Elizabeth Underwood – Class Action Defense

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, 2026February 18, 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, 2026February 18, 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.

November 26, 2025November 26, 2025 by Gerald L. Maatman, Jr.

The EEOC Can Chart Its Own Path: Why The EEOC’s Latest “Win” Is Good News For Employers

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

Duane Morris Takeaways: On November 25, 2025, in Cross v. EEOC, No. 1:25-CV-3702, 2025 WL 3280764 (D.D.C. Nov. 25, 2025), Judge Trevor N. McFadden of the U.S. District Court for the District of Columbia dismissed an Amazon delivery driver’s lawsuit against the EEOC. The lawsuit alleged that the EEOC illegally halted investigations of disparate impact claims following an executive order from President Trump. The district court’s ruling is at least a short-term win for employers, demonstrating that a plaintiff who is not the subject of an EEOC action cannot easily resort to the federal courts to challenge the internal investigation and enforcement policies that caused the EEOC not to pursue theories of employer liability. The “win” is likely the first in a series of challenges to the EEOC’s stance on disparate impact litigation.

Case Background

The plaintiff in this case, Leah Cross, who worked as Amazon delivery driver for several months in 2022, was fired after she failed to satisfy Amazon’s delivery quota requirements. In May 2023, Cross filed a sex-based charge of discrimination against Amazon with the Colorado Civil Rights Division, asserting violations of Title VII and Colorado state law.

Cross contended that Amazon’s delivery quotas and resulting bathroom limitations had a disparate impact on female Amazon employees. Specifically, she alleged, Amazon enforced excessively high delivery quotas, which forced delivery drivers to forgo bathroom breaks. According to Cross, this disparately impacted female delivery drivers because of their differing personal needs relative to male drivers.

In January 2024, the EEOC’s Denver office began investigating the charge. But in April 2025, President Trump issued Executive Order 14281 titled “Restoring Equality of Opportunity and Meritocracy,” which instructed federal agencies to deprioritize enforcement of antidiscrimination laws based on disparate impact theories of liability. That Executive Order also specifically directed the EEOC to examine all pending investigations of such claims and take appropriate action consistent with the new enforcement priorities.

In September 2025, the EEOC issued a memorandum requiring staff to close all investigations of disparate impact claims, which included Cross’s claims. Thereafter, Cross filed a lawsuit against the EEOC, alleging that she “ha[d] been denied the benefit of a full investigation” by the Commission. Cross v. EEOC, No. 1:25-CV-3702, 2025 WL 3280764, at *3 (D.D.C. Nov. 25, 2025).

Cross claimed the EEOC’s memorandum violated § 706(2) of the Administrative Procedure Act, arguing that: (1) the Commission acted contrary to Title VII and the Age Discrimination in Employment Act by “selectively exclud[ing] categories of discrimination from the charge-investigation process;” (2) the Commission acted arbitrarily and capriciously in abruptly changing its policy; (3) the Commission’s memorandum constituted a substantive rule that was “in excess of statutory jurisdiction, authority, or limitations”; and (4) the Commission should have promulgated its memorandum through proper notice-and-comment rulemaking procedures. Id. Therefore, Cross sought a preliminary injunction requesting, among others, for her investigation to be reopened.

The Court’s Opinion

The Court held Cross failed to establish that she had standing to bring her claims and thus dismissed Cross’s claims for lack of subject-matter jurisdiction, without addressing them on the merits. To remedy Cross’s alleged injuries, the Court suggested that Cross could pursue a Title VII action directly against Amazon.

The Court determined that Cross did not show any judicially cognizable injury from the EEOC’s closure of her investigation. Moreover, the Court opined that “even if that were the kind of injury capable of judicial resolution, Cross has not shown that a favorable ruling by this Court would redress that injury.” Id. at *1.

The Court explained that “federal courts are ‘not the proper forum for resolving claims that the Executive branch’ should ‘bring more’ investigations and enforcement actions.” Id. at *4 (quoting United States v. Texas, 599 U.S. 670, 680 (2023)). Under applicable case law recognizing this principle, the Court held, because Cross was not the subject of an EEOC enforcement action, she lacked standing to challenge the agency’s investigation and enforcement decisions.

Implications For Companies

The Court’s ruling is a win for companies, confirming that federal courts currently are not willing to interfere with the EEOC’s internal investigation and enforcement policies regarding disparate impact claims. Even more broadly, the Court’s order reinforces the substantial deference federal courts grant the EEOC in its internal decision-making processes, which could cut in different directions depending on the enforcement priorities and policies of a particular executive branch or EEOC leadership regime.

Crucially, however, employers are not in the clear. Companies still should be proactive and continue to audit regularly their hiring and employment practices for potential disparate impact, which remains unlawful under both federal and state laws notwithstanding any vacillation in EEOC policy. While the EEOC may choose to deprioritize pursuing disparate impact claims, a charging party who receives a Notice of Right to Sue letter still can file a private lawsuit in reliance on longstanding precedent regarding disparate impact.

November 4, 2025 by Gerald L. Maatman, Jr.

