Gerald L. Maatman, Jr. – Page 6 – Class Action Defense

January 9, 2024 by Gerald L. Maatman, Jr.

It Is Here — The Duane Morris Class Action Review – 2024

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

Duane Morris Takeaways: As we kick off 2024, we are pleased to announce the publication of the second annual edition of the Duane Morris Class Action Review. It is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting corporations, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breaches, discrimination, EEOC-Initiated and government enforcement litigation, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, wage & hour class and collective actions, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, the top class action settlements across all areas of law, and primers on both the Illinois Biometric Information Privacy Act and the California Private Attorney General Act. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2024.

This past year Employment Practices Liability Consultant Magazine (EPLiC) called the DMCAR “the Bible” on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.” It said that “The Review must-have resource for in-depth analysis of class actions in general and workplace litigation in particular.” EPLiC continued that “The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting Corporate America,” and “provides insight as to what companies and corporate counsel can expect . . . in terms of filings by the plaintiffs’ class action bar.”

Click here to access our customized website featuring all the Review highlights, including the ten major trends across all types of class actions over the past year.

Order your free copy of the eBook here, and download the Review overview on the key Rule 23 decisions and top class action settlements here.

The 2024 Review analyzes rulings from all state and federal courts in 23 areas of law. It is designed as a reader-friendly research tool that is easily accessible in hard copy and e-Book formats. Class action rulings from throughout the year are analyzed and organized into 23 chapters and 6 appendices for ease of analysis and reference.

Executive Summary Of Key Class Action Trends Over The Past Year

Class action litigation presents one of the most significant risks to corporate defendants today. Procedural mechanisms like the one set forth in Rule 23 of the Federal Rules of Civil Procedure have the potential to expand a claim asserted on behalf of a single person into a claim asserted on behalf of a behemoth that includes every employee, customer, or user of a particular company, product, or service, over an extended period.

A class action allows one or more individuals to pursue claims on behalf of a defined and sometimes sprawling group of similarly situated individuals. When the plaintiffs’ bar aggregates the claims of many individuals in a single lawsuit, a class action can present substantial implications for a corporate defendant. As a result, class action litigation poses some of the most significant legal risks that companies face. By joining the claims of many individuals in a single lawsuit, class actions have the potential to increase potential damages exponentially. A negative ruling in a class action has the potential to reshape a defendant’s business model, to impact future cases, as well as to set guidelines for the entire industry. This can make the outcome of a class action lawsuit significant and potentially devastating for a company. Due to their potential implications, class actions are often costly to defend. Defending against a class action can be a time-consuming and resource-intensive process that diverts management attention from core business activities. Plaintiffs can attempt to leverage this reality to make class actions as expensive and disruptive as possible, in an effort to bring about litigation fatigue and to extract a sizable settlement.

Class actions are often complex legal proceedings with uncertain outcomes. The complexity can arise from managing multiple claims, myriad legal issues, and assorted class members, making it challenging for corporate defendants to predict and control the result. Due to these factors, corporate defendants should approach class actions from a broad vantage point with a thoughtful and multi-faceted defense strategy.

We developed this one-of-a-kind resource to provide a practical desk reference for corporate counsel faced with defending class action litigation. We have organized this year’s book into 23 chapters, with five appendices, each of which provides a rundown of the trends in a particular area of class action litigation, along with the key decisions from courts across the country that companies can use to shape their defense strategies.

We identified 10 key trends that characterize the past year. These trends involve: (i) the continued prevalence of massive class action settlements; (ii) expansive growth in privacy class action litigation; (iii) plaintiff-friendly class certification conversion rates; (iv) an expansive growth of data breach litigation; (v) decisions by the U.S. Supreme Court fueling class action litigation; (vi) transformative rulings on the PAGA front, bolstering its popularity among the plaintiffs’ class action bar; (vii) a resurgence of broader and more aggressive government enforcement activity; (viii) the emergence of generative artificial intelligence (AI) and its potential to reshape class action litigation; (ix) a new focus on ESG-related class action risks; and (x) the continued impact of the arbitration defense in the class action space.

Trend #1 – Class Action Settlement Numbers Continue To Spike At Unprecedented Levels

In 2023, settlement numbers exceeded expectations for the second year in a row. The cumulative value of the top ten settlements across all substantive areas of class action litigation hit near record highs, second only to the settlement numbers we observed in 2022. When the numbers for 2022 and 2023 are combined, the totals signal that we have entered a new era of heightened risks and higher stakes in the valuation of class actions.

On an aggregate basis, across all areas of litigation, class actions and government enforcement lawsuits garnered more than $51.3 billion in settlements in 2023. The largest 20 settlements during 2023 included those on the above chart.

Such numbers are second only to the value of class actions and government enforcement settlements in 2022, which topped $67 billion. Combined, the two-year settlement total eclipses any other two-year period in the history of American jurisprudence.

Trend #2 – Privacy Class Actions Gained Momentum, Increasing In Number And Sophistication

In 2023, the Illinois Biometric Privacy Act (BIPA) continued to fuel a swell of class action litigation. Its technical requirements, coupled with stiff statutory penalties and fee-shifting, provided a recipe for increased filings and hefty settlement demands from the plaintiffs’ class action bar. In terms of lawsuit filings, for nearly a decade following enactment of the BIPA, activity under the statute was largely dormant. Plaintiffs filed an average of approximately two total lawsuits filed per year from 2008 through 2016. Those numbers grew exponentially in 2017 and 2018 and then spiked as the plaintiffs’ class action bar filed a surge of class action lawsuits.

In 2022, companies saw more than five times as many class action lawsuit filings for alleged violations of the BIPA than they saw in 2018, and more than the number of class action lawsuit filings that they saw from 2008 through 2018 combined. Filings continued to accelerate in 2023, prompted by two rulings from the Illinois Supreme Court that increased the opportunity for recovery of damages under the BIPA. In the wake of these rulings, class action filings more than doubled. From January 1, 2023, to the ruling in Cothron, plaintiffs filed approximately 61 lawsuits in Illinois state and federal courts alleging violations of the BIPA. By contrast, in the same period of time following the ruling, plaintiffs filed 150 lawsuits in Illinois state and federal courts, representing an increase of 71%.

