Author: Jennifer A. Riley

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

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

1. 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.

2. 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. and Jennifer A. Riley

Duane Morris Takeaway: In 2023, the EEOC’s litigation enforcement activity showed that its previous slowdown in filing activity is well in the rearview mirror, as the total number of lawsuits filed by the EEOC increased from 97 in 2022 to 144 in FY 2023.

In accordance with tradition, the EEOC filed more lawsuits in September 2023, the last month of its fiscal year, than in any other month from October 2022 forward. This past year, the EEOC filed 67 lawsuits in September, up from 39 filed in September 2022.

Watch below as Duane Morris partner Jerry Maatman addresses the top Trends in Government Enforcement Litigation in 2023, and what to expect in this area in 2024.

DMCAR Trend #7 – Government Enforcement Lawsuit Filings Reflected A Resurgence

The EEOC exhibited a renewed focus on systemic discrimination lawsuits. “Systemic” discrimination, according to the EEOC, involves an alleged “pattern or practice, policy and/or class … where the discrimination has broad impact on an industry, profession, company, or geographic location.” The EEOC filed 25 systemic lawsuits in FY 2023, nearly double the number it filed in each of the past three years. Overall, the 2023 lawsuit filing data and strategic priorities confirm that aggressive EEOC enforcement activity is back on the menu, and the litigation filing machine is back in full throttle, with no signs of slowing down.

1. Litigation And Settlement Trends

In FY 2023, the EEOC filed 144 lawsuits, including 25 systemic lawsuits. This represents a resurgence from what we observed in FY 2022, during which the EEOC filed 97 lawsuits, including 13 systemic suits. These enforcement numbers reflect a boost over filing numbers from FY 2021, as well, during which the EEOC filed 114 lawsuits including 13 systemic lawsuits. They likewise reflect an increase over FY 2020, during which the COVID-19 pandemic pushed case filings down to 33.

The graphic shows this year-over-year filing trend:

As illustrated, FY 2023 represents the highest number of filings since FY 2019, during which the EEOC filed 157 lawsuits. These numbers remain off the high water marks we observed in prior years, including 217 lawsuits in FY 2018 and 201 lawsuits in FY 2017.

Notably, FY 2023 also reflected a resurgence in the filings from historically active district offices. In FY 2023, Philadelphia District Office had by far the most lawsuit filings with 19, followed by Indianapolis and Chicago with 13 filings, and New York and Los Angeles each with 10 filings. Charlotte, Atlanta, Dallas, Phoenix, and Memphis had 9 each, Houston had 8, Miami, Birmingham, and St. Louis had 7 each, and San Francisco had 5 filings.

The following shows the filing numbers in FY 2023 by district office:

The 19 filings by the Philadelphia District Office reflects a significant increase compared to FY 2022 during which Philadelphia filed 7 lawsuits. Similarly, Indianapolis nearly doubled its filings compared to FY 2022. The number of lawsuit filings by the Chicago District Office remained steady at 13. The filings by the Miami District Office fell slightly to 7, compared to its 8 filings in FY 2022.

The balance across various District Offices throughout the country confirms that the EEOC’s aggressiveness is in peak form, both at the national and regional level.

As to systemic filings, the EEOC filed 25 systemic lawsuits in FY 2023, almost double the number it filed in each of the past three fiscal years and the largest number of systemic filings in the past five years. As to its current docket, in FY 2023, the EEOC reported that it had a total of 32 systemic cases on its docket at the end of fiscal year 2022, accounting for 18% of its active merits suits. During FY 2022, the EEOC reported 29 pending systemic cases, which accounted for 16% of the EEOC’s docket.

While these numbers continue to climb, they do not yet reflect the activity that employers observed prior to FY 2018. By the end of FY 2018, the EEOC had 71 systemic cases on its active docket, two of which included over 1,000 victims, and systemic cases accounted for 23.5% of its active docket in that year.

Comparing its monetary recovery to previous years, the EEOC reported that it recovered $513.7 million in all types of cases in FY 2022, an increase over its reported recovery in FY 2021, during which it recovered, $485 million. Comparing the numbers to prior years, the EEOC recovered $535.5 million in all types of cases in FY 2020, $486 million in FY 2019, and $505 million in FY 2018.

The below chart shows the year-over-year change in total recoveries.

In terms of the types of filings, FY 2023 remained generally consistent with prior years in that the EEOC filed the bulk of its lawsuits under Title VII, the Americans with Disabilities Act (“ADA”), and the Age Discrimination in Employment Act (“ADEA”).

Title VII cases once again made up the majority of cases filed. The EEOC filed 97 cases under Title VII, making up 68% of all filings (down from 69% of filings in FY 2022 and above 61% of filings in FY 2021).

The EEOC filed more cases under the ADA this past year with 49 lawsuits, nearly twice the number of ADA lawsuits it filed in FY 2022, and, as a percentage of all filings, ADA lawsuits increased from 29.7% in FY 2022, to 34% of lawsuit filings in FY 2023.

The EEOC filed 12 ADEA lawsuits in FY 2023, an increase from the 7 ADEA lawsuits it filed in 2022.

The following graphs show the number of lawsuits filed according to the statute under which they were filed (Title VII, Americans with Disabilities Act, Pregnancy Discrimination Act, Equal Pay Act, and Age Discrimination in Employment Act) and, for Title VII cases, the theory of discrimination alleged.

Amplifying its renewed activism, the EEOC issued a press release at the end of the fiscal year touting its increased enforcement litigation activity. Such a media statement is unprecedented in that 2023 is the first year the EEOC issued a media statement touting its numbers, a signal that its renewed activity reflects a strategic priority.

