By Eden E. Anderson, Rebecca Bjork, and Gerald L. Maatman, Jr.
Duane Morris Takeaways: On February 15, 2024, the Judge Harry Leinenweber of the U.S. District Court for the NorthernDistrict of Illinois granted a motion to compel arbitration in Hoeg et al. v. Samsung Electronics of America, Inc., Case No. 23-CV-1951 (N.D. Ill. Feb. 15, 2024), and sent 806 individual privacy claims to arbitration and ordered Samsung to pay $311,000 to cover its share of arbitration filing fees in those matters. The decision highlights the potential downsides of class action waivers in arbitration agreements, as well as the importance of coupling a class action waiver with a well-crafted mass arbitration provision designed to streamline arbitration proceedings and, hopefully, limit exposure and litigation costs.
Case Background
Samsung required customers to execute agreements to binding arbitration and those agreements waive the right to pursue class claims. The arbitration agreements provided that electronic acceptance, opening product packaging, product usage, or product retention amounted to acceptance of the arbitration agreement.
In 2022, 806 customers, all of whom alleged they had purchased and used Samsung products, filed individual arbitration actions against Samsung alleging violations of the Illinois Biometric Privacy Act (“BIPA”). After Samsung failed to pay $311,000 in arbitration filing fees due in the matters, AAA administratively closed the cases in January 2023. The plaintiffs then moved to compel arbitration.
The Court’s Decision
The Court granted the motion to compel arbitration and, in doing so, was highly critical of Samsung’s tactics in seeking to stall the prosecution of the claims. The Court found that the plaintiffs alleged they purchased and used Samsung products, and thereby assented to arbitration. While Samsung argued those allegations were conclusory and did not show the existence of agreements to arbitrate, the Court noted that Samsung’s approach “flips the evidentiary burden on its head” because, as the party opposing arbitration, it was Samsung’s burden to dispute the existence of an agreement to arbitrate. Id. at 9.
As to its failure to pay the arbitration filing fees, the Court expressed great displeasure with Samsung, noting that its “repeated failure to pay after multiple deadlines, without any showing of hardship, is a classic refusal to pay scheme in violation of Section 4” of the Federal Arbitration Act. Id. at 15. The Court also highlighted that Samsung’s tactics had delayed plaintiffs’ prosecution of their claims for two years. The Court further denied Samsung’s request that the matters be stayed so that it could pursue an appeal and ordered Samsung to pay the outstanding arbitration fees.
Implications Of The Decision
The Hoeg decision highlights the potential downsides of class action waivers, which have spurred the plaintiffs’ bar to pursue hundreds or even thousands of individual arbitrations all at once. The decision also underscores the importance of adding a mass arbitration provision to an arbitration agreement. Such a provision, if well-crafted, may serve to streamline those proceedings, facilitate resolution, and limit exposure. Some jurisdictions have enacted laws aimed at punishing a retailer’s or employer’s failure to pay arbitration fees. For example, in California, if arbitration fees are not timely paid, it results in a material breach of the arbitration agreement and could lead to the imposition of sanctions including “the reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach.” (Cal. Civil Code § 1281.99.)
By Eden E. Anderson, Gerald L. Maatman, Jr., and Jennifer A. Riley
Duane Morris Takeaways: On February 12, 2024, the Ninth Circuit issued its opinion in Johnson v. Lowe’s Home Centers, LLC, No. 22-16486 (9th Cir. Feb. 12, 2024).It held that federal courts must follow the statutory standing analysis of the California Supreme Court in Adolph v. Uber Technologies, Inc., and not the U.S. Supreme Court’s different interpretation in Viking River Cruises, Inc. v. Moriana. Additionally, in his concurrence, Judge Kenneth Lee opined that issues decided in individual arbitration of a PAGA claim should not have preclusive effect on the bigger non-individual PAGA claim.
Case Background
The plaintiff in Johnson alleged PAGA claims against her former employer based on the employer’s alleged violations of the California Labor Code. Applying all aspects of the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, the district court compelled Johnson’s individual PAGA claims to arbitration and dismissed her non-individual PAGA claims for lack of statutory standing. While the case was on appeal, the California Supreme Court issued its decision in Adolph v. Uber Technologies, Inc., which held that a PAGA plaintiff retains standing to maintain non-individual PAGA claims even after their individual PAGA claims are compelled to arbitration.
At issue on appeal in Johnson v. Lowe’s Home Centers, LLC was whether the non-individual PAGA claims should have been dismissed.
The Ninth Circuit’s Decision
The Ninth Circuit held that federal courts must follow the statutory standing analysis of the California Supreme Court in Adolph, and not the U.S. Supreme Court’s different interpretation in Viking River. It thus vacated the ruling dismissing the non-individual PAGA claims and remanded the case to the district court to apply Adolph.
The Johnson decision is of further interest because of the concurring opinion of Judge Kenneth Lee. His concurrence addressed the next big question in PAGA cases, i.e., the extent to which issues decided by the arbitrator in resolving individual PAGA claims will be binding in court in the litigation of the non-individual PAGA claims. Judge Lee noted that individual arbitration is often “low-stakes” for companies, who sometimes even send non-lawyers, such as paralegals, to arbitration proceedings because the amount at issue is not worth a lawyer’s higher hourly rates. However, as Judge Lee noted, if legal conclusions or factual findings in individual arbitration are binding, then companies would have little choice but to bring in the “legal cavalry” and devote substantial resources in individual arbitration, which would undermineg the efficiency of those proceedings, which is the whole “point” of enforcing arbitration agreements according to their terms. Judge Lee reasoned that there is thus a “lurking tension” between the FAA and the suggestion in Adolph that issue preclusion can apply to the outcome of arbitration of an individual PAGA action. Judge Lee expressed his view that application of issue preclusion in this context would contravene the FAA.
