Category: General

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

Duane Morris Takeaways: Complex wage & hour litigation has long been a focus of the plaintiffs’ class action bar. The relatively low standard by which plaintiffs can achieve conditional certification under the Fair Labor Standards Act (FLSA), often paired with state law wage & hour class claims, offers a potent combination by which plaintiffs can pursue myriad employment claims. To that end, the class action team at Duane Morris is pleased to present the inaugural edition of the Wage & Hour Class And Collective Action Review – 2023. This new publication analyzes the key wage & hour-related rulings and developments in 2022 and the significant legal decisions and trends impacting wage & hour class and collective action litigation for 2023. 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 download a copy of the Wage & Hour Class And Collective Action Review – 2023 eBook.

Stay tuned for more wage & hour class and collective action analysis coming soon on our weekly podcast, the Class Action Weekly Wire.

By Brandon Spurlock

Duane Morris Takeaways: Daily news reports about ChatGPT are ubiquitous. Can it replace legal tasks undertaken by humans (with law degrees and state bar licenses)? Can lawyers use it to enhance their legal work? Quite naturally, this raises the issue of whether ChatGPT will make its way into class action litigation – where the stakes are enormous, and the workloads of lawyers involved in those cases are enormous.

ChatGPT And The Legal Profession

Launched in November 2022, Open AI’s ChatGPT has garnered much attention across the globe for its human-like ability to engage in conversations and generate content that is often indistinguishable from what we would expect talented professionals such as journalists, authors, professors (and even lawyers) to produce. But how does this technology work and what does it mean for the legal profession?

GPT stands for generative pre-trained transformer, which is a language model trained on a large corpus of data.  Through supervised and machine learning, the model analyzes tons of words, with each word having a score.  It then chooses a word with a high score and moves on to the next one. Every choice is determined by complex math and huge amounts of data, which allows it to produce text that is both coherent and accurate (most of the time).   So not only is it able to tap into vast amounts of vocabulary and information, but also it understands words in context, which helps mimic speech patterns while dispatching an encyclopedic knowledge.

How smart is ChatGPT? Well news articles report that it is smart enough to pass an MBA exam from a top business school, a Google coding interview, and several law school essay exams, albeit with less than stellar scores.

What Does This Mean For Class Action Litigation?

For the millions who have experimented with ChatGPT, it is easy to be mesmerized by its capabilities and wonder what it means for those white collar professions that many believed were impervious to displacement by AI, particularly lawyers.  For instance, when you type in a simple question such as “how do you certify a class action lawsuit?”  ChatGPT will respond:

In order for a class action lawsuit to be certified, the court must determine that the class of plaintiffs is sufficiently numerous, that there are common questions of law or fact among the class, that the claims or defenses of the class are typical of the claims or defenses of the individual class members, and that the representative plaintiff(s) will fairly and adequately protect the interests of the class.

This is a far cry from a winning brief, but the possibilities are instantly apparent.  And if you talk to attorneys who have asked the program to prepare work product like an insurance reservation of rights letter, they will tell you that they got a surprisingly workable template from which to start the editing process.  The technology is so promising that some service providers have rolled out a generative AI tool built on a version of OpenAI’s latest models, which is enhanced for legal work.  The tool allows access to legal content with efficiency and cost-effectiveness.

What Are The Pitfalls?

Despite the obvious promise exhibited by ChatGPT’s current abilities, the technology is still in its infancy. In fact, certain results obtained from ChatGPT are often riddled with errors and, in some cases, outright falsehoods.  In one instance, it referenced a non-existent California ethics provision.  In situations like these, where generative AI appears to simply make things up, and do so with complete and utter confidence, the tech industry has termed this a “hallucination.” With these risks in mind, professional liability carries are issuing warnings to law firms on the professional responsibility and risk management implications of the technology.

What’s Next?

Given the promise of ChatGPT, tempered by the associated risks, corporate counsel are certain to ask themselves what comes next for this technology.  Right now, for things like contracts, policies, and other legal documents that tend to be normative, generative AI’s capabilities in gathering and synthesizing information can do a lot of heavy lifting. Therefore, the legal industry should be on the lookout for emerging technologies, like ChatGPT, that can tackle such low hanging fruit, with the immediate benefit being potential cost savings for corporate clients.

As law firms and corporate legal departments contemplate the future of using this tool, it is noteworthy that there is an intellectual property class action pending in federal court in California – J. Doe 1, et al. v. Github, Inc., et al., No. 3:22-CV-06823 (N.D. Cal.) – alleging that OpenAI profits from the work of open-source programmers by violating the conditions of their open-source licenses.  Some commentators believe that the future of AI may well hinge on the outcome of this lawsuit, and it will no doubt be monitored closely by those in the legal industry interested this topic.

In the meantime, if attorneys are feeling uneasy about how AI technology is impacting the profession, try asking ChatGPT “Is being a lawyer a good profession?” and one can take solace in ChatGPT’s answer: “Yes, it can be a very rewarding profession. Lawyers can have a big impact in society and can have a great deal of job satisfaction.”  The industry will have to wait and see if this answer holds over time.

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

Duane Morris Takeaway: In 2022, actions under the California Private Attorneys General Act (PAGA), Cal. Lab. Code, §§ 2698, et seq., saw their first setback as the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022), created a workaround to arbitration programs that require individual proceedings.

The PAGA created a scheme to “deputize” private citizens – “aggrieved employees” – to sue their employers for violations of the California Labor Code on behalf of their co- workers as well as the State. If successful, aggrieved employees receive 25% of any recovered civil penalties and pass the other 75% to the California Labor and Workforce Development Agency (LWDA). The PAGA authorizes the attorneys who pursue the action to collect their attorney’s fees and costs in addition to the civil penalties. As a result, PAGA claims have exploded over the past two decades.

