Duane Morris Takeaway: This week on the Weekly Wire podcast, we are pleased to present Duane Morris partners Jennifer Riley and Michael DeMarino and associate Tyler Zmick in our fourth podcast in our series on class action litigation developments. This week’s edition focuses on appeals in class action litigation. We hope you enjoy it!
DMCAR Trend # 9 – Corporate Defendants Aggressively Asserted Defenses Based On Personal Jurisdiction Video
DMCAR Trend # 9 – Corporate Defendants Aggressively Asserted Defenses Based On Personal Jurisdiction
By Gerald L. Maatman, Jr. and Jennifer A. Riley
Duane Morris Takeaway: In 2022, corporate defendants aggressively asserted defenses based on personal jurisdiction to fracture collective actions in particular. In Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, 137 S. Ct. 1773 (2017), the U.S. Supreme Court held that each plaintiff in a mass action must demonstrate a basis for the court to exercise personal jurisdiction over the defendant for purposes of adjudicating his or her claims, even if those claims are similar to the claims of other plaintiffs.
Federal circuits, however, have disagreed on the impact of the Supreme Court’s ruling in the collective action and class action context. Such a decision has the potential to curtail the forums in which the plaintiffs’ bar may file class and collective actions against a corporate defendant and, in particular, could limit the forums where a plaintiff could bring a nationwide action to those where a court may exercise general personal jurisdiction over the defendant (i.e., typically only the state where the company is organized and the state where it maintains its principle place of business).
Given the potential of the defense to fracture nationwide suits, multiple defendants raised personal jurisdiction in 2022, and the number of federal circuits holding that Bristol-Myers applies to collective actions grew to three (the Third, Sixth, and Eighth Circuits), with one circuit holding otherwise (the First Circuit).
In Fischer, et al. v. Federal Express Corp., 42 F.4th 366 (3d Cir. 2022), the Third Circuit joined the Sixth and Eighth Circuits in concluding that Bristol-Myers requires a court to find personal jurisdiction over the claims of opt-in plaintiffs in an FLSA collective action. The plaintiff, a Pennsylvania resident, brought suit against FedEx in the U.S. District Court for the Eastern District of Pennsylvania alleging that FedEx misclassified her and other security specialists as exempt from the overtime requirements of the FLSA. Two non-resident FedEx employees, who worked for FedEx in their home states, filed notices of consent to join the action. The district court held that it lacked specific personal jurisdiction over FedEx with respect to their claims, and they filed a petition for interlocutory appeal. The Third Circuit granted the petition to resolve whether, in an FLSA collective action, where the district court lacks general personal jurisdiction over the defendant, all opt-in plaintiffs must demonstrate that the district court may exercise specific personal jurisdiction over the defendant to resolve their claims.
The Third Circuit recognized that the Sixth and Eighth Circuits had answered in the affirmative, holding that the claims of FLSA opt-in plaintiffs must arise out of or relate to the defendant’s minimum contacts with the forum state, Id. at 370 (citing Canaday, et al. v. Anthem Cos., 9 F.4th 392 (6th Cir. 2021), and Vallone, et al. v. CJS Solutions Group, LLC, 9 F.4th 861 (8th Cir. 2021)), whereas the First Circuit had answered in the negative, holding that only the named plaintiffs must show that their claims arise out of or relate to the defendant’s minimum contacts with the forum state. Id. (citing Waters, et al. v. Day & Zimmermann NPS, Inc., 23 F.4th 84 (1st Cir. 2022)).
The Third Circuit agreed with the former, holding that, like the out-of-state plaintiffs in Bristol-Myers, the opt-in plaintiffs in FLSA collective actions must satisfy the personal jurisdiction requirements of the Fourteenth Amendment to join the suit by demonstrating general personal jurisdiction or specific personal jurisdiction. As to the former, the opt- ins could not establish general personal jurisdiction over FedEx because the company was incorporated in Delaware and had a principal place of business in Tennessee. As to the latter, the opt-ins could not establish specific jurisdiction because they lived and worked in New York and Maryland, respectively, and based their claims entirely on their treatment by FedEx in their home states. Id. at 383.
