Category: General

 

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jennifer Riley and Alex Karasik with their analysis of privacy class action trends and rulings from 2022, and predictions for what 2023 may bring for Corporate America given key developments in the BIPA class action litigation landscape so far this year. We hope you enjoy the episode.

Episode Transcript

Jennifer Riley: Welcome listeners, thank you for joining us for the latest edition of the Class Action Weekly Wire. We’re here this week to talk about privacy class actions and I’m joined by my colleague Alex Karasik. Alex can you tell our listeners how this area of privacy class actions has evolved over the last few years?

Alex Karasik: Thanks, Jen. Well, the BIPA statute was relatively dormant since it became law in 2008, and since then the number of BIPA class actions has exploded. In addition, if other states start enacting similar statutes regarding biometric privacy we think there will be a similar uptick in class actions for those states throughout the country, so this is definitely an emerging area of law.

Jennifer: The plaintiffs’ class action bar has sought to capitalize in this area on ambiguous statutory provisions, plus slow to develop compliance programs, coupled with stiff statutory penalties and fee shifting, to really leverage some sizable settlements in this area.

Alex: And adding to this minefield, lots of states are considering similar copycat statutes which can make it difficult for employers if you have operations in two different states that have two different laws, plus there’s been some grumblings of a potential federal statute – while none of those have come to fruition yet it’s something that they should definitely pay attention for.

Jennifer: Let’s turn to some of the key rulings in this area both this year and in 2022. Alex, what are some of the key rulings that come to mind?

Alex: In February 2023, the Illinois Supreme Court issued two long-awaited rulings that will undoubtedly shape the BIPA landscape. In Tims, et al. v. Black Horse Carriers, the Illinois Supreme Court held that a five-year statute of limitation applies to the BIPA. The statute itself doesn’t have an express limitations, so some advocates were arguing that a one-year or two-year statute of limitations should apply, but this ruling undoubtedly increases exposure for BIPA cases. In addition the Illinois Supreme Court held in Cothron, et al. v. White Castle that each individual scan is a violation of the BIPA – as opposed to being a per person basis – so once again, if multiple employees are scanning in and out of a factory or office each day, each scan being a violation will again substantially increase potential damages in this space.

Jennifer: Thanks, Alex – what kind of impact do you think these rulings are apt to have on future privacy class action litigation?

Alex: That’s an excellent question, Jen. I think that these rulings are going to increase the plaintiffs’ bar appetite knowing that there’s substantial damages to be had in this space, but at the same time one has to wonder – if it’s a per scan, each violation – plus a five-year statute of limitation – with damages now creeping into the millions and billions of dollars, is it even going to be feasible for plaintiffs to recover on a per scan basis? So that’s something to keep in mind, as I doubt plaintiffs’ counsel will want to litigate these cases in bankruptcy court against businesses. It’ll also be interesting to see the different defenses that an employer or company might offer when defending one of these cases in terms of the constitutionality of such damages, so it remains to be seen how these new goal posts that have been set by the Illinois Supreme Court in February of 2023 will impact both how these cases are tried and resolved, but there’s definitely going to be some big changes on the forefront.

Jennifer: Wow, no wonder this area has really exploded over the past year. Are there any other impactful or interesting rulings that come to mind from 2022-2023?

Alex: Absolutely, Jen. The first BIPA jury trial occurred in 2022 in the fall, and that left a huge impression in this space. In that case, Rogers, et al. v.  BNSF Railway, approximately 45,000 truckers sued a railway company in terms of BIPA violations. There the jury found there were approximately 45,600 discrete violations of the BIPA, and at that point, after entering judgment, the damages were $228 million dollars – that’s a lot of money, and the jury there didn’t sympathize with the employer’s arguments, and awarded the full willful damages available under the statute. So I think that for businesses and employers that are thinking about trying one of these cases in front of a jury pool in Chicago or potentially beyond – there’s a lot of risk there.

