Class Action Defense

February 9, 2024 by Class Action Defense

Third Circuit Breathes New Life Into EEOC Enforcement Lawsuit

By Gerald L. Maatman, Jr., Elisabeth Bassani, and Danielle Dwyer

Duane Morris Takeaways: On February 1, 2024, in EEOC v. Center One, LLC, Nos. 22-2943 & 22-2944 (3d Cir. Feb. 1, 2024), the Third Circuit held that a District Court erred when it granted summary judgment for an employer and dismissed a case brought by the U.S. Equal Employment Opportunity Commission (EEOC) on behalf of a Jewish employee who claimed he was forced to quit after his employer denied him time off for religious holidays. The decision is a reminder of employers’ obligations to reasonably accommodate employees’ sincerely held religious beliefs, practices or observances.

Background Of The Case

The EEOC, on behalf of Demetrius Ford, alleged that Ford’s employer, Center One, discriminated against him based on his religion and constructively discharged him in violation of Title VII because it refused to accommodate his request for time off for high holidays. Specifically, the EEOC asserted that Center One assigned Ford “demeritorious attendance points” because he missed work to observe Rosh Hashanah and subsequently refused to permit him time off for future high holidays without an “official” letter from his congregation attesting to his need to be absent. Id. at 5. Center One also scheduled a meeting with Ford to discuss his attendance issues on Yom Kippur, despite acknowledging it knew it was a high holy day in Judaism. Ford submitted an email exchange with a leader from a congregation in response to Center One’s request for documentation, but Center One told Ford that it needed something more “official.” Id. Ford eventually tendered his resignation, explaining that he was not able to obtain an “official clergy letter.” Id. at 6.

The District Court granted summary judgment to Center One, holding that a mere accrual of attendance points for missing work did not constitute an adverse employment action, and that Ford was not constructively discharged.

The Third Circuit’s Ruling

On appeal, the Third Circuit unanimously vacated the District Court’s ruling and remanded for further proceedings. It held that the EEOC and Ford presented enough evidence for a jury to decide if Ford was constructively discharged. Notably, the Third Circuit agreed with the District Court in finding that accruing attendance points — without any other changes to the compensation, terms, conditions, or privileges of employment — did not constitute an adverse employment action.

But, because there was no dispute that Center One required Ford to work on Rosh Hashanah and Yom Kippur and that Center One asked Ford for an “official” letter from his congregation attesting to his need to take off on high holidays, the Third Circuit opined that a jury could find that Center One’s conduct created an intolerable work environment. It specifically noted that a requirement for “official clergy verification was at odds with the EEOC’s Guidance on religious discrimination, as well as our precedent.” Id. at 8. The Third Circuit also cautioned that “[t]he doctrine of constructive discharge does not require an employee who is seeking religious accommodation to either violate the tenets of his faith or suffer the indignity and emotional discomfort of awaiting his inevitable termination.” Id.

Implications For Employers

The ruling in EEOC v. Center One LLC reminds employers that they need to reasonably accommodate an employee’s sincerely held religious beliefs, practices, or observances. Such accommodations are required unless an employer can show that the accommodation would create an undue hardship. The decison also cautions employers that while they can request documentation in support of an accommodation, they cannot require an official letter from a clergy member, spiritual leader, or other congregant.

February 9, 2024 by Gerald L. Maatman, Jr.

Colorado Federal Court Rules That The EEOC May Seek Back Pay Claims In ADA Lawsuit Against Trucking Company

By Gerald L. Maatman, Jr., Jennifer A. Riley, and George J. Schaller

Duane Morris Takeaways: In Equal Employment Opportunity Commission v. Western Distributing Co., No. 1:16-CV-01727, 2024 U.S. Dist. LEXIS 17225 (D. Colo. Jan. 31, 2024), Judge William J. Martinez of the U.S. District Court for the District of Colorado denied Defendant’s motion to dismiss for lack of standing and granted in part and denied in part Defendant’s motion to reconsider. Both post-trial motions involved disparate impact claims for qualified disabled employees concerning Defendant’s return-to-work policies. For employers facing EEOC-initiated lawsuits under the Americans with Disabilities Act of 1990 (the “ADA”) concerning employment policies, this decision is instructive in terms of the record evidence and filings courts will consider when deciding post-trial motions.

Case Background

On July 7, 2016, the EEOC filed suit on behalf of individuals with disabilities who worked for Defendant Western Distributing Co. (“Western”), a trucking company. The EEOC alleged Western’s employment policies disparately impacted these individuals under the ADA.

Western’s policies required employees to return to work on a “full-duty” basis after medical leave; required certain drivers to static push and pull 130 pounds of weight; and required certain drivers to be able to static push and pull 130 pounds of weight at 58 inches above the ground. Id. at 2.

In January 2023, a jury decided that Western’s “full-duty” policy had a disparate impact on disabled drivers. The post-trial motions resulted from the jury’s decision and Western moved to dismiss for lack of standing (“Standing Motion”) and moved to reconsider the Court’s denial of its yet-to-be-filed Rule 50(b) motion (“Motion to Reconsider”).