Implications For Employers
Whether in state or federal court in a PAGA action, the Ninth Circuit made clear that Adolph must be applied. The concurring opinion in Johnson provides employers facing adverse rulings in individual arbitration with good arguments against the application of issue preclusion in the non-individual PAGA claim proceedings.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Gregory Tsonis
Duane Morris Takeaways: Complex wage & hour litigation has long been a focus of the plaintiffs’ class action bar. The relatively low standard by which plaintiffs can achieve conditional certification under the Fair Labor Standards Act (FLSA), often paired with state law wage & hour class claims, offers a potent combination by which plaintiffs can pursue myriad employment claims. To that end, the class action team at Duane Morris is pleased to present the second edition of the Wage & Hour Class And Collective Action Review – 2024. This new publication analyzes the key wage & hour-related rulings and developments in 2023 and the significant legal decisions and trends impacting wage & hour class and collective action litigation for 2024. We hope that companies and employers will benefit from this resource and assist them with their compliance with these evolving laws and standards.
Click here to download a copy of the Wage & Hour Class And Collective Action Review – 2024 eBook.
Stay tuned for more wage & hour class and collective action analysis coming soon on our weekly podcast, the Class Action Weekly Wire.
Duane Morris Takeaway: Of all defenses, a defendant’s ability to enforce an arbitration agreement containing a class or collective action waiver may have had the single greatest impact in terms of shifting the pendulum of class action litigation. With its decision in Epic Systems Corp. v. Lewis, et al., 138 S. Ct. 1612 (2018), the U.S. Supreme Court cleared the last hurdle to widespread adoption of such agreements. In response, more companies of all types and sizes updated their onboarding materials, terms of use, and other types of agreements to require that employees and consumers resolve any disputes in arbitration on an individual basis. To date, companies have enjoyed a high rate of success enforcing those agreements and using them to thwart class actions out of the gate.
Watch below as Duane Morris partner Jerry Maatman discusses the arbitration defense and how it impacted class action litigation in 2023.
Statistically, corporate defendants fared well in asserting the defense. Across various areas of class action litigation, the defense won approximately 66% of motions to compel arbitration (approximately 123 motions across 187 cases) over the past year. Such numbers are similar to the numbers we saw in 2022, where defendants succeeded on 67% of motions to compel arbitration (roughly 64 motions granted in 96 cases).
The following graph shows this trend:
Despite a tumultuous year in 2022, the arbitration defense in 2023 remained one of the most powerful weapons in the defense toolkit in terms of avoid class and collective actions.
In 2022, the U.S. Supreme Court limited application of the FAA to workers who participate in interstate transportation and, perhaps more significantly, on the legislative front, Congress significantly limited the availability of arbitration for cases alleging sexual harassment or sexual assault. Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the Ending Forced Arbitration Act or EFAA), and President Biden signed the Act into law on March 3, 2022.
The EFAA amended the FAA and provided plaintiffs the discretion to enforce 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 did not render such agreements invalid, but allowed the party bringing the sexual assault or sexual harassment claims to elect to enforce them or to avoid them.
It is likely that defendants have not yet felt the impact of either development.
The Impact Of The EFAA
Despite this setback for the arbitration defense in 2022, companies continued to enjoy a high rate of success enforcing these agreements and using them to thwart class actions in 2023. Since the EFAA became effective on March 3, 2022, courts have issued only 34 published decisions on plaintiffs’ attempts to use the EFAA to avoid arbitration. Plaintiffs succeeded in enforcing the EFAA and keeping claims in court, in whole or in part, in only about 9 of those rulings.
Many of the decisions denying enforcement of the EFAA turned on the fact that the EFAA is not retroactive. Congress provided that the provisions of the Ending Forced Arbitration Act would “apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act [March 3, 2022].” Thus, although courts have disagreed as to when disputes or claims “arise or accrue” for purposes of the EFAA, in many cases, all potential dates pre-dated March 3, 2022, and, therefore, courts concluded that the Act did not apply.
Many courts recognized an exception in cases where plaintiffs were able to allege a “continuing violation” that extended past March 3, 2022, generally finding that the EFAA allowed such claims to remain in court. In Betancourt, et al. v. Rivian Automotive, No. 22-CV-1299, 2023 WL 5352892, at *1 (C.D. Ill. Aug. 21, 2023), for example, plaintiff filed a class action lawsuit alleging that she was regularly subjected to unwanted sexual advances during her employment from December 6, 2021, through “about June 1, 2022,” and, despite making reports to several supervisory level employees, defendant failed to remedy the conduct. The defendant invoked its arbitration agreement with the plaintiff, which included a class and collective action waiver, and the plaintiff claimed that the agreement was unenforceable due to the EFAA. Id. at *2. Acknowledging that the EFFA does not apply retroactively, the court considered whether the action accrued before March 3, 2022, and held that it did not. The court reasoned that the plaintiff alleged a continuing violation, which was ongoing on the date the EFAA was enacted, and, therefore, the arbitration agreement and class action waiver were unenforceable. Id. at *5.