Jennifer: Thanks, Alex – that is some serious money awarded by the jury in that case. We’ll be sure to keep our listeners up to date on happenings in that matter. Are there any other important rulings that our listeners should know about?

Alex: Yeah, absolutely Jen, there are some cases that come to mind that are trying new novel approaches to the BIPA statute. First, in Wilks, et al. v. Brainshark, this case involved the facial recognition in recording of presentations. In the traditional BIPA context, especially in the early years when these class actions first started to get filed, it would predominantly involve allegations of thumbprint or fingerprint scanning, but I think you’re starting to see more in the facial recognition space. Jen, were there any rulings from 2022 that you found interesting?

Jennifer: Thanks, Alex – one that comes to mind immediately is a ruling called Kukovec, et al. v. The Estée Lauder Companies, Inc. That was an interesting ruling because it involved try-on technology. The plaintiffs brought suit against The Estée Lauder Companies alleging that their try-on tool collected or captured facial geometry, and that the defendants had failed to get users consent and failed to inform users regarding the collection and the retention of such data. The defendant in that case moved to dismiss on various grounds.

First, the defendant moved to dismiss on the ground that the court lacked personal jurisdiction – this is an interesting argument because the defendant said the tool was available to Illinois consumers, but more as a passive tool that was available and therefore there wasn’t this purposeful availment of the jurisdiction. The court disagreed and said that the try-on tool was part of the defendant’s marketing and sales strategy, and that the consumers actually had the option to use buttons, to add products to the cart, to send products as gifts through the website, so it was sufficient for personal jurisdiction – and the court noted that the defendant’s argument took an overly narrow view.

Secondly, the defendant argued that venue was improper because there was an arbitration agreement. This is interesting as well because the defendant claimed that the arbitration agreement was part of the terms of use for its web page, but the court disagreed and said that the plaintiff lacked constructive knowledge or there was a lack of evidence that the plaintiff had constructive knowledge of the arbitration agreement, and therefore a lack of evidence the plaintiff accepted those terms.

Third, the defendant sought to dismiss the complaint on the grounds that the plaintiff had alleged only conclusory statements and had failed to allege facts and support of allegations that biometric information was actually collected. The court disagreed and found the pleading sufficient to meet the pleading standards, and that the plaintiff had alleged enough to infer that the defendant had captured biometric information. However, the court ruled that since recklessness and intentionality requires a specific state of mind, that the plaintiff had failed to allege facts in support of those claims, and the court ran a dismissal of those.

Finally, the defendant contended that because the plaintiff had not used the websites of four other brands that also utilize the virtual try-on tool, that the plaintiff lacks standing to represent a class of consumers as to those websites. The court said that argument was premature because the plaintiff had not actually moved to certify a class yet. So that is an interesting ruling, and I think as the popularity of try on tools and technologies continues to grow, we’re going to see more lawsuits attacking similar products and similar technologies fueling or helping to fuel that growth in the biometric data privacy front.

Alex: Wow, that’s a great example Jen, and I can imagine that in the Renaissance Era of e-commerce, virtual try-on tools become more and more popular as people seek to purchase goods and retail products online and we’re going to see a lot more of those from the plaintiffs’ bar in the near future.

Jennifer: How about top settlements, Alex, was the plaintiffs’ bar able to capture big dollars for plaintiffs in privacy class actions over the past year?

Alex: Oh yeah – there’s been a lot of big money dollars in BIPA settlements! There’s a Google settlement for $100 million and a TikTok settlement for $92 million that lead the way, and in fact over the whole tenure of the BIPA statute there’s been over a billion dollars recovered under this law, so it’s absolutely worth a lot of money to employers and businesses – and I think these eye-popping numbers alone should be reason to convince companies of the potential financial risk of not complying with the BIPA.

Jennifer: Thanks, Alex. I think one of our key takeaways here is that it’s very important for companies and corporate counsel to implement policies and procedures that fully comply with the BIPA and other state and federal privacy regulations and statutes. Companies should implement proper safeguards, they should implement consent processes for the collection and retention of biometric data – particularly with respect to Illinois consumers – and in other states either with or considering similar legislation. Companies should also take heed of how they notify users and obtain their consent before collection of biometric information.