Standing Motion

The Court denied Western’s Standing Motion. In reviewing Western’s arguments, the Court determined Western put “great weight … on: (1) Senior U.S. District Judge Lewis T. Babcock’s Bifurcation Order; and (2) several statements by the EEOC’s counsel and the Court during the trial.” Id. at 2.

The Court found the obvious purpose of the bifurcation order was “(1) to give the parties a clear procedure for trying this action; and (2) to give the jury issues it can legally decide and reserve for the Court issues upon which it must rule.” Id. at 3. The Court reasoned that Judge Babcock’s bifurcation order “clearly contemplate[d] separate fact finding on ‘all individual claims and resultant damages’” and construing the order otherwise would be “unjust and border on absurd.” Id. at 4.

As to the statements during trial, the Court concluded that “back pay is viewed as equitable relief . . . to be decided by the judge.” Id. at 3. Therefore, the Court opined that it “will not ascribe to it the power to foreclose retrospective relief to which the EEOC and aggrieved individuals might be entitled. Nor will the Court rule such relief is improper simply because the EEOC did not present any damages evidence to a jury that could not award equitable back pay.” Id. at 4.

Motion to Reconsider

The Court granted Western’s request to reconsider arguments raised in its initial Rule 50(a) motion. The Court addressed Western’s arguments and denied each in full.

First, Western argued “the EEOC waived its Disparate Impact Claim to the extent it was based on the “full-duty policy” by failing to include this claim in its proposed “Challenge Standards” instruction. Id. at 5.

The Court determined its order one month before trial on the EEOC’s motion for partial summary judgment included both the “full-duty and maximum leave policies ‘[as] two of the thirteen discriminatory standards, criteria, or methods of administration that form the basis of the Disparate Impact Claim.’” Id. at 6. The Court also reasoned that Western was aware of the need to defend against the full-duty policy given the “significant body of evidence Western in fact prepared and marshaled to do just that.” Id.

Second, Western sought reconsideration concerning the adequacy of the evidence the EEOC presented at trial with respect to the existence of the full-duty policy and its disparate impact on qualified individuals with disabilities. Id. at 7. The Court denied Western’s request to re-weigh the evidence as the jury during trial “was attentive, engaged, and clearly thoughtful in issuing a narrow verdict.” Id. at 8. As to the disparate impact portion, the Court highlighted that this portion was “a retread of one of Western’s rejected summary judgment arguments.” Id. at 7. Therefore, the Court decided it would “not functionally reverse its own legal conclusions reached during the summary judgment phase.” Id. at 8.

For the same reasons, the Court denied Western’s third argument regarding statistical evidence of the 130-pound push/pull tests as a “re-tread” of an issue already decided on summary judgment. Id. Finally, the Court denied Western’s argument because it “[was] merely a short summary of the arguments raised in the Standing Motion.” Id.

Implications For Employers

Employers that are confronted with EEOC-initiated litigation involving employment policies should note that the Court relied heavily on the established record including prior issued orders, previous motions raising the same or similar arguments, and statements made by counsel at trial.

Further, from a practical standpoint, employers should carefully evaluate employment policies that may impact individuals with disabilities, as courts and juries are apt to scrutinize these materials.

February 9, 2024February 9, 2024 by Gerald L. Maatman, Jr.

Three Months After Class Certification Was Denied, New Mexico Federal Court Allows Sixteen FedEx Delivery Drivers To Intervene In A Class Action

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

Duane Morris Takeaways: In Martinez v. Fedex Ground Package System, Inc., No. 20-CV-1052, 2024 WL 418801 (D.N.M. Feb. 5, 2024), Judge Steven C. Yarbrough of the U.S. District Court for the District of New Mexico granted the intervention motion of 16 putative class members to join the lawsuit, The Court held that the plaintiff-intervenors met the standard for permissive intervention under Rule 24(b)(2). The Court’s decision in this case serves as an important reminder that Rule 23 and Rule 24 employ two separate commonality standards, and that class action cases are not automatically over when a court denies class certification.

Case Background

On October 12, 2020, Plaintiffs Fernandez Martinez and Shawnee Barrett (collectively, “Plaintiffs”) filed suit against Defendant Fedex Ground Package System, Inc. (“Fedex”), alleging that Fedex misclassified them as independent contractors and failed to pay them and putative class members overtime wages in violation of the New Mexico Minimum Wage Act (“NMMWA”).

On November 8, 2022, Plaintiffs moved to certify a class of all current or former New Mexico FedEx drivers who were paid a day rate without overtime compensation. On October 27, 2023, the Court denied Plaintiffs’ motion on the basis that Plaintiffs failed to demonstrate that common questions predominated over individualized issues pursuant to Rule 23(b)(3). Martinez v. FedEx Ground Package Sys., No. 20-CV-1052, 2023 WL 7114678 (D.N.M. Oct. 27, 2023).

