Category: Class Certification Motions

By Gerald L. Maatman, Jr. and Gregory Tsonis

Duane Morris Takeaways: In a decisive ruling on February 29, 2024, Judge Eric F. Melgren of the U.S. District Court for the District of Kansas granted the motion by defendants Bombardier, Inc. (“Bombadier”) and its subsidiary Learjet, Inc., (“Learjet”) in Wood, et al. v. Learjet Inc. et al., Case No. 18-CV-02681 (D. Kan. Feb. 29, 2024), to decertify a collective action brought under the Age Discrimination in Employment Act (“ADEA”). This landmark decision underscores the increased scrutiny applied during the decertification stage of collective actions, especially concerning allegations under the ADEA, and how defendants can successfully achieve decertification by attacking proffered evidence and establishing the individualized inquiries which preclude proceeding as a collective action.

Case Background

The lawsuit originated from claims by two named plaintiffs, both over the age of 40 and former employees at the Bombardier Flight Test Center (“BFTC”) in Wichita, Kansas, operated by Learjet.  The named plaintiffs alleged a pattern or practice of age discrimination in violation of the ADEA, i.e., specifically that defendants targeted non-union employees over the age of 40 for termination.  Following the lawsuit’s initiation, and applying the “similarly situated” collective action standard incorporated by the ADEA from the Fair Labor Standards Act, plaintiffs sought conditional certification of a collective action under the traditionally “lenient” standard applied by the courts within the Tenth Circuit and others in evaluating certification of collective actions.  Specifically, the plaintiffs sought and obtained conditional certification for a collective action consisting of non-union personnel employed since April 2, 2016 at the BFTC whose employment was terminated when they were over 40 years of age.  After the dissemination of notice, additional plaintiffs opted in, with four remaining by the time the defendants moved for decertification.

Procedurally, the defendants moved to decertify the collective action after the conclusion of fact discovery.

The two named plaintiffs and four opt-ins all worked in the BFTC, were over the age of 40 at the time their employment ended, and were terminated for various reasons.  One named plaintiff was terminated as a result of performance issues and a safety violation.  The other named plaintiff was placed on a performance improvement plan for time management issues that resulted in his termination.  While Learjet terminated one opt-in plaintiff for insubordination in connection with his failure to repay a tax payment reimbursement to the company, the three other opt-in plaintiffs were laid off as part of corporate reorganizations, with performance playing a role in some, but not all, layoff-related terminations.

The Court’s Decision

Applying the Tenth Circuit’s two-step approach for collective action certification, the Court moved from the “lenient standard” at the conditional certification stage to the “stricter” standard post-discovery to assess whether the plaintiffs were “similarly situated.”  Id. at 9.  The analysis to determine whether the members of the collective action were “similarly situated” to the named plaintiffs involved examining disparities in employment circumstances and available individual defenses, as well as procedural fairness and efficiency considerations.

The Court found the evidence of a discriminatory policy, predicated on an alleged statement about the company’s age composition, insufficient to establish a pattern or practice of discrimination. To establish an unlawful policy, plaintiffs relied on a single statement made by a director at a meeting in which he “drew an inverted triangle to represent a large number of older workers (at the top) and a small number of younger workers (at the bottom)” and allegedly stated that “the age balance was upside down” and that they “needed to reduce the age of the Company.”  Id. at 3.  The Court, however, determined that “no evidence” of a discriminatory policy existed other than the alleged statement.  Notably, the Court highlighted the lack of documentation, meetings, or direct involvement by management in any discriminatory policy’s alleged development or implementation.  Id. at 13.  Furthermore, terminations affecting the named plaintiffs and opt-ins spanned three years and involved various decision-makers, and evidence demonstrated that the average age of BFTC employees and percentage of workers over the age of forty increased between 2015 and 2019.  Id. at 8, 13.

The Court also considered the individual circumstances of the named plaintiffs’ and opt-ins’ terminations, noting significant differences in the reasons for termination and the involvement of different managers in these decisions.  The Court credited defendants’ argument that individualized defenses required decertification, as some opt-in plaintiffs executed releases barring their ADEA claims, the named plaintiffs’ claims were limited by the scope of their charges of discrimination, and one opt-in failed to disclose claims against defendants in bankruptcy proceedings.  Id. at 16.  Though noting that the individualized evidence was “not onerous,” the Court opined that the diversity in employment circumstances and the presence of individualized defenses underscored the plaintiffs’ disparate situations, which counseled against the maintenance of a collective action.  Id. at 16.  Finally, the Court also found that the “lack of common representative evidence” and the “highly individualized” circumstances of each plaintiff threatened to confuse a jury by requiring separate mini trials, which was wholly inefficient.  Id. at 17.  Accordingly, the Court granted defendants’ motion to decertify.

Implications for Employers

This decision sends a strong message about the potential hurdles faced by plaintiffs in sustaining collective actions after fact discovery, particularly in pattern-or-practice ADEA cases. For employers, the ruling highlights the importance of meticulous record-keeping, clear performance management, and consistent application of termination policies to defend against collective action claims effectively.

Moreover, this decision showcases the strategic value of aggressively challenging collective action certification on the basis of individualized claims and defenses, thereby preventing the broad-brush grouping of distinct employment cases. Employers should also note the critical role of early, proactive legal strategies in managing and mitigating the risks associated with collective action litigation.

