Gerald L. Maatman, Jr. – Page 9 – Class Action Defense

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 1, 2023 by Gerald L. Maatman, Jr.

West Virginia Federal Court Finds Lack Of Involvement By Defendant In Alleged Class Action Solicitation Does Not Preclude Personal Jurisdiction Or Article III Standing

Gerald L. Maatman, Jr., Jennifer A. Riley, and Nick Baltaxe

Duane Morris Takeaways: On July 18, 2023, in Mey v. Levin, Papantonio, Rafferty, Proctor, Buchanan, O’Brien, Barr & Mougey, P.A., et al., Case No. 5:23-CV-46 (N.D. W. Va. July 18, 2023), the Court denied a motion to dismiss Plaintiff’s claims for alleged violations of the Telephone Consumer Protection Act (the “TCPA”). In doing so, the Court held that, despite the fact that Levin Law did not direct and was not involved in the alleged calls, the Court had personal jurisdiction over Levin Law, and Plaintiff had Article III standing to pursue the TCPA claims. In doing so, the Court found allegations concerning the law firm’s alleged agency relationship with a co-defendant sufficient to confer broad authority to adjudicate Plaintiff’s claims against Levin Law under the TCPA. Additionally, the Court concluded that Plaintiff had alleged sufficient facts to support a do-not-call claim under the TCPA by alleging that her cell phone was a residential phone on the National Do-Not-Call Registry.

Case Background

Plaintiff Diana Mey, a resident of West Virginia, initiated this lawsuit against two law firms, Levin Law and Principal Law Group, LLC, alleging that those defendants violated the TCPA by soliciting clients for a mass tort litigation related to toxic water exposure at Camp Lejeune. Mey, Doc. 33 at 1-2. Defendant Levin Law filed a motion to dismiss on numerous grounds, including that the Court lacked personal jurisdiction, that Plaintiff lacked Article III standing, that Plaintiff failed to plead direct or vicarious liability, and that Plaintiff failed to plead a violation of the TCPA. Id. The Court denied the motion. Id. Specifically, Levin Law argued that it was not directly involved in any of the phone calls, which were made by co-defendant MCM Services Group, LLC (“MCM”), and therefore could not be sued for violation of the TCPA. Id. at 8.

Initially, Levin Law, a Florida professional corporation with a principal place of business in Pensacola, Florida, argued that it did not have sufficient minimum contacts with West Virginia because it did not purposely direct the alleged tortious activity toward the state. Id. While the Court acknowledged that Levin Law was not directly involved in the telephone calls placed to Plaintiff, it held that Plaintiff had provided sufficient facts to find that the calls were made by an agent under Levin Law’s control. Id. at 12. Specifically, the Court noted that Plaintiff allegedly received a representation agreement from Principal Law, under which Levin Law would provide legal services to Plaintiff, and Principal Law would serve as Levin Law’s associate counsel. Id. The Court found that these allegations were sufficient to plausibly connect Levin Law to the alleged calls. In a final point regarding personal jurisdiction, the Court did not address whether it had personal jurisdiction over out-of-state class members noting that, to proceed with the case, it needed to find personal jurisdiction only over the named Plaintiff and Defendants. Id. at 13.

The Court then addressed Levin Law’s argument that Plaintiff did not have Article III standing. Specifically, Levin Law argued that the calls, which were initiated by MCM, were not traceable to any conduct by Levin Law, which was a necessary prong in establishing Article III standing. Id. The Court, however, noted that because the representation agreement identified Principal Law as Levin’s Law associate counsel, and Plaintiff received the agreement from Principal Law, the Court reasonably could infer that the calls were made by someone under Levin Law’s control. Id. at 14. As such, the Court found that Plaintiff had pled sufficient facts to trace the challenged conduct to the defendant and, as such, had asserted Article III standing.

The Court addressed Levin Law’s final arguments that Plaintiff failed to plead a theory of liability against it and, further, failed to state a do-not-call claim under the TCPA. First, the Court held that Plaintiff asserted sufficient factual allegations to show vicarious liability and to survive a Motion to Dismiss. Id. at 15. Second, the Court found no case law supporting dismissal of a TCPA claim on the basis that the defendant allegedly placed a call to a cell phone instead of a residential phone. Id. at 17. Specifically, the Court noted that Plaintiff had alleged that her cell phone was used for residential purposes and was placed on the National Do-Not-Call Registry, making the claim actionable under the TCPA. Id.

Key Takeaways

In this ruling, the Court made interesting findings that will extend to plaintiffs outside the TCPA context to survive attacks at the pleading stage of litigation. Specifically, the Court found both personal jurisdiction and Article III standing despite the fact that Levin Law did not purposefully direct the activity at issue. By doing so, the Court agreed with arguments that the conduct of an alleged agent was enough to establish both personal jurisdiction and Article III standing. Going forward, plaintiffs will have yet another way to support personal jurisdiction and Article III standing at the outset of the case even against defendants who they do not contend were directly involved in the conduct about which they complain. Additionally, while there is a split in authority as to whether the TCPA extends to wireless telephone numbers, the Court in this litigation had no issue finding that a cell phone could be a residential phone for purposes of the TCPA, potentially extending its reach and keeping it relevant as a potential source of claims against corporate defendants.

