Category: General

Duane Morris Takeaways: It has been a busy time for the Duane Morris Class Action Defense blog – it just recorded its 300th blog post!!!

Since our kick-off post, our data analytics show there have been over 50,000 views to blog posts, with thousands of our loyal subscribers reading about class action litigation developments. There are many highlights from the past 300 posts, but we wanted to provide just a few for you here. Click on the links below to see all the hot trends in class action litigation!

Overview Of The 300 Posts

We launched the second edition of the Duane Morris Class Action Review, which is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting Corporate America. The Review has been prominently featured in the media and is a must-have for all human resources professionals, business leaders, and corporate counsel.

We will be publishing the 2025 Edition of the Review next January.

So far in 2024, we have published seven mini-books focused on specialized areas of law in class action litigation and on EEOC-Initiated litigation. Here are the links to our blog posts announcing the EEOC Litigation Review, the Data Breach Class Action Review, the Privacy Class Action Review, the Wage & Hour Class And Collective Action Review, the Discrimination Class Action Review, the Private Attorneys General Act Review, and the Consumer Fraud Class Action Review.

We also continued the success of the Duane Morris Class Action Weekly Wire podcast, in which we talk about hot class action rulings and developments in real time and in relatable ways for our viewers. Tune in on Wednesdays for new episodes, and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Google Podcasts, the Samsung Podcasts app, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, YouTube or our RSS feed.

Below are the top five most viewed blog posts – which had over 25,000 combined views!

1. Massachusetts State Court Rules In Class Action That A Multiple-Choice Promotional Test Discriminated Against Minority Police Officers
2. The 2023-2024 Judicial Hellholes Report From The American Tort Reform Association On The Worst Jurisdictions For Defendants
3. Revised Illinois Day and Temporary Labor Services Act: Implications For Staffing Agencies And Their Customers
4. Colorado Supreme Court Applies Litigation Privilege To Attorney’s Allegedly Defamatory Statements About Class Action Defendant
5. It Is Here – The Duane Morris Class Action Review- 2024

Thank you loyal followers for making the Class Action Defense blog your pick for class action litigation related information, trends, and analysis. We truly appreciate it! Please keep coming back, we promise to keep the content fresh!

By Jennifer A. Riley

I was honored to speak today at the 6th Annual Class Action Law Forum at the University of San Diego School of Law.

With hundreds of attendees, the conference focused on the current state of class action litigation and “white hot” litigation topics for 2024. The discussion points provide an excellent roadmap for practitioners and corporate counsel alike on the types of cases and legal issues that Corporate America is likely to encounter over the remainder of 2024.

The Impact of Artificial Intelligence

The theme of my address involved the extraordinary impact of AI on the class action space over the past year.  Aside from improving the efficiency with which the plaintiffs’ class action bar may be able to file and litigate claims, generative AI is providing an ocean of raw material for potential class claims.

Over the past year, we saw AI promptly become a popular subject of class actions in multiple areas.  I touched on three in particular.

AI-Assisted Decision-Making

The first area targets companies that use AI to enhance or streamline their decision-making processes.  Plaintiffs have filed suits against insurers, for instance, that use algorithms to adjudicate claims as well as against agencies that use programs to evaluate governmental benefits.

This type of claim frequently arises in the employment context as companies use algorithms to streamline and enhance their candidate screening and selection procedures and to inform their promotion, transfer, and evaluation decisions.

In May 2023, the EEOC issued a technical assistance document entitled “Assessing Adverse Impact in Software, Algorithms, and Artificial Intelligence Used in Employment Selection Procedures Under Title VII,” which purports to provide employers guidance on preventing discrimination when using AI.  The EEOC provided various examples in terms of how employers are using AI, including resume scanners that prioritize resumes that use certain key words, employee monitoring software that rates employees on the basis of key strokes, virtual assistants or chatbots that ask job applicants about their qualifications, and video interviewing software that evaluates candidates based on their speech patterns and facial expressions.

Unsurprisingly, we have started to see lawsuits attacking use of these types of tools.  In Mobley v. Workday, filed in the Northern District of California, for instance, a plaintiff, an African American male over the age of 40 who claimed that he suffered from anxiety and depression brought suit against Workday claiming that its applicant screening tools discriminated against applicants on the basis of race, age, and disability.  The plaintiff claimed that he applied for 80 to 100 jobs, and despite holding a bachelor’s degree in finance, among other qualifications, did not get a single job offer.