Trend #3 – The Likelihood Of Class Certification In 2023 Remained Strong

In 2023, the plaintiffs’ class action bar succeeded in certifying class actions at a high rate. Across all major types of class actions, courts issued rulings on 451 motions to grant or to deny class certification in 2023. Of these, plaintiffs succeeded in obtaining or maintaining certification in 324 rulings, an overall success rate of 72%. The numbers show that, when compared to 2022, plaintiffs filed more motions for class certification in 2023, resulting in more certified class actions in 2023. Across all major types of class actions, courts issued rulings on 451 motions to grant or deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 324 rulings, with an overall success rate of 72%. In 2022, by comparison, courts issued rulings on 335 motions to grant or to deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 247 rulings, an overall success rate of nearly 74%.

Trend #4 – Data Breach Class Actions Continued Their Growth And Inconsistent Outcomes

The volume of data breach class actions exploded in 2023 and their unique challenges, including issues of standing and uninjured class members, continued to vex the courts, leading to inconsistent outcomes. Companies unfortunate enough to fall victim to data breaches in 2023 faced class actions at an increasing rate, including copy-cat and follow-on class actions across multiple jurisdictions, saddling companies with the significant costs of responding to the data breach as well as the costs of dealing with high-stakes class action lawsuits on multiple fronts. Plaintiffs bringing data breach class actions, however, continued to face hurdles associated with their ability to demonstrate an injury from the alleged data breach and, if they survived dismissal, with convincing courts to grant class certification. Indeed, only 14% of the class certification decisions issued in data breach cases in 2023 came out in favor of plaintiffs.

Trend #5 – U.S. Supreme Court Rulings Continue To Impact The Class Action Landscape

As the ultimate referee of law, the U.S. Supreme Court traditionally has defined the playing field for class action litigation and, through its rulings, has impacted the class action landscape. The past year did not buck that trend. On June 29, 2023, the U.S. Supreme Court ruled in Students for Fair Admissions, Inc., et al. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), that two colleges and universities that considered race as a factor in the admissions process violated the Equal Protection Clause of the U.S. Constitution and Title VI of the Civil Rights Act of 1964. The ruling is fueling controversy along with a wave of claims that is likely to expand.

The Supreme Court’s decision has also caused private sector employers to question whether the ruling impacts their diversity, equity, and inclusion (DEI) initiatives. While politicians moved quickly to stake out positions on the issue, the plaintiffs’ class action bar and advocacy groups moved to take advantage of the uncertainty to line up a deluge of claims.

Trend #6 – PAGA Filings Reached An All-Time High

In 2023, employers saw claims filed under the California Private Attorneys General Act (PAGA) reach an all-time high. According to data maintained by the California Department of Industrial Relations, the number of PAGA notices filed with the LWDA has increased exponentially over the past two decades, from 11 in 2006 to 7,780 in 2023. The PAGA created a scheme to “deputize” private citizens to sue their employers for penalties associated with violations of the California Labor Code on behalf of other “aggrieved employees,” as well as the State. A plaintiff may pursue claims on a representative basis under the PAGA, i.e., on behalf of other allegedly aggrieved employees, but need not satisfy the class action requirements of Rule 23. In other words, the PAGA provides the plaintiffs’ class action bar a mechanism to harness the risk and leverage of a representative proceeding without the threat of removal to federal court under the CAFA and without the burden of meeting the requirements for class certification.

Trend #7 – Government Enforcement Lawsuit Filings Reflected A Resurgence

In 2023, the EEOC’s litigation enforcement activity showed that its previous slowdown in filing activity is well in the rearview mirror, as the total number of lawsuits filed by the EEOC increased from 97 in 2022 to 144 in FY 2023. In accordance with tradition, the EEOC filed more lawsuits in September 2023, the last month of its fiscal year, than in any other month from October 2022 forward. This past year, the EEOC filed 67 lawsuits in September, up from 39 filed in September 2022.

Trend #8 – Generative AI Began Transforming Class Action Litigation

Generative AI hit mainstream in 2023 and quickly become one of the most talked-about and debated subjects among corporate legal counsel across the country, as numerous companies jumped to incorporate AI while attempting to manage its risks. In 2023, we saw the tip of the iceberg relative to the ways that generative AI is poised to transform class action litigation. As the COVID 19 pandemic brought video-conferencing tools into the mainstream, such tools enabled more litigants to conduct and to attend more hearings, more depositions, and more mediations in less time. While the debate continues as to their effectiveness, generative AI is poised to enable lawyers to far surpass those gains in efficiency, potentially enabling the plaintiffs’ class action bar to do “more with less” like never before, leading to more lawsuits that can be handled by fewer lawyers in less time and a potential surge of class actions on the horizon.

Less than a year into the generative AI movement, we have seen the technology influence various aspects of the legal process, including by assisting legal professionals in analyzing vast amounts of data; automating the review of documents, contracts, and communications; increasing the speed and potentially enhancing the accuracy of e-discovery; and automating and enhancing the dissemination of information in the class action settlement administration process.

Trend #9 – ESG Class Action Litigation Hit Its Stride

During the past year, the label “ESG” became “mainstream,” and discussion of its impact became a recurring topic of conversation in boardrooms across the country. ESG refers to broadly to “environmental, social, and governance,” which many companies have embraced as part of their business plans and corporate missions. ESG was not immune to lawsuits, and we saw a steady influx of class action litigation in two particular ESI spheres – (i) product advertising and (ii) employment and DEI-related lawsuits.

Most often, plaintiffs’ class action attorneys file greenwashing lawsuits as class actions. These lawsuits largely focus on claims that defendants marketed products as “environmentally responsible,” “sustainably sourced,” or “humanely raised,” arguing that such misleading claims induce purchasers to pay a premium for “greener” products.

Trend #10 – Arbitration Agreements Remained An Effective Tool To Cut Off Class Actions

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, 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.

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 126 motions across 190 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).

Class action litigation is a staple of the American judicial system. The volume of class action filings has increased each year for the past decade, and 2024 is likely to follow that trend. In this environment, corporate programs designed to ensure compliance with existing laws and strategies to mitigate class action litigation risks are corporate imperatives.

