Class Action Defense

August 9, 2023 by Class Action Defense

Georgia Federal Court Declines To Dismiss ERISA Prohibited Transaction Claims And Certifies Class Despite Differences In Class-wide Investment Choices

By Gerald L. Maatman, Jr., Brian W. Sullivan, and Jesse S. Stavis

Duane Morris Takeaways: On August 2, 2023, Judge Clay Land of the U.S. District Court for the Middle District of Georgia granted a motion to certify a class of participants in an ERISA class action involving an employer-sponsored defined contribution plan in Goodman v. Columbus Regional Healthcare System, Inc., No. 21-CV-15, 2023 WL 4935004 (M.D. Ga. Aug. 2, 2023). The Court rejected defense arguments to deny certification of one large class in favor of smaller sub-classes based on differences in the investment choices and resulting injuries of putative class members. Instead, the Court concluded that allegations that the asserted injuries were caused by Defendant’s common conduct warranted class certification without regard to such differences. For these reasons, the Goodman decision is instructive for ERISA plans and fiduciaries defending putative class claims under the ERISA.

Case Background

Plaintiffs were participants in a defined contribution plan (the “Plan”) sponsored by their employer, Defendant Columbus Regional Healthcare System, Inc. Plaintiffs alleged that Defendant violated its fiduciary duties under the ERISA by failing to prudently monitor and control the Plan’s investments and expenses and because it caused the Plan to engage in prohibited transactions with the Plan’s record-keeper and investment advisor (together, the “Service Providers”). Goodman, 2023 WL 4935004, at *1-2. Plaintiffs moved to certify a class under Rule 23(b)(1) consisting of all plan participants or beneficiaries of the plan with an account balance on or after February 2, 2015 through the termination of the Plan. Id.

Class Certification Granted

Plaintiffs sought to certify a class with respect to their three ERISA claims that Defendant violated its duty to prudently monitor investments and expenses and had engaged in prohibited transactions. Id. at *3. Defendant opposed certification on the grounds that “the class proposed by Plaintiffs is so broad that Plaintiffs did not meet their burden to establish standing, commonality, and typicality” as required by Rule 23. Id. at *4.

Addressing Defendant’s standing challenge first, the Court acknowledged that, to have standing, Plaintiffs and other Plan participants “must have suffered a decrease in value of their defined contribution accounts due to a breach of fiduciary duty.” Id. The Court rejected Defendant’s argument that “it is possible that some members of the putative class as presently defined did not suffer any loss due to the alleged breaches of fiduciary duties.” The Court reasoned that “this is not a standing problem but a liability issue.” Id. It explained that “[t]he possibility that some putative class members may not ultimately make a recovery does not eliminate standing for class certification purposes,” particularly where evidence of specific losses “should be readily ascertainable.” Id.

The Court likewise rejected Defendant’s arguments that Plaintiffs failed to establish the commonality or typicality requirements of Rule 23(a). The Court explained that commonality requires a showing that class members have suffered “the same injury” and that their claims depend on “common questions or law or fact” with common answers. Id. at *5. Typicality, the Court explained, requires evidence of “a sufficient nexus” between the claims of the Plaintiffs and those of the putative class as shown by claims or defenses arising “from the same event or pattern or practice” and “based on the same legal theory.” Id. Together, the Court opined that commonality and typicality require Plaintiffs and the class members to have the same interest and suffer the same injury, even though the Plaintiffs need not have suffered injury “at the same place and on the same day as the class members.” Id.

Applying these principles, the Court rejected Defendant’s suggestions “that there must be a separate sub-class for each allegedly imprudent investment and that the named Plaintiffs cannot establish typicality for allegedly imprudent investments options in which they did not invest.” Id. Instead, the Court held that this “level of granularity” was not “required at the class certification stage” where Plaintiffs had alleged that Defendant employed “flawed selection and monitoring practices” that were the same for class members across all investment options. Id. The same was true of “the excessive fee and prohibited transaction claims,” which were based on Defendant’s “alleged failure to insist” that the Service Providers charge “no more than reasonable fees, which resulted in harm to Plan participants” invested in relevant funds.

As such, the Court concluded that “the alleged cause of the injury remains the same across all funds.” Id. On these allegations, the Court found that there were common questions capable of class-wide resolution and for which Plaintiffs’ claims were typical of the class – whether Defendant breached its fiduciary duties by offering imprudent investments and by allowing the Service Providers to collect unreasonable fees. The Court determined that more granular issues concerning the specific investments and injuries of particular class members “relate to the degree of injury and level of recovery” such that the Court did “not see the benefit of dividing the proposed class into sub-classes by investment option.” Id. at 5-6. For these reasons, the Court granted Plaintiffs’ motion to certify the class.

Implications for Employers and Plan Administrators

Goodman is typical of federal court decisions in the last several years addressing motions to certify classes in cases asserting breach of fiduciary duty claims under the ERISA. The ruling underscores that the focus for class certification of such claims remains on the existence of common, injury-producing conduct rather than the similarity of the resulting injuries. Courts generally will not decline to certify a class based on differences in the investment options chosen or injuries suffered by class members so long as those investments or injuries are linked by a defendant’s common conduct, at even high levels.

August 8, 2023 by Class Action Defense

Seventh Circuit Saves EEOC’s Disability Discrimination Lawsuit

By Gerald L. Maatman, Jr., Alex W. Karasik, and Zev Grumet-Morris

Duane Morris Takeaways: In EEOC v. Charter Communications, LLC, Case No 22-1231, 2023 U.S. App. LEXIS 19528 (7th Cir. July 28, 2023), the Seventh Circuit reversed and remanded a district court’s grant of summary judgment in favor of the employer in an EEOC enforcement lawsuit, holding that an employee was possibly entitled to a modified work schedule as an accommodation to make his commute safer.

This is a significant ruling in the context of EEOC-initiated ADA litigation, as employers may potentially see an increase in litigation related to denials of commute-related accommodation requests.

Case Background

The Charging Party, James Kimmons (“Kimmons’”), alleged that his employer, Charter Communications (“Defendant”) violated the Americans with Disabilities Act (“ADA”) by refusing to accommodate his request for a temporary modified work schedule. Kimmons, who suffers from cataracts, sought a temporary schedule modification allowing him to begin and end his workday two-hours earlier in order to avoid nighttime driving. While originally granting the 30-day request, Defendant ultimately declined to extend this accommodation for an additional 30-days while Kimmons sought closer living arrangements.

Kimmons filed a charge of discrimination with the EEOC. After conciliation efforts failed, the EEOC filed a lawsuit on Kimmons’ behalf. The district court granted summary judgment for Defendant, repeating the oft-cited understanding that employees are responsible for their own commute to and from the workplace. The district court further held that Kimmons’ disability did not affect his ability to perform the essential functions of his job. Id. at *6.

The EEOC thereafter appealed to the Seventh Circuit.

The Seventh Circuit’s Decision

The Seventh Circuit reversed the district court’s grant of Defendant’s motion for summary judgment. In reaching this conclusion, the Seventh Circuit opined that the main question was whether the employee was entitled to a modified work schedule as an accommodation to make his commute safer. The Seventh Circuit concluded that the answer is “maybe.” Id. at *6.

