Duane Morris Takeaways:Register and join us at today’s Duane Morris Exclusive Event – our Book Launch for the Duane Morris Class Action Review – 2025! This event will be offered as an in-person panel discussion and a Zoom webinar.
The DMCAR e-book is an essential desk reference that can be viewed on any device and is fully searchable with selectable text. The 2025 Review analyzes 1,441 class action rulings from state and federal courts in 23 areas of law, providing a comprehensive review of the class action landscape. Details on the 10 key trends identified this year and a copy of the Executive Summary are featured on the DMCAR website here.
You are invited to join Duane Morris Partners Gerald L. Maatman, Jr. and Jennifer Riley for a panel discussion marking the release of the Duane Morris Class Action Review – 2025. Please register here to reserve your spot today! The event will be offered as an in-person discussion or join us live via Zoom webinar.
Featuring authors Gerald L. Maatman, Jr., Jennifer A. Riley and American Lawyer Media staff reporter Amanda Bronstad in a discussion of the key class action developments and decisions in 2024 and what companies can expect in 2025. We hope to see you there!
In-Person Event Location: Convene CityView Duane Morris Plaza | 13th Floor 30 South 17th Street, Philadelphia, PA 1910
Registration: 3:30 p.m. to 4:00 p.m. Eastern Book Launch and Discussion: 4:00 p.m. to 5:00 p.m. Eastern Cocktail Reception: 5:00 p.m. to 6:00 p.m. Eastern
Duane Morris Takeaways:Register today and join us Thursday, January 30, 2025, at a Duane Morris Exclusive Event – our Book Launch for the Duane Morris Class Action Review – 2025! This event will be offered as an in-person panel discussion and a Zoom webinar.
The DMCAR e-book is an essential desk reference that can be viewed on any device and is fully searchable with selectable text. The 2025 Review analyzes 1,441 class action rulings from state and federal courts in 23 areas of law, providing a comprehensive review of the class action landscape. Details on the 10 key trends identified this year and a copy of the Executive Summary are featured on the DMCAR website here.
You are invited to join Duane Morris Partners Gerald L. Maatman, Jr. and Jennifer Riley for a panel discussion marking the release of the Duane Morris Class Action Review – 2025. Please register here to reserve your spot today! The event will be offered as an in-person discussion or join us live via Zoom webinar.
Featuring authors Gerald L. Maatman, Jr., Jennifer A. Riley and American Lawyer Media staff reporter Amanda Bronstad in a discussion of the key class action developments and decisions in 2024 and what companies can expect in 2025. We hope to see you there!
In-Person Event Location: Convene CityView Duane Morris Plaza | 13th Floor 30 South 17th Street, Philadelphia, PA 1910
Registration: 3:30 p.m. to 4:00 p.m. Eastern Book Launch and Discussion: 4:00 p.m. to 5:00 p.m. Eastern Cocktail Reception: 5:00 p.m. to 6:00 p.m. Eastern
By Gerald L. Maatman, Jr., Gregory Tsonis, and Ryan T. Garippo
Duane Morris Takeaways: On January 15, 2025, in Carrera v. EMD Sales, Inc., No. 23-217, 2025 WL 96207 (S. Ct. Jan. 15, 2025), the U.S. Supreme Court unanimously reversed the U.S. Court of Appeals for the Fourth Circuit, holding that the burden of proof required to prove the applicability of exemptions to the Fair Labor Standards Act (the “FLSA”) is not the “clear and convincing evidence” standard applied in the Fourth Circuit. In so doing, the Supreme Court harmonized the law across the country and confirmed that such exemptions need only be proven by a preponderance of the evidence.
Background
E.M.D Sales, Inc. (“EMD”) is a company that distributes food products in the Washington D.C. area. It employs sales representatives who work with partner grocery stores to help manage EMD products. The sales representatives “spend most of their time outside of EMD’s main office servicing stores on their routes,” however, there was disagreement as to “whether [the] sales representatives’ primary duty is to make sales of EMD products.” Carrera v. EMD Sales, Inc., No. 17-CV-3066, 2021 WL 1060258, at *2 (D. Md. Mar. 19, 2021).
In 2017, several of these sales representatives sued EMD in federal court in Maryland, arguing that they were entitled to overtime pay under the FLSA. In response, EMD argued that the sales representatives were exempt from the FLSA’s requirements pursuant to the “outside salesman” exemption. 29 U.S.C. § 213(a)(1).
Following a bench trial on the issue, the district court held that the outside salesman exemption did not apply. In so doing, the district court relied on Fourth Circuit precedent holding that the employer has the burden of proving the applicability of any FLSA exemption by “clear and convincing evidence.” Carrera, 2021 WL 1060258, at *5. In federal courts outside of the Fourth Circuit, an employer is only required to prove these exemptions under a lower standard of proof called the preponderance-of-the-evidence standard, which is the typical standard in civil cases. Id. The district court held that the employer failed to meet the heightened burden of proof regarding the applicability of the exemption, and thus held that the EMD sales representatives were entitled to overtime pay.
On appeal, EMD argued that the heightened “clear and convincing evidence” standard, which had long been the applicable standard for federal courts within the Fourth Circuit, should be overturned so it conformed with the standard applied across the rest of the country. The Fourth Circuit declined to do so and explained that “the district court properly applied the law of this circuit in requiring the defendants to prove their entitlement to the outside sales exemption by clear and convincing evidence.” Carrera v. EMD Sales, Inc., 75 F.4th 345, 353 (4th Cir. 2023). EMD, thereafter, sought review from the U.S. Supreme Court, which granted certiorari to resolve the issue.
The Supreme Court’s Opinion
In a unanimous 9-0 opinion written by Justice Kavanaugh, the Supreme Court explained that the “Fourth Circuit stands alone in requiring employers to prove the applicability of Fair Labor Standards Act exemptions by clear and convincing evidence. Every other Court of Appeals to address the issue has held that the preponderance standard applies.” Carrera, 2025 WL 96207, at *3. In noting that the “preponderance of the evidence” standard is “the established default standard of proof in American civil litigation,” the Supreme Court explained that the default standard can only be abrogated by statute, constitutional requirement, or other uncommon situations where unusual coercive relief is sought (e.g., revocation of citizenship, etc.).
In analyzing whether any such circumstances existed, the Supreme Court first observed that the FLSA is silent on the applicable burden of proof, noting there is no language that suggests that Congress intended a heightened burden to apply. Second, because the FLSA does not implicate constitutional rights, the U.S. Constitution did not compel a different result. Third, because FLSA lawsuits are akin to other employment statutes that entitle certain employees to monetary relief, they are not unusually coercive.