In July 2023, the Senate confirmed Kalpana Kotagal, President Biden’s nominee to fill the fifth Commissioner slot, for a term expiring in July 2027. Upon her confirmation, Democrats gained a 3 to 2 majority among Commissioners. Employers are apt to see increased litigation enforcement activity in 2024 as the EEOC continues to gain momentum with its full component of Biden appointees and can utilize its majority power to advance its agenda.

2. What’s Next For The EEOC?

Now that the EEOC has a majority of Democratic-appointed Commissioners firmly in place, along with a significantly increased proposed budget, we expect that Corporate America will see a continued expansion of enforcement activity in 2024.

Every few years the EEOC prepares a Strategic Enforcement Plan to focus and coordinate the agency’s work and identify subject matter priorities. This year, the EEOC released its Strategic Enforcement Plan for Fiscal Years 2024-2028.

In the 2024-2028 Strategic Enforcement Plan, the EEOC identified three guiding principles. First, the Commission states that to maximize the EEOC’s effectiveness, it will focus on those activities that have the greatest strategic impact, including systemic investigations, resolutions, and lawsuits. The EEOC thus “reaffirms its commitment to a nationwide, strategic, and coordinated systemic program as one of the EEOC’s top priorities.”

Second, the EEOC states that it will take an integrated approach at the agency that promotes collaboration, coordination, and information sharing throughout the agency. It explains that “[e]ffective systemic enforcement requires communication and collaboration between the EEOC’s legal and enforcement units, between headquarters and the field, and across EEOC districts.”

Third, the EEOC states that it will ensure that it achieves results “in accordance with the priorities set forth in the [Strategic Enforcement Plan].” This signals that the Commission will continue to emphasize and prioritize the use of systemic, pattern or practice lawsuits to accomplish its agenda.

As in years past, the Strategic Enforcement Plan also sets out the EEOC’s six substantive priorities.

#1 – Eliminating Barriers In Recruitment and Hiring – The EEOC will focus on recruiting and hiring practices that discriminate, including, among other things the use of technology, including artificial intelligence and machine learning, to target job advertisements or assist in hiring decisions; job advertisements that exclude or discourage certain protected groups from applying; and the use of screening tools or requirements that disproportionately impact workers on a protected basis, including those facilitated by artificial intelligence or other automated systems.

#2 – Protecting Vulnerable Workers – The EEOC will focus on harassment, retaliation, job segregation, discriminatory pay, disparate working conditions, among other things, that impact “particularly vulnerable workers,” which include immigrant and migrant workers; people with developmental or intellectual disabilities; individuals with arrest or conviction records; LGBTQI+ individuals; temporary workers; older workers; individuals employed in low wage jobs, including teenage workers; among others.

#3 – Addressing Selected Emerging And Developing Issues – The EEOC will continue to prioritize issues that may be emerging or developing, which includes qualification standards and inflexible policies or practices that discriminate against individuals with disabilities; protecting workers affected by pregnancy, childbirth, or related medical conditions; and addressing discrimination influenced by or arising as backlash in response to local, national, or global events.

#4 – Advancing Equal Pay Protections for All Workers – The EEOC will continue to focus on combatting pay discrimination in all forms. It notes that, because many workers do not know how their pay compares to their co-workers’ pay and, therefore, are less likely to discover and report pay discrimination, the EEOC will continue to use directed investigations and Commissioner Charges to facilitate enforcement.

#5 – Preserving Access to the Legal System – The EEOC will focus on policies and practices that discourage or prohibit individuals from exercising their rights or impede the EEOC’s enforcement efforts, including, among other things, overly broad waivers, releases, or non-disclosure agreements; and unlawful, unenforceable, or otherwise improper mandatory arbitration provisions.

#6 – Preventing and Remedying Systemic Harassment — The EEOC will continue to focus on combatting systemic harassment in all forms. It notes that, with respect to charges and litigation, a claim by an individual or small group may fall within this priority if it is related to a widespread pattern or practice of harassment.

Some – but certainly not all – of the EEOC’s lawsuits initiated over the past year fall into one or more of these six categories. The EEOC’s focus on systemic litigation underlies many of these enforcement priorities. Because the EEOC views systemic cases as having a particular strategic impact, insofar as they affect how the law influences a particular community, entity, or industry, companies should brace for the expansion of these cases.

3. Department Of Labor Enforcement Year-End Recoveries

The US Department of Labor’s Wage and Hour Division recovered approximately $212.3 million in back wages in FY 2023 and concluded 20,215 compliance actions. These numbers align with the numbers we saw in FY 2022, in which the WHD recovered $213.2 million in back wages and concluded 20,422 compliance actions. The number of compliance actions, and the subsequent back wages recoveries in FY 2022-23 was measurably lower than in FY 2021 and FY 2020. In FY 2021, the WHD concluded 24,746 compliance actions and recovered $232.4 million in back wages and in 2020 it concluded 26,096 compliance actions and recovered $257.8 million in back wages.

Although the WHD back wages recoveries were down, the agency imposed civil money penalties to employers at a 10-year-high of $25.8 million for violations of federal labor laws in FY 2023. This was the highest number in a decade, and was significantly higher than the penalties assessed in 2022 ($21.6 million), 2021 ($20.4 million), and 2020 ($17.9 million).

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

Duane Morris Takeaway: In 2023, employers saw claims filed under the California Private Attorneys General Act (PAGA) reach an all-time high. 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, from 11 in 2006 to 7,780 in 2023. The PAGA created a scheme to “deputize” private citizens to sue their employers for penalties associated with violations of the California Labor Code on behalf of other “aggrieved employees,” as well as the State. A PAGA plaintiff may pursue claims on a representative basis, i.e., on behalf of other allegedly aggrieved employees, but need not satisfy the class action requirements of Rule 23. In other words, the PAGA provides the plaintiffs’ class action bar a mechanism to harness the risk and leverage of a representative proceeding without the threat of removal to federal court under the CAFA and without the burden of meeting the requirements for class certification. If successful in prosecuting such a case, aggrieved employees receive 25% of any civil penalties and pass the other 75% to the California Labor and Workforce Development Agency (LWDA). The plaintiffs’ attorneys who pursue the action may collect their attorneys’ fees and costs.