On December 15, 2023, a group of 16 putative class members (the “Intervenors”) filed a motion to intervene as plaintiffs in the Lawsuit under Rule 24. Martinez, 2024 WL 418801, at 1. In their motion, the Intervenors alleged that they, like Plaintiffs, were “current or former New Mexico FedEx delivery drivers who were paid the same amount of money regardless of how many hours they worked in a day, resulting in no premium payment for overtime hours worked in violation of the [NMMWA].” Id.

The Court’s Decision

The Court granted the Intervenors’ motion. Id. at 2. It held that the Intervenors presented sufficient “questions of law and fact in common with the main action” under Rule 24. Id.

The Court noted that permissive intervention under Rule 24 is appropriate where (i) a federal statute creates a conditional right, or (ii) where the “intervenor has a claim or defense that shares with the main action a common question of law or fact.” Id.

In its opposition, FedEx asserted that because the Intervenors were employed by independent service providers (“ISPs”) to deliver packages on behalf of FedEx, and were not employed by FedEx directly, FedEx was not liable under the NMMWA for allegedly unpaid overtime. Id. Further, FedEx argued that the commonality requirement of Rule 24 was not met because the Court already found the absence of a common question when it denied class certification. Id.

While the Court recognized that it denied class certification under Rule 23’s commonality requirement, it was not persuaded by FedEx’s arguments. The Court underscored that under Rule 24, “rather than asking whether a question is susceptible to resolution ‘in one stroke,’ courts must ask whether intervenors present ‘questions of law and fact in common with’ the main action.” Id.

The Court concluded that the “existing plaintiffs and every intervenor [would] assert that certain common aspects of [FedEx’s] contracts with ISPs [made FedEx] a joint employer and, consequently, jointly liable for any [NMMWA] violations.” Id. Accordingly, the Court ruled that the Intervenors satisfied the Rule 24 commonality standard and were permitted to join the lawsuit as plaintiffs. Id. at 3.

Implications For Companies

The decision in Martinez v. FedEx serves as an important reminder for defendants that class actions are not necessarily over once class certification is denied – and some members of the putative class may take a run at joining the lawsuit per Rule 24. Additionally, it underscores the distinct commonality analyses under Rule 23 and Rule 24.

February 8, 2024February 8, 2024 by Class Action Defense

Thank You For A Successful Duane Morris Class Action Review – 2024 Book Launch Event!

Thank you to all our clients who attended the in-person book launch of the Duane Morris Class Action Review in Philadelphia last week, as well as our nationwide audience who participated via Zoom.

In case you missed it, watch a video of the live presentation below, featuring Duane Morris partners and editors of the Review, Jerry Maatman and Jennifer Riley, with Equal Employment Opportunity Commissioner Keith Sonderling.

Please also view pictures from the in person Book Launch event below. We would love to see you at the event in 2025!

Duane Morris Chairman and CEO Matt Taylor delivers opening remarks.

Duane Morris Vice Chairman Tom Servodidio introduces the panel.

Introducing the Duane Morris Class Action Review - 2024. — Introducing the Duane Morris Class Action Review – 2024.

Review editors and authors Jerry Maatman and Jennifer Riley, guest speaker Commissioner Keith Sonderling of the EEOC.

Commissioner Keith Sonderling of the EEOC.

February 8, 2024February 8, 2024 by Gerald L. Maatman, Jr.

Announcing The Duane Morris EEOC Litigation Review – 2024

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

Duane Morris Takeaways: Given the importance of compliance with workplace anti-discrimination laws for our clients, we are pleased to present the second edition of the Duane Morris EEOC Litigation Review – 2024. The EEOC Litigation Review – 2024 analyzes the EEOC’s enforcement lawsuit filings in 2023 and the significant legal decisions and trends impacting EEOC litigation for 2024. We hope that employers will benefit from this deep dive into how the EEOC’s priorities reveal themselves through litigation. Click here for a copy of the EEOC Litigation Review – 2024 eBook. You can also watch our recent discussion with EEOC Commissioner Keith Sonderling at our Duane Morris Class Action Review Book Launch here.

The Review explains the impact of the EEOC’s six enforcement priorities as outlined in its Strategic Enforcement Plan on employers’ business planning and how the direction of the Commission’s Plan should influence key employer decisions. The Review also contains a compilation of significant rulings decided in 2023 that impacted EEOC-initiated litigation and a list of the most significant settlements in EEOC cases in 2023.

We hope readers will enjoy this new publication. We will continue to update blog readers on any important EEOC developments, and look forward to sharing further thoughts and analysis in 2024!