Alex: Thank you Jen for your time today, and thank you to our listeners for paying attention to our BIPA and privacy presentation. This is obviously a rapidly emerging area of law that absolutely will continue to evolve day by day in the near future.

Jennifer: Thank you Alex, thank you for joining us and thank you to our listeners for viewing another episode of the Class Action Weekly Wire – we’ll see you next week.

Alex: See you soon!

By James J. Coster and Nelson Stewart

Duane Morris Takeways: The U.S. District Court for the Eastern District of New York recently declined to reverse a Magistrate Judge’s denial of a motion seeking to appoint two investors as lead plaintiffs, and their attorneys as class counsel, in a securities fraud class action where the combined losses alleged by the two investors totaled just $323.20. In Guo v. Tyson Foods, Inc., et al, 1:21-CV-00552 (E.D.N.Y. June 1, 2023), putative class members alleged Tyson Foods, Inc. had misled investors about the adequacy of its Covid-19 safety measures, which resulted in a decline of the company’s share price when the misleading information was publicly disclosed. Magistrate Judge James R. Cho found that the movants’ losses were not sufficient to demonstrate an interest in the outcome of the litigation that would ensure compliance with the vigorous advocacy requirements of Rule 23 of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). In denying the motion on Rule 72 review, District Judge Anne M. Donnelly held that the decision was comprehensive, and not “clearly erroneous” or “contrary to law,” as required by the highly deferential standard of review for non-dispositive motions under Rule 72(a). The Court’s refusal to reverse the decision illustrates that a mere prima facie showing of certain damages may not be sufficient to satisfy the adequacy requirements of the PSLRA.

Background

Plaintiff Mingxue Guo filed a putative class action against Tyson asserting violations of the Securities Exchange Act of 1934. The complaint alleged that Tyson and certain officers and directors of the company had failed to disclose the financial implications of its purportedly inadequate Covid-19 safety protocols in publicly filed documents to the SEC between March 13, 2020 and November 16, 2020. On December 15, 2020, the Comptroller of New York City called on the SEC to investigate Tyson and its alleged failure to implement proper safety protocols. Tyson’s share price dropped 2.5%, or $1.78, per share on December 15, 2020.

Tyson investors Chen Porat and Keagan Marcus filed a motion that sought their appointment as lead plaintiffs, and approval of their attorneys as class counsel. Porat alleged losses in the amount of $156.25 and Marcus allegedly incurred losses of $166.95. None of the parties had identified a class member that suffered a greater financial loss and no other member of the class had filed a competing motion for appointment as lead Plaintiff within the required time frame. Porat and Marcus argued that courts typically approve lead Plaintiffs with losses similar to, or less than, the losses they incurred. As discussed in Judge Cho’s decision, a purported class member seeking appointment as lead Plaintiff in a securities class action must meet the typicality and adequacy requirements under Rule 23 of the PSLRA. Porat and Marcus were found to have met the typicality requirement because both parties asserted claims that were based on the same facts concerning the alleged misrepresentations as other class members during the same period. With respect to the adequacy requirement, however, they had not established that they would fairly and adequately protect the interests of the class. Judge Cho held that the PSLRA requires lead Plaintiffs to have a significant financial interest in a class action to avoid Plaintiffs from simply acting as an instrument of counsel, who may have recruited them for that purpose. This requirement incentivizes the lead Plaintiff to monitor and control the litigation in a fashion that will best serve the interests of all the class members. Because Porat and Marcus lacked a significant financial interest in the outcome of the litigation, the Court opined that they failed to satisfy the requirements of the PSLRA and their motion was denied. The ruling concluded that that the case should proceed on an individual basis.

