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

September 25, 2025September 29, 2025 by Gerald L. Maatman, Jr.

Hospital Defeats Wiretap Adtech Class Action After Texas Federal Court Finds No Knowing Disclosure Of Protected Health Information

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

Duane Morris Takeaways: On September 22, 2025, in Sweat v. Houston Methodist Hospital, No. 24-CV-00775, 2025 U.S. Dist. LEXIS 185310 (S.D. Tex. Sept. 22, 2025), Judge Lee H. Rosenthal of the U.S. District Court for the Southern District of Texas granted a motion for summary judgment in favor of a hospital accused of violating the federal Wiretap Act through its use of website advertising technology. This decision is significant. In the wave of adtech class actions seeking millions – sometimes billions – in statutory damages under the Wiretap Act and similar statutes, the Court held that the Act’s steep penalties (up to $10,000 per violation) were not triggered because the hospital did not knowingly transmit protected health information.

Background

This case is part of a rapidly growing line of class actions alleging that website advertising tools – such as the Meta Pixel, Google Analytics, and other similar website advertising technology, or “adtech,” –secretly capture users’ web-browsing activity and share it with third-party advertising platforms.

Adtech is ubiquitous, embedded on millions of websites. Plaintiffs’ lawyers frequently invoke the federal Wiretap Act, the Video Privacy Protection Act (VPPA), state invasion-of-privacy statutes like the California Invasion of Privacy Act (CIPA), and even the Illinois Genetic Information Privacy Act (GIPA). Their theory is straightforward: multiply hundreds of thousands of website visitors by $10,000 per alleged Wiretap Act violation and the potential damages skyrocket. While some of these class actions have resulted in multi-million-dollar settlements, others have been dismissed (as we blogged about here), and the vast majority remain pending. With some district courts allowing adtech class actions to survive motions to dismiss (as we blogged about here), the plaintiffs’ bar continues to file adtech class actions at an aggressive pace.

In Sweat, the plaintiffs sued a hospital, seeking to represent a class of patients whose personal health information was allegedly disclosed by the Meta Pixel installed on the hospital’s website. The district court granted the hospital’s motion to dismiss the state law invasion of privacy claim but allowed the Wiretap Act claim to proceed to discovery. The hospital then moved for summary judgment, arguing that the Wiretap Act’s crime-tort exception did not apply because the hospital lacked knowledge that it was disclosing protected health information.

Under the Wiretap Act, “party to the communication” cannot be sued unless it intercepted the communication “for the purpose of committing any criminal or tortious act.” 18 U.S.C. § 2511(2)(d). This provision is commonly called the “crime-tort exception.” The plaintiffs pointed to alleged violations of the Health Insurance Portability and Accountability Act (HIPAA) as the predicate crime to trigger this exception.

The Court’s Decision

The Court agreed with the hospital and granted summary judgment, holding that the record contained no evidence that the hospital acted with the “purpose of committing any criminal or tortious act” that would trigger the crime-tort exception. 2025 U.S. Dist. LEXIS 185310, at *13.

As the Court explained, case law authorities have developed two different approaches to determine “purpose” under the crime-tort exception. Some courts use the “independent act” approach, under which the unlawful act must be independent of the interception itself. Other courts have used the “primary purpose” approach, under which the defendant’s primary motivation must be to commit a crime or tort.

Applying the “primary purpose” approach, the Court found “no evidence that [the hospital] acted with the purpose of violating HIPAA…the evidence shows that it did not know it was doing so.” Id. at *13. In so holding, the Court cited to the fact that, although the Pixel was installed on “arguably sensitive portions” of the hospital’s website, the hospital received only aggregated, anonymized data, and there was no proof it knew any protected health information was being disclosed. Id. at *13-14. The Court rejected the plaintiffs’ argument that anonymized aggregate data necessarily originates from identifiable data, emphasizing that Meta’s algorithm could anonymize data “at the input level,” preventing the hospital from receiving identifiable data in the first place. Id. at *16.

Implications For Companies

The Court’s holding in Sweat is a significant win for healthcare providers and other defendants facing adtech class actions. This ruling reinforces two key principles. First, knowledge is critical. Like the Wiretap Act’s HIPAA-based crime-tort exception, similar statutes such as the VPPA require a knowing disclosure of identifiable information. If a defendant lacks knowledge that data is tied to specific individuals, liability should not attach. Second, anonymization matters. Where transmissions are encrypted, anonymized, or otherwise inaccessible at the point of input, there may be no “disclosure” at all.

For example, the VPPA requires disclosure of a person’s specific video-viewing activity, and GIPA requires disclosure of an identified individual’s genetic information. When adtech merely sends anonymized or encrypted data to third-party algorithms—data that cannot be traced back to a specific person—there is no knowing disclosure.

Sweat provides strong authority for defendants to argue that anonymized adtech transmissions cannot satisfy the statutory knowledge requirements of the Wiretap Act’s HIPAA-based crime-tort exception or similarly worded privacy statutes.

September 25, 2025September 25, 2025 by Gerald L. Maatman, Jr.

What The Click?: Third Circuit Finds No Standing For Class Complaining Of Website Operator Monitoring Clicks

By Gerald L. Maatman, Jr., Anna Sheridan, and Shannon Noelle

Duane Morris Takeaways: On August 7, 2025, in an opinion authored by Circuit Judge D. Michael Fisher, the United States Court of Appeals for the Third Circuit issued a precedential decision in Cook v. GameStop, Inc., 148 F.4th 153 (3d Cir. 2025), affirming the U.S. District Court for the Western District of Pennsylvania’s dismissal for lack of standing of a putative class action asserting privacy causes of action against a website operator monitoring clicks. The Third Circuit found that merely tracking internet users’ browsing time and website interactions — without recording or disclosing sensitive or personal information — fails to constitute the type of concrete injury required to confer Article III standing. The decision is instructive for corporate counsel dealing with privacy issues and defense of class action litigation.

Case Background

Plaintiff Amber Cook (“Cook” or “Plaintiff”) was an internet user that visited GameStop’s website in Pennsylvania. See Cook, 148 F.4th 153, 156. Through third-party vendor Microsoft and its programming script called Clarity, GameStop was tracking internet user’s browsing history and interaction with its website. Id. The script Clarity creates is known as a “session replay code” that aggregates data about how long the user browsed the website, mouse movement, links clicked, scrolling, search bar entries, and products added and removed from the “cart.” Id. The script creates a unique id and profile for each user and recaptures each user’s session through a video which GameStop could review to improve functionality and user experience. Id. The unique ids and profiles do not utilize personally identifying information such as names, addresses, and the like. Id. at 160. GameStop’s website has a privacy policy describing the script and information collected but this policy is “buried at the very bottom of the website.” Id. at 156.