Approximately 12 of the decisions turned on court interpretations regarding the scope of the EFAA, and we observed the beginnings of a patchwork quilt of interpretations as to the scope of the claims subject to the EFFA. In Johnson, et al. v. Everyrealm, Inc., 657 F. Supp. 3d 535 (S.D.N.Y. 2023), for instance, the plaintiff brought claims for race discrimination, pay discrimination, sexual harassment, retaliation, and intentional infliction of emotional distress, among other things, and the defendant moved to dismiss the sexual harassment claim and to compel arbitration of the remainder. The court denied the motion. It noted that, in its operative language, the EFAA makes a pre-dispute arbitration agreement invalid and unenforceable “with respect to a case which is filed under Federal, Tribal, or State law and relates to the . . . sexual harassment dispute.” Id. at 558 (quoting 9 U.S.C. § 402(a) (emphasis added)). It found such text “clear, unambiguous, and decisive as to the issue.” Id. As a result, the district court concluded that plaintiff pled a plausible claim of sexual harassment in violation of New York law and “construe[d] the EFAA to render an arbitration clause unenforceable as to the entire case involving a viably pled sexual harassment dispute, as opposed to merely the claims in the case that pertain to the alleged sexual harassment.” Id. at 541.
In Mera, et al. v. SA Hospitality Group, LLC, No. 1:23 Civ. 03492 (S.D.N.Y. June 3, 2023), by contrast, plaintiff brought claims for unpaid wages under the FLSA and the New York Labor Law (NYLL), as well as claims for sexual orientation discrimination and hostile work environment. The employer moved to compel arbitration, and the court found the agreement unenforceable as to his hostile work environment claims but enforceable as to his FLSA and NYLL claims. The plaintiff argued that, under the EFAA, the arbitration agreement was unenforceable as to his entire “case,” including his unrelated wage and hour claims under the FLSA and the NYLL, which he brought on behalf of a broad group of individuals. Id. at *3. The court disagreed. It held that, under the EFAA, an arbitration agreement executed by an individual alleging sexual harassment is unenforceable only with respect to the claims in the case that relate to the sexual harassment dispute, since “[t]o hold otherwise would permit a plaintiff to elude a binding arbitration agreement with respect to wholly unrelated claims affecting a broad group of individuals having nothing to do with the particular sexual harassment affecting the plaintiff alone.” Id.
The Impact Of The Transportation Worker Exemption
Despite the U.S. Supreme Court’s clarification of the transportation worker exemption to the FAA in 2022, lower courts continue to grapple and disagree about its scope, effectively holding a potential wave of workplace litigation against transportation, logistics, and delivery companies in check.
In the first and arguably the largest door-opener to the courthouse for the plaintiffs’ class action bar during 2022, the Supreme Court narrowed the application of the Federal Arbitration Act by expanding its so-called “transportation worker exemption” in Southwest Airlines Co. v. Saxon, 142 S.Ct. 1783 (2022). The plaintiff, a ramp supervisor, brought a collective action lawsuit against Southwest for alleged failure to pay overtime. Id. at 1787. Southwest moved to enforce its workplace arbitration agreement under the FAA. In response, the plaintiff claimed that she belonged to a class of workers engaged in foreign or interstate commerce and, therefore, fell within §1 of the FAA, which exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Id. The Supreme Court granted review and went on to hold that “any class of workers” directly involved in transporting goods across state or international borders falls within the exemption. Id. at 1789. 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 plan 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. (citation omitted).
Despite this decision clarifying the exemption, lower courts remained steeped in disputes, often generating irreconcilable differences of opinion over which workers signed arbitration agreements enforceable under the FAA and which did not. In Fraga v. Premium Retail Services, Inc., No. 1:21-CV-10751, 2023 WL 8435180 (D. Mass. Dec. 5, 2023), for example, after the parties litigated the enforceability of the arbitration agreement for more than two years, and the dispute resulted in three full scale judicial opinions, a two-day evidentiary hearing with 6 witnesses, and hundreds of pages of exhibits, the court determined that the plaintiff’s work, which involved sorting, loading, and transporting materials to retailers located within or outside Massachusetts “was not performed frequently and was not closely related to interstate transportation” so as to bring him within the exemption. Id. at *6.
Similarly, in Nunes, et al. v. LaserShip, Inc., No. 1:22-CV-2953, 2023 WL 6326615 (N.D. Ga. Sept. 28, 2023), the plaintiffs opposed a motion to compel arbitration contending that last-mile delivery drivers are engaged in interstate commerce because the goods they transport have traveled interstate and remain in the stream of commerce until delivered. The court disagreed. Whereas it found “no doubt” that the plaintiffs belong to a “class of workers employed in the transportation industry” because they locally transported packages from a warehouse to commercial and residential buildings, it concluded that plaintiffs “do not actually engage in interstate commerce.” Rather, their job entailed sorting and loading packages from the local warehouse and delivering the goods locally. Thus, the court determined that the plaintiffs were “too far removed from interstate activity,” and did not fall within § 1’s exemption.
