Gerald L. Maatman, Jr. – Page 3 – Class Action Defense

September 16, 2026September 17, 2026 by Gerald L. Maatman, Jr.

It’s An Arbitration Agreement After All: Disney Compels Arbitration And Obtains Dismissal Of Class Claims In Antitrust Suit

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

Duane Morris Takeaways: On September 8, 2026, in Unger, et al v. The Walt Disney Company, No. 5:25-CV-01163 (N.D. Cal. Sept. 8, 2026), Judge Edward J. Davila granted Defendant’s motion to compel arbitration, ordered on a consolidated docket with Biddle, et al. v. The Walt Disney Company, No. 5:22-CV-07317 (N.D. Cal.). This decision serves as a clear example of arbitration agreements as a powerful tool for a company to dismiss class claims, and a critical reminder that a company that may not have signed an arbitration agreement can invoke an arbitration agreement in specific circumstances.

Case Background

Plaintiffs Cole Unger and Steven Prescott brought suit against the Walt Disney Company (“Disney”), alleging violations of the Sherman Act and corresponding state laws. Unger filed the Complaint on January 14, 2025 and filed a First Amended Complaint, adding Prescott as a plaintiff, on April 28, 2025. According to the First Amended Complaint, Disney allegedly undertook a “multifaceted campaign to suppress competition in the market for live television streamed over the internet to paying subscribers.” Specifically, Plaintiffs alleged that Disney used its ownership of ESPN to force streaming services to carry non-ESPN content in order to access ESPN, force streaming services to carry ESPN in its “base” package for customers, inflated the price of streaming ESPN through most favored nation clauses with streaming services, and provided anticompetitive rebates to Disney-owned streaming service Hulu. Plaintiffs brought claims on behalf of a putative class of fuboTV subscribers. The Unger lawsuit made similar allegations as another case, Biddle, et al. v. The Walt Disney Company, 5:22-CV-07317 (N.D. Cal.), brought on behalf of a putative class of YouTube TV subscribers and DirecTV Stream subscribers. The cases were consolidated on June 10, 2025.

Shortly before Unger filed his initial complaint, on January 6, 2025, Disney publicly announced its plan to purchase a 70% stake in fuboTV. The parties closed the deal on October 29, 2025, creating a newly combined fuboTV and Hulu + Live TV business.

On December 19, 2025, Disney filed a motion to dismiss Plaintiffs’ class claims, compel arbitration, and stay Plaintiffs’ individual claims pending arbitration. Disney filed its motion subject to fuboTV’s terms of service because Plaintiffs had assented to fuboTV’s terms of service when they subscribed to fuboTV. fuboTV’s terms of service included a provision compelling arbitration of all disputes and waiving class action claims subject to the terms of service. Disney argued that fuboTV’s terms of service, which authorized fuboTV’s “future affiliates” to invoke fuboTV’s rights under the terms of service, permitted Disney to compel arbitration of Plaintiffs’ claims and dismissal of Plaintiffs’ class claims.

The District Court’s Ruling

In a 26-page opinion, Judge Davila granted Disney’s motion to compel arbitration, dismissed Plaintiffs’ class claims, and stayed Plaintiffs’ individual claims pending arbitration. The opinion stressed that Plaintiffs did not dispute that they had assented to fuboTV’s terms of service when they signed up as subscribers. The Court held that the terms of service were “reasonably conspicuous” and that Plaintiffs had “unambiguously manifest[ed] assent” to terms of service. Op. at 9-10.

The Court held that Disney, as a non-signatory to the terms of service, could invoke fuboTV’s terms of service under the “future affiliates” provision. The Court stressed that under “the ordinary definitions of the words within the Future Affiliates Provision” were “clear and unambiguous, such that the Court will rely on its terms so long as this reliance would not lead to an absurd result.” Op. at 14. The Court then rejected Plaintiffs’ enforceability argument that Disney had not undertaken reciprocal contractual obligations, stressing that Disney was not required to “show that it undertook reciprocal obligations.” Op. at 15. Finally, the Court found that enforcement of the arbitration clause by a non-signatory would not lead to absurd results, distinguishing cases cited by Plaintiffs where disputes wholly unrelated to a company’s terms of service were found not to encompass the terms of service. Instead, the Court was unsympathetic to Plaintiffs’ argument that they did not expect to be entering into a contract with Disney when signing up for fuboTV, explaining that “courts have repeatedly found that future affiliates provisions, or clauses granting rights to successors, are valid, despite the existence of some inherent uncertainty.” Op. at 17-18.

The Court then undertook an unconscionability analysis, rejecting Plaintiffs arguments that fuboTV’s terms of service were procedurally and substantively unconscionable. The Court rejected Plaintiffs’ argument that the terms of service were substantively unconscionable as having “near infinite scope,” stressing that the canon of ejusdem generis requires courts to read broad contractual language in the scope of the specific language of the contract. Therefore, the terms of service had practical limitations based on the context of the agreement as a whole. Regarding procedural unconscionability, the Court found that the terms of service were not unconscionable because the terms were inconspicuous, included the ability for users to opt out, and were “not concealed in dense legalese inaccessible to lay consumers.” Op. at 24.

Implications for Companies

When addressing class action claims, companies should scour for any potential arbitration agreements a plaintiff may have signed, even where the plaintiff signed an arbitration agreement not directly with the Company. Courts regularly hold that non-signatories to arbitration agreements can invoke arbitration with a signatory based on multiple legal theories, including the explicit language of the arbitration agreement vesting rights in non-signatories, assignment clauses, estoppel, and a non-signatory’s third-party beneficiary status. Company mergers, like the Disney-fuboTV merger, can change a lawsuit’s calculus and require a plaintiff to individually arbitrate claims rather than petition for class certification in court.

The financial implications of invoking an arbitration agreement are substantial, as shown here. A plaintiff’s individual and class action claims can be dismissed in federal court even after the plaintiff survives a motion to dismiss. In this case, Disney had originally agreed to settle the case with all three subscriber classes for $55 million. Disney and the YouTube TV and DirecTV subscriber classes have since filed for settlement approval for $50 million. Given the reduced settlement now that the fuboTV subscriber class is not included, Disney may have saved $5 million in a settlement award it otherwise would have owed to fuboTV subscribers.

Finally, corporate counsel should regularly update its terms of service to comply with requirements for invoking arbitration in its jurisdiction. Though courts regularly enforce arbitration agreements, an otherwise valid arbitration agreement can be undone if a court finds that the agreement is unconscionable. Helpful provisions for conscionability include permitting the ability to opt out of mandatory arbitration, drafting class waivers and mandatory arbitration provisions in clear and non-legalese language, and allowing signatories time to review provisions. Companies should also require signatories to terms of service to review and affirmatively agree to updates to terms of service and include any waiver of rights in large, clear language.

September 14, 2026September 14, 2026 by Gerald L. Maatman, Jr.

Court Bars Employer From Distributing Arbitration Agreement To Settlement Class Members During Pendency Of Class Settlement

By Gerald L. Maatman, Jr. and Anna Sheridan

Duane Morris Takeaways: On September 4, 2026, in Calderon, et al. v. Public Partnerships, LLC, No. 25-CV-02320 (E.D.N.Y. Sept. 4, 2026), U.S. Magistrate Judge Lara K. Eshkenazi of the U.S. District Court for the Eastern District of New York barred a defendant from distributing a proposed dispute resolution agreement (“DRA”) containing a class action waiver to settlement class members during the period between preliminary and final approval of a class settlement. The decision is a reminder that employers seeking to implement arbitration agreements during the pendency of class litigation must carefully consider timing, and that courts will exercise their authority under Rule 23(d) to protect class members from communications that could cause confusion during critical phases of a settlement.

