Gerald L. Maatman, Jr. – Page 12 – Class Action Defense

September 6, 2023 by Gerald L. Maatman, Jr.

Court Dismisses VPPA Class Claim Alleging That General Mills Shared Consumer Data With Facebook And Google

By Gerald L. Maatman, Jr. and Tyler Zmick

Duane Morris Takeaways: In Carroll v. General Mills, Inc., No. 23-CV-1746 (C.D. Cal. Sept. 1, 2023), Judge Dale Fischer of the U.S. District Court for the Central District of California issued a decision dismissing (for a second time) a class claim brought against General Mills under the Video Privacy Protection Act (“VPPA”). In its decision, the Court ruled that General Mills – a company that manufactures and sells cereals and other food products – did not qualify as a “video tape service provider” under the VPPA, and that even if it did, Plaintiffs’ claim would still fail because they did not show they were “consumers” covered by the statute’s privacy protections. Carroll v. General Mills is the latest decision involving the VPPA – a long dormant statute that class action plaintiffs have recently turned to in attempting to seek redress for alleged privacy violations.

Case Background

Plaintiffs Keith Carroll and Rebeka Rodriguez alleged that they watched videos on General Mills’ website and that General Mills subsequently disclosed their “video viewing behavior” to Facebook and Google. Specifically, Carroll claimed that General Mills sent Facebook the video he watched online and his identifying information in connection with General Mills’ use of a Facebook advertising feature. Similarly, Rodriguez claimed that General Mills disclosed her “video viewing behavior” and other website analytics data to Google through General Mills’ use of the Google Marketing Platform.

Based on these allegations, Plaintiffs filed a class action that alleged General Mills violated the Video Privacy Protection Act (“VPPA”) by knowingly disclosing their personally identifiable information (“PII”) to Facebook and Google. See 18 U.S.C. § 2710(b)(1).

The District Court’s Decision

The Court granted General Mills’ motion to dismiss Plaintiffs’ VPPA claim. It held that Plaintiffs failed to satisfy the first two prongs of the four-step pleading test applicable to VPPA claims.

In analyzing the allegations, the Court explained that to state a VPPA claim, a plaintiff must allege that: (1) a defendant is a “video tape service provider”; (2) the defendant disclosed PII concerning a consumer to another person; (3) the disclosure was made knowingly; and (4) the disclosure was not authorized by the “safe harbor” provision set forth in 18 U.S.C. § 2710(b)(2).

Like the claim asserted in the previous version of their complaint, the Court determined that Plaintiffs’ VPPA claim failed at step (1) because Plaintiffs did not adequately allege that General Mills is a “video tape service provider,” and that even if the Court were to proceed to step (2), Plaintiffs would also fail at that step based on their inability to show that they qualify as “consumers” under the statute.

“Video Tape Service Provider”

Regarding step (1), the VPPA defines a “video tape service provider” as “any person, engaged in the business, in or affecting interstate or foreign commerce, of rental, sale, or delivery of prerecorded video cassette tapes or similar audio visual materials.” 18 U.S.C. § 2710(a)(4). Importantly, the Court noted that the statute does not apply to every company that “delivers audio visual materials ancillary to its business” but only to companies “specifically in the business of providing audio visual materials.” See Order at 6.

Based on the allegations at hand, the Court held that Plaintiffs failed to allege that General Mills – who manufactures and sells cereals, yogurts, dog food, and other products – is “engaged in the business of delivering, selling, or renting audiovisual material.” Id. The Court rejected Plaintiffs’ attempt to satisfy step (1) by adding allegations in their amended complaint regarding General Mills posting on its website links to professionally made videos. In the Court’s words, these “allegations do no more than show that videos are part of General Mills’ marketing and brand awareness,” which does not suggest “that the videos are profitable in and of themselves” or that the videos “are the business that General Mills is engaged in.” Id. at 6-7.

“Consumer”

The Court next held that even if Plaintiffs had satisfied the first step, they nonetheless would have failed at step (2) based on their failure to allege facts establishing that they are “consumers” under the VPPA.

The VPPA defines “consumer” as “any renter, purchaser, or subscriber of goods or services from a video tape service provider.” 18 U.S.C. § 2710(a)(1). Read in the statute’s full context, courts have held that “a reasonable reader would understand the definition of ‘consumer’ to apply to a renter, purchaser or subscriber of audio-visual goods or services, and not goods or services writ large.” See Order at 7 (citation omitted). That is, the definition of “consumer” “mirrors the language used to define a ‘video tape service provider’ as one who is in the business of ‘rental, sale, or delivery’ of audiovisual material.” Id.; see also id. at 7-8 (“‘[C]onsumer’ is obviously meant to be cabined in the same way [as ‘video tape service provider’] – as a renter, purchaser, or subscriber of prerecorded video cassette tapes or similar audio visual materials.”).

The Court determined that Plaintiffs’ prior purchase of General Mills’ food – an “unrelated product” – does not make them “consumers of audiovisual material.” Id. at 8. The Court further noted that Plaintiffs’ failure at step (2) highlights “the fundamental issue” with their VPPA claim – namely, Plaintiffs struggle to plead that they are consumers of General Mills’ audiovisual material because General Mills is not in the business of offering audiovisual material to consumers. See id. at 8-9 (“If General Mills were in such a business, Plaintiffs would not be referring to purchases of General Mills’ food products to establish themselves as consumers.”).

Implications For Corporate Counsel

The decision in Carroll v. General Mills reflects the recent trend among class action plaintiffs’ lawyers of using traditional state and federal laws – including the long dormant VPPA – to seek relief for alleged privacy violations. In applying modern technologies to older laws like the VPPA (passed in 1988), courts have grappled with, among other issues, determining who qualifies as a “video tape service provider” or a “consumer” under the statute.

