Dentists Seek Class Certification In Billion Dollar Antitrust Dispute With Delta Dental

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On February 6, 2024, in In Re Delta Dental Antitrust Litigation, No. 1:19-CV-06734, MDL No. 2931 (N.D. Ill. Feb. 6, 2024). roughly 240,000 dentists and dental practices sought class certification in the U.S. District Court for the Northern District of Illinois against Delta Dental, the largest dental insurance system in the United States, on grounds that Delta Dental and its related entities artificially lowered the reimbursement rates paid for dental goods and services to Plaintiffs in violation of the federal antitrust laws. Plaintiffs moved for class certification under Rule 23(a) and Rule 23(b)(3) on the grounds that all class members have been harmed substantially by the alleged conspiracy between Defendants and that evidence common to the class confirms the existence of the conspiracy to suppress reimbursement rates in violation of Sherman Act Section 1.

Corporate counsel should follow In Re Delta Dental Antitrust Litigation as the ruling on class certification could have a significant impact class action law, generally, and on trade and professional associations facing antitrust issues, specifically.

Case Background

Plaintiffs are dentist and dental practices who participate pursuant to provider agreements in Delta Dental’s Premier or PPO networks. Defendants are the largest dental insurance system in the United States and are comprised of Delta Dental, its 39 state-level member companies and their national coordinating entities, Delta Dental plans Association and DeltaUSA. Plaintiffs claim that Defendants formed a cartel and committed per se violations of Section 1 of the Sherman Act by agreeing to reduce reimbursements to Plaintiffs through territorial restrictions, agreeing to fix the prices for specific dental goods and services, and agreeing to restrict competition from other competitors.

Rule 23 Contentions

Plaintiffs argue that class certification is appropriate under Rule 23(b)(3) because evidence common to the class can prove the existence of the conspiracy and harm to the class in the form of lower reimbursement rates. Plaintiffs claim that written agreements imposed territorial restrictions on competition and required adherence to uniform, or fixed, prices for dental goods and services. The agreements also restricted efforts to sell dental insurance under different brands. According to the model advanced by Plaintiffs’ economic expert, Plaintiffs will be able to establish both class-wide impact and class-wide damages on behalf of more than 97 percent of the proposed class. Plaintiffs also argue that Defendants’ procompetitive justifications for the restrictions are irrelevant in a per se antitrust case, but, in any event, are without merit because premiums paid by dental patients increased substantially during the class period and Delta Dental passed on the increased premiums to executives in the form of generous salaries.

Implications For Corporate Defendants

In Re Delta Dental Antitrust Litigation is another example of a federal court class certification decision that will turn whether evidence of common, injury-producing conduct exists. It will be interesting to follow whether the Court credits evidence as capable of showing the impact of the allegedly anticompetitive conduct across all class members at trial.

Third Circuit Breathes New Life Into EEOC Enforcement Lawsuit

By Gerald L. Maatman, Jr., Elisabeth Bassani, and Danielle Dwyer

Duane Morris Takeaways:  On February 1, 2024, in EEOC v. Center One, LLC, Nos. 22-2943 & 22-2944 (3d Cir. Feb. 1, 2024), the Third Circuit held that a District Court erred when it granted summary judgment for an employer and dismissed a case brought by the U.S. Equal Employment Opportunity Commission (EEOC) on behalf of a Jewish employee who claimed he was forced to quit after his employer denied him time off for religious holidays.  The decision is a reminder of employers’ obligations to reasonably accommodate employees’ sincerely held religious beliefs, practices or observances.

Background Of The Case

The EEOC, on behalf of Demetrius Ford, alleged that Ford’s employer, Center One, discriminated against him based on his religion and constructively discharged him in violation of Title VII because it refused to accommodate his request for time off for high holidays.  Specifically, the EEOC asserted that Center One assigned Ford “demeritorious attendance points” because he missed work to observe Rosh Hashanah and subsequently refused to permit him time off for future high holidays without an “official” letter from his congregation attesting to his need to be absent.  Id. at 5. Center One also scheduled a meeting with Ford to discuss his attendance issues on Yom Kippur, despite acknowledging it knew it was a high holy day in Judaism.  Ford submitted an email exchange with a leader from a congregation in response to Center One’s request for documentation, but Center One told Ford that it needed something more “official.”  Id. Ford eventually tendered his resignation, explaining that he was not able to obtain an “official clergy letter.”  Id. at 6.

The District Court granted summary judgment to Center One, holding that a mere accrual of attendance points for missing work did not constitute an adverse employment action, and that Ford was not constructively discharged.

The Third Circuit’s Ruling

On appeal, the Third Circuit unanimously vacated the District Court’s ruling and remanded for further proceedings. It held that the EEOC and Ford presented enough evidence for a jury to decide if Ford was constructively discharged.  Notably, the Third Circuit agreed with the District Court in finding that accruing attendance points — without any other changes to the compensation, terms, conditions, or privileges of employment — did not constitute an adverse employment action.

But, because there was no dispute that Center One required Ford to work on Rosh Hashanah and Yom Kippur and that Center One asked Ford for an “official” letter from his congregation attesting to his need to take off on high holidays, the Third Circuit opined that a jury could find that Center One’s conduct created an intolerable work environment.  It specifically noted that a requirement for “official clergy verification was at odds with the EEOC’s Guidance on religious discrimination, as well as our precedent.” Id. at 8. The Third Circuit also cautioned that “[t]he doctrine of constructive discharge does not require an employee who is seeking religious accommodation to either violate the tenets of his faith or suffer the indignity and emotional discomfort of awaiting his inevitable termination.” Id.

