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

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.

August 23, 2023 by Gerald L. Maatman, Jr.

Key Takeaways From The EEOC’s Strategic Plan For Fiscal Years 2022-2026

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

Duane Morris Takeaways: On August 22, 2023, the EEOC announced the approval its Strategic Plan (“SP”) for Fiscal Years 2022-2026. The Strategic Plan can be accessed here. The SP furthers the EEOC’s mission of preventing and remedying unlawful employment discrimination and advancing equal employment opportunity for all. The SP focuses on: (1) Enforcement; (2) Education and Outreach; and (3) Organizational Excellence. The SP also provides performance measures for each strategic goal. For corporate counsel involved in employment-related compliance and EEOC litigation, the new SP is required reading.

The EEOC’s Strategic Priorities

Enforcement

The EEOC continues to promote equitable employment initiatives through its enforcement authority. The SP highlights the EEOC’s primary mission of preventing unlawful employment discrimination through its administrative and litigation enforcement mechanisms, and adjudicatory and oversight processes. The main strategic focus for employing these mechanisms is through fair and efficient enforcement based on the circumstances of each charge or complaint while maintaining a balance of meaningful relief for victims of discrimination.

As to enforcement, the SP provides a broad overview of the EEOC’s efforts to allocate its resources to ensure its efforts in stopping unlawful employment discrimination. To that end, the EEOC indicates that it will continue its targeting of systemic discrimination through training staff on systemic cases and devoting additional resources to systemic litigation enforcement. The SP included several performance measures for achieving enforcement goals, including measures on conciliation and litigation resolution, favorably resolving lawsuits, and increasing capacity for systemic investigations.

Education and Outreach

The SP prioritizes education and outreach for deterring employment discrimination before it occurs. The SP focuses on providing education and outreach programs, projects, and events as cost-effective tools for enforcement. Primarily these programs are aimed at individuals who historically have been subjected to employment discrimination. Part of the EEOC’s education and outreach involves expanding use of technology through social media, ensuring the EEOC website is more user-friendly and accessible, and leveraging technology to reach the agency’s audience.

These efforts to improve on education and outreach are aimed at promoting public awareness of employment discrimination laws while maintaining information and guidance for employers, federal agencies, unions, and staffing agencies. The SP provides an in-depth list of measuring education and outreach by utilizing technology to expand the EEOC’s audience and ensuring accessible delivery of information through events, programs, and up-to-date website accessibility and functionality.

Organizational Excellence

The SP makes clear that organizational excellence is the cornerstone of achieving the EEOC’s strategic goals. The SP confirms that the EEOC aims to improve on its culture of accountability, inclusivity, and accessibility. In addition, the EEOC seeks to continue protecting the public and advancing civil rights in the workplace by ensuring its resources are allocated properly to strengthen intake, outreach, education, enforcement, and service.

The EEOC’s organizational excellence strategic goal has two prongs, including improving the training of EEOC employees and enhancing the EEOC’s infrastructure. For employees, the EEOC seeks to foster enhanced diversity, equity, inclusion, and accessibility in the workplace, maintain employee retention, and implement leadership and succession plans. Relative to the agency’s infrastructure, the SP embraces the increased use of technology through analytics, and management of fiscal resources promote the agency’s mission of serving the public.

Implications For Employers

The EEOC’s SP is an important publication for employers since it previews immediate action areas. The SP’s focus on systemic discrimination, conciliation, and litigation, and increasing the Commission’s capacity for litigating alleged systemic violations shows the EEOC is ramping up to improve handling all aspects of charges. The EEOC’s increased focus on technology and employment discrimination awareness similarly shows accessibility will continue to be a pillar of the agency. Accordingly, prudent employers should be mindful of these strategic priorities, and prepare themselves for continued EEOC enforcement.

August 17, 2023 by Gerald L. Maatman, Jr.

Maryland Federal Court Issues Arrest Warrant In EEOC Sex Bias Suit

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

Duane Morris Takeaways: In EEOC v. Above All Odds, LLC, No. 1:21-CV-02492 (D. Md. Aug. 15, 2023) (ECF No. 50), a federal district court in Maryland issued an arrest warrant for an ex-executive of a company involved in an EEOC lawsuit. The EEOC alleged that the ex-executive sexually harassed employees of a mental health clinic. The Court issued the arrest warrant due to the ex-executive refusal to cooperate in the case and with discovery orders.

For employers facing EEOC-initiated lawsuits, the issuance of an arrest warrant is a novel development but informative in terms of the perils of continuously ignoring court orders.