The plaintiffs’ bar is nothing if not innovative and resourceful. Given the massive class action settlement figures in 2022 and 2023 (a combined total of $113 billion), coupled with the ever-developing law, corporations can expect more lawsuits, expansive class theories, and an equally if not more aggressive plaintiffs’ bar in 2024. These conditions necessitate planning, preparation, and decision-making to position corporations to withstand and defend class action exposures.

We hope the Duane Morris Class Action Review provides practical insights into complex potential strategies relevant to all aspects of class action litigation and other claims that can cost billions of dollars and require changed business practices in order to resolve.

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

Fifth Circuit Refuses To Revive EEOC COVID-Era Mask Bias Suit

By Gerald L. Maatman, Jr., Emilee N. Crowther, and Christian J. Palacios

Duane Morris Takeaways: In EEOC v. U.S. Drug Mart, Inc., No. 23-50075, 2024 WL 64766, at *1 (5th Cir. Jan 5, 2024), the Fifth Circuit refused to resurrect an EEOC lawsuit alleging that a Texas pharmacy created a hostile work environment under the Americans with Disabilities Act (the “ADA”) by reprimanding an asthmatic employee for wearing a mask during the beginning of the COVID-19 pandemic. This case illustrates the Fifth Circuit’s high evidentiary standards associated with establishing the existence of a hostile work environment, especially with regards to demonstrating that the conduct was “sufficiently severe or pervasive to alter the conditions of the victim’s employment.” Id.

Background

The charging party, David Calzada, was a pharmacy technician at U.S. Drug Mart (d/b/a Fabens Pharmacy). Id. Mr. Calzada suffered from asthma, and elected to wear a face mask to work on March 26, 2020. Id. However, after arrival, the store manager informed Mr. Calzada that mask-wearing violated the pharmacy’s policy, and instead of removing his mask, Mr. Calzada left for the day. Id. A few days later, when Mr. Calzada returned to work, his supervisors informed him that the pharmacy’s polices were updated and he was now permitted to wear a mask and gloves at work. Id. However, during the meeting, Mr. Calzada was repeatedly belittled by the head pharmacist and at one point called a “disrespectful stupid little kid.” Id. Mr. Calzada quit the same day. Id.

Mr. Calzada subsequently filed a charge of discrimination with the EEOC. Id. The EEOC brought suit against U.S. Drug Mart on his behalf, alleging the Texas pharmacy created a hostile work environment and constructively discharged Calzada based on the conduct of the store manager and head pharmacist. Id. The district court granted summary judgment in favor of U.S. Drug Mart in October of 2022. It determined that “an isolated instance of verbal harassment is generally not sufficient to support a hostile work environment claim.” EEOC v. United States Drug Mart, Inc., No. EP-21-CV-00232, 2022 WL 18539781, at *8 (W.D.Tex. 2022). The EEOC appealed on January 31, 2023.

The Fifth Circuit’s Ruling

The Fifth Circuit, in affirming the district court’s summary judgment decision, held that the EEOC was unable to establish a prima facie case for a hostile work environment claim because it was unable to prove that the head pharmacist’s harsh words were “sufficiently severe or pervasive to alter the conditions of the victim’s employment.” EEOC, 2024 WL 64766, at *2. The Fifth Circuit observed that although the head pharmacist’s behavior was “certainly brusque,” it fell well short of the Fifth Circuit’s fairly high standard for “severe” conduct. Id. The Fifth Circuit noted that the EEOC’s constructive discharge claim failed for the same reason, because proving constructive discharge required an even “greater degree of harassment than that required by a hostile work environment claim.” Id. Accordingly, the Fifth Circuit affirmed the district court’s grant of summary judgment in favor of the employer.

Implications For Employers

The COVID-19 pandemic was accompanied by a variety of novel legal theories and questions of first impression. One thing that remains the same, however, is the high evidentiary standard that plaintiffs need to satisfy to prove their hostile work environment claims, specifically with respect to the element of “severe and pervasive” conduct.

January 6, 2024 by Gerald L. Maatman, Jr.

Texas Federal Court Greenlights EEOC Lawsuit Against Three Companies As Parts Of An Integrated Enterprise

By Gerald L. Maatman, Jr., Emilee N. Crowther, and Christian J. Palacios

Duane Morris Takeaways: In EEOC v. 1901 South Lamar, LLC, No. 1:23-CV-539, 2024 WL 41202, at *1 (W.D. Tex. Jan. 3, 2024), U.S. District Judge Robert Pitman adopted U.S. Magistrate Judge Susan Hightower’s recommendation to deny Defendants’ three Motions to Dismiss an EEOC pregnancy discrimination lawsuit. As Magistrate Judge Hightower’s recommendation illustrates, even smaller entities that would ordinarily not satisfy Title VII’s numerosity requirement cannot escape the EEOC’s grasp if they collectively operate as a single, integrated enterprise.

Case Background

Defendants 1901 South Lamar, LLC d/b/a Corner Bar (“Corner Bar”), Revelry Kitchen & Bar, LLC (“RK&B”), and Revelry on the Boulevard, LLC (“ROTB”) (collectively, “Defendants”) hired Kellie Connolly (“Connolly”) in September 2020 to work at the Corner Bar in Austin, Texas. Id. at *1. On January 31, 2021, Connolly informed the Defendants she was pregnant. Id. Two months later, after Connolly became visibly pregnant, the Defendants allegedly reduced her work hours. Id. On June 25, 2021, Connolly’s manager terminated her employment, stating that “she was becoming ‘too much of a liability’” and that they would part ways “until after the baby.” Id.

The EEOC filed suit against the Defendants alleging they discriminated against Connolly on the basis of her pregnancy in violation of Title VII. Id. In seeking to dismiss the lawsuit, the Defendants argued: (i) Corner Bar was not an “employer” under Title VII because it employed fewer than 15 employees during the relevant time period, and (ii) the Defendants were not an integrated single employer enterprise under Title VII. Id. at *2.

The Court’s Decision

Magistrate Judge Hightower was unpersuaded by the Defendant’s arguments. As a preliminary matter, Magistrate Judge Hightower held that Title VII’s numerosity requirement was not jurisdictional, and could therefore not serve to support Defendant’s Motion to Dismiss for lack of subject- matter jurisdiction.

