By Gerald L. Maatman, Jr., Jennifer A. Riley, and George J. Schaller
Duane Morris Takeaways:In Gannon v. Truly Nolen of America Inc., No. 22-CV-428 (D. Ariz. Aug. 31, 2023), Judge James Soto of the U.S. District Court for the District of Arizona granted Defendant’s motion to dismiss with prejudice on negligence, breach of contract, and consumer fraud claims related to a data breach class action. For companies facing data breach claims in class actions, this decision is instructive in terms of how courts consider cognizable damages, especially when damages allegations are inadequately plead.
Defendant Truly Nolen of America Inc. (“Defendant” or the “Company”), is an Arizona corporation that provides pest control services across the United States and in 30 countries around the world. Id. at 2. The Company experienced a data breach between April 29, 2022 and May 11, 2022. On May 11, 2022, the Company learned the breach occurred and identified personally identifiable information (“PII”) and personal health information (“PHI”) that was compromised. Id. In August of 2022, Defendant sent notice letters to individuals whose data may have been compromised. Id.
The Named Plaintiff, Crystal Gannon (“Plaintiff”), alleged that she received her notice letter regarding the data breach in August of 2022. Id. at 3. In her First Amended Complaint (“FAC”), Plaintiff sought to represent two proposed classes of plaintiffs, including one for a Nationwide Class and one for an Arizona Sub-class, related to the data breach. Id.
Plaintiff alleged numerous claims such as negligence, invasion of privacy, breach of implied contract, breach of the implied covenant of good faith and fair dealing, and violation of the Arizona Consumer Fraud Act (“Fraud Act”). Id. In response, Defendant filed a motion to dismiss on the grounds that Plaintiff’s case was without basis and the entire case was subject to dismissal. Id.
The Court’s Decision
The Court held that there was no valid basis for Plaintiff’s negligence claim. Id. at 4. Plaintiff argued that the Health Insurance Portability and Accountability Act (“HIPAA”) and the Federal Trade Commission Act (“FTCA”) created a duty in Arizona from which relief could be sought. Id. The Court disagreed. It found that neither the HIPAA nor the FTCA provided a private right of action. Id. The Court reasoned that “[p]ermitting HIPAA to define the ‘duty and liability for breach is no less than a private action to enforce HIPAA, which is precluded.’” Id. The Court applied the same logic to the FTCA. Id.
On negligence damages, the Court held that Plaintiff’s FAC failed “to show identity theft or loss in continuity of healthcare of any class members – only the possibility of each.” Id. Under Arizona law, negligence damages require more than merely a threat of future harm, and on their own, threats of future harm are not cognizable negligence injuries. Id. 4-5. Similarly, as to out-of-pocket expenses, the Court opined that Plaintiff failed to demonstrate that her expenses were necessary because she did not properly show that Defendant’s identity monitoring services were inadequate. Id. at 5. Finally, the Court recognized that merely alleging a diminution in value to somebody’s PII or PHI was insufficient. Id. Therefore, the Court dismissed Plaintiff’s negligence claims.
Turning to Plaintiff’s breach of contract claims, the Court determined that Plaintiff did not show cognizable damages, a reasonable construction for the terms of the contract, or consideration for the existence of an implied contract. Id. at 6. The Court held that Plaintiff’s FAC allegations only reflected speculative damages and did not allege proof of real damages. Id. at 5. The Court opined that Plaintiff’s “vaguely pleaded” contract terms failed to show any language that would inform the terms of the agreement and Plaintiff did not point to any conduct or circumstances from which the terms could be determined. Id. at 5-6. Finally, the Court determined that even if Defendant had an obligation to protect the data at issue, such pre-existing obligations did not serve as consideration for a contract. Id. Therefore, the Court dismissed all breach of implied contract claims. Id.
On the claim for breach of the implied covenant of good faith and fair dealing, Plaintiff argued that Defendant breached by failing to maintain adequate computer systems and data security practices, failed to timely and adequately disclose the data breach, and inadequately stored PII and PHI. Because Plaintiff failed to show an enforceable promise, the Court held there could be no breach, and all claims for breach of the implied covenant of good faith and fair dealing were dismissed. Id. at 6.
The Court also dismissed Plaintiff’s Fraud Act claims because Plaintiff failed to show cognizable damages. Id. at 7. The Court reasoned “[p]laintiff cannot simply argue that the system is inadequate because a negative result occurred.” Id. The Court also reasoned that Plaintiff failed to demonstrate that Defendant’s security was inadequate when compared to other companies or any set of industry standards. Id. As to Plaintiff’s privacy claims, the Court held that there were no cognizable claims for invasion of privacy or breach of privacy, and Plaintiff did not dispute these claims in her response. Id.
Accordingly, the Court granted Defendant’s motion to dismiss as to all claims, denied Plaintiff leave to amend her complaint, and dismissed the case with prejudice. Id.
Implications For Companies
Companies confronted with data breach lawsuits should take note that the Arizona federal court in Gannon relied heavily on inadequately pleaded allegations in considering cognizable damages for purposes of granting Defendant’s motion to dismiss. Further, from a practical standpoint, companies should carefully evaluate pleadings for insufficient or speculative assertions on damages.
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 significant class action settlements throughout 2022 and a preview settlement trends in 2023.
Jerry Maatman: Hello loyal blog readers and thank you for joining our weekly installment of the Class Action Weekly Wire. Today I’m joined by my partner Jen Riley, the co-chair of the Duane Morris Class Action Practice Group. Thanks for being on our podcast today, Jen.
Jennifer Riley: Great to be here, thanks for having me Jerry.
Jerry: Today we’re discussing I think the most interesting development in the class action space over the last 24 months, and that would be settlement activity. I’m a big believer that one can tell a lot about what’s going on in the class action world based on settlements in terms of what the going rate is to settle these cases – and the Duane Morris Class Action Review has a full chapter on the top 10 settlements measured by monetary values across a wide area of cases. I know, Jen, that the last year was an exceptional year of settlements – what was the major takeaway for employers?
Jen: Absolutely, Jerry. So in 2022 there were more billion dollar settlements than ever before. The opioid litigation settlements in particular fueled record highs as distributors and manufacturers inked settlements with numerous states to pay out for allegations that they contributed to the opioid epidemic in the United States. So all 10 of the largest settlements of the year 2022 were opioid related. Those numbers were astronomical – they included settlements for $7.4 billion involving distributor McKesson and $6.1 billion involving distributor AmerisourceBergen to resolve the vast majority of the opioid lawsuits brought by state and local governmental against those entities.
