By Gerald L. Maatman, Jr, Jennifer A. Riley, and Daniel D. Spencer
Mark your calendars for our bi-annual program analyzing the latest EEOC developments: Wednesday, October 14, 2026 from 11:00 a.m. to 11:30 a.m. Central. Reserve your virtual seat for the program here.
Join Duane Morris partners Gerald L. Maatman, Jr., Jennifer A. Riley and Daniel D. Spencer for a live panel discussion analyzing the latest impact of enforcement litigation at the U.S. Equal Employment Opportunity Commission, including its new National Enforcement Plan and strategic priorities established in fiscal year 2026 and the enforcement lawsuits filed over the past 12 months. Our virtual program will empower corporate counsel, human resource professionals and business leaders with key insights into the EEOC’s latest enforcement initiatives and provide strategies designed to minimize the risk of drawing the agency’s scrutiny.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Ryan T. Garippo
Duane Morris Takeaways: On September 11, 2026, in Anthony, et al. v. Brian Marketing Group, No. 24-CV-80800, 2026 WL 2685650 (S.D. Fla. Sept. 11, 2026), Judge Aileen M. Cannon of the U.S. District Court for the Southern District of Florida denied a plaintiff’s motion for default judgment on a Telephone Consumer Protection Act (“TCPA”) class action claim and held that cell phone users are not “residential telephone subscribers” entitled to sue under the TCPA’s do-not-call provisions. The decision is premised on the conclusion that a prior Federal Communications Commission’s (“FCC”) order was outside the scope of the agency’s statutory authority under 47 U.S.C. § 227(c). If this decision is widely adopted, it has the potential to upend TCPA litigation nationwide.
Case Background
In June 2024, Plaintiff Michael Anthony (“Plaintiff” or “Anthony”) filed a putative class action against Brian Marketing Group (“BMG”) in the U.S. District Court for the Southern District of Florida for alleged violations of the TCPA and its implementing regulations. He claimed that he received five unsolicited text messages to his personal cellphone over a twelve-month span even though he registered his cell phone number on the national do-not-call registry. The text messages were identical and stated:
“Our records show that you or a loved one reached out for drug or alcohol treatment. We have immediate availability!”
Because Anthony had never used drugs or alcohol, or never heard of BMG, he claims these text messages were unsolicited and violated the TCPA. To that end, Anthony brought a single claim under § 227(c)(5) of the TCPA and its implementing regulations’ prohibition on unlawful communications to individuals who registered their phone numbers on the national do-not-call registry. 47 C.F.R. § 64.1200(c).
In September 2025, following proper service, the Clerk of Court entered default against BMG for failing to appear or respond. As a result, Anthony filed a motion for default judgment seeking declaratory relief and $2,500 in statutory damages.
The Court’s Decision
In a thorough 25-page opinion, Judge Cannon walked through the text, structure, and history of the TCPA to conclude that the FCC’s Report and Order, In Re Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991 (the “2003 Order”) exceeded the agency’s statutory authority. The FCC could not lawfully include cell phone users within the definition of the term “residential telephone subscriber.” As a result, Anthony could not state a claim under § 227(c)(5) of the TCPA.
“The TCPA consists of two parts: § 227(b) imposes ‘restrictions on [the] use of automated telephone equipment,’ and § 227(c) protects ‘subscriber privacy rights’ and is colloquially known as the ‘do-not-call provision.’” Anthony, 2026 WL 2685650,at *2 (quotations omitted). The authority to promulgate the regulations to enforce the do-not-call provision come from an express delegation from the U.S. Congress and were designed “to protect residential telephone subscribers’ privacy rights [and] to avoid receiving telephone solicitations to which they object.” 47 U.S.C. § 227(c)(1).
Although Congress did not define the term “residential telephone subscriber,” the FCC’s implementing regulations – which created the national do-not-call registry adopted that language – when defining the individuals who have a private right of action under the statute. 47 C.F.R. § 64.1200(c)(2) (“No person or entity shall initiate any telephone solicitation to . . . [a] residential telephone subscriber who has registered his or her telephone number on the national do-not-call registry of persons”) (emphasis added); see also 47 C.F.R. § 64.1200(c)(1) (“No person or entity shall initiate any telephone solicitation to . . . [a]ny residential telephone subscriber before the hour of 8 a.m. or after 9 p.m.”) (emphasis added). From 1991 (when the TCPA was passed) to 2003 (when the 2003 Order was issued), there was no indication that the term residential telephone subscriber included calls to cell phones.
But, in 2023, the FCC issued the 2003 Order which purported to extend the national do-not-call registry’s protections to cell phone users because it was “more consistent with the overall intent of the TCPA to allow wireless subscribers to benefit from the full range of TCPA protections.” Anthony, 2026 WL 2685650,at *4 (quotations omitted). Judge Cannon, however, concluded that the FCC lacked the authority to decide this issue in the 2003 Order and therefore Anthony failed to state a claim as a matter of law. Judge Cannon’s analysis followed four primary steps.
First, Judge Cannon examined the plain meaning of “residential telephone subscriber” as used in § 227(c). Because the TCPA does not define the term, Judge Cannon looked to the dictionary definitions in existence at the time of enactment. “At the time the TCPA was enacted in 1991, dictionaries defined ‘residential’ as 1) ‘of or connected with residence,’ 2) ‘of, characterized by, or suitable for, residences or homes,’ and 3) ‘chiefly for residents rather than transients.’” Id. at *7 (quotations omitted). She, therefore, reasoned that the term “residential telephone subscriber” meant “at the very least . . . a person who pays intermittently to receive telephone services that are connected to his or her home.“ Id. Cell phones, however, were not connected to an individual’s residence in 1991 and therefore would not have been captured by the scope of that term at the time.
Second, Judge Cannon explained that the structure of the TCPA confirmed this interpretation as well. In § 227(b), Congress demonstrated its ability to extend protections to “cellular telephone service” subscribers. 47 U.S.C. § 227(b)(1)(A)(iii). It also included a separate section prohibiting the use of the above-mentioned regulated technologies to residential telephone subscribers. 47 U.S.C. § 227(b)(1)(B). Other sections of the TCPA confirmed that interpretation. See Anthony, 2026 WL 2685650, at *9-10. If the term “residential” was synonymous with “cellular,” then Judge Cannon reasoned that § 227(b)(1)(B) would violate the cannon against surplusage because Congress would have regulated the same conduct twice. “In sum, it is clear that Congress knew how to differentiate between cellular and residential when it wished to.” Id. at *10.
Third, Judge Cannon reasoned that the history of the statute confirmed this interpretation. “From the date of enactment of the TCPA through 2003,” no one thought that cell phone numbers were considered residential telephone lines. Anthony, 2026 WL 2685650, at *9-10. Indeed, the FCC even sought additional authority from Congress in order to promulgate such rules prior to 2003. “Nevertheless, in 2003, and without the previously contemplated additional authority from Congress, the FCC promulgated new implementing regulations . . . to bring wireless subscribers within the orbit of residential subscribers.” Id. at *11. In short, “[a]gencies may play the sorcerer’s apprentice but not the sorcerer himself” – and in the absence of an express delegation from Congress to allow the FCC to promulgate rules to protect cell phone users– the extension of § 227(c) to cell phones was improper. Id. at *11 (quoting Facebook, Inc. v. Duguid, 592 U.S. 395, 409 (2021)).
