Elizabeth Underwood – Class Action Defense

July 13, 2026July 13, 2026 by Gerald L. Maatman, Jr.

Ninth Circuit Revives Dishwasher Warranty Class Action Against Whirlpool, Reversing Dismissal Of Washington Consumer Protection Act Claim

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Elizabeth G. Underwood

Duane Morris Takeaways: On July 6, 2026, in Shellenberger v. AIG WarrantyGuard, Inc., et al., No. 25-1448 (9th Cir. July 6, 2026), Judges Christen, Hurwitz, and Bade of the U.S. Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of a putative class action alleging that AIG WarrantyGuard, Inc. and Whirlpool Corporation violated the Washington Consumer Protection Act (“CPA”) in connection with a KitchenAid service plan. The Ninth Circuit held that the named Plaintiff plausibly alleged that the Defendants’ offer letter and service contract, taken together, had the capacity to deceive a reasonable consumer, and that the district court erred in resolving that fact-intensive question at the motion to dismiss stage.

This ruling serves as a cautionary tale for companies that market service plans, particularly where buyout provisions or qualifiers in the fine print may be read as cutting against the offerings set out in consumer offer letters.

Case Background

Plaintiff Hadassah Shellenberger (“Plaintiff”) filed a putative class action against AIG WarrantyGuard, Inc. and Whirlpool Corporation (collectively, “Defendants”), asserting a claim under the CPA, Wash. Rev. Code §§ 19.86.020, 19.86.093. Id. at 1. Plaintiff alleged that Defendants’ offer letter created the impression “that the KitchenAid Service Plan would provide repairs or replacements for covered malfunctions, with repairs performed by KitchenAid-certified technicians, at no out-of-pocket expense to her.” Id. at 3. Plaintiff further alleged that this impression was inconsistent with the terms of the service contract, which included a buyout option, exercisable at Defendants’ sole discretion, allowing Defendants to technically satisfy all obligations under the contract without ever providing a repair or replacement. Id.

The district court dismissed Plaintiff’s CPA claim, finding that she had failed to plausibly allege the first element of a CPA claim, namely, “whether the defendant has engaged in an unfair or deceptive act or practice.” Id. at 2. Plaintiff appealed the ruling to the Ninth Circuit. Id. at 1.

The Ninth Circuit’s Decision

The Ninth Circuit reversed and remanded, finding that the district court erred in dismissing Plaintiff’s CPA claim. Id. at 7. The Ninth Circuit determined that Plaintiff’s interpretation of the offer letter was “facially plausible” because the offer letter mentioned only repairs and replacements as modes of performance, while the buyout option in the service contract provided an alternative manner of performance that was “inconsistent with the advertised benefits.” Id. at 3.

The Ninth Circuit rejected Defendants’ arguments that caveats in the offer letter and a fine-print disclaimer made Plaintiff’s interpretation implausible, finding the disclaimer language “insufficiently clear to change the apparent meaning of the offer letter’s representations.” Id. at 4 (internal quotation marks omitted). In addition, the Ninth Circuit similarly rejected the argument that qualifiers, such as “covered” and “where applicable”, defeated Plaintiff’s reading, concluding that those terms plausibly limited only the specific representations immediately next to them. Id. at 5.

Finally, the Ninth Circuit highlighted that whether a representation is misleading to a reasonable consumer is “a fact-intensive question not typically susceptible to resolution at the motion to dismiss stage.” Id. at 7.

Implications For Companies

This decision underscores that companies cannot avoid liability at the motion to dismiss stage under the CPA and other similar consumer protection statutes by simply pointing to fine-print disclaimers or qualifying words like “covered” or “where applicable.” Instead, courts will look to whether that fine print is clear enough to actually change the overall impression created by a company’s offer letter.

Overall, companies should audit consumer-facing offer letters and relevant marketing materials against discretionary provisions in service contracts to ensure consistency and compliance, especially where materials promise specific modes of performance, such as repair or replacement by certified technicians as seen in this case, that could be undercut by a seller’s discretion to satisfy its obligations through a different mechanism.

July 2, 2026July 2, 2026 by Gerald L. Maatman, Jr.

New Jersey Appellate Division Confirms Representative Wage Actions May Proceed Without Class Certification But Limits Look-Back Period For WHL And ESLL Claims

By Gerald L. Maatman, Jr., Olga A. Romadin, and Elizabeth G. Underwood

Duane Morris Takeaways: On June 29, 2026, in Martinez v. T. Slack Environmental Services, Inc., No. A-1008-24 (N.J. App. Div. June 29, 2026), the New Jersey Appellate Division addressed key issues in a wage and hour representative action brought pursuant to the New Jersey Wage and Hour Law (“WHL”) and the Prevailing Wage Act (“PWA”), including whether a representative action brought under the WHL and the PWA is distinct from a class action under N.J. Rule 4:32-1, and the appropriate statute of limitations for companion wage claims. Id. at 2. The Appellate Division affirmed in part and reversed in part a decision of the trial court holding that the WHL and PWA statutory language is independent of Rule 4:32-1 and therefore does not require class certification, and finding that a two-year—and not six—statute of limitations applies to WHL and Earned Sick Leave Law (“ESLL”) claims. Id. at 3.

This decision is significant for employers in because it confirms that representative wage actions under New Jersey’s wage statutes may proceed outside Rule 4:32-1 class certification procedures while also clarifying that WHL and ESLL claims carry a two-year limitations period, and PWA claims carry a six-year limitations period as breach of contract claims.

Case Background

Juan Martinez (“Martinez”) alleged that he worked as an hourly laborer for T. Slack Environmental Services, Inc. (“T. Slack”), a small, non-union New Jersey contractor that employed between six and ten hourly laborers subject to the same pay practices from 2006 to 2019. Id. at 3-4.

In February 2020, Martinez filed a lawsuit in which he alleged that T. Slack failed to pay required prevailing wages for public work, including for tasks classified as “B” and “C” laborer functions under the PWA. Id. at 4. He also claimed that defendants miscalculated overtime by paying him at lower rates rather than using a blended or weighted rate when he worked on both public and private projects or in different job titles during the same week. Id. at 5. Martinez further alleged uncompensated “off-the-clock” work, including transporting equipment to and from worksites and defendants’ Kenilworth facility, and asserted that earned sick leave was improperly calculated using the lower private wage rate. Id. at 5-6.

Following discovery conducted under the supervision of a special adjudicator, Martinez moved to certify a statutory representative action under the WHL and PWA in September 2024. Id. at 6-7. Defendants opposed on several grounds, arguing that Martinez had not satisfied the class action requirements of Rule 4:32-1, that a representative action was not permissible outside of Rule 4:32-1, that the putative class lacked numerosity, that Martinez was not an adequate representative, and that individualized questions precluded both representative and class treatment. Id. at 7.

The motion court granted Martinez’s motion, certified the matter as a representative action, designated Martinez as the representative of defendants’ current and former employees, and imposed a six-year look-back period for overtime claims from February 28, 2014, to February 28, 2020. Id. at 7. Defendants appealed. Id. at 8.

