Class Action Defense

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

Duane Morris Takeaways: In O’Hailpin v. Hawaiian Airlines Inc., No. 22-CV-00532, 2023 U.S. Dist. LEXIS 220734 (D. Haw. Dec. 12, 2023), Judge Jill Otake of the U.S. District Court for the District of Hawaii denied a motion for class certification brought by current and former employees of Hawaiian Airlines alleging discrimination under Title VII and the ADA against individuals who requested medical or religious accommodations from their employers’ COVID-19 vaccination policy. The decision is pro-defendant and well worth a read in terms of strategies to oppose and prevent class certification of employment discrimination claims.

Case Background

Riki O’Hailpin, along with eight other named plaintiffs (“Plaintiffs”), brought a putative class action against Defendant Hawaiian Airlines Inc. (“Hawaiian”), alleging that Hawaiian violated Title VII of the Civil Rights Act of 1964 (“Title VII”) and the Americans with Disabilities Act (“ADA”) by discriminating against employees who requested medical or religious accommodations from Hawaiian’s Covid-19 vaccination policy.  In response to the Covid-19 pandemic, President Biden issued Executive Order No. 14042, a Federal Contractor Mandate that required certain employers to implement a mandatory vaccination policy.  Under the Federal Contractor Mandate and related guidelines, Hawaiian was required to have its unvaccinated employees masked and socially distanced in the workplace; thus, any exemptions to the vaccine policy would need to comply with those masking and distancing requirements.  Id. at *3.  Plaintiffs challenged Hawaiian’s policy that required all employees “to be vaccinated November 1, 2021 unless they had a reasonable accommodation for a disability as defined under the ADA or a sincerely held religious belief that conflicted with their ability to receive a Covid-19 vaccine.”  Id. at *3-4.

Hawaiian received 568 reasonable accommodation requests related to the vaccine policy, including 496 for religious accommodations and 72 for medical exemptions.  Id. at *3.  Hawaiian subsequently examined every work position and every work location to determine whether masking and distancing were feasible and concluded that, for a majority of the positions, they were not.  Hawaiian also implemented a “Transition Period Testing Program” that provided a deadline for unvaccinated employees to test and a 12-month unpaid leave of absence for those who did not get vaccinated and were not granted an accommodation.  Id. at *6.  The complaint alleged Hawaiian engaged in a “pattern and practice of discrimination” under Title VII and the ADA by denying medical and religious accommodation requests and that the Transition Period Testing Program was a pretext for denying accommodation requests.  Id. at *17.  Plaintiffs sought to represent all current and former Hawaiian employees whose religious and medical vaccine accommodation requests were denied under Hawaiian’s vaccination policy, and proposed a primary class of the approximately 500 employees whose accommodation requests were denied as well as sub-classes, broken down by medical and religious requests, of individuals whose requests were either denied or rescinded by Hawaiian.  Id. at *9.  Plaintiffs moved for class certification under Rule 23 of the Federal Rules of Civil Procedure.  Id.

Plaintiffs’ Motion For Class Certification

The Court evaluated Plaintiffs’ motion for class certification under Rule 23’s requirements of numerosity, adequacy, predominance, typicality, and commonality.  First, it expressed skepticism that one of Plaintiffs’ proposed sub-classes satisfied the numerosity requirement.  Id. at *12-13.  The Court concluded that certification of a sub-class of 14 individuals “whose medical exemption requests were rescinded, such that no final decision was reached … could likely be denied based on numerosity grounds alone.”  Id. at *13.  At the same time, the Court determined that Plaintiffs satisfied Rule 23’s adequacy of counsel requirement.  Id. at *13-14.  Hawaiian did not contest the requirement with respect to the named Plaintiffs and their counsel.  Id.  at *14.

The Court further evaluated whether Plaintiffs’ “pattern and practice” theory of liability met Rule 23’s commonality, typicality, and predominance requirements, with a specific focus on issues susceptible to “generalized proof” versus “individualized proof.”  Id. at *20-21.  The Court found that Plaintiffs could not satisfy the remaining Rule 23 requirements due to the individualized assessments into each medical and religious accommodation request to determine whether Hawaiian’s treatment of each request constituted actionable discrimination under Title VII and the ADA.  Id. at *23-57.

With respect to the sub-classes of individuals who were denied religious accommodation requests, the Court noted that the inquiries into each employee’s “sincerely held religious belief and secular preference” and/or whether the accommodation would cause an “undue hardship” to Hawaiian would require too many individualized assessments to satisfy predominance under Rule 23.  Id. at *27–*42.  For example, the Court noted the analysis of whether the accommodation would impose an undue hardship on Hawaiian would include an individualized review of each position, location, union status, and the ability to mask and social distance.  Id. at *37-39.