Case Background

The EEOC initiated this lawsuit on behalf of three former workers, Bricciana Strickland, Shana Hanson, and Saidah Feyijinmi, of Above All Odds, LLC (“Company”) and the Company’s co-founder, Raymond Dorsey, alleging a pattern of sexual harassment of female employees. (Compl. at 1).

Strickland alleged Dorsey sent text messages asking for a date, and when she refused, Dorsey responded by stating he could fire her from her position. Id. at 5-6. Hanson alleged Dorsey made repeated unwanted sexual advances including Dorsey asking if he could rub her back, sending an email with pornographic content, and throwing condoms on her desk. Id. at 7. Feyijinmi alleged she saw Dorsey throw condoms on Hanson’s desk. Id. at 8. Together, Hanson and Feyijinmi reported Dorsey’s sexual harassment to the Company’s senior management. Id. at 7.

Strickland continued to reject Dorsey’s advances and was demoted, and ultimately Dorsey ordered members of management staff to terminate her. Id. at 6. Hanson was terminated in response to reporting Dorsey’s conduct. Id. at 7. Feyjinmi was presented with a new contract of employment that lowered her salary and required her to work two positions, and after she requested time to review the contract before signing, the company terminated her before she had the opportunity to sign her contract. Id. at 8-9.

The Arrest Warrant

Throughout the course of the lawsuit, Dorsey failed to respond to the EEOC’s complaint and ignored several show cause orders directing him to appear in court. Subsequently, the court found Dorsey in contempt of court in June 2023.

Dorsey also ignored a subpoena to appear in the case brought by the EEOC. Thereafter, the court authorized the arrest of Raymond Dorsey and issued an arrest warrant on August 15, 2023.

Implications For Employers

Employers that are confronted with EEOC-initiated litigation involving allegations of a pattern of sexual harassment should note that ignoring court filings, court proceedings, and orders issued by the court, may result in the court taking action. In this instance, the court relied on the ex-executive’s lack of response to pleadings, court orders, and subpoenas leading to the court issuing an arrest warrant. While the issuance of arrest warrants is rare in litigation, this development illustrates that court orders should not be taken lightly.

August 11, 2023 by Alex W. Karasik

EEOC Settles Its First Discrimination Lawsuit Involving Artificial Intelligence Hiring Software

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

Duane Morris Takeaways: InEqual Employment Opportunity Commission v. ITutorGroup, Inc., et al., No. 1:22-CV-2565 (E.D.N.Y. Aug. 9, 2023), the EEOC and a tutoring company filed a Joint Settlement Agreement and Consent Decree in the U.S. District Court for the Eastern District of New York, memorializing a $365,000 settlement for claims involving hiring software that automatically rejected applicants based on their age. This is first EEOC settlement involving artificial intelligence (“AI”) software bias. As we previously blogged about here, eradicating discrimination stemming from AI software is an EEOC priority that is here to stay. For employers who utilize AI software in their hiring processes, this settlement highlights the potential risk of legal and monetary exposure when AI software generates hiring decisions that disparately impact applicants from protected classes.

Case Background

Defendants iTutorGroup, Inc., Shanghai Ping’An Intelligent Education Technology Co., LTD, and Tutor Group Limited (collectively “Defendants”) hired tutors to provide English-language tutoring to adults and children in China. Id. at *3. Defendants received tutor applications through their website. The sole qualification to be hired as a tutor for Defendants is a bachelor’s degree. Additionally, as part of the application process, applicants provide their date of birth.

On May 5, 2022, the EEOC filed a lawsuit on behalf of Wendy Pincus, the Charging Party, who was over the age of 55 at the time she submitted her application. The EEOC alleged that Charging Party provided her date of birth on her application and was immediately rejected. Accordingly, the EEOC alleged that Defendants violated the Age Discrimination in Employment Act of 1967 (“ADEA”) for programming its hiring software to reject female applicants over 55 years old and male applicants over 60 years old. Id. at *1. Specifically, the EEOC alleged that in early 2020, Defendants failed to hire Charging Party, Wendy Pincus, and more than 200 other qualified applicants age 55 and older from the United States because of their age. Id.

The Consent Decree

On August 9, 2023, the parties filed a “Joint Notice Of Settlement Agreement And Requested Approval And Execution Of Consent Decree,” (the “Consent Decree.”). Id. The Consent Decree confirmed that the parties agreed to settle for $365,000, to be distributed to tutor applicants who were allegedly rejected by Defendants because of their age, during the time period of March 2020 through April 2020. Id. at 15. The settlement payments will be split evenly between compensatory damages and backpay. Id. at 16.

