Class Action Defense

March 12, 2024 by Jennifer A. Riley

Class Action Law Forum – Recent Developments Regarding The Impact Of Artificial Intelligence

By Jennifer A. Riley

I was honored to speak today at the 6th Annual Class Action Law Forum at the University of San Diego School of Law.

With hundreds of attendees, the conference focused on the current state of class action litigation and “white hot” litigation topics for 2024. The discussion points provide an excellent roadmap for practitioners and corporate counsel alike on the types of cases and legal issues that Corporate America is likely to encounter over the remainder of 2024.

The Impact of Artificial Intelligence

The theme of my address involved the extraordinary impact of AI on the class action space over the past year. Aside from improving the efficiency with which the plaintiffs’ class action bar may be able to file and litigate claims, generative AI is providing an ocean of raw material for potential class claims.

Over the past year, we saw AI promptly become a popular subject of class actions in multiple areas. I touched on three in particular.

AI-Assisted Decision-Making

The first area targets companies that use AI to enhance or streamline their decision-making processes. Plaintiffs have filed suits against insurers, for instance, that use algorithms to adjudicate claims as well as against agencies that use programs to evaluate governmental benefits.

This type of claim frequently arises in the employment context as companies use algorithms to streamline and enhance their candidate screening and selection procedures and to inform their promotion, transfer, and evaluation decisions.

In May 2023, the EEOC issued a technical assistance document entitled “Assessing Adverse Impact in Software, Algorithms, and Artificial Intelligence Used in Employment Selection Procedures Under Title VII,” which purports to provide employers guidance on preventing discrimination when using AI. The EEOC provided various examples in terms of how employers are using AI, including resume scanners that prioritize resumes that use certain key words, employee monitoring software that rates employees on the basis of key strokes, virtual assistants or chatbots that ask job applicants about their qualifications, and video interviewing software that evaluates candidates based on their speech patterns and facial expressions.

Unsurprisingly, we have started to see lawsuits attacking use of these types of tools. In Mobley v. Workday, filed in the Northern District of California, for instance, a plaintiff, an African American male over the age of 40 who claimed that he suffered from anxiety and depression brought suit against Workday claiming that its applicant screening tools discriminated against applicants on the basis of race, age, and disability. The plaintiff claimed that he applied for 80 to 100 jobs, and despite holding a bachelor’s degree in finance, among other qualifications, did not get a single job offer.

Workday, of course, is a software vendor. The district court granted the defendant’s motion to dismiss on the ground that plaintiff failed to plead sufficient facts regarding Workday’s supposed liability as an employer or “employment agency.” In other words, the plaintiff failed to allege that Workday was “procuring” employees for its customers and merely claimed that he applied for jobs with a number of companies that all happened to use Workday. On February 20, 2024, the plaintiff filed an amended complaint alleging that Workday was an agent of the employers that delegated authority to Workday to make hiring process decisions or, alternatively, that Workday was an indirect employer.

This is a prime example of a case to watch as we head through 2024 where plaintiffs are seeking to hold a software vendor liable for the use of its product by others.

Privacy Class Actions Targeting AI

The second area I touched on relates to privacy class actions. Companies that develop AI products have faced a slew of class action lawsuits alleging privacy violations. The allegation essentially has been that, by collecting publicly-available data to develop and train their software, developers of AI products stole private and personal information from millions of individuals.

In cases like PM v. OpenAI, as an example, groups of plaintiffs filed class action lawsuits against OpenAI and Microsoft alleging that, by collecting information from the internet to develop and train AI tools like ChatGPT, they stole private information from millions of people. Other lawsuits have been filed against companies like Open AI as well as Google alleging similar claims, including a recent example, AS v. Open AI, filed in the Northern District of California on February 27, 2024.

Copyright Class Actions Targeting AI

Third, in addition to privacy class actions, technology companies have been hit with a surge of recent lawsuits over the alleged “scraping” of copyrighted materials and personal data from across the internet to train their generative AI systems.

On February 28, 2024, for instance, Intercept Media filed suit in the Southern District of New York against Open AI and Microsoft. It alleged that, at least some of the time, ChatGPT provides responses to its users that regurgitate verbatim – or nearly verbatim – copyright protected works of journalism without providing (and even allegedly intentionally excluding) the author, title, copyright, or terms of use information contained in those works.

In terms of other examples, at the end of last year, the New York Times filed a similar lawsuit alleging copyright infringement in both the input and output of Open AI models. The Authors Guild of America filed a class action suit in September 2023 against MicroSoft and Open AI on behalf of tens of thousands of authors alleging willful violations of copyright laws. In the suit, they allege that the two companies reproduced and appropriated the copyrighted work of tens of thousands of authors to train their AI models. In Andersen v. Stability AI, a group of artists claimed that Stability AI created a software program that downloaded billions of copyrighted images to train and to act as a software library for a variety of visual generative AI platforms. They claimed that, having been trained on their works, the software could generate output in their own artistic styles.

Many of these class actions are just getting off the ground. As the results at the motion to dismiss stage continue to be mixed, it suggests that a model for successfully pleading and prosecuting these types of class actions is still a work in progress.

As courts start to weave their patchwork quilt of rulings, I expect we are seeing the tip of the iceberg in the types and numbers of filings we are likely to see on the generative AI class action front.

Other Hot Topics

The conference speakers covered myriad other timely and hot issues in the class action space, including the state of the current law on concepts such as ascertainability, standing, class-wide injury, and manageability at the class certification stage. A recurrent issue was standing and class-wide injury. Even if a court can “generally” determine class-wide injury at the certification and trial phases, how can it manageably resolve individualized questions at the damages phase?

The panelists likewise covered practical aspects of class-wide trials and mass arbitration, including best practices in preparing for and presenting cases for trial including use of video evidence such as video-taped depositions, use of demonstrative evidence at trial, and use of pre-trial focus groups to test and develop key themes and tell a story that resonates with the jury.

In sum, 2024, is shaping up to be a transformative year on the class action litigation front.