The Court’s Decision

In denying the Rule 72 objections to reverse Magistrate Judge Cho’s decision, Judge Donnelly noted that the deferential standard of review for non-dispositive motions under Rule 72(a) created a heavy burden for a party seeking reversal. The decision of a Magistrate Judge denying or approving a lead Plaintiff is non-dispositive. Thus, a movant must demonstrate that the Magistrate Judge’s decision denying appointment of proposed lead Plaintiff was “clearly erroneous” or “contrary to law,” and the Court found that Porat and Marcus had not met that burden. Porat and Marcus had argued that Magistrate Judge Cho’s ruling was erroneous because it would preclude small class actions by appointing only lead Plaintiffs who had suffered a large loss, thereby creating a loss requirement that does not exist under the PSLRA. They further argued that a small loss should not preclude a prima facie showing of adequacy.

Judge Donnelly held that the lack of a specific minimum loss requirement in the PSLRA does not alter the broad discretion the statute grants to the courts in determining the adequacy of a lead Plaintiff. Judge Donnelly opined that the Magistrate Judge’s decision was comprehensive and in accordance with the exacting requirements of the PSLRA. The Court determined that the necessity of a significant financial interest advanced the historical purpose of the PSLRA, and the decision was in line with a number of prior case law authorities that denied motions of proposed lead Plaintiffs on similar grounds.

Key Takeaways

The existence of some measure of damages may not be sufficient to meet the adequacy requirements of the PSLRA unless a proposed lead Plaintiff can demonstrate an interest that will incentivize forceful advocacy on behalf of the entire class. Clearly, damages of $323 is not enough. The decision in Guo indicates that proving adequacy will often necessitate a substantial financial stake in a litigation to serve the restrictive purposes of the PSLRA. Class members who seek appointment as lead Plaintiff without the requisite financial interest will also face a very narrow standard of review if their motion is denied.

By Gerald L. Maatman, Jr., Brad A. Molotsky, and Gregory S. Slotnick

Duane Morris Takeaways: In Zanetich v. Walmart, Inc., Case No. 1:22-CV-05387 (D.N.J. May 25, 2023), a case of first impression, the Judge Christine O’Hearn of the U.S. District Court for the District of New Jersey found the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“CREAMMA”), the 2021 law legalizing recreational marijuana use in the state, does not allow job applicants and employees to file lawsuits alleging adverse actions based on marijuana use.  The ruling is a boon for employers across New Jersey, who will not face the possibility of private lawsuits filed by applicants and employees based on adverse employment actions by employers for their workers’ off-duty marijuana use.  However, the victory may be short-lived, as the Court invited re-examination of the law by way of legislative amendment, enforcement guidance, or New Jersey state court clarity on application of the state’s common law “failure to hire” theory to claims under the CREAMMA.

Case Background

On January 21, 2022, the plaintiff applied for a job with defendants in the Asset Protection Department in one of defendants’ New Jersey locations.  A few days after his January 25, 2022 interview, on January 28, 2022, defendants offered plaintiff the job, beginning on February 7, 2022, “subject to him submitting to and passing a drug test.” Id. at 2. Plaintiff alleged that at the time, the defendants had a Drug & Alcohol Policy that stated “any applicant or associate who tests positive for illegal drug use may be ineligible for employment,” which included marijuana. Id.

After plaintiff took a drug test on January 21, 2022 and tested positive for marijuana, he contacted defendants on February 10, 2022 for an update on his application.  Two days later, defendants informed Plaintiff that his job offer would be rescinded.  When plaintiff asked for the reason for this decision, he was advised it was because he had tested positive for marijuana.

On June 13, 2022, plaintiff filed a class action lawsuit on behalf of himself and others similarly situated asserting two claims, including: (i) violation of the CREAMMA; and (ii) failure to hire and/or termination in violation of New Jersey public policy.

The defendants filed a motion to dismiss the complaint, arguing that the CREAMMA does not provide a private right of action and that New Jersey common law does not recognize a cause of action based on an employer’s failure to hire.  In response, the plaintiff argued that the CREAMMA provides for an implied private cause of action and that his common law cause of action was cognizable as both a wrongful termination and failure to hire.

