Class Action Defense

February 26, 2025February 26, 2025 by Gerald L. Maatman, Jr.

EEOC Male Bias Suit Against Sports Bar Restaurant Group Survives Dismissal

By Gerald L. Maatman, Jr., Anna Sheridan, George J. Schaller

Duane Morris Takeaways: In EEOC v. Battleground Restaurants, Inc. et al., 1:24-CV-792, 2025 U.S. Dist. LEXIS 32071 (M.D.N.C. Feb. 24, 2025), the Court denied Defendants’ motion to dismiss an EEOC lawsuit alleging discriminatory hiring practices against men at a chain of sports bars. The EEOC’s complaint asserts sex discrimination in hiring for server, bartender, and host positions, and for failures to preserve employment records in violation of Title VII of the Civil Rights Act of 1964.

This case signals a new wave of anti-discrimination enforcement actions against companies that prioritize hiring practices that may exclude male applicants. The Commission’s litigation efforts are in full swing, and companies must review their hiring practices to ensure all applicants are weighed neutrally during the application process.

Complaint Allegations

The EEOC’s complaint alleges that between December 1, 2019, and February 18, 2022, Kickback Jack’s restaurants located throughout North Carolina, Virginia, and Tennessee discriminated against males by failing to hire men for front of house, non-managerial positions. Id. at *1. Kickback Jack’s is owned and operated by Battleground Restaurants, Inc. and Battleground Restaurant Group, Inc. (“BRGI”) (collectively “Defendants”). Id.

Kickback Jack’s employs “servers, hosts, and bartenders in non-managerial front-of-house positions,” all of which require no “special skills or qualifications.” Id. at *2. Kickback Jack’s advertisements state that applicants need only “[b]ring [their] great attitude to work and [Kickback Jack’s] will train you.” Id. at *2.

The underlying charge was filed on July 31, 2020, when a female server, Melody Roe, filed an EEOC charge of discrimination against Kickback Jack’s. Id. Included in Roe’s charge of discrimination was statements that Kickback Jack’s “has a policy and/or practice of only hiring females for front of house positions and not into management.” Id. at *3. The EEOC’s investigation into Roe’s charge of discrimination found that Battleground Restaurants, Inc. “maintained a policy or practice . . . of failing or refusing to hire males for non-managerial front of house positions because of their sex.” Id.

The Commission’s investigation further revealed that of the 2,100 non-managerial front-of-house employees employed between December 1, 2019, and February 18, 2022, “approximately 3% were male” and some Kickback Jack’s locations “did not employ male servers at all.” Id. at *4.

As a result of these newly uncovered hiring practices, the EEOC filed a complaint asserting that “a predominantly female front-of-house workforce cannot be justified by any legitimate business purposes” and that Defendants’ hiring practices “were and are intentional and willful.” Id. The Complaint also alleged that Defendants failed to make and preserve records relevant to their employment practices, and specifically failed to retain applications for employment. Id. at *5.

Defendants moved to dismiss the EEOC’s complaint, dismiss or strike BRGI, and requested the Court certify the case for interlocutory appeal. Id. at *1.

District Court’s Ruling

The Court denied the Defendants’ motion in all aspects on the basis that the EEOC complied with procedural and administrative requirements, plausibly alleged a pattern or practice of disparate sex discrimination, and that the EEOC could properly include BRGI as a defendant. Id.

Defendants argued the EEOC failed to provide them with adequate notice of its claims on “behalf of male applicants and the Title VII records violations.” Id. at *5. Defendants did not dispute that it received notice of Roe’s charge of discrimination within 10 days (as required by 42 U.S.C. § 2000e-5(b)). Rather, the Defendants argued the charge of discrimination did not “give them notice of an EEOC investigation into discrimination against males in hiring.” Id. at *7.

The EEOC countered that the investigation into discrimination against males was implicit in Roe’s allegations that the restaurant had “a policy and/or practice of only hiring females” for front of house positions. Id.The Court agreed that the “alleged discrimination against males for front of house positions appears on the face of the charge of discrimination,” Defendants did not allege that they were not on notice of the charge of discrimination, and therefore, the EEOC complied with its administrative and procedural requirements under the statute. Id. at *8

The Court also denied Defendants’ motion to dismiss the EEOC’s preservation of records claim because no 10-day notice requirement exists under the statutory provisions. Id. at *8-9. The Court further disagreed with Defendants that the EEOC’s claims should be limited to 180 days before Defendants received notice of the charge of discrimination because “the complaint [did] not contain the facts necessary to assess whether the EEOC’s claims exceed Title VII’s statute of limitations period.” Id. at *10-11.

On Defendants’ argument to dismiss or strike BRGI, the Court opined that the Commission plausibly alleged BRGI is “essentially, Kickback Jack’s operator.” Id. at *12. The Court held the EEOC can sue BRGI “despite not naming [BRGI] directly as a party in the charge of discrimination or communicating with it based on both the joint enterprise test and substantial identity exception.” Id. at *15.

On the EEOC’s allegations of Title VII sex discrimination in hiring, the Court denied the Defendants’ motion to dismiss because the EEOC “plausibly alleged a pattern or practice of discrimination by using statistics” which demonstrated of the 2,100 non-managerial front-of-house employees approximately only 3% were male. Id. at *18. And in some instances, locations “did not employ any male servers at all.” Id. The EEOC also satisfied its pleading requirements under Title VII as it alleged Defendants discriminated “against male applicants –– a protected class — ” and alleged that “male applicants qualified” for the front-of-house roles.” Id. *17-18. Based on these findings, the Court reasoned “this type of ‘gross disparity’ plausibly demonstrates an inference of discrimination against males who applied to work as servers.” Id. at *18. Therefore, the Court found that the EEOC has met its burden of plausibly alleging the elements of its claim sufficiently to survive a motion to dismiss.

The Court also denied Defendants’ request for certification stating it did “not find any esoteric issues meriting an interlocutory appeal.” Id. at *2.

Implications For Employers

Employers’ hiring practices remain a target for EEOC initiated litigation. This case is but one example of the EEOC bringing a lawsuit after identifying a pattern of potentially discriminatory practices first alleged in a charge. While uncommon, the EEOC does regularly bring these “pattern-or-practice” lawsuits under Section 706 or Section 707 of Title VII of the Civil Rights Act of 1964 when it has a case that draws significant public interest or could make an industry-wide impact.

This is far from the first case of male gender discrimination in the restaurant industry. The popular restaurant chain Hooters has settled several similar lawsuits, one in 1997 for $3.75 million, and one in 2009 for an undisclosed sum. See Latuga v. Hooters, Inc., 1:93-CV-7709 (N.D. Ill. Nov. 25, 1997); see also Grushevski v. Texas Wings, Inc., No. 09-CV-00002 (S.D. Tex. Apr. 16, 2009). Lawry’s restaurants were also hit with an EEOC pattern or practice lawsuit in 2006 alleging that Lawry’s practice of only hiring females for its server positions constituted gender discrimination. See EEOC v. Lawry’s Restaurants, Inc., No. CV 06-01963 (C.D. Cal. Mar. 31, 2006).

