Category: Class Action Weekly Wire

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Christian Palacios with their discussion of what is believed to be the first summary judgment ruling for a certified class under the Illinois BIPA. The Illinois trial court’s decision in this case underscores the danger that companies face under state privacy “strict liability” statutes.

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

Episode Transcript

Jerry Maatman: Thank you for being here, our loyal blog listeners. Welcome to this week’s edition of the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and I’m joined today by my colleague, Christian Palacios. Thank you for being on the podcast today.

Christian Palacios: Thanks, Jerry. I’m really happy to be here

Jerry: Today we’re talking about BIPA ruling – the Illinois Biometric Information Privacy Act, in a case called Thompson, et al. v. Matcor Metal Fabrication (Illinois), Inc., something that we blogged about – a very important opinion. Christian, can you give our listeners kind of an overview of why this case is significant and one they ought to take notice of?

Christian: Absolutely, Jerry. In September of 2019, Matcor Fabrication rolled out a new timekeeping policy, whereby it collected employees, fingerprints using “biometric scanners” for the purposes of determining when employees clocked in and out of work. The scanners that collected this information were connected to Matcor’s timekeeping vendor – ADP – and the company sent finger scan data to ADP every time an employee scanned their fingertips. The plaintiff and class representative, William Thompson, subsequently brought a lawsuit in May of 2020, alleging the company’s timekeeping policy violated the Illinois BIPA. Nearly one year after the lawsuit had commenced, Matcor implemented BIPA-compliant policies, which included distributing a “Biometric Consent Form” outlining Matcor’s policies collecting, retaining, and destroying employee data.

Jerry: Thanks. Now, in this case the plaintiffs early on in the litigation filed a motion for class certification, which was granted. Then there was class-wide discovery, and, as I understand, the record dueling motions, or cross motions for summary judgment were filed, both by the plaintiff on behalf of the class and the defendant. Both in essence saying there was no material issue of fact and liability was either established, if you believe the plaintiff – or there was no liability, if you believe the papers of the defendant. What did the trial court do in ruling upon those cross motions?

Christian: So the court held that there was no dispute of material facts that Matcor’s timekeeping policies during the class-wide time period violated the BIPA. In its ruling, the court dismissed a series of defenses offered by the company, including that in order for the BIPA to apply, Matcor’s timeclocks needed to “collect” and store its employees’ fingerprints, rather than just transmit it to a third-party vendor. The court was unconvinced with this argument. It opined that the BIPA also applied when timeclocks collected biometric information “based on” a fingerprint. Matcor further argued that there was a difference between the “fingertip” scans that it took and the “fingerprint” scans covered by the BIPA, but it was unable to cite authority that showed any meaningful difference between the two. Finally, Matcor argued that the court needed “expert testimony” to assess the type of information the company’s time clocks collected. The court rejected this contention. It observed that collecting employees’ fingertip information clearly fell under the BIPA’s definition of biometric information.

Based on the facts, the court determined that it was undisputed that Matcor began using biometric timeclocks to collect employees’ fingerprints in 2019, and the company didn’t implement a BIPA-compliant policy until one year after the plaintiff commenced his suit. The record also clearly shows that Matcor failed to obtain its employees consent before collecting their fingerprints, and only obtained BIPA releases two years after the suit was initiated. Accordingly, the court granted the plaintiff’s motion for summary judgment and the lawsuit will now proceed to the damages stage.

Jerry: It’s a pretty devastating ruling insofar as basically, there’s no question right now other than damages. And at least in my experience, that’s a very high-stakes maneuver to file a motion for summary judgment on a class-wide basis. And so you can kind of count on one hand the number of times that a plaintiff or defendant ever wins summary judgment when it involves all issues in a case with respect to liability on a class-wide basis. It does show the devastating nature of a failure of compliance by an employer with the requirements of BIPA and kind of is a call to other employers to make sure that they have their employment law house in order to take care of these things.

Christian: Exactly, Jerry. Although Illinois was one of the early adopters of such a stringent privacy laws, it’s certainly not going to be the last, and companies should take preventative measures to limit liability associated with such privacy statutes.

Jerry: Well, thanks so much, Christian, for devoting your thought leadership in this area, great having you on the show and having you part of the podcast. And to our loyal blog listeners, have a happy holiday season!

Christian: Thanks for having me, Jerry. Happy holidays to you and all your listeners.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Tyler Zmick with their discussion of an Illinois Supreme Court ruling that is welcome news for BIPA defendants and companies operating in the health care space.