Cook sued GameStop for its use of the Clarity script, alleging that it violated the Pennsylvania Wiretapping and Electronic Surveillance Control Act (“WESCA”) and asserting a common law cause of action for intrusion upon seclusion. Cook alleged that the WESCA and privacy tort for intrusion upon seclusion prohibit the interception of electronic communications without prior consent and she suffered an injury in fact “‘‘when her communications with . . . GameStop’s website were intercepted’ by the session replay code.” GameStop moved to dismiss the First Amended Complaint at the District Court level pursuant to Federal Rule of Civil Procedure 12(b)(6) and 12(b)(1). See Case No. 2:22-CV-01292, ECF No. 25-27. The District Court granted GameStop’s motion under Rule 12(b)(1) with prejudice and, in the alternative, held that Cook failed to “plead the necessary facts to support her claims for violation of [WESCA] or intrusion upon seclusion.” See Case No. 2:22-CV-01292, ECF No. 45-46. Specifically, the District Court concluded that Cook’s harms were not analogous to the traditional intangible harms recognized by privacy torts because none of the data gathered “could connect her browsing activity to her.” See Case No. 2:22-cCV01292, ECF No. 46, at 8 (emphasis in the original). Cook appealed the District Court’s decision on standing to the Third Circuit.

The Third Circuit’s Ruling

Reviewing whether Cook’s allegations met the Article III standing threshold de novo, the Third Circuit determined that the appeal concerned only the first element of the analysis, or whether Cook had sufficiently alleged an injury in fact (as opposed to the other requirements of traceability and redressability). The Third Circuit adopted the standard articulated in Barclift and Transunion that — to determine whether a plaintiff has suffered a concrete injury — the framework is whether the harm asserted bears a “close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American courts — such as physical harm, monetary harm, or various intangible harms including . . . reputational harm.” Id. at 158 (citing Barclift v. Keystone Credit Servs., LLC, 93 F.4th 136, 141, 145 (3d Cir. 2024); TransUnion LLC v. Ramirez, 594 U.S. 413, 417 (2021)).

The Third Circuit clarified that it would not take as “rigid” of an approach as other federal circuits but that it would consider the privacy torts that Cook identified of disclosure of private information and intrusion upon seclusion to determine if the harm she alleges is “the kind of harm caused by the comparator tort[s].” The Third Circuit found that she failed to identify sufficiently concrete harms under either analogy.

Tracking Information That Is Not Personal Or Sensitive Nor Disclosed Publicly Not Sufficient To Allege Concrete Injury

With regard to the disclosure of private information analogy, the Third Circuit found that the information captured by the session replay code — recording clicks, mouse hovers, and search bar searches — was neither sensitive or personal. In support of this conclusion, the Third Circuit reasoned that the disclosure of such information cannot plausibly be said to result in embarrassment or humiliation. Cook did not share her name, contact information, address, or billing information while on GameStop’s website. Further, though Cook alleged that GameStop obtained information about her device and browser and created a unique ID and profile for her to capture the session replay information, she did not allege that GameStop identified her through this information. Id. at 160. Cook alleged only that if a user “eventually identifies themselves” then GameStop could “back-reference all of that user’s other web browsing.” Id. The Third Circuit found these allegations were too hypothetical to meet Article III’s injury-in-fact requirement.

Going one step further, the Third Circuit found that “even assuming the information was the type that could cause Cook humiliation under ‘public scrutiny,’” Cook did not allege that the information was ever publicized or disclosed publicly. Id. Cook alleged only that the information was disclosed to third-party vendor Microsoft, “not the broader public.” Id.

As the information collected was not personal or sensitive, the Third Circuit also rejected Cook’s intrusion upon seclusion analogy. As an additional basis for rejecting this tort analogy, the Third Circuit acknowledged that “[m]ost of us understand that what we do on the Internet is not completely private.” Id. (citation omitted).

The WESCA Does Not Provide A Statutory Avenue For Circumventing The Injury-In-Fact Requirement For Standing

The Third Circuit next considered and rejected Cook’s argument that the WESCA provides a separate avenue to circumvent Article III’s injury-in-fact requirement. In making this argument, Cook relied on language in the TransUnion decision that the legislature can “‘elevate harms that exist in the real world’ to make them legally actionable” and went on to claim the WESCA did just that in protecting a “wider range of information” from collection during electronic communications. The Third Circuit disagreed with this logic and reading of the TransUnion decision, determining that the theory “contradicts the fundamental holding of TransUnion” which instructs courts to consider the concrete harm actually alleged by the Plaintiff rather than the “harm the statutory cause of action typically protects against.” Id.at 161 (emphasis added). The Third Circuit analyzed that a statutory violation of the WESCA for tracking web browsing information does not dispense with the Article III standing inquiry and Cook was still required to articulate a harm existing in the “real world” under TransUnion, as legislatures cannot “transform something that is not remotely harmful into something that is.” Id.

Precedent In Which Website Operators Affirmatively Represented They Would Not Track Information Are Not Controlling

The Third Circuit further opined that the Nickelodeon and Google II decisions — which Cook cited in favor of her argument that tracking internet browsing history has been found to constitute a concrete harm — were not controlling. The Third Circuit explained that Nickelodean involved claims that a website operator was collecting minors’ personal information despite affirmatively representing that it would not do so. Id. at 162 (citing In Re Nickelodeon Consumer Priv. Litig., 827 F.3d 262, 269 (3d Cir. 2016)). And, similarly, Google II involved allegations that Google bypassed browser privacy settings through the use of browser cookies to track user information. Id. (citing In Re Google Inc. Cookie Placement Consumer Priv. Litig., 934 F.3d 316, 321 (3d Cir. 2019) (Google II)). The Third Circuit found that both were instances of affirmative “promises not to” collect information that the website operator collected in any event. Id. Here, by contrast, Cook failed to identify an affirmative representation on the part of GameStop to refrain from tracking user browsing and website usage information.

Current Status of GameStop Action

A mandate was issued on September 12, 2025 transferring the action back to the jurisdiction of the District Court, where the matter is still pending.

Implications for Website Operators Tracking Browsing History and Use:

The Third Circuit has provided a helpful roadmap for website operators — at least in this jurisdiction — that merely tracking clicks and interaction with a website is insufficient to confer standing in federal court to potential plaintiffs challenging such tracking. It is critical that the tracking at issue in GameStop, however, did not collect personal or sensitive information nor disclose the same. GameStop also did not affirmatively represent that it would not track website use and interaction. Website operators would be well-advised to review any website tracking using this rubric and to seek legal advice in the event of doubt or ambiguity.

