Jennifer A. Riley – Class Action Defense

June 10, 2026June 10, 2026 by Gerald L. Maatman, Jr.

Seventh Circuit Affirms Summary Judgment For Tortilla Manufacturer El Milagro In Sexual Harassment Suit

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

Duane Morris Takeaways: On May 27, 2026, in Sanchez, v. El Milagro, Inc., 2026 U.S. App. LEXIS 14984 (7th Cir. May 26, 2026), the Seventh Circuit issued an opinion that affirmed a district court’s decision granting summary judgment in favor of tortilla manufacturer El Milagro, Inc. (“El Milagro”) for claims of sexual harassment in the workplace in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”) and the Illinois Human Rights Act (“IHRA”).

The opinion fully vindicated the Company’s defenses, and clarifies that a prompt and thorough investigation coupled with appropriate action to bring harassment to an end are crucial to avoid liability under sexual harassment law.

Background

In 2022, Plaintiff Alma Sanchez filed a Class Action Complaint against her employer, El Milagro, Inc. (“El Milagro”), a tortilla manufacturer and distributor of tortilla products, alleging a sexually hostile work environment in violation of the IHRA and, subsequently, Title VII.

Plaintiff alleged she joined El Milagro in July 2019. Plaintiff claimed that in 2020, co-worker Francisco Gutierrez sexually harassed her by “inappropriately touching her three times,” although the Seventh Circuit’s opinion noted that Plaintiff’s version of events changed in numerous ways over time. Id.

According to the subsequent statement to Human Resources that Plaintiff submitted after the third alleged incident, Gutierrez “inappropriately touched [Plaintiff] first in October or November 2019, then in March 2020, and finally in August 2020.” Id. *4-5. Her Complaint, however, alleged that “Gutierrez touched her first in May or June 2020, then in July 2020, and finally in August 2020.” Id. *5.

As to her first alleged incident of harassment, Plaintiff’s Complaint asserted that Gutierrez “intentionally ‘rubbed his genitals’ against her buttocks as he passed her on the production line and then continued to walk away.” Id. In her deposition, however, Plaintiff testified that “she believe[d] Gutierrez purposefully touched her because ‘there were many ways for him to pass through without touching [her],” that he did not “touch her for long because ‘he made it look like he was passing by,’” and when she felt the contact and turned around “[h]e had already passed.” Id. In her later statement to Human Resources, Plaintiff wrote that Gutierrez “said sorry” but at her deposition, she testified that Gutierrez “turned around and stare[d] at me like watching and saying ‘oops.’” Id. *5-6.

Plaintiff alleged she verbally reported this incident two hours later to Supervisor Arturo Brito, which Brito denied. Id. *6. In her HR statement, Plaintiff “stated that although she mentioned this incident to Brito, she did not tell him Gutierrez’s name.” At her deposition, however, Plaintiff claimed that “she ‘specifically told Brito that Mr. Gutierrez had rubbed his genitals on my buttocks’” but, when asked outright, she “agreed that she did not share Gutierrez’s name with [the supervisor] when she reported the first incident.” Id. No Human Resources report was made about this incident at the time.

Plaintiff also asserted Gutierrez “sexually harassed her for the second time in July 2020” and claimed that he “groped her buttock with his hand.” Id. *6-7. Plaintiff contradicted herself about whether and when she reported this incident. In her HR statement, she wrote that she “could not have reported the incident because the factory had been permanently shut down because of the pandemic, but later claimed in the lawsuit that she did report the harassment to Brito the day after it happened. Id. *7. Plaintiff alleged that she informed Brito about this incident, but no complaint about this alleged incident was sent to El Milagro’s Human Resources department. Id.

The third incident occurred on August 29, 2020, and Plaintiff contended that “Gutierrez touched her buttocks for ‘a short time,’ or ‘a few seconds’ while she was stooping down to put down boxes that she was holding.” Id. In her written statement to HR, Plaintiff claimed that “Gutierrez touched her buttocks with one hand” but asserted during the lawsuit that “Gutierrez groped her with both hands when she bent over to put down a box that she was carrying.” Id.

After reporting the third incident to Brito, Plaintiff submitted a written statement to Human Resources describing the three incidents. Gutierrez’s statement claimed he accidentally touched Plaintiff while packing tortillas and apologized. Id. Plaintiff later testified that she “had not seen anyone else experience sexually harassing conduct at any time during her employment at El Milagro.” Id. Plaintiff also alleged subsequent verbal harassment by other coworkers, but Plaintiff did not tell Brito or El Milagro’s HR the names of those individuals. Id. *9.

The district court granted El Milagro summary judgment on Plaintiff’s claims. It also ruled that Plaintiffs’ class action claims could not be certified. Plaintiff appealed the district court’s decision on her individual claim to the Seventh Circuit.

The Seventh Circuit’s Opinion

The Seventh Circuit, in an opinion written by Judge Kenneth F. Ripple, affirmed the district court’s decision granting summary judgment in favor of El Milagro and fully vindicated its position.

As to the controlling legal standard, the Seventh Circuit first concluded that while Title VII and the IHRA do not contain identical language, “both this court and Illinois state courts consistently state that the analytical standards are the same.” Id. *9. Thus, “[t]o constitute actionable sexual harassment, the activity ‘must be sufficiently severe or pervasive to alter the conditions of the [the victim’s] employment and create an abusive working environment.” Id. *10. While noting that “physical acts are considered ‘more severe than harassing comments alone,’” the Court also noted that “physical harassment lies along a continuum just as verbal harassment does.” Id. *12.

Turning to the merits, the Seventh Circuit noted an employer is liable under the IHRA and Title VII “only if it was negligent in controlling working conditions.” To prove such negligence, the Seventh Circuit explained Plaintiff must establish two points: (1) that El Milagro had “notice or knowledge of the harassment,” and (2) that El Milagro “did not take ‘prompt and appropriate corrective action reasonably likely to prevent harassment from recurring.” Id. *16.

Assuming that Plaintiff reported the first two incidents to Brito, as she claimed, the Seventh Circuit concluded that Plaintiff could not establish El Milagro’s knowledge of the first two incidents of alleged harassment. Based on the record evidence, the Court reasoned that “what she told Brito led him to believe that she was complaining of accidental touching that happened because the production lines on which she and Gutierrez worked had close quarters.” Id. at *21. As a result, the Seventh Circuit concluded that “[w]e do not believe that a reasonable jury could conclude from [Plaintiff’s] deposition testimony, or any other evidence in the record related to her reporting of the first two incidents, that she gave Brito ‘enough information to make a reasonable employer think that there was some probability that she was being sexually harassed.’” Id. *20-21.

