Category: General

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.

Check out today’s episode 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.

Episode Transcript

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!

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

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 challenging venues 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.

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

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.

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 Estrada v. 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.

By Gerald L. Maatman, Jr. and Gregory Tsonis

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.

Check out the debut episode here and subscribe to the show on Apple Podcasts.

By Gerald L. Maatman, Jr.

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.

Beauty’s Biggest Makeover In 85 Years – MoCRA Delivers Regulatory Overhaul and Class Action Concerns For Cosmetics Companies

 

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Kelly Bonner analyzing a new horizon on the consumer fraud landscape with their discussion of the Modernization of Cosmetics Regulation Act and its looming impact on class action litigation.

Check out today’s episode 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.

Episode Transcript

Jerry Maatman: Hello, loyal blog readers and welcome to our weekly installment of our Friday Podcast series called the Class Action Weekly Wire. Today I’m joined by my colleague Kelly Bonner, who is going to talk about some new developments in the cosmetics and fashion world. Welcome, Kelly.

Kelly Bonner: Thanks so much, Jerry. It’s great to be here.

Jerry: One of the areas that you’re a thought leader in is all things cosmetics and fashion. And I understand there’s a new law and regulation that we should be aware of in this space. What’s that all about?

Kelly: Absolutely. Well, thought leader – I’m going to have to tell my mom that one. But yes, the Modernization of Cosmetics Regulation Act, or MoCRA, as it’s colloquially referred to, was passed at the end of last year in December, and it is the most significant expansion of the FDA’s authority to regulate cosmetics since the passage of the Federal Food Drug and Cosmetics Act in 1938. So take a moment to think about it – that’s about 85 years.

MoCRA expands the federal government’s authority over cosmetics and creates significant new obligations for manufacturers, packers, and distributors of cosmetic products intended for sale in the United States. It has been referred to as a sea change, and it is hard to underestimate the impact MoCRA will have on cosmetics sold in the United States.

Until now, cosmetics have been regulated at the federal level under the Food Drug and Cosmetics Act, as well as the Fair Packaging and Labeling Act of 1966. Now with MoCRA, the FDA will be empowered to require facility registration, product listing, reporting of serious adverse events – with an expanded definition of what constitutes a serious adverse event, impose record keeping obligations, enforce mandatory recalls of cosmetic products, and regulations regarding good manufacturing practices.

Jerry: If you’re a corporate counsel, I would imagine that this is going to impact what you do on a day-to-day basis in terms of compliance. Do you have any views for our clients with respect to what they can expect on the compliance front?

Kelly: Yes, Jerry, so since MoCRA’s passage in December 2022, cosmetics companies and personal care companies have been grappling with how to approach MoCRA. MoCRA introduces significant changes for businesses operating in the cosmetics industry. For example, it requires any facility that manufactures or processes cosmetic products intended for sale in the United States to register with the FDA and to list products that are sold. The FDA anticipates that its portal for registration and product listing will go live sometime this month, and they’ve released certain guidance on it. But again, FDA is looking at an avalanche of information.

MoCRA also requires new labeling requirements in products, including providing contact information for serious adverse event reporting; it expands the definition of serious adverse event; it imposes greater record keeping obligations regarding product safety documenting and following up on serious adverse events. These are significant obligations that companies will need to comply with. And a lot of these obligations fall on what MoCRA identifies as a “responsible person.” It’s important to remember that MoCRA’s definition of a responsible person is not the same as a responsible person under EU regulations which were previously in existence and really kind of came up with this idea of what we’re responsible person. So it’s important to be versed in what the law requires, and how it is different from what the EU requires.

Jerry: Sounds to me like in the class action space this is going to create lots of regulations, lots of obligations, lots of duties when it comes to consumer fraud class actions. Do you see this new statute as impacting the class action world?

Kelly: Jerry, yes, this statute is going to impact the class action world. MoCRA, significantly, does not provide federal preemption for state consumer protection or products liability claims. Nor does it alter the existing regulatory framework with the relationship between the FTC – the Federal Trade Commission – and the FDA over what kinds of claims personal care products can make. So already, Jerry, what you’re seeing are plaintiffs bringing class action lawsuits over companies’ usage of terms like “clean,” “natural,” “non-toxic,” under fraud theories, or price premium theories. There may be additional opportunities for plaintiffs to obtain information through MoCRA’s required product ingredient listings and new disclosures that are required under MoCRA. Additionally, the record keeping and adverse event reporting aspect of MoCRA will provide plaintiffs with additional fodder to scrutinize the sufficiency of companies’ safety substantiation data and risk assessment processes to allege that products are not actually “safe” or “non-toxic” or “all natural” or do not contain synthetic ingredients. And so given the continued regulatory ambiguity of what constitutes sufficient safety substantiation, as well as what constitutes natural or clean beauty, companies should expect that their testing and compliance practices and their claims will be scrutinized, particularly in litigation discovery and by plaintiffs’ experts.

Jerry: I had the privilege last week of attending and presenting at a class action conference in London with European and Asian lawyers and in-house counsel, and the talk of the conference was on the emergence of consumer fraud claims throughout Europe and Asia. Do you see this new legislation is contributing to a resurgence of class actions in the consumer fraud area, and especially when it comes to what is known as “forever chemicals”?

Kelly: It’s so interesting that you should mention this, Jerry. Earlier this year I was interviewed by WWD because they wanted to talk about what they saw as a surge in consumer class actions bringing claims involving the beauty space, and they wondered what was really driving that. And you know, I think yes – you are really going to see MoCRA just providing a new ground for plaintiffs to pursue claims like these, particularly when it comes to PFAS. Now, what you refer to as PFAS – or perfluoroalkyl and polyfluoroalkyl substances – a class of chemicals that are sometimes intentionally added in cosmetics and personal care products to make it more spreadable essentially, or sometimes they’re unintentionally present, due to their presence in water that was used to prepare the cosmetic. So one of the key provisions of MoCRA charges the FDA to issue a report by the end of 2025 on the use of PFAS in cosmetics and potential human health effects. So obviously that report is going to be of great interest to the plaintiffs’ bar. Again, MoCRA also doesn’t provide any guidance for companies seeking to avoid class action claims for allegedly false or misleading claims and labeling. And so it really does provide new ground for an aggressive plaintiffs’ bar which will seek to use MoCRA’s obligations, and any perceived non-compliance, as the basis for state law claims.

Jerry: Kelly, thank you so much for your analysis of MoCRA and this new area. I think this is definitely not the last time we’ll be hearing about this issue, and it’ll be on the radar of corporate counsel. So thank you so much for lending your thought leadership today on our weekly podcast.

Kelly: Anytime, Jerry. Thank you so much.

Jerry: Have a great day everyone.