February 5, 2024 by Class Action Defense

California Federal Court Grants Class Certification To iPhone App Purchasers

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

Duane Morris Takeaways: On February 2, 2024, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the District of Northern California granted Plaintiffs’ motion to certify a class of purchasers of one or more iOS applications or application licenses from Defendant Apple, Inc. (“Apple”) or who paid for one or more in-app purchases since July 10, 2008 in In Re Apple iPhone Antitrust Litigation, No. 4:11-CV-06714 (N.D. Cal. Feb. 2, 2024). The Court rejected defense arguments that class certification should be denied on the grounds that the model of Plaintiffs’ expert revealed millions of uninjured class members and that individual issues would predominate. Instead, the Court found that the model showed an estimated 7.9% of the class is uninjured and that with more complete data the model will be capable of showing antitrust impact on a class-wide basis.

In Re Apple iPhone Antitrust Litigation is required reading for any corporate counsel handling antitrust class action litigation involving claims by end consumers.

Case Background

Plaintiffs are purchasers of iPhone applications (apps), app subscriptions, and/or in-app content via the iPhone App Store. Defendant sells iPhones and requires app purchases to be made via the App Store. Plaintiffs claim that Apple charges App Store developers supracompetitive commissions that are passed on to consumers in the form of higher prices for app downloads, subscriptions, and in-app purchases. Plaintiffs assert claims under § 2 of the Sherman Act for unlawful monopolization and attempted monopolization of the iPhone applications aftermarket.

In a prior ruling, the Court denied class certification. It had concluded that Plaintiffs could not establish the predominance requirement under Rule 23(b)(3) because they had not demonstrated that damages from Apple’s alleged anticompetitive conduct could be proven on a class-wide basis. According to the Court, the methodology of Plaintiffs’ expert failed to reasonably ascertain how many class members were unharmed by the alleged conduct and individual questions would predominate.

The Court’s Class Certification Ruling

In response to the Court’s ruling, Plaintiffs narrowed their class definition to only include Apple account holders who have spent $10 or more on app or in-app content.

Using that new definition, Plaintiffs submitted revised and new expert reports estimating that the proposed class includes only 7.9% unharmed members and again moved for class certification under Rule 23(b)(3). Since the Court’s prior ruling, the Ninth Circuit also rejected the argument that “Rule 23 does not permit the certification of a class that potentially includes more than a de minimis number of uninjured class members.” Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods LLC, 31 F. 4th 651, 669 (9th Cir. 2022). According to the Court, the revised model can show the impact of Apple’s allegedly anticompetitive conduct across all class members, and once Apple produces the rest of its app transactional data, the model will be able to calculate the exact extent of injury suffered by each class member. Under Olean, the Court opined that Plaintiffs meet the predominance requirement.

Implications For Defendants

In Re iPhone Antitrust Litigation is another example of a federal court class certification decision turning on the existence of common, injury-producing conduct. The Court credited evidence that may be over inclusive at class certification stage of the proceedings, but is nonetheless capable of showing the impact of the allegedly anticompetitive conduct across all class members at trial.

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

California Federal Court Denies Class Certification Of COVID-19 Vaccine Mandate Claims

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

Duane Morris Takeaways: On January 28, 2024, in Chavez, et al. v. San Francisco Bay Area Rapid Transit District, No. 22-CV-06119, 2024 U.S. Dist. LEXIS 14785 (N.D. Cal. Jan. 28, 2024), Judge William Alsup of the U.S. District Court for the Northern District of California denied class certification for a failure to accommodate religious beliefs claim premised on a workplace COVID-19 vaccine mandate. Specifically, the Court held that the putative class was not certifiable as the class failed to meet Rule 23(b)(3)’s predominance and superiority requirements. The decision is a good roadmap for employers dealing with the continuing fall-out of the COVID-19 pandemic.

Background Of The Case

Defendant San Francisco Bay Area Rapid Transit (“BART”) implemented a workplace policy mandating that all employees needed a COVID-19 vaccination by December 21, 2021. Id. at 2. In response, BART received 188 requests for religious exemption and accommodation. Id. While some employees did not complete the exemption application process, 148 employees submitted applications to BART, noting varying belief systems such as “Christianity,” “Catholic,” “Islamism,” or even personal belief systems such as being “anti tyranny [sic].” Id. at 3. A panel of BART employees then reviewed each application individually and conducted further interviews with the applicants before deciding to grant or deny the request. Id. at 5.

Of the 148 completed applications, BART granted 70 religious exemptions and denied 78. Id. Those who were denied were given the option to either comply with the mandate, retire, voluntarily resign, or be terminated. Id. In total, 36 employees either retired, resigned, or were terminated. Id. BART considered accommodation for the 70 employees who were granted exemptions, but ultimately did not provide any accommodations as they could not “identify a reasonable accommodation that did not place an undue hardship on the District.” Id. at 6. Of the 70 applicants who were denied accommodation, 37 resigned, retired, or were terminated. Id. BART additionally received 25 requests for medical exemptions, and eight medical exemptions were granted, with those employees being placed on unpaid leave that only ended upon vaccination. Id.

