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 associates Emilee Crowther and Derek Franklin with their discussion of key rulings and trends in class action litigation under the Fair Credit Reporting Act (“FCRA”).

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 and welcome loyal blog readers and listeners to our next episode of the Weekly podcast series that we call the class Action weekly wire. My name is Jerry Maatman, and I’m a partner at Duane Morris and joining me today are my colleagues, Derek Franklin and Emilee Crowther, and we’re here to talk about Fair Credit Reporting Act class action litigation. Emilee and Derek, can you tell me a little bit about what is going on in this space in terms of the history of the FCRA?

Emilee Crowther: Absolutely, Jerry, and thanks for having me today. The stated purpose of the Fair Credit Reporting Act, or the FCRA, is to ensure that consumer reporting agencies, exercise their important responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy. It requires consumer reporting agencies and entities, obtaining consumer reports to follow reasonable procedures, to assure maximum possible accuracy of consumer reports. Courts have often noted that FCRA violations lend themselves to resolution through class action, litigation, and FCRA. Class actions have increased partially as a result of the Fair and Accurate Credit Transaction Act, or the FACTA, amendments which require that a consumer who is afforded less favorable treatment and reliance on her credit report be provided an adverse action notice.

Derek Franklin: And in FCRA cases in 2023, the class action plaintiffs’ bar continued to look for any failure of an employer to provide disclosures or obtain proper authorization from an applicant. Although these authorization and disclosure requirements may appear to be relatively straightforward, case law has created additional requirements that may not be as obvious from a plain reading of the FCRA. While employers must be vigilant in their efforts to avoid running afoul of the FCRA authorization and disclosure requirements, the third-party agencies they obtain consumer reports from must also take active steps to ensure that they provide accurate reports. The plaintiffs’ bar is quick to investigate violations of these provisions and bring Rule 23 class actions against CRAs.

Jerry: I know that compliance with the FCRA is not for the faint of heart, and it’s certainly spiked quite a bit of class action litigation in terms of our annual report. Are there some significant guideposts in the case law in terms of FCRA class actions?

Emilee: So, the United States Supreme Court’s decision in TransUnion LLC v. Ramirez substantially limited FCRA class actions by making it clear that only consumers who have “been concretely harmed by a defendant’s statutory violation may sue that private defendant over that [FCRA] violation in federal court.” In TransUnion, the defendant credit reporting agency generated thousands of consumer credit reports which mistakenly match the consumers’ names with the names of people on the list of individuals who threaten America’s national security. However, the Supreme Court only allowed this case to proceed for plaintiffs whose false reports had been provided to third-party creditors. According to the Supreme Court, if the third-party creditors did not receive the potentially defamatory reports, then the individuals did not suffer from a concrete injury under the FCRA.

Jerry: Well, the TransUnion case certainly has created quite a tidal wave of defenses and case law that have interpreted just what an “injury-in-fact” may be. How has that resulted in terms of FCRA class certification rulings and motions to dismiss over the past year?

Derek: In 2023, all the three major CRAs in the United States – Equifax, Experian, and TransUnion – had to litigate at least one FCRA class action concerning allegedly inaccurate or incomplete credit reports. In one such case brought against Equifax in the Us. District Court for the Northern District of Georgia, the court granted in part a motion to dismiss as to a state law negligence claim and injunctive relief under the FCRA. But the court denied in part the motion to strike the class action allegations allowing the plaintiffs’ claim to proceed. The court noted that the plaintiffs could not identify a statutory or common law duty of care owed to the plaintiffs by Equifax. And as to the FCRA claim, the court stated that the case is cited by Equifax, centered on instances where a correctly reported credit score was misleading, which was distinguishable from its position, that it was not “objectively unreasonable” for the company to interpret federal law as being inapplicable to credit scores. The ruling is a good roadmap for defendants involved in FCRA class action litigation.

Emilee: Another case, titled Nelson, et al. v. Experian Information Solutions, Inc., the court examined what documents and information would reasonably be “in a consumer’s file” underneath the FCRA. The plaintiff reviewed her credit report and discovered that it contained inaccurate personal identification information, including two addresses that weren’t hers, her maiden name was misspelled, and the last digit of her social security number was incorrect. She contacted Experian to request the information be changed and Experian updated all but one of the incorrect addresses because it was associated with an open credit account. The plaintiff ended up filing a class action against Experian, alleging that Experian violated the FCRA by providing inaccurate personal identification information on her credit report and failing to correct the inaccurate information. Experian filed a motion for summary judgment, asserting that although the FCRA’s disclosure provision requires credit reporting agencies to disclose “all information in a consumer’s file” the word “any” in “any item of information contained in a consumer’s file” is limited to information that might be, or has been, furnished consumer report. Experian contended that since personal identification information, like a consumer’s name, address, and social security number, do not bear on an individual’s credit worthiness, such information did not itself constitute a credit report. The court rejected this argument, and found that the FCRA’s plain language “forbid the use of credit worthiness as a limitation on information contained in both the consumer’s credit report and [in the] consumer’s credit file.” However, the court ended up holding that the existence of a duty to reinvestigate was “not enough to prove a violation of the FCRA” – that the plaintiff also had to establish that Experian, either negligently or willfully, failed to satisfy its duty to reinvestigate by showing that Experian’s interpretation of the FCRA was objectively unreasonable. The court ruled that no jury could find that Experian negligently or willfully violated the FCRA, and that Experian’s interpretation of the FCRA was objectively reasonable. Thus, the court granted Experian’s motion for summary judgment.

Jerry: Those are key cases and a great overview of what corporate counsel are facing here. Certainly the business model of plaintiffs’ counsel is to file the class action, certify the class action, and then monetize it through settlements. How did the plaintiffs’ bar do in terms of monetizing significant FCRA settlements on a class-wide basis over the past year?

Derek: Jerry, in terms of securing high settlements – the plaintiffs’ bar did not do nearly as well in 2023 as in 2022. In 2023, the top 10 FCRA, FDPCA, and FACTA settlements totaled $100.15 million. This was a significant decrease from the prior year, where the top 10 class action settlements totaled $210.11 million.

Jerry: Still a lot of money, and certainly corporate counsel need to be on guard in terms of compliance efforts in this area. What are your thoughts on the takeaways given the case law, given the settlements, in terms of what corporate counsel should have in their toolkit for FCRA compliance?

Emilee: Well, Jerry, it’s very important for consumer reporting agencies to implement policies and procedures that furnish accurate reports. Systemic issues in a reporting system provide the plaintiffs’ class action bar with ample evidence to argue that class certification is justified, regardless of whether there was actual harm to many consumers.

Derek: And to add on to that – good document retention can save the day in FCRA litigation. While various cases involve the generation of consumer reports for tenant applicants, they are just as applicable to consumer reports generated for employee applicants and the plaintiffs’ class action bar will continue to press legal envelope.

Jerry: Well, thank you, Emilee, and thank you, Derek, for your thought leadership in this area. And loyal blog readers and listeners, thank you for joining us for this week’s installment of the Class Action Weekly Wire.

Emilee: Thank you, Jerry, for having us, and thank you loyal listeners.

Derek: Thank you, everyone.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jennifer Riley and Alex Karasik and associate Derek Franklin with their discussion of key rulings involving the Class Action Fairness Act (“CAFA”).

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

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 are Alex Karasik and Derek Franklin. Thank you both guys for being on the podcast.

Alex Karasik: Great to be here, Jen. Thank you.

Derek Franklin: Thanks for having me, Jen.

Jennifer: Today we wanted to discuss trends and important developments in the area of the Class Action Fairness Act, or the CAFA. Alex, can you tell our listeners a little bit about the CAFA before we get into the latest developments?

Alex: Absolutely. Jen. The CAFA is a staple of class action litigation. It was signed into law by George W. Bush, on February 18, 2005. The CAFA expands federal subject-matter jurisdiction over significant class action lawsuits and mass actions in the United States. Functionally, the CAFA provides a mechanism for defendants to remove class actions from state courts to federal courts. So, as a result, CAFA impacts form selection strategies in the class action litigation space.

Derek: Also, to add to Alex, the CAFA does more than facilitate the removal of class actions from state court to federal court. It also regulates the selection of class counsel, toughen certain pleading standards, tightens control over the range of attorneys’ fees that may be awarded in class action settlements, it facilitates the appeals of class certification orders, and it regulates the settlement process in class action settlements.