As to the third incident, all three judges agreed that investigation and corrective measures taken by El Milagro’s Human Resources department were sufficient. The Seventh Circuit noted that “[a]n HR employee interviewed [Plaintiff] and Gutierrez separately,” “HR concluded that the events described by [Plaintiff] could not be substantiated,” and that El Milagro “provided [Plaintiff] with a letter, dated September 16, informing her that the case was closed and that it had told Gutierrez, in a ‘call of attention’ letter, to immediately change his behavior toward her.” Id. *21-22. The Seventh Circuit also determined that “[a]lthough El Milagro did not interview any witnesses, [Plaintiff] did not identify any.” Id. *22.

Thus, the Seventh Circuit concluded that the “prompt investigation” was “the hallmark of a reasonable corrective action” (id.) and that “El Milagro’s investigation shows that it ‘took the harassment seriously and took appropriate steps to bring the harassment to an end.’ . . . [i]t had in place a viable and appropriate mechanism for reporting the misbehavior.” Id. A jury could not reasonably conclude, the Seventh Circuit held, that “El Milagro was negligent in fulfilling its responsibilities in responding to the situation.” Id.

Finally, as to alleged verbal harassment that occurred after HR investigated, the Seventh Circuit concluded that Plaintiff “did not report to anyone the names of the people who made the harassing comments that she overheard after the investigation concluded so El Milagro could not investigate them.” Id.

Accordingly, the Seventh Circuit affirmed the judgment of the district court.

Implications For Employers

The Seventh Circuit’s opinion clarifies what constitutes proper notice in alleged incidents of sexual harassment and reasonable corrective measures taken when an employer is properly on notice, including prompt investigations to bring alleged harassment to an end.

Employers should evaluate their sexual harassment policies and practices to ensure that reporting mechanisms, documentation, and investigation process are sound and that reports of harassment are communicated promptly to those responsible for investigating them. A thorough investigation and quick implementation of reasonable corrective measures can often insulate employers from liability under either Title VII or the IHRA.

June 4, 2026June 4, 2026 by Gerald L. Maatman, Jr.

“Transfer, Not Dismissal” — Arizona Federal Court Confirms That 28 U.S.C. Section 1631 Applies To Personal Jurisdiction

By Gerald L. Maatman, Jr., Jennifer A. Riley, Jamar D. Davis, and Kenny Tran

Duane Morris Takeaways: On June 1, 2026, in Andrew Harrington et al. v. Cracker Barrel Country Store Inc., No. 21-CV-000940, 2026 WL 1532921 (D. Ariz. June 1, 2026), Judge Diane J. Humetewa of the U.S. District Court for the District of Arizona, reaffirmed the Ninth Circuit’s determination that 28 U.S.C. section 1631 does apply to personal jurisdiction issues.

The ruling serves as a blueprint for corporate counsel on jurisdictional defenses in nationwide wage & hour lawsuits

Case Background

Plaintiffs, former Cracker Barrel employees, brought an FLSA collective action seeking redress for alleged failure to pay proper wages. Id. at *1. Cracker Barrel filed a Motion to Dismiss due to the existence of a valid arbitration agreement. Id. A subset of the Plaintiffs who did not continue with arbitration refused to relent, filing a First Amended Complaint asserting that that their signed arbitration agreements were invalid because the Plaintiffs were minors when they signed the agreements. Id. Again, Cracker Barrel filed a Motion to Dismiss contending that the Court lacked personal jurisdiction as none of the named Plaintiffs were from Arizona or worked in Cracker Barrel Arizona stores. Id. The Court subsequently granted Cracker Barrel’s second Motion to Dismiss for lack of personal jurisdiction. Id. Remaining steadfast, the Plaintiffs filed a Second Amended Complaint adding an Arizona Cracker Barrel employee as a plaintiff. Id. In denying Cracker Barrel’s third Motion to Dismiss, the Court held that the addition of the Arizona Cracker Barrel employee cured the jurisdictional defect. Id.

Following the grant of conditional certification, Cracker Barrel filed a Motion to Certify an Interlocutory Appeal. Id. The Court certified for appeal two questions, including, “[w]hether Bristol-Myers Squibb Co. v. Superior Ct. of California, San Francisco Cnty., 582 U.S. 255, 265 (2017), prevents a District Court from sending notice under Section 216(b) of the FLSA to individuals over whom the Court lacks specific personal jurisdiction.” Id. The Ninth Circuit answered in the affirmative and held that “Bristol-Myers applies in collective actions under the FLSA and to that end, specific personal jurisdiction must be analyzed for every individual plaintiff proceeding under the collective action.” Id. In real word application, this meant that the Plaintiffs attempt to cure their Second Amended Complaint by adding an Arizona Cracker Barrel employee was ineffective as specific personal jurisdiction must be satisfied for all Plaintiffs in the collective action. Id. In other words, the Ninth Circuit determined that the District Court lacked personal jurisdiction over the non-Arizona Plaintiffs. Id. at *3.

In response, Plaintiffs filed a Motion to Sever and Transfer Non-Arizona Plaintiffs to the U.S. District Court for the District Court of Massachusetts. Id. at *1.

The Court’s Decision

Plaintiffs cited three statues, 28 U.S.C. Sections 1404, 1406, and 1631, to advance their motion. Id. at *2. The Court found that Section 1404 did not apply to Plaintiffs’ Motion. Id. The Court also clarified that Section 1406 did not apply to Plaintiffs’ Motion as the statute is appropriate when making an attempt to transfer a case if the initial court is not in the proper venue. Id. The Court noted that that venue “is not a jurisdiction component” and that Section 1406 is only proper if the defendant moved to dismiss (or transfer) for improper venue. Id.

The Court observed that Section 1631 did not apply to Plaintiffs’ Motion as it “is used specifically to cure deficiencies in jurisdiction.” Id. The statute, however, hinges on a “want of jurisdiction.” 28 U.S.C. § 1631. All circuits agree that “want of jurisdiction” applies to subject matter jurisdiction; however, there is a circuit split on whether the term applies to personal jurisdiction. Harrington, 2026 2026 WL 1532921, at *2. The Ninth Circuit typically finds that Section 1631 applies to personal jurisdiction. Id.

In the end, the Court made the decision to sever the non-Arizona plaintiffs and transfer their claims to the District Court of Massachusetts because there was a “want of jurisdiction” for the non-Arizona plaintiffs and because the legislative history, plain text, and the Ninth Circuit’s interpretation of Section 1631 (that the statute applies to personal jurisdiction) allowed for the transfer. Id. at 3.