The Magistrate Judge then applied a four-factor test to determine whether these separate entities were a “single, integrated enterprise” under Title VII and concluded that the factors weighed in favor of the EEOC. In particular, the Court found the following facts supported the EEOC’s “integrated business enterprise” allegations: (i) Defendants all shared bartending staff and inventory, (ii) utilized a single Director of Operations to handle all human-resources related services, (iii) jointly marketed their businesses, and (iv) utilized a disciplinary form that bore the logo of each of the Defendants. Id. at *3. Accordingly, the Magistrate Judge found that these facts could support a finding of centralized control of labor relations and recommended the District Court deny Defendants’ Motion to Dismiss. Id. at *4.

The Defendants challenged the order by way of Rule 72 objections. On January 3, 2024, District Court Judge Robert Pitman rejected the Rule 72 objections, and accepted and adopted the Magistrate Judge’s report and recommendation.

Implications For Companies

As the ruling in EEOC v. 1901 South Lamar, LLC, illustrates, even employers with fewer than 15 employees that would ordinarily be exempt from Title VII’s requirements may be sued by the EEOC, provided they have sufficiently integrated affiliates that would collectively put them over Title VII’s numerosity threshold.

January 4, 2024 by Eden Anderson

Permanent Injunction Issued Precluding Enforcement Of California’s Ban On Mandatory Arbitration Agreements

By Eden Anderson, Rebecca Bjork, and Gerald Maatman, Jr.

Duane Morris Takeaways: Last year, the Ninth Circuit held in Chamber of Commerce of the United States v. Bonta, 62 F.4th 473 (9th Cir. 2023), that California Assembly Bill (AB) 51 — a statute that attempted to criminalize employers’ use of mandatory arbitration agreements — was preempted by the Federal Arbitration Act. In Bonta, the Ninth Circuit affirmed a preliminary injunction prohibiting the State of California from enforcing AB 51. On January 1, 2024, following remand in the case, the district court entered a permanent injunction that enjoins the State from enforcing the Labor and Government Code sections enacted as part of AB 51, and awarding the plaintiffs, as prevailing parties, $822,496. The district court’s order brings finality, judgment, and ultimate success to a strong coalition of employer interests who banded together to challenge California’s attempt to criminalize the use of mandatory arbitration agreements.

Case Background

AB 51, effective January 1, 2020, added Section 432.6 to the California Labor Code and Section 12953 to the California Government Code. Labor Code Section 432.6 makes it a misdemeanor for employers to require employees or applicants to waive “any right, forum, or procedure for violation of any provision of the California Fair Employment and Housing Act” or the California Labor Code. Government Code Section 12953 makes it an unlawful employment practice to violate Labor Code Section 432.6.

In December 2019, the U.S. Chamber of Commerce, California Chamber of Commerce, National Retail Federation, California Retailers Association, National Association of Security Companies, Home Care Association of America, and the California Association for Health Services at Home (“Plaintiffs”) filed a complaint against the State of California challenging AB 51 as preempted by the Federal Arbitration Act (FAA).

The district court granted the Plaintiffs’ motion for a preliminary injunction, finding that Plaintiffs were likely to succeed on the merits. California appealed, and challenged only the district court’s holding that AB 51 was likely to be preempted by the FAA. A divided panel of the Ninth Circuit initially reversed the district court in a September 2021 opinion but, after a rehearing petition was filed, the Ninth Circuit withdrew its opinion and issued a new opinion, which affirmed the district court’s preliminary injunction order and held that the FAA preempts AB 51.

The District Court’s Issuance Of A Permanent Injunction

After the decision, the case was remanded to the district court and, on January 1, 2024, the district court issued an order permanently enjoining the State of California from enforcing Labor Code Section 432.6 and Government Code Section 12953. Additionally, the district court awarded the Plaintiffs, as prevailing parties, $822,496 in attorneys’ fees. The order was obtained via stipulation of the parties whereby they agreed that the Ninth Circuit’s decision in Bonta was dispositive of the legal issues in the case and further agreed to the amount of attorneys’ fees to be paid by the State.

Implications For Employers

The district court’s order brings finality, judgment, and ultimate success to a strong coalition of employer interests who banded together to challenge AB 51. Employers in California may permissibly use mandatory arbitration agreements. However, the use of mandatory arbitration agreements potentially can be problematic when it comes to enforcing the agreement. When an applicant or employee must sign an arbitration agreement as a condition of employment, the agreement is a contract of adhesion that will likely be found to be procedurally unconscionable. Thus, a court may refuse to enforce a mandatory arbitration agreement if there are also terms in the agreement that are substantively unconscionable and non-severable.

January 2, 2024 by Gerald L. Maatman, Jr.

It Is Almost Here — The Duane Morris Class Action Review For 2024

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

Duane Morris Takeaways: As we kick off 2024, we are pleased to announce the publication of the second annual edition of the Duane Morris Class Action Review this coming week. It is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting corporations, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breaches, EEOC-Initiated and government enforcement litigation, discrimination, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, wage & hour class and collective actions, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, the top class action settlements across all areas of law, and primers on both the Illinois Biometric Information Privacy Act and the California Private Attorney General Act. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2024.

This past year Employment Practices Liability Consultant Magazine (EPLiC) called the DMCAR “the Bible” on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.” It said that “The Review must-have resource for in-depth analysis of class actions in general and workplace litigation in particular.” EPLiC continued that “The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting Corporate America,” and “provides insight as to what companies and corporate counsel can expect . . . in terms of filings by the plaintiffs’ class action bar.”

Check back here in the coming week for your free download of the publication.

December 18, 2023 by Gerald L. Maatman, Jr.

Hawaii Federal Court Denies Motion To Certify Covid-19 Vaccination Class Action Brought Under Title VII And The ADA

By Gerald L. Maatman, Jr., Nick Baltaxe, and Nathan K. Norimoto

Duane Morris Takeaways: In O’Hailpin v. Hawaiian Airlines Inc., No. 22-CV-00532, 2023 U.S. Dist. LEXIS 220734 (D. Haw. Dec. 12, 2023), Judge Jill Otake of the U.S. District Court for the District of Hawaii denied a motion for class certification brought by current and former employees of Hawaiian Airlines alleging discrimination under Title VII and the ADA against individuals who requested medical or religious accommodations from their employers’ COVID-19 vaccination policy. The decision is pro-defendant and well worth a read in terms of strategies to oppose and prevent class certification of employment discrimination claims.

