Category: Class Action Weekly Wire

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Jennifer Riley with their discussion of a U.S. Supreme Court decision vacating a D.C. Circuit ruling in an NLRB dispute over an employer’s liability for withdrawing recognition from a union under the agency’s successor bar standard. This ruling marks a notable development in the wake of the high court’s Loper Bright Enterprises v. Raimando opinion overturning the Chevron doctrine.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Samsung Podcasts, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, and YouTube.

Episode Transcript

Jerry Maatman: Thank you loyal blog readers and listeners for joining our next episode of the weekly podcast series, the Class Action Weekly Wire. I’m Jerry Maatman of Duane Morris, and joining me is Jen Riley, the vice chair of the Duane Morris Class Action Defense Group. Thanks for being on the podcast, Jen.

Jennifer Riley: Thanks so much, Jerry. Great to be here.

Jerry: Today we’ll be breaking down the Supreme Court’s acceptance of a case for review involving the National Labor Relations Board and Hospital Menonita de Guayama from Puerto Rico. The case is crucial, especially after the Supreme Court’s decision in the Loper Bright Enterprises v. Raimondo case, which reshapes how courts review agencies interpretations of the law. I think this is a fascinating case, and a great opportunity to talk about how the Supreme Court’s shift in its approach is going to affect labor law and employment relations. It’s an interplay between agency discretion, and judicial review. And it’s really at the heart of class action litigation. Jen, can you recap the main points of this case for our viewers and listeners?

Jennifer: Thanks, Jerry, absolutely. The case involves a dispute where a hospital in Puerto Rico withdrew recognition from a union; the National Labor Relations Board ruled that this violated the National Labor Relations Act, citing the successor bar doctrine. That doctrine prevents an employer from withdrawing recognition from a union for at least six months after taking over a bargaining unit. After the hospital filed suit, the D.C. Circuit upheld the NLRB’s decision, and eventually the Supreme Court granted review and agreed to hear the case.

Jerry: Thanks, Jen. The core issue here is whether the successor bar doctrine, which the NLRB has applied for year, is legally valid – especially in light of the Supreme Court’s recent decision in the Loper Bright case. The Supreme Court’s ruling overruled the longstanding Chevron doctrine which had instructed lower federal courts to defer to federal agencies when interpreting ambiguous parts of statutes. That ruling has profound implications for federal courts, which will now review decisions made by agencies like the NLRB in this particular case.

Jennifer: Exactly, Jerry. That is why the Hospital Menonita case is so important. The Chevron doctrine is rooted in the idea that in certain circumstances, agencies with expertise in certain areas are better positioned to interpret ambiguous statutes than courts. If the statute is ambiguous, the court must assess whether the agency’s interpretation of the statute is reasonable. The court will generally uphold the agency’s interpretation, if it is a reasonable interpretation of the ambiguous statute, even if the court itself might have interpreted the statute differently. Courts generally give significant deference to agencies’ expertise and experience in interpreting laws within their jurisdiction.

This is now up for scrutiny, of course, after Loper Bright. Essentially, the hospital argued that the court should independently review whether the NLRB’s interpretation of the law, particularly the successor bar doctrine, was correct under the National Labor Relations Act. The NLRB defended its position, claiming that the D.C. Circuit wasn’t relying solely on Chevron and upholding the decision. The NLRB argued that the circuit actually used pre-Chevron case law that recognized agency discretion in interpreting the National Labor Relations Act. However, the hospital countered that under Loper Bright, any deference to the NLRB’s interpretation would need to be reconsidered.

Jerry: Interesting. I think this is somewhat of a blueprint or a test case for how employers or corporations sued, based on interpretations of agency regulations, can turn the table, so to speak, and argue that federal district court judges should interpret the laws as enacted, and not based on somewhat liberal interpretations of those laws by agencies. That’s exactly what the hospital, as I understand it, argued in terms of the Loper Bright decision requires the court to critically assess an agency’s interpretation, and not simply defer carte blanche to them. In the past, courts would have applied Chevron, and given the agency a wide berth in terms of all benefits, or the jump ball, going to the agency in terms of its interpretation. But now, with Loper Bright we have a new playing field, and the Supreme Court has signaled that agency interpretations will be scrutinized, particularly when the statute in question is ambiguous.

Jennifer: Exactly. The Supreme Court ultimately vacated the D.C. Circuit’s ruling and remanded the case here, sending it back to the D.C. Circuit for reconsideration in light of Loper Bright.

Jerry: It’s interesting, insofar as now the argument is ‘this is the essential reading of the statute, and how the court should interpret it, and the agency’s interpretation is just one data point.’ And now defendants have significant precedent to say agencies’ interpretations have been rejected and basically maybe not even a data point, but shouldn’t even be considered. So, the balance of power has shifted and the litmus test, so to speak, or the playing field on which defendants are operating has completely shifted, based on the Supreme Court’s decision.

Jennifer: Great point, Jerry. The successor bar doctrine itself is already controversial. Some people argue that it’s necessary to protect workers’ rights during employer transitions, while others think it goes too far in restricting employers’ ability to challenge unions.

Jerry: Well, now the case is back with the District of Columbia Court of Appeals, the D.C. Circuit, and it’s that time of the year when people make New Year’s resolutions and predict what’s going to happen in 2025. What is the Jen Riley prognostication as to the ultimate outcome of this particular case?

Jennifer: Well, this one is hard to say. The D.C. Circuit will have to reconsider its ruling with the Loper Bright framework in mind, which means it will have to engage in a more detailed analysis of whether the NLRB’s interpretation of the law is the best reading of the National Labor Relations Act. If the court decides that the successor bar doctrine doesn’t align with the statute, we could see a major shift in labor law, particularly in how unions and employers navigate these types of transitions.

Jerry: Well, that’s a very succinct summary of the significant implications of this case. Stay tuned, readers and listeners. 2025 – put on your seatbelts. This is going to be a heck of a ruling. Well, thank you so much, Jen, for your thought leadership and your contributions and giving us an inside baseball look at what’s going on in terms of the future interpretations of the Loper Bright doctrine, and how that will impact corporations and their defense of both labor and employment matters and class actions in general.

Jennifer: Thanks so much, Jerry. Thanks for having me, and happy holidays to all of our listeners!

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Bernadette Coyle with their discussion of the 2024-2025 edition of the American Tort Reform Association’s (“ATRA”) “Judicial Hellholes” report, which details the 10 least favorable venues for corporate defendants across the country.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Samsung Podcasts, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, and YouTube.