During 2022, the parties in three of these cased filed petitions for review by the U.S. Supreme Court, and requested that it address the question of personal jurisdiction in the context of collective actions. To date, the Supreme Court has denied two of the petitions, with the petition outstanding. Thus, it is unlikely that the Supreme Court will resolve this issue in 2023, and corporate defendants can expect that personal jurisdiction will remain a powerful defense for facing collective actions outside of their home states.
DMCAR Trend # 8 – Courts Continued To Grapple With Problems Of Standing And Uninjured Class Members
By Gerald L. Maatman, Jr. and Jennifer A. Riley
Duane Morris Takeaway: During 2022, courts continued to grapple with the rules that govern the certification of classes that contain uninjured class members. Various cases climbed to the federal circuit level, with varying results, and the U.S. Supreme Court once again declined to take up the issue, making uninjured class members a continued topic of disagreement and debate for 2023.
By definition, individuals who did not suffer injury as the result of the defendant’s conduct cannot maintain claims, and courts do not have the power to award them relief. As the U.S. Supreme Court reiterated in its seminal 2020 decision in TransUnion, “Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.” TransUnion LLC v. Ramirez, et al., 141 S.Ct. 2190, 2208 (quoting Tyson Foods v. Bouaphakeo, et al., 577 U.S. 442, 466 (2016) (Roberts, C.J., concurring)). In this respect, the “plaintiffs must maintain their personal interest in the dispute at all stages of the litigation . . . And standing is not dispensed in gross; rather, plaintiffs must demonstrate standing for each claim that they press and for each form of relief that they seek.” Id.
Courts, however, continue to grapple with the application of these concepts in the class certification context and, in particular, they disagree over whether to certify a class, a plaintiff must demonstrate that every putative class member has standing or, stated differently, must demonstrate that the class excludes those individuals who did not suffer harm. In TransUnion, the Supreme Court expressly left open the question of “whether every class member must demonstrate standing before a court certifies a class.” Id. at n.4. Such a requirement has significant consequences for the class action landscape and, as a result, multiple federal circuits considered the issue over the past year.
In Drazen, et al. v. Pinto, 41 F.4th 1354 (11th Cir. 2022), for example, the Eleventh Circuit vacated and remanded an order approving a class settlement after finding that some settlement class members did not experience an Article III injury. The plaintiffs filed suit alleging that the defendant violated the Telephone Consumer Protection Act by sending unwanted calls and text messages. Although the Eleventh Circuit previously held that a single unauthorized text message is not sufficient for an Article III injury, the district court approved the settlement on the basis that “only the named plaintiffs must have standing.” Id. at 1357. Although only about 7% of the settlement class members had received a single text, the Eleventh Circuit reversed. Applying TransUnion, it explained that, when plaintiffs seek certification, they must limit the class definition “to those individuals who have Article III standing.” Id. at 1361. Because the settlement class may have included individuals who received a single unwanted text message, the Eleventh Circuit held that approving the settlement would allow “individuals without standing [to] receiv[e] what is effectively damages in violation of TransUnion.” Id. at 1362. The Eleventh Circuit remanded to provide the parties an opportunity to revise the class definition.
In Hyland, et al. v. Navient Corp., 48 F.4th 110 (2d Cir. 2022), the Second Circuit confronted a similar issue in the context of a non-monetary settlement and reached the opposite result. The plaintiffs, a group of public servants with loans that the federal Public Service Loan Forgiveness program did not forgive, filed suit claiming that the defendant loan service companies misled them regarding their eligibility for the program. Id. at 115. The parties reached a nationwide non-monetary settlement that preserved class members’ rights to file individual claims for money damages. Id. at 114. The district court approved the settlement, and a group of objectors appealed. On appeal, the objectors argued that because “[s]ome class members were no longer using the company to service their loans when the class was certified . . . the class as a whole. . . lacked standing to pursue injunctive relief.” Id. at 117. The Second Circuit rejected that argument. It held that “[s]tanding is satisfied so long as at least one named plaintiff can demonstrate the requisite injury.” Id. at 117-18. It reasoned that, because the plaintiffs alleged that they “continued to rely on [the company] for information about repaying their student loans,” they plausibly alleged that they “were likely to suffer future harm.” Id. at 118. The Second Circuit concluded that these allegations were “enough to confer standing on the entire class” and affirmed the district court’s order. Id. (citing Amado, et al. v. Andrews, 655 F.3d 89, 99 (2d Cir. 2011) (“In a class action, once standing is established for a named plaintiff, standing is established for the entire class.”)).