Turning next to policy arguments in favor of a heightened standard, the Supreme Court noted that other important statutes, such as Title VII of the Civil Rights Act, apply a preponderance standard while seeking to achieve laudable policy goals, such as ending discrimination in the workplace. Id. at *4-5. Finding nothing particularly distinct about the FLSA, the Supreme Court ultimately rejected the policy arguments advanced by the sales representatives, explaining that “rather than choose sides in a policy debate, this Court must apply the statute as written and as informed by the longstanding default rule regarding the standard of proof.” Id. at *5.
As a result, the Supreme Court reversed the decision of the Fourth Circuit and held that an employer must prove the applicability of FLSA exemptions only by a preponderance of the evidence. The Supreme Court also remanded the case back to the district court for a determination as to whether EMD met the lower evidentiary burden.
Implications For Employers
The Supreme Court’s decision in Carrera is a welcome reprieve for employers sued in Maryland, Virginia, West Virginia, North Carolina, and South Carolina federal courts. These employers will no longer have to satisfy a heightened burden of proof that they would otherwise not have to satisfy if sued for the same claims in any other state. Accordingly, employers based in those states can rest a little easier knowing that the standard for proving FLSA exemptions if sued will be the default standard applied in other jurisdictions, and not the heightened “clear and convincing evidence” standard that has long applied.
Duane Morris Takeaway: As the ultimate referee of law, the U.S. Supreme Court traditionally has defined the playing field for class action litigation and, through its rulings, has impacted the class action landscape. The past year was no exception. Although the U.S. Supreme Court did not directly address the procedural mechanisms that govern class actions during its most recent term, it issued multiple decisions that are sure to influence the class action space.
The most momentous decision came in Loper Bright Enterprises v. Raimondo, et al., 144 S. Ct. 2244 (2024), wherein the Supreme Court overruled Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and undercut the authority of administrative agencies to engage in rulemaking. In doing so, the Supreme Court made clear that lower courts faced with class actions brought under the FLSA, ERISA, and TCPA, for example, must exercise their independent judgment in interpreting statutory provisions without deference to administrative agencies’ interpretations of those statutes.
The Supreme Court also issued a trio of mixed rulings regarding arbitration, including decisions that bear on the use of the Federal Arbitration Act to enforce arbitration agreements with class action waivers, and a number of miscellaneous rulings that likely will impact class actions in the areas of securities fraud, civil rights, preemption, and Title VII.
Watch partner Jerry Maatman discuss this trend in more detail in the video below:
Loper Bright Enterprises v. Raimondo, et al., 144 S. Ct. 2244 (2024)
The so-called Chevron doctrine, a fixture of administrative law for nearly four decades, emanates from the U.S. Supreme Court’s decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and essentially required courts to defer to an agency’s reasonable interpretation of ambiguous laws. The Chevron doctrine involves two steps: (i) first, a court should determine whether the statute in question is unambiguous and, if so, apply its plain meaning; and (ii) second, if the court finds the statute ambiguous, the court should defer to the agency’s interpretation so long as the interpretation is reasonable or permissible.
On June 28, 2024, the U.S. Supreme Court in Loper Bright Enterprises v. Raimondo, et al., 144 S. Ct. 2244 (2024), overturned the 40-year-old Chevron doctrine and held that, when Congress passes an ambiguous law, there is no implied delegation of power to an administrative agency to define its own authority or to say that the law means. The plaintiffs, two sets of commercial fishermen, challenged the authority of councils established under the National Marine Fisheries Service (NMFS) to promulgate a rule requiring Atlantic herring fishermen to cover costs of federally-mandated observers aboard their vessels under the Magnuson-Stevens Fishery Conservation and Management Act (MSA).
Two district courts granted summary judgment, concluding that, where a statute governing its authority falls within the Chevron doctrine, the NMFS is authorized to promulgate rules, and courts are required to defer to its interpretations of ambiguous statutes. Both the D.C. and the First Circuit courts affirmed. Id. at 2256-57. The U.S. Supreme Court granted certiorari regarding the question of Chevron’s continued validity. Id. at 2257.
The Supreme Court vacated the judgments of the courts below and remanded. The Supreme Court held that requiring judicial deference to agency interpretations violates the Administrative Procedure Act (APA), which expressly grants courts authority to review and decide issues of law. Id. at 2263. The Supreme Court explained that, unlike courts, “agencies have no special competence in resolving statutory ambiguities,” particularly when it comes to statutes governing agencies’ own power or authority. The Supreme Court concluded that “Chevron gravely erred.” Id. at 2266.
Loper Bright is poised to impact class actions of all types. In class action litigation, plaintiffs routinely invoke the Chevron doctrine as a powerful tool to pursue broad claims against corporate defendants based on administrative regulations that often exceed statutory requirements. Invoking this doctrine, plaintiffs argue that a court must defer to agency rulemaking whenever the agency’s interpretation supports the litigant’s claims or undermines the defenses of their opponents. For decades, for example, the U.S. Department of Labor (DOL) has enforced the FLSA and other wage and hour laws through extensive regulations and administrative guidance. Whereas the regulations enjoyed considerable deference under Chevron, their future is uncertain under Loper Bright as the decision now requires courts to exercise their independent judgment. Litigants already are feeling the effect of Loper Bright on the FLSA, as demonstrated by a recent decision by the Fifth Circuit invalidating an FLSA regulation regarding the tip credit.
In Restaurant Law Center, et al. v. United States Department of Labor, 2024 WL 4609380 (5th Cir. Aug. 23, 2024), the Fifth Circuit invoked Loper Bright to vacate the DOL’s so-called “80/20” rule. The FLSA defines a “tipped employee” as any employee “engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips,” 29 U.S.C. §207(t), and allows an employer to pay such persons a cash wage less than minimum wage. The DOL adopted a regulation establishing limits on the amount of time tipped employees may perform non-tipped work at the cash wage, the thought being that, if the worker spends too much time performing non-tipped activities, the worker is no longer “engaged in [the tipped] occupation.” Under the rule, if an employee spends (i) more than 20% of a workweek performing non-tipped activities or (ii) more than 30 continuous minutes per shift performing non-tipped duties, the employee does not qualify as “tipped,” and the employer may not pay the cash wage. The Fifth Circuit found the 80/20 rule inconsistent with the statutory text of the FLSA because it impermissibly “disaggregates the component tasks of a single occupation” and thus “applies the tip credit in a manner inconsistent with the FLSA’s text.” Id. at *8-9. Citing Loper Bright and noting the existence of the 80/20 standard since 1988, the Fifth Circuit nonetheless was “not persuaded that the 80/20 standard, however longstanding, can defeat the FLSA’s plain text.” Id. at *9.
