Category: General

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown

Duane Morris Takeaways: On June 3, 2024, in Albright et al v. Ascension Michigan et al, No. 23-1996 (6th Cir. June 3, 2024), a three-judge panel of the Sixth Circuit reversed and remanded a district court’s approval of a nationwide class action settlement because the plaintiffs lacked Article III standing. The case illustrates the fundamental requirement of federal court jurisdiction that all named plaintiffs have an alleged injury traceable to the settling defendants. The decision is required reading for litigants seeking court approval of a Rule 23 class action settlement.

Case Background

On July 12, 2022, over 100 current or former employees sued the Michigan-based Ascension healthcare organization for alleged violations of Title VII and Michigan state law occurring at its Michigan hospitals. The plaintiffs claimed that the defendant entities discriminated against them based on religion and unlawfully denied their request for a religious exemption from the organization’s mandatory COVID-19 vaccination policy. The plaintiffs sought to represent a Rule 23 class of solely-Michigan-based workers.

On April 24, 2023, the parties jointly moved the U.S. District Court for the Western District of Michigan for preliminary approval of a Rule 23 settlement. In the proposed settlement agreement, the settling parties expanded the scope of the lawsuit to the parent company of the Michigan defendant entities and 24 affiliate hospitals, clinics, and other entities in Alabama, Washington, D.C., Indiana, Kansas, Maryland, Michigan, Missouri, New York, Oklahoma, Texas, Tennessee and Wisconsin. Two days later, the district court preliminarily approved the settlement and issuance of notice to the class.

The settling parties filed an amended complaint to facilitate the proposed nationwide class action settlement of claims challenging the mandatory vaccination policy in place at Ascension’s various entities. The amended complaint reflected the same Michigan-based plaintiffs as the original complaint.

About 2,700 of the 4,000 workers who received notice opted-in to the settlement, with 281 workers opting out. Nine opt-ins who had worked for the newly-added entities objected to the settlement on August 23, 2023.

After a final fairness hearing held on October 5, 2023, the district court granted the settling parties’ motion for final approval of the settlement on November 2, 2023 over the objections of the nine objectors.

The objectors filed two notices of appeal to the Sixth Circuit, which were consolidated together. In addition to opposing the settlement on standing grounds, the objectors argued that, by expanding the scope of the settlement class to a nationwide group, the proposed settlement diluted the value of back pay payouts each class member would receive.

The Sixth Circuit’s Ruling

The panel judges of the Sixth Circuit, in a brief unpublished opinion, unanimously ruled that the settlement failed on standing grounds.

For Article III standing to exist, the defendant’s alleged actions must have caused the plaintiff to suffer a concrete “injury-in-fact.” In a class action, for any defendant, at least one named plaintiff must have an injury traceable to the defendant.

Writing for the panel, Circuit Judge Cole reasoned that the named plaintiffs had no injury traceable to the 25 entities added to the lawsuit for settlement purposes. In expanding the scope of the defending entities without “add[ing] any new named plaintiffs to match the additional affiliate defendants,” the settling parties failed to establish subject matter jurisdiction for the district court to approve the settlement. Id. at 3.

Absent standing, the Sixth Circuit concluded that the 95 Michigan-based named plaintiffs could not settle claims on behalf of thousands of other employees who had worked for Ascension entities outside of Michigan.

Accordingly, the Sixth Circuit vacated the district court’s orders approving the class-wide settlement, certifying the settlement class, and awarding attorneys’ fees and expenses to plaintiffs’ counsel. The Sixth Circuit remanded the case to the district court for further proceedings.

Implications For Employers

The ruling in Ascension illustrates that standing challenges to putative class actions are a powerful tool not only at the pleading stage, but at all phases of class action litigation.

Prior to resolving any Rule 23 claims — particularly for nationwide settlements — it is essential for counsel defending class actions to vet the standing of each named plaintiff. Otherwise, just as the litigants in Ascension experienced, even a settlement approved in final form by a district court is vulnerable to being unraveled on appeal.

By Gerald L. Maatman, Jr. and Jennifer A. Riley

Duane Morris Takeaway: In its review of the Duane Morris Class Action Review – 2024, EPLiC Magazine called it the “the Bible” on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.