March 12, 2024 by Gerald L. Maatman, Jr.

The EEOC’s 2023 Annual Performance Report Touts A Record $665 Million In Worker Recoveries

By Gerald L. Maatman, Jr., Alex W. Karasik, and Christian J. Palacios

Duane Morris Takeaways: On March 11, 2024, the EEOC published its Fiscal Year 2023 Annual Performance Report (FY 2023 APR), highlighting the Commission’s accomplishments for the previous year, including a record-breaking recovery of $665 million in monetary relief for over 22,000 workers, a near 30% increase for workers over Fiscal Year 2022.

Employers should take note of the Commission’s annual report, as it provides invaluable insight into the EEOC’s regulatory priorities, and highlights the significant degree of financial risk that companies face for failing to comply with federal anti-discrimination laws. It is a must read for corporate counsel, HR professional, and business leaders.

FY 2023 Statistical Highlights

The EEOC’s recovery of $665 million in monetary relief over the past fiscal year represents an increase of 29.5% compared to Fiscal Year 2022. Specifically, the Commission secured approximately $440.5 million for 15,143 workers in the private sector and state and local governments and another $204 million for 5,943 federal employees and applicants.

Furthermore, the Commission reported having one of the most litigious years in recent memory, with 142 new lawsuits filed, marking a 50% increase from Fiscal Year 2022. Among these new lawsuits, 86 were filed on behalf of individuals, 32 were non-systemic suits involving multiple victims, and 25 were systemic suits addressing discriminatory policies or affecting multiple victims. These numbers show an agency flexing its litigation muscles.

The EEOC’s drastic increase in filings was accompanied by a corresponding increase in complaint activity, with 81,055 new discrimination charges received, 233,704 inquiries handled in field offices, and over 522,000 calls from the public, thereby demonstrating the efficacy of the Commission’s outreach and public education efforts.

Other performance highlights from the report included obtaining more than $22.6 million for 968 individuals in litigation, while resolving 98 lawsuits and achieving favorable results in 91% of all federal district court resolutions. The Commission further reduced its private and federal sector inventories by record levels.

Strategic Developments / Systemic Litigation

The Commission also reported significant progress in its “priority areas” for 2023, which included combatting systemic discrimination, preventing workplace harassment, advancing racial justice, remedying retaliation, advancing pay equity, promoting diversity, equity, inclusion and accessibility (“DEIA”) in the workplace, and, significantly, embracing the use of technology, including artificial intelligence, machine learning, and other automated systems in employment decisions.

In 2023, the EEOC resolved over 370 systemic investigations on the merits, resulting in over $29 million in monetary benefits for victims of discrimination. The Commission also reported that its litigation program achieved a 100% success rate in its systemic case resolutions, obtaining over $11 million for 806 systemic discrimination victims, as well as substantial equitable relief. Further, the Commission made outreach and education programs a priority in 2023, and specifically sought to reach vulnerable workers and underserved communities, including immigrant and farmworker communities, hosting over 680 events for these groups and partnering with over 1,120 organizations, reaching over 107,000 attendees.

Other Notable Developments

Beyond touting its monetary successes, and litigation accomplishments, the FY 2023 APR also highlights the newly enacted Pregnant Workers Fairness Act (“PWFA”), which provides workers with limitations related to pregnancy, childbirth, or related medical conditions the ability to obtain reasonable accommodations, absent undue hardship to the employer.

The Commission began accepting PWFA charges on June 27, 2023 (the law’s effective date) and has conducted broad public outreach relating to employers’ compliance obligations under the new law.

Takeaways For Employers

The EEOC’s Report is akin to a litigation scorecard. By all accounts, 2023 was a record-breaking year for the EEOC. As demonstrated in the report, the Commission has pursued an increasingly aggressive and ambitious litigation strategy to achieve its regulatory goals, and had a great deal of success in obtaining financially significant monetary awards. Employers should take note of these trends and be proactive in implementing risk-mitigation strategies and EEOC-compliant policies.

We anticipate that the EEOC will continue to aggressively pursue its strategic priority areas in 2024, which could shape out to be another precedent-setting year. We will continue to track EEOC litigation activity, and look forward to providing our blog readers with up-to-date analysis on the latest developments.

March 10, 2024 by Class Action Defense

Texas Federal Court Allows ERISA Class Action To Proceed Based On ESG Initiatives

By Gerald L. Maatman, Jr., Brad A. Molotsky, and Jesse S. Stavis

Duane Morris Takeaways: On February 21, 2024, in Spence v. American Airlines, Inc., No. 4:23-CV-00552-O (N.D. Tex. Feb. 21, 2024), Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas denied defendants’ motion to dismiss in a class action filed under the Employee Retirement Income Security Act of 1974 (ERISA). The ruling strikes the latest blow in the war between advocates and opponents of so-called environmental, social, and governance (ESG) investment. If the decision stands and if other courts adopt the rationale of the ruling, ERISA fiduciaries that invest in funds based on ESG factors are apt to face heightened risks and exposures.

Case Background

The primary purpose of the ERISA is to protect the beneficiaries of employee retirement plans. To achieve this goal, the law imposes demanding fiduciary duties on plan administrators, who are required to act with prudence and loyalty in selecting investment vehicles. In general, ERISA fiduciaries are expected to choose funds that will maximize profits for plan beneficiaries. However, in recent years, many investment funds have made concerted efforts to consider the social and environmental impacts of their decisions. This practice has proven controversial, as some plan beneficiaries have claimed that the focus on socially conscious investment has harmed their bottom line.

In Spence, the named plaintiff, an American Airlines pilot, is seeking to represent a class of approximately 100,000 participants in the company’s 401(k) plans. Spence argues that plan fiduciaries violated their duties of loyalty and prudence by investing in underperforming ESG funds, and by choosing funds that are managed by investment firms that pursue ESG goals through proxy voting and shareholder activism. According to plaintiff, firms like BlackRock had cast proxy votes that caused ExxonMobil and Chevron to adopt environmentally and socially conscious policies. Because these policies allegedly resulted in declining stock prices, the plaintiff asserts claims for breach of fiduciary duty to invest in funds managed by these individuals.