The Supreme Court foreshadowed another casualty of Loper-Bright in its decision in Helix Energy Solutions Group, Inc. v. Hewitt, 598 U.S. 39 (2023), wherein it held that highly-compensated employees paid on a daily, hourly, or shift basis do not satisfy the FLSA’s salary basis test. In his dissent, Justice Kavanaugh noted that the Supreme Court’s holding depended on the FLSA regulations, and those “regulations themselves may be inconsistent with the Fair Labor Standards Act.” Id. at 67 (Kavanaugh, J., dissenting). Because the relevant FLSA statutory language regarding exemptions “focuses on whether the employee performs executive duties, not how much an employee is paid or how an employee is paid,” Justice Kavanaugh concluded that it was “questionable whether the Department’s regulations — which look not only at an employee’s duties but also at how much an employee is paid and how an employee is paid — will survive if and when the regulations are challenged as inconsistent with the Act.” Id. Justice Kavanaugh’s implicit invitation to issue such a challenge, coupled with the demise of Chevron, very well may bring more changes to longstanding regulations that fuel hundreds of class action lawsuits each year.
Loper Bright also may fuel challenges related to fiduciary investment strategies. In a rule published in 2022, the U.S. Department of Labor explicitly allowed ERISA fiduciaries to consider environmental, social, and governance factors in selecting investments. In Utah v. Su, 109 F.4th 313 (5th Cir. 2024), 26 states brought suit to challenge the DOL’s rule, and the Fifth Circuit remanded the suit to the U.S. District Court for the Northern District of Texas with instructions to consider the rule in light of Loper Bright. Thus, courts may open the door to class claims for breach of fiduciary duty by investment managers that prioritize environmental, social, and governance factors above profitability.
Defendants also are apt to use Loper Bright to challenge the FCC’s interpretations of the TCPA. With its strict requirements and statutory damages, the TCPA is a frequent source of class claims. In a recent class certification decision involving claims for violation of the TCPA, in Mantha, et al. v. QuoteWizard.com, LLC, 347 F.R.D. 376 (D. Mass. 2024), the district court refused under Loper Bright to defer to the FCC’s interpretation of “person” to mean “residential telephone subscriber.” It instead found that the term “person” in the TCPA’s private-right-of-action provision includes anyone whose number is listed on the national do-not-call registry regardless of who listed it. Id. 394 & n.17.
In sum, this new doctrine of administrative law is already affecting FLSA, ERISA, and TCPA class actions, and has the potential to reshape other laws that provide the bases for class claims and defenses.
In 2024, the U.S. Supreme Court issued three decisions regarding arbitration under the Federal Arbitration Act, each of which has the potential to put more authority back in the hands of courts. The Supreme Court decided: (1) that district courts lack discretion to dismiss and, rather, must stay lawsuits pending the completion of arbitration, Smith v. Spizzirri, 601 U.S. 472 (2024); (2) that workers need not work for companies in the transportation industry to qualify for the FAA’s transportation worker exemption, Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. 246 (2024); and (3) where parties have agreed to two contracts – one sending arbitrability disputes to arbitration, and the other sending arbitrability disputes to the courts – a court must decide which contract governs, Coinbase, Inc. v. Suski, 144 S. Ct. 1186 (2024).
In Smith v. Spizzirri, 601 U.S. 472 (2024), the Supreme Court issued a unanimous decision holding that, when a district court determines that a plaintiff’s claims are arbitrable, the district court does not have discretion to dismiss the lawsuit. In this case, delivery drivers brought wage and hour claims against their former employer regarding their alleged misclassification as independent contractors. Although plaintiffs agreed that their claims were subject to arbitration, they opposed dismissal of their lawsuit and asked the district court to stay the case pending arbitration. Although the district court and the Ninth Circuit found dismissal consistent with the FAA, the U.S. Supreme Court disagreed. Interpreting § 3 of the FAA, which states that the court “shall on application of one of the parties stay the trial of the action until [the] arbitration” has concluded, the Supreme Court held that this statutory language “creates an obligation impervious to judicial discretion.” Id. at 476. It also found that the structure and purpose of the FAA supports interpreting § 3 as mandating a stay rather than dismissal. Based on § 16, which allows for an automatic interlocutory appeal of an order denying a motion to compel arbitration but not for an order granting a motion to compel arbitration, the Supreme Court reasoned that Congress sought to avoid dismissal, which triggers the right to an immediate appeal, and instead intended to move arbitrable disputes out of courts and into arbitration as quickly and easily as possible. Id. at 5-6. Finally, the Supreme Court explained that stays are preferable because they allow federal courts to maintain jurisdiction to resolve disputes between the parties. Id.
In Bissonnette, et al. v. LePage Bakeries Park St., LLC, 601 U.S. 246 (2024), the Supreme Court issued another decision regarding the FAA’s transportation worker exemption. The Court again cautioned that the exemption does not apply in “limitless terms” and, instead, applies only where workers play “a direct and necessary role in the free flow of goods across borders.” Id. Section 1 of the FAA exempts from arbitration “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The third category commonly is called the “transportation worker” exemption. Although the U.S. Supreme Court issued two decisions in 2022 – Southwest Airlines Co. v. Saxon, et al., 596 U.S. 450 (2022), and Domino’s Pizza, LLC v. Carmona, et al., 143 S. Ct. 361 (2022) – construing the FAA’s transportation worker exemption narrowly, many courts failed to heed that direction. As a result, in April 2024, the U.S. Supreme Court again weighed in on the issue in Bissonnette, et al. v. LePage Bakeries Park Street, LLC, 61 U.S. 246 (2024).
The defendant in Bissonnette produced baked goods in 19 states and distributed its products across the country. The plaintiff franchisees contracted with the defendant to distribute the products in local markets. The plaintiffs filed a putative class action, and the defendant moved to compel arbitration on an individual basis. The district court granted the motion, the Second Circuit affirmed, and the U.S. Supreme Court granted further review. As in Saxon, the U.S. Supreme Court emphasized in Bissonnette that the test for application of the transportation worker exemption focuses on the work performed by the plaintiff and not the employer’s industry. Addressing the employer’s argument that such a test would make virtually all workers who load or unload goods, such as pet shop employees and grocery store clerks, exempt transportation workers, the Supreme Court disagreed. It opined that the exemption has “never” been interpreted to apply in “such limitless terms.” Id. at 256. The Supreme Court emphasized that, for the exemption to apply, the worker “must at least play a direct and necessary role in the free flow of goods across borders.” Id. The Supreme Court thus vacated the order compelling arbitration and remanded for further proceedings.
