Author: Class Action Defense

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Derrick Fong-Stempel with their analysis of a recent ruling issued by the California Court of Appeal in the Second Appellate District affirming the district court’s order declining to grant the defendant’s motion to compel arbitration in a PAGA suit.

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.

Learn more about the California PAGA reform bills enacted in 2024 here. Bookmark or download the Duane Morris Private Attorneys General Act Review – 2024 here.

Episode Transcript

Jerry Maatman: Thank you, loyal blog readers and listeners. Welcome to our next episode of our weekly podcast series, the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and joining me today from Los Angeles is my colleague, Derrick Fong-Stempel. Thanks so much for being here on the podcast.

Derrick Fong-Stempel: Thanks, Jerry, great to be here. Thanks for having me.

Jerry: So, today we wanted to highlight a challenging area in California in general, and what’s known as PAGA litigation in particular, and a new ruling by the California Court of Appeal in a case called Arevalo v. Pinnacle Farm Labor Inc. One of the major trends that we’ve been tracking over the last few years would be the growth of cases brought under the California Labor Code as well as under the PAGA statute. So, Derrick, could you give us a little bit of background about this case, and share with our listeners some of your thoughts as to its significance?

Derrick: Absolutely, Jerry. The plaintiff in this action is a farm worker actually, who filed suit against a farm labor contractor and brought class action claims for labor law violations.  Plaintiff separately brought a representative action under PAGA against the defendant Pinnacle Farms. As is customary, plaintiff worked for Pinnacle, but as a laborer was sent to different client farm locations – often several in the same week. One of the clients was Wonderful Citrus Packing. While working at Wonderful’s farm, the plaintiff signed an arbitration agreement which provided that any disputes between the parties would be submitted to individual arbitration. Therefore, Pinnacle filed a motion to compel arbitration based on that agreement. Pinnacle also argued that because Wonderful is its client, the arbitration agreement between Wonderful and the plaintiff should extend to its own employment relationship with plaintiff.

The trial court found that the plaintiff entered into an arbitration agreement with Wonderful, and that Pinnacle was, in fact, a third-party beneficiary of the agreement as the labor contractor. However, it also found that the agreement applied only to work performed for Wonderful and at its location specifically. Essentially, then, the trial court found that a portion of the class claims against Pinnacle were outside the scope of the arbitration agreement and denied arbitration of those claims on that specific basis. Pinnacle, of course, appealed the ruling thereafter.

Jerry: I know that Pinnacle had argued on appeal that the trial court erred in concluding that some of the claims were outside the scope of arbitration. And obviously many, many companies have adopted arbitration agreements that cover themselves or their customers in the wake of the U.S. Supreme Court ruling in the Epic Systems case in 2018. How did that issue play out before the California Court of Appeal in this case?

Derrick: That’s a great question – thanks, Jerry. Epic is a very significant case in the post-Viking River landscape as well. The Court of Appeal here agreed with the trial court that only Wonderful and the plaintiff specifically were signatories to the agreement, and that the agreement was meant primarily to protect Wonderful. The court specifically stated that it was unreasonable to conclude that the plaintiff, by signing an agreement with Wonderful, actually intended to bind himself to arbitrate any other disputes with other landowners’ land. In essence, this was a standard intent-based argument. The Court noted that even if it broadly construed the agreement in favor of arbitration, as Pinnacle argued, it would come to the same conclusion because it would be unreasonable to apply the agreement to the plaintiff’s services provided to an entity other than Wonderful.

Jerry: I’ve been following California-related class action wage and hour developments for going on 42 years, and this is quite an interesting spin by the California Court of Appeal. We may well see this issue percolate up one day to the California Supreme Court. I know for our listeners, obviously 2024 is the year of PAGA reform, and there are many unanswered questions under the new PAGA law in California, and it’s certainly going to spike more and more appellate court decisions in this area. Well, thank you, Derrick, for lending your thought leadership and your analysis of this particular case. Thanks so much for appearing on this week’s episode.

Derrick: Absolutely thanks. So much for having me, Jerry. It was fun to be on the podcast, and thanks again to all the listeners as well.

Jerry: Thank you.

By Gerald L. Maatman, Jr., Jennifer A. Riley, Justin Donoho, and Ryan T. Garippo

Duane Morris Takeaways:  On October 24, 2024, in Vita v. New England Baptist Hospital, 2024 WL 4558621 (Mass. Oct. 24, 2024), the Supreme Judicial Court of Massachusetts ordered dismissal of a claim that a healthcare company’s use of website advertising technology violated the Massachusetts Wiretap Act.  The ruling is significant as it shows that in the hundreds of adtech class actions across the nation seeking millions or billions of dollars in statutory damages under various criminal wiretap acts with civil remedies provisions, the rule of lenity applies, thereby entitling defendants to the benefit of any rational doubt in the construction of the statute and, accordingly, defeating plaintiffs’ mammoth statutory damages claims.

Background

This case is one of a legion of class actions that plaintiffs have filed nationwide alleging that Meta Pixel, Google Analytics, and other similar software embedded in defendants’ websites secretly captured plaintiffs’ web browsing data and sent it to Meta, Google, and other online advertising agencies.  This software, often called website advertising technologies or “adtech,” is a common feature on millions of corporate, governmental, and other websites in operation today.  In adtech class actions, the main event is often a claim brought under a federal or state wiretap act, a consumer fraud act, or the Video Privacy Protection Act, because plaintiffs often seek millions and billions of dollars, even from midsize companies, on the theory that hundreds of thousands of website visitors, times $10,000 per claimant in statutory damages under the Federal Wiretap Act, for example, equals billions.  Plaintiffs have filed the bulk of these types of lawsuits to date against healthcare providers, but they have filed suits against companies that span nearly every industry including retailers, consumer products, and universities.  Several of these cases have resulted in multimillion-dollar settlements, several have been dismissed, and the vast majority remain undecided. 