Watch our Trend #6 video below, where Duane Morris partner Jennifer Riley discusses the PAGA filings explosion, the impact of the PAGA on arbitration, and what to expect with PAGA rulings in 2024.

Trend #6 – PAGA Filings Reached An All-Time High

1. The Explosion Of PAGA Notices

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. The number grew from 11 notices in 2006, to 1,606 in 2013, and then experienced three sizable jumps – to 4,530 in 2014, to 5,732 in 2018, and to 7,780 in 2023, each coinciding with a significant shift in the legal landscape, as discussed below. From 2013 to 2014, employers saw the largest single year increase, from 1,605 notices in 2013 to 4,532 notices in 2014, an increase of 182%.

The most significant drop in the past two decades occurred in 2022, when notices fell from 6,502 in 2021 to 5,817 in 2022, before their resurgence in 2023.

The following chart illustrates this trend.

These numbers closely tie to the shifting landscape of workplace arbitration, as each of the major shifts coincides with the timing of a significant expansion or pull back in the law governing the enforcement of arbitration agreements.

2. The PAGA As A Work-Around To Arbitration

The proliferation of mandatory arbitration programs started as early as 1991 when the U.S. Supreme Court issued Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). The movement did not gain steam, however, until 2011 when the U.S. Supreme Court issued its ruling in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), and held that the Federal Arbitration Act (FAA) preempts state rules that stand “as an obstacle to the accomplishment of the FAA’s objectives.”

In the wake of AT&T Mobility, arbitration programs gained a boost in their popularity. Such programs provided companies a mechanism to contract around class and collective actions. Through a form agreement, offered as a condition of an employment relationship or transaction, for instance, a company could require its employees and customers to resolve any disputes on an individual basis through private, binding arbitration.

The growing popularity of such programs led the plaintiffs’ class action bar to identify work-arounds. The California Supreme Court cemented the PAGA as the frontrunner for employment-related claims with its decision in Iskanian v. CLS Transportation Los Angeles, 59 Cal.4th 348 (Cal. 2014). In Iskanian, the California Supreme Court seemingly immunized the PAGA from arbitration programs when it held that representative action waivers in arbitration agreements are “contrary to public policy and unenforceable as a matter of state law.” Id. at 384.

In rendering its decision, the California Supreme Court distinguished AT&T, reasoning that, whereas the FAA aims to ensure an efficient forum for the resolution of private disputes, a PAGA action “is a dispute between an employer and the state Labor and Workforce Development Agency.” Id.

Iskanian cleared the PAGA as a mechanism by which to maintain a representative action unhindered by arbitration agreements or commitments to arbitrate on an individual basis. The decision undoubtedly fueled the filing of PAGA notices in 2014, which catapulted from 1,606 in 2013 to 4,530 in 2014.

The PAGA workaround experienced another boost in October 2018, when the U.S. Supreme Court bolstered the enforceability of class and collective action waivers in arbitration agreements with its decision in Epic Systems Corp. v. Lewis, et al., 138 S.Ct. 1612 (2018), clearing the path to widespread adoption of arbitration programs. In the wake of Epic Systems, PAGA notices reached a new level, jumping from 4,984 in 2017, to 6,431 in 2019, reflecting PAGA’s expanding popularity as a work-around.

The PAGA-workaround movement suffered its first significant set-back in 2022 with the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022). In Viking River, the U.S. Supreme Court held that, to the extent Iskanian precludes division of PAGA actions into individual and non-individual claims, and thereby “prohibit[s] parties from contracting around this joinder device,” the FAA preempts such rule. Id. Thus, it concluded in the case before it that the lower court should have compelled arbitration of the plaintiff’s individual PAGA claims.

The U.S. Supreme Court then addressed the remaining question – what the lower court should have done with Moriana’s remaining non-individual or representative claims. The Supreme Court opined that the PAGA provides no mechanism to enable a court to adjudicate non-individual claims once an individual claim has been committed to a separate proceeding. As a result, the U.S. Supreme Court opined that Moriana lacked statutory standing to continue to maintain her non-individual claims in court, and the lower court should have dismissed the PAGA representative claims. Id.

Following Viking River, the number of PAGA notices suffered the largest single-year drop in two decades, dropping from 6,502 in 2021, to 5,817 in 2022.

3. The PAGA’s Resurgence

Although the PAGA workaround suffered its first significant set-back in 2022 with the U.S. Supreme Court’s decision in Viking River, the set-back was short lived as, in 2023, the California Supreme Court minimized the impact of the Viking River decision.

In Adolph v. Uber Technologies, Inc., 14 Cal. 5th 1104 (Cal. 2023), the California Supreme Court took up the issue of whether, under California law, a PAGA plaintiff whose individual claims are compelled to arbitration retains standing to bring representative claims. The California Supreme Court disagreed with the U.S. Supreme Court’s interpretation of California law and held that, once a PAGA plaintiff’s individual claims are compelled to arbitration, the plaintiff retains standing to maintain non-individual PAGA claims in court so long as he is an “aggrieved employee.” Id. at 1105.

Adolph, an Uber delivery driver, asserted that Uber misclassified him as an independent contractor. Adolph amended his complaint to allege PAGA claims, and Uber moved to compel arbitration. The trial court denied Uber’s motion to compel arbitration, and the California Court of Appeal affirmed, citing the California Supreme Court’s ruling in Iskanian v. CLS Transportation Los Angeles, 59 Cal.4th 348 (2014). Uber filed a petition for review and, while it was pending, the U.S. Supreme Court issued its decision in Viking River.