Episode Transcript

Jerry Maatman: Thank you, loyal blog readers and listeners for joining us for our weekly podcast series. My name is Jerry Maatman, and I’m a partner at Duane Morris, and joining me today is my colleague, Bernadette Coyle. Thanks so much for being on the podcast.

Bernadette Coyle: Thanks, Jerry. I’m very happy to be here.

Jerry: Today, our podcast covers one of my most favorite topics, and that is the annual report issued by the American Tort Reform Association, which goes by the acronym of ATRA, in terms of its annual report called the “Judicial Hellholes” report. It focuses on litigation issues and does a comparative study of litigation in all 50 states, and then ranks those states with respect to fairness or unfairness of the judicial system and bias, or lack of bias, in the administration of justice. So, it’s an important read for corporate counsel, those facing class action litigation, because it identifies what are suboptimal jurisdictions, what are challenging jurisdictions. And as a result, obviously in terms of our annual study of class action litigation, settlements, and rulings, many of the jurisdictions on that watch list happen to be epicenters for class action litigation. So, Bernadette, in this year’s report there were 10 specific jurisdictions listed as the top Judicial Hellholes, and I’m sure our loyal blog readers and listeners are anxious to hear – so what jurisdiction came out as on top of that infamous list of the worst jurisdictions in which to be sued in 2024?

Bernadette: This year, #1 was a defending champion from 2023; it was the Philadelphia Court of Common Pleas and the Pennsylvania Supreme Court ranked as the most challenging venue for defendants. And over the past few years, the courts there have been issuing nuclear verdicts. We’re talking about eye-popping nine figure damage awards that seem to be handed out with very little consideration for fairness. And additionally, a recent decision from the Pennsylvania Supreme Court has led to a flood of medical liability lawsuits by removing an important legal requirement for entry. In fact, I think they even allowed for duplicative damages in certain cases which only encourages more litigation. So, it’s definitely becoming a very plaintiff-friendly environment.

Jerry: So, kind of the watchwords are: it’s a petri dish or a hotbed for growing certain types of lawsuits. Moving on to #2, which I understand to be New York City. The report highlights it as one of the other really tough places to be sued. What’s your take on the ranking of New York City on the report?

Bernadette: Yeah, I think in New York City they noted a rise in fraudulent lawsuits, particularly with RICO lawsuits being filed against plaintiff firms and the city’s laws, including the Scaffold Law and the consumer protection act, are definitely ripe for abuse. And we’re seeing plaintiffs’ lawyers that are really cashing in on these opportunities, and it’s led to what the report is calling a “fraudemic.” It’s a growing problem in the city’s civil justice system, and unfortunately, leadership seems to be looking the other way.

Jerry: That’s certainly a very concerning trend for corporations that are sued in those jurisdictions. I know that #3 on the list is South Carolina in particular, its treatment of mass torts and the asbestos litigation. What are the problems identified there?

Bernadette: South Carolina’s asbestos judge has become infamous for being highly biased against corporate defendants. The judge often imposes unwarranted sanctions, modifies jury verdicts in favor of plaintiffs, and is becoming known for appointing a receiver to maximize insurance recoveries. All of that creates a legal environment where defendants don’t stand a fair chance, and plaintiffs are given an unfair advantage. This is really a textbook example of how judicial bias can distort the civil justice system.

Jerry: Sounds like that issue systemic to South Carolina in general, and mass tort litigation in particular. Moving on to #4, Georgia, where I litigate the defense of many class actions – what did the report have to say about the state of litigation in the Peach State?

Bernadette: Last year, Georgia was tied for #1 with Pennsylvania, and this year the report notes that Georgia is facing a rise in nuclear verdicts, huge excessive damage awards. And additionally, there’s a trend of inflated medical costs and laws that seem to set defendants up for failure. For example, Georgia still has an archaic seatbelt gag rule, meaning juries can’t even consider whether an occupant was wearing a seatbelt during a crash. It’s part of a broader trend in Georgia’s civil justice system that seems to favor plaintiffs and puts defendants at a severe disadvantage.

Jerry: Thanks. Well, next up is California, and I think that for the 42 years I’ve been a lawyer and dealing with corporate counsel, that seems to be the biggest litigation headache that they face in terms of doing business and getting sued in the state of California. What’s driving the inclusion of California this year in the Judicial Hellholes report?

Bernadette: California continues to be a major destination for plaintiffs’ lawyers looking to expand liability. The state’s legal landscape is very favorable for certain types of lawsuits. I mean, first off, California has the highest number of nuclear verdicts in the nation, and then you’ve got cases like Lemon Law claims and no injury lawsuits under the Private Attorneys General Act and the Americans with Disabilities Act. These are bogging down businesses and creating endless litigation that’s both costly and inefficient.

Jerry: What about Cook County, Illinois, where I was born and raised and sitting today? That deserves special mention this year – what was your take on Cook County’s inclusion?

Bernadette: Yes, Cook County is obviously very near and dear to us, and it’s also become infamous for its disproportionate share of lawsuits, especially no injury litigation and asbestos cases. One of the biggest issues here, though, is the Biometric Information Privacy Act, which has been abused to the point where lawsuits are filed over the very smallest technicalities.

Jerry: Well, those are the major geographic tours of the Hellholes. What about a brief overview of the remainder of the top 10 list?

Bernadette: Absolutely. Next is St. Louis, Missouri, which is also a hotbed for asbestos lawsuits, and for plaintiff-friendly rulings; the Michigan Supreme Court, which seems to allow reliance on junk science; followed by King County, Washington, which made it onto the list for the first time because of judges’ tendency to allow unfair group trials and junk science into court; and finally, Louisiana, with its nuclear verdicts that distort the fairness of its civil justice system.

Jerry: Well, that’s quite a tour of judicial highlights. The ATRA report, though, also has positive developments. What were some of those in terms of the legal landscape in 2024?

Bernadette: Yes, there are bright spots. For example, several states have strengthened their expert evidence rules to prevent junk science from entering court. The Third Circuit Court of Appeals ruled against lawsuits claiming insufficient product warnings when those warnings had been federally approved. And in Kentucky and Utah, we’ve seen courts make decisions that uphold fairness in the legal system.

Jerry: Well, that is good news in terms of judges being umpires and calling balls and strikes rather than being biased in favor of plaintiffs. I do believe that the report is essential, if not required reading, for our corporate counsel, and one can learn a lot looking at these reports from year to year and transposing them against litigation statistics that basically show the epicenters or hotspots of class action litigation tend to be clustered in these states that are identified by the report in terms of constituting a judicial hellhole. Well, thank you so much, Bernadette, for joining us on your very first podcast we really appreciate your contributions and thought leadership today, and thanks so very much.

Bernadette: Thank you for having me, Jerry, and thank you, listeners.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Jennifer Riley with their discussion of how the Trump’s second term in the White House could transform the class action arena heading into 2025.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Samsung Podcasts, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, and YouTube.

Episode Transcript

Jerry Maatman: Thank you, loyal blog readers and listeners, for joining us for this episode of the Class Action Weekly Wire. I’m joined for this episode by my partner, Jen Riley, the vice chair of Duane Morris’ Class Action Defense Group. Welcome, Jen.

Jennifer Riley: Thanks, Jerry. Great to be here.

Jerry: Today, we’re going to be discussing the potential impact of the second Trump presidency. Obviously, the last week has been dramatic in terms of the political world in America, and many people uppermost in their mind are what are going to be the new policies, the new procedures, the goals of the Trump administration, and how that’s going to play out in the class action litigation space. Jen, do you have some immediate thoughts in terms of what we’re going to see starting in 2025?

Jennifer: Thanks, Jerry. Well, since the time of Trump’s first administration, and really, over the past decade, American life and culture have really dramatically transformed. We’ve gone through a global pandemic, which drastically changed how we work and how employers manage their workplaces. The focus during the next Trump administration could reflect an even more pro-business approach with an emphasis on reducing class actions by supporting arbitration and limiting the opportunities for these large-scale lawsuits, especially in the employment space and in the consumer protection area. We also likely will see a few areas of particular focus, namely, immigration reform and easing of enforcement activity by federal agencies like the EEOC and the DOL, and a decrease in support potentially for initiatives, focusing on things like diversity in the workplace.

Jerry: I agree with those points. In living through the changeovers, from red to blue or blue to red, of the White House over the past several decades, I think this changeover may well be one of the most dramatic in memory. I’m looking for the impact on the federal judiciary and the differences between the types of individuals President Biden has nominated for appointments in the federal court compared to those that Donald Trump is apt to put forward, starting in 2025. I think that more conservative, measured federal judiciary may have a big impact in terms of class action litigation, and narrowing the circumstances where classes may well be certified. As far as immigration reform, I know that a lot of clients have been calling us about what is that to happen, and what sort of enforcement mechanisms will be in place. So, I think that America and its business leaders certainly are looking at some change in the offing, and some flux coming down the road.

Jennifer: Another area that I think we likely will see some change is in the artificial intelligence arena. The Trump administration could likely reverse some of the current administration’s regulatory efforts on AI, especially if they’re seen as having an anti-Big Business agenda. President Biden issued several executive orders that provided directives to federal agencies regarding AI, and President Trump could very well end those orders. Additionally, rather than focusing on regulations, the Trump administration could be more inclined to collaborate directly with tech companies – for instance, in crafting AI policies. One roadblock President Trump could have with any AI policy changes is the continued Democratic control of agencies, though, like the EEOC and the NLRB.

Jerry: Those are great points, and speaking about AI, obviously Corporate America is facing a patchwork quilt of laws and regulations without any overarching federal law, and the existence of various pockets of laws and regulations at the state level. So, a very difficult compliance challenge for companies. I think that the two Republican leaders on the commission at the EEOC, Andrea Lucas, and then Marvin Kaplan at the NLRB, may well be tapped to lead those organizations, but that might not take effect until mid-2025, and so maybe the trumpeted demise of government enforcement action at the Department of Labor or at the EEOC may well be overblown in a certain respect.

Jennifer: Oh, I absolutely agree. There have been several new regulations from the NLRB, the EEOC, and the Department of Labor over the past years, from changes to overtime rules, non-compete agreements, independent contractor classifications, and the implementation of the Pregnant Workers Fairness Act. Besides the activity slowing down from all agencies, whether it be ordered or due to lack of funding, though, there’s a chance that some of the regulations are rolled back with Trump’s new administration. The Trump administration also likely will reduce the focus on workplace diversity initiatives, including rolling back policies promoting affirmative action, or expanding definitions of workplace harassment. The EEOC might also take a more narrow approach to enforcing discrimination laws, for instance, things like LGBTQ rights or protections for other nontraditional segments of the workforce.

Jerry: Thanks, Jen. It’s certain change is inevitable and get used to it because it’s coming down the pike. We’ve seen it before, but it’s certainly underscored here in the circumstances of the shift from the Biden administration to the Trump administration. If you heard what he said on the campaign trail, change is in the offing. I know we’ll be addressing this in the forthcoming publication of the annual Duane Morris Class Action Review – that comes out in the first week of January of 2025. So, thanks very much for your thought leadership, Jen, and your analysis of what Corporate America is apt to face in the next few months under the new White House.

Jennifer: Absolutely thanks for having me, Jerry, and thank you to our listeners for joining us today.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman, special counsel Justin Donoho, and associate Ryan Garippo with their analysis of a major settlement in the data breach class action space, and what it signifies for trends in this area as well as data security best practices for companies.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Samsung Podcasts, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, and YouTube.

Episode Transcript

Jerry Maatman: Thank you, loyal blog readers for joining us for this week’s installment of our podcast series called the Class Action Weekly Wire. I’m joined today by my colleagues, Justin and Ryan, and the topic of the day is one of the most significant data breach class action settlements of 2024. Welcome, Justin and Ryan.

Justin Donoho: Hi, Jerry, thank you for having me.

Ryan Garippo: Thanks, Jerry. Happy to be here.

Jerry: So specifically, what we wanted to do was talk about the ins and outs of the $65 million class action settlement announced in a data breach lawsuit entitled Doe v. Lehigh Valley Health Network. Justin, can you set the stage for our listeners and readers about what this case is about and why it’s significant?

Justin: Yes, Jerry. In this case the plaintiffs are cancer patients. They filed a class action against Pennsylvania, based healthcare company, Lehigh Valley Health Network, for its alleged failure to protect their nude photographs taken during their cancer treatments from cybercriminals who hacked into the company servers, stole the photographs, and leaked them to the public in February 2023. The plaintiffs brought claims for negligence, breach of fiduciary duty, publicity of private matters, and other claims. The plaintiffs also sought punitive damages based on their assertion that, despite being told by the criminal hackers that the nude photos and other sensitive data would be released publicly if a ransom were not paid, the health system declined to take any action, and therefore allegedly made a knowing, reckless, and willful decision of their own to allow the criminal hackers to post their nude images on the internet.

Jerry: Most data breach class actions involve infiltration of systems involving social security information, payroll data, and like. Very unusual that would include photographs, let alone photographs of patients receiving treatment. Ryan, what were some of the particulars of the settlement agreement that plaintiffs’ counsel and defense counsel for the defendant had negotiated to get this case resolved?

Ryan: Well, Jerry, the breach affected over a 135,000 patients and employees, more than 600 of whom had their medical images posted online. So the class members will receive payouts ranging from $50 to $70,000. But the higher amounts going to those who actually had their new photos published on the internet, and the lower amounts being for those who suffered a less invasive invasion of their personal information. And, as you’ve mentioned overall, the company will pay a total of $65 million to sell those claims.

Jerry: So our Class Action Review tracks settlements in all substantive areas, including data breach, and over the last 36 months, anecdotally, data breach class actions just keep getting bigger and bigger and bigger. And this is a manifestation of that trend. How do you believe this will impact the price or the going rate of data breach class action settlements going forward in Corporate America?

Ryan: Well, Jerry, I think it’s only likely to go up. The Duane Morris Class Action Review analyzed the largest data breach settlements, and in 2023 plaintiffs secured about $515 million dollars in total for the top 10 settlements. The largest settlement being $350 million in the In Re T-Mobile Customer Data Security Breach Litigation, which accounted for the majority of that number, and the next largest settlement was $49.5 million in the In Re Blackbaud Inc. Customer Data Security Breach Litigation as well. So, this is settlement is very large for a data breach class action settlement overall, and healthcare institutions continue to be a favorite target for the plaintiffs’ bar in the cybersecurity space.

Justin: Thank you, Ryan. This settlement looks like it will likely be one of the largest data breach class action settlements in 2024 for sure. This case also continues the massive growth of data breach litigation in general over the past few years. Cybercrime is on the rise – companies need to likewise raise their own levels of data security practices to mitigate risks associated with these types of incidents. In fact, a number of data security practices including involvement of Board of Directors data encryption and password reset policies were included in some level of detail in this settlement as measures the healthcare company agreed to adopt in addition to paying out all that money to the plaintiffs. These are types of data security measures all companies should consider as they design and work to continuously improve their cybersecurity programs.

Jerry: Well, thanks so much, Justin and Ryan, for your analysis of this settlement and its implications for Corporate America. The newest edition, the 2025 Duane Morris Class Action Review, will come out in the first week of January of 2025, and my prediction would be this particular settlement certainly going to be on that top 10 list. Well, thank you loyal blog readers and listeners for tuning into this week’s installment of the Class Action Weekly Wire, and thank you, Justin and Ryan, for providing your thought leadership.

Ryan: Thanks, Jerry, and thank you to the listeners.

Justin: Thank you, Jerry. Thanks everyone.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associates Greg Tsonis and Derek Franklin with their analysis of a Wisconsin federal court decision weighing in on the two-step process for issuing notice of a Fair Labor Standards Act (“FLSA”) collective action, illustrating a gaining momentum among district courts toward rejecting a two-step “conditional certification” approach in favor of a one-step standard.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Samsung Podcasts, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, and YouTube.

Episode Transcript

Jennifer Riley: Thank you for being here again, for the next episode of our weekly podcast, the Class Action Weekly Wire. I’m Jennifer Riley and with me today are Greg Tsonis and Derek Franklin. Thank you for being on the podcast today guys.

Derek Franklin: Great to be here, thanks for having me.

Greg Tsonis: Yes, thanks Jen, I’m happy to be here.

Jennifer: Today we are discussing a recent ruling coming from the U.S. District Court for the Eastern District of Wisconsin, Laverenz v. Pioneer Metal Finishing. Greg, can you tell us a little about the background of this case?

Greg: Sure, so in this case the plaintiff Amanda Laverenz filed a class and collective action lawsuit under the FLSA and Wisconsin state law alleging that Pioneer deprived her and other similarly situated hourly employees of wages through its practice of rounding employees’ time clock entries to the nearest quarter hour and paying employees based on that rounded time. Now the plaintiff moved for conditional certification of a collective action, and argued that the court should employ a lenient two-step certification process established in 1987 by a Third Circuit district court in Lusardi v. Xerox Corp. Under the Lusardi framework, named plaintiffs need only present what courts have described as a “modest factual showing” that similar potential plaintiffs exist to satisfy the first step of conditional certification. In the second step, assuming others have joined the lawsuit as opt-in plaintiffs and the parties have completed discovery on the merits, the court would then make a final determination whether the opt-in plaintiffs actually qualify as parties to the litigation on the basis of substantial similarity to the named plaintiffs in what is known as a second-stage final certification order. Now here, Pioneer responded that the Court should follow the Fifth Circuit’s 2021 decision in Swales v. KLLM Transport Services, LLC, which rejected the longstanding approach developed in Lusardi.  Pioneer argued that the two-step approach “is inconsistent with the FLSA’s purpose and Seventh Circuit case law stressing the similarities of FLSA certification to Rule 23 certification, which requires ‘rigorous’ scrutiny.”

Jennifer: Yes, the Swales ruling changed the conditional certification analysis significantly. The Fifth Circuit in that case recognized that nothing in the text of the FLSA even mentions “conditional certification.” The Swales court directed that courts should consider all available evidence to determine if analyzing the merits of pending claims required a “highly individualized inquiry” into each opt-in’s circumstances and, if so, to declare a certification inappropriate. Derek, which standard did the court in the Laverenz action ultimately use?

Derek: Well, Jen, the court chose to go with Pioneer’s requested standard. The court adopted the Fifth Circuit’s FLSA collective certification approach in Swales and denied Plaintiff’s motion for conditional certification. The court actually cited in its ruling a 2022 Annual Class Action Report our colleague and Duane Morris partner Gerald L. Maatman, Jr. served as General Editor. In its ruling, the court noted that federal courts in 2021 granted FLSA conditional certification motions in 81% of rulings on such motions during the first stage of the two-step process despite – in that same year – granting 53% of FLSA decertification motions at the next stage. The Court gleaned from that data that “over half of those conditionally certified putative classes failed to survive upon a more rigorous review” and concluded, as a result, that the two-step certification process “defeats the very goal it set out to accomplish — efficiency.” The court ultimately found that “significant factual differences exist regarding how the [time rounding] policy affected each employee” given that “the rounding benefitted some and negatively affected others.” The court also stated that too many individualized claims remained in the matter that would necessarily involve fact-specific inquiries. And the court explained that “it would seem particularly inefficient and unfair to notify a broad class of employees,” given its conclusion that Plaintiff’s proposed collective action claims “involve highly individualized inquiries and defenses.”  Toward that end, the Court determined that “authorizing notice in a case such as this would turn a tool into a sword,” and that “many a plaintiff would likely join the line, requiring Pioneer to defend dozens — possibly hundreds — more claims despite the fact that Laverenz has not even showed a violation of law.” Ultimately, the Court concluded that Plaintiff “failed to provide a sufficient basis for the court to facilitate notice to potential plaintiffs,” and therefore, the Court denied Plaintiff’s motion for conditional certification.

Jennifer: Wow, thanks for the overview. What a significant ruling for employers. How do you both imagine this will impact future rulings on conditional certification in the Seventh Circuit?

Greg: Well Jen, the Duane Morris Class Action Review actually analyzed FLSA conditional certification rates, and, in 2023, plaintiffs won 75% of first stage conditional certification motions. However, only 56% of those conditionally certified collective actions survived motions for decertification involving a more rigorous scrutiny. Hence, the stakes are quite meaningful in terms of the approach outlined in the Laverenz ruling.

Derek: And I would add to that – as any employer who has been sued by a plaintiff seeking to represent an FLSA collective action knows – the discovery burden imposed by application of the two-step Lusardi standard is onerous. Full merits discovery lasting more than a year is common, as opposed to a narrowly-targeted investigation of the work performed by the plaintiffs along with facts relating to the relevant factors. For that reason alone, employers with operations within the Seventh Circuit will be happy to know they can cite this ruling in the future.  While no one can predict the future with any particular degree of certainty, it seems likely that this new legal trend regarding the collective action notice process may eventually need to be resolved by the U.S. Supreme Court.

Jennifer: Thank you both for your great analysis of this ruing and the possible implications it might have in the future on conditional certification motions. We will be providing the new edition of the Duane Morris Class Action Review in early January, which will have statistics on how conditional certification is shaping up for 2024. Greg and Derek, thanks for being here today, and thank you so much to our listeners for tuning in.

Greg: Thanks Jen and thank you listeners.

Derek: Happy to be here and thanks everyone.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and special counsel Rebecca Bjork with their discussion of key sanctions rulings in the past 12 months of class action litigation.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Samsung Podcasts, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, and YouTube.

Episode Transcript

Jennifer Riley: Thank you for being here again for the next episode of our weekly podcast, the Class Action Weekly Wire. I’m Jennifer Riley, partner at Duane Morris, and joining me today is special counsel Rebecca Bjork. Thank you so much for being on the podcast today, Rebecca.

Rebecca Bjork: Great to be here, Jen. Thank you for having me.

Jennifer: Today we have a little different topic – we are discussing significant decisions granting or denying sanctions in class action cases. Rebecca, what are some of the reasons that a court could grant sanctions in a class action?

Rebecca: Sanctions are usually issued in response to a party violating court procedures, or abusing the judicial process in some way. They are more simply thought of as penalties. In civil cases, sanctions are typically in the form of a monetary fine. But the most extreme sanction imposed in civil cases, including class actions, can be dismissal with prejudice of the filing party’s complaint or dismissal of the answer of the responding party. In either of those cases the sanctioned party would have no further recourse available, and the case would be over with judgment entered against them.

Jennifer: Given the cost of defending a class action, corporate defendants also sometimes move for sanctions if the claims are frivolous. For instance, the Sixth Circuit issued a ruling on sanctions in Garcia, et al. v. Title Check, LLC. In that case, the plaintiff filed a class action against the defendant alleging that its buyers fee violated the Michigan General Property Tax Act. In that one, the district court had dismissed the plaintiffs’ claims, finding that the fee was not prohibited by the statute, and then the defendant moved for sanctions against the plaintiffs’ attorneys on the ground that the case was frivolous and had forced the defendant to incur unnecessary legal fees. There the district court granted the motion for sanctions, and ordered the plaintiffs’ counsel to pay attorneys’ fees and costs north of $73,000. On appeal, the Sixth Circuit then affirmed the district court’s ruling in that when the plaintiffs argued that the district court erred in imposing the sanctions because the legal issues in the case were debatable, and because the district court misunderstood Michigan law.

The Sixth Circuit, however, agreed with the district court’s conclusion that the plaintiffs’ counsel had unreasonably pursued a frivolous claim based on an implausible interpretation of the statute. The Sixth Circuit found the plaintiffs should have known that their claims lacked merit. It also rejected the plaintiffs’ argument that sanctions should have been limited to the specific filings relating to the unnecessary claims. Instead, the Sixth Circuit held that the entire action was frivolous and vexatious. For these reasons it affirmed the district court’s ruling, and imposed the sanction on the plaintiffs’ counsel.

Rebecca: A really interesting case involving sanctions. Last year in a class action was AFL-CIO v. LSRI,LLC, where the court entered more serious sanctions. The plaintiffs were two AFL-CIO locals, Local 846 and Local 847, and their employee benefit plans, and the plaintiffs filed a class action alleging that the defendant failed to pay contributions for workers covered under a labor contract for a project involving SpaceX in Cape Canaveral, Florida, in violation of ERISA. Plaintiffs further asserted, and this is important for the sanctions piece of this case, that the actual amounts that plans were owed could not be determined without an audit of the defendant’s records. So the sanctions issue arose in the case after the defendant failed to appear after being served with a complaint, and the court subsequently entered a default order against it. But then the court also ordered the defendant to submit its books, ledgers, payroll records, bank statements, other financial documents reflecting the hours worked by the defendant’s employees. The defendant did not comply with this order, so the plaintiffs moved for an order holding the defendant in contempt of court. After the defendant failed to appear at the hearing on the motion for contempt, the court granted the motion finding the defendant in contempt, and further imposed a compliance fine of $200 per day, and in addition awarded the plaintiffs’ attorneys’ fees and costs. Subsequently, the plaintiffs had to file another motion – and this is surprising – they sought the arrest of the defendant’s principal as a last resort, to obtain compliance with the court’s orders. The court concluded that the monetary sanctions had not been effective in inducing the defendant to comply, and therefore determined that the arrest of the defendant’s principal was appropriate, and so, for these reasons, the court ordered the arrest of the defendant’s principal for civil contempt.

Jennifer: That’s a great example. Rebecca. Sanctions are also deemed warranted in some cases where a party is not forthright with its discovery responses. A great example of that is in In Re Keurig Green Mountain Single-Serve Coffee Antitrust Litigation, where death knell sanctions were imposed. The plaintiffs filed a class action alleging that the defendants violated antitrust laws by operating a monopoly, by using exclusive dealings and exclusionary product design. The plaintiffs filed a motion for sanctions asserting that the defendant Winn Dixie failed to respond to discovery. The court granted the motion, and ordered Winn Dixie to pay attorneys’ fees and costs. The court found that Winn Dixie repeatedly and consciously failed to comply with three court orders indicating that lesser sanctions would not be effective.

Rebecca: Right. Federal courts have wide discretion in calibrating sanctions orders. In 2023, a ruling in Lopez, et al. v. Fun Eats & Drinks, LLC demonstrated how sanctions can include civil contempt orders. Plaintiffs moved for contempt and an award of attorneys’ fees after the defendants violated multiple court orders. The court granted that motion, and had previously entered a final judgment against the defendants, and awarded the plaintiffs more than $538,000, plus attorneys’ fees. So the plaintiffs moved for additional attorneys’ fees, and the defendants failed to respond to the motion. The plaintiffs thereafter served post judgment discovery on the defendants, and they again failed to respond. Plaintiffs moved to compel discovery, and the defendants counsel responded by moving to withdraw as counsel of record due to the defendant’s failure to communicate with them regarding the post judgment, discovery. The court ended up denying the defendant’s motion, and granted the plaintiff’s motion to compel, and the defendants once again failed to respond, and the plaintiffs then resorted to filing their contempt motion. The court granted the motion, holding the defendants in contempt for the refusal to comply with the court’s orders and respond to the post judgment discovery, and also held the defendant’s attorney in civil contempt for his failure to appear at the show cause, hearing, as ordered by the court. So that in the end the court granted the plaintiff’s motion, and ordered the defendants and defendants counsel to pay for the plaintiff’s additional attorneys, fees in the amount of over $5,000.

Jennifer: Thanks, Rebecca, that is a great example as well. Were there any notable rulings that you can think of where sanctions were denied over the past year?

Rebecca: Well, actually, most times sanctions motions are denied, and that is simply because the moving party has not been able to demonstrate bad faith or willfulness by the other party. One example is Colucci, et al. v. Health First, Inc., where the plaintiffs allege anticompetitive practices in the acute healthcare market against the defendant. The court denied the motion for class certification due to lack of standing to represent the class, and the parties later stipulated to dismiss the case. So after that the defendant sought sanctions under Rule 11, arguing that the plaintiff’s counsel had no factual or legal support for asserting standing in the first place. This court denied the motion for sanctions, stating that the arguments in support of class certification were not lacking in evidentiary or legal support sufficient to justify an order granting sanctions, and the defendant also failed to demonstrate any improper purpose in prosecuting the case by the plaintiff’s attorneys.

Jennifer: Thanks, Rebecca, great insights and analysis. I know that these are only some of the cases that had interesting rulings on motions for sanctions over the past 12 months, and that we are apt to see some notable rulings over the remainder of 2024 as well. Rebecca, thanks for being here and to our audience listeners – thank you so much for tuning in.

Rebecca: Thank you, Jen.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Sarah Gilbert with their discussion of key developments in litigation and legislation related to the California Private Attorneys General Act.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Samsung Podcasts, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, and YouTube.

Episode Transcript

Jerry Maatman: Thanks, loyal blog listeners and readers for joining us on this week’s installment of the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and I’m joined by my colleague, Sarah Gilbert, of our San Diego office. Welcome, Sarah.

Sarah Gilbert: Great to be here, Jerry. Thank you.

Jerry: Today we wanted to discuss trends and important developments in state court class action, litigation. Since the decision of where to file a class action is always a strategic imperative for the plaintiff’s bar, and then, whether or not to remove it from state court to federal court. For defense counsel, class action litigation is very much like buying real estate – location, location is everything, Sarah, what are some of the considerations that you’re often speaking to your clients about in terms of state court versus federal court class action litigation.

Sarah: So, although almost all state law procedural requirements for class certification mirror Rule 23 of the federal rules. The plaintiffs’ bar often perceives state courts as having more positive predisposition towards their clients’ interests, particularly where putative class members have connections to the state and the events at issue occurred in the state where the action is filed. Beyond forum shopping between state and federal court, the plaintiffs’ bar also seeks out individual states that are believed to be more plaintiff-friendly, such as California, Georgia, Florida, Illinois, Louisiana, Massachusetts – among others – and these are actually among the leading states where plaintiffs’ lawyers file a volume of class actions. These courts are thought to have more relaxed procedural rules related to discovery, consolidation, and class certification; a lower bar for evidentiary standards; and higher than average jury awards – among other considerations – all of which incentivize forum shopping related to state class actions.

Jerry: I’ve been a lawyer 42 years, and I think at last, count, I’ve been in 48 different states defending class action litigation. And I’d have to say that although state statutory rules and regimes are based loosely on Federal Rule 23, every state approaches class action litigation a little differently, and there are nuances to the law. What do you think is important, for example, for companies operating in California to know about the nuances of California class action litigation?

Sarah: Absolutely. So, it is very important for companies in California to pay attention to California’s controversial Private Attorneys General Act – we call it the PAGA. The PAGA authorizes workers to file lawsuits, to recover civil penalties on behalf of themselves, other employees and the State of California, for state labor code violations. As of now, California is the only state to have enacted this type of law so far. However, several other states are considering their own similar private attorneys general laws, including New York, Washington, Oregon, New Jersey, and Connecticut. So it will be crucial to monitor state legislation on this topic given the impact such laws will have on class litigation strategy moving forward.

Jerry: Well, I know this has been an especially interesting year for PAGA related developments, especially following the reform legislation signed by Governor Newsom in June. And, as I understand it, after June of 2024, there’ll be a new regime in terms of how PAGA damages, PAGA procedures will take place. And although not to be applied retroactively and only into the future, it’s going to be a brand-new playing field in California. I know you’ve been working very hard on strategies for clients to deal with these changes, what would be some of the high-level points or takeaways that you think are important for clients?

Sarah: Sure. So I mean, as is clear and as you referenced, the PAGA reforms and activity are hotly contested, hotly debated in California. California is the epicenter of class actions filed in state court. It has more class action litigation than any other state. While all varieties of class-wide cases are filed in California, a high majority of those are consumer fraud and employment-related. And something I know, with all of our clients in California facing such claims, is that even where an employer’s written formal policies appear facially neutral and compliant – which is very often the case – employees may successfully seek class certification for demonstrating common issues where an employer’s practices and protocols allegedly violate the law, even if those policies, as written, appear to be compliant.

Jerry: Thanks, Sarah. You know, I think it’s very interesting – most companies think that the California Supreme Court exists to find in favor of plaintiffs. Yet in the last month it issued the Lyft decision, which has a direct ‘apples and oranges’ practical effect on PAGA litigation. As I read the opinion, it says, where an employer is facing multiple PAGA actions and settles one of them, the litigants in the other pending PAGA actions cannot parachute in, intervene and challenge the other settlement. So it makes it easier for a company to deal with PAGA litigation and to settle litigation. What are some of your thoughts on the takeaways from the California Supreme Court decision in Lyft?

Sarah: Yeah, absolutely. This was a seminal ruling came out on August 1st of this year. To give some background, in rapid succession between May to July 2018, three plaintiffs, all Lyft drivers, Olson, Seifu, and Turrieta filed separate PAGA actions alleging improper classification as independent contractors. So in 2019, Turrieta reached a $15 million settlement with Lyft, which included a payment of $5 million in attorneys’ fees. As part of the settlement, Turrieta amended her complaint to allege all PAGA claims that could have been brought against Lyft. She then filed a motion for court approval of the settlement consistent with practice. And although the LWDA did not object to the settlement, when Olson and Seifu, the other two plaintiffs, and their counsel, got wind of the settlement, they moved to intervene, and objected. The trial court denied the intervention requests, approved the settlement, and then denied motions by Olson and Seifu to vacate the judgment in the Turrieta PAGA action. The court of appeal affirmed, finding that as nonparties, Olson and Seifu lacked standing to move to vacate the judgment, as only an aggrieved party can appeal from a judgment. On the intervention issue, the Court of appeal explained that the real party interest in a PAGA action is the State of California, and thus neither Olson nor Seifu had a direct interest in the case.

The California Supreme Court then granted review to consider whether a PAGA plaintiff has the right to intervene, object to, or move to vacate a judgment in a related pocket action that purports to settle the PAGA claims that a plaintiff has brought on behalf of the State. The California Supreme Court ended up agreeing with the court of appeal and the trial court, and they made a few notable findings. The California Supreme Court noted there was nothing in the PAGA statute expressly permitting intervention, and that PAGA’s purpose to penalize employers who violate California wage & hour laws and deter such violations was well served by the settling PAGA plaintiff, thus having other PAGA plaintiffs involved in a settled PAGA claim is not necessary to effectuate PAGA’s purpose. Relatedly, the Supreme Court also found significant the fact that the PAGA statute only requires that notice of settlement be sent to the LWDA and approved by the trial court, necessarily implying that other litigants need not be informed of the settlement or otherwise involved.

The Supreme Court also noted that permitting intervention would result in a PAGA claim involving multiple sets of lawyers, all purporting to advocate for the same client, fighting over who could control the litigation and settlement process, and who could recover the attorneys, fees. The Supreme Court highlighted that PAGA plaintiffs nonetheless have a variety of options to pursue other than intervention, such as consolidation or coordination of PAGA cases, to facilitate resolution of the claims in a single proceeding; or PAGA plaintiff can offer arguments and evidence to a trial court related to the PAGA settlement; or raise his or her concerns with the LWDA, so as to spur LWDA action.

Finally, the Supreme Court then held that the same reasoning for its conclusion against a right to intervention also meant that a PAGA plaintiff has no right to move to vacate the judgment obtained by another PAGA plaintiff in a separate PAGA action, or to require that any objections he or she files to another plaintiff settlement be ruled upon.

Jerry: Thanks for that excellent overview, Sarah. I think 2024 and 2025 are going to be bellwether years in California, not only for PAGA related rulings, especially as the reform legislation is implemented, but just class action litigation in general. As our loyal blog readers and listeners know, we do an annual study called the Duane Morris Class Action Review. We download every filing, every ruling in state and federal courts throughout the United States. This morning there were 118 class actions recorded as being filed yesterday, and 40% of them were in the state of California. So California is truly the epicenter of class action litigation. Well, thanks so much for joining us on this weekly episode, Sarah, and thanks so much for your thought leadership in this space.

Sarah: Thank you. Thank you, Jerry.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Nick Baltaxe with their discussion of the settlement process in class action litigation and common issues that arise for both plaintiffs and defendants while crafting settlement agreements.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Samsung Podcasts, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, and YouTube.

Episode Transcript

Jennifer Riley: Thank you for being here again for our next episode of the weekly podcast the Class Action Weekly Wire. I’m Jennifer Riley, partner at Duane Morris, and joining me today is associate Nick Baltaxe. Thank you for being on the podcast, Nick.

Nick Baltaxe: Always a pleasure, Jen, happy to be here.

Jennifer: Today we’re discussing settlement issues in class action litigation over the past 12 months. Nick, how often are there settlements in class action litigation?

Nick: You know, class actions are typically not tried to verdict. Trials in these situations are rare, because financial exposure in most of these cases can be vast, and the possibility of an adverse verdict is usually an unacceptable risk to the employer. Because of that, most potential class actions are resolved either before or on the heels of a class certification order. Rule 23 not only provides a process for that certification of the class action, but also does provide a procedure for settlement of the class action claims as well. Specifically, Rule 23(e) lays out a three-part settlement approval process. It includes preliminary approval, then notice to the class, and final settlement approval.

Jennifer: And what would you say are some of the benefits of settling these types of cases?

Nick: You know there are benefits to everyone included. Early settlements offer plaintiffs relatively quick payments, and they get to kind of skirt around the longer, drawn out class certification and class litigation process. It’s a benefit to the defendant because it allows the defendants to end cases early, which usually avoids the costs of protracted litigation, and usually what is very expensive discovery. Also, there’s a benefit to the court system as they get to avoid needless litigation that clogs court dockets. Usually, when permitted, parties frequently choose to settle on a confidential basis, which also allows the avoidance of risk of adverse publicity which is a dynamic that can benefit both defendants and plaintiffs.

Jennifer: Are there any obstacles to settling or getting court approval of class wide settlements? Or what would you say some of the biggest obstacles are?

Nick: Yes. So, as we stated, there’s both a preliminary and a final approval process for these class settlements. In order to secure a court’s approval at the preliminary stage, the parties must provide sufficient information to the court to determine whether or not it will likely be able to approve the settlement and certify the classes solely for the purposes of the entry of judgment. Rule 23(e) includes a detailed list of factors for consideration before final approval, as well, including the quality of class representation. Whether the negotiation took place at an arm’s length, the adequacy of class relief, and the equitable treatment of the class members. Class notice at the preliminary approval stage is also governed by this rule and outlines the proper process for providing notice to the class members.

Jennifer: Thanks, Nick. The settlement approval process is far from a rubber-stamping process, at least in many courts. While the legal standards are rule-based, courts tend to apply the standards in less than identical fashion based on the case law of the federal circuit which within which they’re located, as well as based on their own discretion. So what might pass muster in one courtroom may not pass muster in another courtroom. Courts do tend to use a less rigorous standard for certification of a class for settlement purposes, though, as compared to non-settlement purposes. I think this is especially evident with the Rule 23(b)(3) requirement of predominance. What do you think this means for counsel crafting these settlements?

Nick: Yes, settlement on a class wide basis consistently poses strategic dilemmas both for plaintiffs and defendants alike. There are multiple issues that need to be considered recrafting the settlement. For example, how much can a defendant concede without compromising its ability to defend the case to the extent the settlement ends up falling through or is not approved; can we settle something on a class wide basis that may be too cheap, and therefore deemed to be inadequate or unfair when being reviewed by the courts; and finally, how extensive and broad can the release language be to cover the settlement parties without risking of that not being approved by the court.

Jennifer: And the courts can answer those questions on a very wide spectrum. So, now that we’ve laid out the settlement process, do you have any notable rulings that you wanted to discuss from the past 12 months?

Nick: So classified settlements require that plaintiffs show all the applicable requirements of Rule 23, and courts have, and will, deny approval to a proposed class-wide settlement if those requirements are not established. A good example is a case called Mercado, et al. v. Metropolitan Transportation Authority. In that case, the plaintiffs, who are a group of employees of the MTA, filed a collective action alleging that the defendant failed to pay overtime compensation in violation of the FLSA.

The parties ultimately settled the claims, and the plaintiffs filed a motion for preliminary settlement approval. However, the court denied the motion. While the parties had asserted that the litigation would have been protracted, expensive, and risky – and that the settlement provided close to maximum recovery for plaintiffs – the court found that the parties failed to provide any documentation to support their assertions concerning the ranges of possible recovery and the reasonableness of the settlement. The court also noted that the settlement agreement’s release was overly broad because it extended liability releases to various entities beyond the defendant as well as to individuals who are not part of the lawsuit. The court also examined attorneys’ fees and costs. In the case, the plaintiffs’ counsel sought a fee of one-third of the settlement proceeds and reimbursement of all costs. The court opined that the requested rates were reasonable, but the plaintiffs’ counsel failed to provide any evidence whatsoever to determine whether the costs were also reasonable. The court finally concluded the plaintiffs failed to address whether the conditional certification status of the collective action affected the settlement; whether they were requested service rewards for the named plaintiffs; and that the fees and the cost of the administration of the settlement fund were reasonable. Accordingly, the court denied the motion for preliminary settlement approval.

Jennifer: Nick, how often would you say that there are objections to class action settlements?

Nick: So there is also a process for class members to object to the settlement, and there are objections all the time in these situations to these settlements. Sometimes these objectors are even successful in overturning the settlement or getting it vacated on appeal. An interesting example from the past 12 months is a case called In Re Wawa, Inc. Data Security Litigation. In that case, the plaintiffs allege that their personal information was compromised following a data breach in which hackers gained unauthorized access to Wawa’s payment systems, therefore, compromising the credit and bank card data of around 22 million customers.

The case was ultimately settled for $9 million in gift cards and other compensation to customers, including $3.2 million for attorneys’ fees and costs. One of the class members, named Theodore H. Frank, objected to the settlement, arguing that the fee calculation was unreasonable, and arguing that the settlement was based on a constructive common fund that combined attorney and class recovery, therefore, making the fee award disproportionate to the amount that was being provided to the class members. The objector also raised concerns about side arguments between class counsel and Wawa.

The district court, however, approved the settlement and dismissed the objections. However, Frank appealed, and the Third Circuit vacated the district court’s ruling. The Third Circuit in doing so highlighted two key considerations in evaluating fee rewards: first, the relationship between the fee award and the benefit received by the class members; and second, any side agreements between class counsel and the defendant. The Third Circuit ruled that the district court on remand had to review the fee award with “fresh guidance” from the appellate level, particularly regarding arrangements between the parties prior to any settlement approval being granted. The Third Circuit also noted the parties’ “clear sailing” arrangement, under which Wawa agreed not to contest any fee petitions filed by class counsel for the consumers, and the fee reversion provision that any reductions in class counsel fees would be returned to Wawa rather than distributed to the class members. The Third Circuit made sure that both of those were being reviewed to determine whether or not they were fair and reasonable. The Third Circuit further opined the district court should consider whether the funds made available to the class members, rather than the amount claimed during the claims process, was the best measure of reasonableness, and whether the fee reward was reasonable in light of any other side agreements between class counsel and Wawa. With all those considerations in mind, the Third Circuit accepted the objection and vacated and remanded it to the district court.

Jennifer: Thanks, Nick. Very, very interesting, and a great example of an appellate court articulating the fairness considerations that should be applied by district courts in considering approval of class action settlements.

Well, I think we are about out of time here for today. So thanks so much for joining me, Nick, and thanks to our listeners for being here. We will be sure to give more updates on settlement issues in class action litigation on our blog, the Duane Morris Class Action Defense Blog, so stay tuned.

Nick: Thanks, all.