September 24, 2025September 24, 2025 by Gerald L. Maatman, Jr.

You’re Invited: Year-End Review Of EEOC Strategy And Litigation Review Webinar

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex Karasik And Gregory Tsonis

Mark your calendars for our bi-annual program analyzing the latest EEOC developments: Wednesday, October 22, 2025 from 11:00 a.m. to 11:30 a.m. Central. Reserve your virtual seat for the program here.

Join Duane Morris partners Gerald L. Maatman, Jr., Jennifer A. Riley, Alex W. Karasik and Gregory Tsonis for a live panel discussion analyzing the latest impact of the dramatic changes at the U.S. Equal Employment Opportunity Commission, including its new strategic priorities and the EEOC lawsuits filed throughout fiscal year 2025. In its annual performance report for FY 2024, the agency touted a record $700 million in monetary recoveries for workers through litigation and administrative avenues. Heading into FY 2026 with significant changes implemented by the Trump administration, employers’ compliance with federal workplace laws and agency guidance remains a corporate imperative. Our virtual program will empower corporate counsel, human resource professionals and business leaders with key insights into the EEOC’s latest enforcement initiatives and provide strategies designed to minimize the risk of drawing the agency’s scrutiny.

Presenters

Gerald L. Maatman Jr.

Jennifer A. Riley

Alex W. Karasik

Gregory Tsonis

September 23, 2025September 23, 2025 by Gerald L. Maatman, Jr.

Second Circuit Rejects Former Employees’ Attempt To Seek Review Of Arbitral Fees Dispute

By Gerald L. Maatman, Jr., Andrew Quay, and Eden Anderson

Duane Morris Takeaways: A Second Circuit panel of Judges Gerard Lynch, Michael Park, and Beth Robinson reversed the Southern District of New York in Frazier v. X Corp., Case No. 24-1948 (2d Cir. Sept. 2, 2025), holding that X’s (formerly Twitter) refusal to pay ongoing arbitral fees did not amount to a “failure, neglect, or refusal … to arbitrate” that the district court was empowered to remedy under the Federal Arbitration Act (“FAA”). The Second Circuit explained that under 9 U.S.C. § 4, district courts may only address a narrow category of disputes limited to whether arbitration must occur between particular parties over particular issues. The decision follows related precedent set by the Third, Fifth, Ninth, and Eleventh Circuits and makes clear that a party’s decision not to abide by the procedural determinations of an arbitrator or arbitral body does not empower a district court to intervene and review.

The decision is an important primer for corporate counsel in handling disputes over ongoing arbitral proceedings.

Case Background

Plaintiff-Petitioners, seven former employees of Twitter, signed arbitration agreements committing them to resolve any employment-related disputes in binding individual arbitration. The employees filed arbitration demands following their termination, believing that they had been denied severance and had been illegally discriminated against, among other claims. After making certain payments of arbitral fees, Twitter asserted that the arbitration agreements required that the fees be apportioned equally between it and the former employees. The agreements called for a pro-rata split of arbitral fees but incorporate by reference Judicial Arbitration and Mediation Services’ (“JAMS”) rules and policies, which required Twitter to pay all but the case initiation fees. The employees sued to compel arbitration under 9 U.S.C. § 4, arguing that by refusing to pay the fees allocated to it by the arbitral body, Twitter was “refus[ing] to arbitrate” in accordance with the arbitration agreements.

At issue before the Second Circuit was whether Twitter’s refusal to pay ongoing arbitral fees constituted an outright refusal to arbitrate that the district court was empowered to remedy under 9 U.S.C. § 4. The former employees took the position that by incorporating the arbitral body’s rules in the arbitration agreements, Twitter agreed to be bound by the arbitral body’s initial determination that Twitter was responsible for the disputed fees. Therefore, the former employees argued, the district court could compel Twitter to pay the disputed fees under 9 U.S.C. § 4.

The Decision

The Second Circuit rejected the former employees’ argument.

It held that a party’s decision not to abide by the procedural determinations of an arbitrator or arbitral body is an intra-arbitration delinquency that arbitral bodies are empowered to manage. Therefore, the former employees could not use 9 U.S.C. § 4 as a vehicle to seek judicial review of the arbitral body’s decision not to proceed with the arbitration process.

Implications Of The Decision

The Frazier decision marks another federal circuit keeping the courts out of disputes in ongoing arbitral proceedings over a party’s payment of fees or compliance with arbitral policies. Corporate counsel must consider the limited scope of permitted review under 9 U.S.C. § 4 when facing disputes in ongoing arbitral proceedings, whether over payment of fees or otherwise.

September 23, 2025September 23, 2025 by Gerald L. Maatman, Jr.

California Adopts New Rules Expanding The FEHA’s Reach To AI Tool Developers

By Gerald L. Maatman, Jr., Justin Donoho, and George J. Schaller

Duane Morris Takeaways: On October 1, 2025, California’s “Employment Regulations Regarding Automated-Decision Systems” will take effect. These new AI employment regulations can be accessed here. The regulations add an “agency” theory under the California Fair Employment and Housing Act (FEHA) and formalize this theory’s applicability to AI tool developers and companies employing AI tools that facilitate human decision making for recruitment, hiring, and promotion of job applicants and employees. With California’s inclusion of a private right of action under the FEHA, these new AI employment regulations may augur an uptick in AI employment tool class actions brought under the FEHA. This blog post identifies key provisions of this new law and steps employers and AI tool developers can take to mitigate FEHA class action risk.

Background

In the widely-watched class action captioned Mobley v. Workday, No. 23-CV-770 (N.D. Cal.), the plaintiff alleges that an AI tool developer’s algorithm-based screening tools discriminated against job applicants on the basis of race, age, and disability in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”), the Age Discrimination in Employment Act of 1967 (“ADEA”), the Americans with Disabilities Act Amendments Act of 2008 (“ADA”), and California’s FEHA. Last year the U.S. District Court for the Northern District of California denied dismissal of the Title VII, ADEA, and ADA disparate impact claims on the theory that the developer of the algorithm was plausibly alleged to be the employer’s agent, and dismissed the FEHA claim which was brought only under the then-available theory of intentional aiding and abetting (as we previously blogged about here).

In recent years, discrimination stemming from AI employment tools has been addressed by other state and local statutes, including Colorado’s AI Act (CAIA) setting forth developers’ and deployers’ “duty to avoid algorithmic discrimination,” New York City’s law regarding the use of automated employment decision tools, the Illinois AI Video Interview Act, and the 2024 amendment to the Illinois Human Rights Act (IHRA) to regulate the use of AI, with only the last of these laws providing for a private right of action (once it becomes effective January 1, 2026).