Implications For Employers

The ruling in EEOC v. Center One LLC reminds employers that they need to reasonably accommodate an employee’s sincerely held religious beliefs, practices, or observances.  Such accommodations are required unless an employer can show that the accommodation would create an undue hardship.  The decison also cautions employers that while they can request documentation in support of an accommodation, they cannot require an official letter from a clergy member, spiritual leader, or other congregant.

Thank You For A Successful Duane Morris Class Action Review – 2024 Book Launch Event!

Thank you to all our clients who attended the in-person book launch of the Duane Morris Class Action Review in Philadelphia last week, as well as our nationwide audience who participated via Zoom.

In case you missed it, watch a video of the live presentation below, featuring Duane Morris partners and editors of the Review, Jerry Maatman and Jennifer Riley, with Equal Employment Opportunity Commissioner Keith Sonderling.

Please also view pictures from the in person Book Launch event below. We would love to see you at the event in 2025!

Duane Morris Chairman and CEO Matt Taylor delivers opening remarks.
Duane Morris Chairman and CEO Matt Taylor delivers opening remarks.
Duane Morris Vice Chairman Tom Servodidio introduces the panel.
Duane Morris Vice Chairman Tom Servodidio introduces the panel.
Introducing the Duane Morris Class Action Review - 2024.
Introducing the Duane Morris Class Action Review – 2024.
Review editors and authors Jerry Maatman and Jennifer Riley, guest speaker Commissioner Keith Sonderling of the EEOC.
Review editors and authors Jerry Maatman and Jennifer Riley, guest speaker Commissioner Keith Sonderling of the EEOC.
Review author and editor Jerry Maatman.
Review author and editor Jerry Maatman.
Commissioner Keith Sonderling of the EEOC.
Commissioner Keith Sonderling of the EEOC.
Book launch reception.
Book launch reception.

California Federal Court Grants Class Certification To iPhone App Purchasers

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On February 2, 2024, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the District of Northern California granted Plaintiffs’ motion to certify a class of purchasers of one or more iOS applications or application licenses from Defendant Apple, Inc. (“Apple”) or who paid for one or more in-app purchases since July 10, 2008 in In Re Apple iPhone Antitrust Litigation, No. 4:11-CV-06714 (N.D. Cal. Feb. 2, 2024). The Court rejected defense arguments that class certification should be denied on the grounds that the model of Plaintiffs’ expert revealed millions of uninjured class members and that individual issues would predominate. Instead, the Court found that the model showed an estimated 7.9% of the class is uninjured and that with more complete data the model will be capable of showing antitrust impact on a class-wide basis.

In Re Apple iPhone Antitrust Litigation is required reading for any corporate counsel handling antitrust class action litigation involving claims by end consumers.

Case Background

Plaintiffs are purchasers of iPhone applications (apps), app subscriptions, and/or in-app content via the iPhone App Store. Defendant sells iPhones and requires app purchases to be made via the App Store. Plaintiffs claim that Apple charges App Store developers supracompetitive commissions that are passed on to consumers in the form of higher prices for app downloads, subscriptions, and in-app purchases. Plaintiffs assert claims under § 2 of the Sherman Act for unlawful monopolization and attempted monopolization of the iPhone applications aftermarket.

In a prior ruling, the Court denied class certification. It had concluded that Plaintiffs could not establish the predominance requirement under Rule 23(b)(3) because they had not demonstrated that damages from Apple’s alleged anticompetitive conduct could be proven on a class-wide basis. According to the Court, the methodology of Plaintiffs’ expert failed to reasonably ascertain how many class members were unharmed by the alleged conduct and individual questions would predominate.

The Court’s Class Certification Ruling

In response to the Court’s ruling, Plaintiffs narrowed their class definition to only include Apple account holders who have spent $10 or more on app or in-app content.

Using that new definition, Plaintiffs submitted revised and new expert reports estimating that the proposed class includes only 7.9% unharmed members and again moved for class certification under Rule 23(b)(3). Since the Court’s prior ruling, the Ninth Circuit also rejected the argument that “Rule 23 does not permit the certification of a class that potentially includes more than a de minimis number of uninjured class members.” Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods LLC, 31 F. 4th 651, 669 (9th Cir. 2022). According to the Court, the revised model can show the impact of Apple’s allegedly anticompetitive conduct across all class members, and once Apple produces the rest of its app transactional data, the model will be able to calculate the exact extent of injury suffered by each class member. Under Olean, the Court opined that Plaintiffs meet the predominance requirement.

Implications For Defendants

In Re iPhone Antitrust Litigation is another example of a federal court class certification decision turning on the existence of common, injury-producing conduct. The Court credited evidence that may be over inclusive at class certification stage of the proceedings, but is nonetheless capable of showing the impact of the allegedly anticompetitive conduct across all class members at trial.

Texas Federal Court Dismisses Video Privacy Protection Act Class Action Concerning Email Newsletter From University Of Texas

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In Brown v. Learfield Communications, LLC, et al., No. 1:23-CV-00374, 2024 U.S. Dist. LEXIS 15587 (W.D. Tex. Jan. 29, 2024), Judge David A. Ezra of the U.S. District Court for the Western District of Texas granted Defendants Learfield Communications, LLC and Sidearm Sports, LLC’s Rule 12(b)(6) motion to dismiss Plaintiff’s Video Privacy Protection Act (VPPA) class claim.  The Court held that Plaintiff failed to plead facts to support his claim under the VPPA because he did not allege that he was a subscriber to audio-visual goods or services themselves, just a newsletter that contained links to publicly-available content on The University of Texas’s website.  Defendants in VPPA class actions can utilize this decision as a roadmap when preparing motions to dismiss.