Case Background

Plaintiffs, personal assistants (“PAs”) who received payment through Public Partnerships, LLC (“PPL”) as part of the New York State Medicaid Consumer Directed Personal Assistance Program (“CDPAP”), brought a class action alleging that PPL violated state and federal law by failing to pay them accurately and on time. After extensive mediation, the parties reached a class settlement and submitted a motion for preliminary approval of class certification, appointment of class counsel, and class settlement on June 23, 2026.

At the preliminary approval hearing on July 1, 2026, PPL raised the topic of a proposed DRA that it intended to distribute to PAs, including settlement class members. PPL explained that it wanted to institute the DRA, including a class action waiver, to create a mechanism to address issues raised by PAs without becoming subject to lawsuits related to its role as the statewide fiscal intermediary. Plaintiffs opposed the implementation of the DRA to the extent it would impact settlement class members, arguing it could confuse class members and cause them to mistakenly opt out of the settlement agreement. Plaintiffs also noted that a prior attempt by PPL to implement a DRA had led to significant class confusion, resulting in PPL withdrawing the DRA.

After the parties were unable to resolve the dispute, PPL filed a motion for approval of its proposed DRA and Plaintiffs filed a cross-motion for a Rule 23(d) order barring distribution of the DRA to settlement class members before final approval of the settlement.

The Court’s Decision

The Court denied PPL’s motion and granted Plaintiffs’ motion for a Rule 23(d) order.

The Court applied the framework set forth in Chen-Oster v. Goldman, Sachs & Co., 449 F. Supp. 3d 216, 255 (S.D.N.Y. 2020), considering factors including class members’ relative vulnerability, evidence of actual or contextual risk of coercion, whether the provision was imposed unilaterally, and evidence of misleading conduct, language, or omissions. The Court emphasized that it need not find actual or willful misconduct “so long as the effect is to interfere with class members’ rights.” (Op. at 4).

While the Court acknowledged that the DRA itself was not coercive or misleading, and credited the steps PPL had taken to reduce confusion, the Court concluded that the risk of confusion for settlement class members was high for several reasons.

First, the timing of the DRA rollout would directly overlap with notifications to settlement class members of the settlement, which could confuse class members about the relationship between the DRA and the settlement.

Second, the DRA contained an opt-out process that, despite best efforts at clarity, could still cause settlement class members to inadvertently opt out of the settlement — a risk the Court found was particularly high due to the number of settlement class members for whom English is not their first language. Third, the timing of the DRA rollout could cause settlement class members to believe that accepting the arbitration agreement was a condition of accepting the settlement.

The Court distinguished the case PPL primarily relied on – Carusillo v. FanSided, Inc., No. 20 Civ. 4766, 2021 WL 4311167 (S.D.N.Y. Sept. 21, 2021) – where the court had permitted distribution of an arbitration agreement during a collective action opt-in period. The Court explained that Carusillo involved a relatively early stage of the litigation, whereas Calderon was in its final stages, with a final approval hearing scheduled for November 10, 2026. The Court noted that PPL offered no explanation for the urgency of its request to communicate with settlement class members about the DRA rather than waiting just a few months until the risk of confusion would no longer exist.

The Court further rejected PPL’s argument that Plaintiffs’ concerns about class confusion ended on September 19, 2026 — the deadline for opt-outs and objections — finding that the risk of confusion would persist even after the opt-out deadline because class members would continue to learn about their settlement rights and could potentially submit late opt-outs.

Implications For Employers

The Calderon decision underscores the importance of timing when implementing arbitration agreements during pending class litigation. While courts have permitted employers to introduce arbitration agreements during the pendency of class or collective actions, the Calderon ruling makes clear that courts will scrutinize the timing of such communications, particularly during the sensitive period between preliminary and final approval of a class settlement. The Court’s decision did not prevent PPL from distributing the DRA to non-class members, and it did not find the DRA itself to be coercive or misleading. Employers should take note, however, that even a well-drafted arbitration agreement with meaningful opt-out protections can be blocked if the timing of its distribution could cause confusion or interfere with class members’ rights during a settlement process. Employers considering rolling out arbitration agreements or dispute resolution programs during the pendency of class litigation should work closely with counsel to carefully evaluate the litigation timeline and consider whether it is prudent to delay the rollout until after settlement proceedings conclude.

September 11, 2026September 11, 2026 by Gerald L. Maatman, Jr.

Court Grants Conditional Certification Of Mortgage Underwriter’s Collective Action

By Gerald L. Maatman, Jr., Gregory Tsonis and Christian J. Palacios

Duane Morris Takeaways: In Brown v. Equity Prime Mortgage, LLC, Case No. 1:25-CV-1832, ECF No. 38 (N.D. Ga. Aug. 27, 2026), U.S. District Judge Michael L. Brown of the Northern District of Georgia granted a plaintiff’s motion for conditional certification of an FLSA collective action on behalf of a group of mortgage underwriters, alleging misclassification and unpaid overtime violations. This decision is yet another reminder for employers of how lenient the evidentiary standard is in jurisdictions that apply the longstanding “two step” conditional certification analysis employed by many courts. This decision further highlights the potential risk associated with classifying broad categories of employees as “exempt” for overtime purposes, while relying exclusively on the FLSA’s administrative exemption (i.e. office workers that require the exercise of independent judgment on important matters).

Background

Plaintiff Shameen Brown worked for Defendant Equity Prime Mortgage, LLC (“EPM”), a national mortgage lender, as an underwriter between March 2023 and May 2024. Order at 2. On April 7, 2025, she filed a class and collective action complaint against her EPM alleging misclassification and unpaid overtime violations, specifically that she typically worked 60 or more hours per week but received no overtime compensation because EPM misclassified her and others as exempt under the Fair Labor Standards Act. Id.

On September 12, 2025, Brown moved to conditionally certify a collective action, pursuant to 29 U.S.C. § 216(b) of the FLSA, of “[a]ll current and former employees of [EPM] working as Underwriters throughout the United States during the time period from three years prior to the filing of this Complaint until final resolution of [the] action.” Id. at 2. Brown submitted a proposed notice and requested permission to send it to potential collective members via mail, e-mail, and text message. She also requested access to the last four digits of collective members’ social security numbers and permission to send a reminder notice halfway through the notice period. Order at 2-3. EPM opposed the motion. Id.

The Court’s Ruling

On August 27, 2026, the Court granted Plaintiff’s motion for conditional certification. At the outset of its decision, the Court observed that the Eleventh Circuit “sanctioned a two-stage procedure for district courts to effectively manage FLSA collective actions in the pretrial phase.” Order at 3.

At the first stage, or the “notice” stage, the Court observed that it need only determine whether there existed other “similarly situated” employees who should be notified of their ability to join the litigation, describing the applicable standard as “not particularly stringent” and “fairly lenient.” Id. at 4. Only at the second stage, typically after close of discovery, would Plaintiff be required to satisfy a higher evidentiary burden to prove that the collective action is similarly situated and could proceed. Id. at 4-5.

In support of conditional certification, Plaintiff submitted affidavits from other former underwriters describing their duties, alleging each underwriter was required to adhere to the same “predetermined underwriting guidelines” without “any authority to deviate” from those guidelines. Id. at 6. EPM argued that its underwriters were not similarly situated because underwriters worked on different loans, such as retail and wholesale, and were “likely exercising more judgment than an underwriter working primarily on loans to individuals with steady W-2 income and low debt.” Id. at 7.