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On February 2, 2024, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the District of Northern California granted Plaintiffs’ motion to certify a class of purchasers of one or more iOS applications or application licenses from Defendant Apple, Inc. (“Apple”) or who paid for one or more in-app purchases since July 10, 2008 in In Re Apple iPhone Antitrust Litigation, No. 4:11-CV-06714 (N.D. Cal. Feb. 2, 2024). The Court rejected defense arguments that class certification should be denied on the grounds that the model of Plaintiffs’ expert revealed millions of uninjured class members and that individual issues would predominate. Instead, the Court found that the model showed an estimated 7.9% of the class is uninjured and that with more complete data the model will be capable of showing antitrust impact on a class-wide basis.

In Re Apple iPhone Antitrust Litigation is required reading for any corporate counsel handling antitrust class action litigation involving claims by end consumers.

Case Background

Plaintiffs are purchasers of iPhone applications (apps), app subscriptions, and/or in-app content via the iPhone App Store. Defendant sells iPhones and requires app purchases to be made via the App Store. Plaintiffs claim that Apple charges App Store developers supracompetitive commissions that are passed on to consumers in the form of higher prices for app downloads, subscriptions, and in-app purchases. Plaintiffs assert claims under § 2 of the Sherman Act for unlawful monopolization and attempted monopolization of the iPhone applications aftermarket.

In a prior ruling, the Court denied class certification. It had concluded that Plaintiffs could not establish the predominance requirement under Rule 23(b)(3) because they had not demonstrated that damages from Apple’s alleged anticompetitive conduct could be proven on a class-wide basis. According to the Court, the methodology of Plaintiffs’ expert failed to reasonably ascertain how many class members were unharmed by the alleged conduct and individual questions would predominate.

The Court’s Class Certification Ruling

In response to the Court’s ruling, Plaintiffs narrowed their class definition to only include Apple account holders who have spent $10 or more on app or in-app content.

Using that new definition, Plaintiffs submitted revised and new expert reports estimating that the proposed class includes only 7.9% unharmed members and again moved for class certification under Rule 23(b)(3). Since the Court’s prior ruling, the Ninth Circuit also rejected the argument that “Rule 23 does not permit the certification of a class that potentially includes more than a de minimis number of uninjured class members.” Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods LLC, 31 F. 4th 651, 669 (9th Cir. 2022). According to the Court, the revised model can show the impact of Apple’s allegedly anticompetitive conduct across all class members, and once Apple produces the rest of its app transactional data, the model will be able to calculate the exact extent of injury suffered by each class member. Under Olean, the Court opined that Plaintiffs meet the predominance requirement.

Implications For Defendants

In Re iPhone Antitrust Litigation is another example of a federal court class certification decision turning on the existence of common, injury-producing conduct. The Court credited evidence that may be over inclusive at class certification stage of the proceedings, but is nonetheless capable of showing the impact of the allegedly anticompetitive conduct across all class members at trial.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Derek S. Franklin

Duane Morris Takeaways: On January 29, 2024, in Hossfeld v. Allstate Insurance Co., No. 1:20-CV-07091 (N.D. Ill. Jan. 29, 2024), Judge Joan B. Gottschall of the U.S. District Court for the Northern District of Illinois denied a renewed motion for class certification brought by plaintiffs accusing Allstate of violating telemarketing laws by allowing an outside party to solicit ‘do-not-call’ listees on its behalf.   After denying the plaintiff’s initial motion of class certification a year earlier, Judge Gottschall denied the plaintiff’s second motion for class certification because the plaintiff failed to show a material change of circumstances in the time since the first certification motion that warranted a different ruling.  The decision is required reading for corporate defendants seeking to quell efforts by plaintiffs to take a second shot at obtaining class certification after a failed earlier attempt.

Case Background

Plaintiff Robert Hossfeld filed a lawsuit against Allstate Insurance Co. alleging that Allstate violated the Telephone Consumer Protection Act (“TCPA”) by providing a telemarketer that Allstate contracted with a list of consumer leads identifying individuals such as Plaintiff who requested to be placed on Allstate’s internal ‘do-not-call’ list.  Id. at 2.

In May 2022, Plaintiff filed a motion for class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure.  In March 2023, the Court denied Plaintiff’s motion on the grounds that Plaintiff failed to show a large enough class to make joinder impractical.  Id. at 2-3.  In the order denying the motion, the Court did not include language stating that its denial of Plaintiff’s certification bid was “with prejudice.”  Id. at 8.

Given the absence of that language, Plaintiff filed a renewed motion for class certification in May 2023 asking the Court to reconsider its earlier class certification ruling.  Plaintiff asserted that he “reviewed the infirmities relied upon by the Court in its original opinion denying his first motion for class certification, and modified the class definitions and arguments to address them.”  Id. at 5.  Allstate moved to strike Plaintiff’s second motion for class certification, arguing that Plaintiff should not be given a “second bite at the apple.”  Id. at 1.

The Court’s Rejection Of Second Motion For Class Certification

On January 29, 2024, the Court issued a 9-page decision granting Allstate’s motion to strike Plaintiff’s second class certification motion.  Id.  The Court’s decision analyzed Plaintiff’s second class certification motion under two applicable standards, including: (1) principles governing a pre-judgment motion for reconsideration under Rules 54(b) and 59(c); and (2) the Rule 23(c)(1) standard for revising an order granting or denying class certification.  Id. at 4.  The Court rejected Plaintiff’s arguments under both standards.