Jerry: It’s interesting, Jen – having studied this space for going on 20 years now, most years’ average settlements across all areas were three to five billion dollars and all of a sudden have a year where the settlements top $60 billion. It brought to mind for me the only analogous situation was two decades ago when state attorney generals and private plaintiffs settled big tobacco cases – about 20 to 25 billion dollars, a lot of money at that time two decades ago was spent, so 2022 was an exceptionally unique year by any measure. I think one of the largest consumer fraud settlements, the $6 billion student loan settlement in Sweet, et al. v. Cardona Student Debt Cancellation Settlement kind of rounded out the story in terms of big blockbuster numbers across the board.
Jen: I will also note that there were some very large antitrust settlements in 2022. The top one came in at about $2.67 billion in In Re Blue Cross Blue Shield Antitrust Litigation. That was an antitrust class action involving claims that health insurance companies violated the Sherman Antitrust Act by entering into unlawful agreements to restrain competition among them in the health and insurance sales market.
Jerry: Well not only antitrust, but also securities fraud – we had the $1 billion In Re Dell Technologies Inc. Class V Stockholders Litigation settled in Delaware as well as the $800 million In Re Twitter Inc. Securities Litigation. Those were robust settlement numbers that also pushed the settlements even higher. What were some of the other areas that you think worth watching in the current calendar year in terms of the potential for large class action settlements?
Jen: Well, definitely the largest settlement so far this year happens to be in the products liability and mass torts space. There the top story is the resolution of claims relating to contamination from so-called forever chemicals in firefighting foam. As of August of this year, all of the claims by local water authorities and municipalities have been resolved in a global settlement agreement. 3M, DuPont, and other defendants will reportedly pay about $10.3 billion to resolve those claims as part of that settlement deal.
Jerry: That is one heck of a blockbuster settlement. The other area where I think we’re going to see significant settlement activity at very high levels would be in the antitrust bucket, and will continue to see large numbers there although it would take a lot of settlements to break the record that was compiled in calendar year 2022 by our calculations checking this on a daily basis from January 1 to the present, we’re at about $38 billion dollars so uh year even if there wasn’t another settlement in 2023 after 2022, 2023 would be the biggest settlement year in the history of American jurisprudence, so still a very, very impressive record being shown by the plaintiffs’ bar in monetizing these class actions.
Jen: Agreed. Those are some impressive sums thus far this year, it will be very interesting to see how the rest of the year unfolds on that front.
Jerry: We’ll be sure to share these results in our analysis with our readers and listeners in terms of our 2024 Duane Morris Class Action Review. Thanks Jen for joining me today and for your great insights and analysis as always, and thank you to our listeners for tuning in to our Friday weekly podcast. Thank you.
By Gerald L. Maatman, Jr., Natalie Bare, and Emilee N. Crowther
Duane Morris Takeaways: In Bone v. XTO Energy, Inc., No. 21-CV-1460, 2023 WL 5431139 (D. Del. Aug. 23, 2023), the Judge Joel H. Slomsky of the U.S. District Court for the District of Delaware granted RUSCO Operating, LLC and Ally Consulting, LLC’s (collectively, “RUSCO”) Motion to Intervene in a case filed by workers that used its app to connect with a company seeking their safety consulting services. The Court allowed RUSCO to intervene as a matter of right based on RUSCO’s interest in its classification of workers that use its app as independent contractors and its interest in enforcing RUSCO’s arbitration agreement.This case serves as a reminder to companies that provide staffing services of the benefits of monitoring litigation filed against partner companies (and the potential pitfalls of not doing so).
Plaintiffs Cory Bone and Luis Carillo were safety consultants engaged by Defendant XTO Energy, Inc. (XTO) as independent contractors through an online app operated by RUSCO Operating, LLC and Ally Consulting. Id. at 1. They sued on behalf of themselves and other similarly- situated workers engaged through the app, alleging misclassification and subsequent failure to pay overtime in violation of the Fair Labor Standards Act (“FLSA”). Id. RUSCO asserted that they paid Plaintiffs directly for the work they provided to XTO, and by using the app, Plaintiffs and putative collective action members had agreed to arbitrate any employment-related disputes. Id. at 2. RUSCO filed a Motion to Intervene to enforce the arbitration agreement. Id.
The Court’s Decision
The Court concluded that RUSCO could intervene as a matter of right. Id.
Under Rule 24, a non-party may intervene (1) as a matter of right, if the disposition of the case would impair its interest; or (2) as a matter of permission, if common questions of law and fact exist between the non-party’s claims or defenses and those at issue in the case. The Court explained that a party must timely demonstrate the following to intervene as a matter of right: “(1) a sufficient interest in the litigation; (2) a threat that the interest will be impaired or affected, as a practical matter, by the disposition of the action; and (3) that its interest is not adequately represented by the existing parties and the litigation.” Id. (quoting Commonwealth v. President of the United States of America, 888 F.3d 52, 57 (3d Cir. 2018).
The first prong required RUSCO to demonstrate a “significantly protectable” interest, i.e., one that is specific to the intervener, capable of definition, “and will be directly affected in a substantially concrete fashion by the relief sought.” Id. at 4 (quoting Kleissler v. U.S. Forest Serv., 157 F.3d 964, 972 (3d Cir. 1998)).
The Court held that RUSCO met this prong because it classified any workers using its app as independent contractors and Plaintiffs’ claims against XTO turned “on whether Plaintiffs [were] employees or independent contractors.” Id. In addition, the Court opined that RUSCO had a significant protectable interest in the litigation due to its interest in enforcing the arbitration agreement Plaintiffs had executed in order to use the app. Id. (discussing RUSCO’s successful intervention in Field v. Anadarko Petro. Corp., 35 F.4th 1013, 1016 (5th Cir. 2022) based on its “interest in enforcing [its] arbitration agreements, particularly given the interrelatedness of the parties’ contractual relationships and the plaintiff’s claims, is ‘a stake in the matter that goes beyond a generalized preference that the case come out a certain way’”).
The second prong required RUSCO to establish “a tangible threat to [its] legal interest.” Id. at 5. The Court held that RUSCO met this prong because the Court’s determinations regarding independent contractor misclassification and arbitration agreement enforcement “could negatively impact RUSCO’s legal interests.” Id.
Finally, the third prong required RUSCO to establish that its interest “diverge[d] sufficiently from the interests of [XTO], such that [XTO might not be able to] devote proper attention to the [RUSCO’s] interests.” Id. (citing Commonwealth, 888 F.3d at 59). on this issue, the Court concluded that XTO could not adequately represent RUSCO’s interest in the litigation because Plaintiffs brought claims based on improper payment, and RUSCO — not XTO — had paid the workers asserting those claims. Id. Moreover, at the time of RUSCO’s intervention, XTO had not yet sought to compel Plaintiffs to arbitration so it had not devoted proper attention to RUSCO’s interests in that regard. Id.