The Carroll decision may suggest that the definitions of “video tape service provider” and “consumer” are relatively straightforward, but other cases can present close calls (e.g., whether a social media platform that delivers various services to users, including video content, is a “video tape service provider”). Indeed, courts have recently faced challenges in interpreting the VPPA’s definitions in cases involving, inter alia, whether individuals who download a free app through which they view videos qualify as “subscribers” (and therefore “consumers”) under the statute.

Given this uncertainty, companies that provide audio visual materials in connection with their business operations should take advantage of the “safe harbor” amendment, adopted in 2013, under which “video tape service providers” may lawfully disclose PII with the informed written consent of consumers. To do so, companies should update their online consent provisions as needed to specifically address the VPPA.

September 6, 2023September 6, 2023 by Gerald L. Maatman, Jr.

Maryland Federal District Court Dismisses Class Action Alleging Website Privacy Violations For Lack Of Article III Standing

By Gerald L. Maatman, Jr., Jennifer A. Riley and Rebecca S. Bjork

Duane Morris Takeaways: On September 1, 2023, Judge Deborah Chasanow of the U.S. District Court for the District of Maryland granted a motion to dismiss a class action alleging that the website of defendant Jetblue Airways violated users’ privacy rights under the Maryland Website and Electronic Surveillance Act (“MWES”A). Finding that the named Plaintiff lacked Article III standing to bring the lawsuit, the Court relied upon the lack of any allegations in the Complaint that any of Plaintiff’s personal information was captured by the alleged use of a session replay code. As a result, his Complaint lacked any allegation of a concrete harm that is necessary to bestow standing by virtue of suffering an injury-in-fact. Employers are well-served to examine their websites for the level of risk they might pose of exposure to litigation of this kind, which is currently being filed in more and more courts around the country.

Case Background

Jetblue Airways Corp. (“Jetblue”) was sued by Matthew Straubmuller in the U.S. District Court for the District of Maryland, alleging that he and a putative class of website users who had visited Jetblue’s website were entitled to damages from Jetblue for violation of the MWESA. Slip Op. at 2. The purpose of that statute is two-fold: both to be a useful tool in crime prevention; and to ensure that “interception of private communications is limited.” Id. at 8.

Plaintiff alleged Jetblue’s website uses a “session replay code” and that this allows for Jetblue to track users electronic communications with the website in real time, and also can enable reenactments of a user’s visit to the website, and that these constitute actionable privacy violations under the provisions of the MWESA.

JetBlue filed a motion to dismiss. It asserted that that Plaintiff lacked Article III standing to bring his claims. It contended that Plaintiff alleged a mere procedural violation of the MWESA and did not allege a concrete harm necessary to establish an injury-in-fact to confer standing.

The District Court’s Decision

Judge Chasnow granted Jetblue’s motion to dismiss. Relying on the Supreme Court’s decision in TransUnion v. Ramirez, 141 S. Ct. 2190 (2021), she rejected Plaintiff’s argument that a statutory violation alone is a concrete injury. The Judge opined that “Courts must independently decide whether a plaintiff has suffered a concrete harm because a plaintiff cannot automatically satisfy the injury-in-fact requirement whenever there is a statutory violation.” Slip Op. at 5-6 (quoting TransUnion (“under Article III, an injury in law is not an injury in fact.”). And more to the point, she cited case law interpreting the MWESA itself to this effect, which Plaintiff had not cited. Id.

As a way of underlining its ruling, the Court noted that Jetblue had submitted a June 12, 2023 decision coming to the exact same conclusion involving a nearly identical complaint filed against Jetblue in the Southern District of California in Lightoller v. Jetblue Airways Corp. Id. at 4.n.1. Other cases involving similar rulings are presently percolating throughout the federal district courts. Id. at 7 (collecting cases).

Implications For Employers

Judge Chasnow’s decision in Straubmuller v. Jetblue Airways Corp. provides corporate counsel with a good opportunity to set up a time to talk with their company’s information technology officers to discuss litigation risks related to websites and how they interact with employees, prospective employees and customers. As more plaintiffs-side attorneys file lawsuits alleging privacy violations like the ones alleged against Jetblue in both state and federal courts around the country, many have a good chance of surviving motions to dismiss. Preventing class action lawsuits are far superior to defending them.

September 5, 2023September 5, 2023 by Gerald L. Maatman, Jr.

Arizona Federal Court Grants Pest Control Company’s Motion To Dismiss Data Breach Class Claims

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

Duane Morris Takeaways: In Gannon v. Truly Nolen of America Inc., No. 22-CV-428 (D. Ariz. Aug. 31, 2023), Judge James Soto of the U.S. District Court for the District of Arizona granted Defendant’s motion to dismiss with prejudice on negligence, breach of contract, and consumer fraud claims related to a data breach class action. For companies facing data breach claims in class actions, this decision is instructive in terms of how courts consider cognizable damages, especially when damages allegations are inadequately plead.

Case Background

Defendant Truly Nolen of America Inc. (“Defendant” or the “Company”), is an Arizona corporation that provides pest control services across the United States and in 30 countries around the world. Id. at 2. The Company experienced a data breach between April 29, 2022 and May 11, 2022. On May 11, 2022, the Company learned the breach occurred and identified personally identifiable information (“PII”) and personal health information (“PHI”) that was compromised. Id. In August of 2022, Defendant sent notice letters to individuals whose data may have been compromised. Id.

The Named Plaintiff, Crystal Gannon (“Plaintiff”), alleged that she received her notice letter regarding the data breach in August of 2022. Id. at 3. In her First Amended Complaint (“FAC”), Plaintiff sought to represent two proposed classes of plaintiffs, including one for a Nationwide Class and one for an Arizona Sub-class, related to the data breach. Id.

Plaintiff alleged numerous claims such as negligence, invasion of privacy, breach of implied contract, breach of the implied covenant of good faith and fair dealing, and violation of the Arizona Consumer Fraud Act (“Fraud Act”). Id. In response, Defendant filed a motion to dismiss on the grounds that Plaintiff’s case was without basis and the entire case was subject to dismissal. Id.

