Gerald L. Maatman, Jr. – Class Action Defense

December 18, 2024December 18, 2024 by Gerald L. Maatman, Jr.

Ninth Circuit Dismisses Adtech Class Action For Lack Of Standing

By Gerald L. Maatman, Jr. and Justin Donoho

Duane Morris Takeaways: On December 17, 2024, in Daghaly, et al. v. Bloomingdales.com, LLC, No. 23-4122, 2024 WL 5134350 (9th Cir. Dec. 17, 2024), the Ninth Circuit ruled that a plaintiff lacked Article III standing to bring her class action complaint alleging that an online retailer’s use of website advertising technology disclosed website visitors’ browsing activities in violation of the California Invasion of Privacy Act and other statutes. The ruling is significant because it shows that adtech claims cannot be brought in federal court without specifying the plaintiffs’ web browsing activities allegedly disclosed.

Background

This case is one of the hundreds of class actions that plaintiffs have filed nationwide alleging that Meta Pixel, Google Analytics, and other similar software embedded in defendants’ websites secretly captured plaintiffs’ web browsing data and sent it to Meta, Google, and other online advertising agencies. This software, often called website advertising technologies or “adtech” is a common feature on many websites in operation today.

In Daghaly, Plaintiff brought suit against an online retailer. According to Plaintiff, the retailer installed the Meta Pixel and other adtech on its public-facing website and thereby transmitted web-browsing information entered by visitors such as which products the visitor clicked on and whether the visitor added the product to his or her shopping cart or wish list. Id., No. 23-CV-129, ECF No. 1 ¶¶ 44-45. As for Plaintiff herself, she did not allege what she clicked on or what her web browsing activities entailed upon visiting the website, only that she accessed the website via the web browser on her phone and computer. Id. ¶ 40.

Based on these allegations, Plaintiff alleged claims for violation of the California Invasion of Privacy Act (CIPA) and other statutes. The district court dismissed the complaint for lack of personal jurisdiction. Id., 697 F. Supp. 3d 996 (S.D. Cal. 2023). Plaintiff appealed and, in its appellate response brief, the retailer argued for the first time that Plaintiff lacked Article III standing.

The Ninth Circuit’s Opinion

The Ninth Circuit agreed with the retailer, found that Plaintiff lacked standing, and remanded for further proceedings.

To allege Article III standing, as is required to bring suit in federal court, the Ninth Circuit opined that a plaintiff must “clearly allege facts demonstrating” that she “suffered an injury in fact that is concrete, particularized, and actual or imminent.” Id., 2024 WL 5134350, at *2 (citing, e.g., TransUnion LLC v. Ramirez, 594 U.S. 413, 423 (2021)).

Plaintiff argued that she sufficiently alleged standing via her allegations that she “visited” and “accessed” the website and was “subjected to the interception of her Website Communications.” Id. at *1. Moreover, Plaintiff argued, the retailer’s alleged disclosure to adtech companies of the fact of her visiting the retailer’s website sufficiently alleged an invasion of her privacy and thereby invoked Article III standing because the adtech companies could use this fact to stitch together a broader, composite picture of Plaintiffs’ online activities. See oral argument, here.

The Ninth Circuit rejected these arguments. It found that Plaintiff “does not allege that she herself actually made any communications that could have been intercepted once she had accessed the website. She does not assert, for example, that she made a purchase, entered text, or took any actions other than simply opening the webpage and then closing it.” Id., 2024 WL 5134350, at *1.As the Ninth Circuit explained during oral argument by way of example, it is not like the Plaintiff had alleged that she was shopping for underwear and that the retailer transmitted information about her underwear purchases. Moreover, the Ninth Circuit found “no authority suggesting that the fact that she visited [the retailer’s website] (as opposed to information she might have entered while using the website) constitutes ‘contents’ of a communication within the meaning of CIPA Section 631.” Id.

In short, the Ninth Circuit concluded that Plaintiff lacked Article III standing, and that this conclusion followed from Plaintiff’s failure to sufficiently allege the nature her web browsing activities giving rise to all of her statutory claims. Id. at *2. The Ninth Circuit remanded with instructions that the district court grant leave to amend if properly requested.

Implications For Companies

The holding of Daghaly is a win for adtech class action defendants and should be instructive for courts around the country. Other courts already have found that an adtech plaintiff’s failure to identify what allegedly private information allegedly was disclosed via the adtech warrants dismissal under Rule 12(b)(6) for failure to plausibly plead various statutory and common-law claims. See, e.g, our blog post about such a decision here. Daghaly shows that adtech plaintiffs also need to identify what allegedly private information beyond the fact of a visit to an online retailer’s website was allegedly disclosed via the adtech, in order to have Article III standing to bring their federal lawsuit in the first place.

December 10, 2024 by Gerald L. Maatman, Jr.

The 2024-2025 Judicial Hellholes Report From The American Tort Reform Association Ranks The Worst Jurisdictions For Defendants

By Gerald L. Maatman, Jr.

Duane Morris Takeaways: The American Tort Reform Association (“ATRA”) annually publishes its “Judicial Hellholes Report,” focusing on litigation issues and identifying jurisdictions likely to have unfair and biased administration of justice. The ATRA recently published its 2024-2025 Report and one of the top-ranking states from 2023 maintained its #1 position for 2024 – Pennsylvania, specifically the Pennsylvania Supreme Court and the Philadelphia Court of Common Pleas – as the most challenging venue for defendants. Readers can find a copy here and the executive summary here.

The Judicial Hellholes Report is an important read for corporate counsel facing class action litigation because it identifies jurisdictions that are generally unfavorable to defendants. The Report defines a “judicial hellhole” as a jurisdiction where judges in civil cases systematically apply laws and procedures in an unfair and unbalanced manner, generally to the disadvantage of defendants. The Report is a “must read” for anyone litigating class actions and making decisions about venue strategy.