By contrast, in Webb, et al. v. Rejoice Delivers, 2023 WL 8438577 (N.D. Cal. Dec. 5, 2023), the court found the opposite. The plaintiff picked up packages from local Amazon facilities and delivered the packages locally. The court, however, noted that, before reaching the local Amazon facilities, the goods had been ordered from Amazon’s website and taken to the local facilities by shipping trucks. As a result, the court held that, because plaintiff “pick[ed] up packages that ha[d] been distributed to Amazon warehouses, certainly across state lines, and transport[ed] them for the last leg of the shipment to their destination,” his work was “a part of a continuous interstate transportation” of goods, so that he was engaged in interstate commerce for the purposes of the FAA § 1 exemption. Id. at *7.
The U.S. Supreme Court is poised to offer more clarity as to this issue in Bissonnette, et al. v. LePage Bakeries Park St., LLC, No. 23-51 (U.S. Sept. 29, 2023). On September 29, 2023, the U.S. Supreme Court granted certiorari in to address the exemption. In Bissonnette, two workers who delivered breads and cakes sued a bakery claiming that it misclassified them as independent contractors and, therefore, denied them minimum wage and overtime. The workers asserted that the transportation worker exemption applied because they handled goods traveling in interstate commerce, but the Second Circuit affirmed the district court’s ruling granting defendant’s motion to compel arbitration.
The question presented to the U.S. Supreme Court involves whether, to be exempt from the FAA, a class of workers actively engaged in interstate transportation also must be employed by a company in the transportation industry. Thus, the Supreme Court’s ruling could provide additional clarity in narrowing or expanding the scope of the exemption, potentially opening the doors to additional class claims.
Given the impact of the arbitration defense, in 2024, companies are apt face additional hurdles, on the judicial or the legislative front, as the plaintiffs’ bar continues to look for workarounds. In particular, as more plaintiffs can assert claims that post-date the EFAA, we expect to see additional litigation and more decisions over the interpretation of the EFAA, including whether the Act’s use of the word “case” renders the statute applicable to all claims in the case, including claims other than sexual harassment and sexual assault, and whether the statute, therefore, will allow for a broader shield to the arbitration defense.
That said, the future viability of the arbitration defense remains an open question, as advocacy groups, government regulators, and political figures push for a ban on class action waivers in arbitration.
Duane Morris Takeaways: On February 1, 2024, a football fan filed a class action lawsuit against the New England Patriots in a Massachusetts federal court, alleging that the football team’s mobile app (the “App”) knowingly disclosed users’ location data and personal information to third-parties in alleged violation of the Video Privacy Protection Act (“VPPA”). This lawsuit marks the latest high-profile VPPA class action lawsuit filing, which have significantly spiked in the last two years.
Although the recent tide of VPPA class action court rulings has generally tipped in favor of defendants, the plaintiffs’ class action bar is still exploring novel theories to bring these high-stakes cases. Companies must therefore pay close attention to privacy-related issues involving mobile applications, including what data is collected and to whom it is transmitted.
The VPPA
Congress passed the VPPA in 1988. The statute imposes liability on, “[a] video tape service provider who knowingly discloses, to any person, personally identifiable information concerning any consumer of such provider.” 18 U.S.C. § 2710(b)(1). A “video tape service provider” is defined 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.” Id. 3-4 (citations omitted). “Personally identifiable information” (“PII”) is defined as “information which identifies a person as having requested or obtained specific video materials or services from a video service provider.” Id. In essence, the statute purports to account for advancements in video-delivery technology by defining a “video tape service provider” broadly to include any business engaged in the “rental, sale, or delivery of prerecorded video cassette tapes or similar audio visual materials.” Id.
The New VPPA Class Action Lawsuit
Plaintiff alleges that he downloaded and installed the App to his mobile phone and regularly used it to access video content. Id. at 2. When downloading the App, users are presented with an option to sign into an existing account, create a new account, or continue without signing in by selecting “MAYBE LATER.” Id. at 4-5. Plaintiff alleges that consumers who select “MAYBE LATER” are not presented with the App’s Terms of Use or Privacy Policy. And even if users select “JOIN NOW”, they are redirected to a login screen where they have the option to log in, but are not required to view or assent to any terms of use or privacy policy unless they take additional steps to create an account. Id. at 5.
In terms of data collection, the lawsuit alleges that when a user opens a video on the App, the App sends the content type, video title, and a persistent identifier to the user’s device. The App then transmits to third parties the user’s information, including location (in geographical coordinates and altitude), advertising ID, and video content consumption. Id. at 6. According to the complaint, the New England Patriots allegedly leverage users’ geolocation so it can maximize advertising revenue and, to that end, uniquely identify its users. For Android software users, the complaint alleges that the Patriots unique advertising ID called an Android Advertising ID (“AAID”) for each of its users with third-parties, which enables a third party to track the user’s movements, habits, and activity on mobile applications. Id. at 10.
Accordingly, the lawsuit alleges that through the New England Patriots’ dissemination of consumers’ PII, third parties such as Google can collect and store billions of metrics and events and make it easier for clients to make data-driven decisions, and these reports are continuously updated and metrics are reported as they occur. Id at 16. Plaintiff seeks to represent a class defined as “All persons in the United States who used the Patriots App to watch videos and had their personally identifiable information — including but not limited to the videos they watched, their geolocation, and their unique advertising IDs — transmitted to one or more third parties.” Id. On behalf of the class, Plaintiff seeks an award of damages, including, but not limited to, actual, consequential, punitive, statutory, and nominal damages.
