Anti-Aging Claims Can Be a Legal Risk as Highlighted by L’Oreal Case

Duane Morris Takeaways: In Lopez, et al. v. L’Oréal USA Inc., Case No. No. 21 Civ. 7300 (S.D.N.Y. Sept. 27, 2022), Judge Andrew Carter of the U.S. District Court for the Southern District of New York denied L’Oréal’s motion to dismiss putative class claims that it misled consumers regarding nature of the collagen ingredients and their effects in its products. Companies should heed this ruling as a cautionary tale for the potential for liability when making anti-aging claims that can be misconstrued by consumers as overbroad.

It is a truth universally acknowledged that a woman over 30 must be in want of an eye cream. Or a serum. Or anything, really, so long as it recreates the appearance of youth, vitality or an actual night’s sleep.

The global market for anti-aging cosmetics is expected to reach $93.1 billion by 2027. But as illustrated by a recent decision from the U.S. District Court for the Southern District of New York, Lopez v. L’Oréal USA Inc., promises that a product can turn back time by “restoring skin” or “promot[ing] cell regeneration” can prove costly for brands looking to capitalize on this growing market.

Brands should be mindful of litigation and regulatory risk when making certain anti-aging claims.

To read the full text of this article by Duane Morris associate Kelly Bonner, which was originally published in Law360, please visit the firm website.

The 2022-2023 Judicial Hellholes Report From The American Tort Reform Association On The Worst Jurisdictions For Defendants

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

Duane Morris Takeaways: Every year the American Tort Reform Association (“ATRA”) publishes its “Judicial Hellholes Report,” focusing on litigation issues and identifying jurisdictions likely to have unfair and biased administration of justice. The ATRA recently published its 2022-2023 Report and Georgia is identified as the most disadvantageous jurisdiction in the country for corporate defendants, the highest ever ranking for the state. Readers can find a copy here and the executive summary here.

The Judicial Hellholes Report is an important read for corporate counsel facing class action litigation because it identifies jurisdictions that are generally unfavorable to defendants. The Report defines a “judicial hellhole” as a jurisdiction where judges in civil cases systematically apply laws and procedures in an unfair and unbalanced manner, generally to the disadvantage of defendants. The Report is a “must read” for anyone litigating class actions and making decisions about venue strategy.

The 2022 Hellholes

In its recently released annual report, the ATRA identified 8 jurisdictions on its 2022 hellholes list – which, in order, include: (1) Georgia (with massive verdicts bogging down business and third-party litigation financing is playing an increasing role in litigation); (2) Pennsylvania (especially in the Philadelphia Court of Common Pleas and the Supreme Court of Pennsylvania); (3) California (with Proposition 65 lawsuits thriving and a huge overall volume of lawsuits, in addition to Private Attorney General Act (PAGA) litigation and Americans with Disability Act (ADA) accessibility lawsuits; (4) New York (with “no-injury” consumer class action lawsuits and the highest volume of lawsuits under the ADA); (5) Illinois (particularly in Cook County as another “no-injury required” hotspot and lawsuits stemming from the Illinois Biometric Information Privacy Act); (6) South Carolina (particularly in asbestos litigation); (7) Louisiana (including deceptive lawsuit advertising practices, coastal litigation, and COVID-19 litigation); and (8) St. Louis, Missouri (with focuses on asbestos litigation and “phantom damages”).

According to the ATRA’s analysis, these venues are less than optimal for corporate defendants and often attract plaintiffs’ attorneys, particularly for the filing of class action lawsuits. Therefore, corporate counsel should take particular care if they encounter a class action lawsuit filed in one of these venues.

The 2023 “Watch List”

The ATRA also included 3 jurisdictions on its “watch list,” including Florida (the ATRA noted that Florida has been making strides to mitigate lawsuit abuse, but issues of inflated medical damages and deceptive trial lawyer advertising still remain); New Jersey (with a powerful trial bar), and Texas (particularly the Court of Appeals for the Fifth District, which the ATRA opined has developed a reputation for being pro-plaintiff and pro-liability expansion).

In addition, the ATRA recognized that several jurisdictions made significant positive improvements this year, highlighting decisions issued by Florida Supreme Court, the U.S. Court of Appeals for the Fourth Circuit, and the Arizona Supreme Court. The ATRA also noted that nine state legislatures enacted positive civil justice reforms this year.