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 that “The Review must-have resource for in-depth analysis of class actions in general and workplace litigation in particular.”

EPLiC continued that “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 to see in 2023 in terms of filings by the plaintiffs’ class action bar and governmental enforcement agencies likes the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (DOL).”

So how do we do it?

The answer is pretty simple – we live, eat, and breathe class action law 24/7/365.

Every day, morning, and evening, we check the previous day’s filings of class action rulings relative to antitrust class actions, appeals in class actions, arbitration issues in class actions, Class Action Fairness Act issues in class actions, civil rights class actions, consumer fraud class actions, data breach class actions, EEOC-initiated litigation, employment discrimination class actions, Employee Retirement Income Security Act class actions, Fair Credit Reporting Act class actions, wage & hour class actions, labor class actions, privacy class actions, procedural issues in class actions, product liability & mass tort class actions, Racketeer Influenced and Corrupt Organization Act class actions, securities fraud class actions, settlement issues in class actions, state court class actions, Telephone Consumer Protection Act class actions, and Worker Adjustment and Retraining Act class actions. The Review also has focused appendices on significant sanctions in class actions, the largest attorneys’ fee awards, major settlements across all areas of litigation, the Illinois Biometric Information Privacy Act and the California Private Attorneys General Act.

We conduct due diligence reviews on a national basis for all of these areas, in both federal courts and in the courts of all 50 states. Then we read and analyze every ruling on Rule 23 certification motions and subsidiary issues throughout federal and state trial and appellate courts. The information is organized in our customized database, which is used to provide the Review’s one-of-a-kind analysis and commentary.

The result is a compendium of class action law unlike any other. Thanks for the kudos EPLiC – we sincerely appreciate it!

We look forward to providing the 2025 Review to all of our loyal readers in early January. In the meantime, check out our first-ever 2024 1st Quarter Class Action Settlement Review blog post here!

By Gerald L. Maatman, Jr., Jennifer A. Riley, Greg Slotnick, and Maria Caceres-Boneau

Duane Morris Takeaways: On May 6, 2024, the Beard Group sponsored the Class Action Money & Ethics Conference in New York City. The agenda is here. During the conference, over 150 attendees discussed key issues impacting class action litigation in 2024. We were privileged to chair the Conference and present the keynote address on class action litigation trends for the past year and what 2024 has in store for Corporate America. The discussion at the program underscores the cutting-edge issues facing companies in this area of law.

Key Trends For The Past Year

In our keynote address, we discussed the top ten developments in the class action litigation space. The leading trends center on the new era of heightened risks and elevated exposures that pivot on record-breaking settlement numbers; the high conversion numbers for class certification motions into certified classes, and the rise in privacy and data breach class actions.

On the settlement front, 2022 saw $66 billion in total proceeds when measured by the top ten settlements in all areas of law. In 2023, that figure totaled $51 billion, for a combined total of $117 billion over the past 24 months.

The pace of class action settlements thus far in 2024 shows no signs of slowing down. In the first four months of the year, three settlements of over $1 billion are in the books and the total (just for the top five settlements in each area) are at $19.8 billion.

In terms of class certification motions, the Plaintiffs bar successfully secured certification in 74% of cases over the past year. Those figures ranged from nearly 97% in securities fraud lawsuits to 14% in data breach cases. That said, the plaintiffs’ bar has proven its track record to convert class action lawsuit filings in to certified classes at a high rate.

In the privacy and data breach space, such claims became ubiquitous in 2023, with a virtual explosion in those types of lawsuits. While certification rates were quite low in data breach situations, the plaintiffs’ bar secured certification in privacy class actions at a higher rate.

Data Breach Panel

An interesting panel discussion – consisting primarily of plaintiffs’ lawyers – ensued after the keynote address on wiretapping class claims under the Video Privacy Protection Act and data privacy class action litigation. They reflected on the patchwork quilt of rulings in these areas over the past year and the low certification rates due to problems in surmounting standing issues based on lack of injury-in-fact showings.