First, the Court determined that Plaintiff did not satisfy the reconsideration standards under Rules 54(b) and 59(e) because he failed to “present either newly discovered evidence or establish a manifest error of law or fact.”  Id. at 5.  The Court noted as part of this conclusion that, “although [Plaintiff] has submitted evidence not previously presented to the court, he [did] not contend that this evidence was unavailable to him when he filed his first class certification motion or that the court made a manifest error of fact or law when it denied his first class certification motion.  Id. at 5-6.

Second, the Court found that Plaintiff’s did not make a necessary showing to reverse the Court’s earlier denial of class certification under Rule 23.  Citing Seventh Circuit precedent in Chapman v. First Index, Inc., 796 F.3d 783, 785 (7th Cir. 2015), which affirmed the denial of a second class certification motion where there was no showing of “a material change of circumstances to justify revisiting the first class certification ruling,” the Court in Hossfeld rejected Plaintiff’s argument for the same reason.  Id. at 7.  As the Court explained, Plaintiff did not dispute that the newly-included arguments and supporting evidence in his second class certification motion were available at the time of his first motion.  Id. at 9.  Thus, the Court concluded that Plaintiff did not show “a material change in circumstances needed to obtain a second bite at the proverbial apple.”  Id.

Based on rejecting Plaintiff’s arguments under both applicable legal standards, the Court granted Allstate’s motion to strike Plaintiff’s second motion for class certification.  Id.

Implications For Companies

This opinion represents a helpful roadmap for employers to fend off attempts by plaintiffs to revive a failed class certification bid.  The decision is a strong source of persuasive authority supporting that a plaintiff cannot successfully move a second time for class certification absent either “a manifest error of law or fact” in the court’s first class certification ruling, or newly-discovered evidence unavailable at the time of the first class certification bid representing a “material change in circumstances.”  Id. at 5, 9.  For these reasons as well, the ruling underscores the importance of not saving potentially supportive arguments and evidence during an initial class certification battle in case of a “second bite at the apple” that may not come.

By Gerald L. Maatman, Jr., Nathan N. Norimoto, Nick Baltaxe

Duane Morris Takeaways: On January 17, 2024, in Anders, et al. v. California State University Fresno, et al., No. 23-15265, 2024 U.S. App. LEXIS 1063 (9th Cir. Jan. 17, 2024), the Ninth Circuit vacated the U.S. District Court for the Eastern District of California’s decision to deny Plaintiffs’ renewed motion for class certification.  Specifically, the Ninth Circuit held that the District Court erred by finding the named plaintiffs would not be adequate class representatives due a “speculative” conflict of interest that could develop at the remedy stage of the litigation.  The Ninth Circuit remanded the action to the District Court for further proceedings.  The ruling is required reading on the procedural aspects of class certification in discrimination cases in general, and with respect to how actual or perceived conflicts on interest in particular implicate the Rule 23 (a)(4) analysis.

Case Background

Plaintiffs Taylor Anders, Hennessey Evans, Abbigayle Roberts, Megan Walaitis, Tara Weir, and Courtney Walburger were all former members of the California State University, Fresno (“Fresno State”) women’s lacrosse team.  Id. at *2.  Plaintiffs brought class claims alleging effective accommodation and equal treatment under Title IX.  Id.  Plaintiffs sought an injunction that would prohibit Fresno State “from eliminating Fresno State’s women’s lacrosse team (or any other women’s varsity intercollegiate athletic opportunities at Fresno State) unless and until Fresno State is and will be in compliance with Title IX.”  Id. at *5, fn. 4.

Plaintiffs “sought certification of classes consisting of current and future female students at Fresno State who have participated in or are able and ready to participate in women’s varsity intercollegiate athletics at Fresno State.”  Id. at *3.  The District Court denied Plaintiffs’ class certification motion in its entirety on the basis that the Plaintiffs were not adequate class representatives under Rule 23(a)(4), as their affiliation and contentions favored the women’s lacrosse team over other women’s varsity sports.  Id.  Plaintiffs appealed to the Ninth Circuit.

The Ninth Circuit’s Ruling

The Ninth Circuit vacated the District Court’s decision to deny class certification of the effective accommodation and equal treatment claims.  Id. at *6. 

First, the Ninth Circuit noted that to defeat adequacy under Rule 23(a)(4), any conflict of interest between the named Plaintiffs and the putative class members must be “actual” and not “speculative,” which only exists if the remedy sought precludes “structural assurance of fair and adequate representation for the diverse groups and individuals affected.”  Id. at *4.

With respect to Plaintiffs’ effective accommodation claim, the Ninth Circuit opined that the District Court erred in finding Plaintiffs would not be adequate class representatives due to a “conflict of interest with members of their proposed class” because the District Court only “speculat[ed] as to conflicts that may develop at the remedy stage.”  Id.  For example, if Fresno State “reinstate[s] at least one women’s sports team,” the Ninth Circuit reasoned that it was only speculation that “plaintiffs would be able to advocate for the reinstatement of the women’s lacrosse team at the expense of other women’s teams.”  Id. at *4-*5.  At the remedies stage, however, the Ninth Circuit determined that Fresno State “can comply with Title IX without reinstating women’s sports teams by leveling down programs instead of ratcheting them up to achieve substantial proportionality between male and female athletics opportunities.”  Id. at *5 (internal quotation marks and citation omitted).  Further, the Ninth Circuit pointed out that if Fresno State reinstates women’s sports teams at the remedies stage, the District Court did not identify any “evidence suggesting plaintiffs would have input into which teams are to be reinstated.”  Id.

