By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown
Duane Morris Takeaways: On February 29, 2024, in Miller II v. SBK Delivery, LLC, No. 2:21-CV-04744 (S.D. Ohio Feb. 29, 2024), Judge Michael H. Watson of the U.S. District Court for the Southern District of Ohio applied the Sixth Circuit’s standard in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023,) to decertify a collective action of delivery drivers seeking unpaid overtime under the FLSA. As one of the first decertification rulings applying the Clark standard, the Court’s opinion is required readingfor businesses litigating FLSA claims before courts in the Sixth Circuit.
Case Background
On September 22, 2021, the plaintiff in Miller II filed a Complaint against the defendant, SBK Delivery, LLC. The defendant contracted with multiple package carriers to provide delivery drivers. The package carriers paid the defendant for each package the drivers delivered. The defendant then paid each driver a percentage of the payment it received from the package carrier. The plaintiff asserted claims of unpaid overtime under the FLSA and Ohio law as well as a breach of contract claim. The plaintiff filed the FLSA claims on behalf of a proposed collective action of drivers who entered into independent contractor agreements with the defendant to provide services as delivery drivers.
On February 9, 2022, the Court approved the parties’ joint stipulation to conditionally certify and issue notice to a collective action consisting of current and former delivery drivers who performed work for the defendant between September 22, 2018 and the present who worked over 40 hours per workweek and were classified as independent contractors.
Nineteen (19) individuals filed consents to join the lawsuit as prospective opt-in plaintiffs.
On March 22, 2023, the defendant filed a motion to decertify the collective action. Prior to the close of briefing on the decertification motion, on May 19, 2023, the Sixth Circuit issued its pivotal decision in Clark.
In Clark, the Sixth Circuit articulated a “strong likelihood” standard for facilitating notice to potential opt-in plaintiffs pursuant to 29 U.S.C. § 216(b) of the FLSA. Under the new standard, only after demonstrating a “strong likelihood” that similarly situated other employees exist may opt-in plaintiffs become parties to the named plaintiff’s lawsuit.
Following the Sixth Circuit’s ruling, the parties filed supplemental briefing to address the similarly-situated status of the collective under Clark.
The Court’s Ruling
Because the parties had stipulated to conditional certification prior to the Sixth Circuit’s ruling in Clark, the Court had not had an earlier opportunity to rule on the plaintiff’s similarly-situated status relative to those in the collective action prior to the issuance of notice to potential opt-in plaintiffs.
Applying the Clark standard to the plaintiff’s claims for the first time, the Court held that the plaintiff failed to show a strong likelihood that he was in fact “similarly situated” to the putative opt-in plaintiffs.
The Court reasoned that it was not enough for the plaintiff to show that he was subject to the same alleged FLSA-violating policy of misclassification as an independent contractor of the defendant. The plaintiff also needed to establish that the question of the amount and extent of alleged unpaid overtime could be determined on a collective-wide basis.
The Court found the plaintiff dissimilar from the opt-ins in multiple key respects, including with respect to the route assignment a driver chose, since each route assignment had different start times, end times and duration. Based on individual differences in whether a driver worked overtime hours, the Court reasoned that evidence of the named plaintiff’s hours worked would not be representative of the claims of the opt-in plaintiffs. Accordingly, the Court concluded that it would need to analyze individually each opt-in plaintiff’s overtime claims to determine liability, which would be completely contrary to the purpose of the collective action mechanism.
As a result of the Court’s application of Clark, it held that the plaintiff’s FLSA claims must proceed on an individual basis only. For these reasons, the Court dismissed each of the opt-in plaintiff’s claims without prejudice.
Implications For Employers
The Court’s ruling in Miller II demonstrates that the Clark standard is a game changer for FLSA litigants in district courts within the Sixth Circuit.
To satisfy the “strong likelihood” iteration of the similarly-situated standard for FLSA certification, plaintiffs must show more than the existence of a common policy or practice that allegedly violates the FLSA. The ruling highlights the opportunity the Clark standard affords to defendants to whittle down the scope of an FLSA lawsuit significantly by marshaling facts of dissimilarity between the named plaintiff and others. To maximize the ability to prevail on a certification ruling under the Clark standard, companies ought to devote significant resources to managing FLSA compliance risks on the front end, before any litigation arises.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex W. Karasik
Duane Morris Takeaways: The last year saw a virtual explosion in privacy class action litigation. As a result, compliance with privacy laws in the myriad of ways that companies interact with employees, customers, and third parties is a corporate imperative. To that end, the class action team at Duane Morris is pleased to present the Privacy Class Action Review – 2024. This publication analyzes the key privacy-related rulings and developments in 2023 and the significant legal decisions and trends impacting privacy class action litigation for 2024. We hope that companies and employers will benefit from this resource in their compliance with these evolving laws and standards.
Click here to download a copy of the Privacy Class Action Review – 2023 eBook. Look forward to an episode on the Review coming soon on the Class Action Weekly Wire!