Implications For Employers

Employers should remain diligent to confirm that personal jurisdiction applies for each plaintiff proceeding under a collective action. This is because attempts by the plaintiff’s bar to retain jurisdiction with the addition of a single plaintiff who is a resident of the location for the presiding court are futile. Further, this decision reaffirms the application of the Ninth Circuit’s reading of Section 1631 — namely, that “want of jurisdiction” applies to personal jurisdiction issues. Companies defending nationwide wage and hour actions should closely evaluate whether transfer motions can be used strategically when personal jurisdiction defects exist, especially in cases involving large groups of opt-in plaintiffs from multiple states.

June 2, 2026June 2, 2026 by Gerald L. Maatman, Jr.

Oregon Federal Court Denies Class Certification Due To The Impact Of Unique Defenses On The Named Plaintiffs

By Gerald L. Maatman, Jr., Jennifer A. Riley, Katherine L. Alphonso, and Jamar D. Davis

Duane Morris Takeaways: On May 28, 2026, in Ashley Schroeder et al. v. University of Oregon, Case No. 6:23-CV-01806, 2026 WL 1494043 (D. Or. May 28, 2026), Judge Michael J. McShane of the U.S. District Court for the District of Oregon – without deciding whether the University of Oregon adequately supports or invests in women athletics – reaffirmed that the typicality requirement for class certification cannot be met when “there is a danger that absent class members will suffer if their representative is preoccupied” with its own unique defenses. The ruling is a significant one for corporate counsel and provides a blueprint for defense of class action claims.

Case Background

In the 2000s, particularly at the collegiate level and among Division 1 institutions in warm-weather conferences, beach volleyball was a rapidly growing sport. Id. at *2. In 2009, the National Collegiate Athletic Association (“NCAA”), under its Emerging Sports for Women program, designated women’s beach volleyball an “emerging sport” for women. Id. Notably, the NCAA Emerging Sports for Women program was designed to encourage schools to create more opportunities for women’s athletic participation to meet the requirements of Title IX of the Education Amendment of 1972 (“Title IX”). Id.

As a state educational institution, the University of Oregon (the “University”) receives federal funds and is therefore subject to Title IX requirements. Id. at *1. In 2013, the University’s athletic department announced the addition of women’s volleyball to its roster of varsity teams. Id. at *2. Since its announcement, the University has worked to approve new beach volleyball facilities, provide locker rooms, make scholarships available for recruitment, and hire a new coach. Id. It currently sponsors eight men’s varsity teams (baseball, basketball, cross country, football, golf, tennis, indoor track and field, and outdoor track and field) and twelve women’s varsity teams (acrobatics and tumbling, basketball, beach volleyball, cross country, golf, lacrosse, soccer, softball, tennis, indoor track and field, outdoor track and field, and (indoor) volleyball). Id. at *1. The University also hosts forty-one club sports teams, including but not limited to rowing, which operate outside of the school’s athletic department and are generally student organized. Id. at *1-2.

Plaintiffs — consisting of female student athletes attending the University, five of which are current or former members of the women’s beach volley team (“Beach Volleyball Plaintiffs”) and four of which are current or former members of the women’s club rowing team (“Rowing Plaintiffs”) — filed a complaint alleging the University continues to violate Title IX by depriving its female student-athletes of equal treatment, equal access to athletic financial aid permissible under federal law, and equal opportunities to participate in varsity athletics. Id. at *1.

In pursuit of their claims, Plaintiffs asked the Court to certify the following classes: (1) Equal Treatment and Benefits Class defined as “all current and future female students who participate or will participate in intercollegiate varsity athletics at [the University]”; (2) Damages Class for the Equal Treatment and Benefits claim; (3) Equal Financial Aid Class defined as “all current and future female students who participate or will participate in intercollegiate varsity athletics at [the University] and do not receive all athletic financial aid permissible under federal law”; (4) Damages Class for the Equal Financial Aid claim; and (5) Effective Accommodation Class defined as “all present and future female students at [the University] who are being deprived of the opportunity to participate on women’s varsity intercollegiate athletic teams.” Id. at *3-4.

The District Court’s Decision

Judge McShane denied class certification for four of the five requested classes, namely the Equal Treatment and Benefits Class, both Damages Classes, and the Effective Accommodation Class. Id. at *5-8. The Court stayed its class certification consideration as to the Equal Financial Aid Class pending final disposition of the underlying claim on its merits. Id. at *4-5.

With regards to the Equal Treatment and Benefits Class, the Court held Federal Rule of Civil Procedure 23(a)’s typicality requirement ultimately prevented certification of the class. Id. at *6. While factual variations between a named plaintiff and proposed class members do not per se defeat typicality, typicality cannot be met when “there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to it.” Id. at *6 (internal citation omitted).

Here, rather than discussing all purported class members, Plaintiffs focused almost exclusively on the unique experiences of the Beach Volleyball Plaintiffs. Id. For example, unlike most of the other women’s varsity teams, the beach volleyball team practiced and competed off campus; until September 2025, the beach volleyball team was the only varsity team without its own locker room; and the beach volleyball team was the only varsity team without a dedicated full-time head coach who was not also coaching another team. Id. Moreover, the Beach Volleyball Plaintiffs “would need to address whether their participation in an ‘emerging’ varsity sport influences the merits of their Title IX claim.” Id. The Court expressed concern that addressing the unique experiences of the Beach Volleyball Plaintiffs would steal the focus of the litigation, creating an impermissible danger to absent class members. Id.

With regards to the two Damages Classes, the Court held a class action is not a superior method to litigate Plaintiffs’ damages claims because there are “too many distinct individual determinations that frustrate [class action] manageability. Id. at *7; see Fed. Rule of Civ. Prod. 23(b)(3). Again, the atypical experiences of the Beach Volleyball Plaintiffs would require individualized inquiry into any alleged liabilities and/or applicable remedies. Id. In addition, individualized inquiries would be needed “to determine which student-athletes were eligible for various forms of financial aid and the amount of aid they hypothetically would have received.” Id. This is only further complicated by “the University’s policy of allocating financial aid on a team-by-team basis and allowing coaches to make discretionary awards to student-athletes,” resulting in a requisite analysis into which student-athletes may have been eligible for aid but were not necessarily awarded scholarships because of other individualized considerations. Id.

With regards to the Effective Accommodation Class, the Court held the Rowing Plaintiffs were not members of the proposed class because they failed to demonstrate “they have the abilities to participate in varsity athletics . . . ” as their rowing times were markedly lower than the worst performing Division 1 rowing teams. Id. at *8 (emphasis in original). As such, Rowing Plaintiffs cannot be deprived of the opportunity to participate in varsity athletics. Id. Moreover, the Rowing Plaintiffs’ “inability to compete on a varsity level subjects them to a unique defense that defeats typicality.” Id. As mentioned above, rowing was a club sport operating outside of the school’s athletic department.

