Duane Morris Takeaways: 2023 was a busy year for the Duane Morris Class Action Defense blog – it just recorded its 200th post of the year!!!!
Since our kick-off post, our data analytics show there have been over 34,000 views to blog posts, with thousands of our loyal subscribers reading about class action litigation developments. There are many highlights from this year’s 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 200 Posts In 2023
We launched the first 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 2024 Edition of the Review in January.
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!
Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Alex Karasik with their discussion of the American Tort Reform Association’s 2023-2024 Judicial Hellholes Report and what it signifies for corporate defendants in the coming year.
Jerry Maatman: Thank you for being here. I’m Jerry Maatman of Duane Morris, and welcome to our regular weekly Friday podcast, the Class Action Weekly Wire. I’m joined by my partner, Alex Karasik, who’s going to talk about the recent American Tort Reform Association Judicial Hellholes report.
Alex Karasik: Thank you, Jerry. Very happy to be here.
Jerry: Alex, we followed this report over the last decade. It’s always published in the second week of December, and it’s purpose is to identify jurisdictions, venues where corporate defendants have a difficult time defending themselves, either due to liberal judges, liberal discovery or class certification rules, or juries that tend to favor plaintiffs over defendants. What did you find interesting with this year’s Judicial Hellholes report?
Alex: Great question, Jerry. This is the first year ever that the ATRA ranked two jurisdictions at the top of the list, Georgia and Pennsylvania, and these are two very interesting states, and that major corporations do business in both of these states quite frequently. In fact, most major corporations in America have some sort of operation in each.
In Pennsylvania, the Pennsylvania Supreme Court and the Philadelphia Court of Common Pleas have proven to be two of the most challenging courts for defendants. In 2022, the Supreme Court of Pennsylvania eliminated the state’s venue rule for medical liability litigation which opened up the flood gates for personal injury lawyers to file medical liability claims in courts that they view as favorable. Pennsylvania also demonstrated there’s some eyebrow raising gigantic verdicts to plaintiffs, including a billion dollar reward against Mitsubishi in a product liability case. There have also been some problematic punitive damages rulings which can again lead to the plaintiffs’ counsel filing more and more in these courts. So Pennsylvania is definitely one of the eye popping states, especially being at the top of this list.
Georgia, which is the defending champion from 2022 report, made this list largely in part due to its massive $1.7 billion punitive damages award in a products liability case containing ethically questionable events and alleged bias court orders. The report noted that not much has changed in Georgia in 2023, and the courts are awarding massive verdicts and issuing liability expanding decisions left and right. So for employers who have business operations in Pennsylvania and Georgia, even though they might not traditionally think of these as bad courts to be in they definitely need to be paying attention to the huge verdicts that are coming out of those locales.
Jerry: I thought the inclusion of Georgia and Pennsylvania were quite interesting. Obviously, in our class action practice those are known as two epicenters where plaintiffs’ lawyers are apt to file cases, and most corporate defendants are doing business in those major jurisdictions. I know, Alex, that you practice on a nationwide basis and tend to go to those epicenters. What were some of the other jurisdictions that rounded out the top 10 this year in the ATRA’s Judicial Hellholes report?
Alex: The first noticeable jurisdiction that I saw on there was right here in our home turf Jerry, in Cook County, Illinois, in Chicago. You and I and our team routinely practices in biometric privacy defense actions here in cases brought under the Illinois Biometric Information Privacy Act, or the BIPA. and a few years ago, after the Illinois Supreme Court issued a ruling about no injury being required to proceed with these lawsuits and saying technical violations are enough. The plaintiffs’ bar has been particularly zealous in pursuing these BIPA class actions, and Cook County seems to be the home of those cases.
#3: Beyond Cook County and beyond Illinois, predictably California is on this list. California is a regular on this report. In California of course, the Private Attorneys General Act, or PAGA, litigation has resulted in a huge flow of lawsuits against employers. Also Prop 65 lawsuits, and just the overall volume of cases in California, including environmental and ESG cases, are also noteworthy. It’s not a surprise that it’s on this list.
