Posts

Posted on by Gerald L. Maatman, Jr.

DMCAR Mid-Year Review – 2024/2025: FLSA Conditional Certifications Remain High, But So Far In 2024 Courts Are Granting Less Class Certification Motions Overall Compared To 2023


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

Duane Morris Takeaway: In the first half of 2024, across all major types of class actions, courts issued rulings on 203 motions to grant or deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 138 rulings, with an overall success rate of 68%. In contrast, in 2023, the plaintiffs’ class action bar succeeded in certifying class actions at a higher rate. Across all major types of class actions, courts issued rulings last year on 451 motions to grant or to deny class certification. Of these, plaintiffs succeeded in obtaining or maintaining certification in 324 rulings, an overall success rate of 72%. In 2022, by comparison, courts issued rulings on 335 motions to grant or to deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 247 rulings, an overall success rate of nearly 74%.

In 2024, the number of motions that courts considered varied significantly by subject matter area, and the number of rulings varied across substantive areas.

The following list summarizes the results in each of ten key areas of class action litigation:

WARN – 100% granted / 0% denied (1 of 1 granted / 0 of 1 denied)
FLSA / Wage & Hour (Conditional Certification) – 84% granted / 16% denied (68 of 81 granted / 13 of 81 denied)
Antitrust – 80% granted / 20% denied (8 of 10 granted / 2 of 10 denied)
FCRA / FDCPA – 75% granted / 25% denied (3 of 4 granted / 1 of 4 denied)
Securities Fraud – 67% granted / 33% denied (10 of 15 granted / 5 of 15 denied)
ERISA – 67% granted / 33% denied (10 of 15 granted / 5 of 15 denied)
Discrimination – 60% granted / 40% denied (6 of 10 granted / 4 of 10 denied)
Privacy – 60% granted / 40% denied (3 of 5 granted / 2 of 5 denied)
FLSA / Wage & Hour (Decertification) – 33% granted / 67% denied (3 of 9 granted / 6 of 9 denied)
Civil Rights – 48% granted / 52% denied (10 of 21 granted / 11 of 21 denied)
Consumer Fraud – 48% granted / 52% denied (12 of 25 granted / 13 of 25 denied)
Data Breach – 33% granted / 67% denied (1 of 3 granted / 2 of 3 denied)
Products Liability / Mass Torts – 0% granted / 100% denied (0 of 1 granted / 1 of 1 denied)
TCPA – 0% granted / 100% denied (0 of 3 granted / 3 of 3 denied).

The plaintiffs’ class action bar obtained the highest rates of success in WARN, wage & hour, antitrust, and FCRA class actions. There has only been one WARN certification ruling in 2024, which was granted by the court for a 100% success rate. In wage & hour litigation, plaintiffs succeeded in obtaining orders certifying classes and/or collective actions in 68 of 81 rulings issued during 2024, a success rate of 84%. In cases alleging antitrust violations, plaintiffs succeeded in obtaining orders certifying classes in 8 of 10 rulings, for a success rate of 80%. And in cases alleging FCRA violations, plaintiffs managed to obtain class certification rulings in 3 of 4 rulings issued during 2024, a success rate of 75%.

Courts Issued More Rulings In FLSA Collective Actions and Wage & Hour Class Actions Than In Any Other Areas Of Law

For the first half of calendar year 2024, courts again issued more certification rulings in FLSA collective actions and wage & hour class actions than in other types of cases. Plaintiffs historically have been able to obtain conditional certification of FLSA collective actions at a high rate, which surely has contributed to the number of filings in this area.

From January 1 to July 1, 2024, courts considered more motions for certification in FLSA matters than in any other substantive area. Overall, courts issued 90 rulings. Of these, 81 addressed first-stage motions for conditional certification of collective actions under 29 U.S.C. § 216(b), and 9 addressed second-stage motions for decertification of collective actions. Of the 81 rulings that courts issued on motions for conditional certification, 68 rulings favored plaintiffs, for a success rate of nearly 84%.

These numbers are higher than the numbers observed in 2023, during which courts issued 183 rulings. Of these, 165 addressed first-stage motions for conditional certification of collective actions under 29 U.S.C. § 216(b), and 18 addressed second-stage motions for decertification of collective actions. Of the 167 rulings that courts issued on motions for conditional certification, 125 rulings favored plaintiffs, for a success rate of nearly 75%.

At the decertification stage, courts generally have conducted a closer examination of the evidence and, as a result, defendants historically have enjoyed an equal if not higher rate of success on these second-stage motions as compared to plaintiffs.

The results so far in 2024 have not supported that typical success. Of the 9 rulings that courts issued on motions for decertification of collective actions, only 3 rulings favored defendants, for a lower success rate of 33%.

An analysis of the rulings demonstrates that a disproportionate number emanated from traditionally pro-plaintiff jurisdictions, including the judicial districts within the Second Circuit (16 decisions) and Ninth Circuit (10 decisions), which include New York and California, respectively.

Takeaways From The Numbers Midway Through 2024

Notable this year at the halfway point, there have been a very small number of rulings emanating from the Fifth and Sixth Circuits (4 and 7 decisions, respectfully), which could account for the high overall conditional certification rate in the wage & hour space, given that these two circuits have imposed new, stricter standards for conditional certification. Plaintiffs likely are shifting their case filings away from these two circuits toward jurisdictions with more lenient, more plaintiff-friendly standards for conditional certification.

The numbers no doubt flow from the different standards and approaches that courts in different federal circuits take in evaluating motions for conditional certification and decertification and, in turn, the likelihood of plaintiffs’ success on such motions. If more courts join the Fifth and Sixth Circuits in abandoning the traditional two-step certification process under 29 U.S.C. § 216(b), and thereby increase the time and expense of gaining a conditional certification order, it may lead to a reshuffling of the deck in terms of where plaintiffs file their cases and the types of claims they pursue.

We will continue to track class certification trends in 2024 and will report on final numbers in the Duane Morris Class Action Review – 2025, which will be published in the first week of January. Stay tuned!

Posted on by Class Action Defense

The Class Action Weekly Wire – Episode 63: Key Developments In FCRA Class Action Litigation


Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associates Emilee Crowther and Derek Franklin with their discussion of key rulings and trends in class action litigation under the Fair Credit Reporting Act (“FCRA”).

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

Episode Transcript

Jerry Maatman: Thank you and welcome loyal blog readers and listeners to our next episode of the Weekly podcast series that we call the class Action weekly wire. My name is Jerry Maatman, and I’m a partner at Duane Morris and joining me today are my colleagues, Derek Franklin and Emilee Crowther, and we’re here to talk about Fair Credit Reporting Act class action litigation. Emilee and Derek, can you tell me a little bit about what is going on in this space in terms of the history of the FCRA?

Emilee Crowther: Absolutely, Jerry, and thanks for having me today. The stated purpose of the Fair Credit Reporting Act, or the FCRA, is to ensure that consumer reporting agencies, exercise their important responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy. It requires consumer reporting agencies and entities, obtaining consumer reports to follow reasonable procedures, to assure maximum possible accuracy of consumer reports. Courts have often noted that FCRA violations lend themselves to resolution through class action, litigation, and FCRA. Class actions have increased partially as a result of the Fair and Accurate Credit Transaction Act, or the FACTA, amendments which require that a consumer who is afforded less favorable treatment and reliance on her credit report be provided an adverse action notice.

Derek Franklin: And in FCRA cases in 2023, the class action plaintiffs’ bar continued to look for any failure of an employer to provide disclosures or obtain proper authorization from an applicant. Although these authorization and disclosure requirements may appear to be relatively straightforward, case law has created additional requirements that may not be as obvious from a plain reading of the FCRA. While employers must be vigilant in their efforts to avoid running afoul of the FCRA authorization and disclosure requirements, the third-party agencies they obtain consumer reports from must also take active steps to ensure that they provide accurate reports. The plaintiffs’ bar is quick to investigate violations of these provisions and bring Rule 23 class actions against CRAs.

Jerry: I know that compliance with the FCRA is not for the faint of heart, and it’s certainly spiked quite a bit of class action litigation in terms of our annual report. Are there some significant guideposts in the case law in terms of FCRA class actions?

Emilee: So, the United States Supreme Court’s decision in TransUnion LLC v. Ramirez substantially limited FCRA class actions by making it clear that only consumers who have “been concretely harmed by a defendant’s statutory violation may sue that private defendant over that [FCRA] violation in federal court.” In TransUnion, the defendant credit reporting agency generated thousands of consumer credit reports which mistakenly match the consumers’ names with the names of people on the list of individuals who threaten America’s national security. However, the Supreme Court only allowed this case to proceed for plaintiffs whose false reports had been provided to third-party creditors. According to the Supreme Court, if the third-party creditors did not receive the potentially defamatory reports, then the individuals did not suffer from a concrete injury under the FCRA.

Jerry: Well, the TransUnion case certainly has created quite a tidal wave of defenses and case law that have interpreted just what an “injury-in-fact” may be. How has that resulted in terms of FCRA class certification rulings and motions to dismiss over the past year?

Derek: In 2023, all the three major CRAs in the United States – Equifax, Experian, and TransUnion – had to litigate at least one FCRA class action concerning allegedly inaccurate or incomplete credit reports. In one such case brought against Equifax in the Us. District Court for the Northern District of Georgia, the court granted in part a motion to dismiss as to a state law negligence claim and injunctive relief under the FCRA. But the court denied in part the motion to strike the class action allegations allowing the plaintiffs’ claim to proceed. The court noted that the plaintiffs could not identify a statutory or common law duty of care owed to the plaintiffs by Equifax. And as to the FCRA claim, the court stated that the case is cited by Equifax, centered on instances where a correctly reported credit score was misleading, which was distinguishable from its position, that it was not “objectively unreasonable” for the company to interpret federal law as being inapplicable to credit scores. The ruling is a good roadmap for defendants involved in FCRA class action litigation.

Emilee: Another case, titled Nelson, et al. v. Experian Information Solutions, Inc., the court examined what documents and information would reasonably be “in a consumer’s file” underneath the FCRA. The plaintiff reviewed her credit report and discovered that it contained inaccurate personal identification information, including two addresses that weren’t hers, her maiden name was misspelled, and the last digit of her social security number was incorrect. She contacted Experian to request the information be changed and Experian updated all but one of the incorrect addresses because it was associated with an open credit account. The plaintiff ended up filing a class action against Experian, alleging that Experian violated the FCRA by providing inaccurate personal identification information on her credit report and failing to correct the inaccurate information. Experian filed a motion for summary judgment, asserting that although the FCRA’s disclosure provision requires credit reporting agencies to disclose “all information in a consumer’s file” the word “any” in “any item of information contained in a consumer’s file” is limited to information that might be, or has been, furnished consumer report. Experian contended that since personal identification information, like a consumer’s name, address, and social security number, do not bear on an individual’s credit worthiness, such information did not itself constitute a credit report. The court rejected this argument, and found that the FCRA’s plain language “forbid the use of credit worthiness as a limitation on information contained in both the consumer’s credit report and [in the] consumer’s credit file.” However, the court ended up holding that the existence of a duty to reinvestigate was “not enough to prove a violation of the FCRA” – that the plaintiff also had to establish that Experian, either negligently or willfully, failed to satisfy its duty to reinvestigate by showing that Experian’s interpretation of the FCRA was objectively unreasonable. The court ruled that no jury could find that Experian negligently or willfully violated the FCRA, and that Experian’s interpretation of the FCRA was objectively reasonable. Thus, the court granted Experian’s motion for summary judgment.