Finally, on May 23, 2024, the U.S. Supreme Court issued its decision in Coinbase, Inc. v. Suski, et al., 144 S. Ct. 1186 (2024), holding that, where parties have agreed to two contracts – one sending disputes regarding arbitrability to arbitration, and the other sending disputes regarding arbitrability to the courts – a court (and not an arbitrator) must decide which contract governs. In connection with the sweepstakes offered by Coinbase, a cryptocurrency exchange platform, users filed a class action complaint alleging that the sweepstakes violated various California consumer protection statutes. Citing an arbitration clause in the User Agreement, Coinbase moved to compel arbitration on an individual basis. The arbitration clause in the User Agreement included a delegation clause that allocated decisions concerning whether disputes were arbitrable to the arbitrator. The users argued that the court, and not an arbitrator, should decide the arbitrability issue and, in support, cited a second contract – the Official Rules – they entered in connection with the sweepstakes. In contrast to the earlier executed User Agreement, the Official Rules contained a forum selection clause that required parties to decide all disputes related to the sweepstakes in California courts. The users argued that the Official Rules superseded the User Agreement and its arbitration and class action waiver provision. The district court denied Coinbase’s motion to compel arbitration, and the Ninth Circuit affirmed.
The U.S. Supreme Court granted review to answer the question of who – a judge or an arbitrator – should decide whether a subsequent contract supersedes an earlier arbitration agreement that contains a delegation clause. The Supreme Court held that, where parties have agreed to two contracts – one sending arbitrability disputes to arbitration, and the other sending arbitrability disputes to the courts – a court must decide which contract governs. By contrast, in cases where only one contract is at issue, and that contract contains an arbitration clause with a delegation provision, courts must send all arbitrability disputes to arbitration, absent a successful challenge to the delegation clause. Thus, it was correct for the district court and the Ninth Circuit to have determined which contract governed the claims concerning the sweepstakes. Although Coinbase sought to challenge the Ninth Circuit’s determination that the Official Rules superseded the User Agreement, the Supreme Court declined to consider that issue.
In 2024, the U.S. Supreme Court issued a number of additional rulings that have the potential to impact class actions, particularly in the areas of securities fraud, civil rights, and Title VII, and with respect to issues such as preemption and bankruptcy plan releases.
Securities fraud. The Supreme Court clarified the standard for claims brought under the Exchange Act alleging pure omissions of fact in Macquarie Infrastructure Corp., v. Moab Partners, L.P., 144 S. Ct. 885 (2024). Under the Securities Act, a pure omission of fact is expressly prohibited if it makes a statement in the offering documents misleading. The Supreme Court held that pure omissions do not impose liability under the Exchange Act. The decision also resolved a split among the courts of appeal concerning a private right of action arising from an Item 303 statement issued pursuant to SEC Regulation S-K. The Supreme Court ruled that, half-truths, in which a defendant discloses some but not all material facts that render the statement misleading, can create liability for an Item 303 statement. However, pure omissions in an Item 303 statement do not create a private right of action.
Civil rights. The U.S. Supreme Court issued an important civil rights ruling in City Of Grant Pass, Oregon v. Johnson, 144 S. Ct. 2202 (2024). The plaintiffs, two individuals experiencing homelessness, filed a class action alleging that a city’s enforcement of ordinances banning camping on public property was unconstitutional under the Eighth Amendment. The Supreme Court determined that enforcing general public-camping laws does not violate the Eighth Amendment’s cruel and unusual punishments clause, opining that this clause focuses on the nature of punishments, not the criminalization of certain behaviors. The Supreme Court also rejected arguments that the enforcement of these laws against individuals who are involuntarily homeless should be considered cruel and unusual and concluded that issues like homelessness and how to address them involve complex policy decisions best left to elected representatives, not federal courts.
Preemption. In Cantero, et al. v. Bank Of America, N.A., 144 S. Ct. 1290 (2024), an alleged class of home buyers argued that the defendant failed to comply with New York law requiring national banks to pay interest on escrow accounts. The defendant argued that federal law preempted the New York law. The district court ruled in favor of the plaintiffs, and the Second Circuit reversed. The Supreme Court then vacated and remanded the Second Circuit’s ruling. According to the Supreme Court, the Second Circuit applied “a categorical test that would preempt virtually all state laws that regulate national banks, at least other than generally applicable state laws such as contract or property laws.” Id. at 1301. The Supreme Court remanded and instructed the Second Circuit to “make a practical assessment of the nature and degree of the interference caused by a state law” by comparing the state law’s level of prevention or interference with national bank borrowers in this case with that found in other banking cases.
Title VII. In Muldrow v. City Of St. Louis, Missouri, 601 U.S. 346 (2024), the Supreme Court held that an employee challenging a job transfer under Title VII must show that the transfer brought about some harm with respect to an identifiable term or condition of employment, but the harm need not be significant. Numerous courts already have cited this opinion in denying motions to dismiss class claims under Title VII, illustrating its immediate impact. See, e.g., Wilder v. Honeywell Fed. Mfg. & Techs., LLC, 2024 WL 4567290, at *6 (W.D. Mo. Oct. 24, 2024) (denying motion to dismiss employment class action in light of Muldrow); Doe v. Bozzuto Mgmt. Co., 2024 WL 3104550, at *6 (D.D.C. June 24, 2024) (same); Tribue v. Maryland, 2024 WL 4202444, at *10 (D. Md. Sept. 13, 2024) (same).
Bankruptcy plan releases. The case of Harrington, United States Trustee, Region 2 v. Purdue Pharma L.P., 144 S. Ct. 2071 (2024), involved a challenge to Purdue’s Chapter 11 bankruptcy plan and the broad release of liability for various parties, including the Sackler family, which owned the company. In 2019, Purdue Pharma filed for Chapter 11 bankruptcy protection as part of an effort to address the thousands of lawsuits filed against it by state and local governments, municipalities, and individuals, related to the opioid epidemic. Plaintiffs claimed that Purdue’s aggressive marketing and distribution of OxyContin contributed to widespread opioid addiction and overdose deaths. As part of its bankruptcy proceedings, Purdue proposed a reorganization plan that involved restructuring the company and creating a public-benefit trust to handle its assets and liabilities. Purdue’s proposed bankruptcy plan, however, also provided a release of liability to the Sackler family, the owners of Purdue. The U.S. government challenged the release as unfair to a number of alleged victims who brought a class action lawsuit and wanted to preserve a chance to seek damages from the Sacklers. The Supreme Court ruled that the Bankruptcy Code does not authorize a release or injunction as part of a Chapter 11 reorganization plan that seeks to discharge claims against a non-debtor, such as the Sacklers, without the consent of the affected claimants.
These rulings generally make it easier for plaintiffs to bring and maintain class claims in court. As a result, corporations are apt to see their impact in the class action space in 2025 and beyond.
By Rebecca S. Bjork, Gerald L. Maatman, Jr., and Jennifer A. Riley
Duane Morris Takeaway: In a unanimous decision issued on January 15, 2025, the U.S. Supreme Court decided in Royal Canin U. S. A. v. Wullschleger, No. 23-677 (U.S. Jan. 15, 2025), that when a plaintiff files a civil suit under both state and federal law and subsequently amends the complaint to drop the federal law claims, the case must be remanded to state court due to lack of subject matter jurisdiction in the district court. This decision lends clarity to employers who have been navigating a circuit split on the question of whether federal district court subject matter jurisdiction is determined at the time of removal to federal court, or whether subsequent amendments abandoning federal claims destroys such jurisdiction. This issue arises over and over again in class action litigation.