The Court agreed with Plaintiff that a collective should be conditionally certified, reasoning that Defendant’s position that underwriters were “likely exercising more judgment” did not contradict the “simplicity” of Plaintiff’s claim that EPM’s underwriters were required to “strictly adhere” to the same “predetermined guidelines” when reviewing loans, and that they were required to apply these guidelines without discretion. Id. The Court also rejected Defendant’s argument that different underwriters had different job descriptions, holding that the postings contained only “minute differences” and involved “similar duties.” Id. at 7. Finally, the Court rejected Defendant’s argument that opt-in plaintiffs were not similarly situated because they used different job descriptions in their LinkedIn postings, quipping that “[o]ne man’s Trash Collector is another man’s Sanitation Expert.” Id. at 8.

As a result, the Court granted Plaintiff’s motion for conditional certification and further approved the form of the proposed notice, authorizing it to be sent via mail, email, and text message. Id. at 9. However, the court denied Plaintiff’s request to send a reminder notice halfway through the notice period, concluding that such notices “would be redundant and ‘could be interpreted as encouragement by the Court to join the lawsuit.”’ Id at 10. It also denied Plaintiff’s request that Defendant be required to provide the last 4 digits of the collective members’ social security numbers, citing privacy concerns. Id. at 11.

Takeaway for Employers

As this case illustrates, employers will continue to face uphill battles at the “conditional certification” stage in jurisdictions that apply the lenient “two step” FLSA certification analysis. Although the Fifth, Sixth, and, most recently, the Seventh Circuit have rejected the majority rule in favor of more rigorous tests, most federal circuits, including the Eleventh Circuit, continue to utilize this plaintiff-friendly analysis. Additionally, employers in all sectors, and in the mortgage industry specifically, should be mindful that classifying employees as exempt carries legal risk, particularly where the employer cannot easily demonstrate that the employees maintain meaningful discretion and exercise independent judgment on important matters as part of their job duties to satisfy the FLSA’s administrative exemption.

September 9, 2026September 9, 2026 by Gerald L. Maatman, Jr.

First District Court In The Fourth Circuit Holds That The TCPA’s Do-Not-Call Provision Does Not Cover Text Messages

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Ryan T. Garippo

Duane Morris Takeaways: On September 3, 2026, in Card, et al. v. R.J. Reynolds Tobacco Holdings, Inc., No. 26-CV-00433, 2026 U.S. Dist. LEXIS 201636 (M.D.N.C. Sept. 3, 2026), Judge Catherine Eagles of the U.S. District Court for the Middle District of North Carolina dismissed a putative class action brought under the Telephone Consumer Protection Act (the “TCPA””), on the basis that § 227(c)(5) of the statute does not extend to text messages. The decision follows the Seventh Circuit’s recent ruling in Steidinger v. Blackstone Medical Services, 182 F.4th 532 (7th Cir. 2026) and represents the first district court within the Fourth Circuit to hold that a text message is not a “telephone call” within the meaning of § 227(c)(5).

Case Background

On May 11, 2026, Plaintiff Shawn Card (“Plaintiff” or “Card”) sued R.J. Reynolds Tobacco Holdings, Inc. (“Reynolds”) under the TCPA claiming the company violated the national do-not-call registry’s requirements. Because Plaintiff alleged his phone number was registered on the national-do-not-call registry, allegedly received unwanted text messages from Reynolds, and supposedly never consented to receive those text messages, he claimed that Reynolds violated § 227(c)(5) of the TCPA.

In the complaint, Plaintiff also sought to represent a class of similarly situated individuals who also received text messages that allegedly violated the TCPA’s long-standing prohibition on telephone calls to numbers on the national do-not-call registry. Plaintiff specifically relied on § 227(c)(5) of the TCPA, which purports to create a private right of action for an individual “who has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of the regulations prescribed under this subsection.”

Reynolds moved to dismiss and argued that § 227(c)(5) does not apply to text messages. Plaintiff opposed that motion.

The Court’s Decision

Judge Eagles found the reasoning of the Seventh Circuit’s recent decision in Steidinger persuasive and dismissed the complaint because text messages “do not fall within the private right of action created by § 227(c)(5).” Card, 2026 U.S. Dist. LEXIS 201636, at *3.

Judge Eagles explained § 227(c)(5) references a “telephone call” and not a “telephone solicitation,” as used elsewhere in the statute, and which is expressly defined to include telephone messages. This decision demonstrated that “Congress intended ‘telephone call’ in § 227(c)(5) to have a narrower scope.” Id. Thus, the structure and text of the TCPA supported this interpretation.

In addition, Judge Eagles also took care to note that – prior to McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation, 606 U.S. 146, 168 (2025) – most courts had presumed that § 227(c)(5) applied to text messages based largely on the Federal Communications Commission’s (the “FCC”) regulations. But after McKesson, those cases are no longer good law because that case “changed the standard for judicial deference to agency statutory interpretation and called into question such decisions relying on the FCC’s interpretation.” Id. at *4.

Finally, Judge Eagles also rejected the approach adopted by the courts that have held the term “telephone call” encompasses text messages, such as Taha v. Momentive Software, Inc., 2026 WL 974297, at *3 (C.D. Cal. Mar. 11, 2026), which reasoned that “had Congress intended to eliminate textual communications from § 227(c)(5) it would have used the phrase ‘voice call,’ rather than ‘telephone call.’” Judge Eagles, however, noted that “the inverse is also true; if it had been the intent to include all types of communications, Congress more simply could have used the broader term ‘call’ as it did in §227(b), rather than ‘telephone call’ as it did in § 227(c)(5).” Id. at *6.

As a result, Judge Eagles concluded that Plaintiff failed to state a claim and became the first district court judge in the Fourth Circuit to conclude that § 227(c)(5) does not cover text messages.

Implications For Companies

The Card decision is significant for the growing split in authority as to whether the private right of action codified at § 227(c)(5) covers text messages. Card is the first court in the Fourth Circuit to hold that such text messages are not actionable. Indeed, there are now district courts in five federal circuits – including the entire Seventh Circuit – that hold text messages are not covered by this section of the statute. A chart summarizing this authority is depicted below.

Federal Circuit	Sample Opinion
1st Circuit	⮽
2nd Circuit	⮽
3rd Circuit	⮽
4th Circuit	Card v. R.J. Reynolds Tobacco Holdings, Inc., 2026 U.S. Dist. LEXIS 201636 (M.D.N.C. Sept. 3, 2026)
5th Circuit	⮽
6th Circuit	Stockdale v. Skymount Prop. Grp., LLC, 825 F. Supp. 3d 622 (N.D. Ohio 2026)
7th Circuit	Steidinger v. Blackstone Med. Servs., 182 F.4th 532 (7th Cir. 2026)
8th Circuit	Rush v. Selectquote Ins. Servs., Inc., 2026 WL 2495598 (W.D. Mo. July 30, 2026)
9th Circuit	⮽
10th Circuit	⮽
11th Circuit	See, e.g., Davis v. CVS Pharmacy, Inc., 797 F. Supp. 3d 1270 (N.D. Fla. Aug. 26, 2025)

On the other hand, there are district courts in the First, Second, Third, and Fifth Circuits that have ruled in favor of the plaintiffs’ bar on this issue with no decisions ruling in favor of corporate defendants in those circuits. There are no district courts in the Tenth Circuit that have analyzed this issue. And the common wisdom is that Howard v. Republican National Committee, 164 F.4th 1119 (9th Cir. 2026) decided this issue for the entire Ninth Circuit.

