Class Action Defense

December 6, 2023 by Gerald L. Maatman, Jr.

The 2023-2024 Judicial Hellholes Report From The American Tort Reform Association Ranks The Worst Jurisdictions For Defendants

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

Duane Morris Takeaways: Annually the American Tort Reform Association (“ATRA”) publishes its “Judicial Hellholes Report,” focusing on litigation issues and identifying jurisdictions likely to have unfair and biased administration of justice. The ATRA recently published its 2023-2024 Report and for the first time in the history of the report, the ATRA ranked two jurisdictions at the top of the list – both Georgia and Pennsylvania, specifically the Pennsylvania Supreme Court and the Philadelphia Court of Common Pleas – as the most challenging venues for defendants. Readers can find a copy here and the executive summary here.

The Judicial Hellholes Report is an important read for corporate counsel facing class action litigation because it identifies jurisdictions that are generally unfavorable to defendants. The Report defines a “judicial hellhole” as a jurisdiction where judges in civil cases systematically apply laws and procedures in an unfair and unbalanced manner, generally to the disadvantage of defendants. The Report is a “must read” for anyone litigating class actions and making decisions about venue strategy.

The 2023 Hellholes

In its recently released annual report, the ATRA identified 9 jurisdictions on its 2023 hellholes list – which, in order, include, tied at number one: (1) Georgia – (the defending “champion” from the top of the 2022 list, with massive verdicts bogging down business and more liability expanding decisions issued by the Georgia Supreme Court); and (1) Pennsylvania (especially in the Philadelphia Court of Common Pleas and the Supreme Court of Pennsylvania); (3) Cook County (as a “no-injury required” hotspot and lawsuits stemming from the Illinois Biometric Information Privacy Act); (4) California (with Proposition 65 lawsuits thriving and a huge overall volume of lawsuits, in addition to Private Attorney General Act (PAGA) litigation, lemon law litigation, and environmental hotbed); (5) New York (with “no-injury” consumer class action lawsuits and massive verdicts); (6) South Carolina (particularly in asbestos litigation, with problems related to bias against corporate defendants, unwarranted sanctions, low evidentiary requirements, liability expanding rulings, unfair trials, severe verdicts, and a willingness to overturn or modify jury verdicts to benefit plaintiffs); (7) Lansing, Michigan (particularly due to liability-expanding decisions by the Michigan Supreme Court and pro-plaintiff legislative activity); (8) Louisiana (with long-running costal litigation and insurance claim fraud litigation); and (9) St. Louis, Missouri (with focuses on junk science in the courtrooms and nuclear verdicts).

According to the ATRA’s analysis, these venues are less than optimal for corporate defendants and often attract plaintiffs’ attorneys, particularly for the filing of class action lawsuits. Therefore, corporate counsel should take particular care if they encounter a class action lawsuit filed in one of these venues.

The 2024 “Watch List”

The ATRA also included 3 jurisdictions on its “watch list,” including Kentucky (the ATRA noted that Kentucky, as a newcomer to the list, has been reported as having some lawyers resorting to unethical measures to secure wins); New Jersey (with a powerful trial bar), and Texas (particularly the Court of Appeals for the Fifth District, which the ATRA opined has developed a reputation for being pro-plaintiff and pro-liability expansion).

In addition, the ATRA recognized that several jurisdictions made significant positive improvements this year, highlighting decisions by the New Hampshire and Delaware Supreme Courts, which rejected no-injury medical monitoring claims, the New Jersey Appellate Court, which discarded improper expert testimony, the Texas Supreme Court, which rejected manipulation of juries, and the West Virginia Supreme Court, which placed reasonable limits on employer liability.

In addition to court actions, the ATRA also stated that nine state legislatures enacted positive civil justice reforms this year.

Implications For Employers

The Judicial Hellholes Report often mirrors the experience of companies in high-stakes class actions, as Georgia, Pennsylvania, Illinois, California, New York, South Carolina, Michigan, Louisiana, and Missouri are among the leading states where plaintiffs’ lawyers file class actions. These jurisdictions are linked by class certification standards that are more plaintiff-friendly and more generous damages recovery possibilities under state laws.

December 6, 2023 by Gerald L. Maatman, Jr.

Maryland Federal Court Reinstates Class Certification In Data Breach Class Action

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.

December 5, 2023 by Gerald L. Maatman, Jr.

Illinois Supreme Court Endorses Broad Interpretation Of The BIPA’s “Health Care Exception”

By Gerald L. Maatman, Jr. and Tyler Zmick

Duane Morris Takeaways: In the latest ruling in the biometric privacy class action space, the Illinois Supreme Court embraced a broad reading of the “health care exception” in the Illinois Biometric Information Privacy Act (“BIPA”) in Mosby v. Ingalls Memorial Hospital, 2023 IL 129081 (Ill. Nov. 30, 2023). The Illinois Supreme Court held that the statute excludes from its scope data collected in two separate and distinct scenarios: (1) “information captured from a patient in a health care setting”; and (2) information collected “for health care treatment, payment, or operations under the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA).” Unlike clause (1), the Supreme Court held that the exception in clause (2) is not limited to data obtained from patients and serves to exclude information that originates from any source.

The Mosby ruling is welcome news to BIPA defendants and companies operating in the health care space. In the wake of the decision, courts likely will be asked to define the exact contours of the BIPA’s broadened “health care exception” in cases presenting facts that are less obviously tied to health care treatment, payment, or operations compared to the facts at issue in Mosby.