In a unanimous decision, the California Supreme Court disagreed with the U.S. Supreme Court’s interpretation of the PAGA. The California Supreme Court held that, so long as an employee alleges that he has been aggrieved by a violation of the Labor Code, he maintains standing under the PAGA. As a result, after a court compels an individual PAGA claims to arbitration, the plaintiff retains standing to pursue his representative PAGA claims in court.

As to logistics, the California Supreme Court clarified several items. First, even though individual PAGA claims may be pending in arbitration and representative PAGA claims pending in court, the claims remain one action, and the court may stay the representative action pending completion of arbitration. Second, if the plaintiff loses in arbitration, at that point, the plaintiff loses standing to maintain representative PAGA claims. Third, if the plaintiff prevails in arbitration or settles his individual claims, he retains standing to return to court to pursue his representative PAGA claims on behalf of others.

By deciding that an individual who signs an arbitration agreement can return to court after arbitration to pursue representative proceedings under the PAGA, the California Supreme Court relegated arbitration agreements to a mere hurdle rather than a bar to PAGA representative actions. Given the technical requirements of California wage & hour law, coupled with the potentially crushing statutory penalties available to successful plaintiffs, we anticipate continued growth of PAGA lawsuits in 2024, with no pull back in site.

4. What’s Next For The PAGA?

The California Supreme Court presently is considering two cases that significantly could impact the future popularity of PAGA lawsuits, including the ease with which plaintiffs can succeed in recovering on a representative basis.

On November 8, 2023, the California Supreme Court heard oral argument in Estrada, et al. v. Royalty Carpet Mills, Inc. The California Supreme Court is considering whether courts have the power to strike or limit PAGA claims based on unmanageability. In a prior decision, Wesson, et al. v. Staples the Office Superstore, LLC, 68 Cal. App. 5th 746 (2021), the California Court of Appeal held that trial courts have inherent authority to strike or limit unmanageable PAGA claims. A few months later, the Court of Appeal in Estrada, et al. v. Royalty Carpet Mills, Inc., 76 Cal. App. 5th 685 (2022), disagreed and concluded that, while a court may limit the presentation of evidence to ensure a manageable trial, a court does not have authority to strike or limit PAGA claims before trial. The California Supreme Court must issue a decision on this issue by February 2024. The California Supreme Court might hold that trial courts possess inherent authority to safeguard an employer’s due process rights, which necessarily encompasses the right to gauge the manageability of and to narrow PAGA claims. Either way, Estrada has the potential to significantly impact the prosecution and defense of PAGA actions.

In Turrieta, et al. v. Lyft, Inc., the California Supreme Court will weigh whether a PAGA plaintiff has a right to intervene, object to, or move to vacate a judgment approving a PAGA settlement in a related action. In that case, between May to July 2018, Olson, Seifu, and Turrieta, all Lyft drivers, filed separate PAGA actions alleging improper classification as independent contractors. Turrieta reached a $15 million settlement with Lyft, which included a $5 million payment to her counsel. As part of the settlement, Turrieta amended her complaint to allege all PAGA claims that could have been brought against Lyft. When Olson and Seifu got wind of the settlement, they moved to intervene and to object. The trial court denied the intervention requests, approved the settlement, and then denied motions by Olson and Seifu to vacate the judgment in the Turrieta PAGA action. The Court of Appeal affirmed, holding that, as non-parties, Olson and Seifu lacked standing to move to vacate the judgment. The Court of Appeal explained that the real party in interest in a PAGA action is the State, and, thus, neither Olson nor Seifu had a direct interest in the case.

Finally, in November 2024, California voters will pass on a proposed measure to repeal the PAGA and to replace it with a new law known as The Fair Pay and Employer Accountability Act. Under the proposed law, employees could not sue for civil penalties in court on behalf of the state and instead would have to file a complaint directly with the Labor Commissioner who would be a party to any lawsuit filed; all civil penalties would go to affected employees; the State would receive increased funding; and civil penalties would be doubled for “willful” violations. The measure is intended to eliminate the windfall profiteering that the plaintiffs’ bar has enjoyed from the PAGA. Although preliminary polling suggests voters support the measure, the plaintiffs’ bar surely will mount vociferous opposition.

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

Duane Morris Takeaway: The volume of data breach class actions exploded in 2023, and their unique challenges, including issues of standing and uninjured class members, continued to vex the courts, leading to inconsistent outcomes. Data breach has emerged as one of the fastest growing areas of class action litigation. After every major (and not-so-major report) of a data breach, companies now can expect the resulting negative publicity to prompt one or more class action lawsuits, saddling companies with the significant costs of responding to the data breach as well as the significant costs of dealing with high-stakes class action lawsuits on multiple fronts.

Watch below as Duane Morris partner Jennifer Riley discusses the impact of data breach class actions in 2023, and what companies can expect to see in 2024.

Trend #4 – Data Breach Class Actions Continued Their Growth, But With Inconsistent Outcomes

Companies unfortunate enough to fall victim to data breaches in 2023 faced class actions, including copy-cat and follow-on class actions across multiple jurisdictions, at an increasing rate. In 2023, we saw a notable increase in data breach class actions as compared to 2022. Plaintiffs filed approximately 246 data breach class actions within the first half of 2023, roughly equivalent to the total number of filings for the entirety of 2022. On average, plaintiffs filed 44.5 data breach class actions per month during 2023 through the end of August, marking a significant increase from the average of 20.6 per month that we saw in 2022. From September 2023 to the end of the year, Plaintiffs filed over 450 additional data breach class actions, for an average of over 125 a month.