Introduction
In a decision that will provoke readers’ memories (fondly or otherwise) of first year civil procedure class in law school, the U.S. Supreme Court ruled that a plaintiff’s deceptive marketing lawsuit originally stating both state and federal causes of action, that later dropped the federal claim in an amended complaint, must be remanded to state court. In a 9-0 decision, Justice Kagan explained that once the state law claims are stripped away, no federal subject matter jurisdiction exists and remand is required. Deciding a split amongst the circuit courts, the Supreme Court sided with the Eighth Circuit – and against the First, Third, Fourth, Sixth and Eleventh Circuits – in deciding that when a case is removed to federal court, an amended complaint dropping the federal claims destroys the district court’s jurisdiction.
This is obviously of interest for employers facing federal statutory class-wide claims involving issues such as wage and hour and discrimination, that also implicate overlapping state statutes.
The Ruling In Royal Canin U. S. A. v. Wullschleger
The U.S. Supreme Court issued its unanimous decision in Royal Canin U. S. A. v. Wullschleger, No. 23-677 (U.S. Jan. 15, 2025). In this case, the plaintiff purchased the defendant’s dog food that requires a prescription to obtain, believing that it contains medicine that off-the shelf dog food does not. Id. at 4. After learning that it does not, she filed suit in Missouri state court alleging violations of the state’s statute against deceptive marketing practices. Her complaint also included a claim under the federal Food, Drug and Cosmetic Act, 21 U.S.C. 301 (“FDCA”), that also forbids deceptive marketing practices.
Royal Canin, seeking perhaps to avoid being thrown to the dogs in a state court jury pool, decided to file a notice of removal of the plaintiff’s lawsuit to federal district court based on federal question jurisdiction (the plaintiff’s FDCA count). Id. at 4-5. In response, the plaintiff amended her complaint, dropping the FDCA claim, and only seeking relief under Missouri state law. Id. at 5. She then moved to remand to state court where she originally filed her complaint, but the district court denied her motion. Id. She ultimately appealed the dismissal of her amended complaint on the merits to the Eighth Circuit, and it reversed the district court’s decision to maintain jurisdiction of the matter and remanded it to state court. Id. Royal Canin sought certiorari to resolve the circuit split, and the Supreme Court obliged and affirmed the Eight Circuit’s ruling.
Basis Of The Supreme Court’s Opinion
In a very systematic and straightforward opinion of the Court, Justice Kagan explained why the limitations on federal court jurisdiction established by statute (e.g., 28 U.S.C. 1331 – cases “arising under” federal law) mandate SCOTUS’ unanimous conclusion. Long-established precedent holds that federal courts are courts of limited jurisdiction. Also, Congress has determined the scope of “supplemental jurisdiction,” where federal courts interpret and apply state law but only so long as they have concurrent federal jurisdiction to do so in the litigation. 28 U.S.C. 1367. And, the Supreme Court emphasized another statute that mandates that if at any time it appears that the federal court lacks subject matter jurisdiction, the case “must” be remanded to state court. 28 U.S.C. 1447(c). Id. at 3-4.
Applying these principles, the Supreme Court rejected Royal Canin’s argument that such limitations do not apply once a case has been removed to federal court and so-called “removal jurisdiction” exists. The Supreme Court explained, “Royal Canin argues that our precedent makes an exception for when an amendment [to a complaint] follows a lawsuit’s removal, but that is to read two bits of gratuitous language for a good deal more than they are worth.” Id. at 6. The Supreme Court continued that “Nothing in § 1367’s text . . . distinguishes between cases removed to federal court and cases originally filed there.” Id. at 8. And, unfortunately for Royal Canin, the Supreme Court has already held that in such a circumstance relating to original jurisdiction, the amended complaint is what determines jurisdiction, not the one at the time of removal. Id. As a result, the Supreme Court concluded that when the plaintiff “reconfigured her case to make it only about state law” her suit “became one for a state court.” Id. at 20.
Implications For Employers
As employers know, many class and collective action lawsuits are filed by plaintiffs that allege both state law and federal law claims. The classic example is a hybrid class and collective action under the Fair Labor Standards Act and a similar but often more onerous state statute governing how employees are paid. In our experience, many plaintiffs add their state law claims in order to extend the relevant statute of limitations period, for example, or sweep in certain state law substantive claims that are not available under a governing federal law.
Royal Canin U. S. A. v. Wullschleger will simplify litigation strategy decisions for employers with nationwide workforces. However, it remains to be seen how the plaintiffs’ bar will respond in terms of crafting both original and amended complaint strategies in the employment law space. We will be following developments closely and will provide our analysis and insights here.
Duane Morris Takeaway: The U.S. Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. (SFFA), et al. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), stimulated a flood of claims targeting diversity, equity, and inclusion (DEI) programs over the past year. Headlines were replete with cases of employees and applicants accusing employers of prioritizing diversity over merit and improperly using protected characteristics to guide decision-making, setting the stage for more class action activity in this area.
In SFFA, the U.S. Supreme Court held that two colleges and universities that considered race as a factor in their admissions processes violated the Equal Protection Clause of the U.S. Constitution and Title VI of the Civil Rights Act of 1964. Although the decision did not arise in the employment context, or involve Title VII, the Supreme Court’s decision striking down the use of racial preferences has caused an increase in class action lawsuits and other claims challenging (i) employers’ DEI programs, (ii) alleged misrepresentations about their DEI programs, and (iii) other environmental, social, and governance (ESG) initiatives.
Watch the video below with partner Jerry Maatman to hear more about this trend:
Since the U.S. Supreme Court struck down affirmative action in college admissions, plaintiffs have filed a flood of challenges to corporate DEI programs, claiming that they constitute impermissible “reverse discrimination” under Title VII. Headlines this past year were replete with cases of employees and applicants accusing employers of prioritizing diversity over merit and improperly using protected characteristics to guide decision-making. In 2024, courts issued a number of rulings in these cases, with mixed results, typically dependent on the nature of the allegations at issue in the lawsuit. In general, companies found more success in overcoming these challenges where their challenged DEI programs were focused more on colorblind issues like eliminating implicit bias and fostering inclusivity, and less success when focused on achieving numerical diversity quotas and other actions perceived as demonizing white males. See, e.g., De Piero v. Pennsylvania State University, 711 F. Supp. 3d 410 (E.D. Pa. 2024) (granting in part and denying in part employee’s reverse discrimination claims); Young v. Colorado Department Of Corrections, 94 F.4th 1242 (10th Cir. 2024) (affirming dismissal of employee’s reverse discrimination claim); Herrera v. New York City Department Of Education, 2024 WL 245960 (S.D.N.Y. Jan. 23, 2024) (denying defendants’ motion for summary judgment on employees’ reverse discrimination claims); Duvall v. Novant Health, Inc., 95 F.4th 778 (4th Cir. 2024) (affirming verdict for employee alleging reverse discrimination).
