Jennifer A. Riley – Page 6 – Class Action Defense

July 20, 2023July 21, 2023 by Brandon Spurlock

Tennessee Federal Court Dismisses Class Action Under the Video Privacy Protection Act Because Plaintiff Failed to Allege He Accessed Video Content

By Brandon Spurlock and Jennifer A. Riley

Duane Morris Takeaways: On July 18, 2023, in Salazar v. Paramount Global d/b/a 247Sports, No. 3:22-CV-00756 (M.D. Tenn. July 18, 2023), Judge Eli Richardson of the U.S. District Court for the Middle District of Tennessee dismissed a class action lawsuit against Paramount Global because the Plaintiff failed to state a claim under the Video Privacy Protection Act (“VPPA”) where Plaintiff’s allegation that his subscription to an online newsletter made him a “subscriber” under the statute was insufficient because he did not allege that he accessed audio visual content through the newsletter. The VPPA is a law from 1980’s stemming from the failed Supreme Court nomination of Robert Bork, which involved his video rental history being published during the nomination process. In the ensuing decades, companies are seeing an increase in class action lawsuits under the VPPA and other consumer privacy statutes where plaintiffs seek to levy heavy penalties against businesses with an online presence. This ruling illustrates that some federal courts will closely examine such statutes to ensure that a plaintiff adequately states a claim based on the underlying statutory definitions before allowing a class action to proceed.

Case Background

Plaintiff filed a putative class action against Defendant Paramount Global d/b/a 247Sports alleging a violation of the VPPA. Id. at 1. According to Defendant, 247Sports.com is an industry leader in content for college sports, delivering team-specific news through online news feeds, social platforms, daily newsletters, podcasts, text alerts and mobile apps. Id. at 2. Plaintiff alleged that Paramount installed a Facebook tracking pixel, which allows Facebook to collect the data on digital subscribers to 247Sports.com who also have a Facebook account. Id. at 3-4. So if a digital subscriber of 247Sports.com is logged-in to his or her Facebook account while watching video content on 247Sports.com, then 247Sports.com sends to Facebook (via the Facebook pixel) the video content name, its URL, and, most notably, the digital subscriber’s Facebook ID. Id. at 4. Plaintiff claimed that Paramount violated the VPPA when it installed the Facebook pixel, which caused the disclosure to Facebook of Plaintiff’s personally identifying information. Id. at 5. Paramount moved to dismiss for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), and for failure to state a claims for relief under Rule 12(b)(6).

The Court’s Decision That Plaintiff Had Standing Under The VPPA

First, Paramount argued that Plaintiff did not have standing because Plaintiff failed to adequately allege either a concrete injury in fact or the traceability of the injury to Paramount’s conduct, because the alleged disclosure of Plaintiff’s information to Facebook did not constitute a concrete injury. Id. at 9. Rejecting Paramount’s standing argument, the Court noted that the VPPA created a “right to privacy of one’s video-watching history, the deprivation of which – through wrongful disclosure, or statutory violation alone – constitutes an injury sufficient to confer Article III standing.” Id. at 11-12. In other words, the VPPA created a statutory right to have personally identifiable information remain private by prohibiting disclosure to third parties. Id. at 12. Thus, the Court ruled that Plaintiff’s allegation that his personally identifiable information was transmitted to Facebook in violation of the VPPA identified a concrete harm for standing purposes. Id. at 14.

Plaintiff Failed To State A Claim Under The VPPA

Paramount also asserted that Plaintiff had no claim under the VPPA because he was not a “consumer,” meaning “any renter, purchaser, or subscriber of goods or services from a video tape service provider.” Id. at 17. Because Plaintiff was not a “consumer” within the meaning of the VPPA, Paramount argued he was not a “subscriber of goods or services from a video tape service provider,” and Plaintiff did not state a claim under the VPPA because the statute only protects individuals who are “consumers” under the statute. Id. at 18.

The Court noted that although the VPPA does not define “subscriber,” the dictionary definition indicates that “subscriber” is a person who “imparts money and/or personal information in order to receive a future and recurrent benefit.” Id. at 19. Further interpreting the statute, the Court reasoned that a consumer is only a “subscriber” under the statute when he or she subscribes to audio visual materials. Id. at 21. Completing the analysis, the Court reasoned that under the VPPA, because Plaintiff’s subscription to the newsletter was not sufficient to establish that the he had subscribed to audio visual materials, Plaintiff’s position was unavailing in claiming that his subscription to the newsletter renders him a “subscriber.” Id. at 22.

The Court, therefore, dismissed Plaintiff’s VPPA class action lawsuit because Plaintiff failed to allege that he actually accessed audio visual content, which necessarily meant that Plaintiff was not a subscriber under the VPPA. Id. at 22.

Implications For Businesses

This past year has seen an uptick in VPPA class action filings against businesses that operate websites offering online videos and using third-party tracking tools. These lawsuits represent an ongoing pattern of increased consumer privacy class litigation throughout the country exposing companies to significant risk across a wide array of industries. Corporate counsel should note this ruling is a positive indication that some courts will closely examine the plain language and legislative intent of a privacy statute to ensure that a plaintiff actually states a viable claim before allowing class litigation to proceed.

July 10, 2023July 20, 2023 by Gerald L. Maatman, Jr.