The Appellate Division’s Decision

The Appellate Division held, consistent with its recent decision in Cano v. County Concrete Corp., 483 N.J. Super. 459 (App. Div. 2026), that “the statutory language of both the WHL and PWA is independent of Rule 4:32-1 and therefore does not require class certification.” Id. at 3. The Appellate Division explained that the remedial nature of the PWA permits any worker “to maintain such action for and on behalf of [themselves] or other work[ers] similarly situated,” N.J.S.A. 34:11-56.40, and that this statute addresses the similar concerns of the WHL and ESLL. Id. at 15.

In addition, the Appellate Division rejected T. Slack’s argument that Martinez was required to present evidence of other similarly situated employees to qualify as a representative action. Id. Instead, it determined that, as in Cano, Martinez’s complaint put defendants on notice regarding the existence of similarly situated employees, and that the plain language of the PWA and WHL does not require a named plaintiff to identify the similarly situated employees to defendants. Id. at 15-16. Defendants, moreover, were already aware of approximately fifteen employees whose names and contact information had previously been provided to Martinez. Id. at 16.

Lastly, the Appellate Division reversed the six-year look-back period for WHL claims, and, by incorporation, ESLL claims. Id. at 18. Relying on Maia v. IEW Constr. Grp., 257 N.J. 330 (2024), the Appellate Division held that the 2019 amendment extending the WHL limitations period from two years to six years applies prospectively only, so the two-year limitations period governed those claims. Id.

On the other hand, the Appellate Division affirmed the six-year look-back period for PWA claims. Id. at 18-19. Because PWA claims for unpaid prevailing wages are treated as breach of contract claims, and the PWA does not provide its own limitations period, the general six-year contract limitations period under N.J.S.A. 2A:14-1 applied. Id. at 19.

Implications For Employers

This decision confirms that representative wage actions under New Jersey’s WHL, PWA, and ESLL may proceed independently of Rule 4:32-1 class certification requirements. While this may expand procedural avenues for plaintiffs pursuing wage claims on behalf of similarly situated employees, employers should note that the decision also limits potential exposure for WHL and ESLL claims by applying a two-year statute of limitations to pre-2019 conduct.

June 24, 2026June 24, 2026 by Gerald L. Maatman, Jr.

California Federal Court Grants In Part And Denies In Part Workday’s Motion To Dismiss In Mobley v. Workday

By Gerald L. Maatman, Jr., Adam D. Brown, and Elizabeth G. Underwood

Duane Morris Takeaways: In the closely watched AI-related litigation entitled Mobley, et al. v. Workday, Inc., No. 23-CV-00770 (N.D. Cal. June 22, 2026) (ECF No. 360), Judge Rita F. Lin of the U.S. District Court for the Northern District of California issued an order denying in part and granting in part Workday’s motion to dismiss. The Court denied Workday’s motion to dismiss Plaintiffs’ California Fair Employment and Housing Act (“FEHA”) claims, holding that Plaintiffs adequately alleged a nexus to California because Workday allegedly designs, develops, and operates its algorithmic screening tools from its California headquarters. Id. at 3-4. The Court also denied the motion as to one of the plaintiffs’ Americans with Disabilities Act (“ADA”) claim, determining that her new proxy-discrimination factual allegations fell within the scope of a prior order granting leave to amend to address certain deficiencies in a prior iteration of Plaintiffs’ Complaint, despite Workday’s argument to the contrary. Id. at 8. However, the Court granted Workday’s motion to dismiss as to Plaintiff Rowe’s newly asserted race-based disparate impact claim because Rowe did not seek leave to add a race-based claim, and therefore Rowe could not add this claim to the Third Amended Complaint (“TAC”). Id. at 9.

For employers and AI vendors defending against AI employment discrimination claims, this decision provides important guidance on how defendants can successfully move to strike unauthorized claims and legal theories that exceed the scope of court-granted leave to amend.

This development follows the Court’s previous Discovery Order, which we blogged on here, Workday’s unsuccessful Motion to Dismiss Plaintiff’s Amended Complaint, which we blogged about here, Workday’s first successful Motion to Dismiss, which we blogged on here, and the EEOC’s amicus brief filing, which we blogged about here.

Case Background

Plaintiffs Derek Mobley, Jill Hughes, Sheilah Johnson-Rocha, and FaithLinh Rowe brought this action against Workday, alleging that Workday’s algorithm-based applicant screening tools discriminated against them and other similarly situated job applicants based on race, age, and disability. Id. at 1. After the Court ruled on two rounds of motions to dismiss, Mobley proceeded on claims for disparate impact discrimination based on race under Title VII, disability under the ADA, and age under the ADEA. Id. at 1-2.

On November 12, 2025, Mobley sought leave to file a further amended complaint adding three new named plaintiffs and claims for sex-based discrimination under Title VII and sex-based, race-based, and age-based discrimination under the FEHA. Id. at 2. The Court found good cause for the late amendment under Federal Rules of Civil Procedure 15 and 16. Id. Workday moved to dismiss the resulting Second Amended Complaint (“SAC”), and the motion was granted in part and denied in part. Id. Plaintiffs were given leave to remedy deficiencies in their FEHA claims, which lacked allegations of a nexus to California, and Hughes was given leave to amend her ADA claim. Id. Plaintiffs then filed a TAC. Id.

Subsequently, Workday filed a motion to dismiss and to strike portions of the TAC, arguing Plaintiffs’ FEHA claims failed to plead a non-conclusory nexus between the alleged misconduct and California, and that the other amendments were unauthorized because they fell outside the scope of Plaintiffs’ leave to amend. Id. at 1.

The Court’s Decision

The decision addressed several issues.

Plaintiffs’ FEHA Claims Were Plausibly Asserted

First, the Court denied Workday’s motion to dismiss the FEHA claims, finding that Plaintiffs sufficiently alleged that Workday, whose principal place of business is in California, participated in the alleged misconduct from its California headquarters. Id. at 3. The TAC alleged that Workday’s tools were “designed, developed, maintained, and controlled from [Workday’s] California headquarters” and that the “screening, scoring, and rejection” of Plaintiffs’ applications “originate[d] in and [was] carried out from California.” Id. at 4. The Court reasoned that the TAC adequately alleged “material participation in the allegedly unlawful discriminatory employment decisions by an actor (Workday, through its algorithmic decision-making tools) in California.” Id.

The Court rejected Workday’s argument that its liability as an agent under the FEHA must turn on the liability of its customers, relying on the California Supreme Court’s decision in Raines v. U.S. Healthworks Medical Grp., 534 P.3d 40 (Cal. 2023). Id. Under Raines, Workday is not subject to derivative liability based on its employer-customer’s liability but instead “is directly liable for its ‘own engagement in FEHA-regulated activities on the employer’s behalf.’” Id. (quoting Raines, 534 P.3d at 53).

The Court also rejected Workday’s contention that applying the FEHA to its California-based conduct would amount to an impermissible extraterritorial application, reasoning that wrongful conduct within California’s borders is not properly understood as “extraterritorial” regardless of where an aggrieved worker resides. Id. at 5-7.

Plaintiff Hughes’s Amended ADA Claim Was Permissible

Second, the Court denied Workday’s motion as to the permissibility of Plaintiff Hughes’s ADA claim. Id. at 8. The TAC alleged that “algorithmic hiring tools can identify and rely upon [ ] proxy indicators of illness or health-related limitations” such as “medical-related leave, or patterns consistent with treatment and recovery,” and “can disproportionately flag and screen out such applicants based on inferred health status rather than job-related qualifications.” Id. The Court rejected Workday’s argument that the Court had not authorized new theories of proxy discrimination for physical disabilities, reasoning that the additional allegations were squarely within the scope of the leave to amend. Id.

