By Gerald L. Maatman, Jr., Alex W. Karasik, and George J. Schaller
Duane Morris Takeaways: On October 30, 2023, President Biden signed an Executive Order (the “EO”) providing guidance for employers on the emerging utilization of Artificial Intelligence in the workplace. The EO establishes industry standards for AI security, innovation, and safety across significant employment sectors. Spanning over 100 pages, the robust EO endeavors to set parameters for responsible AI use, seeking to harness AI for good while mitigating risks associated with AI usage.
For businesses who utilize AI software in their employment decisions processes, the EO signifies a shift in beneficial versus harmful AI use and promotes a principled plan on advancing beneficial AI use.
Security, Innovation, And Safety With AI
AI’s significant developments in such a short period has required policymakers to keep up with the ever-changing AI landscape. President Biden’s EO manifests the White House’s commitment to AI use in a safe and secure manner. The EO also signals a commitment to promoting responsible innovation, competition, and collaboration to propel the United States to lead in AI and unlock the technology’s potential. At the same time, the EO focuses on AI implications for workplaces and problematic AI usage.
AI And Employment Issues
In the White House’s continued dedication to advance equity and civil rights, the EO purports to commit to supporting American workers. As AI creates new jobs and industries, the EO maintains that all workers should be included in benefiting from AI opportunities. As to the workplace, the EO asserts that responsible AI use will improve workers’ lives, positively impact human work, and help all to gain from technological innovation. Nonetheless, the EO opines that irresponsible AI use could undermine workers’ rights.
Further, protections to Americans who increasingly interact with AI are contemplated in the EO and signals that organizations will not be excused from legal obligations. Chief among these protections are continued enforcement of existing safeguards against fraud, unintended bias, discrimination, infringements on privacy, and other harms from AI. The White House seeks parity with the Federal Government in enforcement efforts and creating new appropriate safeguards against harmful AI use.
Significantly, within 180 days of issuing the EO, the Secretary of Labor is tasked with consulting with agencies and outside entities (including labor unions and workers) to develop and publish principles and best practices for employers to maximize AI’s potential benefits. In so doing, the key principles and best practices are to address job-displacement, labor standards and job quality, and employer’s AI-related collection and use of worker data. These principles and best practices further aim to prevent any harms to employees’ well-being.
Implications For Employers
This lengthy order should alert employers that AI is here to stay and the perils of AI use will change as the technology further augments the modern workforce.
As AI becomes more engrained in employment, employers should be mindful of the guidance developed in the EO and should stay up to date on any legislation that stems from AI usage. If businesses have not been paying attention to AI developments, now is the time to start.
Duane Morris Takeaways:On October 25, 2023, in the litigation of In Re Blue Cross Blue Shield Antitrust Litigation, MDL No. 2406 (11th Cir. Oct. 25, 2023), a three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit affirmed a district court’s order giving approval to the Blue Cross Blue Shield insurers’ $2.67 billion class action settlement resolving allegations of antitrust violations and other anti-competitive practices. The settlement, which was reached nearly three years ago, involved Blue Cross Blue Shield agreeing to a multi-billion dollar settlement fund and incorporating various reforms to resolve alleged anti-competitive business practices to harm competition. The Eleventh Circuit rejected various objections from corporate and individual objectors, including arguments that the settlement release would frustrate national employers from participating in the settlement and/or from making similar claims in the future, that the district court failed to scrutinize the allocation of the settlement proceeds among plaintiffs, and issues with the attorneys’ fees awarded. Instead, the Eleventh Circuit found that the district court did not abuse its discretion in approving the settlement.
The affirmation of the district court’s settlement approval in Blue Cross Blue Shield Antitrust Litigation is required reading for any corporate counsel considering settlement of antitrust class action litigation.
Case Background
The underlying multidistrict litigation began in 2012 when subscribers alleged that Blue Cross Blue Shield and member plans engaged in an anti-competitive market allocation and exclusive-dealing scheme to harm competition. The Blue Cross Blue Shield Association is a national insurance company. It owns and licenses its federal trademarks to local member plans and affiliated entities. According to the underlying complaint, subscribers who bought health insurance from Blue Cross Blue Shield alleged that Blue Cross Blue Shield allocated geographic territories, limited member plans’ competition by mandating a minimum percentage of business under the Blue Cross brand for each member doing business inside and outside their territories, restricted the right of member plans to be sold to companies outside the Association, and agreed to other ancillary restraints on competition. There was a separate track of litigation for claims brought by providers, but the case at bar does not involve that track. After the district court granted partial summary judgment for the subscribers in 2018, the parties reached a class action settlement that divided the subscriber-track plaintiffs into two groups: (i) a monetary damages class and (ii) an injunctive relief class.
