It Is Here — The Duane Morris Class Action Review – 2023

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

Duane Morris Takeaways: As we kick off 2023, this is the inaugural year of the new Duane Morris Class Action Review.  It is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting Corporate America, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breach, EEOC-Initiated and government enforcement litigation, employment discrimination, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, wage & hour class and collective actions, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, and the top class action settlement in each area. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2023.

Click here to access our customized website featuring all the Review highlights, including the ten major trends across all types of class actions over the past year.

Order your copy of the eBook here, and download the Review overview on the key Rule 23 decisions and top class action settlements here.

The 2023 Review analyzes rulings from all state and federal courts in 23 areas of law. It is designed as a reader-friendly research tool that is easily accessible in hard copy and e-Book formats. Class action rulings from throughout the year are analyzed and organized into 23 chapters and 4 appendices for ease of analysis and reference.

Executive Summary Of Key Class Action Trends Over The Past Year

Class action litigation presents one of the most significant risks to corporate defendants today. Procedural mechanisms like the one set forth in Rule 23 of the Federal Rules of Civil Procedure have the potential to expand a claim asserted on behalf of a single person into a claim asserted on behalf of a behemoth that includes every employee, customer, or user of a particular company, product, or service, over an extended period. With the potential for exponential enlargement of the size and scope of an action comes the potential for exponential expansion of peril for a corporate defendant. Class action lawsuits can create legal nightmares for companies and their management teams. The exposure created by such aggregation of claims can pose a challenge to a corporation’s balance sheet, market share, and reputation. Sometimes such litigation can push a defendant into bankruptcy.

With the growth of class action litigation over the past decade, counsel for defendants and plaintiffs alike have become more sophisticated, the statutory authority and case law precedents have continued to evolve, and parties on both sides have expanded their arsenal of tools to pursue and to defend these cases. As a result, class action litigation entails ever-changing guideposts, new playbooks, and innovation. The plaintiffs’ class action bar used Rule 23 to its fullest in 2022 in prosecuting class actions against Corporate America. The result was a year like no other in the class action space.

We identified 10 key trends that characterize the past year. These trends involve:  (i) massive class action settlements; (ii) U.S. Supreme Court decisional law on class action issues; (iii) set-backs and statutory impediments to the arbitration defense; (iv) plaintiff-friendly class certification conversion rates; (v) a simmering in government enforcement actions paired with indications of more aggressive federal and state agency litigation against corporations in the coming year; (vi) expansive growth in privacy class action litigation; (vii) an expansion of data protection issues that continue to plague corporate defendants; (viii) continued confusion over the problem of uninjured class members to class certification; (ix) aggressive assertion of defenses based on personal jurisdiction and venue; and (x) transformative rulings on the PAGA front including the first major setback for the plaintiffs’ bar.

Trend #1 – Class Action Settlements In 2022 Redistributed Wealth At An Unprecedented Level

Aside from the Big Tobacco settlements nearly two decades ago, 2022 marked the most extensive set of billion-dollar class action settlements in the history of the American court system. Many of these settlements arose from opioid litigation against manufactures, distributors, and retailers in the pharmaceutical industry. On an aggregate basis, class actions and government enforcement lawsuits garnered more than $71 billion in settlements, with 15 class action cases settling for more than $1 billion. These settlements have redistributed wealth at an unprecedented rate. Suffice to say, 2022 was unlike any other year on the class action settlement front. As success often begets copy-cats, corporations can expect the plaintiffs’ class action bar will be equally if not more aggressive in their case filings and settlement positions in 2023.

Trend # 2 – The U.S. Supreme Court’s Decisions In 2022 Continued To Define The Class Action Landscape

As the ultimate referee of law, the U.S. Supreme Court has continued to define and shift the playing field for class action litigation. The Supreme Court’s rulings in 2022 were no exception. Consistent with its approach over the past several years, the Supreme Court issued three key rulings that impact the plaintiffs’ bar’s ability to bring and maintain class actions. The rulings include Southwest Airlines Co. v. Saxon, et al., 142 S.Ct. 1783 (2022), Morgan, et al. v. Sundance, Inc., 142 S.Ct. 1708 (2022), and Viking River Cruises, Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022). The most effective tool for combating class actions may be the arbitration defense. Contrary to the tendency of its rulings in recent years to expand the arbitration defense, and thus make it more difficult for the plaintiffs’ bar to pursue claims on a class-wide basis, this past year the U.S. Supreme Court pulled back on the arbitration defense by narrowing its coverage.

Trend # 3 – The Arbitration Defense Suffered Setbacks In 2022

Of all defenses, a defendant’s ability to enforce an arbitration agreement containing a class or collective action waiver may have had the single greatest impact in terms of shifting the pendulum of class action litigation. With its decision in Epic Systems Corp. v. Lewis, et al., 138 S. Ct. 1612 (2018), the U.S. Supreme Court cleared the last hurdle to widespread adoption of such agreements. In response, more companies of all types and sizes updated their onboarding materials, terms of use, and other types of agreements to require that any disputes be resolved in arbitration on an individual basis. To date, companies have enjoyed a high rate of success enforcing those agreements and using them to thwart class actions out of the gate. Given the impact of the arbitration defense, in 2023, companies may face additional hurdles, on the judicial or the legislative front, as the plaintiffs’ bar continues to look for workarounds.

Trend # 4 – The Likelihood Of Class Certification In 2022 Was As Strong As Ever

In 2022, the plaintiffs’ class action bar succeeded in certifying class actions at a high rate. Across all major types of class actions, courts issued rulings on over 360 motions to grant or to deny class certification in 2022. Of these, plaintiffs succeed in obtaining or maintaining certification in 268 rulings, with an overall success rate of nearly 75%. The plaintiffs’ class action bar obtained the highest rates of success in securities fraud, ERISA, WARN, and FLSA actions. In cases alleging securities fraud, plaintiffs succeeded in obtaining orders certifying classes in 23 of the 24 rulings issues during 2022, a success rate of 96%. In ERISA litigation, plaintiffs succeeded in obtaining orders certifying class in 18 of 23 rulings issued during 2022, a success rate of 78%. In cases alleging WARN violations, plaintiffs managed to certify classes in 100% of the suits that resulted in decisions this year.