Jerry: Those are key cases and a great overview of what corporate counsel are facing here. Certainly the business model of plaintiffs’ counsel is to file the class action, certify the class action, and then monetize it through settlements. How did the plaintiffs’ bar do in terms of monetizing significant FCRA settlements on a class-wide basis over the past year?

Derek: Jerry, in terms of securing high settlements – the plaintiffs’ bar did not do nearly as well in 2023 as in 2022. In 2023, the top 10 FCRA, FDPCA, and FACTA settlements totaled $100.15 million. This was a significant decrease from the prior year, where the top 10 class action settlements totaled $210.11 million.

Jerry: Still a lot of money, and certainly corporate counsel need to be on guard in terms of compliance efforts in this area. What are your thoughts on the takeaways given the case law, given the settlements, in terms of what corporate counsel should have in their toolkit for FCRA compliance?

Emilee: Well, Jerry, it’s very important for consumer reporting agencies to implement policies and procedures that furnish accurate reports. Systemic issues in a reporting system provide the plaintiffs’ class action bar with ample evidence to argue that class certification is justified, regardless of whether there was actual harm to many consumers.

Derek: And to add on to that – good document retention can save the day in FCRA litigation. While various cases involve the generation of consumer reports for tenant applicants, they are just as applicable to consumer reports generated for employee applicants and the plaintiffs’ class action bar will continue to press legal envelope.

Jerry: Well, thank you, Emilee, and thank you, Derek, for your thought leadership in this area. And loyal blog readers and listeners, thank you for joining us for this week’s installment of the Class Action Weekly Wire.

Emilee: Thank you, Jerry, for having us, and thank you loyal listeners.

Derek: Thank you, everyone.

Posted on by Class Action Defense

New York Federal Court Recommends Class Certification In Tax Preparer Wage & Hour Lawsuit

By Gerald L. Maatman, Jr., Gregory S. Slotnick, and Zachary J. McCormack

Duane Morris Takeaways: On June 21, 2024, in Cinar v. R&G Brenner Income Tax, LLC, No. 20-CV-1362, 2024 U.S. Dist. LEXIS 110045 (E.D.N.Y. June 21, 2024), Magistrate Judge James R. Cho of the U.S. District Court for the Eastern District of New York recommended granting class certification in a suit accusing R&G Brenner Income Tax Centers, also known as R&G Brenner Income Tax Consultants (“R&G Brenner”) of failing to pay overtime wages in violation of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”). Judge Cho was unpersuaded by R&G Brenner’s arguments that plaintiffs’ motion to certify the class and distribute notice to putative class and collective action members was untimely and that plaintiffs could not establish numerosity, commonality, predominance and superiority under Rule 23. The ruling recommended that R&G Brenner’s employees, working as income tax preparers since March 13, 2014, met the requirements for class certification.

In determining the timeliness of the class certification motion, Judge Cho opined that R&G Brenner should not have been surprised by the motion considering that earlier pleadings in the record alluded to its likelihood. Further, the rules governing class actions indicate there is no deadline to file a motion to certify a class. While explaining that plaintiffs could establish numerosity, commonality, predominance and superiority, Judge Cho relied on the terms of more than eighty tax preparers’ employment agreements, which were derived from a form template that R&G Brenner adjusted slightly to allow for individualized compensation and work schedules. Therefore, the Court recommended the tax preparers met the requirements to secure class certification in the lawsuit accusing R&G Brenner of failing to pay overtime.

Case Background

R&G Brenner operates a tax preparation business that maintains approximately thirty offices in the New York metropolitan area. Id. at *2. During tax season, R&G Brenner employs approximately 75 income tax preparers at these different offices, which it classifies as overtime exempt. Id. at *3. On March 13, 2020, tax preparers for R&G Brenner filed a class and collective action claiming the employer violated federal and state wage and hour law by denying them overtime and by taking unlawful deductions from their wages. Id. at *4.

R&G Brenner paid the income tax preparers on a commission-only basis, in which the employees received a weekly advance on their commissions that was later deducted from their final gross commissions at the end of the tax season. Id. at *3. At the end of the tax season, R&G Brenner then created a final reconciliation for each income tax preparer, including: (i) the gross commission earned for the tax season; (ii) all advances that were paid during the season; (iii) all deductions withheld from the employee’s wages; and (iv) the net commission earned by and payable to the income tax preparer for the tax season. Id. at *4. Plaintiffs alleged that this compensation structure denied overtime compensation to the tax preparers even though they routinely worked more than forty hours per week. Id. at *6.

In addition to the contention that R&G Brenner failed to compensate tax preparers for overtime worked, plaintiffs further claimed that R&G Brenner’s policies made unlawful deductions from tax preparers’ wages, including credit card service charges, chargeback receipts, missing deposit money, employee referrals, “early bird specials,” reward money and promo money. Id. Finally, plaintiffs claimed that R&G Brenner did not provide the tax preparers with accurate written wage statements each week and did not pay them at least monthly, as required by New York State law. Id.

The Court’s Decision

Plaintiffs brought their FLSA and NYLL claims under a single action using the procedural mechanisms available under 29 U.S.C. § 216(b) and Rule 23, and moved the Court to certify a class of all income tax preparers who worked for R&G Brenner in New York since March 13, 2014. Id. at *8. R&G Brenner opposed plaintiffs’ motion, arguing the motion was untimely and that plaintiffs had not established numerosity, commonality, predominance, and/or superiority to certify the proposed class action. Id. at *1.

Even though Rule 23 does not provide a deadline for filing a motion for class certification, R&G attempted to persuade the Court to deny the motion as untimely, and therefore prejudicial. Id. at *10. Unpersuaded by this argument, Judge Cho explained that the claims of surprise were contradicted by the plaintiffs’ complaint and amended complaint that put R&G Brenner on notice of the class-wide claim. Id. In addition, R&G Brenner’s timeliness argument was upended by its stipulation with plaintiffs containing an express reservation of plaintiffs’ rights to move for class certification. Id. at *12.

R&G Brenner also failed to persuade Judge Cho that plaintiffs could not fulfill the numerosity requirement to certify the class. Id. at *8. Numerosity is presumed when the putative class has 40 or more members, and plaintiffs identified at least 87 putative class members. Id. However, R&G Brenner argued that the Court should not consider 84 of the 87 collective action notice recipients for numerosity purposes because they declined to opt-in to the collective action. Id. R&G Brenner, however, could not offer any authority in support of this position, and the Court relied on Second Circuit precedent indicating that the number of opt-ins under the FLSA has no bearing on the numerosity requirement under Rule 23. Id.

Finally, plaintiffs successfully demonstrated commonality and typicality through R&G Brenner’s policy of failing to pay overtime compensation, failing to provide plaintiffs with accurate wage statements pursuant to NYLL, delaying payment to plaintiffs, and withholding unlawful deductions. Id. at *15. Plaintiffs, as well as all income tax preparers, were required to sign employment agreements prior to the tax season which included their compensation and work schedule. Id. Those agreements were based on form templates that R&G Brenner adjusted to allow for individualized compensation and work schedules, but were otherwise standardized. Id. Thus, the Court determined that the language of the agreements was similar with the exception of commission rates, salary draws, and work schedules. Id. Relying on the foregoing reasoning, Judge Cho recommended granting the motion to certify the class, allowing the parties until July 8, 2024 to object to his recommendation and report. Id. at *40.

Implications For Employers

Judge Cho’s recommendation and report serves as a cautionary tale for employers drafting standard employment agreements. Even with differing compensation and work schedules, employment contracts derived from standardized language may provide the necessary elements for a Court to find the commonality and typicality requirements of a proposed class under Rule 23 are satisfied for purposes of class certification. Moreover, the decision serves as a timely reminder that courts may find the opt-in rate of an FLSA collective action unrelated to the issue of Rule 23 class certification within the same litigation.

Posted on by Gerald L. Maatman, Jr.

Duane Morris Class Action Review – 2024/2025: Mid-Year Class Action Settlement Report & Analysis

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

Duane Morris Takeaways: Corporate defendants saw unprecedented settlement numbers across all areas of class action litigation in 2022 and 2023, and halfway through 2024, settlement numbers remain robust. The cumulative value of the top ten settlements across all substantive areas of class action litigation hit near record highs in 2023, second only to the settlement numbers observed in 2022. When the numbers for 2022 and 2023 are combined, the totals signal that corporate defendants have entered a new era of heightened risks and higher stakes in the valuation of class actions. On an aggregate basis, across all areas of litigation, class actions and government enforcement lawsuits garnered more than $51.4 billion in settlements in 2023, almost as high as the record-setting $66 billion in 2022. When combined, the two-year settlement total eclipses any other two-year period in the history of American jurisprudence.

As a prelude to the Duane Morris Class Action Review – 2025, this post reports on our analysis of class action settlements through the first half of 2024. The data shows that for the period of January 1 to June 30, 2024, the current year is on pace with the numbers of the previous two years. As of the end of the first half of 2024, the aggregate settlement total across all areas of class action litigation and government enforcement lawsuits is $22.9 billion (in accounting for the top 5 settlements in the various substantive areas of law). It is anticipated that these numbers will increase across the board by the end of the year and when measured by the top 10 settlements in each category.

More Billion Dollar Class Action Settlements

At the mid-way point of 2024, there are four settlements over the billion-dollar mark. In 2023, parties resolved 14 class actions for $1 billion or more in settlements, making 24 billion-dollar settlements in the last two years. Reminiscent of the Big Tobacco settlements nearly two decades ago, 2022 and 2023 marked the most extensive set of billion-dollar class action settlements and transfer of wealth in the history of the American court system.

Class action settlements totaled $66 billion in 2023, $51.4 billion in 2023, and $22.9 billion in 2024 so far.

The Scorecard On Leading Class Actions Settlements Halfway Through 2024

The plaintiffs’ class action bar has scored rich settlements thus far in 2024 in virtually every area of class action litigation.

[Click image to enlarge] The top 5 class action settlement totals in each practice area.
The following list shows the totals of the top 5 settlements at the mid-year point in 2024 in key areas of class action litigation:

$14.45 Billion – Products liability/mass tort class actions
$4.17 Billion – Antitrust class actions
$2.05 Billion – Securities fraud class actions
$628 Million – Consumer fraud class actions
$388.95 Million – Data breach class actions
$331.5 Million – Privacy class actions
$288 Million – ERISA class actions
$157.15 Million – Wage & hour class and collective actions
$147 Million – Discrimination class actions
$101.3 Million – Labor class actions
$67.7 Million – Government enforcement actions
$58.8 Million – Civil rights class actions
$49.69 Million – TCPA class actions
$24.96 Million – Fair Credit Reporting Act class actions

The high dollar settlements of the past two years suggested that the plaintiffs’ bar would continue to be equally, if not more aggressive, with their case filings and settlement positions. From the 2024 data, it certainly looks to be the case as we end the first half of the year.

The data points in each category are set out in the following charts.