#4: Another state that we routinely see on this list is New York. Most recently New York has some no injury consumer class action lawsuits and some massive verdicts that have caught the attention of the ATRA.
#5: South Carolina, which has had a robust asbestos litigation docket.
#6: Lansing, Michigan, particularly due to liability expanding decisions by the Michigan Supreme Court and some pro-plaintiff rulings out there.
#7: Louisiana – lots of insurance claim fraud litigation as well as some coastal litigation there. Louisiana is another one to keep an eye on.
#8: St. Louis, Missouri. Some interesting verdicts coming out there, including verdicts in the nuclear energy space.
So lots of different courts around the country as we see this and even some landlocked states in the middle of the country. So it’s very interesting to see where these courts are emerging as tough places for employers to be.
Jerry: I’ve always thought that class action litigation is a little bit like real estate – location, location, location is everything – and this report confirms anecdotal information that plaintiffs’ bar seeks favorable jurisdictions in areas where judges, juries, or the case laws aligned to make their cases certification friendly.
The American Tort Reform Association also characterized several jurisdictions as what it calls being on a ‘watch list.’ Are there some other jurisdictions that corporate counsel should be aware of and look to in 2024 as sometimes being problematic in terms of where the plaintiffs’ bar files more cases?
Alex: Yeah, Jerry, one of the new jurisdictions on the watch list that I thought was particularly surprising is Kentucky. The ATRA noted that Kentucky, which is again a newcomer to this list, had some issues with lawyers resorting to unique measures to secure wins, and the mention of Kentucky on here is somewhat of a surprise given that it’s not the typical courts we see – such as California and New York. New Jersey has a powerful trial bar, and New Jersey is increasingly becoming a place where employers need to pay attention if they get sued there, and even Texas, which is, you know, oftentimes thought to be an employer-friendly jurisdiction courts within Texas. But now the Court of Appeals in the Fifth District and the ATRA has opined that certain other courts in Texas are starting to become more pro-plaintiff, more product liability in more expansion of verdicts there. So we’re keeping an eye on Texas too, even though it typically tends to be an employer-friendly state for various state and federal jurisdictions.
But despite the gloom and doom, there are some jurisdictions that are improving according to the ATRA, are at least improving in terms of the prospects of employers being able to succeed in these places. For example, the New Hampshire and Delaware Supreme Courts rejected some no injury medical monitoring claims. So that’s a positive development for defendants there. The New Jersey appellate court in particular also had a notable case of discarding and proper expert testimony.
And I know we mentioned Texas had some other courts leading pro claim, if but the Texas Supreme Court rejected claims involving the manipulation of juries. So I think there’s certainly some hope in those places. And finally, the West Virginia Supreme Court recently placed reasonable limits on employer liability. So while a lot of the courts that are on this annual report are mainstays, there are a few new ones that are kind of catching our eye, but there’s also a few that are seemingly becoming a little bit more friendly for employers and defendants to defend cases in. So, as you mentioned Jerry, location, location, location and the keys to these locations ebbs and flows depending on various factors within those courts.
Jerry: Well, thank you Alex for your thoughts and analysis in this area. I definitely believe the report is a required read and an essential desk reference for corporate counsel and knowing the playing field where you’re sued, your judge, the case law – critical components to crafting essential defense strategies to defeat and defend these large cases. Well, thank you very much for joining us on this week’s Class Action Weekly Wire.
Alex: Thank you, Jerry. It was a pleasure to be here and thank you to all of our listeners. Stay tuned!
