George Schaller – Page 2 – Class Action Defense

September 26, 2025 by Gerald L. Maatman, Jr.

Florida Court Finds No Standing For “Disappointed” Consumers In Class Action Lawsuit Concerning Halloween-Themed Candies

By Gerald L. Maatman, Jr., George J. Schaller, and Andrew P. Quay

Duane Morris Takeaways: On September 19, 2025, in Vidal, et al. v. The Hershey Co., No. 24-CV-60831, 2025 U.S. Dist. LEXIS 184308 (S.D. Fla. Sept. 19, 2025), Judge Melissa Damian of the U.S. District Court for the Southern District of Florida dismissed a class action complaint alleging violations of the Florida Deceptive and Unfair Trade Practices Act for deceptive candy packing. The Court held the plaintiff-consumers failed to plausibly allege an economic injury, and therefore, lacked Article III standing. Plaintiffs’ allegations that they were “disappointed” with the lack of carved designs on Halloween-themed candy and blanket assertions that they “paid a premium” was not enough to sustain an economic injury.

The decision illustrates that conclusory statements, without an economic injury, are not enough to confer Article III standing. Though the ruling demonstrates “spooky” claims for deceptive labeling and deceptive advertising can support a potential class action, the Plaintiffs here could not show they sustained an economic injury.

Case Background

Plaintiffs Nathan Vidal and Eduardo Granados, on behalf of themselves and a putative class of consumers, filed a class action complaint against The Hershey Company (“Hershey”). Plaintiffs alleged they purchased certain decorative Reese’s products in Florida and that these products “misled” them in violation of the Florida Deceptive and Unfair Trade Practices Act. Id. at *4

Plaintiffs asserted they would not have purchased Reese’s Peanut Butter Pumpkins and Reese’s White Pumpkins had they known that the products did not contain detailed carvings of eyes and a mouth as pictured on the packaging. Id. at *3-4. Plaintiffs maintained “Hershey [] deceived reasonable consumers … into believing the [p]roducts were something that they were not.” Id. at *5. In true Halloween horror story fashion, Plaintiffs claimed that without the carvings and designs the products were “worthless” and that they would not have purchased them. Id. at *14.

Hershey moved to dismiss for lack of subject-matter jurisdiction or, in the alternative, for failure to state a claim, Hersey also moved to strike Plaintiffs’ class action allegations. Id. at *4.

Hershey primarily argued Plaintiffs lacked standing because “they suffered no injury-in-fact.” Id. at *6. Hershey maintained Plaintiffs lacked standing because they only alleged an economic injury. Hershey however contended Plaintiffs did not suffer an economic injury because they still received “delicious Reese’s candy.” Id. Even still, Hershey countered that most of the at-issue products, contained “DECORATING SUGGESTION” disclaimers and both carved and uncarved images. Id. at * 7. Hershey similarly highlighted that Plaintiffs did not allege the products were defective, inedible, did not meet taste/flavor expectations, or that they lost any economic value without the decorative carvings. Id. at *14.

While Hershey’s motion was pending, Plaintiffs moved for class certification arguing they satisfied all the requirements under Rule 23 to certify a class of consumers who purchased any of the at-issue Reese’s products “based on a false and deceptive representation of an artistic carving” on the products packaging. Id. at *5.

The Court’s Decision

The Court dismissed Plaintiffs’ complaint because they did not allege a concrete economic injury and therefore lacked standing to pursue their personal claims and class claims.

In dismissing Plaintiffs’ complaint, the Court reasoned the Eleventh Circuit’s analysis of standing emphasizes that “[e]conomic injuries are the ‘epitome’ of concrete injuries,” and that such an economic injury can be the “result of a deceptive or unfair practice” where an individual is “deprived of the benefit of her bargain.” Id. at *15. In analyzing the benefit of the bargain a plaintiff’s damages are calculated based on “the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered according to the contract of the parties.” Debernardis v. IQ Formulations, LLC, 942 F.3d 1076, 1084 (11th Cir. 2019) (citing Carriuolo v. Gen. Motors Co., 823 F.3d 977, 986-87 (11th Cir. 2016)).

The Court relied on two analogous cases in considering Plaintiffs’ economic injury assertions. The first case concerned “honey-lemon cough drops” that “soothe[] sore throats” and based on those representations the “plaintiff believed that the cough drops contained lemon ingredients and were capable of soothing bronchial passages.” Id. at *17-18 (citing Valiente v. Publix Super Markets, Inc., 2023 U.S. Dist. LEXIS 91089 (S.D. Fla. May 24, 2023)). The Court in Valiente held plaintiff failed to allege an economic injury because the plaintiff did not allege the cough drops were defective, did not work as advertised, or were otherwise so flawed to render them worthless. Id. at *18.

The second case concerned plaintiffs who alleged they “paid a premium price” for “protein-infused brownies” that contained less than the advertised protein content. Id. at *18 (citing Melancon v. Alpha Prime Supps, LLC, 2025 U.S. Dist. LEXIS 21114 (S.D. Fla. Jan. 13, 2025). The Court in Melancon held plaintiffs failed to allege they suffered an economic injury for the same reasons as Valiente and also failed to identify any competing products for the Court to plausibly conclude that plaintiffs suffered a concrete injury in fact. Id.

Based on these cases, the Court agreed that “Plaintiffs here fail to allege Reese’s Products they purchased were defective or worthless.” Id. The Court explained “[p]ut simply, Plaintiffs do not allege that the products were unfit for consumption, did not taste as Plaintiffs expected, or otherwise were so flawed as to render them worthless.” Id. a

The Court reasoned Plaintiffs’ disappointment and conclusory allegations as to why they were deprived of the benefit of their bargain merely reflected their subjective, personal expectations of how the candies would or should have looked when unpackaged. Id. The Court held Plaintiffs’ failure to tie the value of the candies to their purported misrepresentation theory did not plausibly allege a concrete economic injury for purposes of Article III standing. Id. at *19. Further, the Court reasoned Plaintiffs made no allegations that would allow any measurement of “the difference between the value of the Reese’s Products with or without the decorative carvings.” Id.

The Court also determined Plaintiffs’ “[c]omplaint contain[ed] nothing more than allegations of Plaintiff’s subjective belief that they paid a price premium” and these blanket allegations were not enough to allege a concrete injury. Id. at *19-20.

Accordingly, the Court dismissed Plaintiffs’ complaint finding “Plaintiffs lack Article III standing to assert a claim for relief” individually or on behalf of a purported class. Id. at *20. The Court dismissed Plaintiffs’ complaint without prejudice preserving Plaintiffs’ ability to move for leave to amend within 15 days from the date of the Court’s Order. Id. at *23.