Key Provisions Of California’s AI Employment Regulations

California’s AI employment regulations amend and clarify how the FEHA applies to AI employment tools, thus constituting a new development in case theories available to class action plaintiffs regarding alleged harms stemming from AI systems and algorithmic discrimination.

Employers and AI employment tool developers should take note of key provisions codified by California’s new AI employment regulations, as follows:

Agency theory. An “agency” theory is added under the FEHA like the one that allowed the plaintiff in Mobley v. Workday to proceed past a motion to dismiss on his federal claims, whereby an AI tool developer may face litigation risk for developing algorithms that result in a disparate impact when the tool is used by an employer. While Mobley v. Workday continues to proceed in the trial court, no appellate authority has yet had occasion to address the “agency” theories being litigated in that case under federal antidiscrimination statutes. However, with the California AI employment regulations taking effect October 1, 2025, that theory is now expressly codified under the FEHA. 2 Cal. Code Regs § 11008(a).
Proxies for discrimination. The regulations clarify that it is unlawful to use an employment tool algorithm that discriminates by using a “proxy,” which the regulations define as a “characteristic or category closely correlated with a basis protected by the Act.” Id. §§ 11008(a), 11009(f). While the regulations do not explicitly identify any proxies, proxies that have been identified in literature by the EEOC’s former Chief Analyst include zip code (this proxy is also codified in the IHRA), first name, alma mater, credit history, and participation in hobbies or extracurricular activities.
Anti-bias testing. The regulations state that relevant to a claim of employment discrimination or an available defense are “anti-bias testing or similar proactive efforts to avoid unlawful discrimination, including the quality, efficacy, recency, and scope of such efforts, the results of such testing or other effort, and the response to the results.” Id. § 11020(b). Thus, for example, adoption of the NIST’s AI risk management framework, itself codified as a defense under the CAIA, could be a factor to consider as a defense under the FEHA. Many other factors are pertinent with respect to anti-bias testing, including auditing, tuning, and the use of various interpretability methods and fairness metrics, discussed in our prior blog entry and article on this subject (here).
Data retention. The regulations provide that employers, employment agencies, labor organizations, and apprenticeship training programs must maintain employment records, including automated-decision data, for a minimum of four years. Id. § 11013(c).

Implications For Employers

California’s AI employment regulations increase employers’ and AI tool developers’ risks of facing class action lawsuits similar to Mobley v Workday and/or alleging discrimination under the FEHA. However, developers and employers have several tools at their disposal to mitigate AI employment tool class action risk. One is to ensure that AI employment tools comply with the FEHA provisions discussed above and with other antidiscrimination statutes. Others include adding or updating arbitration agreements to mitigate the risks of mass arbitration; collaborating with IT, cybersecurity, and risk/compliance departments and outside advisors to identify and manage AI risks; and updating notices to third parties and vendor agreements.

September 11, 2025September 11, 2025 by Gerald L. Maatman, Jr.

Illinois Federal Court Allows FLSA Collective Action To Proceed In Misclassification Case

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

Duane Morris Takeaways: On August 22, 2025, U.S. District Judge Matthew Kennelley for the Northern District of Illinois ruled that a group of supermarket meat, bakery, and deli managers could maintain their collective action against the grocery chain, Mariano’s, despite the differences in job responsibilities and store locations of collective action members. In the same order, Judge Kennelley denied Plaintiffs’ motion to certify a proposed class pursuant to Rule 23, highlighting the more demanding requirements for class certification. The case, captioned Depyper, et al. v. Roundy’s Supermarkets, Inc. et al., Case No. 20-C-2317 (N.D. Ill. Aug. 22, 2025) and available here, is significant because it is one of the first times a court considers a defendant’s “decertification” motion following the Seventh Circuit Court of Appeals decision in Richards, et al. v. Eli Lilly & Co., Case No. 24-2574, 2025 WL 221850 (7th Cir. Aug. 5, 2025), (“Eli Lilly”), which addressed the standard applicable for conditionally certifying an FLSA collective action. As this decision illustrates, although plaintiffs may face a higher legal bar for sending notice to a purported collective post-Eli Lilly, maintaining the collective after it has been “conditionally certified” is still subject to a much less demanding analysis than under Rule 23.

Background

Mariano’s and its banner store, Roundy’s Supermarkets, Inc. (“Defendant”), a well-known grocery store chain in the state of Illinois, was sued on April 14, 2020, by a former meat manager and bakery manager, alleging violations of the Fair Labor Standards Act (“FLSA”) and the Illinois Minimum Wage Law (“IMWL”), seeking unpaid overtime wages and alleging they were misclassified as exempt under both laws. Two years later, on April 21, 2022, a former deli manager filed a similar lawsuit alleging similar violations on behalf of her and other similarly situated deli managers. Id. The first lawsuit was “conditionally certified” on November 9, 2020, and Defendant stipulated to conditional certification in the second action on June 14, 2022.

Following the close of the lawsuits’ respective notice periods, the first collective action (comprised of meat managers and bakery managers) numbered twenty-eight (28) plaintiffs, while the second collective action (comprised of deli managers and hot foods managers) contained seventy-six (76) plaintiffs. Id. The parties consolidated the actions shortly thereafter to streamline discovery. Id.

After the close of discovery, Plaintiffs moved for “final certification” of the FLSA collective and concurrently moved to certify a IMWL class under Rule 23 comprised of all Mariano’s deli, hot foods, bakery, and/or meat department managers which were paid a weekly salary and classified as exempt, within the statutory period. Id. at 5. In response, Defendant moved to “decertify” both collectives. Id.

The Court’s Ruling

In a lengthy, 39-page opinion, the Court denied Plaintiffs’ motion for class certification under Rule 23 while simultaneously granting Plaintiffs’ motion for collective action certification (thus denying Defendant’s decertification motion).

The Court considered Plaintiffs’ class certification motion first, holding that while Plaintiffs established a common question (i.e. whether Defendant maintained an unofficial policy of misclassifying department managers), they did not establish that common issues predominated over individual issues. Id. at 10-11. As Defendant maintained that it properly classified Plaintiffs as exempt from the FLSA under the Administrative or Executive exemptions, the Court determined that individualized inquiries would be required to establish whether exempt work was the primary duty of an employee. Id. at 14. Thus, even though proving an unofficial policy “will move the plaintiffs’ claims forward,” the factfinder would still have to determine whether that policy resulted in a department manager having non-exempt primary duties. Id. Notably, the Court also credited various declarations provided by Defendant from department managers that indicated a wide range of “supervisory responsibility,” thus requiring further individualized inquiries regarding satisfaction of the discretion and independent judgment necessary to establish the Administrative exemption, further precluding predominance. Id. at 15-16. Finally, the Court also denied Plaintiffs’ fallback argument for “issue-class certification” under Rule 23(c)(4), similarly reasoning that even isolating the alleged misclassification policy as a common issue would not materially advance the litigation, given liability still turned on an individualized analysis of plaintiffs’ primary duties. Id. at 19.