Finally, Judge Cannon opined on the ongoing circuit split related to whether text messages constitute calls and determined that “the private right of action in § 227(c)(5) . . . does not [authorize] suits by cell phone users based on unwanted text messages (rather than calls)” and noted that this authority was an additional basis to enter judgment for BMG. Anthony, 2026 WL 2685650, at *12.
Implications For Companies
If the reasoning of Anthony is widely adopted, this decision has the potential to eviscerate TCPA litigation for companies across the nation. Indeed, if the call in question is made to a cell phone, this decision essentially holds that there is no cause of action under § 227(c)(5) generally and specifically there is no protections afforded to such users under 47 C.F.R. § 64.1200(c)(1), 47 C.F.R. § 64.1200(c)(2), and 47 C.F.R. § 64.1200(d). It also represents yet another decision to hold that text messages are not calls within the meaning of § 227(c)(5).
That said, one of the more ironic elements of this decision is that it does not categorically foreclose 47 C.F.R. § 64.1601(e) claims – for failure to provide proper caller identification information – which a minority of courts have recently shoehorned into § 227(c)(5)’s private right of action. Despite the numerous other problems with such claims, § 64.1601(e) claims do not purport to hinge on an individual’s residential telephone subscriber status. This decision also does not eliminate TCPA liability under § 227(b)(3) for making calls using regulated technology but it would carve off a substantial chunk of TCPA liability if widely adopted.
While this decision is undoubtedly a positive development for corporate counsel, we are not yet at the stage where companies can take such liability off the table. This decision represents one decision, from one federal judge, and is certainly the minority view. Nonetheless, companies should continue to preserve this argument by raising it as the law continues to develop and monitor this blog to stay on top of this new potential trend in TCPA law.
Duane Morris Takeaway:This week’s episode features Duane Morris partner Jerry Maatman, senior associate Kat Alphonso, and associate Caitlin Capriotti with their analysis of a ruling from the Ninth Circuit rejecting a game platform’s motion to compel arbitration, finding the defendant’s delay in seeking arbitration over nearly a year of litigation waived any right to arbitrate.
Jerry Maatman: Hello everyone, and thank you for being here again for the next episode of the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and joining me today are my colleagues Kat Alphonso and Caitlin Capriotti. Thanks so much for both of you being on the podcast.
Kat Alphonso: Glad to be here, Jerry.
Caitlin Capriotti: Thanks for having me, Jerry.
Jerry: Today, we’re discussing a recent Ninth Circuit decision that addresses an issue we hear about frequently in the context of class action litigation, that being arbitration, and more specifically, when a company can lose the right to compel arbitration by litigating in court too long. The case is Uhl, et al. v. Roblox Corporation from the U.S. Court of Appeals for the Ninth Circuit in San Francisco. The ruling arose out of litigation against the company involving allegations that children using the company’s gaming platform were targeted by adult predators. Kat, can you start us off with some background about the case?
Kat: Absolutely. So, the lawsuit was brought by a parent, Damien Uhl, who alleged that his daughter was exposed to inappropriate communications from an adult posing as a friend on the Roblox platform. The complaint was one of several actions alleging that Roblox failed to adequately protect minors despite representing that it had safeguards in place for younger users. Instead of immediately moving to compel arbitration, Roblox removed the case to federal court and filed a motion to dismiss the complaint on the merits. The company litigated for nearly a year before eventually seeking to compel arbitration based on arbitration provisions contained in its terms of service. The district court denied the motion to compel, concluding that Roblox had waived any right that it had to arbitrate, and Roblox appealed the ruling to the Ninth Circuit.
Jerry: Caitlin, how did the Ninth Circuit approach these issues on appeal, and why did it ultimately affirm the district court’s decision that denied the motion to compel arbitration?
Caitlin: The majority focused on the Ninth Circuit’s two-part waiver test. Under prior circuit precedent. A party waives its right to arbitrate when it knows of its right to compel arbitration, and then engages in conduct that is inconsistent with the exercise of that right. The Ninth Circuit found both elements satisfied. First, the panel concluded that Roblox knew it had a right to arbitrate from the outset. The company acknowledged that all versions of its terms of service during the relevant period contained arbitration provisions because the complaint alleged that the plaintiff’s daughter had used Roblox since 2017, and that purchases were regularly made on that platform, the court found Roblox possessed enough information to know that an arbitration provision potentially applied. Second, the court found that Roblox acted inconsistently with that right. Rather than moving to compel arbitration and seeking limited discovery if necessary, Roblox chose to litigate the case in court. It removed the action from state court, briefed jurisdictional issues, pursued a merits-based motion to dismiss, and waited approximately 11 months before filing its arbitration motion. The panel characterized those actions as inconsistent with a party seeking to arbitrate.
Jerry: One fact that seemed particularly important to the Ninth Circuit was an internal litigation email that surfaced during the proceedings. Kat, could you explain to our listeners why that email became a significant piece of evidence in the court’s analysis?
Kat: Yes, this email was actually really central to the outcome. Roblox argued that it could not originally move to compel arbitration because it lacked the username necessary to determine which version of the arbitration agreement governed the dispute. But the court pointed to an August 2024 email in which Roblox told plaintiffs’ counsel that it did indeed intend to seek arbitration, even though it still did not have a username, and would pursue targeted discovery later to determine which terms applied. The majority viewed that communication as highly damaging to Roblox’s position. According to the court, the email essentially demonstrated that Roblox knew it could seek arbitration without first obtaining the username, and as a result, the court concluded that Roblox could have filed its motion much earlier instead of spending almost a year litigating in court.
Jerry: That’s a very interesting, analysis. The majority also seem to be troubled by the sequence of events. How did that play in the Ninth Circuit’s ultimate decision?
Caitlin: The Ninth Circuit stated that Roblox pursued dismissal on the merits first, and then only turned to arbitration after the District Court rejected its attempt to dispose of the claims in court. The opinion contains some fairly strong language on that point. The court explained that a party cannot ask a district court to dismiss a complaint on the merits while simultaneously holding arbitration in reserve as a backup strategy in case the judicial approach does not work out. According to the majority, that type of litigation tactic is inconsistent with a genuine intent to arbitrate.
Jerry: Well, the Ninth Circuit’s decision was not unanimous. What did the dissent have to say on these issues?
Kat: So, Judge Bumatay dissented and took a very different view of the record. He argued that the Ninth Circuit had never previously held that a party must file a motion to compel arbitration and seek discovery simultaneously in order to preserve arbitration rights. In his view, Roblox lacked sufficient information and identified the specific arbitration agreement at issue, and should have not been penalized for waiting until it could determine that information. Judge Bumatay also criticized the majority for relying on Roblox’s motion to dismiss and removal efforts, noting that the Ninth Circuit precedent had never held that filing a non-jurisdictional motion to dismiss automatically results in waiver, and he argued that removing a case through federal court may actually be consistent with invoking protections under the Federal Arbitration Act. Ultimately, he viewed Roblox conduct as a forfeiture resulting from delay, rather than an intentional waiver of a known right.
Jerry: Well, let’s retreat to a 100,000-foot view and discuss and examine the practical implications of this ruling. Caitlin, what are the lessons learned for companies, that have, arbitration programs with class action waivers in terms of when and how to invoke those provisions to defend themselves in litigation?