The 2024 Hellholes

In its recently released annual report, the ATRA identified 10 jurisdictions on its 2024 hellholes list – which, in order, include: (1) Pennsylvania (especially in the Philadelphia Court of Common Pleas and the Supreme Court of Pennsylvania); (2) New York City (with unique state laws and lawsuit abuses); (3) South Carolina (particularly due to a bias against corporate defendants in asbestos litigation); (4) George (tied for #1 in 2023, the state has seen nuclear verdicts and endless liabilities for defendants); (5) California (with a huge overall volume of lawsuits, huge verdicts, Private Attorney General Act (PAGA) litigation, lemon law litigation, and high-stakes environmental litigation); (6) Cook County, Illinois (with no-injury claims filed under the state’s Biometric Information Protection Act (BIPA) and being a hotbed for asbestos litigation); (7) St. Louis, Missouri (with focuses on junk science in the courtrooms and nuclear verdicts); (8) the Michigan Supreme Court (particularly due to liability-expanding decisions and pro-plaintiff legislative activity); (9) King County, Washington (a first appearance on the list due to trial courts conducting unfair group trials, allowing junk science into evidence, and swapping to other state laws when favorable to plaintiffs); and (10) Louisiana (with long-running costal litigation and nuclear verdicts against defendants).

According to the ATRA’s analysis, these venues are less than optimal for corporate defendants and often attract plaintiffs’ attorneys, particularly for the filing of class action lawsuits. As a result, corporate counsel should take particular care if they encounter a class action lawsuit filed in one of these venues.

The 2025 “Watch List”

The ATRA also included one jurisdiction on its “watch list” — the Texas Court of Appeals for the Fifth District, which had three noteworthy decisions overturned by the Texas Supreme Court that would have expanded liability to defendants. The ATRA emphasized the need for oversight of this appellate court to ensure that it does not deviate from Texas precedent.

The 2025 “Dishonorable Mentions”

The ATRA included a few jurisdictions on its “dishonorable mentions” list, for making unsound decisions, engaging in abusive practices, or other actions that “erode the fairness of a state’s civil justice system.” The venues on the list include the Maryland Supreme Court, following a ruling which rejected a higher standard for expert evidence; Tennessee, as a new hotspot for abusive Americans with Disabilities Act Litigation; and Illinois courts where asbestos claims remain prevalent.

Points Of Lights

In addition, the ATRA recognized that several jurisdictions made significant positive improvements this year, highlighting decisions by the Third Circuit, which ruled that lawsuits alleging insufficient warnings on product labels, even with federal approval, cannot proceed; the Kentucky Court of Appeals, which overturned a previous problematic ruling for defendants; and the Utah Supreme Court, which upheld the state’s statute of repose for medical liability lawsuits.

Implications For Employers

The Judicial Hellholes Report often mirrors the experience of companies in high-stakes class actions, as Pennsylvania, New York, South Carolina, Georgia, California, Illinois, Missouri, Michigan, Washington, and Louisiana are among the leading states where plaintiffs’ lawyers file class actions. These jurisdictions are linked by class certification standards that are more plaintiff-friendly and more generous damages recovery possibilities under state laws.

December 5, 2024December 5, 2024 by Gerald L. Maatman, Jr.

The Duane Morris Class Action Review – 2025 Is Coming Soon!

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

Duane Morris Takeaway: Happy Holidays to our loyal readers of the Duane Morris Class Action Defense Blog! Our elves are busy at work this holiday season in wrapping up our start-of-the-year kick-off publication – the Duane Morris Class Action Review – 2025. We will go to press in early January and launch the 2025 Review from our blog and our book launch website.

The 2025 Review builds on the success of our previous editions and represents our twentieth annual study of the class action space. At over 600 pages, the 2025 Review has more analysis than ever before, with discussion of over 1,250 class certification rulings from federal and state courts over this past year. The Review will be available for download as an E-Book too.

The Review is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting Corporate America, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breach, EEOC-Initiated and government enforcement litigation, employment discrimination, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, wage & hour class and collective actions, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, and the top-class action settlements in each area. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2025.

We are humbled and honored by the recent review of the Duane Morris Class Action Review – 2024 by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said, “The Duane Morris Class Action Review is ‘the Bible’ on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.” EPLiC continued, “The review is a must-have resource for in-depth analysis of class actions in general and workplace litigation in particular. The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting corporate America and provides insight as to what companies and corporate counsel can expect in terms of filings by the plaintiffs’ class action bar and government enforcement agencies like the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (DOL).”

We look forward to providing the 2025 edition of the Review to all our loyal readers in early January. Stay tuned and Happy Holidays!

December 4, 2024 by Gerald L. Maatman, Jr.

Rhode Island Federal Court Rules That Defendants Waived Their Right To Arbitration By Refusing To Pay AAA Filing Fees

By Gerald L. Maatman, Jr., Rebecca S. Bjork, and Eden E. Anderson

Duane Morris Takeaway: In 5-Star General Store, et al. v. American Express Co., 2024 U.S. Dist. LEXIS 217246 (D.R.I. Dec. 2, 2024), Judge Mary McElroy of the U.S. District Court for the District Court of Rhode Island held that the defendants could not move to compel arbitration on the issue of whether it was required to pay filing fees to the American Arbitration Association. This ruling presents an unusual twist to arbitration issues typically resolved by federal courts and is a cautionary warning for companies.

Background

The 5-Star General Store case is an antitrust action brought by merchants who resolved certain claims with American Express entities in arbitration relating to the acceptance of the defendants’ credit cards for purchases at their stores. After the final order was issued, the defendants refused to pay their share of the filing fees to the American Arbitration Association, which totaled more than $17 million. The AAA administratively closed the case and the plaintiffs filed a class action relative to those fees. The defendants moved to compel arbitration of the lawsuit’s claims and to strike the plaintiffs’ class allegations.

