Jennifer A. Riley – Page 6 – Class Action Defense

December 6, 2023 by Gerald L. Maatman, Jr.

Maryland Federal Court Reinstates Class Certification In Data Breach Class Action

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In the proceeding captioned In Re Marriott International Customer Data Security Breach Litigation, MDL No. 8:19-MD-02879, 2023 WL 8247865 (D. Md. Nov. 29, 2023), Judge John Preston Bailey of the U.S. District Court for the District of Maryland granted Plaintiff’s Motion for Class Certification and reinstated several previously-certified classes. The defendant argued that class certification was improper, in part, because the putative class members signed a Choice of Law Provision that contained a class action waiver. Conversely, the plaintiffs contended that the defendant waived its defense based on the Choice of Law Provision. The Court held that (i) the defendant waived its Choice of Law Provision, and (ii) in the absence of an arbitration agreement, the Choice of Law Provision did not override the Rule 23 requirements. For these reasons, this case serves as an important reminder for companies on the importance of the terms of contractual agreements in the context of seeking to arbitrate cases and potentially avoid class or collective actions.

Case Background

In 2016, Marriott purchased Starwood Hotels & Resorts Worldwide (“Starwood”), and inherited Starwood’s IT infrastructure provided by Accenture LLP (“Accenture”) for all Starwood properties. Id. In September 2018, Marriott learned that an unidentified party tried to gain access to the Starwood guest reservation database. After an investigation, Marriott determined Starwood’s database was compromised from July 2014 through September 2018. Id. *1. On November 30, 2018, Marriott disclosed the data breach. Id.

Thereafter, affected consumers filed suit against Marriott and Accenture nationwide. Id. Marriott requested that the actions be consolidated into one multi-district litigation (“MDL”) in the U.S. District Court for the District of Maryland, where Marriott is headquartered. Id. * 4. The case was consolidated, and the plaintiffs filed their joint MDL Complaint alleging various state law contract, statutory consumer protection, and state law negligence claims. Id. The plaintiffs then moved to certify various classes. Id. *2.

The putative class included members of the Starwood Preferred Guest Program (“SPG”). Id. *2. Members of the SPG program signed a contract that contained a “Choice of Law and Venue” Provision (the “Choice of Law Provision”). Id. The Choice of Law Provision stated that any disputes related to the SPG program would “be handled individually without any class action” and would have exclusive jurisdiction in the State of New York. Id. Therefore, the defendant asserted that Rule 23(a)’s “typicality” requirement was not met because the class members were SPG program members, and the class contained both members and non-members of the SPG program. Id.

The District Court agreed with the defendant, and redefined all classes to include only SPG members. Id. *3. However, by doing so, every putative class member was “someone who had purportedly given up the right to engaged in just such class litigation.” In Re Marriott Int’l, Inc., 78 F.4th 677, 682-83 (4th Cir. 2023). The District Court “did not further consider the import of the class waiver on its certification decision,” id. at 683, and granted certification as to three of the plaintiffs’ Rule 23(b)(3) and four Rule 23(c)(4) damages classes. In Re Marriott Int’l, Inc., 341 F.R.D 128, 172-73 (D. Md. 2022). Subsequently, the defendants appealed.

On appeal, the Fourth Circuit held that the District Court erred in failing to address whether or not the SPG members agreed to bar the certification of a class action. In Re Marriott International, 2023 WL 8247865, at *3. The Fourth Circuit vacated the class certification and remanded to the District Court to consider the effect of the Choice of Law Provision on the class. Id.

The District Court’s Decision

The District Court concluded that (i) the defendants waived the Choice of Law Provision, and (ii) absent an arbitration agreement, Rules 23 and 42 prevailed over the parties’ Choice of Law Provision Id. Accordingly, the District Court reinstated the previously-certified classes.

First, the District Court analyzed the plaintiff’s position that the defendants waived the Choice of Law Provision. It opined that “[w]aiver is the intentional relinquishment or abandonment of a known right.” United States v. Olano, 507 U.S. 725, 733 (1993) (internal citations omitted). The District Court reasoned that a party “waives a contractual provision when the party takes actions that are inconsistent with the provision.” In Re Marriott International, 2023 WL 8247865, at *4. The District Court held the defense “clearly waived 5/6” of its Choice of Law Provision because the defendants: (1) requested consolidation into an MDL, which “is the antithesis of handling each claim on an individual basis”; (2) stated that “separately litigating each of the 59 related actions” would “offer no benefit” and heighten the burdens of all involved; and (3) stated venue was proper in Maryland and requested that the MDL be assigned to Maryland, which was inconsistent with the New York Choice of Law Provision. Id. As such, the District Court found that the defendants waived the Choice of Law Provision and all terms contained therein. Id.

Second, the District Court held that it was not required to enforce the Choice of Law Provision outside of a binding arbitration provision. Id. *8. The Choice of Law Provision was “patently distinguishable” from “all of the reported cases on contractual class action waivers” because it did not have a mandatory arbitration clause. Id. *7. When parties agree to resolve their case in a non-judicial forum such as arbitration, “the Federal Rules have limited applicability”. Id. *6. However, in the absence of such an agreement, the District Court opined that “[t]he parties cannot by agreement dictate that a district court must ignore the provisions of Rule 23 of the Federal Rules of Civil Procedure.” Id. *7. The District Court found that Rule 23 and Rule 42 do not “call for consideration of the parties’ preferences,” but rather “furtherance of efficient judicial administration.” Id. Thus, the District Court was not required to enforce the Choice of Law Provision, and held that the plaintiffs did not waive their right to bring a class action claim. Id. *8 *(quoting Martrano v. Quizno’s Franchise Co., 2009 WL 1704469, at *20-21 (W.D. Pa. June 15, 2009)).