The Court’s Decision

The Court held that there was no valid basis for Plaintiff’s negligence claim. Id. at 4. Plaintiff argued that the Health Insurance Portability and Accountability Act (“HIPAA”) and the Federal Trade Commission Act (“FTCA”) created a duty in Arizona from which relief could be sought. Id. The Court disagreed. It found that neither the HIPAA nor the FTCA provided a private right of action. Id. The Court reasoned that “[p]ermitting HIPAA to define the ‘duty and liability for breach is no less than a private action to enforce HIPAA, which is precluded.’” Id. The Court applied the same logic to the FTCA. Id.

On negligence damages, the Court held that Plaintiff’s FAC failed “to show identity theft or loss in continuity of healthcare of any class members – only the possibility of each.” Id. Under Arizona law, negligence damages require more than merely a threat of future harm, and on their own, threats of future harm are not cognizable negligence injuries. Id. 4-5. Similarly, as to out-of-pocket expenses, the Court opined that Plaintiff failed to demonstrate that her expenses were necessary because she did not properly show that Defendant’s identity monitoring services were inadequate. Id. at 5. Finally, the Court recognized that merely alleging a diminution in value to somebody’s PII or PHI was insufficient. Id. Therefore, the Court dismissed Plaintiff’s negligence claims.

Turning to Plaintiff’s breach of contract claims, the Court determined that Plaintiff did not show cognizable damages, a reasonable construction for the terms of the contract, or consideration for the existence of an implied contract. Id. at 6. The Court held that Plaintiff’s FAC allegations only reflected speculative damages and did not allege proof of real damages. Id. at 5. The Court opined that Plaintiff’s “vaguely pleaded” contract terms failed to show any language that would inform the terms of the agreement and Plaintiff did not point to any conduct or circumstances from which the terms could be determined. Id. at 5-6. Finally, the Court determined that even if Defendant had an obligation to protect the data at issue, such pre-existing obligations did not serve as consideration for a contract. Id. Therefore, the Court dismissed all breach of implied contract claims. Id.

On the claim for breach of the implied covenant of good faith and fair dealing, Plaintiff argued that Defendant breached by failing to maintain adequate computer systems and data security practices, failed to timely and adequately disclose the data breach, and inadequately stored PII and PHI. Because Plaintiff failed to show an enforceable promise, the Court held there could be no breach, and all claims for breach of the implied covenant of good faith and fair dealing were dismissed. Id. at 6.

The Court also dismissed Plaintiff’s Fraud Act claims because Plaintiff failed to show cognizable damages. Id. at 7. The Court reasoned “[p]laintiff cannot simply argue that the system is inadequate because a negative result occurred.” Id. The Court also reasoned that Plaintiff failed to demonstrate that Defendant’s security was inadequate when compared to other companies or any set of industry standards. Id. As to Plaintiff’s privacy claims, the Court held that there were no cognizable claims for invasion of privacy or breach of privacy, and Plaintiff did not dispute these claims in her response. Id.

Accordingly, the Court granted Defendant’s motion to dismiss as to all claims, denied Plaintiff leave to amend her complaint, and dismissed the case with prejudice. Id.

Implications For Companies

Companies confronted with data breach lawsuits should take note that the Arizona federal court in Gannon relied heavily on inadequately pleaded allegations in considering cognizable damages for purposes of granting Defendant’s motion to dismiss. Further, from a practical standpoint, companies should carefully evaluate pleadings for insufficient or speculative assertions on damages.

August 29, 2023 by Gerald L. Maatman, Jr.

Ohio Federal Court Grants Conditional Certification In Wage & Hour Collective Action Under The Sixth Circuit’s New “Strong Likelihood” Standard

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

Duane Morris Takeaways: In Gifford v. Northwood Healthcare Group LLC et al., No. 22-CV-04389 (S.D. Ohio Aug. 21, 2023), Judge Sarah D. Morrison of the U.S. District Court for the Southern District of Ohio granted plaintiff’s motion for conditional certification of a wage & hour collective action pursuant to 29 U.S.C. § 216(b) of the Fair Labor Standards Act (“FLSA”). Through sworn declarations and documentary evidence of defendants’ meal break policy, the Court found plaintiff showed a “strong likelihood” that she was similarly-situated to potential collective action members who may elect to join the lawsuit. The ruling adds to the body of case law applying the Sixth Circuit’s new standard for notice to potential opt-in plaintiffs in putative FLSA collective actions announced in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023), and ought to be required reading for any employers involved in wage & hour litigation.

Case Background

On December 15, 2022, plaintiff filed a Complaint against Northwood Healthcare Group, LLC and Garden Healthcare Group, LLC, two entities operating healthcare facilities in Ohio. Plaintiff allegedly worked at two such facilities as a non-exempt Licensed Practical Nurse. The lawsuit targeted the defendants’ meal break practices. Plaintiff contended that due to staffing shortages and the demands of patient care, she did not receive a full, uninterrupted 30-minute (“bona fide”) meal break on a regular basis. As alleged in the Complaint, defendants automatically deducted 30 minutes of time from her hours worked even when she did not receive a bona fide meal break, resulting in unpaid overtime compensation. On behalf of herself and similarly situated other employees, Plaintiff brought claims asserting failure to pay overtime wages under the FLSA, failure to pay overtime wages under the Ohio Minimum Fair Wage Standards Act (“OMFWSA”), failure to keep accurate payroll records under the OMFWSA and failure to pay wages timely under the Ohio Prompt Pay Act.

On March 15, 2023, plaintiff filed a motion for conditional certification of a collective action. On May 15, 2023, defendants opposed the motion on the merits and urged the Court to delay ruling until the Sixth Circuit issued its opinion in Clark.