 Implications For Employers

The Judicial Hellholes Report often mirrors the experience of companies in high-stakes class actions, as Georgia, California, New York, Pennsylvania, Illinois, Louisiana, Missouri, and South Carolina are among the leading states where plaintiffs’ lawyers file class actions. These jurisdictions are linked by class certification standards that are more plaintiff-friendly and more generous damages recovery possibilities under state laws.

California Attorney General Utilizes Novel Nuisance Theory From Opioid Litigation Against Manufacturers Of “Forever” Chemicals In New Government Enforcement Action

By Sharon L. Caffrey and Gerald L. Maatman, Jr.

Duane Morris SynopsisThe Attorney General of California has filed a first of its kind lawsuit against several named manufacturers and “John Doe” manufacturers of per- and polyfluoroalkyl substances (commonly known as PFAS and PFOA) based upon the same public nuisance theory used by several attorneys general and local governments against opioid manufacturers, distributors, and pharmacies in nationwide class action litigation.  Claiming that defendants knew PFAS, PFOA, and related chemicals were harmful but put the chemicals into the market and into the environment with insufficient testing, and claiming the PFAS can be found in the bloodstreams of virtually every Californian, the Attorney General is seeking both equitable and financial relief, including an injunction against further sales of products containing PFAS and PFOA, remediation, and monetary damages.  The lawsuit is a blockbuster of ambitious claims, and given the ubiquitous nature of PFAS and PFOA, this case is one of potential concern for any manufacturer whose products or processes may result in the ingestion or release of PFAS and PFOA.

Case Background

On behalf of the People of California, the California Attorney General is seeking remediation and damages of soil and groundwater allegedly contaminated with PFAS and PFOA.  PFAS and PFOA are sometimes referred to as “forever chemicals” because of their bio-durability in soil, groundwater, and in the human body.  In a nod to the playbook of successful class actions against another industry, the Attorney General’s action relies on the same public nuisance theory used in the opioid litigation, as well as traditional product liability failure to warn theories of liability.

PFAS and PFOA are found in a “wide array of products and industrial processes,” including products as common as food packaging, carpet and fabric coatings and cleaning products.  The claim centers on the release of PFAs and PFOA into drinking water sources, including bays, lakes and streams.  Claiming exposure to PFAS and PFOA contributes to certain cancers, adverse pregnancy outcomes, delayed puberty, and infertility, among other harms, the Attorney General’s suit notes that PFAS and PFOA are ingested orally and persist in the body because they are not readily broken down.

In support of his claims, the Attorney General relies primarily on toxicology studies and some in vitro studies, as well as very limited human epidemiologic evidence that PFAS and PFOA are associated with certain adverse health outcomes.  The complaint also notes that the California Office of Environmental Health Hazard Assessment (OEHHA) listed PFOA and PFOS as chemicals known to cause reproductive toxicity under the Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as “Prop 65.”  The Complaint further asserts that the EPA intends to issue enforceable National Primary Drinking Water Regulations (NPDWRs) for drinking water contaminants, to include PFAS and PFOA by the end of 2022.  Because PFAS and PFOA are not readily broken down in soil, water or the human body, they are found in over 97 percent of all Californians’ bloodstreams.  Finally, the Attorney General’s lawsuit claims that defendants put products containing PFAS and PFOA in the stream of commerce without adequate testing or warnings of the harms they could cause, or while being aware of the potential harms and not warning the public.

Implications For Manufacturers

At present California is the only state that has filed a claim against manufacturers who allegedly put PFAS and PFOA into groundwater and soil.  California’s unique Prop 65 is part of the basis for the Attorney General’s claim.  However, if the U.S. Environmental Protection Agency issues enforceable limits on PFAS and PFOA in drinking water, similar suits will inevitably arise in other jurisdictions.  Companies who believe they may be at risk for similar claims should consult with counsel about the best way to mitigate any exposure for such litigation.

California Callout: New 2023 Privacy Regulations Coming Soon

By Gerald L. Maatman, Jr., Jennifer Riley, Brandon Spurlock, and Alex W. Karasik

Duane Morris Synopsis:  On the heels of California’s enactment of the California Consumer Privacy Act (“CCPA”) in 2020, and after two legislative bills that proposed to continue the employer exemption failed, employers will now need to comply with all requirements of the CPRA (“California Privacy Rights Act”) effective January 1, 2023. California-based employers now face these strict privacy requirements in the existing minefield of nuanced employment laws.