Implications For Companies

Companies should proactively review their arbitration agreements and class or collective action waivers to ensure that contractually agreed-upon terms can and will be imposed by a court. Additionally, when faced with multiple nationwide claims, companies should analyze their case defense strategy and make an informed decision before filing and/or joining an MDL. Finally, as part of any acquisition, companies should have their own data security team thoroughly vet and approve the acquired company’s security infrastructure prior to, or shortly after, the acquisition.

December 5, 2023 by Gerald L. Maatman, Jr.

The Duane Morris Class Action Review – 2024 Is Coming Soon!

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

Duane Morris Takeaway: Happy Holidays to our loyal readers of the Duane Morris Class Action Defense Blog! Our elves are busy at work this holiday season in wrapping up our start-of-the-year kick-off publication – the Duane Morris Class Action Review – 2024. We will go to press in early January, and launch the 2024 Review from our blog and our book launch website.

The 2024 Review builds on the success of last year’s edition. At over 500 pages, the 2024 Review has more analysis than ever before, with an analysis of over 1,100 class certification rulings from federal and state courts over this past year. The Review will be available for download as an E-Book too.

The Review is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting Corporate America, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breach, EEOC-Initiated and government enforcement litigation, employment discrimination, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, wage & hour class and collective actions, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, and the top class action settlement in each area. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2024.

We are humbled and honored by the recent review of the Duane Morris Class Action Review – 2023 by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said that “The Review must-have resource for in-depth analysis of class actions in general and workplace litigation in particular.” EPLiC continued that “The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting Corporate America. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, and the top class action settlement in a myriad of substantive areas. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2023 in terms of filings by the plaintiffs’ class action bar.”

We look forward to providing this year’s edition of the Review to all of our loyal readers in early January. Stay tuned and Happy Holidays!

November 12, 2023November 12, 2023 by Eden Anderson

California Supreme Court Expresses Concern At Estrada Oral Argument About Manageability Of PAGA Claims

By Eden E. Anderson, Gerald L. Maatman, Jr., and Jennifer A. Riley

Duane Morris Takeaways: In a case with significant consequences for employers, the California Supreme Court heard oral argument in Estrada v. Royalty Carpet Mills, No. S274340, on November 8, 2023. In Estrada, the Supreme Court will decide whether trial courts have inherent authority to ensure that PAGA claims will be manageable at trial, and to strike or narrow such claims if they cannot be managed appropriately. The Supreme Court signaled during oral argument its concerns with unwieldy PAGA claims that, if tried, would require a series of mini-trials over the course of years. The Supreme Court further expressed concern with ensuring that employers’ due process rights to present affirmative defenses are protected, potentially signaling the issuance of an employer-friendly decision. A decision is expected in the next three months, and has the potential to transform the prosecution and defense of PAGA litigation.

Case Background

Jorge Estrada filed a putative class action and PAGA action against his former employer asserting meal period violations. After two classes comprised of 157 individuals were certified, the parties tried the claims before a judge in a bench trial. The trial court ultimately decertified the classes, finding there were too many individualized issues to support class treatment. Although the trial court awarded relief to four individual plaintiffs, it dismissed the non-individual PAGA claim, concluding it was not manageable.

On appeal, Estrada argued that PAGA claims have no manageability requirement, and the Court of Appeal agreed in Estrada v. Royalty Carpet Mills, Inc., 76 Cal.App.5th 685 (2022). The Court of Appeal reasoned that class action requirements do not apply in PAGA actions and, therefore, the manageability requirement rooted in class action procedure was inapplicable. Further, the Court of Appeal opined that “[a]llowing courts to dismiss PAGA claims based on manageability would interfere with PAGA’s express design as a law enforcement mechanism.” Id. at 712. The Court of Appeal acknowledged the difficulty that employers and trial courts face with PAGA claims involving thousands of allegedly aggrieved employees, each with unique factual circumstances, but concluded that dismissal for lack of manageability was not an available tool for a trial court to utilize.

Estrada is contrary to the holding in Wesson v. Staples the Office Superstore, LLC, 68 Cal.App.5th 746 (2021), and created a split in authority. In Wesson, the trial court struck a PAGA claim as unmanageable, and the Court of Appeal affirmed. The claims at issue in Wesson involved the alleged misclassification of 345 store managers. The employer’s exemption affirmative defense turned on individualized issues as to each manager’s performance of exempt versus non-exempt tasks, which varied based on a number of factors including store size, sales volume, staffing levels, labor budgets, store hours, customer traffic, all of which varied across the stores. The split in authority prompted the California Supreme Court to grant review in Estrada, but not Wesson.

Oral Argument At The California Supreme Court

During oral argument on November 8, 2023, several Justices, most prominently Justices Liu and Jenkins, expressed skepticism that a trial court’s inherent powers include the ability to outright strike or dismiss an entire PAGA action for lack of manageability. As Justice Liu commented, permitting trial courts such wide ranging power would shortchange the PAGA statute unless there is an overriding constitutional interest.

Several Justices also acknowledged that an employer has a due process right to present evidence to support its affirmative defenses and that, in certain cases, such evidence presentation might require a series of mini-trials over a period of years and wholly consume a trial court’s resources. Justice Kruger asked questions of Estrada’s counsel that suggested the illogical nature of these issues telling trial courts as to what to do in terms of mini-trials, and how unwieldy such PAGA-related problems would evolve under such a set of principles.

Justice Groban also expressed concern about a PAGA case where multiple Labor Code violations are alleged, hundreds or thousands of employees are at issue, and different work sites and different types of employees ranging from janitors to accountants are implicated. Justice Groban asked why, in that case, a trial court could not just limit the case to the accountants only. Other justices raised similar concerns, with Chief Justice Guerrero asking Estrada’s counsel why the answer is that this is all subject to appellate review.

Implications For Employers

The constellation of the comments from the justices seemingly signals that the California Court may hold that trial courts possess inherent authority to ensure an employer’s right to due process is safeguarded, which necessarily encompasses the right to gauge the manageability of PAGA claims and to narrow them as appropriate. As to whether such authority could include outright dismissal of an entire PAGA case, employers will have to wait and see.