Top Class & Collective Action Litigation Settlements In 2024

Top Antitrust Class Action Settlements In 2024

The top 10 antitrust class action settlements totaled $11.74 billion in 2023, and $3.72 billion in 2022.
    1. $2.77 billion – In Re College Athlete NIL Litigation, Case No. 20-CV-3919 (N.D. Cal. May 23, 2024) (settlement agreement reached to resolve claims with former college athletes who filed an antitrust class action seeking compensation allegedly denied to them for decades before the Supreme Court overturned the NCAA’s compensation ban)..
    2. $418 million – Burnett, et al. v. the National Association of Realtors, Case No. 19-CV-332, Gibson, et al. v. National Association of Realtors, Case No.  23-CV-788, and Umpa, et al. v. The National Association of Realtors, Case No. 23-CV-945 (W.D. Mo. Mar. 15, 2024) and Moehrl, et al. v. The National Association of Realtors, Case No. 19-CV-1610 (N.D. Ill. Apr. 23, 2024) (preliminary settlement approval granted in a class action to resolve claims that broker commission rules caused home sellers across the country to pay inflated fees).
    3. $385 million – In Re Suboxone (Buprenorphine Hydrochloride and Naloxone) Antitrust Litigation, Case No. 13-MD-2445 (E.D. Penn. Feb. 27, 2024) (final settlement approval granted in a class action to resolve claims brought by states, insurers and buyers of a new dissolvable strip version of Suboxone to the market, encouraging the move from tablets to strips by misrepresenting to the U.S. Food and Drug Administration that the tablets posed a risk to children of accidental consumption).
    4. $335 million – Le, et al. v. Zuffa LLC, Case No. 15-CV-1045 (D. Nev. Mar. Mar. 20, 2024) (preliminary settlement approval sought in a class action to resolve claims that fighters’ wages were suppressed by up to $1.6 billion).
    5. $265 million – In Re Generic Pharmaceuticals Pricing Antitrust Litigation, Case No. 16-MD-2724 (E.D. Penn. June 26, 2024) (preliminary settlement approval granted for a class action to resolve claims by direct purchasers, end-payors and states alleging that multiple makers of generic drugs conspired to keep the prices on their products high, in violation of state laws and the federal Sherman Act).

Top Civil Rights Class Action Settlements In 2024

The top 10 civil rights class action settlements totaled $643.15 million in 2023, and $1.31 billion in 2022.
    1.  $17.5 million – Clark, et al. v. City Of New York, Case No. 18 Civ. 2334 (S.D.N.Y. Apr. 5, 2024) (settlement approval sought in a class action to resolve claims alleging that the city policy department’s policy requiring all arrested individuals to have their photograph taken without a head covering violated the Religious Land Use and Institutionalized Persons Act).
    2. $13.7 million – Sow, et al. v. New York, Case No. 21 Civ. 533, (S.D.N.Y. Mar. 5, 2024) (final settlement approval granted for a class action resolving claims by individuals who were arrested or arrested and subjected to force by the New York City Police Department during protests in 2020 following the murder of George Floyd).
    3. $12.8 million – In Re Chiquita Brands International Inc., Alien Tort Statute And Shareholders Derivative Litigation, Case No. 08-MD-1916 (S.D. Fla. June 24, 2024) (preliminary settlement approval granted in a class action to resolve claims alleging that the company funded Colombian paramilitary groups leading to the deaths of over 2,500 victims.
    4. $10 million – Adberg, et al. v City Of Seattle, Case No. 20-2-14351-1 (Wash. Super. Ct. Jan. 30, 2024) (settlement reached to end a lawsuit brought by more than 50 protesters who say they were brutalized by its police force during Black Lives Matter demonstrations in the summer of 2020).
    5. $4.8 million – Students For Fair Admissions, Inc., et al. v. University Of North Carolina, Case No. 14-CV-954 (M.D.N.C. Jan. 29, 2024) (the University of North Carolina agreed to cover the fees and expenses of a group founded by affirmative action advocates that won a U.S. Supreme Court challenge to the school’s consideration of race in student admissions).

Top Consumer Fraud Class Action Settlements In 2024

The top 10 consumer fraud class action settlements totaled $3.29 billion in 2023, and $8.596 billion in 2022.
    1. $150 million – In Re Chevrolet Bolt EV Battery Litigation, Case No. 20-CV-13256 (E.D. Mich. May 16, 2024) (preliminary settlement approval sought in a class action to resolve claims against General Motors LLC and LG units over alleged battery which allegedly make cars prone to overheating and fires).
    2. $145 million – In Re Kia Hyundai Vehicle Theft Marketing, Sales Practices, And Products Liability Litigation, Case No. 22-ML-3052 (N.D. Cal. July 15, 2024) (final settlement approval sought in a class action resolving claims that that consumers were left vulnerable to theft and damage due to vehicles being improperly manufactured with design flaws).
    3. $125 million – National Veterans Legal Services Program, et al. v. United States, Case No. 16-CV-745 (D.D.C. Mar. 20, 204) (preliminary settlement approval granted in a class action resolving claims challenging the legality of “excessive” PACER fees).
    4. $108 million – Elder, et al. v. Reliance Worldwide Corp., Case No. 20-CV-1596 (N.D. Ga. Apr. 23, 2024) (preliminary settlement approval granted in a class action to resolve claims alleging that the defendants made and sold water heater connector hoses with defective rubber linings).
    5. $100 million – Esposito, et al. v. Cellco Partnership d/b/a Verizon Wireless, Case No. MID-L-6360-23 (N.J. Super. Apr. 26, 2024) (final settlement approval granted in a class action to resolve claims that the company misled its customers by not disclosing certain fees in its postpaid wireless service plans).

Top Data Breach Class Action Settlements In 2024

The top 10 data breach class action settlements totaled $515.75 million in 2023, and $719.21 million in 2022.
    1. $350 million – In Re Alphabet Inc. Securities Litigation, Case No. 18-CV-6245 (N.D. Cal Apr. 9, 2024) (preliminary settlement approval granted 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).
    2. $15 million – Salinas, et al. v. Block Inc., Case No. 22-CV-4823 (N.D. Cal. June 3, 2024) (preliminary settlement approval granted in a class action to resolve claims that a December 2021 data breach at the companies exposed personally identifiable information, account numbers and trading activity of 8.2 million people).
    3. $8.7 million – Sherwood, et al. v. Horizon Actuarial Services LLC, Case No. 22-CV-1495 (N.D. Ga. Apr. 2, 2024) (final settlement approval granted for a class action to resolve claims that employer benefit plan members’ sensitive data was exposed in a massive breach at a consulting company).
    4. $8 million – In Re Orrick, Herrington & Sutcliffe LLP Data Breach Litigation, Case No. 23-CV-4089 (N.D. Cal. May 31, 2024) (preliminary settlement approval granted in a class action to resolve claims brought by clients of a law firm alleging their personal information was compromised in a March 2023 data breach of some of the firm’s client data).
    5. $7.25 million – In Re Lincare Holdings Inc. Data Breach Litigation, Case No. 22-CV-1472 (M.D. Fla. June 24, 2024) (final settlement approval granted for a class action to resolve claims that the company failed to protect consumers from a 2021 data breach).

Top Discrimination Class Action Settlements In 2024

The top 10 discrimination class action settlements totaled $762.2 million in 2023, and $597 million in 2022.
    1. $54 million – California Civil Rights Department v. Activision Blizzard Inc., Case No. 21STCV26571 (Cal. Super. Jan. 17, 2024) (consent decree entered for an action to resolve claims that the company engaged in gender discrimination, pay inequities, and fostered a culture of sexual harassment in the workplace).
    2. $30 million – Employees’ Retirement System Of Rhode Island v. Paul Marciano, et al., Case No. 2022-0839 (Del. Chan. Jan. 4, 2024) (final settlement approval granted for a class action to resolve claims of decades of alleged sexual misconduct by one of the company’s co-founders).
    3. $25 million – Jewett, et al. v. Oracle America Inc., Case No. 17-CIV-02669 (Cal. Super. Ct. Feb. 11, 2024) (preliminary settlement agreement sought in a class action to resolve claims that female employees were paid less than male employees).
    4. $20 million – Council, et al. v. Merrill Lynch Pierce Fenner, Case No. 24-CV-534 (M.D. Fla. May 24, 2024) (preliminary settlement approval sought in a class action to resolve claims alleging discrimination and retaliation against a proposed class of nearly 1,400 Black financial advisers who alleged they received less pay and promotions compared to their white counterparts).
    5. $18 million – Forsyth, et al. v. HP Inc., Case No. 16-CV-4775 (N.D. Cal. Mar. 29, 2024) (final settlement approval granted in a class action to resolve claims alleging that the company unlawfully pushed out hundreds of older workers as part of a workforce reduction plan in violation of the ADEA).

Top EEOC / Government Enforcement Class Action Settlements In 2024

The top 10 EEOC / government enforcement class action settlements totaled $263.58 million in 2023, and $404.5 million in 2022.
    1. $16.5 million – In The Matter Of Avast Ltd., Case No. 202-3033 (FTC Jan. 19, 2024) (consent decree entered following a Federal Trade Commission lawsuit alleging that the company sold personal information to more than 100 third parties despite promising to protect consumers from online tracking).
    2. $16 million – U.S. Department Of Labor v.  Disaster Management Group LLC (DOL Jan. 24, 2024) (consent order entered following investigations into 62 government subcontractors hired to construct temporary housing and provide services to Afghan refugees at Joint Base McGuire-Dix-Lakehurst in New Jersey).
    3. $15 million – California Civil Rights Department v. Snap Inc. (Cal. Super. Ct. June 18, 2024) (consent order entered following an investigation into the company’s hiring and pay practices were discriminatory, finding the company failed to ensure women were treated equally, resulting in a glass ceiling for pay and promotions, sexual harassment and retaliation when female workers spoke up).
    4. $11.5 million – Washington Department Of Labor & Industries v. Boeing (May 24, 2024) (the parties entered into a compliance agreement following an investigation by the agency after it received four complaints in November 2022 from workers who were performing aircraft maintenance overseas, and found that Boeing had not paid or accounted for all overtime and for paid sick leave for the additional time going to worksites while out of town).
    5. $8.7 million – EEOC v. DHL Express (USA) Inc., Case No. 10-CV-6139 (N.D. Ill. Apr. 24, 2024) (consent decree entered resolving a lawsuit filed alleging that the company gave Black workers more difficult and dangerous work assignments than white employees).

Top ERISA Class Action Settlements In 2024

The top 10 ERISA class action settlements totaled $580.5 million in 2023, and $399.6 million in 2022.
    1. $169 million – Electrical Welfare Trust Fund, et al. v. United States, Case No. 19-CV-353, (Fed. Claims Ct. May 16, 2024) (final settlement approval granted in a class action alleging that the government illegally exacted certain contributions from SISAs under it for benefit year 2014).
    2. $61 million – In Re GE ERISA Litigation, Case No. 17-CV-12123 (D. Mass. Mar. 7, 2024) (final settlement approval granted in consolidated class actions alleging that the company violated the ERISA by directing employee retirement savings into underperforming GE Asset Management funds to generate fees for the subsidiary before it was sold).
    3. $20 million – Durnack, et al. v. Retirement Plan Committee Of Talen Energy Corp., Case No. 20-CV-5975 (E.D. Penn. June 4, 2024) (final settlement approval granted for a class action resolving claims from employees alleging that that they were owed early retirement pension benefits and pension supplements due to a change in control).
    4. $19 million – Krohnengold, et al. v. New York Life Insurance Co., Case NO. 21-CV-1778 (S.D.N.Y. Mar. 5, 2024) (preliminary settlement approval granted in a class action to resolve claims alleging that the company unlawfully kept underperforming proprietary investment options in two employee retirement plans).
    5. $19 million – Colon, et al. v. Johnson, Case No. 22-CV-888 (M.D. Fla. June 10, 2024) (preliminary settlement approval granted in a class action to resolve claims alleging that the company and executives enacted a scheme that diverted workers’ retirement benefits to shell companies and private equity firm Palm Beach Capital).