Trend # 5 – Government Enforcement In 2022 Took A Back Seat

Over the past year, the Biden Administration continued to roll out changes on several fronts as it aimed to expand the rights, remedies, and procedural avenues available to workers. During 2022, such efforts fueled litigation. With its decision in West Virginia v. Environmental Protection Agency, 142 S.Ct. 2587 (2022), the U.S. Supreme Court imposed another hurdle to agency rule-making. Meanwhile, government enforcement litigation activity took a back seat. Over the past two years, the U.S. Department of Labor, in particular, has continued to roll out worker-friendly rules that could have a cascading impact on workplace class actions, including rules designed to wipe out the pro-business policies of the Trump Administration. Such efforts continued on multiple fronts in 2022, including with respect to rules regarding businesses’ utilization of independent contractors and their use of the tip credit. Whereas companies continued to see pro-business rules promulgated by the Trump Administration withdrawn and overwritten in 2022, courts continued to impose hurdles to agency rulemaking, the success of which will continue to be seen in 2023. Enforcement activity remained steady as political appointments remain pending.  Employers are apt to see increased activity in 2023 as the EEOC in particular gains its full component of Biden appointees and can exercise its majority power to advance its agenda.

Trend # 6 – Privacy Class Actions Became An Intense Focus Of The Plaintiffs’ Class Action Bar

Privacy litigation – in a multitude of forms and theories – manifested itself as the hottest area of growth in terms of activity by the plaintiffs’ class action bar. The Illinois Supreme Court likely will rule on key BIPA matters in the early part of 2023 and that the statute will continue to drive class action litigation. Its technical requirements, combined with stiff statutory penalties and fee-shifting, provide a recipe for attention from the plaintiff’s class action bar, and companies’ continued development and use of innovative technologies are apt to provide a veritable barrel of opportunity. The plaintiffs’ bar also grounded privacy claims in the electronic interception provisions of various state laws. While Congress has refrained from addressing data privacy through federal legislation, many states have enacted their own laws, and 2022 saw significant state legislative activity regarding data privacy with five states preparing for new privacy laws to take effect in 2023, including California, Colorado, Connecticut, Utah, and Virginia.

Trend # 7 – Data Protection Issues Continued To Plague Corporate Defendants

Companies that fall victim to data breach attacks have to contend not only with the significant costs of responding to the data breach and potential of government fines, but also the high costs of dealing with high-stakes class action lawsuits. Corporations also suffered setbacks as courts disagreed over the application of the U.S. Supreme Court’s decision in TransUnion v. Ramirez, et al., 141 S. Ct. 2190 (2021), to data breach cases. In TransUnion, the Supreme Court ruled that certain putative class members, who did not have their credit reports shared with third parties, did not suffer concrete harm and, therefore, lacked standing to sue. The Supreme Court decision in Ramirez has not resulted in a bright line rule on standing in data breach cases, as courts continue to apply different interpretations of Ramirez when analyzing the particular circumstances surrounding the breach in assessing the question of standing.

Trend # 8 – Courts Continued To Grapple With Problems Of Standing And Uninjured Class Members

During 2022, courts continued to grapple with the rules that govern the certification of classes that contain uninjured class members. Various cases climbed to the federal circuit level, with varying results, and the U.S. Supreme Court once again declined to take up the issue, making uninjured class members a continued topic of disagreement and debate for 2023. The issue remains one that divides lower federal courts, thereby fueling uncertainty on an important class action issue. If a defendant’s showing that one or more members of the defined class did not suffer a concrete harm can defeat class certification, such a defense is a potent tool for the defense.  As a result, while 2022 saw the further development of the defense, corporate defendants are likely to see continued litigation over this issue during the upcoming year.

Trend # 9 – Corporate Defendants Aggressively Asserted Defenses Based On Personal Jurisdiction

In 2022, corporate defendants aggressively asserted defenses based on personal jurisdiction to fracture class and collective actions. In Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, 137 S. Ct. 1773 (2017), the U.S. Supreme Court held that each plaintiff in a mass action must demonstrate a basis for the court to exercise personal jurisdiction over the defendant for purposes of adjudicating his or her claims, even if those claims are similar to the claims of other plaintiffs. Federal circuits, however, have disagreed on the impact of the Supreme Court’s ruling in the collective action and class action context. It is unlikely that the Supreme Court will resolve this issue in 2023, and corporate defendants can expect that personal jurisdiction will remain a powerful defense for facing class and collective actions outside of their home states.

Trend # 10 – PAGA Actions Suffered Their First Setback, Work-Arounds Continued To Percolate

In 2022, actions under the California Private Attorneys General Act (PAGA), Cal. Lab. Code, §§ 2698, et seq., saw their first setback as a workaround to workplace arbitration programs that require individual proceedings. According to data maintained by the California Department of Industrial Relations, the number of PAGA notices filed with the LWDA has increased exponentially over the past two decades. As the adoption of arbitration programs gained popularity as a mechanism to contract around class and collective actions, the plaintiffs’ class action bar identified work-around strategies. The PAGA workaround suffered its first significant set-back in 2022 with the U.S. Supreme Court’s highly anticipated decision in Viking River Cruises, Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022), which addressed the arbitrability of PAGA claims.

What Should Companies Expect In 2023?

Class action litigation is a staple of the American judicial system. The volume of class action filings has increased each year for the past decade, and 2023 is likely to follow that trend. A company’s programs designed to ensure compliance with existing laws and strategies to mitigate class action litigation risks are corporate imperatives. The plaintiffs’ bar is nothing if not innovative and resourceful. Given the massive class action settlement figures in 2022, coupled with the ever-developing case law under Rule 23, corporations can expect more lawsuits, expansive class theories, and an aggressive plaintiffs’ bar in 2023. These conditions necessitate planning, preparation, and decision-making to position corporations to withstand and defend class action exposures. These crucial issues are inevitably posed by any class action litigation. By their very nature, class actions involve decisions on strategy at every turn. The positions of the parties are constantly changing and corporate defendants must always be looking ahead and anticipating issues during every phase of the litigation.

We hope the Duane Morris Class Action Review provides practical insights into complex potential strategies relevant to all aspects of class action litigation and other claims that can cost billions of dollars and require changed business practices in order to resolve

The 2022-2023 Judicial Hellholes Report From The American Tort Reform Association On The Worst Jurisdictions For Defendants

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

Duane Morris Takeaways: Every year the American Tort Reform Association (“ATRA”) publishes its “Judicial Hellholes Report,” focusing on litigation issues and identifying jurisdictions likely to have unfair and biased administration of justice. The ATRA recently published its 2022-2023 Report and Georgia is identified as the most disadvantageous jurisdiction in the country for corporate defendants, the highest ever ranking for the state. Readers can find a copy here and the executive summary here.

The Judicial Hellholes Report is an important read for corporate counsel facing class action litigation because it identifies jurisdictions that are generally unfavorable to defendants. The Report defines a “judicial hellhole” as a jurisdiction where judges in civil cases systematically apply laws and procedures in an unfair and unbalanced manner, generally to the disadvantage of defendants. The Report is a “must read” for anyone litigating class actions and making decisions about venue strategy.