In Vita, the plaintiff brought suit against a hospital.  According to the plaintiff, the hospital installed the Meta Pixel and Google Analytics on its public-facing website, thereby transmitting to Meta and Google, allegedly without the plaintiff’s consent, the following information: (1) title and URL of the hospital’s web pages she visited; (2) any hospital department she selected (e.g., obstetrics); (3) any search terms she entered; (4) any filtering criteria she used on a “Find a Doctor” webpage, including specialty, location, gender, and language; and (5) whether she navigated to the hospital’s patient portal, although not the contents of records or communications within that portal.  Id. at *3.

Based on these allegations, the plaintiff claimed that the hospital aided Meta and Google to intercept her communications in violation of the Massachusetts Wiretap Act, G. L. c. 272, § 99.  The hospital moved to dismiss, arguing that plaintiff’s interactions with the hospital’s website did not fall within the meaning of “wire communication[s]” protected by the Massachusetts statute.  Id. at *1.  The trial court denied the motion and sent it directly to Massachusetts’ Supreme Judicial Court, which accepted the direct appeal. 

The Supreme Judicial Court’s Opinion

In one of the first appellate decisions anywhere deciding whether the events alleged in an adtech class action complaint violated a wiretap act, the Supreme Judicial Court agreed with the hospital and ordered dismissal of the plaintiff’s wiretap claim.

The Massachusetts Wiretap Act makes it a crime to willfully commit an “interception,” meaning “to secretly hear, secretly record, or aid another to secretly hear or secretly record the contents of any wire or oral communication….”  Id. at *7 (quoting statutory definition).  Violators are punishable by a fine of up to $10,000, imprisonment for up to five years, or a combination of fines and imprisonment.  Id. at *7.  The Massachusetts Wiretap Act also provides a private right of action for any person aggrieved by an interception.  Id. at *6.  Each civil claimant is entitled to statutory damages in the amount of “$100 per day for each day of violation or $1000, whichever is higher.”  Id. at *7.

The claimant in Vita contended that the meaning of “communication” is broad enough to encompass all interactions with the hospitals’ websites when those websites were visited by her and an alleged class of other website visitors.  The Supreme Judicial Court held that “the statutory term ‘communication’ is ambiguous as applied to the web browsing activities allegedly intercepted.  Neither the plain text of the statute nor dictionary definitions make clear whether such activity amounts to ‘communication,’ and the legislative history is concerned with a different type of surveillance.  Thus, the rule of lenity must apply, thereby entitling the defendants to the benefit of any rational doubt in the construction of the statute.”  Id.  In explaining its reasoning on applying the rule of lenity, the Supreme Judicial Court stated that “while the instant cases concern civil liability under the wiretap act, the act also has significant criminal penalties, including up to five years in State prison, and accordingly, the rule of lenity should be applied.”  Id. at *15 (collecting authorities).  In conclusion, the Supreme Judicial Court summarized its opinion as follows: “In sum, the statutory language is ambiguous, and the legislative history is not helpful regarding whether the alleged interceptions of Vita’s uses of the hospitals’ websites are interceptions of “communications” within the meaning of the wiretap act and thereby potentially subject to both civil and criminal penalties. Therefore, the rule of lenity applies, and Vita’s claims against the hospitals, which are based on the wiretap act alone, should be dismissed.”  Id. at *16.

Implications For Companies

Vita provides powerful precedent for any company opposing adtech class action claims under any state or federal wiretap act in which statutory terms are ambiguous.  Consider, for example, the numerous adtech class actions featuring a claim under the Federal Wiretap Act and seeking millions or billions of dollars in statutory damages.  Some courts have dismissed these claims (as discussed in our previous blog entry about a recent win for adtech defendants, here).  Other courts, interpreting the same statutory provisions and applying them to similar adtech class action allegations, have refused to dismiss these claims, allowing them to proceed to costly merits, class certification, and expert discovery.  These differing interpretations of statutory terms by different courts suggest those terms are ambiguous.  Vita instructs that the rule of lenity thus applies, thereby entitling defendants to the benefit of any rational doubt in the construction of the statute and, accordingly, defeating plaintiffs’ mammoth statutory damages claims.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and special counsel Justin Donoho with their analysis of a recent Illinois federal court ruling issued in a BIPA class action involving identify verification software in R.S., et al. v. IDology Inc.

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

Jennifer Riley: Thank you for being here again for the next episode of our weekly, podcast the Class Action Weekly Wire. I’m Jennifer, Riley partner at Duane Morris and joining me today is Justin Donoho. Thank you for being on the podcast Justin.

Justin Donoho: Thank you, Jen. Great to be here.

Jennifer: Today we wanted to highlight a recent ruling in a case that alleges violations of a state privacy statute, the Illinois Biometric Information Privacy Act, or BIPA. The BIPA was enacted in 2008. It requires companies collecting users’ biometric information to inform the person in writing of what data is being collected or stored; to inform the person in writing of the specific purpose and the length of time for which the data will be collected, stored, and used; and to obtain the person’s written consent. The law also prohibits any company from selling or otherwise profiting from consumers’ biometric information. Justin, can you give our listeners some background on the BIPA ruling that we are going to be discussing today?