With respect to Plaintiffs’ motion for FLSA collective action certification, the Court’s analysis and conclusion differed markedly. The Court first noted that FLSA collective actions do not have the same requirements as Rule 23 class actions and, unlike Rule 23, nothing in the FLSA required “adequate representation,” establishing predominance, or proving the superiority of proceeding as a collective. Id. at 21. Notably, the Court first analyzed and considered the Seventh Circuit Court of Appeals’ recent decision in Eli Lilly, which revised the standard for granting conditional certification of an FLSA collective, and its consequence on the instant action. As the Court noted, although Eli Lilly provided some guidance on the “notice” stage of an FLSA collective action, once opt-in discovery concluded, Plaintiffs bore the burden of establishing that they were similarity situated at the final certification stage by a preponderance of evidence. Id. at 23. The Court also noted that Eli Lilly was silent on the standard that district courts should apply to determine whether the collective contains “similarly situated” employees. Id. at 23.

Given the lack of guidance from the Seventh Circuit, the Court applied a three-factor test adopted by district courts in Illinois and elsewhere, which considers: “(1) whether the plaintiffs share similar or disparate factual and employment settings; (2) whether the various affirmative defenses available to the defendant would have to be individually applied to each plaintiff; and (3) fairness and procedural concerns.” Id. at 23.

Applying these factors, the Court determined that plaintiffs met their burden and could maintain both collectives. Specifically, the Court found that the collective members uniformly testified that they were classified as exempt, constrained by upper-level management hierarchy, expected to work 50 hours per week, and often performed the same tasks as hourly employees. Id. at 28. Though Defendant attempted to point to dissimilarities between Plaintiffs’ testimony and the department manager job descriptions, the Court noted that this argument “does not show a difference among the plaintiffs,” concluding that “[t]he fact that the plaintiffs uniformly testified that their job descriptions did not accurately reflect their actual work is a similarity among them, not a difference.” Id. The Court further rejected Defendant’s argument that managers’ job responsibilities varied across locations, noting that the fact that Mariano’s had forty-four (44) locations was not dispositive. Id. at 27. Defendant did not demonstrate how each store was different from the others, the Court opined, further noting that Defendant itself thought store location was “immaterial” when classifying department managers as exempt. Id. at 27-28. Accordingly, the Court certified the twenty-eight (28) collective action of meat and bakery managers and the seventy-six (76) collective action of deli and hot foods managers.

Takeaway for Employers

This decision highlights the relatively lenient standard applicable to FLSA collective actions, as opposed to Rule 23 class actions. Significant variation among job duties, titles, and responsibilities may not be enough to defeat collective action certification, and Employers should formulate an aggressive strategy for obtaining record evidence of substantial dissimilarities to prevail at the decertification stage. The Depyper decision also demonstrates that, while the Seventh Circuit has weighed in on the notice requirement for conditional certification, district courts retain substantial discretion in deciding what standard to apply at the “decertification” stage in assessing whether FLSA collective action members are “similarly situated.” Ultimately, even where employers prevail against Rule 23 class claims, they can still face costly and broad FLSA collective action litigation on wage and hour claims.

September 10, 2025 by Gerald L. Maatman, Jr.

New York Federal Court Dismisses Adtech Class Action Because No Ordinary Person Could Identify Web User

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

Duane Morris Takeaways: On September 3, 2025, in Golden v. NBCUniversal Media, LLC, No. 22-CV-9858, 2025 WL 2530689 (S.D.N.Y. Sept. 3, 2025), Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York granted a motion to dismiss with prejudice for a media company on a claim that the company’s use of website advertising technology on its website violated the Video Privacy Protection Act (“VPPA”). The ruling is significant as it shows that in the explosion of adtech class actions across the nation seeking millions or billions of dollars in statutory damages under not only the VPPA but also myriad other statutes providing for statutory penalties on similar theories that the website owner disclosed website activities to Facebook, Google, and other advertising agencies, the statute and its harsh penalties should not be triggered because no ordinary person could access and decipher the information transmitted.

Background

This case is one of a multiplying legion of class actions that plaintiffs have filed nationwide alleging that Meta Pixel, Google Analytics, and other similar software embedded in defendants’ websites secretly captured plaintiffs’ web-browsing activity and sent it to Meta, Google, and other online advertising agencies.

This software, often called website advertising technology or “adtech,” is a common feature on corporate, governmental, and other websites in operation today. In adtech class actions, the key issue is often a claim brought under the VPPA, a federal or state wiretap act, a consumer fraud act, and even the Illinois Genetic Information Privacy Act (GIPA), because plaintiffs often seek millions (and sometimes even billions) of dollars, even from midsize companies, on the theory that hundreds of thousands of website visitors, times $2,500 per claimant in statutory damages under the VPPA, for example, equals a huge amount of damages. Plaintiffs have filed the bulk of these types of lawsuits to date against healthcare providers, but they also have filed suits against companies that span nearly every industry including retailers, consumer products, and universities. Several of these cases have resulted in multimillion-dollar settlements, several have been dismissed, the vast majority remain undecided, and especially with some district courts being more permissive than others in allowing adtech class actions to proceed beyond the motion to dismiss stage (as we blogged about here), the plaintiffs’ bar continues to file adtech class actions at an alarming rate.

In Golden, the plaintiff brought suit against a media company. According to the plaintiff, she signed up for an online newsletter offered by the media company and, thereafter, visited the media company’s website, where she watched videos. Id. at *2-4. The plaintiff further alleged that, after she watched those videos, her video-watching history was sent to Meta without her permission via the media company’s undisclosed use of the Meta Pixel on its website. Id. Like plaintiffs in most adtech class action complaints, this plaintiff: (1) alleged that before the company sent the web-browsing data to the online advertising agency (e.g., Meta), the company encrypted the data via the secure “https” protocol (id., ECF No. 56 ¶ 45); and (2) did not allege that any human had her encrypted web-browsing data or could retrieve it from the advertising agency’s algorithms or that even the advertising agency, or any other entity or person, has her web-browsing data stored or could retrieve it from the advertising agency’s algorithms in a decrypted (readable) format. Based on the plaintiffs’ allegations, the plaintiff alleged a violation of the VPPA.

The media company moved to dismiss under Rule 12(b)(6), arguing that the media company did not adequately allege that the media company “disclosed” the plaintiff’s “personally identifiable information” (“PII”), defined under the VPPA as “information which identifies a person as having requested or obtained specific video materials or services….” Id., 2025 WL 2530689, at *5-6.