Ninth Circuit Finds Article III Standing Under The TCPA For Owner Of Registered Phone With Third-Party User

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

Duane Morris Takeaways: On June 30, 2023, in Kristen Hall v. Smosh Dot Com, Inc., DBA Smosh, et al., No. 22-16216 (9th Cir. June 30, 2023), the Ninth Circuit reversed the district court’s dismissal for lack of Article III standing of a class action under the Telephone Consumer Protection Act (the “TCPA”) and remanded the claim for further proceedings. In doing so, the Ninth Circuit held that the owner and subscriber of a phone with a number listed on the Do-Not-Call Registry suffers an injury in fact when unsolicited telemarking calls or texts are sent to the number even if the communications are intended for or solicited by another individual or someone else is using the phone at the time the messages are transmitted. In so holding, the Ninth Circuit established that the receipt of unsolicited phone calls or text messages in violation of the TCPA is a “concrete injury in fact sufficient to confer Article III standing” even if the individual bringing the claim was not the phone’s primary user. As a result, the ruling is required reading for any corporate counsel dealing with TCPA class action litigation.

Case Background

Plaintiff Kristen Hall, a resident of Willis, Texas, was in possession of a cellular phone that was used primarily for residential purposes and, at times, provided to her 13-year old son to use in his free time. Hall, No. 22-16216, at 5-6. Plaintiff placed this number on the National Do-Not-Call Registry in order to avoid invasive and irritating solicitation calls and to protect her son from any potential threats. Id. Plaintiff alleged that she was the owner and subscriber of the cell phone at issue and that she listed its number on the Do-Not-Call Registry. Id. at 9.

On or around November 3, 2019, Defendants – who are digital content creators producing “sketch comedy” for an adolescent audience and selling merchandise that relates to their digital content – obtained the personal information for Plaintiff’s son and sent him at least five text messages between December 25, 2019, and June 29, 2020. Id. These texts specifically solicited business and offered discounts on products offered by Defendant Smosh Dot Com, Inc., which Plaintiff alleged was “irritating, exploitative, and invasive” and “precisely the type of communications she sought to avoid when she registered her number on the Do Not Call [R]egistry.” Id. Plaintiff’s First Amended Complaint alleged that Defendants violated § 227(c) of the Telephone Consumer Protection Act (“TCPA”) by sending text messages to numbers listed on the National Do-Not-Call Registry. Id.

Defendants moved to dismiss the First Amended Complaint for failure to state a claim and for lack of standing. They argued that Plaintiff lacked Article III standing because she failed to plead that she was the user of the phone or actually received any of the soliciting text messages from Defendants. Id. at 6-7. Specifically, Defendants argued that because she provided the phone to her son, Plaintiff was not the actual user of the phone or the actual recipient of the messages and, therefore, did not suffer an injury and was instead attempting to assert the legal right of a third party. Id. at 9-10. The district court granted the motion to dismiss on the basis that Plaintiff did not have Article III standing merely because she was the subscriber/owner of the phone while not addressing any of the merits issues. Id. at 7. Plaintiff appealed this ruling. Id.

The Ninth Circuit’s Ruling

The Ninth Circuit reversed the district court’s ruling.

It held that Plaintiff had Article III standing to bring the claims under the TCPA. The Ninth Circuit noted that it was well established that unsolicited telemarketing phone calls or text messages in violation of the TCPA is a concrete injury in fact that, itself, is enough to confer Article III standing. It cited to Van Patten v. Vertical Fitness Grp., LLC, 847 F.3d 1037, 1043 (holding that “[u]nsolicited telemarketing phone calls or text messages, by their nature, invade the privacy and disturb the solitude of their recipients). Id. at 8. Importantly, the Ninth Circuit made clear that the relevant question for Article III standing is whether Plaintiff suffered a cognizable injury. Id. at 12. The Ninth Circuit reasoned that because a violation of the TCPA is a “concrete injury,” and the Do-Not-Call provisions of the TCPA proscribe unsolicited calls and text messages to phone numbers on the Do-Not-Call Registry, Plaintiff’s allegations that she received unsolicited text messages on a number on the registry were sufficient to confer standing. Id.

To reach this holding, the Ninth Circuit found no precedent that the owner of a cell phone also must be the primary or customary user to be injured by unsolicited phone calls or text messages. Id. at 13. The Ninth Circuit reasoned that requiring a certain level of phone usage to be a prerequisite for standing would go against Congress’ intention of preventing individuals on the Do-Not-Call Registry from receiving unsolicited text messages. Id. The Ninth Circuit also opined that this holding would not prevent other users of the phone from bringing claims, as they may also suffer a concrete injury from an unwanted call or text message. Id.

Importantly, the Ninth Circuit did not address the merits of Plaintiff’s claim, and refused to discuss Defendants’ contention that Plaintiff’s son solicited the text messages by signing up for telecommunications through an online form. Id. Instead, the Ninth Circuit held that, even if Plaintiff’s son solicited the messages, therefore affecting the merits of her claim, Plaintiff still had standing to bring her own claim by the virtue of her status as the subscriber and owner of the phone. Id. at 14. The Ninth Circuit additionally did not address the question of whether a subscriber would have Article III standing to litigate a TCPA claim if he or she authorized a third-party user to provide consent to a telemarketer, leaving that question open for the district court to discuss on remand. Id. at 9.

Key Takeaways

The Ninth Circuit has now established that all that is required for Article III standing under the TCPA is the receipt of unsolicited text messages or phone calls to a number owned or subscribed to by an individual and found on the Do-Not-Call Registry, even if that individual is not the primary user of the phone.

This ruling curtails attacks on the pleadings by TCPA defendants, especially with the language included by the Ninth Circuit that standing is “not exclusive” and numerous subscribers/users can bring TCPA claims. However, with the Ninth Circuit leaving open the question of whether a subscriber would have standing if he or she authorized a third-party user to provide consent to receive telemarketing, companies defending TCPA claims still may have a path forward to attacking standing for subscribers of phones on the Do-Not-Call Registry with third-party users. Until then, companies should be cognizant that even if a phone user solicited communications by signing up for those communications, the phone subscriber will still have standing to bring a claim under the TCPA.

July 7, 2023December 1, 2023 by Gerald L. Maatman, Jr.