October 18, 2023 by Gerald L. Maatman, Jr.

Illinois Federal Court Denies Class Certification In A Nationwide FCRA Lawsuit Due To Issues With Commonality, Adequacy Of Representation, And Predominance

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In Sgouros v. Transunion Corp., No. 1:14-CV-01850, 2023 WL 6690474 (N.D. Ill. Oct. 12, 2023), Judge Sharon Johnson Coleman of the U.S. District Court for the Northern District of Illinois denied Plaintiff’s motion for class certification in a Fair Credit Reporting Act (“FCRA”) case because Plaintiff failed to satisfy the Rule 23 requirements of commonality, adequacy of representation, and predominance. For entities facing FCRA class actions, this decision provides a concise explanation of what factors courts may consider with respect to commonality, adequacy of representation, and predominance in ruling on a motion for class certification.

Case Background

In this litigation, Defendants are collectively a well-known American consumer credit reporting agency. In 2013, Defendants offered a 3-in-1 Credit Report, Credit Score & Debt Analysis for consumers to purchase. The 3-in-1 report included a VantageScore, which, similar to a FICO score, looks at the information in a consumer’s credit report and generates a score to help lenders determine a consumer’s creditworthiness.

On June 10, 2013, Plaintiff purchased a 3-in-1 Credit Report and VantageScore from Defendants. Id. at 1. On the same day he purchased the report, Plaintiff alleged he was denied his desired auto loan because “the credit score the lender was provided was more than 100 points lower than the number contained in the VantageScore [Plaintiff] purchased.” Id.

Plaintiff later testified he knew the VantageScore was “useless” in September 2012, and failed to provide an explanation as to why he purchased a VantageScore nine months after such realization. Id. Plaintiff also testified that, contrary to the allegations in his complaint, he did not buy the score in advance of his search for an auto loan, and “he did not read the TransUnion website content that accompanied the purchase of his VantageScore.” Id.

In 2014, Plaintiff filed suit against Defendants alleging violations the Fair Credit Reporting Act (“FCRA”) and the Missouri Merchandising Practices Act (“MMPA”). Id. Plaintiff sought to represent a nationwide class and a Missouri-based class consisting of all persons “who purchased a VantageScore 1.0 Score through TransUnion Interactive’s website, or its predecessor website, during the period October 1, 2009, to September 1, 2015.” Id.

The Court’s Decision

The Court held that Plaintiff failed to establish commonality, adequacy of representation, and predominance for both the FCRA and MMPA claims under Rule 23(a) and (b), and denied class certification. Id. at 6.

Rule 23(a)(2) – Commonality

Plaintiffs must demonstrate that “there are questions of law or fact common to the class” to meet the commonality requirement of Rule 23(a)(2). Id. at 3. Importantly, Plaintiff is required to “demonstrate that the class members ‘have suffered the same injury,’” and that the claims are “capable of classwide resolution.” Id. (citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011)). Plaintiff asserted five questions to establish commonality. Id. Overall, the Court found Plaintiff’s commonality questions were insufficient because they “merely restate[d] the core elements of statutory violations” and did not demonstrate “to what extent the class members suffered a common injury.” Id.

Specifically as to the alleged FCRA violations, the “core liability dispute” was whether or not Defendants failed to supply the class “with a credit score . . . that assist[ed] the consumer in understanding the credit scoring assessment of the credit behavior of the consumer and predictions about the future credit behavior of the consumer.” Id. at 2. Plaintiff asserted that the VantageScore could not assist consumers in understanding their credit score assessment “because the VantageScore was not similar enough to a FICO score and or widely used by lenders.” Id. at 4. The Court disagreed. It held that because Plaintiff failed to present any argument or evidence “independent of a comparison to a FICO score,” Plaintiff’s common questions were not “capable of common answers,” and Rule 23(a)’s commonality requirement was not met. Id.

Similarly, “[b]ecause [Plaintiff’s] MMPA common question . . . [was] premised on the same logic as the FCRA claim,” the Court found that “commonality was not met.” Id.

Rule 23(a)(4) – Adequacy of Representation

A named plaintiff must also establish they can adequately serve as a class representative under Rule 23(a)(4). Id. A named plaintiff is inadequate if they “have serious credibility problems” or if they have “antagonistic of conflicting” interests to absent class members. Id. The Court held that Plaintiff was inadequate to represent the class on both the FCRA and MMPA claims due to Plaintiff’s questionable credibility and the inconsistencies in his deposition testimony. Id. at 4-5.

Rule 23(b)(3) – Predominance

The plaintiff must also demonstrate that the putative class claims “predominate over any questions affecting only individual members,” and are “sufficiently cohesive to warrant adjudication by representation.” Id. at 5. The Court found that the FCRA’s statutory requirement of assisting a consumer in understanding their credit score is “necessarily individualized given the inherently personal nature how credit scores are calculated and consumers’ personal behaviors,” and predominance was not met. Id.

Implications For Credit Reporting Companies

This ruling provides a straightforward analysis of what elements courts may find persuasive in ruling on a motion for class certification in an FCRA class action. It ought to be a required read for corporate counsel in any FCRA case.

October 15, 2023 by Gerald L. Maatman, Jr.

D.C. Federal Court Denies Class Certification For COVID-19 Remote Learning Claims Due To Inadequacy Of The Class Representative

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

Duane Morris Takeaways: In Gur-Ravantab, et al. v. Georgetown University, No. 1:22-CV-01038, 2023 U.S. Dist. LEXIS 179493 (D.D.C. Oct. 5, 2023), Judge Trevor McFadden of the U.S. District Court for the District of Columbia denied Plaintiffs’ motion for class certification on the grounds that the named Plaintiff was neither an adequate representative of the proposed class nor even a member of it.

For companies facing motions for certification motions in class actions, this decision is instructive in terms of considerations over the circumstances where a named plaintiff may fall short of satisfying the adequacy requirement under 23(a)(4).