Legislative Background

The CCPA is often considered the most stringent data privacy law in the United States.  This landmark law established privacy rights for California consumers, including:  (1) the right to know about the personal information a business collects about them and how it is used and shared; (2) the right to delete personal information collected from them (with some exceptions); (3) the right to opt-out of the sale of their personal information; and (4) the right to non-discrimination for exercising their CCPA rights. (See https://oag.ca.gov/privacy/ccpa.).

Currently, data collected from workers is exempt from all but two provisions of the CCPA: (i) employers must provide an initial disclosure to all employees at or prior to the point of collection, and (ii) employees still have a right to statutory damages in the event of a data breach. “Employees” is a term that casts a wide net. It includes job applicants, business owners, officers, directors, medical staff members, independent contractors, emergency contacts and beneficiaries.

Two separate California state bills sought to continue the employer exemption: (1) AB 2891, for an additional three years; and (2) AB 2871, for an indefinite time period.  Neither bill was passed by the Legislature in its final 2022 session. Accordingly, with the exemption expiring, employers must now fully comply with the former CCPA’s requirements, as the new CPRA comes into effect.

Employer Obligations

First, employees are now afforded various rights, including:  (1) a right to request access to their personal information and information about how automated decision technologies work; (2) a right to correct inaccurate personnel information; (3) the right to request that an employer delete their personal information, including the obligation that employers must also notify third parties to whom they have sold or shared such personal information of the consumer’s request to delete; (4) the right to limit the use and disclosure of sensitive personal information to that which is necessary to perform the services or provide the goods reasonably expected by an average consumer who requests such goods and services.

Notice Obligations

Employers should be mindful of particular notice obligations under the CPRA. These include the: (1) requirement of notice at collection; and (2) requirement of a privacy policy.  Regarding the notice at collection, employers are required to give employees, applicants, and contractors notice at the time they collect the information if they plan to collect, use, or disclose that personal information, while also disclosing the categories of personal information.  The privacy policy is comprehensive and must disclose categories of personal information collected over the 12 months before the policy’s effective date. The policy also must disclose sources from which personal information is collected, the business purpose for the collection, categories of third-parties to whom personal information is disclosed; and categories of personal information sold or shared.  And employers are obligated to post the privacy policy online where it is accessible to employees, applicants, and contractors.

Data Governance

To ensure compliance with the CPRA, it is crucial that employers understand where personal information is located within their businesses. It behooves them to undertake a data inventory or data mapping exercise to assess how and where relevant information is stored and/or transferred.  Employers should also take stock of their records retention policies to ensure compliance, and also develop an internal framework to handle requests from employees for access and/or deletion.

Implications For Employers

Employers who have operations in California should immediately take heed of these new obligations. It is inevitable that the Plaintiff’s bar will be scrutinizing these practices come January 2023.  Accordingly, employers should determine whether they are covered by the CPRA, and prepare privacy policies that are fully compliant.

When Consistency Creates Commonality

By Jonathan A. Segal

Duane Morris Takeaways: Guest blogger Jonathan A. Segal – one of the deans of the employment bar in the United States – offers his ruminations on the challenges that employers face in class action litigation.

I recently attended an employment law webinar.  It got me thinking about employers and the challenge of dealing with workplace class action litigation.

At one point, when discussing how to minimize exposure to discrimination claims, a seminar speaker opined there are three words to keep in mind at all times:  “Consistency, Consistency and Consistency.”

When it comes to performance management, if employers treat employees consistently when the circumstances are the same or substantially similar, they can mitigate exposure to individual discrimination claims.  The consistency ensures that helpful comparators exist, which employers can use to defend an alleged employment discrimination claim. Of course, and as important, the consistency here is critical to a strong workplace culture.

However, consistency is not always desirable.  Huh? Stay with me.

Rule 23 of the Federal Rules of Civil Procedure 23 provides:

  • Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:
    • the class is so numerous that joinder of all members is impracticable;
    • there are questions of law or fact common to the class;
    • the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
    • the representative parties will fairly and adequately protect the interests of the class.

As is evident, consistency may help satisfy the second requirement relative to common issues of fact or law. The U.S. Supreme Court decided that a decade ago in its seminal ruling in Wal-Mart Stores, In. v. Dukes, 564 U.S. 338 (2011).