On May 19, 2023, the Sixth Circuit in Clark announced a more rigorous standard for authorizing notice of an FLSA lawsuit to other employees. Abandoning the prior standard of a “modest factual showing” of similarly situated status, the standard in Clark requires plaintiffs to establish a “strong likelihood” that they are similarly situated to potential other plaintiffs.

Days later, in her reply brief filed on May 23, 2023, plaintiff argued that the evidence she presented in her motion satisfied the new standard in Clark.

The Court’s Decision

The Court determined that the evidence provided in support of plaintiff’s motion satisfied the “substantial likelihood” standard announced in Clark.

Specifically, plaintiff provided her own sworn declaration and the sworn declarations of six individuals who had filed consents to join the lawsuit as opt-in plaintiffs. Together, plaintiff and the other declarants worked at six of the 14 facilities plaintiff sought to include in her lawsuit. The Court found the declarations told a consistent story of employees not receiving overtime pay for those occasions when patient care needs required employees to skip or cut short their designated 30 minutes for a meal break, even after employees complained to management about being undercompensated.

Plaintiff also submitted evidence of employee handbooks in effect at the six facilities at which the declarants had worked for the defendants. The Court found that the handbooks reflected nearly identical policies on overtime compensation and meal breaks. For example, the meal break policy in the various employee handbooks stated that employees who worked through their meal breaks would receive pay for their time, whether the work was authorized or not. Defendants argued that plaintiff’s evidence fell short of identifying a “companywide” policy. Defendants pointed out that the declarants had no personal knowledge of the meal break practices in effect at facilities operated by defendants at which they had not worked. The Court disagreed. It opined that plaintiff presented enough evidence of a unified theory of conduct by defendants, notwithstanding that the declarants did not represent former employees at all of the facilities the plaintiff sought to include in the lawsuit.

The Court concluded that the evidence “establishes to a certain degree of probability” that the plaintiff, the individuals who had already filed consents to become opt-in plaintiffs, and the other potential plaintiffs performed the same tasks, were subject to the same policies and were unified by a common theory underlying their causes of action. Id. at 8.

In so ruling, the Court authorized plaintiff to send notice to all current and former hourly, non-exempt direct care employees of defendants who had a meal break deduction applied to their hours worked in any workweek in which they were paid for at least 40 hours of work during a three-year lookback period and through the final disposition of the case.

Implications For Employers

The Court’s ruling in Gifford demonstrates that application of the Sixth Circuit’s “strong likelihood” standard is highly dependent on the evidence presented by a plaintiff. By contrast, under the prior standard, courts routinely granted plaintiffs’ motions to authorize notice to potential opt-in plaintiffs.

Employers with operations in Ohio, Tennessee, Michigan and/or Kentucky should keep a close watch on Gifford and other cases applying the Sixth Circuit’s new standard in FLSA litigation.

August 23, 2023 by Gerald L. Maatman, Jr.

Key Takeaways From The EEOC’s Strategic Plan For Fiscal Years 2022-2026

By Gerald L. Maatman, Jr., Alex W. Karasik, and George J. Schaller

Duane Morris Takeaways: On August 22, 2023, the EEOC announced the approval its Strategic Plan (“SP”) for Fiscal Years 2022-2026. The Strategic Plan can be accessed here. The SP furthers the EEOC’s mission of preventing and remedying unlawful employment discrimination and advancing equal employment opportunity for all. The SP focuses on: (1) Enforcement; (2) Education and Outreach; and (3) Organizational Excellence. The SP also provides performance measures for each strategic goal. For corporate counsel involved in employment-related compliance and EEOC litigation, the new SP is required reading.

The EEOC’s Strategic Priorities

Enforcement

The EEOC continues to promote equitable employment initiatives through its enforcement authority. The SP highlights the EEOC’s primary mission of preventing unlawful employment discrimination through its administrative and litigation enforcement mechanisms, and adjudicatory and oversight processes. The main strategic focus for employing these mechanisms is through fair and efficient enforcement based on the circumstances of each charge or complaint while maintaining a balance of meaningful relief for victims of discrimination.

As to enforcement, the SP provides a broad overview of the EEOC’s efforts to allocate its resources to ensure its efforts in stopping unlawful employment discrimination. To that end, the EEOC indicates that it will continue its targeting of systemic discrimination through training staff on systemic cases and devoting additional resources to systemic litigation enforcement. The SP included several performance measures for achieving enforcement goals, including measures on conciliation and litigation resolution, favorably resolving lawsuits, and increasing capacity for systemic investigations.

Education and Outreach

The SP prioritizes education and outreach for deterring employment discrimination before it occurs. The SP focuses on providing education and outreach programs, projects, and events as cost-effective tools for enforcement. Primarily these programs are aimed at individuals who historically have been subjected to employment discrimination. Part of the EEOC’s education and outreach involves expanding use of technology through social media, ensuring the EEOC website is more user-friendly and accessible, and leveraging technology to reach the agency’s audience.

These efforts to improve on education and outreach are aimed at promoting public awareness of employment discrimination laws while maintaining information and guidance for employers, federal agencies, unions, and staffing agencies. The SP provides an in-depth list of measuring education and outreach by utilizing technology to expand the EEOC’s audience and ensuring accessible delivery of information through events, programs, and up-to-date website accessibility and functionality.

Organizational Excellence

The SP makes clear that organizational excellence is the cornerstone of achieving the EEOC’s strategic goals. The SP confirms that the EEOC aims to improve on its culture of accountability, inclusivity, and accessibility. In addition, the EEOC seeks to continue protecting the public and advancing civil rights in the workplace by ensuring its resources are allocated properly to strengthen intake, outreach, education, enforcement, and service.

The EEOC’s organizational excellence strategic goal has two prongs, including improving the training of EEOC employees and enhancing the EEOC’s infrastructure. For employees, the EEOC seeks to foster enhanced diversity, equity, inclusion, and accessibility in the workplace, maintain employee retention, and implement leadership and succession plans. Relative to the agency’s infrastructure, the SP embraces the increased use of technology through analytics, and management of fiscal resources promote the agency’s mission of serving the public.