Workday, of course, is a software vendor.  The district court granted the defendant’s motion to dismiss on the ground that plaintiff failed to plead sufficient facts regarding Workday’s supposed liability as an employer or “employment agency.”  In other words, the plaintiff failed to allege that Workday was “procuring” employees for its customers and merely claimed that he applied for jobs with a number of companies that all happened to use Workday.  On February 20, 2024, the plaintiff filed an amended complaint alleging that Workday was an agent of the employers that delegated authority to Workday to make hiring process decisions or, alternatively, that Workday was an indirect employer.

This is a prime example of a case to watch as we head through 2024 where plaintiffs are seeking to hold a software vendor liable for the use of its product by others.

Privacy Class Actions Targeting AI

The second area I touched on relates to privacy class actions.  Companies that develop AI products have faced a slew of class action lawsuits alleging privacy violations.  The allegation essentially has been that, by collecting publicly-available data to develop and train their software, developers of AI products stole private and personal information from millions of individuals.

In cases like PM v. OpenAI, as an example, groups of plaintiffs filed class action lawsuits against OpenAI and Microsoft alleging that, by collecting information from the internet to develop and train AI tools like ChatGPT, they stole private information from millions of people.  Other lawsuits have been filed against companies like Open AI as well as Google alleging similar claims, including a recent example, AS v. Open AI, filed in the Northern District of California on February 27, 2024.

Copyright Class Actions Targeting AI

Third, in addition to privacy class actions, technology companies have been hit with a surge of recent lawsuits over the alleged “scraping” of copyrighted materials and personal data from across the internet to train their generative AI systems.

On February 28, 2024, for instance, Intercept Media filed suit in the Southern District of New York against Open AI and Microsoft.  It alleged that, at least some of the time, ChatGPT provides responses to its users that regurgitate verbatim – or nearly verbatim – copyright protected works of journalism without providing (and even allegedly intentionally excluding) the author, title, copyright, or terms of use information contained in those works.

In terms of other examples, at the end of last year, the New York Times filed a similar lawsuit alleging copyright infringement in both the input and output of Open AI models.  The Authors Guild of America filed a class action suit in September 2023 against MicroSoft and Open AI on behalf of tens of thousands of authors alleging willful violations of copyright laws.  In the suit, they allege that the two companies reproduced and appropriated the copyrighted work of tens of thousands of authors to train their AI models.  In Andersen v. Stability AI, a group of artists claimed that Stability AI created a software program that downloaded billions of copyrighted images to train and to act as a software library for a variety of visual generative AI platforms.  They claimed that, having been trained on their works, the software could generate output in their own artistic styles.

Many of these class actions are just getting off the ground.  As the results at the motion to dismiss stage continue to be mixed, it suggests that a model for successfully pleading and prosecuting these types of class actions is still a work in progress.

As courts start to weave their patchwork quilt of rulings, I expect we are seeing the tip of the iceberg in the types and numbers of filings we are likely to see on the generative AI class action front.

Other Hot Topics

The conference speakers covered myriad other timely and hot issues in the class action space, including the state of the current law on concepts such as ascertainability, standing, class-wide injury, and manageability at the class certification stage.   A recurrent issue was standing and class-wide injury.  Even if a court can “generally” determine class-wide injury at the certification and trial phases, how can it manageably resolve individualized questions at the damages phase?

The panelists likewise covered practical aspects of class-wide trials and mass arbitration, including best practices in preparing for and presenting cases for trial including use of video evidence such as video-taped depositions, use of demonstrative evidence at trial, and use of pre-trial focus groups to test and develop key themes and tell a story that resonates with the jury.

In sum, 2024, is shaping up to be a transformative year on the class action litigation front.

Thank you to all our clients who attended the in-person book launch of the Duane Morris Class Action Review in Philadelphia last week, as well as our nationwide audience who participated via Zoom.

In case you missed it, watch a video of the live presentation below, featuring Duane Morris partners and editors of the Review, Jerry Maatman and Jennifer Riley, with Equal Employment Opportunity Commissioner Keith Sonderling.