The panelists predicted a subtle shift in privacy and data breach lawsuits to effectuate a “work around” to these impediments. Multiple plaintiffs’ counsel predicted more reliance on state law claims and litigation of class-wide claims in state court.

Panel On Use Of Qualified Settlement Funds

A panel of plaintiffs and defense lawyers addressed best practices in establishing and working on class-wide settlement with qualified settlement funds (QSF).

Several settlement administrators joined the panel and discussed new challenges in handling QSF funds posed by fraud (both by claimants and cyber criminals), as well as better interest rates that result in generation of more money for distribution.

Panel On Class Notice Strategies

The next panel focused on trends for class notice in 2024 and how artificial intelligence is now mainstream in terms of its use to facilitate the notice send to class members. The panelists expressed how these practices are quite innovative and rapidly evolving. Notice through social media and/or texts or email also is considerable cheaper than U.S. Mail, which is driving down settlement administration costs.

The challenge, however, is to prevent fraudulent claims from individuals seeking a share of the settlement pot. As to take rates, social media advertising is driving the rates upward, but the rates in data breach cases remain low at 2% to 5% (as compared to other types of settlements).- Class member demographics also impact the take rate, as older individuals are apt to view social media notice as “junk mail” or a scam. Conversely, staying ahead of fraudsters has created an imperative for settlement administrators (e.g., where settlement shares are claimed by an IP address of a bot).

Panel On Fraud In The Class Action Process

Another panel discussed the rise of fraudsters in the class action space. Some involve “deep fakes” of persons who seek to assert false claims as named plaintiffs or class members. Others involve cyber-criminals who infiltrate the settlement administration process and seek class settlement shares on a false basis.

Judicial responses have run the gamut from shutting down the settlement administration process and rebooting it with enhanced security measures to referrals to law enforcement personnel to combat fraud. Panelists predicted that judges are apt to ratchet up the scrutiny of final settlement approval of class actions, and possibly promote direct mail notice over digital communications.

ESG Class Action Litigation Panel

Class actions over environmental. social, and governance issues went mainstream in the past year. Panelists tracking these cases predicted that ESG class actions will continue to increase, especially as the plaintiffs’ bar refines their theories of recovery and begin to monetize their claims.

in particular, securities fraud class actions over DEI commitments are increasing as a result of the U.S. Supreme Court’s recent decision in Students For Fair Admissions, Inc., et al. v. President And Fellows Of Harvard College, Case No. 20-1199 (U.S. June 29, 2023). Both plaintiffs’ lawyers and defense counsel anticipate more litigation in this space.

Panel On “Lead Generation” Techniques In Mass Torts & Class Actions

The final panel explored new strategies utilized by the plaintiffs’ bar in reaching out to potential litigants in mass tort and class action litigation situations. The numbers behind the advertising – on television, social media, and radio – top $1.1 billion on an annual basis. On average, plaintiffs’ law firms run over 45,000 advertisements per day across the country with mass tort cases constituting the majority of ad placements.

The panelists opined that nuclear verdicts, large class action settlements, and social inflations are the main factors fueling the advertising. They concluded that these forms of advertising are a staple of the litigation system and not going away anytime soon.

Implications For Companies

Class action litigation is a fact of life for corporations operating in the United States. Today’s conference underscored that change is inevitable, and class actions litigation is no exception.

Duane Morris Takeaway: Join Duane Morris attorneys in Chicago for this special event! Duane Morris’ annual Developments in Workplace Law and Practice seminar series provides our clients and friends with a comprehensive update of important employment, labor relations, benefits and immigration law developments over the past year, as well as imminent changes that may seriously impact their businesses. Emphasis is placed on understanding the practical implications of these developments and the key strategies that immediately can be implemented to deal with them efficiently and effectively. This session encourages lively, thought-provoking discussions. Participants will have the opportunity to network with their peers and the presenters before and after the event. The program is of particular interest to business owners and executives, in-house counsel and HR professionals.

This program is open to all – click here to attend in person!