The 2022 Hellholes

In its recently released annual report, the ATRA identified 8 jurisdictions on its 2022 hellholes list – which, in order, include: (1) Georgia (with massive verdicts bogging down business and third-party litigation financing is playing an increasing role in litigation); (2) Pennsylvania (especially in the Philadelphia Court of Common Pleas and the Supreme Court of Pennsylvania); (3) California (with Proposition 65 lawsuits thriving and a huge overall volume of lawsuits, in addition to Private Attorney General Act (PAGA) litigation and Americans with Disability Act (ADA) accessibility lawsuits; (4) New York (with “no-injury” consumer class action lawsuits and the highest volume of lawsuits under the ADA); (5) Illinois (particularly in Cook County as another “no-injury required” hotspot and lawsuits stemming from the Illinois Biometric Information Privacy Act); (6) South Carolina (particularly in asbestos litigation); (7) Louisiana (including deceptive lawsuit advertising practices, coastal litigation, and COVID-19 litigation); and (8) St. Louis, Missouri (with focuses on asbestos litigation and “phantom damages”).

According to the ATRA’s analysis, these venues are less than optimal for corporate defendants and often attract plaintiffs’ attorneys, particularly for the filing of class action lawsuits. Therefore, corporate counsel should take particular care if they encounter a class action lawsuit filed in one of these venues.

The 2023 “Watch List”

The ATRA also included 3 jurisdictions on its “watch list,” including Florida (the ATRA noted that Florida has been making strides to mitigate lawsuit abuse, but issues of inflated medical damages and deceptive trial lawyer advertising still remain); New Jersey (with a powerful trial bar), and Texas (particularly the Court of Appeals for the Fifth District, which the ATRA opined has developed a reputation for being pro-plaintiff and pro-liability expansion).

In addition, the ATRA recognized that several jurisdictions made significant positive improvements this year, highlighting decisions issued by Florida Supreme Court, the U.S. Court of Appeals for the Fourth Circuit, and the Arizona Supreme Court. The ATRA also noted that nine state legislatures enacted positive civil justice reforms this year.

 Implications For Employers

The Judicial Hellholes Report often mirrors the experience of companies in high-stakes class actions, as Georgia, California, New York, Pennsylvania, Illinois, Louisiana, Missouri, and South Carolina are among the leading states where plaintiffs’ lawyers file class actions. These jurisdictions are linked by class certification standards that are more plaintiff-friendly and more generous damages recovery possibilities under state laws.

Sixth Circuit Denies Writ Of Mandamus In Opioid Class Actions For District Court’s Order That Pushes Discretion Under Rule 16(b) to the Edge

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

Duane Morris Takeaways: In the proceeding entitled In Re National Prescription Opiate Litigation, No. 21-4051, 2022 U.S. App. LEXIS 31328 (6th Cir. Nov. 10, 2022), the Sixth Circuit denied a petition for writ of mandamus regarding a District Court’s Scheduling Order in the giant opioid multidistrict class action and its allowance of the late pleadings amendments as to new defendants, Meijer Distribution, Inc., and Meijer Stores Limited Partnership (“Meijer Defendants”).  The newly-added Meijer Defendants argued that the District Court violated the Rule 16(b) of the Federal Rules of Civil Procedure by allowing Plaintiffs to improperly join them in the ongoing 3-year old case without first seeking leave of court and without demonstrating good cause.  The Sixth Circuit held that the District Court acted within its broad discretion and did not violate the Federal Rules of Civil Procedure because it provided a cut-off date that allowed for the specific amendments.  The Sixth Circuit explained “[t]hough unconventional, the District Court’s actions are not so extraordinary as to warrant mandamus.”  Id. at *1. The decision illuminates the broad discretion that district courts enjoy in managing class action litigation and the important role that scheduling orders play throughout the entire litigation.

Case Background

In July 2018, Plaintiffs filed the underlying lawsuit against a group of pharmacies.  The case was removed to federal court and ultimately became part of the opioid multidistrict class action proceeding entitled In Re National Prescription Opiate Litigation, 1:17-MD-2804 (N.D. Ohio 2017) (“MDL”).

Significantly, in the underlying case, the district court entered an order on May 3, 2018, which amended its Case Management Order and provided that “‘[i]f a case is later designated as a bellwether for motion practice or trial, a separate CMO will be entered that will provide further opportunity to amend.’” (“2021 Bellwether Order”).  See Petition at 4-5.

In 2021, the District Court selected the underlying case to proceed as a bellwether case against the pharmacies.  See Sixth Circuit Order at 1. Subsequently, on May 19, 2021, Plaintiff filed a supplemental pleading, adding the Meijer Defendants to the underlying case.  See id.; Petition at 5.  The amendments were made nearly three years after Plaintiff filed suit and more than 26 months after the deadline to add new defendants.

After unsuccessfully moving to strike the Meijer Amendments and certify the Court’s 2021 Bellwether Order for interlocutory appeal, on November 9, 2021, Defendants filed a petition for a writ of mandamus with the Sixth Circuit.  See Petition at 7.  In the Petition, the Meijer Defendants argued that the District Court allowed Plaintiff to add the Meijer Defendants years after the deadline for amending pleadings passed and without requiring Plaintiff to demonstrate good cause, as required by Rule 16(b) of the Federal Rules of Civil Procedure.  See Petition at 1.  The Meijer Defendants requested that the Sixth Circuit issue a writ ordering the District Court to strike the untimely amendments and dismiss the Meijer Defendants from the case.  See id. at 2.

The Sixth Circuit’s Ruling Denying The Writ Of Mandamus

The Sixth Circuit denied the writ of mandamus. It held that the District Court’s order, while “unconventional,” fell within the parameters of Rule 16(b).  See Sixth Circuit Order at 1.  The Court of Appeals explained that Rule 16(b) requires that “scheduling orders limit the time to join other parties” and the District Court’s 2021 Bellwether Order “explicitly provided permission for plaintiffs to amend their complaint if their case was selected as a bellwether.”  Id.  The Sixth Circuit reasoned that because Plaintiffs exercised their right to amend after the underlying case was chosen as a bellwether, Plaintiffs did not need to seek permission from the District Court.  Id. at 2.