Arguably – and we certainly see it in the courtroom in the manner of arguments by Plaintiff’s counsel – per se rules that are created to minimize any exposure to discrimination claims may increase the employer’s exposure to class claims because of the commonality they create.   But one example suffices — automatic termination of employees after they have been on leave for a specified period of time.

Ralph Waldo Emerson once said that “Foolish consistency is the hobgoblin of little minds.”  Let me say this with a bit more civility. While consistency often is desirable, there are times when consistency hurts rather than helps.  The key is to know when consistency is desirable and when it is, well, anything but optimal.

Over the next year, I will blog about examples of employment practices/rules that create commonality that have been the basis for class action attacks.  In these blogs, I also will talk about alternative approaches that help mitigate exposure to both individual and class action claims.

Stay tuned!

Massachusetts State Court Rules In Class Action That A Multiple-Choice Promotional Test Discriminated Against Minority Police Officers

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

Duane Morris Takeaways – In Tatum et al. v. Commonwealth of Massachusetts, et al., C.A. No. 0984-CV-00576 (Mass. Sup. Ct. 2022), a Massachusetts state court judge conducted a class trial found that a multiple-choice promotional exam – used for years by various police departments to determine promotions – discriminated against Black and Latino police officers in violation of Massachusetts law.  In analyzing the test format, which largely required “rote memorization,” the court opined that the exam failed to adequately test for the relevant job qualifications, as well as the police departments’ use of a ranking system from which candidates were selected for promotion.  Ultimately, the court held that the test and ranking system adversely impacted minorities and interfered with their ability to promote to sergeant.  The decision demonstrates why employers must be careful to implement policies and processes that do not have a discriminatory impact, even if on their face such policies and practices appear to be neutral.

Case Background

The Commonwealth of Massachusetts’ Human Resource Division (“HRD”), for 50 years, administered a written multiple-choice test to police officers to determine promotion to sergeant.  Id. at 4.  Officers were ranked almost exclusively according to their scores on the written examination, with individuals at the top of the list being first in line for promotion.  In 2007, certain police officers that were subject to the written examination sued the Commonwealth of Massachusetts, and the municipalities in which they worked as police officers. They alleged that the testing process unfairly discriminated against them due to their race and national origin in violation of state and federal law.  Id. at 2.   The U.S. Court of Appeal for the First Circuit, in an interlocutory appeal, held that state defendants did not qualify as “employers” under Title VII and were entitled to sovereign immunity, thereby resulting in the dismissal of state law claims against the state defendants, which the plaintiffs subsequently re-filed in state court.  Id.  Though the Massachusetts state court initially dismissed the entire action based on the First Circuit decision, the Massachusetts Supreme Judicial Court remanded several claims, rejected the defense of sovereign immunity, and held that the plaintiffs could be entitled to relief under Massachusetts law prohibiting discrimination.  Id. at 3.  The state trial court subsequently certified a class of current and former police officers that took the written examination administered by HRD in certain years between 2005 and 2012.  Id.

Ultimately, the plaintiffs lost their federal court case after a bench trial, with the federal court finding that the tests had a disparate impact on minorities but that plaintiffs failed to prove that Boston refused to adopt an alternative test with less disparate impact.  Id.  Though the defendants in the state court case tried to dismiss the entire state court action based on the federal court’s decision, the Massachusetts Appeals Court held that defendants did not show issue preclusion and it authorized the case for trial.  Id. at 3-4.  The state trial court conducted a two-week bench trial in June and July of 2022 limited to the issue of class-wide liability.  Id. at 1.

The State Court’s Findings Of Fact And Conclusions Of Law

The state court found a “massive amount of evidence proving the known and unjustified disparate impact” of HRD’s testing format.  Id. at 1. Turning first to the format of the test, the court noted that exam questions “largely test for rote memorization of facts and passages taken directly from textbooks that candidates are asked to study,” and studies commissioned by the HRD over the years to measure the test’s efficacy “did not identify test-taking skills and lack of test-related anxiety as job related.”    Id. at 8.  The multiple choice portion of the test accounted for 80% of a candidate’s score, with 20% coming from an “Education and Experience” form that each candidate would complete.  Id.  The court explained that the allocated percentages had no discernible basis, and further disparaged the Education and Experience portion since every officer received 14 of the 20 available points simply for being able to sit for the exam.  Id. at 8, 28.  Though HRD worked with consultants and subject matter experts to identify the knowledge, skills, and abilities (“KSAs”) important to the job of sergeant, the court noted that the multiple choice questions could only test for 22% to 40% of the relevant KSAs and “did not in fact test for some skills that could have been tested” due to the types of multiple choice questions asked.  Id. at 13-15.  Rather than focusing on abstract knowledge and memorization of academic textbooks, the court reasoned that questions testing situational judgment, for example, should have been used but were not.  Id. at 19.