Please also view pictures from the in person Book Launch event below. We would love to see you at the event in 2025!

By Gerald L. Maatman, Jr., Katelynn Gray, and Gregory S. Slotnick

Duane Morris Takeaways: On January 23, 2024, in Chen et al. v. Reardon, Index No. 908146-23, in the Supreme Court of the State of New York (Albany County), a judge denied a motion to dismiss filed by the New York Department of Labor (NYDOL) seeking dismissal of a lawsuit claiming the agency improperly closed wage theft investigations for home care aides by way of inappropriate rulemaking under New York’s State Administrative Procedures Act (NYSAPA).  Specifically, in evaluating the NYDOL’s motion and giving the workers the benefit of every possible inference, the court held the NYDOL may have improperly engaged in formal rulemaking without abiding by all required prerequisites (such as public notice) in shutting down its investigations of the workers’ unpaid wage claims due to collective bargaining agreements that included mandatory arbitration.  The judge concluded that a “reasonable view of the facts stated” describes the NYDOL’s application of a “fixed, general principle” of dismissing every complaint that was subject to mandatory arbitration (i.e., a NYDOL rule), rather than “ad hoc decisions” evaluating the individual facts and circumstances of each claim.  Id. at 9. 

The decision highlights a state court’s willingness to scrutinize a state agency’s “informal” broad interpretations of its own investigation procedures under state law, and ultimately provides allegedly aggrieved employees with reasonable means to challenge the agency’s actions.

Case Background

Five home care aides who provided live-in services to elderly and disabled patients claim they typically worked 24-hour shifts without ever receiving five hours of uninterrupted sleep or three hours of meal breaks.  Id. at 2.  The workers alleged that they were never paid for more than 13 hours of work for any such 24-hour shifts despite not receiving the required sleeping and meal break periods in alleged violation of the New York Labor Law (NYLL) and its “13-hour rule.”  Id.  After working these shifts for some time, the workers each filed their own complaint with the NYDOL, claiming their compensation structure violated the NYLL.

The NYDOL initially accepted the complaints and began investigating.  However, when the NYDOL determined that the workers were all subject to mandatory arbitration through a collective bargaining agreement with their respective unions, who had filed grievances on their behalf, the NYDOL terminated each investigation.  The NYDOL sent each worker a complaint closing letter stating “we understand other means are available for a resolution of your claims.”  One NYDOL investigator explained to a worker that the DOL closed the case “following the advice of our counsel’s office.  The [CBA] supersedes our authority in this case.  There is no getting around it.  The same is true in each case we have closed on this basis.”  The NYDOL also issued a press release around the same time stating that it “may accept…cases [involving alleged violations of the 13-hour rule] if an employee is not covered by an arbitration clause.”  Id.

In August 2023, the workers filed an Article 78 petition against the NYDOL, seeking that the NYDOL reopen the closed investigations of their claims.  Id. at 2-3.  The workers argued the NYDOL’s policy of closing the investigations was pursuant to a “rule” within the meaning of the NYSAPA and that the NYDOL failed to submit a notice of proposed rulemaking as required before adopting such a rule.  They also claimed the NYDOL’s reliance on that rule before closing their cases was an error of law, that the NYDOL’s jurisdiction is not limited by private arbitration agreements such that termination of their investigations was an abuse of the NYDOL’s discretion.  Id.

The NYDOL moved to dismiss the petition and claimed it must be dismissed because it fails to establish a right of mandamus relief and fails to state a claim under the NYSAPA.  Id.

The Court’s Decision

The Court determined that in considering a motion to dismiss, the petition must be given a liberal construction, the petitioners must be afforded every possible favorable inference, and the motion should only be granted if there is no “reasonable view of the facts” that could entitle petitioners to relief.  Id. at 4. 

The NYDOL argued that it has discretionary authority to investigate employer-employee controversies, and that the Article 78 petition could not be used to compel it to engage in a discretionary act.  Id.  In addressing these positions, the Court found that if a petitioner prevails under either a mandamus to compel or a mandamus to review under New York law, the Court “may grant the petitioner the relief to which he is entitled.”  Id. at 5.  The Court further found that under appropriate circumstances, such relief could include an order that directs specified action by the respondent.  Id.  It then held that because the workers asserted various causes of action under state law and alleged that the NYDOL’s decisions to close their complaints were arbitrary and capricious, affected by errors of law, and abuses of discretion, a judgment in favor of the workers could appropriately require the NYDOL to revisit their complaints.  Id. at 6-7. 