An interesting focus in the Court’s ruling was its dicta regarding the “proverbial elephant in the Title IX room” — men’s college football. Id. at *2. The Court reasoned that college football has evolved into a highly commercialized enterprise requiring investments—“extensive game-day operations and security; expansive locker room and training facilities; specialized coaching staffs numbering in the dozens; strength and conditioning programs; sports medicine and physical therapy personnel; recruiting operations; charter travel; housing and meal programs; academic tutoring; scholarships; and year-round training infrastructure” — comparative to the scale of its revenue. Id. at *2-3. Specifically, Title IX compliance cannot be measured solely on a dollar-for-dollar basis and must be “viewed across the athletic program as a whole.” Id. at *3.

Implications For Universities And Other Title IX Institutions

The Court’s message to the defense bar here is clear: continue to distinguish the named plaintiffs from the proposed class members (through factual distinctions, discrete issues, shortcomings on judicial efficiency, and unique defenses) as much as possible to oppose class certification. The opinion also provides helpful insight into how the statutory and regulatory framework of Title IX permits disparate expenditures among varying collegiate sports (namely men’s football when compared to other sports), serving as a defense into the extraordinary institutional investments associated with men’s college football that does not run counter to the aims of Title IX.

May 28, 2026May 28, 2026 by Gerald L. Maatman, Jr.

U.S. Supreme Court Delivers Arbitration Exemption To Last-Mile Local Drivers

By Gerald L. Maatman, Jr., Jennifer A. Riley, Eden Anderson, Rebecca Bjork, Ryan T. Garippo, and Olga A. Romadin

Duane Morris Takeaways: On May 28, 2026, in Flowers Foods, Inc. v. Brock, 2026 WL 1485669 (U.S. May 28, 2026), and in a much-anticipated ruling following a grant of certiorari from the 10th Circuit’s decision in Brock v. Flowers Foods, Inc., 121 F. 4th 753 (10th Cir. 2024), Justice Neil Gorsuch authored a unanimous opinion for the U.S. Supreme Court that affirmed the applicability of the Federal Arbitration Act (the “FAA”) transportation worker exemption for “last-mile” delivery drivers. Today’s opinion builds on the Supreme Court’s prior decisions in Southwest Airlines Company v. Saxon, 596 U.S. 450 (2022), and Bissonnette v. LePage Bakeries Park Street, LLC, 601 U.S. 246 (2024, to expand the FAA exemption for transportation workers seeking to bypass arbitration. The decision has significant implications for companies who employ delivery drivers and the logistics industry generally, and will play an important factor in re-shaping the arena of class and collective action litigation.

Case Background

Angelo Brock, a Denver-based delivery franchisee who had purchased distribution rights to baked goods produced by Flowers Foods, Inc. (known as a “last-mile” delivery driver), brought a putative class and collective action in a Colorado federal district court alleging that Flowers Foods had underpaid its franchisees in violation of the Fair Labor Standards Act (“FLSA”) and state laws. Id. at *2. “Brock picks up [Flowers Foods’] products from a warehouse in Colorado and delivers them to local stores, all without leaving the State.” Id. He also signed an arbitration agreement. Id. As a result, Flowers Foods filed a motion to compel arbitration under the terms of the agreement that it entered into with its franchisees, which the district court denied, citing 9 U.S.C. § 1., which exempts workers engaged in interstate commerce, and is commonly known as the FAA’s transportation worker exemption. Id.

In denying Flowers Foods’ motion, the district court concluded that Brock fell within the ‘‘transportation worker exemption” of § 1 of the FAA, which exempts transportation workers who engaged in interstate commerce from arbitration. Thus, even though Brock did not cross state lines, the district court reasoned that he had engaged in the transportation of the company’s products – which were created outside of the state – because he delivered those products in Colorado. Id. As a result, the district court declined to compel arbitration. Id.

Following an appeal of that decision by Flowers Foods, which argued that a worker who does not leave the state, like Brock, does not qualify for the exemption, the 10th Circuit affirmed the district court’s decision based on its determination that Brock’s “intrastate route formed a constituent part of the . . . interstate journey” of the cross-border delivery of Flowers Foods’s products. Id. Flowers Foods then sought review from the U.S. Supreme Court.

The U.S. Supreme Court granted Flowers Foods’ petition for writ of certiorari and sought to answer the question of whether a worker can fall under the “transportation worker exemption” for interstate workers under § 1 of the FAA if they neither cross state lines nor interact with vehicles that do. Id. at *3.

The Supreme Court Decision

In a unanimous decision, Justice Neil M. Gorsuch authored the 8-page opinion of the U.S. Supreme Court that affirmed the 10th Circuit’s ruling and held that “transportation workers” are exempt from the reach of the FAA, citing the statutory text, historical use, and U.S. Supreme Court precedent.

The Supreme Court cited its three recent decisions addressing § 1 of the FAA, including New Prime Inc. v. Oliveira, 586 U.S. 105 (2019), Southwest Airlines Company v. Saxon, 596 U.S. 450 (2022), and Bissonnette v. LePage Bakeries Park Street., LLC, 601 U.S. 246 (2024), to reject Flowers Food’s argument that in order to qualify for the exemption, a worker must cross state lines or engage with a vehicle that does. Id. Based on the statutory text, the Supreme Court found nothing in the language of the FAA requiring crossing state lines or interacting with a vehicle that does so. Under the definition for “interstate commerce” provided by Black’s Law Dictionary, the Supreme Court further noted, the transportation of goods between states includes intrastate activity. Id.

The Supreme Court also cited historic use of “interstate commerce” by referencing case law from the 19th and early 20th centuries, including discussing a case concerning steamship transportation of goods called The Daniel Ball, 10 Wall. 557 (1871), where the Supreme Court had found that a steamer that operated in one state without direct contact with other vessels transporting the goods into other states was found to engage in interstate transportation because the goods were destined for other states. Id. at *4.

Further, the Supreme Court rejected Flowers Foods’ argument that prior precedent was erroneously based on the U.S. Constitution’s Commerce Clause, and not the FAA. The Supreme Court noted that the similarity in the language between the Clause and § 1 were “probative” of the common conception of the meaning of the term used by both at the time that the FAA was enacted. Id.

Finally, the Supreme Court declined to find that the distribution agreement between Flowers Foods and Brock was relevant to the analysis. The Supreme Court did not find any significance to the fact that the agreement was signed by Brock’s independent company, and thus affirmed the judgment of the 10th Circuit by expanding the transportation worker exemption to individuals who do not travel to other states or come into contact with vehicles that do. Id. at *5.