In Bowerman, et al. v. Field Asset Services, Inc., 39 F.4th 652 (9th Cir. 2022), the Ninth Circuit considered what happens when the plaintiffs cannot or are not able to define their class so as to exclude uninjured class members. The plaintiff filed suit on behalf of a putative class of workers alleging that the defendant misclassified them as independent contractors rather than employees and, as a result, improperly failed to pay them overtime and failed to reimburse their business expenses. Id. at 657. The district court granted class certification, and the Ninth Circuit reversed. The plaintiffs did not dispute that they lacked common proof that putative class members worked overtime hours or incurred reimbursable expenses, but argued that, under Ninth Circuit precedent, “the presence of individualized damages cannot, by itself, defeat class certification.” Id. at 661-62 (quoting Leyva, et al. v. Medline Industries Inc., 716 F.3d 510, 514 (9th Cir. 2013)). The Ninth Circuit disagreed. It distinguished between “the calculation of damages and the existence of damages in the first place.” Id. at 662.
Quoting its decision in Castillo, et al. v. Bank Of America, NA, 980 F.3d 723, 730 (9th Cir. 2020), the Ninth Circuit noted that “if the plaintiffs cannot prove that damages resulted from the defendant’s conduct, then the plaintiffs cannot establish predominance.” The Ninth Circuit concluded that the defendant’s liability to any class member for failing to pay overtime wages or to reimburse business expenses “would implicate highly individualized inquiries on whether that particular class member ever worked overtime or ever incurred any ‘necessary’ business expenses” and, under such circumstances, class certification is improper.
Further contributing to the divergence of case law precedents, in Olean Wholesale Grocery Cooperative, Inc., et al. v. Bumble Bee Foods, LLC, 31 F.4th 651 (9th Cir. 2022), in an en banc decision, the Ninth Circuit ruled 9 to 2 to uphold an order certifying a class that potentially included a significant number of uninjured class members. The plaintiffs brought suit against Starkist alleging that it engaged in a price-fixing scheme from 2011 to 2013 that led to their paying supra-competitive prices for tuna products. The district court granted class certification. After a panel vacated the order, the Ninth Circuit agreed to hear the case en banc and affirmed the ruling. Both parties presented expert testimony regarding antitrust impact, but their experts disagreed as to whether 28% of the class members could rely on the plaintiffs’ model to show injury attributable to the alleged conspiracy. Similar to Bowerman, the Ninth Circuit addressed the issue as one of predominance, noting that, when individualized questions relate to “the injury status of class members,” Rule 23(b)(3) requires that the court determine whether individualized inquiries about such matters predominate over common questions.” Id. at 668.
The Ninth Circuit rejected the argument that Rule 23 does not permit a district court to certify a class that potentially includes more than a de minimis number of uninjured class members, reasoning that Rule 23(b)(3) “requires only that the district court determine after rigorous analysis whether the common question predominates over any individual questions, including individualized questions about injury or entitlement to damages.” Id. at 669. The Ninth Circuit noted that, here, the defendants did not show that 28% of the class members were uninjured. Rather, the defendants disputed whether class members with no or limited transactions during the benchmark period could rely on the plaintiffs’ model. The district court was not required to resolve the dispute; rather, if the jury were persuaded by the critique, it could conclude that the plaintiffs had failed to prove antitrust impact on a class-wide basis, but “[i]n neither case would the litigation raise individualized questions regarding which members of the class had suffered an injury.” Id. at 681.
In August 2022, Starkist filed a petition with the U.S. Supreme Court asking it to strike down the decision and to elucidate the circumstances in which a court may or may not certify a class that includes a significant number of class members who were never injured by the alleged harm. On November 14, 2022, however, the U.S. Supreme Court turned down the request. Hence, the issue remains one that divides lower federal courts, thereby fueling uncertainty on an important class action issue.
If a defendant’s showing that one or more members of the defined class did not suffer a concrete harm can defeat class certification, such a defense is a potent tool for the defense.
As a result, while 2022 saw the further development of the defense, corporate defendants are likely to see continued litigation over this issue during the upcoming year.