Duane Morris Takeaways: Annually 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 2023-2024 Report and for the first time in the history of the report, the ATRA ranked two jurisdictions at the top of the list – both Georgia and Pennsylvania, specifically the Pennsylvania Supreme Court and the Philadelphia Court of Common Pleas – as the most challengingvenues for defendants. 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 2023 Hellholes
In its recently released annual report, the ATRA identified 9 jurisdictions on its 2023 hellholes list – which, in order, include, tied at number one: (1) Georgia – (the defending “champion” from the top of the 2022 list, with massive verdicts bogging down business and more liability expanding decisions issued by the Georgia Supreme Court); and (1) Pennsylvania (especially in the Philadelphia Court of Common Pleas and the Supreme Court of Pennsylvania); (3) Cook County (as a “no-injury required” hotspot and lawsuits stemming from the Illinois Biometric Information Privacy Act); (4) California (with Proposition 65 lawsuits thriving and a huge overall volume of lawsuits, in addition to Private Attorney General Act (PAGA) litigation, lemon law litigation, and environmental hotbed); (5) New York (with “no-injury” consumer class action lawsuits and massive verdicts); (6) South Carolina (particularly in asbestos litigation, with problems related to bias against corporate defendants, unwarranted sanctions, low evidentiary requirements, liability expanding rulings, unfair trials, severe verdicts, and a willingness to overturn or modify jury verdicts to benefit plaintiffs); (7) Lansing, Michigan (particularly due to liability-expanding decisions by the Michigan Supreme Court and pro-plaintiff legislative activity); (8) Louisiana (with long-running costal litigation and insurance claim fraud litigation); and (9) St. Louis, Missouri (with focuses on junk science in the courtrooms and nuclear verdicts).
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 2024 “Watch List”
The ATRA also included 3 jurisdictions on its “watch list,” including Kentucky (the ATRA noted that Kentucky, as a newcomer to the list, has been reported as having some lawyers resorting to unethical measures to secure wins); 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 by the New Hampshire and Delaware Supreme Courts, which rejected no-injury medical monitoring claims, the New Jersey Appellate Court, which discarded improper expert testimony, the Texas Supreme Court, which rejected manipulation of juries, and the West Virginia Supreme Court, which placed reasonable limits on employer liability.
In addition to court actions, the ATRA also stated 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, Pennsylvania, Illinois, California, New York, South Carolina, Michigan, Louisiana, and Missouri 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.
Duane Morris Takeaway: Happy Holidays to our loyal readers of the Duane Morris Class Action Defense Blog! Our elves are busy at work this holiday season in wrapping up our start-of-the-year kick-off publication – the Duane Morris Class Action Review – 2024. We will go to press in early January, and launch the 2024 Review from our blog and our book launch website.
The 2024 Review builds on the success of last year’s edition. At over 500 pages, the 2024 Review has more analysis than ever before, with an analysis of over 1,100 class certification rulings from federal and state courts over this past year. The Review will be available for download as an E-Book too.
The Review is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting Corporate America, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breach, EEOC-Initiated and government enforcement litigation, employment 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, and the top class action settlement in each area. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2024.
We are humbled and honored by the recent review of the Duane Morris Class Action Review – 2023 by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said that “The Review must-have resource for in-depth analysis of class actions in general and workplace litigation in particular.” EPLiC continued that “The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting Corporate America. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, and the top class action settlement in a myriad of substantive areas. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2023 in terms of filings by the plaintiffs’ class action bar.”
We look forward to providing this year’s edition of the Review to all of our loyal readers in early January. Stay tuned and Happy Holidays!
By Gerald L. Maatman, Jr. and Christian J. Palacios
Duane Morris Takeaways: U.S. Magistrate Judge Joseph Marutollo’s recent report and recommendation – a novel order in the context of class action settlements – in the proceeding captioned In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Case No. 1:05-MD-01720, Doc. No. 9009 (E.D.N.Y. Nov. 28, 2023), highlights the risks associated with class action claims websites and the potential for bad actors to create fraudulent web pages to mislead claimants. Corporate defendants should take care to monitor online activity following the creation of a court-authorized settlement website in order to protect any class-wide settlement and claimants against potential fraudsters. Indeed, in a world where scammers are becoming increasingly more sophisticated through the use of technology, class action settlement websites may be the next frontier in the battle against cybercrime.