Several factors likely contributed to this surge in data breach class actions in 2023, including the MOVEit data breach. The shift to remote work, rise of cloud-based storage, and the escalation of sophisticated cybercriminal activity has threatened data security like never before, giving rise to more large-scale data breaches across industries and thereby prompting more lawsuits. In 2023, the Judicial Panel on Multidistrict Litigation consolidated more than 100 class actions arising from an alleged Russian cybergang’s exploitation of a vulnerability in the file transfer software MOVEit. See In Re MOVEit Customer Data Security Breach Litigation, MDL No. 3083 (J.P.M.L. Oct. 4, 2023). Further, whereas data breach actions pursued a decade ago faced little prospect of success, recent court decisions provided a roadmap for plaintiffs to attempt to show standing and successfully plead duty, causation, and damages, thereby providing additional momentum for the plaintiffs’ class action bar.

The U.S. Supreme Court’s 2021 decision in TransUnion LLC v. Ramirez, et al., 141 S.Ct. 2190 (2021), has presented a fundamental threshold challenge for many data breach class action plaintiffs – i.e., whether the plaintiff suffered a concrete injury such that he or she has standing to assert a claim. 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. Since the TransUnion decision, standing has emerged as a key defense to data breach litigation because the plaintiffs often have difficulty demonstrating that class members suffered concrete harm.

Courts, however, have continued to disagree over the application of TransUnion in the data breach context and have handed down varying decisions. For instance, whereas some courts have found allegations of mere access to personal information insufficient, courts have disagreed as to the amount of harm and level of causation plaintiffs must plead to maintain a claim.

In Ruskiewicz, et al. v. Oklahoma City University, 2023 U.S. Dist. LEXIS 178928 (W.D. Okla. Oct. 4, 2023), for example, the plaintiff alleged that an unauthorized third party accessed and stole her personal information during a data breach, released it into the public domain, and, because of the data breach, she faced a heightened risk of identity theft. The plaintiff claimed that she was required to take mitigation measures, including “placing ‘freezes’ and ‘alerts’ with credit reporting agencies, contacting [her] financial institutions, closing or modifying financial accounts, and closely reviewing [her] credit reports.” Id. at *5. The court granted the defendant’s motion to dismiss on the basis that a plaintiff suing for damages and injunctive relief from a data breach based on a risk that fraud or identity theft may occur in the future, without any facts to show a misuse of the data had occurred, failed to allege a concrete injury and lacked standing. Id. at *6; see, e.g., Holmes v. Elephant Insurance Co., 2023 U.S. Dist. LEXIS 110161 (E.D. Va. June 26, 2023) (holding that allegations regarding an increased risk of harm from future fraud or identity theft and time spent on preventative and mitigation efforts, such as monitoring credit and financial documents, did not demonstrate Article III standing).

In Bohnak, et al. v. Marsh & McLennan Co., 2023 U.S. App. LEXIS 22390 (2d Cir. Aug. 24, 2023), by contrast, the plaintiff alleged that an unauthorized third party accessed her name and Social Security number through a targeted data breach. The district court granted the defendants’ motion to dismiss for lack of standing, finding that the risk of future misuse of her personal information did not give rise to standing. On appeal, the Second Circuit reversed. It held that, under TransUnion, “disclosure of private information” is sufficiently “concrete” for purposes of Article III, and the fact that plaintiff alleged that she incurred “out-of-pocket expenses associated with the prevention, detection, and recovery from identity theft” and “lost time” and other “opportunity costs” associated with attempting to mitigate the consequences of the data breach, was sufficient. Id. at *19; see Florence, et al. v. Order Express, Inc., 2023 U.S. Dist. LEXIS 89410 (N.D. Ill. May 23, 2023) (finding loss of privacy resulting from data breach, including the mitigation costs, constituted a concrete injury).

Courts continue to grapple with the application of TransUnion in the data breach context, where many plaintiffs are unaware or unable to identify any concrete harm traceable to the alleged exposure of their information. Thus, while it is well-settled that individuals who have experienced direct economic injury from a breach (such as fraudulent charges) have legal standing, courts have disagreed as to the standing of persons who have not contended that an unauthorized party misused their data.

Plaintiffs who clear the standing hurdle as to their own claims relative to their ability to demonstrate an injury from the alleged data breach have continued to face a larger and more daunting obstacle at the class certification phase. Indeed, only 16% of the class certification decisions issued in data breach cases in 2023 came out in favor of plaintiffs. Some of this difficulty arises from the problem of uninjured class members.

By definition, individuals who did not suffer injury as the result of the defendant’s conduct cannot maintain claims, and courts do not have the power to award them relief. As the U.S. Supreme Court reiterated in TransUnion, “Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.” TransUnion LLC v. Ramirez, et al., 141 S.Ct. 2190, 2208 (quoting Tyson Foods v. Bouaphakeo, 577 U.S. 442, 466 (2016). “[S]tanding is not dispensed in gross; rather, plaintiffs must demonstrate standing for each claim that they press and for each form of relief that they seek.” Id.

Courts have continued to grapple with the application of these concepts in the class certification context. In particular, they disagree over whether to certify a class, a plaintiff must demonstrate that every putative class member has standing or, stated differently, must demonstrate that the class excludes those individuals who did not suffer harm. In TransUnion, the Supreme Court expressly left open the question of “whether every class member must demonstrate standing before a court certifies a class.” Id. at n.4. Such a requirement has significant consequences in the data breach context.

In Steinmetz, et al. v. Brinker International, Inc., 2023 U.S. App. LEXIS 17539 (11th Cir. July 11, 2023), for instance, the plaintiffs alleged that hackers targeted Chili’s restaurant systems, stole customer data and personally identifiable information, and posted that information on an online market place for stolen payment data. Id. at *2-3. Two named plaintiffs also alleged that, after their visits to Chili’s, they had unauthorized charges on their credit cards. Id. After the district court certified a nationwide class and California state-wide class, the Eleventh Circuit vacated the district court’s ruling. The Eleventh Circuit held that, although the plaintiffs alleged a concrete injury sufficient to demonstrate Article III standing, the phrase “data accessed by cybercriminals” in both class definitions was too broad and the class would have to be limited to “cases of fraudulent charges or posting of credit information on the dark web.” Id. at *15. The Eleventh Circuit determined that the district court needed to refine the class definition to include those two categories only and then conduct a new predominance analysis as to uninjured individuals who simply had their data accessed.