By Eden E. Anderson, Gerald L. Maatman, Jr., and Jennifer A. Riley
Duane Morris Takeaways: On February 12, 2024, the Ninth Circuit issued its opinion in Johnson v. Lowe’s Home Centers, LLC, No. 22-16486 (9th Cir. Feb. 12, 2024).It held that federal courts must follow the statutory standing analysis of the California Supreme Court in Adolph v. Uber Technologies, Inc., and not the U.S. Supreme Court’s different interpretation in Viking River Cruises, Inc. v. Moriana. Additionally, in his concurrence, Judge Kenneth Lee opined that issues decided in individual arbitration of a PAGA claim should not have preclusive effect on the bigger non-individual PAGA claim.
Case Background
The plaintiff in Johnson alleged PAGA claims against her former employer based on the employer’s alleged violations of the California Labor Code. Applying all aspects of the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, the district court compelled Johnson’s individual PAGA claims to arbitration and dismissed her non-individual PAGA claims for lack of statutory standing. While the case was on appeal, the California Supreme Court issued its decision in Adolph v. Uber Technologies, Inc., which held that a PAGA plaintiff retains standing to maintain non-individual PAGA claims even after their individual PAGA claims are compelled to arbitration.
At issue on appeal in Johnson v. Lowe’s Home Centers, LLC was whether the non-individual PAGA claims should have been dismissed.
The Ninth Circuit’s Decision
The Ninth Circuit held that federal courts must follow the statutory standing analysis of the California Supreme Court in Adolph, and not the U.S. Supreme Court’s different interpretation in Viking River. It thus vacated the ruling dismissing the non-individual PAGA claims and remanded the case to the district court to apply Adolph.
The Johnson decision is of further interest because of the concurring opinion of Judge Kenneth Lee. His concurrence addressed the next big question in PAGA cases, i.e., the extent to which issues decided by the arbitrator in resolving individual PAGA claims will be binding in court in the litigation of the non-individual PAGA claims. Judge Lee noted that individual arbitration is often “low-stakes” for companies, who sometimes even send non-lawyers, such as paralegals, to arbitration proceedings because the amount at issue is not worth a lawyer’s higher hourly rates. However, as Judge Lee noted, if legal conclusions or factual findings in individual arbitration are binding, then companies would have little choice but to bring in the “legal cavalry” and devote substantial resources in individual arbitration, which would undermineg the efficiency of those proceedings, which is the whole “point” of enforcing arbitration agreements according to their terms. Judge Lee reasoned that there is thus a “lurking tension” between the FAA and the suggestion in Adolph that issue preclusion can apply to the outcome of arbitration of an individual PAGA action. Judge Lee expressed his view that application of issue preclusion in this context would contravene the FAA.
Implications For Employers
Whether in state or federal court in a PAGA action, the Ninth Circuit made clear that Adolph must be applied. The concurring opinion in Johnson provides employers facing adverse rulings in individual arbitration with good arguments against the application of issue preclusion in the non-individual PAGA claim proceedings.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Gregory Tsonis
Duane Morris Takeaways: Complex wage & hour litigation has long been a focus of the plaintiffs’ class action bar. The relatively low standard by which plaintiffs can achieve conditional certification under the Fair Labor Standards Act (FLSA), often paired with state law wage & hour class claims, offers a potent combination by which plaintiffs can pursue myriad employment claims. To that end, the class action team at Duane Morris is pleased to present the second edition of the Wage & Hour Class And Collective Action Review – 2024. This new publication analyzes the key wage & hour-related rulings and developments in 2023 and the significant legal decisions and trends impacting wage & hour class and collective action litigation for 2024. We hope that companies and employers will benefit from this resource and assist them with their compliance with these evolving laws and standards.
Click here to download a copy of the Wage & Hour Class And Collective Action Review – 2024 eBook.
Stay tuned for more wage & hour class and collective action analysis coming soon on our weekly podcast, the Class Action Weekly Wire.
Duane Morris Takeaway: 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 employees and consumers resolve any disputes 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.
Watch below as Duane Morris partner Jerry Maatman discusses the arbitration defense and how it impacted class action litigation in 2023.
Statistically, corporate defendants fared well in asserting the defense. Across various areas of class action litigation, the defense won approximately 66% of motions to compel arbitration (approximately 123 motions across 187 cases) over the past year. Such numbers are similar to the numbers we saw in 2022, where defendants succeeded on 67% of motions to compel arbitration (roughly 64 motions granted in 96 cases).
The following graph shows this trend:
Despite a tumultuous year in 2022, the arbitration defense in 2023 remained one of the most powerful weapons in the defense toolkit in terms of avoid class and collective actions.
In 2022, the U.S. Supreme Court limited application of the FAA to workers who participate in interstate transportation and, perhaps more significantly, on the legislative front, Congress significantly limited the availability of arbitration for cases alleging sexual harassment or sexual assault. Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the Ending Forced Arbitration Act or EFAA), and President Biden signed the Act into law on March 3, 2022.
The EFAA amended the FAA and provided plaintiffs the discretion to enforce pre-dispute arbitration provisions in cases where they allege conduct constituting “a sexual harassment dispute or a sexual assault dispute” or are the named representatives in “a class or in a collective action alleging such conduct.” In other words, the Act did not render such agreements invalid, but allowed the party bringing the sexual assault or sexual harassment claims to elect to enforce them or to avoid them.