The airline and its employee benefits committee moved to dismiss. They contended that plaintiff lacked standing because he had not shown that he was personally impacted by any investment decisions. Defendants further argued that the plaintiff’s failure to provide meaningful comparisons between the airline’s plans and supposedly better-performing plans was fatal to his case. Finally, they urged the Court to reject plaintiff’s “Challenged Manager theory,” which suggests that investment in funds managed by individuals who have signaled their commitment to ESG is itself a breach of fiduciary duty. This theory, they argued, “is as wrong as it sounds.” Id. at 2.

The Court’s Ruling

In its ruling, the Court rejected all of the defendants’ arguments and denied the motion to dismiss. The Court held that the plaintiff had presented a plausible theory by arguing that ESG funds systematically underperform and that plan fiduciaries breached their duties by selecting these underperforming funds. According to the Court, “[f]ailure to consider [the alleged underperformance of ESG funds] gives rise to a plausible inference that defendants’ conduct was imprudent.” Id. at 12. The Court further held that plaintiff was not required to provide detailed benchmarks at the motion to dismiss stage.

Most significantly, the Court endorsed plaintiff’s Challenged Manager Theory. According to Judge O’Connor:

Plaintiff articulates a plausible story: Defendants’ public commitment to ESG initiatives motivated the disloyal decision to invest Plan assets with managers who pursue non-economic ESG objectives through select investments that underperform relative to non-ESG investments, all while failing to faithfully investigate the availability of other investment managers whose exclusive focus would maximize financial benefits for Plan participants.

Id. at 12-13. This focus on the identity of fund managers, rather than on specific actions taken by those managers, was an innovative theory, and one that the Court adopted in full.

Implications Of The Ruling

The implications of the Court’s ruling are striking. According to the Court, ERISA plans can breach their fiduciary duties not only by choosing the wrong funds, but also by doing business with fund managers who have signaled their commitment to ESG investment.

The decision in Spence is unlikely to be the last word in this space.

March 8, 2024 by Class Action Defense

New York Federal Court Grants Motion To Compel Arbitration Of Putative Class Action Unpaid Overtime Claims Based On Employee Handbook

By Gerald L. Maatman, Jr., Maria Caceres-Boneau, and Gregory S. Slotnick

Duane Morris Takeaways: On March 6, 2024, Judge Joanna Seybert of the U.S. District Court for the Eastern District of New York in Hernandez v. RNC Industries, LLC, et al., Case No. 2:21-CV-04518 (E.D.N.Y. March 6, 2024), issued an order granting a motion to compel arbitration and held that a plaintiff’s putative class action claims for unpaid overtime wages and other wage-related violations were subject to an enforceable arbitration agreement compelling arbitration of such claims on an individual basis. The decision comprehensively summarizes the current state of the law concerning motions to compel arbitration in the Second Circuit. It also provides a timely example of the importance for employers to maintain well-drafted arbitration provisions and related language in employee handbooks and other company policy acknowledgment forms (in both English and workers’ native languages) to effectively limit filed putative class actions down to individual claims.

Case Background

As summarized in Judge Seybert’s opinion, the Plaintiff brought a putative class action in federal court in New York against his former employer, seeking allegedly unpaid overtime wages under the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”), as well as related NYLL claims for failure to provide required wage notices and wage statements. Id. at 1-2. On February 4, 2022, Defendants moved to compel arbitration and stay or dismiss the complaint. Id. at 2.

As to the relevant background facts, the Court stated that the parties dispute when Plaintiff began working for Defendant – Plaintiff claims the time period was approximately March 2018 through September 2020, while Defendants contend that Plaintiff began working for them in May 2019 based on Plaintiff’s signature on I-9 and pay rate notice forms on May 22, 2019. Id. at 2. Plaintiff also executed a “Receipt of Employee Handbook Form” on May 22, 2019, which stated (in both English and Spanish), in relevant part: “I also understand that this handbook contains a mandatory arbitration provision with a class action waiver and that by accepting and/or continuing my at-will employment I agree to the binding arbitration provisions set forth in this handbook.” Id. at 2-3. Plaintiff signed and dated his assent to the contract’s terms. Id. at 3.

The arbitration provision in the Employee Handbook explicitly stated that “[a]ll claims from potential, current or former employees of [Defendant] accruing at any time pursuant to…any claims for monies that may have been owed for back wages, vacation, overtime, prevailing wage or minimum wage claims, including claims under the Fair Labor Standards Act, the New York State Labor Law or similar law… (collectively “Covered Claims”) must be submitted to binding arbitration before the American Arbitration Association”. Id. at 3-4. The arbitration provision continued: “No party shall have the right to bring or participate in a class, collective or other representative proceeding concerning any Covered Claim in any forum including any court of law or arbitration. To be clear all Covered Claims submitted to arbitration must be handled on a singular individual basis.” Id. at 4.

Plaintiff claimed he was never provided with Defendant’s Employee Handbook and did not know it existed – instead he only recalled signing three documents in May 2019 that Defendant told him were “registration-related OSHA documents.” Id. Plaintiff further alleged that no one told him that by signing any of the documents, he would not be able to bring a future lawsuit against Defendant, and that he was unable to understand the documents he signed because he could not speak, read, or write in English. Id.

The Court’s Decision

The Court began by citing to the Federal Arbitration Act’s standards and mandate that courts “direct the parties to proceed to arbitration on issues to which an arbitration agreement has been signed.” Id. at 5 (citing Daly v. Citigroup, Inc., 939 F.3d 415, 421 (2d Cir. 2019)). The Court noted that in order to determine whether to compel arbitration upon the filing of a motion to compel, it must determine: (i) whether the parties agreed to arbitrate; (ii) the scope of the agreement; and (iii) if federal statutory claims are asserted, whether Congress intended those claims to be non-arbitrable. Id. at 5-6. The Court further reasoned that as part of its determination, it must draw all inferences in favor of the non-moving party and if there is a disputed issue of material fact, such as the making of an arbitration agreement, the Court shall proceed summarily to the trial thereof. Id. at 6 (internal citations omitted). Where a party “categorically and specifically” denies signing an arbitration agreement, that evidence creates an issue of triable fact whether the agreement is enforceable; however, where a party merely states they cannot recall signing the agreement or makes assertions based on speculation or that are conclusory, no genuine issue of material fact exists. Id. at 6-7 (internal citations omitted).