Similarly, in Attias, et al. v. Carefirst, Inc., 344 F.R.D. 38 (D.D.C. Mar. 28, 2023), the plaintiffs filed a class action alleging that unauthorized individuals accessed the names, birth dates, email addresses, and subscriber identification numbers for over a million insureds. The district court denied plaintiffs’ motion for class certification. The court found that the plaintiffs met the requirements for Rule 23(a), but it expressed concerns about predominance. The court found potential individualized issues related to demonstrating class-wide injury-in-fact, particularly if the injuries for some class members were only future speculative injuries. For these reasons, the court ruled that the plaintiffs failed to meet the predominance requirement of Rule 23 and denied the motion for class certification.

Given the potency of the standing defense, we anticipate that it will continue to occupy a center-stage role in data breach litigation, particularly as plaintiffs attempt to maneuver around negative precedent at the outset to state a claim, only to encounter a similar obstacle at the class certification stage on a broader scale.

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

Duane Morris Takeaway: In 2023, the number of class certification rulings issued by courts eclipsed the numbers issued in recent years, and the overall rate of class certification remained high, as plaintiffs continued to succeed in certifying class actions at high rates. In 2023, 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 451 motions to grant or to deny class certification in 2023. Of these, plaintiffs succeeded in obtaining or maintaining certification in 324 rulings, an overall success rate of 72%.

Watch Duane Morris partner Jerry Maatman discuss the high certification rates in 2023 and what it means for 2024 in the video below:

Trend #3 – The Likelihood Of Class Certification In 2023 Remained Strong

The numbers show that, when compared to 2022, plaintiffs filed more motions for class certification in 2023, resulting in more certified class actions in 2023. Across all major types of class actions, courts issued rulings on 451 motions to grant or deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 324 rulings, with an overall success rate of 72%. In 2022, by comparison, courts issued rulings on 335 motions to grant or to deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 247 rulings, an overall success rate of nearly 74%.

In 2023, the number of motions that courts considered varied significantly by subject matter area, and the number of rulings varied across substantive areas. The following summarizes the results in each of ten key areas of class action litigation:

Securities Fraud – 97% granted / 3% denied (35 of 36 granted / 1 of 36 denied)
Data Breach – 14% granted / 86% denied (1 of 7 granted / 6 of 7 denied)
Discrimination – 50% granted / 40% denied (4 of 8 granted / 4 of 8 denied)
ERISA – 82% granted / 18% denied (41 of 50 granted / 9 of 50 denied)
FCRA / FDCPA – 75% granted / 25% denied (3 of 4 granted / 1 of 4 denied)
RICO – 70% granted / 30% denied (7 of 10 granted / 3 of 10 denied)
TCPA – 70% granted / 30% denied (7 of 10 granted / 3 of 10 denied)
WARN – 54% granted / 46% denied (7 of 13 granted / 6 of 13 denied)
FLSA (Conditional Certification) – 75% granted / 25% denied (125 of 167 granted / 42 of 167 denied)
FLSA (Decertification) – 44% granted / 56% denied (8 of 18 granted / 10 of 18 denied)
Antitrust – 75% granted / 25% denied (15 of 20 granted / 5 of 20 denied)
Products Liability / Mass Torts – 69% granted / 31% denied (9 of 13 granted / 4 of 13 denied)
Civil Rights – 62% granted / 38% denied (30 of 48 granted / 18 of 48 denied)
Consumer Fraud – 66% granted / 34% denied (38 of 58 granted / 20 of 58 denied).

The plaintiffs’ class action bar obtained the highest rates of success in securities fraud, antitrust, FLSA, and ERISA actions. In cases alleging securities fraud, plaintiffs succeeded in obtaining orders certifying classes in 35 of the 36 rulings issued during 2023, a success rate of 97%. In antitrust litigation, plaintiffs succeeded in obtaining orders certifying classes in 15 of 20 rulings issued during 2023, a success rate of 75%. In cases alleging ERISA violations, plaintiffs succeeded in obtaining orders certifying classes in 41 of 50 rulings, for a success rate of 82%. And in cases alleging FLSA violations, plaintiffs managed to obtain first-stage certification rulings in 125 of 167 rulings issued during 2023, a success rate of nearly 75%.

As additional judicial nominations emanate from the White House to fill open slots in federal courts, we can expect the makeup of the judiciary to continue to evolve toward the left during the upcoming year, thereby reducing the likelihood we will see any significant shift in this trend.

Courts Issued More Rulings In FLSA Collective Actions Than In Any Other Areas Of Law

In 2023, courts again issued more certification rulings in FLSA collective actions than in other types of cases. Plaintiffs historically have been able to obtain conditional certification of FLSA collective actions at a high rate, which surely has contributed to the number of filings in this area.

In 2023, courts considered more motions for certification in FLSA matters than in any other substantive area. Overall, courts issued 183 rulings. Of these, 165 addressed first-stage motions for conditional certification of collective actions under 29 U.S.C. § 216(b), and 18 addressed second-stage motions for decertification of collective actions. Of the 167 rulings that courts issued on motions for conditional certification, 125 rulings favored plaintiffs, for a success rate of nearly 75%.

These numbers are lower than the numbers observed in 2022, during which courts issued 236 rulings. Of these, 219 addressed first-stage motions for conditional certification of collective actions under 29 U.S.C. § 216(b), and 18 addressed second-stage motions for decertification of collective actions. Of the 219 rulings that courts issued on motions for conditional certification, 180 rulings favored plaintiffs, for a success rate of 82%. Such rate was in line with and slightly higher than the historic rate of success that plaintiffs have achieved with respect to such motions.

