By Rebecca S. Bjork, Gerald L. Maatman, Jr., and Jennifer A. Riley
Duane Morris Takeaway: In a unanimous decision issued on January 15, 2025, the U.S. Supreme Court decided in Royal Canin U. S. A. v. Wullschleger, No. 23-677 (U.S. Jan. 15, 2025), that when a plaintiff files a civil suit under both state and federal law and subsequently amends the complaint to drop the federal law claims, the case must be remanded to state court due to lack of subject matter jurisdiction in the district court. This decision lends clarity to employers who have been navigating a circuit split on the question of whether federal district court subject matter jurisdiction is determined at the time of removal to federal court, or whether subsequent amendments abandoning federal claims destroys such jurisdiction. This issue arises over and over again in class action litigation.
Introduction
In a decision that will provoke readers’ memories (fondly or otherwise) of first year civil procedure class in law school, the U.S. Supreme Court ruled that a plaintiff’s deceptive marketing lawsuit originally stating both state and federal causes of action, that later dropped the federal claim in an amended complaint, must be remanded to state court. In a 9-0 decision, Justice Kagan explained that once the state law claims are stripped away, no federal subject matter jurisdiction exists and remand is required. Deciding a split amongst the circuit courts, the Supreme Court sided with the Eighth Circuit – and against the First, Third, Fourth, Sixth and Eleventh Circuits – in deciding that when a case is removed to federal court, an amended complaint dropping the federal claims destroys the district court’s jurisdiction.
This is obviously of interest for employers facing federal statutory class-wide claims involving issues such as wage and hour and discrimination, that also implicate overlapping state statutes.
The Ruling In Royal Canin U. S. A. v. Wullschleger
The U.S. Supreme Court issued its unanimous decision in Royal Canin U. S. A. v. Wullschleger, No. 23-677 (U.S. Jan. 15, 2025). In this case, the plaintiff purchased the defendant’s dog food that requires a prescription to obtain, believing that it contains medicine that off-the shelf dog food does not. Id. at 4. After learning that it does not, she filed suit in Missouri state court alleging violations of the state’s statute against deceptive marketing practices. Her complaint also included a claim under the federal Food, Drug and Cosmetic Act, 21 U.S.C. 301 (“FDCA”), that also forbids deceptive marketing practices.
Royal Canin, seeking perhaps to avoid being thrown to the dogs in a state court jury pool, decided to file a notice of removal of the plaintiff’s lawsuit to federal district court based on federal question jurisdiction (the plaintiff’s FDCA count). Id. at 4-5. In response, the plaintiff amended her complaint, dropping the FDCA claim, and only seeking relief under Missouri state law. Id. at 5. She then moved to remand to state court where she originally filed her complaint, but the district court denied her motion. Id. She ultimately appealed the dismissal of her amended complaint on the merits to the Eighth Circuit, and it reversed the district court’s decision to maintain jurisdiction of the matter and remanded it to state court. Id. Royal Canin sought certiorari to resolve the circuit split, and the Supreme Court obliged and affirmed the Eight Circuit’s ruling.
Basis Of The Supreme Court’s Opinion
In a very systematic and straightforward opinion of the Court, Justice Kagan explained why the limitations on federal court jurisdiction established by statute (e.g., 28 U.S.C. 1331 – cases “arising under” federal law) mandate SCOTUS’ unanimous conclusion. Long-established precedent holds that federal courts are courts of limited jurisdiction. Also, Congress has determined the scope of “supplemental jurisdiction,” where federal courts interpret and apply state law but only so long as they have concurrent federal jurisdiction to do so in the litigation. 28 U.S.C. 1367. And, the Supreme Court emphasized another statute that mandates that if at any time it appears that the federal court lacks subject matter jurisdiction, the case “must” be remanded to state court. 28 U.S.C. 1447(c). Id. at 3-4.
Applying these principles, the Supreme Court rejected Royal Canin’s argument that such limitations do not apply once a case has been removed to federal court and so-called “removal jurisdiction” exists. The Supreme Court explained, “Royal Canin argues that our precedent makes an exception for when an amendment [to a complaint] follows a lawsuit’s removal, but that is to read two bits of gratuitous language for a good deal more than they are worth.” Id. at 6. The Supreme Court continued that “Nothing in § 1367’s text . . . distinguishes between cases removed to federal court and cases originally filed there.” Id. at 8. And, unfortunately for Royal Canin, the Supreme Court has already held that in such a circumstance relating to original jurisdiction, the amended complaint is what determines jurisdiction, not the one at the time of removal. Id. As a result, the Supreme Court concluded that when the plaintiff “reconfigured her case to make it only about state law” her suit “became one for a state court.” Id. at 20.
Implications For Employers
As employers know, many class and collective action lawsuits are filed by plaintiffs that allege both state law and federal law claims. The classic example is a hybrid class and collective action under the Fair Labor Standards Act and a similar but often more onerous state statute governing how employees are paid. In our experience, many plaintiffs add their state law claims in order to extend the relevant statute of limitations period, for example, or sweep in certain state law substantive claims that are not available under a governing federal law.
Royal Canin U. S. A. v. Wullschleger will simplify litigation strategy decisions for employers with nationwide workforces. However, it remains to be seen how the plaintiffs’ bar will respond in terms of crafting both original and amended complaint strategies in the employment law space. We will be following developments closely and will provide our analysis and insights here.
Duane Morris Takeaway: The U.S. Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. (SFFA), et al. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), stimulated a flood of claims targeting diversity, equity, and inclusion (DEI) programs over the past year. Headlines were replete with cases of employees and applicants accusing employers of prioritizing diversity over merit and improperly using protected characteristics to guide decision-making, setting the stage for more class action activity in this area.