The Court’s Ruling

The court denied the defendants’ motion to compel arbitration on whether they were required to pay the AAA filing fees and denied the defendants’ motion to strike the plaintiffs’ class allegations. The plaintiffs sought to represent more than 5,000 merchants accepting the defendants’ cards. They argued that the defendants had waived their right to arbitration by failing to pay their share of the arbitration fees because they were in default of the agreement under § 3 of the FAA. First, the court ruled that it, not an arbitrator, had the authority to decide whether the defendants defaulted on the arbitration agreement. Although the court found no controlling case law authority directly on point, it decided to follow the Fifth, Ninth, Tenth and Eleventh Circuits, which have held that courts may decide whether failure to pay arbitration fees constitutes a default under § 3.

Second, the court focused on whether the defendants were in default of the agreement. Relying on Black’s Law Dictionary, which defines “default” as “the omission or failure to perform a legal or contractual duty; esp., the failure to pay a debt when due,” the court found the issue to be clear and concluded that the defendants defaulted on the arbitration agreement. Id. at *12. It also opined that a second arbitration likely would not fare any better than the first and the parties would end up before the court again.

Third, the court rejected the defendants’ claim that the plaintiffs lacked clean hands and therefore should not be allowed to pursue their claims in court. The court reasoned that the plaintiffs did not change their theory of their case sufficiently when filing the instant case to rescind the defendants’ waiver of arbitration. Therefore, the court denied the defendants’ motion to compel arbitration.

Finally, the court also denied the defendants’ motion to strike the plaintiffs’ class allegations because the class was ascertainable by objective means and the class definition was not “fail safe” because it did not contain a legal conclusion that determines eligibility for class membership. Id. at *32-33. The court further considered and rejected the defendants’ claims that the plaintiffs’ requests for injunctive and declaratory relief under Rule 23(b)(2) and 23(c)(4), including certification of issues classes, should be stricken at the pleading stage.

Implications For Companies:

This ruling should serve as a cautionary tale to companies that regularly seek to enforce mandatory arbitration agreements when those agreements require individual arbitration. The defendants’ failure to pay filing fees for thousands of individual arbitrations could lead to a complete waiver of the ability to compel arbitration of the claims in the future.

December 4, 2024 by Gerald L. Maatman, Jr.

The FTC Issues Three New Orders Showing Its Increased 2024 Enforcement Activities Regarding AI And Adtech

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

Duane Morris Takeaways: On December 3, 2024, the Federal Trade Commission (FTC) issued an order in In Re Intellivision Technologies Corp., (FTC Dec. 3, 2024) prohibiting an AI software developer from making misrepresentations that its AI-powered facial recognition software was free from gender and racial bias, and two orders in In Re Mobilewalla, Inc. (FTC Dec. 3, 2024), and In RE Gravy Analytics, Inc. (FTC Dec. 3, 2024), requiring data brokers to improve their advertising technology (adtech) privacy and security practices. These three orders are significant in that they highlight that in 2024, the FTC has significantly increased its enforcement activities in the areas of AI and adtech.

Background

In 2024, the FTC brought and litigated at least 10 enforcement actions involving alleged deception about AI, alleged AI-powered fraud, and allegedly biased AI. See the FTC’s AI case webpage located here. This is a fivefold increase from the at least two AI-related actions brought by the FTC last year. See id. Just as private class actions involving AI are on the rise, so are the FTC’s AI-related enforcement actions.

This year the FTC also brought and litigated at least 21 enforcement actions categorized by the FTC as involving privacy and security. See the FTC’s privacy and security webpage located here. This is about twice the case activity by the FTC in privacy and data security cases compared with 2023. See id. Most of these new cases involve alleged unfair use of adtech, an area of recently increased litigation activity in private class actions, as well.

In short, this year the FTC officially achieved its “paradigm shift” of focusing enforcement activities on modern technologies and data privacy, as forecasted in 2022 by the FTC’s Director, Bureau of Consumer Protection, Samuel Levine, here.

All these complaints were brought by the FTC under the FTC Act, under which there is no private right of action.

The FTC’s December 3, 2024 Orders

In Intellivision, the FTC brought an enforcement action against a developer of AI-based facial recognition software embedded in home security products to enable consumers to gain access to their home security systems. According to the complaint, the developer described its facial recognition software publicly as being entirely free of any gender or racial bias as shown by rigorous testing when, in fact, testing by the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) showed that the software was not among the top 100 best performing algorithms tested by NIST in terms of error rates across different demographics, including region of birth and sex. (Compl. ¶ 11.) Moreover, according to the FTC, the developer did not possess any of its own testing to support its claims of lack of bias. Based on these allegations, the FTC brought misrepresentation claims under the FTC Act. The parties agreed to a consent order, in which the developer agreed to refrain from making any representations about the accuracy, efficacy, or lack of bias of its facial recognition technology, unless it could first substantiate such claims with reliable testing and documentation as set forth in the consent order. The consent order also requires the developer to communicate the order to any of its managers and affiliated companies in the next 20 years, to make timely compliance reports and notices, and to create and maintain various detailed records, including regarding the company’s accounting, personnel, consumer complaints, compliance, marketing, and testing.

In Mobilewalla and Gravy Analytics, the FTC brought enforcement actions against data brokers who allegedly obtained consumer location data from other data suppliers and mobile applications and sold access to this data for purposes of online advertising without consumers’ consent. According to the FTC’s complaints, the data brokers engaged in unfair collection, sale, use, and retention of sensitive location information, all in alleged violation of the FTC Act. The parties agreed to consent orders, in which the data brokers agreed to refrain from collecting, selling, using, and retaining sensitive location information; to establish a Sensitive Location Data Program, Supplier Assessment Program, and a comprehensive privacy program, as detailed in the orders; provide consumers clear and conspicuous notice; provide consumers a means to request data deletion; delete location data as set forth in the order; and perform compliance, recordkeeping, and other activities, as set forth in the order.