It is likely that defendants have not yet felt the impact of either development.
The Impact Of The EFAA
Despite this setback for the arbitration defense in 2022, companies continued to enjoy a high rate of success enforcing these agreements and using them to thwart class actions in 2023. Since the EFAA became effective on March 3, 2022, courts have issued only 34 published decisions on plaintiffs’ attempts to use the EFAA to avoid arbitration. Plaintiffs succeeded in enforcing the EFAA and keeping claims in court, in whole or in part, in only about 9 of those rulings.
Many of the decisions denying enforcement of the EFAA turned on the fact that the EFAA is not retroactive. Congress provided that the provisions of the Ending Forced Arbitration Act would “apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act [March 3, 2022].” Thus, although courts have disagreed as to when disputes or claims “arise or accrue” for purposes of the EFAA, in many cases, all potential dates pre-dated March 3, 2022, and, therefore, courts concluded that the Act did not apply.
Many courts recognized an exception in cases where plaintiffs were able to allege a “continuing violation” that extended past March 3, 2022, generally finding that the EFAA allowed such claims to remain in court. In Betancourt, et al. v. Rivian Automotive, No. 22-CV-1299, 2023 WL 5352892, at *1 (C.D. Ill. Aug. 21, 2023), for example, plaintiff filed a class action lawsuit alleging that she was regularly subjected to unwanted sexual advances during her employment from December 6, 2021, through “about June 1, 2022,” and, despite making reports to several supervisory level employees, defendant failed to remedy the conduct. The defendant invoked its arbitration agreement with the plaintiff, which included a class and collective action waiver, and the plaintiff claimed that the agreement was unenforceable due to the EFAA. Id. at *2. Acknowledging that the EFFA does not apply retroactively, the court considered whether the action accrued before March 3, 2022, and held that it did not. The court reasoned that the plaintiff alleged a continuing violation, which was ongoing on the date the EFAA was enacted, and, therefore, the arbitration agreement and class action waiver were unenforceable. Id. at *5.
Approximately 12 of the decisions turned on court interpretations regarding the scope of the EFAA, and we observed the beginnings of a patchwork quilt of interpretations as to the scope of the claims subject to the EFFA. In Johnson, et al. v. Everyrealm, Inc., 657 F. Supp. 3d 535 (S.D.N.Y. 2023), for instance, the plaintiff brought claims for race discrimination, pay discrimination, sexual harassment, retaliation, and intentional infliction of emotional distress, among other things, and the defendant moved to dismiss the sexual harassment claim and to compel arbitration of the remainder. The court denied the motion. It noted that, in its operative language, the EFAA makes a pre-dispute arbitration agreement invalid and unenforceable “with respect to a case which is filed under Federal, Tribal, or State law and relates to the . . . sexual harassment dispute.” Id. at 558 (quoting 9 U.S.C. § 402(a) (emphasis added)). It found such text “clear, unambiguous, and decisive as to the issue.” Id. As a result, the district court concluded that plaintiff pled a plausible claim of sexual harassment in violation of New York law and “construe[d] the EFAA to render an arbitration clause unenforceable as to the entire case involving a viably pled sexual harassment dispute, as opposed to merely the claims in the case that pertain to the alleged sexual harassment.” Id. at 541.
In Mera, et al. v. SA Hospitality Group, LLC, No. 1:23 Civ. 03492 (S.D.N.Y. June 3, 2023), by contrast, plaintiff brought claims for unpaid wages under the FLSA and the New York Labor Law (NYLL), as well as claims for sexual orientation discrimination and hostile work environment. The employer moved to compel arbitration, and the court found the agreement unenforceable as to his hostile work environment claims but enforceable as to his FLSA and NYLL claims. The plaintiff argued that, under the EFAA, the arbitration agreement was unenforceable as to his entire “case,” including his unrelated wage and hour claims under the FLSA and the NYLL, which he brought on behalf of a broad group of individuals. Id. at *3. The court disagreed. It held that, under the EFAA, an arbitration agreement executed by an individual alleging sexual harassment is unenforceable only with respect to the claims in the case that relate to the sexual harassment dispute, since “[t]o hold otherwise would permit a plaintiff to elude a binding arbitration agreement with respect to wholly unrelated claims affecting a broad group of individuals having nothing to do with the particular sexual harassment affecting the plaintiff alone.” Id.
The Impact Of The Transportation Worker Exemption
Despite the U.S. Supreme Court’s clarification of the transportation worker exemption to the FAA in 2022, lower courts continue to grapple and disagree about its scope, effectively holding a potential wave of workplace litigation against transportation, logistics, and delivery companies in check.