Implications For Employers

As we predicted in a previous post in October 2025 (here – blog post), the Supreme Court’s decision is highly significant for logistics companies and deliver driver employees. This decision further expands the “transportation worker exemption” to make it much more difficult for employers to compel arbitration in class and collective actions brought by workers in transportation and transportation-adjacent positions. The U.S. Supreme Court’s decision, which was designed to prevent an analysis that hinges on “game of tag” with vehicles engaged interstate commerce, now has the potential to sweep in a wide variety of workers whose conduct is only tangentially related to movement of a company’s products across state lines.

Despite this blow to employers’ arbitration defenses, there are still some arguments for companies to assert in order to maintain their arbitration programs. By its own terms, the Supreme Court’s opinion is limited to whether § 1 requires a bright line rule that workers who “never cross[] state lines and never interact[] with vehicles that do” are outside of the FAA exemption and does not opine on whether a worker could be so attenuated from interstate commerce that they fall outside the scope of the exemption. Further, some arbitration agreements may be enforceable under state law and, therefore, the choice of law provisions in those these agreements will likely be the difference maker in whether a class action will survive a motion to compel arbitration or not. As a result, corporate counsel – particularly in the logistics industry – should follow the developments in this space closely, because their arbitration programs are under siege and a new wave of class actions is likely headed for their organizations.

May 27, 2026May 27, 2026 by Jennifer A. Riley

The Beard Group’s Class Action Money & Ethics Conference Covers Major Developments And Trends In Class Action Litigation

By Jennifer A. Riley, Greg Tsonis, George J. Schaller, and Ryan T. Garippo

Duane Morris Takeaways: Jennifer A. Riley, Greg Tsonis, George J. Schaller, and Ryan T. Garippo, members of the Duane Morris Class Action Defense Group, recently attended the Beard Group’s Class Action Money & Ethics Conference organized in New York City. The conference, held on May 21, 2026, hosted hundreds of attendees, covered key trends in class action litigation, and honored several attorneys for their accomplishments in the class action industry. Jennifer A. Riley of Duane Morris gave the keynote address, and George J. Schaller and Ryan T. Garippo of Duane Morris received awards for their accomplishments as two of 12 Premier Class Action Lawyers Of Tommorow in the United States.

The Conference

At the Class Action Money & Ethics Conference, the Beard Group, Inc. hosts a gathering of the top class action professionals to discuss the hottest topics in class action and multi-plaintiff litigation, including new filings, pre-trial proceedings, settlements, verdicts, and the latest trends in this area of the law. The Conference featured panelists and attendees who are attorneys on both sides of the bar, judges, as well as other professionals who focus their work on class action litigation.

The Conference features panels that speak on a wide range of topics. These topics included the use of data analytics and artificial intelligence in class action litigation, mass arbitrations, the trends in data breach and consumer protection litigation, environmental class actions, and more.

The State Of The Industry

Jen Riley, Vice Chair of Duane Morris’s Class Action Defense Team, opened the Conference by presenting the ten latest trends in class action and multi-plaintiff litigation in her keynote speech. The presentation is based on the findings from the Duane Morris Class Action Review, which is a “one-of-a-kind” publication, that summarizes class action trends and decisions across substantive areas of law.

As Jen Riley explained, in 2025, class action litigation exploded which led to record-breaking settlement figures by a wide margin. In 2025, the ten largest class action settlements can be aggregated to a total of over $79 billion dollars which were paid from corporate defendants to individuals across the nation. This trend was driven by high class certification rates, high quantities of class action filings, shifts within the substantive claims that plaintiffs are pursuing and several other variables. The net effect of these trends was that the class action mechanism served as an effective tool for the plaintiffs’ bar to redistribute wealth at an unprecedented level.

Jen Riley also discussed the shifting landscape with respect to some of the most cutting-edge defenses to defeating class actions. She discussed the success of corporate defendants in defeating class actions via motions to compel arbitration, and some of the latest case law on arbitrations that is currently being litigated before the U.S. Supreme Court. In addition, she reviewed the ongoing federal appellate circuit split concerning the standards for when to grant conditional certification (if at all) under the Fair Labor Standards Act and the applicability of the personal jurisdiction defense to the claims of individual class and collective action members. Jen Riley, providing the keynote address, is pictured below:

Panels On Class Actions And Related Issues

Following Jen Riley’s keynote address, numerous panels followed on the state of class action litigation across various areas of substantive law. The panels in the morning focused on a wide range of topics. The first panel discussed the use of data analytics in class action litigation, particularly by plaintiffs’ attorneys, to identify potential defendants to sue and then effectively prosecute their clients’ claims after. There were also panelists on securities class actions, which helped explain the role that private plaintiffs’ firms have to play during the Trump administration’s control of the U.S. Securities and Exchange Commission. The morning ended with a discussion of the future of litigation financing and the impact of various state laws on the continued viability of the practice.

The panels in the afternoon focused largely on consumer class actions and again covered many areas of substantive law. The afternoon opened with a lively panel on the current state of mass arbitrations, including a conversation regarding the plaintiffs’ bar’s use of arbitration agreements in their engagement letters, and how it impacts their ability to challenge the viability of arbitration agreements in federal and state courts across the country. There were panels on how the plaintiffs’ bar evaluates claims in data breach cases, as well as the shifting trends in data privacy class actions as a result. These panels were followed by additional discussions on the impact of multi-district litigation, environmental class actions, and a comparative analysis of global class actions which explained the various ways that plaintiffs are seeking to monetize mass torts and other alleged harms outside of Rule 23’s class action mechanism. The afternoon concluded with a panel on the scope of consumer protection class actions, including the cutting-edge theories that plaintiffs are pursuing to advance the law in this space, as well as the challenges in identifying plaintiffs to pursue such claims in light of the Eleventh Circuit’s decision that service payments are per se impermissible in class action settlements.

Premier Class Action Lawyers Of Tommorow Award Ceremony

After the panels concluded, there was a reception which was emceed by the Honorable Kathy King, who is a Justice on the Supreme Court in New York County state court. Justice King gave her concluding remarks on the event and also awarded this year’s Premier Class Action Lawyers Of Tommorow with awards for accomplishments in the class action industry. The award was provided to twelve attorneys, under the age of 40, who are redefining the frontiers of class action litigation through innovative strategies, landmark victories, and unwavering commitment to justice on both sides of the bar.

This year’s award winners included Ryan Garippo and George Schaller, both of Duane Morris, who were honored to accept their awards from Judge King and the Beard Group. George and Ryan are pictured below:

May 19, 2026May 19, 2026 by Gerald L. Maatman, Jr.