Texas Federal Court Finds That The Final DOL 80/20 Rule Is Still In Play…At Least For Now

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

Duane Morris Takeaways: On July 6, 2023, in Restaurant Law Center, et al. v. U.S. Department of Labor, No. 1:21-CV-1106 (W.D. Tex. July 5, 2023) (ECF No. 67), federal district judge Robert Pitman of the U.S. District Court for the Western District of Texas denied the Restaurant Groups’ motion for preliminary injunction as to the new “80/20 Rule” – after being reversed by the Fifth Circuit several months prior – and denied the Restaurant Groups’ motion for summary judgment and granted the Department of Labor’s (“DOL”) motion for summary judgment. Judge Pitman determined that the DOL’s decision to construct and enforce the Final Rule was a permissible construction of the Fair Labor Standards Act (“FLSA”) and is not arbitrary and capricious. ECF 67 at 28. The ruling is nowhere close to the end of this litigation and the service and hospitality industry should pay close attention to what comes next as the Restaurant Law Center will inevitably appeal the district court’s decisions to the Fifth Circuit and as the U.S. Supreme Court has decided to reconsider the authority of agencies during the next term. The next set of decisions will be part of a broader analysis of the rules regarding tip credit, and more generally, the DOL’s authority.

The Final Rule

In late 2021, the DOL revived and revised the 80/20 Rule by providing that employers can utilize the tip credit only so long as 80 percent or more of the work is tip-producing, and not more than 20 percent is “directly supporting work.” See 29 C.F.R. § 531.56. Under the Final Rule, no tip credit can be taken for any non-tipped work. “Tip-producing work” is defined as work the employee performs directly providing services to customers for which the employee receives tips (i.e., taking orders and serving food). “Directly supporting work” is defined as work that is performed by a tipped employee in preparation of or to otherwise assist tip-producing customer service work (i.e., rolling silverware and setting tables). Non-tipped work includes preparing food or cleaning the kitchen, dining room, or bathrooms.

The Final Rule also includes a new requirement that an employer cannot utilize the tip credit when an employee performs more than 30 consecutive minutes of “directly supporting work.” Directly supporting work done in intervals of less than 30 minutes scattered throughout the workday would not invalidate the tip credit, subject to the 80/20 Rule. However, employers must pay minimum wages for “directly supporting work” performed after the lapse of the first 30 continuous minutes.

Procedural Background

In December 2021, the Restaurant Law Center challenged the Final Rule in the U.S. District Court in the Western District of Texas, on the grounds that, among other things, it violated the Fair Labor Standards Act. Restaurant Law Center, No. 1:21-CV-1106 at 4. The Texas federal district court denied the preliminary injunction after finding that the Plaintiffs failed to show that they would suffer irreparable harm absent the preliminary injunction. Id.

On April 28, 2023, the Fifth Circuit reversed the Texas federal district court, finding that the Restaurant Groups “sufficiently showed irreparable harm in unrecoverable compliance costs . . . .” Rest. L. Ctr. v. U.S. DOL, 66 F.4th 593, 595 (5th Cir. 2023). Significantly, the Fifth Circuit noted that that compliance costs would likely be necessary to track the number of minutes worked on nontipped labor and that the new 30-minute rule would impose additional monitoring costs. Id. The Fifth Circuit remanded the case for further proceedings. Id. [Our previous blog post on that ruling is here.]

The Texas Federal District Court’s Decision on Summary Judgment

At the second go-around, the district court had two fully-briefed motions, including: (1) the Restaurant Groups’ motion for preliminary injunction; and (2) the parties’ cross-motions for summary judgment. The district court denied the Restaurant Groups’ motion for summary judgment and granted the DOL’s cross-motion for summary judgment after finding that, contrary to the Restaurant Groups’ assertions, the DOL’s decision to construct and implement the Final Rule was a permissible construction of the FLSA and is not arbitrary and capricious. Id. at 28. In addition, the Texas federal district court denied the Restaurant Groups’ motion for preliminary injunction after finding that the Restaurant Groups did not succeed, and were likely not to succeed, on the merits of the case, that the balance of equities did not tip in the Restaurant Groups’ favor, and that an injunction was not in the public interest. Id.

In determining the Final Rule’s validity, the district court used a two-step framework articulated in Chevron, USA, Inc. v. Natural Resources Def. Council, Inc., 467 U.S. 837 (1984). Id. at 8. Under Chevron, if a statute has a gap that needs to be filled, Congress gave the agency administering the rule, rather than courts, authority to resolve it. Id. The district court found that Chevron deference applied to the case because Congress “delegated authority to the agency generally to make rules carrying the force of law,” and that the Final Rule “was promulgated in the exercise of that authority.” Id. at 10.

The federal district court also analyzed the FLSA’s text, structure and purpose, and legislative history, and found that, contrary to the Restaurant Group’s assertions, the statute was ambiguous. Id. at 17. The district court explained that “Congress has crafted an ambiguous statute and tasked DOL with implementing the ambiguous provisions,” and the Court “must defer to the agency’s regulation so long as it is not arbitrary, capricious, or manifestly contrary to the statute.” Id. at 17. The district judge further found that the Final Rule “accomplishes” the purposes of the FLSA “by adopting a ‘functional test’ to determine when an employee may be considered engaged in a tipped occupation.” Id. at 19.

Significantly, the district court also considered whether the Major Questions Doctrine was triggered, as discussed in West Virginia v. EPA, 142 S. Ct. 2587 (2022). Id. at 24. The district court found that the Major Questions Doctrine was not triggered because an agency action was only considered to be of “vast economic significance” if it requires “billions of dollars in spending.’” Id. at 25. The district court found that the DOL “pointed out that the average annual cost of the Rule in this case is $183.6 million” and explained that this amount was “far less than the billions considered in the cited cases. Id. The district court further opined that the “DOL has been interpreting the tip credit provision of the FLSA, as well as its other provisions, for decades.” Id.