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

 Episode Transcript

Jerry Maatman: Thank you loyal blog readers and listeners, welcome to this week’s installment of the Class Action. Weekly Wire. Joining me today is my colleague, Tyler Zmick, here at Duane Morris.

Tyler Zmick: Thanks, Jerry. Great to be here.

Jerry: Today we’re discussing the most recent decision of the Illinois Supreme Court in Mosby v. Ingalls Memorial Hospital, a decision by the high court regarding exemptions under the BIPA statute – which is the source of so much class action litigation here in Illinois. Tyler, you’re one of the foremost thought leaders in this particular space – what’s your read on this particular decision?

Tyler: Sure, well I think it’s a significant and rare defendant-friendly ruling. And this exception at issue in the case could be potentially pretty broad and could be a basis for defendants to assert viable defenses in cases that are sort of less obviously involving or related to healthcare than this specific Mosby case.

But with respect to this case that went before the Illinois Supreme Court – the plaintiffs were nurses, and the hospitals they worked at required them to use a fingerprint-based medication dispensing system. So basically, the nurses had to scan their fingerprints to verify their identities, and the system would then give them access to controlled medicines which the nurses would then give to their patients. So, the plaintiffs sued the hospitals they worked for, in addition to the company that sold the medication dispensing device, and they alleged that all the defendants violated the BIPA by using the device to collect their biometric finger scan data without complying with the BIPA statute’s notice and consent requirements.

In the trial court, the defendants moved to dismiss, and they did so on the basis that the claims failed because plaintiff’s’ data was excluded from the scope of the BIPA. And specifically § 10 of the statute states that “biometric identifiers do not include information captured from a patient in the health care setting or information collected for healthcare treatment, payment, or operations under HIPAA.” And, as we all know, HIPAA is the federal health privacy statute that applies in many circumstances, and is often cross-referenced in state statutes. So defendants argued that the latter clause regarding HIPAA applied, and that plaintiffs’ fingerprints had been used so that the nurses could provide medicine to treatments, meaning the fingerprints were collected for healthcare treatment under HIPAA, but the trial court denied the motions to dismiss, which led to the appeal – first the Appellate Court, and then to the Illinois Supreme Court.

Jerry: I thought that the trial court’s disposition of the exemption, as well as the discussion by the Illinois Appellate Court regarding the either narrow or broadness of that particular exemption, was very interesting. I know, in handling these sorts of cases, plaintiffs always argue that exemptions to liability should be construed very narrowly. But it seems like in this particular case, the Illinois Supreme Court ruled in a very practical and straightforward way. With respect to the exemption, what did you find interesting between the trial court, Appellate Court, and Supreme Court’s treatment of the exemption?

Tyler: That’s a good question. I think primarily the Appellate Court’s reading of the healthcare exception in the BIPA statute was less based on the plain language of the statute, and as we know, the first rule of statutory interpretation is, go with the plain language of the statute, and read every word, so nothing is superfluous. And that is what the Illinois Supreme Court did here, and also interestingly, what one of the three appellate court justices did – specifically Appellate Court Justice Mikva thought that the exception should be applied more broadly in the way the Illinois Supreme Court did end up interpreting it.

Jerry: I went to law school with Justice Mikva, a good friend and very well respected in the bar. Did you think that the dissent in terms of its interpretation, somewhat carried the day and swayed the Illinois Supreme Court in terms of the result that we saw here from the high court?

Tyler: Yes, absolutely. I mean in pretty much every respect the Illinois Supreme Court agreed with Justice Mikva’s dissent. The high court unanimously held that as Justice Mikva opined that the BIPA’s exclusion for information collected for healthcare treatment, payment, or operations under HIPAA can apply to the biometric data of healthcare workers, and not only patients. And obviously here we have plaintiffs that were nurses and thus healthcare workers.

Going to the specific analysis that was adopted by the Supreme Court and Appellate Court’s justice, the high court determined that the relevant sentence of § 10 excludes from the definition of biometric identifier data that may be collected in 2 separate and distinct scenarios rather than overlapping scenarios. Specifically, biometric identifiers do not include (i) information captured from a patient in a healthcare setting or (ii) information collected, used, or stored for healthcare treatment, payment, or operations under HIPAA. And the Supreme Court again agreed with defendants that the two categories are different, because the information excluded under the first clause originates only from the patient, whereas information excluded under the second clause may originate really from any source. And regarding that second HIPAA clause, the Supreme Court observed that the Illinois Legislature borrowed the phrase ‘healthcare treatment, payment, and operations’ from the federal HIPAA regulations, and it’s important to note that the federal HIPAA regulations in turn provide relatively broad definitions for those terms. So it remains to be seen just how broad the BIPA’s healthcare exception will be when applied in other future BIPA cases.