In SFFA, the U.S. Supreme Court held that two colleges and universities that considered race as a factor in their admissions processes violated the Equal Protection Clause of the U.S. Constitution and Title VI of the Civil Rights Act of 1964. Although the decision did not arise in the employment context, or involve Title VII, the Supreme Court’s decision striking down the use of racial preferences has caused an increase in class action lawsuits and other claims challenging (i) employers’ DEI programs, (ii) alleged misrepresentations about their DEI programs, and (iii) other environmental, social, and governance (ESG) initiatives.
Watch the video below with partner Jerry Maatman to hear more about this trend:
Since the U.S. Supreme Court struck down affirmative action in college admissions, plaintiffs have filed a flood of challenges to corporate DEI programs, claiming that they constitute impermissible “reverse discrimination” under Title VII. Headlines this past year were replete with cases of employees and applicants accusing employers of prioritizing diversity over merit and improperly using protected characteristics to guide decision-making. In 2024, courts issued a number of rulings in these cases, with mixed results, typically dependent on the nature of the allegations at issue in the lawsuit. In general, companies found more success in overcoming these challenges where their challenged DEI programs were focused more on colorblind issues like eliminating implicit bias and fostering inclusivity, and less success when focused on achieving numerical diversity quotas and other actions perceived as demonizing white males. See, e.g., De Piero v. Pennsylvania State University, 711 F. Supp. 3d 410 (E.D. Pa. 2024) (granting in part and denying in part employee’s reverse discrimination claims); Young v. Colorado Department Of Corrections, 94 F.4th 1242 (10th Cir. 2024) (affirming dismissal of employee’s reverse discrimination claim); Herrera v. New York City Department Of Education, 2024 WL 245960 (S.D.N.Y. Jan. 23, 2024) (denying defendants’ motion for summary judgment on employees’ reverse discrimination claims); Duvall v. Novant Health, Inc., 95 F.4th 778 (4th Cir. 2024) (affirming verdict for employee alleging reverse discrimination).
In October 2024, a rare class action trial in California in Palmer, et al. v. Cognizant Technology Solutions Corp., Case No. 17-CV-6848 (C.D. Cal.), led a jury to find a technology firm liable for engaging in a pattern or practice of discrimination against Caucasian and non-Indian employees in its termination and deployment decisions. The plaintiffs alleged the technology firm favored Indian and South Asian employees for whom it sponsored H-1B visas. The jury concluded, based on statistical evidence presented at trial, that the technology firm engaged in a pattern or practice of discrimination by terminating non-Indian and non-South Asian employees at a much higher rate than its other employees (8.4 times more likely).
In 2024, the U.S. Supreme Court granted certiorari in a reverse discrimination lawsuit, with a decision likely to be rendered in 2025 that will have implications for reverse discrimination lawsuits of all types, including class actions, moving forward. At issue in Ames, et al. v. Ohio Department of Youth Services, No. 23-1039 (U.S. cert granted Oct. 4, 2024), is whether, in addition to pleading the other elements of an employment discrimination claim under Title VII of the Civil Rights Act of 1964, a majority-group plaintiff must show “background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority.” The Supreme Court is poised to resolve a federal circuit split over this issue, potentially opening the courthouse to more such claims.
Although many companies’ DEI programs remain strong post-SFFA with an increased emphasis on inclusivity and ensuring compliance with anti-discrimination laws, other companies have begun stepping down their DEI commitments for a variety of reasons, including the fear of a backlash of reverse discrimination claims. Companies that step down their DEI commitments, however, should take care to ensure that their public-facing statements regarding those commitments remain true.
More generally, all companies should take care to ensure that they are not overstating or misrepresenting their policies and practices regarding DEI and other social issues. Such overstatements are known as “diversity washing” or “woke washing,” and are increasingly forming the basis of class action lawsuits alleging securities fraud or other misrepresentations.
In 2024, federal courts denied motions to dismiss in two diversity-washing class actions, for example, finding that plaintiffs plausibly stated claims for intentional misrepresentations. See Craig, et al. v. Target Corp., 2024 WL 4979234 (M.D. Fla. Dec. 4, 2024) (denying motion to dismiss securities fraud class action alleging misrepresentations regarding the risk of customer boycotts from ESG, DEI, and LGBT initiatives); SEB Inv. Management AB v. Wells Fargo & Co., 2024 WL 3579322 (N.D. Cal. July 29, 2024) (denying motion to dismiss securities fraud class action alleging false or misleading statements regarding corporation’s requirement that 50% of job interview candidates be diverse).
Companies’ statements regarding their DEI commitments have been voluntary to date. As a result, diversity-washing claims have applied only to statements companies have elected to make. However, many more public company statements about diversity may be forthcoming and subject to complaints filed by the plaintiffs’ class action bar, pending a challenge in the Fifth Circuit to SEC-approved Nasdaq rules requiring any of the over 3,000 companies listed with the Nasdaq with at least five board members to either have two board members from an underrepresented group or explain why not. The Fifth Circuit previously upheld these Nasdaq board diversity rules over a challenge under the First and Fourteenth Amendments to the U.S. Constitution, the Securities Exchange Act, and the Administrative Procedure Act. See Alliance For Fair Board Recruitment v. SEC, 85 F.4th 226 (5th Cir. 2023). In 2024, the Fifth Circuit vacated that opinion and reheard the case en banc, on May 14, 2024. If the Nasdaq board diversity rule is upheld, it will take full effect in December 2026.
The label “ESG” has become mainstream in the past few years. ESG refers broadly to “environmental, social, and governance,” which many companies have embraced as part of their business plans and corporate missions. Whereas diversity-washing class actions focus on the “S” in ESG, class actions also recently have proliferated relative to overstatements regarding environmental issues, thus highlighting the “E” in “ESG.”