One of the most interesting parts of Card is that Judge Eagles’s opinion suggests that the issue is still live in the Ninth Circuit. Howard was decided in the context of a § 227(b)(3) claim. Thus, when Judge Eagles suggested that the term “any call” in § 227(b)(3) is a “broader term” than was used in § 227(c)(5), it also suggests that there may be some daylight between Howard and the growing number of district courts that hold §227(c)(5) does not cover text messages. Card, 2026 U.S. Dist. LEXIS 201636, at *6.

While this decision is undoubtedly a positive development for corporate counsel, we are not yet at the stage where companies can consider revising their text messaging programs. The new decisions are coming in rapidly and the landscape is changing quickly. Nonetheless, the Card decision provides corporate defendants with a powerful tool to challenge putative § 227(c)(5) class actions, premised on the receipt of text messages, particularly in the Fourth Circuit. As a result, companies should continue to raise this argument and monitor this blog to stay on top of this growing split in authority.

September 8, 2026September 8, 2026 by Gerald L. Maatman, Jr.

One Step At A Time: Another District Court Rejects The Lusardi Bifurcated Discovery And Conditional Certification Approach

By Gerald L. Maatman, Jr., Mike Rosenblatt, and Anna Sheridan

Duane Morris Takeaways: On September 3, 2026, in Harris, et al. v. Shoe Show, Inc., No. 3:25-CV-00398 (W.D.N.C. Sept. 3, 2026), Judge Susan C. Rodriguez denied Plaintiffs’ pre-discovery motion for conditional certification of an FLSA collective action and granted Defendant’s emergency motion for expedited, single stage discovery. The decision joins the growing trend of courts declining to bifurcate FLSA discovery into conditional certification and post-conditional certification stages.

Case Background

Plaintiffs Benjamin Harris and Marticilla Roberts brought suit against Shoe Show, Inc., alleging violations of the Fair Labor Stands Act (“FLSA”). According to the Complaint, filed June 11, 2025, Defendant Shoe Show, Inc. allegedly failed to pay store managers for all overtime hours worked. Specifically, Plaintiffs allege that they were required to communicate with co-workers and supervisors about work-related matters outside of the store while off-the-clock. The Complaint defined Plaintiffs’ proposed FLSA collective action as “all hourly-paid and overtime-eligible Store Managers, who worked over 40 hours in any workweek for Defendant” for the prior three plus years (the alleged lookback period was slightly longer than the typical three years for an FLSA claim due to an alleged tolling agreement).

On July 25, 2025, Plaintiffs filed a pre-discovery motion for conditional certification of a collective action under FLSA § 216(b). On July 28, 2025, Defendant filed a motion to expedite discovery and requested a stay on briefing on Plaintiffs’ pre-discovery motion for conditional certification. Defendant’s motion stated that Plaintiffs used “boilerplate declarations” that “call[ed] into question their evidentiary value.” Defendant also provided declarations from thirty store managers to counter Plaintiffs’ claims to demonstrate that their claims “are not commonly shared by the Company’s Store Managers.”

The District Court’s Ruling

In a 3-page opinion, Judge Rodriguez denied Plaintiffs’ pre-discovery motion for conditional certification and granted Defendant’s motion for expedited discovery. The Court was brief in its analysis, citing “the arguments, record, and applicable authority, including the text” of the FLSA. Op. at 1.

The Court primarily relied on the growing case law revisiting the so-called “two-step process” for certification of FLSA collective actions. Prior to 2021, in what is commonly referred to as the Lusardi approach, courts almost universally applied a two-step process to certification of FLSA collective actions, first requiring a plaintiff to make a modest factual showing that plaintiff was similarly situated to others, followed by a second stage with a more thorough examination of evidence with the benefit of discovery. See Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987). In 2021, the Fifth Circuit in Swales, et al. v. KLLM Transport Services, LLC, 985 F.3d 430, 436 (5th Cir. 2021), rejected the two-step approach for evaluating motions for certification of collective actions, holding that district courts should “rigorously scrutinize the realm of ‘similarly-situated’ workers … at the outset of the case.” In 2023, the Sixth Circuit in Clark v. A&L Homecare & Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023), likewise rejected the two-step approach, though introduced a new standard requiring plaintiffs to demonstrate a “strong likelihood” that other employees are “similarly-situated” to the plaintiff.

Though the Fourth Circuit has yet to weigh in on this issue, Judge Rodriguez cited the Fifth Circuit’s approach in Swales, the Sixth Circuit in Clark, and two district court decisions within the Fourth Circuit rejecting bifurcated certification under the FLSA. Op. at 2. See Hubbard v. Southwood Realty Co., No. 3:24-CV-00481, 2026 WL 823169 (W.D.N.C. Mar. 25, 2026); Mathews v. USA Today Sports Media Grp., LLC, 1:22-CV-1407, 2023 WL 3676795 (E.D. Va. Apr. 14, 2023).

Implications for Companies

When addressing FLSA collective action claims, corporate counsel should be cautioned against accepting Lusardi’s bifurcated approach without pushback and cite to Swales and Clark to slow down a plaintiff’s race to conditional certification. After Hubbard, the Harris decision is now the second district court opinion within the Fourth Circuit in 2026 to reject Lusardi and adopt a single, streamlined discovery approach for FLSA certification. While most circuits still use the Lusardi approach, the circuit split created by the Swales (5th Circuit), Clark (6th Circuit), and Richards, et al. v. Eli Lilly & Co., 149 F.4th 901 (7th Cir. 2025), rejecting Lusardi shows that momentum is moving away from bifurcated discovery.

In the Fourth Circuit in particular, companies can add Harris, in addition to Hubbard and Mathews,to their toolkit to strengthen their arguments against the two-step Lusardi approach. As with any circuit split, this latest trend against bifurcated discovery reinforces how critical it is for companies to understand the approach in the district where they are being sued, but the recent trend away from Lusardi should give companies the impetus in any jurisdiction for arguing against bifurcated discovery and rushing to conditional certification.

August 31, 2026August 31, 2026 by Gerald L. Maatman, Jr.

EEOC Finalizes Strategic Plan And Proposes Overhaul Of Federal Sector Complaint Process

By Gerald L. Maatman, Jr., Bernadette M. Coyle, and Elizabeth G. Underwood

Duane Morris Takeaways: On August 26, 2026, the EEOC took two significant actions – finalizing its FY 2026-2030 Strategic Plan and voting to issue a Notice of Proposed Rulemaking that would fundamentally overhaul the equal employment opportunity complaint process for federal sector employees. Among other changes, the proposed rule would eliminate mandatory pre-complaint counseling, replace the automatic right to an administrative hearing with a targeted referral model, impose heightened pleading standards, and abolish administrative class complaints.

Given the EEOC’s responsibility to enforce federal anti-discrimination laws, these developments are a “must read” for employers.

EEOC Finalizes FY 2026-2030 Strategic Plan

The EEOC approved its FY 2026–2030 Strategic Plan, which carries forward the core priorities outlined in the draft released in early July: strategic enforcement, intake modernization, and outreach expansion. Key performance metrics include a target of 90% favorable resolution in enforcement lawsuits and a 2% annual reduction in intake inventory from FY 2025 baseline levels. For a detailed analysis of the plan’s provisions, see our blog post on the topic.

Proposed Rulemaking To Overhaul The Federal Sector Complaint Process

29 C.F.R. Part 1614 governs discrimination complaints against federal agencies. Under the current framework, an aggrieved employee or applicant must contact an EEO counselor at the agency where the individual works or applied for a job within 45 days of the alleged discriminatory action, participate in counseling or an alternative dispute resolution program, file a formal complaint if counseling or ADR is unsuccessful, await an agency investigation, and then either request a final decision from the agency as to whether discrimination occurred or request a hearing before an EEOC Administrative Judge.