Implications For Businesses
This lawsuit represents another example of class action plaintiffs’ lawyers 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 issues such as the determination of who qualifies as a “video tape service provider” or a “consumer” under the statute. It will be interesting to follow this lawsuit to see whether the Court follows the recent trend of courts dismissing VPPA class actions.
That said, this high-profile filing also suggests that companies should regularly update their online consent provisions as needed to specifically address the VPPA. Businesses that pro-actively implement compliance mechanisms will thank themselves later in terms of preventing class action litigation.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and George J. Schaller
Duane Morris Takeaways: InEqual Employment Opportunity Commission v. Western Distributing Co., No. 1:16-CV-01727, 2024 U.S. Dist. LEXIS 17225 (D. Colo. Jan. 31, 2024), Judge William J. Martinezof the U.S. District Court for the District of Colorado denied Defendant’s motion to dismiss for lack of standing and granted in part and denied in part Defendant’s motion to reconsider. Both post-trial motions involved disparate impact claims for qualified disabled employees concerning Defendant’s return-to-work policies. For employers facing EEOC-initiated lawsuits under the Americans with Disabilities Act of 1990 (the “ADA”) concerning employment policies, this decision is instructive in terms of the record evidence and filings courts will consider when deciding post-trial motions.
Case Background
On July 7, 2016, the EEOC filed suit on behalf of individuals with disabilities who worked for Defendant Western Distributing Co. (“Western”), a trucking company. The EEOC alleged Western’s employment policies disparately impacted these individuals under the ADA.
Western’s policies required employees to return to work on a “full-duty” basis after medical leave; required certain drivers to static push and pull 130 pounds of weight; and required certain drivers to be able to static push and pull 130 pounds of weight at 58 inches above the ground. Id. at 2.
In January 2023, a jury decided that Western’s “full-duty” policy had a disparate impact on disabled drivers. The post-trial motions resulted from the jury’s decision and Western moved to dismiss for lack of standing (“Standing Motion”) and moved to reconsider the Court’s denial of its yet-to-be-filed Rule 50(b) motion (“Motion to Reconsider”).
Standing Motion
The Court denied Western’s Standing Motion. In reviewing Western’s arguments, the Court determined Western put “great weight … on: (1) Senior U.S. District Judge Lewis T. Babcock’s Bifurcation Order; and (2) several statements by the EEOC’s counsel and the Court during the trial.” Id. at 2.
The Court found the obvious purpose of the bifurcation order was “(1) to give the parties a clear procedure for trying this action; and (2) to give the jury issues it can legally decide and reserve for the Court issues upon which it must rule.” Id. at 3. The Court reasoned that Judge Babcock’s bifurcation order “clearly contemplate[d] separate fact finding on ‘all individual claims and resultant damages’” and construing the order otherwise would be “unjust and border on absurd.” Id. at 4.
As to the statements during trial, the Court concluded that “back pay is viewed as equitable relief . . . to be decided by the judge.” Id. at 3. Therefore, the Court opined that it “will not ascribe to it the power to foreclose retrospective relief to which the EEOC and aggrieved individuals might be entitled. Nor will the Court rule such relief is improper simply because the EEOC did not present any damages evidence to a jury that could not award equitable back pay.” Id. at 4.
Motion to Reconsider
The Court granted Western’s request to reconsider arguments raised in its initial Rule 50(a) motion. The Court addressed Western’s arguments and denied each in full.
First, Western argued “the EEOC waived its Disparate Impact Claim to the extent it was based on the “full-duty policy” by failing to include this claim in its proposed “Challenge Standards” instruction. Id. at 5.
The Court determined its order one month before trial on the EEOC’s motion for partial summary judgment included both the “full-duty and maximum leave policies ‘[as] two of the thirteen discriminatory standards, criteria, or methods of administration that form the basis of the Disparate Impact Claim.’” Id. at 6. The Court also reasoned that Western was aware of the need to defend against the full-duty policy given the “significant body of evidence Western in fact prepared and marshaled to do just that.” Id.
Second, Western sought reconsideration concerning the adequacy of the evidence the EEOC presented at trial with respect to the existence of the full-duty policy and its disparate impact on qualified individuals with disabilities. Id. at 7. The Court denied Western’s request to re-weigh the evidence as the jury during trial “was attentive, engaged, and clearly thoughtful in issuing a narrow verdict.” Id. at 8. As to the disparate impact portion, the Court highlighted that this portion was “a retread of one of Western’s rejected summary judgment arguments.” Id. at 7. Therefore, the Court decided it would “not functionally reverse its own legal conclusions reached during the summary judgment phase.” Id. at 8.
For the same reasons, the Court denied Western’s third argument regarding statistical evidence of the 130-pound push/pull tests as a “re-tread” of an issue already decided on summary judgment. Id. Finally, the Court denied Western’s argument because it “[was] merely a short summary of the arguments raised in the Standing Motion.” Id.
Implications For Employers
Employers that are confronted with EEOC-initiated litigation involving employment policies should note that the Court relied heavily on the established record including prior issued orders, previous motions raising the same or similar arguments, and statements made by counsel at trial.