Jennifer: Thanks so much for that background, guys. Derek, can you talk a bit more about the impact of CAFA on class action litigation?

Derek: Yeah, CAFA has played a major role in large bet the company class actions. The plaintiffs’ class action bar has traditionally maintained success in achieving class certification in state courts, particularly those with locally elected judges who may be hostile toward out-of-state defendants. Prior to the implementation of the CAFA, in order for a federal court to have maintained jurisdiction,  there needed to be a monetary threshold of $75,000 met by every plaintiff in the case, and all named plaintiffs in a class action had to be citizens of states differing from those of all defendants. Now under the CAFA, jurisdictional requirements are much less restrictive, and thus more difficult for the plaintiffs’ bar to establish that the action should remain in state court.

Jennifer: Alex, what types of class action litigation, would you say, are most affected by the CAFA?

Alex: Great question, Jen. Class actions filed under federal statute, such as the FLSA, Title VII, or ERISA, are almost exclusively filed in federal court. So, the CAFA has most significantly impacted state law wage and hour claims and related state law type class action claims in employee-friendly states, such as California. The plaintiffs’ class action bar notoriously pursues wage and hour claims in state courts. It tends to be a more favorable forum for plaintiffs in certain areas. The Second Circuit over time became known as the federal circuit where securities law became the most developed. However, the Ninth Circuit became a circuit where more rulings under CAFA were made than any other circuit in the federal system. So, we tend to see various wage and hour and other potential consumer claims filed in state court, and therefore removed under the CAFA.

Jennifer: Were there any key CAFA rulings in 2023?

Alex: It doesn’t happen every year – but in 2023, in fact, courts and all of the federal circuits adjudicated jurisdictional issues based on the CAFA. Beyond the traditional wage and hour context, the CAFA rulings come in a variety of shapes, form, and sizes. Some of those came under the Illinois Biometric Information Privacy Act, which the three of us know very well, being located here in Chicago, Illinois. Other claims involve breaches of consumer product warranties, for instance, under the Magnum-Moss Warranty Act, so CAFA claims can really impact a wide variety of different types of causes of action.

Derek: In particular, the Third Circuit ruled on a breach of warranty case in Rowland, et al. v. Bissell Homecare, Inc., which involved a consolidated appeal concerning four putative class actions filed in state court, alleging violations of the MMWA. The defendants removed those cases pursuant to the CAFA and the plaintiffs filed motions to remand which the district court granted on appeal. The Third Circuit affirmed the District Court’s rulings under the MMWA. The amount controversy must be at least $50,000, and, if it’s a class action, it must have at least 100 named plaintiffs. The Third Circuit opined that in imposing additional requirements for federal jurisdiction, that Congress manifested an intent to restrict access to federal court for MMWA claims. The Third Circuit determined that at a minimum, the requirement that a class action name at least 100 plaintiffs for federal jurisdiction under the MMWA was not satisfied because each complaint at issue named only one plaintiff. The Third Circuit also reasoned that the MMWA’s stringent jurisdictional requirements were irreconcilable with the CAFA because they have differing requirements for how many plaintiffs must be named in a class action that can be brought in federal court, i.e., the CAFA requires only one plaintiff, and the MMWA requires at least 100 plaintiffs. The Third Circuit, therefore, concluded that applying the CAFA in this situation would render the MMWA’s named plaintiff requirement meaningless.

Jennifer: Alex, with the explosive amount of privacy class action litigation recently, can you tell us a bit more about the BIPA ruling in particular that you mentioned earlier?

Alex: Yeah, Jen, there was a really interesting ruling in the Northern District of Illinois in a case called Halim, et al. v. Charlotte Tilbury Beauty, Inc. There the plaintiff filed a putative class action in Illinois state court against the defendants, a makeup and cosmetic company and its parent corporation, alleging violation of the BIPA. It wasn’t a fingerprint scan BIPA case, but rather, this is one where, the defendants allegedly unlawfully collected facial geometry when the plaintiff used the virtual try-on software to superimpose the defendant’s makeup products on the plaintiff’s face. The defendants removed the case to federal court, and the plaintiffs thereafter sought to remand. The court granted plaintiffs’ motion to remand the action to state court because the defendants did not satisfy the $5 million amount-in-controversy requirement. The defendants had argued in removing the case, that they satisfied the requirement through their calculation of a $12 million dollar amount-in-controversy calculation for the BIPA. They claim there was six violations of the BIPA for each putative class member, times 100 putative class members, times two face scans per class member, times $5,000 per violation – which is the statutory amount for a reckless violation – times two defendants. Yeah, that’s a lot of math. And using all this math, defendant came up with an 8-figure number that they anticipated would be the damages exposure. Court rejected this calculation, saying, it’s too speculative and unreasonable to satisfy the defendant’s burden, and therefore, because of that, the court remanded this case back to Illinois state court.

Jennifer: What should corporate counsel and employers be on the lookout for in 2024?

Alex: We anticipate, there will be continued arguments over removal due to jurisdictional issues. The plaintiffs’ bar is crafty and constantly evolving their strategies for arguing against litigating cases in federal court. Many times state courts are more favorable forum, and I don’t think that trend will change in the coming year. What remains to be seen is how effective these strategies will be, and granting motions through remand especially as many of the major class action statutes, such as the BIPA, might evolve at the legislative level.

Jennifer: Well said. Thank you so much for all of this great analysis. Derek and Alex, thank you for being here with me today, and listeners, thank you so much for tuning in.

Alex: Thanks for having me, Jen, and thank you to all of our listeners. We appreciate you tuning in today as well.

Derek: Thanks, everyone.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Nathan Norimoto with their discussion of developments and trends in the area of civil rights class action litigation.

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

Jennifer Riley: Hello, everyone, and thank you for being here again for the next episode of our weekly, podcast the Class Action Weekly Wire, I’m, Jennifer, Riley partner and Dwayne Morris and joining me today is Nathan Norimoto. Thank you for being on the podcast Nathan.

Nathan Norimoto: Great to be here, Jen.

Jennifer: Today we wanted to discuss some trends and important developments in the area of civil rights class action litigation. Nathan, do you want to talk a bit about this area of law before we get into a development over the past year?

Nathan: Yes, definitely. For more than 70 years, class actions have been among the most powerful tools to secure civil rights in America. This began with the class action of Brown, et al. v. The Board Of Education, which declared school segregation unlawful and arguably set the stage for the Civil Rights Movement. In 1966, Congress and the judicial rule-making authorities crafted Rule 23 with the express goal of empowering litigants, challenging systemic discrimination, particularly segregation, to force courts to order widespread objective relief that would protect members of the class as a whole. Ever since, this provision remains as salient to the enforcement of federal civil rights statutes and constitutional claims as it was at its inception. So, for a multitude of reasons, class actions are often a tool of first resort by advocacy groups to remedy civil rights violations.

Jennifer: Thank you so much for that overview. What were some of the major developments in 2023 and during the first half of 2024 in the civil rights class action litigation space?

Nathan: Class actions in the civil rights context span numerous issues during that time period. Given this breadth of subject area, there were well over 100 decisions in this space. In these far ranging claims and groups of individuals, one common theme continues to be whether litigants can meet the commonality and typicality requirements of Rule 23, under the federal rules of civil procedure, to establish class certification. 2023 saw court rulings where numerous civil rights cases were certified, as well as granted class certification affirmed on appeal.

Jennifer: Are there any key rulings from this past year that listeners need to know about in the civil rights litigation class action area?

Nathan: Definitely. So, among all civil rights cases, the ruling on class certification in Progeny, et al. v. City Of Wichita was likely amongst the most significant. The plaintiffs, a nonprofit organization and several individuals, filed a class action alleging that the defendant, the city of Wichita, kept a “gang list” created and maintained by the Wichita Police Department, or WPD, whom WPD personnel had determined that the definition of a criminal street gang member. The individual plaintiffs alleged that they were wrongfully designated as criminal street gang members and added to the gang list, which adversely affected their lives. The plaintiff filed a motion for class certification pursuant to Rule 23, and the court granted the motion. The plaintiff proposed class consisted of all persons included in the Wichita Police Department’s gang list as an active or inactive gang member or gang associate. The court also determined that several common questions existed to establish commonality, including whether the statute was unconstitutionally vague, whether it failed to provide procedural protections to persons on the gang list, and whether inclusion in the gang list has a chilling effect on the right to freedom of association. The court held that the plaintiffs established that the defendant acted or refused to act by applying the gang list criteria to add persons to the gang list without procedural protections for those persons, which was applicable to the entire class. So the court ruled that the requested injunction seeking to bar the defendant from enforcing the statute was appropriate to the class as a whole, because all class members were on the gang list, and therefore the court granted class certification.