These “greenwashing” class actions continued to proliferate in 2024. See Dorris, et al. v. Danone Waters of America, 2024 WL 4792048 (S.D.N.Y. Nov. 14, 2024) (dismissing greenwashing class action); Fanucchi v. Enviva Inc., 2024 WL 3302564 (D. Md. July 3, 2024) (dismissing greenwashing class action); Boyd, et al. v. Target Corp., 2024 WL 4287669 (D. Minn. Sept. 25, 2024) (denying motion to dismiss greenwashing class action).
As companies continue to add statements regarding their environmental impact or social responsibility to enhance their marketing efforts, communicate their company values, and/or attempt to appeal to consumers and shareholders attuned to ESG considerations, we expect to see ESG class actions continue their growth trajectory.
Duane Morris Takeaway: Despite another tumultuous year of rulings, the arbitration defense remained one of the most powerful weapons in the class action defense toolkit. A defendant’s ability to enforce an arbitration agreement containing a class or collective action waiver continues to reign as one of the most impactful defenses in terms of shifting the pendulum of class action litigation. The U.S. Supreme Court cleared the last hurdle to widespread adoption of such agreements with its decision in Epic Systems Corp. v. Lewis, et al., 138 S. Ct. 1612 (2018). In response, more companies of all types and sizes updated their onboarding systems, terms of use, and other types of agreements to require that employees and consumers resolve any disputes in arbitration on an individual basis.
Watch Review Editor Jerry Maatman explain this trend below:
To date, companies have enjoyed a high rate of success enforcing those agreements and using them to thwart class actions out of the gate. In 2024, although defendants continued to win most motions to compel arbitration filed, their margin of victory dwindled. Across substantive areas of class action litigation, courts issued rulings on approximately 167 motions to compel arbitration over the past year. Defendants prevailed in 91 of those rulings, a success rate of approximately 54%. These numbers are lower than the numbers we saw in 2023, where courts issued rulings on 187 motions to compel arbitration, and defendants prevailed on 123 motions, which translated into a success rate of 66%.
Given the potency of the arbitration defense, the plaintiffs’ class action bar has continued to press potential exceptions to its coverage, including the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the Ending Forced Arbitration Act or EFAA) and the transportation worker exemption to the FAA. Over the past year, plaintiffs made significant strides on both fronts as courts issued a mixed bag of rulings. Plaintiffs continued to assert the EFAA to avoid arbitration of cases containing claims for alleged sexual harassment. And, despite the U.S. Supreme Court’s guidance, many lower federal courts continued to apply the transportation worker exemption in a broad manner to workers who handled goods that moved in interstate commerce, irrespective of whether they played a direct role in transporting the goods across borders, such as last-mile delivery drivers, warehouse workers, and local distributors.
The EFAA amended the FAA and provided plaintiffs the discretion to avoid pre-dispute arbitration provisions in cases where they allege conduct constituting “a sexual harassment dispute or a sexual assault dispute” or are the named representatives in “a class or in a collective action alleging such conduct.” In other words, the Act does not render arbitration agreements invalid but allows plaintiffs bringing sexual assault or sexual harassment claims to elect to avoid the agreements and to bring their cases in court instead of arbitration.
In 2024, plaintiffs asserted the EFAA as a defense to approximately 47 motions to compel arbitration. Plaintiffs succeeded in enforcing the EFAA and keeping claims in court, in whole or in part, in approximately 27 of those rulings, or 57.4%. More than two years after the law’s effective date, courts are continuing to define its parameters, and rules regarding the law’s application are taking shape in multiple areas, the majority of which are coming out in favor of a broad application of the EFAA, making it easier for plaintiffs to avoid arbitration.
When Do Claims Arise?
Although by its terms the EFAA applies to any “dispute or claim that arises or accrues” on or after its enactment on March 3, 2022, courts have adopted varying interpretations of this language. Multiple decisions in 2024 showed that courts are receptive to arguments that the EFAA applies to conduct that occurred prior to the effective date of the Act so long as the plaintiffs file their charges or lawsuits after March 3, 2022.
In Famuyide, et al. v. Chipotle Mexican Grill Inc., 2024 U.S. App. LEXIS 19449 (8th Cir. Aug. 5, 2024), for example, the Eighth Circuit took a broad view as to when a dispute “arises” for purposes of the Act. A former employee claimed that a co-worker raped her at work in 2021, months before the EFAA took effect. The Eighth Circuit, however, held that the dispute arose when the plaintiff filed her lawsuit in court in July 2022 and not when the sexual assault occurred in 2021 or even when her attorneys sent a demand letter to the defendant in February 2022 because the demand letter was not a “conflict or controversy between the parties.” Id. at *6.
Similarly, in Kader, et al. v. Southern California Medical Center Inc., 2024 Cal. App. LEXIS 50 (Cal. App. 2d Dist. Jan. 29, 2024), the Second Appellate District for the California Court of Appeal found that a dispute arose when the plaintiff filed charges with the Department of Fair Employment and Housing. An executive brought claims for sexual misconduct, as well as discrimination, retaliation, and defamation against a medical center alleging that it employed a doctor who sexually assaulted him. The defendant moved to compel arbitration based on an agreement that the plaintiff signed in 2019. The Court of Appeal concluded that the date a dispute arises “depends on the unique facts of each case” but that “a dispute does not arise merely from the fact of injury.” Rather, “[f]or a dispute to arise, a party must first assert a right, claim, or demand.” Id. at *5.
What About Allegedly Continuing Violations?