Case Background

Defendants Learfield Communications, LLC and Sidearm Sports, LLC (collectively, “Defendants”) operated the University of Texas at Austin’s (“UT”) website (the “UT Website”).  Id. at 2.  The UT Website contains software that enables Facebook to track the activity of UT Website users on other websites.  Id.  Defendants invite UT Website visitors to subscribe to emailed newsletters.  Id. at 3.  The newsletters provide links to various videos, clips, and other content on the UT Website related to UT Athletics.  Id.  Plaintiff Adam Brown subscribes to UT’s emailed newsletter.  Id.

In April 2023, Plaintiff filed a class action against Defendants UT, UT Athletics, Learfield, and Sidearm alleging that they violated the VPPA by purportedly exposing the subscribers’ personal identification information and gathering marketing data without consent.  Id. at 4.  In June 2023, UT and UT Athletics filed a motion to dismiss based on sovereign immunity.  Id.  at 2.  The motion was granted in July.  Id.  In September, Defendants Learfield and Sidearm filed a motion to dismiss under 12(b)(1), 12(b)(6), and 12(b)(7).  Id.

The Court’s Decision

The Court denied Defendants’ Rule 12(b)(1) and 12(b)(7) motions to dismiss. It held that neither Learfield or Sidearm was entitled to immunity as an “arm of the state,” and that neither UT or UT Athletics were indispensable parties to the lawsuit.  Id. at 7-10.

The Court, however, granted Defendants’ Rule 12(b)(6) motion to dismiss on the basis that Plaintiff was not a “consumer” under the VPPA because he failed to allege a factual nexus between the subscription and Defendants’ allegedly actionable video content.  Id. at 2, 19, 26.

To state a claim under the VPPA, the Court noted that a plaintiff must allege that a defendant “(1) is a video tape service provider; (2) who knowingly disclosed to any person; (3) personally identifiable information; (4) concerning any consumer.”  Id. at 10-11; 18 U.S.C. 2710(b)(1).  Under the VPPA, a “consumer” is “any renter, purchaser, or subscriber of goods or services from a video tape service provider.”  18 U.S.C. § 2710(a)(1).

The Court reasoned that the VPPA “only applies to consumers (including subscribers) of audio video services” because, when reading the term “consumer” in the full context of the VPPA, “a reasonable reader would understand the definition of ‘consumer’ to apply to a renter, purchaser or subscriber of audio-visual goods or services, and not goods or services writ large.”  Id. at * 19 (emphasis original) (quoting Carter v. Scripps Networks, LLC, 2023 WL 3061858, at *6 (S.D.N.Y. Apr. 24, 2023)).

The Court concluded that Plaintiff was not a “consumer” under the VPPA because (i) the newsletter did not contain videos, just links to videos on the UT Website; and (ii) the linked videos were available for any member of the public to see on the UT Website, not just those who subscribed to the newsletter.  Id. at 26-28.  Accordingly, the Court ruled that Plaintiff was not a subscriber to audio-visual goods or services, just a newsletter.  Id. at 28-29.  Ultimately, because Plaintiff failed to allege facts to support a claim under the VPPA, the Court granted Defendants 12(b)(6) motion to dismiss.  Id. at 29.

Implications For Companies

The decision in Brown v. Learfield serves as a roadmap for defendants in VPPA class actions to utilize when preparing motions to dismiss. This case is also important as it adds the Western District of Texas to a growing number of federal courts that strictly construe the VPPA to audio-visual materials, not links to publically-available videos in newsletters.  See, e.g., Carter v. Scripps Networks, LLC, No. 22-CV-2031, 2023 WL 3061858, at *6 (S.D.N.Y. Apr. 24, 2023); Jefferson v. Healthline Media, Inc., No. 3:22-CV-05059, 2023 WL 3668522, at *3 (N.D. Cal. May 24, 2023); Gardener v. MeTV, No. 22-CV-5963, 2023 WL 4365901, at *4 (N.D. Ill. July 6, 2023).

New York State Court Refuses To Dismiss Claims Alleging The NYDOL Closed Unpaid Wage Investigations Due To Improper Agency Rulemaking

By Gerald L. Maatman, Jr., Katelynn Gray, and Gregory S. Slotnick

Duane Morris Takeaways: On January 23, 2024, in Chen et al. v. Reardon, Index No. 908146-23, in the Supreme Court of the State of New York (Albany County), a judge denied a motion to dismiss filed by the New York Department of Labor (NYDOL) seeking dismissal of a lawsuit claiming the agency improperly closed wage theft investigations for home care aides by way of inappropriate rulemaking under New York’s State Administrative Procedures Act (NYSAPA).  Specifically, in evaluating the NYDOL’s motion and giving the workers the benefit of every possible inference, the court held the NYDOL may have improperly engaged in formal rulemaking without abiding by all required prerequisites (such as public notice) in shutting down its investigations of the workers’ unpaid wage claims due to collective bargaining agreements that included mandatory arbitration.  The judge concluded that a “reasonable view of the facts stated” describes the NYDOL’s application of a “fixed, general principle” of dismissing every complaint that was subject to mandatory arbitration (i.e., a NYDOL rule), rather than “ad hoc decisions” evaluating the individual facts and circumstances of each claim.  Id. at 9. 