Implications for Employers
Companies providing staffing services should review litigation filed against the entities to which they provide staff to evaluate whether the disposition of claims or issues in the litigation will implicate their interest. Staffing companies that refer workers to other companies should ensure the contract contains adequate notice provisions concerning litigation pertaining to the employment relationship. Companies that do not discover litigation that may affect their interests may have to live with results of unfavorable outcomes.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown
Duane Morris Takeaways:In Gifford v. Northwood Healthcare Group LLC et al., No. 22-CV-04389 (S.D. Ohio Aug. 21, 2023), Judge Sarah D. Morrison of the U.S. District Court for the Southern District of Ohio granted plaintiff’s motion for conditional certification of a wage & hour collective action pursuant to 29 U.S.C. § 216(b) of the Fair Labor Standards Act (“FLSA”). Through sworn declarations and documentary evidence of defendants’ meal break policy, the Court found plaintiff showed a “strong likelihood” that she was similarly-situated to potential collective action members who may elect to join the lawsuit. The ruling adds to the body of case law applying the Sixth Circuit’s new standard for notice to potential opt-in plaintiffs in putative FLSA collective actions announced in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023), and ought to be required reading for any employers involved in wage & hour litigation.
On December 15, 2022, plaintiff filed a Complaint against Northwood Healthcare Group, LLC and Garden Healthcare Group, LLC, two entities operating healthcare facilities in Ohio. Plaintiff allegedly worked at two such facilities as a non-exempt Licensed Practical Nurse. The lawsuit targeted the defendants’ meal break practices. Plaintiff contended that due to staffing shortages and the demands of patient care, she did not receive a full, uninterrupted 30-minute (“bona fide”) meal break on a regular basis. As alleged in the Complaint, defendants automatically deducted 30 minutes of time from her hours worked even when she did not receive a bona fide meal break, resulting in unpaid overtime compensation. On behalf of herself and similarly situated other employees, Plaintiff brought claims asserting failure to pay overtime wages under the FLSA, failure to pay overtime wages under the Ohio Minimum Fair Wage Standards Act (“OMFWSA”), failure to keep accurate payroll records under the OMFWSA and failure to pay wages timely under the Ohio Prompt Pay Act.
On March 15, 2023, plaintiff filed a motion for conditional certification of a collective action. On May 15, 2023, defendants opposed the motion on the merits and urged the Court to delay ruling until the Sixth Circuit issued its opinion in Clark.
On May 19, 2023, the Sixth Circuit in Clark announced a more rigorous standard for authorizing notice of an FLSA lawsuit to other employees. Abandoning the prior standard of a “modest factual showing” of similarly situated status, the standard in Clark requires plaintiffs to establish a “strong likelihood” that they are similarly situated to potential other plaintiffs.
Days later, in her reply brief filed on May 23, 2023, plaintiff argued that the evidence she presented in her motion satisfied the new standard in Clark.
The Court’s Decision
The Court determined that the evidence provided in support of plaintiff’s motion satisfied the “substantial likelihood” standard announced in Clark.
Specifically, plaintiff provided her own sworn declaration and the sworn declarations of six individuals who had filed consents to join the lawsuit as opt-in plaintiffs. Together, plaintiff and the other declarants worked at six of the 14 facilities plaintiff sought to include in her lawsuit. The Court found the declarations told a consistent story of employees not receiving overtime pay for those occasions when patient care needs required employees to skip or cut short their designated 30 minutes for a meal break, even after employees complained to management about being undercompensated.
Plaintiff also submitted evidence of employee handbooks in effect at the six facilities at which the declarants had worked for the defendants. The Court found that the handbooks reflected nearly identical policies on overtime compensation and meal breaks. For example, the meal break policy in the various employee handbooks stated that employees who worked through their meal breaks would receive pay for their time, whether the work was authorized or not. Defendants argued that plaintiff’s evidence fell short of identifying a “companywide” policy. Defendants pointed out that the declarants had no personal knowledge of the meal break practices in effect at facilities operated by defendants at which they had not worked. The Court disagreed. It opined that plaintiff presented enough evidence of a unified theory of conduct by defendants, notwithstanding that the declarants did not represent former employees at all of the facilities the plaintiff sought to include in the lawsuit.
The Court concluded that the evidence “establishes to a certain degree of probability” that the plaintiff, the individuals who had already filed consents to become opt-in plaintiffs, and the other potential plaintiffs performed the same tasks, were subject to the same policies and were unified by a common theory underlying their causes of action. Id. at 8.
In so ruling, the Court authorized plaintiff to send notice to all current and former hourly, non-exempt direct care employees of defendants who had a meal break deduction applied to their hours worked in any workweek in which they were paid for at least 40 hours of work during a three-year lookback period and through the final disposition of the case.
Implications For Employers
The Court’s ruling in Gifford demonstrates that application of the Sixth Circuit’s “strong likelihood” standard is highly dependent on the evidence presented by a plaintiff. By contrast, under the prior standard, courts routinely granted plaintiffs’ motions to authorize notice to potential opt-in plaintiffs.
Employers with operations in Ohio, Tennessee, Michigan and/or Kentucky should keep a close watch on Gifford and other cases applying the Sixth Circuit’s new standard in FLSA litigation.
Dane Morris Takeaways: On August 25, 2023, Judge Frank Easterbrook of the U.S. Court of Appeals for the Seventh Circuit published an opinion in which a three-judge panel held that Plaintiffs — former McDonald’s workers — alleged a plausible violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 in Deslandes v. McDonald’s USA, LLC, Nos. 22-2333 & 22-2334 (7th Cir. Aug. 28, 2023). The Seventh Circuit rejected the district court’s conclusion that plaintiffs failed to allege a per se violation of Section 1 because the horizontal no-poach restraint alleged by plaintiffs could be a naked restraint between competitors rather than a restraint ancillary to the success of cooperative venture. Instead, the Seventh Circuit concluded that additional discovery, economic analysis, and potentially a trial could be required to resolve the issue.
The ruling in Deslandes v. McDonalds is required reading for any corporate counsel handling antitrust class action litigation involving no-poach or non-solicitation issues.
Plaintiffs, a group of former McDonald’s workers, brought a class action over alleged antitrust violations in the U.S. District Court for the Northern District of Illinois. Defendants McDonalds USA, LLC and McDonald’s Corporation (collectively, McDonald’s) operate fast-food restaurants or do so through a subsidiary, and until recently, every McDonald’s franchise agreement contained a provision prohibiting any franchise operator from hiring any person employed by a different franchise or by McDonald’s itself until six months after the last date that person had worked for McDonald’s or another franchise. Plaintiffs allege that they were unable to earn higher wages at other franchises while these provisions were in effect. The district court dismissed the complaint, and Plaintiffs appealed.