Case Background

Riki O’Hailpin, along with eight other named plaintiffs (“Plaintiffs”), brought a putative class action against Defendant Hawaiian Airlines Inc. (“Hawaiian”), alleging that Hawaiian violated Title VII of the Civil Rights Act of 1964 (“Title VII”) and the Americans with Disabilities Act (“ADA”) by discriminating against employees who requested medical or religious accommodations from Hawaiian’s Covid-19 vaccination policy. In response to the Covid-19 pandemic, President Biden issued Executive Order No. 14042, a Federal Contractor Mandate that required certain employers to implement a mandatory vaccination policy. Under the Federal Contractor Mandate and related guidelines, Hawaiian was required to have its unvaccinated employees masked and socially distanced in the workplace; thus, any exemptions to the vaccine policy would need to comply with those masking and distancing requirements. Id. at *3. Plaintiffs challenged Hawaiian’s policy that required all employees “to be vaccinated November 1, 2021 unless they had a reasonable accommodation for a disability as defined under the ADA or a sincerely held religious belief that conflicted with their ability to receive a Covid-19 vaccine.” Id. at *3-4.

Hawaiian received 568 reasonable accommodation requests related to the vaccine policy, including 496 for religious accommodations and 72 for medical exemptions. Id. at *3. Hawaiian subsequently examined every work position and every work location to determine whether masking and distancing were feasible and concluded that, for a majority of the positions, they were not. Hawaiian also implemented a “Transition Period Testing Program” that provided a deadline for unvaccinated employees to test and a 12-month unpaid leave of absence for those who did not get vaccinated and were not granted an accommodation. Id. at *6. The complaint alleged Hawaiian engaged in a “pattern and practice of discrimination” under Title VII and the ADA by denying medical and religious accommodation requests and that the Transition Period Testing Program was a pretext for denying accommodation requests. Id. at *17. Plaintiffs sought to represent all current and former Hawaiian employees whose religious and medical vaccine accommodation requests were denied under Hawaiian’s vaccination policy, and proposed a primary class of the approximately 500 employees whose accommodation requests were denied as well as sub-classes, broken down by medical and religious requests, of individuals whose requests were either denied or rescinded by Hawaiian. Id. at *9. Plaintiffs moved for class certification under Rule 23 of the Federal Rules of Civil Procedure. Id.

Plaintiffs’ Motion For Class Certification

The Court evaluated Plaintiffs’ motion for class certification under Rule 23’s requirements of numerosity, adequacy, predominance, typicality, and commonality. First, it expressed skepticism that one of Plaintiffs’ proposed sub-classes satisfied the numerosity requirement. Id. at *12-13. The Court concluded that certification of a sub-class of 14 individuals “whose medical exemption requests were rescinded, such that no final decision was reached … could likely be denied based on numerosity grounds alone.” Id. at *13. At the same time, the Court determined that Plaintiffs satisfied Rule 23’s adequacy of counsel requirement. Id. at *13-14. Hawaiian did not contest the requirement with respect to the named Plaintiffs and their counsel. Id. at *14.

The Court further evaluated whether Plaintiffs’ “pattern and practice” theory of liability met Rule 23’s commonality, typicality, and predominance requirements, with a specific focus on issues susceptible to “generalized proof” versus “individualized proof.” Id. at *20-21. The Court found that Plaintiffs could not satisfy the remaining Rule 23 requirements due to the individualized assessments into each medical and religious accommodation request to determine whether Hawaiian’s treatment of each request constituted actionable discrimination under Title VII and the ADA. Id. at *23-57.

With respect to the sub-classes of individuals who were denied religious accommodation requests, the Court noted that the inquiries into each employee’s “sincerely held religious belief and secular preference” and/or whether the accommodation would cause an “undue hardship” to Hawaiian would require too many individualized assessments to satisfy predominance under Rule 23. Id. at *27–*42. For example, the Court noted the analysis of whether the accommodation would impose an undue hardship on Hawaiian would include an individualized review of each position, location, union status, and the ability to mask and social distance. Id. at *37-39.

For the medical accommodation sub-classes, the Court noted that the ADA extends “only to qualified individuals … who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires.” Id. at *44 (quoting 42 U.S.C. § 12111(8)). For this reason, the Court opined that the reasonableness of the accommodation “is necessarily individualized, based on the person’s position and location, and the extent to which an accommodation would amount to an undue hardship on Hawaiian.” Id. at *52. In light of the individualized inquiries to determine the reasonableness of each accommodation (masking, social distancing, or testing) for each qualified individual, the Court determined that Plaintiffs did not meet their “burden to explain why commonality, typicality, and predominance are met” for the ADA subclasses. Id. at *55-56.

Accordingly, the Court denied Plaintiffs’ motion for class certification and held that a class action was not “the superior way” for Plaintiffs’ claims to proceed. Id. at *56.

Implications For Employers

This decision represents a helpful roadmap for employers to defend not only against potential Covid-19 vaccine-related class action complaints, but also against putative class actions brought under Title VII and the ADA. The Court’s ruling underscores the importance of individualized inquiries for religious and medical accommodation requests under Title VII and the ADA, and offers tools to defend against the plaintiff’s burden of demonstrating predominance, typicality, and commonality at the class certification stage of the litigation.

December 18, 2023December 18, 2023 by Gerald L. Maatman, Jr.

Florida Federal Court Allows The EEOC To Expand Its Lawsuit Based On The Joint Employer Doctrine

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

Duane Morris Takeaways: In EEOC v. Princess Martha, LLC, et al., Case No. 8:22-CV-2182, 2023 U.S. Dist. LEXIS 219651 (M.D. Fla. Dec. 11, 2023), Judge Charlene Honeywell of the U.S. District Court for the Middle District of Florida ruled that a real estate acquisition firm could not avoid a disability discrimination suit filed by the EEOC, despite the fact that the real estate firm was not named in the original charge of discrimination. The EEOC initially only sent two of the three defendants the operative charge of discrimination, but throughout the course of the investigation the Commission discovered that the real estate acquisition firm was a joint employer, and subsequently sent the real estate firm notice and amended its complaint accordingly. This case illustrates the dangers of joint employer liability for highly integrated corporate entities, and the judicial latitude the EEOC is often afforded to amend its complaints after charging a named party.