The recent case against Battleground shows that the EEOC continues to closely scrutinize hiring practices which select individuals based on a protected characteristic, including gender. Employers must also monitor and audit their hiring practice outcomes to ensure statistical models don’t demonstrate discrimination otherwise an EEOC action may be on the horizon.

February 25, 2025February 25, 2025 by Gerald L. Maatman, Jr.

EEOC’s First Publicized Settlement During The Trump Administration Puts Employers On Notice Of “Anti-American Bias”

By Gerald L. Maatman, Jr., and Christian J. Palacios

Duane Morris Takeaways: On February 18, 2025, in EEOC v. LeoPalace, Case No.: 1:25-CV-00004 (D. Guam), the EEOC settled a lawsuit and entered into a three-year consent decree with LeoPalace Resort, a large hotel in Guam. Under the terms of the agreement, LeoPalace agreed to pay over $1.4 million and hire an external equal employment monitor to settle allegations that it provided employees of non-Japanese national origin with less favorable wages, benefits, and other terms of employment than their Japanese counterparts. This lawsuit is significant because it is the first seven figure settlement that the Commission has procured since President Trump took office in January 2025 and it is accompanied by a statement from the new Acting Chair Andrea Lucas announcing the Commission’s new enforcement agenda and its intent to protect all workers from national origin discrimination and “Anti-American” bias.

The LeoPalace Settlement And Anti-American Bias Enforcement

On February 14, 2025 the EEOC filed suit against LeoPalace in the U.S. District Court for the District of Guam, on behalf of non-Japanese employees Christopher Adams, Thomas Lee and Donald Gueniot Jr., alleging that the hotel subjected these workers to less favorable wages and benefits, and other terms and conditions of employment compared to equivalent or subordinate Japanese employees on the basis of their national origin (non-Japanese), in violation of Title VII of the Civil Rights Act. Id. at 1. The Commission settled with LeoPlace shortly thereafter, resulting in the hotel chain agreeing to pay $1,412,500.00 and further agreeing to a three-year external equal opportunity monitor to oversee compliance and training, as well as reinstate former employees interested in going back to work for LeoPalace. Id. at 9.

In the accompanying press release, Acting Chair Andrea Lucas announced, ““Federal anti-discrimination laws ensure equal employment opportunity for jobs performed by all workers regardless of national origin. The President’s Executive Order on Ending Illegal Discrimination and Restoring Merit-Based Opportunity recognizes that the longstanding federal civil rights laws serve as a bedrock to support equality of opportunity for all Americans. This case is an important reminder that unlawful national origin discrimination includes discrimination against American workers in favor of foreign workers.” See EEOC Newsroom, LeoPalace Resort to Pay Over $1.4 Million in EEOC National Origin Discrimination Lawsuit (Feb. 18, 2025). This is the Commission’s first publicized settlement since Lucas was appointed Acting Chair of the EEOC on January 21, 2025.

One day after the settlement was announced, the EEOC published a second press release on its Newsroom “putting employers and other covered entities on notice” that the Commission was committed to protecting all workers from unlawful national origin discrimination, including American workers. See EEOC Newsroom, EEOC Acting Chair Vows to Protect American Workers from Anti-American Bias (Feb. 19, 2025). The Commission further explained that, although Title VII’s national origin nondiscrimination requirement generally meant that employers could not prefer American workers, it also meant that employers could not prefer non-American workers, or otherwise disfavor Americans. Id. It concluded its press release by stating that while employers may have “many excuses” for preferring non-American workers (including lower labor cost, client preference, or a biased perception that foreign workers have a better work ethic than Americans), none of these were legally permissible reasons to violate Title VII. Id.

Takeaway for Employers

Every new presidential administration brings with it an array of objectives focused on different policy priorities. Since President Trump took office, he has taken unique steps to reshape the Commission by firing its Chair, two Commissioners, and its general counsel, all within the course of a few weeks. The Commission has already indicated it is committed to carrying out President Trump’s policy agenda, consistent with his executive orders related to “unlawful DEI-motivated race and sex discrimination,” “defending the biological and binary reality of sex and related rights,” “protecting workers from religious bias and harassment, including antisemitism” and, as the above settlement illustrates, “anti-American national origin discrimination.” See EEOC Newsroom, President Appoints Andrea R. Lucas EEOC Acting Chair (Jan. 21, 2025).

Employers should take note of the EEOC’s new policy priorities and can likely expect increased enforcement activity in each of these areas for the next four years.

February 25, 2025February 25, 2025 by Gerald L. Maatman, Jr.

Announcing The Launch Of The Duane Morris Discrimination Class Action Review – 2025!

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 second edition of the Discrimination Class Action Review – 2025. This publication analyzes the key discrimination-related rulings and developments in 2024 and the significant legal decisions and trends impacting discrimination class action litigation for 2025. 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 bookmark or download a copy of the Discrimination Class Action Review – 2025 e-book. Look forward to an episode on the Review coming soon on the Class Action Weekly Wire!

February 24, 2025February 24, 2025 by Gerald L. Maatman, Jr.

Data Privacy Class Action Alleges Insurers Improperly Collected The Data Of 40 Million Users Through Third-Party Applications

By Gerald L. Maatman, Jr., Justin Donoho, George J. Schaller, Ryan T. Garippo

Duane Morris Takeaways: In Mahoney, et al. v. The Allstate Corp, et al., 25-CV-01465 (N.D. Ill. Feb. 11, 2025), Plaintiffs Michael Mahoney and Scott Schultz (collectively, “Plaintiffs”) filed a putative class action lawsuit asserting Allstate, and its subsidiary Arity, illegally obtained personal driving data of 40 million policyholders through third-party mobile application software. The case is pending in the U.S. District Court for the Northern District of Illinois before Judge Steven C. Seeger.This is the third lawsuit in a series of lawsuits alleging class-wide allegations based on Allstate’s alleged data collection practices. See Sims et al. v. The Allstate Corp. et al., 1:25-CV-00407 (N.D. Ill. Jan. 14, 2025) (alleging data collection through third party application Sirius XM); see also Arellano et al. v. The Allstate Corp. et al., 1:25-CV-01256, (N.D. Ill. Feb. 5, 2025) (alleging data collection through third party applications Life360, GasBuddy, and Fuel Rewards).

Mahoney, Sims, and Arellano, represent a triumvirate of data privacy class actions centered on allegations of improper data collection through third-party applications. Companies will be well-served monitor these cases for their novel assertions in trending data privacy litigation.