Implications For Companies

The FTC’s increased enforcement activities in the areas of adtech and AI serve as a cautionary tale for companies using adtech and AI.

As the FTC’s recent rulings and its 2024 dockets show, the FTC is increasingly using the FTC Act as a sword against alleged unfair use of adtech and AI. Moreover, although the December 3 orders do not expressly impose any monetary penalties, the injunctive relief they impose may be costly and, in other FTC consent orders, harsher penalties have included express penalties of millions of dollars and, further, algorithmic disgorgement. As adtech and AI continue to proliferate, organizations should consider in light of the FTC’s increased enforcement activities in these areas—and in light of the plaintiffs’ class action bar’s and EEOC’s increased activities in these areas, as well, as we blogged about here, here, here, here, and here—whether to modify their website terms of use, data privacy policies, and all other notices to the organizations’ website visitors and customers to describe the organization’s use of AI and adtech in additional detail. Doing so could deter or help defend a future enforcement action or class action similar to the many that are being filed today, alleging omission of such additional details, and seeking a wide range of injunctive and monetary relief.

November 19, 2024 by Gerald L. Maatman, Jr.

TLMT Conference In Mexico Addresses Key Complex Litigation Issues

By Gerald L. Maatman, Jr.

Duane Morris Takeaways: The Trial Lawyers of Mass Torts (TLMT) – an organization of plaintiffs’ class action lawyers – hosted their annual educational conference this week in Cabo, Mexico. TLMT invited Gerald L. Maatman, Jr. of Duane Morris, the co-author of the Annual Class Action Review, as one of the sole representatives of the class action defense bar to provide defendant-side perspectives on class action and mass tort litigation.

The TLMT brings together top practitioners on both sides of the bar as well as the judiciary to tackle contemporary issues in complex litigation, focusing on class actions and mass torts. The conference featured numerous prominent federal judges who handle leading MDL proceedings and class actions, including Judge Charles Breyer, Northern District of California, Judge Karen Caldwell, Eastern District of Kentucky, Judge Edward Chen, Northern District of California, Judge Vince Chhabria, Northern District of California, Judge Jacqueline Corley, Northern District of California, Judge James Donato, Northern District of California, Judge Nancy Rosenstengel, Southern District of Illinois, Judge David Proctor, Northern District of Alabama, Judge Richard Seeborg, Northern District of California, Judge Jane Milazzo, Eastern District of Louisiana, and Judge Joy Flowers Conti, Western District of Pennsylvania. In addition, Judges Amul Thapar and Rachel Bloomekatz of the U.S. Court of Appeals for the Sixth Circuit gave presentations.

The opening sessions focused on mass tort claims brought in MDL’s and cutting-edge class actions for data breaches and privacy violations.

I had the honor and privilege of speaking on the class action developments panel that included Judge Beth Freeman and Judge Rita Lin of the U.S. District Court of the Northern District of California and Judge Kenly Kiya Kato of the U.S. District Court for the Central District of California. Our panel addressed a wide variety of cutting-edge class action issues running the gamut from standing to settlements, and experts to arbitration.

Standing Issues

The requirement of a named plaintiff to possess legal standing often rears its head early on in a class action. The stakes can be high and case determinative, and also impact selection of forum considerations (e.g., where a motion to dismiss for lack of standing results in the remand of the class action to state court). The Judges further pointed out that standing can impact case management issues and the scope of discovery, which are important to companies due to the sheer size of class actions and the costs to defend them. Interestingly, the Judges opined that bifurcation of discovery into a class certification stage and a merits stage – while previously popular in the class action space – has largely fallen out of favor as a viable case management tool.

Settlements

Rule 23 requires courts to pass on and approve settlements. The Judges remarked that precertification settlements are more difficult to adjudicate but remain a viable exit ramp for many class actions.

The Judges agreed with my commentary on how the approach to settlement issues – especially for pre-certification settlements – is one of the most widely-varying areas from judge-to-judge and venue-to-venue in terms of judicial decision-making. Like buying real estate, “location, location, and location” means everything in terms of the way settlements are approached from a case law standpoint, which vary in state and federal courts and with respect to the pertinent case law in each location.

Experts & Certification

The Judges agreed that expert testimony is often the most crucial factor in the certification battle. The costs can be immense, but a win or loss on class certification can represent monetary exposure (or a lost opportunity) of substantial economic benefit (or loss). In sum, the stakes are exceedingly high and scrimping on expert fees may be short-sighted.

Arbitration

The Judges had interesting views on the interrelationship of arbitration and class action litigation. While the statistical findings of our Duane Morris Annual Class Action Review – 2024 demonstrate that corporate defendants won motions to compel arbitration (of class action claims on an individual basis) at a rate of 66% over the past year, nearly a third were denied – and often for a multitude of reasons. The Judges agreed on the high-stakes nature of such motions and how case-specific facts drive the extent to which discovery should be allowed on key factual and legal disputes over arbitration agreements. They also observed how mass arbitration has “weaponized” arbitration programs in certain situations where arbitration has virtually replaced Rule 23 as a method for adjudication of large-scale disputes or in situations involving hundreds or thousands of claimants.

July 28, 2024July 29, 2024 by Tyler Z. Zmick

Illinois Federal Court Dismisses Class Action Privacy Claims Involving Use Of Samsung’s “Gallery” App

By Tyler Zmick, Justin Donoho, and Gerald L. Maatman, Jr.