As for the workers’ claims under the NYSAPA and the NYDOL’s potentially improper rulemaking, the NYDOL argued that its determination to decline to investigate the individual petitioners’ claims was specific to the facts and circumstances of the complaints and subsequent investigations, and not of “general applicability that implements or applies law.”  Id.  The Court opined that the NYSAPA requires the NYDOL to comply with certain procedural requirements before adopting any “rule” and that if the NYDOL engaged in formal rulemaking but did not comply with the procedural requirements of the NYSAPA, that regulatory action must be annulled.  Id. at 6-7. 

The NYDOL conceded that it did not follow the rulemaking procedures laid out in the NYSAPA, and the only question the Court needed to decide was whether the workers adequately pled that NYDOL’s decision to terminate its investigations was pursuant to a rule within the meaning of the NYSAPA.  Id. at 7.  It noted that a “rule” under the NYSAPA is a fixed, general principle applied without consideration of other relevant facts and circumstances, as distinguished from ad hoc decision-making based on individual facts and circumstances.  Id. 

The Court reasoned that “rules” direct what action should be taken regardless of individual circumstances and apply to future courses of conduct.  It held that a “policy” dictating specific results without regards to other relevant circumstances is subject to the NYSAPA’s rulemaking requirements.  Id. at 8. 

In this case, the Court found that the workers had alleged that the NYDOL dismissed each of their complaints because their unions had entered into collective bargaining agreements with their employers that called for mandatory arbitration of their claims.  Id. at 8-9.  The workers also alleged that the NYDOL’s practice or policy of dismissing complaints on this basis was rigidly applied without regard to aides’ individualized circumstances or any mitigating factors.  Id.  The NYDOL investigator’s statement to one worker that the NYDOL was required to terminate all investigations of the workers due the collective bargaining agreements and that “there is no getting around it” was further evidence in support of the workers’ petition that the NYDOL engaged in improper rulemaking.  Id. at 9. 

The Court ultimately gave the workers’ petition a liberal construction, accepted its pleaded facts as true, and gave them the benefit of every possible inference, denying the NYDOL’s motion to dismiss the petition.  Id.  The Court determined that the workers’ petition sufficiently alleged the NYDOL’s application of a fixed, general principle of dismissing every complaint that was subject to a mandatory arbitration agreement as opposed to an “ad hoc decision” based on individual facts and circumstances.  Id.

Implications For Businesses

The Chen decision illustrates that under appropriate circumstances, judges will not hesitate to question broadly-applicable “policies” of state agencies akin to “rules” under state law.  As evidenced in this case, such scrutiny includes denying state agency motions to dismiss claims brought by aggrieved workers who feel an agency failed to follow its own procedural requirements in closing investigations into their claims.  It also serves as a timely reminder for all employers of the ever-present possibility that state agencies may still investigate workers’ claims despite the existence and application of perfectly valid mandatory arbitration agreements.   Employers should always remain cautious any time a state agency closes an investigation before completion due to the possibility such closure may later be found to have been improper by a court.  Employer skepticism of broadly applicable state agency policies concerning workers’ claims that results in uniform outcomes is also warranted, especially when an agency confirms such position in press releases!

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

Duane Morris Takeaways: On January 16 and 17, 2024, in Messer v. Bristol Compressors International, LLC, No. 1:18-CV-00040 (W.D. Va.), on remand from a Fourth Circuit decision, Judge James P. Jones of the U.S. District Court for the Western District of Virginia issued an opinion and order entering judgment in the amount of $2,407,471.90 for severance pay benefits owed under an ERISA employee benefits plan based on violations of the 60-day notice requirement of the Worker Adjustment and Retraining Notification Act (WARN Act), 29 U.S.C. § 2102(a)(1). The multi-million dollar ruling stems from a 2018 WARN-covered “plant closing” and follows an earlier award on November 23, 2021 of $1.39 million to certain class members for damages including back pay and interest owed pursuant to the WARN Act for the same notice violation underlying the recent ruling.