As a threshold question, the Seventh Circuit examined the threshold question of whether an employee’s work-schedule was inherently outside the scope of the ADA. Relying on decisions within its jurisdiction and those of its sister courts, the Seventh Circuit declined to offer a bright line rule. Instead, it concluded that the inquiry was fact-intensive and necessarily unbefitting for summary judgment resolution. Specifically, while acknowledging that “getting to and from work is in most cases the responsibility of an employee, not the employer,” the Seventh Circuit reasoned that an employee’s disability could interfere with that commute, thereby entitling him to a work-schedule accommodation “if commuting to work is a prerequisite to an essential job function, such as attendance in the workplace, and if the accommodation is reasonable. Id. at *3.

Further, the Seventh Circuit determined that a trier of fact could find Kimmons’ travel to his workplace a prerequisite essential to his job duties, which demanded regular attendance. Moreover, whether or not Kimmons’ cataracts constituted a disability was a question of fact, it was not unreasonable to believe it negatively impacted his evening commutes. And because Defendant failed to establish how Kimmons’ schedule modification imposed an undue burden on its operations, the accommodation was not inherently unreasonable sufficient to warrant dismissal of the litigation. While businesses are not compelled to exhaust every avenue to improve trivial comforts of its disabled workforce, the Seventh Circuit emphasized that it will consider the precise accommodation at issue when evaluating these efforts. Id. at *21

Finally, the Seventh Circuit opined that it, “do[es] not intend to endorse an interpretation of the ADA where ‘no good deed goes unpunished.’” Id. at *23. The Seventh Circuit additionally clarified that the employer need not provide the exact accommodation the employee requests. However, the Seventh Circuit held that a qualified individual’s disability substantially interferes with his ability to get to work and attendance at work is an essential function, an employer may sometimes be required to provide a commute-related accommodation, if reasonable under the circumstance. Id. at *26. Accordingly, the Seventh Circuit reversed the district court’s grant of Defendant’s motion for summary judgment and remanded to the district court.

Implications For Employers

This is a novel ruling in that it opens the possibility for employers to be held liable for accommodations related work scheduled based on commuting concerns. While the Seventh Circuit made abundantly clear that it did not want to establish a bright-line rule, this decision demonstrates that in some situations, employers could potentially be responsible for granting accommodation requests related to work schedules and commutes. Employers should thus continue to closely consider all accommodation requests, even those that may seem outside of the scope of day-to-day job duties.

August 6, 2023August 6, 2023 by Class Action Defense

Louisiana Federal Court Grants Defendants’ Motion To Decertify Collective Action And Evidences A New Fifth Circuit Regime Post-Swales

By Gerald L. Maatman, Jr. and Emilee N. Crowther

Duane Morris Takeaways: In Moore v. MW Servicing, LLC, No. 20-CV-217 (E.D. La. Aug. 2, 2023), Judge Greg Guidry of the U.S. District Court for the Eastern District of Louisiana granted Defendants Motion to Decertify Plaintiffs’ Collective Action, holding that, pursuant to Swales v. KLLM Transportation Services, L.L.C., 985 F.3d 430 (5th Cir. 2021), Plaintiffs had not met their burden of establishing they were “similarly situated” to the opt-ins during the decertification stage. The decision in Moore evidences the new Fifth Circuit regime in certifying/decertifying collective actions post-Swales, in that it properly places the “similarly situated” burden in Plaintiff’s court at all relevant times. The ruling should be required reading for all businesses defending wage & hour litigation in the states comprising the Fifth Circuit.

Case Background

Defendants MW Servicing, LLC, WBH Servicing, LLC, Bruno, Inc., and Joshua Bruno (“Defendants”) own and operate various properties in Louisiana. Plaintiffs Brittany Moore, Dmitry Feller, Jada Eugene, Christopher Willridge, and five opt-in Plaintiffs (“Plaintiffs”) worked for Defendants as property managers, leasing agents, leasing consultants, accounting managers, executive assistants, janitorial/maintenance workers, and babysitters.

Plaintiffs filed their a collective action (the “Complaint”) against Defendants on January 20, 2020, asserting Defendants failed to pay minimum wage under the Federal Labor Standards Act (“FLSA”), and failed to pay, or untimely paid, Plaintiffs their final checks under the Louisiana Wage Payment Act (“LWPA”).

The Lusardi v. Xerox Corporation Standard

At the time Plaintiffs filed their Complaint, the standard practice in federal courts to certify a collective action and send notice to potential opt-in plaintiffs followed the two-step process outlined in Lusardi v. Xerox Corporation, 116 F.R.D. 351 (D.N.J. 1987).

The first Lusardi step, also known as the “notice stage,” required courts to determine whether the named plaintiffs and potential opt-in plaintiffs were “similarly situated” solely on the basis of the pleadings and affidavits submitted by the parties. Id. at 360-61. Once the named plaintiffs met this lenient threshold, courts often granted conditional certification and notice was sent to the potential opt-ins. Id.

The second Lusardi step, also known as the “decertification stage,” permitted defendants to move to decertify the conditional certification, but shifted the burden of establishing that plaintiffs are not “similarly situated” to defendants. Id.

In Moore, Plaintiffs filed their motion for conditional certification on May 5, 2020. Almost a year later, on March 15, 2021, the Court granted Plaintiffs’ Motion for Conditional Certification.

The Fifth Circuit’s Departure From Lusardi “Notice Stage” In Swales

In Swales v. KLLM Transport Services, L.L.C., 985 F.3d 430, 441 (5th Cir. 2021), the Fifth Circuit rejected Lusardi’s “notice stage” approach. The Fifth Circuit held that the text of the FLSA did not require a certification phase, and courts should instead determine at the outset of the case “what facts and legal considerations are material to determining whether Plaintiff and the proposed class are similarly situated.” (emphasis added).

Importantly, in rejecting Lusardi’s “notice stage” approach, the Fifth Circuit held that the burden of establishing that the plaintiffs and opt-ins are “similarly situated” rests with plaintiffs at all relevant times. Id. at 443, n. 65 (“a plaintiff should not be able to simply dump information on the district court and expect the court to sift through it and make a determination as to similarity”).

On January 5, 2022, Defendants in Moore filed a motion to decertify the collective action. They asserted that Plaintiffs were not “similarly situated,” and the collective action should be decertified.

The Court’s Decision

On August 2, 2023, Judge Guidry granted Defendants motion to decertify on the grounds that Plaintiffs had not met their burden to establish they were “similarly situated” to the opt-ins. Moore, No. 20-217, at 7.

In reaching its decision, the Court acknowledged that while Swales rejected the traditional Lusardi “notice stage,” the Fifth Circuit clarified that the factors considered by courts in Lusardi’s “decertification stage” could “help inform or guide” courts “similarly situated analysis.” Id. at 3 (citing Loy v. Rehab Synergies, L.L.C., 71 F 4th 329, 336-37 (5th Cir. 2023)). Thus, even though Lusardi’s “notice stage” had been employed in this case, the Court elected to impose Swales for the decertification stage and required Plaintiffs to establish that they had met the “similarly situated” requirement of the FLSA. Id.

The court considered three factors, including: “(1) the disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to defendant which appear to be individual to each plaintiff; [and] (3) fairness and procedural considerations.” Id. at 3 (quoting Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1103 (10th Cir. 2001)).

As to the first factor, the Court noted substantial differences existed between the plaintiffs and opt-ins’ method of payment (salary versus hourly), employer (all worked for different entities), job titles, and the asserted wrongful acts of Defendants. Id. at 5-6. As to the second factor, the Court found that too many individualized claims remained in the matter (such as joint employment, good faith and willfulness, common policies, and salary status), which would necessarily require individualized defenses. Id. at 6. As to the final factor, while the Court acknowledged that the plaintiffs and opt-ins did have some overlapping common issues, “other methods of managing [the] litigation to the benefit of judicial efficiency” existed. Id.