Jennifer: Thank you, Nathan, for that overview. So, turning to some trends and developments – there were over 100 rulings in this area in 2023. How are things progressing thus far in 2024 – have there been any interesting cases where class certification was granted?

Nathan: Certainly. So it seems like courts are continuing to grant class certification rulings in this area so far this year. One example here in California, Berg, et al. v. County Of Los Angeles, the plaintiffs were a group of protesters who filed a class action asserting that the Los Angeles Sheriff’s Department, or the LASD, had used excessive force against peaceful protesters and unlawfully detain them in violation of their First, Fourth, and Fourteenth Amendment rights in connection with the George Floyd protests. The plaintiffs filed a motion for class certification on one injunctive relief class and two damages classes, and that motion was granted by the court. As to the injunctive relief class, the defendants opposed the motion on mootness and standing grounds, and the court found that could not determine that the class would be moot, and that because the plaintiffs had stated they plan to attend future protests, they could plausibly be fearful of future harm. Next, for the first damages class, containing individuals who were arrested at the protests, the court stated that there were several common issues central to the class, including (i) whether the defendants have a custom and practice of using indiscriminate force against the peaceful protesters; (ii) whether there has been a manifest failure by the defendants to train employees on the use of force against the protesters; and (iii) whether the defendants had ratified violations of peaceful protesters’ rights. So finally, on the last and third class, the other damages class which contained individuals who were subject to the use of rubber bullets or tear gas, the court determined that the plaintiffs sufficiently established the common alleged harm of a “chill” to their First Amendment rights to unify the class. The court stated that the class met the predominance requirement under Rule 23 because the plaintiffs alleged class-wide general damages and challenged only a single “custom and practice of abusing indiscriminate force against peaceful protesters.” The court concluded that class action would be superior method of adjudication for the direct force class, or the third class, and granted the motion for class certification in its entirety.

Jennifer: It certainly seems like we will see courts continuing to grapple with motions for class certification in this area in 2024, and the plaintiffs’ bar continuing to aggressively pursue certification on behalf of plaintiffs. We know that successful certification often leads to settlements between the parties, rather than continuing the litigation and ultimately going to trial. How successful were plaintiffs in securing settlement dollars in this space in 2023?

Nathan: Pretty successful. Settlement numbers in civil rights class actions in 2023 were definitely significant. The top 10 settlements total $643.15 million. However, this is significant, but it was a decrease from the prior year when the top 10 civil rights class action settlements topped $1.3 billion.

Jennifer: The top settlement amounts in each area of law have been massive in recent years, and a major trend that we track in the Duane Morris Class Action Review. We will continue to track these numbers in 2024 and keep listeners aware of developments. Is there anything else corporate counsel and employers should be on the lookout for in 2024?

Nathan: So given the volume of litigation in the civil rights area, as well as the frequency which with classes are granted and new burgeoning issues for that can percolate in these cases – for example, claims connection with COVID-19 in connection with the increase homelessness issues that we’re facing in our cities – it’s anticipated that the plaintiffs’ bar will continue to be creative, and definitely inventive in this space, as we progress through 2024.

Jennifer: Well, thanks so much for all of this great analysis, Nathan. Thank you for being here with me today. Listeners, thank you for tuning in. And if you have any questions or comments on today’s podcast please feel free to send us a DM on Twitter @DMClassAction.

Nathan: Thanks for having me, Jen, and thank you listeners for being here today.

Jennifer: Thank you listeners again for joining us today, and please join us next week for the next episode of the Class Action Weekly Wire.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Sean McConnell with their discussion of key rulings and developments in the antitrust class action space, including a landmark settlement resolving litigation spurred by college athletes’ claims regarding the NCAA’s ban on monetization of name, image, and likeness.

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: Welcome loyal blog listeners. Thank you for being here on our weekly podcast, the Class Action Weekly Wire. I’m excited to introduce Sean McConnell, my partner in our Philadelphia office, who chairs our antitrust defense group. Welcome, Sean!

Sean McConnell: Thank you, Jerry. I’m very happy to be part of the podcast today.

Jerry: Today we’re talking about key issues in antitrust class action litigation. We recently published, under your guidance, the Duane Morris Antitrust Class Action Review. Readers can get it for free off of our blog. Sean, in the antitrust class action world, what sorts of issues is the publication focusing on this year?

Sean: Well, we had one fairly large decision recently this year from the U.S. Supreme Court in Visa v. National ATM Council. In that case, the United States Supreme Court declined a petition for review submitted by both Visa and MasterCard that urged the Supreme Court to review a circuit split according to petitioners over the correct standard of review that courts should use when evaluating motions for class certification. Visa and MasterCard argued that the U.S. Court of Appeals for the DC. Circuit erred by only requiring plaintiffs to show that questions common to the class predominate and allowing the fact finder later in proceedings to address issues related to uninjured class members. So, by denying the petition for review, the U.S. Supreme Court has left that standard open for interpretation by the circuit courts.

Jerry: I think that’s a really significant decision, and certainly the D.C. Circuit’s opinion ought to be a required read for any counsel involved in antitrust class actions involving price fixing allegations. I think it underscores how important the standard for review is. To me, securing class certification is the Holy Grail on the plaintiff side of the V. They file the case, they certify it, they monetize it. If you take a deep dive into the D.C. Circuit’s ruling, what are some of the takeaways that you think are important?

Sean: Sure. So we’ll start with the kind of the basic facts, Jerry. The plaintiffs for the case where the petitioners involved ATM operators and the defendants, of course, were Visa and MasterCard. You know, global payment technology companies that operate networks that connect various financial institutions together, so that when a consumer is using an ATM they can access their bank, even if they’re using an ATM from another member bank that’s using that network. And the plaintiffs allege that the defendants used an ATM nondiscrimination rule, which kept fees the same across various networks, and prevented ATM operators from playing networks off of each other, and getting lower rates for their users and plaintiffs, allege that those rules allowed defendants to actually charge supracompetitive transaction fees, and to foreclose competition from those other competing ATM networks. The D.C. Circuit Court affirmed a district court ruling that granted class certification with respect to three different classes. So the first two classes, which were not at issue in the Supreme Court decision involved consumers, but the third class involved the ATM operators themselves. And according to defendants, the D.C. Circuit used a lower standard for class certification similar to one used by the Eighth and Ninth Circuits, whereas the Second, Third, Fifth, and Eleventh Circuits employ a more rigorous, careful consideration standard regarding plaintiffs’ burden to establish predominance. And by denying review, the issue remains unresolved in terms of Rule 23 class certification standards.

Jerry: You know, I think it’s much like buying real estate – location, location, location is everything. And in one circuit, a case might not get certified and the defendant would win yet in another circuit, depending on the difference in the standard plaintiffs might be successful. It sounds to me like this is going to end up in the U.S. Supreme Court someday. Were there other notable developments that you think are important to corporate counsel in the past 12 months on the antitrust space?

Sean: Yes, Jerry, there were a few very high profile settlements in the class action world this year focusing on antitrust class actions in both collegiate and professional sports. So, the first, which I’m sure many are familiar with, involves the college athlete, name, image, and likeness antitrust litigation. And shortly after the Ninth Circuit declined to decertify the certified class of former college athletes, who sought damages due to the NCAA’s ban on compensation, going back to 2016, the NCAA agreed to a settlement with the class in the amount of $2.77 billion. The class contains hundreds of thousands of former student athletes who claimed they were owed name, image, and likeness compensation during that period. The payments as part of the settlement will be spread out over 10 years, and the settlement will also establish a framework for revenue sharing between schools, conferences, and the athletes themselves. The settlement potentially ends one of the NCAA’s most significant legal battles, but still faces other antitrust class action lawsuits over player compensation and transfer rules and will likely face other issues related to how it will compensate athletes going forward. The NCAA, of course, has been lobbying Congress for many years for federal legislation on name, image, and likeness and for an antitrust exemption that would allow the schools, the conferences, and the NCAA itself to, you know, collectively bargain or arrange with student athletes compensation rules. But absent that ability to collectively bargain, or for the players to unionize, any such arrangement with the student athletes has been considered a violation of Section 1 of the Sherman Act. So it’s still yet to be decided what will happen going forward on how these schools, conferences, and the NCAA itself will be able to compensate student athletes going forward absent an antitrust exemption.