Given the format of the multiple-choice exam and the types of questions asked, the court observed that a racial disparity existed based on test-taking ability, and not on job qualifications.  Noting that “[t]est taking skills are built through practice,” the court adopted the opinions of expert witnesses who testified that “minorities, in general, have had fewer opportunities to participate in our educational system” and differences in average test scores of minorities on tests of cognitive abilities “is due to socioeconomic differences, lack of access to opportunity, and structural racism that exists within the system.”  Id. at 26.  Ultimately, the court found that “[b]ecause HRD failed to test many important KSAs, measured test-taking skills and memorization, enabled test-related anxiety to affect results and failed to ask questions that focused upon measuring job-related knowledge, its format did not rank candidates for promotional purposes on a basis that was substantially job related.”  Id. at 14.

The court also noted that HRD had knowledge of the shortcomings and adverse impact of its tests before and during their use.  A 1987 job analysis conducted by a consulting firm recommended that a written test “did not assess many of the attributes needed for the job” and “should account for no more than 40% of the overall score.”  Id. at 16.  In addition, a study conducted for the Boston Police Department in 2000 advised HRD that an examination should include non-written components, such as an assessment center and performance review system.  Id. at 17.  The failure to include a performance based assessment technique, the court explained, “injects extraneous influences (such as test-taking ability and temporary memorization skills) into the selection process.”  Id.  Analysis of the rate of minorities’ promotion to sergeant showed that minorities were promoted at a drastically lower rate than non-minority officers.  Id. at 17-19.

The court further determined that Defendants failed to adopt alternatives that would have minimized or eliminated the adverse impact of the tests on minority test-takers.  The tests could have contained fewer questions, reducing the “large cognitive loads” and memorization required, in order to reduce the adverse impact.  Id. at 45.  Rather than using questions that require “rote memorization,” HRD could have used questions that tested situational judgment and were written in plain language instead of “convoluted phrases.”  Id.  Most notably, banding, in which scores within a range are treated as equal, would have reduced adverse impact because there was no evidence that a police officer that scored one point higher than another was more qualified or would make a better sergeant.  Id. at 45-46.  Further, HRD adopted 11-point bands in 2009 at the recommendation of a consultant.  Id.  Finally, the use of other testing methods, such as oral assessments and performance reviews, to assess nonwritten skills “such as leadership, conscientiousness, calmness under pressure, decision-making, interpersonal skills, and oral communication” would have reduced the adverse impact of the tests.  Id. at 47.

As a result of the myriad shortcomings of HRD’s written tests, the Court described at length the statistically significant adverse impact of the tests on minority test-takers across all years as compared to white test-takers in the form of lower passing rates, lower overall scores, lower rate of promotion of minority police officers, and increased delay in promotion of minority police officers.  Id. at 34-42.  Given the adverse impact on scoring and the use of a rank-order list to determine promotions, the court found an adverse impact on the ability and timeliness of minority police officers to achieve promotion to sergeant.  Id. at 57.  The multiple-choice format of the exam and the ranking of candidates were not job-related, the court also held, given the invalidity of the exam and ranking process.  Id. at 61-63.  Based upon its factual findings, the court held that “[o]verwhelmingly persuasive evidence proves that HRD interfered with the class members’ rights to consideration for promotion to police sergeant without regard to race or national origin.”  Id. at 75.

Implications for Employers

The Tatum decision illustrates why employers with criteria for promotion must be cognizant of how such testing systems may adversely impact classes of individuals in violation of state and federal law.  While the testing system used in this case appeared neutral, in practice the test and ranking system resulted in less promotions and increased delay in promotions for minorities.  This case demonstrates the potential for costly and years-long class action lawsuits stemming from employer policies and practices in determining promotions.  Given these risks, it behooves employers to ensure that neutral policies and practices do not adversely impact groups of individuals.

