Gerald L. Maatman, Jr. – Page 8 – Class Action Defense

September 29, 2023October 2, 2023 by Gerald L. Maatman, Jr.

EEOC’s September Spree Of Filings Caps Off Landmark Year In FY 2023

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

Duane Morris Takeaways: In FY 2023, the EEOC’s litigation enforcement activity showed that any previous slowdown due to the COVID-19 pandemic is well in the rearview mirror, as the total number of lawsuits filed by the EEOC increased from 97 in 2020 to a whopping total of 144 in FY 2023. Per tradition, September 2023 was a busy month for EEOC-Initiated litigation, as this month marks the end of the EEOC’s fiscal year. This year, 67 lawsuits were filed September, up from the 39 filed in September of FY 2022.

Overall, the FY 2023 lawsuit filing data confirms that EEOC litigation is back in full throttle, with no signs of slowing down. Employers should take heed. Amplifying that activism, the Commission issued a press release at the end of the fiscal year touting its increased enforcement litigation activity, a somewhat unprecedented media statement that the EEOC has never issued in previous years.

Lawsuit Filings Based On EEOC District Offices

In addition to tracking the total number of filings, we closely monitor which of the EEOC’s 15 district offices are most actively filing new cases over the year and throughout September. Some districts tend to be more aggressive than others, and some focus on different case filing priorities. The following chart shows the number of lawsuit filings by EEOC district offices.

In FY 2023, Philadelphia District Office had by far the most lawsuit filings with 19, followed by Indianapolis and Chicago with 13 filings, and New York and Los Angeles each with 10 filings. Charlotte, Atlanta, Dallas, Phoenix, and Memphis had 9 each, Houston had 8, Miami, Birmingham, and St. Louis had 7 each, and San Francisco had 5 filings.

The most noticeable trend of FY 2023 is the filing deluge in Philadelphia (19 lawsuits), compared to FY 2022 where Philadelphia District Office filed 7 lawsuits. Similarly, Indianapolis ramped up its filings compared to the 7 filings from FY 2022. Like FY 2022, Chicago remained steady near the top of the list again with 13 filings. Los Angeles, had a slight increase, based on the 8 filings it had in FY 2022. Going another direction, Miami filings slightly fell compared to its 8 filings in FY 2022. Finally, both New York and Charlotte increased their filings from FY 2022, with New York substantially increasing from 7, and Charlotte moderately increasing from 7 filings.

The balance across various District Offices throughout the country confirms that the EEOC’s aggressiveness is in peak form, both at the national and regional level.

Lawsuit Filings Based On Type Of Discrimination

We also analyzed the types of lawsuits the EEOC filed, in terms of the statutes and theories of discrimination alleged, in order to determine how the EEOC is shifting its strategic priorities.

When considered on a percentage basis, the distribution of cases filed by statute remained roughly consistent compared to FY 2023 and FY 2022. Title VII cases once again made up the majority of cases filed, making up 68% of all filings (down from the 69% filings in FY 2022, and significantly above 61% in FY 2021). ADA cases also made up a significant percentage of the EEOC’s September filings, totaling 34%, in line with 29.7% in FY 2022, although down from the 37% in FY 2021. There were also 12 ADEA cases filed in FY 2023, after 7 age discrimination cases filed in FY 2022.

The graphs below show the number of lawsuits filed according to the statute under which they were filed (Title VII, Americans With Disabilities Act, Pregnancy Discrimination Act, Equal Pay Act, and Age Discrimination in Employment Act) and, for Title VII cases, the theory of discrimination alleged.

Lawsuits Filings Based On Industry

The graphs below show the number of lawsuits filed by industry. Three industries were the primary targets of lawsuit filings in FY 2023: Restaurants with 28 filings, Retail with 24 filings, and Healthcare with 24 filings. Not far off those industries are Manufacturing with 15 filings; Construction with 7 filings; Automotive, Security, and Transportation with 6 filings each; and Technology with 5 filings.

Hospitality and Healthcare employers should be keenly aware of the EEOC’s enforcement of alleged discriminatory practices in these sectors. But in reality, employers in nearly any industry are vulnerable to EEOC-initiated litigation., as detailed by the below graph.