Background
After 15 years of contentious litigation, Visa and MasterCard settled a putative class action for $5.6 billion to resolve allegations that the credit card companies violated federal and state antitrust laws resulting in over 12 million merchants allegedly paying excessive fees to Visa and MasterCard. As is typical in class actions of this size, a court-authorized settlement website was created to accept claim submissions and provide claimants with details regarding the settlement agreement.
On November 28, 2023, Magistrate Judge Marutollo recommended that the Court order the website “settlement2023.org” (and any affiliate website) be taken down, as the operators of the Settlement2023.org entity, who remain unknown, were attempting to deceive putative class members into using the site through various schemes, including using fake voicemails from rap artist Snoop Dogg to convince users of its validity. According to Magistrate Judge Marutollo’s report, although the scam website ceased operation on November 21, 2023, it was unclear if other webpages remained open under different domain names that were also operated by the Settlement2023.org entity.
The Magistrate Judge’s Recommendation And Report
In addition to recommending the Court issue an order to take down of any and all remaining webpages that attempt to mimic the court-authorized settlement website, Magistrate Judge Marutollo also recommended that the owners and operators of the Settlement2023.org entity be required to identify themselves, and provide a list of all class members that signed up for its services, as well as give notice to would-be customers that any contract they entered into with the entity was now void. Finally, the Magistrate Judge requested that the Court be notified of any newly-detected websites and recommended that the court-authorized website be updated to alert those who may have been deceived by the settlement2023.org website.
Implications
Cybercriminals continue to capitalize on advances in technology to launch misinformation campaigns, and large class action settlements are in the cross-hairs of this emerging threat. Therefore, it is imperative that plaintiff and defendant-side representatives alike remain vigilant to protect class members from deception and safeguard the integrity of the class action settlement process.
Duane Morris Takeaways: USA-based companies are experiencing a deluge of class action litigation. Part of the increase is related to ESG-related claims (“Environmental, Social, and Governance”) involving environmental justice, product advertising, employment and DEI, corporate social responsibility, and investment practices. At the National Conference on Class Actions 2023 by BLG and the Quebec Bar Association in Montreal, Jerry Maatman of the Duane Morris Class Action Defense Group provided commentary on the state of U.S. class action litigation and how Asian, European, and U.S.-based corporations should be “looking around the corner” to ready themselves for new class action theories advancing ESG-related claims..
The National Conference on Class Actions in Montreal – with a robust two day agenda and roster of speakers from Canada, Europe, and Asia – examined diverse issues on cutting-edge class actions on a global basis. Subjects included the phenomenon of the “continuous evolution” of class action theories; securities fraud class action theories; collective, opt-in and opt-out representative actions in Canada and Europe; cross-jurisdictional class actions; and the dawn of ESG class actions filed by NGO’s, consumers, workers, and advocacy groups.
I had the privilege of speaking in Montreal on the current state of U.S. class action litigation, its impact on the global economy and litigation in non-U.S. jurisdictions, and the future of ESG-related class-wide litigation in America.
The plaintiffs’ class action bar in the United States is exceedingly innovative and in constant pursuit of “the next big then” insofar as potential liability is concerned for acts and omissions of Corporate America. Environmental, Social, and Governance issues – known as “ESG” – each of the verticals within ESG are topics on the mind of leading plaintiffs’ class action litigators. As ESG-related issues evolve and become increasingly more important to corporate stakeholders, class action litigation against companies is inevitable and has already begun to take shape. Factors driving these class actions include the new “social inflation” concepts coming out to the COVID-19 pandemic, as well as social movements coalescing around climate change, technological disruptions, and social justice.