Plaintiff Rowe’s Race-Based Disparate Impact Claim Was Dismissed

Third, the Court dismissed Plaintiff Rowe’s race-based disparate impact claim under Title VII, which sought for the first time to assert discrimination based on her race as an Asian American. Id. at 9. The Court reasoned that the Second Amended Complaint did not contain such a claim and that Plaintiffs had not previously sought or received authorization to add the claim, as the prior race-related allegations were limited to African American and Black applicants. Id.

Plaintiffs’ Direct-Employer Theory Was Stricken

Finally, the Court dismissed Plaintiffs’ new legal theory that Workday is liable as an employer because it used the challenged recruitment and hiring procedures in screening and selecting its own employees, explaining that this legal theory was unauthorized. Id. at 10.

Implications For Employers

This decision highlights that companies developing and operating AI-driven hiring tools in and/or from California may be subject to the FEHA for their own California-based conduct, even when the affected applicants reside and apply for jobs out of state.

Moreover, the Court’s treatment of the amendments to the complaint underscores the importance of carefully observing the scope of court-granted leave to amend. While the Court permitted new proxy-discrimination allegations supporting an existing ADA claim, the Court dismissed and struck a new race-based theory and a new direct-employer theory that exceeded the scope of the amendments the Court had authorized, illustrating that plaintiffs cannot use amendments to incorporate entirely new claims or theories without leave.

June 22, 2026June 22, 2026 by Gerald L. Maatman, Jr.

No Retake Allowed: New York Federal Court Denies EEOC’s Motion For Reconsideration In Equal Pay Act Case Against School District

By Gerald L. Maatman, Jr., Olga A. Romadin, and Elizabeth G. Underwood

Duane Morris Takeaways: On June 18, 2026, Judge Anthony J. Brindisi of the U.S. District Court for the Northern District of New York denied the EEOC’s motion for reconsideration of the Court’s earlier order denying cross-motions for summary judgment in EEOC v. Hunter-Tannersville Central School District, No. 1:21-CV-00352, 2026 WL 1759441 (N.D.N.Y. June 18, 2026). The district court found that the EEOC failed to satisfy the standard for reconsideration, reasoning that the EEOC had not identified an intervening change in controlling law, new evidence, or a clear error warranting relief.

This ruling is significant for employers defending Equal Pay Act claims and reinforces the high burden parties must satisfy to obtain reconsideration, namely, that a motion for reconsideration cannot be used to relitigate old issues or present evidence that was previously available.

Case Background

On March 26, 2021, the EEOC filed this action against the Hunter-Tannersville Central School District (“District”) alleging that the District violated § 206(d)(1) of the Equal Pay Act of 1963 by paying a former District superintendent, Dr. Susan T. Vickers (“Vickers”), less than her male colleagues for substantially equal work. Id. at *1. In response, the District denied the allegations and raised a statutory affirmative defense, asserting that any alleged pay disparity resulted from factors other than sex under 29 U.S.C. § 206(d)(1)(iv). Id.

After several years of discovery, the parties filed cross-motions for summary judgment. Id. The Court denied both motions, finding that genuine disputes of material fact precluded summary judgment in favor of either party. Id. The EEOC then timely moved for reconsideration, which the District opposed. Id.

The Court’s Decision

The Court ultimately denied the EEOC’s motion for reconsideration of the Court’s order denying cross-motions for summary judgment. Id.

First, the EEOC argued that the Court had erroneously accepted certain facts as undisputed after overlooking contrary evidence, specifically a deposition exhibit that the EEOC admittedly did not submit with its prior motion papers. Id. However, the Court rejected this argument for two reasons. Id. The omitted deposition exhibit did not qualify as “new evidence” because it was readily available at the time of the earlier briefing. Id. Moreover, the EEOC did not show that the omitted evidence was inconsistent with any of the challenged findings. Id. at *2.

Next, the EEOC contended that the Court misapplied Second Circuit precedent on the question of substantial equivalence. Id. The Court disagreed, explaining that the Second Circuit has made clear that “[w]hether two positions are ‘substantially equivalent’ for Equal Pay Act purposes is a question for the jury.” Id. (quoting Lavin-McEleney v. Marist Coll., 239 F.3d 476, 480 (2d Cir. 2001)). In particular, the Court determined that the EEOC did not show a clear error in the Court’s application of the law because the “expansive record” included “sufficient evidence from which a reasonable factfinder could conclude that Vickers’ comparators had different or additional job responsibilities and performance requirements.” Id.

The EEOC also argued that the Court failed to require the District to “prove” that the pay disparities between Vickers and her comparators stemmed from gender-neutral factors. Id. at *3. The Court, however, determined that the EEOC’s argument misunderstood the relative burdens on a motion for summary judgment. Id. While the District would have needed to “prove” its affirmative defense as a matter of law to succeed on its own motion, to survive the EEOC’s motion and get to trial, “the District was only required to identify sufficient evidence from which a reasonable factfinder could conclude that ‘the pay disparity in question result[ed] from a differential based on any factor except for sex.’” Id. (quoting Eisenhauer v. Culinary Inst. of Am., 84 F.4th 507, 522–23 (2d Cir. 2023)). The Court found the District met that standard. Id.

Finally, the Court rejected the EEOC’s argument that the Court failed to apply the law requiring the District to prove that longevity and negotiation were gender-neutral factors. Id. In rejecting the EEOC’s argument, the Court noted that the EEOC cited no controlling authority for the proposition that longevity and negotiations cannot constitute factors other than sex, identifying several courts within the Second Circuit that have found such factors to be legitimate factors other than sex. Id.

Because the Court declined to reconsider its earlier ruling, the Court indicated that the EEOC’s contingent requests regarding the issues of willfulness, good faith, and damages were rendered moot. Id. at *4.

Implications For Employers

The Court’s decision underscores that motions for reconsideration are subject to a demanding standard and cannot be used as a second opportunity to relitigate issues or present evidence that was available during an earlier round of briefing.

This decision also reinforces that the question of whether two job positions are “substantially equivalent” under the Equal Pay Act is a fact-intensive inquiry properly reserved for a jury, and that shared job descriptions alone do not establish substantial equivalence as a matter of law. Id. at *2.

Lastly, the Court’s analysis confirms that longevity and salary negotiations remain viable “factors other than sex” under the Equal Pay Act in the Second Circuit. Id. at *3. Employers should therefore document the legitimate, gender-neutral factors underlying compensation decisions to support a potential affirmative defense in the event of an Equal Pay Act challenge.

June 2, 2026June 2, 2026 by Gerald L. Maatman, Jr.