The Sixth Circuit noted that the 2021 Bellwether Order allowed plaintiffs to amend whenever their case was selected as a bellwether, and there was no cut-off for amendments.  Id.  The Sixth Circuit acknowledged that, under the 2021 Bellwether Order and without any cut-off date, the amendments could have gone differently (i.e., made on the eve of trial or adding a defendant that was completely new to the litigation).  Id. at 2.  Instead, the Sixth Circuit determined that the Meijer Defendants suffered little, if any, prejudice.  Id. at 2-3.  Thus, the Court of Appeals explained, “[t]hat unusual aspect of the scheduling order did not clearly violate Rule 16 because it provided some limit (when the case was selected as a bellwether), although the order went right to the edge of the district court’s discretion under Rule 16.”  Id. at 2.

In denying the writ, the Sixth Circuit held that the Meijer Defendants “ha[ve] shown that the district court’s scheduling order was unconventional but not a judicial usurpation of power nor a clear abuse of discretion.”  Id. at 3.

Implications For Companies

The Sixth Circuit’s order recognizes the broad discretion that district courts have in managing their dockets and illustrates the importance that scheduling orders play in all types of cases, and specifically in MDLs and class actions.  Companies should pay close attention to all of the proposed deadlines included in any scheduling orders, and try to prevent these types of amendments from being entered at the outset.

Ohio State Wins More Than Just Games, As The Ohio Court of Appeals Reverses Class Certification In Favor Of The University

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

Duane Morris Synopsis In Smith v. Ohio State University, 2022-Ohio-4101 (Ohio App. Nov. 17, 2022), The Ohio State University successfully appealed an Ohio Court of Claim’s (“trial court”) Order granting class certification in a lawsuit brought by a former undergraduate student.  The former student alleged that when the university only offered online classes due to COVID-19, it breached its contract by keeping all the tuition payments from her and other students without giving them the robust in-person experience promised when they initially paid their tuition bills.  The Ohio Court of Appeals held that while the trial court has broad discretion in granting class certification, it failed to determine proof of injury and economic damages relative to the former student and potential class members.  In crafting a class certification defense strategy, especially in a breach of contract case where the injury and damages typically are in play, employers should focus on the lawsuit basics when opposing class certification, i.e., demanding that plaintiffs show causation and injury in fact.

Case Background

Plaintiff, a former college student, filed a lawsuit alleging that Defendant, The Ohio State University (“OSU”), breached its contract and received unjust enrichment in Spring 2020 by failing to partially refund students their tuition and fees after transitioning from their robust, in-person education to “subpar” online education during COVID-19.  Id. at 4-5.

In June 2021, Plaintiff moved for class certification.  Id. at 5.  After briefing and oral argument, the trial court granted Plaintiff’s motion and certified a class consisting of all undergraduate students enrolled in classes at Defendant’s Columbus campus during the Spring 2020 semester. Notably, the trial court found that the class suffered the same injury, i.e., losing the benefit of in-person classes and access to the campus.  Id. at 9-10.

In appealing the trial court’s decision, Defendant raised several arguments for why the trial court’s decision was incorrect. Significantly, Defendant’s main, and ultimately successful, arguments focused on the trial court’s failure to conduct the “rigorous analysis” required by Ohio Civil Rule 23 (like Federal Rule of Civil Procedure 23) in determining whether Plaintiff had satisfied the prerequisites for class certification.  Id. at 10-11.

The Court Of Appeals’ Ruling Reversing Class Action Certification

The Ohio Court of Appeals agreed with Defendant and reversed the trial court’s order granting class certification for three reasons.

First, the Court of Appeals found that the Plaintiff failed to present sufficient evidence of an economic injury.  Id. at 17-18.  Instead, the trial court simply assumed that a “benefit” was lost based only on the fact Defendant closed its campus and switched to remote classes and services in response to the pandemic.  Id. at 18.

Second, the Court of Appeals found that the trial court failed to consider Defendant’s arguments and evidence contesting proof of injury.  Id. at 18-19.  Defendant submitted an expert report that included evidence that students paid the same for in-person and online learning and that the in-person teaching modality carried the possibility of substantial remote instruction even in a normal semester.  Id. at 19. Meanwhile, Plaintiff submitted no expert testimony regarding how and or whether other students were injured in this case.  Id.  Indeed, Plaintiff’s expert’s report excluded any survey questions or consideration of market preferences during an emergency such as the pandemic that forced the closure.  Id.

Third, the Court of Appeals found that the trial court’s analysis of Plaintiff’s unjust enrichment claim was merely folded into the same generalized injury analysis without any individualized consideration.  Id. at 19-20.

In holding that the trial abused its discretion, the Court of Appeals reasoned that, “[t]he trial court, in assuming an injury from the fact of closure and termination of in-person classes, did not assess these complicated and difficult considerations, particularly as they relate to whether [Plaintiff] presented any common evidence — or even a method to possibly determine — that class members suffered an economic injury considering the effect of the pandemic.”  Id. at 20.  Further, the Court of Appeals opined that “having accepted the closure of campus and temporary termination of in-person classes and services as an injury per se, and having failed to consider how the pandemic affects class certification in this case at all, the trial court did not undertake a rigorous analysis with respect to the number and nature of individualized inquires that might be necessary to establish liability with respect to both tuition and fees.”  Id.

Implications

In class actions asserting breach of contract claims, it is not uncommon for plaintiffs to seek class certification before developing their case through affidavits from other individuals and expert testimony.  Employers can use this to their advantage by attacking causation and damages. This strategy may not only hinder a plaintiff from notifying potentially thousands of other putative class members of the claims, but also potentially saving money through limited discovery.

New Trial Sought Following $228 Million Judgment In Landmark BIPA Class Action

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex W. Karasik

Duane Morris Synopsis:  In Rogers v. BNSF Railway Co., Case No. 19-CV-03083 (N.D. Ill.), the first federal court jury trial in a case brought under the novel Illinois Biometric Information Privacy Act (“BIPA”), the plaintiffs secured a verdict in favor of the class of 45,000 workers against Defendant BNSF. After a week-long trial in the U.S. District Court for the Northern District of Illinois in Chicago, the jury found that BNSF recklessly or intentionally violated the law 45,600 times. The Court thereafter entered against BNSF for $228 million. Post-trial motions are now before the Court, which raise significant issues for all companies that use biometric equipment.

On November 9, 2022, Defendant BNSF Railway Co. filed a motion for a new trial under Rule 59(a) or to reduce the damages award under Rule 59(e). It argues that none of the 45,000 class members suffered any actual harm. It also raised constitutional concerns about the BIPA.

This latest development suggests that BNSF is pulling out all the stops to challenge the precedent-setting $228 million judgment. The outcome of this motion and future appeals will profoundly shape the privacy class action landscape.