The Court’s analysis first concluded that the arbitration agreement at-issue in the case was valid. In response to Plaintiff’s arguments, Defendants asserted that Plaintiff’s signed acknowledgement that he received the Employee Handbook containing a binding arbitration provision was conclusive evidence that he knew the handbook’s contents and assented to them; the arbitration agreement was explicit and contained no temporal limits; and Plaintiff’s claims he was not aware of the agreement’s contents or was misled regarding same had no merit since he received the Receipt of Employee Handbook Form in his native language (Spanish). Id. at 7-8.

The Court found that Plaintiff did not create a question of material fact as to whether the arbitration agreement was enforceable. Id. at 8. In support of its conclusion, the Court cited to the fact that Plaintiff did not deny signing the Receipt of Employee Handbook, which stated (in Spanish): “I also understand that this handbook contains a mandatory arbitration provision with a class action waiver and that by accepting and/or continuing my at-will employment, I agree to the binding arbitration provisions set forth in this handbook”. Id. Moreover, the Court noted that none of the “registration documents” Plaintiff signed, and claims he was misled into signing, fit the description of the Receipt of Employee Handbook Form. Id.

The opinion cited Second Circuit case law holding that where a Plaintiff merely states he cannot recall signing an agreement as opposed to denying he has done so, such declaration generally fails to create a triable issue of fact regarding the enforceability of an arbitration agreement. Id. at 9 (internal citations omitted). Here, Plaintiff’s statement that “to his knowledge” he did not sign documents concerning not being able to bring a future lawsuit against Defendants was not an “unequivocal denial” that such a contract was made. Id. Moreover, under New York contract law, Plaintiff was deemed to have accepted the arbitration policy by continuing to work after being advised it was his responsibility to read and understand all company policies, including the arbitration policy. Id. at 10. According to the opinion, Plaintiff agreed by signing (and not disputing his signature of) the Receipt of Employee Handbook Form that he received and read a copy of the Employee Handbook and also that it is his responsibility to keep himself appraised of any changes to the policy. Id. As such, the Court rejected Plaintiff’s argument that his non-receipt of the Employee Handbook somehow invalidates his agreement to arbitrate.

The Court also ruled that under New York law, a party is not excused from failure to read and understand the contents of a document signed by the party, and that the Second Circuit rejects the notion that a language barrier could prevent the enforcement of contractual obligations. Id. at 11-12 (internal citation omitted). Moreover, after finding that the parties agreed to arbitrate, the Court confirmed that the arbitration provision covered Plaintiff’s claims under the FLSA and NYLL, all of which are arbitrable. Id. at 12-13. The Court granted Defendants’ motion to compel arbitration and stayed the litigation pending the outcome of arbitration. Id. at 15.

Implications For Businesses

Hernandez serves as timely reminder of just how important a sound arbitration agreement and related company policies and acknowledgement forms can be in the event of a filed class action litigation in court. Here, the Court pointed to Defendants’ clear and articulable policies in granting a motion to compel arbitration of Plaintiff’s claims on an individual basis and cut down the potential class exposure in its entirety at the outset. Not only did Defendants maintain an enforceable arbitration agreement, but also it further locked Plaintiff into the agreement by citing to the agreement to arbitrate with language in its Receipt of Employee Handbook Form. Critically, the Receipt of Employee Handbook Form was provided to the Plaintiff in both English and his native language (Spanish), and he signed and dated it. In light of these additional defenses, Plaintiff’s failure to recall signing the documents and other claims that no one informed him he would be barred from suing Defendants in the future by signing failed to defeat Defendants’ motion to compel. Employers in the Second Circuit should use this decision as a roadmap for arbitration agreement and policy best practices.

March 7, 2024 by Gerald L. Maatman, Jr.

Announcing The Launch Of The Duane Morris Discrimination Class Action Review – 2024!

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

Duane Morris Takeaways: Legal compliance to prevent discrimination is a corporate imperative. Companies and business executives operate in the court of public opinion and workplace inequality continues to grab headlines and remains forefront in the public eye. In this environment, employers can expect discrimination class actions to reach even greater heights in 2024. To that end, the class action team at Duane Morris is pleased to present the inaugural edition of the Duane Morris Discrimination Class Action Review – 2024. This publication analyzes the key discrimination-related rulings and developments in 2023 and the significant legal decisions and trends impacting discrimination class action litigation for 2024. We hope that companies and employers will benefit from this resource in their compliance with these evolving laws and standards.

Class action litigation in the discrimination space remains an area of key focus of skilled class action litigators in the plaintiffs’ bar. Class actions challenging employment policies and practices has a robust history since passage of the Civil Rights Act of 1964. For decades, federal courts routinely granted class certification in nationwide employment discrimination class actions, which often spiked settlements that entailed huge pay-outs and across-the-board changes to HR systems. In turn, significant changes in the workplaces of Corporate America resulted from class action precedents, massive settlements, and injunctive relief orders. This changed in large part over a decade ago when the U.S. Supreme Court decided Wal-Mart Inc. v. Dukes, et al., 564 U.S. 338 (2011). That decision reversed a class certification order in a pay and promotions lawsuit involving 1.5 million class members who asserted claims of sex discrimination in pay and promotions. In handing down this ruling, the Supreme Court tightened the legal requirements for securing class certifications. It simultaneously forced the plaintiffs’ bar to adjust their strategies on how to prosecute class actions, while also fueling new defense strategies for opposing class certification motions. Suddenly gone were the days when nationwide class actions challenging hiring, compensation, and promotion policies of large corporations inevitably ended with across the board certification orders and big settlement checks.

