Clear Sailing To $3.2 Million:  Third Circuit Affirms Hefty Fee Award Despite Low Claim Rate In Data Breach Class Action Settlement

By Gerald L. Maatman, Jr., Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways:  On June 25, 2025, in In Re Wawa Data Security Litigation, No. 24-1874, 2025 WL 175035 (3d Cir. June 25, 2025), the Third Circuit approved a $3.2 million class fee award for class counsel contained in a settlement agreement finding that fees can be based on relief made available to the class and does not have to be capped by a percentage of the relief actually claimed in low-harm data breach security class action where the claim rate is notoriously low.  The Third Circuit also held that clear sailing agreements (agreements not to challenge class counsel fee petitions) and fee reversions (where amount of agreed-upon fee not awarded reverts to defendant) are not per se impermissible and, rather, there must be evidence of collusion or harm to class members to invalidate a fee award on this basis.

Case Background Leading to Wawa I

On December 19, 2019, Wawa — a convenience store chain with 850 locations throughout the mid-Atlantic and Florida that sells fuel as well as convenience store items — released a public statement through its CEO detailing a data security breach Wawa had experienced in which hacker stole payment information including credit and debit card numbers used at all Wawa stores and fuel dispensers.  As the Third Circuit noted “a race to the courthouse promptly ensued” with plaintiffs filing 15 different state statutory and common law class action claims that were ultimately consolidated by Chief Judge Juan Sanchez of the U.S. District Court for the Eastern District of Pennsylvania on January 8, 2020.  In Re Wawa Inc. Data Security Litigation, Civ No. 24-1874, at *6 (3d Cir. June 25, 2025) (hereafter “Wawa II”). Three litigation tracks emanated out of this consolidation, including: (1) a financial institution track; (2) an employee track; and (3) a consumer track.  The consumer track is the subject of the Wawa II decision at issue and involved numerous common law, state consumer protection, and data privacy claims.  The consumer plaintiffs sought compensatory relief and an injunction requiring Wawa to: (1) strengthen its data security systems and monitoring procedures to prevent further breaches; (2) submit to future annual audits of those systems; and (3) provide several layers of free credit monitoring and identify theft insurance to all class members. 

Several months after the consolidated class complaint was filed, settlement talks began in which the parties retained a mediator to supervise a mediation session that lasted almost 12 hours.  As a result of this mediation session, the parties agreed Wawa would provide either compensation for out-of-pocket losses or a Wawa gift card.  Plaintiffs were divided into three tiers:  (1) customers who affirmed they spent at least some time monitoring their credit card statements were eligible for a $5 Wawa gift card (this tier was subject to a $6 million cap and a $1 million floor); (2) customers who saw a fraudulent charge that required some effort to sort out were eligible for a $15 Wawa gift card (this tier was subject to a $2 million cap with no floor); and (3) customers who could show certain out-of-pocket losses caused by the breach could receive up to $500 in cash (this tier was subject to a $1 million cap without a floor).  Wawa also agreed to a range of injunctive relief to improve its security systems through a continuation of a $25 million investment in security that the Wawa board authorized pre-settlement in February 2020.  This security system improvement commitment included retaining a security firm to evaluate compliance, conducting an annual penetration test for potential vulnerabilities to data breaches, operating a system to encrypt payment information at sale terminals, implementing security procedures at sale terminals, and maintaining written security programs and policies.  Wawa further committed to provide class members notice of the settlement via updates posted in stores, a settlement website, and a press release.  After the terms for compensatory and injunctive relief were settled, the parties then agreed that Wawa would pay class counsel $3.2 million in attorneys’ fees and related costs “paid by Wawa as directed by the Court” and further providing that Wawa would “cooperate with Class Counsel, if and as necessary, in providing information Class Counsel may reasonable request from Wawa in connection with preparing the petition” for fees. Id. at *9. The settlement agreement was silent about what would happen if the district court awarded less than the full $3.2 million in fees.  

On July 30, 2021, Judge Gene Pratter of the Eastern District of Pennsylvania issued an opinion preliminarily approving the settlement finding it “fair, reasonable, and adequate” as the settlement negotiations took place at arm’s length,” the relief offered provided both monetary and injunctive components, and there was “no reason to doubt that settlement [would] provide a tangible benefit to plaintiffs and proposed class members while avoiding the costs and risks associated with continued litigation.” In re Wawa, Inc. Data Sec. Litig., No. CV 19-6019, 2021 WL 3276148, at *9, 11 (E.D. Pa. July 30, 2021).

On November 10, 2021, class member Theodore Frank filed objections arguing: (1) Wawa’s notice procedures were improper; (2) the gift card claims rate was too low; (3) the attorneys’ fees contemplated by the settlement agreement were too high given that most of the relief made available to the class was not cash-based; and (4) the fee provision of the agreement contained an improper clear sailing (i.e., an agreement not to challenge class counsel’s fee petition) and fee reversion (i.e., agreement that any amount of the $3.2 million not awarded to class counsel reverts to Wawa) that restricted the district court’s ability to fix any potential imbalance between attorneys’ fees and the final relief awarded to the class.  Frank raised no objection to the certification process or the certification decision.

In response to this objection, a Second Amended Settlement Agreement was submitted on November 12, 2021 making tier 1 gift cards automatically available to mobile application users and eliminating the gift cards’ expiration date.  An Objector, Frank, submitted further objections that the settlement would permit any amount of attorneys’ fees short of the $3.2 million agreed-upon to revert back to Wawa.  As a result, on February 4, 2022, counsel submitted a Third Amended Settlement Agreement clarifying that Wawa would not benefit from approval of less than $3.2 million in attorneys’ fees and committing that any shortfall would be distributed to tier 1 and tier 2 gift card holders.  On April 20, 2022, Judge Pratter issued an opinion giving final approval of the settlement agreement and deeming it fair, reasonable, and adequate, as required by Rule 23(e)(2).