About the Chicago Program

Join Dan Canales, Alex Karasik, Jennifer Long, Jerry Maatman, John Reade, Jen Riley, Lisa Spiegel and Brandon Spurlock for a discussion of the following topics:

What’s New for Illinois Employers in 2024 and Beyond?

Hear all about current updates for Illinois employers including the latest regulatory guidance on mandatory paid leave requirements, how to prepare for mandatory pay transparency requirements beginning in 2025, the latest requirements impacting employers using temporary labor, and other anticipated employee-friendly changes in the legislative pipeline for 2025 and beyond.

Learn how recent federal developments impact your employment practices, including the Department of Labor’s regulatory action on independent contractor and employee misclassification, the NLRB’s recent regulatory action on joint employer issues, how OSHA’s new union representative walkaround rule impacts non-union employers, and other nationwide trends in state and local legislation.

Class Action Review: Top Developments Employers Should Expect for 2024 and Beyond

Class action litigation presents one of the most significant risks to corporations today. Learn the latest highlights in class action trends, decisions and settlements in crucial areas impacting Corporate America, including civil rights, employment discrimination, wage payment, labor and other class and collective actions brought by current and former employees. We will also share our insight on what companies and corporate counsel can expect to see in 2024 and beyond.

Digital Developments: What Businesses Need to Know About AI, Privacy and Data Breach Class Actions

Emerging technologies such as AI, biometric timekeeping software and cloud storage of data have exploded onto the scene of the modern workplace. Hear the latest developments about:

• How employers are handling the emergence of AI
• How courts are adjudicating privacy class actions following two major Illinois Supreme Court decisions involving the Biometric Information Privacy Act (BIPA)
• What employers need to know about the latest trend in class action litigation: data breach claims

Employee Benefits Update

The rules governing employee benefit plans are always changing and it is no different in 2024. We will discuss the biggest issues that employers should keep in mind this year – including:

• Health and welfare plan fiduciary developments
• Recent guidance under SECURE 2.0 that impacts all 401(k) plan
• Updates on ERISA retirement plan litigation and the steps that employers can take to minimize their potential exposure

The Latest Updates for Employers on Immigration Sponsorship and Immigration Related Investigations

Employer sponsorship of employees for work authorization and green cards can be a long, complex process. Over time, organizations, jobs, locations, and employees all change. Learn what rights employers have during the sponsorship process to stop, change or redirect sponsorship efforts and how those decisions will impact the sponsored employees.

USCIS, ICE and the DOJ regularly investigate employers for immigration-related compliance during visa sponsorship, and immigration-related discrimination during the I-9 and E-Verify processes. These investigations can be onerous with unexpected government visits to employer locations, large document productions and significant fines for civil liability. Get the latest updates for employer compliance in these situations.

Sign up today and join us at this important event!

By Eden E. Anderson, Rebecca S. Bjork, and Gerald L. Maatman, Jr.

Duane Morris Takeaways:  On April 10, 2024, the Ninth Circuit held in Fli-Lo Falcon, LLC v. Amazon.com, Case No. 22-35818 (9th Cir. Apr. 10, 2024), that business entities are not covered by the Federal Arbitration Act’s (“FAA”) transportation worker exemption.  The Ninth Circuit stated, “[w]hile a natural person such as an independent contractor may be a transportation worker, a non-natural person such as a business entity that employs or contracts with transportation workers, is not.”  Id. at 12.  The Ninth Circuit’s opinion is a must read for companies seeking to solidify their arbitration programs and manage their litigation risks. 

Case Background

The plaintiffs in Fli-Lo Falcon were delivery service partners (“DSPs”) that contracted with Amazon to deliver packages.  To join the DSP program, an individual needed to first create a business entity.  When plaintiffs filed a putative class action against Amazon, it sought to compel arbitration pursuant to an arbitration clause in the DSP agreements.  The district court compelled arbitration and dismissed the case, and the Ninth Circuit affirmed.