July 27, 2023 by Alex W. Karasik

EEOC Issues New ADA Guidance On Visual Disabilities And Discussing AI Impact

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

Duane Morris Takeaways: On July 26, 2023, the EEOC issued a new Guidance entitled “Visual Disabilities in the Workplace and the Americans with Disabilities Act” (the “Guidance”). This document is an excellent resource for employers, and provides insight into how to handle situations that may arise with job applicants and employees that have visual disabilities. Notably, for employers that use algorithms or artificial intelligence (“AI”) as a decision-making tool, the Guidance makes clear that employers have an obligation to make reasonable accommodations for applicants or employees with visual disabilities who request them in connection with these technologies.

The EEOC’s Guidance

The EEOC’s Guidance endeavors to address four subjects, including: (1) when an employer may ask an applicant or employee questions about a vision impairment and how an employer should treat voluntary disclosure; (2) what types of reasonable accommodations applicants or employees with visual disabilities may need; (3) how an employer should handle safety concerns about applicants and employees with visual disabilities; and (4) how an employer can ensure that no employee is harassed because of a visual disability.

The EEOC notes that if an applicant has an obvious impairment or voluntarily discloses the existence of a vision impairment, and based on this information, the employer reasonably believes that the applicant will require an accommodation to perform the job, the employer may ask whether the applicant will need an accommodation (and, if so, what type). Some potential accommodations may include: (i) assistive technology materials, such as screen readers and website accessibility modifications; (ii) personnel policy modifications, such as allowing the use of sunglasses, service animals, and customized work schedules; (iii) making adjustments to the work area, including brighter lighting; and (iv) allowing worksite visits by orientation, mobility, or assistive technology professionals.

For safety concerns, the Guidance clarifies that if the employer has concerns that the applicant’s vision impairment may create a safety risk in the workplace, the employer may conduct an individualized assessment to evaluate whether the individual’s impairment poses a “direct threat,” which is defined as, “a significant risk of substantial harm to the health or safety of the applicant or others that cannot be eliminated or reduced through reasonable accommodation.” For harassment concerns, the EEOC notes that employers should make clear that they will not tolerate harassment based on disability or on any other protected basis, including visual impairment. This can be done in a number of ways, such as through a written policy, employee handbooks, staff meetings, and periodic training.

Artificial Intelligence Implications

As we previously blogged about here, the EEOC has made it a priority to examine whether the use of artificial intelligence in making employment decisions can disparately impact various classes of individuals. In the Q&A section, the Guidance tackles this issue by posing the following hypothetical question: “Does an employer have an obligation to make reasonable accommodations to applicants or employees with visual disabilities who request them in connection with the employer’s use of software that uses algorithms or artificial intelligence (AI) as decision-making tools?”According to the EEOC, the answer is “yes.”

The Guidance opines that AI tools may intentionally or unintentionally “screen out” individuals with disabilities in the application process and when employees are on the job, even though such individuals are able to do jobs with or without reasonable accommodations. As an example, an applicant or employee may have a visual disability that reduces the accuracy of an AI assessment used to evaluate the applicant or employee. In those situations, the EEOC notes that the employer has an obligation to provide a reasonable accommodation, such as an alternative testing format, that would provide a more accurate assessment of the applicant’s or employee’s ability to perform the relevant job duties, absent undue hardship.

Takeaways For Employers

The EEOC’s Guidance serves a reminder that the Commission will vigorously seek to protect the workplace rights of individuals with disabilities, including those with visual impairments. When employers are confronted with situations where an applicant or employee requests reasonable accommodations, the Guidance provides a valuable roadmap for how to handle such requests, and offers a myriad of potential solutions.

From an artificial intelligence perspective, the Guidance’s reference to the use of AI tools suggests that employers must be flexible in terms providing alternative solutions to visually impaired employees and applicants. In these situations, employers should be prepared to utilize alternative means of evaluation.

July 20, 2023 by Gerald L. Maatman, Jr.

Illinois Supreme Court Refuses To Reconsider “Per-Scan” BIPA Accrual Ruling In Cothron v. White Castle

By Gerald L. Maatman, Jr. and Tyler Zmick

Duane Morris Takeaways: As we previously blogged, on February 17, 2023 the Illinois Supreme Court held in Cothron v. White Castle, 2023 IL 128004 (2023), that a separate claim for damages accrues under the Biometric Information Privacy Act (“BIPA”) each time a private entity scans or transmits an individual’s biometric data in violation of Sections 15(b) or 15(d) of the statute. On July 18, 2023, the Illinois Supreme Court denied White Castle’s petition for hearing, resulting in the February 17 ruling becoming the final “law of the land” in Illinois. The Court’s decision to deny White Castle’s rehearing petition was not unanimous, however, as reflected by the blistering dissent penned by Justice Overstreet and joined by Chief Justice Theis and Justice Holder White. For companies involved in BIPA class action litigation, the dissent is required reading, as it foreshadows an array of defense-oriented arguments over damages issues in privacy litigation.

Illinois Supreme Court’s Majority Decision In Cothron

In a 4-3 split ruling, the Illinois Supreme Court held on February 17, 2023 that a separate claim accrues under the BIPA each time a private entity scans or transmits an individual’s biometric data in violation of Sections 15(b) or 15(d), respectively.