In addition, the Ninth Circuit held that the District Court erred by failing to “independently analyze the equal treatment claim,” and evaluate whether a conflict of interest exists with the respect to the claim.  Id. at *5.  The Ninth Circuit directed the District Court to analyze the Plaintiffs’ equal treatment claim in light of the “conclusion that the injunctive relief Plaintiffs seek under their effective accommodation claim does not necessarily require reinstatement of the women’s lacrosse team” and to “specifically assess whether a conflict exists under the equal treatment claim.”  Id. at *5-*6.

In conclusion, the Ninth Circuit vacated the denial of class certification and remanded to the District Court for further proceedings on the class certification issue.  Id. at *6.

Key Takeaways

The Ninth Circuit’s decision in Anders makes it easier for plaintiffs to certify a class in the Title IX context by messaging that challenges to the adequacy of a class representative in a Title IX lawsuit must be based on an actual conflict of interest.  Importantly, any challenges to class certification based on the fairness of a potential remedy will likely fail as too “speculative.”  Any entity that must comply with Title IX, and finds itself the potential victim of a class action based on Title IX, should keep this distinction in mind.

By Gerald L. Maatman, Jr., Nick Baltaxe, and Nathan K. Norimoto

Duane Morris Takeaways: In O’Hailpin v. Hawaiian Airlines Inc., No. 22-CV-00532, 2023 U.S. Dist. LEXIS 220734 (D. Haw. Dec. 12, 2023), Judge Jill Otake of the U.S. District Court for the District of Hawaii denied a motion for class certification brought by current and former employees of Hawaiian Airlines alleging discrimination under Title VII and the ADA against individuals who requested medical or religious accommodations from their employers’ COVID-19 vaccination policy. The decision is pro-defendant and well worth a read in terms of strategies to oppose and prevent class certification of employment discrimination claims.

Case Background

Riki O’Hailpin, along with eight other named plaintiffs (“Plaintiffs”), brought a putative class action against Defendant Hawaiian Airlines Inc. (“Hawaiian”), alleging that Hawaiian violated Title VII of the Civil Rights Act of 1964 (“Title VII”) and the Americans with Disabilities Act (“ADA”) by discriminating against employees who requested medical or religious accommodations from Hawaiian’s Covid-19 vaccination policy.  In response to the Covid-19 pandemic, President Biden issued Executive Order No. 14042, a Federal Contractor Mandate that required certain employers to implement a mandatory vaccination policy.  Under the Federal Contractor Mandate and related guidelines, Hawaiian was required to have its unvaccinated employees masked and socially distanced in the workplace; thus, any exemptions to the vaccine policy would need to comply with those masking and distancing requirements.  Id. at *3.  Plaintiffs challenged Hawaiian’s policy that required all employees “to be vaccinated November 1, 2021 unless they had a reasonable accommodation for a disability as defined under the ADA or a sincerely held religious belief that conflicted with their ability to receive a Covid-19 vaccine.”  Id. at *3-4.

Hawaiian received 568 reasonable accommodation requests related to the vaccine policy, including 496 for religious accommodations and 72 for medical exemptions.  Id. at *3.  Hawaiian subsequently examined every work position and every work location to determine whether masking and distancing were feasible and concluded that, for a majority of the positions, they were not.  Hawaiian also implemented a “Transition Period Testing Program” that provided a deadline for unvaccinated employees to test and a 12-month unpaid leave of absence for those who did not get vaccinated and were not granted an accommodation.  Id. at *6.  The complaint alleged Hawaiian engaged in a “pattern and practice of discrimination” under Title VII and the ADA by denying medical and religious accommodation requests and that the Transition Period Testing Program was a pretext for denying accommodation requests.  Id. at *17.  Plaintiffs sought to represent all current and former Hawaiian employees whose religious and medical vaccine accommodation requests were denied under Hawaiian’s vaccination policy, and proposed a primary class of the approximately 500 employees whose accommodation requests were denied as well as sub-classes, broken down by medical and religious requests, of individuals whose requests were either denied or rescinded by Hawaiian.  Id. at *9.  Plaintiffs moved for class certification under Rule 23 of the Federal Rules of Civil Procedure.  Id.

Plaintiffs’ Motion For Class Certification

The Court evaluated Plaintiffs’ motion for class certification under Rule 23’s requirements of numerosity, adequacy, predominance, typicality, and commonality.  First, it expressed skepticism that one of Plaintiffs’ proposed sub-classes satisfied the numerosity requirement.  Id. at *12-13.  The Court concluded that certification of a sub-class of 14 individuals “whose medical exemption requests were rescinded, such that no final decision was reached … could likely be denied based on numerosity grounds alone.”  Id. at *13.  At the same time, the Court determined that Plaintiffs satisfied Rule 23’s adequacy of counsel requirement.  Id. at *13-14.  Hawaiian did not contest the requirement with respect to the named Plaintiffs and their counsel.  Id.  at *14.