The Class Action Context
In 2022, the plaintiffs’ class action bar filed, litigated, and settled class actions at a breathtaking pace. The aggregate totals of the top ten class action settlements – in areas as diverse as mass torts, consumer fraud, antitrust, civil rights, securities fraud, privacy, and employment-related claims – reached the highest historical totals in the history of American jurisprudence. Class actions and government enforcement litigation spiked to over $63 billion in settlement totals. As analyzed in our Duane Morris Class Action Review, the totals included $50.32 billion for products liability and mass tort, $8.5 billion for consumer fraud, $3.7 billion for antitrust, $3.25 billion for securities fraud, and $1.3 billion for civil rights. While the exact totals are not in yet for 2023, aggregate settlement numbers are nearly as high over the past 11 months.
As “success begets success’ in this litigation space, the plaintiffs’ bar is focused on areas of opportunity for litigation targets. ESG-related areas are a prime area of risk.
The ESG Context
Corporate ESG programs is in a state of constant evolution. Early iterations were heavily focused on corporate social responsibility (or “CSR”), with companies sponsoring initiatives that were intended to benefit their communities. They entailed things like employee volunteering, youth training, and charitable contributions as well as internal programs like recycling and employee affinity groups. These efforts were not particularly controversial.
In recent years, ESG programs have become more extensive and more deeply integrated with companies’ core business strategies, including strategies for avoiding risks, such as those presented by employment discrimination claims, the impacts of climate change, supply chain accountability, and cybersecurity and privacy. Companies and studies have increasingly framed ESG programs as contributing to shareholder value.
As ESG programs become larger and more integrated into a company’s business, so do the risks of attracting attention from regulators and private litigants.
Class Actions Are Coming From Multiple Quarters
While class action litigation can emanate from many sources, four areas in particular are of importance in the ESG space.
Shareholders: Lawsuits by shareholders regarding ESG matters are accelerating. Examples include claims that their stock holdings have lost value as a result of false disclosures about issues like sexual harassment allegations involving key executives, cybersecurity incidents, or environmental disasters. Even absent a stock drop, some shareholders have brought successful derivative suits focused on ESG issues. Of recent note, employees of corporations incorporated in Delaware who serve in officer roles may be sued for breach of the duty of oversight in the particular area over which they have responsibility, including oversight over workplace harassment policies. In its ruling in In Re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-CV-324 (Del. Ch. Jan. 25, 2023), the Delaware Court of Chancery determined that like directors, officers are subject to oversight claims. The ruling expands the scope of the rule established in the case of In Re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), which recognized the duty of oversight for directors. The decision will likely result in a flurry of litigation activity by the plaintiffs’ bar, as new cases will be filed alleging that officers in corporations who were responsible for overseeing human resource functions can be held liable for failing to properly oversee investigations of workplace misconduct such as sexual harassment.
Vendors and Business Partners: As companies face increasing demands to address ESG issues in their operations and throughout their supply chains, ESG requirements in commercial contracts are increasing in prevalence. Requirements imposed on vendors, suppliers, and partners – to ensure their operations do not introduce ESG risks (e.g., by using forced or child labor or employing unsustainable environmental practices) are becoming regular staples in a commercial context. In addition, as more companies report greenhouse gas emissions – and may soon be required by the SEC to report on them – they increasingly require companies in their supply chain to provide information about their own emissions. Furthermore, if the SEC’s proposed cybersecurity disclosure rules are enacted, companies also may require increased reporting regarding cybersecurity from vendors and others. These actions – and disclosures – provide fodder for “greenwashing” claims, where consumers claim that company statements about environmental or social aspects of their products are false and misleading. The theories in these class actions are expanding by encompassing allegations involving product statements as well as a company’s general statements about its commitment to sustainability.
State Consumer Protection and Employment Laws: The patchwork quilt of state laws create myriad causes of action for alleged false product advertising and other misleading marketing statements. The plaintiffs’ bar also has invoked statutes like the Trafficking Victims Protection Reauthorization Act to bring claims against companies for alleged failures to stop alleged human rights violations in their supply chains. These claims typically allege that the existence of company policies and programs aimed at helping end human rights violations are themselves a basis for liability. In making human capital management disclosures a part of ESG efforts (including whether to disclose numeric metrics or targets based on race or gender), companies may find themselves in a difficult place with respect to potential liability stemming from stated commitments to diversity and inclusion. On the one hand, companies that fail to achieve numeric targets they articulate (e.g., a certain percent or increase in diversity among management) may subject themselves to claims of having overpromised when discussing their future plans. Conversely, employers that achieve such targets may face “reverse discrimination” claims alleging that they abandoned race-based or gender-neutral employment practices to hit numbers set forth in their public statements.