Implications For Employers

The EEOC’s SP is an important publication for employers since it previews immediate action areas. The SP’s focus on systemic discrimination, conciliation, and litigation, and increasing the Commission’s capacity for litigating alleged systemic violations shows the EEOC is ramping up to improve handling all aspects of charges. The EEOC’s increased focus on technology and employment discrimination awareness similarly shows accessibility will continue to be a pillar of the agency. Accordingly, prudent employers should be mindful of these strategic priorities, and prepare themselves for continued EEOC enforcement.

August 11, 2023 by Alex W. Karasik

EEOC Settles Its First Discrimination Lawsuit Involving Artificial Intelligence Hiring Software

By Alex W. Karasik, Gerald L. Maatman, Jr. and George J. Schaller

Duane Morris Takeaways: InEqual Employment Opportunity Commission v. ITutorGroup, Inc., et al., No. 1:22-CV-2565 (E.D.N.Y. Aug. 9, 2023), the EEOC and a tutoring company filed a Joint Settlement Agreement and Consent Decree in the U.S. District Court for the Eastern District of New York, memorializing a $365,000 settlement for claims involving hiring software that automatically rejected applicants based on their age. This is first EEOC settlement involving artificial intelligence (“AI”) software bias. As we previously blogged about here, eradicating discrimination stemming from AI software is an EEOC priority that is here to stay. For employers who utilize AI software in their hiring processes, this settlement highlights the potential risk of legal and monetary exposure when AI software generates hiring decisions that disparately impact applicants from protected classes.

Case Background

Defendants iTutorGroup, Inc., Shanghai Ping’An Intelligent Education Technology Co., LTD, and Tutor Group Limited (collectively “Defendants”) hired tutors to provide English-language tutoring to adults and children in China. Id. at *3. Defendants received tutor applications through their website. The sole qualification to be hired as a tutor for Defendants is a bachelor’s degree. Additionally, as part of the application process, applicants provide their date of birth.

On May 5, 2022, the EEOC filed a lawsuit on behalf of Wendy Pincus, the Charging Party, who was over the age of 55 at the time she submitted her application. The EEOC alleged that Charging Party provided her date of birth on her application and was immediately rejected. Accordingly, the EEOC alleged that Defendants violated the Age Discrimination in Employment Act of 1967 (“ADEA”) for programming its hiring software to reject female applicants over 55 years old and male applicants over 60 years old. Id. at *1. Specifically, the EEOC alleged that in early 2020, Defendants failed to hire Charging Party, Wendy Pincus, and more than 200 other qualified applicants age 55 and older from the United States because of their age. Id.

The Consent Decree

On August 9, 2023, the parties filed a “Joint Notice Of Settlement Agreement And Requested Approval And Execution Of Consent Decree,” (the “Consent Decree.”). Id. The Consent Decree confirmed that the parties agreed to settle for $365,000, to be distributed to tutor applicants who were allegedly rejected by Defendants because of their age, during the time period of March 2020 through April 2020. Id. at 15. The settlement payments will be split evenly between compensatory damages and backpay. Id. at 16.

In terms of non-monetary relief, the Consent Decree also requires Defendants to provide anti-discrimination policies and complaint procedures applicable to screening, hiring, and supervision of tutors and tutor applicants. Id. at 9. Further, the Consent Decree requires Defendants to provide training programs on an annual basis for all supervisors and managers involved in the hiring process. Id. at 12-13. The Consent Decree, which will remain in effect for five years, also contains reporting requirements and record-keeping requirements. Most notably, the Consent Decree contains a monitoring requirement, which allows the EEOC to inspect the premises and records of the Defendants, and conduct interviews with the Defendant’s officers, agents, employees, and independent contractors to ensure compliance.

Implications For Employers

To best deter EEOC-initiated litigation involving AI in the hiring context, employers should review their AI software upon implementation to ensure applicants are not excluded based on any protected class. Employers should also regularly audit the use of these programs to make sure the AI software is not resulting in adverse impact on applicants in protected-category groups.

This significant settlement should serve as a cautionary tale for businesses who use AI in hiring and are not actively monitoring its impact. The EEOC’s commitment to its Artificial In telligence and Algorithmic Fairness Initiative is in full force. If businesses have not been paying attention, now is the time to start.

August 1, 2023 by Gerald L. Maatman, Jr.

West Virginia Federal Court Finds Lack Of Involvement By Defendant In Alleged Class Action Solicitation Does Not Preclude Personal Jurisdiction Or Article III Standing

Gerald L. Maatman, Jr., Jennifer A. Riley, and Nick Baltaxe

Duane Morris Takeaways: On July 18, 2023, in Mey v. Levin, Papantonio, Rafferty, Proctor, Buchanan, O’Brien, Barr & Mougey, P.A., et al., Case No. 5:23-CV-46 (N.D. W. Va. July 18, 2023), the Court denied a motion to dismiss Plaintiff’s claims for alleged violations of the Telephone Consumer Protection Act (the “TCPA”). In doing so, the Court held that, despite the fact that Levin Law did not direct and was not involved in the alleged calls, the Court had personal jurisdiction over Levin Law, and Plaintiff had Article III standing to pursue the TCPA claims. In doing so, the Court found allegations concerning the law firm’s alleged agency relationship with a co-defendant sufficient to confer broad authority to adjudicate Plaintiff’s claims against Levin Law under the TCPA. Additionally, the Court concluded that Plaintiff had alleged sufficient facts to support a do-not-call claim under the TCPA by alleging that her cell phone was a residential phone on the National Do-Not-Call Registry.