Case Background

The Plaintiffs in Mosby were nurses who claimed that their hospital-employers required them to use a fingerprint-based medication-dispensing system to verify their identities. Plaintiffs sued their employers and the company that distributed the medication-dispensing system, alleging that Defendants violated §§ 15(a), 15(b), and 15(d) of the BIPA by using the medical-station scanning device to collect, use, and/or store their “finger-scan data” without complying with the BIPA’s notice-and-consent requirements and by disclosing their purported biometric data to third parties without first obtaining their consent.

Defendants moved to dismiss in the trial court, arguing that the claims failed because Plaintiffs’ data was specifically excluded from the BIPA’s scope under § 10 of the statute, which states that “[b]iometric identifiers do not include information captured from a patient in a health care setting or information collected, used, or stored for health care treatment, payment, or operations under [the HIPAA].” 740 ILCS 14/10. Defendants argued that the latter clause applied in that Plaintiffs’ fingerprints had been used in connection with Plaintiffs providing medicine to patients, meaning their fingerprints were “collected, used, or stored for health care treatment, payment, or operations under [the HIPAA].” Id.

The trial court denied Defendants’ motions. It ruled that § 10’s “health care exception” was limited to patient information protected under the HIPAA and that the exclusion does not extend to information collected from health care workers.

On appeal, the First District of the Illinois Appellate Court affirmed the denial of Defendants’ motions to dismiss. Echoing the trial court, the Appellate Court determined that the biometric data of health care workers is not excluded from the BIPA’s scope and that the relevant provision of § 10 excluded from the BIPA’s protections “only patient biometric information.” Mosby, 2023 IL 129081, ¶ 16; see id. ¶ 17 (“[T]he appellate court held that ‘the plain language of the statute does not exclude employee information from the [BIPA’s] protections because they are neither (1) patients nor (2) protected under HIPAA.’”) (citation omitted).

Appellate Court Judge Mikva dissented from the majority’s opinion. Judge Mikva opined that the legislature meant to exclude from the BIPA’s scope the biometric data of health care workers “where that information is collected, used, or stored for health care treatment, payment, or operations, as those functions are defined by the HIPAA.” Id. ¶ 19 (citation omitted). Judge Mikva expressed the view that the first part of § 10’s “health care exception” excludes from the BIPA’s coverage information from a particular source (i.e., patients in a health care setting) and that the second part excludes information used for particular purposes (i.e., health care treatment, payment, or operations), regardless of the source of that information.

The Illinois Supreme Court’s Decision

On further appeal, the Illinois Supreme Court agreed with Appellate Court Judge Mikva’s dissent, unanimously holding that the BIPA’s exclusion for “information collected, used, or stored for health care treatment, payment, or operations under [the HIPAA]” can apply to the biometric data of health care workers (not only patients).

The Supreme Court determined that the relevant sentence of § 10 excludes from the definition of “biometric identifier” data that may be collected in two distinct (rather than overlapping) scenarios – namely, biometric identifiers do not include (i) information captured from a patient in a health care setting or (ii) information collected, used, or stored for health care treatment, payment, or operations under HIPAA. Id. ¶ 37 (“[T]he phrase prior to the ‘or’ and the phrase following the ‘or’ connotes two different alternatives. The Illinois legislature used the disjunctive ‘or’ to separate the [BIPA’s] reference to ‘information captured from a patient in a health care setting’ from ‘information collected, used, or stored for health care treatment, payment, or operations under [the HIPAA].’ Pursuant to its plain language, information is exempt from the [BIPA] if it satisfies either statutory criterion.”) (internal citations omitted).

The Supreme Court agreed with Defendants that the two categories of information are different because information excluded under the first clause originates from the patient, whereas information excluded under the second clause may originate from any source. Regarding the second clause, the Supreme Court observed that the Illinois legislature borrowed the phrase “health care treatment, payment, and operations” from the federal HIPAA regulations. Accordingly, the Supreme Court determined that “the legislature was directing readers to the HIPAA to discern the meaning of those terms,” which meanings “relate to activities performed by the health care provider – not by the patient.” Id. ¶ 52.

Thus, the Supreme Court held that a health care worker’s data used to permit access to medication-dispensing stations for patient care qualifies as “information collected, used, or stored for health care treatment, payment, or operations under [the HIPAA]” and is exempt from the statute’s scope.

Implications Of The Decision

After the recent slew of plaintiff-friendly BIPA decisions issued by both state and federal courts, the Illinois Supreme Court’s decision in Mosby comes as welcome news for companies facing privacy-related class actions – particularly those operating in the health care space.

Relying on Mosby, defendants will likely add the BIPA’s “health care exception” to their arsenal of defenses in a wider array of cases moving forward. Importantly, for purposes of the second “HIPAA prong” of the statute’s “health care exception,” federal HIPAA regulations govern the definitions of the terms “health care treatment,” “payment,” and “operations.” Given that the regulatory definitions of those terms are broad, see 45 C.F.R. § 160.103; id. § 164.501, defendants will likely test the breadth of the exception in future cases presenting facts that may be less obviously tied to health care treatment, health care payment, and/or health care operations compared to the facts at issue in Mosby.

December 5, 2023 by Gerald L. Maatman, Jr.

The Duane Morris Class Action Review – 2024 Is Coming Soon!

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

Duane Morris Takeaway: Happy Holidays to our loyal readers of the Duane Morris Class Action Defense Blog! Our elves are busy at work this holiday season in wrapping up our start-of-the-year kick-off publication – the Duane Morris Class Action Review – 2024. We will go to press in early January, and launch the 2024 Review from our blog and our book launch website.

The 2024 Review builds on the success of last year’s edition. At over 500 pages, the 2024 Review has more analysis than ever before, with an analysis of over 1,100 class certification rulings from federal and state courts over this past year. The Review will be available for download as an E-Book too.