Case Remanded for Further Proceedings
A horizontal agreement between competitors could be considered a per se violation of Section 1 of the Sherman Act or it could be considered a violation under the Rule of Reason. Per se violations are reserved for certain agreements, like price-fixing or market allocation. All other arrangements by competitors are considered under the Rule of Reason, which includes an assessment of the relevant product or service market and a defendant’s (or defendants’) power in such market. The assessment of market power typically includes an analysis of market share and barriers to entry and expansion, among other factors.
Here, Plaintiffs did not allege that McDonald’s had market power in the market for labor at its restaurants, and the Seventh Circuit agreed with the district court that there was so much competition for fast-food restaurant workers that McDonald’s could not have had market power. Nonetheless, the Seventh Circuit disagreed with the district court’s determination that Plaintiffs had not alleged a per se violation.
A no-poach clause (or any other clause) is considered ancillary, rather than naked, if it is ancillary to the success of a cooperative venture. The district court concluded that Plaintiffs had not alleged a per se violation because the no-poach clause was ancillary to the franchise agreement in that it expanded the output of burgers and fries and led to the success of the cooperative venture between franchises. The Seventh Circuit disagreed with this analysis because “it treats benefits to consumers (increased output) as justifying detriments to workers (monopsony pricing).” Id. at 3. While the Seventh Circuit recognized the possibility that the no-poach clause could have been protecting franchises’ investment in training, it found that selling more burgers and fries to consumers is immaterial to justifying any detriment to workers from the provision and remanded the case for further proceedings on the question.
Implications For Employers
Deslandes v. McDonald’s is notable in that it opens the door to significant discovery, economic analysis, and potentially even trial proceedings to determine whether a no-poach (or similar employment provision) is ancillary to an agreement or a naked restraint that can be adjudicated only on the pleadings. The Seventh Circuit also signaled that the fact that the no-poach provision was nationwide in scope (rather than limited to a particular labor submarket) and that fact that the restriction lasted for the duration of employment and an additional six months (rather than limited to the time to recoup training investment) could tend to show that the no-poach clause was an illegal means for suppressing wages rather than a reasonable restraint to further the success of the overall franchise. Employers utilizing no poach agreements are well-served to consider the Deslandes ruling in detail.
Duane Morris Takeaways:In Parker, et al. v. Tenneco Inc., et al., Case No. 2:23-CV-10816 (E.D. Mich. Aug. 21, 2023), Judge George Steeh of the U.S. District Court for the Eastern District of Michigan denieda motion to compel arbitration based on finding an ERISA class action waiver in an arbitration agreement unenforceable. The Court determined that Plaintiffs’ breach-of-fiduciary-duty claim under the ERISA “seeks relief for the [Benefits] plan as a whole,” and that “the harm (and the recovery) is to the Plan, rather than to plaintiffs specifically.” Id. at 14-15. In turn, the Court concluded that compelling arbitration and enforcing the class action waiver would prevent plan participants from seeking plan-wide remedies conferred by the ERISA statute. For these reasons, the Parker decision is instructive for employers seeking to implement an enforceable class action wavier and configure arbitration agreements that are best suited to account for the possibility of a class action waiver being nullified.
The group of Plaintiffs in the Parker lawsuit were led by Tanika Parker, a current employee of DRiV Automotive Inc. (“DRiV”), and Andrew Farrier, a former worker for Tenneco Inc. (“Tenneco”). DRiV and Tenneco were two of several affiliated entities named as Defendants in the case. Parker and Farrier, participants in ERISA-covered 401(k) plans (the “Plans”) sponsored by their respective employers, alleged that Defendants breached their fiduciary duties under the ERISA by failing to prudently monitor and control the Plans’ investments and expenses. Defendants moved to compel arbitration of Plaintiffs’ claims on an individual basis, pursuant to an Arbitration Procedure adopted by the Plans containing language barring participants from bringing ERISA claims as a group or class. The Arbitration Procedure also provided that, if the class action waiver was found unenforceable or invalid by a court, the entire arbitration procedures would become null and void.
Eastern District of Michigan Opinion
In denying Plaintiffs’ motion to compel arbitration, Judge Steeth ruled that the class action waiver within the Arbitration Procedure was unenforceable because it “limits a participant’s substantive right under ERISA by prohibiting plan participants from bringing suit.” Id. at 15.
The Court’s reasoning cited an April 2022 Sixth Circuit decision in Hawkins v. Cintas Corp., 32 F.4th 625, 630 (6th Cir. 2022), which held that breach-of-fiduciary-duty claims under the ERISA are “brought in a representative capacity on behalf of the plan as a whole.” Id. at 10. The Court also quoted the explanation in the Hawkins decision that, although an ERISA breach-of-fiduciary-duty claim is typically brought by individual plaintiffs, “it is the plan that takes legal claim to the recovery, suggesting that the claim really ‘belongs’ to the Plan,” and that “an arbitration agreement that binds only individual participants cannot bring such claims into arbitration.” Id. at 12.
Consistent with that rationale, the Court in Parker held that the ERISA class action waiver in the Arbitration Procedure at issue was unenforceable because it would preclude Plan participants from pursuing “plan-wide remedies” provided for under the ERISA statute that cannot be waived by an agreement. Id. at 15. According to the Court, this would occur by the class action waiver “(1) prohibiting participants from bringing suit in a representative capacity on behalf of the plan, and (2) limiting relief to losses attributable to individual participant accounts, as opposed to plan-wide remedies.” Id.
Given that the Arbitration Procedure provided that it “shall be rendered null and void in all respects” if the class action waiver were to be “found unenforceable or invalid by the court,” the Court declared the entire Arbitration Procedure null and void and denied Defendants’ motion to compel arbitration. Id. at 15-16.
Implications for Class Action Defendants
As federal courts continue to issue decisions limiting the application of class action waivers relative to claims under the ERISA, it remains critical for businesses and employers to regularly review their arbitration agreements and class action waiver language to ensure legal compliance. Any business trying to implement an enforceable class action waiver should carefully consider the potential risks of extending that language to cover plan mismanagement claims under the ERISA. Businesses should also review their arbitration procedures to ensure they are best positioned to function independently of a potentially unenforceable class action waiver.
Duane Morris Takeaways – In Moses v. N.Y. Times Co., No. 21-2556, 2023 WL 5281138 (2d Cir. Aug. 17, 2023), Objector-Appellant Eric Isaacson (“Isaacson”) was successful in appealing an order of the U.S. District Court for the Southern District of New York approving a class action settlement, and attorneys’ fee award, and an incentive award in a class action against the New York Times (the “NYT”) alleging violations of California’s Automatic Renewal Law. The Second Circuit’s opinion is a case study for corporate counsel on the attributes of class action settlements that courts are apt to reject during the approval process.