Complaint Allegations

Michael Mahoney resides in San Francisco, California, and he downloaded the GasBuddy application in 2011 to “find competitive gas prices.” Mahoney, 25-CV-01465, ECF No. 1 § III ¶ 14 (N.D. Ill. Feb. 11, 2025). Scott Schultz resides in Highland Park, Illinois, and he downloaded the GasBuddy application in 2021 and used it “in his own and other people’s vehicles to find competitive gas prices.” Id. § III ¶ 15.

Plaintiffs collectively allege that Allstate and its subsidiary Arity (collectively, “Defendants”) “conspired to collect drivers’ geolocation data and movement data from mobile devices, in-car devices, and vehicles.” Id. § IV ¶ 7. Plaintiffs allege Defendants designed a software development kit that could be integrated into third-party mobile applications such as “Routely, Life360, GasBuddy, and Fuel Rewards.” Id. § IV ¶ 8. Plaintiffs further allege Defendant advertised that they “collect data ‘every 15 seconds or less’ from 40 million ‘active mobile connections’ and ‘derive[] unique insights that help insurers, developers, marketers, and communities understand and predict driving behavior at scale.” Id. § IV ¶ 24.

Plaintiffs contend Defendants’ software development kit was “designed to and does collect data” including “Geolocation data and ‘GPS Points,’” “cellphone accelerometer, magnetometer, and gyroscopic data,” “Trip attributes” data (including start and end locations, trip distances, trip duration), “Derived events” data (including acceleration, speeding, distracted driving, crash detection), and “Metadata.” Id. § IV ¶ 11 (A) – (E). Plaintiffs further assert that when using these third-party applications “Defendants could collect real-time data on their locations and movements and surreptitiously collect highly sensitive and valuable data directly from Plaintiffs’ mobile phones.” Id. § IV ¶ 16.

It is also important to note that Plaintiffs maintain that Defendants used their personal data to “develop, advertise, and sell several products and services to third parties, including insurance companies . . .” and used the purchased consumer data for “[Defendants’] own underwriting purposes.” Id. § IV ¶ 23. Plaintiffs, ultimately, assert that Defendants real purpose in using this data is for their “own financial and commercial benefit” and to obtain “substantial profit.” Id. § V ¶ 49. They ultimately assert via their nine-count Complaint that this technology amounts to a wiretapping of their personal information which entitles them, inter alia, to a sum of “$100 per day per violation or $10,000” per class member whichever is greater. Id. § V ¶ 51.

Implications For Companies

Although such data collection lawsuits are no longer a new phenomenon, their scope has become far more aggressive as the plaintiffs’ bar continues to look for ways to monetize lawsuits against corporations using such technologies.

Take for example the dilemma presented by Mahoney. In that case, it is likely that Defendants will have strong defenses to this action. For example, Plaintiffs admit that Defendants’ purpose in using this technology was to earn “substantial profit.” Id. § V ¶ 49. Based on similar allegations, many courts have found that these purposes are insufficient for a plaintiff to avail itself of such wiretapping statutes. See, e.g., Katz-Lacabe v. Oracle Am., Inc., 668 F. Supp. 3d 928, 945 (N.D. Cal. 2023) (dismissing wiretap claim because defendant’s “purpose has plainly not been to perpetuate torts on millions of Internet users, but to make money.”).

There are, however, enough court rulings that come out in the opposite direction to give a corporate defendant pause. See, e.g., R.S. v. Prime Healthcare Services, Inc., No. 24-CV-00330, 2025 WL 103488, at *6-7 (C.D. Cal. Jan. 13, 2025) (recognizing the split and siding with the plaintiffs). And, if Plaintiffs are correct that there are 40 million individuals in the class, and that each class member is entitled to $10,000 at a minimum, then this lawsuit alleges at least $400 billion dollars in liability. Even if there is a 1% chance of success on these claims, it would suggest that the completely unrealistic figure of $4 billion dollars is on the table.

Corporations in these types of class actions are faced with the difficult choice of settling the claims for an astronomical figure based on the use of technologies which are ubiquitous in nature (like software development kits for mobile applications) or defend a $400 billion lawsuit based on defenses in an area of the law which is not fully developed. It will be interesting to see how the Mahoney defendants balance these concerns as the case progresses, because many twists and turns lie ahead.

In the meantime, corporate counsel should take the opportunity to evaluate their companies’ data collection and privacy policies to make sure their companies are not easy targets. If the allegations in Mahoney are any example, the mere threat of one of these lawsuits should be enough to keep corporate counsel up at night. And, if their companies are ultimately sued in one of these lawsuits, they should ensure that an experienced defense team has its hands on the steering wheel.

February 20, 2025February 20, 2025 by Gerald L. Maatman, Jr.

The Class Action Weekly Wire – Episode 89: Key Trends In Privacy Class Actions

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman, special counsel Justin Donoho, and senior associate Tyler Zmick with their discussion of the key trends analyzed in the 2025 edition of the Duane Morris Privacy Class Action Review, including the major settlements and cutting-edge litigation theories percolating in a variety of privacy-related class actions, including the Biometric Information Privacy Act (“BIPA”), advertising technologies (“adtech”), and artificial intelligence tools.

Bookmark or download the Privacy Class Action Review e-book here, which is fully searchable and accessible from any device.

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

Episode Transcript

Jerry Maatman: Welcome, loyal listeners, to the next installment of the Class Action Weekly Wire. My name is Jerry Maatman, I’m a partner at Duane Morris, and joining me today are my colleagues, Justin and Tyler.

Justin Donoho: Thank you, Jerry, happy to be part of the podcast.

Tyler Zmick: Thanks, Jerry. I’m glad to be here.

Jerry: Today on our podcast we’re discussing the recent publication of this year’s edition of the Duane Morris Privacy Class Action Review. Our loyal listeners can download the desk reference from our blog, the Duane Morris Class Action Defense Blog. Justin, can you tell our listeners a little bit about our desk reference?

Justin: Yes, and thank you. Last year saw a continued explosion in privacy class action litigation. As a result, it is imperative that companies beef up their efforts to comply with privacy laws in the many ways that companies interact with employees, customers, and others. To that end, the class action team at Duane Morris is pleased to present the Privacy Class Action Review – 2025. This publication analyzes the key privacy-related rulings and developments in 2024, and the significant legal decisions and trends impacting privacy class action litigation for 2025 in a variety of different privacy-related subject areas. We hope that companies and employers will benefit from this resource in their compliance with these evolving laws and standards.

Jerry: Well, just on this podcast I know the assembled speakers have over 60 years of experience in dealing with these issues. But I’d have to say 2024 was a year of incredible change and flux. Tyler, what are some of the key guideposts out there in the case law over the past 12 months?