Regarding the attorneys’ fee award, Judge Pratter awarded the agreed-upon amount of $3.2 million, allocating $3,040,060 to attorneys’ fees, $45,940 to litigation expenses, and $100,000 for settlement administration expenses.  Judge Pratter found that the Gunter factors supported an award of this amount which requires consideration of:  (1) the size of the fund created and the number of persons benefitted; (2) the presence or absence of substantial objections by members of the class to the settlement terms and/or fees requested by counsel; (3) the skill and efficiency of the attorneys involved; (4) the complexity and duration of the litigation; (5) the risk of nonpayment; (6) the amount of time devoted to the case by plaintiffs’ counsel; and (7) the awards in similar cases.  See Gunter v. Ridgewood Energy Corp., 223 F.3d 190 (3d Cir. 2000).   For Gunter factor 1, Judge Pratter relied on the value of the funds made available to the class; for factor 2 the only substantive objections before the Court were raised by Frank and were addressed in the third iteration of the settlement agreement; for factor 3 the Judge was satisfied that the skill of the attorneys involved weighed in favor of approval; for factor 4 the Judge noted that data breach litigation is “inherently complex;” for factor 5 the fact that counsel took the case on a contingency basis weighed in favor of approval; for factor 6 the attorneys spent 6,000 hours on the litigation; and, as to factor 7 the Judge noted that other data breach class actions have resulted in fee awards significantly higher. In re Wawa, Inc. Data Sec. Litig., No. CV 19-6019, 2022 WL 1173179, at *11 (E.D. Pa. Apr. 20, 2022). A lodestar cross-check also supported the fee award. 

Third Circuit’s Decision in Wawa I

Objector Frank challenged the fee award portion of the settlement agreement on appeal to the Third Circuit arguing that the provision on fees constituted a “clear sailing” agreement because, according to Frank’s interpretation of the provision, Wawa agreed not to contest a fee request from class counsel and Frank also claimed that a “fee reversion” was still contained in the agreement despite the fact that the amended iteration of the settlement agreement clarified that any amount not awarded to counsel would be distributed amongst the class and would not revert back to Wawa.  In Re: Wawa, Inc. Data Security Litigation, 85 F.4th 712, 717-18 (3d Cir. 2023) (hereinafter “Wawa I”).  Frank argued that attorneys’ fees should be capped at 25% of the amount actually awarded to the class, not the amount offered to the class.  The Third Circuit issued a decision in Wawa I, on November 2, 2023, vacating the fee award and remanding the action back to the district court to determine the reasonableness of the attorneys’ fee in light of the benefit rendered to the class and to evaluate the presence of side agreements indicating “collusion,” i.e. a commitment from Wawa not to dispute a fee request from class counsel or an agreement amongst the parties that any portion of the attorneys’ fee not awarded to class counsel would revert back to Wawa.  Id. at 727.  The Court also remanded for additional consideration about the reasonableness of the award finding that the district court “saw itself as bound to consider only the funds made available to the class” when it could evaluate reasonableness by reference to “either amounts paid or amounts made available.”  Id. at 725-26. 

On remand, Judge Pratter requested the parties provide submissions containing any information they believed she should consider based on the panel’s decision in Wawa ISee Wawa II, at *7 (3d Cir. June 25, 2025).  Objector Frank expressly declined to argue that collusion occurred between counsel for the class and Wawa and suggested the panel used the word “collusion” as “semantic shorthand” to consider potential conflicts with broad brushstrokes.  Class counsel and Wawa submitted declarations that there was no collusion.  Id.  Objector Frank pointed out that counsel admitted there was a clear sailing agreement in a joint declaration class counsel filed in October 2021 and again proposed that an attorney fee award should be based on actual rather than proposed recovery.   Id.  Class counsel countered that Objector Frank had conceded there was no collusion.  Id.  On April 9, 2024, Judge Pratter issued an opinion and judgment that the fee awarded was reasonable and that there were no side agreements or anything problematic in settlement negotiations which were conducted at arms’ length under the supervision of a mediator.  See 2024 WL 1557366, at *7-13. She specifically found that Wawa’s agreement to “cooperate” in the preparation of a fee petition meant no more than the common meaning of that term which did not waive Wawa’s right to object to fees.  Id. at *7.  On the issue of fee reversion, Judge Pratter found that there was “never any discussion of any tradeoff” and any insinuation of an unintentional fee reversion was “diligently corrected” prior to her final approval of the settlement.  Id. at *10.  On the issue of reasonableness of the fee award, Judge Pratter again evaluated the funds offered finding the gift cards to be a “meaningful benefit” because they “closely approximate cash” and that the injunctive relief was also “central” to the award and “weigh[ed] strongly in favor” of granting the fee figure.   Id. at *14-17.  Judge Pratter further acknowledged that the appeal and remand proceedings already reduced the value of counsel’s fee by an estimated $408,492.  Id. at n.13. 

Third Circuit’s Decision in Wawa II

On appeal for the second time to the Third Circuit in Wawa II, Objector Frank mounted three arguments, including:  (1) Judge Pratter did not follow the panel’s mandate in Wawa I which he claimed found that a clear sailing agreement and intentional fee reversion existed between counsel; (2) Judge Pratter’s findings as to the clear sailing and fee reversion were clearly erroneous; and (3) Judge Pratter erred by relying on the amount “made available” to the class as the basis of the fee award rather than the amount actually paid to class members.  Wawa II, 2025 WL 1750352, at *9-12.  The Third Circuit rejected all three arguments and affirmed the fee award. 