Relying on the statute’s plain language and the fact that the actions of “collecting” and “disclosing” biometric data can occur more than once, the Supreme Court agreed with Plaintiff’s interpretation – namely, that Section 15(b) “applies to every instance when a private entity collects biometric information without prior consent” and that Section 15(d) “applies to every transmission to a third party.” Cothron, 2023 IL 128004, ¶¶ 19, 23, 28. The Supreme Court acknowledged that this interpretation – coupled with the statute allowing prevailing plaintiffs to recover up to $1,000 or $5,000 for each “violation” – could lead to astronomical damages awards that may be “harsh, unjust, absurd or unwise,’” id. ¶ 40 (citation omitted), but noted that it must apply the statute as written and that policy-based concerns should be addressed by the Illinois legislature.

Dissent To Majority’s Decision To Deny White Castle’s Rehearing Petition

On July 18, 2023 the Illinois Supreme Court denied White Castle’s petition for rehearing in Cothron v. White Castle, effectively leaving White Castle with no further avenues for challenging the ruling.

Three Justices (the same three who dissented to the February 17 majority decision) disagreed with the decision to deny White Castle’s petition for rehearing. In opining that the Supreme Court should have granted rehearing, the Dissent focused on three issues, including: (1) the majority’s “per scan” theory of liability subverting the intent of the Illinois legislature; (2) the majority’s “per scan” theory of liability threatening the survival of Illinois businesses and raising “significant constitutional due process concerns,” id. ¶ 70; and (3) the majority’s decision in failing to provide trial courts with criteria to use in exercising their discretion whether to award statutory damages for BIPA violations.

First, the Dissent stated that the Illinois legislature meant for the BIPA to be a straightforward remedial statute that allows individuals to choose to provide (or not to provide) their biometric data after being informed that the data is being collected, stored, and potentially disclosed. The Dissent rejected the majority’s “flawed construction” of the statute, which mistakenly presumes that the legislature meant for the BIPA to “establish a statutory landmine” and “destroy commerce in its wake when negligently triggered.” Id. ¶ 73; see also id. (“The majority’s construction of the [BIPA] does not give effect to the legislature’s true intent but instead eviscerates the legislature’s remedial purpose of the [BIPA] and impermissibly recasts [it] as one that is penal in nature rather than remedial.”).

Second, the Dissent opined that by construing the statute to allow for awards of statutory damages that bear no relation to any actual monetary injury suffered, the majority’s decision raises due process concerns that “raise doubt as to [the BIPA’s] validity.” Id. ¶ 74; see also id. ¶ 75 (“The legislature’s authority to set a statutory penalty is limited by the requirements of due process. When a statute authorizes an award that is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable, it does not further a legitimate government purpose, runs afoul of the due process clause, and is unconstitutional.”).

Finally, the Dissent took issue with the majority’s refusal to clarify its February 17 holding with respect to the discretionary (rather than mandatory) nature of liquidated damages under the statute. Specifically, the Dissent noted that the majority opinion did not provide trial courts with standards or criteria to apply in determining whether to award statutory damages in a particular BIPA case and, if so, in what amount. The Dissent asserted that the Supreme Court should have agreed to clarify “that statutory damages awards must be no larger than necessary to serve the [BIPA’s] remedial purposes” and to “explain how lower courts should make that determination.” Id. ¶ 85. Per the Dissent, “[w]ithout any guidance regarding the standard for setting damages, defendants, in class actions especially, remain unable to assess their realistic potential exposure.” Id.

Implications For Corporations

Assuming White Castle cannot convince the U.S. Supreme Court to grant review of the Cothron decision based on constitutional issues, Cothron is now the final law of the land in Illinois. White Castle and other BIPA defendants may, however, attempt to raise constitutional challenges to the statute in other BIPA cases moving forward based on the same concerns expressed by the three dissenting Justices in Cothron.

The denial of White Castle’s rehearing petition indicates that the well is beginning to dry for businesses in terms of potential BIPA defenses. While employers and other BIPA defendants can still explore novel defenses, such as the exception for information captured from a patient in a health care setting or challenges to personal jurisdiction, many companies caught in the crosshairs of BIPA class actions will face pressure to settle due to the risk of facing monumental potential damages. Moreover, attempts to reform the BIPA statute failed in 2023, and the Illinois legislature likely will not consider any further reform proposals until 2024. Given the bleak outlook of the law as it stands, it is imperative that businesses immediately ensure they are compliant with the BIPA.

July 19, 2023 by Gerald L. Maatman, Jr.

D.C. Circuit Issues A “How-To” Ruling Regarding Issue Certification For Rule 23 Class Actions

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

Duane Morris Takeaways: On July 18, 2023, the U.S. Court of Appeals for the District of Columbia Circuit ruled that district courts must analyze the predominance and superiority requirements for certification of a class action when considering an “issue class” under Rule 23(c). In Harris v. Medical Transportation Management, Inc., No. 22-7033 (D.C. Cir. July 18, 2023), the three-judge panel ruled that the district court erred when it certified an “issue” class under Rule 23(c)(4) without first undertaking an analysis of whether the class certification prerequisites of Rule 23(a) and 23(b) had also been satisfied. The case was remanded for further proceedings. The D.C. Circuit’s decision ought to be required reading for employers with large workforces and those dealing with wage & hour class actions. It bears watching whether the district court’s analysis of the rigorous requirements of Rule 23(b) on remand also results in a pro-certification decision, given the instructions provided on remand.