Implications For Companies

Companies faced with consumer fraud class action lawsuits alleging theories of false advertising and deceptive practices related to their products must consider standing at the outset of any litigation.

Vidal illustrates the importance of analyzing Article III standing issues in every lawsuit. The Vidal Plaintiffs did not allege a sufficient economic injury based on their personal expectations of how Halloween-themed candies should have looked and did not allege the candies were defective, flawed, or reduced the actual value of the product. Accordingly, the Court subjected their claims to dismissal.

Companies should not treat defective or false advertising product class action claims lightly, and if faced with such a lawsuit, Companies must consider all available defenses.

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

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

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

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

Background

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

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

Key Provisions Of California’s AI Employment Regulations

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

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

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

Implications For Employers

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

August 6, 2025August 6, 2025 by Gerald L. Maatman, Jr.

The Seventh Circuit Raises The Bar For Conditional Certification Under The FLSA And The ADEA

By Gerald L. Maatman, Jr., Ryan T. Garippo, and George J. Schaller

Duane Morris Takeaways: On August 5, 2025, in Richards, et al. v. Eli Lilly & Co., et al., No. 24-2574, 2025 U.S. App. LEXIS 19667 (7th Cir. Aug. 5, 2025), the Seventh Circuit issued an opinion that vacated and remanded a district court’s decision to conditionally certify a group of potential opt-in plaintiffs in an Age Discrimination in Employment Act (“ADEA”) collective action. The opinion breaks new ground on the contours of 29 U.S.C. Section 216(b), and as a result, also applies to conditional certification of wage & hour collective actions under the Fair Labor Standards Act (“FLSA”). The opinion elucidates the standards for notice in FLSA collective actions. While the opinion is undoubtedly a win for employers, only time will tell the scope of the win, as this opinion ultimately may create more questions than it answers.

Background

In 2022, Monica Richards (“Richards” or “Plaintiff”) sued Eli Lilly & Co and Lilly USA, LLC (collectively, “Eli Lilly”), the international pharmaceutical manufacturers and her one-time employer, alleging discrimination under the ADEA. The ADEA incorporates the FLSA’s “enforcement provision, permitting employees to band together in collective actions when suing an employer for age discrimination.” Id. at *3. Richards, as a result, alleged that Eli Lilly promoted younger employees in violation of the ADEA.

Shortly after she filed her lawsuit, Richards “moved to conditionally certify a collective action, asserting that the unfavorable treatment she experienced was part of a broader pattern of age discrimination against Eli Lilly’s older employees.” Id. at *9. “Conditional certification” of such claims has traditionally been thought of in two steps. At the first step, an employee moves for conditional certification, i.e., to send notice of the lawsuit, to all individuals that he or she contends are similarly situated to him or her. Drawing on a District Court of New Jersey opinion from 1987, Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987), many courts hold that the employee has a light burden at this stage, and thus rely solely on the plaintiff’s allegations, and do not consider competing evidence submitted by the employer.

If the employee’s motion is granted, as they are with exceedingly high rates, those individuals covered by the collective action definition receive notice of the lawsuit and then have the ability to opt-in as party plaintiffs to the case and participate in discovery. At the close of discovery, if the case has not settled, the employer can then move to decertify the conditionally certified collective action, and prove the employees are not similarly situated, which results in the opt-in plaintiffs’ claims being dismissed without prejudice if successful.

In this case, the fight over the applicability of Lusardi took center stage as it has in many other collective actions. In recent years, the Fifth and Sixth Circuit Courts of Appeal, have found that Lusardi’s two step approach is inconsistent with the text of the FLSA. Swales v. KLLM Transp. Servs., LLC, 985 F.3d 430 (5th Cir. 2021); Clark v. A&L Homecare & Training Ctr., LLC, 68 F.4th 1003 (6th Cir. 2023). In Swales, 985 F.3d at 443, the Fifth Circuit rejected Lusardi’s two-step approach outright, and required its district courts to “rigorously enforce” the FLSA’s similarity requirement at the outset of the litigation in a one-step approach. Similarly, in Clark, 68 F.4th at 1011, the Sixth Circuit adopted a comparable, but slightly more lenient standard, requiring the employee to show a “strong likelihood” that others are similarly situated to him or her before the district court can send notice.

In contrast, the Second, Ninth, Tenth, and Eleventh Circuits continue to either follow or allow the district court to adopt the two-step framework outlined in Lusardi. Harrington v. Cracker Barrel Old Country Store, Inc., 142 F.4th 678 (9th Cir. 2025); Thiessen v. Gen. Elec. Cap. Corp., 267 F.3d 1095 (10th Cir. 2001); Myers v. Hertz Corp., 624 F.3d 537 (2d Cir. 2010); Hipp v. Liberty Nat’l Life Ins. Co., 252 F.3d 1208 (11th Cir. 2001). This brewing circuit split gave rise to the dispute in Richards.

Against this backdrop, the district court in Richards ultimately followed Lusardi, and decided to send notice to the employees whom Richards contended were similarly situated to her. But Eli Lilly filed a motion for interlocutory appeal, which was subsequently granted, and the Seventh Circuit set out to opine on the circuit split for itself.

The Seventh Circuit’s Opinion

The Seventh Circuit, in an opinion written by Judge Thomas Kirsch, rejected the Lusardi framework but declined to go as far as Clark or Swales. The Seventh Circuit observed that the notice process should be facilitated by three guiding principles: (1) the timing and accuracy of notice; (2) judicial neutrality; and (3) the prevention of abuses of joinder. Richards, 2025 U.S. App. LEXIS 19667 at *14. It reasoned that the Lusardi standard threatened the latter two principles by “incentivizing defendants to settle early rather than attempt to ‘decertify’ at step two . . . transforming what should be a neutral case management tool into a vehicle for strongarming settlements and soliciting claims.” Id. at * 17. Thus, the Seventh Circuit rejected Lusardi, but what to do in the alternative was a more difficult question.

The Seventh Circuit decided that rather than endorse the rigid standards of Clark or Swales, its approach would be guided by “flexibility” and an analysis that is not an “all-or-nothing determination.” Id. at *19. Indeed, a plaintiff must now “make a threshold showing that there is a material factual dispute as to whether the proposed collective is similarly situated.” Id. at *21. Or, in other words, a plaintiff must “produce some evidence suggesting that they and the members of the proposed collective are victims of a common unlawful employment practice or policy.” Id, at *21-22. To counter a plaintiff’s evidence, an employer “must be permitted to submit rebuttal evidence and, in assessing whether a material dispute exists, courts must consider the extent to which plaintiffs engage with opposing evidence.” Id., at *22.It is not clear, however, the burden a plaintiff must satisfy to refute the defendant’s evidence to move forward.