Case Background

As we blogged about here, Plaintiff filed a class action lawsuit alleging that BNSF unlawfully required truck drivers entering the Company’s facilities to provide their biometric information through a fingerprint scanner. He claimed that BNSF collected the drivers’ fingerprints without first obtaining informed written consent or providing a written policy that complied with the BIPA and therefore violated sections 15(a) and (b) of the BIPA. BNSF argued that it did not operate the biometric equipment and instead sought to shift blame to a third-party vendor who operated the biometric equipment that collected drivers’ fingerprints.

The case proceeded before a jury in federal court in Chicago. The proceeding was closely watched, as it represented the very first time any class action had gone to a full trial with claims under the BIPA. The trial lasted five days. However, the jurors deliberated for just over an hour. Following the jury’s finding of liability, the Court entered a judgment against BNSF in the amount of $5,000 per violation, for a total amount of $228 million.

BNSF’s Motion For A New Trial Or Amended Judgment

BNSF renewed its motion for judgement as a matter of law pursuant to Federal Rule of Civil Procedure Rule 50(b), following the Court’s denial of BNSF’s Rule 50(a) motion at trial. In the alternative, BNSF moved for a new trial under Rule 59(a), or to reduce the damages award under Rule 59(e).

First, BNSF argues that there was insufficient evidence for the jury to find that BNSF violated the BIPA. Id. at *3. In support of that argument, BNSF cited testimony from its former Director of Technology Services that BNSF did not collect or obtain biometrics from truck drivers in Illinois, that the biometric data was stored on another entity’s server, and that BNSF did not maintain a copy of any of that data. Id. at *4.

Second, BNSF argues that it is entitled to judgment as a matter of law or a new trial, or at least a significant reduction in damages, because there was insufficient evidence for a rational jury to conclude that BNSF violated the BIPA recklessly or intentionally 45,600 times — which is the basis for the $228 million damages award.  Id. at *5-6. BNSF claims that there was no evidence that BNSF even learned about the BIPA until April 2019. Therefore, BNSF argued, no rational jury could have inferred from this evidence that BNSF consciously disregarded or intentionally violated the rights of Plaintiff and the class members at any point, much less for the full class period starting in April 2014.

Third, BNSF argued that the Court’s award of $228 million in damages where Plaintiff admits he and the members of the class have suffered no actual harm violates the Due Process Clause and Excessive Fines Clause of the U.S. Constitution. BNSF points out that, “It is undisputed that neither Plaintiff nor any member of the class has suffered any actual harm from any alleged violation of BIPA. Given that the agreed value of the class’s injury is zero dollars, any award would be disproportional to such nonexistent harm.”  Id. at *8-9.

Accordingly, BNSF seeks relief that the Court should enter judgment as a matter of law against Plaintiff and in favor of BNSF; or in the alternative, the Court should grant BNSF a new trial, or substantially reduce the damages award against BNSF.

The ball is now in Plaintiff’s court to respond to the motion. Further proceedings will then await the parties after full briefing of the post-trial motion.

Implications For Employers

BNSF’s filing of this motion indicates that the Company will not be going down (to the tune of $228 million) without a fight. The ultimate outcome of this motion, and any potential Seventh Circuit appeals, will be carefully scrutinized by both the plaintiff class action bar and businesses throughout Illinois and beyond.

Employers not only should continue to monitor this groundbreaking privacy class action lawsuit, but also ensure their strategic compliance plans are sufficient in regards to biometric privacy laws.

Judges Continue To Push For Diversity In Selecting And Approving Class Counsel

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

Duane Morris Takeaways – Requiring a legal team’s diversity in the courtroom is part of a growing trend by federal judge in selecting lead counsel in a class action. On both sides of a class action, plaintiffs and defense teams are increasingly staffing cases with junior and diverse attorneys, and allowing them meaningful opportunities to participate in litigation. In turn, federal judges are viewing such staffing methodologies as part and parcel of good practice management.

Background

The push for diversity in the law is hardly new.

Federal district judges around the nation – including judges in California, Illinois, Massachusetts, New York, and Texas – have issued general standing orders that encourage legal teams to allow diverse and less experienced attorneys take the lead in various segments of court proceedings. And in 2021, George Washington Law School released a leading guide to best practices for MDL and class actions, which advocated that judges “make appointments consistent with the diversity of our society and justice system.” George Washington Law School, Inclusivity and Excellence: Guidelines and Best Practices for Judges Appointing Lawyers to Leadership Positions in MDL and Class-Action Litigation, at 1 (March 15, 2021).

Over the last couple of years, some judges have acted on George Washington Law School’s advice by facilitating opportunities for diverse and/or junior attorneys to have a role in their cases. For example, recently, on October 26, 2022, Magistrate Judge Gabriel Fuentes of the U.S. District Court for the Northern District of Illinois advised the parties in multidistrict litigation that he would be holding a video hearing to discuss expert discovery and argue motions, and that he expected junior attorneys to take the lead. John Gross and Co., Inc., et al. v. Agri Stats, Inc., et al., 1:19-CV-08318 (N.D. Ill. Oct. 26, 2022).

Other judges in class action lawsuits have strongly encouraged, or even required, counsel to be diverse. For example, Judge Susan Illston of the U.S. District Court for the Northern District of California approved lead counsel in a class action lawsuit but noted “the apparent lack of diversity, including by female lawyers, among the group that argued” at a recent hearing. Sayce v. Forescout Technologies, Inc., No. 20-CV-00076, 2020 WL 6802469, at *9 (N.D. Cal. Nov. 19, 2020). Judge Illston “strongly urge[d] all parties to this case to make meaningful litigation opportunities available to junior and underrepresented lawyers throughout the pendency of this action.” Id.

With the increase in newly appointed judges, it is likely that even more federal judges will follow suit by not only instituting standing orders, but also in requiring law firms to send their junior and diverse attorneys to court. Now, more than ever, it is important for law firms to hire diverse attorneys, teach diverse attorneys to handle small and complex matters, and retain their diverse attorneys by allowing them to meaningfully participate in legal proceedings.

Implications for Law Firms

We expect that more courts and clients will begin to consider, and perhaps require, the diverse makeup of legal teams at increasing rates. Law firms can prepare for this critical demand of diverse legal teams by hiring, retaining, and actively involving diverse and junior lawyers, in both big and small cases, at the outset.