But the pendulum appears to be swinging back, as courts are becoming increasingly inclined to find for plaintiffs in class certification rulings, and thereby raising the potential for large monetary remedies. This is especially true in the discrimination context, as society continues to grapple with widespread inequality in the wake of large scale social justice campaigns like Black Lives Matter and the #MeToo movement. Businesses are being confronted with increasingly employee-friendly legislative changes and a more aggressive plaintiffs’ bar.

Click here to download a copy of the Duane Morris Discrimination Class Action Review – 2024 eBook. Look forward to an episode on the Review coming soon on the Class Action Weekly Wire!

March 6, 2024March 6, 2024 by Class Action Defense

The Class Action Weekly Wire – Episode 46: 2024 Preview: Privacy Class Action Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley, special counsel Brandon Spurlock, and associate Jeff Zohn with their discussion of 2023 developments and trends in privacy class action litigation as detailed in the recently published Duane Morris Privacy Class Action Review – 2024.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Google Podcasts, the Samsung Podcasts app, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, YouTube or our RSS feed.

Episode Transcript

Jennifer Riley: Welcome to our listeners, thank you for being here for our weekly podcast, the Class Action Weekly Wire. I’m Jennifer Riley, partner at Duane Morris, and joining me today is special counsel Brandon Spurlock and associate Jeffrey Zohn. Thank you for being on the podcast, guys.

Brandon Spurlock: Thank you, Jen, happy to be part of the podcast.

Jeff Zohn: Thanks, Jen, I am glad to be here.

Jennifer: Today on the podcast we are discussing the recent publication of this year’s edition of the Duane Morris Privacy Class Action Review. Listeners can find the eBook publication on our blog, the Duane Morris Class Action Defense Blog. Brandon, can you tell our listeners a little bit about our new publication?

Brandon: Yeah, sure, Jen, the last year saw a virtual explosion of privacy class action litigation. As a result, compliance with privacy laws in the myriad ways that companies interact with employees, customers, and third parties is a corporate imperative. To that end, the class action team at Duane Morris is pleased to present the Privacy Class Action Review – 2024. This publication analyzes the key privacy-related rulings and developments in 2023, and the significant legal decisions and trends impacting privacy class action litigation for 2024. We hope the companies and employers will benefit from this resource. Their compliance with these evolving laws and standards

Jennifer: In the rapidly evolving privacy litigation landscape, it is crucial for businesses to understand how courts are interpreting these often ambiguous privacy statutes. In 2023, courts across the country issued a mixed bag of results leading to major victories for both plaintiffs and defendants. Jeff, what were some of the takeaways from the publication with regard to litigation in this area in 2023?

Jeff: Yeah, you’re absolutely right that there was a mixed bag of results – both defendants and plaintiffs can point to major BIPA victories in 2023. This past year will definitely be remembered for some of the landmark pro-plaintiff rulings that will provide the plaintiffs’ bar with more than enough ammunition to keep BIPA litigation in the headlines for the foreseeable future. Specifically in 2023, the Illinois Supreme Court issued two seminal decisions that increase the opportunity for recovery of damages under BIPA, including Tims, et al. v. Black Horse Carriers, which held a five-year statute of limitations applies to claims under BIPA, and Cothron, et al. v. White Castle System, Inc., which held that a claim accrues under the BIPA each time a company collects or discloses biometric information.

Jennifer: Two major rulings indeed. Brandon, what do you anticipate these rulings will mean for privacy class actions in 2024?

Brandon: Sure, Jen. These rulings have far-reaching implications together. They have the potential to increase monetary damages in BIPA class actions in an exponential manner, especially in employment context, where employees may scan in and out of work multiple times per day across more than 200 workdays per year. In 2023, in the wake of these rulings, class action filings more than doubled. We anticipate that the high volume of case filings will continue at 2024.

Jeff: I think it’s important to add that even though BIPA is an Illinois state statue, various other states are continuing to consider proposed copycat statutes that follow the lead of Illinois. The federal government likewise continues to consider proposals for a national statute. These factors have transformed biometric privacy compliance into a top priority for businesses nationwide and have promoted privacy class actions to the top of the list of litigation risks facing business today. If other states succeed in enacting similar statutes, businesses can expect similar surges in those States as the filing numbers of Illinois continue their upward trend.

Jennifer: Thanks so much for that information – all very important for companies navigating the privacy class action regulations and statutes. The Review also talks about the top privacy settlements in 2023. How did plaintiffs do in securing settlement funds last year?

Brandon: Plaintiffs did very well in securing high dollar settlements. In 2023, the top 10 privacy settlements totaled $1.32 billion. This was a significant increase over 2022, when the top 10 privacy class action settlements totaled still a high number, but just almost $900 million. Specific to BIPA litigation settlements, the top 10 BIPA class action settlements totaled almost $150 million dollars in 2023.

Jennifer: Thank you. We will continue to track those settlement numbers in 2024 as record breaking settlement amounts have been a huge trend that we have tracked over the past two years. Thank you to Brandon and Jeff for being here today, and thank you to the loyal listeners for tuning in. Listeners, please stop by the blog for a free copy of the Privacy Class Action Review eBook.

Jeff: Thank you for having me, Jen, and thank you to all of our listeners.

Brandon: Thanks so much, everyone.

March 6, 2024 by Gerald L. Maatman, Jr.

Ohio Federal Court Decertifies FLSA Collective Action In Latest Application Of Sixth Circuit’s “Strong Likelihood” Standard

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

Duane Morris Takeaways: On February 29, 2024, in Miller II v. SBK Delivery, LLC, No. 2:21-CV-04744 (S.D. Ohio Feb. 29, 2024), Judge Michael H. Watson of the U.S. District Court for the Southern District of Ohio applied the Sixth Circuit’s standard in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023,) to decertify a collective action of delivery drivers seeking unpaid overtime under the FLSA. As one of the first decertification rulings applying the Clark standard, the Court’s opinion is required reading for businesses litigating FLSA claims before courts in the Sixth Circuit.