Caitlin: So, there are several important takeaways. First, companies that intend to rely on arbitration agreements need to evaluate that strategy immediately upon receiving a complaint. This decision demonstrates that courts are increasingly willing to scrutinize litigation conduct and timing when determining whether arbitration rights have been waived. Defendants should be cautious about pursuing merits-based motions before addressing arbitration. Here, the Ninth Circuit repeatedly stated that Roblox sought dismissal with prejudice before moving to compel arbitration. That sequencing played a substantial role in the court’s waiver analysis. Finally, if a court believes additional information is needed to establish the applicability of an arbitration agreement, it should consider promptly moving to compel arbitration and requesting limited discovery rather than waiting months to raise the issue.
Kat: I would also add, Jerry, that the ruling illustrates a broader trend we’re seeing following the Supreme Court’s decision in Morgan v. Sundance. Courts are becoming more willing to find waiver without requiring plaintiffs to prove prejudice. That means defendants face greater risk when they actively litigate before invoking arbitration. For companies with online terms of service, consumer arbitration agreements, or even employee arbitration programs, early case assessment is more important than ever. Delays that might have once been excused can now create a significant risk that arbitration rights will be lost altogether.
Jerry: Well, well said. Those are excellent takeaways. Certainly, to me, the decision underscores and is a valuable reminder that arbitration is simply not a defense to keep in one’s back pocket or in reserve. Companies and litigants who want the benefits of arbitration must act consistently, promptly, and pretty quick from that choice at the beginning of litigation. Once a defendant chooses to litigate substantive issues, beware, because they are going to be subject to an argument from plaintiffs’ counsel in these class actions that the defendant has waived the right to compel arbitration.
Well, Kat and Caitlin, thank you so much for being our guest today and providing your insights on this most significant Ninth Circuit ruling, and thank you to our listeners for tuning in for another episode of the Class Action Weekly Wired. We look forward to bringing you more updates on important developments in the class action world. Until next time, thanks so much for tuning in and listening.
Caitlin: Thanks for having me, Jerry, and thanks, listeners.
Duane Morris Takeaways: On September 8, 2026, Judge Mark A. Davis of the North Carolina Superior Court denied Plaintiffs’ motion for class certification and excluded key portions of Plaintiffs’ expert report in Davis v. HCA Healthcare, Inc., Case No. 21-CVS-003276-100 (N.C. Super. Ct. Sept. 8, 2026). The Court found that Plaintiffs, a putative class of indirect purchasers alleging that a hospital network’s anticompetitive conduct caused them to pay inflated health insurance premiums, failed to satisfy the predominance requirement under Rule 23 of the North Carolina Rules of Civil Procedure because they could not demonstrate class-wide antitrust impact through common proof. The decision is required reading for defense counsel in antitrust class actions, particularly those involving indirect purchaser claims and pass-through theories of harm.
Case Background
Plaintiffs are individual North Carolina residents and a small business who purchased commercial health insurance in the Western North Carolina region through various channels, including ACA Exchange plans, employer-sponsored fully-insured plans, and employer-sponsored self-funded plans. They brought suit against the HCA entities that acquired Mission Health, a hospital system in Western North Carolina, from ANC Healthcare, Inc. and Mission Hospital, Inc. (the “ANC Defendants”) in January 2019, as well as the ANC Defendants themselves (the former nonprofit owners of Mission Health). The Plaintiffs asserted claims for monopolization, attempted monopolization, and restraint of trade under N.C.G.S. § 75-1 and the North Carolina Constitution.
Mission Health had previously operated under a Certificate of Public Advantage (“COPA”) that shielded it from antitrust liability in exchange for regulatory oversight. The COPA was repealed in 2016. Plaintiffs allege that Defendants coerced Blue Cross Blue Shield (“BCBS”) and United Healthcare (“United”) into including anticompetitive provisions in managed care contracts, resulting in supra-competitive prices for healthcare services that were ultimately passed through to the putative class in the form of higher health insurance premiums. A separate direct purchaser class action against the same Defendants, City of Brevard v. HCA Healthcare, Inc., No. 1:22-CV-00114 (W.D.N.C.), was previously filed in federal court and settled. The present action was designated a mandatory complex business case and assigned to the North Carolina Business Court.
The Court’s Decision
The Court focused its denial on the predominance requirement, specifically whether Plaintiffs demonstrated class-wide antitrust impact through common proof. As a threshold matter, the Court rejected Plaintiffs’ argument that because they sought only equitable relief — injunctive relief and equitable disgorgement rather than monetary damages — a relaxed predominance standard should apply. The Court emphasized a critical structural distinction between North Carolina Rule 23 and Federal Rule 23: unlike the Federal Rules, which exempt injunctive-relief classes from the predominance requirement under Rule 23(b)(2), North Carolina’s Rule 23 requires predominance for all class actions regardless of the type of relief sought. See Dewalt v. Hooks, 382 N.C. 340, 350–51 (2022). This distinction eliminated Plaintiffs’ primary pathway to a lower certification bar.
Turning to the merits, the Court found that Plaintiffs’ indirect purchaser theory — that supra-competitive healthcare prices were passed through by BCBS and United to class members via higher premiums — was not supported by sufficient common evidence. The Court excluded paragraphs 232–237 of Plaintiffs’ expert, Dr. Robert J. Town’s, report under Rule 702 and the Daubert framework. Dr. Town’s opinions on pass-through consisted of only six paragraphs out of 237 total, relied solely on general economic literature and selected deposition testimony, and did not employ any econometric or statistical model. Critically, Dr. Town admitted in deposition that he was never asked to quantify damages, determine the number of class members who suffered harm, calculate a pass-through rate, or analyze any lag between alleged overcharges and premium increases.
The Court relied heavily on Sidibe v. Sutter Health (Sutter I), 333 F.R.D. 463 (N.D. Cal. 2019), where a similar indirect purchaser class was denied certification because the expert’s pass-through analysis was based on assumptions rather than rigorous econometric modeling, and noted that even the expert in Sutter I had at least attempted to construct a statistical model, which Dr. Town had not done. The Court catalogued a series of unaddressed questions that Dr. Town’s analysis failed to consider, including how many distinct insurance plans were affected, the role of regulatory oversight by the NC Department of Insurance, competition within the insurance market, other factors contributing to premium increases, whether refunds or rebates offset any pass-through, the differences between ACA, fully-insured, and self-funded plans, and whether employers absorbed costs rather than passing them to employees. The Court also rejected Plaintiffs’ alternative theory that class members were harmed by a decrease in the quality of services at Mission Health, finding this theory inherently individualized and subjective.
Implications For Employers
Davis v. HCA Healthcare is a significant defense victory in indirect purchaser antitrust class actions and underscores the rigorous burden plaintiffs face in demonstrating pass-through impact on a class-wide basis. The decision reinforces that generic economic literature and corporate representative testimony about general pricing trends are insufficient to satisfy predominance — plaintiffs must present actual econometric or statistical modeling showing that alleged overcharges were passed through to all or virtually all class members.
The ruling also highlights a potentially significant structural advantage for class action defendants in North Carolina state court: because North Carolina’s Rule 23 does not contain a counterpart to Federal Rule 23(b)(2), plaintiffs cannot avoid the predominance requirement simply by recasting damages claims as requests for injunctive or equitable relief. Defense counsel should further note the Court’s thorough catalogue of individualized issues that an indirect purchaser expert must address — including plan-specific pricing dynamics, regulatory influences, competitive market conditions, and employer-level absorption of costs — which provides a useful roadmap for challenging pass-through expert opinions in future cases. The decision is consistent with a growing body of case law requiring rigorous empirical analysis in indirect purchaser class actions and sends a clear signal that courts will closely scrutinize the methodology behind pass-through theories at the certification stage.
