By Gerald L. Maatman, Jr., Rebecca S. Bjork, and Ryan Garippo
Duane Morris Takeaways:On April 23, 2026, in Hall v. Bitcoin Depot, Inc., Case No. 25-CV-04317 (N.D. Ga. Apr. 23, 2026), Judge William Ray of the U.S. District Court for the Northern District of Georgia dismissed a putative class action alleging that users of Bitcoin Depot’s cryptocurrency ATMs were at significant risk of identity theft and attendant personal, social and financial harms due to a data breach. The District Court held that the Named Plaintiff did not properly plead a cognizable injury sufficient to confer Article III standing to sue, due to not pleading any specific misuse of his data. The decision clarifies the legal standards within the Eleventh Circuit regarding standing requirements in data breach class action cases, thus providing helpful and nuanced guidance for defendants facing similar lawsuits. This is especially true because the dismissal was granted without prejudice, affording the Named Plaintiff an opportunity to cure his defective pleading and potentially setting the stage for further litigation on this issue.
Case Background
Quincey Hall sued Bitcoin Depot, Inc. in federal court in the Northern District of Georgia on behalf of a putative class of consumers who used the company’s cryptocurrency ATMs. Id. at 2. After a data breach occurred affecting the ATMs, approximately 26,000 individuals’ personally identifiable information was exposed online. Id. After being notified by Bitcoin Depot that his information was amongst that involved in the breach, Hall filed his class action lawsuit as a “proposed representative of a class of individuals ‘impacted by [Bitcoin Depot’s] failure to safeguard, monitor, maintain and protect’ their personal information prior to the data breach.” Id.
Hall’s Complaint alleged that because of the data breach, he and the putative class members are “at [a] significant risk of identity theft and various other forms of personal, social and financial harm.” Id. at 3. He alleged that Bitcoin Depot is liable for common law tort and contract claims, as well as for violations of the Georgia Uniform Deceptive Trade Practices Act and he sought both monetary damages and injunctive relief. Id.
Bitcoin Depot filed a motion to dismiss under Rule 12(b)(6) based both on a failure to state a claim and for lack of standing to sue under Article III of the Constitution. Id.
The Court’s Decision
Judge Ray granted Bitcoin Depot’s motion to dismiss the complaint and he did so without prejudice, allowing the Named Plaintiff an opportunity to correct his defective pleading. Id. at 10. The court’s analysis of the legal requirements for standing in data breach cases is clarifying because it demonstrates that nuance matters when considering whether the injury-in fact requirement for Article III standing is properly pled.
First, the court explained that to constitute a case or controversy within the meaning of Article III, the plaintiff must have standing to sue (id. at 3), and in the context of a class action lawsuit “only one named plaintiff must have standing as to any particular claim in order for it to advance.” Id. at 5 (citation omitted).
Second, the court explained that to demonstrate standing, a named plaintiff must show that “[he] has suffered ‘an injury in fact that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical[.]’” Id. Furthermore, when seeking damages specifically, the court explained that “the mere risk of future harm, standing alone, cannot qualify as a concrete harm.” Id. (quoting TransUnion LLC v. Ramirez, 594 U.S. 413, 436 (2021). And for injunctive relief, too, the named plaintiff must establish that there is a “substantial risk that, in the near future, they will suffer an injury.” Id.
Third, the court applied these standards to the allegations in the Named Plaintiff’s complaint and held that those allegations were insufficient to establish Article III standing. Hall had only pled a risk of identity theft and the resulting potential adverse impacts on him and putative class members. He had not pled any facts that his specific information had been leaked to known criminal dark websites that in similar circumstances have survived motions to dismiss in data breach cases. Id. at 9 (citing, inter alia, Green-Cooper v. Brinker, Int’l., Inc., 73 F. 4th 883, 889 (11th Cir. 2023).) In short, the Named Plaintiff had failed to allege that there was any misuse of his stolen identity data, and that was fatal to his pleading under the established rules for Article III standing.
Implications For Data Breach Class Action Defendants
Data breach class actions are abundant, as corporate counsel working in this space know. As such, it is crucial for all to have an understanding of the possible defenses available at the pleading stage to reduce litigation risk and force potentially meritless claims to a second round of pleading and motion to dismiss practice. Understanding how district courts analyze nuances in plaintiffs’ pleadings relating to this important area of the law – Article III standing – is critical to launching a successful defense to any such claims.
Duane Morris Takeaways: Gregory Tsonis, a Partner in the Duane Morris Class Action Defense Group, recently spoke at the Global Class Actions and Mass Torts Conference organized by Perfect Law in London. During the conference on April 22 and 23, 2026, over 200 attendees discussed key issues impacting class action litigation in 2025/2026. As a guest presenter from the United States on employment class actions, Greg spoke on United States class action trends and defense strategies.
The Conference
Perfect Law brings together top practitioners on both sides of the bar, as well as academics and the judiciary, to tackle contemporary issues in complex litigation, focusing on class actions and mass torts. The conference featured several prominent federal judges who handle leading MDL proceedings and class actions, including Judge Robert Dow, Northern District of Illinois (and Counselor to the Chief Justice of the US Supreme Court), Judge Robin L. Rosenberg, Southern District of Florida, and Judge Yvonne Gonzalez Rogers, Northern District of California. In addition, Judge Amy J. St. Eve of the U.S. Court of Appeals for the Seventh Circuit spoke on multiple panels.
The organizers compiled a wide range of knowledge and experience on cutting edge class action topics, including recent trends and emerging issues. The presenters covered the latest developments in class action trends across Canada, the United States, and Europe. They discussed trends and legal developments in consumer, privacy, and employment class actions, as well as the continued growth of mass tort actions targeting various industries.
Trends in Global Mass Torts and Public Nuisance
I had the privilege of speaking on class action and mass tort trends. Our panel addressed a wide variety of cutting-edge class action issues running the gamut from settlements, the important arbitration defense, and litigation funding.
The proliferation of mass tort and class action litigation is largely driven by heightened risks and elevated exposure that are connected to record-breaking settlement numbers. In 2025, settlement numbers reached an unprecedented level in class action litigation. In 2024, settlement numbers broke the $40 billion mark for the third year in a row. In 2025, the cumulative value of the highest ten settlements across all substantive areas of class action litigation surpassed that benchmark and totaled $79 billion. Combined, the top 10 settlement numbers of the past four years in all substantive areas exceeded $238 billion, representing use of the class action mechanism to redistribute wealth at an unprecedented level. Mass tort litigation has recently also somewhat shifted away from areas like the pharmaceutical companies and the opioid crisis to industries like technology companies, for example, on the basis that tech companies knew and disregarded harms from social media.
I was also able to address the effectiveness of the arbitration defense to preclude or limit class action litigation. Arbitration agreements with class action waivers provide the foundation for one of the most potent defenses to class action litigation. While the U.S. Supreme Court has continued to promote arbitration agreements, plaintiffs have continued to attack their enforceability, and courts across the country have continued to apply exceptions in inconsistent and expansive ways. Mass arbitration has also emerged as a way to weaponize arbitration proceedings, with the plaintiffs’ bar seeking to adjudicate hundred or thousands of claims by bypassing Rule 23’s class certification requirements.