Government Enforcement Litigation: Federal, state and local government regulators have taken multiple actions against companies based on their alleged participation in climate change, investments inconsistent with ESG goals, or alleged illegal activities. For instance, in 2019, the U.S. Department of Justice investigated auto companies for possible antitrust violations for agreeing with California to adopt emissions standards more restrictive than those established by federal law. While the investigation did not reveal wrongdoing, it underscores the creativity that proponents and opponents of ESG efforts can employ.
Implications For Corporate Decision-Makers
The creation, content, and implementation of ESG programs carries increasing litigation risks for corporations but it is unlikely that ESG programs will diminish is size or scale in the coming years given increased focus by Fortune 100s and 500s and increased regulation at the federal and state levels.
Sound planning, comprehensive legal compliance, and systematic auditing of ESG programs should be a key focus and process of all entities beginning or continuing their ESG journey. As more and more companies adopt some level of corporative ESG strategy planning, compliance and auditing are some of the key imperatives in this new world of exposure to diminish and limit one’s exposure.
By Eden E. Anderson, Gerald L. Maatman, Jr., and Jennifer A. Riley
Duane Morris Takeaways:In a case with significant consequences for employers, the California Supreme Court heard oral argument in Estrada v. Royalty Carpet Mills, No. S274340, on November 8, 2023. In Estrada, the Supreme Court will decide whether trial courts have inherent authority to ensure that PAGA claims will be manageable at trial, and to strike or narrow such claims if they cannot be managed appropriately. The Supreme Court signaled during oral argument its concerns with unwieldy PAGA claims that, if tried, would require a series of mini-trials over the course of years. The Supreme Court further expressed concern with ensuring that employers’ due process rights to present affirmative defenses are protected, potentially signaling the issuance of an employer-friendly decision. A decision is expected in the next three months, and has the potential to transform the prosecution and defense of PAGA litigation.
Case Background
Jorge Estrada filed a putative class action and PAGA action against his former employer asserting meal period violations. After two classes comprised of 157 individuals were certified, the parties tried the claims before a judge in a bench trial. The trial court ultimately decertified the classes, finding there were too many individualized issues to support class treatment. Although the trial court awarded relief to four individual plaintiffs, it dismissed the non-individual PAGA claim, concluding it was not manageable.
On appeal, Estrada argued that PAGA claims have no manageability requirement, and the Court of Appeal agreed in Estradav. Royalty Carpet Mills, Inc., 76 Cal.App.5th 685 (2022). The Court of Appeal reasoned that class action requirements do not apply in PAGA actions and, therefore, the manageability requirement rooted in class action procedure was inapplicable. Further, the Court of Appeal opined that “[a]llowing courts to dismiss PAGA claims based on manageability would interfere with PAGA’s express design as a law enforcement mechanism.” Id. at 712. The Court of Appeal acknowledged the difficulty that employers and trial courts face with PAGA claims involving thousands of allegedly aggrieved employees, each with unique factual circumstances, but concluded that dismissal for lack of manageability was not an available tool for a trial court to utilize.
Estrada is contrary to the holding in Wesson v. Staples the Office Superstore, LLC, 68 Cal.App.5th 746 (2021), and created a split in authority. In Wesson, the trial court struck a PAGA claim as unmanageable, and the Court of Appeal affirmed. The claims at issue in Wesson involved the alleged misclassification of 345 store managers. The employer’s exemption affirmative defense turned on individualized issues as to each manager’s performance of exempt versus non-exempt tasks, which varied based on a number of factors including store size, sales volume, staffing levels, labor budgets, store hours, customer traffic, all of which varied across the stores. The split in authority prompted the California Supreme Court to grant review in Estrada, but not Wesson.