Duane Morris Takeaways: In G.T., et al. v. Samsung Electronics America, Inc., et al., No. 21-CV-4976, 2024 WL 3520026 (N.D. Ill. July 24, 2024), Judge Lindsay C. Jenkins of the U.S. District Court for the Northern District of Illinois dismissed claims brought under the Illinois Biometric Information Privacy Act (“BIPA”). In doing so, Judge Jenkins acknowledged limitations on the types of conduct (and types of data) that can subject a company to liability under the statute. The decision is welcome news for businesses that design, sell, or license technology yet do not control or store any “biometric” data that may be generated when customers use the technology. The case also reflects the common sense notion that a data point does not qualify as a “biometric identifier” under the BIPA if it cannot be used to identify a specific person. G.T. v. Samsung is required reading for corporate counsel facing privacy class action litigation.

Background

Plaintiffs — a group of Illinois residents who used Samsung smartphones and tablets — alleged that their respective devices came pre-installed with a “Gallery application” (the “App”) that can be used to organize users’ photos. According to Plaintiffs, whenever an image is created on a Samsung device, the App automatically: (1) scans the image to search for faces using Samsung’s “proprietary facial recognition technology”; and (2) if it detects a face, the App analyzes the face’s “unique facial geometry” to create a “face template” (i.e., “a unique digital representation of the face”). Id. at *2. The App then organizes photos based on images with similar face templates, resulting in “pictures with a certain individual’s face [being] ‘stacked’ together on the App.” Id.

Based on their use of the devices, Plaintiffs alleged that Samsung violated §§ 15(a) and 15(b) of the BIPA by: (1) failing to develop a written policy made available to the public establishing a retention policy and guidelines for destroying biometric data, and (2) collecting Plaintiffs’ biometric data without providing them with the requisite notice and obtaining their written consent.

Samsung moved to dismiss on two grounds, arguing that: (1) Plaintiffs did not allege that Samsung “possessed” or “collected” their biometric data because they did not claim the data ever left their devices; and (2) Plaintiffs failed to allege that data generated by the App qualifies as “biometric identifiers” or “biometric information” under the BIPA, because Samsung cannot use the data to identify Plaintiffs or others appearing in uploaded photos.

The Court’s Decision

The Court granted Samsung’s motion to dismiss on both grounds.

“Possession” And “Collection” Of Biometric Data

Regarding Samsung’s first argument, the Court began by explaining what it means for an entity to be “in possession of” biometric data under § 15(a) and to “collect” biometric data under § 15(b). The Court observed that “possession” occurs when an entity exercises control over data or holds it at its disposal. Regarding “collection,” the Court noted that the term “collect,” and the other verbs used in § 15(b) (“capture, purchase, receive through trade, or otherwise obtain”), all refer to an entity taking an “active step” to gain control of biometric data.

The Court proceeded to consider Plaintiffs’ contention that Samsung was “in possession of” their biometrics because Samsung controls the proprietary software used to operate the App. The Court sided with Samsung, however, concluding that Plaintiffs failed to allege “possession” (and thus failed to state a § 15(a) claim) because they did not allege that Samsung can access the data (as opposed to the technology Samsung employs). Id. at *9 (“Samsung controls the App and its technology, but it does not follow that this control gives Samsung dominion over the Biometrics generated from the App, and plaintiffs have not alleged Samsung receives (or can receive) such data.”).

As for § 15(b), the Court rejected Plaintiffs’ argument that Samsung took an “active step” to “collect” their biometrics by designing the App to “automatically harvest[] biometric data from every photo stored on the Device.” Id. at *11. The Court determined that Plaintiffs’ argument failed for the same reason their § 15(a) “possession” argument failed. Id. at *11-12 (“Plaintiffs’ argument again conflates technology with Biometrics. . . . Plaintiffs do not argue that Samsung possesses the Data or took any active steps to collect it. Rather, the active step according to Plaintiffs is the creation of the technology.”).

“Biometric Identifiers” And “Biometric Information”

The Court next turned to Samsung’s second argument for dismissal – namely, that Plaintiffs failed to allege that data generated by the App is “biometric” under the BIPA because Samsung could not use it to identify Plaintiffs (or others appearing in uploaded photos).

In opposing this argument, Plaintiffs asserted that: (1) the “App scans facial geometry, which is an explicitly enumerated biometric identifier”; and (2) the “mathematical representations of face templates” stored through the App constitute “biometric information” (i.e., information “based on” scans of Plaintiffs’ “facial geometry”). Id. at *13.

The Court ruled that “Samsung has the better argument,” holding that Plaintiffs’ claims failed because Plaintiffs did not allege that Samsung can use data generated through the App to identify specific people. Id. at *15. The Court acknowledged that cases are split “on whether a plaintiff must allege a biometric identifier can identify a particular individual, or if it is sufficient to allege the defendant merely scanned, for example, the plaintiff’s face or retina.” Id. at *13. After employing relevant principles of statutory interpretation, the Court sided with the cases in the former category and opined that “the plain meaning of ‘identifier,’ combined with the BIPA’s purpose, demonstrates that only those scans that can identify an individual qualify.” Id. at *15.

Turning to the facts alleged in the Complaint, the Court concluded that Plaintiffs failed to state claims under the BIPA because the data generated by the App does not amount to “biometric identifiers” or “biometric information” simply because the data can be used to identify and group the unique faces of unnamed people. In other words, biometric information must be capable of recognizing an individual’s identity – “not simply an individual’s feature.” Id. at *17; see also id. at *18 (noting that Plaintiffs claimed only that the App groups unidentified faces together, and that it is the device user who can add names or other identifying information to the faces).

Implications Of The Decision

G.T. v. Samsung is one of several recent decisions grappling with key questions surrounding the BIPA, including questions as to: (1) when an entity engages in conduct that rises to the level of “possession” or “collection” of biometrics; and (2) what data points qualify (and do not qualify) as “biometric identifiers” and “biometric information” such that they are subject to regulation under the statute.

Regarding the first question, the Samsung case reflects the developing majority position among courts – i.e., a company is not “in possession of,” and has not “collected,” data that it does not actually receive or access, even if it created and controlled the technology that generated the allegedly biometric data.