Litigation funding by private entities also continues to fuel the prevalence of class action and mass tort litigation. Financial firms are continuing to invest substantial sums into portfolios of class action and mass tort litigation, and disclosure requirements continue to be a source of dispute.
Panel On Thresholds For Class Certification Across Jurisdictions
On the first day of the conference, an interesting panel discussion ensued on class certification standards in various jurisdictions. Panelists spoke to the general requirements under Rule 23(a) – numerosity, commonality, adequacy, and typicality – and the differences between class action requirements in the United States and other countries. In Canada, for example, a sufficiently numerous class can consist of as little as two people, while in the United States 40 individuals will typically be sufficient to satisfy numerosity.
In discussing the Rule 23 standard in the United States, the panel presented to the audience the statistics on class certification presented in the Duane Morris Class Action Review – 2026. In terms of class certification motions, the Plaintiffs bar successfully secured certification in 68% of cases over the past year, a slight increase from the 63% success rate in 2024. In 2025, plaintiffs also maintained more consistent certification rates across substantive areas, from a low of 33% in the data breach area, to highs above 70% in the antitrust, wage & hour, and securities fraud areas. Likewise, courts granted more than 90% of the motions for class certification that they adjudicated in 2025 in the ERISA and WARN areas. Additionally, the panel spoke to the importance of reaching the class certification stage in a case, which in many cases can take three to four years, and that approximately 75% of Rule 23(f) petitions to appeal class certification decisions during the pendency of the case are denied by courts of appeal.
Panel on Class Representative Duties
Another panel of plaintiffs lawyers, defense lawyers, judges, and professors addressed the duties of class representatives in varying jurisdictions. The panelists discussed how in the United States, class representatives are expected to be knowledgeable about the litigation, the claims asserted, and the class nature of the action. The class representatives must individually be adequate and have claims that are typical of the putative class as well. The panelists discussed the ability to compensate class representatives for their participation as class representatives, with all but one circuit in the United States permitting such incentive payments (the Eleventh Circuit does not allow incentive payments). Europe largely does not permit incentive payments to class representatives, with such payments expressly forbidden in the Netherlands.
By Gerald L. Maatman, Jamar D. Davis, and Caitlin Capriotti
Duane Morris Takeaways: On April 1, 2026, in Laura O’Dell et. al. v. Aya Healthcare Services, Inc., No. 25-1528, 2026 U.S. App. LEXIS 9420 (9th Cir. Apr. 1, 2026), a panel for the Ninth Circuit held that the U.S. District Court for the Southern District of California erred in relying on non-mutual offensive collateral estoppel to preclude the enforcement of hundreds of arbitration agreements based select arbitral awards from unappointed arbitrators for different parties. This decision reaffirms the principle of consent set forth in the Federal Arbitration Act (“FAA”) and the Ninth Circuit’s preference (in line with the FAA) for enforcement of valid arbitration agreements in individualized proceedings.
Case Background
Aya Healthcare Services, Inc. (“Aya”) is an agency the pairs traveling nurses and other supporting clinicians with hospitals in need. In 2022, four former employees filed a putative class action against Aya for allegedly reducing their pay mid-contract, asserting breach of contract, fraudulent inducement, state wage-and-hour violations, and violations under the Fair Labor Standards Act (FLSA). As a condition of employment, all employees signed arbitration agreements to resolve any employment-related disputes outside of the court system. Aya moved to compel arbitration, and the U. S. District Court for the Southern District of California (the “District Court”) granted the motion and compelled all four named plaintiffs to arbitration.
Aya proceeded to arbitrate with each of the four plaintiffs in four separate arbitrations. Each plaintiff challenged the validity of the arbitration agreements, and the delegation clause assigned the arbitrator (rather than the court) authority to decide whether the arbitration agreement was valid. Two arbitrators ruled the arbitration agreements were unconscionable, and two arbitrators ruled the arbitration agreements were valid. By the time the parties moved the District Court to confirm their respective arbitral awards, 255 additional plaintiffs had opted-in to the case pursuant to a collective action procedure under the FLSA. Aya moved to compel each of these plaintiffs to arbitration. In response, a newly assigned district judge raised sua sponte the issue of whether collateral estoppel barred Aya from enforcing the additional arbitration agreements against the opt-in plaintiffs. Ultimately, the District Court denied Aya’s motion to compel arbitration.
The District Court applied the doctrine of non-mutual offensive collateral estoppel to preclude the enforcement of the arbitration agreements between Aya and the 255 employees. This doctrine was “non-mutual” because a party different from the party in the original action is seeking preclusion and “offensive” because the new party is using a prior award as a sword (rather than a shield). However, the District Court only gave the collateral estoppel effect to the two decisions finding the arbitration agreements unconscionable, and awarded no such power to the decisions holding the arbitration agreements as valid. The Ninth Circuit reviewed the motion to compel arbitration de novo.
The Ninth Circuit’s Decision
The Ninth Circuit held that the District Court’s novel application of an equitable preclusion doctrine did not preclude the enforcement of the arbitration agreements because application of the doctrine runs contrary to FAA’s intention to enforce the agreed upon terms of valid arbitration agreements in individualized proceedings. “Precluding an arbitration that the parties had agreed to – because a different arbitrator in a different proceeding had concluded that an agreement between different parties was unconscionable – would render the parties’ consent meaningless,” wrote U.S. Circuit Judge Eric C. Tung (emphasis in original). This goes against the fundamental requirement that each arbitration agreement requires individualized resolution. The Ninth Circuit also stated that “the application of non-mutual offensive issue preclusion would also violate the principle of consent that the [Federal Arbitration Act (“FAA”)] incorporates.” Id. at *8. When parties enter arbitration agreements, the FAA serves to have those agreements enforced. Further, even when the validity of an arbitration agreement is at issue, the issue-preclusion doctrine is not a “generally applicable contract defense.” Id.
Further, the Ninth Circuit determined that the District Court’s order effectively transformed individual arbitration proceedings into a bellwether class action to which the parties never agreed. This also goes to the issue of consent. The Ninth Circuit cited the U.S. Supreme Court’s decisions in Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018), and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), as holding that imposing a class action without the parties’ consent (or adequacy of representation) and where the parties had agreed to individual arbitration is a violation of the FAA. Allowing one arbitration proceeding to preclude hundreds or thousands of arbitration agreements, as the logic of the District Court suggests, regardless of adequacy of representation, would strip the resulting class action from all its important protective features.
As a result, the Ninth Circuit reversed the District Court’s judgment and remanded for further proceedings.
Implications For Employers
This decision reaffirms the strength of the FAA and reiterates the Ninth Circuit’s preference for enforcing arbitration agreements on an individualized basis.
District court judges who may have personal preferences against arbitration cannot destroy the FAA with novel doctrines inconsistent with the FAA.