The decision highlights the extremely technical nature and high stakes of WARN Act litigation in the class action context.

Case Background

On July 31, 2018, Bristol Compressors International (BCI) notified employees that it would close its manufacturing facility in Bristol, Virginia, and their employment would terminate on or before September 30, 2018. BCI implemented several rounds of terminations over the next three and a half months, beyond the originally anticipated date of September 30, 2018 for the final terminations. However, BCI did not issue additional notice under the WARN to those whose employment ended after September 30, 2018.  The manufacturing facility ultimately closed on November 16, 2018.

On October 19, 2018, a group of former employees sued BCI- under the WARN Act.  The plaintiffs alleged that the company failed to provide 60 days’ notice of their terminations in accordance with the specific requirements of the WARN Act.

On June 20, 2019, the Court granted the plaintiffs’ motion for certification of three sub-classes of former employees terminated due to the plant closing under Rules 23(a) and 23(b)(3). Sub-class One included employees involuntarily terminated between July 31, 2018 and August 31, 2018. Sub-class Two included employees involuntarily terminated after August 31, 2018 who signed a stay bonus agreement that included an express waiver of claims under the WARN Act. Sub-class Three included employees involuntarily terminated after August 31, 2018 who had not signed a stay bonus agreement.

Following a bench trial, the Court in 2020 granted summary judgment to BCI on the plaintiffs’ claim for benefits owed under a company severance pay plan. The Court found that BCI validly terminated its severance pay plan before the employment terminations.  In a separate 2020 opinion, the Court dismissed upon summary judgment the WARN Act claims of four class members whose employment ended on October 19, 2018. The Court reasoned that BCI’s July 31, 2018 notification was adequate to prepare them for their later job losses. The plaintiffs appealed those prior rulings to the Fourth Circuit.

The Fourth Circuit’s Ruling

On April 3, 2023, the Fourth Circuit, in an unpublished opinion, reversed and remanded parts of the 2020 rulings.  Messer v. Bristol Compressors International, LLC, 2023 U.S. App. LEXIS 7826 (4th Cir. Apr. 3, 2023) (per curiam).

The Fourth Circuit reversed the denial of severance pay benefits to the class, concluding the company did not terminate the severance pay plan in accordance with the ERISA’s requirements for modifying or terminating an ERISA-governed benefits plan.  As a result, the severance pay plan was in effect when the employment terminations occurred.

The Fourth Circuit affirmed the decision upholding the release of claims under the WARN Act to members of Sub-class Two. However, because the release of claims in the stay bonus agreements those class members signed explicitly carved out claims for vested benefits under the company’s “written benefit plans,” members of Sub-class Two did not waive their claims for severance pay benefits owed to them under the ERISA-governed employee benefit plan.

The Fourth Circuit also vacated the grant of summary judgment to BCI on the WARN Act claims of the four plaintiffs whose employment ended on October 19, 2018.  The Fourth Circuit pointed to the regulation under the WARN Act providing that, if an employer postpones a covered plant closure for 60 days or more, additional 60 days’ notice under the WARN Act is owed to affected employees.  See 20 C.F.R. § 639.10. Because the company issued no additional notice to those four individuals after July 31, 2018, but terminated their employment after September 30, 2018, the Fourth Circuit opined that a WARN Act violation was established.

The District Court’s Decision

On remand, the Court granted the plaintiffs’ unopposed motion for summary judgment on the two issues on which the Fourth Circuit reversed and remanded. Consistent with the Fourth Circuit’s ruling, the Court held that all class members were entitled to severance pay benefits under the severance pay plan, plus interest, and the four plaintiffs whose employment ended on October 19, 2018 were in addition owed back pay and prejudgment interest for a 60-day period.

On January 17, 2014, the Court ordered the case closed, with leave granted to class counsel to file a supplemental motion for attorneys’ fees and costs within 30 days.

Implications For Employers

The Messer case is illustrative of the many decisions in recent years in which plaintiffs have recovered multi-million dollar judgments following class certification of WARN Act claims. Employers should remain vigilant to the WARN Act, and the potential exposure to 60 days’ worth of back pay, lost benefits and prejudgment interest in the event of violations, well before implementing any mass layoff or plant closure that may trigger its strict notification requirements.