Jerry: It’s so interesting to me as a sports fan how there’s such a tie between an antitrust law and college athletics. Also, I’ve been involved on the professional side with the LIV and the PGA Tour. I know that you’re quite a thought leader in this space, and you’ve written quite a bit on MMA fighters. I know that that was an important development this year. Could you share a little bit of your thoughts on that case?

Sean: Sure, you know, one of the most significant kind of antitrust wage and compensation cases from the past year actually happened in the context of UFC fighters and mixed martial artists. The UFC’s parent company TKO Holding Inc. revealed recently that it will pay $335 million to settle a class action brought by MMA fighters who alleged that UFC engaged in anticompetitive conduct to suppress the fighters’ wages in the case Le v. Zuffa. The parties had engaged the mediation in February, and were set for trial for April. And you know, practitioners and thought leaders were excited for the case because it was really the first kind of monopsony antitrust class action. The prior rulings in the case are required reading for any corporate counsel handling antitrust class action litigation involving wage suppression issues. The plaintiffs allege that UFC engaged in a in a practice of using exclusive contracts as well as its overall market power with respect to mix mixed martial arts and a series of acquisitions consolidating the market and buying up competing promoters of MMA fights to suppress the wages of the fighters and their opportunities to and earn more endorsement, money, and other forms of compensation. And the class alleged damages of upwards of $1.6 billion. The parties will still, despite the settlement agreement in principle, will still need to present that settlement to the court for preliminary and final approval. Of course, pursuant to Rule 23, but the settlement itself really underscores the ability of workers to use the antitrust laws to tilt labor market dynamics in their favor and to increase workers bargaining leverage for get greater compensation and benefits going forward.

Jerry: Think it’s very interesting, too. It kind of foreshadows the Biden administration arm of the Department of Justice getting involved in both criminal civil wage suppression antitrust cases. So the remaining chapters of the book have a long way to go to be written. But thank you so much for Sean, for sharing your expertise and joining us. And thank you, loyal blog listeners, for tuning into this week’s Class Action Weekly Wire.

Sean: Thank you very much, Jerry.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Justin Donoho with their discussion of best practices for corporate counsel to address liabilities and lawsuits emerging from the cybersecurity and data privacy landscape. Recent years have seen an exponential rise in class action lawsuits and mass arbitrations as a result of cybersecurity incidents and data privacy allegations, involving a growing list of technologies. In light of these developments, implementation of data privacy and security best practices is a corporate imperative for mitigating risk and deterring litigation.

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 listeners and readers for joining us on this week’s installment of the Class Action Weekly Wire. This is our 60th podcast in our series, and I’m privileged and honored to welcome Justin to be our guest on today’s podcast. Welcome, Justin.

Justin Donoho: Thank you, Jerry. Great to be here.

Jerry: So, today we’re going to be discussing a hot topic: cybersecurity, data breach, and privacy class actions in general, and things that can be done to get ahead of the curve and to mitigate or eliminate these particular risks. And, Justin, I know you’re a thought leader in this space, so we wanted to discuss with you today some of the trends and thoughts you have in this particular space.

Justin: That’s generous, but thank you. And yes, in the past few years we’ve seen an explosion of class action lawsuits alleging cybersecurity incidents where criminals have compromised organizations’ computer networks and stolen their data or held it hostage for ransom payments. Lately, we’ve also seen a spike in data privacy class actions alleging companies’ unauthorized use of advertising technologies on their websites – like the Meta Pixel and Google Analytics, which send users web browsing information to Meta and Google, which are the world’s two largest advertising agencies – and other website advertising technologies, or “adtech.” We are tracking both of these types of cases, cyber security and data privacy, quite extensively, and unfortunately can report that they continue to proliferate in 2024.

Jerry: Thanks, Justin. You did a post on the Duane Morris Class Action Defense Blog this past week that got some of the highest reviews and most clicks among our readership in terms of advice you had for corporations to get ahead of these risks. What are some of the key things that you think companies ought to be thinking about, considering, and implementing to mitigate their risks?

Justin: Yes, thank you. First, let’s talk about the use of arbitration agreements that mitigate the risks of both class actions and mass arbitrations. Our audience is likely familiar with the arbitration agreement defense when it comes to defeating class actions. This defense was largely successful over the last decade in making claims just go away. But times have changed – those arbitration agreements need to be tweaked to mitigate the risks as well as mass arbitrations, which can cost companies millions of dollars to defend. Mass arbitrations are becoming increasingly popular, especially for cybersecurity and data privacy class actions that bring high-dollar novel claims for statutory damages with class sizes often totaling millions of people. Enterprising plaintiffs’ attorneys with big war chests and litigation funders are increasingly using mass arbitrations to pressure organizations into agreeing to multimillion dollar settlements just to avoid the massive arbitration costs. Proactive measures organizations are taking to mitigate this risk include adding mechanisms in their arbitration clauses, such as predispute resolution clauses; mass arbitration waivers; bell weather procedures; arbitration case filing requirements, and more.

This area of the law is developing quickly. One case we are watching will be one of the first appellate cases to address the latest trend of mass arbitrations – it’s Wallrich v. Samsung, in the Seventh Circuit. At issue there is whether the district court erred in ordering the defendant facing data privacy claims to pay over $4 million in mass arbitration fees.

Jerry: Well, I know this is a hot area and an ever evolving area in terms of arbitration issues. But also you touched on another area, and that would be data breach class actions. This, to me, is an area that, just as like the tsunami wave breaking on the beach, that the claims have doubled from 2019 to 2020, then doubled again in 2021 to 2022. Last year there were 1,320 data breach class actions brought countrywide. And this year, so far, we’ve tracked about 600. And so the crest of the wave is anywhere from ending. What do you think in this area of data breach class actions in terms of what companies can do to address this risk?

Justin: Yeah, exactly, Jerry. It’s important that companies keep pace with a tsunami wave of their own in their pursuit of continuously improving their IT practices and cybersecurity measures. There are definitely some cybersecurity best practices that companies can be doing, not only to prevent cyber security incidents from happening in the first place, but also to defend against one of plaintiffs’ main argument in many of these class actions – that organizations failed to use reasonable cybersecurity measures.

Each organization will have its own priorities, to be sure, but here are just a few typical ones:

• improve IT governance;
• comply with industry guidelines such as ISO, COBIT, ITIL, NIST, and C2M2;
• deploy multi-factor authentication, network segmentation, and other multi-layered security controls;
• stay current with identifying, prioritizing, and patching security holes – as new ones do continuously arise;
• design and continuously improve a cybersecurity incident response plan;
• routinely practice handling ransomware incidents with tabletop exercises – tabletop exercises may even be covered by your insurance company; and
• implement and continuously improve security information and event management systems and processes.

Jerry: There’s another emerging litigation trend with respect to web browsing. And you had mentioned Meta Pixel and Google Analytics – and as someone who has a computer science degree and understands what’s going on, how do you translate that for corporate counsel in terms of the risk posed by the plaintiffs’ bar focusing on those particular activities?

Justin: Well, this is a very popular type of case right now, for sure. One first step that companies can do to is to to mitigate these risks of those types of cases is to find out if, and to what extent, they may be using these website advertising technologies. Millions do. Some companies served with an adtech lawsuit have not even known that any adtech was installed on their websites. It could have been installed by a vendor without the proper authorization of protections. Or even as a default, without any human intent, through the use of some web publishing tools.

Organizations should consider whether to have an audit performed before any litigation arises as to which adtech is, or has been installed, on which web pages, when and which data types were transmitted as a result. Multiple experts specialize in adtech audits just like this and also serve as expert witnesses, should any litigation arise. An adtech audit is relatively quick and inexpensive, and it might be cost beneficial for an organization to perform an adtech audit before litigation arises. It might convince an organization to turn off some of its unneeded adtech now, thereby cutting off any potential damages relating to that adtech in a future lawsuit. It could also assist in presently updating and modernizing website terms of use and data privacy policies to more fully inform users about the company’s use of adtech and vendor agreements to prohibit vendors from incorporating any unwanted adtech into the company’s websites. These updates to company documents could help defeat some of the high-dollar fraud claims and other claims we constantly see in these types of cases.