The Court further evaluated whether Plaintiffs’ “pattern and practice” theory of liability met Rule 23’s commonality, typicality, and predominance requirements, with a specific focus on issues susceptible to “generalized proof” versus “individualized proof.”  Id. at *20-21.  The Court found that Plaintiffs could not satisfy the remaining Rule 23 requirements due to the individualized assessments into each medical and religious accommodation request to determine whether Hawaiian’s treatment of each request constituted actionable discrimination under Title VII and the ADA.  Id. at *23-57.

With respect to the sub-classes of individuals who were denied religious accommodation requests, the Court noted that the inquiries into each employee’s “sincerely held religious belief and secular preference” and/or whether the accommodation would cause an “undue hardship” to Hawaiian would require too many individualized assessments to satisfy predominance under Rule 23.  Id. at *27–*42.  For example, the Court noted the analysis of whether the accommodation would impose an undue hardship on Hawaiian would include an individualized review of each position, location, union status, and the ability to mask and social distance.  Id. at *37-39.

For the medical accommodation sub-classes, the Court noted that the ADA extends “only to qualified individuals … who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires.”  Id. at *44 (quoting 42 U.S.C. § 12111(8)).  For this reason, the Court opined that the reasonableness of the accommodation “is necessarily individualized, based on the person’s position and location, and the extent to which an accommodation would amount to an undue hardship on Hawaiian.”  Id. at *52.  In light of the individualized inquiries to determine the reasonableness of each accommodation (masking, social distancing, or testing) for each qualified individual, the Court determined that Plaintiffs did not meet their “burden to explain why commonality, typicality, and predominance are met” for the ADA subclasses.  Id. at *55-56.

Accordingly, the Court denied Plaintiffs’ motion for class certification and held that a class action was not “the superior way” for Plaintiffs’ claims to proceed.  Id. at *56.

Implications For Employers

This decision represents a helpful roadmap for employers to defend not only against potential Covid-19 vaccine-related class action complaints, but also against putative class actions brought under Title VII and the ADA.  The Court’s ruling underscores the importance of individualized inquiries for religious and medical accommodation requests under Title VII and the ADA, and offers tools to defend against the plaintiff’s burden of demonstrating predominance, typicality, and commonality at the class certification stage of the litigation.

By Seth A. Goldberg and Nick Baltaxe

Duane Morris Takeaways: A California Superior Court recently granted class certification relative to a class of hundreds of employees against a group of dispensary defendants where the Plaintiffs presented sufficient evidence that the off-the-clock work claims, meal and rest period claims, and reimbursement of necessary business expenses claims predominated over individual inquiries and were typical of the class.  The Court did not rule on the merits of the integrated enterprise, alter ego, or joint employer arguments, nor did the Court agree with the Defendant’s arguments that the claims were not typical because the Plaintiffs were not employed by each Defendant. Nonetheless, the ruling is important for employers in general and cannabis dispensaries in particular.

Case Background and the Court’s Ruling

A group of dispensary and retail store employees at four different dispensaries owned by different entities asserted that they should be treated as a single enterprise. The Plaintiffs moved to certify a class of all current and former non-exempt, hourly employees of the Defendants from January 13, 2017 through the present. The Plaintiffs alleged that the putative class members were expected to work off-the-clock in order to set up their timekeeping program and their payroll program as well as review materials on the timekeeping program, before clocking-in on their personal cell phone. The Plaintiffs additionally contended that the Defendants failed to provide meal and rest periods, timely pay all wages on termination, or provide accurate itemized wage statements. The Plaintiffs also argued that because the four Defendants should be considered a single enterprise, they failed to comply with the higher minimum wage found in the City of Los Angeles Minimum Wage Ordinance.

The Court granted the Plaintiffs’ motion for class certification.  The Court noted that the Plaintiffs’ arguments  regarding the Defendants being an integrated enterprise could be established by common proof. At the class certification stage, the Court determined that the Defendants’ arguments went to the merits of the Plaintiffs’ claims and did not compel denial of the Plaintiffs’ motion.  The Court found that each of the Plaintiffs’ class claims were subject to common proof, that the Plaintiffs’ injuries were typical of the class, and that the Plaintiffs and their counsel were adequate to serve as class representative and class counsel.  Importantly, the Court reached this conclusion despite Defendants’ introduction of compliant policies and procedures relating to these wage & hour claims.

Key Takeaways

There are thousands of state-licensed cannabis operators in California, a state known for its ubiquitious wage & hour litigation, and thousands more across the 38 states in the US that have legalized cannabis for medical and/or adult-use purposes.  As the cannabis industry continues to mature and evolve, wage & hour class actions are likely to become more frequent in the cannabis industry, just as they have grown in other industries.  It is crucial that employers ensure that they follow federal and state wage & hour laws and provide their employees with complaint policies and procedures.  Arbitration agreements with class waivers also should be provided to each employee in states where applicable.  This becomes even more crucial in the cannabis space, where brands are expanding due to a high volume of M&A transactions and market consolidation.  Cannabis companies should continue to be cognizant of the strict wage & hour regulations in their states as the industry continues to grow.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In the proceeding captioned In Re Marriott International Customer Data Security Breach Litigation, MDL No. 8:19-MD-02879, 2023 WL 8247865 (D. Md. Nov. 29, 2023), Judge John Preston Bailey of the U.S. District Court for the District of Maryland granted Plaintiff’s Motion for Class Certification and reinstated several previously-certified classes.  The defendant argued that class certification was improper, in part, because the putative class members signed a Choice of Law Provision that contained a class action waiver.  Conversely, the plaintiffs contended that the defendant waived its defense based on the Choice of Law Provision.  The Court held that (i) the defendant waived its Choice of Law Provision, and (ii) in the absence of an arbitration agreement, the Choice of Law Provision did not override the Rule 23 requirements.  For these reasons, this case serves as an important reminder for companies on the importance of the terms of contractual agreements in the context of seeking to arbitrate cases and potentially avoid class or collective actions.