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

Duane Morris Takeaway: As the ultimate referee of law, the U.S. Supreme Court traditionally has defined the playing field for class action litigation and, through its rulings, has impacted the class action landscape. The past year did not buck that trend. On June 29, 2023, the U.S. Supreme Court ruled in Students for Fair Admissions, Inc., et al. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), that two colleges and universities that considered race as a factor in the admissions process violated the Equal Protection Clause of the U.S. Constitution and Title VI of the Civil Rights Act of 1964. The ruling is fueling controversy along with a wave of claims that is likely to expand.

Check out the video below to see Duane Morris partner Jennifer Riley discuss the impact of U.S. Supreme Court rulings on the class action landscape in 2023, and what is coming in 2024.

Trend #5 – U.S. Supreme Court Rulings Continue To Impact The Class Action Landscape

1. The U.S. Supreme Court’s Decision

Students for Fair Admissions, an advocacy group, brought two lawsuits alleging that the use of race as a factor in admissions by Harvard and the University of North Carolina, respectively, violated Title VI and the Equal Protective Clause of the Fourteenth Amendment. The U.S. Supreme Court agreed.

After reviewing the language of the Fourteenth Amendment (no State shall “deny to any person . . . the equal protection of the laws”), the Supreme Court began its analysis by recapping its early jurisprudence, including its decision in Brown v. Board of Education, 347 U. S. 483, 493 (1954), wherein it held that the right to a public education “must be made available to all on equal terms.” Students, 600 U.S. at 201, 204. The Supreme Court noted that these decisions, and others like them, reflect the broad “core purpose” of the Equal Protection Clause: “[D]o[ing] away with all governmentally imposed discrimination based on race.” Id. at 206.

The Supreme Court explained that, accordingly, any exceptions to the Equal Protection Clause’s guarantee must survive a daunting two-step examination known as “strict scrutiny,” which asks, first, whether the racial classification is used to “further compelling governmental interests” and, second, whether the government’s use of race is “narrowly tailored” or “necessary” to achieve that interest. Id. at 206-07. In Grutter v. Bollinger, 539 U.S. 306, 325 (2003), the Supreme Court endorsed the view that “student body diversity is a compelling state interest” but insisted on limits in how universities consider race. In particular, the Supreme Court sought to guard against two dangers: (i) the risk that the use of race will devolve into “illegitimate . . . stereotyp[ing]” and (ii) the risk that race will be used as a negative to discriminate against those racial groups that are not the beneficiaries of the race-based preference. To manage its concerns, Grutter imposed a third limit on race-based admissions programs. “At some point,” the Supreme Court held, “they must end.” Students, 600 U.S. at 212.

In Students for Fair Admissions, the U.S. Supreme Court held that the defendants’ race-conscious admissions systems failed each factor and, therefore, ran afoul of the Equal Protection Clause. As an initial matter, the U.S. Supreme Court found that defendants failed to operate their race-based admissions programs in a manner that is “sufficiently measurable to permit judicial [review].” Id. at 214-17. Second, the U.S. Supreme Court held that the race-based admissions systems failed to comply with the twin commands of the Equal Protection Clause that race may never be used as a “negative” and that it may not operate as a stereotype. Id. at 218-219. The U.S. Supreme Court explained that “college admissions are zero-sum. A benefit provided to some applicants but not to others necessarily advantages the former group at the expense of the latter.” Id. Third, the U.S. Supreme Court held that the admissions programs lack a “logical end point” as Grutter required. Id. at 221. As a result, the U.S. Supreme Court determined that the admissions programs “cannot be reconciled with the guarantees of the Equal Protection Clause.” Id. at 230.

2. The Ruling’s Early Impact

On July 19, 2023, in Ultima Services Corp., et al. v. U.S. Department of Agriculture, No. 20-CV-00041, 2023 WL 4633481 (E.D. Tenn. July 19, 2023), a district court extended Students for Fair Admissions to the government contracting context and held that the Small Business Association’s use of racial preferences to award government contracts likewise violates the Equal Protection Clause.