Case Background

Plaintiff Diana Mey, a resident of West Virginia, initiated this lawsuit against two law firms, Levin Law and Principal Law Group, LLC, alleging that those defendants violated the TCPA by soliciting clients for a mass tort litigation related to toxic water exposure at Camp Lejeune. Mey, Doc. 33 at 1-2. Defendant Levin Law filed a motion to dismiss on numerous grounds, including that the Court lacked personal jurisdiction, that Plaintiff lacked Article III standing, that Plaintiff failed to plead direct or vicarious liability, and that Plaintiff failed to plead a violation of the TCPA. Id. The Court denied the motion. Id. Specifically, Levin Law argued that it was not directly involved in any of the phone calls, which were made by co-defendant MCM Services Group, LLC (“MCM”), and therefore could not be sued for violation of the TCPA. Id. at 8.

Initially, Levin Law, a Florida professional corporation with a principal place of business in Pensacola, Florida, argued that it did not have sufficient minimum contacts with West Virginia because it did not purposely direct the alleged tortious activity toward the state. Id. While the Court acknowledged that Levin Law was not directly involved in the telephone calls placed to Plaintiff, it held that Plaintiff had provided sufficient facts to find that the calls were made by an agent under Levin Law’s control. Id. at 12. Specifically, the Court noted that Plaintiff allegedly received a representation agreement from Principal Law, under which Levin Law would provide legal services to Plaintiff, and Principal Law would serve as Levin Law’s associate counsel. Id. The Court found that these allegations were sufficient to plausibly connect Levin Law to the alleged calls. In a final point regarding personal jurisdiction, the Court did not address whether it had personal jurisdiction over out-of-state class members noting that, to proceed with the case, it needed to find personal jurisdiction only over the named Plaintiff and Defendants. Id. at 13.

The Court then addressed Levin Law’s argument that Plaintiff did not have Article III standing. Specifically, Levin Law argued that the calls, which were initiated by MCM, were not traceable to any conduct by Levin Law, which was a necessary prong in establishing Article III standing. Id. The Court, however, noted that because the representation agreement identified Principal Law as Levin’s Law associate counsel, and Plaintiff received the agreement from Principal Law, the Court reasonably could infer that the calls were made by someone under Levin Law’s control. Id. at 14. As such, the Court found that Plaintiff had pled sufficient facts to trace the challenged conduct to the defendant and, as such, had asserted Article III standing.

The Court addressed Levin Law’s final arguments that Plaintiff failed to plead a theory of liability against it and, further, failed to state a do-not-call claim under the TCPA. First, the Court held that Plaintiff asserted sufficient factual allegations to show vicarious liability and to survive a Motion to Dismiss. Id. at 15. Second, the Court found no case law supporting dismissal of a TCPA claim on the basis that the defendant allegedly placed a call to a cell phone instead of a residential phone. Id. at 17. Specifically, the Court noted that Plaintiff had alleged that her cell phone was used for residential purposes and was placed on the National Do-Not-Call Registry, making the claim actionable under the TCPA. Id.

Key Takeaways

In this ruling, the Court made interesting findings that will extend to plaintiffs outside the TCPA context to survive attacks at the pleading stage of litigation. Specifically, the Court found both personal jurisdiction and Article III standing despite the fact that Levin Law did not purposefully direct the activity at issue. By doing so, the Court agreed with arguments that the conduct of an alleged agent was enough to establish both personal jurisdiction and Article III standing. Going forward, plaintiffs will have yet another way to support personal jurisdiction and Article III standing at the outset of the case even against defendants who they do not contend were directly involved in the conduct about which they complain. Additionally, while there is a split in authority as to whether the TCPA extends to wireless telephone numbers, the Court in this litigation had no issue finding that a cell phone could be a residential phone for purposes of the TCPA, potentially extending its reach and keeping it relevant as a potential source of claims against corporate defendants.

July 27, 2023 by Alex W. Karasik

EEOC Issues New ADA Guidance On Visual Disabilities And Discussing AI Impact

By Alex W. Karasik, Gerald L. Maatman, Jr., and George J. Schaller

Duane Morris Takeaways: On July 26, 2023, the EEOC issued a new Guidance entitled “Visual Disabilities in the Workplace and the Americans with Disabilities Act” (the “Guidance”). This document is an excellent resource for employers, and provides insight into how to handle situations that may arise with job applicants and employees that have visual disabilities. Notably, for employers that use algorithms or artificial intelligence (“AI”) as a decision-making tool, the Guidance makes clear that employers have an obligation to make reasonable accommodations for applicants or employees with visual disabilities who request them in connection with these technologies.

The EEOC’s Guidance

The EEOC’s Guidance endeavors to address four subjects, including: (1) when an employer may ask an applicant or employee questions about a vision impairment and how an employer should treat voluntary disclosure; (2) what types of reasonable accommodations applicants or employees with visual disabilities may need; (3) how an employer should handle safety concerns about applicants and employees with visual disabilities; and (4) how an employer can ensure that no employee is harassed because of a visual disability.

The EEOC notes that if an applicant has an obvious impairment or voluntarily discloses the existence of a vision impairment, and based on this information, the employer reasonably believes that the applicant will require an accommodation to perform the job, the employer may ask whether the applicant will need an accommodation (and, if so, what type). Some potential accommodations may include: (i) assistive technology materials, such as screen readers and website accessibility modifications; (ii) personnel policy modifications, such as allowing the use of sunglasses, service animals, and customized work schedules; (iii) making adjustments to the work area, including brighter lighting; and (iv) allowing worksite visits by orientation, mobility, or assistive technology professionals.

For safety concerns, the Guidance clarifies that if the employer has concerns that the applicant’s vision impairment may create a safety risk in the workplace, the employer may conduct an individualized assessment to evaluate whether the individual’s impairment poses a “direct threat,” which is defined as, “a significant risk of substantial harm to the health or safety of the applicant or others that cannot be eliminated or reduced through reasonable accommodation.” For harassment concerns, the EEOC notes that employers should make clear that they will not tolerate harassment based on disability or on any other protected basis, including visual impairment. This can be done in a number of ways, such as through a written policy, employee handbooks, staff meetings, and periodic training.