Case Background

In Harris, the named plaintiffs were non-emergency medical drivers for the defendant, a company that provides transportation to individuals on public assistance who require transit getting to medical appointments. They alleged that they and a class of other drivers who they seek to represent in a class action lawsuit were denied minimum and overtime pay in violation of District of Columbia and federal wage and hour laws. Slip op. at 5-6.

Whether defendant MTM could as a matter of law be held liable as the drivers’ employer is a threshold question in the litigation. Id. at 6. The district court certified issues classes as to (i) whether MTM is the drivers’ joint employer (along with its sub-contractors); and (ii) whether MTM is a general contractor under D.C. law and thus strictly liable. Id. at 8. The district court did so despite finding previously that the predominance requirement of Rule 23(b)(3) was not met under the facts of the case specifically as they relate to the payment system for the drivers. Id. at 7-8.

MTM appealed the issue certification ruling.

The D.C. Circuit’s Decision

In a straightforward ruling, but one that delves into the complexities of Rule 23 with law-professor like precision, the D.C. Circuit panel consisting of Judges Millett, Childs and Rogers determined that the district court could not certify the issue classes under Rule 23(c)(4) without deciding whether those classes also meet the requirements of Rule 23(a) – commonality and typicality – and 23(b) – predominance and superiority. In essence, the D.C. Circuit read the plain language of Rule 23 and observed that sub-sections (a), (b) and (c) all bear on the certification inquiry conducted by the district court and therefore must be considered on an equal basis. Id. at 14-15.

In the penultimate statement of the holding, Judge Childs opined that “Rule 23’s text and structure offer no quarter to the view that Rule 23(c)(4) creates an independent type of class action that is freed from all of Rule 23’s other class action prerequisites. So the district court should have ensured that the issue class that it certified met all, and not just some, of Rule 23(a) and (b)’s preconditions to class status.” Id. at 15-16.

The D.C. Circuit instructed the district court that it must analyze on remand each of the potential class actions available under Rule 23(b)(3)’s predominance analysis. Id. at 19-20. It discussed various ways in which Rule 23(c)(4) can be applied in the context of the joint employer analysis that is at issue in Harris, such as bifurcating the liability issue from remedial claims, or where affirmative defenses may muddy the waters of class-wide evidence in a certified issues class. Id. at 21-22.

In a similar vein, Judge Childs instructed that summary judgment motions on discrete issues represent another way in which district courts could management issue certified class actions where the predominance of individualized issues threaten to overrun the common proof. Id. at 24-25.

Implications For Employers

The D.C. Circuit opinion in Harris v. MTM provides corporate counsel and executives a clear and easily understandable explanation of how Rule 23(b) and (c) intersect with one another when an issue class or classes are certified in class action litigation. District courts cannot certify issue classes under Rule 23(c)(4) without undertaking the rigorous analysis required to conclude that a class action is superior and manageable, that common issues will predominate over individualized issues, and that there are common and typical issues to be resolved in the first place. And by suggesting specific mechanisms that a district court has at its disposal for case management purposes such as targeted summary judgment motions, the decision provides reasonable strategies to consider when facing class action litigation.

July 10, 2023July 20, 2023 by Gerald L. Maatman, Jr.

Ninth Circuit Finds Article III Standing Under The TCPA For Owner Of Registered Phone With Third-Party User

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

Duane Morris Takeaways: On June 30, 2023, in Kristen Hall v. Smosh Dot Com, Inc., DBA Smosh, et al., No. 22-16216 (9th Cir. June 30, 2023), the Ninth Circuit reversed the district court’s dismissal for lack of Article III standing of a class action under the Telephone Consumer Protection Act (the “TCPA”) and remanded the claim for further proceedings. In doing so, the Ninth Circuit held that the owner and subscriber of a phone with a number listed on the Do-Not-Call Registry suffers an injury in fact when unsolicited telemarking calls or texts are sent to the number even if the communications are intended for or solicited by another individual or someone else is using the phone at the time the messages are transmitted. In so holding, the Ninth Circuit established that the receipt of unsolicited phone calls or text messages in violation of the TCPA is a “concrete injury in fact sufficient to confer Article III standing” even if the individual bringing the claim was not the phone’s primary user. As a result, the ruling is required reading for any corporate counsel dealing with TCPA class action litigation.

Case Background

Plaintiff Kristen Hall, a resident of Willis, Texas, was in possession of a cellular phone that was used primarily for residential purposes and, at times, provided to her 13-year old son to use in his free time. Hall, No. 22-16216, at 5-6. Plaintiff placed this number on the National Do-Not-Call Registry in order to avoid invasive and irritating solicitation calls and to protect her son from any potential threats. Id. Plaintiff alleged that she was the owner and subscriber of the cell phone at issue and that she listed its number on the Do-Not-Call Registry. Id. at 9.

On or around November 3, 2019, Defendants – who are digital content creators producing “sketch comedy” for an adolescent audience and selling merchandise that relates to their digital content – obtained the personal information for Plaintiff’s son and sent him at least five text messages between December 25, 2019, and June 29, 2020. Id. These texts specifically solicited business and offered discounts on products offered by Defendant Smosh Dot Com, Inc., which Plaintiff alleged was “irritating, exploitative, and invasive” and “precisely the type of communications she sought to avoid when she registered her number on the Do Not Call [R]egistry.” Id. Plaintiff’s First Amended Complaint alleged that Defendants violated § 227(c) of the Telephone Consumer Protection Act (“TCPA”) by sending text messages to numbers listed on the National Do-Not-Call Registry. Id.