First, the Third Circuit found the Wawa I panel did not hold that a clear sailing agreement existed or that the fee reversion was intentional.  Rather, the parties and Judge Pratter “assumed” the existence of a clear sailing agreement and the panel followed suit but the issue was never squarely decided.  Id. at *9-10.  Likewise, the Wawa II panel did not agree that Wawa I found that any fee reversion was intentional.  Id.  In any event, the Wawa II Court clarified that clear sailing agreements and fee reversions are not “per se impermissible” but are rather “red flags” requiring further scrutiny which they felt satisfied Judge Pratter performed during the remand proceedings.  Id.  The Third Circuit held, as a result, that Judge Pratter did comply with the Wawa I mandate.  Id. at 10.

Second, applying the clearly erroneous standard to Judge Pratter’s factual findings, the Third Circuit agreed with Judge Pratter’s finding that there was no clear sailing agreement or intentional fee reversion indicating collusion.  Id. at 10-12.  The Wawa II Court assessed and agreed with Judge Pratter’s findings that the language in the settlement agreement on fees did not constitute a clear sailing agreement and, regardless, Judge Pratter “thoroughly examined the parties’ negotiation process” and found it to be devoid of any evidence of collusion or negative implications for the class.  Id. at *11.  The panel afforded “great deference” to the Judge’s decision to credit testimony from Wawa’s counsel on this issue.  The panel also did not find any credible evidence that the class was harmed at all by the provision on attorneys’ fees.  Id.  Further, the Court also agreed that any fee reversion in the initial draft of the settlement agreement was unintentional and due to counsel’s impression that the fee award was low and therefore it was unlikely the court would award anything less.  Id.

Third, on the issue of the reasonableness of the fee award, the Court agreed with the district court that the fee award was reasonable.  Id. at 12-14.  In support of this conclusion, the Court found that the gift cards were designed to be spendable cash at any Wawa store, three-fourths of Wawa’s inventory is under $5, and the gift cards did not have an expiration date.  The Court further acknowledged the injunctive relief that the class received as justifying the amount of attorneys’ fees which “they themselves requested in the Consolidated Complaint” and, though “difficult to value,” nevertheless “has real value.”  Id. at *13. The Third Circuit disagreed with Objector Frank that the injunctive relief should not be considered in evaluating the reasonableness of the award because Wawa was already in the process of implementing the improved security measures pre-settlement, finding that “Wawa’s post-settlement security updates and formal commitment to the relief are attributable to the settlement.”   Id. (emphasis added).  Finally, and of significant note, the Court took into account the fact that the low claim rate present—the class consisted of 22 million members and 563,955 claims which meant a claim rate of 2.56%—is typical in low-harm data breach class action settlements, such as this one.  Id. at *13-14.  Though the claim rate is axiomatically low given the low overall harm, this does not negate the attorney time dedicated to finalizing meaningful relief to address the alleged harms at issue.  Id.  The Court also affirmed the district court’s use of the Gunter factors and lodestar cross check to support its analysis.  Id. at *14. 

Implications of Wawa II Decision

The Wawa II decision evidences the Third Circuit’s endorsement of basing fee awards in class settlements on the recovery offered to class members, setting aside the claim rate, in the context of low-harm data breach class actions where low claim rates are well-documented.  So long as the recovery secured is meaningful (be it through injunctive, monetary, or other means) and the hours class counsel spent on securing that relief justify the award sought, the fee petition is colorable.  This provides good guidance for defense counsel and objectors that in objecting to fee awards in such cases more is needed than the mere suggestion of a clear sailing agreement or fee reversion, and rather evidence of harm to the class or collusion amongst counsel must be shown to demonstrate that the fee is unreasonable or exorbitant. 

Annual NYU Conference on Labor & Employment Law

By Shannon Noelle

On June 9-10, NYU hosted its 77th annual conference on Labor & Employment Law, a non-partisan forum for stakeholders and experts to discuss current labor and employment policy and law.  We were privileged to attend the conference as an invited guest of sponsor and leading industry expert firm Resolution Economics. 

The conference spanned two days, with keynote addresses from Honorable Jonathan Snare, Deputy Solicitor of Labor, U.S. Department of Labor, and Marvin E Kaplan the National Labor Relations Board (NLRB) Chair.  The conference featured panels on topics such as the US Workforce, Reimagining Labor in a Conservative Era, Reimagining Civil Service, Federal Labor Preemption of State Captive Audience, Just Cause and Sectoral Bargaining Laws, Equal Access to Justice Reform Act, Facilitating Lawful Immigration (with speaker Ted Chiappari, Partner at Duane Morris,), Labor Union Political Activism, Future of the National Labor Relations Act, Restructuring the NLRB, AI Issues, Emerging Issues in Employment Arbitration, Employment Discrimination Law and Disparate Impact, and Restrictive Covenants.  

Future of the Department of Labor

Deputy Solicitor Snare opened the conference stating that the DOL’s new perspective is “personnel as policy” indicating that the Department has onboarded individuals with extensive and varied experience to bring insight and perspective to the Department’s new enforcement directives.  He stated that the Department’s enforcement priorities include “helping employers minimize unintentional errors,” child labor law enforcement, and speedy recovery of back way.  With regard to the test for independent contractor status, the DOL will rely on Fact Sheet #13 containing the “economic reality” framework and the 2019 Opinion Letter on Independent Contractors and Virtual Marketplace Companies.   In analyzing joint employer status, Deputy Solicitor Snare advised practitioners to look at the analysis in effect under the prior Trump administration for guidance which set out a 4-factor control test.  Solicitor Snare indicated that the overtime rule implemented in 2024 and joint employer analysis are currently under review by the Department. 