California Federal Court Clarifies Limits On AI Bias Testing And Applicant Data Disclosure In Mobley v. Workday

By Gerald L. Maatman, Jr., Adam D. Brown, and Elizabeth G. Underwood

Duane Morris Takeaways: In Mobley, et al. v. Workday, Inc., Case No. 23-CV-00770, 2026 WL 1510537 (N.D. Cal. May 29, 2026) (ECF No. 340), Magistrate Judge Laurel Beeler of the U.S. District Court for the Northern District of California issued an order resolving three discovery disputes in this closely watched employment discrimination class action involving novel artificial intelligence (AI) issues. The Court denied Plaintiffs’ motion to compel production of Workday’s bias-testing data, finding that the attorney-client privilege protects the data because Workday’s attorneys curated it and used the results in providing legal advice. The Court also denied Plaintiffs’ motion to compel Workday to produce its customers’ applicant data because Plaintiffs failed to show that Workday had control of that data within the meaning of Rule 34 of the Federal Rules of Civil Procedure. However, the Court ordered production of Workday’s EEO-1 and Office of Federal Contract Compliance Programs (OFCCP) documents, finding those documents to be relevant to Workday’s knowledge of potential demographic disparities when utilizing its AI tools.

The ruling is significant for corporate counsel. For employers navigating the intersection of privilege, discovery obligations, and AI hiring tools, this ruling provides important guidance on protecting bias-testing data while recognizing the broad scope of discoverable information in AI employment discrimination cases.

This development follows Workday’s unsuccessful Motion to Dismiss Plaintiff’s Amended Complaint, which we blogged about here, Workday’s first successful Motion to Dismiss, which we blogged on here, and the EEOC’s amicus brief filing, which we blogged about here.

Case Background

Plaintiffs are suing Workday for utilizing an AI screening system that allegedly is more likely to deny employment applications from individuals who are African American, suffer from disabilities, or are over forty years old. Id. at *1. Workday Recruiting is a software product that helps customers manage hiring, and customers who purchase Workday Recruiting have access to an algorithmic feature called Candidate Skills Match, which determines the extent to which an applicant’s skills match the role to which they applied. Id. In 2024, Workday acquired HiredScore, which allowed Workday to offer additional features to customers, including Spotlight, a candidate review tool, and Fetch, a sourcing tool that connects organizations with potential talent by suggesting individuals for open jobs. Id.

As to the present discovery disputes, first, Plaintiffs filed a motion to compel Workday to produce its bias-testing data and its customers’ applicant data. Id. at *3. The parties disagreed as to whether the bias-testing data was protected by attorney-client privilege and whether Workday had control of its customers’ applicant data. Id. Second, Plaintiffs sought to compel production of Workday’s EEO-1 and OFCCP documents, with the parties disputing relevance, burden, and waiver. Id. at *6. Third, Plaintiffs moved to compel Workday to provide deanonymized data of applicants’ names and other application information. Id. at *7.

The Court’s Decision

Attorney-Client Privilege Applied To Bias-Testing Data

First, the Court agreed with Workday that its bias-testing data was protected from disclosure by the attorney-client privilege. Id. at *4. Specifically, the Court reasoned that the bias-testing data was privileged because Workday had shown more than mere direction from its attorneys and “ha[d] represented that its attorneys curated the data it used in the bias testing, the overall purpose of the testing was to provide legal advice and not to be used in a business capacity, and it ha[d] not submitted the data to a regulatory body.” Id.

Moreover, the Court rejected Plaintiffs’ arguments that Workday had waived privilege by using the bias-testing data offensively through reliance on an “AI Fact Sheet” that stated Workday performs bias testing. Id. at *5. Instead, the Court held that “Workday’s invoking the mere existence of its bias testing outside of litigation [was] not enough to waive privilege.” Id.

No Control Over Customer Application Data

Second, the Court denied Plaintiffs’ motion to compel Workday to produce its customers’ applicant data. Id. at *6. The Court found that Plaintiffs had not met their burden of demonstrating that the provision of the Master Subscription Agreement allowing Workday to produce a customer’s data under a court order constituted “control” under Rule 34 because Workday did not have a legal right to obtain its customers’ data on demand. Id. at *6. However, the Court observed that some third parties that Plaintiffs had subpoenaed had taken the position that Plaintiffs should seek the data from Workday instead. Id. Thus, the Court encouraged the parties to work together to resolve the issue. Id.

Production Of EEO-1 and OFCCP Documents

Third, the Court ordered production of Workday’s EEO-1 and OFCCP documents, finding that Plaintiffs had met their initial burden on relevance. Id. In particular, the Court reasoned that Workday utilizes the same AI tools as its customers, and under either the agent or direct-employer theory, “Workday’s EEO-1 and OFCCP documents are relevant to its knowledge of potential demographic disparities when utilizing AI tools.” Id. at *6.

Deanonymized Applicant Data

Finally, the Court disposed of Plaintiffs’ request for deanonymized applicant data as moot because Plaintiffs had admitted in subpoenas seeking the same information from third parties that they did not need applicant names. Id. at *7.

Implications For Employers

This decision reinforces the concept that bias-testing data can be shielded from production under attorney-client privilege when an employer’s attorneys curate the underlying data and conduct bias-testing for the purpose of providing legal advice, as opposed to a business or regulatory compliance purpose. Of note, and as supported by this Court’s decision, companies that utilize AI in their hiring processes should structure their bias-testing under the direction of legal counsel to preserve attorney-client privilege.

Moreover, the Court’s ruling on EEO-1 and OFCCP documents suggests that employers and AI vendors should be aware that they may face broad discovery obligations regarding their own use of the same AI tools they market to customers, as in this case, the Court found Workday’s EEO-1 and OFCCP documents relevant because Workday uses the same AI tools as its customers.

April 1, 2026April 1, 2026 by Gerald L. Maatman, Jr.

New York Federal Court Recommends Denial Of Class Certification In Gender Pay Discrimination Suit Against Bloomberg

By Gerald L. Maatman, Jr., Denis Yavorskiy, and Elizabeth Underwood

Duane Morris Takeaways: On March 24, 2026, in Ndugga v. Bloomberg L.P., No. 20 Civ. 7464, 2026 WL 828730 (S.D.N.Y. Mar. 24, 2026), Magistrate Judge Gabriel W. Gorenstein in the U.S. District Court for the Southern District of New York issued a Report and Recommendation recommending that class certification be denied in a gender-based pay discrimination case brought under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (“Title VII”) and the New York State Human Rights Law, N.Y. Exec. Law §§ 290-301 (“NYSHRL”). The Magistrate Judge determined that Plaintiff’s statistical evidence was not significant and flawed and that Plaintiff failed to show that any pay disparity was traceable to a particular senior executive at Bloomberg L.P. (“Bloomberg”).

For employers defending against pattern-or-practice pay discrimination class actions, this decision provides a roadmap for defeating commonality and is a reminder that statistical evidence must be both methodologically sound and causally connected to an identified employment practice.

Case Background

Naula Ndugga, a Black female news producer formerly employed at Bloomberg News, sued Bloomberg alleging gender-based pay discrimination. Ndugga began working as a paid intern at Bloomberg News in September 2017. Ndugga alleged that she was paid a starting salary of $65,000 while male producers hired out of the same internship program received $75,000 and that she was repeatedly overlooked for raises, promotions, and favorable assignments. Her operative complaint, filed in July 2024, sought certification a “U.S. Class” and a “New York Class,” each of which included female reporters, producers, and editors who “(1) were not Team Leaders or in other supervisory positions, and (2) were subjected to [Bloomberg’s] compensation systems.” Id. at *2-3. According to Bloomberg, members of the putative classes worked in nearly 30 cities, in more than 30 different business units, held more than 30 different job profiles, and were assigned to more than 40 different peer groups. Id. at *5.