The decision highlights a state court’s willingness to scrutinize a state agency’s “informal” broad interpretations of its own investigation procedures under state law, and ultimately provides allegedly aggrieved employees with reasonable means to challenge the agency’s actions.

Case Background

Five home care aides who provided live-in services to elderly and disabled patients claim they typically worked 24-hour shifts without ever receiving five hours of uninterrupted sleep or three hours of meal breaks.  Id. at 2The workers alleged that they were never paid for more than 13 hours of work for any such 24-hour shifts despite not receiving the required sleeping and meal break periods in alleged violation of the New York Labor Law (NYLL) and its “13-hour rule.”  Id.  After working these shifts for some time, the workers each filed their own complaint with the NYDOL, claiming their compensation structure violated the NYLL.

The NYDOL initially accepted the complaints and began investigating.  However, when the NYDOL determined that the workers were all subject to mandatory arbitration through a collective bargaining agreement with their respective unions, who had filed grievances on their behalf, the NYDOL terminated each investigation.  The NYDOL sent each worker a complaint closing letter stating “we understand other means are available for a resolution of your claims.”  One NYDOL investigator explained to a worker that the DOL closed the case “following the advice of our counsel’s office.  The [CBA] supersedes our authority in this case.  There is no getting around it.  The same is true in each case we have closed on this basis.”  The NYDOL also issued a press release around the same time stating that it “may accept…cases [involving alleged violations of the 13-hour rule] if an employee is not covered by an arbitration clause.”  Id.

In August 2023, the workers filed an Article 78 petition against the NYDOL, seeking that the NYDOL reopen the closed investigations of their claims.  Id. at 2-3The workers argued the NYDOL’s policy of closing the investigations was pursuant to a “rule” within the meaning of the NYSAPA and that the NYDOL failed to submit a notice of proposed rulemaking as required before adopting such a rule.  They also claimed the NYDOL’s reliance on that rule before closing their cases was an error of law, that the NYDOL’s jurisdiction is not limited by private arbitration agreements such that termination of their investigations was an abuse of the NYDOL’s discretion.  Id.

The NYDOL moved to dismiss the petition and claimed it must be dismissed because it fails to establish a right of mandamus relief and fails to state a claim under the NYSAPA.  Id.

The Court’s Decision

The Court determined that in considering a motion to dismiss, the petition must be given a liberal construction, the petitioners must be afforded every possible favorable inference, and the motion should only be granted if there is no “reasonable view of the facts” that could entitle petitioners to relief.  Id. at 4

The NYDOL argued that it has discretionary authority to investigate employer-employee controversies, and that the Article 78 petition could not be used to compel it to engage in a discretionary act.  Id.  In addressing these positions, the Court found that if a petitioner prevails under either a mandamus to compel or a mandamus to review under New York law, the Court “may grant the petitioner the relief to which he is entitled.”  Id. at 5The Court further found that under appropriate circumstances, such relief could include an order that directs specified action by the respondent.  Id.  It then held that because the workers asserted various causes of action under state law and alleged that the NYDOL’s decisions to close their complaints were arbitrary and capricious, affected by errors of law, and abuses of discretion, a judgment in favor of the workers could appropriately require the NYDOL to revisit their complaints.  Id. at 6-7

As for the workers’ claims under the NYSAPA and the NYDOL’s potentially improper rulemaking, the NYDOL argued that its determination to decline to investigate the individual petitioners’ claims was specific to the facts and circumstances of the complaints and subsequent investigations, and not of “general applicability that implements or applies law.”  Id.  The Court opined that the NYSAPA requires the NYDOL to comply with certain procedural requirements before adopting any “rule” and that if the NYDOL engaged in formal rulemaking but did not comply with the procedural requirements of the NYSAPA, that regulatory action must be annulled.  Id. at 6-7

The NYDOL conceded that it did not follow the rulemaking procedures laid out in the NYSAPA, and the only question the Court needed to decide was whether the workers adequately pled that NYDOL’s decision to terminate its investigations was pursuant to a rule within the meaning of the NYSAPA.  Id. at 7It noted that a “rule” under the NYSAPA is a fixed, general principle applied without consideration of other relevant facts and circumstances, as distinguished from ad hoc decision-making based on individual facts and circumstances.  Id. 

The Court reasoned that “rules” direct what action should be taken regardless of individual circumstances and apply to future courses of conduct.  It held that a “policy” dictating specific results without regards to other relevant circumstances is subject to the NYSAPA’s rulemaking requirements.  Id. at 8

In this case, the Court found that the workers had alleged that the NYDOL dismissed each of their complaints because their unions had entered into collective bargaining agreements with their employers that called for mandatory arbitration of their claims.  Id. at 8-9The workers also alleged that the NYDOL’s practice or policy of dismissing complaints on this basis was rigidly applied without regard to aides’ individualized circumstances or any mitigating factors.  Id.  The NYDOL investigator’s statement to one worker that the NYDOL was required to terminate all investigations of the workers due the collective bargaining agreements and that “there is no getting around it” was further evidence in support of the workers’ petition that the NYDOL engaged in improper rulemaking.  Id. at 9

The Court ultimately gave the workers’ petition a liberal construction, accepted its pleaded facts as true, and gave them the benefit of every possible inference, denying the NYDOL’s motion to dismiss the petition.  Id.  The Court determined that the workers’ petition sufficiently alleged the NYDOL’s application of a fixed, general principle of dismissing every complaint that was subject to a mandatory arbitration agreement as opposed to an “ad hoc decision” based on individual facts and circumstances.  Id.