Ultimately, the Court found that a single trial of all plaintiffs’ claims would “result in confusion both for the jury and management of the trial itself,” and granted Defendants’ motion to decertify the collective action. Id. at 7.

Implications for Employers

In the Fifth Circuit pre-Swales, plaintiffs’ counsel could readily establish that plaintiffs and opt-ins were “similarly situated” during the notice stage by presenting minimal evidence. After plaintiffs’ counsel met this low threshold and conditional certification was granted, employers were left with two options: (1) expend significant resources to conduct extensive discovery in pursuit of establishing that plaintiffs and opt-ins were not “similarly situated”; or (2) settle. Thus, until Swales, Plaintiffs’ counsel were able to utilize employers’ looming financial burden to unfairly obtain settlements on the basis of threadbare evidence.

Post-Swales, however, district courts in the Fifth Circuit are required to “rigorously scrutinize the realm of ‘similarly situated’ workers, [at] the outset of the case, not after a lenient, step-one ‘conditional certification.’” Swales, 985 F.3d at 434. By placing the FLSA’s “similarly situated” burden on Plaintiffs, this ensures that collective action complaints can no longer be used as fishing expeditions, and reduces the likelihood that frivolous lawsuits are filed.

Since Swales, the Sixth Circuit in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003, 1009 (6th Cir. 2023), similarly rejected Lusardi’s two-step certification approach, but elected not to adopt Swales “rigorous scrutiny” standard. Instead, the Sixth Circuit held that notice must only be sent to potential plaintiffs if they show “a ‘strong likelihood’ that those employees are similarly situated to the plaintiffs themselves.” Id. at 1011.

While at present only the Fifth and Sixth Circuits have departed from the longstanding Lusardi standard, other circuits may follow suit, and depending on how many circuits “jump ship” from Lusardi, the issue may soon be ripe for judicial review with the U.S. Supreme Court.

August 4, 2023 by Class Action Defense

The Class Action Weekly Wire – Episode 24: WARN Act Class Actions

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Tyler Zmick with their discussion of recent developments in WARN class action litigation spurred by the COVID-19 pandemic and its impact on the global workforce.

Episode Transcript

Jennifer Riley: Thank you for being here again, for the next episode of our Friday weekly podcast, the Class Action Weekly Wire. I’m Jen Riley, partner at Duane Morris, and joining me today is Tyler Zmick. Thank you for being on the podcast, Tyler.

Tyler Zmick: Thank you, Jen. Great to be here, thanks for having me.

Jen: So today we wanted to discuss trends and important developments in Worker Adjustment and Retraining Notification Act, or WARN Act class action litigation. So class actions brought under the WARN Act remain an area of key focus for skilled class action litigators in the plaintiffs’ bar. In recent years, dozens of COVID-19-related lawsuits have been filed under the WARN Act, as well as under state counterparts to the WARN Act, and new class actions are being filed almost daily. The mass layoffs that arose in the aftermath of the pandemic and related to quarantines and those spawned countless WARN Act class actions, resulting in courts having issued several significant decisions in that area – in COVID-19-related WARN Act cases, including rulings that can shape the contours of future WARN Act class action litigation beyond the pandemic and for years to come.

Tyler, can you explain to our listeners some of the requirements for employers under the WARN Act?

Tyler: Absolutely. So, the WARN Act requires employers to give written notice to affected employees at least 60 days before conducting a plant closing or mass layoff at a single site of employment. Now as you’d expect, the statute has very specific definitions of each of those teams. A “plant closing” is the permanent or temporary shutdown of a single site of employment or one or more facilities or operating units within that site of employment where the shutdown results in an “employment loss” during any 30-day period for at least 50 full-time employees. A “mass layoff” is a reduction in force – sometimes called a “RIF” – that is not a plant closing and results in an employment loss at a single site of employment during any 30-day period for either A) at least 50 full-time employees who comprise at least 33 percent of the employee population, or B) 500 or more full-time employees. The WARN Act regulations require aggregation of employment losses at a single site of employment during a rolling 90-day period, which in essence extends the statute’s 30-day period to 90 days. And the statue has teeth in the sense that covered employers that do not satisfy the statute’s requirements, or qualify for an exemption, can be liable to affected employees for back pay and benefits.

Jen: Thanks so much Tyler for that great overview. In terms of class action litigation relating to the WARN Act, how often do courts or are courts certifying these types of cases?

Tyler: In short – very, very often. In the year 2022, plaintiffs’ lawyers actually won every single motion for class certification that was filed in a WARN Act case pending in federal court. And the jurisdictions where those rulings were issued were clustered in the Third, Fourth, and Eleventh Circuits.

Jen: Wow, pretty good success rate! Can you tell our listener about some of the most significant rulings in the WARN class action space?

Tyler: Sure. So, one case from 2022 involving Rule 23 in the context of a WARN Act class action is Jones, et al. v. Scribe Opco, Inc. The plaintiff filed a class action alleging that the defendant, his former employer, violated the WARN Act when he and other employees were furloughed due to the COVID-19 pandemic. The plaintiff claimed that while the employer gave notice of the initial furlough, the defendant employer failed to provide a follow-up notice once it became reasonably foreseeable that the furlough/layoff would exceed six months. The court granted the plaintiff’s motion for class certification, finding that all the requirements for Rule 23 were satisfied. The court determined that the putative class of 344 people met the numerosity requirement. The court further ruled that although the determination of each class member’s damages would be individualized based on their rate of pay and the benefits to which they were entitled, all of the class members’ claims involved the same legal questions. Specifically, the court ruled that common questions underlying the elements of the WARN Act claim and the defendant’s affirmative defenses were common and predominated over any individual issues. Finally, the court concluded that the plaintiff met the superiority requirement of Rule 23 because of the small individual values of the respective claims for class members, and the fact that it would be difficult to have potentially dozens of individual WARN actions filed by affected employees.

Jen: Thanks, Tyler. So one question that intrigues me in terms of WARN Act litigation is this question of what is this “single site of employment” and how does that bear when employees are working from home. So as the pandemic has spurred this trend and great rise of remote work, how does that “single site of employment” test apply? Do you have any rulings that address that question?

Tyler: Yes, absolutely. A case that got a lot of attention in the legal media is Piron, et al. v. General Dynamics Information Technology Inc., which was issued in 2022. In this case the court analyzed what constitutes a “single site of employment” under the WARN Act for employees who remotely, and the court analyzed that statutory term in the context of a motion for class certification under Rule 23(b)(3). So in the Piron case, the proposed class consisted of remote employees who had worked under the employer’s Flexible Work Location policy. Under that policy, employees could work from a company-provided setting (e.g., an office) or from an alternative setting like their home. Employees frequently moved from location to location to conduct their work duties depending on their schedules and where they preferred to be that day. When the defendant laid off the employees, many of whom who fell into that group who were subjected to the policy, the employees filed a class action against the defendant under the WARN Act, asserting they were not given the 60 days’ notice required for “mass layoffs” occurring at a “single site of employment.” In opposing class certification, the defendant argued that the putative class could not show that questions of law and fact for the class “predominate” over the same questions for the individual plaintiffs. Specifically, the defendant argued that the plaintiffs did not work at a “single site of employment” and thus could not trigger the WARN Act’s notice requirements for mass layoffs. Instead, the court would have to look at each class member’s individual situation to determine his or her place of employment. For example, for each class member you’d have to look at how often they work in the office versus at home or some other location. The court rejected the defendant’s predominance argument, and ruled that the class could be certified under Rule 23(b)(3). So in its ruling, the court emphasized that the remote-work policy applied to all employees, and this policy would guide its determination of what constituted the site of employment for each employee. Meaning the critical inquiry – the application of the remote work policy and its application to the work arrangements of the employees – would be common to all potential class members, even if some class members utilized that policy a little bit differently. This case illustrates one potential pitfall that can arise with the shift from an office workforce to a remote or hybrid workforce – and that pitfall is the possibility of layoffs to a remote or hybrid work force triggering WARN Act liability. It also highlights how the use of a common remote work policy for remote workers can potentially render a class of workers sufficiently similar for purposes of Rule 23 class actions.