The decline in success rates in 2023 likely reflects the impact of courts in certain federal circuits more closely scrutinizing motions for conditional certification. Until recently, courts almost universally applied a two-step process to certification of FLSA collective actions.

At the first stage, courts applied a lenient burden such that they required a plaintiff to make only a “modest factual showing” that he or she was similarly situated to others, and plaintiffs often met such burden by submitting declarations from a limited number of potential collective action members.

At the second stage, courts conducted a more thorough examination of the evidence to determine whether in fact the plaintiff was similarly situated to those he or she sought to represent such that the matter should proceed to trial on a representative basis.

Recently, however, federal appellate courts in two circuits – the Fifth Circuit and Sixth Circuit — took a closer look at the so-called two-step process. In 2021, the Fifth Circuit in Swales v. KLLM Transport Services, LLC, 985 F.3d 430, 436 (5th Cir. 2021), rejected the two-step approach to evaluating collective action certification, holding instead that district courts must “rigorously scrutinize the realm of ‘similarly situated’ workers … at the outset of the case.”

This past year, in 2023, the Sixth Circuit joined the Fifth Circuit in jettisoning the traditional two-step approach.

In Clark, et al. v. A&L Homecare & Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023), the Sixth Circuit rejected the traditional two-step approach, but expressly declined to adopt the standard approved by the Fifth Circuit. Instead, the Sixth Circuit introduced a new standard that focuses on whether the plaintiff has demonstrated a “strong likelihood” that other employees he or she seeks to represent are “similarly situated” to the plaintiff.

As these new, stricter standards in the Fifth and Sixth Circuits take hold, we are likely to see success rates normalize as plaintiffs shift their case filings away from these two circuits toward jurisdictions with more lenient, more plaintiff-friendly standards for conditional certification.

Indeed, the success rate for plaintiffs in the Fifth Circuit declined by a noticeable amount in 2023, likely as a trickle-down effect of Swales.

In 2022, courts in the Fifth Circuit issued 7 rulings on motions for conditional certification, and plaintiffs prevailed in 5, or 71%. In 2023, courts in the Fifth Circuit issued 6 rulings on motion for conditional certification, and plaintiffs prevailed in 3, or 50%.

At the decertification stage, courts generally have conducted a closer examination of the evidence and, as a result, defendants historically have enjoyed an equal if not higher rate of success on these second-stage motions as compared to plaintiffs.

The results in 2023 were no exception.

Of the 18 rulings that courts issued on motions for decertification of collective actions, 8 rulings favored defendants, for a success rate of 44%. Such rate aligns with the success rate defendants enjoyed in 2022, and aligns with the historic rate of success that defendants have achieved at the decertification stage.

An analysis of these rulings demonstrates that a disproportionate number emanated from traditionally pro-plaintiff jurisdictions, including the judicial districts within the Second Circuit (27 decisions) and Ninth Circuit (44 decisions), which include New York and California, respectively.

Similar to recent years, however, the number of rulings emanating from the Sixth Circuit (22 decisions) proved nearly as high if not higher than the number of rulings in the traditional pro-plaintiff forums, a trend that, as mentioned above, is likely to reverse as we start to see the impact of Clark and plaintiffs begin shifting their filings toward other jurisdictions.

The following map illustrates these variations:

The numbers no doubt flow from the different standards and approaches that courts in different federal circuits take in evaluating motions for conditional certification and decertification and, in turn, the likelihood of plaintiffs’ success on such motions. If more courts join the Fifth and Sixth Circuits in abandoning the traditional two-step certification process, and thereby increase the time and expense of gaining a conditional certification order, it may lead to a reshuffling of the deck in terms of where plaintiffs file their cases and the types of claims they pursue.

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

Duane Morris Takeaway: Continuing with the top trends in class action litigation over the past year as we recognized in the Duane Morris Class Action Review – 2024, today we are discussing Trend #2. Trend # 2 focuses on class action litigation in the privacy space, which has generated a multitude of filings as it continues its reign as the hottest area of growth in terms of activity by the plaintiffs’ class action bar.

In today’s video blog, Duane Morris partner Jennifer Riley discusses the rise in privacy class actions under the Illinois Biometric Information Privacy Act (BIPA) in 2023, the impact of two seminal Illinois Supreme Court rulings on the application of the BIPA, and other privacy areas heating up in the class action arena.

Trend #2 – Privacy Class Actions Gained Momentum, Increasing In Number And Sophistication

1.    Illinois Biometric Information Privacy Act Claims

In 2023, the Illinois Biometric Privacy Act (BIPA) continued to fuel a swell of class action litigation. Its technical requirements, coupled with stiff statutory penalties and fee-shifting, provided a recipe for increased filings and hefty settlement demands from the plaintiffs’ class action bar.

Enacted in 2008, the BIPA regulates the collection, use, and handling of biometric identifiers and information by private entities. Subject to limited exceptions, the BIPA generally prohibits the collection or use of an individual’s biometric identifiers and biometric information without notice, written consent, and a publicly-available retention and destruction schedule.

In terms of lawsuit filings, for nearly a decade following enactment of the BIPA, activity under the statute was largely dormant.

Plaintiffs filed an average of approximately two total lawsuits filed per year from 2008 through 2016. Those numbers grew exponentially in 2017 and 2018 and then spiked as the plaintiffs’ class action bar filed a surge of class action lawsuits.

In 2022, companies saw more than five times as many class action lawsuit filings for alleged violations of the BIPA than they saw in 2018, and more than the number of class action lawsuit filings that they saw from 2008 through 2018 combined.

Filings continued to accelerate in 2023, prompted by two rulings from the Illinois Supreme Court that increased the opportunity for recovery of damages under the BIPA.