Case Background

In 2016, Marriott purchased Starwood Hotels & Resorts Worldwide (“Starwood”), and inherited Starwood’s IT infrastructure provided by Accenture LLP (“Accenture”) for all Starwood properties.  Id.  In September 2018, Marriott learned that an unidentified party tried to gain access to the Starwood guest reservation database.  After an investigation, Marriott determined Starwood’s database was compromised from July 2014 through September 2018.  Id. *1.  On November 30, 2018, Marriott disclosed the data breach.  Id.

Thereafter, affected consumers filed suit against Marriott and Accenture nationwide.  Id.  Marriott requested that the actions be consolidated into one multi-district litigation (“MDL”) in the U.S. District Court for the District of Maryland, where Marriott is headquartered.  Id. * 4.  The case was consolidated, and the plaintiffs filed their joint MDL Complaint alleging various state law contract, statutory consumer protection, and state law negligence claims.  Id.  The plaintiffs then moved to certify various classes.  Id. *2.

The putative class included members of the Starwood Preferred Guest Program (“SPG”).  Id. *2.  Members of the SPG program signed a contract that contained a “Choice of Law and Venue” Provision (the “Choice of Law Provision”).  Id.  The Choice of Law Provision stated that any disputes related to the SPG program would “be handled individually without any class action” and would have exclusive jurisdiction in the State of New York.  Id.  Therefore, the defendant asserted that Rule 23(a)’s “typicality” requirement was not met because the class members were SPG program members, and the class contained both members and non-members of the SPG program.  Id.

The District Court agreed with the defendant, and redefined all classes to include only SPG members.  Id. *3.  However, by doing so, every putative class member was “someone who had purportedly given up the right to engaged in just such class litigation.”  In Re Marriott Int’l, Inc., 78 F.4th 677, 682-83 (4th Cir. 2023).  The District Court “did not further consider the import of the class waiver on its certification decision,” id. at 683, and granted certification as to three of the plaintiffs’ Rule 23(b)(3) and four Rule 23(c)(4) damages classes.  In Re Marriott Int’l, Inc., 341 F.R.D 128, 172-73 (D. Md. 2022).  Subsequently, the defendants appealed.

On appeal, the Fourth Circuit held that the District Court erred in failing to address whether or not the SPG members agreed to bar the certification of a class action.  In Re Marriott International, 2023 WL 8247865, at *3.  The Fourth Circuit vacated the class certification and remanded to the District Court to consider the effect of the Choice of Law Provision on the class.  Id.

The District Court’s Decision

The District Court concluded that (i) the defendants waived the Choice of Law Provision, and (ii) absent an arbitration agreement, Rules 23 and 42 prevailed over the parties’ Choice of Law Provision Id. Accordingly, the District Court reinstated the previously-certified classes.

First, the District Court analyzed the plaintiff’s position that the defendants waived the Choice of Law Provision.  It opined that “[w]aiver is the intentional relinquishment or abandonment of a known right.”  United States v. Olano, 507 U.S. 725, 733 (1993) (internal citations omitted).  The District Court reasoned that a party “waives a contractual provision when the party takes actions that are inconsistent with the provision.” In Re Marriott International, 2023 WL 8247865, at *4.  The District Court held the defense “clearly waived 5/6” of its Choice of Law Provision because the defendants: (1) requested consolidation into an MDL, which “is the antithesis of handling each claim on an individual basis”; (2) stated that “separately litigating each of the 59 related actions” would “offer no benefit” and heighten the burdens of all involved; and (3) stated venue was proper in Maryland and requested that the MDL be assigned to Maryland, which was inconsistent with the New York Choice of Law Provision.  Id.  As such, the District Court found that the defendants waived the Choice of Law Provision and all terms contained therein.  Id.

Second, the District Court held that it was not required to enforce the Choice of Law Provision outside of a binding arbitration provision.  Id. *8.  The Choice of Law Provision was “patently distinguishable” from “all of the reported cases on contractual class action waivers” because it did not have a mandatory arbitration clause.  Id. *7.  When parties agree to resolve their case in a non-judicial forum such as arbitration, “the Federal Rules have limited applicability”.  Id. *6. However, in the absence of such an agreement, the District Court opined that “[t]he parties cannot by agreement dictate that a district court must ignore the provisions of Rule 23 of the Federal Rules of Civil Procedure.”  Id. *7.  The District Court found that Rule 23 and Rule 42 do not “call for consideration of the parties’ preferences,” but rather “furtherance of efficient judicial administration.”  Id.  Thus, the District Court was not required to enforce the Choice of Law Provision, and held that the plaintiffs did not waive their right to bring a class action claim.  Id. *8 *(quoting Martrano v. Quizno’s Franchise Co., 2009 WL 1704469, at *20-21 (W.D. Pa. June 15, 2009)).