Justin: Yes, this case involves an individual who visited an online gaming platform, and to participate in the platform she was required to upload a selfie in order to register as well as a copy of her photo ID so that the gaming platform could take some data from both of those, and then compare the two to see if there was a match, or, in other words, to verify whether the individual was who she said she was. In order to do this comparison, or matching function, the gaming company used what is called an application programming interface, or API, embedded in the gaming software which had been developed by a separate company marketing itself as an identity verification platform, and also the defendant in this case.

So, plaintiff here sued the back-end software company doing the verification, not the gaming company whose front-end online platform she visited. She alleged that the verification company’s API obtained her “scan of face geometry” in violation of BIPA, and failed to inform her that it was doing so. Thus triggering the staggering statutory damages under BIPA that has made it such a popular statute to sue under these days anytime someone uses any software at all relating to a face.

Jennifer: Thanks, Justin. So, this lawsuit was initially filed in state court and then removed to federal court in July of 2022. The defendant thereafter moved to dismiss the action, arguing that the court lacked personal jurisdiction over IDology because it is a Georgia corporation. The defendant also argued that the plaintiff failed to allege some essential prerequisites to certain aspects of the BIPA claims, and pled other aspects only in a very conclusory manner. The ruling on that motion came earlier this week. Justin, can you tell our listeners how the Court ultimately came down?

Justin: Yes. So yeah, the defendant raised a number of arguments, but really focused mostly on two: (1) lack of personal jurisdiction under Rule 12(b)(1), and also (2) failure to plausibly allege a BIPA violation under Rule 12(b)(6), both of which had to do basically with whether the plaintiff had alleged a sufficient connection between the events alleged in the complaint and the state of Illinois. The crux of the defendant’s argument was that although the plaintiff uploaded her selfie and photo ID to the gaming platform while she was in Illinois, the defendant, during all of this, was located in Georgia, and not really doing anything itself since the API had already been embedded in the gaming platform’s software.

The Court considered these arguments, ruled from the bench, and basically rejected them, allowing the case to move forward to discovery. According to the Court, because the alleged data collection occurred in Illinois, this was a sufficient connection, at least for pleading purposes to Illinois, to allow the BIPA claims to go forward. Moreover, according to the Court, it was sufficient that the verification company enabled the gaming company to obtain the plaintiff’s alleged biometric identifiers in Illinois, even though the verification company, the defendant, did not obtain them in Illinois itself. So, this case will be proceeding, but it is important to emphasize that this was only a ruling on the plausibility of the plaintiff’s pleadings. The door is not closed to the defendant to show, after discovery is completed, that there is not a sufficient connection to Illinois to apply the statute. Once the case has all the facts in the case will be an important one to watch, since how that issue comes out may affect BIPA litigation risk to software companies outside Illinois that merely create APIs used by other full end-user software products.

One more issue in this case, of course, is the issue of verification versus identification. We see this one a lot – does software capture a sufficient “scan of face geometry” to be unique to an individual when just doing that verification, or matching function, as opposed to grabbing enough information to compare to a large database to do identification? Courts have come out both ways on this issue during the pleading stage, and it was not an argument raised in the pleading stage in this case. But this case is another one to watch in this developing area of the law as well.

Jennifer: Absolutely. We will have to see how this case progresses, and ultimately, whether the plaintiffs are successful in obtaining class certification on their claims. We will keep our listeners updated.

Justin: Agreed, and we’ll be on the lookout for any of the merits issues we’ve been discussing as well.

Jennifer: Thanks, Justin, for your insight and thanks so much to our listeners for joining us on the latest episode of the Class Action Weekly Wire. We will see you next week!

Justin: Thanks!

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features a sneak peek into the third installment of the Duane Morris PFAS Webinar Series: Risk Mitigation and the Rise of Class Action Litigation. Duane Morris partners Jerry Maatman, Jennifer Riley, and Brad Molotsky provide a high-level overview of the recent developments, key rulings, and risk mitigation strategies in their analysis of the “forever chemicals” explosion in the product liability & mass tort class action landscape.

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.

Watch the full webinar and previous recordings on our website. Bookmark or download the Duane Morris Product Liability & Mass Torts Class Action Review – 2024. Follow the Duane Morris PFAS Blog to stay up-to-date on developments in this rapidly evolving area.

Episode Transcript

How “Forever Chemicals” Have Permeated Class Actions

Jerry: So, you start out with Big Tobacco, you go to asbestos, then you go to opioids, and now you’re at PFAS – and so you’re seeing kind of the fourth generation of well-developed theories, well- financed plaintiffs’ lawyers learning the lessons of the last two decades about how to attack corporate defendants in this area with these theories. And lay on top of that class action theories. So you have very expert plaintiffs’ lawyers doing this and focusing on it, and so I’d say it’s as challenging as I’ve ever seen in terms of the types of cases and the breadth of the cases – it’s rather remarkable.

Class Certification: The Holy Grail Of The Plaintiffs’ Bar

Jerry: One way to think about it is the business model of the plaintiffs’ class action bar: identify the case and file it, certify it, and then monetize it. And do the least amount of work possible to get the greatest return. It’s like the Wall Street theory of investment. And so as Jen will talk about, those areas there are some where certification is near certain other areas where the plaintiffs’ bar is not doing so good and what we’re talking about right now products liability & mass tort it’s right on the 70-72% line but think about that – it’s not even a jump ball. Seven out of 10 cases if lot are being certified. So that’s homework, that’s preparation, that’s skill – picking the right case, picking the right theory – to maximize the potential to certify it.