Settlement Affirmed
Several parties appealed the district court’s approval of the class action settlement. Home Depot argued that the settlement release would, among other things, frustrate enforcement of the federal antitrust laws. The Eleventh Circuit rejected this argument because “[p]rivate enforcement is only one mechanism by which federal antitrust laws may be vindicated.” Id. at 13. The Eleventh Circuit noted that the “government may also enforce the antitrust laws against companies like Blue Cross” and intimated that DOJ or state attorneys general could investigate and bring claims against Blue Cross for anticompetitive conduct. Id. at 13-15. With respect to argument about the apportionment of settlement funds, the Eleventh Circuit opined that federal laws requires “equity, not equality.” Id. at 25. It therefore concluded that the approval of the class-wide settlement, though facially unequal, was not unfair and not an abuse of discretion.
Implications for Defendants in Class Actions
In Re Blue Cross Blue Shield Antitrust Litigation is one of the most significant antitrust class actions in recent years, and is arguably a historic resolution in terms of industry practices. From the early stages of the action, a court-appointed settlement master helped the parties in settlement negotiations, and the Eleventh Circuit referred to the settlement master’s view that the settlement at issue was reasonable.
Duane Morris Takeaway: In the first episode of the Duane Morris Business Development 360 podcast, show host Joe West, partner and Duane Morris Chief Diversity, Equity and Inclusion Officer, sits down with Jerry Maatman, partner and chair of Duane Morris Class Action Defense group, who shares the simple, fundamental approach to his thriving practice that has helped him become the preeminent class action defense attorney in the country.
Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Greg Tsonis with their discussion of a California wage & hour settlement for $155 million in a class action brought by correctional officers regarding overtime wages for pre- and post-shift tasks.
Jerry Maatman: Thank you for being here. Welcome to our Friday weekly podcast called the Class Action Weekly Wire. My name is Jerry Maatman I’m a partner at Duane Morris, and today we’re joined by my colleague Greg Tsonis who works in our employment group here in Chicago. Welcome, Greg.
Greg Tsonis: Thanks, Jerry. I’m very happy to be here.
Jerry: Today on our podcast we’re discussing wage and hour litigation. By my way of thinking – the number one risk that employers have throughout the United States. And there was a significant development this week with a rather substantial settlement involving correctional officers in California. Greg, can you give us a thumbnail description of what occurred ?
Greg: Absolutely, Jerry. So this case has actually been going on for 15 years. The classes in this case consisted of over 10,000 current and retired correctional sergeants and lieutenants that worked in the California correctional system. They filed suit against the state of California and its Department of Corrections and Rehabilitation alleging that they failed to pay overtime wages for preliminary and postliminary work activities – things like security searches, tool pickup, and pre-shift supervisory responsibilities – extending all the way back to 2005.
Jerry: Because of a more than 15-year litigation timeline – is that unusual in California or other parts of the country?
Greg: Very unusual, definitely not typical for a wage and hour class action alleging these types of claims to go on for 15 years.
Jerry: What were some of the terms of the settlement, and in your mind why is it significant for employers?
Greg: So in terms of the topline dollars, the party settled the claims for $155 million which included $46.5 million in attorney fees to three different law LA firms. Ultimately in the Court’s analysis of the settlement, it determined that the settlement was fair, reasonable, and adequate and found that it afforded members of the settlement classes meaningful relief under the circumstances, taking into consideration the risks and expenses of continued litigation. The Court also found that the fees requested were reasonable in part based on both the results obtained by class counsel as well as the issues and risk involved in the case, and the fact that the litigation had been going on for over 15 years. So a settlement this size – certainly employers should be aware of the potential risk for wage and hour class actions that have the potential for these sorts of nine figure settlements.
Jerry: In terms of a 15-year timeline, what were some of challenges confronted in the case involving uh class members who passed away, class members who went on to other jobs and were ex-employees, and then morale issues with the current employee population?
Greg: That’s exactly right Jerry. So thousands of the original class members have obviously retired at this point given the length of time, and one of the original named plaintiffs and even other unnamed class members have even passed away since the litigation commenced. In fact, indicated in their final settlement approval motion was that it would be a great benefit to the remaining class members to finalize the settlement at long last and you know get these individuals paid as soon as possible.