The Basis Of The Ninth Circuit’s Decision

A critical issue in the case was whether the FAA’s transportation worker exemption applied to the plaintiffs.  The Ninth Circuit held it did not because the transportation worker exemption “does not extend to business entities.”  Id. at 12.  The Ninth Circuit reasoned that the language of the exemption compelled this conclusion.  Section 1 of the FAA provides that it “shall not apply to contracts of employment of seamen, railroad employees, or any other class of worker engaged in interstate commerce.”  9 U.S.C. § 1.  Applying the statutory canon of construction ejusdem generis, which instructs that general words be construed to embrace only objects similar in nature to those objects specifically enumerated, the Ninth Circuit reasoned that the word “workers” in § 1 could not be construed to include a business entity, given the § 1’s  earlier reference to “seamen” and “railroad employees.”  Id. at 12.  Thus, the Ninth Circuit opined that “[w]hile a natural person such as an independent contractor may be a transportation worker, a non-natural person such as a business entity that employs or contracts with transportation workers, is not.”  Id.

Relatedly, the Ninth Circuit also held that “‘contracts of employment’ in the transportation worker exemption do not extend to commercial contracts.”  Id. at 14.  In reaching this conclusion, the Ninth Circuit cited the language of the transportation worker exemption, which exempts “contracts of employment of . . . any other class of workers.”  The Ninth Circuit emphasized that, “for a contract to be a contract of employment covered by § 1, it must have a qualifying worker as one of the parties.”  Id.

In a concurring opinion, Circuit Judge Holly Thomas disagreed that business entities can never be subject to the transportation worker exemption.  Plaintiffs’ expressed concern that “companies could then contract around the FAA’s exemption by forcing their transportation workers to create sham corporations, then contracting with those corporations rather than employing the workers directly” resonated with Judge Thomas.  Id. at 25.  However, Judge Thomas concurred in the result as to the plaintiffs because “Plaintiffs are not sham corporations, but bona fide business entities and their relationship is not an employment relationship, but a commercial one.”  Id.

Implications Of The Ruling

In spite of the concurring opinion of Circuit Judge Thomas, it is now the law in the Ninth Circuit that the transportation worker exemption does not apply to a business entity.  The opinion sets up a split of authority in the federal circuits, and it remains to be seen if a petition for writ of certiorari will be pursued with the U.S. Supreme Court.

By Gerald L. Maatman, Jr., Tyler Zmick, and Christian J. Palacios

Duane Morris Takeaways:  In Svoboda v. Amazon, Case No. 21-C-5336, 2024 U.S. Dist. LEXIS 58867 (N.D. Ill. Mar. 30, 2024), Judge Jorge L. Alonso of the U.S. District Court for the Northern District of Illinois granted class certification to a class of plaintiffs who alleged that Amazon’s “virtual try-on” (“VTO”) technology violated the Illinois Biometric Information Privacy Act (“BIPA”).  In doing so, Judge Alonso dealt Amazon a significant blow in its efforts to block the certification of a purported class of claimants that might number in the millions (with pre-certification discovery already establishing that there were over 160,000 persons who used Amazon’s VTO technology during the relevant class period). This decision is the most recent success by the plaintiffs’ bar in a string of victories for class action privacy lawsuits across Illinois and illustrates that even the largest and most sophisticated companies in the world face legal exposure in connection with their biometric retention and application practices. 

Background

Amazon sells products to consumers on its mobile website and shopping application. Its “virtual try-on” technology allows users to virtually try on makeup and eyewear, and is exclusively available on mobile devices. VTOs are software programs that use augmented reality to overlay makeup and eyewear products on an image or video of a face, which allows shoppers to see what the product might look like prior to deciding whether to purchase it. During the relevant class period, there were two VTOs at issue, one of which was developed by a third party (ModiFace), and another which was developed in-house by Amazon that later replaced ModiFace. Id. at 4. Amazon’s VTOs come in two forms, including: (1) VTO technology available for lip products, and; (2) VTOs available for glasses. The ModiFace VTO is available for lip liner, eye shadow, eye liner, and hair color. Amazon licenses, rather than owns ModiFace VTO. Id. at 5.