The Review is a one-of-its-kind publication analyzing class action trends, decisions, and settlements in all areas impacting Corporate America, including the substantive areas of antitrust, appeals, the Class Action Fairness Act, civil rights, consumer fraud, data breach, EEOC-Initiated and government enforcement litigation, employment discrimination, the Employee Retirement Income Security Act of 1974, the Fair Credit Reporting Act, wage & hour class and collective actions, labor, privacy, procedural issues, product liability and mass torts, the Racketeer Influenced and Corrupt Organizations Act, securities fraud, state court class actions, the Telephone Consumer Protection Act, and the Worker Adjustment and Retraining Notification Act. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, and the top class action settlement in each area. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2024.

We are humbled and honored by the recent review of the Duane Morris Class Action Review – 2023 by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said that “The Review must-have resource for in-depth analysis of class actions in general and workplace litigation in particular.” EPLiC continued that “The Duane Morris Class Action Review analyzes class action trends, decisions, and settlements in all areas impacting Corporate America. The Review also highlights key rulings on attorneys’ fee awards in class actions, motions granting and denying sanctions in class actions, and the top class action settlement in a myriad of substantive areas. Finally, the Review provides insight as to what companies and corporate counsel can expect to see in 2023 in terms of filings by the plaintiffs’ class action bar.”

We look forward to providing this year’s edition of the Review to all of our loyal readers in early January. Stay tuned and Happy Holidays!

December 3, 2023 by Class Action Defense

Judge Recommends Scam Class Action Settlement Site Be Shut Down

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

Duane Morris Takeaways: U.S. Magistrate Judge Joseph Marutollo’s recent report and recommendation – a novel order in the context of class action settlements – in the proceeding captioned In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Case No. 1:05-MD-01720, Doc. No. 9009 (E.D.N.Y. Nov. 28, 2023), highlights the risks associated with class action claims websites and the potential for bad actors to create fraudulent web pages to mislead claimants. Corporate defendants should take care to monitor online activity following the creation of a court-authorized settlement website in order to protect any class-wide settlement and claimants against potential fraudsters. Indeed, in a world where scammers are becoming increasingly more sophisticated through the use of technology, class action settlement websites may be the next frontier in the battle against cybercrime.

Background

After 15 years of contentious litigation, Visa and MasterCard settled a putative class action for $5.6 billion to resolve allegations that the credit card companies violated federal and state antitrust laws resulting in over 12 million merchants allegedly paying excessive fees to Visa and MasterCard. As is typical in class actions of this size, a court-authorized settlement website was created to accept claim submissions and provide claimants with details regarding the settlement agreement.

On November 28, 2023, Magistrate Judge Marutollo recommended that the Court order the website “settlement2023.org” (and any affiliate website) be taken down, as the operators of the Settlement2023.org entity, who remain unknown, were attempting to deceive putative class members into using the site through various schemes, including using fake voicemails from rap artist Snoop Dogg to convince users of its validity. According to Magistrate Judge Marutollo’s report, although the scam website ceased operation on November 21, 2023, it was unclear if other webpages remained open under different domain names that were also operated by the Settlement2023.org entity.

The Magistrate Judge’s Recommendation And Report

In addition to recommending the Court issue an order to take down of any and all remaining webpages that attempt to mimic the court-authorized settlement website, Magistrate Judge Marutollo also recommended that the owners and operators of the Settlement2023.org entity be required to identify themselves, and provide a list of all class members that signed up for its services, as well as give notice to would-be customers that any contract they entered into with the entity was now void. Finally, the Magistrate Judge requested that the Court be notified of any newly-detected websites and recommended that the court-authorized website be updated to alert those who may have been deceived by the settlement2023.org website.

Implications

Cybercriminals continue to capitalize on advances in technology to launch misinformation campaigns, and large class action settlements are in the cross-hairs of this emerging threat. Therefore, it is imperative that plaintiff and defendant-side representatives alike remain vigilant to protect class members from deception and safeguard the integrity of the class action settlement process.

December 1, 2023 by Class Action Defense

The Class Action Weekly Wire – Episode 40: Global Developments In Artificial Intelligence Regulations

U.S. And U.K. Cybersecurity Agencies Announce International Agreement Addressing AI Safety

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Brandon Spurlock with their discussion of the latest developments on the regulatory front of artificial intelligence.

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: Hello, loyal blog readers! Welcome to the Class Action Weekly Wire. Today our guest is my colleague, Brandon Spurlock.

Brandon Spurlock: Hey Jerry, it’s great to be here. Thanks.

Jerry: Today, we’re talking about the most recent developments on a global basis for regulatory endeavors insofar as artificial intelligence is concerned. I know that, Brandon, you’re a thought leader in that space, so wanted to get your feedback on what corporations should know about the global move towards regulation of artificial intelligence.

Brandon: Absolutely, Jerry. Well, this agreement was unveiled to the public just this past weekend – November 26 to be exact. It’s titled “Guidelines for Secure AI System Development.” This initiative was led by the U.K.’s National Cyber Security Centre, and it was developed in conjunction with the U.S.’ Cybersecurity and Infrastructure Security Agency. These guidelines focus on how to keep artificial intelligence safe from rogue actors. The U.S., Britain, Germany, are among 18 countries that signed on to the new guidelines laid out in this 20-page document. Now, this is a non-binding agreement that lays out general recommendations, such as monitoring AI systems for abuse, elevating data protection and vetting software suppliers. One thing to note is that the framework does not address the challenging questions around data sources for AI models or appropriate use of AI tools.