Jerry: $155 million is a monster huge settlement. I’ve studied this area for about 20 years and done comparative analyses of top 10 settlements in each calendar year, and I know that last year the top 10 wage and hour class action settlements topped out at about $545 million. Where does this year’s $155 million class action settlement rank this particular case?
Greg: Great question. So far this year this settlement ranks at number two in the wage and hour space of top settlements in 2023. It’s obviously a very significant settlement and could very well stay at the top of the range of recoveries for wage and hour cases this year.
Jerry: Well inevitably, like most often with taxes and rates go up, it sounds like 2023 is trending for a very, very big year and possibly higher settlement numbers than in years in the past.
Greg: I think that’s absolutely right Jerry.
Jerry: Well thank you for your thought leadership and joining us today, Greg< and providing your analysis of this particular noteworthy settlement .
Greg: Thanks for having me Jerry and thank you to all the listeners.
Jerry: That’s it for our Friday weekly podcast thanks for joining us here at the Duane Morris Class Action Blog.
Duane Morris Takeaways: USA-based companies are embracing use of artificial intelligence. At today’s Employment Practices Liability Insurance Conference in Chicago, Jerry Maatman of the Duane Morris Class Action Defense Group served as one of the co-hosts of the Conference, which addressed a broad range of topics on employment-related litigation and risk transfer strategies. Commissioner Keith Sonderling of the U.S. Equal Employment Opportunity Commission gave the keynote address at the Conference on the Legal Implications of Artificial Intelligence (“AI”) in the Workplace. Commission Sonderling shred his thoughts on the what, how, and why corporations should be “looking around the corner” to ready themselves for new class action theories and possible EEOC litigation over the use of AI.
This blog post summarizes some of the salient points from the keynote address. For corporate counsel and HR professionals, Commissioner Sonderling’s insights are invaluable.
The Context
AI in the workplace is ubiquitous and expanding rapidly. It is not only about replacing workers with robots, but instead is about the broader notion of using AI tools to assist with employment-related decisions. Commissioner Sonderling, more than any other EEOC official, has labored extensively in this area in terms of writing professional papers, giving speeches, and spearheading the Commission’s guidance in this area.
The Three Buckets Of AI
Commissioner Sonderling suggested that it is helpful to place AI-related questions into three buckets – including (i) the generative AI bucket; (ii) AI decision-making tools; and (iii) AI tools for employee monitoring and privacy.
Generative AI is starting to replace knowledge workers. That said, the decision to replace jobs may impact protected category groups disproportionally. Essentially, think of this as a high-tech RIF process. Plaintiffs’ class action lawyers or government enforcement litigators may assert that such decisions inevitably target older workers or less educated workers who are more diverse, especially if “last in are the first out” in terms of the replacement process. The bottom line is that there is lots of potential for disparate impact discrimination claims.
As to HR Departments using AI as decision-making tools, the challenge is the integrity of decision-making processes. Commissioner Sonderling asserted that the EEOC is focused on and concerned with AI bias and use of such tools to discriminate either intentionally or by disparate impact. This implicates both the design and type of use of the AI tools. He predicted that future lawsuits in this space would be more challenging and broader than ever before in terms of systemic lawsuits attacking an employer’s policies or practices.
Relative to AI tools for employee monitoring and privacy, Commission Sonderling suggested that states are getting into the mix by passing laws that regulate monitoring (e.g., Illinois through the Biometric Information Privacy Act). Federal legislation is likely years in the distance. Commissioner Sonderling opined that federal legislation may evolve in the copyright space as an initial first step.
The Takeaways For Employers
In his Q&A session at today’s Program, Commissioner Sonderling indicated that these evolving areas are likely to spike extensive litigation against employers in the future. He predicted that the plaintiffs’ class action bar will bring the lion’s share of the cases, as the EEOC has a limited budget and bandwidth to sue (e.g., in the 2023 Fiscal Year just ended on September 30, 2023, the Commission brought less than 150 lawsuits). He also opined that the EEOC will be focused on the employment decision at issue, so an employer’s reliance on the testing of an AI tool undertaken by a software vendor will not insulate an employer from potential liability for an allegedly discriminatory employment-related decision.