Illinois Federal Court Holds Private University Is Exempt From BIPA Regulations

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex W. Karasik

 Duane Morris Takeaway:  In an important ruling for higher education entities, Judge Robert Gettleman of the U.S. District Court for the Northern District of Illinois recently dismissed a student’s proposed class action alleging that Defendant’s remote test-proctoring software violated the Illinois Biometric Information Privacy Act (“BIPA”). The Court determined that Defendant DePaul University qualified as a financial institution exempt from the statute. Powell v. DePaul University, No. 21-C-3001, 2022 U.S. Dist. LEXIS 201296 (N.D. Ill. Nov. 4, 2022). Employers in the higher education space who are confronted with biometric privacy class actions can tuck this ruling away for potential use at the pleading stage.

Case Background

Plaintiff alleged that Defendant’s use of the Respondus Monitor, an online remote proctoring tool, violated the BIPA by capturing, using, and storing students’ facial recognition and other biometric identifiers and biometric information. Plaintiff specifically asserted that Defendant did not “disclose or obtain written consent before collecting, capturing, storing, or disseminating user’s biometric data, and failed to disclose what it does with that biometric data after collection, in violation of BIPA’s retention and destruction requirements. Id. at *2.

Defendant moved to dismiss the action pursuant to Rule 12(b)(6) for failure to state a claim. It argued that the BIPA’s express terms specify that it does not apply to financial institutions that are subject to Title V of the Gramm-Leach-Bliley Act (“GLBA”). Id. Defendant contended that since it was a participant in the U.S. Department of Education’s Federal Student Aid Program, it is considered a financial institution subject to Title V of the GLBA.  Defendant contended that both the Federal Trade Commission (“FTC”) and the Department of Education (“DOE”) have recognized that universities are considered financial institutions under the GLBA. Defendant also asserted that Title V rulemaking authority lies with the Consumer Financial Protection Bureau (“CFPB”), which adopted and republished the privacy rules originally promulgated by the FTC.  The FTC rules state that any institution “significantly engaged in financial activities” is a financial institution. Id. at *5.

Plaintiff argued that Defendant was not a financial institution, but rather was in the business of higher education. Thus, Plaintiff contended that Defendant was not subject to Title V, and therefore subject to the BIPA.

The Court’s Decision

The Court granted Defendant’s motion to dismiss.  First, the Court noted that at least five other district courts have ruled on the same issue and rejected Plaintiff’s argument, and have determined that the BIPA’s section 25(c) exemption for financial institutions applies to institutions of higher education. Id.

In support of its conclusion, the Court found that the guidance provided by the CFPB included examples demonstrating the word “significantly” means something less than “primary.” Id. at *8. Accordingly, the Court rejected Plaintiff’s argument that the exemption should not apply was because Defendant was not primarily in the financial business. Id.

The Court further explained that the DOE provided issued public guidance in 2020 reiterating that the GLBA required financial institutions to have information privacy protections, and that the FTC “has enforcement authority for the requirements and has determined that institutions of higher education (institutions) are financial institutions under GLBA.” Id. at *4-5.

Additionally, the Court opined that the FTC’s rule, made in 2000 when it had enforcement and rulemaking authority under the GLBA, also considered universities to be financial institutions if they “appear to be significantly engaged in lending funds to consumers.” Id. at *6. The Court reasoned that the consistent interpretation of the statute by multiple entities was particularly persuasive in finding that the claims should be dismissed. For these reasons, the Court granted Defendant’s motion to dismiss Plaintiff’s claims with prejudice.

Implications For Employers

In the BIPA class action landscape, federal and state courts in Illinois have rejected many potential affirmative defenses that employers have used to try and stave off these massive cases. However, even though the exemption is somewhat narrow, higher education institutions now have a blueprint to attack BIPA class actions at the pleading stage.  Finally, to the extent states beyond Illinois enact similar privacy statutes, this ruling may be of use to higher education institutions in those states that are confronted with class actions.

What Employers Should Know About The EEOC’s Draft Strategic Plan For FY 2022-2026

By Gerald L. Maatman, Jr., Jennifer A. Riley, Rebecca S. Bjork, and Gregory Tsonis

Duane Morris Takeaways: On November 4, 2022, the U.S. Equal Employment Opportunity Commission released a preliminary draft of its 2022-2026 Strategic Plan.  According to its preliminary draft, the EEOC plans to focus its internal operations over the next four years to make changes that it hopes will improve its performance securing targeted injunctive relief and conducting systemic investigations, along with its use of technology to process charges and conciliate them.  The four-year plan – which is distinct from the EEOC’s strategic enforcement plan, still to be released in the coming months – was published in the Federal Register and is open for comment until December 4, 2022.  Even if employers do not submit comments, they would be well-advised to review the draft and final Plan once it is announced because it provides a window into the EEOC Commissioners’ thinking for how the agency will use its resources to redress and deter workplace discrimination.   

Introduction

Every four years, the EEOC prepares a Strategic Plan that drives how it will improve its internal operations to better enforce federal anti-discrimination laws.  The Plan for 2022-2026 that has now been published in the Federal Register is important because once it is finalized after the review and comment period expires, it will set forth specific goals along with performance metrics to measure how well those goals are being met.  The key elements of the draft Plan and why they are important are critical data points for employers.

Operational Improvements And Performance Metrics Sought By The EEOC

The 2022-2026 Strategic Plan draft signals that when investigating private sector employers, the EEOC will focus its internal operations on four key areas.  First, the EEOC will ensure that by FY 2025, “90% of EEOC conciliations and litigation resolutions contain targeted, equitable relief and that level is maintained through FY 2026.”  (Draft Strategic Plan at 15.)  The draft Plan explains the EEOC’s view that such a goal likely would improve compliance with the statutes enforced by the agency nationwide.

Second, between FY 2022 and 2026, the EEOC aims to continue to “favorably resolve at least 90% of enforcement lawsuits.”  (Id. at 16.)  On this point, the EEOC explains that because its systemic litigation program is resource intensive, this goal is important to enable the agency to use its resources in a wise and efficient manner.  Employers who have faced systemic lawsuits are well-aware of the amount of litigation resources they can consume, both for the companies involved and the EEOC.

Third, “In each year through FY 2026, the EEOC will provide training to all field staff on identifying and investigating systemic discrimination, and at least 90% of investigators and trial attorneys will participate in systemic training each year.”  (Id.)  The draft Plan explains that the purpose of this goal is “expanding the EEOC’s capacity to conduct systemic investigations, resulting in a coordinated, strategic, and effective approach to systemic enforcement.”  (Id.)  This likely signals that the draft Strategic Enforcement Plan will continue to emphasize and prioritize the EEOC’s use of pattern or practice lawsuits to enforce the statutes over which Congress gave it authority.