California Supreme Court Rules That A Smash-And-Grab Hardware Theft, With No Access To Sensitive Records, Does Not Automatically Result In Multi-Million Or Billion Dollar Liability Under California Privacy Laws

By Gerald L. Maatman, Jr., Jennifer A. Riley, Ryan T. Garippo, and Jamar D. Davis

Duane Morris Takeaways: On May 14, 2026, in J.M. v. Illuminate Education, Inc., No. S286699, 2026 Cal. LEXIS 2657 (May 14, 2026), the California Supreme Court held that the California Court of Appeal decision to deny a demurrer was improper for an incorrect application of privacy laws. This decision emphasizes why defendants should confirm whether a plaintiff sufficiently pled a cause of action that aligns with the remedies that he or she seeks to recover. Further, the opinion clarifies that injury under the Confidentiality of Medical Information Act, Cal. Civ. Code § 56, et seq. (“CMIA”) depends on whether the company subjects medical information to a substantial risk of unauthorized use or access, not whether the unauthorized user actually views sensitive data.

Case Background

Illuminate Education, Inc. (“Illuminate”) is a technology company that helps educators determine the academic progression of an individual student, as well as their areas of potential improvement. The company uses data from individual students, including medical data, to make these determinations. Illuminate provided its services to the Ventura County Office of Education, under which Plaintiff (a minor) was a student. Plaintiff provided his medical information to the Ventura County Office of Education, which then provided Plaintiff’s health data to Illuminate.

In 2022, Illuminate became aware of suspicious activity related to its systems. Illuminate promptly initiated an investigation. The investigation confirmed an unauthorized user gained access to Illuminate’s records, including students’ medical information. Illuminate sent a notice to the guardians of the affected students, including Plaintiff, informing them of the scope of the potential disclosure. The notice made it clear that Illuminate found no evidence that the unauthorized user (or users) was successful in actual or attempted misuse of the data.

After the breach, Plaintiff alleges that he received several mail solicitations at an address provided to only the Ventura County Office of Education. As a result, Plaintiff filed a class action lawsuit alleging that Illuminate, as health care provider, negligently managed the students’ medical records under the CMIA and failed to expediently disclose the data breach to those affected under the Customer Records Act, Cal. Civ. Code § 1798.80, et seq. (“CRA”).

The trial court sustained Illuminate’s demurrer, without leave to amend, after Plaintiff twice failed to cure deficiencies in his pleadings. The Court of Appeal reversed that decision, holding that the trial court abused its discretion by sustaining the demurrer, because Plaintiff may have been able to cure the defects in his complaint if a different legal analysis was applied.

Following that decision, the California Supreme Court set out to resolve the disagreement.

The California Supreme Court’s Decision

The California Supreme Court’s analysis hinges on its statutory interpretation, involving the plain reading of the statutes and their legislative histories. Generally, this analysis fell into three distinct categories.

First, Justice Goodwin Liu, writing for the California Supreme Court, reasoned that Plaintiff failed to establish a valid claim under CMIA because he could not allege that Illuminate was a “provider of health care” under California Civil Code section 56.06. Relying on the text of section 56.06, the Supreme Court explained there are two ways for a business to qualify as a “provider of health care”: (1) a covered business maintains medical records to make the information available to either an individual or a health care provider upon request of the individual or provider; or (2) a covered business makes medical information available for an individual or a health care provider upon request to allow an individual to manage their information, or to help diagnose or treat the individual.

The Supreme Court also confirmed this interpretation by relying on the legislative history of the statutes. The Supreme Court observed that the legislative history confirmed that the legislature was concerned with situations where diabetics used a data platform to record glucose levels, or where people with hypertension used platforms to track their blood pressure. Relying on the legislative history, the Supreme Court observed that Plaintiff never alleged that Illuminate created a repository of student records that allowed the students to create their own records, or to access and share those records at their discretion. Instead, Plaintiff asserted that Illuminate stored medical information to help educators monitor, evaluate, and address student needs. As a result, Illuminate was not a “provider of health care,” because it did not make medical records available upon request of the individual or provider.

The Supreme Court also quickly addressed Plaintiff’s inability to satisfy the alternative method for determining whether Illuminate is a “provider of health care” because Plaintiff never alleged that Illuminate “provides medical information to health care providers or individuals for diagnosis and treatment of an individual.” Illuminate Education, 2026 Cal. LEXIS 2657, at *12. As a result, and after quickly dispensing with a few other arguments, the Supreme Court concluded that Illuminate was not a “provider of health care” under the CMIA.

Second, in addition to analyzing whether Illuminate was a “provider of health care,” the Supreme Court also determined whether Plaintiff had alleged sufficient injury to state a claim under the CMIA. The Supreme Court disagreed with Illuminate’s argument that injury requires an unauthorized person to view medical data, and ruled that a plaintiff alleges injury by claiming that the medical information was exposed to “a significant risk of unauthorized access or use.” Id. at *29.

The CMIA requires covered entities to “preserve[] the confidentiality” of medical information. Cal. Civ. Code § 56.101(a). The Supreme Court stated that “confidentiality” requires “keeping information private or secret” and clarified that this obligation applies regardless of whether an unauthorized party actually views the data. Illuminate Education, 2026 Cal. LEXIS 2657, at *26. (“[W]e reject the rule that no breach of confidentiality has occurred until medical information is actually viewed by an unauthorized person.”). Instead, the determination of whether a covered entity failed to preserve the confidentiality of data depends on a factor-based analysis that considers the “form, duration, and extent of the data breach, as well as any mitigation efforts by the covered entity.” Id. at *30. Thus, a plaintiff need not allege that his or her data was “actually viewed” by a third party, because that person is “unlikely to know what an unauthorized party has done with their data unless they suffer actual damage” and instead “[a]ll relevant circumstances must be considered” when determining whether confidentiality was breached. Id.

Third, for the CRA claim, the Supreme Court ruled that Plaintiff did not state a cause of action against Illuminate because Plaintiff was not a customer within the meaning of the statute. To bring suit under the CRA, a plaintiff must establish that he or she is a “customer” within the meaning of the statute. Boorstein v. CBS Interactive, Inc., 222 Cal. App. 4th 456, 467 (2013). A customer is “an individual who provides personal information to a business for the purpose of purchasing or leasing a product or obtaining a service from the business.” Cal. Civ. Code § 1798.80(c). Here, the Supreme Court found that Plaintiff never alleged that he provided any personal information to Illuminate to purchase or lease a product, or obtain a service from Illuminate. The Supreme Court observed that the Ventura County Office of Education purchased Illuminate’s services and provided the student information, not Plaintiff. Moreover, the Supreme Court disregarded Plaintiff’s argument that he was the “ultimate” customer of Illuminate because the CRA “does not authorize suit by all consumers or beneficiaries; it authorizes a civil action for an injured ’customer.’” Id. at *32.