Jen: Very interesting ruling. How about any issues or rulings on exemptions provided to employers under the WARN Act?

Tyler: Sure – so this is the last case I’ll go over for today’s video blog, and it’s a significant one issues by the Fifth Circuit where the court provided guidance regarding the “Natural Disaster” Exception to the WARN Act. The case was Easom, et al. v. US Well Services, Inc., in which the Fifth Circuit held that COVID-19 does not qualify as a natural disaster under the WARN Act’s natural disaster exception. So as background, in that case the plaintiffs filed a WARN Act class action claiming that the defendant terminated their employment without the 60-day noticed required by the WARN Act. The defendant, US Well, argued that the termination was caused by COVID-19, and therefore notice of the layoff with 60-day notice was not required due to the WARN Act’s natural-disaster exception. Both the plaintiff and defendant in the trial court moved for summary judgment on that issue regarding the exception. The district court denied both motions. In doing so, the trial court concluded that COVID-19 was a natural disaster because people did not start or consciously spread it and it was a disaster based on how many people were killed or infected. The trial court nonetheless denied the defendant’s motion for summary judgment because the exception in the WARN Act uses a but-for causation standard and the court found that the record did not show that COVID-19 was the but four cause of the layoffs – meaning other factors could have been in play as for what led to the layoffs. On appeal, the Fifth Circuit basically disagreed with the trial court’s entire order. The Fifth Circuit held that COVID-19 does not qualify as a natural disaster and in doing so the appellate court narrowly construed the statutory language which limits examples of natural disasters to “flood, earthquake, or drought” and other hydrological, geological, and meteorological events. The Fifth Circuit also examined whether the phrase “due to” in the natural disaster exception requires but-for or proximate causation and unlike the trial court, the Fifth Circuit determined that the natural disaster exception incorporates proximate causation not but-for causation.

Jen: Great insights and analysis Tyler, thank you so much. I know that these are only some of the cases that had very interesting rulings in WARN Act class actions over the past year. The remainder of 2023 is sure to give us some more insights and more examples of the way that class actions are continuing to evolve in this space. That brings us to our conclusion, thanks to our listeners for joining us today – we’ll see you on the next edition of the Class Action Weekly Wire.

August 1, 2023 by Gerald L. Maatman, Jr.

West Virginia Federal Court Finds Lack Of Involvement By Defendant In Alleged Class Action Solicitation Does Not Preclude Personal Jurisdiction Or Article III Standing

Gerald L. Maatman, Jr., Jennifer A. Riley, and Nick Baltaxe

Duane Morris Takeaways: On July 18, 2023, in Mey v. Levin, Papantonio, Rafferty, Proctor, Buchanan, O’Brien, Barr & Mougey, P.A., et al., Case No. 5:23-CV-46 (N.D. W. Va. July 18, 2023), the Court denied a motion to dismiss Plaintiff’s claims for alleged violations of the Telephone Consumer Protection Act (the “TCPA”). In doing so, the Court held that, despite the fact that Levin Law did not direct and was not involved in the alleged calls, the Court had personal jurisdiction over Levin Law, and Plaintiff had Article III standing to pursue the TCPA claims. In doing so, the Court found allegations concerning the law firm’s alleged agency relationship with a co-defendant sufficient to confer broad authority to adjudicate Plaintiff’s claims against Levin Law under the TCPA. Additionally, the Court concluded that Plaintiff had alleged sufficient facts to support a do-not-call claim under the TCPA by alleging that her cell phone was a residential phone on the National Do-Not-Call Registry.

Case Background

Plaintiff Diana Mey, a resident of West Virginia, initiated this lawsuit against two law firms, Levin Law and Principal Law Group, LLC, alleging that those defendants violated the TCPA by soliciting clients for a mass tort litigation related to toxic water exposure at Camp Lejeune. Mey, Doc. 33 at 1-2. Defendant Levin Law filed a motion to dismiss on numerous grounds, including that the Court lacked personal jurisdiction, that Plaintiff lacked Article III standing, that Plaintiff failed to plead direct or vicarious liability, and that Plaintiff failed to plead a violation of the TCPA. Id. The Court denied the motion. Id. Specifically, Levin Law argued that it was not directly involved in any of the phone calls, which were made by co-defendant MCM Services Group, LLC (“MCM”), and therefore could not be sued for violation of the TCPA. Id. at 8.

Initially, Levin Law, a Florida professional corporation with a principal place of business in Pensacola, Florida, argued that it did not have sufficient minimum contacts with West Virginia because it did not purposely direct the alleged tortious activity toward the state. Id. While the Court acknowledged that Levin Law was not directly involved in the telephone calls placed to Plaintiff, it held that Plaintiff had provided sufficient facts to find that the calls were made by an agent under Levin Law’s control. Id. at 12. Specifically, the Court noted that Plaintiff allegedly received a representation agreement from Principal Law, under which Levin Law would provide legal services to Plaintiff, and Principal Law would serve as Levin Law’s associate counsel. Id. The Court found that these allegations were sufficient to plausibly connect Levin Law to the alleged calls. In a final point regarding personal jurisdiction, the Court did not address whether it had personal jurisdiction over out-of-state class members noting that, to proceed with the case, it needed to find personal jurisdiction only over the named Plaintiff and Defendants. Id. at 13.

The Court then addressed Levin Law’s argument that Plaintiff did not have Article III standing. Specifically, Levin Law argued that the calls, which were initiated by MCM, were not traceable to any conduct by Levin Law, which was a necessary prong in establishing Article III standing. Id. The Court, however, noted that because the representation agreement identified Principal Law as Levin’s Law associate counsel, and Plaintiff received the agreement from Principal Law, the Court reasonably could infer that the calls were made by someone under Levin Law’s control. Id. at 14. As such, the Court found that Plaintiff had pled sufficient facts to trace the challenged conduct to the defendant and, as such, had asserted Article III standing.

The Court addressed Levin Law’s final arguments that Plaintiff failed to plead a theory of liability against it and, further, failed to state a do-not-call claim under the TCPA. First, the Court held that Plaintiff asserted sufficient factual allegations to show vicarious liability and to survive a Motion to Dismiss. Id. at 15. Second, the Court found no case law supporting dismissal of a TCPA claim on the basis that the defendant allegedly placed a call to a cell phone instead of a residential phone. Id. at 17. Specifically, the Court noted that Plaintiff had alleged that her cell phone was used for residential purposes and was placed on the National Do-Not-Call Registry, making the claim actionable under the TCPA. Id.