Top FCRA, FDPCA, And FACTA Class Action Settlements In 2024

The top 10 FCRA, FDPCA, and FACTA class action settlements totaled $100.15 million in 2023, and $210.11 million in 2022.
    1. $9.75 million – Sullen, et al. v. Vivint, Inc.,Case No. 01-CV-2023-903893 (Ala. Cir. Ct. Apr. 23, 2024) (final settlement approval granted in a class action alleging that the company accessed credit information in violation of the Fair Credit Reporting Act and created Vivint accounts without authorization).
    2. $6.76 million – Martinez, et al. v. Avantus LLC, Case No. 20-CV-1772 (D. Conn. Feb. 27, 2024) (final settlement approval granted in a class action alleging that the company violated federal law by including inaccurate information on mortgage borrowers’ credit reports).
    3. $5.7 million – Steinberg, et al. v. Corelogic,Case No. 22-CV-498 (S.D. Cal. Apr. 9, 2024) (final settlement approval granted in a class action lawsuit to resolve claims that the company violated the federal Fair Credit Reporting Act by listing consumers as deceased on credit reports when they were actually alive).
    4. $1.87 million – Parker, et al. v. The Salvation Army, Case No. 20-CV-4787 (Cal. Super. Ct. Mar. 20, 2024) (preliminary settlement approval granted in a class action to resolve claims to resolve claims the company  failed to comply with the Fair Credit Reporting Act (FCRA) when procuring job applicant background checks for employment applicants.
    5. $877,000 – McKey, et al. v. TenantReports.com LLC, Case No. 22-CV-1908-GJP (E.D. Penn. Feb. 27, 2024) (final settlement approval granted in a class action lawsuit to resolve claims that the company prepared consumer background reports that included outdated criminal non-conviction information).

Top FLSA / Wage & Hour Class And Collective Settlements In 2024

The top 10 FLSA / wage & hour class and collective action settlements totaled $742.5 million in 2023, and $574.55 million in 2022.
    1. $72.5 million – Utne, et al. v. Home Depot USA Inc., Case No. 16-CV-1854 (N.D. Cal. Mar. 8, 2024) (final settlement approval granted for a class action to resolve claims that the company failed to pay hourly wages, pay final wages on time, and provide accurate written wages).
    2. $38 million – In The Matter Of The Investigation Of Letitia James, Attorney General Of The State Of New York Of Lyft Inc., AOD No. 23-041 (AG Labor Bureau Nov. 30, 2024) (the New York Attorney General took legal action against Lyft, claiming the ride-booking company withheld wages from drivers by deducting taxes and fees from their pay instead of having passengers pay those expenses and prevented drivers from receiving the benefits they were entitled to under New York law).
    3. $16.65 million – Goldthorpe, et al. v. Cathay Pacific Airways Ltd., Case No. 17-CV-3233 (N.D. Cal. June 20, 2024) (preliminary settlement approval sought in a class action to resolve claims alleging that the airline violated state labor laws governing meal and rest periods, overtime and reserve duty pay).
    4. $16 million – Oman, et al. v. Delta Air Lines Inc., Case No. 15-CV-131 (N.D. Cal. May 15, 2024) (preliminary settlement approval sought in a class action to resolve claims alleging that the company failed to provide accurate wage statements in violation of California Labor Law).
    5. $14 million – Bolding, et al. v. Banner Bank, Case No. 17-CV-601 (W.D. Wash. Jan. 8, 2024)(final settlement approval sought in a class and collective action to resolve claims that the company misclassified mortgage loan officers as exempt employees and thereby failed to pay overtime compensation in violation of federal and state wage & hour laws).

Top Labor Class Action Settlements In 2024

The top 10 labor class action settlements totaled $129.67 million in 2023.
    1. $55 million – Saunders, et al. v. State of Michigan Unemployment Insurance Agency, Case No. 22-000007-MM (Mich. Cl. Ct. Apr. 16, 2024) (preliminary settlement approval granted in a class action to resolve claims that unemployment benefits were improperly clawed back without notice during the COVID-19 pandemic)
    2. $20 million – In Re International Longshore and Warehouse Union, Case No. 23-BK-30662 (N.D. Cal. Bankr. Feb. 22, 2024) (preliminary settlement approval granted in a class action to resolve claims alleging that the union of engaging in an unlawful boycott of the company during a labor dispute).
    3. $20 million – Bauserman, et al. v. State Of Michigan Unemployment Insurance Agency, Case No. 15-000202 (Mich. Ct. Claims Jan. 29, 2024) (final settlement agreement granted in a class action to resolve claims over the Michigan Unemployment Insurance Agency’s use of a computer program to detect fraudulent claims, which resulted in thousands of false fraud determinations).
    4. $3.8 million – Moliga, et al. v. Qdoba Restaurant Corp., Case No. 23-2-11540-6 (Wash. Super. Ct. Apr. 10, 2024) (preliminary settlement approval granted in a class action to resolve claims that the company violated Washington state’s pay transparency law when it failed to disclose pay information in job postings).
    5. $2.5 million – Arrison, et al. v. Walmart Inc., Case No. 21-CV-481 (D. Ariz. Feb. 16, 2024) (preliminary settlement approval granted in a class action to resolve claims that the company should have paid nearly 80,000 workers for the time they spent undergoing COVID-19 screenings before clocking in for their shifts).

Top Privacy Class Action Settlements In 2024

The top 10 privacy class action settlements totaled $1.32 billion in 2023, and $896.7 million in 2022.
    1. $90 million – In Re Facebook Internet Tracking Litigation, Case Nos. 22-16903 and 22-16904 (9th Cir. Feb. 21, 2024) (final settlement approval affirmed in a class action to resolve claims alleging that Facebook used cookies to track the internet activity of logged-out social network users who visited third-party websites containing Facebook “Like” button plugins).
    2. $75 million – Rogers, et al. v. BNSF Railway Co., Case No. 19-CV-3083 (N.D. Ill. June 18, 2024) (final settlement approval granted in a class action to resolve claims alleging that the company unlawfully scanned drivers’ fingerprints for identity verification purposes without written, informed permission or notice when they visited BNSF rail yards).
    3. $62 million – In Re Google Location History Litigation, Case No. 18-CV-5062 (N.D. Cal. May 3, 2024) (final settlement approval granted in a class action to resolve claims that Google illegally collected and stored smartphone users’ private location information).
    4. $52.5 million – Schreiber, et al. v. Mayo Foundation For Medical Education And Research, Case No. 22-CV-188 (W.D. Mich. May 25, 2024) (final settlement approval granted in a class action to resolve claims that the company shared subscriber information with third parties without getting consumer consent).
    5. $52 million – In Re Clearview AI Inc. Consumer Privacy Litigation, Case No. 21-CV-135 (N.D. Ill. June 21, 2024) (preliminary settlement approval granted in a novel settlement in a multidistrict litigation targeting Clearview AI’s allegedly unlawful practice of “scraping” internet photos to collect biometric facial data wherein the class will receive a 23% stake in the company).

Top Products Liability And Mass Tort Class Action Settlements In 2024

The top 10 products liability / mass tort class action settlements totaled $25.83 billion in 2023, and $50.32 billion in 2022.
    1. $10.3 billion – In Re Aqueous Film-Forming Foams Product Liability Litigation, MDL 2873 (D.S.C. Mar. 29, 2024) (final settlement approval granted in a class action to resolve claims with 3M by utilities that maintain it’s liable for the damage they have and will incur due to its signature PFAS that were used for decades in specialized fire suppressants, called aqueous film-forming foams (AFFF), that were sprayed directly into the environment and reached drinking water).
    2. $1.18 billion – Camden, et al. v. E.I. DuPont de Nemours & Co., Case No. 23-3230 (D.S.C. Feb. 8, 2024) (final settlement approval granted in a class action to resolve claims in a multidistrict litigation for the firefighting agent aqueous film forming foam (AFFF), which contains per- and polyfluoroalkyl substances (PFAS).
    3. $1.1 billion – Philips Recalled CPAP, Bi-Level PAP, And Mechanical Ventilator Products Liability Litigation, Case No. 21-MC-1230 (W.D. Penn. Apr. 29, 2024) (settlement reached in a multi-district litigation claiming that degraded foam in breathing machines caused plaintiffs personal injuries or will require long-term medical monitoring).
    4. $916 million – State Of Hawaii, et al. v. Bristol-Myers Squibb Co., Case No. 1CC141000708 (Hawaii Cir. Ct. May 21, 2024) (court found in favor of the plaintiffs and ordered payment by the companies to resolve claim alleging they marketed and sold Plavix in an unfair and deceptive manner, and that the companies failed to disclose that the drug could be harmful to those of East Asian and Pacific Islander ancestry).
    5. $750 million – In Re Aqueous Film-Forming Foams Products Liability Litigation, Case No. 18-MN-2873 (D.S.C. June 11, 2024) (preliminary settlement approval granted to resolve claims that Johnson Controls International PLC subsidiary Tyco Fire Products LP’s public water systems’ federal claims that some “forever chemicals” they detected in their supplies came from firefighting foam it made).

Top Securities Fraud Class Action Settlements In 2024

The top 10 securities fraud class action settlements totaled $5.4 billion in 2023, and $3.25 billion in 2022.
    1. $580 million – Iowa Public Employees’ Retirement System, et al. v. Bank of America Corp. Litigation, Case No. 17-CV-6221 (S.D.N.Y. Sept. 4, 2024) (final settlement approval granted in a class action to resolve claims alleging that the defendants conspired to block and boycott new offerings that would have increased competition and improved the efficiency and transparency of the market, in violation of Section 1 of the Sherman Act).
    2. $490 million – In Re Apple Inc. Securities Litigation, Case No. 19-CV-2033 (N.D. Cal. June 3, 2024) (preliminary settlement approval granted in a class action to resolve claims that Apple’s CEO Tim Cook defrauded shareholders by concealing falling demand for iPhones in China).
    3. $434 million – In Re Under Armour Securities Litigation, Case No. RDB-17-388 (D. Md. June 21, 2024) (settlement reached in a class action brought by investors alleging that the company inflated stock prices by hiding declining demand for its products).
    4. $350 million – In Re Alphabet Inc. Securities Litigation, Case No. 18-CV-6245 (N.D. Cal. Apr. 9, 2024) (preliminary settlement approval granted in a class action to resolve claims that the company deceived them about a March 2018 software glitch that allegedly gave third-party app developers the ability to access the private profile data of 500,000 users of the Google Plus social media site).
    5. $192.5 million – Chabot, et al. v. Walgreens Boots Alliance Inc., Case No. 18-CV-2118 (M.D. Penn. Feb. 7, 2024) (final settlement approval granted in a class action to resolve claims that the company’s executives lied about the likelihood of an ultimately unsuccessful merger between the two drugstore chains).