Oral Argument At The California Supreme Court
During oral argument on November 8, 2023, several Justices, most prominently Justices Liu and Jenkins, expressed skepticism that a trial court’s inherent powers include the ability to outright strike or dismiss an entire PAGA action for lack of manageability.As Justice Liu commented, permitting trial courts such wide ranging power would shortchange the PAGA statute unless there is an overriding constitutional interest.
Several Justices also acknowledged that an employer has a due process right to present evidence to support its affirmative defenses and that, in certain cases, such evidence presentation might require a series of mini-trials over a period of years and wholly consume a trial court’s resources. Justice Kruger asked questions of Estrada’s counsel that suggested the illogical nature of these issues telling trial courts as to what to do in terms of mini-trials, and how unwieldy such PAGA-related problems would evolve under such a set of principles.
Justice Groban also expressed concern about a PAGA case where multiple Labor Code violations are alleged, hundreds or thousands of employees are at issue, and different work sites and different types of employees ranging from janitors to accountants are implicated. Justice Groban asked why, in that case, a trial court could not just limit the case to the accountants only. Other justices raised similar concerns, with Chief Justice Guerrero asking Estrada’s counsel why the answer is that this is all subject to appellate review.
Implications For Employers
The constellation of the comments from the justices seemingly signals that the California Court may hold that trial courts possess inherent authority to ensure an employer’s right to due process is safeguarded, which necessarily encompasses the right to gauge the manageability of PAGA claims and to narrow them as appropriate. As to whether such authority could include outright dismissal of an entire PAGA case, employers will have to wait and see.
Duane Morris Takeaways – In a significant development impacting both staffing agencies and their customers, recent legislative changes in Illinois propose to delay implementation of the equal pay provision of the Illinois Day and Temporary Labor Services Act (IDTLSA) until April 1, 2024. Further, recent guidance from the Illinois Department of Labor clarifies that the 90-day period which triggers the equal pay and benefit provision requires a temporary laborer to actually work 90 days for a client employer. A comprehensive breakdown of the 2023 amendments to the IDTLSA and the law’s significant new requirements can be found here.
Proposed Amendment And Recent Clarification To Equal Pay And Benefit Provision
On November 9, 2023, both houses of the Illinois General Assembly passed legislation that further amends Section 42 of the IDTLSA. The original IDTLSA amendments, passed on August 4, 2023, required staffing firms to provide day and temporary laborers with equal pay and benefits as workers employed directly by the client employer after 90 days of work. The new bill passed by the Illinois legislature, HB 3641, proposes to delay the start of the 90-day calculation period. Specifically, the approved bill adds language to the IDTLSA stating that “[t]he calculation of the 90 calendar days may not begin until April 1, 2024.” This proposed delay would provide employers and staffing agencies with additional time to ensure compliance with the IDTLSA’s equal pay requirements.
It is important to note that this amendment, if signed into law by Governor J. B. Pritzker, extends the timeline for compliance with the IDTLSA’s equal pay and benefits provision only. It does not, however, exempt employers and staffing agencies from adhering to other mandates of the IDTLSA, which took effect on August 4, 2023. These mandates include but are not limited to placement fee restrictions, required safety training, labor issue disclosures, and stringent recordkeeping requirements.
Further clarifying the scope of these requirements, the Illinois Department of Labor published a list of frequently asked questions following the amendments’ passage on August 4, 2023. One frequent question raised by employers and staffing agencies alike is whether the 90 days which entitle a temporary employee to equal pay and benefits is 90 days assigned at a client or 90 days actually worked. The IDOL’s recently published Day and Temporary Labor Service Agency FAQ (which can be found here) clarifies that the 90-day count “includes only days worked by a day or temporary laborer for the third-party client within a 12-month period, not simply the total duration of the contract or assignment.” Notably, even a minimal amount of time worked on any given day will count towards the 90-day total.