Sixth Circuit Denies Writ Of Mandamus In Opioid Class Actions For District Court’s Order That Pushes Discretion Under Rule 16(b) to the Edge
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Shaina Wolfe
Duane Morris Takeaways: In the proceeding entitled In Re National Prescription Opiate Litigation, No. 21-4051, 2022 U.S. App. LEXIS 31328 (6th Cir. Nov. 10, 2022), the Sixth Circuit denied a petition for writ of mandamus regarding a District Court’s Scheduling Order in the giant opioid multidistrict class action and its allowance of the late pleadings amendments as to new defendants, Meijer Distribution, Inc., and Meijer Stores Limited Partnership (“Meijer Defendants”). The newly-added Meijer Defendants argued that the District Court violated the Rule 16(b) of the Federal Rules of Civil Procedure by allowing Plaintiffs to improperly join them in the ongoing 3-year old case without first seeking leave of court and without demonstrating good cause. The Sixth Circuit held that the District Court acted within its broad discretion and did not violate the Federal Rules of Civil Procedure because it provided a cut-off date that allowed for the specific amendments. The Sixth Circuit explained “[t]hough unconventional, the District Court’s actions are not so extraordinary as to warrant mandamus.” Id. at *1. The decision illuminates the broad discretion that district courts enjoy in managing class action litigation and the important role that scheduling orders play throughout the entire litigation.
In July 2018, Plaintiffs filed the underlying lawsuit against a group of pharmacies. The case was removed to federal court and ultimately became part of the opioid multidistrict class action proceeding entitled In Re National Prescription Opiate Litigation, 1:17-MD-2804 (N.D. Ohio 2017) (“MDL”).
Significantly, in the underlying case, the district court entered an order on May 3, 2018, which amended its Case Management Order and provided that “‘[i]f a case is later designated as a bellwether for motion practice or trial, a separate CMO will be entered that will provide further opportunity to amend.’” (“2021 Bellwether Order”). See Petition at 4-5.
In 2021, the District Court selected the underlying case to proceed as a bellwether case against the pharmacies. See Sixth Circuit Order at 1. Subsequently, on May 19, 2021, Plaintiff filed a supplemental pleading, adding the Meijer Defendants to the underlying case. See id.; Petition at 5. The amendments were made nearly three years after Plaintiff filed suit and more than 26 months after the deadline to add new defendants.
After unsuccessfully moving to strike the Meijer Amendments and certify the Court’s 2021 Bellwether Order for interlocutory appeal, on November 9, 2021, Defendants filed a petition for a writ of mandamus with the Sixth Circuit. See Petition at 7. In the Petition, the Meijer Defendants argued that the District Court allowed Plaintiff to add the Meijer Defendants years after the deadline for amending pleadings passed and without requiring Plaintiff to demonstrate good cause, as required by Rule 16(b) of the Federal Rules of Civil Procedure. See Petition at 1. The Meijer Defendants requested that the Sixth Circuit issue a writ ordering the District Court to strike the untimely amendments and dismiss the Meijer Defendants from the case. See id. at 2.
The Sixth Circuit’s Ruling Denying The Writ Of Mandamus
The Sixth Circuit denied the writ of mandamus. It held that the District Court’s order, while “unconventional,” fell within the parameters of Rule 16(b). See Sixth Circuit Order at 1. The Court of Appeals explained that Rule 16(b) requires that “scheduling orders limit the time to join other parties” and the District Court’s 2021 Bellwether Order “explicitly provided permission for plaintiffs to amend their complaint if their case was selected as a bellwether.” Id. The Sixth Circuit reasoned that because Plaintiffs exercised their right to amend after the underlying case was chosen as a bellwether, Plaintiffs did not need to seek permission from the District Court. Id. at 2.
The Sixth Circuit noted that the 2021 Bellwether Order allowed plaintiffs to amend whenever their case was selected as a bellwether, and there was no cut-off for amendments. Id. The Sixth Circuit acknowledged that, under the 2021 Bellwether Order and without any cut-off date, the amendments could have gone differently (i.e., made on the eve of trial or adding a defendant that was completely new to the litigation). Id. at 2. Instead, the Sixth Circuit determined that the Meijer Defendants suffered little, if any, prejudice. Id. at 2-3. Thus, the Court of Appeals explained, “[t]hat unusual aspect of the scheduling order did not clearly violate Rule 16 because it provided some limit (when the case was selected as a bellwether), although the order went right to the edge of the district court’s discretion under Rule 16.” Id. at 2.
