the services, and the contingency or certainty of the compensation.”  (internal citations and quotations omitted).  Applying this framework, Judge Wolson found that a 7:1 ratio for attorneys’ fees as compared to damages was unreasonable and could not be used to reach the jurisdictional threshold. 

Judge Wolson further opined that this conclusion also was consistent with protecting the judicial economy of federal courts as litigants and attorneys should not be able to use exorbitant attorneys’ fees estimates to circumvent the amount in controversy requirement to invoke diversity jurisdiction.  In the case at hand, the parties agreed for purposes of the motion that Plaintiff Wise could recover $9,350.30 in monetary damages and that the legal issues at hand involved straight-forward unpaid overtime claims.  Notably, Judge Wolson also found the Plaintiff’s attorneys’ declaration, waiving the right to collect attorneys’ fees, to be unavailing as it arguably amended the complaint.

Implications For Employers

The Court’s holding in Wise emphasizes the importance of providing concrete evidence regarding damages sought and reasonable attorneys’ fee estimates when seeking to remove based on diversity jurisdiction.  Ultimately, the damages and attorneys’ fees alleged in the complaint take precedence, but proportionality must be considered even in the context of fee shifting statutes.  If a party’s jurisdictional math does not add up, they may be sent back to where the matter started:  state court.  

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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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