Case Background

On September 22, 2021, the plaintiff in Miller II filed a Complaint against the defendant, SBK Delivery, LLC. The defendant contracted with multiple package carriers to provide delivery drivers. The package carriers paid the defendant for each package the drivers delivered. The defendant then paid each driver a percentage of the payment it received from the package carrier. The plaintiff asserted claims of unpaid overtime under the FLSA and Ohio law as well as a breach of contract claim. The plaintiff filed the FLSA claims on behalf of a proposed collective action of drivers who entered into independent contractor agreements with the defendant to provide services as delivery drivers.

On February 9, 2022, the Court approved the parties’ joint stipulation to conditionally certify and issue notice to a collective action consisting of current and former delivery drivers who performed work for the defendant between September 22, 2018 and the present who worked over 40 hours per workweek and were classified as independent contractors.

Nineteen (19) individuals filed consents to join the lawsuit as prospective opt-in plaintiffs.

On March 22, 2023, the defendant filed a motion to decertify the collective action. Prior to the close of briefing on the decertification motion, on May 19, 2023, the Sixth Circuit issued its pivotal decision in Clark.

In Clark, the Sixth Circuit articulated a “strong likelihood” standard for facilitating notice to potential opt-in plaintiffs pursuant to 29 U.S.C. § 216(b) of the FLSA. Under the new standard, only after demonstrating a “strong likelihood” that similarly situated other employees exist may opt-in plaintiffs become parties to the named plaintiff’s lawsuit.

Following the Sixth Circuit’s ruling, the parties filed supplemental briefing to address the similarly-situated status of the collective under Clark.

The Court’s Ruling

Because the parties had stipulated to conditional certification prior to the Sixth Circuit’s ruling in Clark, the Court had not had an earlier opportunity to rule on the plaintiff’s similarly-situated status relative to those in the collective action prior to the issuance of notice to potential opt-in plaintiffs.

Applying the Clark standard to the plaintiff’s claims for the first time, the Court held that the plaintiff failed to show a strong likelihood that he was in fact “similarly situated” to the putative opt-in plaintiffs.

The Court reasoned that it was not enough for the plaintiff to show that he was subject to the same alleged FLSA-violating policy of misclassification as an independent contractor of the defendant. The plaintiff also needed to establish that the question of the amount and extent of alleged unpaid overtime could be determined on a collective-wide basis.

The Court found the plaintiff dissimilar from the opt-ins in multiple key respects, including with respect to the route assignment a driver chose, since each route assignment had different start times, end times and duration. Based on individual differences in whether a driver worked overtime hours, the Court reasoned that evidence of the named plaintiff’s hours worked would not be representative of the claims of the opt-in plaintiffs. Accordingly, the Court concluded that it would need to analyze individually each opt-in plaintiff’s overtime claims to determine liability, which would be completely contrary to the purpose of the collective action mechanism.

As a result of the Court’s application of Clark, it held that the plaintiff’s FLSA claims must proceed on an individual basis only. For these reasons, the Court dismissed each of the opt-in plaintiff’s claims without prejudice.

Implications For Employers

The Court’s ruling in Miller II demonstrates that the Clark standard is a game changer for FLSA litigants in district courts within the Sixth Circuit.

To satisfy the “strong likelihood” iteration of the similarly-situated standard for FLSA certification, plaintiffs must show more than the existence of a common policy or practice that allegedly violates the FLSA. The ruling highlights the opportunity the Clark standard affords to defendants to whittle down the scope of an FLSA lawsuit significantly by marshaling facts of dissimilarity between the named plaintiff and others. To maximize the ability to prevail on a certification ruling under the Clark standard, companies ought to devote significant resources to managing FLSA compliance risks on the front end, before any litigation arises.

March 5, 2024 by Gerald L. Maatman, Jr.

Federal Court In Kansas Blows Up ADEA Collective Action Against Learjet, Inc. And Bombardier, Inc., Granting Defendants’ Motion To Decertify

By Gerald L. Maatman, Jr. and Gregory Tsonis

Duane Morris Takeaways: In a decisive ruling on February 29, 2024, Judge Eric F. Melgren of the U.S. District Court for the District of Kansas granted the motion by defendants Bombardier, Inc. (“Bombadier”) and its subsidiary Learjet, Inc., (“Learjet”) in Wood, et al. v. Learjet Inc. et al., Case No. 18-CV-02681 (D. Kan. Feb. 29, 2024), to decertify a collective action brought under the Age Discrimination in Employment Act (“ADEA”). This landmark decision underscores the increased scrutiny applied during the decertification stage of collective actions, especially concerning allegations under the ADEA, and how defendants can successfully achieve decertification by attacking proffered evidence and establishing the individualized inquiries which preclude proceeding as a collective action.

Case Background

The lawsuit originated from claims by two named plaintiffs, both over the age of 40 and former employees at the Bombardier Flight Test Center (“BFTC”) in Wichita, Kansas, operated by Learjet. The named plaintiffs alleged a pattern or practice of age discrimination in violation of the ADEA, i.e., specifically that defendants targeted non-union employees over the age of 40 for termination. Following the lawsuit’s initiation, and applying the “similarly situated” collective action standard incorporated by the ADEA from the Fair Labor Standards Act, plaintiffs sought conditional certification of a collective action under the traditionally “lenient” standard applied by the courts within the Tenth Circuit and others in evaluating certification of collective actions. Specifically, the plaintiffs sought and obtained conditional certification for a collective action consisting of non-union personnel employed since April 2, 2016 at the BFTC whose employment was terminated when they were over 40 years of age. After the dissemination of notice, additional plaintiffs opted in, with four remaining by the time the defendants moved for decertification.

Procedurally, the defendants moved to decertify the collective action after the conclusion of fact discovery.