In 2024, the Second Circuit weighed in on the impact of plaintiffs’ alleging “continuing violations,” again in a way consistent with a broad interpretation of the EFAA. In Olivieri, et al. v. Stifel, Nicolaus & Company, 112 F.4th 74 (2d Cir. 2024), the Second Circuit held that the EFAA shields claims from arbitration where the plaintiff alleges that the misconduct continued past the effective date of the law. Although the plaintiff alleged that she began experiencing a retaliatory hostile work environment before the effective date of the Act, and filed suit in January 2021, she claimed that the continuing course of conduct persisted after enactment of the EFAA, and, therefore, her claims were covered under the EFAA through the continuing violation doctrine. The Second Circuit agreed. The Second Circuit held that, while the plaintiff’s claim did accrue before the EFAA went into effect given that she filed suit in January 2021, her claims continued to accrue again with each act she alleged added to the hostile work environment. The Second Circuit reasoned that, “[i]f Congress wanted the EFAA to apply only to claims that ‘first’ accrue after its enactment, it could have said so.” Id. at 89.
Does The EFAA Shield Tag-Along Claims?
The scope of the EFAA has been a hotly contested issue in terms of the breadth of its arbitration shield and whether it applies to all claims asserted by a plaintiff or only the sexual assault or sexual harassment claims. In October 2024, California’s Second Appellate District held in Yongtong Liu, et al. v. Miniso Depot CA Inc., 105 Cal. App. 5th 791 (Cal. App. 2d Dist. 2024), that the EFAA extends to a plaintiff’s entire employment case, including a plaintiff’s wage claims, shielding them from arbitration. A human resources employee brought suit against an employer alleging that the CEO made inappropriate comments regarding her appearance and sexual orientation. The employee also asserted wage & hour claims for alleged misclassification, unpaid overtime, and minimum wage violations. The EFAA states, in relevant part, that “no predispute arbitration agreement . . . shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the . . . sexual harassment dispute.” 9 U.S.C. § 402(a) (emphasis added). Focusing on the statute’s use of the word “case,” the appellate court ruled that the EFAA “makes the parties’ arbitration agreement unenforceable as to [plaintiff’s] entire case.” Such ruling runs counter to others, including the June 2023 decision in Mera v. SA Hospitality Group LLC, 675 F. Supp. 3d 442, 448 (S.D.N.Y. 2023), wherein a federal magistrate judge ruled that, although a restaurant chain could not force a plaintiff to arbitrate his sexual harassment claims, it could force him to arbitrate his wage & hour overtime claims because they “do not relate in any way to the sexual harassment dispute.”
Companies should anticipate continued development of these and other novel issues as we continue further past the enactment date and plaintiffs continue to shift their interest toward the EFAA’s arbitration shield.
In one of the largest door-openers to the courthouse for the plaintiffs’ class action bar, courts have issued a runaway train of rulings that position the transportation worker exemption to swallow up the FAA for workers who move or contribute to the movement of goods. Section 1 of the FAA exempts from arbitration “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The third category commonly is called the “transportation worker” exemption. Although the U.S. Supreme Court has instructed lower courts to interpret the transportation worker exemption “narrowly,” its parameters have carved a slippery slope for lower courts.
In Southwest Airlines Co. v. Saxon, et al., 142 S.Ct. 1783 (2022), the U.S. Supreme Court applied the transportation worker exemption to an airport ramp supervisor. Although it held that the exemption requires direct involvement in the transportation of goods across state or international borders, it had no problem finding the plaintiff part of such a class: “We have said that it is ‘too plain to require discussion that the loading or unloading of an interstate shipment by the employees of a carrier is so closely related to interstate transportation as to be practically a part of it.’ . . . We think it equally plain that airline employees who physically load and unload cargo on and off planes traveling in interstate commerce are, as a practical matter, part of the interstate transportation of goods.” Id. at 1789.
This ruling set off a barrage of decisions finding individuals who touch goods that move in interstate commerce, or the means of transport for such goods, subject to the exemption. As a result, in April 2024, the U.S. Supreme Court took up Bissonnette, et al. v. LePage Bakeries Park Street, LLC, 61 U.S. 246 (2024). As in Saxon, the U.S. Supreme Court emphasized that the test for application of the transportation worker exemption focuses on the work performed by the plaintiff and not the employer’s industry. Addressing the employer’s argument that its test would fold virtually all workers who load or unload goods, such as pet shop employees and grocery store clerks, into the exemption, the Supreme Court stated that the exemption has “never” been interpreted to apply in “such limitless terms.” Id. at 256. For the exemption to apply, the worker “must at least play a direct and necessary role in the free flow of goods across borders.” Id.
The Bissonnette decision appears to have had a smaller impact on the lower courts, which issued opinions before and after Bissonette that broadly construe the transportation worker exemption.
In May, for example, the California Court of Appeal in Peters, et al. v. SDLA Courier Services, 2024 Cal. App. Unpub. LEXIS 2954 (Cal. App. 2d Dist. May 14, 2024), found the plaintiff, a delivery driver who made only local deliveries of Amazon products, an exempt transportation worker. The plaintiff filed a class action alleging that the defendant violated various provisions of the California Labor Code, and the defendant moved to compel arbitration of the plaintiff’s individual claims and to dismiss the class claims. The trial court denied the motion, finding the FAA inapplicable because the plaintiff was a “last-leg delivery driver” and “engaged in interstate commerce.” Id. at *2. The Court of Appeal affirmed, reasoning that, but for the plaintiff and those like her, the packages would not get delivered to customers.
The Ninth Circuit also applied the transportation worker exemption broadly in three of its decisions this past year, both before and after Bissonette.
On March 12, 2024, in perhaps the most aggressive application to date, the Ninth Circuit ruled in Ortiz, et al. v. Randstad Inhouse Services, LLC, 95 F.4th 1152 (9th Cir. 2024), that the plaintiff, a warehouse equipment operator responsible for moving packages to and from warehouse racks, qualified as a transportation worker. After plaintiff filed a class action for alleged wage & hour violations, the defendant moved to compel arbitration, and the district court denied the motion. The Ninth Circuit affirmed. It found that the plaintiff “actively engaged” in transportation because he “ensured that goods would reach their final destination by processing and storing them while they awaited further interstate transport.” Id. at 1162. Further, it found that the plaintiff “actively engaged” with transportation because he handled goods “as they went through the process of entering, temporarily occupying, and subsequently leaving the warehouse.” Id.