Looking Ahead To Fiscal Year 2024

Moving into FY 2024, the EEOC’s budget includes a $26.069 million increase from 2023, and focuses on six key areas including advancing racial justice and combatting systemic discrimination on all protected bases; protecting pay equity; supporting diversity, equity, inclusion, and accessibility (DEIA); addressing the use of artificial intelligence in employment decisions and preventing unlawful retaliation.

The EEOC also announced goals for its own Diversity, Equity, Inclusion, and Accesibility (DEIA) program where it seeks to achieve four goals, including workplace diversity, employee equity, inclusive practices, and accessibility. Additionally, the EEOC continues to polish its FY 2021 software initiatives addressing artificial intelligence, machine learning, and other emerging technologies in continued efforts to provide guidance. Finally, the joint anti-retaliation initiative among the EEOC, the U.S. Department of Labor, and the National Labor Relations Board will continue to address retaliation in American workplaces.

Key Employer Takeaways

In sum, FY 2023 was a year of new leadership and structural changes at the EEOC. With a significantly increased proposed budget, it is more crucial than ever for employers pay close attentions in regards to the EEOC’s strategic priorities and enforcement agendas. We anticipate these figures will grow by next year’s report, so it is more crucial than ever for employers to comply with discrimination laws.

September 22, 2023 by Gerald L. Maatman, Jr.

Conditional Certification Denied To Illinois Jail Guards Who Were Not Paid For Time Outside Work Engaging In COVID-19 Protocols

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

Duane Morris Takeaways: In Evans III, et al v. Dart, et al., No. 1:20-CV-02453 (N.D. Ill. Sept. 15, 2023), Judge Rebecca R. Pallmeyer of the U.S. District Court for the Northern District Of Illinois denied Plaintiffs’ motion for conditional certification of a collective action of Cook County Jail Guards who were not compensated for time spent off-the-clock decontaminating their work gear to prevent the spread of COVID-19. In rejecting the jail correctional officers’ bid for conditional certification under 29 U.S.C. § 216(b), the Court ruled the Plaintiffs could not establish that they were victims of a common policy or plan that violated the law, as there was no evidence that the jail even had an off-the-clock decontamination policy. Thus, the Court concluded that Plaintiffs failed to establish that their cleaning efforts outside of work resulted from any requirement imposed by their employer. The ruling is a blueprint for corporate counsel in terms of a solid approach for opposing employment-related conditional certification motions.

Case Background

The factual origins of the case stem from a COVID-19 outbreak at the Cook County Department of Corrections (“Cook County Jail”) in April 2020. Plaintiffs allege that, amid the outbreak, the Cook County Jail required correctional officers to “engag[e] in decontamination/sanitation activities” before and/or after their shifts within the CCDOC, “including washing and sanitizing their uniforms, sanitizing their persons, sanitizing and maintaining personal protective equipment (‘PPE’), and showering.” Id. at 2.

According to Plaintiffs, they would spend approximately 20 to 30 minutes before and after shifts completing these protocols but were not paid for that time. As the Court noted, “each Plaintiff described slightly different activities that took slightly different amounts of time,” which formed “a consistent narrative of enhanced decontamination activities, significantly exceeding what they did prior to COVID.” Id. at 4.

In the same month that the April 2020 outbreak began, Plaintiffs filed this lawsuit on behalf of themselves and a proposed group of all persons who worked at the Cook County Jail between January 27, 2020 and June 11, 2021 who engaged in the purported COVID-19 decontamination protocols, but who were not paid for time spent on those activities. Id. at 3.

The Court’s Decision

The Court declined to certify the proposed collective action based on finding that Plaintiffs fell short in identifying a common policy requiring workers in the proposed collective action to engage in those [decontamination] activities as a condition of their employment.” Id. at 1. Importantly, the Court noted that the Plaintiffs themselves acknowledged that there was no express written policy requiring correctional officers to decontaminate outside of work, and that the only instructions that they received from supervisors about decontamination was during roll call meetings, when supervisors would merely “read and disseminate general advice from the CDC” and instruct guards to not bring items home from the jail. Id. at 4-5.