Implications For Companies

Companies should proactively review their arbitration agreements and class or collective action waivers to ensure that contractually agreed-upon terms can and will be imposed by a court.  Additionally, when faced with multiple nationwide claims, companies should analyze their case defense strategy and make an informed decision before filing and/or joining an MDL.  Finally, as part of any acquisition, companies should have their own data security team thoroughly vet and approve the acquired company’s security infrastructure prior to, or shortly after, the acquisition.

By Gerald L. Maatman, Jr., Katelynn Gray, and Gregory S. Slotnick 

Duane Morris Takeaways:  Lack of adequacy of the named plaintiff in a class action can result in the denial of Rule 23 class certification in appropriate circumstances.  In Cheng, et al. v. HSBC Bank USA, N.A., No. 20-CV-01551, 2023 U.S. Dist. LEXIS 161453 (E.D.N.Y. Sept. 12, 2023), the plaintiff filed a class action against the defendant alleging breach of contract and violation of § 349 of the New York General Business Law.  The plaintiff filed a motion for class certification pursuant to Rule 23, and the court denied the motion on the basis of the bank’s strong defense to the plaintiff’s individual claims, which was was likely to impede the claims of other class members – even though the class members were not subject to the same defense.  Employers in New York defending Rule 23 class actions should carefully consider the court’s reasoning and finding that plaintiff was an inadequate representative of his sought-after class.  As shown in Cheng, potential defenses to a named plaintiff’s individual claims may be sufficient to defeat class certification.  

Case Background

In Cheng, the plaintiff asserted that defendant HSBC Bank USA, N.A. (“HSBC” or “the bank”) failed to apply interest to plaintiff’s bank savings account deposits in a timely manner.  After the plaintiff made a deposit with the bank on May 31, 2019, he alleged HSBC did not apply any interest on the account until June 4, 2019, four days after the deposit.  Plaintiff claimed the bank also delayed applying interest on another deposit made on November 26, 2019 until November 29, 2019.  In November and December 2019, the plaintiff made phone calls to HSBC to address the alleged delays in crediting interest to his deposits.  Id. at *2.  The bank responded that its policy was to not credit interest on account deposits until 3 to 5 business days after they were made.  In the 2019 phone calls, the plaintiff indicated that he understood interest could not accrue until the bank had his “money on hand,” and that his concern was that the bank was failing to post the funds and initiate interest accrual upon receipt of those funds, despite the fact that it already had the “money on hand.”  Id. at *3.  In one of the 2019 phone calls, when a bank representative explained that plaintiff should have received an email indicating his deposit needed to pass through a clearing process before HSBC could post it to his account (and presumably, begin interest accrual), plaintiff responded, “I don’t care about the email…I look at when is my money withdraw[n] from other bank, when is the money posted to my HSBC account, okay?  Don’t tell me HSBC takes five days to post the money after you receive it.”  Id. at *4.

In plaintiff’s lawsuit, brought on behalf of himself and a prospective class of customers, plaintiff claimed HSBC was obligated to credit interest to his account on the day he initiated the deposit or transfer, rather than when the bank actually received the money.  Plaintiff contended the class consisted of at least 100 members and the amount in controversy exceeded $5 million.  Id. at *5.  At his deposition, plaintiff attempted to contextualize the 2019 phone calls, but admitted that he had read HSBC’s Terms and Charges Disclosures (“Disclosures”) when opening his account.  The Disclosures stated that “[i]nterest begins to accrue on the Business Day you deposit noncash items.”  Noncash items are instruments like checks and wire transfers.  Id. at *1-2.

Although the court previously had denied the bank’s motion for summary judgment on the claims by drawing all reasonable inferences in plaintiff’s favor, it expressed in that decision its view that the 2019 phone calls “strongly suggested” plaintiff shared HSBC’s understanding that the “you deposit” language in the Disclosures meant interest would begin to accrue once HSBC had cleared funds on hand, not when he initiated the deposit.  Id. at *6.  The court also opined that in the calls, plaintiff appeared to recognize HSBC could not apply interest until it was in receipt of his funds, and plaintiff told the bank multiple times that if the delay in accruing interest was due to a delay in receiving the funds, “that’s perfect” and “that’s fine.”  Id.

The Court’s Opinion Denying Class Certification

In its decision denying class certification under Rule 23, the court set forth Rule 23’s threshold requirements for class certification – numerosity, commonality, typicality, and adequacy – and confirmed plaintiff bears the burden of establishing each element.  Id. at *8.  The court pointed specifically to the adequacy requirement of Rule 23(a)(4), which focuses on the fitness of purported class representative to competently litigate the case on behalf of absent class members, and reiterated that the interests of the named plaintiff cannot be antagonistic to those of the rest of the class.  Id.

The court found that plaintiff faced “serious obstacles to recovery on his individual claims,” and that plaintiff’s statements made in the 2019 phone calls were compelling evidence he understood that he would not begin accruing interest until the bank had his cash on hand.  Id. at *10.  The court reasoned that in his class certification motion, plaintiff now alleged that the bank misled him to believe that interest would begin accruing as soon as he initiated a deposit, which was contradicted by the statements made by plaintiff in the 2019 phone calls.  The court determined that the 2019 phone calls, plaintiff’s conflicting allegations about whether he read the Disclosures, and his prior relevant litigation and banking history were all likely to weaken his claims, and that there was a strong argument that plaintiff “knew precisely what he was doing and that he and HSBC shared the same understanding about what the key term ‘you deposit’ meant.”  Id. at *11.