The proposed rule would eliminate mandatory pre-complaint counseling and replace it with a direct-filing model. According to the EEOC, from 2017 to 2021, federal agencies conducted an average of 35,618 counselings per year, with only 385 cases settling at the counseling stage each year. Instead, individuals would have 60 days from the discriminatory act to file a complaint directly with the federal agency at issue. The agency would then have to investigate and issue a prompt final decision.

Another significant change is the replacement of the current automatic right to an EEOC administrative hearing with a “targeted referral model.” Under the current system, the EEOC processes an average of 7,514 hearing requests per year, yet only 4% proceed to an actual hearing, and only 1.7% result in a finding of agency liability. Average processing time from docketing to decision is 442 days, and successful complainants wait an average of over 2.5 years for resolution. Under the proposed rule, after the issuance of a final decision, the complainant may appeal to the EEOC, which could refer the case for Administrative Judge proceedings when a hearing or other additional proceedings are deemed necessary or efficient. Referral grounds include genuine disputes of material fact, credibility determinations, incomplete records, and complex issues.

The proposed rule would also eliminate administrative class complaint adjudication under Part 1614. The EEOC cited its limited resources, approximately 2,000 employees and 70 to 130 Administrative Judges responsible for a federal workforce of nearly two million individuals and characterized class complaints as a “perennial source of delay,” with some taking over a decade to resolve at the threshold certification stage alone. The proposal preserves putative class claims for administrative exhaustion purposes, meaning that employees could still pursue class actions in federal court. Related individual complaints may also be jointly processed.

Key Employer Takeaways

Although the Notice of Proposed Rulemaking applies only to the federal sector, it is part of a broader enforcement realignment that private sector employers should understand. Read alongside the EEOC’s FY 2025-2029 National Enforcement Plan and FY 2026-2030 Strategic Plan, the EEOC is signaling that it intends to concentrate its resources on specific substantive priority areas, such as DEI enforcement and disparate treatment theories, rather than casting a wide net.

Given the volatility of the EEOC’s priorities, it is more crucial than ever for employers to stay abreast of EEOC developments and comply with anti-discrimination laws.

August 27, 2026August 27, 2026 by Gerald L. Maatman, Jr.

Colorado’s Proposed Rules Require Meaningful Human Review And Reconsideration Of Employment Decisions Materially Influenced by AI

By Gerald L. Maatman, Jr., Justin Donoho, and Hayley Ryan

Duane Morris Takeaways: On August 11, 2026, the Colorado Department of Law released a set of proposed rules intended to govern the implementation of Colorado’s Automated Decision-Making Technology Act (“ADMT Act”) and Conversational Artificial Intelligence Service Operator Requirements (the “Chatbot Safety Act”). Both laws, and the proposed rules (to the extent they become final, following a notice and comment period), take effect January 1, 2027.

The proposed rules under the ADMT Act would add additional layers of regulatory burdens on companies using AI-based tools to make consequential automated decisions affecting a consumer’s access to, eligibility for, or terms of employment, education, housing, lending, financial services, insurance, health care, essential government services, and public benefits.

Take AI employment tools, for example — if Colorado’s ADMT rules were to become final, they would require companies using AI employment tools to make available and readily accessible to job candidates and employees:

the make, model, and version number of any AI tool whose outputs were used or will be used to materially influence a consequential employment decision such as in candidate screening, interviewing, hiring, firing, and other consequential employment decisions;
the types and categories of personal data input to the model;
the sources of these input data, including the identities of intermediary and original sources; and
to the recipients of any adverse outcomes materially influenced by the AI tool:
1. within 30 days, notifications of the adverse outcome setting forth the decision, purpose of the AI tool, the reasoning and primary factors relied upon by the AI tool to produce the output, and the relative roles of the AI tool and human reviewers in the decision — such as whether the employer followed the human best practices to mitigate the risk of AI hiring tool noncompliance with antidiscrimination statutes that we identified in our blog (here); and
2. within 45 days after receipt of a request for review, complete a meaningful human review and reconsideration of any adverse outcome, to the extent commercially reasonable.

The proposed rules under the Chatbot Safety Act would add age-assurance, disclosure, privacy, minor-protection, crisis-response, and reporting requirements on companies using AI-based chatbots.

The analysis in our blog post focuses on the “meaningful human review and reconsideration” component of the ADMT Act and its corresponding proposed rules, in the context of adverse employment decisions (number 4(b), above), to assist companies in preparing for compliance by January 1, 2027, and in commenting on the proposed rules before the comment period closes on October 26, 2027, as may be appropriate for their businesses.

Organizations evaluating and seeking to comply with the proposed rules should continue monitoring the rulemaking process, as key provisions, including those discussed below, may change before the rules become effective.

Background

Colorado’s ADMT Act (Colo. Rev. Stat. § 6-1-1701, et seq.) was enacted May 14, 2026, and will become effective January 1, 2027. It provides, among other things, that when an employee or job applicant experiences an adverse outcome resulting from a consequential decision that was materially influenced by AMDT such as an AI employment tool, then the employee or job applicant may request, and the employer must provide (i) instructions for requesting personal data and correcting factually incorrect or materially inaccurate personal data used in the decision; and (ii) “an opportunity for meaningful review and reconsideration of the consequential decision, to the extent commercially reasonable.” Id. § 6-1-1705.

“Meaningful Human Review,” as defined under the ADMT Act, requires the employer to designate an individual who has authority to approve, modify, or override a consequential decision to perform the review. Id. § 6-1-1701(15). Further, in conducting the review, the designated individual must consider relevant, available primary evidence, must be trained to conduct the review, must not default to the system output, and must have access to sufficient information to understand (i) the output’s intended use, material limitations, and categories of inputs; and (i) the principal factors used to generate the output, without requiring disclosure of proprietary source code, model weights, or other trade secrets. Id.

The ADMT Act also provides that, on or before January 1, 2027, Colorado’s Attorney General shall adopt rules to clarify and implement these requirements. Id.

On August 11, 2026, the Colorado Department of Law released a set of proposed rules under the ADMT Act and Chatbot Safety Act that, among other things, would clarify and implement rules regarding reviewer standards, commercial reasonableness, response requirements, and documentation requirements, as discussed below.

Who Can Perform A Meaningful Human Review?

The proposed rules provide that an individual who conducts a meaningful human review must meet the following criteria:

Independence – The reviewer must be an independent reviewer who did not make the original decision and who is not a subordinate of the original decision-maker, whenever feasible.
Subject matter understanding – The reviewer must have a level of subject matter understanding that is commensurate with the nature of, and negative consequences resulting from, the adverse outcome of the consequential decision being reviewed.
Sufficient training – The reviewer must be trained regarding (a) accuracy and objectivity in decision-making; (b) information considered by the AI employment tool; (c) the output’s intended use, material limitations, and categories of inputs; and (d) the subject matter at issue at a level that would enable the reviewer to identify whether review of additional available primary evidence would be valuable, and to review and understand that evidence.
Sufficient authority – The reviewer must not be subject to steering by the upper management that would influence the reviewer’s decision, and they must be shielded from potential retaliation.
Unassisted by AI – The reviewer may not use any ADMT in conducting his or her review.

When Is Meaningful Human Review Commercially Reasonable?

Under the ADMT Act, employers receiving requests to review adverse outcomes materially influenced by an AI employment tool must conduct a meaningful human review and reconsideration of such outcome “to the extent commercially reasonable.”

The proposed rules provide that an employer bears the burden of demonstrating that meaningful human review is not commercially reasonable.