For the medical accommodation sub-classes, the Court noted that the ADA extends “only to qualified individuals … who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires.”  Id. at *44 (quoting 42 U.S.C. § 12111(8)).  For this reason, the Court opined that the reasonableness of the accommodation “is necessarily individualized, based on the person’s position and location, and the extent to which an accommodation would amount to an undue hardship on Hawaiian.”  Id. at *52.  In light of the individualized inquiries to determine the reasonableness of each accommodation (masking, social distancing, or testing) for each qualified individual, the Court determined that Plaintiffs did not meet their “burden to explain why commonality, typicality, and predominance are met” for the ADA subclasses.  Id. at *55-56.

Accordingly, the Court denied Plaintiffs’ motion for class certification and held that a class action was not “the superior way” for Plaintiffs’ claims to proceed.  Id. at *56.

Implications For Employers

This decision represents a helpful roadmap for employers to defend not only against potential Covid-19 vaccine-related class action complaints, but also against putative class actions brought under Title VII and the ADA.  The Court’s ruling underscores the importance of individualized inquiries for religious and medical accommodation requests under Title VII and the ADA, and offers tools to defend against the plaintiff’s burden of demonstrating predominance, typicality, and commonality at the class certification stage of the litigation.

By Seth A. Goldberg and Nick Baltaxe

Duane Morris Takeaways: A California Superior Court recently granted class certification relative to a class of hundreds of employees against a group of dispensary defendants where the Plaintiffs presented sufficient evidence that the off-the-clock work claims, meal and rest period claims, and reimbursement of necessary business expenses claims predominated over individual inquiries and were typical of the class.  The Court did not rule on the merits of the integrated enterprise, alter ego, or joint employer arguments, nor did the Court agree with the Defendant’s arguments that the claims were not typical because the Plaintiffs were not employed by each Defendant. Nonetheless, the ruling is important for employers in general and cannabis dispensaries in particular.

Case Background and the Court’s Ruling

A group of dispensary and retail store employees at four different dispensaries owned by different entities asserted that they should be treated as a single enterprise. The Plaintiffs moved to certify a class of all current and former non-exempt, hourly employees of the Defendants from January 13, 2017 through the present. The Plaintiffs alleged that the putative class members were expected to work off-the-clock in order to set up their timekeeping program and their payroll program as well as review materials on the timekeeping program, before clocking-in on their personal cell phone. The Plaintiffs additionally contended that the Defendants failed to provide meal and rest periods, timely pay all wages on termination, or provide accurate itemized wage statements. The Plaintiffs also argued that because the four Defendants should be considered a single enterprise, they failed to comply with the higher minimum wage found in the City of Los Angeles Minimum Wage Ordinance.

The Court granted the Plaintiffs’ motion for class certification.  The Court noted that the Plaintiffs’ arguments  regarding the Defendants being an integrated enterprise could be established by common proof. At the class certification stage, the Court determined that the Defendants’ arguments went to the merits of the Plaintiffs’ claims and did not compel denial of the Plaintiffs’ motion.  The Court found that each of the Plaintiffs’ class claims were subject to common proof, that the Plaintiffs’ injuries were typical of the class, and that the Plaintiffs and their counsel were adequate to serve as class representative and class counsel.  Importantly, the Court reached this conclusion despite Defendants’ introduction of compliant policies and procedures relating to these wage & hour claims.

Key Takeaways

There are thousands of state-licensed cannabis operators in California, a state known for its ubiquitious wage & hour litigation, and thousands more across the 38 states in the US that have legalized cannabis for medical and/or adult-use purposes.  As the cannabis industry continues to mature and evolve, wage & hour class actions are likely to become more frequent in the cannabis industry, just as they have grown in other industries.  It is crucial that employers ensure that they follow federal and state wage & hour laws and provide their employees with complaint policies and procedures.  Arbitration agreements with class waivers also should be provided to each employee in states where applicable.  This becomes even more crucial in the cannabis space, where brands are expanding due to a high volume of M&A transactions and market consolidation.  Cannabis companies should continue to be cognizant of the strict wage & hour regulations in their states as the industry continues to grow.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In the proceeding captioned In Re Marriott International Customer Data Security Breach Litigation, MDL No. 8:19-MD-02879, 2023 WL 8247865 (D. Md. Nov. 29, 2023), Judge John Preston Bailey of the U.S. District Court for the District of Maryland granted Plaintiff’s Motion for Class Certification and reinstated several previously-certified classes.  The defendant argued that class certification was improper, in part, because the putative class members signed a Choice of Law Provision that contained a class action waiver.  Conversely, the plaintiffs contended that the defendant waived its defense based on the Choice of Law Provision.  The Court held that (i) the defendant waived its Choice of Law Provision, and (ii) in the absence of an arbitration agreement, the Choice of Law Provision did not override the Rule 23 requirements.  For these reasons, this case serves as an important reminder for companies on the importance of the terms of contractual agreements in the context of seeking to arbitrate cases and potentially avoid class or collective actions.