In denying the writ, the Sixth Circuit held that the Meijer Defendants “ha[ve] shown that the district court’s scheduling order was unconventional but not a judicial usurpation of power nor a clear abuse of discretion.” Id. at 3.
Implications For Companies
The Sixth Circuit’s order recognizes the broad discretion that district courts have in managing their dockets and illustrates the importance that scheduling orders play in all types of cases, and specifically in MDLs and class actions. Companies should pay close attention to all of the proposed deadlines included in any scheduling orders, and try to prevent these types of amendments from being entered at the outset.
New Trial Sought Following $228 Million Judgment In Landmark BIPA Class Action
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex W. Karasik
Duane Morris Synopsis: In Rogers v. BNSF Railway Co., Case No. 19-CV-03083 (N.D. Ill.), the first federal court jury trial in a case brought under the novel Illinois Biometric Information Privacy Act (“BIPA”), the plaintiffs secured a verdict in favor of the class of 45,000 workers against Defendant BNSF. After a week-long trial in the U.S. District Court for the Northern District of Illinois in Chicago, the jury found that BNSF recklessly or intentionally violated the law 45,600 times. The Court thereafter entered against BNSF for $228 million. Post-trial motions are now before the Court, which raise significant issues for all companies that use biometric equipment.
On November 9, 2022, Defendant BNSF Railway Co. filed a motion for a new trial under Rule 59(a) or to reduce the damages award under Rule 59(e). It argues that none of the 45,000 class members suffered any actual harm. It also raised constitutional concerns about the BIPA.
This latest development suggests that BNSF is pulling out all the stops to challenge the precedent-setting $228 million judgment. The outcome of this motion and future appeals will profoundly shape the privacy class action landscape.
As we blogged about here, Plaintiff filed a class action lawsuit alleging that BNSF unlawfully required truck drivers entering the Company’s facilities to provide their biometric information through a fingerprint scanner. He claimed that BNSF collected the drivers’ fingerprints without first obtaining informed written consent or providing a written policy that complied with the BIPA and therefore violated sections 15(a) and (b) of the BIPA. BNSF argued that it did not operate the biometric equipment and instead sought to shift blame to a third-party vendor who operated the biometric equipment that collected drivers’ fingerprints.
The case proceeded before a jury in federal court in Chicago. The proceeding was closely watched, as it represented the very first time any class action had gone to a full trial with claims under the BIPA. The trial lasted five days. However, the jurors deliberated for just over an hour. Following the jury’s finding of liability, the Court entered a judgment against BNSF in the amount of $5,000 per violation, for a total amount of $228 million.
BNSF’s Motion For A New Trial Or Amended Judgment
BNSF renewed its motion for judgement as a matter of law pursuant to Federal Rule of Civil Procedure Rule 50(b), following the Court’s denial of BNSF’s Rule 50(a) motion at trial. In the alternative, BNSF moved for a new trial under Rule 59(a), or to reduce the damages award under Rule 59(e).
First, BNSF argues that there was insufficient evidence for the jury to find that BNSF violated the BIPA. Id. at *3. In support of that argument, BNSF cited testimony from its former Director of Technology Services that BNSF did not collect or obtain biometrics from truck drivers in Illinois, that the biometric data was stored on another entity’s server, and that BNSF did not maintain a copy of any of that data. Id. at *4.
Second, BNSF argues that it is entitled to judgment as a matter of law or a new trial, or at least a significant reduction in damages, because there was insufficient evidence for a rational jury to conclude that BNSF violated the BIPA recklessly or intentionally 45,600 times — which is the basis for the $228 million damages award. Id. at *5-6. BNSF claims that there was no evidence that BNSF even learned about the BIPA until April 2019. Therefore, BNSF argued, no rational jury could have inferred from this evidence that BNSF consciously disregarded or intentionally violated the rights of Plaintiff and the class members at any point, much less for the full class period starting in April 2014.
Third, BNSF argued that the Court’s award of $228 million in damages where Plaintiff admits he and the members of the class have suffered no actual harm violates the Due Process Clause and Excessive Fines Clause of the U.S. Constitution. BNSF points out that, “It is undisputed that neither Plaintiff nor any member of the class has suffered any actual harm from any alleged violation of BIPA. Given that the agreed value of the class’s injury is zero dollars, any award would be disproportional to such nonexistent harm.” Id. at *8-9.