In terms of non-monetary relief, the Consent Decree also requires Defendants to provide anti-discrimination policies and complaint procedures applicable to screening, hiring, and supervision of tutors and tutor applicants. Id. at 9. Further, the Consent Decree requires Defendants to provide training programs on an annual basis for all supervisors and managers involved in the hiring process. Id. at 12-13. The Consent Decree, which will remain in effect for five years, also contains reporting requirements and record-keeping requirements. Most notably, the Consent Decree contains a monitoring requirement, which allows the EEOC to inspect the premises and records of the Defendants, and conduct interviews with the Defendant’s officers, agents, employees, and independent contractors to ensure compliance.

Implications For Employers

To best deter EEOC-initiated litigation involving AI in the hiring context, employers should review their AI software upon implementation to ensure applicants are not excluded based on any protected class. Employers should also regularly audit the use of these programs to make sure the AI software is not resulting in adverse impact on applicants in protected-category groups.

This significant settlement should serve as a cautionary tale for businesses who use AI in hiring and are not actively monitoring its impact. The EEOC’s commitment to its Artificial In telligence and Algorithmic Fairness Initiative is in full force. If businesses have not been paying attention, now is the time to start.

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

Class Certification Granted To Illinois Consumers Whose DNA Was Shared With Third Parties Without Their Consent

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Jeffrey R. Zohn

Duane Morris Takeaways: On August 3, 2023, Judge Elaine E. Bucklo of the U.S. District Court For The Northern District Of Illinois granted class certification for individuals located in Illinois who had their genetic test results disclosed to third parties by Defendant Sequencing, LLC (“Sequencing”) in Melvin v. Sequencing, LLC, Case No. 21-CV-2194 (N.D. Ill. Aug. 3, 2023). Plaintiff David Melvin moved for class certification under Rule 23 on the basis that Sequencing violated the rights of up to 1,550 people under the Illinois Genetic Information Privacy Act (“GIPA”). Sequencing opposed the motion by arguing that a ruling on class certification should be delayed or denied because Plaintiff is not an adequate class representative and that Plaintiff failed to establish the predominance and superiority requirements of Rule 23. Sequencing’s position was not well-taken as the Court granted the Motion in a succinct 11-page order that described aspects of Sequencing’s arguments as “unaccompanied by authority” and lacking “reasoned argument.” The ruling is required reading for any companies dealing with GIPA claims in class action litigation.

GIPA Background

The Illinois legislature enacted the GIPA, 410 ILCS 513, in order to enhance privacy protections by prohibiting the unauthorized disclosure and use of an individual’s genetic information. Relevant to Melvin, Section 15 of the GIPA provides that “genetic testing and information derived from genetic testing is confidential and privileged and may be released only to the individual tested and to persons specifically authorized . . . by that individual to receive the information.” Id. at *2. Section 30 of the GIPA provides that “[n]o person may disclose . . . the identity of any person upon whom a genetic test is performed or the results of a genetic test in a manner that permits identification of the subject of the test[.]” Id. Section 35 of the GIPA prohibits the dissemination of genetic information to an entity other than the one to which the subject provided it. Id.

Case History

In Melvin, Plaintiff sought to represent a class of Illinois consumers who sent their DNA to Sequencing only for Sequencing to disclose it to unknown third party developers without first obtaining those consumers’ consent.

During discovery, Sequencing described its process for collecting and analyzing its customers’ DNA. The customers either send Sequencing their DNA directly or upload the results of a DNA test taken by a third party, such as 23andMe or Ancestry.com. Sequencing uses that information to create a “DNA data file” containing “raw human DNA data” that can be used to assess the customers’ genetic code. Id. at 4. The customers can then purchase reports based on their own genetic code. Most of the reports that are available for purchase are provided by third party developers. As soon as a customer purchases a report, their personal and genetic information is automatically transmitted to the corresponding third party developer.

Plaintiff, who went through this entire process, claimed that Sequencing did not inform him that his genetic information would be shared and that he never consented to the disclosure of that information to anyone.

The Court’s Opinion

In granting Plaintiff’s motion for class certification, Judge Bucklo issued an 11-page order “plain[ly]” explaining “that a class action is the superior vehicle for pursuing the class claims asserted” by Plaintiff. Id. at 10. Since Sequencing did not meaningfully dispute or argue otherwise, the Court concluded that Plaintiff satisfied the numerosity, commonality, typicality, and adequacy of counsel requirements of Rule 23 of the Federal Rules of Civil Procedure.

Sequencing suggested that Plaintiff was not an adequate class representative because he had suffered no damages at all. The Court rejected this “bald statement,” which was “unaccompanied by authority or reasoned argument.” Id. at 9. It noted that Sequencing “offers no basis to believe that Plaintiff would not be entitled to the same statutory damages he claims on behalf of the class and subclass if he succeeds in establishing Defendant’s liability.” Id.