Plaintiff Gabriel Chavez and 16 other named plaintiffs filed a class action complaint alleging that BART’s policy violated Title VII, the First Amendment right to free exercise of religion under 42 U.S.C. § 1983, and California’s Fair Employment and Housing Act (“FEHA”). Id. at 7. Plaintiff sought to certify a class pursuant to Rule 23(b)(3) composed of “all employees employed by BART who (1) have been ordered to submit to a COVID-19 vaccination, (2) have sincerely held religious beliefs which prevent them from taking the vaccine, (3) have submitted a request for a religious exemption, and (4) were denied a religious accommodation.” Id. Plaintiff also proposed a second, alternative class consisting of all employees employed by BART who “(1) have been ordered to submit to a COVID-19 vaccination, (2) have sincerely held religious beliefs which prevent them from taking the vaccine, (3) have submitted a request for religious exemption and religious accommodation, and (4) whose request for a religious exemption were denied.” Id.

The Court’s Ruling

The Court examined the class certification requirements under Rule 23(b)(3), which provide that a plaintiff must establish “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Id. at *8. The Court held that Plaintiffs’ proposed class, as well as the proposed alternative class, did not satisfy the predominance and superiority requirements, and denied Plaintiffs’ certification motion. Id. at 23.

First, the Court examined the requirement of common issues predominating over any questions affecting only individual members. Id. at 11-20. With respect to Plaintiffs’ Title VII and FEHA claims, the Court noted that whether or not an individual had a bona fide religious belief – a requirement for both claims – there were too many individual systems of belief to examine. Id. at 12. The Court held that nearly every named plaintiffs’ application contained a distinct system of belief, and any examination of whether or not a request rested on a “bona fide religious belief” would necessarily require an individual inquiry into each plaintiffs’ belief system. Id. The Court expressed doubt that the various written or interview responses of one plaintiff will have any evidentiary impact on the bona fide religious belief of the class as a whole. Id.

Next, the Court held that BART’s undue hardship showing required an individualized inquiry of factual issues. Id. The Court noted that the potential class members are drawn from a large diversity of jobs – over a dozen unique jobs – and that accommodations reasonably considered for a “train conductor’s request bear no relation to the job functions and reasonable accommodations BART must consider when evaluating the exemption request of a manager of technology programs, a fire protection worker, or a police officer, or a senior operations supervisor liaison.” Id. 13-14. Further, the Court found that the inclusion of some union employees in the putative class also required individualized inquiries as the union’s contracted-for-rights “grant impacted workers certain rights, such as seniority, that BART is not required to transgress upon.” Id. at 14. Moreover, the Court indicated that a significant portion of the class would not be impacted by an “undue hardship” analysis, as 78 of the proposed members were not even considered for accommodation. Id. at 15. The Court did acknowledge that some aspects of the undue hardship consideration may be more amenable to common proof, but in light of the putative class’s “job diversity,” it reasoned that any undue hardship analysis “cannot be understood without an interrogation of individual employees’ job duties.” Id. at 16.

As to the Free Exercise of Religion Claims, the Court determined that those claims could not satisfy the predominance requirement. In doing so, it noted that “the sincerity and religious nature of plaintiffs’ belief is . . . an individualized issue.” Id. at 20. The Court found that each of the plaintiffs cited a “myriad” of religious and of personal experiences, along with refusal due to “CDC VARS data and concerns regarding health consequences, the Organization of American States Declaration of Rights of Indigenous Peoples, Senate Bill 1383 and Senate Bill 1159, among others.” Id. The Court concluded that the need to determine whether plaintiffs have met the bona fide religious belief threshold required individualized inquiries, which ultimately foreclosed class certification. Id.

Finally, the Court found that the putative class did not satisfy Rule 23(b)(3)’s superiority requirement. The Court reasoned that class members have “significant interest in the individual control of their claims.” Id. at 21-22. As an example, it noted that two potential class members have already brought individual actions against BART, and that seventeen other employees had filed suit in a third case. Id. at 22. The Court held that “[p]utative class members’ demonstrated interest in bringing and controlling these various litigations further reflects the significant monetary and emotional stakes at issue, and counsels against certification.” Id. In closing, the Court noted that given “the wide range of individual issues and proof” there will also likely be difficulties in managing the class action. Id.

Implications For Employers

The ruling in Chavez, et al. v. San Francisco Bay Area Rapid Transit District confirms that the need for individualized inquiries is a strong impediment to certifying a class action premised on COVID-19 vaccine accommodation theories of liability. This ruling stresses the specific importance of these individualized inquiries in the context of religious accommodations, which have recently been the subject of significant litigation after many employers implemented COVID-19 vaccine mandates in the workplace

February 5, 2024 by Class Action Defense

Texas Federal Court Dismisses Video Privacy Protection Act Class Action Concerning Email Newsletter From University Of Texas

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

Duane Morris Takeaways: In Brown v. Learfield Communications, LLC, et al., No. 1:23-CV-00374, 2024 U.S. Dist. LEXIS 15587 (W.D. Tex. Jan. 29, 2024), Judge David A. Ezra of the U.S. District Court for the Western District of Texas granted Defendants Learfield Communications, LLC and Sidearm Sports, LLC’s Rule 12(b)(6) motion to dismiss Plaintiff’s Video Privacy Protection Act (VPPA) class claim. The Court held that Plaintiff failed to plead facts to support his claim under the VPPA because he did not allege that he was a subscriber to audio-visual goods or services themselves, just a newsletter that contained links to publicly-available content on The University of Texas’s website. Defendants in VPPA class actions can utilize this decision as a roadmap when preparing motions to dismiss.