Beauty’s Biggest Makeover In 85 Years – MoCRA Delivers Regulatory Overhaul and Class Action Concerns For Cosmetics Companies
Duane Morris Takeaway:This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Kelly Bonner analyzing a new horizon on the consumer fraud landscape with their discussion of the Modernization of Cosmetics Regulation Act and its looming impact on class action litigation.
Jerry Maatman: Hello, loyal blog readers and welcome to our weekly installment of our Friday Podcast series called the Class Action Weekly Wire. Today I’m joined by my colleague Kelly Bonner, who is going to talk about some new developments in the cosmetics and fashion world. Welcome, Kelly.
Kelly Bonner: Thanks so much, Jerry. It’s great to be here.
Jerry: One of the areas that you’re a thought leader in is all things cosmetics and fashion. And I understand there’s a new law and regulation that we should be aware of in this space. What’s that all about?
Kelly: Absolutely. Well, thought leader – I’m going to have to tell my mom that one. But yes, the Modernization of Cosmetics Regulation Act, or MoCRA, as it’s colloquially referred to, was passed at the end of last year in December, and it is the most significant expansion of the FDA’s authority to regulate cosmetics since the passage of the Federal Food Drug and Cosmetics Act in 1938. So take a moment to think about it – that’s about 85 years.
MoCRA expands the federal government’s authority over cosmetics and creates significant new obligations for manufacturers, packers, and distributors of cosmetic products intended for sale in the United States. It has been referred to as a sea change, and it is hard to underestimate the impact MoCRA will have on cosmetics sold in the United States.
Until now, cosmetics have been regulated at the federal level under the Food Drug and Cosmetics Act, as well as the Fair Packaging and Labeling Act of 1966. Now with MoCRA, the FDA will be empowered to require facility registration, product listing, reporting of serious adverse events – with an expanded definition of what constitutes a serious adverse event, impose record keeping obligations, enforce mandatory recalls of cosmetic products, and regulations regarding good manufacturing practices.
Jerry: If you’re a corporate counsel, I would imagine that this is going to impact what you do on a day-to-day basis in terms of compliance. Do you have any views for our clients with respect to what they can expect on the compliance front?
Kelly: Yes, Jerry, so since MoCRA’s passage in December 2022, cosmetics companies and personal care companies have been grappling with how to approach MoCRA. MoCRA introduces significant changes for businesses operating in the cosmetics industry. For example, it requires any facility that manufactures or processes cosmetic products intended for sale in the United States to register with the FDA and to list products that are sold. The FDA anticipates that its portal for registration and product listing will go live sometime this month, and they’ve released certain guidance on it. But again, FDA is looking at an avalanche of information.
MoCRA also requires new labeling requirements in products, including providing contact information for serious adverse event reporting; it expands the definition of serious adverse event; it imposes greater record keeping obligations regarding product safety documenting and following up on serious adverse events. These are significant obligations that companies will need to comply with. And a lot of these obligations fall on what MoCRA identifies as a “responsible person.” It’s important to remember that MoCRA’s definition of a responsible person is not the same as a responsible person under EU regulations which were previously in existence and really kind of came up with this idea of what we’re responsible person. So it’s important to be versed in what the law requires, and how it is different from what the EU requires.
Jerry: Sounds to me like in the class action space this is going to create lots of regulations, lots of obligations, lots of duties when it comes to consumer fraud class actions. Do you see this new statute as impacting the class action world?
Kelly: Jerry, yes, this statute is going to impact the class action world. MoCRA, significantly, does not provide federal preemption for state consumer protection or products liability claims. Nor does it alter the existing regulatory framework with the relationship between the FTC – the Federal Trade Commission – and the FDA over what kinds of claims personal care products can make. So already, Jerry, what you’re seeing are plaintiffs bringing class action lawsuits over companies’ usage of terms like “clean,” “natural,” “non-toxic,” under fraud theories, or price premium theories. There may be additional opportunities for plaintiffs to obtain information through MoCRA’s required product ingredient listings and new disclosures that are required under MoCRA. Additionally, the record keeping and adverse event reporting aspect of MoCRA will provide plaintiffs with additional fodder to scrutinize the sufficiency of companies’ safety substantiation data and risk assessment processes to allege that products are not actually “safe” or “non-toxic” or “all natural” or do not contain synthetic ingredients. And so given the continued regulatory ambiguity of what constitutes sufficient safety substantiation, as well as what constitutes natural or clean beauty, companies should expect that their testing and compliance practices and their claims will be scrutinized, particularly in litigation discovery and by plaintiffs’ experts.