Further, from a practical standpoint, employers should carefully evaluate employment policies that may impact individuals with disabilities, as courts and juries are apt to scrutinize these materials.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther
Duane Morris Takeaways: In Martinez v. Fedex Ground Package System, Inc., No. 20-CV-1052, 2024 WL 418801 (D.N.M. Feb. 5, 2024), Judge Steven C. Yarbrough of the U.S. District Court for the District of New Mexico granted the intervention motion of 16 putative class members to join the lawsuit, The Court held that the plaintiff-intervenors met the standard for permissive intervention under Rule 24(b)(2). The Court’s decision in this case serves as an important reminder that Rule 23 and Rule 24 employ two separate commonality standards, and that class action cases are not automatically over when a court denies class certification.
Case Background
On October 12, 2020, Plaintiffs Fernandez Martinez and Shawnee Barrett (collectively, “Plaintiffs”) filed suit against Defendant Fedex Ground Package System, Inc. (“Fedex”), alleging that Fedex misclassified them as independent contractors and failed to pay them and putative class members overtime wages in violation of the New Mexico Minimum Wage Act (“NMMWA”).
On November 8, 2022, Plaintiffs moved to certify a class of all current or former New Mexico FedEx drivers who were paid a day rate without overtime compensation. On October 27, 2023, the Court denied Plaintiffs’ motion on the basis that Plaintiffs failed to demonstrate that common questions predominated over individualized issues pursuant to Rule 23(b)(3). Martinez v. FedEx Ground Package Sys., No. 20-CV-1052, 2023 WL 7114678 (D.N.M. Oct. 27, 2023).
On December 15, 2023, a group of 16 putative class members (the “Intervenors”) filed a motion to intervene as plaintiffs in the Lawsuit under Rule 24. Martinez, 2024 WL 418801, at 1. In their motion, the Intervenors alleged that they, like Plaintiffs, were “current or former New Mexico FedEx delivery drivers who were paid the same amount of money regardless of how many hours they worked in a day, resulting in no premium payment for overtime hours worked in violation of the [NMMWA].” Id.
The Court’s Decision
The Court granted the Intervenors’ motion. Id. at 2. It held that the Intervenors presented sufficient “questions of law and fact in common with the main action” under Rule 24. Id.
The Court noted that permissive intervention under Rule 24 is appropriate where (i) a federal statute creates a conditional right, or (ii) where the “intervenor has a claim or defense that shares with the main action a common question of law or fact.” Id.
In its opposition, FedEx asserted that because the Intervenors were employed by independent service providers (“ISPs”) to deliver packages on behalf of FedEx, and were not employed by FedEx directly, FedEx was not liable under the NMMWA for allegedly unpaid overtime. Id. Further, FedEx argued that the commonality requirement of Rule 24 was not met because the Court already found the absence of a common question when it denied class certification. Id.
While the Court recognized that it denied class certification under Rule 23’s commonality requirement, it was not persuaded by FedEx’s arguments. The Court underscored that under Rule 24, “rather than asking whether a question is susceptible to resolution ‘in one stroke,’ courts must ask whether intervenors present ‘questions of law and fact in common with’ the main action.” Id.
The Court concluded that the “existing plaintiffs and every intervenor [would] assert that certain common aspects of [FedEx’s] contracts with ISPs [made FedEx] a joint employer and, consequently, jointly liable for any [NMMWA] violations.” Id. Accordingly, the Court ruled that the Intervenors satisfied the Rule 24 commonality standard and were permitted to join the lawsuit as plaintiffs. Id. at 3.
Implications For Companies
The decision in Martinez v. FedEx serves as an important reminder for defendants that class actions are not necessarily over once class certification is denied – and some members of the putative class may take a run at joining the lawsuit per Rule 24. Additionally, it underscores the distinct commonality analyses under Rule 23 and Rule 24.
Duane Morris Takeaways: Given the importance of compliance with workplace anti-discrimination laws for our clients, we are pleased to present the second edition of the Duane Morris EEOC Litigation Review – 2024. The EEOC Litigation Review – 2024 analyzes the EEOC’s enforcement lawsuit filings in 2023 and the significant legal decisions and trends impacting EEOC litigation for 2024. We hope that employers will benefit from this deep dive into how the EEOC’s priorities reveal themselves through litigation. Click here for a copy of the EEOC Litigation Review – 2024 eBook. You can also watch our recent discussion with EEOC Commissioner Keith Sonderling at our Duane Morris Class Action Review Book Launch here.
The Review explains the impact of the EEOC’s six enforcement priorities as outlined in its Strategic Enforcement Plan on employers’ business planning and how the direction of the Commission’s Plan should influence key employer decisions. The Review also contains a compilation of significant rulings decided in 2023 that impacted EEOC-initiated litigation and a list of the most significant settlements in EEOC cases in 2023.
We hope readers will enjoy this new publication. We will continue to update blog readers on any important EEOC developments, and look forward to sharing further thoughts and analysis in 2024!
By Gerald L. Maatman, Jr., Nathan K. Norimoto, Nick Baltaxe
Duane Morris Takeaways: On January 28, 2024, in Chavez, et al. v. San Francisco Bay Area Rapid Transit District, No. 22-CV-06119, 2024 U.S. Dist. LEXIS 14785 (N.D. Cal. Jan. 28, 2024), Judge William Alsup of the U.S. District Court for the Northern District of California denied class certification for a failure to accommodate religious beliefs claim premised on a workplace COVID-19 vaccine mandate. Specifically, the Court held that the putative class was not certifiable as the class failed to meet Rule 23(b)(3)’s predominance and superiority requirements. The decision is a good roadmap for employers dealing with the continuing fall-out of the COVID-19 pandemic.