Central to Ndugga’s theory was that compensation at Bloomberg News was controlled by a “single decisionmaker:” Reto Gregori, Bloomberg News’ deputy editor and a member of its Editorial and Research Management Committee. Id. at *4. Ndugga maintained that Gregori “micromanaged, at both systemic and individual levels, every stage of [Bloomberg News’] multipart evaluation and compensation systems,” resulting in lower pay for women. Id. at *5. Bloomberg countered that performance ratings and compensation decisions were made by hundreds of different managers across the organization. Id.

Ndugga retained labor economist Dr. David Neumark, who performed a regression analysis comparing compensation between female and male employees while controlling for variables such as race, experience, education, job profile, performance ratings, business unit, and an accounting category referred to as “Cost Center.” Id. at *19. For the proposed U.S. Class, Neumark found that female employees’ total compensation was 3.1% below that of similarly situated male employees, which was a difference of 1.64 standard deviations. Id. at *20. For the proposed New York Class, Neumark found a 4.4% disparity, amounting to a difference of 2.29 standard deviations. Id.

The Court’s Analysis

Magistrate Judge Gorenstein’s recommended denying class certification on the grounds that Ndugga failed to put forward sufficient evidence of discrimination to satisfy the commonality requirement of Rule 23(a)(2).

First, the Magistrate Judge determined that Neumark’s 1.64 standard deviation result as to the proposed U.S. Class was, by Neumark’s own admission, not statistically significant. Citing Ottaviani v. State Univ. of New York at New Paltz, 875 F.2d 365, 371 (2d Cir. 1989), the court explained that “[a] finding of two standard deviations corresponds approximately to a one in twenty, or five percent, chance that a disparity is merely a random deviation from the norm.” Id. at *15. While some courts have relaxed this threshold for small samples sizes, the Magistrate Judge found no basis for disregarding this rule because Neumark’s analysis was based on a large dataset of 750 compensation records. Id. at *31.

Second, for both proposed classes, the Magistrate Judge found that Neumark’s inclusion of “Cost Center” as a control variable in his regression analysis was improper. Cost Center is an organizational accounting category to which costs are charged, and Neumark even acknowledged that it “does not play a role in compensation guidelines.” Id. at *35. Bloomberg’s expert, Dr. Denise Neumann Martin, demonstrated that when Cost Center was excluded from the analysis, any observed pay differences between men and women were no longer statistically significant at either the 5% or 10% levels. Id. at *38. Accordingly, the Magistrate Judge found that the inclusion of this variable “obfuscate[d] the principal explanatory variable” and created a mere “appearance of difference.” Id.

Finally, the Magistrate Judge agreed with Bloomberg that Ndugga did not provide adequate evidence to show that any disparity in pay was traceable to Gregori. Id. Specifically, the court noted that even if Gregori may have been involved in all aspects of compensation, this does not in itself establish that he was responsible for any pay disparity. Id. at *39.

Implications For Employers

This Report and Recommendation in the Ndugga case is a win for employers defending against pattern-or-practice gender pay discrimination class actions and provides guidance on how to defeat a showing of commonality. Employers should scrutinize a plaintiff expert’s findings and assumptions, including whether they fall below the two-standard-deviation threshold, the size of the data set considered, and whether certain control variables are irrelevant like the Cost Center variable was here.

The court’s analysis also illustrates that where lower-level managers exercise substantial discretion over performance ratings and compensation, the involvement of a senior executive in a final review capacity does not automatically transform the process into a class-wide common policy. Even if a plaintiff can show a common mode of exercising discretion through a decisionmaker’s influence, she still must establish a causal relationship between this practice and the pay discrimination alleged.

March 30, 2026March 30, 2026 by Gerald L. Maatman, Jr.

Overtime Case Loses Pulse: New York Federal Court Finds Medical School Researchers Are Learned Professionals Exempt From FLSA And Denies Bid For Collective Action Certification

By Gerald L. Maatman, Jr., Elizabeth Underwood, and Olga A. Romadin

Duane Morris Takeaways: On March 26, 2026, Judge Paul Engelmayer of the U.S. District Court for the Southern District of New York issued an order denying certification of a Fair Labor Standards Act (“FLSA”) collective action brought by a study coordinator alleging that his employer, a medical school, misclassified him and a group of similarly-situated individuals in Castillo, et al. v. Albert Einstein College of Medicine, Inc. et al., No. 24 Civ. 00984, 2026 WL 834712 (S.D.N.Y. Mar. 26, 2026). Following discovery, the Court found that a higher standard for the first step of the conditional certification process was warranted, and on review of evidence submitted by the defendants as well as the plaintiff, it declined to certify the collective action, concluding that the differences in coordinators’ duties precluded a collective action.

Case Background

Plaintiff, a researcher in the Cognitive Neurophysiology Laboratory of the Albert Einstein College of Medicine, a medical school based in New York, brought a collective action against the College and three related entities, including a teaching college and the schools’ parent corporations, alleging that they had misclassified study and research coordinators as “learned professionals” exempt from overtime under the FLSA. Id. at *3.

The College filed a motion to dismiss Castillo’s amended complaint in July 2024, arguing that it was not an “employer” under the FLSA and NYLL, but the Court found this unavailing and denied the motion, and the parties proceeded to discovery. Id. at *1. Castillo then moved for conditional certification under the FLSA, seeking to encompass a collective of current and former employees working as research and study coordinators for the College of Medicine and its related entities who he alleged were not compensated for overtime work. Id. Castillo also sought to toll the FLSA statute of limitations period and asked the Court to authorize notice to individuals employed by the defendants as far back as three years. Id.

The District Court’s Decision

The Court found that, in light of the substantial discovery between the parties, the plaintiff faced a higher threshold requirement of making a “modest plus” factual showing in step one of the Second Circuit’s two-step process to certify a collective action under the FLSA, which it ruled Castillo had failed to meet because evidence submitted by both parties was not convincing that a collective of similarly-situated individuals existed. Id. at *5.

In its analysis, the Court noted that classifying a category of employees as learned professionals exempt under the FLSA is not, on its own, enough for a finding of a “common policy, plan, or practice” to find them to be “similarly situated.” Id. at 6. Plaintiffs have to show a uniform misclassification by identifying individuals with similar duties and responsibilities, and Castillo had failed to do so here because his reliance on two declarations and six job descriptions lacked the weight and detail necessary to account for the work of hundreds of individuals in dozens of departments and programs across the institutions. Id. at *7-8.

The Court was further swayed by the defendants’ evidence of substantial job descriptions showing a variety of duties and responsibilities both demonstrating variation and fitting into the learned professional exemption. Id. at *8-9. Defendants produced 49 job descriptions demonstrating that coordinators’ duties ran the gamut—while some were primarily tasked with data collection, others were responsible for developing clinical studies, making medical recommendations, or engaging with patients—and had “differing levels of intellectual rigor” and educational requirements. Id.

Finally, the Court found that Castillo’s reliance on the deposition testimony of the College’s vice president of human resources actually bolstered the defendants’ position that the duties and responsibilities of coordinators vary widely from one position to the next, undermining his argument that they are similarly situated and thus eligible for conditional certification. Id. at *10-11.

Implications For Employers

This decision offers several practical takeaways for employers in fields where workers may fall under an FLSA exemption. Employers are well-served by maintaining and cataloging detailed job descriptions that accurately reflect the duties and educational requirements of each position.