The two named plaintiffs and four opt-ins all worked in the BFTC, were over the age of 40 at the time their employment ended, and were terminated for various reasons. One named plaintiff was terminated as a result of performance issues and a safety violation. The other named plaintiff was placed on a performance improvement plan for time management issues that resulted in his termination. While Learjet terminated one opt-in plaintiff for insubordination in connection with his failure to repay a tax payment reimbursement to the company, the three other opt-in plaintiffs were laid off as part of corporate reorganizations, with performance playing a role in some, but not all, layoff-related terminations.

The Court’s Decision

Applying the Tenth Circuit’s two-step approach for collective action certification, the Court moved from the “lenient standard” at the conditional certification stage to the “stricter” standard post-discovery to assess whether the plaintiffs were “similarly situated.” Id. at 9. The analysis to determine whether the members of the collective action were “similarly situated” to the named plaintiffs involved examining disparities in employment circumstances and available individual defenses, as well as procedural fairness and efficiency considerations.

The Court found the evidence of a discriminatory policy, predicated on an alleged statement about the company’s age composition, insufficient to establish a pattern or practice of discrimination. To establish an unlawful policy, plaintiffs relied on a single statement made by a director at a meeting in which he “drew an inverted triangle to represent a large number of older workers (at the top) and a small number of younger workers (at the bottom)” and allegedly stated that “the age balance was upside down” and that they “needed to reduce the age of the Company.” Id. at 3. The Court, however, determined that “no evidence” of a discriminatory policy existed other than the alleged statement. Notably, the Court highlighted the lack of documentation, meetings, or direct involvement by management in any discriminatory policy’s alleged development or implementation. Id. at 13. Furthermore, terminations affecting the named plaintiffs and opt-ins spanned three years and involved various decision-makers, and evidence demonstrated that the average age of BFTC employees and percentage of workers over the age of forty increased between 2015 and 2019. Id. at 8, 13.

The Court also considered the individual circumstances of the named plaintiffs’ and opt-ins’ terminations, noting significant differences in the reasons for termination and the involvement of different managers in these decisions. The Court credited defendants’ argument that individualized defenses required decertification, as some opt-in plaintiffs executed releases barring their ADEA claims, the named plaintiffs’ claims were limited by the scope of their charges of discrimination, and one opt-in failed to disclose claims against defendants in bankruptcy proceedings. Id. at 16. Though noting that the individualized evidence was “not onerous,” the Court opined that the diversity in employment circumstances and the presence of individualized defenses underscored the plaintiffs’ disparate situations, which counseled against the maintenance of a collective action. Id. at 16. Finally, the Court also found that the “lack of common representative evidence” and the “highly individualized” circumstances of each plaintiff threatened to confuse a jury by requiring separate mini trials, which was wholly inefficient. Id. at 17. Accordingly, the Court granted defendants’ motion to decertify.

Implications for Employers

This decision sends a strong message about the potential hurdles faced by plaintiffs in sustaining collective actions after fact discovery, particularly in pattern-or-practice ADEA cases. For employers, the ruling highlights the importance of meticulous record-keeping, clear performance management, and consistent application of termination policies to defend against collective action claims effectively.

Moreover, this decision showcases the strategic value of aggressively challenging collective action certification on the basis of individualized claims and defenses, thereby preventing the broad-brush grouping of distinct employment cases. Employers should also note the critical role of early, proactive legal strategies in managing and mitigating the risks associated with collective action litigation.

March 5, 2024March 5, 2024 by Class Action Defense

Investment Advisory Business And Executive Ordered By New York Federal Court To Pay Agreed-Upon Settlement Amount, Plus Interest After Ignoring Court Deadlines

By Gerald L. Maatman, Jr., Maria Caceres-Boneau, and Gregory S. Slotnick

Duane Morris Takeaways: On February 29, 2024, Judge Andrew Carter of the U.S. District Court for the Southern District of New York in Lee v. Grove Group Advisors LLC, et al., Case No. 1:20 Civ. 05937 S.D.N.Y. (Feb. 29, 2024), issued an order granting a motion to enforce a settlement agreement reached between the parties nearly three years after it was initially submitted for approval, and more than two years after the Court ultimately approved the agreement as fair and reasonable. The decision underscores the importance of a Court’s retention of jurisdiction over a case in order to enforce or otherwise apply the settlement of a case, and also serves as a reminder that employers and individual business executives who sign settlement agreements to end litigation should always be prepared to make all agreed-upon payments, or else risk the ire of a Judge, the Court’s enforcement of the agreement, and additional interest on the original settlement amount.

Case Background

According to the Complaint filed by the Plaintiff on July 30, 2020, Plaintiff began working on August 9, 2019 for the defendants – including an investment advisory company and its Chief Executive Officer/Co-Founder (together, “Defendants”) – as a “Manufacturing and Engineering Director” for which Defendants agreed to pay Plaintiff an annual salary of $160,000. Complaint (“Compl.”) at ¶¶ 12, 21-22. Plaintiff claims that Defendants also agreed to provide him with fifteen (15) days of PTO per year. Id. at ¶ 23. According to Plaintiff, in January 2020, Defendants ceased paying him his wages, told him that they’d pay him “soon,” and after he continued to work for Defendants, in February 2020, Defendants sent him a letter stating that his last day of employment was February 13, 2020. Id. at ¶¶ 26-33. The letter also informed Plaintiff that Defendants owed him approximately $24,000 for the period from December 22, 2019 to February 13, 2020, that Defendants did not have the means to pay him at that time, but that they were making “every effort to raise money for the company in order to pay our liabilities, yours included.” Id. at ¶ 32.

Plaintiff alleges that on May 15, 2020, Defendants paid him only $3,846.15, and that Defendants did not pay him the balance of what they owed him despite Plaintiff trying to reach out to Defendants on numerous occasions in an attempt to get paid, the only reply from Defendants being “we will let you know when we get the funds to pay you.” Id. at ¶¶ 34-35. Plaintiff claimed entitlement to $20,153.87 in unpaid earned wages for work performed for Defendants, as well as sixty-four (64) hours of accrued, unused PTO valued at $4,923.07 – totaling $25,076.94. Id. at ¶¶ 36-38.