In October 2024, a rare class action trial in California in Palmer, et al. v. Cognizant Technology Solutions Corp., Case No. 17-CV-6848 (C.D. Cal.), led a jury to find a technology firm liable for engaging in a pattern or practice of discrimination against Caucasian and non-Indian employees in its termination and deployment decisions. The plaintiffs alleged the technology firm favored Indian and South Asian employees for whom it sponsored H-1B visas. The jury concluded, based on statistical evidence presented at trial, that the technology firm engaged in a pattern or practice of discrimination by terminating non-Indian and non-South Asian employees at a much higher rate than its other employees (8.4 times more likely).
In 2024, the U.S. Supreme Court granted certiorari in a reverse discrimination lawsuit, with a decision likely to be rendered in 2025 that will have implications for reverse discrimination lawsuits of all types, including class actions, moving forward. At issue in Ames, et al. v. Ohio Department of Youth Services, No. 23-1039 (U.S. cert granted Oct. 4, 2024), is whether, in addition to pleading the other elements of an employment discrimination claim under Title VII of the Civil Rights Act of 1964, a majority-group plaintiff must show “background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority.” The Supreme Court is poised to resolve a federal circuit split over this issue, potentially opening the courthouse to more such claims.
Although many companies’ DEI programs remain strong post-SFFA with an increased emphasis on inclusivity and ensuring compliance with anti-discrimination laws, other companies have begun stepping down their DEI commitments for a variety of reasons, including the fear of a backlash of reverse discrimination claims. Companies that step down their DEI commitments, however, should take care to ensure that their public-facing statements regarding those commitments remain true.
More generally, all companies should take care to ensure that they are not overstating or misrepresenting their policies and practices regarding DEI and other social issues. Such overstatements are known as “diversity washing” or “woke washing,” and are increasingly forming the basis of class action lawsuits alleging securities fraud or other misrepresentations.
In 2024, federal courts denied motions to dismiss in two diversity-washing class actions, for example, finding that plaintiffs plausibly stated claims for intentional misrepresentations. See Craig, et al. v. Target Corp., 2024 WL 4979234 (M.D. Fla. Dec. 4, 2024) (denying motion to dismiss securities fraud class action alleging misrepresentations regarding the risk of customer boycotts from ESG, DEI, and LGBT initiatives); SEB Inv. Management AB v. Wells Fargo & Co., 2024 WL 3579322 (N.D. Cal. July 29, 2024) (denying motion to dismiss securities fraud class action alleging false or misleading statements regarding corporation’s requirement that 50% of job interview candidates be diverse).
Companies’ statements regarding their DEI commitments have been voluntary to date. As a result, diversity-washing claims have applied only to statements companies have elected to make. However, many more public company statements about diversity may be forthcoming and subject to complaints filed by the plaintiffs’ class action bar, pending a challenge in the Fifth Circuit to SEC-approved Nasdaq rules requiring any of the over 3,000 companies listed with the Nasdaq with at least five board members to either have two board members from an underrepresented group or explain why not. The Fifth Circuit previously upheld these Nasdaq board diversity rules over a challenge under the First and Fourteenth Amendments to the U.S. Constitution, the Securities Exchange Act, and the Administrative Procedure Act. See Alliance For Fair Board Recruitment v. SEC, 85 F.4th 226 (5th Cir. 2023). In 2024, the Fifth Circuit vacated that opinion and reheard the case en banc, on May 14, 2024. If the Nasdaq board diversity rule is upheld, it will take full effect in December 2026.
The label “ESG” has become mainstream in the past few years. ESG refers broadly to “environmental, social, and governance,” which many companies have embraced as part of their business plans and corporate missions. Whereas diversity-washing class actions focus on the “S” in ESG, class actions also recently have proliferated relative to overstatements regarding environmental issues, thus highlighting the “E” in “ESG.”
These “greenwashing” class actions continued to proliferate in 2024. See Dorris, et al. v. Danone Waters of America, 2024 WL 4792048 (S.D.N.Y. Nov. 14, 2024) (dismissing greenwashing class action); Fanucchi v. Enviva Inc., 2024 WL 3302564 (D. Md. July 3, 2024) (dismissing greenwashing class action); Boyd, et al. v. Target Corp., 2024 WL 4287669 (D. Minn. Sept. 25, 2024) (denying motion to dismiss greenwashing class action).
As companies continue to add statements regarding their environmental impact or social responsibility to enhance their marketing efforts, communicate their company values, and/or attempt to appeal to consumers and shareholders attuned to ESG considerations, we expect to see ESG class actions continue their growth trajectory.
Duane Morris Takeaways:Register today and join us Thursday, January 30, 2025, at a Duane Morris Exclusive Event – our Book Launch for the Duane Morris Class Action Review – 2025! This event will be offered as an in-person panel discussion and a Zoom webinar.
The DMCAR e-book is an essential desk reference that can be viewed on any device and is fully searchable with selectable text. The 2025 Review analyzes 1,441 class action rulings from state and federal courts in 23 areas of law, providing a comprehensive review of the class action landscape. Details on the 10 key trends identified this year and a copy of the Executive Summary are featured on the DMCAR website here.
You are invited to join Duane Morris Partners Gerald L. Maatman, Jr. and Jennifer Riley for a panel discussion marking the release of the Duane Morris Class Action Review – 2025. Please register here to reserve your spot today! The event will be offered as an in-person discussion or join us live via Zoom webinar.
Featuring authors Gerald L. Maatman, Jr., Jennifer A. Riley and American Lawyer Media staff reporter Amanda Bronstad in a discussion of the key class action developments and decisions in 2024 and what companies can expect in 2025. We hope to see you there!
In-Person Event Location: Convene CityView Duane Morris Plaza | 13th Floor 30 South 17th Street, Philadelphia, PA 1910
Registration: 3:30 p.m. to 4:00 p.m. Eastern Book Launch and Discussion: 4:00 p.m. to 5:00 p.m. Eastern Cocktail Reception: 5:00 p.m. to 6:00 p.m. Eastern
Duane Morris Takeaways:Register today and join us Thursday, January 30, 2025, at a Duane Morris Exclusive Event – our Book Launch for the Duane Morris Class Action Review – 2025! This event will be offered as an in-person panel discussion and a Zoom webinar.
The DMCAR e-book is an essential desk reference that can be viewed on any device and is fully searchable with selectable text. The 2025 Review analyzes 1,441 class action rulings from state and federal courts in 23 areas of law, providing a comprehensive review of the class action landscape. Details on the 10 key trends identified this year and a copy of the Executive Summary are featured on the DMCAR website here.