Background Of The Case
Plaintiff Maribel Moses (“Moses”) brought a class action on behalf of similarly-situated subscribers in California against the NYT alleging it violated the California Automatic Renewal Law (“ARL”) by enrolling consumers who sign up for a NYT subscription, either through its website or the App, in a renewing subscription without providing the requisite disclosures and authorizations.
The parties engaged in informal discovery and mediation right off the bat and reached an agreement which settled the claims of 876,606 persons. Under the terms of the settlement agreement, NYT agreed to implement business reforms to comply with the ARL, and to provide class members with Access Codes valid for a one-month free subscription to a NYT product, or a pro rata cash payment. A $1.65 million non-reversionary settlement fund was established to pay all approved claims, attorneys’ fees of up to $1.25 million, and a court-approved incentive award to Moses of up to $5,000.
The district court preliminarily approved the settlement agreement on May 12, 2021 and conditionally certified the class for settlement purposes. Of the 876,606 persons, three class members, including Isaacson, objected to the settlement. Isaacson’s arguments were focused on the fairness of the settlement, the attorneys’ fees calculation, and the lawfulness of the incentive award. In approving the settlement, the district court applied a presumption of fairness standard and found it was reached in “arm’s-length negotiation between experienced, capable counsel . . . after a nine-hour mediation before a neutral third party.” Id. at 8. The district court further found the relief afforded to the class was “commensurate with the harm alleged” and that the incentive award was appropriate under Second Circuit precedent. Id. at 9. With respect to the proposed attorneys’ fee award, the district court found the Access Codes were not coupons under the Class Action Fairness Act’s (“CAFA”) coupon settlement provisions, which includes various restrictions on the award of attorneys’ fees. Instead, the district court looked to the value of the entire settlement in determining whether the award was appropriate and ruled that given its face value of $5,563,000, $1.25 million in attorneys’ fees (22.5% of the total face value of the settlement) was reasonable. The attorneys’ fee award constituted 76% of the $1.65 million settlement fund.
Isaacson appealed the judgement to the Second Circuit.
Second Circuit’s Decision To Vacate The District Court’s Judgment
In vacating the district court’s judgement, a three-judge panel of the Second Circuit agreed with Isaacson that the district court applied the wrong legal standard when it approved the proposed settlement and wrongly concluded that the Access Codes were not “coupons” under the CAFA.
Federal Rule of Civil Procedure 23(e) requires court approval when settling claims of a certified class and provides that a district court may only approve a class-wide settlement after a hearing and only on finding that it is “fair, reasonable, and adequate.” Acknowledging the nine factors historically used to evaluate the fairness, reasonableness and adequacy of a class settlement, and without displacing them, the panel pointed to the 2018 revisions to Rule 23(e)(2), which include a list of four considerations district courts must evaluate, one of which is whether the “proposal was negotiated at arm’s length.” The inclusion of this factor, the panel held, “prohibit courts from applying a presumption of fairness to proposed settlements arising from an arms-length agreement.” Id. at 13. Instead, the panel explained, courts must consider all four factors outlined in Rule 23(e)(2) “holistically,” which includes, among other considerations, taking into account the terms of any proposed award of attorney’s fees. Id.
Isaacson argued, and the panel agreed, that the district court erred when it presumed the proposed settlement was fair because it was reached in an arm’s-length negotiation, and further abused its discretion when it failed to evaluate such fairness in light of the attorneys’ fee and incentive awards. Notably, the panel opined “the error does not automatically require the reversal of the settlement’s approval”, and that it is “possible” the district court’s errors could be “harmless.” Id. at 22. In this case however, the panel found the error could not be “written off as harmless” given the fee awards were “intimately intertwined with the settlement.” Id. at 22-23. In fact, the panel pointed out that the amount of attorneys’ fees and incentive payment awarded directly impacted the amount of funds available for pro rata distribution to class members. As such, the district court was required to consider these fees, not just separately, but together with the other requisite considerations.
With respect to the attorneys’ fee award, the panel agreed with Isaacson that the Access Codes were coupons “under the plain meaning of the word,” i.e., digital vouchers provided to class members valid only for “select products or services.” Id. at 29, 32. The fact that the class members had the option to take cash relief was not of import, the panel found. As such, since the Access Codes were coupons, the district court was required to apply the CAFA’s coupon settlement provisions when calculating the attorneys’ fee awards, which looks to the redemption value of the coupons, as opposed to the face value of the settlement. On remand, the panel said the district court must evaluate the settlement both in light of the fee award and comply with the CAFA’s coupon settlement requirements when determining the amount of such an award.
The one argument of Isaacson’s shot down by the panel was his challenge to the approval of the $5,000 incentive award. It refused to reverse established precedent in the Second Circuit or depart from Rule 23, which allows incentive awards that are fair and appropriate.
The panel ultimately vacated and remanded the district court’s order approving the settlement and the attorneys’ fees award. At that same time, it did not opine on the fairness of the settlement or suggest that it must be overturned.
Implications For Corporate Defendants
The Second Circuit’s ruling is a perfect example of how an attorneys’ fee award that is not thought through can serve to delay, and potentially derail, the class action settlement process. It is not enough to simply consider it on its own, but the proposed attorneys’ fee award must be considered holistically with all the Rule 23(e)(2) factors in determining whether the ultimate proposal is fair, reasonable, and adequate.
Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Nick Baltaxe with their analysis of settlement approval issues highlighted in class action litigation of 2022.
Jerry Maatman: Hello blog readers and thank you for welcoming us this week. I’m joined by my colleague and associate Nick Baltaxe and today we’re going to talk about settlement approval in the class action context. Nick, thanks so much for joining us on this week’s podcast.
Nick Baltaxe: Thank you for having me Jerry, you know it’s always a pleasure.
Jerry: Well, Rule 23 does many things and one of the things that regulates is the process by which a court must approve a settlement. In general litigation I think probably 98% of cases are disposed of either in motions to dismiss or by settlement. What about in the class action context – how are cases handled and how do they exit the court system?
Nick: So similarly, there’s very rarely trials to verdicts in the class action context. The reason for that is trials are not just very financially expensive in terms of legal fees, but present a large amount of financial exposure and a large possibility of an adverse verdict that could be very, very financially harmful and present unacceptable risks. So because of those risks, class actions are typically resolved before or on the heels of class certification order. As you stated, Rule 23 not only provides a process for the certification of a class action, but also provides the procedure for the settlement of the class action. Specifically, Rule 23(e) lays out a three-part settlement approval process that includes preliminary approval, which is approval that provides notice to the putative class, notice the class members, and finally, final settlement approval.