Top TCPA Class Action Settlements In 2024

The top 10 TCPA class action settlements totaled $103.45 million in 2023, and $134.13 million in 2022.
    1. $21.88 million – Smith, et al. v. Assurance IQ LLC, Case No. 2023-CH-09225 (Ill. Cir. Ct. Sept. 3, 2024) (final settlement approval granted in a class action to resolve claims alleging that the company violated the Telephone Consumer Protection Act with unsolicited robocalls).
    2. $9.7 million – Berman, et al. v. Freedom Financial Network LLC, Case No. 18-CV-1060 (N.D. Cal. Feb. 16, 2024) (final settlement approval granted in a class action to resolve claims alleging that the debt consolidation company and its subsidiaries made telemarketing calls which violated the Telephone Consumer Protection Act).
    3. $9 million – Moore, et al. v. Robinhood Financial LLC, Case No. 21-CV-1571 (W.D. Wash. July 16, 2024) (final settlement approval granted in a class action to resolve claims that the company’s referral text messages violated Washington telemarketing laws).
    4. $7 million – Williams, et al. v. Choice Health Insurance LLC, Case No. 23-CV-292 (M.D. Ala. July 9, 2024) (final settlement approval granted in a class action to resolve claims that the company violated the TCPA with unsolicited marketing calls).
    5. $2 million – Burnett, et al v. CallCore Media Inc., Case No. 21-CV-3176 (S.D. Tex. June 25, 2024) (final settlement approval granted in a class action to resolve claims the company placed prerecorded phone calls to consumers in violation of state laws and the federal TCPA).

 

Posted on by Class Action Defense

California Federal Court Rejects AI Class Action Plaintiffs’ Cherry-Picking Of AI Algorithm Test Results And Orders Production Of All Results And Account Settings

By Gerald L. Maatman, Jr., Justin R. Donoho, and Brandon Spurlock

Duane Morris Takeaways:  On June 24, 2024, Magistrate Judge Robert Illman of the U.S. District Court for the Northern District of California ordered a group of authors alleging copyright infringement by a maker of generative artificial intelligence to produce information relating to pre-suit algorithmic testing in Tremblay v. OpenAI, Inc., No. 23-CV-3223 (N.D. Cal. June 13, 2024).  The ruling is significant as it shows that plaintiffs who file class action complaints alleging improper use of AI and relying on cherry-picked results from their testing of the AI-based algorithms at issue cannot simultaneously withhold during discovery their negative testing results and the account settings used to produce any results.  The Court’s reasoning applies not only in gen AI cases, but also other AI cases such as website advertising technology cases.

Background

This case is one of over a dozen class actions filed in the last two years alleging that makers of generative AI technologies violated copyright laws by training their algorithms on copyrighted content, or that they violated wiretapping, data privacy, and other laws by training their algorithms on personal information.

It is also one of the hundreds of class actions filed in the last two years involving AI technologies that perform not only gen AI but also facial recognition or other facial analysis, website advertising, profiling, automated decision making, educational operations, clinical medicine, and more.

In Tremblay v. OpenAI, plaintiffs (a group of authors) allege that an AI company trained its algorithm by “copying massive amounts of text” to enable it to “emit convincingly naturalistic text outputs in response to user prompts.”  Id. at 1.  Plaintiffs allege these outputs include summaries that are so accurate that the algorithm must retain knowledge of the ingested copyrighted works in order to output similar textual content.  Id. at 2.  An exhibit to the complaint displaying the algorithm’s prompts and outputs purports to support these allegations.  Id.

The AI company sought discovery of (a) the account settings; and (b) the algorithm’s prompts and outputs that “did not” include the plaintiffs’ “preferred, cherry-picked” results.  Id. (emphasis in original).  The plaintiffs refused, citing work-product privilege, which protects from discovery documents prepared in anticipation of litigation or for trial.  The AI company argued that the authors waived that protection by revealing their preferred prompts and outputs, and asked the court to order production of the negative prompts and outputs, too, and all related account settings.  Id. at 2-3.

The Court’s Decision

The Court agreed with the AI company and ordered production of the account settings and all of plaintiffs’ pre-suit algorithmic testing results, including any negative ones, for four reasons.

First, the Court held that the algorithmic testing results were not work product but “more in the nature of bare facts.”  Id. at 5-6.

Second, the Court determined that “even assuming arguendo” that the work-product privilege applied, the privilege was waived “by placing a large subset of these facts in the [complaint].”  Id. at 6.

Third, the Court reasoned that the negative testing results were relevant to the AI company’s defenses, notwithstanding the plaintiffs’ argument that the negative testing results were irrelevant to their claims.  Id. at 6.

Finally, the Court rejected the plaintiffs’ argument that the AI company can simply interrogate the algorithm itself.  As the Court explained, “without knowing the account settings used by Plaintiffs to generate their positive and negative results, and without knowing the exact formulation of the prompts used to generate Plaintiffs’ negative results, Defendants would be unable to replicate the same results.”  Id.

Implications For Companies

This case is a win for defendants of class actions based on alleged outputs of AI-based algorithms.  In such cases, the Tremblay decision can be cited as useful precedent for seeking discovery from recalcitrant plaintiffs of all of plaintiffs’ pre-suit prompts and outputs, and all related account settings.  The court’s fourfold reasoning in Tremblay applies not only in gen AI cases but also other AI cases.  For example, in website advertising technology (adtech) cases, plaintiffs should not be able to withhold their adtech settings (the account settings), their browsing histories and behaviors (the prompts), and all documents relating to targeted advertising they allegedly received as a result, any related purchases, and alleged damages (the outputs).  As AI-related technologies continue their growth spurt, and litigation in this area spurts accordingly, the implications of Tremblay may reach far and wide.

Posted on by Class Action Defense

California Legislature Passes PAGA Reform Bills

By Nick Baltaxe, Shireen Wetmore, Jennifer Riley, and Gerald L. Maatman, Jr.

Duane Morris Takeaways: PAGA reform is here.  On June 27, 2024, the California Legislature signed off on two bills (AB 2298 and SB 92) resulting in significant reforms to California’s Private Attorneys General Act (“PAGA”). Governor Newsom previously announced the deal between business and labor groups, which also means the referendum to repeal PAGA will not appear on the November ballot.  Once signed into law by the Governor, the new reforms will bring sweeping changes to the PAGA.  These changes aim to curtail many of the criticisms that have been levied at the PAGA from both groups.  The changes apply to PAGA actions in which the PAGA notice was filed on or after June 19, 2024 and it is anticipated that the changes will also have an immediate impact on litigation strategy in pending PAGA actions filed before that date as well.     

California Legislature Approves PAGA Reform Bills

After Governor Newsom announced on June 18, 2024, that labor and business interests had inked a deal significantly altering the PAGA, the California Legislature quickly moved to approve two bills (AB 2288 and Senate Bill 92).  Proponents of the initiative to repeal PAGA had agreed to withdraw the referendum if the bills were passed within the deadline to withdraw the referendum.  The bills were approved just in the nick of time — on June 27, 2024, which was both the deadline to withdraw the the PAGA referendum and the date the two bills were passed.  These changes include reforms to the penalty structure, new defenses for employers, standing requirements limiting the scope of PAGA actions, and a new “cure” process for both small and large employers, among other changes that will significantly impact litigation strategy for PAGA claims (and likely spawn new legal questions as the law is tested in the field and the courts.)  The reforms do not alter the requirement that a claimant first file a notice with the Labor & Workforce Development Agency (“LWDA”) also known as an LWDA or PAGA notice.  These reforms affect all PAGA notices filed on or after June 19, 2024, with some exceptions, described in further detail below.

Penalty Structure Reforms

One of the primary complaints from business interests, in particular small business interests, was that the PAGA’s penalty structure frequently resulted in potential penalties in the millions upon millions of dollars based on the barest of allegations, often of highly technical violations of the Labor Code.  Employers complained that these violations did not implicate any actual harm to employees and that there could be compounded penalties for so-called “derivative” claims.  The compounding of penalties meant plaintiffs would try to stack multiple penalties based on the same alleged act or omission by an employer.  The new PAGA addresses several of these complaints, eliminating some penalties altogether, limiting the availability of penalties for certain derivative claims, and clarifying how penalties are calculated.

  • Clarity on Initial vs. Subsequent Violations: ­­Previously, PAGA penalties were set at $100 for “initial” violations of the Labor Code and $200 for any “subsequent” violations, unless otherwise prescribed by statute.  The reforms removed the distinction between “initial” and “subsequent” violations — now the civil penalty for an alleged violation is $100 for each aggrieved employee per pay period.  However, a court may reduce a penalty award in order to avoid an award that is unjust, arbitrary and oppressive, or confiscatory.  See Lab. Code § 2699(e)(2).  Repeat offenders may be subject to higher penalties.
  • Reduced Penalties for Isolated Events: If the violation resulted from an isolated, non-recurring event (e., the violation had not extended beyond the lesser of 30 days or four consecutive pay periods), the penalties are further limited to $50 per aggrieved employee per pay period. See Cal. Lab. Code § 2699(f)(2)(A)(ii).
  • Reduced Penalties for Wage Statement Violations: If the violation is a violation of Labor Code section 226 for non-complaint wage statements, additional limitations apply.  For violations of § 226(a) (other than (a)(8) regarding the legal name or address of the employer), the penalty is $25 for each aggrieved employee per pay period if the employee could promptly and easily determine accurate information from the wage statement or if the employee would not be confused or misled about the correct identity of their employer.  If the violation involves § 226(a)(8), the penalty is $25 if the employee would not be confused or misled about the correct identity of their employer or, if their employer is a farm labor contractor, the legal entity that secured the services of that employer.  These limitations do not apply if the employer failed to provide a wage statement to the employee.  See Lab. Code § 2699(f)(2)(A)(i).
  • Special Rules for Increased Penalties: In lieu of the “subsequent violation” penalty, a $200 penalty per aggrieved employee per pay period can now only be levied in certain circumstances.  Specifically, this amount may only be awarded where an agency or court has determined that the employer’s policy or practice led to that same violation of the Labor Code in the previous five years or if a court determines that the employers’ conduct was malicious, fraudulent, or oppressive.  See Lab. Code § 2699(f)(2)(B).
  • No Additional Recovery For Derivative Penalties Under Labor Code Sections 201, 202, or 203: An employee can no longer recover additional penalties for violations of Labor Code section 201, 202, or 203, which address when an employee must be paid upon resignation or termination, when seeking recovery for underlying wage violations.  The same applies to Labor Code sections 204 and 226, unless the violation meets heightened scienter requirements as outlined below. See Lab. Code § 2699(i).
  • Limited Recovery Under Labor Code Sections 204 and 226: An employee can recover additional penalties for Labor Code section 204, which addresses when an employee must be paid during their employment, if that violation is willful or intentional.  Additionally, an employee can recover additional penalties for violation of Labor Code section 226, which mandates that certain information be included on wage statements, if that violation is knowing, intentional, or involves a complete failure to provide a wage statement.  See Lab. Code § 2699(i).
  • Pay Period Defined: PAGA originally imposed monetary penalties on a per pay period basis. This unfairly penalized employers that paid employees on a weekly basis, as opposed to a biweekly basis.  The reforms address this disparity, by clarifying that the recoverable penalties will be reduced by 50% where an employer’s regular pay period is weekly rather than biweekly.
  • Employee’s Share Of Recovery Increased: The percentage of penalties awarded to the aggrieved employees has been increased from 25% to 35%.