Section 8(a) of the Small Business Act instructs the Small Business Administration (the SBA) to contract with other agencies “to furnish articles, equipment, supplies, services, or materials to the Government,” 15 U.S.C. § 637(a)(1)(A), and to “arrange for the performance of such procurement contracts by [subcontracting with] socially and economically disadvantaged small business concerns,” 15 U.S.C. § 637(a)(1)(B). The SBA adopted a regulation creating a “rebuttable presumption” that “Black Americans; Hispanic Americans; Native Americans; Asian Pacific Americans [; and] Subcontinent Asian Americans” are “socially disadvantaged.” 13 C.F.R. § 124.103(b)(1).

The district court held that the § 8(a) program does not satisfy strict scrutiny. First, the Administration did not assert a compelling interest. The district court reasoned that while the government “has a compelling interest in remediating specific, identified instances of past discrimination,” the program lacked any such stated goals. Id. at *11. Second, the district court held that, even if the SBA had a compelling interest in remediating specific past discrimination, the § 8(a) program was not narrowly tailored to serve that alleged compelling interest. Id. at *14. The § 8(a) program had no logical end point or termination date, was both underinclusive and overinclusive relative to its “imprecise” racial categories, and failed to review race-neutral alternatives.

The district court concluded that the defendants’ use of the rebuttable presumption violated Ultima’s Fifth Amendment right to equal protection, and it enjoined defendants from using the rebuttable presumption of social disadvantage in administering the program. Id. at *18.

Although the district court in Ultima limited its holding to the use of a “rebuttable presumption” in administration of § 8(a) programs, in addressing the requirement that racially conscious government programs must have a “logical end point,” it cited Students for Fair Admissions and noted that “its reasoning is not limited to just [college admissions programs].” Id. at *15 n.8. Thus, the first opinion considering the impact of Students for Fair Admissions extended it beyond college admissions, reflecting the decision’s potential to fuel claims asserted under 42 U.S.C. § 1981, Title VII, and other anti-discrimination statutes.

3. Implications For Class Action Litigation

The Supreme Court’s decision has also caused private sector employers to question whether the ruling impacts their diversity, equity, and inclusion (DEI) initiatives. While politicians moved quickly to stake out positions on the issue, the plaintiffs’ class action bar and advocacy groups moved to take advantage of the uncertainty to line up a deluge of claims.

In the wake of Students for Fair Admissions, the Office for Federal Contractor Compliance Programs (OFCCP), the office responsible for overseeing affirmative action programs for federal contractors, promptly updated its website to state that its affirmative action programs are separate from those that educational institutions implemented to increase racial diversity in their student bodies. The OFCCP stated that “[t]here continue to be lawful and appropriate ways to foster equitable and inclusive work environments and recruit qualified workers of all backgrounds.”

Likewise, in response to the decision, EEOC Chair Charlotte Burrows, a Democratic appointee, promptly issued a statement declaring that the decision “does not address employer efforts to foster diverse and inclusive workforces or to engage the talents of all qualified workers, regardless of their background. It remains lawful for employers to implement diversity, equity, inclusion, and accessibility programs that seek to ensure workers of all backgrounds are afforded equal opportunity in the workplace.”

By contrast, Andrea Lucas, a Republican-appointed EEOC Commissioner, emphasized a different sentiment in a Fox News interview regarding the impact of Students for Fair Admissions: “I think this [decision] is going to be a wake-up call for employers. . . . Even though many lawyers don’t use the word affirmative action, it’s rampant today. . . . Pretty much everywhere there is a ton of pressure . . . across corporate America to take race-conscious . . . actions in employment law. That’s been illegal and it is still illegal.” As to potential challenges, she added: “I have noticed an increasing number of challenges to corporate DEI programs and I would expect that this decision is going to shine even more of a spotlight about how out of alignment some of those programs are. . . I expect that you are going to have a rising amount of challenges.”

Consistent with predictions, in the wake of the U.S. Supreme Court’s ruling, Republican Attorneys General from 13 states and Senator Tom Common of Arkansas sent a letter to the CEOs of Fortune 100 companies stating: “[T]oday’s major companies adopt explicitly . . . discriminatory practices [including], among other things, explicit racial quotas and preferences in hiring, recruiting, retention, promotion, and advancement.” They urged the companies to cease unlawful hiring practices. In response, 21 Democratic Attorneys General sent a letter condemning the Republican Attorneys General’s “attempt at intimidation”: “While we agree with our colleagues that “companies that engage in racial discrimination should and will face serious legal consequences…[w]e write to reassure you that corporate efforts to recruit diverse workforces and create inclusive work environments are legal and reduce corporate risk for claims of discrimination.”