The Court’s Decision

The Court agreed with the media company and held that the plaintiff failed plausibly to plead any unauthorized “disclosure.”

As the Court explained, “PII, under the VPPA, has three distinct elements: (1) the consumer’s identity, (2) the video material’s identity, and (3) the connection between them.” Id. at *6. Moreover, PII “encompasses information that would allow an ordinary person to identify a consumer’s video-watching habits, but not information that only a sophisticated technology company could use to do so.” Id. (emphasis in original). Therefore, “to survive a motion to dismiss, a complaint must plausibly allege that the defendant’s disclosure of information would, with little or no extra effort, permit an ordinary recipient to identify the plaintiff’s video-watching habits.” Id. For these reasons, explained the Court, the Second Circuit has “effectively shut the door for Pixel-based VPPA claims.” Id. at *7 (citing Hughes v. National Football League, 2025 WL 1720295 (2d Cir. June 20, 2025)).

Applying these standards, the Court dismissed the plaintiff’s VPPA claim with prejudice, holding that, “[i]n short, because the alleged disclosure could not be appreciated — decoded to reveal the actual identity of the user, and his or her video selections — by an ordinary person but only by a technology company such as Facebook, it did not amount to PII.” Id. at *6-7. In so holding, the Court cited an “emergent line of authority” shutting the door on VPPA claims not only in the Second Circuit but also in other U.S. Courts of Appeal. See In Re Nickelodeon Consumer Priv. Litig., 827 F.3d 262, 283 (3d Cir. 2016) (affirming dismissal of VPPA case involving the use of Google Analytics, stating, “To an average person, an IP address or a digital code in a cookie file would likely be of little help in trying to identify an actual person”); Eichenberger v. ESPN, Inc., 876 F.3d 979, 986 (9th Cir. 2017) (affirming dismissal of VPPA case because “an ordinary person could not use the information that Defendant allegedly disclosed [a device serial number] to identify an individual”).

Implications For Companies

The Court’s holding in Golden is a win for adtech class action defendants and should be instructive for courts around the country addressing adtech class actions brought under not only the VPPA, but also other statutes prohibiting “disclosures,” and the like. These statutes should be interpreted similarly to require proof that an ordinary person could access and decipher the web-browsing data, identify the person, and link the person to the data.

Consider a few examples. A GIPA claim requires proof of a disclosure or a breach of confidentiality and privilege. An eavesdropping claim under the California Information of Privacy Act (CIPA) § 632 requires proof of eavesdropping. A trap and trace claim under CIPA § 638.51 requires proof that the data captured is reasonably likely to identify the source of the data. A claim under the Electronic Communications Privacy Act (ECPA) requires proof of an interception.

When adtech sends encrypted, inaccessible, anonymized transmissions to the advertising agency’s algorithms, has there been any disclosure or breach of confidentiality and privilege (GIPA), eavesdropping (CIPA § 632), data capture reasonably likely to identify the source (CIPA § 638.51), or interception (ECPA)? Just as adtech transmissions are insufficient to amount to a disclosure under the VPPA, Golden shows neither should adtech transmissions trigger these similarly worded statutes because no ordinary person could access and decipher the data transmitted.

September 9, 2025September 9, 2025 by Gerald L. Maatman, Jr.

Colorado Federal Court Grants Summary Judgment For Employer In EEOC Case Alleging Long COVID Complications

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

Duane Morris Takeaways: On September 3, 2025, in Equal Employment Opportunity Commission v. A&A Appliance, Inc. d/b/a Appliance Factory Outlet, Inc., No. 1:23-CV-02456 (D. Colo. Sept. 3, 2025), Judge Daniel D. Domenico of the District Court for the District of Colorado granted Defendant A&A Appliance, Inc.’s motion for summary judgment as to the EEOC’s claims. The Court held that the EEOC failed to make a prima facie case of violations of the Americans with Disabilities Act because it had not shown Defendant was aware of a disability or request for accommodation from the charging party. This ruling illustrates the steps an employee must take to adequately demonstrate a disability and request an accommodation and the situations where an employer may be justified in terminating an employee who fails to return from taking leave under the Family Medical Leave Act.

Case Background

Defendant A&A Appliance, Inc. (“Defendant”) employed Karima Javanzad (“Claimant”) from February 2019 to June 2020. (ECF 172 at 1) Shortly before her termination, in April, the Claimant requested a retroactive 12-week leave of absence under the Family Medical Leave Act (“FMLA”), citing various ailments for her and her son, including COVID-19. Id. at 1-2. Defendant granted the Claimant’s FMLA request from March 12 to June 7. Id. at 2. During her leave, the Claimant contacted Defendant on several occasions to inquire regarding the length of her leave and whether she could extend it. Id. Defendant consistently communicated with the Claimant and informed her that she could extend her leave “if the triggering condition for FMLA was extended by [her] medical provider.” Id. The Claimant did not return to work on June 8, she did not respond to Defendant’s requests to discuss her position, and she did not provide nor receive any confirmation that she ever contracted COVID-19 nor had any disability requiring an accommodation until after the end of her leave. Id. at 6-7. The last doctor’s note the Claimant received in May stated that she did not have any work restrictions. Id. at 6. On June 9, Defendant informed the Claimant that her FMLA had been exhausted and requested to further discuss her position, but Claimant never responded. Id. at 7. As such, Defendant terminated her employment on June 10. Id. at 7.

In response to her termination, the Claimant filed a charge with the Equal Employment Opportunity Commission (the “EEOC”), alleging disability discrimination and retaliation under the Americans with Disabilities Act (the “ADA”). Id. at 2. When conciliation efforts between the parties failed, the EEOC filed a lawsuit on behalf of the Claimant against Defendant on the same grounds. Id. Following discovery, both parties moved for summary judgment. Id.

The Court’s Order

The Court granted summary judgment in favor of the Defendant on both the ADA discrimination and the retaliation counts. Id. at 4. On each count, the Court reasoned that the EEOC must show that the Claimant was either disabled or that she was engaged in a protected activity for which she was discriminated or retaliated against. See id. at 4-10. The Court concluded that the EEOC could prove neither element.

First, the Court noted that the Claimant provided three possible disabling illnesses, COVID-19, vocal cord paralysis, and gastritis. Id. at 7. However, she never received a formal diagnosis for any of them until after she was terminated. Id. Moreover, while the Claimant asserted that she was unable to return to work, her May doctor’s note contradicted her statements by indicating that she “did not have any [work] restrictions” and that she could return to work without issue. Id. at 6-7. The Court concluded that these “inconsistent representations regarding [Claimant’s] ability to return to work” coupled with the lack of clarity regarding her illness meant that “Defendant cannot be found to have been on notice of a disability that required accommodation under the ADA.” Id. at 7 (emphasis added).