Class Action Settlement Numbers Continue To Spike At Unprecedented Levels

Jerry: So that study that we do annually that we talked about – a very popular and important telling chapter is on class action settlements. I’m a believer that you can tell a lot about the state of the market and what’s going on by settlements. Why is that? Well, I think success begets copycats in the class action area, and so where you see the plaintiffs’ bar beginning to score settlements or significant settlements you have other people entering the space filing their own lawsuits, and what we’ve seen in the last two years are higher settlement numbers than ever before. In 2023, $51.4 billion; in 2022, $66 billion; and that’s driven by mass tort and product liability claims – both the subject area we’re here for (PFAS) and opioids. So, 20 years ago the only analogue was when there were big tobacco class actions and enforcement actions brought by attorneys general, where you saw billions upon billions of dollars paid in the interim. You could count on one hand, usually one, two, or three billion dollar settlements per year, and the amount would be four to five to six billion in all the areas. Then all of a sudden, we have this jump when we had the big opioid settlements – but then you’re seeing it in other areas like a securities fraud case over a billion, an antitrust case over three billion, and so it’s the Renaissance right now with the plaintiffs’ bar, and it’s by way of my thinking the biggest transfer of wealth in the history of American jurisprudence has occurred in the last 24 months.

Jerry: Now we monitor on a daily basis, and if you look at the period of January 1 through June 30, the first six months we were at $33 billion – so we’re on track for a third year in a row to have these

blockbuster numbers. And what it has done is fueled the growth of plaintiffs’ firms using things like artificial intelligence to bulk up the way in which they litigate the cases. Jen and I spoke at a conference in New York City on mass torts and products liability, and at the keynote address was a plaintiffs’ lawyer said the following, which I thought was rather remarkable – he was involved in the Camp Lejeune water cases, where it is alleged that service members were exposed to cancer-causing water pollution in the ’50s, ‘60s, and ‘70s, and he said collectively the plaintiffs’ counsel had spent the following amount of money to market to potential litigants: $1.1 billion had been spent by these law firms trying to find plaintiffs to bring these cases. So, we’re talking about incredible sums of money that the plaintiffs’ bar is getting behind these cases advertising, trying to find people to bring these mass torts and products liability cases. 

Jerry: I mentioned before the iPhones, the omnipresent news cycle of all these big cases, but if you break down just last year – the $51.4 billion – you’re talking about you know a couple of billion per month and over $100 million per day being paid in class action settlements approved by courts. So I’d say the era that we’re in right now is characterized by heightened values of class actions and exponential risk, so if you’re operating in this environment – especially in those epicenters of class action litigation – you’re in a very unique zone that’s never existed before, that’s probably not going away anytime soon. And forever chemicals, for whatever reason, has been identified as the next so-called opportunity of the plaintiffs’ bar where they’re going to be pivoting from opioids to forever chemicals, So, I think you’re going to see this these sorts of numbers and the products liability and mass torts area for months, if not years, to come.

Tracking PFAS In The Class Action Landscape

Brad: Talk to us a bit about PFAS – like what do you think’s driving it, and what’s going on here?

Jennifer: We’ve been seeing PFAS cases for probably almost a decade. Plaintiffs have been filing lawsuits over alleged environmental health consequences associated with these chemicals, and I would say the earlier were largely against manufacturers – of Teflon, of other common household products – but as you as you mentioned, Brad, that landscape seems to be rapidly shifting. So, recently we’ve seen the range of lawsuits, the companies targeted – we’ve seen that really expand. And now we’re seeing these cases brought against not only manufacturers, but other companies in the chain of commerce, including companies that use chemicals in their finished products. For example, restaurants using PFAS-containing food wrappers packaging, retailers of PFAS containing clothing items. And the types of plaintiffs asserting these types of claims are also expanding. We’re seeing state and local governments that have begun filing lawsuits, largely over claimed contamination involving water supplies. So I think it’s as the effects of PFAS become more readily available, more widely known, widely spread, that’s generating some of this as well, As Jerry mentioned earlier, these huge settlements – and I think we’re going to talk more about some of these settlements in particular – but those huge settlements are really inspiring more plaintiffs’ lawyers to get into this space, and I think that is contributing to this expansion.

Brad: Well, so we’ve got as we were talking about kind of PFAS is you know over 12,000 different chemicals – some complex, some simple. Once they get out into the groundwater, they move very quickly. And so if you did testing in Antarctica, or out in Alaska, or in Russia – you would find PFAS in the water, you would find it likely around certain airports where you know firefighting foam has been used, that had PFAS in it. As Jen indicated, it’s found its way into a lot of household products – why? Because it works, it’s got certain properties to it that keep water out of it.

Building Your PFAS Risk Mitigation Toolkit

Jennifer: At least from the class action perspective, because many of these cases are very defensible, and some of the principles we talked about earlier in terms of plaintiffs having a hard time keeping these cases together and getting them certified certainly apply here. So plaintiffs alleging that they ingested something that caused cancer, for instance, a defendant’s going to argue that look – different class members ingested different things, different amounts of those things, some had cancer, some didn’t, they had different types of cancer, they had different interactions with other potentially cancer-causing substances – all of these things are going to lend themselves to individualize inquiries into plaintiffs’ unique circumstances and unique medical histories that are going to be tools that defendants have in their kits to oppose class certification in this context. So, many of these cases haven’t gotten to the class certification stage because we’ve been talking a lot about motions to dismiss and settlements, but I think that this roadmap for how to certify and keep one of these cases together is still something that is very much a work progress, and it’s going to be a big hurdle I think in these types of cases.