Consumer Fraud Class Actions On The Rise In The Cannabis Industry – With More To Come With Interstate Sales

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

Duane Morris Takeaways: Cannabis products – such as vapes, pre-rolled joints, tinctures, gummies, and beverages – are consumer packaged goods that are required under state law to be marketed with packaging and labeling that demonstrates their safety to consumers. Although the U.S. state-licensed cannabis industry has been one of the fastest-growing industries in the U.S. over the past decade, consumer fraud lawsuits arising out of alleged packaging and labeling problems, which are a common risk for CPG manufacturers in other industries, have, until now, not been a major consideration for the cannabis supply chain.  However, that is changing. As three recent lawsuits suggest, consumer fraud class actions may be on the rise in the industry. Given the media attention cases like these attract, and the potential for damages for thousands or millions of potential consumers, the cannabis supply chain should take notice. As discussed below, this is going to be especially true once cannabis products are permitted to be sold interstate.

Key Cases

In Centeno et al. v. DreamFields Brands Inc., and Med for America, Inc., a consumer class action filed on October 20, 2022, in the Superior Court of California for Los Angeles County, two putative class representatives filed a putative class action against the manufacturers of Jeeter-branded pre-roll joints on behalf of “all persons who, while in the State of California and within the applicable statute of limitations period, purchased or more Jeeter Products.”  The complaint alleges that the putative class representatives purchased a variety of Jeeter-branded pre-rolled joints based on the high THC potencies stated on the labeling of such products, but those products were actually lower in THC than stated on the labeling. Given that products with greater THC potency are priced higher than products with lower THC, the putative class representatives claim they paid a premium they would not have paid had they known the true THC potency of the Jeeter products they purchased, and thus they suffered an economic loss for which they should be made whole. Their complaint alleges that “millions of other consumers” bought Jeeter pre-rolled joints and suffered the same economic loss. As the Complaint asserts:

If Defendants told the truth — that is, that its products’ THC content is substantially lower than represented on the label — the price of its Products would fall dramatically. If  consumers knew the truth — that the Products contain substantially less THC than the label says —  Defendants could not sell their Products for its current prices. Indeed, as explained above, cannabis products with lower declared amounts of THC content sell for substantially less than ones with higher declared amounts of THC content. Accordingly, if Defendants told the truth about the THC content of their products, they would have had to lower the price, and Plaintiffs and class members would have paid less.

In addition to seeking for themselves and the class of “millions of consumers” damages for the amounts overpaid for the Jeeter-branded pre-rolls, the putative class representatives also seek punitive damages, attorneys’ fees, and injunctive relief to stop the allegedly fraudulent labeling under California’s unfair competition and false advertising statutes, as well as various common law claims.

We previously wrote about a number of separate actions filed against Curaleaf, the largest U.S. cannabis product manufacturer in 2021, arising out of allegations that Curaleaf mislabeled tinctures containing THC that were marketed as containing CBD. One of those cases, Williamson v. Curaleaf, Inc., a consumer class action filed in the U.S. District Court for the District of Oregon on May 30, 2022, was reported last week to have settled for payments of $150 to $200 for as many as 500 class members who are alleged to have consumed the mislabeled Curaleaf tinctures. Like the class action complaint filed in Centeno arising out of the mislabled Jeeter pre-rolls, Williamson’s class action complaint sought statutory damages, punitive damages, and attorneys’ fees under Oregon’s consumer fraud statute known as the unfair Trade Practices Act.

In addition to Centeno and Williamson, we previously wrote about Plumlee v. Steep Hill Inc., a putative class action filed in the U.S. District Court for the Eastern District of Arkansas against cannabis testing lab and cannabis cultivators NSMC-OPCO LLC, Bold Team LLC and Osage Creek Cultivation LLC, which, like Centeno, arose out of allegations that the operators falsified the amount of THC in their cannabis products. As in Centeno, Plumlee seeks class-wide damages for economic loss, i.e., amounts overpaid for mislabeled cannabis products, and as in Centeno and Williamson, Plumlee seeks punitive damages and attorneys’ fees for the alleged fraudulent conduct. Interestingly, although the claims in Plumlee are sound in consumer fraud, Plumlee asserts that the defendants acted together to form an enterprise in violation of the Racketeer Influenced and Corrupt Organizations Act. As we previously wrote, these claims could just as easily been asserted as consumer fraud.