Jerry: I had the privilege last week of attending and presenting at a class action conference in London with European and Asian lawyers and in-house counsel, and the talk of the conference was on the emergence of consumer fraud claims throughout Europe and Asia. Do you see this new legislation is contributing to a resurgence of class actions in the consumer fraud area, and especially when it comes to what is known as “forever chemicals”?
Kelly: It’s so interesting that you should mention this, Jerry. Earlier this year I was interviewed by WWD because they wanted to talk about what they saw as a surge in consumer class actions bringing claims involving the beauty space, and they wondered what was really driving that. And you know, I think yes – you are really going to see MoCRA just providing a new ground for plaintiffs to pursue claims like these, particularly when it comes to PFAS. Now, what you refer to as PFAS – or perfluoroalkyl and polyfluoroalkyl substances – a class of chemicals that are sometimes intentionally added in cosmetics and personal care products to make it more spreadable essentially, or sometimes they’re unintentionally present, due to their presence in water that was used to prepare the cosmetic. So one of the key provisions of MoCRA charges the FDA to issue a report by the end of 2025 on the use of PFAS in cosmetics and potential human health effects. So obviously that report is going to be of great interest to the plaintiffs’ bar. Again, MoCRA also doesn’t provide any guidance for companies seeking to avoid class action claims for allegedly false or misleading claims and labeling. And so it really does provide new ground for an aggressive plaintiffs’ bar which will seek to use MoCRA’s obligations, and any perceived non-compliance, as the basis for state law claims.
Jerry: Kelly, thank you so much for your analysis of MoCRA and this new area. I think this is definitely not the last time we’ll be hearing about this issue, and it’ll be on the radar of corporate counsel. So thank you so much for lending your thought leadership today on our weekly podcast.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther
Duane Morris Takeaways:In Sgouros v. Transunion Corp., No. 1:14-CV-01850, 2023 WL 6690474 (N.D. Ill. Oct. 12, 2023), Judge Sharon Johnson Coleman of the U.S. District Court for the Northern District of Illinois denied Plaintiff’s motion for class certification in a Fair Credit Reporting Act (“FCRA”) case because Plaintiff failed to satisfy the Rule 23 requirements of commonality, adequacy of representation, and predominance. For entities facing FCRA class actions, this decision provides a concise explanation of what factors courts may consider with respect to commonality, adequacy of representation, and predominance in ruling on a motion for class certification.
Case Background
In this litigation, Defendants are collectively a well-known American consumer credit reporting agency. In 2013, Defendants offered a 3-in-1 Credit Report, Credit Score & Debt Analysis for consumers to purchase. The 3-in-1 report included a VantageScore, which, similar to a FICO score, looks at the information in a consumer’s credit report and generates a score to help lenders determine a consumer’s creditworthiness.
On June 10, 2013, Plaintiff purchased a 3-in-1 Credit Report and VantageScore from Defendants. Id. at 1. On the same day he purchased the report, Plaintiff alleged he was denied his desired auto loan because “the credit score the lender was provided was more than 100 points lower than the number contained in the VantageScore [Plaintiff] purchased.” Id.
Plaintiff later testified he knew the VantageScore was “useless” in September 2012, and failed to provide an explanation as to why he purchased a VantageScore nine months after such realization. Id. Plaintiff also testified that, contrary to the allegations in his complaint, he did not buy the score in advance of his search for an auto loan, and “he did not read the TransUnion website content that accompanied the purchase of his VantageScore.” Id.
In 2014, Plaintiff filed suit against Defendants alleging violations the Fair Credit Reporting Act (“FCRA”) and the Missouri Merchandising Practices Act (“MMPA”). Id. Plaintiff sought to represent a nationwide class and a Missouri-based class consisting of all persons “who purchased a VantageScore 1.0 Score through TransUnion Interactive’s website, or its predecessor website, during the period October 1, 2009, to September 1, 2015.” Id.
The Court’s Decision
The Court held that Plaintiff failed to establish commonality, adequacy of representation, and predominance for both the FCRA and MMPA claims under Rule 23(a) and (b), and denied class certification. Id. at 6.