Key Takeaways

In this ruling, the Court made interesting findings that will extend to plaintiffs outside the TCPA context to survive attacks at the pleading stage of litigation. Specifically, the Court found both personal jurisdiction and Article III standing despite the fact that Levin Law did not purposefully direct the activity at issue. By doing so, the Court agreed with arguments that the conduct of an alleged agent was enough to establish both personal jurisdiction and Article III standing. Going forward, plaintiffs will have yet another way to support personal jurisdiction and Article III standing at the outset of the case even against defendants who they do not contend were directly involved in the conduct about which they complain. Additionally, while there is a split in authority as to whether the TCPA extends to wireless telephone numbers, the Court in this litigation had no issue finding that a cell phone could be a residential phone for purposes of the TCPA, potentially extending its reach and keeping it relevant as a potential source of claims against corporate defendants.

July 28, 2023July 28, 2023 by Class Action Defense

The Class Action Weekly Wire – Episode 23: EEOC Summer Update

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Jeffrey Zohn with their discussion of recent developments at the EEOC including the Commission’s current enforcement priorities, the nomination of Kalpana Kotagal as the new commissioner, and what employers can expect under the current leadership structure.

Episode Transcript

Jerry Maatman: Blog readers, welcome to our Friday installment of the Class Action Weekly Wire. My name is Jerry Maatman of Duane Morris and I’m joined today by my colleague, Jeffrey Zohn, for this week’s episode. Welcome, Jeff!

Jeffrey Zohn: Thanks, Jerry. It’s great to be here, and I’m especially honored to be here because in today’s episode we get to mix it up where I got to interview you and ask you some questions about what’s going on with the Equal Employment Opportunity Commission, also known as the EEOC.

Jerry: Sounds good, fire away with those questions.

Jeff: All right so we’ll start out with an easier one for you – can you first explain about how the EEOC is structured in terms of its governance – who’s in charge, and how can one become part of the EEOC leadership?

Jerry: The EEOC is a creature of statute, it is in theory to be a bipartisan commission with leadership consisting of a chair, a vice chair, and three commissioners – and those five set policies for the EEOC, approve policy statements and enforcement guidance. A general counsel is also appointed by the President and reports to those commissioners, and typically the party in power that holds the White House will have a three to two advantage in terms of the composition of the five – the chair, the vice chair, and the three commissioners.

Jeff: Now of those five commissioners, are they all currently in place?

Jerry: Well, the EEOC has been dealing, like many government agencies, with recovering from the pandemic and from the election and so it has been operating for quite a while with only four commissioners – two Republicans and two Democrats. Although the EEOC and public pronouncements would not say things are deadlocked, people looking at the EEOC from the outside would suggest that there is an ideological deadlock with two Republican policy makers not agreeing with two Democratic policy makers, but in the last two weeks the Senate approved President Biden’s nomination of the fifth commissioner Kalpana Kotagal – she has yet to be sworn in, but will be sworn in any day now, and that will then allow the EEOC to have a full complement of policy makers and the five Commissioners, and will tip the balance in favor of kind of Democratic views of the policies and enforcement guidance memorandum of the EEOC.

Jeff: That sounds like a major development and something that could possibly bring some pretty significant changes to the EEOC.

Jerry: For employers it’s definitely, in the practical world in which we live, going to have a cause and effect that’s very different than what we’ve seen for the last two years, I think on several levels. The first level will be the issuance of policy guidance where the EEOC opines on how it interprets various statutes – and with a three to two majority with the Democrats, in my experience, what I’ve seen are very expansive interpretations of obligations that employers have under anti-discrimination laws and a broadening of the way the EEOC views rights of workers. Its views are not binding on federal courts, but its views are important, and its views activate the manner in which its investigators, district offices, and regional trial attorneys view the world and enforce the statute – and so there’s going to be a definite change, and the EEOC will act in a more activist manner to fulfill its policy mandates but it will do so with a tilt towards Democratic labor policies.

The second area where there will be a change most commentators believe, and I’m of the same opinion, that lawsuits – or investigations that have been in the queue for approval as lawsuits – will be approved and will begin to be filed. So the last couple of years EEOC-authorized lawsuits where the Commission sues in the public interest, on behalf of the United States against employers, on behalf of groups of employees – have been anywhere between about 85 and 105 lawsuits, and so its fiscal year starts on October 1 and goes to September 30. So we’re halfway through or a little past halfway through in the fiscal year, but I think what we’re going to see is an accelerated filing of lawsuits – especially what are known as systemic lawsuits that are bigger, brought on behalf of various groups of employees, hundreds sometimes thousands of employees, and so one way to look at the impact of the third Democratic commissioner is it will unleash the potential that the EEOC has in terms of litigation enforcement and I expect it to flex its muscle and bring more of those cases.

Jeff: So narrowing in a little bit more on Ms. Kotagal, the fifth appointment, the third Democrat – Jerry you’ve been one of the most distinguished lawyers in this field for a while, can you give us any background information on her?

Jerry: Well she is a very talented lawyer who also thinks expansively about this area and has handled big plaintiff-side employment discrimination class actions, she comes from the Cohen Milstein firm – probably one of the best if not the top plaintiff-side civil rights and employment discrimination law firm – she’s one of the key partners there. I’ve handled a myriad of cases against her, she’s an excellent lawyer, and has in the past few years been involved in movements: both the #MeToo movement and a movement that started in Hollywood, where Hollywood contracts for production of movies were created with a clause that would allow for hiring and use of a more diverse set of cast members and production personnel, and so she’s very interested in opening the doors of employment, she’s interested in bringing test cases to challenge policies, and she’s a champion of protected minority groups – so I expect her to utilize her expertise and bring it to the EEOC and to push the envelope, so to speak, in terms of what the EEOC does in enforcing employment discrimination laws

Jeff: It certainly sounds like her influence is going to be is going to be rapid and significant.

Jerry: I think so. I think the main thing on the EEOC’s agenda in terms of regulatory guidance will be the new Pregnant Workers Fairness Act where the EEOC will issue regulations and fill in the gaps, so to speak, of that law which is an amendment to the Pregnancy Discrimination Act that President Biden signed this year, and look for that to be kind of a signal of where the EEOC is going, and I expect it will be a very expansive document that will push the envelope even on that law to create more rights for workers who are pregnant and more obligations for employers – so that would be the first signal I would be looking for if I were an employer.

Jeff: Beyond that, are there any other EEOC developments that you think are worth talking about right now?

Jerry: I think the most relevant for most employers is the issue of systemic litigation that the EEOC has talked about it, but the number of systemic lawsuits that have been filed have been limited, and because the new commissioner’s background is on what I would call impact litigation, bringing cases to promote change, I think you’re going to be seeing test cases I think you’re going to be seeing cases brought on large against large employers, industry leaders to try and make a point and try and enforce the statute in a way that sends a signal to smaller players in the industry. So I think the EEOC is going to get back into the business of bringing large lawsuits against large employers that are very newsworthy.

Jeff: I think that should be the flashing red lights for the big companies to keep an eye on because that’s going to be impacting them directly. Definitely now is a great time for employers out there to make sure that they are compliant with all these requirements and the things that we think the EEOC is going to be going after.

Jerry: Absolutely, I think change is inevitable and the watchword is compliance compliance compliance is what employers need to be focused on at this point in terms of an activist EEOC.