Implications For Businesses

The Chen decision illustrates that under appropriate circumstances, judges will not hesitate to question broadly-applicable “policies” of state agencies akin to “rules” under state law.  As evidenced in this case, such scrutiny includes denying state agency motions to dismiss claims brought by aggrieved workers who feel an agency failed to follow its own procedural requirements in closing investigations into their claims.  It also serves as a timely reminder for all employers of the ever-present possibility that state agencies may still investigate workers’ claims despite the existence and application of perfectly valid mandatory arbitration agreements.   Employers should always remain cautious any time a state agency closes an investigation before completion due to the possibility such closure may later be found to have been improper by a court.  Employer skepticism of broadly applicable state agency policies concerning workers’ claims that results in uniform outcomes is also warranted, especially when an agency confirms such position in press releases!

Report From New York City: U.S. Privacy Laws, A.I. Developments, And Bryan Cranston Take Center Stage At Legalweek 2024


By Alex W. Karasik

Duane Morris Takeaways Privacy and data breach class action litigation are among the key issues that keep businesses and corporate counsel up at night.  There was over $1 billion dollars procured in settlements and jury verdicts over the last year for these types of “bet-the-company” cases.  At the ALM Law.com Legalweek 2024 conference in New York City, Partner Alex W. Karasik of the of the Duane Morris Class Action Defense Group was a panelist at the highly anticipated session, “Trends in US Data Privacy Laws and Enforcement.”  The conference, which had over 6,000 attendees, produced excellent dialogues on how cutting-edge technologies can potentially lead to class action litigation.  While A.I. took the main stage, along with an epic keynote speech from revered actor, Bryan Cranston, privacy and data-management issues were firmly on the radar of attendees.

Legalweek’s robust agenda covered a wide-range of global legal issues, with a prominent focus on the impact of technology and innovation.  Some of the topics included artificial intelligence, data privacy, biometrics, automation, and cybersecurity.  For businesses who deploy these technologies, or are thinking about doing so, this conference was informative in terms of both their utility and risk.  The sessions provided valuable insight from a broad range of constituents, including in-house legal counsel, outside legal counsel, technology vendors, and other key players in the tech and legal industries.

I had the privilege of speaking about how data privacy laws and biometric technology have impacted the class action litigation space.  Joining me on the panel was Christopher Wall (Special Counsel for Global Privacy and Forensics, and Data Protection Officer, HaystackID); Sonia Zeledon (Associate General Counsel Compliance, Risk, Ethics, and Privacy, The Hershey Company); and Pallab Chakraborty (Director of Compliance & Privacy, Xilinx).  My esteemed fellow panelists and I discussed how the emerging patchwork of data privacy laws – both in the U.S. and globally – create compliance challenges for businesses.  I provided insight on how high-stakes biometric privacy class action litigation in Illinois can serve as a roadmap for companies, as similar state statutes are emerging across the country.  In addition, I explored how artificial intelligence tools used in the employee recruitment and hiring processes can further create potential legal risks.  Finally, I shared my prediction of how the intersection of ESG and privacy litigation will continue to emerge as a hot area for class action litigation into 2024 and beyond.

Finally, and probably the most important update to many of you, Bryan Cranston’s keynote address was awesome!  Covering the whole gamut of the emotional spectrum, Bryan was fascinating, inspirational, and hilarious.  Some of the topics he discussed included the importance of family, the future impact of A.I. on the film industry, his mescal brand, and a passionate kiss during his first acting scene at 19.  Bryan was a tough act follow!

Thank you to ALM Law.com, the Legalweek team, my fellow panelists, the inquisitive attendees, the media personnel, and all others who helped make this week special

Illinois Supreme Court Opens The Door For More Wage & Hour Antitrust Class Actions

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On January 19, 2024, the Illinois Supreme Court unanimously held that the Illinois Antitrust Act does not allow staffing agencies to avoid allegations that they suppressed wages and agreed not to hire each other’s workers in The State of Illinois ex rel. Kwame Raoul v. Elite Staffing, Inc., et al., No. 2024 IL 128763 (Ill. Jan. 19, 2024). The Supreme Court rejected defense arguments that the complaint failed to state a cause of action because the Illinois Antitrust Act provides that services otherwise subject to the Act “shall not be deemed to include labor which is performed by natural persons as employees of others.” Id. at 3. The Supreme Court concluded that reading the Illinois Antitrust Act so broadly would contradict the entire purpose of the Act, i.e., promoting and protecting free and fair competition; therefore it found that the Act does not exclude all agreements concerning labor services, including the conduct alleged.

Illinois v. Elite Staffing is an important reminder that businesses must be mindful of state antitrust and competition laws, in addition to the federal antitrust laws, and is required reading for any corporate counsel handling antitrust class action litigation under state antitrust and competition laws involving wage-suppression issues.