Jerry: Well, our Duane Morris Class Action Review has a chapter in and of itself with respect to key settlements as well as settlement approval issues, and as general counsel that I deal with often say, ‘if I’m going to settle a class action I only want to settle it once, I want a broad settlement bar’ – what are some of the positive attributes or reasons to settle a class action?
Nick: Yes, so there’s benefits to both sides of the aisle for settling these class actions on an early basis. From the plaintiffs’ point of view and a reason that you see a lot of plaintiffs’ attorneys and plaintiffs being willing to settle these sorts of cases at an early stage – you get payment quicker and even with the class approval, the class settlement approval process – that can take a longer period of time, so you want plaintiffs generally want to settle this on an early side so that they can get the money quicker. However, on the side of the employers, of the defendants, as indicated before getting the trial in these cases is usually a very expensive process in terms of legal fees, so settling early avoids the high costs including all the burdensome discovery related costs that come from having to defend class actions that you don’t see in other non-class related litigation. You also see benefits to the court system by avoiding needless litigation that clogs court dockets, especially in the context of these class actions or these cases, depending on the size of the putative class and issues with manageability and other class certification issues can take multiple weeks. Additionally, although class action settlements are matters of public record, they generally contain provisions where a defendant will not admit liability, which can also be positive for the publicity for that defendant. Finally and importantly, a settlement will bar anyone who is in that class and receives remuneration – in other words, does not opt out – from bringing claims, and those settlements can be crafted to be as broad as possible to eliminate as many claims assuming that the named plaintiff is agreeable and the court approves.
Jerry: Thank you for that overview of the process. Chapter 20 of the Duane Morris Class Action Review analyzes the significant settlement approval decisions rendered in state and federal courts. Briefly based on your analysis and review of an array of those decisions, what are some of the common obstacles or objections that judges in reviewing class action settlements focus upon in terms of issues where settlements are not approved?
Nick: In order to secure the court’s approval to send notice to the class regarding that settlement, there must be sufficient information provided to the court in order to determine whether or not it will be likely to approve the settlement and certify the class purely for the purpose of the judgment. Rule 23(e) itself actually includes a detailed list of factors that must be considered before the final approval of the class settlement. Those factors include things like the quality of class representation, whether the negotiations took place at an arm’s length, the adequacy of class relief, and the equitable treatment of class members. So you’ll see a lot of discussion on whether or not the negotiations were fair, whether the agreed-upon number provides proper relief for all the class members, and those are some of the bigger obstacles that you’ll see facing approval and also mostly the reasons that a court is going to push back and not approve of a proposed class action settlement.
Jerry: I think one of the common myths in the class action space is that once you settle the class action, it’s pretty much a rubber stamp approval process – and I think nothing could be further from the truth. The law is different in every jurisdiction and the practice locally is different in front of every court, but if there is one trend it seems to me that in California, more so than in any other geographic venue, judges are very strict in reviewing class action settlements and are more apt to deny approval probably than in any other jurisdiction. What does this mean overall for both plaintiffs’ counsel and defense counsel in terms of the practice, of how they craft a settlement, what it should look like, and how it’s presented to a court?
Nick: So the settlement process being as non-rubber stamped as it is and a court-by-court basis applying these standards on non-identical fashions presented a lot of strategic dilemmas for both parties when they’re crafting a settlement agreement. For example, for a defendant you have to consider how much you’d be willing to concede in the settlement agreement without losing your ability to defend the case to the extent the settlement falls through or the settlement is not approved by the court. You also have to consider if a settlement is going to be viewed as not sufficient – potentially too cheap by a court or deemed inadequate or unfair when reviewed and considering all of the putative class members, and also as indicated, you have to consider how broad you attempt to make the release. It is a strategic positive for a defendant to make as broad of a release as possible, secure as much protection for class claims coming from those class members, but too broad of a release might get push back from the court.
We saw a lot of these issues in a more recent case that has been continuing to develop over the past few months which was Lusk, et al. v. Five Guys Enterprises LLC, et al. As you indicated, in California there seems to be a very stringent class action approval process. In the Eastern District of California, Lusk v. Five Guys is now on its fifth attempt to have class certification approved from that district court; they had chances in December 2019, October 2020, June 2021, and in a recent denial in 2022 the court looked at things such as the willingness to pay one million dollars to settle claims that it’s discredited in its briefs as a perverse set of circumstances, the court looked to cautiously and rigorously scrutinize the attempt to settle the class action, and even warned the parties to carefully consider how they would like to proceed before fighting another notion of this kind, and it would not consider a new motion that merely tinkers with the same details that the previous motions have already presented. So as indicated by you know this rule and as you mentioned with California, it’s a strict process, it’s not a very simple rubber stamp – you don’t see most cases get to a fourth or a fifth go around, but you do see courts really scrutinize what the parties are bringing forward in their class action approval motions.
Jerry: That’s a fascinating case and case study, it reminds me of kind of the counter-intuitive notion that defense counsel is bargaining for the lowest possible settlement, and that’s true, but also the lowest possible settlement that a court will approve and kind of evidence of that is the famous or infamous, depending on how one looks at it, Facebook BIPA settlement where the parties presented a $550 million settlement to the court and the court said ‘that’s inadequate, that’s a not enough of a payment to the class,’ and sent them into the room so to speak to renegotiate the deal, and months later the deal was sweetened is $650 million and then the court approved it. So certainly not a rubber stamp process and certainly there are situations where a court may force the parties back to the negotiating table to change, sweeten, revise the deal to the extent the court may feel it’s unfair.
Another area of concern is not the plaintiffs’ lawyer or the named plaintiff, but class members who may register an objection, and there is a process in Rule 23 for the court to undertake and hear and rule upon objections to class action settlements. How does that work in this space?
Nick: So objections are very common in the class action settlement sphere and on certain occasions objections can even be successful in overturning the settlement or getting it vacated on appeal. One really interesting example from the last year was Saucillo, et al. v. Peck. In that case plaintiffs brought a class action and representative claim under PAGA based on different alleged violations of the California Labor Code. Several years of litigation passed and the parties reached a settlement. The district court overruled the objection of an objector who had filed a separate PAGA claim in a different case but was not a party to the underlying PAGA claim. In this decision Ninth Circuit opined that the objector had no right to appeal in the action to which he was not a party. However, with respect to the class action settlement at issue in the appeal, a different objector argued that in evaluating the proposed pre-certification settlement the district court erroneously applied a presumption of fairness. The district court considered that the parties engaged in an arm’s length, serious, informed, and non-conclusive negotiation, both counsels were experienced and knowledgeable, and therefore applied a presumption of fairness. However, the Ninth Circuit reasoned that in the pre-certification context the district court should have employed a higher standard of fairness and put in a more probing inquiry into what would normally be required under Rule 23(e). It remanded the case for further proceedings based on that language.