Artificial Intelligence Implications

As we previously blogged about here, the EEOC has made it a priority to examine whether the use of artificial intelligence in making employment decisions can disparately impact various classes of individuals. In the Q&A section, the Guidance tackles this issue by posing the following hypothetical question: “Does an employer have an obligation to make reasonable accommodations to applicants or employees with visual disabilities who request them in connection with the employer’s use of software that uses algorithms or artificial intelligence (AI) as decision-making tools?”According to the EEOC, the answer is “yes.”

The Guidance opines that AI tools may intentionally or unintentionally “screen out” individuals with disabilities in the application process and when employees are on the job, even though such individuals are able to do jobs with or without reasonable accommodations. As an example, an applicant or employee may have a visual disability that reduces the accuracy of an AI assessment used to evaluate the applicant or employee. In those situations, the EEOC notes that the employer has an obligation to provide a reasonable accommodation, such as an alternative testing format, that would provide a more accurate assessment of the applicant’s or employee’s ability to perform the relevant job duties, absent undue hardship.

Takeaways For Employers

The EEOC’s Guidance serves a reminder that the Commission will vigorously seek to protect the workplace rights of individuals with disabilities, including those with visual impairments. When employers are confronted with situations where an applicant or employee requests reasonable accommodations, the Guidance provides a valuable roadmap for how to handle such requests, and offers a myriad of potential solutions.

From an artificial intelligence perspective, the Guidance’s reference to the use of AI tools suggests that employers must be flexible in terms providing alternative solutions to visually impaired employees and applicants. In these situations, employers should be prepared to utilize alternative means of evaluation.

July 20, 2023 by Gerald L. Maatman, Jr.

Illinois Supreme Court Refuses To Reconsider “Per-Scan” BIPA Accrual Ruling In Cothron v. White Castle

By Gerald L. Maatman, Jr. and Tyler Zmick

Duane Morris Takeaways: As we previously blogged, on February 17, 2023 the Illinois Supreme Court held in Cothron v. White Castle, 2023 IL 128004 (2023), that a separate claim for damages accrues under the Biometric Information Privacy Act (“BIPA”) each time a private entity scans or transmits an individual’s biometric data in violation of Sections 15(b) or 15(d) of the statute. On July 18, 2023, the Illinois Supreme Court denied White Castle’s petition for hearing, resulting in the February 17 ruling becoming the final “law of the land” in Illinois. The Court’s decision to deny White Castle’s rehearing petition was not unanimous, however, as reflected by the blistering dissent penned by Justice Overstreet and joined by Chief Justice Theis and Justice Holder White. For companies involved in BIPA class action litigation, the dissent is required reading, as it foreshadows an array of defense-oriented arguments over damages issues in privacy litigation.

Illinois Supreme Court’s Majority Decision In Cothron

In a 4-3 split ruling, the Illinois Supreme Court held on February 17, 2023 that a separate claim accrues under the BIPA each time a private entity scans or transmits an individual’s biometric data in violation of Sections 15(b) or 15(d), respectively.

Relying on the statute’s plain language and the fact that the actions of “collecting” and “disclosing” biometric data can occur more than once, the Supreme Court agreed with Plaintiff’s interpretation – namely, that Section 15(b) “applies to every instance when a private entity collects biometric information without prior consent” and that Section 15(d) “applies to every transmission to a third party.” Cothron, 2023 IL 128004, ¶¶ 19, 23, 28. The Supreme Court acknowledged that this interpretation – coupled with the statute allowing prevailing plaintiffs to recover up to $1,000 or $5,000 for each “violation” – could lead to astronomical damages awards that may be “harsh, unjust, absurd or unwise,’” id. ¶ 40 (citation omitted), but noted that it must apply the statute as written and that policy-based concerns should be addressed by the Illinois legislature.

Dissent To Majority’s Decision To Deny White Castle’s Rehearing Petition

On July 18, 2023 the Illinois Supreme Court denied White Castle’s petition for rehearing in Cothron v. White Castle, effectively leaving White Castle with no further avenues for challenging the ruling.

Three Justices (the same three who dissented to the February 17 majority decision) disagreed with the decision to deny White Castle’s petition for rehearing. In opining that the Supreme Court should have granted rehearing, the Dissent focused on three issues, including: (1) the majority’s “per scan” theory of liability subverting the intent of the Illinois legislature; (2) the majority’s “per scan” theory of liability threatening the survival of Illinois businesses and raising “significant constitutional due process concerns,” id. ¶ 70; and (3) the majority’s decision in failing to provide trial courts with criteria to use in exercising their discretion whether to award statutory damages for BIPA violations.

First, the Dissent stated that the Illinois legislature meant for the BIPA to be a straightforward remedial statute that allows individuals to choose to provide (or not to provide) their biometric data after being informed that the data is being collected, stored, and potentially disclosed. The Dissent rejected the majority’s “flawed construction” of the statute, which mistakenly presumes that the legislature meant for the BIPA to “establish a statutory landmine” and “destroy commerce in its wake when negligently triggered.” Id. ¶ 73; see also id. (“The majority’s construction of the [BIPA] does not give effect to the legislature’s true intent but instead eviscerates the legislature’s remedial purpose of the [BIPA] and impermissibly recasts [it] as one that is penal in nature rather than remedial.”).

Second, the Dissent opined that by construing the statute to allow for awards of statutory damages that bear no relation to any actual monetary injury suffered, the majority’s decision raises due process concerns that “raise doubt as to [the BIPA’s] validity.” Id. ¶ 74; see also id. ¶ 75 (“The legislature’s authority to set a statutory penalty is limited by the requirements of due process. When a statute authorizes an award that is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable, it does not further a legitimate government purpose, runs afoul of the due process clause, and is unconstitutional.”).