Case Background

In July 2020, the Illinois Attorney General sued Elite Staffing Inc., Metro Staff Inc., Midway Staffing Inc. and their common customer, Colony Inc., on grounds that Colony required the staffing agencies not to poach each other’s employees and to agree to below-market wages for temporary workers at Colony. The three staffing firms provided a Colony facility with temporary workers beginning in 2018 where between 200 and 1,000 temporary workers would work at any given time. According to the allegations in the Complaint, Colony required the staffing agencies not to offer better wages or other benefits to any of each other’s workers and precluded the workers from trying to switch between the agencies. The Defendants moved to dismiss the complaint arguing that the alleged conduct was exempted from antitrust liability under the Illinois Antitrust Act. The circuit court denied the motion, and the Illinois Appellate Court concluded that the exemption in the Act did not extend to services provided by staffing agencies. The Illinois Supreme Court thereafter granted Defendants’ petition for leave to appeal.

Illinois Antitrust Act Does Not Exclude All Agreements Concerning Labor

Section 4 of the Illinois Antitrust Act exempts from coverage “labor which is performed by natural persons as employees of others.” See 740 ILCS § 10/4. This section is important because, among other reasons, § 3 of the Illinois Antitrust Act, which is expressly modeled after § 1 of the Sherman Act and federal court interpretations thereof, would otherwise proscribe the conduct alleged in the Complaint. The Supreme Court noted that just as reading §1 of the Sherman Act to prohibit every restraint on competition would be absurd, so too would be reading § 4 of the Illinois Antitrust Act in isolation. Specifically, the Supreme Court found that “service” cannot be read so broadly as to exempt all agreements concerning wages and conditions of employment from antitrust scrutiny regardless of their anticompetitive effects, which would be contrary to the entire purposes of the Illinois Antitrust Act. Id at 19. The Supreme Court concluded that agreements between employers that concern wages or hiring may violate the Illinois Antitrust Act unless it is part of a collective bargaining process.

Implications For Employers

Illinois v. Elite Staffing opens to door for workers in Illinois to use state antitrust law to tilt labor market dynamics in their favor and to increase their bargaining leverage for greater compensation and benefits. It serves as an important reminder for employers to also be mindful of state antitrust and competition laws when making labor market decisions.

UFC Loses Summary Judgment In Wage-Suppression Class Action Battle With MMA Fighters

By Gerald L. Maatman, Jr. and Sean McConnell

Duane Morris TakeawaysOn January 18, 2024, Judge Richard F. Boulware II of the U.S. District Court for the District of Nevada denied Defendant’s motion for summary judgment in a wage suppression antitrust class action and declined to exclude two of Plaintiffs’ key experts in Le v. Zuffa, LLC, No. 2:15-CV-01045 (D. Nev. Jan. 18, 2024). The Court rejected defense arguments that summary judgment was appropriate on largely the same grounds that it certified the class on August 9, 2023, including arguments that the statistical model of Plaintiffs’ expert was flawed because it failed to include everyone in the sport and failed to consider the ways promoters help fighters develop into bigger stars. Defendant also argued that there was no dispute that there are more UFC fighters, more fights, and better compensation than at the start of the class period; however, the Court found sufficient evidence that UFC may have used its market power to suppress wages in any event.

 Le v. Zuffa is the first labor monopsony case ever, and the ruling in is required reading for any corporate counsel handling antitrust class action litigation involving wage-suppression issues.

Case Background

Plaintiffs are current or former UFC fighters. Defendant, Zuffa, LLC does business as UFC and is the preeminent MMA event promoter in the United States. Plaintiffs allege that UFC used exclusive contracts, market power, and a series of acquisitions to suppress wages paid to UFC fighters during the class period by up to $1.6 billion. Plaintiffs filed suit in December 2014 and defeated UFC’s motions for partial summary judgment in 2017. In February 2018, plaintiffs moved to certify two classes. A class consisting of all persons who competed in one or more live professional UFC-promoted MMA bouts taking place in the United States from December 16, 2010 to June 30, 2017 was certified last August (our prior post on that ruling is here).

In light of the class certification, Defendant renewed its motion for summary judgment and moved to exclude expert testimony. The Court struck two of Defendant’s motions to exclude and denied summary judgment. As a result, the case is scheduled to start trial on April 8, 2024.

Denial Of Summary Judgement

The Court rejected Defendant’s arguments for summary judgment on grounds that they were repetitive and unavailing.

Specifically, Zuffa argued that the total number of bouts, fighter compensation, and fighters all increased during the class period, that there are no barriers to enter the fight promotion market, and that it did not prevent competitors from signing and promoting fighters. The Court found that the fact that the raw numbers of fighters, bouts, and compensation increased is not dispositive and credited Plaintiffs’ evidence that their wages were still suppressed. The Court also noted that it expressly rejected Defendant’s arguments regarding barriers to entry and completion in the class certification decision.

Implications For Employers

Le v. Zuffa has the potential to be a landmark labor antitrust class action.

The Court credited evidence establishing that UFC has anticompetitive power on the buyer-side market of purchasing fighter services and that it used this power to harm all UFC fighters. Like other labor antitrust cases, Le v. Zuffa could be an important test of workers’ ability to use antitrust law to tilt labor market dynamics in their favor and to increase workers’ bargaining leverage for greater compensation and benefits.

Trend #5 – U.S. Supreme Court Rulings Continue To Impact The Class Action Landscape

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

Duane Morris Takeaway: As the ultimate referee of law, the U.S. Supreme Court traditionally has defined the playing field for class action litigation and, through its rulings, has impacted the class action landscape. The past year did not buck that trend. On June 29, 2023, the U.S. Supreme Court ruled in Students for Fair Admissions, Inc., et al. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), that two colleges and universities that considered race as a factor in the admissions process violated the Equal Protection Clause of the U.S. Constitution and Title VI of the Civil Rights Act of 1964. The ruling is fueling controversy along with a wave of claims that is likely to expand.