Defendants moved to dismiss the First Amended Complaint for failure to state a claim and for lack of standing. They argued that Plaintiff lacked Article III standing because she failed to plead that she was the user of the phone or actually received any of the soliciting text messages from Defendants. Id. at 6-7. Specifically, Defendants argued that because she provided the phone to her son, Plaintiff was not the actual user of the phone or the actual recipient of the messages and, therefore, did not suffer an injury and was instead attempting to assert the legal right of a third party. Id. at 9-10. The district court granted the motion to dismiss on the basis that Plaintiff did not have Article III standing merely because she was the subscriber/owner of the phone while not addressing any of the merits issues. Id. at 7. Plaintiff appealed this ruling. Id.

The Ninth Circuit’s Ruling

The Ninth Circuit reversed the district court’s ruling.

It held that Plaintiff had Article III standing to bring the claims under the TCPA. The Ninth Circuit noted that it was well established that unsolicited telemarketing phone calls or text messages in violation of the TCPA is a concrete injury in fact that, itself, is enough to confer Article III standing. It cited to Van Patten v. Vertical Fitness Grp., LLC, 847 F.3d 1037, 1043 (holding that “[u]nsolicited telemarketing phone calls or text messages, by their nature, invade the privacy and disturb the solitude of their recipients). Id. at 8. Importantly, the Ninth Circuit made clear that the relevant question for Article III standing is whether Plaintiff suffered a cognizable injury. Id. at 12. The Ninth Circuit reasoned that because a violation of the TCPA is a “concrete injury,” and the Do-Not-Call provisions of the TCPA proscribe unsolicited calls and text messages to phone numbers on the Do-Not-Call Registry, Plaintiff’s allegations that she received unsolicited text messages on a number on the registry were sufficient to confer standing. Id.

To reach this holding, the Ninth Circuit found no precedent that the owner of a cell phone also must be the primary or customary user to be injured by unsolicited phone calls or text messages. Id. at 13. The Ninth Circuit reasoned that requiring a certain level of phone usage to be a prerequisite for standing would go against Congress’ intention of preventing individuals on the Do-Not-Call Registry from receiving unsolicited text messages. Id. The Ninth Circuit also opined that this holding would not prevent other users of the phone from bringing claims, as they may also suffer a concrete injury from an unwanted call or text message. Id.

Importantly, the Ninth Circuit did not address the merits of Plaintiff’s claim, and refused to discuss Defendants’ contention that Plaintiff’s son solicited the text messages by signing up for telecommunications through an online form. Id. Instead, the Ninth Circuit held that, even if Plaintiff’s son solicited the messages, therefore affecting the merits of her claim, Plaintiff still had standing to bring her own claim by the virtue of her status as the subscriber and owner of the phone. Id. at 14. The Ninth Circuit additionally did not address the question of whether a subscriber would have Article III standing to litigate a TCPA claim if he or she authorized a third-party user to provide consent to a telemarketer, leaving that question open for the district court to discuss on remand. Id. at 9.

Key Takeaways

The Ninth Circuit has now established that all that is required for Article III standing under the TCPA is the receipt of unsolicited text messages or phone calls to a number owned or subscribed to by an individual and found on the Do-Not-Call Registry, even if that individual is not the primary user of the phone.

This ruling curtails attacks on the pleadings by TCPA defendants, especially with the language included by the Ninth Circuit that standing is “not exclusive” and numerous subscribers/users can bring TCPA claims. However, with the Ninth Circuit leaving open the question of whether a subscriber would have standing if he or she authorized a third-party user to provide consent to receive telemarketing, companies defending TCPA claims still may have a path forward to attacking standing for subscribers of phones on the Do-Not-Call Registry with third-party users. Until then, companies should be cognizant that even if a phone user solicited communications by signing up for those communications, the phone subscriber will still have standing to bring a claim under the TCPA.

July 7, 2023December 1, 2023 by Gerald L. Maatman, Jr.

Texas Federal Court Finds That The Final DOL 80/20 Rule Is Still In Play…At Least For Now

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

Duane Morris Takeaways: On July 6, 2023, in Restaurant Law Center, et al. v. U.S. Department of Labor, No. 1:21-CV-1106 (W.D. Tex. July 5, 2023) (ECF No. 67), federal district judge Robert Pitman of the U.S. District Court for the Western District of Texas denied the Restaurant Groups’ motion for preliminary injunction as to the new “80/20 Rule” – after being reversed by the Fifth Circuit several months prior – and denied the Restaurant Groups’ motion for summary judgment and granted the Department of Labor’s (“DOL”) motion for summary judgment. Judge Pitman determined that the DOL’s decision to construct and enforce the Final Rule was a permissible construction of the Fair Labor Standards Act (“FLSA”) and is not arbitrary and capricious. ECF 67 at 28. The ruling is nowhere close to the end of this litigation and the service and hospitality industry should pay close attention to what comes next as the Restaurant Law Center will inevitably appeal the district court’s decisions to the Fifth Circuit and as the U.S. Supreme Court has decided to reconsider the authority of agencies during the next term. The next set of decisions will be part of a broader analysis of the rules regarding tip credit, and more generally, the DOL’s authority.