To meet this burden, employers must use specific evidence, and consider the following factors, weighed together, with no single factor being dispositive:

type of review required — i.e., either (a) if the circumstances and request indicate that the AI tool may have malfunctioned, then correcting and re-performing the decision-making process; or (b) if additional evidence is submitted by the employee or job applicant, then considering whether that evidence changes the adverse outcome;
magnitude of harm resulting from the adverse outcome;
reversibility of the adverse outcome;
value provided by the review of available primary evidence;
employer size and capacity;
marginal cost and technical feasibility of the review; and
availability of qualified reviewers.

When the harm to an employee or job applicant resulting from an adverse outcome is a severe and irreversible denial of a basic human need, meaningful human review is presumed to be commercially reasonable. This presumption of commercial reasonableness can be rebutted by evidence showing that the review is technically or financially impossible or could not change the adverse outcome of the consequential decision.

When And How Must An Employer Respond To A Request For Review?

Within 10 days after receiving a request for review of an adverse outcome of a consequential decision meaningfully influenced by an AI employment tool, the employer must confirm receipt of the request and provide information about how the employer will process the request.

Within 45 days of receiving the request, meaningful human review must be completed, and a response must be provided to the employee or job candidate. The response must include the reviewer’s decision to confirm or override the consequential decision, the type of review conducted, the factors considered in making that decision, and the reasons the reviewer decided to confirm or override the consequential decision. Reasons provided must be specific to the evidence provided, and not a recitation of the AI tool’s general logic.

Where possible, an adverse outcome must be stayed pending meaningful human review.

What Documentation Of Meaningful Human Reviews Must Be Retained?

When a meaningful human review is conducted, the employer must retain a record showing:

the reviewer identity, authority, and relevant training;
review timestamps;
primary evidence available to the reviewer, including information provided by the employee or job candidate;
the reviewer’s access to the AI tool’s intended use, limitations, inputs and principal factors;
whether the reviewer approved, modified, or overrode the output; and
a written justification for the reviewer’s decision to approve, modify, or override the output.

Implications For Companies

Colorado’s ADMT Act and Chatbot Safety Act and their corresponding proposed rules add significant operational obligations and compliance burdens for companies using automated decision-making technology to meaningfully influence consequential decisions, and using chatbots, respectively.

This blog post identified one component of these multifaceted burdens relating to one type of ADMT – meaningful human review and consideration of employment decisions materially influenced by AI employment tools.

Although the ADMT Act and Chatbot Safety Act do not provide a private right of action, violations may be prosecuted by the Colorado Attorney General and are treated as a deceptive trade practice under the Colorado Consumer Protection Act, carrying civil penalties of up to $20,000 per violation.

Companies using or considering using ADMT or chatbots should consider whether to comment on the proposed rules before the comment period closes on October 26, 2027, should continue to monitor the content of the rules as they may evolve during the notice and comment period, and should prepare for complying with the rules by the time they are scheduled to come into effect on January 1, 2027.

August 26, 2026August 26, 2026 by Gerald L. Maatman, Jr.

Colorado Federal District Court Denied FLSA Conditional Certification In Meal And Rest Break Case Due To Insufficient Evidence Of A Companywide Practice

By Gerald L. Maatman, Jr., Tiffany Alberty, and Brett Bohan

Duane Morris Takeaways: On August 21, 2026, in Lightner v. DaVita, Inc., No. 23-CV-03104 (D. Colo. Aug. 21, 2026), Judge Nina Y. Wang of the U.S. District Court for the District of Colorado denied a motion seeking conditional certification of a collective action under the Fair Labor Standards Act (“FLSA”). Plaintiff, a former DaVita nurse, alleged that the healthcare company maintained a practice of failing to pay its nurses and technicians for rest breaks lasting fewer than 20 minutes across 41 states. The Court concluded that Plaintiff had not made the threshold factual showing necessary to demonstrate that putative collective members were victims of a common policy or plan, despite the lenient standard that applies at the conditional-certification stage. The decision highlights the evidentiary burden that FLSA plaintiffs must meet to obtain conditional certification and demonstrates that conclusory allegations and sparse evidence, even at this early stage, will not suffice.

Case Background

Plaintiff Anduin Lightner, an hourly nurse formerly employed by DaVita, a nationwide dialysis and healthcare provider, filed this action in November 2023. Id. at 1-3. She alleged that DaVita routinely required its nurses and technicians to “remain responsible for patient care” during their meal breaks, causing frequent interruptions. Id. at 2. Despite those interruptions, DaVita automatically deducted 30 minutes from each shift lasting at least six hours, depriving employees of compensation for time they actually worked. Id. Lightner further claimed that DaVita required employees to clock out for rest breaks lasting fewer than 20 minutes. Id. Combined, she claimed, this off-the-clock time resulted in unpaid overtime for employees who worked more than 40 hours per week. Id.

Based on these allegations, Lightner moved for conditional certification of a collective covering “all current and former hourly nurses and technicians” who provided “direct patient care” at DaVita facilities across 41 states and who allegedly lost overtime pay because of the company’s failure to compensate them for short rest breaks. Id. at 3. Before the Court ruled on the motion, Lightner withdrew her request to certify a separate meal-break collective, narrowing the case to the rest-break theory alone. Id. at 3, n. 1.

After Lightner filed her motion, DaVita moved to strike all consent forms on the grounds of false and misleading communications to recruit opt-in plaintiffs. Id. at 3-4. The Court agreed and ordered a curative notice; approximately half of the original opt-in plaintiffs filed corrected consent forms. Id. at 4.

The Court’s Opinion

Applying the two-step framework approved by the Tenth Circuit in Thiessen v. General Electric Capital Corp., the Court assessed whether Lightner had raised substantial allegations that the proposed collective members were victims of a single decision, policy, or plan. Id. at 4.

The Court found that the complaint contained only conclusory assertions about DaVita’s supposed practice of failing to pay for short rest breaks. Id. at 10. The allegations did not explain how the alleged practice was implemented, how frequently it deprived employees of compensation, or which of DaVita’s many facilities (spanning 41 states) were involved. Id. The Court noted that such bare-bones allegations, without more, do not qualify as “substantial” for conditional-certification purposes. Id.

Turning to the evidentiary record, the Court found the showing equally deficient. Id. at 11-13. Lightner supported her conclusory allegations with citations to only one piece of evidence: the time records for a single employee (who had not filed a corrected consent form and who did not identify in which state she worked), but the Court determined this did “little to establish a companywide practice, across 41 states, of failing to compensate employees for short rest breaks.” Id. at 11-12. Although Lightner attached hundreds of pages of deposition testimony to her motion, she failed to “cite any of this evidence in support of her claim.” Id. at 12.

Nevertheless, the Court reviewed the deposition testimony and acknowledged that testimony from several employees established that their meal breaks were frequently interrupted. Id. at 12. However, that testimony did not demonstrate that interrupted employees “started working again within 20 minutes of starting their break.” Id. The Court concluded that Lightner had not bridged the gap between the “interruptions happening” and an alleged 41-state common practice of not paying for sub-20-minute breaks. Id. at 13-14.

The Court emphasized that while the conditional-certification standard is lenient, “it is not nonexistent, and it cannot be satisfied by unsupported assertions.” Id. at 14. Accordingly, the Court denied the motion. Id. at 15.

Implications For Employers

The Lightner decision offers several important lessons. First, it reaffirms that, even at the initial conditional-certification stage where the standard is intentionally modest, courts will scrutinize whether a plaintiff has offered any concrete evidence of a common policy or plan. Conclusory allegations that a practice existed “companywide” will not carry the day absent at least some factual support tying the alleged practice to the employer’s operations.