By Gerald L. Maatman, Jr., Justin R. Donoho, and Ryan Garippo

Duane Morris Takeaways:  On October 15, 2024, in Salazar v. NBA, 2024 WL 4487971 (2d Cir. Oct. 15, 2024), a unanimous panel of the U.S. Court of Appeals for the Second Circuit reversed the dismissal of a privacy class action against the National Basketball Association (“NBA”) and held that a web user who casually watched videos on the NBA’s website after signing up for a free email newsletter plausibly alleged that he was a “subscriber of goods and services” under the Video Privacy Protection Act (“VPPA”).  The Second Circuit was unpersuaded by the NBA’s arguments that the VPPA applies only to subscribers of audiovisual content.  Instead, it found, as a matter of first impression, that an email newsletter qualifies as “goods or services” under the VPPA, reversed the dismissal order, and remanded for the district court to address the NBA’s other arguments, including whether the plaintiff failed to plausibly allege his lack of consent and the NBA’s knowing disclosure.

Background

This case is one of a hundred or so VPPA class actions that plaintiffs have filed nationwide alleging that Meta Pixel, Google Analytics, and other similar software embedded in defendants’ websites secretly captured plaintiffs’ online video watching histories and sent it to Meta, Google, and other online advertising agencies.  This software, often called website advertising technologies or “adtech” is a common feature on millions of corporate, governmental, and other websites in operation today.  Plaintiffs’ typical theory in these cases is that they were “subscriber[s] of goods or services from a video tape service provider” under the VPPA, 18 U.S.C. § 2710, such that the defendants therefore violated that statute by knowingly disclosing their video watching histories without their consent via the use of adtech.

The VPPA was enacted in 1988, after a newspaper published a profile on Supreme Court nominee Judge Robert Bork’s video rental history that identified 146 films he and his family had rented from a video store.  Id. at *9.  Although Congress later amended the VPPA in 2012, “to clarify that a video tape service provider may obtain a consumer’s informed, written consent on an ongoing basis and that consent may be obtained through the Internet … much of the 1988 VPPA’s text remains unchanged.”  Id. at **9-10.  Thus, in VPPA cases, courts are often left to “grapple with how the language of this statute applies in today’s increasingly online world.”  Id. at *1.

In Salazar, the plaintiff brought suit against the NBA.  According to the plaintiff, he signed up for an online email newsletter offered by the NBA and, thereafter, visited the NBA’s website, where he watched videos.  Id.   The plaintiff further alleged that, after he watched those videos, his video-watching history was sent to Meta without his permission via the NBA’s undisclosed use of the Meta Pixel on its website.  Id.  Based on these allegations, the plaintiff alleged a violation of the VPPA.  The NBA moved to dismiss under Rule 12(b)(6), arguing that the plaintiff failed to plausibly allege a violation of the VPPA because, among other things, (1) the plaintiff did not sign up for any “audiovisual ‘good or service,’” id. (emphasis in original); (2) the NBA did not knowingly disclose the video-watching history to Meta, as Plaintiff was the one who did that via his own browser and Facebook settings, id. at *4; and (3) the plaintiff consented to disclosure to Meta by consenting to the NBA’s privacy policy.  Id. at *4 n.4.  The district court accepted the NBA’s first argument and dismissed on that basis, without reaching the other two arguments.  The Plaintiff appealed.

The Second Circuit’s Decision

The Second Circuit agreed with the plaintiff and reversed. It rejected the district court’s conclusion that the VPPA applies to subscribers only of audiovisual services.

First, the Second Circuit found that the VPPA’s language saying it applies to “any renter, purchaser, or subscriber of goods or services from a video tape service provider,” id. § 2710(a)(1), “makes no mention of audiovisual materials” in reference to the “goods or services.”  Id. at *11.  This omission was meaningful, according to the court, because Congress knew how to include the word “audiovisual” in other portions of the VPPA, namely, its definition of a “video tape service provider” as including a business engaged in renting, selling, or delivering prerecorded video cassette tapes “or similar audio visual materials.”  Id. (quoting 18 U.S.C. § 2710(a)(4)).  As the Second Circuit explained, “Congress’s decision to use different words in different definitions strongly signals its intent to convey different meanings.”  Id.

Moreover, the Second Circuit held that under the NBA’s interpretation of “goods and services” as audiovisual materials, “Congress’s express restriction in the definition of ‘personally identifiable information’ to information about ‘video materials or services’ would be superfluous.”  Id.

Further, the Second Circuit found that although the First and Eleventh Circuits are split on whether a person who merely downloads an app to view content counts as a “subscriber,” that circuit split was not implicated here because the plaintiff alleged that he signed up for the newsletter and, in doing so, provided his email address, IP address, and cookies associated with his device.  Id. at *15.  These allegations were sufficient, the Second Circuit held, to allege he was a “subscriber.”  As the Second Circuit explained, the NBA’s relationship with the plaintiff was “distinct from its relationship with casual NBA.com video-watchers who had not signed up for the newsletter.”  Id. at *15 (emphasis added).

In short, the Second Circuit concluded that a web user who casually watched videos on the NBA’s website after signing up for a free email newsletter plausibly alleged that he was a “subscriber of goods and services” under the VPPA.  The Second Circuit therefore reversed and remanded for the district court to address the NBA’s remaining arguments in the first instance.  Id. at *4 n.4, 16.