Jerry: Well, it seems to me this is a gem of a ruling, and one that defendants – both in and outside of the healthcare industry – should put in their toolbox as an additional line of defense to oppose efforts to certify classes or for plaintiffs’ lawyers prosecuting BIPA cases. So thank you very much for your analysis, Tyler, and for being our guest on this week’s Class Action Weekly Wire.

Tyler: Absolutely. Thanks for having me, Jerry.

U.S. And U.K. Cybersecurity Agencies Announce International Agreement Addressing AI Safety

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Brandon Spurlock with their discussion of the latest developments on the regulatory front of artificial intelligence.

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

Episode Transcript

Jerry Maatman: Hello, loyal blog readers! Welcome to the Class Action Weekly Wire. Today our guest is my colleague, Brandon Spurlock.

Brandon Spurlock: Hey Jerry, it’s great to be here. Thanks.

Jerry: Today, we’re talking about the most recent developments on a global basis for regulatory endeavors insofar as artificial intelligence is concerned. I know that, Brandon, you’re a thought leader in that space, so wanted to get your feedback on what corporations should know about the global move towards regulation of artificial intelligence.

Brandon: Absolutely, Jerry. Well, this agreement was unveiled to the public just this past weekend – November 26 to be exact. It’s titled “Guidelines for Secure AI System Development.” This initiative was led by the U.K.’s National Cyber Security Centre, and it was developed in conjunction with the U.S.’ Cybersecurity and Infrastructure Security Agency. These guidelines focus on how to keep artificial intelligence safe from rogue actors. The U.S., Britain, Germany, are among 18 countries that signed on to the new guidelines laid out in this 20-page document. Now, this is a non-binding agreement that lays out general recommendations, such as monitoring AI systems for abuse, elevating data protection and vetting software suppliers. One thing to note is that the framework does not address the challenging questions around data sources for AI models or appropriate use of AI tools.

Jerry: Well it certainly seems to be a milestone on the road to regulation of AI from a comparative standpoint. Where is the United States when it comes to regulation of artificial intelligence, as compared to other countries or major jurisdictions?

Brandon: Really  good question, Jerry. Many countries are putting their resources together, as well as independently positioning themselves to demonstrate leadership when it comes to embracing AI – while also cautioning its security, privacy, and market risk. So countries like France, Germany, Italy – they recently reached an agreement on how artificial intelligence regulations should be structured around “mandatory self-regulation through codes of conduct.” So what does this mean? It’s focused on how these AI systems are designed to produce a broad range of outputs. The European Commission, the European Parliament, and the EU Council are negotiating how the bloc should position itself on this particular topic.

Even last month, when we examined President Biden’s executive order on artificial intelligence, that publication from the White House further provides businesses with the in-depth roadmap of how the U.S. federal government’s regulatory goals regarding AI are developing.

Jerry: The evolution of artificial intelligence is certainly uppermost in the mind of most corporate counsel, and its impact on litigation – and in particular, the class action world – is real and palpable and with us. So thank you for your thoughts and analysis, Brandon, and we’ll see you next week on the Class Action Weekly Wire.

Brandon: Thanks, Jerry.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Eden Anderson with their discussion of a PAGA case currently before the California Supreme Court weighing whether trial courts have inherent authority to ensure that PAGA claims will be manageable at trial, and to strike or narrow such claims if they cannot be managed appropriately.

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

Episode Transcript

Jerry Maatman: Thank you for being here, loyal blog readers, in our next installment of the Class Action Weekly wire. I’m very excited to join my colleague, Eden Anderson, who is on the show today to talk about new California developments.

Eden Anderson: Thanks, Jerry. I’m very happy to be here.

Jerry: Great. A significant decision in the PAGA area was argued this past month in the California Supreme Court. And I know you’re following all things PAGA and all things arbitration on behalf of employers, and are very much in the forefront of thought leadership in this area. Could you tell our audience a bit about the case and what it means?