Case Background

The named Plaintiff, Emir Gur-Ravanatab (“Plaintiff”), was a Class of 2020 graduate of Georgetown University. Id. at 1. In March 2020 of his final semester, the COVID-19 pandemic swept the nation. Id. at 2. Defendant, Georgetown University (“Defendant”), like many other schools, announced its transition to remote instruction for the rest of the Spring 2020 semester. Id.

Plaintiff alleged that he entered a contract with the Defendant, and under that contract, Plaintiff paid tuition in exchange for a guarantee of “in-person classroom learning and other services.” Id. at 1-2. Plaintiff alleged that there was a material difference in value between in-person and remote instruction. Therefore, despite Defendant’s transition to remote instruction, Plaintiff was never paid the difference. Id. at 2.

Plaintiff alleged breach of an express and implied contract claims, and an unjust enrichment claim. Id. Plaintiff sought compensatory and punitive damages, and restitution for his claims. Id. He also moved to certify a class on behalf of other students who similarly formed contracts with Defendant and were enrolled as undergraduate students “during the Spring 2020 semester who paid tuition and Mandatory Fees.” Id. Plaintiff alleged the class covered roughly 7,300 other current and former university students. Id.

The Court’s Decision

The Court denied Plaintiff’s motion for class certification. It held that the named Plaintiff was not an adequate representative of the class he proposed to certify nor even a member of the class. Id. at 1.

The Court reasoned the requirements of all class action suits are well-settled under Rule 23. Id. at 3. These requirements are known as “numerosity,” “commonality,” “typicality,” and “adequacy.” Id. at 4. Additionally, the Court relied on U.S. Supreme Court precedent that “has ‘repeatedly held’ that ‘a class representative must be a part of the class and possess the same interest and suffer the same injury as the class members.’” Id. After a plaintiff and his proposed class satisfy those requirements, then the plaintiff and the proposed class must fall within one of the three “buckets” of class actions enumerated under Rule 23(b). Id. at 4-5. The Court found Plaintiff “stumbled before reaching Rule 23(b)” as he was “both an inadequate representative of the proposed class, and a non-member” of it. Id. at 5.

The Court focused its ruling on the adequacy prong under Rule 23(a). The Court opined that “[Plaintiff] does not share the same interests as the other class members, and indeed, has a potential conflict of interest with them,” and therefore is “not an adequate class representative.” Id. at 7. Plaintiff suffered two problems, including: (i) Plaintiff’s mother is an employee of the university; and (ii) Plaintiff did not personally pay tuition or mandatory fees. Id. at 7-8. Therefore, the Court determined “he lack[ed] the kind of concrete stake in the outcome of th[e] litigation necessary to be the vigorous advocate the class is entitled to.”

As to potential class conflicts, Plaintiff’s mother was a Turkish language instructor with the university, and hence he had a close familial relationship to a person who may be harmed by a judgment against the university. Id. at 8. Further, Plaintiff testified in his deposition that his parents, including his mother “exert a ‘pretty major’ influence over his decisions.” Id. The Court reasoned that “Rule 23 requires that class representatives be able to engage in arm’s-length dealings with the opposing side” and Plaintiff did not meet that standard. Id. However, the Court acknowledged that this conflict on its own “would not be enough, standing on its own, to defeat adequacy,” but other problems persisted. Id.

Plaintiff’s second problem was he did not share the same interest in this case as the other class members. Id. Plaintiff “sued for a refund of the difference in value between the education he paid for and the one he got,” but Plaintiff “did not pay for an education at all.” Id. The Court considered Plaintiff’s student account as the operative measure for educational payments. Id. at 8-11.

On balance, the Court construed the student account two ways. Either, Plaintiff did “not pay [Defendant] a dime,” Id. at 9, or Plaintiff “got more money out of [Defendant] that semester than he put in.” Id. at 11. Based on the Court’s reasoning, both accountings lead to the same problem, i.e., that Plaintiff “will likely have no compensatory damages to claim,” and “without compensatory damages, [Plaintiff] cannot claim punitive damages either.” Id. Therefore, the Court held that Plaintiff could not obtain meaningful relief, and thus, “he lack[ed] ‘the incentive to represent the claims of the class vigorously.’” Id. As a result of Plaintiff owing no money towards tuition and Mandatory Fees, the Court found he “quite simply is not a member of the proposed class.” Id.

The Court further discussed the second named Plaintiff, Emily Lama, and her exclusion from the class as well because she was “enrolled as a graduate student during the Spring 2020 Semester,” meaning she also did not fit the undergraduate class description. Id. at 11-12.

Accordingly, as there was no named Plaintiff to represent the class, the Court denied Plaintiffs’ motion for class certification. Id. at 12.

Implications For Companies

Companies confronted with motions for class certification should take note that the court in Gur-Ravantab relied on Plaintiffs’ inability to adequately represent the class based on a fact intensive analysis that disqualified the named Plaintiff as a suitable class representative. Further, from a practical standpoint, companies should carefully evaluate class representatives for unique characteristics that are distinguishable from the proposed class.

October 3, 2023 by Gerald L. Maatman, Jr.

In The Latest Application of the Sixth Circuit’s Novel “Strong Likelihood” Standard, Ohio District Court Denies Plaintiffs’ Motion to Issue Notice of FLSA Overtime Lawsuit

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

Duane Morris Takeaways: On September 27, 2023, District Court Judge Charles E. Fleming in Woods et al. v. First Transit, Inc., et al., 21-cv-739 (N.D. Ohio Sept. 27, 2023) denied plaintiffs’ motion for court-authorized notice of bus drivers’ claims of alleged unpaid overtime wages under the Fair Labor Standards Act (FLSA). The district court applied the Sixth Circuit’s newly-minted standard to conclude the plaintiffs failed to demonstrate a “strong likelihood” exists that they are similarly situated in relevant respects to other employees of the defendant transportation company. The court’s rejection of the plaintiffs’ “self-serving declarations” and consideration of the defendants’ competing evidence illustrates how the Sixth Circuit’s new standard is a game changer for FLSA litigants in Ohio, Michigan, Tennessee and Kentucky.