On the topic of OSHA enforcement priorities, Solicitor Snare referenced the recent Sea World fine and citation from 2024 for $16,5550 after a trainer was injured by a killer whale during a training session.   Solicitor Snare discussed the general duty clause in connection with this citation, found in Section 5(a(1) of the Occupational Safety and Health Act, requiring employers to furnish a place of employment free from recognized hazards that cause or are likely to cause, death or serious physical harm to employees, stating that this duty is not qualified under common law by the assumption of the risk or contributory negligence doctrine. 

There was also discussion of the Department’s implementation on May 15, 2025 of the non-enforcement policy regarding the 2024 Mental Health Parity and Addiction Equity Act (MHPAEA).   Solicitor Snare stated that this policy would “cut regulatory red tape” and give workers better access to mental health and substance abuse treatment as compliance with the former law was “burdensome.”   And, finally, Solicitor Snare discussed the Department’s initiative to improve pharmaceutical pricing transparency and provide Crypto guidance.  

Future of the NLRA and Restructuring the NLRB

The panel on the future of the NLRA and restructuring the NLRB advocated for restructuring the Board as opposed to dissolution, acknowledging that Board law on the National Labor Relations Act (NLRA) changing with each administration lacks clarity and consistency but also noting the utility of a quasi-judicial body continuing to provide guidance and decisions on labor disputes.  The panel discussed the upcoming decision regarding President Trump’s removal of Democrat Board member Gwynne Wilcox without cause—which reduced the Board to two members lacking the necessary 3-member quorum to issue decisions as to unfair labor practices—as likely to redefine Board authority and the Presidential executive power across the federal government.  The panel concluded that, no matter how the issue is decided, it presents an opportunity for both labor and management to consider how to refashion the Board into an exclusively adjudicatory agency likely to pass constitutional requirements and, at the same time, reduce the incidence of policy oscillation that has plagued the agency for decades. 

Acting General Counsel for the NLRB William Cowen expressed cautious optimism that a recent proposal to fund the agency at 4.7% below its current level would be “adequate for us to do our jobs” and expressed that he sees “ a way through this.” 

Samuel Estreicher, NYU Law professor, Roger King, HR Policy Association senior counsel, and David Sherwyn, Cornell University professor, discussed their proposal for restructuring the NLRB (recently detailed in a paper published by the University of Pennsylvania Carey School of Law) refashioning the board as a six-member court consisting of two Democrats, two Republicans, and two nonpartisans.  Further requirements for board members under this proposal would be that they cannot have represented labor or management interests for a six-year period prior to nomination to the Board to show a “propensity for independence.”  This requirement is to ameliorate the policy oscillation and lack of consistency in board law and to lend credibility to the agency.  The article authors indicated that they have gotten reasonable interest and traction from lawmakers and are actively in discussions regarding their proposal. 

Developments in AI

On the topic of AI, panelists discussed the proliferation of generative AI in the last 18 months which is used across the employment life cycle in sourcing, recruiting, predicting high potential employees, employees likely to leave, and even AI that generates job descriptions.   Experts indicated that the federal regulatory landscape is evolving with the Trump administration expected to roll out an action plan by the end of July.  Several recent reports discuss a Trump administration proposal, included in a House-passed budget reconciliation bill, that would implement a 10-year federal preemption or moratorium on state and local AI laws and regulations.  Thus, federal regulation of the AI space is expected to be on the radar of practitioners and experts alike.  

Implications for Companies

Employers must stay compliant with existing law (despite shifting prosecutorial priorities current labor and employment laws remain in effect) and monitor legal developments on the horizon.  Employers must remain vigilant in their compliance efforts and seek legal guidance for assistance in navigating this rapidly changing legal landscape.

Nothing Common or Predominant About Emotional Distress Damages

By Gerald L. Maatman, Jr., Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways:  In an opinion issued on May 29, 2025, Judge Christy Wiegand of the U.S. District Court for  the Western District of Pennsylvania denied class certification of two proposed classes under the Fair Debt Collections Practices Act (“FDCPA”) (one in the alternative in the event of failure of the first) finding that the predominance requirement of Rule 23(b)(3) was not met where putative class members’ standing would depend on individualized inquiries “highly specific” to each member or was based solely on the fact that the member was a consumer that received a debt collection letter (whether it was read or not).  The ruling is a defense blueprint for defending FDCPA cases.

Case Background

Named Plaintiff Jeffrey Lezark brought a putative class action under the FDCPA against I.C. System, Inc. (“ICS”), a debt collector, that allegedly sent Lezark and putative class members debt collection letters (“540 Letters”) to collect on a medical debt.  The 540 Letter stated in relevant part that “[i]f you fail to contact us to discuss payment of this account, our client has authorized us to pursue additional remedies to recover the balance due, including referring the account to any attorney.” (ECF  91 ¶ 17).  Lezark alleged that, in sending the 540 Letter, ICS violated the FDCPA by implying that legal action was possible to collect the debt when it was not.  The Court authorized distribution of a Claim Form Questionnaire to putative class members to enable Lezark to collect information regarding their standing.  The Questionnaire asked respondents for their individual experience upon reading the 540 Letter.  Putative class members were instructed not to fill out the questionnaire if they did not read the 540 Letter.  The questionnaire asked if putative class members:  (1) felt anxious, overwhelmed, or stressed because they believed they could be subject to legal action or have debt referred to an attorney; (2) contacted an attorney or some other person because they believed they could be subject to legal action or debt could be referred to an attorney; (3) contacted ICS because they believed that they could be subject to legal action or that their debt could be referred to an attorney; (4) made a payment on their account because they believed they could be subject to legal action or their debt could be referred to an attorney; or (5) experienced some other event or engaged in some other conduct after reading the 540 Letter.