In the first and arguably the largest door-opener to the courthouse for the plaintiffs’ class action bar during 2022, the Supreme Court narrowed the application of the Federal Arbitration Act by expanding its so-called “transportation worker exemption” in Southwest Airlines Co. v. Saxon, 142 S.Ct. 1783 (2022). The plaintiff, a ramp supervisor, brought a collective action lawsuit against Southwest for alleged failure to pay overtime. Id. at 1787. Southwest moved to enforce its workplace arbitration agreement under the FAA. In response, the plaintiff claimed that she belonged to a class of workers engaged in foreign or interstate commerce and, therefore, fell within §1 of the FAA, which exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Id. The Supreme Court granted review and went on to hold that “any class of workers” directly involved in transporting goods across state or international borders falls within the exemption. Id. at 1789. It had no problem finding the plaintiff part of such a class: “We have said that it is ‘too plain to require discussion that the loading or unloading of an interstate shipment by the employees of a carrier is so closely related to interstate transportation as to be practically a part of it.’ . . . We think it equally plan that airline employees who physically load and unload cargo on and off planes traveling in interstate commerce are, as a practical matter, part of the interstate transportation of goods.” Id. (citation omitted).
Despite this decision clarifying the exemption, lower courts remained steeped in disputes, often generating irreconcilable differences of opinion over which workers signed arbitration agreements enforceable under the FAA and which did not. In Fraga v. Premium Retail Services, Inc., No. 1:21-CV-10751, 2023 WL 8435180 (D. Mass. Dec. 5, 2023), for example, after the parties litigated the enforceability of the arbitration agreement for more than two years, and the dispute resulted in three full scale judicial opinions, a two-day evidentiary hearing with 6 witnesses, and hundreds of pages of exhibits, the court determined that the plaintiff’s work, which involved sorting, loading, and transporting materials to retailers located within or outside Massachusetts “was not performed frequently and was not closely related to interstate transportation” so as to bring him within the exemption. Id. at *6.
Similarly, in Nunes, et al. v. LaserShip, Inc., No. 1:22-CV-2953, 2023 WL 6326615 (N.D. Ga. Sept. 28, 2023), the plaintiffs opposed a motion to compel arbitration contending that last-mile delivery drivers are engaged in interstate commerce because the goods they transport have traveled interstate and remain in the stream of commerce until delivered. The court disagreed. Whereas it found “no doubt” that the plaintiffs belong to a “class of workers employed in the transportation industry” because they locally transported packages from a warehouse to commercial and residential buildings, it concluded that plaintiffs “do not actually engage in interstate commerce.” Rather, their job entailed sorting and loading packages from the local warehouse and delivering the goods locally. Thus, the court determined that the plaintiffs were “too far removed from interstate activity,” and did not fall within § 1’s exemption.
By contrast, in Webb, et al. v. Rejoice Delivers, 2023 WL 8438577 (N.D. Cal. Dec. 5, 2023), the court found the opposite. The plaintiff picked up packages from local Amazon facilities and delivered the packages locally. The court, however, noted that, before reaching the local Amazon facilities, the goods had been ordered from Amazon’s website and taken to the local facilities by shipping trucks. As a result, the court held that, because plaintiff “pick[ed] up packages that ha[d] been distributed to Amazon warehouses, certainly across state lines, and transport[ed] them for the last leg of the shipment to their destination,” his work was “a part of a continuous interstate transportation” of goods, so that he was engaged in interstate commerce for the purposes of the FAA § 1 exemption. Id. at *7.
The U.S. Supreme Court is poised to offer more clarity as to this issue in Bissonnette, et al. v. LePage Bakeries Park St., LLC, No. 23-51 (U.S. Sept. 29, 2023). On September 29, 2023, the U.S. Supreme Court granted certiorari in to address the exemption. In Bissonnette, two workers who delivered breads and cakes sued a bakery claiming that it misclassified them as independent contractors and, therefore, denied them minimum wage and overtime. The workers asserted that the transportation worker exemption applied because they handled goods traveling in interstate commerce, but the Second Circuit affirmed the district court’s ruling granting defendant’s motion to compel arbitration.
The question presented to the U.S. Supreme Court involves whether, to be exempt from the FAA, a class of workers actively engaged in interstate transportation also must be employed by a company in the transportation industry. Thus, the Supreme Court’s ruling could provide additional clarity in narrowing or expanding the scope of the exemption, potentially opening the doors to additional class claims.
Given the impact of the arbitration defense, in 2024, companies are apt face additional hurdles, on the judicial or the legislative front, as the plaintiffs’ bar continues to look for workarounds. In particular, as more plaintiffs can assert claims that post-date the EFAA, we expect to see additional litigation and more decisions over the interpretation of the EFAA, including whether the Act’s use of the word “case” renders the statute applicable to all claims in the case, including claims other than sexual harassment and sexual assault, and whether the statute, therefore, will allow for a broader shield to the arbitration defense.
That said, the future viability of the arbitration defense remains an open question, as advocacy groups, government regulators, and political figures push for a ban on class action waivers in arbitration.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and George J. Schaller
Duane Morris Takeaways: InEqual Employment Opportunity Commission v. Western Distributing Co., No. 1:16-CV-01727, 2024 U.S. Dist. LEXIS 17225 (D. Colo. Jan. 31, 2024), Judge William J. Martinezof the U.S. District Court for the District of Colorado denied Defendant’s motion to dismiss for lack of standing and granted in part and denied in part Defendant’s motion to reconsider. Both post-trial motions involved disparate impact claims for qualified disabled employees concerning Defendant’s return-to-work policies. For employers facing EEOC-initiated lawsuits under the Americans with Disabilities Act of 1990 (the “ADA”) concerning employment policies, this decision is instructive in terms of the record evidence and filings courts will consider when deciding post-trial motions.