Jerry: Well it certainly seems to be a milestone on the road to regulation of AI from a comparative standpoint. Where is the United States when it comes to regulation of artificial intelligence, as compared to other countries or major jurisdictions?

Brandon: Really good question, Jerry. Many countries are putting their resources together, as well as independently positioning themselves to demonstrate leadership when it comes to embracing AI – while also cautioning its security, privacy, and market risk. So countries like France, Germany, Italy – they recently reached an agreement on how artificial intelligence regulations should be structured around “mandatory self-regulation through codes of conduct.” So what does this mean? It’s focused on how these AI systems are designed to produce a broad range of outputs. The European Commission, the European Parliament, and the EU Council are negotiating how the bloc should position itself on this particular topic.

Even last month, when we examined President Biden’s executive order on artificial intelligence, that publication from the White House further provides businesses with the in-depth roadmap of how the U.S. federal government’s regulatory goals regarding AI are developing.

Jerry: The evolution of artificial intelligence is certainly uppermost in the mind of most corporate counsel, and its impact on litigation – and in particular, the class action world – is real and palpable and with us. So thank you for your thoughts and analysis, Brandon, and we’ll see you next week on the Class Action Weekly Wire.

Brandon: Thanks, Jerry.

November 24, 2023 by Gerald L. Maatman, Jr.

Report From Montreal: What A Comparative Analysis Of ESG Class Action Litigation May Teach USA-Based Companies

By Gerald L. Maatman, Jr.

Duane Morris Takeaways: USA-based companies are experiencing a deluge of class action litigation. Part of the increase is related to ESG-related claims (“Environmental, Social, and Governance”) involving environmental justice, product advertising, employment and DEI, corporate social responsibility, and investment practices. At the National Conference on Class Actions 2023 by BLG and the Quebec Bar Association in Montreal, Jerry Maatman of the Duane Morris Class Action Defense Group provided commentary on the state of U.S. class action litigation and how Asian, European, and U.S.-based corporations should be “looking around the corner” to ready themselves for new class action theories advancing ESG-related claims..

The National Conference on Class Actions in Montreal – with a robust two day agenda and roster of speakers from Canada, Europe, and Asia – examined diverse issues on cutting-edge class actions on a global basis. Subjects included the phenomenon of the “continuous evolution” of class action theories; securities fraud class action theories; collective, opt-in and opt-out representative actions in Canada and Europe; cross-jurisdictional class actions; and the dawn of ESG class actions filed by NGO’s, consumers, workers, and advocacy groups.

I had the privilege of speaking in Montreal on the current state of U.S. class action litigation, its impact on the global economy and litigation in non-U.S. jurisdictions, and the future of ESG-related class-wide litigation in America.

The plaintiffs’ class action bar in the United States is exceedingly innovative and in constant pursuit of “the next big then” insofar as potential liability is concerned for acts and omissions of Corporate America. Environmental, Social, and Governance issues – known as “ESG” – each of the verticals within ESG are topics on the mind of leading plaintiffs’ class action litigators. As ESG-related issues evolve and become increasingly more important to corporate stakeholders, class action litigation against companies is inevitable and has already begun to take shape. Factors driving these class actions include the new “social inflation” concepts coming out to the COVID-19 pandemic, as well as social movements coalescing around climate change, technological disruptions, and social justice.

The Class Action Context

In 2022, the plaintiffs’ class action bar filed, litigated, and settled class actions at a breathtaking pace. The aggregate totals of the top ten class action settlements – in areas as diverse as mass torts, consumer fraud, antitrust, civil rights, securities fraud, privacy, and employment-related claims – reached the highest historical totals in the history of American jurisprudence. Class actions and government enforcement litigation spiked to over $63 billion in settlement totals. As analyzed in our Duane Morris Class Action Review, the totals included $50.32 billion for products liability and mass tort, $8.5 billion for consumer fraud, $3.7 billion for antitrust, $3.25 billion for securities fraud, and $1.3 billion for civil rights. While the exact totals are not in yet for 2023, aggregate settlement numbers are nearly as high over the past 11 months.

As “success begets success’ in this litigation space, the plaintiffs’ bar is focused on areas of opportunity for litigation targets. ESG-related areas are a prime area of risk.

The ESG Context

Corporate ESG programs is in a state of constant evolution. Early iterations were heavily focused on corporate social responsibility (or “CSR”), with companies sponsoring initiatives that were intended to benefit their communities. They entailed things like employee volunteering, youth training, and charitable contributions as well as internal programs like recycling and employee affinity groups. These efforts were not particularly controversial.

In recent years, ESG programs have become more extensive and more deeply integrated with companies’ core business strategies, including strategies for avoiding risks, such as those presented by employment discrimination claims, the impacts of climate change, supply chain accountability, and cybersecurity and privacy. Companies and studies have increasingly framed ESG programs as contributing to shareholder value.

As ESG programs become larger and more integrated into a company’s business, so do the risks of attracting attention from regulators and private litigants.

Class Actions Are Coming From Multiple Quarters

While class action litigation can emanate from many sources, four areas in particular are of importance in the ESG space.

Shareholders: Lawsuits by shareholders regarding ESG matters are accelerating. Examples include claims that their stock holdings have lost value as a result of false disclosures about issues like sexual harassment allegations involving key executives, cybersecurity incidents, or environmental disasters. Even absent a stock drop, some shareholders have brought successful derivative suits focused on ESG issues. Of recent note, employees of corporations incorporated in Delaware who serve in officer roles may be sued for breach of the duty of oversight in the particular area over which they have responsibility, including oversight over workplace harassment policies. In its ruling in In Re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-CV-324 (Del. Ch. Jan. 25, 2023), the Delaware Court of Chancery determined that like directors, officers are subject to oversight claims. The ruling expands the scope of the rule established in the case of In Re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), which recognized the duty of oversight for directors. The decision will likely result in a flurry of litigation activity by the plaintiffs’ bar, as new cases will be filed alleging that officers in corporations who were responsible for overseeing human resource functions can be held liable for failing to properly oversee investigations of workplace misconduct such as sexual harassment.