You are invited to join Duane Morris Partners Gerald L. Maatman, Jr. and Jennifer Riley for a panel discussion marking the release of the Duane Morris Class Action Review – 2025. Please register here to reserve your spot today! The event will be offered as an in-person discussion or join us live via Zoom webinar.
Featuring authors Gerald L. Maatman, Jr., Jennifer A. Riley and American Lawyer Media staff reporter Amanda Bronstad in a discussion of the key class action developments and decisions in 2024 and what companies can expect in 2025. We hope to see you there!
In-Person Event Location: Convene CityView Duane Morris Plaza | 13th Floor 30 South 17th Street, Philadelphia, PA 1910
Registration: 3:30 p.m. to 4:00 p.m. Eastern Book Launch and Discussion: 4:00 p.m. to 5:00 p.m. Eastern Cocktail Reception: 5:00 p.m. to 6:00 p.m. Eastern
Duane Morris Takeaways: As we kick off 2025, we are pleased to announce the publication of the third annual edition of the Duane Morris Class Action Review. It is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting corporations, including class certification rulings in the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breaches, discrimination, EEOC-initiated and government enforcement litigation, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, wage & hour class and collective actions, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, the largest class action settlements across all areas of law, and primers on both the Illinois Biometric Information Privacy Act and the California Private Attorney General Act. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2025.
We are humbled and honored by the recent review of the Duane Morris Class Action Review by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said, “The Duane Morris Class Action Review is ‘the Bible’ on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.” EPLiC continued, “The review is a must-have resource for in-depth analysis of class actions in general and workplace litigation in particular. The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting corporate America and provides insight as to what companies and corporate counsel can expect in terms of filings by the plaintiffs’ class action bar and government enforcement agencies like the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (DOL).”
We are equally proud that the Review made its way into American jurisprudence over the past year, with a federal district court citing our analysis on class action trends in its decision on a motion for class certification.
Click here to access our customized website featuring all the Review highlights, including the ten major trends across all types of class actions over the past year. Order your free copy of the e-book here, and download the Review overview here.
Check out an exclusive article featuring the Review posted this morning in Forbes here. The Firm’s press release on the Review can be found here.
The 2025 Review analyzes rulings from all state and federal courts in 23 areas of law. It is designed as a reader-friendly research tool that is easily accessible in hard copy and e-book formats. Class action rulings from throughout the year are analyzed and organized into 23 chapters and 7 appendices for ease of analysis and reference.
Executive Summary Of Key Class Action Trends Over The Past Year
Class action litigation presents one of the most significant risks to corporate defendants today. Procedural mechanisms like the one set forth in Rule 23 of the Federal Rules of Civil Procedure have the potential to expand a claim asserted on behalf of a single person into a claim asserted on behalf of a behemoth that includes every employee, customer, or user of a particular company, product, or service, over an extended period. Class actions allow plaintiffs to pursue claims on behalf of a defined and sometimes sprawling group of unnamed individuals. By aggregating the claims of many persons in a single lawsuit, plaintiffs can seek to increase the size of their cases exponentially in terms of the number of claims they assert and the damages they seek. As a result, class actions can present substantial implications for corporate defendants.
As plaintiffs increase the size of their cases, the resulting legal risks can grow, bringing increased leverage for plaintiffs. A negative ruling in a class action has the potential to reshape a defendant’s business model, to impose significant financial consequences, and to shape standards for the entire industry. The outcome of a class action lawsuit, therefore, can be significant and potentially devastating for a company. Due to their potential implications, class actions are often costly to defend. Defending a class action can be a time-consuming and resource-intensive process that diverts management attention from core business activities. Plaintiffs can attempt to leverage this reality to make class actions as expensive and disruptive as possible, in an effort to bring about litigation fatigue and to extract sizable settlements from corporations.
Class actions are sometimes even more perilous to settle. Given the potential size and cost, class action settlements can attract media attention and lead to public scrutiny. Lucrative settlements can prompt copy-cat lawsuits and lead to more claims. Negative publicity can have widespread implications, including potential harm to a company’s reputation, potential damage to its brand, and potential drop in consumer trust. Class actions are complex legal proceedings with uncertain outcomes. The complexity can arise from managing multiple claims, myriad legal issues, and assorted class members, making it challenging for corporate defendants to predict and control the result. Due to these factors, corporate defendants should approach class actions from a broad vantage point with a thoughtful and multi-faceted defense strategy.
We developed a one-of-a-kind resource to provide a practical desk reference for corporate counsel faced with defending class action litigation. We have organized this year’s book into 23 chapters, with seven appendices, each of which provides an analysis of the trends in a particular area of class action litigation, along with the key decisions from courts across the country that companies can use to shape their defense strategies.
We identified ten key trends that characterized 2024. These trends include: (i) the continued prevalence of massive class action settlements; (ii) the normalization of plaintiff-friendly class certification conversion rates across substantive areas of class action litigation; (iii) the expansion of privacy class action litigation; (iv) continued efforts to chip away at and counter the impact of the arbitration defense as a barrier to class action litigation; (v) a surge of challenges to diversity, equity, and inclusion (DEI) programs that are likely to fuel class claims; (vi) decisions by the U.S. Supreme Court laying the groundwork for rebooted litigation theories and defenses; (vii) continued growth of data breach class actions; (viii) attention-getting headlines regarding PFAS litigation, which generated the largest class settlement and attorneys’ fee award of 2024; (ix) filing activity in California on the PAGA front demonstrating its continued popularity among the plaintiffs’ class action bar; and (x) a decreased role for government enforcement activity.
Trend # 1 – Settlement Numbers Break $40 Billion For The Third Year In A Row
In 2024, settlement numbers broke the $40 billion mark for the third year in a row. The cumulative value of the highest ten settlements across all substantive areas of class action litigation totaled $42 billion. That number is the third highest value we have tallied in the last two decades, trailing only the settlement numbers from 2023 and 2022. In 2023 settlements totaled $51.4 billion, and in 2022, settlements totaled $66 billion. Combined, the past three years of $159.4 billion reflect use of the class action mechanism to redistribute wealth at an unprecedented level.
Trend #2 – Class Certification Numbers Normalize Across Substantive Areas
Although courts issued fewer decisions on motions for class certification in 2024 as compared to 2023, the plaintiffs’ class action bar obtained certification at a more consistent rate across all substantive areas, suggesting that plaintiffs are being more selective in their investments and the cases they pursue through class certification. In 2024, courts issued rulings on 432 motions for class certification, a decrease from 2023, when courts issued rulings on 451 motions for class certification. Of those, courts granted motions for class certification at a lower rate. Courts granted 272 of those motions, for a certification rate of approximately 63%. In 2023, by contrast, courts granted 324 motions for class certification, for a certification rate of approximately 72%.