Jeff: That is definitely a great advice, and I really appreciate all of the insights you had today, Jerry.

Jerry: Thanks all our loyal blog readers for joining us for this week’s Friday podcast. Signing off, this is Jeff and Jerry. Have a great day

Jeff: Bye everyone, thank you!

July 27, 2023 by Alex W. Karasik

EEOC Issues New ADA Guidance On Visual Disabilities And Discussing AI Impact

By Alex W. Karasik, Gerald L. Maatman, Jr., and George J. Schaller

Duane Morris Takeaways: On July 26, 2023, the EEOC issued a new Guidance entitled “Visual Disabilities in the Workplace and the Americans with Disabilities Act” (the “Guidance”). This document is an excellent resource for employers, and provides insight into how to handle situations that may arise with job applicants and employees that have visual disabilities. Notably, for employers that use algorithms or artificial intelligence (“AI”) as a decision-making tool, the Guidance makes clear that employers have an obligation to make reasonable accommodations for applicants or employees with visual disabilities who request them in connection with these technologies.

The EEOC’s Guidance

The EEOC’s Guidance endeavors to address four subjects, including: (1) when an employer may ask an applicant or employee questions about a vision impairment and how an employer should treat voluntary disclosure; (2) what types of reasonable accommodations applicants or employees with visual disabilities may need; (3) how an employer should handle safety concerns about applicants and employees with visual disabilities; and (4) how an employer can ensure that no employee is harassed because of a visual disability.

The EEOC notes that if an applicant has an obvious impairment or voluntarily discloses the existence of a vision impairment, and based on this information, the employer reasonably believes that the applicant will require an accommodation to perform the job, the employer may ask whether the applicant will need an accommodation (and, if so, what type). Some potential accommodations may include: (i) assistive technology materials, such as screen readers and website accessibility modifications; (ii) personnel policy modifications, such as allowing the use of sunglasses, service animals, and customized work schedules; (iii) making adjustments to the work area, including brighter lighting; and (iv) allowing worksite visits by orientation, mobility, or assistive technology professionals.

For safety concerns, the Guidance clarifies that if the employer has concerns that the applicant’s vision impairment may create a safety risk in the workplace, the employer may conduct an individualized assessment to evaluate whether the individual’s impairment poses a “direct threat,” which is defined as, “a significant risk of substantial harm to the health or safety of the applicant or others that cannot be eliminated or reduced through reasonable accommodation.” For harassment concerns, the EEOC notes that employers should make clear that they will not tolerate harassment based on disability or on any other protected basis, including visual impairment. This can be done in a number of ways, such as through a written policy, employee handbooks, staff meetings, and periodic training.

Artificial Intelligence Implications

As we previously blogged about here, the EEOC has made it a priority to examine whether the use of artificial intelligence in making employment decisions can disparately impact various classes of individuals. In the Q&A section, the Guidance tackles this issue by posing the following hypothetical question: “Does an employer have an obligation to make reasonable accommodations to applicants or employees with visual disabilities who request them in connection with the employer’s use of software that uses algorithms or artificial intelligence (AI) as decision-making tools?”According to the EEOC, the answer is “yes.”

The Guidance opines that AI tools may intentionally or unintentionally “screen out” individuals with disabilities in the application process and when employees are on the job, even though such individuals are able to do jobs with or without reasonable accommodations. As an example, an applicant or employee may have a visual disability that reduces the accuracy of an AI assessment used to evaluate the applicant or employee. In those situations, the EEOC notes that the employer has an obligation to provide a reasonable accommodation, such as an alternative testing format, that would provide a more accurate assessment of the applicant’s or employee’s ability to perform the relevant job duties, absent undue hardship.

Takeaways For Employers

The EEOC’s Guidance serves a reminder that the Commission will vigorously seek to protect the workplace rights of individuals with disabilities, including those with visual impairments. When employers are confronted with situations where an applicant or employee requests reasonable accommodations, the Guidance provides a valuable roadmap for how to handle such requests, and offers a myriad of potential solutions.

From an artificial intelligence perspective, the Guidance’s reference to the use of AI tools suggests that employers must be flexible in terms providing alternative solutions to visually impaired employees and applicants. In these situations, employers should be prepared to utilize alternative means of evaluation.

July 21, 2023 by Class Action Defense

The Class Action Weekly Wire – Episode 22: TCPA Class Action Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jennifer Riley, Katelynn Gray, Sheila Raftery Wiggins, and associate Shaina Wolfe with their analysis of key trends and notable rulings in the class action landscape of the Telephone Consumer Privacy Act (“TCPA”). We hope you enjoy the episode.

Episode Transcript

Jennifer Riley: Thank you for being here again, for the next episode of our Friday weekly podcast, the Class Action Weekly Wire. I’m Jen Riley, partner at Duane Morris, and joining me today are partners Sheila Raftery Wiggins and Katelynn Gray and associate Shaina Wolfe. Thank you guys for being on the podcast today.

Today we wanted to discuss trends and important developments in Telephone Consumer Protection Act or “TCPA” class action litigation. The TCPA has long been a booming focus of consumer litigation, particularly in the class action space. The statute was enacted in 1991 – it’s a federal statute – it’s aimed at protecting consumers from companies that use ATDS, meaning automatic telephone dialing systems, to engage in mass telemarketing methods, including robocalls. The TCPA originally focused on unwanted telephone calls and faxes. For many years, plaintiffs successfully have alleged that a defendant used an automatic telephone dialing system (ATDS) to call or send messages to a cell phones without obtaining prior express consent.

Sheila, can you explain some of the recent Supreme Court litigation governing the TCPA’s interpretation – in particular, what constitutes an autodialer?

Sheila Raftery Wiggins: Sure, Jen. In 2021, the U.S. Supreme Court issued its ruling Facebook, et al. v. Duguid, which adopted a narrow interpretation of what devices count as an ATDS. Before Duguid, some federal circuits held that equipment could qualify as an autodialer just because it autodialed stored phone numbers that had not been randomly or sequentially generated in the first instance. But the Supreme Court rejected this interpretation and held that “a necessary feature of an autodialer under § 227(a)(1)(A) is the capacity to use a random or sequential number generator to either store or produce phone numbers to be called,” because the contrary interpretation “would capture virtually all modern cell phones, which have the capacity to store telephone numbers to be called and dial such numbers.”

Jen: Got it. Are there other types of communication governed by the TCPA?

Katelynn Gray: As you can imagine, Jen, the TCPA was enacted thirty years ago, so of course the methods and the technologies that businesses use to engage customers now has changed. I’m sure all of you have received text messages from businesses for a variety of different reasons, including to communicate with customers, solicit consumer feedback, announce product promotions, identify the status of a delivery, even utilize two-factor security authentication. So, as a result of that – as a result of the changes that have occurred in the last thirty years – courts have now begun interpreting the TCPA to include text messages. The TCPA also empowers the Federal Communications Commission, or something that we refer to as the FCC, to “prescribe regulations to implement” the statute, and to create exemptions to statutory liability “by rule or order.” 47 U.S.C. § 227(b)(2)(B). So under this authority, the FCC has actually created a “two-tier system of consent” for TCPA liability, with different kinds of calls essentially requiring different types of consent.

Jen: Shaina, can you talk about how successful the plaintiffs’ bar has been in obtaining class certification in TCPA class action cases?

Shaina Wolfe: The plaintiffs’ bar was fairly successful in 2022 where they sought class certification over TCPA issues, particularly relating to or involving robocalls. The plaintiffs’ bar won 67% of motions for class certification, and companies secured denials in 33% of the decisions.