Another key finding by the Court was that Plaintiffs “did not report their off-duty decontamination activities to their supervisors, nor were they asked about those efforts or disciplined for failing to decontaminate proper.” Id. at 5. Further, the Court made important note of how “no named Plaintiff reported monitoring the time consumed by their daily decontamination activities, submitting any decontamination overtime, or asking their supervisors about decontamination overtime, although many testified that there was no clear way to submit an overtime claim for these activities in the CCDOC “Workforce” record system.” Id.

In reaching its determination, the Court also rejected the relevance of a Communicable Diseases Policy that Cook County had in place requiring workers to “use good judgment and follow training and procedures related to mitigating the risks associated with communicable disease,” and if exposed to one, to “begin decontamination procedures immediately, obtain medical attention if needed, and “notify a supervisor as soon as practical.” Id. at 7. According to the Court, because this policy specified that its aim was to “provide a safe work environment,” the Court found it “hard to imagine how a pre-shift shower or laundering one’s uniform after a drive home is consistent with that language” and concluded, in turn, that the policy did not require the Plaintiffs to engage in COVID-19 protocols at issue outside of work at the jail. Id. at 11.

Finally, the Court discussed how, even if the Communicable Diseases Policy applied to activities outside of work, an “insurmountable” problem for Plaintiffs was that “none of them seemed to know about the policy at the time they were undertaking those activities.” Id. at 12. As a result, the Court found that there was no evidence showing that the Defendants had actual or constructive knowledge of any de facto policy requiring the Plaintiffs to engage in decontamination activities away from the jail. Id. at 15.

For these reasons, the Court concluded that the Plaintiffs fell short of satisfying the requirements for conditional certification of their proposed collective action.

Implications For Employers

The Evans ruling underscores the importance of maintaining and utilizing well-organized clearly-delineated employee conduct policies for activities at and away from the workplace, in anticipation of arguing the absence of uniform policies and procedures in collective actions under 29 U.S.C. § 216(b). In dismissing all of Plaintiffs’ arguments after finding an absence of policy or plan for all proposed collective action members that violated the law, the Court signaled its steady reliance on the well-established standards for these types of claims, providing a valuable reaffirmation to employers’ reliable defense strategies.

September 15, 2023 by Gerald L. Maatman, Jr.

Colorado Supreme Court Applies Litigation Privilege To Attorney’s Allegedly Defamatory Statements About Class Action Defendant

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

Duane Morris Takeaways: In Killmer, Lane & Newman, LLP v. BKP, Inc., No. 21-SC-930, (Col. Sept. 11, 2023), the Colorado Supreme Court ruled that an attorney’s allegedly defamatory statements about a company’s wage-and-hour practices during a press conference to announce filing a class action against that same company were protected by the litigation privilege. The Supreme Court’s unanimous en banc opinion held that the Colorado Court of Appeals erred in concluding that there was an exception to the applicability of the litigation privilege where the size and contours of the proposed class were easily ascertainable from the employer’s records and undermined the need to identify and alert potential class members through the press. In reversing the appellate panel’s ruling, the Colorado Supreme Court determined that the attorney’s statements were shielded from defamation claims by the litigation privilege since the statements merely repeated wage-and-hour allegations made in the complaint and advanced the goals of the lawsuit. The decision in BKP serves as a reminder to companies of the potential pitfalls of bringing defamation claims against attorneys who disseminate information to the public about a party that they are suing in a class action.

Case Background

In 2018, two law firms, Killmer, Lane & Newman, LLP and Towards Justice (collectively, along with attorney Mari Newman of Killmer, Lane & Newman, “the Attorneys”), filed a federal class action lawsuit claiming that Ella Bliss Beauty Bar (“Ella Bliss”), an operator of beauty salons in the Denver metropolitan area, failed to properly pay its nail technicians for required custodial work under federal and Colorado state law. Id. at 5.

On the same day the federal lawsuit was filed, one the Attorneys, Mari Newman, held a press conference in which she stated that Ella Bliss nail technicians had to clean the businesses “for no pay whatsoever,” that the salons “only pay [employees] for the hours they feel like paying,” and that Ella Bliss “is simply too cheap to pay its workers the money they deserve.” Id. at 43. The Attorneys collectively also issued a press release that day asserting that “Ella Bliss Beauty Bar forced its service technicians to perform janitorial work without pay, refused to pay overtime, withheld tips, and shorted commissions.” Id. at 44.