Case Background

Defendants Learfield Communications, LLC and Sidearm Sports, LLC (collectively, “Defendants”) operated the University of Texas at Austin’s (“UT”) website (the “UT Website”). Id. at 2. The UT Website contains software that enables Facebook to track the activity of UT Website users on other websites. Id. Defendants invite UT Website visitors to subscribe to emailed newsletters. Id. at 3. The newsletters provide links to various videos, clips, and other content on the UT Website related to UT Athletics. Id. Plaintiff Adam Brown subscribes to UT’s emailed newsletter. Id.

In April 2023, Plaintiff filed a class action against Defendants UT, UT Athletics, Learfield, and Sidearm alleging that they violated the VPPA by purportedly exposing the subscribers’ personal identification information and gathering marketing data without consent. Id. at 4. In June 2023, UT and UT Athletics filed a motion to dismiss based on sovereign immunity. Id. at 2. The motion was granted in July. Id. In September, Defendants Learfield and Sidearm filed a motion to dismiss under 12(b)(1), 12(b)(6), and 12(b)(7). Id.

The Court’s Decision

The Court denied Defendants’ Rule 12(b)(1) and 12(b)(7) motions to dismiss. It held that neither Learfield or Sidearm was entitled to immunity as an “arm of the state,” and that neither UT or UT Athletics were indispensable parties to the lawsuit. Id. at 7-10.

The Court, however, granted Defendants’ Rule 12(b)(6) motion to dismiss on the basis that Plaintiff was not a “consumer” under the VPPA because he failed to allege a factual nexus between the subscription and Defendants’ allegedly actionable video content. Id. at 2, 19, 26.

To state a claim under the VPPA, the Court noted that a plaintiff must allege that a defendant “(1) is a video tape service provider; (2) who knowingly disclosed to any person; (3) personally identifiable information; (4) concerning any consumer.” Id. at 10-11; 18 U.S.C. 2710(b)(1). Under the VPPA, a “consumer” is “any renter, purchaser, or subscriber of goods or services from a video tape service provider.” 18 U.S.C. § 2710(a)(1).

The Court reasoned that the VPPA “only applies to consumers (including subscribers) of audio video services” because, when reading the term “consumer” in the full context of the VPPA, “a reasonable reader would understand the definition of ‘consumer’ to apply to a renter, purchaser or subscriber of audio-visual goods or services, and not goods or services writ large.” Id. at * 19 (emphasis original) (quoting Carter v. Scripps Networks, LLC, 2023 WL 3061858, at *6 (S.D.N.Y. Apr. 24, 2023)).

The Court concluded that Plaintiff was not a “consumer” under the VPPA because (i) the newsletter did not contain videos, just links to videos on the UT Website; and (ii) the linked videos were available for any member of the public to see on the UT Website, not just those who subscribed to the newsletter. Id. at 26-28. Accordingly, the Court ruled that Plaintiff was not a subscriber to audio-visual goods or services, just a newsletter. Id. at 28-29. Ultimately, because Plaintiff failed to allege facts to support a claim under the VPPA, the Court granted Defendants 12(b)(6) motion to dismiss. Id. at 29.

Implications For Companies

The decision in Brown v. Learfield serves as a roadmap for defendants in VPPA class actions to utilize when preparing motions to dismiss. This case is also important as it adds the Western District of Texas to a growing number of federal courts that strictly construe the VPPA to audio-visual materials, not links to publically-available videos in newsletters. See, e.g., Carter v. Scripps Networks, LLC, No. 22-CV-2031, 2023 WL 3061858, at *6 (S.D.N.Y. Apr. 24, 2023); Jefferson v. Healthline Media, Inc., No. 3:22-CV-05059, 2023 WL 3668522, at *3 (N.D. Cal. May 24, 2023); Gardener v. MeTV, No. 22-CV-5963, 2023 WL 4365901, at *4 (N.D. Ill. July 6, 2023).