Jen: So it sounds like the plaintiffs’ bar has been fairly successful overall. Sheila, can you comment on some of the notable successful certification rulings in this space?

Sheila: Sure – in Head, et al. v. Citibank, N.A., the plaintiff received 100 robocalls from the defendant, a bank, over the course of three months regarding an overdue credit account of a man she did not know. The plaintiff was never a customer of the defendant and did not authorize the man or anyone else to open an account with the defendant using her cellphone number. The plaintiff filed a class action, alleging that the defendant routinely violated the TCPA by placing calls using an artificial or prerecorded voice to telephone numbers assigned to a cellular telephone service, without prior express consent. The court granted the motion. The court explained that the defendant did not deny that it places billions of calls each year regarding delinquent accounts, or that millions of accounts in its system are marked “wrong number” and that at least one unsolicited call must be placed to the number before a telephone number is marked wrong. Moreover, the court noted that the defendant did not dispute that it called the plaintiff repeatedly before it marked the account associated with her number “cease-and-desist,” making a clear inference that there may be numbers not yet marked “wrong,” “no consent,” or “cease-and-desist” for which the defendant does not have authorization to robocall. The court also found that the proposed class satisfied the typicality and commonality requirements, that common questions of law and fact predominated, and that in the absence of a class action, thousands of meritorious claims would likely go unredressed because the cost of litigation would dwarf any possible reward under the TCPA.

Jen: Thanks so much Sheila. Katelynn, were there any memorable class certification rulings denying certification in 2022?

Katelynn: So there was one that I’ll talk about, but I just would generally say in 2022 it seems that defendants in TCPA class actions continued to succeed in defeating class certification by demonstrating that the proposed representative, or the individual who sought to represent the class, was inadequate or atypical, so essentially didn’t have anything in common with the other class members – especially where the circumstances surrounding their consent distinguish them from those other class members. So one of those examples was a case called Bustillos, et al. v. West Covina Corp. Fitness. This was a case where a former gym member went into the defendant’s gym and he provided his phone number to an employee who entered it into his profile – and I’m sure a lot of us do this all the time. Unfortunately for the company, the phone number provided was actually one digit off from the actual number of the former gym member – and belonged to the plaintiff in this case. At one point, the defendant authorized its marketing agency to send out a one-time pre-recorded telephone message to former gym members and guests who had expressed interest in joining the gym at a certain point – essentially inviting them to join or rejoin. Most of these individuals had provided their telephone numbers when they filled out a guest registration or a contract with the defendant when they joined the gym the first time. The plaintiff was one of 1,400 individuals that received a pre-recorded message on her cell phone from the defendant offering a gym membership promotion. So in this instance, the Court denied certification because they found the plaintiff in this case did not allege or produce evidence that any of the other messages were sent to wrong numbers and therefore found she was not typical to the members of the class she proposed to represent.

Shaina: Another common reason that courts deny class certification in TCPA cases is due to predominance of an individualized issue. For TCPA cases, one of the most powerful affirmative defenses is showing consent to the telemarketing messages. Courts have tended to rule in favor of defendants where they can show that a substantial portion of the proposed class consented to the communications; the purpose and nature of each communication varied from person to person; or identifying who provided consent and who did not would be impractical or impossible. There were also several case rulings that demonstrated this defense, including Cooper v. Neilmed Pharmaceuticals, Inc., where the defendant successfully offered five methods by which it received prior express invitation or permission from recipients before sending faxes, which creates almost a sort of presumption that the consent issue will be individualized.

Jen: Before we turn to settlements, if I recall the largest TCPA jury verdict ever was overturned on appeal last year, is that correct?

Sheila: That’s correct. The largest TCPA jury verdict involved in an award of $925 million, however, the defendant successfully overturned the verdict on appeal. In Wakefield, et al. v. ViSalus, Inc., the plaintiffs filed a class action alleging that the defendant made unlawful telephone calls using prerecorded voice messages in violation of the TCPA. Following a trial, the jury returned a verdict in favor of the plaintiffs and found that the defendant sent over 1.8 million prerecorded calls to class members without prior express consent. Accordingly, the jury awarded the minimum statutory damages of $500 per call for a verdict against the defendant of $925 million. The defendant filed a post-trial motion challenging the constitutionality of the statutory damages award under the due process clause of the Fifth Amendment as being unconstitutionally excessive. The district court denied the motion. On appeal, the Ninth Circuit vacated and remanded the district court’s denial of the defendant’s motion. On appeal, the defendant contended that even if the TCPA’s statutory penalty of $500 per violation was constitutional, an aggregate award of $925,220,000 was so “severe and oppressive” that it violated the defendant’s due process rights. So this case has ultimately obtained an extension of time from the Supreme Court to file a petition for certiorari.

Jen: Wow, we will absolutely keep listeners updated as to what happens next in that case. As far as TCPA settlements, I doubt there were any quire that large, but were there any significant settlements over the past year – Shaina, can you comment on that?

Shaina: I can. Although none were in the hundreds of millions, there were several multi-million class-wide TCPA settlements in 2022. Four of the top 10 were over $15 million and the value of the top 10 totaled over $134 million.

Jen: Thanks Shaina. Great insights and analysis, everyone. I know that these are only some of the cases that had interesting rulings over the past year in the TCPA class action space. The remainder of 2023 is sure to give us some more insights into the ways that class actions are evolving in the TCPA class litigation area. Thanks again everybody for joining us today, thanks to the panel – we look forward to connecting again next Friday on the next episode of the Class Action Weekly Wire.

July 20, 2023July 20, 2023 by Class Action Defense

California Supreme Court Rules That So Long As They Are Aggrieved, PAGA Plaintiffs Can First Pursue Individual Claims In Arbitration And Then Can Pursue Non-Individual Claims In Court

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

Duane Morris Takeaways: On July 17, 2023, the California Supreme Court issued its long-awaited decision in Adolph v. Uber Technologies, Inc., No. S274671 (July 17, 2023), addressing standing requirements under the Private Attorneys General Act of 2004 (“PAGA”). The Supreme Court held that, once a PAGA plaintiff’s individual claims are compelled to arbitration, the plaintiff retains standing to maintain non-individual, representative PAGA claims in court so long as they are an aggrieved employee. If the plaintiff loses in arbitration, they are not aggrieved and therefore lack standing. However, if the plaintiff prevails or settles their individual claims in arbitration, they can then return to court to prosecute their non-individual PAGA claims. For companies facing PAGA claims, the ruling in Adolph is required reading, as it will usher in a new period of workplace litigation in California.

Case Background

Erik Adolph, an Uber delivery driver, alleged that Uber misclassified him as an independent contractor. Although Adolph initially sought to maintain a class action, those efforts were thwarted by a class action waiver in his workplace arbitration agreement. Adolph then amended his complaint to allege PAGA claims. The trial court denied Uber’s motion to compel arbitration, and the Court of Appeal affirmed on the basis of California’s prior rule, under Iskanian v. CLS Transportation, 59 Cal. 4th 348 (2014), that PAGA claims cannot be split into individual and non-individual parts and that a PAGA claim was non-arbitrable.