Exactly one year later, Ella Bliss’ parent company, BKP, Inc. (“BKP”) filed a defamation lawsuit against the Attorneys in Colorado state court pertaining to five allegedly defamatory statements that the Attorneys made during their 2018 press remarks, including the ones quoted above. Id. at 13. The district court dismissed the defamation suit and found that the Attorneys’ statements were protected by the litigation privilege, which shields from defamation claims statements by an attorney that have “some reference to the subject matter of . . . proposed or pending litigation.” Id. at 22.

When the Plaintiffs appealed the dismissal to a three-judge panel of the Colorado Court of Appeals, the appellate panel partially reversed the district court’s decision and found that some of the statements at issue were not shielded by the litigation privilege. Id. at 49. While the Attorneys argued that the goals of the media statements were to promote their class action and publicize it to potential additional class members, the appellate panel rejected that notion since the Attorneys were set to receive employment records and payroll documents in discovery that could have easily identified the class members without needing to resort to harmful press statements. Id. at 14.

Following the appellate decision, the Colorado Supreme Court granted the petitioner’s writ for certiorari and analyzed on the question of “whether the common law litigation privilege for party-generated publicity in pending class action litigation excludes situations in which the identities of class members are ascertainable through discovery.” Id. at 1.

The Colorado Supreme Court’s Decision

On further appeal, the Colorado Supreme Court reversed the appellate panel’s ruling and determined that the litigation privilege applied to the allegedly defamatory attorney statements at issue. Id. at 49. The Supreme Court reasoned that the statements “merely repeated, summarized, or paraphrased allegations in the class action complaint” and, therefore, “served to notify the public, absent class members, and witnesses about, and therefore furthered the objective of, the litigation.” Id. at 42.

The Supreme Court also held that the appellate panel erred by basing its litigation privilege analysis on whether the identities of class members were easily ascertainable through discovery. Id. at 2. According to the Supreme Court, two reasons led to that conclusion: “(1) ascertainability is generally a requirement in class action litigation, and imposing such a condition would unduly limit the privilege in this kind of case;” and (2) “the eventual identification of class members by way of documents obtained during discovery is not a substitute for reaching absent class members and witnesses in the beginning stages of litigation.” Id.

Implications For Employers

The Colorado Supreme Court’s decision in BKP, Inc. is notable in that it may serve to embolden the inclination of some class action plaintiffs’ attorneys to use strategic communication techniques to air their clients’ claims in the ‘court of public opinion’ in an attempt to gain leverage, as well as using mass communication tools to grow the reach of their lawsuit to more potential class members. While employers understandably may want to fight back against weaponized misinformation by asserting defamation claims, employers should exercise caution and pick their battles when it comes to such claims, given the high potential for variance in judicial outcomes in states where the case law on this issue remains unsettled and the jurisdictional variables also at play. Ultimately, corporate counsel should carefully consider the potential risks of pursuing a defamation claim against an attorney based on statements that a court may find shielded by privilege regardless of their truthfulness.

September 14, 2023 by Gerald L. Maatman, Jr.

Illinois Federal Court Orders Defendant To Pay Over $4 Million In Arbitration Fees In Mass Arbitration Alleging Violation Of The BIPA

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

Duane Morris Takeaways: Mass arbitration continues to be a formidable tool for plaintiffs’ attorneys seeking to deal with class action waivers in arbitration agreements. This trend is aptly demonstrated by a new ruling in Wallrich, et al. v. Samsung, Case No. 22-CV-5506 (N.D. Ill. Sept. 12, 2023), where Judge Harry D. Leinenweber of the U.S. District Court for the Northern District of Illinois ordered the defendants – who had been served with just shy of 50,000 arbitration demands – to pay the arbitration fees and submit to arbitrating consumers’ claims that the defendants had committed violations of the Illinois privacy laws. Those fees had been waived by the arbitration authority, as allowed by a provision in its’ supplemental rules, but the Court sided with the plaintiffs, who had moved to compel arbitration after the fees were waived, and seeking also to require the defendants to pay them.

Case Background

The Named Plaintiffs filed 49,986 arbitration claims with the American Arbitration Association (“AAA”) on September 7, 2022 on behalf of consumers who are users of Samsung mobile devices. Id. at 2, 5. They alleged that the defendants had unlawfully collected their biometric information in violation of the Illinois Biometric Information Privacy Act. The user agreement required all disputes be resolved in final, binding arbitration and it prohibited class actions. Id. at 3.