February 2, 2024 by Class Action Defense

New York State Court Refuses To Dismiss Claims Alleging The NYDOL Closed Unpaid Wage Investigations Due To Improper Agency Rulemaking

By Gerald L. Maatman, Jr., Katelynn Gray, and Gregory S. Slotnick

Duane Morris Takeaways: On January 23, 2024, in Chen et al. v. Reardon, Index No. 908146-23, in the Supreme Court of the State of New York (Albany County), a judge denied a motion to dismiss filed by the New York Department of Labor (NYDOL) seeking dismissal of a lawsuit claiming the agency improperly closed wage theft investigations for home care aides by way of inappropriate rulemaking under New York’s State Administrative Procedures Act (NYSAPA). Specifically, in evaluating the NYDOL’s motion and giving the workers the benefit of every possible inference, the court held the NYDOL may have improperly engaged in formal rulemaking without abiding by all required prerequisites (such as public notice) in shutting down its investigations of the workers’ unpaid wage claims due to collective bargaining agreements that included mandatory arbitration. The judge concluded that a “reasonable view of the facts stated” describes the NYDOL’s application of a “fixed, general principle” of dismissing every complaint that was subject to mandatory arbitration (i.e., a NYDOL rule), rather than “ad hoc decisions” evaluating the individual facts and circumstances of each claim. Id. at 9.

The decision highlights a state court’s willingness to scrutinize a state agency’s “informal” broad interpretations of its own investigation procedures under state law, and ultimately provides allegedly aggrieved employees with reasonable means to challenge the agency’s actions.

Case Background

Five home care aides who provided live-in services to elderly and disabled patients claim they typically worked 24-hour shifts without ever receiving five hours of uninterrupted sleep or three hours of meal breaks. Id. at 2. The workers alleged that they were never paid for more than 13 hours of work for any such 24-hour shifts despite not receiving the required sleeping and meal break periods in alleged violation of the New York Labor Law (NYLL) and its “13-hour rule.” Id. After working these shifts for some time, the workers each filed their own complaint with the NYDOL, claiming their compensation structure violated the NYLL.

The NYDOL initially accepted the complaints and began investigating. However, when the NYDOL determined that the workers were all subject to mandatory arbitration through a collective bargaining agreement with their respective unions, who had filed grievances on their behalf, the NYDOL terminated each investigation. The NYDOL sent each worker a complaint closing letter stating “we understand other means are available for a resolution of your claims.” One NYDOL investigator explained to a worker that the DOL closed the case “following the advice of our counsel’s office. The [CBA] supersedes our authority in this case. There is no getting around it. The same is true in each case we have closed on this basis.” The NYDOL also issued a press release around the same time stating that it “may accept…cases [involving alleged violations of the 13-hour rule] if an employee is not covered by an arbitration clause.” Id.

In August 2023, the workers filed an Article 78 petition against the NYDOL, seeking that the NYDOL reopen the closed investigations of their claims. Id. at 2-3. The workers argued the NYDOL’s policy of closing the investigations was pursuant to a “rule” within the meaning of the NYSAPA and that the NYDOL failed to submit a notice of proposed rulemaking as required before adopting such a rule. They also claimed the NYDOL’s reliance on that rule before closing their cases was an error of law, that the NYDOL’s jurisdiction is not limited by private arbitration agreements such that termination of their investigations was an abuse of the NYDOL’s discretion. Id.

The NYDOL moved to dismiss the petition and claimed it must be dismissed because it fails to establish a right of mandamus relief and fails to state a claim under the NYSAPA. Id.

The Court’s Decision

The Court determined that in considering a motion to dismiss, the petition must be given a liberal construction, the petitioners must be afforded every possible favorable inference, and the motion should only be granted if there is no “reasonable view of the facts” that could entitle petitioners to relief. Id. at 4.

The NYDOL argued that it has discretionary authority to investigate employer-employee controversies, and that the Article 78 petition could not be used to compel it to engage in a discretionary act. Id. In addressing these positions, the Court found that if a petitioner prevails under either a mandamus to compel or a mandamus to review under New York law, the Court “may grant the petitioner the relief to which he is entitled.” Id. at 5. The Court further found that under appropriate circumstances, such relief could include an order that directs specified action by the respondent. Id. It then held that because the workers asserted various causes of action under state law and alleged that the NYDOL’s decisions to close their complaints were arbitrary and capricious, affected by errors of law, and abuses of discretion, a judgment in favor of the workers could appropriately require the NYDOL to revisit their complaints. Id. at 6-7.

As for the workers’ claims under the NYSAPA and the NYDOL’s potentially improper rulemaking, the NYDOL argued that its determination to decline to investigate the individual petitioners’ claims was specific to the facts and circumstances of the complaints and subsequent investigations, and not of “general applicability that implements or applies law.” Id. The Court opined that the NYSAPA requires the NYDOL to comply with certain procedural requirements before adopting any “rule” and that if the NYDOL engaged in formal rulemaking but did not comply with the procedural requirements of the NYSAPA, that regulatory action must be annulled. Id. at 6-7.

The NYDOL conceded that it did not follow the rulemaking procedures laid out in the NYSAPA, and the only question the Court needed to decide was whether the workers adequately pled that NYDOL’s decision to terminate its investigations was pursuant to a rule within the meaning of the NYSAPA. Id. at 7. It noted that a “rule” under the NYSAPA is a fixed, general principle applied without consideration of other relevant facts and circumstances, as distinguished from ad hoc decision-making based on individual facts and circumstances. Id.