On September 19, 2023, Students for Fair Admissions filed a lawsuit in the U.S. District Court for the Southern District of New York seeking to end race-conscious admissions at the U.S. Military Academy. . See Students for Fair Admissions v. U.S. Military Academy at West Point, et al., No. 7:23 Civ. 08262 (S.D.N.Y.). The group alleged that the admissions program at West Point, which takes race into account in its admissions process for future Army officers, is unconstitutional and unnecessary for a service that relies on soldiers following orders regardless of skin color.

The group filed a similar action against the U.S. Naval Academy on October 5, 2023, in the U.S. District Court for the District of Maryland. See Students for Fair Admissions v. U.S. Naval Academy, et al., No. 23-CV-2699 (D. Md.). The group seeks to prevent the Naval Academy in Annapolis, Maryland from taking race into account in the selection of an entering class of midshipmen. After filing suit, the group promptly sought a preliminary injunction.

On December 20, 2023, a federal judge denied a request to temporarily bar the Naval Academy from using race in its admissions process while the parties litigate the case. Students for Fair Admissions v. U.S. Naval Academy, No. 23-CV-2699, 2023 WL 8806668, at *1 (D. Md. Dec. 20, 2023) (noting that plaintiff’s requested injunctive relief “would undoubtedly alter the status quo,” and, at this stage, the parties have not developed a factual record from which the court can determine whether the Naval Academy’s admissions practices will survive strict scrutiny).

On October 4, 2023, another advocacy group, the America First Legal Foundation asked the EEOC to launch an investigation into Salesforce’s allegedly “unlawful employment practices” claiming that, through its programs promoting diversity and equality, it engaged in unlawful race-based and sex-based discrimination. The group has lodged similar accusations against than a dozen other companies alleging that they maintain programs that aim to increase workplace representation of women and minorities at the expense of White, heterosexual men. The American Alliance for Equal Rights filed lawsuits against additional companies, including law firms, claiming that their grants and programs excluded individuals based on their race.

Finally, on December 19, 2023, a Wisconsin attorney represented by the Wisconsin Institute for Law & Liberty filed suit alleging that a clerkship program maintained by the Wisconsin State Bar is unconstitutional because its eligibility requirements and selection processes discriminate among students based on various protected traits, primarily race. See Suhr v. Dietrich, et al., Case No. 23-CV-01697 (E.D. Wis.). He claims that members of Bar leadership are violating his First Amendment rights because they are using his mandatory dues as a practicing attorney to fund the program.

As these questions continue to percolate, and courts start to weave a patchwork quilt of rulings, such uncertainty is likely to fuel class action filings and settlements in the workplace class action space at an increasing rate. Companies should expect to see more governmental enforcement activity, litigation focused on alleged “reverse” discrimination, and claims challenging DEI initiatives.

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

Duane Morris Takeaways:  As we kick off 2024, we are pleased to announce the publication of the second annual edition of the Duane Morris Class Action Review this coming week. It is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting corporations, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breaches, EEOC-Initiated and government enforcement litigation, discrimination, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, wage & hour class and collective actions, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, the top class action settlements across all areas of law, and primers on both the Illinois Biometric Information Privacy Act and the California Private Attorney General Act. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2024.

This past year Employment Practices Liability Consultant Magazine (EPLiC) called the DMCAR “the Bible” on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.” It said that “The Review must-have resource for in-depth analysis of class actions in general and workplace litigation in particular.” EPLiC continued that “The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting Corporate America,” and “provides insight as to what companies and corporate counsel can expect . . . in terms of filings by the plaintiffs’ class action bar.”

The 2024 Review analyzes rulings from all state and federal courts in 23 areas of law. It is designed as a reader-friendly research tool that is easily accessible in hard copy and e-Book formats. Class action rulings from throughout the year are analyzed and organized into 23 chapters and 6 appendices for ease of analysis and reference.

Check back here in the coming week for your free download of the publication.