Vendors and Business Partners: As companies face increasing demands to address ESG issues in their operations and throughout their supply chains, ESG requirements in commercial contracts are increasing in prevalence. Requirements imposed on vendors, suppliers, and partners – to ensure their operations do not introduce ESG risks (e.g., by using forced or child labor or employing unsustainable environmental practices) are becoming regular staples in a commercial context. In addition, as more companies report greenhouse gas emissions – and may soon be required by the SEC to report on them – they increasingly require companies in their supply chain to provide information about their own emissions. Furthermore, if the SEC’s proposed cybersecurity disclosure rules are enacted, companies also may require increased reporting regarding cybersecurity from vendors and others. These actions – and disclosures – provide fodder for “greenwashing” claims, where consumers claim that company statements about environmental or social aspects of their products are false and misleading. The theories in these class actions are expanding by encompassing allegations involving product statements as well as a company’s general statements about its commitment to sustainability.

State Consumer Protection and Employment Laws: The patchwork quilt of state laws create myriad causes of action for alleged false product advertising and other misleading marketing statements. The plaintiffs’ bar also has invoked statutes like the Trafficking Victims Protection Reauthorization Act to bring claims against companies for alleged failures to stop alleged human rights violations in their supply chains. These claims typically allege that the existence of company policies and programs aimed at helping end human rights violations are themselves a basis for liability. In making human capital management disclosures a part of ESG efforts (including whether to disclose numeric metrics or targets based on race or gender), companies may find themselves in a difficult place with respect to potential liability stemming from stated commitments to diversity and inclusion. On the one hand, companies that fail to achieve numeric targets they articulate (e.g., a certain percent or increase in diversity among management) may subject themselves to claims of having overpromised when discussing their future plans. Conversely, employers that achieve such targets may face “reverse discrimination” claims alleging that they abandoned race-based or gender-neutral employment practices to hit numbers set forth in their public statements.

Government Enforcement Litigation: Federal, state and local government regulators have taken multiple actions against companies based on their alleged participation in climate change, investments inconsistent with ESG goals, or alleged illegal activities. For instance, in 2019, the U.S. Department of Justice investigated auto companies for possible antitrust violations for agreeing with California to adopt emissions standards more restrictive than those established by federal law. While the investigation did not reveal wrongdoing, it underscores the creativity that proponents and opponents of ESG efforts can employ.

Implications For Corporate Decision-Makers

The creation, content, and implementation of ESG programs carries increasing litigation risks for corporations but it is unlikely that ESG programs will diminish is size or scale in the coming years given increased focus by Fortune 100s and 500s and increased regulation at the federal and state levels.

Sound planning, comprehensive legal compliance, and systematic auditing of ESG programs should be a key focus and process of all entities beginning or continuing their ESG journey. As more and more companies adopt some level of corporative ESG strategy planning, compliance and auditing are some of the key imperatives in this new world of exposure to diminish and limit one’s exposure.

November 17, 2023 by Class Action Defense

The Class Action Weekly Wire – Episode 39: PAGA Faces Potential Transformation In California Supreme Court Decision

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Eden Anderson with their discussion of a PAGA case currently before the California Supreme Court weighing whether trial courts have inherent authority to ensure that PAGA claims will be manageable at trial, and to strike or narrow such claims if they cannot be managed appropriately.

Episode Transcript

Jerry Maatman: Thank you for being here, loyal blog readers, in our next installment of the Class Action Weekly wire. I’m very excited to join my colleague, Eden Anderson, who is on the show today to talk about new California developments.

Eden Anderson: Thanks, Jerry. I’m very happy to be here.

Jerry: Great. A significant decision in the PAGA area was argued this past month in the California Supreme Court. And I know you’re following all things PAGA and all things arbitration on behalf of employers, and are very much in the forefront of thought leadership in this area. Could you tell our audience a bit about the case and what it means?

Eden: Yes, the Estrada, et al v. Royalty Carpet Mills case. There the plaintiff Jorge Estrada filed a putative class and PAGA action against his former employer asserting meal period violations under California law. The employer manufactured carpets and had employees working at a number of different locations and a number of different positions. The court initially certified two classes of workers from two different production facilities – 157 employees in total – and the claims were tried to the bench. The judge ultimately to decertified one of the two classes. The judge found there were too many individualized issues to support class treatment for that group, and as to the PAGA claim for that group, the judge deemed it not manageable, and dismissed it. Mr. Estrada appealed, and he argued that PAGA claims have no manageability requirement, and the Court of Appeal agreed with him; it reasoned that class action requirements don’t apply to PAGA actions, and therefore the manageability requirement that is rooted in class action procedure does not apply. And at the same time the Court of Appeal acknowledged that the difficulty that employers face, and trial courts as well with PAGA claims involving hundreds or thousands of employees, but it concluded that dismissal for lack of manageability just isn’t a tool that trial courts can utilize.

Jerry: I know there are a range of approaches that trial courts and appellate courts have undertaken when it comes to managing or adjudicating a PAGA action. Is there a split in authority that the California Supreme Court is going to be debating and looking at in terms of its ultimate ruling?