On July 19, 2024, the Ninth Circuit affirmed the district court’s ruling in Lopez, et al. v. Aircraft Service International, Inc., 107 F.4th 1096 (9th Cir. 2024). The plaintiff, a fueling technician at Los Angeles International Airport, initiated a wage and hour class action against his employer, who moved to compel arbitration. The district court denied the motion. It reasoned that, although the plaintiff did not handle goods in commerce, he was directly involved in the maintenance of the means by which the goods were transported. The Ninth Circuit affirmed. Although the plaintiff did not have any hands-on contact with goods or any direct participation in their movement, the Ninth Circuit reasoned that the plaintiff’s work fueling airplanes was a “vital component” of the plane’s ability to fly. Id. at 1101.
On September 11, 2024, the Ninth Circuit issued another broad ruling in Nair, et al. v. Medline Industries, LP, 2024 WL 4144070 (9th Cir. Sept. 11, 2024). There, the plaintiff was a California warehouse operator who worked on a shipping dock stacking pallets and wrapping them in saran wrap. The plaintiff alleged that a driver told her that he made out-of-state deliveries and that a training video showed her employer shipping medical supplies throughout the country. The Ninth Circuit affirmed the district court’s order denying a motion to compel arbitration, noting that the employer had done nothing to rebut the plaintiff’s evidentiary showing that she packaged and loaded goods that traveled in interstate commerce. Justice Ryan Nelson’s concurrence cautioned that the Ninth Circuit needed to ground its decisions in the statutory text of the transportation worker exemption rather than through “judicially created tests [that] risk taking on a life of their own.” Id. at *2.
The U.S. District Court for the District of Colorado followed this line of reasoning and issued a similar ruling in Rietheimer, et al. v. United Parcel Service Inc., No. 23-CV-477 (D. Colo. Nov. 13, 2024). The plaintiff, a last-mile delivery driver, filed a class action, and the defendant moved to dismiss the class claims and compel individual arbitration. The court ruled that the plaintiff and other last-mile delivery drivers like him were engaged in interstate commerce within the meaning of the transportation worker exemption. The court explained that, although the plaintiff did not directly transport goods across state lines, a significant portion of the packages he handled came from out of state, and his role was integral to the final step in the interstate delivery process. It reasoned that the packages the plaintiff delivered were part of an ongoing interstate transaction and thus concluded that he was directly involved in the free flow of goods across state borders. Given the enduring impact that the arbitration defense has in class action litigation, companies are apt to face additional hurdles from creative workarounds from the plaintiffs’ class action bar as courts continue to push the boundaries of the transportation worker exemption.
Duane Morris Takeaway: As authors and editors of our firm’s our Class Action Review, we identified ten (10) key trends in class action litigation over the past year. Trend # 1 focuses on the unprecedented number of massive class action settlements reached in the last 12 months. Aside from the Big Tobacco settlements nearly two decades ago, 2022, 2023, and 2024 have marked the most extensive set of billion-dollar class action settlements in the history of the American court system.
In today’s video blog, Duane Morris partner Jerry Maatman discusses how the aggregate monetary value of class action settlements continued to reach incredible highs in 2024, as plaintiffs’ lawyers and government enforcement agencies monetarized their claims into enormous settlement values. In 2024, the plaintiffs’ bar was successful in converting case filings into significant settlement numbers again. Tune in below to hear all about this or read the blog post blow for more information.
In 2024, settlements reached the $40 billion mark for the third year in a row. The cumulative value of the highest ten settlements across all substantive areas of class action litigation totaled $42 billion. That number is the third highest value we have tallied in the last two decades, trailing only the settlement numbers from 2023 and 2022. In 2023 settlements totaled $51.4 billion, and in 2022, settlements totaled $66.0 billion. Combined, the past three years of $159.4 billion reflect use of the class action mechanism to redistribute wealth at an unprecedented level.
These gargantuan settlements yielded extraordinary and record-setting attorneys’ fee awards. On April 23, 2024, U.S. District Judge Richard Gergel of the U.S. District Court for the District of South Carolina awarded more than $956 million in attorneys’ fees to plaintiffs’ lawyers who secured two settlements worth more than $11 billion with four manufacturers of “forever chemicals” that allegedly polluted drinking water in the United States with per- and polyfluoroalkyl substances, or PFAS. Numbers like this explain at least in part why we are continuing to see the plaintiffs’ class action bar grow in numbers and expand its reach as lawyers clamor to identify the next “tort of the day.”
On an aggregate basis, across all areas of litigation, class actions and government enforcement lawsuits garnered more than $42 billion in settlements in 2024. The largest 20 settlements during 2024 are in the chart below. The total for the top 20 settlements in 2024 was $34.6 billion.
Such numbers fall slightly short only of the numbers we tallied in 2022 and 2023. The value of class actions and government enforcement settlements in 2022 topped $66 billion, and the value in 2023 topped $51 billion. Combined, the three-year settlement total eclipses any other three-year period in the history of American jurisprudence.
As to settlements of one billion dollars or more, in 2024, parties agreed to resolve ten class actions for $1 billion or more. These settlements include the following:
The number of billion dollar settlements in 2024 surpassed the number in 2023, falling short only of the number of billion-dollar settlements in 2022. In 2023, parties resolved nine class actions for $1 billion or more. In 2022, parties resolved 15 class actions for $1 billion or more in settlement dollars. Together, corporations have seen 34 settlements of one billion dollars or more in three years. This string of settlements marks the most extensive set of billion-dollar class action settlements in the history of the American court system.