In considering that threshold determination, the district court has the discretion to send notice or not.It also has the discretion to resolve some of the disputed issues, and narrow the scope of notice, or not. It also may authorize limited and expedited discovery to make the determination, or not. Id., at *24.It also has the discretion to allow a plaintiff to come forward with more evidence, or not. In essence, “[t]he watchword here is flexibility.” Id. And, with those principles in mind, the Seventh Circuit vacated and remanded for further proceedings consistent with the opinion.

Implications For Employers

The Seventh Circuit’s opinion is undoubtedly a win for employers, but the opinion introduces ambiguity into the equation with its focus on “flexibility.” See id. Plaintiffs in Illinois, Wisconsin, and Indiana can no longer rely on mere allegations to send notice and must wrestle with an employer’s evidence contradicting claims of a common unlawful policy or practice. This result is most certainly a win.

It is what comes next that is the problem. What is the level of scrutiny a district court must apply when deciding whether a plaintiff engaged with an employer’s evidence? Should a district court apply a one-step approach or two-step approach? Should it allow limited and expedited discovery? What is the standard to obtain such discovery? When should a court allow a plaintiff to come forward with more evidence? When should it not? All these questions go unanswered.

These unanswered questions continue to contribute to the procedural morass that employers must navigate in wage-and-hour collective actions under the FLSA. In addition to these questions, employers are also now navigating the 4-way circuit split on whether Lusardi applies at all and a separate circuit split, also discussed on our blog, regarding the applicability of Bristol Myers Squibb Co. v. Super. Ct. of Cal., 582 U.S. 255 (2017) to collective actions. With both issues ripe for consideration by the U.S. Supreme Court, corporate counsel facing a collective action should consider hiring experienced outside counsel to help navigate these complicated procedural issues and monitor this blog for further developments.

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

North Carolina Federal Court Dismisses Data Breach Class Action In Finding Bare Assertions Are Insufficient To Confer Standing

By Gerald L. Maatman, Jr., George J. Schaller, and Bernadette M. Coyle

Duane Morris Takeaways:

On June 30, 2025, in Panighetti, et al. v. Intelligent Business Solutions, Inc., No. 1:23-CV-209, 2025 U.S. Dist. LEXIS 123406 (M.D.N.C. June 30, 2025), Judge Loretta C. Biggs of the U.S. District Court for the Middle District of North Carolina granted Intelligent Business Solution’s (“IBS”) motion to dismiss a data breach class action and found that Plaintiff did not have standing under Article III because he failed to plead a concrete injury. Plaintiff alleged on behalf of himself, and over 11,000 other individuals, that IBS invaded his privacy and negligently failed to protect his personal informal following a data breach in 2022.

The decision in Panighetti shows a growing trend among federal courts finding claims based on future and/or speculative harm in data breach class actions are insufficient – without any concrete instance of personal information being stolen or misused –to establish Article III standing.

Case Background

IBS, a health information company, collects and maintains personal identifiable information and protected health information for healthcare entities. Plaintiff, a hospital patient that IBS provided services for, alleged that his personal information was part of a 2022 data breach. Id. at 1. Plaintiff further alleged the data breach exposed the names, Social Security numbers, medical treatment information, and health insurance information of an estimated 11,595 individuals. Id. at 2.

After IBS became aware of the data breach, it notified impacted individuals. Plaintiff maintained that by issuing this notification, IBS “created a present, continuing, and significant risk of suffering identity theft.” Id. On March 7, 2023, Plaintiff filed suit against IBS, alleging seven causes of action including negligence, invasion of privacy, unjust enrichment, and violation of the North Carolina Unfair Trade Practices Act. Id.

IBS moved to dismiss and asserted Plaintiff lacked Article III standing to bring his claims. IBS argued Plaintiff was “not able to plead facts that show there was actual misuse of data that resulted in identity theft, fraud, or another concrete injury-in-fact.” Id. at 4. Plaintiff countered that he had standing to sue “because the data breach harmed him, will harm him again, and requires him to expend resources mitigating that harm” and that these harms “confer standing” based on Fourth Circuit precedent. Id.

The Court’s Order

The Court granted IBS’s motion to dismiss. The Court held Plaintiff failed to establish standing. The Court reasoned that to proceed with a lawsuit, Article III requires a plaintiff to “demonstrate (1) an injury in fact; (2) causation; and (3) redressability.” Id. at 5 (citing David v. Alphin, 704 F.3d 327, 333 (4th Cir. 2013)).

On the first element, the Court explained that Plaintiff must show he “suffered an invasion of a legally protected interest which is concrete, particularized, and actual or imminent.” Id. Plaintiff argued that he was injured because the breach: “(1) exposed his medical records, thus invading his privacy; (2) exposed information criminals can use to commit fraud and steal his identity; (3) required him to spend resources to mitigate the risk; and (4) caused him to suffer from anxiety, sleep disruption, stress, fear, and frustration.” Id. Relying on Fourth Circuit precedent, the Court rejected Plaintiff’s argument that he was injured because of the data breach because nowhere in the pleadings did Plaintiff claim that he was a victim of identity theft or fraud, that risk of future theft was “certainly impending,” or provide instances of his personal information being exploited. Further, spending resources to mitigate the increased risk caused by the breach, where there was no misuse of data, was too speculative to confer standing.

Turning to Plaintiff’s claims of emotional harm, the Court opined that although the Supreme Court took no position on whether emotional harm confers standing in TransUnion v. Ramirez, Fourth Circuit precedent, in Beck, rejected a Plaintiff’s claims that “emotional upset” and “fear of future identity theft and financial fraud” was sufficient to confer standing. Id. at 8 (quoting Beck v. McDonald, 848 F.3d. 262 (4th Cir. 2017). Accordingly, the Court dismissed Plaintiff’s claims of emotional harm as “bare assertions of possible or potential harm.” Id.

Implications For Companies

Standing remains an effective defense for companies to challenge putative class actions at the responsive pleading stage especially, whereas here, Plaintiff failed to assert facts demonstrating harm stemming from a data breach.

Panighetti shows that data breach plaintiffs cannot rely on speculative injuries based on future harm to satisfy Article III standing requirements. However, companies asserting an Article III standing defense must consider the possibility of a class action plaintiff refiling in state court when determining whether to challenge standing in federal court.

June 18, 2025June 18, 2025 by Gerald L. Maatman, Jr.