Uber filed a Petition for Review and, while it was pending, the U.S. Supreme Court issued its decision in Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022), holding that PAGA claims are divisible and that the Federal Arbitration Act preempted California law insofar as it precluded arbitration of an individual PAGA claim. The U.S. Supreme Court further opined that, once a PAGA plaintiff’s individual claims are compelled to arbitration, they lose standing to pursue non-individual PAGA claims. Against this backdrop, the California Supreme Court granted review in Adolph.

The California Supreme Court’s Decision

In a unanimous decision, the California Supreme Court disagreed with Viking River’s interpretation of PAGA standing. The California Supreme Court held that, so long as an employee alleges they are aggrieved by a violation, they maintain standing under the PAGA. Thus, even after individual PAGA claims are compelled the arbitration, the plaintiff retains standing to pursue non-individual PAGA claims in court.

As to logistics, the Supreme Court clarified several things. First, even though individual PAGA claims may be pending in arbitration and non-individual PAGA claims pending in court, the claims all remain one action, and the court action may be stayed pending completion of arbitration. Second, if the plaintiff loses in arbitration, at that juncture, the plaintiff no longer has standing to maintain non-individual PAGA claims. Third, if the plaintiff prevails in arbitration or settles their individual claims, they continue to possess standing to return to court to pursue non-individual PAGA claims on behalf of others.

Implications for Employers

In the wake of Adolph, the stakes for employers in individual PAGA arbitrations are high. Employers facing PAGA claims should conduct an early assessment of the plaintiff’s individual claims and if unmeritorious aggressively defend the matter because a win in arbitration will extinguish the case in court as well. We also anticipate that PAGA plaintiffs may begin alleging their aggrieved employee status, yet disclaiming any individual relief, in order to bypass arbitration altogether. It remains to be seen if that pleading strategy will be condoned by California courts.

July 20, 2023 by Gerald L. Maatman, Jr.

Illinois Supreme Court Refuses To Reconsider “Per-Scan” BIPA Accrual Ruling In Cothron v. White Castle

By Gerald L. Maatman, Jr. and Tyler Zmick

Duane Morris Takeaways: As we previously blogged, on February 17, 2023 the Illinois Supreme Court held in Cothron v. White Castle, 2023 IL 128004 (2023), that a separate claim for damages accrues under the Biometric Information Privacy Act (“BIPA”) each time a private entity scans or transmits an individual’s biometric data in violation of Sections 15(b) or 15(d) of the statute. On July 18, 2023, the Illinois Supreme Court denied White Castle’s petition for hearing, resulting in the February 17 ruling becoming the final “law of the land” in Illinois. The Court’s decision to deny White Castle’s rehearing petition was not unanimous, however, as reflected by the blistering dissent penned by Justice Overstreet and joined by Chief Justice Theis and Justice Holder White. For companies involved in BIPA class action litigation, the dissent is required reading, as it foreshadows an array of defense-oriented arguments over damages issues in privacy litigation.

Illinois Supreme Court’s Majority Decision In Cothron

In a 4-3 split ruling, the Illinois Supreme Court held on February 17, 2023 that a separate claim accrues under the BIPA each time a private entity scans or transmits an individual’s biometric data in violation of Sections 15(b) or 15(d), respectively.

Relying on the statute’s plain language and the fact that the actions of “collecting” and “disclosing” biometric data can occur more than once, the Supreme Court agreed with Plaintiff’s interpretation – namely, that Section 15(b) “applies to every instance when a private entity collects biometric information without prior consent” and that Section 15(d) “applies to every transmission to a third party.” Cothron, 2023 IL 128004, ¶¶ 19, 23, 28. The Supreme Court acknowledged that this interpretation – coupled with the statute allowing prevailing plaintiffs to recover up to $1,000 or $5,000 for each “violation” – could lead to astronomical damages awards that may be “harsh, unjust, absurd or unwise,’” id. ¶ 40 (citation omitted), but noted that it must apply the statute as written and that policy-based concerns should be addressed by the Illinois legislature.

Dissent To Majority’s Decision To Deny White Castle’s Rehearing Petition

On July 18, 2023 the Illinois Supreme Court denied White Castle’s petition for rehearing in Cothron v. White Castle, effectively leaving White Castle with no further avenues for challenging the ruling.

Three Justices (the same three who dissented to the February 17 majority decision) disagreed with the decision to deny White Castle’s petition for rehearing. In opining that the Supreme Court should have granted rehearing, the Dissent focused on three issues, including: (1) the majority’s “per scan” theory of liability subverting the intent of the Illinois legislature; (2) the majority’s “per scan” theory of liability threatening the survival of Illinois businesses and raising “significant constitutional due process concerns,” id. ¶ 70; and (3) the majority’s decision in failing to provide trial courts with criteria to use in exercising their discretion whether to award statutory damages for BIPA violations.

First, the Dissent stated that the Illinois legislature meant for the BIPA to be a straightforward remedial statute that allows individuals to choose to provide (or not to provide) their biometric data after being informed that the data is being collected, stored, and potentially disclosed. The Dissent rejected the majority’s “flawed construction” of the statute, which mistakenly presumes that the legislature meant for the BIPA to “establish a statutory landmine” and “destroy commerce in its wake when negligently triggered.” Id. ¶ 73; see also id. (“The majority’s construction of the [BIPA] does not give effect to the legislature’s true intent but instead eviscerates the legislature’s remedial purpose of the [BIPA] and impermissibly recasts [it] as one that is penal in nature rather than remedial.”).

Second, the Dissent opined that by construing the statute to allow for awards of statutory damages that bear no relation to any actual monetary injury suffered, the majority’s decision raises due process concerns that “raise doubt as to [the BIPA’s] validity.” Id. ¶ 74; see also id. ¶ 75 (“The legislature’s authority to set a statutory penalty is limited by the requirements of due process. When a statute authorizes an award that is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable, it does not further a legitimate government purpose, runs afoul of the due process clause, and is unconstitutional.”).

Finally, the Dissent took issue with the majority’s refusal to clarify its February 17 holding with respect to the discretionary (rather than mandatory) nature of liquidated damages under the statute. Specifically, the Dissent noted that the majority opinion did not provide trial courts with standards or criteria to apply in determining whether to award statutory damages in a particular BIPA case and, if so, in what amount. The Dissent asserted that the Supreme Court should have agreed to clarify “that statutory damages awards must be no larger than necessary to serve the [BIPA’s] remedial purposes” and to “explain how lower courts should make that determination.” Id. ¶ 85. Per the Dissent, “[w]ithout any guidance regarding the standard for setting damages, defendants, in class actions especially, remain unable to assess their realistic potential exposure.” Id.

Implications For Corporations

Assuming White Castle cannot convince the U.S. Supreme Court to grant review of the Cothron decision based on constitutional issues, Cothron is now the final law of the land in Illinois. White Castle and other BIPA defendants may, however, attempt to raise constitutional challenges to the statute in other BIPA cases moving forward based on the same concerns expressed by the three dissenting Justices in Cothron.

The denial of White Castle’s rehearing petition indicates that the well is beginning to dry for businesses in terms of potential BIPA defenses. While employers and other BIPA defendants can still explore novel defenses, such as the exception for information captured from a patient in a health care setting or challenges to personal jurisdiction, many companies caught in the crosshairs of BIPA class actions will face pressure to settle due to the risk of facing monumental potential damages. Moreover, attempts to reform the BIPA statute failed in 2023, and the Illinois legislature likely will not consider any further reform proposals until 2024. Given the bleak outlook of the law as it stands, it is imperative that businesses immediately ensure they are compliant with the BIPA.