By Gerald L. Maatman, Jr., Anna Sheridan, and Olga Romadin
Duane Morris Takeaways: On September 16, 2026, in Jimenez, Jr., et al. v. OE Federal Credit Union, Case No. 24-CV-02746 (N.D. Cal. Sept. 16, 2026), U.S. District Judge Jon S. Tigar of the U.S. District Court for the Northern District of California denied plaintiffs’ motion for preliminary approval of a class action settlement in a data breach case involving over 220,000 individuals. The decision is a significant reminder that courts will scrutinize class action settlements for obvious deficiencies, and that plaintiffs seeking preliminary approval must “show their work” by providing detailed information about the relative value of their claims and the strengths and weaknesses of their case.
Case Background
Plaintiffs Daniel Jimenez Jr., Mark Hendren, and Erica Jaramillo are current or former customers of OE Federal Credit Union (“OEFCU”), which is described as “the country’s largest labor-based credit union.” Order at 1. OEFCU possessed its customers’ personally identifiable information (“PII”) and protected health information (“PHI”), including full names, Social Security numbers, dates of birth, bank and financial account information, driver’s license numbers, medical procedure information, and health insurance information. Id. Sometime between August 19, 2023 and October 29, 2023, OEFCU suffered a ransomware attack and data breach resulting in unauthorized access to the PII/PHI of the named plaintiffs and the putative class.
Plaintiffs filed suit alleging claims for negligence, breach of implied contract, invasion of privacy, unjust enrichment, violation of the California Unfair Competition Law, violation of the California Consumer Privacy Act, violation of the California Customer Records Act, and declaratory relief. They brought claims on behalf of themselves and a class of all persons identified as being impacted by the data breach. After OEFCU moved to dismiss, the Court granted the motion in part and denied it in part, dismissing several claims with leave to amend and the declaratory relief claim with prejudice.
The parties subsequently engaged in mediation and reached a proposed class settlement. Under the proposed settlement, OEFCU agreed to establish a non-reversionary settlement fund of $2,300,000. Id. at 3. Each class member could submit a claim of up to $5,000 for reimbursement of out-of-pocket losses traceable to the data incident. Settlement class members were also entitled to submit a claim for a pro rata cash payment from the net settlement fund, estimated at approximately $50 per claimant. California class members could claim an additional $75, subject to reduction based on the total number of claimants. The settlement agreement proposed to deduct $766,666.66 in attorney’s fees (one-third of the common fund), $5,000 each to the three class representatives as service awards, and undetermined amounts for litigation costs and settlement administration costs. Id.
The Court’s Decision
Judge Tigar denied the motion for preliminary approval, identifying seven deficiencies that collectively prevented a finding that the settlement fell “within the range of possible approval” under Rule 23(e)(2). See In Re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007).
Adequacy of Relief — Rule 23(e)(2)
The first four deficiencies all bore on whether the proposed settlement provided adequate relief to the class. The Court began by questioning the use of a claims-made distribution process, noting that because OEFCU could readily identify class members from its own records, requiring them to submit claims was unnecessary and would predictably depress the actual payout — “[t]he effect of not simply distributing relief to the known class members is that the defendant will likely pay out much less than it would if there were no claiming process.” Order at 6. The Court noted that claims-made settlements are appropriate when it is the best or only option available, as is often the case with consumer class actions. Id. The Court faulted Plaintiffs for providing no information about the maximum potential recovery at trial, offering instead only boilerplate that the settlement “provides significant relief” and “is well within the range of other data breach settlements.” Relatedly, Plaintiffs supplied only generic statements about the “high level of risk, expense, and complexity” of continued litigation rather than a careful analysis of the claims and defenses — falling short of the Court’s requirement that movants “show their work by explaining the relative value of their claims in significant detail.” Order at 7–8 (quoting Haralson, 383 F. Supp. 3d at 970). Finally, the Court observed that the estimated $50 per-member pro rata payment was unsupported by evidence. Order at 8. After subtracting attorney’s fees alone, the actual per-member recovery was closer to $6, and would decline further once administration costs, incentive awards, and out-of-pocket reimbursement claims were accounted for — the Court noted that if just over 300 claimants sought the full $5,000 reimbursement, the pro rata share could dwindle to nothing for remaining class members. Order at 8.
Equitable Treatment — Rule 23(e)(2)(D)
The fifth deficiency concerned the settlement’s differential treatment of class members. The settlement provided California class members a higher recovery than non-California members, yet Plaintiffs identified no California subclass with distinct claims that might justify the disparity. Order at 8–9. The Court emphasized that unexplained disparate treatment “increases the likelihood that the settlement agreement does not meet the Rule 23(e) standard.” Id. at 9 (quoting Ferrington v. McAfee, Inc., No. 10-CV-01455, 2012 WL 1156399, at *8 (N.D. Cal. Apr. 6, 2012)).
Accuracy and Procedural Compliance
The final two deficiencies concerned the quality of the submission itself. The Court identified a material discrepancy between the motion’s description of the timing of payments to class members and the actual terms of the settlement agreement. Order at 9–10. The Court also found that the motion failed to comply with the Northern District of California’s Procedural Guidelines for Class Action Settlements — including the requirements to explain anticipated versus maximum class recovery, to identify the settlement administration process and its costs, and to provide information about comparable settlements. Id. at 10; see also Bakhtiar v. Info. Res., Inc., No. 17-CV-04559, 2020 WL 11421997, at *8 (N.D. Cal. Jan. 30, 2020) (“A movant’s failure to address the issues discussed in the Guidelines is a proper ground for denying a motion for preliminary or final approval of a class action settlement.”).
The Court denied the motion without prejudice to Plaintiffs’ filing a revised motion, which it ordered due by November 4, 2026. The Court also reminded the parties that the Ninth Circuit benchmark for attorney’s fees in a successful class action is 25% of the common fund, and that Plaintiffs should justify any deviation from that benchmark. Id.
Implications For Companies
The Jimenez decision is a reminder that courts will closely scrutinize class action settlements at the preliminary approval stage, particularly in data breach litigation impacting consumers. The decision underscores several key points for corporate counsel. Most importantly, parties should closely follow the Court’s Procedural Guidelines for Class Action Settlements as failure to heed those Guidelines can serve as an independent basis for denying preliminary approval.
On a more granular level, the Jimenez decision offers other relevant practice pointers for class action settlements. First, claims-made settlement structures may be disfavored where the class members are readily identifiable from the defendant’s records. Second, plaintiffs seeking preliminary approval must do more than offer boilerplate language about the risks of litigation — they must provide concrete information about the maximum potential recovery and a detailed analysis of the strengths and weaknesses of their claims. Third, settlements that provide differential treatment to subsets of class members without explanation may face heightened scrutiny under Rule 23(e)(2)(D). Companies facing data breach class actions should work closely with counsel to ensure that any settlement submissions provide the level of detail and analysis that courts increasingly require before granting preliminary approval.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Mike Rosenblatt
Duane Morris Takeaways: On September 8, 2026, in Unger, et al v. The Walt Disney Company, No. 5:25-CV-01163 (N.D. Cal. Sept. 8, 2026), Judge Edward J. Davila granted Defendant’s motion to compel arbitration, ordered on a consolidated docket with Biddle, et al. v. The Walt Disney Company, No. 5:22-CV-07317 (N.D. Cal.). This decision serves as a clear example of arbitration agreements as a powerful tool for a company to dismiss class claims, and a critical reminder that a company that may not have signed an arbitration agreement can invoke an arbitration agreement in specific circumstances.