Jerry: Those are great insights, and I would recommend to all our blog listeners and readers to take a look at Justin’s blog post from this past week – I called it an essential reference or desk guide, or survival packet, to navigate through the thicket of all these particular issues.

Well, thank you, Justin, for joining us for this week’s Class Action Weekly Wire.

Justin: Thanks for having me, Jerry.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Tyler Zmick with their discussion of significant rulings and developments in the biometric privacy class action sphere.

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

Jennifer Riley: Thank you for being here 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 my colleague Tyler Zmick. Thank you for being on the podcast, Tyler.

Tyler Zmick: Thanks, Jen, very happy to be here.

Jennifer: Today on the podcast we are discussing the Illinois Biometric Information Privacy Act, or sometimes called BIPA, as well as notable decisions from courts over the past 18 months, highlighting a recent 2024 ruling. Tyler, could you give our listeners a brief overview of the BIPA?

Tyler: Absolutely, Jen. So the statute was enacted in 2008, and BIPA is a state law that regulates the collection, use, and handling of biometric identifiers and biometric information by private entities. Subject to a couple limited exceptions, BIPA generally prohibits the collection or use of a person’s biometric data without first providing the required notice, obtaining their written consent, and also posting a publicly available retention and destruction schedule.

Jennifer: Thanks very much for that overview. There are two major Illinois Supreme Court rulings from 2023 that govern the BIPA landscape and significantly impacted the way BIPA litigation is playing out. Tyler, you no doubt know which two cases I’m referring to – could you tell our listeners a bit about them?

Tyler: Sure, absolutely. So, these two decisions, which are a little bit old at this point – they were both issued in February of 2023 – had a profound impact on the interpretation of BIPA and the landscape of BIPA litigation. So the first ruling was issued in a case called Tims v. Black Horse Carriers, and in that case the Illinois Supreme Court held that a 5 year statute of Limitations applies to all claims brought under BIPA. So this really adds to the risks that employers and other companies who do business in Illinois face in terms of class action exposure, as the court rejected defendants attempts to argue that a shorter one or two year statute of limitations applies.

The other ruling, issued later in February of 2023, came in a case called Cothron v. White Castle, and in that case the court decided whether each fingerprint or other type of biometric data being scanned is its own discrete violation of the statute. And so, as background, the Seventh Circuit, the federal appellate court, was uncertain how to answer that sort of novel question of state law. And so it kicked it over to the Illinois Supreme Court to ask for clarification, and the court held that BIPA claims accrue not only once upon the initial collection or disclosure of biometric data, but rather each independent time that a company collects or discloses biometric information. And so this ruling, it really exponentially increased the monetary damages in BIPA class actions that a company can face, especially in the employment context – because you generally have a fact pattern where employees are scanning their fingerprints to clock in and out. And so they’re doing that multiple times a day when they start their shifts, when they go on their lunch breaks, and then when they clock in after lunch, and then clock out for the day. And so Cothron basically held that each time they scan their fingerprint is a separate and independent violation. And this could, for just one employee amount to, you know, over 200 work days per year – we’re talking a lot of potential damages.

All of that said, the Illinois Supreme Court acknowledged that it’s ruling on the violation issue and the accrual issue was somewhat Draconian, and so that invited the Illinois legislature to tackle the issue by clarifying that, you know, maybe a violation only occurs upon the first scan of biometric data. The legislature, as it’s you know, customary to do, took its time, drag its feet a little bit, but they did get around to passing a statutory amendment that now clarifies that for purposes of collecting or disclosing biometric data, the violation only occurs the first time that a company scans that type of information. And so both houses of the Illinois legislature have actually approved and passed the amendment. As of today, the governor is waiting to sign the bill, he’s expected to do so. Once Governor Pritzker signs off, that law will take effect, and Cothron will basically be no longer good law on a going forward basis.

Jennifer: Thanks, Tyler, great overview. So the Tims and Cothron rulings really eviscerated two of the key BIPA defenses used by companies over the past several years, however, companies still can use other defenses – such as whether biometric data was actually collected, used, or stored; such as whether and to what extent alleged violations actually occurred in Illinois for purposes of satisfying extra territoriality limitations; as well as the constitutionality of the potentially excessive or crushing damages that could resolve from a finding that each scan was a separate violation; companies can also call upon Rule 23(b)(3) arguments regarding whether a class action really is the appropriate vehicle to litigate a bit of a dispute based on superiority or predominance concerns.

Tyler: Exactly, Jen. You know, those defenses do exist, however, companies really need to be aware of the dangers associated with collecting or storing biometric data without BIPA compliant policies in place. As just one example, very recently the U.S. District Court for the Northern District of Illinois granted class certification to a class action plaintiffs where there are at least 160,000 class members, probably much more. And the case involves Amazon’s “virtual try-on” technology. Basically, it is a virtual technology where a person can upload a photo or video of themselves and then superimpose maybe make up or other fashion products onto their face to see how the product would look, and plaintiffs claim that that technology involves biometric data in the form of scans of face geometry. And in granting class certification in this case, the court dealt Amazon a significant blow in its efforts to block class certification. This decision is really the most recent example of success by the plaintiffs’ bar in a string of victories for class action privacy lawsuits across Illinois, and it illustrates that even the largest and most sophisticated companies can face legal exposure in connection with their biometric collection and retention practices.

Jennifer: We will certainly keep listeners updated on the developments in that case. What about settlement numbers in 2023, in BIPA class actions – what were the monetary totals paid out to plaintiffs?

Tyler: Sure – in BIPA related class actions, 2023 saw robust settlements, but actually a decline when compared to 2022. So if you’re looking at the top 10 BIPA class action settlements in 2023, they totaled $147.86 million, and that is compared to in 2022, $278.9 million.

Jennifer: Well, perhaps a bit of good news then, for employers and companies on the declining settlement value front. Thanks so much for being here again today, Tyler, and thank you so much to our listeners for tuning in.

Tyler: Thanks for having me, Jen, and thanks again to all of our listeners.

Jennifer: See you next week on the Class Action Weekly Wire!

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsels Eden Anderson and Rebecca Bjork with their discussion of significant arbitration rulings in the class action 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 for joining our weekly Podcast series. The Class Action Weekly Wire. My name is Jerry Maatman, and I’m a partner at Duane Morris and joining me today are my colleagues, Eden Anderson and Rebecca Bjork. Welcome.

Eden Anderson: Great to be here, Jerry.

Rebecca Bjork: Thanks, Jerry.

Jerry: Today, we wanted to discuss trends and important rulings in the area of arbitration, and specifically where named plaintiffs in class actions are signatories to arbitration agreements that contain class action waivers. What were some of the most significant developments in this space in calendar year 2023?

Eden: Well, while not a class action case, a big development in related PAGA litigation occurred out here in California in 2023. After the U.S. Supreme Court’s decision in Viking River Cruises, there was an open question in California as to whether a PAGA plaintiff whose individual claims are compelled to arbitration retain standing to still pursue their non-individual claims in court, and the California Supreme Court answered that question in the Adolph v. Uber Technologies case. And unfortunately, the answer was not a good outcome for employers.

The California Supreme Court held that PAGA plaintiffs do have standing to pursue non-individual claims in court, even if their individual claims are in arbitration. And as to logistics, the court clarified a few things. First, even though individual PAGA claims may be pending in arbitration and non-individual PAGA claims pending in court, the claims all remain one action, and the court action can be stayed pending the completion of arbitration. And as a practical matter, that’s what we’re seeing happen. And then, second, if the plaintiff loses an arbitration at that juncture, the plaintiff clearly no longer has standing to maintain non-individual PAGA claims. And third, if the plaintiff prevails in arbitration or settles their individual claims, they continue to possess standing to return to court, to pursue non-individual PAGA claims on behalf of others.

Jerry: Thanks, Eden. That sure underscores how vitally important it is for employers given the Adolph ruling to conduct an early assessment as to the value and viability of the named plaintiff’s claim as opposed to running the gauntlet, trying that individual arbitration, losing on at least one claim, and then having the plaintiffs’ lawyer resurrect a representative action and then corral and bring in all the other workers at issue in the case. What are some of the strategies to avoid that result in light of both Viking River and the Adolph decisions?