Check out the video below to see Duane Morris partner Jennifer Riley discuss the impact of U.S. Supreme Court rulings on the class action landscape in 2023, and what is coming in 2024.

Trend #5 – U.S. Supreme Court Rulings Continue To Impact The Class Action Landscape

  1. The U.S. Supreme Court’s Decision

Students for Fair Admissions, an advocacy group, brought two lawsuits alleging that the use of race as a factor in admissions by Harvard and the University of North Carolina, respectively, violated Title VI and the Equal Protective Clause of the Fourteenth Amendment. The U.S. Supreme Court agreed.

After reviewing the language of the Fourteenth Amendment (no State shall “deny to any person . . . the equal protection of the laws”), the Supreme Court began its analysis by recapping its early jurisprudence, including its decision in Brown v. Board of Education, 347 U. S. 483, 493 (1954), wherein it held that the right to a public education “must be made available to all on equal terms.” Students, 600 U.S. at 201, 204. The Supreme Court noted that these decisions, and others like them, reflect the broad “core purpose” of the Equal Protection Clause: “[D]o[ing] away with all governmentally imposed discrimination based on race.” Id. at 206.

The Supreme Court explained that, accordingly, any exceptions to the Equal Protection Clause’s guarantee must survive a daunting two-step examination known as “strict scrutiny,” which asks, first, whether the racial classification is used to “further compelling governmental interests” and, second, whether the government’s use of race is “narrowly tailored” or “necessary” to achieve that interest. Id. at 206-07. In Grutter v. Bollinger, 539 U.S. 306, 325 (2003), the Supreme Court endorsed the view that “student body diversity is a compelling state interest” but insisted on limits in how universities consider race. In particular, the Supreme Court sought to guard against two dangers: (i) the risk that the use of race will devolve into “illegitimate . . . stereotyp[ing]” and (ii) the risk that race will be used as a negative to discriminate against those racial groups that are not the beneficiaries of the race-based preference. To manage its concerns, Grutter imposed a third limit on race-based admissions programs. “At some point,” the Supreme Court held, “they must end.” Students, 600 U.S. at 212.

In Students for Fair Admissions, the U.S. Supreme Court held that the defendants’ race-conscious admissions systems failed each factor and, therefore, ran afoul of the Equal Protection Clause. As an initial matter, the U.S. Supreme Court found that defendants failed to operate their race-based admissions programs in a manner that is “sufficiently measurable to permit judicial [review].” Id. at 214-17. Second, the U.S. Supreme Court held that the race-based admissions systems failed to comply with the twin commands of the Equal Protection Clause that race may never be used as a “negative” and that it may not operate as a stereotype. Id. at 218-219. The U.S. Supreme Court explained that “college admissions are zero-sum. A benefit provided to some applicants but not to others necessarily advantages the former group at the expense of the latter.” Id. Third, the U.S. Supreme Court held that the admissions programs lack a “logical end point” as Grutter required. Id. at 221. As a result, the U.S. Supreme Court determined that the admissions programs “cannot be reconciled with the guarantees of the Equal Protection Clause.” Id. at 230.

  1. The Ruling’s Early Impact

On July 19, 2023, in Ultima Services Corp., et al. v. U.S. Department of Agriculture, No. 20-CV-00041, 2023 WL 4633481 (E.D. Tenn. July 19, 2023), a district court extended Students for Fair Admissions to the government contracting context and held that the Small Business Association’s use of racial preferences to award government contracts likewise violates the Equal Protection Clause.

Section 8(a) of the Small Business Act instructs the Small Business Administration (the SBA) to contract with other agencies “to furnish articles, equipment, supplies, services, or materials to the Government,” 15 U.S.C. § 637(a)(1)(A), and to “arrange for the performance of such procurement contracts by [subcontracting with] socially and economically disadvantaged small business concerns,” 15 U.S.C. § 637(a)(1)(B). The SBA adopted a regulation creating a “rebuttable presumption” that “Black Americans; Hispanic Americans; Native Americans; Asian Pacific Americans [; and] Subcontinent Asian Americans” are “socially disadvantaged.” 13 C.F.R. § 124.103(b)(1).

The district court held that the § 8(a) program does not satisfy strict scrutiny. First, the Administration did not assert a compelling interest. The district court reasoned that while the government “has a compelling interest in remediating specific, identified instances of past discrimination,” the program lacked any such stated goals. Id. at *11. Second, the district court held that, even if the SBA had a compelling interest in remediating specific past discrimination, the § 8(a) program was not narrowly tailored to serve that alleged compelling interest. Id. at *14. The § 8(a) program had no logical end point or termination date, was both underinclusive and overinclusive relative to its “imprecise” racial categories, and failed to review race-neutral alternatives.

The district court concluded that the defendants’ use of the rebuttable presumption violated Ultima’s Fifth Amendment right to equal protection, and it enjoined defendants from using the rebuttable presumption of social disadvantage in administering the program. Id. at *18.

Although the district court in Ultima limited its holding to the use of a “rebuttable presumption” in administration of § 8(a) programs, in addressing the requirement that racially conscious government programs must have a “logical end point,” it cited Students for Fair Admissions and noted that “its reasoning is not limited to just [college admissions programs].” Id. at *15 n.8. Thus, the first opinion considering the impact of Students for Fair Admissions extended it beyond college admissions, reflecting the decision’s potential to fuel claims asserted under 42 U.S.C. § 1981, Title VII, and other anti-discrimination statutes.