Case Background

On April 6, 2021, three named plaintiffs filed a class and collective action lawsuit asserting claims of unpaid overtime in violation of the FLSA and Ohio, California and New York state laws. The plaintiffs alleged that the defendant failed to pay overtime wages to fixed-route bus drivers for work performed before and after their shifts. The plaintiffs also alleged the defendant deducted 30 minutes’ worth of time from their pay for unpaid meal breaks even when they did not receive uninterrupted break time. After the district granted the defendant’s partial motion to dismiss the New York and California state law claims, only the Ohio state law claims survived. Additionally, only two named plaintiffs remained after one of the named plaintiff s was shown never to have worked as a fixed-route bus driver.

Two individuals filed consents to join the lawsuit as opt-in plaintiffs in October 2021 and a third joined the lawsuit in February 2022.

After approximately six months of fact discovery solely on the issue of conditional certification, the named plaintiffs moved for conditional certification of their claims under the FLSA on June 29, 2022. If granted, the plaintiffs would have authority to issue notice to a collective including any person who drove a fixed bus route for the defendant in any week during the prior three years.

In support of their motion, the plaintiffs submitted sworn declarations of the two named plaintiffs and three putative opt-in plaintiffs, job descriptions, an employee handbook and a user guide for time entry. In opposition to the motion, the defendant submitted sworn declarations of managers at the locations at which the named or opt-in plaintiffs had worked, declarations of corporate human resources and payroll staff and collective bargaining agreements governing fixed-route bus drivers at various locations.

After the parties fully briefed the motion, the district court deferred ruling on the motion until the Sixth Circuit Court of Appeals issued its anticipated decision on the standard for conditional certification in FLSA cases.

On May 19, 2023, the Sixth Circuit in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023), announced a new standard for determining whether FLSA plaintiffs may issue court-sanctioned notice to other employees. Rejecting the prior standard in which a plaintiff need only make a “modest factual showing” to win court-authorized notice, the Sixth Circuit held that plaintiffs must put forth sufficient evidence to demonstrate a “strong likelihood” exists that they are similarly situated to other employees. Factors relevant to the analysis include whether the potential other plaintiffs performed the same tasks and were subject to the same timekeeping and pay policies as the named plaintiffs. After Clark, the parties submitted supplemental briefs arguing how the new standard applied to the plaintiffs’ pending motion.

The Court’s Decision

Upon weighing the parties’ competing evidence, the district court answered “no” to the question whether a strong likelihood exists that the named plaintiffs experienced the same policies of unpaid overtime wages as other employees of the defendant.

The district court concluded that the plaintiffs did not introduce any evidence of a “company-wide policy” binding on all fixed-route bus drivers that potentially violates the FLSA. The court stated that the only evidence of the alleged unlawful overtime pay practices came in the form of “self-serving declarations” of doubtful credibility. For example, an opt-in plaintiff declared that she worked as a fixed-route bus driver until December 2020. However, the manager who oversaw the opt-in plaintiff’s location declared that no driver at that location drove a fixed bus route. The court reasoned no “strong likelihood” exists that the opt-in plaintiff is similarly situated to the named plaintiffs given that the opt-in plaintiff could not be in the proposed collective of fixed-route bus drivers.

The court also considered the evidence of written policies regarding meal breaks, or the lack thereof, for fixed-route bus drivers. Contrary to the plaintiffs’ allegation of company-wide automatic pay deductions for meal break time, the manager of the location at which one of the named plaintiffs had worked declared that drivers at that location did not even receive meal breaks.

The collective bargaining agreements in evidence showed that different locations of work had different policies governing time entry and breaks for fixed-route bus drivers. For example, a collective bargaining agreement for one location stated that the defendant paid drivers for 15 minutes of time prior to their route to perform pre-shift work. A collective bargaining agreement for another location said the defendant paid drivers 20 minutes for pre-shift work.

In sum, the court reasoned that the evidence revealed dissimilarity in policies and practices concerning compensation for the company’s fixed-route bus drivers. Because the evidence showed employees were subject to different policies concerning key issues such as how they report time, how schedules are set, what period of time is compensable, whether they receive a meal break and how meal breaks are paid, the court concluded the plaintiffs did not satisfy the “strong likelihood” standard announced in Clark to obtain court-authorized notice of their FLSA claims.

Implications For Employers

The district court’s ruling in Woods leaves no doubt that FLSA plaintiffs in the Sixth Circuit face a heightened evidentiary burden to obtain court-authorized notice in the wake of the Sixth Circuit’s new standard in Clark. The district court clarified that the “strong likelihood” standard in Clark is an evidentiary standard, not a pleading standard. The court’s analysis in Woods shows defendants have a genuine opportunity to present evidence to attack the plaintiffs’ efforts to show a common policy of FLSA-violating conduct and thereby block notice to other employees who may expand the scope of the lawsuit exponentially. Employers with operations in the Sixth Circuit ought to use Clark as an opportunity to look anew at their wage and hour policies and practices to guard against the risk of costly and time-consuming FLSA litigation.

October 2, 2023December 1, 2023 by Gerald L. Maatman, Jr.

Texas Federal Court Shoots Down Executive Order 14,026

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

Duane Morris Takeaways: On September 26, 2023, in Texas v. Biden, No. 6:22-CV-00004 (S.D. Tex. Sept. 26, 2023), Judge Drew B. Tipton of the U.S. District Court for the Southern District of Texas granted in part and denied in part the States’ Motion for Summary Judgment and enjoined the federal government from enforcing Executive Order 14,026 and the Final Rule against the States of Texas, Louisiana, and Mississippi and their agencies. Judge Tipton found that the President acted exceeded his authority by issuing Executive Order 14,026 and unilaterally requiring federal contractors to increase their employees’ minimum wage from $10.10 to $15 per hour. Other district courts have considered the President’s authority in issuing Executive Order 14,026, but Judge Tipton is the first federal judge to find that the President exceeded his authority. This ruling hits only the surface of what is yet to come. The parties in other cases have already filed appeals in the Ninth and Tenth Circuits challenging district court opinions that have issued contrary rulings, and the government in this case is bound to appeal this decision to the Fifth Circuit.