Transgender Worker Can Intervene In Bias Suit After EEOC Moves To Dismiss Action With Prejudice

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

Duane Morris Takeaways: On June 05, 2025, in EEOC et al., v. Sis-Bro, Inc., Case No. 3:24-CV-00968 (S.D. Ill. June 5, 2025), Judge J. Phil Gilbert of the U.S. District Court for the Southern District of Illinois granted a transgender worker’s petition to intervene in an EEOC discrimination case against her former employer, after the Commission moved to permanently dismiss the lawsuit to comply with a January 2025 Executive Order issued by President Trump. The Court opined that while it “recognize[d] that it may not dictate what cases the EEOC pursues” given that this was “the exclusive purview of the Executive Branch,” the worker also deserved a fair opportunity to litigate her claims. Id. at 3. This decision is noteworthy for its unique procedural posture. During the first few months of the Trump Administration, the EEOC has realigned its enforcement priorities consistent with a flurry of executive orders, but, as this decision illustrates, the Commission’s pending enforcement actions may not be so easily dismissed to the extent a private litigant’s rights are implicated by the dismissal.

Case Background

In March 2024, the EEOC brought an employment discrimination case on behalf of charging party Rafael Figueroa a/k/a Natasha Figueroa, alleging her employer, Sis-Bro Inc., a pig farm, discriminated against her by creating a hostile work environment and constructively discharged her based on her sex and transgender status in violation of Title VII. Id. at 1. After surviving a motion to dismiss, the Court allowed Figueroa to intervene and assert state law tort and discrimination claims, all of which were either voluntarily dismissed, or dismissed by the Court without prejudice, shortly thereafter. While discovery was ongoing, Sis-Bro filed a partial motion for summary judgment on the issue of back pay, front pay, and reinstatement, asserting Figueroa was not entitled to such relief given she was not legally eligible to work in the U.S. Id. at 2.

While the partial motion for summary judgement was pending, the executive administration changed, and on January 20, 2025, President Trump issued Executive Order 14168, “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government.” After the Executive Order was issued, the EEOC moved to dismiss the action with prejudice, on the basis that continuing to litigate the matter would violate the Trump administration’s new Executive Order. Id.

As the EEOC’s motion to dismiss was pending, Figueroa sought to intervene a second time, filing yet another intervenor complaint asserting violations of Title VII (similar claims to that of the Commission), in addition to §1981 claims based on race, color, ethnicity, and national origin. Id. at 7. Figueroa did not request back pay, front pay, or reinstatement in her second intervenor complaint, but instead sought non-pecuniary and punitive damages, as well as attorneys’ fees. Id. at 3. In response, Sis-Bro moved to dismiss Figueroa’s motion to intervene, amongst other related motions, to dispose of the action entirely.

The Court’s Ruling

The Court began its ruling by observing, in dicta, that Figueroa had an interest in her claims that Sis-Bro violated the law, and while her claims may fail for other reasons, “the EEOC’s change of heart will not be one of those reasons.” Id. at 4. The Court then granted the EEOC’s motion to dismiss without prejudice, to ensure Figueroa’s rights were not impaired. Id. at 4-5.

The Court next addressed Sis-Bro’s arguments and rejected the contention that Figueroa’s motion to intervene was untimely, given Sis-Bro was unable to demonstrate her second intervenor action would have any prejudicial effect. Id. at 6. Although the Court did not allow Figueroa to re-plead her §1981 claims (because they were dismissed in the previous intervenor action), Figueroa was allowed to plead a new Title VII claim, given it was like the one that the EEOC abandoned, despite surviving a motion to dismiss. Id. at 7-8. The Court reasoned that although Figueroa did not assert these claims in her original intervenor complaint, “she placed her confidence in the good faith of the EEOC to pursue her rights along with its other statutory claims” and she sought to timely intervene once it became clear that the EEOC “changed its mind.” Id. at 9. Accordingly, the Court found Sis-Bro should be ready to litigate the matter.

Implications For Employers

As the above case illustrates, despite the fact that there has been a “changing of the guard” and the EEOC under President Trump has drastically different enforcement priorities than the Biden Administration, the Commission’s pending enforcement actions will not be so easily dismissed by courts, to the extent pending enforcement actions conflict with newly promulgated executive orders, provided that the allegedly aggrieved private litigant is ready and able to pursue the action without the assistance of the Commission.

Given that the EEOC under President Trump has indicated it will be withdrawing from many areas championed during the Biden Administration (e.g., disparate impact cases and abortion-related Pregnant Workers Fairness Act accommodation actions), private enforcement actions may increase within the coming months to fill in the enforcement vacuum left open by the Commission.

June 12, 2025June 12, 2025 by Gerald L. Maatman, Jr.

Illinois Federal Court Certifies Interlocutory Appeal To Seventh Circuit On The Retroactivity Of The Amended BIPA

By Gerald L. Maatman, Jr., George J. Schaller, and Ryan T. Garippo

Duane Morris Takeaways: On June 10, 2025,inClay v. Union Pac. R.R. Co, No. 24-CV-4194, 2025 U.S. Dist. LEXIS 108672 (N.D. Ill. June 10, 2025), Judge Georgia N. Alexakis of the U.S. District Court for the Northern District of Illinois certified for interlocutory appeal her decision denying Union Pacific’s motion for partial summary judgment after concluding the 2024 amendment to the Illinois Biometric Information Privacy Act (the “BIPA”) was not retroactive. In 10 days from entry of Judge Alexakis’ Order, Union Pacific may request the Seventh Circuit’s review of the certified question of whether the 2024 amendment to the BIPA applies retroactively. This would be a key issue of significant importance to all companies facing BIPA class actions.

Case Background

Plaintiff Reginald Clay is a truck driver that visited Union Pacific’s facilities. He alleges Union Pacific required him to register his fingerprint information and scan his fingerprints upon entering and exiting those facilities. Id. at *2-3. Clay also alleges Union Pacific did not “disclose what was done with his [fingerprint] information or how it would be stored.” Id. at *3. On April 16, 2024, Clay sued Union Pacific under the BIPA.

In August 2024, the Illinois legislature amended the BIPA to “clarify that when an entity subject to the [BIPA] ‘in more than one instance, collects, captures, purchases, receives through trade, or otherwise obtains the same biometric identifier or biometric information from the same person using the same method of collection,’ in violation of the [BIPA], the entity ‘has committed a single violation … for which the aggrieved person is entitled to, at most, one recovery.’” Id. (quoting 740 ILCS 14/20(b), (c), as amended by SB 2979, Public Act 103-0769.)

On November 4, 2024, Union Pacific moved for partial summary judgment and argued “under the 2024 BIPA amendment Clay was now entitled to recover for at most a single BIPA violation rather than the ‘per-scan’” violation under Cothron v. White Castle Sys., Inc., 2023 IL 128004, ¶ 24. Id. at *3-4. On April 10, 2025, the Court concluded that “the BIPA amendment was substantive rather than procedural” and therefore the BIPA amendment “was not retroactive under Illinois law, and thus did not apply to Clay’s claim.” Id. at *4.

Union Pacific requested certification of the Court’s order for interlocutory appeal. Clay opposed the request.