Case Background
On July 7, 2016, the EEOC filed suit on behalf of individuals with disabilities who worked for Defendant Western Distributing Co. (“Western”), a trucking company. The EEOC alleged Western’s employment policies disparately impacted these individuals under the ADA.
Western’s policies required employees to return to work on a “full-duty” basis after medical leave; required certain drivers to static push and pull 130 pounds of weight; and required certain drivers to be able to static push and pull 130 pounds of weight at 58 inches above the ground. Id. at 2.
In January 2023, a jury decided that Western’s “full-duty” policy had a disparate impact on disabled drivers. The post-trial motions resulted from the jury’s decision and Western moved to dismiss for lack of standing (“Standing Motion”) and moved to reconsider the Court’s denial of its yet-to-be-filed Rule 50(b) motion (“Motion to Reconsider”).
Standing Motion
The Court denied Western’s Standing Motion. In reviewing Western’s arguments, the Court determined Western put “great weight … on: (1) Senior U.S. District Judge Lewis T. Babcock’s Bifurcation Order; and (2) several statements by the EEOC’s counsel and the Court during the trial.” Id. at 2.
The Court found the obvious purpose of the bifurcation order was “(1) to give the parties a clear procedure for trying this action; and (2) to give the jury issues it can legally decide and reserve for the Court issues upon which it must rule.” Id. at 3. The Court reasoned that Judge Babcock’s bifurcation order “clearly contemplate[d] separate fact finding on ‘all individual claims and resultant damages’” and construing the order otherwise would be “unjust and border on absurd.” Id. at 4.
As to the statements during trial, the Court concluded that “back pay is viewed as equitable relief . . . to be decided by the judge.” Id. at 3. Therefore, the Court opined that it “will not ascribe to it the power to foreclose retrospective relief to which the EEOC and aggrieved individuals might be entitled. Nor will the Court rule such relief is improper simply because the EEOC did not present any damages evidence to a jury that could not award equitable back pay.” Id. at 4.
Motion to Reconsider
The Court granted Western’s request to reconsider arguments raised in its initial Rule 50(a) motion. The Court addressed Western’s arguments and denied each in full.
First, Western argued “the EEOC waived its Disparate Impact Claim to the extent it was based on the “full-duty policy” by failing to include this claim in its proposed “Challenge Standards” instruction. Id. at 5.
The Court determined its order one month before trial on the EEOC’s motion for partial summary judgment included both the “full-duty and maximum leave policies ‘[as] two of the thirteen discriminatory standards, criteria, or methods of administration that form the basis of the Disparate Impact Claim.’” Id. at 6. The Court also reasoned that Western was aware of the need to defend against the full-duty policy given the “significant body of evidence Western in fact prepared and marshaled to do just that.” Id.
Second, Western sought reconsideration concerning the adequacy of the evidence the EEOC presented at trial with respect to the existence of the full-duty policy and its disparate impact on qualified individuals with disabilities. Id. at 7. The Court denied Western’s request to re-weigh the evidence as the jury during trial “was attentive, engaged, and clearly thoughtful in issuing a narrow verdict.” Id. at 8. As to the disparate impact portion, the Court highlighted that this portion was “a retread of one of Western’s rejected summary judgment arguments.” Id. at 7. Therefore, the Court decided it would “not functionally reverse its own legal conclusions reached during the summary judgment phase.” Id. at 8.
For the same reasons, the Court denied Western’s third argument regarding statistical evidence of the 130-pound push/pull tests as a “re-tread” of an issue already decided on summary judgment. Id. Finally, the Court denied Western’s argument because it “[was] merely a short summary of the arguments raised in the Standing Motion.” Id.
Implications For Employers
Employers that are confronted with EEOC-initiated litigation involving employment policies should note that the Court relied heavily on the established record including prior issued orders, previous motions raising the same or similar arguments, and statements made by counsel at trial.
Further, from a practical standpoint, employers should carefully evaluate employment policies that may impact individuals with disabilities, as courts and juries are apt to scrutinize these materials.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther
Duane Morris Takeaways: In Martinez v. Fedex Ground Package System, Inc., No. 20-CV-1052, 2024 WL 418801 (D.N.M. Feb. 5, 2024), Judge Steven C. Yarbrough of the U.S. District Court for the District of New Mexico granted the intervention motion of 16 putative class members to join the lawsuit, The Court held that the plaintiff-intervenors met the standard for permissive intervention under Rule 24(b)(2). The Court’s decision in this case serves as an important reminder that Rule 23 and Rule 24 employ two separate commonality standards, and that class action cases are not automatically over when a court denies class certification.
Case Background
On October 12, 2020, Plaintiffs Fernandez Martinez and Shawnee Barrett (collectively, “Plaintiffs”) filed suit against Defendant Fedex Ground Package System, Inc. (“Fedex”), alleging that Fedex misclassified them as independent contractors and failed to pay them and putative class members overtime wages in violation of the New Mexico Minimum Wage Act (“NMMWA”).