Second, in the alternative, the Court held that, even if the EEOC had presented evidence that the Claimant suffered from COVID-19, the EEOC’s claims still failed. Id. The Court reasoned that, to recover for a claim for failure to accommodate or for retaliation for requesting an accommodation, an employee must “make an adequate request, making clear that she wants assistance for her disability.” Id. at 8 (internal quotation marks omitted). According to the Court, the Claimant’s requests for additional information regarding her remaining leave did not amount to an accommodation request. Id. In fact,“Ms. Javanzad never made an explicit request for an accommodation from Defendant — even for an additional leave of absence — until after her FMLA leave expired.” Id. And when she did request additional leave, the Claimant did not provide any details about the leave she was requesting. Id. The Court concluded that these facts provided an independent basis for entering summary judgment against the EEOC. Id. at 9.

Implications For Employers

The Court’s decision in A&A Appliance, Inc. serves as a reminder to both employees and employers. Although employers must engage in the interactive process for both ADA and FMLA purposes to reasonably accommodate employees’ disabilities, the onus rests with the employee to demonstrate a disability and to request an accommodation, effectively providing notice to the employer of the claimed disability. If the employee fails to satisfy either of these prerequisites, an employer is not on notice of any disability and may be justified in terminating the employee’s employment.

September 8, 2025September 8, 2025 by Gerald L. Maatman, Jr.

Washington Supreme Court Rules That Job Applicants Need Not Be “Bona Fide” Under The EPOA To Launch Class Actions

By Gerald L. Maatman, Jr., Eden E. Anderson, and Caitlin Capriotti

Duane Morris Takeaways: On September 4, 2025, the Washington Supreme Court issued its highly anticipated decision in Branson, et al. v. Washington Fine Wine & Spirits, LLC, et al., Case No. 103394-0 (Wash. Sept. 4, 2025), holding that job applicants are not required to prove they are a “bona fide” or a “good faith” applicant to obtain remedies under the EPOA in class action litigation. The Washington Supreme Court acknowledged, but declined to address, other open issues under the EPOA, which means that state and federal courts in Washington will now be called upon to rule on other unresolved issues under the statute, including whether the EPOA even grants a private right of action to applicants in the first instance.

Case Background

Washington state’s Equal Pay and Opportunities Act (“EPOA”) was amended in 2022 to require employers to include wage or salary range information in job postings. Soon thereafter, a torrent of class action lawsuits followed, some filed by applicants who had legitimately sought employment, but far more filed by serial plaintiffs seeking recovery of staggering amounts of statutory damages and attorneys’ fees. Before it was further amended in 2025, the EPOA provided for $5,000 in statutory damages per job applicant.

Plaintiffs Lisa Branson and Cherie Burke submitted applications for retail positions with defendant and the job postings to which they applied did not contain the required salary or wage range information. Branson interviewed for the position for which she applied and discussed pay during that interview, but did not accept the position she was offered.

Subsequently, Branson and Burke filed a class action lawsuit invoking their right to statutory damages under the EPOA. Although Branson seemingly was a bona fide job applicant, the defendant filed a motion to bifurcate discovery, arguing that plaintiffs were not the type of “job applicants” the EPOA was intended to protect and that the statute only applies to “bona fide” applicants. The U.S. District Court for the Western District of Washington certified the following question: “What must a Plaintiff prove to be deemed a ‘job applicant’” under the EPOA? The Washington Supreme Court accepted certification to resolve that question.

The Decision

Relying first on the dictionary definition of “applicant,” as “one who applies for something,” the Supreme Court noted that the definition does not rely on the subjective intent of the individual to determine whether a person is an applicant. Thus, the plain meaning of the term means only “one who applies” irrespective of their intent in doing so. The Supreme Court noted that elsewhere in the EPOA the legislature used the phrase “bone fide,” but it did not do so in reference to job applicants, further confirming no such limitation.

The Supreme Court also found telling the fact that the legislature originally considered conferring remedies broadly to “individuals,” but then amended the statute to confer remedies on applicants and employees, suggesting the legislature specifically considered who could obtain remedies and yet did not include any further words of limitation such as “bona fide.” Additionally, the Supreme Court highlighted that although the agency charged with adopting rules implementing the statute, Labor & Industries, originally promulgated draft rules which defined a job applicant as a “good faith” applicant, that definition was withdrawn and never implemented.

The Supreme Court repeatedly noted in the decision that, if the EPOA is to be limited to bona fide or good faith job applicants, the Washington legislature will need to act to make this change.

Three of the nine justices issued a sharply worded dissent disagreeing with the majority’s ruling and expressing their view that the EPOA was not designed to “give bounty seekers an incentive to trawl the internet for noncompliant job postings to obtain a statutory damages award unrelated to any personal harm.” Dissenting Opinion, at 2.

Although the outcome is not what employers were hoping for, there are silver linings in the Branson decision and, in particular, in the Supreme Court’s numerous footnotes. Principally, although it declined to rule on the issue because the argument was not made by the defendant, the Supreme Court chose to highlight in footnote 3 that the EPOA may only confer a private right of action on employers, and limit applicants to filing claims with Labor and Industries. The Supreme Court also chose to emphasize another argument made in amicus briefing in footnote 6 of the decision wherein it highlighted that the remedies available under the EPOA may be too severe and unconstitutional. It declined to rule on that issue too as it also was not an argument made by the defendant. Thus, these issues and many others remain unresolved and may soon be addressed by Washington state and federal courts as the legions of EPOA cases, all stayed pending the Branson ruling, are now litigated.

Implications of the Decision:

The Branson decision is an unfortunate ruling for Washington state employers. An unharmed plaintiff who never had any legitimate interest in a posted job position and whose only goal is to collect money through legal proceedings now has the green light to seek remedies under the EPOA. That said, the Branson decision highlights other defense arguments that can and should be made in all pending EPOA cases. The decision suggests that a private right of action is limited to employees, and that applicants can only seek remedies under the EPOA through administrative proceedings before Labor & Industries.

September 2, 2025September 2, 2025 by Gerald L. Maatman, Jr.