The Court’s Order

On June 10, 2025, the Court certified Union Pacific’s request for an interlocutory appeal of the order denying Union Pacific’s partial motion for summary judgment. Id. at *7.

The Court determined Union Pacific satisfied the four statutory criteria under 28 U.S.C. § 1292 (b)that: “there must be a question of law, it must be controlling, it must be contestable, and its resolution must promise to speed up the litigation.” Id. at *1-2. In addition, the Court found Union Pacific satisfied the Seventh Circuit’s fifth “non-statutory requirement: [that] the petition must be filed in the district court within a reasonable time after the order sought to be appealed.” Id. at *2.

The Court reasoned whether the 2024 amendment to the BIPA is retroactive is “undoubtedly ‘a question of the meaning of a statutory or constitutional provision,” the Amended BIPA “presents ‘an abstract issue of law . . . suitable for determination by an appellate court without a trial record,” and that the question of BIPA retroactivity “is quite likely to affect the further course of litigation.” Id. at *4. As Union Pacific argued, and as the District Court agreed, if the “Seventh Circuit were to conclude that Clay was entitled to only one recovery… [that] certainty about the retroactivity of the 2024 amendment would ‘materially advance the ultimate termination of the litigation.” Id. at *5.

The Court reasoned Union Pacific’s motion was timely because the Court “did not consider 28 days to be unreasonable in preparing a motion to certify for interlocutory appeal a novel question of state law, especially when Clay points to no prejudice he suffers as a result.” Id. at *6.

The Court also opined that while “the Court shares Clay’s view that its April 10 order was ‘correctly reasoned,’[], its confidence does not mean that BIPA retroactivity is not ‘contestable’ within the meaning of § 1292.” Id. In addition, the Court relied on the overwhelming decisions of judges within the Northern District of Illinois and Illinois state court finding the “BIPA amendment does not apply retroactively to pending cases, [], so no current dispute exists among the courts.” Id. at *6-7. But that the consensus of these decisions “does not mean there is ‘no substantial ground for difference of opinion’ about retroactivity.” Id. at *7.

The Court concluded that though its “confidence in its earlier decision” in Schwartz v. Supply, Inc., 23-CV-14319, (N.D. Ill. Nov. 22, 2024) (finding 2024 BIPA amendment not retroactive to pending cases) is not changed that it acknowledges “the novelty and complexity of the legal issue” of retroactivity. Accordingly, the Court found Union Pacific meet all four statutory requirements and the Seventh Circuits’ timeliness requirement and certified Union Pacific’s interlocutory appeal.

Implications For Companies

The ruling in Clay sparks newfound hope on the hotly contested issue of retroactivity of the 2024 amendment to the BIPA. Judge Alexakis’ well-reasoned decision allows Union Pacific 10 days from the Court’s order to request the Seventh Circuit’s interlocutory review of the certified question.

Should the Seventh Circuit grant Union Pacific’s pending request, then the BIPA’s “per-scan” damages for pre-amendment BIPA litigation will receive further consideration. However, even if the Seventh Circuit grants the request, there is always a possibility the Seventh Circuit certifies the question to the Illinois Supreme Court.

Until then, the deluge of decisions referenced in Clay denying retroactivity remain in effect. Companies met with BIPA litigation must monitor Clay as it progresses through interlocutory review.

May 12, 2025May 12, 2025 by Gerald L. Maatman, Jr.

California Court Sua Sponte Dismisses CIPA Class Action For Lack Of Standing

By Gerald L. Maatman, Jr., Tyler Z. Zmick, and George J. Schaller

Duane Morris Takeaways: On April 4, 2025,inRodriguez v. Autotrader.com, Inc., No. 24-CV-08735, 2025 U.S. Dist. LEXIS 70074 (C.D. Cal. Apr. 4, 2025), Judge R. Gary Klausner of the U.S. District Court for the Central District of California dismissed with prejudice a class action complaint which asserted violations of the California Invasion of Privacy Act (“CIPA”) for lack of standing. Plaintiff admitted she was a “tester” and knew that defendant Autotrader’s website contained tracking devices before accessing it, leading the Court to rule that Plaintiff failed to allege an unlawful use of pen registers and trace devices under the CIPA.

This ruling is welcome news for businesses sued by so-called “tester” plaintiffs, who actively seek out websites to “test” for potential CIPA violations.

Case Background

Plaintiff Rebeka Rodriguez filed a class action complaint against Autotrader.com, asserting claims under (i) CIPA § 631 for violating California’s wiretapping and eavesdropping statute and (ii) CIPA § 638.51 for violating California’s statute prohibiting the use of pen registers and trace devices.

Plaintiff claimed that Autotrader’s website immediately installs third-party tracking software that collects various types of information to deliver targeted advertising. She alleged that she ran a search containing “confidential” and “private” information using a search bar on Autotrader’s website, and that such information was then shared with third parties without her consent. Plaintiff also claimed that when she visited the website, tracking software was installed on her browser which “captured and sent identifying information to third parties.” Plaintiff admitted that she was actively seeking out privacy violations when she visited Autotrader’s website.

On March 14, 2025, the District Court granted Autotrader’s request that Plaintiff’s CIPA § 631 claim be dismissed with prejudice for lack of standing. See Rodriguez v. Autotrader.com, Inc., No. 24-CV-08735, 2025 U.S. Dist. LEXIS 47308, at *1 (C.D. Cal. Mar. 14, 2025). The Court’s March 14 order also directed the parties to show cause in writing “whether Plaintiff has standing to bring her § 638.51 claim.” Id.

The Court’s Order

On April 4, 2025, the Court sua sponte dismissed Plaintiff’s remaining pen register claim under CIPA § 638.51 for lack of standing. The Court relied on the same analysis used in dismissing Plaintiff’s § 631 claim – specifically, Plaintiff was “a tester that actively [sought] out privacy violations,” she “had no expectation of privacy’ when she visited [Autotrader’s] website, and therefore, lacked an injury sufficient to establish standing.” Rodriguez v. Autotrader.com, Inc.,No. 24-CV-08735, 2025 U.S. Dist. LEXIS 47308, *2 (C.D. Cal. Apr. 4, 2025). In its ruling, the Court determined that neither party disputed that Plaintiff’s § 638.51 claim “requires the same disclosure of sensitive information and reasonable expectation of privacy as her § 631 claim.” Id.

The Court was not persuaded by Plaintiff’s argument that her status as a tester did not preclude “standing even though she expected or sought out an injury,”finding her supporting authority distinguishable because the cases she relied on involved “First Amendment and ADA claims for which the plaintiffs were injured regardless of their expectations or intentions.” Id. at *3. Accordingly, the Court dismissed Plaintiff’s § 638.51 claim with prejudice.