Duane Morris Takeaways: Clients, ranging from some of the world’s largest manufacturers and insurance companies to startup companies and individual inventors, turn to Duane Morris for counsel and representation in claims involving products liability and toxic torts. For years, Duane Morris has worked with clients to develop cost-containment and strategic litigation plans designed to minimize the risk, business disruption and potentially staggering cost of products liability and toxic tort litigation. Our goal is to provide value by acting as proactive counselors and advisors, rather than simply responding to particular problems in isolation. To that end, the class action team at Duane Morris is pleased to present the Products Liability & Mass Torts Class Action Review – 2026. This publication analyzes the key rulings and developments in 2025 and the significant legal decisions and trends impacting both product liability class action litigation and mass tort litigation for 2026. We hope that companies and employers will benefit from this resource and assist them with their compliance with these evolving laws and standards.
Click here to bookmark or download a copy of the Products Liability & Mass Torts Class Action Review – 2026 e-book.
Stay tuned for more products liability and mass tort class action analysis coming soon on our weekly podcast, the Class Action Weekly Wire.
Duane Morris Takeaways: On March 6, 2025, Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York granted class certification with modifications in a case involving a stablecoin issuer’s alleged issuance of unbacked or debased stablecoins in furtherance of an alleged scheme to manipulate the market prices for crypto commodities and futures in the litigation captioned In Re Tether & Bitfinex Crypto Asset Litigation, No. 19 Civ. 9236, 2026 WL 629826 (S.D.N.Y. Mar. 6, 2026). The ruling is significant as it shows that while crypto purchasers who file class action complaints alleging violations of the Sherman Act and Commodities Exchange Act may be able to satisfy Rule 23 so long as they offer reliable expert models on class-wide causation and damages and limit their proposed classes to purchasers who used fiat currency or stablecoins to make their purchases on domestic or stateless exchanges, such class actions may also be subject to dismissal based on summary judgment on the question of whether the defendants’ alleged provision of unbacked or debased stablecoins caused an increase in price of crypto commodities and futures.
Background
In the litigation captioned In Re Tether & Bitfinex Cryto Asset Litigation, the plaintiffs, four purchasers of Bitcoin, Bitcoin futures, and other crypto assets, brought a class action against various entities and individuals associated with the issuer of a stablecoin and the stablecoin issuer’s sister company, a crypto asset exchange, alleging that the defendants artificially inflated the prices of the plaintiffs’ crypto asset purchases by engaging in market manipulation under the Commodities Exchange Act and monopolization and restraint of trade under the Sherman Act. Id. at *2, 26.
According to the plaintiffs, the stablecoin issuer issued hundreds of millions of unbacked or debased stablecoins while telling the market that these stablecoins were fully backed by U.S. dollars whereas actually they were backed only by the sister crypto exchange’s accounts receivables and inaccessible funds. Id. at *2-3. Further according to plaintiffs, the defendants used an anonymous trader to engage in cross-exchange arbitrage by purchasing “massive” amounts of crypto commodities on other exchanges with the debased stablecoin, selling them on the defendant exchange for U.S. dollars, and withdrawing those funds as the stablecoin. Id. at *4. All these activities were allegedly performed by the defendants with knowledge and intent to inflate crypto commodity and futures prices and allegedly resulted in artificially inflated prices of crypto assets purchased by the plaintiffs. Id.
The plaintiffs moved for class certification under Rule 23, seeking to certify classes of acquirers in the United States during the class period of crypto commodities and futures, respectively. Id. at *5. In support, the plaintiffs submitted a report from an antitrust and economics expert that included an event study purporting to show that the issuance of the unbacked or debased stablecoin caused the price of Bitcoin to increase, a regression analysis that purported to model how a change in the outstanding volume of the stablecoin affects Bitcoin prices, and an overcharge model that purported to quantify the artificial inflation of Bitcoin based on the extent to which the stablecoin was debased or unbacked. Id. at *6.
The defendants moved to exclude the plaintiff’s expert and opposed class certification by challenging only adequacy and predominance (not any of the other Rule 23 requirements). On adequacy, the defendants argued that adequacy was not satisfied due to two sources of potential intraclass conflict – intraclass trading and plaintiffs’ alternative models for showing debasement and inflation. On predominance, the defendants argued that individual questions would predominate when resolving questions of class-wide impact, injury, and extraterritoriality.
The Court’s Decision
The Court began its analysis by excluding the plaintiffs’ expert’s event study purporting to show that the issuance of the unbacked or debased stablecoin caused the price of Bitcoin to increase. As the Court explained, the event study was unreliable because the “t-test” model it employed violated the key assumption of the model “that the values within in each tested group are independent, meaning that they are not correlated with each other.. Id. at *6 n.5, 12-13. However, the court denied exclusion of the expert’s regression model, overcharge model, and other opinions. Id. at *14-19.
Turning next to the defendants’ two adequacy challenges, the Court rejected both. First, the Court found that intraclass trading did not create any conflicts because the alleged classes included only buyers alleging only price inflation. Id. at *23-24. Second, the Court found that there were also no intraclass conflicts based on plaintiffs’ alternative methods for showing stablecoin debasement because the methods differed only “in the extent of the debasement they show on certain days, but they are not diametrically opposed. In fact, the debasement is, by default, one-directional.” Id. at *25.
Turning to defendants’ challenges to predominance, the court found that common evidence would be used “to establish that Defendants engaged in certain conduct, such as issuing debased or unbacked [stablecoins], misrepresenting that [the stablecoins were] always backed one-to-one by USD held in reserve by [the defendant crypto exchange], disseminating debased [stablecoins] through the Anonymous Trader, and conspiring with the Anonymous Trader to increase cryptocommodity prices.” Id. at *27. The court also found that common evidence would be used for the elements relating to the defendants’ scienter or intent. Id. at *27. In sum, the Court found that common questions predominated as to “issues related to defendants’ anticompetitive conduct.” Id. However, as the Court explained, “the elements of antitrust and CEA cases that pertain to Defendants’ conduct almost always present a common question that predominates … Because of this, class certification in CEA and antitrust cases often turns on whether common issues predominate in establishing injury, causation, or damages.” Id. at *26-27 (emphasis added).
Next the Court found that the plaintiffs could demonstrate class-wide impact or causation through plaintiffs’ expert’s regression analysis, although the Court found this to be a “closer question.” Id. at *28. Although the defendants did not provide a sufficient reason to exclude the regression analysis such as the expert’s failure to account for a key variable, the Court found nevertheless that the defendants called into question the plaintiffs’ ability with its regression model to establish “the fact of causation.” Id. at *28-30. However, as the Court explained, “That type of challenge sounds more in summary judgment than in Rule 23(b)(3). Indeed, the Supreme Court has warned that when ‘the concern about the proposed class is not that it exhibits some fatal dissimilarity but, rather, a fatal similarity — [an alleged] failure of proof as to an element of the plaintiffs’ cause of action — courts should engage that question as a matter of summary judgment, not class certification.’” Id. (quoting Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 457 (2016)).
Further, the Court found that the plaintiffs could measure damages on a class-wide basis using Plaintiffs’ overcharge model. Id. at *31.
Finally, as to the defendants’ remaining challenges to predominance, the Court rejected them as to the predominance finding but embraced them for purposes of narrowing the Plaintiffs’ proposed class definitions in two ways.