In 2023, the Illinois Supreme Court issued two seminal decisions that increased the opportunity for recovery of damages under the BIPA. On February 2, 2023, the Illinois Supreme Court issued its ruling in Tims v. Black Horse Carriers, 2023 IL 127801 (Feb. 2, 2023), and held that a five-year statute of limitations applies to claims under the BIPA. Perhaps even more significantly, on February 17, 2023, the Illinois Supreme Court issued its ruling in Cothron, et al. v. White Castle System, Inc., 2023 IL 1280004 (Feb. 17, 2023), and held that a claim accrues under the BIPA each time a company collects or discloses biometric information.

These rulings have far-reaching implications. Together, they have the potential to increase monetary damages in BIPA class actions in an exponential manner, especially in the employment context, where employees might scan in and out of work multiple times per day across more than 200 workdays days per year.

In the wake of these rulings, class action filings more than doubled. From January 1, 2023, to the ruling in Cothron, plaintiffs filed approximately 61 lawsuits in Illinois state and federal courts alleging violations of the BIPA.

By contrast, in the same period of time following the ruling, plaintiffs filed 150 lawsuits in Illinois state and federal courts, representing an increase of 71%.

Below is a chart outlining this litigation spike:

Throughout the remainder of 2023, lawsuit filings continued to grow in number and sophistication as they targeted more advanced and innovative technologies. Given the five-year statute of limitations, and the potential for enhanced monetary penalties, we anticipate that filings and settlement numbers in BIPA litigation will continue to expand.

2.    Other Sources Of Privacy Class Actions

Various provisions of state privacy, anti-surveillance, and wiretap statutes have had a similar impact, fueling creativity by the plaintiffs’ class action bar as it looks to apply many pre-existing laws to challenge the use of innovative and novel technologies that companies use to collect information about consumers and their online activities.

Over the past year, plaintiffs have filed a barrage of class action lawsuits under the federal Video Privacy Protection Act (VPPA). Congress originally passed the VPPA in 1988 to prevent the wrongful disclosure of video tape sale and rental records. Plaintiffs have filed lawsuits under the VPPA against companies that offer video content on their websites.

The VPPA prohibits a “video tape service provider” from knowingly disclosing personally identifiable information concerning any consumer of such provider.” 18 U.S.C. § 2710(b)(1). The statute defines a “video tape service provider” to include any person “engaged in business, or affecting interstate or foreign commerce, of rental, sale, or delivery of prerecorded video cassette tapes or similar audio-visual materials.” 18 U.S.C. § 2710(a)(4).

Some courts have construed “similar audio-visual materials” broadly, generally concluding that its definition encompasses streaming video delivered electronically. Plaintiffs allege that companies that maintain videos on their websites and deploy pixel tracking tools violate the VPPA because their websites track the videos that visitors watch and share the viewing data with third parties.

The VPPA provides for damages up to $2,500 per violation in addition to costs and attorneys’ fees for successful litigants, making it an attractive source of filings for the plaintiffs’ class action bar. Indeed, plaintiffs have initiated more than 137 class actions under the VPPA over the past year.

Similarly, state wiretapping and anti-surveillance laws are continuing to generate filings by enterprising plaintiffs’ lawyers. Plaintiffs have initiated class actions against companies that use third-party software to track user activity on their webpages, or to create and record transcripts of conversations conducted via chat features, based on the theory that such practices potentially violate electronic interception provisions of various state laws.

The plaintiffs’ bar grounded these claims in the electronic interception provisions of wiretap statutes like the California Invasion of Privacy Act, the Pennsylvania Wiretapping and Electronic Surveillance Act, and the Florida Security of Communications Act, among other laws, which generally prohibit the unauthorized interception of communications transmitted electronically.

The plaintiffs’ bar has targeted technologies that track a user’s interactions with the website (e.g., clicking, scrolling, swiping, hovering and typing) and create a recording of those interactions and inputs through session replay software.

It also has attacked coding tools that create and store transcripts of conversations with users in a website’s chat feature. Plaintiffs generally allege that recording users’ interactions with a website and sending that recording to a third party for analysis without their consent is an illegal invasion of their privacy. Over the past year, these lawsuits met mixed results.

During 2023, federal district courts in California ruled on the initial round of “chatbot” cases filed under the California Invasion of Privacy Act (CIPA) and several responded with skepticism. Courts granted motions to dismiss on various grounds finding, among other things, that the statutory provisions at issue do not apply to communications over the internet, see, e.g., Licea, et al. v. American Eagle Outfitters, Inc., 2023 WL 2469630, at *5-6 (C.D. Cal. Mar. 7, 2023); a party cannot “eavesdrop” on its own conversation, see id. at *7-8; Licea, et al. v. Cinmar, LLC, 2023 WL 2415592, at *7-8 (C.D. Cal. Mar. 7, 2023); or that allegations that a defendant used the code embedded in a chat program to “harvest valuable data” were too vague and conclusory to state a claim. See, e.g., Cody, et al. v. Boscov’s, Inc., 2023 WL 2338302, at *2 (C.D. Cal. Mar. 2, 2023).

Other courts denied motions to dismiss similar claims. See, e.g., Valenzuela, et al. v. Nationwide Mutual Insurance Co., 2023 WL 5266033, at *4-10 (C.D. Cal. Aug. 14, 2023); D’Angelo, et al. v. Penny OpCo, LLC, 2023 WL 7006793, at *2-4, *8-9 (S.D. Cal. Oct. 24, 2023).

These rulings contribute to a patchwork quilt of decisions in this space. Given the stakes, we do not anticipate that this initial round of decisions will spell the death knell for suits attacking session replay or chatbot suits, many of which remain in the pipeline before various courts. Instead, we anticipate that plaintiffs will respond with additional creativity as they attempt to plead around these potential issues and identify new technologies at which to target their claims.