As for the second question, the Court’s decision in Samsung complements the Ninth Circuit’s recent decision in Zellmer v. Meta Platforms, Inc., where it held that a “biometric identifier” must be capable of identifying a specific person. See Zellmer v. Meta Platforms, Inc., 104 F.4th 1117, 1124 (9th Cir. 2024) (“Reading the statute as a whole, it makes sense to impose a similar requirement on ‘biometric identifier,’ particularly because the ability to identify did not need to be spelled out in that term — it was readily apparent from the use of ‘identifier.’”). Courts have not uniformly endorsed this reading, however, and parties will likely continue litigating the issue unless and until the Illinois Supreme Court provides the final word on what counts as a “biometric identifier” and “biometric information.”

July 23, 2024 by Gerald L. Maatman, Jr.

Ninth Circuit Broadly Applies The FAA’s Transportation Worker Exemption To Fueling Technicians To Green Light Their Class Action And Side-Step Arbitration

By Eden E. Anderson, Rebecca S. Bjork, and Gerald L. Maatman, Jr.

Duane Morris Takeaways: On July 19, 2024, in Lopez v. Aircraft Service International, Inc., Case No. 23-55015 (9th Cir. July 19, 2024), the U.S. Court of Appeals for the Ninth Circuit held that the Federal Arbitration Act’s (FAA) transportation worker exemption applies to an airplane fueling technician. Even though the technician had no hands-on contacts with goods, the Ninth Circuit held that was not required because fuel is necessary to flying the plane that holds the goods. The decision is yet another from the Ninth Circuit broadly applying the FAA’s transportation worker exemption, in spite of multiple recent decisions from the U.S. Supreme Court directing narrow that loop hole to mandatory arbitration. The Lopez decision presents an obstacle for employers seeking to enforce arbitration agreements and class action waivers within the Ninth Circuit, thereby opening the door to arguments that workers who do not even handle goods in the stream of commerce are exempt from arbitration if their work somehow supports the mechanism by which the goods travel.

Case Background

Danny Lopez worked as a fueling technician at Los Angeles International Airport. He added fuel to airplanes. After Lopez filed a wage & hour class action against his employer, the employer moved to compel arbitration. The district court denied the motion, concluding that Lopez was an exempt transportation worker because he was directly involved in the flow of goods in interstate or foreign commerce. It reasoned that, although Lopez did not handle goods in commerce, he was directly involved in the maintenance of the means by which the goods were transported. The employer appealed on the grounds that the FAA’s transportation worker exemption is to be narrowly construed and that Lopez did not have any hands-on contact with goods and direct participation in their movement.

The Ninth Circuit’s Decision

The Ninth Circuit began its analysis by mentioning the U.S. Supreme Court’s 2022 decision in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022). In Saxon, the U.S. Supreme Court instructed that the transportation worker exemption is to be narrowly construed and does not turn on the industry within which the work is performed. Saxon held that airline ramp agents are nonetheless transportation workers exempt from the FAA because, in loading and unloading cargo onto airplanes, ramp agents play a “direct and necessary role in the free flow of goods across borders” and are “actively engaged in the transportation of those goods across via the channels of foreign or interstate commerce.” Id. at 458. Perceiving that the transportation worker exemption continued to be misapplied by lower courts, the U.S. Supreme Court repeated this same guidance this year in Bissonnette v. Le Page Bakeries Park St., LLC, 601 U.S. 246 (2024), and cautioned that the exemption should not be applied broadly to all workers who load and unload goods as they pass through the stream of interstate commerce.

While mentioning this recent controlling authority, the Ninth Circuit harkened back to its 2020 analysis of the transportation worker exemption in Rittman v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2004), deeming it consistent with Saxon and Bissonnette. In Rittman, the Ninth Circuit held that Amazon delivery drivers making local, last mile deliveries of products from Amazon warehouses to customers’ homes were exempt transportation workers engaged in interstate or foreign commerce. Applying “the analytical approach applied in Rittman,” the Ninth Circuit concluded that Lopez was an exempt transportation worker because his fueling of airplanes was a “vital component” of the plane’s ability to fly. Id. at 12.

Implications Of The Decision

The Lopez decision is yet another from the Ninth Circuit broadly applying the FAA’s transportation worker exemption, in spite of multiple recent decisions from the U.S. Supreme Court directing narrow interpretation. The Lopez decision opens the door to arguments that workers who do not even handle goods in the stream of commerce are exempt from arbitration if their work somehow supports the mechanism by which the goods travel.

July 12, 2024 by Gerald L. Maatman, Jr.

Minnesota Federal Court Imposes $100 Per Day Civil Contempt Sanctions For Company’s Continued Failure To Comply With An EEOC Subpoena

By Gerald L. Maatman, Jr., Jennifer A. Riley, and George J. Schaller

Duane Morris Takeaways: In EEOC v. Cambridge Transportation., Inc., No. 0:23-MC-00101, 2024 U.S. Dist. LEXIS 118857 (D. Minn. July 8, 2024), Judge Nancy E. Brasel of the U.S. District Court for the District of Minnesota accepted U.S. Magistrate Judge Dulce J. Foster’s Report and Recommendation (see EEOC v. Cambridge Transportation, Inc., No. 0:23-MC-00101, 2024 U.S. Dist. LEXIS 121147 (D. Minn. June 10, 2024)) to impose civil contempt sanctions against Cambridge Transportation Inc. for its failure to comply with an EEOC subpoena. The EEOC sought documents in its administrative charge investigation into Title VII discrimination allegations on behalf of a former Cambridge Transportation, Inc. worker.

The Court ordered payment to the EEOC of $100 per day for each day Cambridge Transportation, Inc. remains out of compliance beginning on June 7, 2024. Over one month later, Cambridge remains out of compliance based on the docket. This ruling is a warning admonisiton for employers facing EEOC subpoenas and the seriousness for any alleged non-compliance with the Commission’s investigation process.