First, on the question of injury, the Court found that whether common issues predominate turns on whether injury occurs “(i) when a Class Member purchases an artificially inflated cryptocommodity, or (ii) when that Class Member experiences economic loss flowing from their purchase of that cryptocommodity.” Id. at *31. As the Court explained, whereas the defendants argued “that economic loss is required for Class Members to establish injury — like in the securities context,” Plaintiffs argued “that the magnitude of loss only matters for the calculation of damages — like in the antitrust context.” Finding this issue “close,” the Court ruled for the plaintiffs, reasoning as follows: “The [d]efendants are correct that the Class Assets share more in common with securities than commodities such as olive oil, especially given that purchasers of cryptocommodities often sell them later, either at a loss or gain … But the Court ultimately sides with Plaintiffs because, at its core, this is an antitrust case, not a securities action. And unlike in securities cases, antitrust injury flows from the overcharge itself.” Id. at *32. The Court “remain[ed] concerned, however, that the initial harm that is required to establish an antitrust injury is not as clearcut for Class Members who purchased cryptocommodities with other cryptocommodities” because “whether that purchaser has incurred the required initial overcharge would depend on whether the purchasing cryptocommodity was more or less inflated than the purchased cryptocommodity.” Id. at *33. In addition, the court found no injury for any alleged class members who acquired class assets only by engaging in mining, using a crypto fork, or receiving them as gifts. Id. at *33. Thus, the Court limited the proposed classes of crypto commodity and futures acquirers to purchasers who used fiat currency or stablecoins. Id.
Second, on the question of extraterritoriality, the Court found that “[o]n Plaintiffs’ CEA [Commodities Exchange Act] cause of action, individual questions predominate regarding futures trades on foreign exchanges” because “the domesticity of transactions on foreign exchanges is too fact-specific for class certification,” including “facts concerning the formation of the contracts, the placement of purchase orders, the passing of title, or the exchange of money.” Id. at *34-36. Foreign exchanges aside, the Court found that there are no individualized questions as to domesticity for futures transactions executed on domestic exchanges.” Id. Lastly, on the remaining question of whether stateless exchanges “are governed by the domestic exchange rule or foreign exchange rule,” which question the Court found “especially important in the context of the crypto-economy,” the Court held that this inquiry satisfied predominance because it “can be determined on an exchange-by-exchange, rather than person-to-person, basis.” Id. at *35. Accordingly, the Court limited the futures subclass to all purchasers of crypto commodity futures with fiat currency or stablecoins in the United states during the class period so long as they purchased futures on either U.S.-based exchanges or stateless exchanges “that either (a) matched trades on servers in the United States or (b) prohibited buyers from revoking their orders once placed.” Id. at *38.
For these reasons, the Court granted the plaintiffs’ motion for class certification and narrowed the plaintiffs’ proposed class definitions.
Implications For Companies
The In Re Bitfinex class certification ruling is an instructive one for litigants on either side of crypto class actions alleging antitrust and commodities violations. For plaintiffs, it shows that table stakes for achieving class certification of such claims include (a) proffering reliable models regarding class-wide causation and damages and (b) limiting class definitions to transactions that can use common evidence to satisfy the injury element and escape the extraterritoriality defense. For defendants, it shows that if their challenges to plaintiffs’ causation and damages models are ineffective, then summary judgment remains as a vehicle to show the absence of sufficient evidence for the plaintiff to demonstrate causation of any purported antitrust or commodities injury due to defendants’ alleged conduct.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Hayley Ryan
Duane Morris Takeaways: On February 20, 2026, in Clark v. Blue Diamond Growers, Case No. 22-CV-01591, 2026 WL 483275 (N.D. Ill. Feb. 20, 2026), Judge Jorge L. Alonso of the U.S. District for the Northern District of Illinois denied class certification in a deceptive advertising lawsuit brought under the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”). The Court concluded that the named plaintiff was not an adequate class representative because she knew the allegedly misleading representation was false yet continued purchasing the product. Because that knowledge defeated proximate causation and created a unique defense, the Court determined that class certification was improper.
This decision is a reminder that plaintiffs asserting deceptive advertising claims must show they were actually deceived. Where a named plaintiff knew “the truth” and continued to buy the product anyway, adequacy under Rule 23(a)(4) is vulnerable.
Background
Plaintiff Margo Clark filed a putative class action complaint against Blue Diamond Growers, a cooperative of California almond growers that sells flavored almonds, including “Smokehouse® Almonds.” Id. at *1. She alleged that the “Smokehouse®” label misled consumers into believing the almonds were smoked in a smokehouse, when in fact the smoky flavor derived from added seasoning. Id. According to Plaintiff’s Complaint, this purported misrepresentation enabled Blue Diamond to charge a price premium in violation of the ICFA. Id.
Plaintiff moved to certify a class of Illinois purchasers of Smokehouse® Almonds from March 2019 to the present. Id.
The Court’s Ruling
Judge Alonso denied certification based on a failure to establish adequacy of representation. Id. at *2. Under Federal Rule of Civil Procedure 23(a)(4), a class may be certified only if “the representative parties will fairly and adequately protect the interests of the class.” Where the named plaintiff is subject to an arguable unique defense, however, adequacy is lacking. Id. at *1.
Here, the dispositive issue was proximate causation under the ICFA. To prevail on a deceptive advertising claim under the ICFA, a plaintiff must establish that the alleged deception proximately caused her injury, i.e., that she was actually deceived. Id. at *2. A plaintiff who knows the truth cannot establish proximate cause because she was not misled. Id.
At her deposition, Plaintiff testified that she learned as early as 2019 or 2020, after viewing a Facebook advertisement from her counsel, that the almonds were seasoned rather than smoked. Id. Despite that knowledge, she continued to purchase the product for over a year. Id. The Court found this testimony fatal, holding that Plaintiff was “inadequate to serve as the class representative because she cannot show proximate causation as required to prevail on her claim.” Id.
Plaintiff’s counsel attempted to rehabilitate the claim through a declaration asserting that the Facebook advertisements were not targeted to Illinois consumers in 2019 or 2020. Id. However, counsel also acknowledged in the same declaration that Plaintiff submitted her information in response to the advertisement approximately one year before signing her representation agreement in March 2022. Id. The Court concluded that this timeline did not resolve the proximate cause problem. Even accepting counsel’s version, Plaintiff “saw the advertisement around March 2021, yet she still continued to purchase almonds for another year.” Id.
Plaintiff’s counsel also relied on Plaintiff’s amended interrogatory responses in which she claimed she first learned the almonds were not smoked during a conversation with her attorney after signing the representation agreement. Id. at *3. Based on that revision, Plaintiff’s counsel argued that Plaintiff could establish proximate causation because she stopped purchasing the almonds after she signed the representation agreement. Id.
The Court was unpersuaded. Weighing the deposition testimony, the declaration, and Plaintiff’s original interrogatory responses, the Court concluded that Blue Diamond’s proximate cause defense was at least arguable – and that was sufficient. Id. The Court emphasized that a unique defense need only be “arguable” to defeat adequacy, and here it was “certainly arguable.” Id.
Accordingly, the Court denied certification and directed the parties to submit a joint status report addressing how they intend to proceed on Plaintiff’s individual claims and whether they have considered settlement discussions in light of the Court’s certification ruling. Id.