Fourth, “the EEOC will make significant progress toward enhanced monitoring of conciliation agreements, leading to a more robust compliance program.”  (Id. at 17.)  The Commission’s focus here is to implement “streamlined and standardized procedures, improved tracking and internal reporting mechanisms, and related training for EEOC field staff” to ensure that conciliation agreements are reached and enforced.  (Id.).

Finally, the EEOC continues to be aware that its charge intake process needs work.  The draft Plan pledges to leverage technological advancements to “enhance its intake services to potential charging parties, respondents, and representatives.”  (Id. at 19.)

Implications For Employers

The EEOC’s FY 2022-2026 draft Strategic Plan is a document that provides insight into the direction the agency will take to improve how it functions.

With a nod the old E.F. Hutton TV commercial, “when the EEOC speaks, employers should listen…”

Massachusetts State Court Rules In Class Action That A Multiple-Choice Promotional Test Discriminated Against Minority Police Officers

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

Duane Morris Takeaways – In Tatum et al. v. Commonwealth of Massachusetts, et al., C.A. No. 0984-CV-00576 (Mass. Sup. Ct. 2022), a Massachusetts state court judge conducted a class trial found that a multiple-choice promotional exam – used for years by various police departments to determine promotions – discriminated against Black and Latino police officers in violation of Massachusetts law.  In analyzing the test format, which largely required “rote memorization,” the court opined that the exam failed to adequately test for the relevant job qualifications, as well as the police departments’ use of a ranking system from which candidates were selected for promotion.  Ultimately, the court held that the test and ranking system adversely impacted minorities and interfered with their ability to promote to sergeant.  The decision demonstrates why employers must be careful to implement policies and processes that do not have a discriminatory impact, even if on their face such policies and practices appear to be neutral.

Case Background

The Commonwealth of Massachusetts’ Human Resource Division (“HRD”), for 50 years, administered a written multiple-choice test to police officers to determine promotion to sergeant.  Id. at 4.  Officers were ranked almost exclusively according to their scores on the written examination, with individuals at the top of the list being first in line for promotion.  In 2007, certain police officers that were subject to the written examination sued the Commonwealth of Massachusetts, and the municipalities in which they worked as police officers. They alleged that the testing process unfairly discriminated against them due to their race and national origin in violation of state and federal law.  Id. at 2.   The U.S. Court of Appeal for the First Circuit, in an interlocutory appeal, held that state defendants did not qualify as “employers” under Title VII and were entitled to sovereign immunity, thereby resulting in the dismissal of state law claims against the state defendants, which the plaintiffs subsequently re-filed in state court.  Id.  Though the Massachusetts state court initially dismissed the entire action based on the First Circuit decision, the Massachusetts Supreme Judicial Court remanded several claims, rejected the defense of sovereign immunity, and held that the plaintiffs could be entitled to relief under Massachusetts law prohibiting discrimination.  Id. at 3.  The state trial court subsequently certified a class of current and former police officers that took the written examination administered by HRD in certain years between 2005 and 2012.  Id.

Ultimately, the plaintiffs lost their federal court case after a bench trial, with the federal court finding that the tests had a disparate impact on minorities but that plaintiffs failed to prove that Boston refused to adopt an alternative test with less disparate impact.  Id.  Though the defendants in the state court case tried to dismiss the entire state court action based on the federal court’s decision, the Massachusetts Appeals Court held that defendants did not show issue preclusion and it authorized the case for trial.  Id. at 3-4.  The state trial court conducted a two-week bench trial in June and July of 2022 limited to the issue of class-wide liability.  Id. at 1.

The State Court’s Findings Of Fact And Conclusions Of Law

The state court found a “massive amount of evidence proving the known and unjustified disparate impact” of HRD’s testing format.  Id. at 1. Turning first to the format of the test, the court noted that exam questions “largely test for rote memorization of facts and passages taken directly from textbooks that candidates are asked to study,” and studies commissioned by the HRD over the years to measure the test’s efficacy “did not identify test-taking skills and lack of test-related anxiety as job related.”    Id. at 8.  The multiple choice portion of the test accounted for 80% of a candidate’s score, with 20% coming from an “Education and Experience” form that each candidate would complete.  Id.  The court explained that the allocated percentages had no discernible basis, and further disparaged the Education and Experience portion since every officer received 14 of the 20 available points simply for being able to sit for the exam.  Id. at 8, 28.  Though HRD worked with consultants and subject matter experts to identify the knowledge, skills, and abilities (“KSAs”) important to the job of sergeant, the court noted that the multiple choice questions could only test for 22% to 40% of the relevant KSAs and “did not in fact test for some skills that could have been tested” due to the types of multiple choice questions asked.  Id. at 13-15.  Rather than focusing on abstract knowledge and memorization of academic textbooks, the court reasoned that questions testing situational judgment, for example, should have been used but were not.  Id. at 19.

Given the format of the multiple-choice exam and the types of questions asked, the court observed that a racial disparity existed based on test-taking ability, and not on job qualifications.  Noting that “[t]est taking skills are built through practice,” the court adopted the opinions of expert witnesses who testified that “minorities, in general, have had fewer opportunities to participate in our educational system” and differences in average test scores of minorities on tests of cognitive abilities “is due to socioeconomic differences, lack of access to opportunity, and structural racism that exists within the system.”  Id. at 26.  Ultimately, the court found that “[b]ecause HRD failed to test many important KSAs, measured test-taking skills and memorization, enabled test-related anxiety to affect results and failed to ask questions that focused upon measuring job-related knowledge, its format did not rank candidates for promotional purposes on a basis that was substantially job related.”  Id. at 14.

The court also noted that HRD had knowledge of the shortcomings and adverse impact of its tests before and during their use.  A 1987 job analysis conducted by a consulting firm recommended that a written test “did not assess many of the attributes needed for the job” and “should account for no more than 40% of the overall score.”  Id. at 16.  In addition, a study conducted for the Boston Police Department in 2000 advised HRD that an examination should include non-written components, such as an assessment center and performance review system.  Id. at 17.  The failure to include a performance based assessment technique, the court explained, “injects extraneous influences (such as test-taking ability and temporary memorization skills) into the selection process.”  Id.  Analysis of the rate of minorities’ promotion to sergeant showed that minorities were promoted at a drastically lower rate than non-minority officers.  Id. at 17-19.