On November 8, 2022, Plaintiffs moved to certify a class of all current or former New Mexico FedEx drivers who were paid a day rate without overtime compensation. On October 27, 2023, the Court denied Plaintiffs’ motion on the basis that Plaintiffs failed to demonstrate that common questions predominated over individualized issues pursuant to Rule 23(b)(3). Martinez v. FedEx Ground Package Sys., No. 20-CV-1052, 2023 WL 7114678 (D.N.M. Oct. 27, 2023).
On December 15, 2023, a group of 16 putative class members (the “Intervenors”) filed a motion to intervene as plaintiffs in the Lawsuit under Rule 24. Martinez, 2024 WL 418801, at 1. In their motion, the Intervenors alleged that they, like Plaintiffs, were “current or former New Mexico FedEx delivery drivers who were paid the same amount of money regardless of how many hours they worked in a day, resulting in no premium payment for overtime hours worked in violation of the [NMMWA].” Id.
The Court’s Decision
The Court granted the Intervenors’ motion. Id. at 2. It held that the Intervenors presented sufficient “questions of law and fact in common with the main action” under Rule 24. Id.
The Court noted that permissive intervention under Rule 24 is appropriate where (i) a federal statute creates a conditional right, or (ii) where the “intervenor has a claim or defense that shares with the main action a common question of law or fact.” Id.
In its opposition, FedEx asserted that because the Intervenors were employed by independent service providers (“ISPs”) to deliver packages on behalf of FedEx, and were not employed by FedEx directly, FedEx was not liable under the NMMWA for allegedly unpaid overtime. Id. Further, FedEx argued that the commonality requirement of Rule 24 was not met because the Court already found the absence of a common question when it denied class certification. Id.
While the Court recognized that it denied class certification under Rule 23’s commonality requirement, it was not persuaded by FedEx’s arguments. The Court underscored that under Rule 24, “rather than asking whether a question is susceptible to resolution ‘in one stroke,’ courts must ask whether intervenors present ‘questions of law and fact in common with’ the main action.” Id.
The Court concluded that the “existing plaintiffs and every intervenor [would] assert that certain common aspects of [FedEx’s] contracts with ISPs [made FedEx] a joint employer and, consequently, jointly liable for any [NMMWA] violations.” Id. Accordingly, the Court ruled that the Intervenors satisfied the Rule 24 commonality standard and were permitted to join the lawsuit as plaintiffs. Id. at 3.
Implications For Companies
The decision in Martinez v. FedEx serves as an important reminder for defendants that class actions are not necessarily over once class certification is denied – and some members of the putative class may take a run at joining the lawsuit per Rule 24. Additionally, it underscores the distinct commonality analyses under Rule 23 and Rule 24.
Duane Morris Takeaways: Given the importance of compliance with workplace anti-discrimination laws for our clients, we are pleased to present the second edition of the Duane Morris EEOC Litigation Review – 2024. The EEOC Litigation Review – 2024 analyzes the EEOC’s enforcement lawsuit filings in 2023 and the significant legal decisions and trends impacting EEOC litigation for 2024. We hope that employers will benefit from this deep dive into how the EEOC’s priorities reveal themselves through litigation. Click here for a copy of the EEOC Litigation Review – 2024 eBook. You can also watch our recent discussion with EEOC Commissioner Keith Sonderling at our Duane Morris Class Action Review Book Launch here.
The Review explains the impact of the EEOC’s six enforcement priorities as outlined in its Strategic Enforcement Plan on employers’ business planning and how the direction of the Commission’s Plan should influence key employer decisions. The Review also contains a compilation of significant rulings decided in 2023 that impacted EEOC-initiated litigation and a list of the most significant settlements in EEOC cases in 2023.
We hope readers will enjoy this new publication. We will continue to update blog readers on any important EEOC developments, and look forward to sharing further thoughts and analysis in 2024!
Duane Morris Takeaway: During the past year, the label “ESG” became “mainstream,” and discussion of its impact became a recurring topic of conversation in boardrooms across the country. ESG refers to broadly to “environmental, social, and governance,” which many companies have embraced as part of their business plans and corporate missions.
Watch the video below as Duane Morris partner Jerry Maatman discusses the impact of ESG on class action litigation and how this trend will evolve in 2024.
DMCAR Trend #9 – ESG Class Action Litigation Hit Its Stride
ESG was not immune to lawsuits, and we saw a steady influx of class action litigation in two particular ESI spheres – (i) product advertising and (ii) employment and DEI-related lawsuits.
The former focused on product advertising and, in particular, on allegations that marketing campaigns touting products as “green” or “sustainable” or “carbon neutral,” among other things, are false, misleading, and deceptive. Commonly called “greenwashing,” these claims generally refer to false or misleading statements about the environmental benefits or about the performance of particular products or operations and, in particular, tend to target statements touting the “green” or “sustainable” or “eco-friendly” characteristics of such products or operations.