Background

In August of 2021, a woman was offered a job at Princess Martha, a Florida retirement community, but her job offer was rescinded after she failed a drug test on account of the medications she took to treat her Post Traumatic Stress Disorder. She promptly filed a charge of discrimination with the EEOC alleging Princess Martha’s hiring practices violated the Americans with Disabilities Act of 1990.

The EEOC sent Princess Martha notice of the charge on November 23, 2021. During the course of its investigation the Commission determined that Princess Martha had a joint employer relationship with TJM Properties, whom it sent notice to on May 26, 2022. After determining that TJM Properties and Princess Martha violated the ADA, and after an unsuccessful conciliation attempt, the EEOC filed a lawsuit against both TJM Properties and Princess Martha on September 21, 2022. The Commission subsequently amended its complaint by adding TJM Property Management to the suit, alleging TJM Property Management received proper notice of the lawsuit because of its interrelated relationship as a single or integrated enterprise and/or joint employer status with the other defendants.

TJM Properties and TJM Property Management moved to dismiss the lawsuit on two grounds: First they argued that the EEOC had failed to exhaust its administrative remedies, including adequately putting the TJM entities on notice and giving them the opportunity to conciliate. Second, they argued that the EEOC’s complaint failed to establish a single/integrated enterprise or joint employer relationship existed between the TJM entities and Princess Martha.

The Court’s Ruling

In ruling in favor of the EEOC, the Court made short work of the defendants’ first argument. TJM Properties participated in the conciliation process and was explicitly notified by the Commission that it was a joint employer to Princess Martha. TJM Property Management similarly received notice due to its interrelated nature with the other defendants, and the TJM entities shared a principal place of business and the same mailing address. Furthermore, the Court pointed to an agreement existed between the defendants that required TJM Property Management to assist in coordinating legal matters with Princess Martha.

With respect to the defendants’ second argument, the Court noted that typically only parties named in EEOC charges could be charged in suits, but courts used a five-factor test to determine whether a non-named party could be sued. Applying the factors to the case, the Court determined that all three defendants were “highly integrated.” Id. at * 8. All three entities shared a mailing address, and the managing members of Princess Martha were also active in the management of TJM. Additionally, the human resources director for Princess Martha was a TJM Properties employee, and all three entities shared a common owner. Because of this, the Court concluded that despite the fact that the EEOC had not named TJM Property Management in the original suit, the highly integrated nature of the defendants made the Commission’s amended complaint appropriate.

Implications For Employers

As the ruling in EEOC v. Princess Martha, LLC illustrates, many courts are reluctant to strictly interpret an EEOC complaint, and the Commission can likely amend its lawsuit if, during the course of its investigation, it discovers that named defendants have highly integrated relationships with non-named entities. Therefore, companies with closely adjacent corporate affiliates should take extra care if they receive a charge of discrimination from the EEOC, as the Commission may later amend its complaint to include a non-named corporate entity.

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

The 2023-2024 Judicial Hellholes Report From The American Tort Reform Association Ranks The Worst Jurisdictions For Defendants

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

Duane Morris Takeaways: Annually the American Tort Reform Association (“ATRA”) publishes its “Judicial Hellholes Report,” focusing on litigation issues and identifying jurisdictions likely to have unfair and biased administration of justice. The ATRA recently published its 2023-2024 Report and for the first time in the history of the report, the ATRA ranked two jurisdictions at the top of the list – both Georgia and Pennsylvania, specifically the Pennsylvania Supreme Court and the Philadelphia Court of Common Pleas – as the most challenging venues for defendants. Readers can find a copy here and the executive summary here.

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

The 2023 Hellholes

In its recently released annual report, the ATRA identified 9 jurisdictions on its 2023 hellholes list – which, in order, include, tied at number one: (1) Georgia – (the defending “champion” from the top of the 2022 list, with massive verdicts bogging down business and more liability expanding decisions issued by the Georgia Supreme Court); and (1) Pennsylvania (especially in the Philadelphia Court of Common Pleas and the Supreme Court of Pennsylvania); (3) Cook County (as a “no-injury required” hotspot and lawsuits stemming from the Illinois Biometric Information Privacy Act); (4) California (with Proposition 65 lawsuits thriving and a huge overall volume of lawsuits, in addition to Private Attorney General Act (PAGA) litigation, lemon law litigation, and environmental hotbed); (5) New York (with “no-injury” consumer class action lawsuits and massive verdicts); (6) South Carolina (particularly in asbestos litigation, with problems related to bias against corporate defendants, unwarranted sanctions, low evidentiary requirements, liability expanding rulings, unfair trials, severe verdicts, and a willingness to overturn or modify jury verdicts to benefit plaintiffs); (7) Lansing, Michigan (particularly due to liability-expanding decisions by the Michigan Supreme Court and pro-plaintiff legislative activity); (8) Louisiana (with long-running costal litigation and insurance claim fraud litigation); and (9) St. Louis, Missouri (with focuses on junk science in the courtrooms and nuclear verdicts).

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

The 2024 “Watch List”

The ATRA also included 3 jurisdictions on its “watch list,” including Kentucky (the ATRA noted that Kentucky, as a newcomer to the list, has been reported as having some lawyers resorting to unethical measures to secure wins); New Jersey (with a powerful trial bar), and Texas (particularly the Court of Appeals for the Fifth District, which the ATRA opined has developed a reputation for being pro-plaintiff and pro-liability expansion).

In addition, the ATRA recognized that several jurisdictions made significant positive improvements this year, highlighting decisions by the New Hampshire and Delaware Supreme Courts, which rejected no-injury medical monitoring claims, the New Jersey Appellate Court, which discarded improper expert testimony, the Texas Supreme Court, which rejected manipulation of juries, and the West Virginia Supreme Court, which placed reasonable limits on employer liability.

In addition to court actions, the ATRA also stated that nine state legislatures enacted positive civil justice reforms this year.