New York State (Court) Of Mind: New York Federal Court Remands Allstate Data Breach Case To State Court For Lack Of Federal Question Jurisdiction

By Gerald L. Maatman, Jr., Ryan T. Garippo, and Elizabeth G. Underwood

Duane Morris Takeaways: On October 28, 2025, Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York granted the People of the State of New York’s (the “State”) motion to remand in New York v. Nat’l Gen. Holdings Corp., No. 25 Civ. 03608, 2025 U.S. Dist. LEXIS 212731 (S.D.N.Y. Oct. 28, 2025). The State alleged that National General Holdings Corporation violated various state laws related to data protection programs and notifications to affected individuals when data breaches in 2020 and 2021 exposed the corporation’s customer information. This case reinforces the concept that a plaintiff is indeed the master of the complaint and can strategically craft their complaint to ensure that a case is litigated in state court.

Case Background

The State sued Allstate Insurance Company when one of its units, National General Holdings Corporation (the “Defendants”), was involved in two data breaches in 2020 and 2021, exposing nearly 200,000 consumers’ drivers’ license numbers to hackers. The State alleged that the Defendants failed to protect customers’ sensitive information and did not inform customers that their data was stolen.

Importantly, the complaint did not assert any cause of action under federal law. Instead, the complaint alleged that the Defendants violated three federal statutes, including the Gramm-Leach-Bliley Act (“GLBA”), the Health Insurance Portability and Accountability Act (“HIPAA”), and the Health Information Technology for Economic and Clinical Health Act (“HITECH”). The State brought the action against the defendants pursuant to New York State General Business Law (“GBL”) §§ 349, 350, 899-aa, and 899-bb, and New York Executive Law § 63(12).

Based on the inclusion of allegations that they violated federal law, the Defendants removed the action to the U.S. District Court for the Southern District of New York pursuant to 28 U.S.C. §§ 1331 and 1441, invoking the Court’s ability to decide a federal question. The State, however, moved to remand the case and for attorney’s fees incurred due to the removal.

Magistrate Judge Robert Lehrburger concluded in a report and recommendation that the Court lacked federal subject matter jurisdiction to hear the case because the causes of action (1) were not created by federal law and (2) did not satisfy the standard set forth in Gunn v. Minton, 568 U.S. 251 (2013), and Grable & Songs Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005) (the “Gunn-Grable” test). ECF 55. Under the Gunn-Grable test, federal question jurisdiction exists only when a federal issue is “(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Gunn, 568 U.S. at 258.

In his report and recommendation, Magistrate Judge Lehrburger determined that the third element as to whether a federal issue was “substantial” was not satisfied. This inquiry looks to “the importance of the issue to the federal system as a whole,” not just the issues of one case. Id. at 260. In this case, the Defendants argued that the substantiality requirement was met because of the substantial federal interests in data privacy and national security; however, Magistrate Judge Lehrburger found these arguments were unpersuasive and recommended that the Court remand the case but not award attorney’s fees to the State.

The Court’s Opinion

In an opinion written by Judge Lewis Kaplan, the Court agreed with Magistrate Judge Lehrburger’s reasoning and held that the case did not pass the Gunn-Grable test.

The Court determined that Magistrate Judge Lehrburger correctly rejected the Defendants’ argument that the State’s claims satisfy the Gunn-Grable test as to the “substantiality” element. First, the Court found that the Defendants’ argument as to whether the New York State Attorney General had the authority to enforce the federal GLBA was “entirely inapt” because the complaint did not allege any GLBA claims. Nat’l Gen. Holdings Corp., 2025 U.S. Dist. LEXIS 212731, at *3. Second, the Court held that the federal government’s interest in data privacy was insufficient to meet the Gunn-Grable test. Third, the Court determined that the federal law questions implicated by the state law claims, including whether defendants are insulated from liability under state law if the defendants’ data protection programs and data breach notification procedures were in compliance with federal law, “are inherently fact-intensive and therefore likely would not provide guidance in future cases.” Id. at *4.

Moreover, the Court also rejected the Defendants’ argument that whether the GLBA preempts the New York Attorney General from bringing the state law claims is a substantial federal question, reasoning that the question was not “necessarily raised” and that preemption is an affirmative defense that may not serve as the basis for subject-matter jurisdiction. Id. at 4–5. Finally, the Court held that none of the three exceptions to the well-pleaded complaint rule applied because the Defendants did not assert the first two exceptions, and the third exception would have had to pass the Gunn-Grable test, which it did not.

Implications For Companies

Nat’l Gen. Holdings Corp. serves as a cautionary reminder of the uphill battles that corporate defendants often face to remove to and then keep bet-the-company litigation in federal court.

Although it is not uncommon for a corporation to prefer “federal courts because it fears a corporate defendant . . . will not get a fair trial in state court,” the road to get there is not always guaranteed. See, e.g., Hosein v. CDL West 45th Street, LLC, No. 12 Civ. 06903, 2013 WL 4780051, at *3 (S.D.N.Y. June 12, 2013). As on display here, the Nat’l Gen. Holdings Corp. opinion shows that corporate defendants may not even get to litigate in a federal forum even when there are allegations that they violated federal law.

As a result, corporate counsel should be aware that relying on a state law claim involving an embedded federal issue, as the basis for federal subject-matter jurisdiction, may not be successful in 100% of cases, but it may be worth a chance to attempt to remove the case to federal court if it is the company’s only opportunity to obtain a fair trial.