Background Of The Case
Defendant San Francisco Bay Area Rapid Transit (“BART”) implemented a workplace policy mandating that all employees needed a COVID-19 vaccination by December 21, 2021. Id. at 2. In response, BART received 188 requests for religious exemption and accommodation. Id. While some employees did not complete the exemption application process, 148 employees submitted applications to BART, noting varying belief systems such as “Christianity,” “Catholic,” “Islamism,” or even personal belief systems such as being “anti tyranny [sic].” Id. at 3. A panel of BART employees then reviewed each application individually and conducted further interviews with the applicants before deciding to grant or deny the request. Id. at 5.
Of the 148 completed applications, BART granted 70 religious exemptions and denied 78. Id. Those who were denied were given the option to either comply with the mandate, retire, voluntarily resign, or be terminated. Id. In total, 36 employees either retired, resigned, or were terminated. Id. BART considered accommodation for the 70 employees who were granted exemptions, but ultimately did not provide any accommodations as they could not “identify a reasonable accommodation that did not place an undue hardship on the District.” Id. at 6. Of the 70 applicants who were denied accommodation, 37 resigned, retired, or were terminated. Id. BART additionally received 25 requests for medical exemptions, and eight medical exemptions were granted, with those employees being placed on unpaid leave that only ended upon vaccination. Id.
Plaintiff Gabriel Chavez and 16 other named plaintiffs filed a class action complaint alleging that BART’s policy violated Title VII, the First Amendment right to free exercise of religion under 42 U.S.C. § 1983, and California’s Fair Employment and Housing Act (“FEHA”). Id. at 7. Plaintiff sought to certify a class pursuant to Rule 23(b)(3) composed of “all employees employed by BART who (1) have been ordered to submit to a COVID-19 vaccination, (2) have sincerely held religious beliefs which prevent them from taking the vaccine, (3) have submitted a request for a religious exemption, and (4) were denied a religious accommodation.” Id. Plaintiff also proposed a second, alternative class consisting of all employees employed by BART who “(1) have been ordered to submit to a COVID-19 vaccination, (2) have sincerely held religious beliefs which prevent them from taking the vaccine, (3) have submitted a request for religious exemption and religious accommodation, and (4) whose request for a religious exemption were denied.” Id.
The Court’s Ruling
The Court examined the class certification requirements under Rule 23(b)(3), which provide that a plaintiff must establish “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Id. at *8.The Court held that Plaintiffs’ proposed class, as well as the proposed alternative class, did not satisfy the predominance and superiority requirements, and denied Plaintiffs’ certification motion. Id. at 23.
First, the Court examined the requirement of common issues predominating over any questions affecting only individual members. Id. at 11-20. With respect to Plaintiffs’ Title VII and FEHA claims, the Court noted that whether or not an individual had a bona fide religious belief – a requirement for both claims – there were too many individual systems of belief to examine. Id. at 12. The Court held that nearly every named plaintiffs’ application contained a distinct system of belief, and any examination of whether or not a request rested on a “bona fide religious belief” would necessarily require an individual inquiry into each plaintiffs’ belief system. Id. The Court expressed doubt that the various written or interview responses of one plaintiff will have any evidentiary impact on the bona fide religious belief of the class as a whole. Id.
Next, the Court held that BART’s undue hardship showing required an individualized inquiry of factual issues. Id. The Court noted that the potential class members are drawn from a large diversity of jobs – over a dozen unique jobs – and that accommodations reasonably considered for a “train conductor’s request bear no relation to the job functions and reasonable accommodations BART must consider when evaluating the exemption request of a manager of technology programs, a fire protection worker, or a police officer, or a senior operations supervisor liaison.” Id. 13-14.Further, the Court found that the inclusion of some union employees in the putative class also required individualized inquiries as the union’s contracted-for-rights “grant impacted workers certain rights, such as seniority, that BART is not required to transgress upon.” Id. at 14. Moreover, the Court indicated that a significant portion of the class would not be impacted by an “undue hardship” analysis, as 78 of the proposed members were not even considered for accommodation. Id. at 15.The Court did acknowledge that some aspects of the undue hardship consideration may be more amenable to common proof, but in light of the putative class’s “job diversity,” it reasoned that any undue hardship analysis “cannot be understood without an interrogation of individual employees’ job duties.” Id. at 16.
As to the Free Exercise of Religion Claims, the Court determined that those claims could not satisfy the predominance requirement. In doing so, it noted that “the sincerity and religious nature of plaintiffs’ belief is . . . an individualized issue.” Id. at 20. The Court found that each of the plaintiffs cited a “myriad” of religious and of personal experiences, along with refusal due to “CDC VARS data and concerns regarding health consequences, the Organization of American States Declaration of Rights of Indigenous Peoples, Senate Bill 1383 and Senate Bill 1159, among others.” Id. The Court concluded that the need to determine whether plaintiffs have met the bona fide religious belief threshold required individualized inquiries, which ultimately foreclosed class certification. Id.