Trend #3 – Privacy Class Actions Continue To Proliferate As Plaintiffs Search For Winning Theories
The plaintiffs’ class action bar has continued to invest in the privacy class action space and, over the past year, has generated a multitude of filings, making privacy one of the hottest areas of growth in terms of activity by the plaintiffs’ class action bar. As technology continues to infiltrate our everyday lives, it provides ongoing inspiration for novel claims. Two of the most active areas of privacy litigation over the past year include: (1) litigation regarding “biometric” technologies under the Illinois Biometric Privacy Act (BIPA); and (2) claims regarding website advertising technologies (adtech) asserted under a variety of federal and state statutory and common laws.
Trend #4 – Plaintiffs Continue To Chip Away At The Arbitration Defense
Despite another tumultuous year of rulings, the arbitration defense remained one of the most powerful weapons in the class action defense toolkit. A defendant’s ability to enforce an arbitration agreement containing a class or collective action waiver continues to reign as one of the most impactful defenses in terms of shifting the pendulum of class action litigation. The U.S. Supreme Court cleared the last hurdle to widespread adoption of such agreements with its decision in Epic Systems Corp. v. Lewis, et al., 138 S. Ct. 1612 (2018). In response, more companies of all types and sizes updated their onboarding systems, terms of use, and other types of agreements to require that employees and consumers resolve any disputes in arbitration on an individual basis. In 2024, the defense won 91 of 167 motions to compel arbitration, for a success rate of 54%. By way of comparison, in 2023 the defense won 126 of 190 motions to compel arbitration, for a success rate of 66%.
Trend #5 – Plaintiffs Target DEI and ESG Initiatives Prompting Roll Back
The U.S. Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. (SFFA), et al. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), stimulated a flood of claims targeting diversity equity and inclusion (DEI) programs over the past year. Headlines were replete with cases of employees and applicants accusing employers of prioritizing diversity over merit and improperly using protected characteristics to guide decision-making, setting the stage for more class action activity in this area.
Trend #6 – The Supreme Court Lays The Groundwork For Rebooted Litigation Theories
As the ultimate referee of law, the U.S. Supreme Court traditionally has defined the playing field for class action litigation and, through its rulings, has impacted the class action landscape. The past year was no exception. Although the U.S. Supreme Court did not directly address the procedural mechanisms that govern class actions during its most recent term, it issued multiple decisions that are sure to influence the class action space.
Trend #7 – Data Breaches Gives Rise To An Unprecedented Number Of Class Action Filings
Data breach litigation remained expansive in 2024 as plaintiffs filed more data breach class actions than in any other year and double the number filed in 2022. As the number of data breaches has accelerated, such events have provided the fuel for a surge of class actions. Despite the significant increase in filings, courts issued few (only five) class certification decisions in 2024, suggesting that many motions are in the pipeline or that, observing the difficulty that plaintiffs have faced in certifying such cases over the past two years, plaintiffs are electing to monetize their data breach claims prior to reaching that crucial juncture. So long as defendants continue to play ball on the settlement front, we are likely to see settlement payouts continue to lure plaintiffs to this space and fuel those filing numbers.
Trend #8 – PFAS Inspires Forever Litigation
PFAS class actions inspired some of the most attention-grabbing headlines this past year across the legal landscape. PFAS, or per- and polyfluoroalkyl substances, are a group of manmade chemicals that are resistant to oil, water, and heat. They are used in many consumer and industrial products and are commonly called “forever chemicals” because of their persistence, meaning they do not break down easily in the environment. PFAS generated the largest class action settlement in 2024, which came in at more than twice the next highest settlement, which also involved PFAS, and generated an attorneys’ fee award of nearly one billion dollars. These numbers are going to inspire a continued wave of PFAS class actions, as the plaintiffs’ class action bar targets more companies with claims that their products or packaging contained PFAS, and those companies, in turn, search for claims against their material suppliers.
Trend #9 – California Remains Ground Zero For PAGA Representative Actions
The California Private Attorneys General Act (PAGA) inspired more representative lawsuits than any other statute in America over the past year. According to the California Department of Industrial Relations, plaintiffs filed more than 9,464 PAGA notices in 2024, a nearly 22% increase over 2023, and a whopping 85,936% increase over the 11 PAGA notices filed in 2006. The so-called PAGA reform legislation passed in 2024 by California lawmakers seemingly did little to nothing to curb interest in these cases, which continue to present one of the most viable workarounds to workplace arbitration agreements.
Trend #10 – The Change At The White House Signals A Decreased Role For Government Enforcement Litigation
Government enforcement litigation is similar in many respects to class action litigation. In lawsuits brought by the U.S. Equal Employment Opportunity Commission (EEOC), as well as the U.S. Department of Labor (DOL), government enforcement claims typically involve significant monetary exposure, numerous claimants, and complex procedures. These types of lawsuits most often pose reputational risks to companies. As the White House shifts from blue back to red, the incoming Trump Administration has promised less government oversight of business and less regulation, thereby signaling less government enforcement litigation. Change, therefore, is inevitable.
Conclusion
Class action litigation is a staple of the American judicial system. The volume of class action filings has increased each year for the past decade, and 2025 is likely to follow that trend. In this environment, programs designed to ensure compliance with existing laws and strategies to mitigate class action litigation risks are corporate imperatives.
The plaintiffs’ bar is nothing if not innovative and resourceful. Given the massive class action settlement figures from 2022 through 2024 (a combined total of $159.4 billion), coupled with the ever-developing law, corporations can expect more lawsuits, expansive class theories, and an equally if not more aggressive plaintiffs’ bar in 2025. These conditions necessitate planning, preparation, and decision-making to position corporations to withstand and defend class action exposures.
Duane Morris Takeaways: Our Class Action Review publication launch is just around the corner – Tuesday, January 7, 2025.
The 2025 Review builds on the success of our previous editions and represents our twentieth annual study of the class action space. At over 650 pages, the 2025 Review has more analysis than ever before, with discussion of over 1,440 class certification rulings from federal and state courts over this past year. The Review will be available for download as an E-Book too.
The Review is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting Corporate America, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breach, EEOC-Initiated and government enforcement litigation, employment discrimination, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, wage & hour class and collective actions, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, and the top-class action settlements in each area. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2025.
We are humbled and honored by the recent review of the Duane Morris Class Action Review – 2024 by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said, “The Duane Morris Class Action Review is ‘the Bible’ on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.” EPLiC continued, “The review is a must-have resource for in-depth analysis of class actions in general and workplace litigation in particular. The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting corporate America and provides insight as to what companies and corporate counsel can expect in terms of filings by the plaintiffs’ class action bar and government enforcement agencies like the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (DOL).”
We look forward to providing the 2025 edition of the Review to all our loyal readers on January 7. Stay tuned and Happy Holidays!