The Texas Federal District Court’s Decision on the Preliminary Injunction

In addition, as instructed by the Fifth Circuit, the district court reconsidered the Restaurant Groups’ Motion for Preliminary Injunction. At the outset, the district court noted that “[a]lthough a failure to show likelihood of success on the merits is grounds alone for denial of a preliminary injunction, the Court will address the two remaining Rule 65 factors pursuant to the Fifth Circuit’s mandate to ‘proceed expeditiously to consider the remaining prongs of the preliminary injunction analysis.’” Id. at 26 (citing Rest. L. Ctr., 66 F.4th at 600). Despite the Fifth Circuit’s finding that Restaurant Groups will suffer irreparable harm because their compliance costs are non-recoverable, Rest. L. Ctr, 66 F.4th at 595, in balancing the equities, the district court essentially found the opposite – – that the Restaurant Groups, again, failed to show irreparable harm from complying with the Final Rule. See id. at 26-27.

Significantly, the Fifth Circuit previously disagreed with the DOL’s assertion that “employers need not engage in ‘minute to minute’ tracking of an employee’s time in order to ensure that they qualify for the tip credit.” Rest. Law Ctr., 66 F.4th at 599 (“No explanation is given (nor can we imagine one) why an employer would not have to track employee minutes to comply with a rule premised on the exact number of consecutive minutes an employee works.”). Contrary to the Fifth Circuit, the district court agreed with the DOL and found that “restaurants must already monitor the amount of time employees spend on non-tipped labor under the 80/20 rule, and the new 30-minute rule does not impose a new form of monitoring.” ECF 67 at 26. In addition, the district court noted that it is not clear that the Rule imposes significantly greater costs than restaurants incurred under the preexisting guidance because the Restaurant Groups failed to “provide an estimate of this additional monitoring.” Id. In essence, contrary to the Fifth Circuit’s Order, the district court, again, “emphasized the weakness of [the Restaurant Groups’] evidence.” Rest. Law Ctr., 66 F.4th at 598 (“For instance, the court found [the Restaurant Groups] claimed ongoing costs “to be overstate[d]” because the rule does not require “the level of detailed monitoring of which [the Restaurant Groups] warn. . . [this point is] meritless”).

Further, the district court explained that eighteen months had passed since the parties filed their briefs on the preliminary injunction, and that the Rule took effect on December 28, 2021 and has remained in place. Id. Without citing to any evidentiary support, the district court noted that “[r]estaurants and DOL have complied with the Rule since that time.” Id. at 27.

Moreover, similar to the district’s court’s first order, which was reversed by the Fifth Circuit, the district court explained “that even if there are ongoing management costs, the most significant compliance costs associated with the Rule were familiarization and adjustment costs, which have now already been incurred, and that granting an emergency motion to rescind the Rule now cannot undo these costs, and may very well force restaurants to incur additional costs adjusting to the policy that takes its place.” Id. Ultimately, the district court found that the Restaurant Groups’ “compliance costs do not outweigh the substantial harm that DOL may endure from essentially starting from scratch on a rule that serves to codify long-standing guidance.” Id.

Thus, the district court found that even if Restaurant Groups showed a likelihood of success on the merits, “neither the balance of equities nor the public interest would support a nationwide preliminary injunction.” Id. at 28.

Implications For The Service & Hospitality Industry

The fight to end and/or limit the Department of Labor’s authority and promulgation of the tip credit rule is far from over. Although the Texas federal district court sent a clear indication that it did not agree with the Fifth Circuit’s decision, and that it would not disturb the Department of Labor’s authority, the service and hospitality industry should be watchful for what has yet to come. The Restaurant Law Center will undoubtedly appeal both of the Texas federal district court’s rulings, and the Fifth Circuit has already indicated that preventing enforcement of the Final Rule may be on the horizon. Moreover, the Supreme Court’s decision to reconsider the Chevron doctrine in Loper Bright Enterprises v. Gina Raimondo, Case No. 22-451 – which will be heard in the next term – to the extent that it narrows or eliminates federal courts’ deference to agencies’ decisions, could substantially impact the agenda the Department of Labor can pursue. The service and hospitality industry should stay tuned for the Fifth Circuit’s rulings in Restaurant Law Center and Supreme Court’s forthcoming ruling Loper Bright Enterprises.

June 8, 2023 by Gerald L. Maatman, Jr.

Illinois Federal Court Denies Class Certification In Chicago Water Department Race Discrimination Lawsuit

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

Duane Morris Takeaways: In Edmond, et al. v. City of Chicago, No. 17-CV-4858 (N.D. Ill. June 6, 2023), Judge Matthew F. Kennelly of the U.S. District Court for the Northern District of Illinois denied a motion for class certification filed by a group of current and former employees alleging workplace race discrimination in violation of state and federal law. The ruling highlights the viability of defense positions relative to Plaintiffs’ failure to meet the Rule 23 commonality requirement, which was instrumental to defeating their bid for class certification.

Case Background

Nine African-American workers currently or previously employed by the Chicago Department of Water brought a putative class action against the City of Chicago and several individuals employed by it in 2017, alleging race discrimination and a hostile work environment on behalf of a group of employees. Plaintiffs alleged the existence of an ongoing and pervasive “culture of racism” fostered by organizational leadership across five bureaus and various sub-bureaus, treatment plants, and construction sites. Id. at 4. The lawsuit was brought after the City’s Inspector General uncovered emails containing racist exchanges between Department commissioners and deputies, which resulted in resignations of two executives. Id.