Case Background

On October 19, 2023, the EEOC petitioned for an Application for and Order to Show Cause Why Administrative Subpoena Should Not Be Enforced (the “Application”) against Respondent Cambridge Transportation, Inc. (“Cambridge”). (See United States EEOC v. Cambridge Transp., Inc., No. 0:23-MC-00101, ECF No. 1.) The EEOC’s subpoena duces tecum sought information from Cambridge regarding a charge of discrimination under Title VII of the Civil Rights Act of 1964. (See id.) In the underlying charge, Charging Party Becky Blechinger alleged that Cambridge “discriminated against her on the bases of her sex (female), race (white), national origin (United States) and disability by paying a higher rate of compensation to men of Somalian national origin,” who worked at Cambridge. (See id., ECF No. 2, at 2.)

On November 1, 2023, the Court issued an order to show cause for the EEOC’s Application. (See id., ECF No. 7.) On November 21, 2023, the EEOC provided a status report that reflected it had not effectuated service on Cambridge. (See id., ECF No. 9)

On December 19, 2023, the EEOC filed a Motion to Stay Proceedings. (See id., ECF No. 12.) Therein, the EEOC stated Cambridge responded and acknowledged receipt of the Court’s order to show cause and further indicated that Cambridge intended to produce the documents identified in the EEOC’s Application by December 26, 2023. (See id.) The following day the Court stayed the case. (See id., ECF No. 13.)

On January 25, 2024, the EEOC filed another status report with a request due to Cambridge’s failure to comply with the subpoena. Thereafter, the Court entered an order for hearing on the EEOC’s Application. (See id., ECF Nos. 14 & 15.) On February 22, 2024, Cambridge attended the hearing via telephone through its non-attorney registered agent. (See id., ECF No. 18.)

On February 27, 2024, the Court granted the EEOC’s Application and determined that Cambridge must comply with the subpoena or otherwise the Court may find Cambridge in civil contempt and impose a daily fine for each day Cambridge remains out of compliance. (See id., ECF No. 20.)

On May 14, 2024, the EEOC provided a status report to the Court and reiterated that Cambridge failed to comply with the subpoena and requested the Court impose a civil fine of $800 per day, for each day past May 14, 2024, that Cambridge remains non-compliant. (See id., ECF No. 23.)

On May 20, 2024, the Court ordered a hearing on the EEOC’s Application and required Cambridge to retain counsel to enter an appearance on its behalf to show cause why sanctions should not be imposed for failure to comply with the Court’s February 27 order. (See id., ECF No. 25.) On June 7, 2024, the hearing occurred and Cambridge did not appear. (See id., ECF No. 27.)

The Magistrate’s Report and Recommendation and the District Court Judge’s Finding

On June 10, 2024, Magistrate Judge Dulce J. Foster issued his Report and Recommendation. (See United States EEOC v. Cambridge Transp., Inc., No. 0:23-MC-00101, 2024 U.S. Dist. LEXIS 121147 (D. Minn. June 10, 2024). The report detailed the continued failures of Cambridge to respond to the Agency’s subpoena and efforts to enforce its subpoena. (See id., at *1-6.)

The Court opined Cambridge had “ample time to retain counsel, for its alleged counsel to enter an appearance and to ensure its counsel either would be available to attend the show cause hearing or move to reschedule it” and “despite having months,” it had “faile[d] to do so and made no efforts to explain that failure or seek more time to comply.” (See id., at *5.) As a result, the Court found Cambridge waived all of its defenses to the EEOC’s motion and request for sanctions. (See id., at *5-6.)

The Court reiterated its authority that it “may hold a person who, having been served, fails without adequate excuse to obey the subpoena or an order related to it.” (See id, at *6) (quoting Fed. R. Civ. P. 45(g).) The Court found Cambridge’s continued non-compliance with the subpoena warranted contempt and imposition of monetary sanctions. (See id.) The Court’s recommendation was not made “lightly, but Cambridge’s intransigent refusal to cooperate” left the Court with few other options. (See id.)

On the requested $800 per day fine from the EEOC, the Court reasoned at this stage that it was not justified at this stage. (See id.) The Court instead recommended an initial daily fine of “$100 per day for each day Cambridge remains noncompliant with the subpoena beginning June 7, 2024, the date of the show cause hearing, and continuing until Cambridge satisfactorily complies.” (See id., at *7.) The Court further held “additional sanctions and penalties may be warranted in the future” if Cambridge’s failure to comply continues. (See id.)

The District Court Judge found no clear error in the Magistrate Judge Foster’s recommendation and report. (United States EEOC v. Cambridge Transp., Inc., No. 0:23-MC-00101, 2024 U.S. Dist. LEXIS 118857, at * 1 (D. Minn. July 8, 2024).) In so holding, the Court adopted the report in full, and found Cambridge in civil contempt and ordered payment of $100 per day for each day Cambridge remains out of compliance with the EEOC’s subpoena, beginning on June 7, 2024. (Id.) The Court left open whether any additional sanctions and penalties may apply.

Implications For Employers

This recommendation and report, and resulting Court order, illustrates the length to which the EEOC will go to enforce its investigation of allegations of discrimination under Title VII of the Civil Rights Act of 1964. Companies should recognize the EEOC’s enforcement efforts have teeth, and heed the Court’s response that imposed a daily fine based on total non-compliance.

Companies should take measures to ensure compliance with any EEOC request for information and respond accordingly, and promptly, to any investigation including subpoena requests. Otherwise, Companies may find themselves footing a $100 bill for every day of non-compliance and possibly expose themselves to further civil contempt sanctions.

July 8, 2024 by Gerald L. Maatman, Jr.