Lezark proposed one class definition consisting of “all individuals in the state of Pennsylvania who within the applicable statute of limitations, received a letter from Defendant in which Defendant claimed it was authorized to refer a medical debt to an attorney, incurred said debt from a medical provider that entered into a contract with Defendant in which the provider elected [NLAR] and/or litigation referral and incurred such debt for personal, family, and/or household purposes.” (ECF 130, at 4). There were over 15,000 putative class members of this first proposed class.  Lezark also sought certification of an alternative class definition if the Court determined the first class definition could not be certified consisting of “[a]ll individuals who: signed, dated, and returned the Claim Form Questionnaire; checked the first, second, third, fourth, and/or fifth box on the Claim Form Questionnaire; and did not indicate that they failed to receive or read the 540 Letter.” Id. There were over 700 putative class members of this alternative proposed class. 

ICS focused its opposition on challenging both proposed class definitions adherence to Rule 23(b)(3)’s predominance requirement.  ICS specifically cited to and relied on TransUnion LLC v. Ramirez, 594 U.S. 413 (2021), where the U.S. Supreme Court held that federal courts must “affirmatively determine that each putative class member has Article III standing before awarding that class member damages,” arguing that both proposed class definitions would require individualized factual inquiries into the injuries sustained by each putative class member.  See ECF No. 142 (citing ICS’ opposition brief, ECF No. 136 at 14).  As to the first class definition, Lezark argued that there was standing under Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982) as each class member suffered an injury “in precisely the form [that the FDCPA] was intended to guard against.”  Havens, 455 U.S. at 364.As it regards the alternative proposed class definition, Lezark argued that Huber v. Simon’s Agency, Inc., 84 F.4th 132, 150 (3d Cir. 2023), confers standing as, in that case, the Third Circuit held that the named plaintiff that received a debt collection letter had standing as the plaintiff identified “an allegedly deceptive communication and specific harmful action and inaction she took as a result of the communication.”  Huber, 84 F.4th at 150.  The District Court rejected both proposed class definitions and Plaintiff’s argument that case law precedent supported certification in this context.    

As to the Havens standing argument for the first proposed class definition, the Court found that the Havens decisions was a distinguishable and narrow holding applicable to the Fair Housing Act (“FHA”) and not a proposed FDCPA class definition.  The Court explained that  “the plaintiff in Havens was not just given false information but suffered a concrete injury in the form of racial discrimination prohibited by the FHA.”  See ECF No. 142, at 13 (citing Havens, 373-74).  The Court found that Lezark’s argument — that any consumer that is the object of a misrepresentation made unlawful under the FDCPA has de facto suffered an injury in the precise form prohibited by the FDCPA — was in direct tension with the TransUnion decision.  The Supreme Court in TransUnion rejected the proposition that “a plaintiff automatically satisfied the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”  594 U.S. at 426.  The Court, therefore, declined to extend the logic in Havens to “the 15,000-plus Proposed Class members” that “simply . . . receive the 540 Letter” with no “evidence that they read it, let alone suffered any downstream harm as a result.”  See ECF No. 142 at 14.

As to the alternative proposed class definition that Plaintiff argued had viability under Huber, the Court pointed out that Huber only found standing as to the named plaintiff and had been remanded to the district court to make a predominance determination.  The Court highlighted that Huber guided the district court on remand to evaluate whether each putative class member “undertook the kind of determinant action or inaction required for standing” and could show the same with a “plausible straight forward method” suitable for class adjudication.  Huber, 84 F.4th at 157-58.  Applying this directive, the District Court found that Lezark himself had demonstrated standing, having shown evidence of emotional distress and the decision to file for bankruptcy based on the 540 Letter, but the putative class members did not.  Plaintiff had to show that putative class members could “likely” demonstrate standing through summary judgment and trial but the Court found that given that standing was “premised on suffering emotional distress and/or taking particular actions in response to the 540 Letter” this “necessarily” would require “individualized and highly” specific inquiries as to each member requiring deposition testimony, cross and direct examination, and medical records.  See ECF No. 142 at 10-11.

Implications For Employers and Debt Collectors

This decision reinforces that plaintiffs’ burden at the certification stage of demonstrating concrete, particularized injury is not a mere formality.  To the contrary, plaintiffs must come forward with evidence showing that putative class members can likely demonstrate standing through summary judgment and trial using a method that is common amongst all class members and unlikely to produce individualized mini trials on the issue of damages.  The Lezark decision also further underscores that this burden is particularly high in cases asserting standing on the basis of emotional distress or intangible injuries.

When Removing Diversity Cases Defendants Cannot “Embiggen” The Amount-In-Controversy Through Attorneys’ Fee Estimates

By Gerald L. Maatman, Jr., Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways:  In an order issued on May 13, 2025, Judge Joshua Wolson of the U.S. District Court for the Eastern District of Pennsylvania ruled that a case removed to federal court on the basis of diversity jurisdiction had to be remanded back to state court given that the amount-in-controversy (AIC) alleged was based on an attorneys’ fee award that exceeded the plaintiff’s damages award by “at least seven times.”