The Court’s decision also highlights the strategic value of the “modest plus” standard for defendants facing FLSA conditional certification motions. Where pre-certification discovery has already taken place, defendants in many circuits may involve this heightened standard and submit their own evidence to demonstrate that putative class members are not similarly situated with respect to their job duties and requirements.

February 18, 2026May 26, 2026 by Gerald L. Maatman, Jr.

A Win For Plaintiffs And A Warning For Class Counsel: New Jersey Appellate Division Reverses Dismissal Of Class Action Consumer Fraud Claims But Bars Attorney From Dual Role

By Gerald L. Maatman, Jr., Gregory S. Slotnick, Gregory D. Herrold, and Elizabeth G. Underwood

Duane Morris Takeaways: On February 17, 2026, in Paciorkowski v. Jetson Electric Bikes LLC, No. A-1640-24, 2026 WL 438086, at *1 (N.J. App. Div. Feb. 17, 2026), the New Jersey Appellate Division reversed a trial court’s dismissal of a plaintiff’s individual consumer fraud claims against an electric bike manufacturer, holding that a plaintiff need not demonstrate personal injury to establish standing under the New Jersey Consumer Fraud Act (“CFA”). However, the Appellate Division affirmed the denial of class certification, holding that an attorney cannot serve in the dual role of class representative and class counsel due to inherent conflicts of interest, reaffirming a general rule established over forty years ago that remains valid today. Id. at *6.

This decision underscores that economic losses, such as purchasing defective products, are sufficient to establish standing under the CFA, while also reinforcing the longstanding prohibition against attorneys wearing two hats in class action litigation.

Case Background

Plaintiff Thomas Paciorkowski, an attorney proceeding pro se, purchased three electric Bolt bikes manufactured by defendant Jetson Electric Bikes, LLC (“Jetson”) over the course of eight months in 2020. Id. at *1. Plaintiff alleged that he purchased the bikes for personal use, primarily for vacations, and did not use them for over a year after purchase. Id. He stated he first became aware the bikes were defective over a year after purchase when he went to inflate the bike tires and discovered they would not support his weight or the weight capacity listed on the bikes. Id.

On January 5, 2024, nearly four years after purchasing his first bike, Plaintiff filed a complaint against Jetson asserting individual claims and seeking to certify a class action. Id. The complaint asserted seven causes of action: two violations of the CFA; common law fraud; breach of express warranties; breach of implied warranties of merchantability; violations of the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301-2312; and unjust enrichment. Id.

Plaintiff alleged that Jetson made misrepresentations and engaged in unconscionable commercial practices in advertising and marketing its electric bikes. Id. at *2. Specifically, plaintiff asserted four main contentions. Id. First, plaintiff claimed the Bolt had a maximum rider-weight limit of 250 pounds and the Bolt Pro had a maximum rider-weight limit of 265 pounds, but both bikes were equipped with tires that could not support those weights. Id. Second, plaintiff alleged that Jetson advertised the bike tires as being made from rubber when they were actually made from cheaper nylon. Id. Third, plaintiff contended that Jetson advertised the bikes as made from rust-proof aluminum, but the frames were made from cheaper steel or iron that could rust. Id. Fourth, plaintiff asserted that both bikes are illegal to use in New Jersey because the Bolt, being motorized but lacking pedals, should be classified as a motorcycle under New Jersey law and cannot be used on bike paths or bike lanes. Id.

Jetson did not appear in the trial court, and on May 10, 2024, a default was entered against it. Id. at *1. On September 18, 2024, plaintiff moved to certify a class, which he defined as “[A]ll purchasers of Jetson Bolts and Bolt Pros who purchased the products at Costco stores in New Jersey or who purchased online at Costco and had the product shipped to a New Jersey address. The class excludes everyone who returned the product to Costco.” Id. at *2. Plaintiff represented that there were 230 potential plaintiffs who purchased Bolts and 4,863 potential plaintiffs who purchased Bolt Pros. Id.

On December 24, 2024, the trial court entered an order denying plaintiff’s motion to certify a class. Id. at *3. In a brief written statement, the trial court determined plaintiff lacked standing to bring any claims because he had “suffered no personal injury from the product.” Id.

The Appellate Division’s Ruling

On appeal, the Appellate Division reversed the dismissal of plaintiff’s individual claims, holding that the trial court erred in concluding plaintiff lacked standing. Id. at *6.

The Appellate Division explained that a plaintiff can bring a claim under the CFA if he “suffers any ascertainable loss of moneys or property” as a result of unlawful conduct. Id. at *3. According to the Appellate Division, an ascertainable loss is one that is “quantifiable or measurable,” and can be established by demonstrating either an out-of-pocket loss or a deprivation of the benefit of one’s bargain. Id. (citing Robey v. SPARC Grp. LLC, 256 N.J. 541, 548 (2024)).

The Appellate Division found that plaintiff alleged ascertainable losses under the CFA because he purchased three Jetson bikes for just under $700 and alleged they are defective and unusable. Id. at *4. It emphasized that personal injury is not a requirement for standing under the CFA, noting that the New Jersey Supreme Court has clarified the CFA only allows recovery of economic damages and does not permit recovery of non-economic damages. Id. at *4.

However, while the Appellate Division reversed on standing grounds regarding plaintiff’s individual claims, the court affirmed the denial of class certification on alternative grounds, holding plaintiff cannot serve in the dual role of class representative and class counsel. Id. at *5.

The Appellate Division relied on the New Jersey Supreme Court’s decision in In Re Cadillac V8-6-4 Class Action, 93 N.J. 412 (1983), which adopted a general rule prohibiting a lawyer from serving in the dual capacities of class representative and attorney for the class. Id. at *6. The ruling in In Re Cadillac identified three concerns: (1) the appearance of impropriety; (2) a potential conflict of interest because attorneys’ fees are drawn from the fund that also provides compensation to class members; and (3) the prohibition against an attorney acting as counsel in a case where he or she might also be a witness. Id.

Moreover, the decision noted that the U.S. Court of Appeals for the Third Circuit continues to adhere to a per se prohibition against a plaintiff class representative serving as class counsel. Id. (citing Kramer v. Scientific Control Corp., 534 F.2d 1085, 1090 (3d Cir. 1976)). The court noted that it was unaware of any case questioning the validity of the rule established in In re Cadillac, and interpreted the lack of recent cases questioning this rule as “acceptance of the well-established rule and its continued validity.” Id.

Of note, it acknowledged the single narrow exception to the rule adopted by In Re Cadillac, which potentially allows for an attorney to serve as both counsel and class representative in certain public interest litigation. The Appellate Division held that the instant case did not qualify as the type of action covered by the public interest except

Implications For Employers

This decision reinforces New Jersey’s (and the Third Circuit’s) longstanding prohibition against attorneys serving as both class counsel and class representative. While this may seem to limit class action exposure in situations when a plaintiff-attorney brings suit, employers should recognize that this procedural bar does not eliminate potential individual claims or prevent a class from proceeding with separate counsel and representative plaintiffs.

February 18, 2026May 26, 2026 by Gerald L. Maatman, Jr.