In 2024, rich settlement numbers spanned nearly every area of class action litigation. The following shows the cumulative value of the ten highest settlements in each key area of class action litigation:
The value of the ten highest settlements in the privacy, data breach, and labor areas increased in 2024, reflecting the growth of class action litigation in these areas, as they account for a higher percentage of the overall total. By contrast, the value of the ten highest settlements in antitrust, discrimination, civil rights, and FCRA class actions decreased to less than 50% of their 2023 totals.
Particularly when viewed in conjunction with the settlement values observed in 2022 and 2023, the settlement numbers in 2024 confirm that we have entered and are operating in a new era of enhanced class action risks. Corporations should expect these numbers to continue to incentivize the plaintiffs’ class action bar to be equally if not more aggressive with their case filings and settlement positions in 2025.
While settlements have been particularly robust over the past three years, the number of class action filings have been relatively stable and are down slightly overall in 2024.
There has been a steady increase in areas such as data privacy, with heightened concerns about cybersecurity and consumer data protection driving lawsuits. Additionally, the COVID-19 pandemic sparked a rise in class actions related to health and safety protocols, insurance claims, and employee rights. Overall, the legal landscape has grown more complex, with plaintiffs and defendants navigating a more dynamic and often contentious environment, and often leading to massive settlement opportunities for plaintiffs.
Duane Morris Takeaway: Corporations should expect such numbers to incentivize the plaintiffs’ class action bar to be equally if not more aggressive with their case filings and settlement positions in 2025.
Duane Morris Takeaways: As we kick off 2025, we are pleased to announce the publication of the third annual edition of the Duane Morris Class Action Review. It is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting corporations, including class certification rulings in the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breaches, discrimination, EEOC-initiated and government enforcement litigation, 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, the largest class action settlements across all areas of law, and primers on both the Illinois Biometric Information Privacy Act and the California Private Attorney General Act. 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 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 are equally proud that the Review made its way into American jurisprudence over the past year, with a federal district court citing our analysis on class action trends in its decision on a motion for class certification.
Click here to access our customized website featuring all the Review highlights, including the ten major trends across all types of class actions over the past year. Order your free copy of the e-book here, and download the Review overview here.
Check out an exclusive article featuring the Review posted this morning in Forbes here. The Firm’s press release on the Review can be found here.
The 2025 Review analyzes rulings from all state and federal courts in 23 areas of law. It is designed as a reader-friendly research tool that is easily accessible in hard copy and e-book formats. Class action rulings from throughout the year are analyzed and organized into 23 chapters and 7 appendices for ease of analysis and reference.
Executive Summary Of Key Class Action Trends Over The Past Year
Class action litigation presents one of the most significant risks to corporate defendants today. Procedural mechanisms like the one set forth in Rule 23 of the Federal Rules of Civil Procedure have the potential to expand a claim asserted on behalf of a single person into a claim asserted on behalf of a behemoth that includes every employee, customer, or user of a particular company, product, or service, over an extended period. Class actions allow plaintiffs to pursue claims on behalf of a defined and sometimes sprawling group of unnamed individuals. By aggregating the claims of many persons in a single lawsuit, plaintiffs can seek to increase the size of their cases exponentially in terms of the number of claims they assert and the damages they seek. As a result, class actions can present substantial implications for corporate defendants.
As plaintiffs increase the size of their cases, the resulting legal risks can grow, bringing increased leverage for plaintiffs. A negative ruling in a class action has the potential to reshape a defendant’s business model, to impose significant financial consequences, and to shape standards for the entire industry. The outcome of a class action lawsuit, therefore, can be significant and potentially devastating for a company. Due to their potential implications, class actions are often costly to defend. Defending a class action can be a time-consuming and resource-intensive process that diverts management attention from core business activities. Plaintiffs can attempt to leverage this reality to make class actions as expensive and disruptive as possible, in an effort to bring about litigation fatigue and to extract sizable settlements from corporations.
Class actions are sometimes even more perilous to settle. Given the potential size and cost, class action settlements can attract media attention and lead to public scrutiny. Lucrative settlements can prompt copy-cat lawsuits and lead to more claims. Negative publicity can have widespread implications, including potential harm to a company’s reputation, potential damage to its brand, and potential drop in consumer trust. Class actions are complex legal proceedings with uncertain outcomes. The complexity can arise from managing multiple claims, myriad legal issues, and assorted class members, making it challenging for corporate defendants to predict and control the result. Due to these factors, corporate defendants should approach class actions from a broad vantage point with a thoughtful and multi-faceted defense strategy.
We developed a one-of-a-kind resource to provide a practical desk reference for corporate counsel faced with defending class action litigation. We have organized this year’s book into 23 chapters, with seven appendices, each of which provides an analysis of the trends in a particular area of class action litigation, along with the key decisions from courts across the country that companies can use to shape their defense strategies.
We identified ten key trends that characterized 2024. These trends include: (i) the continued prevalence of massive class action settlements; (ii) the normalization of plaintiff-friendly class certification conversion rates across substantive areas of class action litigation; (iii) the expansion of privacy class action litigation; (iv) continued efforts to chip away at and counter the impact of the arbitration defense as a barrier to class action litigation; (v) a surge of challenges to diversity, equity, and inclusion (DEI) programs that are likely to fuel class claims; (vi) decisions by the U.S. Supreme Court laying the groundwork for rebooted litigation theories and defenses; (vii) continued growth of data breach class actions; (viii) attention-getting headlines regarding PFAS litigation, which generated the largest class settlement and attorneys’ fee award of 2024; (ix) filing activity in California on the PAGA front demonstrating its continued popularity among the plaintiffs’ class action bar; and (x) a decreased role for government enforcement activity.