Case Background

On January 9, 2025, Plaintiff Frank Wise sued his former employer Kimberly-Clark, a manufacturer of paper-based consumer products, in the Philadelphia Court of Common Pleas on behalf of himself and a putative class, accusing his former employer of violating the Pennsylvania Minimum Wage Act (“PMWA”) by failing to pay overtime for the time spent walking to and from job assignments in the Defendant’s manufacturing facility.  As part of its remedial regime, the PMWA permits a prevailing party to recover “reasonable” attorneys’ fees.  Plaintiff Wise estimated that his damages totaled $9,350.30, but on his cover sheet he indicated that the amount in controversy totaled “[m]ore than $50,000.00” for the amalgamated claims of the class.  (ECF No. 1-3, p. 2). 

On February 26, 2025, Defendant Kimberly-Clark removed the action to federal court, asserting that the amount in controversy was over $75,000 because Plaintiff Wise “may try to recover at least $78,375.00 in attorney’s fees.”  (ECF No. 1 ¶¶ 24, 29). Plaintiff Wise moved to remand by including with that motion a declaration from his attorneys that if the lawsuit proceeded on an individual, rather than a class wide basis, the Plaintiff and his attorneys would waive the right to recover attorneys’ fees that would cause the amount in controversy to cross $75,000.

The Court’s Order

Judge Wolson found that Defendant Kimberly-Clark did not carry its burden to demonstrate that the amount in controversy exceeded $75,000, which the Defendant primarily based on its attorneys’ fees estimate.  Although attorneys’ fees can be factored into the amount in controversy threshold, the attorneys’ fees sought must be reasonable.  To pinpoint the legal standard under Pennsylvania law for determining when an award of attorneys’ fees is reasonable, Judge Wolson surveyed case law interpreting statutes similar to the PMWA, such as the Pennsylvania Unfair Trade Practices and Consumer Protection Law, where Pennsylvania courts determined that the “term reasonable” incorporates the concept of proportionality between the damages award and attorneys’ fees award.  Though Pennsylvania law contains no “hard-and-fast rule for the acceptable ratio,” courts consider “the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite properly to conduct the case, the customary charges of the members of the bar for similar services, the amount involved in the controversy and benefits resulting to the clients from the services, and the contingency or certainty of the compensation.”  (internal citations and quotations omitted).  Applying this framework, Judge Wolson found that a 7:1 ratio for attorneys’ fees as compared to damages was unreasonable and could not be used to reach the jurisdictional threshold. 

Judge Wolson further opined that this conclusion also was consistent with protecting the judicial economy of federal courts as litigants and attorneys should not be able to use exorbitant attorneys’ fees estimates to circumvent the amount in controversy requirement to invoke diversity jurisdiction.  In the case at hand, the parties agreed for purposes of the motion that Plaintiff Wise could recover $9,350.30 in monetary damages and that the legal issues at hand involved straight-forward unpaid overtime claims.  Notably, Judge Wolson also found the Plaintiff’s attorneys’ declaration, waiving the right to collect attorneys’ fees, to be unavailing as it arguably amended the complaint.

Implications For Employers

The Court’s holding in Wise emphasizes the importance of providing concrete evidence regarding damages sought and reasonable attorneys’ fee estimates when seeking to remove based on diversity jurisdiction.  Ultimately, the damages and attorneys’ fees alleged in the complaint take precedence, but proportionality must be considered even in the context of fee shifting statutes.  If a party’s jurisdictional math does not add up, they may be sent back to where the matter started:  state court.  

Class Action Issues In 2025 – Report From The 9th Annual Class Action Conference In New York City

By Gerald L. Maatman, Jr., Jennifer A. Riley, Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways: On May 8, 2025, the Beard Group sponsored the Class Action Money & Ethics Conference in New York City. During the conference, over 200 attendees discussed key issues impacting class action litigation in 2025. We were privileged to chair the Conference and present the keynote address on class action litigation trends for the past year and what 2025 has in store for Corporate America. The discussion at the program underscores the cutting-edge issues facing companies in this area of law.

Key Trends For The Past Year

In our keynote address, we discussed the top ten developments in the class action litigation space. The leading trends center on the new era of heightened risks and elevated exposures that pivot on record-breaking settlement numbers, the high conversion numbers for class certification motions into certified classes, and the rise in privacy and data breach class actions.

On the settlement front, 2022 saw $66 billion in total proceeds when measured by the top ten settlements in all areas of law. In 2023, that figure totaled $51 billion, for a combined total of $117 billion over the past 24 months. And in 2024, those numbers came in at $42 billion, which pushed the settlement numbers to $159 billion for the past 36 months.

In terms of class certification motions, the Plaintiffs bar successfully secured certification in 63% of cases over the past year. Those figures ranged from nearly 83% in WARN lawsuits to 37% in RICO cases. That said, the plaintiffs’ bar has proven its track record to convert class action lawsuit filings in to certified classes at a high rate.

In the privacy and data breach space, such claims became ubiquitous in 2024, with a virtual explosion in those types of lawsuits. While certification rates were quite low in data breach situations, the plaintiffs’ bar secured certification in privacy class actions at a higher rate.

We also discussed how class actions over environmental. social, and governance issues went mainstream in the past year. We predicted that ESG class actions will continue to increase, especially as the plaintiffs’ bar refines their theories of recovery and begin to monetize their claims. In particular, securities fraud class actions over DEI commitments are increasing as a result of the U.S. Supreme Court’s recent decision in Students For Fair Admissions, Inc., et al. v. President And Fellows Of Harvard College, 600 U.S. 181 (2023). Both plaintiffs’ lawyers and defense counsel anticipate more litigation in this space.

Data Breach Panel

An interesting panel discussion – consisting primarily of plaintiffs’ lawyers – ensued after the keynote address on wiretapping class claims under the Video Privacy Protection Act and data privacy class action litigation. They reflected on the patchwork quilt of rulings in these areas over the past year and the low certification rates due to problems in surmounting standing issues based on lack of injury-in-fact showings.