Implications For Companies

The Second Circuit’s opinion serves as a cautionary tale for companies using adtech on webpages containing video content.  As the ruling shows, VPPA litigation risk for such companies is not limited to users who sign up to receive the video content.  In addition, companies using adtech on webpages containing video content face the risk of VPPA class actions by allowing users to sign up for other, non-audiovisual goods or services.  Further, companies using adtech also face the risk of VPPA class actions merely by making an app available to view the video content, at least in some circuits, as the Second Circuit noted. 

As adtech and online videos continue to proliferate, organizations should consider in light of Salazar whether to modify their website terms of use, data privacy policies, and all other notices to the organizations’ website visitors and customers to describe the organization’s use of adtech in additional detail.  Doing so could deter or help defend a future class action lawsuit similar to the many that are being filed today, alleging omission of such additional details, and raising high-dollar claims for statutory damages brought under not only the VPPA ($2,500 per alleged class member), as in this case, but also federal and state wiretap acts and consumer fraud acts, as in other cases we blogged about here, here, and here.

By Gerald L. Maatman, Jr., Tiffany E. Alberti, and Bernadette Coyle

Duane Morris Takeaways: On October 10, 2024, the Tenth Circuit declined to overturn a district court order that remanded a Colorado wage & hour class action back to state court after it found that Wendy’s International (“Wendy’s”) failed to file its removal request within the 30-day removal provision of the Class Action Fairness Act (“CAFA”) after Plaintiffs provided a demand that triggered the CAFA factors. The ruling in Little v. Wendy’s International, LLC, Case No. 24-1232, 2024 WL 4455858 (10th Cir. Oct. 10, 2024), is a lesson for corporate defendants on fundamental time deadlines for removals of class actions under the CAFA.

Case Background

The CAFA expands federal subject-matter jurisdiction over class action lawsuits in the United States by providing a way for defendants to remove these cases from state courts to federal courts. To bring remove a case to federal court through the CAFA, there must be: (1) minimal diversity; (2) 100 or more putative class members; and (3) more than $5 million in controversy. 28 U.S.C § 1332(d)(2). A defendant must generally remove the case either within 30 days of receipt of the initial complaint showing that the CAFA’s jurisdictional requirements are met or within 30 days of receipt of “a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.” Id. at § 1446(b)(3) (emphasis added).

In October 2020, Jeffrey Little (“Plaintiff”) filed a putative class against Wendy’s in Colorado state court, accusing the fast food chain of violating the Colorado Wage Claim Act, Colo. Rev. Stat. §§ 8-4-101–125, and the Colorado Minimum Wage Act, Colo. Rev. Stat. §§ 8-6-101–120, by failing to ensure workers took meal and rest breaks.

In January 2023, as the state court considered certifying a class of Wendy’s workers in Colorado, Plaintiff’s counsel sent two demand letters to Wendy’s. The first letter stated in part, “Pursuant to C.R.S. § 8-4-109, demand is made for payment of wages in the amount of $5,930,118.70.” 2024 WL 4455858, at *1. The second letter, sent one and a half weeks later, stated in part, “Pursuant to C.R.S. § 8-4-109, Jeffrey Little, and designated representative attorneys Alexander Hood and Brian D. Gonzales, hereby demand payment of wages in the amount of $5,100,000.00.” Id.

The state court granted the Plaintiff’s class certification motion on October 31, 2023. Relying on the removal provisions of the CAFA, under §§ 1332(d), 1453(b), 1446, Wendy’s removed the action to federal court in November 2023, arguing that the 30-day deadline was not triggered by the Plaintiff’s original and amended state court complaints because the complaints did not address the size of the proposed class and the amount of damages. Wendy’s also contended that the demand letters did not trigger the 30-day deadline because there was no explanation for the amount sought and the demand letters did not claim to be settlement offers. The district court disagreed and granted Little’s motion to remand the action to state court after finding that Wendy’s removal motion was untimely.

Wendy’s appealed the remand order to the Tenth Circuit.

The Tenth Circuit’s Ruling

On appeal, Wendy’s made three arguments. First, Wendy’s argued that the figures in the demand letters merely stated an amount without adequately explaining the basis for the amount sought, and thus did not trigger the 30-day removal period under § 1446 of the CAFA. Second, Wendy’s claimed that the demand did not reflect a reasonable estimate of the claims because they did not purport to be settlement offers. Finally, Wendy’s contended that the district court’s remand order incorrectly went beyond the four corners of the Plaintiff’s initial complaints and the demand letters in determining that Wendy’s was late in filing its removal request.

On the issue regarding whether the demand letters provided Wendy’s with adequate notice of the amount of monetary damages sought, the Tenth Circuit explained that in invoking C.R.S. § 8-4-109, which is intended to supply notice to a potential defendant of an employee’s intention to seek unpaid wages, the demand letters went beyond an ambiguous statement by making “specific demands that had statutory significance.” Id. at *6. It noted that while other circuits (specifically the Eighth Circuit) have required more than unproven statements to trigger the 30-day deadline, the Tenth Circuit had previously ruled that a Colorado state court civil cover sheet (that indicates a box stating the amount in controversy) provided adequate notice to the defendant. Thus, the Tenth Circuit held that each of the demand letters was sufficient to put Wendy’s on notice that the amount in controversy exceeded $5 million, thereby triggering the third CAFA factor, and ultimately determining Wendy’s filing of the removal untimely.