As a result, the court determined that the plaintiff could not be an adequate representative of the class he sought to represent because he acknowledged in the 2019 phone calls that he understood the key terms of the bank’s policies.  The court opined there was a strong argument that the plaintiff understood the defendant’s terms, but was attempting to represent a class based on the bank’s alleged misconduct.  Id. at *10-11.  The court ruled that it was “not comfortable” making plaintiff the representative of all other class members’ claims and allowing him to bind hundreds of absent class members to plaintiff’s story, conditioning their recovery on how well plaintiff’s story held up.  Id. at *12.  For these reasons, the court denied plaintiff’s motion for class certification under Rule 23(a)(4).

Implications For Employers

The court’s decision denying class certification based on its finding that plaintiff failed to meet Rule 23’s adequacy threshold requirement is a potentially helpful roadmap for employers facing class action claims.  The court’s analysis centered on an individualized determination of plaintiff’s particular factual background in ultimately holding it was uncomfortable the plaintiff could adequately represent hundreds of absent class members based on his own contradictory and inconsistent testimony and evidence.  Businesses defending class actions should consider each named plaintiff’s individual circumstances and factual background for issues that could preclude their ability to adequately represent class members.  The decision confirms that in the appropriate circumstances, courts will not hesitate to deny class certification to named plaintiffs on such grounds.

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On November 3, 2023, Judge Claudia Wilken of the U.S. District Court for the District of Northern California granted a motion by Plaintiffs – a group of former, current and future student athletes – for certification of three proposed damages classes under Rule 23(b)(3) in the litigation entitled In Re College Athlete NIL Litigation, No. 4:20-CV-03919 (N.D. Cal. Nov. 3, 2023). Judge Wilken certified three classes seeking to recover compensation for the commercial use of their names, images, and likenesses (“NIL”). This class certification order follows a September 22, 2023 order in the same case certifying a proposed injunctive relief class under Rule 23(b)(2). While defendants did not dispute certification of the proposed injunctive relief class, they argued that the damages classes should not have been certified because the NIL market is inherently too distinct for the thousands of impacted student-athletes to claim the same kind of harm from lost compensation. In certifying the three proposed damages classes, the order sets the stage for a possible class-wide trial for hundreds of millions or even billions in back pay for student athletes.

Case Background

Plaintiffs are student athletes who either have competed or will compete on a Division I team since June 15, 2020. Defendants are the National Collegiate Athletic Association (“NCAA”) and the “Power Five” Conferences – the Pac-12 Conference, Big Ten Conference, Big 12 Conference, Southeastern Conference, and Athletic Coast Conference. Plaintiffs allege that Defendants set and enforced a set of rules to restrict the compensation that student-athletes can receive in exchange for the commercial use of student-athletes’ NIL and prohibit NCAA member conferences and schools form sharing with student athletes the revenue they receive from third parties for the commercial use of student-athletes’ NIL. Even though Defendants had suspended enforcement of some of these rules, they have not suspended enforcement of rules that prohibit NIL compensation contingent upon athletic participation or performances or enrollment at a particular school, including, most notably, compensation for lucrative broadcast deals that pay conferences hundreds of millions of dollars. Plaintiffs’ complaint includes claims for Sherman Act Section 1 violations for conspiracy to fix prices and group boycott or refusal to deal as well as a claim for unjust enrichment.

Plaintiffs moved for class certification of their claims under § 1 of the Sherman Act only.

The Court’s Certification Order

The decision at issue deals only with Plaintiffs’ motion for certification of three proposed damages classes under Rule 23(b)(3). The proposed classes are (i) current and former Division I men’s basketball players and FBS football players; (ii) current and former Division I women’s basketball players; and (iii) current and former Division 1 athletes that did not play Division I basketball or FBS football. Plaintiffs’ alleged damages fall into three different buckets, including: (1) broadcast TV NIL damages, which arise out of student-athletes having been deprived of compensation they would have received from conferences for use of their NIL in broadcasts of FBS football or Division I basketball games in the absence of the challenged restrictions; (2) video game damages, which arise out of student-athletes having been deprived of compensation they would have received from video game publishers for use of their NIL; and (3) third-party NIL damages suffered between 2016 and July 1, 2021 when the NCAA started to allow some NIL compensation for student athletes.

Defendants argued that the predominance requirement of Rule 23(b)(3) was not met because common proof cannot establish antitrust damages on a class-wide basis due to intra-class conflicts that exist among class members in each class as a result of Plaintiffs’ methodology for calculating damages. The Court disagreed. Relying largely on the opinions of Plaintiffs’ experts, the Court concluded that every class member suffered injury as a result of the NCAA’s rules, and that every class member will be entitled to receive a piece of the damages pie.

Implications For Organizations

The Court’s ruling is important to the ongoing debate over student athletes’ compensation. Thus far, NCAA-member schools cannot directly compensate their athletes for NIL. By certifying the damages classes proposed by Plaintiffs, the Court’s decision is likely to advance the ball on this issue.