Jerry: Another area of concern are attorney’s fees, where the court in the final approval hearing has to adjudicate the petition for attorneys’ fees and award of costs filed by class counsel, and this is an area where there are both objections and where courts want to make sure that plaintiffs’ counsel are not getting rich off the backs of the class, and they tend to be very noteworthy rulings where a court will measure the lodestar and the amount of hours and fees that go into the class action settlement. In terms of the past 12 months were there are some notable rulings in this space that would bear upon ideas about how to negotiate settlements?
Nick: Attorneys’ fees awards and the requests that come with them are heavily scrutinized in the class action context, not only because of the money that’s at risk but because of the fairness that underlies the entire class action settlement process. This sort of calculation in the request for attorneys’ fees will often lead to very heavy-handed disputes especially when they come at the end of an already hard-fought class action with the settlement at risk. Nonetheless, you see a lot of class counsel attempting to recover for their time attributable and leading to disputes that, as you said, come quite often to these sorts of cases.
One of the most recent ones was found in the Fifth Circuit in Fessler, et al. v. Porcelana Corona De Max, S.A. This was a punitive class of consumers who sued for Porcelana, who was a toilet manufacturer, for providing or in manufacturing the detective toilet tanks. They settled the case in two parts, first entering into a partial settlement over certain models that Porcelana manufactured in a specific plant, the Benito Juarez plant, between 2007 and 2010. At this point the plaintiffs sought to certify the claims that were not settled and the district court denied the motion. The parties then subsequently reached a class-wide settlement agreement for the second portion and filed a motion for an awards of attorneys’ fees for the two classes. Porcelana then challenged the amount sought, arguing that the recovery by plaintiffs’ counsel should be limited to the hours spent on behalf of the successful class claims only. The district court granted that motion, finding it “practically impossible” to identify which hours should be removed from the attorneys’ fee award and be allocated to either one class claim or the other class claim. Instead, it simply reduced the lodestar amount that it was going to award to the attorneys. Upon appeal by Porcelana, the Fifth Circuit reversed the district court’s order on the fee award. It held that specifically when attorneys’ fees requested by class counsel is supported by time spent on both successful and unsuccessful claims, the district court “must address the ‘common core of facts’ and the ‘common legal theories’ sufficiently so that no fees are awarded on unsuccessful theories.” The Fifth Circuit therefore vacated the attorneys’ fee award and remanded the case back to the district court to “consider the amount of damages and non-monetary relief sought compared to what was actually received by the class.” So a case like this goes to show that even in an approved settlement the attorneys’ fees can be a point of dispute and that parties have to very seriously consider what could be attributed to successful class claims, what could be attributed to non-successful class claims, and how those sorts of splits could potentially lead to significant disputes in the class action settlement approval processes.
Jerry: Those are great insights from the Fifth Circuit. I know that a lot of people are sometimes unaware that actually in California in the Ninth Circuit, the benchmark and attorneys’ fees is 25% and in many areas of the country they’re 33% and there are some instances where courts have awarded 35% up to 40% or 42% percent, so location, location, location is everything when it comes to settlement approval, as well as awards of attorneys’ fees.
Well, thank you Nick for joining us on this week’s podcast, the Class Action Weekly Wire, and signing off for Nick and myself – Jerry Maatman here at Duane Morris. Have a great day.
By Gerald L. Maatman, Jr., Gregory Tsonis, and Brittany Wunderlich
Duane Morris Takeaways: On August 21, 2023, Judge Barbara Rothstein of the U.S. District Court for the Western District of Washington granted the EEOC’s motion for reconsideration, reversing its decision granting summary judgment to defendant Telecare Mental Health Services of Washington, Inc.’s (“Telecare”) in a disability discrimination case entitled EEOC v. Telecare Mental Health Services of Washington, Case No. 2:21-CV-1339 (W.D. Wash. Aug. 21, 2023). Despite giving the EEOC multiple opportunities to submit evidence rebutting Telecare’s argument that the claimant was not qualified for the position to which he applied, and the EEOC’s failure to do so prior to its motion for reconsideration, the Court ultimately found from the EEOC’s belated evidence that a disputed material fact existed that must be resolved by a jury. The ruling demonstrates the difficulty in achieving summary judgment in an discrimination case, as well as the reluctance of courts to bar discrimination claims entirely. For employers handling EEOC litigation, this ruling is instructive, as successful motions for reconsideration are rare, and reversals of summary judgment even rarer.
The court noted that when ruling on Telecare’s motion for summary judgment, it gave the EEOC multiple opportunities to submit evidence rebutting Telecare’s argument that the claimant was not qualified for the position in which he applied. The court further chastised the EEOC for submitting such evidence for the first time in its motion for reconsideration, calling the EEOC’s failure “particularly egregious.” Despite the EEOC submitting such evidence for the first time in its motion for reconsideration, the district court ultimately reinstated the claimant’s claim after finding that an issue of material disputed fact existed.
In 2019, claimant Jason Hautala applied for a position as a registered nurse at a Telecare facility that assisted the mentally ill. While Telecare extended an offer of employment to the claimant, the offer was conditioned on the requirement that Hautala pass a physical examination to determine his fitness for the position. Telecare ultimately rescinded its offer because the claimant had a permanent leg injury, which made him unable to perform the basic functions of a registered nurse.
The EEOC filed suit on behalf of Hautala under the Americans with Disabilities Act (ADA) claiming that Telecare discriminated against him because of his disability. Telecare moved for summary judgment, arguing in part that Hautala was not a “qualified individual” for the position under the ADA based on comments he made that reflected a negative attitude towards the mentally ill. Telecare alleged Hautala made statements including “in my youth, I used to enjoy a crazy person takedown, but as I get older, I enjoy these things less and less” and “fighting off meth heads isn’t as much fun in my 50s as it was in my 30s.” Id. at 3. In support of its motion, Telecare submitted evidence that compassion toward patients with mental illness was an essential job function, and that Telecare would not hire someone who referred to patients as “crazy” or “meth heads.” The EEOC, in its opposition brief, failed to address Telecare’s argument or offer any contrary evidence.
The Court gave the EEOC a second chance to present evidence rebutting Telecare’s argument, requesting supplemental briefing on Telecare’s argument that Hautala was not a “qualified individual” for the position. Despite the second opportunity to rebut Telecare’s position, the EEOC offered no contrary evidence and argued only that the comments, “as after-acquired evidence, could not be considered as a post hoc justification” for Telecare’s failure to hire Hautala. Id. at 4.