Tyler: So, there’s been an explosion of class action lawsuits in recent years, including 2024, involving adtech technologies. And of course, biometric data. I think the biggest driver is the fact that we are operating in a legal environment that is evolving so quickly that said technology has far outpaced the law, especially when it comes to new tools like Meta Pixel, Google Analytics, and other adtech technologies. While these tools are innovative in many ways that benefit businesses, they’re also collecting massive amounts of sensitive data – data that consumers may have never explicitly agreed to share. The courts are now grappling with outdated statutes, such as old wiretapping and eavesdropping laws, and trying to apply them to modern technologies.

Justin: Absolutely. Businesses that rely on these technologies have often done so without thinking through a variety of ways that they can mitigate the risk of noncompliance or mitigate the risk of facing any class action lawsuit in the first place, by modernizing their terms of service and data privacy policies. The rise in class actions is directly related to an increased public awareness about data privacy, and of course, the increased aggressiveness of plaintiffs’ attorneys trying to expand the application of the Illinois Biometric Information Privacy Act, for example, with high-profile cases alleging violations of various AI technologies that perform functions other than facial recognition or any kind of person recognition.

Jerry: Speaking of BIPA – 2024 certainly saw a mixed bag of rulings related to biometric data collection, particularly on the issue of facial analysis technologies. So, how does one make sense, if you’re a corporate decision-maker, of what businesses are facing and the risks that are out there, given these murky waters with the case law developments?

Tyler: That’s a great question. The mixed rulings obviously create an atmosphere of uncertainty. And that’s what I think is driving so much of the litigation companies are basically being forced to decide whether to settle or to litigate these cases and risk very high damage awards, because often there are substantial penalties for violations when courts release decisions on issues where there’s no clear-cut answer, and when the decisions are often conflicting, such as on the issue you mentioned about whether certain types of data count as biologically unique. It leaves businesses with many gray areas to navigate, and this is only compounded by the reality that these technologies evolve faster than courts can keep up.

Justin: Yes, and from the business side, companies are being forced to take a much more cautious approach when it comes to how they collect and process biometric data. For example, they’re revisiting their privacy policies in terms of service and taking a closer look at the technologies they use, too. Some companies, especially larger ones, like Google, Meta, and Oracle, have already settled for significant amounts, which sends a clear signal to others that ignoring these issues is just simply too costly.

Jerry: Let’s talk about settlements. So, the plaintiffs’ mantra is file the case, certify the case, then monetize the case. Certainly, in the last 12 months we saw some eye-popping settlements, particularly the $1.4 billion deal between Meta and the State of Texas. What does this tell us about the broader implications of these settlements and what it means for companies operating in this sort of environment?

Justin: Yeah, the size of these settlements is indicative of the stakes involved for sure. As you mentioned, the Meta settlement alone was huge, and it’s reflective of the kind of high-dollar cases we are now seeing across the board. Privacy class action litigation has outpaced other areas of law in terms of growth. And as companies continue to allegedly violate privacy laws, there’s real financial risk involved statutory damages in some of these privacy laws can reach up to $5,000 per violation, which to a plaintiff means per website visit of millions of visitors. And with class actions these violations multiply quickly. This creates significant potential liability for companies.

Tyler: I think that’s exactly right. and it’s not just the monetary cost. These cases also damage a company’s reputation in the world we live in. Consumers are more aware than ever of how their data is used. And if you’re a company in a settlement like that, it’s not just about paying a fine – you’ve also potentially lost consumer trust, and that can have long term business implications.

Jerry: Well, we’ve certainly seen a rise in filings of privacy-related class actions, but we’re also seeing an increase in the skill and ability of the plaintiffs’ bar to secure certification in these class actions. Do you expect this trend to continue during 2025?

Justin: Well, at least the rise in privacy class actions I expect to continue. I mean, it’s been going like this, and it’s going to keep going. We’ll see about the certification decisions as more consumers become aware of their rights, and as data privacy laws continue to evolve. I think we’ll continue to see an uptick in class action filings for sure. Privacy law is still in its infancy in many respects. and many of the current legal frameworks just don’t fully cover the realities of all the new technologies, and how data is being used today, and how data science is evolving the ambiguity is creating fertile grounds for litigation, and I expect that to keep growing.

Tyler: And from a litigation standpoint – yes, we’ll likely continue to see class actions. However, I do think that courts will eventually have to provide more clarity on some of these unsettled issues. We’ve got one of the first federal appeals brewing soon, for example, regarding whether online advertising technology violates the Federal Wiretap Act. As things currently stand, though, the litigation landscape in this area and many other areas of privacy law remain in flux, and there’s still a lot of uncertainty about certain privacy laws, and how they will be applied.

Jerry: Well, I guess the bottom line is we’ve reached a pivot point, certainly a pivotal moment in the intersection of technology and privacy law. Well, thank you, Justin and Tyler, for being here today, and thank you to our loyal listeners for participating in this week’s Class Action Weekly Wire. Please stop by and visit our blog for a free copy that you can download of the Privacy Class Action Review e-book.

Tyler: Thank you for having me, Jerry, and thank you, Listeners.

Justin: Thank you so much, everybody.

February 18, 2025February 18, 2025 by Gerald L. Maatman, Jr.

It’s Here! The Duane Morris Privacy Class Action Review – 2025

By Gerald L. Maatman, Jr., Jennifer A. Riley, Alex W. Karasik, Gregory Tsonis, Justin Donoho, and Tyler Zmick

Duane Morris Takeaways: The last year saw a virtual explosion in privacy class action litigation. As a result, compliance with privacy laws in the myriad of 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 second edition of the Privacy Class Action Review – 2025. This publication analyzes the key privacy-related rulings and developments in 2024 and the significant legal decisions and trends impacting privacy class action litigation for 2025. We hope that companies and employers will benefit from this resource in their compliance with these evolving laws and standards.

Click here to bookmark or download a copy of the Privacy Class Action Review – 2025 e-book. Look forward to an episode on the Review coming soon on the Class Action Weekly Wire!

February 17, 2025February 17, 2025 by Gerald L. Maatman, Jr.

California Federal Court Shuts The Door On Environmental Class Action Complaint For Lack Of Standing

By Gerald L. Maatman, Jr. and Nathan K. Norimoto

Duane Morris Synopsis: In Genesis B., et al. v U.S. Environmental Protection Agency, et al., Case No. 2:23-CV-10345 (C.D. Cal. Feb. 11, 2025), Judge Michael Fitzgerald of the U.S. District Court for the Central District of California dismissed, without leave to amend, a putative class action for lack of standing due to a lack of traceability between plaintiffs’ alleged injury and challenged policies promulgated by defendants, the United States Environmental Protection Agency (“EPA”) and the Office of Management and Budget (“OMB”). The ruling is an important reminder on the importance of standing in class action litigation.