Finally, the Dissent took issue with the majority’s refusal to clarify its February 17 holding with respect to the discretionary (rather than mandatory) nature of liquidated damages under the statute. Specifically, the Dissent noted that the majority opinion did not provide trial courts with standards or criteria to apply in determining whether to award statutory damages in a particular BIPA case and, if so, in what amount. The Dissent asserted that the Supreme Court should have agreed to clarify “that statutory damages awards must be no larger than necessary to serve the [BIPA’s] remedial purposes” and to “explain how lower courts should make that determination.” Id. ¶ 85. Per the Dissent, “[w]ithout any guidance regarding the standard for setting damages, defendants, in class actions especially, remain unable to assess their realistic potential exposure.” Id.

Implications For Corporations

Assuming White Castle cannot convince the U.S. Supreme Court to grant review of the Cothron decision based on constitutional issues, Cothron is now the final law of the land in Illinois. White Castle and other BIPA defendants may, however, attempt to raise constitutional challenges to the statute in other BIPA cases moving forward based on the same concerns expressed by the three dissenting Justices in Cothron.

The denial of White Castle’s rehearing petition indicates that the well is beginning to dry for businesses in terms of potential BIPA defenses. While employers and other BIPA defendants can still explore novel defenses, such as the exception for information captured from a patient in a health care setting or challenges to personal jurisdiction, many companies caught in the crosshairs of BIPA class actions will face pressure to settle due to the risk of facing monumental potential damages. Moreover, attempts to reform the BIPA statute failed in 2023, and the Illinois legislature likely will not consider any further reform proposals until 2024. Given the bleak outlook of the law as it stands, it is imperative that businesses immediately ensure they are compliant with the BIPA.

July 19, 2023 by Gerald L. Maatman, Jr.

D.C. Circuit Issues A “How-To” Ruling Regarding Issue Certification For Rule 23 Class Actions

By Gerald L. Maatman, Jr. and Rebecca S. Bjork

Duane Morris Takeaways: On July 18, 2023, the U.S. Court of Appeals for the District of Columbia Circuit ruled that district courts must analyze the predominance and superiority requirements for certification of a class action when considering an “issue class” under Rule 23(c). In Harris v. Medical Transportation Management, Inc., No. 22-7033 (D.C. Cir. July 18, 2023), the three-judge panel ruled that the district court erred when it certified an “issue” class under Rule 23(c)(4) without first undertaking an analysis of whether the class certification prerequisites of Rule 23(a) and 23(b) had also been satisfied. The case was remanded for further proceedings. The D.C. Circuit’s decision ought to be required reading for employers with large workforces and those dealing with wage & hour class actions. It bears watching whether the district court’s analysis of the rigorous requirements of Rule 23(b) on remand also results in a pro-certification decision, given the instructions provided on remand.

Case Background

In Harris, the named plaintiffs were non-emergency medical drivers for the defendant, a company that provides transportation to individuals on public assistance who require transit getting to medical appointments. They alleged that they and a class of other drivers who they seek to represent in a class action lawsuit were denied minimum and overtime pay in violation of District of Columbia and federal wage and hour laws. Slip op. at 5-6.

Whether defendant MTM could as a matter of law be held liable as the drivers’ employer is a threshold question in the litigation. Id. at 6. The district court certified issues classes as to (i) whether MTM is the drivers’ joint employer (along with its sub-contractors); and (ii) whether MTM is a general contractor under D.C. law and thus strictly liable. Id. at 8. The district court did so despite finding previously that the predominance requirement of Rule 23(b)(3) was not met under the facts of the case specifically as they relate to the payment system for the drivers. Id. at 7-8.

MTM appealed the issue certification ruling.

The D.C. Circuit’s Decision

In a straightforward ruling, but one that delves into the complexities of Rule 23 with law-professor like precision, the D.C. Circuit panel consisting of Judges Millett, Childs and Rogers determined that the district court could not certify the issue classes under Rule 23(c)(4) without deciding whether those classes also meet the requirements of Rule 23(a) – commonality and typicality – and 23(b) – predominance and superiority. In essence, the D.C. Circuit read the plain language of Rule 23 and observed that sub-sections (a), (b) and (c) all bear on the certification inquiry conducted by the district court and therefore must be considered on an equal basis. Id. at 14-15.

In the penultimate statement of the holding, Judge Childs opined that “Rule 23’s text and structure offer no quarter to the view that Rule 23(c)(4) creates an independent type of class action that is freed from all of Rule 23’s other class action prerequisites. So the district court should have ensured that the issue class that it certified met all, and not just some, of Rule 23(a) and (b)’s preconditions to class status.” Id. at 15-16.

The D.C. Circuit instructed the district court that it must analyze on remand each of the potential class actions available under Rule 23(b)(3)’s predominance analysis. Id. at 19-20. It discussed various ways in which Rule 23(c)(4) can be applied in the context of the joint employer analysis that is at issue in Harris, such as bifurcating the liability issue from remedial claims, or where affirmative defenses may muddy the waters of class-wide evidence in a certified issues class. Id. at 21-22.

In a similar vein, Judge Childs instructed that summary judgment motions on discrete issues represent another way in which district courts could management issue certified class actions where the predominance of individualized issues threaten to overrun the common proof. Id. at 24-25.

Implications For Employers

The D.C. Circuit opinion in Harris v. MTM provides corporate counsel and executives a clear and easily understandable explanation of how Rule 23(b) and (c) intersect with one another when an issue class or classes are certified in class action litigation. District courts cannot certify issue classes under Rule 23(c)(4) without undertaking the rigorous analysis required to conclude that a class action is superior and manageable, that common issues will predominate over individualized issues, and that there are common and typical issues to be resolved in the first place. And by suggesting specific mechanisms that a district court has at its disposal for case management purposes such as targeted summary judgment motions, the decision provides reasonable strategies to consider when facing class action litigation.