Accordingly, the Court granted Telecare’s motion for summary judgment, holding that the EEOC failed to allege facts sufficient to support its prima facie case of discrimination under the ADA. In particular, the Court found that the claimant was not a qualified individual for the nursing position he applied for given Telecare’s undisputed evidence that Hautala had made the “troubling” and “inappropriate” comments, that compassion for patients suffering from mental illness was a necessary qualification for the position, and that the comments “conclusively demonstrated a lack of such compassion.” Id.
The EEOC’s Motion For Reconsideration
The EEOC subsequently filed a motion for reconsideration of the summary judgment ruling in Telecare’s favor. In doing so, the EEOC for the first time provided evidence that Telecare was aware of Hautala’s views towards the mentally ill, and argued that a material issue of fact required reinstating Hautala’s ADA claims.
The EEOC contended that it was entitled to reconsideration because subjective criteria (i.e., whether the claimant possessed the requisite compassion for the job) could not be considered as part of its prima facie case. In rejecting this argument, the Court found the McDonnel Douglas burden-shifting framework inapplicable because Telecare admitted it did not hire Hautala based upon his disability, nor was the subjective criteria at issue “hotly contested” like the criteria in the EEOC’s cited precedent.
However, the Court found the EEOC’s second argument for reconsideration more convincing. The EEOC argued that there was a disputed issue of fact as to whether Telecare knew of the claimant’s view on mentally ill patients during the application process, thereby contradicting Telecare’s argument that Hautera’s comments were disqualifying for the position. The EEOC submitted as evidence an email from Telecare’s employees following Hautera’s interview in which they acknowledged Hautera’s comments, but nonetheless “advanced Hautala in the application process.” Id. at 9. As a result, in order to “avoid the potential for manifest error” and “in the interests of justice,” the Court concluded that summary judgement on the issue of whether Hautala was a qualified individual was not appropriate and that “[d]enying Claimant Hautala a chance to have his substantive disability discrimination claims heard based on the EEOC’s failure to timely present the issue is a potential injustice that is easily avoided.” Id. The Court, however, made clear that it was “not absolving” the EEOC “of its obligation to prove that Hautala was a qualified individual with a disability,” only that a factual dispute exists as to whether Telecare “would actually have considered the comments disqualifying.” Id. at 10.
Though the Court ultimately reinstated the EEOC’s claim, Judge Rothstein chastised the EEOC for not citing this evidence in its summary judgment briefing, noting that the EEOC’s failure to cite to such evidence was “particularly egregious” given that the Court gave the EEOC a second chance to do so. Noting that the parties filed over 1,000 pages of exhibits in support for their motions, the Court chastised the EEOC for failing to cite the evidence in its summary judgment briefs and noted that “[j]udges are not like pigs, hunting for truffles buried in briefs’ or on the record.” Id. at 9.
Implications For Employers
This decision demonstrates the reluctance of courts to bar discrimination claims asserted by the EEOC even after severe and “egregious” missteps in litigation. This latitude afforded to the EEOC, coupled with the resources available to the government in EEOC-initiated actions, requires close coordination with experienced counsel to defeat discrimination lawsuits at the pleading stage. Employers faced with such claims should work closely with their counsel to ensure a comprehensive litigation strategy that maximizes the potential for defeating claims before the necessity of going to trial.
By Gerald L. Maatman, Jr., Alex W. Karasik, and George J. Schaller
Duane Morris Takeaways: On August 22, 2023, the EEOC announced the approval its Strategic Plan (“SP”) for Fiscal Years 2022-2026. The Strategic Plan can be accessed here. The SP furthers the EEOC’s mission of preventing and remedying unlawful employment discrimination and advancing equal employment opportunity for all. The SP focuses on: (1) Enforcement; (2) Education and Outreach; and (3) Organizational Excellence. The SP also provides performance measures for each strategic goal. For corporate counsel involved in employment-related compliance and EEOC litigation, the new SP is required reading.
The EEOC’s Strategic Priorities
The EEOC continues to promote equitable employment initiatives through its enforcement authority. The SP highlights the EEOC’s primary mission of preventing unlawful employment discrimination through its administrative and litigation enforcement mechanisms, and adjudicatory and oversight processes. The main strategic focus for employing these mechanisms is through fair and efficient enforcement based on the circumstances of each charge or complaint while maintaining a balance of meaningful relief for victims of discrimination.
As to enforcement, the SP provides a broad overview of the EEOC’s efforts to allocate its resources to ensure its efforts in stopping unlawful employment discrimination. To that end, the EEOC indicates that it will continue its targeting of systemic discrimination through training staff on systemic cases and devoting additional resources to systemic litigation enforcement. The SP included several performance measures for achieving enforcement goals, including measures on conciliation and litigation resolution, favorably resolving lawsuits, and increasing capacity for systemic investigations.
Education and Outreach
The SP prioritizes education and outreach for deterring employment discrimination before it occurs. The SP focuses on providing education and outreach programs, projects, and events as cost-effective tools for enforcement. Primarily these programs are aimed at individuals who historically have been subjected to employment discrimination. Part of the EEOC’s education and outreach involves expanding use of technology through social media, ensuring the EEOC website is more user-friendly and accessible, and leveraging technology to reach the agency’s audience.
These efforts to improve on education and outreach are aimed at promoting public awareness of employment discrimination laws while maintaining information and guidance for employers, federal agencies, unions, and staffing agencies. The SP provides an in-depth list of measuring education and outreach by utilizing technology to expand the EEOC’s audience and ensuring accessible delivery of information through events, programs, and up-to-date website accessibility and functionality.
The SP makes clear that organizational excellence is the cornerstone of achieving the EEOC’s strategic goals. The SP confirms that the EEOC aims to improve on its culture of accountability, inclusivity, and accessibility. In addition, the EEOC seeks to continue protecting the public and advancing civil rights in the workplace by ensuring its resources are allocated properly to strengthen intake, outreach, education, enforcement, and service.
The EEOC’s organizational excellence strategic goal has two prongs, including improving the training of EEOC employees and enhancing the EEOC’s infrastructure. For employees, the EEOC seeks to foster enhanced diversity, equity, inclusion, and accessibility in the workplace, maintain employee retention, and implement leadership and succession plans. Relative to the agency’s infrastructure, the SP embraces the increased use of technology through analytics, and management of fiscal resources promote the agency’s mission of serving the public.
Implications For Employers
The EEOC’s SP is an important publication for employers since it previews immediate action areas. The SP’s focus on systemic discrimination, conciliation, and litigation, and increasing the Commission’s capacity for litigating alleged systemic violations shows the EEOC is ramping up to improve handling all aspects of charges. The EEOC’s increased focus on technology and employment discrimination awareness similarly shows accessibility will continue to be a pillar of the agency. Accordingly, prudent employers should be mindful of these strategic priorities, and prepare themselves for continued EEOC enforcement.