The “Cure” For Employers’ Ills

The reforms also introduce a new and more complicated “cure” process for avoiding or reducing penalties.  Employers may take steps before a complaint is filed, or during litigation, to limit potential penalties.

  • Pre-LWDA Notice Penalty Cap: If, before receiving an LWDA notice or a request for records from the employee, an employer takes “all reasonable steps” to cure the violations alleged in the LWDA letter, awardable penalties are now capped at no more than 15% of the total available penalties.  See Lab. Code § 2699(g).
  • Post-LWDA Notice Penalty Cap: The penalty cap is increased to 30% if the “reasonable steps” are taken within 60 days of receiving the LWDA Notice.  See Lab. Code § 2699(h).

An employer takes “all reasonable steps” if it conducts periodic payroll audits and takes action in response to those audits, disseminates lawful policies, trains supervisors on applicable Labor Code and wage order compliance, and takes appropriate corrective action with regard to its supervisors.  Whether or not an employer’s conduct was reasonable will be evaluated by the totality of the circumstances. See Cal. Lab. Code § 2699(g)(2).

Eliminating Penalties Altogether

In addition to these caps, there is now a path towards the complete elimination of PAGA penalties if an employer cures an alleged labor code violation.  Specifically, if an employer takes the “reasonable steps” defined by statute and actually cures an employee’s unpaid wages, the employee can no longer recover PAGA penalties for the Labor Code violation.  The “cure” is effective when the employee is “made whole,” or provided an amount sufficient to recover any unpaid wages due to the alleged violations going back three years from the date of the notice.  However, this amount must also include seven percent interest, liquidated damages that are required by statute, and a reasonable attorneys’ fees award as determined by the court or agency.  Practically speaking, this “cure” option will likely still require costly outlays to ensure all fees are covered and potentially litigation over the reasonableness of the claimed attorneys’ fees.  We anticipate that, in response to these complicated requirements, employee’s may start to include in the LWDA notice a calculation of the proposed “cure” amount, much like an initial settlement demand.

New Standing Requirement

Prior to the passage of these bills, judicial interpretations of the statute held that an employee who experienced a single Labor Code violation could bring a claim for violations of any provision of the Labor Code on behalf of aggrieved employees, even for violations the employee bringing the claim never experienced.  Now, an employee must have suffered every violation he or she attempts to bring on behalf of other aggrieved employees.  This inclusion effectively negates the California Court of Appeal’s ruling in Huff v. Securitas Security USA Services, Inc., 23 Cal.App.5th 745 (2018), which held that an employee could seek PAGA penalties for any and all Labor Code violations, even if the employee had not experienced those violations. The new standing requirement will narrow the scope of PAGA actions to only those allegedly suffered by the PAGA plaintiff—and by extension add some guard rails to discovery as well as the size of the representative group at issue.

Manageability Is Back!

The bills also codified a long-litigated potential defense known as “manageability.”  Specifically, in January of this year, the California Supreme Court struck down the limited defense that employers had been using to try to reign in PAGA matters, holding that trial courts did not have the inherent authority to strike a claim as unmanageable.  See Estrada v. Royal Carpet Mills, Inc., 15 Cal.5th 582 (2024).  Now, courts are empowered by statute to limit evidence presented at trial or the scope of the claims to ensure that the case is manageable and may be effectively tried.  It will remain to be seen whether requests for trial plans enter the employer’s toolbox in these representative matters as they have in California class actions.

Injunctive Relief

Another criticism of the PAGA was the inability of a PAGA plaintiff to seek injunctive relief, effectively making PAGA a bounty-hunter statute with no real teeth to effectuate change.  Under the new reforms, an employee can now seek injunctive relief related to alleged Labor Code violations.  Employers should be prepared for new PAGA claims to include requests that the Court require the employer to modify their practices to ensure compliance with Labor Code provisions.  This is reminiscent of the injunctive relief available to plaintiffs under California’s Unfair Competition Law.  Labor had identified this provision as a key priority for PAGA reform and comments from representatives from the business community reflect the common interest in working towards full compliance with the Labor Code for all employers and employees.

New Early Evaluation Procedures For Large And Small Businesses

The reforms introduce new procedures both with the LWDA and the courts to allow for effective litigation, and potential early resolution, of these claims.

For PAGA notices (and their associated claims) filed on or after June 19, 2024, employers who employed at least 100 employees during the PAGA period can now request an “early evaluation conference” and a request to stay the proceedings before or simultaneous with the employer’s responsive pleading.  This request must include a statement from the employer identifying which allegations it disputes and which allegations it will cure.  The court will then set an early evaluation conference.  To the extent the employer stated they would cure any of the alleged violations, the court may also ask the employer to submit to the neutral and plaintiff, on a confidential basis, the employer’s plan to cure the deficiencies.  If other violations remain in dispute, the neutral may stay the consideration of the cure plan or agreement until after the litigation of the disputed issues.

If the neutral approves the cure plan, the employer must submit evidence within ten days showing that the cure occurred. If the neutral, employer, and employee all agree the violations have been cured, they will submit a joint statement to the court setting forth the terms of their agreement.  If the neutral or employee does not agree that the violation was cured, the employer may file a motion to request the court to approve the cure.  The employer can submit evidence with this motion showing that the alleged violations were corrected.  Any PAGA penalties calculated with these cures must take into account other limitations and caps on penalties that would be applicable due to the prompt cure.

Smaller employers have a separate early evaluation process.  Before October 1, 2024, employers with fewer than 100 employees during the PAGA period cannot take advantage of this early conference.  However, starting October 1, 2024, employers with under 100 employees can submit a confidential proposal to the LWDA within 33 days of their receipt of notice that lays out their exact plan for the cure.  The LWDA can make a determination on the sufficiency of the cure at the outset or set a conference to determine the sufficiency of the cure.

If the cure is facially sufficient or if the LWDA believes a conference is needed to discern the sufficiency of the cure, the LWDA will set a conference.  This is an accelerated timeline, as the LWDA must rule on the plan within 14 days of its submission and the conference must occur within 30 days of that date.  At this conference, the LWDA will discern if the cures are sufficient, whether or not any additional information is needed, and set a deadline to complete the cure.

When the employer completes the cure, it must provide to the LWDA and the plaintiff a sworn notification to the employee and agency that the cure is completed, accompanied by a payroll audit and check register if the violation involves a payment obligation.  The LWDA must confirm whether the cure was completed within twenty days of receiving the cure documents.  If the LWDA preliminarily believes the violation has been cured, the LWDA must provide notice to the plaintiff that the cure is complete.  If a plaintiff disagrees with the decision, the plaintiff may request a hearing on that determination.  If the LWDA confirms the violation was cured, the employee cannot continue with a civil action.  The employee can also appeal this determination to the superior court, although any payment the plaintiff received as part of the cure process will offset any judgment later entered with respect to that violation if the superior court concludes the agency abused its discretion in finding the cure was adequate.

However, if the LWDA believes the cure proposal is not sufficient, the employee can proceed with a civil action.  Importantly, if this process extends beyond the 65-day timeframe for the investigation by the LWDA, the statute of limitations on the PAGA claims are tolled.  As of October 1, 2024, employers with fewer than 100 employees during the PAGA period can also request the early evaluation conference described above for larger employers.  The employer’s submission of a cure proposal to the LWDA does not prevent the employer from requesting the early evaluation conference.  However, no employer can use this notice and “cure” provision more than one time in a 12-month period for violations of the same provision, regardless of the location of the worksite or if it did not cure that same violation upon prior notice.  See Cal. Lab. Code § 2699.3(d)

There is also a separate process if the only alleged violation the small employer will seek to cure is a violation of Labor Code section 226.  In that case, the employer can cure the deficiency within 33 days of the postmark date of the notice and file notice with a description of the cure to both the LWDA and the plaintiff.  If the plaintiff disputes this cure, he or she may file notice describing why the cure is being disputed.  This process is also on an accelerated timeline, and the LWDA must make a determination within 17 days of receipt of that dispute.  The LWDA can either confirm the cure, provide an additional three days for the employer to complete the cure, or allow the employee to file a PAGA claim for violation of Labor Code section 226.  If the LWDA does not respond, the employee can continue with his or her PAGA claim.  This determination can also be appealed to the superior court.

Impact On Employers and Litigation Strategy

While the focus may be on the reduction of penalties, the passage of these bills has also ushered in a new era for employers.  Not only will this greatly impact litigation strategy when dealing with PAGA claims, but employers now have a tight timeline in which to make important strategic decisions regarding things like election into early evaluation, cure, or other alternative dispute resolution.  Many are celebrating the reforms, but it remains to be seen how these reforms will impact PAGA litigation generally.  Because the reforms only apply as of June 19, 2024, employers with pending PAGA matters will want to look closely at the reforms and their cases to see whether and how the reforms will impact those pending matters.  In addition, we anticipate that there will be some bumps as the LWDA and the courts work through new questions raised by these reforms.  Each case is unique and employers should work closely with counsel to evaluate each claim.

What Should Employers Do Next?

As always, it is important to maintain up to date, compliant policies and practices and ensure your teams are trained on those policies.  If you are hit with an LWDA notice, take prompt action to evaluate whether one of these new alternative procedures will benefit your company.

Please stay tuned for additional steps you can take in light of these reforms.

If you have any questions about this post, please feel free to contact any of the wage-and-hour attorneys in our Employment, Labor, Benefits and Immigration Practice Group or your Duane Morris contact.

Posted on by Class Action Defense

The Class Action Weekly Wire – Episode 62: Class Action Fairness Act Key Rulings


Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jennifer Riley and Alex Karasik and associate Derek Franklin with their discussion of key rulings involving the Class Action Fairness Act (“CAFA”).

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

Episode Transcript

Jennifer Riley: Thank you for being here again for the next episode of our weekly podcast the Class Action Weekly Wire. I’m Jennifer Riley partner at Duane Morris and joining me today are Alex Karasik and Derek Franklin. Thank you both guys for being on the podcast.

Alex Karasik: Great to be here, Jen. Thank you.

Derek Franklin: Thanks for having me, Jen.

Jennifer: Today we wanted to discuss trends and important developments in the area of the Class Action Fairness Act, or the CAFA. Alex, can you tell our listeners a little bit about the CAFA before we get into the latest developments?

Alex: Absolutely. Jen. The CAFA is a staple of class action litigation. It was signed into law by George W. Bush, on February 18, 2005. The CAFA expands federal subject-matter jurisdiction over significant class action lawsuits and mass actions in the United States. Functionally, the CAFA provides a mechanism for defendants to remove class actions from state courts to federal courts. So, as a result, CAFA impacts form selection strategies in the class action litigation space.

Derek: Also, to add to Alex, the CAFA does more than facilitate the removal of class actions from state court to federal court. It also regulates the selection of class counsel, toughen certain pleading standards, tightens control over the range of attorneys’ fees that may be awarded in class action settlements, it facilitates the appeals of class certification orders, and it regulates the settlement process in class action settlements.

Jennifer: Thanks so much for that background, guys. Derek, can you talk a bit more about the impact of CAFA on class action litigation?