The panelists predicted a subtle shift in privacy and data breach lawsuits to effectuate a “work around” to these impediments. Multiple plaintiffs’ counsel predicted more reliance on state law claims and litigation of class-wide claims in state court.

Panel On Class Notice Strategies

The next panel focused on trends for class notice in 2025 and how artificial intelligence is now mainstream in terms of its use to facilitate the notice send to class members. The panelists expressed how these practices are quite innovative and rapidly evolving. Notice through social media and/or texts or email also is considerable cheaper than U.S. Mail, which is driving down settlement administration costs.

The challenge, however, is to prevent fraudulent claims from individuals seeking a share of the settlement pot. As to take rates, social media advertising is driving the rates upward, but the rates in data breach cases remain low at 1% to 5% (as compared to other types of settlements).- Class member demographics also impact the take rate, as older individuals are apt to view social media notice as “junk mail” or a scam. Conversely, staying ahead of fraudsters has created an imperative for settlement administrators (e.g., where settlement shares are claimed by an IP address of a bot).

Panel On Fraud In The Class Action Process

Another panel discussed the rise of fraudsters in the class action space. Some involve “deep fakes” of persons who seek to assert false claims as named plaintiffs or class members. Others involve cyber-criminals who infiltrate the settlement administration process through artificial intelligence software and seek class settlement shares on a false basis.

Judicial responses have run the gamut from shutting down the settlement administration process and rebooting it with enhanced security measures to referrals to law enforcement personnel to combat fraud. Panelists predicted that judges are apt to ratchet up the scrutiny of final settlement approval of class actions, and possibly promote direct mail notice over digital communications.

Implications For Companies

Class action litigation is a fact of life for corporations operating in the United States. Today’s conference underscored that change is inevitable, and class actions litigation is no exception.

Visualize This:  The Sixth Circuit Holds That The VPPA Applies Only To Consumers Of Audio-Visual Materials

By Gerald L. Maatman, Jr., Shannon Noelle, and Ryan T. Garippo

Duane Morris Takeaways:  On April 3, 2025, in Salazar, et al. v. Paramount Global, d/b/a 247Sports, Case No. 23-5748, 2025 WL 1000139 (6th Cir. Apr. 3, 2025), the Sixth Circuit departed from two other federal circuits (i.e., the Second and Seventh Circuits) in its interpretation of “consumers” covered by the Video Privacy Protection Act (“VPPA”), and affirmed the district court’s dismissal of a putative class action on the basis that only consumers of audio-visual related materials are covered by the protections of the Act.  The Sixth Circuit’s holding narrows the scope and reach of the statute and is a welcome reprieve for companies offering video content on their websites in connection with advertising technology (“adtech”).

Background

In September 2022, Michael Salazar brought a putative class action against Paramount Global (i.e., the owner of 247Sports.com), claiming that the media company violated the VPPA because it installed Meta Pixel on its website. Salazar alleged that Meta Pixel, a form of adtech, tracked his and putative class members’ video viewing history and disclosed it to Meta without his consent.  He sought to represent a putative class of subscribers to 247Sports.com’s newsletter which contained links to articles (that could contain videos), photographs, and other content.

Salazar, however, did not allege that he was a subscriber of audio visual materials as contemplated by the statute.  18 U.S.C. § 2710(a)(1)-(4).  To the contrary, he alleged that he was a subscriber of 247Sports.com’s newsletter, and that 247Sports.com separately provided audio visual materials to its customers.  Salazar v. Paramount Global, 683 F.Supp. 3d 727, 744 (M.D. Tenn. 2023).  But, the district court determined that Salazar’s interpretation of the VPPA was “unavailing.”  Id.  Indeed, “there [was] no allegation in the complaint that Plaintiff accessed audio visual content through the newsletter (or at all, for that matter).  The newsletter [was] therefore not audio visual content, which necessarily means that Plaintiff [was] not a ‘subscriber’ under the VPPA.”  Id.

Salazar is no stranger to this legal issue.  Last year, in a virtually identical case, the U.S. District Court for the Southern District of New York, dismissed a putative VPPA class action brought by Salazar on the basis that “signing up for an online newsletter did not make Salazar a VPPA subscriber.’”  Salazar v. National Basketball Association, 118 F.4th 533, 536-37 (2d Cir. 2024).  Salazar appealed that decision to the Second Circuit, which reversed the lower court, and held that the VPPA protects “consumers regardless of the particular goods or services rented, purchased, or subscribed to.”  Id. at 549.  If blog readers would like to learn more about the Second Circuit’s decision, a link to our post is included here.

Salazar appealed this case on the same grounds as his Second Circuit win and asked the Sixth Circuit to determine whether he was considered a “subscriber” and thus, a “consumer” under the VPPA.

The Sixth Circuit’s Decision

The Sixth Circuit affirmed the district court’s ruling and agreed that to be considered a “consumer” under the VPPA an individual must purchase goods or services of an audio-visual nature.

Judge John Nalbandian, writing for the Sixth Circuit, reasoned that the term “subscriber” must be viewed in its broader context, and in harmony with the other words in the statute such not to render associational words inconsistent or superfluous.  Applying these canons, the Sixth Circuit explained that the words “goods and services” informed the meaning of the term “subscriber.”  By using the terms together, the statute was intended to encompass only audio-visual goods or services provided by a video tape service provider, as opposed to any and all goods and services, provided by that company.  In other words, if a video tape service provider makes “hammers” or a “Flintstones sweatshirt or a Scooby Doo coffee mug,” a consumer of such goods would not fall under the purview of the VPPA.  Paramount Global, 2025 WL 100139, at *10.