Plaintiffs alleged that the hostile work environment included racially offensive language, threatening gestures, and disparate treatment of Black employees in violation of 42 U.S.C. §§ 1981 and 1983 and Illinois law, and filed a motion to certify a class that included all Black workers employed by the Water Department since 2011 and three sub-classes for individuals who had been eligible for overtime, those with disciplinary infractions, and those who had been denied promotions.

In 2018, the Court granted Defendants’ partial motion to dismiss. Plaintiffs then brought a motion to amend the complaint in order to drop the individuals from the suit, which was granted without prejudice. Subsequently, Plaintiffs filed a motion to certify the classes pursuant to Rule 23 of the Federal Rules of Civil Procedure.

The Court’s Decision

The City argued that because Plaintiffs were unable to establish a shared work environment in their hostile work environment claim due to the Department’s dispersed workforce, Plaintiffs failed to identify a common contention whose resolution would resolve class claims, as required under Rule 23(a)(2)’s commonality element. The Court agreed with this position. It opined that there was no “evidence of common areas shared by all Department employees or instances of harassment broadcast across the entire Department.” Id. at 10. The Court found that the experience of putative class members varied across the Department, with individual claims of discrimination ranging from verbal to visual conduct, while others alleged bias in duty assignments or disciplinary actions.

Plaintiffs additionally contended that a pervasive culture of discrimination permeated the Water Department. They cited statements made by members of the city administration and the Inspector General’s investigation, and posited that this was proof of a “de facto policy of racism” across the workplaces. Id. at 11. The Court was not convinced that this had a uniform impact on all the named Plaintiffs and putative class members to satisfy the commonality question, and it denied the motion for class certification based on Plaintiffs’ failure to meet this threshold under Rule 23(a).

Likewise, Judge Kennelly rejected Plaintiffs’ arguments for certification of each sub-class based on a pervasively racist culture. The Court concluded that disciplinary, overtime, and promotion decisions were made by individual supervisors based on their personal discretion and varied across the Department, and that Plaintiffs failed to show evidence that the same decision-makers were responsible for such actions. Id. at 23. The Court was not convinced by Plaintiffs’ expert witness’ use of statistical data to show a disparate impact, noting that similar evidence had not been sufficient to demonstrate commonality for purposes of class certification in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).

Implications For Employers

The Edmond ruling underscores the importance of maintaining and utilizing a well-organized workplace reporting structure and managerial discretion in employment matters in anticipating arguing the absence of Rule 23’s commonality requirement, as seen in the Wal-Mart decision. In dismissing all of Plaintiffs’ arguments after finding an absence of a work environment common to all putative class members and no top-down decision-making policy regarding wages and promotions, the Court signals its steady reliance on the well-established standards for these types of claims, providing a valuable reaffirmation to employers’ reliable defense strategies.

May 24, 2023 by Gerald L. Maatman, Jr.

A Stellar Review For The Duane Morris Class Action Review – 2023

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

Duane Morris Takeaway: In its review of the Duane Morris Class Action Review – 2023, EPLiC Magazine called it the “the Bible” on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.

We are humbled and honored by the recent review of the first edition 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.”

So how was it done?

The answer is pretty simple – we live, eat, and breathe class action law 24/7/365.

Every day, morning and evening, we check the previous day’s filings of class action rulings relative to antitrust class actions, appeals in class actions, arbitration issues in class actions, Class Action Fairness Act issues in class actions, civil rights class actions, consumer fraud class actions, data breach class actions, EEOC-initiated litigation, employment discrimination class actions, Employee Retirement Income Security Act class actions, Fair Credit Reporting Act class actions, wage & hour class actions, labor class actions, privacy class actions, procedural issues in class actions, product liability & mass tort class actions, Racketeer Influenced and Corrupt Organization Act class actions, securities fraud class actions, settlement issues in class actions, state court class actions, Telephone Consumer Protection Act class actions, and Worker Adjustment and Retraining Act class actions. We conduct searches on a national basis, in federal courts and all 50 states. Then we read and analyze every ruling on Rule 23 certification motions and subsidiary issues throughout federal and state trial and appellate courts. The information is organized in our customized database, which is used to provide the Review’s one-of-a-kind analysis and commentary.

The result is a compendium of class action law unlike any other. Thanks for the kudos EPLiC – we sincerely appreciate it!

We look forward to providing the 2024 Review to all of our loyal readers in early January. In the meantime, look for our first-ever Mid-Year Update coming at the beginning of July!

May 15, 2023May 16, 2023 by Gerald L. Maatman, Jr.

Tennessee Becomes Eighth State To Enact Comprehensive Privacy Legislation

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

Duane Morris Takeaways: As efforts to enact comprehensive privacy protection continue to stall on the federal level, states have stepped up to create a patchwork quilt of protections for those doing business with consumers within their borders. Tennessee recently became the eighth state – following Indiana, California, Colorado, Connecticut, Iowa, Utah, and Virginia – to enact comprehensive privacy legislation. At least 15 other states have introduced similar bills during the current legislative session, and Montana’s comprehensive consumer privacy statute awaits the signature of its Governor. Companies doing business in Tennessee or with Tennessee consumers should take heed of the new law and review their policies and processes for compliance.

Tennessee Legislation

After receiving overwhelming support from both houses of the General Assembly, on May 11, 2023, Governor Bill Lee signed the Tennessee Information Protection Act into law. With this law, Tennessee became the eighth state to institute comprehensive consumer privacy legislation. The law is set to take effect on July 1, 2024.

The act applies to businesses that conduct business in Tennessee or produce products or services that are targeted to Tennessee residents and that: (1) control or possess the personal information of at least 175,000 consumers; or (2) control or process personal information of at least 25,000 consumers and derive more than 50% of their gross revenue from the sale of personal information. The law contains exemptions for certain types of entities, such as governmental entities, certain financial institutions, non-profit organizations, and higher education institutions. The law also exempts certain types of data, such as personal information regulated by the Family Educational Rights and Privacy Act, and protected health information under HIPAA.