  1. Implications For Class Action Litigation

The Supreme Court’s decision has also caused private sector employers to question whether the ruling impacts their diversity, equity, and inclusion (DEI) initiatives. While politicians moved quickly to stake out positions on the issue, the plaintiffs’ class action bar and advocacy groups moved to take advantage of the uncertainty to line up a deluge of claims.

In the wake of Students for Fair Admissions, the Office for Federal Contractor Compliance Programs (OFCCP), the office responsible for overseeing affirmative action programs for federal contractors, promptly updated its website to state that its affirmative action programs are separate from those that educational institutions implemented to increase racial diversity in their student bodies. The OFCCP stated that “[t]here continue to be lawful and appropriate ways to foster equitable and inclusive work environments and recruit qualified workers of all backgrounds.”

Likewise, in response to the decision, EEOC Chair Charlotte Burrows, a Democratic appointee, promptly issued a statement declaring that the decision “does not address employer efforts to foster diverse and inclusive workforces or to engage the talents of all qualified workers, regardless of their background. It remains lawful for employers to implement diversity, equity, inclusion, and accessibility programs that seek to ensure workers of all backgrounds are afforded equal opportunity in the workplace.”

By contrast, Andrea Lucas, a Republican-appointed EEOC Commissioner, emphasized a different sentiment in a Fox News interview regarding the impact of Students for Fair Admissions: “I think this [decision] is going to be a wake-up call for employers. . . . Even though many lawyers don’t use the word affirmative action, it’s rampant today. . . . Pretty much everywhere there is a ton of pressure . . . across corporate America to take race-conscious . . . actions in employment law. That’s been illegal and it is still illegal.” As to potential challenges, she added: “I have noticed an increasing number of challenges to corporate DEI programs and I would expect that this decision is going to shine even more of a spotlight about how out of alignment some of those programs are. . . I expect that you are going to have a rising amount of challenges.”

Consistent with predictions, in the wake of the U.S. Supreme Court’s ruling, Republican Attorneys General from 13 states and Senator Tom Common of Arkansas sent a letter to the CEOs of Fortune 100 companies stating: “[T]oday’s major companies adopt explicitly . . . discriminatory practices [including], among other things, explicit racial quotas and preferences in hiring, recruiting, retention, promotion, and advancement.” They urged the companies to cease unlawful hiring practices. In response, 21 Democratic Attorneys General sent a letter condemning the Republican Attorneys General’s “attempt at intimidation”: “While we agree with our colleagues that “companies that engage in racial discrimination should and will face serious legal consequences…[w]e write to reassure you that corporate efforts to recruit diverse workforces and create inclusive work environments are legal and reduce corporate risk for claims of discrimination.”

On September 19, 2023, Students for Fair Admissions filed a lawsuit in the U.S. District Court for the Southern District of New York seeking to end race-conscious admissions at the U.S. Military Academy. . See Students for Fair Admissions v. U.S. Military Academy at West Point, et al., No. 7:23 Civ. 08262 (S.D.N.Y.). The group alleged that the admissions program at West Point, which takes race into account in its admissions process for future Army officers, is unconstitutional and unnecessary for a service that relies on soldiers following orders regardless of skin color.

The group filed a similar action against the U.S. Naval Academy on October 5, 2023, in the U.S. District Court for the District of Maryland. See Students for Fair Admissions v. U.S. Naval Academy, et al., No. 23-CV-2699 (D. Md.). The group seeks to prevent the Naval Academy in Annapolis, Maryland from taking race into account in the selection of an entering class of midshipmen. After filing suit, the group promptly sought a preliminary injunction.

On December 20, 2023, a federal judge denied a request to temporarily bar the Naval Academy from using race in its admissions process while the parties litigate the case. Students for Fair Admissions v. U.S. Naval Academy, No. 23-CV-2699, 2023 WL 8806668, at *1 (D. Md. Dec. 20, 2023) (noting that plaintiff’s requested injunctive relief “would undoubtedly alter the status quo,” and, at this stage, the parties have not developed a factual record from which the court can determine whether the Naval Academy’s admissions practices will survive strict scrutiny).

On October 4, 2023, another advocacy group, the America First Legal Foundation asked the EEOC to launch an investigation into Salesforce’s allegedly “unlawful employment practices” claiming that, through its programs promoting diversity and equality, it engaged in unlawful race-based and sex-based discrimination. The group has lodged similar accusations against than a dozen other companies alleging that they maintain programs that aim to increase workplace representation of women and minorities at the expense of White, heterosexual men. The American Alliance for Equal Rights filed lawsuits against additional companies, including law firms, claiming that their grants and programs excluded individuals based on their race.

Finally, on December 19, 2023, a Wisconsin attorney represented by the Wisconsin Institute for Law & Liberty filed suit alleging that a clerkship program maintained by the Wisconsin State Bar is unconstitutional because its eligibility requirements and selection processes discriminate among students based on various protected traits, primarily race. See Suhr v. Dietrich, et al., Case No. 23-CV-01697 (E.D. Wis.). He claims that members of Bar leadership are violating his First Amendment rights because they are using his mandatory dues as a practicing attorney to fund the program.

As these questions continue to percolate, and courts start to weave a patchwork quilt of rulings, such uncertainty is likely to fuel class action filings and settlements in the workplace class action space at an increasing rate. Companies should expect to see more governmental enforcement activity, litigation focused on alleged “reverse” discrimination, and claims challenging DEI initiatives.

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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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