Case Background
Plaintiffs Cole Unger and Steven Prescott brought suit against the Walt Disney Company (“Disney”), alleging violations of the Sherman Act and corresponding state laws. Unger filed the Complaint on January 14, 2025 and filed a First Amended Complaint, adding Prescott as a plaintiff, on April 28, 2025. According to the First Amended Complaint, Disney allegedly undertook a “multifaceted campaign to suppress competition in the market for live television streamed over the internet to paying subscribers.” Specifically, Plaintiffs alleged that Disney used its ownership of ESPN to force streaming services to carry non-ESPN content in order to access ESPN, force streaming services to carry ESPN in its “base” package for customers, inflated the price of streaming ESPN through most favored nation clauses with streaming services, and provided anticompetitive rebates to Disney-owned streaming service Hulu. Plaintiffs brought claims on behalf of a putative class of fuboTV subscribers. The Unger lawsuit made similar allegations as another case, Biddle, et al. v. The Walt Disney Company, 5:22-CV-07317 (N.D. Cal.), brought on behalf of a putative class of YouTube TV subscribers and DirecTV Stream subscribers. The cases were consolidated on June 10, 2025.
On December 19, 2025, Disney filed a motion to dismiss Plaintiffs’ class claims, compel arbitration, and stay Plaintiffs’ individual claims pending arbitration. Disney filed its motion subject to fuboTV’s terms of service because Plaintiffs had assented to fuboTV’s terms of service when they subscribed to fuboTV. fuboTV’s terms of service included a provision compelling arbitration of all disputes and waiving class action claims subject to the terms of service. Disney argued that fuboTV’s terms of service, which authorized fuboTV’s “future affiliates” to invoke fuboTV’s rights under the terms of service, permitted Disney to compel arbitration of Plaintiffs’ claims and dismissal of Plaintiffs’ class claims.
The District Court’s Ruling
In a 26-page opinion, Judge Davila granted Disney’s motion to compel arbitration, dismissed Plaintiffs’ class claims, and stayed Plaintiffs’ individual claims pending arbitration. The opinion stressed that Plaintiffs did not dispute that they had assented to fuboTV’s terms of service when they signed up as subscribers. The Court held that the terms of service were “reasonably conspicuous” and that Plaintiffs had “unambiguously manifest[ed] assent” to terms of service. Op. at 9-10.
The Court held that Disney, as a non-signatory to the terms of service, could invoke fuboTV’s terms of service under the “future affiliates” provision. The Court stressed that under “the ordinary definitions of the words within the Future Affiliates Provision” were “clear and unambiguous, such that the Court will rely on its terms so long as this reliance would not lead to an absurd result.” Op. at 14. The Court then rejected Plaintiffs’ enforceability argument that Disney had not undertaken reciprocal contractual obligations, stressing that Disney was not required to “show that it undertook reciprocal obligations.” Op. at 15. Finally, the Court found that enforcement of the arbitration clause by a non-signatory would not lead to absurd results, distinguishing cases cited by Plaintiffs where disputes wholly unrelated to a company’s terms of service were found not to encompass the terms of service. Instead, the Court was unsympathetic to Plaintiffs’ argument that they did not expect to be entering into a contract with Disney when signing up for fuboTV, explaining that “courts have repeatedly found that future affiliates provisions, or clauses granting rights to successors, are valid, despite the existence of some inherent uncertainty.” Op. at 17-18.
The Court then undertook an unconscionability analysis, rejecting Plaintiffs arguments that fuboTV’s terms of service were procedurally and substantively unconscionable. The Court rejected Plaintiffs’ argument that the terms of service were substantively unconscionable as having “near infinite scope,” stressing that the canon of ejusdem generis requires courts to read broad contractual language in the scope of the specific language of the contract. Therefore, the terms of service had practical limitations based on the context of the agreement as a whole. Regarding procedural unconscionability, the Court found that the terms of service were not unconscionable because the terms were inconspicuous, included the ability for users to opt out, and were “not concealed in dense legalese inaccessible to lay consumers.” Op. at 24.
Implications for Companies
When addressing class action claims, companies should scour for any potential arbitration agreements a plaintiff may have signed, even where the plaintiff signed an arbitration agreement not directly with the Company. Courts regularly hold that non-signatories to arbitration agreements can invoke arbitration with a signatory based on multiple legal theories, including the explicit language of the arbitration agreement vesting rights in non-signatories, assignment clauses, estoppel, and a non-signatory’s third-party beneficiary status. Company mergers, like the Disney-fuboTV merger, can change a lawsuit’s calculus and require a plaintiff to individually arbitrate claims rather than petition for class certification in court.
The financial implications of invoking an arbitration agreement are substantial, as shown here. A plaintiff’s individual and class action claims can be dismissed in federal court even after the plaintiff survives a motion to dismiss. In this case, Disney had originally agreed to settle the case with all three subscriber classes for $55 million. Disney and the YouTube TV and DirecTV subscriber classes have since filed for settlement approval for $50 million. Given the reduced settlement now that the fuboTV subscriber class is not included, Disney may have saved $5 million in a settlement award it otherwise would have owed to fuboTV subscribers.
Finally, corporate counsel should regularly update its terms of service to comply with requirements for invoking arbitration in its jurisdiction. Though courts regularly enforce arbitration agreements, an otherwise valid arbitration agreement can be undone if a court finds that the agreement is unconscionable. Helpful provisions for conscionability include permitting the ability to opt out of mandatory arbitration, drafting class waivers and mandatory arbitration provisions in clear and non-legalese language, and allowing signatories time to review provisions. Companies should also require signatories to terms of service to review and affirmatively agree to updates to terms of service and include any waiver of rights in large, clear language.
Duane Morris Takeaways:On September 4, 2026, in Calderon, et al. v. Public Partnerships, LLC, No. 25-CV-02320 (E.D.N.Y. Sept. 4, 2026), U.S. Magistrate Judge Lara K. Eshkenazi of the U.S. District Court for the Eastern District of New York barred a defendant from distributing a proposed dispute resolution agreement (“DRA”) containing a class action waiver to settlement class members during the period between preliminary and final approval of a class settlement. The decision is a reminder that employers seeking to implement arbitration agreements during the pendency of class litigation must carefully consider timing, and that courts will exercise their authority under Rule 23(d) to protect class members from communications that could cause confusion during critical phases of a settlement.
Case Background
Plaintiffs, personal assistants (“PAs”) who received payment through Public Partnerships, LLC (“PPL”) as part of the New York State Medicaid Consumer Directed Personal Assistance Program (“CDPAP”), brought a class action alleging that PPL violated state and federal law by failing to pay them accurately and on time. After extensive mediation, the parties reached a class settlement and submitted a motion for preliminary approval of class certification, appointment of class counsel, and class settlement on June 23, 2026.