Similar to other comprehensive state privacy laws, the Tennessee law grants Tennessee residents certain rights in their personal information. It allows for consumers to confirm whether a company is processing their personal information, to access their personal information, to correct inaccuracies in their personal information, to delete their personal information, to obtain copies of their personal information, and to opt out of future sales or targeted advertising.

The law allows a consumer to invoke his or her rights (and the rights of his or her children) at any time by submitting a request to a controller of the personal information specifying the rights that the consumer wishes to invoke, and it requires the respondent to comply with an authenticated request without undue delay but, in all cases, within 45 days.

The law imposes various requirements on persons and entities who “determine[] the purpose and means” of processing personal information. For example, it requires such persons and entities to limit the collection of personal information to what is adequate, relevant, and reasonably necessary in relation to the purposes for which the data is processed; to establish, implement, and maintain reasonable data security practices; and, if the controller processes or sells personal information for targeted advertising, to clearly and conspicuously disclose the processing, as well as the manner in which a consumer may exercise the right to opt out of the processing.

The Tennessee law does not provide for a private right of action and vests exclusive enforcement authority in the Tennessee attorney general. It allows a court to impose civil penalties of up to $7,500 per violation, and allows treble damages for willful or knowing violations. The law requires that, prior to initiating an action, the attorney general must provide a 60-day notice period during which the recipient may cure the noticed violation to avoid an enforcement action. The law also creates an affirmative defense under certain circumstances for a company that creates, maintains, and complies with a written privacy policy that reasonably conforms to documented policies, standards, and procedures designed to safeguard consumer privacy.

Implications for Businesses

Covered persons and entities who do business in Tennessee or who target Tennessee consumers should start reviewing their policies and developing processes to comply with the Tennessee law. Although the law is not set to take effect until July 1, 2024, the law adds another challenge to the already complex compliance landscape for companies seeking to operate on a nationwide basis.

May 10, 2023 by Gerald L. Maatman, Jr.

Introducing The Duane Morris Consumer Fraud Class Action Review – 2023

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

Duane Morris Takeaways: Class action litigation in the consumer fraud area has exponentially increased over the past several years, leaving corporations extremely vulnerable. Additionally, most consumer fraud class actions come with the possibility of excessive payouts for corporations. To that end, the class action team at Duane Morris is pleased to present the inaugural edition of the Consumer Fraud Class Action Review – 2023. We hope it will demystify some of the complexities of consumer fraud litigation and keep corporate counsel updated on the ever-evolving nuances in this area of law. We hope this book, which manifests the experience and expertise of the Duane Morris class action defense group, will assist clients by identifying trends in the case law and offering practical approaches in handing consumer fraud class action litigation.

Click here to download a copy of the Duane Morris Consumer Fraud Class Action Review – 2023 ebook.

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May 8, 2023 by Gerald L. Maatman, Jr.

Class Action Money & Ethics Conference – The State Of Class Action Litigation

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

Duane Morris Takeaways: We were honored to present the keynote address today to open the 7th Annual Class Action Money & Ethics Conference in New York City sponsored by Beard Group, Citi Financial, Simpluris, and Pacer Monitor. With over 100 attendees, the program focused on the current state of class action litigation and “white hot” litigation topics for 2023. The discussion points provide an excellent roadmap on what is likely coming down the road for Corporate America for the remainder of 2023.

Class Action Dynamics

The themes of our keystone address focused on the extraordinary developments in class action litigation over the past 12 months.

The plaintiffs’ bar certified class actions at unprecedented levels throughout the country and monetized their cases with the highest settlement values seen in over 25 years. Many of these settlements arose from opioid litigation against manufactures, distributors, and retailers in the pharmaceutical industry. On an aggregate basis, class actions and government enforcement lawsuits garnered more than $71 billion in settlements, with 15 class action cases settling for more than $1 billion. Suffice to say, 2022 was unlike any other year on the class action settlement front. As success often begets copy-cats, corporations can expect the plaintiffs’ class action bar will be equally if not more aggressive in their case filings and settlement positions in 2023.

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

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

Hot Class Action Topics

Among the topics addressed at the Conference were ESG class actions, PFAS “forever chemicals” litigation, Camp LeJeune mass tort litigation, Talc liability class actions, crypto class actions, and gender discrimination and pay equity class action litigation.

Litigating ESG Consumer Class Actions

Baldassare Vinti, Jeff Warshafsky, and Jennifer Yang of Proskauer Rose LLP led a discussion of class action litigation focusing on ESG environmental marketing claims, which they noted have been an increasing in number in the consumer class action space. These putative class actions challenge “green” claims that products or services are “carbon neutral,” “recyclable,” “non-toxic,” or otherwise beneficial for the environment.

PFAS “Forever Chemical” Class Actions

Michael J. Bisceglia, Brian M. Ledger, Paul T. Nyffeler, and Thomas R. Waskom of Hunton Andrews Kurth LLP presented on PFAS “forever chemical” litigation. Despite stringent regulation, PFAS has been linked to harmful health effects, including cancer. They predicted that after opioid litigation, many in the plaintiffs’ class action bar view this area as the next “big thing” for widespread mass tort and class actions.

Camp LeJeune Litigation & New Theories Of Liability

Mark A. DiCello of DiCello Levitt discussed the state of mass tort litigation with water contamination lawsuits filed against the U.S. Government alleging adverse health effects for affecting nearly 175,000 marines, sailors, their families and civilians at the camp between 1950 and 1985. Those cases were consolidated into MDL No. 2218 and the government successfully obtained dismissal of all of those cases in 2016. Plaintiffs’ lawyers have continued to litigate based on new theories of liability. The amount of advertising about the litigation is also continuing to mount (estimated at a cost of $500,000 to date), as more than 2,000 lawsuits are pending.