The Court granted the defendants’ motion in its entirety, dismissing both claims.

The Court’s Ruling

The Court noted the parties agreed there is no explicit private cause of action in the CREAMMA and undertook a three-part analysis to determine whether the CREAMMA included an implied private cause of action.

First, the Court held that the CREAMMA’s focus was on regulating the manufacture, sale, and use of marijuana in NJ – not expanding employment rights for applicants and employees.  However, it ultimately read the statute liberally to include plaintiff in the class of persons for whose special benefit the statute was enacted.  This factor, the Court concluded, weighed in favor of an implied private cause of action.

Second, the Court looked to legislative intent. It reasoned that other employment statutes adopted by the NJ legislature, such as the Conscientious Employee Protection and the New Jersey Law Against Discrimination, explicitly provide for a private cause of action.  The Court found that the other employment statutes also expressly provide for a remedy, and that the CREAMMA did not provide either, which weighed against a private cause of action.  The Court opined that unlike the CREAMMA and the New Jersey Cannabis Regulatory Commission (“CRC”), cases from other states finding an implied private cause of action in similar employment-related provisions in other state’s medical marijuana statutes involved statutes that are distinct in that no agency or commission was created and tasked with enforcement of the statute.  In other words, creation of the CRC and tasking it to handle all aspects of enforcing the CREAMMA differentiated New Jersey from the other states.

Third, the Court determined that the legislative scheme of the CREAMMA does not support an inference that it provides an implied private cause of action given its delegation of authority to the CRC to create regulations and enforce violations.  As such, the Court dismissed plaintiff’s CREAMMA claim.

Finally, the Court held that New Jersey common law does not provide a cause of action for failure to hire, and that plaintiff was only offered a job subject to his passing a drug test; he was never employed by defendants.  Since plaintiff was never employed by defendants, the Court concluded that he failed to state a wrongful discharge claim because a failure to hire claim cannot support a common law wrongful discharge claim under New Jersey law.

Implications Of The Decision

For the moment, businesses in New Jersey have a viable defense to individual or class action claims brought by recreational marijuana users for adverse actions taken against them due to their use.  This includes the ability to rescind conditional job offers to applicants who fail a drug test for marijuana.  However, the Court noted that its decision left the plaintiff without a remedy and rendered the language of the CREAMMA employment provision at issue “meaningless.”  The Court called on the New Jersey legislature, the CRC, or the New Jersey Supreme Court to act.  The Court even mapped out suggestions to allow workers to sue for remedial relief, including: (i) amending the law; (ii) adopting regulations allowing the CRC to enforce the provision; or (iii) issuance of a New Jersey Supreme Court decision finding it appropriate to depart from prior New Jersey common law rejecting failure to hire claims based on the CREAMMA’s statutory language. In fact, shortly after the Court published its opinion, plaintiff appealed the decision to the Third Circuit Court of Appeals.  As a result, New Jersey-based employers should stay tuned to the appeal and proceed with caution before taking adverse action based on applicant or employee recreational marijuana use.

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

Duane Morris Takeaway: In its review of the Duane Morris Class Action Review – 2023, EPLiC Magazine called it the “the Bible” on class action litigation and an essential desk reference for business executives, corporate counsel, and human resources professionals.

We are humbled and honored by the recent review of the first edition 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.”

So how was it done?

The answer is pretty simple – we live, eat, and breathe class action law 24/7/365.

Every day, morning and evening, we check the previous day’s filings of class action rulings relative to antitrust class actions, appeals in class actions, arbitration issues in class actions, Class Action Fairness Act issues in class actions, civil rights class actions, consumer fraud class actions, data breach class actions, EEOC-initiated litigation, employment discrimination class actions, Employee Retirement Income Security Act class actions, Fair Credit Reporting Act class actions, wage & hour class actions, labor class actions, privacy class actions, procedural issues in class actions, product liability & mass tort class actions, Racketeer Influenced and Corrupt Organization Act class actions, securities fraud class actions, settlement issues in class actions, state court class actions, Telephone Consumer Protection Act class actions, and Worker Adjustment and Retraining Act class actions. We conduct searches on a national basis, in federal courts and all 50 states. Then we read and analyze every ruling on Rule 23 certification motions and subsidiary issues throughout federal and state trial and appellate courts. The information is organized in our customized database, which is used to provide the Review’s one-of-a-kind analysis and commentary.