Implications For Employers

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

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

Maryland Federal Court Reinstates Class Certification In Data Breach Class Action

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In the proceeding captioned In Re Marriott International Customer Data Security Breach Litigation, MDL No. 8:19-MD-02879, 2023 WL 8247865 (D. Md. Nov. 29, 2023), Judge John Preston Bailey of the U.S. District Court for the District of Maryland granted Plaintiff’s Motion for Class Certification and reinstated several previously-certified classes. The defendant argued that class certification was improper, in part, because the putative class members signed a Choice of Law Provision that contained a class action waiver. Conversely, the plaintiffs contended that the defendant waived its defense based on the Choice of Law Provision. The Court held that (i) the defendant waived its Choice of Law Provision, and (ii) in the absence of an arbitration agreement, the Choice of Law Provision did not override the Rule 23 requirements. For these reasons, this case serves as an important reminder for companies on the importance of the terms of contractual agreements in the context of seeking to arbitrate cases and potentially avoid class or collective actions.

Case Background

In 2016, Marriott purchased Starwood Hotels & Resorts Worldwide (“Starwood”), and inherited Starwood’s IT infrastructure provided by Accenture LLP (“Accenture”) for all Starwood properties. Id. In September 2018, Marriott learned that an unidentified party tried to gain access to the Starwood guest reservation database. After an investigation, Marriott determined Starwood’s database was compromised from July 2014 through September 2018. Id. *1. On November 30, 2018, Marriott disclosed the data breach. Id.

Thereafter, affected consumers filed suit against Marriott and Accenture nationwide. Id. Marriott requested that the actions be consolidated into one multi-district litigation (“MDL”) in the U.S. District Court for the District of Maryland, where Marriott is headquartered. Id. * 4. The case was consolidated, and the plaintiffs filed their joint MDL Complaint alleging various state law contract, statutory consumer protection, and state law negligence claims. Id. The plaintiffs then moved to certify various classes. Id. *2.

The putative class included members of the Starwood Preferred Guest Program (“SPG”). Id. *2. Members of the SPG program signed a contract that contained a “Choice of Law and Venue” Provision (the “Choice of Law Provision”). Id. The Choice of Law Provision stated that any disputes related to the SPG program would “be handled individually without any class action” and would have exclusive jurisdiction in the State of New York. Id. Therefore, the defendant asserted that Rule 23(a)’s “typicality” requirement was not met because the class members were SPG program members, and the class contained both members and non-members of the SPG program. Id.

The District Court agreed with the defendant, and redefined all classes to include only SPG members. Id. *3. However, by doing so, every putative class member was “someone who had purportedly given up the right to engaged in just such class litigation.” In Re Marriott Int’l, Inc., 78 F.4th 677, 682-83 (4th Cir. 2023). The District Court “did not further consider the import of the class waiver on its certification decision,” id. at 683, and granted certification as to three of the plaintiffs’ Rule 23(b)(3) and four Rule 23(c)(4) damages classes. In Re Marriott Int’l, Inc., 341 F.R.D 128, 172-73 (D. Md. 2022). Subsequently, the defendants appealed.

On appeal, the Fourth Circuit held that the District Court erred in failing to address whether or not the SPG members agreed to bar the certification of a class action. In Re Marriott International, 2023 WL 8247865, at *3. The Fourth Circuit vacated the class certification and remanded to the District Court to consider the effect of the Choice of Law Provision on the class. Id.

The District Court’s Decision

The District Court concluded that (i) the defendants waived the Choice of Law Provision, and (ii) absent an arbitration agreement, Rules 23 and 42 prevailed over the parties’ Choice of Law Provision Id. Accordingly, the District Court reinstated the previously-certified classes.

First, the District Court analyzed the plaintiff’s position that the defendants waived the Choice of Law Provision. It opined that “[w]aiver is the intentional relinquishment or abandonment of a known right.” United States v. Olano, 507 U.S. 725, 733 (1993) (internal citations omitted). The District Court reasoned that a party “waives a contractual provision when the party takes actions that are inconsistent with the provision.” In Re Marriott International, 2023 WL 8247865, at *4. The District Court held the defense “clearly waived 5/6” of its Choice of Law Provision because the defendants: (1) requested consolidation into an MDL, which “is the antithesis of handling each claim on an individual basis”; (2) stated that “separately litigating each of the 59 related actions” would “offer no benefit” and heighten the burdens of all involved; and (3) stated venue was proper in Maryland and requested that the MDL be assigned to Maryland, which was inconsistent with the New York Choice of Law Provision. Id. As such, the District Court found that the defendants waived the Choice of Law Provision and all terms contained therein. Id.

Second, the District Court held that it was not required to enforce the Choice of Law Provision outside of a binding arbitration provision. Id. *8. The Choice of Law Provision was “patently distinguishable” from “all of the reported cases on contractual class action waivers” because it did not have a mandatory arbitration clause. Id. *7. When parties agree to resolve their case in a non-judicial forum such as arbitration, “the Federal Rules have limited applicability”. Id. *6. However, in the absence of such an agreement, the District Court opined that “[t]he parties cannot by agreement dictate that a district court must ignore the provisions of Rule 23 of the Federal Rules of Civil Procedure.” Id. *7. The District Court found that Rule 23 and Rule 42 do not “call for consideration of the parties’ preferences,” but rather “furtherance of efficient judicial administration.” Id. Thus, the District Court was not required to enforce the Choice of Law Provision, and held that the plaintiffs did not waive their right to bring a class action claim. Id. *8 *(quoting Martrano v. Quizno’s Franchise Co., 2009 WL 1704469, at *20-21 (W.D. Pa. June 15, 2009)).

Implications For Companies

Companies should proactively review their arbitration agreements and class or collective action waivers to ensure that contractually agreed-upon terms can and will be imposed by a court. Additionally, when faced with multiple nationwide claims, companies should analyze their case defense strategy and make an informed decision before filing and/or joining an MDL. Finally, as part of any acquisition, companies should have their own data security team thoroughly vet and approve the acquired company’s security infrastructure prior to, or shortly after, the acquisition.