Case Background

In 2016, Marriott purchased Starwood Hotels & Resorts Worldwide (“Starwood”), and inherited Starwood’s IT infrastructure provided by Accenture LLP (“Accenture”) for all Starwood properties.  Id.  In September 2018, Marriott learned that an unidentified party tried to gain access to the Starwood guest reservation database.  After an investigation, Marriott determined Starwood’s database was compromised from July 2014 through September 2018.  Id. *1.  On November 30, 2018, Marriott disclosed the data breach.  Id.

Thereafter, affected consumers filed suit against Marriott and Accenture nationwide.  Id.  Marriott requested that the actions be consolidated into one multi-district litigation (“MDL”) in the U.S. District Court for the District of Maryland, where Marriott is headquartered.  Id. * 4.  The case was consolidated, and the plaintiffs filed their joint MDL Complaint alleging various state law contract, statutory consumer protection, and state law negligence claims.  Id.  The plaintiffs then moved to certify various classes.  Id. *2.

The putative class included members of the Starwood Preferred Guest Program (“SPG”).  Id. *2.  Members of the SPG program signed a contract that contained a “Choice of Law and Venue” Provision (the “Choice of Law Provision”).  Id.  The Choice of Law Provision stated that any disputes related to the SPG program would “be handled individually without any class action” and would have exclusive jurisdiction in the State of New York.  Id.  Therefore, the defendant asserted that Rule 23(a)’s “typicality” requirement was not met because the class members were SPG program members, and the class contained both members and non-members of the SPG program.  Id.

The District Court agreed with the defendant, and redefined all classes to include only SPG members.  Id. *3.  However, by doing so, every putative class member was “someone who had purportedly given up the right to engaged in just such class litigation.”  In Re Marriott Int’l, Inc., 78 F.4th 677, 682-83 (4th Cir. 2023).  The District Court “did not further consider the import of the class waiver on its certification decision,” id. at 683, and granted certification as to three of the plaintiffs’ Rule 23(b)(3) and four Rule 23(c)(4) damages classes.  In Re Marriott Int’l, Inc., 341 F.R.D 128, 172-73 (D. Md. 2022).  Subsequently, the defendants appealed.

On appeal, the Fourth Circuit held that the District Court erred in failing to address whether or not the SPG members agreed to bar the certification of a class action.  In Re Marriott International, 2023 WL 8247865, at *3.  The Fourth Circuit vacated the class certification and remanded to the District Court to consider the effect of the Choice of Law Provision on the class.  Id.

The District Court’s Decision

The District Court concluded that (i) the defendants waived the Choice of Law Provision, and (ii) absent an arbitration agreement, Rules 23 and 42 prevailed over the parties’ Choice of Law Provision Id. Accordingly, the District Court reinstated the previously-certified classes.

First, the District Court analyzed the plaintiff’s position that the defendants waived the Choice of Law Provision.  It opined that “[w]aiver is the intentional relinquishment or abandonment of a known right.”  United States v. Olano, 507 U.S. 725, 733 (1993) (internal citations omitted).  The District Court reasoned that a party “waives a contractual provision when the party takes actions that are inconsistent with the provision.” In Re Marriott International, 2023 WL 8247865, at *4.  The District Court held the defense “clearly waived 5/6” of its Choice of Law Provision because the defendants: (1) requested consolidation into an MDL, which “is the antithesis of handling each claim on an individual basis”; (2) stated that “separately litigating each of the 59 related actions” would “offer no benefit” and heighten the burdens of all involved; and (3) stated venue was proper in Maryland and requested that the MDL be assigned to Maryland, which was inconsistent with the New York Choice of Law Provision.  Id.  As such, the District Court found that the defendants waived the Choice of Law Provision and all terms contained therein.  Id.

Second, the District Court held that it was not required to enforce the Choice of Law Provision outside of a binding arbitration provision.  Id. *8.  The Choice of Law Provision was “patently distinguishable” from “all of the reported cases on contractual class action waivers” because it did not have a mandatory arbitration clause.  Id. *7.  When parties agree to resolve their case in a non-judicial forum such as arbitration, “the Federal Rules have limited applicability”.  Id. *6. However, in the absence of such an agreement, the District Court opined that “[t]he parties cannot by agreement dictate that a district court must ignore the provisions of Rule 23 of the Federal Rules of Civil Procedure.”  Id. *7.  The District Court found that Rule 23 and Rule 42 do not “call for consideration of the parties’ preferences,” but rather “furtherance of efficient judicial administration.”  Id.  Thus, the District Court was not required to enforce the Choice of Law Provision, and held that the plaintiffs did not waive their right to bring a class action claim.  Id. *8 *(quoting Martrano v. Quizno’s Franchise Co., 2009 WL 1704469, at *20-21 (W.D. Pa. June 15, 2009)).

Implications For Companies

Companies should proactively review their arbitration agreements and class or collective action waivers to ensure that contractually agreed-upon terms can and will be imposed by a court.  Additionally, when faced with multiple nationwide claims, companies should analyze their case defense strategy and make an informed decision before filing and/or joining an MDL.  Finally, as part of any acquisition, companies should have their own data security team thoroughly vet and approve the acquired company’s security infrastructure prior to, or shortly after, the acquisition.