The Final Rule

In late 2021, the DOL revived and revised the 80/20 Rule by providing that employers can utilize the tip credit only so long as 80 percent or more of the work is tip-producing, and not more than 20 percent is “directly supporting work.” See 29 C.F.R. § 531.56. Under the Final Rule, no tip credit can be taken for any non-tipped work. “Tip-producing work” is defined as work the employee performs directly providing services to customers for which the employee receives tips (i.e., taking orders and serving food). “Directly supporting work” is defined as work that is performed by a tipped employee in preparation of or to otherwise assist tip-producing customer service work (i.e., rolling silverware and setting tables). Non-tipped work includes preparing food or cleaning the kitchen, dining room, or bathrooms.

The Final Rule also includes a new requirement that an employer cannot utilize the tip credit when an employee performs more than 30 consecutive minutes of “directly supporting work.” Directly supporting work done in intervals of less than 30 minutes scattered throughout the workday would not invalidate the tip credit, subject to the 80/20 Rule. However, employers must pay minimum wages for “directly supporting work” performed after the lapse of the first 30 continuous minutes.

Procedural Background

In December 2021, the Restaurant Law Center challenged the Final Rule in the U.S. District Court in the Western District of Texas, on the grounds that, among other things, it violated the Fair Labor Standards Act. Restaurant Law Center, No. 1:21-CV-1106 at 4. The Texas federal district court denied the preliminary injunction after finding that the Plaintiffs failed to show that they would suffer irreparable harm absent the preliminary injunction. Id.

On April 28, 2023, the Fifth Circuit reversed the Texas federal district court, finding that the Restaurant Groups “sufficiently showed irreparable harm in unrecoverable compliance costs . . . .” Rest. L. Ctr. v. U.S. DOL, 66 F.4th 593, 595 (5th Cir. 2023). Significantly, the Fifth Circuit noted that that compliance costs would likely be necessary to track the number of minutes worked on nontipped labor and that the new 30-minute rule would impose additional monitoring costs. Id. The Fifth Circuit remanded the case for further proceedings. Id. [Our previous blog post on that ruling is here.]

The Texas Federal District Court’s Decision on Summary Judgment

At the second go-around, the district court had two fully-briefed motions, including: (1) the Restaurant Groups’ motion for preliminary injunction; and (2) the parties’ cross-motions for summary judgment. The district court denied the Restaurant Groups’ motion for summary judgment and granted the DOL’s cross-motion for summary judgment after finding that, contrary to the Restaurant Groups’ assertions, the DOL’s decision to construct and implement the Final Rule was a permissible construction of the FLSA and is not arbitrary and capricious. Id. at 28. In addition, the Texas federal district court denied the Restaurant Groups’ motion for preliminary injunction after finding that the Restaurant Groups did not succeed, and were likely not to succeed, on the merits of the case, that the balance of equities did not tip in the Restaurant Groups’ favor, and that an injunction was not in the public interest. Id.

In determining the Final Rule’s validity, the district court used a two-step framework articulated in Chevron, USA, Inc. v. Natural Resources Def. Council, Inc., 467 U.S. 837 (1984). Id. at 8. Under Chevron, if a statute has a gap that needs to be filled, Congress gave the agency administering the rule, rather than courts, authority to resolve it. Id. The district court found that Chevron deference applied to the case because Congress “delegated authority to the agency generally to make rules carrying the force of law,” and that the Final Rule “was promulgated in the exercise of that authority.” Id. at 10.

The federal district court also analyzed the FLSA’s text, structure and purpose, and legislative history, and found that, contrary to the Restaurant Group’s assertions, the statute was ambiguous. Id. at 17. The district court explained that “Congress has crafted an ambiguous statute and tasked DOL with implementing the ambiguous provisions,” and the Court “must defer to the agency’s regulation so long as it is not arbitrary, capricious, or manifestly contrary to the statute.” Id. at 17. The district judge further found that the Final Rule “accomplishes” the purposes of the FLSA “by adopting a ‘functional test’ to determine when an employee may be considered engaged in a tipped occupation.” Id. at 19.

Significantly, the district court also considered whether the Major Questions Doctrine was triggered, as discussed in West Virginia v. EPA, 142 S. Ct. 2587 (2022). Id. at 24. The district court found that the Major Questions Doctrine was not triggered because an agency action was only considered to be of “vast economic significance” if it requires “billions of dollars in spending.’” Id. at 25. The district court found that the DOL “pointed out that the average annual cost of the Rule in this case is $183.6 million” and explained that this amount was “far less than the billions considered in the cited cases. Id. The district court further opined that the “DOL has been interpreting the tip credit provision of the FLSA, as well as its other provisions, for decades.” Id.