The result is a compendium of class action law unlike any other. Thanks for the kudos EPLiC – we sincerely appreciate it!

We look forward to providing the 2024 Review to all of our loyal readers in early January. In the meantime, look for our first-ever Mid-Year Update coming at the beginning of July!

Duane Morris Takeaway:  This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jennifer Riley and Mike DeMarino and associate Aaron Bauer with their analysis of the Fair Credit Reporting Act class action litigation trends and developments in 2022 and what to expect in 2023. We hope you enjoy it.

By Gerald L. Maatman, Jr. and Jeffrey R. Zohn

Duane Morris Takeaways: More than 10 years after Plaintiffs filed suit in Carlson et al. v. Northrop Grumman Severance Plan et al., No. 22-1764, 2023 WL 3299703 (7th Cir. May 8, 2023), the Seventh Circuit put to rest the idea that a sponsor of an ERISA welfare-benefit plan is a fiduciary of the plan’s participants.  Instead, per the ruling in Carlson, the sponsor is obligated to follow the terms of the plan as written.  When the plan grants the sponsor discretion to determine who qualifies, the sponsor may exercise that discretion and may even change the way it exercises that discretion over time.  If the plan does not grant the sponsor any such discretion, the sponsor must abide by the precise terms of the plan. The Seventh Circuit’s decision is well worth a read by corporate counsel, as it provides some bright-line tests for defense of class action claims brought under the ERISA.

Background And Context

Enacted in 1974, the Employee Retirement Income Security Act (“ERISA”) is the culmination of a long line of legislation concerned with the labor and tax aspects of employee benefit plans.  In light of the often rapidly evolving retirement and health care needs of employees and their families, the ERISA has been subject to numerous amendments since its enactment nearly 50 years ago.  Nonetheless, its primary aim has always been to protect the interests of participants and their beneficiaries in employee benefit plans.

The ERISA sets minimum standards for most voluntarily established retirement plans (such as 401(k) plans) and welfare benefit plans (such as medical benefits).  These plans must also meet certain ERISA-based standards in order to qualify for favorable tax treatment.

Importantly, the ERISA explicitly empowers a participant of an employee benefit plan – including former employees in certain circumstances – to bring a civil action to recover benefits due or to clarify rights under the terms of the plan. More often than not, such litigation takes the form of a class action.

Case Background

On April 9, 2013, Plaintiffs filed a class action lawsuit against their former employer – Northrop Grumman (“Northrop”) – seeking payment of severance benefits Plaintiffs alleged Northrop owed them when they were laid off in 2012.

The plain language of Northrop’s Severance Plan (the “Plan”) grants the HR Department discretion to determine who qualifies for benefits under the Plan and may notify recipients of their benefits via an HR Memo.  Plaintiffs and the other class members did not receive the HR Memo upon being laid off and, therefore, did not receive benefits under the Plan.

After class certification, the U.S. District Court for the Northern District of Illinois granted Northrop’s motion for summary judgment. It held that the Plan’s language gives the HR Department discretion to choose who, if anyone, gets severance pay on being laid off.  Carlson et al. v. Northrop Grumman Severance Plan et al., No. 13-CV-02635, 2022 WL 971873 (N.D. Ill. Mar. 31, 2022).  The district court further opined that the ERISA does not prevent an ERISA severance plan from possessing and exercising discretion to determine recipients.  Plaintiffs appealed to the Seventh Circuit.

The Seventh Circuit’s Ruling

On May 8, 2023, the U.S. Court of Appeals for the Seventh Circuit affirmed the grant of summary judgment in favor of Northrop.