The Court reasoned that “rules” direct what action should be taken regardless of individual circumstances and apply to future courses of conduct. It held that a “policy” dictating specific results without regards to other relevant circumstances is subject to the NYSAPA’s rulemaking requirements. Id. at 8.

In this case, the Court found that the workers had alleged that the NYDOL dismissed each of their complaints because their unions had entered into collective bargaining agreements with their employers that called for mandatory arbitration of their claims. Id. at 8-9. The workers also alleged that the NYDOL’s practice or policy of dismissing complaints on this basis was rigidly applied without regard to aides’ individualized circumstances or any mitigating factors. Id. The NYDOL investigator’s statement to one worker that the NYDOL was required to terminate all investigations of the workers due the collective bargaining agreements and that “there is no getting around it” was further evidence in support of the workers’ petition that the NYDOL engaged in improper rulemaking. Id. at 9.

The Court ultimately gave the workers’ petition a liberal construction, accepted its pleaded facts as true, and gave them the benefit of every possible inference, denying the NYDOL’s motion to dismiss the petition. Id. The Court determined that the workers’ petition sufficiently alleged the NYDOL’s application of a fixed, general principle of dismissing every complaint that was subject to a mandatory arbitration agreement as opposed to an “ad hoc decision” based on individual facts and circumstances. Id.

Implications For Businesses

The Chen decision illustrates that under appropriate circumstances, judges will not hesitate to question broadly-applicable “policies” of state agencies akin to “rules” under state law. As evidenced in this case, such scrutiny includes denying state agency motions to dismiss claims brought by aggrieved workers who feel an agency failed to follow its own procedural requirements in closing investigations into their claims. It also serves as a timely reminder for all employers of the ever-present possibility that state agencies may still investigate workers’ claims despite the existence and application of perfectly valid mandatory arbitration agreements. Employers should always remain cautious any time a state agency closes an investigation before completion due to the possibility such closure may later be found to have been improper by a court. Employer skepticism of broadly applicable state agency policies concerning workers’ claims that results in uniform outcomes is also warranted, especially when an agency confirms such position in press releases!

January 31, 2024January 31, 2024 by Class Action Defense

Report From New York City: U.S. Privacy Laws, A.I. Developments, And Bryan Cranston Take Center Stage At Legalweek 2024

By Alex W. Karasik

Duane Morris Takeaways: Privacy and data breach class action litigation are among the key issues that keep businesses and corporate counsel up at night. There was over $1 billion dollars procured in settlements and jury verdicts over the last year for these types of “bet-the-company” cases. At the ALM Law.com Legalweek 2024 conference in New York City, Partner Alex W. Karasik of the of the Duane Morris Class Action Defense Group was a panelist at the highly anticipated session, “Trends in US Data Privacy Laws and Enforcement.” The conference, which had over 6,000 attendees, produced excellent dialogues on how cutting-edge technologies can potentially lead to class action litigation. While A.I. took the main stage, along with an epic keynote speech from revered actor, Bryan Cranston, privacy and data-management issues were firmly on the radar of attendees.

Legalweek’s robust agenda covered a wide-range of global legal issues, with a prominent focus on the impact of technology and innovation. Some of the topics included artificial intelligence, data privacy, biometrics, automation, and cybersecurity. For businesses who deploy these technologies, or are thinking about doing so, this conference was informative in terms of both their utility and risk. The sessions provided valuable insight from a broad range of constituents, including in-house legal counsel, outside legal counsel, technology vendors, and other key players in the tech and legal industries.

I had the privilege of speaking about how data privacy laws and biometric technology have impacted the class action litigation space. Joining me on the panel was Christopher Wall (Special Counsel for Global Privacy and Forensics, and Data Protection Officer, HaystackID); Sonia Zeledon (Associate General Counsel Compliance, Risk, Ethics, and Privacy, The Hershey Company); and Pallab Chakraborty (Director of Compliance & Privacy, Xilinx). My esteemed fellow panelists and I discussed how the emerging patchwork of data privacy laws – both in the U.S. and globally – create compliance challenges for businesses. I provided insight on how high-stakes biometric privacy class action litigation in Illinois can serve as a roadmap for companies, as similar state statutes are emerging across the country. In addition, I explored how artificial intelligence tools used in the employee recruitment and hiring processes can further create potential legal risks. Finally, I shared my prediction of how the intersection of ESG and privacy litigation will continue to emerge as a hot area for class action litigation into 2024 and beyond.

Finally, and probably the most important update to many of you, Bryan Cranston’s keynote address was awesome! Covering the whole gamut of the emotional spectrum, Bryan was fascinating, inspirational, and hilarious. Some of the topics he discussed included the importance of family, the future impact of A.I. on the film industry, his mescal brand, and a passionate kiss during his first acting scene at 19. Bryan was a tough act follow!

Thank you to ALM Law.com, the Legalweek team, my fellow panelists, the inquisitive attendees, the media personnel, and all others who helped make this week special