Implications for Companies
Clark reinforces a core Rule 23 principle that a named plaintiff subject to a unique defense cannot adequately represent a class. In deceptive advertising cases under the ICFA and similar statutes, knowledge is often outcome-determinative. If a plaintiff knew of the alleged defect before purchasing, or continued purchasing after learning the truth, proximate causation becomes vulnerable.
For companies defending consumer fraud class actions, deposition testimony, purchase history, and discovery into when and how the plaintiff allegedly learned of the “defect” or deception may provide a powerful adequacy challenge. As Clark illustrates, even an “arguable” unique defense can be enough to defeat class certification.
By Gerald L. Maatman, Jr., Gregory S. Slotnick, and Elizabeth G. Underwood
Duane Morris Takeaways:On February 12, 2026, the U.S. Court of Appeals for the Second Circuit affirmed a district court’s refusal to so order a proposed consent decree between the Equal Employment Opportunity Commission (“EEOC”) and a union that would have substantially modified and terminated court supervision over the union’s referral hall and hiring practices in a Title VII enforcement action that has been pending for fifty-five years. United States Equal Emp. Opportunity Comm’n v. Loc. 580 of the Int’l Ass’n of Bridge, Structural & Ornamental Ironworkers, Joint Apprentice-Journeymen Educ. Fund of the Architectural Ornamental Iron Workers Loc. 580, Allied Bldg. Metal Indus., No. 25-CV-44, 2026 WL 392327, at *1 (2d Cir. Feb. 12, 2026). Applying the standard set out in S.E.C. v. Citigroup Glob. Mkts., Inc., 752 F.3d 285, 294 (2d Cir. 2014), the Second Circuit held that the district court did not abuse its discretion in finding the proposed settlement was not “fair and reasonable” and did not adequately resolve the core discrimination claims in the original 1971 complaint. Id. at *4. The Second Circuit, like the district court, emphasized the union’s consistent failures to comply with court‑ordered recordkeeping obligations, the gaps in the critical referral‑hall data, and the need for a more extensive factual record before the court may unwind extensive injunctive relief and oversight in this case. Id.
Case Background
The litigation began in 1971, when the U.S. Department of Justice (“DOJ”) filed suit against Local 580 of the International Association of Bridge, Structural, and Ornamental Ironworkers and the Join Apprentice-Journeymen Educational Fund of the Architectural Ornamental Iron Workers Local 580 (“Local 580”), alleging race discrimination in their employment practices, in violation of Title VII of the Civil Rights Act of 1964. Id. at *1. The complaint asserted that Local 580 engaged in “patterns and practices” of discrimination that denied non-white individuals employment opportunities because of their race. Id. Specifically, the complaint alleged that Local 580 systemically excluded non-white individuals from union membership and refused to refer them for available ironworking jobs. Id.
In 1974, the EEOC was substituted as plaintiff for the DOJ. Id. at n.1. In 1978, following negotiations, the district court entered a consent judgment that: (1) permanently enjoined the union from discriminating against Black and Hispanic ironworkers; (2) established remedial membership benchmarks for Black and Hispanic workers; and (3) imposed specific data‑collection and recordkeeping requirements regarding operation of the union’s referral hall — “a clearinghouse in which the union matches available members with employers requesting ironworking services.” Id.
Over the ensuing decades, however, the union repeatedly failed to comply with its obligations. Id. Throughout the 1980’s and 1990’s, the district court issued multiple contempt orders addressing non‑compliance and increased the scope of its mandatory union remedial obligations. Id.
In 2019, following a period without discrimination complaints, the EEOC assessed whether ongoing court supervision remained necessary. Id. at *2. Interviews with 41 Black and Hispanic current and former Local 580 members revealed that 17% reported racial discrimination, often involving referral-hall operations or job allocation. Id. The EEOC’s labor economist analyzed “fund office” data from 2009–2019, which showed racial disparities in overtime and working days (attributed to employer rather than union conduct), and “hiring hall dispatch” data limited to June 2018–2019, which showed no statistically significant disparities and mixed results on unemployment duration. Id. Based on this record, the EEOC and the union negotiated a proposed consent decree that would impose new, less stringent compliance obligations, vacate all prior remedial obligations and court orders, immediately terminate the special master’s appointment, and end judicial oversight after three years. Id.
In 2020, the parties jointly moved to enter the proposed consent decree. Id. The district court requested supplemental information, including the union’s 2009–2018 referral-hall data, which was missing from the economist’s report but which had been required by court order, and evidence of efforts to address the documented disparities. Id. Ultimately, the district court denied the motion without prejudice in 2022, determining the EEOC’s submission was insufficient, and the parties had “entirely failed” to produce the missing data and had not described remedial actions, as required. Id.
In 2023, the parties renewed their motion for the same proposed decree. Id. at *3. The district court again denied the motion in 2024, concluding the settlement was not “fair and reasonable” and not in the public interest. Id. The court reasoned that without mandated referral-hall data and evidence of remedial efforts, it could not conclude the decree would resolve the core discrimination allegations, and that approval could signal that other litigants may ignore court-ordered recordkeeping without consequence. Id.
The EEOC appealed, arguing that the district court abused its discretion in finding the proposed consent decree was not fair and reasonable and was not in the public’s interest. Id.
The Second Circuit’s Ruling
The Second Circuit ultimately affirmed the district court’s denial of the proposed consent decree, finding the district court did not abuse its discretion in concluding that the decree failed the “fair and reasonable” standard. Id. at *1. The Second Circuit applied the Citigroup framework, which requires a proposed consent decree to be both “fair and reasonable” and not disserve the public interest. Id. at *4 (quoting Citigroup, 752 F.3d at 294). According to the Second Circuit, to determine whether a proposed settlement is “fair and reasonable,” a district court considers four factors, including: “(1) the basic legality of the decree; (2) whether the terms of the decree, including its enforcement mechanism, are clear; (3) whether the consent decree reflects a resolution of the actual claims in the complaint; and (4) whether the consent decree is tainted by improper collusion or corruption of some kind.” Id. (quoting Citigroup, 752 F.3d at 294–95).
The Second Circuit held that the district court did not abuse its discretion in concluding that the proposed decree failed the third factor – whether the consent decree reflects a resolution of the original claims. Id. Specifically, Local 580’s persistent failure to comply with court-ordered recordkeeping requirements left critical gaps in the data about referral-hall operations, rendering the economist’s conclusion of race-neutral operations of “limited utility.” Id. The Second Circuit noted that, given a history of over fifty-five-years and multiple contempt orders, the district court reasonably required a more extensive factual record to evaluate whether the proposed settlement addressed the 1971 complaint’s core allegations. Id.
Regarding the public interest analysis, the Second Circuit found that the district court’s first rationale, that entering a favorable judgment despite Local 580’s disregard for recordkeeping mandates could signal to future litigants that court orders may be ignored without consequence, was a permissible public interest consideration independent of agency policy. Id. at *5. However, the Second Circuit noted that the district court’s second rationale, declining to defer to the EEOC’s public interest determination based on the agency’s shifting policy priorities—was likely an error under the Citigroup standard, which instructs courts not to reject settlements based solely on disagreement with agency policy decisions. Id. Ultimately, because the proposed decree still failed the “fair and reasonable” requirement, the Second Circuit affirmed the district court’s denial without needing to reverse on the public interest issue. Id.