Eden: Well, but Jerry, as we thought might see happen, some plaintiffs have been alleging that they are aggrieved employees but then disclaiming individual relief trying to avoid arbitration through that pleading tactic. And there’s a recent decision from the California Court of Appeal, Balderas v. Fresh Start Harvesting, that plaintiffs are relying upon in support of that tactic the plaintiff there alleged that she was “not suing in an individual capacity” and, although the trial court felt the plaintiff lacked standing because she wasn’t seeking individual relief, the Court of Appeal disagreed and allowed the case to proceed in court. The Balderas decision was initially unpublished, non-citable, but the plaintiffs’ bar pushed for it to become a published, citable decision. Of course, from the defense perspective this pleading tactic raises some ethical concerns, because you have a plaintiff who is giving up any individual monetary recovery for themselves purely as a forum selection strategy that ends up only benefiting other people including their counsel.

Jerry: Rebecca, are there any other notable decisions in this array of cases from 2023?.

Rebecca: Oh, definitely. The Ninth Circuit also issued an important decision in Chamber Of Commerce Of The United States Of America v. Bonta, et al., which held that California Assembly Bill, also known as AB 51 – which is a statute that attempted to criminalize employers’ use of mandatory arbitration agreements – is preempted by the FAA. In that case, the Ninth Circuit affirmed a preliminary injunction prohibiting California from enforcing AB 51. On January 1, 2024, following a remand in the case, the district court entered a permanent injunction enjoining the State from enforcing the Labor and Government Code sections enacted as a part of AB 51, and the court also awarded the plaintiffs as prevailing parties $822,496. The district court’s order brings finality, judgment, and ultimate success to a strong coalition of employer interests that banded together to challenge the State’s attempt to criminalize the use of mandatory arbitration agreements.

Jerry: Well, that was a welcome ruling from the Ninth Circuit for employers, especially employers that utilize workplace arbitration agreements with class action waivers on a 50-state basis. Our Duane Morris Class Action Review kept track statistically in our database about all arbitration rulings last year, and it showed that 66% of the time, two-thirds of the time, employers were successful in winning motions to compel arbitration, and in the instances where they were not – about one third of the time – it wasn’t so much that there was something defective about the arbitration agreement, it’s that the employer couldn’t demonstrate that the employee had signed off on it, that the onboarding program was such that it couldn’t be proved, they couldn’t find the signature, couldn’t find the electronic trail, that would demonstrate that the employee actually signed off and agreed to the arbitration program. So it seems like the defense is very viable. The Ninth Circuit cleared one of the impediments to doing so. What do you see, as 2024 has now begun, some of the key arbitration decisions in this calendar year?

Eden: Yeah, Jerry, there have been, several significant rulings from the U.S. Supreme Court just in the last month. Last week the court issued its decision in Coinbase v. Suski, which held that where parties have agreed to two contracts – one sending arbitrability disputes to arbitration, and the other sending arbitrability disputes to the courts – that a judge (and not an arbitrator) must decide which of the two contracts governs. So, if a company rolls out successive contracts containing inconsistent terms regarding the forum for dispute resolution, a court will decide which of the two contracts applies. Companies with arbitration program should take heed of the Coinbase decision, and make sure that the wording of later issued contracts does not impair previously existing contractual rights to compel disputes to arbitration.

Rebecca: And the U.S. Supreme Court also issued a unanimous decision on May 16 of this year in Forrest v. Spizzirri, holding that when a district court determines that the claims in a lawsuit are arbitrable and a party has requested a stay of litigation, the district court does not have the discretion to dismiss the lawsuit instead. And this this decision resolved a split amongst the federal circuit courts over whether Section 3 of the FAA requires a stay in such circumstances by use of the word “shall” in that provision. The Supreme Court reasoned very clearly that established canons of statutory interpretation, as well as the structure and the purpose of the FAA, compelled the result in that case.

And, very importantly, on April 12, 2024, the U.S. Supreme Court issued a decision in Bissonnette v. LePage Bakeries Park St., LLC. In that case, they held that the application of the transportation worker exemption in the FAA turns upon the work performed by the plaintiff and not the employer’s industry. The Supreme Court made clear that this work-focused test should not bring within the exemption large swaths of workers who, you know, in some manner engage in products that happen to be within the flow of commerce. But instead, the Supreme Court clarified that the worker at issue must play a “direct” and a “necessary” role in the free flow of goods across state borders for the exemption to apply.

Jerry: Certainly seems that the U.S. Supreme Court is a big supporter of arbitration, especially in the class action space, and is trying to clarify things rather than to muddle them. What do you see coming down the track in 2024 in this space?

Eden: Yeah, Jerry, on the PAGA front we’ll likely continue to see plaintiffs disclaiming individual relief in an attempt to avoid arbitration. And in November, Californians will have the opportunity to vote on an initiative that aims to replace PAGA with the new law, the Fair Pay and Employer Accountability Act (“FPEAA”). And the new law, if passed, it will increase penalties for violations. But, on the other hand, it won’t provide for attorneys’ fees recovery, which, as you know, is a driving force behind the flood of PAGA cases that we see. And on the class action front, the future viability of the arbitration defense remains an open question as advocacy groups, government regulators, and political figures push for a ban on class action waivers in arbitration and to carve out categories of claims from arbitration altogether.

Jerry: Well, thank you both very much for this thought leadership and analysis of what we’re seeing. Harkens back to the presidential election from four years ago where actually the viability of workplace arbitration agreements surfaced in the presidential debates. So be interested to see if that occurs in this go around this particular summer. Well, thank you both, and thank you loyal blog readers and listeners for tuning into this week’s edition of the Class Action Weekly Wire.

Eden: Thanks. Jerry. Thanks, listeners.

Rebecca: Thank you.

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 significant appellate decisions issued by courts throughout 2023 and 2024.

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: Loyal blog readers, thank you for being here again for our next episode of the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and joining me today is my colleague Tyler Zmick. And we’re here to talk about appeals. Thanks so much, Tyler, for being on the podcast.

Tyler Zmick: Thanks very much for having me, Jerry.

Jerry: Today we wanted to discuss trends and important rulings in the area of appeals in class action litigation in general, and class certification orders in particular. Parties obviously have very limited options to seek interlocutory appeal in litigation. But class action litigation is a little different. Tyler, could you share with us some of the ways in which parties can move for interlocutory appeal on class action related issues?

Tyler: Sure. So there are basically two potential avenues that a party has for seeking interlocutory appeal of a class certification ruling. The primary mechanism is Rule 23(f) of the Federal Rules, and that rule states that a party must ask for permission to appeal with the clerk of the appellate court within 14 days of the district court order being entered. And as the backup option, the second one parties can also seek interlocutory appellate review under Federal Statute 28 U.S.C. § 1292(b). And both of these avenues together, Rule 23(f) and Section 1292(b), they’re important in that early appeals help correct early errors on questions of law that, if left until final judgment, could potentially require parties to spend years engaging in needless and expensive litigation.

Jerry: I’ve always thought that the stakes are high in class action litigation, especially if there’s a certification order and the discovery that file follows it, it can be a million dollar kind of issue. When you’re advising your clients, what are the kind of the primary options or differences between those two methods for appeal?

Tyler: Sure that’s a great question. There’s multiple different standards applied by the courts, but I think one of the primary differences is that, unlike an interlocutory appeal under section 1292(b), Rule 23(f) does not require that the district court certify an issue for appeal. So Rule 23(f) is a one step process where only the appellate court needs to allow the appeal to go forward. Under Section 1292(b), on the other hand, a party needs permission from both the district court and the appellate court to move forward with the appeal. So you have basically two gatekeepers instead of one, and hence it’s higher burden that you face if you want to seek an appeal through that route.

Jerry: Since they’re discretionary, what kind of success factors do you see from year to year in the appellate courts?

Tyler: Success rates are generally not great. The data shows that appellate courts deny roughly 75% of Rule 23(f) petitions, and most of those denials are accomplished via summary orders, meaning the order just says the petition for permission to appeal is denied without any explanation or reasoning on part of the court.