Second, the decision illustrates the challenges FLSA plaintiffs face when attempting to certify geographically broad collectives. The Court was unwilling to conclude that, because meal breaks were sometimes interrupted for some employees at some locations, Plaintiff had shown that the company systematically refused to pay for compensable short breaks across dozens of states.

Third, the ruling underscores the importance of employers maintaining clear timekeeping practices and policies. DaVita’s own time records were a focal point of the Court’s analysis, and the absence of widespread evidence of unpaid sub-20-minute breaks in those records undermined Plaintiff’s theory.

Finally, the case serves as a cautionary note about opt-in solicitation practices in FLSA collective actions. The Court’s finding that Plaintiff’s counsel used false and misleading communications to recruit opt-ins—resulting in a curative notice order and the loss of approximately half the original opt-ins—demonstrates the risks of aggressive solicitation tactics and the scrutiny courts will apply to the process.

August 24, 2026August 24, 2026 by Gerald L. Maatman, Jr.

California Federal Court Slams The Brakes On Driver Class Action

By Gerald L. Maatman, Jr., Betty Luu, and Jamar D. Davis

Duane Morris Takeaways: On August 18, 2026, in Maynor Mejia v. RXO Last Mile, Inc., No. 22-CV-08976, 2026 WL 2415257 (N.D. Cal. Aug. 18, 2026), Judge Susan Illston of the U.S. District Court for the Northern District of California denied a motion to certify a class of independent-contractor drivers and others who provided services to assist with the delivery of goods who alleged they were misclassified under California law. This decision underscores that even a facially strong misclassification theory can fail under Rule 23 if there is a conflict between the named plaintiff and the class the plaintiff seeks to represent. Courts will look beyond a uniform contracting framework and probe whether the class representative’s individual circumstances make the representative typical and adequate and will pay close attention to all asserted legal theories that may undermine any effort to seek class certification.

Background:

Plaintiff Maynor Mejia (“Plaintiff”) worked as a contract carrier and delivery driver providing last-mile delivery services for Defendant RXO Last Mile, Inc. (“RXO”) by picking up merchandise at merchants’ stores or warehouses and delivering and installing the merchandise at customers’ homes or businesses. Id. at 1-2. Like other contract carriers in RXO’s network, Plaintiff contracted with RXO as an independent contractor rather than as a direct employee, and his work was governed by a Delivery Service Agreement (DSA) that set out the terms of the parties’ independent-contractor relationship, including the screening, qualification, and approval requirements imposed on contract carriers and the employees of the contract carriers. Id. at 2-3.

On April 10, 2026, Plaintiff moved to certify a class for all persons who performed delivery services for RXO that were classified as independent contractors or otherwise worked as non-employees during the class period and cursorily suggested in the alternative that Judge Illston certify three sub-classes of contract carriers, drivers, and helpers. Id. at 3. Following a hearing on June 12, 2026, Judge Illston ordered additional briefing from Plaintiff clarifying, among other things, Plaintiff’s proposed sub-classes and how each sub-class independently meets the Rule 23(a) and (b) requirements. Id. at 4. On June 26, 2026, Plaintiff proposed three sub-classes for (1) contract carriers, defined as individuals who executed a DSA with RXO; (2) drivers, defined as individuals engaged by a contract carrier to perform deliveries for RXO who did not themselves execute a DSA with RXO; and (3) helpers, defined as individuals who performed delivery services for RXO as non-employee helpers (the latter two are the “Driver and Helper subclasses”). Id. at 4. Plaintiff contended that RXO’s standardized contracting model and uniform operational requirements misclassified the persons in the sub-classes as independent contractors when they should have been treated as employees. Id. at 1.

Through discovery, RXO identified 2,485 class members, including 652 contract carriers, 1,251 drivers, and 582 helpers. Id. at 9. Plaintiff testified in his deposition that, as a contract carrier, he treated at least some of the members of the Driver and Helper subclasses as his own employees: he paid taxes on their behalf, engaged them as his “‘employees’” paid them, issued W-2s, paid them overtime, instructed them to take meal breaks, and assigned them routes based on their performance.” Id. at 11.

The Court’s Findings:

Judge Illston denied certification, finding that Plaintiff failed to satisfy Rule 23’s commonality, typicality, and adequacy requirements. Id. at 13.

As a threshold matter, Judge Illston determined that Plaintiff satisfied the numerosity and ascertainability requirements. Id. at 8-9. Specifically, Judge Illston found the proposed class ascertainable because Plaintiff adequately identified the class members, and RXO confirmed through its discovery responses that 2,485 individuals fell within that class definition. Id.

For the commonality requirement, however, Judge Illston found that Plaintiff failed to meet his burden, at least with respect to the Driver and Helper sub-classes, because Plaintiff’s reliance on the ABC test is incompatible with the joint employment theory of liability Plaintiff intended to pursue against RXO on behalf of those sub-classes. Id. at 10-11. The ABC test, adopted by the California Supreme Court in Dynamex Operations W., Inc. v. Superior Court, 4 Cal. 5th 903 (2018), and later codified by Assembly Bill 5, presumes that a worker is an employee unless the hiring entity establishes that: (A) the worker is free from the control and direction of the hirer in connection with the performance of the work; (B) the worker performs work outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. Id. at 6-7.

Judge Illston observed that Plaintiff’s motion to certify “focused almost entirely on the ABC test [which Plaintiff argued] encompasses all claims in the [Complaint] and applies to all three sub-classes.” Id. at 10. However, in Plaintiff’s reply brief and at the certification hearing, Plaintiff confirmed his intent to pursue a joint employment theory of liability as to the Drivers and Helpers who did not sign a DSA. Id. This created a fundamental tension in Plaintiff’s case, as the ABC Test applies to misclassification claims, where the question is whether a worker is an employee or independent contractor, but it does not apply to joint employment claims, where the worker is already recognized as an employee of one entity and the question is whether a second entity is also liable as a joint employed. Id. at 10-11. Judge Illston’s analysis was guided by the Ninth Circuit’s decision in Bowerman v. Field Asset Servs., Inc. 60 F.4th 459, 473 (9th Cir. 2023), which established that because the “reasons for selecting the ABC test are uniquely relevant to the issue of allegedly misclassified independent contractors, the ABC test does not extend to the joint employment context, where those concerns are no longer present.” Id. at 10.

Judge Illston also rejected Plaintiff’s alternative argument that RXO was a joint employer of Driver and Helper sub-classes under the Martinez test. Id. at 11. Under Martinez v. Combs, 49 Cal. 4th 35, 64 (2010), a joint employment relationship exists where the alleged joint employer: “(1) have exercised control over the workers’ wages, hours, or working conditions; (2) suffered or permitted them to work; or (3) engaged them, thereby creating a common law employment relationship.” Id. Judge Illston found this argument “unavailing” because Plaintiff failed to “explain how the joint employment test would apply and how it would not require an individualized inquiry” into the employment practices of each Contract Carrier. Id.

Judge Illston next considered the typicality and adequacy requirements together, noting that the considerations underlying these two prerequisites “overlap considerably.” Id. at 11. Judge Illston concluded that Plaintiff satisfied neither requirement with respect to the Driver and Helper subclasses because he had a conflict of interest with those sub-classes. Id. at 12. Specifically, under Section 5(d) of the DSA, Plaintiff agreed to “assume sole responsibility” for his workers’ compliance with “all applicable laws, rules, and regulations, including but not limited to wage and hour laws…” Id. Thus, Plaintiff could be individually liable to the members of the Driver and Helper subclasses for the very claims he seeks to represent on their behalf. Id. As Judge Illston explained, “in order for [Plaintiff] to argue that his Drivers and Helpers were deprived of accurate wage statements, breaks, pay, and other employment protections, he would also have to admit that he deprived them of such employee benefits, creating antagonistic interests between [Plaintiff] and the subclasses he seeks to represent.” Id.