Case Background

Plaintiffs, a group of children living in California, filed a putative class action seeking declaratory relief premised on alleged violations of the Equal Protection Clause of the Fifth Amendment, the Due Process Clause of the Fifth Amendment, and the Take Care Clause of Article II of the U.S. Constitution. (Order Granting Motion to Dismiss Complaint (ECF No. 50.) at 1-2.) Plaintiffs allege they were “harmed by climate change due to increased pollution and emissions, rising temperatures, extreme weather patterns, and wildfire exposure.” Id. at 2.

Plaintiffs challenge Circular Order No. A-4, a “guidance document” issued by the OMB that “sets forth the Executive Branch policy on benefit-cost analysis” (“BCA”). Id. at 2. In accordance with Circular Order No. A-4, the EPA issued, “Guidelines for Preparing Economic Analyses” (the “EPA Guidelines”), that set forth the EPA’s “policy on performing BCA and other economic analyses of contemplated regulations in accordance with Circular Order No. A-4.” Id. Plaintiffs allege that, based on the EPA Guidelines, the EPA issued Regulatory Impact Analyses that “anticipate[ ] and evaluate[ ] the likely consequences of its regulatory actions allowing climate pollutions.” Id. These various policies, according to Plaintiffs, “require” the EPA to apply “discount rates” that “put their thumb on the scale against urgent and ambitious regulatory programs to reduce climate pollution, and in favor of taking less ambitious actions in the present.” Id. at 3.

Defendants, the EPA, Michael Regan, “in his official capacity as Administrator of the EPA,” the OMB, and Shalanda Young, “in her official capacity as Director of OMB” (together, “Defendants”), moved to dismiss the operative complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure for lack of subject-matter jurisdiction and failure to state a claim, respectively. Id. at 6. The Court granted Defendants’ motion to dismiss, without leave to amend, dismissing the complaint for lack of subject-matter jurisdiction finding that Plaintiffs lacked standing to pursue their complaint as the purported injuries were not “fairly traceable” to Defendants’ policies. Id. at 7.

Court’s Decision

The Court analyzed two theories of harm advanced by Plaintiffs, including: (1) “environmental harms” that Defendants’ policies allegedly “result in the under-regulations of greenhouse gas emissions, which burdens Plaintiffs by disrupting, inter alia, their education, recreation, and religious expression;” and (2) “harms from discrimination” because Defendants’ policies allegedly “[deny them] equal treatment under law.” Id.

First, the Court held that Plaintiffs lacked standing because they failed to demonstrate the alleged “environmental harms” were “fairly traceable” to any of the alleged “discriminatory” policies. Id. at 8. Critically, the Court reasoned that “Plaintiffs fail to allege that Circular No. A-4 or the EPA Guidelines set out binding discount rates or practices.” Id. (emphasis added). The Court noted that the OMB’s policies should be interpreted as “guidance documents” and that BCAs are “context-specific in nature, and [do] not mandate a particular [discount] rate.” Id. Thus, the EPA “may or may not” use discounting, and even it does apply discounting, it “is only a single guiding factor when used” in any promulgated policies. Id. Since Plaintiffs “theory of harm therefore bundles uncertainty on uncertainty,” the Court concluded that Plaintiffs failed to “demonstrate traceability as to their environmental harms.” Id.

The Court rejected Plaintiffs attempt to distinguish decisions from the Eighth and Fifth Circuits, finding that those courts’ reliance on a “draft update to Circular No. A-4” was immaterial to the decisions. Id. at 9. The Court also rejected Plaintiffs’ argument that it was premature to consider whether Defendants’ policies were “binding” at the responsive pleading stage of the litigation. Id. at 9-10.

Second, the Court held that Plaintiffs failed to establish they “suffered an injury-in-fact” that is traceable to the alleged discrimination caused by Defendants’ policies. Id. at 12. The Court noted that, “to find that there is traceability as to the alleged facial discrimination, the Court must find that unequal treatment under the law occurred.” Id. Here, the complaint failed to identify any “individual” harms suffered by Plaintiffs, and instead “anticipate[s] societal harms and benefits” that “will be experienced relatively equally by all people — both in the United States and around the world — who are alive at the time of their impacts.” Id. As such, the alleged harm “does not derive from any of the children in the [Defendants’ policies], but on the allegation that the [Defendants’ policies] result in a suboptimal rate of greenhouse gas emissions in the future, which will disproportionately impact present-day children.” Id. As an example, the Court noted the complaint fails to answer how the policies “work a discriminatory harm against an individual aged 17 years and 364 days and not an individual aged 18 years.” Id. Thus, the Court determined that Plaintiffs claims failed because they are “not about a stigmatic injury at all, but rather a displeasure with the EPA’s economic analyses in assessing the impacts of future harms.” Id. at 14.

Finally, the Court granted Defendants’ motion without leave to amend because, “no matter how many opportunities for amendment Plaintiffs receive, they cannot overcome the structural lack of injury-in-fact and traceability as to their claims.” Id. at 16. Since Defendants’ policies “do not prescribe a discount rate that the EPA must use and because Plaintiffs challenge no specific policies,” the Court found it “difficult to imagine how Plaintiffs could ever sufficiently allege standing on” the facts set forth in the complaint. Id.

Implications For Companies

Standing can be an effective tool to challenge putative class action complaints at the responsive pleading stage of the litigation. Although a court may be hesitant to dismiss a complaint without leave to amend, the G.B. decision underscores how effective challenging standing can be to secure a dismissal in the employer’s favor at the outset of the litigation.

February 17, 2025February 17, 2025 by Gerald L. Maatman, Jr.

Tennessee Federal Court Rejects Certification Of Breach Of Contract Class Action

By Gerald L. Maatman, Jr., Justin R. Donoho, and George Schaller

Duane Morris Takeaways: On February 10, 2025, Judge Aleta A. Trauger of the U.S. District Court for the Middle District of Tennessee denied class certification in a case involving breach of contract and a disputed element of mutual assent a/k/a meeting of the minds, in Hall v. Warner Music Group Corp., No. 22-CV-0047 (M.D. Tenn. Feb. 10, 2025). The ruling is significant as it shows that plaintiffs who file class action complaints alleging breach of contract cannot satisfy Rule 23’s commonality requirement where the issue of whether the parties agreed to a material term of contract requires individualized inquiry into the parties’ minds and whether they met.

Background

This case involving lack of mutual assent is one of the many since the famous case of Raffles v. Wichelhaus, 159 Eng.Rep 375 (1864), in which the defendant agreed to purchase cotton arriving in a ship named “Peerless” arriving while cotton prices were low, whereas the plaintiff seller had in mind a different ship by the same name arriving while cotton prices were high. (And where the English High Court found no binding contract).