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

Illinois Supreme Court Endorses Broad Interpretation Of The BIPA’s “Health Care Exception”

By Gerald L. Maatman, Jr. and Tyler Zmick

Duane Morris Takeaways: In the latest ruling in the biometric privacy class action space, the Illinois Supreme Court embraced a broad reading of the “health care exception” in the Illinois Biometric Information Privacy Act (“BIPA”) in Mosby v. Ingalls Memorial Hospital, 2023 IL 129081 (Ill. Nov. 30, 2023). The Illinois Supreme Court held that the statute excludes from its scope data collected in two separate and distinct scenarios: (1) “information captured from a patient in a health care setting”; and (2) information collected “for health care treatment, payment, or operations under the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA).” Unlike clause (1), the Supreme Court held that the exception in clause (2) is not limited to data obtained from patients and serves to exclude information that originates from any source.

The Mosby ruling is welcome news to BIPA defendants and companies operating in the health care space. In the wake of the decision, courts likely will be asked to define the exact contours of the BIPA’s broadened “health care exception” in cases presenting facts that are less obviously tied to health care treatment, payment, or operations compared to the facts at issue in Mosby.

Case Background

The Plaintiffs in Mosby were nurses who claimed that their hospital-employers required them to use a fingerprint-based medication-dispensing system to verify their identities. Plaintiffs sued their employers and the company that distributed the medication-dispensing system, alleging that Defendants violated §§ 15(a), 15(b), and 15(d) of the BIPA by using the medical-station scanning device to collect, use, and/or store their “finger-scan data” without complying with the BIPA’s notice-and-consent requirements and by disclosing their purported biometric data to third parties without first obtaining their consent.

Defendants moved to dismiss in the trial court, arguing that the claims failed because Plaintiffs’ data was specifically excluded from the BIPA’s scope under § 10 of the statute, which states that “[b]iometric identifiers do not include information captured from a patient in a health care setting or information collected, used, or stored for health care treatment, payment, or operations under [the HIPAA].” 740 ILCS 14/10. Defendants argued that the latter clause applied in that Plaintiffs’ fingerprints had been used in connection with Plaintiffs providing medicine to patients, meaning their fingerprints were “collected, used, or stored for health care treatment, payment, or operations under [the HIPAA].” Id.

The trial court denied Defendants’ motions. It ruled that § 10’s “health care exception” was limited to patient information protected under the HIPAA and that the exclusion does not extend to information collected from health care workers.

On appeal, the First District of the Illinois Appellate Court affirmed the denial of Defendants’ motions to dismiss. Echoing the trial court, the Appellate Court determined that the biometric data of health care workers is not excluded from the BIPA’s scope and that the relevant provision of § 10 excluded from the BIPA’s protections “only patient biometric information.” Mosby, 2023 IL 129081, ¶ 16; see id. ¶ 17 (“[T]he appellate court held that ‘the plain language of the statute does not exclude employee information from the [BIPA’s] protections because they are neither (1) patients nor (2) protected under HIPAA.’”) (citation omitted).

Appellate Court Judge Mikva dissented from the majority’s opinion. Judge Mikva opined that the legislature meant to exclude from the BIPA’s scope the biometric data of health care workers “where that information is collected, used, or stored for health care treatment, payment, or operations, as those functions are defined by the HIPAA.” Id. ¶ 19 (citation omitted). Judge Mikva expressed the view that the first part of § 10’s “health care exception” excludes from the BIPA’s coverage information from a particular source (i.e., patients in a health care setting) and that the second part excludes information used for particular purposes (i.e., health care treatment, payment, or operations), regardless of the source of that information.

The Illinois Supreme Court’s Decision

On further appeal, the Illinois Supreme Court agreed with Appellate Court Judge Mikva’s dissent, unanimously holding that the BIPA’s exclusion for “information collected, used, or stored for health care treatment, payment, or operations under [the HIPAA]” can apply to the biometric data of health care workers (not only patients).

The Supreme Court determined that the relevant sentence of § 10 excludes from the definition of “biometric identifier” data that may be collected in two distinct (rather than overlapping) scenarios – namely, biometric identifiers do not include (i) information captured from a patient in a health care setting or (ii) information collected, used, or stored for health care treatment, payment, or operations under HIPAA. Id. ¶ 37 (“[T]he phrase prior to the ‘or’ and the phrase following the ‘or’ connotes two different alternatives. The Illinois legislature used the disjunctive ‘or’ to separate the [BIPA’s] reference to ‘information captured from a patient in a health care setting’ from ‘information collected, used, or stored for health care treatment, payment, or operations under [the HIPAA].’ Pursuant to its plain language, information is exempt from the [BIPA] if it satisfies either statutory criterion.”) (internal citations omitted).

The Supreme Court agreed with Defendants that the two categories of information are different because information excluded under the first clause originates from the patient, whereas information excluded under the second clause may originate from any source. Regarding the second clause, the Supreme Court observed that the Illinois legislature borrowed the phrase “health care treatment, payment, and operations” from the federal HIPAA regulations. Accordingly, the Supreme Court determined that “the legislature was directing readers to the HIPAA to discern the meaning of those terms,” which meanings “relate to activities performed by the health care provider – not by the patient.” Id. ¶ 52.

Thus, the Supreme Court held that a health care worker’s data used to permit access to medication-dispensing stations for patient care qualifies as “information collected, used, or stored for health care treatment, payment, or operations under [the HIPAA]” and is exempt from the statute’s scope.

Implications Of The Decision

After the recent slew of plaintiff-friendly BIPA decisions issued by both state and federal courts, the Illinois Supreme Court’s decision in Mosby comes as welcome news for companies facing privacy-related class actions – particularly those operating in the health care space.

Relying on Mosby, defendants will likely add the BIPA’s “health care exception” to their arsenal of defenses in a wider array of cases moving forward. Importantly, for purposes of the second “HIPAA prong” of the statute’s “health care exception,” federal HIPAA regulations govern the definitions of the terms “health care treatment,” “payment,” and “operations.” Given that the regulatory definitions of those terms are broad, see 45 C.F.R. § 160.103; id. § 164.501, defendants will likely test the breadth of the exception in future cases presenting facts that may be less obviously tied to health care treatment, health care payment, and/or health care operations compared to the facts at issue in Mosby.