Having concluded that Plaintiff failed to carry his burden on the commonality, typicality, and adequacy requirements under Rule 23, Judge Illston denied Plaintiff’s motion for class certification in its entirety. Id. at 13.

Implications for Companies

This decision carries practical implications for companies utilizing independent-contractor structures. Companies should ensure their contracting agreements expressly allocate wage-and-hour compliance obligations to downstream contractors, as such provisions expose named plaintiffs to individual liability for the very claims they assert on behalf of a class, creating conflicting interests that defeat typicality and adequacy.

The decision also serves as a useful reminder to be pragmatic and to scrutinize whether a plaintiff’s legal theories are consistent with binding precedent. Companies should pursue early discovery into the working relationship between a plaintiff and workers. As this case demonstrates, a named plaintiff’s personal employment practices can defeat certification even where a uniform contracting template governs the workforce.

August 20, 2026August 20, 2026 by Gerald L. Maatman, Jr.

Eighth Circuit Affirms Landmark Billion Dollar Class Action Settlement In Real Estate Broker Commission Antitrust Litigation

By Gerald L. Maatman, Jr., Mike Rosenblatt, and Brett Bohan

Duane Morris Takeaways: On August 19, 2026, in Burnett v. National Association of Realtors, Nos. 24-3444, 24-3450, 24-3451, 24-3527, 24-3585, 24-3619, 24-3621 (8th Cir. Aug. 19, 2026), the U.S. Court of Appeals for the Eighth Circuit affirmed the district court’s final approval of a nationwide class action settlement resolving antitrust claims alleging that the National Association of Realtors (the “NAR”) and several major real estate brokerage franchisors conspired to inflate buyer-broker commissions. The settlement exceeds $1 billion in total value, eliminates the longstanding rule requiring sellers to offer compensation to buyer brokers through multiple listing services, and survived challenges from seven separate groups of objectors and intervenors.

Case Background

Starting in 1996, NAR’s Cooperative Compensation Rule required home sellers listed on an NAR-affiliated Multiple Listing Service (“MLS”) to offer the buyer’s broker a commission. Id. at 9. In practice, this rule meant “sellers paid a combined commission of roughly 5-6% of the sale price, split roughly evenly between the seller’s broker and the buyer’s broker” even though the buyer’s broker represented the buyer. Id. Because of the supremacy of NAR-affiliated MLSs in the national residential market, the rule applied nationwide. Id.

In April 2019, Rhonda Burnett filed a class action in the Western District of Missouri on behalf of a group of Missouri home sellers against NAR and four brokerage franchisors—HomeServices of America, Anywhere Real Estate, RE/MAX, and Keller Williams. Id. She alleged that the defendants had conspired to fix prices in violation of Section 1 of the Sherman Antitrust Act. Id. After trial in October 2023, a jury awarded $1.785 billion in damages subject to trebling. Id. at 10. While post-trial motions were pending, the parties in this case and in several related nationwide actions reached a global settlement. Id. NAR agreed to pay the settlement fund $418 million, HomeServices agreed to pay $250 million, and additional opt-in brokerages brought the total fund above $1 billion. Id. at 11. NAR also agreed to eliminate the Cooperative Compensation Rule and implement changes restructuring buyer-broker compensation. Id.

The district court entered an 88-page final approval order certifying a nationwide settlement class and approving the settlement under Rule 23. Id. at 13. Seven groups of objectors and intervenors appealed the settlement. Id. at 13 n.3.

The Eighth’s Opinion

The Eighth Circuit upheld the district court’s approval of the settlement and rejected the objectors’ and intervenors’ challenges.

Standing. The Eighth Circuit rejected the argument that plaintiffs lacked Article III standing for injunctive relief, finding an ongoing injury because “home prices remain inflated absent” the settlement’s practice changes. Id. at 17.

Rule 23(e)(2) Fairness Factors. The Eighth Circuit clarified that Rule 23(e)(2), as amended in 2018, provides the authoritative factors for evaluating class-action settlements. Id. at 21. However, the district court did not err by considering additional factors, even if it was not required to do so. Id.

Overbroad Release Challenge. Objectors/Intervenors contended the settlement impermissibly extended to New York claims involving the Real Estate Board of New York’s (“REBNY”) independently operated rules. Id. at 22. The Eighth Circuit held that both the NAR and REBNY claims hinged on the same operative factual predicate—that industry rules were used to keep brokerage fees artificially high at the expense of home buyers and sellers. Id. at 23. Because the released claims shared a “common nucleus of operative fact” with the litigated claims, the breadth of the release was permissible. Id.

Adequacy of Representation. The Eighth Circuit rejected the argument that class counsel had provided inadequate representation. Id. at 26. It held that the district court did not err in finding class counsel was qualified, had pursued the case aggressively through trial, and negotiated at arm’s length with the defendants. Id.

Attorneys’ Fees. The Eighth Circuit upheld a $333 million attorneys’ fees award—one-third of the fund—as consistent with Eighth Circuit precedent under the percentage-of-the-benefit approach. Id. at 30-31.

Distribution Method.The Eighth Circuit held that the parties did not need to establish a detailed distribution plan prior to final settlement approval. Id. at 32. A notice that “outlines the settled and released claims and states the total settlement amounts” is sufficient. Id.

Fairness Hearing Procedure. Objectors/Intervenors also challenged the district court’s requirement that all objectors appear in person at the fairness hearing. Id. The Eighth Circuit found due process was satisfied where counsel for non-appearing objectors was able to argue at the hearing, and the district court addressed the objections on the merits. Id.

Adoption of Proposed Order. The Eighth Circuit rejected the argument that the district court’s adoption of the plaintiffs’ proposed settlement order warranted heightened scrutiny, reaffirming that “even when the trial judge adopts proposed findings verbatim, the findings are those of the court and may be reversed only if clearly erroneous.” Id. at 33 (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 572 (1985)).

Timeliness of Intervention. The Eighth Circuit affirmed the denial of a group of objectors’ intervention motion because (1) “the litigation had proceeded for five years” before they filed the motion, (2) the intervenors knew about the case, (3) they offered no explanation for the delay, and (4) reopening the settlement would prejudice the parties. Id. at 34-35.

Implications For Companies

The Eighth Circuit’s decision carries broad significance. First, the sheer magnitude of the settlement, more than $1 billion in total, highlights the extraordinary financial exposure that antitrust price-fixing claims can generate. Under the Sherman Act, depending on the claims and damages alleged, successful plaintiffs may be entitled to treble damages, meaning that even a single adverse jury verdict can spiral into catastrophic liability. Businesses that participate in industry-wide arrangements touching price, commissions, or fee structures should ensure that any agreements or coordinated practices involving competitors are reviewed by experienced antitrust counsel before implementation.

Second, it reinforces that federal courts retain wide latitude to approve nationwide settlements releasing claims beyond the originally certified class’s geographic scope, provided the claims share a common factual predicate. Companies facing multi-state litigation should recognize that a settlement in one jurisdiction may resolve related claims elsewhere.

Third, the opinion provides the Eighth Circuit’s first definitive guidance on the 2018 Rule 23(e)(2) amendments, making clear that Rule 23 supplies the mandatory factors while circuit-specific tests may supplement but not supplant them.

Finally, the decision reinforces the high deference appellate courts afford district courts evaluating complex settlements following contested litigation and trial.