Trend # 1 – Settlement Numbers Break $40 Billion For The Third Year In A Row
In 2024, settlement numbers broke the $40 billion mark for the third year in a row. The cumulative value of the highest ten settlements across all substantive areas of class action litigation totaled $42 billion. That number is the third highest value we have tallied in the last two decades, trailing only the settlement numbers from 2023 and 2022. In 2023 settlements totaled $51.4 billion, and in 2022, settlements totaled $66 billion. Combined, the past three years of $159.4 billion reflect use of the class action mechanism to redistribute wealth at an unprecedented level.
Trend #2 – Class Certification Numbers Normalize Across Substantive Areas
Although courts issued fewer decisions on motions for class certification in 2024 as compared to 2023, the plaintiffs’ class action bar obtained certification at a more consistent rate across all substantive areas, suggesting that plaintiffs are being more selective in their investments and the cases they pursue through class certification. In 2024, courts issued rulings on 432 motions for class certification, a decrease from 2023, when courts issued rulings on 451 motions for class certification. Of those, courts granted motions for class certification at a lower rate. Courts granted 272 of those motions, for a certification rate of approximately 63%. In 2023, by contrast, courts granted 324 motions for class certification, for a certification rate of approximately 72%.
Trend #3 – Privacy Class Actions Continue To Proliferate As Plaintiffs Search For Winning Theories
The plaintiffs’ class action bar has continued to invest in the privacy class action space and, over the past year, has generated a multitude of filings, making privacy one of the hottest areas of growth in terms of activity by the plaintiffs’ class action bar. As technology continues to infiltrate our everyday lives, it provides ongoing inspiration for novel claims. Two of the most active areas of privacy litigation over the past year include: (1) litigation regarding “biometric” technologies under the Illinois Biometric Privacy Act (BIPA); and (2) claims regarding website advertising technologies (adtech) asserted under a variety of federal and state statutory and common laws.
Trend #4 – Plaintiffs Continue To Chip Away At The Arbitration Defense
Despite another tumultuous year of rulings, the arbitration defense remained one of the most powerful weapons in the class action defense toolkit. A defendant’s ability to enforce an arbitration agreement containing a class or collective action waiver continues to reign as one of the most impactful defenses in terms of shifting the pendulum of class action litigation. The U.S. Supreme Court cleared the last hurdle to widespread adoption of such agreements with its decision in Epic Systems Corp. v. Lewis, et al., 138 S. Ct. 1612 (2018). In response, more companies of all types and sizes updated their onboarding systems, terms of use, and other types of agreements to require that employees and consumers resolve any disputes in arbitration on an individual basis. In 2024, the defense won 91 of 167 motions to compel arbitration, for a success rate of 54%. By way of comparison, in 2023 the defense won 126 of 190 motions to compel arbitration, for a success rate of 66%.
Trend #5 – Plaintiffs Target DEI and ESG Initiatives Prompting Roll Back
The U.S. Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. (SFFA), et al. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), stimulated a flood of claims targeting diversity equity and inclusion (DEI) programs over the past year. Headlines were replete with cases of employees and applicants accusing employers of prioritizing diversity over merit and improperly using protected characteristics to guide decision-making, setting the stage for more class action activity in this area.
Trend #6 – The Supreme Court Lays The Groundwork For Rebooted Litigation Theories
As the ultimate referee of law, the U.S. Supreme Court traditionally has defined the playing field for class action litigation and, through its rulings, has impacted the class action landscape. The past year was no exception. Although the U.S. Supreme Court did not directly address the procedural mechanisms that govern class actions during its most recent term, it issued multiple decisions that are sure to influence the class action space.
Trend #7 – Data Breaches Gives Rise To An Unprecedented Number Of Class Action Filings
Data breach litigation remained expansive in 2024 as plaintiffs filed more data breach class actions than in any other year and double the number filed in 2022. As the number of data breaches has accelerated, such events have provided the fuel for a surge of class actions. Despite the significant increase in filings, courts issued few (only five) class certification decisions in 2024, suggesting that many motions are in the pipeline or that, observing the difficulty that plaintiffs have faced in certifying such cases over the past two years, plaintiffs are electing to monetize their data breach claims prior to reaching that crucial juncture. So long as defendants continue to play ball on the settlement front, we are likely to see settlement payouts continue to lure plaintiffs to this space and fuel those filing numbers.
Trend #8 – PFAS Inspires Forever Litigation
PFAS class actions inspired some of the most attention-grabbing headlines this past year across the legal landscape. PFAS, or per- and polyfluoroalkyl substances, are a group of manmade chemicals that are resistant to oil, water, and heat. They are used in many consumer and industrial products and are commonly called “forever chemicals” because of their persistence, meaning they do not break down easily in the environment. PFAS generated the largest class action settlement in 2024, which came in at more than twice the next highest settlement, which also involved PFAS, and generated an attorneys’ fee award of nearly one billion dollars. These numbers are going to inspire a continued wave of PFAS class actions, as the plaintiffs’ class action bar targets more companies with claims that their products or packaging contained PFAS, and those companies, in turn, search for claims against their material suppliers.
Trend #9 – California Remains Ground Zero For PAGA Representative Actions
The California Private Attorneys General Act (PAGA) inspired more representative lawsuits than any other statute in America over the past year. According to the California Department of Industrial Relations, plaintiffs filed more than 9,464 PAGA notices in 2024, a nearly 22% increase over 2023, and a whopping 85,936% increase over the 11 PAGA notices filed in 2006. The so-called PAGA reform legislation passed in 2024 by California lawmakers seemingly did little to nothing to curb interest in these cases, which continue to present one of the most viable workarounds to workplace arbitration agreements.
Trend #10 – The Change At The White House Signals A Decreased Role For Government Enforcement Litigation
Government enforcement litigation is similar in many respects to class action litigation. In lawsuits brought by the U.S. Equal Employment Opportunity Commission (EEOC), as well as the U.S. Department of Labor (DOL), government enforcement claims typically involve significant monetary exposure, numerous claimants, and complex procedures. These types of lawsuits most often pose reputational risks to companies. As the White House shifts from blue back to red, the incoming Trump Administration has promised less government oversight of business and less regulation, thereby signaling less government enforcement litigation. Change, therefore, is inevitable.