In the end, the Supreme Court reversed the judgment of the Court of Appeal and remanded the matter for further proceedings.

Implications For Companies

This decision emphasizes the importance of ensuring that a plaintiff has sufficiently pled all causes of action asserted. When the CMIA or CRA are involved, companies must consider whether they are, in fact, a covered entity in order to determine whether they are subject to the statutes’ reach.

Further, to assert injury under the CMIA for a data breach claim, the analysis hinges on the risk of unauthorized use, not what an unauthorized user is able to do with the data. Thus, it is imperative that companies take all reasonable steps to retain the confidentiality of sensitive records, making an extra effort to ensure that hardware is secure.

For CRA claims, companies need to pay special attention to which entities solicit or contract for their services as attention to these details can potentially thwart a potential CRA claim.

In short, organizations that use such medical data, and operate in California, should take note of this decision because it impacts their defenses both positively and negatively going forward.

May 19, 2026May 19, 2026 by Gerald L. Maatman, Jr.

Announcing The New Duane Morris Higher Education Class Action Review – 2026!

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

Duane Morris Takeaway: We are proud to announce the release of the first-ever Higher Education Class Action Review – 2026, a comprehensive examination of the rapidly evolving world of litigation involving colleges and universities.

Class action lawsuits against colleges and universities have multiplied in both frequency and complexity over the last several decades. What began as isolated disputes involving admissions practices or employment discrimination has evolved into a broad spectrum of high-stakes litigation touching nearly every aspect of institutional operations. Institutions now confront class claims involving tuition and fee refunds, antitrust allegations, Title IX compliance, financial aid practices, student privacy, labor and employment disputes, disability accommodations, consumer protection statutes, data breaches, and the use of emerging educational technologies.

The COVID-19 pandemic accelerated many of these trends, producing an unprecedented wave of litigation that tested the contractual, fiduciary, and ethical obligations universities owe to students, faculty, and employees alike. At the same time, plaintiffs’ attorneys increasingly recognized that educational institutions possess the precise characteristics that make them attractive targets for aggregate litigation: substantial assets, expansive data systems, and policies affecting large populations.

As a result, colleges and universities now operate in an environment where a single institutional decision can trigger nationwide claims involving thousands of individuals and expose institutions to extraordinary legal and reputational risk.

Yet higher education remains unlike any other industry. Universities occupy a unique legal and cultural space shaped by academic freedom, shared governance, nonprofit missions, constitutional obligations, and public trust. Courts are often tasked with balancing these longstanding traditions against modern doctrines of consumer protection, employment law, privacy regulation, and mass tort procedure.

The Higher Education Class Action Review – 2026 explores the procedural frameworks governing class certification, the substantive legal theories most frequently asserted against educational institutions, and the strategic considerations that shape litigation outcomes. Designed for attorneys, university counsel, administrators, policymakers, academics, and risk management professionals, the book provides a detailed roadmap for understanding the rapidly expanding role of class action litigation in education.

The Higher Education Class Action Review – 2026 offers readers a timely and authoritative guide to one of the most consequential developments in modern education law. Get your eBook copy today!

Stay tuned to the Class Action Weekly Wire for more news and information about the Higher Education Class Action Review – 2026.

May 12, 2026May 12, 2026 by Gerald L. Maatman, Jr.

Announcing The First Edition Of The Insurance Class Action Review – 2026!

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

Duane Morris Takeaway: The rise of class action litigation has fundamentally transformed the modern legal landscape, and we are proud to announce the publication of the Insurance Class Action Review – 2026, a comprehensive new resource examining the evolving risks, trends, and defense strategies shaping class action litigation across the insurance sector.

The class action mechanism is unparalleled among procedural rules in terms of its impact on the American legal system. Its ability to exponentially expand the potential damages associated with a single claim has elevated class litigation into one of the most consequential forces confronting corporate defendants. In many instances, the mere threat of class certification can alter litigation strategy, settlement dynamics, and business operations on a massive scale.

For insurers, these risks have become increasingly complex and far-reaching. Class action litigation now touches nearly every aspect of the insurance business, from premium calculations and claims handling practices to cybersecurity breaches, artificial intelligence underwriting models, and climate-related coverage disputes. As insurers continue to collect and process enormous volumes of consumer data while operating under overlapping contractual, statutory, and regulatory frameworks, they face unprecedented exposure to collective litigation. The Insurance Class Action Review – 2026 was developed to help legal and business leaders navigate this rapidly changing environment. The book also examines how broader societal and economic forces are reshaping litigation risk. Digital transformation has dramatically increased the amount of sensitive consumer information maintained by insurers, while catastrophic weather events, inflationary pressures, and shifting healthcare and labor markets have intensified scrutiny of claims practices and pricing models.

Looking ahead, the future of insurance class action litigation will likely be shaped by forces extending well beyond traditional coverage disputes. Artificial intelligence, digital surveillance technologies, climate risk, ESG initiatives, and expanding state consumer protection regimes are already redefining the contours of collective litigation. As these developments continue, class actions will remain a central mechanism through which courts, consumers, regulators, and the insurance industry negotiate questions of fairness, transparency, and economic responsibility.

Because the stakes in class litigation are often existential, corporate defendants must approach these cases from a broad vantage point with thoughtful, proactive, and multi-faceted defense strategies. We developed the Insurance Class Action Review – 2026 eBook as a one-of-a-kind resource to help insurers, corporate counsel, risk professionals, and litigators better understand the rapidly evolving class action landscape and prepare for the challenges ahead. Get your copy today!

May 5, 2026May 5, 2026 by Gerald L. Maatman, Jr.

Introducing The Energy, Oil, And Gas Class Action Review – 2026: A Guide To Litigation In A Transforming Industry

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

Duane Morris Takeaway: The global energy landscape in 2025 stands at a moment of profound transformation. Oil and gas companies—long the backbone of industrial development and economic growth—now operate under intensifying scrutiny from regulators, investors, and an increasingly litigious public. As markets evolve and the long-term consequences of decades of extraction become more visible, class action litigation has emerged as one of the most powerful mechanisms for accountability and redress.

It is against this backdrop that Duane Morris has published the Energy, Oil, And Gas Class Action Review – 2026. It arrives as a timely and essential resource for understanding the rapidly shifting legal terrain. This new publication examines the complex and fast-developing world of energy class action litigation, offering a comprehensive look at how both plaintiffs and defendants are adapting their strategies. The industry now operates within a landscape shaped by scientific uncertainty, geopolitical volatility, and the accelerating transition to alternative energy sources.