Settlement Stalled Yet Again: Second Circuit Affirms Denial Of Consent Decree To Resolve Decades‑Long Race Discrimination Lawsuit

By Gerald L. Maatman, Jr., Gregory S. Slotnick, and Elizabeth G. Underwood

Duane Morris Takeaways: On February 12, 2026, the U.S. Court of Appeals for the Second Circuit affirmed a district court’s refusal to so order a proposed consent decree between the Equal Employment Opportunity Commission (“EEOC”) and a union that would have substantially modified and terminated court supervision over the union’s referral hall and hiring practices in a Title VII enforcement action that has been pending for fifty-five years. United States Equal Emp. Opportunity Comm’n v. Loc. 580 of the Int’l Ass’n of Bridge, Structural & Ornamental Ironworkers, Joint Apprentice-Journeymen Educ. Fund of the Architectural Ornamental Iron Workers Loc. 580, Allied Bldg. Metal Indus., No. 25-CV-44, 2026 WL 392327, at *1 (2d Cir. Feb. 12, 2026). Applying the standard set out in S.E.C. v. Citigroup Glob. Mkts., Inc., 752 F.3d 285, 294 (2d Cir. 2014), the Second Circuit held that the district court did not abuse its discretion in finding the proposed settlement was not “fair and reasonable” and did not adequately resolve the core discrimination claims in the original 1971 complaint. Id. at *4. The Second Circuit, like the district court, emphasized the union’s consistent failures to comply with court‑ordered recordkeeping obligations, the gaps in the critical referral‑hall data, and the need for a more extensive factual record before the court may unwind extensive injunctive relief and oversight in this case. Id.

Case Background

The litigation began in 1971, when the U.S. Department of Justice (“DOJ”) filed suit against Local 580 of the International Association of Bridge, Structural, and Ornamental Ironworkers and the Join Apprentice-Journeymen Educational Fund of the Architectural Ornamental Iron Workers Local 580 (“Local 580”), alleging race discrimination in their employment practices, in violation of Title VII of the Civil Rights Act of 1964. Id. at *1. The complaint asserted that Local 580 engaged in “patterns and practices” of discrimination that denied non-white individuals employment opportunities because of their race. Id. Specifically, the complaint alleged that Local 580 systemically excluded non-white individuals from union membership and refused to refer them for available ironworking jobs. Id.

In 1974, the EEOC was substituted as plaintiff for the DOJ. Id. at n.1. In 1978, following negotiations, the district court entered a consent judgment that: (1) permanently enjoined the union from discriminating against Black and Hispanic ironworkers; (2) established remedial membership benchmarks for Black and Hispanic workers; and (3) imposed specific data‑collection and recordkeeping requirements regarding operation of the union’s referral hall — “a clearinghouse in which the union matches available members with employers requesting ironworking services.” Id.

Over the ensuing decades, however, the union repeatedly failed to comply with its obligations. Id. Throughout the 1980’s and 1990’s, the district court issued multiple contempt orders addressing non‑compliance and increased the scope of its mandatory union remedial obligations. Id.

In 2019, following a period without discrimination complaints, the EEOC assessed whether ongoing court supervision remained necessary. Id. at *2. Interviews with 41 Black and Hispanic current and former Local 580 members revealed that 17% reported racial discrimination, often involving referral-hall operations or job allocation. Id. The EEOC’s labor economist analyzed “fund office” data from 2009–2019, which showed racial disparities in overtime and working days (attributed to employer rather than union conduct), and “hiring hall dispatch” data limited to June 2018–2019, which showed no statistically significant disparities and mixed results on unemployment duration. Id. Based on this record, the EEOC and the union negotiated a proposed consent decree that would impose new, less stringent compliance obligations, vacate all prior remedial obligations and court orders, immediately terminate the special master’s appointment, and end judicial oversight after three years. Id.

In 2020, the parties jointly moved to enter the proposed consent decree. Id. The district court requested supplemental information, including the union’s 2009–2018 referral-hall data, which was missing from the economist’s report but which had been required by court order, and evidence of efforts to address the documented disparities. Id. Ultimately, the district court denied the motion without prejudice in 2022, determining the EEOC’s submission was insufficient, and the parties had “entirely failed” to produce the missing data and had not described remedial actions, as required. Id.

In 2023, the parties renewed their motion for the same proposed decree. Id. at *3. The district court again denied the motion in 2024, concluding the settlement was not “fair and reasonable” and not in the public interest. Id. The court reasoned that without mandated referral-hall data and evidence of remedial efforts, it could not conclude the decree would resolve the core discrimination allegations, and that approval could signal that other litigants may ignore court-ordered recordkeeping without consequence. Id.

The EEOC appealed, arguing that the district court abused its discretion in finding the proposed consent decree was not fair and reasonable and was not in the public’s interest. Id.

The Second Circuit’s Ruling

The Second Circuit ultimately affirmed the district court’s denial of the proposed consent decree, finding the district court did not abuse its discretion in concluding that the decree failed the “fair and reasonable” standard. Id. at *1. The Second Circuit applied the Citigroup framework, which requires a proposed consent decree to be both “fair and reasonable” and not disserve the public interest. Id. at *4 (quoting Citigroup, 752 F.3d at 294). According to the Second Circuit, to determine whether a proposed settlement is “fair and reasonable,” a district court considers four factors, including: “(1) the basic legality of the decree; (2) whether the terms of the decree, including its enforcement mechanism, are clear; (3) whether the consent decree reflects a resolution of the actual claims in the complaint; and (4) whether the consent decree is tainted by improper collusion or corruption of some kind.” Id. (quoting Citigroup, 752 F.3d at 294–95).

The Second Circuit held that the district court did not abuse its discretion in concluding that the proposed decree failed the third factor – whether the consent decree reflects a resolution of the original claims. Id. Specifically, Local 580’s persistent failure to comply with court-ordered recordkeeping requirements left critical gaps in the data about referral-hall operations, rendering the economist’s conclusion of race-neutral operations of “limited utility.” Id. The Second Circuit noted that, given a history of over fifty-five-years and multiple contempt orders, the district court reasonably required a more extensive factual record to evaluate whether the proposed settlement addressed the 1971 complaint’s core allegations. Id.

Regarding the public interest analysis, the Second Circuit found that the district court’s first rationale, that entering a favorable judgment despite Local 580’s disregard for recordkeeping mandates could signal to future litigants that court orders may be ignored without consequence, was a permissible public interest consideration independent of agency policy. Id. at *5. However, the Second Circuit noted that the district court’s second rationale, declining to defer to the EEOC’s public interest determination based on the agency’s shifting policy priorities—was likely an error under the Citigroup standard, which instructs courts not to reject settlements based solely on disagreement with agency policy decisions. Id. Ultimately, because the proposed decree still failed the “fair and reasonable” requirement, the Second Circuit affirmed the district court’s denial without needing to reverse on the public interest issue. Id.

Implications For Employers

This decision signals that, in long-running cases – particularly those with a history of noncompliance – district courts may demand more extensive factual showings before approving proposed consent decrees, even when the parties reach an agreement and even when an enforcement agency also supports settlement. Moreover, this decision underscores the importance for employers to ensure strict compliance with all court-ordered recordkeeping requirements, as courts may refuse to approve favorable settlements where mandated records are missing or incomplete, despite the parties’ agreement.

February 3, 2026February 3, 2026 by Gerald L. Maatman, Jr.