The agreement also required use of the services of the AAA and explicitly invoked the AAA’s rules, including its supplemental rules relating to arbitration fees. Id. On September 27, 2022, Samsung refused to pay its portion of the initial arbitration fees to the AAA because it believed the claimants included deceased individuals and others who did not reside in Illinois. Id. at 6. Plaintiffs responded by moving to compel arbitration on October 7, 2022. Id. at 7.

The Court’s Decision

Judge Leinenweber compelled arbitration of the claims of living, Illinois resident petitioners and ordered the respondents to pay the AAA arbitration fees. He first concluded that the arbitration agreements are valid between Samsung and those who actually are its consumers. Id. at 21-22. Second, he noted that as to the petitioners that respondents suspected were either deceased or not Illinois residents, he explained that petitioners’ counsel used Samsung’s own customer list to remove ineligible petitioners. Id. Third, he determined that the arbitration agreement left questions of arbitrability to the arbitrator, thereby declining to rule on respondents’ argument that the collective action waiver in the agreement applies to mass arbitrations, which would bar petitioners’ claims with the AAA. Id. at 25. Finally he ruled that he had the authority to construe and enforce the AAA’s rules about arbitration fees, and determined that respondents are required to pay approximately $4.13 million in fees. Id. at 30, 33-34.

Implications For Employers

As corporations who employ large numbers of individuals in their workforces know, agreements to arbitrate claims related to employment-related disputes are common. They serve the important strategic function of minimizing class action litigation risks. But corporate counsel also are aware that increasingly, plaintiffs’ attorneys have come to understand that arbitration agreements can be used to create leverage points for their clients. Mass arbitrations seek to put pressure on respondents to settle claims on behalf of large numbers of people, even though not via the procedural vehicle of filing a class or collective action lawsuit. As a result, corporate counsel should carefully review arbitration agreement language with an eye towards mitigating the risks of mass arbitrations as well as class actions.

September 11, 2023 by Gerald L. Maatman, Jr.

Ohio Federal District Court Authorizes Notice Of FLSA Claims In Step One Of The Two-Step “Strong Likelihood” Test And Certifies Rule 23 Class

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

Duane Morris Takeaways: In Hogan v. Cleveland Ave Restaurant, Inc. d/b/a Sirens, et al., 15-CV-2883 (S.D. Ohio Sept. 6, 2023), Chief Judge Algenon L. Marbley of the U.S. District Court for the Southern District of Ohio authorized notice to potential opt-in plaintiffs and conditionally certified a collective action of thousands of adult club dancers in a case asserting violations of the Fair Labor Standards Act (“FLSA”) and Ohio law, including claims of unpaid minimum wages, unlawfully withheld tips, and unlawful deductions and/or kickbacks. For good measure, the Court also granted class certification on the plaintiffs’ state law claims. The opinion is a must-read for employers in the Sixth Circuit facing — or hoping to avoid facing — class and collective wage & hour claims.

Case Background

On October 6, 2015, the named plaintiff Hogan filed the lawsuit as a class and collective action asserting violations of the FLSA and Ohio law. After amending the complaint in May 2017 to add additional defendants, on May 14, 2020, Hogan filed a Second Amended Class and Collective Action Complaint, the operative complaint, with a second named plaintiff, Valentine.

In the operative complaint, the named plaintiffs asserted claims against seven adult entertainment clubs and their owners and managers as well as two club associations and an individual defendant with which the clubs were associated. The plaintiffs later settled their claims against one of the seven clubs.

The allegations in the operative complaint center on the clubs’ use of a landlord-tenant system by which the defendant clubs charged dancers “rent” to perform at the clubs for tips from customers in lieu of paying them wages for hours worked.

On September 26, 2022, the plaintiffs moved for certification of their claims as a class and collective action. The parties concluded briefing on the motion five months before May 2023, when the Sixth Circuit issued its pivotal decision in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023). In Clark, the Sixth Circuit ushered in a new, more employer-favorable standard for deciding motions for conditional certification pursuant to 29 U.S.C. § 216(b) of the FLSA.