At the preliminary approval hearing on July 1, 2026, PPL raised the topic of a proposed DRA that it intended to distribute to PAs, including settlement class members. PPL explained that it wanted to institute the DRA, including a class action waiver, to create a mechanism to address issues raised by PAs without becoming subject to lawsuits related to its role as the statewide fiscal intermediary. Plaintiffs opposed the implementation of the DRA to the extent it would impact settlement class members, arguing it could confuse class members and cause them to mistakenly opt out of the settlement agreement. Plaintiffs also noted that a prior attempt by PPL to implement a DRA had led to significant class confusion, resulting in PPL withdrawing the DRA.
After the parties were unable to resolve the dispute, PPL filed a motion for approval of its proposed DRA and Plaintiffs filed a cross-motion for a Rule 23(d) order barring distribution of the DRA to settlement class members before final approval of the settlement.
The Court’s Decision
The Court denied PPL’s motion and granted Plaintiffs’ motion for a Rule 23(d) order.
The Court applied the framework set forth in Chen-Oster v. Goldman, Sachs & Co., 449 F. Supp. 3d 216, 255 (S.D.N.Y. 2020), considering factors including class members’ relative vulnerability, evidence of actual or contextual risk of coercion, whether the provision was imposed unilaterally, and evidence of misleading conduct, language, or omissions. The Court emphasized that it need not find actual or willful misconduct “so long as the effect is to interfere with class members’ rights.” (Op. at 4).
While the Court acknowledged that the DRA itself was not coercive or misleading, and credited the steps PPL had taken to reduce confusion, the Court concluded that the risk of confusion for settlement class members was high for several reasons.
First, the timing of the DRA rollout would directly overlap with notifications to settlement class members of the settlement, which could confuse class members about the relationship between the DRA and the settlement.
Second, the DRA contained an opt-out process that, despite best efforts at clarity, could still cause settlement class members to inadvertently opt out of the settlement — a risk the Court found was particularly high due to the number of settlement class members for whom English is not their first language. Third, the timing of the DRA rollout could cause settlement class members to believe that accepting the arbitration agreement was a condition of accepting the settlement.
The Court distinguished the case PPL primarily relied on – Carusillo v. FanSided, Inc., No. 20 Civ. 4766, 2021 WL 4311167 (S.D.N.Y. Sept. 21, 2021) – where the court had permitted distribution of an arbitration agreement during a collective action opt-in period. The Court explained that Carusillo involved a relatively early stage of the litigation, whereas Calderon was in its final stages, with a final approval hearing scheduled for November 10, 2026. The Court noted that PPL offered no explanation for the urgency of its request to communicate with settlement class members about the DRA rather than waiting just a few months until the risk of confusion would no longer exist.
The Court further rejected PPL’s argument that Plaintiffs’ concerns about class confusion ended on September 19, 2026 — the deadline for opt-outs and objections — finding that the risk of confusion would persist even after the opt-out deadline because class members would continue to learn about their settlement rights and could potentially submit late opt-outs.
Implications For Employers
The Calderon decision underscores the importance of timing when implementing arbitration agreements during pending class litigation. While courts have permitted employers to introduce arbitration agreements during the pendency of class or collective actions, the Calderon ruling makes clear that courts will scrutinize the timing of such communications, particularly during the sensitive period between preliminary and final approval of a class settlement. The Court’s decision did not prevent PPL from distributing the DRA to non-class members, and it did not find the DRA itself to be coercive or misleading. Employers should take note, however, that even a well-drafted arbitration agreement with meaningful opt-out protections can be blocked if the timing of its distribution could cause confusion or interfere with class members’ rights during a settlement process. Employers considering rolling out arbitration agreements or dispute resolution programs during the pendency of class litigation should work closely with counsel to carefully evaluate the litigation timeline and consider whether it is prudent to delay the rollout until after settlement proceedings conclude.
Duane Morris Takeaway:This week’s episode features Duane Morris partner Jennifer Riley and senior Associate Kat Alphonso with their analysis of a ruling from the Washington Court of Appeals affirming a trial court’s denial of a motion to compel arbitration in a wage & hour class action.
Jennifer Riley: Hello, everyone, and thank you again for being here for the next episode of the Class Action Weekly Wire. I’m Jennifer Riley and joining me today is Kat Alphonso. Today, we’re discussing an interesting wage and hour ruling out of Washington that employers should really pay close attention to. The case is Daryl Clemons v. Securitas Security Services USA, Inc. The Washington Court of Appeals in that case affirmed a trial court’s denial of an employer’s motion to compel arbitration in a proposed wage and hour class action. So, it’s an important ruling. Kat, thank you for being on the podcast today.
Kat Alphonso: Thank you for having me, Jen. You’re right, this is a very important decision, because it highlights that even in jurisdictions that generally favor arbitration, courts are still going to scrutinize how arbitration agreements are presented to employees. The takeaway here isn’t necessarily about the language of the agreement itself, but about the process that the employer uses when obtaining the employee’s signature.
Jennifer: Great. Let’s start, if we can, with the background. Can you tell our listeners what happened in this case?
Kat: Sure. The plaintiff, Daryl Clemons, began working for Securitas Security Services USA in 2008. During his employment, he signed an updated dispute resolution agreement in 2011 that required employment-related disputes to be resolved through final and binding arbitration rather than in court. Years later, Securitas terminated his employment in 2023. He subsequently filed a proposed wage and hour class action, alleging that the company failed to provide legally required meal and rest breaks, and failed to pay employees all hours worked, including overtime. When Securitas moved to compel the arbitration, and based on the 2011 agreement, the trial court denied the motion, and the company appealed. The Washington Court of Appeals ultimately affirmed the trial court’s decision.
Jennifer: One thing that stood out to me here is that the appellate court acknowledged that Washington strongly favors arbitration. So, this wasn’t a court expressing hostility toward arbitration agreements generally, was it?
Kat: Not at all. In fact, the court expressly reiterated Washington’s long-standing policy favoring arbitration and noted that courts make presumptions in favor of enforcing arbitration agreements, but the court also emphasized that it remains the judiciary responsibility to determine whether a particular arbitration agreement is valid and enforceable. The question here was whether this particular agreement was procedurally unconscionable, and that’s where the employer ran into problems.
Jennifer: Okay, great. Let’s talk about procedural unconscionability. What exactly did the court find here?
Kat: Well, the court found that Mr. Clemons lacked a meaningful opportunity to understand or evaluate the arbitration agreement before signing it. According to his declaration, his supervisor routinely handed employees paperwork and expected them to sign it immediately before beginning work. Mr. Clemons stated that there was no explanation regarding what the documents were, whether signing it was voluntary, or whether employees could take additional time to review. He also said that he didn’t know whether he had a right to refuse to sign. The court found that on those facts, it was significant because the Washington Supreme Court had previously held that undue pressure to sign an arbitration agreement without a reasonable opportunity to consider its terms can render an agreement procedurally unconscionable.
Jennifer: And did Securitas try to rebut the allegations in this case?
Kat: Yeah, the company relied heavily on the declaration from its regional vice president of human resources, who stated that signing arbitration agreements was voluntary, and that employees could opt out if they did not want to participate. According to the declaration, the agreement included opt-out instructions. The problem was, the actual agreement signed by Mr. Clemons did not contain any of those provisions stating that participation was voluntary, nor did it have an opt-out clause. So, the appellate court highlighted this discrepancy and agreed with the trial court’s conclusion that the declaration was not persuasive on that point.