Most often, plaintiffs’ class action attorneys file greenwashing lawsuits as class actions. These lawsuits largely focus on claims that defendants marketed products as “environmentally responsible,” “sustainably sourced,” or “humanely raised,” arguing that such misleading claims induce purchasers to pay a premium for “greener” products.
In Smith, et al. v. Keurig Green Mountain, Inc., No. 4:18-CV-06690 (N.D. Cal.), for example, the plaintiffs filed a class action lawsuit asserting various claims, including breach of warranty, misrepresentation, and violation of the California Unfair Competition Law, targeting Keurig’s representations regarding its K-cup coffee pods. In particular, Keurig marketed its K-cups as recyclable with labeling that consumers could “[h]ave [their] cup and recycle it, too.” The plaintiffs claimed that, in fact, the K-cups were not recyclable. In 2019, the court denied Keurig’s motion to dismiss, and, in 2020, the court granted the plaintiff’s motion for class certification. In February 2023, the court granted final approval of class action settlement for $10 million.
In Dwyer, et al. v. Allbirds, 598 F. Supp. 3d 137 (S.D.N.Y. 2022), the plaintiff filed a similar greenwashing class action alleging that defendant marketed its shoes, in part, based on their sustainability using statements like “Sustainability Meets Style” and “Environmentally Friendly.” The plaintiff brought claims for breach of express warranty, fraud, and unjust enrichment and asserted violations of §§ 349-350 of the New York General Business Law. Allbirds maintained a website showing the carbon footprint associated with its products based on a life-cycle analysis (LCA), and showing the environmental impact of its materials based on the third-party Higg Material Sustainability Index (Higg MSI). The plaintiff attacked the LCA tool and the Higg MSI standard as incomplete measurements of product sustainability. The court granted Allbirds’ motion to dismiss for failure to state a claim.
In Lizama, et al. v. H&M Hennes & Mauritz LP, No. 4:22-CV-1170 (E.D. Mo. 2023), the plaintiffs filed a class action complaint alleging that the retailer deceptively attempted to “greenwash” its allegedly environmentally damaging practices. H&M’s “Conscious Choice” collection included items made from recycled and organic materials that H&M marketed as “more sustainable.” The plaintiffs alleged that, in fact, H&M’s clothing was not sustainable because the synthetic materials in the collection had a negative environmental impact. The plaintiffs asserted claims for violation of various California and Missouri statutes and sought to certify various sub-classes. On May 12, 2023, the court granted the defendant’s motion to dismiss the California claims for lack of personal jurisdiction and dismissed the Missouri claims because it found the alleged statements not misleading as a matter of law.
Relative to employment and DEI-related lawsuits, the plaintiffs’ class action bar focused numerous claims based on allegations that companies failed to live up to their representations regarding diversity, equity, and inclusion or breached their DEI commitments.
Plaintiffs anchored many of their class claims on board-related DEI commitments, employment discrimination, and workplace safety issues. In the corporate DEI cases, plaintiffs asserted claims that companies allegedly failed to live up to their DEI commitments or failed to abide by their DEI policies or practices. In many of the ESG-related employment discrimination cases, plaintiffs focused on claims that corporate officers or directors breached their fiduciary duties by failing to address employment discrimination, by adopting policies that discriminate, or by failing to address safety concerns.
In Bucks County Employees Retirement System v. Norfolk Southern Corp., No. 2:23-CV-982 (N.D. Ga. 2023), for instance, the plaintiff filed a securities class action against the defendant and three of its managers alleging that they misrepresented the corporation’s worker safety practices prior to a chemical train derailment, leading investors to purchase company stock at inflated levels. The plaintiff alleged that the defendants committed to safety as a “core value” in their public statements and SEC filings but, in reality prioritized more lucrative practices at the expense of safety, such as longer and heavier trains and lower headcounts. The plaintiff asserted that such culture of “increased risk-taking” made the company more vulnerable to derailments.
As companies continue to add statements regarding their environmental impact or social responsibility to enhance their marketing efforts, communicate their company values, and/or attempt to appeal to consumers and shareholders attuned to ESG considerations, we expect to see ESG class actions continue their growth trajectory.
Duane Morris Takeaway: Generative AI hit mainstream in 2023 and quickly become one of the most talked-about and debated subjects among corporate legal counsel across the country, as numerous companies jumped to incorporate AI while attempting to manage its risks. In 2023, we saw the tip of the iceberg relative to the ways that generative AI is poised to transform class action litigation.
In the video below, Duane Morris partner Jennifer Riley discusses the latest AI class action rulings, and what companies can expect to see in AI litigation in 2024.
DMCAR Trend #8 – Generative AI Began Transforming Class Action Litigation
Opportunities For Enhanced Efficiency
As the COVID 19 pandemic brought video-conferencing tools into the mainstream, such tools enabled more litigants to conduct and to attend more hearings, more depositions, and more mediations in less time. While the debate continues as to their effectiveness, generative AI is poised to enable lawyers to far surpass those gains in efficiency, potentially enabling the plaintiffs’ class action bar to do “more with less” like never before, leading to more lawsuits that can be handled by fewer lawyers in less time and a potential surge of class actions on the horizon.