In so holding, the Sixth Circuit departed from the Second and Seventh Circuits, including the near-identical lawsuit brought by Salazar himself, that found the phrase “goods or services” to encompass all goods and services that a provider places in the marketplace.  Judge Rachel Bloomekatz, penning the dissent, reached the same conclusion.  She opined that, under the majority’s interpretation, a provider could “stitch[] together” non-video transactions to provide information about audio-visual transactions that could reveal a consumer’s personal information.  Id. At *12.  The majority found such concerns unavailing and reasoned that the type of information available from the videos on Paramount Global’s website was not inherent to the newsletter and was “accessible to anyone, even those without a newsletter subscription.”  Id. at *7.

As a result, the Sixth Circuit affirmed the district court’s decision to dismiss the complaint without leave to amend.

Implications For Companies

Circuit splits in the federal courts are increasingly rare.  It is nearly unprecedented, however, to have a situation where one litigant has created a federal circuit split with himself.  Salazar could file one lawsuit in New York and his claims would go forward.  But, if the exact same lawsuit was filed in Tennessee, then dismissal would be the proper remedy.

This patchwork system may be difficult for corporate counsel, tasked with ensuring their companies’ adtech compliance, to follow.  But, the Sixth Circuit’s decision in Paramount Global is better than the alternative and could pave the way for other circuits to similarly limit the scope of the VPPA in their relevant jurisdictions.

In the meantime, however, corporate counsel for companies based in Kentucky, Michigan, Ohio, and Tennessee can rest a little easier knowing that – they can offer newsletters without worrying that adtech, installed solely on their websites – will somehow subject them to draconian VPPA liability.

No Shot at Class Certification – Pennsylvania Federal Court Rules that Company Review of COVID-19 Vaccine Exemption Requests Requires Individualized Inquiries Not Suitable For Class Treatment

By Gerald L. Maatman, Jr., Shannon Noelle, and Anna Sheridan

Duane Morris Takeaways: In Meinert et al. v. Port Authority of Allegheny County, Case No. 2:22-CV-01736 (W.D. Pa. 2025), Judge Robert J. Colville of the U.S. District Court for the Western District of Pennsylvania denied class certification for a class of former transit company employees that were allegedly denied medical and religious exemptions to an employer-mandated COVID-19 vaccination policy. In so doing, the Court highlighted opportunities for defendants to defeat class certification by offering proof that the proposed class is amenable to ordinary joinder and that individualized inquiries predominate over common ones in terms of the qualified disabilities, sincerely held religious beliefs, and undue hardship. The ruling is a required read for corporate counsel facing workplace-related class actions.

Background

Former bus drivers and maintenance workers of Pittsburgh Regional Transit filed a class action complaint against the transit company in December 2022 alleging that a company policy issued in early 2022 requiring COVID-19 vaccinations for employees resulted in class members being denied a medical or religious exemption in violation of federal and state law prohibiting discrimination based on a disability or sincerely held religious belief.  In total, the transit company received 350 accommodation requests related to its COVID-19 vaccination policy — 54 of which were for medical exemptions and 296 of which were for religious exemptions.  The Company formed an Accommodation Review Committee that ultimately granted 13 medical exemption and 30 religious exemption requests to its vaccination policy. 

The plaintiffs argued that the exemption review process was a “sham.”   As it regards the medical exemption review process, the plaintiffs argued all proposed class members (the “medical exemption class”) were denied a medical exemption because their pre-existing conditions or disabilities did not show a contraindication to the CDC guidelines and the Company did not factor whether the conditions were a recognized disability under the ADA.  As it regards its religious exemption review process, the plaintiffs maintained that the Company did not engage in any individualized analysis to determine undue hardship (the “religious exemption class”). 

The Court’s Decision

In its Rule 23 analysis, the Court ruled that the medical exemption class failed to meet the numerosity and commonality prerequisites and that the religious exemption class failed to satisfy the commonality and predominance requirements for class certification.  The Court found that as the plaintiffs presented no evidence to contradict the Company’s proof that only 12 individuals fell into the proposed medical exemption class, the Court opined that the plaintiffs failed to establish numerosity and demonstrate that joinder of all members was impracticable, particularly given that all class members were employees of the Company in Pittsburgh. 

The Court also rejected plaintiffs’ generic arguments that class certification would promote consistent results and judicial economy.  The Court further addressed the lack of commonality of the medical exemption class in dicta (as the lack of numerosity was sufficient to dismiss the proposed class) but nevertheless found that determining whether each member of the class had a cognizable disability would be an individualized inquiry that could not be considered on a class wide basis. 

With respect to the religious exemption class, the Court found a lack of commonality given that the sincerity of a class member’s religious beliefs and the undue hardship to the Company are both individualized inquiries not suitable for class treatment.  The Court rejected plaintiffs’ contention that the Company did not engage in any individual analysis to determine undue hardship, crediting an affidavit submitted by the Company detailing the Accommodation Review Committee’s process and attaching denial letters, which it reasoned illustrated that the Company considered undue hardship on an individual-by-individual basis.  For the same reasons, the Court also reasoned that predominance was lacking as to the religious exemption class given that the sincerity of class members’ religious beliefs and undue hardship to the Company would both turn on individualized proof rather than evidence common to all class members. 

Implications of the Decision

The Court’s decision underscores the opportunity for defendants to defeat certification by submitting evidence that proposed members of the class are limited and could be easily joined through ordinary joinder procedures and that the proposed class-wide proceeding is not apt to generate common answers as to whether class members are entitled to relief, as opposed to common questions

Employers implementing similar review processes for exemption requests to company policies are well-advised to document and evidence an individualized process in evaluating and responding to such requests to defend against class action exposure.   

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

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