Talc Liability Class Actions

Gina Passarella, the editor in chief of American Lawyer, moderated a roundtable discussion with Melanie L. Cyganowski of Otterbourg P.C., Mohsin Meghji of M3 Partners, Robert J. Stark or Brown Rudnick, and Joshua A. Sussberg of Kirkland & Ellis regarding resolution of talc liability. The census of the roundtable was that this remains a hot topic in the class action and corporate restructuring communities, and that 2023 is expected to see various bankruptcy rulings in this sector.

After FTX, Crypto Lawyers And Class Actions

Michael P. Canty of Labaton Sucharow LLP and Graham Newman Chappell, Chappell & Newman provided their insights on crypto class action issues. They agreed that with the collapse of FTX, the crypto industry has endured more scrutiny. In this respect, decades-old laws are apt to provide fertile ground for assertion of class action theories.

Gender Based Discrimination & Pay Inequality

Matthew L. Berman of Valli Kane & Vagnini LLP and Rachel Geman of Lieff Cabraser Heimann & Bernstein LLP led a discussion on gender discrimination and pay equity class-based litigation.

With recent large equal pay cases, such as last year’s Google gender discrimination class action settlement of $118 million, and recent laws regarding pay equity and requiring pay transparency, a spotlight is shining on compensation in the workplace.

Mass Torts & Cases To Watch In 2023

Christopher Ege of Gordon Rees Scully Mansukhani, LLP, Mark Eveland of Verus LLC, Bridie Farrell of Milestone, Neil Kornswiet of Optium Captial LLC, and Edward E. Neiger of Ask LLP closed the Conference with a roundtable discussion of the state of mass tort litigation. They discussed several cases with some of the biggest brands making their way through court MDL proceedings, including Roundup, Tylenol Autism, and Elmiron. Based on key settlements from 2022, they predicted a robust litigation landscape for 2023.

Implications For Corporate America

If 2022 is any indication, 2023 is shaping up to be a signal year of developments in class action litigation.

May 4, 2023December 1, 2023 by Gerald L. Maatman, Jr.

Indiana Joins The Bandwagon In Passing A Comprehensive Privacy Law

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

Duane Morris Takeaways: The United States currently has no comprehensive data privacy law. Rather, a patchwork quilt of various privacy laws cover different types of data, such as information in credit reports (the Fair Credit Reporting Act), student records (Family Educational Rights and Privacy Act), and consumer financial products (Gramm-Leach-Bliley Act). In an attempt to fill the void of federal legislation, Indiana recently joined six other states – California, Colorado, Connecticut, Iowa, Utah, and Virginia – in enacting a comprehensive privacy statute, the Indiana Consumer Data Protection Act (“ICDPA”). At least nineteen states have introduced similar privacy bills this legislative session. Montana and Tennessee have comprehensive consumer privacy statutes pending signature by their governors. Businesses in Indiana should start immediately reviewing their policies and implementing processes for complying with ICDPA to avoid enforcement litigation by the Indiana Attorney General.

Indiana Legislation

On May 1, 2023, Indiana Governor Holcomb signed Senate Bill 5, known as the ICDPA. This new law will take effect on January 1, 2026.

The ICDPA applies to companies that conduct business in Indiana or produce products or services that are targeted to residents of Indiana and during a calendar year: (1) control or process the personal data of 100,000 consumers (who are Indiana residents) or (2) control or process personal data of at least 25,000 consumers (who are Indiana residents) and more than 50% of gross revenue from the sale of personal data. Significantly, the ICDPA does not apply to data processed or maintained in the course of applying to or being employed by a business. Moreover, the ICDPA does not apply to government entities, non-profit organizations or higher education institutions.

The ICDPA provides consumers with rights to their personal data, including:

– opt-out rights related to the sale of personal data, targeted marketing and profiling (automated decision making that could have significant legal effects, such as those related to employment and benefits);
– access rights, including a right to confirm whether a company is processing any data at all;
– deletion rights;
– correction rights, limited to data the consumer previously provided;
– appeal rights; and
– data portability rights (summary of the personal data sent to the consumer must be in a portable and readily usable format).

“Personal data” is broadly defined as information that is “linked or reasonably linkable to an identified or identifiable individual.” Personal data does not include de-identified data, publicly available information, or data related to a group or category of customers that is not linked or reasonably linked to an individual customer. The ICDPA also provides consumers the right to opt-out of the collection and processing of their sensitive personal data. “Sensitive personal data” includes: (1) personal data revealing racial or ethnic origin, religious beliefs, a mental or physical health diagnosis made by a healthcare provider, sexual orientation, or citizenship or immigration status; (2) genetic or biometric data that is processed for the purpose of uniquely identifying a specific individual; (3) personal data collected from a known child; and (4) precise geolocation data. Certain personal data that is covered by other statutes like the Fair Credit Reporting Act or Family Educational Rights and Privacy Act is exempt.

Once the ICDPA takes effect, companies must respond to a consumer personal data request within 45 days of receipt of the request. Companies may also seek a 45-day extension to respond. If a consumer appeals a company’s decision to deny the consumer’s request, the appeal response must be delivered within 60 days. If the appeal is denied, the company must provide the consumer with a method for contacting the state attorney general.

Importantly, the ICDPA does not provide individuals with a private right of action against businesses that violate the Indiana Law. Rather, the Indiana Attorney General will have exclusive enforcement authority. Prior to any enforcement action, the business will be allowed 30 days to cure the alleged violation. Only after the thirty days pass will the Indiana Attorney General be permitted to bring an enforcement action for the alleged violation. If the Indiana Attorney General decides to bring an enforcement action, the business may be fined up to $7,500 per violation.