The Court was also unpersuaded by Sequencing’s argument to deny class certification based on Plaintiff’s failure to establish the predominance and superiority requirements of Rule 23. It reasoned that “no absent class members have filed individual GIPA claims against” Sequencing nor has Sequencing articulated a reason to believe that individual class members have an interest in pursuing and controlling separate GIPA actions. Id. at 10.

As a last ditch effort to oppose class certification, Sequencing argued that the Court should “probe behind the pleadings before coming to rest on the certification question.” Id. at 10-11. This argument was not well-taken by the Court. Judge Bucklo determined that “[P]laintiff’s motion does not rest on the pleadings alone but on the ample evidence he has developed in discovery. Moreover, [Sequencing] offers no hint of the evidence it expects to uncover that would cut against class treatment of Plaintiff’s claims.” Id.

Finding that none of Sequencing’s arguments had merit, the Court granted Plaintiff’s motion and certified the class.

Implications For Corporate Defendants

When opposing a motion for class certification, it is important to choose arguments carefully and selectively. In Melvin, Sequencing conceded that Plaintiff had satisfied most of the Rule 23 requirements while only half-haphazardly arguing that Plaintiff did not satisfy the remaining requirements. The Court did not take Sequencing’s overall position seriously, as it described Sequencing’s opposition as containing “bald statement[s]” “unaccompanied by authority or reasoned argument.”

August 4, 2023 by Gerald L. Maatman, Jr.

Federal Court In Connecticut Certifies Over 25,000 Person Class In ERISA Class Action Lawsuit

By Gerald L. Maatman, Jr. and Jeffrey R. Zohn

Duane Morris Takeaways: On July 28, 2023, Judge Michael P. Shea of the U.S. District Court For The District Of Connecticut granted class certification for current and former employees of Yale-New Haven Hospital in Ruilova et al. v. Yale-New Haven Hospital, Inc. et al., Case No. 3:22-CV-00111 (D. Conn. July 28, 2023). Plaintiffs alleged that their retirement accounts were not appropriately managed, which resulted in poor investment decisions and excessive fees. Although many class action defendants are emboldened to fight on every aspect of plaintiffs’ claims, the Defendants in Ruilova took a different approach. Prior to the Court granting certification, Defendants stipulated to the certification of an over 25,000-person class in order to streamline the litigation and efficiently manage the litigation. Per Rule 23, the Court deemed that the motion satisfied the requirements for class certification.

Case History

In January 2022, Plaintiffs Kaity Ruilova and Eileen Brannigan (“Plaintiffs”) filed a class action lawsuit against Yale-New Haven Hospital, Inc. and its Board of Directors and Investment Oversight Committee (“Defendants”) alleging breach of fiduciary duty under the Employee Retirement Income Security Act (“ERISA”). Plaintiffs sought to represent over 25,000 former and current employees that participated in the Yale-New Haven ERISA Plan (“the Plan”). The Plan had assets totaling approximately $1.66 billion.

The lawsuit alleged that Defendants failed to fully disclose the expenses and risks of the Plan’s investment options to participants, allowed unreasonable expenses to be charged to participants (at a rate around 33% higher than comparable plans), and accepted high-cost and poorly-performing investments. Plaintiffs sought to recover all losses resulting from each breach of fiduciary duty.

Defendants filed a motion to dismiss that the Court granted in part and denied in part. The Court dismissed the claims made against the Board of Directors because the Board of Directors was not a fiduciary of the Plan. The Court denied the motion to dismiss as to the claim alleging that the Plan incurred excessive recordkeeping and administrative fees and the related failure-to-monitor claims.

While still denying that they are liable to Plaintiffs, approximately four months later, Defendants struck a deal with Plaintiffs to jointly file a stipulation to certify the class just as Plaintiffs articulated in the Complaint. The Court certified the class in a brief half page order one month later. Per its duty under Rule 23, the Court analyzed the motion and determined that Plaintiffs met the prerequisites for class certification.

Implications for Class Action Defendants

While a court certifying a class does not always make headlines, this one is unique. Defendants proactively agreed to stipulate to the certification of the class that Plaintiffs’ counsel alleged in the Complaint. The parties’ conversations and thought processes that led to this decision will never be known, but this strategy is a good reminder to always assess the merits of plaintiffs’ claims and only attack the weakest aspects of the case. Doing more is a waste of everyone’s resources, may demonstrate a lack of good faith, and could damage credibility in the eyes of the court.