Jennifer: Got it. So, did it come down to a credibility issue for the company?
Kat: Yes, the court observed that Securitas offered evidence describing general policies, but it did not present testimony from anyone who actually participated in the onboarding process or the document signing process involving Mr. Clemons, nor did they provide evidence that his supervisor informed him that he could opt out or take additional time to review the agreement. So, as a result, the employee’s account of what occurred was largely unrebutted.
Jennifer: Got it, understood. So, another interesting aspect of this decision is that the court found circumstantial evidence sufficient. The employee didn’t specifically remember signing the arbitration agreement, yet the court still credited his testimony.
Kat:: That’s right. So, Securitas argued that because Mr. Clemons did not distinctly remember signing the arbitration agreement in 2011, his testimony was speculative, but the court rejected that position. It explained that Mr. Clemons clearly remembered the routine practice of his supervisor when he was presenting paperwork, and that circumstantial evidence is entitled to the same weight as direct evidence. The court concluded that Mr. Clemons’ description of the workplace practice, combined with the lack of evidence showing that he was informed of any right to opt out, was sufficient to establish procedural unconscionability.
Jennifer: Got it. So, despite Washington’s preference for arbitration, the court ultimately focused on the fairness of the process used to obtain assent from this employee.
Kat: That’s exactly right. The court did not hold that arbitration agreements themselves are unenforceable. It held that employees must be given a meaningful choice. Here, the court found that Mr. Clemons was not informed that the agreement was voluntary, he was not informed that he had a right to opt out, and he was not given a reasonable opportunity to consider the agreement’s terms before signing. And under those circumstances, the agreement was procedurally unconscionable and therefore unenforceable.
Jennifer: Got it. So, let’s now shift to the practical implications. What lessons should employers take away from this decision?
Kat: So, employers should ensure that arbitration agreements expressly state that participation is voluntary, and if there is an option to opt out, that the agreement clearly describes the procedures to opt out. If the company intends to rely on those provisions later, they should be in the actual documents that the employee signs. Employers should also document the onboarding process. It’s helpful to have acknowledgements indicating that employees received sufficient time to review, had an opportunity to ask questions, and understood the implications of arbitration. Finally, supervisors and managers should be trained carefully. This case became largely about how the documents were presented in practice.
Jennifer: And from a wage and hour perspective, this ruling potentially has major consequences because the plaintiff’s claims now continue in court as a putative class action. So, if arbitration had been enforced, the litigation landscape would’ve looked very different for this case. Instead, the plaintiff now retains the ability to pursue the class claims in court on behalf of a putative class of Washington hourly non-exempt employees who are alleging unpaid wages, missed meal periods, missed rest breaks, and overtime violations as well. So those are claims that can present some substantial exposure for employers if class certification is granted.
Kat: Exactly. This decision serves as a reminder that arbitration agreements remain a powerful risk management tool, but employers cannot treat implementation as an afterthought. Courts are increasingly examining whether employees truly had a meaningful opportunity to understand what it was they were signing. Even a well-drafted agreement can be vulnerable if the execution process is flawed. So, employers should periodically review not only the language of their agreements, but also the procedures used to distribute, explain, and obtain signatures on those agreements.
Jennifer: Great insights as always, Kat. Thanks so much. So, that wraps up today’s episode. Thank you to our listeners for joining us today for this discussion of the Washington Court of Appeals decision in Clemons v. Securitas Security Services USA. We will continue to monitor developments in wage and hour litigation, class actions, as well as arbitration law, and keep you updated on the latest trends affecting employers nationwide. Thank you so much for listening, and we’ll see you next time.
Kat: Thank you for listening, everyone, and thanks, Jen.
By Gerald L. Maatman, Jr., Gregory Tsonis and Christian J. Palacios
Duane Morris Takeaways: In Brown v. Equity Prime Mortgage, LLC, Case No. 1:25-CV-1832, ECF No. 38 (N.D. Ga. Aug. 27, 2026), U.S. District Judge Michael L. Brown of the Northern District of Georgia granted a plaintiff’s motion for conditional certification of an FLSA collective action on behalf of a group of mortgage underwriters, alleging misclassification and unpaid overtime violations. This decision is yet another reminder for employers of how lenient the evidentiary standard is in jurisdictions that apply the longstanding “two step” conditional certification analysis employed by many courts. This decision further highlights the potential risk associated with classifying broad categories of employees as “exempt” for overtime purposes, while relying exclusively on the FLSA’s administrative exemption (i.e. office workers that require the exercise of independent judgment on important matters).
Background
Plaintiff Shameen Brown worked for Defendant Equity Prime Mortgage, LLC (“EPM”), a national mortgage lender, as an underwriter between March 2023 and May 2024. Order at 2. On April 7, 2025, she filed a class and collective action complaint against her EPM alleging misclassification and unpaid overtime violations, specifically that she typically worked 60 or more hours per week but received no overtime compensation because EPM misclassified her and others as exempt under the Fair Labor Standards Act. Id.
On September 12, 2025, Brown moved to conditionally certify a collective action, pursuant to 29 U.S.C. § 216(b) of the FLSA, of “[a]ll current and former employees of [EPM] working as Underwriters throughout the United States during the time period from three years prior to the filing of this Complaint until final resolution of [the] action.” Id. at 2. Brown submitted a proposed notice and requested permission to send it to potential collective members via mail, e-mail, and text message. She also requested access to the last four digits of collective members’ social security numbers and permission to send a reminder notice halfway through the notice period. Order at 2-3. EPM opposed the motion. Id.
The Court’s Ruling
On August 27, 2026, the Court granted Plaintiff’s motion for conditional certification. At the outset of its decision, the Court observed that the Eleventh Circuit “sanctioned a two-stage procedure for district courts to effectively manage FLSA collective actions in the pretrial phase.” Order at 3.
At the first stage, or the “notice” stage, the Court observed that it need only determine whether there existed other “similarly situated” employees who should be notified of their ability to join the litigation, describing the applicable standard as “not particularly stringent” and “fairly lenient.” Id. at 4. Only at the second stage, typically after close of discovery, would Plaintiff be required to satisfy a higher evidentiary burden to prove that the collective action is similarly situated and could proceed. Id. at 4-5.
In support of conditional certification, Plaintiff submitted affidavits from other former underwriters describing their duties, alleging each underwriter was required to adhere to the same “predetermined underwriting guidelines” without “any authority to deviate” from those guidelines. Id. at 6. EPM argued that its underwriters were not similarly situated because underwriters worked on different loans, such as retail and wholesale, and were “likely exercising more judgment than an underwriter working primarily on loans to individuals with steady W-2 income and low debt.” Id. at 7.
The Court agreed with Plaintiff that a collective should be conditionally certified, reasoning that Defendant’s position that underwriters were “likely exercising more judgment” did not contradict the “simplicity” of Plaintiff’s claim that EPM’s underwriters were required to “strictly adhere” to the same “predetermined guidelines” when reviewing loans, and that they were required to apply these guidelines without discretion. Id. The Court also rejected Defendant’s argument that different underwriters had different job descriptions, holding that the postings contained only “minute differences” and involved “similar duties.” Id. at 7. Finally, the Court rejected Defendant’s argument that opt-in plaintiffs were not similarly situated because they used different job descriptions in their LinkedIn postings, quipping that “[o]ne man’s Trash Collector is another man’s Sanitation Expert.” Id. at 8.