Virginia Federal Court Slices Away Out-of-State FLSA Claims Against Pizza Company

By Gerald L. Maatman, Jr., Anna Sheridan, and Ryan T. Garippo

Duane Morris Takeaways: On August 22, 2025, in Shamburg, et al. v. Ayvaz Pizza, LLC, et al., No. 24-CV-00098, 2025 WL 2431652 (W.D. Va. Aug. 22, 2025), Judge Jasmine Yoon of the U.S. District Court for the Western District of Virginia partially dismissed a proposed nationwide collective action brought by pizza delivery drivers. Although Plaintiff Chandler Shamburg (“Plaintiff” or “Shamburg”), and other plaintiffs, asserted nationwide Fair Labor Standards Act (“FLSA”) and state law claims from multiple jurisdictions, the Court dismissed nearly all of them for lack of personal jurisdiction. This ruling reinforces the growing trend of federal courts willing to apply the Due Process Clause’s protections to expansive FLSA collective actions and underscores the difficulty plaintiffs face in keeping sprawling, multi-state, wage claims altogether in one federal court.

Case Background

In 2024, Shamburg filed a putative class and collective action that alleged that Ayvaz Pizza (“Ayvaz”), a franchisee that “operates an unidentified number of Pizza Hut Franchise Stores within” Virginia, that is neither incorporated in nor has its principal place of business in Virginia, violated the FLSA and various state laws. Id. at *1. They also sued Ayvaz’s owner, Shoukat Dhanani, for this conduct as well. Id.

Shamburg (and, ultimately several other plaintiffs) alleged that both himself, and other drivers, were “required to use their own cars, ensure their cars were legally compliant, pay car-related costs including gasoline expenses, maintenance and part costs, insurance, financing charges, and licensing and registration costs, pay storage costs, cell phone costs, and data charges, and pay for other necessary equipment.” Id. As a result, Shamburg and the out-of-state plaintiffs alleged that their hourly rate of pay dropped below the FLSA’s minimum wage guarantee because these expenses were “kicked back” to Ayvaz. Id. at *1-2. They also brought seventeen state law claims that “assert causes of action from seven different states and invoke both state statutory and common law.” Id. at *8.

But, Ayvaz was no stranger to these issues. It was also recently sued in Garza, et al. v. Ayvaz Pizza, LLC, No. 23-CV-01379 (S.D. Tex.), and Stotesbery, et al. v. Muy Pizza-Tejas, LLC, et al., No. 22-CV-01622 (D. Minn.), based on similar allegations. Based on the existence of these prior two actions, and the presence of the out-of-state plaintiffs’ claims, Ayvaz and its owner moved to dismiss based on lack of personal jurisdiction (both general and specific), lack of supplemental jurisdiction, and the first-to-file doctrine. Judge Yoon’s decision followed.

The Court’s Ruling

In general, Judge Yoon’s decision was split into four discrete parts — each addressing whether the Court could exercise various forms of jurisdiction over Ayvaz and its owner. For the most part, the Court declined each type of jurisdiction.

General Personal Jurisdiction & Out-Of-State Plaintiffs

First, although it was uncontested that Ayvaz was neither incorporated in nor headquartered out of Virginia, Plaintiffs argued that Ayvaz was subject to general personal jurisdiction in Virginia based on the U.S. Supreme Court’s decision in Mallory v. Norfolk Southern Railway Co., 600 U.S. 122 (2023). In Mallory, the U.S. Supreme Court held that Due Process does not prohibit “a State from requiring an out-of-state corporation to consent to personal jurisdiction to do business there.” Id. at 127. Like the Pennsylvania statute at issue in Mallory, Virginia also has “an out-of-state business registration statute.” Shamburg¸ 2025 WL 2431652, at *5.

Judge Yoon, however, reasoned that “unlike Pennsylvania, Virginia law does not require the out-of-state business to condition its registration on submitting to general personal jurisdiction” consistent with the decisions of several other district courts. Id. Thus, the Court “conclude[d] that, absent explicit consent to jurisdiction in Virginia’s business registration statute” it could not exercise general personal jurisdiction over Ayvaz or its owner.

Specific Jurisdiction & Out-Of-State Plaintiffs

Second, the Court addressed the out-of-state plaintiffs’ argument that the Court could exercise specific personal jurisdiction over Ayvaz as to the out-of-state plaintiffs but disagreed. Judge Yoon weighed in on the pending circuit split regarding the applicability of Bristol-Myers Squibb v. Superior Court, 582 U.S. 255 (2017), to FLSA collective actions. The Third, Sixth, Seventh, Eighth and Ninth Circuits hold that Bristol-Myers applies, whereas the First Circuit stands alone and holds otherwise.

Judge Yoon agreed with “the approach taken by the majority of the Courts of Appeals” and held each plaintiff “must present independent, sufficient bases for the exercise of the court’s specific jurisdiction over that claim.” Id. at *6. Similarly, because none of the plaintiffs alleged facts related to the owner’s minimum contacts with Virginia “beyond the fact that Ayvaz is registered to do business in Virginia and operates an unidentified number of Pizza Hut Franchise Stores,” their claims could not proceed against him either.

The Seventeen State Law Counts

Third, having dismissed the out-of-state plaintiffs’ claims, Judge Yoon declined to exercise supplemental jurisdiction over the seventeen state law counts. The Court observed that “the presence of more subclasses (eight) than states (seven) provides evidence of both complexity and the lack of commonality” that show that the state law claims “would substantially predominate over the FLSA claim.” Id. at *8. The court dismissed those claims without prejudice, leaving only the FLSA claims brought by Virginia-based employees.

The First-To-File Doctrine

Fourth and finally, the Court declined Ayvaz’s request to dismiss the case under the “first-to-file” doctrine due to the existence of the earlier filed suits in Garza and Stotesbury. The first-to-file rule allows a federal court to decline jurisdiction when a substantially similar lawsuit involving the same parties and issues is already pending in another court. Id. at *10. But, the court concluded that the “putative classes and respective issues” in the two prior suits differ enough that the first-to-file rule should not be applied. Id. at *12.

Indeed, “Stotesbery, by design, includes an FLSA claim limited to those who work in Minnesota” and thus did not overlap based on the Court’s ruling. Id. And, the Court declined to apply the first-to-file doctrine to Garza because the “case was settled and dismissed with prejudice” and thus was not pending at the time of the decision. Id. at *10. “Accordingly, Plaintiffs’ complaint will survive the motion to dismiss with respect to the FLSA claim for Plaintiffs who live in or work in Virginia.” Id. at *12.

Implications for Employers

The Shamburg decision demonstrates that courts are increasingly unwilling to allow out-of-state employees to anchor nationwide collective actions against employers without first affording employers certain due process protections. This growing trend prevents employers from having to defend these actions in distant and unfamiliar courts, and forces plaintiffs to bring these actions where these employers are incorporated or headquartered.

With these trends in mind, corporate counsel should continue to monitor this blog for developments because the Bristol-Myers circuit split is sure to be decided by the U.S. Supreme Court soon, and if their companies are sued in putative class and collective actions, it is better to prepared in advance for when these important issues are decided.