Conclusion
Class action litigation is a staple of the American judicial system. The volume of class action filings has increased each year for the past decade, and 2025 is likely to follow that trend. In this environment, programs designed to ensure compliance with existing laws and strategies to mitigate class action litigation risks are corporate imperatives.
The plaintiffs’ bar is nothing if not innovative and resourceful. Given the massive class action settlement figures from 2022 through 2024 (a combined total of $159.4 billion), coupled with the ever-developing law, corporations can expect more lawsuits, expansive class theories, and an equally if not more aggressive plaintiffs’ bar in 2025. These conditions necessitate planning, preparation, and decision-making to position corporations to withstand and defend class action exposures.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Gregory Tsonis
Duane Morris Takeaways: On December 17, 2024, in a critical ruling in Stafford, et al. v. Bojangles’ Restaurants, Inc., No. 23-2287 (4th Cir. Dec. 17, 2024), the Fourth Circuit vacated the district court’s certification of a class action involving allegations of unpaid off-the-clock work and unauthorized edits to employee time records at Bojangles Restaurants. The Fourth Circuit determined that the district court erred in its application of Rule 23’s commonality and predominance requirements, relying on overly broad class definitions and vague assertions of company-wide policies. The decision underscores the importance of specificity in class certification arguments and highlights the successful opposition to class certification when plaintiffs rely upon generalized allegations and purportedly common policies in wage-and-hour litigation.
Case Background
Bojangles’ Restaurants, Inc. operates over 300 fast-food locations across eight states. The company employs a three-tier management structure with shift managers, assistant general managers, and general managers. Shift managers, the lowest tier, are responsible for a variety of operational duties, including pre-opening and post-closing tasks. Bojangles maintains internal policies prohibiting off-the-clock work and requiring employees to clock in and out to ensure accurate tracking of hours and overtime pay.
The lawsuit arose from allegations that Bojangles violated its policies by requiring shift managers to perform off-the-clock work and, at times, by systematically editing time records to reduce overtime payments. The Named Plaintiff Richard Stafford, a former hourly-paid shift manager, alleged that he was frequently required to work off the clock, perform unpaid tasks such as cleaning, making bank deposits, and traveling between locations, and was subject to unauthorized time-shaving.
The lawsuit was originally filed as an FLSA collective action and, in 2020, the district court conditionally certified a collective action for Stafford’s FLSA claims that attracted nearly 550 opt-in plaintiffs. Stafford later amended the complaint to assert state law class claims under various state wage and hour laws, and subsequently sought Rule 23 class certification for state law claims in North Carolina, South Carolina, Alabama, Georgia, Kentucky, Tennessee, and Virginia. While five of the state law classes failed to meet Rule 23’s adequacy prong, the district court certified classes for North Carolina and South Carolina shift managers, citing the Bojangles Opening Checklist, which allegedly mandated pre-shift tasks, as a common issue. The class definitions broadly included all shift managers employed within three years of the complaint’s filing since the district court found that at least 80% of shift managers would have worked an opening shift at some point.
Bojangles appealed, arguing that the district court’s class certification was overly broad and lacked the specificity required under Rule 23.
The Fourth Circuit’s Decision
The Fourth Circuit found that the district court relied excessively on generalized claims of Bojangles’ policies without providing specific evidence of commonality among the class members. While the Opening Checklist provided some basis for commonality regarding pre-shift work, the district court failed to address whether other alleged activities, such as time-shaving and post-closing tasks, were similarly unified by a common policy. The Fourth Circuit emphasized that “[a]llegations of generalized policies are not usually sufficient for the purposes of class certification” and further noted that Rule 23 does not permit a “30,000-foot view of commonality.” Id. at 11. Instead, plaintiffs must demonstrate that common questions predominate over individualized issues, and they had not done so with respect to the type of alleged off-the-clock work and time shaving.
The Fourth Circuit also criticized the overly broad class definitions, which included all shift managers employed during a three-year period without specifying the types of claims or injuries alleged. Such vague definitions risked including individuals with no viable claims and failed to meet Rule 23’s requirements. The lack of specificity raised concerns about commonality, predominance, and typicality, according to the Fourth Circuit, because some plaintiffs may not even have off-the-clock or time shaving claims against Bojangles. It suggested that sub-classes might be appropriate to address distinct issues but left this determination to the district court on remand.
The decision concluded by emphasizing the importance of adhering to Rule 23’s prerequisites to ensure that class actions remain a viable and efficient mechanism for resolving disputes. Characterizing Rule 23 class actions as a “carefully crafted compromise,” the Fourth Circuit observed that its decision was meant to “ensure that the class-action train stays on the tracks.” Id. at 19. Without clear evidence of commonality and precise class definitions, the Fourth Circuit ultimately vacated and remanded the district court’s class certification decision.
Implications for Employers
This decision provides a helpful roadmap for employers facing wage-and-hour class action cases premised on an alleged common policy. As this case exemplifies, employers should focus on the lack of specificity in alleged policies to counter claims of commonality or predominance. Demonstrating variations in employee experiences, decision-making processes, or other individualized factors can effectively undermine arguments for class-wide treatment.
Thinking through such considerations is an absolute necessity, and one that begins with the planning of a strategic defense early in the litigation process. Documenting lawful policies and practices during discovery lays a foundation for opposing class certification. By emphasizing the need for clear evidence and precise definitions, this ruling underscores the challenges plaintiffs face in meeting Rule 23’s rigorous standards. Employers can use these standards to their advantage, ensuring that ill-defined and nebulous classes are not certified in the high-stakes litigation they often face.
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 ruledthat 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.
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.
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!
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.