In Hall, the plaintiffs, two musical artists, sued for breach of implied contract against a record label. The parties had entered into a written recording agreement providing for the payment of 8% royalties at a time before the invention of digital streaming and not expressly covering distribution through digital streaming. Hall, slip op. at 2. In 2005, when the label started streaming plaintiffs’ music digitally both domestically and internationally, it began to pay the plaintiffs at the higher rate appearing on their royalty statements of 50%. Id. at 3, 14. For foreign digital streaming, the 50% rate was applied after the deduction of a payment to the foreign distributor. Id. at 12-13. It was common in the industry and a consistent course of dealing of the defendant to apply royalty rates to digital streaming revenues received only after payment to the foreign distributor. Id. The plaintiffs accepted these digital streaming royalty payments for years without viewing the royalty statements or “attempting to identify the revenue base against which a royalty rate for foreign streaming was applied . . . until [one of the plaintiff’s] first discussion with one of his attorneys in this case.” Id. at 15.

The plaintiffs moved for class certification under Rule 23. The plaintiffs maintained that they met the commonality requirement because they and other artists with legacy contracts received royalty payments for foreign streaming sales with statements indicating an unqualified 50% royalty. Id. at 10-11. In contrast, the record label maintained that a claim for breach of implied contract requires the plaintiffs to prove that a valid and enforceable contract was formed between the label and “each class member, which will require an individualized inquiry into the knowledge, understanding, and intent of the artists, including whether the artist even looked at the royalty statements, whether the artists construed them to offer an implied amendment, what exactly the artist believed those implied terms to be, whether the artist had a good-faith belief about a possible rescission claim, whether the artist would have rescinded unless paid at the source, whether the artist intended to forbear, and when (if ever) these events occurred.” Id. at 11 (emphasis in original). In other words, according to the record label, the common question, “was an implied contract formed?” could not be answered by a simple yes or no without such an individualized inquiry. Id.

The Court’s Decision

The Court agreed with defendants and held that plaintiffs did not carry their burden of showing commonality.

Central to Court’s holding was the “problematic question of mutual assent.” Id. at 18. As the Court explained, “even if the court presumes that other putative class members’ royalty statements look like the plaintiffs’ and that there are common questions regarding the defendants’ conduct that may yield common answers (i.e., that the royalty statements do not expressly reflect that the royalties are calculated based [after paying the foreign distributor]), it is clear that the threshold question of whether an implied contract between [the label] and each putative class member was formed does not yield a common answer but, instead, will depend entirely on the particularized circumstances of each artist whose contract, like the plaintiffs’, does not expressly provide for royalties on foreign digital streaming.” Id.

In short, the Court reasoned that “the named plaintiffs’ particularized circumstances show that they simply never thought about whether an implied contract had been formed or its terms until approached by lawyers. Other artists may have paid closer attention to their business arrangements.” Id.

In conclusion, the Court noted that, “to the extent there are questions of fact or law common to the plaintiffs and all putative class members, the relative importance of these common questions pales in comparison to the importance of those that do not yield a common answer — primarily the question of whether implied contracts were formed at all.” Id. at 23.

Implications For Companies

The Hall decison is a win for defendants of breach of contract class actions involving the issue of whether the parties had a meeting of the minds on a material term of contract. In such cases, the Hall decision can be cited as useful precedent for showing that the commonality requirement is not met because individualized inquiries predominate when it comes to analyzing evidence regarding a meeting of the minds.

The Court’s reasoning in Hall applies not only in cases involving: (1) commercial form contracts, like in Hall, but also (2) alleged employment contracts, see Cutler v. Wal-Mart Stores, Inc., 927 A.2d 1 (Md. Ct. App. 2007) (affirming denial of motion for class certification, stating, “Any determination concerning a ‘meeting of the minds’ necessarily requires an individual inquiry into what each class member, as well as the [employer’s] employee who allegedly made the offer, said and did”); In re Wal-Mart Wage & Hour Emp. Pracs. Litig., 2008 WL 3179315, at *19 (D. Nev. June 20, 2008) (denying motion for class certification, stating, “Plaintiffs’ breach of contract claims would involve particularized inquiry into contract formation, including such issues as meeting of the minds”); (3) form real estate contracts, see Haines v. Fid. Nat’l Title of Fla., Inc., 2022 WL 1095961, at *17 (M.D. Fla. Feb. 17, 2022) (denying motion for class certification, stating, “If a buyer and seller interpreted [the agreement] the way [seller] interprets the provision, their meeting of the minds would have a significant impact upon any potential liability for [seller]. In that regard, the buyer’s and seller’s state of mind for each transaction are relevant . . . individualized discovery and factfinding regarding each buyer’s and seller’s intent and understanding would be required”); and (4) alleged contracts regarding the use of AI, see Lokken v. UnitedHealth Group, Inc., 2025 WL 491148, at *8 (D. Minn. Feb. 13, 2025) (finding insureds’ claim against health insurer for breach of contract regarding insurer’s use of AI-based automated decision making technologies not preempted by the Medicare Act and therefore allowed to proceed to discovery, raising the question of whether parties’ minds met via the insurer’s explicit descriptions of its “claim decisions as being made by ‘clinical services staff’ and ‘physicians,’ without mention of any artificial intelligence”).

February 13, 2025February 18, 2025 by Gerald L. Maatman, Jr.

The Class Action Weekly Wire – Episode 88: Key Trends In Data Breach Class Actions

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Jennifer Riley, special counsel Justin Donoho, and associate Ryan Garippo with their discussion of the key trends analyzed in the 2025 edition of the Duane Morris Data Breach Class Action Review, including the contributing factors in the exponential growth of data breach class action filings, the sophistication of the plaintiffs’ bar litigation theories, and the chart-topping settlements in this area.

Bookmark or download the Data Breach Class Action Review e-book here, which is fully searchable and accessible from any device.

Episode Transcript

Jerry Maatman: Welcome all our loyal listeners and blog readers. Thank you for being here on our weekly podcast, the Class Action Weekly Wire. I’m, Jerry Maatman of Duane Morris, and joining me today are my colleagues, Jen, Justin, and Ryan. Thanks so much for being on this particular podcast.

Jennifer Riley: Thank you, Jerry. Happy to be part of the podcast today.

Justin Donoho: Thanks, Jerry. Glad to be here.

Ryan Garippo: Thanks for having me, Jerry.

Jerry: Today in the podcast we’re discussing the publication of this year’s Duane Morris Data Breach Class Action Review and desk reference designed for our clients to give them the latest, greatest information on the cutting-edge issues in the world of data breach class action. Listeners can find the e-book publication on our blog, the Duane Morris Class Action Defense blog. Jen, can you share with our listeners a bit about this desk reference and publication?