Eden: Yes, the Estrada, et al v. Royalty Carpet Mills case. There the plaintiff Jorge Estrada filed a putative class and PAGA action against his former employer asserting meal period violations under California law. The employer manufactured carpets and had employees working at a number of different locations and a number of different positions. The court initially certified two classes of workers from two different production facilities – 157 employees in total – and the claims were tried to the bench. The judge ultimately to decertified one of the two classes. The judge found there were too many individualized issues to support class treatment for that group, and as to the PAGA claim for that group, the judge deemed it not manageable, and dismissed it. Mr. Estrada appealed, and he argued that PAGA claims have no manageability requirement, and the Court of Appeal agreed with him; it reasoned that class action requirements don’t apply to PAGA actions, and therefore the manageability requirement that is rooted in class action procedure does not apply. And at the same time the Court of Appeal acknowledged that the difficulty that employers face, and trial courts as well with PAGA claims involving hundreds or thousands of employees, but it concluded that dismissal for lack of manageability just isn’t a tool that trial courts can utilize.

Jerry: I know there are a range of approaches that trial courts and appellate courts have undertaken when it comes to managing or adjudicating a PAGA action. Is there a split in authority that the California Supreme Court is going to be debating and looking at in terms of its ultimate ruling?

Eden: Yes, that’s correct. The holding in Estrada is contrary to the holding in Wesson v. Staples, where the trial court struck a PAGA claim as unmanageable, and the Court of Appeal affirmed. The claims at issue in Wesson involved the alleged misclassification of 345 store managers. The employer’s exemption affirmative defense turned on individualized issues as to each manager’s performance of exempt versus non-exempt tasks, which varied based on a number of factors including store size, sales volume, staffing levels, labor budgets, store hours, customer traffic, all of which varied across the stores.  The split in authority prompted the California Supreme Court to grant review in Estrada, but not Wesson. The Court of Appeal there determined that they had properly been dismissed for lack of manageability.

Jerry: I know the case was argued on November 8, and the stakes are quite high. It’s a vexing area for employers. It’s a challenging area for judges and lawyers. What were your takeaways from the oral argument, and what employers ought to know about the issues that were argued over that day before the California Supreme Court?

Eden: Overall, it was an uplifting oral argument for employers, which, as you know, can be a little bit unusual out here. On the downside, several justices, including justices Liu and Jenkins, express some skepticism about whether a trial court’s inherent powers allow it to outright strike or dismiss an entire PAGA action for lack of manageability. Justice Liu commented that permitting trial courts such wide-ranging power could shortchange the PAGA statute, unless there’s an overriding constitutional interest. On that point several justices acknowledged that an employer has a due process right to present evidence to support its affirmative defenses, and that in certain cases that evidence might require a series of mini trials over a period of years and wholly consume a trial court’s resources. Justice Kruger asked questions of Estrada’s counsel about the impracticability of requiring trial courts to consume years of time and resources in that manner. Justice Groban also expressed concern about a PAGA case, for example, where you have multiple labor code violations alleged, hundreds or even thousands of employees at issue, different work sites, different types of employees ranging from janitors to accountants, and he asked why, in such a case a trial court could not just limit the case to the accountants only, and other justices raised similar concerns. Chief Justice Guerrero asked Estrada’s counsel why the answer shouldn’t just be that trial courts have this broad discretion and that it’s just something that’s going to be subject to appellate review.

Jerry: It’s often said that California is the toughest venue in the United States to be an employer and litigate cases in courtrooms there. I suspect the answer is a little more nuanced, since every case is different. But given your expertise in this area and your thought leadership, do you have any prognostications for employers as to the outcome of the Estrada case and the California Supreme Court?

Eden: Yeah, given the constellation of comments from the justices, the court may hold that trial courts have an inherent authority to protect an employer’s due process rights, and that such power necessarily encompasses the right to gauge the manageability of PAGA claims, and to narrow them down as to whether that authority includes outright dismissal of an entire PAGA case. Employers are going to have to wait and see – a decision has to issue within 90 days, so we will soon know the answer.

Jerry: Well, in following the dockets of filings in all the states as we do, I think the number one case being filed these days by the plaintiffs’ bar are PAGA representative actions. So this particular decision certainly has the potential to be a game changer in the landscape of legal liability, especially in California. Well, thank you so much, Eden, and thank you to our loyal blog listeners for another edition and participation in our Class Action Weekly Wire.

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

Executive Order Targets Safety & Security, Consumer Privacy, And Algorithmic Discrimination

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Alex Karasik and associate George Schaller with their discussion of the landmark Executive Order published by the White House last week regarding artificial intelligence. The EO provides a good roadmap for employers of the federal government’s regulatory goals as artificial intelligence begins to take firm root throughout all sectors of the American economy.