Eden: Yes, that’s correct. The holding in Estrada is contrary to the holding in Wesson v. Staples, where the trial court struck a PAGA claim as unmanageable, and the Court of Appeal affirmed. The claims at issue in Wesson involved the alleged misclassification of 345 store managers. The employer’s exemption affirmative defense turned on individualized issues as to each manager’s performance of exempt versus non-exempt tasks, which varied based on a number of factors including store size, sales volume, staffing levels, labor budgets, store hours, customer traffic, all of which varied across the stores. The split in authority prompted the California Supreme Court to grant review in Estrada, but not Wesson. The Court of Appeal there determined that they had properly been dismissed for lack of manageability.

Jerry: I know the case was argued on November 8, and the stakes are quite high. It’s a vexing area for employers. It’s a challenging area for judges and lawyers. What were your takeaways from the oral argument, and what employers ought to know about the issues that were argued over that day before the California Supreme Court?

Eden: Overall, it was an uplifting oral argument for employers, which, as you know, can be a little bit unusual out here. On the downside, several justices, including justices Liu and Jenkins, express some skepticism about whether a trial court’s inherent powers allow it to outright strike or dismiss an entire PAGA action for lack of manageability. Justice Liu commented that permitting trial courts such wide-ranging power could shortchange the PAGA statute, unless there’s an overriding constitutional interest. On that point several justices acknowledged that an employer has a due process right to present evidence to support its affirmative defenses, and that in certain cases that evidence might require a series of mini trials over a period of years and wholly consume a trial court’s resources. Justice Kruger asked questions of Estrada’s counsel about the impracticability of requiring trial courts to consume years of time and resources in that manner. Justice Groban also expressed concern about a PAGA case, for example, where you have multiple labor code violations alleged, hundreds or even thousands of employees at issue, different work sites, different types of employees ranging from janitors to accountants, and he asked why, in such a case a trial court could not just limit the case to the accountants only, and other justices raised similar concerns. Chief Justice Guerrero asked Estrada’s counsel why the answer shouldn’t just be that trial courts have this broad discretion and that it’s just something that’s going to be subject to appellate review.

Jerry: It’s often said that California is the toughest venue in the United States to be an employer and litigate cases in courtrooms there. I suspect the answer is a little more nuanced, since every case is different. But given your expertise in this area and your thought leadership, do you have any prognostications for employers as to the outcome of the Estrada case and the California Supreme Court?

Eden: Yeah, given the constellation of comments from the justices, the court may hold that trial courts have an inherent authority to protect an employer’s due process rights, and that such power necessarily encompasses the right to gauge the manageability of PAGA claims, and to narrow them down as to whether that authority includes outright dismissal of an entire PAGA case. Employers are going to have to wait and see – a decision has to issue within 90 days, so we will soon know the answer.

Jerry: Well, in following the dockets of filings in all the states as we do, I think the number one case being filed these days by the plaintiffs’ bar are PAGA representative actions. So this particular decision certainly has the potential to be a game changer in the landscape of legal liability, especially in California. Well, thank you so much, Eden, and thank you to our loyal blog listeners for another edition and participation in our Class Action Weekly Wire.

Eden: Thank you for having me, Jerry, and thank you listeners.

November 15, 2023November 15, 2023 by Gerald L. Maatman, Jr.

Illinois Appellate Court Denies Cell Phone Retailer’s Second Attempt To Arbitrate Class Action Privacy Claims

By Gerald L. Maatman, Jr. and Tyler Zmick

Duane Morris Takeaways: In Ipina v. TCC Wireless, 2023 IL App (1st) 220547-U (Nov. 9, 2023), the First District of the Illinois Appellate Court held that T-Mobile retailer TCC Wireless was barred from enforcing an arbitration clause in the plaintiff’s employment agreement based on TCC’s actions in an earlier-filed privacy class action it settled. The Court determined that TCC was collaterally estopped from compelling the plaintiff’s claims to arbitration because TCC had unsuccessfully moved to send nearly identical claims to arbitration in the earlier-filed case. In doing so, the Illinois Appellate Court embraced a broad view of the circumstances in which “offensive” collateral estoppel is warranted in the class action context – that is, when a party may be prohibited from making an argument that was already raised and rejected in an earlier case.

Background

Plaintiff Stephanie Ipina alleged that while employed by Defendant TCC Wireless, she used a fingerprint-based timekeeping device to clock in and out of work. According to Plaintiff, her use of the timekeeping device resulted in TCC collecting her biometric data. Plaintiff claimed that TCC did not give her prior notice that it would be collecting her biometric data or obtain her prior written consent, and that TCC disclosed her data to TCC’s “payroll provider” without Plaintiff’s consent. Based on these allegations, Plaintiff asserted that TCC violated §§ 15(b) and 15(d) of the Illinois Biometric Information Privacy Act (the “BIPA”).

Plaintiff’s complaint also described a prior BIPA class action entitled Garcia v. TCC Wireless, which had been brought against TCC based on the same timekeeping device used by the Plaintiff in Ipina. In Garcia, TCC responded to the complaint by moving to compel arbitration pursuant to the plaintiff’s employment agreement, which stated that “[a]ny dispute arising out of or relating in any [way] to Employee’s employment with [TCC] . . . shall be resolved by binding arbitration . . . . except for (i) the institution of a civil action seeking equitable relief, or (ii) the institution of a civil action of a summary nature where the relief sought is predicated on there being no dispute with respect to any fact.” Id. ¶ 7.