On the issue regarding whether the district erred in relying on “other paper” received through discovery to adequately put Wendy’s on notice of the $5 million in controversy, the Tenth Circuit held that the district court was allowed to rely on limited discovery that revealed extent of Wendy’s workforce and operations in Colorado that would support the amount in controversy. It explained that, “[t]he evidence developed in discovery helped to show that the demand letters at least appeared to reflect a reasonable estimate of the plaintiff’s claim, even if they did not provide a precise mathematical calculation underlying the estimate.” Id. For this reason, the Tenth Circuit concluded that the district court did not err in its evaluation of “other paper” for the purposes of the CAFA.

Implications For Corporations

The Tenth Circuit’s ruling underscores the importance of a global consideration of all documents exchanged throughout litigation that can effectively determine the best strategy for corporations facing potential class action lawsuits. Because the CAFA is a powerful tool to combat against state court class actions, where federal courts are less attractive forums for plaintiffs, it is crucial for employers to prioritize initial complaints, demand letters, and other papers (such as discovery documents) to recognize whether they are put on notice of the CAFA factors ensuring they meet the 30-day deadline for removal to federal court.

By Gerald L. Maatman, Jr., Gregory Tsonis, and Christian J. Palacios

Duane Morris Takeaways:  On October 3, 2024, the Seventh Circuit upheld the decertification of a class of satellite technicians in a wage and hour suit against DirectSat USA LLC (“DirectSat”) on the grounds that a class action was not the best method of resolving the lawsuit.  The ruling in Jacks v. Directsat USA, LLC, Case No. 23-3166, 2024 U.S. App. LEXIS 25099 (7th Cir. Oct. 3, 2024), is significant, as it represents the first time the Seventh Circuit has taken a definitive position on resolving “issues class actions” under Rule 23(c)(4), a topic that is currently the subject of a circuit split.  Although the Seventh Circuit ultimately agreed with the majority approach adopted by the Second, Third, Fourth, Sixth and Ninth Circuits – that permits certification as long as common questions predominate in resolving the individual issues to be certified – it also clarified that district courts should look at the relationship any certified issues have to the dispute as a whole.

Background

DirectSat (owned by UniTek USA, LLC) installs and services residential satellite dishes throughout the state of Illinois.  The company employs satellite technicians to install and maintain the satellites, and it  compensates them on a per-installation basis (though the technicians record their time worked in order to ensure they are paid the legal minimum).  Id. at *2.  On February 9, 2010, three plaintiffs filed a class action against DirectSat, UnitTek, and certain company executives, alleging violations of the Illinois Minimum Wage Law (“IMWL”), the Fair Labor Standards Act (“FLSA”), and Illinois common law, claiming they were not paid for the time spent doing tasks such as maintaining their vehicles, mapping directions for service calls, and loading equipment prior to leaving for a job site.  Id.

In June 2012, Judge Gottschall of the U.S. District Court for the Northern District of Illinois certified a class of full-time Illinois DirectSat satellite technicians who worked at the company from July 12, 2008 through February 9, 2010. This initial class was certified pursuant to Federal Rule 23(b)(3) for plaintiffs’ IMWL claims.  Eight months after the district court certified the Rule 23(b)(3) class, the Seventh Circuit affirmed a separate district court’s decertification of a similar case captioned Espenscheid v. DirectSat USA, 705 F.3d 770 (7th Cir. 2013).  Following the decision in Espenscheild, Judge Gottschall vacated the previous certification order and certified a second Rule 23(c)(4) “issue class,” to resolve fifteen questions related to DirectSat’s liability that plaintiffs argued could be decided on a class-wide basis, such as the definition of the satellite technicians’ work day. Id. at*6.

The case was then re-assigned to another district judge, Judge Pacold, in August 2019, who proceeded to decertify the Rule 23(c)(4) class months before the case was scheduled to go to trial, on the basis that DirectSat’s liability could not be resolved on a class-wide basis, and the fifteen certified issues would not resolve the lawsuit, given, amongst other things, the variance of the claims at issue. Id. at *9.  Although the original named plaintiffs settled their claims individually, they reserved their right to appeal the decertification decision, which they did.  On October 3, 2024, the Seventh Circuit affirmed the district court’s decertification, though on slightly different grounds.

The Seventh Circuit’s Ruling

The Seventh Circuit panel (comprised of Judges Easterbrook, Kirsch, and Lee) affirmed the decertification of the Rule 23(c)(4) issues class action.  Writing for the court, Judge Lee first rejected plaintiff’s arguments that Judge Pacold should have deferred to Judge Gottschall’s ruling certifying the fifteen issues for trial under Rule 23(c)(4), given Rule 23’s broad authority to revoke or alter class certification prior to a final judgement.  Id. at *15.  The Seventh Circuit also rejected plaintiffs’ argument that Judge Pacold improperly considered merits questions at the class certification stage, observing that merits inquiries were appropriate in determining if Rule 23’s certification prerequisites could be satisfied.  Id.

The Seventh Circuit then turned to the issue of whether plaintiffs’ class action was properly decertified, and concluded that it the district court did not err in doing so.  The Seventh Circuit observed there was a circuit split regarding the interaction between Rule 23(b)(3) and Rule 23(c)(4).  The Fifth Circuit currently limits Rule 23(c)(4) classes to instances where the plaintiff’s cause of action, taken as a whole, satisfies Rule 23(b)(3)’s predominance requirement.  By contrast, the Second, Third, Fourth, Sixth and Ninth Circuits permit Rule 23(c)(4) certification so long as common questions predominate in resolving the individual issues to be certified.  Id. at *19. 