Implications For Companies

While the ruling in Rodriguez is a positive development for businesses, the scope of the decision was limited in that Plaintiff lacked standing only because her claim required a violation of her “reasonable expectation of privacy.” “Tester” plaintiffs in other class action lawsuits frequently assert claims against website hosts and website service providers and can proceed past the motion-to-dismiss stage.

While companies cannot prevent “tester” plaintiffs from filing similar lawsuits, companies can protect themselves from liability under the CIPA by employing safeguards on their websites in the form of data-tracking disclosures and obtaining consent from users.

February 26, 2025February 26, 2025 by Gerald L. Maatman, Jr.

EEOC Male Bias Suit Against Sports Bar Restaurant Group Survives Dismissal

By Gerald L. Maatman, Jr., Anna Sheridan, George J. Schaller

Duane Morris Takeaways: In EEOC v. Battleground Restaurants, Inc. et al., 1:24-CV-792, 2025 U.S. Dist. LEXIS 32071 (M.D.N.C. Feb. 24, 2025), the Court denied Defendants’ motion to dismiss an EEOC lawsuit alleging discriminatory hiring practices against men at a chain of sports bars. The EEOC’s complaint asserts sex discrimination in hiring for server, bartender, and host positions, and for failures to preserve employment records in violation of Title VII of the Civil Rights Act of 1964.

This case signals a new wave of anti-discrimination enforcement actions against companies that prioritize hiring practices that may exclude male applicants. The Commission’s litigation efforts are in full swing, and companies must review their hiring practices to ensure all applicants are weighed neutrally during the application process.

Complaint Allegations

The EEOC’s complaint alleges that between December 1, 2019, and February 18, 2022, Kickback Jack’s restaurants located throughout North Carolina, Virginia, and Tennessee discriminated against males by failing to hire men for front of house, non-managerial positions. Id. at *1. Kickback Jack’s is owned and operated by Battleground Restaurants, Inc. and Battleground Restaurant Group, Inc. (“BRGI”) (collectively “Defendants”). Id.

Kickback Jack’s employs “servers, hosts, and bartenders in non-managerial front-of-house positions,” all of which require no “special skills or qualifications.” Id. at *2. Kickback Jack’s advertisements state that applicants need only “[b]ring [their] great attitude to work and [Kickback Jack’s] will train you.” Id. at *2.

The underlying charge was filed on July 31, 2020, when a female server, Melody Roe, filed an EEOC charge of discrimination against Kickback Jack’s. Id. Included in Roe’s charge of discrimination was statements that Kickback Jack’s “has a policy and/or practice of only hiring females for front of house positions and not into management.” Id. at *3. The EEOC’s investigation into Roe’s charge of discrimination found that Battleground Restaurants, Inc. “maintained a policy or practice . . . of failing or refusing to hire males for non-managerial front of house positions because of their sex.” Id.

The Commission’s investigation further revealed that of the 2,100 non-managerial front-of-house employees employed between December 1, 2019, and February 18, 2022, “approximately 3% were male” and some Kickback Jack’s locations “did not employ male servers at all.” Id. at *4.

As a result of these newly uncovered hiring practices, the EEOC filed a complaint asserting that “a predominantly female front-of-house workforce cannot be justified by any legitimate business purposes” and that Defendants’ hiring practices “were and are intentional and willful.” Id. The Complaint also alleged that Defendants failed to make and preserve records relevant to their employment practices, and specifically failed to retain applications for employment. Id. at *5.

Defendants moved to dismiss the EEOC’s complaint, dismiss or strike BRGI, and requested the Court certify the case for interlocutory appeal. Id. at *1.

District Court’s Ruling

The Court denied the Defendants’ motion in all aspects on the basis that the EEOC complied with procedural and administrative requirements, plausibly alleged a pattern or practice of disparate sex discrimination, and that the EEOC could properly include BRGI as a defendant. Id.

Defendants argued the EEOC failed to provide them with adequate notice of its claims on “behalf of male applicants and the Title VII records violations.” Id. at *5. Defendants did not dispute that it received notice of Roe’s charge of discrimination within 10 days (as required by 42 U.S.C. § 2000e-5(b)). Rather, the Defendants argued the charge of discrimination did not “give them notice of an EEOC investigation into discrimination against males in hiring.” Id. at *7.

The EEOC countered that the investigation into discrimination against males was implicit in Roe’s allegations that the restaurant had “a policy and/or practice of only hiring females” for front of house positions. Id.The Court agreed that the “alleged discrimination against males for front of house positions appears on the face of the charge of discrimination,” Defendants did not allege that they were not on notice of the charge of discrimination, and therefore, the EEOC complied with its administrative and procedural requirements under the statute. Id. at *8

The Court also denied Defendants’ motion to dismiss the EEOC’s preservation of records claim because no 10-day notice requirement exists under the statutory provisions. Id. at *8-9. The Court further disagreed with Defendants that the EEOC’s claims should be limited to 180 days before Defendants received notice of the charge of discrimination because “the complaint [did] not contain the facts necessary to assess whether the EEOC’s claims exceed Title VII’s statute of limitations period.” Id. at *10-11.

On Defendants’ argument to dismiss or strike BRGI, the Court opined that the Commission plausibly alleged BRGI is “essentially, Kickback Jack’s operator.” Id. at *12. The Court held the EEOC can sue BRGI “despite not naming [BRGI] directly as a party in the charge of discrimination or communicating with it based on both the joint enterprise test and substantial identity exception.” Id. at *15.

On the EEOC’s allegations of Title VII sex discrimination in hiring, the Court denied the Defendants’ motion to dismiss because the EEOC “plausibly alleged a pattern or practice of discrimination by using statistics” which demonstrated of the 2,100 non-managerial front-of-house employees approximately only 3% were male. Id. at *18. And in some instances, locations “did not employ any male servers at all.” Id. The EEOC also satisfied its pleading requirements under Title VII as it alleged Defendants discriminated “against male applicants –– a protected class — ” and alleged that “male applicants qualified” for the front-of-house roles.” Id. *17-18. Based on these findings, the Court reasoned “this type of ‘gross disparity’ plausibly demonstrates an inference of discrimination against males who applied to work as servers.” Id. at *18. Therefore, the Court found that the EEOC has met its burden of plausibly alleging the elements of its claim sufficiently to survive a motion to dismiss.

The Court also denied Defendants’ request for certification stating it did “not find any esoteric issues meriting an interlocutory appeal.” Id. at *2.

Implications For Employers

Employers’ hiring practices remain a target for EEOC initiated litigation. This case is but one example of the EEOC bringing a lawsuit after identifying a pattern of potentially discriminatory practices first alleged in a charge. While uncommon, the EEOC does regularly bring these “pattern-or-practice” lawsuits under Section 706 or Section 707 of Title VII of the Civil Rights Act of 1964 when it has a case that draws significant public interest or could make an industry-wide impact.