Rule 23(a)(2) – Commonality
Plaintiffs must demonstrate that “there are questions of law or fact common to the class” to meet the commonality requirement of Rule 23(a)(2). Id. at 3. Importantly, Plaintiff is required to “demonstrate that the class members ‘have suffered the same injury,’” and that the claims are “capable of classwide resolution.” Id. (citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011)). Plaintiff asserted five questions to establish commonality. Id. Overall, the Court found Plaintiff’s commonality questions were insufficient because they “merely restate[d] the core elements of statutory violations” and did not demonstrate “to what extent the class members suffered a common injury.” Id.
Specifically as to the alleged FCRA violations, the “core liability dispute” was whether or not Defendants failed to supply the class “with a credit score . . . that assist[ed] the consumer in understanding the credit scoring assessment of the credit behavior of the consumer and predictions about the future credit behavior of the consumer.” Id. at 2. Plaintiff asserted that the VantageScore could not assist consumers in understanding their credit score assessment “because the VantageScore was not similar enough to a FICO score and or widely used by lenders.” Id. at 4. The Court disagreed. It held that because Plaintiff failed to present any argument or evidence “independent of a comparison to a FICO score,” Plaintiff’s common questions were not “capable of common answers,” and Rule 23(a)’s commonality requirement was not met. Id.
Similarly, “[b]ecause [Plaintiff’s] MMPA common question . . . [was] premised on the same logic as the FCRA claim,” the Court found that “commonality was not met.” Id.
Rule 23(a)(4) – Adequacy of Representation
A named plaintiff must also establish they can adequately serve as a class representative under Rule 23(a)(4). Id. A named plaintiff is inadequate if they “have serious credibility problems” or if they have “antagonistic of conflicting” interests to absent class members. Id. The Court held that Plaintiff was inadequate to represent the class on both the FCRA and MMPA claims due to Plaintiff’s questionable credibility and the inconsistencies in his deposition testimony. Id. at 4-5.
Rule 23(b)(3) – Predominance
The plaintiff must also demonstrate that the putative class claims “predominate over any questions affecting only individual members,” and are “sufficiently cohesive to warrant adjudication by representation.” Id. at 5. The Court found that the FCRA’s statutory requirement of assisting a consumer in understanding their credit score is “necessarily individualized given the inherently personal nature how credit scores are calculated and consumers’ personal behaviors,” and predominance was not met. Id.
Implications For Credit Reporting Companies
This ruling provides a straightforward analysis of what elements courts may find persuasive in ruling on a motion for class certification in an FCRA class action. It ought to be a required read for corporate counsel in any FCRA case.
By Gerald L. Maatman, Jr., Nicolette J. Zulli, and Zachary J. McCormack
Duane Morris Takeaways: In the massive proceeding known as In Re 3M Combat Arms Earplug Products Liability Litigation, No. 3:19-MD-0288 (N.D. Fla. Oct. 14, 2023), Judge M. Casey Rodgers of the U.S. District Court for the Northern District of Florida recently issued a novel order warning claimants and attorneys to beware of scammer phone calls asking for sensitive personal information. The Court advised that imposters pretending to be employees of Settlement Administrator Archer Systems LLC (“Archer Systems”) had called numerous claimants involved in the 3M Company (“3M”) Combat Arms Earplug (“CAE”) multi-district litigation (“MDL”) asking for social security numbers and date of births to confirm participation in the $6 billion settlement deal reached in August 2023. This fraudulent activity to retrieve personal information comes as the result of a Reddit post leaking the telephone number Archer Systems previously used to contact claimants. In response to this post, scammers spoofed outgoing calls to claimants using this number, thereby prompting the Court’s intervention. Judge Rodgers explained the Federal Bureau of Investigation (“FBI”) has been notified of the scam and advised claimants to be vigilant in shielding personal sensitive information from possible scammers. Judge Rodgers issued his order to encourage all claimants involved in the MDL to immediately contact their lawyer if contacted by someone claiming to be an Archer Systems employee. This swindle in the administrative process of a massive settlement presents as the latest iteration in the onslaught of cyber-attacks, data, and security breaches affecting consumers in recent times.
Case Background
3M, the Minnesota-based conglomerate operating in the fields of industry, worker safety, healthcare, and consumer goods, produces thousands of products under several brands. Between 2003 and 2015, 3M and subsidiary, Aearo Technologies Inc., manufactured and supplied United States military service members with CAE to protect them from loud military training and combat noises. The earplug’s short design did not provide enough coverage to certain users’ ear canals, failing to form a proper seal, and exposing military service members to harmfully loud noises. This resulted in numerous users reporting hearing loss and other ear issues. In 2016, Moldex-Metric, Inc., a California-based competitor, filed a whistleblower lawsuit against 3M, claiming that these defective earplugs did not meet the standards for protection required by the government. In 2018, 3M paid over $9 million to the Department of Justice, and shortly following this settlement with the government, numerous individualized lawsuits poured in from military service members. In 2019 these lawsuits were centralized in the Northern District of Florida, and in August 2023, after a court-ordered mediation, 3M reached a settlement with the 260,000 claimants who formed the largest MDL in the history of the United States.