The District Court’s Decision

First, the court articulated the standard by which it would decide the plaintiffs’ motion for court-supervised notice of their FLSA claims. The court described the Sixth Circuit’s opinion in Clark as “maintain[ing] the two-step process for FLSA collective actions but alter[ing] the calculus.” Slip Op. at 7. Whereas pre-Clark case law authorized notice at step one of the two-step process after only a modest showing of similarly-situated status, the standard post-Clark demands that plaintiffs show a “strong likelihood” exists that there are others similarly situated to the named plaintiffs with respect to the defendants’ alleged violations of the FLSA prior to authorizing notice. Defendants after Clark retain the ability, after fact discovery concludes, to demonstrate that the named plaintiffs in fact are not similarly- situated to any individual who files a consent to join the lawsuit as a so-called opt-in plaintiff. Also unchanged by Clark is the standard for determining similarly-situated status for FLSA purposes.

The court in Hogan concluded that the plaintiffs adequately demonstrated a “strong likelihood” that they are in fact similar to the proposed group of dancers who too were classified as “tenants” of the six defendant clubs who paid rent to lease space at the clubs to earn tips from customers without receiving any wages from the defendant clubs.

In support of their motion, the plaintiffs submitted sworn declarations, deposition testimony, and documentary evidence of the defendants’ policies and practices with respect to dancers. The court found that the plaintiffs showed that the clubs maintained a system in which the defendants acted together to require dancers to pay rent for leasing space, often documented in lease agreements, instead of being paid as employees for performing work.

Among the defendants’ arguments opposing the plaintiff’s motion, the court considered, but ultimately rejected, the defendants’ argument that arbitration provisions in the lease agreements should preclude court-authorized notice of the FLSA claims. The court cited Clark for the proposition that it may consider as a relevant factor the defense of mandatory arbitration agreements in deciding whether to authorize notice of FLSA claims. Homing in on the facts, the court reasoned that members of the potential collective action did not all sign the lease agreements and that those who signed the lease agreements had the option to agree to forgo arbitration of their claims. According to the court, the defendants would have a stronger basis to defeat court-authorized notice if they could show that all dancers had to sign the lease agreement and the lease agreement made arbitration mandatory.

In addition, the court evaluated whether the plaintiffs satisfied the Rule 23 standards for seeking to certify a class of dancers on their state law claims. The court concluded that the plaintiffs met the requirements for class certification under Rule 23(b)(3), because questions of law or fact common to class members predominated over any questions affecting only individual members (the predominance inquiry), and that a class action was superior to other available methods for fairly and efficiently adjudicating the case (the superiority inquiry).

As to predominance, the court reasoned that the issue of the defendants’ alleged unlawful system of treating dancers as tenants rather than paying them wages predominated over individualized issues such as whether a particular dancer signed a lease agreement. As to superiority, the court concluded that the relatively small size of each dancer’s wage claim demonstrated that individuals would have little incentive to pursue their claims alone. Finding no factors pointing against class treatment of the claims, the court concluded that treating the claims as a class action was the superior method for adjudicating liability efficiently.

Implications For Employers

Hogan is the latest in a series of opinions applying the Sixth Circuit’s novel “strong likelihood” standard to plaintiffs’ efforts to expand the scope of their FLSA claims to potential opt-in plaintiffs. The developing case law in this area reflects a highly fact-specific approach to deciding whether plaintiffs have made the necessary showing to unlock court-authorized notice of their claims to potential opt-in plaintiffs. The opinion in Hogan is significant in that it grapples with the “strong likelihood” standard alongside the well-established test for certifying a class pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure.

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

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

By Gerald L. Maatman, Jr. and Tyler Zmick

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

Case Background

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

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

The District Court’s Decision

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

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

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

“Video Tape Service Provider”

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

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

“Consumer”

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

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

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

Implications For Corporate Counsel

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

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

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

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

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

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

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

Case Background

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

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

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

The District Court’s Decision

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

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

Implications For Employers

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

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

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

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

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

Case Background

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

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

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

The Court’s Decision

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

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

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

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

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

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

Implications For Companies

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

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

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

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

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

Case Background

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

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

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

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

The Court’s Decision

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

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

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

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

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

Implications For Employers

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

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

August 28, 2023August 28, 2023 by Gerald L. Maatman, Jr.