According to the Court Order, the parties reached agreement at mediation and submitted an initial proposed settlement agreement for Court approval on May 27, 2021, as required by Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015). Order at 1. On December 28, 2021, after the parties filed a revised agreement, the Court approved the agreement as fair and reasonable, and it provided for payment by Defendants of a settlement sum of $14,990 by January 11, 2022. Id. at 1-2. Critically, the Court retained jurisdiction over the case to hear any motion to enforce or otherwise apply the settlement. Id. The Order stated that Plaintiff now sought to enforce the agreement, and that the Court provided Defendants with multiple opportunities to respond to the motion to enforce, including a December 4, 2023 order to show cause as to why Plaintiff’s motion to enforce should not be deemed unopposed. Id.

The Court’s Decision

The Court determined that because the parties reached a binding and enforceable agreement, Plaintiff’s motion to enforce the agreement should be granted. Id. The order confirmed that to date, Defendants had not paid any of the settlement sum, and that after counsel for Defendants’ request to withdraw was granted by the Court, Plaintiff filed a motion to enforce the settlement on April 12, 2023. Id. at 2. Defendants also ignored the Court’s repeated warnings to obtain new counsel. Id. On June 5, 2023, the Court issued an order to show cause as to why the Plaintiff’s motion should not be treated as unopposed, and provided another follow-up to Defendants by way of a December 1, 2023 filing. Id. Defendants did not respond, and the Court noted that they have not made any filing on the docket since February 9, 2023. Id. at 2-3.

The Court set out the standard of review for settlement agreements, which it stated are interpreted according to general principles of contract law. Id. at 3. The Court found that when a judge determines a settlement agreement was in fact reached, the agreement is binding on the parties, and that the parties must be in agreement on all essential terms. Id. The order confirmed that once a settlement agreement is reached, it constitutes a binding and conclusive contract, and that the parties are bound to its terms even if they have a later change of heart. Id. at 4.

The Court stated that it may only vacate a stipulation of settlement upon a showing of good cause, such as fraud, collusion, mistake, duress, lack of capacity, or where the agreement is unconscionable, contrary to public policy, or so ambiguous that it indicates by its terms that the parties did not reach agreement. Id. at 5.

In this case, the Court found no such showing of good cause to vacate the agreement, since it was written and signed by the parties and approved by the judge. Id. In considering the totality of the circumstances, the Court ruled that Plaintiff established that the signed settlement agreement is enforceable. Id. at 6. As a result, the Court granted Plaintiff’s motion to enforce the agreement, as well as Plaintiff’s request for 9% interest per year from the date the funds became due (January 11, 2021) to the date the funds became owed (April 12, 2023 – the filing date of the motion to enforce settlement). Id. The Court calculated such interest to be $3,034.55, and ultimately held Plaintiff is entitled to recover from Defendants, individually, jointly and severally, the total amount of $18,024.55. Id.

Implications For Businesses

The Lee decision illustrates that under appropriate circumstances, such as the settlement of an unpaid wage claim providing for a judge to retain jurisdiction, a court is apt to grant motions to enforce a settlement agreement without hesitation (and also award interest on same). In this case, the Court provided Defendants with numerous opportunities to defend themselves and appear on the docket. However, Defendants’ silence spoke volumes, and the Court ultimately approved Plaintiff’s motion to enforce the valid agreement previously reached and submitted on the docket by the parties.

Businesses and their executives should always ensure their intent and unquestioned ability to make agreed-upon payments as part of any litigation settlement agreement (and to their employees), whether an unpaid wage claim filed on the docket for Court approval in the Second Circuit, or a private, confidential breach of contract claim. This is especially so when a Court retains jurisdiction over a filed matter to enforce any settlement agreement reached. Of course, employers should also make sure that they follow Court Orders and meet Court deadlines to a tee!

February 29, 2024 by Class Action Defense

Illinois Federal Court Trims Homebuyers’ Antitrust Class Claims In Dispute With NAR

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On February 20, 2024, Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois granted Defendants’ motion to dismiss with respect to a federal antitrust claim seeking injunctive relief for violations of Section 1 of the Sherman Act, among other claims, in Batton, et al. v. The National Association of Realtors, et al., No. 21-CV-00430 (N.D. Ill. Feb. 20, 2024). The Court accepted defense arguments that the members of the putative class were only indirect purchasers of buyer-broker services; therefore the Court opined that they were barred from seeking damages under federal antitrust law by Illinois Brick Co. v. Illinois, 431 U.S. 720, 729 (1977), and dismissed the claim for injunctive relief under Section 1 because the more directly injured home sellers are challenging the same rules and seeking the same injunction in separate, related cases.

Batton is required reading for any corporate counsel handling antitrust class action litigation involving indirect purchasers.

Case Background

Plaintiffs are homebuyers. Defendants, National Association of Realtors (“NAR”), Realogy Holdings Corp., HomeServices of America, Inc., HSF Affiliates, LLC, Long & Foster Companies, Inc., BHH Affiliates, LLC, RE/MAX LLC, and Keller Williams Realty, Inc. utilized a Multiple Listing Service (“MLS”) in the sale of homes. Plaintiffs alleged that MLS access was restricted only to home sellers who make a set commission offer to the successful buyer-broker, resulting in supracompetitive commission rates that get baked into the purchase price for homes. Plaintiffs brought a claim for injunctive relief under Sherman Act Section 1 as well as various state antitrust and consumer protection claims.

The Court’s Ruling

Although Illinois Brick does not preclude indirect purchasers like the putative class of homebuyers from pursing claims for injunctive relief under the Sherman Act, the Court dismissed the claim. It reasoned that because the more directly injured home sellers were challenging the same rules and seeking the same injunction in separate litigation before the same Court, the claim could not stand.

Implications For Defendants

Batton could be an important test of indirect purchasers’ ability to use antitrust law when there are other purchasers better suited to bring federal antitrust claims. Hence, it is an important decision in this space.