Jennifer: Absolutely, Jerry. The volume of data breach class actions exploded in 2024. Data breach has emerged as one of the fastest growing areas of class action litigation. The Review contains an overview of these filing numbers as well as settlements as well as some of the key decisions in this area. So, in sum, courts continue to reach inconsistent outcomes on issues such as standing and uninjured class members, those issues that are uniquely challenging in the data breach space. The Review has dozens of contributors, and it reflects really the collective experience and expertise of our class action defense group.

Jerry: I think it used to be, people thought whenever there was a drop in the stock following a company announcement, as sure as the sun rises in the east and sets in the west every day, there’d be a securities fraud class action lawsuit being filed. That seems to be the case now, when there’s a data breach incident, a data breach class action follows in its wake. Justin, can you shed some light on why this particular cause of action in this particular space has been growing incrementally over the last 36 months?

Justin: Absolutely. I mean, the frequency of the data breaches have been increasing, which is a huge part, and of course, with that comes heightened attention from both consumers and the plaintiffs’ bar. High profile cases, such as that multidistrict litigation arising from the Marriott International breach that affected over 133 million people, for example. There’s the MOVEIt MDL, which is another big one that got going last year. These have all put companies on notice that failure to secure personal data can lead to costly litigation. Cost lawsuits are not just about the breach itself, it’s also about the aftermath. So, consumers are now more aware of the risks and more inclined to seek legal recourse when their data is compromised.

Jerry: I think this is a great area where the notion that the law is trailing behind technology and can’t keep up with it – may well explain some of the developments in this particular space from a cybersecurity perspective. How do you think the increasing frequency of these sorts of events, and the sophistication of cyber criminals, is playing out in the class action space?

Ryan: Well, the rise in cyberattacks is definitely a huge factor. We’re seeing more sophisticated tactics from cybercriminals. Ransomware is at least one prime example – hackers demand payments in exchange for not publishing or further exploiting stolen data. The issue is that paying the ransom doesn’t necessarily guarantee the safe return or the deletion of the data, which makes these incidents devastating for companies. Additionally, I think we’ve seen as there’s been a shift to remote work and cloud-based infrastructure, that more vulnerabilities are exposed which ultimately increases the frequency of breaches. As a result, I think we’re seeing more lawsuits following these incidents and plaintiffs’ attorneys are more eager to capitalize on the growing number of affected individuals.

Jerry: In the last two weeks, the U.S. Supreme Court has accepted a case for review on the issue of uninjured class members, and whether or not their presence is something that can be used by a defendant to stop class certification. And one of the things we’ve seen in the last few years in the data breach area is the lack of injury or no injury-in-fact, as the Supreme Court has articulated that in TransUnion v. Ramirez. Jen, what do you see in terms of what plaintiffs are doing to try and come up with theories, at least from a financial damage or injury standpoint, that companies are now facing in what I would call data breach litigation 2.0?

Jennifer: Well, Jerry, I think several factors are really contributing to the rise of the popularity of these lawsuits. First, I think the sheer volume of people affected by these breaches has ballooned. Especially with breaches impacting millions of consumers or employees. As the size of these cases increases, I think it naturally leads to higher settlement amounts which in turn are attracting more plaintiffs’ lawyers to this area. Additionally, I think the type of data being compromised is becoming more sensitive – financial and healthcare information, for example – are leading to additional claims and higher potential damages and are leading plaintiffs’ attorneys to become more creative in looking for ways to monetize, capitalize on these breaches in terms of converting them into settlement dollars.

Justin: Yes, absolutely. And some courts are also becoming more sympathetic to plaintiffs in these cases, and to the potential long-term consequences of data breaches to plaintiffs, even where immediate harm is not apparent. So, it’ll be interesting to see where that Supreme Court case plays out. And let’s not forget about the legal fees and the expert fees also contributing to some of these large settlement dollars. As these cases become more complex with issues like class certification and determining damages, and the reasonableness of the cybersecurity, the costs involved in litigating these lawsuits are skyrocketing.

Jerry: You mentioned class certification – certainly the plaintiffs’ bar their theory is file the case, certify the case, then monetize the case, and the statistical study within the desk reference talks about the rise in class certification to 40%. Still a low number, but significantly up from 16% in calendar year 2023. What do you attribute to the trend that’s showing an upward number and a more of a chance for the plaintiffs’ bar to certify their data breach class actions?

Ryan: Well, like we mentioned before, I think it’s reflective of the fact that plaintiffs’ counsel has gotten more sophisticated in this space, and courts are getting more sympathetic to the plaintiffs at issue. But that said, class certification is still a major hurdle in any class action. And it’s particularly challenging in data breach cases. The increased success rate for class certification in the data breach space is 40% in 2024, reflecting that evolving legal precedent. Courts are now more inclined to accept the argument that consumers have suffered harm, even if their data hasn’t been directly misused, and that the mere recognition of an indirect harm, such as the increased risk of identity, theft, or emotional dispute or emotional distress, is enough to allow plaintiffs to get into court and overcome this clear obstacle.

Jerry: Jen, what were some of the major data breach litigation markers in the federal courts this year, by your way of thinking?

Jennifer: Well, Jerry, great question. We discuss in the Review some of the largest ones. Certainly, one of the prime examples is the ongoing MOVEIt Customer Data Breach Litigation. That litigation that began back in 2023 continued throughout 2024, and is ongoing. In that one, the Judicial Panel on Multidistrict Litigation consolidated more than 200 class action lawsuits. Those lawsuits resulted from a Russian cybergang hacking the file transfer software MOVEIt. The Judicial Panel on Multidistrict Litigation transferred those proceedings after consolidating them to the U.S. District Court for the District of Massachusetts. The plaintiffs in that case, as I mentioned, alleged that this vulnerability in the Massachusetts-based company MOVEIt, a transfer file software, was exploited. That data breach is considered to be the largest hack of 2023. According to the Panel’s initial transfer order, it exposed personally identifiable information of more than 55 million people. So, as I mentioned, that proceeding is ongoing. In July 2024, the Transferee Court issued an order adopting a modified bellwether structure in which it ordered the plaintiffs to file up to six consolidated amended complaints, and it ordered the parties to meet confer on the defendants to be named in each of those. The plaintiffs are going to file their motions for class certification, according to the schedule at least, in the summer of 2025. So, lots to be done in those cases yet.

Jerry: Well, it seems to me that data breach litigation, especially in the class action arena, is a problem or a fear that keeps corporate counsel up at night, and some of the top settlements in this space in 2024 maybe fuel that fear. What were some of the key and highest class action settlements in the data breach case, despite the fact that certification hovered around 40%?