Implications For Employers
This decision signals that, in long-running cases – particularly those with a history of noncompliance – district courts may demand more extensive factual showings before approving proposed consent decrees, even when the parties reach an agreement and even when an enforcement agency also supports settlement. Moreover, this decision underscores the importance for employers to ensure strict compliance with all court-ordered recordkeeping requirements, as courts may refuse to approve favorable settlements where mandated records are missing or incomplete, despite the parties’ agreement.
By Gerald L. Maatman, Jr., Rebecca S. Bjork, and Anna Sheridan
Duane Morris Takeaways: On February 9, 2026, in Oliver, et al. v. Navy Federal Credit Union, Case No. 24-1656 (4th Cir. Feb. 9, 2026), the Fourth Circuit issued a 2-1 ruling partially affirming a district court’s order striking class allegations from a complaint alleging racial discrimination in mortgage lending before any discovery had occurred. In addition to the parties’ briefs, the Fourth Circuit received briefs from four amici supporting the defendant, indicating substantial interest in the outcome of the appeal. Navy Federal Credit Union prevailed in the district court on its motion to strike the class allegations from the complaint pled under Rule 23(b)(2) and Rule 23(b)(3). On appeal, the Fourth Circuit reversed the decision striking the Rule 23(b)(2) allegations because it found that the district court acted prematurely, given the legal standards governing when courts are authorized to do so (which it helpfully clarified). However, under those same legal standards, the majority concluded that the district court properly struck the plaintiffs’ Rule 23(b)(3) allegations. The dissenting judge concurred with the decision to affirm striking the Rule 23(b)(3) allegations but would also have affirmed the ruling striking the Rule 23(b)(2) allegations.
The decision is a helpful illustration of how defendants facing class action litigation can use the mechanism of Rule 23(c)(1)(A) to eliminate class-wide exposure early in the process, along with the limitations of such an approach.
Case Background
Laquita Oliver and nine other named plaintiffs, who all are either Black or Latino, brought a putative class action against Navy Federal Credit Union in 2023 alleging that the lender systematically discriminates against minority mortgage loan applicants based on their race. Slip op. at 3. Plaintiffs allege that the lender uses a “semi-automated underwriting process” and a single form for collecting information from every applicant that includes information that can be proxies for race, resulting in unlawful intentional and disparate impact discrimination. Id. at 4, 15-16. They sought class-wide relief for “all minority residential loan applicants from 2018 through the present” whose loans were denied, issued with less favorable terms, or processed more slowly than non-minority applicants. Id. at 4. Plaintiffs sought certification of a class to provide injunctive and declaratory relief generally applicable to the class as a whole under Rule 23(b)(2), and also certification under Rule 23(b)(3) – allowing class treatment where common issues predominate over individualized issues. Id. at 16.
The defendant filed a motion to dismiss under Rule 12(b)(6) and a motion to strike the class allegations in the complaint under Rule 12(f) and Rule 23(d)(1)(D). Id. at 5. It argued the case could not proceed as a class action due to myriad differences between the loan products they offer, and because the plaintiffs “failed to explain how an undefined underwriting process could produce discriminatory effects for class members who applied for different [loan] products.” Id. The district court denied the motion to dismiss but granted to motion to strike the class allegations, and the Plaintiffs appealed to the Fourth Circuit. Id. at 5.
The Fourth Circuit’s Decision
A divided panel of the Fourth Circuit affirmed the district court’s decision striking the Rule 23(b)(3) class allegations from Plaintiffs’ complaint before any discovery had occurred but reversed the decision to strike the class allegations seeking injunctive and declaratory relief under Rule 23(b)(2). The dissenting judge would have affirmed the district court’s decision in full.
As a threshold matter, which this blog’s more wonkish readers will appreciate, the Court of Appeals took the time to sort through a procedural miasma present in Rule 23 litigation relating to motions to strike class allegations. Navy Federal Credit Union, like many other defendants before them, had moved to strike under Rule 12(f) – which allows courts to strike material from complaints that they deem to be “redundant, immaterial, impertinent or scandalous” (id. at 7) – along with Rule 23(d)(1)(D), which allows them to order that a party amend their pleadings to remove class allegations. Id. at 8. The Fourth Circuit determined that those rules, as a logical and practical matter, cannot form the basis for a district court to issue an order striking class allegations, but instead, Rule 23(c)(1)(A) does. Id. at 6, 9. That rule requires district courts to decide class certification issues at “an early practicable time.” Fed. R. Civ. P. 23(c)(1)(A). Because a decision to strike class allegations necessarily implies that those allegations cannot possibly form the basis for a decision on class certification, the Fourth Circuit concluded that Rule 23(c), which is entirely concerned with the class certification process, is the proper procedural vehicle. Id. at 6-9. Even though Navy Federal Credit Union did not raise that rule as its procedural mechanism for seeking to strike the class allegations, the Court of Appeals decided it would do so sua sponte in affirming the order striking the Rule 23(b)(3) class. Id. at 9, n.1.
Then, the majority explained how district courts should analyze allegations in class action complaints when defendants move to strike them to determine whether the time is right to do so. In other words, such motions may not be granted prematurely, and district courts within the Fourth Circuit must now do so by looking to the face of the complaint. Applying the 1978 precedent established in Goodman v. Schlesinger, 584 F.2d 1325 (4th Cir. 1978), it decided that if the class claims fail as a matter of law, district courts may strike them before any discovery has occurred. Id. at 6. However, district courts commit legal error if they grant such motions where the dispute cannot readily be resolved by looking at the complaint alone. Id. at 11-12. The majority concluded that just as a district court may never grant class certification based solely on the face of the complaint, a court may deny class certification at that preliminary stage only if the class allegations do not satisfy Rule 23’s class certification requirements as a matter of law. Id. at 13.
Finally, the majority examined whether the district court erred when it granted Navy Federal Credit Union’s motion to strike both class claims before discovery occurred. It decided that the district court exceeded its discretion when it struck the Rule 23(b)(2) class claim, but it was not error to strike the Rule 23(b)(3) class claim. Id. at 14. The majority noted that while it was not entirely clear based on the record before why the district court ruled the way it did on the defendant’s motion, the language used indicated a concern from the district court judge about the manageability of the Rule 23(b)(3) class claims and whether a class action would be a superior method for trying such claims, given the material variations in the types of mortgage products applied for and their various requirements. Id. at 14-15. Thus, the plaintiffs’ factual allegations could not be tried on a class-wide basis consistent with Rule 23. But the allegations relating to the Rule 23(b)(2) injunctive relief class was different, the majority concluded. The allegations underlying that class claim are far more cohesive and centralized than the others, making it error for the district court to strike those allegations under Rule 23. Id. at 16-18.