Derek: Yeah, CAFA has played a major role in large bet the company class actions. The plaintiffs’ class action bar has traditionally maintained success in achieving class certification in state courts, particularly those with locally elected judges who may be hostile toward out-of-state defendants. Prior to the implementation of the CAFA, in order for a federal court to have maintained jurisdiction,  there needed to be a monetary threshold of $75,000 met by every plaintiff in the case, and all named plaintiffs in a class action had to be citizens of states differing from those of all defendants. Now under the CAFA, jurisdictional requirements are much less restrictive, and thus more difficult for the plaintiffs’ bar to establish that the action should remain in state court.

Jennifer: Alex, what types of class action litigation, would you say, are most affected by the CAFA?

Alex: Great question, Jen. Class actions filed under federal statute, such as the FLSA, Title VII, or ERISA, are almost exclusively filed in federal court. So, the CAFA has most significantly impacted state law wage and hour claims and related state law type class action claims in employee-friendly states, such as California. The plaintiffs’ class action bar notoriously pursues wage and hour claims in state courts. It tends to be a more favorable forum for plaintiffs in certain areas. The Second Circuit over time became known as the federal circuit where securities law became the most developed. However, the Ninth Circuit became a circuit where more rulings under CAFA were made than any other circuit in the federal system. So, we tend to see various wage and hour and other potential consumer claims filed in state court, and therefore removed under the CAFA.

Jennifer: Were there any key CAFA rulings in 2023?

Alex: It doesn’t happen every year – but in 2023, in fact, courts and all of the federal circuits adjudicated jurisdictional issues based on the CAFA. Beyond the traditional wage and hour context, the CAFA rulings come in a variety of shapes, form, and sizes. Some of those came under the Illinois Biometric Information Privacy Act, which the three of us know very well, being located here in Chicago, Illinois. Other claims involve breaches of consumer product warranties, for instance, under the Magnum-Moss Warranty Act, so CAFA claims can really impact a wide variety of different types of causes of action.

Derek: In particular, the Third Circuit ruled on a breach of warranty case in Rowland, et al. v. Bissell Homecare, Inc., which involved a consolidated appeal concerning four putative class actions filed in state court, alleging violations of the MMWA. The defendants removed those cases pursuant to the CAFA and the plaintiffs filed motions to remand which the district court granted on appeal. The Third Circuit affirmed the District Court’s rulings under the MMWA. The amount controversy must be at least $50,000, and, if it’s a class action, it must have at least 100 named plaintiffs. The Third Circuit opined that in imposing additional requirements for federal jurisdiction, that Congress manifested an intent to restrict access to federal court for MMWA claims. The Third Circuit determined that at a minimum, the requirement that a class action name at least 100 plaintiffs for federal jurisdiction under the MMWA was not satisfied because each complaint at issue named only one plaintiff. The Third Circuit also reasoned that the MMWA’s stringent jurisdictional requirements were irreconcilable with the CAFA because they have differing requirements for how many plaintiffs must be named in a class action that can be brought in federal court, i.e., the CAFA requires only one plaintiff, and the MMWA requires at least 100 plaintiffs. The Third Circuit, therefore, concluded that applying the CAFA in this situation would render the MMWA’s named plaintiff requirement meaningless.

Jennifer: Alex, with the explosive amount of privacy class action litigation recently, can you tell us a bit more about the BIPA ruling in particular that you mentioned earlier?

Alex: Yeah, Jen, there was a really interesting ruling in the Northern District of Illinois in a case called Halim, et al. v. Charlotte Tilbury Beauty, Inc. There the plaintiff filed a putative class action in Illinois state court against the defendants, a makeup and cosmetic company and its parent corporation, alleging violation of the BIPA. It wasn’t a fingerprint scan BIPA case, but rather, this is one where, the defendants allegedly unlawfully collected facial geometry when the plaintiff used the virtual try-on software to superimpose the defendant’s makeup products on the plaintiff’s face. The defendants removed the case to federal court, and the plaintiffs thereafter sought to remand. The court granted plaintiffs’ motion to remand the action to state court because the defendants did not satisfy the $5 million amount-in-controversy requirement. The defendants had argued in removing the case, that they satisfied the requirement through their calculation of a $12 million dollar amount-in-controversy calculation for the BIPA. They claim there was six violations of the BIPA for each putative class member, times 100 putative class members, times two face scans per class member, times $5,000 per violation – which is the statutory amount for a reckless violation – times two defendants. Yeah, that’s a lot of math. And using all this math, defendant came up with an 8-figure number that they anticipated would be the damages exposure. Court rejected this calculation, saying, it’s too speculative and unreasonable to satisfy the defendant’s burden, and therefore, because of that, the court remanded this case back to Illinois state court.

Jennifer: What should corporate counsel and employers be on the lookout for in 2024?

Alex: We anticipate, there will be continued arguments over removal due to jurisdictional issues. The plaintiffs’ bar is crafty and constantly evolving their strategies for arguing against litigating cases in federal court. Many times state courts are more favorable forum, and I don’t think that trend will change in the coming year. What remains to be seen is how effective these strategies will be, and granting motions through remand especially as many of the major class action statutes, such as the BIPA, might evolve at the legislative level.

Jennifer: Well said. Thank you so much for all of this great analysis. Derek and Alex, thank you for being here with me today, and listeners, thank you so much for tuning in.

Alex: Thanks for having me, Jen, and thank you to all of our listeners. We appreciate you tuning in today as well.

Derek: Thanks, everyone.

Posted on by Class Action Defense

Colorado Federal Court Grants Frontier Airlines’ Motion to Compel Arbitration In The GoWild! Pass Program Class Action

By Gerald L. Maatman, Jr., Tiffany E. Alberty, Eden E. Anderson and Rebecca S. Bjork

Duane Morris Takeaways:  On June 14, 2024, in Hartsfield, et al. v. Frontier Airlines, Inc., Case No. 23-CV-2093 (D. Colo. June 14, 2024), Magistrate Judge Kathryn A. Starnella for the U.S. District Court for the District of Colorado recommended granting Frontier Airline’s motion to compel arbitration and dismiss the class claims of the Plaintiffs. This decision further illuminates the power of clear and conspicuous terms and conditions that allow for arbitration clauses and class action waivers.

Case Background

Plaintiffs and the putative class representatives (“Plaintiffs”) are individuals who sued Frontier Airlines, Inc. (“FA”) for alleged misrepresentations associated with its GoWild! Pass Program (“Pass Program”), a program that allowed participants to book unlimited number of airline flights for a specific period of time. When signing up for the Pass Program, Plaintiffs had to click “Join Now” button, thereby confirming that they agreed to the Terms & Conditions (“T&C”). When clicking “Join Now” button, the T&C was hyperlinked above, which opened another window to the actual T&C. The T&C was presented multiple times throughout the enrollment process, and even after purchase through a confirmation email, which expressly stated that the participant in the Pass Program is subject to the T&C. Id. at 2-3.

The T&C contained an arbitration clause that clearly outlined any Pass Program dispute would be subject to arbitration and governed by Colorado law. The T&C also contained a class action waiver.

For these reasons, FA moved to compel arbitration under the T&C and dismiss the class claims. Plaintiffs claimed that the arbitration clause was invalid because they never assented to the T&C, and that FA did not provide a conspicuous notice of T&C to which they agreed, thereby making it unconscionable and unenforceable.

The Court’s Opinion

Under the Federal Arbitration Act, (“FAA”), the Court noted that it “must rigorously enforce arbitration agreements according to their terms.” Id. at  4 (citing Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 230 (2013)). The Court also opined that it must  apply state contract law principles to determine validity and enforceability. Id.

Plaintiffs argued that no contract existed between the parties, because the T&C and its arbitration clause were “obscure” and failed to prove a “reasonably conspicuous notice.” Id. 5. The Court disagreed. It recognized that Plaintiffs “merely had to click on a single bold and underlined link” that would directly open the T&C which included the arbitration clause. The Court, highlighted that the link was offered multiple times to Plaintiffs during the sign up process and after purchase. Id. at 5-6.

Plaintiffs also argued that regardless if there was a valid contract, the arbitration agreement was unconscionable and thus unenforceable. The Court used a multi-factor test to determine a contractual provision’s conscionability, including: (1) a standardized agreement executed by parties of unequal bargaining strength, (2) lack of opportunity to read or become familiar with the document before signing it; (3) use of fine print in the portion of the contract containing the provision; (4) absence of evidence that the provision was commercially reasonable or should reasonably have been anticipated; (5) the terms of the contract, including substantive unfairness; (6) the relationship of the parties, including factors of assent, unfair surprise and notice; and (7) and all the circumstances surrounding the formation of the contract, including its commercial setting, purpose and effect. Davis v. M.L.G. Corp., 712 P.2d 985, 991 (Colo. 1986).

Plaintiffs claimed the unconscionability stemmed from unequal bargaining strength, convoluted presentation of the agreement, commercially unreasonable application and as it was substantively unfair. The Court was not persuaded by these arguments, as it found that circumstances here did not support that idea that the arbitration agreement was “snuck in or forced upon an unsuspecting or unsophisticated customer with no options.” Id. at 8 (citing Davis, 712 P.2d at 991). While the Court agreed that there was unequal bargaining strength, it held that FA provided Plaintiffs ample opportunities to read the T&C, which were not in fine print, thus there was no surprise or lack of notice. Finally, the Court found that the dispute fell within the scope of the arbitration agreement because the language was clear as to “any dispute in connection with Member and Frontier.” Id. at 9.

As it applies to the class action status, the T&C explicitly state that any case brought under the Pass Program can only be pursued in an individual capacity and not as a purported class-wide action. Because Plaintiff provided no arguments that the class action waiver was unconscionable, the Court held that the class action waiver bars Plaintiffs’ collective claims.

Implications For Employers

The holding in Hartsfield, et al. v. Frontier Airlines, Inc. highlights the enforceability of an arbitration through clear and conspicuous T&C.

T&C can completely change the landscape where a dispute can be raised, the choice of law, and the existence of any class claims. Giving individuals ample opportunities to review the T&C they are agreeing to is equally important. As such, corporate counsel, therefore, should take note any T&C, where modifications can or should be made to ensure enforceability of specific clauses like an arbitration agreement and class action waiver.

Posted on by Class Action Defense

The Class Action Weekly Wire – Episode 61: Key Developments In Civil Rights Class Action Litigation


Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Nathan Norimoto with their discussion of developments and trends in the area of civil rights class action litigation.

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

Episode Transcript

Jennifer Riley: Hello, everyone, and thank you for being here again for the next episode of our weekly, podcast the Class Action Weekly Wire, I’m, Jennifer, Riley partner and Dwayne Morris and joining me today is Nathan Norimoto. Thank you for being on the podcast Nathan.

Nathan Norimoto: Great to be here, Jen.

Jennifer: Today we wanted to discuss some trends and important developments in the area of civil rights class action litigation. Nathan, do you want to talk a bit about this area of law before we get into a development over the past year?

Nathan: Yes, definitely. For more than 70 years, class actions have been among the most powerful tools to secure civil rights in America. This began with the class action of Brown, et al. v. The Board Of Education, which declared school segregation unlawful and arguably set the stage for the Civil Rights Movement. In 1966, Congress and the judicial rule-making authorities crafted Rule 23 with the express goal of empowering litigants, challenging systemic discrimination, particularly segregation, to force courts to order widespread objective relief that would protect members of the class as a whole. Ever since, this provision remains as salient to the enforcement of federal civil rights statutes and constitutional claims as it was at its inception. So, for a multitude of reasons, class actions are often a tool of first resort by advocacy groups to remedy civil rights violations.