Michigan Federal Court Declines To Compel Arbitration Of ERISA Claims Due To An Unenforceable Class Action Waiver

By Gerald L. Maatman, Jr. and Derek Franklin

Duane Morris Takeaways: In Parker, et al. v. Tenneco Inc., et al., Case No. 2:23-CV-10816 (E.D. Mich. Aug. 21, 2023), Judge George Steeh of the U.S. District Court for the Eastern District of Michigan denieda motion to compel arbitration based on finding an ERISA class action waiver in an arbitration agreement unenforceable. The Court determined that Plaintiffs’ breach-of-fiduciary-duty claim under the ERISA “seeks relief for the [Benefits] plan as a whole,” and that “the harm (and the recovery) is to the Plan, rather than to plaintiffs specifically.” Id. at 14-15. In turn, the Court concluded that compelling arbitration and enforcing the class action waiver would prevent plan participants from seeking plan-wide remedies conferred by the ERISA statute. For these reasons, the Parker decision is instructive for employers seeking to implement an enforceable class action wavier and configure arbitration agreements that are best suited to account for the possibility of a class action waiver being nullified.

Case Background

The group of Plaintiffs in the Parker lawsuit were led by Tanika Parker, a current employee of DRiV Automotive Inc. (“DRiV”), and Andrew Farrier, a former worker for Tenneco Inc. (“Tenneco”). DRiV and Tenneco were two of several affiliated entities named as Defendants in the case. Parker and Farrier, participants in ERISA-covered 401(k) plans (the “Plans”) sponsored by their respective employers, alleged that Defendants breached their fiduciary duties under the ERISA by failing to prudently monitor and control the Plans’ investments and expenses. Defendants moved to compel arbitration of Plaintiffs’ claims on an individual basis, pursuant to an Arbitration Procedure adopted by the Plans containing language barring participants from bringing ERISA claims as a group or class. The Arbitration Procedure also provided that, if the class action waiver was found unenforceable or invalid by a court, the entire arbitration procedures would become null and void.

Eastern District of Michigan Opinion

In denying Plaintiffs’ motion to compel arbitration, Judge Steeth ruled that the class action waiver within the Arbitration Procedure was unenforceable because it “limits a participant’s substantive right under ERISA by prohibiting plan participants from bringing suit.” Id. at 15.

The Court’s reasoning cited an April 2022 Sixth Circuit decision in Hawkins v. Cintas Corp., 32 F.4th 625, 630 (6th Cir. 2022), which held that breach-of-fiduciary-duty claims under the ERISA are “brought in a representative capacity on behalf of the plan as a whole.” Id. at 10. The Court also quoted the explanation in the Hawkins decision that, although an ERISA breach-of-fiduciary-duty claim is typically brought by individual plaintiffs, “it is the plan that takes legal claim to the recovery, suggesting that the claim really ‘belongs’ to the Plan,” and that “an arbitration agreement that binds only individual participants cannot bring such claims into arbitration.” Id. at 12.

Consistent with that rationale, the Court in Parker held that the ERISA class action waiver in the Arbitration Procedure at issue was unenforceable because it would preclude Plan participants from pursuing “plan-wide remedies” provided for under the ERISA statute that cannot be waived by an agreement. Id. at 15. According to the Court, this would occur by the class action waiver “(1) prohibiting participants from bringing suit in a representative capacity on behalf of the plan, and (2) limiting relief to losses attributable to individual participant accounts, as opposed to plan-wide remedies.” Id.

Given that the Arbitration Procedure provided that it “shall be rendered null and void in all respects” if the class action waiver were to be “found unenforceable or invalid by the court,” the Court declared the entire Arbitration Procedure null and void and denied Defendants’ motion to compel arbitration. Id. at 15-16.

Implications for Class Action Defendants

As federal courts continue to issue decisions limiting the application of class action waivers relative to claims under the ERISA, it remains critical for businesses and employers to regularly review their arbitration agreements and class action waiver language to ensure legal compliance. Any business trying to implement an enforceable class action waiver should carefully consider the potential risks of extending that language to cover plan mismanagement claims under the ERISA. Businesses should also review their arbitration procedures to ensure they are best positioned to function independently of a potentially unenforceable class action waiver.