Implications For Class Action Defendants
When companies are sued in class actions, it is crucial for them to have corporate counsel that understand not only the stakes and extreme exposure risk such lawsuits present, but also the nuances and often-changing jurisprudence governing Rule 23. Motions to strike class allegations are a very powerful tool for such companies to use, and the Fourth Circuit’s decision is a welcome clarification of how to think deliberately and critically about the prospects for such motion practice to succeed. The key is to understand the relationship between the specific facts alleged in such complaints and the requirements of Rule 23, in all of its nuances.
Duane Morris Takeaway:This week’s episode features Duane Morris partners Jerry Maatman, Jennifer Riley, and Daniel Spencer with their discussion of the key trends and developments analyzed in the new edition of the EEOC And Government Enforcement Litigation Review – 2026.
Jerry Maatman: Thank you for being here, loyal blog readers and listeners, for the next episode of our regular podcast series, The Class Action Weekly Wire. My name is Jerry Maatman, and I’m a partner at Duane Morris, and joining me today are my colleagues and fellow partners, Jen Riley and Daniel Spencer. Welcome.
Jennifer: Great to be here, Jerry. Thanks for having me.
Daniel: Yeah, thanks, Jerry.
Jerry: Today, we’re here to announce our publication of the 2026 edition of Duane Morris’ EEOC And Government Enforcement Litigation Review. The review is available on our blogsite as an e-book and is a must-read for employers.
Jennifer: Absolutely, Jerry. Government enforcement litigation continues to look more and more like class action litigation in terms of both its exposure and its complexity. When you’re dealing with lawsuits brought by agencies like the EEOC or the Department of Labor, you’re often looking at significant risk, a large number of claimants, and serious reputational concerns for the companies involved.
Daniel: And one of the key points that we emphasize in the Review is that while these cases resemble class actions, they don’t actually operate the same way procedurally. In private class actions, plaintiffs have to jump through a bunch of hoops, like Rule 23, to get through class certification. That’s not the case with government enforcement and litigation.
Jerry: Exactly. A great example is what are known as EEOC systemic pattern or practice lawsuits, where there’s no class certification requirement, and the practical impact of the case, however, is just like a class action in terms of the amount of money necessary to defend it, the amount of management time that has to be allocated to the defense of the case, and the need to defend against widespread company-wide allegations of alleged discriminatory behavior. It’s certainly a high-stakes sort of lawsuit.
Jennifer: And that’s why employers cannot afford to underestimate these cases. Even without Rule 23, EEOC systemic lawsuits raise many of the same strategic and litigation challenges as private class actions raise. And those agencies are aggressive – the EEOC and the DOL, they continue to be two of the most active federal enforcement bodies.
Daniel: Yeah, Jen, and the numbers from 2025 really drive that point home. In fact, the top 10 EEOC enforcement action settlements and verdicts totaled $41.43 million, which is a notable increase from $25.95 million in 2024. The trend tells us that enforcement activity is not slowing down.
Jerry: I think it’s pertinent to note that the Department of Labor numbers are even more eye-popping from the perspective of corporate decision makers. In 2025, the top 10 settlements in the DOL space totaled $3.29 billion. That was up, quite a bit from 2024, when it was $335 million. So, you can see how dramatic the increase has been with the Department of Labor on its radar screen, looking for employers engaged in what it calls as alleged wage theft against workers.
Jennifer: Those DOL cases covered a range of issues, also Fair Labor Standards Act claims, as well as litigation involving consent decrees and injunctions. The rulings we analyzed in the review show how broad and potentially impactful the DOL enforcement actions can be.
Daniel: And that’s why this Review is so important for companies across the country. It looks at the legal issues that are being litigated, the enforcement strategies these agencies are using, and identifies and understands those critical trends for companies trying to stay ahead of the risk.
Jerry: Well, that’s well said, Jen and Daniel. And for anyone who wants to dig deeper, the full Review is available in e-book format on the Duane Morris Class Action Defense Blog. And we’ll be continuing to cover legal developments and rulings in the EEOC and the DOL space over the remainder of 2026, so stay tuned to the Class Action Weekly Wire.
Jennifer: Thanks for having me on the podcast, Jerry, and thanks to our listeners for being here. As always, subscribe to stay updated on the latest trends in class action law.
Daniel: Glad to be a part of the podcast, and thanks very much to all the listeners. Be sure to download your copy of the Review today.
Duane Morris Takeaway: The final trend in our DMCAR series outlines how the California Private Attorneys General Act (PAGA) inspired more representative lawsuits than any other statute in America over the past three years. According to the California Department of Industrial Relations, the number of PAGA notices filed in 2025 approached 9,900, which surpasses the 9,464 PAGA notices in 2024.
DMCAR co-editor Jennifer Riley outlines this trend in the following video:
The so-called PAGA reform legislation passed in 2024 by California lawmakers seemingly did little to nothing to curb interest in these cases.
The PAGA created a scheme to “deputize” private citizens to sue their employers for penalties associated with violations of the California Labor Code on behalf of other “aggrieved employees,” as well as the State. A PAGA plaintiff may pursue claims on a representative basis, i.e., on behalf of other allegedly aggrieved employees, but need not satisfy the class action requirements of Rule 23.
Thus, the PAGA provides the plaintiffs’ class action bar a mechanism to harness the risk and leverage of a representative proceeding without the threat of removal to federal court under the CAFA and without the burden of meeting the requirements for class certification.
The PAGA’s popularity in recent years, however, also flows from its status as one of the most viable workarounds to workplace arbitration agreements. Thus, it presents one of the most pervasive litigation risks to companies doing business in California.
The Growth Of PAGA Notices Continues
According to data maintained by the California Department of Industrial Relations, the number of PAGA notices filed with the LWDA has increased exponentially over the past two decades.
The number grew from 11 notices in 2006, to 1,606 in 2013, and then underwent three sizable jumps – to 4,530 in 2014, to 5,732 in 2018, and to 7,464 in 2023, each coinciding with a significant shift in the legal landscape regarding arbitration. In 2024, notices exceeded 9,464 for the first time and, in 2025, the number of PAGA notices reached a new all-time high of approximately 9,981.
Employers saw the largest single year increase in 2014, when the number of notices increased from 1,605 in 2013 to 4,532 notices in 2014, an increase of 182%.
The most significant drop in the past two decades occurred in 2022, when notices fell from 6,502 in 2021 to 5,817 in 2022, before their resurgence in 2023 and continued growth in 2024 and 2025. The following chart illustrates this trend.
These numbers closely tie to the shifting impact of workplace arbitration programs, in that each of the major shifts coincides with the timing of a significant expansion or pull back in the law governing the enforcement of arbitration agreements.
PAGA reform seemingly has had little to no impact on the growth on PAGA filings. On June 18, 2024, Governor Newsom announced that labor and business groups had inked a deal to alter the PAGA in return for removing the referendum to repeal the PAGA from the November 2024 ballot. The California Legislature quickly moved to approve two bills (AB 2288 and Senate Bill 92). The alterations included reforms to the penalty structure, new defenses for employers, changes to the PAGA’s standing requirements, and a new “cure” process for both small and large employers, among other changes. These reforms affect all PAGA notices filed on or after June 19, 2024, with some exceptions. As noted above, however, PAGA reform did little to quell PAGA filings.
Could PAGA Activity Skyrocket?