The Explosion Of PAGA Notices

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 1,743 in 2011, to 5,208 in 2016, and to 6,502 in 2021. From 2013 to 2014, employers saw the largest single year increase, from 1,605 notices in 2013 to 4,532 notices in 2014, an increase of 182%. Over the five-year period from 2017 to 2021, the number of notices grew from 4,985 in 2017, to 6,502 in 2021, an increase of 30%.

The following chart illustrates this trend.

The increase is a likely reaction to the growth of workplace arbitration, fueled by the availability of fee-shifting.

The PAGA As A Work-Around To Arbitration

Although the proliferation of mandatory arbitration programs started as early as 1991 when the U.S. Supreme Court issued Gilmer, et al. v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the movement did not gain steam until 2011, when the U.S. Supreme Court issued its ruling in AT&T Mobility LLC v. Concepcion, et al., 563 U.S. 333 (2011), and held that the FAA preempts state rules that stand “as an obstacle to the accomplishment of the FAA’s objectives,” and it did not peak until 2018 with the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis, et al., 138 S.Ct. 1612 (2018), wherein the last hurdle to enforcement of class and collective action waivers was eliminated.

As the adoption of arbitration programs gained popularity as a mechanism to contract around class and collective actions, the plaintiffs’ class action bar identified work-arounds. The California Supreme Court’s cemented the PAGA as the frontrunner for generated labor-related claims with its 2014 decision in Iskanian, et al. v. CLS Transportation Los Angeles, 59 Cal.4th 348 (Cal. 2014), which seemingly immunized the PAGA from arbitration programs. In Iskanian, the California Supreme Court held that “where an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.” Id. at 384. Whereas the California Supreme Court acknowledged Concepcion, it nevertheless reasoned that the rule against PAGA representative action waivers did not frustrate the FAA’s objectives because, whereas the FAA aims to ensure an efficient forum for the resolution of private disputes, a PAGA action “is a dispute between an employer and the state Labor and Workforce Development Agency.” Id.

The ruling likely fueled the filing of PAGA notices in 2014 and thereafter, as it cleared the PAGA as a mechanism by which to maintain a representative action unhindered by agreements to arbitrate on an individual basis. The PAGA workaround suffered its first significant set-back in 2022 with the U.S. Supreme Court’s highly anticipated decision in Viking River Cruises, Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022), which addressed the arbitrability of PAGA claims.

The Dagger Of Viking River

In Viking River, the U.S. Supreme Court drove a dagger through the heart of this work- around by continuing its trend of enforcing the FAA over state efforts to avoid or flat-out prohibit arbitration. See, e.g., Cal. Lab. Code § 229 (“Actions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.”). The U.S. Supreme Court confirmed that, whether judicial or legislative in nature, where the FAA is in play, it preempts efforts to enforce those rules.

In Viking River, the U.S. Supreme Court found a conflict between the FAA and PAGA’s procedural structure. It recognized that the statute contains a “built-in mechanism of claim joinder,” which permits “aggrieved employees” to use the Labor Code violations they personally suffered as a basis to join to the action any claims that could have been raised by the State in an enforcement proceeding. Id. at 1923. It held that, to the extent that Iskanian precludes division of PAGA actions into individual and non-individual claims, and thereby “prohibits parties from contracting around this joinder device,” the FAA preempts such rule. Id.

Importantly, however, after finding that Viking should have been able to compel arbitration of plaintiff’s individual claim, the U.S. Supreme Court addressed “what the lower courts should have done with Moriana’s non-individual claims.” Id. at 1925. It ruled that, once an individual claim has been committed to a separate proceeding, the employee is no different from a member of the general public, and the PAGA provides no mechanism for such person to maintain suit. As a result, the correct course was to dismiss the remaining claims. Id.

As a result, the U.S. Supreme Court eviscerated perhaps the most popular work-around to workplace arbitration, dealing a significant blow to the plaintiffs’ bar and its ability to pursue claims on a representative basis.

What’s Next?

In her concurrence, Justice Sotomayor expressly opened the door to two potential solutions to the majority opinion. She suggested that, in its analysis of the parties’ contentions, the Supreme Court detailed “several important limitations on the pre-emptive effect of the [FAA],” meaning that “California is not powerless to address its sovereign concern that it cannot adequately enforce its Labor Code without assistance from private attorneys general.” Id. at 1925. First, she suggested that, if the majority was incorrect in its understanding that the plaintiff lacked “statutory standing” under the PAGA to litigate her “non-individual” claims separately, “California courts, in an appropriate case, will have the last word.” Second, alternatively, Justice Sotomayor opined that “the California Legislature is free to modify the scope of statutory standing under the PAGA within state and federal constitutional limits.” Id. at 1925-26.

Although the California State Legislature has not taken action, on July 20, 2022, the California Supreme Court granted review in Adolph, et al. v. Uber Technologies, Inc., No. G059860, on the question as to whether an aggrieved employee, who agreed to arbitrate claims under the PAGA that are “premised on Labor Code violations actually sustained by” the aggrieved employee, maintains standing to pursue “PAGA claims arising out of events involving other employees” in court or in any other forum agreed by the parties. The California Supreme Court is likely to issue a decision on these questions in 2023.

In the meantime, despite the U.S. Supreme Court’s ruling in Viking River, many plaintiff’s attorneys have requested, and many California courts have granted, stays of representative claims, rather than dismissals, likely in order to preserve tolling in the event that the California Supreme Court fashions a rule that permits them to proceed with representative claims.

By Gerald L. Maatman, Jr. and Jennifer Riley

Duane Morris Takeaway: Watch the video below with Duane Morris partner Jerry Maatman, who explains how in 2022 government enforcement litigation activity took a back seat, and outlines what we can expect to happen in 2023.