The Seventh Circuit explained that the terms of ERISA welfare-benefit plans always control.  While plan administrators must act in a fiduciary capacity when exercising discretion, the entities that establish the plans do not have the same obligation.  Instead, those entities are entitled to act in their own interests and need not provide participants any vesting interests.

“A person possessing discretion may change the way that discretion is exercised,” according to the Seventh Circuit.  Id. at 2. As such, if a sponsor is granted discretion in determining who qualifies for plan benefits, it is not required to treat all participants equally, even if “deliberate past practice, [] mistaken past practice, and [] mistaken efforts to describe the benefits in writing” suggest otherwise. Id. at 3.

However, that is only true when the sponsor does possess such discretion.  An ERISA sponsor still must apply a pension or welfare plan as written.  The terms of the plan itself always control.  No administrators or clerical employees can vary its terms.

In Carlson, the terms of the Plan granted Northrop’s HR Department the discretion to provide severance benefits to laid off employees, including Plaintiffs, by delivering them an HR Memo.  Plaintiffs did not receive severance benefits or an HR Memo.  The Seventh Circuit did not find any relevance in Plaintiffs’ position that, prior to October 2011, every laid-off employee who qualified for severance benefits received the HR Memo.  Even if Plaintiffs’ position was factually accurate, which Northrop denied, the Seventh Circuit reasoned that Northrop was still entitled to change its approach and select which, if any, laid off employees would receive severance benefits.

The Seventh Circuit was also unpersuaded by Plaintiffs’ argument that Northrop interfered with Plaintiffs’ rights (a position which effectively argues that Northrop’s HR Department is a fiduciary of the Plan’s participants).  The Seventh Circuit concluded that it is not.  Instead, Northrop’s HR Department was properly exercising the discretion given to it under the plain terms of the Plan.

Implications For Employers

The Carlson decision indicates that courts will continue to honor the terms of an ERISA welfare-benefit plan based on the plain terms of the plan (and not based on past practices or even written plan summaries).

Nonetheless, Carlson is not an invitation for plan sponsors to blindly exercise discretion in determining qualification of ERISA welfare-benefit plans.  Instead, it serves as a reminder that sponsors do not have unlimited authority in the execution of the plan.  Sponsors must follow the terms of the plan as written.  If the plan does not grant discretion in the execution of the plan, then no discretion may be exercised.  If discretion is granted, then it must be exercised carefully and within the bounds of the grant.

Therefore, in deciding whether a plan applies to certain employees, employers should carefully review the terms of the plan rather than merely rely on past practices or plan summaries.

Duane Morris Takeaway:  This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Jennifer Riley with their analysis of the employment discrimination class action litigation trends and developments in 2022 and what to expect in 2023. We hope you enjoy it.

 

Duane Morris Takeaways: Since its inception in September of 2022, the Duane Morris Class Action Defense blog has now recorded its 100^th post!!!!

Since our kick-off post, our data analytics show there have been over 20,000 views to blog posts, with thousands of our loyal subscribers reading about class action litigation developments. There are many highlights from the last 100 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, and tune in below for a special thank you announcement from the blog’s editor, Jerry Maatman.

Overview Of The Last 100 Posts

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 also published five 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-Initiated Litigation Review, the Privacy Class Action Review, the Wage & Hour Class And Collective Action Review, the Private Attorneys General Act Review, and the Consumer Fraud Class Action Review.

 

 

 

 

 

 

 

 

The blog also kicked-off the Class Action Weekly Wire Podcast, where experts in the field discuss trends and hot developments. Tune in every Friday for a new episode!

 

Click here to read our most viewed blog post entitled Massachusetts State Court Rules In Class Action That A Multiple-Choice Promotional Test Discriminated Against Minority Police Officers. Over 2,000 people read this post!

 

Click here to watch our most viewed Class Action Weekly Wire Podcast, regarding ChatGPT and artificial intelligence and the impact on class action litigation.

 

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! See below for a special message from the blog’s editor, Jerry Maatman. And please keep coming back, we promise to keep the content fresh!