This is far from the first case of male gender discrimination in the restaurant industry. The popular restaurant chain Hooters has settled several similar lawsuits, one in 1997 for $3.75 million, and one in 2009 for an undisclosed sum. See Latuga v. Hooters, Inc., 1:93-CV-7709 (N.D. Ill. Nov. 25, 1997); see also Grushevski v. Texas Wings, Inc., No. 09-CV-00002 (S.D. Tex. Apr. 16, 2009). Lawry’s restaurants were also hit with an EEOC pattern or practice lawsuit in 2006 alleging that Lawry’s practice of only hiring females for its server positions constituted gender discrimination. See EEOC v. Lawry’s Restaurants, Inc., No. CV 06-01963 (C.D. Cal. Mar. 31, 2006).

The recent case against Battleground shows that the EEOC continues to closely scrutinize hiring practices which select individuals based on a protected characteristic, including gender. Employers must also monitor and audit their hiring practice outcomes to ensure statistical models don’t demonstrate discrimination otherwise an EEOC action may be on the horizon.

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

Data Privacy Class Action Alleges Insurers Improperly Collected The Data Of 40 Million Users Through Third-Party Applications

By Gerald L. Maatman, Jr., Justin Donoho, George J. Schaller, Ryan T. Garippo

Duane Morris Takeaways: In Mahoney, et al. v. The Allstate Corp, et al., 25-CV-01465 (N.D. Ill. Feb. 11, 2025), Plaintiffs Michael Mahoney and Scott Schultz (collectively, “Plaintiffs”) filed a putative class action lawsuit asserting Allstate, and its subsidiary Arity, illegally obtained personal driving data of 40 million policyholders through third-party mobile application software. The case is pending in the U.S. District Court for the Northern District of Illinois before Judge Steven C. Seeger.This is the third lawsuit in a series of lawsuits alleging class-wide allegations based on Allstate’s alleged data collection practices. See Sims et al. v. The Allstate Corp. et al., 1:25-CV-00407 (N.D. Ill. Jan. 14, 2025) (alleging data collection through third party application Sirius XM); see also Arellano et al. v. The Allstate Corp. et al., 1:25-CV-01256, (N.D. Ill. Feb. 5, 2025) (alleging data collection through third party applications Life360, GasBuddy, and Fuel Rewards).

Mahoney, Sims, and Arellano, represent a triumvirate of data privacy class actions centered on allegations of improper data collection through third-party applications. Companies will be well-served monitor these cases for their novel assertions in trending data privacy litigation.

Complaint Allegations

Michael Mahoney resides in San Francisco, California, and he downloaded the GasBuddy application in 2011 to “find competitive gas prices.” Mahoney, 25-CV-01465, ECF No. 1 § III ¶ 14 (N.D. Ill. Feb. 11, 2025). Scott Schultz resides in Highland Park, Illinois, and he downloaded the GasBuddy application in 2021 and used it “in his own and other people’s vehicles to find competitive gas prices.” Id. § III ¶ 15.

Plaintiffs collectively allege that Allstate and its subsidiary Arity (collectively, “Defendants”) “conspired to collect drivers’ geolocation data and movement data from mobile devices, in-car devices, and vehicles.” Id. § IV ¶ 7. Plaintiffs allege Defendants designed a software development kit that could be integrated into third-party mobile applications such as “Routely, Life360, GasBuddy, and Fuel Rewards.” Id. § IV ¶ 8. Plaintiffs further allege Defendant advertised that they “collect data ‘every 15 seconds or less’ from 40 million ‘active mobile connections’ and ‘derive[] unique insights that help insurers, developers, marketers, and communities understand and predict driving behavior at scale.” Id. § IV ¶ 24.

Plaintiffs contend Defendants’ software development kit was “designed to and does collect data” including “Geolocation data and ‘GPS Points,’” “cellphone accelerometer, magnetometer, and gyroscopic data,” “Trip attributes” data (including start and end locations, trip distances, trip duration), “Derived events” data (including acceleration, speeding, distracted driving, crash detection), and “Metadata.” Id. § IV ¶ 11 (A) – (E). Plaintiffs further assert that when using these third-party applications “Defendants could collect real-time data on their locations and movements and surreptitiously collect highly sensitive and valuable data directly from Plaintiffs’ mobile phones.” Id. § IV ¶ 16.

It is also important to note that Plaintiffs maintain that Defendants used their personal data to “develop, advertise, and sell several products and services to third parties, including insurance companies . . .” and used the purchased consumer data for “[Defendants’] own underwriting purposes.” Id. § IV ¶ 23. Plaintiffs, ultimately, assert that Defendants real purpose in using this data is for their “own financial and commercial benefit” and to obtain “substantial profit.” Id. § V ¶ 49. They ultimately assert via their nine-count Complaint that this technology amounts to a wiretapping of their personal information which entitles them, inter alia, to a sum of “$100 per day per violation or $10,000” per class member whichever is greater. Id. § V ¶ 51.

Implications For Companies

Although such data collection lawsuits are no longer a new phenomenon, their scope has become far more aggressive as the plaintiffs’ bar continues to look for ways to monetize lawsuits against corporations using such technologies.

Take for example the dilemma presented by Mahoney. In that case, it is likely that Defendants will have strong defenses to this action. For example, Plaintiffs admit that Defendants’ purpose in using this technology was to earn “substantial profit.” Id. § V ¶ 49. Based on similar allegations, many courts have found that these purposes are insufficient for a plaintiff to avail itself of such wiretapping statutes. See, e.g., Katz-Lacabe v. Oracle Am., Inc., 668 F. Supp. 3d 928, 945 (N.D. Cal. 2023) (dismissing wiretap claim because defendant’s “purpose has plainly not been to perpetuate torts on millions of Internet users, but to make money.”).

There are, however, enough court rulings that come out in the opposite direction to give a corporate defendant pause. See, e.g., R.S. v. Prime Healthcare Services, Inc., No. 24-CV-00330, 2025 WL 103488, at *6-7 (C.D. Cal. Jan. 13, 2025) (recognizing the split and siding with the plaintiffs). And, if Plaintiffs are correct that there are 40 million individuals in the class, and that each class member is entitled to $10,000 at a minimum, then this lawsuit alleges at least $400 billion dollars in liability. Even if there is a 1% chance of success on these claims, it would suggest that the completely unrealistic figure of $4 billion dollars is on the table.

Corporations in these types of class actions are faced with the difficult choice of settling the claims for an astronomical figure based on the use of technologies which are ubiquitous in nature (like software development kits for mobile applications) or defend a $400 billion lawsuit based on defenses in an area of the law which is not fully developed. It will be interesting to see how the Mahoney defendants balance these concerns as the case progresses, because many twists and turns lie ahead.