Procedural Background

The Federal Property and Administrative Services Act (“Procurement Act” or the “Act”) applies to federal and contractor employees. Congress implemented the Act to centralize the process by which various good and services are purchased by agencies on behalf of the government.

On April 21, 2021, President Biden, relying solely on the Act, issued Executive Order 14,026 (“EO 14,026”) to require federal contractors and subcontractors to pay certain employees $15 per hour. EO 14,026 was scheduled to begin on January 30, 2023, with annual increases thereafter. Specifically, in issuing EO 14,026, President Biden invoked his authority to “promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers.” Id. at 5. After engaging in notice-and-comment rulemaking, the U.S. Department of Labor published its Final Rule, Increasing the Minimum Wage for Federal Contractors, on November 24, 2021, implementing EO 14,026 (the Final Rule and EO 14,026 are the “Wage Mandate”). Id.

Three months later, three states – Texas, Louisiana, and Mississippi (the “States”) – sued President Biden, the U.S. Department of Labor (“DOL”), and certain DOL executives (collectively the “federal government”) challenging the validity of the Wage Mandate. Id. at 2-3.

The parties cross-filed cross-motions to dismiss and motions for summary judgment. The federal government argued generally that two of the Act’s provisions, read together, provide the President with a broad grant of authority to implement policies “that the President considers necessary to foster an economical and efficient system for procuring and supplying goods and services for using property,” including the Wage Mandate. Id. at 13. The States argued that the Act is far more narrow and that it is primarily meant as a means to “centralize and introduce flexibility into government contracting to remedy duplicative contracts and inefficiencies,” which does not include setting the minimum wage for federal contractors. Id.

The District Court’s Decision

The District Court granted in part and denied in part the States’ cross-motion for summary judgment. It found that the States proved that that the President acted “ultra vires,” or beyond his authority in issuing EO 14,026. Judge Tipton enjoined the federal government from enforcing EO 14,026 and the Final Rule against Texas, Louisiana, and Mississippi and their agencies.

The District Court agreed with the States and held that Sections 101 and 102 of the Act “read together, unambiguously limit the President’s power to the supervisory role of buying and selling goods.” Id. The District Court found that the Act’s historical context further supported its holding that the President’s authority “does not include a unilateral policy-making power to increase the minimum wage of employees of federal contractors.” Id. at 15.

Judge Tipton further found that the purpose of the Act purpose conflicts with the Wage Mandate. He explained that the Act’s purpose is to provide “a relatively hands-off framework that enables agencies to determine for themselves the quantity and quality of items to procure on behalf of the federal government. It does not confer authority for the President to decree broad employment rules.” Id. at 20. As an example, the District Court compared the Act to two other permissible federal wage statutes – the Davis Bacon Act and the Walsh-Healey Public Contracts Act. Id. at 20-21. Judge Tipton opined that unlike those two permissible federal wage-statutes, in which Congress expressly gave the Secretary of Labor limited power to tailor the minimum wage of certain classes of federal contractors, the Procurement Act did not permit the President unlimited wage-setting authority. Id. at 21. The District Court concluded that the “Procurement Act’s text, history, purpose and structure limit the President to a supervisory role in policy implementation rather than a unilateral, broad policy-making power to set a minimum wage.” Id. at 22.

The federal government will likely appeal the decision, and the Fifth Circuit will join the Ninth and Tenth Circuits in deciding whether the President exceeded his authority in issuing EO 14,026.

Implications for Employers

The District Court’s decision is a huge win for employers in Texas, Louisiana, and Mississippi as the federal government is prohibited from enforcing EO 14,026. Companies should stay tuned for the imminent showdown in the Fifth, Ninth, and Tenth Circuit’s on the President’s Authority over increasing the minimum wage for federal contractors and subcontractors.

September 29, 2023October 2, 2023 by Gerald L. Maatman, Jr.

EEOC’s September Spree Of Filings Caps Off Landmark Year In FY 2023

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

Duane Morris Takeaways: In FY 2023, the EEOC’s litigation enforcement activity showed that any previous slowdown due to the COVID-19 pandemic is well in the rearview mirror, as the total number of lawsuits filed by the EEOC increased from 97 in 2020 to a whopping total of 144 in FY 2023. Per tradition, September 2023 was a busy month for EEOC-Initiated litigation, as this month marks the end of the EEOC’s fiscal year. This year, 67 lawsuits were filed September, up from the 39 filed in September of FY 2022.

Overall, the FY 2023 lawsuit filing data confirms that EEOC litigation is back in full throttle, with no signs of slowing down. Employers should take heed. Amplifying that activism, the Commission issued a press release at the end of the fiscal year touting its increased enforcement litigation activity, a somewhat unprecedented media statement that the EEOC has never issued in previous years.

Lawsuit Filings Based On EEOC District Offices

In addition to tracking the total number of filings, we closely monitor which of the EEOC’s 15 district offices are most actively filing new cases over the year and throughout September. Some districts tend to be more aggressive than others, and some focus on different case filing priorities. The following chart shows the number of lawsuit filings by EEOC 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 most noticeable trend of FY 2023 is the filing deluge in Philadelphia (19 lawsuits), compared to FY 2022 where Philadelphia District Office filed 7 lawsuits. Similarly, Indianapolis ramped up its filings compared to the 7 filings from FY 2022. Like FY 2022, Chicago remained steady near the top of the list again with 13 filings. Los Angeles, had a slight increase, based on the 8 filings it had in FY 2022. Going another direction, Miami filings slightly fell compared to its 8 filings in FY 2022. Finally, both New York and Charlotte increased their filings from FY 2022, with New York substantially increasing from 7, and Charlotte moderately increasing from 7 filings.