Finally, the Court found that the putative class did not satisfy Rule 23(b)(3)’s superiority requirement. The Court reasoned that class members have “significant interest in the individual control of their claims.” Id. at 21-22. As an example, it noted that two potential class members have already brought individual actions against BART, and that seventeen other employees had filed suit in a third case. Id. at 22. The Court held that “[p]utative class members’ demonstrated interest in bringing and controlling these various litigations further reflects the significant monetary and emotional stakes at issue, and counsels against certification.” Id. In closing, the Court noted that given “the wide range of individual issues and proof” there will also likely be difficulties in managing the class action. Id.
Implications For Employers
The ruling in Chavez, et al. v. San Francisco Bay Area Rapid Transit District confirms that the need for individualized inquiries is a strong impediment to certifying a class action premised on COVID-19 vaccine accommodation theories of liability. This ruling stresses the specific importance of these individualized inquiries in the context of religious accommodations, which have recently been the subject of significant litigation after many employers implemented COVID-19 vaccine mandates in the workplace
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Derek S. Franklin
Duane Morris Takeaways: On January 29, 2024, in Hossfeld v. Allstate Insurance Co., No. 1:20-CV-07091 (N.D. Ill. Jan. 29, 2024), Judge Joan B. Gottschall of the U.S. District Court for the Northern District of Illinois denied a renewed motion for class certification brought by plaintiffs accusing Allstate of violating telemarketing laws by allowing an outside party to solicit ‘do-not-call’ listees on its behalf. After denying the plaintiff’s initial motion of class certification a year earlier, Judge Gottschall denied the plaintiff’s second motion for class certification because the plaintiff failed to show a material change of circumstances in the time since the first certification motion that warranted a different ruling. The decision is required reading for corporate defendants seeking to quell efforts by plaintiffs to take a second shot at obtaining class certification after a failed earlier attempt.
Case Background
Plaintiff Robert Hossfeld filed a lawsuit against Allstate Insurance Co. alleging that Allstate violated the Telephone Consumer Protection Act (“TCPA”) by providing a telemarketer that Allstate contracted with a list of consumer leads identifying individuals such as Plaintiff who requested to be placed on Allstate’s internal ‘do-not-call’ list. Id. at 2.
In May 2022, Plaintiff filed a motion for class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure. In March 2023, the Court denied Plaintiff’s motion on the grounds that Plaintiff failed to show a large enough class to make joinder impractical. Id. at 2-3. In the order denying the motion, the Court did not include language stating that its denial of Plaintiff’s certification bid was “with prejudice.” Id. at 8.
Given the absence of that language, Plaintiff filed a renewed motion for class certification in May 2023 asking the Court to reconsider its earlier class certification ruling. Plaintiff asserted that he “reviewed the infirmities relied upon by the Court in its original opinion denying his first motion for class certification, and modified the class definitions and arguments to address them.” Id. at 5. Allstate moved to strike Plaintiff’s second motion for class certification, arguing that Plaintiff should not be given a “second bite at the apple.” Id. at 1.
The Court’s Rejection Of Second Motion For Class Certification
On January 29, 2024, the Court issued a 9-page decision granting Allstate’s motion to strike Plaintiff’s second class certification motion. Id. The Court’s decision analyzed Plaintiff’s second class certification motion under two applicable standards, including: (1) principles governing a pre-judgment motion for reconsideration under Rules 54(b) and 59(c); and (2) the Rule 23(c)(1) standard for revising an order granting or denying class certification. Id. at 4. The Court rejected Plaintiff’s arguments under both standards.
First, the Court determined that Plaintiff did not satisfy the reconsideration standards under Rules 54(b) and 59(e) because he failed to “present either newly discovered evidence or establish a manifest error of law or fact.” Id. at 5. The Court noted as part of this conclusion that, “although [Plaintiff] has submitted evidence not previously presented to the court, he [did] not contend that this evidence was unavailable to him when he filed his first class certification motion or that the court made a manifest error of fact or law when it denied his first class certification motion. Id. at 5-6.
Second, the Court found that Plaintiff’s did not make a necessary showing to reverse the Court’s earlier denial of class certification under Rule 23. Citing Seventh Circuit precedent in Chapman v. First Index, Inc., 796 F.3d 783, 785 (7th Cir. 2015), which affirmed the denial of a second class certification motion where there was no showing of “a material change of circumstances to justify revisiting the first class certification ruling,” the Court in Hossfeld rejected Plaintiff’s argument for the same reason. Id. at 7. As the Court explained, Plaintiff did not dispute that the newly-included arguments and supporting evidence in his second class certification motion were available at the time of his first motion. Id. at 9. Thus, the Court concluded that Plaintiff did not show “a material change in circumstances needed to obtain a second bite at the proverbial apple.” Id.
Based on rejecting Plaintiff’s arguments under both applicable legal standards, the Court granted Allstate’s motion to strike Plaintiff’s second motion for class certification. Id.
Implications For Companies
This opinion represents a helpful roadmap for employers to fend off attempts by plaintiffs to revive a failed class certification bid. The decision is a strong source of persuasive authority supporting that a plaintiff cannot successfully move a second time for class certification absent either “a manifest error of law or fact” in the court’s first class certification ruling, or newly-discovered evidence unavailable at the time of the first class certification bid representing a “material change in circumstances.” Id. at 5, 9. For these reasons as well, the ruling underscores the importance of not saving potentially supportive arguments and evidence during an initial class certification battle in case of a “second bite at the apple” that may not come.
By Eden E. Anderson, Rebecca Bjork, and Gerald L. Maatman, Jr.