Accordingly, BNSF seeks relief that the Court should enter judgment as a matter of law against Plaintiff and in favor of BNSF; or in the alternative, the Court should grant BNSF a new trial, or substantially reduce the damages award against BNSF.
The ball is now in Plaintiff’s court to respond to the motion. Further proceedings will then await the parties after full briefing of the post-trial motion.
Implications For Employers
BNSF’s filing of this motion indicates that the Company will not be going down (to the tune of $228 million) without a fight. The ultimate outcome of this motion, and any potential Seventh Circuit appeals, will be carefully scrutinized by both the plaintiff class action bar and businesses throughout Illinois and beyond.
Employers not only should continue to monitor this groundbreaking privacy class action lawsuit, but also ensure their strategic compliance plans are sufficient in regards to biometric privacy laws.
Judges Continue To Push For Diversity In Selecting And Approving Class Counsel
By Gerald L. Maatman, Jr., Jennifer A. Riley, Shaina Wolfe
Duane Morris Takeaways – Requiring a legal team’s diversity in the courtroom is part of a growing trend by federal judge in selecting lead counsel in a class action. On both sides of a class action, plaintiffs and defense teams are increasingly staffing cases with junior and diverse attorneys, and allowing them meaningful opportunities to participate in litigation. In turn, federal judges are viewing such staffing methodologies as part and parcel of good practice management.
The push for diversity in the law is hardly new.
Federal district judges around the nation – including judges in California, Illinois, Massachusetts, New York, and Texas – have issued general standing orders that encourage legal teams to allow diverse and less experienced attorneys take the lead in various segments of court proceedings. And in 2021, George Washington Law School released a leading guide to best practices for MDL and class actions, which advocated that judges “make appointments consistent with the diversity of our society and justice system.” George Washington Law School, Inclusivity and Excellence: Guidelines and Best Practices for Judges Appointing Lawyers to Leadership Positions in MDL and Class-Action Litigation, at 1 (March 15, 2021).
Over the last couple of years, some judges have acted on George Washington Law School’s advice by facilitating opportunities for diverse and/or junior attorneys to have a role in their cases. For example, recently, on October 26, 2022, Magistrate Judge Gabriel Fuentes of the U.S. District Court for the Northern District of Illinois advised the parties in multidistrict litigation that he would be holding a video hearing to discuss expert discovery and argue motions, and that he expected junior attorneys to take the lead. John Gross and Co., Inc., et al. v. Agri Stats, Inc., et al., 1:19-CV-08318 (N.D. Ill. Oct. 26, 2022).
Other judges in class action lawsuits have strongly encouraged, or even required, counsel to be diverse. For example, Judge Susan Illston of the U.S. District Court for the Northern District of California approved lead counsel in a class action lawsuit but noted “the apparent lack of diversity, including by female lawyers, among the group that argued” at a recent hearing. Sayce v. Forescout Technologies, Inc., No. 20-CV-00076, 2020 WL 6802469, at *9 (N.D. Cal. Nov. 19, 2020). Judge Illston “strongly urge[d] all parties to this case to make meaningful litigation opportunities available to junior and underrepresented lawyers throughout the pendency of this action.” Id.
With the increase in newly appointed judges, it is likely that even more federal judges will follow suit by not only instituting standing orders, but also in requiring law firms to send their junior and diverse attorneys to court. Now, more than ever, it is important for law firms to hire diverse attorneys, teach diverse attorneys to handle small and complex matters, and retain their diverse attorneys by allowing them to meaningfully participate in legal proceedings.
Implications for Law Firms
We expect that more courts and clients will begin to consider, and perhaps require, the diverse makeup of legal teams at increasing rates. Law firms can prepare for this critical demand of diverse legal teams by hiring, retaining, and actively involving diverse and junior lawyers, in both big and small cases, at the outset.