In the wake of the August settlement, an unknown Reddit user leaked the telephone number Archer Systems used to contact claimants in the CAE settlement. Scammers quickly took action, disguising calls with the number and contacting claimants, to ask for social security numbers as well as birthdates, in an attempt to commit identity theft. Upon learning about the scheme, Judge Rodgers issued his cautionary order on October 14, 2023.
The Court’s Order
The order warns claimants “THIS IS A SCAM,” and that the FBI had been notified. The order further advises claimants on how to protect their sensitive personal information from potential scammers. It goes on to educate claimants on the fraudsters’ approach: that Archer Systems is not directly contacting claimants unsolicited, nor is it utilizing auto dialer or auto caller bots. Rather, that Archer Systems will only ask claimants for the last four digits of their social security number, not the entire number, and that claimants should not respond to any emails from anyone representing themselves as Archer Systems. The Court’s order discourages claimants from sharing information regarding this settlement on social media, since it appears the anonymous Reddit user obtained the Archer Systems telephone number through a claimant’s social media post. Finally, the order directs counsel to send a copy of the order to represented claimants, as well as advising the court clerk to forward the order to pro se claimants.
Legal Implications
Overall, the Court’s order comes in response to yet another fraudulent scheme to trick one of the most visible segments of the population – America’s veterans – into providing sensitive information that could result in identity theft, and ultimately, substantial financial and other damage. Scammers have utilized similar identity theft schemes in recent class action litigation, but are now exploiting posts on social news websites and forums – in this case, Reddit – to spur novel and inventive fraud schemes. Crafty scammers continue to profit off litigation covered by the media, tricking service members into surrendering sensitive information. In today’s world of social media and artificial intelligence, the online environment is riper than ever for unforeseen methods of fraudulent abuse. As illustrated by this case, modern scammers utilize a large “bag of tricks” to obtain sensitive information and employers should be prepared to review and adapt company policies and procedures incessantly to ensure effective protection of employee and company data.
Duane Morris Takeaway: Duane Morris partners Jerry Maatman, Jennifer Riley, and Alex Karasik host a panel discussion on the Equal Employment Opportunity Commission’s role in workplace discrimination law and recent developments in its enforcement and litigation strategies. The panelists identify key trends emerging from EEOC-initiated litigation and analyze the agency’s newly released strategic plan for fiscal years 2022-2026. This virtual program will empower corporate counsel, human resource professionals and business leaders with insights into the EEOC’s latest enforcement initiatives and provide strategies to minimize the risk of drawing the EEOC’s scrutiny.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and George J. Schaller
Duane Morris Takeaways:In Gur-Ravantab, et al. v. Georgetown University, No. 1:22-CV-01038, 2023 U.S. Dist. LEXIS 179493 (D.D.C. Oct. 5, 2023), Judge Trevor McFadden of the U.S. District Court for the District of Columbia deniedPlaintiffs’ motion for class certification on the grounds that the named Plaintiff was neither an adequate representative of the proposed class nor even a member of it.
For companies facing motions for certification motions in class actions, this decision is instructive in terms of considerations over the circumstances where a named plaintiff may fall short of satisfying the adequacy requirement under 23(a)(4).
Case Background
The named Plaintiff, Emir Gur-Ravanatab (“Plaintiff”), was a Class of 2020 graduate of Georgetown University. Id. at 1. In March 2020 of his final semester, the COVID-19 pandemic swept the nation. Id. at 2. Defendant, Georgetown University (“Defendant”), like many other schools, announced its transition to remote instruction for the rest of the Spring 2020 semester. Id.
Plaintiff alleged that he entered a contract with the Defendant, and under that contract, Plaintiff paid tuition in exchange for a guarantee of “in-person classroom learning and other services.” Id. at 1-2. Plaintiff alleged that there was a material difference in value between in-person and remote instruction. Therefore, despite Defendant’s transition to remote instruction, Plaintiff was never paid the difference. Id. at 2.