Jennifer: Thank you so much for that overview. What were some of the major developments in 2023 and during the first half of 2024 in the civil rights class action litigation space?

Nathan: Class actions in the civil rights context span numerous issues during that time period. Given this breadth of subject area, there were well over 100 decisions in this space. In these far ranging claims and groups of individuals, one common theme continues to be whether litigants can meet the commonality and typicality requirements of Rule 23, under the federal rules of civil procedure, to establish class certification. 2023 saw court rulings where numerous civil rights cases were certified, as well as granted class certification affirmed on appeal.

Jennifer: Are there any key rulings from this past year that listeners need to know about in the civil rights litigation class action area?

Nathan: Definitely. So, among all civil rights cases, the ruling on class certification in Progeny, et al. v. City Of Wichita was likely amongst the most significant. The plaintiffs, a nonprofit organization and several individuals, filed a class action alleging that the defendant, the city of Wichita, kept a “gang list” created and maintained by the Wichita Police Department, or WPD, whom WPD personnel had determined that the definition of a criminal street gang member. The individual plaintiffs alleged that they were wrongfully designated as criminal street gang members and added to the gang list, which adversely affected their lives. The plaintiff filed a motion for class certification pursuant to Rule 23, and the court granted the motion. The plaintiff proposed class consisted of all persons included in the Wichita Police Department’s gang list as an active or inactive gang member or gang associate. The court also determined that several common questions existed to establish commonality, including whether the statute was unconstitutionally vague, whether it failed to provide procedural protections to persons on the gang list, and whether inclusion in the gang list has a chilling effect on the right to freedom of association. The court held that the plaintiffs established that the defendant acted or refused to act by applying the gang list criteria to add persons to the gang list without procedural protections for those persons, which was applicable to the entire class. So the court ruled that the requested injunction seeking to bar the defendant from enforcing the statute was appropriate to the class as a whole, because all class members were on the gang list, and therefore the court granted class certification.

Jennifer: Thank you, Nathan, for that overview. So, turning to some trends and developments – there were over 100 rulings in this area in 2023. How are things progressing thus far in 2024 – have there been any interesting cases where class certification was granted?

Nathan: Certainly. So it seems like courts are continuing to grant class certification rulings in this area so far this year. One example here in California, Berg, et al. v. County Of Los Angeles, the plaintiffs were a group of protesters who filed a class action asserting that the Los Angeles Sheriff’s Department, or the LASD, had used excessive force against peaceful protesters and unlawfully detain them in violation of their First, Fourth, and Fourteenth Amendment rights in connection with the George Floyd protests. The plaintiffs filed a motion for class certification on one injunctive relief class and two damages classes, and that motion was granted by the court. As to the injunctive relief class, the defendants opposed the motion on mootness and standing grounds, and the court found that could not determine that the class would be moot, and that because the plaintiffs had stated they plan to attend future protests, they could plausibly be fearful of future harm. Next, for the first damages class, containing individuals who were arrested at the protests, the court stated that there were several common issues central to the class, including (i) whether the defendants have a custom and practice of using indiscriminate force against the peaceful protesters; (ii) whether there has been a manifest failure by the defendants to train employees on the use of force against the protesters; and (iii) whether the defendants had ratified violations of peaceful protesters’ rights. So finally, on the last and third class, the other damages class which contained individuals who were subject to the use of rubber bullets or tear gas, the court determined that the plaintiffs sufficiently established the common alleged harm of a “chill” to their First Amendment rights to unify the class. The court stated that the class met the predominance requirement under Rule 23 because the plaintiffs alleged class-wide general damages and challenged only a single “custom and practice of abusing indiscriminate force against peaceful protesters.” The court concluded that class action would be superior method of adjudication for the direct force class, or the third class, and granted the motion for class certification in its entirety.

Jennifer: It certainly seems like we will see courts continuing to grapple with motions for class certification in this area in 2024, and the plaintiffs’ bar continuing to aggressively pursue certification on behalf of plaintiffs. We know that successful certification often leads to settlements between the parties, rather than continuing the litigation and ultimately going to trial. How successful were plaintiffs in securing settlement dollars in this space in 2023?

Nathan: Pretty successful. Settlement numbers in civil rights class actions in 2023 were definitely significant. The top 10 settlements total $643.15 million. However, this is significant, but it was a decrease from the prior year when the top 10 civil rights class action settlements topped $1.3 billion.

Jennifer: The top settlement amounts in each area of law have been massive in recent years, and a major trend that we track in the Duane Morris Class Action Review. We will continue to track these numbers in 2024 and keep listeners aware of developments. Is there anything else corporate counsel and employers should be on the lookout for in 2024?

Nathan: So given the volume of litigation in the civil rights area, as well as the frequency which with classes are granted and new burgeoning issues for that can percolate in these cases – for example, claims connection with COVID-19 in connection with the increase homelessness issues that we’re facing in our cities – it’s anticipated that the plaintiffs’ bar will continue to be creative, and definitely inventive in this space, as we progress through 2024.

Jennifer: Well, thanks so much for all of this great analysis, Nathan. Thank you for being here with me today. Listeners, thank you for tuning in. And if you have any questions or comments on today’s podcast please feel free to send us a DM on Twitter @DMClassAction.

Nathan: Thanks for having me, Jen, and thank you listeners for being here today.

Jennifer: Thank you listeners again for joining us today, and please join us next week for the next episode of the Class Action Weekly Wire.

Posted on by Class Action Defense

Illinois Federal Court Rejects Class Action Because An AI-Powered Porn Filter Does Not Violate The BIPA

By Gerald L. Maatman, Jr., Justin R. Donoho, and Tyler Z. Zmick

Duane Morris Takeaways:  In a consequential ruling on June 13, 2024, Judge Sunil Harjani of the U.S. District Court for the Northern District of Illinois dismissed a class action brought under the Illinois Biometric Information Privacy Act (BIPA) in Martell v. X Corp., Case No. 23-CV-5449, 2024 WL 3011353 (N.D. Ill. June 13, 2024).  The ruling is significant as it shows that plaintiffs alleging that cutting-edge technologies violate the BIPA face significant hurdles to support the plausibility of their claims when the technology neither performs facial recognition nor records distinct facial measurements as part of any facial recognition process.

Background

This case is one of over 400 class actions filed in 2023 alleging that companies improperly obtained individuals’ biometric identifiers and biometric information in violation of the BIPA.

In Martell v. X Corp., Plaintiff alleged that he uploaded a photograph containing his face to the social media platform “X” (formerly known as Twitter), which X then analyzed for nudity and other inappropriate content using a product called “PhotoDNA.”  According to Plaintiff, PhotoDNA created a unique digital signature of his face-containing photograph known as a “hash” to compare against the hashes of other photographs, thus necessarily obtaining a “scan of … face geometry” in violation of the BIPA, 740 ILCS 14/10.

X Corp. moved to dismiss Plaintiff’s BIPA claim, arguing, among other things, that Plaintiff failed to allege that PhotoDNA obtained a scan of face geometry because (1) PhotoDNA did not perform facial recognition; and (2) the hash obtained by PhotoDNA could not be used to re-identify him.

The Court’s Opinion And Its Dual Significance

The Court granted X Corp.’s motion to dismiss based on both of these arguments.  First, the Court found no plausible allegations of a scan of face geometry because “PhotoDNA is not facial recognition software.”  Martell, 2024 WL 3011353, at *2 (N.D. Ill. June 13, 2024).  As the Court explained, “Plaintiff does not allege that the hash process takes a scan of face geometry, rather he summarily concludes that it must. The Court cannot accept such conclusions as facts adequate to state a plausible claim.”  Id. at *3.

In other cases in which plaintiffs have brought BIPA claims involving face-related technologies performing functions other than facial recognition, companies have received mixed rulings when challenging the plausibility of allegations that their technologies obtained facial data “biologically unique to the individual.”  740 ILCS 14/5(c).  BIPA defendants have been similarly successful at the pleading stage as X Corp., for example, in securing dismissal of BIPA lawsuits involving virtual try­-on technologies that allow customers to use their computers to visualize glasses, makeup, or other accessories on their face.  See Clarke v. Aveda Corp., 2023 WL 9119927, at *2 (N.D. Ill. Dec. 1, 2023); Castelaz v. Estee Lauder Cos., Inc., 2024 WL 136872, at *7 (N.D. Ill. Jan. 10, 2024).  Defendants have been less successful at the pleading stage and continue to litigate their cases, however, in cases involving software verifying compliance with U.S. passport photo requirements, Daichendt v. CVS Pharmacy, Inc., 2023 WL 3559669, at *2 (N.D. Ill. May 4, 2023), and software detecting fever from the forehead and whether the patient is wearing a facemask, Trio v. Turing Video, Inc., 2022 WL 4466050, at *13 (N.D. Ill. Sept. 26, 2022).  Martell bolsters these mixed rulings in non-facial recognition cases in favor of defendants, with its finding that mere allegations of verification that a face-containing picture is not pornographic are insufficient to establish that the defendant obtained any biometric identifier or biometric information.

Second, the Court found no plausible allegations of a scan of face geometry because “Plaintiff’s Complaint does not include factual allegations about the hashes including that it conducts a face geometry scan of individuals in the photo.”  Martell, 2024 WL 3011353, at *3.  Instead, the Court found, obtaining a scan of face geometry means “zero[ing] in on [a face’s] unique contours to create a ‘template’ that maps and records [the individual’s] distinct facial measurements.”  Id.

This holding is significant and has potential implications for BIPA suits based on AI‑based, modern facial recognition systems in which the AI transforms photographs into numerical expressions that can be compared to determine their similarity, similar to the way X Corp.’s PhotoDNA transformed a photograph containing a face into a unique numerical hash.  Older, non-AI facial recognition systems in place at the time of the BIPA’s enactment in 2008, by contrast, attempt to identify individuals by using measurements of face geometry that identify distinguishing features of each subject’s face.  These older systems construct a facial graph from key landmarks such as the corners of the eyes, tip of the nose, corners of the mouth, and chin.  Does AI-based facial recognition — which does not “map[] and record[] … distinct facial measurements” (id. at *3) like these older systems — perform a scan of face geometry under the BIPA?  One court addressing this question raised in opposing summary judgment briefs and opined on by opposing experts held: “This is a quintessential dispute of fact for the jury to decide.”  In Re Facebook Biometric Info. Priv. Litig., 2018 WL 2197546, at *3 (N.D. Cal. May 14, 2018).  In short, whether AI-based facial recognitions systems violate the BIPA remains “the subject of debate.”  “The Sedona Conference U.S. Biometric Systems Privacy Primer,” The Sedona Conference Journal, vol. 25, at 200 (May 2024).  The Court’s holding in Martell adds to this mosiac and suggests that plaintiffs challenging AI­-based facial recognition systems under the BIPA will have significant hurdles to prove that the technology obtains a scan of face geometry.

Implications for Companies

The Court’s dismissal of conclusory allegations is a win for defendants’ whose cutting-edge technologies neither perform facial recognition nor record distinct facial measurements as part of any facial recognition process.  While undoubtedly litigation over the BIPA will continue, the Martell decision supplies useful precedent for companies facing BIPA lawsuits containing insufficient allegations that they have obtained a scan of facial geometry unique to an individual.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

Proudly powered by WordPress