As a result, the Court granted Plaintiff’s motion for conditional certification and further approved the form of the proposed notice, authorizing it to be sent via mail, email, and text message. Id. at 9. However, the court denied Plaintiff’s request to send a reminder notice halfway through the notice period, concluding that such notices “would be redundant and ‘could be interpreted as encouragement by the Court to join the lawsuit.”’ Id at 10. It also denied Plaintiff’s request that Defendant be required to provide the last 4 digits of the collective members’ social security numbers, citing privacy concerns. Id. at 11.
Takeaway for Employers
As this case illustrates, employers will continue to face uphill battles at the “conditional certification” stage in jurisdictions that apply the lenient “two step” FLSA certification analysis. Although the Fifth, Sixth, and, most recently, the Seventh Circuit have rejected the majority rule in favor of more rigorous tests, most federal circuits, including the Eleventh Circuit, continue to utilize this plaintiff-friendly analysis. Additionally, employers in all sectors, and in the mortgage industry specifically, should be mindful that classifying employees as exempt carries legal risk, particularly where the employer cannot easily demonstrate that the employees maintain meaningful discretion and exercise independent judgment on important matters as part of their job duties to satisfy the FLSA’s administrative exemption.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Ryan T. Garippo
Duane Morris Takeaways: On September 3, 2026, in Card, et al. v. R.J. Reynolds Tobacco Holdings, Inc., No. 26-CV-00433, 2026 U.S. Dist. LEXIS 201636 (M.D.N.C. Sept. 3, 2026), Judge Catherine Eagles of the U.S. District Court for the Middle District of North Carolina dismissed a putative class action brought under the Telephone Consumer Protection Act (the “TCPA””), on the basis that § 227(c)(5) of the statute does not extend to text messages. The decision follows the Seventh Circuit’s recent ruling in Steidinger v. Blackstone Medical Services, 182 F.4th 532 (7th Cir. 2026) and represents the first district court within the Fourth Circuit to hold that a text message is not a “telephone call” within the meaning of § 227(c)(5).
Case Background
On May 11, 2026, Plaintiff Shawn Card (“Plaintiff” or “Card”) sued R.J. Reynolds Tobacco Holdings, Inc. (“Reynolds”) under the TCPA claiming the company violated the national do-not-call registry’s requirements. Because Plaintiff alleged his phone number was registered on the national-do-not-call registry, allegedly received unwanted text messages from Reynolds, and supposedly never consented to receive those text messages, he claimed that Reynolds violated § 227(c)(5) of the TCPA.
In the complaint, Plaintiff also sought to represent a class of similarly situated individuals who also received text messages that allegedly violated the TCPA’s long-standing prohibition on telephone calls to numbers on the national do-not-call registry. Plaintiff specifically relied on § 227(c)(5) of the TCPA, which purports to create a private right of action for an individual “who has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of the regulations prescribed under this subsection.”
Reynolds moved to dismiss and argued that § 227(c)(5) does not apply to text messages. Plaintiff opposed that motion.
The Court’s Decision
Judge Eagles found the reasoning of the Seventh Circuit’s recent decision in Steidinger persuasive and dismissed the complaint because text messages “do not fall within the private right of action created by § 227(c)(5).” Card, 2026 U.S. Dist. LEXIS 201636, at *3.
Judge Eagles explained § 227(c)(5) references a “telephone call” and not a “telephone solicitation,” as used elsewhere in the statute, and which is expressly defined to include telephone messages. This decision demonstrated that “Congress intended ‘telephone call’ in § 227(c)(5) to have a narrower scope.” Id. Thus, the structure and text of the TCPA supported this interpretation.
In addition, Judge Eagles also took care to note that – prior to McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation, 606 U.S. 146, 168 (2025) – most courts had presumed that § 227(c)(5) applied to text messages based largely on the Federal Communications Commission’s (the “FCC”) regulations. But after McKesson, those cases are no longer good law because that case “changed the standard for judicial deference to agency statutory interpretation and called into question such decisions relying on the FCC’s interpretation.” Id. at *4.
Finally, Judge Eagles also rejected the approach adopted by the courts that have held the term “telephone call” encompasses text messages, such as Taha v. Momentive Software, Inc., 2026 WL 974297, at *3 (C.D. Cal. Mar. 11, 2026), which reasoned that “had Congress intended to eliminate textual communications from § 227(c)(5) it would have used the phrase ‘voice call,’ rather than ‘telephone call.’” Judge Eagles, however, noted that “the inverse is also true; if it had been the intent to include all types of communications, Congress more simply could have used the broader term ‘call’ as it did in §227(b), rather than ‘telephone call’ as it did in § 227(c)(5).” Id. at *6.
As a result, Judge Eagles concluded that Plaintiff failed to state a claim and became the first district court judge in the Fourth Circuit to conclude that § 227(c)(5) does not cover text messages.
Implications For Companies
The Card decision is significant for the growing split in authority as to whether the private right of action codified at § 227(c)(5) covers text messages. Card is the first court in the Fourth Circuit to hold that such text messages are not actionable. Indeed, there are now district courts in five federal circuits – including the entire Seventh Circuit – that hold text messages are not covered by this section of the statute. A chart summarizing this authority is depicted below.
Federal Circuit
Sample Opinion
1st Circuit
⮽
2nd Circuit
⮽
3rd Circuit
⮽
4th Circuit
Card v. R.J. Reynolds Tobacco Holdings, Inc., 2026 U.S. Dist. LEXIS 201636 (M.D.N.C. Sept. 3, 2026)
5th Circuit
⮽
6th Circuit
Stockdale v. Skymount Prop. Grp., LLC, 825 F. Supp. 3d 622 (N.D. Ohio 2026)
Rush v. Selectquote Ins. Servs., Inc., 2026 WL 2495598 (W.D. Mo. July 30, 2026)
9th Circuit
⮽
10th Circuit
⮽
11th Circuit
See, e.g., Davis v. CVS Pharmacy, Inc., 797 F. Supp. 3d 1270 (N.D. Fla. Aug. 26, 2025)
On the other hand, there are district courts in the First, Second, Third, and Fifth Circuits that have ruled in favor of the plaintiffs’ bar on this issue with no decisions ruling in favor of corporate defendants in those circuits. There are no district courts in the Tenth Circuit that have analyzed this issue. And the common wisdom is that Howard v. Republican National Committee, 164 F.4th 1119 (9th Cir. 2026) decided this issue for the entire Ninth Circuit.
One of the most interesting parts of Card is that Judge Eagles’s opinion suggests that the issue is still live in the Ninth Circuit. Howard was decided in the context of a § 227(b)(3) claim. Thus, when Judge Eagles suggested that the term “any call” in § 227(b)(3) is a “broader term” than was used in § 227(c)(5), it also suggests that there may be some daylight between Howard and the growing number of district courts that hold §227(c)(5) does not cover text messages. Card, 2026 U.S. Dist. LEXIS 201636, at *6.
While this decision is undoubtedly a positive development for corporate counsel, we are not yet at the stage where companies can consider revising their text messaging programs. The new decisions are coming in rapidly and the landscape is changing quickly. Nonetheless, the Card decision provides corporate defendants with a powerful tool to challenge putative § 227(c)(5) class actions, premised on the receipt of text messages, particularly in the Fourth Circuit. As a result, companies should continue to raise this argument and monitor this blog to stay on top of this growing split in authority.