Plaintiff alleged breach of an express and implied contract claims, and an unjust enrichment claim. Id. Plaintiff sought compensatory and punitive damages, and restitution for his claims. Id. He also moved to certify a class on behalf of other students who similarly formed contracts with Defendant and were enrolled as undergraduate students “during the Spring 2020 semester who paid tuition and Mandatory Fees.” Id. Plaintiff alleged the class covered roughly 7,300 other current and former university students. Id.
The Court’s Decision
The Court denied Plaintiff’s motion for class certification. It held that the named Plaintiff was not an adequate representative of the class he proposed to certify nor even a member of the class. Id. at 1.
The Court reasoned the requirements of all class action suits are well-settled under Rule 23. Id. at 3. These requirements are known as “numerosity,” “commonality,” “typicality,” and “adequacy.” Id. at 4. Additionally, the Court relied on U.S. Supreme Court precedent that “has ‘repeatedly held’ that ‘a class representative must be a part of the class and possess the same interest and suffer the same injury as the class members.’” Id. After a plaintiff and his proposed class satisfy those requirements, then the plaintiff and the proposed class must fall within one of the three “buckets” of class actions enumerated under Rule 23(b). Id. at 4-5. The Court found Plaintiff “stumbled before reaching Rule 23(b)” as he was “both an inadequate representative of the proposed class, and a non-member” of it. Id. at 5.
The Court focused its ruling on the adequacy prong under Rule 23(a). The Court opined that “[Plaintiff] does not share the same interests as the other class members, and indeed, has a potential conflict of interest with them,” and therefore is “not an adequate class representative.” Id. at 7. Plaintiff suffered two problems, including: (i) Plaintiff’s mother is an employee of the university; and (ii) Plaintiff did not personally pay tuition or mandatory fees. Id. at 7-8. Therefore, the Court determined “he lack[ed] the kind of concrete stake in the outcome of th[e] litigation necessary to be the vigorous advocate the class is entitled to.”
As to potential class conflicts, Plaintiff’s mother was a Turkish language instructor with the university, and hence he had a close familial relationship to a person who may be harmed by a judgment against the university. Id. at 8. Further, Plaintiff testified in his deposition that his parents, including his mother “exert a ‘pretty major’ influence over his decisions.” Id. The Court reasoned that “Rule 23 requires that class representatives be able to engage in arm’s-length dealings with the opposing side” and Plaintiff did not meet that standard. Id. However, the Court acknowledged that this conflict on its own “would not be enough, standing on its own, to defeat adequacy,” but other problems persisted. Id.
Plaintiff’s second problem was he did not share the same interest in this case as the other class members. Id. Plaintiff “sued for a refund of the difference in value between the education he paid for and the one he got,” but Plaintiff “did not pay for an education at all.” Id. The Court considered Plaintiff’s student account as the operative measure for educational payments. Id. at 8-11.
On balance, the Court construed the student account two ways. Either, Plaintiff did “not pay [Defendant] a dime,” Id. at 9, or Plaintiff “got more money out of [Defendant] that semester than he put in.” Id. at 11. Based on the Court’s reasoning, both accountings lead to the same problem, i.e., that Plaintiff “will likely have no compensatory damages to claim,” and “without compensatory damages, [Plaintiff] cannot claim punitive damages either.” Id. Therefore, the Court held that Plaintiff could not obtain meaningful relief, and thus, “he lack[ed] ‘the incentive to represent the claims of the class vigorously.’” Id. As a result of Plaintiff owing no money towards tuition and Mandatory Fees, the Court found he “quite simply is not a member of the proposed class.” Id.
The Court further discussed the second named Plaintiff, Emily Lama, and her exclusion from the class as well because she was “enrolled as a graduate student during the Spring 2020 Semester,” meaning she also did not fit the undergraduate class description. Id. at 11-12.
Accordingly, as there was no named Plaintiff to represent the class, the Court denied Plaintiffs’ motion for class certification. Id. at 12.
Implications For Companies
Companies confronted with motions for class certification should take note that the court in Gur-Ravantab relied on Plaintiffs’ inability to adequately represent the class based on a fact intensive analysis that disqualified the named Plaintiff as a suitable class representative. Further, from a practical standpoint, companies should carefully evaluate class representatives for unique characteristics that are distinguishable from the proposed class.
By Gerald L. Maatman, Jr., Alex W. Karasik, and George J. Schaller