Jerry: I know you’ve been involved in many appeals in class action situations and co-authored the chapter in the Duane Morris Class Action Review on appeals. Were there any particular decisions that you think are important to share with our listeners in terms of what occurred in the appellate courts in 2023?

Tyler: Sure, absolutely, I think one notable case was issued in July of 2023. The case was In National ATM Council, Inc., et al. v. Visa Inc., and in that case the D.C. Circuit actually offered a rare explanation of its decision. And the decision was to grant a petition to appeal a class certification order under Rule 23(f). And so by way of background, in that case the district court certified a class of ATM operators and ATM customers who alleged that defendants Visa and Mastercard’s rules regarding ATM fees violated federal antitrust laws. And the D.C. Circuit granted Visa and Mastercard’s Rule 23(f) petition to appeal. In doing so, the D.C. Circuit noted sort of strangely that the trial court’s class certification order did not pose an important legal question that needed to be resolved, which is unusual because usually that is the case when an appellate court will accept a Rule 23(f) petition to appeal. Instead, the D.C. Circuit noted that the trial courts order contained statements of law that were unclear, the court citations were not current, and it’s “record analysis” was notably terse. So, in other words, the district court’s explanation was inadequate. If you’re a trial court judge, this is not the kind of order you want to see from the appellate court that is directly above you, and the D.C. Circuit also commented that the district court’s order failed to cite the Supreme Court’s most recent case law analyzing whether common issues predominate over individualized ones in the class action context. So taken together, the appellate court concluded that questionable accuracy of the district court’s unclear language, combined with the settlement pressure that would result from a class certification ruling in favor of plaintiffs, warranted a Rule 23(f) appeal.

Jerry: That seems to be a really interesting decision, and one that practitioners can learn from. Now that we’re almost midway through 2024, have there been any similar rulings or interesting appellate decisions on these sorts of petitions so far this year?

Tyler: Yes, absolutely. I think there’s been at least one notable ruling in 2024 thus far, and the case is Dale, et al. v. Deutsche Telekom AG, where the plaintiffs filed a class action on behalf of AT&T and Verizon customers, and the plaintiffs alleged that a merger between T-Mobile and Sprint resulted in the reduction of competition, causing these customers to have to pay billions of dollars more for their wireless services than they would have otherwise had to pay. And so, in response to the complaint, T-Mobile filed a motion to dismiss, arguing that antitrust standing was lacking, and the district court denied that motion, after which T-Mobile moved to certify the issue for appeal under Section 1292(b). And specifically T-Mobile sought to certify the question whether the plaintiffs, who were customers of AT&T and Verizon, plausibly alleged antitrust standing to challenge the merger of T-Mobile and Sprint. And so the issue is, do these plaintiffs have standing given that they are not customers of either of the parties to the merger, but rather non-parties AT&T and Verizon, who whose cell phone rates basically are going to be impacted by this merger. In deciding to certify the question for appeal, the district court held that this standing question is a contestable question of pure law, not a mixed question of fact and law. And so when it’s a pure legal issue, it’s more likely to meet the interlocutory appeal test. And specifically the court reasoned that there were substantial grounds for a difference of opinion on whether the plaintiffs plausibly alleged antitrust standing. And the court stated that the complaint set forth a plausible theory that AT&T and Verizon customers were injured at the first step as direct consumers in the market, where the merger allegedly restrained competition and raised prices. And so, as a result, the court certified the question for interlocutory appeal to the Seventh Circuit, and it remains to be seen if the Seventh Circuit will also let the appeal go forward.

Jerry: That’ll be a good one to mark to see when the future ruling comes out. I’ve always thought Rule 23, in terms of allowing that appeal was kind of an exception to the general rule, that interlocutory appeals are just so difficult – a big uphill climb. Conversely, in terms of your study in this area and your practice, have there been any relevant court rulings involving appeals under the interlocutory appeal route, which is 28 U.S.C. § 1292(b), in 2023 or in 2024?

Tyler: Yup. So defendants succeeded in obtaining interlocutory appellate review under Section 1292(b) in multiple decisions in 2023, including on one critical issue relative to the class and collective action context. And that issue is how to apply the U.S. Supreme Court’s decision in Bristol-Myers Squibb regarding personal jurisdiction and how that sort of intersects with the claims of potential out-of-state opt-ins in FLSA collective actions as opposed to Rule 23 class actions. So in the case at issue, Vanegas, et al. v. Signet Builders, Inc., it was filed in federal court in Wisconsin, and the plaintiff filed an FLSA collective action, claiming that the defendant failed to pay him, owed overtime, and the plaintiff sought to represent a collective action of mostly non-U.S. citizens, including only 30 who worked in Wisconsin, which is where the case was pending, and almost 600 who performed work in other states. The defendant argued that personal jurisdiction was lacking with respect to those out-of-state potential opt-ins. But the court rejected that argument and proceeded to conditionally certify the proposed collective action and basically pushed to the future the issue of whether the court could exercise personal jurisdiction over those out-of-state potential opt-ins. And so, as a result of that order, defendant sought to certify an appeal under Section 1292(b), and specifically defendant sought to certify this question – whether in an FLSA collective action, if it is proper to defer the personal jurisdiction inquiry until after notice has been sent to potential opt-ins. The court granted defendant’s petition, basically because that question is important enough to warrant interlocutory review. While the court concluded that the jurisdictional principles in Bristol-Myers Squibb did not apply in the FLSA collective action context, the court ruled that the decision was still certifiable for review, because other courts have held that Bristol-Myers Squibb does apply to FLSA collective actions. In addition, it’s a pure question of law that would not require the appellate court to sift through the factual record and obviously the decision here would have a dramatic impact on the future scope of the litigation.

Jerry: Well, that’s a great result for the defendant in that case, somewhat of a unicorn to get an appeal like that up there. So two big appellate rulings to watch for then in the next quarter to several months away in the Seventh Circuit. Well, it seems like novel approaches are the ones that seem to get the courts’ attention as appellate issues begin to percolate through the court.

Well, thanks so much for this great analysis of a very complex area, Tyler, and thank you for being with us today. Listeners, thank you for tuning in.

Tyler: Thanks for having me, Jerry.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Shireen Wetmore and special counsel Eden Anderson with their discussion of landmark ruling issued last week by the California Supreme Court and its developing impact on wage & hour class and collective action litigation in the Golden State.

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, welcome to our weekly podcast, the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and joining me today from sunny California are my colleagues, Shireen Wetmore and Eden Anderson. Thanks so much for being on today’s podcast.

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

Shireen Wetmore: Jerry, thanks for having me.

Jerry: Today, we’re focusing on a recent California Supreme Court ruling in a case called Naranjo v. Spectrum Security Services. It is a gift to employers, because typically news from the California Supreme Court is not always a thumbs up for employers. But in this case we’re going to discuss and explore what it means for employers, and why this decision is so important for employers facing California Labor Code claims. Eden, you briefed this case and you won it before the California Supreme Court – could you give us a little background on what was before the Court in this case?

Eden: Of course Jerry. The procedural history here is a bit convoluted, and involves a couple trips to the California Supreme Court. Mr. Naranjo worked as a security officer for Spectrum. But he was not guarding property. Spectrum contracts with federal agencies, including the U.S. Marshals Service, FBI, Federal Bureau of Prisons, ICE, and DEA, to provide guarded transport for federal prisoners and detainees. The federal contracts required continuous custody of the prisoner. So, because of the nature of the work, Spectrum just paid its officers continuously through their shifts and did not provide an unpaid 30-minute meal period.

And so way back in 2004, Mr. Naranjo filed a class action alleging claims under California law for meal period violations, and he also asserted derivative claims for statutory penalties for failure to pay all wages due at termination, which is a claim asserted under Section 203 of the Labor Code; and a claim for statutory penalties for wage statement inaccuracies or violations, which is a claim asserted under Section 226(e) of the Labor Code. These claims were all certified as a class and proceeded to trial.

At trial, Spectrum asserted a number of defenses premised on the fact that its officers worked alongside federal employees on federal lands, arguing that California meal period requirements just didn’t apply, and ultimately, those defenses were rejected by the trial court.

But, the judge found that the defenses had been asserted in good faith and were objectively reasonable, and the judge held that Spectrum’s good faith served as a defense to the Section 203 waiting time penalties claim, but not the Section 226(e) wage statement claim, and the difference in outcome was tied to different statutory language in those sections. As a result, Spectrum was found liable not just for the underlying meal period infractions, but for an additional $1.1 million in statutory penalties and attorneys’ fees.