AI Hallucinated Case Citations Prompt Sanctions And Delay Class Action Settlement

By Gerald L Maatman, Jr., Shannon Noelle, and Elizabeth G. Underwood

Duane Morris Takeaways: On November 20, 2025, in Buchanan v. Vuori, Inc., No. 5:23-CV-01121 (N.D. Cal. Nov. 20, 2025), Magistrate Judge Nathanael M. Cousins of the U.S. District Court for the Northern District of California imposed sanctions on plaintiff’s counsel for using artificial intelligence to generate case law citations in a motion for preliminary approval of a wage and hour collective action settlement. The sanctions included an order directing plaintiff’s counsel to pay $250 to the clerk of court, striking the motion without leave to refile, and referring plaintiff’s counsel to the Court’s Standing Committee on Professional Conduct. Importantly, because of the sanctions, Magistrate Judge Cousins found plaintiff’s counsel to be an inadequate representative of the class and precluded plaintiff’s counsel from filing an additional motion for approval of the class settlement. This required defense counsel to file a case management statement requesting a stipulation of dismissal that was approved on January 8, 2026. Plaintiff’s counsel’s use of AI ultimately delayed final disposition of the action until months later and underscores the growing trend of judicial commitment to accountability with respect to attorney use of AI in drafting legal filings.

Case Background

On March 14, 2023, a former Vuori, Inc. (“Vuori”) employee, Terrence Buchanan, sued Vuori, alleging that it had violated the Fair Labor Standards Act (FLSA) and various California Labor Codes by miscalculating the overtime paid to their employees by failing to include commissions or bonuses in calculating overtime. See Case No. 5:23-cv-01121, ECF No. 1. Eventually, the parties settled the litigation.

On October 3, 2025, after a first try for settlement approval failed, counsel for Plaintiff filed a second motion for preliminary approval of a collective action settlement (ECF No. 81) followed by a corrected motion on October 28, 2025 (ECF No. 89). Upon review of the corrected motion, the Court found that the memorandum in support of the motion included 8 quotations “supposedly attributable to a real case” that did not actually appear in the cited case and “one nonexistent case.” See ECF No. 96, at 1. On November 5, 2025, the Court ordered plaintiff’s counsel to show cause as to why he should not be sanctioned pursuant to Federal Rule of Civil Procedure 11(c) and referred to the Court’s Standing Committee on Professional Conduct under Civil Local Rule 11-6 for providing fabricated case law to the Court. Plaintiff’s counsel filed a response and proof of service that he provided the Court’s order to show cause to his client. See ECF Nos. 92, 93. He also filed a supplemental response. See ECF No. 94. The Court held a hearing on the order to show cause on November 19, 2025, at which counsel and plaintiff Buchanan appeared. See ECF No. 96, 1-2.

Order Imposing Sanctions And Finding Class Counsel Is Therefore Inadequate

Magistrate Judge Cousins ordered sanctions by way of payment of $250 to the clerk of court pursuant to Federal Rule of Civil Procedure 11(c), referred Plaintiff’s counsel to the Standing Committee on Professional Conduct pursuant to Civil Local Rule 11-6, and ordered that the motions for preliminary approval be stricken without leave to refile.

In support of this decision, Magistrate Judge Cousins explained that “the rise in non-existent cases and quotations hallucinated by artificial intelligence tools” is of “particular concern.” ECF No. 96 at 3. He noted that Plaintiff’s counsel “acknowledge[d] without reservation” that his motion “contained one non-existent case citation.” ECF No. 92, at 3 (citing ECF No. 92 at 2). Plaintiff’s counsel also admitted to using about six different AI tools to prepare his motion “[a]s a solo practitioner under time pressure” and that he used the tools to check one another. Id. at 3-4. The Court noted that the corrected memorandum of law in support of the second motion for preliminary approval, did not correct the false case law hallucinated by the AI tools. Id. at 4. The Court made clear that the intentions of Plaintiff’s counsel were irrelevant and that his use of AI which “led him to submit a hallucinated case to the Court through his motion” and failure to conduct a reasonable inquiry into the law cited in his motion violated Rule 11(b) and Local Rule 11-4. Id. at 4-5. Specifically, the Court found that Plaintiff’s counsel violated his duty of candor owed to the tribunal under California Rule of Professional Conduct 3.3 by citing nonexistent cases and quotations to the Court and certifying “via signature that he had conducted reasonable inquiry into these citations when he had not.” Id. at 5.

Though Plaintiff’s counsel offered to forfeit attorneys’ fees in the matter, to file an amended motion certifying that he verified all citations, and to complete continuing legal education, the Court declined his suggested sanctions and instead ordered that: (1) plaintiffs’ second motion for preliminary approval of a class action settlement and corrected motion be stricken with prejudice; (2) Plaintiff’s counsel pay the clerk of court $250 by December 5, 2025; and (3) Plaintiff’s counsel be referred to the Court’s Standing Committee on Professional Conduct in connection with his violation of Local Rule 11-4 and unprofessional conduct. As to the third remedial measure, the Standing Committee has authority to conduct further investigation or impose additional discipline, such as continuing legal education or notification of the state bar as it deems necessary and appropriate. Magistrate Judge Cousins added that it was the Court’s “hope” that “the experience with the Standing Committee also proves constructive for Plaintiff’s counsel, who attests that he is a very busy sole practitioner who faces various logistical constraints.” See ECF No. 96 at 6.

Finally, and notably, the Court found that striking plaintiff’s motion for settlement approval “necessarily raises the questions” of whether Plaintiff’s counsel could adequately represent the class through final approval of settlement. The Court found that Plaintiff’s counsel could not file an amended motion for preliminary approval of the class settlement because “it does not find that he is adequate class counsel, which would prevent the Court from approving a renewed motion for settlement approval.” See ECF No. 96, at 7.

Delay Of Final Disposition Due To Sanctions And Inadequate Class Representative Finding

On December 5, 2025, the Court docketed and acknowledged receipt of counsel’s payment of $250 to the clerk of court. See ECF No. 98. As Magistrate Judge Cousins found Plaintiff’s counsel to be an inadequate class representative and therefore prohibited him from filing further motions to approve the class action settlement, on January 7, 2026, counsel for Vuori was required to file a case management statement to get final disposition of the action and setting out Vuori’s position that the parties signed a settlement agreement containing “a general release of Plaintiff’s claims against Defendant” and, per the terms of that agreement, “Plaintiff was obligated to dismiss this action with prejudice no later than December 31, 2025.” See ECF No. 100, at 2. To that end, counsel for Vuori requested that “Plaintiff immediately dismiss this action with prejudice.” Id. On that same day, Plaintiff’s counsel filed a Stipulation of Dismissal with the Court. See ECF No. 101. On January 8, 2026, the Court granted the stipulation of dismissal with prejudice by order signed by Magistrate Judge Cousins. See ECF No. 102.

Implications For Companies

This order is unprecedented. The implications of the sanctions order and the aftermath of the order is two-fold. First, employers and companies should review class counsel’s filings scrupulously by noting any citations or quotations that seem incorrect and AI-generated as this may build a case for disqualifying class counsel and may prove as a barrier to getting approval of a class settlement agreement. Second, employers and companies must be diligent in ensuring that in-house and outside counsel alike use human verification in connection with the use of any AI tool when drafting court filings to ensure that all case law citations and quotations have been independently verified by an attorney prior to filing such information with a court to avoid similar deleterious consequences.