Implications for Businesses

The ICDPA does not take effect until January 1, 2026. Covered businesses should start reviewing their policies and implementing processes for complying with the ICDPA to avoid enforcement by the Indiana Attorney General.

May 4, 2023 by Gerald L. Maatman, Jr.

Seventh Circuit Affirms Dismissal Of “Bare Bones” Lawsuit Brought Under Illinois Genetic Information Privacy Act

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Tyler Z. Zmick

Duane Morris Takeaways: On May 1, 2023, the U.S. Court of Appeals for the Seventh Circuit issued one of only a handful of decisions that have been released regarding the Illinois Genetic Information Privacy Act (“GIPA”). In Bridges v. Blackstone, Inc., No. 22-2486, 2023 WL 3165218 (7th Cir. May 1, 2023), the Seventh Circuit affirmed the District Court’s dismissal of Plaintiffs’ GIPA claims based on Plaintiffs’ failure to allege that Defendant “disclosed” or was “compelled to disclose” their statutorily-protected genetic information. Similar to its more well-known counterpart – the Illinois Biometric Information Privacy Act (“BIPA”) – liability under the GIPA could potentially result in “astronomical” damages awards and may represent an increasingly important Illinois law in the privacy space.

GIPA Background

Enacted in 1998, the GIPA was designed to prevent employers and insurers from using genetic testing data as a means to discriminate for employment or insurance underwriting purposes.

To further that goal, the statute places restrictions on the ability to release “genetic testing and information derived from genetic testing.” Specifically, the GIPA provides that “genetic testing and information derived from genetic testing is confidential and privileged and may be released only to the individual tested and to persons specifically authorized, in writing in accordance with Section 30, by that individual.” 410 ILCS 513/15(a). Section 30, in turn, states that subject to certain exceptions, “[n]o person may disclose or be compelled to disclose the identity of any person upon whom a genetic test is performed or the results of a genetic test in a manner that permits identification of the subject of the test, except to . . . the subject of the test.” 410 ILCS 513/30(a).

Like the BIPA, the more widely-known privacy statute, the GIPA allows “[a]ny person aggrieved by a violation” of the statute to collect liquidated damages “for each violation” in the following amounts: (1) for negligent violations, $2,500 or actual damages, whichever is greater; or (2) for intentional or reckless violations, $15,000 or actual damages, whichever is greater. 410 ILCS 513/40. Like the BIPA, prevailing GIPA plaintiffs can also recover reasonable attorneys’ fees and costs.

Case Background

In Bridges, the Plaintiffs sent their DNA samples (obtained through at-home test kits) to Ancestry.com, a genealogy company. Years later, Defendant Blackstone, Inc. purchased Ancestry.com for $4.7 billion in an all-stock acquisition. Plaintiffs subsequently filed a putative class action against Blackstone in July 2021, alleging that its acquisition of Ancestry.com resulted in a violation of the GIPA.

After removing the complaint to the U.S. District Court for the Southern District of Illinois, Blackstone moved to dismiss on the basis that Plaintiffs failed to sufficiently allege a claim for relief under the GIPA.

The District Court agreed, holding that Plaintiffs failed to state a GIPA claim because they did not adequately allege that Blackstone “compelled” Ancestry.com to disclose Plaintiffs’ genetic data under Section 30 of the GIPA. The District Court agreed with Blackstone that “compel[ing]” the disclosure of genetic information necessarily requires something more than receipt or obtainment, yet Plaintiffs alleged only that Blackstone “may have been entitled to request or receive information from Ancestry in connection with the[] acquisition.” Bridges v. Blackstone Grp., Inc., No. 21-CV-1091, 2022 WL 2643968, at *4 (S.D. Ill. July 8, 2022).

The Seventh Circuit’s Decision

The Seventh Circuit affirmed the District Court’s dismissal of Plaintiffs’ GIPA claim under Rule 12(b)(6).

Regarding the District Court’s reason for granting Blackstone’s motion to dismiss, the Seventh Circuit held that it need not answer the question “over whether GIPA liability can attach to a company like Blackstone that allegedly receives protected information, rather than discloses that information,” because Plaintiffs “have failed to state a claim regardless.” Id. at *2.

The Seventh Circuit agreed with the District Court that it is not plausible to infer that “a run-of-the-mill corporate acquisition, without more alleged about that transaction, results in a compulsory disclosure within the meaning of Section 30.” Bridges v. Blackstone Grp., Inc., No. 22-2486, Order at 4 (7th Cir. May 1, 2023) (“All we can say with certainty about Blackstone’s all-stock acquisition of Ancestry is that a change in ownership occurred – nothing more.”).

Implications for Employers

One of only a few cases to have interpreted the statute, the Bridges decision indicates that a company is not subject to liability under the GIPA based solely on its acquisition of another company that may be in possession of genetic data.

Nonetheless, Bridges serves as a reminder to Illinois employers that collect genetic information, medical histories, and/or conduct “health screenings” as part of their application processes about the importance of complying with the GIPA.

The GIPA’s statutory text mirrors the BIPA’s text in important (and potentially concerning) ways, including that (i) a plaintiff can likely sue under the GIPA regardless of whether an actual injury is alleged; and (ii) following the Illinois Supreme Court’s logic as applied to the BIPA in Cothron v. White Castle, 2023 IL 128004 (Ill. Feb. 17, 2023) (see here), statutory damages may accrue under the GIPA each separate time a company “disclose[s] or [is] compelled to disclose” genetic data protected by the GIPA. Thus, it is possible that plaintiffs will file increased numbers of GIPA class actions in Illinois courts in the coming months and years.