In the meantime, corporate counsel should take the opportunity to evaluate their companies’ data collection and privacy policies to make sure their companies are not easy targets. If the allegations in Mahoney are any example, the mere threat of one of these lawsuits should be enough to keep corporate counsel up at night. And, if their companies are ultimately sued in one of these lawsuits, they should ensure that an experienced defense team has its hands on the steering wheel.

February 17, 2025February 17, 2025 by Gerald L. Maatman, Jr.

Tennessee Federal Court Rejects Certification Of Breach Of Contract Class Action

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

Duane Morris Takeaways: On February 10, 2025, Judge Aleta A. Trauger of the U.S. District Court for the Middle District of Tennessee denied class certification in a case involving breach of contract and a disputed element of mutual assent a/k/a meeting of the minds, in Hall v. Warner Music Group Corp., No. 22-CV-0047 (M.D. Tenn. Feb. 10, 2025). The ruling is significant as it shows that plaintiffs who file class action complaints alleging breach of contract cannot satisfy Rule 23’s commonality requirement where the issue of whether the parties agreed to a material term of contract requires individualized inquiry into the parties’ minds and whether they met.

Background

This case involving lack of mutual assent is one of the many since the famous case of Raffles v. Wichelhaus, 159 Eng.Rep 375 (1864), in which the defendant agreed to purchase cotton arriving in a ship named “Peerless” arriving while cotton prices were low, whereas the plaintiff seller had in mind a different ship by the same name arriving while cotton prices were high. (And where the English High Court found no binding contract).

In Hall, the plaintiffs, two musical artists, sued for breach of implied contract against a record label. The parties had entered into a written recording agreement providing for the payment of 8% royalties at a time before the invention of digital streaming and not expressly covering distribution through digital streaming. Hall, slip op. at 2. In 2005, when the label started streaming plaintiffs’ music digitally both domestically and internationally, it began to pay the plaintiffs at the higher rate appearing on their royalty statements of 50%. Id. at 3, 14. For foreign digital streaming, the 50% rate was applied after the deduction of a payment to the foreign distributor. Id. at 12-13. It was common in the industry and a consistent course of dealing of the defendant to apply royalty rates to digital streaming revenues received only after payment to the foreign distributor. Id. The plaintiffs accepted these digital streaming royalty payments for years without viewing the royalty statements or “attempting to identify the revenue base against which a royalty rate for foreign streaming was applied . . . until [one of the plaintiff’s] first discussion with one of his attorneys in this case.” Id. at 15.

The plaintiffs moved for class certification under Rule 23. The plaintiffs maintained that they met the commonality requirement because they and other artists with legacy contracts received royalty payments for foreign streaming sales with statements indicating an unqualified 50% royalty. Id. at 10-11. In contrast, the record label maintained that a claim for breach of implied contract requires the plaintiffs to prove that a valid and enforceable contract was formed between the label and “each class member, which will require an individualized inquiry into the knowledge, understanding, and intent of the artists, including whether the artist even looked at the royalty statements, whether the artists construed them to offer an implied amendment, what exactly the artist believed those implied terms to be, whether the artist had a good-faith belief about a possible rescission claim, whether the artist would have rescinded unless paid at the source, whether the artist intended to forbear, and when (if ever) these events occurred.” Id. at 11 (emphasis in original). In other words, according to the record label, the common question, “was an implied contract formed?” could not be answered by a simple yes or no without such an individualized inquiry. Id.

The Court’s Decision

The Court agreed with defendants and held that plaintiffs did not carry their burden of showing commonality.

Central to Court’s holding was the “problematic question of mutual assent.” Id. at 18. As the Court explained, “even if the court presumes that other putative class members’ royalty statements look like the plaintiffs’ and that there are common questions regarding the defendants’ conduct that may yield common answers (i.e., that the royalty statements do not expressly reflect that the royalties are calculated based [after paying the foreign distributor]), it is clear that the threshold question of whether an implied contract between [the label] and each putative class member was formed does not yield a common answer but, instead, will depend entirely on the particularized circumstances of each artist whose contract, like the plaintiffs’, does not expressly provide for royalties on foreign digital streaming.” Id.

In short, the Court reasoned that “the named plaintiffs’ particularized circumstances show that they simply never thought about whether an implied contract had been formed or its terms until approached by lawyers. Other artists may have paid closer attention to their business arrangements.” Id.

In conclusion, the Court noted that, “to the extent there are questions of fact or law common to the plaintiffs and all putative class members, the relative importance of these common questions pales in comparison to the importance of those that do not yield a common answer — primarily the question of whether implied contracts were formed at all.” Id. at 23.

Implications For Companies

The Hall decison is a win for defendants of breach of contract class actions involving the issue of whether the parties had a meeting of the minds on a material term of contract. In such cases, the Hall decision can be cited as useful precedent for showing that the commonality requirement is not met because individualized inquiries predominate when it comes to analyzing evidence regarding a meeting of the minds.

The Court’s reasoning in Hall applies not only in cases involving: (1) commercial form contracts, like in Hall, but also (2) alleged employment contracts, see Cutler v. Wal-Mart Stores, Inc., 927 A.2d 1 (Md. Ct. App. 2007) (affirming denial of motion for class certification, stating, “Any determination concerning a ‘meeting of the minds’ necessarily requires an individual inquiry into what each class member, as well as the [employer’s] employee who allegedly made the offer, said and did”); In re Wal-Mart Wage & Hour Emp. Pracs. Litig., 2008 WL 3179315, at *19 (D. Nev. June 20, 2008) (denying motion for class certification, stating, “Plaintiffs’ breach of contract claims would involve particularized inquiry into contract formation, including such issues as meeting of the minds”); (3) form real estate contracts, see Haines v. Fid. Nat’l Title of Fla., Inc., 2022 WL 1095961, at *17 (M.D. Fla. Feb. 17, 2022) (denying motion for class certification, stating, “If a buyer and seller interpreted [the agreement] the way [seller] interprets the provision, their meeting of the minds would have a significant impact upon any potential liability for [seller]. In that regard, the buyer’s and seller’s state of mind for each transaction are relevant . . . individualized discovery and factfinding regarding each buyer’s and seller’s intent and understanding would be required”); and (4) alleged contracts regarding the use of AI, see Lokken v. UnitedHealth Group, Inc., 2025 WL 491148, at *8 (D. Minn. Feb. 13, 2025) (finding insureds’ claim against health insurer for breach of contract regarding insurer’s use of AI-based automated decision making technologies not preempted by the Medicare Act and therefore allowed to proceed to discovery, raising the question of whether parties’ minds met via the insurer’s explicit descriptions of its “claim decisions as being made by ‘clinical services staff’ and ‘physicians,’ without mention of any artificial intelligence”).