Both Amazon and ModiFace VTOs essentially works the same for every user. In order to access Amazon’s virtual try-on technology, the user first begins by clicking a “try on” button on an Amazon product page (the use of this try-on feature is entirely optional and does not serve as a barrier to the customer actually purchasing the product). The first time the customer uses Amazon VTO, she is shown a pop-up screen that states, “Amazon uses your camera to virtually place products such as sunglasses and lipstick on your face using Augmented Reality. All information remains on your device and is not otherwise stored, processed or shared by Amazon.”  Only after granting permission can the customer use the VTO technology to virtually try on the product. Users may select “live mode” or “photo upload mode” to superimpose the try-on product on an image of their own face. For both modes, the VTOs use software to detect users’ facial features and use that facial data in order to determine where to overlay the virtual products. Id. at 5.

Based on these facts, plaintiffs brought a class action lawsuit against Amazon, which alleged that the online retailer violated the BIPA’s requirements by collecting, capturing, storing or otherwise obtaining the facial geometry and associated personal identifying information of thousands (if not millions) of Illinois residents who used Amazon’s VTO applications from computers and other devices without first providing notice and the required information, obtaining informed written consent, or creating written publicly-available data retention and destruction guidelines. Id. Plaintiffs sought to certify a class of all individuals who used a virtual try-on feature on Amazon’s mobile website or app while in Illinois on or after September 7, 2016. Significantly, pre-certification discovery established that at least 163,738 people used virtual try-on technology on Amazon’s platforms while in Illinois during the class period. Id. at 6.

The Court’s Ruling

In ruling in favor of the plaintiffs, Judge Alonso systematically rejected each of Amazon’s arguments as to why plaintiffs failed to satisfy Rule 23’s requirements for class certification. Given the size of the purported class, Amazon did not attempt to contest the numerosity requirement. With respect to the adequacy requirement, Amazon argued that the named plaintiffs were inadequate and atypical because they alleged they used VTO for lipstick, and not eyewear or eye makeup (while the majority of the proposed class was comprised of individuals who used VTO for eyewear). Amazon further argued that the named plaintiffs had a conflicting interest with the class members who used VTO for eyewear, because the BIPA’s healthcare exception bars claims arising from the virtual try-on of eyewear. Id. at 12.  The Court rejected this argument. It found that there was no evidence that the named plaintiffs’ interests were antagonistic, or directly conflicted with those members who used VTO to try on eyewear, and Amazon’s concern that plaintiffs lacked an incentive to vigorously contest the healthcare exception defense was merely speculative. Id. The Court was also satisfied that the plaintiffs’ claims arose from the same course of conduct that gave rise to other class members’ claims (such as Amazon’s purported collection, capture, possession, and use of facial templates via its VTOs) and thus the typicality requirement was satisfied. Id. at 15.

Similarly, the Court reasoned that common questions of law or fact predominated over any questions affecting individual members, and a class action was superior to other available methods for fairly and efficiently adjudicating the controversy.  Id. at 17. Amazon asserted that there was no reliable way to identify class members who used VTO in Illinois during the class period, and thus, individualized inquiries predominated rendering the case unmanageable. Id. at 21. The Court rejected this argument. It agreed with the plaintiffs that Illinois billing addresses, IP addresses from which VTO was used, and geo-location data all served as a way of identifying class members. Amazon raised other arguments about the difficulty of identifying potential class members, but Judge Alonzo rejected all of these arguments, observing that plaintiffs did not need to identify every member of the class at the certification stage.  Id. at 23.

Finally, the Court dispatched with Amazon’s various affirmative defenses. In particular, Amazon argued that it had unique defenses for every member of the putative class, since damages were discretionary under the BIPA. The Court disagreed. It noted that the Illinois Supreme Court had determined that a trial court could fashion a damages award in a BIPA lawsuit that fairly compensated class members while deterring future violations, without destroying a defendant’s business. Id. at 25.

Implications for Employers

Employers should be well aware of the dangers associated with collecting or retaining individuals’ biometric information without BIPA-compliant policies in place. This case serves as a reminder that the larger the company, the larger the potential class size of a class or collective action. Although it remains to be seen the actual size of Svoboda v. Amazon, the class will likely number in the hundreds of thousands and this case should serve as a wake-up call for companies, regardless of scale, of the dangers of running afoul of the Prairie State’s privacy laws.