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.

Lawsuit Filings Based On Type Of Discrimination

We also analyzed the types of lawsuits the EEOC filed, in terms of the statutes and theories of discrimination alleged, in order to determine how the EEOC is shifting its strategic priorities.

When considered on a percentage basis, the distribution of cases filed by statute remained roughly consistent compared to FY 2023 and FY 2022. Title VII cases once again made up the majority of cases filed, making up 68% of all filings (down from the 69% filings in FY 2022, and significantly above 61% in FY 2021). ADA cases also made up a significant percentage of the EEOC’s September filings, totaling 34%, in line with 29.7% in FY 2022, although down from the 37% in FY 2021. There were also 12 ADEA cases filed in FY 2023, after 7 age discrimination cases filed in FY 2022.

The graphs below 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.

Lawsuits Filings Based On Industry

The graphs below show the number of lawsuits filed by industry. Three industries were the primary targets of lawsuit filings in FY 2023: Restaurants with 28 filings, Retail with 24 filings, and Healthcare with 24 filings. Not far off those industries are Manufacturing with 15 filings; Construction with 7 filings; Automotive, Security, and Transportation with 6 filings each; and Technology with 5 filings.

Hospitality and Healthcare employers should be keenly aware of the EEOC’s enforcement of alleged discriminatory practices in these sectors. But in reality, employers in nearly any industry are vulnerable to EEOC-initiated litigation., as detailed by the below graph.

Looking Ahead To Fiscal Year 2024

Moving into FY 2024, the EEOC’s budget includes a $26.069 million increase from 2023, and focuses on six key areas including advancing racial justice and combatting systemic discrimination on all protected bases; protecting pay equity; supporting diversity, equity, inclusion, and accessibility (DEIA); addressing the use of artificial intelligence in employment decisions and preventing unlawful retaliation.

The EEOC also announced goals for its own Diversity, Equity, Inclusion, and Accesibility (DEIA) program where it seeks to achieve four goals, including workplace diversity, employee equity, inclusive practices, and accessibility. Additionally, the EEOC continues to polish its FY 2021 software initiatives addressing artificial intelligence, machine learning, and other emerging technologies in continued efforts to provide guidance. Finally, the joint anti-retaliation initiative among the EEOC, the U.S. Department of Labor, and the National Labor Relations Board will continue to address retaliation in American workplaces.

Key Employer Takeaways

In sum, FY 2023 was a year of new leadership and structural changes at the EEOC. With a significantly increased proposed budget, it is more crucial than ever for employers pay close attentions in regards to the EEOC’s strategic priorities and enforcement agendas. We anticipate these figures will grow by next year’s report, so it is more crucial than ever for employers to comply with discrimination laws.

September 11, 2023 by Gerald L. Maatman, Jr.

Ohio Federal District Court Authorizes Notice Of FLSA Claims In Step One Of The Two-Step “Strong Likelihood” Test And Certifies Rule 23 Class

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

Duane Morris Takeaways: In Hogan v. Cleveland Ave Restaurant, Inc. d/b/a Sirens, et al., 15-CV-2883 (S.D. Ohio Sept. 6, 2023), Chief Judge Algenon L. Marbley of the U.S. District Court for the Southern District of Ohio authorized notice to potential opt-in plaintiffs and conditionally certified a collective action of thousands of adult club dancers in a case asserting violations of the Fair Labor Standards Act (“FLSA”) and Ohio law, including claims of unpaid minimum wages, unlawfully withheld tips, and unlawful deductions and/or kickbacks. For good measure, the Court also granted class certification on the plaintiffs’ state law claims. The opinion is a must-read for employers in the Sixth Circuit facing — or hoping to avoid facing — class and collective wage & hour claims.

Case Background

On October 6, 2015, the named plaintiff Hogan filed the lawsuit as a class and collective action asserting violations of the FLSA and Ohio law. After amending the complaint in May 2017 to add additional defendants, on May 14, 2020, Hogan filed a Second Amended Class and Collective Action Complaint, the operative complaint, with a second named plaintiff, Valentine.

In the operative complaint, the named plaintiffs asserted claims against seven adult entertainment clubs and their owners and managers as well as two club associations and an individual defendant with which the clubs were associated. The plaintiffs later settled their claims against one of the seven clubs.

The allegations in the operative complaint center on the clubs’ use of a landlord-tenant system by which the defendant clubs charged dancers “rent” to perform at the clubs for tips from customers in lieu of paying them wages for hours worked.

On September 26, 2022, the plaintiffs moved for certification of their claims as a class and collective action. The parties concluded briefing on the motion five months before May 2023, when the Sixth Circuit issued its pivotal decision in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023). In Clark, the Sixth Circuit ushered in a new, more employer-favorable standard for deciding motions for conditional certification pursuant to 29 U.S.C. § 216(b) of the FLSA.

The District Court’s Decision

First, the court articulated the standard by which it would decide the plaintiffs’ motion for court-supervised notice of their FLSA claims. The court described the Sixth Circuit’s opinion in Clark as “maintain[ing] the two-step process for FLSA collective actions but alter[ing] the calculus.” Slip Op. at 7. Whereas pre-Clark case law authorized notice at step one of the two-step process after only a modest showing of similarly-situated status, the standard post-Clark demands that plaintiffs show a “strong likelihood” exists that there are others similarly situated to the named plaintiffs with respect to the defendants’ alleged violations of the FLSA prior to authorizing notice. Defendants after Clark retain the ability, after fact discovery concludes, to demonstrate that the named plaintiffs in fact are not similarly- situated to any individual who files a consent to join the lawsuit as a so-called opt-in plaintiff. Also unchanged by Clark is the standard for determining similarly-situated status for FLSA purposes.

The court in Hogan concluded that the plaintiffs adequately demonstrated a “strong likelihood” that they are in fact similar to the proposed group of dancers who too were classified as “tenants” of the six defendant clubs who paid rent to lease space at the clubs to earn tips from customers without receiving any wages from the defendant clubs.