The Energy, Oil, And Gas Class Action Review – 2026 captures these developments in a structured, accessible format and offers practitioners, in-house counsel, and industry stakeholders a clear understanding of where litigation risk is heading.

Download your copy today and stay ahead of the curve in in this industry.

Stay tuned to the Class Action Weekly Wire for more information on the Energy, Oil, And Gas Class Action Review – 2026 coming soon!

May 4, 2026 by Gerald L. Maatman, Jr.

Seventh Circuit Holds That Refusing To Register An Arbitration Agreement With The AAA Is Not A “Refusal To Arbitrate” Under The FAA

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Hayley Ryan

Duane Morris Takeaways: On May 1, 2026, in Bernal et al. v. Kohl’s Corporation et al., No. 24-2806, 2026 WL 1193991 (7th Cir. May 1, 2026), the U.S. Court of Appeals for the Seventh Circuit affirmed a federal district court’s denial of a petition to compel arbitration, holding that the defendant’s refusal to register its arbitration agreement with the American Arbitration Association (“AAA”), which caused the AAA to close the arbitration proceedings, did not constitute a “refusal to arbitrate” under the Federal Arbitration Act (“FAA”). The Seventh Circuit reasoned that because the parties had delegated that procedural question to the AAA, the district court had no authority to compel arbitration.

This decision is a significant win for businesses facing mass arbitration campaigns, particularly where arbitration agreements incorporate the AAA’s Consumer Arbitration Rules. The decision offers a concrete mechanism to avoid the steep filing fees such campaigns generate.

Background

Plaintiffs purchased products through Kohl’s website in 2020 and 2022 and agreed to arbitration provisions that required all disputes to be resolved through binding arbitration before the AAA under its rules, including the AAA’s Consumer Arbitration Rules. Id. at * 1. The arbitration agreement also delegated to the arbitrator exclusive authority “to resolve any dispute related to the interpretation, applicability, enforceability or formation of” the arbitration agreement. Id.

In December 2022, Plaintiffs’ counsel initiated the pre-arbitration process by serving Kohnl’s with approximately 10,000 notices of dispute, followed by an additional 44,656 notices in April 2023. These claims alleged that Kohl’s marketing practices violated California’s consumer protection laws. Id. at *2. This is a classic mass arbitration strategy in which plaintiffs’ firms file thousands of individual demands to exploit mandatory per-claim filing fees paid by corporate defendants.

On May 22, 2023, while settlement discussions were ongoing, Kohl’s modified its terms and conditions to designate the National Arbitration and Mediation tribunal (rather than the AAA) as the arbitration forum for all claims. That same day, Plaintiffs filed formal individual demands with the AAA and paid all applicable filing fees. Id. Under AAA Consumer Arbitration Rule R-12, however, a business must register its arbitration clause and pay administrative fees for the AAA to administer consumer arbitrations. Kohl’s declined to do so. As a result, the AAA exercised its discretion to decline administration, closed the cases, and refunded Plaintiffs’ filing fees. Id. at *3.

Plaintiffs then filed suit in the U.S. District Court for the Central District of California, which was later transferred to the U.S. District Court for the Eastern District of Wisconsin pursuant to the forum selection clause, petitioning the court to compel Kohl’s to register its arbitration agreement with the AAA, pay all necessary filing fees, and proceed to arbitration. Id.

The District Court’s Ruling

The U.S. District Court for the Eastern District of Wisconsin denied the petition. Relying on Wallrich v. Samsung Elecs. Am., Inc., 106 F.4th 609 (7th Cir. 2024), the district court found that the parties had bargained for the AAA to apply and interpret its own Consumer Arbitration Rules. Id. at *3. When the AAA exercised that discretion by closing Plaintiffs’ cases upon Kohl’s non-registration, the court concluded it lacked authority to override that decision. Id.

Plaintiffs filed an interlocutory appeal, arguing that Kohl’s refusal to register its agreement constitutes a refusal to arbitration in violation of the Federal Arbitration Act (“FAA”). Id.

The Seventh Circuit’s Decision

The Seventh Circuit affirmed. Id. at *7. It held that the AAA’s exercise of discretion in closing Plaintiffs’ cases “flowed directly from the parties’ agreement granting AAA that power, leaving nothing for the district court to compel under the Federal Arbitration Act.” Id.

Under the FAA, a party seeking to compel arbitration must establish: (1) an enforceable written arbitration agreement; (2) a dispute falling within the scope of the agreement; and (3) a refusal to arbitrate. Id. at *4 (citing Wallrich, Inc., 106 F.4th at 617-18). The Seventh Circuit’s analysis centered on the third element, i.e. whether Kohl’s non-registration constituted a refusal to arbitrate. Id.

The Seventh Circuit characterized the AAA’s registration requirement as a “forum-specific procedural gateway” matter – the kind of matter parties implicitly delegate to the arbitration provider when they agree to arbitrate under its rules. Id. at *6 (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 85–86 (2002)). Citing Howsam, 537 U.S. at 85, the Seventh Circuit reasoned that, absent contrary language in the arbitration agreement, parties who agree to AAA arbitration intend to withhold registration disputes from judicial review. Id. Because the AAA exercised its own discretion (consistent with the parties’ agreement) in closing the cases, there was “nothing for the district court to compel” under the FAA. Id. at *7.

The Seventh Circuit also relied on its prior decision in Wallrich, which held that a defendant’s failure to pay AAA fees, which resulted in termination of the arbitration, did not constitute a refusal to arbitrate where the outcome flowed from the parties’ agreed-upon procedures.

The Dissent

Judge Joshua P. Kolar dissented. In his view, Kohl’s non-registration “was a conscious step to depart from its agreement to arbitrate,” not a procedural question delegated to the AAA. Id. at *8. Judge Kolar warned that the majority’s reasoning stretches Wallrich’s holding too far and effectively converts “any bilateral agreement to arbitrate under AAA’s Consumer Rules into something of a unilateral option-to-arbitrate for business.” Id. at *9. Judge Kolar would have compelled Kohl’s to register so that the AAA could initiate proceedings. Id.

Implications for Companies

Bernal has immediate practical significance for companies facing mass arbitration exposure under AAA arbitration agreements. By simply declining to register its arbitration agreement with the AAA, a company can cause the AAA to close the proceedings without judicial recourse, at least in the Seventh Circuit. Businesses with AAA arbitration clauses in their consumer-facing agreements should assess whether this strategy is available and appropriate given their specific contractual language and forum.

That said, the dissent’s warning deserves attention. If other circuits adopt Judge Kolar’s reasoning, or if the AAA amends its rules in response, the window this decision opens may narrow. Companies should monitor developments carefully and consult counsel before relying on non-registration as a mass arbitration defense.