DMCAR Mid-Year Review – 2024/2025: FLSA Conditional Certifications Remain High, But So Far In 2024 Courts Are Granting Less Class Certification Motions Overall Compared To 2023

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

Duane Morris Takeaway: In the first half of 2024, across all major types of class actions, courts issued rulings on 203 motions to grant or deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 138 rulings, with an overall success rate of 68%. In contrast, in 2023, the plaintiffs’ class action bar succeeded in certifying class actions at a higher rate. Across all major types of class actions, courts issued rulings last year on 451 motions to grant or to deny class certification. Of these, plaintiffs succeeded in obtaining or maintaining certification in 324 rulings, an overall success rate of 72%. In 2022, by comparison, courts issued rulings on 335 motions to grant or to deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 247 rulings, an overall success rate of nearly 74%.

In 2024, the number of motions that courts considered varied significantly by subject matter area, and the number of rulings varied across substantive areas.

The following list summarizes the results in each of ten key areas of class action litigation:

WARN – 100% granted / 0% denied (1 of 1 granted / 0 of 1 denied)
FLSA / Wage & Hour (Conditional Certification) – 84% granted / 16% denied (68 of 81 granted / 13 of 81 denied)
Antitrust – 80% granted / 20% denied (8 of 10 granted / 2 of 10 denied)
FCRA / FDCPA – 75% granted / 25% denied (3 of 4 granted / 1 of 4 denied)
Securities Fraud – 67% granted / 33% denied (10 of 15 granted / 5 of 15 denied)
ERISA – 67% granted / 33% denied (10 of 15 granted / 5 of 15 denied)
Discrimination – 60% granted / 40% denied (6 of 10 granted / 4 of 10 denied)
Privacy – 60% granted / 40% denied (3 of 5 granted / 2 of 5 denied)
FLSA / Wage & Hour (Decertification) – 33% granted / 67% denied (3 of 9 granted / 6 of 9 denied)
Civil Rights – 48% granted / 52% denied (10 of 21 granted / 11 of 21 denied)
Consumer Fraud – 48% granted / 52% denied (12 of 25 granted / 13 of 25 denied)
Data Breach – 33% granted / 67% denied (1 of 3 granted / 2 of 3 denied)
Products Liability / Mass Torts – 0% granted / 100% denied (0 of 1 granted / 1 of 1 denied)
TCPA – 0% granted / 100% denied (0 of 3 granted / 3 of 3 denied).

The plaintiffs’ class action bar obtained the highest rates of success in WARN, wage & hour, antitrust, and FCRA class actions. There has only been one WARN certification ruling in 2024, which was granted by the court for a 100% success rate. In wage & hour litigation, plaintiffs succeeded in obtaining orders certifying classes and/or collective actions in 68 of 81 rulings issued during 2024, a success rate of 84%. In cases alleging antitrust violations, plaintiffs succeeded in obtaining orders certifying classes in 8 of 10 rulings, for a success rate of 80%. And in cases alleging FCRA violations, plaintiffs managed to obtain class certification rulings in 3 of 4 rulings issued during 2024, a success rate of 75%.

Courts Issued More Rulings In FLSA Collective Actions and Wage & Hour Class Actions Than In Any Other Areas Of Law

For the first half of calendar year 2024, courts again issued more certification rulings in FLSA collective actions and wage & hour class actions than in other types of cases. Plaintiffs historically have been able to obtain conditional certification of FLSA collective actions at a high rate, which surely has contributed to the number of filings in this area.

From January 1 to July 1, 2024, courts considered more motions for certification in FLSA matters than in any other substantive area. Overall, courts issued 90 rulings. Of these, 81 addressed first-stage motions for conditional certification of collective actions under 29 U.S.C. § 216(b), and 9 addressed second-stage motions for decertification of collective actions. Of the 81 rulings that courts issued on motions for conditional certification, 68 rulings favored plaintiffs, for a success rate of nearly 84%.

These numbers are higher than the numbers observed in 2023, during which courts issued 183 rulings. Of these, 165 addressed first-stage motions for conditional certification of collective actions under 29 U.S.C. § 216(b), and 18 addressed second-stage motions for decertification of collective actions. Of the 167 rulings that courts issued on motions for conditional certification, 125 rulings favored plaintiffs, for a success rate of nearly 75%.

At the decertification stage, courts generally have conducted a closer examination of the evidence and, as a result, defendants historically have enjoyed an equal if not higher rate of success on these second-stage motions as compared to plaintiffs.

The results so far in 2024 have not supported that typical success. Of the 9 rulings that courts issued on motions for decertification of collective actions, only 3 rulings favored defendants, for a lower success rate of 33%.

An analysis of the rulings demonstrates that a disproportionate number emanated from traditionally pro-plaintiff jurisdictions, including the judicial districts within the Second Circuit (16 decisions) and Ninth Circuit (10 decisions), which include New York and California, respectively.

Takeaways From The Numbers Midway Through 2024

Notable this year at the halfway point, there have been a very small number of rulings emanating from the Fifth and Sixth Circuits (4 and 7 decisions, respectfully), which could account for the high overall conditional certification rate in the wage & hour space, given that these two circuits have imposed new, stricter standards for conditional certification. Plaintiffs likely are shifting their case filings away from these two circuits toward jurisdictions with more lenient, more plaintiff-friendly standards for conditional certification.

The numbers no doubt flow from the different standards and approaches that courts in different federal circuits take in evaluating motions for conditional certification and decertification and, in turn, the likelihood of plaintiffs’ success on such motions. If more courts join the Fifth and Sixth Circuits in abandoning the traditional two-step certification process under 29 U.S.C. § 216(b), and thereby increase the time and expense of gaining a conditional certification order, it may lead to a reshuffling of the deck in terms of where plaintiffs file their cases and the types of claims they pursue.

We will continue to track class certification trends in 2024 and will report on final numbers in the Duane Morris Class Action Review – 2025, which will be published in the first week of January. Stay tuned!