Less than a year into the generative AI movement, we have seen the technology influence various aspects of the legal process, including by assisting legal professionals in analyzing vast amounts of data; automating the review of documents, contracts, and communications; increasing the speed and potentially enhancing the accuracy of e-discovery; and automating and enhancing the dissemination of information in the class action settlement administration process.
Legal research, for example, traditionally required a time-consuming undertaking that involved sifting through dozens of decisions and secondary authorities. AI tools are enhancing this process through natural language search capabilities and machine learning algorithms that streamline the process and enhance the results. Document review similarly traditionally required a time-consuming and painstaking process. AI tools are using machine learning and text analytics, for example, to sort and categorize large datasets with increasing accuracy. By quickly analyzing extensive document sets, AI tools can expedite the discovery process, making litigation more efficient and cost-effective.
Likewise, AI has the potential to revolutionize the process of administering class action settlements. The participation in claims-made settlements, for instance, often falls within the range of 15% to 35%, depending upon various factors such as the type and method of notice. AI can be used in a variety of ways, including to find potential class members and thereby raise claim rates, while reducing administrative costs, increasing the amount available for distribution as well as the ultimate settlement payout.
In sum, the legal industry is poised to leverage this transformative technology to make leaps in enhancing the efficiency and effectiveness of the class action litigation process.
Risk Of Class Claims
While improving the efficiency with which the plaintiffs’ class action bar can litigate class actions, generative AI is providing an ocean of raw material for potential claims. Upon hitting the mainstream, AI promptly became the subject of class claims, which span multiple theories and areas of law.
While generative AI might improve the speed of interactions, for instance, users have the ability to exploit AI to generate massive amounts of false information or to simply inadvertently rely upon errors in AI-generated communications, giving rise to claims. Similarly, the SEC has warned businesses against “AI washing,” or making false claims regarding their AI capabilities, likening it to the greenwashing phenomenon that has been the target of an agency crackdown. The plaintiffs’ class action bar is using such representations about AI to fuel class claims for consumer fraud based on allegedly misleading or deceptive representations about the efficacy of AI technology. In Matsko, et al. v. Tesla, Case No. 22-CV-5240 (N.D. Cal. Sept. 14, 2022), for instance, a plaintiff filed a class action alleging that Tesla exaggerated the capabilities of its software and asserting various causes of action for breach of warranty and violation of California consumer protection laws, among others.
Companies that incorporate AI to streamline their decision-making processes likewise face the prospect of class action suits. Plaintiffs have filed suits against insurers that used algorithms to adjudicate claims, for example, as well as against agencies that used programs to deny or reduce government benefits. In Kisting-Leung, et al. v. Cigna Corp., Case No. 23-CV-01477 (E.D. Cal. 2023), for instance, a group of California consumers filed a class action complaint against a national health insurance company alleging that its use of an algorithm to deny certain medical claims constituted breach of the implied covenant of good faith and fair dealing, unjust enrichment, intentionally interfered with contractual relations, and violated California’s Unfair Competition Law.
The developers of generative AI products have not remained immune. Such companies have faced a slew of class action lawsuits alleging privacy violations. In a series of lawsuits beginning in June and July 2023, the plaintiffs’ class action bar has alleged that, by collecting publicly-available data to develop and train their software, developers of generative AI products stole private and personal information from millions of individuals. In P.M., et al. v. OpenAI LP, No. 3:2023-CV-03199 (N.D. Cal. 2023), a group of plaintiffs filed a class action suit against OpenAI LP and Microsoft, Inc. alleging that by collecting publicly-available information from the internet to develop and train its generative AI tools, including ChatGPT, Dall-E, and Vall-E, OpenAI stole private information from millions of people, violating their privacy and property rights, among other claims. In J.L., et al. v. Alphabet Inc., No. 3:23-CV-03440 (N.D. Cal. 2023), the same plaintiffs’ firm filed a class action lawsuit against Google, similarly alleging that, by collecting internet data to train its tools like Bard, Imagen and Gemini, Google infringed privacy rights and violated the Copyright Act.
Developers of generative AI tools similarly have faced claims. Plaintiffs have filed class action lawsuits claiming that, by collecting and using internet data to train generative AI models, developers violated copyright laws. In Andersen, et al. v. Stability AI, Ltd., Case No. 23-CV-00201 (N.D. Cal. Oct. 20, 2023), for example, plaintiffs filed a class action on behalf of artists alleging that Stability AI, Ltd. and Stability AI, Inc. “scraped” billions of copyrighted images from online sources, without permission, to train their models to generate new images without ascribing credit to the original artists. In Doe v. GitHub, Inc., 22-CV-06823 (N.D. Cal. May 11, 2023), the plaintiffs, a group of developers who allegedly published licensed code on GitHub’s website, filed a class action lawsuit against GitHub, the online code repository, as well as Microsoft and OpenAI claiming that GitHub improperly used that code to train its AI-powered coding assistant, Copilot, without appropriate attribution in violation of copyright management laws.
As technology continues to grow and change, and the plaintiffs’ class action bar continues to flex its creativity, the number and types of claims are likely to expand and evolve during the upcoming year.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown