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

Episode Transcript

Jerry Maatman: Hello loyal blog readers, welcome to this week’s installment of our Class Action Weekly Wire series. I’m joined today by my colleagues Alex Karasik and George Schaller for an interesting discussion on artificial intelligence. Welcome Alex and George.

Alex Karasik: Thank you Jerry, always a pleasure.

George Schaller: Great to be here, Jerry.

Jerry: Today we’re talking about an important issue that has been in the news over the last week, and that is the White House initiative on artificial intelligence. Alex, can you give provide some overviews of what employers and corporations need to know about this particular event?

Alex: Absolutely, Jerry – like many federal, state, and local regulatory bodies, the White House is also paying attention to AI in terms of what its impact might be on a broad range on constituents. The Executive Order endeavors to cover eight key areas: consumer protection, workers’ protection, safety and security, privacy, innovation and competition, global leadership, and the government’s own use of AI. And in setting the tone on the regulatory front, this marks the White House’s commitment to these areas. The broad range means that essentially every sector of the American business economy could be potentially underneath the umbrella of AI and impacted by this new development.

Jerry: I found it fascinating that the White House and President Biden would focus on and get involved in potential regulation and policy statements in artificial intelligence. George, what does the Executive Order say and contemplate with respect to issues involving safety and security?

George: That’s a great question, Jerry. The EO directs the creation of new safety and security standards in requiring safety testing and reporting, standard safety tests, biological synthesis screening, determining best practices for detecting AI-generated content, establishing a cybersecurity program, and ordering the development of a national security memorandum. There are many AI-enabled problems like “deep fakes” and disinformation campaigns, and these are key targets in this area. Right now the processes and technologies for labeling the origins of text, audio, and visual content is further behind than the advancement of AI tools – a reliable way to identify machine-generated content does not yet exist.

On the privacy viewpoint, the EO includes evaluating how government agencies collect and use commercially available information, as well as enhancing privacy guidance for federal agencies.

Jerry: The phone calls I’ve gotten over the last ten days from general counsel of companies with whom we work focused on their responsibilities, obligations, and duties as employers. Alex, in pivoting to anti-discrimination issues and how artificial intelligence may impact workplace litigation issues – are there particular topics, areas, and issues that employers should focus on in the wake of the Executive Order?

Alex: Thank you, Jerry, that’s a great question. If we had to boil this down to three topics that are most impacted by the Executive Order in terms of anti-discrimination laws, it would be equity, workers’ protection, and civil rights. And what’s the common thread that ties all these topics together? Algorithmic fairness and algorithmic discrimination is a common theme. For example, the EO mentions making sure that federal contractor programs are being monitored for not having any type of discriminatory impact on those that are being hired. We’ve also seen something similar in New York City, where in July of 2023, there was an algorithmic fairness law that came out about the use of artificial intelligence in hiring processes. And we anticipate that the Executive Order is starting the conversation on the federal level. Whether or not and how the Executive Order will be enforced remains to be seen, but nonetheless I think this signifies that the federal government is aware what state and local governments are doing around the country and they’re now starting that conversation from a broader, bigger level.

George: Additionally, the EO highlights the importance of responsible and effective government use of AI by issuing guidance, acquiring products, and hiring professionals for government agencies. The EEOC has artificial intelligence in its strategic sights as well – both on the enforcement level and as an agency resource. It will be important to watch how different government agencies will be involved with carrying out the eight priorities set forth in the EO and considering the short timelines outlined, and further down the road, seeing what the extent of the enforcement strategy will be.

Alex: The Executive Order also aims to identify the benefits of AI and see how this technology could be used for good purposes. In addition, the Executive Order calls for monitoring of the labor markets to see what is the actual impact of this technology in terms of how it’s being used – is it having a good impact, are there potential harms that are arising from its use? Essentially, the Executive Order wants more data to make the most informed decisions.

Jerry: It struck me that this 100-page Executive Order is, in essence, the first ten feet in a race that is probably as long as a marathon, and this is that starting salvo in terms of the government getting involved in AI regulation. More importantly, the plaintiffs’ bar is nothing if not innovative, and certainly the use of artificial intelligence, applications of it, and challenges to its use are going to be things that I believe are going to find their way into privacy-related class action litigation and employment-related class action litigation, at least at the start.

George and Alex, thank you for your comments and thought leadership in this area, and loyal blog readers, we’ll see you next week on our future installment of the Class Action Weekly Wire.