As noted above, the PAGA emerged as one of the most popular tools of the plaintiffs’ class action bar in recent years due to its potential immunity from workplace arbitration agreements. The California Supreme Court is poised to consider the viability of so-called “headless” PAGA actions in 2026 – i.e., actions that lack or disclaim any individual PAGA claim (often because the plaintiff signed an arbitration agreement covering such claim) and seek to pursue only the representative PAGA component on behalf of other allegedly aggrieved employees.
The growing adoption of arbitration programs led the plaintiffs’ class action bar to identify various workarounds, and the PAGA emerged as one of the most viable in 2016 when the California Supreme Court issued its decision in Iskanian v. CLS Transportation Los Angeles, 59 Cal.4th 348 (Cal. 2014). In that case, the California Supreme Court held that representative action waivers in arbitration agreements are “contrary to public policy and unenforceable as a matter of state law.” Id. at 384. In so holding, Iskanian essentially immunized PAGA claims from arbitration and permitted plaintiffs to pursue representative actions under PAGA unhindered by arbitration agreements or commitments to arbitrate on an individual basis. The decision undoubtedly fueled the filing of PAGA notices in 2014, which catapulted from 1,606 in 2013 to 4,530 in 2014.
The PAGA suffered its first setback as an arbitration work-around in 2022 with the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022). In Viking River, the U.S. Supreme Court held that, to the extent Iskanian precludes division of PAGA actions into individual and non-individual claims, and thereby “prohibit[s] parties from contracting around this joinder device,” the FAA preempts such rule. Id. As a result, the U.S. Supreme Court held that the lower court should have compelled arbitration of the plaintiff’s individual PAGA claim and should have dismissed the PAGA representative claim. Id.
The set-back was short lived as, in 2023, the California Supreme Court minimized the impact of the Viking River decision. In Adolph v. Uber Technologies, Inc., 14 Cal. 5th 1104 (Cal. 2023), the California Supreme Court took up the issue of whether, under California law, a PAGA plaintiff who’s individual PAGA claim is compelled to arbitration retains standing to bring a representative PAGA claim. The California Supreme Court answered the question in the affirmative. It held that, once a PAGA plaintiff is compelled to arbitrate his or her individual PAGA claim, so long as he or she is found to be an “aggrieved employee,” the plaintiff retains standing to maintain a non-individual PAGA claim in court. Id. at 1105.
By deciding that an individual who signs an arbitration agreement can return to court after arbitration to pursue a representative proceeding under the PAGA, the California Supreme Court relegated arbitration agreements to a mere hurdle rather than a bar to PAGA representative actions. Still, the plaintiffs’ bar has continued its attempt to eliminate the arbitration defense altogether to streamline their ability to proceed with representative actions in court. One emerging tool is the so-called “headless” PAGA action.
While such a tool seemingly runs counter to the ruling in Adolph and other cases, which have held that a PAGA claim necessarily consists of both and individual and representative portions, the California Court of Appeal gave it life in April 2024 with its decision in Balderas v. Fresh Start Harvesting, 101 Cal. App. 5th 533 (2024). In that opinion, the California Court of Appeal denied a motion to compel arbitration, holding that a plaintiff could maintain a representative PAGA action, even without an individual PAGA claim, so long as the plaintiff alleges that he or she suffered a Labor Code violation.
Appellate courts have taken different views as to this strategy over the past year. On July 7, 2025, for instance, in CRST Expedited, Inc. v. Superior Court Of Fresno County, 112 Cal. App. 5th 872 (Cal. App. 2025), the Court of Appeal for the Fifth District concluded that a worker’s dismissal of his individual PAGA claim did not bar him from pursuing a representative PAGA claim. The trial court granted the worker’s unopposed motion to dismiss his individual PAGA claim, and the defendant then sought dismissal of the non-individual PAGA claim on the ground that the plaintiff lacked standing to proceed. The trial court denied the motion. On appeal, the Court of Appeal concluded that the PAGA statute is ambiguous on this point and, faced with an ambiguous statute, opined that the primary objective of the PAGA statute is to maximize enforcement of labor laws and deter employer violations. As such, it held that requiring arbitration of individual claims before pursuing non-individual claims would undermine those enforcement efforts and that, to achieve effective enforcement, the PAGA statute should be interpreted to allow “PAGA plaintiffs and their counsel the flexibility to choose among bringing a PAGA action that seeks to recover of civil penalties on (1) the LWDA’s individual PAGA claims, (2) the LWDA’s non-individual PAGA claims, or (3) both.” Id. at 917.
In Williams, et al. v. Alacrity Solutions Group, LLC, 2025 Cal. LEXIS 4161 (Cal. App. July 9, 2025), the Court of Appeal for the Second District reached the opposite conclusion. The plaintiff, a former insurance adjuster, filed an action alleging that the defendant failed to pay overtime compensation. Although the plaintiff separated from his employment in January 2022, the plaintiff waited until March 2023 to file a PAGA notice with the LWDA. The plaintiff thereafter filed suit solely on behalf of other current and former employees and did not seek penalties on his own behalf. The trial court dismissed the plaintiff’s action holding that, because the plaintiff filed his PAGA notice more than a year after his employment ended, his individual claim was time-barred and, without a timely individual claim, he could not maintain a PAGA representative claim. The Court of Appeal affirmed the trial court’s ruling. It explained that a PAGA plaintiff must have a timely claim for violations he or she personally suffered. The plaintiff filed a petition for review with the California Supreme Court, and the California Supreme Court granted and deferred the appeal pending consideration and disposition of related issues in Leeper, et al. v. Shipt, 331 Cal. Rptr. 3d 450 (Cal. 2025)
In Leeper, the Court of Appeal for the Second District reached a similar conclusion. The plaintiff, a former Shipt worker, alleged that Shipt misclassified her and others as independent contractors in violation of state wage & hour laws. The trial court denied the defendant’s motion to compel arbitration ruling that, because the plaintiff sought only non-individual civil penalties, there were no individual claims to arbitrate. On appeal, the Court of Appeal reversed. It reasoned that every PAGA action inherently includes an individual claim, alongside the representative claim. The Court of Appeal opined that the statutory language of the PAGA states that a PAGA action is one brought both on behalf of the plaintiff (the individual claim) and on behalf of others (the representative claim). On request for review, the California Supreme Court agreed to review the Court of Appeal’s order and to address the following questions: (i) Does every PAGA necessarily include both individual and non-individual PAGA claims, regardless of whether the complaint specifically alleges individual claims; and (ii) can a plaintiff choose to bring only a non-individual PAGA action?
If the California Supreme Court sides with the plaintiffs on these issues and allows plaintiffs to maintain “headless” or representative-only PAGA claims, it will allow plaintiffs with arbitration agreements to bypass arbitration and to avoid the risk that they might not succeed on their individual PAGA claims. If plaintiffs can avoid arbitration altogether, such a ruling surely would bolster PAGA’s popularity as an arbitration work-around. Either way, given the technical requirements of California wage & hour law, coupled with the potentially crushing statutory penalties available to successful plaintiffs, employers should anticipate continued growth of PAGA lawsuits in 2026.