In support of their motion, the plaintiffs submitted sworn declarations, deposition testimony, and documentary evidence of the defendants’ policies and practices with respect to dancers. The court found that the plaintiffs showed that the clubs maintained a system in which the defendants acted together to require dancers to pay rent for leasing space, often documented in lease agreements, instead of being paid as employees for performing work.

Among the defendants’ arguments opposing the plaintiff’s motion, the court considered, but ultimately rejected, the defendants’ argument that arbitration provisions in the lease agreements should preclude court-authorized notice of the FLSA claims. The court cited Clark for the proposition that it may consider as a relevant factor the defense of mandatory arbitration agreements in deciding whether to authorize notice of FLSA claims. Homing in on the facts, the court reasoned that members of the potential collective action did not all sign the lease agreements and that those who signed the lease agreements had the option to agree to forgo arbitration of their claims. According to the court, the defendants would have a stronger basis to defeat court-authorized notice if they could show that all dancers had to sign the lease agreement and the lease agreement made arbitration mandatory.

In addition, the court evaluated whether the plaintiffs satisfied the Rule 23 standards for seeking to certify a class of dancers on their state law claims. The court concluded that the plaintiffs met the requirements for class certification under Rule 23(b)(3), because questions of law or fact common to class members predominated over any questions affecting only individual members (the predominance inquiry), and that a class action was superior to other available methods for fairly and efficiently adjudicating the case (the superiority inquiry).

As to predominance, the court reasoned that the issue of the defendants’ alleged unlawful system of treating dancers as tenants rather than paying them wages predominated over individualized issues such as whether a particular dancer signed a lease agreement. As to superiority, the court concluded that the relatively small size of each dancer’s wage claim demonstrated that individuals would have little incentive to pursue their claims alone. Finding no factors pointing against class treatment of the claims, the court concluded that treating the claims as a class action was the superior method for adjudicating liability efficiently.

Implications For Employers

Hogan is the latest in a series of opinions applying the Sixth Circuit’s novel “strong likelihood” standard to plaintiffs’ efforts to expand the scope of their FLSA claims to potential opt-in plaintiffs. The developing case law in this area reflects a highly fact-specific approach to deciding whether plaintiffs have made the necessary showing to unlock court-authorized notice of their claims to potential opt-in plaintiffs. The opinion in Hogan is significant in that it grapples with the “strong likelihood” standard alongside the well-established test for certifying a class pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure.

September 6, 2023September 6, 2023 by Gerald L. Maatman, Jr.

Maryland Federal District Court Dismisses Class Action Alleging Website Privacy Violations For Lack Of Article III Standing

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

Duane Morris Takeaways: On September 1, 2023, Judge Deborah Chasanow of the U.S. District Court for the District of Maryland granted a motion to dismiss a class action alleging that the website of defendant Jetblue Airways violated users’ privacy rights under the Maryland Website and Electronic Surveillance Act (“MWES”A). Finding that the named Plaintiff lacked Article III standing to bring the lawsuit, the Court relied upon the lack of any allegations in the Complaint that any of Plaintiff’s personal information was captured by the alleged use of a session replay code. As a result, his Complaint lacked any allegation of a concrete harm that is necessary to bestow standing by virtue of suffering an injury-in-fact. Employers are well-served to examine their websites for the level of risk they might pose of exposure to litigation of this kind, which is currently being filed in more and more courts around the country.

Case Background

Jetblue Airways Corp. (“Jetblue”) was sued by Matthew Straubmuller in the U.S. District Court for the District of Maryland, alleging that he and a putative class of website users who had visited Jetblue’s website were entitled to damages from Jetblue for violation of the MWESA. Slip Op. at 2. The purpose of that statute is two-fold: both to be a useful tool in crime prevention; and to ensure that “interception of private communications is limited.” Id. at 8.

Plaintiff alleged Jetblue’s website uses a “session replay code” and that this allows for Jetblue to track users electronic communications with the website in real time, and also can enable reenactments of a user’s visit to the website, and that these constitute actionable privacy violations under the provisions of the MWESA.

JetBlue filed a motion to dismiss. It asserted that that Plaintiff lacked Article III standing to bring his claims. It contended that Plaintiff alleged a mere procedural violation of the MWESA and did not allege a concrete harm necessary to establish an injury-in-fact to confer standing.

The District Court’s Decision

Judge Chasnow granted Jetblue’s motion to dismiss. Relying on the Supreme Court’s decision in TransUnion v. Ramirez, 141 S. Ct. 2190 (2021), she rejected Plaintiff’s argument that a statutory violation alone is a concrete injury. The Judge opined that “Courts must independently decide whether a plaintiff has suffered a concrete harm because a plaintiff cannot automatically satisfy the injury-in-fact requirement whenever there is a statutory violation.” Slip Op. at 5-6 (quoting TransUnion (“under Article III, an injury in law is not an injury in fact.”). And more to the point, she cited case law interpreting the MWESA itself to this effect, which Plaintiff had not cited. Id.

As a way of underlining its ruling, the Court noted that Jetblue had submitted a June 12, 2023 decision coming to the exact same conclusion involving a nearly identical complaint filed against Jetblue in the Southern District of California in Lightoller v. Jetblue Airways Corp. Id. at 4.n.1. Other cases involving similar rulings are presently percolating throughout the federal district courts. Id. at 7 (collecting cases).

Implications For Employers

Judge Chasnow’s decision in Straubmuller v. Jetblue Airways Corp. provides corporate counsel with a good opportunity to set up a time to talk with their company’s information technology officers to discuss litigation risks related to websites and how they interact with employees, prospective employees and customers. As more plaintiffs-side attorneys file lawsuits alleging privacy violations like the ones alleged against Jetblue in both state and federal courts around the country, many have a good chance of surviving motions to dismiss. Preventing class action lawsuits are far superior to defending them.