Jerry: That’s a very interesting outcome in the practical, real world in which companies and employers are endeavoring to comply with requirements of the California Labor Code. What’s the distinction between the waiting time penalties and the wage statement violations?

Eden: Section 203 of the Labor Code imposes liability for a “willful” failure to pay all wages due at termination, and Section 226(e) imposes liability for a “knowing and intentional failure” to provide an accurate wage statement.  So, the trial court felt that “willful” and “knowing and intentional” meant different things.

Jerry: Well, the $1.1 million dollar statutory penalty was a whopper. I take it the decision was appealed – what happened at the California Court of Appeal?

Eden: Well, the Court of Appeal did not actually address the statutory language issue. Instead, it held that meal period premiums were not “wages,” and because they weren’t wages, Labor Code Sections 203 and 226 didn’t apply at all.

But the California Supreme Court then granted review and disagreed. It held in 2022 that meal period premiums and also rest period premiums are wages that must be fully paid at termination, and which also have to appear on a wage statement. So then, the California Supreme Court remanded the case to the Court of Appeal to revisit the Labor Code Sections 203 and 226 claims.

On remand, the Court of Appeal found that Spectrum’s defenses had been asserted in good faith and that a good faith dispute as to liability furnished a defense both to claims. The Court of Appeal also held that Spectrum could not have known that a meal period premium had to appear on a wage statement because the law as to whether a meal period premium was a wage or penalty was not clear until the 2022 decision.

Naranjo then sought review, and the California Supreme Court again took up the case, this time to determine whether a good faith defense applies to wage statement claims under Labor Code Section 226(e).

And that brings us to last week’s ruling that we are discussing today.

Jerry: Well, thanks so much, Eden, that’s a great overview, and in essence a scorecard for employers closely watching this case in terms of how it got up to the California Supreme Court and how the ruling emanated. Shireen, how did the California Supreme Court answer that essential question, and what does the decision mean for employers who are facing these sorts of claims?

Shireen: Thanks, Jerry. Great question. So this ruling has huge ramifications for pending wage statement claims, and we see them routinely asserted in wage and hour class actions, but they also serve as a basis for claims and civil penalties in PAGA actions. And it’s an exceptionally rare pro employer decision, which is why we’re all so jazzed about it. But the court held that an employer’s objectively reasonable good faith belief that it complied with the law serves as a defense to liability for penalties in an inaccurate wage statement under Labor Code 226(e).

So what does that mean? It means that if an employer has objectively reasonable defense to liability as to the underlying claim for unpaid wages, it will not also be liable for additional wage statement penalties, even if the defense is ultimately rejected. Which is what happened here. So if an employer is found to be liable for the underlying claim, still going to get out of those penalties – that is a huge benefit for employers. So, an employer tried to comply with the law. Their conduct and defenses were objectively reasonable. They shouldn’t be facing liability on the wage statement penalties – or if the law as to whether wages were even due was in some way unclear at the time, that too serves as a potential defense to a wage statement penalty claim. Just a reminder, our audience definitely already knows this, but a good faith defense does not include ignorance of the law. But it’s still a really significant win for California employers, because, as you were saying earlier, employers work really hard to try to comply with the very complex world that is California Labor Code wage & hour requirements. And these wage statement claims they can, as was the case here, add hundreds of thousands of dollars in exposure in a class action. It’s often the tail wagging the dog on an otherwise limited claim for damages in these cases. And so the Naranjo decision means that employers who act in good faith have a really important defense, and should not be facing liability for wage statement penalties going forward.

Jerry: Seems to me this is a huge win. I’ve always thought employers don’t wake up every morning and think about how am I going to steal wages from my employees. Rather they’re thinking about, how am I going to comply with the law? And this gives them a huge incentive and a huge defense in class actions involving California labor code violations.

Conversely, how will this impact PAGA claims were those sorts of penalties are being sought by plaintiffs’ counsel?

Shireen: Well, that’s a great question, and it kind of remains to be seen. The impact of the decision is something we anticipate parties are going to be arguing about, continuing to argue about, maybe expediting some of the arguments they are making. From our perspective, it would make no sense to award civil penalties under PAGA if the employer is not liable for statutory penalties under the wage statement statute that forms the basis for the PAGA claim. But plaintiffs are likely going to try to limit the decision. They’re going to argue that the good faith defense only applies to Section 226(e) and not to their PAGA claim. So this is something we’re going to be closely watching and duking out – possibly with Eden briefing up to the California Supreme Court again.

Jerry:  Well, congratulations to the defense team here, kudos to you in terms of pushing the edges of the law and coming up with defenses that work for our clients and for employers in general in California. And thanks so much to both of you for joining this week’s podcast.

Shireen: Jerry, thanks for having us.

Eden: Thank you, everyone. Glad to be part of the podcast and this big win for California employers.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman, Jennifer Riley, and Alex Karasik with their discussion of our upcoming webinar, the Duane Morris Mid-Year Review of EEOC Litigation and Strategy. Reserve your virtual seat for the program here, and check out the 2024 edition of the Duane Morris EEOC Litigation Review here.

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: Welcome to all of our listeners. Thank you for being here for our weekly podcast, the Class Action Weekly Wire. I’m Jerry Maatman, partner at Duane Morris, and joining me today are my colleagues and fellow partners, Jen Riley and Alex Karasik. Thanks so much for being on the podcast today.

Jennifer Riley: Thank you, Jerry, happy to be part of the podcast.

Alex Karasik: Thanks, Jerry. Glad to be here.

Jerry: Today we’re very excited, we have a great message about an upcoming webinar, the Duane Morris Mid-Year Review of the EEOC Litigation and Strategy. This is a must-see and must-attend webinar, that in essence gives a mid-year report card on what the EEOC is doing in the courthouse. And the hosts will be myself, Jen, and Alex, and we wanted to personally invite each of you, our listeners and our readers, to sign up and attend the event, which, of course, is for free. Jen, could you talk a little bit for our listeners about the contents of this year’s webinar?

Jen: Sure, Jerry. Essentially, this is a quick 30 min panel discussion, where the three of us will do two primary things. First, we’ll analyze the EEOC’s latest strategic priorities. And second, we will analyze and review the lawsuit filings that we’ve seen so far during the first half of the Commission’s fiscal year 2024. We will bring that analysis to you in a half hour segment.

Jerry: Thanks. This is a great virtual program that’s perfect for human resource professionals, business leaders, and corporate counsel, and is designed to provide insights, in essence, inside baseball news, regarding the EEOC’s latest enforcement initiatives and strategies. And it’s designed to keep businesses off the radar of the EEOC. Alex, what are some of the details of the webinar that our listener should know?

Alex: The webinar is scheduled for Monday, May 13 at 2 pm, and it runs from 2 pm to 2:30 pm Central Time. We will provide a sign up link in the episode transcript on the class action defense blog. This webinar is a great information-packed 30 minutes – we understand a lot of our corporate counsel, HR professionals, and business leaders, that you just mentioned, Jerry, have busy schedules. So we’re going to do our best to pack this into a 30 minute webinar, and then we’ll go from there and to give insights into the EEOC’s activities throughout the first half of the fiscal year.

Jerry: Well, the past is prologue. Last year we had over a thousand attendees, from the United States, Europe, and Asia, so we hope all the listeners can tune in this year.

Jen: We also want to remind listeners that we recently published a primer on EEOC litigation, called the EEOC Litigation Review – 2024. Complying with workplace anti-discrimination laws is important for companies looking to stay out of the EEOC’s crosshairs. The review is a great resource for corporate counsel and human resources professionals alike. It is available on the class action defense blog in e-book format.

Alex: We were also fortunate enough to discuss the EEOC strategic priorities with EEOC Commissioner Keith Sonderling at our Duane Morris Class Action Review book launch in February 2024 – for anyone interested in watching that discussion, it is also available on our blog.

Jerry: Thanks, Alex, and thanks, Jen. Certainly looking forward to the upcoming webinar on the EEOC in a few weeks, and, as always, we will keep our blog readers and listeners fully updated on these important announcements.

Alex: Thanks, Jerry. We look forward to seeing everyone soon.

Jen: Thanks for having me, Jerry, and, thanks to all of our listeners.

Jerry: Have a great day.