The trial court in Garcia denied TCC’s motion to compel because TCC did not dispute that it collected employees’ biometric data without consent, and therefore the plaintiff’s claims were subject to the arbitration clause’s “carve-out” for claims “of a summary nature where no facts are in dispute.” Id. ¶ 23. The parties in Garcia later reached a class-wide settlement, after which TCC produced a list of 899 employees to include in the settlement class. Due to TCC “compil[ing] the class incorrectly,” however, Plaintiff Stephanie Ipina and other TCC employees were omitted from the list of class members eligible to receive payments in connection with the Garcia settlement.

In response to the complaint filed in the Ipina case (on behalf of Plaintiff and other individuals who should not have been omitted from the settlement class in Garcia), TCC moved to compel Plaintiff’s BIPA claims to arbitration based on the same employment agreement provision at issue in Garcia. In opposing the motion, Plaintiff argued that TCC was collaterally estopped from compelling arbitration based on TCC’s motion to compel arbitration having been denied in the Garcia action. The trial court granted TCC’s motion, however, reasoning that collateral estoppel did not apply because unlike in Garcia, in the present case TCC denied the factual allegations set forth in the complaint.

The Illinois Appellate Court’s Decision

On appeal, the Illinois Appellate Court reversed the trial court and held that TCC was collaterally estopped from enforcing the arbitration provision in Plaintiff’s employment agreement.

The Court noted that collateral estoppel is an equitable doctrine that “promotes fairness and judicial economy by preventing the relitigation of issues that have already been resolved in earlier actions.” Id. ¶ 21 (internal quotation marks and citation omitted). A party seeking to collaterally estop its opponent from raising a particular argument must show that (i) the current issue is identical to one that was resolved in a prior action; (ii) the court in the previous matter entered a final judgment on the merits; and (iii) the party against whom estoppel is being asserted was a party, or in privity with a party, to the prior litigation.

The Appellate Court summarized TCC’s litigation conduct in Garcia by noting that in that case, TCC did not dispute that it collected employees’ biometric data without consent; in light of that fact, the court in Garcia denied TCC’s motion to compel arbitration because of the arbitration provision’s exception for claims of a summary nature where no facts are in dispute; the court also denied TCC’s motion to reconsider the order denying TCC’s motion to compel arbitration, which denial TCC did not appeal; and the parties subsequently settled the case on a class-wide basis.

Based on these facts, and contrary to the trial court’s order, the Appellate Court ruled that Plaintiff had shown that the collateral estoppel elements were established, and that the trial court erred in not applying the doctrine.

First, the Appellate Court rejected TCC’s attempt to distinguish the present case from Garcia on the basis that unlike Garcia, in this case TCC had denied the allegations in Plaintiff’s complaint. According to the Appellate Court, this argument was contradicted by the position TCC had taken throughout the litigation, which is that Plaintiff should have been included in the Garcia settlement because TCC collected her biometric data before she signed a consent form. Because “TCC is bound by these admissions,” the Appellate Court ruled that the issue in the present case was identical to the issue resolved in Garcia because TCC had effectively conceded the plaintiffs’ factual allegations in both cases. Id. ¶ 25.

Second, the Appellate Court found that the trial court in Garcia entered a “final judgment on the merits” when it issued an order granting final settlement approval and dismissing the case with prejudice. Acknowledging the split in authority as to whether a settlement agreement qualifies as a “final order on the merits,” the Appellate Court sided with those decisions reflecting the proposition that “policy reasons counsel in favor of applying the doctrine of collateral estoppel to interlocutory judgments after settlement and dismissal with prejudice.” Id. ¶ 28 (citation omitted). As stated by the Appellate Court, “[c]ollateral estoppel exists to prevent litigants from doing exactly what TCC attempts. The doctrine’s purpose is to prevent a party from losing an issue on the merits, but then relitigating it before a different judge to procure the desired result.” Id. ¶ 29. Thus, the Appellate Court found that Plaintiff satisfied the second element.

Third, the Appellate Court held that the last collateral estoppel element was satisfied because TCC was the defendant in Garcia and was the same party against whom estoppel was being asserted in the present case. See id. ¶ 30 (“TCC was a party in Garcia, where it had the same incentive to fully litigate the enforcement of the arbitration clause (and in fact did so).”). However, the Appellate Court also noted that while both parties argued on appeal the issue of Plaintiff’s privity, that was is “irrelevant” because “the privity requirement only applies to the party against whom estoppel is asserted.” Id.

Implications For Corporations

Ipina is an important reminder that a litigation decision made in one case can have potentially significant consequences for that party in an entirely separate action. As illustrated in the Ipina case, a party’s position in one matter (e.g., a defendant conceding the truth of certain factual allegations in a complaint) can be used to limit (or entirely foreclose) that party’s ability to raise a defense in another matter – regardless of how strong the defense might be on the merits.

Thus, corporate defendants should always think about the “big picture” when deciding on a course of action to take in defending a lawsuit. They should consider not only how a defense position may impact that particular litigation, but also how the position could affect separate and seemingly unrelated actions involving the same (or a related) party, whether in cases that are currently pending or that may be filed in the future.

November 14, 2023 by Class Action Defense

New York Federal Court Denies Class Certification Due To Rule 23(a)(4) Adequacy Requirement Based On Employer’s Strong Defense To Plaintiff’s Individual Claims

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

Duane Morris Takeaways: Lack of adequacy of the named plaintiff in a class action can result in the denial of Rule 23 class certification in appropriate circumstances. In Cheng, et al. v. HSBC Bank USA, N.A., No. 20-CV-01551, 2023 U.S. Dist. LEXIS 161453 (E.D.N.Y. Sept. 12, 2023), the plaintiff filed a class action against the defendant alleging breach of contract and violation of § 349 of the New York General Business Law. The plaintiff filed a motion for class certification pursuant to Rule 23, and the court denied the motion on the basis of the bank’s strong defense to the plaintiff’s individual claims, which was was likely to impede the claims of other class members – even though the class members were not subject to the same defense. Employers in New York defending Rule 23 class actions should carefully consider the court’s reasoning and finding that plaintiff was an inadequate representative of his sought-after class. As shown in Cheng, potential defenses to a named plaintiff’s individual claims may be sufficient to defeat class certification.