Indiana Court Of Appeals Strikes Down Class Action COVID-19 Immunity Statute
By Gerald L. Maatman, Jr, Jennifer A. Riley, and Gregory Tsonis
Duane Morris Takeaways – In Mellowitz v. Ball State University and Board of Trustees of Ball State University, et al, No. 22A-PL-337 (Ind. Ct. App. Oct 5, 2022), the Indiana Court of Appeals struck down a 2021 law that sought to protect in-state universities from class action liability related to the shutdown of university campuses during the COVID-19 pandemic. While the law stated that individuals “may not” bring class actions against universities resulting from actions taken to defend against the spread of COVID-19, the Indiana Court of Appeals held that the statute was “procedural” and in conflict with Rule 23 of Indiana’s Rules of Trial Procedure, which states that individuals “may” proceed as a class under certain circumstances. The Court’s ruling is important, as it puts at risk other statutes passed in Indiana and other states restricting class actions against businesses for COVID-19-related claims.
Background Of The Case
In 2020, Plaintiff Keller J. Mellowitz, a student at Ball State University, filed a putative class action asserting claims for breach of contract and unjust enrichment against Ball State as a result of the university’s decision to cancel in-person classes during the COVID-19 pandemic. Id. at 3. After the complaint was filed, the Indiana General Assembly in 2021 enacted Public Law 166-2021, part of which was codified as Indiana Code Section 34-12-5-7 (“Section 7”) and barred class actions against post-secondary educational institutions for claims of breach of contract and unjust enrichment arising from COVID-19. Ball State subsequently sought relief from Plaintiff’s lawsuit under Section 7, which the trial court granted, and Plaintiff appealed. Id. at 5.
The Appellate Court’s Ruling Reversing And Remanding the Trial Court’s Decision
Plaintiff argued on appeal that, as a procedural statute, Section 7 impermissibly conflicts with Indiana Trial Rule 23, which governs class-action procedures and sets forth the requirements to proceed as a class action, thus rendering Section 7 a “nullity.” The Indiana Court of Appeals began its analysis recognizing longstanding precedent establishing that in a conflict between a procedural statute and the Indiana Rules of Trial Procedure, “the trial rules govern,” however trial rules “cannot abrogate or modify substantive law.” Id. at 6-7. Whether a law was “substantive,” the Court explained, depended on whether it established “rights and responsibilities” whereas procedural laws merely prescribed “the manner in which such rights and responsibilities may be exercised.” Id. at 7.
In analyzing the specific statutes at issue, the Court of Appeals examined Indiana’s analog to Federal Rule 23, which sets forth the criteria for bringing a class action. The Court of Appeals noted that Indiana Trial Rule 23 was indisputably a procedural rule that allows a plaintiff, when the appropriate criteria are met, to assert his or her claims on behalf of others. Turning to Section 7, the Court of Appeals explained that the statute did not affect any plaintiff’s substantive right to bring a suit for breach of contract or unjust enrichment, but simply “frustrates them by encouraging a multiplicity of lawsuits from similarly situated plaintiffs.” Id. at 14. While Ball State argued that the law protected Indiana universities from “widespread legal liability” from actions taken to combat and mitigate the spread of COVID-19, the Court of Appeals found the argument “unpersuasive,” explaining that since Section 7 did not prevent any individual plaintiff from asserting the same claims against universities, it therefore “does not reduce the institutions’ potential legal liability in the slightest.” Id. at 14-15. Ball State also argued that adopting Plaintiff’s “extreme position” would endanger two similar laws passed by the Indiana Legislature, which sought to protect business owners from class-action tort liability. Id. at 15 n.6. The Court rejected Ball State’s argument. It determined that it had “no opinion” on those statutes since they were not before it in the appeal. Id.
With Indiana Trial Rule 23 stating that a plaintiff “may” bring a class action and Section 7 stating the plaintiff “may not,” the Court of Appeals held that both laws could not apply in a given situation and, as a result, Section 7 was a “nullity.” Id. at 15. The Court of Appeals therefore reversed the trial court’s ruling and remanded the case for further proceedings.
Implications for Employers
While Ball State will very likely appeal this decision to the Indiana Supreme Court, the rationale adopted by the Indiana Court of Appeals could undermine similar statutes meant to protect Indiana employers from class action liability resulting from actions taken in response to the COVID-19 pandemic. As many other states throughout the country similarly passed laws meant to protect businesses from liability due to COVID-19, the Mellowitz decision provides a potential avenue for plaintiffs to challenge laws in other states. Mellowitz demonstrates that employers should continue to be aware of the potential for class action lawsuits stemming from response to the COVID-19 pandemic, despite efforts by Indiana’s legislature and other states’ legislatures to prevent such costly, high-risk litigation.