The largest data breach class action settlement in 2024 was $350 million in *In Re Alphabet Inc. Securities Litigation*, Case No. 18-CV-6245 (N.D. Cal. Sept. 30, 2024), in which the court granted final settlement approval in a class action alleging that a software glitch led to a data breach in which Google+ users’ personal data was exposed for three years.

Justin: Yes, Jerry. Plaintiffs did very well in securing high dollar settlements last year, with the top 10 settlements totaling $593.2 million dollars. This was a significant increase over 2023 when the top 10 totaled $515 million – so they keep going up, too.

Jerry: Well, my prognostication is the 2025 numbers are going to go up and even exceed those chart-toppers in the next 12 months. In terms of final parting thoughts for our loyal listeners, what are some of the takeaways and key points that our listeners and readers should keep in mind for data breach issues in 2025?

Ryan: Invest in strong cybersecurity measures – it’s essential to stay out of the game in this space and constantly involve your cybersecurity infrastructure against these emerging threats. But beyond that, companies should also have a well-designated incident response plan in place and make sure that it’s regularly tested. This helps ensure not only quicker recovery, but also a stronger defense in court if a breach ever occurs. This legal landscape is evolving, and data breaches are no longer niche; they’re becoming an expected part of the litigation landscape, and so, having a proactive and comprehensive approach can help mitigate the immediate and long-term costs, and help keep you out of those $500 million numbers that Jerry and Justin mentioned before.

Jerry: Well, thanks, Jen, Justin, and Ryan, for your thought leadership and your analysis of this particular area. Loyal listeners, please stop by our blog and website to download for free our e-book, Data Breach Class Action Review – 2025. Thanks so much everyone for lending your expertise today on our Class Action Weekly Wire podcast.

Ryan: Thanks, Jerry.

Justin: Thanks for having me and thank you, listeners.

Jennifer: Thanks so much, everyone. See you next week.

February 12, 2025February 12, 2025 by Eden Anderson

The Federal Arbitration Act Turns 100

By Eden E. Anderson, Rebecca S. Bjork, Jennifer A. Riley, and Gerald L. Maatman, Jr.

The Federal Arbitration Act (FAA) turns 100 years old today.

In enacting the FAA on February 12, 1925, Congress eliminated the power of the states to require that claims be resolved in court when contracting parties instead agree to resolve their claims in arbitration. The FAA’s purpose was to reverse longstanding judicial hostility to arbitration agreements, and to place arbitration agreements on equal footing with other contracts under the law.

As we celebrate the FAA’s 100th birthday, we highlight three key areas in which the FAA’s scope and application have come under scrutiny in recent years.

The Scope Of The Transportation Worker Exemption Remains Unclear

The FAA does not apply to employment contracts of seamen, railroad employees, and workers engaged in foreign or interstate commerce. The scope of this so-called transportation worker exemption has been a hotbed for litigation in recent years, with the U.S. Supreme Court addressing the issue in multiple decisions. The high court’s decisions in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), Domino’s Pizza, LLC v. Carmona, et al., 143 S. Ct. 361 (2022), and Bissonnette v. LePage Bakeries Park St., LLC, 61 U.S. 246 (2024), emphasized that the transportation worker exemption is to be narrowly construed and that, for the exemption to apply, a worker must play a direct and necessary role in the free flow of goods across borders.

In the wake of these decisions, state and federal courts are now grappling with what that means and whether warehouse workers, last-mile delivery drivers, ride-hailing drivers, and fueling technicians meet the “direct and necessary role” test. While such classes of workers bear little resemblance to the seamen and railroad employees expressly excluded from the FAA’s scope, in jurisdictions hostile to arbitration, including California courts and the Ninth Circuit, the transportation worker exemption has been found to apply. It is therefore important for employers to include language in arbitration agreements that permits alternative enforcement of the agreement under state law if the FAA is found not to apply.

Does EFASHA Exempt Entire Cases From Arbitration?

On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASHA). Under the EFASHA, an employee alleging sexual harassment or assault, whether individually or as a class representative, may pursue their claims in court rather than in arbitration, regardless of whether they agreed with their employer to arbitrate their claims.

But what happens when a plaintiff alleges such claims, but also alleges claims that permissibly can be arbitrated? Courts too have begun answering that question. Some courts have concluded that the EFASHA’s statutory language requires that the employee’s entire case remain in court, reasoning that the EFASHA makes a pre-dispute arbitration agreement invalid and unenforceable “with respect to a case” which means the entire case. (9 U.S.C. § 402(a) (emphasis added).) The court so concluded in Johnson v. Everyrealm, Inc., 657 F. Supp. 3d 535 (S.D.N.Y. 2023), in denying the employer’s motion to compel the plaintiff’s sex harassment, race discrimination, and retaliation claims to arbitration.

The outcome, however, differed in Mera v. SA Hosp. Grp., LLC, 675 F. Supp. 3d 442 (S.D.N.Y. 2023), wherein the plaintiff alleged claims that he experienced a hostile work environment on account of his sexual orientation and that he and other employees suffered state and federal wage and hour infractions. The court there determined that, because the wage and hour claims did not “relate to” the hostile work environment claim, the wage and hour claims could be compelled to arbitration. Id. at 447.

If a plaintiff can allege a plausible claim that triggers the EFASHA’s application, they may be successful in keeping all their claims in court, or possibly only some of them.

We anticipate continued litigation in this area, and an uptick in the assertion of tenuous sex-based harassment claims that might not otherwise have been plead.

Appellate Issues Raised By Recent Case And Legislative Developments

What happens to the trial court proceedings after a decision on a motion to compel arbitration has also been a hotly litigated issue.

In Smith v. Spizzirri, 601 U.S. 472 (2024), the U.S. Supreme Court held that, when a federal court finds that a dispute is subject to arbitration and a party has requested a stay of the court proceeding pending arbitration, the FAA compels the court to stay, and to not dismiss, the proceeding. Consequently, if a plaintiff’s claims are compelled to arbitration and the district court proceedings stayed, there will be no judgment with an associated right to appeal. Thus, the plaintiff’s only recourse—if they dispute the arbitration ruling—will be to seek permission to pursue an interlocutory appeal or to pursue an appeal of the forum issue long after the fact if and when they lose in arbitration.

Another stay issue that will surely be litigated concerns a 2024 amendment to California’s Code of Civil Procedure. In California, if a motion to compel arbitration is denied and that decision is appealed, there is now no longer an automatic stay of the court proceedings during the pendency of an appeal. As a result, plaintiffs can seemingly proceed with their claims in court while the employer seeks a reversal of the forum issue on appeal, unless the appellant seeks and obtains a stay from the trial court. As this law on its face disfavors arbitrate, we anticipate it will be challenged.

For a more comprehensive summary of FAA-related litigation issues, Duane Morris’s 2025 Wage & Hour Class and Collective Action Review, available here, features an entire Chapter on this topic.