The court further determined that Defendants failed to adopt alternatives that would have minimized or eliminated the adverse impact of the tests on minority test-takers.  The tests could have contained fewer questions, reducing the “large cognitive loads” and memorization required, in order to reduce the adverse impact.  Id. at 45.  Rather than using questions that require “rote memorization,” HRD could have used questions that tested situational judgment and were written in plain language instead of “convoluted phrases.”  Id.  Most notably, banding, in which scores within a range are treated as equal, would have reduced adverse impact because there was no evidence that a police officer that scored one point higher than another was more qualified or would make a better sergeant.  Id. at 45-46.  Further, HRD adopted 11-point bands in 2009 at the recommendation of a consultant.  Id.  Finally, the use of other testing methods, such as oral assessments and performance reviews, to assess nonwritten skills “such as leadership, conscientiousness, calmness under pressure, decision-making, interpersonal skills, and oral communication” would have reduced the adverse impact of the tests.  Id. at 47.

As a result of the myriad shortcomings of HRD’s written tests, the Court described at length the statistically significant adverse impact of the tests on minority test-takers across all years as compared to white test-takers in the form of lower passing rates, lower overall scores, lower rate of promotion of minority police officers, and increased delay in promotion of minority police officers.  Id. at 34-42.  Given the adverse impact on scoring and the use of a rank-order list to determine promotions, the court found an adverse impact on the ability and timeliness of minority police officers to achieve promotion to sergeant.  Id. at 57.  The multiple-choice format of the exam and the ranking of candidates were not job-related, the court also held, given the invalidity of the exam and ranking process.  Id. at 61-63.  Based upon its factual findings, the court held that “[o]verwhelmingly persuasive evidence proves that HRD interfered with the class members’ rights to consideration for promotion to police sergeant without regard to race or national origin.”  Id. at 75.

Implications for Employers

The Tatum decision illustrates why employers with criteria for promotion must be cognizant of how such testing systems may adversely impact classes of individuals in violation of state and federal law.  While the testing system used in this case appeared neutral, in practice the test and ranking system resulted in less promotions and increased delay in promotions for minorities.  This case demonstrates the potential for costly and years-long class action lawsuits stemming from employer policies and practices in determining promotions.  Given these risks, it behooves employers to ensure that neutral policies and practices do not adversely impact groups of individuals.

Indiana Court Of Appeals Strikes Down Class Action COVID-19 Immunity Statute

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

Duane Morris Takeaways – In Mellowitz v. Ball State University and Board of Trustees of Ball State University, et al, No. 22A-PL-337 (Ind. Ct. App. Oct 5, 2022), the Indiana Court of Appeals struck down a 2021 law that sought to protect in-state universities from class action liability related to the shutdown of university campuses during the COVID-19 pandemic.  While the law stated that individuals “may not” bring class actions against universities resulting from actions taken to defend against the spread of COVID-19, the Indiana Court of Appeals held that the statute was “procedural” and in conflict with Rule 23 of Indiana’s Rules of Trial Procedure, which states that individuals “may” proceed as a class under certain circumstances.  The Court’s ruling is important, as it puts at risk other statutes passed in Indiana and other states restricting class actions against businesses for COVID-19-related claims.

Background Of The Case

In 2020, Plaintiff Keller J. Mellowitz, a student at Ball State University, filed a putative class action asserting claims for breach of contract and unjust enrichment against Ball State as a result of the university’s decision to cancel in-person classes during the COVID-19 pandemic.  Id. at 3.  After the complaint was filed, the Indiana General Assembly in 2021 enacted Public Law 166-2021, part of which was codified as Indiana Code Section 34-12-5-7 (“Section 7”) and barred class actions against post-secondary educational institutions for claims of breach of contract and unjust enrichment arising from COVID-19.  Ball State subsequently sought relief from Plaintiff’s lawsuit under Section 7, which the trial court granted, and Plaintiff appealed.  Id. at 5.

The Appellate Court’s Ruling Reversing And Remanding the Trial Court’s Decision

Plaintiff argued on appeal that, as a procedural statute, Section 7 impermissibly conflicts with Indiana Trial Rule 23, which governs class-action procedures and sets forth the requirements to proceed as a class action, thus rendering Section 7 a “nullity.”  The Indiana Court of Appeals began its analysis recognizing longstanding precedent establishing that in a conflict between a procedural statute and the Indiana Rules of Trial Procedure, “the trial rules govern,” however trial rules “cannot abrogate or modify substantive law.”  Id. at 6-7.  Whether a law was “substantive,” the Court explained, depended on whether it established “rights and responsibilities” whereas procedural laws merely prescribed “the manner in which such rights and responsibilities may be exercised.”  Id. at 7.

In analyzing the specific statutes at issue, the Court of Appeals examined Indiana’s analog to Federal Rule 23, which sets forth the criteria for bringing a class action.  The Court of Appeals noted that Indiana Trial Rule 23 was indisputably a procedural rule that allows a plaintiff, when the appropriate criteria are met, to assert his or her claims on behalf of others.  Turning to Section 7, the Court of Appeals explained that the statute did not affect any plaintiff’s substantive right to bring a suit for breach of contract or unjust enrichment, but simply “frustrates them by encouraging a multiplicity of lawsuits from similarly situated plaintiffs.”  Id. at 14.  While Ball State argued that the law protected Indiana universities from “widespread legal liability” from actions taken to combat and mitigate the spread of COVID-19, the Court of Appeals found the argument “unpersuasive,” explaining that since Section 7 did not prevent any individual plaintiff from asserting the same claims against universities, it therefore “does not reduce the institutions’ potential legal liability in the slightest.”  Id. at 14-15. Ball State also argued that adopting Plaintiff’s “extreme position” would endanger two similar laws passed by the Indiana Legislature, which sought to protect business owners from class-action tort liability.  Id. at 15 n.6.  The Court rejected Ball State’s argument. It determined that it had “no opinion” on those statutes since they were not before it in the appeal.  Id.

With Indiana Trial Rule 23 stating that a plaintiff “may” bring a class action and Section 7 stating the plaintiff “may not,” the Court of Appeals held that both laws could not apply in a given situation and, as a result, Section 7 was a “nullity.”  Id. at 15. The Court of Appeals therefore reversed the trial court’s ruling and remanded the case for further proceedings.

Implications for Employers

While Ball State will very likely appeal this decision to the Indiana Supreme Court, the rationale adopted by the Indiana Court of Appeals could undermine similar statutes meant to protect Indiana employers from class action liability resulting from actions taken in response to the COVID-19 pandemic.  As many other states throughout the country similarly passed laws meant to protect businesses from liability due to COVID-19, the Mellowitz decision provides a potential avenue for plaintiffs to challenge laws in other states.   Mellowitz demonstrates that employers should continue to be aware of the potential for class action lawsuits stemming from response to the COVID-19 pandemic, despite efforts by Indiana’s legislature and other states’ legislatures to prevent such costly, high-risk litigation.

 

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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