The Texas Federal District Court’s Decision on the Preliminary Injunction

In addition, as instructed by the Fifth Circuit, the district court reconsidered the Restaurant Groups’ Motion for Preliminary Injunction. At the outset, the district court noted that “[a]lthough a failure to show likelihood of success on the merits is grounds alone for denial of a preliminary injunction, the Court will address the two remaining Rule 65 factors pursuant to the Fifth Circuit’s mandate to ‘proceed expeditiously to consider the remaining prongs of the preliminary injunction analysis.’” Id. at 26 (citing Rest. L. Ctr., 66 F.4th at 600). Despite the Fifth Circuit’s finding that Restaurant Groups will suffer irreparable harm because their compliance costs are non-recoverable, Rest. L. Ctr, 66 F.4th at 595, in balancing the equities, the district court essentially found the opposite – – that the Restaurant Groups, again, failed to show irreparable harm from complying with the Final Rule. See id. at 26-27.

Significantly, the Fifth Circuit previously disagreed with the DOL’s assertion that “employers need not engage in ‘minute to minute’ tracking of an employee’s time in order to ensure that they qualify for the tip credit.” Rest. Law Ctr., 66 F.4th at 599 (“No explanation is given (nor can we imagine one) why an employer would not have to track employee minutes to comply with a rule premised on the exact number of consecutive minutes an employee works.”). Contrary to the Fifth Circuit, the district court agreed with the DOL and found that “restaurants must already monitor the amount of time employees spend on non-tipped labor under the 80/20 rule, and the new 30-minute rule does not impose a new form of monitoring.” ECF 67 at 26. In addition, the district court noted that it is not clear that the Rule imposes significantly greater costs than restaurants incurred under the preexisting guidance because the Restaurant Groups failed to “provide an estimate of this additional monitoring.” Id. In essence, contrary to the Fifth Circuit’s Order, the district court, again, “emphasized the weakness of [the Restaurant Groups’] evidence.” Rest. Law Ctr., 66 F.4th at 598 (“For instance, the court found [the Restaurant Groups] claimed ongoing costs “to be overstate[d]” because the rule does not require “the level of detailed monitoring of which [the Restaurant Groups] warn. . . [this point is] meritless”).

Further, the district court explained that eighteen months had passed since the parties filed their briefs on the preliminary injunction, and that the Rule took effect on December 28, 2021 and has remained in place. Id. Without citing to any evidentiary support, the district court noted that “[r]estaurants and DOL have complied with the Rule since that time.” Id. at 27.

Moreover, similar to the district’s court’s first order, which was reversed by the Fifth Circuit, the district court explained “that even if there are ongoing management costs, the most significant compliance costs associated with the Rule were familiarization and adjustment costs, which have now already been incurred, and that granting an emergency motion to rescind the Rule now cannot undo these costs, and may very well force restaurants to incur additional costs adjusting to the policy that takes its place.” Id. Ultimately, the district court found that the Restaurant Groups’ “compliance costs do not outweigh the substantial harm that DOL may endure from essentially starting from scratch on a rule that serves to codify long-standing guidance.” Id.

Thus, the district court found that even if Restaurant Groups showed a likelihood of success on the merits, “neither the balance of equities nor the public interest would support a nationwide preliminary injunction.” Id. at 28.

Implications For The Service & Hospitality Industry

The fight to end and/or limit the Department of Labor’s authority and promulgation of the tip credit rule is far from over. Although the Texas federal district court sent a clear indication that it did not agree with the Fifth Circuit’s decision, and that it would not disturb the Department of Labor’s authority, the service and hospitality industry should be watchful for what has yet to come. The Restaurant Law Center will undoubtedly appeal both of the Texas federal district court’s rulings, and the Fifth Circuit has already indicated that preventing enforcement of the Final Rule may be on the horizon. Moreover, the Supreme Court’s decision to reconsider the Chevron doctrine in Loper Bright Enterprises v. Gina Raimondo, Case No. 22-451 – which will be heard in the next term – to the extent that it narrows or eliminates federal courts’ deference to agencies’ decisions, could substantially impact the agenda the Department of Labor can pursue. The service and hospitality industry should stay tuned for the Fifth Circuit’s rulings in Restaurant Law Center and Supreme Court’s forthcoming ruling Loper Bright Enterprises.

July 1, 2023 by Gerald L. Maatman, Jr.

California District Court Gives Green Light To BIPA Claims Brought Against YouTube

By Gerald L. Maatman, Jr. and Tyler Z. Zmick

Duane Morris Takeaways: In Colombo v. YouTube, LLC, et al., No. 22-CV-6987, 2023 WL 4240226 (N.D. Cal. June 28, 2023), the U.S. District Court for the Northern District of California issued a decision embracing a broad interpretation of the data types that are within the scope of the Illinois Biometric Information Privacy Act (“BIPA”). The decision puts businesses on notice that the statute may apply to the collection or possession of any “scan of face geometry,” regardless of whether the scan can be used to identify a specific individual – – in other words, a “biometric identifier” under the BIPA need not be capable of “identifying” a person. Colombo v. YouTube, LLC is required reading for corporate counsel facing privacy class action litigation.

Background

Plaintiff’s BIPA claims were premised on two YouTube video editing tools that allegedly resulted in the collection of his “biometric identifiers” and “biometric information” (collectively, “biometric data”) – YouTube’s (1) “Face Blur” tool and (2) “Thumbnail Generator” tool. Id. at 2-3. According to Plaintiff, the “Face Blur” tool enables a user to select faces appearing in videos uploaded by the user that he or she may wish to “blur,” resulting in those faces appearing blurry and unrecognizable to any viewer of the videos. Plaintiff claimed that when someone uses the tool, YouTube scans the uploaded video “to detect all unique faces” and, in doing so, “captures and stores scans of face geometry from all detected faces, creating a unique ‘faceId’ for each.” Id. at 2 (citation omitted).