Ultimately, the Seventh Circuit agreed with the majority approach, but also concluded that a class should not be certified under Rule 23(c)(4) unless the certification would be superior to any other methods of adjudicating the controversy.  Id.  Thus, in addition to demonstrating that common questions predominate as to each issue to be certified, the party seeking certification under Rule 23(c)(4) also must show the proposed issues would be the most practical and efficient way to resolve the litigation.  Id. at *23.  Using this approach, the Seventh Circuit took issue with the district court’s ruling, because it examined whether common questions predominated the entire cause of action, rather than looking to see whether common questions predominated as to each of the certified issues.  Id.  Despite this, the Seventh Circuit agreed with the district court’s determination that proceeding to trial on the certified issues would not be “superior to other available methods for fairly and efficiently adjudicating the controversy” as required by Rule 23(b)(3).  Id.

Implications

Given that the Seventh Circuit’s direction regarding how a district court should analyze a Rule 23(b)(4) issues class action, plaintiffs will now have the additional burden of demonstrating that the certified issues would be superior to other methods of adjudication.  This ruling could provide employers with additional tools to defend against issues class actions, and impose a higher bar on plaintiffs seeking to take advantage of the issue class mechanism. 

By Gerald L. Maatman, Jr., Zach McCormack, and Ryan T. Garippo

Duane Morris Takeaways:  On September 24, 2024, in EEOC v. Total Systems Services, LLC, No. 23-CV-01311 (N.D. Ga. Sept. 24, 2024), Judge William Ray II of the U.S District Court for the Northern District of Georgia adopted a report and recommendation from a magistrate judge granting in part and denying in part Total Systems Services, LLC’s (“TSS”) motion for summary judgment on claims of disability discrimination.  In an increasingly digital world, this opinion in an EEOC enforcement lawsuit exemplifies some of the risks that employers face when allowing a portion of their workforce to work remotely.

Case Background

Plaintiff Joyce Poulson (“Poulson”) worked as a customer service representative for TSS from 2016-2020.  As a customer service representative, Poulson was assigned to take telephone calls from the clients of three different banks related to travel benefits associated with their credit cards.  Prior to the COVID-19 pandemic, TSS did not allow its employees to work remotely.  In the wake of the pandemic, however, TSS began transitioning as many employees as possible to remote work.  Poulson was not selected to be one of the employees to transition to remote work based, in part, on the fact that SunTrust Bank (i.e., one of TSS’ clients for whom she took calls) would not allow it.

In 2020, Poulson was diagnosed as a “pre-diabetic” by her doctor.  This condition did not limit her job functions and was adequately controlled by medication.  However, when one of Poulson’s other co-workers tested positive for COVID-19, Poulson’s doctor advised that she should self-quarantine (a period of time that was ultimately covered by the Family Medical Leave Act (“FMLA”)). After the period of self-quarantine, Poulson requested to continue with remote work based on her doctor’s recommendation that she was at “high-risk of suffering severe effects.”  Id. at 7.

TSS explained to Poulson that it would consider her for a remote position when the next round of remote positions became available.  TSS also asked Poulson to demonstrate that she had adequate internet speed available at home to demonstrate that she could do her job remotely.  When Poulson’s internet speed proved too slow and no remote positions opened, Poulson resigned her employment accusing TSS of exhibiting a “blatant disregard” for her health.  Id. at 9.

Poulson then took a new job where she would still have to work in person at least 50% of the time.  Moreover, in her employment application for that job, Poulson indicated that she did not have a disability.  But regardless, shortly thereafter the Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit on Poulson’s behalf claiming disability discrimination under the Americans with Disabilities Act (“ADA”), constructive discharge, and FMLA retaliation.

The Court’s Opinion

Judge William Ray II of the U.S. District Court for the Northern District of Georgia adopted a report and recommendation of a magistrate judge partially granting TSS’ motion for summary judgment.  

First, the Court found there was a genuine dispute of material fact as to whether TSS unlawfully denied Poulson’s request for a reasonable accommodation under the ADA.  To this point, TSS argued that its general accommodations in light of the COVID-19 pandemic were reasonable.  But the Court held that this theory missed the mark.  The Court reasoned that there is a “difference between a general policy that applies to all employees and an appropriate and reasonable accommodation that could overcome the precise limitations resulting from an employee’s disability.”  Id. at 20.  In the absence of a specific effort to accommodate Poulson’s disability, summary judgment could not be granted.

Second, as to the constructive discharge claim, the Court granted summary judgment.  It explained that TSS “was not responsible for the severe and pervasive effects of the COVID-19 pandemic.”  Id. at 27.  Consequently, there was nothing about its decisions with regard to remote work that would support an inference that the decision was made with the intent to force Poulson to resign.

Third, the Court concluded that the decision not to allow remote work was not sufficient to also support a claim for FMLA retaliation.  The EEOC’s theory was that the adverse action required to maintain such a claim was the denial of Poulson’s reasonable accommodation.  However, the Court explained that “there is no real distinction between ‘excluding’ [Poulson] from her requested accommodation and ‘failing to accommodate’ her request.”  Id. at 30.  In essence, this claim was more properly brought under an ADA discrimination theory.

With these rulings adopted, the Court allowed the ADA discrimination claim to be decided by a jury but dismiss the rest of the EEOC’s claims.

Implications For Employers

The prevalence of remote work has expanded in recent years and so too as the associated liability with such work.  However, the general option to work remotely does not relieve companies of their obligations under the ADA.  Corporate counsel must keep in mind that their companies are still required to engage in the interactive process, for each individual employee, in order to determine whether the requested accommodation is reasonable regardless of a company’s general remote work policies.  Otherwise, the EEOC can prove to be a formidable and aggressive litigant — who is often ready to test the sufficiency of a corporation’s policies.