Case Background

In Cheng, the plaintiff asserted that defendant HSBC Bank USA, N.A. (“HSBC” or “the bank”) failed to apply interest to plaintiff’s bank savings account deposits in a timely manner. After the plaintiff made a deposit with the bank on May 31, 2019, he alleged HSBC did not apply any interest on the account until June 4, 2019, four days after the deposit. Plaintiff claimed the bank also delayed applying interest on another deposit made on November 26, 2019 until November 29, 2019. In November and December 2019, the plaintiff made phone calls to HSBC to address the alleged delays in crediting interest to his deposits. Id. at *2. The bank responded that its policy was to not credit interest on account deposits until 3 to 5 business days after they were made. In the 2019 phone calls, the plaintiff indicated that he understood interest could not accrue until the bank had his “money on hand,” and that his concern was that the bank was failing to post the funds and initiate interest accrual upon receipt of those funds, despite the fact that it already had the “money on hand.” Id. at *3. In one of the 2019 phone calls, when a bank representative explained that plaintiff should have received an email indicating his deposit needed to pass through a clearing process before HSBC could post it to his account (and presumably, begin interest accrual), plaintiff responded, “I don’t care about the email…I look at when is my money withdraw[n] from other bank, when is the money posted to my HSBC account, okay? Don’t tell me HSBC takes five days to post the money after you receive it.” Id. at *4.

In plaintiff’s lawsuit, brought on behalf of himself and a prospective class of customers, plaintiff claimed HSBC was obligated to credit interest to his account on the day he initiated the deposit or transfer, rather than when the bank actually received the money. Plaintiff contended the class consisted of at least 100 members and the amount in controversy exceeded $5 million. Id. at *5. At his deposition, plaintiff attempted to contextualize the 2019 phone calls, but admitted that he had read HSBC’s Terms and Charges Disclosures (“Disclosures”) when opening his account. The Disclosures stated that “[i]nterest begins to accrue on the Business Day you deposit noncash items.” Noncash items are instruments like checks and wire transfers. Id. at *1-2.

Although the court previously had denied the bank’s motion for summary judgment on the claims by drawing all reasonable inferences in plaintiff’s favor, it expressed in that decision its view that the 2019 phone calls “strongly suggested” plaintiff shared HSBC’s understanding that the “you deposit” language in the Disclosures meant interest would begin to accrue once HSBC had cleared funds on hand, not when he initiated the deposit. Id. at *6. The court also opined that in the calls, plaintiff appeared to recognize HSBC could not apply interest until it was in receipt of his funds, and plaintiff told the bank multiple times that if the delay in accruing interest was due to a delay in receiving the funds, “that’s perfect” and “that’s fine.” Id.

The Court’s Opinion Denying Class Certification

In its decision denying class certification under Rule 23, the court set forth Rule 23’s threshold requirements for class certification – numerosity, commonality, typicality, and adequacy – and confirmed plaintiff bears the burden of establishing each element. Id. at *8. The court pointed specifically to the adequacy requirement of Rule 23(a)(4), which focuses on the fitness of purported class representative to competently litigate the case on behalf of absent class members, and reiterated that the interests of the named plaintiff cannot be antagonistic to those of the rest of the class. Id.

The court found that plaintiff faced “serious obstacles to recovery on his individual claims,” and that plaintiff’s statements made in the 2019 phone calls were compelling evidence he understood that he would not begin accruing interest until the bank had his cash on hand. Id. at *10. The court reasoned that in his class certification motion, plaintiff now alleged that the bank misled him to believe that interest would begin accruing as soon as he initiated a deposit, which was contradicted by the statements made by plaintiff in the 2019 phone calls. The court determined that the 2019 phone calls, plaintiff’s conflicting allegations about whether he read the Disclosures, and his prior relevant litigation and banking history were all likely to weaken his claims, and that there was a strong argument that plaintiff “knew precisely what he was doing and that he and HSBC shared the same understanding about what the key term ‘you deposit’ meant.” Id. at *11.

As a result, the court determined that the plaintiff could not be an adequate representative of the class he sought to represent because he acknowledged in the 2019 phone calls that he understood the key terms of the bank’s policies. The court opined there was a strong argument that the plaintiff understood the defendant’s terms, but was attempting to represent a class based on the bank’s alleged misconduct. Id. at *10-11. The court ruled that it was “not comfortable” making plaintiff the representative of all other class members’ claims and allowing him to bind hundreds of absent class members to plaintiff’s story, conditioning their recovery on how well plaintiff’s story held up. Id. at *12. For these reasons, the court denied plaintiff’s motion for class certification under Rule 23(a)(4).

Implications For Employers

The court’s decision denying class certification based on its finding that plaintiff failed to meet Rule 23’s adequacy threshold requirement is a potentially helpful roadmap for employers facing class action claims. The court’s analysis centered on an individualized determination of plaintiff’s particular factual background in ultimately holding it was uncomfortable the plaintiff could adequately represent hundreds of absent class members based on his own contradictory and inconsistent testimony and evidence. Businesses defending class actions should consider each named plaintiff’s individual circumstances and factual background for issues that could preclude their ability to adequately represent class members. The decision confirms that in the appropriate circumstances, courts will not hesitate to deny class certification to named plaintiffs on such grounds.