Future Litigation Prospects

There are a few reasons cannabis consumer fraud class actions may not have been attractive to the plaintiffs’ class action bar in recent years. First, given that cannabis products may only be manufactured and sold in the same state, the size of a class and the amount of damages are limited to consumers in a single state, as opposed to the type of nationwide class action one see with other CPGs. Indeed, Centeno, Williamson, and Plumlee, assert claims on behalf of a single state-wide class.

Second, most state cannabis markets have only recently – in the past few years – begun to grow into markets of hundreds of thousands or millions of consumers, and thus a single state class a few years ago would likely have been too small to warrant the investment in an expensive litigation by plaintiffs’ counsel.

Third, and similarly, defendants’ pockets are deeper today as a result of the increased sales over time than they were just a few years ago. For these reasons, the continued growth of state cannabis markets is likely to result in more cannabis consumer fraud class actions.

However, the interstate sale of cannabis products is really going to change the risk spectrum from consumer fraud class actions.

Once interstate sales of cannabis products are permitted, the mass marketing and distribution of cannabis products to consumers in multiple states in a region, if not nationally, will open the door to claims asserted on a nationwide basis that a cannabis consumer product was mislabeled. While such claims would be asserted under state-specific consumer fraud laws, they may be asserted on behalf of consumers around the country, resulting in significant exposure to the cannabis supply chain, i.e., growers, processors, labs, and dispensaries, for economic loss and punitive damages, as well as attorneys’ fees. These types of claims are routinely filed by the plaintiffs’ class action bar on behalf of nationwide classes arising out of the alleged mislabeling of other CPGs, and that bar will no doubt have cannabis products in their sights when interstate sales cannabis begin.

$228 Million Judgment Entered In First Ever BIPA Class Action Trial Before A Chicago Jury

By: Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex W. Karasik

Duane Morris Synopsis:  In Rogers v. BNSF Railway Co., Case No. 19-CV-03083 (N.D. Ill.), the first federal court jury trial in a case brought under the novel Illinois Biometric Information Privacy Act (“BIPA”), the plaintiffs secured a verdict in favor of the class of 45,000 workers against Defendant BNSF. After a week-long trial in the U.S. District Court for the Northern District of Illinois in Chicago, the jury found that BNSF recklessly or intentionally violated the law 45,600 times, based on the defense expert’s estimated number of drivers who had their fingerprints collected.  The Court thereafter entered a judgment against BNSF for $228 million.

This landmark verdict showcases the potentially devastating impact of the BIPA statute on unwary businesses across the state of Illinois that collect, use, or store biometric information.

Case Background

Plaintiff, a truck driver, filed a class action lawsuit alleging that BNSF unlawfully required drivers entering the Company’s facilities to provide their biometric information through a fingerprint scanner.  He claimed that BNSF collected the drivers’ fingerprints without first obtaining informed written consent or providing a written policy that complied with the BIPA and therefore violated sections 15(a) and (b) of the BIPA.  BNSF argued that it did not operate the biometric equipment and instead sought to shift blame to a third-party vendor who operated the biometric equipment that collected drivers’ fingerprints.

The case proceeded before a jury in federal court in Chicago. The proceeding was closely watched, as it represented the very first time any class action had gone to a full trial with claims under the BIPA

The trial lasted five days. However, the jurors deliberated for just over an hour.  The jurors were asked to: (1) indicate on the verdict form whether they sided with Plaintiff, and (2) if so, indicate how many times BNSF violated the BIPA negligently or how many times the company violated the statute recklessly or intentionally.

The BIPA provides for damages of $1,000 for every negligent violation, and up to $5,000 in liquidated damages for every willful or reckless violation. At the conclusion of the trial, the jury found that BNSF recklessly or intentionally violated the law 45,600 times.  Accordingly, the Court entered a judgment against BNSF in the amount of $5,000 per violation, for a total amount of $228 million.

Implications For Employers

This verdict undoubtedly will embolden the plaintiffs’ class action bar and equally serve as an eye opener for businesses in Illinois.  In the short term, companies can expect an uptick in the number of BIPA class actions filed by the plaintiffs’ bar. While it is almost certain that the verdict will be challenged in post-trial motions and in an appeal, companies can expect that plaintiffs’ lawyers will increase their settlement demands in other BIPA class actions.

The BIPA vastly increases the importance of adopting a strategic compliance plan for businesses that operate in Illinois.  It is more important than ever for companies to implement proper mechanisms and consent forms to comply with the BIPA.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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