Implications for Employers and Staffing Agencies
This legislative update and further guidance from the Illinois Department of Labor underscore the dynamic nature of labor laws and the importance of staying informed. Given the IDTLSA’s extensive requirements and private right of action as an enforcement mechanism, employers and staffing agencies must remain vigilant in understanding and complying with the law’s evolving requirements to avoid potential legal complications.
Duane Morris Takeaway: In the first episode of the Duane Morris Business Development 360 podcast, show host Joe West, partner and Duane Morris Chief Diversity, Equity and Inclusion Officer, sits down with Jerry Maatman, partner and chair of Duane Morris Class Action Defense group, who shares the simple, fundamental approach to his thriving practice that has helped him become the preeminent class action defense attorney in the country.
Duane Morris Takeaways: USA-based companies are embracing use of artificial intelligence. At today’s Employment Practices Liability Insurance Conference in Chicago, Jerry Maatman of the Duane Morris Class Action Defense Group served as one of the co-hosts of the Conference, which addressed a broad range of topics on employment-related litigation and risk transfer strategies. Commissioner Keith Sonderling of the U.S. Equal Employment Opportunity Commission gave the keynote address at the Conference on the Legal Implications of Artificial Intelligence (“AI”) in the Workplace. Commission Sonderling shred his thoughts on the what, how, and why corporations should be “looking around the corner” to ready themselves for new class action theories and possible EEOC litigation over the use of AI.
This blog post summarizes some of the salient points from the keynote address. For corporate counsel and HR professionals, Commissioner Sonderling’s insights are invaluable.
The Context
AI in the workplace is ubiquitous and expanding rapidly. It is not only about replacing workers with robots, but instead is about the broader notion of using AI tools to assist with employment-related decisions. Commissioner Sonderling, more than any other EEOC official, has labored extensively in this area in terms of writing professional papers, giving speeches, and spearheading the Commission’s guidance in this area.
The Three Buckets Of AI
Commissioner Sonderling suggested that it is helpful to place AI-related questions into three buckets – including (i) the generative AI bucket; (ii) AI decision-making tools; and (iii) AI tools for employee monitoring and privacy.
Generative AI is starting to replace knowledge workers. That said, the decision to replace jobs may impact protected category groups disproportionally. Essentially, think of this as a high-tech RIF process. Plaintiffs’ class action lawyers or government enforcement litigators may assert that such decisions inevitably target older workers or less educated workers who are more diverse, especially if “last in are the first out” in terms of the replacement process. The bottom line is that there is lots of potential for disparate impact discrimination claims.
As to HR Departments using AI as decision-making tools, the challenge is the integrity of decision-making processes. Commissioner Sonderling asserted that the EEOC is focused on and concerned with AI bias and use of such tools to discriminate either intentionally or by disparate impact. This implicates both the design and type of use of the AI tools. He predicted that future lawsuits in this space would be more challenging and broader than ever before in terms of systemic lawsuits attacking an employer’s policies or practices.
Relative to AI tools for employee monitoring and privacy, Commission Sonderling suggested that states are getting into the mix by passing laws that regulate monitoring (e.g., Illinois through the Biometric Information Privacy Act). Federal legislation is likely years in the distance. Commissioner Sonderling opined that federal legislation may evolve in the copyright space as an initial first step.
The Takeaways For Employers
In his Q&A session at today’s Program, Commissioner Sonderling indicated that these evolving areas are likely to spike extensive litigation against employers in the future. He predicted that the plaintiffs’ class action bar will bring the lion’s share of the cases, as the EEOC has a limited budget and bandwidth to sue (e.g., in the 2023 Fiscal Year just ended on September 30, 2023, the Commission brought less than 150 lawsuits). He also opined that the EEOC will be focused on the employment decision at issue, so an employer’s reliance on the testing of an AI tool undertaken by a software vendor will not insulate an employer from potential liability for an allegedly discriminatory employment-related decision.
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