Regarding YouTube’s “Thumbnail Generator” feature, Plaintiff described the tool as auto-generating photographic thumbnails (i.e., screenshots from an uploaded video) by scanning videos for faces at the time they are uploaded and using the “face data to auto-generate thumbnails that contain faces.” Id. (citation omitted).

Based on his alleged use of these two YouTube tools, Plaintiff alleged that YouTube violated Sections 15(a) and 15(b) of the BIPA by (i) failing to develop and comply with a written policy made available to the public establishing a retention policy and guidelines for destroying biometric data, and (ii) collecting his biometric data without providing him with the requisite notice and obtaining his written consent.

YouTube moved to dismiss on three grounds, arguing that: (1) Plaintiff failed to allege that data collected by YouTube qualifies as “biometric data” under the BIPA because YouTube did not (and could not) use the data to identify Plaintiff or others appearing in uploaded videos; (2) Plaintiff’s claims violated Illinois’s extraterritoriality doctrine and the dormant Commerce Clause; and (3) Plaintiff failed to allege that he was “aggrieved” for purposes of his Section 15(a) claim.

The Court’s Decision

The Court denied YouTube’s motion to dismiss on all three grounds.

“Biometric Identifiers” And “Biometric Information”

YouTube first argued that Plaintiff failed to allege that data collected through the Face Blur and Thumbnail Generator tools qualify as “biometric data” under the BIPA because Plaintiff did not plausibly allege that YouTube could use the data to affirmatively identify Plaintiff or other individuals. See id. at 4 (“In YouTube’s view, biometric identifiers must identify a person and biometric information must actually be used to identify a person.”).

The Court rejected YouTube’s argument, stating that “[t]he “point is not well taken.” Id. The Court noted the statute’s definition of “biometric identifier” as “a retina or iris scan, fingerprint, voiceprint, or scan of hand or face geometry,” see 740 ILCS 14/10 – a definition that does not explicitly require that the listed data points be capable of identifying a particular person. While the Court acknowledged that the term “identifier” may suggest that the data must be used to identify a person, the Court also opined that “‘[w]hen a statute includes an explicit definition, we must follow that definition,’ even if it varies from a term’s ordinary meaning.” Id. at 4 (citation omitted); see also id. at 5 (“[T]he Illinois legislature was perfectly free to define ‘biometric identifier’ in a specific manner that is not tethered to the plain meaning of the word ‘identifier’ alone.”).

Extraterritoriality & Dormant Commerce Clause

The Court also rejected YouTube’s arguments that Plaintiff failed to allege that YouTube’s relevant conduct occurred “primarily and substantially” in Illinois, and Plaintiff’s interpretation of the BIPA would run afoul of the dormant Commerce Clause.

The Court held that Plaintiff sufficiently alleged that YouTube’s conduct occurred “primarily and substantially” in Illinois, thereby satisfying the extraterritoriality doctrine. Id. at 5. Responding to YouTube’s argument that the company’s headquarters and data servers are located outside of Illinois, the Court stated that those facts are “not dispositive” and that “[m]aking the geographic coordinates of a server the most important circumstance in fixing the location of an Internet company’s conduct would . . . effectively gut the ability of states without server sites to apply their consumer protection laws to residents for online activity that occurred substantially within their borders.” Id. at 6 (citation omitted).

Using the same reasoning, the Court concluded that “YouTube’s dormant Commerce Clause theory fares no better” because YouTube’s allegedly BIPA-violating conduct “cannot be understood to have occurred wholly outside Illinois,” id. at 7 (citation omitted) – i.e., Plaintiff’s claims were based on the application of an Illinois law to Illinois-based YouTube users.

Whether Plaintiff Is “Aggrieved” Under Section 15(a)

Finally, the Court rejected YouTube’s argument that Plaintiff failed to allege that he was “aggrieved” under Section 15(a), which sets forth two requirements for entities in possession of biometric data: (i) to develop a publicly available BIPA-compliant retention policy; and (ii) to comply with that policy. YouTube argued that Plaintiff failed to allege that he was aggrieved under Section 15(a) because he did not claim that YouTube failed to comply with an existing retention policy as to his biometric data (e.g., that three years had passed since his last interaction with YouTube, yet YouTube had failed to destroy his biometric data).

The Court observed, however, that Plaintiff alleged that YouTube failed to develop and “therefore failed to comply with any BIPA-compliant policy,” which “is enough to move forward . . . [a]t the pleadings stage.” Id. at 8 (emphasis added) (citation omitted).

Implications For Corporate Counsel

Colombo can be added to the list of recent plaintiff-friendly BIPA decisions, as it endorses an expansive view of the types of data that constitute “biometric data” under the statute. Indeed, the Colombo ruling suggests that any data that can be characterized as a “scan of face geometry” – regardless of whether the scan can be linked to a specific person to identify him or her – qualifies as a “biometric identifier” within the BIPA’s scope. Put another way, technology capable of only detecting a category of objects or characteristics in a photo or video (e.g., software that identifies the location of a human face in a photo – as opposed to an arm or leg – without being able to link that face to a specific person) may involve data subject to regulation under the BIPA.